Abb Case Study

ABB CASE STUDY

Asea Brown Boveri (ABB) became the world’s largest competitor in power generation, trasmission and distribution as a result of a cross- border merger between the two giants of the European electrical equipment industry: Asea AB of Sweden and BBC Brown Boveri Ldt. Of Switzerland.

Before developing specific strategies, managers must analyze and understand the competitive market dynamics in their industry and their own firm’s resources and capabilities. The first stage to analyze the context must relate the internal strengths and weaknesses of the firm and then the external opportunities and threats in the market place, so-called SWOT analysis. The strengths are:

* Broad product portfolio: power generation, transmission and distribution; process automation systems, robotics, high speed locomotives and environmental and pollution control equipment.

* Wide geographic base: based on 850 separate legal entities operating in 140 countries , that allows to exploit economies of scope.

* Contribution of individual businesses to the new company: Asea contributes superior to current profit performance, sophisticated management controls and marketing aggressiveness, while BBC brings a strong order book, $4 billion in cash and marketable securities, and technical expertise.

* Robust growth rate in revenues and profit: following up the merger, Asea’s 65000 employees are combined with BBC’s 85000 employees, increasing the firm’s dimension. Furthermore, in 1988, ABB’s first year of combined operations, the new company’s pretax income is US$ 536 million on sales of 17.8 billion.

On the side of weakness, operating in a such wide market can’t allow the individuation of the actual core activity. Analyzing the external context, firm’s manager have to be able to take the opportunities to create a competitive advantage. In ABB case, organic and inorganic growth represents an opportunity: in fact, ABB’s main purpose is to increase productive...