ABB Form and Strategy

1
ABB Form and Strategy

• Created by
• Simon Frechette
• Jason Andujar
• Soojin Eom
• Craig Haglund
• Brian Smith
• May 2006

2
Agenda

• Corporate Strategy and Vision
• Percy Barnevik and Strategy
• Percy Barnevik and Structure
• Organizational Structure
• Power Products Strategy
• Power Systems Strategy
• Key Points

3
Corporate Strategy and Vision

• ABB is a global leader in power and
  automation technologies that enable utility and
  industry customers to improve their performance
  while lowering environmental impact. The ABB
  group of companies operates in around 100
  countries and employs about 105,000 people.
• ABBs Mission as one or the worlds
  leading engineering companies, we help our
  customers to use electrical power effectively and
  to increase industrial productivity in a
  sustainable way.

4
Corporate Strategy 1990s

• Rapid growth due to acquisitions
• Example ABB in Spain
• Decentralization and multidivisional global
• strategy
• Tailoring their plant to the needs of the local
• culture.
• In Spain ABB worked with the powerful
• unions and the traditional Spanish culture

5
Corporate Strategy 2000-2005

• Emphasis on the quality of ABB products
• Focus on the efficiency and operating margins
• Technological innovation
• providing sustainable energy solutions to a
• variety of regions in the world
• Responsible acquisitions to fuel
• worldwide dominance

6
Percy Barnevik and Strategy

• From the very start ABB chose a multidomestic
  approach, keeping local production but trying to
  improve competitiveness vigorously with the help
  of a number of strategies and methodologies, for
  example
• Customer Focus
• Time Based Management
• Total Quality Management
• Six Sigma
• Seven-Ups
• In Business, success is 5 strategy, 95
  execution
• 
  Percy Barnevik

7
ABBs Organizational Structure Barneviks
original view
The Global Matrix -an organizational structure
that would balance the global business focus and
the national market focus -balance between
centralization and decentralization of authority
between the center and local management

• Problems with the Matrix
• -conflict of interest between the business area
  management and regional management
• -delayed decision making especially at the
  frontline level
• -slow response to the rapidly changing business
  environment

8
ABBs Organizational Structure
Dormanns strategy - Focus on two core
divisions - Identify competitive edge -
Improve on cost position and in profit
9
ABBs Organizational Structure 2006
Kindles strategy - Widen focus beyond growth
to higher margins - Greater return on
capital and cash generations - Deliver
results more consistently and reliably
10
Power Products Strategy

• Fix transformer business while continuing cost
  migration
• In 2004 ABB built a new manufacturing facility
  for distribution transformers. Reasons for this
  decision were competitiveness, people competence,
  cost levels and the power transformer experience
  in India. This represents both an attempt to
  improve their transformer business and to migrate
  manufacturing to a low-cost country.

11
Power Products Strategy

• Streamline product portfolio
• In 2003, ABB sold its building systems business
  in Australia to Downer EDI Limited. ABB
  Australias CEO said The transaction is in
  keeping with ABBs global strategy announcement
  last year to focus on core areas of power and
  automation technologies for utility and industry
  customers. This simplification of ABB
  Australias product portfolio allows them to
  focus on organic growth in the power products
  business area.

12
Power Products Strategy

• Update high-voltage product platform
• In 2004, ABB entered into a partnership with the
  manager of an award-winning energy efficient
  office tower in Perth, Australia. Together they
  engineered a solution to reduce the harmonics
  generated in the building. Using the building
  managers proposition, ABB came up with a package
  which included active harmonic filters. This
  customer-based approach allows ABB to
  continuously update their high-voltage product
  platforms.

13
Power Systems Strategy

• Focus on higher margin projects, strengthen
  project execution
• - Revenue growth in power systems from 2005-2009
  gt 5
• - EBIT margin in power systems from 2005-2009 gt
  6
• Leverage installed base for service

14
Power Systems cont.

• Focus on core activities including transmitting
  and distributing power, management and control of
  electrical networks and power plants, and
  optimizing power generation and flow
• March 31, 2006 ABB won a 24 million contract to
  help increase electrical power output at the
  Oskarshamn Unit 3 nuclear reactor, on the
  southeast coast of Sweden.
• March 16, 2006 ABB wins 16 million wind farm
  contract in Sweden.

15
Power Systems cont.

• Further Process and System Standardization
• Push new applications and products
• Example ABB Corporate Research Centers
• They have Research centers located in Sweden,
  Switzerland, Germany, Norway, Finland, Italy, two
  in the US, and the latest addition is an Indian
  center which is the first Research center in
  Asia.
• Over 700 researchers and scientists in corporate
  research centers
• Over 6,000 scientists and engineers working in
  RD divisions
• synergies with over 70 universities and research
  institutes.

16
Key Points/Summary

• Become one of the worlds leading engineering
  companies.
• Use of the multi-domestic approach, using various
  methods to keep local production and improve
  competitiveness.
• Restructure organization to improve margins,
  capital return, results and reliability.
• Fix Transformers and manufacture in low cost
  areas.

• Streamline the Product Portfolio
• Continuously Updating High-Voltage Product
  Platform
• Focus on higher margin projects
• Focus on core activities
• Push new applications and projects
• Early Growth through acquisitions
• Decentralization and tailoring to local
  communities
• Emphasis on quality
• Technological Innovations

17
References

• Slide 3
• ABB (2005) Power and productivity for a better
  world. Retrieve May 20th, 2005, from
  http//intra.som.umass.edu/calas/abb20power20po
  int202005.ppt
• Slide 4
• ibid
• Slide 10
• ABB India News ABB to sell building systems
  businesses in Australia and Hong Kong April 30,
  2003 www.abb.com
• Slide 11
• ABB Australia News. ABB helps improve energy
  efficiencies at Perths QV1 office towers
  November 18, 2004 www.au.abb.com
• Slide 12
• ABB Australia News ABB sells its building
  systems business in Australia May 1, 2003
  www.au.abb.com
• Slide 13
• ABB PowerPoint 2005
• Slide 14
• ABB Press Releases. ABB wins 16 million wind
  farm contract in Sweden. March 16, 2006.
  www.abb.com
• ABB Press Releases. ABB wins 24 million order
  to upgrade power plant. March 31, 2006.
  www.abb.com
• Slide 15
• ABB. How does ABB leverage its global
  research? October 12, 2004. www.abb.com