Assignment 1: Strategic Management and Strategic Competitiveness

Asea and Brown, Boveri (also known as ABB, Inc.) is one of the world’s leading multinational corporations operating in robotics and in the power and automation technology areas. They provide solutions for secure, energy-efficient generation, transmission and distribution of electricity and for increasing productivity in industrial, commercial and utility operations (ABB Group Annual Report 2011). Their collection of products ranges from light switches to robots, and from large electrical transformers to control systems that manage entire power networks and factories. ABB is a global company that currently has 135,000 employees and operates in around 100 countries. Their assignment is to help their customers meet their challenges with minimal environmental impact. Globalization consists of knowing how to compete globally, how to address new players and regional training blocks and how to develop new products for emerging regions. Michel Demare, CEO and CFO of ABB, states “ABB supporting globalization with a balanced, non-colonial approach.” A global company must find enough raw materials and learn how to use existing ones more efficiently. ABB is looking at ways to make its participation in the global economy more resource-efficient. The environment involves addressing climate changes, developing protocols and doing it before the 2016 threshold which is when some estimates project these changes will become irreversible. In 2008, ABB looked at ways internally and externally to proactively address climate change issues. “Research suggests that we could reduce future increases in our global energy consumption by 30% to 50% by 2030,” says Demare. “We are committed to addressing these challenges, and we have technologies such as low-voltage drives that can help.” These drives can save 70% on the previous power consumption of many motors and only 10% have been installed thus far. The world is going through a time of extraordinary change. An increase in populations and rising living standards are increasing demand for resources, the trading of goods and transportation. Millions of people are migrating into cities each year, causing an increased demand on transport solutions and for clean forms of energy, like electricity. We also see that the world is going digital which is resulting in the need for huge capacity for data storage. These trends show a need for technology and innovation, which is one of ABB’s strengths. In 2011, ABB won an order for an innovative power transmission link in northern India that will deliver enough electricity for 90 million people. On a smaller scale, in Estonia, they are developing the world’s first nationwide network of fast-charging stations for electric vehicles (ABB Group Annual Report 2011). ABB has also launched some new innovative products, which include offerings for energy efficient data centers and ships using DC technology and a new high-efficiency motor design that won a prestigious automation award in Germany last year. One of ABB’s goals is to continue to meet their customers’ technology requirements in today’s rapidly changing environments, so they are focusing on investment in R&D over the next few years. They spend 20 percent more in R&D spending in 2011 to reach 3.6 percent of revenue and are targeting 4 percent by 2015. The industrial organization (I/O) model of above-average returns specifies that the industry or segment of an industry that chooses to compete in the market has a stronger influence on performance than the decisions managers make within the company. The resource-based model assumes that each organization is a collection of unique resources and capabilities. The resources are inputs into a firm’s production process and are classified as physical, human and organizational capital. This model also assumes that firms acquire different resources and develop unique capabilities based on how they combine and use resources (Hitt, Ireland & Hoskisson 2013). ABB has acquired several companies over the past few years and expanded their different operations, products and services. In May 2012, ABB completed its acquisition of Thomas & Betts, a North American leader in low voltage products. This acquisition advances ABB’s strategy of expanding its Low Voltage Products division into new geographies, sectors and products. With Thomas & Betts’ electrical components and ABB’s low voltage protection and control and measurement products, this will create a broader low voltage offering. “Our joint low-voltage electrical components business is globally balanced and has one of the broadest scopes in the industry,” says Tarak Mehta, head of ABB’s Low Voltage Products division. He believes that with Thomas & Betts’ strong distribution network and talented and experienced team of professionals, they will be an integral part of the US operations and ABB will be better positioned to support low-voltage customers around the world. For this reason, I believe that ABB follows the resource-based model to earn above average returns. ABB’s mission is to improve performance, drive innovation, attract talent and act responsibly. ABB strives to help their customers improve in the areas of performance, grid reliability and productivity; doing so by helping them save energy and lower environmental impact. They continually look at new innovations and provide the best quality in our products, systems and services. Retaining dedicated and skilled people and offering employees an attractive, global work environment is something that they are committed to. Sustainability and business ethics are at the core of ABB’s market offering and operations. The vision of ABB is “As one of the world’s leading engineering companies, we help our customers to use electrical power efficiently, to increase industrial productivity and to lower environmental impact in a sustainable way. Power and productivity for a better world.” ABB’s mission and vision focuses on some of the key components in having a successful business. By continuing to provide top quality products and service, creating a good work environment and attracting and retaining employees, and by helping their customers save millions of dollars on energy savings, I believe these are three of the major reasons for their success. These would include the market stakeholders, primary customers, suppliers, and employees. ABB’s shareholders have a major impact on the overall success of the company.