Triple Bottom Line and Stakeholder Analysis for 3M Conglomerate - Research Paper Example

Triple Bottom Line and Stakeholder Analysis for 3M Conglomerate Introduction 3M is a multi-industrial and multi-national manufacturer of diverse products and services that operates in six segments of business including security, safety, and protection, electronics and communication, display and graphics, consumer and office, industrial and transportation, and healthcare (Theis 12). With over 60% of the organization’s total revenue coming from its international market by 2010, 3M is a global company with enough global penetration to take advantage of lucrative and growing economies like Brazil, China, and India (Theis 12). As a global marketer, manufacturer, and innovator of technology, 3M is a business leader with its main competition being General Electric, Carlisle Companies, Tyco International, and Danaher in the international conglomerate sector. Triple Bottom Line Analysis Profit In late 2012, 3M announced that, consistent with its marketplace presence and relevance building strategy, they would start aligning management and resources towards 5 groups of business including energy and electronics, safety and graphics, healthcare, industrial, and consumer. The conglomerate’s operation results have been managed based on the segment structure in existence throughout the year 2012. 3M results will be managed under this alignment on its coming into full effect by mid-2013. The conglomerate’s net income for 2012’s fourth quarter was $991 million compared to 2011’s fourth quarter net income of $954 million (Gibson 83). 4th quarter sales for 2012 increased by 4.2% to 47.4 billion from 2011, while there was a 4.3% growth in organic sales in local currency (Gibson 83). In this growth of organic local currency sales, the office and consumer segment led with an 8.7% growth; with increase in growth for office and stationery supplies, home improvement construction markets, and consumer healthcare. Graphics and display grew by 8.3% in organic local currency sales; with an increase in sales for commercial graphics, traffic safety systems, architectural markets, and optical systems (Gibson 84). In healthcare, the same grew by 5.9%, particularly in oral care, wound care, health information systems, and food safety. While transportation grew by 3.9% and communication and electronics grew by 1.8%, protection, security, and safety declined by 1.7%. For the entire 2012, 3M’s income stood at $4.444 billion in comparison to $4.283 in 2011, which was an increase of 6%. Sales also increased by 1% to 29.9% in 2012 as organic currency sales also increased by 2.6% aided by a 0.8% increase to sales, although currency effects saw a 2.4% reduction year-on-year (Gibson 85). From these results, it is clear that 3M is a highly profitable company that has seen growth in a period directly following the global recession. Planet The first set of environmental goals released by 3M was in 1990 and since this period, they have managed to cut emission of Greenhouse gases worldwide by over 72%, a reduction by 96% of volatile organic compound emissions, and an 82% decrease in the use of energy (Bogdan 76). In line with this, the company has set new goals that they expect to reach by 2014. These goals include a reduction of 15% in volatile air emissions indexed to net sales from base year 2010, a 10% reduction in waste production indexed to net sales from base year 2010, and an increase in energy efficiency of 25% indexed to net sales from base year 2005 (Bogdan 76). In addition, 3M expects to reduce emissions of greenhouse gases by 5% indexed to net sales from base year 2006 by 2013 and the development of plans to conserve water where the company is located in water stressed areas with water scarcity. Since the inception of their new goals in 2005/2006, 3M has seen an 8.6% decrease in volatile organic compounds, a well as a 9.2% waste reduction. They have also seen a 32% increase in energy efficiency, a 55% reduction in greenhouse gases, and a 100% development of their plans to conserve water (Bogdan 77). Through a process of collaborative product development, 3M has created various technologies that have the sustainability edge over their competitors. Diffuser and translucent films optimize LED light use, while the Novec 1230, which is a fire retardant fluid, has a potential for global warming of 1. This is lower than all acceptable halocarbon agents that have been allowed for use indoors by 99.9% (Bogdan 77). In addition, their Life Cycle Management approach is integral to their business practices. From this information, coupled to their impressive sales and subsequent profits, it is clear that 3M is able to grow their business as they protect the environment.  People 3M is a diverse company that produces numerous products in over 60 countries they operate in. For a long time, collaboration and dialogue with their partners, employees, shareholders, and neighbors has been a crucial aspect of their business. This is extended locally, as well as globally with the development of new systems meant to engage all their stakeholders since 2009 (Savitz & Webber 39). This system sees all local sites run by 3M come up with custom plans meant to get feedback from their stakeholders about pertinent issues. The received feedback is then used for shaping 3M’s strategies for sustainability and ensuring that they continue operating in a way that is sensitive to the stakeholders’ requirements and needs. In 2010, the conglomerate also came up with sustainability goals that aim to challenge their international and local sites to expand into community volunteerism, formal surveys of stakeholders, and the tracking of giving to the local community and the impacts this will have on their vital priorities (Savitz & Webber 39). Their facilities use various tools including community newsletters, employee surveys, employee meetings, neighbor meetings, local civic group participation, and open tours and houses of their facilities. With regards to social responsibility and community involvement, the conglomerate gives back to the communities around their facilities and has a powerful track record for doing this (Savitz & Webber 40). Their involvement places an especially high emphasis on the environment, education, and humanitarian services. For example, their nature conservancy has led to natural environment conservation via land purchases in China, Brazil, Mexico, and the US. Other examples include their support for in-kind donations as part of their United Way initiative for natural disasters. They also have a volunteer program for active retirees. Their CSR approach is a vital part of their outreach efforts and a win-win situation for the community, the employees, and the conglomerate’s profit and environmental bottom line (Savitz & Webber 40). Stakeholder Analysis Company Analysis 3M, as a conglomerate company with local and global operations, has several strengths in its operations. One of them is Research and Development as they have over fifty five thousand different products in almost every market they operate in, which has allowed them to increase product development (The 3M Company 22). Their strong geographic presence and product portfolio allows them to stay competitive and stable in spite of demand and economy fluctuations. The conglomerate also has a global presence with their US operations accounting for only 36% of their revenues, 10.8% in Canada and Latin America, 25.4% in Latin America, 25.4% in Asia Pacific, and 27.5% in Africa, the Middle East, and Europe (The 3M Company 22). This helps to protect the conglomerate from fluctuation in demand. Finally, 3M also have a steady growth in revenue with a $5 billion between 2005 and 2011, which overrode the effects of the global recession. Weaknesses of 3M include Class Action suits on the basis of ADEA guideline violations that threaten to see the conglomerate lose billions of dollars and a poor performance of their graphics and display segment that decreased by 16.6% between 2007 and 2012 (The 3M Company 23). 3M engages various internal stakeholders including retirees, employees, and investors. 3M seeks to provide their investors with attractive returns through global, high quality, and sustainable growth (The 3M Company 24). The conglomerate also has robust policy for their dividend payments that is shown in their high ratio of payout and a long-term record of accomplishment of dividends. In addition, 3M has paid its investors consecutively in the past 100 years. 3M has also increased its dividends for the past 56 successive years. They also expect to pay their investors a dividend of $2.54 that is up from 2012’s $2.36. On top of this, the conglomerate paid dividends of over 40% of their total income to investor. This high ratio of payout along with their long history of successively high dividend payments has ensured that 3M is a highly attractive stock for those investors seeking to invest in stocks that pay dividends. This record of accomplishment shows the conglomerate’s high commitment to dividend payment. 3M, looking into the future, contends that it will increase their future dividends in relation to their growth in earnings. Simultaneously, the conglomerate aims to have growth in earnings of approximately 9-11% every year for the coming 5 years (The 3M Company 25). They contend that it is possible for them to achieve growth in earnings based on their diversified interests strengths that include electronics, graphics, safety, consumer, healthcare, and industrial markets using its growing and strong research commitment. Therefore, there is a high likelihood that investors in 3M will see an increase in dividends in the short term. Community Analysis…412 3M engages various external stakeholders including NGOs, governments, communities, suppliers, competitors, students, academics and universities, peer companies, and customers. The external stakeholder used for this section is the supplier. 3M engages its suppliers actively in their sustainability efforts by communicating its expectations regarding sustainability in contract clauses, direct business meetings, and links to their website (Bowden et al 55). Reductions of waste and increased efficiency of energy use are common items in their agenda. The conglomerate is involved in the energy star US program, while hosting best practice seminars and promoting pledge programs for vital suppliers. 3M sources suppliers with responsibility through training their tendering teams in aspects of sustainability of the supply chain with additional focus on the management and comprehension of preference factors in selection of suppliers. 3M also sources their suppliers from diverse businesses with special focus on minority owned, small veteran owned, woman-owned, and service-disabled owned suppliers. When 3M is awarding tenders and contracts to their suppliers, they also consider the impact that the suppliers’ sales footprints will have on the community (Bowden et al 55). Changing patterns of demand could portend significant impacts on the suppliers where the conglomerate’s footprint is on the higher side. Thus, 3M tries to place limits on their business volumes to reduce excessive local community impacts. 3m also has tools and databases for product responsibility that are meant to manage safety, health, and environmental information concerning their products. They have made extensive attempts with their suppliers to collect information on raw material composition. In addition to, other information on safety, health, and the environment that they give to their clients, while also complying with the EU RoHS directive and the EU’s REACH legislation, as well as other packaging, material use, and chemical content regulations and laws internationally (Bowden et al 56). Having set a high bar for themselves regarding safety, health, and the environment, 3M also expects that their suppliers will do the same. Their sourcing policy directs their selection and retention of suppliers globally, while it also establishes a framework that seeks to ensure their suppliers have safe workplaces that maintain reasonable and fair HR and labor practices and management of distribution and manufacturing operations that reduce environmental impacts. 3M also monitors the consistency of their suppliers to their policies of the supply chain including supplied materials, HR/labor, transportation, and EHS. They also monitor matters of sustainability with regards to the supply chain such as material content and transportation expectations, searching for relationships with small diverse supplier businesses, and working in conjunction with clients and suppliers to improve efforts of sustainability (Bowden et al 56). Customer Analysis…412 3M seeks to satisfy their customers with superior service, value, and quality, as well as innovative technologies. The conglomerate has various customer segments: Business Segments % of total revenue Industrial and Transportation 33.75% Health care 16.93% Consumer & Office 13.92% Electronics and Communications 16.98% Safety and Graphics 18.42% (Oster 77) With Regards to the health care segment, 3M is one of the world’s largest producer of surgical and medical products, while also manufacturing orthodontic and dental products, drug delivery systems, microbiological monitoring and testing equipment, and health information systems. The Medical Products Division accounts for 16.93% of the conglomerate’s yearly revenues. (June 30, 2013) Revenues (in millions $) II. Quarter % (of total Revenues) (June 30, 2013) Income (in millions $) II. Quarter % (Profit Margin) 1,336.00 16.93 % 417.00 31.21 % (Plunkett 44) 3M Healthcare Segment Growth (June 30, 2013) Y/Y Revenue % II. Quarter Q/Q Revenue % (June 30, 2013) Y/Y Income % II. Quarter Q/Q Income % 4.13 % 1.91 % 0.72 % 3.22 % (Plunkett 45) 3M Healthcare Financial Ratios Health Care I. Quarter (March 31, 2013) IV. Quarter (Dec. 31, 2012) III. Quarter (Sep. 30, 2012) II. Quarter (June 30, 2012) Revenues (In millions $) 1,311.0 1,332.0 1,263.0 1,283.0 % of total Revenues 16.89 % 17.73 % 16.56 % 16.73 % Y / Y Revenue change 2.42 % 5.63 % 1.36 % 1.1 % Seq. Revenue change -1.58 % 5.46 % -1.56 % 0.23 % Income (In millions $) 404.0 430.0 400.0 414.0 % of total Income 23.11 % 29.23 % 23.43 % 23.55 % Profit Margin 30.82 % 32.28 % 31.67 % 32.27 % Y / Y Income change 0.5 % 10.54 % 8.99 % 13.74 % Seq. Income change -6.05 % 7.5 % -3.38 % 2.99 % (Plunkett 48) 3M Medical Products Division caters to various needs of their consumers, including designing of medical devices that address various environments and conditions and unifying communications by helping providers to shift activities of health management to the home setting. They also allow for visualization of data by transforming healthcare data into easy to understand and meaningful information, and creating experiences that support and coordinate the journey of the patient (Savitz & Webber 121). 3M, in order to fulfill these needs, builds comprehensive strategies for the consumer by shifting to a mindset and business model that is consumer-focused, identifying, and capturing valuable segments of the healthcare consumer market and using new channels of distribution, and developing growth strategies that are based on new services and products for the consumer. In addition, they deploy approaches to behavior change in relation to risk-based segmentation of the consumer market to reduce cost for payments related to conditions related to lifestyle like obesity and smoking (Savitz & Webber 121). Competitor Analysis…412 In the industrial conglomerate industry, 3M’s major competitors are Carlisle Companies, Tyco International, Danaher, and General Electric. For this section, General Electric will be used as 3M’s major competitor. GE has several strengths, including global recognition as Forbes Magazine recognized it as the world’s biggest company, while it is also one of the world’s most recognizable brands (Nye 44). This has given it a competitive advantage because it can attract more clients. GE also has global competitiveness since their products are world-renown and it meets the specific needs of its clients, while also being a big lender in countries that it operates in. In addition, they also have excellent management by dividing their operations into business units that play distinct roles with their own independent management. GE also has diversified operation lines with investment in numerous products under their various units, ranging from home appliances, aviation appliances, automotives, energy, technology, insurance services, and financial services. Environmental initiatives are also GE’s strength as they have embraced social responsibility and a green economy (Nye 44). Their weaknesses include an underperforming energy sector due to fuel price fluctuations caused by shortages, which has threatened GE’s profitability and over-diversification that could lead to over-stretching and slow rate of decision-making. The numerous operation units need attention and are difficult and expensive to manage (Nye 45). With regards to its profit aspect in the 3BL analysis, GE is taking advantage of the growing population in the world and the need for significant improvement of infrastructure to make the cities more habitable (Foran et al 102). With regards to the planet component, General Electric pays close attention to international trends that affect markets and operations, raw materials, and the environment. With an increasing consumer market, there is increasing pressure on resources and GE takes responsibility for environmental performance by acting responsibly as they grow their business (Newton 64). Finally, with regards to the people component, rely on empowered, motivated, and skilled employees to succeed, while expecting their suppliers to adhere to their sustainability provisions. Works Cited Bogdan, Marek. Implementation of Corporate Social Responsibility at 3M. Munich: GRIN Verlag, 2011. Print. Bowden, Adrian R.; Lane, Malcolm R. and Martin, Julia H. Triple Bottom Line Risk Management: Enhancing Profit, Environmental Performance, and Community Benefits. New York: John Wiley & Sons, 2001. Print. Foran, Barney., Lenzen, Manfred. & Dey, Christopher. Balancing Act: A Triple Bottom Line Analysis of the Australian Economy. Canberra, ACT: CSIRO, 2005. Print. Gibson, Charles H. Financial Reporting and Analysis + Thomsonone Printed Access Card. South-Western Pub, 2012. Print. Newton, Lisa H. The American Experience in Environmental Protection, Heidelberg: Springer, 2013. Print. Nye, David E. Image Worlds: Corporate Identities at General Electric. Cambridge, Mass: MIT Press, 2012. Print. Oster, Sharon M. Modern Competitive Analysis. New York: Oxford University Press, 1999. Print. Plunkett, Jack W. Plunkett's Health Care Industry Almanac. Houston, Tex: Plunkett Research, 2008. Print. Savitz, Andrew W. & Weber, Karl. Talent, Transformation, and the Triple Bottom Line: How Companies Can Leverage Human Resources for Sustainable Growth. San Francisco: Jossey-Bass, 2013. Print Savitz, Andrew W. & Weber, Karl. Talent, Transformation, and the Triple Bottom Line: How Companies Can Leverage Human Resources for Sustainable Growth. San Francisco: Jossey-Bass, 2013. Internet resource The 3M Company. 3M Company - 2011 Sustainability Report. 25 June 2011. Web. 12 October 2013 . Theis, Anita. 3M Case Analysis: Cultivating Core Competences. Munich: GRIN Verlag, 2013. Print. 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