Compsis was facing head winds in 2004. Their revenue
dropped from $4.2 million to $3.3 million. While the implemented Electronic
toll collection system successfully in Australia with partnership with an
American firm Philips. But their venture in India did not see success due to
cost constraints.
While Compsis gets majority of their business from Brazil,
but they do not want to rely on only Brazil and want to expand. They are
looking for opportunities in other Latin American countries, Other emerging
markets such as India, Pakistan and of course the biggest market for electronic
toll collection that is the USA. But entering into the US market is not that
easy for Compsis. While US market was matured and growing, it was dominated by
firms such as MarkIV, TransCore, Raytheon, SIRIT, ACS State, VES Systems,
CASETA Technologies , ETC Inc. The customer base in the USA is mainly Quasi-governmental
bodies. While the US market has 64 toll agencies in 26 states, the ETC sales
process is significantly different than other markets.
In 1980s- 1990, the public agencies did not have much
experience in procuring vendors for ETC.
Hence, vendors and major toll authorities came together to form trade
organization called International Bridge, Tunnel and Toll
Association (IBTTA). This trade organization organized major conferences,
seminars, advocacy initiative and request for proposals
(Lehrich,Paredes,Ravikumar,2009).
While with a membership in this trade organization
made sure that the members would come to know about projects, but the firms had
to procure through public RFPs and the projects usually gets awared after
sealed bid , 2 step sealed bid and competitive negotiation processes.
RFP process is well defined and time consuming and
have defined steps (Lehrich,Paredes,Ravikumar,2009).
The evaluation criteria included –
1. quality
of employees
2. Ability
of the vendor to maintain high qualuty human resource during the prject life
cycle
3. Past
performance of the vendor
4. Vendor
understands the ask
5. Cost
for the project
Usually
there are defined steps before the project is awared. All these steps make sure
the whole process is fair and open to all.
The Diamond model of National advantage -
Demand
Condition – this refers to the domestic
customers. In this case, all car owners who drive on toll roads are potential
customers. And the firm that meets high expectation of domestic customer tends
to do better (Ketchen & Short, 2012). For Compsis, Brazilian drivers are the customers.
Brazil is still an emerging economy so it would be safe to assume that there is
scope of growth left and the market is not matured yet.
The US ETC market is matured and has many players
already. The consumers in this case the drivers are used to sophisticated
systems. Compsis will have to deliver their best product. Compsis does not do
any business in the USA, so they would like to enter the market with most
matured product which is SICAT. While COMPSIS has experience in implementing
ETC in Australia with collaboration with an American firm called Phillips, but
in the USA COMPSIS does not have a partner yet as Phillips does not exist
anymore.
Factor
Conditions- refers to the raw material
and other inputs required to produce good and service. These would mean- land,
labor, capital market, infrastructure etc. When a firm has access to all that
is necessary tends to do better.
Compsis is ETC solution provider. They have developers
to implement the system. Having access to engineers is very critical, Compsis
has strong ties with Brazilian universities Instituto
Tecnologico de Aeronautica (ITA) and the Universidade do Vale do Paraiba
(UNIVAP).
Related
and Supporting Industries – is
about having industries that is associated with same industry, and those
industries being great at what they do (Ketchen & Short,
2012).
In our case Compsis was founded by Brazilian
Aeronautics engineers and for they software and hardware they need engineers
and other companies to produce hardware. Compsis had to outsource manufacturing
of vehicle sensors, high resolution cameras, toll gates, signaling elements,
RFID sensors etc. Compsis developed the software and then integrated the
hardware with the software and installed the system in toll plazas.
Firm
Strategy, Structure and Rivalry – refers
to the local competition the firm faces. The more competition a firm face, the
more opportunity it gets become stronger (Ketchen & Short,
2012).
In case of Compsis, it developed SICAT 4 system in
1996, which was enhanced with new features gradually. Compsis added features to
it such as Lane level vehicle detection, Plaza supervision, Auditing and
overall Financial Supervision.
What I understood from this is, Compsis did not face
that hard of a competition that it might face in the USA.
Optimal international business strategy for the firm
With their matured
product SICAT and with latest product SICAT XP, Compsis can look into markets
where demand is. That might include latin American countries, North America,
emerging markets etc. Understanding the market is important, since Compsis has
already worked in Australia and India, they have understanding of those
markets, they can look into those markets again for new opportunities. But,
this is definitly not Compsis’s forte, they have started expanding and long way
to go before they understand different geographies, so demand condition driven
strategy would not be optimal for them.
Factor condition for
Compsis mainly revolves around software developpers, hardware developpers.
While the firm has tie ups with universities in Brazil, they do not have any
tie ups else where. And they need to look for hardware manufacturer, wherever
they go. The factor condition has many unknown factors at this moment, hence
this cannot be the optimal strategy.
Compsis completed a project successfully in Australia
with partnership with US firm names Phillips, and their endeavor in India, did
not go that well. Their strategy to partner up with another vendor might be a
good idea but they do not have enough experience in competing against other
firms globally (Lehrich,Paredes,Ravikumar,2009).
Compsis is mainly a software firm, they implanted ETC
solutions while partnered up with other hardware manufactures to deliver
complete solutions in Brazil and Australia. They can partner up with a hardware
manufacturer which is reputable and considerable local or have local expertise
and try to enter other market, I think related and supporting industries could
provide them with optimal result in international market.
Best market entry option for Compsis to implement possible
US expansion
The USA is matured ETC market which is not that price
sensitive. Hence there are lot of companies competing. Compsis needs to partner
up with a technology firm like Philips. So, in collaboration they can implement
the ETC system with software and hardware in toll plazas. They have history of
success in this model. And this will be probably their best chance to show
their competence, experience in RFP, if they find an experienced, reputable
hardware manufacturer as partner. Since they are more or less a software
development firm and ETC implementation partner, their software team can work
from anywhere, but they will need to hire engineers to implement ETC in toll
plazas.
References -
Lehrich,J.,
Paredes,P. J., Ravikumar, R. ( December,2009).Compsis at a Crossroads.
Retrieved on August
7, 2019. Retrieved from
https://my.uopeople.edu/pluginfile.php/515770/mod_workshop/instructauthors/U7%20Compsis-at-a-Crossroads-Lehrich.pdf
Ketchen, D., & Short, J. (2012). Strategic
Management Evaluation and Execution. Retrieved August 7, 2019,Retrieved
from https://my.uopeople.edu/pluginfile.php/515745/mod_page/content/6/strategic-management-evaluation-and-execution
compressed.pdf
Comments
Post a Comment