Harsh Lessons from International Expansion

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In the early 1990s, the period that is focused on the case study, sale of arc welding equipment accounted for around 87% of their $853 million in total sales. As they sold high-value, high-quality products at competitive prices and with outstanding customer service, they were able to make even the corporate giants like General Electric and Westinghouse withdraw from the arc welding business. With such optimum success in their domestic market due to their quality products and efficient work culture or processes, Lincoln electric started having global aspirations in the early 1990s. Factors that triggered the company to take on the foreign expansion Before the initiation of its global expansion plans, Lincoln Electric actually had operations in Canada, Australia, and France. However, all the three functioned independently away from the direct influence of the Lincoln Electric’s headquarters, and so Lincoln was primarily viewed as a U.S. company. Thus, to achieve the tag of a global company, Lincoln started looking for opportunities or situations to arise. It happened first in the early 1980s when the U.S. economy faced a financial slowdown. In order to survive or even succeed in those tough situations, the management put forth the idea of foreign expansion. The main argument was if Lincoln is totally dependent on the domestic market and if that market gets affected by problems like a financial slowdown, it may not have other options to survive and proliferate. Although, this idea was rejected by the top management team particularly William Irrgang, who headed Lincoln from 1965 until 1986, Lincoln had to initiate its foreign expansion plans, when the major Swedish manufacturer of arc-welding products, ESAB started making inroads into U.S. ESAB was already operating in the countries of Latin America and Far East Asia, apart from its home operations in Europe. Then, it suddenly bought two midsize arc welding manufacturers in the United States. This showed that ESAB had global ambitions and importantly wanted to make incursions into the U.S. domestic market, thereby capturing a sizable market share from Lincoln. To check ESAB’s growing influence, Lincoln decided to take the battle to ESAB’s markets in Europe and Latin America. (Hastings 1999). Thus, to avoid over-dependence on the domestic market particularly during tough financial times, to avoid saturation effect in the market, to aggressively compete with its competitor and also to look for potential opportunities in the foreign market, Lincoln decides to launch its foreign expansion plans. Thus, in 1986, after Irrgang died, his successor George E. Ted Willis, dreamed of Lincoln’s becoming a global power. (Hastings 1999). Competitive advantages on which the foreign investments were based As mentioned above, Lincoln was able to garner sizable market share, and achieved the tag of a successful company, mainly because it delivered quality products. They are able to do that by having optimal organizational processes, which was fully complimented by an effective workforce. The workforce was skilled and experienced to come up with innovative and quality products in quick turnaround times. Their efficiency was further optimized by motivation programs, particularly Lincoln’s incentive system. That system combined a bonus with piecework – the practice of paying each factory worker on the basis of how many units he or she produces instead of hourly wages or salaries.