3m Analysis

3M’s industrial segment is its largest one that spans a lot of 3M’s products from adhesive sprays and tapes, to automotive bonding agents. In 2015 it generated 10,328 million dollars in revenue, and 2,263 million dollars in net income this creates a NOI margin of 21.91%.

The value chain shows the core activities for 3M is very interesting as 3M engages in a differentiation strategy. Appendix A presents the value chain. The value chain shows that 3M operates on a mix of strategies, using their economies of scale to reduce the cost of products, while at the same time investing a lot of money towards R&D to ensure that they have new cutting edge products to offer to the market. It also procures a competitive advantage from its well known brands such as Scotch Brite and Scotch Tape (see Appendix B for list of popular 3M brands). 3M has engaged in horizontal and vertical integration to get even better economies of scale; this can be seen in the balance sheet where goodwill (9,249 billion) makes up 28% of total assets.

In the primary activities of inbound and outbound logistics are the most important to 3M as good management of these activities can greatly reduce costs. This cost reduction increases the margin and creates a more competitive product. 3M uses state of the art warehouse management system called “Highjump” to accomplish its tasks (automatic inventory control). This is very important for large companies such as 3M as it has so many operations that a umbrella operation system reduces costs greatly. Its impact can be seen as orders have increased overtime yet staff numbers have not increased, these saved costs allow for more money to go to research and development. Branding is also an important aspect part of 3M’s value chain as it provides a priceless image for them, and name brands are a big deal in the United States, when customers are making a decision most of the time as long as the prices are reasonable they will go with the more popular brand....