Lincoln Electric Essay

1300 WordsSep 3, 20096 Pages
The two most important issues that Lincoln Electric is faced with are as follows. First, the inability to meet customer demand because of the shortages in supply creates opportunities for competing firms to enter the industry. What resources and capabilities does Lincoln Electric have that can mitigate this threat of entry. Second, the emphasis put on the monetary incentive plan leaves the company vulnerable in economic hardships. How can Lincoln Electric continue to encourage competition and quality without a high emphasis on monetary incentives? Examining the arc welding product industry structure will help identify the opportunities associated with that structure. Arc welding is part of the emerging, mature, and international…show more content…
For example, their valuable and rare inventory control team maximizes efficiency and lowers cost by loading palettes completely full of product while the competition loads palettes only half full of product wasting valuable room. The threat of suppliers, threat of buyers, and threat of entry are the significant threats in the arc welding product industry. Suppliers in the arc welding product industry include all of the employees that make up a company. The suppliers can threaten performance, quality, and production cost. The temporary competitive advantage that Lincoln Electric uses to mitigate this threat is a valuable, (fairly) rare, (fairly) costly to imitate, organizationally competent employee compensation program. The program includes large bonuses, pays per piecework, and guarantees 75% employment forever. This program also exploits the opportunities associated with the cost advantages in the mature and international industry through economies of scale. For example, the learning curve illustration in figure 6.2 and equation 6.5 in chapter 6 of Barney shows that as the cumulative amount of time spent on a project increases (turnover is low), per unit cost decreases. Due to the rapid change in industry demand, the threat of buyers quickly becomes an issue. Without adequate supply, buyers are forced to move to new suppliers. This can lead to a loss in future business. Lincoln
Open Document