marketing case

Team Case Study Assignment

Due: August 14th, 2017

Business Strategies & Marketing Programs at 3M

The Minnesota Mining & Manufacturing Company, better known as 3M, began

manufacturing sandpaper nearly a century ago. Today it is the leader in dozens of

technical areas from fluorochemistry to fiber optics. The firm makes more than 60,000

different products, which generated $25.3 billion in global sales in 2008 (over $30 billion

in 2015). The company produced $3.5 billion in operating income despite the onset of a

global recession in the second half of the year.

As you might expect of a firm with so many products, 3M is organized into a large

number of strategic business units (SBUs). The company contains 35 such SBUs or

product divisions organized into six market sectors.

1. The Industrial & Transportation Sector makes a variety of tapes, abrasives,

adhesives, filters and specialty chemicals for industrial applications ranging from

aerospace to automobile manufacturing.

2. The Health Care Sector markets a variety of medical, surgical, pharmaceutical and

dental products & services.

3. The Consumer & Office Sector offers products for homes & offices, such as Post-it

brand repositionable notes and Scotch brand tapes.

4. The Electro & Communications Sector supplies connecting, splicing & protective

products for electronica & communication markets.

5. The Display & Graphics sector is a world leader in the sales of films & reflective

materials for electronic displays, touch screens, commercial graphics & traffic

control.

6. The Safety, Security & Protection Services Sector markets a wide variety of products

ranging from respirators for worker safety to cleaning supplies and fire protection

products.

The corporation’s growth strategy has focused primarily on internal new product

development, emphasizing both improved products for existing customers and new

products for new markets. One formal objective assigned to every business unit is to

obtain at least 30% of annual sales from products introduced within the past four years.

The company supports its growth strategy with a R&D budget of $1.4 billion, more than

6% of its total revenues.

The company also pursues growth through the aggressive development of

foreign markets, and an additional organizational sector is responsible for coordinating

the firm’s marketing efforts across countries. In 2008, 3M attained $16.1 billion in sales -

64% of its total revenue- outside the United States.

Differences in customer needs and life-cycle stages across industries, however,

lead 3M’s various business units to pursue their growth objectives in different ways. The

Industrial Tape Division with the Industrial & Transportation Sector, for example,

operates in an industry where both the product technologies and the customer

segments are relatively mature and stable. Growth in this group results from extending

the scope of adhesive technology (for instance, attaching weather stripping to auto

doors), product improvements and line extensions targeted at existing customers, and

expansion into global markets.

In contrast, the firm’s Drug Delivery Systems Division within the Health Care

Sector develops new medical applications for emerging technologies developed in 3M’s

many R&D labs. It sells a variety of technologies for the delivery of medications that are

inhaled or absorbed through the skin. Most of the unit’s growth comes from developing

new products, often through alliances with other pharmaceutical firms, aimed at new

markets.

The competitive strategies of 3M’s various business units also differ. For

instance, the industrial tape unit is primarily concerned with maintaining its commanding

market share in existing markets while preserving or even improving its profitability. Its

competitive strategy is to differentiate itself from competitors on the basis of product

quality and excellent customer service.

But the drug delivery systems unit’s strategy is to avoid head-to-head competitive

battles by being the technological leader and introducing a stream of unique new

products. To be successful, though, the unit must devote substantial resources to R&D

and to the stimulation of primary demand. Thus, its main objective is volume growth,

and it must sometimes sacrifice short-run profitability to fund the product development

and marketing efforts needed to accomplish that goal.

These differences in competitive strategy, in turn, influence the strategic

marketing programs within the various business units. For instance, the firm spends

very little on advertising or sales promotion for its mature industrial tape products.

However, it does maintain a large, well-trained salesforce that provides valuable

problem-solving assistance and other services to customers.

In contrast, the pioneering nature of the drug delivery unit’s technologies calls for

more extensive promotion to attract potential alliance partners, develop awareness

among prescribing physicians, and stimulate primary demand. Consequently, the unit

devotes a relatively large portion of its revenues to advertising in technical journals

aimed at the pharmaceutical industry, physicians, and other medical professionals.

Although different business and marketing strategies make sense for business

units facing different market conditions, they pose a dilemma for top management. Can

a variety of competitive strategies and marketing programs be consistent with, and

effective under, a single corporate strategy or company policy? George Buckley had to

address this issue when he took over as 3M’s CEO in 2005. His predecessor had

instituted a “six sigma” program throughout the firm. Six sigma is a quality control

approach that uses rigorous statistical analysis to remove variability from a process-

such as order fulfillment or product delivery- thereby reducing defects, improving quality,

and lowering costs.

Six sigma’s objectives and methods make good sense for mature businesses

such as 3M’s industrial tape unit where the product line is well established and

improving quality and lowering costs are important means of maintaining profitability.

But what about a business whose competitive strategy focuses on innovation and new

product development, such as the drug delivery systems unit? As one management

guru points out, “The more you hardware a company for total quality management (e.g.,

six sigma), the more it is going to hurt break-through innovation. The mind-set that is

needed, the capabilities that are needed, the metrics that are needed... for

discontinuous innovation are totally different.”

Consequently, CEO Buckley has made adjustments in the firm’s corporate

policies to accommodate some of the strategic differences across the firm’s business

units. For instance, while he has continued to pursue six sigma goals in 3M’s mature

businesses, he has loosened the reins a bit by de-emphasizing the six sigma approach

in the firm’s research labs and some of its pioneering business units.

Questions:

1. The 3M company’s Industrial Tape SBU pursues a differentiated defender

strategy in an industry where both the basic technologies and the customer

segments are relatively mature and stable.

a. Is the objective imposed by top management of obtaining 30 percent of sales

from products introduced within the last four years an appropriate objective

for such a SBU?

b. What do you think top management hopes to accomplish by imposing such

an objective on the SBU?

c. What are the potential disadvantages or dangers of imposing such an

objective?

2. If you were the general manager of the 3M Industrial Tape SBU, which objectives

would you argue are most appropriate for your business unit in view of its

strategy and its external environment? Why?