BUS 5117 Unit 7 WA Compsis at A Crossroads

Running head: BUS 5117 – COMPSIS AT A CROSSROADS 1
BUS 5117: Strategic Decision Making and Management

Written Assignment Unit 7: Compsis at a Crossroads
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University of the People
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Author Note
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This assignment is being submitted for BUS 5117 Strategic Decision Making and
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Management Course.
Correspondence concerning this article should be addressed to the Department of

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Business Administration, University of the People, 225 S. Lake Ave Suite 300, Pasadena, CA
91101
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BUS 5117 – COMPSIS AT A CROSSROADS 2
Introduction
Compsis, the Brazilian technology company founded in the city of São José dos Campos
in 1989 by a couple of engineers, has the dominant share of the system integration for electronic
toll collection (ETC) market in the Latin America country. SICAT is its flagship cornerstone
though it was also into developing and marketing advanced traffic management, vehicle
monitoring and magnetic guidance systems. The company had developed a strong relationship
with key government contracting authorities and operators of toll roads within Brazil and had
reached US$4.2 million in revenue by 2003 (Lehrich, Paredes & Ravikumar, 2009).
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However, the success Compsis had enjoyed started to become gloomy in 2014 when its
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revenue dropped by nearly US$1 million, due to delays of the Brazilian government in awarding
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new toll road concessions. For a company like Compsis this was crucial because without new toll
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roads, all the company could hope for is to convince existing customers to upgrade to a newer
version of their ETC software (which was not due for completion until April 2005). Therefore,
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Compsis management needs to find alternative solutions or pray for 2005 to be better and
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continue to rely on the fragile ETC market in Brazil. The company was considering expansion
into the United States and other developing ETC markets. It had implemented projects in
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Australia and India in the past but has struggled to win new projects outside Brazil (Lehrich et
al., 2009). How could it enter the US market where there are also many sophisticated players is
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the big question.

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Analysis of the United States ETC Market
The United States had a mature electronic toll collection (ETC) market that was larger
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than all the Spanish-speaking Latin American markets combined and was already being
dominated by well-established providers. Vendors in this market who were comprised mostly of
transit authorities and agencies (though there were few private companies) were not only
concerned about price but also placed serious value on quality, competence and expertise
(Lehrich et al., 2009).
The US market used mostly an open bidding process and competitive negotiations for
procurements. Firms must submit their bids which are evaluated on multiple criteria including an
understanding of the task (demonstrated in the technical proposal), quality of employees, the
ability to maintain high quality, past performance, and cost). Joining a trade organization is the
easiest way firm might ensure they obtain information about upcoming projects (Lehrich et al.,
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2009).
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The Diamond Model
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Harvard Business School Professor Michael Porter provided a framework for
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understanding how likely a firm based in a particular country might succeed if it competed in the
international arena. The determinants of national advantage, commonly known as the diamond
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model, espouses four factors that shape firms’ success in competing in the international market
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(Ketchen & Short, 2012). These factors are explored for the Brazilian company, Compsis.
Demand Conditions refers to the nature and expectations of domestic customers

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(Ketchen & Short, 2012). Compsis developed the first version of its toll collection software
(SICAT 4) or the Brazilian market in 1996. The Brazilian electronic toll collection market is
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matured and operators in the market were not just concerned about price but also quality. Due to
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the demand for high quality and more functionalities from ETC operators the company is in a
non-stop development mode to respond to customers' expectations. It was set to roll out SICAT
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XP in April 2005 as a full package plug-and-play solution. Considering the potential expansion
to the US market, the firm was in a good position to respond to the quality requirements
demanded by the US customers (Lehrich et al., 2009).
Factors Conditions refer to the nature of inputs needed to produce the products and
services Compsis offer (Ketchen & Short, 2012). Compsis was established by a couple of
engineers from the aircraft industry in Brazil. The company has available skilled labor that
developed (and customized) the systems in-house. Their skillset is also evident by the contracts
with 39% of concessionaires for installation and software and ongoing maintenance and updates
contributing 65% of revenue in 2004. Their ties with leading engineering universities in the
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country provide them access to additional resources (Lehrich et al., 2009).
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Related and Supporting Industries refers to how developed and helpful Compsis
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suppliers and other complementary industries are (Ketchen & Short, 2012). While Compsis
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focused on the development of software in-house and the installation of devices and integration,
it relied on local hardware manufacturers to provide it high-resolution cameras, vehicle sensors,

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signaling elements, toll gates, RFID sensors, etc. (Lehrich et al., 2009). This is an indication that
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the industries supporting ETC in Brazil were vibrant.
Strategy, Structure and Rivalry refer to how fierce the competition in the firm's home
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market is, according to the Ketchen and Short (2012). By 2004 there were eight players fighting
for the top position in the Brazilian market. Compsis captured 39%, followed by CSRoute and
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TESC with 17% and 14% respectively. To obtain this market position Compsis had to
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continuously innovate to come up with level 4 of its product that most of its competitors could
not match. As the firm was looking to expand overseas the competition in its home country,
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though not between that many players, had prepared it to compete on the technical side.
However, its sales team was inexperienced with the dynamics of international markets and public
RFP processes (Lehrich et al., 2009).
Compsis International Business Strategy and US Expansion
By integrating backward Compsis can seize the opportunity to enter new industries and
attach value to core products. The backward integration strategy can potentially decrease cost
and thus increase profitability. It can also pursue a forward integration strategy by becoming a
toll road operator (Ketchen & Short, 2012). However, this is a decision that Compsis executives
should consider with caution as the upfront investment needed is substantial.
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Additionally, the Latin American market is growing rapidly and presents possible
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opportunities. The firm can utilize a robust market development strategy to swiftly position itself
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as the optimum solution for integrated transportation systems in Latin America. Achieving this
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will reduce their reliance on the Brazilian market and provide further exposure for their products.
The best move for Compsis to enter the United States market is to partner with a
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reputable US-based firm to compete in a single region to penetrate the US ETC market using its
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most mature product, SICAT. After it has successfully established itself in a single US market,
the firm should change strategy to progressively expand its products and services to other US
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markets.
Conclusion
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Compsis has demonstrated to be the dominant player in the Brazilian market and
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continues to employ innovative engineering in its products. However, the market conditions in
the country have threatened the financial position of the firm and expansion into other markets
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has become crucial for its survivability. Consequently, the firm leaders need to examine its
likelihood to succeed in the international market using for the factors of Porter’s Diamond model
(Ketchen & Short, 2012) and pursue a strategy that promises the best result, so it reduces its
reliance on the Brazilian market.
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References
Ketchen, D. & Short, J. (2012). Strategic Management Evaluation and Execution. This book is
licensed under a Creative Commons by-nc-sa 3.0 license.
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
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Running head: BUS 5117 – COMPSIS AT A CROSSROADS 1

BUS 5117: Strategic Decision Making and Management

Correspondence concerning this article should be addressed to the Department of

the big question.

Analysis of the United States ETC Market

(Lehrich et al., 2009).

Demand Conditions refers to the nature and expectations of domestic customers

demanded by the US customers (Lehrich et al., 2009).

it relied on local hardware manufacturers to provide it high-resolution cameras, vehicle sensors,

the industries supporting ETC in Brazil were vibrant.

RFP processes (Lehrich et al., 2009).

Compsis International Business Strategy and US Expansion

should consider with caution as the upfront investment needed is substantial.

reliance on the Brazilian market.

licensed under a Creative Commons by-nc-sa 3.0 license.

Management. Retrieved from:

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