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ABB: STRATEGIC RISE, DECLINE AND RENEWAL

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Abdul Javed

on 30 September 2013

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Transcript of ABB: STRATEGIC RISE, DECLINE AND RENEWAL

Introduction
- ABB is a multinational corporation headquartered in Zurich, Switzerland, operating in robotics and mainly in the power and automation technology areas.
- It ranked 158th in the Forbes Ranking (2013). 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
Identifications of stakeholders and their problems
Social responsibility Stakeholders and concerns

Customer
Competitions
Government
Human resources
Investors
Community
Positive and negative views
What would happen to an organization if employees don’t trust one another ?

Conduct business with a High Social responsibility
• Increase employee participation
• Emphasis on developing core technology and core competency
• Developing multinational teams
• Power struggle between CEO Lindahl and Jorgen Centerman
• Lindahl and Barnevki awarded themselves between the both of them a 143 million dollars remuneration package
Analysis of alternative solutions
- Percy Barnevik’s period of decentralized matrix structural style of ABB, conflicts occurred.

- Alternative to this solution instead of regionalisation is a change to a product structure or hierarchical structure

- Goran Lindhal used a product structure

STRATEGIC RISE, DECLINE AND RENEWAL
Objective's
Core Objective - Turning ABB into a "Knowledge Company"

What is a Knowledge Company ? A company that makes its money by selling its knowledge. "Computers, Networks and the Corporation" Scientific American, Sept. 1991. (Concept)

ABB buys companies with complex, high-tech products and maximizes there potential through market power and broader "knowledge".

How did they aim to achieve this ?

Emphasis and Expansion - Automation, Financial Services, Industrial Robots and Factory Control Systems
Customer focus
Restructure for Global compatibility
Managerial implications
How did each CEO's decisions impact the decision making of the next CEO's ?
Recommended solutions
Jurgen Dormann further innovated the product structure

Created two core units and one core business unit.

The focus was on more of the core activities of power and automation technologies

Concerns
Emphasis and Expansion in - Over expansion, Financial sector failures

Customer focus - Drop in quality

Restructure for Global compatibility - Cultural clashes not managed, resistance to change.

Matrix Structure
PROS
Align close to customers’ needs
Improve communication with customers
Improve customer responsiveness

Cons
Decrease operating cycles
Create conflict and confusion in organizations

Any Questions ?
2001 – 2002: Jorgen Centerman
The first successor of Barnevik - he believed the way to reduce costs and fix balance sheet would be through restructuring
7 Divisions
4 to serve user customers,
2 to to serve the four end-user divisions and external customer base
1 for Financial Services division
Added new relevant acquisitions

Failed and had to layoff 12,000 workers
Had to deal with Combustion Engineering’s asbestos liabilities
Left ABB $4 Billion in debt and near bankruptcy




2002 – 2007: Jurgen Dormann
Focused on the 2 main strengths of ABB: Power and Automation Technologies
Introduced the step-change program
-Would save $900 Million
-40% if saving by laying off 37,000 workers
-20% from improved production methods, etc.
-40% was from outsourcing of select activities

Economics Background




2008 – Present: Joseph Hogan
Joseph Hogan Increased revenue of to $34.9 Billion.
Kept his predecessor’s ideas in mind in developing the company globally in power and automation technologies

Lost money due to global economic downturn
Blaming:

cost and scarcity of funding
lower GDP
level of commodity prices


Mulligan, R.M 2008, ‘ABB: Strategic Rise, Decline and Renewal (1988-2008)’, Richmond the American International University in London, pp. 312-324.
Author unknown, ‘Complex Aggregation Strategies’, Harvard Business Review – The Forgotten Strategy, p.80

2003 was ABBs turnaround year. ABB started to profit after 3 years of losses.
Mulligan, R.M 2008, ‘ABB: Strategic Rise, Decline and Renewal (1988-2008)’, Richmond the American International University in London, pp. 312-324.
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