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Abb and Caterpillar A Key Account Management Case Solution
The case ABB and Caterpillar (A): Key Account Management highlights issues related to the relation between ABB, a Swiss engineering group, and Caterpillar, a construction and mining equipment manufacturer. ABB has five business divisions process automation division, power product division, power system division, robotics division, and automation product, division. caterpillar currently receives products and services from the process automation division in the form of Turbocharger for its machinery. ABB is a major supplier of Caterpillar, selling 30% of the total Turbocharger produced. However, there were communication gaps between the management of ABB and Caterpillar which led to the building up of negative perceptions of ABB. This further led to the verge of closure in a relationship. There were complaints highlighted by Caterpillar in regard to high pricing, delivery issues, and a perception that Caterpillar is being held as a hostage and will be dictated by ABB. Meetings were called from the senior tier to address and convey issues through the adoption of efficient global account management.
Following questions are answered in this case study solution:
What are the specific payoffs for both supplier and customer if they can forge a win-win relationship?
What form of global account management will work best?
What do GAMs do and how can their performance be measured?
How do both parties identify the misalignment and enact the change needed in both firms?
What does each firm need to do to get the right support in their company and keep people informed?
To repair the degrading relationship between Caterpillar and ABB arising partly due to the internal power struggle between Group Account Manager and BU Management
Case Study Questions Answers
1. What are the specific payoffs for both supplier and customer if they can forge a win-win relationship?
In a win-win relationship both supplier and customer close deals at the most favorable point with maximum benefits to both of them as compared to just a single party enjoying benefits at the expense of the other. There are payoffs in establishing this relationship. Win-win relationship helps in building a strong business relation between supplier and customer. This in turn helps in carrying on business operations in a smooth manner with compromises from either of them during some bottlenecks. For instance, if there are issues regarding raw material supplies faced by the supplier, customer can be informed beforehand so that he can act pro-actively based on a good relationship. Moreover, in a win-win relationship, supplier and customer can unleash the potential of future business opportunities. Supplier can negotiate with customer for an increase in order to them specifically and increasing their own business. Meanwhile, the customer in turn can demand for better prices and increase in credit facility to them. Furthermore, supplier can extend their products and services to customers from their entire product mix. For instance, Abb currently supplies Turbocharger to Caterpillar. Based on good relations and win-win dealings, Abb can extend its products and services portfolio to Caterpillar as Caterpillar would find it beneficial for their business due to better terms and conditions. However, there are downsides as well for win-win relationship as well. There might be expectations gap between supplier and customer, leading to disputes in future. There might be perceptions from either party that the other party is at benefit while we are at loss. Moreover, it might be perceived that either party is dominant due to the deal as it is perceived by Caterpillar that Abb dictates them and works on their own will and comfort rather than theirs. Hence, this leads to shattering of confidence between supplier and customer, reducing chances for future business.
2. What form of global account management will work best?
There are three approaches of global account management (GAM). These are referred to as coordinated GAM, control GAM, and separate GAM. In a coordinated GAM, local sales team have a more power and authority compared to global account management. This works best when focus is on developing and strengthening local relationship with customers rather than standardizing protocols in global avenues. In control GAM, the power and authority are distributed between the local sales team and global account management with an overall mix of power and authority tilted towards global account management. In a separate GAM, as the words suggest, separate unit is formed to look after global accounts for the customers. This is costly and resources intensive as a separate unit is formed to address and facilitate customers. In the context of ABB and Caterpillar, choice between coordinated GAM and control GAM will be made as separate GAM is not feasible for ABB due to intensive cost nature. Although Caterpillar would like to have a separate GAM since ABB is a major supplier of Caterpillar. Control GAM would be a better option and approach in context of this relation which will be a better fit for each of them. Since the power is distributed between local and GAM with tilt towards GAM, it would facilitate Caterpillar with a localized touch while maintaining cost for ABB.
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