Abb Is a Multinational Corporation

ABB is a multinational corporation headquartered in Zurich, Switzerland, operating in robotic and mainly in the power and automation technology areas. ABB Sea Brown Boveria was formed in 1988 from the merger of Asea AB (Sweden) and BBC Brown Boveria (Switzerland). It ranked 143rd in the Forbes Ranking (2010). ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world.

ABB has operations in around 100 countries, with approximately 145,000 employees in June 2012, and reported global revenue of $40 billion for 2011 Situational factors leading the merger. The external factor is the economic expansion in the developed industrialized countries and in some Asian country that led to a significant rise in the demand for generation, transmission and distribution of electricity to fuel the increasing demand of growing industries and domestic population particularly in the 1960s and the early 1970s.

Although the demand for power generation and supply was lower because of the impact of low economic slow growth rate in the mid-1970, the development within European Community offer company the way out of this impasses Internal factor: CEO Percy Barnevik has a great understanding of the environmental forces affecting the heavy industry in Europe and beyond and his ability to communicate and influence colleagues to see his point-of-view enable the merger to be completed in January 1988. The result of merger created the extremely expansion and profit for both company.

The Percy Barnevik management goal was to build a company that could conduct business in each of the major areas of the world. The Percy management focuses on: * The development of a group-wide umbrella culture * The development of core technologies and core competencies * The development and use of multinational teams * Application to the development of effective global manager * Building a multi-domestic or federal organization a global-local continuum * The development of effective communication, understanding, and patience * The development of a customer focus programmed

After the merge, ABB had the decentralized structure along with business segments and geographic region dimension. The purpose of decentralized structure is identify and analyze the total need of customer and market, improving communication within the company such that the company could responds quickly to customer, improving company responsiveness to customer requirements, product, service quality, and decreasing the operating cycle time. ABB spend six-year period to acquire a great global expansion with 150 companies worldwide. Until 1993 Barnevik realized that such expansion could create problem in the matrix structure.

The first reason is the world was becoming more regionalized by 1993. The EU was becoming a strong economic entity and could achieve economic parity with USA as more European countries joined in the years ahead. The second reason is the matrix structure of such size and reach can cause control and communication problem. In particular the dual reporting nature of matrix structures has always created friction between executives. To counter these problem areas Barnevik carried out a major restructuring in 1993. the geographic dimension was reorganized into three geographic region : Europe, the Americas and Asia.

Whether this restructuring would eliminate friction between National Country Manager and Business Leaders is moot point bus at least the new regional head would be able discuss conflict issues at EMC level rather than Barnevik travel extensively and intervene to solve such problem Strategic decline :operational Problems and shift to “knowledge” company During the late 1990sand into 2000, ABB was concerned with major restructuring and a planned change to a so-called “knowledge” company base on Lindahl strategy. In 1997 he began a major restructuring in which he planned to move thousands of manufacturing from Europe and USA to Asia.

The change to a “knowledge” company involved a strategic sift away from traditional heavy engineering activities of power generation and rail way transportation systems toward a focus on high-tech” knowledge-based” sectors particularly automation, industrial robots and factory control systems. One of the internal drivers for this transformation was to increase ABB’s revenues by about one third by 2011. ABB was become the world-leading manufacturer of robotics and automated control systems with annual revenues of $8. 5bn. After the entire merge with ADtranz to DaimlerChrysler AG and ALSTOM cop.

ABB had six business segment comprising Power Transmission, Power Distribution, Automation, Products, Contracting and Financial Services. The matrix structure was essentially run down when the regional was discontinuing. Barnevik and Lindahl’s strategic move unraveled due to the problems in Financial Services, lack of quality control in Power Generation, attempts at un-related diversification and continuing problem with combustion Engineering in The USA. The result was a loss $729million for year 2001 according to financial segment ABB report.

This result affect the shareholder thinking about Barnewik strategy was working well at that current industry. Barnewik resigned his chairmanship of ABB in November 2001. Jorgen Centerman became the CEO from January 2001 to September 2002. He tried to restructure ABB to reduce the costs and repairing the balance sheet. He replaces the six existing business segment with seven business division structures along customer groups. His strategy was not worked; even ABB was nearly bankruptcy with the debt of $4bn in balance sheet.

Strategic renewal: global focus on power Automation and robotic technologies Jorgen Centerman resigned CEO for Jurgen Dormann in December 2002. Jurgen Dormann began his strategy that gradually returned the focus of ABB to its two core strengths of power and automation technologies. Fringe businesses were rapidly sold and workforce reduced from 150,000 to 113,000, more over he initiated actions relating to a so-called step-change program, combustion Engineering, continuing balance sheet repair a major restructuring.

By February 2004 the company’s two core units had turned in stronger than forecast returns and the share price had risen to SFr 6. 50. Despite a net loss of $767 million on revenues of $18. 795bn at 31st December 2003, first quarter in 2004 showed that his plan was working as the company posted a net income of $4million. With confidence in future of ABB he announced he would resign as CEO at the end of December 2004 in favor of Fred Kindle. Once Kindle was CEO he slimmed down Sulzer further to concentrate on four disparate core divisions. This strategy resulted in employees being reduced from 25,000 to 9,000 and sales from SFn4. 5bn to SFn 1. 9 bn. The strategy resulted in improved but modest earning.

Under kindle future strategy would concentrate on improving operational excellence and margin via organic growth. Under Kindle AB’s financial situation improved considerable from four year of losses. The company achieved a double –figure EBIT/sales margin, which it never previously achieved. Net cash from operation was higher than any other time in its history. On 17th July 2008, ABB announced that Joseph Hogan wan to become it new CEO. ABB believed that his appointment would lead to accelerated growth for ABB in Asian Markets. 008 prove to be a record-breaking year for ABB. Revenue was billed at $34. 9bn(20% above 2007) and operating cash flow at $4. 0bn(30% above 2007). These results are impressive and confirm the sound strategic direction developed by Centerman, Dormann, and Kindle to develop the company globally in power, automation technology. However, the global economic downturn in the latter stages of 2008 impacted adversely on the group particular in the new orders and EBIT. For 2009 the new CEO state that “visibility” in its markets was “limited” because of significant uncertainty surrounding the key demand drivers for company’s products and systems.