ASEA BROWN BOVERI (ABB), SWEDEN, 2004: [627228]

ASEA ​ ​ BROWN ​ ​ BOVERI ​ ​ (ABB), ​ ​ SWEDEN, ​ ​ 2004:
WHAT ​ ​ WENT ​ ​ WRONG?

PICIOREA ​ ​ F ​ ​ A ​ ​ STEFANIA
RUJOIU ​ ​ C ​ ​ ANASTASIA-MARIA
STRACHINESCU ​ ​ D ​ ​ GEORGIANA
LUCAN ​ ​ N ​ ​ MARIAN-RAZVAN
LUNGU ​ ​ S ​ ​ GESICA-IOANA
MOTONIU ​ ​ I ​ ​ D ​ ​ ANA

1.Introduction
Name ​ ​ of ​ ​ the ​ ​ company
Asea ​ ​ Brow ​ ​ Boveri ​ ​ (ABB)

About ​ ​ the ​ ​ company
The ​ ​ ABB ​ ​ Group ​ ​ has ​ ​ over ​ ​ 115 ​ ​ years ​ ​ of ​ ​ rich ​ ​ history ​ ​ dating ​ ​ back ​ ​ to ​ ​ the ​ ​ late
1800s. ​ ​ The ​ ​ Group ​ ​ was ​ ​ formed ​ ​ in ​ ​ 1988 ​ ​ when ​ ​ Asea ​ ​ AB ​ ​ of ​ ​ Västerås, ​ ​ Sweden ​ ​ and
BBC ​ ​ Brown ​ ​ Boveri ​ ​ Limited ​ ​ of ​ ​ Baden, ​ ​ Switzerland ​ ​ merged. ​ ​ Each ​ ​ company ​ ​ held ​ ​ 50
percent ​ ​ of ​ ​ the ​ ​ new ​ ​ entity ​ ​ and ​ ​ was ​ ​ headquartered ​ ​ in ​ ​ Zurich. ​ ​ Switzerland.
In ​ ​ 1883, ​ ​ Ludvig ​ ​ Fredholm ​ ​ founded ​ ​ Elektriska ​ ​ Aktiebolaget ​ ​ in ​ ​ Stockholm ​ ​ that
in ​ ​ 1890 ​ ​ merged ​ ​ with ​ ​ Wenstroms ​ ​ and ​ ​ Granstroms ​ ​ Elektriska ​ ​ Kraftbolag ​ ​ to ​ ​ form ​ ​ Asea
(Allmanna ​ ​ Svenska ​ ​ Elektriska ​ ​ Aktiebolaget). ​ ​ In ​ ​ the ​ ​ next ​ ​ fifty ​ ​ years, ​ ​ Asea ​ ​ grew ​ ​ from
an ​ ​ unknown ​ ​ company ​ ​ to ​ ​ an ​ ​ international ​ ​ entity ​ ​ having ​ ​ subsidiaries ​ ​ in ​ ​ Great ​ ​ Britain,
Denmark, ​ ​ Finland, ​ ​ and ​ ​ Spain. ​ ​ The ​ ​ company ​ ​ became ​ ​ famous ​ ​ for ​ ​ its ​ ​ transmission
lines, ​ ​ generators, ​ ​ transformers, ​ ​ locomotives, ​ ​ and ​ ​ motors.
BBC ​ ​ was ​ ​ founded ​ ​ by ​ ​ Charles ​ ​ E. ​ ​ L. ​ ​ Brown ​ ​ and ​ ​ Walter ​ ​ Boveri ​ ​ in ​ ​ Baden,
Switzerland ​ ​ in ​ ​ 1891. ​ ​ By ​ ​ the ​ ​ early ​ ​ 1900, ​ ​ BBC ​ ​ had ​ ​ its ​ ​ operations ​ ​ in ​ ​ Austria, ​ ​ Germany,
Italy, ​ ​ and ​ ​ Norway. ​ ​ Like ​ ​ Asea, ​ ​ BBC ​ ​ manufactured ​ ​ power ​ ​ plants, ​ ​ turbines,
transformers, ​ ​ hydroelectric ​ ​ power ​ ​ stations, ​ ​ locomotives, ​ ​ and ​ ​ other ​ ​ industrial
products. ​ ​ The ​ ​ company ​ ​ invented ​ ​ many ​ ​ new ​ ​ technologies ​ ​ and ​ ​ set ​ ​ the ​ ​ pace ​ ​ for ​ ​ the
power ​ ​ generation ​ ​ industry.
The ​ ​ company ​ ​ is ​ ​ known ​ ​ for ​ ​ its ​ ​ unique ​ ​ organizational ​ ​ structure, ​ ​ consistent
growth ​ ​ pattern, ​ ​ and ​ ​ extensive ​ ​ worldwide ​ ​ operations. ​ ​ ABB ​ ​ is ​ ​ admired ​ ​ because ​ ​ of ​ ​ its
outstanding ​ ​ growth, ​ ​ highly ​ ​ sophisticated ​ ​ management, ​ ​ and ​ ​ peculiar ​ ​ corporate
structure. ​ ​ ABB ​ ​ particularly ​ ​ became ​ ​ famous ​ ​ for ​ ​ its ​ ​ unique ​ ​ decentralized ​ ​ horizontal
organizational ​ ​ system ​ ​ and ​ ​ global ​ ​ networking, ​ ​ which ​ ​ was ​ ​ based ​ ​ on ​ ​ lateral
communication ​ ​ across ​ ​ the ​ ​ company’s ​ ​ 1,000 ​ ​ entities ​ ​ around ​ ​ the ​ ​ globe. ​ ​ ABB
continues ​ ​ to ​ ​ be ​ ​ global ​ ​ leader ​ ​ in ​ ​ the ​ ​ areas ​ ​ of ​ ​ power ​ ​ and ​ ​ automation ​ ​ technologies.
In ​ ​ the ​ ​ year ​ ​ 1990, ​ ​ the ​ ​ company ​ ​ acquired ​ ​ Combustion ​ ​ Engineering ​ ​ Unit.
Between ​ ​ 1993 ​ ​ and ​ ​ 1998, ​ ​ ABB ​ ​ continued ​ ​ to ​ ​ grow ​ ​ in ​ ​ Europe, ​ ​ Asia ​ ​ and ​ ​ Latin
America ​ ​ by ​ ​ seeking ​ ​ acquisitions, ​ ​ alliances ​ ​ and ​ ​ joint ​ ​ ventures. ​ ​ The ​ ​ year ​ ​ 1998 ​ ​ was
particularly ​ ​ important ​ ​ for ​ ​ ABB ​ ​ when ​ ​ it ​ ​ acquired ​ ​ Elsag ​ ​ Bailey ​ ​ Process ​ ​ Automation.
The ​ ​ acquisition ​ ​ made ​ ​ ABB ​ ​ a ​ ​ major ​ ​ player ​ ​ in ​ ​ the ​ ​ global ​ ​ automation ​ ​ market.
As ​ ​ of ​ ​ 2004, ​ ​ the ​ ​ ABB ​ ​ Group ​ ​ has ​ ​ operations ​ ​ in ​ ​ over ​ ​ 100 ​ ​ countries, ​ ​ employs
116,464 ​ ​ people ​ ​ worldwide, ​ ​ and ​ ​ is ​ ​ listed ​ ​ on ​ ​ the ​ ​ stock ​ ​ exchanges ​ ​ of ​ ​ Zurich,
Stockholm, ​ ​ London, ​ ​ Frankfurt, ​ ​ and ​ ​ New ​ ​ York
In ​ ​ the ​ ​ last ​ ​ five ​ ​ years, ​ ​ ABB ​ ​ has ​ ​ not ​ ​ been ​ ​ able ​ ​ to ​ ​ achieve ​ ​ the ​ ​ same ​ ​ growth ​ ​ and
expansion ​ ​ because ​ ​ of ​ ​ changing ​ ​ markets ​ ​ and ​ ​ slow ​ ​ demand.

Specific ​ ​ facts
In ​ ​ 2000, ​ ​ the ​ ​ Groups’ ​ ​ market ​ ​ capitalization ​ ​ exceeded ​ ​ $40 ​ ​ billion.
The ​ ​ company ​ ​ lost ​ ​ $691 ​ ​ million ​ ​ in ​ ​ 2001 ​ ​ and ​ ​ $161 ​ ​ million ​ ​ in ​ ​ 2002, ​ ​ it ​ ​ earned ​ ​ a
net ​ ​ profit ​ ​ of ​ ​ $108 ​ ​ million ​ ​ in ​ ​ 2003, ​ ​ when ​ ​ revenues ​ ​ surpassed ​ ​ $20.4 ​ ​ billion ​ ​​ ​ and ​ ​ the
company’s ​ ​ market ​ ​ value ​ ​ stood ​ ​ at ​ ​ $12.12 ​ ​ billion.

Members
Percy ​ ​ Barnevik-former ​ ​ chairman
Goeran ​ ​ Lindah- ​ ​ former ​ ​ chief ​ ​ executive ​ ​ (left ​ ​ in ​ ​ 2001)
Jürgen ​ ​ Dormann- ​ ​ CEO(until ​ ​ 2004)
Fred ​ ​ Kindle-CEO ​ ​ (from ​ ​ 2004)

2.Problems:
Percy ​ ​ Barnevik, ​ ​ the ​ ​ former ​ ​ chairman, ​ ​ implemented ​ ​ a ​ ​ very ​ ​ aggressive ​ ​ strategy
in ​ ​ order ​ ​ to ​ ​ achieve ​ ​ the ​ ​ position ​ ​ of ​ ​ global ​ ​ player. ​ ​ ABB ​ ​ expanded ​ ​ operations ​ ​ and
sought ​ ​ internationalization ​ ​ at ​ ​ a ​ ​ very ​ ​ fast ​ ​ pace ​ ​ through ​ ​ widespread ​ ​ international
subsidiaries.
Negative ​ ​ effects: ​ ​ ​​ heavy ​ ​ losses ​ ​ in ​ ​ 2001,2002,2003 ​ ​ (investment ​ ​ costs).
Percy ​ ​ Barnevik’s ​ ​ (former ​ ​ chairman) ​ ​ and ​ ​ Goeran ​ ​ Lindhal’s ​ ​ (former ​ ​ chief
executive) ​ ​ exaggerated ​ ​ pension ​ ​ payments; ​ ​ just ​ ​ Bernevik ​ ​ received ​ ​ $87 ​ ​ million.
Total ​ ​ loss ​ ​ of ​ ​ the ​ ​ company: ​ ​ over ​ ​ $500 ​ ​ million, ​ ​ negative ​ ​ publicity.
The ​ ​ company’s ​ ​ U.S. ​ ​ subsidiary ​ ​ (U.S. ​ ​ Combustion ​ ​ Engineering ​ ​ Unit ​ ​ acquired ​ ​ in
1990) ​ ​ was ​ ​ sued ​ ​ for ​ ​ asbestos ​ ​ liabilities ​ ​ (asbestos ​ ​ liability ​ ​ ​ typically ​ ​ accompanies
asbestos-related ​ ​ diseases ​ ​ because ​ ​ most ​ ​ people ​ ​ are ​ ​ exposed ​ ​ while ​ ​ they ​ ​ are ​ ​ at
work). ​ ​ In ​ ​ 2003, ​ ​ another ​ ​ 90 ​ ​ 000 ​ ​ new ​ ​ asbestos ​ ​ claims ​ ​ were ​ ​ filled.
Negative ​ ​ effects: ​ ​ ​ company’s ​ ​ image ​ ​ has ​ ​ been ​ ​ affected, ​ ​ costs ​ ​ in ​ ​ 2003 ​ ​ (first ​ ​ set
of ​ ​ claims): ​ ​ $1.2 ​ ​ billion, ​ ​ corporate ​ ​ liability ​ ​ to ​ ​ U.S. ​ ​ plaintiffs ​ ​ increased ​ ​ to ​ ​ around
$200 ​ ​ billion, ​ ​ major ​ ​ setback ​ ​ to ​ ​ the ​ ​ company’s ​ ​ global ​ ​ restructuring ​ ​ and
recovery.
East ​ ​ Asian ​ ​ crisis, ​ ​ ABB ​ ​ unable ​ ​ to ​ ​ keep ​ ​ up ​ ​ with ​ ​ the ​ ​ changing ​ ​ markets, ​ ​ slow ​ ​ demand.
Negative ​ ​ effects: ​ ​ ​ massive ​ ​ reductions ​ ​ in ​ ​ the ​ ​ company’s ​ ​ revenues ​ ​ because ​ ​ of
the ​ ​ currency ​ ​ depreciation, ​ ​ cancellation ​ ​ of ​ ​ projects, ​ ​ downsizing, ​ ​ total ​ ​ loss ​ ​ in
2001-2002: ​ ​ over ​ ​ $1 ​ ​ billion, ​ ​ the ​ ​ company ​ ​ hasn’t ​ ​ been ​ ​ able ​ ​ to ​ ​ achieve ​ ​ the
same ​ ​ growth.
ABB’s ​ ​ corporate ​ ​ blunders, ​ ​ complex ​ ​ organizational ​ ​ structure ​ ​ and ​ ​ reshuffling ​ ​ of ​ ​ the ​ ​ top
management.
Negative ​ ​ effects: ​ ​ ​ major ​ ​ financial ​ ​ downfall ​ ​ affecting ​ ​ the ​ ​ company’s ​ ​ market
value, ​ ​ growth ​ ​ and ​ ​ global ​ ​ operations.
Decentralization ​ ​ while ​ ​ keeping ​ ​ the ​ ​ global ​ ​ matrix ​ ​ structure ​ ​ in ​ ​ many ​ ​ markets.
Negative ​ ​ effects: ​ ​ ​​ decrease ​ ​ in ​ ​ performance, ​ ​ losses.

In ​ ​ 2004, ​ ​ there ​ ​ has ​ ​ been ​ ​ an ​ ​ increase ​ ​ in ​ ​ the ​ ​ industry’s ​ ​ competition ​ ​ (power ​ ​ plants ​ ​ and
infrastructural ​ ​ industries) ​ ​ and ​ ​ some ​ ​ of ​ ​ the ​ ​ large ​ ​ market ​ ​ opportunities ​ ​ have
disappeared.

Causes: ​ ​​ The ​ ​ main ​ ​ cause ​ ​ is ​ ​ the ​ ​ organizational ​ ​ structure ​ ​ (matrix ​ ​ structure) ​ ​ that
has ​ ​ been ​ ​ maintained ​ ​ even ​ ​ though ​ ​ the ​ ​ global ​ ​ expansion ​ ​ should ​ ​ have ​ ​ stopped. ​ ​ The
matrix ​ ​ structure ​ ​ was ​ ​ only ​ ​ adequate ​ ​ while ​ ​ the ​ ​ company ​ ​ was ​ ​ expanding ​ ​ globally
(ABB’s ​ ​ internationalization). ​ ​ Therefore, ​ ​ the ​ ​ fact ​ ​ that ​ ​ the ​ ​ structure ​ ​ has ​ ​ not ​ ​ been
adapted ​ ​ to ​ ​ the ​ ​ company’s ​ ​ activities ​ ​ led ​ ​ to ​ ​ many ​ ​ problems. ​ ​ The ​ ​ problems ​ ​ occurred
from ​ ​ the ​ ​ East ​ ​ Asian ​ ​ crisis ​ ​ or ​ ​ from ​ ​ the ​ ​ increased ​ ​ competition ​ ​ ​​ cannot ​ ​ be ​ ​ controlled ​ ​ by
the ​ ​ company’s ​ ​ management ​ ​ and ​ ​ they ​ ​ couldn’t ​ ​ have ​ ​ been ​ ​ avoided. ​ ​ In ​ ​ these ​ ​ cases,
it’s ​ ​ important ​ ​ to ​ ​ come ​ ​ up ​ ​ with ​ ​ a ​ ​ plan ​ ​ in ​ ​ order ​ ​ to ​ ​ minimize ​ ​ the ​ ​ losses. ​ ​ The ​ ​ cause ​ ​ for
the ​ ​ asbestos ​ ​ claims ​ ​ was ​ ​ that ​ ​ OSHA’s ​ ​ (Occupational ​ ​ Safety ​ ​ and ​ ​ Health
Administration) ​ ​ regulations ​ ​ regarding ​ ​ the ​ ​ prevention ​ ​ at ​ ​ work ​ ​ were ​ ​ not ​ ​ respected. ​ ​ The
cause ​ ​ for ​ ​ the ​ ​ exaggerated ​ ​ pensions ​ ​ has ​ ​ a ​ ​ personal ​ ​ character, ​ ​ the ​ ​ action ​ ​ of ​ ​ P.
Barnevik.

3. ​ ​ Alternative ​ ​ solutions ​ :
We ​ ​ will ​ ​ present ​ ​ below ​ ​ different ​ ​ types ​ ​ of ​ ​ organizational ​ ​ structures ​ ​ since ​ ​ this ​ ​ is
the ​ ​ main ​ ​ cause ​ ​ for ​ ​ most ​ ​ of ​ ​ ABB’s ​ ​ problems.

International ​ ​ division: ​ ​​ might ​ ​ be ​ ​ applied ​ ​ by ​ ​ the ​ ​ companies ​ ​ which ​ ​ are
internationalized ​ ​ in ​ ​ a ​ ​ limited ​ ​ geographical ​ ​ area ​ ​ and ​ ​ which ​ ​ have ​ ​ a ​ ​ few ​ ​ specialists ​ ​ in
international ​ ​ business.
Advantages ​ : ​ ​ top ​ ​ management’s ​ ​ attention ​ ​ is ​ ​ focused ​ ​ on ​ ​ the ​ ​ foreign ​ ​ part ​ ​ of ​ ​ the
company, ​ ​ concentration ​ ​ of ​ ​ international ​ ​ management ​ ​ expertise ​ ​ in ​ ​ the
headquarters.
Disadvantages ​ : ​ ​ a ​ ​ very ​ ​ difficult ​ ​ international ​ ​ coordination ​ ​ of ​ ​ the ​ ​ resources
(due ​ ​ to ​ ​ the ​ ​ high ​ ​ degree ​ ​ of ​ ​ internationalization), ​ ​ a ​ ​ conflict ​ ​ between ​ ​ the
domestic ​ ​ division ​ ​ and ​ ​ the ​ ​ foreign ​ ​ division’s ​ ​ goals, ​ ​ the ​ ​ specialists ​ ​ from ​ ​ the
home ​ ​ country ​ ​ are ​ ​ disinclined ​ ​ to ​ ​ make ​ ​ a ​ ​ priority ​ ​ foreign ​ ​ customers ​ ​ needs.
Global ​ ​ product ​ ​ division: ​ ​​ is ​ ​ recommended ​ ​ for ​ ​ companies ​ ​ with ​ ​ a ​ ​ very ​ ​ diversified
product ​ ​ line ​ ​ and ​ ​ growth ​ ​ opportunities, ​ ​ and ​ ​ companies ​ ​ which ​ ​ use ​ ​ advanced
technology.
Advantages ​ : ​ ​ the ​ ​ company ​ ​ can ​ ​ add ​ ​ new ​ ​ products ​ ​ without ​ ​ disturbing ​ ​ the ​ ​ rest
of ​ ​ the ​ ​ organization, ​ ​ fast ​ ​ response ​ ​ to ​ ​ the ​ ​ international ​ ​ competition ​ ​ regarding
specific ​ ​ product ​ ​ lines.
Disadvantages ​ : ​ ​ production ​ ​ managers ​ ​ remain ​ ​ focused ​ ​ more ​ ​ on ​ ​ the ​ ​ internal
market, ​ ​ wasteful ​ ​ duplication ​ ​ of ​ ​ the ​ ​ management, ​ ​ plant ​ ​ capacity ​ ​ utilization ​ ​ and
sales ​ ​ representations ​ ​ within ​ ​ regions.

Global ​ ​ area ​ ​ division: ​ ​​ may ​ ​ be ​ ​ used ​ ​ by ​ ​ the ​ ​ companies ​ ​ with ​ ​ narrow ​ ​ product ​ ​ lines ​ ​ and
mature ​ ​ business ​ ​ within ​ ​ industries ​ ​ such ​ ​ as ​ ​ beverages, ​ ​ food, ​ ​ cosmetics ​ ​ or
pharmaceuticals.
Advantages ​ : ​ ​ local ​ ​ managers ​ ​ have ​ ​ strong ​ ​ decision-making ​ ​ power ​ ​ and ​ ​ could
find ​ ​ better ​ ​ solutions ​ ​ faster ​ ​ for ​ ​ local ​ ​ problems, ​ ​ creates ​ ​ opportunities ​ ​ for
economies ​ ​ of ​ ​ scale.
Disadvantages ​ : ​ ​ duplication ​ ​ of ​ ​ functional ​ ​ and ​ ​ product ​ ​ specialists ​ ​ among ​ ​ the
regions, ​ ​ lack ​ ​ of ​ ​ interest ​ ​ of ​ ​ area ​ ​ divisions ​ ​ to ​ ​ promote ​ ​ new ​ ​ products ​ ​ developed
in ​ ​ the ​ ​ headquarter ​ ​ or ​ ​ in ​ ​ another ​ ​ regional ​ ​ department.
Global ​ ​ functional ​ ​ division ​ : ​ ​ could ​ ​ be ​ ​ implemented ​ ​ by ​ ​ firms ​ ​ with ​ ​ narrow ​ ​ and
standardized ​ ​ product ​ ​ line, ​ ​ for ​ ​ example ​ ​ companies ​ ​ from ​ ​ the ​ ​ raw ​ ​ materials ​ ​ extractive
industry.
Advantages ​ : ​ ​ a ​ ​ small ​ ​ number ​ ​ of ​ ​ managers ​ ​ can ​ ​ control ​ ​ the ​ ​ international
activities, ​ ​ functional ​ ​ line ​ ​ managers ​ ​ can ​ ​ directly ​ ​ control ​ ​ all ​ ​ activities.
Disadvantages ​ : ​ ​ divergences ​ ​ between ​ ​ the ​ ​ marketing ​ ​ and ​ ​ the ​ ​ production
departments ​ ​ which ​ ​ need ​ ​ to ​ ​ be ​ ​ settled ​ ​ at ​ ​ the ​ ​ headquarter, ​ ​ difficult ​ ​ global
coordination ​ ​ of ​ ​ the ​ ​ functional ​ ​ departments.

4.Selection ​ ​ of ​ ​ the ​ ​ optimal ​ ​ solution:
Global ​ ​ product ​ ​ division ​ ​ ​ is ​ ​ the ​ ​ optimal ​ ​ solution ​ ​ for ​ ​ the ​ ​ problems ​ ​ occurred
within ​ ​ the ​ ​ ABB ​ ​ Group ​ ​ company.
ABB ​ ​​ ​ Group ​ ​ owns ​ ​​ ​ products ​ ​ for ​ ​ the ​ ​ power ​ ​ generation ​ ​ industry, ​ ​ such ​ ​ as ​ ​ power
plants, ​ ​ turbines, ​ ​ transformers ​ ​ and ​ ​ so ​ ​ on ​ ​ and ​ ​​ ​ the ​ ​ global ​ ​ product ​ ​ division ​ ​ would ​ ​ be
the ​ ​ most ​ ​ suitable ​ ​ solution ​ ​ as ​ ​ the ​ ​ company ​ ​ has ​ ​ numerous ​ ​ growth ​ ​ opportunities ​ ​ and ​ ​ a
diversified ​ ​ line ​ ​ of ​ ​ production, ​ ​ this ​ ​ solution ​ ​ leading ​ ​ to ​ ​ a ​ ​ fast ​ ​ response ​ ​ to ​ ​ the
international ​ ​ competition ​ ​ in ​ ​ its ​ ​ activity ​ ​ area. ​ ​ The ​ ​ solution ​ ​ will ​ ​ diminish ​ ​ the
cancellation ​ ​ of ​ ​ projects ​ ​ and ​ ​ increase ​ ​ the ​ ​ performance, ​ ​ the ​ ​ global ​ ​ operations,
therefore, ​ ​ leading ​ ​ to ​ ​ a ​ ​ decrease ​ ​ in ​ ​ losses.
In ​ ​ opposition ​ ​ with ​ ​ the ​ ​ optimal ​ ​ solution ​ ​ presented ​ ​ earlier ​ ​ we ​ ​ have ​ ​ the
international ​ ​ division ​ ​ ​ which ​ ​ has ​ ​ an ​ ​ internationalization ​ ​​ ​ limited ​ ​ by ​ ​ geographical
areas ​ ​ and ​ ​ difficulties ​ ​ in ​ ​ the ​ ​ international ​ ​ coordination ​ ​ of ​ ​ resources.
Also, ​ ​​ ​ the ​ ​ ​ global ​ ​ area ​ ​ division ​ ​ ​ is ​ ​ used ​ ​ mostly ​ ​ in ​ ​ industries ​ ​ much ​ ​ more
different ​ ​ than ​ ​ the ​ ​ power ​ ​ generation ​ ​ industry ​ ​ and ​ ​ focuses ​ ​ on ​ ​ finding ​ ​ fast ​ ​ solution ​ ​ for
the ​ ​ problems ​ ​ that ​ ​ occurs, ​ ​ again ​ ​ in ​ ​ the ​ ​ local ​ ​ area ​ ​ as ​ ​ against ​ ​ the ​ ​ advantages ​ ​ of ​ ​ the
global ​ ​ product ​ ​ division.
In ​ ​ addition, ​ ​ ABB ​ ​ Group ​ ​ as ​ ​ a ​ ​ global ​ ​ leader ​ ​ company ​ ​ in ​ ​ the ​ ​ automation
technologies ​ ​ area ​ ​ would ​ ​ not ​ ​ succeed ​ ​ its ​ ​ rebirth ​ ​ and ​ ​ repositioning ​ ​ in ​ ​ the ​ ​ industry ​ ​ if
global ​ ​ functional ​ ​ division ​ ​ ​ would ​ ​ represent ​ ​ the ​ ​ main ​ ​ solution ​ ​ as ​ ​ against ​ ​ the ​ ​ global
product ​ ​ division ​ ​ because ​ ​ it ​ ​ presents ​ ​ difficulties ​ ​ in ​ ​ global ​ ​ coordination ​ ​ which ​ ​ will ​ ​ not
help ​ ​ the ​ ​ company ​ ​ to ​ ​ decrease ​ ​ the ​ ​ massive ​ ​ reduction ​ ​ of ​ ​ the ​ ​ revenues ​ ​ and ​ ​ market
value.

5.Implementation ​ ​ of ​ ​ the ​ ​ optimal ​ ​ solution
The ​ ​ organisational ​ ​ chart ​ ​ will ​ ​ be ​ ​ changed ​ ​ from ​ ​ a ​ ​ Global ​ ​ Matrix ​ ​ Division
Structure ​ ​ to ​ ​ a ​ ​ Global ​ ​ Product ​ ​ Division ​ ​ Structure. ​ ​ In ​ ​ the ​ ​ headquarters, ​ ​ the ​ ​ production
(with ​ ​ all ​ ​ the ​ ​ product ​ ​ divisions), ​ ​ marketing, ​ ​ finance ​ ​ and ​ ​ personnel ​ ​ departments ​ ​ will
directly ​ ​ respond ​ ​ to ​ ​ the ​ ​ CEO. ​ ​ Further ​ ​ on, ​ ​ in ​ ​ each ​ ​ country, ​ ​ there ​ ​ will ​ ​ be ​ ​ a ​ ​ subsidiary
containing ​ ​ a ​ ​ marketing, ​ ​ finance ​ ​ and ​ ​ personnel ​ ​ department ​ ​ that ​ ​ will ​ ​ respond ​ ​ to ​ ​ the
marketing ​ ​ department. ​ ​ There ​ ​ will ​ ​ also ​ ​ be ​ ​ a ​ ​ production ​ ​ department ​ ​ in ​ ​ certain
countries ​ ​ in ​ ​ which ​ ​ production ​ ​ is ​ ​ feasible.
The ​ ​ only ​ ​ change ​ ​ will ​ ​ be ​ ​ at ​ ​ the ​ ​ operating ​ ​ division ​ ​ level, ​ ​ but ​ ​ it ​ ​ will ​ ​ be ​ ​ drastical.
More ​ ​ people ​ ​ will ​ ​ have ​ ​ to ​ ​ be ​ ​ hired ​ ​ in ​ ​ each ​ ​ country ​ ​ in ​ ​ order ​ ​ to ​ ​ adapt ​ ​ the ​ ​ products ​ ​ and
the ​ ​ marketing ​ ​ to ​ ​ each ​ ​ market ​ ​ and ​ ​ to ​ ​ respond ​ ​ fast ​ ​ to ​ ​ the ​ ​ global ​ ​ competitiveness.
As ​ ​ a ​ ​ disadvantage, ​ ​ the ​ ​ duplication ​ ​ of ​ ​ management ​ ​ and ​ ​ sales ​ ​ representatives
is ​ ​ not ​ ​ a ​ ​ waste ​ ​ of ​ ​ resources ​ ​ since ​ ​ it ​ ​ helps ​ ​ the ​ ​ company ​ ​ to ​ ​ adapt ​ ​ to ​ ​ each ​ ​ market
faster. ​ ​ The ​ ​ production ​ ​ managers ​ ​ will ​ ​ not ​ ​ tend ​ ​ to ​ ​ consider ​ ​ more ​ ​ the ​ ​ internal ​ ​ market,
because ​ ​ production ​ ​ will ​ ​ take ​ ​ place ​ ​ only ​ ​ in ​ ​ certain ​ ​ countries.