Expanding into India by investing in major production facility
Lincoln Electric should expand into India and there are many reasons for that. First of all, if we look at the past 15 years of the growth of India, then it could be seen that India has been an attractive market for Lincoln Electric over the period of past 15 years and the economy of the country has been growing rapidly. The government of the country would also need thousands of new oil and gas pipelines as it has been currently rebuilding its infrastructure. Furthermore, the industry growth of India has been much higher than the country growth rate and India was considered as the third largest welding market in Asia in the year 2006. Therefore, it is recommended for Lincoln Electric to invest in a major production facility in India and expand its operations.
Entry Mode in India and Decision Factors
Lincoln Electric should choose to expand into India through a Greenfield site and the reason for this is that if the company goes for an acquisition then it will most likely pay more than it has paid in the past (Eicher, 2003). Furthermore, if the company goes for a joint venture then there might be issues with competitors and family control. The South East Asian market values the Lincoln brand and the company could penetrate the Indian market by establishing a strong manufacturing facility. In addition, if the company wants to be successful with its Greenfield site plan then it will have to change the incentive plan which should be more similar to the Indian labor market. The company will also have to be agile with the demands of the Indian environment as a company and adapt itself to the Indian corporate culture.
Along with this, there are many significant factors that should be considered by the company before entering the Indian market. The management of the company needs to perform a detailed risk/benefit review of the economic and the political conditions of India, the competitive situation of the market and the nature of the market. The economy of India is blooming and the political situation is stable therefore, Lincoln would be taking a calculated risk by investing in India.
Another important decision factor is the financial condition of the company and if we look at the financial statements performance and specific regional ratios of the company since 1994 (exhibits), then it could be said that the company is financially sound to undertake the planned expansion. The company also needs to consider what additional capabilities it will need to create in India. For instance, the company might be able to grow the Indian market through exports from other countries of the world however; it will also need to add new manufacturing capabilities in India also so that it can position itself in the new market. This is necessary because it is going to result in lower costs for the company, creation of a competitive advantage when the manufacturers of the India ask for more sophisticated technologies of India such as welding robots and automation. The company can also set more competitive prices of its welding supplies.
Lincoln Electric’s expansion in countries
Lincoln Electric has been most successful in United States and there are many aspects for the company on which this success is based upon. The first aspect is that the board of the company follows a decentralized approach to management. The company encourages face to face communication on a regular basis and the company has maintained an open-door policy for its production workers, middle managers and top executives.
If the work practices and the compensation rates seem to be unfair, then the workers are also able to challenge the management (Anthony, 2007). According to (Daft, 2010), all the decentralized organizations use open-book management and all the employees are aware with the financial condition of the company. Therefore, the concept of open book management helps the employees of the company to take more interest in the organizational activities as they clearly understand how their activities affect the business goals of the organization. Therefore, Lincoln Electric is most likely to be successful in these type of countries where all these factors exist and decentralized and open book management practices are followed......................
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