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3m case

3m case

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Published by Brady Shiplet
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Published by: Brady Shiplet on Jun 29, 2010
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Case Analysis
 
 
3M: Cultivating Core Competency
 
By Brady Shiplet and Paul Koen
 Part A. General Environment 
 Demographic Segment
 
The company's revenues are spread across six key businesses, with industrial and transport, healthcare,and safety, security, and protection services businesses accounting for about 31%, 17%, and 14.4% of 
 
the total revenues. The company operates on a global scale in the US; Europe, Middle East, and Africa(EMEA); and Asia Pacific markets.Economic Segment
 
The company recorded revenues of $25,269 million in the financial year ended December 2008(FY2008), an increase of 3.3% over FY2007.The net profit was $3,460 million in FY2008, a decrease
 
of 15.5% compared with FY2007. Most of 3M’s costs are incurred in dollars.The economic slowdown in the United States and abroad is the biggest economic obstacle faced by3M. Also, Rising oil prices result in price increases and supply limitations of several oil-derived rawmaterials.Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability torealize projected growth rates in its sales and earnings.Political/Legal
 
Complying with stringent environment laws is a major concern for 3M. These ever increasing lawscould increases the company's operating costs and reduce its profits.Sociocultural Segment
 
Society’s values and attitudes have been changing. More and more people are becoming concernedabout the environment and the ways in which we use energy. In order to become more energy-conscious, 3M has moved into the realm of renewable energy.Global Segment
 
3M has diversified operations in terms of the number of industries and geographic regions served. Theeconomic crisis is not only in the U.S. Its effects are found on a global scale as well because of globalization.Overall Assessment (Summary)
 
Most of the opportunities in the general environment come from the movement to green energy.Renewable energy is a new market and host ample room for growth. The major threats faced by thecompany come from the political legal segment. Complying with new environmental laws is hurtingthe company’s bottom line.
 Part B. Porter’s Five Forces Model 
Threat of Entry
 
3M’s Innovation, technology, manufacturing capabilities, and know-how provide a significant barrier 
 
to entry. The company’s portfolio is also diversified across a number of industries.Bargaining Power of Suppliers
 
There is not much bargaining power realized by 3M’s suppliers. The company is so large it can exert power over these entities. Also, most products purchased are raw materials. These usually change withthe market; therefore, suppliers can not set their own prices.Bargaining Power of Buyers
 
:With so many substitute products available, bargaining power of buyers is high. Retailers are also beginning to offer their own version of 3M’s older innovative products.Threat of Substitute Products:Because 3M operates in such a diverse array of industries, the threat of substitute products is high.Retail stores are also beginning to offer their own private label brands at a lower price than 3M products.Rivalry
 
Within every industry 3M operates rivalry is high. Because of the large amount of industries thecompany operates in there is always a barrage of new competitors.
 Part C. Competition
 3M operates in rapidly evolving and intensely competitive segments. As the company is diversifiedmanufacturing company, it would face intense competition from various large scale companies in itsexisting businesses. It faces direct competition from Balchem Corporation, Bayer, CONMEDCorporation, H.B. Fuller, Johnson and Johnson, and Cardinal Health, among others. Increasingcompetition from global and domestic players threatens to erode the market share of the company.
 Part D. Tangible and Intangible Resources
 Tangible Resources
 
Financial Resources Net income for 2007 was $4.1 billion, or $5.60 per share, versus $3.9 billion, or $5.06 per share, in2006 — up 6 percent and 11 percent, respectively. Excluding special items, 2007 earnings were$4.98 per share, up 11 percent.Sales for 2009 were $23.1 billion and earnings per share of $4.52, down 8.5 percent and 7.6 percent, respectively. Excluding special items, 2009 earnings declined 9.3 percent to $4.69 per share. The share price was lower in 2009 than in 2007; however, the company has made headwayas continues to climb out of the depression.The major rating agencies routinely evaluate the company’s credit profile. This evaluation is basedon a number of factors, which include financial strength, business and financial risk, as well astransparency with rating agencies and timeliness of financial reporting. The Company has an AA-
 
credit rating, with a stable outlook, from Standard & Poor’s and an Aa2 credit rating, with a stable
 
outlook, from Moody’s Investors Service.
Organizational Resources3M is supported from its headquarters in Saint Paul, Minnesota. It has more than 35 business units,organized into six businesses:
Consumer and Office
Display and Graphics
Electro and Communications
Health Care
Industrial and Transportation
Safety, Security and Protection Services
Physical Resources3M operates in more than 65 countries – 35 international companies with manufacturing operations,35 with laboratories.
Technological Resources
45 technology platforms, including:
o
Adhesives
o
Abrasives
o
Light Management
o
Microreplication
o
Nonwoven Materials
o
Nanotechnology
o
Surface Modification
6,700 researchers worldwide; 3,400 in the United States.
U.S. Patents Awarded – 518Intangible Resources
 
3M is a long standing company. During its tenure it has amassed 518 U.S. patents. Also through thistime it has developed a culture of innovation and one that values knowledge. These facts cannot bereplicated.
 Part E. Core Competence
 The company prides itself on its innovation capabilities. It is able to produce new innovative products because of its research and development, manufacturing, knowledge sharing, and supply chaincapabilities.

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