Case An International Strategy Powers ABB’s Future ABB, headquartered in Zurich, Switzerland, is a..


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An International Strategy Powers ABB’s

ABB, headquartered in Zurich, Switzerland,
is a major competitor in the power and automation technologies industries
across the major markets globally. It has 140,000 employees operating in almost
100 countries. In fact, it has five major businesses—power products, power
systems, discrete automation, low voltage products, and process automation. It
operates in eight major regions: (1) Northern Europe, (2) Central Europe, (3)
the Mediterranean, (4) North America, (5) South America, (6) India, the Middle
East, and Africa, (7) North Asia, and (8) South Asia. Over time, ABB has been a
successful company using its geographic diversification across the globe to its
advantage. It also exemplifies the difficulty of managing an international
strategy and operations. For example, its power systems business has
experienced performance problems in recent years due to poor performance in
some countries due primarily to the economy downturn. Notwithstanding the
difficulty of managing in emerging economies, much of its growth is focused on
improving country infrastructure such as power systems and grids. In 2014, the
firm announced that the Asia, Middle East, and Africa (AMEA) region currently
contributes about 37 percent of ABB’s total revenue, or about $15.3 billion,
and “emerging markets were planned to contribute to two-thirds of the forecast
growth between 2015 and 2020.” In recent years, most of ABB’s entries to new
markets and expansions in existing markets have come from acquisitions of
existing businesses in those markets. Recently, it acquired Siemens’ solar
energy business, Power-One, and U.S.-based Los Gatos Research, a manufacturer
of gas analyzers used in environmental monitoring and research. The purchase of
Power-One represents a major risk as the solar power industry is in a downturn.
Yet some analysts predict a brighter future for the industry over the long
term. ABB also uses other modes of entry and expansion, exemplified by the 2013
joint venture with China’s Jiangsu Jinke Smart Electric Company to design,
manufacture, and provide follow-up service on high voltage instrument
transformers. It also recently procured major contracts for business in Brazil
and South Africa. Partly due to the global economic recession that began in
2008, recent weak economic performance, and some poor expansion decisions,
ABB’s performance has been weaker than expected. As a result, the CEO and chief
technology officer announced their resignations in 2013. Despite these changes,
ABB is a highly respected global brand, and, after its recent changes (e.g.,
closing some country operations), its revenues and earnings have started to
rise. These positive changes have been largely attributed to the success of its
North American businesses. Its acquisitions of Baldor (maker of industrial
motors) in 2010 and Thomas & Betts in 2012 greatly enhanced its North
American operations and revenues. It has also had success in manufacturing
equipment and robots with its robotics business headquartered in the United
States. It is even moving to help small companies, such as ones in the beer
industry, to automate their production processes. Therefore, even in turbulent
times, ABB’s future looks bright.

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