I completly agree that greater profit potential is an attractive reason for pursuing a high engagement entry mode but I do not always see it as a higher risk. By aquiring a firm rather than joining in some kind of partnered effort, much greater control is esablished to ensure that all efforts of the aquiring firm are in line with the short and long term goals. If the CAGE model is leveraged to choose a region for cross boarder business establishment, I feel that the rewards are almost completely in favor of the resulting single entity. The greater the split of control the greater the chance for conflicting goals that lead to business failure. In the case of expanding business to a location vastly different from the home company, I do still see benefit in diversifying the risk through a JV or equity alliance.
In the event of an aquisition or green field venture abroad, it becomes more important than ever for both the parent firm and the firm being aquired to share a definite vision and scope. For that to happen, there must be a strong amount of control to ensure that all efforts are in line with these goals. As Walters discusses, "letting nature take its course" destines the effort to fail. There must be close leadership action to overcome the corporate culture differences that may exist. In contrast to what others have mentioned above, I see a high engagement entry mode as actually lowering the risk and increasing the odds for success to ensure that all benefits of the aquisition, JV, or greenfield venture are realized to their full projected potential.
Although I agree with Walters in the importance of cultural blending when developing a JV with businesses of two different cultures, I think he completely glosses over the barries to this kind of change. As others have mentioned and we have learned in this class, cultural change takes a very long time and can be quite difficult. I strongly agree with Danielle and Peng in that an important step would be to first look for a partner whos culture is similar with different core competancies. If I were a VP of a company and someone was pitching the idea of a JV with a business abroad of a vastly different culture, they better have a damn good and accurate ROI that greatly outweighs the enormous risk presented.
The blending of culture adjustment would mainly be important in an equity based alliance. In this type of alliance's shared ownership and financial interest between the two companies, the importance of common goals and synergy can be made or broken by a culture clash. With this type of alliance, I strongly agree with Walter's statement that "letting nature take its course" stacks the deck against a successful business venture. This culture blending would be less important with the contractual alliance that does not involve the shared ownership. Even with the non-ownership forms of alliance, a good understanding of the cultural difference would lower the risk for all parties involved.
Excellent point regarding the increase in higher education emphasis. I too agree that in the future we will have a shortage of labor employees thus further reducing industrial exports from the US. With such an emphasis on education for white collar employement, I could see LE having more diffcult time finding laborers regardless of the motivational system they have in place now as compared to just 10 years ago.
The employees of LE are cetainly individualists. They are motivated primarily by the very direct financial results of their actions. Many companies have forms of profit sharing but they are primarily based on team or company performance as a whole. As the case mentions, LE pays each employee's bonus based on their individual efforts. In the United States specifically, we have an abundance of people who are motivated by by personal financial gain and power. This reflected in the number of people attending college and persuing higher education in the US. The end goal is to make more money.
I do not think that LE would find it difficult to find employees. With such a merit system in place, I think that a fairly average laborer would be self motivated to perform at their best. If anything, I would expect LE to have an easier time finding qualified employees than other organizations with more orthodox methods of motivation. If an employee makes it in and is not performing, their financail gain will reflect that. If they are not making the money that their piers are earning, they would likely be motivated to seek employement elsewhere.
Regarding the model, culture certainly has brought value to the company through the incentive system. All production workers are paid based on output and an acceptable level of quality. As others have mentioned, the piece rate system is not rare but the combination of employee recognition and sizable bonus with the piece rate system is. The culture of LE also makes their incentive system very inimitable by competitors. Within the realm of the United States, it's hard to think of a substitutable resource that would allow the employees to be motivated they way they are at LE. Wendy puts it well when she describes how they have created the "perfect storm".
After looking further into the article, I see culture as being the main intagible resource that is responsible for LE's success. There are many profitable companies in existance besides LE, but most of the profit sharing is distributed among the executive staff and management. This is the piece of corporate culture that would be very difficult to change. LE's culture is what allows this kind of incentive system work to motivate ALL employees. As Marc mentions below, it's rare to see a production worker making the kind of money mentioned in the article as well as a manufacuring facility the size of LE sans a union.
The culture and motivation go hand in hand. The culture of profit sharing was established well before the business grew like it has. By establishing this culture early in the roots of LE, higher level management has become used to distributing profits throughout all who work for the business. Again, with the US being an individualist driven nation, I think the motivation of higher pay is almost built in.
It even goes deeper than that. Motivational strategy also went towards making employees feel empowered. Blue collar employees were able to submit ideas for improvements within the business. Many ideas were implemented and the employees were recognized for it. As the article stated, some felt almost as if they worked for themselves.
Excellent point in regard to corporate culture. I think this is the largest barrier to entry when it comes to jumping on the Lincoln Incentive "bandwagon". As mentioned in the article, the techniques of production were shared and their incentive system was public knowledge but they remained an industry leader. The other firms that tried to compete were already very large and established. Many of the corporate leaders of these companies would have a difficult stomaching this kind of profit sharing throughout the entire company.
Still I feel that this advantage fails the VRIN test. A startup company could much more easily immitate this incentive model.
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Medley