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ASEA BROWN BOVERI (ABB), SWEDEN, 2004:

This case evaluates Asea Brown Boveris (ABB)

global operations within the topics of its complex

organizational structures and control systems. The

primary objective of this case is to examine ABBs

problems that arose because of its organizational

structure and management reshuffling in early 2000.

The company incurred massive losses, eventually shedding

16,000 jobs worldwide.

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Case Synop sis

In the last fifteen years, academics and business

practitioners studying multinational corporations (MNCs)

and global companies often admired ABB because of its

outstanding growth, sophisticated management, and

peculiar corporate structure.

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Above all, ABB became famous for its unique

horizontal organizational system and global

networking that was based on lateral

communication across the companys 1,000 entities

around the globe.

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Almost every international management and

international business textbook analyzed ABBs

global structure that incorporated matrix and other

organizational structures based on decentralization

and horizontal systems .

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Case Synop sis

The phrase think global, act local became synonymouswith ABB and its former chairman, Percy Barnevik whoaggressively advocated and practiced the concept thatdid very well in the first ten years but later broughtcontrol problems and weakened operations. For a longtime, the global corporate image and operations that

ABB management projected looked outstandingalthough the company had problems in its matrix andcontrol systems. Eventually, ABB incurred heavy lossesand became a major liability to stockholders.

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Discussi on Q uesti on s1. What are your views of ABBs position in the global infrastructure industry?

As discussed in the case, ABB was a major global player in the infrastructure andother industrial products.

The merger of Asea and Brown Boveri was a perfect businessstrategy since both companies sold complementary productsand targeted the same markets. In the post-merger era, thecompany had excellent growth and carried long-term prospects.In the nineties, the ABB Group reached to a point where it was aglobal force to be reckoned with. Of course, East Asian marketswere ripe for the companys Infrastructural projects. During theEast Asian Crisis, ABB was poised to add additional non-core

products to its portfolio of 1,000 entities worldwide.

The companys organizational structure looked solid and itsworldwide operations were benchmarked in studies byacademics and other companies.

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2. Analyze and evaluate ABBs organizational structure and its control systemsduring the tenures of Percy Barnevik and Jrgen Dormann (see Figure 1). Also,draw a chart to discuss the companys strengths and weaknesses.

Chart showing ABBs strengths and weaknesses. The data canbe collected from the company Web site (see annual reports)and online business publications.

In addition, Figure 1 should be used to compare and contrastthe companys CEOs, Percy Barnevik and Jrgen Dormannsince both sought different organizational structures and controlsystems. Barnevik was infatuated with global expansion while

Dormann was hired to rescue ABB from its bankruptcy. A goodsource of information on the Infrastructural industry can beobtained from Value Line, Standard & Poors Industry Surveys,Hoovers Company Reports, and other trade publications.

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3 . What specific strategies does ABB need to undertake in the coming years to bea key player in the industry?

ABB strategies can be divided into two areas.In theshort-term, the company should concentrate on

seeking new projects and expand the businessopportunities. In the long-term, ABB should fix its

organizational structure which seems complex andineffective. ABB should shed some of its non-coreoperations although Dorman has implemented thisstrategy by selling oil and gas operations. Another

area which seems important is creating a new imageafter Barneviks pension scandal.

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4 . What did you learn from ABBs complex organizational structure and its globaloperations?

Regarding organizational structures and control systems, ABB

case is important in three areas. First, organizational structuresare never permanent. Companies need to reconfigure andredesign their global operations because of changing marketsand business environments. It is critical to bring changes fromtime to time. Although efficient in some companies, horizontaland networking-type of organizational systems are known for their problems at the global level when companies operatevertically and horizontally. In the coming years, ABB is expectedto regain its lost markets but the company will never have those

prospects that were available in the nineties. Finally, it will beinteresting to see if ABBs new management is able toturnaround the company by seeking alliances and joint venturesor just keep shedding its businesses to stay profitable.