Creating Strategy for Company: ABB - Case Study Example

?Creating strategy for company: ABB case study Introduction Engineering conglomerate ABB, from its itself is just among of the diverse and complex organizations that need to be managed the right way. In this paper, the proponent tries to identify the key strategic issues that ABB is facing. Theories from Levitt and Porter are applied in the key points presented in this essay. In line with this, the proponent also discusses theories identified to the issues in the case study and critically assesses how useful the application of the theory is for developing future strategy. Acquisition-led growth strategy This is one of the major strategic issues stated in the case which was said to be suited in a widely globalizing market. Prior to digging on this issue further, let us examine first other important strategic issues. ABB tried to adapt certain capacity to be global in coverage and this resulted to its strategic move to optimize resources in order to have competitive edge in cost leadership. For instance, the company tried to improve its economies of scale and scope by specializing in the production of major product’s components around the world. Not only that, ABB also tried to come up with feasible cost saving measures such as component outsourcing and overhead cuts. Based on the idea of Levitt (1984) on globalization, the idea of ABB to go global is therefore a matter of necessity. The very reason is the fact that in globalization, there is an attempt on the part of an organization to come up with goods of the best quality and reliability yet at the lowest price possible in order to compete. This is the very reason why ABB needs to consider two important dimensions in its structure: products and region just prior to be highly competitive in the global setting. It is implied that in order to obtain competitive advantage according to Porter (1998), the two factors that need to be taken into account are attractiveness of industries and relative competitive position. According to Porter, it is not an assurance that certain competitive advantage can be achieved if only one of these two factors is considered. In other words, certain firm aiming to reach its competitive advantage needs to be certain about the competitiveness of industries and its relative competitive position. This is also the very reason why ABB eventually needs to consider operating local. The local presence of a certain company contributes to its potential to top in the competition especially in the industry where ABB belongs. Thus, ABB finally decided to consider an acquisition-led growth strategy, a sort of its focus competitive strategy based on Porter’s generic competitive strategies (Porter, 1998). ABB believes that with this strategy while it stays in its goal to be global, it can also increase its local presence in order to enhance its competitive advantage. However, there is basically a contradiction in this. ABB aiming to go global needs also to stand local is a form of contradiction at some point. Levitt (1984) pointed out that poor execution may be a significant problem in this situation due to the fact that what exists in the local trend may not be what is in the global setting and vice versa. This is a potential reason why ABB failed with its acquisition-led growth strategy and to some extent, the management considered having incurred bad purchases of some of its acquired companies. In this case, Porter and Levitt’s theories of competitive advantage and globalization proved to be highly significant in understanding the success of ABB in the midst of ongoing competition in the global setting. The very proofs are specific situations just presented earlier in this section. In fact, based on these theories, ABB’s success can be significantly assessed and the reasons of its failures may be substantially explained. This proves further that the theories of Porter and Levitt are useful in formulating future strategies for various firms in both local and global context. Novel structure Another issue facing ABB is its ability to be both centralized and decentralized. This is evident on the management’s ability to minimize bureaucracy, but giving regional managers a great deal of autonomy at the same time. As stated in the case, this resulted to lack of standardization and a culture of waste and duplication. Levitt (1984) significantly pointed out that in modern marketing, modern corporations are looking forward to what customers really wanted rather than what is convenient for the company. In other words, there is certain customer standard that prevails in order to effectively promote certain service or product offerings of the firm. However, Porter (1998) also pointed out that product differentiation strategy for instance could definitely help enhance the competitive advantage of the firm. This further implies that each firm trying to come up with this strategy has the potential to create a need for their product and service offerings. This is a contradiction to the idea of Levitt knowing the fact that he focused on the idea that customers has the ability to create their standard. It is hard on the part of ABB to come up with control system that will work on centralized approach considering that its current system is highly decentralized. Its control system should be within certain level of complexity. For instance, under formulation of innovative products, the approach may vary from various companies integrated with ABB. Based on the above-mentioned theories, ABB has the option to adjust its strategies in creating a standard for its product and service offerings or its entire management approach. This depends on which theories it has to follow. If it has to follow on the theory of Levitt in understanding customers’ needs and standard in the midst of its both centralized and decentralized management system, then the idea should be purely customer-centric approach. However, using Porter’s theory of differentiation, it talks about innovation and it could be applied from both customers’ and the firm’s perspectives. Thus, in either way, both customers’ or firm’s standards would make sense implying further that theories in competitive strategy and globalization are remarkably important. Conclusion The above discussion shows that theories of Levitt and Porter are important especially on how a certain firm should come up with a specific competitive strategy in the midst of a tough competition in today’s global market. Based on the case of ABB, theories in globalization and competitive strategy are at some point effective to help formulate a suitable competitive strategy that will work up to its maximum potential. References Levitt, T. (1984) The globalization of markets. The McKinsey Quarterly. Porter, M. E. (1998) Competitive advantage: creating and sustaining superior performance: with a new introduction. New York, NY: Simon and Schuster. Read More