University of Western Sydney International Business- 500004 Individual Research Paper 3M Prepared for: TC Sydney Graduate School of Management By: Surbhi Suri: 16453584 Submitted On: 09/11/2010 EXECUTIVE SUMMARY 3M is a multinational company with branches operating all over the globe. 3M is looking to grow in the new markets for its long term strategy, and decided to service China, India, and Singapore. 3M expansion in the international markets and business strategy is build around its core competency of innovation. M has adopted product differentiation strategy, and provide value proposition of cost effectiveness to the customers. 3M long term strategy is to realise economies of scale and location economies by moving some of its manufacturing in Singapore. 3M is a decentralised company at the international level, whereas the decisions related to R&D, and finances are made at centralised level. Company has horizontal structure globally, and even at national levels. Majority of the findings in this paper is based on the research completed on internet.
World economy is changing rapidly, as we are moving away from national economy to crossing the borders into other countries. Increasing competition, technology advances, companies’ strategies to have sustained growth and profitability led many companies to expand into foreign markets. (Dowling, Liesch, gray and hill, Asia Pacific edition, p 4) For any organisation to succeed globally, the need is to learn and move comfortably from one culture to other.
The companies, who succeed in achieving this, are the winners in global economy. (Kreitner/Kinicki, Organisation Behaviour Eight Edition, p 95) Companies expanding in the foreign countries, and provide value to organisations operations are defined as multinational enterprise (MNE). 3M is multinational originated in 1902. It is a technology company with the products ranged from consumer, offices, electro, communications, health care, transportation etc. (3M website). This research paper explores 3M’s international business strategies and corporate structure.
The first section talks about the organisation, second section talks about the company’s strategy, third section talks about the companies’ structure, and the last section talks about companies’ international strategy, and then the final conclusion. 3M 3M is fundamentally a science based company, manufacture innovative products which serves customers to six different business segments such as consumer and office business, display and graphic business, electro and communication business, health care business, industrial and transportation business, and safety, security and protection services business. 3M website) 3M is a US based company, which has expanded itself in the international segments such as The Americas, Europe, The Middle East and Africa and Asia and The Pacific. (3M Global Gateway Page)Established in 1902, 3M employs more than 69000 people around the world; deliver wide range of innovative products, advanced technologies and excellent services to the customers in more than 200 countries. 3M vision is “We earn customer loyalty and respect when we effectively differentiate from our competition, communicate and reinforce the 3M brand strategy.
The 3M brand identity standards serve to continually reinforce our frame of reference and the 3M brand promise. 3M growth in total revenue and Net Profit after growth (figure 1) has been consistent in last 6 years, and revenue has an upward trend (figure 2) in the past five years. (IBIS World, 2010). Figure 1 3M Financial Performance source: IBIS World Figure 2 3M Key Measures source: IBIS World 3M INTERNATIONAL BUSINESS STRATEGIES 3M is a global company, with customer, suppliers and employees workings in countries all around the world.
As it is a US based company, many of the US laws apply on the way 3M does its business all around the world. At the same time, 3M is also subject to the laws in the individual countries where it does its business. (3M website) 3M story of expanding in international market started in 1920 by then CEO William McKnight. Mr McKnight decided that the technology is advancing in the world, to be competitive; company needs to expand its horizons overseas. McKnight sent one of his sales manager as an Expatriate (Hartel & Fujimoto, 2nd ed. P 188) in Europe to search for distributors.
Although sale for 3M product jumped from $200 to more than $68,000 in that year, however later on McKnight decided that overseas companies should run mainly by the local people who understand the markets, culture, and business well. (A Century of Innovation: The 3M Story Book) Majority of revenue generated by 3M comes from its foreign based operations. It has an export strategy as described by Dowling et. Al, Asia-Pacific ed. , p471, whereby company has build its export based on the three main principles as being * enter on a small scale to minimise the risk, expand the business once the exporting business is successful, * third and the most important one is to employ local people to promote the products. 3M has always been under tremendous pressure of providing a cost effective product suited to local markets. 3M has adopted for a transnational strategy as described by Dowling et. Al, Asia-Pacific ed, p380, where it is based on an integrated network and teamwork. This strategy is driven by the need of local markets, and to be able to compete with the local producers.
The drawback of having a transnational strategy is that having different products for different companies raises the costs, which is counter to company’s strategy of cost effectiveness. Large international firms such as ABB (engineering conglomerates) and Ford have faced potential problems while implementing the transnational strategy. Also, another example is the case of Caterpillar – a Japanese company. Company overcome this issue by redesigning its product to use many identical components, and then investing and centralising the manufacturing of its components is its major markets.
Caterpillar’s step to make changes in the strategy helped company reducing its cost significantly. (Dowling, Liesch, Gray and Hill, Asia-Pacific ed, p382) 3M has overcome this issue by keeping some of the core functions such as engineering, research and development, finance and human resource strongly centralized. 3M is an international company, and has vast expansion around the globe, which makes its job hard in respect to having a unified culture around the globe. values any society puts Culture is the way, and onto its peoples.
Culture gets passed around from the generations, families, friends, teachers, and other relevant people within any society (Kreitner/Kinicki, p 96). A great example of 3M facing cultural issues was when it tried to expand in Russia. Russian people are world known for not rewarding its people for the performance. Its business environment is corrupt, and people take bribes. To overcome this issue, 3M Russia actively promotes ethic training, not just for its staff but also for its customers. (Kreitner/Kinicki, p119). M employees share the same set of values all around the globe, and 3M is committed to doing the right thing by its employees. George W Buckley has said the following lines, which reflects 3M is a strong believer in looking after its employees: “The essential elements of success are simple: Organizations that value people are the organizations that will win. Organizations that try to make us all the same, look the same, think the same, speak the same, and behave the same, are the organizations that will lose. – George Buckley, Chairman, President and CEO (3M Website) 3M is an innovative company, which believes in doing its core business in a smarter way. It also meets its social responsibilities and reduces the impact on the environment by implementing three strategic principles that make sustainability implicit in everything they do: * Economic Success – by developing differentiated, practical products for its customers. * Environmental Protection – provide practical products and solutions to address environmental challenges for the customers. Social Responsibility – by taking views from the stakeholders, and then looking into ways to improve sustainable performance. (3M Website) By using above principles, 3M accomplish its key sustainable objectives such as managing environmental footprints; ensuring products are safe to use for the end users, appropriate management of health and safety issues for its customers, employees and public, high quality products for the customers, taking appropriate measures to ensure employees safety, and providing good return for the shareholders. 3M Website) 3M STRUCTURE 3M structure has been characterised as Horizontal Differentiation. Company is divided into subunits; with the decision making skills is based on the function, business type, and also the geographical location of the business. (Dowling, Liesch, Gray, Hill, Asia-Pacific ed, p 398) 3M has divided responsibilities in product divisional structure with the Vice President for each unit reporting to CEO of the company based in US – Head Office: A. Electro and Communication business B. Consumer and office business
C. Display and graphic business D. Strategy and corporate development E. Human resource F. Safety, security and protection services business G. Marketing and sales H. Research and Development, and Chief Technology Officer I. Health Care Business J. Industrial and Transportation business K. Legal Affairs and General Counsel L. International Business M. Corporate Supply Chain Solutions 3M also have vice presidents for the different regions such as Asia Pacific, Latin America and Europe/Middle East and Africa all based in U.
S. Each and every country has a managing director/CEO who reports to Head Office. General Managers for each subunit reports to CEO. (see attached Appendix 1) Each division is decentralised for the decision making authority within it division, however head office is responsible for overall strategic management worldwide. This fact is supported by Dowling et. Al, Asia-Pacific ed, p 399 that to increase coordination, and control over the overall strategy, majority of international companies adapt to product divisional strategy.
International firm such as Philips has the similar structure, and created division for lighting, electronics – consumer and industrial, and medical systems. Each product system is decentralised to product divisions, and responsible for the individual product performance. Head office is responsible for strategic decisions, and also takes control of finances for individual divisions. (Dowling, Liesch, Gray, Hill, Asia-Pacific ed, p399) 3M INTERNATIONAL STRATEGY Over the years, 3M has expanded itself globally. Initial strategy used by 3M to expand globally was export strategy.
Its long term strategy is to know the markets of the country well, start at the smaller scale, and then once the product is well known, then expand it. In recent years, China and India are the main focus for 3M as CEO Buckley expressed his intentions to develop in the emerging markets. (3M’s Global Growth, Star Tribune, Feb. 2, 2008) Also, 3M is spending a lot of money in expanding into new factories, R&D centres in Brazil, Russia, India, China, Poland, and have started expanding in Turkey, Kazakhstan and Ukraine. 3M’s Global Growth, Star Tribune, Feb. 2, 2008). While the GFC was affecting the major economies and companies worldwide, majority of businesses decided to cut R&D expenses, whereas 3M is one of the multinational decided to increase its R&D by 30% to strengthen the core business of innovation. As part of 3M long term strategy, company is exploring into moving its manufacturing units from USA to countries like Singapore, where it’s highly tax beneficial, and also cheap labour cost. M is also looking into acquiring the new business in various countries. As part of this strategy, 3M bought Cuno Filters in 2005, and now Cuno operates as a division within the Industrial and Transportation division of 3M. The acquisition combined the innovation of 3M with the Cuno filtration application. In 2006, 3M exit out from pharmaceutical non-core business within Australia as this business was not aligned with the core competency of 3M. Since then they have realigned the health care business by keeping drug delivery system. M looks for market portfolio (portfolio they can offer to the market, and grow the business), not market share. In last few months, they have acquired the business of Arizant Inc. – a leading manufacturer of patients warming solutions. Arizant is not only a market leader in these products, they also have intellectual property portfolio, and solid technology platforms will expand 3M’s infection prevention division, as well as provide innovative wound care technology. (Press Release, Business Wire, Sept 9, 2010) SWOT
Analysis 3M dynamic Swot analysis emphasis the fact that although 3M is a strong business globally, and have solid revenue and profit growth over the years. The main reasons for this growth are 3M strong innovation culture, and diversified business locations and divisions. The biggest weakness for 3M is not marketing the products with the logo. Lot of people do know about the house hold cleaning products in the market, but unaware of the fact that it’s from 3M. Even businesses know them by post-it note company, not 3M.
Strength * Solid Revenue and Profit Growth * Diversified geographic locations * Strong culture of innovation * Strong research and development * Diversified business in different division| Weaknesses * Saturating markets * Lack of synergy between different units * More focused competitors * Marketing the product| Opportunity * Continue to expand globally * Acquisitions in key operating areas * Growing ASIAN markets * Increasing healthcare demand globally| Threats * Weaker economic conditions in US * Exchange rate fluctuations * Increasing competition world-wide * Slow in innovations|
CONCLUSION Growth aspirations of companies with strategies and structure leads to the Growth aspirations of companies lead to expansions of its operations. Companies form strategies and structures to realise the aspirations. 3M has built the business strategy on its core competency of being an innovative company. 3M product differentiation strategy and offering value proposition of cost effectiveness to the customer. M has become market leaders in producing innovative products, and have sustained the growth over last century. In my opinion, 3M is a strong company, with a lot of potential to grow over the years. REFERENCES http://solutions. 3m. com. au/wps/portal/3M/en_AU/WW2/Country/ http://www. 3m. com/ http://www. startribune. com/business/15119766. html