Lincoln Electric Venturing Abroad
Lincoln Electric
Executive Summary
Michael Gillespie, The Lincoln Electric Company’s new president for the Asia Region, was “encouraged to develop plans to open welding consumables factories in several Asian countries” by the new CEO, Anthony Massaro, and Gillespie had specifically “turned his attention to plans for Indonesia [O’Connell,[1] main reference, p 1].” We worked with Gillespie to prepare for the September 1996 meeting with Massaro and the presidents of the other worldwide regions. We analyzed Lincoln’s current capabilities and its past experiences and prepared a transformative plan based on business concept innovation [Hamel[2], ch 3], documented by this report, with a three pronged approach for the Asia Region. The first prong would be to execute Massaro’s strategy, to grow revenue in the less-developed countries, by building a factory in Indonesia in a joint venture with SSHJ as a pilot step, to be followed by further expansion to other South East Asian countries, and to China. The second prong would be to build on Lincoln’s strengths as an organization, including its technical innovativeness and incentive system and its people, to prepare Lincoln for the expansion effort ahead. The third prong would be to extend Lincoln’s competencies to the level of a living system [Senge[3], ch 12] that learns, from the Asia Region expansion experience and from all aspects of its future existence, how to grow sustainably [Kaplan[4], ch 4].
Current Status
Lincoln was financially sound at this time to undertake the planned international expansion. After having been remarkably successful for nearly a century of existence, Lincoln started to slide in 1988 toward bankruptcy with a steep drop in cash from $61 million to $23.9 million, with $17.5 million from long term debt [p 19]. Return-on-sales dropped from 6.2% in 1987 to 1.7% in 1991 [Exhibit A. Financial Ratios]. Similarly, return-on-equity and return-on-assets, respectively, dropped from 13.5% and 9.4% in 1987
Executive Summary
Michael Gillespie, The Lincoln Electric Company’s new president for the Asia Region, was “encouraged to develop plans to open welding consumables factories in several Asian countries” by the new CEO, Anthony Massaro, and Gillespie had specifically “turned his attention to plans for Indonesia [O’Connell,[1] main reference, p 1].” We worked with Gillespie to prepare for the September 1996 meeting with Massaro and the presidents of the other worldwide regions. We analyzed Lincoln’s current capabilities and its past experiences and prepared a transformative plan based on business concept innovation [Hamel[2], ch 3], documented by this report, with a three pronged approach for the Asia Region. The first prong would be to execute Massaro’s strategy, to grow revenue in the less-developed countries, by building a factory in Indonesia in a joint venture with SSHJ as a pilot step, to be followed by further expansion to other South East Asian countries, and to China. The second prong would be to build on Lincoln’s strengths as an organization, including its technical innovativeness and incentive system and its people, to prepare Lincoln for the expansion effort ahead. The third prong would be to extend Lincoln’s competencies to the level of a living system [Senge[3], ch 12] that learns, from the Asia Region expansion experience and from all aspects of its future existence, how to grow sustainably [Kaplan[4], ch 4].
Current Status
Lincoln was financially sound at this time to undertake the planned international expansion. After having been remarkably successful for nearly a century of existence, Lincoln started to slide in 1988 toward bankruptcy with a steep drop in cash from $61 million to $23.9 million, with $17.5 million from long term debt [p 19]. Return-on-sales dropped from 6.2% in 1987 to 1.7% in 1991 [Exhibit A. Financial Ratios]. Similarly, return-on-equity and return-on-assets, respectively, dropped from 13.5% and 9.4% in 1987
References: [2] Hamel, G. (2002) “Leading the Revolution,” Harvard Business School Press. [3] Senge, Peter. (2006) “The Fifth Discipline,” Second Edition, Doubleday. [4] Kaplan, D. and Norton, R. (2006) “Alignment”, Harvard Business School Press. [6] Drucker, PF (1985) “Innovation and Entrepreneurship,” HarperCollins Publishers. [7] Senge, Peter. (2006) “The Fifth Discipline,” Second Edition, Doubleday. [9] Alavi, M. and Leidner, DE. (2001) “Review: Knowledge Management and Knowledge Management Systems: Conceptua Foundations and Research Issues”, MIS Quarterly, Vol. 25, pp 107-136.