Lincoln Electric in China (B): Updates SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Lincoln Electric in China (B): Updates
Supplement to case IN1256. This case looks at how Lincoln Electric, the US-based company renowned for its compensation scheme, tried to implement its human resource policies globally and particularly in China.
Authors :: Ingmar Bjarkman, D. Charles Galunic, Joanna Lockard
Swot Analysis of "Lincoln Electric in China (B): Updates" written by Ingmar Bjarkman, D. Charles Galunic, Joanna Lockard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lincoln Electric facing as an external strategic factors. Some of the topics covered in Lincoln Electric in China (B): Updates case study are - Strategic Management Strategies, Growth strategy, Human resource management, International business, Leadership, Manufacturing, Motivating people and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Lincoln Electric in China (B): Updates casestudy better are - – there is backlash against globalization, talent flight as more people leaving formal jobs, increasing energy prices, increasing household debt because of falling income levels, increasing transportation and logistics costs, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies,
cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Lincoln Electric in China (B): Updates
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lincoln Electric in China (B): Updates case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lincoln Electric, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lincoln Electric operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Lincoln Electric in China (B): Updates can be done for the following purposes –
1. Strategic planning using facts provided in Lincoln Electric in China (B): Updates case study
2. Improving business portfolio management of Lincoln Electric
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lincoln Electric
Strengths Lincoln Electric in China (B): Updates | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lincoln Electric in Lincoln Electric in China (B): Updates Harvard Business Review case study are -
Highly skilled collaborators
– Lincoln Electric has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lincoln Electric in China (B): Updates HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Lincoln Electric has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lincoln Electric has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Lincoln Electric is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ingmar Bjarkman, D. Charles Galunic, Joanna Lockard can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Lincoln Electric is present in almost all the verticals within the industry. This has provided firm in Lincoln Electric in China (B): Updates case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Lincoln Electric
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lincoln Electric does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Lincoln Electric are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Lincoln Electric has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Leadership & Managing People industry
– Lincoln Electric in China (B): Updates firm has clearly differentiated products in the market place. This has enabled Lincoln Electric to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Lincoln Electric to invest into research and development (R&D) and innovation.
Learning organization
- Lincoln Electric is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lincoln Electric is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lincoln Electric in China (B): Updates Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Leadership & Managing People field
– Lincoln Electric is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lincoln Electric in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Lincoln Electric in the sector have low bargaining power. Lincoln Electric in China (B): Updates has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lincoln Electric to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Lincoln Electric is one of the leading recruiters in the industry. Managers in the Lincoln Electric in China (B): Updates are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Lincoln Electric in China (B): Updates | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lincoln Electric in China (B): Updates are -
Capital Spending Reduction
– Even during the low interest decade, Lincoln Electric has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Lincoln Electric has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the segment, Lincoln Electric needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lincoln Electric is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lincoln Electric in China (B): Updates can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Lincoln Electric in China (B): Updates that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Lincoln Electric in China (B): Updates can leverage the sales team experience to cultivate customer relationships as Lincoln Electric is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Lincoln Electric, firm in the HBR case study Lincoln Electric in China (B): Updates needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Lincoln Electric has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Lincoln Electric has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lincoln Electric even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lincoln Electric in China (B): Updates HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lincoln Electric has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lincoln Electric in China (B): Updates, is just above the industry average. Lincoln Electric needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Lincoln Electric is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Lincoln Electric needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lincoln Electric to focus more on services rather than just following the product oriented approach.
Opportunities Lincoln Electric in China (B): Updates | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Lincoln Electric in China (B): Updates are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lincoln Electric can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lincoln Electric can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lincoln Electric can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lincoln Electric in China (B): Updates, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lincoln Electric in the consumer business. Now Lincoln Electric can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lincoln Electric can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Lincoln Electric can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lincoln Electric in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Lincoln Electric can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Lincoln Electric can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lincoln Electric to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lincoln Electric is facing challenges because of the dominance of functional experts in the organization. Lincoln Electric in China (B): Updates case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lincoln Electric can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Lincoln Electric has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lincoln Electric in China (B): Updates - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lincoln Electric to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Lincoln Electric has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Lincoln Electric in China (B): Updates External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lincoln Electric in China (B): Updates are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lincoln Electric in the Leadership & Managing People sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Lincoln Electric has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Lincoln Electric needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lincoln Electric.
Stagnating economy with rate increase
– Lincoln Electric can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lincoln Electric will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Lincoln Electric needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lincoln Electric in China (B): Updates, Lincoln Electric may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Increasing wage structure of Lincoln Electric
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lincoln Electric.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lincoln Electric needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Environmental challenges
– Lincoln Electric needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lincoln Electric can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lincoln Electric can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lincoln Electric with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Lincoln Electric in China (B): Updates Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Lincoln Electric in China (B): Updates needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Lincoln Electric in China (B): Updates is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Lincoln Electric in China (B): Updates is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Lincoln Electric in China (B): Updates is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lincoln Electric needs to make to build a sustainable competitive advantage.