Group d Case

8/3/2019 Group d Case

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PRESENTATION

ON

CASE: ASEA BROWN BOVERI(ABB)

Presented by:

GROUP D



INTRODUCTION In the late 20th century ABB, once known as Asea

Brown Boveri, was created when the two electricalengineering and equipment giants ASEA of Sweden

and BBC Brown Boveri of Switzerland joined forces. The merger was done on august 10, 1987.In 1988 its

first year of combined operations, the new company’spretax income would be US$ 536 million on sales of

US$17.8 billion. Percy Barnevik became the company's CEO and began

an aggressive expansion program, acquiring the American company Combustion Engineering in 1990.



ABB uses a matrix structure for its organization

The ABB Group is made up of some 1,000 companiesand more than 5,000 profit centers.

Worldwide business activities are grouped into 4Business Segments comprising 37 Business Areas.

Each Business Area is responsible for global strategies,business plans, allocation of manufacturing, and

product development. Local company managers, in turn, are responsible for

operations in each country in line with the globalstrategy of the Business Area.



ASEA MOTIVES

Asea want to achieve financial strength and Economic

of scale. Asea can make its position stronger in Austria, Italy,

Switzerland, and West Germany.



BROWN BOVERI MOTIVES BBC want to achieve rapid growth.

BBC can achieve competitive advantage and enhanced

profit.



ABB’s mission To be a global leader and to act like one.



Reasons of merger

Asea and BBC want to become single most powerfulglobal player in the power sector and fight stiff outsight competition from SIEMENS,GENERALELECTRONICS(GE) and like global player.



COMPETITIVE ADVANTAGE ASEA BROWN BOVERY

Sophisticated managementcontrols

Marketing aggressiveness

Stong order book(large clientbasis)

Technical expertise



SYNERGIES Manufacturing Synergy:-The joint venture between

these two former competitors allowed them tocombine expensive research-and-development effortsin superconductors, high-voltage chips, and controlsystems used in power plants.

Marketing Synergy:- ASEA's strength in Scandinaviaand northern Europe balanced Brown Boveri's strongpresence in Austria, Italy, Switzerland, and WestGermany.



IS ORGANIC GROWTH POSSIBLE?

Organic growth is possible but not sufficient for both Asea and BBC.

Merger of Asea and brown boveri is perfect businessstrategy since both company sold complementry

product and target the same market. Because of this merger ABB achieved tremendous

growth and long term prospects.



Merger motive model Monopoly theory

Efficiency theory



ABB’s strategy ABB goals are being global and local, big and small,

and radically decentralized with centralized reporting

From the top, ABB should be perceived as global (in the

areas of strategy, reporting, and knowledge transfer).

From the bottom, ABB subsidiaries should be seenas local (in local management responsibility and freedom)and decentralized (in financial reporting and

accountability). Global optimization goals were the responsibility of each

business area, while location-dependent goals wereallocated to regional managers.



Matrix structure

Connected to the transnational MNC, the matrix is a way

to organize when trying to achieve:

Local responsiveness, i.e. diversification, withlearning as a key requirement

Scale and scope efficiencies in production etc



Matrix structure

It consisted of 4 Management Levels:1. TOP MANAEMENT LEVEL - Group Executive Management(GEM) :

Its members include president & CEO, Deputy CEO and 11EVP(Executive Vice Presidents).

The primary task of GEM is to devise global strategies andperiodically review the performance of ABB’s 8 businesssegment spread over 28 business regions.

Few members of GEM are involved in specified fields likeaudit, corporate control, corporate development, corporatefinance and risk management.



2.MIDDLE MANAEMENT LEVEL–

Business Area & country managers

1. Business Area managers report to the EVP of concerned business segment.

2. Responsibilities are: Global strategies for allotted business unit. To ensure that required quality and cost standards are

maintained in ABB’s operating companies. To allot export markets to front line operating companies. To facilitate transfer of unique technical know how within

operating companies. To Focus on R & D.



The country managers headed the national holdingcompanies(NHC’s) in each of the countries in which ithad operations and report to members of GEM.

The country managers also formulate & implement HR policies within the country. They also interacted withtrade unions, customers to sort out the local issues.



3. THE LOWER MANAEMENT LEVEL – Heads of FLOC’s

This structure consist of heads of the front line

operating companies(FLOCs) of ABB. ABB’s businessoperation have 50 business areas where business isoperated by 1300 FLOCs.

FLOCs were independent business entities with ownfinancial statement & debt requirement.

FLOCs have a reasonable amount of autonomy &Responsibilities.



4. THE PROFIT CENTRE LEVEL – Profit Centers Managers

It is the lowest layer of Matrix Structure, the opeartion of

1300 FLOCs were split in to 3500 Profit centres.On an average each profit centre consists of 50 people.

The Profit centers were also independent entities having

their own profit & loss statements.

The Profit Centers are closest link to ABB’s customers.





STRENGTHS ABB had a large pool of highly skilled managers who

were familiar with both companies,allowing ABB to select the best managers for theavailable positions.

Both companies operated in the sameindustry, allowing ABB to reap short-term costbenefits associated with eliminating duplicated effortsand leveraging economies of scope.



WEAKNESS Managers were not taking quick decision.



OPPORTUNITY Rising global demand

Strong need for local identity.



THREATS Political instability

Degree to which ABB is considered a “foreign invader”.



Group d Case

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