"If both business partners have a clear single business vision for an identified market opportunity, it just makes so much sense," says John Paterson, CEO of David Brown. Joint ventures can be a useful way to accelerate your progress in a new market. The UK-based manufacturer shares its experiences.
David Brown, based in Huddersfield, UK, is perhaps best known for making tractors, and as a one-time owner of Aston Martin. But the modern-day company has its sights set firmly on supplying the global market with its gearing solutions and services for mining, oil and gas, conventional power and renewables.
It allows us to accelerate our entry into those markets
It now has engineering and manufacturing facilities in France, South Africa, Australia, China, Canada and the US, and a growing network of service centres. And in several other countries, it's using joint ventures as a way to establish a quick foothold in new territories.
Last year the group set up a 50-50 partnership with Bharat Forge – a household name in India – to serve the Indian heavy engineering industry. David Brown also has joint ventures in China, Chile and Indonesia, and is seeking potential partners in Brazil.
Get close to the customer
For Chief Executive John Paterson, joint ventures are a logical way to further the firm's aim of providing a global after-sales service and repair as well as engineering and manufacturing.
"Many engineering companies focus on their background in design and manufacturing, and not on the large service opportunity on the items they supply and install," he says. "It's part of our growth strategy to provide that global after-sales service."
"But to do that, you have to be very close to your customer. And if you have to find or construct a service centre in a new part of the world, it often takes quite a long time."
"That's why we've taken the decision to pair up with established partners who perhaps don't have gear expertise, but do have facilities and a market network on the ground. It allows us to accelerate our entry into those markets".
Gain an instant understanding
David Brown's 75-25 joint venture with a Chilean firm is a case in point. "The market for servicing Chile's mines is under-served, and our partner, Summit Mining, has a fantastic understanding of what's required," says Paterson. "For us to try to reach the point they had reached would have taken many years."
Brazil has proved a tougher nut to crack: "We've looked at three potential partners there, and for various reasons we've decided not to go ahead. You have to have a local presence to succeed in that environment, and to try to achieve that without a local partner is risky.
"There are difficulties in joint ventures, as in any partnership – particularly when different cultures are involved. But if both partners have a clear single business vision for an identified market opportunity, it just makes so much sense."