British american tobacco - Essay Example

British American Tobacco British American Tobacco The British American Tobacco is one of the biggest companies dealing in tobacco in the world. According to various business analysts, BAT is the second largest around the globe. Currently, the company sells about 300 tobacco brands in over 180 tobacco markets in the world. In terms of global market share the company controls about 15% of the available tobacco market. The company has expanded its operations to over 80 nations in the world. British American Tobacco was formed after two major companies dealing in tobacco came together.

In the year 1901 the American Tobacco Company under the leadership of James Buchanan decided to explore the British market. In order to be able to prevent the American tobacco from taking a bigger market share in the U.K, the British tobacco companies came together and formed the Imperial Tobacco Company (BOYLE 2010, 67). The Imperial Tobacco Company managed to prevent the American Tobacco’s venture of being the major market share (Sen 2002, 164). The American tobacco tried all means to get a breakthrough in the British market without success.

The business rivalry cumulated to a trade war with all companies spending a lot of money trying to outdo the other (BOYLE 2010, 67). The trade war continued for along time with both companies making immense losses. The American tobacco company eventually moved out of the U.K market thus leaving the Imperial Company to control the market. The exit of the American Tobacco Company enabled the Imperial Tobacco Company to totally control the British market (Gilmore & Collin 2007, 241). After making the breakthrough in the British market, the Imperial Tobacco Company started contemplating making a move to the United States market (Gilmore & Collin 2007, 241).

Aware of the fact that the Imperial Company had the potential to make it in the American market the chairman of the American Tobacco company called for a truce. The companies agreed that each should conduct its business in its domestic market. Later on the companies came together and formed the British American Tobacco. The company headquarters is in London, Windsor House, and 50 Victoria Street. Being an international company the British American has to look for prospective markets for their products (Watson 2002, 166).

Various countries have different protocols and considerations before any international company is allowed to trade locally. An example is India where the British tobacco company controls about 30% of the market share. In India the government has stopped issuing any more manufacturing licenses to tobacco companies. India has also placed a ban on any foreign companies from investing in the country so as to prevent the tobacco market from any foreign competition. Most countries are striving to inspire the growth of the local based industries.

In that aspect most of the countries are regulating the tobacco market to favor the local manufacturers. As a result international firms dealing in Tobacco such as British American Tobacco are given a lot of restrictions (Gilmore & Collin 2007, 241). Due to the strict regulations that are placed on international companies dealing in tobacco the entry to the new tobacco markets is very difficult. All over the world cigarette is one of the most highly taxed. In most countries where cigarette is perceived to be very harmful to human health, but it is still considered legal very high taxes is imposed to “discourage people from smoking.

” Some countries however tax cigarettes highly so as to get more revenue since they perceive that the companies dealing in cigarettes make a lot of money. There are some countries that the excise duty charged on cigarettes is even more than 50% of the selling price. In a country such as India, the tobacco industry has been victim of what can be termed as prejudiced taxation (Gilmore & Collin 2007, 241). In a survey conducted in India in the year 2013, cigarrate consumption accounted for only about 15 % of the total tobacco consumption in the country.

The other percentage is taken up by some other non – smoking varieties of tobacco like zarda, bidi, gutkha and khaini. Apparently the other varieties are not taxed as highly. British American Tobacco controls the largest market share in just about all the geographical tobacco markets in the world (Sen 2002, 164). However Europe remains to be one of the favorite markets as it is where the company makes a lot of sales. The revenue from the sales in Europe makes up about 40% of the British American’s Tobacco revenue.

The sales in terms of geographical markets are; Africa and the Middle East make about 16% of all the sales, Asia Pacific 23%, Eastern Europe 11%, Western Europe 27% and the Americas 23%. Even though the company has over 300 brands some of major brands that are known worldwide. In the financial year that ended in 2012 the firm managed to make about £15.2 billion in net revenue, this was about an 18% increase from the previous financial year (Sen 2002, 164). The net income came to about £5.5 billion.

The increase was attributed to some of the worlds’ known brands such as, Pall Mall about 69 billion cigarettes were sold, Dunhill 42 billion, Lucky strike 27 billion, Kent 62 billion. Just like any other type of business there are bound to be competition. Some of the five major competitors in the tobacco market are: Japan Tobacco International which produces some of the renowned brands such as Mild seven, Winston and Camel. Philip Morris which manufactures Marlboro (the best selling brand in the whole world) Imperial Tobacco Group Altria Group China National Tobacco Company, this is the largest tobacco company in the world.

It sells about 1.6 trillion cigarettes annually. Among all the top tobacco companies in the world the china National Tobacco Company relies on the domestic market to sell its products. In the year 2012 the company managed to sell about 1.8 trillion cigarettes. It is worth noting that the sales were made in China alone. Most of the top British Tobacco competitors operate in very few countries or countries of origin. However the British Tobacco Company has spread its operations to different parts of the world.

This is an advantage as the company is able to penetrate into the various world tobacco markets. Since its formation the British American Tobacco has undergone tremendous transformation. It has become one of the most successful tobacco firms in the world. Even though the entry into some markets is difficult the company still has managed to record impressive sales in all the international markets. The company currently has managed to venture into over 80 countries` in the world. Despite the regulations that have been put in place by the various governments to control the tobacco market, British American Tobacco has continued to excel.

Reference List Watson, R. (2002). European Court adviser rules against British American Tobacco and Imperial. BMJ, 325(7365), 616c-616. Gilmore, A. B., Mckee, M., & Collin, J. (2007). The invisible hand: how British American Tobacco precluded competition in Uzbekistan. Tobacco Control, 16(4), 239-247. Sen, S. (2002). Reviews of Books:The Global Cigarette: Origins and Evolution of British American Tobacco 1880-1945 Howard Cox. The American Historical Review, 107(1), 164-165. BOYLE, P. (2010).

Tobacco science, policy and public health. Oxford, Oxford University Press.