TIMKEN CASE STUDY1Doan Thi Thu Ha
Timken was known as a leading manufacturer of highly engineered bearings and alloy steels and famous for its tapered roller bearings with over 200 types in more than 30,000 sizes. It was also the market leader in mechanical seamless steel tubing and shipped more than one million tons of premium alloy steels annually. Timken was located in Canton, Ohio. However, its operation was not limited in Ohio but in twenty-five countries and employed over 20,000 people worldwide. In the early 1990s, Timken intended to take the U.S model to Europe with some customization for the local market and focused on case-carburized tapered roller bearings. In early 1997, Timken reviewed its strategy with specific aim for the European market: to gain market share, to lower its cost structure and to increase production capacity. It also addressed three segments: small bearings for automotive and light industrial markets, medium bearings for construction equipment and large bearings for process and other heavy industries. As Timken Polska fulfilled the small bearings plant requirement and Gnutti Carlo S.p.A. in Italy provided a medium-sized bearings plant, Timken had to search for a large bearings plant in Central Europe that would provide the company with low-cost manufacturing capacity. Rulmenti Grei in Romania could be the potential choice for Timken¶s large bearings plant. Rulmenti Grei offered valuable assets from market share, equipments to skill engineers to help Timken to crack the European industrial bearings market. This acquisition would be consistent with Timken¶s strategy of gaining market share, improving cost structure and increasing production capacity. However, Timken might face the difficulties of Romania¶s political instability and the numerous operational challenges of integrating the plant into Timken¶s global organization. Furthermore, as Rulmenti Grei produced a variety of bearing types, this investment could lead to the change in its century-corporate culture of focusing on tapered roller bearings. Timken also had to consider the acquisition cost and the additional investment they would undertake for plant upgrades and expansion.
The merits of an acquisition of Rulmenti Grei and the risks for Timken
According to the ranking system of Timken, Rulmenti Grei seemed to have a good assessment First, Rulmenti Grei had been a big manufacturer producing over 1,200 types and sizes of bearings including tapered, cylindrical, spherical, and ball bearings. Although tapered roller bearings currently represented only 18 percent of production, this proportion could be increased by retooling its equipment. Second, Timken was familiar with much of Grei’s equipment as It was made by an American machine builder. Third, the employees of Rulmenti Grei seemed to have high education and many of them had technical degrees. Furthermore, many professors spoke English fluently. Therefore, Timken could easily bring it up to US standards. Skilled talent is hard to find and difficult to retain. Local companies usually take advantages of this as they understand the culture, the behaviors and the expectation of local people to build up a strategy to attract talents (Bhattacharya, 2008). Thus, acquisition a company with impressive workforce could strengthen Timken’s competitive ability. Rulmenti Grei was considered as the good candidate for the company’s three-plant plan. It could offer Timken an opportunity to establish a stronger competitive position in the European industrial bearings market and to lower manufacturing costs across its heavy bearings business. It is said that local companies often win in the price war while the organizational processes and cost structures of many global companies make it difficult for them to sell products and services at optimal price points to satisfy both global, glocal, local and bottom customers (Khanna, 2006). Therefore, having effective cost structure would be the great...
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