Lincoln Electric Analysis
Lincoln Electric-Analysis
Submitted by: Rahul Agarwal
1. Put yourself in CEO John Stropki's shoes. Should Lincoln Electric expand into India by investing in a major production facility there?
Ans. An Indian expansion through an investment in the major production facility is the most logical step for Lincoln Electric in pursuance of its long term strategic goals. The company needs to be free from its dependence on North American sales; the sales in the North American markets are stagnant whereas other markets especially the Asian markets are growing significantly faster. Its long term financial targets which include sales growth double the rate of growth in worldwide industrial production, operating margins over 15%, earnings growth of 10% annually and return on Equity greater than 20% can only be achieved through significant presence in the fastest growing economies viz. China and India. The company already has significant presence in China and an expansion into the Indian market is especially promising for the following reasons: * Real average GDP growth of almost 6% making it one of the fastest growing economies in the world. * Its 2005 project market of $415 million was 80% of the all the countries of Latin America and greater than all Eastern European countries. * It is projected that in 50 Yrs the country would be fastest growing economy in the World * India has significant infrastructural needs and currently the country is rebuilding its oil and gas pipeline infrastructure and therefore needs thousands of miles of new oil and gas pipelines. * India’s welding market was also the third largest in Asia. * Industry growth rate was even higher than the country’s growth rate because of India’s recent focus on construction and infrastructure projects. * One of the major competitors already has a significant presence in India 2. If you were to expand into India, would you enter through acquisition, a greenfield site, or
Submitted by: Rahul Agarwal
1. Put yourself in CEO John Stropki's shoes. Should Lincoln Electric expand into India by investing in a major production facility there?
Ans. An Indian expansion through an investment in the major production facility is the most logical step for Lincoln Electric in pursuance of its long term strategic goals. The company needs to be free from its dependence on North American sales; the sales in the North American markets are stagnant whereas other markets especially the Asian markets are growing significantly faster. Its long term financial targets which include sales growth double the rate of growth in worldwide industrial production, operating margins over 15%, earnings growth of 10% annually and return on Equity greater than 20% can only be achieved through significant presence in the fastest growing economies viz. China and India. The company already has significant presence in China and an expansion into the Indian market is especially promising for the following reasons: * Real average GDP growth of almost 6% making it one of the fastest growing economies in the world. * Its 2005 project market of $415 million was 80% of the all the countries of Latin America and greater than all Eastern European countries. * It is projected that in 50 Yrs the country would be fastest growing economy in the World * India has significant infrastructural needs and currently the country is rebuilding its oil and gas pipeline infrastructure and therefore needs thousands of miles of new oil and gas pipelines. * India’s welding market was also the third largest in Asia. * Industry growth rate was even higher than the country’s growth rate because of India’s recent focus on construction and infrastructure projects. * One of the major competitors already has a significant presence in India 2. If you were to expand into India, would you enter through acquisition, a greenfield site, or