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What moves should Monsanto now make? How will it meet the challenge from Du Pont?

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Introduction

MEMORANDUM To: Hugh Grant, CEO From: Gregg Steiger , Jeff Feng Subject: What moves should Monsanto now make? How will it meet the challenge from Du Pont? Monsanto's greatest challenge is seemingly its greatest opportunity. As biotech companies produce "smarter" products, much of the world continues to resist the benefits. Despite the huge potential of genetically modified (GM) foods, Monsanto continues to be plagued by heavy spending, leadership changes and the high cost of marketing genetically altered crops to the world. Of Monsanto's two main products - genetically altered seeds and chemicals - Roundup has been Monsanto's cash cow for years and the mainstay of the company since 1901; however, the chemical business is in sharp decline. In 2003, biotech revenues are expected to surpass chemical revenues. In the face of this inflection point, Monsanto needs to take the position of an analyzer1, by protecting its biotech position, while also searching for new product and market opportunities. ...read more.

Middle

and China, to introduce genetically modified seeds and chemicals. This introduction needs to be done in a way as to not threaten China's domestic producers, but rather offer new opportunities. This move could also extend the life of Monsanto's chemical products in a new and growing market. A second key strategy should be the analysis of other product and market opportunities. Much as Nokia went from tires to a cell phones, Monsanto needs to consider applying development efforts to non-food products that leverage their strong R&D capabilities. Monsanto should consider taking a portion of their total R&D spend, say 10% or $10 million*, and devote this money solely to non-food based GM products. See Appendix for a list of product/market ideas. In summary, the world population will double in 50 years. There is not enough land to feed the world population at this rate. While the European community wrestles with their fears of GM food, Monsanto must take an "analyzer" position to maintain its leadership position in biotech products while exploring other product and market opportunities. ...read more.

Conclusion

For example, R&D spending, through funding from the U.S. government, could go toward products that assist in protecting the Space Shuttle from the intense heat of re-entry. Perhaps products or chemicals could be develop that would replace the insulation panels that caused the latest Space Shuttle disaster. * Form alliances with companies to develop software and labeling for GM food. A directive was passed into EU law in October 2003 that requires any food or animal feed that contains at least 0.9 percent of GM ingredients to have a label. By taking advantage of this type of product opportunity, Monsanto could begin to work with the EU, rather than against, to develop products that meet their standards. They could also create a competitive advantage over other bio-tech companies, like DuPont, by offering traceability software and labeling for any products produced through Monsanto seed and/or chemical products. 1 Management Strategy, Sustaining Competitive Advantage, Alfred A. Marcus, University of Minnesota 2 "EU Delays Vote on lifting bio-engineered food ban", Agence France Presse, November 10, 2003 * Monsanto has reported R&D spending of $500 million in 2003. ...read more.

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