MAKERERE UNIVERSITY BUSINESS SCHOOL

ASSIGNMENT
INTRODUCTION TO INTERNATIONAL BUSINESS
ENVIRONMENT
GROUP 35 - THE JCB IN INDIA CASE

NAMES REG NO. SIGNATURES

1. MUGISHA VINCENT 25/U/14463/PS
2. NAGGAYI PATRICIA 25/U/14534/PS
3. APOLOT QUEEN 25/U/14168/PS
ELIZABETH
4. KEMBABAZI SHILLAH 25/U/14333/PS
5. TURYAGUMANAWE DAVIS 25/U/14819/PS
6. NYANGOMA EVELYNE 25/U/14734/PS
7. NAKIMULI CATHERINE 25/U/14569/PS
8. KAITESI BARBRA
9. AKARIZA PATIENCE
10. NATAMBA JOEL BEN 25/U14678/PS
CHAPTER 12 OF GLOBAL BUSINESS TODAY, Pg 395
Read the JCB in India case. Discuss the following questions:

1. What motivated JCB to enter the Indian market?

JCB was a large British manufacturer of construction equipment. It w

as founded by Joseph Cyril Bamford in 1945 and named after him JC Bamford excava
tors limited. Later in 1979 JCB entered into a joint venture with escorts, an Indian eng
ineering conglomerate, to manufacture backhoe loaders for sale in India. The decision
to enter into the Indian market was driven by the following reasons;

Indians untapped growth potential for construction equipment greatly mot

ivated JCB to enter the Indian market by 1979. JCB recognised the immense potential
in India construction and infrastructural sector like housing, construction of roads. Th
erefore, JCB foresaw the benefits of joining the Indian market little wonder after joini
ng the market JCB was able to sell 2,000 backhoes and an 80 percent of share of the I
ndian market.

The strong motive to enter Indian market made JCB enter into the Indian m
arket. JCB was motivated by India’s large and growing demand for construction equip
ment, driven by rapid infrastructural development. That is in the late 1970’s India was
aiming at developing rural roads, irrigation canals and housing which required constru
ction equipments.

The global export opportunity motivated JCB to enter into the Indian mark
et. By manufacturing in India JCB was able to produce equipment for other countries.
It is also observed that JCB increased investments in other countries for examples it es
tablished a wholly owned factories in Brazil and United States through this it was able
to construct another manufacturing company in India thus acting as a motivational too
l to the JCB company.

Strategic partnership with escorts limited company in India motivated JCB to

enter into the Indian market. JCB entered into a joint venture with Escorts, an Indian e
ngineering company that had already established distribution networks and reputation
that had a deep understanding of the Indian market and significant manufacturing exp
ertise which made them an ideal partner for a foreign company like JCB to venture i
nto Indian market.

Cost effective manufacturing base set a fair ground for JCB to enter into Indi
an market. India offered low labour costs in production making it cheaper for JCB to a
cquire both skilled and unskilled labour and their joint venture with escorts that had w
ell established engineering company with expertise in manufacturing agricultural mac
hinery and automotive components. This provided JCB with immediate access to man
ufacturing know-how, and a supply chain network, drastically reducing the time and
cost of setting up operations from scratch. This made JCB join Indian market with a fa
ir grounding base in Indian market.

Strategic long-term growth vision motivated JCB to enter Indian market.

JCB anticipated that India’s economy would gradually open up making it a key growt
h engine for decades, this motive made JCB to enter into a joint venture with hopes fr
om its managers of winning India’s market in the near future.

The government of India’s mandated joint venture motivated JCB to join t

he market. Although JCB would have prepared to go into the Indian market alone, the
government regulation in India at that time required foreign investors to create ventur
es with local companies. It is no surprise that JCB allowed to join hands with the esco
rts, an Indian engineering conglomerate to manufacture backhoe loaders for sell in Ind
ia.

The first mover advantage motivated JCB to enter the Indian market. It is o
bserved that in 1979 JCB was the first foreign construction company to enter India. It
was able to capture 40 percent stalk before other companies would join and it also sec
ured a strong brand ahead of its global rivals like caterpillar, Komatsu and Volvo as a r
eason to why JCB moved up to number four in the industry with almost 10 percent in
the global market share.

The easy adaptability of JCB products in India. The JCB products like bac
khoe loader was versatile, affordable and suitable for India’s conditions. The company
hoped that the Indians will easily adopt to its products as they joined to the already exi
sting local company that manufactured almost similar products.
 The need for new growth markets in foreign countries. Like any other compa
ny, JCB was motivated by the desire to expand beyond its traditional markets. It had a
lready established its self in Europe and other markets. Therefore, India was a strategy
to increase its geographic footprint and decrease dependence on any single region thus
motivating JCB to also enter Indian market by 1979.

2. What caused the Company to choose the Joint Venture

entry Mode?
Existence of government regulations at a time that required foreign inv
estors to create joint ventures with local companies led to the joint venture entr
y mode. The decision to enter a joint venture in India was driven by the laws t
hat restricted foreign investors from implementing its own strategies such as n
ew investments or more aggressive growth plan, without the consent of its part
ners. This lack of full control forced the company to enter into a joint venture
with Escorts.
The high tariff barriers which made direct exports to India difficult for
ced JCB to engage in a joint venture with escorts. This ensured that both comp
anies were to share all financial burdens and risks hence a better strategy that
would enable JCB meet its success hence favouring JCB to join a joint venture
entry mode in India.
Strategic benefits of the chosen partner also became a cause for JCB e
nter into a joint venture in India. JCB made a strategic choice in selecting Esco
rts limited as its partners. This partnership offered several critical advantages li
ke providing deep market knowledge and distribution network that gave JCB i
nstant market access and credibility that would have been difficult for JCB alo
ne making it easy for JCB join joint venture.
The need for easy access to resources and distribution channels caused
JCB choose the joint venture entry mode in India. A local partner provides eas
y access to raw materials, technology, skilled labour and established distributio
n networks. This speeds up market entry and builds competitiveness for the co
mpany.
 Strategic alliance for competitive advantage in the Indian market ca
used JCB to choose entry mode joint venture. The company’s managers believ
ed that it was better to get a foot hold in the nation thereby gaining advantage
over global competitors.
The market advantage motivated JCB to choose a joint venture ent
ry mode. JCB felt that the Indian construction market was ripe for growth whi
ch would become very large and create a high demand for construction equip
ments.
JCB’s need to brand its self in India caused JCB choose a joint ven
ture entry mode. Indian customers were more likely to trust products backed b
y a well-known Indian company, escorts rather than a completely foreign firm
thus engaging in a joint venture entry mode.
The need to mitigate risks compelled JCB to enter into a joint venture. A
s a first mover company in India, JCB could have experienced a lot of risks for
example the learning costs, early marketing costs but because JCB was in a joi
nt venture with the escorts, these risks were shared financially which reduced t
heir burden causing JCB enter into a joint venture entry mode.

3. What were its later reservations about the chosen mode of entr

y?

JCB faced its later reservations about the joint venture mode of entr
y in the Indian market that were either positive or negative to the company due to
evolving realities that combined the complexity of managing a shared entity in Ind
ia as observed;

A large market share in the Indian market was its later reservation in Ind
ia for choosing joint venture as the mode of entry. Twenty years later, some of the
JCB’ s foresight had been rewarded that is the joint venture was selling 2,000 back
hoes in India, and it had an 80 percent share of the Indian market.

JCB was able to transform the joint venture into a wholly owned sub
sidiary. In 2002, JCB took the advantage of the relaxation of the government r
 egulations on foreign investment to purchase all the escorts remaining equity t
hus transforming the joint venture into a wholly owned subsidiary.
Increased sales and profits. JCB was able to make 1.5 billion pounds
of sales and 110 million pounds and the company had moved up to number fo
ur in the industry with almost 10 percent of the global share.
Limited control over the company. JCB felt that the venture limited its
ability to expand and it was hesitant about transferring the know-how to a vent
ure that it did not have a majority stake and therefore lacked control.
Inability to introduce new competitive measures in the company. With
the fear that the valuable technologies would leak out of the joint venture with
Escorts which was one of the largest manufacturing company in India, JCB di
d not implement any new innovations into the company as they thought that es
corts was their competitor in the future.
Limited investment and growth of the company. The company was un
willing to make the investment in India requirements to take the joint venture t
o the next level unless it could capture more of the long-run returns. This also l
imited the profits in a short run due to limited investment

4. What can you say about the timing of entry?

JCB entered into its first joint venture with escorts in India and it exported tw
o-thirds of its production from Britain. JCB being the first foreign market in In
dia it enjoyed and suffered the challenges of the first mover advantage;
Ability to preempt rivals and capture demand by establishing a stron
g brand name in Indian market. This earned JCB trust, credibility, loyalty from
customers and a competitive advantage in the market thus a gradual expansion
of the company.
Ability to build sales volume in India and ride down the experience
curve ahead of rivals, giving the early entrant a coat advantage over later entra
nts. This enabled JCB to cut prices below to that of later entrants that chased t
hem out of the market.
 The ability of JCB to create switching costs that tie customers into th
eir products or service. By entering the Indian market for backhoes in 1979, J
CB was able to gain significant first-mover advantages, cumulating in an 80 p
ercent share of the market for backhoes by the early 2000’s.
However, JCB was doing great, being the first to enter the market bef
ore all other foreign firms, it also suffered challenges as;
High pioneering costs like market education, building infrastructure f
rom scratch, technology and product adoption in a new market. JCB had to be
ar the costs that a later entrant can avoid. These costs are associated with the e
arly entrants in a foreigner market like JCB in India
Subsequent change in regulations since regulations can change in awa
y that diminishes the value of an early entrants investment. Just like JCB was f
orced into a joint venture in India for its first because of the timing of the entry.
Slow market growth of the company. Since JCB had to first understan
d and educate the Indians on their imported goods that were unfamiliar to the
m. This also made the products like machines, contractors and backhoe loaders
costly those making it difficult for JCB to increase their sales in India.
High tariff burdens imposed on JCB exports like machines from Brit
ain also greatly reduced their would be profits in the Indian market that didn’t
affect the later entrants in India after the change of the regulations on the forei
gn investors.

5. How did the company take advantage of the market conditions

in India to survive and thrive?

Localization of manufacturing in India. Later after the increase of th
e Indian market, JCB stopped relying on the imports instead it set up manufact
uring plants in India thereby localizing the market. This reduced exportation c
ost burdens and made its products affordable to the Indian natives.
Early market entry via a joint venture as its mode of entry. This enab
led JCB enjoy the first mover advantages like immediate access to local netwo
rks, labour and regulatory familiarity in the construction industry. India was sti
ll under developed thus allowing JCB set customer preferences and industrial s
tandards in the engineering sector of India.
Branded the company in the Indian market. Overtime, JCB became
a household in India name in India to the extent where people used it as a gene
ric word for excavators. This trapped into cultural mindset by associating JCB
machines with strength, reliability and progress that always acted as a referral
to the Indian market.
Training and skill development in India. JCB set up operation trainin
gs across India. This was conducted within the employees of the company that
were given knowledge and skills to ensure proper handling of the company’s
machines and later extended the teaching to the community in India to create p
ublic awareness thus an opportunity to attain skills.
Catered the India’s infrastructural development that acted as a long str
ategic foundation in the Indian market. India’s rapid infrastructure growth for
example roads, housing and rural developments that JCB boosted created a hu
ge demand for constructional equipments thus increasing the company’s mark
et shares in India.
Continuous technological advancements and innovations in the India
n market. The company kept introducing new models and upgrades to suit the
India’s market conditions. These innovations gave them a competitive edge ov
er other engineering companies thus taking an advantage of the Indian market
conditions to survive and thrive.
Government partnerships with JCB company set a long- lasting relatio
n in the Indian market. JCB benefited from India’s government in that it took o
ver the country’s projects to develop infrastructure like in the golden quadrilat
eral, rural road schemes and housing programs. By aligning with these nationa
l priorities, thy secures along lasting connection with India that created a stron
g demand for the company’s market.
Cooperate social responsibilities to the community was set as a market
strategy in India. The company invested in the community developmental acti
vities, friendly technology and local employment that improved the company’s
reputation and gave them a long-term good will in India.
Set up a strong dealer and service networks across India. This was thr
ough the created extensive sales and service network connections across India
including rural areas. This ensured after sales support, spare parts availability a
nd good customer care relations that built a strong loyalty among its customers
in India.
Product innovations and diversifications in the Indian market. Later JC
B started manufacturing excavators, compactors, telehandlers and many more
that were different from it’s initial products like the backhoe loaders. This help
ed the company to serve both large and small infrastructure firms hence captur
ing a wide customer volume in India.
It exploited the relaxation of the government regulations in India. Th
e company saw an opportunity and it did not hesitant to take advantage as it to
ok this to its logical end when it responded to further relaxation of the govern
ment regulations on foreign investment to purchase all of Escorts remaining eq
uity, transforming the joint venture into a wholly owned subsidiary that enable
d them implement their own decisions in the company’s operations hence a ste
ady development in the Indian market.
JCB made India an export hub for the other countries across making it
a global manufacturing base. JCB made Indian manufacturing operations cost-
effective as it became the undisputed leader in the India’s construction equipm
ent market, controlling 80 percent of the backhoe loader market. This reduced
costs and increased competitiveness.

In conclusion, JCB’s venture to India was calculative, strategic and s

uccessful as it illustrates how a multinational company can gain market by co
mbining early entry mode via joint venture into foreign markets like India.