CASE 2 Lincoln Electric;Venturing Abroad FAN Libo
CASE 2 Lincoln Electric; Venturing Abroad FAN Libo
Case structure The case begun with a brief introduction of the trigger issue,which questions whether Mike Gillespie, president of Lincoln Electric's Asia region,should invest in a new factory in Indonesia.More specifically, it questions whether should consider transferring Lincoln's unique incentive system of management to such an operation. The case then presents a broad overview of Lincoln Electric company,its historic development,and its outstanding long-term performance.In particular,it focuses on the unique management philosophy that has been built around the incentive system of piecework, bonuses,and quranteed employment
Case structure The case begun w ith a brief introduction of the trigger issue, which questions whether Mike Gillespie, president of Lincoln Electric’s Asia region, should invest in a ne w factory in Indonesia. More specifically, it questions whether should consider transferring Lincoln’s unique incentive system of management to such an ope ration. The case then presents a broad overview of Lincoln Electric company, its historic development, and its outstanding long-term performance. In particular, it focuses on the unique management philosophy that has been built around the incentive system of piecework, bonuses, a nd quranteed employment
The next section of the case documents the company's experience in overseas expansion,describing how long- established operations in Canada,Australia,and France have successfully adopted the Lincoln's incentive-based management model. However,the new wave of international expansion in the late 1980s and early 1990s,has wun into major difficulties.For the first time in its history,Lincoln has begun losing money,and the board saw the need to replace the CEO and bring in new management under the leadership of Tony Massro,Lincoln's first out side CEO
The next section of the case documents the company’s experience in overseas expansion, describing ho w longestablished operations in Canada, Australia, and France have successfu lly adopted the Lincoln’s incentive-based management mod el. How ever, the new wave of international expansion in the late 1980s and early 1990s, has wun into major difficu lties. For the first time in its history, Lin coln has begun losing money, and the board sa w the need to replace the CEO and bring in ne w management under the leadership of Tony Massro, Lincoln’s first out side CEO
Finally,Massaro and his team decide it is time to renew overseas expansion based on having learned from Linclon's previous failure abroad. In particular,the case focuses on the activities in Asia and concentrates on the entry decision into Indonesia
Finally, Massaro and his team decide it is time to renew overseas expansion based on having learned from Linclon’s previous failure abroad. In particular, the case focuses on the activities in Asia and concentrates on the entry decision into Indonesia
Learning purpose This case can be used to develop a number of central learning purposes including the following: To demonstrate the development of strategic advantages through building of organizational capability. To illustrate the power of strategy-structure fit by providing an excellent illustration of how the tight alignment of Lincoln's strategy,organization,system,processes,and culture create an international capability that has provided it with a sustainable source of competitive advantage. To illustrate the motivations,mentalities,and means of internationalization
Learning purpose This case can be used to develop a number of central learning purposes including the following: To demonstrate the development of strategic advantages through building of organiz ational capability. To illustrate the pow er of strategy-structure fit by providing an excellent illustration of how the tight a lignment of Lincoln’s strategy, organiz ation, s ystem, processes, and culture create an international capability that has provided it w ith a sustainable source of competitive advantage. To illustrate the motiv ations, men talities, and means of internation aliz ation
Assignment Questions 1.How was Lincoln able to grow and prosper for so long in such a difficulty industry that forced out other giants such as GE,Westinghouse,and BOC?What has accounted for Lincoln's outstanding and enduring success in US? 2.Given the great success,why did the internationalization thrust of the late 1980s and early 1990s fail? 3.What do you think of Lincoln's emerging international strategy by the mid-1990s?Does this company have a competitive advantage that can be transferred to the global environment? 4.What advice would you give to Mike Gillespie with regard to his Asian expansion strategy,and particularly, his plans to expand operations in Indonesia?
Assignment Questions 1. How was Lincoln able to grow and prosper for so long in such a difficulty industry that forced out other giants such as GE, Westinghouse, and BOC? What has accounted for Lincoln’s outstanding and enduring success in US? 2. Given the great success, w hy did the internationaliz ation thrust of the late 1980s and early 1990s fail? 3. What do you think of Lincoln’s emerging international strategy by the mid-1990s? Does this company have a competitive advantage that can be transferred to the global environment? 4. What advice w ould you give to Mik e Gillespie with regard to h is Asian expansion strategy, and particularly, his plans to expand ope rations in Indonesia?
Assignment question I Management .Monitoring the Strategy Culture norms incentive system .Lower cost manufactory .Worker consultations .Low overhead by .Open communication leveraging fixed assets Shared Values .Belief in the individual .Sharing rewards .Equality for everyone Staff .Recruit self-motivated HR Policies hard work .Guaranteed employment ·Encourage support .Limited benefit Individual initiate Incentive System .Piece work salary •Annual bonus
Assignment question I S h ared Values •Belief in the individual •Sharing rewards •Equality for everyone Inc e ntive S ystem •Piece work s alary •Annual bonus Staff •Recruit s elf-moti vated hard work •Encourage support Individual initiate Culture n orms •Worker consultations •Open communication Management •Monitoring the incentive s y s tem HR Policies •Guaranteed emplo yment •Limited benefit Str ategy •Lower cost manufactory •Low overhead b y leveraging fixed assets
The Lincoln Electric Model Strategy Incentive System People -low-cost producer .Piecework Recruit self-motivated hard workers -lower overhead by leveraging fixed Bonus .Encourage, support individual assets initiative Values Belief in the individual Sharing rewards-employees customers,shareholders Egalitarianism Culture/Norms Management HR Policies .Worker consultation Monitoring the incentive system .Guaranteed employment Open communication Ensure fairness,maintain trust Self-funded benefits
The Lincoln Electric Model Strategy ·low-cost producer ·lower overhead by leveraging fixed assets Incentive System ·Piecework ·Bonus People ·Recruit self-motivated hard workers ·Encourage, support individual initiative Culture/Norms ·Worker consultation ·Open communication Management ·Monitoring the incentive system ·Ensure fairness, maintain trust HR Policies ·Guaranteed employment ·Self-funded benefits Values ·Belief in the individual ·Sharing rewards-employees ·customers, shareholders ·Egalitarianism
McKinsey Co's 7S framework Structure Strategy Systems Shared Values Skills Style Staff
McKinsey & Co's 7S framework
Understanding Incentive system According to Exhibit 9: Why is the incentive-compensation system so critical in a company where labor represents only 2%of the manufacturing cost? Why is a managerial improvement in a labor productivity so important for a commodity product?
Understanding Incentive system According to Exhibit 9: Why is the incenti v e-compensation sy s tem so critical in a company w here labor represents only 2% of the manufacturi ng cost? Why is a managerial i mprovement in a labor productiv ity so important for a commodity product?
