Monsanto: Better Living Through Genetic Engineering?

Case Analysis:

Monsanto: Better Living Through Genetic Engineering?

What strategic mgmt concepts or principles discussed in the chapter is illustrated by specific circumstances in the case?

Market Commonality

The number of markets with which the firm and a competitor are jointly involved and the degree of importance of each market.

Resource Similarity

The extent to which the firm's tangible & intangible resources are comparable to a competitors in terms of both type & amount.

Ð'* Monsanto faced several large competitors. One giant in the market was American Home Products whose agricultural subsidiary competed directly with Monsanto through heavy focus on R&D and marketing. It had introduced alternative products that had the same chemical base as roundup and thus could be used by it.

Ð'* DuPont and Novartis also competed with Monsanto primarily in the areas of pharmaceuticals, chemicals, and consumer home products.

Ð'* Monsanto's patent on Roundup, by far its biggest selling product and the world's most used herbicide, expired in late 2000. As a result, generic brands have become available and the company has lost sales to competing products. In response, Monsanto has lowered prices, further affecting its profitability.

Factors Affecting Likelihood of Attack:

Fast cycle markets are intensely dynamic and a 1st mover advantage is often unsustainable.

Firms may cannibalize older generation product while introducing new innovative premium ones

First Mover Incentives

Ð'* First movers allocate funds for

Ð'- product innovation and development

Ð'- aggressive advertising

Ð'- advanced research and development

Ð'* First movers can gain

Ð'- the loyalty of customers who may become committed to the firm's goods or services

Ð'- market share that can be difficult for competitors to take during future competitive rivalry

Ð'* The development of Roundup in the 1960's had put Monsanto's agricultural division into the forefront, and scientists in the division were working hard to develop the next generation of herbicide and seed systems.

Ð'* Monsanto were the first to genetically modify a plant cell. It led to the success in growing plants with genetically engineered traits.

Ð'* Monsanto was one of the very few companies to be able to genetically modify plants.1996

Ð'* In the early 1990's Monsanto spent $.14 per revenue dollar on R&D compared to the industry of $.09 per revenue dolar.

Ð'* Second mover responds to the first mover's competitive action, typically through imitation:

o Studies customers' reactions to product innovations

o Tries to find any mistakes the first mover made, and avoid them

o Can avoid both the mistakes and the huge spending of the first-movers

o May develop more efficient processes and technologies

Ð'* The patent expiration of glyphosate had further opened opportunities for companies to enter the agribusiness, an area that had long been dominated by Monsanto.

Ð'* AHP's focus on market research and R&D resulted in the development of an improved alternative to Roundup products, EXTREME herbicide and PURSUIT residual.

Ð'* Generic brands have become available and the company has lost sales to competing products. In response, Monsanto has lowered prices, further affecting its profitability.

Ð'* On January 1999, Dow Chemical Company announced a multi-year agreement that also licensed the rights to Monsanto's patent data for glyphosate herbicide.

Factors Affecting Likelihood of Response:

Ð'* Strategic actions receive strategic responses

Ð'* Tactical responses are taken to counter the effects of tactical actions

Ð'* Strategic actions elicit fewer total competitive responses

Ð'* A competitor likely will respond quickly to a tactical action

Ð'* The time needed to implement and assess a strategic action delays competitors' responses

Pre-emptive strategies

* Expand production capacity (create over-capacity)

* Bundling of resources.

Tie up raw materials from rivals.

Use of contracts (long term).

Ð'* Generic brands have become available and the company has lost sales to competing products. In response, Monsanto has lowered prices, further affecting its profitability.

Ð'* On January 1999, Dow Chemical Company announced a multi-year agreement that also licensed the rights to Monsanto's patent data for glyphosate herbicide.

Ð'* AHP signed a multi-year agreement in July 1999 in which Cynamid would be allowed to purchase the glyphosate for EXTREME. AHP was able to benefit by Monsanto's large base of existing customers.

Ð'* A major restructioning of the company took place two years after the success of genetically modifying a plant cell. Monsanto divested its non-strategic business to consolidate around its core competency, high-value added proprietary products.

Ð'* Monsanto targeted professional farmers by advertising Roundup in magazines such as Farm & Country, Farm Journal, and High Plains Journal. The primary marketing message for roundup was that it was a safe product to use. The productivity increase enabled by Roundup was already clear to farmersÐ'--at