Introduction

ABB is a multinational corporation headquartered in Zurich, Switzerland, operating in robotics and mainly in the power and automation technology areas. It ranked 143rd in Forbes Ranking (2010).
ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB has operations in around 100 countries, with approximately 145,000 employees in June 2012.

At a glance

Company name : ABB (Asea Brown Boveri Ltd )
Type : publicly- traded limited company
Traded as : SIX: ABBN, NYSE: ABB, OMX: ABB, NSE: ABB, BSE: 500002
Industry : Electrical Equipment
Founded : 1988 through merger of ASEA (1883) of Sweden and Brown, Boveri & Cie (1891)
Headquarters : Zürich, Switzerland
Area served : Worldwide
Key people : Joe Hogan (CEO), Hubertus von Grünberg (Chairman)
Products : Power technology, Industrial automation

In the introductory part, here we explain some words about the ABB Company on that time. In 1997 Goran Lindahl took over from Barnevik as CEO of the technology giant and is feeling the demanding market and shareholder pressures. After joining he declared ‘I want to make ABB a company that encourages and demands innovation from all of its employees, and a company that creates the environment in which teamwork and innovation flourish,’ ABB has different priorities in different markets. Western Europe and North America are the company’s biggest markets. However, the high-potential markets are the Middle East, Africa, Latin America and Asia. These markets are growing fast, and ABB expects to have half of its customers in these regions not long into the 21st century. The priority is on building local manufacturing, engineering and other forms of added value. ABB wants to integrate these operations into the global networks to obtain full synergy effects and economies of scale.

During 1998, it was shown that--- • The industrial production in OECD countries, in which ABB performs about 75 per cent of its total business, continues to grow, although at a slower pace than the strong growth rates of the previous year. • Industrial production and Economic activity in Europe, Latin America, Indian, Southeast Asia is lower than the year before, but still high compared with historical levels.

The company recognizes that the world is rapidly changing and increasingly unpredictable. As a result of the ongoing economic uncertainty, overall global demand is forecast to remain soft in the near future. ABB expects to benefit with its well established local presence around the world from higher demand in various industries and world markets.

Company also recognized that- Efforts have paid off and the group has taken its opportunities in Asia and positioned itself for future growth in what is seen to be ‘the world’s most dynamic market over a long term – China’.

The interest in China is growing steadily, and companies in Japan, the Western European countries, the United States and elsewhere today view the Chinese market as having enormous potential. With a population of a billion and a growing economy, it seems to be worthwhile to gain a foothold in the market.

On the other hand, China’s new firms are proving to be very competitive, and China’s culture is quite different from that of the West. However, the Chinese market growth remains relatively good for enterprises such as Procter & Gamble, Motorola, Nestlé and ABB. This market acts as a lifeboat to many worldwide companies suffering from the financial crisis in the rest of Southeast Asia.

Chinese Culture and its influence • Five thousand years old culture with a unique cultural heritage of philosophy, science and technology, societal structures and traditional administrative bureaucracy. • The Chinese people aren’t respondent to other culture, values and norms. • China is much more advance in technology than western countries like home electronics but far lag behind in social and cultural factors. • China is a perfect zone for doing business in basic industries, specially for the companies operating business in the field of construction. • China has to give 15 millions of new employment to her increasing population. • The country has begun to enjoy unprecedented strategic latitude for the first time in 200 years • China is expected to evolve into a hybrid system of authoritarianism, democracy, socialism and capitalism. • China is indeed the largest market in the world and enjoy the highest foreign direct investment and foreign aid of any developing country. • Long term market strategy is a must for doing business in china. • The family is viewed as an essential social unit and there is a strong tendency to promote the collective or the group. • Locating staff, undertaking practical market research and awareness about changes in policies and regulations a must for the investors. • The concept of ‘face’ (mianzi) is seen as an important characteristic of the culture. • Contacts and cooperation are built on trust and seen as serious if trust is broken. • Good performance, autonomy, good name and delivery is essential for doing business in china.

Local Roots • The strategy of ABB is to use its global strength to support the needs of its local customers around the world. • ABB in China wants to set up local production because of high import duty, increase market share, closeness to local market, shorter delivery period and local modifications of the products. • ABB’s high quality product would be pans a type test based on the Chinese standard. • ABB companies in china can merely change the product design other than according to the agreement with the licensee but cannot change the technology. • ABB feels that to be close to the customer is the lowest guarantee that local requirements are meeting.

Profit Centers • ABB’s strategy is to take full advantage of its economics of scale and represent them by national companies. • ABB Company recognizes that centers enable the company to be efficient for decentralization, relatively fast, sensitive and responsive. • The profit center makes the company independent which is its strength. • ABB China is trying to force ABB companies to use two official channels- locally produced product and directly imported from a technology partner.

Structure

• ABB is a huge enterprise with disappeared business area, which encompasses the three segments: power generation, transmission and distribution and industrial building system.

• Every country had its national ABB head office dealing with all the company businesses in that particular country.

• Each business area represents a distinct worldwide product market.

• BA is responsible for worldwide market allocation and the development of a worldwide technical strategy for that specific product line.

• China is the most developing countries there is no BA in place in the decision power of the country management is consequently closer at hand.

• The local subsidiary in China two or more licensors in western countries from which they buy components.

• The enterprise is divided into 5000 profit centers and because each of these profit centre want a profit when selling a component or products.

• There have some short coming in the co-ordination and co-operation between the licensor and the local Chinese subsidiary.

• According to the licensor it does not quote in the local ABB companies market because a customer with foreign currency will prefer imported product.

• The technology is owned today by the centers or excellence on Europe or no called licensor who pay for all the product development.

• ABB has chosen this licensee to be responsible for the company’ world source of this specific technology. These units are responsible for developing new products and look after the quality.

Multiculturism • The current fashion exemplified by ABB is for the firm’s to be multicultural multinationals and be very sensitive to national differences.

• Barnevik did debate that culturally diverse set of managers can be a source of strengths.

• Barnevik believe that the advantage of building a culturally diverse cadre of global manager is to improve the quality of managerial decision making.

• ABB in china is typified by a culturally diverse set of mangers with a mixture of managerial idea, derived from the different manager’s national background, different values and different working method.

• According to another manager ABB is a very international company with a great deal of influence from Scandinavian culture.

• In China the ABB culture is influenced by Chinese culture, in spite of that the mangers do not feel that the result is a sub culture of the ABB culture rather a mixture of managers from different cultures- “We are a multi domestic company”.

Expatriates • The BA’s are the person who is sent as expatriates to any other countries on behalf of the company with assignment. • ABB has the coordinated executive committee and 500 global managers who are assigned with the job of transferring expertise around the world and to expose the company’s leadership. • However expatriates costs the company with high amount, ABB in china is facing another problems such as- ← The expatriates come from another country. ← They feel lack of supports from home office. ← It is very difficult to have insights into the working conditions of the country. ← As the expatriates are assigned for relatively short time period, it is difficult for them to build up informal relationship. • Today when there are about 100 expatriates with 25 differential nationalities in china, it is mostly up to the individuals to prepare themselves for the acclimatization. • In most of the cases the expatriates don’t know about the situation when the contact expires.

The Chinese Challenge

• ABB prefer to send out mangers who has 10-15 years of experience to those places where challenges are bigger and potential risk are greater.

• The worldwide company ABB is specially focusing on creating an creating an environment where team work and active participation will promoted.

• To teach the employees the western management practice the ABB China has recent set up an agreement with a business school in Beijing to arrange training for Chinese employees.

• For solving the problem of quitting offer training. ABB has setup a precaution that the employee has to pay back the training investment. If he or she quits.

• Now ABB china as regarded as experience centre of working for an international company such as ABB for getting better paying job.

Reorganization According to the ABB mission book, the roles in the two dimensions of the ABB matrix must be complementary. It demands that both the individual company and the headquarters level are flexible and strive for extensive communication. ABB China is measuring how the different companies are performing within China. The BA, on the other hand, is measuring how the specific products are performing on a worldwide basis and what the profitability is for the products. Each BA has a financial controller, and each country level has one also.

CEO Göran Lindahl says that restructuring is aimed at making the organization faster and more cost-efficient. Due to the demands of a more global market, there are reasons for getting rid of the regional structure and concentrating more on the specific countries.

According to Göran Lindahl, the reorganization is preparation for a much faster rate of change in the markets and for the company to be able to respond more effectively to the demands of globalization. It is seen as an aggressive strategy to create a platform for future growth.

The BAs will manage their businesses on a worldwide basis and there will no longer be the confusion caused by BA and country management setting different objectives. At the same time, segments are split up to make them more manageable.

The general managers of the individual joint ventures and other units will have only one manager above them in the organization that has a global view of the business.

Future Vision • It can no longer be extrapolated, but can be forecast by creativity, imagination, ingenuity and innovation – action based not on what was, but on what could be. • The corporate culture needs to be replaced by globalizing leadership and corporate values. • On the path towards the 21st century, ABB will focus on several essential elements:

I. a strong local presence; II. a fast and flexible organization; III. the best technology and products available; IV. and excellent local managers

Lastly, in the rapidly changing environment, and competition, enterprises that adapt quickly and meet customer needs will be the winner, and this is the ultimate goal of ABB.

Conclusion
This paper is all about the key findings on a case study named “ABB in Chaina 1998”. Here we tried to find out the major issues that ABB Company had to consider when they entered into the Chinese market as a multidomestic company. We highlighted Chinese Culture and its influence, the Chinese challenge, the company’s expatriates, its multiculturism, structure, Profit Centers, Local Roots, reorganization of management style , future Vision etc.