Diversification drives up 3M in China

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By Cai Muyuan and Ding Qi (chinadaily.com.cn)
Updated: 2009-05-28 14:31

At a time when many global firms are shrinking to cope with the economic slowdown, what does one of the world's most diversified companies do in the Chinese market? In an exclusive interview with China Daily website, Kenneth Yu, Managing Director of 3M China, shared their secret of growth.

Although the US-based Fortune Top 500 Company makes over 69,000 products and primarily works on 45 technologies, Yu didn't think diversification strategy is cutting their edge.

"Being diversified doesn't mean that we are not specialized," Yu said, "what we are good at is combining and upgrading various technologies to create products satisfying different needs."

"For example, we make most of the brightness enhancement film available in the Chinese market. It is used in cell phones, LCD TVs, computers, GPS, etc. The widely used new technology was transformed from an old technology which can be found in overhead projectors used in schools 20 years ago."

"After we upgrade this technology, it means a lower cost TV for the manufacturer because less light tubes would be needed. It costs consumers less to buy than a high standard product, and it is also environmentally-friendly because less energy will be consumed. It's a win-win situation," Yu said.

"The other example is 3M's reflective materials, which have been used for traffic safety for decades," he added. "The first reflective road sign was invented in the 1930s by 3M. We kept upgrading and now we have the new high intensity prismatic grade sheeting. 3M has improved the reflectivity from about 50 candle power to over 500 candle power today. It means a lot to traffic safety in the world, especially for China," Yu said.

Currently, the innovative company has a worldwide presence in a variety of markets covering consumer market and office, healthcare, transportation, commerce, education, electronics and communications. It owns famous brands like Post-it, Scotch and Thinsulate and has provided solutions to different industries and consumers in China since 1984.

However, some may argue that a diversified strategy also means fierce competitions from many different areas. Yu said the key to success is to always keep reinventing products. "We were always upgrading our technologies before any competitors came in."

Kenneth Yu has been working for 3M for 40 years and heading its China operations for more than 15 years. And 3M China has grown from a small office with several people in the 1980s into a big group now with more than 5,700 employees and 12 subsidiaries.

Yu attributed its rapid growth to putting consumers' needs first. "The unique quality about 3M is that we anticipate what the customers need before they realize," said Yu.

"In the 1990s, we knew one thing the country must do was to attract foreign investment or simply get business started. However, there was no telephone network because the cost to install one was 5,000 yuan, while the average income was 400 yuan per person. That was when we decided to start providing a telephone network," he recalled.

After the investment in 1994, 3M's China telephone network business quickly went into full scale production, he said, adding that was one of the moves he is most proud of in China.

Although no company is immune to the current global economic slowdown, Yu has no plan to change 3M's diversified route in China and he is quite optimistic about China's economic future.

"Although some of our business has been affected by the economy, being overly cautious is not a choice," Yu said, "You don't set a long term strategy based on short term ups and downs. 3M invested $400 million in its research center in Shanghai last year. China will need it in the long run, so investment should be made in the long run," He said.

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