I agree with Aleks, although most people see an acquisition to be successful if they create a benefit greater than the 2 companies by themselves, however other intangible resources such as knowledge or even tangible resources such as retaining specialized workers are hard to quantify into a number and will not show up on your profits.
I agree with Jeff. Going on with that, I also believe many M&A's fail due to the fact that they merge with other firms that are unrelated therefore they are unable to create synergies such as consolidation of equipment/sales-force, greater market power or access to new distribution networks. These corporations are known as conglomerates and tend to fail at a higher rate than firms that use related diversification strategies allowing them to gain synergies through acquisitions.
In order for an merger and acquisition to be successful the combined benefits from the two companies must be greater than the two companies by itself (ie. AB > A + B) Tyco International is an example of multiple successful acquisitions. They were able to acquire a wide variety of SBU’s and maintain success despite the different businesses being unrelated. Although Tyco did not have any related diversification synergies between its core businesses it was able to achieve revenue and cost synergies at the SBU level. Tyco was able to be successful by encouraging this different business to acquire companies that would allow them to consolidate manufacturing and distribution networks, establishing a common sales force for all the businesses.
When creating an alliance it is essential for cultures to be blended. The extent to how much blending depends on the type of alliance. However, for an alliance to be successful both companies must adapt their cultures in order to assure the employees of both companies fit in. If only one culture was used as opposed to blending the cultures, the company’s employees who have to take on the new culture will have trouble adapting and it will take much longer to build trust in the new culture, as they are unfamiliar with it. It may also make these employees feel they are of less value than employees from the other company and they will not be motivated to make the alliance successful.
LE's employees seem to be no different than competitors employees rather it appears the incentives and management techniques transform these employees into more productive workers. By not cutting workers during downturns, they were able to retain creative, hard working employees who have gone through training programs therefore increasing productivity. Also by having management polices that allows workers to meet with top management and give suggestions, most equipment was modified and ran at two to three times its original rate.
These employee's value high reward incentives (which pays them according to productivity), a creative management style which makes them feel as equally important as management, and guaranteed employment which offers employees job safety regardless of how much they produce. I do not think it is hard to find people like this, however it will take time to mold these new people into the highly productive employees they have in the case.
I would say employee motivation and company culture both play a major role in understanding Lincoln Electrics competitive advantage. Due to employees being highly motivated, their workers were able to increase productivity at twice the rate of competitors as well as produce at much higher levels. The culture of the company allowed everyone to feel equal regardless of the position held in the company. As mentioned, there were no reserved parking spots for senior staff and all employees ate together in the same cafeteria. Top management had an open door policy in which employees could discuss ways to improve production.
The main causes of Lincoln Electrics competitive advantage is their incentive system and their innovative management style. Analyzing their competitive advantage using a VRIN model defiantly shows that they are holding a competitive advantage. Their resources are rare and extremely valuable setting them apart from others. The resource is hard to imitate and non-substitutable, as mentioned in the case, James Lincoln shared the company’s techniques of doing business and still competitors could not maintain the same level of productivity as Lincoln Electric.
Holding the analysis to the US market, Lincoln Electric is definitely demonstrating a competitive advantage through the use of intangible resources. This competitive advantage is attributed to Lincoln Electric’s innovative management style and its incentive system. The piecework system in place motivated employees to work hard and since there was no limit on how much could be earned workers worked faster and harder then the average industry rate. Also, with guaranteed employment workers did not have to worry about getting laid off during times when orders dropped or when they overproduced. Through this incentive system workers were paid 82% greater than the city average pay for manufacturing workers. Management's "open-door" policy towards all its employees made them feel they had a say in the company and allowed them to bring suggestions straight to the executives.These management styles and incentive systems in place gave employees a sense of ownership at all levels in the organization. Through this Lincoln Electric was able to outperform competitors in the industry making it the industry leader.
Going with Jeff's point, although administrations are being changed every 4 years, the overall nation as a whole remains. The corporations and common people's strategies and goals are not going to shift much with the new administration. Also going with Aleks point, many policies put in place are long-term policies that are not easy to change. So when assessing a country and doing the proper due diligence, it is important to understand which policies and strategies that are going to be in place for the long-run in order to fully understand the country you are entering.
I agree with Aleks that no one model should be exclusively used when assessing to enter another country. Rather, a combination of models should be used, perhaps the CLEAR model should be used as a screening tool and the remaining countries can be screened down even further using the CAGE model. This allows the company to do the proper due diligence by using multiple models that have different assessment criteria.
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Brainchild