Question

1. Why did JCB, a company that had traditionally favored wholly owned operations, form a joint venture with Escorts? Did the company have any other alternatives? 2. What prompted JCB to buy out its partner? Do you feel JCB’s concerns were valid? Why or why not?

3. What did JCB learn from its experiences in India? How did this help JCB in its overall strategy?

Answer 1

(1)

JCB( J. C. Bamford excavators) formed a joint venture with Escorts in 1979. The former is a British industrial machinery manufacturing company, while the latter is an Indian engineering company. The motive behind this action was to

• enter Indian market at low cost.
• take the advantage of their Indian counterpart in coping with the lack of knowledge about the economic, legal and political conditions in India.
• exploit the potential of growth in the Indian market before their competitors could do so.
• combat the high trade tariffs.
• comply regulations prevailing in India at that time that required foreign investors to form a joint venture with local companies in order to operate in the country.

JCB could have licensed its technology to Escorts in order to enter the Indian market.

(2)

The joint venture was very successful and JCB gained 80 % of the market share.

However JCB felt the arrangement limited their

• expansion opportunities.
• control over operations.
• control over technological competence.

This prompted JCB to buy out its partner in 2002.

JCB's concerns were valid as this buy out resulted in tighter control over operations and increased ability to integrate productive process of manufacturing that in turn led to reduced cost.