Flexibility: Real Options Analysis Under Risk and Uncertainty

Businesses must have strategies that allow them to make it through difficult periods.  Depending on the type of market, the level of risk and uncertainty must be weighed and tools should be implemented to help protect the company against times of challenge.  For Monsanto, their strategizing has come under serious scrutiny.  Two of their choices in particular strike a nerve.  

The first: they claim that they have a right to a percentage of sales on all genetically modified resulting crops.  For example, they sell the seed. The farmer grows the crop.  The renewal crop that results the following year is subject to a royalty of 2% each year according to Monsanto.

The second: they are big guns that shoot at little guys.  They are the world's largest seed provider, yet they have sued farmers who unknowingly used genetic modified seeds through third party purchase and were unaware of the renewal royalties expected from Monsanto.

How are they trying to enforce these rules and ensure the continued pay in case R&D is lacking or there are issues with new product?  They are attempting to recreate the copywright/patent that would make any plant derivative of a GMO that started with Monsanto their intellectual property!  Many call this "unnatural".  

"The issue as it concerns Monsanto is not whether the company has a right to sell products and charge for them as it chooses. But essentially, Monsanto holds crops hostage with its position on royalties. The farmer grows his crop using manifold resources including labor. He also grows the seeds that he intends to replant – but finds he cannot until Monsanto is paid again … and again."

If Monsanto owns the rights to a portion of the profits from all future crops because their products were key in developing the original one, this gives them increased flexibility and padding in the event of a bad season for producing or sale of a new product.  Because research and development is very costly to imitate, manufacturing decisions are crucial and can result in heavy losses if the wrong choices are made. 

http://www.infowars.com/monsantos-business-model-a-devious-strategy-to-extend-copyright-into-perpetuity/