3M (MMM) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. - Supplies & Fixtures
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for 3M (United States)
Based on various researches at Oak Spring University , 3M is operating in a macro-environment that has been destablized by – increasing energy prices, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google,
there is backlash against globalization, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that 3M can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the 3M, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 3M operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of 3M can be done for the following purposes –
1. Strategic planning of 3M
2. Improving business portfolio management of 3M
3. Assessing feasibility of the new initiative in United States
4. Making a Constr. - Supplies & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of 3M
Strengths of 3M | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of 3M are -
Diverse revenue streams
– 3M is present in almost all the verticals within the Constr. - Supplies & Fixtures industry. This has provided 3M a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the 3M are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Operational resilience
– The operational resilience strategy of 3M comprises – understanding the underlying the factors in the Constr. - Supplies & Fixtures industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– 3M has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– 3M has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. - Supplies & Fixtures industry. Secondly the value chain collaborators of 3M have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Constr. - Supplies & Fixtures industry
– 3M has clearly differentiated products in the market place. This has enabled 3M to fetch slight price premium compare to the competitors in the Constr. - Supplies & Fixtures industry. The sustainable margins have also helped 3M to invest into research and development (R&D) and innovation.
Analytics focus
– 3M is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Constr. - Supplies & Fixtures industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that 3M has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– 3M is one of the leading players in the Constr. - Supplies & Fixtures industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of 3M in Constr. - Supplies & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- 3M is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at 3M is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at 3M emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of 3M in the Capital Goods sector have low bargaining power. 3M has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps 3M to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of 3M | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of 3M are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of 3M supply chain. Even after few cautionary changes, 3M is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left 3M vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, 3M has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Capital Spending Reduction
– Even during the low interest decade, 3M has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Constr. - Supplies & Fixtures industry using digital technology.
Low market penetration in new markets
– Outside its home market of United States, 3M needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
3M has a high cash cycle compare to other players in the Constr. - Supplies & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of 3M, it seems that company is thinking out the frontier risks that can impact Constr. - Supplies & Fixtures industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative at 3M, in the dynamic environment of Constr. - Supplies & Fixtures industry it has struggled to respond to the nimble upstart competition. 3M has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, 3M has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. - Supplies & Fixtures industry over the last five years. 3M even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Compensation and incentives
– The revenue per employee of 3M is just above the Constr. - Supplies & Fixtures industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the Constr. - Supplies & Fixtures industry, 3M needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on 3M ‘s star products
– The top 2 products and services of 3M still accounts for major business revenue. This dependence on star products in Constr. - Supplies & Fixtures industry has resulted into insufficient focus on developing new products, even though 3M has relatively successful track record of launching new products.
3M Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of 3M are -
Building a culture of innovation
– managers at 3M can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Constr. - Supplies & Fixtures industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. - Supplies & Fixtures industry, but it has also influenced the consumer preferences. 3M can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Constr. - Supplies & Fixtures industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for 3M in the Constr. - Supplies & Fixtures industry. Now 3M can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. - Supplies & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 3M can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. 3M can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of 3M has opened avenues for new revenue streams for the organization in Constr. - Supplies & Fixtures industry. This can help 3M to build a more holistic ecosystem for 3M products in the Constr. - Supplies & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, 3M can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help 3M to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. 3M can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– 3M has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, 3M is facing challenges because of the dominance of functional experts in the organization. 3M can utilize new technology in the field of Constr. - Supplies & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help 3M to increase its market reach. 3M will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– 3M can improve the customer journey of consumers in the Constr. - Supplies & Fixtures industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help 3M to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects 3M can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats 3M External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of 3M are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, 3M can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate 3M prominent markets.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Easy access to finance
– Easy access to finance in Constr. - Supplies & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. 3M can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of 3M business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– 3M can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Constr. - Supplies & Fixtures industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. 3M will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. 3M needs to understand the core reasons impacting the Constr. - Supplies & Fixtures industry. This will help it in building a better workplace.
Regulatory challenges
– 3M needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Constr. - Supplies & Fixtures industry regulations.
Environmental challenges
– 3M needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. 3M can take advantage of this fund but it will also bring new competitors in the Constr. - Supplies & Fixtures industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for 3M in the Constr. - Supplies & Fixtures sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that 3M is facing in Constr. - Supplies & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 3M in Constr. - Supplies & Fixtures industry. The Constr. - Supplies & Fixtures industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of 3M Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at 3M needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of 3M is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of 3M is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of 3M to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that 3M needs to make to build a sustainable competitive advantage.
