Monsanto Case Analysis

Monsanto and the Global Water Treatment Industry Case

Akhmad Dwi Riyanto

29116011

M. Daniala Syuhada

29116059

Gemma Grimaldi

29116223

Siti F. Ristekawati

29116122

SYND SY NDIC ICATE ATE 5 - EM EMBA BA 55 A ITB

GLOBAL WATER TREATMENT INDUSTRY Industry 











Definition: Water treatment sector the largest segment of the environmental industry worldwide was divided into two major applications: Waste Water Treatment and Clean Water Treatment The world market for water treatment equipment was estimated to be 100 billions dollars. Due to buoyant of the expansion of the market in the early 1990s many companies enter the market resulting in intense competition. The industry was extremely fragmented, in the US alone, there were over 50.000 water treatment company. According to Monsanto’s President of sustainable development, the demand for water was exceeding supply in a number of world area. Was it worthwhile for Monsanto to enter this industry?

THREAT OF NEW ENTRANTS: BARRIERS TO ENTRY Yes (O)

1. Do large firms have a cost or performance advantage in Monsanto’s segment of industry?

O

2. Are there any proprietary product differences in your industry?

O

3. Are there any establish brand identities in Monsanto’s industry?

O

No (O)

4. Do Monsanto’s customers incur any significant costs in switching suppliers?

O

5. Is a lot of capital needed to enter Monsanto’s industry?

O

6. Is serviceable used equipment expensive?

O

7. Does the new comer in your industry face difficulty in accessing distribution channel?

O

8. Does experience help Monsanto continuously lower costs?

O

9. Does the newcomer have any problem in obtaining the necessary skilled people, materials or suppliers?

O

10. Does Monsanto product or service have any proprietary features that give you lower costs?

O

11. Are there any licenses, insurance or qualifications that are difficult to obtain?

O

12. Can the newcomer expect strong retaliation on entering the market?

O

BARGAINING POWER OF SUPPLIERS Yes (O)

1. Monsanto’s inputs (materials, labor, supplies, services, etc.) are standard rather that unique or differentiated.

O

2. Monsanto can switch between suppliers quickly and cheaply.

O

3. Monsanto’s suppliers would find it difficult to enter Monsanto’s business.

No (O)

O

4. Monsanto can substitute inputs readily.

O

5. Monsanto have many potential suppliers.

O

6. Monsanto’s business is important to his suppliers.

O

7. Monsanto’s cost of purchase does not have a significant influence on Monsanto’s overall costs.

O

BARGAINING POWER OF BUYERS Yes (O)

1. Is there a large number of buyers relative to the number of firms in the business?

O

2. Does Monsanto have a large number of customers, each with relatively small purchases?

O

No (O)

3. Does the customer face any significant costs in switching suppliers?

O

4. Does the buyer need a lot of important information?

O

5. Is the buyer aware of the need for additional information?

O

6. Is there anything that prevents Monsanto’s customer from taking his function in-house? 7. Monsanto’s customers are not highly sensitive to price.

O O

8. Monsanto’s product is unique to some degree and has accepted branding. 9. Monsanto’s customers’ business are profitable

O O

THREAT OF SUBSTITUTE PRODUCTS Yes (O)

1. Substitutes have performance limitations, which do not completely offset their lower price, or their performance advantage is not justified by their higher price.

O

2. The customer will incur costs in switching to a substitute.

O

No (O)

3. Monsanto’s customer has no real substitute

O

4. Monsanto’s customer is not likely to substitute

O

INTENSITY OF RIVALRY AMONG COMPETITORS Yes (O)

1. The industry is growing rapidly.

O

2. There are few incumbent competitors.

O

3. The industry is not cyclical with intermittent over-capacity.

O

No (O)

4. The fixed costs of the business are relatively low portion of total costs.

O

5. There are significant product differences and brand identities among competitors.

O

6. The competitors are diversified rather that specialized.

O

7. It would not be hard to get out of this business because there are no specialized skills and facilities or long-term contract commitments.

O

8. Monsanto’s customer would incur significant costs in switching to a competitor.

O

9. Monsanto’s product is complex and requires a detail understanding on the part of your customer.

O

10. Your competitors’ firms are all approximately the same size as yours.

O

Five Forces of Competition Framework

Monsanto's Porter’s

SUPPLIERS

Bargaining power of suppliers

POTENTIAL ENTRANTS

Threats of new entrants

INDUSTRY COMPETITORS Rivalry among existing firms Bargaining power of buyers BUYERS

Threats of substitute

SUBSTITUTES

OVERALL INDUSTRY RATING Favorable

Threats of new entrants

O

Bargaining power of buyers

O

Threats of substitutes Bargaining power of suppliers Intensity of rivalry among competitors

Moderate

Unfavorable

O O O

Conclusion: Water treatment industry is still attractive to enter and to invest for Monsanto