Business / Companies

Sticking to plan in firm with diverse portfolio

By He Wei in Shanghai (China Daily) Updated: 2014-03-06 07:17

One recipe he calls upon for overseeing the China market is what is known as the Six Sigma philosophy. Six Sigma is a management method developed by Motorola Inc that emphasizes setting extremely high objectives, collecting data and analyzing results to a fine degree as a way to reduce defects in products and services. As an aficionado, McSheffrey seeks to improve the quality of process output by identifying and removing errors in manufacturing and minimizing variables in the business process.

Under McSheffrey's helm, the 3M team led a "lean" business process by defining customer needs, measuring key aspects of the current process, analyzing data to investigate cause-and-effect relationships, improving the existing process and controlling the future state of the process.

Sticking to plan in firm with diverse portfolio

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To that end, 3M's unusually wide portfolio breadth successfully shields it against over-reliance on any market. Its vast product line ranges across high-tech colored films and dental supplies to mundane items such as glasses, cloths and sponges.

In the fiscal year ending Dec 31, 3M reported overall operating profits had surged 21 percent year-on-year. While two business segments fell short of expectations, robust performance in industry and healthcare helped drive up sales to $30.9 billion, an increase of 3.2 percent.

"3M is good at managing currency risks and sells many consumer staples and healthcare items that tend to hold up well even in turbulent periods," said Deane Dray, an analyst at Citi Research who tracks 3M's stocks.

A research note by Nomura Securities Co Ltd analyst Shannon O'Callaghan stated: "Organic growth is accelerating, capital allocation is turning positive and margins may even have room to rise a bit, all suggesting to us that earnings-per-share growth could surprise to the upside versus current consensus estimates for 2014 and 2015."

Constant decision-making is needed in a vast and vibrant market such as China, McSheffrey said. For instance, one strong growth area of 3M last year was fueled by liquid-filtration products in China, which experienced more than 70 percent year-on-year sales growth in the residential water filtration market.

The smog that has been witnessed in large areas of China drove up sales of protective facial masks and air-purification machines.

A consequent run on face masks lifted profits at 3M and demand remains strong because concerns over the worsening air quality persist.

As the leader in the niche market, 3M is well-positioned to teach basic know-how to the public about choosing masks and the proper fitting of them. When the severe haze lingered in Shanghai at the end of December, 3M's protective respirators sold out in brick-and-mortar outlets as well as on multiple online channels.

"Honestly, I am proud," said the CEO, referring to the ubiquitous 3M logo on the streets of Shanghai. "It means opportunities for us but, more importantly, I'm glad to see we are able to help people improve their lives."