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Nus cerebration monsanto case rbs gems
- 1. University of Mumbai Team Members – RBS Gems Dhupar, Ayush Mr. +91 – 976 926 7760 ayushdhupar@gmail.com George, Sheba Ms . +91 – 720 884 6175 shebap30@gmail.com Sanganee , Nikunj Mr. +91 – 808 202 9196 nikunj.189@gmail.com Monsanto case study: Improving the lives of farmer Round 1 - Executive Summary 9th September, 2013 Empowering Leadership Rustomjee Business School
- 2. Recommended strategies for Monsanto Pull Strategy Push Strategy Grain cooperatives Forming farmers association for eliminating intermediaries. Contract farming Providing employment opportunities through contracts for farming on test piece of land. Social events Educational events, Inter – district competition etc. will help improve Monsanto’s reputation. Management Contracts Lease out unutilized land for agriculture purposes. Agricultural Training schools Attracting farmers and their children towards agro education. Tenant farming and sharecropping Bridge between small farmers and large landowners, with contract farming or sharecropping (splitting of grains as profits) Opinion leaders/ large landowners Convincing large land owners regarding the usage of GMS & its benefits. Farmer-owned business Help from farmers who are indulged in multiple businesses. Government buy-in Tie up with Government for Stable prices of grains. Upstream/downstream business links Identify back-end suppliers and front-end consumers for efficient value chain Forward integration Creating a value chain for grains. Global Exposure & Involvement Show videos of farming techniques conducted at international level. Tie-up assured buy-backs with corporate Tie up with MNC’s for purchasing the byproducts. Eg: Wheat flour, corn flour etc. Joint Ventures Enter into a joint venture with another seed producing company to enjoy the supply chain management. Investments & Expected Returns Table 1: Gain from GMS on 25Ha Land Land (Ha) Seed for sowing Cost of GM Seed Total cost of Seed Total Produce (40xGMS) Selling Price Total Revenue Other Prodn. costs (55% of Sales) Net Gain 25 250 kg US$2/kg $500 10,000Kg US$4/kg $40,000 US$22,000/- US$17,500 The above is worked on assumption of an investment of $70,000 to purchase 25 Ha land, and gain is calculated ignoring financing costs and taxes. Table 2: Expected Investments and Returns a) Monsanto’s current Annual Sales (APAC) $ 850m b) SG&A expenses as a % of sales 17% c) APAC SG&A expenses $ 144m d) 30% of APAC expenses to be spent in Indonesia $43m e) Net Gain for 25 Ha land (USD) $17,500 f) Total Land mass available(m Ha) 5.33 g) Land area currently under cultivation (m Ha) 3.2 h) Non-cultivated land 2.13 h) 20% of non-cultivated land is brought under Monsanto - either through PPP, or leasehold or Government support (m Ha) 0.43 i) 20% of existing cultivable land adopt Monsanto (m Ha) 0.64 j) Total land under Monsanto (m Ha) 1.07 k) Expected Returns $ 746mn Returns 417 %
- 3. Monsanto’s Potential Partnerships Partnering Organization Nature of relationship Farmer Investments Benefits Nokia Tech partner (OVI Life Tools) Nil Updates on climate. Advice on farming techniques Agricultural School Training & development Course fee (free) Exchange of technology Better understanding of agriculture. Quantity of fertilizers to be used for GM seeds Local seed Distribution Supply Chain Management Cost of seeds GMS at Subsidized rate. Monsanto can sell better through already established company. Telecommunication Co. (Eg. Telkom) Call Centre Toll free 24 hour assistance on any agricultural problem. NGO’s CSR Free Free seeds to the BPL farmers, for their basic food requirement, Monsanto can improve their reputation. Performance Metric Model 1: Public Private Partnership Process:- Monsanto can directly approach the Government of Indonesia, and ask for a piece of fertile land, This land would be a demonstration area to show the yield and productivity of GM seeds Monsanto can then plant their GMS seeds to actually prove the advantages of GMS’s Advertisements and tourism can be conducted in order to spread the awareness about Monsanto and GM seeds The produce can then be utilized for distribution among the poor farmers and for export. During the interim period, Monsanto can partner with any of the above organizations to create awareness and educate farmers about GMS. Factors – Push Strategy Baseline Increase in sales 10% Increase in No. of farmer users 5000 No. of sample request increases 20% Increase in no. of grain corporations 5% Increase in income due to exports 15% Factors – Life style improvement Baseline Increase in income 20% Increase in purchase of fixed asset 10% Increase in purchase of movables 5% Increase in purchase of personal land/transport 12% 5. Opening bank account 10%
- 4. Model 1 - Grain Cooperative Process:- There are approx 78000 villages in Indonesia. Each village or every 4-5 villages will form a cooperative of grass root farmers. On harvesting, the grass root farmers will come together sell their harvest to the District cooperative formed through their respective village cooperative on regular basis. District cooperative can then sell the wheat & cotton or develop wheat & cotton products and sell it to the state federation which will directly trade it and the surplus can be exported which will help the Government of Indonesia in reducing their current account deficit. Advantages:- Warehousing will be taken care by village or district cooperatives, eliminating chances of grain spoilage on grass root levels. Provides employment opportunities at village, district and state levels. Surplus money earned by the state federation by selling the grains and the products can be distributed as dividends. Diversification from grains to by-products like wheat flour, corn flour and the same can be sold to various MNC’s. Conclusion Our strategies are twofold; first the Pull strategy which will create a demand for Monsanto seeds while the Push strategy will try to increase the supply. The investment plan suggests that if Monsanto invest $144 mn, then its returns would be $746 mn which is 4.17 times. We have suggested a few potential partners in Telecom, educational and NGO sectors which will help Monsanto in improving its credibility. The PPP model and the Grain corporative model indicate the implementation of the plan.