Running head: A CASE STUDY OF COMPSIS 1

A Case Study of Compsis

University of the People

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A Case Study of Compsis

Compsis, founded in 1989, is a company based in the Brazilian industrial city of São

José dos Campos. Its largest service line is the systems integration service for electronic toll

collection (ETC). The company owns more than 30% of the domestic ETC integration

market, which occupies the first place. Meanwhile, Compsis also did some business in

foreign countries such as Australia and India.

Unfortunately, Compsis is facing a crossroads because it didn’t perform well in 2004.

The company profited US$4.2 million (R$11.1 million) in 2003 but the revenue fell to US$3.3

million (Lehrich, Paredes & Ravikumar, 2009). Therefore, the management of Compsis is

considering to apply some strategies to keep the company competitive in the following a

few years. Among all of the options, to enter the ETC market of the United States is

considered to be a reasonable one because the market is even larger than all of Spanish-

speaking Latin America put together (Lehrich, Paredes & Ravikumar, 2009).

The Diamond Model Analysis

To determine the strategies to implement in this case, it is crucial to perform an in-

detail analysis at first. It will be beneficial to analyze the company based on Porter’s Theory

of National Competitive Advantage of Industries since the model can check the

competitiveness of a company in the international market according to objective domestic

conditions. This model is also known as the Diamond Model and consists of four important

components, which are Demand Conditions, Factor Conditions, Related and Supporting Industries,

and Firm Strategy, Structure, and Rivalry (Ketchen & Short, 2012).
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Demand Conditions

The demand conditions aspect refers to “the nature and volume of domestic

customers.” (Ketchen & Short, 2012) Companies are considered to be advantageous if the

domestic customers have high expectations and needs. For instance, ETC integration

companies like Compsis will suffer a lot in the global market if their home country doesn’t

need to build any toll roads. Actually, the Brazilian government prolonged delayed awarding

new toll road construction rights to concessionaires and this behavior brought direct impact

to Compsis’s business. Fortunately, the executives of Compsis believed that awarding will

start soon. Since Compsis had strong relationships with key decision-makers in the operator

firms and could provide a reasonable balance of price and quality, the domestic demands for

both brand new and follow-up U&M projects can be fulfilled by Compsis once the

government continues to award new toll road construction rights.

Factor Conditions

Factor conditions are considered to be the required resources that firms use in order

to create products and services. In the case of Compsis, the required resources should be

the resources used in the software industry, especially software engineering human

resources. According to the research, the Brazilian software industry is developing quickly

and is in a promising condition (Worldwide Erc, 2019; Botelho, Stefanuto & Veloso, 2004).

Moreover, the cost of software specialists is regarded to be quite low, particularly compared

to the cost in the United States or Canada (Santos, 2019). Therefore, this aspect should be

Compsis’s advantage.
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Related and Supporting Industries

The concept of related and supporting industries notes “the extent to which firms’

domestic suppliers and other complementary industries are developed and

helpful.” (Ketchen & Short, 2012) In Compsis’s case, the relative hardware manufacturers

should be connected to the company’s related and supporting industries because Compsis

usually install then integrate both the hardware and the SICAT software altogether at the

level of the booth, plaza, and multi-plaza auditing system. It seems that local suppliers have

the ability to provide required hardware components for Compsis such as vehicle sensors,

high resolution cameras, and RFID sensors. Meanwhile, Compsis also showed a willingness

to use foreign maker’s hardware components when approaching the international market

(Lehrich, Paredes & Ravikumar, 2009).

Firm Strategy, Structure, and Rivalry

A firm’s strategy and structure are considered to be heavily affected by its domestic

rivals. Generally, companies from a competitive market have more possibilities to win the

global market because they usually have to use sophisticated strategies and structures to

survive in the domestic market at first. For Compsis, the competition in terms of the

Brazilian ETC market is normal. They own roughly one third of the domestic market and it

is actually the first place. On the other hand, any technology-based company in Brazil can be

vulnerable according to the management of Compsis (Lehrich, Paredes & Ravikumar, 2009).

Thus, the domestic competition cannot be overlooked.

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Strategic Solutions

An Optimal International Business Strategy

After the aforementioned in-detail diamond model analysis, the international

strategy to take for Compsis should be clear. There are majorly three genres of strategies

usually used by multinational corporates, which are the multi-domestic strategy, the global

strategy and the transnational strategy (Ketchen & Short, 2012). The transnational strategy

should be an optimal one due to two perspectives. At first, the Brazilian ETC market will

continue to be the most significant fertile ground for Compsis. Since Compsis is still a small

firm with few experienced specialists compared to other multinational companies, the

global strategy is too costly to run (Lehrich, Paredes & Ravikumar, 2009). On the other

hand, the ETC market differs from one country to another country due to the differences in

policies and regulations. It is necessary to adjust the solutions for each market with no

doubt. As a result, the transnational strategy is the most reasonable one to apply.

The Best Market Entry Option

In order to smoothly enter the ETC market of the United States, Compsis has a lot

of options including exporting its products, licensing the software as a whole or in an on-

demand approach, setting up sales offices in the United States, partnering up with other

firms, and so on. Among all of the options, the best one is considered to be cooperating with

existing industry players and technology firms in the ETC industry of the United States.

The particular approach can be either creating a joint venture or strategic alliance because

both have a similar effect (Ketchen & Short, 2012). The most important aspect is to lower

the threshold for Compsis to enter the United States because the company has little
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overseas experience. There are at least two advantages to use this option. At first, employees

in Compsis, especially the sales team members have little experience regarding the

international market. The American ETC market is already very mature so that it would be

quite risky to compete solely in the United States. However, the existing players can provide

the experience. Besides, Compsis had a very successful experience to partner up with

foreign firms in Australia, which proved that Compsis could take advantage of this approach

(Lehrich, Paredes & Ravikumar, 2009).

With regard to the systems to promote, it should be better to implement the SICAT-

first approach at the initial stage because the competitive advantages of a product are

usually the key element when going overseas (Boundless, n.d.). There is no doubt that

SICAT XP has most competitive advantages since the deep management of operations in

SICAT XP is not possible on most competitors’ systems. Meanwhile, the failure in India is

unlikely to happen because the market in the United States can afford relatively high price

solutions. Also, there is no need to persuade customers to upgrade to SICAT XP—which is

considered to be difficult—since it is a completely new market (Lehrich, Paredes &

Ravikumar, 2009).

Conclusion

In conclusion, based on the diamond model analysis, Compsis is suggested to use the

transnational strategy and cooperating with existing players in the ETC industry of the

United States. To make a breakthrough in an international market like the United States,

Compsis should promote its flagship product SICAT XP since it has most competitive

advantages.

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References

Botelho, A. J. J., Stefanuto, G., & Veloso, F. (2004). The Brazilian software industry. Georgia

Institute of Technology.

Boundless. (n.d.). Competitive Advantage. International Business. Retrieved from https://

courses.lumenlearning.com/suny-internationalbusiness/chapter/reading-competitive-

advantage/

Ketchen, D & Short, J. (2012) Strategic Management: Evaluation and Execution. Retrieved from

https://my.uopeople.edu/mod/book/view.php?id=192168&chapterid=210526

Lehrich, J., Paredes, P. & Ravikumar, R. (2009). Compsis at a Crossroads. MIT Sloan School of

Management. Retrieved from: https://mitsloan.mit.edu/LearningEdge/strategy/

compsis/Pages/default.aspx

Santos, B. (2019). A comparison of average salaries between Brazil and India. Retrieved from

https://establishbrazil.com/articles/comparison-average-salaries-between-brazil-and-

india

Worldwide Erc. (2019). Brazil’s Growing Tech Industry Creates Strong Demand for Skilled

Workers. Retrieved from https://www.worldwideerc.org/news/brazil-s-growing-tech-

industry-creates-strong-demand-for-skilled-workers/