3m Case Study

3M

1. Background and Point of View        

Once conceived as a small-scale mining endeavor in 1902, 3M has developed into one of the largest technological powerhouses in the industry, boasting annual sales of $23 billion and net income of $3.2 billion. 3M, formerly known as Minnesota Mining and Manufacturing Company, houses products that enhance the productivity of individuals around the world. In many cases, it was a pioneer in introducing different technologies, such as sandpaper, reflective materials, adhesive tapes, protective chemicals, and many more. It serves its customers through seven major business units: Consumer and Office, Display and Graphics,  Electro and Communications, Healthcare, Industrial and Transportation, Safety and Protection Services, and Security Systems.

        William McKnight, the chairman of the board in 1949, is most known for shaping the company’s culture that encouraged employee initiative and innovation. Under his leadership, 3M was one of the first companies in the United States to incorporate an R&D Division, establishing its first central research laboratory which aimed to supplement the work of product divisions, especially with regards to long-term research. In 1991, Livio DeSimone was named the next CEO. Under his management, 3M’s innovation was compromised, and soon after, it experienced stagnation. Profits declined which lead to the laying off of employees, closing down of numerous factories, and discontinuation of several products.

        In 2001, 3M, with its new chairman and CEO Jim McNemy, Jr., continued its steady growth, which was aided by the introduction of various initiatives. Among his more notable ones was Six Sigma, a quality control and statistic analysis tool which aims to cut costs by reducing defects or errors. Aside from this, 3M’s achievements under McNerny’s hand includes increasing profitability to 25.5% and stock prices to $42 both in 2003 alone. Ever since then, however, growth has been sub-par compared to its competitors.

        This case study takes the point of view of George Buckley as he evaluates his strategic approach and capacity to bring about desired results for 3M. Concepts from the topic Strategic Management is applied in the Recommendations. To ensure consistency and precision, the study is set in the year 2006.

1. Problem Statement

How can 3M improve stock performance and increase shareholder value without sacrificing its innovative culture?

GOAL: Increase stock price beyond the 70-80 range.

Stock price is often based on investor’s perception of the firm’s potential for growth and innovation. In order to achieve this goal, we have identified three main objectives: