Executive Summary
This report will show the analysis of Lincoln Electric Company as well as the India industry to establish whether the idea to venture into the market is prudent at the moment. This will be done using financial analysis, SWOT analysis, Porter’s five forces analysis, and VRIN analysis. At the moment. Lincoln Electric Company is an established brand and so establishing itself in the Indian industry cannot prove to be a tough task. Being one of only a few worldwide broad-line manufacturers of both arc welding equipment and consumables, it has higher prospects of striking it positively in the market. Lincoln’s global strategy has been aimed at supplying everything that the consumers need when they need it. Similar ventures in Asia has been successful with the company starting out producing low end consumables for domestic production, but as the market grew domestic producers began focusing domestic production on advanced, automated welding equipment products. The low end consumables at the moment were shipped in from China and South Korea.
Porter’s Five Forces Analysis: The Indian Welding Industry has been expanding despite the entry of new players. The five forces to be analyzed include; - threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products, and competitive rivalry among the players. The threat of new entrants is weak due to the requirements of establishing a brand in the industry. The bargaining power of buyers is weak while that of suppliers is reasonable. The consequents is that the buyers have little choice on the products in the market. The suppliers are few so they have a reasonable power. The threat of substitutes is weak as the market is so specific. The industry rivalry is very high calling for smart strategies to ensure branding and capturing of loyal customers.
SWOT (Strength, Weaknesses, Opportunity, Threats) analysis: The company strengths include innovation, a strong labor force that cuts across all the areas it has ventured into, production of unique products and appealing designs to the buyers. Its main weakness is trust build-up especially when venturing into a competitive and specific Indian industry. It has a great opportunity of global expansion due to its great understanding of the welding industry. The main threat comes from competitors who are also fairly established in the market.
Financial Analysis: Looking at the financial operations in 2003, 2004 and 2005, Lincoln has great prospects of making it well in the Indian market. In 2003 the net sales were $1040.60 million, $ 1333.70 million in 2004 and $1601.20 million in 2005. The sharp increase can be attributed to the customer satisfaction based designs and branding of its products which has earned it loyal customers. The net profit in these years was $70 million, $110.3 million and $$153.50 respectively. The net income from 2003 to 2005 was $54.50 million, $80.60 and $122.3 million respectively. This translated to a 7.6% profit margin and 10.6% return on asset. This is a good run that can be continued by making the venture in the Indian industry.
An analysis of the competitors such as Aldor and ESAB India show that they have a 15% and 18% operating margin which places it at a better position. The lessons learnt from other Asian countries can help it make a better entry. In Japan, there were insufficient resources while in South Korea, there was no local production presence. So some of the options available to make a strong venture into the Indian Industry include acquiring some of the companies and/or forming a joint venture with some. The process will involve getting the potential companies and making sure that they have a similar business culture for success. Continued international ventures should be promoted by focusing on the construction and infrastructure industry.
