3M company: consideration and review of its strategic positioning and business development in relation to Ansoff’s matrix and diversification strategy
I. Introduction of 3M company
Established in 1902 by five businessmen, the original concept of 3M company starts from Minnesota Mining and Manufacturing Company. Through the history of over 100 years of innovation, 3M nowadays becomes highly diversified US multinational with the operations in more than 70 countries and a wide range of over 55,000 products worldwide by the end of 2013 (3M innovation brochure). This paper will deeply analyze its strategic positioning and how the use of diversification strategy assists company to standout.
II. Strategic positioning
1. Environment:
PESTLE analysis
Political: After the US government shutdown in 2013, the political environment in US is instable. Besides the rising terrorism in Middle East, there is existing corruption inside government operations. Each year, the corporation spends considerable funds on lobbying vote1 Economic: The ongoing global economic recession in 2007 affects negatively to the company. However, the health-care division, accounts for 20% of total 3M’s operating profit, offsets the negative effects as it continuously out-perform others 3M’s businesses, mitigating the forecasted results of economic gloom. “The conglomerate spans many sectors, which among other things means it usually has exposure to something doing relatively well” as said Harrison Grodnick, a senior portfolio manager at 3M. US conglomerate that allows them to invest in the most growth-promising area, even in economic recession. Other factors affect the sales volume of 3M including currency exchange rates, rising labor costs, inflation, and taxation level2
Social – cultural: The consumer preferences has been changing constantly and unknowably, requiring continuous customer connection from the producers. The cultural values in 1990s are different from the embedded values now, and thus, the lifestyles among population often unarticulated. As a result, with a history of long and successful innovation as the 3M company, they have to regularly “conducting empirical research and maintaining strong relationships with customers and consumers on a regional, national, and global scale” (brochure)
Technology: Technological factor is the most determined element to 3M company. Over the past century, technology has expanded and developed unlimitedly, having direct impacts on human lifestyles; as a result, there is the fierce competition among technology companies. To survive and stand out in this competitive market, “3M spends more than a billion dollars a year on R&D or about 6% to 7% of its annual sales. About 20% of this budget supports its twelve technology centers. The approximately 1000 researchers that work in each of these centers are commissioned to identify and develop new technology bases that could take from five to 10 years to develop into marketable products.”3
Enviroment: As the environmental sustainability awareness increases in recent years, the company spent a major investment on restoration plan as its direct result of the company’s booming manufactions. In response to the investigation of the US Environmental Protection Agency, 3M funded a $56million projects to clean up the toxic contamination in Mississipi river. In 2008, the company set up the Renewable Energy Division to enhance its image; yet, there is still contronversial disputes between the state of Minnesota and company. (rules and regulations, environmental disasters in countries, global warming a)
Legal: tax policy and employment laws of the Minesota state law and federal law directly affects the company. Especially, Minnesota is one of the most supporting state for doing business, with other giants such as Target, US Bancorp, General Mills, and Medtronic headquartered there.4
Safety standard and labor laws have strong influence on the operation of the company. Moreover,