Lincoln Electric: Venturing Abroad
1. How was Lincoln able to grow and prosper for so long in such a difficult commodity industry that forced out other giants such as General Electric, Westinghouse, and BOC? What is the source of Lincoln’s outstanding and enduring success?
Don't use plagiarized sources. Get Your Custom Essay on
Lincoln Electric: Venturing Abroad
Just from $13,9/Page
Lincoln Electric was able to grow and prosper in such a difficult industry, because of their groundbreaking incentive program. It was a system that awarded annual bonus to efficient employees based on the amount and quality of their piecework.
In addition, there was a guaranteed employment policy and a system of limited company-paid benefits. Lincoln Electric believed that with these incentives, the employees were more likely to be self-motivated, and more content in their position. They believed in the value of the individual, and the potential they had to better the company- and they were correct. Lincoln Electric was able to force other companies out of the industry and continue with their successful operation. This is because their employees had a greater output per hour than their competitors.
Lincoln Electric placed more attention on recruiting good workers, rather than cutting jobs and costs, and it worked seamlessly through the mid 1980s. At this point in time, they were holding 36% of the $1.5 billion U.S. market for welding equipment and supplies, and were financially sound to expand internationally.
2. Given this outstanding success, why did the internationalization thrust of the late 1980s and early 1990s fail? Despite Lincoln Electric’s prosperous time, they failed during the late 1980s and early 1990s due to a variety of factors. The rapid international growth greatly decreased stockholders equity by over $80 million over a two-year period, and an even steeper drop in cash as long-term debt increased to an astonishing $217 million. This was mainly because they attempted to apply American standards in France, Australia, and Canada.
This management style and culture simply did not match up, and it directly affected the company’s performance. This caused much distress among the foreign workforce, and as a result, unions formed and the workers became less productive as a whole. They stopped responding to the incentive program, and focused more on fighting for hourly wages and holiday compensation. In addition, since the management was made up of inexperienced, local workers, their supervision was distant and not engaging. Another negative factor was the global recession. It was a time of overpriced goods and services, and Lincoln Electric definitely felt the negative repercussions in their operations. They were force to rethink their strategy to adapt to these new cultures.