International Business - Attractive Market For JBC

International Business 1. Why do you think that India was an attractive market for JBC? As mentioned in the textbook, the fast growth in construction that the Indian economy was experiencing opened up for foreign expansion during 1979. JBC felt that the potential in the Indian market was too good to ignore. JCB entered the Indian market through a joint venture with Escorts, an Indian engineering conglomerate before becoming the sole owner of JCB in India. As JCB manufactures high-end back-hoe, earthmoving, and construction equipment, the capital investment that the nation was made in infrastructure projects, combined with the rapid pace of economic growth overall, made the country of these years the most attractive globally. This was in my opinion the reason why the Indian market was so attractive. 2. Historically, JCB entered foreign markets through exports. Why do you think JCB generally favored exports? I believe that JCB generally favored exports because it was easier for JCB to have centralized focus and control on engineering, technology, etc than to set up local production in different countries. Also, JCB is a relatively small company compared to Caterpillar and Komatsu, so setting up production in multiple countries would not have made an economic sense. Low market share coupled with uncertainties of demand and economy pose a big risk for a relatively small global player to expand manufacturing operations in other countries 3. In India, JCB decided to enter via a joint venture. What was the articulated rationale for this? In what other ways might the joint venture strategy have benefited JCB? India was a relatively closed economy back in 1979 when JCB entered the Indian market. High tariff barriers made export unviable to India. The government regulations required foreign companies to have a joint venture partnership with Indian companies with Indian counterparts being the majority stakeholder. JCB realized that the Indian market had tremendous growth potential and the construction industry was set to grow with huge demand for public infrastructure and commercial and residential sectors on the boom. The joint venture strategy benefitted JCB by giving an early foothold in the Indian construction equipment market. By the end of the 1990s, the joint venture was selling some 2000 backhoes in India and had an 80% share of the Indian market. Riding on the success of its early joint venture strategy, the company is a leading manufacturer of backhoes in the Indian market and India contributes to more than a third of its global revenues. 4. What were the risks associated with the joint venture strategy? How did JCB deal with these risks? A joint venture strategy will always bring some risks. Some of the risks associated with the joint venture strategy were (I) t hat JCB was concerned that technology transfer and sharing technical know-how with Escorts might make Escorts self-capable and Escorts might turn into a direct competitor for JCB. (II) because of the limited control and stake in the joint venture due to prevalent regulations in India. The joint venture limited the expansion strategy of the JCB. The global success was achieved by the JCB by utilizing leading-edge manufacturing technologies and relentless product innovation. 5. What are the benefits to JCB of localizing significant production in India? What are the disadvantages? Do the benefits outweigh the disadvantages? The main benefit is in my opinion that it helps the company to sell additional products in India. The localizing of production will most likely support the company when it needs to produce a larger number of units in the future. Two other great benefits are it will minimize the cost and the dealers can access the spare parts immediately. Lastly, JBC does not have to struggle with high tariffs when exporting to India. The main disadvantage is in my opinion that the company needs to face the financial struggle & economic slowdown of the country, but the benefits outweigh the disadvantages for sure!