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

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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 analyzer, by protecting its biotech position, while also searching for new product and market opportunities.  Monsanto is clearly a technology company and research & development (R&D) is its future.  As you’ve stated, you “can’t run a technology business on a hope and a prayer that the European situation will improve in the near-term.”  The European Union  (EU) postponed a vote on Monday, November 10, 2003; to begin importing GM food. With public opinion in Europe largely hostile to GM foods, it would be difficult to predict the outcome of the December 2003 vote.

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In the face of the EU position on GM, a key strategy for Monsanto should be China, which needs genetic research as a way to get the most from its arable land, which is already scarce.  China entered the World Trade Organization (WTO) in 2002 and appears on the doorstep of more open trade rules.  Monsanto should take advantage of this huge opportunity by forming partnerships with companies like Cargill, who also see China as a strategic market, and the governments of U.S. and China, to introduce genetically modified seeds and chemicals.  This introduction needs to be done in ...

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