Need one single space. Need add subtitle. Total word count at least 700. CASEWe are using Case #3: “Bayer Crop Science” for this discussion. Find it in your packet or at the Harvard site. “Bayer Crop Science”, David E. Bell, Damien McLoughlin, Natalie Kindred and James Barnett. Harvard Business School, January 30, 2020. 26 p. Item # 9-520-055.WHAT YOU NEED TO DOYou will see that I have started a new post and put in a question(s) to start off the conversation. The questions are noted below as well.Think through your response to the question. Use the details in the case as well as the concepts, tools and frameworks we are discussing in class to compose your response. Be sure that you are providing not only an answer to the question, but supporting that answer with details from the case, just as if I was to ask you “how did you get to that conclusion from the material in the case”.As a reminder — compose your original post in WORD and save it. Then copy/paste into Canvas. Do not risk writing a beautiful discussion post in Canvas and having the system time out before you get to post it…….As a guideline on length:Your own post: No less than the equivalent of one single-spaced page, or four to five paragraphs.Responses: Typically, one or two paragraphs and include more than broad “I agree” statements. Demonstrate you have read the post, thought about it, and put in something that is akin to a conversation – follow-up questions, your own experience that is similar or differs, etc.THIS WEEK’s QUESTIONLiam Condon has just sent out the agenda for the quarterly management team meeting. It’s time to set strategic integration priorities for the next three years. Condon has asked that you come prepared with your assessment of the original strategic rationale for this transaction, your evaluation of how the firm has done so far and your recommendations on where investments should be made to realize the promise of the Bayer-Monsanto acquisition. How will shareholder value be created to cover the 15% premium that Bayer paid?Condon has thrown out a few options for you to consider, so evaluate those and recommend which should be implemented and how, but feel free to add others as well. How can adoption of Climate’s platform be increased? Should operations and structure be further combined? What has to be done to complete and leverage the digitization of R&D? How can consumer and farmer trust be improved to meet the food supply needs of the future? And what should Bayer do about the lawsuits still outstanding?For the exclusive use of J. Zhao, 2021.
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REV: JANUARY 30, 2020
DAVID E. BELL
DAMIEN MCLOUGHLIN
NATALIE KINDRED
JAMES BARNETT
Bayer Crop Science
Driving to his office on a hot June 2019 morning, Liam Condon reflected that a year had passed
since German life-sciences company Bayer Group finalized its acquisition of Monsanto, the U.S.-based
global leader in seeds and provider of agricultural services. Condon was a Bayer board member and
president of Bayer’s Crop Science division, which, following the Monsanto acquisition, had become the
biggest player in the global seed and agrichemical industry. Bayer’s historical strength was in cropprotection products (insecticides, herbicides, fungicides, etc.), which farmers used to prevent yield
losses caused by pests and other threats. Monsanto was the world’s leading seed seller. For example,
its market share in corn germplasm (seeds and other genetic resources) was over 50% in the U.S., about
45% in Brazil, and about 75% in Argentina. In soybean germplasm, its share was over 40% in the U.S.
and about 20% in Brazil. Monsanto also had a digital agriculture arm, The Climate Corporation
(Climate), which offered farmers advanced digital tools to collect farm data and provided them with
tailored operational advice and product recommendations to help boost yields.
Condon expected the acquisition to produce €1 billion of cost synergies by 2022 (80% in cost of
goods sold and 20% from consolidating revenues) and for Bayer’s Crop Science division to achieve an
EBITDA margin of over 30% by 2022. 1 Strategically, he saw the “new” Bayer as uniquely positioned to
drive the evolution of agriculture into something more like digitally enabled precision manufacturing.
To feed over nine billion people sustainably by 2050, farmers needed inputs tailored to specific soils
and climates, plus actionable information to optimize farming decisions. The Bayer team intended to
enable this by translating big data—from farms through Climate (now part of Bayer), and from Bayer’s
research and development (R&D) operations—into value for farmers, shareholders, and society.
The strategy was already taking root. Climate was expanding its farmer-subscriber network and its
bank of real-world agricultural data. Internally, Bayer’s Crop Science division was digitizing its entire
R&D system, which was expected to radically improve product innovation. The resulting pipeline of
high-value products would be recommended to farmers (along with competitors’ products) through
Climate. The business model put data and innovation at the center of Bayer’s strategy.
HBS Professor David E. Bell, Professor Damien McLoughlin (UCD Michael Smurfit Graduate Business School), Agribusiness Senior Researcher
Natalie Kindred, and Case Researcher James Barnett (Case Research & Writing Group) prepared this case. It was reviewed and approved before
publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company.
HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.
Copyright © 2019, 2020 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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Bayer Crop Science
Condon was enthusiastic about the future for Bayer, even as he recognized that several serious and
delicate merger-related challenges were yet to be resolved. Was his enthusiasm justified? Would Bayer
create value by driving agriculture’s transformation?
Bayer Group
Bayer was founded in 1863 in Leverkusen, Germany, originally focusing on textiles. The firm
developed aspirin later that century and, over time, evolved into a self-described “leader in health care
and nutrition” with the purpose of “Science for a Better Life.” In 2019, Bayer, led by Management Board
Chairman Werner Baumann, comprised 420 consolidated companies in 90 countries and had over
115,000 employees. Its 2018 revenues of €40 billion came mostly from four segments. The
Pharmaceuticals division, with €17 billion in revenues, included a radiology supplies business but
mainly focused on developing and selling prescription medicines through wholesalers, pharmacies,
and hospitals. Bayer’s Crop Science division generated €14 billion in revenues in 2018 and more than
€19 billion on a pro-forma basis, and was expected to become the Group’s largest business. (First-half
2019 sales topped €11 billion.) The Consumer Health division (€5.5 billion) focused on over-the-counter
medicines, cosmetics, and personal care products. Finally, the Animal Health business (€1.5 billion)
made preventive and curative products for pets and farm animals and sold them through veterinarians
and other channels. (See Exhibit 1 for financials, Exhibit 2 for R&D spending, Exhibit 3 for strategic
priorities, and Exhibit 4 for a stock chart.)
The Crop Science Industry
Seeds and Traits
In recent decades, academic and commercial breeders had applied their advancing knowledge of
plant genetics to identify desirable characteristics (e.g., resistance to adverse weather or disease,
improved nutritional quality) and develop enhanced seed varieties that enabled better harvests. Such
innovation was complex; one industry expert called trait development “more complicated than rocket
science.” 2 Firms bred proprietary traits into their own branded seeds and often licensed them to other
seed firms. Monsanto (now Bayer) was the industry leader in licensing seed and trait technologies to
others.
Bayer valued the global market for seeds and traits at about €40 billion in 2019. 3 Of the total market,
grains and oilseeds accounted for roughly 75% of sales. 4 About 40% of sales were of genetically
modified (GM) seeds. 5 In the GM process, scientists made targeted changes to a seed’s genetic
composition to introduce or affect specific traits. Some GM traits enhanced production efficiency,
provided insect protection, or increased drought tolerance in crops. For example, Monsanto developed
a GM trait with tolerance to its Roundup-brand (glyphosate) herbicide and bred it into “Roundup
Ready” seeds. Other GM traits enhanced qualities like shelf-life or appearance; examples included GM
apple varieties (not developed by Monsanto) with reduced levels of the enzymes that caused browning.
In 1996, Monsanto was the first to commercialize GM row crop seeds such as cotton and soybeans, and
it remained the leading GM seed producer. (See Exhibits 5 and 6 for U.S. adoption of GM crops.)
According to ISAAA, a GM crop advocacy group, GM crops were grown in 26 countries in 2018, of
which five—the U.S., Brazil, Argentina, Canada, and India—accounted for 91% of the global GM crop
area. Half the global GM crop area was for soybeans. In addition to the 26 growing countries, 44
countries imported GM crops in 2018. 6 Some countries banned or strictly regulated production of GM
crops and the importation of food products with GM ingredients.
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Crop-Protection Products
Crop-protection products were applied to seeds, plants, or soils and contained at least one active
substance—a chemical, microorganism, plant extract, etc.—that mitigated harm to crops from
damaging organisms. The main product types were herbicides, insecticides, and fungicides. They
could be preventive or curative; selective (affecting only the targeted pest) or broad spectrum (affecting
all organisms); and function through contact with the pest or through absorption by the plant. The
crop-protection category included synthetic pesticides—chemicals that were the industry’s traditional
product—as well as biologically derived “biopesticides” and plant growth regulators, which
influenced the life process of crops by, for example, promoting nutrient absorption. By some
definitions, the category also included biostimulants, products which promoted specific plant
attributes such as color. Chemical and biological crop-protection products were broadly used in
conventional farming. Organic farming standards emphasized naturally derived forms of crop
protection but also permitted the use of certain synthetic products. 7 Bayer valued the global market for
crop-protection products at about €50 billion in 2019. 8
The Price of Innovation
For seed and crop protection companies, developing and commercializing products was time
consuming, complex, and very expensive. A 2011 study of GM traits found that the process from
discovery to commercialization could take seven to 13 years or more and cost over €100 million. 9 Firms
often sought intellectual property protections for innovations—including novel active ingredients,
product formulations and uses, manufacturing processes, traits, seeds, genomics-related processes,
breeding technology, commercial seed and hybrid products, etc.—which protected their investment.
Market-by-market regulatory approvals took years. An extreme example was Brazil: three agencies
shared oversight of the crop protection market, and it could take eight years to register a new molecule
and four years for a generic. 10 (Brazil was thought to be reforming its system.) The introduction of
innovative products that “stacked” beneficial characteristics added to the cost of R&D and
commercialization.
Growing More With Less
Since the mid-20th century, the increased use of synthetic fertilizers, improved seed varieties, and
crop-protection products had enabled dramatic growth in global agricultural productivity, achieved
more through yield increases than cropland expansion. From 1960 to 2019, the worldwide area of
cropland per capita nearly halved, from 0.43 hectares (ha) (about 1.3 billion ha of cropland available to
feed 3 billion people) to 0.23 ha (about 1.75 billion ha for 7.5 billion people). 11
However, overall yield growth was slowing and existing products had limited potential to raise
productivity—a sobering fact given that the global population was set to grow to nearly 10 billion in
2050, necessitating a 50% increase in gross agricultural output. 12 Developing nations would account
for 8 billion people by 2050 and require 70% more meat and dairy compared to 2016. 13 Urbanization
was a major pressure. As people migrated to cities and raised their incomes, their consumption of
protein, processed food, and overall calories increased. Over half the world’s 7.5 billion people now
lived in cities; in China alone, the urban population could reach 76% by 2025. 14 At the same time, the
effects of climate change, pollution, and land degradation were eroding supplies of freshwater and
arable land.
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Many experts believed that feeding the future population would require a significant expansion in
agricultural production without undermining crucial natural resources. Land restoration and land-use
conversions in places like Brazil could create new land area for farming without clearing intact habitat,
and regions that had not yet adopted modern farming methods could increase productivity by doing
so. But the sum of these efforts was likely to be insufficient without the development of innovations
and processes to accelerate agricultural productivity.
Digital Agriculture
Farmers traditionally relied on experience, their own analyses, and advice from trusted sources—
their generational forefathers on the farm, fellow farmers, suppliers, and agronomic advisors from the
public and private sectors—to make decisions such as what seeds to plant and how to manage threats
from insects, weather, and disease. The results were normally not clear until harvest time and, even
then, it was difficult to discern how much any one factor (plant genetics, environmental factors,
agronomic practices) had influenced the yields of a particular harvest. Digital agricultural tools could
potentially fine-tune the production process by giving farmers useful data in real time to inform
operational decisions, as well as provide feedback on the impact of those decisions.
The spectrum of digital agriculture technologies included sensors, drones, robotics, artificial
intelligence (AI), communication networks, algorithms, predictive analytics, and more. These
components typically functioned in an “Internet of Things” model, frequently or constantly collecting,
integrating, and analyzing data from different points in a system in order to improve its performance.
The range of potential uses in agriculture was wide. One existing application involved using sensors
to monitor soil moisture and integrating this data with weather forecasts to inform irrigation protocols.
Another involved monitoring environmental factors and using predictive analytics to anticipate risk of
pests and diseases; farmers could then adapt their chemical sprays accordingly. (Exhibit 7 describes
the use of data in farming.) “Digital tools will change agriculture tremendously,” said Brett Begemann,
COO of Bayer’s Crop Science division. “I don’t think the industry has an appreciation yet for how
dramatic that change will be.”
Although the field was still emerging, players across the finance, technology, and crop inputs
sectors were staking claims in digital agriculture, with about €6.7 billion invested in “agtech” in 2016
and 2017. 15 “Many players are active in the space, from large multinationals to a plethora of venturebacked startups, all offering single solutions,” said Mike Stern, CEO of The Climate Corporation and
head of digital farming at Bayer. “But even the more established players in the industry face the
challenge of credibility, access to the farmer, and scalability.”
Many industry observers expected the necessary step-change in agricultural productivity to come
not from digital agriculture alone, but from the integration of digital agriculture and broader data
science capabilities with breeding, biotechnology, and chemistry. In a June 2018 interview, Hugh Grant,
Monsanto’s former CEO and chairman, predicted that this integration would drive a “renaissance” and
“unlock that next tranche of productivity.” “[I]t feels like that’s just around the corner,” he said. 16
From Big Six to Big(ger) Four
The acquisition of Monsanto by Bayer—announced in September 2016, approved in June 2018, and
executed that August—capped off a series of seed-and-chemical mega-mergers that began in 2015. Back
then, the industry had been under pressure as farmers cut purchases amid a prolonged slump in crop
prices. Analysts began predicting a wave of mergers, though six firms—BASF, Bayer, Dow Chemical,
DuPont, Monsanto, and Syngenta—already controlled 75% of the crop-protection market and 62% of
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the seeds market. 17 Each of the so-called “Big Six” was active in chemicals and seeds but stronger in
one area (see Table 1). The general rationale for potential tie-ups was twofold. First, firms could
combine their portfolios to form one-stop-shops for seeds, agrichemicals, and digital services, thereby
capturing a greater share of farmers’ wallets. The Bayer team believed this combination of products
and innovation would unlock new value for growers. Second, greater scale would allow firms to absorb
the growing cost and complexity of developing and commercializing new products.
Table 1
The “Big Six” Sales in 2015 (€ millions)
Firm
Country
BASF
Bayer
Dow Chemical
DuPont
Monsanto
Syngenta
Germany
Germany
U.S.
U.S.
U.S.
Switzerland
Seeds & Traits
Small
€1,277
€1,296
€6,242
€9,144
€2,613
Agrichemicals
€5,848
€8,271
€4,579
€2,772
€4,248
€9,212
Source:
Compiled from James MacDonald, “Mergers in Seeds and Agricultural Chemicals: What Happened?” USDA ERS,
February 15, 2019, https://www.ers.usda.gov/amber-waves/2019/february/mergers-in-seeds-and-agriculturalchemicals-what-happened/, accessed June 2019; Capital IQ; and company documents.
Note:
Conversions to euros for Dow Chemical, DuPont, Monsanto, and Syngenta performed by Capital IQ using the firms’
respective fiscal year-end date.
The first bid came in May 2015, with Monsanto offering to buy Syngenta for about €40 billion. A
survey of Syngenta shareholders found “overwhelming support” for deal negotiations, but Syngenta
rejected the offer, calling it too low and citing antitrust and political concerns. 18 This was applauded
by some, including many U.S. farmers who worried the merger would reduce competition and lead to
higher prices. Seeds and agrichemicals were already major cost items—in the U.S. they accounted for
about 20% of annual expenses for corn, cotton, and soybean farmers 19—and from 1995 to 2015, U.S.
farmers’ average cost of seeds had risen roughly 300% and chemicals about 11%. 20 “American
agriculture is already far too economically concentrated, leaving family farmers and ranchers at a great
disadvantage in the marketplace,” said the president of the National Farmers Union, a U.S. trade group,
in 2015. 21 “When you have that much market power, there’s too much money to be made using your
market power to push the company’s interests forward,” added a member of the group’s board. 22
Their relief did not last. Within 13 months, three deals were announced that, after lengthy antitrust
reviews, reduced the “Big Six” to four: Corteva, a firm created in the merger and spinoff of Dow
Chemical’s and DuPont’s agriculture units; ChemChina-Syngenta, formed when state-owned
ChemChina, China’s largest chemicals producer, bought Syngenta for about €38 billion; a Bayer, which
bought Monsanto for about €55 billion (Monsanto had first tried to buy Bayer’s agricultural unit); and
BASF, which bought the roughly €8 billion in assets that regulators made Bayer sell before approving
its Monsanto purchase. 23 (See Exhibit 8 for “Big Four” 2018 sales and R&D spending.) Condon believed
the table was now set: it was hard to imagine that further major consolidation would be permitted.
a ChemChina sold generic pesticides, partly through Adama, its Israeli subsidiary. It did not sell seeds or do much R&D.
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Bayer Crop Science
The Bayer-Monsanto Marriage
Condon was skilled at the mechanics and diplomacy of acquisitions, having overseen several as
head of Bayer’s Crop Science division since 2012 and in prior leadership roles at Bayer Group’s former
HealthCare unit and at Schering AG. Still, the Monsanto deal was unprecedented. It was the largest
ever acquisition not only for Bayer, but for all of Germany. The regulatory approval process had been
highly complex. (Regulators had been concerned that the series of mergers could undermine
competition and innovation in the industry.) Bayer’s regulator-mandated sales to BASF—its cotton,
canola, soybean, and vegetable seed businesses, an herbicide, some R&D assets, and its digital unit—
was claimed by the U.S. Department of Justice to be the largest merger divestiture in U.S. history. 24
(See Exhibit 9 for Monsanto’s and Bayer’s stock performance.)
Dropping the Monsanto name was a weighty step for the company. By namesake, Monsanto was
founded in 1901 and known for driving game-changing innovations. “I’m really proud of what
Monsanto achieved,” said Grant. “We didn’t just lead an industry—we kind of formed it, with all the
challenges and benefits that come with it.” 25 Despite this proud legacy, many saw clear value in uniting
as Bayer. The Monsanto name carried a certain notoriety, due to the controversy over GM crops and,
more recently, thousands of lawsuits attempting to link glyphosate to cancer. Bayer firmly denied this
allegation. 26 Assessments of glyphosate’s safety by official agencies had produced mixed conclusions
and intense debate. In 2015, the World Health Organization’s International Agency for Research on
Cancer found glyphosate to be a probable human carcinogen, while the European Food Safety
Authority concluded the opposite. 27 In 2019, the U.S. Environmental Protection A gency reiterated its
own finding that glyphosate posed no risk to public health and was not a carcinogen. 28
Monsanto also had a mixed reputation with farmers, as the Wall Street Journal noted in 2015:
“Monsanto’s advances in genetic engineering have helped farmers produce bigger crops and avoid
using some harsh chemicals previously needed to control weeds and pests. But farmers say those tools
come with a high price and strict rules that Monsanto vigorously enforces, sometimes with lawsuits
against its customers that have damaged the company’s reputation in parts of the Midwest.” 29
Begemann noted, “These rules, primarily around saving and re-using seeds, are common among
companies that make seeds to protect their investments in R&D, allowing continued investment in
better seed technology. Most farmers in the main GM crop markets don’t want to save seed because
doing so causes quality concerns.” Farmers concerned about GM seed prices, which in the U.S.
increased 230% from 2000 to 2010, 30 had also criticized Monsanto, which, as the largest seed company,
was most closely associated with these tensions. “A main driver of higher prices is the stacking of traits,
which brings benefits to farmers but also adds to the cost of seed development,” noted Begemann.
Stakeholder Engagement and Sustainability
For Bayer, such concerns underscored the importance of stakeholder engagement. “In the U.S., there
is a tendency to focus primarily on shareholder value, whereas in Europe there is a stronger tendency
to consider the needs of a broader set of stakeholders,” said Condon. “Our long experience in
healthcare has taught us the importance of listening to consumers and taking public opinion into
account. So this will help as we navigate our journey to shape the future of agriculture. Integrity is part
of the DNA of our company, and communicating this more effectively will help build public trust.” He
continued:
We intend to do a better job of explaining the societal benefits of new products.
Monsanto said itself it could have done a better job of this, and many consumers saw its
innovations as benefiting only farmers and the company itself. So, for many consumers,
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the innovations had no upside or value, only risk. In addition, the gap between consumers
and producers of food has never been wider, so there is a real challenge to bridge this gap.
At Bayer we take a holistic view on value creation and focus on innovation that is
economically, socially, and environmentally sustainable. We engage with a variety of
NGOs to listen, learn, and collaborate and are careful not just to project our values onto
theirs. In order to foster more public understanding of our work, we are posting the
results of our product and safety trials publicly, as we believe that transparency is the
currency of trust.
Bayer’s pledges going forward included several sustainability-related targets. “A successful
acquisition and future for Bayer will depend heavily on public trust and sustainability,” said Jesus
Madrazo, head of agricultural affairs and sustainability at Bayer’s Crop Science division. After the
acquisition, the company had publicly committed to reducing the environmental impact of crop
protection by 30% by developing products that could be applied more precisely and with less
environmental impact, in part through digital innovations. Other targets focused on reducing
greenhouse gas emissions in crop production and helping 100 million smallholder farmers access
sustainable agricultural solutions. “Our long-term success as a company lies in providing farmers with
the best tools and solutions so they can grow enough with less environmental impact,” Madrazo said.
“Every commitment to innovation should also be a commitment to sustainability.” [See the Appendix
for more on Bayer’s commitments.]
Farmer Reaction
Despite some media reports to the contrary, “Farmer and retailer feedback on the acquisition has
overall been positive,” said Lisa Safarian, president of North American commercial operations for
Bayer’s Crop Science division, based in St. Louis. “We talked to many farmers, commodity groups, and
wholesale retailers to get a sense of their thoughts and potential concerns. Some expressed reservations
about concentration, but this question was eased when they learned the assets regulators required
Bayer to sell to gain regulatory approval of the acquisition of Monsanto.”
Some customers thought having a few high-volume suppliers made sense for the industry, and they
anticipated better products and lower prices, perhaps through volume-based discounts. Frank
Terhorst, head of crop strategy and portfolio management, expounded on the benefits: “We saw a
compelling case for the merger from an industry perspective. Agriculture needs a strong leader to
enable sustainable growth, and the deal made us that.”
A New Industry Leader
Bayer was now the largest player in the global agriculture industry, with a robust commercial
portfolio of chemical and biological crop protection products, conventional and biotech seeds, traits,
and digital agriculture tools and services. (See Exhibit 10 for products and Exhibit 11 for a depiction
of R&D assets and market reach.) The R&D pipeline was strong: peak sales potential of products with
launch dates from 2017 to 2022 was projected at more than €17 billion. Bayer’s Crop Science division,
historically strong in Europe and Latin America, also had an improved global presence with the
addition of legacy-Monsanto’s foothold in North America.
The acquisition of Monsanto expanded Bayer’s North America-based staff by 74% Group-wide. The
total staff size of Bayer’s Crop Science division increased 84%, to 38,000. 31 The crop protection team
stayed in its existing base in Monheim, Germany, the global headquarters of Bayer’s Crop Science
division, while the seed business operated from the former Monsanto campus in St. Louis, Missouri.
The Climate team remained based in its existing San Francisco, California, office.
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Leadership decisions were made over several months (see Exhibit 12). “We took our time looking
internally and externally at every position, because we wanted to ensure we had the best person in the
industry for each role,” said Condon. “The process, involving a professional external recruiting
company and interviews with the board and myself, led to a team consisting of equal Bayer and
Monsanto personnel, and no external hires. That was pure coincidence, as we had set no quotas for
legacy company hiring and just wanted the best people we could find, regardless of where they came
from.” He saw little distance between the visions of the two firms’ organizations. “After an acquisition,
you often have to convince people from the other company of a new vision and strategy, and you can
lose a lot of talent,” he noted. “But both of us saw the advantage of coming together to innovate faster
and truly shape agriculture. That is why they [Monsanto] had first sought to buy us. Not having to
convince people of a different vision helped a lot with integration and keeping talent.”
Digitization and Innovation
The Climate Corporation
Started by previous Google employees and raised on venture capital, Climate had first focused on
climate-related risk and sold crop insurance to farmers. When Monsanto paid $930 million for it in
2013, many were skeptical. “But there is no doubt that Monsanto’s first mover advantage in acquiring
Climate was big to Monsanto’s value when purchased,” said Stern.
Climate’s digital platform, FieldView, helped farmers improve productivity and profitability by
making more informed decisions. The platform integrated and analyzed data from several sources.
These included data that farmers collected from their farms using FieldView Drive, a cloud-connected
device that plugged into tractors and other equipment (it was compatible with most equipment types);
data that farmers entered manually into FieldView; data from public records (published studies,
weather forecasts, satellite imagery, etc.); and Bayer’s plant-genetics data. The results were available to
farmers on the FieldView dashboard on their computer, tablet, or smartphone. The information and
features that farmers accessed depended on their type of subscription and user preferences but broadly
included regularly-updated field maps, crop-performance analyses, historical comparisons, real-time
satellite imaging of the farm’s operations, and other information. (See Exhibit 13 for examples.)
Climate’s privacy policy assured farmers that their data was aggregated and remained in the
farmer’s control. 32 “We have been consistently clear that all of the farmer’s data is controlled by the
farmer,” said Sam Eathington, Climate’s chief science officer. “And we have sharing tools within our
platform that allows the farmer to share data with an agronomist, another seed provider, whoever, and
we can transfer data, delete it—whatever the farmer wants.”
Farmers paid $299 for one FieldView Drive and $249 for each additional Drive. For free, they could
use the baseline service, FieldView Prime, which provided weather information, simple data
visualization, field summary data, cloud storage, and other basic services. To access more features,
farmers could pay for a subscription to FieldView Plus, which included additional features such as
yield analysis, soil fertility insights, field health imagery, and other services.
To get started, a farmer first identified his or her fields on a digital map. With a FieldView Drive
attached to the farm equipment, the farmer could populate his or her dedicated account with planting
data (by square meter), seed types and seeding density, crop protection and fertilizer applications, and,
after harvest, yields by square meter. In essence, this service collated information the farmer already
(in principle) knew but had been unable to see all in one place. “This capability was wildly successful
with farmers,” reported Stern. Safarian noted that farmers were very curious when they saw different
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performance responses from different parts of their fields they were not aware of before. “In the old
days data was only available at a field level and much of it was simply observational or disconnected
and so the theories about what caused the differences matched that level of information and
granularity,” she said. Shrinking the unit of analysis from the field to the square meter was
transformative, noted Begemann:
Fifteen years ago, farmers could only go out and scout their fields, but on average you
could only scout 1% to 2% of your field and then extrapolate assumptions about the entire
field. Now you can look at every meter of the field and make decisions. That disease you
thought was in an entire field? With FieldView you can find out that it is just in one corner,
and you can decide to treat that specific corner of the field differently from the rest.
When comfortable going to the next step, the farmer could opt for FieldView Pro, a $1-per-acre paid
subscription service that used analyses of field variability to build customized seeding and fertility
plans tailored to a farmer’s unique fields. In mid-2019, Climate was trialing a new predictive seedselection and placement technology called Seed Advisor, which provided a personalized
recommendation on the best corn hybrid and seeding population rate for a farmer’s unique fields. Seed
Advisor recommended corn seed varieties sold by Bayer as well as other companies. Begemann said
farmers using Seed Advisor had produced an average of nine more bushels per acre. A similar tool for
recommending crop-protection products would be launched soon.
“We are clear with farmers about how we use their data: we use it to make the best recommendation
possible for them, and we anonymize it to use for internal production planning and research, but never
for pricing,” said Eathington. “All of the data is transparent, so the farmer would immediately know if
we made a bad faith recommendation that benefited our production line over their yield optimization,”
added Begemann. “They would see that our recommendations had failed to maximize production.
FieldView only recommends the best solutions, even if that means going to a competitor to buy inputs.
The idea that we are going to tell farmers how the products they use perform is misguided—they have
all the information to see for themselves.” Stern also emphasized that seed recommendations were
highly sensitive to conditions of the land: “It’s not a case of one size fits all. In a typical county in the
U.S., we are likely to be recommending 25 different corn seed genetics. In the old days, when two
neighboring farmers had no reason to suspect their farmland had differing field variability, they might
use the exact same solution.”
The FieldView platform used feedback to learn and improve. “We make recommendations based
on data science, but we also learn from what actually happens in the field when the farmer implements
our proposals—and from when he or she chooses not to use our recommendation—and can refine our
systems over time,” said Stern. The system could also refine its knowledge based on how products
performed on fields similar to a given farmer’s, whether next door or in a different country. “We can
utilize FieldView to cross-learn across regions,” said Eathington. “Using historical data, we know Italy
and Eastern Europe share similar growing environments to temperate climates in the U.S., like Iowa
and Wisconsin. Using our data from the states, we can extrapolate insights about these European
regions.”
The farmer always had the option to modify or ignore FieldView’s recommendations, or to follow
the recommendations on some fields and not others. Terhorst said the secret to adoption was to walk
the farmer through the reasoning for the recommendation, at least initially. One could draw an analogy
to driverless cars: even eager adopters were unlikely to cede total decision-making control to this new
technology, at least not until assured of its reliability over repeated experiences. It could be possible to
leave all decisions to FieldView and let it select planting time, seed types and seed density, fertilizer
applications, and so on, but few users would do so right away, if ever. Still, Madrazo noted that the
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gradual automation of farm-management decisions could fundamentally change what it meant to be a
farmer: “Farmers have become more marketing oriented, and that trajectory will continue with digital
tools. In the past, and even today, the role of a farmer is heavily production oriented: what to plant,
when to plant, and so on. If this can be automated, perhaps the farmer will be more marketing oriented
across the entire ag and food value chain, thinking about what grocers want, what consumers want,
using growing data to establish transparency, and much more.”
In 2018, farmers were using FieldView across 60 million paid acres, projected to reach 90 million
acres by the end of 2019. Stern noted that it took nearly two years for Climate to generate five million
hours of streamed data, just over a year for the next five million, and three months for the most recent.
“We emphasize growth over profitability with Climate because we want our network to grow as much
as possible,” noted Begemann. FieldView had expanded outside the U.S. to Canada, Brazil, and
Europe, and most recently Argentina. Climate had also entered India, in 2018, with a smallholder
mobile product called Climate FarmRise. While FieldView was optimized for mid- to large-sized farms,
more than 85% of farms in India were smaller than two hectares. b FarmRise provided analysis without
the Drive hardware. Begemann noted that drones might be used to apply pesticides to small fields
more accurately and with less personal danger to farmers.
In addition to developing new markets and services, the Climate team was considering new pricing
models. Terhorst explained: “For farmers open to risk sharing, I can see linking pricing of our products
to the farm’s output, thus sharing the risks and benefits together. Other farmers could benefit from
risk-management models in which we would predetermine reimbursements in cases of reduced yield.”
Farm data and trust Access to farmers’ data had been a sensitive aspect of advancing digital
agriculture. The farming culture in many markets was characterized by a proud self-reliance. A
farmer’s expertise was built through years, often generations, of hard work and closeness to the land.
As such, many were reluctant to surrender data to profit-seeking outsiders. A 2017 study in Australia
found that about 60% of farmers had little to no trust in technology providers regarding privacy and
unauthorized use of data. 33 “With yield improvement research and digital agriculture, the bottleneck
for years has been getting the data,” said Eathington.
Farm retailers, who had influence with farmers, had also pushed back. “As a retailer, you may see
this as a loss of leverage. You are no longer giving farmers advice; you no longer can offer products
that maximize your own margins,” said Terhorst. “This is an example of how digital agriculture will
increase transparency and change farming.” Eathington said many farmers were eager to see their data
captured and used to create value: “For some time, farmers have had digital startups show up on their
doorstep saying they would like this, that, and the other thing, and all of this data has been collected,
but nothing comes to fruition. Farmers wanted to see us doing something with it.”
Competition Condon and Stern felt that, in Climate, Bayer had the preeminent digital
agriculture platform with a strong head start over the competition. “Other firms haven’t invested as
much in digital agriculture, giving Climate a better market position,” said Stern. (See Exhibit 14 for
more on Climate’s presence and competitive position.) Still, they were cautious. “With the way
technologies interact, we know our position can change quickly,” said Terhorst. Eathington elaborated:
There are many companies ready to replace us as the digital platform of choice in the
market. Even Google, Amazon, IBM, and other major companies are talking more and
more about agriculture and are investing in the industry in small ways here and there. To
b For more on FarmRise, see: https://bit.ly/2WcnVOR.
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create a quality, competitive product, firms need two things: meaningful investment and
relevant data. Climate has been the leader in both.
Begemann predicted that in digital agriculture—as in seeds, agrichemicals, and biologicals—the
crowded field would eventually thin down to a few key firms. Winning was all about offering the best,
most comprehensive platform, he explained:
Back in the 1990s, there were far more crop-science competitors, and all believed they
would have their own seeds and traits. That never happened, as just a few traits became
hugely successful and were then licensed to others. R&D departments were not going to
waste time trying to replicate a successful trait. With the digital platform, it is similar. Our
vision with Climate has been to build a platform to be the ecosystem for the industry. And
with the best R&D insights, people will naturally gravitate towards our digital platform.
[Exhibit 15 depicts Bayer’s vision of a total solution for a U.S. crop farmer.]
Safarian noted that FieldView users generally appreciated the transparency surrounding the
performance of products and combinations they used on their fields:
With FieldView the farmer can see what’s possible from his land on a sub-field level
with the right combination of seeds, crop protection, and local agronomic advice. At
harvest, the tool will show how the seeds and crop protection combination performed
throughout the field and gives the grower confidence to make similar selections or
changes again for next year. Of course we want our products to win in the field every
time, but ultimately FieldView gives the farmer, his local advisors, and our field team
more data to help make the best decisions for his operation every year.
Research & Development
As a result of the Monsanto acquisition, Bayer’s Crop Science division had increased its annual R&D
budget from €1.2 billion in 2017 to roughly €2.3 billion in 2019—almost double the closest competitor,
according to Condon. For agriculture—a market Monsanto’s Grant said faced a “crushing need for
innovation”—it was a huge investment. 34 Still, the combined R&D spending of the top five agricultural
companies, which Bob Reiter, head of R&D for Bayer’s Crop Science division, pegged at about €6 billion
annually, was low relative to some other science-based sectors. Biopharmaceutical firms, for instance,
spent about €161 billion on R&D in 2018, representing about a fifth of that industry’s sales. 35
Bayer’s Crop Science division was focused on digitizing all aspects of its R&D operation, staffed by
about 7,300 researchers at 35 research facilities and 175 breeding sites worldwide. The goal was to
transform R&D by using advanced computational tools to analyze vast sets of internal research data,
integrated with field data from Climate, to supercharge the velocity and efficiency of product
development. The idea was to create products finely tuned for specific crops and regions and, through
FieldView, recommend these products to the farmers most likely to benefit from them. “There is little
to be gained by developing me-too products,” said Stern. “The way to proceed is to develop
differentiated products on your own or license in others’ innovations.” In effect, FieldView users who
acted on Climate’s product recommendations were conducting ongoing field trials on their own farms,
sending back data on the products’ efficacy over different growing seasons to further inform internal
R&D.
“Just as we are digitalizing agriculture, we are doing the same in R&D—moving to automated data
collection, AI, machine learning, et cetera to make decision making as data driven as possible, far more
than in the past,” said Reiter. “Advanced computational tools, like machine learning, will transform
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the trajectory of value creation from data.” He noted the simple value of combining the knowledge of
the Monsanto and Bayer R&D teams and the learning that came from their first interactions: “And
when you add the power of AI, it’s like adding lighter fluid to the fire: everything will go much faster.”
As an example of the potential power of AI and big data, Reiter noted that almost all R&D was around
the “main effects” of products, but AI could be used to tease out interactions. He continued:
In the past, maybe 1% of our ideas led to a marketable product, but we can improve
that substantially with data. And development takes seven years on average for seed
varieties, but I see that being reduced substantially with our new techniques. In the old
days, the way to test whether cross-bred seed had the right traits was to plant it and wait.
Today we are able to test the DNA of the seed directly without ever planting it. Now with
CRISPR it is becoming possible to create the hybrid with the right traits in a directed
fashion. This kind of improvement is happening at every turn.
Eathington elaborated: “We can also combine R&D with production planning. If we are developing
several new seeds or pesticides that are two years from market, we can use FieldView to forecast
demand and adjust R&D investment allocation appropriately. Predictive tools will be especially precise
when assessing future values of GM products as they usually follow a related product to market that
had a similar genetic makeup.”
In 2019, digitization progress was uneven across different areas of R&D. It was most advanced in
seeds and breeding, areas in which Monsanto and Climate had collaborated for several years. “The
science behind the Seed Advisor tool was built entirely on R&D insight,” explained Stern. “We take
existing R&D data and use it with underlying environmental data to help maximize yield. But in terms
of digitization, there is still a lot of potential for crop protection to catch up since the acquisition.” The
digitization initiative had broad organizational implications, Reiter explained: “We’ve reduced
spending on core capabilities in other segments, instead investing in digitally enabling those areas. For
example, we now prioritize hiring data scientists over plant breeders. Also, R&D now has a set of
service platforms that will be available to projects. Field Testing is a platform service, Data Science is a
platform, and so on.” (See Exhibit 16 for an example of R&D acceleration.)
From Vision to Reality
Condon saw Bayer as the player best positioned to develop and deliver better seeds, better
agrichemicals, and better information to the global agriculture system. His team was committed to the
strategy of innovation and digitization, and the assets and expertise were in place. However, the
anticipated digital transformation, internally and in the market, was still largely theoretical, as much
of the leap-frogging in product development that Bayer anticipated could occur only once its
digitization initiative was further along.
There was also a pressing need to expand FieldView’s subscribership and tap into a wider universe
of agricultural data: the engine of Bayer’s crop science strategy and the key to beating the competition.
How could Climate best communicate its good stewardship of data and show farmers the worth of
adopting digital tools? How could the team anticipate and stay ahead of nimble, well-resourced
competitors in the shape-shifting world of digital agriculture? And if Climate succeeded in building
the “Amazon.com” of agriculture—the unparalleled go-to platform used by farmers for information
and advice about a suite of products from across the industry—should it continue to be owned by
Bayer, or spun off as an independent company?
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Even as it pursued its strategy, Bayer faced mounting pressure to demonstrate that buying
Monsanto was the right decision. There was a risk, as in any acquisition, that the deal’s benefits and
risks had been miscalculated. Some critics said Bayer overpaid and agreed to too many divestments.
Bayer faced intensifying financial and reputational risk from glyphosate-related lawsuits, and although
the company cited research attesting to the product’s safety, at least one jury found in favor of a
plaintiff, though the financial award was significantly reduced by a judge. At Bayer’s Annual
Stockholders’ Meeting in May 2019, shareholders voted no confidence in Baumann, an unprecedented,
if symbolic, rebuke at the company.
Condon was optimistic, but he agreed that some changes were needed. This included being more
proactive and transparent in informing the public about crop science’s role in driving food security in
a sustainable manner, something he felt the industry had so far done poorly. “We want to engage in
consumer awareness to provide a more objective view,” he said. But this was a tall order, as evidenced
in a survey of college-educated, high-income individuals in 13 countries. In all 13, most respondents
thought feeding the global population was a critical challenge and were open to using technology, in
general, as a means of growing more food. But they were less supportive of using specific technologies,
such as pesticides, fertilizers, and GM crops. 36
Stakeholder engagement, farmers’ trust, transparency, successful execution of the digitization and
innovation strategy—Condon saw all of these as pivotal to Bayer’s future performance. Was he on the
right track? What were the biggest opportunities for the business in the near and long term? Was global
agriculture truly on the cusp of a digital transformation, and if so, was Bayer the right player to lead
it?
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Bayer Crop Science
Exhibit 1
Bayer Group, Key Data by Segment (€ millions), 2013-2018
Total Revenues
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Covestro
Total EBITDA
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Covestro
Total Oper. Profit Before Tax
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Covestro
Total Assets
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Non-allocated Assets
Covestro
Total Deprec. & Amortization
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Covestro
Total Capital Expenditure
Pharmaceuticals
Consumer Health
Crop Science
Animal Health
All Other
Corp. Functions & Consolidation
Covestro
Source:
2013
2014
2015
2016
2017
40,157
11,258
7,743
8,853
3,365
(2,356)
11,294
8,401
3,490
1,844
2,248
222
(475)
1,072
5,773
2,552
1,421
1,801
49
(479)
429
51,317
16,585
8,515
10,826
1,981
4,981
8,429
2,611
943
417
452
158
4
637
(2,155)
(564)
(209)
(532)
(239)
(6)
(605)
41,339
12,151
7,031
9,543
3,355
(2,451)
11,710
8,685
3,699
1,658
2,360
200
(419)
1,187
5,833
2,657
1,144
1,838
21
(425)
598
70,234
19,377
19,387
12,676
2,253
7,194
9,347
2,697
1,036
445
452
173
6
585
(2,484)
(668)
(202)
(699)
(261)
(7)
(647)
46,085
15,346
6,078
10,162
1,510
3,346
(2,403)
12,046
10,256
4,616
1,456
2,406
347
238
(466)
1,659
7,060
3,327
1,005
1,872
318
43
(472)
967
73,917
22,389
16,560
14,230
791
2,324
8,263
9,360
3,104
1,286
429
499
29
191
6
664
(2,554)
(764)
(182)
(735)
(43)
(311)
(5)
(514)
34,943
16,449
6,042
9,951
1,533
2,398
(1,430)
9,318
5,251
1,411
2,421
349
224
(338)
6,826
3,947
987
1,898
320
18
(344)
73,055
22,173
16,558
14,868
838
2,632
507
15,479
2,365
1,231
426
473
30
199
6
(2,208)
(851)
(220)
(773)
(39)
(307)
(18)

35,015
16,885
5,876
9,610
1,579
3,466
(2,401)
9,288
5,711
1,231
2,043
381
358
(436)
5,903
4,325
518
1,235
307
4
(486)
75,087
21,753
14,896
13,106
935
2,206
4,207
17,984
2,148
1,034
414
410
36
241
13
(2,418)
(1,126)
(181)
(670)
(41)
(359)
(41)
2018
39,586
16,783
5,453
14,305
1,510
4,287
(2,752)
9,547
5,598
1,096
2,651
358
735
(891)
3,914
3,213
(2,077)
3,138
312
397
(1,069)
126,285
20,687
12,224
76,809
1,001
2,977
613
11,974
2,999
981
380
1,349
39
235
15
(2,564)
(888)
(228)
(1,030)
(55)
(354)
(9)

“Bayer Financials, Segments,” Capital IQ, accessed March 2019. Bayer spun off Covestro in 2015.
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Bayer Crop Science
Exhibit 2
Bayer Group R&D Spending by Segment (€ millions and % of total), 2017-2018
Pharmaceuticals1
Consumer Health
Crop Science
Animal Health
Reconciliation
Total
Source:
520-055
R&D Expenses
(€M)
R&D Expenses
Before Special
Items (€M)
Share of R&D
Expenses (%)
R&D Expenses
Before Special
Items
(% of sales)
2017
2018
2017
2018
2017
2017
2,888
240
1,166
155
55
4.504
2,893
226
1,950
143
34
5,246
2,724
228
1,120
145
55
4,272
2,589
221
1,856
141
33
4,840
64.1
5.3
25.9
3.4
1.2
100
2018
55.1
4.3
37.2
2.7
0.6
100
16.2
3.9
11.7
9.2
4.7
12
2018
15.5
4.1
13.0
9.4
2.0
12
R&D
Employees
(FTE)
2017
2018
8,138
368
5.174
333
28
14,041
7,924
346
8,526
440
39
17,275
Company documents.
1 The 2018 R&D costs for Pharmaceuticals include income of approximately €190 million from a Xarelto (drug brand)
collaboration with Janssen Research & Development, LLC, a subsidiary of Johnson & Johnson.
Exhibit 3
Bayer Group’s Strategic Priorities, 2019
1.
Positioning businesses to mega-trends: health and nutrition. We provide solutions for two of the
most pressing challenges of our times.
2.
Steering a leading portfolio: leadership in our relevant markets. We invest in a portfolio of strong,
value-generating businesses.
3.
Driving value: profitable growth. We increase the value of our businesses in the long-term.
4.
Focusing on our strength: innovation. We address unmet societal challenges through innovation.
Source:
“Strategy,” Bayer Group website, https://www.bayer.com/en/strategy.aspx, accessed July 2019.
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Exhibit 4
Source:
Bayer Group Share Price, June 2015-June 2019
Compiled via Capital IQ, accessed October 2019.
Exhibit 5
Adoption of Genetically Modified Crops in the U.S. (% of planted acres), 1996-2018
Source:
“Genetically engineered soybean, cotton, and corn seeds have become widely adopted,” USDA ERS website, July 2018,
https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=90362, accessed September
2019.
Note:
HT=herbicide tolerant, Bt=insect resistant. Data for each crop category includes varieties with both HT and Bt (stacked)
traits.
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Exhibit 6
520-055
U.S. Corn and Cotton Acreage by Type of GM Seed (Stacked vs. Single Trait), 2000-2018
Source:
“The share of corn and cotton acreage planted with genetically engineered stacked seeds has climbed since 2000,”
USDA ERS website, December 2018, https://www.ers.usda.gov/data-products/chart-gallery/gallery/chartdetail/?chartId=90885, accessed September 2019.
Note:
HT=herbicide tolerant, Bt=insect resistant.
Exhibit 7
Source:
How Data is Transforming the Way Growers Operate
BCG Analysis via Jan-Frederik Jerratsch, Torsten Kurth, Gerd Wübbels, and Decker Walker, “Growing on Data: The
New
Go-to-Market
Reality
in
Agriculture,”
BCG,
October
17,
2018,
https://www.bcg.com/publications/2018/growing-on-data-new-go-to-market-reality-agriculture.aspx,
accessed
May 2019.
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Exhibit 8
“Big Four” Pro Forma Sales and R&D Post Acquisitions and Divestments (€ billions), 2018
Source:
Bayer Group, “Crop Science Summer Technology Showcase, August 1-2, 2019,” slide 18, available via
https://www.investor.bayer.com/en/handouts/investor-handout/, accessed October 2019.
Notes:
1 The unaudited pro-forma data are presented as if both the acquisition of Monsanto and the associated divestments
had taken place as of January 1, 2018. Sales of Monsanto are presented in periods as per the Bayer fiscal year. Onetime effects of business operations, the accounting for discontinued operations, and the recognition and measurement
of sales from certain business transactions have been adjusted in line with Bayer’s accounting. 2 Excludes non-agro
business sales of ADAMA. 3 Includes BASF Ag Sales 2018 as reported plus €1.4bn reported sales in 2018 from Bayer
businesses sold to BASF. Split between Seed and CP businesses based on internal estimates.
Exhibit 9
Source:
Bayer Group and Monsanto Relative Stock Performance, January 2010-June 2019
Compiled via Capital IQ, accessed July 2019.
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Exhibit 10
Source:
Bayer’s Crop Science Division Products (Post Acquisition), 2018
Bayer Group 2018 Annual Report, p. 25.
Exhibit 11
Source:
520-055
Bayer’s Crop Science Division R&D Assets and Market Reach
Bayer Group, “Crop Science Summer Technology Showcase, August 1-2, 2019,” slide 22, available via
https://www.investor.bayer.com/en/handouts/investor-handout/, accessed October 2019.
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Exhibit 12
Source:
Bayer’s Crop Science Division Executive Leadership
“Monsanto Acquisition Update,” Bayer, Investor Relations, June 2018, p. 22,
https://www.investor.bayer.com/en/downloads/2018/, accessed March 2019.
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Exhibit 13a
Image of Climate FieldView Dashboard
Exhibit 13b
Image of FieldView Crop Performance Analysis
520-055
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Exhibit 13c
Image of Field Health Imagery
Images taken over to time to enable farmers to identify problems, prioritize scouting, and take action.
Source:
The Climate Corporation website, https://climate.com/, accessed July 2019.
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Exhibit 14a
FieldView Brand Health (2019 Brand Health Monitor Survey, U.S.)
Exhibit 14b
FieldView U.S. Presence: FieldView Drive Locations
Source:
520-055
Bayer Group, “Crop Science Summer Technology Showcase, August 1-2, 2019,” slides 48-49, available via
https://www.investor.bayer.com/en/handouts/investor-handout/, accessed October 2019.
23
This document is authorized for use only by JunKai Zhao in BA453 Winter 2021 taught by Beth Hjelm, University of Oregon from Dec 2020 to Mar 2021.
Source:
Bayer’s Crop Science Division—Example of Its Future Agronomic Solutions for a U.S. Corn Farmer
-24-
Bayer Group, “Monsanto Acquisition Update,” June 2018, slide 14, Bayer_Investor_Presentation_Monsanto_Acquisition_Update_June_2018_final.pdf, accessed July 2019.
Exhibit 15
520-055
For the exclusive use of J. Zhao, 2021.
This document is authorized for use only by JunKai Zhao in BA453 Winter 2021 taught by Beth Hjelm, University of Oregon from Dec 2020 to Mar 2021.
For the exclusive use of J. Zhao, 2021.
Bayer Crop Science
Exhibit 16
Source:
520-055
Bayer’s Crop Science Division—Example of Accelerated R&D
Bayer Group, “Crop Science Summer Technology Showcase, August 1-2, 2019,” slide 37, available via
https://www.investor.bayer.com/en/handouts/investor-handout/, accessed October 2019.
25
This document is authorized for use only by JunKai Zhao in BA453 Winter 2021 taught by Beth Hjelm, University of Oregon from Dec 2020 to Mar 2021.
For the exclusive use of J. Zhao, 2021.
520-055
Bayer Crop Science
Appendix
Bayer Group press release, June 14, 2019
Bayer is raising the bar in transparency, sustainability and engagement, reflecting its heightened
responsibility and potential as a new leader in agriculture. “We’re making good progress on integrating
the acquired agriculture business, and are now starting to implement a series of measures to drive
transparency and sustainability across our business,” Werner Baumann, Chairman of the Board of
Management of Bayer AG, said on Friday. These measures address questions and concerns Bayer has
heard about its role in agriculture in the year following its acquisition of Monsanto. “We will continue
to advance our standard, driven by our commitment to a better life for this generation and generations
to come.”
Innovation will cut the ecological footprint of Bayer’s agricultural portfolio. With its solutions, the
company will reduce the environmental impact by 30 percent by 2030. Bayer aims to achieve this by
developing new technologies, scaling down crop protection volumes, and enabling more precise
application. This will help to restore and retain biodiversity, combat climate change, and make the most
efficient use of natural resources.
The company will measure the progress by comparing the Environmental Impact Quotient (EIQ)
against the current market standards. The EIQ was established in the 1990’s by Cornell University
(U.S.) and relates volume to toxicity and therefore represents a more meaningful measuring system
than volume only. Bayer will seek to continuously improve the EIQ of its crop solutions by investing
in world-class innovation for seeds and traits, digital farming, biological solutions and new low-residue
and reduced rate application products. Furthermore, the company will invite global experts and
stakeholders to participate in a Bayer Sustainability Council to bolster the company-wide efforts.
While glyphosate will continue to play an important role in agriculture and in Bayer’s portfolio, the
company is committed to offering more choices for growers and will invest approximately €5 billion
in additional methods to combat weeds over the next decade. This R&D investment will go towards
improving the understanding of resistance mechanisms, discovering and developing new modes of
actions, further developing tailored Integrated Weed Management solutions and developing more
precise recommendations through digital farming tools. In addition, partnerships with weed scientists
around the world will be enhanced to help develop customized solutions for farmers at a local level.
Transparency is Bayer’s foundation. In 2017, Bayer began releasing all of its safety-related Crop
Science studies online for anyone to see. Since then, it has released hundreds of studies for nearly 30
compounds, including all 107 company-owned glyphosate studies. Going forward, the company will
pilot a program inviting scientists, journalists and NGO representatives to participate in its scientific
preparation for the upcoming EU glyphosate re-registration process, which will start later this year.
On top of that, the company will apply consistent safety standards to its products—even when it
means exceeding local regulations. Since 2012, Bayer has stopped selling all products that were
considered acute toxicity class 1 by the World Health Organization, regardless of whether they were
allowed in a particular market. Bayer . . . will only sell crop protection products in developing countries
that meet both the safety standards of that local market and the safety standards of a majority of
countries with well-developed programs to regulate crop protection products.
In the coming months, [Bayer] will evolve its engagement policies that ground all of its interactions
with scientists, journalists, regulators and the political sphere in transparency, integrity and respect.
Source:
Bayer Group website, https://media.bayer.com/baynews/baynews.nsf/id/2019-0169-E, accessed July 2019.
26
This document is authorized for use only by JunKai Zhao in BA453 Winter 2021 taught by Beth Hjelm, University of Oregon from Dec 2020 to Mar 2021.
For the exclusive use of J. Zhao, 2021.
Bayer Crop Science
520-055
Endnotes
1 “Bayer to drive value creation as company pursues ambitious growth targets through 2022,” Bayer Group press release
(London/Leverkusen, December 5, 2018), Bayer Group website, https://media.bayer.com/baynews/baynews.nsf/ID/Bayerto-drive-value-creation-as-company-pursues-ambitious-growth-targets-through-2022, accessed October 2019.
2 Darcy Maulsby, “The Future of Seed Trait Technology Takes Shape,” Thrive, Summer 2017, Syngenta website,
http://www.syngenta-us.com/thrive/research/seed-trait-technology-future.html, accessed June 2019.
3 Bayer Group, “Crop Science Summer Technology Showcase, August 1-2, 2019,” slide 19, available via
https://www.investor.bayer.com/en/handouts/investor-handout/, accessed October 2019.
4 Technavio, “Global Seeds Market 2018-2022,” pp. 11, 15, Technavio database, accessed July 2019.
5 Technavio, “Global Seeds Market 2018-2022,” p. 16.
6 “ISAAA Brief 54-2018: Executive Summary,” ISAAA website,
http://www.isaaa.org/resources/publications/briefs/54/executivesummary/default.asp, accessed October 2019.
7 Electronic Code of Federal Regulations, Title 7: Agriculture, Part 205: National Organic Program, current as of October 10,
2019, e-CFR website, https://www.ecfr.gov/cgi-bin/textidx?c=ecfr&SID=9874504b6f1025eb0e6b67cadf9d3b40&rgn=div6&view=text&node=7:3.1.1.9.32.7&idno=7#se7.3.205_1600,
accessed October 2019.
8 Bayer Group, “Crop Science Summer Technology Showcase.”.
9 “The Birth of a Biotech Trait: How Biotech Seeds Are Created and Approved,” United Soybean Board website, December 21,
2012, https://unitedsoybean.org/article/the-birth-of-a-biotech-trait-how-biotech-seeds-are-created-and-approved; “Cost of
Bringing A Biotech Crop to Market,” Crop Life International website, 2011, https://croplife.org/plantbiotechnology/regulatory-2/cost-of-bringing-a-biotech-crop-to-market/, both accessed July 2019; and “The cost and time
involved in the discovery, development, and authorization of a new plant biotechnology derived trait—A Consultancy Study
for Crop Life International, September 2011,” Phillips McDougall, September 2011, CropLife website, https://croplife.org/wpcontent/uploads/2014/04/Getting-a-Biotech-Crop-to-Market-Phillips-McDougall-Study.pdf, accessed October 2019. Cost
figure converted from USD to EUR using the 2011 average daily rate, compiled via Capital IQ.
10 “Global Crop Protection Market, Forecast to 2023,” Frost & Sullivan, Report K33E-88, May 2019, pp. 36-39, F&S database,
accessed June 2019.
11 “Farming without plant protection products,” Panel for the Future of Science and Technology, European Parliamentary
Research Service, March 2019, p. 1, EU website,
http://www.europarl.europa.eu/RegData/etudes/IDAN/2019/634416/EPRS_IDA(2019)634416_EN.pdf, accessed June 2019.
12 FAO. 2018. The future of food and agriculture – Alternative pathways to 2050. Summary version. Rome. p. 31; and “Our
Industry 2016,” Syngenta website, p. 6, https://www.syngenta.com/~/media/Files/S/Syngenta/our-industry-syngenta.pdf,
accessed June 2019.
13 “Monsanto Acquisition Update, June 2018,” p. 18,
file:///C:/Users/nkindred/Downloads/Bayer_Investor_Presentation_Monsanto_Acquisition_Update_June_2018_final.pdf;
and “Our Industry 2016,” Syngenta website, p. 6, https://www.syngenta.com/~/media/Files/S/Syngenta/our-industrysyngenta.pdf, accessed June 2019.
14 “Our Industry 2016,” Syngenta website, pp. 6-7.
15 Mark Young, “The Age of Digital Agriculture,” Climate FieldView, p. 4, https://bit.ly/2PpjYTJ, accessed May 2019. Data
converted from USD to EUR using the average of annual rates in 2016 and 2017, compiled via Capital IQ.
16 Jacob Bunge, “Life after the Monsanto Sale,” The Wall Street Journal, June 21, 2018, https://www.wsj.com/articles/life-afterthe-monsanto-sale-1529586001, accessed August 2019.
17 Samantha DeCarlo, “And Then There Were Four?: M&A in the Agricultural Chemicals Industry,” Office of Industries,
USITC Executive Briefings on Trade, April 2018, https://bit.ly/2UzOtb3, accessed March 2019.
27
This document is authorized for use only by JunKai Zhao in BA453 Winter 2021 taught by Beth Hjelm, University of Oregon from Dec 2020 to Mar 2021.
For the exclusive use of J. Zhao, 2021.
520-055
Bayer Crop Science
18 Andrew Pollack and Michael J. de la Merced, “Monsanto Abandons $47 billion Takeover Bid for Syngenta,” The New York
Times online, August 26, 2015, https://www.nytimes.com/2015/08/27/business/dealbook/monsanto-abandons-47-billiontakeover-bid-for-syngenta.html, accessed July 2019.
19 Jacob Bunge, “U.S. Farmers Fear Fallout from Any Monsanto-Syngenta Deal,” The Wall Street Journal online, June 8, 2015,
https://www.wsj.com/articles/u-s-farmers-fear-fallout-from-any-monsanto-syngenta-deal-1433721809?mod=article_inline,
accessed July 2019.
20 Bunge, “U.S. Farmers Fear Fallout from Any Monsanto-Syngenta Deal.”
21 Jacob Bunge, “Monsanto Drops $46 Billion Bid for Syngenta,” The Wall Street Journal online, August 26, 2015,
https://www.wsj.com/articles/monsanto-drops-bid-for-syngenta-1440600680, accessed July 2019.
22 Bunge, “U.S. Farmers Fear Fallout From Any Monsanto-Syngenta Deal.”
23 All deal size figures, publicly reported in many outlets, were converted from USD to EUR at the average daily rate in 2017,
compiled from Capital IQ.
24 “Bayer wins U.S. government approval for Monsanto takeover,” DW online, May 29, 2018,
https://www.dw.com/en/bayer-wins-us-government-approval-for-monsanto-takeover/a-43985636, accessed November
2019.
25 Bunge, “Life After the Monsanto Sale.”
26 “Glyphosate’s Impact on Human Health and Safety,” Bayer Group website, https://www.bayer.com/en/glyphosate-
impact-on-human-health-and-safety.aspx, accessed October 2019.
27 “EFSA statement addressing stakeholder concerns related to the EU assessment of glyphosate and the ‘Monsanto Papers,’”
European Food Safety Authority, May 23, 2017, EFSA website, https://www.efsa.europa.eu/sites/default/files/170523-efsastatement-glyphosate.pdf, accessed October 2019.
28 Manolis Kogevinas, “Probable carcinogenicity of glyphosate,” British Medical Journal (April 2018) Kogevinas, M. (2019).
Probable carcinogenicity of glyphosate. BMJ (Clinical Research Ed.), 365, L1613; and “News Release: EPA Takes Next Step in
Review Process for Herbicide Glyphosate, Reaffirms No Risk to Public Health,” EPA website, April 30, 2019,
https://www.epa.gov/newsreleases/epa-takes-next-step-review-process-herbicide-glyphosate-reaffirms-no-risk-publichealth, both accessed October 2019.
29 Bunge, “U.S. Farmers Fear Fallout From Any Monsanto-Syngenta Deal.”
30 Technavio, “Global Seeds Market 2018-2022,” p. 84.
31 Bayer Group 2018 Annual Report, p. 53.
32 See Climate’s privacy policy here: “Privacy Policy,” The Climate Corporation website, last updated May 16, 2018,
https://www.climate.com/legal/privacy-policy, accessed October 2019.
33 Leanne Wiseman and Jay Sanderson, “Farms create lots of data, but farmers don’t control where it ends up and who can use
it,” The Conversation, April 16, 2019, https://bit.ly/2XqkPHD, citing Zhang A, Baker I, Jakku E and Llewellyn R,
“Accelerating precision agriculture to decision agriculture: The needs and drivers for the present and future of digital
agriculture in Australia. A cross-industry producer survey for the Rural R&D for Profit ‘Precision to Decision’ (P2D) project,”
EP175936, CSIRO, Australia, 2017, pp. 43-45, https://www.crdc.com.au/sites/default/files/P2D%20producer%20survey%20%20CSIRO%20Final%20Report.pdf, accessed November 2019.
34 Bunge, “Life After the Monsanto Sale.”
35 EvaluatePharma, “World Preview 2019, Outlook to 2024,” 12th Edition, June 2019, p. 18, EvaluatePharma website,
https://info.evaluate.com/rs/607-YGS-364/images/EvaluatePharma_World_Preview_2019.pdf, accessed November 2019.
36 “The Agricultural Disconnect,” Syngenta and Edelman Berland, Syngenta website, pp. 2-3, 5, 9, 11,
https://www.syngenta.com/~/media/Files/S/Syngenta/documents/agricultural-disconnect.pdf, accessed June 2019.
28
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6/12/2020
BA453
Competitive Positioning and Dynamics
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University of Oregon, Lundquist College of Business, BA453
1
This Week’s Agenda
• Lecture 1 – Traditional Ways of Thinking About Competitors and Rivalry
• Lecture 2 – Drivers of Rivalry and Game Theory
• Lecture 3 – Analyzing Competitors
• Lecture 4 – Compete, Cooperate or Think Differently
• Lecture 5 – Key Takeaways: What’s the Point?
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2
Competitive Analysis
• Why?
o
o
o
Better understand rivals
Better understand your own position
May offer insights on where, how, and speed of potential innovations
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1
6/12/2020
Understand how you perform relative to competitors.
Source: “Transforming Strategy One Customer at a Time”. Richard Harrington and Anthony
Tian. Harvard Business Review. Mar2008, Vol. 86 Issue 3.
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What Influences Small Car Buyers?
(Key Success Factors)
KSF = Economic and technological characteristics of
the industry and competitive weapons used
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What Influences Small Car Buyers?
(Key Success Factors)







Price
Quality/reliability/durability
Dealer service
Safety
Fuel economy, cost of ownership
Manufacturer’s reputation
Finance options
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2
6/12/2020
Key Success Factors – Small Cars
Wt.
Toyota
Toy Sc
Ford
Fd Sc
Price
KSF
0.2
4
0.8
3
0.6
Quality
0.2
4
0.8
5
1.0
Service
0.2
5
1.0
3
0.6
Safety
0.1
3
0.3
3
0.3
Cost of
Ownership
0.3
3
0.9
3
0.9
Total
1.0
3.8
3.4
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But here you need to remember the goal of positioning
• Designing the product offering and image to occupy a distinctive place in the mind of the
target market.
• To (target group) our (brand) is (concept) that (point of differentiation)
• Reflected in price, physical attributes, packaging, promotion, advertising, etc.
• “Product ladders” and price premiums
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8
This Week’s Agenda
• Lecture 1 – Traditional Ways of Thinking About Competitors and Rivalry
• Lecture 2 – Drivers of Rivalry and Game Theory
• Lecture 3 – Analyzing Competitors
• Lecture 4 – Compete, Cooperate or Think Differently
• Lecture 5 – Key Takeaways: What’s the Point?
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3
6/12/2020
Competitive Strategy is Often Thought of “as War” with
Attack and Defensive Strategies
(4) Bypass attack
(2) Flank attack
(1) Frontal attack
Attacker
Defender
(3) Encirclement attack
(5) Guerilla attack
Regardless of which specific strategy, remember the principles of
mass and objective!
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Keeping an eye on competitors is critical to your future
Stocks Rattled by Amazon in 2017: Groceries
Amazon announces it is
buying Whole Foods
Whole Foods +37%
Walmart +44%
Amazon announces it is
lowering prices
Target – 10%
Kroger – 20%
J
2017
D
2017
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Source: NY Times
11
Porter’s Five Forces framed factors that influence the
intensity of rivalry
• Number of competitors
• Industry growth prospects
• Overcapacity
• Fixed costs
• Exit costs and barriers
• Switching costs for buyers
• Differentiation among competitors, brand strength
• Diversity of competitors
These can affect the likelihood of price wars, product
proliferation, and other forms of retaliation !
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6/12/2020
Drivers of Competitive Rivalry
• Market Commonality
• Market Dynamics – size, growth, structure
• Resource Similarity
• Awareness
• Motivation/Reputation
• Ability
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Competitive Responses are driving to improve
performance
• Strengthen own position
• Obtain unoccupied position
• Deposition or reposition
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The Form and Intensity of Rivalry Can Change the Risk of
Price Wars – And We Want to Avoid Them At All Costs!
Industry Characteristic
Raises Risk of a
Price War
Lowers Level of a
Price War
Type of product/service
Undifferentiated
Differentiated
Market growth rate
Stable/decreasing
Increasing
Price visibility to
competitors
High
Low
Buyer price sensitivity
High
Low
Overall industry cost trend
Declining
Stable
Industry capacity utilization
Low
High
Number of competitors
Many
Few
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5
6/12/2020
Four Nonprice Competitive Strategies
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Toyota’s Competitive Approach Was to Use Market and
Product Proliferation Across Almost Every Market Segment
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Game theory emerged about 50 years ago and has
continually developed more implications for strategy.
When each company picks its
“best” strategy, the resulting
combination offers the lowest
profits to the competitors.
This sets up a prisoner’s dilemma
situation, in which competition
leads to low outcomes while
cooperation results in higher
outcomes.
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6/12/2020
A Payoff Matrix Can Be Used to Find the Most
Profitable Dominant Strategy
Example: A Payoff Matrix for GM and Ford
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A Payoff Matrix
to Find the Most Attractive Dominant Strategy
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We see these principles in mainstream media all the
time.
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6/12/2020
The “Prisoner’s Dilemma”
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“Look Forward, Reason Back” Uses Decision Trees
Example: UPS’s Pricing Strategy
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Conclusions from Applied Use of Game Theory
Game Theory is most valuable when:
• The industry has a high level of rivalry
• Many and/or global competitors
• Market growth is static
• Players are aggressively fighting for market share
• Competitors are “fearful” and may become “desperate”
If these conditions do not exist, value may be minimal.
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8
6/12/2020
This Week’s Agenda
• Lecture 1 – Traditional Ways of Thinking About Competitors and Rivalry
• Lecture 2 – Drivers of Rivalry and Game Theory
• Lecture 3 – Analyzing Competitors
• Lecture 4 – Compete, Cooperate or Think Differently
• Lecture 5 – Key Takeaways: What’s the Point?
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25
What do you need to know?
OBJECTIVES
What are competitor’s current goals?
Is performance meeting their goals?
How are its goals likely to change?
PREDICTIONS
STRATEGY
How is the firm competing?

What strategy changes will
the competitor initiate?
STRATEGY
What assumptions does the
competitor hold about the industry
and itself?

How will the competitor
respond to our strategic
initiatives?
RESOURCES & CAPABILITIES
What are the competitors’ key
strengths and weaknesses?
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University of Oregon, Lundquist College of Business, BA453
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
26
Competitive Analysis
• How?
o
o
o
Constant vigilance
Searching in unusual places
Benchmarking
Where would you look for information about your company’s competitors –
outside of published public information?
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9
6/12/2020
Having said this, not everyone does it! What did you
learn from Coyne and Horn?
• How is game theory used in businesses today?
• What do firms actually do?
• What does the research show about how companies react?
• How else can your company make sure you think creatively about your competitors?
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What did you learn from “Predicting Your Competitors’
Reaction”(Coyne and Horn)?
1. Will the competitor react at all?
2. What options will the competitor actively consider?
3. Which option will the competitor most likely choose?
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What did you learn from “Predicting Your Competitors’
Reaction”(Coyne and Horn)?
This leads to a series of other questions …
1. Will your rival “see” your actions?
2. Will the competitor feel threatened?
3. Will mounting a response be a priority?
4. Can your rival overcome organizational inertia?
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6/12/2020
How can you use this to your own advantage?
What options will the competitor actively consider?
• Analyze broad variety of options
• Predict which options the competitor will analyze
• Predict which options the competitor will actively consider
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31
How can you use this to your own advantage?
What options will the competitor actively choose?

How many moves ahead does your competitor look?

What metrics does your competitor use?

What is your adversary’s decision-making process?
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32
Competitor Assessment
• High
• Medium
• Low – Why?
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33
11
6/12/2020
How much time should you focus on competition?
Depending on your company’s stage, maybe not much….

Tina Seelig

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What should you make from all of this?

Spending time on competitive analysis is important, but decide how
much

Spending more time may really give you an advantage since others
typically don’t – or do so at a really superficial level

Look in places that are unusual, that will try to give you an informational
edge

Use game theory when it might be helpful – particularly when
developing an idea of what a competitor may choose, how they may
assess/weigh/decide among options
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35
This Week’s Agenda
• Lecture 1 – Traditional Ways of Thinking About Competitors and Rivalry
• Lecture 2 – Drivers of Rivalry and Game Theory
• Lecture 3 – Analyzing Competitors
• Lecture 4 – Compete, Cooperate or Think Differently
• Lecture 5 – Key Takeaways: What’s the Point?
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12
6/12/2020
Growth
Shakeout
Demand
Remember the Concept of Industry Life Cycles?
Mature
Decline
Embryonic
Time
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Competitive dynamics in mature industries follow
typical patterns
• Small number of large, interdependent firms
• Consolidation – acquisitions
• Game theory – pricing is critical – signaling, leadership
• Barriers to entry, control capacity, maintain excess capacity
• Non-price competition – brands, service, new products/uses/markets (product
proliferation)
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You can compete if you think differently.
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13
6/12/2020
Remember the idea of Disruptive Innovations?
When new solutions emerge that:


Offer a different package of attributes not yet valued by current customers
Open up the definition of the market itself and revolutionize the structure of the
industry

Dramatically alter the nature of competition

Require companies to adopt new strategies to survive
Disruptions often cause the decline of established companies
40
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The “Value Innovation” article lays out the “Blue Ocean”
principle, an Alternative View (Kim and Mauborgne)
Reduce
What factors should be reduced well
below the industry standard?
Eliminate
What factors that the
industry has taken for
granted should be
eliminated?
Create/Add
Creating
New Markets
What factors that the
industry has never offered
should be created or
added?
Raise
What factors should be raised well
above the industry standard?
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41
Make Explicit Decisions to Establish a Position that
Clearly is “Blue Ocean”
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42
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6/12/2020
Make Explicit Decisions to Establish a Position that
Clearly is “Blue Ocean”
Example: [yellow tail] and the Wine Industry
Source: Kim and Mauborgne, Blue Ocean Strategy, 2006
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Blue Ocean Strategy
• The simultaneous pursuit of differentiation and low cost to open
up a new market space and create new demand.
• It is about creating and capturing uncontested market space,
thereby making the competition irrelevant.
• It is based on the view that market boundaries and industry
structure are not a given and can be reconstructed by the actions
and beliefs of industry players.
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15
6/12/2020
Decide Whether Being First in a Market is Important: First
Movers and Fast Followers
“Whoever is first in the field and
awaits the coming of the
enemy, will be fresh for the
fight; whoever is second in the
field and has to hasten to battle
will arrive exhausted.”
– Sun-Tzi
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Whether a first mover advantage exists depends on costs
and benefits for specific markets and a specific firm
• High risk strategy – market pioneer (new entrants)
o
Can get monopoly-like status (and profits)
o
Timing is tricky – need to be lucky
• Requires…
o Proprietary technology
o Resources that are acquired preemptively
o Ability to lock in customers to prevent switching
o Network effects to attract partners and customers
• Disadvantages (or reasons to consider being a fast follower)
o
Benefit from (free ride on) early entrants’ investments in education and infrastructure
o
Less uncertainty
o
Leverage complementary assets in marketing, distribution, production such that can
scale up quickly
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“Making Game Theory Work for Managers”
– Lindstadt and Muller
“On any given day …
AT&T might find Motorola
to be a supplier, a buyer,
a competitor, and a partner.”
“Co-opetition”
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16
6/12/2020
Co-opetition
• Recognizes that business relationships have
more than one aspect
• Businesses must both cooperate and to create
value, even while competing to divide this value
among themselves.
Co-opetition involves multiple roles
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HTC’s Backward and Forward Integration along the
Industry Value Chain in the Smartphone Industry
EXHIBIT 8.5
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Cooperation and Coopetition differ!
Coordination (Collusion?)





Illegal if explicit; can be OK when implicit
Few competitors with similar costs, high entry barriers,
culture accepts cooperation
Price signaling, price leadership
Nonprice competition
Capacity control
Coopetition




Win-win
Create and divide value – both cooperative and competitive
Imitation can be good
Less resistance, sustainable
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17
6/12/2020
Collaboration can be thought of as a strategic play towards
building the overall market size and resilience,or getting
solutions to market faster.

Tina Seelig

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Companies also have to contend with partners who
are also enemies…..”frenemies”.
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This Week’s Agenda
• Lecture 1 – Traditional Ways of Thinking About Competitors and Rivalry
• Lecture 2 – Drivers of Rivalry and Game Theory
• Lecture 3 – Analyzing Competitors
• Lecture 4 – Compete, Cooperate or Think Differently
• Lecture 5 – Key Takeaways: What’s the Point?
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18
6/12/2020
Key Take-Aways: What’s the Point?
• Understand competitors’ goals, strategies, strengths and weaknesses — qualitatively and quantitatively
• Before making a strategic move, anticipate the likelihood and potential success of competitor
responses – maybe even build relatively straightforward scenarios of responses. Your competitors are
probably not doing so!
• Look beyond historical reactions since these are not necessarily what a competitor will do in the future
• Remember when the stakes are high, or a company feels caged in, the response may be unpredictable,
fierce and fast.
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Key Take-Aways: What’s the Point?
• Value innovation comes from positioning theory. Finding a blue ocean can come from lowering costs
or increasing customer benefits.
• Value innovation requires looking at the markets and competitors in new ways.
• Consider cooperation and collaboration since they might be as profitable as innovation.
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Strategic Analysis Tools – Building our list

Business Model Canvas

Value Chains

Benchmarking

VRIO Framework

Net Present Value

Generic Positioning Strategies

ROIC

SWOT/TOWS

PESTEL Analysis

Game Theory

Scenario Planning

Competitive Analysis

Porter’s Five Forces

Co-opetition

Strategic Groups
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19
BA453 DISCUSSION BOARD GRADING RUBRIC
Name: __________________________________________________
Week/Topic: __________________________________________________
Total Points
_____/50
Original Posting – 32 points
0 – Did not post by deadline
Criteria
Excellent to Very Good : 90+
Heading/ Hook (2)
Concepts and
Evaluation (25)
2: Excellent hook and interesting
heading.
22-25: Excellent work. Insightful
analysis. Great integration of issues in
capstone with concepts in class.
Provides a clear context for opinions.
Identifies potential alternative views.
Used examples and facts to substantiate
key points. Lots of specifics.
Shows reflection from class discussion
and readings. Demonstrates that
discussions and readings have prompted
analysis and reflection — even if just to
reinforce pre-existing conclusions.
Presentation (5)
5: Grammatically correct with excellent
presentation, structure and layout.
Good in Some Areas: 75-89%
1:Good hook and interesting heading.
17-21: Strong identification of issues and
analysis on some concepts, but not consistent
treatment in terms of depth. Some integration of
class concepts.
Shows some evidence of independent and
critical thought. Post acknowledges original ideas
and adds something about how class
discussions have helped clarify or amplify the
ideas.
Presentation (2)
0: Hook and header restates topic or no
header included.
>16: Analysis could use strengthening. Does
not yet show in-depth understanding of the
frameworks nor how the issues are relevant,
or not.
Perspective provided is largely facts about
the tool or the company, with limited
synthesis or in-depth application of ideas.
Used examples and facts to substantiate key
points. Lots of specifics.
Largely a recitation of existing facts, fitting
them into analysis, rather than showing any
new or provocative thoughts.
3-4: Generally grammatically correct. A few
syntax or grammar issues, but overall strong
presentation, structure and layout.
0-2: Grammar and presentation issues need
to be addressed to strengthen the post, but
overall intent is clear.
Reply Postings – 18 points Up to 6 points per reply 0 – Did not post by deadline
Criteria
Excellent to Very Good : 90+
Good in Some Areas: 75-89%
4: Thoughtful and insightful response
2-3: Reply shows understanding of the
Context (4)
that moves the discussion forward.
Response shows student is thinking both
about topic as well as the issues posed
by the original post. Student moves
beyond just a response and references
own experiences and assignment.
2: Grammatically correct with excellent
presentation, structu…
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