ABB (ABLZF) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for ABB (United States)
Based on various researches at Oak Spring University , ABB is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, technology disruption, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ABB can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ABB, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ABB operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of ABB can be done for the following purposes –
1. Strategic planning of ABB
2. Improving business portfolio management of ABB
3. Assessing feasibility of the new initiative in United States
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of ABB
Strengths of ABB | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ABB are -
Training and development
– ABB has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– ABB is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Electronic Instr. & Controls industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– ABB is one of the most innovative firm in Electronic Instr. & Controls sector.
Diverse revenue streams
– ABB is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided ABB a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of ABB comprises – understanding the underlying the factors in the Electronic Instr. & Controls industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Electronic Instr. & Controls
– ABB is one of the leading players in the Electronic Instr. & Controls industry in United States. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in United States but also across the existing markets. The ability to lead change has enabled ABB in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of ABB in the Technology sector have low bargaining power. ABB has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps ABB to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– ABB has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – ABB staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– ABB has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ABB has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the ABB are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– ABB has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electronic Instr. & Controls industry. Secondly the value chain collaborators of ABB have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of ABB in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of ABB | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ABB are -
Low market penetration in new markets
– Outside its home market of United States, ABB needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, ABB has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electronic Instr. & Controls industry over the last five years. ABB even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on ABB ‘s star products
– The top 2 products and services of ABB still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though ABB has relatively successful track record of launching new products.
Lack of clear differentiation of ABB products
– To increase the profitability and margins on the products, ABB needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– ABB has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, ABB is slow explore the new channels of communication. These new channels of communication can help ABB to provide better information regarding Electronic Instr. & Controls products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of ABB is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but ABB needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ABB to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that ABB needs to have more collaboration between its sales team and marketing team. Sales professionals in the Electronic Instr. & Controls industry have deep experience in developing customer relationships. Marketing department at ABB can leverage the sales team experience to cultivate customer relationships as ABB is planning to shift buying processes online.
Employees’ less understanding of ABB strategy
– From the outside it seems that the employees of ABB don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of ABB supply chain. Even after few cautionary changes, ABB is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left ABB vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of ABB is just above the Electronic Instr. & Controls industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
ABB Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ABB are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ABB to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for ABB to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ABB can use these opportunities to build new business models that can help the communities that ABB operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for ABB in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electronic Instr. & Controls industry, and it will provide faster access to the consumers.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. ABB can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects ABB can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, ABB can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Electronic Instr. & Controls industry, but it has also influenced the consumer preferences. ABB can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for ABB to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– ABB has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled ABB to build a competitive advantage using analytics. The analytics driven competitive advantage can help ABB to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– ABB can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, ABB is facing challenges because of the dominance of functional experts in the organization. ABB can utilize new technology in the field of Electronic Instr. & Controls industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, ABB can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help ABB to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– ABB can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats ABB External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ABB are -
Easy access to finance
– Easy access to finance in Electronic Instr. & Controls industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. ABB can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of ABB
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of ABB.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– ABB has witnessed rapid integration of technology during Covid-19 in the Electronic Instr. & Controls industry. As one of the leading players in the industry, ABB needs to keep up with the evolution of technology in the Electronic Instr. & Controls sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– ABB high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, ABB may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of ABB.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents ABB with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electronic Instr. & Controls sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on ABB demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Electronic Instr. & Controls industry and other sectors.
Stagnating economy with rate increase
– ABB can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Electronic Instr. & Controls industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for ABB in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of ABB business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of ABB Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ABB needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of ABB is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of ABB is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of ABB to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that ABB needs to make to build a sustainable competitive advantage.