2.Problems, causes and negative effects
2.1. Identification of the problem
At the beginning of the 2000’s ABB is facing the problem of not being able to adapt its organisational structure to the current economic environment. Although the company has been renowned for its unique and innovative structure, its complexity makes is difficult to manage in the current economic environment. Starting with the seventies, ABB has been successfully using the matrix organisational structure, by having an efficient horizontal communication system, with a lot of decentralisation and low hierarchical controls. However, the scale that that the company has reached is now very difficult to manage by using this framework. Coordination of the activities proves very difficult to achieve, while the low level of control leaves the opportunity open for mistakes that affect the image of the corporation (such as the asbestos scandal). Therefore, ABB needs to find a way to better adapt its corporate structure to the complexity and the dynamism of the global market. 2.2.Identification of the causes
2.3.Identification of the negative effects that may arise if the problem is not solved
Until now, ABB’s competitive advantage lied heavily in its organizational structure. For a multinational company with a size as ABB’s, the control over international subsidiaries and their integration in the entire system is an essential step in maintaining their success. However, the organizational structure has to be modified in order to reflect the dynamics of the international business environment. As a result, due to the loss of market share and profits, ABB had to alter its organizational structure. To start with, ABB has formulated their objectives and also the wanted end results of their future organizational structure, that will suffer modifications throughout a long period of time in order to regain their international competitive advantage. Therefore, the alternative solutions include the different organizational structures that ABB can adopt.
1. International Division Structure
This type of organizational structure requires the development of a separate division inside it, with sole purpose of conducting all international activities. In this way, international activities are all centralized. This structure is suited for multidomestic strategies that demand little integration and standardization between domestic and foreign operations.
* creates a critical mass of international expertise: all the employees working in this division will be trained towards understanding and creating the suitable strategies for international strategies; * easier to manage: having a unique division for international activities makes it easier for top management to oversee the outcome of their work; * achieve economies of scale due to the centralization of all international subsidiaries;
* formation of divergent interests: as the international division is separated from the domestic one, the possibility of different interests from the two sides is very high; * a high degree of internationalization makes it difficult to allocate resources and to coordinate all activities; * top management may not be internationally focused.
2. Product Division Structure
In this case, a multinational company groups similar products under one product head, each focusing on a single product segment for its global strategy. In other words, a division for each product category is created and each one of them is held accountable for the entire process: from manufacturing to marketing. This type of strategy is suitable for companies that have a large variety of products, addressed to highly different customer types and also for companies that use highly-advanced technology.
* offers cost efficiency: through centralisation of manufacturing; * fast flow of technology and...