MONSANTO COMPANY – DOING BUSINESS IN INDIA Individual Case Memo – Prince Ponnachan Student ID: 5006514 Discuss the history of Monsanto in India. How does Monsanto’s business in India contribute to its sustainability goals? Answer: Monsanto India Limited (MIL) was established in 8th December, 1949 as a private limited Company at Mumbai and was converted into a public limited company on 1st July, 1978. In 2002, the firm introduced, through a joint venture, the first in-the-seed cotton trait biotechnology for Indian farmers. The seeds contained insect-protection traits — a protein to protect cotton plants from potentially devastating pests called bollworms, which caused the majority of crop yield loss in cotton. The company Manufacture Agricultural Chemicals. Monsanto's work in India began over 50 years ago, soon after independence. Its product Roundup has been providing plantation growers with a leading–edge weed control solution since 1991. It has pioneered the chemical-weed-control concept in the country and is a market leader in rice herbicides which are marketed under the brand name MACHETE. It also markets `Lasso' a broad-spectrum herbicide. After marketing herbicides since the 1970s, the firm had begun offering hybrid seeds of corn, cotton and vegetables from the turn of the century. In 2002, the firm introduced, through a joint venture, the first in-theseed cotton trait biotechnology for Indian farmers. The seeds contained insect-protection traits — a protein to protect cotton plants from potentially devastating pests called bollworms, which caused the majority of crop yield loss in cotton. Monsanto has had a huge hand in transforming the agricultural trends in India by introducing products with technological innovations, resulting in lower usage of chemical pesticides and improving efficiency. In 2002, the firm introduced, through a joint venture, the first in-the-seed cotton trait biotechnology for Indian farmers. The seeds contained insect-protection traits — a protein to protect cotton plants from potentially devastating pests called bollworms, which caused the majority of crop yield loss in cotton. In 2002, the firm introduced, through a joint venture, the first in-the-seed cotton trait biotechnology for Indian farmers. The seeds contained insect-protection traits - a protein to protect cotton plants from potentially devastating pests called bollworms, which caused the majority of crop yield loss in cotton. Monsanto’s focus on sustainable farming emphasized the life sciences. Recognizing that current farm practices and technologies were not adequate to meet the growing global demand for food, its sustainability vision would be realized through biotechnology along with improved hybrid seeds and modernized agronomic practices. Monsanto viewed its sustainability plan in three metrics. The first is resource utilization (in terms of land, soil, water, energy and greenhouse gases) per unit of farm production. The second is from the point of view of the farmer. Income is a major metric here. Farm income is an area where the progress in India has been phenomenal of late. Therefore, it can be said that Monsanto has contributed in the sustainability goals in India by its huge technological contributions to the farmers of India, increasing their productivity and by focusing on developing sustainable products which does no harm the environment. What are the main risks that Monsanto faces in terms of regulatory uncertainty? Answer: Monsanto has over the years focused and invested more on R&D than any other company. Monsanto was investing roughly 10 per cent of sales each year on R&D. In contrast, DuPont reported R&D at about 5 per cent of sales. While it has drastically changed the agricultural returns of the farmers, Monsanto finds itself stuck in a lot of regulatory issues. Reasons for which are: decisions made by fragmented governing bodies, different political parties governing different provinces, communities/activists speculating and restricting technological interventions. All the R&D based investments by Monsanto are at a risk, since new technology and products and not easily accepted in the market where it faces Regulatory, which even if streamlined takes about a decade for approval. There isn’t a guarantee even after the long approval process, if the end result is to be a positive one. For eg: In February 2010, the federal government made a surprising intervention. In the late 1990s, Monsanto had sold an insect-protection gene for brinjal to Mahyco, a local seed company with its own focus crops. Following this, Mahyco had successfully completed a rigorous, nine-year regulatory review of insect protection biotech brinjal, after which GEAC had finally given its approval in October 2009. The new seeds were due for commercial launch when the federal minister of environment and forests personally intervened to overrule the formal approval given by the official regulator, requesting further study. The sudden change in the established, sciencebased regulatory framework had taken the seed companies in India by surprise. Apart from this, there’s also the general goodwill of the company at stake, when activists who can influence people and government, go against the company and its products which can seriously risk the smooth running of business for Monsanto. Make the argument that investments should be made in accordance with changing regulatory realities and Monsanto should embrace short-term manoeuvres to comply with changing rules. Then make the argument that Monsanto should work only on products that have a straightforward approval process, but that limit innovation for local farmers. Answer: As righty pointed out by Gerald A. Steiner, Monsanto’s business is technology intensive and that gives room for short-term manoeuvres, since they don’t have large fixed assets, like big factories, that we need to put to work regularly. This allows them a certain amount of flexibility in running their business. The best way to go about is perhaps looking at the current set of problems that are worrying the farmers and providing technological solutions to those, which will help in the smooth streamlining of regulatory processes. Investments and products that come with futuristic solutions are clearly not entertained by authorities in India (reasons could be speculation, misguiding information on the products etc.) Therefore, using its technological facet and quick mechanism, agricultural solutions and products should be set up in short-term manoeuvres. This will also enhance the image of the company as a major problem solver in the agricultural industry. Given the regulatory uncertainties, its safer to continue with older products while making small advancements as per the current requirements. Monsanto should primarily only focus on products which won’t invite regulatory inconveniences, since India is a huge market for Monsanto and it cannot risk its business in India for any given reason. More energy has to put into making the parties involved in educating decision makers and to make them understand the benefits of innovated products and the impact it has on the agricultural business in India. That being said, focusing only on previous products and products already streamlined washes away a huge line of opportunities in the agricultural sector, the implementation of new hybrid crops which could possibly change the face of the agribusiness. What are the challenges to option you recommend? How will you generate internal support at Monsanto for this approach? Answer: a. The major challenge will continue to be the lack of innovation being brought into the market, avoiding a lot of futuristic possibilities. b. Another challenge is that short term manoeuvres would require frequent and constant technological advancement, which would be a major cost for the company. c. Price caps imposed by the government will further add to the burden of carrying out a business that needs constant improvised technology with low incomes. d. India being an agrarian country with around 70% of the people directly or indirectly upon agriculture has the highest number of farmer suicides. Knowing this, a lot of products that could probably help improve the lives of farmers economic conditions will have to be pipelined. e. The agricultural produce in India is yet to meet the global standards, which is possible only with scientific intervention like the rest of the world. It is also the need of the hour to increase the produces due to the ever-rising population. Internal support for this approach would be created by increasing the funding to create teams that can work specifically for short term manoeuvres, on technologies that are fit as per the changing laws and regulations. Recruiting compliance experts in the particular area who can explain and help forecast the possible regulatory issues that would come up.
