Strategy Analysis : 3m 's Differentiation Strategy

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1. 3M’s Differentiation Strategy 3M has become one of the world’s most innovative companies by following a dedicated differentiation strategy, underpinned by the entrepreneurial spirit with which the company was founded. This strategy consists of aspects spanning the value chain, which are summarized in Exhibit 1. While all aspects of this strategy are important and interrelated, we will discuss a few of the key facets that led to such prolific product innovation: entrepreneurial spirit, knowledge sharing, and the “tripod” of manufacturing, research, and sales. Entrepreneurial Spirit: A belief in the power of individual entrepreneurship was part of 3M’s DNA and was enforced by encouraging employees to spend 15% of their time on projects of…show more content…
In fact, Chuck Harstad explains that until Jacobson’s J35 program in the 1980s, 3M’s, “drive...for developing premium-priced products meant [they] were not comfortable competing on price,” causing 3M to, “innovate [their] way into a new niche,” when confronted (Bartlett and Mohammed, 11). Not only did 3M’s strategy not undermine itself, but many of their policies were complementary, reinforcing the desired effects. To support researcher’s “tinker-time” and “well-intentioned failures,” 3M carried a R&D budget that was roughly twice the size of the industry average as a percentage of sales. Additionally, the “dual ladder” policy allowed “good people” to continue to develop in research, engineering, and/or marketing, while allowing them to continue to develop professionally. This resulted in top level executives with technical backgrounds who understood the product development process, rather than non-technical ones, who would likely push cost reduction, to the detriment of innovation. Potential to create economic value 3M’s activities have a high potential to create economic value as shown by Five Forces analysis (note: this analysis is for 3M’s corporate level and may vary greatly for each business unit). The low threat of entry is determined by generally high-tech development patented products, which are developed through a research intensive process and
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