Why do you think JCB not simply license its technology to Escorts?

Please help explain with example and answer only one question.

CLOSING CASE JCB in India In 1979, JCB, the large British manufacturer of construct the nation, thereby gaining an advantage over global tion equipment, entered into a joint venture with Escorts, competitors, rather than wait until the growth potential an Indian engineering conglomerate, to manufacture was realized. backhoe loaders for sale in India. Escorts held a majority Twenty years later, the joint venture was selling some 60 percent stake in the venture, and JCB 40 percent. 2,000 backhoes in India, and had an 80 percent share of The joint venture was a first for JCB, which histori- the Indian market. Moreover, after years of deregula- cally had exported as much as two-thirds of its produc- tion, the Indian economy was booming. However, JCB tion from Britain to a wide range of nations. However, felt that the joint venture limited its ability to expand. high tariff barriers made direct exports to India For one thing, much of JCB's global success was based difficult. upon utilizing leading-edge manufacturing technologies JCB would probably have preferred to go it alone in and relentless product innovation, but the company India, but government regulations at the time required was very hesitant about transferring this know-how to a foreign investors to create joint ventures with local com- venture where it did not have a majority stake and panies. In any event, JCB felt that the Indian construc therefore lacked control. The last thing JCB wanted tion market was ripe for growth, and that looking forward was for these valuable technologies to leak out of the it could become very large indeed. The company's man- joint venture into Escorts, which was one of the largest agers believed that it was better to get a foothold in manufacturers of tractors in India and might conceivablybecome a direct competitor in the future. Moreover, JCB's foreign investment was bearing fruit. The product JCB was unwilling to make the investment in India line had been expanded from 120 machines in 2001 to required to take the joint venture to the next level over 250. JCB had 47 dealers and some 275 outlets unless it could capture more of the long-run returns. around India, and it claimed a market share in India of Accordingly, in 1999 JCB took advantages of changes 53 percent. JCB's sales approached El.8 billion, earnings in government regulations to renegotiate the terms of were a record $187 million, and the company had moved the venture with Escorts, purchasing 20 percent of its up to number four in the industry, with almost 10 per- partner's equity to give JCB majority control. In 2002, cent of global market share.64 JCB took this to its logical end when it responded to further relaxation of government regulations on for- eigninvestment to purchase all of Escorts' remaining Case Discussion Questions equity, transforming the joint venture into a wholly 1. What was the strategic rationale underlying JCB's owned subsidiary. Around the same time, JCB also invested in wholly owned factories in the United entry into India in 1979 and China in 2005? Given States and Brazil. that capital to fund expansion is limited, does it Having gained full control, in early 2005 JCB in- make more sense for JCB to expand its presence in creased its investment in India, announcing that it these markets, as opposed to more developed mar- kets, such as those of Western Europe? would build a second factory that it would use to serve the fast-growing Indian market. At the same time, JCB 2. Why do you think JCB chose to enter India via a also announced that it would set up another wholly joint venture, as opposed to some other entry owned factory in China to serve that market. India and mode! China, the two most populous nations in the world, 3. Why did JCB not simply license its technology to were growing rapidly, construction was booming, and Escorts! JCB, then the world's fifth-largest manufacture of con- 4. What were the potential disadvantages of JCB's struction equipment, was eager to expand its presence in joint venture with Escorts? order to match its global rivals, particularly Caterpillar, 5. What were the benefits of gaining full control of Komatsu and Volvo, who were also expanding aggres- the Indian joint venture in 2002? Can you think sively in these markets. By 2008 there were signs that of any drawbacks