Prabu Kalidoss

2015H149240P

Since its inception, Asea Brown Boveri (hereafter called ABB) has always
attracted the business and academic community because of its unique
organizational structure, consistent growth pattern, and extensive worldwide
operations. After the merger of Asea and Brown, Boveri and Cie (BBC), ABB
had an excellent international expansion. Academics and business
practitioners studying multinational corporations (MNCs) and global
companies often admired ABB 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 companys 1,000 entities around the globe. The
phrase think global, act local became synonymous with ABB and its former
chairman, Percy Barnevik, who aggressively advocated and practiced the
concept in the company. In 2004, ABB continues to be global leader in the
areas of power and automation technologies although the companys
corporate image has been affected because of heavy losses in 2001 and
2002. In 2003, ABBs revenues surpassed $20.4 billion and made a profit of
$108 million. During the same period, the companys market value stood at
$12.12 billion. On the other hand, in 2000, the Groups market capitalization
exceeded $40 billion. 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.
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 Vsters, Sweden
and BBC Brown Boveri Limited of Baden, Switzerland merged their
operations and formed ABB (Asea Brown Boveri) Limited. Each company
held 50 percent of the new entity and was headquartered in Zurich.
Switzerland. The merger was highly rated by the media because of Europes
1992 economic integration. 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.

Prabu Kalidoss

2015H149240P

The company invented many new technologies and set the pace for the
power generation industry. Before merging with Asea, BBC was operating
globally and employed 97,000 workers worldwide. Under the leadership of
its former chairman Percy Barnevik, the company launched a massive global
expansion program because of growing demand, especially in East Asia and
Eastern Europe. Between 1993 and 1998, ABB continued to grow in Europe,
Asia and Latin America by seeking acquisitions, alliances and joint ventures
that helped the company to consolidate its position in world markets. 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. ABBs current history and corporate profile are
incomplete without discussing its two former high-ranking officers, Percy
Barnevik (chairman) and Goeran Lindahl (chief executive), who left the
company in 2001. Both were criticized by the world media over their
generous pension payments received from ABB after departing the company.
Barnevik alone received over $87 million in pension benefits. Interestingly,
during the same year, ABB lost $691 million. In addition, the companys U.S.
subsidiary was sued for asbestos liabilities.
Since Barnevik coordinated the merger between Asea and Brown Boveri,
he was highly admired by the analysts because of his corporate foresight
and making ABB one of the best global companies in the world. In the late
nineties, Barnevik was known as another Jack Welch (former CEO of General
Electric) because of his leadership, star image and global vision. Jrgen
Dormann, the current CEO (2004) who worked for Aventis, took over the
company in September 2002 and has brought a multitude of structural
changes to avoid bankruptcy. Although ABB lost $691 million in 2001 and
$161 million in 2002, it earned a net profit of $108 million in 2003.