ABB Strategic Corporate Analysis and Determinants of Planning - Business Plan Example

ABB Strategic Corporate Analysis and Determinants of Planning  Introduction: The following analysis will seek to provide a strategic overview with regards to ABB firm. ABB is a multinational Swiss firm with its headquarters in Switzerland, operates primarily in the power industry and automation technology industry. ABB maintains operations in over 100 countries, maintaining approximately 144,000 employees, a total revenue for all operational divisions was approximately 40 billion USD in 2012, making this one of the largest business conglomerates in the world.As such, evaluating the strength of current strategy, determining likely best practices and key approaches for future strategy will be incorporated as a core objective of this analysis. Although there are many means of measurement with regards to the way in which a firm can seek to address current and future strategic needs one of the most effective is with respect to performing a PESTEL analysis; weighing the unique threats and likely impacts of Political, Economic, Social, Technological, and Legal effects that the firm faces and could likely face in the future. Rather than laboring through a PESTEL analysis within the body of this strategic needs and future approach, the PESTEL analysis has been relegated to the appendix of this analysis; with only the responses to the way in which strategy can and should be formulated as a means of addressing the key weaknesses and opportunities that it denotes in the body of the analysis. Furthermore, whereas a PESTEL analysis is a perfect tool for measuring the external environment, a SWOT analysis has been engaged as a means of measuring the internal environment of ABB and delineating what Strengths, Weaknesses, Opportunities, and Threats exist for it. Therefore, through an examination of both of these measurements and a discussion of their requisite parts, it is the hope of this author that the reader will gain more informed understanding not only with respect to the operational realities and strategy that the firm should engage but also with regards to appreciating the dynamics of what has led ABB to experience such a level of success up until this point in time. As such, defining these issues and promoting a further discussion and analysis of operations and strategic management will hopefully engage and complete understanding of the key steps that could be engaged to seek to promote ABB to a level of renewed power and dynamic business strength within the coming years. Strategy Analysis: Ultimately, with regards to strategic analysis, there are two unique approaches that can be taken. Firstly, and external environmental approach can help to be definitive with regards to the way in which the firm itself operates within the environment of competition and other definitive compliments of the outside world. As such, Porter’s Five Forces and PESTEL analyses are oftentimes utilized as a means of drawing a further level of inference with regards to the way in which the external environment impacts upon strategy and approach that a specific entity should take. However, it must not be understood that the external environmental analysis is the only approach that should be utilized. Rather, it must also be understood that an internal environmental analysis of the way in which a firm operates is equally needful. In such a manner, the following analysis will provide a recommendation with regards to both internal and external analysis of the ABB firm. With regards to the external analysis that has been performed, this is ultimately indicative of a PESTEL analysis that is represented within the appendix of this brief review. Whereas the results and primary data that the PESTEL analysis has produced will be represented and discussed within the body of this paper, the part of the research of the PESTEL analysis will be represented within the Appendix. Furthermore, an internal analysis of the means through which the firm faces threats and potential growth opportunities will also be conducted; utilizing a SWOT analysis. The SWOT analysis will of course be concentric upon Strengths, Weaknesses, Opportunities, and Threats that ABB faces; or is likely to face in the very near future. The ultimate purpose of approaching an analysis of this particular firm from a two divided approach is to allow the reader to come away with a more thorough and complete understanding of what elements define the external and internal realities and environment for ABB. Internal Analysis: In seeking to categorize the strength of ABB, it must be noted that the firm is a multinational conglomerate that has fast monetary resources and funds through which it can attempt to penetrate further markets, and integrate to more and complete degree with its consumers. This level of funding and the business acumen through which the firm has developed over the decades, allows ABB to have a unique advantage over many of the companies that would otherwise be in closer competition with it. A further noted strength is with respect to the fact that ABB does not need to continually fight for further customers. Whereas it is true the customer service and appreciation for the existing customers is a fundamental aspect of the business process and customer relationship that ABB exhibits, many of the consumers of the services that they provide have already proven their devotion and preference for ABB and its products and services. In such a way, the firm has the ability to leverage this commitment and loyalty as a means of promoting further development in the future. Secondly, the greatest weakness that is faced in an internal analysis is with regards to the fact that the firm is entrenched in a particular approach to their customers and the culture of ABB is not likely to experience shifts towards more efficient or dynamic process. Although there are not great shortcomings that can be immediately noted, the weakness of having a stodgy culture within a firm provides for a great weakness due to the fact that the ability to evolve and integrate with further profitability and consumers is solely contingent upon the ability of the firm to change its approach and integrate with the market in a new and differentiated manner. As such, having a culture that is not amenable to change necessarily creates a great weakness for it. Whereas this weakness may not be seen as fundamentally important, the ability of the firm to continue to deliver high quality goods and services to their consumers within this reality reduces the likelihood that ABB can continue to be such a dominant force within the market for an extended period of time. The key opportunity that ABB can engage with has to do with the opportunity of engaging with emerging markets. Whereas ABB has predicated the bulk of its profitability within the developed and Western world, the emerging markets of Southeast Asia and South America provide a unique opportunity through which a further level of business engagement and investment can ultimately be hugely beneficial to the profitability and future viability of the firm. Finally, the firm also faces the issue of threats to its continued survival. The most relevant threat that it faces is with regards to the fact that its products are normally at the higher end of the competitive exchange of goods and services. What this means is the fact that ABB is not able to effectively compete within the market for moderately priced solutions for the products or services that they provide. Whereas this has not yet been an issue of great importance, due to the consumer loyalty and major accounts that the firm holds with large manufacturers within the developed world, future pressures on price and the threat of entrants to the market could easily see this threat erode some level of market dominance that ABB current espouses. Without a renewed and continual drive to reduce the cost of its products, the firm faces a very real and present threat of losing market share to the litany of different competitors; especially with regards to the emerging markets throughout the developing world. From the internal analysis that has thus far been discussed, the firm faces a severe obstacle of seeking to tackle key issues relating to business development and cultural challenges that could provide a danger to the way in which the firm continues to operate. In seeking to engage with this SWOT analysis and provide a strategic approach that could best suit the needs of the firm, it is the understanding of this author that the most rational course of action would be to leverage the strength of the relationships and existing client base that the firm has to offer as a means of integrating with other markets. However, this key strength in and of itself must not be overlooked with relation to the strategic opportunity that the firm has during the current era. Ultimately, effective business management and leadership is predicated upon the ability to rapidly integrate with needs and promote business development in a timely manner. As such, the key opportunity that the firm has at this current juncture has to do with the levels of available funding that it has to allocate to specific needs. Accordingly, effective strategy with regards to ABB development can be understood with respect to the way that it uses a portion of its available financial reserves to ensure that it retains a level of market dominance not only within the current era but seek to entrench it in the future. A further strategic understanding that can be gained from the SWOT analysis is with regards to the fact that the greatest maneuver that can be made with respect to diminishing the threats that faces ABB are contingent upon maintaining a competitive advantage over the competition. Whereas the firm has a definitive advantage of being well known and well-liked by its consumers/clients, a key weakness is with regards to its lack of representation throughout the development world and new markets. As such, the firm faces a tangential danger of becoming irrelevant with regards to these emerging markets and no longer being relevant in an increasingly changing world. Accordingly, the strategic engagement that the firm should make is to actively integrate with emerging markets and attempt, where possible, to make its offerings relevant to these sectors and affordable. Although each of these dangers that have been prevented warrant a strategic approach, it is the view of this author that the single most dangerous reality that ABB faces is with respect to its rather intractable culture. Whereas all firms that exist within a market for a given period of time necessarily become somewhat stagnant, the threat of this cultural stagnation and unwillingness to change with the current strategic needs of the era pose an especially dire threat to the way in which the firm can engage with new customers and continue to provide best practices to those that it seeks to service. External Analysis: Whereas the very first section of this analysis has been contingent upon the key threats and weaknesses that face ABB, the following section will provide a strategic analysis for the means through which this particular entity should seek to navigate these threats and implement a level of strategic planning and procedural analysis as a means of successfully navigating the many threats that exist within the current dynamic. It is the hope of this author that this secondary section, unlike the first, will provide suggestions and key areas of potential change that should be integrated as a means of formulating an effective developmental strategy towards guarding against the many threats and weaknesses that have thus far been defined (Saul, 2012). Political Strategy Formulation for ABB: Firstly, with respect to the political threats that are faced by ABB, it should be noted that the firm itself must engage in an increased level of lobbying with respect to the different nations that it operates in as well as the trade blocs that exist for its clients. This approach has been employed in established companies for a long time to ensure stability in extreme economic situations. Cooperate lobbyists normally have a proactive role in politics and this helps to come up with agendas that ensure a friendly business environment. This is a suitable approach of preventing the losses incurred due to inflations and stiff government policies. Effective lobbying within governmental agencies and legislators would provide ABB with an increased level of prominence and engage lawmakers with an understanding of the fact that by enacting any type of legislation to constrain business upon the grounds that it could somehow affect labor disproportionately would ultimately be harmful. A further strategy that should be employed is with respect to seeking to differentiate the firm away from merely providing industrial solutions and tangible material to the clients in question. Although it is oftentimes a dangerous strategy to employ a different approach from the one that is been proven to work so well ABB would do well to realize the fact that the current economy is predicated increasingly on services. As such, providing consultation and allowing for clients to integrate with the expert advice and services that a firm such as ABB could provide would be instrumental in helping to diversify the firm away from merely being one that is effectively defined by the automation process and the means through which other entities around the globe can cut costs by reducing their workforce. Economic Strategy Formulation for ABB: Further, a useful strategy that can be employed with respect to the economic slowdown that has been felt by almost every individual within the current system is to engage in a level of business development that expands beyond merely providing industrial equipment and automated means of growth for the consumer. Whereas these processes have thus far defined the very backbone of ABB, and the subsequent success and revenue potential that it engenders, such a solitary level of focus bears a distinct risk with regards to continuing to remain relevant in a rapidly changing world. As such, an effective diversification strategy would need to engage an oversight panel and a thorough market review prior to being implemented. Expansion of business operations increases production and service provision which reflects to a larger market. With increase in sales, profit margin is bound to increase (Prahalad, C. K., & Hamel, G. 1990). This is also a vital tool for a business survival in case one product fails to thrive in the market. In such a way, strategy can be informed and overseen by continual inputs; increasing the chance that the relevance of the diversification strategy will be able to meet the needs of the market and ultimately the consumers within the market. This will involve application of suitable analysis skills to understand and exploit the market opportunities using the available resources to realize high gains. Social Strategy Formulation for ABB: Ultimately, although it may not seem that ABB has any control over the way in which society develops, the means by which the firm continues to leverage labor and expertise, as well as research and design, within the European market will need to undergo a complete and thorough overhaul as long as the demographics of society continue to be evidenced in the way that they currently are. Firms apply different social strategy tools depending on their social goals. Strategic interaction is commonly applicable where a firms aims to exploit government and industry regulations to compete well in the market. Other firms major in cost leadership through innovation to reduce production cost .This can be transferred to social opportunities to maintain and attract the labor cost. In short, although the firm has been able to grow and currently employs over 150,000 individuals worldwide, the level and extent to which Europe can continue to provide the expertise that this firm requires for its future endeavors is ultimately in question. This is of course due to the fact the demographic shift within Europe will soon not likely be able to provide the demands for subject matter expertise that such a large multinational such as ABB would require. With this in mind, a further level of reliance upon the component entities that make up ABB is required to address the demographic and social shifts that will soon determine the future of the firm. As a means of translating this concern into strategy, the firm will need to engage in setting quotas and eliciting more regional inputs with regards to the direction that the company should go; as well as relying upon these regional departments to furnish more and more subject matter experts for the needs of the coming market (Prosters, 2012). A reliance upon international labor, not only in terms of production - but also in terms of subject expertise is not only recommended based upon the grounds that this will inherently reduce the demographic threat that the EU faces, it is also recommended due to the fact that it would more effectively allow the firm to integrate with the unique needs of its multinational clients by engaging in a level of increased diversity. TechnologicalStrategy Formulation for ABB: The reality of the fact is that the technological shifts and changes that take place within the current market cannot be fully ameliorated by strategic planning. Although planning in and of itself is useful, the extent to which strategic planning can be engaged as a function of seeking to ameliorate the technological pressures that exist for the firm within the current and future environments is limited. However, even within this limited technological strategy that has thus far been denied, it should be understood that the firm could benefit from seeking to integrate further levels of industrial automation with the breakthroughs that are taking place within the software realm. Industrial process is much slower to change than the software design features of operating systems and programs (John Wiley, 2001). Software engineering also comes with benefits of reduced production cost, flexibility, reliability and efficiency. The level and extent to which ABB could garner further levels of profitability by engaging in newer and more technologically advanced procedures and products could be vast. As such, developing an entire division of the company to seek out these new breakthroughs and integrate them with current and future projects, as well as research and development would be instrumental in seeking to lessen the threats that technology has to the way which the firm continues to operate. EnvironmentalStrategy Formulation for ABB: The strategy that ABB should engage with regards to the environmental realities that have thus far been discussed is perhaps the most difficult strategic question to engage. The fact remains, no matter which metric is being analyzed, that the overall level of resources, availability, and price are continually working against the firm. As such, seeking to reduce the industrial process and minimize waste at each and every opportunity is just one approach that could be leveraged with regards to implementing a strategic plan with regards to the environmental threats that have thus far been engaged. Whereas the strategic approach that has thus far been promoted focuses upon engaged divisions, oversight boards, and departments to engage the respective changes that are required to reduce the risk that the threatens elaborated upon previously reflect, the same can be said with respect to the need for oversight with regards to strategy and planning on waste reducing and the effective use of the resources that the firm utilizes. Moreover, the research and development branches of the entity can be engaged as a means of finding the most efficient and alternative means of maintaining global representation for the firm and its products/services. Conclusion: From the information that is thus far been presented, it is clear and apparent that each of the threats that have been discussed also engender a certain level of response that could conceivably place ABB at a far more effective level of control and competition that it would be experiencing if no strategy for engaging these threats was employed. Furthermore, by engaging the strategy implementations that have been recommended, the firm will necessarily engage the planning process to a more effective degree and seek to ameliorate many of the extant risks that exist within the current market. Naturally, change for the sake of change is not an effective maneuver that could see ABB experiencing further profitability or success in the near future. However, by seeking to address the unique internal and external threats that necessarily constrain and impact upon the way in which the firm can seek to promote its best interests, this analysis has been able to engage the reader with a renewed level of understanding concerning how an effective integration with regards to strategy could prevent these shortcomings and maximize the benefits of existing best practices and strengths. Yet, before concluding, it must be noted that not a single one of the strategies that have been promoted within this piece come at no cost. Rather, integrating with the demands of the current and perceived risks of the future world has a high cost that must be borne by the firm in he hopes that effective strategic approaches will engender effective and successful continuity of operations well into the future. Even though the firm itself has a powerful and dynamic impact upon the current business environment, this position is not guaranteed and studies indicate that only those firms, regardless of size, that are able to integrate with the changes of the environment are able to continue to survive. As such, it is the understanding of this particular author that even though ABB has developed an impressive array of clientele and continues to integrate with the needs of these consumers, changes to the culture and key strategic planning must be engaged as a means of motivating efficiency, productivity, and ensuring that the firm itself maintains its relevance into the immediate future. Bibliography Alperin, R 2012, The Need for Structured Plan Governance in the Wake of Tussey v. ABB, Inc, Benefits Law Journal, 25, 4, pp. 6-24, Business Source Complete, EBSCOhost, viewed 22 November 2013. Brinco, S 2012, ABB, Ltd. SWOT Analysis, ABB, Ltd. SWOT Analysis, pp. 1-9, Business Source Complete, EBSCOhost, viewed 28 November 2013. Kallenberg, K 2007, The Role of Risk in Corporate Value: A Case Study of the ABB Asbestos Litigation, Journal Of Risk Research, 10, 8, pp. 1007-1025, Business Source Complete, EBSCOhost, viewed 14 November 2013. Martins, L 2011, ABB FUNDS KID GRID AT NC MUSEUM, INSTALLS FIRST DC FAST CHARGER IN US 2012, POWERGRID International, 17, 11, p. 8, Business Source Complete, EBSCOhost, viewed 22 November 2013. Prosters, G 2012, DATAMONITOR: ABB, Ltd, ABB, Ltd. SWOT Analysis, pp. 1-10, Business Source Complete, EBSCOhost, viewed 22 November 2013. Rinsby, T 2012, ABB Inc. Named One of Americas Safest Companies 2012, Professional Safety, 57, 11, p. 12, Business Source Complete, EBSCOhost, viewed 17 November 2013. Saul, A 2012, ABB SRL, Seenews Research & Profiles (Company Profiles), pp. 52-54, Business Source Complete, EBSCOhost, viewed 10 November 2013. Zhu, L 2013, ABB to launches service product for continuous hoist monitoring, Coal International, 261, 5, p. 60, Business Source Complete, EBSCOhost, viewed 30 November 2013. Appendix Political Factors and the effect of governance on the given entity: The first of these determinants which will be discussed with relation to ABB is that of the political factors that could affect the overall viability and profitability of the firm within the next few years. As such, a few of these key concerns would be associated with any form of government policies that would affect the degree of intervention that the government had previously exhibited within this given sector of the economy. Oftentimes political changes incorporate many of the PESTEL factors that will be discussed as they can affect laws, micro economics, trade balance, currency valuation etc. As such, it is correctly denoted as the first determinant in that it has such a broad and overarching affect on the other factors that will be listed. Moreover, a company such as ABB serves as one of the technological pillars for manufacturing (Kallenberg, 2007). Although it is impossible to measure the extent to which the government would intervene if ABB were to be at risk of being insolvent, it is the belief of this author that at least some effort would be made to salvage the firm from bankruptcy; due in part to the fact that it has become such a vital contributor to the economy of Switzerland. Yet, a more pressing issue that should come under analysis with regards to the political threat that ABB faces is with regards to the reality of the products and services that ABB is responsible for representing to the consumer markets. Ultimately, the firm relies for the lion’s share of its US 40 billion dollar a year revenue based upon the demands that automated manufacturing places upon it. In such a way, a very clear and prescient threat is with regards to the fact that ABB could likely face a political situation in the future in which several of its main clients, and indeed entire trade blocks, could utilize political means to effectively bar ABB from the market. Although this may seem as something that is rather absurd, the fact of the matter is that with the ever increasing global population and the specter of joblessness, the overall level of favorability that individuals view automation is greatly reduced (Martins, 2011). Indeed, some governments have already become highly hostile to firms utilizing further automation to produce their products and guide their industries that they have placed restrictions upon the degree and extent to which automation can or should define the manufacturing process. Similarly, as opposed to the other determinants which will be discussed, the political determinant has the ability to directly affect sectors such as workforce training, health and safety, as well as infrastructure development and labor relations. For purposes of the outlook, the researcher would be safe to assume that the stable political and economic system that is in place throughout the majority of the nations in which ABB actively engages is not one that should be taken for granted and may very well represent a dire risk with regards to the changes in politics that could adversely affect the firm’s ability to operate and continue to engage in revenue generation. Economic Factors and the effect of economic determinants on the future of the firm: Likewise, the secondary determinant that this analysis will consider is that of the economic factors that could potentially affect the firm in its operations within the future. Of all of the determinants that will be listed, this one in particular deserves the most attention. This added attention is due to the fact that the market for heavy industry and manufacturing is predicated upon the growth of the economy. Whereas a gloomy outlook of the future for the economic environment necessarily states that further austerity lies ahead, the individual analyst would be remiss if they were not to consider this outlook as impactful with regards to the economic forces that could define the way in which ABB seeks to engage with its clients. Periods of sustained economic malaise have definitively been noted to have an adverse, oftentimes tragic, impact with regards to the way in which manufacturing is exhibited. Accordingly, if the economy begins to take a turn for the worse, the first sectors that feel the brunt of the slowdown are necessarily those that do not provide basic needs or services to the consumer. Furthermore, this economic factors ties in closely with the level to which the global economy is performing as well as the level to which domestic government intervention aids or hurts the firm in question. As the rate of recovery for the global economy has been slow, it is reasonable to assume that the economic factors to include: higher interest rates, weak currency exchange rates, and terms of trade can negatively affect the business that the firm would otherwise like to carry out within such a time period (Brinco, 2012). As stated, this factor more so than any of the others which will be discussed has the most possibility of providing very weak sales numbers for the ABB. Social Factors and the effect of social/cultural determinants in assessing the future viability of the firm: The third determinant, that of the social changes and/or pressures which could affect the firm, is more nuanced than the others that will be discussed. These social factors are of dire importance to any firm that operates throughout a global environment. One of the primary threats is with regards to the fact that the society within Europe is demonstrably aging at a rather rapid rate. Accordingly, replacing the employees of ABB at their headquarters and sites of production within the European Union will prove to be increasingly difficult as the current generation ages and fewer and fewer young people are able to replace them in the workforce. Further, besides the sociological factors affecting ABB on the domestic front, the prime sociological factor that the firm faces on the global front is with regards to the slow but steady reduction in cheap labor. For years firms within the developed world outsourced their means of production to nations such as China and elsewhere; in an attempt to drive down the cost of production and increase the revenue that could be generated on each unit sold. However, even a cursory look at the nature of labor within the current model indicates the fact that the availability of cheap or skilled labor, regardless of what region of the world is considered, is slowly drying up. Technological Factors and the effect of emerging trends in differentiating the product from the competition and meeting the desires of the target market: With each iteration of the company’s releases, the effect of technology on the firm’s products is one of the foremost determinants that defines whether this particular firm will experience a degree of success or merely fall by the wayside as compared to the competition (Rinsby, 2012). In this way, the technological determinant is a pervasive one that must be considered with great care upon each and every design development and possible new direction which might be pursued. However, beyond merely representing the attractiveness of the product to the customer, the technology that defines the nature of ABB can be seen with respect to the way in which the firm has now been challenged with providing more and more integrated products that not only speak to the needs of mechanical industry but with regards to the need for integrated computing components to define this process. As such, changes to the way in which the demand for these products are effected based upon their technological needs must factor in heavily to an understanding of the potential strategy that ABB must integrate in the future if it indeed seeks to maintain its prominence. Environmental Factors and the effects of the threat of natural disaster on the business practices and planning of Nintendo Corporation: Although there is no single aspect of the PESTEL analysis that should be discounted or not considered, one might be led to believe that the environmental factors that might face ABB would within the next few years be limited. However, the recent incidence of the “rare earth” shortage that has plagued the electronics industry helps to shed further light upon the way in which such an environmental concern could adversely impact upon the supply mechanisms that firms such as ABB might leverage as a means of continuing to promote its corporate interests and engage in further revenue generation. Although the environmental threats that are faced by ABB cannot be definitively linked to any one area of the globe, a better and more actionable understanding of the environmental threats has to do with the fact that a greater and greater demand is being placed upon the increasingly scant raw materials that the earth is able to provide; thereby inherently driving the price of this raw materials up (Alperin, 2012). At some juncture, the overall price of the products that ABB is able to provide may be well above what the consumer is willing to pay; opening the door to competition or leveraging technology as a means of services the nuanced needs of the clients that ABB has come to rely upon to drive its corporate strategy. Legal Factors and the effects of the law, both domestic and international, on the way in which the firm chooses to chart its course: The least of the PESTEL forces which this brief report will analyze is that of the legal factors that could conceivably harm the firm’s ability to make a profit within the future. As noted earlier, the laws that govern the way in which the firm engages in business both domestically and internationally can directly affect the viability of the firm (Zhu, 2013). Moreover, having a defined and stable governmental and judicial system is only one small part of achieving stability in this respect. The role of international law is also a consideration that the firm must continuously account for in formulating market penetration and development goals for their new and existing product lines. Read More