Lincoln Case Shanghai

The Case Summary

Company Background

In the mid-1990s, Lincoln made a new effort at expanding its operations in Asia, following the closure of the Japanese operation. This followed the introduction in 1995 of a new management structure for the corporation consisting of new executive positions (Presidents) and accompanying staffs to manage each of five key strategic regions: North America, Europe, Russia-Africa-Middle East, Latin America, and Asia (including Australia). Michael Gillespie was appointed President for the Asian region. Asia was now a key target of the firm. Gillespie’s plan was to create local (regional) competencies and construct an integrated sales and manufacturing business with Asia.

Gillespie and Vice President for manufacturing in the Asia region, Ray Bender recognized that at least two issues would weigh heavily in their strategy for Asia. With the exception of Japan, manual (stick) welding was still the predominant technique in Asia and the shift to semiautomatic and automatic welding was only occurring slowly and in concentrated areas. Gillespie decided to build operations in three locations: Indonesia, the Philippines, and China. The natural hub for this operation was China.

Lincoln had established a representative office in Tianjin in the late 1980s. Instead of a manufacturing partner, Lincoln decided to only seek the collaboration of its distributors. Thus, the investment in the “Lincoln Electric (Shanghai) Welding Co., Ltd.” was made with a 68% stake by Lincoln and 8% by each of four Lincoln’s distributors in Asia.

The decision to build an advanced manufacturing facility in Shanghai had good reasons. For one thing, Shanghai was home to the Pudong New Area, a massive new development area located south-east of the Huangpu river and home to a large number of free trade zones.

In early 1997, Julius Wu was appointed Country Manager for China and General Manager of the Shanghai Operation. Wu was originally from Taiwan and...