The Coming of Age of Bio-Technology

Strategic Management Course

70-127-01
Prof. Abraham Carmeli
Bar Ilan University, EMBA Program, 2010

Moran Treiser, 043559830

Yaniv Presler, 031204175
Lior Davidovich, 040016487
Eden Perry, 033810433
Company Company Overview
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:
►Herbicides and seeds
►Industrial chemicals – Man made fibers and
plastics
►Pharmaceuticals & food products - low calorie
sweeteners and other food ingredients
Company Company Overview
Profile
Financial Information ( Mil .)
Company Company Overview
Profile
Financial Information by Geographic Area ( Mil .)
Current Monsanto ’ s Value Chain Diagram
Status
Firm InfrastructureFocus on markets Smaller , more
and meeting flexible
customer needs strategic
Human Resource business units
SBUs – benefits of flexibility and
Management creativity associated with smaller and
more entrepreneurial organization MA
RG
Technologica
l
Development
Strong
capability in
Investments in Technology
in order to Integrated IN
bio - tech Differentiation Strategy .
research
Procuremen Companies that Frequent Evaluation
t will help Processes to Monitor
the company to Suppliers ’ Performances
Activities

grow
Inbound Operation Outbound Marketing & Servi
Support

Logistics s Logistics Sales ce

improve Policy Choice Efficient Extensive Support team
the of Plant Order Sizes . personal with 1800
quality Technology . relationships number to
of the To be with buyers . call 24 / 7

IN
different Interrelation Strong
final ships with
product Coordination

RG
Sister Units among
functions

MA
in R & D ,
Marketing
and Product
Premium
Development .
Pricing

Primary Activities
Current Monsanto ’ s Five Forces Diagram
Status

Can mitigate Supplier Can frighten off new

Power by : Threat entrants due to the need
► More likely to make of New to :► Enter at Large
very large purchases Entrants Scale to be Cost
which reduces chance of Competitive
supplier power ► Take time to move
down the “ Learning
►Curve
post” patent thinking
from 1995
Bargainin Rivalry Among Bargaining
g Power Competing Firms in Power of
of Industry Buyers
Suppliers Very few competitors

Well positioned Can mitigate Buyer Power

relative to by :
Substitutes in order ► Premium products .
to :► Make investments to create ► Effective
better products ( bio - tech ). Threat
of products .
Substitute ► Very close
► Working on a new
market Products connection with the
► Premium prices buyers ( farmers )
Competiti
ve
Cornerstones of Advantageous Strategic
Advantage Position
► 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)
Competiti
ve
Cornerstones of Advantageous Strategic
Advantage Position
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
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Long term Planning ( 1 )
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Long term Planning ( 2 )
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Creating high entry - barriers
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Re - organization and creation of SBUs ( 1 )
►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
►Implementation of McKinsey’s “9 Block Matrix”
► Business services provided by “Monsanto
Business System” / Outsourcing
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Re - organization and creation of SBUs ( 2 )

Monsanto
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Unique deployment of resources ( 1 )
► 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
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Unique deployment of resources ( 2 )
► Scale-economy
► No-fear from cannibalism – Willing to enter new
markets and develop new products, procurement, etc.
► Ambidextrous system – Exploitation of Roundup™
simultaneously with exploration of new
opportunities (Solaris, Produce)
Competiti
ve
Becoming a Bio - Tech Giant
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
Competiti
ve
Becoming a Bio - Tech Giant
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
Competiti
ve
Becoming a Bio - Tech Giant
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
Competiti
ve
Becoming a Bio - Tech Giant
Advantage
Solaris SBU
► Provides lawn & garden products
► Client-Oriented: Established “Residential
Products Division”
► Indentified 3 opportunities: Home lawn,
international expansion and conversion of current
product line for new industries
► Successful strategy: Revenue grew from $15 Mil.
To $140 Mil. in 7 years; Provided steady cash flow
for Monsanto
► Provided Monsanto a steady cash flow,
relationships with retailers and better
understanding of client’s needs
Competiti
ve
Becoming a Bio - Tech Giant
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
Sustainab
le
Monsanto ’ s SCA
Competiti
ve
Advantage Maintaining SCA
► Disrupting the Status Quo
Identify new opportunities to serve the customer by
shifting the rules of competition through speed and
variety
► Creating Temporary Advantage
Use superior knowledge of the customer, technology
and the future to enhance customer orientation and
empower workers
► Seizing the Initiative
Move aggressively into new areas of competition to
create new advantage and undermine a competitor’s
old advantage
► Sustaining the Momentum
Take several actions in a row in order to seize the
initiative and create momentum to develop new
advantages
Sustainab
le
Competition Simulation
Competiti
ve
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)
Sustainab
le
Competition Simulation
Competiti
ve
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