3m Business Analysis

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3M Business Analysis III
Steve Phelps
MGT/521
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 Economy

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

and Statistics.

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

2001 recession.

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

high, which...
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