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DATE: 3 May, 2016

UNIVERSITY OF DERBY
The Derby Business School

Module: Issues in Global Business & Strategic Concepts

Module Code: 6IM501
Program me: BA (HONS) Business Administration

Module Assessment:
Critical Evaluation of JC Bamford Excavators Ltd.s Global
Strategy &
Recommendation of Future Strategy

Prepared For:
MR. ASHIQUR RAHMAN BHUYIAN
Module Leader, University of Derby
Prepared by:
Ms. FARIBA TABASSUM
UOD ID- 100421952
Table of Contents
2

EXECUTIVE SUMMARY............................................................................................................... 5
INTRODUCTION......................................................................................................................... 6
PROFITABILITY AND GROWTH OF JC BAMFORD.........................................................................7
FIGURE 1: EFFICIENCY FRONTIER OF JCB.................................................................................. 7
PRICING STRATEGY OF JCB........................................................................................................ 8
FIGURE 2: EFFICIENCY FRONTIOR OF JCB.................................................................................. 9
VALUE CREATION OF JC BAMFORD............................................................................................ 9
FIGURE 3: Determinants of JCBs Value.................................................................................. 10
............................................................................................................................................... 10
IMPACT OF POLITICAL ECONOMY ON JCB................................................................................ 11
INTERNATIONAL BUSINESS STRATEGY OF JCB.........................................................................12
FIGURE 4: FUTURE STRATEGY OF JCB..................................................................................... 12
CONSEQUENCES OF GLOBALIZATION ON JCB.........................................................................13
STAFFING POLICY OF JC BAMFORD.......................................................................................... 14
CONCLUSION & RECCOMENDATION........................................................................................ 15
REFERENCE............................................................................................................................. 17

EXECUTIVE SUMMARY
3

JC Bamford Excavators Ltd. is one of the largest heavy construction equipment and
earth multinational manufacturing machinery in motion illustrates the success of
global reach in recent years, the value of design and innovation. Trailing
globalization, JCB have been trading worldwide with their machineries and also
gaining competitive advantage acquiring 22 plants in four continents. The company
has been globally marketing in different countries all over the world trailing its
success adopting international strategy and global standardization strategy.
JCB have been affected by the economic downturn of 2008, which led to the market
downturn of 43% in 2014. Recently, increasing demand for construction equipment in
operations such as grading, excavation and lifting and material handling for
infrastructural development, should fuel the market for construction equipment. The
global market for construction equipment to show stable growth in the 2015-2020
forecast periods. Growth of industrial activities and the rapid residential and
commercial development and the increase of government investment in the
infrastructure sector, will lead to a general increase in the global market for
construction equipment.
Keeping a view on JCBs future strategy, this report has been made which suggests
with the adoption of the strategy location company can benefit in the future, to
experience the economies of localization, the learning curve and the experience
curve. It is important to recognize that there are still significant differences between
national markets, requires companies customize marketing strategies, product
characteristics and operating practices to meet the conditions of particular markets.
Caterpillar, the next best rival JCB has focused on localization strategy with its global
strategy. Bangla cat is a Caterpillar plant, which operates in Bangladesh, which is
providing

competitive

advantage

to

the

parent

company.

Adopting

JCB

transnational strategy will benefit in maintaining the local response capacity, thus
creating a positive relationship with the regulatory parties or the government to
avoid the difficulties associated with politics. Apart from this, but also it helps JCB in
reducing cost pressure and maintain a low-cost strategy on a global scale and
consequently generate more profit to the company in the future, as in the current
situation JCB sells its product at a very high price compared to their next best rivals.

INTRODUCTION
British Multinational Corporation, J. C. Bamford Excavators Ltd. is one of the largest
heavy construction equipment and earth moving machinery manufacturing company
since 1945. Today the company is marked as a trademark for holding its uniqueness
by continuing as a family owned business of the Bamford family with the core
determination on innovation, ambition and absolute hard work. (jcb,2016)
JCB is currently investing in production in the UK due to increased production
capacity at its headquarters in Rochester, United Kingdom. Observing the vast
potential of the Indian market, JCB UK enters into a joint venture with Escorts India, in
1979 and turning JCB India into its fully owned subsidiary in 2003. (the economic
times,2013) the Indian market is very much important for JCB as JCB India itself sell
its products in 150 countries globally and has been traced to contribute 30% of its
parent companys sales last year. Trailing globalization, JCB have been trading
worldwide with their machineries and also gaining competitive advantage acquiring
22 plants in four continents. According to Charles W. Hill, Globalization can lead to
development and gain the efficiency in economic welfare and trade enhances the
division of labour as countries specialize in areas of comparative advantage (Hill,
2013, pg-11).
JC Bamford (UK) is globally ranked to be the third amongst the key vendors; Volvo
(Sweden), Caterpillar Inc. (U.S.A.) and Komatsu Ltd. (Japan). (uk.finance,2013) JCB
has been deficient from holding its position in the first rank compared to its next two
rival companies. In some cases, things have worked in favour of Caterpillar more
favourably just because they existed in the market before JCB and have a wellearned brand value and reputation in the International market.

PROFITABILITY AND GROWTH OF JC BAMFORD

According to Oxford Economics, JCB contributes about 1.4bn a year to UKs GDP,
545m to the Treasurys coffers and supports 24,000 British jobs as a result
estimating that every full-time JCB job supports another three in the supply chain.
With sales of 2.68bn and profits of 313m, 2013 was the third most profitable year
for JCB. (the guardian,2015)
Whereas Michael Porter argues that firms need to choose either differentiate or low
cost and to configure its internal operation to support that strategic emphasis,
DEG
(Charles
REE

W. L Hill, 2013, p. 420) JCB tends to follow undifferentiated marketing

having a single product line targeting various types of industry in the market. JCB can

OF

use the differentiation strategy and obtain advantages from Porters five industry

PRO
DUC
forces.
T

(Vitale Robert, 2011, p. 41)

DIFF
ERE
NTIA
TION

FIGURE 1: EFFICIENCY FRONTIER OF JCB

DIFFERNTIATION
FOCUS

DIFFERNTIATION

HIGH

Business aims with

high cost focus &
narrow target
scope.
LOW

COST FOCUS

Business aims
with product
uniqueness &
broad target
COST LEADERSHIP
scope.

Superior profts
through power
costs.

Business aims
with limited part
of the market.
NARROW

BROAD

PRICING STRATEGY OF JCB

The increasing cost of construction equipment could pose a challenge to the growth
of this market. Key vendors dominating this space are AB Volvo, Caterpillar Inc., JCB
and Komatsu Ltd. The increasing competition among vendors is also forcing vendors
to differentiate themselves by providing innovative value-added services. For this
reason, organizations across the industry prefer to have the latest construction
equipment technology to improve their productivity; some SMEs find it difficult to buy
such equipment due to the high cost. Consequently, construction equipment vendors
are offering construction equipment on a rental basis. This allows cost-driven
organizations in developing countries to opt for the latest construction equipment at
minimal cost, thereby improving their operational productivity.

Therefore it can be perceived, JC Bamford Excavators Ltd. uses Competition based

pricing and has a perfect competitive market structure. An organisation tends to use
this in a situation where they set price basing upon the price set by its competitors.
Some markets have a number of firms of same size, having similar price in order to
avoid a price war. (Peter Stimpson,2002, pg-184)

Increased Value/Diferentiation

FIGURE 2: EFFICIENCY FRONTIOR OF JCB

JCB
Efficiency Frontier
Caterpillar

High Cost
Low Cost (C)

VALUE CREATION OF JC BAMFORD

Put forth by Harvard business Professor Michael Porter, wise application and
understanding of the value chain holds the potentiality to act as a strong concept for
creating competitive advantages for a company that are often unknown to its rivals.
(Vitale Robert, 2011, p.19) JCB has been showing trails of adding value to their
products by leveraging global know-how to develop offerings and spanning price
points. Unlike Caterpillar, Komatsu and Volvo, JCB has mainly focused on versatile
and low-priced backhoes rather than on productive excavators and as result the 2005
launched 3DX model turned to be the bestselling construction machines in India. The
company creates value among the customers through trade shows, production of fuel
efficient machineries and service centres for the customers where they re-

manufacture their old machines to the latest specifications at 50% less than new
parts. (Ravi Venkatesan,2013) JCB being known as a, family-owned business itself
creates a value in its brand image as there is no other company like JCB in Britain as
the founding families or owners are more tempted in selling their business rather
than running. (the guardian,2015) According to the Wall Street Journal Caterpillar, the
next best rival of JCB has been found to spend about 4.4% of its revenue whereas;
JCB

invests

only

3%

of

its

turnover

on

research

and

development.

(the

guardian,2015)
Therefore, to obtain more value JCB, being an international business can cut their
expenditure in some other sector and invest more in the R & D sector in assemble to
the need to integrate R & D and production, specifically in those international
businesses that have dispersed production activities to different locations around the
globe in consideration of relative factor costs and the like. (W. L. Hill, 2013, pp. 419420)

FIGURE 3: Determinants of JCBs Value

Reduce Costs:
Manufactures fuel
efficient machines.

PROFITABILITY
Add Value & Raise
Price:

VALUATION

OF JCB

Customer
Service
Points
&
remanufacture their
Sell More in Existing
Markets:

PROFIT
GROWTH

Opening new plant in

Haryana,India.

Enter New
Markets:
Opening new plant
in countries like

IMPACT OF POLITICAL ECONOMY ON JCB

Today, the policy of the United States and Britain become more and more people
focused: an appeal to public opinion rather than motivated coherent policy concepts.
(Bernard Crick, 2002, p.11) Despite of being one of the largest private companies in
UK and helping the economy to wean off its dependency on debts and consumer
spending, JCB have been affected by their national political economy. A combat
between the Bamford brothers has set to reveal the operation of an obscure
company that has channelled millions of pounds to the Conservatives. (the
guardian,2010) The recent rise of the trade barriers by the European Union (EU) has
resulted in creating a negative relation between JCB and the British Prime Minister,
David Cameron. (the guardian,2015) However, one of the rivals of JCB, Hitachi
Construction Machinery in China has been ranked to be one of the A-grade
businesses among the five companies, in maintaining good relationship with its local

10

government and employees. This as a result made certain things convenient for the
company. (Kazuyuki Motohashi, 2015, p.130)
In terms of keeping JCBs business in concern, they should put effort in maintaining
positive relationship with their regulatory parties or the government to avoid
difficulties associated with politics. According to Hill, changes in the
microenvironment forces can have a direct impact on some or all forces in Porter's
model, thereby altering the relative strength of these forces and, with it, the
attractiveness of an industry. (Hill, 2008, p.66)

INTERNATIONAL BUSINESS STRATEGY OF JCB

Companies mainly operate from four different strategic viewpoints, which are often
categorized as a global standardization strategy, a strategy of localization, an
international strategy and a transnational strategy. The adequacy of any strategy
varies given the magnitude of the pressure to lower prices and the ability of native
response. (Hill, 2013, p. 435) JC Bamford trailed international strategy by trading
their products derived from its core competencies to the international market. In
1979, JCB showed trails of following global standardization strategy by forming joint
venture in India and later turning into its fully owned subsidiary in 2003 (the
economic times,2013) as their core concentration was on obtaining the cost
reduction that come from and location economics and experience curve effect.
(Hill,2011).To maintain a low cost strategy on a global scale, they continued its
strategy of developing its business in emerging markets, expanding its range of
products, innovating more established products, expanding its dealer network and
develop and improve the support offered to customers.

11

FIGURE 4: FUTURE STRATEGY OF JCB

TRANSNATIONAL
STRATEGY

LOCALIZATION STRATEGY

For providing better customer service and obtain benefits associated with
localization strategy

JCB is recommended for the adaptation of localization strategy.

Also to keep up with the current competitive market & follow the changing
trends JCB should shift towards adapting to a new market strategy such as;
transnational strategy.

JCB should continue with its global strategy and as a future strategy the company
can also adopt localization and transnational strategy. By adopting localization
strategy the company can be benefited in future by experiencing location economies,
learning curve and experience curve. It is important to recognize that significant
differences still exist among national markets, requiring companies to customize
market strategies, product features and operating practises to meet the conditions in
particular markets. Caterpillar, the next best rival of JCB has been focusing on
localization strategy along with their global strategy. Bangla Cat is a plant of
Caterpillar operating in Bangladesh, which is providing competitive advantage to the
parent company. Adoption of transnational strategy will benefit JCB in maintaining

12

local responsiveness thus creating positive relationship with the regulatory parties or
the government to avoid difficulties associated with politics. Apart from this, it would
also help JCB in reducing cost pressure and maintain a low cost strategy on a global
scale and as a result generate more profit to the company in future, as in current
situation JCB sells its product in a high price compared to its next best rivals. JCB can
also open new plant in new markets like Bangladesh, Pakistan and Nigeria; as it
would benefit them being labour efficient.

CONSEQUENCES OF GLOBALIZATION ON JCB

The world is moving away from self-contained national economies toward an
interdependent, integrated global economic system. (Hill, 2013, p.4) Globalization
is the shift toward a more integrated and interdependent world economy.
From 2007 till today, UK in the past 2.5 years has desperately and publicly trying to
get the finance in order facing Austerity Budget, Tax Hikes, Cuts but over all that the
national debt is still growing. Accordingly, since 2009 USAs debt of credit card has
been lowering at 21% and housing at 14%. China held $ 1.3 trillion in Treasuries US
from June, making it the largest holder of foreign exchange reserves China US debt
but leaped by a record $ 94 billion in August, according to the central bank. (CNN,
2015)
Institute of International Finance estimated that emerging markets suffered record
net outflows of $ 732 billion in 2015, with China accounting for the bulk of that. The
Russian ruble, Mexican peso and Colombian peso all hit record depressions against
the dollar. Global emerging-market currencies fell 3% in the first two weeks of 2016.
(the market oracle, 2016)
This shows that not only UK but many other countries have also been affected by the
economic downturn. One of the strongest measures of the worldwide perfect storm is
the increasing state spending, national debt and interest rate.
Global demand for construction equipment and machinery suffered a big drop after
the 2008 economic crisis JCB certainly has not been immune to the effects of the

13

economic downturn. The lack of credit had a major impact on customer orders for
excavators and construction equipment. So again it grows faster demand from
emerging markets (where the team has been necessary for the construction boom)
to rebalance

your

business

and

reduce dependence

on the UK

economy.

Subsequently, the market crash of 2009, the government of several countries have
begun investing to develop better infrastructure. (uk.finance,2013)

This led to an increase in demand for construction equipment worldwide, creating an

opportunity for the heavy construction equipment and machinery manufacturers to
recover from the fall.

STAFFING POLICY OF JC BAMFORD

Staffing policy has to do with the right people in the right place or select skilled
employee who is perfect for a particular job people. According to the hill there are
mainly 3 types of police staffing and are polycentric, and geocentric approach
ethnocentric approach. (Hill,2013)
Currently JCB follows the ethnocentric approach in its personnel policy. Except for
India the company usually meets all key management personnel of the parent
company in its plants in Brazil, China, Russia and North America. Caterpillar, the next
best rival of JCB has been focusing on localization strategy along with their global
strategy. Bangla Cat is a plant of Caterpillar operating in Bangladesh, which is
providing competitive advantage to the parent company.
JCB is recommended to adopt the geocentric approach as it can be applied to hiring
practices when the company mix people from all places with the same based on their
abilities instead of their country of origin. Geocentric recruitment of human resources
refers to putting the best people in their plants, regardless of where they come from.
According to the Week, 22nd September 2015, JCB declared a 400 job cut which was
an impact of the economic downfall. JCB doing business globally, if approaches
geocentric recruitment, they would benefit from cross cultural knowledge and would

14

also gain efficiency from their human resource, as hiring local people would reduce
the risk of cultural myopia and expatriate failure. (Hill, 2013)

CONCLUSION & RECCOMENDATION

JC Bamford Excavators Ltd., being one of the largest heavy construction equipment
and earth moving machinery manufacturing multinational company illustrates their
success of global reach over the years, the value of design and innovation. The
company has been globally marketing in different countries all over the world trailing
its success adopting international strategy and global standardization strategy.
Therefore, JCB should continue with its global strategy and as a future strategy the
company can also adopt localization and transnational strategy.
By adopting localization strategy the company can be benefited in future by
experiencing location economies, learning curve and experience curve. It is
important to recognize that significant differences still exist among national markets,
requiring companies to customize market strategies, product features and operating
practises to meet the conditions in particular markets. Caterpillar, the next best rival
of JCB has been focusing on localization strategy along with their global strategy.
Bangla Cat is a plant of Caterpillar operating in Bangladesh, which is providing
competitive advantage to the parent company. Adoption of transnational strategy will
15

benefit JCB in maintaining local responsiveness thus creating positive relationship

with the regulatory parties or the government to avoid difficulties associated with
politics. Apart from this, it would also help JCB in reducing cost pressure and
maintain a low cost strategy on a global scale and as a result generate more profit to
the company in future, as in current situation JCB sells its product in a high price
compared to its next best rivals. JCB can also open new plant in new markets like
Bangladesh, Pakistan and Nigeria; as it would benefit them being labour efficient.
JC Bamford tends to follow undifferentiated marketing having a single product line
targeting various types of industry in the market whereas; they can use the
differentiation strategy and obtain advantages from Porters five industry forces thus
increasing their profitability and growth.
Being a global business JCB is highly recommended to invest more in research and
development, in assemble to the need to integrate R & D and production, specifically
in those international businesses that have dispersed production activities to
different locations around the globe in consideration of relative factor costs and the
like.
JCB currently follows ethnocentric approach in their staffing policy. Except for India
the company usually fulfils all key management with the parent company staff in
their plants in Brazil, China, Russia and North America. Lastly, JCB is recommended to
adopt geocentric approach as it can be applied to hiring practices when the company
mixing people from all locations equally based on their skills rather than their country
of origin. Geocentric recruitment of human resource refers to putting the best people
in their plants, regardless of where they come from.

16

REFERENCE
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http://www.bbc.com/news/uk-25252765 [Accessed 30 Apr. 2016].
Bernard Crick, 2002, Democracy: A Very Short Introduction, Oxford University Press, p.11
Case Study: Increasing Customer Value Through IT for JCB India - Wipro Digital. 2016,
[ONLINE] Available at: http://wiprodigital.com/case-study-jcb-india/. [Accessed 29 April
2016].
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Hill, C. W. L., 2012. International Business: Competing in the Global Marketplace. 5 th ed. New
York: McGraw-Hill/Irwin
Jamie Doward. 2010. Feud between Bamford brothers threatens to cast light on funding for
Tories | Politics | The Guardian. [ONLINE] Available at:
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[Accessed 29 April 2016].
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kings of construction equipment | Equipment. [ONLINE] Available at:
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Jcb. (2016). STRATEGY OF INNOVATION AND INVESTMENT CONTINUES TO REAP REWARDS |
JCB. [online] Available at: http://www.jcb.com/presscentre/NewsItem.aspx?ID=627 [Accessed
29 Apr. 2016].
Jcb.co.uk. (2016). JCB SHOWS RESILIENCE AS EMERGING MARKETS FALL. [online] Available at:
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Jonathan Sibun . 2016. Sir Anthony Bamford has dug deep to make JCB a success Telegraph. [ONLINE] Available at:
http://www.telegraph.co.uk/finance/newsbysector/industry/7236097/Sir-Anthony-Bamfordhas-dug-deep-to-make-JCB-a-success.html. [Accessed 29 April 2016].

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Kazuyuki Motohashi. 2015. Global Business Strategy: Multinational Corporations Venturing

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%20government&f=false. [Accessed 29 April 2016].
Mattioli, D. (2016). With Eye on Competition, Firms Keep Spending on R&D. [online] WSJ.
Available at:
http://www.wsj.com/articles/SB10001424052748704498804574558281569248344 [Accessed
29 April 2016].
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gws_rd=cr,ssl&ei=w4KTVqiPPIW3aePVr4gK#q=JCB+UK+enters+into+a+joint+venture+with
+Escorts+India
%2C+in+1979+and+turning+JCB+India+into+its+fully+owned+subsidiary+in+2003.
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The Guardian, 2016. JCB staff agree to work fewer hours to save jobs | Business | The
Guardian. [ONLINE] Available at: http://www.theguardian.com/business/2015/nov/30/jcb-staffwork-fewer-hours-save-jobs-redundancies. [Accessed 29 April 2016].
The Week UK. (2016). JCB job cuts are 'first ripple' of global slowdown hitting UK. [online]
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JCB. [online] Available at: http://articles.economictimes.indiatimes.com/2013-1027/news/43432825_1_jcb-india-construction-equipment-manufacturer-jcb-anthony-bamford
[Accessed 29 Apr. 2016].
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18

West, K. (2015). JCB: Britains yellow digger, a money machine scooping up sales of 2.6bn.
[Online] the Guardian. Available at: http://www.theguardian.com/business/2015/apr/11/jcbbritain-yellow-digger-money-machine-sales [Accessed 29 Apr. 2016].
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APPENDIX
FIGURE 1: MARKET SHARE OF GLOBAL HEAVY CONSTRUCTION
EQUIPMENTS & MACHINERY MANUFACTURERS (2014-2015)

(slideshare,2015)

19

FIGURE 2: THE FOUR MARKET STRUCTURE

(Hubbarrd, O`Brien, 2013, pg-396)

FIGURE 3: PORTERS GENERIC STRATEGIES & INDUSTRY FORCES

(quickmba,2010)

20