MGMT 4650SS – Strategic Management – Sandip Basu
Week 7 - 2/21/2015 – Adaptation and Strategic Change
Group 5 - Jenna Copeland, Chiyi Chen, Mary Marshall, Peter Legakis & Brandon Tiffith
Monsanto’s March into Biotechnology
After evaluating the rationale for Monsanto’s entry into the emerging field of biotechnology, it became apparent that He was one of the world’s largest high-volume, low-margin producers of commodity chemicals. But by the late 1970’s the costs of raw materials had risen and the company’s earnings dropped significantly. This commotion caused Monsanto to diversify into agribusiness with the addition of Innoven II. Monsanto’s CEO had an interest in biotechnology and signed off on small biotech projects to be completed during conventional ones. Monsanto soon wanted to diversify into pharmaceuticals, which it soon did with the acquisition of the Steale’s pharmaceutical firm. After restricting the company, Monsanto had to decide what to do with Steale’s biotechnology development. These are a few things that lead to his reasoning leading him to enter the field:
At the time there were a larger number of new biotechnology companies entering the pharmaceuticals sector.
Not only would the emerging field of biotechnology benefit Monsanto in pharmaceuticals, but also it would also benefit them in the agriculture sector.
The firm would be able to transfer the competencies to new business. Monsanto’s entry into the field of biotechnology didn’t go as he expected. Trying to enter the plant agriculture field of biotechnology, his attempts at genetic engineering the seed were problematic. Animal agriculture and the bio-engineering of proteins to prevent different animal diseases, or entering the pharmaceutical side of biotechnology to produce proteins in the drugs, Monsanto had many difficulties navigating through the challenges that they all brought. The positive aspects were that:
The company wants to build everything within themselves.
They want to do their own research.
They also want to do their own development.
By doing that, they were able to build great relationships with university affiliations. The professors that they used at the university have no development cost, they had access to some of the most brilliant minds, and all the grants from the government were discovery money. All the time that he invested in the university research opened a door in the future for new discoveries.
There are a plethora of lessons can be learnt from the case about making diversification decisions. Howard Schneiderman wrote the case “Monsanto’s March into Biotechnology” in the late 1980s. At the time, Monsanto shares were being traded at a deep discount, as compared to rivals like Dupont and Dow Chemical. This was due to consumer skepticism
