Question 1: What are the reasons behind Lincoln Electric being effective or ineffective?
Reason for the company being effective:
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One of the major reasons for Lincoln company success lies in the methodology the company uses to compensate its employees. The compensation system is based on philosophy of development of one potential through a properly defined incentive system.
This incentive system was first proposed by the company then CEO James F. Lincoln. The system is comprised of four major factor elements. These elements include, wages that come inform of piece out put where an employee is paid according to the amount of work done. Other factors are end year bonus, limited benefits and guaranteed employment.
Another contributing factor credited to the success of the company is the management style and culture. The culture at Lincoln Company creates a spirit of team work between the employees and management.
The management style in the company is aimed at building sense of trust between the management and employees. Open communication in the company enables the employees to freely share their ideas and express their grievances to the superiors.
The company’s financial health is also a factor to the company’s productivity and profits.
Reasons for the company’s ineffectiveness:
Financial troubles: During the 1991 recession in Europe and Japan, saw new companies in these geographical locations make huge loses and effect was responsible for dragging the whole company down.
Another factor is that the compensation system in America did not quite apply effectively in other parts of the world simply because there was difference in culture and ways of operations.
Question 2: How did Lincoln firm achieve competitive advantage?
The company’s innovative management style, culture and effective incentive system contribute majorly to the firm’s competitive advantage. The firm also maintained a significant cost advantage above its competitors in the post world war II period that saw major competitor withdraw fro the market as Lincoln firm dominated (Porter 22).
Question 3: Can Lincoln Company apply the above competitive advantage in a new international context?
The company application of its management styles and incentive system in other geographical set ups will not be successful in gaining competitive advantage. This is attributed to difference in culture and management style practiced in these different countries.
The company top management realized that it could not utilize the American incentive system to other parts of the world because different cultures had different drive to achieve performance. The company can not use the cost advantage either since other international companies have even lower cost in their products than Lincoln firm.
However the company can explore end year bonus to its employees abroad to make employees motivated and work extra hard. This will eventually be a source of competitive advantage to the company.
Question 4: How has Lincoln competitive advantage been effective and why?
Lincoln competitive advantage has enable the company acquire large market share especially in America. It is estimated that Lincoln Company holds 36 percent of a total of 1.5 billion American dollars in welding and equipment supplies making one of the biggest welding company in America.
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This has been possible due to cost advantage utilized by the company that has enabled it gain competitive advantage over its competitors. The company’s culture and management style has enhanced effective communication within the company and encouraged new ideas to be developed.
Lincoln competitive advantage has enabled the firm to expand internationally. The guaranteed employment has been helpful to the company even in times of economic hardship. This technique has enabled the firm to still work effectively without laying off workers.
Porter, Michael. Competitive advantage: Creating and sustaining superior performance. New York: Simon and Schuster Inc, 1985.