One of the best ways to develop a picture of any company is with the SWOT analysis -- a look at a company's strengths, weaknesses, opportunities, and threats. Today, I'd like to focus on 3M
- Leadership. CEO George Buckley is highly respected, and 3M is repeatedly recognized as a top company for developing leaders.
- Innovation. Get a load of these stats: 567 patents awarded; 6,700 researchers worldwide; more than 1,000 Ph.Ds on staff; and nearly $1.3 billion spent on R&D in 2009.
- Geographically diverse. Sixty-three percent of sales are outside of the United States; the company has operations in more than 65 countries.
- Diverse in terms of revenue streams, too. 3M has six key business units, none of which account for more than 33% of sales.
- Financially strong. Paid a dividend every quarter since 1916.
- Litigation. The company needs to fight its patents in court and in the recent past has brought or settled suits against fellow well-financed companies DuPont
(NYSE: DD)and Avery Dennison (NYSE: AVY).
- Continual reinvestment. The downside of innovation: Continual reinvestment is necessary for 3M to maintain innovation and keep the product pipeline strong.
- Pension obligations. 3M has a well-funded pension and last year moved from defined-benefit to defined-contribution plans for new workers, but it still faces rising expenses related to pension and retirement benefits.
- Growth in emerging markets. In the recently completed second quarter, sales in emerging economies grew 38% year over year.
- Growth by acquisition. This strategy has served 3M well of late, and it plans to continue spending money on acquisitions this year.
- As the company calls it, "Managing the entire pyramid." What this means is owning the entire value chain in current product classes it controls -- not just the high end.
- Adjacencies. Enter markets similar to areas it is currently in, such as renewable energy, water infrastructure, architecture, and lighting.
- Acquisitions gone wrong. From the company's 10-K: "Future results will be affected by the Company's ability to integrate acquired businesses quickly and obtain the anticipated synergies."
- Rules, regulations, and lawsuits. Again, the 10-K says it best: "The Company's future results may be affected by various legal and regulatory proceedings, including those involving product liability, antitrust, environmental or other matters."
- Raw materials costs. Fluctuations in commodity or energy costs pose a threat to profits.
- Cheaper competitors. The company may have to accept lower margins to compete on price with lower-cost manufacturers.
- Currency rates. Because the majority of 3M's sales are abroad, a strong dollar would dent the bottom line.
What have I missed? Fill in the SWOT blanks in the comments box below.
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