British American Tobacco's Development - Assignment Example

British American Tobacco Name Admission Unit Tutor Date British American Tobacco Anon (2010) postulates that BAT (British American Tobacco) is an international company that manufactures, packages, sell, and distribute tobacco products. It is located in the United Kingdom’s capital London. It is also a holding corporation of all companies owned by the British American Tobacco Group. The organization provides various products such as cigars, cigarettes, and pipe tobacco in over 300 state and overseas brands. Together with other affiliates, BAT generates 919 billion tobacco products in 49 factories operating in forty-one nations. The company’s vision includes achieving international tobacco trade leadership to build investor value. The company seeks more control amongst its global rivals. The corporate is also intended to be the first in the tobacco trade as the favored main stakeholders’ partner as well as in showing responsibility. The company also intends to increase volume including the international tobacco marketplace value share through mergers, organic development, and acquisition. The British American Tobacco plc as stated by Cookson (2011) handles its operations through the assistance of senior managers and other low-level employees. However, in 2009, the company faced several problems because of the challenges in the FMCG (Fast Moving Consumer Goods) sector. Its overall marketplace volumes decreased by two percent in all its products although the total performance of the company was solid. According to Howard (2009), the company persisted on investing in its promotional initiatives that led to maintenance of its marketplace shares in the major markets. The GDB (Global drive Brands) developed by a joint four percent on volume, which was a 27 percent in BAT’s international volume. Additionally, the total BAT trademark mix is objective between low price, average price, and premium. The British American Tobacco plc operates with other business affiliates to make sure that it meets its customers’ demands at the appropriate time and location. However, the company has also benefited from this since it has upheld its market share particularly in the very competitive trade (Howard, 2000). BAT often surveys its global consumer base beside its FMNG business peers and mostly against other rivals in the industry. Its attempts made it to become a recognized business for consumer relations in the tobacco management division in 2009 by Dow Jones sustainability directory. BAT prefers using the “Direct Store Sales” to vend its tobacco products to consumers (British American Tobacco, 2012). This facilitates better availability of the market or consumer data. This has also assisted it with an unswerving marketing relationship to their tactical sale accounts. In the 2009 financial year, the overall volume of sales in BAT arrived at a 50 percent. Report by Howard (2009) indicates that emerging marketplaces use most of the marketing strategies formed by the tobacco business especially in industrial markets with weak regulations that control the tobacco business. For instance, the United States including other nations is recycling the sham “low tar” marketing promotion of the tobacco commodities. The United Kingdom Federal Judiciary later found out in 2006 that although tobacco organizations had known that cigarettes containing low tar did not contained any health gain, they still continued to encourage smokers to continue using the products to maintain their income. However, even nowadays, BAT still promotes its products citing that they have low tar. Additionally, the British American Tobacco plc uses cutthroat marketing approaches for the promotion of their products in targeted populations like the underprivileged, women, and young people. British American Tobacco (2012) posits that when promoting tobacco products to women, BAT uses its Vogue brand which is the Kinotavr Film gala yearly sponsor. In order promote tobacco products such as cigarettes to women; the company established a fashion based pack of cigarette through a famous Vogue Les Ephemeres trademark artist from France. The company also attempts to establish the same product in Brazil through the Vogue trademark. Following the brand alternatives launch like Aroma and Bleue lines in 2009, the sales for Vogue augmented. The other marketing strategy used by BAT to entice women includes the Kent Nanotek cigarette brand, which was launched in Egypt to target rich women. To target the young people, BAT established the Kent HD, a modern style that evokes the brands perception as novel and fresh. Nanotek and Kent HD marketing mostly entice the young people. Another strategy used by BAT in Latin America includes the sale of menthol cigarettes dubbed as Lucky Strike Nites designed for attractive night partying youths. BAT profoundly targets the young people in Africa by funding concerts as well as single-cigarette sale promotions that tend to be cheaper compared to packs. The company stated that in 2008, the music galas throughout Africa led to an augmentation in marketplace shares amongst the young people and wealthy smokers. The employees from BAT also employ trendy online media sites such as Facebook when promoting its brands, events, as well as new products to the youths. For example, most young people searched for famous trademarks such as “Lucky Strikes” and “Dunhill” especially on the media sites. BAT also targets African people with whose income is low through gifts via its distributors, numerous giveaways during funded music shows, as well as profligate prizes contests, which need buying cigarettes. Awards like vehicles, televisions, motorbikes, and money tend to appeal most Africans who live poorly. These promotions for tobacco offer incentives to the young people to begin smoking. In 2007 and 2008, BAT generated concerts to endorse cigarettes dubbed Pall Mall in Mali. BAT is also involved in Corporate Social Responsibility for image improvement and to weaken efforts of tobacco management. Moon and Bates (1993) state that the company has been involved in corporate social responsibility through charitable ventures like young people smoking prevention, biodiversity preservation, catastrophe relief, child labor elimination, and sustainability. However, some critics stipulate that these attempts fail to fully address the origin of social predicaments thus resulting to community exploitation. For instance, they claim that BAT alleged its CSR in Russia through a YSP (Youth Smoking Program) but instead of the program to decrease smoking habits, it motivated the young people to keep or begin smoking. Additionally, BAT performs corporate social responsibility by sponsoring the jua kali sector especially in East Africa where locals exhibit their craftsmanship to achieve publicity, promote their goods, as well as meet regional politicians. In 2000, BAT also co-established the ECLTF (Eliminating Child Labor in Tobacco Foundation) as a corporate social responsibility effort although critics say that it did not take significant actions of eradicating child labor. BAT also takes part in CSR especially in Kenya by supporting regional farmers as well as their households through fertilizers, pesticides, and seeds loans. In 2009, BAT launched a subsidiary project called Bentoel in Indonesia by donating about 110,000 packages of food to Malang orphanages. The company has also taken part in improving schools by awarding every learning institution with 100,000 dollars grant. Through its PESTLE analysis, BAT is able to define its opportunities and threats; the analysis also assists in the visualization of uncontrollable external facets or has any possibility of affecting its objectives. a) Legal/Political aspects Normally, tobacco businesses are imposed dogmatic control through taxes as well as tariff charges (Anon, 2010). Additionally, product exhibition, advertisement, and marketing restrictions shun descriptions such as mild and light, carbon monoxide, nicotine smoke products, tobacco components, and smoking prohibitions in social places. The British American Tobacco plc is conscious of these facets and utilizes legal representatives for legal counsel regarding civic responsibilities, shareholders matters, and marketing. b) Economical aspects The duty on tobacco increased because of inflation. In the United Kingdom, elevated taxation impact on the cigarette business led to increased prices that caused reduced yearly business volumes and larger competition on prices. Imposing tobacco taxes leads to increased revenue for governments all over the globe. An organization such as the British American Tobacco contributes significantly to the monetary system in over 150 nations. Approximately 100 million individual globally obtain jobs from this business. c) Technological aspects Moon and Bates (1993) say that because of technological advancement, cigarette manufacturing is fully mechanized into technology, from tobacco processing to cigarette filters and paper cutting. Packaging also undergoes automation while cigarettes are packed into relevant trademark packs; they are wrapped in defensive film, and then packed in boxes. BAT possesses modern machines in its factories and they cannot undergo redeployment or destruction. The company takes part in technical processes through its own studies either through its departments or further institutions to innovate fresh production and ideas. The organization deem in examining and adjusting to new accessible production technology. It has also created and upheld new methods of cultivation for soil replenishment through the utilization of organic matter for enhanced fertility framework including environmental benefit. d) Cultural and Social Aspects People tend to gain knowledge because of the elevated levels of health risks amongst smokers. The British American Tobacco plc is familiar with these health risks and controls its business responsibly. It is operating through dialogue in commercial goals, informing people about the effects of heavy smoking on its packets, and restricting smokers to smoke in social places. Outsourcing is a very important activity in the British American Tobacco especially in the information technology sector. For instance, recently, the company attempted to harden its applications and networks to safeguard its operations from fresh cyber intimidation by switching gradually to project applications that are web-facilitated. BAT also signed a contract with Orange Business Services to supply it with network and bandwidth management. The ITC systems are also intended to offer controlled protection services to the organization’s operating firms as well as distributors. BAT’s international IT protection head, Gareth Lindahl stipulated that the organization is aimed at using the internet for business applications, thus exposing it to bigger risks (Elliot and Elliot, 2009). The ITC is intended to handle three major security ventures namely BAT’s external communications, installation, and management of sensitive documents as well as password crypts and hardening of applications. The ITC used in BAT uses CISCO technology in its firewalls, infringement detection and prevention, as well as event reporting and connection. Tom Millar is the BAT’s ITC manager who ensures that the applications and vaults are hardened for safety. Some of the firms that have approached BAT for outsourcing include Juniper, F5-Networks, and Cyber-Ark. Recently, an organization called Wipro signed a contract with BAT to offer maintenance services for international trade operations (British American Tobacco, 2012). One year after another, the BAT has continued to grow from 3.1 Billion to 3.8 Billion GBP in spite of reasonably stagnant resources. Appendix 1 In conclusion, British American Tobacco is a global tobacco company located in London, United Kingdom. It manufactures, distributes, and sells tobacco products such as cigars and cigarettes. However, just like any other business, BAT uses its PESTLE analysis to learn about its external environment. With years of operating in the competitive environment, BAT has realized that outsourcing is very important for its development. This has made it to outsource IT applications from other companies to protect its sensitive data. Additionally, the company has also taken part in corporate social responsibility by engaging in communal activities. For BAT to stay in business, it has carried out strategic marketing approaches to its targeted consumers such as the young people, women, and the underprivileged. As indicated in the income statement above, BAT’s revenues have continued to augment every year making it one of the leading tobacco companies. Lastly, because of its competitiveness, BAT has been enlisted in the FTSE 100 index. BAT YEAR 2009 BAT YEAR 2010 BAT YEAR 2011 BAT YEAR 2012 List of references Anon, I. (2010) Who are we? ‘British American Tobacco [Online] May 3 2010. Accessible from http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO52ADCY?opendocument&SKN=1 [Retrieved: 12th April 2013] British American Tobacco (2012). Annual Report. Accessible from www.bat.com www.globalmarketsandcompanies.com [Retrieved: 12th April 2013] Cookson, Clive. (2011) BAT Aims to smoke out Nicotine Lovers who find Cigarettes a Drag. [Online] April 5 2011 http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO8FLL93/$FILE/medMD8FNE7K.pdf?openelement. [Retrieved: April 12 2013] Elliot, B. and Elliot, J. (2009). Financial Accounting and Reporting. 13th Edition. Essex: Pearson Education Limited. Fernando, A. (2009). Corporate Governance: Principles, Policies, and Practices. New Delhi: Pearson Education. Howard, C. (2000). The Global Cigarette: Origins and Evolution of British American Tobacco 1880-1945. Oxford: Oxford University Press. Howard, C. (2009). "British American Tobacco Company". In Linsun CHENG. Berkshire Encyclopedia of China. Great Barrington, Massachusetts: Berkshire Publishing Group. Moon, P. and Bates, K. (1993). Core analysis in strategic performance appraisal. Management Accounting Research 4:139-152 Appendix 1 Data accessed from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=BATS:LN&dataset=incomeStatement&period=A¤cy=US%20Dollar Read More