Case Nordson

The Fisher College of Business Nordson do Brasil
May 17, 2002
NORDSON DO BRASIL: CHALLENGES IN AN EMERGING

MARKET
Gregory Merk, General Manager-Latin America South (LAS) and the head of
Nordson do Brasil, a wholly owned subsidiary of Nordson (Nasdaq: NDSN), was deep in
thought in his Tambore office in Sao Paulo. He was thinking about his plan of action for his
first 2002 quarterly meeting at Westlake, Ohio, worldwide headquarters (HQ) of Nordson.
This was to be a crucial meeting, more than a mere update – HQ wanted to be apprised of the
problems and issues facing the Brazilian subsidiary as well as the entire LAS region which
reported through Nordson do Brazil. Senior management specifically wanted him to break the
problems down into immediate concerns and other long-term strategic issues. Merk had been
requesting this audience with HQ for quite some time. He realized that he had HQ’s ear now
and wanted to make the best of this opportunity to have his concerns addressed. He decided to
spend the better part of the coming week to thoroughly prepare for the meeting.
Amongst Merk’s immediate concerns were the challenges Nordson LAS faced
due to the global recession and the Argentine crisis with its contagion effects over the
entire LAS region. Although Nordson do Brazil had adapted its business practices to suit
the business realities of the region, specifically to counter the recession, Merk realized
that more work needed to be done in order to stay viable and competitive in today’s
troubled times. He was also feeling the pressure due to the tough cost-cutting measures
that Nordson had implemented worldwide. Furthermore, he knew that the upcoming
presidential elections held in October, would have an effect on Brazil’s view of
international trade. Historically, new presidents have come to office initially with the
mind-set of restoring Brazil’s independence on imports by increasing tariffs. This
approach ensures the president of a continuing base of support from the domestic
business community all the while boosting national pride.
MBA Candidates Shirley Alvarenga (2003), Elbert Goode II (2003), and Amit Senapaty (2002) prepared
this case under the supervision of Professor Stephen Hills as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation. Some information has been
disguised to maintain confidentiality. This case was written in conjunction with the 2002 Fisher College of
Business Emerging Markets and Field Study (EMFS) course.
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Nordson do Brasil: Challenges in an Emerging Market May 17, 2002
In the long run, Merk had several strategic concerns. Over the past decade,
Nordson has made several aggressive acquisitions. While these acquisitions added to the
product diversity and market share of Nordson, they also brought with them several
challenges in terms of integration and cultural assimilation issues. Particularly, Nordson
do Brazil has been affected by these issues in that it has been difficult to motivate the
sales force to learn about or sell the constantly expanding line of new products. The sales
force views the time spent on learning the new products as well as training their client
base on these products, as an opportunity cost of lost sales on the more established
products that customers buy on a more frequent basis.
Another important issue that Merk was deliberating on was whether Nordson
should set up a manufacturing facility in Brazil. Presently, Nordson do Brazil operates
solely as a sales & distribution subsidiary of the corporate office. Nordson Corporation
prides itself on its high quality products. In order to maintain control of the quality of its
products, Nordson had refrained from setting up manufacturing plants in emerging
markets. Recently, however, Nordson has decided to venture into an emerging market
with its establishment of a plant in China. The China venture will be keenly watched by
senior management to determine if it’s still possible to retain high quality controls and
processes within an emerging market. Merk was also keenly observing the performance
of the plant in China, as its success would determine corporate’s decision in establishing
a plant in Brazil.
Decision authority was another concern of importance to Merk’s. At this time,

decision authority is centralized with corporate making all major decisions involving the
operations of each subsidiary. The problem with this structure is that most of senior
management in Westlake is not fully informed and aware of the customs, the culture, and
the politics involved in conducting business in Brazil. Consequently, senior
management’s decisions are based on American business standards and tend to disregard
country specific factors that are essential to business transactions in Brazil.
In principle, Merk and Nordson are still committed to Nordson LAS. Despite the
recent financial crisis, Brazil is still recognized as one of the largest emerging markets
with a huge potential. This factor makes the future growth potential for Nordson LAS
look very promising. Merk, however, knew that there needed to be significant changes
made in order for Nordson LAS to continue and sustain its growth with regards to both its
short-term and long-term concerns.
DOING BUSINESS IN BRAZIL: PROBLEMS AND OPPORTUNITIES

Economic Crises
The year 2001 brought with it a worldwide recession. Latin America was severely
affected by this economic downturn. To compound the problems, came the Argentine
currency and debt crisis. Argentina, which carried huge amounts of loans from multilateral
agencies like the IMF, defaulted on its debt in early 2001. Successive governments in
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Argentina were guilty of fiscal mismanagement over the past few years. There was no
discipline in government expenses and its revenues fell far short of the expenditure.
Consequently, they ran huge deficits and brought the country to the present difficult state of
affairs in which ordinary citizens have strict limited access to their bank checking accounts
due to the government’s fear of a sudden flight of capital. Presently, the Argentine economy is
at a standstill. Companies are closing down for lack of economic activity and availability of
capital. There is widespread unrest among the middle class. Currently, the unemployment rate
has shot up to over 25%. Given the heavy economic interaction among Latin American
nations, the Argentine crisis has had a contagion effect over other countries in the region. The
Argentine situation combined with the global recession is having a detrimental effect on
Brazil, and its business activities.
Business Environment
Notwithstanding the above, Brazil is as such beset with problems with which every
business must contend. Infrastructure remains a big problem in Brazil. The existing
transportation network, both road and rail, is not up to the standards of a developed country.
Lack of education and illiteracy continue to be a problem outside the metropolitan areas. The
country is still not self-sufficient in electricity generation. There is a huge disparity in the
income distribution across the population. All of these problems are more pronounced in the
less developed northern regions of the country. Corruption and crime are rampant throughout
the country. Personal safety becomes a key issue for anyone who wants to conduct business in
Brazil.
Furthermore, from a business perspective, high interest rates in the country act as a
dampener for fresh investment. Legislation is outdated and conflicting throughout the region.
Taxes are very high and the tax code is convoluted and confusing. Importation laws and rules
are ambiguous and open to much interpretation. Political stability in Brazil is not as good as
the developed world. The exchange rate fluctuation poses a real problem for international
trade. Essentially, in addition to the above, global or international companies that choose to
enter the Brazilian market must weigh four key areas: 1) the business culture, 2) business
corruption, 3) labor laws, and 4) the tax code.
The Brazilian government has privatized most sectors of the economy, but still
maintains control of the big players such as major banks and oil companies. As stated by
Brazil’s current President, Fernando Henrique Cardoso:
“There was never any chance of neo-liberalism here. This is a poor country and the
state is always going to have an important role in attenuating social differences. We
liberalized but we didn’t make a clean sweep of everything that existed before. In Brazil, state
spending has actually increased as a percentage of economic output.”
This statement exemplifies Brazil’s lower class citizens’ dependence on the

government and the social justice platform adopted by the government.
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Business Culture: Business in Brazil is done on a personalized basis. Before any type of
negotiations or contract signing takes place, the active parties want to know each other
personally. This typically slows down the business process, but it is worthwhile once the
transactional relationship begins. This construct improves the formation of a long-term
business relationship, and decreases the chances of a corrupted partnership. Long-term
relationships become even more relevant in situations similar to that of the economic
crisis suffered by Brazilians in the mid 1990’s, and by Argentines in 2001.
Corruption: Corruption is synonymous with business in Brazil. This is why the base of
Brazilian business is building long-term personal relationships. Managers and business owners
like to make a judge of character of their business partners before making any major
transactions. A corrupt bureaucracy is a big irritant for foreign businesses, which are
accustomed to a swifter pace in their home countries. Eventually, they come to terms with the
red tape and the ‘under-the-table’ transactions and come to the realization that these practices
are simply an integral part of doing business in the country. In fact, it can be argued that
corruption is a necessity when conducting business in Brazil due to the lack of clearly defined
property rights, efficient capital markets, and an efficient judicial system.
Labor: The labor laws of Brazil place large multi-national corporations and domestic
firms at a disadvantage when dealing with its employees. Since the early 1900’s, labor
unions have heavily influenced government policy through the Ministry of Labor. Past
dictatorships throughout Brazil’s history have used labor unions and paternalism from
slavery as a means to reach the lower class – which represents the largest segment of the
Brazilian population. Elected officials take the size and influence of the unions into
account when making judgments between an employer and former employee. Labor laws
and courts work so much in the favor of employees, that it is actually cheaper and less of
an headache to keep an under performing employee, than to fire them. This is because
Brazilians view work as a means to provide for their families welfare. A company that
fires or lays-off an employee is seen as jeopardizing his or her way of living. This
mindset refers back to the dependence of the working class on their employers.
Businesses in Brazil therefore have to contend with the high social costs of hiring an
employee.
Tax Code: The tax code in Brazil is the most bizarre aspect of doing business in the country.
An importer in Brazil may pay as high a tax as 40% on a typical product. Importation taxes
range between 14-30% of CIF (cost including freight). There are taxes levied by the states on
circulation of merchandise that amounts to around 28%. Some of these taxes are
compounding in nature and are calculated as tax over tax. Due to this cumbersome and
complex tax code, the importer is forced to pass the cost into the buyer who pays a large
premium. Importers and customers are not the only ones bearing the brunt. In fact, taxes on
local manufacturers are high as well. As can be seen, the tax code acts as a major impediment
to the economic growth in the country and is in need of urgent reform.
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Opportunities
Despite the problems discussed above, Brazil offers a tremendous opportunity for
international firms. Latin America, specifically Brazil, is viewed as having emerging markets
with high growth potential. Brazil has a burgeoning middle class with a lot of purchasing
power. The country is improving on every front – education, infrastructure, legislation and
economic reform – contributing to a more aware consumer base with high demand. At the
moment, Brazil is opening its markets into international trade and the days of import
substitution seem to be forgotten and confined to history. The country’s export
competitiveness given its inexpensive and vast resources is on the ascent. Privatization is
leading to increasing modernization in all facets of the society. The census shows that the
overall population of Brazil is growing at a rate of 1% per year. The robust growth in the
general population and most importantly in the middle class provides great opportunities for
firms to expand their product mix. This is key because Brazil has been known to be a class-
based society, with huge disparities between the living standards of the haves and have-nots.
The relative lack of modernization in the northern and other non-metropolitan regions of the
country offer a tremendous opportunity for infrastructure and capital goods companies.
Invariably, such an investment is followed by the arrival of consumer goods companies. As
economic and legislative reforms progress, the opportunities of doing business in Brazil will
become even more apparent. The predicted robust growth in the country’s GDP combined
with lower labor and raw material costs compared to those of developed economies, offer a
very attractive investment opportunity for overseas firms.
NORDSON CORPORATION
Company Background
Nordson Corporation, founded in 1954, designs, manufactures and markets precision

dispensing systems that apply adhesives, sealants and coatings to a broad range of consumer
and industrial products during manufacturing operations. The company also manufactures
technology-based systems for curing and surface treatment processes.
Nordson products are used in a diverse range of end markets including appliance,
automotive, bookbinding, container, converting, electronics, food and beverage, furniture,
medical, metal finishing, nonwovens, packaging and other diverse industries. Headquartered
in Westlake, Ohio, Nordson markets its products through a network of wholly owned
subsidiaries in 31 countries throughout North America, Europe, Japan, Asia, Latin America
and Australia. More than 50% of the company's revenues are generated outside the United
States.
The company has around 4,000 employees worldwide. Principle manufacturing

facilities are located in Alabama, California, Florida, Georgia, New Jersey, Ohio, Rhode
Island, Germany, The Netherlands and the United Kingdom. Exhibit 1 gives a brief
overview of Nordson. Details of the company’s businesses, markets it serves and the
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customers for each business are presented in Exhibit 2. Sales breakdown by each
business segment, geography, markets served and product type is captured in Exhibit 3.
Company History and Evolution
The U.S. Automatic Company, parent company of Nordson Corporation, was

founded in Amherst, Ohio in 1909. Initially, the company specialized in high-volume,
low-cost screw machine parts for the then emerging automotive industry. The company
was reorganized in 1935 as U.S. Automatic Corporation and, under the direction of
Walter G. Nord, shifted its production emphasis to lower-volume, high-precision parts
that were critical in supporting the United States' defense effort during World War II.
In the years following the war, Mr. Nord, along with sons Eric and Evan, searched
for a proprietary product to serve as a basis for future growth. This resulted in the
acquisition of patents covering the "hot airless" method of spraying paint and other
coating materials. The Nordson Division of U.S. Automatic Corporation was founded in
1954 to produce and market airless spray equipment.
Beginning in the late 1960s, Nordson pioneered the technology and equipment for
applying powder coatings with the development of the compact and efficient cartridge-
type recovery/recycle systems. Nordson has continually refined its cartridge-booth
technology and is an innovator in all aspects of the powder coating process. Recent
advancements include specialized equipment for applying environmentally compatible
liquid coatings such as waterborne and super-critical fluid coatings.
The company's continued growth is based on a customer-driven strategy that is

global in scope. With this in mind, Nordson began an aggressive campaign in the late
1980s to acquire companies that would strengthen its position as a leader in technology,
product quality and customer service. Since then, Nordson has acquired companies that
have helped to enhance its adhesive dispensing product line and expand its presence in
emerging high-technology markets.
Nordson expanded its hot melt adhesive dispensing business with the acquisitions
of Meltex (Lüneburg, Germany) and Slautterback Corporation (Monterey, California),
incorporating the latest technological advancements in heating, dispensing and electronic
controls. By acquiring VeriTec Technologies (Fairfield, New Jersey), a manufacturer of
cold-adhesive dispensing equipment, Nordson broadened its abilities to serve a complete
range of needs for product assembly, packaging and converting applications worldwide.
This equipment, ranging from manual to fully automated systems, accommodates a wide
variety of materials and production requirements in high-speed, high-volume
manufacturing environments.
In the nonwovens market, Nordson acquired J&M Laboratories, Inc.

(Dawsonville, Georgia), a manufacturer of melt-blowing systems used to produce
synthetic nonwoven fabrics and adhesive dispensing equipment for the assembly of
diapers, medical disposables and feminine hygiene products. The acquisition merged
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J&M's meltblown and spun-bond technologies with Nordson's existing nonwovens

capabilities, creating an integrated network of applications and streamlining service.
In the late 1990s, Nordson focused its acquisition efforts on companies with
histories of above-average financial performance that would expand its presence in
emerging high-technology markets. From 1996 to 2000, the company made strategic
acquisitions in this key segment, adding ultraviolet (UV) curing capabilities from
Spectral Technology Group (Slough, United Kingdom) and Horizon Lamps, Inc.
(Phillipsburg, New Jersey); gas plasma technologies from March Instruments, Inc.
(Concord, California) and Advanced Plasma Systems (St. Petersburg, Florida); and
precision dispensing equipment for the electronics, medical and fiber optics industries
with the acquisitions of Asymtek (Carlsbad, California) and EFD, Inc. (East Providence,
Rhode Island). Exhibit 4 captures the complete list of acquisitions made by the company.
Since 1954, Nordson Corporation has grown from a local company with sales
under $1 million, to a multinational organization with sales in excess of $731 million in
2001. The company recently restructured into three major business segments - adhesive
dispensing and nonwoven fiber systems, advanced technology systems, and coating and
finishing systems - each supported by a worldwide sales and service network to better
serve its global customer base.
Marketing, Sales and Distribution
Given Nordson’s worldwide customer base and multinational operations of its blue-
chip customers, the company understood very early that it was imperative for it to be close to
its customers and understand their needs. This is precisely the reason that the company has
wholly owned subsidiaries in 31 countries and working relationships with more than 165
distributor organizations expanding its worldwide presence to 57 countries. Nordson attempts
to leverage its technical, financial and human resource capabilities in these wholly owned
subsidiaries with the purpose of being better positioned to respond quickly to customer needs.
This international network of subsidiaries is intended to benefit multinational customers who
rely on the company to meet their specifications from plant to plant and from continent to
continent.
R&D and Manufacturing
Nordson has tried to locate its manufacturing facilities close to its big markets to
reduce expenditures associated with various transportation and import costs. Most of its
facilities and offices are located in the US, the biggest market (50% sales from US/Canada).
However, a major trend in the industry is to cut labor and raw material costs by locating
manufacturing facilities in stable and emerging markets. Unlike saturated and competitive
markets, emerging markets offer huge growth potential. Through its various acquisitions,
Nordson has expanded to include strategically located facilities in Europe, its second largest
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market (30% of sales). Nordson’s coating and finishing works in China was its first
manufacturing venture into an emerging market.
Each of its factories is dedicated to delivering engineering systems that meet specific
operating requirements of a particular market segment. Each manufacturing unit includes
highly skilled engineers, materials schedulers and assembly specialists working together to
achieve high quality and fast response time on each customer order. Nordson’s manufacturing
systems and processes meet the ISO 9000 series of Quality Management Standards – a
symbol of quality that is recognized worldwide. Despite these measures, as Nordson expands
its manufacturing facilities globally, one of its main concerns continues to be maintaining
consistency in quality standards to meet the needs of its customers.
Suppliers and the Supply Chain
Nordson initiated a global procurement initiative in 2000 that embraced a

comprehensive, worldwide approach to supply-chain management. The aim being to cut costs
by leveraging the company’s buying power, boosting service and quality among suppliers, and
improving the efficiency of the purchasing process. A key aspect of the initiative is to reduce
the number of suppliers with whom the company does business. This would increase its
purchasing power and strengthen its position at the negotiating table. Partnering with key
suppliers early in the design process can lead to even more savings. In addition to cost, another
goal is to focus on the level of service and quality suppliers provide. Subsidiaries are also
encouraged to get involved in the process.
Service Focus
The company is the market leader in nearly every business segment it competes in.
With distinctive expertise in the development of precision dispensing systems and related
technologies for an array of industrial material, Nordson is widely regarded for the quality,
durability and performance of its products as well as the expertise of its worldwide network of
sales and service engineers. Rather than viewing itself as a provider of equipment, the
company’s strategy is to focus on improving the performance of its customers’ businesses by
enhancing the quality, yield, cost-performance and speed of their packaging and processing
lines. From research and product development to manufacturing and after-the-sale service,
Nordson tries to work in partnership with customers to assure total satisfaction.
Competition and Industry
Nordson operates in an extremely competitive and cyclical capital goods industry that
is heavily dependent on economic booms and bust cycles. The capital goods sector,
specifically, the industrial machinery industry that the company operates in, depends on
capital expenditure from businesses for its survival. The recent global recession has given the
entire industry a few anxious moments. On a relative basis, Nordson has navigated the recent
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recession in a much better way than its competition. Since the company operates in diverse
segments and markets, its competitors are different in each of these businesses. Exhibit 5
captures the relative performance of Nordson vis-à-vis the industry, the capital goods sector
and the market proxy. One has to understand, however, that the comparisons are not strictly
between comparable firms. Exhibit 6 presents an extract from an analyst report on the
company published in June 2000. Presented from a Wall Street analyst’s perspective, the
report discusses the investment opportunities in Nordson Corp.
Other notable events in the recent past
EFD: The acquisition of EFD, Inc. in Nov. 2000 was the company’s largest acquisition.
This Rhode-Island based manufacturer of precision, low pressure dispensing systems has
an impressive history of high profit margins and double-digit growth. This was a perfect
fit with Nordson’s existing businesses that focused on customers in the electronics,
medical and automotive industries. This association also provides increased exposure to
yet untapped global markets by using Nordson’s strength in international distribution.
With the addition of EFD, the company’s advanced technology business segment
increased to 23% of annual sales from 18% in 2000. Although the acquisition added to
Nordson’s product offering to a customer, it imposed a cash crunch on the company and
brought with it a culture that was difficult to integrate within Nordson’s overall culture.
Action 2000 (Exhibit 7): The close of fiscal 2001 marked the successful conclusion of this
two-year initiative to optimize performance and stimulate financial growth. As a part of the
plan, the company aggressively consolidated disparate geographic organizations into three
major global business segments; consolidated product lines and manufacturing facilities; made
major investments in new information technology; and improved the time-to-market of its
products. The company claims that the initiative gave it tangible results that include an
actively integrated worldwide organization that is prepared better than ever to respond to
global customers’ requirements and better positioned to seize related opportunities in
emerging markets. It also claims to have eliminated much of the complexity and inefficiency
associated with regional approach to products, customers and competitors, while streamlining
the attendant internal processes and support organizations. Fortunately for the company, cost-
reduction efforts associated with Action 2000 – including aggregate reduction of worldwide
headcount by 15% and the closure of 9 manufacturing plants – were started well in advance of
the economic downturn that was experienced in fiscal 2001. Although the company
anticipates the total cost of the initiative to be around $26 million, the program seems to have
returned savings of $36 million with a continuing $40 million anticipated in fiscal 2002. At the
outset of Action 2000, the goal was to reduce total selling, general and administrative (SGA)
expenses from a 5-year high of 45% to less than 40% beginning in fiscal 2002. Despite the
combined effects of weaker revenue growth and additional expenses related to acquisitions,
the company was still able to reduce SGA expenses to 42% of sales in fiscal 2001.
Recent Performance
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Fiscal 2001 was a year of significant transition for both Nordson and the markets
it served (Exhibit 8). The company started the year with strong momentum, a record
backlog of orders and impressive growth in most of its geographic and industrial market.
By year-end, however, external markets had completely reversed and a recession was
underway in the United States with prospects similarly weak elsewhere. The completion
of Y2K investments in information systems and the collapse of the Internet bubble
combined to bring about a dramatic contraction in business spending. The resulting
corrections in technology stock market valuations and, in turn, decline in business and
consumer confidence led to a broader contraction in capital spending in all sectors of the
economy. This capital spending slowdown spread to international markets in Asia, Latin
America and, more recently, Europe. As an international producer of capital goods,
Nordson has been affected by this cyclical worldwide downturn. While the worst seems
to be over for the economy, the exact turn-around cannot be accurately forecasted. The
capital goods industry was among the worst hit due to the recession.
The weakened external environment limited the company’s sales volume growth
in Fiscal 2001 to just 2%. Nevertheless, this sales growth represented the 31st consecutive
year of increasing sales volume for the company. Since Nordson’s international sales are
generally collected in local currencies – especially the Euro – against a strong dollar
resulted in 1% decline in total sales. EPS was down from the year record of $1.85 to
$1.02, before severance and restructuring charges. This performance is, however, good in
relation to its competition.
CORPORATE-SUBSIDIARY RELATIONSHIP
The organization structure of Nordson is such that significant decision rights are
centralized with headquarters. A case in point would be the cost control measures initiated by
senior management with Action 2000, which forced subsidiaries to reduce operational costs.
These measures did not take into account each subsidiaries unique situation. Over the past
decade Nordson’s corporate strategy was to grow organically as well as grow through
acquisitions. The speed with which theses acquisitions were made presented cultural
integration issues. Although the acquisitions added to Nordsons’ overall growth, they
nevertheless presented the subsidiaries with the challenge of selling and keeping up with a
rapidly expanding product line. In addition, at times the acquired firm maintained its own
distribution network that competed directly with Nordsons’ existing network.
NORDSON DO BRAZIL AND LATIN AMERICA SOUTH (LAS)

Subsidiary Background
Nordson do Brazil was established in 1988 primarily as a sales and service, wholly
owned subsidiary of Nordson Corporation; it became one of the 31world-wide direct
operations of the corporation. It is also the operational headquarters of the entire Latin
American South (LAS) organization consisting of Brazil, Argentina, Uruguay, Paraguay,
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Peru, Chile, Bolivia, Guyana, Suriname and French Guiana. Gregory Merk, who heads
Nordson do Brazil, is the General Manager of the LAS division. (Exhibit 9 shows the
organizational chart).
Principal operations of LAS are marketing, engineering, importation, sales and service
of Nordson products in the LAS region. The LAS division is responsible for all Nordson
product lines. There is no manufacturing done in the entire LAS region and it is based 100%
on imported technologies and products. Nordson do Brasil sales for the year 2001 was a little
over $10 million. Overall, Brazil contributes an average of 85% of LAS sales. Clearly, Brazil
is the dominant market in the LAS region. At the moment, LAS sales are expected to grow by
12% annually.
The organization and functioning of Nordson do Brazil has been tailored to suit the
business realities of Brazil and the LAS region. It is also consistent with overall Nordson
corporate philosophy and values. Action 2000, among other initiatives, required several harsh
cost cutting measures and lesser resources for the subsidiaries. The Argentine crisis and the
ongoing global recession further required the subsidiary to adapt and operate in a leaner
manner. Consequently, Merk implemented several initiatives that enabled the subsidiary to
work around these seemingly Herculean problems.
Gregory Merk, General Manager of LAS
Merk is the key figure in the LAS division. He started his career at Nordson in 1992,
as an intern in Nordson’s Osaka, Japan office. Impressed with his business skills and ability to
quickly learn the language and adapt to the culture, he was hired full-time after he graduated
with a degree in finance and accounting from the State University of New York in 1994. In
1997, after three years with increasing responsibilities in the nonwovens systems group in
Osaka, he moved to Sao Paulo to run the subsidiary operations. Heavily influenced by his
experience in Japan, Merk brought his unique management style to Brazil. Employees have
grown to appreciate his open-door policy. He values loyalty and teamwork. His philosophy
when faced with a problem is to seek resolution instead of placing blame. As a result, he was
promoted to his current position in 2000, as the General Manager of LAS. Given his ease and
expertise with languages, he has easily learned Portuguese and has assimilated into the
Brazilian culture, an extremely important virtue in the personal relationship-based business
environment. He is the chief firefighter and motivator in the company and has successfully led
the company thus far through troubling times.
Competitive Positioning
Merk recently undertook a benchmarking study vis-à-vis his competitors to determine

where Nordson stood on parameters considered important by customers. Exhibit 10 presents
the results of the study. Clearly, the company is doing better than its competitors in all criteria
(product quality, delivery reliability, service, specification quality, offer speed, delivery speed,
delivery reliability) except price. Price was the only important order winning criteria where
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Nordson fared worse than its competitors in Brazil. This further underscores Nordson’s strong
brand recognition and its competitive positioning as a premium-priced product.
Human Resources
The organizational chart of Nordson do Brazil is presented in Exhibit 11. From a

recent high of 52 employees, the company now maintains only 30 employees on its pay roll
due to Action 2000. Of the 30 employees, all except Merk are Brazilian. A combination of the
cost cutting and the recent recession resulted in a skeleton staff with several open positions.
This has forced Merk to take on more operational duties and spend less time in important
administrative functions.
Sales and Distribution
Sales and distribution are the key functions of the subsidiary since the company has no
manufacturing facilities in any of the Latin American region. Traditionally, Nordson keeps a
mixture of full-time and part-time salespeople to cover a regional area. This plan did not work
in Brazil because of the costs and risks associated with in-house labor. Nordson opted out of
hiring a fully staffed sales force to cover the enormous size of Brazil. There was a major
disparity between the development of the north and south regions. The southern region is
industrialized and heavily populated, whereas the northern region is significantly more
underdeveloped and is less populated. This led Merk to determine that it was not necessary to
increase the SG&A expense by staffing salespeople to cover the sparse northern region. An
unnecessary increase in the sales force could lead to unwanted labor disputes in the event of
firings or layoffs during slow times. Nevertheless, Merk also realized that the
underdevelopment of the northern region presented future growth opportunities. So instead of
increasing the headcount of his official sales department, Merk outsourced a sales force to
cover areas within the northern region of Brazil. These salesmen are independent contractors
who are not salaried and receive no benefits. The contractors are paid only by commission,
and are known as partners to Nordson, not Nordson employees. This framework enables
Nordson to lower or maintain its SG&A expenses while efficiently covering more territory.
Most importantly, it reduces Nordson’s risks of involvement in any employee liability suits or
infractions of Brazilian labor laws.
Service and Maintenance
To reduce costs, the subsidiary out-sources maintenance and service to third

parties. In addition to the high social costs of employing a maintenance and service force,
the high fixed costs of establishing a maintenance and service center would be
prohibitive. The subsidiary maintains a skeletal maintenance staff that ensures that proper
training and expertise is provided to the third parties to maintain consistent service
quality.
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Inventory Management
Merk has tried to run a tight ship in terms of inventory. The general rule is to import
only the necessary parts to attend customer orders. Strategic parts with high turnover,
however, are kept in inventory that is based on the consumption of the last three months.
Whenever a part is not in inventory, an effort is always made to offer an alternative part to the
customer. Also, attractive prices are offered on parts on the slow moving list so that the firm
doesn’t carry much idle inventory, which would otherwise eat up meager resources. As a
result of these measures, the inventory levels have decreased over the years and have helped
the firm operate in a more just-in-time basis.
Finance and Accounting
Given the volatile exchange rate and depreciating local currency, Nordson do Brazil
does all its quotes and billings in US dollars. This places the burden and risk of a fluctuating
exchange rate on the buyer. This also helps when Nordson Corp. consolidates accounts since
invoicing in US dollars gives it an effective hedge against the exchange rate risk. Furthermore,
most of the firm’s operating expenses are in the local currency. This works out perfectly for
Nordson as the top line is in US dollars and the expenses are in the local currency, thus
profiting from the local currency’s depreciation against the dollar that invariably is the case
most of the time. This increases the overall profitability of the firm when measured in US
dollars. In addition, as a precaution against extreme exchange rate fluctuation, invoicing is
blocked if the exchange rate fluctuates beyond 5%.
Another change that Merk implemented was tighter controls on credit extended to
distributors and customers. Suspect customers and distributors are given a net 30 credits
instead of a typical net 45. There is a strong emphasis on cash flow control now than ever
before. Idle cash is immediately invested and excess liquidity is never held up in inventory.
Because raising money in Brazil is expensive, the subsidiary always prefers cash infusion
from the parent when it needs additional liquidity.
The company pays heavy import taxes on the parts and products it imports into
the country. Consequently, the firm is forced to pass this cost to customers which results
in Nordson having higher prices in relation to its competition. This is a legacy of the
complex tax code in place in the country. Since the taxes on business profits are also
harsh, the company uses the flexibility in the accounting norms in the country to show
break-even numbers or a bare minimum profit in their accounting statements so as to
avoid taxes on profits to the extent possible.
Accountability and Awareness
Merk has ensured that there be tight accountability on the part of every Nordson
employee as well as third parties such as the independent sales force and maintenance
13
personnel. Everyone is encouraged to come up with innovative ideas to make a sale or cut
costs. Special efforts are made in educating all employees on the current situation. The
purpose is to maintain a lean, flexible and proactive workforce that can help tide over the
present slump and position the subsidiary for future growth.
STRATEGIC CONCERNS AND IMMEDIATE ISSUES

Merk was optimistic about the future growth opportunities for Nordson do Brasil and
the LAS region. He knew that Brazil was the largest economy in South America, and highly
regarded as one of the key emerging markets in the world. Merk, however, also realized that
several short term and long-term issues needed to be addressed before Nordson could ever
reap the full rewards of being a market leader in Brazil.
Short Term
Argentine Crisis: In the short term, several issues needed to be addressed. The first
issue is how Nordson would handle its accounts in Paraguay, Uruguay, and Argentina
that were affected by the Argentine crisis. What actions should Nordson take to preserve
the accounts, while at the same time receive payments for receivables? For example, the
distributor in Argentina has had to cut the work force in half and has been faced with
major cash flow problems due to uncollectibles from its Argentine customers. This in
turn has effects on Nordson do Brazil in that it has extended substantial credit to the
distributor.
Paraguay, Uruguay and Argentina accounted for less than 10% of total LAS sales,
amounting to approximately US $1 million. What should Nordson do in addition to the
steps it has already taken in order to reduce its risk in Argentina? Should Nordson focus
its efforts on dealing with only Brazilian accounts and avoiding Argentina all together?
Or, should headquarters infuse the subsidiary with cash to tide it over the bad accounts,
maintaining the status quo and hope that the worst is over?
Presidential Elections: The second short term issue is the effect of the upcoming
presidential elections. In the past, there has been a pattern for new president-elects to
reduce the number of imports that come into Brazil in order to promote the “self-
reliance” and the independence of the country. The President-elects enforce this
reduction by increasing the tariff rates on all imports. This directly affects Nordson in
that 98% of all of its products sold are manufactured outside of Brazil. How should
Nordson deal with this issue? Furthermore, if the tariffs are increased, Nordson products
will become more expensive and consequently less attractive for its customers vis-à-vis
its competition. Should Nordson ignore the issue as a part of doing business in Brazil,
hoping that such a measure will affect all its competitors equally, since most of its
competitors are overseas firms importing into Brazil? Also, would the fact that most of
Nordson customers in Brazil are multinational firms (for example, P&G, Johnson &
14
Johnson, Kimberly Clark) that have had long relationships with the company help them?
Switching costs are likely to be high for such customers should they decide to switch.
Human Resources: The staff reduction is another challenge in that now the firm must
remain competitive in an economically volatile region with an even smaller staff. In addition,
the office now only employs 2 engineers and has had to eliminate various key positions.
Consequently, this has placed an additional stress on Merk, as he has had to assume multiple
roles within his branch. Most of his time is spent trouble-shooting and handling day-to-day
affairs rather than on larger strategic issues facing the firm. Given the importance of personal
relationships in Brazil, Merk would prefer to spend his time strategizing and building personal
relationships with important people in the business and the government community rather than
in day-to-day affairs. The need for a trusted and able operations manager is acutely felt.
Acquisitions & Corporate-Subsidiary Relationship: Another challenge for Merk is

managing the adverse situations created by the various acquisitions made recently by the
parent. It is very difficult to keep sales representatives up to date with all the new products that
are constantly being added. It is difficult to have the sales representatives become experts
when the list of new products keeps growing so quickly. Sales representatives feel pressured
to sell products they do not feel quite knowledgeable about in presenting to customers.
Providing incentives to commissioned-based sales people is especially challenging when one
considers that the branch has already been under pressure to cut costs. In addition, there have
been instances in which the acquired company wishes to retain its own distribution network in
a country for sometime, thus creating a situation whereby the same company has different
competing distribution channels for different products.
Merk also has had a trying time thus far on impressing upon corporate the value of
“personal relationships” when conducting business in Brazil. It is difficult to measure and
translate personal relationships into the bottom line of a profit and loss statement. The parent,
accustomed to quantifying everything that affects a business, does not always realize the
impact of such relationships to business.
Nordson has been focusing on making investments in its advanced technology

business and has been diverting its best resources and funds to this business. Consequently, the
cash cow of the firm, adhesive dispensing, has suffered to some extent. This has had some
bearing on the LAS market where the adhesive business is the main revenue driver and where
the advanced technology business is largely non-existent. Although this may change in the
long run, this move together with the cost-reduction initiatives have cost the company a large
market share in Brazil. Furthermore, the trend in the market from traditional packaging
towards more shrink-wrapping certain beverage and food items has posed additional
challenges for the subsidiary. It has tried to counter with aggressive discounts, rebate programs
and bulk purchase discounts. Although it has mitigated the problem to an extent, the company
needs to find a way to expand its shrink-wrapping business base rather than compromise on its
price in its traditional packaging business.
Long-term strategic concerns
15
Decision Rights: Based on the disparity of business cultures between the U.S. and Brazil,
Merk pondered the idea of decentralization from Westlake headquarters. The numbers
oriented and results driven environment of Westlake headquarters did not transcend to the
business environment of Brazil. Westlake has had difficulty fully understanding the situation
in Brazil due to basic cultural differences. Could total decentralization lead to robust growth of
Nordson do Brasil due to a better understanding of the market? Or should the present
arrangement of substantial centralization with limited leeway provided to the subsidiary stay
the same?
Incentive Compensation: Merk was also concerned about the lack of incentive
compensation at his division. He believed that if employees at the subsidiary were
provided with incentives based on divisional performance, this would help align their
performance with the firm’s objectives. Currently, there was no such system. The transfer
price for the division was determined at corporate headquarters and costs were allocated
to the subsidiary without any material consultation.
Corporate Responsiveness: Responsiveness of the headquarters to the subsidiary’s

needs was another issue that Merk intended to take up with senior management. There
were many instances when the subsidiary felt that the parent imposed decisions on it
without heeding to its opinion or concerns. For instance, the subsidiary has had to bear a
heavy cost due to the measures initiated in Action 2000. At times, Merk was not allowed
to make key hiring decisions because it was not in line with the cost control measures
even when it was impressed upon them that it was imperative for the subsidiary to hire
these resources. Also, requests for cash infusion were sometime delayed resulting in loss
of key business opportunities. Merk wanted to set up a proper system with senior
management in order to have concerns heard and addressed by the parent. He also wanted
more involvement in strategic decisions that affected the LAS region.
Manufacturing Option: An important issue that Merk was grappling with was whether to
make a case to Nordson with regard to building a manufacturing facility in Brazil.
Increasingly, many competitors have been able to enter the market at lower price points on
similar products due to localized manufacturing thereby making use of the cheaper raw
material and labor in Brazil. Having these localized facilities enabled competitors to avoid
having to pay heavy tariffs associated with imports in the process. Due to the significant
number of customers setting up bases in Latin America, establishing a manufacturing facility
in Brazil offered a tremendous opportunity for Nordson to better service its customers.
Increasing economic and legislative reforms, infrastructure improvements and modernization
due to privatization has been making it easier for international manufacturers to exploit the
opportunity of lower production costs by using the cheaper resources that Brazil offers. With
the global economy slowly coming out of the recession and the developed markets becoming
increasingly more saturated and competitive, Nordson is looking for opportunities in emerging
economies with such a huge potential like Brazil. As mentioned before, Nordson recently set
up a manufacturing facility in China, the first such attempt in an emerging market.
Given the expected growth rate that the LAS region offered and the rapid
industrialization in the region, there was a compelling case for Nordson to consider setting up
16
manufacturing facilities in the country. There were risks, however, associated with the
decision. Presently the entire LAS region generated revenues of around $10 million, a
miniscule portion of Nordson’s worldwide sales in 2001 of $731 million. Also, the Argentine
financial crisis was far from resolved with its future ramifications very uncertain. Nordson,
being a company known for its quality of products and consistency of specifications and
production processes would be concerned about maintaining the same standards in Brazil. The
present volume of $10 million did not justify an investment in a manufacturing facility. Also,
the company had just recently initiated cost control measures and was cash strapped due to the
recent EFD acquisition. If the promised growth opportunities are not realized, however, the
entire investment could go awry. On the other hand, if Nordson could benefit from the
inexpensive production costs associated with manufacturing in Brazil, it could use the facility
to export, much like it intends to use the facility in China. Merk was weighing all these issues
for and against setting up a manufacturing plant in Brazil.
Merk, now equipped with pertinent information, must decide what the key issues
are to be resolved for his important meeting in Westlake. He must decide the best course
of actions to take in both the short-run and in the long-run.
17
Exhibit 1:
Nordson at -a-Glance
Date Founded:
1954
Headquarters:
Nordson Corporation
28601 Clemens Road
Westlake, Ohio 44145
(440) 892-1589
Major manufacturing, research and development facilities:

Ohio, Georgia, Alabama, California, Connecticut, Florida, New Jersey, Rhode Island, Germany,
The Netherlands, and the United Kingdom
Worldwide Operations:
Direct operations and sales support offices in a total of 31 countries; working relationships with more
than 165 distributor organizations expanding worldwide presence to 57 countries
Markets served:
Agriculture, appliance, automotive, avionics, bookbinding, building and construction, cosmetics, container,
converting, defense, electronics, flooring, food and beverage, furniture, graphic arts, metal finishing, nonwovens,
packaging, pharmaceutical, plastics, product assembly, sporting goods, telecommunications, wood finishing,
and other diverse industries.
2001 sales performance:

$731.4 million
Sales outside the Untied States:

52 percent of 2001 sales
2001 diluted earnings per share:

$1.02
Return on average shareholders' equity:

13 percent in 2001
Common stock:
Traded over the Nasdaq Stock Market's National Market under the symbol NDSN
18
Exhibit 2:
Business Profiles
BUSINESS LINE OF BUSINESS/MATERIALS MARKETS/END CUSTOMERS
UNIT BUSINESS APPLIED PRODUCTS
ADHESIVE PACKAGING Hot Melt Adhesive Food & Beverage P&G
APPLICATION Liquid Adhesive Pharmaceutical Unilever
Lubricants Bookbinding Anheuser-
Busch
Kellogg
PRODUCT Hot Melt Adhesive Appliances Whirlpool
ASSEMBLY Lubricants Building/Construction General
Furniture Electric
Speaker/Disc Merillat
Assembly Bose
HM COATING Hot Melt Adhesive Bags & Envelopes Johnson &
Specialty Label Johnson
Stocks Moore Bus.
Forms
NONWOVENS Hot Melt Adhesive Baby Diapers P&G

Fibers Adult Incontinence Kimberly Clark
Medical Products KAO
AUTOMOTIVE Adhesives Automotive All Major
Sealants Assembly Automobile
Manufacturers
FINISHING POWDER Powder Paints & Coatings Appliances Whirlpool
COATING Automotive General
Components Electric
Metal Furniture Steelcase
Recreational Trek Bicycles
Equipment
LIQUID Waterborne Paints Building Materials Pella Windows
FINISHING Low Solvent Based Paints Home & Office Hillenbrand
Furniture Merillat
Pipes & Tubing
CONTAINER Liquid Coatings Food & Beverage Crown Cork &
Powder Coatings Seal
American
National Can
Ball Metal
Metal
Container
ADVANCED ELECTRONICS Conformal Coatings Semiconductors Intel
TECHNOLOGY Flux Materials Electronics Motorola
Epoxies Telecommunications IBM
Solder Pastes Automotive AMD
Plasma Treatment Disk Drive Industry Delphi
ADVANCED Ultraviolet Curable Graphic Arts American
TREATEMENT Materials Electronics Greetings
SYSTEMS Plasma Treatment Flooring Golden Books
Packaging Kodak
Wood Finishing IBM
Medical Intel
19
Exhibit 3:
Sales Distribution – 2001

GEOGRAPHIC DISTRIBUTION
U.S./Canada Europe
49% 30%
Pacific South Japan

PRODUCT TYPE 11% 10% INDUSTRY SEGMENT
Engineered Systems Advanced Technology Coating and
Parts 23% Finishing
33% 33%
18%
Standard Product Adhesive Dispensing

34% 59%
Markets Served
Sem ic on duc to rs T e leco mmun icat ion s

7% 2%
E lect r onic Co mpo nen t s Pr in te d Circ uit B oar ds

5% 4%
M e dica l Pr od uct s
4%
In dus tr ial App lic at io ns

10 % Co ns umer Non -D ur able s
3 6%
Au to mot ive
4%
Con sume r Du ra bles

28 %
20
Exhibit 4:
Nordson Acquisitions
1989 - 2000
1989 Meltex Adhesive systems
1992 Slautterback Adhesive systems
1994 ETI Powder systems
1994 Mountaingate Induction curing systems
1995 Walcom Adhesive systems
1996 Spectral UV curing systems
1996 Asymtek Electronic systems
1997 ACT UV curing systems
1998 J&M Nonwoven systems
1999 APS Plasma cleaning/etching systems
1999 March Plasma cleaning/etching systems
1999 VeriTec Adhesive verification systems
1999 Horizon Lamps UV Lamps
2000 EFD Precision Dispensing
21
Exhibit 5:
RATIO COMPARISON
Valuation Ratios Company Industry Sector S&P 500

P/E Ratio (TTM) 46.89 28.31 22.48 30.00
P/E High - Last 5 Yrs. 50.76 34.31 29.64 50.14
P/E Low - Last 5 Yrs. 13.66 12.23 9.13 17.63
Beta 0.87 0.83 0.69 1.00
Price to Sales (TTM) 1.52 1.62 1.15 3.63

Price to Book (MRQ) 4.03 3.26 3.16 5.34
Price to Tangible Book (MRQ) NM 5.58 6.93 8.21
Price to Cash Flow (TTM) 24.27 18.62 17.16 22.72
Price to Free Cash Flow (TTM) 13.13 17.53 22.18 36.36
% Owned Institutions 35.83 49.95 51.76 60.72
Dividends Company Industry Sector S&P 500

Dividend Yield 1.74 1.41 1.41 1.76
Dividend Yield - 5 Year Avg. 2.00 1.15 1.42 1.30
Dividend 5 Year Growth Rate 9.24 -4.59 -0.04 8.40
Payout Ratio (TTM) 80.69 21.27 23.23 30.34
Growth Rates(%) Company Industry Sector S&P 500

Sales (MRQ) vs Qtr. 1 Yr. Ago -17.33 3.34 9.26 -1.44
Sales (TTM) vs TTM 1 Yr. Ago -8.12 2.64 9.88 1.94
Sales - 5 Yr. Growth Rate 3.72 10.72 11.56 12.88
EPS (MRQ) vs Qtr. 1 Yr. Ago -25.76 -4.57 -4.89 6.73

EPS (TTM) vs TTM 1 Yr. Ago -60.83 -15.52 -8.68 -8.62
EPS - 5 Yr. Growth Rate -12.57 2.29 5.61 8.20
Capital Spending - 5 Yr. Growth Rate -0.22 4.99 10.78 10.55
Financial Strength Company Industry Sector S&P 500

Quick Ratio (MRQ) 0.46 1.37 0.94 1.12
Current Ratio (MRQ) 1.02 2.41 1.72 1.67
LT Debt to Equity (MRQ) 0.68 0.56 0.86 0.65
Total Debt to Equity (MRQ) 1.42 0.64 1.05 1.04
Interest Coverage (TTM) 2.00 12.96 8.18 7.77
22
Exhibit 5: Continued
Profitability Ratios (%) Company Industry Sector S&P 500

Gross Margin (TTM) 53.64 32.17 22.15 46.49
Gross Margin - 5 Yr. Avg. 54.84 31.66 22.25 47.64
EBITD Margin (TTM) 9.52 11.71 10.99 19.71

EBITD - 5 Yr. Avg. 12.30 12.84 11.84 21.80
Operating Margin (TTM) 7.78 9.65 8.12 15.78

Operating Margin - 5 Yr. Avg. 9.99 10.42 8.71 17.95
Pre-Tax Margin (TTM) 4.91 8.48 6.80 13.62

Pre-Tax Margin - 5 Yr. Avg. 8.76 9.65 7.82 17.17
Net Profit Margin (TTM) 3.25 5.31 4.37 8.40

Net Profit Margin - 5 Yr. Avg. 5.71 5.99 5.01 11.25
Effective Tax Rate (TTM) 33.89 36.52 36.54 34.22

Effective Tax Rate - 5 Yr. Avg. 35.92 37.50 37.82 35.75
Management Effectiveness (%) Company Industry Sector S&P 500

Return On Assets (TTM) 2.64 5.64 5.00 5.72
Return On Assets - 5 Yr. Avg. 6.94 7.48 6.03 7.94
Return On Investment (TTM) 4.92 7.02 7.18 9.25

Return On Investment - 5 Yr. Avg. 11.57 10.01 8.77 12.69
Return On Equity (TTM) 8.73 10.87 13.21 16.78

Return On Equity - 5 Yr. Avg. 17.15 17.10 15.69 21.43
23
Efficiency Company Industry Sector S&P 500

Revenue/Employee (TTM) 184,000 200,005 303,670 522,614
Net Income/Employee (TTM) 5,977 12,395 17,732 78,618
Receivable Turnover (TTM) 4.22 6.15 7.79 9.37

Inventory Turnover (TTM) 2.21 5.59 7.43 10.29
Asset Turnover (TTM) 0.81 1.17 1.15 0.97
50 Companies in the Misc. Capital Goods industry listed in order of descending market capitalization.
VDFOY ITW WOS SPW GWW JELCY ASD ALS NOI
CUM DCI ZBRA MTD MX HSC YRK MSM ROP
FLS GGG LECO IEX NDSN TECUA HUG BGG TEX
LII TTC INDGF RBC CUNO NC CREO SHS GEG
ATU EASI SSSS WSO NTK MZ GSLI TII SURE
GDI UNA TNC ASTE ENO
Alphabetical Listing of all Industries in the Capital Goods Sector
Aerospace & Defense
Constr. & Agric. Machinery
Constr. - Supplies & Fixtures
Construction - Raw Materials
Construction Services
Misc. Capital Goods
Mobile Homes & RVs
24
Exhibit 6:
25
26
Exhibit 7:
Action 2000: A Plan to Accelerate Corporate Financial Growth

Overview
In 1998, Edward P. Campbell, Nordson president and chief executive officer, announced a far-
reaching program titled Mission: BEST. The program is based on three strategies --Improve,
Innovate, Grow -- designed to make Nordson "the best company in every market and every
location where we do business." The Mission: BEST program also highlights key initiatives and
restates the company's corporative values.
Action 2000 is the next phase of the Mission: BEST program announced in October 1999. Action
2000 is a company wide initiative to realign Nordson's management structure for optimum
performance, consolidate business operations, streamline manufacturing processes, stimulate
the development of innovative products, provide access to new markets through both internal
growth and strategic acquisitions, and accelerate financial growth. Simply stated, the company
will act rather than react.
Six components make up Action 2000:
• Reorganizing the company's adhesives systems businesses under common

management across Europe and North America.
• Developing global product lines and consolidating regional product lines, suppliers and
manufacturing facilities to take advantage of scale and investment in high-quality, low-
cost design and production capabilities.
• Initiating operational consolidations and staffing reductions targeted at 5 percent of the

company's worldwide workforce over the next 12 months.
• Establishing a global procurement initiative to leverage the company's purchasing

strength across 11 businesses and four international divisions, reducing costs by not less
than 5 percent.
• Launching an e-commerce initiative to accelerate the company's use of Web-based

technologies and provide leading-edge service and value to customers.
• Streamlining business processes through investments in information technology and the

prioritization of value-added activities. This includes the launch of an SAP enterprise
management system in early 2000.
Financial and growth objectives of Action 2000, to be completed over the next 24 months,
include:
• Organic business growth of 8 to 10 percent annually, with selective acquisitions being

additive.
• Profit growth averaging 15 percent over the long term.
• A $20 million reduction in spending over the next two years to reach a sustaining level of
SG&A expenses at 40 percent of sales.
• A $10 million reduction in annual manufacturing and procurement costs by the end of
fiscal year 2001.
Action 2000 is expected to produce annual cost savings of approximately $30 million by the end
of fiscal 2001.
27
Exhibit 8:
28
29
The Fisher College of Business Nordson do Brasil
May 17, 2002
Exhibit 9:
L A S REGION
LATIN AM ERICA
GROUP
NORDSON
DO BRASIL
SANTOS MAMANI NORDAR RCM GALICYS BRAZIL

PERU ARGENTINA CHILE CHILE Representatives
(HM) (HM/FIN) (HM) (FIN)
DIST. NORDSUL
URUGUAY/PARAGUAY (HM)
M ULTI
(HM)
MARTIN
(HM/FIN)
REMPEL
(HM)
TECNOR
(HM)
REINALDO
(HM)
NELSON
(HM)
30
Exhibit 10:
Importance X Performance
PERFORMANCE good Matrix - Systems
DELIVERY SPEED SERVICE
1 OFFER SPEED
Better
than
2 SPECIFICATION QUALITY
DELIVERY
3 RELIABILITY
COMPETITORS
PRODUCT QUALITY
compared to
4
Same
as
5
6
PRICE
7
Worse 8
than
bad
9
9 8 7 6 5 4 3 2 1
Less Qualifiers Order
Relevant winners
IMPORTANCE
to
low CUSTOMERS high
31
Exhibit 11:
NORDSON DO BRASIL - 2002

GREG MERK
GENERAL MANAGER
GISSELE FAVERON CLAUDIO MIZUGUCHI

Executive Secretary IT Supervisor
Marcelo Simionato LAÉRCIO BRUMATTI EFD

Financial Manager OPEN OPEN Finishing Manager JOSÉ HUMBERTO PIERONI
NW Manager PPA Manager Sales Supervisor
DIMAS ALIGLERI CHRISTIANO DELATORRE GILBERTO SOUZA OPEN/TEMP

Administrative/H.R. Coordinator NW Supervisor PPA Sales Supervisor Administrative Assistant
MARIA APARECIDA MORAES NIVALDO BISPO RONALDO TEZUKA

Tax Specialist SIMONE MENEZES PPA Salesman Engineering Supervisor
Intern
MEIRE SANTOS FELIPE PINTO
Accountant MARCELO GRECHI PPA Salesman RALPHO OLIVEIRA
NW Engineer Application Engineer
QUEZIA ALVES DÉBORA SOARES
Admin. Asst. LETICIA OLIVEIRA Customer Service JUVENIL TOME
Customer Service Senior Technician
OPEN TÂNIA DUTRA
Imp./Exp. Supervisor WALTER SANCHEZ Customer Service ELIANI SILVA
Electronic Technician Customer Service
ANDRE MARCELINO
MARILENE DIAS CLAIR AMORIN Electronic Technician JOSE NASCIMENTO
Imp./Exp. Assistant NW Technician Sales Engineer
CARLOS DIAS
Warehouse Supervisor
OPEN/TEMP
Warehouse Assistant
32

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Case Nordson

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The Fisher College of Business Nordson do Brasil

May 17, 2002

NORDSON DO BRASIL: CHALLENGES IN AN EMERGING

Decision authority was another concern of importance to Merk’s. At this time,

DOING BUSINESS IN BRAZIL: PROBLEMS AND OPPORTUNITIES

This statement exemplifies Brazil’s lower class citizens’ dependence on the

Nordson Corporation, founded in 1954, designs, manufactures and markets precision

The company has around 4,000 employees worldwide. Principle manufacturing

Company History and Evolution

The U.S. Automatic Company, parent company of Nordson Corporation, was

The company's continued growth is based on a customer-driven strategy that is

In the nonwovens market, Nordson acquired J&M Laboratories, Inc.

J&M's meltblown and spun-bond technologies with Nordson's existing nonwovens

Marketing, Sales and Distribution

R&D and Manufacturing

Suppliers and the Supply Chain

Nordson initiated a global procurement initiative in 2000 that embraced a

Competition and Industry

Other notable events in the recent past

NORDSON DO BRAZIL AND LATIN AMERICA SOUTH (LAS)

Gregory Merk, General Manager of LAS

Merk recently undertook a benchmarking study vis-à-vis his competitors to determine

The organizational chart of Nordson do Brazil is presented in Exhibit 11. From a

Sales and Distribution

Service and Maintenance

To reduce costs, the subsidiary out-sources maintenance and service to third

Finance and Accounting

Accountability and Awareness

STRATEGIC CONCERNS AND IMMEDIATE ISSUES

Acquisitions & Corporate-Subsidiary Relationship: Another challenge for Merk is

Nordson has been focusing on making investments in its advanced technology

Corporate Responsiveness: Responsiveness of the headquarters to the subsidiary’s

Major manufacturing, research and development facilities:

2001 sales performance:

Sales outside the Untied States:

2001 diluted earnings per share:

Return on average shareholders' equity:

NONWOVENS Hot Melt Adhesive Baby Diapers P&G

Sales Distribution – 2001

Pacific South Japan

Standard Product Adhesive Dispensing

Sem ic on duc to rs T e leco mmun icat ion s

E lect r onic Co mpo nen t s Pr in te d Circ uit B oar ds

In dus tr ial App lic at io ns

Con sume r Du ra bles

Valuation Ratios Company Industry Sector S&P 500

Beta 0.87 0.83 0.69 1.00

Price to Sales (TTM) 1.52 1.62 1.15 3.63

% Owned Institutions 35.83 49.95 51.76 60.72

Dividends Company Industry Sector S&P 500

Payout Ratio (TTM) 80.69 21.27 23.23 30.34

Growth Rates(%) Company Industry Sector S&P 500

EPS (MRQ) vs Qtr. 1 Yr. Ago -25.76 -4.57 -4.89 6.73

Capital Spending - 5 Yr. Growth Rate -0.22 4.99 10.78 10.55

Financial Strength Company Industry Sector S&P 500

Profitability Ratios (%) Company Industry Sector S&P 500

EBITD Margin (TTM) 9.52 11.71 10.99 19.71

Operating Margin (TTM) 7.78 9.65 8.12 15.78

Pre-Tax Margin (TTM) 4.91 8.48 6.80 13.62

Net Profit Margin (TTM) 3.25 5.31 4.37 8.40

Effective Tax Rate (TTM) 33.89 36.52 36.54 34.22

Management Effectiveness (%) Company Industry Sector S&P 500

Return On Investment (TTM) 4.92 7.02 7.18 9.25

Return On Equity (TTM) 8.73 10.87 13.21 16.78