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Case#2: Lincoln

Electric: Venturing
Abroad
With an effective and well-established, albeit
abnormal, business model driving a consistently
successful and profitable domestic business,
Lincoln Electric was determined to gain
worldwide market share in the welding
equipment and consumables industry by
venturing into the developing markets of Eastern
nations. International management correctly
identified Indonesia as a logical point of entry for
the Eastern markets. The nation’s construction
and manufacturing industries were growing
rapidly (12.4% and 11.0%, respectively, in 1996),
and Lincoln Electric already had an established
reputation for producing a high quality product.
The future success of the company in the
developing nations of the East hinged heavily on
how Michael Gillespie, president of the Asia
region, would plan and execute his entry strategy
into Indonesia.

Jason Sansoucie
10/24/2009
INTB 6200 FA2 L

1 Lincoln Electric: Venturing Abroad. Partnering with SSHJ.geert- hofstede. Vietnam. or all. the company would have considerable growth potential if it were to manufacture consumables in a local. The potential growth and earnings for this partnership was significant. and China. SSHJ had the product knowledge and expertise needed to shift the Indonesian welding market to Lincoln Electric. Gillespie must acknowledge that the collectivistic people of Indonesia may not blindly accept a compensation plan heavily weighted by individual achievement. was typically known for being a collectivistic culture2. in turn. In a market where stick welding was prevalent. Lincoln Electric can re-assess the potential risks/rewards associated with implementing some. of its domestic compensation plan’s techniques. Having primarily distributed Lincoln products for 20 years in Singapore. and would allow the partnership to expand its focus to the other developing Eastern nations in which SSHJ distributed Lincoln’s products (such as China). a successful joint venture between these two companies in Indonesia would be the branding Lincoln needed in order to gain market share in the Eastern bloc. Moreover. in a joint venture would prove to be the most effective entry strategy for Lincoln Electric into Indonesia. By utilizing a more traditional management approach and compensation system. Northeastern University. . due to local import tariffs. Lincoln Electric only manufactured 1% of stick welding consumables1. the company should be able to gain the trust and respect of the workforce. Indonesia. 2 Geert Hofstede Cultural Dimensions. Previously. 2002. This. like other Asian countries. low-cost facility. would allow for the company to market and bring exposure to its higher-margin welding equipment. SSHJ had the local industry knowledge and government contacts that Gillespie’s marketing manager deemed “essential” in maintaining some level of stability and support in what some believed to be an unstable economy. Lincoln Electric received varying levels of success with regards to its unique compensation plan from its foreign employees. Over the years. SSHJ also had the financial strength (and confidence in Lincoln’s business strategy. Ivey School of Business. Once this is accomplished.com/hofstede_indonesia. which had been displayed previously when Sin Soon Huat had voluntarily takes losses for Lincoln to enter new markets) to invest in a new manufacturing facility. a subsidiary of Sin Soon Huat.shtml. Clearly. Burma. http://www.