Research Proposal on "3M (NYSE: Mmm) Is a Diversified Manufacturing"

Research Proposal 4 pages (1129 words) Sources: 4 Style: MLA

[EXCERPT] . . . .

3M (NYSE: MMM) is a diversified manufacturing company that makes a wide range of consumer products. They are best known for Scotch tape Post-It Notes and Thinsulate, but produce dozens of other products. With over 75,000 employees in over 60 countries, 3M is one of the largest firms in the United States. Major business divisions include Industrial/Transportation, Health Care, Display and Graphics; Consumer and Office; Safety, Security and Protection; and Electro and Communications. All told, 3M recorded a net income of $4.096 billion on revenues of $24.462 billion in 2007.

In recent months, 3M has made a steady stream of acquisitions in a wide variety of sectors. The company has, however, lowered its guidance to investors in terms of its 2008 and 2009 earnings expectations. The global economic downturn is not expected to impact 3M as much as many other firms, but the company still expects some sluggishness. In order to withstand the downturn, the company is shedding approximately 1800 jobs, with an estimated cost savings of $170 million (Chernikoff, 2008).

SWOT

3M has many strengths from which they derive competitive advantage. The company has a very strong balance sheet, featuring almost $3 billion in cash and short-term investments at the end of the last quarter (Reuters, 2008). The company is liquid and thus able to meet their financial obligations even in the event of economic downturn. 3M has a debt ratio of 55.8%, which is in the optimal range for a stable, diversified consumer products company. The company is well-diversified both geographically and by product, which will help insulate them against economic downturn, although they are somewhat dependent on the U.S. market, which accounts for around 37% of their sales (3M 2007 Annual Report). The firm has several powerhouse products that dominate their respective markets, giving 3M high franchise value. Many 3M brands are market leaders. Furthermore, they have been able to maintain this leadership through innovation. They do this by plugging 6% of sales back into research and development (Marcial, 2008). The company has also demonstrated strong, consistent growth over the past few years, impressive given its size.

3M has few weaknesses. The company has some dependency on the U.S. market, because that market is the largest. The wide range of products insulates it from sector-specific shocks, but 3M's dependency on the American market makes it susceptible to broad-scale downturns. The company's size and matrix structure is difficult to execute well. It can be difficult, at the executive level, to understand the nuances of each business and each market when the company operates a matrix structure. However, there is strong cooperation between 3M units, mitigating this weakness. Another weakness is the company's environmental record, which has been questioned over the years. There are no current environmental scandals, but the firm has large manufacturing facilities that make heavy use of chemicals, making it one of the nation's largest polluters. After that, 3M's weaknesses are mostly related to soft spots in specific products - this is a very strong company.

3M has many opportunities. During recession, 3M's strategy is typically to pursue acquisitions. They use their strong balance sheet to acquire firms at low valuations. The company also uses recessions as opportunities to streamline their operations, as the recent jobs cuts illustrate. 3M still has room for improvement in their supply chain, which can bring about further cost reductions. Another key opportunity for 3M… READ MORE

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