3 M case study

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A Case Study

On

"3M Company


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3M Company Profi le:

"3M" comes from "Minnesota Mining & Manufacturing," but those three M'smight better stand for Mistake = Magic = Money. Throughout its 101-year history,

many of 3M's breakthrough products have followed a similar arc: A 3M customeridentifies a problem, and a 3M engineer expresses confidence in being able tosolve it. He bangs his head against the wall for years, facing repeated setbacks,until management finally tells him to stop wasting time and money. Undeterred,the engineer stumbles onto a solution and turns a dead end into a ringing success.Lots of companies like to talk about giving employees the freedom to makemistakes. But 3M found a way to incorporate random chance into company policy,driving its transformation from a struggling startup to a Fortune 500 mainstay.When Jim Collins and Jerry Porras, co-authors of the bestseller Built to Last(1994), asked Bill Hewlett of Hewlett-Packard for a corporate role model, he

replied, "3M! You never know what they're going to come up with next. Thebeauty of it is that they probably don't know what they're going to come up withnext either."Although William McKnight, the man responsible for 3M's entrepreneurial culture,was not, in fact, a company founder, he does deserve the credit for what made 3Msuccessful during his 59 years at the company and beyond. Says Noa Staryk, chairof the McKnight Foundation, which McKnight founded in 1953: "There are twovalues that resonate from my great-grandfather: innovation and risk taking."


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Table of ontent

Points

No.

Title Page No.

1.History, development and growth of

company

4-6

2.Identification of internal strength and

weakness

7-9

3. Nature of external environment 10-12

4. A SWOT analysis 13-21

5.Kind of corporate level strategy pursued

by the co.

22-24

6.Nature of the companys business level

strategy

25-28

7.Companys structure and control system

and how they match its strategy

29-32

8. Recommendation 33

9. Conclusion 34


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1.History, development and

growth of company


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Five businessmen founded 3M inTwo Harbors,Minnesota, in 1902. Originally

amining venture, the goal was to mine corundum, but this failed because the mine's

mineral holdings wereanorthosite,which had no commercial value. Co-founder JohnDwan solicited funds in exchange for stock and Edgar Ober and Lucius Ordway took

over the company in 1905. The company moved toDuluth and began research and

producingsandpaper products.William L. McKnight,later a key executive, joined the

company in 1907, andA. G. Bushjoined in 1909. 3M finally became financially stable in

1916 and was able to paydividends.The company moved toSt. Paul,where it

remained for 52 years before outgrowing the campus and moving to its current

headquarters at 3M Centre inMaplewood,Minnesota. The new Maplewood campus is

475 acres (1.92 km2

) and has over 50 buildings, including an Innovation Center thatdisplays products 3M has taken to market. The company began by mining stone

fromquarries for use in grinding wheels. Struggling with quality and marketing of its

products, management supported its workers to innovate and develop new products,

which became its core business. Twelve years after its inception, 3M developed its first

exclusive product: Three-M-ite cloth. Other innovations in this era included masking

tape, waterproof sandpaper, andScotch brand tapes.By 1929, 3M had made its first

moves toward international expansion by forming Durex to conduct business in Europe.

The same year, the companys stock was first traded over the counter and in 1946 listedon theNew York Stock Exchange (NYSE). The company is currently a component of

theDow Jones Industrial Average and of theS&P 500.The founders original plan

was to sell the mineralcorundum to manufacturers in the East for making grinding

wheels. After selling one load, on June 13, 1902, the five went to the Two Harbors

office of company secretary John Dwan, which was on the shore ofLake

Superior and is now part of the 3M National Museum, and signed papers making

Minnesota Mining and Manufacturing a corporation. In reality, however, Dwan

and his associates were not selling what they thought; they were really selling theworthless mineralanorthosite.Failing to makesandpaper with the anorthosite, the

founders decided to import minerals like Spanishgarnet,after which sale of

sandpapers grew. In 1914, customers complained that the garnet was falling off the

paper. The founders discovered that the stones had traveled across the Atlantic

Ocean packed nearolive oil,and the oil had penetrated the stones. Unable to take
http://en.wikipedia.org/wiki/Two_Harbors,_Minnesotahttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Anorthositehttp://en.wikipedia.org/wiki/Duluth,_Minnesotahttp://en.wikipedia.org/wiki/Sandpaperhttp://en.wikipedia.org/wiki/William_L._McKnighthttp://en.wikipedia.org/wiki/Archibald_Bushhttp://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Saint_Paul,_Minnesotahttp://en.wikipedia.org/wiki/Maplewood,_Minnesotahttp://en.wikipedia.org/wiki/Quarrieshttp://en.wikipedia.org/wiki/Scotch_Tapehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Dow_Jones_Industrial_Averagehttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Corundumhttp://en.wikipedia.org/wiki/Lake_Superiorhttp://en.wikipedia.org/wiki/Lake_Superiorhttp://en.wikipedia.org/wiki/Anorthositehttp://en.wikipedia.org/wiki/Sandpaperhttp://en.wikipedia.org/wiki/Garnethttp://en.wikipedia.org/wiki/Olive_oilhttp://en.wikipedia.org/wiki/Olive_oilhttp://en.wikipedia.org/wiki/Garnethttp://en.wikipedia.org/wiki/Sandpaperhttp://en.wikipedia.org/wiki/Anorthositehttp://en.wikipedia.org/wiki/Lake_Superiorhttp://en.wikipedia.org/wiki/Lake_Superiorhttp://en.wikipedia.org/wiki/Corundumhttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Averagehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Scotch_Tapehttp://en.wikipedia.org/wiki/Quarrieshttp://en.wikipedia.org/wiki/Maplewood,_Minnesotahttp://en.wikipedia.org/wiki/Saint_Paul,_Minnesotahttp://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Archibald_Bushhttp://en.wikipedia.org/wiki/William_L._McKnighthttp://en.wikipedia.org/wiki/Sandpaperhttp://en.wikipedia.org/wiki/Duluth,_Minnesotahttp://en.wikipedia.org/wiki/Anorthositehttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Two_Harbors,_Minnesota


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the loss of selling expensive inventory, they roasted the stones over fire to remove

the olive oil; this was the first instance ofresearch and development at 3M.

The company's late innovations include waterproof sandpaper (1921) and masking

tape (1925), as well as cellophane "Scotch Tape" and sound-deadening materialsfor cars. During the 1950s, the company expanded worldwide with operations in

Canada, Mexico, France, Germany, Australia, and the United Kingdom in large

part by Clarence Sampair. In 1951, international sales were approximately $20

million. 3Ms achievements were recognized by the American Institute of

Management naming the company one of the five best-managed companies in the

United States" and included it among the top 12 growth stocks (3M).[10]

In the late 1960s and early 1970s, 3M published a line ofboard games,largely

under the "3M bookshelf game series" brand. These games were marketed to adultsand sold throughdepartment stores,with easily learned simple rules but complex

game play and depth and with uniformly high-quality components. As such, they

are the ancestors of the German "Euro games". The games covered a variety of

topics, from business and sports simulations to word and abstract strategy games.

They were a major publisher at the time for influential U.S. designersSid

Sackson andAlex Randolph.In the mid-1970s, the game line was taken over

byAvalon Hill.

3M's Mincom division introduced several models ofmagnetic taperecorders forinstrumentation use and for studio sound recording. An example of

the latter is the model M79 recorder, which still has a following today. 3M

Mincom was also involved in designing and manufacturing video production

equipment for the television and video production industries in the 1970s and

1980s, with such items ascharacter generators and several different models

ofvideo switchers,from models ofaudio andvideo routers to video mixers for

studio production work.

3M Mincom was involved in some of the firstdigital audio recordings of the late

1970s to see commercial release when a prototype machine was brought to

theSound 80 studios inMinneapolis.After drawing on the experience of that

prototype recorder, 3M later introduced in 1979 a commercially available digital

audio recording system called the "3M Digital Audio Mastering System",[11]which
http://en.wikipedia.org/wiki/Research_and_developmenthttp://en.wikipedia.org/wiki/Scotch_Tapehttp://en.wikipedia.org/wiki/3M#cite_note-10http://en.wikipedia.org/wiki/3M#cite_note-10http://en.wikipedia.org/wiki/3M#cite_note-10http://en.wikipedia.org/wiki/Board_gamehttp://en.wikipedia.org/wiki/3M_bookshelf_game_serieshttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Sid_Sacksonhttp://en.wikipedia.org/wiki/Sid_Sacksonhttp://en.wikipedia.org/wiki/Alex_Randolphhttp://en.wikipedia.org/wiki/Avalon_Hillhttp://en.wikipedia.org/wiki/Magnetic_tape_recorderhttp://en.wikipedia.org/wiki/Magnetic_tape_recorderhttp://en.wikipedia.org/wiki/Instrumentationhttp://en.wikipedia.org/wiki/Character_generatorhttp://en.wikipedia.org/wiki/Video_switcherhttp://en.wikipedia.org/wiki/Audio_routerhttp://en.wikipedia.org/wiki/Video_routerhttp://en.wikipedia.org/wiki/Digital_audiohttp://en.wikipedia.org/wiki/Sound_80http://en.wikipedia.org/wiki/Minneapolishttp://en.wikipedia.org/wiki/3M#cite_note-11http://en.wikipedia.org/wiki/3M#cite_note-11http://en.wikipedia.org/wiki/3M#cite_note-11http://en.wikipedia.org/wiki/3M#cite_note-11http://en.wikipedia.org/wiki/Minneapolishttp://en.wikipedia.org/wiki/Sound_80http://en.wikipedia.org/wiki/Digital_audiohttp://en.wikipedia.org/wiki/Video_routerhttp://en.wikipedia.org/wiki/Audio_routerhttp://en.wikipedia.org/wiki/Video_switcherhttp://en.wikipedia.org/wiki/Character_generatorhttp://en.wikipedia.org/wiki/Instrumentationhttp://en.wikipedia.org/wiki/Magnetic_tape_recorderhttp://en.wikipedia.org/wiki/Magnetic_tape_recorderhttp://en.wikipedia.org/wiki/Avalon_Hillhttp://en.wikipedia.org/wiki/Alex_Randolphhttp://en.wikipedia.org/wiki/Sid_Sacksonhttp://en.wikipedia.org/wiki/Sid_Sacksonhttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/3M_bookshelf_game_serieshttp://en.wikipedia.org/wiki/Board_gamehttp://en.wikipedia.org/wiki/3M#cite_note-10http://en.wikipedia.org/wiki/Scotch_Tapehttp://en.wikipedia.org/wiki/Research_and_development


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On August 30, 2010, 3M announced that they had acquiredCogent Systems for

$943 million.

On October 13, 2010, 3M completed acquisition of Arizant Inc. In December

2011, 3M completed the acquisition of the Winterthur Technology Group, abonded abrasives company.

3M follows a business model based on "the ability to not only develop unique

products, but also to manufacture them efficiently and consistently around the

world (3M)".

On January 3, 2012, it was announced that the Office and Consumer Products

Division ofAvery Dennison was being bought by 3M for $550 million. The

transaction was canceled by 3M in September 2012 amid antitrust concerns.
http://en.wikipedia.org/wiki/Cogent_Systemshttp://en.wikipedia.org/wiki/Avery_Dennisonhttp://en.wikipedia.org/wiki/Avery_Dennisonhttp://en.wikipedia.org/wiki/Cogent_Systems


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2.Identification of internalstrength and weakness


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Internal Factors:

One of the internal factors that affect 3M is diversification. 3M is a company that isknown for having over sixty thousand products with various levels of uses. In thebook Strategic Management, it is explained that when 3M first started selling

products, they only sold mineral called corundum. Eventually they started sellingsandpaper, masking tape, and cellophane tape. Now 3M sells thousands of productsranging from Post-it notes to asthma inhalers. The reason that 3M is able to diversifyits product line is because they use seven operating units.

A strategy 3M uses is to continually develop products in different markets andconstantly develop new products. The First Lego League describes the 3M companyas a "$17 billion diversified technology company with leading positions inelectronics, telecommunications, industrial, consumer and office, health care, safetyand other markets." Regardless of their current assignments, 3M developmental

employees are encouraged to devote up to 15 percent of their working hours toindependent projects. The research and development team alone has a tremendousbudget to work with, which is usually over a billion dollars per year.

The key to developing new projects for 3M is that it encourages its development teamto constantly work on something new. This is shown by its perpetual goal to have30% of its revenues to come from products introduced within the past four years. Bycreating products in markets in which they have not previously been involved, 3M isusing the horizontal scope of diversification. This allows them to penetrate manydifferent markets.

It does not want to be in each market merely as a common competitor. D. Slater, ofCIO.com, states that " The company recognizes that great ideas alone do not agreat corporation make. In each market it serves, 3M aims to be the preferred supplier.So along with its innovation obsession, 3M focuses on achieving supply chainexcellence and customer loyalty." This shows that 3M is not producing these60,000 products and then letting them die in the market by not supporting them. Itdoes not spread itself so thin that it loses track of its massive accounts of products. 3Mstrives to be the best in each market that it penetrates.

Another internal factor that affects 3M is the offensive style of management that ituses to keep from becoming a defensive company which some market leaders do. 3Mhas had the fortune of being the market leader in many of its brands for several years,including Scotch and Filtrete. Some companies will focus on their competitors andimprove their current products when they are threatened with losing market share ortrying to gain more of their brands market share. This strategy is used by marketleaders who are trying to maintain their position of dominance in their field. 3M, on


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the other hand, feels that they would be more successful if they were to use a marketchallenger strategy.

The market challenger is aggressive and is constantly improving its products so that itcan become the market leader. 3M did this by separating itself into seven different

operating units. Each of these units is competing with each other as if they wereseparate companies on their own, with the exception that they pass informationbetween each other freely in hopes of further development. Since it operates in thismanner, complimented by research and development strategies, 3M can continuallyattack its own markets with literally thousands of new product designs and strategies.

3M has remained the brand leader in many of its fields because it has reinvented itselfover and over again with improvements discovered by its research and developmentteams trying to come up with completely different products. It is fairly uncommon fora market leader to change its formula and reinvent itself before they lose market share.

This is an aggressive strategy that is used more commonly by market challengers. Anexample of this is the improvements with Scotch tape, which has been the marketleader for clear tape for years. For a product that is relatively simple, this is tough todo because it can be emulated so easily from one company to another. Scotch tape onthe other hand is able to keep its position because of the constant reinvention of itsproduct. In 1998, Scotch tape improved its product by selling precut tape, which is asimple innovation that capitalizes on a demand in its market. According to 3m.com,Scotch plans on introducing tape that comes in a dispenser that operates hands-free,allowing easier use of its product.

Staffing is an internal factor from the organizational environment that affects 3M. 3Mtakes human resources very seriously. For example, an executive-level globalcompetency model that was developed at the Minnesota Mining & ManufacturingCompany (3M) in order to respond to the environmental challenges necessary forstrengthened leadership is described. Work on this model was carried out inpartnership with the firm's top executives and a global team of in-house professionals.The model can be used to assess the level of readiness of candidates for the company'stop 500 global positions, to develop of incumbent executives, and to improveobjectivity in the placement of future leaders. (Alldredge&Nilan, 2000)

As far as business expansion, in the organizational environment, 3M does most of itsexpansion through the development of its own segments into the top competitors in itsfield. In fact, between the beginning of the year 2000, and the end of 2004 3M onlyacquired ten companies and spent roughly five hundred million dollars. This showsthat the expansion that has been done by 3M has been focused heavily through itsresearch and development department.


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We stopped editing here on Monday. I continued to the end during my class that day. -Sam

Despite most of the company's expansion and success being driven from within thecompany, 3M sometimes finds that it is lucrative to acquire other companies in order

to facilitate growth. There are many reasons for this strategy, including speed. It ismuch faster for a company to enter an industry by acquisition rather than throughinternal development. However, most of the acquisitions by 3M involve industries italready competes in. 3M acquires the competing business because of resources andcapabilities that it can use to further develop its own product lines. Examples of recentacquisitions in 2006 were the acquisition of SCC Products and JJ Converting LLC to" Enhance 3M's Electronic Solutions for Flexible Packaging" (3M). Thecompany also acquired Security Printing and Systems Limited to add to its"line of products for secure documents such as passports, ID cards, driver's

licenses and visas, and secure document issuance systems"(3M). Finally, the

company's acquisitions of Nylonge Corp. to expand manufacturing capabilities, andArchon Technologies Inc. to strengthen its line of core products for motor vehicleagencies, further illustrates 3Ms recent flurry of acquisitions. This is an importantissue for 3M because the company must decide if an acquisition will help thecompany's strategic positioning and add synergy or if the acquisition will add nothingof value and cost the firm time and money. Another important player in 3M'sstrategies is its stakeholders.

Stakeholders were once known as a person or a group of people who temporarilyholds money or other property while its owner was being determined. Now,

stakeholders include people who will be affected by an event and can influence it, butwho are not directly involved with doing work, people who are affected by an actiontaken by an organization or group, and people with an interest in a group's or anorganization's success in delivering intended results and in maintaining the viability ofthe group or organization's product and/or services (wikipedia.com).

There are many ways to communicate with stakeholders. 3M chooses to do this by:Neighbor meetings, employee meetings, employee surveys, community newsletters,facility open houses and tours, active participation in local civic groups, participationin community organizations like chambers of commerce or task forces around issues

such as economic development and job creation, and facility Web sites. (3m.com) Thefeedback that is received from the stakeholders helps shape the sustainabilitystrategies that 3M implements, and it also makes sure that it continues to operate itsbusiness in a way that will satisfy all of its needs.


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The stakeholders who are currently with the company will probably continue to bestakeholders in the future. One major thing that this depends on is the success of thecompany, however, if 3M continues to be as successful as it has been, then thestakeholders will continue to support it. Stakeholders matter to the performance of thefirm because its people make its success. 3M realizes that it should value the

relationship it has with its employees, customers, suppliers, and other majorstakeholders. "We recognize that our people make our success and we placegreat emphasis on enabling employees to realize their individual potential. We alsodevelop strong, trusting relationships with customers ensuring we provide quality andreliability. We also work closely with suppliers to ensure their business principles arecompatible with ours." (3m.com)


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3. External Analysis


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Competitive 5 Forces Analysis of P& G:

External Factors:

One of these important external factors that affects 3M is in the strategic environment.The first we will discuss is competitors. In a market, such as the one that 3M is in,there is competition everywhere. There are a few major companies that compete with

3M, and they are Amphenol Corporation (APH), Johnson and Johnson (JNJ), AveryDennison Corp. (AVY), and Bayer AG (BAY). When the number of employees iscompared between the companies, 3M falls right in the middle, so they would havethe average number of employees, with 69,315. Another comparison between thecompanies is with their revenue. Again, 3M falls right in the middle. These companiesmake up part of an industry of conglomerates which, as a whole, are not doing as wellas the individual companies are financially.


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Another external factor that affects 3M would be from the industrial environment. Themain industrial factor effecting 3M would be commoditization. Commoditization isthe trend for innovative new products to become commonplace as the technologiesinvolved are shared and the products secrets disseminated. Once it has happened, salesdepend less on uniqueness and more on price. It is easy to see this simply by walking

into a hardware store and checking for 3M products. Invariable, a cheaper comparableproduct is sitting right next to it on the shelf. Its classic brands are known by nearlyevery consumer and some of its branding names, like Post-its, are household namesacross America. However, innovation only lasts so long. At 3M's annual meeting inMay 2000, company CEO L.D. DeSimone noted that over a third of the company'ssales in 1999 came from products new to the market in the past four years. (Byrne,2000) 3M deals with this factor by encouraging its employees to innovate and becreative with at least 10% of the time they are at work.

The last of the external factors that affect 3M would be from the macroscopic

environment. The macroscopic factor that stands out the most is the environmentalrisk factor. This risk is also tied to the political risk factor. Due in part to theinnovative nature of the company, 3M must always worry about producing productsthat might harm the environment. The Environmental Protection Agency said, in2000, that it had pressed Minnesota, Mining, and Manufacturing to find a solutionafter 3M's own tests had shown that a chemical compound, perfluorooctanylsulfonate,used in Scotchgard and an array of other products, could pose a risk to theenvironment and human health. (Barboza, 2000) This is a fundamental factor ofconcern because it is in the best interest of the firm to innovate quickly, but in the bestinterest of the consumer to take care of the environment.

The legal factors 3M must deal with are from the macroscopic environment. Becausemuch of the company's business is created from internal innovations (including 487U.S. patents), it is important for 3M to defend its competitive position. 3M has filedseveral lawsuits against companies who have tried to duplicate the successful productsthat 3M has introduced. The company engages in lawsuits as a method ofneutralization within the competitive dynamic. Because 3M is an incumbent withinthe industries it operates, it finds it necessary to respond to newcomers in the industrywith the tactic of neutralization. Some of the lawsuits have been successful inderailing competition, while other lawsuits failed and allowed the competitors to

continue producing the similar products.

Most recently, in early September of 2006, 3M filed a lawsuit against Clorox Co. andSears Holdings Corp., citing patent infringements relating to its water purificationsystems. This case is still pending. In late September of 2006, 3M was awarded with afavorable judgment against Avery Dennison Corp., a major competitor, in a patentinfringement lawsuit involving adhesives for use on large graphics. These examples


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exhibit ways that 3M aggressively neutralizes competitors within the legalenvironment. However, sometimes 3M is on the other side of the battle, defendingitself against its own patent infringement, environmental violations, and agediscrimination claims.

The age discrimination lawsuit was filed by the AARP in April 2005 as part of a classaction lawsuit, citing the company's leadership selection and performance appraisals"violated the Minnesota Human Rights Act" (AARP). Another difficultywithin the legal environment came in early 2006 when 3M agreed to pay $1.5 millionfor violations under the Toxic Substances Control Act (TSCA). The EPA allowed 3Mto "disclose and correct any violations uncovered by an internal audit, in

exchange for reduced civil penalties" (Chemical Week). In 2003, 3M also had$93 million in losses on its financial statements, related to an unfavorable court rulingin a case filed by LePage's Inc. Because of the significant amount of time and moneyit costs the company, legal problems can be one of the most important issues that the

3M must face.

Rick, you need to expand on this section

Economic factors, in the macroscopic environment, can dramatically change a firm'sstrategic needs. 3M is a multinational corporation which has companies in over 60countries, including major locations in the United States, Canada, China, Germany,Japan, Korea, UK, and Brazil. With 61% of the company's $21.2 billion in worldwidesales coming from outside the U.S., it is clear to see that the International businessenvironment is important to 3M. Factors such as currency exchange rates, tariffs,

quotas, and local content requirements are important external issues that the companymust look at. These issues are addressed in the company's International BusinessPolicy Statement:

International business transactions are regulated by many countries. It is 3M policy tocomply with the legal requirements of each country in which we conduct business,including import, export and tax laws, as well as with applicable U.S. laws. 3Memployees and others acting on 3M's behalf who cross national borders for 3Mbusiness purposes must comply with applicable immigration laws. 3M policy alsoprohibits corrupt practices in any form, including bribery.

A company cannot succeed by focusing on the external factors alone. It mustovercome many obstacles within its own company(internally). Some internal factorsthat 3M has had to deal with are the diversification of its products, the strategies toresearch and market its new product lines, and how to expand its company further.


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4. SWOT ANALYSIS


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SWOT Analysis of 3MCompany:

3M Company, formerly known as the Minnesota Mining and ManufacturingCompany, is an American multinational conglomerate corporation based

in Maplewood, Minnesota. 3M are an innovative company, they devote part of theworking week to coming up with new ideas and developing those ideas. Theyidentify with their customers' needs well and dominate the market space theyoccupy.

Strengths

R&D

3M is one of the most geographically dispersed and diversified corporations outthere today. As was stated earlier, the company produced over 55,000 different

products in almost every market there is. The company operates in over 60countries with manufacturing businesses in over 35. This has continued to be oneof the biggest strengths for 3M and has allowed them to continue to push the barfor R&D and new product development. This strong product portfolio andgeographic presence has allowed 3M to remain very stable despite changing

economies and demand fluctuations.3M has and continues to spend substantial money on R&D , with $1,293 million in2009, and $1,404 million, $1,368 million, and $1,522million in FY2008, FY2007,and FY2006 respectively. 3Ms R&D expenditures, at around 5% of sales annual

allows 3M to maintain a sizeable competitive advantage in new productdevelopment.International/Geographic Presence

3M maintains a geographically diversified business presence. In 2008, Thecompany's US operationaccounted for 36.3% of total revenues. Europe, Middle east and Africa, Asia-Pacific, and Latin America and Canada accounted for 27.5%, 25.4%, and 10.8% oftotal revenues, respectively. The geographic diversity of the company helps

protect it from some demand fluctuations, although not as helpful in a globalrecession as we have just experienced.


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Steady Revenue Growth

3M has seen steady revenue growth, with revenue up over $25 billion in 2008,from about $20 billion in 2004. Unfortunately, revenue was down to about $23

billion in 2009, but hopefully they will be back on track this year.

Weaknesses

Class Action Suit

In May 2009, current and former employees of 3M filed a class action lawsuit inUS District Court for the Northern District of California alleging agediscrimination in violation of the Age Discrimination in Employment Act (ADEA).The potential class of plaintiffs includes more than 6,000 current and former 3M

employees, including approximately 50 men and women who have already optedin to the lawsuit. The complaint alleges that since at least 2001 3M intentionallyhas discriminated against employees over age 46 in performance appraisals,training, promotions, and pay because it perceives them as unwilling or unable toaccept or adequately implement 3M's new management techniques. As the finalindignity, 3M fires or forces these older employees into retirement or resignation,according to the complaint.

Poor performance of Display and Graphics Segment

In FY2008, the display and graphics segment of the company recorded revenues of$3,255 million in FY2008, compared with $3,904 million in FY2007, a decrease of16.6% compared with FY2007. A weak performance of this segment, whichcontributed about 13% of the companys revenues in FY2008,would have anunfavorable impact on the companys financial performance. Third quarter 2009sales in this segment were pretty flat with that of 3rd quarter 2008, but about athird of what they were in 2007.


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Opportunities

Acquisitions

Acquisitions are also a major opportunity moving forward with 3M. The companymade a number of very strategic acquisitions in 2008 which includes companiessuch as Food Diagnostics and Meguiars. 3M has also made plans to spend about$1 billion on acquisitions in the next year. Considering this, Acquisitions shouldcontinue to be a big source of growth within 3M.

Expansion into Renewable Energy Sources

In February of 2009 the company formed a Renewable Energy Division that itexpected to help organic growth. The segment will offer a broad array of products

combining both enhancements to existing products offered by 3M as well as newproduct development all of which focus on energy generation and energymanagement. The energy generation products will focus on solar, wind,geothermal, and biodiesel energy products solutions that include adhesives, films,tapes and coatings.

Technology and Supply Expansions

In 2008 and 2009, 3M has made strategic supply expansions such as a deal theystruck with Amperex Technologies, (ATL) to become a strategic supplier orcathode materials and to work jointly with ATL to develop new cathode, anode,and electrolyte materials for the fast-growing lithium-ion battery industry.Lithium-ion batteries are used in handheld consumer electronics devices and inautomobiles. Under the agreement, 3M granted ATL a license to 3M intellectual

property for the use of 3M NMC cathode materials in lithium-ion batteries.

Also, in June, 3M made an agreement with SUSS Microtech to expand access to3M Wafer Support System (WSS) equipment for temporary wafer bonding ofultrathin wafers required for 3-D packaging. As part of this non-exclusive

agreement, SUSS MicroTec becomes an authorized equipment supplier for the 3MWSS and will manufacture and sell XBC300 and CBC300 wafer bondersconfigured to use 3Ms WSS materials including 3M Liquid UV-Curable Adhesiveand light-To-heat conversion coating. Under the agreement, both companies willwork closely to address customer demands for high-performance process solutionsthat support high-volume manufacturing m with a competitive cost of ownership.These and other expansions should help 3M increase its product excellence.


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Threats

Economy

The biggest threat to 3M is that of a double dip recession. 3M operatesglobally the industrial materials market. Sales decreased in 2009, and bothindustrial and consumer spending need to pick up for 3M to recover.

Environment

Environmental regulations also pose a substantial threat to 3M. 3M operates many

facilities that are involved in chemical processes, and increased regulation could be

costly. To avoid the sting of new regulation, 3M should implement as many new

changes and efficiencies as it can now. The company has to allocate resources

regularly to environment compliance cost, which increases the company's

operating costs.

Competition

As a diversified industrial company, 3M has competition from a variety ofcompanies, many of which are also holdings in the fund. Competitors includeJohnson and Johnson, H.B. Fuller, Bayer, Kimberly Clark, GE, and many others.

Looking at the chart, you can see that 3M has kept up with, and in the past 6months or so outperformed the S&P and several of its main competitors. Thismay be attributed to the success of its restructuring plan, acquisitions, and strategic

partnerships that has been the focus of much of 3M growth recently.


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5.Kind of corporate level

strategy pursued by

3MCompany


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Corporate level strategy pursued by 3MCompany:

Strategic Alliance in Emerging Markets:

Joint Ventures in countries such as China and India create a unique foothold for 3Min a

vast consumer market while also minimizing the risk of a full-blown Acquisition and/orsetting up new manufacturing/plant facilities and having to source materials, etc. SuchJVs also ensure adequate political and governmental cooperation and facilitation, and

usually are accompanied with favorable tax treatment and other incentives. A precedenthas already been set with P&Gs JV arrangement with China since 1998. There could bea lack of control over the technology and an inability to realize location-based and scale-based economies. Other issues such as span of control, amount of decentralized decision-making, corporate culture, leadership, and training are all issues at hand.

Vertical Integration:

3Mhas an efficient distribution system which allows it to distribute its products invarious region of the globe at a lower cost than its competitors because3Mcollaborates with distributors like Wal-Mart, Target etc. to keep supply chainfunctioning efficiently. This allows restocking of shelves at distributors mucheasier as it provides real time data to 3Mas stock levels deplete. This allows 3Mtosave costs associated with huge inventories and warehouses.

New Ventures:

This strategy would help fulfillProduct Proliferation, as 3Mconstantly seeks to fill

all the niches, a necessary strategy, especially in a Mature market. Additionally,

this facilitates anInternational Strategy whereby 3Mdevelops innovative new

products in its HQ and then transfers them to local markets. Given the highly

fragmented nature of the beauty care market, combined with the intense

competition, this strategy will enable 3Mto tackle, head-on, the markets stagnation

with respect to certain beauty products, a result of low product development and

innovation. The case illustrates how some experts have stated that the markets

poor sales will only then around with the launch of dramatically different products,

stating that the market needs leaders like 3Mto come out with revolutionary

products and to spend considerable dollars on advertising in order to get consumers


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excited again. The emerging mens market is also a key market segment, and one

which is constantly gaining momentum. The Beauty market in general is

expanding as more and more Consumers look to take better care of themselves.

This Strategy also helps build the Beauty segment amongst Lower-Income

Consumers if we assume that such new Products are competitively priced andbacked up with the necessary package tailored for specific markets. P&Gs

exceptional Distribution network will also help facilitate this Strategy. This

Strategy also works well in terms of winning against the competition.


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6.Nature of the

companys business

level strategy


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Business-Level Strategy of P&G

Quality Focus

3Mchoose to focus on the premium end of the market with their business-level

strategies. A company pursuing quality leadership is likely to place less emphasison its cost structure, and more on the reliability, brand appeal and overall quality ofits products and services. 3Mcurrently has 23 brands within its product portfoliothat individually generate over one billion dollars in sales annually. PG also has 20

brands that generate half of a billion dollars in annual sales. Combined, these 43brands account for 85% of PGs total salesand 90% of PGs profit. PG maintains

the strongestperforming portfolio of brands within its industry. Moreover, PGmaintains its key competitive advantage for the overall success of the firm. Total Quality Management (TQM) or other iterative quality improvement

systems. Focusing on employee development. Using advertising and public relations to create a prestigious image.

Cost Focus

Cost leadership is another strategic direction chosen at the business level. Cost-focused initiatives seek to achieve the lowest end-user price possible by decreasingcosts along the value chain, even possibly reaching back through the supply chain

to spot inefficiencies and improve processes for cost minimization. 3Mis takingsome strategy to reduce cost. They are:

implementing automated production or service processes, keeping the workforce lean, sourcing low-cost materials Outsourcing non-vital business functions.

Innovation

3Mis the industry leader in terms of innovation. Each year in the U.S., the IRI NewProduct Pacesetter Report ranks the best selling new products within the consumermarket. Over the past 14 years, 3Mhas had 114 top 25 pacesettersmore than sixtimes the number of pacesetters of their largest competitors combined. (Pacesetteris defined as a new, innovative Consumer Packaged Brand that exceeds $7.5 M inits first year).Consumer Understanding


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Each year, 3M interacts with nearly 5 million consumers in over 60 countriesWorldwide. It is important for 3M to gain insight on consumer understanding inorder to discover innovation opportunities and to find ways in which the companycan better serve its customers. It is especially important for PG to recognize andadjust to cultural differences among its international markets.

Established GoToMarket Capability

3Mis ranked as the preferred supplier and industry leader in a wide range ofcapabilities including clearest company strategy, brands most important toretailers, strong business fundamentals and innovative marketing programs.

Scale

3M is able to take advantage of its ability to operate on a large scale. This allowsPG to share processes and procedures among the categories under which theyoperate. This also creates the ability for PG to capitalize on its internationalexpansion opportunities since they have the capabilities and resources for suchventures.


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7.3M Companys structure andcontrol system and how she

match its strategy


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P&Gs organization structure is an important part of her capability to grow. It combines globalscale benefits with a local focus to win with consumers and retail customers in each countrywhere 3Mproducts are sold. 3Mrecently grouped its Global Business Units into four industry-based sectors as part of the Companys ongoing plan to improve business performance. Thebusinesses in each sector are focused on common consumer benefits, share common

technologies, and face common competitors.

P&Gs structure has removed many of the traditional overlaps and inefficiencies that exist inmany large companies.

Global Business Units (GBUs) focus solely on consumers, brands and competitorsaround the world. They are responsible for the innovation pipeline, profitability andshareholder returns from their businesses.

Market Development Organizations (MDOs) are charged with knowing consumers andretailers in each market where 3Mcompetes and integrating the innovations flowing fromthe GBUs into business plans that work in each country.

Global Business Services (GBS) utilizes 3Mtalent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&Gs scale for awinning advantage.

Lean Corporate Functions ensure ongoing functional innovation and capability

improvement.


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The Foundations of3MsMultidivisional Structure:

Consumer giant 3M has a bold self-perception, believing that its rightful place incorporate America is as a company that is admired, imitated, and uncommonly

profitable. Historical successes suggest that this perception is reasonably consistentwith reality. Across time, 3M has been quite profitable while analysts have viewedthe firms management techniques as setting the gold standard for others toemulate. Two of the innovations and subsequent skills for which 3Mis recognizedare brand management and excellence in managerial training. CEOs Jeff Immelt(GE), Meg Whitman (eBay) and W. James McNerney, Jr. (3M) are just a few ofthe alumni who have achieved great success following their 3Mcareers. As with allsuccessful firms, 3Mis challenged to continuously reinvent itself while striving tooutperform its competitors. Rivals such as Unilever are launching intensecampaigns to improve their competitive positions relative to P&G. Unilever beganrestructuring in 1999 to deliver on the promises of its Path to Growth agenda.

Unilevers five-year restructuring involves a major overhaul of its portfolio. Thefirm has sold low-growth businesses and acquired new-growth drivers, mostnotably Best foods, which it bought for $24 billion in 2000.The Company alsosnapped up diet brand Slim Fast and Ben & Jerrys ice cream.3Malsorestructured its operations in 1999. Framed around the objective of having anorganizational structure that would allow the firm to think globally and actlocally, 3Mformed a unique version of the cooperative multidivisional structure tosupport use of its related constrained diversification strategy. This structure, which3Mofficials believe is a source of competitive advantage for the firm, features fiveglobal business product units (GBUs) (baby, feminine and family care, fabric andhome care, food and beverage, and health and beauty care) and seven marketdevelopment organizations (MDOs), each formed around a region of the world,such as Northeast Asia. Using the five global product units to create strong brandequities through ongoing innovation is how 3Mthinks globally; interfacing withcustomers to ensure that a divisions marketingplans fully capitalize on localopportunities is how 3Macts locally. Information is shared between the product-oriented and the marketing-oriented efforts to enhance the corpora-tions

performance. Indeed, some corporate staff members are responsible for focusingon making certain that knowledge is meaningfully categorized and then rapidly

transferred throughout P&Gs businesses.Those working to achieve this objectiveare part of P&GsGlobal Business Services (GBS) group. Last, the Corporate Functions group isessentially a set of consultants ready to assist those working in the global businessunits and the market development organizations in their efforts to use bestpractices in terms of organizationalfunctions, such as external relations,information technology management, and human resources practices.


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8.Recommendation


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Recommendation of 3M:

3M has to go for a combined Low-Income segment and New Natural Product

strategy as this facilitates P&Gs need to capturea greater slice of the Low-

Income consumer market both in Mature and Developing markets, which also

capturing a greater slice of the Natural Ingredient market and the growing

Mens Market.

3M should refocus business strategy. It will be helpful for the company to

regain its market share in developing countries.

3M should invest more on advertising to retain its customer and pay more

attention to its issues and should review very well. 3Musing the tool of

depositioning very well to attain its customers and a part of preparation

against their competitor like Unilever.

3M has a dubious pricing strategy. In India sometimes they adopt the

premium pricing and at other times they change it to value pricing. This

creates confusion in the mind of customer. Our recommendation is that

Pantene should stick to one strategy and develop on it. Fluctuating prices have

chances to affect the mind of customers negatively. This should be avoided.

3M should keep up the efforts of bringing in more and more innovativeproducts. This is because ultimately nothing works for a company more than

its products.

Some rumors about the presence of wax in Pantene shampoo affected the

market. Such rumors should be severely dealt with as they affect the brand

loyalty as well as market share.

There were some reports which said that Pantene tests its product on animals

which ultimately proves fatal to them. This created a big problem for Pantene

by the environmentalists. This project recommends Pantene to go more herbal

and environment friendly as it affects the companys image in the long run.

Pantene is still not much known in the semi urban India. Stress should be laid

on the promotion of Pantene in the interior of country as well.


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9.Conclusion


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Conclusion:

It is concluded that competing through Innovation is a better strategy than on Price

for 3Mand No-frills. The debate is highly dependent on the marketplace; consumer

product market is a mature market therefore only innovation offer good prospect ofsuccess. Wit and Meyer stated that market opportunities are created rather than

found. (2005) Thus market research could never predict some large potential of

innovative products. As in a mature market is often populated by standardized and

uncreative business that fails to innovate. The potential for success by Innovation

strategy is greater in such competitive environment. Because the demand for

competition may be less exacting. Some minor annual product modification could

be potential to better attract customers. Besides, organizational objectives are

considered. Innovation strategy can be adopted by firm which has organizational

goals of current profit maximization or building brand image. Market skimming

price can be set for innovated product in order to gain high margin and generate the

most profit. Building brand image for sustainable competitive advantages can be

achieved by heavy investment in promotion and advertising new product features.

It is to be appreciated that rules of game in industry are always changing.

Innovation reflects a firm is constantly modernized to better meet the dynamic

demand of market. Firms Innovation consists of Strategy, Product and Process

Innovation is therefore has a better chance for success. The crucial battles amongst

firms at the same marketplace, is necessary for differing approaches to the market.

Documents

3 M case study