Objective of JCB

Question:

Explain the Objective of JCB.

Answer:

J.C. Bamford Excavators Limited, universally recognized as JCB, is one of the leading British multinational corporations in the globe. It has headquarter in Rocester, Staffordshire and this leading corporation manufactures equipments for construction, waste handling, agriculture, demolition and agriculture. From the recent reports, it can be stated that this company is the world’s largest construction. From the global market position of JCB, it can be seen that JCB is present in different parts of the globe and now the company has been planning to expand the business further. Considering the nature of the business, it can be seen that China is the most potential country to expand the business in and thus JCB has identified China as their target market. Therefore, in this particular task, focus would be shed on an effective business plan through which the company would be able to expand their commercial existence. Therefore, it can be stated that in order to do that, a strong business plan seeks to generate that would help the organization in significant increase in the sales and profits. The business plan has been prepared on the basis of present market condition of JCB that includes data on size and growth of market and geographical segments, needs of the customers, perception as well as the buying behavior. 

Objective of JCB

• Present objectives of JCB are to reduce cost and make significant profits, so that they can expand their business in target market, i.e. China. 

• JCB want to make an equal and fair profit in the business to business and business to customer marketing service industry. It can be stated that this aim can be reached by attaining proper market penetration and product development based on the requirements of the customers. 

• The mission of this international corporation is to become the top producing manufacturing company in the target market by providing the highest quality service to the customers. 

• Under the leadership of Sir Anthony Bamford, JCB has been successfully transformed from one factory operation in Staffordshire with a significant turnover of £43 million to a global business. It has 22 plants around the world employing more than 10,000 people making over 300 different products. The major objective of JCB is to move near to the potential customers and for this they need to move into the rural areas of India (Barringer 2012). 

Location of JCB 

In the present  competitive world, globalization has immensely impacted the organizational position of the company. If focus is shed on JCB, it can be seen that in every corner of the world, JCB is available, as this is world’s top three manufacturers of construction equipment. The company has successfully employed 12,000 people in four continents and sells the products in 150 countries with the help of 2000 dealer depot locations. From the world map, it can be seen that North America, Latin America, Africa, Middle East, Europe, India, Asia, Oceania, Scandinavia, Russia and CIS. However, it can be stated that in all these locations, customers can get equipments of agriculture, construction, engines, industrial, generators, industrial, light equipments, utility products, vibromax and some more. Apart from that, it can be stated that it is easy to find out the locations of JCB viatheir websites with detailed information (Beamish 2013).  

The company has focused on localization strategy, which has driven the company to form strategies on the basis of the demand of the local market. In this context, it has been found that JCB supplies the products that are mostly useful in the respective nations.  In addition to that, the company has also undertaken extensive aggressive strategies in order to operate their business in the global market. It has been observed from numerous studies that the company has been currently focused on creating a massive hub in Indian construction market. Majority of the earth moving vehicles in India are supplied by JCB. In this context, JCB is also noted to focus on tactful market entry mode as a means of expanding their business in the global market.

Available products of JCB

If focus is shed on this corporation, it can be seen that JCB is one of the leading organizations that sell several products to the students and these have been mentioned here. However, they operated their business by focusing on engine technology, compaction equipment, diesel generators, hydraulic excavators, Industrial Forklifts, several light equipment, lighting towers, rough terrain forklifts and many more. These particular products are highly significant with respect to obtain the better part of their revenue.  In this part, it is required to mention some of the new machines that the company has recently launched into the market and these are Backhoe Loader, Tracked Excavator, Wheeled Loader, Skid Steer Loader, Super Loader, Generator and Tele-handler (jcb.co.uk 2016). Therefore, it can be stated that the company has been trying to capture more market share and thus they are highly focused on manufacturing new models of machines as per the requirement of the people. Site dumpers, skid steer loaders, telescopic handlers, telescopic wheel loaders are some of the most featured machines that are highly popular among the consumers and the company believes that to capture more market share, they are required to bring some modifications to these models (Cronin-Gilmore 2012). 

Present strategy of JCB

From the market position, it can be seen that JCB enjoyed its best year in 2007 because it successfully sold more than 70,000 machines in order to increase its year on year sales by 30%. This was a full 18% above the present growth. However, it can be stated that the company enjoyed a great success, as it continued its strategy of developing its business in the emerging markets of the globe. In order to do that, they have shed their focus on broadening its range of products as well as expanding its dealer network (Wilson and Gilligan 2012). Apart from that, the company has tried to shed light on developing as well as enhancing the support that it offers to their customers. From the report of the company, it can be seen that entering into the emerging market can be proved to be a great source during 2007. JCM enjoyed its entry in the emerging markets like Bulgaria, Romania, Russia, Brazil and Canada. Therefore, the company is confident enough about its market entry mode and relying on these marketing strategies to take entry in the China market. 

Future strategy 

After analyzing the market situation, the company has found that there are some sectors that might witness downturn and this would hamper the overall expansion of the business. This situation has turned attention of the company towards China, as the market possibilities are high in China. It can be stated that downturn in North America have put a question mark in front of JCB, as the market condition in JCB feel by 17%. Besides North America, European economies as well put the company under pressure, as the market condition stated that the effects are expected to be felt in the house building sector particularly to which the construction was solely linked with. Therefore, JCB’s future strategy would be international, as the company at present work under global-standardization strategy (Jcbexplore.com 2016). 

Apart from that, it can be stated that this United Kingdom based construction organization and leading equipment manufacturer JCB has planned an aggressive India marketing strategy with proper focus of tapping the vat rural market. It reckons that it would provide the corporation all the essential volumes amidst diminishing sales as well as slowing financial system. From the company, it can be seen that JCB at present has more than 400 outlets in India and mostly all these outlets are in urban as well as semi-urban areas. However, it is required to mention that the company expects that the new marketing strategy would give 15% growth at the initial level and more than 15% in the next year, even if the market conditions remain slow-moving (Killing 2012). 

Identifying the new market and potential market of JCB 

It can be stated that it is a truly global corporation, but for manufacturing firms, it is required to have a local presence, as this is the key success factor. Analyzing the market condition of China, it can be stated that they are required to integrate and collaborate with the local Chinese companies like Liugong, Zoomlion and XCMG. Kotler et al. (2015) have stated that joint ventures can most importantly aid the global business growth. Therefore, it can be stated that China market is the most potential market into which JCB can take entry. On the other hand, if focus is shed on potential market, then it can be said that rural market of India is one of the most potentials markets and JCB can take entry into this market successfully to gain significant market share. It can be stated that in the first year of taking entry into the market, it would be really tough, as the company needs to learn new skills and the detailed market analysis. At the initial level of taking entry into the China market, the company is required to rely on joint ventures, as this is one of the useful means to accelerate the progress into the new market (Morgan, Katsikeas and Vorhies 2012). 

Barringer (2012) has stated that if both the business partners have a clear and single business vision for an identified business opportunity, it makes so much of sense. Therefore, joint venture into the China market is the most affordable option in front of JCB. Therefore, it can be stated that in India, JCB require to almost expand disproportionately to be properly able to reach out to the interior parts. Apart from that, it can be stated that to gain significant market share, the company needs to develop new products as well. In the rural parts, need of tractors are high and this part is to required to keep in mind. This is one of the low-cost sustainable solutions to the small earth moving works unlike people using tractor with attachments to do the same task (Morgan, Katsikeas and Vorhies 2012). 

Market entry mode

Sun and Lee (2013) have stated that businesses of any size can use joint venture in order to strengthen the long-term relationship, as there are several benefits of joint venture. JCB at the initial stage is required to collaborate with either Liugong or Zoomlion or XCMG. These are the reputed corporations in China and JCB is required to tie the business knot with any of them. Through the joint venture, JCB would be able to access new markets and the distribution networks and would experience increased capability. Apart from that, joint venture would assist JCB to share the risks of costs with the business partner and at the same time would access to greater resources like specialized staffs, technology and finance. Besides taking entry into the China market, the company is required to focus on localization mode at the time of taking entry into the rural areas of India. However, it can be stated that Terpstra, Foley and Sarathy (2012) have opined that once a company has an established distribution channel, another company could use its profitability to sell the products. The company at the time of taking entry into the foreign market might lack in proper market knowledge, sufficient human capital as well as technology along with access to a particular market and joint venture would be helpful in this particular case. It has been already mentioned that the company needs to reduce its cost and in order to walk on this way; it is beneficial to go for the joint venture. This would help the company to increase productivity as well as reduce the overall cost. However, it is required to mention here that joint venture would assist the company in reducing duplication. Therefore, the market entry mode of JCB would be joint venture (Wilson and Gilligan 2012). 

SWOT analysis of JCB

Strengths

JCB has a strong brand name and good reputation among its customers and that is the biggest strength they have. It has access to high grand natural resources. Their distribution network is superior to their rivals. Being one of the world’s top three manufacturers of construction equipment, JCB has employed over 10,000 people on four continents (McKee et al. 2016). They sell their products in 150 countries through the help of 1,500 dealer depot locations. JCB is capable of manufacturing 300 machines of different types (Jcb.com 2016). Their customer service procedures are unique and no other organization in the industry can compete with them in this sector. 

Weaknesses

JCB is unable to protect their patents and this is their biggest weakness. On the other hand, as the organization is capable of manufacturing more than 300 types of machines, the cost structure of its manufacturing unit is extremely high (Rapalis et al. 2016).

Opportunity

New technologies are being introduced almost daily, which is great opportunity for JCB to expand their business. Besides, most of the countries where JCB operates, are removing international trade barriers. JCB is also known for their best customer care services. However, in some cases the organization failed respond quickly that created disappointment among the customer (DeFreitas et al. 2013). Therefore, the organization has an opportunity to strengthen their customer care services in the near future. 

Threat

As mentioned by Bolz et al. (2014), firm products are losing their demand among the consumers which is the biggest threat for organizations such as JCB. Besides, at a lower price, several substitute products are introduced in the market. New rules and regulations in countries is also expected to create problems for global firms. 

Comparison of JCB with Caterpillar and Komatsu 

JCB is an international brand that is currently operating in over 150 countries. The organization has a range of over 300 machines including backhoe loader, which is the most popular product of JCB because of its versatility (Jcb.com 2016). 

Caterpillar

Equipments of Caterpillar are vastly used in agriculture industries in Europe. Besides, they are also used as military gun tractors in several countries. Holt is a popular product of Caterpillar whose engine inspired the development of the tank by British army. Currently, the company has over 400 products and operating in 200 countries around the world. In the year of 2011, Caterpillar acquired sales of US$57 billion (Mazumdar 2012). 

Komatsu

The organization was named after the city of Komatsu located in Ishikawa where the company was founded in the year of 1917. Komatsu Ltd. and other 182 companies including 146 subsidiaries are working under Komatsu Group. It is the world’s second largest organization that manufactures construction and mining equipments (Mazumdar 2012). However, in some countries such as Japan and China, Komatsu has greater share than Caterpillar. It manufactures the largest bulldozer in the world, which is D575. 

Future strategies of JCB 

JCB is currently planning to employ an aggressive marketing strategy in India. Their focus will be to tap into the vast rural markets. The higher authority of the organization is expecting to improve their sales volumes after implementing this marketing strategy. A Bharat strategy is on the way under which JCB will expand their presence by opening new outlets and appointing new dealers near tier 3 towns and villages. Management of JCB is expecting that Bharat strategy will help them to gain 15% growth.

Cost reduction process and increase profit

In the contemporary business world, every organization is looking forward to cost reduction process to minimize the expenses of the organizations as well as increasing the profit in a significant fashion. The cost reduction approach ensures proper allocation of resources so that the organizations can effectively utilize the resources to increase the revenue. In this context, JCB employs a number of initiative to cut down the unnecessary cost along with maximize their profits in the international market. These steps are discussed below:

Global sourcing:

Global Sourcing is one of the most effective techniques that is used for reducing the expenses concerning the access of foreign skills, technology as well as business opportunities. The company can manufacture various equipment in a relatively low cost. Moreover, the company can tap resources as well as skills from different nation. This particular strategy will reduce the expenses of supply and employee wage (Steven et al. 2014). The alternative option of supplier is another impressive facility of global sourcing. The reduced cost of supply chain management system makes the global sourcing as most attractive strategy in contemporary business world. It has been identified that JCB has been highly focused on Indian urban as well as semi urban market as their global sourcing hub. Being a most popular construction giant in India JCB is currently attempting to grasp the Indian rural market.

Increase predictability:

The prediction of the market is another major strategy for reducing the cost of the business approaches of JCB. The business market prediction can effectively forecast the customer preferences as well as purchase trend (Sarkar and Moon 2014). The company mostly focuses on economic manufacturing process so that they would not waste their resources in developing unpopular products. For instance, in the current world the customers are highly aware of the growing problem of pollution and scarce resource. Therefore, they are looking for an alternative source of power in every business activities. Contemplating these facts, JCB has been concentrated on developing generator named as ‘Inteli-Hybrid’, which has been able to offer several impressive environment friendly facilities (jcb.co.uk 2016).

Reduce duplication:

The modern-day business organizations are mostly focused on avoiding the duplication in manufacturing or conducting any business activities. The duplication causes a severe wastage of resources as any specific task would have been unnecessarily conducted double time. In this competitive world, the duplication poses a greater threat to all of the business organizations. It not only decreases the wastage of resources but also minimizes the time and effort (Steven et al. 2014). The proper implementation of reduced duplication effectively offers JCB to earn a distinct competitive edge. This particular competitive edge will eventually increase the chances of success for any business approach.

Reduce cost:

The organization also implements several direct costs cutting approach to minimize the expenses of business activities. This particular strategy mostly aims to cut down various superfluous expenses in various business operations. For instance, JCB has signed a three-year contract with a British transport management company in order to reduce the cost of the company transport. It has been highly effective for reducing the cost of the supply chain. This particular strategy is quite effective for improving service as well as visibility of the company’s business profits (jcb.co.uk 2016).

PESTEL analysis of JCB 

PESTEL analysis tool will be used in order to evaluate and analyze macro environment of JCB. Macro environment factors that affect the operations of JCB are political factors, economic factors, social factors, environmental factors and legal factors.

Political factors: Political factors are the main factors that affect the operations of JCB.  JCB is operating in countries of North America, Europe, Africa, Latin America and Oceania. Every country has their own governments along with different laws and legislations. Besides, export and import policies are also different in those countries. For example, the political example political example in Europe and USA are stable; however, in UK where the recent hike in tax and new legislation from the conservatives can affect the buying power of the customers. 

Economic factor: Economic factors including recession, inflation, growth in GDP and growth in population can affect business organizations and their operations. JCB experienced a major setback due to the recessions in UK. However, the country is recovering slowly as the inflation rate has increased to 3.4% (Lu et al. 2015). On the other hand, different counties have different prices of raw materials, diesel, petrol, import and export cost which is another major problem for JCB. In some countries, cost of raw materials is higher than other countries. Therefore, construction and operational costs in those counties are also higher that other countries that affects their revenue. As a result, the organization is forced to increase their prices and loosing competitive advantage over its rivals. 

Social factors: JCB is operating in almost every continent. Each country has different societies along with different cultures, religion, value and attitude. Therefore, the organization is having a hard time to maintain balance in order to avoid any kind of discrimination. 

Technological factors: JCB is a construction-equipment manufacturing organization; therefore, they must upgrade their technology regularly. It must be enhanced in a way that the organization can compete in better way and can maintain its position in the market. Currently, JCB has the world’s best technologies for manufacturing construction equipments. It has also invented new products such as 3CX Compact backhoe loader with unique features (Edwards and Love 2016). It is 6’3” wide and has a height of 9’ that offers maximum maneuverability. With 25mph hydrostatic transmission, it is able to provide 19% ore control (Jcb.com 2016). 

Environmental factors: JCB is moving towards sustainable development while focusing to implement new technologies and innovations in order to improve efficiency and productivity. The organization is trying to enable economic growth through infrastructure and energy development. 

Legal factors: Different countries have various laws and legislation in their countries. Each organization operating in those countries are bound to obey those rules and regulations including employment rules, labor laws and other laws (Simatupang and Sridharan 2016).  

Recommendations 

In the study, it is already recommended that JCB will have to take two major steps in order to secure their market position in the future. As a first step, they will have to focus on rural area of India and as a second step; they will have to penetrate new markets. In order to start a new venture in a country, China is recommended for JCB. China is the largest construction site in the world as China is building more and more buildings, railroads, airports and power plants. 

Some organizations are already there and fighting to gain supremacy in Chinese construction machinery industry such as Sany America, SDLG, Liugong, Zoomlin, XCMG, and Lonking. However, the winner is yet not decided as these organizations are facing huge challenges in establishing distribution channels in China. JCB can handle this problem easily as they will get a huge financial backup. It is recommended that must build a local sales team that will guide the organization through China’s unique business culture in the conciliation process. Local sales team will help JCB to identify key distributors as they have better understanding of how Chinese business and government agencies operate. Once key distributors are identified, JCB will have to develop proper marketing strategy to strengthen their position in the Chinese market. 

Conclusions 

The organization is currently focusing on urban areas having 400 shops in those areas. Primary strategy of the organization was to develop and enhance new technologies to gain more market share globally. However, their rivals such as Caterpillar and Komatsu have done it better than JCB. As a result, the company is slowly losing their market position in some countries. Besides, manufacturing cost of JCB is also higher than any other organization in the industry. As a result, prices of their products are higher than other companies such as Caterpillar and Komatsu. For JCB, it is the high time to enter new markets such as China. Some construction-equipment manufacturing companies do exist in China; however, they do not have ample amount of experience and technology to compete with JCB. That is why; JCB should focus on Chinese market by selecting a proper market entry strategy. On the other hand, they are also thinking to improve and strengthen their presence in Indian market. The higher management of JCB is planning to build their presence in rural areas of India, which are unexplored currently.

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