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CASE ANANLYSIS OF ABB (A)

Article Summary: This analysis of ABB (A) is very importance to the future managers of the firm as we undergo training and leadership and experience in the firms or companies. it is also importance to under the business needs and strategies that will lead to the success of the business as the world market become very competitive as the technolgy is repaidly changing its systems.

(c) Daniel Kon Ater Nyok CASE ANANLYSIS OF ABB (A)

CASE STUDY 8: REBUILDING ABB (A)

I am interested in International Business Strategy and decision issues' in the contemporary market. Daniel Kon Ater Nyok Senior lecturer for accounting and Finance, Faculty of Economics and management Sciences Dr John Garang Memorial University of Science and Technology Jonglei State The Republic South Sudan

QUESTION 1: a. What explains the frustrating cycle of change at ABB in the years since its formation until early 2005? The frustrating cycle of change at ABB can be explained through the numerous and different organisational transformations implemented by each CEO. Evident throughout the case is the different strategic initiatives and guiding principles that each CEO adopted. The company's initial aim from development and with the introduction of each CEO was to restructure, through what they believed to be simplifying the structure and then growing. From the beginning this included centralising control systems, making English the corporate language, creating a new corporate identity, streamlining operations and aligning country organisations and finally expanding via diversification through bolt-on acquisitions, equity investments and joint ventures. It also involved creating a nimble and innovative organisation which allowed decisions to be made at the lowest level allowing for localisation and the introduction of a global matrix structure. Over time, and with each CEO change, new guiding principles were introduced into the company and this is where problems arose, including job losses, corporate restructuring, changes to the decision making processes and the removal of regional organisations. These constant changes and the restructuring of the organisation led to staff being unaware of their roles and responsibilities and created in-fighting between managers across countries and widespread inefficiency within departments. There were no processes implemented to align employees with the strategic objectives of the company and there was no scorecard for senior executives. Also, there was no identified long-term strategy for the company. Each time a new CEO took control, the direction of the organisation changed to suit there own corporate agenda and experiences. It is apparent that after the retirement/forced retirement of the founding CEO Percy Barnevik the company lacked leadership that transcended borders, as well as the ability to set and work towards any long-term strategic objectives. Rather new objectives were put into place and new problems arose. It is apparent, that although each CEO wanted to create a 'transnational' company, they lacked the ability to put their ideas into a structure which actually worked and met the desired conditions needed to be effective. b. Were ABB's problems mainly strategic? Organisational? Or caused by external factors? It is apparent that the problems that ABB faced were influenced by the three aforementioned areas, including strategy, organisational inefficiencies and external factors. External Factors: These affected the company in the sense that they dramatically altered the markets that ABB was competing in, making it more difficult for the company to pursue their strategy of growth via acquiring businesses and diversification. External factors that impacted on the business included the dot.com bubble, 9/11, and economic downturn, especially during the Asian Financial Crisis. Organisational: The influences which created inefficiencies for the company included poor execution of services, staggering short-term debt which was the result of acquisitions; asbestos claims; restructuring costs and share buy back issues, the pension scandal, corporate governance issues and the duplication of services - leading to cost increases. However, as ABB were unable to effectively execute their transnational strategy throughout the business, it is this area which was the significant contributing factor to their problems. According to Bartlett and Ghoshal a transnational company has specialised units' world-wide which are linked into an integrated network of operations that enables them to achieve their multi-dimensional strategic objectives of efficiency, responsiveness and innovation (Turner and Henry, 1994, p. 419). It is evident that ABB attempted to fulfil the required objective initially of thinking globally and acting locally through there matrix structure which allowed geographic regions to be completely autonomous in their decision making processes. The three interrelated guiding principles of being a successful transnational company include the ability to disperse assets, specialise in tasks and foster interdependence (Turner et al, 1994, p. 419). However in all three areas, ABB had significant downfalls which led to their inability to develop and create a strategy that was effective. For example, achieving the goal of dispersing assets and resources to capitalise on local strengths means that they need to create an environment where the company can transfer knowledge and experience to ensure that they are aware of those areas which are best suited to their product. They were unable to achieve this as they did not create the right environment to foster knowledge sharing, leading to business units running independently from each other as autonomous units.

QUESTION 2: Which of the three organisational models would you recommend to Kindle? What are the tradeoffs involved in your recommendation? Essentially, ABB is a 'federation of national companies' (Turner and Henry, 1994). As such there is a need to be able to find a balance in the organisation model that the organisations adopts, as there are over 1,300 subsidiary companies that all have different needs and wants. While the 'functional organisational' model that has been adopted by some of ABB's competitors has worked successfully, the high levels of product diversity that ABB has in comparison to their competitors would make this strategy hard to implement. Further, this model would also limit the transfer of knowledge which provides one of ABB's advantages that it currently holds over its competitors, as the company would no longer be under one single organisational umbrella (Holmstrom and Roberts, 1998). Similarly, while a 'multidimensional organisation' model would provide the most benefits to the organisation a whole, the risks of implementing this change may negate any of the benefits received. Royer and Grote (1992, p18) point this out, arguing that in most cases it is more beneficial for an organisation to adopt a "multinational", international or global strategic posture", which would be fulfilled utilising the global business organisational model. Continuing with a 'global business organisation' model give the best balance to the company and allow them to continue with a simplified decision making model and associated efficiency and speed benefits that ABB needs to remain successful, as indicated by the findings of Turner and Henry (1994). There would be some associated trade-off's that should be considered by the company however, including reduced earning capacity and less hierarchical control within the company that the other two models offer. Further, unlike the previously used multidimensional model, this model offers a less effective transfer of knowledge because although there is some continuity of the business as a whole the hierarchy which is essential for an expedient transfer is lessened (Holmstrom and Roberts, 1998). Overall however, the benefits of ABB continuing to pursue a global business organisation model are higher than adopting any of the other models. This is primarily because the organisation is so fragmented with a high level of diversity and products, the other two options may be harder to implement and the likelihood of a successful outcome will be lower. QUESTION 3: What people system and processes need to be put in place to support the recommended organizational model and required organizational transformation? To support its new model, ABB would need accurate, real-time visibility into the inventory held in the parts crib. It also needs to be able to give its suppliers access to the inventory information so that they could perform planning and replenishment activities on ABB's behalf. The initial deployment took approximately five months from the completion of the business case to live operations. ABB uses "Mobile Display Scanners" to record inventory receipts in the crib and usage in a particular project. The scanning process captures not just what was used but who utilized the inventory as well. It also records the information of business activities to the extent of the value that is generated from these various activities across the global network. When vendors deliver replenishment stock, this is scanned in their inventory and recorded accordingly. They also perform periodic inventory audits and can remove inventory that is not moving and purge it from the system. All of this information moves instantly from the scanning devices to the SmartSpare database via wireless technology. ABB will also be able to focus its Systems, Applications and Products (SAP) implementation on human resources (HR), finance and administration (FandA), Information Systems (IS) and corporate governance processes to better target efficiencies including shorter monthly closing cycles and a significant reduction in administrative costs. In upgrading to the latest release of SAP's market-leading ERP application with added product offering such as Customer Relationship Management (CRM) and Supply Chain Management (SCM), ABB would ultimately plan to extend its current SAP user base of 22,000 to at least 88,000 employees. In addition to SAP functionality in relation to people systems and processes, there are components that are associated to the application that allow for full knowledge management solution (Phillips, 2005). The main aspect is related to the management of job profiles and competencies of the employees in the training events management. For instance, it is possible to link the required knowledge so that an employee is able to reach a required competency. Furthermore, the management of training events can also have the knowledge associated with the programmed training course or courses linked. Article Source: http://www.upublish.info/

About the Author: Daniel Kon Ater Nyok REFERENCES: Holmstrom, B. & Roberts, J. (1998). "The boundaries of the firm revisited". The Journal of Economics Perspectives, Vol. 12, No. 4, pp. 73 - 94. Phillips, J. (2005), "Investing in Your Company's Human Capital: Strategies to Avoid Spending Too Little or Too Much", Amacom Publications. Royer, S. & Grote, S. (2002). "The concepts of Bartlett and Ghoshal: transnationals and beyond". Universitat Paderbron. Online, viewed 10th November 2007, http://wiwi.upb.de/bwl5/lehre/SS02/Seminar/Seminar%20FDI/Topic%207%20Transnationals%20(Bartlett%20Goshal) .pdf Turner, I. & Henry, I. (1994). "Managing international organisations: lessons from the field". European Management Journal, Vol. 12, No. 4, pp. 417 - 431. Keywords: Daniel Kon Ater Nyok, Strategy, Management of the firms, Customer Relationship Management CRM and Supply Chain Management SCM, **NOTE** - Daniel Kon Ater Nyok has claimed original rights on the article "CASE ANANLYSIS OF ABB (A)" ... if there is a dispute on the originality of this article ... please contact us via our Contact Form and supply our staff with the appropriate details of dispute. Daniel Kon Ater Nyok Article Feed : http://www.upublish.info/rssauthor/138364.xml

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By: Daniel Kon Ater Nyok

Posted on: 2011-07-07 Print Published Article Copy Published Article Download PDF Article Author Feed

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