ABB Asea Brown Boveri
Case n. 4 (5-6-7)
1) What is ABB context and environment?
A deep study and understanding of the environmental context where an enterprise operates, is a necessary step that must precede any further analysis. Before setting a strategy, the management of the firm has to be aware of the internal potentiality of the company as well as of the external uncertainties (both positive and negative) it may encounter. The case presents a new born company that has just handled a merger: because of the great uncertainty and delicacy that distinguishes the situation, this first step is even more important. The context is definitely a global one: as a matter of fact ABB counts 850 separate legal entities in 140 countries all over the World. ABB operates in the Electrical Equipment Industry, and it is the result of a merger between two important European enterprises (Asea and BBC). The merger had a great impact over the whole industry, because the new ABB became the world’s largest competitor in transmission and distribution, and the leading World supplier of process automation systems, robotics, high speed locomotives and environmental and pollution control equipment. The competitive environment was then deeply influenced by the merger, because ABB competitors by that moment had to face a giant common enemy: furthermore the acquisition strategy, carried out by ABB, radicalizes more and more the situation, generating a response by the competitors. They started to reorganize themselves with new fusions and joint ventures. To give a more penetrating view of the context we may apply the SWOT analysis theory to the case. SWOT analysis enables to identify Strengths, Weaknesses, Opportunities and Threats that a company should manage during its business activity. Referring to ABB’s Strengths we have first of all to consider that thanks to the merger the company significantly increased its market’s share, gaining a leading position over the global industry as well as the possibility to improve economies of scale and scope . The merger also allowed the new born enterprise to unite both strengths of Asea and BBC: Asea brought to ABB its sophisticated management controls and marketing aggressiveness, while BBC brought a strong order book. So, thanks to the fusion the new company became richer both in tangible and intangible resources (know-how, distinctive internal capabilities, relationship and networks). About weaknesses it is important to point out that the integration between two companies is by the way risky. Reshaping the organizational structure, as well as the roles and the competences of the personnel of two former archenemies, isn’t something simple, and may bring a lot of uncertainties that are definitely expensive (in terms of moneys and top management’s attention) to manage. After the examination of internal Strengths and Weaknesses, we can start considering external Opportunities and Threats. The merger and the following acquisition’s strategy permit to ABB to catch the opportunities that a global market may offer, especially the opportunities of expansion in new countries. As a matter of fact, entering new local markets "as an insider and not an invader", which is one of the main objectives ABB wants to reach, will give to the company the opportunity of winning new orders and electrical generation contracts. Finally, the main Threats for ABB are its competitors and their reactions: as already mentioned, the new born giant scared a lot the other companies, that started to make alliance against a new dangerous common enemy. We can also imagine that the predominant position of the company may generate new threats brought by the antitrust and in general legal authorities all over the World, with connected costs of bureaucracy, compliance to the laws, etc.
2) What is the ABB strategy?
When we talk about strategy we have to consider a double level: the corporate and the business one. While the...
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