Name of the Company: ABB
Business Sector: Engineering and Capital Goods
Operating Geography: Europe, Switzerland, Global
About the Company: ABB is the pioneer in electrical products, robotics and motion, industrial automation and power grids, with customers in utilities, industry and transport & infrastructure in more than 100 countries with 132,000 employees. ABB has four market-leading divisions: Robotics and Motion, Electrification Products, Power Grids and Industrial Automation. The company is headquartered in Zurich, Switzerland.
Revenue: $33,828 Million (31 Dec 2016)
SWOT & PESTLE Analysis
|1. Global footprint|
2. Long-term contracts
3. Diverse product portfolio
|1. Involvement in anti-competitive practices
2. Huge debt burden
|1. Growth potential in renewables|
2. Software differentiated services
|1. Potential legal hassles
2. Geopolitical uncertainties
3. Forex variations
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1. Global footprint: ABB enjoys a dominant position in several markets that it serves. The company is one of the leading power and automation engineering companies in the world with operations in around 100 countries across Europe, Asia, Middle East and Africa (AMEA), and the Americas. ABB, one of the largest manufacturers of electric motors and drives, serves these markets through a global production, engineering and service base. The company's strong positions in these markets are well backed by its local R&D and product development capabilities, which enable it to match and even exceed local competitors in terms of the speed of product development and deployment. In the time ahead, with the maximum demand for infrastructure projects to come from developing countries, ABB is well placed to exploit that in the long run.
2. Long Term Contracts: With the long-term nature of the contract in the infrastructure projects, a stable and constant revenue is ensured to ABB. Also, with the development and expansion of local service base, a long term relationship with clients with the potential of repeat orders is ensured.
3. Diverse product portfolio: ABB is highly focused on technological development to help drive its competitiveness in the marketplace. It invests hugely in R&D, which in turn develop new and innovative products as well as strengthen its existing product portfolio.
1. Involvement in anti-competitive practices: ABB has been involved in various antitrust activities. In 2014, the EU Commission took the decision regarding its investigation of anticompetitive practices in the cables industry. In 2013, the company & Brazilian Antitrust Authority (CADE) agreed to settle its ongoing investigation into ABB’s involvement in anticompetitive practices in the cables industry. Company's cables business remains under investigation for alleged anticompetitive practices in certain other jurisdictions. ABB’s brand image is adversely affected by its frequent involvement in these investigations.
2. Huge debt burden: ABB has a long-term debt of $5,800 Million. High debt impacts the returns of the company with huge interest payments. This hampers the ability of the company to invest in future expansion. Also, this level of debt makes it increasingly difficult for the company to get an additional credit line.
1. Growth potential in renewables: With the focus on climate change, there has been a lot of impetus on renewable source of power generation. There is an expected investment of $ 7 trillion in the next 25 years. This brings ABB an opportunity to present a smarter, greener grid solution.
2. Software differentiated services: By the end of 2020, more than 20 billion devices, excluding computers and smartphones, will be connected to the internet. The stream of data from these devices will be a rich source of business intelligence. This presents a huge opportunity to analyse this data and thereby to increase the need for software differentiated services for ABB.
1. Potential legal hassles: ABB is subjected to proceedings, litigation or threatened litigation and other claims and enquiries related to environmental, labour, product, regulatory, tax and other matters. ABB’s South Korean subsidiary was involved in a significant criminal scheme involving significant embezzlement and misappropriation of funds. These types of incidents adversely impact the brand image of ABB.
2. Geopolitical uncertainties: Microeconomic and geopolitical developments are signalling a mixed picture with continued uncertainty. The overall market is being negatively impacted by modest growth and global uncertainties, such as Brexit.
3. Forex Variations: Oil prices and foreign exchange translation effects adversely impact the financials of ABB. While ABB was able to have stable revenue developments in local currencies despite market headwinds, its US Dollars revenues declined by 5%.ABB SWOT analysis has been conducted by Roshan Bhatt and reviewed by senior analysts from Barakaat Consulting.
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