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Export of Goods
 Export
Advantages Disadvantages
• Low initial investment • Potential costs of trade
• Reach customers quickly barriers
• – Transportation cost
Complete control over
– Tariffs and quotas
production
• • Foregoes potential location
Benefit of learning for
future expansion economies
• Difficult to respond to
customer needs well

When Is Export Appropriate?

 Low trade barriers
 Home location has cost advantage
 Customization not crucial
 TURNKEY PROJECTS
UNDER THIS SYSTEM, A FOREIGN COMPANY IS GIVEN THE CONTRACT TO SET
UP THE ENTIRE PLANT OR A PROJECT INCLUDING THE TRAINING OF OPERATING
PERSONNEL. AFTER THE COMPLETION OF THE CONTRACT THE FOREIGN CLIENT IS
HANDED THE “KEY” TO THE PLANT THAT IS READY FOR THE OPERATION. TURNKEY
PROJECTS ARE COMMON IN CHEMICAL, PHARMACEUTICAL AND REFINERY
INDUSTRY. EVEN SETTING UP OF AERODROME COULD BE A TURNKEY PROJECT.

ADVANTAGES DISADVANTAGES

 HIGH RETURNS  NO TECHNOLOGY TRANSFER

 IF FDI IS RESTRICTED
 COMPANY – NO LONG TERM INTEREST
 TECHNOLOGY NOT LEAKED

 HOST COUNTRY IS BENEFITTED

 TURNKEY PROJECTS ARE COMMON IN FERTILIZER, CHEMICAL, PHARMACEUTICAL,
PETROLEUM REFINING, CEMENT INDUSTRIES IN WHICH COMPLICATED PROCESSES
AND HUGE INVESTMENTS ARE REQUIRED.

INTERNATIONAL AIRPORT AT BANGLORE WAS JOINTLY CONSTRUCTED BY LARSEN

& TOUBRO (CIVIL WORK) AND SIEMENS (TECHNICAL WORK)

IRCON INTERNATIONAL LTD. HAS SUCCESSFULLY COMPLETED PROJECTS LIKE

CONSTRUCTION OF RAILWAY STATIONS, BRIDGES, TUNNELS ETC. IT HAS
SERVED CLIENTS FROM IRAQ, MALAYSIYA, BANGLADESH, ALGERIA, SAUDI
ARABIA, INDONESIA AND THAILAND.

BECHTEL, THE LARGEST CONSTRUCTION COMPANY IN THE USA CONSTRUCTED

SEMICONDUCTOR PLANT FOR MOTOROLA IN CHINA AND A PIPELINE FOR BP IN
ALGERIA.
 CONTRACT MANUFACTURING

UNDER CONTRACT MANUFACTURING, ONE COMPANY ARRANGES TO

MANUFACTURE ITS PRODUCT FROM ANOTHER COMPANY IN A DIFFERENT

COUNTRY.

THE ORIGINAL COMPANY PROVIDES ALL THE SPECIFICATIONS, MATERIALS

REQUIRED FOR THE PRODUCT. THE CONTRACT MANUFACTURER MUST SATISFY

CONDITIONS WITH RESPECT TO QUALITY, QUANTITY, DATE OF DELIVERY ETC. IT

ALSO ESTABLISHES GUIDELINES FOR THE INSPECTION OF THE PRODUCT.

 GODREJ SOAPS MANUFACTURED DETTOL FOR RECKITT & BENKISEN,
CLEARTON FOR NICHOLAS LABS, POND’S DREAMFLOWER AND POND.S COLD
CREAM FOR POND’S.

IN 90’S TITAN, IN ORDER TO BECOME GLOBAL THOUGHT OF CONTRACT

MANUFACTURING GLOBAL WATCH BRANDS AS IT WOULD TAKE LESS RISK. BUT
DROPPED THE IDEA AS THERE WAS NO GLORY IN BEING A CONTRACT
MANUFACTURER.

ADIDAS GETS FOOTWEAR MANUFACTURED ON CONTRACT BASIS FROM

CHINA.
 MANAGEMENT CONTRACT

IN MANAGEMENT CONTRACT, A COMPANY PROVIDES ITS MANAGEMENT

TALENT TO ASSIST A FOREIGN COMPANY FOR A SPECIFIED PERIOD FOR SOME
FEES.

FOR EXAMPLE, THE BRITISH AIRPORT AUTHORITY HAS CONTRACT TO

MANAGE SOME AIRPORTS IN THE US, ITALY AND AUSTRALIA.

DISNEY MANAGES THEME PARKS IN FRANCE AND JAPAN.

 Licensing Agreement
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Licensing of Technology

MNE Local Firm

Fees and Royalties

 IN LICENSING A FIRM TRANSFERS ITS INTANGIBLE PROPERTY SUCH AS

EXPERTISE, KNOW-HOW, BLUEPRINT, MANUFACTURING DESIGN TO A FIRM

LOCATED ABROAD.

A LICENCE CAN BE EXCLUSIVE, NON-EXCLUSIVE OR CROSS. IN AN

EXCLUSIVE LICENCE, THIS ARRANGEMENT PROVIDES EXCLUSIVE RIGHTS TO

PRODUCE AND MARKET THE PRODUCT IN A SPECIFIED REGION. ON THE

CONTRARY, A NON-EXCLUSIVE LICENCE DOES NOT GRANT A FIRM SOLE ACCESS

TO THE MARKET. LICENSOR CAN GRANT MORE COMPANIES THE RIGHT TO USE

THE IPR IN THE SAME REGION.

CROSS LICENCE IS RECIPROCAL WHERE INTANGIBLE PROPERTY IS

TRANSFERRED BETWEEN TWO FIRMS. IN 90’S THERE WAS CROSS LICENSING

BETWEEN FUJITSU OF JAPAN AND TEXAS INSTRUMENTS OF US.

 Licensing Agreement
Advantages Disadvantages
• Low initial investment • Lack of control over operations
• Avoids trade barriers • Difficulty in transferring tacit
• Potential for utilizing knowledge.
location economies • Potential for creating a
• Access to local knowledge competitor
• Easier to respond to
customer needs

When Is Licensing Appropriate?

 Well codified knowledge
 Strong property rights regime
 Location advantage
 ARVIND MILLS GOT LICENSES FROM REPUTED
INTERNATIONAL BRANDS SUCH AS ARROW, LEE, WRANGLER
FOR THE INDIAN MARKET.
 DURING MID-1990’S SPORTS SHOE MAJOR NIKE INC. OF USA ENTERED
INDIA THROUGH LICENSING AGREEMENT WITH SIERA INDUSTRIAL
ENTERPRISES LTD. THERE WAS ROYALTY TO NIKE AT 6% OF NET SALES
REVENUE. THOUGH NIKE HAD BIG PLANS, THE SALES DID NOT PICK UP

DUE TO ‘DISTANCE’ BETWEEN THE LICENSOR AND LICENSEE, THERE IS

NO CONTROL ON HOW THE TRANSFERRED TECHNOLOGY IS USED BY THE
LICENSEE. NIKE HAD CHOSEN A WRONG MODE OF ENTRY FOR INDIAN
MARKET.
 Franchising Agreement
FRACHISING IS A FORM OF LICENSING IN WHICH A COMPANY
(FRANCHISOR) ALLOWS OTHER INDEPENDENT COMPANY (FRANCHISEE) IN
A FOREIGN TARGET COUNTRY TO CONDUCT BUSINESS UNDER THE
FRANSISOR’S TRADE NAME, POLICIES AND PROCEDURES.

THE MAIN GROWTH PERIOD OF FRANCHISING WAS AFTER THE

SECOND WORLD WAR. NOWADAYS, FRANCHISING IS COMMON IN
BUSINESS FIELDS SUCH AS FAST-FOOD RESTAURANTS, CAR RENTAL
CHAINS, SOFT DRINKS, HOTEL CHAINS AND MANY OTHER SERVICE
BUSINESSES.
 FRANCHISI
NG
ADVANTAGES DISADVANTAGES

 OVERSEAS EXPANSION WITH A  REVENUES MAY NOT BE ADEQUATE

MINIMUM INVESTMENT
 LIMITED OVERSEAS OPPORTUNITY
 FRANCHISEES’ PROFIT TIED TO
THEIR EFFORTS.  LACK OF EFFECTIVE CONTROL

 FRANCHISEES’ KNOWLEDGE  PROBLEM IN PERFORMANCE STANDARD

ABOUT LOCAL MKT. AVAILABLE

 PHYSICAL PROXIMITY
McD0NALD’S FRANCHISEE IN INDIA ARE
1] CONNAUGHT PLAZA RESTAURANT Pvt. Ltd. FOR
NORTH/EAST REGION.
2] HARDCASTLE RESTAURANTS Pvt. Ltd. FOR
SOUTH/WEST REGION

KFC OF YUM! BRANDS HAS THREE FRANCISEES

1] SAPPHIRE FOODS
2] RJ CORPORATION
3] BURMAN HOSPITALITY
THESE THREE FRANCHISEES ARE WORKING AS MASTER
FRANCHISEE ON BEHALF OF YUM! BRANDS.
 Joint Venture
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MNE Local Firm

Share of
Inputs Profit
Inputs Joint Venture
Company
Share of Profit
 A JOINT VENTURE IS A CORPORATE CHILD OF TWO OR MORE PARENT
COMPANIES.

IT HAS THREE PRINCIPAL FORMS:

1] MINORITY JV

2] 50/50 JV

3] MAJORITY JV

1] IT CAN BE AS LOW AS 1% BY ONE PARTNER AND THE REST BY THE OTHER.

TOYOTA KIRLOSKAR MOTOR LTD. IS A JV IN WHICH KIRLOSKAR HAD INITIALLY
26% EQUITY HOLDING BUT WITH THE EXPANSION OF COMPANY, JAPANESE
PARTNER BROUGHT IN MORE CAPITAL AND THE KIRLOSKAR’S SHARE OF EQUITY
REDUCED TO 1%.
 STILL JV IS FUNCTIONING, BECAUSE KIRLOSKARS ARE MORE INTERESTED IN
BEING A SUPLLIER TO TKML AND OTHER TOYOTA PLANTS ELSEWHERE IN THE
WORLD.

LIKEWISE TOYOTA IS INTERESTED IN THE LOCAL TAG ‘KIRLOSKAR’ BEING A

RESPECTABLE NAME. MOREOVER, IT IS PREVENTING PROTECTIONIST INDIAN
SENTIMENT.

THE MANAGEMENT IS SHARED BY PARTNERS AS PER MUTUAL AGREEMENT.

IN CASE OF TOYOTA KIRLOSKAR MOTOR LTD. MD IS FROM TOYOTA MOTOR
CO. OF JAPAN AND DEPUTY MD IS FROM KIRLOSKAR GROUP.
2] IN 2009, AMERICAN WAL-MART FORMED 50/50 JV WITH BHARTI RETAIL
WITH THE OBJECTIVE OF SETTING UP CASH-AND-CARRY STORES IN INDIA.

3] RECENTLY, THERE IS A GENERAL TREND TOWARDS LESS RESTRICTIVE POLICIES

OF GOVERNMENTS SUCH AS MEXICO, S. KOREA, INDIA.
 Joint Venture
Advantages Disadvantages
• Access to partner’s local • Potential loss of proprietary
knowledge knowledge
• Reduction of concern about • Potential conflicts between
overpayment partners
• Both parties have some • Neither partner has full
performance incentives performance incentive
• Significant control over • Neither partner has full
operation control
When Is a Joint Venture Appropriate?
 Both partners contribute hard-to-measure inputs
 Large expected mutual gains in the long-run
 Trade secrets can be walled off
GAINS TO FOREIGN COMPANY

 KNOWLEDGE ABOUT LOCAL MARKET

 DISTRIBUTION NETWORK

 GOVERNMENT CONTACTS

 TACKLING LOCAL RULES & REGULATIONS

 SAFEGUARDING AGAINST PROTECTIONIST SENTIMENTS

 TAX CONCESSIONS / INCENTIVES

 WHERE WOS ARE NOT ALLOWED

GAINS TO LOCAL COMPANY

 TECHNOLOGY UPGRADATION

 CAPITAL

 BRAND NAME

 INTERNATIONAL OUTLOOK
 WHEN HONDA MOTORS ENTERED INDIAN MOTORCYCLE MARKET

IN THE EARLY 1980’S, IT ENTERED THROUGH JV WITH HERO

GROUP OF INDIA AND HERO HONDA MOTORS LTD. CAME INTO

EXISTENCE. THIS JV INTRODUCED 4-STROKE ENGINE TECHNOLOGY

FOR THE MOTORCYCLES. THE COMPANY WENT FAR AHEAD OF ITS

COMPETITORS.
 TVS – AN ESTABLISHED FIRM WITH REPUTATION OF QUALITY AND

SERVICE, FORMED A JV WITH SUZUKI. SUZUKI’S INTENTION WAS TO GAIN

KNOWLEDGE OF MARKETING AND NETWORKING IN INDIA THROUGH JV.

WHEREAS TVS HAD THE INTENTION OF GETTING THE TECHNOLOGY OF 2-

STROKE AND 4-STROKE IN TWO WHEELERS. THE JV SUCCEEDED IN

MANUFACTURING 2-STROKE TWO WHEELERS. HOWEVER, TVS WANTED TO

MANUFACTURE 4-STROKE TWO WHEELERS, BUT SUZUKI DID NOT HAVE THAT

TECHNOLOGY SUITABLE FOR INDIAN MARKET.

IN THIS CASE, TVS HAD ACHIEVED ITS OBJECTIVE. IT GREW AND SUZUKI

WAS UNWILLING TO INTRODUCE 4-STROKE MOTORCYCLE AND THEY SPLIT.

 BEFORE THE FORMATION OF TKML, TOYOTA AND DCM

HAD A JV, DCM-TOYOTA JV. (DELHI CLOTH & GENERAL MILLS).

HOWEVER, TOYOTA WAS NOT HAPPY WITH THE PARTNER

AS DCM HAD EXPERTISE IN DIFFERENT FIELDS SUCH AS

CHEMICALS AND TEXTILE. IT WAS A WRONG PAIRING.

HENCE, TOYOTA DECIDED TO SPLIT AND CHOSE

‘KIRLOSKARS’, A CENTURY OLD REPUTED MANUFACTURER

IN THE FIELD OF ENGINEERING.

 A 50:50 joint venture was created Sony Ericsson, a famous mobile
handset brand of that period. Ericsson (a Swedish telecom company) was a
mobile handset maker and Sony had the technology. This JV gave the
organization the capacity to compete with leading companies like Nokia and
Apple.
It is a 50:50 JV where each party owns 50% of the share. Through this JV,
Bayer (a German Pharma company was able to distribute its products in the
Indian market and in turn, the JV helped Cadila to increase its share value
in the market. Thus both parties benefited from the association.

Tata AIG General Insurance Company is a JV between Tata Group and

American International Group (ATG).
ICICI Prudential Life Insurance Co. is a JV between ICICI Bank and
Prudential plc. , a prominent international financial services group from UK.
 TATA GROUP AND STARBUCKS, AN AMERICAN MULTINATIONAL
CHAIN OF COFFEE HOUSES, SET UP 50:50 JV IN INDIA IN 2012

i. STARBUCKS GOT A REPUTED BRAND NAME IN INDIA

ii. IT COULD OBTAIN ROASTED COFFEE FROM TATA THAT

REDUCED COST

iii. IT COULD USE LUXURY HOTELS TO ESTABLISH ITS SERVICES

 Foreign Acquisition
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Investment

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Profit
 Merger & Acquisition
MERGER IS GENERALLY BETWEEN TWO EQUIVALENT ENTITIES.

ACQUISITION MAY BE;

1] A MINORITY
2] A MAJORITY
3] FULL OUTRIGHT STAKE

ACQUISITION OF FULL OUTRIGHT STAKE IS ALSO CALLED BROWN-FIELD INVESTMENT

 MERGER & ACQUISITION LEADS TO INTEGRATION OF TWO OR MORE
BUSINESS UNITS.

THERE ARE THREE TYPES OF INTEGRATION;

1] HORIZONTAL INTEGRATION
2] VERTICAL INTEGRATION
3] CONGLOMERATE

1] HORIZONTAL INTEGRATION : WHEN TWO FIRMS FROM THE SAME

INDUSTRY COME TOGETHER, IT IS CALLED HORIZONTAL INTEGRATION.

FOR EXAMPLE, ONE AUTOMOBILE COMPANY ACQUIRES SOME OTHER

AUTO COMPANY, IT IS HORIZONTAL INTEGRATION.

 -- TATA STEEL ACQUIRED CORUS, A EUROPEAN STEEL COMPANY

--- TATA MOTORS ACQUIRED JAGUAR LAND ROVER (JLR), A BRITISH

MULTINATIONAL AUTOMOBILE MANUFACTURER PRUDUCING LUXURY
CARS.

-- TATA TEA ACQUIRED TETLEY, A BRITISH TEA COMPANY

HORIZONTAL INTEGRATION AIMS AT INCREASING MARKET SHARE,

INCREASING COMPETITIVE STRENGTH, IMROVING LEVEL OF

TECHNOLOGY, ENJOYING ECONOMIES OF SCALE.

2] VERTICLE INTEGRATION: WHEN A COMPANY ACQUIRES OR MERGES
WITH SOME OTHER COMPANY INVOLVED IN THE DIFFERENT STAGE OF
THE PRODUCTION OF THE SAME PRODUCT, IT IS CALLED VERTICLE
INTEGRATION. FOR EXAMPLE, AN AUTOMOBILE COMPANY ACQUIRES A
STEEL COMPANY

VERTICLE INTEGRATION IS FURTHER DIVIDED INTO;

A] FORWARD
B] BACKWARD AND
C] BALANCED
A] FORWARD INTEGRATION INVOLVES ACQUISITION OF A COMPANY CLOSER TO

THE FINISHED PRODUCT. A CLOTHING MANUFACTURER ACQUIRING A RETAIL

STORE OR A CAR MANUFACTURER ACQUIRING DEALERSHIP NETWORK ARE THE

EXAMPLES OF FORWARD VERTICLE INTEGRATION.

IN 2017, AMAZON ACQUIRED WHOLE FOODS MARKET, A SUPERMARKET

CHAIN SPECIALIZING IN NATURAL & ORGANIC FOODS WITH MORE THAN 500

STORES IN THE USA, UK AND CANADA.

THIS MOVE ALLOWED AMAZON TO ENTER THE GROCERY INDUSTRY &

INTEGRATE ITS ONLINE RETAIL CAPABILITIES WITH PHYSICAL STORES.

B] BACKWARD INTEGRATION REFERS TO THE ACQUISITION OF A

COMPANY CLOSER TO THE RAW MATERIAL. FOR EXAMPLE, A CAR

MANUFACTURER ACQUIRING A STEEL COMPANY OR A COMPUTER

MANUFACTURER ACQUIRING A CHIP-MAKING COMPANY.

TESLA, AN ELECTRIC VEHICLE MANUFACTURER ACQUIRED CALIFORNIA

BASED COMPANY SOLARCITY IN 2016. BY INTEGRATING SOLARCITY,

TESLA AIMED TO SECURE A STABLE SUPPLY OF SOLAR PANELS &

SOLAR ENERGY.
C] BALANCED INTEGRATION TAKES PLACE WHEN A COMPANY

CHOOSES TO PURSUE BOTH BACKWARD AND FORWARD

INTEGRATION IN ORDER TO HAVE GREATER CONTROL OVER THE

ENTIRE SUPPLY CHAIN. FOR EXAMPLE, A FURNITURE

MANUFACTURER OWNS SAWMILLS AS WELL AS A FURNITURE

SHOW-ROOM OR A FOOD PRODUCER OWNS A FARM, A FOOD

PROCESSING UNIT AND ALSO A RETAIL STORE TO SELL HIS

PRODUCT.
3] CONGLOMERATE: WHEN A COMPANY ACQUIRES SOME OTHER

COMPANY WHICH IS ENGAGED IN TOTLLAY DIFFERENT BUSINESS, IS

CALLED CONGLOMERATE.

THERE ARE LARGE INDIAN CONGLOMERATES LIKE TATA GROUPS,

GODREJ, ITC GROUP, MAHINDRA GROUP, RELIANCE INDUSTRIES LTD.

LARSEN & TOUBRO ETC.

PROCTER & GAMBLE, UNILEVER, NESTLE, SAMSUNG ARE SPREAD ALL

OVER THE WORLD.

 Foreign Acquisition
Advantages Disadvantages
• Access to target’s local • Uncertainty about target’s
knowledge value
• Control over foreign • Difficulty in “absorbing”
operations acquired assets
• Control over own • Infeasible if local market for
technology corporate control is
underdeveloped

When Is Acquisition Appropriate?

 Developed market for corporate control
 Acquirer has high “absorptive” capacity
 High synergy
Going it Alone: “Green Field” Entry
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Company
 Going it Alone: “Green Field” Entry
Advantages Disadvantages
• Normally feasible • Slower startup
• Avoids risk of • Requires knowledge
overpayment of foreign
• Avoids problem of management
integration • High risk and high
• Still retains full commitment
When Is “Green Field” Entry Appropriate?
control
 Lack of proper acquisition target
 In-house local expertise
 Embedded competitive advantage
 GREENFIELD INVESTMENT & BROWNFIELD INVESTMENT

WHENEVER ANY COMPANY WANTS TO ENTER A NEW COUNTRY, IT CAN INVEST

IN BUILDING NEW FACILITIES OR IT CAN INVEST IN THE EXISTING FACILITIES.

INVESTMENT IN BUILDING NEW FACILITIES IS KNOWN AS GREENFIELD

INVESTNT, BUT INVESTMENT IN EXISTING FACILITIES IS CALLED BROWNFIELD
INVESTMENT.

GREENFIELD INVESTMENT BUILDS NEW PLANT, MANUFACTURING FACILITIES

FROM SCRATCH. IT STARTS WITH LAND ACQUISITION. COCA COLA, PEPSI,
HYUNDAI, P & G, CATERPILLAR, FORD ARE THE EXAMPLES OF GREENFIELD
INVESTMENT. BROWNFIELD INVESTMENT AQUIRES AN EXISTING PLANT OR
MANUFACTURING UNIT WHICH MAY BE LYING IDLE, UNUTILIZED OR
UNDERUTILIZED. IT IS UPGRADED OR MODIFIED. IT IS AQUIRED THROUGH
M & A. DAIICHI SANKYO ACQUIRED RANBAXY IN 2008, VODAFONE
ACQUIRED HUTCHISON ESSAR ACQUIRED IN 2007
 TATA MOTORS ACQUIRED JAGUAR LAND ROVER LTD. , A BRITISH
AUTOMOBILE MFG. CO.

MERCEDES BENZ GROUP, A GERMAN AUTOMOTIVE COMPANY

SET UP MERSEDES BENZ INDIA NEAR PUNE.

TOYOTA FOUNDED A NEW PLANT IN MEXICO IN 2015

 Going it Alone: “Brownfield” Entry
Advantages Disadvantages
• Access to established • Overpayment
facilities (Managerial hubris)
• Outdated technology
• Skilled manpower
• Location constraint
• Licenses, approvals
• Cultural issues
• Instant branding • Difficult to expand
When Is “Brownfield” Entry Appropriate?
 Availability of proper acquisition target
 Rapid globalization
 Attractive destination
 DIEBOLD

For much of its 144-year history, Diebold Inc. did not worry much about
international business. As a premier name in bank vaults and then automated
teller machines (ATM), the Ohio-based company found that it hands full
focusing on U.S. financial institutions. The company first started to sell ATM
machines in foreign markets in the 1980’s. Wary of going alone, Diebold forged a
distribution agreement with the Dutch multinational company, Philips NV.
Under the agreement, Diebold manufactured ATMs in the US and exported
them to foreign customers after Philips had made the sale.

In 1990, Diebold pulled out of the agreement with Philips and established
a joint venture with IBM, INTERBOLD, for the research, development and
distribution of ATM machines worldwide. Diebold, which owned a 70% stake
in the JV, supplied the machines, while IBM supplied the global marketing,
sales and service functions. Diebold thought it lacked the resources to
establish an international presence. In essence, Diebold was exporting its
machines via IBM’s distribution network.
 By 1997, foreign sales had grown from the single digit to more than 20% of
Diebold’s total revenue. But sales in the US were slowing due to a saturated
domestic market. Looking forward, Diebold saw rapid growth in demand for
ATMs in a wide range of developed and developing markets. Particularly
China, India and Brazil where an emerging middle class was starting to use the
banking system in large numbers and demand for ATM was expected to surge.
It was at this point that Diebold decided to establish its own foreign
distribution network.

As a first step, Diebold purchased IBM’s 30% stake in the INTERBOLD. In

part, the acquisition was driven by Diebold’s dissatisfaction with IBM’s sales
force. Diebold’s ATMs were just a part of their product portfolio and not
necessarily their top priority. Diebold believed it could attain a greater market
share if it gained direct control over distribution.
 The company also realised that in addition to local distribution, it would
need a local manufacturing presence in a number of regions. Among the
reasons for this were the differences in the way ATMs are used, requiring
customisation of the product. In part of Asia, for example, many customers pay
their utility bills with cash via ATMs. To gain market share, Diebold had to
design ATMs that both accept and count stacks of up to 100 currency notes and
weed out counterfeits. In other countries, ATMs perform multiple functions
from filing tax returns to distributing theatre tickets. Diebold believed that
locating close to key market would help facilitate local customisation.
 To jump-start its international expansion, Diebold went on a foreign
acquisition binge. In 1999 it acquired Brazil’s Procomp Amazonia Industria
Electronica, an electronic company with sales of $400 million and a big presence
in ATMs. This was followed in quick succession by the acquisitions of the ATM
units of France’s Groupe Bull and Holland’s Getronics, both major players in
Europe for a combined $160 million. In China, where no substantial indigenous
competitors were open to acquisition, Diebold established a manufacturing and
distribution JV in which it took a majority position. The result; by 2002 Diebold
had a manufacturing presence in Asia, Europe and Latin America as well as the
US and distribution operations in 80 nations, the majority of which were wholly
owned by Diebold. International sales were accounted for some 37% of the
company’s $1.94 billion in revenues in 2002 and were forecast to grow at
double-digit rates.