Monsanto aims to be the leading agricultural company in the global market.
II. Objectives of the Case
The case aims to:
Identify the core competencies of Monsanto
Identify the problems faced by the company, and its main concern 3.
Enumerate alternative courses of action for the company’s concerns 4.
Recommend the course of action that best fits with resources and constraints
III. Problem Statement
With the company’s large ambitions, it is faced with a burdensome debt load, and insufficient resources to finance business expansion.
IV. Alternative Courses of Action
Divest the following businesses: Nutrition & Consumer Products; and Pharmaceuticals in order to focus on Agriculture 2.
Enter a joint venture with other industry players
Expand business through debt financing
V. Analytical Tools
Thorough study of Monsanto’s business recommends that it focus on its core competency – Agriculture. Focusing on agriculture, would also mean its divesting on the other businesses in its portfolio, both Nutrition & Consumer products, and Pharmaceuticals.
VII. Implementation Plan
To finance expansion, firstly in Pharmaceuticals, it is best to enter a merger with another company within 2 – 3 years. It is best to harness maximum cash inflow for a lackluster company, with the plan of divesting it in the future.
In the long-run, 5 – 10 years coming in to the future, focus on agriculture, and expand business through debt financing. Cash inflows generated, may be diverted to this segment. A portion of outstanding debt may also be converted to equity, for a less risky business.
Monsanto indeed is troubled with its growing debt load. Faced with threats coupled with both strengths and weaknesses, it is imperative that Monsanto face them with urgency. Its ambition of a life sciences behemoth may not be achieved due to internal weaknesses and external conditions.
The BCG Matrix
The BCG Matrix studies the three segments in Monsanto’s business portfolio: Agriculture, Nutrition and Consumer Products, and its Pharmaceuticals segment.
The nutrition and consumer products segment is a star. A star is a business segment with high relative market share in a rapidly growing business environment – should be profitable for a segment. However, it may require higher investments to keep up with the rapid market growth. This segment may consume more cash than is earned.
GD Searle is a question mark as it is with a relatively lower market share in a rapidly growing market – likewise an expensive venture. Higher investments to this segment may only maintain its small market share, even when the market share is yielding low or negative profits from its operations.
A business with a relatively low market share in a slowly growing stagnant market, is seen as a moderate supplier and user of cash. Unfortunately however, no segment in Monsanto’s portfolio falls in this classification
The agriculture division of Monsanto is a cash cow. The cash cow is a business segment with a high relative market share in a lowly growing market. This is both profitable and a source of excess cash. The slow growth of the market does not require large investments to maintain market position
Success Sequence for Monsanto
A success sequence in the BCG Matrix involves investing cash from cash cows, the Agriculture segment, in selected question marks, such as the Pharmaceuticals segment, to enable them to become stars by increasing their relative market shares.
Expiring patent of leading product which composes 40% of Sales 2.
Opposition to genetic modification in Europe
Bovine somatotropism resistance in legal or regulatory environment 5.
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