Key Points • Core Competencies • Product mix • Technical Developments • innovation, • technology. • Customer Relations & Marketing • Quality • Service • Operations • speed • Productivity • efficiency • Logistics • Culture & Leadership • Management • Organization • Decision-making abilities • Financials
Product Mix • Lincoln could solve customers’ process problems and improve process productivity with its ability to combine both equipment and consumables development needs into one integrated package.
Tech Development Strengths • Technological innovation allows the company to earn a price premium for many of its products. • Industry leader in new market introductions and quality performance. • The most aggressive, comprehensive, and successful R&D program in the welding industry
Tech Development • More than 50% of Lincoln Electric’s equipment sales in 2005 were generated by welding machines introduced in the previous five years. • Known as “The Welding Experts,” vs. its leading competitors who chose to diversify their resources far away from welding. • In 2004 began building regional engineering development centers worldwide.
Costumer Relations Strengths • Product support and guarantees, allows the company to earn a price premium for many of its products. • Customer support • Training • Consultation • Guaranteed Cost Reduction Program
Costumer Relations Weaknesses • Geographical distance; logistics
Marketing Strengths • Strong brand identity
Operations Strengths • Efficiency • Solutions oriented • Supply chain and FANUC Robotics • Harris Colorific acquisition Weaknesses • Maintaining operational efficiency internationally • Incompatible power source
Logistics Weaknesses • Local production presence
Inimitability Product mix Technical Developments Customer Relations & Marketing Operations Logistics 5 4 3 3 2
Durability Product mix Technical Developments Customer Relations & Marketing Operations Logistics 3 4 5 4 4
Appropriability Product mix Technical Developments Customer Relations & Marketing Operations Logistics 5 5 5 4 4
Sustainability Product mix Technical Developments Customer Relations & Marketing Operations Logistics 3 3 4 3 2
Ador Welding Ltd. • $50 million in sales in 2005 with a 15% operating margin, and a portion of its shares traded on the local stock exchange. • Cost-adjusted annual revenue growth rate at 20% over the next two years, which should continue with a return on capital employed at over 40%.
Ador Welding Ltd. • The company has shifted some production to Silvassa, a government-created tax-free zone, and by concentrating production at a smaller number of facilities Ador had realized both economies of scale as well as tax savings. • In July 2006 the company’s publicly traded shares were valued at 10.9x FY07 estimated net earnings per share, and EBITDA per share was predicted by the same local analyst to grow at a CAGR of 29% and net earnings per share to grow at a CAGR of 23% over the next two years.
Ador Welding Ltd. • Ador had annual sales of 241.6 crore (large values of India’s currency, the rupee, are counted in terms of crore, with one crore the same as 10,000,000 rupees). • The company had produced 17,217 MT of consumable welding products in FY06, and Ador had previously constructed plant lines that could produce far more than that should the market continue to grow.Ador had in FY06 paid a dividend of 15 rupees, equal to a 4% yield on the stock.
ESAB India • Over $50 million in sales in 2005. • 18% operating margin in 2004 • Newly Restructured • New $4.6 million, 50,000 square foot, greenfield manufacturing plant
EWOC Allows Ltd. • $30 million in revenues in 2005
Smaller Competitors • D & H Sécheron • $3.5 million in sales in 2005 • Indo Matsushita • Anand Arc • Manufactures fullrange of welding consumables • Claims that it produces the highest-quality electrodes in India
Culture Strengths • Industry-leading productivity advancesthrough innovative human resource and incentive systems. • stock ownership • incentive bonuses via merit ratings • Employee Advisory Board • employee suggestion system
Culture • annuities for retired employees • group life insurance. • No lay-off policy • The entrepreneurial spirit • Piecework • Work days • Merit ratings • Trusting relationships
Culture Weaknesses • Competent executive management • Synergies of acquisitions • Competent operational/functional management • Incentive and bonuses
Financials Strengths • 2005: operating income was $153.5 million and net income was $122 million on sales of $1.6 billion. Weaknesses • Domestic Reliance • Over-forecast and spending