ABB and Caterpillar Key Account

Management Case
Group Assignment

Group 5:
Avinash Singh (GSEP13CMM023)
Kautilya Tyagi (GSEP13CMM026)
Prajakta Talathi (GSEP13CMM031)
Vihaan Chaudhary (GSEP13CMM037)

5/12/2014
 ABB and Caterpillar Key Account Management Case

Table of Contents
Background...................................................................................... Error! Bookmark not defined.
Company Analysis......................................................................................................................... 2
SWOT Analysis.......................................................................................................................... 2
Strength................................................................................................................................ 2
Weakness ............................................................................................................................. 2
Threat................................................................................................................................... 3
Opportunity .......................................................................................................................... 3
Customer Analysis ........................................................................................................................ 3
Key Issues .................................................................................................................................... 3
Strategic Options.......................................................................................................................... 4
Fulfil All Customer Demands...................................................................................................... 4
Steering Committee .................................................................................................................. 5
Customer Asset Management.................................................................................................... 5
Relationship-Oriented Perspective ......................................................................................... 5
Network-Oriented Perspective ............................................................................................... 6
Recommendations and Justification............................................................................................... 6
Implement Global Customer Management (GCM) Program ......................................................... 6
Network-Oriented Perspective to manage Key Customer Accounts.............................................. 7

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 ABB and Caterpillar Key Account Management Case

Situational Analysis
Company Analysis
ABB, a $20.7 billion Swiss – Swedish engineering group, was a worldwide leader in power and
automation technology supplying utility and industrial customer with product and services. It
operated in more than 100 countries and employed 104,000 people worldwide. ABB has five
business divisions namely:

 Power Products
 Power Systems
 Automation Product
 Robotics
 Process Automation Division

SWOT Analysis

STRENGTH WEAKNESS
- Cutting Edge Technology - Unclear Roles and
- Global Presence reaponsibilities
- Well Trained employees - Lack Of Coordination
- Disconnect with customer

THREAT OPPORTUNITY
- Overdependence on caterpillar - Clearly define & Integrate GAM
- Caterpillar developing their own role with BU
Turbocharger - Steering committee headed by
- Big Account at the verge of Paul
moving out

Strength
1. Cutting Edge Technology: All products of ABB are technically very superior. Customers are
very much satisfied with the performance of the products.
2. Well Trained Employees: Employees of ABB have good knowledge about their products.
They know in and out about the product. It increases the respect for the employee in front of
their customers and strengthens the position of ABB.
3. Global Presence: ABB operates in more than 100 countries around the world. It increase s the
reliability on the company and provides advantage to handle customers on global level.

Weakness
1. Unclear Role: People in the organization are not very clear about roles and responsibilities of
the Group Account Manager and Business Unit.
2. Lack of Coordination: Because of unclear roles and responsibilities, coordination within the
company is missing.

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 ABB and Caterpillar Key Account Management Case

3. Disconnect with Customer: Although ABB is providing superior quality product but they are
not engaged properly with the customers.

Threat
1. Overdependence on Caterpillar: For the turbochargers business, 30% of the total volume
produced by ABB is consumed by Caterpillar. This increases the risk of the business.
2. Caterpillar developing their own Turbochargers: Air system group of Caterpillar is
developing its own turbochargers designs. This has created lot of conflict between ABB and
Caterpillar. Also Intellectual Property (IP) matters have been raised.
3. Big Account at the Verge of Moving Out: Caterpillar is one of the biggest accounts for ABB.
Due to this disconnect created by ABB, Caterpillar started looking for the replacing ABB as a
supplier.

Opportunity
1. Clearly Define and Integrate GAM Role with BU: ABB is facing lot of friction because of
unclear roles and responsibilities. It ultimately reduces the efficiency of ABB. Integrating GAM
role with BU increases the efficiency of ABB as a whole and strengthens its position in market.
2. Steering Committee Headed by Paul: Dan Ahren (GAM) has developed good chemistry with
Paul. Now ABB can work in close coordination with Steering committee to increase the
engagement with Caterpillar and repair the earlier damage.

Customer Analysis
 Sales and Revenues of Caterpillar is about US$ 36.3 billion
 World leading manufacturer of construction and mining equipment, diesel and natural gas
engines and industrial gas turbines
 Has 3 segments:
o Machinery
o Engines and
o Financial Products
 Represents over US$ 67 million in Revenues for ABB. Over $40 million come from supply of
Turbochargers
 ABB’s top three customers in terms of volume. 30% of Turbochargers produced are sold to
Caterpillar
 Uses Turbochargers for 2 plants at Lafayette, Indiana and Kiel, Germany
 Caterpillar Motoren GmbH @ Co. in Kiel was a world leader for four stroke medium speed
diesel engines used in ships for main propulsion

Key Issues
 Initially individual BUs were responsible for dealing with the account and took care of the
requirements of the customers, but these units weren’t ready to accept the direct
involvement of the GAM in the key decisions making concerning those accounts.

 ABB’s dictating terms while deciding price, delivery times, and quantity. There was no
concern about maintaining a good relationship and providing the best of the services to the
customer. The Business Units were hard pressed on deciding their own terms and not on the

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 ABB and Caterpillar Key Account Management Case

customer’s expectations. They were not valuing the importance of building a value
relationship with the customer.

 Non familiarity of the changes taking place in the organization amongst the various Business
Units. There was clear lack of communication between the management and the Units. This
was visible from the fact that the Units resisted the GAM’s making any new decisions for the
existing customers and wanted no interference from them into their business deals. Lack of
trust and Coordination within the BU’s and the GAM’s on key accounts.

 Management negligence in trying to build relationship and flexibility between the units and
the GAM’s. Management had to make sure that both these parties understand clearly each
other’s roles and responsibilities and support each other in building a strong clientele

 Lack of transparency from the customer’s side in not informing key plans and internal
building up of similar designing for the Turbochargers.

 Lack of understanding of the customer-supplier relationship, their structure, culture and

business practices with no emphasis on customer relationship management.

 Lack of effort in strengthening the relationship with the customer .The customer (Caterpillar)
as well as the supplier (ABB) both look disengaged and therefore there has to be a bridge for
both of them to communicate clearly, try and solve critical issues together, understand each
other’s working style and form a long-term relationship which work in favor of both and
benefits them in the long run.

 Lack of training of the existing BU members and instilling in them the importance of working
together as one unit with the GAM’s for the overall interest of the company.

 Lack of flexibility and transparency in the culture of the company in dealing with key
customers like Caterpillar.

Strategic Options
In today’s tough global competition, companies in B2B Markets need to rethink the way they
manage their customer portfolio and interact with their customers. Customer-centric leadership is
required to manage strategic customers as assets. Different strategies can be adopted for asset
management based on its scope and depth and on value creation and risk management.

Few Strategic Options are:

Fulfil All Customer Demands

Mend strained ties with Caterpillar by fulfilling their demands of be tter delivery support and
enhanced collaboration.

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 ABB and Caterpillar Key Account Management Case

Pros
The immediate risk of Client could become
loosing the customer will more demanding in the
be removed. future.
Future prospects of
getting more business
will be enhanced.

Cons
Steering Committee
Create a steering committee comprising of ABB and Caterpillar’s decision making executives to work
on issues in a systematic manner. The focus should be on negotiating on the points of contention
rather than accepting whatever they need.
Pros

Customer will take it as a sign of Negotiations if not done

commitment from ABB and might properly could lead to
reconsider the decision to switch. the same results as right
BU will have confidence in ABB now.
management because of their
involvement in the negotiating
process.
Cons

Customer Asset Management

The customer asset management perspectives are:

Relationship-Oriented Perspective
Relationship-Oriented Perspective puts business relationship first; ABB manager should behave as an
advisor and apply consultative techniques to develop comprehensive, tailored value proposition
with Caterpillar. Partnership built on mutual trust to do continued business.

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 ABB and Caterpillar Key Account Management Case

Pros Customer satisfaction and Significant co-investment

loyalty results into and deeper linking of joint
relationship success and processes is required.
partnership Absence from one party
Projects pursued in will fail to give results
collaborative fashion
Longer time horizon

Cons
Network-Oriented Perspective
Network-Oriented Perspective defines, explores and creates value within the supplier-customer
ecosystem. ABB Managers should act as “Intrapreneur” who orchestrates value creation and risk
reduction.
Pros

Shared governance Investment costs from

Gives Relationship, both parties
Economic, Knowledge Employees need to be
and Leadership managed, staffed and
Advantage trained propoerly
Cons

Recommendations and Justification

Implement Global Customer Management (GCM) Program
There is clear lack of co-ordination between the GAM and the Business Unit team of ABB. The BU
doesn’t want GAM to be interfering how to manage the key issues like prices and deliveries of the
Caterpillar account. Therefore to increase the co-ordination among these teams internally and with
the client Caterpillar, ABB should implement the Global Customer Management (GCM) program to
manage this account.

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 ABB and Caterpillar Key Account Management Case

ABB seems to have aspired to implement some essence of GCM because the newly appointed Group
Account Manager (GAM) Dan Ahern is responsible for Caterpillar account globally rather than
regionally which was the earlier norm. But clearly there are problems in the conceptualisation and
implementation of this change because the BU is not clear on the roles and responsibili ties of the
newly created GAM position. Therefore our recommendation is that the program should be
implemented properly with serious commitment from top management.

Reasons to implement GCM:

 Attracting, retaining and nurturing global customers is a complex task that goes well beyond
traditional customer relationship management programs (CRM)
 A global client might realize that there is service variability by a supplier across geographic
boundaries which can become a source of contention.
 There might be price differences between geographies for which the supplier might not have a
justifiable reason.
 The client might feel the requirement for better delivery support from the supplier and a
better coordination with them. Creating a GCM program will foster this relationship and show
the supplier’s commitment to the customer.

Research suggests that companies which implement GCM have a significant improvement in their
customer satisfaction and revenues and increases their competitive position in their market. In t his
particular case implementing GCM with proper corporate commitment, dedicated task force, full
time GAM’s and training programs supported by IT infrastructure will remove the ambiguity about
the GAM position form the perspective of BU and increase thei r co-operation.

Network-Oriented Perspective to manage Key Customer Accounts

Dan should incorporate Network-oriented approach and gain the below advantages for ABB:

• Relationship – to form joint value creation with Caterpillar

• Economic – to devise measures to lower total costs, address hidden costs and value drivers

• Knowledge – to seek knowledge-based value that can be translated into high impact
activities in the network of ABB

• Leadership – to motivate and coach cross-function, cross-unit and cross-geography teams of

ABB and help them understand roles and responsibilities of GAM

On implementing Network perspective approach, it can be leveraged by ABB with the help of three
key dimensions:

 Mind-set – to drive value creation and risk management in co-creation business

relationships in close collaboration with internal and external stakeholders of both ABB and
Caterpillar
 Context – to specify responsibilities, key performance indicators, competences and
collaboration at ABB-Caterpillar interface
 Competence – to possess skills like Relational, Commercial, Knowledge Management and
Leadership skills

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