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The ABB Group’s Strategic Management Essay (Critical Writing)

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Updated: Jul 14th, 2020

Description of the ABB CEOs’ strategy styles

Among a variety of ABB leaders, three important figures introduced different strategy styles that put the company on a new level. For example, Percy Barnevik followed an aggressive growth strategy (intent-driven strategy), changed the roles within the company, and improved the organizational structure to create a new model of a competitive enterprise. He was led by his desire to surplus other companies and gain better profits.

Fred Kindle promoted a restructuring strategy (trend-driven strategy) that could help to restore the company’s focus and return to profitability. He wanted to help the company become better. Joe Hogan’s intentions to create a balance between the organizational growth and operational efficiency made him decide to use a low-key style without any immediate changes but smooth transitions that can be clarified to everyone (resource-driven strategy). He was able to use what Barnevik wanted to do and what Kindle did.

The challenges faced ABB

Barnevik is the first CEO of the company that was formed as a result of a merger. It was difficult for ABB to introduce itself as a powerful engineering company with appropriate abilities to compete. Barnevik had to consider the achievements of other companies and their leaders and develop an independent organization with its unique culture, structure, and missions. He wanted to promote the global expansion of the company. However, it was also necessary to consider all global changes and react to everything in a short period. There were two main challenges for the company – the lack of time to analyze all information and the necessity to make decisions regarding the current changes.

Rules of thumb to guide ABB’s operation

According to MacIntosh and MacLean (2015), rules of thumb introduce several guiding decisions that can be applied to a particular situation. These practices are not time-consuming and help to make the correct decisions in most cases. Leaders can make decisions that vary by their nature and the results that can be observed in the company. Still, as a rule, all decisions of such time play a crucial role in the company and are characterized by positive or negative outcomes. One particular alternative should be chosen to leave other possible available alternatives behind. In case the alternative fails, another option from the list left behind can be used. Still, it is not enough to choose an alternative. It is more important to develop a powerful implementation plan with the help of which the alternative can be developed.

In the case study under consideration, different CEOs of the company promote numerous operations that can be explained or guided by the rules of thumb at different epochs of the ABB’s development. Barnevik’s decision is probably one of the brightest examples that can be used to explain the company’s operations. The necessity to restructure ordinary organizations that were used in the merge process removed more than 90% of the employees. This rule helped to improve business performance and reduce the costs of the people, who stayed involved in the company. The attempt to improve annual sales created another rule of thumb that told about the possibility to derive about 70% of revenues from domestic markets and get 30% from export production. Such proportions could be enough for the possible success of the company and were challenged by globalization and numerous economic crises (Hitt, Ireland, & Hoskisson, 2008).

Change of the rules of thumb

Barnevik was the first CEO, who created the rules of thumb for ABB to be followed. However, with time, new CEOs appeared and tried (even unintentionally) to change these rules of thumb because of some new conditions or opportunities took place. The approach of Joe Hogan is one of the attempts to change the rule about the importance of restructuring the company. This leader believed that it was not necessary to change something just to meet personal comfort zones (MacIntosh & MacLean, 2015). Sometimes, it could be better to leave everything as it was and even try to cut the costs to survive.

Hogan’s new rule of thumb was based on the possibility to meet a sustained drop in orders using the cost-cutting strategy and the attention to investments and acquisitions. These changes did not lead to some negative outcomes only. A new look and a new evaluation of the situations in which the company was found helped ABB to cope with the current challenges and neglect the necessity to restructure the company in case some problem takes place.

Unexpected events that CEOs encounter

During different periods, ABB faced certain challenges, and its CEOs had to make solutions or even leave their positions to offer new suggestions and ideas or provide other people with opportunities to improve the situation. For example, one of the challenges Barnevik faced was the necessity to introduce ABB as a truly global organization. In a short period, the CEO decided to change the roles and consider the liabilities of the companies from which ABB was merged. The results were several debts, the criticism of Barnevik’s organizational model, and the investigations of several pending lawsuits (MacIntosh & MacLean, 2015).

Kindle faced another challenge connected with the necessity to make considerable acquisitions that cost a lot. Kindle did not want to spend the company’s money, and the company wanted to promote some changes based on new adjustments. Such disagreements resulted in Kindle’s abrupt leaving. The company expected a lot from Hogan. He was forced to introduce new tactics and ideas on how to promote the company’s growth. In response to the previous CEO’s approaches, Hogan decided to quit the idea of restructuring and focused on acquisitions and investments. Besides, he reduced the geographical margins considerably because it helped to removed uncertainty out of the company.

Narratives the CEOs fostered

Each CEO has his narration and different methods of crafting their narrations. A strategy is a craft that is used to deal with challenges and offer the solutions that can help to improve situations using resolutions, creativity, and other capabilities (MacIntosh & MacLean, 2015). Barnevik was the CEO with several ambitions that made him check the share price of GE day by day. His dream was to stay competitive as long as it was possible. This person was obsessed with the idea of organizational growth. He introduced the matrix system to declare the company as a unique engineering company with several global intentions and innovations.

Kindle had to deal with certain operational and strategic issues left by the previous CEO. He decided to use the trends of the company as the main sources of motivation and promotion of the company. His task was not only to solve particular problems but also not to find more problems. Therefore, he did not find it necessary to make new expensive adjustments. Still, it turned out to be his main problem that could not understand by other representatives of the company. Finally, Hogan wanted to take the best ideas offered by Kindle and Barnevik and combine them in his resource-based strategy. Operational efficiency and growth had to be combined, and Hogan knew how to achieve this balance choosing slow but reasonable moves.

Things to focus the next CEOs attention

The next CEO has to consider the example offered by Hogan first to get a clear picture of how a successful CEO may look in ABB. The next step should be the identification of the opportunities and threats regarding the current changes in the sphere of politics, economic, and even culture (Hill & Jones, 2011). Finally, it is necessary to pay more attention to the needs of employees and their suggestions on how to improve the company. Employee commitment may be a solution for ABB.

Regarding the article by Prahalad and Hamel (1990), it is possible to define two main principles of core competence: the importance to organize work and the ability to deliver values. On the one hand, it is not an easy task to identify the core competencies of a company and make sure other companies cannot imitate it in terms of communication, involvement, and deep commitment (Prahalad & Hamel, 1990).

On the other hand, it is important to understand how to deliver the values of a company without making all its secrets and unique approaches. It is hard to say that ABB succeeded to follow both principles successfully. On the one hand, ABB’s CEOs had to organize its work properly and promote deep commitment. From the case study, it is hard to understand if the company supported the idea of commitment in its operations. On the other hand, the values of the company were identified from the very beginning, and the CEOs knew what they had to strive for and if they were able to meet the goals set.

References

Hill, C.W.L. & Jones, G.R. (2011). Essentials of strategic management. Mason, OH: South-Western Cengage Learning. Web.

Hitt, M., Ireland, R.D., & Hoskisson, R. (2008). Strategic management: Competitiveness and globalization, concepts. Mason, OH: South-Western Cengage Learning. Web.

MacIntosh, R., & MacLean, D. (2015). Strategic management: Strategists at work. London, UK: Palgrave Macmillan. Web.

Prahalad, C.K. & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68, 79-91. Web.

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