Angel PinaHardin BUSU 620 Economic Analysis for Managers Monsantos Roundup Case Study Monsanto, founded in 1901,

became known as a life science organization because the manufactured Saccharine, vanilla, phenol and aspirin (Baccara, Backus, Bar-Isaac, Cabral, & White, 2003). In 1995, Monsanto found itself in financial trouble and decided to merge with Pharmacia. Investors were worried that the merger would bring down the profits of Pharmacia. However, this was not the case as stock priced for Monsanto increased by 80% between October 2000 and August 2001 (Baccara, et. al, 2003). Using the time-series model can help explain investors fears regarding the merger of Monsanto and Pharmacia. The time-series model seeks to predict the outcomes simply by extrapolating past behavior into the future (Samuelson & Marks, 2009). Observing the trends and business cycle of Monsanto told investors how well the organization was doing over time; if they were able to sustain their economic growth even while in recessionary times. Additionally, investors could look at seasonal variations to predict how well Monsanto products sold during different times of the year. Finally, random fluctuation, though often uncertain, could be used to show irregular movements due to essentially random factors (Samuelson & Marks, 2009). Robert Shapiro had a good understanding of the supply and demand concept. He understood that demand depended on what quantities people were willing and able to purchase at various prices. Additionally, he knew that producers were only willing and able to supply a good or product at a certain level. Given this knowledge and that the patents for some Monsanto products were getting ready to expire; he lowered the price on average 9% per year for almost five years allowing the average volume to increase 22% a year (Samuelson & Marks, 2009). Additionally, he used a highly profitable product to finance cutting edge research and development of cutting edge science. As more environmentally friendly methods of farming came into play, one was tillage conservation in which crops were planted without first plowing the fields under. Using sensitivity analysis allowed analysts to determine how an optimal decision is affected if key economic facts or conditions vary (Samuelson & Marks, 2009). These analysts were able to advocate that tillage conservation would be sensitive to the price of herbicides. By introducing the development of herbicide-tolerant crops, Monsanto was able to exploit economies of scale. A price reduction of one product, Roundup, increased the demand for its complementary product, Roundup Ready Seeds. This allowed Monsanto to maintain high market shares in countries where patent laws were less strict; thereby causing barriers to entry in the herbicide market (Baccara, Backus, Bar-Isaac, Cabral, & White, 2003) (Samuelson & Marks, 2009).