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3M exec predicts long economic slowdown

Posted by pakin On February - 2 - 2016

HAK CHEOL SHIN, executive vice president of international operations for US-based multinational industrial conglomerate 3M, believes the world is at the start of what will be a prolonged period of slow economic growth that will claim many casualties in the corporate world.

Hak said one of the main contributing factors for this was the emerging-market slowdown, particularly in China, which he labelled a new phenomenon.

Other major factors he cited as among the major causes included the collapse of prices for oil and gas and other commodities, and the weakening of global currencies.

The United States will be among the very few economies that will be an exception to this global slowdown phenomenon, he said.

Despite the gloomy outlook, Shin believes the Chinese economy will not have a feared hard landing.

He said the low-growth problems were compounded by “mega-events” such as geopolitical incidents that were unpredictable. As a result, he said companies had to improve their “responsiveness” and learn to operate in the “new reality”, such as over-capacity being a problem, particularly for multinational companies.

“Two key words: quickly and effectiveness. We have to become like a chameleon. Many companies will become history,” he said.

“Any company, small or big, cannot be complacent at this period.”

In a bid to cope better with the forecast prolonged slowdown, 3M has developed what it calls the “play book”, which is in essence “scenario planning” on how it will respond when a major event erupts.

The company’s diversified products, markets, and geographic portfolio will help it weather the current situation, he said.

“Healthcare, consumer, safety businesses are among [our businesses] that are still doing very well. Domestic-driven industries tend to do better in this period,” he said. “While people are not putting in new fibre-optic cable, they’re still going to hospitals.”

Hak said 3M executives considered themselves “portfolio managers” whose task was to make the right choices at the right time involving three dimensions – the product, market, and geographical portfolios. Given the current economic scenario, the US$31.8-billion (Bt1.1 trillion) company is investing in growth areas including Southeast Asia, he said.

And despite the challenging economic times, he said 3M was increasing its research and development budget.

“Since our current CEO assumed the post in 2012, he made a statement to increase R&D from 5.5 per cent to 6 per cent of sales. We’re following his statement,” Shin said.

“R&D and commercialisation are probably our main strategies to grow. We’re investing $1.8 billion every year in R&D,” he said.

Hak said Thailand was 3M’s biggest market in Southeast Asia, accounting for about 35 per cent of its sales in the region, which totalled about $1 billion annually.

Thailand is also one of 3M’s most “penetrated” markets in the world, as measured by the size of its business in the country versus the size of the economy. He said the company tried to replicate its success in Thailand to elsewhere.

The company appointed Napaporn Ratanasaenghirun as its first Thai managing director last November. Napaporn had previously led 3M Vietnam, where she doubled 3M sales during her three-year term. Hak said 3M Thailand had continued to outperform the economy, growing its business at a higher percentage than the growth of gross domestic product for many years. It plans for that to continue.

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