Based on the attached Case Study...
Should Mike Gillespie invest in a new factory in Indonesia? If yes, should he do it alone or through a joint venture? Should he transport Lincoln's unique corporate culture to Indonesia? Why or why not?© BrainMass Inc. brainmass.com October 5, 2022, 4:44 pm ad1c9bdddf
SOLUTION This solution is FREE courtesy of BrainMass!
Yes, Mike Gillespie should invest in a new factory in Indonesia because trade barriers and the cost of transport made consumables more difficult to import profitability than equipment. Tariffs of about 30% and shipping cost of about 7%of factory cost made it impossible for Lincoln to compete in Indonesia's low margin stick consumables segment without having a local manufacturing base. The new factory would also allow the Lincoln's strategy to become realized in the country of Indonesia. The strategy was to build brand awareness and loyalty by importing and selling equipment to other company that were users of wielding products such as construction and manufacturing industries. They would also make wielding products in Indonesia, but it does not look like the first few years will produce a large profitable return.
A joint venture would probably be the best type of investment in Indonesia because there were a few barriers and problems that could arise in the country if the factory was wholly owned by Lincoln. The political and economic risks were serious during the time of Lincoln's plan to invest in Indonesia. There was turmoil in the country because of the President's opponents (President Suharto was ill and the opponents were warring with the government) and the economic was growing, but the government owned most businesses and the government officials were corrupt. A joint venture would provide access to a partner's local expertise and relationship with key people in business and government. Gillespie believed these contacts would make the process of constructing the factory, operations of the business and distribution of products easy. Gillespie already knew of two distribution companies that would be very likely joint venture partners. Both of the distribution companies should be joint ventures with Lincoln because Tira knew important contacts and SSHJ had the monetary power to invest in Lincoln's new factory.
No, The Lincoln unique cultural should not be taken to Indonesia because Indonesia had an established pay structure already in place for their production workers. The Lincoln Company did not have experience with the labor practices, ethical and public relations in Indonesia. . The past history of Lincoln's investment with foreign countries and not understanding the cultural of the countries caused plant closures and financial failure, so they should understand Indonesia's cultural before bring their unique cultural to Indonesia.© BrainMass Inc. brainmass.com October 5, 2022, 4:44 pm ad1c9bdddf>