Business level strategy analysis of ABB Essay

Business    level    strategy    analysis    of    ABB

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ABB    operates    in    the    following    business    lines:

1)       Power    Products:    These    refer    to    the    key    components    in    the    transmission    and    distribution    of    electricity.    This    division    incorporates    manufacturing    network    for    power    transmission    and    distribution    components    like    transformers,    switchgear,    circuit    breakers,    cables    and    associated    equipment.    It    also    offers    services    aimed    at    enhancing    product    lifespan    and    ensuring    product    performance.

2)       Power    Systems:    This    business    division    offers    turnkey    systems    and    services    for    power    transmission    and    distribution    grids    and    power    plants.,    with    substations    and    substation    automation    systems    being    the    focus    areas.

3)       Automation    Products:    This    division    manufactures    drives    motors    and    generators,    low    voltage    products    and    power    electronics    with    an    aim    to    improve    customers’    energy    efficiency    and    productivity.

4)       Process    Automation:  ABB    provides    its    customers    with    integrated    solutions    for    control,    plant    optimization,    and    industry-specific    application    knowledge    aimed    at    providing    customers    with    improved    asset    productivity    and    energy    savings.

5)       Robotics:    ABB    is    a    leading    supplier    of    robotics    solutions,    supplying    customers    with    robots,    robot    software,    peripheral    equipment,    modular    manufacturing    cells    and    service    for    tasks    such    as    welding,    handling,    assembly,    painting    and    finishing,    picking,    packing,    palletizing    and    machine    tending.[1]

These    business    lines    are    a    consequence    of    the    organization    restructuring    carried    out    in    2006.    The    reorganization    was    done    as    part    of    ABB’s    overall    strategy    to    enter    and    become    a    big    player    in    the    knowledge    space    and    aimed    at    providing    its    customers    integrated    solutions    packages    in    all  of  the    afore-mentioned    business    domains.

Strategy  for  Robotics  business  line

ABB  has  clearly  demonstrated  the  intent  to  invest  in  and  develop  its  operations  in  Asia.  This  is  one  strategy  that  could  pay  rich  dividends.  Asia  is  on  an  industrialization  spree  and  the  industrialization  so  far  had  been  based  on  the  low  labor  cost  strategy.  However,  the  manufacturing  industry  in  Asian  countries  (especially  China  and  India)  is  constantly  looking  for  technological  advantages  to  help  in  improving  quality  of  production  and  drive  down  costs.

ABB  stands  to  make  a  difference  here  with  its  expertise  in  robotics  solutions  (as  opposed  to  being  just  another  supplier  of  robots).  ABB’s  strategy  of  providing  integrated  robotic  solutions  that  reduce  operating  costs,  improving  product  quality  and  consistency,  increasing  production  output  rates,  etc.  works  as  a  differentiator  in  an  overcrowded  market.  ABB’s  expansion  in  Asia,  designed  to  take  advantage  of  the  region’s  rapid  industrialization  and  growth  is  designed  at  gaining  market  leader  status  in  some  of  the  most  important  developing  economies  in  the  world.

Strategy  for  Power  Systems  and  Process  Automation

ABB  has  been  investing  heavily  in  developing  consulting  expertise  in  the  Power  Systems  and  Process  Automation  domains.  It  has  been  recruiting  software  engineers    and  power  industry  experts  in  an  effort  to  implement  successfully  its  new  strategy  of  supplying  IT-driven  intelligent  solutions  for  discerning  customers.  ABB  has  indeed  managed  to  position  itself  as  a  Power  Systems  and  Process  Automation  solutions  provider  and  not  just  another  equipment  vendor.  Its  recent  customer  wins  in  the  form  of  supplying  control  technology  for  two  new  power  stations  in  Brazil  and  supplying  turbine  control  systems  for  the  Terga  power  station,  Algeria  merely  underscore  this  fact.[2]

ABB  internally  stresses  on  the  following  key  levers  to  drive  its  Automation  business:

·         Operational  Excellence:  ABB  constantly  tweaks  logistics  ,  design  and  marketing  processes  to  improve  operational  efficiency.

·         Core  Competencies:  ABB  focuses  more  on  core  competencies  and  does  not  consider  market  share  to  be  the  all-important  criterion.  Indeed,  60%  of  its  automation  revenues  come  through  its  qualified  partners  such  as  Systems  Integrators,  Distributors  and  OEMs.

·         Strategic  marketing:  Automation  conferences  ,  brand  advertising  in  respected  media  channels  and  customer-win  showcasing  form  the  thrust  of  ABB’s  marketing  strategy.

·         People  power:  ABB  manages  its  talent  well  and  has  implemented  excellent  performance  compensation  programs  and  rewards  and  recognition  programs  for  its  employees.[3]

Strategy  for  Power  Products  and  Automation  products

Inspite  of  its  new  image  of  a  solutions  provider,  ABB  has  taken  care  not  to  stray  from  its  core  competency  of  producing  innovative,  high  quality  power  products.

ABB  has  maintained  a  focus  these  domains  to  take  advantage  of  a  power  industry  in  the  grips  of  rapid  deregulation.  It  has  however,  diversified  some  of  the  risk  it  faces  in  these  markets  through  strategic  alliances  and  Joint  ventures  with  companies  like  Alstom.  Some of  the  key  points  of  this  strategy  are:

a)       ABB  can  maintain  a  strong  presence  in  markets  which  showcase  its  core  competencies

b)       ABB  can  take  advantage  of  the  deregulation  of  the  power  markets  as  and  when  it  happens

c)       The  risk  of  excessive  exposure  to  this  market  is  reduced  because  of  the  partnerships  and  alliances  ABB  has  formed  with  other  industry  leaders  like  Alstom

d)       Solutions  providers  need  to  have  strong  underlying  products  around  which  solutions  can  be  built.  Therefore,  ABB  has  to  focus  on  its  basic  product  offerings  and  keep  innovating  its  basic  product  line.

[2] In_Control,an ABB customer publication, Issue November,2008
[3], March 2006

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