3m final by priyank
TRANSCRIPT
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By Group 3
PRIYANK GUPTASUNNY JAIN
FARAAZ HASNAIN
LAXMAN RAO
YASHWANT NELLURI
IN THE NEW MILLENNIUM
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Facts Minnesota Mining & Manufacturing Company (3M) was formed in
1902.
One of the largest technology driven of US .
Over 50,000 products of high/low technology.
3M markets are Electronics, health care, telecommunications,
industrial, consumer and office, safety and other markets.
Popular brands such as Post-it, Scotch-Brite and 3M Scotchshield.
Innovation is the USP
Revenue $ 16.4 BN .
R&D budget $ 1 BN annually.
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Core Competency of 3M
Innovative technology portfolio.
Superior manufacturing process capabilities.
3M Satisfy the tests of core competency
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Evolution of 3M
Strategy1907-09 3M designed customer oriented brand of salesmanship.
1921 3M invented a waterproof sandpaper & purchased the patent and
removed defects.
1923 3M developed Scotch tape.1930 3M funneled 45% of its profits into new products & tripled in size.
1947 Scotch magnetic audiotapes were introduced. 3M grew almost 20-fold.
1950 Further innovation of dry-printing photocopy process.
1951 Invention of Thermofax.
1952 3M had surpassed the $100 million mark & was employing some 10,000people.
1956 Scotch gard fabric and upholstery protector.
1958 Scotch-brite scouring pads.
1959 3M 20th consecutive year of increased sales.
1963-67 It doubled in size, becoming a billion dollar company.
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Contd..1970 Number of obstacles interfered with its growth & 3M lost the cassette tape market.
1980 Major competitors threatened 3M on all fronts.
1990 Innovation was stagnating, most of the innovations were extension of existing
product lines
1997 30% of total revenue were generated from products introduced within past fouryears
1998 Revenue and profits both decline
2001 Launch of six sigma, a quality control and improvement initiative to cut costs. Out
of 75000, layoff of 6500 workers
2002 Acquisition of Corning Precision Lens , the worlds leading supplier of optical
lenses.
2003 Reorganization within the company, split of 3 largest divisions of the company i.e.
transportation, graphics and safety.
2003 Major realignment of R&D operations.
2004 Anemic revenue growth while broader makets had been expanding
2005 Realization to generate growth, maintain premium margins and managingcompany's portfolio
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Developing technology-oriented solutions to satisfy customer needs.
Filling market niches.
Abandoning markets where desired prices (and margins) cannot be
maintained.
Generating a high percentage of sales from new products.
Establishing and fostering a culture of Innovation.
PAST STRATEGY
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EXISTING STRATEGY
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3M Existing Strategy Growth strategy based on enhanced core competency and building
long-term competency.
Technology and innovation as the engine to grow and developexisting markets through disruptive (natural substitute)
technologies, logical developments and extensions of existingproducts, and "out of the garage" technology developments
Grow core business through the strength of constant reinvention,stronger key customer partnership, customization, solvingcustomer needs, entering niche segments, and capturing new
segments Emphasize product localization using mix of brands andlocal acquisitions
Speed growth through strategic licensing, investment in small techcompanies, University alliances, and extensive promotion ofinvention
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Contd
Maintain innovative culture - follow 15% rule
Accurately measuring sales growth potential - demand andcapacity to benefit from scale in core product categories* andto gain relative share in targeted markets
Accurate capacity planning
Competitive Advantage - unique shared technology model
Strategically manage portfolio
Maintain premium margins
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The Ansoffs matrix
3M leverages its existing resources and
capabilities.
3M seeks to achieve growth with existing productsin their current market segments, aiming to
increase its market share.
Strategy- Ansoffs Matrix
Market Penetration Market Development
Product Development Diversification
Market
Product
Old
New
Old New
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Strategy- Michael Porter Paramaters
3M has adopted differentiation strategy as it is
Patenting all its product to have the uniqueness inthe market.
Entering into New and emerging market to broad
market scope.
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SWOT ANALYSISSTRENGTH WEAKNESS
Strong R & D capability
Innovative Company
Diversified business portfolio
Robust industrial business
Weak personal care segment
Low margins in the US
OPPORTUNITY THREAT
Growing demand for LCDs
Acquisition of brands
International expansion
Growth in private labels
Higher oil prices
Exchange rate fluctuations
Threat of New entrants
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Crafting the strategyStrategies can be formed at different levels of the organization. As the
company 3M was growing in terms of its products, brands andinnovation, there was a need for division of business. Thus, the
company was divided into 6 business units
3M
Consumer andOffice Business
Display andGraphicsBusiness
Electro andCommunication
Business
Health CareBusiness
Industrial andTransportation
Business
Safety, Securityand Protection
ServicesBusiness
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Corporate level strategy: Corporate level strategy concerns
how a diversified company intends to establish business
position in different industries and the actions and approachesemployed to improve the performance of the group of
businesses of the company.
CorporateLevel
Strategy
Capturecross
business fits
Size ofdiversification
Related orunrelated
diversification
Geographicexpansion Strengthen
position inexistingbusiness
Position innew industry
through
acquisition
Divestationin weak or
unattractivebusiness
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Capture cross business fits
3M was initially only into abrasive and tape
business
Slowly they started to make products from
different sector
Size of diversification
3M didnt diversify their business beyond certain
limits. When they found that there were products
which were not profitable, were not taken for
research in their lab center
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Related or unrelated diversification
3M is a company that has pursued a strategy of related
diversification.
In 3Ms case, the commonality is in the development of a
set of core technologies, which are then shared amongdifferent kinds of business units
Geographic expansion
3M has vast a geographical expansion. It operates in morethan 65 countries having 75,000 employees worldwide
and 6,700 researchers contributing to the R&D of the
company with their innovations
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Strengthen position in existing
business
3M strengthens its existing businesses by continuous
innovation under the same product line which either
adds some new feature to the product or changing
the product to an extent that it meets some other
specific need
This decision is taken care of at the business levelbut the corporate policy is clear that there has been
strengthening of the existing business
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Positioning in new industry through
acquisition
In 3M the decision of acquisition to enter a new industry
is taken care at the business level and not at the corporate
level.
Because of the reason that 3M believes that no one can
understand their business better than the division itself
The decision is strictly taken on the basis of whether 3Malready owns the technology that the company they are
going to acquire has. If the answer is no, they will go for
the acquisition or else no
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Divesting in weak and unattractive
business
This decision, at 3M, is again taken at the
division level.
If the technology in certain business is outdated
and is of no use to 3M they will divest in that
business and go for a new one
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Business and functional level
strategy:Business level
strategy
Competitiveadvantage
Proactiveness
Respond tochanging
environment
Collaboration
Functional
Strategy
R&DSupply ChainManagement
ManufacturingSales andmarketing
Humanresource
managment
Financial
Strategy
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Contd
Strategic management for creativity in 3M
The rule of 15%
The 7 cent rule
25/5 rule
Motivational awards and forums
Golden step award Carlton Society award
Genesis grant
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BUSINESS AND FUNCTIONAL LEVEL
STRATEGY:
To increase the speed at which the employees
bring innovative ideas to the company 3M uses
following strategies:
a. The rule of 15%: Technical people could spend up to15% of their own workweek on projects that might
benefit the consumer, without having to justify the
project to their manager.
b. 25/5 rule: The rule of 25/5 said that 25% of theprofitable sales in any year should come from products
which were not in existence 5 years back. This strategy
was taken to boost innovation.
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c. 30/4 rule: The rule of 25/5 was revised and changed tothe 30% of profitable sales coming from products not
been into existence 4 years back.
d. Motivational awards and forums: To meet the human
requirements of esteem needs, there were awards which
were given to the scientists based on their work.
Golden step award: This award is given to a person whose
product has brought $5 million of profitable sales.
Carlton Society award: Any extra ordinary contribution to the
product lines of the 3M would fetch this award.
Genesis grant: This award is given to a person if he brings in a
new idea for a business division he doesnt belong to.
Contd.
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Competitive advantage of a company is defined bythree dimensions majorly
a. A product which has chances of winning
competitive advantage.b. Development of expertise which sets us apart from
our competitors.
c. Having an insulation on the business so that other
are not able to copy it easily.
3M has its innovation in terms of its competitive
advantage and the patent power acts as its insulator.
Competitive advantage:
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3M is a proactive company in terms of:
It feels the need of a customer by identifying its
problem and then it solves it.
In terms of market expansion and diversification.
keeps looking for opportunities to acquire
companies which have a technology which 3M
doesnt have.
Proactiveness
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Have 3M not changed the kind of products it
offers, it would have not sustained for such a long
time (110 years).
They respond to the changing environments and
needs of the consumers and act accordingly.
Respond to changing environment
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Operational level strategies at 3M for
innovation:
Lead user process:
The lead user process at 3M says that every
product is first made by the lead users first and
companies just commercialize the product.
3M try to get information from these lead users
in order to know the innovations already made
by them.
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At 3M, in the pyramid of expertise approach, they
will find out about the technology which is used
by the next lead user and reach the top of their
pyramid.
By reaching the top of the pyramid of every area
where advanced technology is used for the similarpurpose, the research team gets a fair idea of what
is already used by lead users in this world.
Pyramid of Expertise
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Indirect cost control
Global sourcing
E- productivity
Six Sigma
3M Acceleration programme
INITIATIVES TAKEN
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ROIC risen from 17.6% in 2001 to 21.6% in 2003
3Ms stock price had risen from $42 to $73 in
2003
2000 employees had been through six-sigma
training by the third quarter of 2003
400 higher level managers had been through
Advanced Leadership Development Programme
ACHIEVEMENTS
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