PRESENTATION ON CASE: ASEA BROWN BOVERI(ABB)

Presented by: GROUP D

INTRODUCTION
In the late 20th century ABB, once known as Asea

Brown Boveri, was created when the two electrical engineering and equipment giants ASEA of Sweden and BBC Brown Boveri of Switzerland joined forces. The merger was done on august 10, 1987.In 1988 its first year of combined operations, the new companys pretax income would be US$ 536 million on sales of US$17.8 billion. Percy Barnevik became the company's CEO and began an aggressive expansion program, acquiring the American company Combustion Engineering in 1990.

 ABB uses a matrix structure for its organization The ABB Group is made up of some 1,000 companies

and more than 5,000 profit centers. Worldwide business activities are grouped into 4 Business Segments comprising 37 Business Areas. Each Business Area is responsible for global strategies, business plans, allocation of manufacturing, and product development. Local company managers, in turn, are responsible for operations in each country in line with the global strategy of the Business Area.

ASEA MOTIVES
Asea want to achieve financial strength and Economic

of scale. Asea can make its position stronger in Austria, Italy, Switzerland, and West Germany.

BROWN BOVERI MOTIVES

BBC want to achieve rapid growth.
BBC can achieve competitive advantage and enhanced

profit.

ABBs mission
To be a global leader and to act like one.

Reasons of merger
Asea and BBC want to become single most powerful

global player in the power sector and fight stiff outsight competition from SIEMENS,GENERAL ELECTRONICS(GE) and like global player.

COMPETITIVE ADVANTAGE
ASEA
Sophisticated management

BROWN BOVERY
Stong order book(large client

controls Marketing aggressiveness

basis) Technical expertise

SYNERGIES
Manufacturing Synergy:-The joint venture between

these two former competitors allowed them to combine expensive research-and-development efforts in superconductors, high-voltage chips, and control systems used in power plants.
Marketing Synergy:- ASEA's strength in Scandinavia

and northern Europe balanced Brown Boveri's strong presence in Austria, Italy, Switzerland, and West Germany.

IS ORGANIC GROWTH POSSIBLE?

Organic growth is possible but not sufficient for both

Asea and BBC. Merger of Asea and brown boveri is perfect business strategy since both company sold complementry product and target the same market. Because of this merger ABB achieved tremendous growth and long term prospects.

Merger motive model

Monopoly theory
Efficiency theory

ABBs strategy
ABB goals are being global and local, big and small,

and radically decentralized with centralized reporting From the top, ABB should be perceived as global (in the areas of strategy, reporting, and knowledge transfer). From the bottom, ABB subsidiaries should be seen as local (in local management responsibility and freedom) and decentralized (in financial reporting and accountability). Global optimization goals were the responsibility of each business area, while location-dependent goals were allocated to regional managers.

Matrix structure
Connected to the transnational MNC, the matrix is a way to organize when trying to achieve:

Local responsiveness, i.e. diversification, with learning as a key requirement

Scale and scope efficiencies in production etc

Matrix structure
It consisted of 4 Management Levels:
1. TOP MANAEMENT LEVEL - Group Executive Management(GEM) :

Its members include president & CEO, Deputy CEO and 11 EVP(Executive Vice Presidents).
The primary task of GEM is to devise global strategies and periodically review the performance of ABBs 8 business segment spread over 28 business regions. Few members of GEM are involved in specified fields like audit, corporate control, corporate development, corporate finance and risk management.

2.MIDDLE MANAEMENT LEVEL Business Area & country managers

Business Area managers report to the EVP of concerned business segment. 2. Responsibilities are:
1.

Global strategies for allotted business unit. To ensure that required quality and cost standards are maintained in ABBs operating companies. To allot export markets to front line operating companies. To facilitate transfer of unique technical know how within operating companies. To Focus on R & D.

The country managers headed the national holding companies(NHCs) in each of the countries in which it had operations and report to members of GEM. The country managers also formulate & implement HR policies within the country. They also interacted with trade unions, customers to sort out the local issues.

3. THE LOWER MANAEMENT LEVEL Heads of FLOCs

This structure consist of heads of the front line operating companies(FLOCs) of ABB. ABBs business operation have 50 business areas where business is operated by 1300 FLOCs. FLOCs were independent business entities with own financial statement & debt requirement. FLOCs have a reasonable amount of autonomy & Responsibilities.

4. THE PROFIT CENTRE LEVEL Profit Centers Managers

It is the lowest layer of Matrix Structure, the opeartion of 1300 FLOCs were split in to 3500 Profit centres. On an average each profit centre consists of 50 people. The Profit centers were also independent entities having their own profit & loss statements. The Profit Centers are closest link to ABBs customers.

STRENGTHS
ABB had a large pool of highly skilled managers who

were familiar with both companies, allowing ABB to select the best managers for the available positions. Both companies operated in the same industry, allowing ABB to reap short-term cost benefits associated with eliminating duplicated efforts and leveraging economies of scope.

WEAKNESS
Managers were not taking quick decision.

OPPORTUNITY
Rising global demand
Strong need for local identity.

THREATS
Political instability
Degree to which ABB is considered a foreign invader.