• Founded in 1895 by John C. Lincoln• World largest manufacturing of arc

welding products• A leading producer of industrial electric

motors• Headquarters: Cleveland, Ohio, US.• 11 factories located overseas• Public Company• Company’s US. market share > 40%

PROFILE

1 How would you characterize Lincoln Electric’s strategy?

In this context, what is the nature of Lincoln’s business?

Upon what bases does this company compete?

STRATEGY (CORPORATE-LEVEL STRATEGY)

Products:• Arc-welding equipments• Electric motors• Plasma and oxy-fuel cutting equipment• Robotic welding systems• Welding power sources• Wire feeding systems• Fume extraction equipment• Consumable metal electrodes and fluxes

Related Diversified

STRATEGY (CORPORATE-LEVEL STRATEGY)

Subsidiary:The Harris Products GroupManufacturer of:• Welding Consumables,• Gas Apparatus, and• Other Specialty Products.

Related Diversified

STRATEGY

LOW COST ORIENTED:• Cost minimization

o Maximize outputs using minimum inputs• High productivity of labor forces• High efficiency in production process

o No unnecessary stepso Reduce wasted motionso reduce wasted materials

• Still maintain & improve quality

NATUREBusiness:o Industrial manufacturing company

(Manufacturer of capital goods = arc welding)o Publicly ownedWorking Conditions:o Fair treatment among employeeso High cooperation & teamworko High worker productivityo Compensation management plan

• Short term: individual incentive bonus• Long term: retirement program, medical plan

LINCOLN’s COMPETING BASES

1. Quality of productsCompetition increases the quality of arc-welding products.

2. Price of products • Producing arc-welding products at low

costs compare to its competitors.• Market: highly price competitive

(price variations=1% or 2%)

Goal: “to build better an better product at a lower and lower price”

It competes the competitors on the bases of:

2 What are the most important elements of Lincoln’s overall approach to organization and control that help explain why this company is so successful? How well do Lincoln’s organization and control mechanism fit the company’s strategic requirements?

IMPORTANT ELEMENTS OF SUCCESFULNESS

“The excellent attitude of the employees and their willingness to work harder, faster, & more intelligently than other industrial workers”

o The efficiency of operations generating a competitive advantage over the market (low price, good quality)

o Superiorness over competitors Existing and potential competitors are not able to produce at the same products at low costs lead to high market share

IMPORTANT ELEMENTS OF SUCCESFULNESS

Company = Motivator for the employees no layoff since world war II higher salary received compare to other companies in Cleveland continuous compensation system

Worldwide manufacturing capability (11 factories overseas) increase revenues

IMPORTANT ELEMENTS OF SUCCESFULNESS

Commitment to quality Efficient distribution system

“materials were stored as close as possible to the workstation”

Responsiveness towards customers’ demands

LINCOLN’S ORGANIZATION & CONTROL MECHANISM TO STRATEGY

VERY WELL.. Tasks are precisely defined no

overlapping duties productive To achieve the top pay individual

employee’s must accomplish good performance

Tight cost control to reduce cost & raise productions

LINCOLN’S ORGANIZATION & CONTROL MECHANISM TO STRATEGY

VERY WELL.. Rating cards system include

performance criteria that the company wants its employee to achieve.• Quality• Dependability• Ideas & cooperation• Output

LINCOLN’S ORGANIZATION & CONTROL MECHANISM TO STRATEGY

Employee have to buy the Stock in BV price increase the stock price working hard

3 What is the corporate culture like at Lincoln Electric?

What type of employees would be happy working at Lincoln Electric?

CULTURE

Open line communication and trust Customers the most important Shared control, and Knowledge shared High cooperation and teamwork Fight against deception

Type of Employees

Hard working employees Employees seeking for high salary Employees who are kind to learn

and share knowledge Innovative employees

4 What is the applicability of Lincoln’s approach to organization and control to other companies?

Why don’t more companies operate like Lincoln?

APPLICABILITY LEVEL

It is hard to apply Lincoln’s approach to other companies

WHY?• Hard to find productive labor forces• Not suitable for small enterprises

(with low & unstable income ) high & stable income is needed for the compensation plans

5 What could cause Lincoln’s strategy implementation approach to break down?

What are the threats to Lincoln’s continued success?

UNPROPER IMPLEMENTATION APPROACH

Wages given are not in pieces rate low productivity

Incentives given are not based on employees’ accomplishment (unfair) low productivity

Tight authorization line (less flexibility) no open door policy lower level employees are less motivated to propose innovations & suggestions

Threats

• New innovation found by competitors slow down the business its shown with Nippon steel

• Input prices volatility higher production cost

• Input shortage • U.S economic slowdown

• Low income no money for incentives• Employees’ layoffs

6Would you like to work in an

environment like that at Lincoln Electric?

WORKING IN THE ENVIRONMENT LIKE LINCOLN

YES, I WOULDWHY?• High Salary• Give a fair incentive system based on

performances• Suggestions are respected “point”• Ideas & Initiatives are accounted• Give long term compensation

(retirement fund, life insurance)• Good working atmosphere knowledge

shared, high cooperation

WORKING IN THE ENVIRONMENT LIKE LINCOLN

YES, I WOULDWHY?• Piecework pay system Fair• On the job training• Portion of annual profits was distributed

as bonuses• 2 weeks vacations• Stock ownership program