Case of ABB: Strategic Rise, Decline, and Renewal
Silvia Abendaño Delgado(S124778@student.hb.se )
In this paper, we research the five solutions to the case of ABB: strategic rise, decline, and renewal. We conduct our solutions by analysis of the kinds of CEOs’ strategies and structures from 1988 to 2008. We completed our solutions by identifying the ideas and factors, which cued key areas to go awry and affect the performance of the business; discussing the key strategic initiatives implemented by the various CEOs appointed; analysis of the pros and cons of matrix structures and compare and contrast with the structures; assessing ABB’s current corporate culture; commenting on some strategic options. Our solutions were based on the book called International Management Managing Across Border and Cultures.
1. Identify Percy Barnevik´s ideals and discuss the factors which caused key areas to go awry and effect the performance of the business.
Percy Barnevik´s management had a goal, the goal was to build a company that could lead business in each of the major areas of the world, for this he was focused on the next seven points:
* The development of a group-wide umbrella culture: ABB established a common set of values, policies and operational guidelines. * The development of core technologies and core competencies: being a technology leader and market share leader. * The development and use of multinational teams: Barnevik believed, that the use of such teams throughout the company gave a deeper insight into global and local business problems. * Application to the development of effective global managers: competence was the key to selection, he believed that global managers were made, not born. * Bulding a multi-domestic or federal organisation along a global-locan continuum: some companies would be super local, and some would be super global. * The development of effective communication, understanding and patience. * The development of a customer focus programme: main focus was to permanently change the company´s value system and orient every employee towards the customer.
Some of the factors, which caused key areas to go awry was in the period of expansion because this could lead to problems in the matrix structure, for two factors:
* The world was becoming more regionalised, and was formed the “Triad economies”, therefore ABB needed to have strong representation in each of these three regions, and needed structural systems. * The matrix structures of such size and reach can cause control communication problems. The dual reporting (nature of matrix structures) has always created friction between executives, there was always a conflict of interest between them. *
For this Barnevik carried out a major restructuring in 1993. According to the consolidated financial performance, we can observe the large increase from 1993 to 1994, mainly in the net profit from $0.07 bn to $0.76 bn, and the EBIT/ revenues ratio from 4.8% to 8.8%.
2. Key strategic initiatives implemented by the various CEOs appointed after Barnevik´s tenure to take the company out of the “crumbling mess”. Barnevik relinquished to became Chairman in 1997, after Barnevik´s tenure the following were: Göran Lindahl (1997-2000), Jörgen Centerman (2001-2002), Jürgen Dormann (2002-2004), Fred Kindle (2004-2008), and Joseph Hogan (2008 to present).
Göran Lindahl as CEO carried out two big restructuring: Firstly he planned to move thousands of manufacturing jobs from Europe and USA to Asia. The another major restructuring was carried out in which the geographic regional reporting structure was reduced in favour of a realignment of business activities on global lines. Finally Lindahl´s strategic originated important financial problems.
Jörgen Centerman as CEO was manly concerned with a major restructuring, new aquisitions and...
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