3M Company SWOT Analysis
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3M CO (Minnesota Mining and Manufacturing) is a company that manufactures all over the world, introducing new technologies and marketing a wide scope of products. It is present in the markets of healthcare, industrial markets, markets of display and graphics, consumer and office markets, safety, security and protection services, electronics, telecommunications and electrical and transportation. I will make a SWOT analysis of the company, discussing its major strengths, weaknesses, opportunities and threats,
According to Reuters, one of the main strengths of 3M is significant intercompany cooperation in research, manufacturing and marketing of products. Enterprise uses numerous distribution channels to sell its products. They are sold directly to its users, and also through numerous wholesalers, retailers, jobbers, distributors and dealers worldwide. 3M owns 197 sales offices in many countries of the world, 12 of which are in the United States and 185 internationally.
The 3M brands are the important strength of the company, as they are well-known and trusted all over the world. The company produces great number of products in various areas, such as technology, office supplies, automotive, medical, and food services. Most of the brands are market leaders.
Potential for revenue growth is an important strength of 3M. Looking at the company’s income statement we see that the company has showed strong achievements in increasing the sales volume with all seven business segments, stimulating positive local-currency growth globally. Operating income is one of the most important indicators of company’s business performance. 3M has continually been improving its activity for the past two years, and eventually its operation income reached the rate of 23.7% of sales in the second quarter of 2004. Six out of 3M’s seven business segments showed better operating income margins in the second quarter of 2004 compared to the same period last year.
Also, the company in one of the top innovators worldwide, as it derives 30% of revenue from products that are less than four years old and 10% from products less that are than one year old.
Another strength of 3M is its sustaining the environment. Company’s facilities, business units and global subsidiaries use an Environmental, Health, and Safety (EHS) Management System, which was developed to identify EHS issues that influence 3M facilities and businesses, and also to provide, implement and track progress on action plans, addressing the issues of priority. Due to the EHS Management System 3M company is providing more proactive management at the business unit and subsidiary level.
One of the major strengths of 3M Company is its sustainability. The company was selected for inclusion in the 2005 Dow Jones Sustainability Index (DJSI) that investigates leading sustainability-driven companies’s performance globally. This is the fifth year that 3M has been selected in the DJSI, and also the fourth year that the company has been recognized as the leader among diversified industrial companies.
Company is strong in developing a good organizational structure. 3M was named by Industry Week (2003) as one of its ‘100 Best-Managed Companies’. 2003 was the fourth year the company has received this honor.
3M is strong in international competition. Company’s stable financial strength has allowed it to take the “long view” in expanding internationaly, in spite of political uncertainty and economic volatility.
Also, a very important factor of company’s strength is represented by its people. The primary reason for 3M’s success is generations of industrious and imaginative employees in all parts of the enterprise worldwide.
Advertising through the Internet is one of 3M strengths, as it improve company’s productivity and increase company and customer savings and benefits.
However, as all companies do, 3M has its weaknesses. I think the main one is instability. Almost each page at the company’s website has word ‘innovation’ across the top. Therefore, we can conclude that this enterprise will not be static, which provides a lot of risk.
I think 3M some weaknesses in managing, as it is a conglomerate company. Conglomerate companies are harder to manage than enterprises that focus on a single area of business, having some other product lines that cooperate with that main area.
Another weakness is that the company is not well adapted to change in currency exchange rates. L.D. DeSimone, chairman and chief executive officer of the company, said: “We have a strong presence in Japan and Asia, and our businesses continue to be affected by the economic contractions in that area.” DeSimone also mentioned that currency, at current exchange rates, will reduce full-year earnings by an estimated 10 percent.
Of course, the weakness of the company is the source of its largest costs. 3M has rather high selling, general and administrative expenses. Additionally, they have increased in 2004 under the negative impact by currency translation, also influenced by increase in advertising and merchandising expenditures, supporting 3M’s brand portfolio.
3M Company is rather weak at performing successfully in the stock market. NYSE informs that the company increased guidance for its fiscal year, but this accomplishment was too small and failed to satisfy the Street. It resulted in downing the stock in early trading for more than 4%. In general, company’s shares have perspective for growth in future, but not at present.
There are some opportunities that 3M can use in order to improve its position. Relatively stable political environment provides good opportunity for company’s development and growth.
Improvement of technologies is an important opportunity to find ways of reducing the costs, in particular, general, selling and administrative costs. Also, it would be helpful to find sources for purchasing products and services at lower prices. Additionally, it could be a good opportunity for 3M to maintain faster, better, and more responsive services, making the prices more competitive.
Investing resources is also an opportunity for 3M. However, it is important to make sure that the company is using largest and best investment opportunities, accelerating high growth and sustainable products.
I think the company should use its opportunity to provide investors an attractive return by stable, qualitative growth. 3M should do its best to meet stakeholder expectations worldwide, identifying and soliciting feedback from stakeholders.
Threats always exist for any company. As for 3M, I think, the first threat they face might be lack of investment. Many people can doubt whether to invest the money into 3M stock, as it had had mixed success. The company’s stock is in the diversified industry, which was recognized as a great industry during last 10 years, but it hasn’t been so excellent during the last five years. Of course, historic returns do not necessarily predict company’s future performance but they can make the investors think about the weaknesses of industry’s structure or quality of a company’s management.
Another threat, in my opinion, is connected with company’s objective for continuous innovation. I think that customers do not always trust the brands, which permanently issue the products with the label ‘new’ on the package. Sometimes they prefer to use products that they have already tested and are sure in their effectiveness. Therefore, sometimes company’s excessive aspiration for innovation can fail to meet customers’ needs and bring losses.
Although 3M has a strong economical position, local economic problems and weaknesses, especially in the areas where the company operates widely, can influence its profit and performance.
In the whole 3M is rather profitable and successful company, being one of the leading manufacturers all over the world. But I think it should control its performance, as competitors are always present in the market.
In my opinion, the company should strengthen its weak points and investigate possible threats. Also, there are some ways to improve company’s performance.
In my opinion, a process Six Sigma, implemented by the company, is a good way to improve the quality of its products.
Though 3M already has a strong organizational structure, it may improve it by attracting and retaining talented employees and provide working places where individual initiative is encouraged and rewarded. Maintaining good working conditions, including health and safety protection, supporting continuous learning, employee growth and knowledge sharing would be helpful.
I think that 3M should find the ways to improve its stock indicators. According to the information at NYSE, 3M stock’s forward earnings yield of 4.83% is return it would generate annually, if its profits remained fixed and the company paid out as dividends all of its earnings. Such indicator is much lower than the earnings yields of other company’s stocks in related industry; however, 3M is completely healthy in absolute terms.
In order to generate considerable returns for investors, the company will maybe only have to maintain moderate growth in its earnings or increase market’s valuation.
Generally, I think, 3M Company has much perspective for growth, and developing its strong features and using available opportunities it can provide financial stability and increase its revenue in future.