Managing in a Strategic Context – Lincoln Electric

Managing in a Strategic Context – Lincoln Electric

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Questions:
Should Lincoln Electric expand to India by investing in a major facility there? Using frameworks/literature of the course justify your answer with an analysis of the external environment.

Taking into account the lessons learned from expansion in other countries what strategy should Lincoln Electric choose to enter India – an acquisition, a joint venture or building a new plant on its own?

What challenges you may foresee as a result of your strategic choice? Make recommendations to overcome these challenges.

Executive Summary
Lincoln Electric is a multinational company based in the United States dealing with manufacturer of welding products. The company has diversified its operations to other nations including regions in the Middle East. Due to its long period of operation, the company has made huge progress and gain of expertise by studying the ever changing market and demand trends. Its long years of operations have enabled it expand and become one of the companies offering employment to large numbers of employees. Its founder, John C. Lincoln had great ambitions, which have transformed the company in conjunction with the excellent management team. Guided by its mission and vision statement, the company has been able to make tremendous growth with opening of operations in other countries outside America. The company focuses on opening more operational sites which will demand more on management.
Overall strategy
Costs
Lincoln Electric Company has made huge financial gains contributed by its wide market share and high demands for its products. Lincoln’s initial investment was $200 in 1985 where it started by selling electric motors. Growth in size and operations has led to increase in assets mainly cash assets. Through the years of operation, Lincoln has made millions of dollars in revenue making it the largest welding company in the world (James 2001). For example, in 2005, Lincoln Company had made revenues amounting to $153 million. The finances have been used in expansion of the company’s operations and improving its existing plants in different countries.
Market share
The long period of operation of Lincoln Company has enabled it venture widely into the world of electrical products. This has enabled it expand and study different markets in the world to the extent of making it dominant in some regions. Another aspect contributing to its excellence in market share is its top position ranking in the field of manufacture of welding products. The relatively low prices of the Company’s welding products were a huge incentive that attracted many buyers in different countries. The expertise in the making of the products was also a huge boost to the gain of huge market shares (Vermeulen 2001).
The Company’s sales in America made 60% while the rest were sold in other operational sites in different countries. Besides the sales made in the countries of operation, sales were also made in form of exports to potential markets worldwide. One of the major boosts to the Company’s external sales was in China, which accounted for the largest sales in the external markets (Hayes 2005). Encouraged by this warm welcome in the Chinese market, Lincoln established a viable manufacturing plant in China in 1977. This was a huge boost to the company’s target of capturing huge market shares for its welding products.
Philosophy and the company’s focus
Since its foundation, Lincoln Company has been guided by its mission statement that contains its objectives and goals. In spite of the company being ranked first, Lincoln is still striving to remain the best (Mary 2005). The company’s philosophy is to be the best in the manufacture of durable welding products and provide quality construction services. This philosophy has been the framework guiding the management team towards achieving the laid down objectives.
Compensation and the pay system
Due to its huge number of employees in its various operational sites, Lincoln Company has a unique and friendly payment system. In his acting capacity as a senior officer in the Company, James came up with the straight piecework plan. In this system, each worker was paid according to the amount of work finished. To encourage competitiveness amongst its employees, Lincoln Company uses the commission system determining payments for its employees. Salaries are in most cases determined by the number of items manufactured, and the sales made in a particular period. Workers who portray excellence in their tasks get promoted, and this helps keep competitiveness in the company. Employees compete to present their best to their employers, and this helps add value to the skills in the company. This has aided the company in producing quality and durable welding products (James 2001).
Communication
Communication within and outside the organization is vital in passing information between employees and their employers. Lincoln Company has a good system that ensures an effective passing of information in the organization. Orders from the senior management to the employees reach on time, and this ensures continuity in operations. Besides the internal flow of information, communication flows smoothly to the external operational bases owned by the company (Hayes 2005). Effective communication in Lincoln Company ensures proper coordination hence favoring smooth flow of operations.
General nature of Lincoln Electric business and its application in other organizations
Lincoln Company has an ordinary structure found in other multinational companies ranging from its management to production of welding products. The company is headed by senior management officials who oversee the running of operations within and outside the company. Its model can easily be applied in other firms or companies due to its simplicity and workability. The running of the company is based on giving of orders from the senior to the subordinates or the employees. Senior officers operate from the company’s headquarters in the United States. The managers ensure that operations run smoothly in the numerous operational sites in outside countries. Other companies can easily adopt this mode of management since it observes the flow of orders and running of company affairs (Jordan 2009).
The company’s resources mainly come from the revenues raised from sales made by the company. The corporation has also made huge profits over the years, which assist in running of the company’s affairs. Besides the financial assets of the company, there are non-financial assets like vehicles and buildings that are owned by the company. The company has huge capabilities considering its huge revenues and non-financial assets in its various operational sites. The assets owned by the company have enabled the company carryout huge investments, as well as open external operational bases in various countries (James 2001). This has added value to Lincoln’s competitive advantage by invading potential markets for welding products. In addition, the company can maintain relatively low prices for welding products compared to its rival companies.
The resources owned by Lincoln in various countries contribute to its asset value making. It the largest welding company in the world. Most of the company’s financial assets have been put back to the economy by expanding its operations, and this adds to its strength. This strength has been used to capture the available opportunities in the construction industry in various parts of the world. The company has been able to launch various products, and this has been aided by the expertise in its workers and the management team (Siegel 2007).
The management methods used by Lincoln can easily be copied by other companies in their daily operations. In line with this, the simple management plan has been vital in running the numerous operational bases owned by Lincoln Electric business. The good management has also promoted good relationship between the managers and the employees. This promotes easy communication that promotes sharing of ideas and joint approach to problems facing the company. The employees can easily raise issues of concerns, which ultimately end up benefiting Lincoln in its bid to further its success (Jordan 2009).
Stakeholders’ influence on Lincoln’s operations in India
Lincoln electric company has made huge external investments by opening branches in various countries. Among these nations is India, which has offered good working environment enabling the company to make huge progress in size increase. India’s high population also played a role in favoring the thriving of Lincoln Company due to the large market for the welding products. India’s GDP had been growing at the rate of 6%, which made it a fast growing nation economically (Liang 2004). This attracted Lincoln Company to venture into the Indian economy in the aim of meeting the growing demand for welding products.
India’s welding market was ranked third in Asia by 2006 and this was a vital source of market for Lincoln’s welding products. It is also at this time that India’s infrastructure and construction industry reached its peak translating to high demand for welding products. The choice of the India was a vital and wise decision made by Lincoln’s company management team. The returns from the sales made in India’s welding plant were very encouraging for Lincoln Company. The profits made in India were used to make further advancements by opening other plants in different countries in Asia and the larger Middle East (Siegel 2007).
In spite of Lincoln’s great ambition for the Indian market, the company faced fierce competition from the already existing welding companies. The largest competitor for Lincoln was the Ador Welding Limited that controlled large size of the welding products market.
Stakeholders in India have a huge impact on the strategies adopted by Lincoln ranging from the employment to payment systems. Firstly, the method used in hiring of employees would have to be revised in India due to the enormous population and the rising need for Welding products. In order to satisfy the growing demand for the construction products, Lincoln would need to make adjustments in its business strategies to increase its production (Mary 2005). The main stakeholders that are likely to have an influence on Lincoln’s human resource practices are the workers and the management team. The major part of the influence would be on the recruitment of employees considering the large Indian population. To create a balance in the employment sector, Lincoln Company needs to create neutrality in employment.
Conclusion
Lincoln Electric Business has been successful in the field of production and selling of welding products. The company has employed simple management structure that works for its numerous operational bases in various countries. The long years of operation has enabled Lincoln make huge profits assisting in the running of the multinational company. The management team in Lincoln has been effective by providing quality leadership that can be emulated by their employees. The huge revenues made by the company have been used in the opening of external operational bases in other countries. This has increased its competitive advantage enabling it fight competition from its rival welding companies.

Word Count: 1,560 (Excluding Executive Summary)

References
Harvir, S, 2001, “The impact of internal marketing activities on external marketing outcomes.” Journal of Quality Management 6, no. 1: 61-76.
Hayes, R, 2005, Upton. “2 Operations-based Strategy.” Operations Management: A Strategic Approach: 10.
James, R, 2001, “Keiretsu, governance, and learning: Case studies in change from the Japanese automotive industry.” Organization science 12, no. 6.
Johnson, K, 2003, “Does it pay to be good? Social responsibility and financial performance.” Business Horizons 46, no. 6: 34-40.
Jordan, I, 2009, “Labor market institutions and global strategic adaptation: Evidence from Lincoln Electric.” Management Science 55, no. 9: 1527-1546.
Liang, N, 2004, “Implicit mental models in teaching cases: An empirical study of popular MBA cases in the United States and China.” Academy of Management Learning & Education 3, no. 4: 397-413.
Mary, M, 2005, “Causes of the difficulties in internationalization.” Journal of International Business Studies 38, no. 5.
Barbara, Z, 2009, “Labor market institutions and global strategic adaptation: Evidence from Lincoln Electric.” Management Science 55, no. 9: 1527-1546.
Siegel, J, 2007 “Lincoln electric.” Harvard Business School Case 707445.
Vermeulen, F, 2001, “Controlling international expansion.” Business Strategy Review 12, no. 3: 29-36.

1. Should Lincoln Electric expand to India by investing in a major facility there? Using frameworks/literature of the course justify your answer with an analysis of the external environment.
700 words
• Market Selection: INDIA
• This is an international strategy
• The question is: Should they go to India or not?
• What are the market characteristics?
• Using the frameworks/literature: PESTEL (political, economic, social, legal)
The decision to invest in a major facility in India must be taken with a risk or benefits review of the political and economic conditions, the nature of the market, and the competitive situation in India. The political condition is stable and the economy is booming so Lincoln is taking a calculated risk in the investing there. Lincoln is financially sound at this time to undertake the planned Indian expansion. Lincoln should be able to finance the expansion given the strong Income Statements since 1994. The opportunities in India are tremendous in the metal fabrication sector. Lincoln can serves this growing market via exports from other locations but it quickly needs to add manufacturing capabilities in India t position it advantageously. Manufacturing directly in India will enable lower costs, more competitive pricing of welding supplies and competitive advantage when Indian manufacturers start asking for more sophisticated welding technologies like automation and robots.

The decision to invest in a major facility in India must be taken with a risk/benefits review of the political and economic conditions, the nature of the market, and the competitive situation in India. The political condition is stable and the economy is booming so Lincoln is taking a calculated risk in investing there. Lincoln is financially sound at this time to undertake the planned Indian expansion. Lincoln should be able to finance the expansion given the strong Income Statements since 1994. The opportunities in India are tremendous in the metal fabrication sector. Lincoln can serves this growing market via exports from other locations but it quickly needs to add manufacturing capabilities in India to position it advantageously. Manufacturing directly in India will enable lower costs, more competitive pricing of welding supplies and competitive advantage when Indian manufacturers start asking for more sophisticated welding technologies like automation and welding robots.

2. Taking into account the lessons learned from expansion in other countries what strategy should Lincoln Electric choose to enter India – an acquisition, a joint venture or building a new plant on its own? 900 words
• Evaluate your options:
? Acquisition
? Joint venture
? Building a new plant (Greenfield)
• How to evaluate?
? Suitability: appropriate for the situation?
? Acceptability: what are the risks and return on investment?
? Feasibility: Does Lincoln have the resources? E.g. financial, human, skills?
• What are the lessons learned? They should help you guide the discussion and make a choice!
Lincoln should enter through a Greenfield site because an acquisition strategy would not meet Lincoln acquisition criteria’s and Lincoln would likely pay more than it has been used to pay in the past. There might also be issues with family control and competitors in a JV. Lincoln brand is valued in SE Asia and will help Lincoln establish a strong manufacturing base to penetrate the Indian market. However, to be successful with its Greenfield site, Lincoln must adapt its Incentive Plan to meet India’s labour market institutions. Lincoln has to be agile as an organisation to meet the demands of the foreign environment and adapt its corporate culture to the local market.

3. What challenges you may foresee as a result of your strategic choice? Make recommendations to overcome these challenges. 400 words
• What are the challenges of expanding to another country?
• Recommendations to overcome these challenges.
References
http://www.karlvilleneuve.com/categories/nouvelles-b2b/should-lincoln-electric-expand-in-india-by-investing-in-a-major-facility-there.html
Lincoln Electric from Yeh Sean
Should Lincoln Electric expand to India by investing in a major facility there? Using frameworks/literature of the course justify your answer with an analysis of the external environment.

Taking into account the lessons learned from expansion in other countries what strategy should Lincoln Electric choose to enter India – an acquisition, a joint venture or building a new plant on its own?

What challenges you may foresee as a result of your strategic choice? Make recommendations to overcome these challenges.

Should Lincoln Electric expand to India by investing in a major facility there? Using frameworks/literature of the course justify your answer with an analysis of the external environment.

Taking into account the lessons learned from expansion in other countries what strategy should Lincoln Electric choose to enter India – an acquisition, a joint venture or building a new plant on its own?

What challenges you may foresee as a result of your strategic choice? Make recommendations to overcome these challenges.

Evaluate your options:
Acquisition
Joint venture
Building a new plant (Greenfield)
How to evaluate?
Suitability: appropriate for the situation?
Acceptability: what are the risks and return on investment?
Feasibility: Does Lincoln have the resources? E.g. financial, human, skills?
What are the lessons learned? They should help you guide the discussion and make a choice!
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