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Merger in Big Agriculture

Posted on November 02 2016 | Author: Alexander Lazier

$66 billion is the price agreed upon in the largest all-cash acquisition in history. In September of 2016, Bayer the German agrochemical giant, reached a deal after months of deliberations to acquire the American seed company, Monsanto. Outpours of public concern followed as the deal would result in history’s largest seed and agriculture company.

Lets look at the facts:

The total revenue produced by Monsanto in 2015 was $15 billion, while Bayer as a corporation produced $46 billion and its subsidiary Bayer CropScience, $12 billion. The acquisition of Monsanto will provide Bayer with 24 percent of the world’s pesticides, 29 percent of its seeds and 70 percent of the cottonseed market.

Public Concerns
A preliminary concern is that Bayer Crop Science dominates the agrochemical/pesticide industry, while Monsanto leads global seed production. An acquisition therefore is not consolidation of like-businesses, but rather a move for full supply-chain control, more aptly known as vertical integration.

Vertical integration of the two largest companies in their respective fields has strong potential to curb competition and thus increase the probability of price gouging. Although agricultural yields have increased over the years, so have crop prices. Therefore, the potential for price gouging poses large risks in keeping global crop prices elevated, which would have strong effects on related industries.

Lastly, the acquisition will leave farmers facing a duopoly in seed: Bayer/Monsanto and, Syngenta/ChemChina and an additional duopoly in chemicals: Dow/Dupont and Bayer/Monsanto.

Company Reassurances
Bayer and Monsanto have attempted to eliminate the negative buzz by outlining the positive benefits of the acquisition. Primarily, merging two businesses with differing expertise will facilitate faster, more effective R&D in the production of environmentally robust seeds, which are crucial to pest aversion and drought resistance as the world’s population skyrockets. With an annual R&D budget of $2.8 billion, the acquisition is hoping to advance seed research exponentially.

Additionally, as large regulatory hurdles must be passed to introduce novel biotechnology to the market, it is difficult for anyone but large players to compete. The unpredictable and lengthy process encourages consolidation and pushes for vertical integration, as it would be inefficient to do otherwise.

U.S. Government Reactions
The U.S. Senate has responded to the acquisition by assigning both the Justice Department and the Federal Trade Commission to an investigation to ensure that the acquisition will not substantially lessen smaller scale competition.

Industry Reactions
The agriculture industry responded with mixed opinions. If Bayer is true to their claims, the acquisition will create an advanced seed landscape with an increased profile of products that will increase yield and minimizing losses. However, other growers remain skeptical and believe company-centered values and price hikes will eventually be the reality.

Wherever the public stands on this acquisition, the consequences will not begin to appear clear for months, if not years. While concern is indisputably warranted, the potential for great agricultural gains are equally at play. It is up to time to tell whether this potential will be met.  

 

Alexander Lazier
Junior Analyst, Agricultural Technologies

 

Sources
Monsanto brand name may get the circular file in proposed Bayer acquisition
Monsanto's latest acquisition could send food prices soaring
Why our food would be in danger from a Bayer-Monsanto merger

 

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University of Wisconsin-Extension

 

 






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Market Research and Your Company

Posted on March 23 2016 | Author: Alexander Lazier

The advent of advertising was here. The date is November 2nd, 1920 in Pittsburgh, Pennsylvania and the first radio advertising licence had just been purchased. While undeniably monumental, early advertising lacked the direction and precision which market research would eventually facilitate over the decades to come. Early marketing managers would simply create and advertise with the optimism that readers would be influenced through the information provided. However, it was not until Harvard psychologist Daniel Starch pioneered the first market research firm in the mid-1920s that quantifiable data was utilized in supporting serious company strategies.

Nearing a century later, market research has evolved into a pillar of corporate strategy. With increasingly precise technologies and algorithms with abilities to collect information on the most specific of demographics; effective businesses have rooted themselves in high-level market research.   

Though broad in terminology, market research is defined as “The action or activity of gathering information about consumers' needs and preferences.” The current mediums of which this information is identified and interpreted include:

Market information

  • Being cognisant of applicable commodity prices on the market
  • Recognition of supply and demand situations
  • Understanding social, technical, and legal aspects of market

Market segmentation

  • The division of the market or population into subgroups with similar motivations
  • Division allows for deeper analysis of geographic differences, personality differences, gender differences, demographic differences, technographic differences, use of product differences, and psychographic differences

Market trends

  • Identification of patterns in the market
  • Ability to forecast events which have bearing on profit, production, and market value

SWOT analysis

  • Written analysis of the Strengths, Weaknesses, Opportunities and Threats (SWOT) to a business

Marketing Effectiveness

The measure of marketing ROI through the means of:

  • Customer analysis
  • Choice modelling
  • Competitor analysis
  • Risk analysis
  • Product research
  • Advertising the research
  • Marketing mix modeling
  • Simulated Test Marketing

How can your company benefit from Market Research?

As mentioned by the Canadian Government, the goal of conducting market research is to equip businesses with the information needed to make informed strategic decisions on innovation, growth, and the 4 P's:

  • Product — Improve product or service based on findings reflecting customer wants and needs. Focus on features such as function, appearance and customer service.
  • Price — Set a price based on popular profit margins, competitors' prices, financing options or the price a customer is willing to pay.
  • Placement — Decide where to set up and how to distribute a product. Compare the characteristics of different locations and the value of points of sale (retail, wholesale, online).
  • Promotion — Figure out how to best reach particular market segments (teens, families, students, professionals, etc.) in areas of advertising, publicity, social media, and branding.

In summation, by conducting research on a regular basis, businesses keep up with the market dynamics by pre-emptively adjusting to new regulations and technological breakthroughs. While intuition through experience can prove helpful at times, it is research and facts that paint the more accurate picture of your company’s market.


Sources
Diaz Ruiz, C. A. (2013). Assembling Market Representations. Marketing Theory 13 (3): 245–261.
Drucker, P. F. (1974).
 Management: Tasks, Responsibilities, Practices. Australia: Harper & Row. p. 864.
Government of Canada. (2015). Market research and statistics. Canada Business. Retrieved: March 16, 2016
Pauline M., Mark T., Barbara S., Michael S. (2009) The SAGE Handbook of Marketing Theory. SAGE Publications. p. 61-82.

Photo Sourced
Best Finance. (2015). How to Choose a Currency for Your Offshore Bank Account. Retrived from: bestfinancenetwork.com/tag/banking-services

 

Alexander Lazier
Market Intelligence Specialist
Bioenterprise Corporation






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