The Lincoln Electric Company - Case Study Example

The availability and prices for raw materials are subject to volatility and are affected by global economic conditions, speculative action, world supply, and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated shortages, and other factors. Other economic factors include exchange rate fluctuations and limits on the repatriation of monies (The Lincoln Electric Company online). Sociological factors affecting the industry include the absence of trained labor pools as young skilled labor pursue cleaner and safer jobs (Brat, 2006).

On the technological front, increasing power ratings and continued improvements in beam quality and processes, such as remote welding, are expected to increase revenues. Advances in solid-state laser technology, including disc lasers and fiber lasers, are expected to foster growth trends (Frost & Sullivan online). In the environmental environment, the industry increasingly faces complicated environmental regulations including those concerning air and water emissions and waste management. Lastly, factors in the legal environment that could affect the cutting and welding industry are lawsuits pressed by plaintiffs who develop neurological conditions caused by exposure to manganese contained in welding consumables.

This industry also faces the risk of exposure to product liability claims in the event that accidents or failures on projects result in bodily injury or property damage. Also, this industry is required to comply with a wide variety of conflicting foreign laws and regulations, import and export limitations, and exchange controls (The Lincoln Electric Company online). The intensity of rivalry in the cutting and welding industry is high. Lincoln Electric operates in a highly competitive global environment and competes with other broad line manufacturers and numerous smaller competitors specializing in particular products.

Moreover, in the past decade, the United States arc welding industry faced fiercer foreign competition as low-cost imports became more readily available. This foreign competition intensifies as the U.S. dollar depreciates in relation to other currencies. Suppliers have high bargaining power. The main raw material used in the cutting and welding industry is steel. Since 2003, the price of steel has increased substantially and there have been periodic shortages due to worldwide economic factors, including increased demand for construction materials in developing nations such as China and India.

Customers have high bargaining power. The customers of the cutting and welding industry are the manufacturing and industrial sectors (The Lincoln Electric Company online). The cutting and welding industry is fragmented and faces a consolidating end-user base. The barriers to entry are high. Rising labor costs and the decrease in the number of skilled welders together with the increased demand for high-precision welding is set to drive the adoption of welding robots. Sizeable capital investment is required to install automated equipment (Frost & Sullivan online).

The threat of substitutes is low. Welding is still the dominant method of joining metals today (Lab Safety Supply online; The Lincoln Electric Company online). Lincoln Electric has a culture of innovation, technological leadership, and employee focus, which are also its strengths. Recognized as the "welding experts".