One could define a competitive advantage as an advantage that a company has over its other competitors within its external environment; thus allowing the company to generate more revenue, greater sales or margins and retain more customers than their competitors (Investopedia, 2012).
Monsanto boasts many competitive advantages which sets it apart from the other competitors. Firstly, Monsanto’s seeds are patented and aren’t allowed to be replanted after harvest by farmers who use it, this ensures that Monsanto’s future profits remain safe. Furthermore, 90% of the world’s genetically modified seeds are sold and distributed by Monsanto or by companies that are somewhat affiliated with Monsanto, or use their genes in production. In addition to this, Monsanto holds 70%-100% market share on some crops – this means that Monsanto practically dominates many different markets, and by dominating by such a large share, also means that Monsanto can make barriers to entry difficult for new competitors and can thrive on continuous research and development to increase its scope and presence in the biotechnology/genetic modification segment (Ferrell and Hartline, 2011).
Monsanto also has a long history in biotechnology which has given it a huge competitive edge over subsequent competitors; as a loyal consumer base will have been established already. Monsanto outlines their competitive advantage as “the ability to continuously deliver unique combinations of new traits and genetics through a combination of seed chipping and molecular breeding”. Monsanto also adds that 2 more key competitive advantages are its sheer efficiency and unequivocal quality of produce, which allows farmers in many developing countries to grow more crops on less land with less crop being left to chance (Monsanto, 2012). Summarising all of the above, the most prevalent key competitive advantage Monsanto has over its competitors within the external environment such as Pioneer Hi-Bred International is undoubtedly its prolific market dominance, which possibly allows Monsanto to set prices, alter barriers to entry and have more bargaining power over consumers due to the monopolistic/duopolistic environment it currently operates in.
On the contrary, many factors may affect and threaten Monsanto’s competitiveness in the future. The external environment, also known as an operating environment is defined by Lipsey and Chrystal (2011) as the conditions, entities, events, competition and other factors surrounding an organisation which influences its activities and choices; which furthermore determines a firm’s opportunities as well as its risks. Ferrell and Hartline (2011) conveys Monsanto’s main risks as; its inability to enforce its code of ethics effectively – which could lead to Monsanto committing another organisational misconduct; as seen in 2002, where a Senior Manager from Monsanto instructed an Indonesian consulting company to pay a bribe of $50,000 to a member of the country’s environment ministry, in order to hide an invoice which had allegedly shown that Monsanto was facing opposition from local farmers and activists in regards to genetically modified cotton. This resulted in Monsanto having to pay out $1million to the Department of Justice, $500,000 to the SEC and three years of close activity monitoring by US authorities.
Also, another risk outlined was its increased competition as of lately. Many other biotechnology firms are starting to gain a presence in the market, most notably Pioneer Hi-Bred International (now Du Point Pioneer); an American hybrid and varietal seeds producer, which has taken on a rather aggressive pricing strategy to gain clout within the segment, this includes seed sampling which will attract the more price conscious consumer, and much lower grain prices, which may convince farmers to switch from Monsanto to cheaper brands – as the technologies involved gets cheaper and more accessible, this will inevitably drive down Monsanto’s profit margin, cost them market share and bargaining power with consumers. Thus, making this factor the most threatening to Monsanto’s future survival. Another major factor could also be the ‘intellectual property’ wars currently going in within the industry – with many different companies patenting different ideas and concepts; the seed industry is heavily reliant on research, development and innovation. Patents may make it harder for other firms to enter the market, but can also be detrimental to other firms within the market, in this case, Monsanto (Langinier and Moschini, 2002).
Monsanto’s main stakeholders include Customers, Green Lobbyist Groups and Society/The General Public. One of the most important of the three are Monsanto’s customers: Monsanto’s primary customers are farmers where seeds, herbicides and other agricultural products are commonly purchased – the bargaining power of Monsanto customers are low, as it isn’t easy to buy alternatives, they have low financial power and can’t make the product themselves. Additionally, the threat of substitute products is very low, however, as this market becomes more competitive, we may see a shift in bargaining power leaving farmers with more choice – engaging with them by possibly offering incentives and so forth will perhaps ensure future loyalty.
Green Lobbyist Groups and Society/General Public are more concerned about renewable energy, sustainability and environmental ethics, as the green trends are becoming more and more common in the world, however food safety is an issue; many people still aren’t convinced that GM foods are safe and risk free, an EU wide ‘Euro barometer’ survey showed that an overwhelming majority of Europeans disapprove of GM foods (European Commission, 2005).
For firms like Monsanto, listening, understanding and responding to the interests of different stakeholders isn’t just about being charitable or socially responsible – it’s a part of thinking about business activities in a way that recognises the independence of commercial and social objectives. Engaging with these stakeholders encourages executives to address social and non-social factors simultaneously (Samuelson and Birchard, 2003).
There are many strategies a firm can utilise in order to improve its image, the marketing strategy is a plan which allows the firm to concentrate its resources on generating increased sales and achieve a competitive advantage over its external environment. Having said this, Monsanto could try rebranding themselves; possibly changing its name in order to distance itself from a turbulent past, additionally, it would give the firm a new lease of life; ready to take on new competitors and possibly gain some more new customers. An overhaul of the brand on a whole will improve public relations, and would give Monsanto a chance to teach key stakeholders more about the company, it’s heritage and its vision.
On the other hand, Social Marketing occurs when a firm aims to achieve specific behavioural goals for a social benefit, it is often looked at as the non-commercial marketing practice where profit isn’t the main focus.
Social marketing helps firms such as Monsanto to engage with various stakeholders and make society a better place (Robin and Reidenbach, 1987), two strategies Monsanto could take on are to meet sustainable agriculture goals and demands – in order to accommodate a growing world and encouraging efficiency across the firm and charitable giving, which it has already been getting involved with, giving back to the very communities which thrive off Monsanto products may bring long term benefits, such as providing youth programmes which provides scholarships for up and coming agriculture professionals – such a behavioural change in the target population is a benefit to both parties. However, sometimes Social marketing can be very costly, and is sometimes described as being restricted to the non-profit organisation, embarking upon some social strategies may waste management time – as audits need to be carried out.
To conclude, Monsanto is the market leader and appears to be sustaining its competitiveness really well, however, there are threats which Monsanto needs to be aware of; such as competition within the external environment and its inability to enforce codes of ethics correctly, which lead to a hefty fine and a lawsuit. In contrast to that, Monsanto can embark on various marketing and social marketing strategies to increase revenue and promote corporate social responsibility.
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