CASE ANALYSIS
LINCOLN ELECTRIC: VENTURING ABROAD
First of all, Indonesia has a huge population and its economy has been growing rapidly over the years with a great deal construction going on. And, the market for welding products is large, but unsophisticated. Generally, the consumers use hand held stick welders rather than the semiautomatic or fully automatic machines, but Lincoln electric could break this trend with its expansion all around the country.
There could be variety of entry methods. Ownership of a manufacturing venture and establishing a joint venture are the leading ones. Ownership of a manufacturing venture seems to be problematical if you are entering a market which is quite different from your original culture. If you don’t have a local expertise and relationships with the key people in the business and the government, you will probably have difficult times while setting up your business. And, Lincoln Electric has failed before in the 90’s due to the ignorance of other cultures, so the company should not make the same mistake one more time. At this point, joint venture seems to be a great idea for entering Indonesian market. It would provide access to partner’s local expertise and strong relationships within the business and the government. These would be crucial during the process of constructing the factory and for operations and distribution.
As it is given in the case possible joint venture partners are Lincoln’s two local distributors: Tira Austenite (Tira) and Suryiasurana Hidupjaya (SSHJ). Tira is an Indonesian-owned company and has a network of 14 offices throughout the country. SSHJ is a Singaporean-Chinese family firm and has only two offices in Indonesia. Tira has high-level relationships with the government officials, and this very important for doing business such country where the government has an absolute power. In the matter of such relationships SSHJ has an obvious weakness. Tira has wide network with its 14 offices throughout the country; whereas SSHJ has only two. Tira holds inventories of many different products, and so it seems to be spread thin financially. This would be unfavorable meanwhile SSHJ is financially very strong. However, when I look at the comparison between these two companies I would like to go along with Tira. Because, Lincoln Electric has a financial power, but has not local expertise. Tira would be providing that and, also Lincoln would be able to use their incentive system with appropriate modifications. So, a joint venture which is made with Tira would be the best option to enter Indonesian market.