Strategic issues faced by Engineering Conglomerate ABB Company


Managing Strategies






Word Count- 899 words

Table of contents

TOC o “1-3” h z u 1.0 Background statement PAGEREF _Toc308774151 h 31.1 Strategic issues faced by Engineering Conglomerate ABB Company PAGEREF _Toc308774152 h 32.0 Application of the key points to the case study PAGEREF _Toc308774153 h 43.0 Relationship between the theory and the key issues in the study PAGEREF _Toc308774154 h 54.0 References PAGEREF _Toc308774155 h 75.0 Appendix: Brief reading week 3-5 PAGEREF _Toc308774156 h 9

1.0 Background statementMost organizations use strategic management systems to assist in increasing their production in order to compete with others in the market. Strategic issues focus most on the development of an organization in relation to its internal and external environment that affect the organization’s performance (Ansoff 1980, pp. 138-148; King 1982, pp. 45-49). Strategic managements are set of organizational schedules, routines, and processes aimed at perceiving, analyzing, and responding to strategic issues. They help an organization in learning and adapting to the prevailing market conditions in order to achieve better alignment with its environment (Duncan & Weiss 1979).

1.1 Strategic issues faced by Engineering Conglomerate ABB Company Engineering Conglomerate ABB Company came up with pleasing management strategies that were aimed at equipping the company for competition in the global markets. According to Brown (1981), strategic management issues take many forms depending on the nature of the organization and the level of management in the company. The Company was faced with some organizational issues that include: budgeting issues, development of new technologies, declining unit performance, and competition from other companies. On the issue of budgeting, the company wishes to come up with a two structure implementation strategies.

The first strategy is related to power generation, transmission, and distribution, while the other structure is concerned with industrial and building systems, and transport. These strategies have led the company into many budget constraints that see it making losses worth billions of dollars. In the development of the new technologies, the company tries to implement new methods of power generation through the purchase of technologically advanced equipment. These equipments end up causing threats to the environment because of the construction, Example is the Combustion Engineering and Widmer and Ernst deal that used asbestos to insulate the products. On the other hand, the company had a good performance during the initial stages of implementing the strategies whereby in 1997, the companies turnover increased by nearly double from 1988, with the profits increasing to nearly four times at the same period. Finally, the company faced stiff competition from other organizations that contributed to its decline in the profits achieved. Moreover, these companies were well established and thus, had a lot of demand. 2.0 Application of the key points to the case studyThere are two key points that are of importance in the given case study. First, there is a point of profit maximization. This was achieved through the purchase of advanced units in the company that ensured high level of production therefore leading to increased output. Strategy is an organization’s vision for profit and growth. The vision is expressed in the mission statements, job descriptions, and policy documents so that every employ of the company is made aware of the set plans (Amisano, 2008). The Company’s strategies on power production and distribution combined with industrial and building systems were designed to increase on its profit in order to compete with other bigger organizations in the globe. The company ensured that managers in the higher positions perform their duties in order to motivate others in the lower positions to improve on their duties and responsibilities. Percy Barnevik, the Company’s CEO was a result oriented person who ensured that the new strategies were followed and implemented. He created the new corporate farm, which demonstrated how large companies can be organized and managed.

Secondly, the study points out on the issue of production. Although ABB Company had good strategies in the development of two structures that brought about high profits in a period of ten years, there company had poor production strategies. All organizations including service provision organizations exist to achieve specified organizational goals; they have what they regard as their core business activities and such, all other activities and functions in the organization occur in line with organizational goal. Production and operations are key functions in services business, which aim at attaining the business goal in a cost-effective way while giving regard to time limits and quality of service (Shi Yong & Yi Peng 2001). The poor production structure resulted to the company incurring many losses that totaled to almost 4b billion dollars in debt. After Percy handed over leadership to Goran, the company profits started declining. There was poor management as they were less concerned with the productivity of the company. The purchase of the Combustion engineering and Widmer and Ernst cost the company 1.43 billion dollars as a result of asbestos exposure to the environment.3.0 Relationship between the theory and the key issues in the study The management theory is the most significant in the study. The Company’s first management under the leadership of Percy was well conformed and ensured that high profits were achieved. Percy came up with the two strategic plans that ensured high productivity, but turned up to cost the company a lot after some years. Good management is essential in the success of any organization in all business fields since it forms the stepping stone for all activities in an organization (Mabey & Finch-Lees 2009, pp. 126-127; Fiol & Lyles 1985, pp. 803-813). In future development, the above theory is useful since it makes the leaders in an organization understand the need for good management aspects for the better performance of a company. The management in an organization should come together and discuss the issues related to the industry, which involves addressing the performance issues, marketing strategies, production aspects, and areas that need improvement (Haberberg & Rieple 2008). On the other hand, the organization should ensure that they deal with materials that are environmentally friendly to avoid incidences like those experienced by Engineering Conglomerate ABB.

4.0 References Amisano, G. (2008), What Humpty Dumpty Can Teach Big Companies about Maximizing

Profits. Salient Corporation. Retrieved from:

Ansoff, J. (1980), Strategic Issue Management: Strategic Management Journal. 1(1), Pp. 138


Brown, J. K. (1981), Guidelines for Managing Corporate Issues Programs. New York: The

Conference Board.

Duncan, R. B. & Weiss, A. (1979), Organizational Learning. Implications for Organizational

Design: In B Staw (Ed), Research in Organizational Behavior. Green which, CAT: JAI

Press. (1), pp. 75-124

Fiol, M. & Lyles, M. (19850, Organizational Learning. Academy of Management Review. (10),

pp. 803-813

Haberberg, A & Rieple, A. (2008). Strategic management: Theory and Cases. Oxford University


King, W. R. (1982), Using Strategic Issue Analysis. Long Range Planning. 15(4), Pp. 45-49

Mabey, C, & Finch-Lees, T. (2009), Management and Leadership Development. The Sage

Handbook of Human Resource Management. London: Sage, pp. 126-127

Shi Yong & Yi Peng. (2001), Multiple Criteria and Multiple Constraint Levels Linear

Programming. Singapore: World Scientific Publishing Co. Pte. Ltd.

Appendix: Brief reading week 3-5

What are the key points that the writer is putting forward?

From the study, the writer has emphasized on the two key points, the profit maximization, and the issues on production management. Profit maximization is a good strategy in any organization that ensures the company achieves its goals and visions in the provision of better goods and services to the global market. Production on the other hand ensures that an organization takes to the market what the customer needs and that, which is environmentally friendly.

What aspects of strategic management is the article discussing

From the case study presented, the issue of good managerial practices is discussed as an aspect of strategic management. Good management is an aspect that makes many organizations to achieve better returns in their activities. It ensures that all the operations in an organization are learning according to the plan and that there is good cooperation among the employees, employers and investors.

Can you identify some criticism in the paper and its approach

From the case presented, the writer is critical on how the company starts making losses after many years of profits. This brings about a second thought that there might be some issues that were not addressed as to the source of the sudden failure of the company. According to the survey conducted by Staw, the organizational behavior is used to identify the characteristics of a given company, and only the stake holders have the ability to discover its weaknesses. Good approaches to the criticism are through clear intervention among the stakeholders and seeking advice from other organizations.

What do you find most interesting aspect of the article? Why is this?

The article presents a situation whereby, the CEO, Percy Bernevik, came up with a two strong strategic measures that ensured the company made a lot of profits within a period of ten years. The company purchased most of the small companies dealing with power generation, transmission, and transportation in an effort to improve its production. This is interesting because the company flooded the market at a high speed and before others could realize, it had already established itself and attracted as many customers and investors as possible.

What parts of reading are most difficult to understand? Why is this?

Some of the areas are not clearly elaborated. First is the section on the bureaucracy. The writer did not clearly illustrate the means in which the company used to come up with these strategies and how they affected the global market. Secondly, it is not explained how the Asian market managed to down lay the ABB company and the kind of competition they posed to the market.

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