Entering India Via A Joint Venture Essay

1001 Words Nov 15th, 2015 null Page
JCB chose to enter India via a joint venture, as opposed to some other entry mode because of high trade tariffs made export to India difficult. The Indian government enforced regulations by requiring foreign investors to have joint ventures with local companies even though JCB want to do it alone. At that time, JCB believed that the Indian construction market will grow into a larger market. As a result, the company wants to get access to the Indian market to gain advantage over global competitors. At the end of 1990s, the joint venture was making progress in selling backhoes which let them gain 80 percent share of Indian market. This joint venture gave JCB advantages because they can understand the market and political acceptance. JCB did not license its technology to Escorts because they did not want their technology to leak out. Also, they did not have a majority stake in the market that caused them to lacked control. Escorts have 60 percent and JCB has 40 percent in the venture. In addition, their valuable technologies can become Escorts technologies which can make them direct competitor in the future. Since most of the machines that JCB exports are in India.

The benefit of gaining full control of the Indian joint venture in 2002 was a control of the market. The changes of Indian government regulations caused JCB to take advantage of the terms of Escorts venture. Eventually, JCB purchased 20 percent of their partner’s equity to gain a majority control. Additionally,…

Related Documents