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Lincoln Case

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Marcus Evans

on 17 February 2013

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Transcript of Lincoln Case


Provide high-quality and large quantity of products at competitive price by increasing productivity and efficiency

Work together with employees, managers, and other factories for efficient production and increased profit

Constraint: Laws and regulations imposed by local governments Individual efforts are the key to success and efficiency
Entrepreneurial mindset is promoted
Everyone treated equality
Teamwork between employees and manager (open-door policy; casual relations)
Employees have a sense of ownership Incentive program focuses on individual efforts to maximize efficiency and profits, and having employees work together
Incentive program can be changed by international managers to meet local needs*.
International executive team:
Five regional VPs to oversee sales staff and advise on whether their region needs more manufacturing capacity
VPs meet with CEO every 2 months to go over global strategy and make recommendations
VPs' personal rewards tied to regional profitability and helping increase profitability in other regions.

*Incentive Program does not work well internationally CEO: Massaro VP Asia: Gillespie Outsider brought in for international experience
Focused on international production and entering local markets Outsider brought in for international experience
Trying to adopt incentive program in Asia
Unsure if piecework strategy will work outside U.S. Asia Head of Manufacturing: Bender Recommends using piecework strategy in Indonesia International Ventures Operations in US, Canada, Australia, and France (hesitation to expand internationally) Early History Founded by John C. Lincoln in 1895 in Cleveland, Ohio
Manufactured electric motors and generators
Moved into electric wielders in 1911
Incentive System started by founder's brother
Piecework, focus on quality and quantity
Annual Bonus, based on overall plant profits
Guaranteed Employment
Limited Benefits, but increased pay International Experience A new broom...sweeps clean
Hired experienced, outsiders to fix international problems
Closed several international factories
Changed way factories worked together in trade blocs
Sought to provide help and expertise in international factories and stop sink or swim mentality
Allowed variation on using incentive program abroad Developed World Market Decreased growth
Issues with Unions
Government labor laws and regulatory issues
Differing work/reward attitudes Human Highly efficient employees who feel a strong connection with company
(entrepreneurship, innovation, training, and belief in equality) Technology Technical advantage in automatic welding processes
Efficient manufacturing system
New product R&D centers Capital Factories located throughout the world in profitable markets Market Recognition Recognized as a world leader in welding products
Reputation of producing high quality, inexpensive products Create complete solutions for welding equipment to make customers more productive and successful. Develop an integrated sales and manufacturing strategy that would build on the company's existing relationships with distributors and customers. Grow and maintain world-wide brand reputation to provide high quality products that meet customers' needs Expand global production in order to be more competitive and lower costs Expand Global sales and market penetration To be the world leader in welding equipment, with high quality products and efficient operations. Brand
Manufacturing (insure quality)
Operations & Manufacturing
HR system to support incentive system
M&A or joint venture
Sales and marketing
Global executive management/financial system to support global expansion Brand
Increase market share in developing markets
Build factories or shipping into emerging markets
Enter more high-growth emerging markets
Maintain market presence in developed markets
Target construction and manufacturing customers Brand
Awareness and Loyalty from customers resulting in increased market share in emerging markets and maintain market share in developed markets

Build factories in the developing market

Increase global sales and production Brand
Maintained reputation, awareness, and loyalty in developed market
Seeing increased sales in emerging markets

Global strategy meeting to determine what factories to build

Increased global sales and production by hiring outside personal with international manufacturing experience Emerging World (Indonesia) High Tariffs and Shipping Costs
Rise in regional trading blocs
Market Demand: consumable cost
Growing Market
Very low market penetration
Labor regulations
Competition: low price, low quality consumables
Financial uncertainty and instability
Civil unrest '96 Domestic Market Developed market, high market share
Incentive Program
High productivity, low cost, & Innovation
Highly Competitive Welder: Lester Hillier Entrepreneurial minded employee (poster boy for Lincoln) Founders: John C. and James F. Though they are gone, their presence still lingers... Pay and bonus
Guaranteed employment Promote from within
Hire incentive-able employees
Select leaders with international experience More of Productive
Present ideas, open-door
Days worked
Quality Assurance
No one above others Inputs 1916 - 1955 1988 - 1994 International Expansion into Europe, South America, and Asia (mostly by acquisition)
Lack of international experience caused problems
European economic programs hurt Lincoln's profitability (near to bankruptcy)
Incentive programs were not working in some plants because of employee preferences, unions, and government laws and regulations 1995 - Present VP bimonthly meetings
Representative committee
Equality between managers and employees
Training program Networks Performance measures
Incentive program
Quality control
Communication of needs of different markets Lateral Process Baseball - Individual effort collaborated with company goals
Traditional Manager System Teams Massaro (international-minded) Integrative Roles Power and Authority Reporting Relations Organizational Roles Geographic structure 5 VPs report to CEO every 2 months VP's responsible for sales
VP's help decide where production capacity needs to grow Vision Direction Core Competence To be the world leader in welding with high quality products and efficient operations. Strategic Focus is on Operations to:
Build the Brand
Sales Management and Incentive Program that leads to productivity, low costs, high quality, employee loyalty, and greater sales. Goals Values Behaviors Compensation and Rewards Increase individual employee and company-wide efficiency
Metrics: Low costs, high sales, production output, and number of ideas Output
Ideas and Cooperation
Equality Performance Feedback Staffing and Selection Learning and Development Annual Review, bimonthly VP meeting, merit system Use of networks and lateral processes to create and share ideas. The management's role is to support employees by implementing the merit system, training, and representative meetings. The international thrust failed because management: failed to understand employee preferences of rewards and international laws; provided little formal instructions to individual factories (sink or swim); failed to place constraints on individual factories; and provided no global oversight or coordination for production. Europe
Philosophies against piecework rewards; Preferences for vacation
Laws against piecework rewards
Culture does not prefer offered incentives or the hierarchy-less management style
Bonuses for two years become part of the salary What advice would you give to Mike Gillespie with regard to his Asian expansion strategy and particularly, his plans to expand operations in Indonesia? Incentives
Should implement a modified incentive program
Must comply with the minimum wage law
Should grant smaller quarterly bonuses to meet workers' family needs
Bonus based on profits and productivity of individuals (quantity and quality of production) Entry into Market
Joint Venture with SSHJ
Worked with Lincoln for almost 20 years
Sell almost exclusively Lincoln products already
More professional than Tira
Stronger financially than Tira
Can suffer a short-term loss while building market
Focus on a long-term relationship that will allow SSHJ to build the relationships it currently lacks with the government What is the key to making Lincoln Electric’s system work so well? What is management’s core role? The Incentive Reward Program is the key because it leads to efficiency and productivity in workers, which leads to low cost and high quality. Question 1 Given Lincoln’s past, great success, why did the internationalization thrust of the late 1980s and early 1990s fail? And why did Lincoln’s start-up operations in Japan and Venezuela fail? Operations in Japan failed specifically because workers did not accept the management style or the incentive program.
Operations in Venezuela failed because management did not have experienced to efficiently manufacture products (sink or swim). Question 2 Question 4 Question 3 Question 5 In which countries is the economic system or cultural values too different that the Lincoln system can never work? Massaro provided a geographical structure (5 VP's)
He encouraged global cooperation by providing rewards for company-wide success.
He adjusted incentives to match local values and cultures.
He hired local sales and marketing staffs. How is Massaro’s recent overseas initiative different from Lincoln’s earlier failed approach? Expand into Indonesia
Growing economy
Customers in construction and manufacturing
Competitor's products don't compare to Lincoln's
Shipping and tariffs making importing impractical CASE ANALYSIS QUESTIONS Wanting Fen, Qian Yang, Neal Mansius, Marcus Evans
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