Case Study on "Harsh Lessons From International Expansions"

Case Study 4 pages (1395 words) Sources: 4

[EXCERPT] . . . .

Harsh Lessons From International Expansions

Harsh International Expansions

In 1992, Lincoln Electric faced major losses from their European operations. This was problematic, because it meant that the company was dealing with the possibility of defaulting on its loans. At the same time, they were going to be unable to pay the bonuses that they had promised to employees. This was the cornerstone of their strategy for: retaining their top talent and as a source of motivation. As a result, Lincoln Electric faced the possibility that key employees could leave and they could begin to enter a downward spiral of decline. This is significant, because it is illustrating how the strategy that the firm had been using between 1986 and 1991 backfired. At which point, this was threatening the economic viability of the organization itself. To fully understand the overall scope of what was happening requires: analyzing how the crisis occurred / developed, exploring the action plan, identifying the offensive / defensive tactics that were utilized and what security was need. Once this takes place, it will provide the greatest insights as to how the company can overcome these challenges. (Augustine, 2000, pp. 227 -- 235)

Define the Problem

The biggest problem that faced Lincoln Electric is that they began to focus on expanding internationally too quickly. Where, they were concerned about trying to become a worldwide conglomerate without looking at if a particular business will help them to build their overall bottom lime and if they are a strategic fit. This caused them to purchase companies abroad that would eat away at the profitable divisions of the firm. At the same time, the company took on large amounts of debt to expand globally. Over the course to time, this would contribute to the hemorrhaging of cash. That started to have a dramatic impact on their overall bottom line and the strategy for retaining key employees (i.e. The bonus system). (Augustine, 2000, pp. 227 -- 235)

Explore the key issues and explain the best way they can be resolved.

The key issues that Lincoln Electric is facing include: their board does not fully understand how to integrate the firm internationally and there were companies purchased that were not a strategic fit for the organization. In the case of their board not fully understanding how to integrate internationally, this caused them to hire managers that did not know how to objectively evaluate businesses. This was problematic, because it meant that they began to purchase entities at the wrong time (i.e. when the economy was peaking). (Augustine, 2000, pp. 227 -- 235)

At which point, these managers began to acquire companies that did not fit well with the business model of Lincoln Electric or the organization itself. Over the course of time, this made it difficult to implement the business strategy of the firm with those corporations that were acquired. Once this occurred, it meant that there were two different atmospheres inside these entities. To make matters worse, the independence that was given to overseas subsidiaries made it difficult to change the policies and procedures that were implemented by Lincoln Electric. This caused there to be different focuses in strategy between: the parent company and the overseas entity. At which point, the subsidiary continued with business as usual (which helped contribute to the losses the corporation was facing). These different elements are important, because they are illustrating how this basic approach led to the dramatic decline in earnings between 1986 and 1991 for Lincoln Electric. Once this occurred, it caused a lack of accountability inside the company itself. (Augustine, 2000, pp. 227 -- 235)

Explain how you could avoid the crisis

The way that the crisis could have been avoided was to have managers focus on the pricing and timing of the acquisitions themselves. Where, they wanted to examine if purchasing a particular company would have been a good choice strategically speaking. This could have been accomplished by looking at the current state of the local economy. As, you want to evaluate if: it has been continuing to expand for several years in a row and is beginning to peak. At the same time, executives needed to look at the… READ MORE

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