ABB

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.
ABB’s Mission: as one or the world’s leading engineering
companies, we help our customers to use electrical power
effectively and to increase industrial productivity in a sustainable
way.

4. Corporate Strategy 1990’s
-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. ABB’s Organizational Structure
Barnevik’s original view
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
National
Company
A
National
Company
B
National
Company
C
Etc.
Business
Area 1
Business
Area 2
Business
Area 3
Business
Area 4
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

8. ABB’s Organizational Structure
Dormann’s strategy : - Focus on two core divisions
- Identify competitive edge
- Improve on cost position and in profit

9. ABB’s Organizational Structure 2006
Kindle’s 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 Australia’s
CEO said: “The transaction is in keeping with ABB’s
global strategy announcement last year to focus on
core areas of power and automation technologies for
utility and industry customers.” This simplification of
ABB Australia’s 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 manager’s 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 > 5%
- EBIT margin in power systems from 2005-2009 > 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 R&D
divisions
• synergies with over 70 universities and research institutes.

16. • 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.
Key Points/Summary
• 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/abb%20power%20point%202005.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 Perth’s 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