Cost Leadership: Monsanto's Strategy

When evaluating what cost advantage Monsanto exploits, one finds that Monsanto's approach is not necessarily to be a cost leader.  Below is an exerpt from the Monsanto website discussing their seed pricing strategy.

"....as a business, we pride ourselves on products that provide the most value, and on being transparent in the way we price them...Our pricing philosophy is a key component of our commitment to serving the best interest of our farmer customers."

http://www.monsanto.com/newsviews/pages/seed-prices.aspx

Their business strategy is product differentiation (and sometimes tacit collusion) but not cost leadership.  They are not shy about this, in fact, it is laid out squarely in this direct quote from their website (cited above).

"When determining the value provided by seed, we consider tangible and intangible benefits the product provides as compared to competing alternatives. Tangible factors include the money farmers save on inputs that our products reduce the need for (chemicals, labor, equipment, fuel, etc.) and the additional income from increases in yield. Intangible factors include convenience, reduction in financial risk and reduced exposure to chemicals. In some crops, these benefits differ between regions and we account for this through regional pricing. Much of the data we use to quantify benefits comes from annual field testing conducted in cooperation with our customers on their farms. Analysis of this data helps us price products so they deliver more value to farmers than competitors’ products."

This concept is interesting to me.  While most industries I feel, focus on how much did it cost them to make and market their products, and how much will they need to sell at said price to yield profit, Monsanto focuses on what can they charge that customers will feel is reasonable based on all the benefits of their product.  Then they further push or pull the pricepoint depending on the region and what competition exists for those local crops, how much people of that region are willing to pay for their advantages, and how much will people save in other expenses by choosing their product versus another without genetic modification.