(TIỂU LUẬN) TOPIC ANALYZING INTERNATIONAL MARKETS EXPANSION STRATEGY OF LINCOLN ELECTRIC

HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES
INFORMATION TECHNOLOGY
FACULTY OF BUSINESS ADMINISTRATION
---------***--------

SCIENTIFIC RESEARCH REPORT
TOPIC:
ANALYZING INTERNATIONAL MARKETS
EXPANSION STRATEGY OF LINCOLN ELECTRIC

Student’s name: Tiêu Vịnh
Nghi
ID number: 19DH120135
Class: KQ1902
Instructor:
Tiến Thông

Dr.

Nguyễn


HCM, December/ 2021


TABLE OF CONTENTS
1. Introduction
1.1. Object
1.2. Aim
1.3. Scope
1.4. Stucture

2. Literature review
2.1. Definition of Market Entry
2.2. Entry Modes
2.3. Business overview
3. Methodology
4. Discussion
5. Conclusion and Recommendation
6. References

List of abbreviations:
LECO : Lincoln Electric company


Abstract: The fact that firms nowadays desire to expand into
international markets is really not surprising; it is a vital step in
raising brand recognition and reaping several benefits (both in
terms of profits, contracts, etc.). as well as macroeconomic
issues like foreign exchange profits, diplomacy, and
employment. Although the issue is not new, it is never out of
date and it is never too late to do it. However, if the firm does
not comprehend the market and give a suitable way to access
it, it will be exposed to several threats, maybe leading to
bankruptcy. Enterprises must have specific information of their
target market, including whether the legal corridor is wide or
narrow, the time to determine whether or not to join that
market, and the country's size of expansion. Is the new market
truly assisting firms in maximizing their efficiency? What
should the firm do if there is a failure/loss in the foreign
market? Lincoln Electric is the greatest piece of worldwide
growth that we can think of. From failing as a result of taking

the incorrect path to market penetration and losing money to
becoming a worldwide firm that leads the globe in welding
equipment,..with representative offices in over 160 countries
(including purchasing form)
Keywords:
Lincoln Electric, international market, expansion, entry modes,
FDI.
1. Introduction
1.1. Object of the research
The Lincoln Electric Company and its case study on its
international expansion strategy was the focus of my
research. LECO is also a common topic in student
research papers or issues on market penetration. The
income numbers and the number of workers are also
officially declared on a regular basis, and the information
and history of the object can be easily searched publicly
with great precision. The investigation of Lincoln Electric
will provide many new insights on how to broaden the
market and, more particularly, how to solve it, making it
simpler for readers to picture the current situation. LECO
is a significant international organization in the globe,
and the knowledge gathered while investigating and


researching about it will assist this research paper gain
credibility.
1.2. Reasons for selecting the topic
With a major in International Business, I believe that the
topic of international market expansion is an amazing
subject to discuss and investigate. It is also the current

trend for both domestic and international businesses to
aim for a larger number of customers and higher profits.
As a result, the lessons gained from a giant multinational
corporation's collapse and recovery, such as Lincoln
Electric, will provide a wealth of information on which
markets to explore. Learn from your mistakes and know
how to approach a potential market in the most efficient
and risk-free way possible. The issues highlighted and
answers proposed in this study article will define new
perspectives, new thinking, and experiences in business
and international affairs, in addition to being useful for
research.
1.3. Scope of the reseach
For data tables on FDI, GDP in potential markets such as
India, China, or LECO profit throughout each year, the
research will utilize data from 2005 to 2020. And how
LECO went about entering into these markets. The
research will also focus the firm's SWOT analysis on when
the company enters the market, what strengths and
limitations it will have when picking that market, and how
that will affect the company to determine the best
strategy for entering the industry
1.4. Structure
This research has 5 main sections:
+ Introduction
+ Literature review
+ Methodology
+ Discussion
+ Conclusion and Recommendation
Finally, at the conclusion of the article, there is a

reference section where the information was obtained.
The major material focuses on providing an overview of
basic information about Lincoln Electric Company through


PESTLE analysis, and strategies to join the market, as
well as resolving the risk of loss associated with picking
the wrong approach to enter the market. In addition, this
study offers a number of data collecting and analysis
methodologies. Large sections 1,2,3,4,5 will offer the
main topics.

2. Literature review
2.1. Definition of Market entry
Market entry is the process of entering a new market to
create or distribute items in order to grow business scale,
client base, and profitability. [ CITATION Tha21 \l 1066 ]
Enterprises entering a new market help to boost supply
capacity and stimulate competition, resulting in
additional job opportunities for that market. [ CITATION
Tha18 \l 1066 ].
Foreign Direct Investment (FDI) is a term that has gained
a lot of popularity recently, although it has a lot of
distinct meanings. The International Monetary Fund
claims that [ CITATION IMF93 \l 1066 ], “Direct investment
is the category of international investment that reflects
the objective of a resident entity in one economy
obtaining a lasting interest in an
enterprise resident in another economy. The lasting
interest implies the existence of a long-term relationship

between the direct investor and the enterprise and a
significant degree of influence by the investor on the
management of the enterprise”. FDI is frequently
accompanied by technology transfer to host nations,
which includes the transfer of machinery, equipment,


patents, innovations, technical know-how, management,
and project implementation.
To achieve control or participate in the control of the
investment company, foreign investors must provide a
minimum proportion of capital in the legal capital or
charter capital, depending on the conditions of each
country's legislation. The capital contribution percentage
of the investors will determine each party's rights and
obligations, as well as profit and risk distribution.
[ CITATION LêM21 \l 1066 ]
2.1.1. Foreign markets
It takes a lot of time, effort, and money to choose a
business market. As a result, companies should use
appropriate market research approaches to save time
and money. In addition, there are four crucial aspects
to consider while selecting worldwide markets:
Growth gate: To protect their long-term interests,
investors will select potential market nations based on
their rate of development. Businesses must also learn
about the purchasing power of clients in the nation of
investment, the rate of competition in the same
industry, and the areas of supporting and alternative
products.

Market size: quantity of FDI investment in the market,
trade infrastructure
Cultural: When entering international markets,
language and cultural considerations should be taken
into mind. Businesses will not have the potential to
attract new clients if they cannot touch their emotions,
nor convey their products and marketing in their own
language. More critically, even a minor mistake
in culture issues might result in erasure and the loss of
a prospective market for good.
Legal corridor: Governments can establish investment
barriers to protect domestic businesses and industries
by reducing international competition in certain
industries such as tourism, military equipment
manufacturing, aluminum and steel production,
automobile manufacturing, aircraft manufacturing, and
energy extraction in terms of protecting national
security. As a result, firms must carefully examine and


pay attention to the political and legal circumstances.
[CITATION Đại \n \l 1066 ]
With over 200 nations on the planet, assessing and
selecting an optimal market is difficult. For example, if
a company wants to target a global market with a
huge population and large consumption sources, China
and India will be the first places to consider. If firms
need to reach a developed country in terms of
economics and technology, countries like the United
States of America, Japan, and others are obvious

choices.
In developing economies like China, India and others,
buying powers of customers is growing and high end
automobile and other infrastructure’s projects demand
is also continuously increasing. This makes the
developing economies an ideal choice for Lincoln
Electric’s global expansion.[ CITATION Lin10 \l 1066 ]
For example of FDI rate in India (2019) is
50,610,647,353.6 (USD), Country uses the 2008
System of National Accounts methodology.

Figure 2.1.1: Foreign Direct Investment, net inflows
(BoP, current US$)[CITATION Wor \l 1066 ]
2.1.2. Time of entry
The second important consideration in foreign market
investment is the right time to enter the market. To
create a brand and earn revenues, it is critical to have
the correct time. Investors should consider if it is too
early or too late to invest, whether it is a politically or
economically unstable time, and how this will effect
market expansion. Whether you choose to enter this
nation or not is up to you. When the firm answers
those questions, it will be able to determine when it is
acceptable to enter.
2.1.3. Scale of entry
Businesses must carefully evaluate scale of entry; the
choice of big or small scale relies on the nation that
the company picks, as well as the vision and money of

the investment organization. Of course, if you choose
to invest on a large scale, businesses will face
significant risks; however, if smart strategies, smart
management, and leadership talent are in place,
profits will be very high. Proportionate to or greater
than the quantity of capital invested.
2.2. Entry Modes
According to the book named International Business:
Competing in the Global Marketplace by Charles W.L Hill,
there are those kind of entry modes:
- Exporting
- Turnnkey projects
- Licensing
- Franchising
- Joint ventures
- Wholly owned subsidiaries

Figure 2.2: Advantages and Disadvantages of Entry
modes (Charles W.L. Hill)
2.3. Business overview
Lincoln Electric Holdings Inc is a multinational corporation
based in the United States. Welding machines, arc
welding accessories, plasma cutting equipment, Oxy-Gas,
and robotic automated welding systems are all


manufactured by the firm. Its headquarters are in Euclid,
Ohio, in the United States.
John C. Lincoln created Lincoln in 1895 with a $ 200
investment, primarily to make electric motors of his own

design.
Operating 55 manufacturing facilities in 18 countries and
exporting to more than 160 countries [ CITATION Chris \l
1066 ]

Figure 2.3: Overview of Lincoln Electric Company
(Lincoln Electric, Proxy Statement, 2021)
Lincoln Electric's greatest acquisition to date was Air
Liquide Welding SA for $130 million in 2017. Lincoln
Electric has made acquisitions in 11 different US states as
well as 15 international nations. Machinery (58%) and
manufacturing are two of the company's most targeted
industries (29%).
Manufacturing facilities are situated in the United States,
Australia, Brazil, Canada, China, Colombia, France,
Germany, India, Italy, Mexico, the Netherlands, Poland,
Romania, Russia, Spain, Turkey, and the United Kingdom
through wholly-owned subsidiaries. At December 31,


2020, the Company employed approximately 10,700
people around the world.

3. Methodology
3.1. Data collection
- Secondary data sources were used to construct the
study. We can also analyze and collect data from
books, past study articles, publicly available statistics,
and so on. Statistics from LECO's own annual reports
are typically used, such as:

- Report:
/>(2001)
/>(2020)
-

Book:
[ CITATION Int \l 1066 ]

-

Reseasrch:
/>doi=10.1.1.361.1823&rep=rep1&type=pdf

-

Website:
/>
3.2. Analysis tools


4. Discussion
4.1. SWOT analysis of LECO
According to [ CITATION Jor18 \l 1066 ], Lincoln Electric
can use strengths to create niche positioning in the
market, to consolidate and expand the market position,
can strive to reduce & remove weaknesses so that it can
better compete with competitors, look out to leverage
opportunities provided by industry structure, regulations
and other development in external environment, and
finally make provisions and develop strategies to mitigate

threats that can undermine the business model of Lincoln
Electric.
4.1.1. Strenghts
- Diverse Product Portfolio of Lincoln Electric


Successful Go To Market Track Record
Intellectual Property Rights
Managing Regulations and Business Environment
Lincoln Electric has some of the most recognized
brands in the domestic market it operates in.
4.1.2. Weakness
- Implementation of Technology in Processes
- Lincoln Electric track record on environmental issues
is not very encouraging.
- Lincoln Electric is suffering from lack of critical talent
especially in the field of technology & digital
transformation. Lincoln Electric is struggling to
restructure processes in light of developments in the
field of Artificial Intelligence (AI) and machine learning.
- Lincoln Electric is not efficiently managing the
inventory and cash cycle.
4.1.3. Opportunities
- One of the challenges Lincoln Electric facing right now
is limited access to high level talent market because of
limited budget. Expansion into international market
can help Lincoln Electric to tap into international talent
market.
- Growing Market Size and Evolving Preferences of
Consumers

- E-commerce business model can help Lincoln Electric
to tie up with local suppliers and logistics provider in
international market. Social media growth can help
Lincoln Electric to reduce the cost of entering new
market and reaching to customers at a significantly
lower marketing budget. It can also lead to crowd
sourcing various services and consumer oriented
marketing based on the data and purchase behavior.
- According to [ CITATION Jor18 \l 1066 ], globalization
along with boom in digital marketing and social media
has considerably reduced the risks of market entry and
marketing in international market.
- Lincoln will take advantage of its many opportunities
to grow by focusing on increasing market share,
leveraging its prior investments, and expanding
geographically. Expansion initiatives include growing
the aluminum consumables, flux cored wire, specialty
consumables, automation, retail and rental businesses;
-


geographic growth in Europe, Asia and Latin America;
expansion into complementary businesses; and growth
in high-potential product lines.[ CITATION 200 \l 1066 ]
4.1.4. Threats
- Government Regulations and Bureaucracy
- As Lincoln Electric can leverage low cost of reaching
customers using social media and e-commerce, so can
the competitors – both local and international
competitors.

- Instead of using Joint Ventures, it is feasible to use
Acquisition as a technique of entering the market.
- The threats of substitutes often arise either from
economic cycle or technological innovation. It may
require repositioning of certain brands on part of
Lincoln Electric in certain markets .
4.2. Core competencies
Competence can be demonstrated by a company's core
competencies, which include expertise, good skills, and
value creation. LECO must re-price some values for
consumers with excellent quality items at low rates if it
wants to gain a competitive edge. The result is superior
quality, functionality and efficiency in every product.
[ CITATION 20001 \l 1066 ]
It's a unique skill that only a few competitors possess.
With it comes the difficulty of copying (in terms of
products, formulas, marketing, and so on), which creates
the ideal core value for business competition, particularly
in the international market.[ CITATION Min19 \l 1066 ]. For
example, Lincoln Electric has become known as “The
Welding Experts.” It is the only public company in the
world 100 percent focused on welding. Our global
manufacturing platform allows us to serve customers
anywhere in the world, with the leading lineup of valueadded welding equipment and supplies. And around the
world, our products are backed by Lincoln's unmatched
technical expertise and customer support.[ CITATION
20001 \l 1066 ]

Eg: LECO’s Marlet Share

[CITATION Chi19 \t \l 1066 ]

As a company develops its business model and
incorporates its intellectual assets, core competencies
change. Core competencies are not just things that a
company does exceptionally well; they are also sets of
skills or systems that provide customers with exceptional
value at best-in-class levels. To be considered, such skills
or systems must contribute to perceived customer
benefits, be difficult to imitate, and allow for market
leverage.[ CITATION Fun \l 1066 ]
Core competencies should be hard to imitate because
they represent multiple skills, technologies, and
organizational elements.Prahalad and Hamel (1990,
May/June).
4.3. Analyze and select target market
Should LECO expand into India market?
[ CITATION Sie08 \l 1066 ] Claimed that: “The fact India accounts
for 3% of the Global Welding Industry Sales and 17% of
the world population makes this market naturally
attractive, in addition India’s GDP has been growing at an
average of 6% year after year for about 20 years, and
Goldman Sachs projects that India will become the world
fastest growing economy over the next 50 years, which
means that the country will be investing heavily in
infrastructure that will boost the welding market
including, but not limited to, highways, railroad, oil and
gas pipes and airports. In addition, India is located in a
geo-economical region that represents 45% of the global

welding sales – more that North America and Europe
combined that account for 23% and 21% respectively.”


According to [ CITATION 20001 \l 1066 ], Lincoln Electric
has a leading market position in Latin America and
continues to grow market share. Mexico and Central
America continue to be a fast-growing market for Lincoln.
Lincoln’s acquisition of a consumables business in
oilproducing Venezuela provides the Company with the
leading market position in one of the major markets in
South America. With operations in Mexico, Venezuela and
Brazil, Lincoln is well-positioned to serve all regions of the
Latin American market. Lincoln Electric continues to
increase market share in the Asian marketplace. Over the
past several years, Lincoln has established a regional
platform in Greater China and Southeast Asia. With our
Australian operation, along with our Kuang Tai joint
venture, Lincoln occupies a geographic platform that will
enable us to expand market share and build businesses
in the region. Lincoln continues to maintain a leading
market position in the highly diverse region covering
Russia, Africa and the Middle East. Lincoln’s leading
position in this geographically diverse market is due, in
part, to the Company’s strength in the oil and gas
segment of the welding industry, a segment that
presents opportunity to grow market share for products
and services as well as expanding its distribution network
and continuing to promote leadership in technology.
Upon acquisition of a business, the Company uses the

income, market or cost approach (or a combination
thereof) for the valuation as appropriate. The valuation
inputs in these models and analyses are based on market
participant
assumptions.
Market
participants
are
considered to be buyers and sellers unrelated to the
Company in the principal or most advantageous market
for the asset or liability.[ CITATION Chris \l 1066 ]
The Company’s products are sold in both domestic and
international markets. In the Americas, products are sold
principally through industrial distributors, retailers and
also directly to users of welding products. Outside of the
Americas, the Company has an international sales
organization comprised of Company employees and
agents who sell products from the Company’s various
manufacturing sites to distributors and product users.
[ CITATION Chris \l 1066 ]


4.4. Failure
Lincoln next big move was to buy Maser Griescheim of
Germany, the most expensive company, and named it
Maser
Lincoln
GmbH.
During George expansion plan Lincoln invested close to
$325 millions. These acquisitions were done on the basis

of poor knowledge and judgment of George Willis which
resulted big losses overseas and brought the company to
its knees. Company solvency was in question and despite
strong sales in USA, company could not offset the
overseas losses. Lincoln Electric had to borrow money to
pay annual bonuses to 3000 US workers. It took another
3 years of hard work and constant research and
adjustments to bring the Lincoln electric back to
profitability. During 80s and early 92 experiences made
Lincoln Electric to realize that one size fits all does not
work in International markets.[ CITATION Lin10 \l 1066 ]
4.5. Marketing for international markets
Upon acquisition of a business, the Company uses the
income, market or cost approach (or a combination
thereof) for the valuation as appropriate. The valuation
inputs in these models and analyses are based on market
participant
assumptions.
Market
participants
are
considered to be buyers and sellers unrelated to the
Company in the principal or most advantageous market
for the asset or liability.(2021)
One of the biggest marketing and sales successes in
2005 was the exhibit at the global welding trade show in
Essen, Germany, which is held once every four years.
[ CITATION 200 \l 1066 ]
If the customer willingness is high then company has a
strong brand awareness and brand loyalty. Lincoln

Electric can design favorable channel policies vis a vis
channel partners. Email Marketing is form a direct
marketing approach that Lincoln Electric can take to
directly reach out to its potential customers. Email
Marketing can help the Lincoln Electric to reach out high


probability prospects based on the data collected by the
company using its kiosks, trade marketing, and customer
survey.[ CITATION Jor18 \l 1066 ]
Managing
delivery
and
services
uncertainty[ CITATION Jor181 \l 1066 ]

in

times

of

5. Conlusion and Recommendation
5.1. Conlusion
5.2. Recommendation
Every market need a unique strategy. Every global
acquisition should be well researched and carefully
prepared. Local norms, game rules, and labor regulations
should all be well researched.

6. References
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