A Case Study of Diebold

INTRODUCTION

Managing business operations, especially at the international scale, is a complicated process (Kumar, Gaur, & Pattnaik, 2012). There are several aspects which have to be kept in mind by the authorities. Any mistake can have a significant negative impact on the company and even jeopardise its very existence. This essay will shed light on international business management strategies adopted by Diebold, an ATM manufacturer. providing the most valuable insights for those who are seeking business dissertation help.

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WHY DIEBOLD USED INTERNATIONAL DISTRIBUTION AGREEMENTS

During the 1980s, the firm started to expand its operations globally, which made the aspect of distribution and supply chain all the more critical. They were essential to reach out to the target customers and enhance the sales figures. In this regard, Diebold had established agreements with different suppliers and companies that looked after its distribution network (Okoro, 2012).

Several reasons can be used to explain why Diebold used distribution agreements as a way to distribute its products in the international markets and why it partnered with companies like Philips NV and IBM. One of the main reasons herein can be the fact that Diebold did not have enough experience and exposure to the international market (Alon, Ni, & Wang, 2012). Due to the same reason as well, the company could not have set up its operations in foreign markets. To better understand this, the OLI model can be used. Since, at the time, the aspect of internationalisation was very new and had not been fully explored or understood, therefore, if Diebold would have used any other ways to distribute its products, they would not have provided the firm with desired effects. Due to this reason, the management at Diebold decided to use international distribution agreements as a way to enter the international markets (Jiang, Beamish, & Makino, 2014). Later on, the company use acquisitions as an entry mode, mainly so that it can get already established networks and also gain local exposure.

Several reasons can be used

WHY DIEBOLD FAVOURED ACQUISITION AS AN ENTRY MODE

For Diebold, the US was the primary market. However, it eventually started to saturate, and there were very few opportunities left for the company in the country. Due to this reason, it had to venture in other developed and developing regions like Asia and Europe. This was the primary reason that essentially forces Diebold to modify its international expansion strategy (Kaynak & Baker, 2013). It was now aiming to capture and control a substantial share of the international market as well.

Another reason that forced the hand of Diebold to take such measures was that IBM, its partner in the Interbold joint venture, was not meeting its performance targets (Cuervo-Cazurra, 2016). Diebold realised that for IBM and its sales employees, selling the ATMs was not a priority. Instead, it was just a product in their portfolio. IBM had often failed to fulfil its sales quotas, which further became an issue for Diebold. Management at the ATM manufacturer realised this and decided it was a perfect time and opportunity to build its distribution and supplier network. For this, the company took the route of acquiring companies in the key markets, so it can gain local exposure and also alter its products to fit with demands of the customers (Kumar, Gaur, & Pattnaik, 2012). This shows that the company had adopted a customer-centric approach, rather than product-driven philosophy. This further allowed the company to have a manufacturing presence in Asia, Europe and Latin America.

WHY DIEBOLD ENTERED CHINA THROUGH JOINT VENTURE AND NOT WHOLLY-OWNED SUBSIDIARY

Although one of the best ways to enter a market is through wholly-owned subsidiaries, Diebold used joint ventures to enter the Chinese market. The main reason behind this decision was the fact that there were no indigenous or local competitors in China that Diebold could have acquired (Cuervo-Cazurra, 2016). This means there were no companies with enough exposure and experience of the local market in China. Diebold could not have benefited by acquiring organisations that lacked the required skills and capabilities.

This decision can also be understood and supported through one element of the OLI model – location. It states that every action performed by an organisation should be for its advantage while utilising the locally available tools and resources. In this case, as discussed above, there were no local competitors for Diebold to acquire (Burnett, 2018). Instead of entering into joint ventures, if the company had decided to set up its operations through wholly-owned subsidiaries, then it could have suffered from even significant losses. This is mainly due to the reason that the company would have been required to invest a significant sum of money, time and resources in analysing the Chinese market and getting an understanding about it. Also, risks for the firm would have increased and thereby reduced its chances of attaining success in China (Alon, Ni, & Wang, 2012).

DRAWBACKS OF USING JOINT VENTURES AS ENTRY METHODS

Several drawbacks are associated with joint ventures in comparison to wholly-owned subsidiaries while entering a new market. One of the most significant drawbacks is in terms of the speed of the decision-making process (López-Duarte & Marta, 2013). In a joint venture, since two or more parties are involved, it often complicates the decision-making process. Now since Diebold entered the Chinese market in joint ventures rather than a wholly-owned subsidiary, the company could face issues in areas where it needs to make quick decisions.

In a joint venture setting the process of financial reporting gets lengthy and complicated (Chang, Jaiho, & Moon, 2013). Herein it can be said that while analysing the financial transactions, Diebold could face issues because every transaction will have to be checked and rechecked to ensure they are correctly reflected in accounting books of all the parties. This can end up taking much time, thus delaying the decision-making process and causing multiple problems for the companies.

As was seen with IBM and Diebold, there are chances that the companies in the joint venture might not be able to perform well with one another. As opposed to wholly-owned subsidiaries, Diebold could have easily implemented a decision, and it would not have required permission and approval from other players (Meschi, Thanh, & Wassmer, 2016). However, this is not the case with firms' decision to enter the Chinese market through a joint venture. The decision-making process will be lengthy and time-consuming. It could even lead to a clash between the investing firms and thereby bringing a quick end to their relationship.

SHOULD WEST SEEK TO HALT CHINA’S ECONOMIC EXPANSION

Today, China is one of the fastest-growing nations in the world. The company has grown at a very rapid pace. Its rate of growth has put fear in many western countries. Due to this reason, many experts believe that it is becoming imperative for the West to stop China and its growth (Wolf, 2018). Because of recent events such as terrorism, in the international market, it is fast becoming imperative for the western nations to stop China’s economic expansion. However, it is being believed that stopping China's economic growth and expansion is challenging, in addition to the fact that it is now too late to perform such activities (Burnett, 2018). On this basis, it can be said that there are no chances of stopping China’s economic expansion.

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CONCLUSION

This essay will shed light on international business management strategies adopted by Diebold, an ATM manufacturer. Several reasons can be used to explain why Diebold used distribution agreements as a way to distribute its products in the international markets and why it partnered with companies like Philips NV and IBM.

REFERENCES

Sharmiladevi, J. (2017). UNDERSTANDING DUNNING’S OLI PARADIGM. Indian Journal of Commerce & Management Studies , 47-52.

López-Duarte, C., & Marta, V.-S. (2013). Cultural distance and the choice between wholly owned subsidiaries and joint ventures. Journal of Business Research, 2252-2261.

Chang, S.‐J., Jaiho, C., & Moon, J. J. (2013). When do wholly owned subsidiaries perform better than joint ventures? Strategic Management Journal, 317-337.

Meschi, P.-X., Thanh, P., & Wassmer, U. (2016). Transactional and institutional alignment of entry modes in transition economies. A survival analysis of joint ventures and wholly owned subsidiaries in Vietnam. International Business Review, 946-959.

Wolf, M. (2018, December). How the West should judge a rising China. Retrieved from Financial Times: https://www.ft.com/content/e30e9ed4-5754-11e8-bdb7-f6677d2e1ce8

Burnett, K. (2018, December). Its too late to stop China's rise, so the West must start to question its own assumptions. Retrieved from South China Morning Post: https://www.scmp.com/comment/insight-opinion/article/2142384/its-too-late-stop-chinas-rise-so-west-must-start-question

Kumar, V., Gaur, A., & Pattnaik, C. (2012). Product diversification and international expansion of business groups. Management International Review , 175-192.

Okoro, E. (2012). Cross-cultural etiquette and communication in global business: Toward a strategic framework for managing corporate expansion. International Journal of Business and Management , 130.

Alon, I., Ni, L., & Wang, Y. (2012). Examining the determinants of hotel chain expansion through international franchising. International Journal of Hospitality Management, 379-386.

Jiang, R., Beamish, P., & Makino, S. (2014). Time compression diseconomies in foreign expansion. Journal of World Business, 114-121.

Kaynak, E., & Baker, J. (2013). International Business Expansion Into Less-Developed Countries: The International Finance Corporation and Its Operations. Routledge.

Cuervo-Cazurra, A. (2016). Multilatinas as sources of new research insights: The learning and escape drivers of international expansion. Journal of Business Research , 1963-1972.

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