Challenges Faced by Monsanto Company - Term Paper Example

? Threats/challenges faced by Monsanto Company from the External Environment Introduction Monsanto Company Inc. is an agricultural company with headquarter in the state of Missouri. The company has consolidated revenue of more than $10 billion in the year ended August 31 2010. Monsanto’s major product line includes agriculture seeds developed through biotechnology, herbicides. Monsanto claims to have developed genetically modified seeds for various agricultural crops to give much higher yield per acre of land with lesser inputs. The company’s growth largely depends upon such technologies that the company has developed through in-house scientific research and development programs. It will be pertinent to have a brief glance at Monsanto’s financials for last three years that are enumerated as per the following. Years ended Aug. 31  2010 2009 2008 % Change in 2010 over 2009 Operating Results EBIT  $1572 $3007 $2891 (48%) Net Income Attributable to Monsanto (In Millions) $1,109 $2,109 $2,024 (47%) Diluted Earnings per Share  $2.01 $3.80 $3.62 (47%) Free Cash Flow (In Millions) $564 $1,523 $795 (63% ) Source: http://www.monsanto.com/investors/Pages/financial-highlights.aspx It should be noted that there is a sharp fall in net income of Monsanto during the year 2010 which the company sources attribute to the collapse of herbicide business. (Monsanto Quarterly…2010) Monsanto’s businesses belong to the new age biotechnology field that is itself ingrained with a lot of controversies. The corn produced through the seeds of Monsanto is known as Bt corn. In the corn's DNA, a gene from soil bacteria known as Bt (Bacillus thuringiensis) is infused that is capable of producing Bt-toxin. This is a kind of pesticide and destroys certain insects when they attack the crop. Thus, external use of pesticide is reduced drastically and yield per acre increases manifold. Using this technology, the company has developed seeds for various crops such as cotton, corn, oilseeds, rice and many more. (Smith, 2011) With the above back ground, it will be appropriate to examine the social, political, legal, economical threats that the company has been facing as many of these threats are capable to derail its growth and development if not tackled cautiously. Threat from Generic Producers Monsanto’s operations and rising profits depended largely on its patented product lines. One of the biggest threat that is looming large from the external environments is from the low-cost generic manufacturers hailing from China who have started snatching the market from the Monsanto’s off patent product 'Roundup', a kind of pesticide, which has already given a big jolt to Monsanto this year reducing its sale by 56 percent to $269m from $614m in the quarter last year. (Monsanto Quarterly…2010) Sociopolitical Threats and Issues Monsanto’s operations are spread to more than 100 countries. Monsanto’s major market has been U.S. The company has been trying heavily to enter into Europe to cultivate genetically modified seeds but without much of a success. Till date Europe has never shown any inclination to grow genetically modified (GM) foods. Most countries in Europe have not given green signal to this technology. They feel that until it is proved safe for human consumption and for environment they are not ready to take a risk with genetically engineered crops. The company is constantly coaxing the authorities that their seeds will yield higher crops, use less water and pesticides but with no avail. Apart, the company also claims that their modified variety of rice will be beta-carotene rich and can prevent the deficiency of vitamin A, yet such arguments are not altering public opinion in Europe. Britain allowed only one trial of GM potatoes in Cambridgeshire but so far not allowed for any other major trials in their soil. So is the case with European Union where officials are not ready to lift restrictions imposed on its cultivation. (Will Europe…2008) A Large Lobby against Monsanto’s GM Products There has been widespread opposition to the company’s GM products throughout the world. Perhaps, no other company has faced so much opposition for its products ever in the history. The activists throughout the world including U.S. are demanding that it should be mandatory to differentiate organic foods from GM food. The products grown through GM seeds should display clearly on food packages and labeled accordingly. In May 2011, the activists from Chicago organized a GMO Food Dump Program outside the Lincoln Park and pressed the store to stop selling unlabelled GMO foods. The issue is GM food cannot coexist with organic food. They want food stores to declare and display that genetically modified ingredients are unacceptable ingredients. The group of activists explicitly believes that GMO’s are not safe and environmentally sustainable. The movement is getting heat at other places too such as Seattle and New York. (Millions against Monsanto…2011) The media have been quite vociferous in their reporting about the findings from different researchers about the ill effects of the consumption of GM foods. As Poulter (2011) reports last month, “Toxins implanted into GM food crops to kill pests are reaching the bloodstreams of women and unborn babies, alarming research has revealed.” In an independent study carried out by Canadian doctors revealed that around 93 percent of pregnant women and 80 percent of yet-to-born babies tested positive for traces of the chemicals. GM corns are fed to the livestock around the world and thus toxins are reaching humans and babies in the womb through them. Monsanto has been claiming that even if these toxins are taken by animals or humans they would come out of the body without causing any harm. But these claims of the company have been ill founded as mentioned in the report. Now, demands have been raised from many quarters to put a ban on GM crops and products. The report further states that blood samples were tested for Bt toxin in pregnant women and in 93 percent of the mothers traces were found; besides, traces were also found in 80 percent of the umbilical cords. The report further contends that the toxin is found in the human body because of the consumption of animal products such as milk, eggs, meat who originated from the products derived from the cattle fed with GM corn. The research report is said to be significant and first of its kinds and likely to give strength to all those who are in opposition of GM products. (Poulter, 2011) The Agriculture Biotechnology Council is in opposition to these findings and refuses to accept it. Its chairman is of the view that these findings are unreliable. He states that world is consuming GM products for last 15 years without any health issue. The point is that when such controversies are rampant on the use of GM foods they are posing grave threat to Monsanto and its future. After all, they are directly connected to the issues of health of every human being and regulatory authorities cannot overlook it as it is opposed tooth and nail by all health conscious people. Legal Threats In an another development, Public Patent Foundation, organic agricultural organizations, and over 60 family farmers from U.S sued Monsanto in the district court accusing that the company has disrupted their agricultural businesses. Plaintiffs spanning from Ohio to Oregon, and Maine to California have accused that their organic farming is in jeopardy. Organic Seed Growers and Trade Association (OSGATA), a not-for-profit organization, claims that transgenic contamination of organic seed causes irreversible harm to the organic seed industry (Finley, 2011). Many other not-for-profit organizations such as Organic Crop Improvement Association International, Inc. (OCIA), The Cornucopia Institute, Demeter Association, Inc., Center for Food Safety (CFS) and many more have become plaintiff in a suit against Monsanto for the cause of health issues and food safety making it tough for the company to survive in the long run. (United States…2011) Conclusion Monsanto’s external threats are not emerging from any competitive forces; instead, it can be said that company enjoys monopolistic position in most of its product lines. The challenges to the company now largely forge in developing amiability for its GMO business line among masses including regulatory authorities such as European Commission and the like. Given the intense debate going on about harmful effects of GMO products and a lot of arguments in its favor and against company’s businesses are like to swirl between two extremes. And that does not augur well for the promoters and company stake holders. So far there is no labeling required by law on GM products but once the authorities put them in place, it is likely that the company finds more people refusing to use GM products. That may turn out to be a big setback to the company. Numerous litigation suits filed against the company are bringing bad publicity and may create havoc if the company is proved accused in the court of law and punished. The company is passing through the worst period in its history and it needs to devise a full-fledged strategy based on scientific evidence to convince the masses and thwart external challenges. That is the only way the company can win the confidence of masses and survive. References 1. Financial Highlights (2010), Online 16 June 2011 http://www.monsanto.com/investors/Pages/financial-highlights.aspx 2. Smith, Jeffrey (2011), Dangerous Toxins From Genetically Modified Plants Found in Women and Fetuses, online from 17 June 2011 http://www.responsibletechnology.org/blog/1412 3. Monsanto quarterly profits fall 45% (2010), Online 16 June 2011 http://www.ft.com/cms/s/0/466078cc-844a-11df-b9f800144feabdc0.html#axzz1PPlEh5Id 4. Will Europe Give in to Genetically Modified Foods (2008), Online 16 June 2011 http://blogs.discovermagazine.com/80beats/2008/06/19/will-europe-give-in-to-genetically-modified-foods/ 5. Millions Against Monsanto: Chicago to Seattle, on to Boulder, New York & Your Town Online 16 June 2011 http://www.organicconsumers.org/articles/article_23237.cfm 6. Poulter, Sean (2011), GM food toxins found in the blood of 93% of unborn babies, Online 16 June 2011 http://www.dailymail.co.uk/health/article-1388888/GM-food-toxins-blood-93-unborn-babies.html 7. Finley, Tiffany (2011), Battleground for Planting Rights: Monsanto Sued by Farmers, online 17 June 2011 http://www.triplepundit.com/2011/04/battleground-planting-rights-monsanto-sued-farmers/ 8. United States District Court, Online 17 June 2011, http://www.pubpat.org/assets/files/seed/OSGATA-v-Monsanto-Complaint.pdf Read More