AN INTERNATIONAL STRATEGY POWERS ABB’S FUTURE
Case Study
A Paper Presented to
DR. MA. PAGASA NANETTE C. ROTAIRO
Faculty, Lyceum of the Philippines University
In Partial Fulfilment of the Requirements
For the Course
Advance Strategic Quality Management
By
JERMAINE MARIANE G. DELGADO
WENDELL GALAPATE
APPLE P. REVILLA
September 2018
Mini Case
AN INTERNATIONAL STRATEGY POWERS ABB’S FUTURE
I.
Introduction
ABB is one of the world’s leading engineering companies, help the customers to
use electrical power effectively and to increase industrial productivity in a sustainable
way. It serves electric, gas and water utilities, as well as industrial and commercial
customers, with a range of products, systems and services for power transmission,
distribution and power plant automation. The company also delivers automation systems
for measurement, control, motion, protection and plant optimization across a full range of
industries.
The history of ABB goes back to the late nineteenth century and is a long and
illustrious record of innovation and technological leadership in many industries. ABB
Limited is the result of a 1987 merger between the Swedish electrical engineering
company, Asea, and the Swiss engineering company, Brown Boveri. This merger created
the largest company in Europe in its industry with 180,000 employees. It was started in
Switzerland. Having helped countries all over the world to build, develop and maintain
their infrastructures, ABB has in recent years gone over from large-scale solutions to
alternative energy and the advanced products and technologies in power and automation
that constitute its Industrial IT offering.
As one of the world’s leading engineering companies, ABB envisions to help their
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.
Improve performance ABB helps customers improve their operating performance,
grid reliability and productivity while saving energy and lowering environmental impact.
Drive innovation and quality are key characteristics of our product, systems and service
offering. ABB is committed to attracting and retaining dedicated and skilled people and
offering employees an attractive, global work environment. Sustainability, lowering
environmental impact and business ethics are at the core of our market offering and our
own operations
ABB have variety of products: Control Systems, Force Measurement Devices,
Transformers,
Semiconductors,
Reactors,
Power
Electronics,
and
Insulation
Components.
II.
Background
ABB, headquartered in Zurich, Switzerland, is a major competitor in the power and
automation technologies industries across the major markets globally. It operates in eight
major regions: Northern Europe, Central Europe, the Mediterranean, North America,
South America, India, the Middle East and Africa, North Asia and South Asia. Over time,
ABB has been a successful company using its geographic diversification across globe to
it advantage.
III.
Statement of the Problem (Situation) or Critical Issues and Concerns and
Answers
1. What are the dominant reasons for ABB to enter into international markets?
There are multiple dominant reasons for ABB to enter into international
markets. A major reason is the acquisitions of the potential companies like PO,
LGR, etc. around the globe, it is also to expand globally interns of enhancing the
brand name and to create a mark in the international market. Another reason is
the economic downturn in some part of the operational regions created financial
fluctuations in relation to the expenses and revenue, which raise a need to invest
in new markets and explore potential opportunities. ABB, being a company with
immense experience and goodwill in the local and specific range of markets, it is
a prospective move for the company to enter international markets. The main
motive of the potential business making companies is to grow to the prospective
extends and make productive profits. It is very essential for ABB to enter
international markets both in terms of increasing its goodwill as well as brand
image to make further prospective results.
2. Which corporate international strategy would you classify ABB as using? Explain
your answer.
ABB can be categorized into transnational strategy for multiple reasons.
The transnational strategy allows a firm to achieve global efficiency and local
responsiveness. The twin goals of global integration and local responsive require
a lot of flexibility. The company also maintains local response by operating with
profits and adapted an acquisition business strategy. It has entered new markets
by acquisition for expanding its geographic diversification in the existing market.
On top of that the company has adapted the global strategy for the purpose of
withstanding with its standards and values.
3. Why has ABB used acquisitions and joint ventures as dominant entry modes in
international markets?
ABB has used acquisitions and joint ventures as dominant entry modes in
international markets for various reasons.
Acquisitions: They are considered to be the best way of entering a new
market, which is by using the reputation of the existing company and acquiring it
for a profitable value. Acquisitions help to provide the potential of the organization,
by making optimum utilization of the resources and for making its unique mark in
the particular location or area.
On the other hand, Joint ventures are considered to be the best way to enter
into a new market, considering the amount of risk involved in these are
comparatively low with the involvement of the joint partner. With joint ventures, all
the resources and benefits that are provided by the local governments can be
enjoyed for smoother functioning of the business functions. The company used
entry mode, joint venture in 2013 with Country C’s Company to design and
manufacture the high voltage instrument transformers. Several different modes of
entry into international markets are used by the companies to gain benefits of the
new international market.
4. What the main political and economic risks that ABB must deal with given that it
has a strong focus on entering emerging economies?
The political unrest in the emerging economy would have serious
consequences on the company’s investors, it is due to the decisions and social
conditions prevailing in the market. Another risk in the major political instability
would reflect a shutdown of an industry since, change in the governance might
influence the functioning of the organization. Moreover, using joint venture and
acquisitions would be subject to few economic and political restrictions, which are
required to overcome lawfully. Another risk is human resources and their working
conditions plays a predominant role in influencing and political and economic
factors. ABB must have a clear vision regarding the emerging market’s political
and economic risks. The knowledge over these aspects helps in evaluating the
organization decisions and forecast, with respect to the plan to address any
struggles in the future.
5. What are the significant organizational complexities that ABB encounters as it tries
to manage its international strategy?
Organizational complexity refers to the number of different professional
specializations that are available within the organization. The elements would be
functional units of the organization. Significance of organization complexities
encountered by ABB to manage its international strategies are:
-
Resource gathering- one of the most important organization complexities,
which helps to procure all the required resources. For example: land, labor,
capital and natural resources. These are considered to be the basic
requirements of any organization and complexity in gathering those would be
highly difficult for simpler organization.
-
Organizational Design. It is a process of strategic grouping of organizational
activities and individuals who work in groups. The design of the organization
varies depending on the nature of the industries. It is highly essential to
understand the functioning process and in order to obtain effective results.
-
Information technology System. The IT will help to maintain complex database
and provide information security to the database of the company, which is
volatile to hackers. It helps to simplify the work and improves the accuracy in
the output.
-
Promotional Activities. They play an important role to increase sales and gain
profiles. Therefore, promotional activities would create a brand name for ABB.
Being an organization with goodwill helps in creating an effective influence
upon the customers. ABB’s entry into international markets was supposed to
bear several organizational complexities.
IV.
Conclusion
It is very essential for any emerging, promising and potential organization
or firms to enter international markets both in terms of increasing its goodwill as
well as brand image to make further prospective results. Expanding your market
through international strategy would help an organization in a lot of areas. Hence,
the transnational strategy allows a firm to achieve global efficiency and local
responsiveness. Several different modes of entry into international markets are
used by the companies to gain benefits of the new international market.
Companies like ABB must have a clear vision regarding the emerging market’s
political and economic risks. The knowledge over these aspects helps in evaluating
the organization decisions and forecast, with respect to the plan to address any
struggles in the future. Moreover, ABB’s entry into international markets was
supposed to bear several organizational complexities because they will form part
in the creation of new ideas that will surely help the company progress.
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Case Study
A Paper Presented to
DR. MA. PAGASA NANETTE C. ROTAIRO
Faculty, Lyceum of the Philippines University
In Partial Fulfilment of the Requirements
For the Course
Advance Strategic Quality Management
By
DIAN M. GUIA
HAZEL MAREE B. JUANILLAS
September 2018