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A Review of ABB: Strategic Rise, Decline, and Renewal Jennifer Gimbert- jgimbe1@students.towson.edu Jennifer Hood- jhood2@students.towson.edu Eric McCabe- emccab2@students.towson.edu Peyton Zeher- pzeher1@students.towson.edu Completed as partial fulfillment for MNGT 438 Multinational Management & Culture

Last revised: May 16th 2011

ABB Abstract In this paper, we reviewed the strategic rise, decline, and renewal of Asea Brown Boveri

(ABB) from 1988 to 2008. In conducting this review, we focused on the strategies and structures set in place by various CEOs over this twenty year time period. During our investigation, we used an evidence-based management approach to assist us in our research. We completed our findings by presenting a future outlook for the company after its strategic renewal. Our findings were based on the case study published in Dereskys (2011) text with an updated data set from a wide range of outside sources including company published information, published literature, and credible internet sources.

ABB Introduction Asea Brown Boveri (ABB) is a global leader in power technologies in the industrial electrical equipment market including power products, power systems, discrete automation and motion, as well as process automation. Founded on January 5th, 1988 as a result of a merger

between Asea and BBC, ABB is currently headquartered in Zurich, Switzerland. With operations in 100 countries worldwide, including Europe, the Americas, Asia, the Middle East, and Africa, ABB employs roughly 116,000 people worldwide. Under current CEO Joseph Hogan, ABB was ranked 237th on the Fortune Global 500 for 2010 (Fortune 500, 2010). When compared to Siemens, the two are somewhat similar. However, Siemens began in 1847 as opposed to 1988. Therefore, Siemens has been in this industry much longer. Both companies are very concerned with energy efficiency and production. Asea Brown Boveri (ABB) encountered many problems over the course of its existence. One of the problems that it came across was that ABB found that its matrix structure would create problems when expanding to a global market. Barnevik realized that such expansion could create problems in the matrix structure as originally designed for two basic reasons (Deresky, 2011). The first reason was that by 1993, the world had become a more regionalized place. NAFTA, EU, and Asia were referred to as the Triad economies and were responsible for a large percentage of the worlds GDP. ABB needed to have strong representation in each of these three regions and needed structural systems in place that catered for this increased geographic spread and operational complexity (Deresky, 2011). The second reason was that having matrix structures of such a large size and reach can result in control and communication problems. It is also most commonly known to cause

ABB problems between executives. This problem in particular is important to study because if the wrong matrix structure is put into place, the entire organization as a whole will not be able to operate efficiently. The implication that I can draw from this problem is that ABB can greatly benefit by switching their structure to better fit their organization. The problems ABB executives faced were due to friction between business area leaders of the business segments and the national country executives. There was always a conflict of interest and tugs-of war between them to such an extent that speed of communication became damaged which was, of course, a key requirement of the highly decentralized group. In many instances, Barnevik himself had to spend a lot of time moving back and forth to personally intervene and interact with them to sort out conflicts (Deresky, 2011). This problem is extremely important to study because if your employees do not get along and trust each other, they will not perform well. The implication that we can draw from this problem is that ABB needs to invest in developing ways to get their employees to trust each other so that they can avoid conflicts and come up with ways to better deal with confrontation. Once Goran Lindahl took over as the CEO of Asea Brown Boveri, there was trouble keeping the matrix structure healthy after the regional dimension was cut. The global nature of the matrix structure was product focused. Lindahl shared Barneviks thinking in moving ABB to a knowledge-based organization primarily through industrial automation and Barneviks reputation was such that it was accepted that these dramatic changes were necessary for future growth and profitability of ABB. However, at the end of 2000 Lindahl was forced to resign as CEO in an internal power struggle that favored Jorgen Centerman, the head of ABBs automation segment (Deresky, 2011). This switch was confusing to stakeholders, and is an important topic to study because in order to make a profit and attract stakeholders, you must

ABB keep up a healthy and correct matrix structure so that your organization can make a profit. The

implication that I can draw from this issue is that if ABB does not choose to change the way they organize the company, it will continue to lose money and become unhealthier as time passes. Another problem that ABB has encountered is that it had incurred a huge loss of $729 million for the year of 2001. The reasons for this loss are that their share price fell by two-thirds of the value in one year and the financial segments insurance business incurred a loss of $433 million due to charges and underwritten losses. Before taking this exceptional loss into account, financial services accounted for one-third of ABBs profits despite employing only one percent of the total ABB workforce: a serious state of affairs in a business where most of the sales were generated by electrical engineering products (Deresky, 2011). ABBs balance sheet also showed $9.79 billion in debt outstanding, some of which was due to needing to finance acquisitions. $3.3 billion of debt was in short-term loans. To add on to the debt, ABB also racked up a net debt of $4 billion. The debt problem is very important to study because if this problem is not solved, stakeholders will not be willing to invest in this company. Strategic moves coupled with a rapidly deterring financial situation caused stakeholders to question the strategic fitness of both Barnevik and Lindahl to lead the company. This feeling was reinforced in early 2001 when it was learned that Lindahl and Barnevik had awarded themselves total retirement benefits of $143 million between them (Deresky, 2011). Investors and stakeholders questioned top management about the control of the company when finding out about the bonuses that Barnevik and Lindahl awarded themselves. The implication that I draw from this problem is that if this problem persists, consumers will learn of this company having no corporate social responsibility and will not want to invest in it. Also, debt will continue to rise until the company goes bankrupt.

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Methodology The goal of our research study of ABB Company was to identify the reasons for the success or failure in their various strategic implementations of corporate structure by various CEOs throughout company history. We then analyzed the current structure and strategic direction of ABB, followed by our future outlook for the company based on the facts presented. A majority of our qualitative information focused on historical research of past CEOs performances and was done through the case study, ABB: Strategic Rise, Decline and Renewal found on pages 312-323 of Dereskys International Management textbook. This resource also provided us with quantitative data through charts and tables which supplemented the case text. Additional quantitative data came from sources such as CNN Money, Yahoo Finance, and ABB Groups annual report for 2010. Looking at the structure changes made by different CEOs paired with the financial success of the company during that time period we were able to get a clear picture of the ABBs strategic successes and failures. Additional information was needed when predicting the future outlook of the company and evaluating its performance. This information included the company mission statements, future goals, and new market focus which were found on the companys public website. The website also provided historical financial data along with information on current and past CEOs. We also obtained information concerning the companys strengths, and weaknesses from Data Monitor, 2010. Since public perception of a company is growing more important, we incorporated a recent news article from the Financial Times that indicates some corrupt behavior at ABB involving bribes and payoffs. All of our sources came from credible printed documents and websites that we reviewed, analyzed, and put into the results and discussion sections that follow.

ABB Results

Problem Identification. Asea Brown Boveris (ABB) main issue was the lack of a fit between their strategy and their organizational culture. We evidenced this earlier on this paper, but this problem was identified in the very beginning when ABBs CEO Percy Barnevik found that a matrix structure would not support or compliment an expanding strategy (Deresky 2011, 314). Since 1996, ABB has been through period after period of restructuring with each new CEO. However, not all of the CEOs followed Barneviks original strategy and culture, continuing the problem of a lack of a fit between the strategy and organizational culture. This problem is evidenced in more detail in the following discussions of the case questions. The first part of the first question in the case study in Deresky (2011) asked us to identify the ideals of CEO Percy Barnevik in building ABB into a global corporate presence. Barnevik had seven main ideals that he wanted to utilize and foster in growing ABB. The first ideal was to develop a group wide-umbrella culture (Deresky, 2011, p. 312). Some of the aspects of this ideal included using English as the organizations main language, using the U.S. dollar as the global reporting currency, and the implementation of common values, policies, and operating guidelines (Deresky, 2011, p. 312). The second ideal was to develop core technologies and core competencies by becoming the leaders of technology and market share in all, if not most, of their eight business segments (Deresky 2011, p. 313). The third ideal involved the development and use of multinational teams (Deresky 2011, p. 313). This would allow ABB to overlook cultural differences and become quick problem solvers. This involved teams at the very top of the company as well. The supervisory board was comprised of eight members, each hailing from four different nations. Barnevik also utilized this ideal by sending members with different

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nationalities to other cultures/nations in order to bring more knowledge and skills to other business sectors. Barneviks fourth ideal was to develop effective global managers. According to Deresky (2011), Barnevik believed that global managers were made, not born (Deresky 2011, p. 313). This meant that managers had the opportunity to travel to different countries for a set number of years in order to gain deeper insights into different cultures (Deresky 2011, p. 313). The fifth ideal was to build a multi-domestic or federal organization along a global-local continuum. Barnevik wanted for most of the companies to fall somewhere between being super - local or super global (Deresky 2011, p. 313). In other words, Barnevik wanted his companies to be glocal, or globally local. This was an idea that we had discussed in class where companies are globally present, but local enough to meet the needs and wants of the customers in each region. The sixth ideal was to develop effective communication, understanding, and patience. Barnevik realized that in order to have a global presence, the ability to communicate with, to understand, and be patient with different cultures was required. The final ideal of Barneviks was to develop a customer focused program. Raising quality and service levels were the main aspect of this ideal in order for all the employees to truly know their customers (Deresky 2011, p. 313). The second half of the first question given to us in the case in Deresky (2011) asked us to discuss the factors that caused key areas to have trouble and effected the performance of the business. After Gran Lindahl became CEO, he changed ABBs focus from a customer focus, to a product focus with his new matrix organization (Deresky 2011, 317). This essentially clashed with Barneviks ideal of having a customer focused program. The second question posed to us in the case by Deresky (2011) wanted us to identify the key strategic initiatives implemented by the various CEOs after Barneviks tenure to take the

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company out of the crumbling mess that it found itself in 2001. Before we go about answering this question, we would like to explain what crumbling mess ABB was currently in during 2001. Gren Lindahl had been appointed CEO after Barnevik resigned to become Chairman. After Lindahl had spent a large amount of funds moving manufacturing jobs to Asia, about $850 million, he also changed the structure of the company to a product focused matrix (Deresky 2011, 317). Figure 1 displays ABBs matrix structure with Lindahl as CEO. Figure 1. Lindahl had also gone about selling out its heavy engineering and nuclear power companies to ALSTOM and UKS BNFL in 2000 for $1.2 billion and $484 million (Deresky 2011, 317). Once all of this was done, the Financial Services segment of ABB found that ABB had incurred a loss of $729 million, and the share price had dropped by two-thirds in one year (Deresky 2011, 317). ABBs insurance company had also taken a large hit of $433 million due to estimated insurance loss reserves and underwriting losses (Deresky 2011, 317). ABB also had $9.79 billion in total debt outstanding due to needing to pay for all the recent acquisitions (Deresky 2011, 317). ABB encountered another problem when about $1 billion in asbestos claims had arisen by 2000 due to Barneviks acquisition of Combustion Engineering who supplied asbestos containing products (Deresky 2011, 319). The first CEO to take a step towards ABBs renewal, in the shortest amount of the time, was Jrgan Centerman. He was only CEO from January 2001 to September 2002. He restructured ABB by creating seven business divisions and customer groups for each unit. Figure 1 displays the organization of ABB under Centerman. Figure 2.

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Centermen wanted to accelerate ABB away from heavy industrial products towards new technologies and services (Deresky, 2011, p. 319). He began the process of acquiring, selling and combining divisions, with the hope of realized savings of $800 million (Deresky, 2011, p. 319). He also reduced the workforce by 12,000 to reduce operating costs by some $500 million (Deresky, 2011, p. 319). The final step by Centermans was to alleviate the balance sheet by restructuring a $3 billion of the debt and selling its Structured Finance business to General Electric for $2.5 billion (Deresky, 2011, p. 320). The second CEO to take a step towards ABBs renewal was Jrgen Dormann. He reigned as ABBs CEO from December 2001 April 2007. His main goal was to return the focus of ABB to its core strengths of power and automation technologies (Deresky 2011, 320). Dormann was the first CEO to inact cost savings and reduction in order to bring ABB out of debt. He sold fringe businesses and reduced the workforce from 150,000 to 113,000 (Deresky 2011, 320). He also aimed to increase the competiveness of ABBs core businesses, reduce overhead costs and streamline operations by $900 million on an annual basis until 2005 (Deresky 2011, 320). In order for this aim to be achieved, there were 1,400 specific initiatives that would be established and monitored (Deresky 2011, 320). These initiatives included improved production methods, consolidation of office space and manufacturing facilities, closing non-profitable units, outsourcing, and resolving the asbestos claims from 2000 (Deresky 2011, 320). In 2002, Dormann started selling divisions of ABB. The water and electricity metering business was sold for $233 million; the building systems in Sweden, Norway, Denmark, Finland, Russia, and Baltic states for $233 million; the Sirius re-insurance business; and the upstream part of the Oil/Gas/Petroleum (OGP) for $925 million (Deresky 2011, 320). He restructured ABB by creating two core business units and a non-core business unit. Power technologies and

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automation technologies were the two core business units which included all the actual products and services that ABB provided. Global Customer Groups (GCGs) were also included for these two units. The non-core business unit included groups such as equity ventures and logistics systems (Deresky 2011, 318). Figure 2 shows this structure. Figure 3. Dormann had also combined divisions such as the Power Technology Products divisions with the Utilities division to create the Power Technologies division (Deresky 2011, 320). As a result, Dormann had improved the financial image of ABB by slowly lowering the amount of debt, and increasing the net income of about $4 million (Deresky 2011, 320). Table 1 displays the financial information of Dormanns era as compared to the financial image of ABB wit h Barnevik and Lindahl as CEO. Table 1. Fred Kindle was the next CEO of ABB. Kindle took over ABB from September 2004 February 2008. Kindle had a different take on ABBs strategy. He wanted ABBs focus on improving operational excellence and margins through organic growth (Deresky 2011, p. 321). Instead of selling business divisions, Kindle favored small acquisitions of around $2 billion (Deresky 2011, 321). In addition, Kindle also brought the asbestos claims from 2000 to a conclusion with a 1.43 billion settlement (Deresky 2011, 321). Kindle created a milestone for ABBs divesture history in selling Lummus Global to Chicago Bridge & Iron Co. for $950 million (Deresky 2011, 321). For the organizational structure, he replaced the two core business units and non-core business unit structure with five divisions: Power Products, Power Systems, Automation Products, Process Automation and Robotics (Deresky, 2011, p. 321). Figure 3 displays ABBs structure under Kindle.

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An Executive Committee was introduced at the Group level, the Group Markets, and Technology order to ensure that ABBs strategies were being transferred nationally and regionally (Deresky 2011, 321). Business division headquarters were also relocated to Zurich, Norwalk, Connecticut, and Shanghai (Deresky 2011, 321). Finally, Kindle wanted ABB to be focused on future demand for its products and services, which included increasing energy efficiency, delivering reliable power, and improving industrial productivity (Deresky 2011, 321). The second question of case in Deresky also asked for our opinion of which CEO performed the best and to explain why. It is our opinion that Jrgen Dormann performed the best because he made the most efforts to remove costly divisions and business units. Under Barnevik and Lindahl, ABB was tracked to gain more knowledge and become leaders of the industry, but it was at too costly. Dormann also restructured the company into divisions with similar product segments creating for better synergy and communication between the divisions. He also improved the financial image of ABB. Finally, he focused on technology as a core competency brought future returns and innovations. This effort can be seen even today since ABB is an industry leader in providing power and automation technologies. The third question listed in the case by Deresky asks to discuss the pros and cons of matrix structures. Looking at the early matrix structure created by Percy Barnevik, it included several positive outlooks for growing potential in ABBs future in the global marketplace. Other positives about the use of the matrix structure included identifying customers needs through As time passed and ABB grew, this matrix structure would have to be replaced. Control and communication problems, increases in global regionalization, and the friction caused between executives due to the reporting nature of the company were the downsides for the matrix

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structure. In a product structure, each product offered by the company is represented by a separate division or business unit (SBU). Each SBU is run by a manager and is responsible for its own production and sales (Deresky, 2011). This varies from the matrix structure in that each SBU communicates and operates internally, focusing on its surrounding environment to increase profits, and fulfill its need for innovation and increased market share (Deresky, 2011). In contrast, the matrix structure uses both horizontal and vertical lines of responsibility, connecting multiple divisions of the organization on a global level. Unlike relying on the production of one manager, the matrix structure takes advantage of multiple personnel skills and experiences (Deresky, 2011). The second half of case question number three asks about ABBs current structure and why it took the company so long to get where they are now. ABB now uses a global geographic structure which consists of eight geographic regions and five product divisions (ABB, 2011). This can be seen below in Figure 5. Figure 5. The reason ABB experienced multiple restructurings, starting in October 1997, is due to the companies continually changing market strategy and the need for strategic fit in the market. In order for ABB to gain market share in numerous regions and with multiple product divisions, the companys overall strategy and structure needed to change with the global business environment it was competing within. By continually upgrading and changing its structure, ABB is aligning the strategic goals of the organization with its HR practices to produce the most efficient structure as possible. The contradicting visions and strategies of CEOs along with changes in the global marketplace have brought ABB to their current structure.

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14 The fourth question asks about the differences between ABBs old corporate structure

versus the current corporate structure. ABBs mission statement is to improve performance, drive innovation, attract talent, and act responsibly. ABB improves performance by helping customers to improve their operating performance and productivity all while saving energy and lowering the environmental impact. ABB drives innovation with their high quality products. ABB also makes sure to retain people that are both dedicated and skilled. Lastly, the company acts responsibly through sustainability and a high code of ethics. When Barnevik was the CEO, the old corporate structure had a common set of values and guidelines, solved problems quickly, developed deep roots to get closer to customers, and encouraged entrepreneurship. However, the current corporate structure focuses on improving the financial health of the company, seeking out corporate restructuring, and resolving old disputes. The final question posed to us in the case by Deresky (2011) states for us to comment on ABBs current strategy of seeking small bolt-on acquisitions to existing product areas rather than via major acquisitions that could take the company into new areas. We believe seeking small bolt-on acquisitions matches ABBs current ideology to avoid non-core business. It allows ABB to continue to simplify its global structure in a rational manner while simultaneously saving the company money that it would need to spend to expand into new areas. Seeking major acquisitions would signal a revert back to the old strategy of the days of Barnevik by creating a powerful global corporation via aggressive global expansion. It is also ABBs main strategy to become leaders in the specific areas of power and automation technologies, not to move into new area, such as aerospace. This would be outside of their power and utility customers. By using other resources and efforts to put into the new area, they would not be able to focus as closely on their current customers.

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15 Proposed future directions. After much thorough research, we believe that ABB has a

strong outlook, but needs to evaluate their current strategies to fit with the organizational structure. According the SWOT Analysis provided by Datamonitor (2010), ABB is encountering a weakness of sluggish performance in all of the business divisions. In the fiscal year 2009, ABB saw a decline in revenue across all of the divisions (Datamonitor 2010, p. 7). This is an indication that ABB is still having difficulty finding a good fit between their strategic goals and their organizational structure. In order to solve this major problem for ABB, we recommend that ABB go back to the strategic planning phase of the strategic management process to clarify its mission and objectives (Deresky 2011, p. 202). The mission charts the direction of the company and provides a basis for strategic decision making (Deresky 2011, p. 202). Deresky states that as a result, ABB should be able to increase their profitability of their divisions (Deresky 2011, p. 202). ABBs current mission states that they want to improve performance, drive innovation, attract talent, and act responsibility (ABB, 2011). As a global company, ABB should incorporate a point about culture and diversity. Poor performance in all of the divisions could be due to a lack of understanding and sensitivity to the diverse markets or employees. Along with re-evaluating their mission and strategy, ABB should enforce policies concerning bribery and corruption. In 2008 and 2010, ABB had to pay large fines and settlements due to allegations of bribery and corruption in the U.S., E.U., Mexico, and Iraq. ABB had to set aside $850 million in funds for allegations against them from the U.S. and E.U. that they had violated the Foreign Corrupt Practices Act with suspicious payments (Shoemaker, 2008). In 2010, ABB was forced to pay $58 million to settle a bribery case in Iraq and Mexico (Crooks & Eagelsham, 2010). ABB had made concealed, corrupt payments to officials at a state-owned Mexican electric utility to gain contracts (Crooks & Eaglesham, 2010). An article

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from the Financial Times also states they had paid $300,000 to the former Iraqi government in order to win orders under the United Nations oil-food program (Crooks & Eaglesham, 2010). The Financial Times points out that this isnt the first time that ABB has been involved in improper payments, especially in the Middle East (Crooks & Eaglesham, 2010). Values and policies about bribery and corruption should be more strongly incorporated into ABBs strategy. If they are not, then ABB needs to re-visit their mission and strategy to make sure they address this. Bribery and corruption should not be tolerated by a global company, and as such should be prohibited with proper policies and systems such as having a global compliance system where employees have to read, and sign-off on understanding the bribery and corruption laws in countries (Deresky 2011, 48). Employees should also be made aware of the penalties of violating these policies (Deresky 2011, 48). ABB should develop, or more strictly enforce, a worldwide code of ethics (Deresky 2011, 48). If the issues of bribery and corruption are not addressed in the strategy of ABB, overall financial performance and relationships with countries hosting subsidiaries could decline. ABBs current CEO is Joseph Hogan, and has been in charge since 2008. He has continued the customer focus strategy of ABB that was started originally with Percy Barneviks ideals of developing a customer centered program. This is evidenced by ABBs strategy on their website with the statement of, With about 124,000 employees we are close to customers in around 100 countries (ABB, 2011). Additionally, the three CEOs following Lindahl all used a structure that utilized Global Customer Groups for each division. Hogan is continuing this legacy of being focused on the customer. However, the recent issues with bribery and corruption have been under his command. Hogan is either not enforcing the policies and rules as harshly as he should be, or his ideals are being lost in translation between him and his regional managers. He

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could also be fostering the idea that its acceptable to do these things, an ideal that will trickle down through the levels of the organization. His predecessors who helped to bring ABB to its great status, were not involved with such transactions and relationships. Hogan should be wary of these issues for the future outlook of ABB in order to truly make it successful. However, he has made ABB profitable even in the harsh economic times of today. The overall increase in profitability of ABB can be seen in Table 2. However, compared to their direct competitor, Siemens AG, they are not as financially strong. Table 3 gives the financial information for Siemens AG. Overall, ABB has a healthy outlook for the future based on the evidence we have gathered. Conclusion In this study, we have researched and analyzed the strategic rise, decline, and renewal of ABB. Given the fact we have built a case centered on strong evidence through the use of various qualitative and quantitative research methods, we are optimistic that ABBs renewal can continue into future further growth. We predict that if ABB stays consistent with their strategy and considers small acquisitions that fit with their product lines rather than branching out into new areas, ABB can continue to prosper. It should be noted that we are confident in our informational sources considering that we used credible and factual based resources. Our goal is that the reader can gain a better insight on the importance of the relationship between corporate strategy and structure based on our review.

ABB References ABB Group Annual Report 2010. Retrieved from ABB at http://www400.abbext.com/2010/ar on 4/17/11. ABB Ltd ADS: Company Profile. Retrieved from Standard & Poors at http://www.netadvantage.standardandpoors.com.proxytu.researchport.umd.edu/NASApp/NetAdvantage/cp/companyOverView.do on 4/17/11. ABB Ltd Snapshot. Retrieved from LexisNexis at http://www.lexisnexis.com.proxytu.researchport.umd.edu/hottopics/lnacademic/ on 4/17/11. Fortune 500 2010: The Worlds Biggest Companies. Retrieved from Fortune at http://money.cnn.com/magazines/fortune/global500/2010/snapshots/6648.html on 4/17/11. ABB Important Events. Retrieved from www.abb.com on 4/17/11. Deresky, H. (2010). International Management: Managing across borders and cultures. 7th edition. Prentice Hall DATAMONITOR: ABB Ltd. (2010). ABB, Ltd. SWOT Analysis, 1-10. Retrieved from EBSCOhost.

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Table 1. Financial Statistics Comparison between Lindahl, Centerman, Dormann, and Kindle 1997 1998 1999 2000 2001 Revenues EBIT Net profit (loss) Stockholders Equity Total Assets Net cash operations Employees 31.3 1.14 0.57 5.28 29.8 from 1.97 213 3.6 12.2 22.9 1.33 0.48 6.0 32.8 0.80 199 5.8 21.1 24.5 1.12 1.36 4.27 30.6 1.58 161 4.6 21.8 19.4 1.17 1.43 5.17 30.9 0.75 161 6.0 n/a 19.4 0.16 2002 19.5 0.20 2003 20.3 0.29 2004 20.6 1.05 2005 2006 2007 20.9 1.71 23.2 2.56 1.39 6.04 25.1 1.94 108 11.0 21.0 29.2 4.01 3.76 10.96 31.0 3.1 112 13.7 35.0

(0.73) (0.82) (0.78) (0.035) 0.74 1.97 29.5 1.98 157 0.8 n/a 1.01 32.3 0.019 139 1.0 n/a 2.92 30.4 2.84 24.7 3.48 22.8 1.01 104 8.2 14.0

(0.51) 0.90 116 1.4 n/a 102 5.1 8.0

EBIT/Revenues Return/Capital Employed

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Table 2. Financial Statistics for ABB 2007 ($Million) Revenue Profit before taxes 29,183 4,023 34,912 4,552 1.36 13.90 31,795 4,126 1.27 18.17 31,589 3,818 1.12 19.26 2008 2009 2010

Diluted Net earnings 1.66 per share ($) Market value 26.4

Sources: LexisNexis Academic. ABB Financial Reports. Yahoo Finance (2011)

Table 3. Financial Statistics for ABBs Competitor, Siemens AG 2007 (Million Revenue Profit before taxes 72,448 20,876 77,327 21,043 1.90 65.75 76,761 20,710 2.58 86.56 75,978 21,647 4.49 121.11 2008 2009 2010

Diluted Net earnings 4.13 per share () Market value 96.42

Sources: Various Siemens AG Annual Reports.

ABB Figure 1. ABBs Organizational Structure under Lindahl as CEO

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Power Transmission

Power Generation

Automation

Products/Contracting

OGC

Financial Services

GPG

GPG

GPG

GPG

GPG

GPG: Global Products Group Source: Deresky, 2011, p. 318

Figure 2. ABBs Organizational Stucture under Centerman as CEO

Utilities

Industries

OGC

Financial Services

Power Technology Products

Automation Technology Products

GCG

GCG

GCG

GCG

GCG: Global Customer Group Source: Deresky, 2011, p. 318

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Figure 3. ABBs Organizational Structure under Dormann as CEO

Power Technologies

Automation Technologies

Non-Core Activites

Power Systems Utility Automation Systems High-Voltage Products Medium Voltage Products Power Transformers Distribution Transformers

Low Voltage Products Paper/Minerals/Marine/Turbocharging Drives/Motors/Electronics Robotics/Automotive/Manufacturing Petroleum/Chemical/Consumer Industries Control Platform/Enterprise Products

Equity Ventures Structured Finance Building Systems New Ventures Group Processes Logistics Systems Service Workshop Corporate Other

GCG GCG

GCG: Global Customer Group Source: Deresky, 2011, p. 318

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Figure 4. ABBs Organizational Structure under Kindle as CEO

Power Products

Power Systems

Automation Products

Process Automation

Robotics

Transmission Distribution

GCG

Network Management Utitlity Communication Substations FACTS HVDC systems Power Plant Solutions Automation Control/Protection Systems

LV Switchgear Breakers Switches Control products Rail Components Instrumentation Power Electronics Drives/motors etc.

Plant Automation/Electrificat ion Energy Management Measurement Telecommunications Asset Optimization Process Optimization

Assembly Finishing Machine Tending

GCG

GCG

GCG

GCG: Global Customer Group Source: Deresky, 2011, p. 318

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Source: ABB Website