Lincoln Electric

How should Lincoln Electric enter India? Give the pros and cons of the different alternatives under consideration by Lincoln’s management. What do you recommend and why?

Lincoln Electric has three alternatives to enter India. First, is enter India by acquisition. Second is by a joint venture with a local partner and finally by building a new plant of its own.

I would suggest Lincoln Electric to first enter India by a joint venture with a local partner in order to gain knowledge and experience in how the country operates in terms of bureaucracy, labor laws, culture and so on. Once they have a clear understansing of the environment in India, Lincoln Electric should definitely build a production facility in India because of the growth and foreseen opportunities.

Let us examine the pros and cons of different alternatives:

1. Enter India by aquisition:

Pros: No need to set-up a plant and can achieve economies of scale and eliminate inefficiences as Lincoln Electric is known for its high quality products and its technical innovations and can bring its best practices on board.

Can get an established customer base and distribution channel and contacts of the acquired company.

Cons: Would have to pay a premium price for a company as the welding market in India is booming.

Most established Indian companies are already in a joint vanture or have been acquired by global compititors. The rest are mostly small family owned businesses which may not be willing to be acquired unless a preimium price (substantially over its present valuation) is offered and acquiring such companies may not work well for Lincoln Electric as they may not have that well an established customer base and distribution channel.

2. Enter India by joint venture:

Pros: Will get a better sense of working environment in India and can gain knowledge and experience