3M Company: Case Study

Introduction

Minnesota Mining and Manufacturing Company, commonly known as 3M Company, is a multinational company with its headquarters located at Minnesota, United States. The company was established in the 1902 and produces a wide rang of products (more than 50,000). Some of the products that the firm produces include adhesives, fire protection materials, electronic products and medical instruments. The products are mainly science-oriented and find application in various market segments. Some of these include, health care, manufacturing industry, safety, security and office products (3M, 2010, p.1). The company now operates in over 60 countries and distributes its products to over 200 countries.

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The paper entails a case study aimed at evaluating the company’s strategic approach for the year 2007 and the extent to which this approach will enable the firm to acquire the desired results for the company during its 2007 financial year. The paper uses the firm’s performance in the year 2006 to make recommendations for enhancing strategic competitiveness for the following year.

3M Company’s Strategic Performance

Balanced scorecard framework (BSC) is a strategic and performance management tool used by marketing executives to transform a company’s objectives and strategies into action (NetMBA, 2010, para. 1-3). The system integrates four main perspectives which include financial performance, customers, internal processes and innovation and learning. In addition, it also employs four aspects in the analyses; objectives, measures, targets, and initiatives.

Financial perspectives address the relationship between the business and its shareholders. It may include measures such as profitability, increase in sales or the business profitability.

Customer perspectives address the relationship between the firm and its customers and how well the customer services are geared at meeting the financial goals. An example is taking measures aimed at enhancing consumer loyalty. On the other hand, internal process perspectives address issues of customer satisfaction. Measures such as duration of delivery and adding value to customer services are also incorporated.

Innovation and development metrics address issues of how a firm can be creative or innovative in order to achieve its objectives. Measures in this area include refresher courses for staff and acquisition of modern technology. All the perspectives can be integrated to translate business strategy into implementation of these ideas.

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Core Competency and Comparative Advantage

3M’s competitive advantage lies in its application of modern technology in the process of manufacturing their products. An example includes design of the UKs first biometric passport to be used in British embassies around the world. The company was also the first to design traffic signals that are visible from different angles.

Diversification as a means of expanding consumer base has also increased the competitive advantage of the company. The company operates more than 35 business units categorized into six businesses. The six businesses have all attained leading positions in the global market. The company applies more than 40 technology platforms in its operations and makes over 50,000 different products touching on almost every facet of our daily lives (3M, 2010, p.1).

The company has wide customer bases which have been achieved through incorporation of effective marketing. This is evident from the fact that the company has numerous marketing channels located around the world. The firm operates in more than 60 countries with its products available for purchase in more than 200 countries. The company’s products are also sold online enabling purchases from any part of the world.

The company has strategic plans of managing climate change and tackling environmental degradation through prioritizing reduction of Greenhouse emissions as outlined in the Kyoto Protocol. The company has achieved this through improvement in its manufacturing processes, energy management and use of equipment that reduce pollution. In 2006, the company set a target of reducing Greenhouse emissions with a margin of 5% by 2011. The company has also adopted energy efficient methods. This resulted in an 80 percent improvement in energy management since 1973. Besides, the company continues to invest in renewable energy. An example of this is the installation of solar equipment in Canada in 2006 and use of wind energy in Texas, US from 2001.

The firm has managed to attain a sustainable competitive advantage. Use of modern technology has enabled it to produce goods and services targeting different sectors of the market. Both old and new technologies are utilized by the firm in its various market segments. This ensures that the company continues to be a market leader through the innovative ideas it adopts.

Diversification has also ensured sustainable competitive advantage. The firm’s continuous expansion into new markets resulted into an increment in the firm’s level of sales from $20 billion in 2004 up from $15 billion in the 1990s (3M, 2010, p.1).

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Market expansion has also been partly contributed by the adoption of environmentally efficient manufacturing processes.

Evaluation of the 2006 Strategy

3M Company registered a net profit of $3,851 billion during its financial year which ended in 2006 (Clarke, 2007, p. 28). This was an improvement from the previous year’s (2005) profit of $3.111 billion with a margin of 20 percent. This success can be attributed to the company’s effectiveness in formulation and implementation of excellent strategic and performance management.

One of the methods employed by the company in order to achieve such a growth in profits is investing in research and development (R & D). Since the company applies modern innovations in the design of its products, an investment in the R & D department directly leads to an increase in the profit margin. The firm used $1.522 billion dollars in 2006 for R & D and other related expenses. This was a sharp increase from the amount used in the previous years for the same purpose. The amount used in 2005 and 2004 totaled $1.274 billion and $1.246billion respectively (Clarke, 2007, p.54).

The company also achieved a 10 percent increase in sales levels during the same year which is the largest growth in six years. This was mainly achieved through diversification and expansion of the consumer base into other regions outside US. The results were amazing with 61 percent of the total sales resulting from its foreign market. This was despite the fact that only 35 percent of the goods were produced outside US (Clarke, 2007, p.65). Use of liquid crystal display technology in the manufacture of television sets led to soaring sales around the world (Clarke, 2007, p.75). The company assets also grew by a considerable margin. In addition, the firm’s total current assets totaled $8,946 billion up from $7,115 in 2005. This was made possible by acquisition of assets in countries outside US in an effort to increase the company’s global presence and use cheaper production processes in these countries. The company completed 19 acquisitions during this year as opposed to only 4 acquisitions in 2005. An overall look into the firm’s financial performance during the year 2006 indicates that it achieved growth in all of its six business categories.

The company also made great energy cuts by using energy efficient methods.

Acquisition Strategy

3M Company has expanded its acquisition strategy to overseas countries. The company acquires overseas local companies in order to penetrate the local or regional markets. This strategy is known as localization and enables the company to access theses markets by using local brands and manufacturing processes. Upon gaining effective foreign market penetration, the company attaches its brands to the local ones. This has led to technology transfer to the foreign markets. The company made 19 acquisitions in the year 2006.Some of the acquired firms included Nylonge Corp., Brontes Technologies, SCC Products Incorporation, Mahindra Engineering and Chemical Products Ltd. These acquisitions have enabled the company to expand its product lines and increase their presence in these countries.

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Plan of Action

Information on geographic areas indicates that net sales are lowest in the Latin America and Canada. The strategy for the year 2007 would be to increase the company’s presence in these regions. This can be achieved through acquisition of related companies or establishment of new manufacturing centers in the regions identified.

Table 1. Geographical Area Information

US Asia Pacific Africa, Middle East and Europe Latin America and Canada Other Areas Total
Net sales to Customers (millions) $8.853 $6,251 $5,726 $2,080 $13 $22,923

Records of the different business segments reveal that the Electro and Communications segment is not performing as well as the other segments (Clarke, 2007, p.45). A solution to this would be to increase its budgetary allocation for R & D for this segment. This will lead into an increment in research for products that target all market niches.

In general, the company should increase its presence in the international market and diversify its products so as to achieve global competitive advantage.

Conclusion

Strategic management of a business organization can enable it to achieve market leadership. Innovative mechanisms ensure that the firm’s competitive advantage is maintained.

Reference List

  1. Clarke, A.C. (2007). 2006 Annual Report: working our magic.
  2. NetMBA.(2007). The Balanced Scorecard. Web.
  3. 3M. (2010). 3M Facts. Web.

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