To: Lincoln Electric Board
From: Zijia Zhu
Subject: a report explaining why Lincoln’s mixed results overseas
Lincoln electric could gain profits for consecutive years in the US, but had mixed results overseas. Some countries like Canada and Australia could successfully adapt to the traditional operating and compensation method, whereas many countries failed. I believe this is due to many different factors in the society reacting to the traditional method.
To begin with, cultural value is vital. In Europe, managers and workers are philosophically opposed piecework and seemed to value vacation more highly than extra income from bonus. This is a cultural thing deep in mind which could not been altered easily.
Moreover, many of Lincoln’s acquisitions are unionized. So the relationship between management and workers are not that intimate. If the incentive system does not attract them, it is really hard to make employees to trust. Also though the managers in overseas subsidiaries are enthusiastic about Lincoln’s manufacturing and incentive system, they have no manufacturing experience with little assistance from Lincoln.
Regulation difference is another factor. For example in Brazil any bonus paid for consecutive two years becomes a legal entitlement and it is illegal to get piecework measure in Germany. These all jeopardize the implementation of Lincoln’s method.
In the end, government corruption and centralized power in certain country like Indonesia also affect the implementation. The import and export business is controlled by local companies and it is hard to get into it. Economic is unstable in Indonesia which may make currency value drop and reduce demand for import from Lincoln.
So these are factors why Lincoln got mixed results overseas.
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