1

A Case Study
On
"3M Company





2

3M Company Profile:
"3M" comes from "Minnesota Mining & Manufacturing," but those three M's
might better stand for Mistake = Magic = Money. Throughout its 101-year history,
many of 3M's breakthrough products have followed a similar arc: A 3M customer
identifies a problem, and a 3M engineer expresses confidence in being able to
solve 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 make
mistakes. 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. The
beauty of it is that they probably don't know what they're going to come up with
next 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 3M
successful during his 59 years at the company and beyond. Says Noa Staryk, chair
of the McKnight Foundation, which McKnight founded in 1953: "There are two
values that resonate from my great-grandfather: innovation and risk taking."










3

Table of Content


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

4



1. History, development and
growth of company

5


Five businessmen founded 3M in Two Harbors, Minnesota, in 1902. Originally
a mining venture, the goal was to mine corundum, but this failed because the mine's
mineral holdings were anorthosite, which had no commercial value. Co-founder John
Dwan solicited funds in exchange for stock and Edgar Ober and Lucius Ordway took
over the company in 1905. The company moved to Duluth and began research and
producing sandpaper products. William L. McKnight, later a key executive, joined the
company in 1907, and A. G. Bush joined in 1909. 3M finally became financially stable in
1916 and was able to pay dividends. The company moved to St. Paul, where it
remained for 52 years before outgrowing the campus and moving to its current
headquarters at 3M Centre in Maplewood, Minnesota. The new Maplewood campus is
475 acres (1.92 km
2
) and has over 50 buildings, including an Innovation Center that
displays products 3M has taken to market. The company began by mining stone
from quarries 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, and Scotch 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 listed
on the New York Stock Exchange (NYSE). The company is currently a component of
the Dow Jones Industrial Average and of the S&P 500. The founders original plan
was to sell the mineral corundum 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 of Lake
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 the
worthless mineral anorthosite. Failing to make sandpaper with the anorthosite, the
founders decided to import minerals like Spanish garnet, 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 near olive oil, and the oil had penetrated the stones. Unable to take
6

the loss of selling expensive inventory, they roasted the stones over fire to remove
the olive oil; this was the first instance of research 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 materials
for 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 of board games, largely
under the "3M bookshelf game series" brand. These games were marketed to adults
and sold through department 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. designers Sid
Sackson and Alex Randolph. In the mid-1970s, the game line was taken over
by Avalon Hill.
3M's Mincom division introduced several models of magnetic tape
recorders for instrumentation 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 as character generators and several different models
of video switchers, from models of audio and video routers to video mixers for
studio production work.
3M Mincom was involved in some of the first digital audio recordings of the late
1970s to see commercial release when a prototype machine was brought to
the Sound 80 studios in Minneapolis. 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
7

consisted of a 32-track digital audio tape recorder and a companion 4-track digital
recorder for final mastering. 3M later designed and manufactured several other
commercially available models of digital audio recorders used throughout the early
to mid-1980s.
In 1980, the company introduced Post-it notes. In 1996, the company's data
storage and imaging divisions were spun off as the Imation Corporation. Imation
has since sold its imaging and photographic film businesses to concentrate on
storage.
Today, 3M is one of the 30 companies included in the Dow Jones Industrial
Average (added on August 9, 1976), and is 97 on the 2011 Fortune 500 list.
[12]
The
company has 132 plants and over 67,000 employees worldwide, with sales offices
in over 200 countries. The vast majority of the company's employees are local
nationals, with few employees residing outside their home country. Its worldwide
sales are over $20 billion, with international sales 58% of that total.
In 2002, 3M Co. agreed to acquire AiT Advanced Information Technologies Corp.
for about $37.4-million in cash, after AiT had strongly hinted it had put itself on
the auction block.
On December 20, 2005, 3M announced a major partnership with Roush-Fenway
Racing, one of NASCAR's premier organizations. In 2008, the company will
sponsor Greg Biffle in the NASCAR Sprint Cup Series as he drives the No. 16Ford
Fusion. In addition, on February 19, 2006, 3M announced that it would become the
title sponsor of the 3M Performance 400 at Michigan International Speedway for at
least the next three years.
On April 4, 2006, 3M announced its intention to sell its pharmaceutical non-core
business. The pharmaceuticals businesses were sold off in three deals, in Europe,
the Americas, and the remainder of the world. Another division of the Health Care
business, Drug Delivery Systems, remains with 3M. The Drug Delivery System
division continues to contract manufacture inhalants and transdermaldrug-delivery
systems, and has now taken on manufacture of the products whose licenses were
sold during the divestiture of the pharmaceuticals business. On September 8, 2008,
3M announced an agreement to acquire Meguiar's, a car-care products company
that was family-owned for over a century.
8

On August 30, 2010, 3M announced that they had acquired Cogent 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, a
bonded 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 of Avery Dennison was being bought by 3M for $550 million. The
transaction was canceled by 3M in September 2012 amid antitrust concerns.












9


2. Identification of internal
strength and weakness






10

Internal Factors:
One of the internal factors that affect 3M is diversification. 3M is a company that is
known for having over sixty thousand products with various levels of uses. In the
book Strategic Management, it is explained that when 3M first started selling
products, they only sold mineral called corundum. Eventually they started selling
sandpaper, masking tape, and cellophane tape. Now 3M sells thousands of products
ranging from Post-it notes to asthma inhalers. The reason that 3M is able to diversify
its product line is because they use seven operating units.
A strategy 3M uses is to continually develop products in different markets and
constantly develop new products. The First Lego League describes the 3M company
as a "$17 billion diversified technology company with leading positions in
electronics, telecommunications, industrial, consumer and office, health care, safety
and other markets." Regardless of their current assignments, 3M developmental
employees are encouraged to devote up to 15 percent of their working hours to
independent projects. The research and development team alone has a tremendous
budget 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 team
to constantly work on something new. This is shown by its perpetual goal to have
30% of its revenues to come from products introduced within the past four years. By
creating products in markets in which they have not previously been involved, 3M is
using the horizontal scope of diversification. This allows them to penetrate many
different markets.
It does not want to be in each market merely as a common competitor. D. Slater, of
CIO.com, states that " The company recognizes that great ideas alone do not a
great 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 chain
excellence and customer loyalty." This shows that 3M is not producing these
60,000 products and then letting them die in the market by not supporting them. It
does not spread itself so thin that it loses track of its massive accounts of products. 3M
strives to be the best in each market that it penetrates.
Another internal factor that affects 3M is the offensive style of management that it
uses to keep from becoming a defensive company which some market leaders do. 3M
has 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 and
improve their current products when they are threatened with losing market share or
trying to gain more of their brands market share. This strategy is used by market
leaders who are trying to maintain their position of dominance in their field. 3M, on
11

the other hand, feels that they would be more successful if they were to use a market
challenger strategy.
The market challenger is aggressive and is constantly improving its products so that it
can 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 were
separate companies on their own, with the exception that they pass information
between each other freely in hopes of further development. Since it operates in this
manner, complimented by research and development strategies, 3M can continually
attack 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 itself
over and over again with improvements discovered by its research and development
teams trying to come up with completely different products. It is fairly uncommon for
a 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. An
example of this is the improvements with Scotch tape, which has been the market
leader for clear tape for years. For a product that is relatively simple, this is tough to
do because it can be emulated so easily from one company to another. Scotch tape on
the other hand is able to keep its position because of the constant reinvention of its
product. In 1998, Scotch tape improved its product by selling precut tape, which is a
simple 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. 3M
takes human resources very seriously. For example, an executive-level global
competency model that was developed at the Minnesota Mining & Manufacturing
Company (3M) in order to respond to the environmental challenges necessary for
strengthened leadership is described. Work on this model was carried out in
partnership 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's
top 500 global positions, to develop of incumbent executives, and to improve
objectivity in the placement of future leaders. (Alldredge&Nilan, 2000)
As far as business expansion, in the organizational environment, 3M does most of its
expansion through the development of its own segments into the top competitors in its
field. In fact, between the beginning of the year 2000, and the end of 2004 3M only
acquired ten companies and spent roughly five hundred million dollars. This shows
that the expansion that has been done by 3M has been focused heavily through its
research and development department.
12

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 the
company, 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 is
much faster for a company to enter an industry by acquisition rather than through
internal development. However, most of the acquisitions by 3M involve industries it
already competes in. 3M acquires the competing business because of resources and
capabilities that it can use to further develop its own product lines. Examples of recent
acquisitions in 2006 were the acquisition of SCC Products and JJ Converting LLC to
" Enhance 3M's Electronic Solutions for Flexible Packaging" (3M). The
company 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, and
Archon Technologies Inc. to strengthen its line of core products for motor vehicle
agencies, further illustrates 3Ms recent flurry of acquisitions. This is an important
issue for 3M because the company must decide if an acquisition will help the
company's strategic positioning and add synergy or if the acquisition will add nothing
of value and cost the firm time and money. Another important player in 3M's
strategies is its stakeholders.
Stakeholders were once known as a person or a group of people who temporarily
holds 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, but
who are not directly involved with doing work, people who are affected by an action
taken by an organization or group, and people with an interest in a group's or an
organization's success in delivering intended results and in maintaining the viability of
the 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, participation
in community organizations like chambers of commerce or task forces around issues
such as economic development and job creation, and facility Web sites. (3m.com) The
feedback that is received from the stakeholders helps shape the sustainability
strategies that 3M implements, and it also makes sure that it continues to operate its
business in a way that will satisfy all of its needs.

13

The stakeholders who are currently with the company will probably continue to be
stakeholders in the future. One major thing that this depends on is the success of the
company, however, if 3M continues to be as successful as it has been, then the
stakeholders will continue to support it. Stakeholders matter to the performance of the
firm because its people make its success. 3M realizes that it should value the
relationship it has with its employees, customers, suppliers, and other major
stakeholders. "We recognize that our people make our success and we place
great emphasis on enabling employees to realize their individual potential. We also
develop strong, trusting relationships with customers ensuring we provide quality and
reliability. We also work closely with suppliers to ensure their business principles are
compatible with ours." (3m.com)





14





3. External Analysis





15



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), Avery
Dennison Corp. (AVY), and Bayer AG (BAY). When the number of employees is
compared between the companies, 3M falls right in the middle, so they would have
the average number of employees, with 69,315. Another comparison between the
companies is with their revenue. Again, 3M falls right in the middle. These companies
make up part of an industry of conglomerates which, as a whole, are not doing as well
as the individual companies are financially.
16

Another external factor that affects 3M would be from the industrial environment. The
main industrial factor effecting 3M would be commoditization. Commoditization is
the trend for innovative new products to become commonplace as the technologies
involved are shared and the products secrets disseminated. Once it has happened, sales
depend 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 comparable
product is sitting right next to it on the shelf. Its classic brands are known by nearly
every consumer and some of its branding names, like Post-its, are household names
across America. However, innovation only lasts so long. At 3M's annual meeting in
May 2000, company CEO L.D. DeSimone noted that over a third of the company's
sales 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 be
creative 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 environmental
risk factor. This risk is also tied to the political risk factor. Due in part to the
innovative nature of the company, 3M must always worry about producing products
that might harm the environment. The Environmental Protection Agency said, in
2000, that it had pressed Minnesota, Mining, and Manufacturing to find a solution
after 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 the
environment and human health. (Barboza, 2000) This is a fundamental factor of
concern because it is in the best interest of the firm to innovate quickly, but in the best
interest of the consumer to take care of the environment.
The legal factors 3M must deal with are from the macroscopic environment. Because
much of the company's business is created from internal innovations (including 487
U.S. patents), it is important for 3M to defend its competitive position. 3M has filed
several lawsuits against companies who have tried to duplicate the successful products
that 3M has introduced. The company engages in lawsuits as a method of
neutralization within the competitive dynamic. Because 3M is an incumbent within
the industries it operates, it finds it necessary to respond to newcomers in the industry
with the tactic of neutralization. Some of the lawsuits have been successful in
derailing 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. and
Sears Holdings Corp., citing patent infringements relating to its water purification
systems. This case is still pending. In late September of 2006, 3M was awarded with a
favorable judgment against Avery Dennison Corp., a major competitor, in a patent
infringement lawsuit involving adhesives for use on large graphics. These examples
17

exhibit ways that 3M aggressively neutralizes competitors within the legal
environment. However, sometimes 3M is on the other side of the battle, defending
itself against its own patent infringement, environmental violations, and age
discrimination claims.
The age discrimination lawsuit was filed by the AARP in April 2005 as part of a class
action lawsuit, citing the company's leadership selection and performance appraisals
"violated the Minnesota Human Rights Act" (AARP). Another difficulty
within the legal environment came in early 2006 when 3M agreed to pay $1.5 million
for violations under the Toxic Substances Control Act (TSCA). The EPA allowed 3M
to "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 ruling
in a case filed by LePage's Inc. Because of the significant amount of time and money
it 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's
strategic needs. 3M is a multinational corporation which has companies in over 60
countries, 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 worldwide
sales coming from outside the U.S., it is clear to see that the International business
environment is important to 3M. Factors such as currency exchange rates, tariffs,
quotas, and local content requirements are important external issues that the company
must look at. These issues are addressed in the company's International Business
Policy Statement:
International business transactions are regulated by many countries. It is 3M policy to
comply 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. 3M
employees and others acting on 3M's behalf who cross national borders for 3M
business purposes must comply with applicable immigration laws. 3M policy also
prohibits corrupt practices in any form, including bribery.
A company cannot succeed by focusing on the external factors alone. It must
overcome many obstacles within its own company(internally). Some internal factors
that 3M has had to deal with are the diversification of its products, the strategies to
research and market its new product lines, and how to expand its company further.


18









4. SWOT ANALYSIS



19

SWOT Analysis of 3MCompany:
3M Company, formerly known as the Minnesota Mining and Manufacturing
Company, is an American multinational conglomerate corporation based
in Maplewood, Minnesota. 3M are an innovative company, they devote part of the
working week to coming up with new ideas and developing those ideas. They
identify with their customers' needs well and dominate the market space they
occupy.


Strengths
R&D
3M is one of the most geographically dispersed and diversified corporations out
there today. As was stated earlier, the company produced over 55,000 different
products in almost every market there is. The company operates in over 60
countries with manufacturing businesses in over 35. This has continued to be one
of the biggest strengths for 3M and has allowed them to continue to push the bar
for R&D and new product development. This strong product portfolio and
geographic 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 in
2009, 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 product
development.
International/Geographic Presence
3M maintains a geographically diversified business presence. In 2008, The
company's US operation
accounted 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% of
total revenues, respectively. The geographic diversity of the company helps
protect it from some demand fluctuations, although not as helpful in a global
recession as we have just experienced.


20

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 in
US District Court for the Northern District of California alleging age
discrimination 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 opted
in to the lawsuit. The complaint alleges that since at least 2001 3M intentionally
has discriminated against employees over age 46 in performance appraisals,
training, promotions, and pay because it perceives them as unwilling or unable to
accept or adequately implement 3M's new management techniques. As the final
indignity, 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 of
16.6% compared with FY2007. A weak performance of this segment, which
contributed about 13% of the companys revenues in FY2008, would have an
unfavorable impact on the companys financial performance. Third quarter 2009
sales in this segment were pretty flat with that of 3rd quarter 2008, but about a
third of what they were in 2007.









21

Opportunities

Acquisitions

Acquisitions are also a major opportunity moving forward with 3M. The company
made a number of very strategic acquisitions in 2008 which includes companies
such as Food Diagnostics and Meguiars. 3M has also made plans to spend about
$1 billion on acquisitions in the next year. Considering this, Acquisitions should
continue 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 it
expected 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 new
product development all of which focus on energy generation and energy
management. 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 they
struck with Amperex Technologies, (ATL) to become a strategic supplier or
cathode 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 in
automobiles. 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 to
3M Wafer Support System (WSS) equipment for temporary wafer bonding of
ultrathin wafers required for 3-D packaging. As part of this non-exclusive
agreement, SUSS MicroTec becomes an authorized equipment supplier for the 3M
WSS and will manufacture and sell XBC300 and CBC300 wafer bonders
configured to use 3Ms WSS materials including 3M Liquid UV-Curable Adhesive
and light-To-heat conversion coating. Under the agreement, both companies will
work closely to address customer demands for high-performance process solutions
that support high-volume manufacturing m with a competitive cost of ownership.
These and other expansions should help 3M increase its product excellence.
22


Threats

Economy

The biggest threat to 3M is that of a double dip recession. 3M operates
globally the industrial materials market. Sales decreased in 2009, and both
industrial 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 of
companies, many of which are also holdings in the fund. Competitors include
Johnson 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 6
months or so outperformed the S&P and several of its main competitors. This
may be attributed to the success of its restructuring plan, acquisitions, and strategic
partnerships that has been the focus of much of 3M growth recently.




23



5. Kind of corporate level
strategy pursued by
3MCompany


24

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/or
setting up new manufacturing/plant facilities and having to source materials, etc. Such
JVs also ensure adequate political and governmental cooperation and facilitation, and
usually are accompanied with favorable tax treatment and other incentives. A precedent
has already been set with P&Gs JV arrangement with China since 1998. There could be
a 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 in
various region of the globe at a lower cost than its competitors because
3Mcollaborates with distributors like Wal-Mart, Target etc. to keep supply chain
functioning efficiently. This allows restocking of shelves at distributors much
easier as it provides real time data to 3Mas stock levels deplete. This allows 3Mto
save costs associated with huge inventories and warehouses.

New Ventures:
This strategy would help fulfill Product Proliferation, as 3Mconstantly seeks to fill
all the niches, a necessary strategy, especially in a Mature market. Additionally,
this facilitates an International 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 and
backed 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 emphasis
on its cost structure, and more on the reliability, brand appeal and overall quality of
its products and services. 3Mcurrently has 23 brands within its product portfolio
that 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 43
brands account for 85% of PGs total sales and 90% of PGs profit. PG maintains
the strongestperforming portfolio of brands within its industry. Moreover, PG
maintains 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 decreasing
costs along the value chain, even possibly reaching back through the supply chain
to spot inefficiencies and improve processes for cost minimization. 3Mis taking
some 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 New
Product Pacesetter Report ranks the best selling new products within the consumer
market. Over the past 14 years, 3Mhas had 114 top 25 pacesettersmore than six
times the number of pacesetters of their largest competitors combined. (Pacesetter
is defined as a new, innovative Consumer Packaged Brand that exceeds $7.5 M in
its first year).
Consumer Understanding
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Each year, 3M interacts with nearly 5 million consumers in over 60 countries
Worldwide. It is important for 3M to gain insight on consumer understanding in
order to discover innovation opportunities and to find ways in which the company
can better serve its customers. It is especially important for PG to recognize and
adjust to cultural differences among its international markets.

Established GoToMarket Capability

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

Scale

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




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7. 3M Companys structure and
control system and how she
match its strategy





30

P&Gs organization structure is an important part of her capability to grow. It combines global
scale benefits with a local focus to win with consumers and retail customers in each country
where 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. The
businesses 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 in
many large companies.
Global Business Units (GBUs) focus solely on consumers, brands and competitors
around the world. They are responsible for the innovation pipeline, profitability and
shareholder returns from their businesses.
Market Development Organizations (MDOs) are charged with knowing consumers and
retailers in each market where 3Mcompetes and integrating the innovations flowing from
the 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 a
winning advantage.
Lean Corporate Functions ensure ongoing functional innovation and capability
improvement.



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The Foundations of 3Ms Multidivisional Structure:
Consumer giant 3M has a bold self-perception, believing that its rightful place in
corporate America is as a company that is admired, imitated, and uncommonly
profitable. Historical successes suggest that this perception is reasonably consistent
with reality. Across time, 3M has been quite profitable while analysts have viewed
the firms management techniques as setting the gold standard for others to
emulate. Two of the innovations and subsequent skills for which 3Mis recognized
are brand management and excellence in managerial training. CEOs Jeff Immelt
(GE), Meg Whitman (eBay) and W. James McNerney, Jr. (3M) are just a few of
the alumni who have achieved great success following their 3Mcareers. As with all
successful firms, 3Mis challenged to continuously reinvent itself while striving to
outperform its competitors. Rivals such as Unilever are launching intense
campaigns to improve their competitive positions relative to P&G. Unilever began
restructuring in 1999 to deliver on the promises of its Path to Growth agenda.
Unilevers five-year restructuring involves a major overhaul of its portfolio. The
firm has sold low-growth businesses and acquired new-growth drivers, most
notably Best foods, which it bought for $24 billion in 2000.The Company also
snapped up diet brand Slim Fast and Ben & Jerrys ice cream. 3Malso
restructured its operations in 1999. Framed around the objective of having an
organizational structure that would allow the firm to think globally and act
locally, 3Mformed a unique version of the cooperative multidivisional structure to
support use of its related constrained diversification strategy. This structure, which
3Mofficials believe is a source of competitive advantage for the firm, features five
global business product units (GBUs) (baby, feminine and family care, fabric and
home care, food and beverage, and health and beauty care) and seven market
development organizations (MDOs), each formed around a region of the world,
such as Northeast Asia. Using the five global product units to create strong brand
equities through ongoing innovation is how 3Mthinks globally; interfacing with
customers to ensure that a divisions marketing plans fully capitalize on local
opportunities 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 focusing
on making certain that knowledge is meaningfully categorized and then rapidly
transferred throughout P&Gs businesses. Those working to achieve this objective
are part of P&Gs
Global Business Services (GBS) group. Last, the Corporate Functions group is
essentially a set of consultants ready to assist those working in the global business
units and the market development organizations in their efforts to use best
practices in terms of organizational functions, such as external relations,
information technology management, and human resources practices.
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8. Recommendation





33

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 capture a 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 innovative
products. 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



35

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 of
success. 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.