ABB Ltd. is a leader in power and automation technologies. ABB provides products and systems for industrial, commercial customers, and financial services using the most advanced technologies and applications. The ABB Group was formed in 1987 through the merger of the Swedish company Asea with the Swiss company Brown Bovery. Presently its core company is organized into 5 divisions and the following are the percentages of the 2002 gross revenues:
- Automation Technology (22%)
- Utilities (21%)
- Industries (19%)
- Power Technology (19%)
- Other (19%)
Percy Barnevik, who at that time was the CEO of Asea, became the CEO of this new established corporation. Back in 1996, the National Electrical Manufacturers Association (NEMA) recognized Barnevik as an “innovative inspirational leadership in the electro industry and his role as a chief architect of a global company that recognizes no national borders and vigilantly protects the spirit of entrepreneurship” (ABB, 1996). Through his new management style and through delegating responsibilities to its managers, ABB became a predominant player in the Industrial electrical equipment industry competing with companies such us: Emerson Electric, GE, ITT Industries and Nidec Co. with operation in around 100 countries and employing about 115,000 people.
Table of Contents
1. Introduction
2. Transnational Framework
3. Global Localization
4. Value Chain Analysis
5. Other ways of looking at EPG
6. Strategies
7. The Organizational Structure
8. SWOT Analysis
9. SWOT Turnaround Framework
10. Risk Analysis/PEST Model
11. ABB´s current situation
Objectives and Topics
The primary objective of this case analysis is to evaluate ABB's evolution and organizational effectiveness within the global power and automation market. The research explores how the company navigated the complexities of maintaining global integration while ensuring local responsiveness through its unique matrix structure and strategic management shifts.
- Analysis of the transnational organizational framework and matrix structure.
- Evaluation of ABB’s value chain and competitive advantages.
- Strategic assessment of growth, market entry, and decentralization initiatives.
- Investigation into organizational risk factors using the PEST model.
- Assessment of current restructuring efforts and future corporate direction.
Excerpt from the Book
The Organizational Structure
ABB chose a Matrix structure in order to balance the global business focus of the organization. The CEO believed that this structure was the best way to implement a transnational strategy. He believed that with a better management style, he could avoid the communication flows from being slow, inflexible and bureaucratic. The Matrix structure is built on approximately 60 global business areas (global focus) with the national market focus provided by 1300 local companies (national focus) grouped under the umbrella of several country-based holding companies.
The operating companies are charged with managing the front-line operations. In each major country or region, these companies are administered through a national holding company, which is responsible for ensuring effective performance of ABB’s total market presence. At the same time, each operating company reports to one of 58 Business Areas responsible for developing global strategies.
The management model focused on decentralized responsibility and individual accountability. Therefore, major changes in business assumptions, organizational practices, and management styles had to be made. The following graph shows the Partial Matrix Relationship in the Relays BA. There are only two layers of management between the local company management and the CEO. This shows the flattened hierarchical structure of ABB.
Chapter Summary
Introduction: Provides an overview of ABB Ltd., its origins via merger, and its core operational divisions.
Transnational Framework: Discusses the strategic goal of balancing global integration with local responsiveness to achieve competitive superiority.
Global Localization: Examines Barnevik’s management philosophy and the delegation of responsibilities to local managers within a global structure.
Value Chain Analysis: Analyzes the coordination of R&D, production, and marketing across international units to exploit synergies.
Other ways of looking at EPG: Reviews the evolution of ABB's business structure following the alliance between Asea and Brown Boveri.
Strategies: Details the strategies involving acquisition and diversification used to enter new markets and exploit industry trends.
The Organizational Structure: Explains the implementation and logic behind ABB’s matrix structure and its flattened hierarchy.
SWOT Analysis: Evaluates the company's internal strengths and weaknesses alongside external market factors.
SWOT Turnaround Framework: Addresses management failures, such as communication issues and the challenges of managing diverse legal systems.
Risk Analysis/PEST Model: Categorizes various environmental risks including political, economical, social, and technological factors.
ABB´s current situation: Summarizes recent restructuring efforts, leadership changes, and financial performance markers.
Keywords
ABB, Transnational, Matrix Structure, Percy Barnevik, Global Strategy, Local Responsiveness, Value Chain, SWOT Analysis, PEST Model, Decentralization, Organizational Restructuring, Power Technology, Automation, Management Philosophy, Business Area
Frequently Asked Questions
What is the primary focus of this analysis?
The analysis investigates the organizational and strategic development of ABB, focusing on how the company managed its global matrix structure and transnational operations.
What are the central themes of the work?
Key themes include global-local integration, decentralized management, strategic organizational growth, and the navigation of risks in international markets.
What is the main objective of ABB's strategy?
The goal was to achieve global efficiency and competitiveness while maintaining local responsiveness, effectively managing the contradictions of being big yet local.
Which methodology is applied in the research?
The study utilizes a case analysis approach, applying management frameworks such as the Transnational Framework, Value Chain Analysis, SWOT, and the PEST model.
What is covered in the main body of the text?
The main body examines the evolution of ABB's business units, the implementation of its matrix organization, its strategic market entry, and a comprehensive risk assessment.
What are the defining keywords for this research?
Essential keywords include Transnational, Matrix Structure, Decentralization, Strategic Management, and Global Integration.
How did the "30/30/30 rule" impact ABB's operations?
It was part of a major corporate restructure where 30% of headquarters personnel were relocated, 30% were outsourced, and 30% were laid off, allowing for better focus on local consumers.
Why did the matrix structure create communication challenges?
Employees were often required to report to two different bosses with potentially conflicting objectives, which could lead to inefficiency and frustration in the long term.
- Quote paper
- Marion Maguire (Author), 2004, ABB Ltd. Company Analysis, Munich, GRIN Verlag, https://www.grin.com/document/35475
