Case Study Analysis Lincoln Electric: Venturing Abroad Essay

capital of Nebraska Electric (LE) has been a assignr of electrical and welding technology reapings since the late 1800s. The companionship remained principally a family and employee held company until 1995, then virtually 40% of its equity went to the public. crowd capital of Nebraska, one of the founders, developed unique attention techniques that effectively motivated the employees. These forethought techniques were implemented as an unusual (for the era) coordinate of compensation and benefits called incentive management. The incentive management system consisted of four describe areas factory jobs found solely on piecework output a year-end bonus that could suit qualified or exceeded an individuals regular pay guaranteed employment and special benefits. Management successors to James capital of Nebraska continued with this thriving philosophy even out during hard times. This incentive system supportd Lincoln Electric with a of import competitive advantage over i ts home(prenominal) competitors.This incentive system gain the bonus rented Lincoln employees to earn more than their counter bring outs at other firms, which contributes to employee motivation. sensation additional aspect of Lincolns incentive system was that of expressage benefits. James Lincoln developed a system of minimal company paid benefits, where he rationalized that fewer benefits would equate more funds operational for employee bonus and compensation. The successful incentive schedule and participative management style provided an surround where a Lincoln intentiont could produce many times (up to ternary times-with half the personnel) that of a similar manufacturing plant. The employee involvement program and the incentive program at Lincoln were operative contributors to their cap capacity to maintain a red-blooded reputation as a high quality producer, which has driven stain loyalty.When combined with the approachable and participative management style, Linco lns culture was able to continuously leverage changes from their employees. The management at Lincoln provided an environment where employees were drop to make suggestions or complaints, these ideas became changes and the changes turned into innovations. Such as manufacturing equipment modifications that would run, two to collar times their original rate. Lincoln continues to be profitable by portentous contributions of these production efficiencies. An increase in production rates (with the uniform or less resources) equates directly to higher returns on investments, lowercost of goods sold, and the ability to do more with less (especially during economic challenges). In general, there is an entrepreneurial attitude at LE and the ability to harvest these innovations is Lincolns true competitive advantage. As of 1995, Lincoln Electric controlled 36% of the $1.5 billon U.S. mart for welding equipment and supplies, where it is handed the leading competitor.The Lincoln Electric Co mpany possesses financial stability, they let recently brought their debt under control as shown in Appendix B-Brief fiscal Analysis, which shows an improving debt trend (current, quick, debt to assets, and debt to equity ratios) this is considered an enabling item when embarking upon a bran- pertly multinational venture, financial/resources to overcome potential problems. In addition, Lincoln has experience a strong recoin truth illustrated by the trends detailed on the dinero sales and income after taxes charts shown in Appendix B-Brief Financial Analysis.Lincoln provide have to overcome its limited success in their introductory supranational ventures, evident by the closures of plants in Germany, Japan, Venezuela, and Brazil. Some of this limited success was due to their lack on international experience and a failure to provide assistance, sink or swim corporate attitude. LE might not have been looking at a wide-term view and whitethorn have given up on these plants too proterozoic. Similar domestic ventures take on the average seven years before nice profitable. Additional reasons for early international failures was the lack of contingency planning in the form of no corporate support, advice or direction. Another shortcoming of their early international ventures is that Lincoln attempted to apply its incentive management universally to all countries/cultures. They failed to understand the importance of tailoring rewards and incentives for specific countries/cultures.Key elements of the initial wave of LEs international ventures are domestic operations accounted for 85% of the worldwide production and nearly all new product development until the late 1980s, universal application of the incentive management programs, and in general the corporation paid little attention to there international divisions. However, as of 1996, Lincolnre-organized its international ventures by naming a chairman for distributively of the five regions, this is a dem onstration of a new furiousness and managementing on the international ventures from LE.In additional to the CEO having a planned oversight into the expansion there go forth be council consisting of each of these presidents to plan, integrate and implement global strategies. The compensation for these presidents will as well as take interregional cooperation. Both of these efforts address key Lincoln weakness from there prior international ventures of sink or swim corporate attitude and interregional pestiferous competition. One final item is that Lincoln realized that in the guerilla wave of international expansion true understanding of a surface area/culture is as important as technological skills.First, Lincoln essential continue to utilize its successful incentive and management philosophy ordinance for employees in the U.S. The domestic operations provide the financial/resource excogitation or enabler for continued global expansion, but with no loss of focus on the domestic operation. Lincoln should complete a product structure analysis to determine which plant (domestic or international) should build which product. This analysis should consider all external environmental (particularly political) factors and ensure the companys strategies for long term and short term goals are a significant part of the analysis. A key roadblock to the expansion into Indonesia is the political environment.The civil agitation and an uncertain future regime must be watched and analyzed with broad care. A meeting should immediately be setup with the local government to present Lincolns long-term strategy. However, prior to this meeting Lincoln must conduct prolonged research into the stability, history and any significant background information about the current government and then settle how to approach this potentially volatile situation. Also Lincoln must construct contingency plans should the government become a problem and then be continuously adjusting these contingency plans as the situation changes.One threat to Lincolns expansion plan to enter the set welding consumables markets is that it is dominated by two other multinational firms (see Appendix A-Consumables Market) they control approximately 60% of this market. Once again, Lincoln must conduct continuous extensive marketresearch to determine risk, provide data for their living short-run and long-term tactical and strategic plans. This marketing research will also support the development of Lincolns first appearance strategies. Once, the production focus areas are defined Lincoln should develop incentives to ensure cooperation with no pernicious competition amid regions, interregional management compensation will help.A coherent set of financial metrics must be developed and utilised to determine regional performance each region will be compared in the same manner. Lincoln must also ensure that start-ups be provided a safety net of sorts that utilizes resources/innova tions to combat obstacles that would prevent success. Another testimonial is to collect lessons learned on the failed European operations, ensure that the same situations are not repeated in Asia/Indonesia. The regional presidents council will help to ensure success, however control in key decisions should be left to the corporation.A joint venture in Indonesia is the crush way to enter. Tiras relationship with high level government officials is real important due to the political situation. SSHJ has the financial strength that Tira does not. Lincoln should go into a joint venture with both Tira and SSHJ since each firm brings complementary color strengths. This joint venture must be carefully crafted compensation will be direct as a partnership type between SSHJ and Tira, where incentives exist to ensure mutual success. An agreement with SSHJ to build a new factory should be completed and support for a low amour loan to help Tira with maintaining Lincoln inventory. This joint venture will be carefully controlled and monitored by Lincoln and they will maintain the maximum cadence of ownership allowed by Indonesian law. As mention previously, Lincolns competitive edge is its ability to tap into employee innovative talents and then to quick implement them. Lincoln should conduct cultural research into what types of rewards apply to the Indonesian culture and then customs duty design an incentive system that utilizes these rewards.The successful implementation of this similar formula of corporate culture and incentives will allow Lincoln once again to continuously improve through employee innovations. The custom designed incentive reward may be benefits on a rising scale additional vacation/compensation time or company ownership as a stock option plan instead of the bonus/compensation plan used in the U.S. Lincoln shouldcontinue to leverage their brand reputation/loyalty, and leverage their ability to produce at a lower cost (through its successful innova tion processes) and to get around into this new market also, price competition should be avoided as an entry strategy. Instead, compete on product value.The planned entry strategy into the stick welding consumables is the right direction, the growth rate and potential market is very attractive, however the entry strategy must also be developed to counter whatever defensive or offensive moves the other arrogant multinational firms do to prevent Lincoln from gaining market share. Finally, Lincolns long-term strategies must be compatible with achievable goals that allow qualified time (seven to ten years) to for the Indonesian venture to fully develop profitably.