JCB in India

JCB IN INDIA
Summary:
 At the beginging: exports t India
 1979: joint venture with escorts because of new government regulations
 India: very interesting and promising construction market
 20 years later: 80% share of the Indian market
 Wholly owned subsidiary in 1999
 5th largest manufacture of construction equipment
1) What was the strategic rationale underlying JCB’s entry into India in 1979
and China 2005? Given that the capital to fund expansion is limited, does it
make more sense for JCB to expand its presence in these markets, as opposed
to more developed markets , such as those of Western Europe?
From reading the case study it can be stated that the choice for JCB entrance
into the Indian market was due to its construction market. JCB believed that
the Indian markets were deemed as being favourable for investments and cold
benefit then in the long to a greater extent. The Managers also believed that
by entering the Indian market than do competitors they would gain an
advantage rather than waiting for when this growth of the Indian market came
noticeable to other Manufacturers. JCB being the ranked the fifth largest
construction equipment manufacturer in the world thought that it should
compete in China on the same level with that of its competitors (namely
Caterpillar, Komatsu and Vovlo) reason being that the construction industry
was increase at a fast rate and these competitors had already started expansion
into the Chinese markets.
2) Why do you think JCB chose to enter India via a joint venture, as opposed to
some other entry mode?
JCB decided to enter in the Indian market via joint venture with escorts as
opposed to any other entry mode for the reason of the high tariff barriers which
made direct exports to foreign markets difficult. A tariff is any tax placed on
imports or exports (trade tariffs); they serve as a form of protectionist
measure. By JCB engaging into a joint venture with Escorts, JCB was able to
gain access into the India market while not having to experience any
challenges that may arise when one is starting a business that solely owned.
Furthermore, it can be assumed that one reason why JCB may have chosen
joint venture was so that he can strengthen his relationship with other
organization. This will aid in helping the business grow faster and in turn, will
increase productivity flow in the generation of higher profits.
3) Why did JCB not simply license its technology to Escorts?
A license is simply the giving of authorization to use patents, trademarks,
copyrights designs and any other intellectual property rights to another party
or individual. In this case JCB did nt want to engage in licensing its
technology to Escorts for the main reason that f they provided Escorts with
their ‘know-how’ they could in turn adapt this new technology and use it to
compete with them. JCB thought that there technology gave the a sense of
competitive advantage in that field and so, if passed on to Escorts, they can
adapt and later on be of a major competitor towards JCB.
4) What were the potential disadvantages of JCB’s joint venture with Escorts?
By engaging in a joint venture with Escorts, JCB believed that this business
strategy will hinder the company’s ability to reach out to other markets and or
expand its product offering. JCB was also of the view that the technology that
they incorporated into their organization is of high quality and thus, gave them
a major advantage to that of other similar manufacturers; they need not want
to share this competitive gain with Escorts. In addition, not having distinct
control would not allow them to compete in ways they believe are both
efficient and effective for the ‘Indian Market’ which they saw as an important
investing and a rapidly growing economy.
5) What were the benefits of gaining full control of the Indian joint venture in
2002? Canyou think of any drawbacks?
JCB gained many advantages by having full control of the Indian joint
venture, they reduced therisk of losing control over their technological
competence, they were now able to have tightercontrol over the operations,
they regained the ability to engage in global strategic coordination,and they
now became able to integrate the productive process of manufacturing which
greatlyincreases the overall benefit of the organisation by reducing costs. The
drawbacks of a whollyowned subsidiary are the inherent risks of setting up
overseas operations, there risks of learninghow to do business in a new
culture, and that JCB now had to bear all the operational costs byitself.

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