British American Tobacco - Essay Example

It is documented that the company was formed in 1902 by joining Imperial Tobacco Company of United Kingdom with American Tobacco Company of USA. The resulting company was then referred to as the British-American Tobacco Company Ltd. The name later changed to British American Tobacco plc which immediately began earnest diversification in countries all over the world except the United Kingdom and USA, the parent countries. This essay attempts to present a critical appraisal of the strategies adopted by BAT since 2003, an analysis of its environment of operation as well as an evaluation of its potential to remain a major player in the global tobacco business.

There is also a brief conclusion given at the end of the essay. Since the year 2003, British American Tobacco Company put in place significant strategic initiatives which saw it grow from a regional company to a global conglomerate. To attain its current status, BAT employed a myriad of strategies. At the outset, the tobacco company decided to grow organically by increasing its market share in existing markets and also through entering new markets. This strategy required BAT to increase its market penetration in the tobacco industry while at the same time observing cost efficiency.

Interestingly enough, organic growth was reportedly very successful though with enormous cost implications. To this effect, BAT managed to increase organic sales volumes of its four main brands namely Dunhill, Kent, Pall Mall and Lucky Strike (as cited in Lee and Collin, 2006). Additionally, these top brands are reported to have seen an increase of 8% in volumes in 2003 as indicated in Lee and Collin (2006) with further expectations of even better performance in 2005. This projection in growth by volume was indicative of some organic growth especially in the face of difficult situations in some key markets (Lee and Collin, 2006).

On the other hand, to enhance its diversification programme, British American Tobacco went into partnership with R. J. Reynolds Tobacco Company on 11 June 2006 to manufacture Camel brand of cigarettes in Sweden. This marked part of the company's strategy of growth through careful acquisitions as well as some organic growth and share exchanges in the long term to realise high single figure earnings (Glantz, 2000). For this reason financially attractive mergers and acquisitions were concluded in close succession to provide BAT with growth opportunities.

A land mark acquisition came in 2003 when BAT acquired Ente Tabacchi Italiani, Italy's state tobacco company, thereby elevating BAT to the number two slot in Italy. This acquisition had come on the heels of an earlier one of Rothmans International in 1999 which had some presence in Burma (Glantz, 2000). Finally, in 2008 BAT acquired Turkey's state-owned cigarette maker Tekel (as cited in Glantz, 2000). In my commends about organic growth for BAT, its veracious appetite for market penetration raised a lot of criticism from human rights groups particularly with the Rothmans International hence forcing BAT to sell its share of the factory in 2003 purportedly after an exceptional request from the British government (Mackey, Mackey and Barney, 2007).

Advertising and promotion also marked another strategy employed by BAT since 2003. This strategy was