Lincoln Electric Co. Essay

1065 words - 4 pages

Success of Lincoln ElectricLincoln views itself as predominately a manufacturing firm. The company has endured for more than 100 years in a highly competitive industry by keeping prices low. It also provides excellent technical service. From it's beginning, Lincoln has focused on developing administrative and operational procedures to achieve high efficiency without degrading quality. The development of the company's routines was based on substantial practical knowledge about the details of effective interpersonal relationships in a piece-rate system. These aspects of the organization's culture are not easily replicable by other firms. For example, it would be difficult for another organization to replicate the cohort of senior workers that serve as role models for younger employees. The success of Lincoln Electric has been built on two basic ideas. One is producing more and more of a progressively better product at a lower and lower price for a larger and larger group of customers. The other is that an employee's earning and promotion are in direct proportion to his individual contribution toward the company's success.Business StrategyLincoln Electric's strategy was simple and unwavering. Their strategy was to concentrate on reducing costs and passing the savings through to the customer by continuously lowering prices. Management had adhered to this policy even when products were on allocation because of shortages in productive capacity. The result had been an expansion of both market share and primary demand for arc welding equipment and supplies over the past half century. Lincoln's strategy had also encouraged the exit of several major companies (including General Electric) from the industry and had caused others to seek more specialized market niches. Management believed its incentive system and the climate it fostered were responsible in large part for the continual increase in productivity upon which this strategy depended. Under the Lincoln incentive system, employees were handsomely rewarded for their productivity, high quality cost reduction ideas, and individual contributions to the company. Management felt it had achieved an enviable record in following this strategy. Welding machines and electrodes were like razors and razor blades. A Lincoln welding machine often had a useful life of 30 years or more, while electrodes (and fluxes) were consumed immediately in the welding process. Although certain competitors might meet Lincoln's costs and quality in selected products, management believed that no company could match the line overall. Another important competitive edge for Lincoln was its sales force. Most competitors operate through distributors. But Lincoln has its own top field sales force. The sales force prides itself on working more hours than anyone else and paid a salary plus bonus. It has a unique process in manufacturing. Management was continually evaluating opportunities for backward integration and had not arbitrarily...

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