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    Business overview-ABB & Caterpillar

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    arpita mishra
    ABB is a key supplier of turbochargers to Caterpillar but faces issues including a disconnect between the companies, unclear roles and responsibilities, and low revenue from the account. To improve the relationship and account management, ABB should [1] integrate sales across business units to increase revenue and collaboration, [2] ensure senior management support and participation in the steering committee, and [3] provide transparency into pricing and the strategic importance of Caterpillar's business. Addressing these issues would help move Caterpillar higher on ABB's customer loyalty ladder.

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    Business overview-ABB & Caterpillar

    Uploaded by

    arpita mishra
    110 views8 pages
    ABB is a key supplier of turbochargers to Caterpillar but faces issues including a disconnect between the companies, unclear roles and responsibilities, and low revenue from the account. To improve the relationship and account management, ABB should [1] integrate sales across business units to increase revenue and collaboration, [2] ensure senior management support and participation in the steering committee, and [3] provide transparency into pricing and the strategic importance of Caterpillar's business. Addressing these issues would help move Caterpillar higher on ABB's customer loyalty ladder.

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    B2B_ABB_Group 9

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    ABB is a key supplier of turbochargers to Caterpillar but faces issues including a disconnect between the companies, unclear roles and responsibilities, and low revenue from the account. To improve the relationship and account management, ABB should [1] integrate sales across business units to increase revenue and collaboration, [2] ensure senior management support and participation in the steering committee, and [3] provide transparency into pricing and the strategic importance of Caterpillar's business. Addressing these issues would help move Caterpillar higher on ABB's customer loyalty ladder.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    110 views8 pages

    Business overview-ABB & Caterpillar

    Uploaded by

    arpita mishra
    ABB is a key supplier of turbochargers to Caterpillar but faces issues including a disconnect between the companies, unclear roles and responsibilities, and low revenue from the account. To improve the relationship and account management, ABB should [1] integrate sales across business units to increase revenue and collaboration, [2] ensure senior management support and participation in the steering committee, and [3] provide transparency into pricing and the strategic importance of Caterpillar's business. Addressing these issues would help move Caterpillar higher on ABB's customer loyalty ladder.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 8

    Business overview- ABB & Caterpillar

    5 business divisions-
    Power products Divisions
    Power systems
    Automation products
    Robotics
    Process Automation Machin
    ery

    Financial
    products

    2004 - ABB - World leader in power


    and automation technologies

    Leading manufacturer of construction and


    Operates in >100 $20.7 billion mining equipments, diesel and natural gas
    countries worth engines and industrial gas turbines
    Sales and Revenues of $36.6 billion in 2005
    Relationship between ABB and caterpillar

    US $40 Mn came from Caterpillar buys 30% of


    selling turbochargers the turbochargers
    alone produced

    ABB is supplier to ABB supplied


    Caterpillar's two plants components worth US
    - Lafayette, Indiana & $67 Mn to Caterpillar
    Kiel, Germany in 2004.
    Issues outstanding
    • Big disconnect between caterpillar & ABB Turbo systems customer wise
    and management wise
    Customer and • Caterpillar managers wanted supplier replacement due to ABB’s hostile
    management behavior
    disconnect

    • No clarity on the roles and responsibilities of GAM of caterpillar


    • Turbocharger BU management did not want GAM’s involvement in turbo
    Roles &
    Responsibilities charging working groups or the steering committee
    of GAM

    • Caterpillar was ABB’s top customer with 30% share in turbo systems by
    30% by volume volume while making only 10% in revenue
    & 10% by
    revenue
    Insights/points to consider
    • About Caterpillar as a Key Account
    – Purchases a significant volume of Turbochargers
    – DMU- involves Jim Owens (CEO), Dan Murphy (VP- Global purchasing), Paul Wroblewski
    (operations manager) and Tom Sandbord (Purchase manager)- It involves interaction
    with different stakeholders.
    – Expectations: More attention and robust/better delivery support, Better Relationship,
    which can be long-lasting
    • Straight Rebuy situation- on the verge of becoming a modified rebuy situation
    • Interestingly, Paul who was getting hostile vibes from ABB, has now accepted to be in the
    steering committee.
    Current Status

    May invest in you


    position on loyalty ladder

    Most Valuable
    Partners
    Customers
    collaboration

    Is willing to pay premiums

    Resists competitors
    Commodity underperformer
    buyers s Endorses products

    Wants to grow relationship

    Sellers cost of serving Customer

    ABB was always in the want to grow relationship part of the loyalty ladder. Caterpillar has 2 other suppliers other than
    ABB and from the case we can see that, Caterpillar was ready to replace ABB immediately.

    ABB Turbo charger sells 30% of the product for less than 10% revenue and this shows price cutting. The order quantity
    provided by Kiel is less in volume and ABB also suffers from IP problems and turbo charger design by Caterpillar. So ABB is
    not enjoying much revenue and is currently under performer.
    ABB could have moved Caterpillar by collaborating with them on design and leveraging the product mix.
    Account Selection Criteria

    Capacity
    Customer
    Utilization Price & Margins Order Patterns
    Maintenance Cost
    (product Mix)

    Turbo Chargers At present only 0.3% The order pattern


    AC machine of ABB’s revenue is might lead to Customer
    LV Control generated from reduction in price and Maintenance cost
    Instrumentation Caterpillar, but on but ABB counteract it might be high, but
    Robotics extending the profit by offering they can be
    Opportunities to mix and by working specialised service. In decreased by
    collaborate with Air for larger orders a the case of reorders.
    system group on high profit margin is turbocharger the
    design possible. committee might help

    Caterpillar has high rate for growth


    Already three suppliers present, if ABB does not approach for key supplier status then competitors might.
    Both the companies value technological growth so there is strategic compatibility
    Operational problems due to small order quantity can be solved by diversifying the product.
    Key Account Management

     When Dan approached Oliver, his responses were not inviting. For successful key account
    management program, senior manager’s support is necessary.
     The support might not be present as the program is being instituted for the first time. The
    revenue from Caterpillar being less, the loss of BU’s control and the new CEO might also
    be a factor.
     Dan should have met R&D managers, purchase managers and operation managers on both
    side. Most importantly he should have met LEC executives and Tom Sandborg .
     The revenue for ABB Turbo charger BU from Caterpillar is less. ABB should do business
    across the product line to achieve revenue. In such a scenario some BU will have to trade
    on their profit margin. Therefore integration of sales programs with Key account program
    is essential. This integration will reduce antagonism and encourage co-operation.
     Since many other BU’s are co-operating, ideally Dan should lead the steering committee
    or at the least participate in it. The other BU heads involved in caterpillar should also be
    informed of the decision.
     Apart from Dan one executive from turbo charger BU should sponsor the committee.
     Moreover the compatibility of strategy between ABB and Caterpillar should be checked
    and depending upon it mission and the goals of the Key Account management program
    and sales program should be set.
    Recommendations

    1. Less impact on short term but


    in long run, big client like
    caterpillar would be entirely
    lost
    2. ABB can
    1. ABB can
    approach 2. More flexibility could be
    leave the
    caterpillar provided which can help in
    issue as it maintaining balance of power
    with a new
    was between the two partners.
    offer
    3. Proper division of
    4. ABB responsibilities needs to be
    3. Need for there i.e. who makes the final
    should decision? Exact role of Key
    ABB’s whole
    provide account manager
    turbocharger
    better
    unit to work
    transparency 4. Transparency in terms of price
    as a team and importance of caterpillar
    to caterpillar
    to ABB.

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