Monsanto Presentation Final Eden

The Coming of Age of Bio-Technology

Strategic Management Course70-127-01

Prof. Abraham CarmeliBar Ilan University, EMBA Program, 2010

Moran Treiser, 043559830Yaniv Presler, 031204175

Lior Davidovich, 040016487Eden Perry, 033810433

Company OverviewCompany

Profile►Founded in 1901 with $5,000 investment

►3rd Largest U.S. chemical company 145th Largest industrial company on the Fortune 500►Developed, produced and marketed:

►Pharmaceuticals & food products - low calorie sweeteners and other food ingredients

►Herbicides and seeds

►Industrial chemicals – Man made fibers and plastics

Company

Profile Financial Information (Mil.)

Company Overview

1992 1993 1994$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Net sales (Mil.)Operating Income (Mil.)R&D Investment (Mil.)

Company

Profile Financial Information by Geographic Area (Mil.)

Company Overview

1992 1993 1994$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

U.SEurope/AfricaAsia PacificCanadaLatin America

Monsanto’s Value Chain DiagramCurrent Status

Technological Development

Human ResourceManagement

Firm Infrastructure

Procurement

MARGIN

MARGIN

Focus on markets and meeting customer needs

Smaller, more flexible strategic business units

SBUs – benefits of flexibility and creativity associated with smaller and more entrepreneurial organization

Policy Choice of Plant Technology. To be different

Support team with 1800 number tocall 24/7

Investments in Technology in order to Integrated Differentiation Strategy.

Companies that will helpthe company to grow

Frequent Evaluation Processes to Monitor Suppliers’ Performances

improve the quality of the final product

Efficient Order Sizes.

Interrelationships with Sister Units

Supp

ort A

ctivi

ties

Inbound Logistics Operations Outbound Logistics Marketing & Sales Service

Strong capability in bio-tech research

Extensive personal relationships with buyers. Strong Coordinationamong functionsin R&D, Marketingand Product Development.

Premium Pricing

Primary Activities

Monsanto’s Five Forces Diagram

Threat of New

Entrants

Bargaining Power

of Suppliers

Threat of Substitute Products

Can frighten off new entrants due to the need to: ► Enter at Large

Scale to be Cost Competitive► Take time to move down the “Learning Curve”

Well positioned relative to Substitutes in order to:

► Make investments to create better products (bio-tech).

► Working on a new market► Premium prices

Rivalry Among Competing Firms in

IndustryVery few

competitors

Rivalry Among Competing Firms in

IndustryVery few

competitors Can mitigate Buyer Power by:

Bargaining Power of Buyers

► Premium products.► Effective products.► Very close connection with the buyers (farmers)

Can mitigate Supplier Power by:

► More likely to make very large purchases which reduces chance of supplier power

► post patent thinking from 1995

Current Status

Cornerstones of Advantageous Strategic Position

Competitive

Advantage ► Long term thinking (post patent thinking

since 1995)► Small & flexible strategic business units (McKinsey’s SBUs model)► N=1, R=G (Solaris)

► Requirement based positioning (Ceregen)

► Bio-Technology R&D over the last 10 years ($300M)► Improving the manufacturing process (Ceregen teams)► Wide range of innovative products

► Understanding regulations

► Hyperopia (“far-sighted”, Solaris)

Cornerstones of Advantageous Strategic Position

Competitive

Advantage Differentiation Strategy of Monsanto

► Unique product features and

performance (Roundup-ready™ crops)

► Support from other SBUs (Gargiulo)

► Brand and reputation (Roundup™)

► Focus on customers satisfaction and

needs (Protiva)

► New technology (Bio-Technology)

► Global company with several markets

Competitive

Advantage

Becoming a Bio-Tech Giant

Long term Planning (1)

Fact: Roundup™ is one of the company’s core products

Threat: Patent expires in 2000; Loss of entry barrier

Actions:►Enters new markets►Develops new applications for Roundup™►New Roundup based products: Roundup-Ready™ crops.

Becoming a Bio-Tech GiantCompetitive

Advantage Long term Planning (2)

Fact: Monsanto is known as an agricultural company

Threat: Limits the company’s product variety

Actions:►Re-define itself also as a food ingredients company


Advantage Creating high entry-barriers

Fact: Monsanto is the largest Glyphosate producer in the world

Threat: Upcoming competition from alternate producers

Actions:►Utilizing accumulated knowledge to reduce production costs

►February 1995, Monsanto re-organized into 15 Strategic Business Units►Tried to enjoy the scale-economy while enjoying the flexibility and creativity of a small-sized company ►Re-organization perceived as the alternative for outsourcing and better facilitation of

Re-organization and creation of SBUs (1)

►Implementation of McKinsey’s “9 Block Matrix”

► Business services provided by “Monsanto Business System” / Outsourcing


Advantage

Re-organization and creation of SBUs (2)

Monsanto

Crop Protection

Fibers

Growth enterprises

Kelco

Ceregen

NutraSweet Consumer Products

NutraSweet Ingredients

Performance MaterialsPlastics

Produce

Protiva

Salflex

Serle

Solaris

Specialty and Eng. Products


Advantage


Advantage

► SBUs structure – Access to accumulated knowledge (Solaris enriched the group with B2C methods)► Effective corporations – Gargiulo’s use of bio-technology► Creation of entry barriers - Limited patent protection► Monsanto’s low-cost production

► Regulatory approvals experience

Unique deployment of resources (1)


Advantage

► Ambidextrous system – Exploitation of Roundup™ simultaneously with exploration of new opportunities (Solaris, Produce)

► Scale-economy

► No-fear from cannibalism – Willing to enter new markets and develop new products, procurement, etc.

Unique deployment of resources (2)


Advantage Crop Protection SBU

► Developers of RoundUp™; Weed control herbicides► Market worth $25 Billion; Little growth opportunity

► Roundup-ready™ crops; Develops genetically Roundup™ resistant crops (cooperation with other SBUs)

► Market worth $25 Billion; Little growth opportunity


Advantage Ceregen SBU

► Provides primary research and product commercialization► Bio-Tech market growing rapidly; Current market worth $6 Billion

► Strong product portfolio; Fullest product pipeline

► Developers of BollGard™ Cotton Seeds; Co-developer of Roundup-Ready™

► Main Mission: strengthen Monsanto position in the seed industry

► Secondary Missions: Build commercial skills along with technological know-how; Develops relationship with farmers; Decide on R&D focus


Advantage Protiva SBU

► Focuses on the animal sciences field

► Posilac™ - Increasing milk production hormone

► Primary markets: Short term - North America, Long term - Asia

► B2C Distribution model ; Ships overnight

► 80 people sales force challenge: Educating farmers for Posilac use & herd management methodologies► No product competition(!)

► Public reacted in fear to “Genetically altered milk” and other health implications


Advantage Solaris SBU

► Provides lawn & garden products

► Client-Oriented: Established “Residential Products Division”

► Successful strategy: Revenue grew from $15 Mil. To $140 Mil. in 7 years; Provided steady cash flow for Monsanto

► Indentified 3 opportunities: Home lawn, international expansion and conversion of current product line for new industries

► Provided Monsanto a steady cash flow, relationships with retailers and better understanding of client’s needs


Advantage Gargiulo SBU

► Market leader in “Fresh Tomatoes” (10% share); 2nd in berry packing; fruit importer► Co-developed branded tomato (100% premium over commodity tomatoes) with Calgene► Branded products as a vehicle to deliver bio-technology to the market place► Opportunity for Monsanto to gain “know-how” in the consumer food market

Monsanto’s SCA Sustainable

Competitive

Advantage

Maintaining SCA

► Disrupting the Status QuoIdentify new opportunities to serve the customer by shifting the rules of competition through speed and variety► Creating Temporary AdvantageUse superior knowledge of the customer, technology and the future to enhance customer orientation and empower workers► Seizing the InitiativeMove aggressively into new areas of competition to create new advantage and undermine a competitor’s old advantage► Sustaining the MomentumTake several actions in a row in order to seize the initiative and create momentum to develop new advantages

Competition SimulationSustainable

Competitive

Advantage

Opportunities for Monsanto’s rivals (1)

► Focus in R&D to produce better genetically-altered seeds / simpler and more resistant products (milk industry)► Develop products according to specific markets regulations► Compete with Monsanto’s less dominant products and not its core solutions (food industry and not Roundup™ related)► Use global resources to insure lowest production costs (R=G)

Competition SimulationSustainable

Competitive

Advantage

Opportunities for Monsanto’s rivals (2)

► Acquire suppliers in main markets in order to insure low distribution costs

► Invest in product marketing and perceived benefits► Establish market dominancy in un-penatrated states► Exploit patent expiration to develop generic products

Documents

Monsanto Presentation Final Eden