Case Study Analysis Lincoln Electric: Venturing Abroad Essay

capital of Nebraska Electric (LE) has been a producer of electrical and join technology products since the late 1800s. The community remained primarily a family and employee held company until 1995, thus approximately 40% of its virtue went to the public. James capital of Nebraska, one of the founders, developed unique oversight techniques that effectively motivated the employees. These focus techniques were executeed as an unusual (for the era) structure of compensation and benefits called incentive management. The incentive management brass consisted of four backbone areas factory jobs based solely on piecework output a year-end bonus that could equal or exceeded an individuals regular pay guaranteed employment and limited benefits. Management successors to James capital of Nebraska continue with this successful philosophy even during hard times. This incentive system provided capital of Nebraska Electric with a operative competitive advantage over its domestic competitor s.This incentive system plus the bonus allowed capital of Nebraska employees to substantiate more than their answerparts at other firms, which contributes to employee motivation. mavin additional aspect of Lincolns incentive system was that of limited benefits. James Lincoln developed a system of minimal company paid benefits, where he rationalized that fewer benefits would equate more funds available for employee bonus and compensation. The successful incentive program and participative management style provided an environment where a Lincoln be aftert could produce many times (up to three times-with half the personnel) that of a similar manufacturing plant. The employee involvement program and the incentive program at Lincoln were significant contributors to their dexterity to maintain a solid reputation as a high quality producer, which has driven smirch loyalty.When combined with the approachable and participative management style, Lincolns coating was able to continuous ly leverage changes from their employees. The management at Lincoln provided an environment where employees were free to make suggestions or complaints, these ideas became changes and the changes turned into knowledgeablenesss. Such as manufacturing equipment modifications that would run, two to three times their original rate. Lincoln continues to be profitable by significant contributions of these production efficiencies. An attach in production rates (with the same or less resources) equates directly to higher returns on investments, lightcost of goods sold, and the ability to do more with less (especially during economic challenges). In general, there is an entrepreneurial perspective at LE and the ability to harvest these innovations is Lincolns avowedly competitive advantage. As of 1995, Lincoln Electric controlled 36% of the $1.5 billon U.S. market for welding equipment and supplies, where it is considered the leading competitor.The Lincoln Electric Company possesses p ecuniary stability, they gift recently brought their debt under control as shown in Appendix B-Brief Financial Analysis, which shows an improving debt trend (current, quick, debt to assets, and debt to fair play ratios) this is considered an enabling item when embarking upon a new foreign venture, financial/resources to overcome dominance problems. In addition, Lincoln has experienced a strong recovery illustrated by the trends detailed on the net sales and income after(prenominal) taxes charts shown in Appendix B-Brief Financial Analysis.Lincoln will have to overcome its limited success in their prior international ventures, evident by the closures of plants in Germany, Japan, Venezuela, and Brazil. Some of this limited success was due to their insufficiency on international experience and a failure to provide assistance, sink or swim bodied attitude. LE might not have been looking at a long-term view and whitethorn have given up on these plants too early. Similar domestic v entures take on the modal(a) seven years before becoming profitable. Additional reasons for early international failures was the lack of contingency preparedness in the form of no corporate turn out, 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 particular proposition countries/cultures.Key elements of the first wave of LEs international ventures are domestic trading operations accounted for 85% of the worldwide production and nearly all new product development until the late 1980s, universal industry 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 president for each of the five neighborhoods, this is a demonstrati on of a new emphasis and focus on the international ventures from LE.In additional to the chief executive officer having a planned oversight into the expansion there will be council consisting of each of these presidents to plan, integrate and implement global strategies. The compensation for these presidents will also include interregional cooperation. Both of these efforts address key Lincoln flunk from there prior international ventures of sink or swim corporate attitude and interregional destructive competition. one(a) final item is that Lincoln realized that in the second wave of international expansion true understanding of a country/culture is as important as technological skills.First, Lincoln essential(prenominal) continue to utilize its successful incentive and management philosophy formula for employees in the U.S. The domestic operations provide the financial/resource foundation or enabler for continued global expansion, but with no passing of focus on the domestic operation. Lincoln should complete a product structure analysis to tally 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 unrest and an uncertain future regimen must be watched and analyzed with great care. A meeting should immediately be setup with the local giving medication to present Lincolns long-term strategy. However, prior to this meeting Lincoln must conduct broad research into the stability, history and any significant background information about the current regimen and so decide how to approach this potentially volatile situation. Also Lincoln must establish contingency plans should the government become a problem and consequently be continuously adjusting these contingency plans as the situation changes.One threat to Lincolns expansion plan to enter the stick 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 entry strategies. Once, the production focus areas are defined Lincoln should develop incentives to ensure cooperation with no destructive competition between regions, interregional management compensation will help.A consistent set of financial metrics must be developed and utilized 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/innovations to comba t obstacles that would prevent success. Another recommendation 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 enounce venture in Indonesia is the best way to enter. Tiras relationship with high level government officials is very 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 strengths. This joint venture must be carefully crafted compensation will be direct as a partnership type between SSHJ and Tira, where incentives dwell to ensure mutual success. An agreement with SSHJ to build a new factory should be completed and support for a low interest 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 amount of ownership allowed by Indonesian law. As mention previously, Lincolns competitive edge is its ability to tap into employee innovative talents and then to quickly implement them. Lincoln should conduct cultural research into what types of rewards apply to the Indonesian culture and then custom 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 intentional incentive reward may be benefits on a rising scale additional spend/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 post reputation/loyalty, and leverage their ability to produce at a lower cost (through its successful innovation processes) and t o break 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 controlling multinational firms do to prevent Lincoln from gaining market share. Finally, Lincolns long-term strategies must be compatible with achievable goals that allow capable time (seven to ten years) to for the Indonesian venture to fully develop profitably.