ASEA BROWN BOVERI

CASE ANALYSIS

The case highlights the merger of the two European

electrical giants; Asea AB of Sweden and BBC Brown Boveri of
Switzerland. Aseas 65000 employees and BBCs 85000
employees would combine to create a company comprising of
850 separate legal entities operating in over 140 countries.
Aseas Percy Barnevik was appointed the new CEO and
President and he shortly faced new challenges. The first
concern was to merge two rival companies and find a common
platform and hence he came up with a common reporting
system and constantly communicated with the managers and
helped them and defined their roles and responsibility clearly.
But the big concern was to manage the operations and to
manage the performance of this new global giant. Barnevik
took this as an act of three contradicting objectives: global and
local, big and small, and decentralized and centralized
reporting.
Barnevik also emphasized on a policy bible a 21 page
booklet that described new organizational relationship, this
gave stress to decentralization of power and individual
accountability also this guide was translated in many languages
and was circulated among all the employees by top level
managers.
ABB chose the matrix form of organisation structure. As the
business of ABB was very complex this form of organisation
helped the company to deal with internal and external
complexities. Barnevik advocated the decentralized form of
organisation and matrix structure did just that. This helped
them take quick decisions as he believed in the 7/3rule and
also helped them respond quickly to the changes in the

environment. It also helped the o communicate well and

motivate the employees to make better decisions and to bring
their knowledge and skills on the table and hence helping in
attaining economies of scale and edge in technical know-how
as the knowledge flew across the organisations, best practices
and cost cutting methods were also introduced and applied
across the organisation.
ABB was an organisation with 3 internal contradiction.
Barnevik wanted to ABB to be global and local; big and small;
radically decentralized and centralized reporting and control.
He wanted to resolve this contradiction to get organizational
advantage. He wanted to organize these activities to optimize
globally and maximize performance in every country in which
ABB operates.
In the matrix comprised of company managers who
focussed on the operations of a particular business in that
country they were responsible for

Customer based regional strategies

Regional results and profitability
Day to day management
Relationships with local government and bodies.

They in turn reported to the regional managers who were

responsible for all the operating activities of a particular
country.
The other dimension of the matrix was the Business area (BA)
managers. They represented a distinct word wide product
market. The power transmission of ABB were classified into 7
Bas
The BA was accountable for

R&D
Worldwide results
Purchasing coordination
Pricing strategy

 Acquisitions
Production and quality, etc.
Each BA reported to one of the 11 vice presidents. There was
a two dimensional reporting matrix with regional
responsibilities on one hand and product responsibilities on the
other.
ABB had developed a communicating and reporting system
as well named ABACUS. Now it had to use the managing and
marketing strengths brought by Asea and operational efficiency
of BBC to take a healthy competitive advantage and also use its
huge pool of top managers and resources to continuously add
value and reach new heights.