What are the strategic choices available? What are the driving forces behind the choices? Compsis at A Crossroads

 Founded in 1989 in the Brazilian industrial city of São José dos Campos, Compsis is an electronic toll collection (ETC) service company that had gained the dominant share of the Brazilian market and had even managed projects in Australia and India. In 2004, however, it appeared that Compsis’s success might be in jeopardy. Revenue fell due to the Brazilian government’s prolonged delay in awarding new toll road construction rights to concessionaires. Despite considerable efforts by the business development team, Compsis had been unable to win new ETC projects outside Brazil, not only in Latin America but in Europe and India as well. Compsis's strength was mostly on turning its ETC software, the SICAT, into a simpler, more flexible product. However, this strength would be useless if it is hard to convince existing customers to upgrade. 

Therefore Compsis stood at a crossroads. In 2005, the Brazilian government was expected to award more concessions, the new SICAT version would be completed, and Compsis would be ready to test new products ranging from traffic management systems to magnetically guided buses. On the other side of the road, Compsis could ill afford to depend solely on the vagaries of the Brazilian market. The company could try to expand elsewhere in Latin America and other developing ETC markets, or Compsis could turn to a mature market, a country where experienced toll system buyers demanded and paid for cutting-edge technology from industry leaders such as the United States.

As 2004 drew to a close, Ailton knew that Compsis had several months of operating cash in the bank to support the decision. Now, the options were to wait out the current drought and expect that the Brazilian government’s funding for toll concessions would rebound as predicted, or to do it ultimately has to do, international expansion since Brazil was a limited market. If it chooses to expand internationally, which one would be better for this time? Compsis 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. Was Compsis ready to expand to the United States, where it could probably match the quality and beat the price of its competitors? Let's discuss the options of which road should Compsis choose? Before we make any decision, we must know what available options we have. This is important because oftentimes we made bad decisions due to we overly limited ourselves, or give ourselves too many choices and causing time-wasting. Of course, there are always driving forces behind choices. 

In 1996, Compsis decided to expand its technology strategy into a new area, Intelligent Transportation Systems(ITS). Compsis stuck to its core skills, integrating complex hardware and software systems. This strategy sought to win contracts from a range of Brazilian ITS projects. Moreover, since the SICAT(Electronic Toll Audit) was the most demanded, Compsis designed its SICAT software and outsourced the hardware to local suppliers to increase its operating efficiency. It is similar to Apple Inc. outsourcing its hardware manufacturing globally, mostly in China, to reduce the cost, but the core skills do not. 

In my opinion, the main reason that contributed to Compsis's success was that Compsis was able to take the advantage of its core skills to widen its product lines, gain its flexibility of service and products, and catch up with the good timing to expand its business. Nonetheless, some of Compsis's success was learned from its failures. Unlike customers in mature countries who could afford costly systems, the Indian toll market was sensitive to price. Its India project was a wash, with no loss, but also no profits. It was a pricy lesson that Compsis learned from expanding in a developing country. In this case, we can understand that widening the product lines and gaining flexibility is crucial when expanding globally.

References

Compsis at a Crossroads, a case study by Lehrich, M. J., Paredes, P. J., & Ravikumar, R