Computadores e Sistemas Ind e Com LTDA popularly known as Compsis was

Computadores e Sistemas Ind. e Com. LTDA popularly known as Compsis was founded in 1989 by engineers from the Brazilian aircraft firm Embraer based in S?o Jos? dos Campos. They started off as aircraft embedded system for Brazilian Airforce, with failure switched to automotive Electronic Toll Collector (ETC). However, in 1991 Compsis found its debut customer, General Motors Brazil, and from then on devoted its systems integration expertise primarily to the broad field of automotive products. In 1996, Compsis expanded its technology strategy into a new segment – intelligent transportation systems (ITS), offering products such as Advanced Traffic Management (ATMS), Vehicle Monitoring System (SMV), Magnetic Guidance System (SGM) and Electronic Toll Audit (SICAT) to Brazilian ITS projects and ETC systems integration.

The firms core value is to develop more diverse customized products and services which creates a value for its customers, by integrating complex hardware and software systems rather than manufacture transponders or run customer service centers. By 2004, SICAT implementation and maintenance was deriving the majority of compsis’s revenue making it a flagship and cornerstone.

Its operations involved installing both the hardware and software, then integrating the two at the level of the booth, plaza, and multi-plaza auditing system. Improvement in the operational activities with improved functions such as developing SICAT software helped the firm attain a huge market share (about 39%) in Brazilian market. The SICAT software served Lane Level, Plaza Supervision, Auditing and Overall Financial Supervision (known as level 1 -4 of SICAT development). At level – 4, Compsis could sell SICAT not as a project that required building and customization, but as a product that would approach the convenience of plug-and-play.

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This breakthrough offered the firm access to operate in Australia, India, and become a market leader in Brazil’s ETC industry with revenue reaching US$4.2 million in 2003, Despite this Compsis refused to rely solely on its Brazilian SICAT business and strove to expand into new markets throughout the world. However, in 2004, Revenue fell to US$3.3 million, due to the Brazilian government’s prolonged delay in awarding new toll road construction rights to concessionaries and due to the company not being unable to win new ETC (electronic toll collection) projects outside Brazil. With all these difficulties, the company is at a crossroad and decided to increase their utilities and seek new markets especially in United States because its developed market for ETC systems. However, if Compsis really wants to grow, then Brazil was ultimately a limited market but they hadn’t been perfectly successful in its earliest international projects, but the team had learned crucial lessons about project management, cultural differences, and the complexities of finding a local partner. This paper seeks to help Compsis cross the roads of the impending cashflow drought by introducing compsis, its desire for the US market, analysis of the U.S market, compsis in the Diamonds model and identifies optimal international business strategy and the best market penetration into the US market.

The U.S. market

Unlike the Australia and Indian markets, the ETC industry in the United States was mature, growing steadily, and dominated by several well-established providers. The ETC customer base in the US was comprised mostly of transit agencies and transit authorities such as Departments of Transportation (DOT) both at state and federal levels. More so, competition amongst potential vendors entrants to the ETC market was based majorly on credibility, competence, and proven expertise. ETC projects in the US were handled by public organizations that also constructed and operated the roads, only few private firms were involved. As of 2004, a total of 64 toll agencies were distributed among 26 states with almost 12,000 of road projects of which the largest toll road builders were Florida, New York, Texas, and Illinois. TransCore, MarkIV, Raytheon, SIRIT, ACS State and Local Solutions, VES Systems, CASETA Technologies, ETC Inc. and Iteris dominated the market. Remarkably, the first two shared 92% of the market. Besides this, ETC Sales process was not well known to public agencies and procurement was difficult due to insufficient knowledge of the product and service offerings, however, they rely on several trade organizations. Specifically, the International Bridge, Tunnel and Toll Association (IBTTA) served as the main trade organization and included among its members virtually every toll authority and the most significant vendors. Every member was qualified to the list of current open Requests for Proposals (RFPs) since the majority of projects were procured through public RFPs. The RFP was a competitive, well-regulated bidding process with clear guidelines and procedures, timely, designed to ensure fair competition among vendors using a scoring system. Studying the market and its complexity, it is indeed a serious nut for Compsis to crack. However, for a firm that has successfully operated loacally, it must have developed the muscle to face these complexities in gaining entry into the US markets. Employing the Michael Porters’ economic diamond model we can uncover the Compsis’s potentials liable for it to compete favorably in the US markets.

The Diamond Model Vs. The Compsis

Porters economic diamond model for (domestic or small) businesses help them to understand their competitive position in global markets. This model is also known as the Porter Diamond theory of National Advantage since all factors that are important in global business competition resemble the points of a diamond. The model assumes that the competitiveness of businesses is related to the performance of their other businesses especially in their home country. This is because the characteristics of the home country play a central role in explaining the international competitiveness of the firm. Indeed, the home base of the company is an important determinant of a firm’s strengths and weaknesses relative to foreign rivals, and also shapes its likely future strategies of which Compsis is no different. Moreover, other factors are tied together in the value-added chain in a long-distance relation or a local or regional context. The Porter Diamond model bases its assessment on six elements: factor conditions, demand conditions, related /supporting industries, firm strategy, structure and rivalry, government and chance. According the diamond model Compsis competitiveness is thus;

Factor conditions – refers to different types of resources (human resources, physical resources, knowledge resources, capital resources and infrastructure) that may or may not be present in Brazil, Compsis home country and includes:

• Government of Brazil puts continuous efforts in awarding concessions and making sound transport policies.

• Rapid developing and growing IT Workforce/Industry.

• High level of commuter education or awareness on toll collection and ITS technology is high.

• Brazil has geographical IT advantages to provide RFID transponders, hardware, integration and software, maintenance, back-end (customer support), detection and auditing technology services.

• Presence of solid infrastructures to support complex and integrated system of wires, detection devices, and software, both to monitor drivers and employees and to audit the receipts.

• Presence of sophisticated traffic management agencies and facilities

• Adequate transport management systems

• Presence of highway construction and maintenance companies.

• Hardware manufacturers and local suppliers, who provide vehicle sensors, high resolution cameras, toll gates, signaling elements, RFID sensors, etc.

• Adequate capital investments in developing softwares and in research and development (R&D).

Demand conditions involves factors such as early demand, market size, market growth and sophistication. These characteristics can help companies create competitive advantage, or determine If a producer can realize sufficient economies of scale, this will offer advantages to other companies to service the market from a single location. Demand conditions includes;

• Growing number of road users.

• Road transport is cheaper, relatively safer, convenient and accessible for everybody.

• Upcoming online businesses including App builders.

• mature market with cutting-edge technology from industry leaders and full of experienced toll system buyers.

• Fast increasing number of private concessionaires.

• Government of Brazil regulates the ETC market regulation.

• Increasing request for SICAT 4 upgrade leading to four levels of functionality.

• Presence of existing SICAT 4 customers and growing market for upgrade to full SICAT XP package.

• Brazilian toll concessionaires had contracted with Compsis for installation and software

• Availability of high priced and technologically sophisticated services.

• Compsis’s ETC trade partnerships in Australia and India

Related and supporting industries – related and supporting industries can produce inputs that are critical for innovation and internationalization. These industries provide cost-effective inputs, and for Compsis includes;

• Brazil’s has a leading ETC market.

• Trading partners – Australian and Indian.

• The government investments in transport and IT development.

• Local Hardware manufacturers and local suppliers

• strong relationships with the Brazilian government and toll road operators,

• International SOPs among industry competitors for quality and technological expertise.

• Presence of the detection and auditing technology industry.

Firm strategy, structure and rivalry – includes how companies are organized and managed, their objectives and the nature of rivalry in the local market. The way in which companies are established, set goals and are managed is critical to success on international markets. Compsis strategies include;

• Compsis Market leader in Brazil ETC market with high IT technology.

• Compsis, other IT business and hardware supplier companies.

• Market competition in ITS especially in ETC. With competitors competing based on price, quality, technical knowhow, or local knowledge.

• Target niche market by continuous development and improvement of ITS segments (ATMS, SMV, SGM and SICAT).

• Turning its ETC software SICAT into a simpler, more flexible with level – 4 functionality product to achieve competitive advantage.

• Roll out of new products ranging from traffic management systems to magnetically guided buses.

• Compsis’s technologically sophisticated services are highly price-sensitive.

• Rather than manufacture transponders or run customer service centers, Compsis stuck to its core skills: integrating complex hardware and software systems.

• Compsis prefers installing both the hardware and software, then integrate the two at the level of the booth, plaza, and multi-plaza auditing system

• Introducing a stand-alone product and as an upgrade for current SICAT 4 customers, SICAT XP would be web-based, layered on an inexpensive SQL or MySQL database, and most importantly flexible enough to be sold in modules.

• installing the software with a minimum of front-end interface customization, and then switching on or off whichever functions and levels the buyer had chosen to license or forgo.

• Compsis sells SICAT as a plug-and-play product and depends on it as a single product

Government – the government can have strong influence on the international competitiveness of a firm. In addition, it can influence each of the five other forces in the Porter Diamond model. The government element for Compsis includes;

• Brazilian government’s prolonged delay in awarding new toll road construction rights to concessionaries

Chance – refers to random events that are beyond the control of the company.

• Hoping that the Brazilian governments will award new toll operating rights.

From the model we see that Compsis has significant resources and competence to succeed in the international market. Besides the porter’s diamond model, the business strategy Compsis will employ in moving into the international seen is important in determining its success.

Optimal International Business Strategy for Compsis

Consequently, moving into the US market will enlist Compsis as a multinational company with three possible strategies to choose from, during market entry. These includes entry using Multi-domestic ( sacrifices efficiency in favor of emphasizing responsiveness to local requirements within each of its markets) strategy just like MTV channels, a Global (sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency) strategy such as Microsoft, or the Transnational (tries to balance the desire for efficiency with the need to adjust to local preferences within various countries) strategy just like the McDonald’s and KFC’s. Considering the sensitivity of Compsis products and services in the ITS/ETC industry I will recommend the optimal international business strategy to be the translational strategy for Compsis. Operating as a transnational company will help the firm benefit from different regulations (Lander, n.d.). For instance, if Compsis manufacturers a new product that would be impractical to make in the United States, they may choose to manufacture it in Brazil where compliance costs are lower and then export it back to the U.S. On the other hand, if you have a product that isn’t eligible for approval from U.S. regulators, you may be able to legally sell it in other countries. They can also take advantage of lowering cost of labor. For instance, they can choose to manufacture through subsidiaries which can lower the fraction of what American workers get paid, working in these countries lets you maintain cost-competitive pricing while staying profitable. Besides this, favourable taxation and deeper cultural understanding are also benefits (Lander, n.d.). Perhaps, Compsis is established as a transnational company, it’s market entry option cannot be overemphasized if it must withstand the heat of fierce competition in other market.

Us Expansion Market Entry Option for Compsis.

Undoubtably, after a poor year, Compsis have decided to expand their operations to other markets due to uncertainty and limitations in the Brazilian market. The firms focus is to expand into Latin America, the USA or to remain in Brazil. Compsis have a high market share in Brazil (39%) but following revenue drop by $0.9 million in 2004, the CEO Ailton believes that expanding internationally will ensure financial success. In Latin America, the market is small but rapidly growing, which could generate Compsis revenue in future if they could outsource their business there. However, the market seems to have varied projected overall revenues in the future. Customers are very price sensitive and are unlikely to pay for Compsis high-end technology software. The US market, appears to be rewarding and I believe this to be the most suitable option for Compsis. Overall revenues grow year on year and the market is steadily growing and therefore should Compsis successfully establish themselves, they will most likely experience great financial success in the long term. The majority of projects in the US require Request for Approvals (RFPs) to ensure fair competition amongst the firms wanting the project. Unlike the Latin America market, US customers are also not as price sensitive as they only weight 15% of their decision-making process on cost. Compsis also have a competitive advantage being one of few companies offering auditing and financial services as part of their product thus this USP would enable them to win a potential contract over US rivals and ensure long term financial success. On the other hand, the USA market has massive domestic competition; companies such as Transcore have an established name in all segments of the ETC market, so this is potentially one constraint that will affect Compsis venture. To implement this plan, Compsis must find a local partner firm with good prospect to partner with. I will propose the entry to be a strategic alliance (firms work together cooperatively, but no new organization is formed). They can align with Mark IV which is in a different segment of the market – manufacturing the equipment used in toll collections systems and ITS, but stayed away from systems integrations. Mark IV, for example, as the largest toll transponder manufacturer in the U.S., had developed strong relationships with government buyers and all levels of toll suppliers in the industry. Compsis can leverage on this alliance to provide the integration part of Marks IV market being that they have a dominant market presence with government buyers and sharing 92% of the market segment with Transcore. This is a veritable entry strategy that will be most effective for the company. They can still decide to acquire Mark IV everything being equal. Acquiring the company will also announce their complete presence in all sectors of the ETC market. In Strategic alliance, Compsis and Mark IV share decision-making authority, control of the operation, and any profits that the relationship creates. It will further close the cultural gap, provides important knowledge about local conditions, facilitate acceptance of Compsis involvement with government officials, etc.

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Computadores e Sistemas Ind e Com LTDA popularly known as Compsis was. (2019, Nov 23). Retrieved from http://paperap.com/computadores-e-sistemas-ind-e-com-ltda-popularly-known-as-compsis-was-369-best-essay/

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