Buseness Strategy in Backhoe Loader Market-United Kingdom (Term Paper Sample)

JCB: BUSINESS STRATEGY IN BACKHOE LOADER MARKET-UNITED KINGDOM
Name:
Institution:
Executive Summary
This report aims at analyzing the various strategic facets that JCB utilizes in the manufacture, distribution, and sale of construction machinery, specifically the backhoe loaders, within the UK market. It conducts an industrial analysis to determine the requirements and trends that contribute to the key success factors. For this to be delivered successfully, the report has dissected the company's current strategic position within the heavy equipment industry using the PESTEL, Porter's Five Forces, SWOT, Value chain, and the Porter's Three Generic Strategic analytical tools. The analysis showed that, with intense rivalry in the market and economic downturn effects, the current differentiation strategy employed by the company is redundant. Despite being helpful in acquiring a bigger market share, the firm can no longer use it to strengthen and maintain its competitive edge. This is because of the imitation from the competitors. The world is increasing becoming connected with modern technologies such as the Internet; hence, access to information about competitor's products is no longer a hindrance. Besides, there is the risk of changing customer tastes and preferences. For that reason, the company will have to adopt a cost leadership strategy that will ensure the introduction of new technology to embrace process innovation rather than the traditional product innovation. This will heavily cut down costs and increase profitability. Moreover, it will insulate the company against powerful buyers, whose tastes and preferences might change over time.
Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc395640098 \h 2Introduction PAGEREF _Toc395640099 \h 42. External environmental analysis PAGEREF _Toc395640100 \h 42.1 PESTEL PAGEREF _Toc395640101 \h 42.1.1 Political aspect PAGEREF _Toc395640102 \h 52.1.2 Economic aspect PAGEREF _Toc395640103 \h 52.1.3 Socio-cultural aspect PAGEREF _Toc395640104 \h 62.1.4 Technology PAGEREF _Toc395640105 \h 62.1.5 Environment PAGEREF _Toc395640106 \h 62.1.6 Legal aspect PAGEREF _Toc395640107 \h 72.2 Porter’s five forces PAGEREF _Toc395640108 \h 72.2.1 Bargaining power of buyers PAGEREF _Toc395640109 \h 72.2.2 Bargaining power of suppliers PAGEREF _Toc395640110 \h 72.2.3 Threat of Entry PAGEREF _Toc395640111 \h 82.2.4 Threat of Substitutes PAGEREF _Toc395640112 \h 82.2.5 Industry Rivalry PAGEREF _Toc395640113 \h 83. Internal environmental analysis (Value chain analysis) PAGEREF _Toc395640114 \h 94. SWOT Analysis PAGEREF _Toc395640115 \h 104.1 Strengths PAGEREF _Toc395640116 \h 104.2Weaknesses PAGEREF _Toc395640117 \h 114.3 Opportunities PAGEREF _Toc395640118 \h 114.4 Threats PAGEREF _Toc395640119 \h 115. Analysis PAGEREF _Toc395640120 \h 12Conclusion PAGEREF _Toc395640121 \h 13References PAGEREF _Toc395640122 \h 15
Introduction
JCB which stands for "JC Bamford Excavators Limited" is a British-owned construction equipment manufacturer with presence in four continents and 150 countries across the world. Its main facility is based in Rocester, United Kingdom. In 1945, its founder the Late Joseph Cyril Bamford (JCB) left the family’s agricultural venture to set up his own business of building agricultural trailers for large scale farmers (Adamson & Pollington, 2006). After several failed attempts, the company launched its first backhoe loader in 1954, which led to introduction of other models such as JCB3, JCB3C, and JCB 4 backhoe loaders. Despite the recent product diversification, backhoe loader has been the company’s backbone in terms of progress and success (Daniels, 1990). The product has been very instrumental in helping the company to acquire and maintain the UK’s market share. The production of backhoe loader is done in two sites. The 1CX and 2CX models together with their derivatives are built in the Cheadle factory, while all other models are built at the main facility in Rocester.
This report aims at analyzing the various strategic facets that JCB utilizes in the manufacture, distribution, and sale of construction machinery, specifically the backhoe loaders, within the UK market. It conducts an industrial analysis to determine the requirements and trends that contribute to the key success factors of the entrants and already existing firms. For this to be delivered successfully, the report has dissected the company's current strategic position within the heavy equipment industry using the PESTEL, Porter's Five Forces, SWOT, Value chain, and the Porter's Three Generic Strategic analytical tools.
2. External environmental analysis
2.1 PESTEL
PESTEL, which stands for "Political, Economic, Social, Technological, Environmental, and Legal factors”, is an analysis framework that examines and monitors the external environment factors of any business entity that may have an impact on its operations. Thus, it is used as a strategic analytical technique of examining the prevailing and future state of the industry a firm belongs to (Bennett, 1999).
2.1.1 Political aspect
Like most of the developed countries in the world, the United Kingdom has exhibited considerable political stability over time (Chatterjee, 2002). This has played a pivotal role in the implementation of the policies and regulations aimed at streamlining business activities within the country including the manufacturing sector. The recent legislation on reforms in the banking sector has facilitated easy access to credit by plant hirers and contractors, who are the main customers of backhoe loaders. This has led to a steady expansion of the construction industry thus creating demand for earthmoving equipment (Chudley & Greeno, 2005). It is needless to say that JCB has been one of the biggest beneficiaries of this development. In addition, the promotion of inward investment by the British government has been instrumental as far as protection of human capital is concerned.
2.1.2 Economic aspect
In the recent past (2008-09), the UK economy was thrown into a recession that left a tremendous destruction of the construction industry. During this period, there were massive job losses and pay cuts (Warner, 2010). Those who were in employment also felt the effects of the meltdown as majority of the employers could not actualize any pay rise. There was a general decline in the purchase of backhoe loaders due to low demands in housing, infrastructure, and commercial sectors. Consequently, JCB's sales margins subsided. However, as the economic growth rejuvenates, the heavy equipment's demand has bounced back and it is steadily increasing (Grant, 2013).
2.1.3 Socio-cultural aspect
The performance of the UK manufacturing sector is characterized by the belief that every new entrant in the industry must adhere to the set guidelines of corporate social responsibility. Supporting and promoting the local community has become an indispensable part of business in the contemporary UK market. For instance, getting involved in charities and fund-raising builds the rapport of the company and consolidates their customer loyalty. On that note, JCB has been sponsoring charity work that aims at fighting child abuse in the UK for over 25 years (Forgang, 2004).
2.1.4 Technology
Technology has become a crucial aspect of any business landscape in the modern world. The manufacturing sector in the UK has experienced a towering development as a result of fast and reliable processes, improvement in communication, and efficient utilization of resources (Hooley, Saunders & Piercy, 2004). For instance, web cams mounted on sites enables the project manager or the building owner view the work progress without necessarily being at the site. To embrace that, JCB has incorporated the Global Positioning Sensors (GPS) systems in the manufacture of backhoe loaders. This ensures that the machine performs tasks accurately and efficiently without being instructed what, when, and where to do. As a result, cases of hazards at construction sites have declined significantly (Grant, 2013).
2.1.5 Environment
There have been great concerns by the environmentalists in the UK that the manufacturing industry contributes significantly to the environmental degradation. This has been done through overutilization of the non-renewable natural resources and pollution. The company has been largely mentioned as one of the greatest contributors of air pollution (Kelley, 1972).
2.1.6 Legal aspect
In any given business environment, consumers need protection against substandard products and misleading marketing practices. In 2008, the British government introduced the unfair trading regulations to curb lawlessness exhibited in various business environments. For instance, those businesses that unfair competition practices may risk prosecution or fines (Morton, 2002).
2.2 Porter’s five forces
Porter's five forces framework is an analysis tool that employs five forces to establish the profitability of an industry so that a firm can modify its competitive strategy. It is an important tool for any given business entity since it helps one understand the strength of competitive position either currently or in future (Porter, 1980).
2.2.1 Bargaining power of buyers
Generally, the UK market is characterized by buyers who have a strong bargaining power compared to other European markets. They demand products of highest quality but at a lower price (Johnson & Scholes, 1999). This translates to lower revenue generated by the producer despite high cost of producing those high quality products. Eventually, a decline in profits becomes inevitable. In the UK's construction industry, buyers have a strong bargaining power mainly because they are few in number. In addition, the presence of many substitutes from other manufacturers such as Caterpillar, ...