1. EPGP-2009
JCB :Earth-shattering success
Market Sensing strategies in the Backhoe Loader Industry
Team Members
Amith MP – 0910006
Gopalakrishnan D - 0910021
KrishnaKumar U – 0910033
Mukesh Sharma – 0910036
Sujeet Kumar – 0910062
10/26/2009
Term Project for B2BMM: Term 5

2. TABLE OF CONTENTS
TABLE OF CONTENTS ....................................................................................................... 2
1. INTRODUCTION .............................................................................................................. 3
FOCUS ............................................................................................................................... 3
METHODOLOGY................................................................................................................... 3
2. BACKGROUND ................................................................................................................ 5
CONSTRUCTION & FARM EQUIPMENT INDUSTRY .................................................................... 5
BACKHOE LOADER .............................................................................................................. 6
JCB INDIA........................................................................................................................... 7
3. ANALYSIS ........................................................................................................................ 8
MARKET SEGMENTATION ..................................................................................................... 8
Overall Market Size ........................................................................................................ 8
Market segments ........................................................................................................... 8
SEGMENT OF INTEREST – PLANT HIRERS .............................................................................. 9
CUSTOMER PAIN POINTS AND VALUE DRIVERS .................................................................... 11
COMPETITOR ANALYSIS ..................................................................................................... 11
INFERENCES FROM COMPETITOR ANALYSIS ........................................................................ 12
4. UNDERSTANDING THE STRATEGY OF JCB – MARKET SENSING ........................... 13
GEOGRAPHICAL COVERAGE ............................................................................................... 13
RE-MANUFACTURING: SERVICE EXCHANGE ......................................................................... 14
FUEL EFFICIENCY .............................................................................................................. 14
GENERIC/ CONCEPT MODELLING......................................................................................... 14
OPERATOR TRAINING ........................................................................................................ 15
PRICING ........................................................................................................................... 15
FINANCING ........................................................................................................................ 16
5. VALUE MODELLING ..................................................................................................... 17
PARAMETERS .................................................................................................................... 17
DATA SHEET ..................................................................................................................... 17
VALUE MODEL ................................................................................................................... 18
6. REFERENCES ............................................................................................................... 20

3. 1. Introduction
This paper attempts to study the business-to-business marketing strategies of JCB, the
market leader in Earthmoving & Construction Equipment sector in India.
Focus
The various strategies employed by JCB would be viewed from the theoretical foundations
and frameworks as outlined in ‘Business Market Segmentation- Understanding, Creating and
Delivering value (Anderson & Narus)’, with a special focus on the Market Sensing
approaches.
Our study reveals that the staggering success experienced by JCB is linked in several ways
to the market sensing strategies employed. This strategy, which we present in this paper,
includes the identification of the right market segment, focussing on the value drivers and
pain points of the segment, assessing customer value and delivering against it, and keeping
abreast of the competitive context.
Methodology
The overall scheme is as depicted in the illustration below:
Information collection
Business Corporate
Website Analyst reports
database communication
Information Analysis
Scenario Construction Scenario Analysis
Hypothesis
Formulating hypothesis Fine tuning hypothesis

4.  Information collection: The study is based on secondary sources of information
such as company website, analysts report, business databases, and corporate
communication.
 Information analysis: Based on the information collected from the above sources,
we construct a scenario and analyze the actions taken by the firm. The scenario
analysis comprises the overall market context including customer segments,
competitor information, customer preferences and the key value drivers of customer
satisfaction.
 Hypothesis: Based on the findings of the research, this study attempts to
hypothesize and evaluate the market sensing strategy employed by JCB.

5. 2. Background
This section provides a brief description of Earthmoving & Construction Equipment (ECE)
sector, Backhoe Loaders and JCB India.
Construction & Farm Equipment industry
The Indian construction equipment industry has an estimated size of $2.8 billion. Though the
Indian construction equipment industry is only a fraction of the global market whose size is
over $80 billion, it has been growing at an impressive annual rate of 30% as compared to the
global market‟s rate of 5%.
The main macroeconomic factors responsible for the projected growth of this industry are:
 Roads: The Indian road network is the second largest in the world with 3.5 million
kilometres, but more than half of the network is un-surfaced. The National Highway
Development project established in 1995 comprises the Golden Quadrilateral
connecting the four metropolitan cities with a total length of 6000 kilometres, and the
North South East West corridor connecting Srinagar-Kanyakumari, Silchar-
Saurashtra and Salem-Cochin over a distance of 7500 kilometres.
 Railways: Only about 14% of the 1,00,000 kilometres of rail track is electrified. The
ambitious $25 billion National Railway Vikas Yojana envisages the addition of 10,000
kilometres of new railway lines, modernisation and development of 20 stations and
the metro projects.
 Airports: The passenger traffic is expected to grow at 20% per annum and the cargo
at 10% per annum has ushered in a slew of construction of greenfield projects and
modernisation of existing facilities across the country.
 Power: The peak demand for power has been outstripping the generation by 10-15%
annually. Investments of $177 billion have been earmarked for this under the 11th
five-year plan.
 Irrigation, Urban Infrastructure and Telecommunication: Similar development
initiatives are expected in this sector, fuelling the demands for construction
equipment.
The construction equipment industry is broadly divided into the following categories:

6. This paper focuses on the Backhoe Loader, classified under the Earthmoving Equipment
category.
Backhoe Loader
The Backhoe Loader comprises of a tractor cabin with a front shovel/ bucket and a small
backhoe in the rear. It is a versatile machine, employed in medium to small scale projects in
urban engineering, construction and several other projects. It can be used for several
applications such as construction, demolition, light transportation of building materials,
excavation, landscaping, paving roads etc.
The backhoe loader was invented in UK in 1953 by Joseph Cyril Bamford, the founder of
JCB. In India and several other countries, the backhoe has come to be called as „JCB‟ and
less by its generic name.
The most popular backhoe models sold in India feature 70 to 80 horsepower engines, two
wheel drive, a 1 m3 front loader bucket and a .25m3 rear backhoe.
The statistical listing of the overall market and the relative market positions data is as
depicted below.

7. 1215 570 180 Number of Suppliers 7
1976 5% 3% 1%
9% Number of Joint Ventures 3
1908
JCB Market Leader JCB
9% L&T Case Production (Units) 22,226
Telcon
15,920 Sales (Units) 21,769
TEREX- Vectra
73%
Caterpillar
Importers’ Penetration (%) 0
Others Population (Units) 70,500
Sales Forecast 2012 (Units) 52,000
Data as of March, 2008
JCB India is the clear market leader with over 73% of the market share. The nearest
competitors are Telcon, L&T Case, whose market shares are a meagre 9% each.
JCB India
JCB India is a fully owned subsidiary of JC Bamford Excavators Limited (UK), this third
largest Earthmoving & Construction equipment company in the world.
JCB India started operations in 1979 as a joint venture between JCB UK and Escorts India.
In 2003, JCB UK acquired 100% shares in the company, and today JCB India is the fastest
growing company in the Earthmoving and construction Equipment Company in India.
The flagship product of JCB India is the Backhoe Loader. The total number of JCB
Backhoes in use in India is estimated to be over 80,000, with one in two backhoes currently
sold being a JCB machine. JCB India operates the largest Backhoe Loader manufacturing
facility in the world at Ballabgarh in Haryana, and two other manufacturing plants in Pune.
Today, JCB India contributes over 30% revenues of JCB worldwide.

8. 3. Analysis
This section begins with an analysis of the Market segments in the Backhoe Loader industry,
and identifying the segment of interest for JCB.
Market Segmentation
Overall Market Size
The analysis of the unit sales in the period from 1998 to 2007 reveals a period of explosive
growth in the latter years, especially from 2004 to 2007.
25,000
20,000
15,000 Fig 3.1: Growth trajectory of Back-
Hoe Loaders
10,000
5,000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Market segments
The key market segments are as listed below:
 Plant hirers: These are often owner-operators with a single machine who provide
the backhoe on an hourly/monthly rent basis. The spectacular demand (and sales)
for backhoes in the recent past is attributed to this segment, for whom equipment
rental is a very viable business owing to the high rental rates.
 Contractors: These are private contractors who regard the machine as utility
machines and typically deploy them on a variety of applications that they are
involved in.
 Others: This segment includes Institutional buyers, Civic bodies, and Agricultural &
Industrial applications.
From the picture below of the customer segmentation, it could be safely hypothesized that
the dominant segment of interest for all market-share seeking firms is the Plant hirer
segment. In the next section, the Plant hirers segment is analyzed in detail, in order to
unravel the market strategy employed by JCB. Some of the characteristics are common to
all the segments, while some are specific to the plant hirer segment.

9. 10%
25%
Plant hirers Fig 3.2: Customer Segmentation for
65% Contractors
Back-Hoe Loaders
Others
Segment of Interest – Plant Hirers
The main characteristics of the customers in this segment are as listed below:
Operational
• Attractive break-even period
• Ruggedness, Long Life
• Priority order for productivity
• Minimum down/idle time
• Fuel efficiency
Functional
• Functional features – generic qualifiers
• Value-added features
Financial
• Plant-hire business model –ROI, Breakeven
• Competitive pricing
• High Re-sale value
• Availability of financing
 Plant hire business model – For short-term usage, the average hourly rate for a
backhoe loader ranges between Rs 600 to Rs 750, including the charges for fuel,
maintenance and the operator. In case of a long-term usage where the monthly rates
apply, the average rate is between Rs 70,000 to 80,000 per month. The average
utilisation of the backhoe is between 2000 and 3000 hours per year.
Assuming a purchase price of Rs 18 lakhs, this translates to a breakeven period of
approximately two-and-half years, as shown below:
Rental per Revenue per Purchase Maintenance, Fuel, Breakeven
month Year Price Operator* Period
Rs 75,000 Rs 9,00,000 Rs 18,00,000 Rs 3,60,000 2.4
*: Annual charges assumed at 20% of purchase price
 Ruggedness and long life: It follows from the above that the customer is placing a
long-time bet, usually out of his savings or external financing, and would expect the

10. machine to last long. The machine will be expected to be rugged, and to last long so
that the returns can be enjoyed over a longer period of time.
 Functional features – generic: The machine would lose its value to this segment if
it were to be specialized/targeted to any one working scenario, such as mining or
construction or agricultural. Instead, it would be an attractive proposition to have an
„all-terrain‟ machine that can be used with similar ease in all of the applications. As
opposed to the developed markets where the backhoe is used as a „production
equipment‟, the most popular usage in India is as a „multi-purpose utility tool‟.
It thus follows from this argument that the classical marketing strategy of feature-
differentiation cannot be applied in this context as the base level of qualifiers at a
functional level are expected to be generic. A manufacturer could attempt to package
the differentiation over this minimal qualifying level, but it would seem from the
context that the differentiation makes better sense in other, non-functional areas.
 Priority order for productivity: A customer in this segment is not likely to view
productivity and performance with any high level of interest. The nature of the
business model which is based on „hourly‟ rental rates does not provide any
substantial motivation to demand a higher productivity and performance. On the
contrary, it could be intuitively hypothesized that a machine with higher productivity is
likely to be viewed with dis-interest, unless there is sufficient leeway to charge
premium rental rates.
 Minimum downtime: Owing to the normal practice of purchasing the machine
against loans, the customers in this segment would want that the machine has
minimum down time. The customers would want to press the machine into use as
much as possible. This also follows from the high levels of demand for rental services
observed for the machine.
 Service network & Spare part availability: For the manufacturer, ensuring
minimum downtime translates into designing sturdy machines, developing a superior
network of service personnel and sales part distribution.
 Fuel efficiency: One of the key advantages of the backhoe is its mobility, as
compared to several other alternates which require to be hauled up to the distant
construction sites. Also, a typical machine owner is likely to service end users within
a wide circumference, and require driving the machine across these distant work
sites. A fuel efficient machine minimizes the idle-time of the machine, as the owner
can afford to press it into productive service even when the distances between two

11. worksites are substantial. This is besides the actual work process which takes place
with the running engine. Thus, fuel efficiency would be a top priority for the
customers in this segment.
 Re-sale value: The users in this segment would also want to see that the machine
fetches a good value in the second-hand market. For an average customer in this
segment, the machine represents a substantial form of liquidity, if its re-sale vale is
high.
 Price sensitivity: The customer being usually an owner-operator would regard the
price as one of the main considerations during a buying a decision.
 Financing options: Availability of financing options would be important as the
majority of customers would purchase by availing loans. Among other things, this
also indicates that the machine has to have sufficient residual (resale) value to
appeal to the financiers.
Customer pain points and Value Drivers
The key value drivers (other than price) and the paint points, based on the above discussion,
are as summarized below:
• Long life • Down time, and resultant loss
• Ruggedness of productivity
• Minimum down time • Spare parts availability
• High service centre and spare • Availability of skilled operators
parts coverage • Difficult in arranging financing
• Financing support • High price
• Generic features
• Fuel efficiency
• Re-sale value
Value Pain
Drivers Points
Competitor Analysis
This section discusses the competitive environment facing JCB, before proceeding with the
analysis of the market sensing strategy employed by JCB.
The overall growth of the industry and the main players in the period from 2003 to 2007 is as
depicted in the table below.
Player 2003 2004 2005 2006 2007
JCB 3,480 5,200 7,400 10,400 16,066

12. Telcon-JD 400 462 850 1,425 2,000
L&T-Case 480 525 695 1,183 1,950
TEREX Vectra - 87 310 775 1,285
Caterpillar 47 245 235 215 700
Others - 8 10 45 225
Total 4,407 6,527 8,735 14,043 22,226
 Telcon: Telcon is a subsidiary company of TATA motors, which holds 60% share,
and Hitachi Construction Machinery Co. Ltd, Japan holding the balance 40%. The
company commenced manufacturing of construction equipment in 1961, as a division
of TELCO. In 1984, it entered into a technical collaboration with HCM, Japan for
manufacturing state of the art hydraulic excavators.
 L&T Case: L&T Case is a 50:50 joint venture between L&T and CNH , Global Nv.
engaged in the manufacture and sale of construction equipment and road building
equipment such as loader backhoes and vibratory compactors. A major player in
both these segments, L&T-Case is a market leader in the vibratory compactor
segment, apart from the loader backhoe segment.
 TEREX Vectra - Terex Vectra Equipment (P) Limited is a 70:30 joint venture of Terex
Corporation, USA and Vectra Limited, UK. The former is the 3rd largest construction
equipment manufacturer in the world, while the latter is engaged in diverse fields
such as trucks, buses, automotive parts and construction equipment.
Inferences from Competitor analysis
Some of the key inferences on studying the main competitors are as listed below:
 The competitors joint ventures, between local and foreign firms and in the
case of TEREX-Vectra, between two foreign firms. In contrast, JCB acquired
the stakes from its JV partner long ago, and thus does not experience the
situations characteristic of JV firms (dispute on partner involvement/
investment, head office-subsidiary dissonance, force fitting of home market
models etc.)
 JCB has established the biggest backhoe plant in India. Arguably, this
facilitates the company to produce locally for the local market, instead of
relying on importing globally successful models.

13. 4. Understanding the strategy of JCB – Market Sensing
In this section, we attempt to analyze the strategy adopted by JCB in addressing the
dominant segment of interest. The mapping of the strategies adopted by JCB with the
characteristics of the segment of interest is a summarized in the following illustration and
detailed below:
Geographical coverage
JCB has developed the most comprehensive dealer and service networks as compared to its
competitors in the backhoe segment. This brings it very close to its customers during the
acquisition process, and for the life-time of the product as part of the after-sales support. The
network for JCB and the other top two competitors is as listed below:
Company Office/ Branch Dealers Outlets
JCB 20 48 320
Telcon 32 38 125
L&T 20 45 100
In a later section, we have attempted to capture the benefits of this strategy through a value-
in-use assessment.
JCB has also been following a policy whereby interested employees are encouraged to
switch over to managing service centres as independent franchises. When the employee
moves over to managing a service centre, he carries along with him a great deal of tacit
learning, in addition to having a synergistic OEM-service centre relationship. Our research
has not found any similar policy being used by any of the competitors.
Senior company officials cite the expansive network as a clinching factor, as the competitors
do not have such a presence. In addition to the above network, JCB has four parts
warehouse depots in Pune, Chennai, Kolkatta and Ballabhgarh.

14. The service motto of JCB as captured in their caption says it all - ‘ When you need a part,
you need it right away’. The owner-operators cannot usually afford a machine breakdown for
even a short while.
To a customer, the after-sales support and spare parts availability are critical factors leading
to satisfaction, due to the need for reducing down/idle time.
Re-manufacturing: Service Exchange
JCB has rolled out a scheme by which the customers can bring an old machine (not
externally damaged) to the service centre, and have it „remanufactured‟ to the latest
specifications. JCB claims that all the major components of the JCB machine, including the
engine, is intelligently designed so that they can be remanufactured, providing multiple
lifecycles. This process costs the customer 50% less than new parts, and comes with a
warranty of 12 months on the parts fitted by the dealer.
Our research has not found any similar program rolled out by the competition.
To a customer, the value proposition is very powerful. The remanufacturing directly
influences the productive service life, minimizes the downtime due to wear-and-tear and
dramatically resurrects the re-sale value, which even otherwise is a significant amount. In a
later section, the value provided by this feature is analyzed.
Fuel Efficiency
The fuel consumption of the JCB backhoe is impressive, though a standard metric is hard to
arrive at due to the dependence of the fuel consumption on several operating conditions
such as terrain, operating load, digging height etc. Also, like most other transportation
sectors, the plant hirer also does resort to passing on fuel expense hikes to the end user.
Though the JCB has not been reported in unfavourable light with respect to fuel efficiency,
Telcon the nearest challenger has been reported to have introduced a highly fuel efficient
engine from the Hitachi stable.
Generic/ concept modelling
The JCB backhoe has been very popular in India, and in common parlance the term „JCB‟
has come to denote the „backhoe‟. Thus, the concept marketing of the JCB has been a huge
success, with the consumer looking up to the features provided in the JCB model as a
benchmark. It places additional pressure on the competitors who need to align their features
as close to that of the JCB as possible. This creates severe drag on the receptivity of a new
differentiated feature, and thus the risk of a competitor not getting benefits by providing a
new feature is high. For e.g., most of the players in the industry have advanced „articulated‟

15. machines selling well in their home markets, which however is very unlikely to find favour
with the current customer mindset fixated on the trademark JCB with its rock bed of „rigidity‟.
As the MD of JCB India, Vipin Sondhi, clarifies – the backhoe ( i.e. „JCB‟) in India is generic
because the customers choose to make it one.
On the part of JCB, this aspect has been partially responsible for persisting with its flagship
3D model in its unchanged form for over 15 years from the introduction of the model in 1980.
JCB was forced to change only after the competitors introduced sophisticated models in
2002-03 such as the L&T 851, Telcon JD315 and the Caterpillar 424 series. JCB responded
by upgrading its technology and coming out with an improved 3DX model in 2003.
This move is to be seen more as one of pre-emption as the competitors never were in a
position to even register a minor dent to JCB whose market share has never gone below
70%. Partly, the inability of the competition is also related to the success JCB attained in
modelling the expectations of a backhoe (i.e. JCB in layman terms), and the other enabling
factors mentioned in this section. Thus, it can be hypothesized that, JCB has been
successful in driving down feature differentiation; thereby restricting the leeway for
competitors to take JCB headlong on a feature war. This shifts the competition to areas such
as service network, spare parts availability and several other path dependent, time-intensive
processes, which favour the incumbent.
Operator Training
One of the factors affecting the industry has been the lack of skilled operators who are well
versed with the various operational techniques of a backhoe. JCB conducts regular training
programmes for operators. Besides imparting a working knowledge of the machine
operation, the training programs also help in promoting proper and safe handling techniques,
thereby improving the life and performance of the machine. The dominance of JCB further
reinforces the popularity and patronage, as it is a viable means of employment for operators
as opposed to the lesser known brands.
Pricing
The base prices for standard machines (excluding VAT, excise and sales tax) are as
depicted in the table below.
Company (model) Unit Price ( Rs Lakhs)
Caterpillar (424B) 15.5 - 16
JCB (3DX) 15.3 - 15.8
Terex-Vectra (TC760) 14.8 - 15.3
Telcon (JD315-V) 14.5 - 15
L&T Case (770) 14.5 - 15

16. BEML (BL9H) 14.5 - 15
ACE (AX130) 13.8 - 14.3
The delivered price of a machine would be higher than that listed above and would vary by
region- for e.g. the price for JCB 3DX could be approximately Rs 18 lakhs after application of
taxes. As can be inferred, the highest price for backhoes in India is charged by Caterpillar
(who is a marginal player), followed by JCB.
Even though, the price of the JCB is higher than all other suppliers (other than CAT), they
still are the market leaders in an extremely price sensitive market. This points to the faith in
the brand and its higher perceived value, due to the monetisation of the various tangible and
intangible value propositions (such as parts availability, service network coverage etc.).
Over the years, the customer has come to view the JCB as the benchmark for not just the
features, but the pricing too. In a subsequent section, we present the findings from a value
assessment modelling of the JCB 3DX in relation to its next best alternative which
demonstrate the rationale for the premium in the acquisition price. The key finding from this
is that the customer is value sensitive, and looks at the overall cost of ownership.
Financing
Availability of financing options is an important aspect in the buying decision. Typically,
financing periods vary from 2 to 3 years with a down payment of 5% to 25% depending on
the type of the machine and the buyer‟s credit worthiness. In this case JCB fares very well,
as the buyers usually secure a loan covering 75 to 85% of the base price, with relative ease.
This is linked to the excellent relations between JCB and the main financiers, the volume of
transactions involving JCB and the decent resale value for repossessed machines. The
residual value of the JCB 3DX after 3 years is estimated to be Rs. 12 lakhs – i.e. nearly 60%
of the original purchase price.
Recently, JCB signed an agreement with the largest bank in India, SBI, whereby dealers of
JCB would apprise prospective JCB customers about the loan advantage of the bank and
help them in applying for it. The agreement, covering 47 dealer locations and 12,000 SBI
branches, further states that SBI would process and disburse the application in 72 working
hours. This landmark agreement is regarded as a compelling advantage for JCB, as it
facilitates the penetration into the first time buyers from the interior rural locations who would
otherwise find it difficult to arrange financing on their own.
The other suppliers usually have to live with a higher asking down payment and additional
concessions, though some of them are able to leverage their relations and volumes from
non-backhoe equipments where they may be relatively well-off.

17. 5. Value Modelling
In this section, we perform a Customer Value assessment using the value-in-use paradigm.
As explained earlier, the functional features are not considered in this process, due to the
diversity of the application of the machine. The cost figures for the various OEMs were not
available; hence they are not included in this analysis.
Parameters
Attribute Description Hypothesis Word Equation Assumption
Service Centres & Effect of the Firm with a better Deduct: Machine has a
Spare part service centre network can reduce Number of days of service/ replacement
availability coverage and the downtimes by service/ part requirement of twice
spare parts speedy servicing/ replacement in a per month
availability on replacement month x Time
minimizing the required to service/
downtime replace the part
Remanufacturing Effect of the Remanufacturing Add: Remanufacturing
remanufacturing scheme has the Additional value prolongs the life of
scheme on the life effect of prolonging injected by the the machine by one
of the machine, the life of the remanufacturing - half of original
and the quality of machine, and Cost of standard life. For the
operation reducing the remanufacturing to purpose of this
downtime on a long the customer analysis, the
term basis remanufacturing is
conducted after 5
years.
Re-sale Value Effect of having a Resale value Add : re-sale value Re-sale value is
high resale value provides a form of used to offset the
liquidity to the price (as it is
owner, either for recoverable). For the
personal use or for purpose of this
professional exercise the resale is
purposes such as exercised at the end
purchase of a new of 5 years.
equipment
Data sheet
The data sheet for JCB and the NBA is presented here, for use in the value model in the
subsequent section.
JCB
Description Value
Time required to haul the machine to service centre and complete the work 3 hours
Purchase price 18 lakhs
Known resale value after 3 years 12 lakhs
Time required for Machine value to fully depreciate ( as a proxy for machine life) 9 years
Additional life injected by remanufacturing 4.5 years
Cost of remanufacturing ( assumed) 2 lakhs

18. Next Best Alternative
Description Value
Time required to haul the machine to service centre and complete the work 12 hours
Purchase price 17 lakhs
Resale value after 3 years 10 lakhs
Time required for Machine value to fully depreciate ( as a proxy for machine life) 7.2 years
Additional life injected by remanufacturing NA
Note: Assumed/Expected values have been used for some of the calculations, wherever the actual value is not
publically available.
Value model
An approximate value model based on the available data is as shown below.
Attribute JCB NBA
2( monthly frequency) x
Service Centres & 2( monthly frequency) x 12 (No. of 12 (No. of months) x 12
Spare part availability ( months) x 3 (Service time) x 650 ( (Service time) x 650 (
per year) Hourly rental) Rs. -46,800 Hourly rental) Rs. -1,87,200
75,000 ( rental fee per
Total rental revenue ( 75,000 ( rental fee per month) x month per year) x 12
Value per year) 12 (No. of months) Rs. 9,00,000 (No. of months)
17,00,000( Purchase Rs. 9,00,000
18,00,000 ( Purchase price) / 9 price) / 7.2 (Machine
Price Price ( per year) (Machine life) Rs. 2,00,000 life) Rs. 2,36,111
Value - Price ( per
CIP year) Rs. 10,53,200 Rs. 9,48,911
Scenario - 1 Disposed after 5 years Rs. 8,00,000 Rs. 5,35,000
Total value Rs. 60,66,000 Rs. 52,79,556
Remanufactured after
Scenario - 2 5 years
New life Original + 0.5 of original 13.50 0.00
Cost of
remanufacturing Rs. 2,00,000 Rs. -
Incemental rental Incremental life * Monthly rental -
revenue Cost of remanufacturing Rs. 38,50,000 Rs. -
Inference
The JCB has a superior value proposition in the three cases considered above, due to
1. Better service and spare parts network, leading to quicker servicing and hence
reduced down time
2. Higher resale value ( due to several of the factors discussed in this paper), resulting
in better monetization and liquidity
3. Remanufacturing scheme adding to a crucial advantage in terms of extending the
productive work life of the machine
Intangibles

19. In addition to the above parameters, there are several others which do not lend themselves
to a clear quantitative conversion, but are compelling nevertheless, as listed below.
 Ease of financing
 Better employability for operators associating with JCB
 Personalized contact owing to larger service network
 Larger pool of trained repairmen; leading to service utility and better usage of
machine. In contrast, there will be a perceived difficulty in repairing and servicing
locally for other machines.
 Accumulated knowledge about machine residing with peer groups and guilds; owing
to widespread usage
 Generic-ness of the feature reduces complexity in search and evaluation costs for a
prospective buyer; especially considering that the level of literacy and technical
awareness may not be very high for most users in the dominant segment.

20. 6. References
1. Equipment Analysis India: Backhoe Loaders – Off-Highway Research
2. Construction Equipment : Markets & Opportunities – India Brand Equity Foundation
3. “State Bank of India and JCB India Ltd. Enter into first of its kind collaboration –
fuelling India Growth Story”, Aug‟31, 2009, www.indiaprwire.com
4. “JCB opens world's largest backhoe loader plant in Faridabad, India “,
http://machinist.in/index.php?option=com_content&task=view&id=2023&Itemid=2
5. “JCB expands operations in India” ,
http://www.constructionupdate.com/products/constructionworld/2006/cwoctober2006/
004.html
6. “JCB India has added another feather to its crown” ,
http://www.constructionupdate.com/products/projectsinfo/2007/26thFeb-
4thmarch2007/012.html
7. “JCB India growing with ambitious development and expansion plans”,
http://machinist.in/index.php?option=com_content&task=view&id=1711&Itemid=2
8. “Crawler Excavators: Current makes and
models”,http://digitalmagazinetechnology.com/a/?KEY=equipmentworld-10-
specguide#page=63
9. “India JCB‟s single largest market”, http://www.nbmcw.com/articles/equipment-a-
machinery/market-reserch/1083-india-jcbs-single-largest-market.html
10. “Brand building”,
http://www.constructionupdate.com/products/constructionworld/2006/cwnovember20
06/002.html
11. “Off Highway Research Optimistic about India”,
http://www.nbmcw.com/articles/equipment-a-machinery/interviews/3123-off-highway-
research-optimistic-about-india.html

21. 12. “We promise maximum productivity and profits to our customers." - Vipin Sondhi”,
http://www.constructionupdate.com/products/constructionworld/2006/cwnovember20
06/014.html
13. “FULL MARKS TO JCB 2CX”,
http://www.contractjournal.com/Articles/1994/03/10/31337/full-marks-to-jcb-2cx.html
14. “EJCB: Innovating for growth” , http://www.icjonline.com/productjcb.htm
15. Construction Update : http://www.constructionupdate.com/asapp/default.asp
16. Machinist.in : http://machinist.in
17. JCB India: http://www.jcb.com/home.aspx?usercountryid=88&langid=1