ABBMission Statement: As one of the worlds leading engineering companies, we help our customers to use electrical power effectively

and to increase industrial productivity in a sustainable way Power and productivity for a better world

Background
ABB (Asea Brown Boveri) was the product of a merger between two companies, Asea and BBC Brown Boveri, in 1988. In its twenty years of existence ABB has become one of the largest engineering companies in the world as well as one of the largest conglomerates across the globe. ABB is an automation and power technology provider which, by now, is well established across the globe. Its power technologies entails electric, gas, and water while its automation technologies provide products and services which aid wanting companies industrial processes. Also ABB produce products that are not critical to their business such as petrochemicals, building systems, as well as nonproduction based services such as equity & financial ventures. With company HQ in Zrich, Switzerland, the company conducts its business in Europe and Asia and employs approximately 108,000 people. (Datamonitor, 2007) In between the years 1989 and 2001 the company diversified its business into nuclear power, generation of power, rail distribution businesses, pharmaceuticals and oil and gas activities after merging and acquiring a number of other companies1 although in the years proceeding 2003 it began to sell off many of these companies. Presently ABB has won many prestigious contracts for operations across the world. Here are a few examples: y 2005 Got contract from the Gulf Co-operation Council Interconnection Authority (GCCIA), to link the electric networks of each of the Gulf States. y 2006 (May) - Won 5 year contract (worth $100 million) for provision of transformers and services to the Tennessee Valley Authority (www.tva.gov/news/files/11-30-06_agenda.pdf). y 2006 (Dec) - $450 million contract from Qatar General Electricity & Water Corp to expand their power transmission systems (MEED, 2006). y 2007 (May) Received Contract worth $350 million to link the UKs and the
1

ABB acquired the following companies: Westinghouse Electric Corp, Combustion Engineering, Elsag Bailey Process Automation, Entrelec, MEGATransformadores.

Netherlands power grids (Professional Engineering, 2006). y 2007 (Aug) Won contract (off E-ON) to supply power equipment to connect the worlds largest wind farm to the German grid. This was valued at $400 million. (Datamonitor, 2007)

The core concentration of ABB is robotics and energy transmission markets. Robotics range from process control systems such as Symphony DCI system which serves clients such as ICI Paints and Heineken while in the Automation solutions a popular product for water waste management for petrochemical and metal production is IT 800xA which is used by renowned companies Statoil and Pharmaceutical Plant (www.abb.com).

Financial Performance Profitability According to the companies Annual report and results for Quarter 4 of 2007 ABB claim to have sustained a net profit of $29,183,000 for 2007 a 25% increase on 2006. By the end of 2007 the balance sheet for the company was a record 5.4 billion which the company claim is due to the large generation of cash flow from various Lummus Global engineering projects. ABB in recent years have enjoyed high sales growth across the globe. Europe remains the strongest market for ABB accounting for 46.8% of total fiscal revenue while Asia holds 25% a lucrative 19% rise from 2006 proofing the future market attractiveness for the Asian market particularly China as later described. Both continents of America account for 18.5% of overall corporate profit with a growth rate of 7% from the previous year. However, it is important to note that considering the market scope of North and South America, ABBs performance in this geographic market is rather weak compared to Europe. Statistically Africa and the Middle East market provided ABB with the least amount of revenue with 9.6% in 2007 although the sales have increased by 20% compared to 2006. This would possibly indicate future potential of the African and Arab market as such percentage increase in one year is staggering and would not be possible in a mature market such as Europe. (www.abb.com/product/ap/seitp334/928aef676bf0e982c125704a0056c7c6.aspx). Share Price Activity As of March 2008, ordinary shares in ABB are trading at $0.44c per share (Yahoo Finance). The companys yearly financial report for 2007 state that earnings per share is at $1.40 while stockholder equity has increased from $6,038 million US dollars in 2006 to $10,957 in 2007 which would give reason to say that the share price 0.44c is quite

competitive. One of the main financial outcomes for ABB as a result of the 2007 financial report is the proposal by the executive board to double the value of dividends paid out with a dividend or debenture holder now having the option of being paid $0.44c on a dividend. The boards desire to pay out high on dividends would certainly indicate how high the performance of the company is in recent years as they wish to reduce ordinary shares in circulation (Yahoo Finance, 2008). Investments The company wishes to invest over the next 2 years from 2008 to 2010 $1.1 billion us dollars on all five product-line divisions to improve strategic positions (Datamonitor, 2007).

ABBs Corporate Strategy One of the key factors in ABB becoming such a successful engineering multinational firm was the decentralized networks in which it operated under upon merging. The first CEO of the company Percy Barnevik dealt with what were considered the two biggest problems in the robotics industry of the time fragmentation and misuse of resources leading to over-capacity. To tackle this problem Barnevik set a core strategy of intentional de-centralisation of the entire organization which made networks of production facilities and electric power generators relevant to sectors geographic size and market attractiveness. This strategy helped to have better market focus and help the company become a low cost leader. ABB built on the renound multinational concept of Think Global, Act Local by emphasizing core competencies such as process and automation control systems to build footholds in each sector of the world. Another element of the de-centralization strategy which influenced ABBs business activities in the nineties was the companys behaviour in local markets. As the company expanded into the global company and opened production and market channels outside of Europe e.g. United States, the company successfully entered new markets without eroding local market presence and affecting employment. Since 1996 Barnevik is no longer the CEO or involved with ABB but his decentralisation strategy has been developed under JrgenCenterman (Kets de Vries, 1998). ABB has undergone a change in company strategy recently. The firm began, in 2001, to focus on streamlining like so many other engineering firms have done in order to maintain its low cost strategy. The companys whole focus has shifted, from a heavy engineering focus to IT and automation solutions (International Power Generation, 2003). This began when the company sold its shares in ABB Alstom Power2. This shift in overall strategy was driven by then CEOJrgenCenterman who resigned soon after due to weak financial performance and negative product perception in general. Centermanwas
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ABB Alstom Power is a large engineering power plant.

replaced by JrgenDormann who strived to continue what Barnevik began. He continued to cut costs and tackle ABBs debt problems by means of mass lay offs and is believed to have saved the business about $800 million within his first year and a half at the helm (International Power Generation, 2003). His cause was not at all aided by CE filing for bankruptcy. However, the company now, as a strategic move, split its interests into five divisions which are as follows:

y Power Products y Power Systems y Automation Products y Process Automation y Robotics (Datamonitor, 2007) We will discuss ABBs major products and services later in the paper. Other changes have also been rung in such as the removal of one management layer, power products, power systems and automation product divisions would be headquartered in Zurich, Switzerland while robotics divisions were delegated to Shanghai, China. Connecticut, in the United States would be the headquarters of ABBs process automation division (Process Engineering, 2005). With those changes came another significant event, the departure of Dormann. He was replaced by Fred Kindle as CEO and president in February 2004 who went on to comment on the changes at ABB, This is an evolution of our strategy, not a revolution (Process Engineering, 2005). ABB have also strived to improve its research and development resources which have resulted in the development of new technologies for wind power generation. ABB have also researched branching out into solar and biogas power (Profitable Sustainability, 2001). ABB Market Activities To keep in accordance with the overall corporate strategy of low-cost decentralization, ABB do not have one set marketing strategy for the entire company. Instead ABB and CEO Fred Kindle allow for each division to design its own relevant market strategy to cope with the market necessity, size and competitive environment. Power Products Division In this category for example ABB offers transformers, circuit breakers and cables. These are key components to transmit and distribute electricity. As a part of these products, the service element is apparent as the performance and life span of the products is monitored. The most profitable division in ABB it grossed $6.5 billion in 2007 and is market leader in both voltage products and transformers. The main competitors are Siemens and

Schneider who as of 2005 are involved in a $550 development of its wind turbine products to challenge ABB (B2Brenergy.com). As the most profitable division in the organisation, it will be crucial for the company to maintain its market dominance in the market and must build on core competencies. The will continue to streamline to maintain lower costs for both the company and the customer while investment in the China will help cost migration as production rates are lower in that region than Europe. The growing economies of scale in countries like China and India are significant opportunities for the company to maintain sales growth.

Power Systems Division This area offers the transmission of power and includes distribution grids and power plants. The key areas in this department would include electrical substations and automation systems. Economic growth & emerging markets make the Power Systems market very competitive with Siemens challenging ABB rigorously in this market sector. ABB are improving their position in existing markets by improving processes and applications such as its PsGuard deigned to improve the quality of service in the power system market. The company is also using its strong brand name to leverage existing products into developing markets that have an increased demand for power generation systems. Automation Products Division This division offers a number of products to improve consumers overall productivity. Typical examples would include electric motors and generators. The main consumers would fall into areas like utility operations, commercial and residential buildings. The company is keeping the Automation division operating on a standardized form of channel management unlike the rest of the divisions within ABB as global industrial trends is focusing on automated production and the reduction of human employment. The sector holds $40 billion a year and ABBs current growth rate is 4% which they wish to increase to 7% by 2009 (ABB Strategy 2005-2009). Similar to the power products division cost migration is occurring to maintain margins as the increase in production rates in Europe is affecting the automation market. Automation Process Division The main focus of this offer is providing consumers with integrated solutions for control, plant optimization and specific knowledge on industry patterns and trends. Industries include oil, gas, power, chemicals and pharmaceuticals. One key driver in this market is the future potential of alternative fuels. ABB do not dominate this market and rank second to Siemens and this could possibly be due to the

success of Siemens gas turbine generators in North Africa which serve a huge sector of the continents growing market and is substantially helping Siemens develop a long term foothold in the relatively young market (www.industry.siemens.com). In the mature markets of Europe and North America ABB are going to begin offering service contracts for low volume production companies. Also division are hoping to challenge Siemens current lead with the market development of 800xA systems which the company considers to be a state of the art breakthrough in the market (www.abb.com/products). Robotics This would be ABBs main focus for strategy as of late the companies performance in this sector has declined, with revenues dropping by 24.2% over 2005. ABB has one of the largest installed bases of industrial robotics in the world. It provides robot software, peripheral equipment and modular manufacturing cells for a range of tasks such as painting, wielding and finishing. This division operates in a number of key markets like automotive plastics and metal fabrication (www.abb.com). Critically ABB have a significant market share of 36% in the metallic and paint automation industry over nearest competitor Yaskawa. With a large shift over the next ten years into robotic production, it is very much possible that ABB will increase on its $4.7 billion obtained from the market. The company are very strongly placed in the market due to the knowledge of automation existing in the company and the technological capacity to improve its products (ABB Strategy 2005 2009).

Marketing Environment In todays modern environment it is of critical importance to gain a competitive edge over your competitor, while also differentiating the product offering. The organization as a whole must consider the environment it operates. The overall monitoring of a marketing strategy should be continuous, as this ensures that if a possible alteration is up for consideration that the managers can deal with it adequately and develop a solution. ABB is a global company operating across numerous industries, offering a wide variety of products & services throughout Europe, Asia, the Middle East, Africa & the Americas. Therefore the need for analyzing the environment and understanding differences in certain areas is crucial to the overall success of the company. The micro elements of the company have to be considered for e.g. the immediate external consumers, agents & distributors, not forgetting also our competitors. To maximise and maintain the growth of ABB is an integral part of their mission and, macro elements are of major importance. ABB has well established itself as multi-national company diversifying across many countries accepting major considerations in regards to political factors. An Undeniable

factor to its success has been the stability of the regions it has located in. The freedom and open nature of the European Union has allowed for trading barriers to be lifted ensuring open competition. The political stability that has ascended in Europe in recent years has had positive implications for the company. Government trading agreements allow for numerous positive aspects. In more recent times there has been political unrest e.g. the Far East and China. This could have negative connotations for future orientation and expansion for ABB, however diligent planning should help overcome this. A key determinant of success in any industry would be the economic state of the environment in which it operates. The continued growth of Asian countries is staggering, e.g. China. The expanding economies of Asia, the Middle East and other regions are obvious contributors to ABBs rapid organic growth. (Datamonitor, 2007). There has been an increase in demand from North America and Europe as the older infrastructures can no longer meet modern requirements. ABB have engaged with a several number of Socio-cultural aspects. Developing a marketing structure to suit a certain culture can be extremely demanding on resources and it takes quite a considerable amount of time to do so. Society today have become more aware of surrounding issues with big businesses therefore sustainable growth can be measured by being responsive to cultural norms in a country. ABB must consider considerations like, language, religion, roles & green issues. The fact is ABB has a very strong reputation in this area. An example of action would be the Estlink power connection between Estonia and Finland, using power friendly technology to conduct the project (Datamonitor, 2007).

Technological advancements have been paramount to the success of ABB. Therefore developing strategies in foreign regions have to be carefully planned as all the other element of a business model may work, however if the technology is not in place the business will fail. In todays business environment technology acts as a gauge for competitive advantage, and drives globalisation. ABB design a mass range of products using the most up to date technology, but not only this as there process are all effected by technological programs which deliver the final product.