Forecast for growth

When a multinational giant like ABB makes core changes in its global management policies, how does that impact on its local investments? Tarek Atia went to Zurich to find out
With its headquarters in Zurich, Switzerland, ABB (Asea Brown Boveri) is a global conglomerate with companies involved in manufacturing, process and customer industries, oil, gas and petrochemicals, and nearly a dozen other fields. Its Egyptian operations employ some 2,500 people in nearly every sector that the company does business in, making the multinational one of the country's major investors. Its overall holdings in Egypt served local customers with $303 million in order intakes in the year 2000.
Every February, ABB brings its country representatives to Zurich for an annual meeting and press conference, to announce its financial results and set down goals for the future. Considerable anticipation preceded this year's press conference coming as it did shortly after the group's new CEO, Jurgen Centerman, had announced a fundamental shift in ABB's operating structure just 10 days after taking the helm on 1 January 2001.
From now on, Centerman said, ABB would be a customer-centric organisation. What that means, in practical terms, is that instead of the company being divided, as it had traditionally been, along product lines, it would now be centred instead around its main customer groups: power, gas and water utilities; process industries (like pulp and paper, metal and mining, chemicals and pharmaceuticals); manufacturing and consumer industries (like car makers and food and beverage companies); and oil, gas and petrochemical companies.
The announcement was initially greeted with much scepticism both in the business world and the press, sounding as though it were a public relations move meant to shift the focus from what analysts were predicting would be poor financial results for the year 2000.
Centerman himself addressed that scepticism in his presentation last month. "Yeah, yeah, yeah," he said, "everyone talks about customers." But, said the new CEO, he had figures to prove that the new system would deliver results. ABB's top 200 customers account for 30 per cent of its $25.4 billion sales, and yet 180 of them buy from only one of ABB's 28 business areas. According to Centerman, if the group were to attract just an additional four per cent of the business its 200 customers currently do with other companies offering the same goods and services as ABB, that would translate into $4 billion in additional orders.
Up till now, the company's different business areas each had sales representatives who approached the same customers. Under the new system, one representative would approach a single customer with a complete suite of ABB products and services that customer might use.
The bottom line -- a six per cent decline in revenues for 2000 -- was that this global giant needed to be far more streamlined and efficient in order to compete in rapidly changing markets.
Regarding the group's plans for its Egyptian investments, Centerman told Al-Ahram Weekly that the country has "developed quite well in the past few years. It is certainly considered one of ABB's key priorities." In light of the steady deregulation in the country's water, oil and gas, electricity, telecommunications and airport sectors, Centerman was very optimistic and upbeat about the possibilities for future growth. "I would be very surprised if we didn't drive it forward there in the next year and beyond."
The group's chief financial officer, Renato Fassbind, also confirmed that the numbers he had been getting from Egypt have been very positive. According to ABB Egypt, the Egyptian operation increased its order intake by 50 per cent for 2000 as compared to 1999 as well as the trebling of its cash flow in the same period, despite what many analysts considered to be a slowdown economy.
According to Max Abitol, the group's regional director for the Middle East and Africa, Egypt represents 10 per cent of ABB's $3.3 billion in revenues from the Middle East. The company's advantage, Abitol told the Weekly, is that 100 per cent of its product and service lines are local operations, meaning the switchboards, circuit breakers, etc., are all manufactured at the company's factories in the 10th of Ramadan City.
Bassim Youssef, who heads ABB's Egyptian operations, says the group's transformation to a customer-centric management philosophy will gel well with the synergy that its 10 Egyptian wholly or partly-owned subsidiaries already practice. "I consider myself a sales guy, so I know how important it is for our sales staff to have a complete range of ABB products so that our clients buy 100 per cent from us and not our competitors."
Youssef sees great potential for ABB in the airports, water, and alternative energy sectors. In fact, the group is bidding on a BOT project (build operate and transfer) for the expansion of Sharm Al-Sheikh airport, a project potentially worth $200 million.
Youssef is positive about the country's investment climate at present, saying the situation could only improve with the availability of more information and statistical data about the local market and better communication with government bodies.
The current and projected exposure of ABB in Egypt is a continuation of a long-standing relationship between the company and the country. The companies that are now called ABB built the first electrical over-head mass transit line in Egypt back in 1956, as well as the country's first hydropower plant and power-desalination plant. In 1965, ABB built the world's largest transmitting station in Alexandria.
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