Case Study

ABB process automation: Competing in the mid-tier market in China

13 pages
August 2011
Reference: IMD-3-2225

ABB was facing increasing competition in the process automation market in China from local, good enough (mid-tier) competitors. Senior management at ABB had to decide whether ABB should enter the mid-tier market itself, and, if so, whether to do it by acquiring a local competitor or by growing into the market segment organically. ABB decided to enter the segment by organic growth setting up a new company, Winmation, which employed a different business model than the traditional ABB model. The case describes the launch strategy and the initial results. At the end of the case, Lance Zhao, the general manager of Winmation has to decide whether he needs to modify the strategy in response to some early challenges.

Learning Objective

The case gives participants an opportunity to develop a deeper understanding of the true nature of many low cost competitors based in China. Contrary to the thinking of many Western executives, these companies can have significantly lower costs than the global market leaders, their products are good enough to meet the needs of many customers, and despite very low prices these companies can be quite profitable. Participants also have an opportunity to consider the pros and cons of entering the mid-tier market organically or by acquisition. Finally, they can discuss some of the issues a large, sophisticated European company faced as it entered the good enough market segment.

Keywords
Low Cost Competition, New Business Model, Process Automation
Settings
China
Asea Brown Boveri
2010
Type
Field Research
Copyright
© 2011
Available Languages
English
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