1. Why do you think JCB chose to enter India via a joint venture, as opposed to some other entry mode? Why did JCB not simply license its technology to Escorts?
At the time of 1979 JCB investing in India, whose rules didn't permit foreign companies to invest directly, so JCB had to invest under a joint venture with a company in India, Escorts. Escorts and JCB invested a corresponding rate of 60% and 40%. The joint venture manufactured backhoe loaders to sell in India. JCB didn't license its technology to Escorts because it feared to lose its valuable technologies, which Escorts is the biggest company could acquire the know-how to become a direct competitor in the future. Even during the joint venture, JCB also hesitated to transfer the valuable technologies because it feared to leak out the know-how when it was not enough authority to control the joint venture.
2. What were the benefits of gaining full control of the Indian joint venture in 2002? Can you think of any drawbacks?
After gaining full control of the joint venture in 2002, JCB raised its investment in India, such as building a second factory, expanding its dealer network, localizing production. Especially in 2007, based on the prediction of the global economic crisis, JCB expanded the original India factory in Ballabgarh and made major repairs. Its amount of the dealer network increased twofold in 2011, and concurrently, it also localized production of the parts more than 80%. The process worked, so it kept costs low, and as a result, its revenue increased tenfold in India. A drawback that can affect the profit of the investors is changes of foreign exchange rate. If India rupee loses its value in comparison with the pound sterling, the profit of the investor in British will decrease.
Management Focus: Tesco’s International Growth Strategy
1/ Why did Tesco’s initial international expansion strategy focus on developing nations?
The Tesco's international expansion strategy focused on developing nations to avoid strong local competitors existing, but Tesco also saw the strong growth potential of retailing market of the nations in the future.
2/ In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
In Asia, Tesco's great experiences over joint venture agreements with local partners help it get more advantages in negotiation with other Asian partners to enter the markets, especially entering the large Chinese market. Surely, Tesco understands strong and weak points of the partners to bring useful assets to the ventures. The understanding helps to increase the chances of success both Tesco and its partners. The risks can be loss of control if its stake is less than its partners, and the partners acquire understanding over the local retailing market or steal its ideas. In other case, if the partners go bankrupt, they also affect Tesco with debt. The risks can also come from the government, when the ventures concern state-owned companies. To mitigate the risks, Tesco should involve a rate of the investment of either 50% or 100%.
3/ In March 2006, Tesco announced that it would enter the United States. This represented a departure from its historic strategy of focusing on developing nations. Why do you think Tesco made this decision? How is the U.S. market different from others Tesco has entered? What are the risks here? How do you think Tesco has been doing?
Tesco's traditional strategy focuses on developing nations with weak indigenous competition, so it represents a departure when it announced that it would enter the United States. The way is a traditional strategy which it has used in the developing nations. The U.S. market is more competitive than others Tesco has entered, so it has used Tesco Express as a way to avoid the head-to-head competition. The risk is the local U.S. competitors can win Tesco in the market. However, it seems the strategy is successful when it avoids confronting the competitors, and then it learns from the experiences in the crowded U.S. market to apply for its traditional markets in the developing nations.
At the time of 1979 JCB investing in India, whose rules didn't permit foreign companies to invest directly, so JCB had to invest under a joint venture with a company in India, Escorts. Escorts and JCB invested a corresponding rate of 60% and 40%. The joint venture manufactured backhoe loaders to sell in India. JCB didn't license its technology to Escorts because it feared to lose its valuable technologies, which Escorts is the biggest company could acquire the know-how to become a direct competitor in the future. Even during the joint venture, JCB also hesitated to transfer the valuable technologies because it feared to leak out the know-how when it was not enough authority to control the joint venture.
2. What were the benefits of gaining full control of the Indian joint venture in 2002? Can you think of any drawbacks?
After gaining full control of the joint venture in 2002, JCB raised its investment in India, such as building a second factory, expanding its dealer network, localizing production. Especially in 2007, based on the prediction of the global economic crisis, JCB expanded the original India factory in Ballabgarh and made major repairs. Its amount of the dealer network increased twofold in 2011, and concurrently, it also localized production of the parts more than 80%. The process worked, so it kept costs low, and as a result, its revenue increased tenfold in India. A drawback that can affect the profit of the investors is changes of foreign exchange rate. If India rupee loses its value in comparison with the pound sterling, the profit of the investor in British will decrease.
Management Focus: Tesco’s International Growth Strategy
1/ Why did Tesco’s initial international expansion strategy focus on developing nations?
The Tesco's international expansion strategy focused on developing nations to avoid strong local competitors existing, but Tesco also saw the strong growth potential of retailing market of the nations in the future.
2/ In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
In Asia, Tesco's great experiences over joint venture agreements with local partners help it get more advantages in negotiation with other Asian partners to enter the markets, especially entering the large Chinese market. Surely, Tesco understands strong and weak points of the partners to bring useful assets to the ventures. The understanding helps to increase the chances of success both Tesco and its partners. The risks can be loss of control if its stake is less than its partners, and the partners acquire understanding over the local retailing market or steal its ideas. In other case, if the partners go bankrupt, they also affect Tesco with debt. The risks can also come from the government, when the ventures concern state-owned companies. To mitigate the risks, Tesco should involve a rate of the investment of either 50% or 100%.
3/ In March 2006, Tesco announced that it would enter the United States. This represented a departure from its historic strategy of focusing on developing nations. Why do you think Tesco made this decision? How is the U.S. market different from others Tesco has entered? What are the risks here? How do you think Tesco has been doing?
Tesco's traditional strategy focuses on developing nations with weak indigenous competition, so it represents a departure when it announced that it would enter the United States. The way is a traditional strategy which it has used in the developing nations. The U.S. market is more competitive than others Tesco has entered, so it has used Tesco Express as a way to avoid the head-to-head competition. The risk is the local U.S. competitors can win Tesco in the market. However, it seems the strategy is successful when it avoids confronting the competitors, and then it learns from the experiences in the crowded U.S. market to apply for its traditional markets in the developing nations.
