ABB and Caterpillar Key

Account Management Case

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

ABB and Caterpillar Key Account Management Case

Table of Contents
Background............................................................................................................ 2
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

- Global Presence
- Well Trained employees

- Unclear Roles and

reaponsibilities
- Lack Of Coordination
- Disconnect with customer

THREAT

OPPORTUNITY

- Overdependence on
caterpillar
- Caterpillar developing
their own Turbocharger
- Big Account at the verge
of moving out

Clearly define & Integrate

GAM role with BU
- Steering committee
headed by Paul

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 increases the reliability on the company and provides advantage to
handle customers on global level.

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ABB and Caterpillar Key Account Management Case

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.
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
ABBs 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

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ABB and Caterpillar Key Account Management Case

Key Issues

Initially individual BUs were responsible for dealing with the account and
took care of the requirements of the customers, but these units werent
ready to accept the direct involvement of the GAM in the key decisions
making concerning those accounts.

ABBs 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 customers
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 GAMs 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 BUs and the
GAMs on key accounts.

Management negligence in trying to build relationship and flexibility

between the units and the GAMs. Management had to make sure that
both these parties understand clearly each others roles and
responsibilities and support each other in building a strong clientele

Lack of transparency from the customers 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 others
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 GAMs 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.

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ABB and Caterpillar Key Account Management Case

Strategic Options
In todays 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

P ro s

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

The immediate risk

of loosing the
customer will be
removed.
Future prospects of
getting more
business will be
enhanced.

Client could become

more demanding in
the future.

Steering Committee
Create a steering committee comprising of ABB and Caterpillars 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.

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P ro s

ABB and Caterpillar Key Account Management Case

Customer will take it as a

sign of commitment from
ABB and might reconsider
the decision to switch.
BU will have confidence in
ABB management because
of their involvement in the
negotiating process.

Negotiations if not
done properly could
lead to the same
results as right now.

Customer Asset Management

The customer asset management perspectives are:

P ros

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.

Customer
satisfaction and
loyalty results into
relationship success
and partnership
Projects pursued in
collaborative fashion
Longer time horizon

Significant coinvestment and

deeper linking of
joint processes is
required. Absence
from one party will
fail to give results

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.

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P ro s

ABB and Caterpillar Key Account Management Case

Shared
governance
Gives
Relationship,
Economic,
Knowledge and
Leadership
Advantage

Investment costs
from both parties
Employees need
to be managed,
staffed and
trained propoerly

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 doesnt 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.
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 responsibilities 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 suppliers commitment to the
customer.

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ABB and Caterpillar Key Account Management Case

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 this particular case implementing GCM
with proper corporate commitment, dedicated task force, full time GAMs and
training programs supported by IT infrastructure will remove the ambiguity about
the GAM position form the perspective of BU and increase their 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 crossgeography 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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