The fortunes of a British manufacturer illustrate the varied problems faced to a greater or lesser extent by all global players. Manufacturers of earth moving and construction equipment such as Caterpillar in the US are often cited as a bell-weather of their respective economies but in addition they also face challenges common to many global firms. In Britain, Caterpillar’s equivalent is a privately held company called JCB, ranked third in the world by volume in its segment of the earth moving machinery market behind Caterpillar of the US and Komatsu of Japan. Named JCB after the founder Joseph Cyril Bamford who started the company in 1945, the company is still run by his son, the current chairman Sir Anthony Bamford. The firm now employs over 7000 people worldwide with production in the UK, US, India, China and Brazil. Employment is down from 10,000 just two years ago but the credit crisis hit major plant and machinery purchasing hard, depressing sales from £2b previously to £1.35b in 2009. Still the company reacted quickly cutting costs and managed to remain in profit, albeit only £28m in 2009 from £187m in 2007.
Sales are now improving strongly in emerging markets, particularly China, Vietnam, Indonesia and India where JCB sells 38% of all earth movers in spite of significant domestic competition. The market in China is forecast to grow at 15-20% per year and while JCB is not as well positioned as some of its competitors to exploit that growth they share a challenge in that market with other western earth moving equipment manufacturers and that is intellectual property theft.
Sir Anthony Bamford has called unlicensed copying of western technology by Asian manufacturers “a cancer and recently complained to Wen Jiabao, the Chinese premier, at a banquet. According to Bamford, Wen’s reply was along the lines of “Â¦China is a vast country with millions of mouths to feed, and many Chinese businesses were suing Chinese competitors for the same reason (IP theft)” not very helpful. But JCB is not slow to use whatever means they can to counter what they see as their biggest challenge in Asia, more so than straight competition from legitimate low cost Asian manufacturers. At a trade fair in Munich this year JCB was one of a group of western construction machinery companies that reported Asian rivals to the German police, alleging intellectual property theft. As a result, machines with suspect features were removed from rivals display stands by police. JCB’s frustration is probably shared by the likes of Caterpillar who cited intellectual property theft as one of several reasons supporting plans to return manufacture of some heavy equipment to the US.
JCB is taking legal action against a Chinese company and a South Korean group in the German and Indian courts. Sir Anthony said JCB would sue copyists “wherever they sell these products adding “They are scooping up on a huge scale products that took a lifetime to develop. The dilemma western producers face is that the growth is all coming from these markets, so they can’t boycott them. The best they can do is probably restrict local manufacture to lower technology components and use the courts to fight every infringement they come across. Western authorities are not blind to the problem although they have been pretty ineffective in dealing with it. The recent White House Strategic Plan to counter intellectual property theft sounds like another politician inspired piece of rhetoric but let’s hope it has more teeth than previous attempts to counter the problem. Technological expertise or ingenuity is one of few areas left where western businesses still lead the world.