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Lincoln Electric Venturing Abroad Case Solution
Lincoln Electric had been immensely successful because of its innovative strategies in technology and management. The amalgamation of the two put it in a situation where it overtook giants in the electronics industry such as General Electric and BOC. Its success story, however, was not so successful internationally. Lincoln’s first attempt to expand in Europe failed because the management strategies that had worked at the headquarters did not work in the European subsidiaries. The incentive approach was not suitable for the culture of the employees in Europe. The incentive strategy had been the star of its management innovativeness and the basis of its success. The new CEO later realized that this strategy could not be implemented in all situations. Lincoln had to adapt its strategies according to the international norms.
Following questions are answered in this case study solution
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?
Given this outstanding success, why did the internationalization thrust of the late1980s and early 1990s fail?
What is your evaluation of the company’s internationalization strategy under Tony Massaro’s leadership? Is it likely to be more successful than the previous offshore initiatives? If so, why?
Should Lincoln go ahead with its investment in Indonesia? If so, what should beits entry strategy with respect to partnerships? Which compensation option would you recommend to Mike Gillespie as he considers the advisability of implementing the company’s incentive management system?
Case Analysis for 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?
The major source of the success of Lincoln Electric was its innovativeness. In the initial stages of the company, two innovations that were complementary to each other served to make the company flourish. It is because these innovations were complementary, did the company succeed in its initial years. The company’s foundation was built in 1895 when other companies were still emerging in terms of technology. The second source of success came into the company when John Lincoln’s, the founder of the company’s brother, James joined the company. He joined in 1907 and introduced efficient administration and management in the company that complemented the technical innovativeness of the company. His incentive management policy was innovative and gave the company strategic benefits.
The technical innovativeness continued to bring success to the company from its initial years to its 100 years of existence. It grew in both technical innovation and organizational development and adjusted with the developing technological and organizational market. It adjusted its incentive system accordingly and introduced new policies that improved the communication between the workers inculcating success. Therefore, this integration of technological and organizational development innovations developed a synergy for the company acting as a booster for its success.
2. Given this outstanding success, why did the internationalization thrust of the late1980s and early 1990s fail?
In the 1980s and the 1990s, the company expanded internationally to Europe. However, this internationalization effort failed because of several mistakes that the company made in the new acquisitions. Despite the outstanding success, the mistakes overpowered the company’s competitive advantage and success. In Europe, the acquired plants were implemented with the incentive-based system. The workers in these plants were not used to working under the incentive system. Culturally differing, for the workers and managers in the European plants, the vacation time was more precious than the extra salary earned from incentives. This meant that the incentive system was not valued by the employees, and this was not an effective strategy for the European market.
One other mistake that the executives made was giving less attention to the subsidiaries. As a result, the structure became decentralized, and the subsidiaries could not be controlled and the collaboration between the plants was low. The prediction was that the incentives offered to the employees would be able to increase productivity along with the financial problems arising. After it had been realized that there were problems in the European subsidiaries, the decision was made to develop a strategic liaison team that would function in doing the analysis of the foreign subsidiaries. In this situation, the team that was formed to analyze the operations consisted only of Cleveland-based managers instead of those who had an idea about the European operations, these mistakes combined, led to the failure of Lincoln’s internationalization efforts.
3. What is your evaluation of the company’s internationalization strategy under Tony Massaro’s leadership? Is it likely to be more successful than the previous offshore initiatives, if so, why?
Tony Massaro held substantial experience of working internationally. Given this, he was the company’s first CEO to have such extensive international experience. Under his leadership, the internationalization was far more successful than it had been in the 1980s and the 1990s. The focal point of his international strategy was global efficiency. This meant to give a fresh start to the company and to develop a new structure. He divided the location into five regions. Each region had a president overlooking the operations there and collaborating with others. This changed the company from being decentralized to centralize.
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