Asea And Brown Boveri Case

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The dismal state of utility equipment market has resulted in merger of two power equipment giants, Asea and Brown Boveri to Asea Brown Boveri (ABB). To build and manage this new company ABB to operate on a global scale as well as have a strong national presence in all operating countries and to design a decentralized organizational structure with central control are the two main challenges in this case. This is the central issue because it is very difficult to implement both the Matrix structure in as organization as well as follow the transnational business model due to high coordination required and great emphasis on both on global integration and on localization. Percy Barnevik, CEO of ABB, main purpose was to create an organization that could obtain great level of integration at the same time a high level of national responsiveness (he wanted ABB to be a transnational company). Barnevik was effectively able to achieve this by his management style which was fundamental to develop ABB, in four years, into a $29 billion company with over 200.000 employees worldwide. He selected ten key people responsible for implementing the matrix structure for ABB that consisted of “an organization built on approximately 60 global business areas (BAs) with the national market focus provided by 1,300 local companies grouped under the umbrella of several country-based holding companies”. Barnevik’s requirements was to make sure that ABB was able “to manage three contradictions – to be global and local, big and small, radically decentralized with central control”, to support his management strategy. He presented a 21-page “policy bible” to the top management outlining the major policies and values to be communicated to the people of the organization. He established certain rules that were to be followed by all members in the organization to carry out his management style. Even

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