Asea Brown Boveri Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Asea Brown Boveri Case Solution

ABB’s global strategy under Kindle

Fred Kindle has criticized the organization’s current business strategy. He proposed three fundamental strategic objectives on which the business strategy is based on. These three fundamental principles include strategy, execution, and people. He argued that the strategy making activity was just secondary in the large organizations like ABB. He further argued that the execution is the main focus for the organization. Strategies can be planned easily but the main task is to execute the strategy.

He proposed to change the organization’s performance matrices. The focus of the all businesses under ABB was to have increasing growth regardless of the operating margins and capital efficiency. Therefore, there was no focus on the value creation and sustainable business growth.
Kindle identified that decentralized structure is making the organization inefficient. This is making the business highly fragmented where each business unit is holding the rights to work as an independent organization, each manager imposes systems and procedures that he/shedeem best for his/her division. Thus,the business lacks a common set of rules, systems &procedures, and guidelines to execute the business. He wants a system that is in between decentralization and centralization, as he considered centralization inefficient for a large organization.
Although the organization has expanded globally,it has not achieved optimization. In other words, the benefits of being globalized have not been achieved. Kindle identified Structures, Systems and People as being the reason for such sub-optimization.

Considering all issues and problems, Kindle is looking into three strategic changes options, proposed by the corporate planning group that are:

Global Business Organization
Functional Organization
Multidimensional Organization

Optimal reorganization plan

While considering which option is better for the future of ABB, the Functional organization seemed to be a better option. This organization structure is also being used by competitor companies and they are operating effectively with EBIT margins of 16%-18%. The structure is quite simple and a performance accelerator. However,the planning team has identified that ABB’s corporate portfolio is too complicated and wider as compared to the peer companies. Thus, the simple, functional organization cannot be a feasible option.

Another option is to have a multi-dimensional organization. This option is not a viable one, it will add to the complexity of the organization structure. This structure involves different divisions or groups engaged in different operational dimensions of the organization. The structure can be well defined through Exhibit 1. Thus, there will be a lack of clarity on the reporting lines and there will be the same issue of decentralization as well. Therefore,this method is also not preferable.

The feasible option is the global business organization. In this method, it is recommended that the ABB should continue its organizational structure that was implemented by Dormann. However, changes are needed in order to make it optimal. The organization is divided only into two divisions,which are Automation Technologies and Power technologies. There is a need to divide the divisions further so that the operations can be harmonized and made simple in order to be effectively manageable. Besides this, there will be one geographical division of markets and technologies. Each division will be responsible for its operations’ profitability and performance. Besides this, each geographic area, which will contain all 5 divisions, will have to show the combine operating results. The main geographical division will also be responsible for planning and implementation policies and operating systems and procedures for its all five divisions........................

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Asea Brown Boveri Harvard Case Solution & Analysis