PROFILE

• 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%
 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)
 Related Diversified
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

 STRATEGY
(CORPORATE-LEVEL STRATEGY)
 Related Diversified

Subsidiary:
The Harris Products Group
Manufacturer of:
• Welding Consumables,

• Gas Apparatus, and

• Other Specialty Products.

 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 steps
o Reduce wasted motions
o reduce wasted materials
• Still maintain & improve quality
 NATURE
Business:
o Industrial manufacturing company

(Manufacturer of capital goods = arc welding)

o Publicly owned

Working Conditions:
o Fair treatment among employees
o High cooperation & teamwork
o High worker productivity
o Compensation management plan
• Short term: individual incentive bonus
• Long term: retirement program, medical plan
 LINCOLN’s COMPETING
BASES
It competes the competitors on the bases of:
1. Quality of products
Competition 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”
 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
 6
Would you like to work in an
environment like that at Lincoln
Electric?
WORKING IN THE ENVIRONMENT
LIKE LINCOLN
 YES, I WOULD
WHY?
• 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 WOULD
WHY?
• Piecework pay system  Fair
• On the job training
• Portion of annual profits was distributed
as bonuses
• 2 weeks vacations
• Stock ownership program