Managing Business Markets

1. Why was Caterpillar planning to discontinue its relationship with ABB?

Ans -

a. Caterpillar's executives were aware that ABB was a highly technologically

advanced organization, that its products were excellent, and that ABB's business
divisions had a deep understanding of the product's characteristics and benefits.
But, when it came to dealing with Caterpillar, ABB offended Caterpillar by
interfering in their business operations.

b. Without the involvement of the group's senior account managers, the Business
Units responsible for ABB Turbo systems functioned in silos when it came to
product delivery and price. The Caterpillar executives were concerned that ABB
was too powerful in terms of delivery and price.

c. Any problems in the turbo systems section might have far-reaching consequences
for the remainder of ABB's products for Caterpillar. In an email to Dan Ahern, the
management of Turbo Systems pleaded with him to cease meddling with their
internal operations.

Caterpillar's executives thus concluded that they should explore for other turbocharger
suppliers and lessen their dependency on Turbo Systems.

2. What changes are required in both procurement and selling to rebuild the ABB-
CAT relationship?

Ans –

a. ABB's procurement and sales departments are now operating autonomously,

without discussing or sharing information about choices made about the
Caterpillar account. The Caterpillar delivery and price problem must be resolved
by the ABB business units working together with their Group Key Account
Management team in order to avoid any further retaliation from Caterpillar
management against other ABB product companies.
b. Dan Ahern has said that he would not participate in the working groups that
determine specifics such as price and delivery, but he must participate in the
overall Caterpillar process.
c. The ABB Group Key Account Management team must be alerted and approve of
any communication from the Turbo Systems BU to Caterpillar.
d. Caterpillar's diverse demands must be taken into consideration by the ABB Turbo
Systems BU prior to imposing delivery features and price alternatives. Caterpillar
and ABB will both profit from working together.
e. The Caterpillar account relationship may be improved if the ABB business units
are aware of the value that the Group Key Account Management team brings to
the table.