Strategic Management for ABB Ltd.

This report discusses the strategic challenges faced by ABB Ltd. and provides a comprehensive analysis of its mission, goals, objectives, and capabilities. It also includes a PESTLE analysis and a Five Forces Model analysis.

1
STRATEGIC MANAGEMENT
Strategic Management Department: Leadership and Management
ABB Ltd.

2
STRATEGIC MANAGEMENT
Table of Contents
Introduction.................................................................................................................................................4
About ABB..............................................................................................................................................4
Purpose of the work.....................................................................................................................................4
Strategic challenge......................................................................................................................................5
Mission, goals and objectives statements....................................................................................................5
Mission....................................................................................................................................................5
New mission statement............................................................................................................................6
Vision..........................................................................................................................................................6
Objectives....................................................................................................................................................6
PESTLE.......................................................................................................................................................7
P- POLITICAL FACTOR.......................................................................................................................7
E- ECONOMIC FACTOR......................................................................................................................7
S- SOCIAL FACTOR.............................................................................................................................8
T- TECHNOLOGICAL FACTOR..........................................................................................................8
E- ENVIRONMENTAL FACTOR.........................................................................................................8
L- LEGAL FACTORS............................................................................................................................9
FIVE FORCES MODEL.............................................................................................................................9
THREATS OF NEW ENTRANTS.........................................................................................................9
BARGAINING POWER OF SUPPLIERS..............................................................................................9
BARGAINING POWER OF BUYERS................................................................................................10
THREATS OF SUBSTITUTE PRODUCTS AND SERVICES............................................................10
RIVALRY AMONG THE EXISTING COMPETITORS.....................................................................10
CAPABILITIES THAT LINK TO CRITICAL SUCCESS FACTORS IN THE INDUSTRY..................10
VRIO ANALYSIS....................................................................................................................................12
V- VALUE............................................................................................................................................12
R- RARITY...........................................................................................................................................13
I-IMITABILITY....................................................................................................................................13

3
STRATEGIC MANAGEMENT
O- ORGANIZATION............................................................................................................................14
SWOT ANALYSIS FOR ABB LTD...................................................................................................................15
Strengths...............................................................................................................................................15
Weakness..............................................................................................................................................15
Opportunities........................................................................................................................................15
Threats...................................................................................................................................................15
TOWS ANALYSIS FOR ABB LTD.........................................................................................................16
S-O STRATEGIES;...................................................................................................................................17
S-T STRATEGIES;...................................................................................................................................17
SAF STRATEGY EVALUATION...........................................................................................................17
S- SUITABILITY..................................................................................................................................17
A-ACCEPTABILITY............................................................................................................................18
F- FEASIBILITY..................................................................................................................................18
REFERENCES..........................................................................................................................................19

4
STRATEGIC MANAGEMENT
Introduction
About ABB
ABB is a public traded limited company which deals in heavy electrical equipment,
robotics, and automation technology and power areas. The company was formed by the merger
of ASEA (which is Swedish company) and Brown, Boveri & Cie (which is a Swiss company) in
the year 1988. Headquarter of the company is located in Zürich, Switzerland. It is the largest
builder of electricity grids in the world (Birkinshaw, et. al., 2007). The matrix structure is
followed by ABB. The company is having four production divisions i.e. electrification products,
robotics and motion, industrial automation and power grids and one corporate division. The
company has the history of innovation of more than 130 years; it is currently focusing on the
future of industrial digitalization. There exist two main objectives of the company, the first is to
transfer the electricity from any power plant to any plug, and the second one is to bring the
automation in the industries from the natural resources to the final products. The company is
providing their services in more than 100 countries in the world. They are the world leader in the
digital technologies. The company has installed more than 70,000 controlling systems that are
connecting more than 70 million devices. The company believes in bringing the continuous
innovation in their products, services, and systems so that they increase the efficiency,
productivity, and reliability for their customers.
Purpose of the work
The purpose of this work is to understand the nature of strategic management and its
competitive and institutional context. To understand that how the strategic analysis and the
formulation contribute to the performance of the organizations. The main purpose of this report

5
STRATEGIC MANAGEMENT
is to discuss the strength and limitation of the strategic analysis and how it fits into the overall
strategy process. We will also going to write the strategic plan for the selected company.
Strategic challenge
The one strategic challenge that the company is facing right now is the related to the
common goals. As the company has the history of merger and acquisitions in the past, therefore,
there exist many other companies as well that are working under the name of ABB. For the other
companies, having a proper synchronization with the aims and objectives of the parent is not
always easy (wright, 2017). They are used to of working with other objectives and possess
different core values. Therefore, in order to bring them together and get the most from them, it is
important for the strategic managers of the company to find the ways so that they can get over
this challenge.
Mission, goals and objectives statements
Mission
ABB wants their customer to enhance their operating performance, their reliability on the
power grid along with the productivity while at the same time lowering the consumption of
energy and reducing the impact on the environment (GROUP, 2017). The focus of the company
is on customer satisfaction. Bringing the innovation and maintaining the quality is the main
characteristics of the company’s products, services, and systems.
The focus of the company’s mission is on the improvement of customer performance and
reliability and not on the sustainability. They are not motivated to hire and retain the skilled
employees in their mission statement.

6
STRATEGIC MANAGEMENT
New mission statement
The mission of ABB to empower their customers by increasing their operating performance and
their reliability on the power grid while lowering their energy consumption by introducing the
innovation and maintaining the quality in their products and services. Also the company wants to
attract skillful and talented employees and retaining them into the company by providing them
attractive and global wok environment and take care of sustainability, reducing the impact on
environment and considering business ethics in practices are at their core which also reflect in
their operations as well.
Vision
ABB is the leading engineering company in the world, and help their customers to use the
electrical power more efficiently, increase the productivity of the industries and take care of the
reduction of the impact on the environment, “Power and productivity for the better world”.
The vision statement of the company is customer orientated and has environmental value.
Objectives
There exist nine objectives in the annual Group Sustainability report of the company.
These are;
 Products, services, and solutions
 Safe operations
 Climate actions
 Resource efficiency
 Right materials

7
STRATEGIC MANAGEMENT
 Responsible sourcing
 Integrity
 Human rights
 Our people and community
PESTLE
P- POLITICAL FACTOR
The political stability issues can play the important role in the operations in this industry.
As we know that the company is dealing in all over the world, therefore, there is a high
probability that they face trouble in the counties where there is uncertainty in the politics. Also,
the companies have to deal with the corruption in many countries which is part of regulations of
industrial goods sector (Makos, 2015). The trade regulations and tariffs that the government
charges for the industrial goods also vary. Not all the companies are business friendly. Therefore,
we can say that, the political factor is a threat for the companies in this sector.
E- ECONOMIC FACTOR
There are various macro environment factors like savings rate, inflation rate, foreign
exchange, interest rate, and the economic cycle. All these factors help in identifying the possible
demand and the required investment in a particular economy (Rothenberg, et. al., 2011). The
economic system that the companies are using, plays an important role in order to find out that
what are strategies required for the operations in that economy. Hence, the economic factor is
more of a mix of threat and opportunity for the companies.

8
STRATEGIC MANAGEMENT
S- SOCIAL FACTOR
The cultural environment of the market is an important factor that has a great impact on
the organizations. The people living in various places do not have the same skill set. As their
mission is to manufacture only the quality products and provide the quality services to their
customers, therefore, they have to maintain the same level of skill throughout their branches
(Newton, 2014). For the organizations, the social factor is mostly a threat for them.
T- TECHNOLOGICAL FACTOR
The technology is the most important pillar in the mission and the vision of the
organizations. But as we all know, that the technology is changing every day, and it is hard for
the company to keep up with those changes. The competitors of ABB are the biggest threat to the
company in terms of technology evolution (Recklies, 2006).). But as the company is using the
most innovative method in their business operations, hence, the technological factors will be
more like opportunity for them.
E- ENVIRONMENTAL FACTOR
As we have mentioned in the vision of the company, that their goal is to take care of the
reduction of the impact on the environment as much as possible. And for that purpose, they have
to think constantly to find the ways to achieve that vision. The organizations in this sector do
face issues in dealing in different companies because of the different environmental law. Apart
from that, change weather and climate, waste management, are the main factors that affect the
operations of the company. Hence, this factor is the threat for them.

9
STRATEGIC MANAGEMENT
L- LEGAL FACTORS
In a number of countries, the company can face the issue of not having robust protection
for the intellectual property rights of the company, because of the weak legal framework. Health
and safety law, employment law, discrimination law, are some of the examples by which the
company faces issues in doing their business in multiple countries. Therefore, this is also the
threat for the operations of them.
FIVE FORCES MODEL
THREATS OF NEW ENTRANTS
There are so many new companies that are ready into the market of diversified
machinery. They also bring innovation into the industry and use various strategies like providing
products and services at lower prices, finding ways to reduce the cost involved in the operations
and providing valuable services to their customers (Grundy, 2006). The companies have to deal
with all the challenges that the new companies bring into the market in order to be on top.
Although it is a threat for the organizations, but it will help them in improving their business
consistently, which is a good opportunity for them.
BARGAINING POWER OF SUPPLIERS
The organizations who are dealing in the diversified machinery are dependent on the raw
materials in order to manufacture their products. When the supplier gets in the dominant
position, the company has to suffer from the decrease in the margins which they can earn from
the market (Porter, 2008). It not only impacts the company economically but also has the impact
on its productivity. Therefore, this can act as a threat for the companies.

10
STRATEGIC MANAGEMENT
BARGAINING POWER OF BUYERS
Buyers have a nature of demanding more products and services and want to pay the
minimum possible price for their needs. This affects the profitability of organizations for the
longer duration of time. It generally comes into the light when the customer base of the company
is quite small (Narayanan & Fahey, 2005). It provides higher bargaining power to them, and
demands for the discounts and offer. If the companies are able to form good strategies, they can
convert this threat into opportunity.
THREATS OF SUBSTITUTE PRODUCTS AND SERVICES
When the new or the existing competitor bring the new product in the market that offers
the same features, or more, then it hurts the profitability of the industries. Due to this, the market
of the companies gets divided. Hence, it is a threat for the organizations in this industry.
RIVALRY AMONG THE EXISTING COMPETITORS
When the rivalry between the companies gets more intense, then it results in lowering
down of the prices and thus decreases in the productivity with the profitability. Competitors of
organizations can affect the long-term profitability of them (Barney, 2014). Therefore, increase
in competition will help in bring the enhancement in the company, which is a good opportunity
for them.
CAPABILITIES THAT LINK TO CRITICAL SUCCESS FACTORS IN THE INDUSTRY
The critical success factors can be understood as the factors that are necessary for the
success of the business. In ABB, the company has a state of the art technology in order to assist
their customers in increasing their efficiency and productivity. For that purpose, ABB
engineering services supply a wide range of consulting services for their customer who is doing

11
STRATEGIC MANAGEMENT
their business in the manufacturing operations as well as in engineering. The services that the
ABB provides also consist of the implementation of the project and their management (GROUP,
2017). The company is providing their services to its customers who are working in the
chemical, oil and gas, petrochemical, pharmaceutical and various consumer industries that are
located worldwide.
In order to do so, ABB takes a very comprehensive approach for the assessment of the
industrial processes. They have a wide range of innovative technological tools that help them in
getting the information about the project and finding the opportunities for the companies in days,
which can take months to other company. This wide range of opportunities and information
helps the decision maker of the client companies to have a rapid and an independent view of the
enhancement possibilities for their performance and processes. Therefore, with their help, the
companies are able to establish the well planned sustainable change programs (JOHNSON,
WHITTINGTON, & SCHOLES, 2014). The method that they used in order to find the key
issues and the possible opportunities for the enhancement is by benchmarking their current
performance and processes in various fields such as,
 Manufacturing,
 Supply chain,
 Waste,
 Safety,
 Maintenance,
 Environment,
 Quality,

12
STRATEGIC MANAGEMENT
 HR,
 Strategy,
 Yield,
 Energy, and
 Competitive position.
They have the assessment database of more than 500 plants all over the world. Their team
has surveyed over $25 billion and providing the client benefits of more than $100 million per
year. Their benchmarking approach has helped them in making the efficient operational
enhancements even by spending less financial assets of their customers. Their tested
manufacturing enhancement processes to provide the step change improvements in order to
assert the performance and productivity of their company.
In the petrochemical business, they have performed their project on the operational
improvement and manufacturing excellence, which has provided the outcomes of more than
$26m per annum in value. In the continuous chemical plants, they have completed their projects
of manufacturing improvements teams, which has provided the outcomes of more than $1
million per annum (Morosini & Lioulias). In the specialty chemicals, they have executed the
projects of batch plant OEE and polymer processing, which have provided the outcomes of more
than $10 million per annum. And in the catalyst manufacturer, they have executed the project of
operational excellence of more than $4 million per annum.
VRIO ANALYSIS
V- VALUE, i.e., “Is this resource or capability valuable to the firm?”

13
STRATEGIC MANAGEMENT
Yes, the benchmarking capabilities of the company are valuable to them. The
benchmarking technique that the company uses has helped in creating the new opportunities for
the company and diminishing the possibilities of threat from their competitors. Therefore, we can
say that it is the strength of the company (Cardeal & Antonio, 2012). The opportunities that the
firm have attempted in order to exploit them are technological change, economic climate, and
legal and political condition as well.
In addition to that, the threats that the benchmarking technique of the ABB Ltd. is able to
mitigate are threats of rivalry, threats of buyers and threats of a substitute.
R- RARITY, i.e., “Is control of the resource/capability in the hands of a relative few?"
The benchmarking technique that the company is using is unique and does not possess by
any other competitors. Due to this, this works as the valuable source for the company and
provide them with a competitive advantage over the others. Despite the various adversities faced
by the company in terms of economic crisis and political instability in some countries, the
company was able to endure this technique over time in order to get the sustained benefits over
others.
I-IMITABILITY, i.e., “Is it difficult to imitate, and will there be significant cost
disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"
ABB has got the competitive advantage over its other competitors because of this
technique. The techniques used by others in order to find the opportunities for the customer and
provide an improvement in their current processes are not that effective as of ABB.

14
STRATEGIC MANAGEMENT
O- ORGANIZATION, i.e., “Is the firm organized, ready, and able to exploit the
resource/capability?" "Is the firm organized to capture value?”
There are many elements to this question of organization, such as the formal reporting
structure of the ABB, various compensation policies, and management control systems. The
reporting structure of the company includes the information about who will report to whom
within the organization. In the management control system, it is making sure that the decisions of
the managers must align with the goals and objectives of ABB (Knott, 2009). Providing
incentives to the employees on their excellent performance comes under the compensation
policies.

15
STRATEGIC MANAGEMENT
SWOT ANALYSIS FOR ABB LTD.
Strengths
 Large customer base with customers of long term contracts
 Superior brand value opens the opportunity of aftermarket sale
 Has root in all over the world
Weakness
 In the past, the company has overpaid for the their acquisitions
 Margin is not enhancing on shorter term
Opportunities
 Initiatives taken by government will help in increase the demand in power sector
 The company is strong in terms of finance and has a huge cash flows
Threats
 The economy’s bad outlook can have a negative impact on the cash flows
 The government is under the pressure for cutting down the financial cost for the project.

16
STRATEGIC MANAGEMENT
TOWS ANALYSIS FOR ABB LTD.
The issues have been found in the context of the company that company has some internal
weakness such as less of productivity. However, the company has great opportunity to enter in
new market but due to lack of attentiveness company have to struggle in entering to the new
market. Strict regulations can be dealt by having the long-term contract with the government
companies in the new market.
INTERNAL FACTORS
EXTERNAL FACTORS
INTERNAL STRENGTHS
 A world leader in
automation and power
 Operating in all over
the world
 Provide a wide range
of services in electrification
products, robotics and motion,
industrial automation and
power grids
 Having long-term
contracts
INTERNAL WEAKNESS
 The company has a
history of doing payment more
than necessary for the
acquisitions.
 Not all of the
collaborations delivered the
same productivity
EXTERNAL
OPPORTUNITIES
 Growth rates
 Entering into new
markets
 Introducing new
products and services via
continuous innovation
 New opportunities
generating due to the global
demands.
S-O STRATEGIES
 The company can enter
new markets and have a taste
of success by their wide range
of services
 Introducing new and
better products and services
will help in having the long-
term contract with the existing
clients.
W-O STRATEGIES
 The company can take
the most from all of their
acquisitions by using their
innovation and technology.
EXTERNAL THREATS
 Worldwide economy
crisis
 The increment in labor
S-T STRATEGIES
 Strict regulations can
be deal by having the long-
term contract with the
W-T STRATEGIES
 Avoid any new merger
deal till there is stability in the

17
STRATEGIC MANAGEMENT
wages
 Strict environmental
regulations
 Intense competition
from worldwide organizations
government companies in the
new market.
world economy.
S-O STRATEGIES;
ABB has one of the widest ranges of products and services which they offer to the customers I
the field of electrification of the products, robotics, and automation, power grid. Therefore, they
can enter the new markets such as developing countries and provide them with their wide range
of services to their businesses. This will help in the expansion of the company which in results
will be a profitable step for the company.
S-T STRATEGIES;
As ABB will be going to enter the new market, the company have to deal with the strict
business, trading and environmental regulations, as not all of the companies are business
friendly. Hence, in order to deal with them, it would be helpful for them if they can have the
contract with the government or public companies of that market. Their long-term contract will
provide their government assurance that they will be here for a longer period of time. Due to
that, the government might loosen the regulations for ABB.

18
STRATEGIC MANAGEMENT
SAF STRATEGY EVALUATION
S- SUITABILITY
The strategy that has been proposed in the TOWS matrix will help in taking the full use
of opportunities that we have discussed. The wide range of products and services of the company
will help them in entering the new markets like developing countries. The reason behind this, in
the developed countries, the demand for the new technology and innovation is higher than that of
the developing countries. The company cannot survive for much longer with the same
technology in the developed market than they can in the developing nation. Therefore, by
entering into that market, they do have to worry about the innovation much, and they can focus
on the services and products that they are already having. Penetrating the market first will be
helpful for them in order to avoid any threats.
A-ACCEPTABILITY
The strategies that have been proposed here will be helpful for the organization in order
to meet the expectations of the stakeholders. The new market will work as the land of
opportunity for the ABB. They will be able to generate more profits and the risk of threats will
be minimal. They can be more involved in the decision making of the strategies in the company.
F- FEASIBILITY
The resources that are required for the successful implementation of all the strategies are
already possessed by the company. They just have to give the direction to those resources and
they will bring the desired profits and help in accomplishing the goals of the company.

19
STRATEGIC MANAGEMENT
REFERENCES
Birkinshaw, J., Bouquet, C. and Ambos, T.C., 2007. Managing executive attention in the global
company. MIT Sloan Management Review, 48(4), p.39.
Makos, J. 2015. An Overview of the PESTEL Framework. PESTLE Analysis, 18.
Rothenberg, E., Goldberg, K., Salak, W.J. and Draper, J., Salak William J, 2011. Computer-
processing system scoring subjects relative to political, economic, social, technological,
legal and environmental (pestle) factors, utilizing input data and a collaboration process,
transforming a measurement valuation system regarding the value of subjects against an
agenda. U.S. Patent Application 12/905,521.
Newton, P. (2014). What is the PESTLE Analysis?.
Recklies, D. (2006). PEST Analysis.
Barney, J. B. (2014). Gaining and sustaining competitive advantage. Pearson higher ed.
Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic
Change, 15(5), 213-229.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business
review, 86(1), 25-40.
Narayanan, V.K. and Fahey, L., 2005. The relevance of the institutional underpinnings of
Porter's five forces framework to emerging economies: An epistemological
analysis. Journal of Management Studies, 42(1), pp.207-223.

20
STRATEGIC MANAGEMENT
Cardeal, N. and Antonio, N.S., 2012. Valuable, rare, inimitable resources and organization
(VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to
competitive advantage?.
Knott, P., 2009. Integrating resource-based theory in a practice-relevant form. Journal of
Strategy and Management, 2(2), pp.163-174
GROUP, A. (2017). Introduction of ABB Czech Republic. ABB.
JOHNSON, G., WHITTINGTON, R., & SCHOLES, K. (2014). Exploring Strategy. Harlow:
Pearson Education Limited.
Morosini, P., & Lioulias, P. (n.d.). ABB (A): FACING THE CHALLENGES OF THE NEW
MILLENNIUM. Retrieved JUNE 27, 2018, from IMD:
https://www.imd.org/research/publications/education-publications-case-studies/1279/abb-
a-facing-the-challenges-of-the-new-millennium/
wright, t. (2017, NOV 14). 3 Of The Biggest Business Strategy Challenges We All Share.
Retrieved JUNE 27, 2018, from CASCADE: https://www.executestrategy.net/blog/3-of-
the-biggest-business-strategy-challenges-we-all-share/