April 23, 2012
3M Business Analysis III
To answer the question of how current economic trends are affecting 3M and what
strategies 3M is using to adapt to the those economic trends, it is necessary to understand what
the current state of the United States economy is, then define what economic trends exist.
The best ways to understand what encompasses the economy in the United States is to
first look the Gross Domestic Product. This statistic measures the country’s total output.
According to the Gross Domestic Product, the United States economy is everything produced by
every company and person in the United States. This year the Gross Domestic Product was
totaled just over $15 trillion, according to the Bureau of Economic Analysis.
The Gross Domestic Product is made of four primary components: Personal
Consumption Expenditures, which measures consumer spending; Business Investments, which is
basically purchases that companies make to produce consumer goods; Government Spending;
and Net Exports of Goods and Services, which measures what is added and subtracted to the
Gross Domestic Product with exports and imports, respectively. Of these four components,
it is the Personal Consumption Expenditures that is probably the most important of the Gross
Domestic Product, as it accounts for a large part of the United States economy. Over 60% of
what the United States produces is for personal consumption according to the Bureau of Labor
The Current State of the Economy
While the United States has experienced some economic highs and lows, overall the
United States economy was the model of a healthy robust economy. However, for close to ten
years the United States economy has experienced a gradual downturn. This downtown has
cumulated into what many believe is a recession for the United States economy. What that
means in terms of the Gross Domestic Product is that it has been decreasing and not growing for
a consistent period of time.
The beginning of this downturn can be traced to the early 2000’s with the “housing
bubble”. This was a period where many people agreed to house mortgages that they proved
unable to afford. There was high speculation in the housing market where many believed
housing prices would continue to increase. In 2006 housing prices begin to decrease, and many
homeowners was faced with the prospect of losing money by selling their homes for far less
than their mortgage. As a result they foreclosed. This trend of mortgage foreclosure spread
nationwide. Many banks and fund managers that had large investments in mortgage-backed
securities also faced the prospect of large losses.
After 2006, banks didn’t want those foreclosed loans as collateral and causes banks to not
want to lend to each other. This, in turn, led to the government backed bailout of institutions
like AIG, Fannie Mae and Freddie Mac. By 2008, employment had declined faster than in the
In 2009, a government backed stimulus plan was enacted, essentially curbing the four
quarter decline in the Gross Domestic Product, effectively ending the recession. Unemployment
continued to rise and many business leaders expected to feel the effects of the recession through
the end of 2010.
Current Economic Trends
Some resulting economic trends that the United States economy is experiencing are the
non-growth in the Gross Domestic Product, which means job creation will not be stimulated; the
value of the dollar is declining, which means the dollar can buy fewer foreign goods thus
increasing the price for imports and causing inflation; home prices are lowering; employment is
low and unemployment is high, which mean less consumer spending; and the trade deficit is