3m Case Analysis

3M Telecom Systems Division: Fibrlok Splice

MAJOR ISSUE: Should Denny Hamill focus on stimulating sales of 3M’s Fibrlok splice? If yes, then how?

ALTERNATIVE ONE: Do nothing.

Advantages:

• No additional capital needed for R&D

• No added risk to company

• Currently maintaining a small but profitable market

Disadvantages:

• With current strategy, sales have leveled off

• Missing a huge market potential for mechanical splices

• Does not satisfy company requirement for 30% of sales coming from new products

Quantitative;

Under current conditions, 3M Telecom Division has experienced revenue growth of $1.10 million (8.8%) from 1993 to 1994, and $1.08 million (7.9%) from 1994 to 1995. All else remaining constant, if this trend continues then we can expect to see continued revenue growth over the next several years, albeit smaller each year.

ALTERNATIVE TWO: Invest in major cost reduction and design to drive the market.

Advantages:

• Could lead to higher conversion of fiber wire, thus more splices used

• Vast majority of market for mechanical splices currently untapped

• Satisfies company requirement for 30% of sales coming from new product

Disadvantages:

• Not guaranteed to increase conversion/use of fiber optic wire

• More capital and time required for R&D

• Risk of losing capital if not successful

Quantitative:

Based on the current market size of 648 million existing and expected new telephone lines globally in 1996 with an average of 7.5 splices per line for fiber optic wire installation, there is a potential market for 4.86 billion mechanical splices, or $15.6 billion. Currently, only 5 million splicers are being sold annually, with 3M accounting for about 1.5 million (30%) of those sales. This represents only about .01% of the current market potential, so over 99% of the market is currently not being tapped.

ALTERNATIVE THREE: Partner with NTT to reduce risk.

Advantages:

• More available capital for R&D

• Risk is shared...