3M 2009 Annual Report Download - page 4

2 Innovating Toward Faster Growth
marginally positive. X factors, of course, remain
X factors, though demand for H1N1-related products
will almost certainly contract. There are some financial
headwinds in pension and possibly also in price and
labor costs. The sequential effect of government
stimulus packages, to the extent that they actually
made any measurable difference outside of China,
will be negative.
In terms of specific markets, the health care market
should remain positive, as should that for renewable
energy, security and LCD TVs. As I said earlier, I don’t
expect much positive news in residential housing,
commercial construction or automotive. Consumer
markets will likely grow a little, led by new product
innovations in air filtration, labels and perhaps water
initiatives, too. So we have a split of positive and still
negative market news, but with the positives nudging
out the negatives overall. The only market that might get
markedly worse in the United States and other major
economies is commercial construction and our presence
there is not that large.
Unemployment seems to be the key determinant of
what happens next in the economy, particularly so in
the United States. The danger is being deceived by the
illusion of falling unemployment rates, which might occur
only because people are losing benefits faster than new
entrants are joining the unemployment rolls. So, while
we might be through the worst of the economic tempest,
we are still sailing in some very choppy economic waters
and caution is required.
On the other hand, there is no question that we at 3M
are optimistic about our creative capabilities, confident
in our operational strength and reassured by our strong
balance sheet. We also believe that the best and most
balanced approach for 3M to take for 2010 is to mix our
confidence with caution about the state of end markets.
As we demonstrated in 2009, this kind of overall
economic picture is by no means bad news for 3M. With
great cash flow, high margins and a powerful balance
sheet, we have choices some other companies don’t
have. The current conditions present us an opportunity
to continue and even accelerate key investments and
to press forward aggressively to gain market share
from our competitors. We have the ability to finance
our growth with internal funds and therefore are
not dependent on external resources that might get
tighter, rarer and more expensive. Of course, we will
stay consistent with our core plan of controlling costs,
generating cash, and ethically driving sales.
Our goal in 2010 is to grow 3M faster than the
market grows by becoming ever more important to
our customers. We can do that by filling in product
white spaces at all levels in the market pyramid, using
technology to differentiate our products from the
competition, and by using market-led pricing to attract
customers and then driving service levels up to keep
them. We enable this strategy by making our supply
chains shorter and our new product vitality index higher.
We then turbocharge this strategy and growth by
making great new acquisitions.
Such an approach also maintains our ability to respond
quickly to opportunities. Last year we experienced
just such an opportunity in our respiratory protection
product line, largely because of H1N1-related demand.
While some may attribute our success in this market to
serendipity, the fact is that we put the manufacturing
capacity in place early following a thorough assessment
of the opportunities for growth in this area…and it