Building a Global Business Enterprise — 3M, A Case Study

Building a Global Business is not about merely being present in several geographies.

Global Business or Company is not synonymous with multinational corporation. A Global Business transcends differences among nationalities, ethnicity, cultures and social class. Country of Origin, Race, Social Status, Family Wealth and even Organisational Hierarchy count for nothing in a Global Business. Every stakeholder of the organization is a Global citizen and winning trust of all of them is absolutely necessary for businesses to survive globally. Global businesses thrive by building superior capabilities and responsiveness. Global businesses pursue certain strategies that are not in evidence in their domestic, multi-domestic, transnational or multinational rivals.

The strategies pursued by 3M illustrate the style of functioning of a global corporation. 3M is a diversified corporation operating in fields as diverse as Industry, Worker Safety, Health Care, and Consumer Goods.

Brief description of the company:

Established in 1902, 3M stands for The Minnesota Mining and Manufacturing Company. It is a US based company and has 80 manufacturing plants in the 29 states of US. Outside US, 3M has 127 Manufacturing & Converting Facilities in 37 Countries. Overall, 3M has 116 offices across 75 Counties. 3M has more than 60,000 products catering to homes, businesses, schools, hospitals, and other industries. 3M has more than 93,000 employees worldwide and has been on the Fortune 500 list for 65 Years now.

What makes 3M a truly Global Business?

The principal elements of the strategy pursued by 3M to achieve global leadership are as follows:

Superior Capabilities: 3M has consciously moved out of its original core business to acquire capabilities in primarily three areas of competencies. Abrasives, adhesives and Substrates. Using its core competencies in these three areas 3M has created a vast array of products which have application in several industries.

Patents: 3M Has constantly developed innovative technologies which are protected by patents in order to gain an edge over its competitors.

Global Presence: 3M is present globally. This allows it to tap markets world wide. It also allows it to build on areas in which each region excels. 3M can pickup manufacturing capability in APAC and design capability in India. 3M could offer its products to every country in a form customized to the requirements of the region.

Supply Chain: 3M has been successful in creating a supply chain which enables it to source material, manufacture and distribute locally in every market in the world. This gives it an enormous advantage over those who manufacture in limited sites and move products across huge distances.

R&D Localisation: 3M Conducts research in different parts of the world keeping in view local requirements for customization of products as well as capabilities available in that part of the world.

Let us examine in greater detail each element of the other strategies. Superior Capabilities:

The company initially began a mining company but now has diversified into various businesses.

• Industrial Business contributes around 37% of the total sales and is the biggest contributor among all its segments. Membrane switch spacers & Foam fabricators are few products to name from this business.
• Safety and Graphics Business constitutes around 20% of the total sales and they do not sell products. They sell enhancements like reflective sheeting on highway signs or the roofing granules.
• Electronics and Energy Business: Products from this business include power cables to pressure sensitive resins and this business contributes around 16% of the total global sales.
• Health Care Business: With 18% contribution to sales, this business has product line ranging from surgical drapes to teeth whiteners. Products also include software products.
• Consumer Business: The rest of the revenue for 3M comes from consumer items like air conditioner filters, bandages, sponges, shower pads, etc.

With all the above businesses and the products in all lines it displays how 3M has built superior capabilities over time. With constant innovation, better technologies, and operational excellence (Use of Lean Six Sigma, Control Price Leakage, Factory Cost Reduction, etc.) 3M is able to achieve economies of scale and stand true to its tagline: Science. Applied to Life. Building superior capabilities is a big measure how global a business can be or can go.

The Power of Patents:

Patents play a vital role in making a company global. The true power of patents. 3M is one of those companies which has achieved 1,00,000 patent mark back in 2014 and continues to maintain the patent legacy. Patents protect the key competitive product area and keeps infringers at bay. Few incidents I would like to quote where the patents helped 3M are:

• 1980: 3M’s Scotch Cast Orthopedic Casting Tape — This tape was superior to the then market leader J&J’s plaster-of-paris bandage roll. 3M’s roll tape was light, breathable and comfortable.
• 1987: International Trade Commission decided in favor of 3M and U.S. Custom officials when a Japanese company began selling Seibulite Ultralite, a copy of 3M’s Scotchlite high-intensity reflective sheeting. The product was a patent issued to a young 3M scientist, Joe McGrath.
• 1991: When 3M came with the revolutionary Post It notes, AMPAD (American Pad and Paper) also issued its products just like that of 3M. 3M sued AMPAD and won the case.

Aggressive protection of 3M’s Intellectual Property has been a key factor of growth of 3M. In a very nice move by the company, 3M owns the patents and 3M divisions owns the products. 3M has 3000 new patents every year in 46 technology platforms with over 8000 Scientists and researchers working worldwide. This displays how patents play a vital role in deciding how a business can go Global.

Global Presence:

Retired president, Jim Thwaits said that 3M was flexible enough to marry their business philosophy with local customers and patterns. This is why 3M was able to be first in many places.

• One primary reason as to why 3M is able to go global and survive is the democratic nature of the top leadership. The top leadership always had faith in the people of 3M. They always administered that the operations outside US are not intended to be ‘cookie cutter’ duplicates of 3M’s US Operations. As time progressed and the company started to make impressions over the world, 3M dismantled all Silos. There was flow of people, information, and assistance. It is because of this thought process that 3M was able to establish 31 companies between 1970 and 1997!
• Pathfinder program of 1978 encouraged new products and businesses outside of the US. This is when 3M started to grow aggressively outside of the US.
• Another significant reason why 3M is a Global Business is 3M believes that 95% of the population lives outside US. Hence, they are able to see clearer on the bigger landscape and are not short sighted.

Supply Chain Localization:

With localized supply chain as we can see from the image, 3M has been able to keep its costs low and revenues high. Advantages that localized supply chain provide are:

• More Flexibility: Growth in a particular location is not constant and can change over time. Local Sourcing will help to cater the demand.
• Reduced Supply Chain Costs: Imagine supplying Laminating Adhesives to APAC form US and supplying the same Laminating Adhesives to APAC from Korea. Significant reduction in distance of about 30% or close to 1000 miles. This reduction in distance has cost implications and by having a localized supply chain 3M is able to keep its costs low.
• But 3M is able to maintain its business all over the world as it has better control of its local supply chain.
• Apart from control, 3M is in a better position to address any concerns regarding supply chain.

R&D Localization:

As we can see from the image, R&D is carried out as a global function and each centre is carrying out a different Research best suited for the location. R&D in a localized manner helps the company to come up with products best suited for the location, thereby drastically reducing the cost of test launches and failures.

R&D coupled with Patents has also helped 3M to defend markets with untapped potential. As of 2019, 3M spends about 6% of its sales revenue in R&D which is close to 1900 Million USD. As of date 3M has its labs in 36 countries and invested more than 2 Billion USD in R&D. This huge spending potential and with labs all over the world makes 3M a global business.

How all the actions put together create greater value:

3M has effectively deployed each of these five strategic platforms to establish itself as a global corporation and gained enormous competitive advantage over its rivals. This approach to business establishes the fact that globalization is not about being present in several geographies. Globalization is about leveraging the strengths and capabilities in each region. This is called mapping sources of global advantage. Apart from this globalization is about capitalizing on opportunities in each geography by offering products customized for the requirements of that region. And finally it is about building unmatched capabilities by giving equal opportunities to talent where ever it may be found.

Thank You again Dr. Amit Bhadra Sir for your guidance!

Originally published at https://www.linkedin.com.