Strategic realignment of business pushes 3M back in the black

The Indian operations of the over $30-billion 3M, which was lagging for sometime, have seen a major turn around following realignment of its businesses in the country. 3M is a mid-cap company and produces about 55,000 products ranging from adhesives to car care products.

3M Managing Director (India), Amit Laroya, told BusinessLine that the company’s focus was shifted to high margin products, which resulted in higher profitability of the company.

“Profits were under pressure. Hence, one of our objectives was to get us back on track and we carried out several measures to drive growth in a market which was flat,” he said.

Laroya, who took as the Managing Director nearly two years ago, pointed out that the company stopped selling low margin products and exited certain lines of businesses.

The company shifted about 2,000 employees to areas which were top priority for 3M.

The company, which is listed on BSE, decided to re-prioritise the resources around and also changed the compensation package of the sale team giving more weightage to sale of products with higher margins.

3M also carried out geographic prioritisation and focused on those markets where it had not penetrated before.

Among the small and medium enterprises, the top 20 were identified and a dedicated team was set up to grow that business.

It eventually resulted in 40–50 per cent growth from that space. “This happened in a market environment which is flat and degrowing,” he pointed out.

3M has also automated the sales force and has developed an app for its customers and has tried to drive execution discipline in the process. It has also set up a central business service group which will manage all the interfaces including pricing strategy.

The company has also drawn up a plan which focuses on breakthrough opportunities in India, especially in the areas of e-commerce and smart cities.

In the case of e-commerce, Laroya said, the company is looking at addressing two to three opportunities and is focusing on premium customers in tier two and three cities. In a market where there are too many ‘me too’ products, 3M has tried to be more innovative and is allowing customers to customise requirements from a whole range of products throwing up another revenue stream for the company.

“E-commerce is a way to add value for our customers and is not based on price discounting. Our life is not dependent on e-commerce,” said Laroya.

Laroya said these efforts have paid of with the company posting a 152 per cent growth in net profit to ₹108.34 crore during 2014-15 while total income grew nearly 6 per cent to ₹1,840 crore.