Case Study (for report)

Case Study (for report) - Case Study: Lincoln Electric...

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Case Study: Lincoln Electric Venturing Abroad David L. Chu Prof. J. Decker EMGT 538 November 4, 2007 Lincoln Electric Executive Summary Current Status Four Lessons Learned Aligning Strategy Building on Strengths Learning as an Organization Conclusion Exhibit A. Financial Ratios References Executive Summary Michael Gillespie, The Lincoln Electric Company’s new president for the Asia Region, was “encouraged to develop plans to open welding consumables factories in several Asian countries” by the new CEO, Anthony Massaro, and Gillespie had specifically “turned his attention to plans for Indonesia [O’Connell, <!--[if !supportFootnotes]--> [1] <!--[endif]--> main reference, p 1].” We worked with Gillespie to prepare for the September 1996 meeting with Massaro and the presidents of the other worldwide regions. We analyzed Lincoln’s current capabilities and its past experiences and prepared a transformative plan based on business concept innovation [Hamel <!--[if !supportFootnotes]-->[2]<!-- [endif]--> , ch 3], documented by this report, with a three pronged approach for the Asia Region. The first prong would be to execute Massaro’s strategy, to grow revenue in the less-developed countries, by building a factory in Indonesia in a joint venture with SSHJ as a pilot step, to be followed by further expansion to other South East Asian countries, and to China. The second prong would be to build on Lincoln’s strengths as an organization, including its technical innovativeness and incentive system and its people, to prepare Lincoln for the expansion effort ahead. The third prong would be to extend Lincoln’s competencies to the level of a living system [Senge <!--[if !supportFootnotes]-->[3]<!--[endif]--> , ch 12] that learns, from the Asia Region expansion experience and from all aspects of its future existence, how to grow sustainably [Kaplan <!--[if !supportFootnotes]-->[4]<!--[endif]--> , ch 4]. Current Status Lincoln was financially sound at this time to undertake the planned international expansion. After having been remarkably successful for nearly a century of existence, Lincoln started to slide in 1988 toward bankruptcy with a steep drop in cash from $61 million to $23.9 million, with $17.5 million from long term debt [p 19]. Return-on-sales dropped from 6.2% in 1987 to 1.7% in 1991 [Exhibit A. Financial Ratios] . Similarly, return-on-equity and return-on-assets, respectively, dropped from 13.5% and 9.4% in 1987 to 5.5% and 3.3% in 1991. Restructuring efforts between 1992 and 1994 [p 19] and the associated management changes [p 7] succeeded in the ensuing financial turnaround to return to pre-1987 status with 6.0% ROS, 18.6% ROE, and 11.2% ROA in 2005. A 40% equity public offering in 1995 [p 1] injected approximately $132 million <!--[if !supportFootnotes]-->[a]<!--[endif]--> . With the financial leverage at
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2.15x and quick ratio, current ratio, interest coverage, and long-term-debt/total-assets of respectively 0.9x, 2.1x, 9.1x, and 15.2%, Lincoln should be able to finance the Asian expansion.
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This note was uploaded on 03/24/2010 for the course EU bba taught by Professor Sanke during the Spring '10 term at Piedmont College.

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Case Study (for report) - Case Study: Lincoln Electric...

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