Lincoln Electric

Posted: August 25th, 2021

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Lincoln Electric

Firm Overview and History

Lincoln Electric is a company which traces its origin to 1895 with an initial plan of selling electric motors designed by the owner. The inclusion of the owner’s brother led to the alteration of the business model and diversified to include the production of equipment used in welding, including consumable products for the same purpose. The company growth rate was highest in the period after 1995 when it became not only the leading manufacturer of welding consumables in the United States but also the global leader in that line of business. The company’s success was attributed to innovation which allowed it to sell its products at a premium price. It also had a good track record in terms of human resource management through attractive employee incentives which increased productivity. The company developed policies that ensured the remuneration of employees based on their productivity. It became a leader in human resource, setting standards that would later be adopted by companies across the United States.

            The company’s focused on the creation of an entrepreneurial environment.  Individual employees practiced autonomy in the production of different products. The payment system was such that emphasis was laid on quality and any defects detected had to be rectified. It also built a culture of trust amongst the low-level employees as well as the senior management and in the end, established a no lay-off policy(Siegel). It also placed a huge investment in research and development to come up with new products and methods of welding. The result was the development of equipment in which the company was the pioneer leading to the ownership of several patent rights. Several research and development facilities were set up in different countries to deal with challenges specific to those markets.

Core Competence

The company grew into a broad line manufacturer of arc welding and consumable products. Thus, it placed itself in the market as a provider of solutions to the problems faced by welders as well as a provider of welding products. The company’s integrated packages were attractive both to small scale buyers and professional welding companies, especially when it came to the automated welding systems. The adoption of a good supply chain also ensured that the product reached the intended consumer on time. The prices of the commodities were also set by the company thus protecting the final consumer from exploitation by middlemen (Siegel). In the spirit of diversification, the company started the production of gas cutting and welding equipment in 1990. The company wound up its sale and production of electric motors in 1999 perhaps due to the lack of good performance.

            Lincoln Electric core competence lay in its marketing strategy. With products selling in 86 countries, it attracted customers through the offering of free advice on the use of commodities. They provided adequate training to the distributors and the customers, thus ensuring the highest productivity gains. The end result was that they could sell their products at a premium price. The marketing strategy adopted ensured that the company gained a competitive edge. It prided itself by having a technical sales force and the support provided to the customers by the research and development team. Their representatives would provide hands-on training to customers and make recommendations based on their observations at the ground. The close relationship with consumers assured them of a ready market. It was this ready market that allowed it to invest further in research and development. The result was diversification and the development of more than product lines. It was also responsive to the emerging technological trends. Clearly, Lincoln Electric’s core competence lay in understanding the market and coming up with products to meet specific consumer needs.

Current Strategy

Lincoln Electric current strategy has not deviated from what the company has been doing in the recent past. It is a global strategy that aims to see the company sell in all countries in the world. It has also embarked on looking at its subsidiaries and deciding the ones that are performing well and the ones that need to be shut down. It has also embraced cost optimization strategies to ensure the consumers can easily afford the company’s products (Siegel and Larson). They have recently adopted a structured production system to ensure products meet the standards expected in the industry. Lincoln Electric has adopted a transportation strategy that reduces the cost of transport by storing their raw materials. It has continued to be a company that responds to consumer needs by sending sales representatives to the market to gather the views of the consumers.

Business Challenges

The company has faced huge operating losses as a result of the expansion strategies into several European countries. The cost of setting up operations in these countries was so huge that the company had to borrow money to pay employees during this period. There were also challenges related to trade union activities that were foreign to the executives in the overseas subsidiaries which served as stumbling blocks (Siegel). In addition, the company’s overreliance on the North America market did not allow it to focus on the growing demand in other countries.

Works Cited

Siegel, J. “Lincoln Electric.” Harvard Business Review, 2008.

Siegel, J. I., and B. Z. Larson. “Labor Market Institutions and Global Strategic Adaptation: Evidence from Lincoln Electric.” Management Science, vol. 55, no. 9, 2009, pp. 1527-1546, doi:10.1287/mnsc.1090.1028.