ABB (ABBN) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for ABB (Germany)
Based on various researches at Oak Spring University , ABB is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing transportation and logistics costs, geopolitical disruptions, there is increasing trade war between United States & China, technology disruption, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, 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 Germany
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 -
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.
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.
Digital Transformation in Electronic Instr. & Controls industry
- digital transformation varies from industry to industry. For ABB digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ABB has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
Ability to recruit top talent
– ABB is one of the leading players in the Electronic Instr. & Controls industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– ABB has clearly differentiated products in the market place. This has enabled ABB to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped ABB to invest into research and development (R&D) and innovation.
High brand equity
– ABB has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled ABB to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of ABB
– The covid-19 pandemic has put organizational resilience at the centre of everthing ABB does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- ABB is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at ABB is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at ABB emphasize – knowledge, initiative, and innovation.
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.
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.
Weaknesses of ABB | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ABB are -
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.
High operating costs
– Compare to the competitors, ABB has high operating costs in the Electronic Instr. & Controls industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract ABB lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of ABB, it seems that company is thinking out the frontier risks that can impact Electronic Instr. & Controls industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Products dominated business model
– Even though ABB has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. ABB should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in Germany, ABB is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Electronic Instr. & Controls industry.
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.
Interest costs
– Compare to the competition, ABB has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, ABB needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Capital Spending Reduction
– Even during the low interest decade, ABB has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Electronic Instr. & Controls industry using digital technology.
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.
ABB Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ABB are -
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.
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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help ABB to increase its market reach. ABB will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– ABB has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for ABB in the Electronic Instr. & Controls industry. Now ABB can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Buying journey improvements
– ABB can improve the customer journey of consumers in the Electronic Instr. & Controls industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at ABB can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Electronic Instr. & Controls industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Electronic Instr. & Controls industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. ABB can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. ABB can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats ABB External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ABB are -
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.
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. ABB needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for ABB in Electronic Instr. & Controls industry. The Electronic Instr. & Controls industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. ABB will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
Environmental challenges
– ABB needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. ABB can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
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.