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Manufacturers of
construction equipment
• JCB Case Study
Group 9: Anna Constantino, Charlene Selle, Sebastian Eldrup-Jorgensen, Sidhesh
Sarda, Thais Alvarez, Zien Huang,
Introduction
•
•
•
•
•
•
The company JCB - Charlene
Reasons for entering India - Sid
Joint Venture - Thais
Results of Joint Venture (1979-2000) - Anna
Transformation to subsidiary - Emily
Conclusion - Sebastian
The Company JCB
• Founded in 1945 by J. C. Bamford
• Headquartered in Rocester Staffordshire, England
• JCB manufactures machines for use inconstruction,
industrial, and agricultural
• Operates in 4 continents and 150 countries
• 7 factories UK, Germany, Brazil, North/ South America,
India and China
• Employees 8,000
• Today: Among the 3 largest players in the world
Company facts
• In 2007 JCB's turnover increased to a record of £2.25billion1
• Emerging markets proved to be the main source of business
growth during 2007. JCB enjoyed success with significant
growth in markets around the world including India, Bulgaria,
Romania, Poland, Russia and South America.
• Profits: £187million (record high)
1
http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=7879509
Looking at a New Market
• When a company wants to invest abroad, they
look for countries with a long term profitability
potential.
• the attractiveness of a country is determined by
economic and political factors.
• Making an FDI is a huge strategic commitment,
you are exposing yourself to a new country 
new risks: consumers, currency and general
economic & political risks.
Urbanization
•In 1950 only 18% of people in developing
countries lived in cities
•In 2000 the proportion was 40%
•Developing countries have much faster urban
population growth—an average annual
growth rate of 2.3%, compared to the
developed world's urban growth rate of 0.4%
Real GDP
The construction Industry
• The construction industry is second largest
industry in India after the agriculture industry
• When we talk about construction industry we are
talking about making hospitals, schools,
townships, government building, urban
infrastructure.
• Construction is essential for the socioeconomic
growth ofany country.
Early Mover
• JCB got a good grip of the market in India
because they were one of the first major
companies who invested in automated
construction equipment.
• By the year 2000, JCB had managed to capture
about 80% of the market share.
Why Choose Joint Venture?
• High tariffs
• High trade tariffs made export to India difficult.
• Government regulations
– The government regulations at that time
required foreign investors to create joint
venture with local companies.
Joint Venture
Joint venture is a firm jointly owned by two
or more independent firms. It is the most
popular mode for entering new markets.
Advantages
Disadvantages
Access to local partners
knowledge
Lack of control over
technology
Sharing development
costs and risks
Inability to engage in
global strategic
coordination
Politically acceptable
Inability to realize
location and experience
economies
Results from Joint Venture
• Twenty years later, sales soared.
• Increase in shares
• Deregulation
• licensing?
Foreign Investment
• 1999 - purchasing 20 percent of
Escorts’ equity to give JCB majority
control
• 2002 - JCB purchanse all of Escorts’
remaining equity, transforming the
joint venture into a wholly owned
subsidiary
Government Regulations
1991: Economic reform programme begun by Prime Minister PV
Narasimha Rao.
India asked for a $1.8 billion bailout loan from IMF, which in return
demanded reforms.
1998: - India carries out nuclear tests, leading to widespread
international condemnation and India suffered the impact of economic
crisis in Southeast Asia, the economics was getting worse.
1999: Signed bilateral Lahore peace declaration with Pakistan. The
government budget deficit 5.8 billion U.S. dollars.
2002: March. The new export and import policy
Conclusion
• Case Type: Succesful FDI in a developing economy!
• Target market: India
Means: joint venture  Reason: regulation & tariffs
• Company today:
Sharp deterioration in market conditions in construction!
Result: Revenue has fallen to £380 million (2009)2
OPERATEING LOSS of £68 million !!!
JCB India is seeking to ride the recovery with a new range of
products for 2010.
2http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=12663123