Integrative case study Analysis - Lincoln Electric in China

This report analyses the factors associated with Lincoln Electric, which impacted the International Human Resource Management (IHRM) of the company. It discusses the three main issues, such as sourcing human resource for global marketing; International business ethics and HRM, and International industrial relations and the global institutional context.

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Integrative case study Analysis
Lincoln Electric in China
Prepared By:

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Table of Contents
1. Executive Summary.........................................................................................................................3
2. Introduction.....................................................................................................................................4
3. Background......................................................................................................................................4
3.1 Brief profile of company & its current standing........................................................................4
4. Three Pertinent IHRM Challenges/Issues/Problems....................................................................5
4.1 Discussion & analysis of IHRM Issue 1.....................................................................................5
4.2 Discussion & analysis of IHRM Issue 2.....................................................................................7
4.3 Discussion & analysis of IHRM Issue3....................................................................................10
5. Conclusion......................................................................................................................................11
References..........................................................................................................................................13

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1. Executive Summary
Lincoln Electric holds a unique organizational strategy, which has many creative
ideas. It aims to keep its employees motivated, and in order to do so, the company has
implemented the incentive system that efficiently distributes the profits in the company. All
these incentives were considered as the expressions of mutual respect for every person
signing for the job. The Lincoln Electric face three major International Human Resource
Management issues, such as, such as sourcing human resource for global marketing;
International business ethics and HRM, and International industrial relations and the global
institutional context.
In order to mitigate the issues, the report presents specific recommendations that
provide power to the decision making as well as trust in management. It is recommended
from the report that the capacity of the company can expand to gain more profits and market,
they focus on human resources and analyse the overseas market, before expanding their
business.
It is also essential that Lincoln Electric should build the professional organizational
structure, which permits the management and increase the diversity in management. In
resolving the issue of sourcing HR for the global market, the company should focus on the
significance of clearance and competition of punishment and reward method in day to day
operational activities (Hamel, 2012). The incentive system was necessary for Lincoln Electric
in achieving decade success.
In the case of solving the next issue, it is crucial to understand that every country has
their different politics, culture, laws, diversity, workers right as well as child labour. Lincoln
Electric should refer to the overseas operations carefully before working or making any
commitment.

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2. Introduction
Having the right international strategy is essential for company growth while
expanding its business in the global market. In order to have an international business
strategy that is successful, it needs the managers and essential decision makers to analyse the
nature of the international industries and also the changing aspects of the international
competition. The aim of this report is to analyse as well as evaluate the factors associated
with Lincoln Electric, which impacted the International Human Resource Management
(IHRM) of the company. This report will try to present the ways related to handling business
expansion in China. Most of the report will present the three main issues, such as sourcing
human resource for global marketing; International business ethics and HRM, and
International industrial relations and the global institutional context. The report will discuss
the problem and will also present a recommendation to mitigate the issues.
aving an excellent Global
and international strategy
is pivotal in the success or
failure of a
company’s growth when
expanding its business
abroad. To have a Global

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strategy which is
successful
requires Managers and key
decision makers to
understand the nature of
global industries and also
the changing aspects of
global competition
(Twarowska & Kakol,
2013). The purpose of this
report is
to analyse and evaluate
the factors that had led to
Lincoln Electrics (L.E)
failure in their early efforts
to expand outside of the
U.S and also come to a
decision on how they

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should handle expansion
into
India, based on previous
failed experiences to
expand globally. The
majority of the report will
be
written from a 2006
viewpoint, and also will
include presentation slides
from PESTLE and VRIN
analysis’s of Lincoln
Electrics expansion into
India.
3. Background
3.1 Brief profile of company & its current standing
Lincoln Electric Company is one of the popular manufacturing company that
emphasize the welding items for the current 30 years. The organization includes the
outstanding brothers, which move the company towards success (Kumar, Gaur & Pattnaik,

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2012). Where John holds the technical geniuses and comes up with the best production skills;
James has the best knowledge about the management and works towards the staff incentives
(O’Connell, 2018).
The organization attained its reputation from the period of world war till today and
has emerged as the top welding equipment suppliers, with the best quality and reasonable
prices (Kumar, Gaur & Pattnaik, 2012). In the production aspect related to welding
equipment, it's considered as the popular production line with the regular flow of low idling
period and high flexibility (Hamel, 2012).
Lincoln electric also holds the unique system to offer employees incentive to work
beyond the average industrial rate, not only at the fast speed but also with the less rate of
turnover. Staff at Lincoln Electric are motivated to express their recommendations about the
current plan of production (Hamel, 2012).
Under this system with the technology and patent of John Lincoln, the organization is
able to maintain its quality and productivity benefits within the market and enhanced the all-
time production line (Hamel, 2012). John Lincoln was able to make the reputation of the
company by launching the company's philosophy (Kumar, Gaur & Pattnaik, 2012).
They have focused on the significance of clearance and competition of punishment
and reward method in day to day operational activities (Hamel, 2012). The incentive system
was important for Lincoln Electric in achieving decade success.
4. Three Pertinent IHRM Challenges/Issues/Problems
4.1 Discussion & analysis of IHRM Issue 1
Sourcing human resource for global marketing
Issue
There is a high amount of work in the global human resource management as
emphasized in the Chinese labour practices and practices also discuss about the Chinese

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company transfer of their practices, while other companies don't do it, as there is a less work
on how the institutions of labour market impact strategic selection in different host nations
(Peter, 2016).
Companies assist in creating knowledge by initiating the communication of both
explicit and implicit human knowledge (Kaplan & Norton, 2016). Each day, new knowledge
is getting developed through the organization and individuals in serving the rationale of
articulating as well as enhancing the individual knowledge (Kaplan & Norton, 2016).
Technology often supports organizations in managing knowledge (Kumar, Gaur & Pattnaik,
2012).
ERP process also supports in enhancing the process of creating, managing and transferring
the knowledge within the company (Kaplan & Norton, 2016). Most of the manufacturing
process going within the Lincoln Electric are rightly dependent over the human knowledge
and therefore, it's paramount for the organization to manage the same effectively for attaining
highest productivity (Kaplan & Norton, 2016).
Lincoln Electric had utilized as well as retain the knowledge of employees by its
reward and incentive system, and their open ways of communication between all the staff of
the company (Kaplan & Norton, 2016). Implementation of an international ERP system,
along with the related updating to fulfil the different local environment, will move in the long
run to improve the better Lincoln operations expansion around the world (Kaplan & Norton,
2016). The application of internet services will also enhance organizational communication
effectiveness, and in this manner, the company is able to share more knowledge for achieving
high productivity (Kaplan & Norton, 2016).
Lincoln Electric is a popular company, which was able to effectively master in
applying the reward and incentive system for encouraging their staff (Kaplan & Norton,
2016). This system has helped the company in earning different advantages and place it on a

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global map because of its massive business success (Kaplan & Norton, 2016). Nevertheless,
Lincoln Electric came across a few issues in sourcing the human resources for their global
marketing (Kaplan & Norton, 2016). This happened when the company tried to expand in the
international market in the late 1980s, with the assumption that incentive system will work
well in other parts of the world, and they will be able to conduct global marketing with the
human resource in an effective manner (Kaplan & Norton, 2016).
This issue emanated through the overconfidence of leaders. It was noted that, due to
the inadequate global experience as well as failure to have sensitivity towards the diversified
culture impacted the global marketing of Lincoln Electric (Kaplan & Norton, 2016). For this
issue, Lincoln Electric need more money and skilled staff. The company was required to
make an investment in time for studying about the labour trends and cultural values of China,
in which they were interested in expanding, for understanding how best they can actually
modify the HR system as well as organizational culture to get adapted with the local
environment and culturally sensitive (Kaplan & Norton, 2016).
Solution
It is recommended that to solve the HR issue in global marketing, it is important that
Lincoln Electric should learn to become responsive towards the local culture of China, in
which they were planning to expand their business (Kaplan & Norton, 2016). The company
should also learn to update their incentive system to get adapted with the requirements of
local cultures, and the company should also learn to get adapted in other countries too
(Kaplan & Norton, 2016). Lincoln Electric should also hire the internationally experienced
employees or managers, who can change the realm quickly with globalization for a better
perception of both future opportunities and threats (Kaplan & Norton, 2016). Despite
different issues, which Lincoln Electric has faced in expansion, the company will achieve

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success in coming time, as they have understood how to deal with issues (Kaplan & Norton,
2016).
4.2 Discussion & analysis of IHRM Issue 2
International business ethics and HRM
Issue
As businesses are expanding globally, they should not only understand the company's
vision, mission, strategies, policies as well as goals, but they should also consider the ethical
and legal problems in the global business (Alavi & Leidner, 2011). When the organization
plan to initiate the long term expansion in the overseas environment, they should try to handle
the ethical issues as well as decision making, for the purpose of successful expansion (Alavi
& Leidner, 2011).
Few of the ethical issues going in the international business and the same faced by
Lincoln Electric are working standards and conditions, outsourcing, equal opportunity,
supervisory oversight, child labour, political arena, diversity at workplace, human rights,
integrity and trust, religion, corruption, environment and bribery (Alavi & Leidner, 2011).
Lincoln Electric expanding its business in the international market, are expected to
completely link with the state and federal safety regulations, fiscal and monetary reporting
status, environmental laws, as well as civil rights laws (Alavi & Leidner, 2011).
While production outsourcing might come up with a low cost of labour, then it also
brings ethical issues for organizational management. Lincoln electric face working conditions
issues in the market of China (Alavi & Leidner, 2011). Workers often work for longer hours,
which is quite uncomfortable and workers facing hazardous environment was also challenges
(Alavi & Leidner, 2011).
Differences in culture is another ethical issue faced by Lincoln Electric, which creates
variation in failure and success in the international market (Alavi & Leidner, 2011). Every

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country has its own customs, code of ethics and traditions. Consideration of culture might
make or adversely impact the business internationally (Alavi & Leidner, 2011). Cultural
issues include the language that implies the company should depend on the translators while
communicating with business customers and contacts (Alavi & Leidner, 2011).
Gender was another ethical issue, in which women don't hold equal rights as
compared to men. Lincoln Electric often come across prohibition of trade, during religious
events (Kumar, Gaur & Pattnaik, 2012). Going as per the cultural and ethical values is
important for the big organizations, in order to gain the assistance of business and to attain
the competitive benefits in a specific market (Alavi & Leidner, 2011). The rapid international
business growth has increased the qualified professional's demand, who have knowledge
about the international market, cultural considerations, business practices as well as ethical
issues in global business (Alavi & Leidner, 2011). It is important for Lincoln Electric to learn
about the challenging ethical issues, which they might come across in global business
expansion (Alavi & Leidner, 2011).
Lincoln Electric also face ethical issues due to the environmental regulations going in
the host nation. There are many countries that hold regulations related to pollutants emission,
use and dumping of toxic materials and many more (Alavi & Leidner, 2011). Developing
countries might be no so strict, and as per critics, it results in the rise of pollution level
through multinational operations.
Few modern philosophies mention that MNC's power comes with the high social
responsibility to provide resources back to society (Alavi & Leidner, 2011). The thought of
social responsibility increases because of the philosophy that people should refer to the social
consequences of actions (Kumar, Gaur & Pattnaik, 2012). They should consider that decision
should have an ethical and meaningful economic as well as social results (Carpenter, Taylor
& Erdogan, 2011). It is analysed that social responsibility can be helpful if the same is

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correctly and relevantly give way to business. Particularly, businesses which are a big one
and successful require to identify the moral and social obligations and provide donation and
resources to the society (Carpenter, Taylor & Erdogan, 2011).
Solution
Lincoln Electric has analysed that business practices, which are illegal, are usually not
permitted in overseas countries (Carpenter, Taylor & Erdogan, 2011). Nevertheless,
organizations which enter in the international markets with the specific code of ethics hold
better options for attaining the positive global reputation, which lead to high profits and
strong market share (Carpenter, Taylor & Erdogan, 2011). The ethical issues, as well as
marketing ethics in the overseas trade, which companies come across in the international
stage, is complex as well as long. Every country has their different politics, culture, laws,
diversity, workers right as well as child labour (Kumar, Gaur & Pattnaik, 2012). Lincoln
Electric should refer to the overseas operations carefully before working or making any
commitment (Carpenter, Taylor & Erdogan, 2011).
4.3 Discussion & analysis of IHRM Issue3
International industrial relations and the global institutional context
Issue
The international industry develops options for the growth in sales for Lincoln
Electric. Nevertheless, global competition can also develop new threats, which includes
rivalry, the threat of substitute and threat of entry (Twarowska & Kakol, 2013). It is analysed
that Lincoln electric mitigate all these threats by applying the cost leadership strategy
(Twarowska & Kakol, 2013). For instance, rare and valuable inventory controls team, which
increases the efficiency and reduces the cost through uploading the palettes, while the
competition often loads the palettes, which are half full of wasting valuable room products
(Twarowska & Kakol, 2013).

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The threat of buyers, the threat of suppliers, and the threat of entry are the major
threats in the Lincoln Electric industry (Twarowska & Kakol, 2013). Suppliers in the
company include the staff that make the organization. The suppliers can easily create threaten
performance, cost of production and quality (Twarowska & Kakol, 2013). Because of the fast
changes in the industry demand, the threat coming from buyers is the problem. Without the
proper supply, buyers are pressurized to go towards the new suppliers (Siegel, 2018). This
can result in the loss of future business (Kumar, Gaur & Pattnaik, 2012). Lincoln Electric
apply the valuable, rare and organizationally competent forces for reducing the risk (Kumar,
Gaur & Pattnaik, 2012). This option permits them to focus on customer service and build
international business relations, which provide better quality and performance of brand
identification (Kumar, Gaur & Pattnaik, 2012).
The threat of entry for Lincoln Electric includes the cost benefits and economies of
scale. The company try to reduce the threats by applying the resources, which support in
creating the cost benefits, which are rare, valuable as well as organizationally competent
(Kumar, Gaur & Pattnaik, 2012). All these resources cover up internal sales force, staff
compensation package, inventory control team, and flat organizational structure (Kumar,
Gaur & Pattnaik, 2012).
Solution
Global expansion will reduce this threat by raising the supply. It will also try to
exploit the options available in the process innovation associated with a reduction in
transportation cost and delivery time, because of the reduction between customer and factory
(Carpenter, & Dunung, 2011). Reducing the cost of transportation in connection with Lincoln
electric present process innovation strategy. The rise in sales and a reduction in the cost of
transportation will raise the net income (Carpenter, & Dunung, 2011). The rise in income can
be applied as the support in economic challenges. Though the same doesn't bring change in

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monetary incentives, but it won't permit the Lincoln electric flexibility (Kumar, Gaur &
Pattnaik, 2012). It is analysed that Lincoln Electric is quite prepared with government
securities and cash for initiating international business relations, which can fulfil the
requirements of customers (Carpenter, & Dunung, 2011). Nevertheless, global business
relations as the course of action is quite a risky setback, which might interfere with the
present strategy of the company, which is the flat organizational structure. Global expansion
will finally need high hierarchy levels (Carpenter, & Dunung, 2011). The flat organization
with a less hierarchy level is considered as the resource for Lincoln Electric, which is rare
and valuable (Ahlstrom & Bruton, 2019). Removing it might lead to the possibility of no
interaction between the remaining resources, which help the company in becoming successful
(Perlmutter, 2010).
5. Conclusion
Recommendations on the issues
It is recommended that the course of action is required for expanding Lincoln electric
internationally. Though the cost of doing the same is high, the organization is finally prepared
for the purpose of exploiting the options, and though Lincoln Electric organizational structure
is flat, they hold the rare and valuable technologically hardware as well as software resources,
which might remove the threat to get arise. This type of course of action is directly related
with the process innovation strategy, it exploits the global options, which permit the
organization to expand, and remove the threat of buyers and threat of entry by the help of
economies of scale.
It is analysed that expansion often limits the option, which is available to wean the monetary
incentives, but the rise in sales provide the company with support during the period of
economic challenges. Though this report recommends the approach for increasing the Asian

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expansion of Lincoln Electric, it explores that for such type of expansion to gain sustainable
success, it should depend over the increasing Lincoln Electric in a traditional manner.
Lincoln electric requires to broaden the previous cooperation culture, and open
communication between the management and employees to cover up the ethical link with the
company business partners, peer units, and society for attaining the general wellbeing and to
meet the future financial sustainability. Lincoln also require to increase the previous culture
for training and mentoring, for the purpose of practising the holistic management of
knowledge and for facilitating the employee's personal growth.
Implementation Plan for the most pertinent issue
The company should emphasize the issues related to international business relation
because it’s a significant concern while expanding the business in the overseas market. The
company has to make international business relations, if the same help them in building
networking, relations, gain a better understanding of the market with the help of local players.
It is recommended to CEO to try to prepare government securities and cash for initiating
international business relations, which can fulfil the requirements of customers. The company
can also organize different meetings, events for building business relations with the local
players, and customers in the overseas market.

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