The Monsanto Company - Essay Example

?The Monsanto Company Introduction Strategic intent of a firm involves maximizing the internal resources in order to achieve core competence in a competitive environment which enables the firm to accomplish its goals (Mulcaster 2009, pp. 68-75). Monsanto is a life sciences company that over the years has evolved its line of operations from pharmaceutical, food industry to research. This transformation has ensured the company’s competitive advantage due to its huge investment in research and development. Monsanto’s strategic mission is to meet the ever growing need of food and fibre for the world populace while conserving and improving natural resources and the environment respectively. Monsanto’s strategic intent is to harness its huge resource base, financial and otherwise and take advantage of its market leadership position to produce life changing products like Aspirin, Roundup and the current YieldGard Plus and Roundup Ready. The culture of innovation, huge resource base and ample investment in R&D which is its current and future competitive strategy, act as its key competitive pillars that have seen it rise to be the giant it is today. External The external environment of a firm includes all the factors that cause pressure and constraints to the operation of a firm. One is social-cultural factors where resources utilized in the implementation of the company’s strategies are highly mobile leading to flexibility. The company decision makers aim at maximisation of profits ignoring the social responsibility of the company (Tichy 2003). The other is technological influence where Monsanto aimed at capitalizing on technology. This saw the introduction of biotechnology which was also the company’s strategic research initiative. The company also had developed its technology in that it provided proprietary technology. Economical factors affecting the company include changes in the economic landscape in the areas of operations. With the company being global there are high chances that global economic patterns will affect the company a great deal. An example is the global economic meltdown of 2008 which affected many international firms. Operating internationally exposes Monsanto to unfavourable exchange rates which may hinder competitiveness. Political factors affecting the company had both negative and positive effects. The current position is that the company is at the declining stage since various competing products have been introduced in the market. The company has also lost trust with customers who think that some the ingredients in a number of the company’s products cause illnesses to farm workers. The Porter’s Five Force theory for example the bargaining power of buyers is high as the company is in the pharmaceutical industry which is rated 3rd in the world. Mulcaster (2009, pp. 68-75) describes that the bargaining power of buyers increases when the buyers purchase in bulk and are few in number. Buyers can also switch to other products without incurring high switching costs thus power increase. Buyers’ bargaining power also increases when they are able to effectively integrate backwards (Ohmae 2002). The bargaining power of suppliers is high as the Company supplies its products throughout the world for example the Roundup pesticide. The factors influencing the power of suppliers include suppliers purchasing in bulk and being few. Threat of new entrants was also a major threat to the company. The firm was affected by the economies of scale, product differentiation, capital requirements, switching costs of various buyers and access to distribution channels. Cost disadvantages and government policy are also threats of firms wishing to venture into this market. According to Tichy (2003), threat of substitutes increases when buyers face small or no switching costs and to reduce this threat it is important to produce differentiated products which are most valued by most customers and this was the action that Monsanto undertook. Competitive rivalry among firms currently in the industry would increase in situations where there are numerous or equally balanced competitors, when the industry growth declines and where there are high fixed costs. Competitors Competitors in this industry are few but are quite strong for them to be ignored. Some of them are American Home Products (AHP), DuPont Corporation, Novartis Corporation., Syngenta, among others forming an oligopolistic market. AHP has a huge capital base which it uses to become competitive innovation-wise. The company has been engaging in intense research and development initiatives while investing heavily in marketing. However, due to the first mover advantage that Monsanto enjoys with most products like Roundup it tends to overcome their competitiveness. The company also had effective distribution channels in that it sold its products around the world and its customer service was valued. The competitive rivalry is moderate. Monsanto is operating in an attractive industry. Internal The firm’s resources include capital equipments as tangible resource and skills of individual employees, patents, finances and talented managers as intangible resources. Considering the capabilities and resources at the disposal of Monsanto it is clear to see that integration will yield higher performance. The ability to integrate various employee roles and competences coupled with managerial skills to produce quality and reliable products realises competitive advantage for Monsanto. Core competencies Monsanto has a highly educated and skilled workforce. This is coupled with the company generally having in place better HR practices than its rivals. The firm’s investment in research and development is more than the industry’s average. In respect to value chain configuration Monsanto has ensured that it holds those activities that are core like research and manufacturing. It has on the other hand outsourced marketing and distribution of its products to agents like Scott’s Company. Strengths, Weaknesses, Opportunities and Threats Strength of the company includes their suppliers, their finances and the skilled personnel who were able to come up with new techniques and new products. The weakness of firm is that it keeps on changing its managers and its culture thus making it difficult for employees to adopt a particular culture. Monsanto has the whole world market to exploit. It needs to expand its business to many more countries. There is also big room for improvement of its products and with R&D there are more chances of coming up with new products that curb pesticides and seeds that produce plants that withstand harsh climatic conditions. The threats lie in the worldwide dislike of genetically modified foods. Patenting bureaucracies in regards to GM foods is the other. The line of business is also heavily regulated by many governments starting with United States Government forming one of the most important threats to consider. Court cases and fines resulting from them have also become too heavy a burden for the company to bear. Monsanto being a multinational company has to embrace the harsh business environment that the world has become. Competitors are increasing their strategic advantages with time thereby making Monsanto to re-evaluate its core competences in order to compete effectively. Through intense R&D and huge capital outlay, a company in this industry can easily achieve market leadership position. Current strategies The firm seems to follow a differentiation strategy. The reason for this is that it will be easy for the company to do a follow up of individual product’s performance in the market and it enhances further research and development initiatives. Related linked diversification is the corporate strategy of the firm. Dealing in agricultural related but different products ensures that the company creates a market niche in the lucrative industry. It has also adopted a global approach which has helped it gain competitive advantage. This is also because this way there is market diversification and agriculture is practiced everywhere therefore there is need to capture the biggest marker possible. The company has been involved in joint ventures like that of itself and Pharmacia & Upjohn’s so as to gain competitive advantage from further diversification. Recommended strategies Monsanto should follow unrelated diversification strategy so as to capture more products and customers globally. Since the firms competing with it have ventured into its market heavily, it is time to change tact and have a new product line. It should maintain the global strategy since it has not exhausted the market yet. Conclusion Companies in the agriculture related business line need to develop measures that curb both crop diseases and bad weather patterns. Monsanto has come to offer various solutions over the years although many challenges with its developments like Roundup have come to affect reputation. Competition is also stiff since companies in the business have huge capital outlay for the purposes of R&D. The environment is made worse by the fact that its products are heavily regulated but the government while the public is sceptical of the products’ possible side effects. Monsanto has however managed to steer clear of many challenges and strategy changes should be put in place to steer the company further. Cochlear Company Introduction The firm produces Cochlear which is used to assist deaf people in their hearing. The company’s strategic mission is to be the leading Cochlear producing company and intends to sell the products globally in order to assist the deaf worldwide. To attain the mission the company aimed at producing a product that had not been produced in the market thus establishing a uniqueness which built the firm’s individuality. The company’s strategic intent is to harness its technological innovativeness to produce world-class cochlear designs as a lifelong commitment. The company has maintained this in over 20 years of its history and to more than 80,000 people worldwide. It has the potential to maintain this growth trend basing this on its wide resource base and innovativeness. Economic influence The economic factors affecting Cochlear includes increased cost of the cochlear device which most people could not afford thus lacking the opportunity of getting an implant. The demand of the device therefore could only be purchased by relatively affluent individuals, a medical insurance company or government institutions. This showed that the customers were limited thus resulting to less sales. The device was also limited to rich nations and only the country with a stable economic position could purchase it. The strength of this factor can be rated as moderate. Political/legal influence There are government regulatory bodies for example the US Food and Drug Administration. The company therefore has to operate according to the rules set up by these regulatory bodies. The new devices for example have to be approved by FDA before they are sold in the United States. The other political factor is when FDA initiated the meningitis scare which was linked with the use of the cochlear implant. The strength of the political/legal factor is rated as low. Technological influence Cochlear technology has been reported to be getting more sophisticated day by day. It is also a fast moving technology and this change has enhanced the capacity and quality of the device. The improved technology has therefore made the device smaller thus increasing its demand. Cochlear company has been rated as the world leader and prominent innovator in the high technology niche within the market environment that the company operates. Mulcaster (2009, pp. 68-75) describes that this factor has enabled the company to achieve its competitive advantage and thus being able to position its product in the market. According to the Porter’s Five Forces theory the case shows that there is an increased bargaining power of buyers. This is because the buyers in the market are limited since the device is too expensive to be purchased by poor nations. The buyers can also switch to other products without incurring any cost. The bargaining power of suppliers can be termed as moderate since suppliers are not too many as the device is spread to few nations. There is also unavailability of substitute products which makes the power of suppliers to increase to some extent. There are few threats from new entrants though the Advanced Boinics which is a private company in US which has introduced other devices. Rivalry among competing firms has been present especially with the many debates raised about the idea of Cochlear implants in the deaf community where most people despised the device since it was not a cure for the problem (Moore, 2000). Med-Ei was also a competing firm that had collaborated with various universities in the production of hearing devices thus was a fierce competitor. The rivalry between firms may be rated as moderate. The firm had both tangible and intangible resources. Tangible resources include the equipments used in setting implants e.g. microphones, transmitters etc. Buildings and motor vehicles also form tangible resources of Cochlear. The intangible resources included the skills of employees where the firm employs experts. There were also talented managers and the company had more finances that made it have a competitive advantage over other competing farms. Core competences Cochlear’s core competence lies in its technological advancement and being able to develop unique products of high quality. This has been as a result of increased input towards R&D to improve its products e.g. Nucleus 24 Contour AdvanceTM. It also has a huge capital base and records impressive profit margins yearly with significant improvement of up to 45%. It also has world class manufacturing facilities which receive facelifts regularly. The value chain runs in a way that the company manufactures and offers products for sale. It has involved itself in the distribution as these products are customer sensitive. It has not outsourced its designing services while it holds almost all other operations due to the nature of its business. SWOT analysis The most important strengths of Cochlear are technology and innovation, skilled staff and huge capital base and these are all high. Its weakness is the price of its commodities which is not favourable in many countries of the world hence its weak global presence. It however has a big opportunity as a world leader to capture the full global market after a thorough review of its pricing strategy to fit developing countries. Threats on the other hand encompass regulations by the governments and cases on quality of its products. Other high threat is that competitors coming up stronger than before. Cochlear is a company that is dedicated to offering the best service possible despite the many huddles the business environment poses. The management has devised means of evading them by being more innovative with the help of investments in research and development. The pricing strategy needs to be revised for the company to maximise on its potential through snatching the opportunity to be fully global. Current strategy The company engages in a focused strategy since it produces cochlear implants. This is a technologically intense endeavour and has few complementary products with which it can go hand in hand with. It is more of a transnational business than it is global mainly due to the costly nature of its products and production. Recommended It should still follow the focussed strategy in order to maintain firmness and gain market niche in many countries. Its international strategy should move towards being global so as to expand on market share. Conclusion Cochlear company deals in a highly sensitive business and this requires sensitive management initiatives so as to remain afloat. Its strategies seem to work well so far but the opportunities that remain unexploited are enormous. The company needs to reduce on its prices or reduce on production cost before deciding to go global due to the fact that the world has more poor than rich people. References Hanson, D, Dowling, P, Hitt, M, Ireland, R & Hoskissson, R 2008, Strategic management, Competitiveness and globalization, Pacific Rim Third Edition, Melbourne, Thompson. Moore, H 2000, Creating public value, Strategic management in government, Cambridge, Harvard University Press. Mulcaster, W 2009, Three strategic frameworks, Business strategy series, vol. 10, no. 1, pp. 68 – 75. Ohmae, K 2002, The mind of the strategist, McGraw Hill, New York. Tichy, N 2003, Managing strategic change, Technical, political, and cultural dynamics, John Wiley, New York. Read More