Table of Content
3M’S CORE COMPETENCY
3M’S SUSTAINABLE COMPETITIVE ADVANTAGE
EXTERNAL ENVIRONMENTAL FORCES
3M’S ACQUISITION STRATEGY
Creating an innovative Culture
Having a bottom-up Organizational Structure / Management Support
EFFICIENT CREATION OF SYNERGIES
The following report assesses the strategic performance of 3M in 2006 by evaluating its core competence, its competitive advantage and its strategy used to reach 3M’s mission which is defined as “Solving and delivering unique solutions for original equipment manufacturers and mass channel customers”. This analysis brings forward a set of recommendations, consisting of an integrated set of actions which will exploit the company’s competences more efficiently and therefore maximize value and enhance the company’s strategic competitiveness in the future.
3M’s Core Competency
To be a successful business, a company needs to develop core competences and base its strategies and its products on those. Core competences are defined as the collective learning within the organization; especially about the coordination of diverse production skills and the integration of multiple streams of technologies (Prahalad&Hamel, 1990, p. 82). These competences are business processes that fulfill the following criteria:
- Provide potential access to wide range of markets
- Contribute to the perceived customer benefits of the end product
- Difficult for competitors to imitate
Furthermore, one important aspect of core competences is that they do not diminish with use (Prahalad&Hamel, 1990). The connection between competences and a company’s end products can be seen in the following graphic:
Graphic 1 - Competencies: The Roots of Competitiveness
(Prahalad&Hamel, 1990, p.81)
illustration not visible in this excerpt
In the case of 3M, their core competences are being innovative and creating synergies between different industries. The company has a “unique model of a technology and manufacturing adjacency lattice that shares basic technologies and manufacturing processes across multiple businesses, markets and product lines” (Case 3M).
Most of 3M’s basic businesses are connected to each other in this way rather than being isolated from each other, therefore basing all of their products on their core competences.
3M’s Sustainable Competitive Advantage
A competitive advantage exists, “when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors. A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy ” (Barney, 1991, p.102). This definition is based on two assumptions:
- Resource heterogeneity, and
- Resource immobility
Following from this, a company can obtain a sustainable competitive advantage, if it operates in a market/industry in which resources are heterogeneous and immobile, and its resources are valuable, rare, imperfectly imitable and non-substitutionable.
Graphic 2 - Relationship between Resource Heterogeneity, Resource Immobility, VRIO and sustained competitive advantage
illustration not visible in this excerpt
(Barney, 1991, p. 112)
3M’s sustainable competitive advantage is based on their capability to combine scientific, engineering and manufacturing competency throughout different technology platforms in order to serve their niche markets. Within those technology platforms 3M has gained a tremendous knowledge and is able to use this comprehension to develop new products for different markets. Thereby a huge amount of linkages are formed between each technology platform and each market. This cross business enables 3M an internal technology transferring and sharing.
To test the potential of 3M’s competitive advantage Barney’s VRIO framework is used.
The value of the technology exchange is reflected in boosting innovation. Thus one technology platform can generate profits in different industries. In reverse, one market can benefit from the expertise of varying technology platforms. This provides a high value for 3M’s competitive advantage.
There is a necessity for high financial recourses to secure the rareness of this competitive advantage. Therefore, only large companies are potentially able to enter this monetary commitment. The rareness is hence given.
This complex system of technology exchange among several markets is due to the experience of over 100 years. During this period the coordination was further developed and adapted according to the market situation and needs of the company. The history of depended condition leads to an imperfect imitability.
From the organizational point of view 3M has built its company to support the technology exchange in the best way. However, there is still potential available for further improvements when it comes to the efficiency of the logistic structure of 3M (out of a theoretical point of view).
Reviewing the VRIO framework one can say that 3M has an unexploited competitive advantage. But since a perfect organizational structure can be hardly performed a sustainable competitive advantage can be awarded.
External Environmental Forces
3M is an international company, which is not only active in its domestic market in the United States, but also all over the world where 3M is generating more than 60% of its sales in mid- 2006. Therefore, it has to cope with global issues and global environmental forces, especially since the company decided to concentrate on countries like Russia or China for its international growth. However, these countries and markets bear some political and legal issues and challenges.