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Lincoln Electric Company Case study

Cultural differences in modern companies conditioned the international strategy – Lincoln Electric Case study

Is very important understand and adapt our company to these countries if we have a good result in a future.

1) In which countries is the economic system or the cultural values too different that the Lincoln system can never work? The cultural and social differences of the countries where they operate companies such as, Lincoln, makes you rethink the system must adapt to economic conditions and laws of each territory.

The reward system created by Lincoln based on piecework, is a system that motivates the employee but depending on the country may be illegal by existing legislation. For example, in Canada this system had to be adapted to Canadian law: paid leave, however, assured the job was never introduced.

In France, the system was adapted to the requirements of the law or the rules of French industry: paid leave, health insurance, …) There are other cases, for example, Brazil that the bonus can not be paid for two consecutive years and is meant as an acquired right or Germany where it is illegal to pay for piecework.

Differences in legal matters affecting our management model, so it is advisable to use different tools for identifying the general environment and intermediate, for example: PEST Analysis Five Forces

In order to develop strategies to adapt to settle in before the country and prevent further problems. In the words of Massaro was that he wanted to impose the form of Lincoln’s work in all sites without adapting to local requirements.

But not only the legal or political differences pose barriers to operating in a country, religious matters, cultural pose in some cases significant changes in the design of facilities, schedules, etc. We must remember the case of Arab countries where shops must have many doors: for men and women, or prayer times where you should close the store during that time.

2) How is Massaro’s recent overseas initiative different from Lincoln’s earlier failed approach? Massaro’s entrance into the company was a major change in orientation in relation to the traditional policy of Lincoln, introducing criteria of rationality and efficiency. Upon his arrival he found an organization balkanized; to be cases of overproduction in some plants or weak in others. With the EU Schengen agreement which allows free movement of capital, people and goods redesigned the company’s strategy for Europe. But in South America, Venezuela and Brazil, met with various problems.

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One of the first decisions taken was to replace directors who had by others who knew the company philosophy and implement it there. One of the major reforms that Massaro and Elliot did was restate the company’s international strategy. In Europe, a study of the costs of each plant, implementing a uniform system of internal audit that would enable them to analyze the different plants (because each plant had its own system) and it was the decision to eliminate jobs, a policy was never taken. In 1994, IG Metals closed firing a total of 464 workers in general in Europe fired a total of 200 workers involved in the production (administrative).

But the revolution not only stayed there Massaro: streamlining the organization of Lincoln Europe was also related to the products, adapting their products to European tastes and shifting the production, for example, a product manufactured in Europe that made in U.S. to reduce costs, and the bonus system was adapted himself to Lincoln in order to achieve cooperation among all plants, establishing a system of pan-European achievements. In America, the NAFTA treaty, there was also a rationalization of production at the plant in Mexico, as was the case with Canada years ago. Plants were closed in Brazil, Venezuela and Japan, causing a total of 120 dismissals

3) Having built the plant, what kind of management system and compensation policies should Gillespie put in place? The construction of a new plant in Indonesia was a new challenge for Lincoln: the unique characteristics of Indonesian policies, cultural differences

I had to make a decision: Does the system of remuneration of Lincoln? Adapt to the customs “Indonesian? Or System Change? This question will respond to the decision taken by Gillespie and that we would have proposed. The decision was not casual, as reflected in the text, the analysis made in the general environment, offering competitive advantages, such as an untapped market, low labor costs,… but on the other hand, the political situation – in the hands of dictator Suharto-energy policy in the hands of the dictator also. But the rapid growth of the Indonesian economy tipped the balance towards the installation of the factory in Indonesia.

The strategy of entry into the country had to give Lincoln the control and the rights of the profits, for this joint venture option, which allows access to local agents who have a more direct with people from government, administration and potential buyers. These contacts were important for Gillespie in the early stages of implementation in the country. There was in that first moment two possible partners to join with them in two different ways of working, the strengths of each were: first contacts with the government, in the case of TIRA and in the case of SSHJ financial strength and past experience having previously worked with Lincoln. In fact, the latter was his choice.

On the issue of compensation policies, the only legal requirement was a monthly payment of 170,000 rupiah a month, is where Lincoln bonus policy was in conflict how should we act? What incentive system should apply? Given these three different answers questions are:

1. Pay 250,000 rupiah per month with an annual bonus equivalent to two months’ salary.
2. Apply the Cleveland model but adapted to Indonesian workers, with less culture than American workers.
3. Make a pure piece-rate system, according to Bender, is the best way to motivate workers and produce more and more room is achieved.

If our hands were the policy decision on compensation, would focus in the following way: given the conditions under which they are Indonesian citizens, the bonus comprises exchange them for, a house with the necessary conditions for employee and his immediate family, which will help motivate the worker would get to continue in the company and to work, because if you lose your job would be entitled to that house. Ford applied a similar system in the Amazon in the late nineteenth and early twentieth centuries, when he started his project failed to plant rubber trees on the tires, this system apart from being implemented by Ford, other companies subsequently implemented, with different results depending on the evolution of the company.

The system of remuneration that would apply would be similar to that used in the West, with its corresponding overtime, so that the employee may have time to be with his family to live and work backwards. In the XXI century we can not think of a proper industrial organization in the nineteenth century England, and that companies must provide, among other things, to create prosperity in countries where they operate, is called Corporate Social Responsibility.

4) Using the Globe and Hoffestde tools- analyze the difference from expanding operations from the US to these countries. Using the tools of Hoffestde, comparatively analyze the different countries of which the text refers.

1. Power Distance Index (PDI)
2. Individualism (IDV)
3. Masculinity (MAS)
4. Uncertainty Avoidance Index (UAI)
5. Long-Term Orientation (LTO)

Analyzing the data offered by the graphics, highlighted as an important factor, since the text is repeated several times, individualism, comparing the values we offer, we determine the ranking of countries is as follows:

As shown in the table, the highest level of individualism is for the United States and Canada, where Lincoln’s incentive system works best, but in Indonesia we see that is the least of all. An analysis of these data allows us to anticipate future strategic decisions of international implementation.
US (+/- 90)
Canada (+80)
France (70-80)
Germany (70)
Brazil (30-40)

Another factor that seems significant is the Uncertainty Avoidance Index, an analysis of the graphs shows that the ranking of countries, from highest to lowest is as follows:

From the data, we note that the first post-except France-Brazil and Germany were forced to close factories, among other things, its poor ability to adjust to the new guidelines.

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