Monsanto and Global Water Treatment
Case Study
Syndicate 1
Nurul Ibnu Hidayat 29121339
Jessica Amanda Putri 29121377
Ridhwan Iskandarsyah 29121405
Questions
1. Is the state of competition in the industry stronger than normal?
2. Can industry firms expect to earn decent profits given prevailing
competitive forces?
3. Are some of the competitive forces sufficiently powerful to undermine
industry profitability?
These questions can be answered by elaborating Porter’s Five Forces.
However, Before implementing Porter's Five Forces analysis, two analyzes
were carried out in the form of geographical aspects and industrial scope.
Case Overview
● The world market for water treatment equipment was
estimated to be 100 billions dollars.
● Due to buoyant of the expansion of the market in the
early 1990s many companies enter the market
resulting in intense competition.
● The industry was extremely fragmented, in the US
alone, there were over 50.000 water treatment
company.
● According to Monsanto’s President of sustainable
development, the demand for water was exceeding
supply in a number of world area.
Geographical Aspect Analysis
In 1998, Monsanto was a multinational corporation that operated in many countries and continents, primarily in
the agricultural and biotechnology industries. Some of the areas where Monsanto operated in that year
included:
● North America: Monsanto had significant operations in the United States and Canada, including research
and development facilities, seed production, and crop protection product manufacturing.
● Europe: Monsanto had a presence in several European countries, including France, Germany, Italy,
Spain, and the United Kingdom. The company focused on crop protection, seed production, and
biotechnology research and development.
● Asia: Monsanto operated in several Asian countries, including China, India, Japan, South Korea, and
Taiwan. The company focused on crop protection and seed production, with a growing emphasis on
biotechnology.
● Latin America: Monsanto had operations in several Latin American countries, including Argentina, Brazil,
Chile, Colombia, and Mexico. The company focused on crop protection and seed production, with a
growing emphasis on biotechnology.
To assess the attractiveness of the drinking water segment of the water treatment industry in geographical
analysis, Monsanto needs to look at several aspects such as Location, Target Demographics, Potential Market
Evaluation, Social Cultural, and Human Resource Capabilities
Geographical Aspect Analysis
Potential
Target
Location Market
Demographics
Evaluation
High opportunities High opportunities High opportunities
Geographical
Aspect
Analysis
Human
Social
Resource
Cultural
Capabilities
Moderate Moderate
opportunities opportunities
Geographical Aspect Analysis (Location)
Some of the factors that Monsanto could consider for Based on those factors, Monsanto could find that some of
location analysis to assess the attractiveness of the the most attractive geographical markets for its entry were:
drinking water segment of the water treatment industry
were: ● North America and Western Europe, which had high
levels of economic development and urbanization,
● The level of economic development and strict regulations and standards for drinking water
urbanization of different regions and countries, quality and safety, and high awareness and
which would affect the availability and quality of tap affordability of drinking water treatment solutions.
water and the affordability and awareness of However, these markets also had high competitive
drinking water treatment solutions. intensity and low growth rates compared to other
● The regulatory environment and standards for regions.
drinking water quality and safety in different regions ● Asia-Pacific, Latin America, Eastern Europe, and
and countries, which would influence the demand Africa, which had lower levels of economic
and requirements for drinking water treatment development and urbanization, less stringent
regulations and standards for drinking water quality
products and services.
and safety, and lower awareness and affordability of
● The competitive intensity and structure of the drinking water treatment solutions. However, these
drinking water treatment industry in different regions markets also had lower competitive intensity and
and countries, which would determine the entry higher growth rates compared to other regions.
barriers and opportunities for Monsanto.
Geographical Aspect Analysis (Target Demographics)
Some of the factors that Monsanto could consider for its Based on these factors, Monsanto could find that some of
target demographic analysis were: the most attractive target demographics for its entry were:
● The income level and purchasing power of different ● High-income urban consumers who valued health,
end users, which would affect their ability and safety, convenience, and quality in their drinking
willingness to pay for drinking water treatment water choices. They would be willing to pay a
products and services. premium for advanced drinking water treatment
● The health consciousness and environmental products and services that could provide them with
awareness of different end users, which would purified, filtered, or enhanced tap water at home or
affect their perception and preference for drinking on-the-go.
water treatment products and services. ● Low-income rural consumers who lacked access to
● The lifestyle and consumption habits of different end safe and reliable tap water sources. They would be
users, which would affect their usage frequency and looking for affordable and effective drinking water
intensity of drinking water treatment products and treatment products and services that could provide
services. them with basic protection from waterborne
diseases and contaminants.
Geographical Aspect Analysis (Potential Market Evaluation)
The global water treatment ● Municipal drinking water treatment segment is highly regulated and
industry is a large and competitive, with a few dominant players such as Nalco, BetzDearborn, and
diverse market that offers Calgon Carbon. However, it also has a high growth potential due to the
various opportunities for
increasing demand for safe and clean water in both developed and developing
Monsanto, a biotechnology
giant highly committed to countries. Monsanto can leverage its expertise in biotechnology and chemical
sustainable development engineering to develop innovative and environmentally friendly solutions for
efforts. The water treatment municipal drinking water treatment.
industry can be segmented ● Residential drinking water treatment segment is less regulated and more
into four dimensions: types of fragmented, with a variety of products such as filters, distillers, reverse osmosis
products and services, systems, and ultraviolet lamps. It also has a high growth potential due to the
applications, end users, and
rising consumer awareness and preference for pure and healthy water.
geographical markets. The
drinking water segment, Monsanto can leverage its strong brand name and distribution network to enter
which consists of municipal this segment with differentiated and high-quality products.
drinking water treatment and ● The bottled water industry is also large and growing, with many players such
residential drinking water as Nestle, Coca-Cola, PepsiCo, Danone, and Perrier. However, it also faces
treatment, is one of the most some challenges such as environmental concerns, price competition, and
attractive segments for regulatory issues. Monsanto can enter this industry by acquiring or partnering
Monsanto to enter. with an existing player or by launching its own brand of bottled water.
Geographical Aspect Analysis (Social Cultural)
Monsanto, a biotechnology ● Leveraging its expertise in biotechnology and genetic engineering to develop
giant highly committed to innovative solutions for water purification and quality improvement, such as
sustainable development biofilters, biosensors, and bioremediation agents.
efforts, has several
● Expanding its presence in emerging markets, especially in Asia and Latin
opportunities to enter new
industries in terms of social America, where the demand for clean and safe drinking water is high due to
cultural factors in the drinking population growth, urbanization, and environmental pollution.
water segment of the water ● Creating a strong brand image and reputation as a leader in sustainable
treatment industry. Some of development and corporate social responsibility, by addressing the social and
these opportunities are: environmental issues related to water scarcity, pollution, and access, such as
supporting community-based projects, promoting water conservation and
reuse, and partnering with NGOs and governments.
● Diversifying its product portfolio and customer base by offering a range of
products and services for different segments of the drinking water market, such
as chemicals, equipment, devices, consulting, and maintenance.
● Capitalizing on the growing consumer awareness and preference for healthy
and natural products, by offering organic, biodegradable, and environmentally
friendly products for water treatment, such as natural coagulants, disinfectants,
and membranes.
Geographical Aspect Analysis (HR Capabilities)
Monsanto had to evaluate the ● The company had a strong presence in North America and Europe, where it
opportunities and challenges had a large and skilled workforce, as well as established relationships with
for entering this segment in customers and regulators. However, these markets were also highly
terms of its human resource
competitive and mature, with low growth rates and high entry barriers.
capabilities for every
geographic area. Moreover, Monsanto faced ethical and environmental concerns from some
stakeholders regarding its genetically modified products and practices.
● On the other hand, Monsanto had less presence and experience in emerging
markets, such as Asia, Latin America, and Africa, where the demand for
drinking water treatment was growing rapidly due to population growth,
urbanization, pollution, and scarcity of water resources. These markets offered
attractive opportunities for growth and innovation, but also posed significant
challenges for Monsanto in terms of its human resource capabilities. The
company had to recruit, train, and retain local talent, as well as adapt to
different cultural, legal, and regulatory environments. Furthermore, Monsanto
had to compete with local and regional players, who had lower costs and better
knowledge of customer needs and preferences.
Industrial Scope Analysis
Industry Regulatory
Competition
Characteristics Factors
Moderate
High opportunities Low opportunities
opportunities
Industrial
Scope
Analysis
Innovation
Demand
and
Levels
Technology
High opportunities High opportunities
Industrial Scope Analysis (Industry Characteristics)
Within this industry, the ● The industry characteristics for the drinking water treatment segment varied
drinking water treatment depending on the category and the geographical market. In general, the
segment was particularly municipal drinking water treatment category was more mature, stable, and
attractive for Monsanto, as it
regulated than the residential drinking water treatment category, which was
aligned with its core
competencies and values. more dynamic, fragmented, and innovative. The municipal drinking water
However, the drinking water treatment category also had higher entry barriers, lower growth rates, and
treatment segment also posed lower profit margins than the residential drinking water treatment category.
significant challenges and However, the municipal drinking water treatment category also had larger
uncertainties for Monsanto in market size, higher customer loyalty, and lower customer sensitivity than the
terms of industry residential drinking water treatment category.
characteristics.
● The geographical market for the drinking water treatment segment also
influenced the industry characteristics. In developed countries, such as the
United States and Western Europe, the demand for drinking water treatment
was driven by consumer awareness of health and environmental issues, as
well as by regulatory standards and enforcement. In developing countries,
such as China and India, the demand for drinking water treatment was driven
by population growth, urbanization, industrialization, and scarcity of clean
water sources. However, developing countries also faced challenges such as
low income levels, lack of infrastructure, political instability, and cultural
barriers.
Industrial Scope Analysis (Competition)
Monsanto faced some significant ● Those competitors had established brands, customer bases,
challenges and risks in entering the distribution channels, and technological capabilities in the
drinking water treatment segment. industry, and some of them had formed strategic alliances or
One of them was the high level of partnerships to enhance their market power and innovation
competition and fragmentation in potential. Monsanto would have to invest heavily in research
the industry, which consisted of and development (R&D), marketing, and acquisitions to gain a
hundreds of players ranging from foothold and differentiate itself in this crowded and complex
large multinational corporations market.
such as GE, Dow Chemicals, ● However, Monsanto still had some opportunities to enter new
DuPont, and Suez Lyonnaise des industries in terms of competition for the drinking water
Eaux, to small and medium-sized treatment segment of the global water treatment industry.
enterprises that specialized in niche
markets or regions.
Industrial Scope Analysis (Regulatory Factors)
Another challenge for Monsanto ● The industry was influenced by various stakeholders such as
was the uncertainty and complexity governments, NGOs, media, consumers, and activists who had
of the regulatory and social diverse and sometimes conflicting interests and opinions on
environment in the water treatment water issues. For example, some stakeholders were opposed to
industry. The industry was subject to the privatization of water services or the use of GMOs or
different laws and standards across chemicals for water treatment, arguing that they posed ethical or
countries and regions regarding environmental risks. Monsanto would have to navigate these
water quality, safety, pricing, regulatory and social challenges carefully and proactively to
ownership, and management. avoid legal disputes or reputational damage.
Industrial Scope Analysis (Innovation and Technology)
Monsanto, a leading biotechnology ● One opportunity was to leverage its expertise in biotechnology
company, had huge opportunities in to develop new products and services that could improve the
terms of innovation technology for quality and safety of drinking water. For example, Monsanto
the global water treatment industry,
could use its genetically modified bacteria to remove
especially the drinking water
segment market. contaminants from water sources, or its biodegradable polymers
to reduce sludge and waste. These products could offer
environmental and economic benefits to customers and society.
● Another opportunity was to expand its existing portfolio of water
treatment chemicals and equipment, such as chlorine dioxide,
activated carbon, reverse osmosis membranes, and ultraviolet
disinfection systems. These products were widely used by
municipal and residential customers to purify tap water and
bottled water. Monsanto could use its strong brand name,
distribution network, and customer relationships to gain market
share and increase revenues.
Industrial Scope Analysis (Demand Levels)
The global demand for drinking water ● The demand for municipal drinking water treatment was
was expected to grow significantly in especially high in developing countries, where access to
the next decade, driven by population safe and clean water was limited and waterborne diseases
growth, urbanization, industrialization, were prevalent.
environmental awareness, and health ● The demand for residential drinking water treatment was
concerns. also increasing in both developed and developing countries,
as consumers became more aware of the quality and safety
of their tap water and sought additional protection from
contaminants.
● The bottled water industry was also growing rapidly, as
consumers perceived bottled water as a convenient and
healthy alternative to tap water.
Porter Five Forces Framework
Intensity of Rivalry Among Competitors
Intensity of Rivalry Among Competitors (2)
Analysis: First, there were many incumbent competitors in both the municipal and
The rivalry among
1 residential segments of the industry. According to the case, some of the major
players in the municipal segment were Nalco Chemical Company, Betz Laboratories
competitors is influenced by Inc., Calgon Corporation, and Ondeo Nalco Company. These companies produced
several factors, such as the chemicals and equipment for water purification and disinfection. Some of the major
number and size of players in the residential segment were Culligan International Company, EcoWater
competitors, the degree of Systems Inc., Kinetico Incorporated, and RainSoft Water Treatment Systems. These
product differentiation, the companies produced point-of-use devices such as filters, softeners, and reverse
level of industry growth, the osmosis systems. The case also mentioned that there were over 500 small
exit barriers, and the cost companies in the residential segment that offered similar products.
conditions. Based on these
factors, we can say that the
rivalry among competitors Second, the degree of product differentiation was low in both segments. The
in the drinking water 2 case stated that most of the products and services offered by competitors were
similar in terms of quality and performance. The customers did not perceive
treatment industry was
high. significant differences among brands and relied mostly on price and availability as
criteria for purchase decisions. The case also noted that there was a lack of
innovation and technological advancement in the industry.
Intensity of Rivalry Among Competitors (3)
Third, the level of industry growth was moderate in both segments. The case
3 estimated that the global water treatment industry grew at an annual rate of 5% from
1993 to 1998. However, this growth rate varied across regions and applications. For
example, the municipal segment grew faster in developing countries than in
developed countries due to increasing demand for safe drinking water. The residential
segment grew faster in North America and Europe than in other regions due to
increasing awareness of water quality issues and health concerns.
Fourth, the exit barriers were high in both segments. The case indicated that
Based on this analysis, we
can conclude that Monsanto
4 there were significant sunk costs involved in entering and operating in the industry.
For example, competitors had to invest heavily in research and development,
faced a high degree of manufacturing facilities, distribution networks, marketing campaigns, and customer
rivalry among competitors service. Moreover, competitors faced legal and regulatory constraints that made it
if it decided to enter the difficult to exit or switch to other industries.
drinking water treatment
industry. This would have Fifth, the cost conditions were unfavorable in both segments. The case
reduced its profitability and
market share potential.
5 suggested that there were high fixed costs and low variable costs associated with
producing and selling water treatment products and services. This implied that
Therefore, Monsanto's competitors had to operate at high-capacity utilization rates to achieve economies of
chance in this analysis scale and lower unit costs. However, this also increased the risk of overcapacity and
was low. price wars if demand declined or fluctuated.
Threat of Substitute Products
Threat of Substitute Products (2)
Analysis: ● Monsanto's chance in this analysis was low, as it
faced a high threat of substitute products that
The threat of substitute products for the drinking could reduce its potential market share and
water segment of the water treatment industry was profitability.
high based on three factors: number of substitute ● Moreover, Monsanto had to compete with other
products, perceived level of product differentiation, established players in the drinking water
and switching cost. segment, such as Nalco Chemical Company
● First, there were many substitute products (which produced chemicals for municipal water
available for customers who wanted clean treatment), Culligan International Company
and safe drinking water, such as bottled (which offered residential water purification
water, home filtration systems, and boiling devices), and Nestlé S.A. (which dominated the
water. bottled water industry with brands such as
● Second, the perceived level of product Perrier and Poland Spring).
differentiation among these products was ● Therefore, Monsanto had to overcome several
low, as customers did not see much challenges and barriers to entry if it wanted to
difference in quality or taste among them. succeed in this industry.
● Third, the switching cost for customers was
low, as they could easily change their
preferences and habits without incurring
significant expenses or inconveniences.
Bargaining Power of Buyers
Bargaining Power of Buyers (2)
Analysis: The number of buyer demand was high, as more people were concerned about the
The bargaining power of
1 quality and safety of their drinking water due to environmental pollution and health
issues.
buyers in the drinking water
segment of the water The products offered by the suppliers were undifferentiated, as most of them used
treatment industry was high.
2 similar technologies and chemicals to purify water. This made it easy for buyers to
compare prices and quality among different suppliers.
The buyers' switching cost was low, as they could easily change their suppliers
3 without incurring significant penalties or losses. For example, municipal water
treatment plants could switch from one chemical supplier to another with minimal
disruption to their operations.
The size of buyers was large, as they included municipal water treatment plants,
4 residential water purification device manufacturers, and bottled water companies.
These buyers had significant bargaining power over the suppliers due to their large
volume of purchases and their ability to influence consumer preferences.
Bargaining Power of Buyers (3)
Monsanto's chance in this The threat of integrating backward was moderate, as some buyers had the potential
analysis was low, as it faced
a highly competitive and 5 to produce their own water treatment chemicals or equipment. For example, some
bottled water companies had their own water sources and purification facilities.
price-sensitive market with However, this option was not feasible for all buyers due to the high capital investment
powerful buyers. Moreover, and regulatory requirements involved.
Monsanto had a negative
reputation among The quality product information was low, as there was a lack of standardization and
environmentalists and
consumers due to its
6 transparency in the water treatment industry. This made it difficult for buyers to
assess the performance and reliability of different suppliers and their products.
involvement in genetically Moreover, some suppliers engaged in deceptive marketing practices to exaggerate
modified crops and the benefits of their products or to undermine their competitors.
herbicides. This could
hamper its acceptance and The ability to postpone purchase was low, as buyers had a constant and urgent need
credibility in the water
treatment industry.
7 for clean and safe drinking water. This reduced their bargaining power as they could
not delay or cancel their orders without compromising their operations or customer
Therefore, Monsanto would satisfaction.
need to differentiate its
products and services from
its competitors by offering
superior quality, innovation,
and sustainability
Bargaining Power of Suppliers
Bargaining Power of Suppliers (2)
Analysis: The supply of chemicals and equipment for water treatment was abundant and
The bargaining power of
1 diverse, as there were many suppliers in the market offering similar products. The
industry was fragmented and commoditized, with low entry barriers and high price
suppliers in the drinking competition. Therefore, suppliers had little leverage over firms in terms of supply.
water treatment industry was
low, based on the following The products offered by suppliers were not highly differentiated or unique, as they
factors: 2 were mostly standardized and interchangeable. Firms could easily switch from one
supplier to another without losing quality or performance. Therefore, suppliers had
little leverage over firms in terms of differentiation.
The switching cost for firms to change suppliers was low, as there were no significant
3 contractual obligations, loyalty programs, or technical dependencies that would
prevent buyers from switching. Firms could easily compare prices and features of
different suppliers and choose the best option. Therefore, suppliers had little leverage
over firms in terms of switching cost.
The number of large suppliers in the market was high, as there were many players
4 with similar market shares and capabilities. The industry was characterized by low
concentration and high rivalry among suppliers. Therefore, suppliers had little
leverage over firms in terms of size.
Bargaining Power of Suppliers (3)
The potential for firms to integrate backward and produce their own inputs was high,
5 as there were no significant barriers or costs that would prevent them from doing so.
Firms could access raw materials, technology, and know-how to produce their own
Based on this analysis, chemicals and equipment for water treatment. Therefore, suppliers had little leverage
Monsanto's chance in over firms in terms of backward integration.
entering the drinking water
treatment industry was low, The products provided by suppliers accounted for a small proportion of the total costs
as it would face strong
competition from existing
6 incurred by firms in the water treatment industry. The main costs for firms were
related to labor, energy, distribution, and maintenance. Therefore, suppliers had little
suppliers who had low leverage over firms in terms of cost.
bargaining power and low
profitability. Some of the The substitutes for what suppliers provide were high, as there were alternative ways
major suppliers in this
industry were Nalco
7 to treat water without using chemicals or equipment. For example, firms could use
natural methods such as filtration, sedimentation, or aeration; or use bottled water
Chemical Company (USA), instead of tap water. Therefore, suppliers had little leverage over firms in terms of
Betz Laboratories Inc. substitution.
(USA), Calgon Corporation
(USA), Degremont SA The sales generated by suppliers from the water treatment industry accounted for a
(France), Ionics Inc. (USA),
and US Filter Corporation
8 small fraction of their total sales, as they served other industries such as agriculture,
mining, oil and gas, and pharmaceuticals. Therefore, suppliers had little leverage over
(USA). firms in terms of dependence.
Threat of New Entrants: Barriers to Entry
Threat of New Entrants: Barriers to Entry (2)
Analysis: The incumbents have established relationships with suppliers and customers that
The threat of new entrants
1 give them access to lower input prices and higher output prices than new entrants.
They also have accumulated experience and know-how that enable them to optimize
was high for Monsanto, their processes and reduce their costs.
based on the following
factors: Customers’ brand preferences and loyalty to incumbents were also low, as
2 consumers were more concerned about the quality and safety of their drinking water
than the brand name of the provider.
Intellectual property protection was weak, as patents and trade secrets were difficult
3 to enforce in the water treatment industry.
Network effects were negligible, as there was no significant benefit for customers to
4 use the same provider as others.
Threat of New Entrants: Barriers to Entry (3)
Monsanto's chance in this Capital requirements were high, as entering the drinking water segment required
analysis was low. The
company faced strong 5 significant investments in research and development, production facilities, distribution
networks, and regulatory compliance.
competitive pressures from
potential entrants that could
erode its profitability and The incumbents have established relationships with key distributors such as
market share in the drinking 6 municipalities, utilities, and industrial customers that give them access to large and
stable markets. New entrants may face difficulties in securing contracts with these
water segment. The
company had to overcome distributors or may have to offer lower prices or higher incentives to gain market
several barriers to entry and share.
compete with established
players that had economies Government policies and trade policies were unfavorable, as there were strict
of scale, experience, and
reputation in the industry.
7 environmental and health regulations that imposed high costs and risks on new
entrants.
The company also had to
deal with changing customer
preferences, technological
innovations, and social and There were trade barriers and tariffs that restricted access to foreign markets.
environmental issues that
affected the demand and
8
supply of drinking water.
Porter Five Forces Framework-Monsanto
The bargaining power of suppliers:
low, as firms had access to raw
materials and technology that were not
Rivalry among existing firms: high.
scarce or differentiated.
There were many established players
in the market, such as Nalco,
The threat of new entrants: high, as BetzDearborn, Calgon Carbon, and
the industry had low entry barriers. Culligan.
The threat of substitute products:
high, as bottled water was a popular
alternative for consumers who were
The bargaining power of buyers: concerned about the quality and safety
high, as municipal and residential of tap water.
customers had many options to
choose from and could switch
suppliers easily.
Conclusion
● The intensity of rivalry among competitors was The drinking water segment of the water
high, as there were many established players in treatment industry was not very
the market, such as Nalco, BetzDearborn, attractive for Monsanto, based on the
Calgon Carbon, and Culligan. Porters 5 Forces analysis.
● The threat of substitute products was also high,
as bottled water was a popular alternative for Based on this analysis, the suggestion
consumers who were concerned about the for Monsanto would be to avoid entering
quality and safety of tap water. the drinking water segment of the water
● The bargaining power of buyers was high, as treatment industry, unless it could find a
municipal and residential customers had many way to differentiate its products and
options to choose from and could switch services from the existing competitors
suppliers easily. and create a loyal customer base.
● The bargaining power of suppliers was low, as Monsanto could also consider entering
firms had access to raw materials and other segments of the water treatment
technology that were not scarce or differentiated. industry that were more attractive, such
● The threat of new entrants was high, as the as industrial wastewater treatment or
industry had low entry barriers. agricultural water management.
Thank you
