What Is Happening with Tobacco Companies, That Electronic Cigarettes Become Popular - Research Paper Example

What is happening with tobacco companies, that electronic cigarettes are becoming popular, why is it rising Tobacco developing countries) (Electronic Cigarettes phenomenon - servicing a need) Introduction - Background Around the world cigarette smoking has become a trend and a style statement starting from the teenage of the people. Across the globe most of the people are addicted to cigarette smoking and tobacco. Many companies have come up with different sizes, different flavors of cigarettes to encourage the customers and attract the new customers also. These new innovative and different flavors of cigarettes do encourage and attract generally the young and the teenagers to start smoking and also increase their smoking levels. There are many strong operators in the global environment in the cigarette industry like Lorillard, Philip Morris International, Altria Group etc. who have developed new varieties of cigarettes and have captured a huge market share across the globe. But over the last few years the increasing awareness of health care among people and also the governmental policies that are against smoking conventional cigarettes has grown up at a huge rate. This has affected the tobacco companies in a huge way in their sales and also in their financials. Because of this there is a continuous decline in their sales. The companies thus are looking for other options to start for not allowing their business from declining and also for the revamp. Companies like Lorillard and Philip Morris International are; looking to launch the new concept of electronic cigarettes in the market to capture the market share again and to attract more customers. Electronic cigarette is the new product that is been launched in the market for people who are looking to quit smoking but are not able to quit and also taking the health factor of the people in mind. The electronic cigarettes are not filled with tobacco instead they have a liquid containing nicotine which is been diluted in glycerin or propylene glycol and water. The level of nicotine does vary based on the cartridges and they also have certain flavors added to them. In this research it can be seen how the market for the tobacco companies is going down with the increasing demand of electronic cigarette in the market using secondary research and understanding the impact of electronic cigarette over the tobacco industry in the global market. Thesis statement What is happening with tobacco companies, that electronic cigarettes are becoming popular, why is it rising and affecting in the Tobacco developing countries? What is the phenomenon behind the electronic cigarette and the need for service in this category? Scope of research This research over the reasons for the decline in the demand for tobacco and also with the growing demand of the electronic cigarette is very crucial for the tobacco industry. This will help the tobaccos companies across the world to know the trend in which the demand for electronic cigarettes has increased over the tears in various parts of the world and mainly among the teenagers. The tobacco companies can use this research for their growth and for understanding the changing market condition and also the change in the demand of the people. Even the new upcoming companies can make use of this report to understand the market condition and enter the market by coming up with the product which is highly in demand among the customers. The perception among the customers with respect to electronic segment can be understood easily and based on this the companies can also look to enter this market and attract customers. This research report can also be used for further research over the growing demand of electronic cigarettes in the global market. The researchers can use this research top understand the changing preference among the customers who are looking to quit smoking and for having better health. The research will help the doctors to understand the goring demand of electronic cigarette among the people across the world thus they can make an estimate of the harm that it can cause. The scientist and research people can use it to have an idea about the total harm that electronic cigarette can cause ion the world and what measures they can develop to stop people from even using this. This research will help the teenagers to understand what electronic cigarette is really about and how it can cause an affect to them. Research objectives This research is been done over the topic of the rise in the growth of the demand of the electronic cigarette and the impact that it has over the tobacco companies. The tobacco developing countries are also been affected by a huge way because of this growing demand of electronic cigarettes over the years. This is done to understand the condition of the global tobacco industry in the past few years and the way it has been affected because of the growth that e-cigarette has seen in this same time. The objective behind this research is to understand the reasons why the demand for the conventional cigarette is on a declining curve and on the other hand the demand for the electronic cigarette has kept increasing across the globe at all different locations. The research is been done to understand the phenomenon behind the electronic segment and the reasons why it is able to attract so many customers helping the companies to generate such huge revenues in such a short time. The research is mainly focused upon the growth that the electronic cigarette market has seen over the last few years and the way it has caused a lot of problems for the tobacco companies affecting their sales and reducing their revenue by a great margin (Thompson 2008, 45-52). Lot of customers have shifted their preference from conventional cigarettes to e-cigarettes and the reason behind the customers for doing so is been studied in this research and is data is been analyzed properly to understand the exact reasons. Literature review The sales of electronic cigarettes have seen a boom over the last few years. Many analysts working on the tobacco industry have been surprised by the sudden surge in the sales of these products. According to the U. S. Food and Drug Administration (2014), the huge success of e cigarettes in the last few years has started acting as a potential threat for the original tobacco industry (U. S. Food and Drug Administration, 2014, 2). This is because the sales of tobacco containing products like cigarettes and hookah have been reduced considerably due to more customers shifting towards the e-cigarettes. According to the work of Heiyess (1999), the conventional tobacco industry has been a highly profitable industry with huge volumes of transaction and revenue generation over years of its operations (Heiyess, 1999, 35). However, in recent times, the conventional tobacco products is seeing a drop in its sales due to the introduction of new smokeless and filter containing products like the e-cigarettes and e-hookah products. As per the work of Hilt (2000), these products have posed as substitute products for conventional smoking items thereby hampering their popularity and sales in the global markets (Hilt, 2000, 280-300). Many giant tobacco companies have started entering into the e-cigarettes business in order to revamp their product offerings and brand image. Also, many tobacco companies have started to enter into the manufacturing and selling of e-cigarettes with the aim of shaping up a sustainable and positive image for their brands. The companies entering into the businesses of e-cigarettes have to focus extensively on distribution points, potential markets, demands and costs of marketing. They also have to extensively focus on the regulatory policies in different countries because the tobacco and smoking industry is largely controlled by regulatory policies. The regulatory policies are critical influencers of demands and sales in this industry. The major tobacco and electronic cigarette markets in the world are the markets in the United States and the United Kingdom. The year 2013 saw a huge influx of the tobacco companies into the e-cigarette industries with large companies like BAT, Lorillard, Imperial, Philip Morris International (PMI) stepping into e-cigarettes industry either by setting up their own business units or by acquiring popular e-cigarette manufacturing companies. The third largest tobacco company in the United States, Lorillard acquired Bluecigs, an e-cigarette manufacturing company in 2012. Other giant tobacco manufacturing companies like RJ Reynolds American were reportedly testing their electronic cigarette products ‘Vuse’ in the American market in 2013. E-cigarettes are seen as both an opportunity and a threat for the tobacco industry. According to the work of Wiesenberg (2014), e-cigarettes are the biggest challenges as well as opportunities faced by the tobacco industry in recent times (Wiesenberger, 2014, p.150). The demand for smokeless products in the markets of the United States and Europe has caused the sale of e-cigarettes to surpass that of traditional tobacco products in these markets. Also, the increasing aversion of people towards tobacco and the accelerating cause of concerns for the negative effects of tobacco and nicotine on the heath have made the smoking industry slowly shifting towards the e-cigarettes and e-shisha products. Remos (2006) suggests that an increase in the popularity of the overall vapors category has caused a subsequent increment in the popularity and sales of e-cigarette products (Remos, 2006, 14). The emergence of e-vapor products as anew and popular trend embraced by the young generation has driven the popularity of e-cigarettes and increased the volume of sales for these products in the global markets. The lack of suitably placed regulations and tax policies are likely to act as an opportunity for then e-cigarettes industry to boom in the next 2-3 years. However, it is difficult to assess how many customers would smoke e-cigarettes as a trend and how many customers would actually become loyal users of these products. The substitutability factor of e-cigarettes as being a replacement for conventional cigarettes and other smoking items also remains a debatable issue among the analysts in the tobacco industry. Bathe (2014) has identified that the sale and future success of e-cigarettes in the global markets would be driven mainly by three factors which are the regulatory policies, taxes and product innovation or product devolvement (Bathe, 2014, 12). As per Remos (2006), the overall outlook for the market of e-cigarettes cannot be predicted with certainty because of the various unstable macro environmental factors associated with the success of e-cigarettes like consumer perceptions, regulations, taxes etc.(Remos, 2006, 780). However, many analysts like have suggested that the e-cigarettes market is expected to boom further in the coming few years because of the rise in demand for smokeless products as well as the increasing awareness of people about the ill effects of nicotine and tobacco on the health. A major concern arising for the heath community across the world is the entry of giant tobacco manufacturing and selling companies in the market of e-cigarettes. According to The Time (2014),This is likely to boost the sales of e-cigarettes further with the giant companies supporting the sales of these products by their strong hold on the smoking industry and their respective resources and capabilities (The Time, 2014). The main motivation of the tobacco companies in entering into the market of e-cigarettes either by buying e-cigarette companies or by setting up their own diversified business units is to maximize the profits in their businesses. The long term strategic goals of the tobacco manufacturing companies for entering into the e-cigarette industry cannot be identified specifically at this stage of the industry. There are many theories supporting the strategy of tobacco companies to try to penetrate the e-cigarettes market. According to some analysts like Nichiois (2014), e-cigarettes are perceived by the tobacco companies as an entrance product for capturing the market of young smokers (Nichiois, 2014, 4). Also, these products are seen as a suitable gateway for promoting the double use of electronic cigarettes among the current smokers for the purpose of quitting smoking as well as for using the electronic cigarettes as a part of their smoking habits. Other analyst are of the view that the tobacco companies are entering into the business of e-cigarettes because they have identified e-cigarettes as a way of increasing sustainability and as a way of maximizing their profits because the e-cigarettes seem to be the future of the global smoking industry. Also the restrictiveness in the regulatory environment for the smoking industry and tobacco industry is increasing which means that the tobacco companies will have to find sustainable products and business areas to venture into for ensuring more profitability in the future. According to Mackay and Adams (2001), the big tobacco companies bringing in their resources, capabilities, marketing and financial powers as well as their lobbying prowess into the e-cigarettes market is expected to change the dimensions and the overall landscape of this market Mackay and Adams (2001). The big tobacco companies are also likely to influence the e-cigarettes market by their practice of shifting the boundaries in an industry with respect to legal as well as ethical behaviors. According to the work of Frick (2013), the involvement of renowned tobacco companies in the e-cigarette market is indicative of the e-cigarettes being the future trend of the smoking industry and that the stakes associated with the e-cigarette industry are high Frick, 2013, 90). According to Tobacco Vapor Electronic Cigarette Association in 2013 that the demands for e-cigarettes have explored in the entire global nicotine market attracting millions of customers on regular basis. Thus the demand for the conventional cigarettes has gone down by a huge margin over the last few years. As per Riker in 2012, as soon as e-cigarettes came in the market it came under the scrutiny of food and drug administration (FDA). Because of the increasing demand of e-cigarettes in the market FDA did unapproved the drug delivery in the market in 2008 (Glatter, Robert 2012). Westenberger in 2009 said that FDA did launch a series of investigation to understand the affect caused by the e-cigarettes and did find that these were also potentially harmful to the customers because of the presence of the nicotine and other vapor substances present in the product. Other researches like Schripp in 2012 found that the materials used in the manufacturing of the e-cigarettes are far less harmful than the conventional cigarettes. In 2007, Wickstrom did find that nicotine consumption by the women and the girls do affect a lot as the nicotine does get into the breast milk leading to exposure of nicotine to the new born babies during breast feeding. This can affect the health conditions of the babies from the time they are born and also lead to certain kind of abnormalities in the new born babies. All these researchers have explained that the intake of nicotine does affect a lot in the health of the people at every age and gender category who are getting addicted to it (Etter 2013, 34-45). Research methodology This research is been done based on the secondary data which is been obtained from various scholarly sources. Based on the sources that are been gathered from different researches that is been done by the researchers earlier. The secondary data does help to get a lot of information about the topic and also gives a clear understanding of the market situation. The amount of data that is obtained by using this method is very huge and it does help in understanding the topic very easily and also without spending too much of time over it. The amount of time that is been spend over the research used by this method is far less when compared do using primary data. The data which is been collected from the secondary sources is been analyzed using the qualitative research technique. The qualitative research technique is generally used for descriptive understanding of the topic. It helps to understand the concept easily and also in a clear way (Smith 2011, 98-102). This particular method is far cheaper when compared to the quantitative research by collecting primary data. The chances of mistakes in understanding the topic and deviating from the topic is very less in this case as all the study is been done by using the sources related to the research that is done by the researcher over the years on the same related topic. Reaching to the accurate conclusion and getting the accurate result related to the topic chosen is very easy and also genuine by the use of secondary research (Sands 2010, 34-38). The scholarly articles that are been used in this are also good researchers and also associations which are known for good and accurate research and also have done the research in a genuine manner, thus the chances of deviating from the topic or getting wrong understanding of the topic is very difficult thus achieving the accurate result in an easy manner. Data Analysis and interpretation The data that is collected from the scholarly sources is been analyzed top understand the impact of electronic cigarettes in the tobaccos market and the way it has affected the tobacco companies. The below diagram will show clearly the rise in demand of electronic cigarettes among the teenagers over the last few years (Action on smoke and health 2009). The graph clearly shows that the demand of the e-cigarettes among the teenagers in UK has increased at a good pace thus it have affected the demand of the conventional cigarettes causing a huge impact on the growth of the tobacco companies. (Source: Action on smoke and health 4) This has become because of the increasing health concerns and also with the increasing governmental laws on stopping the sales of conventional smoking. Because of this the tobacco companies have tried to shift themselves towards launching e-cigarettes in the market. Thus the overall revenue generated from the e-cigarettes is been growing at huge rate and is seen in the below graph. (Source: Fleagle 2014, 3) In the tobacco developing countries the promotion of the smokers have declined over the years on a constant basis because of rise of becoming health consciousness among the people in different countries and because of the increasing governmental laws. The promotion of the smokers is been seen in the below graph. Thus it can be seen that the number of smokers over the year has gone down in quite a large number in most of the tobacco growing countries. (Source: Fleagle 2014, 4) The ingredients used in e-cigarettes are nicotine, propylene glycol, glycerin and added flavors. These items are been approved by the FDA as non-hazardous and can be used in food items. Because of which people who are trying to quit smoking and for having a good and healthy life prefer to shift to e-cigarettes over conventional cigarettes and it is affecting a lot on the sales of the conventional cigarettes (Sanghani 2014). The teenagers are taking up this new concept because of the stylist look they get from the e-cigarettes which does provides a good status symbol to the teenagers among their friends and in the society. (Source: Action on smoke and health 2014, 2) This stylish look of the cigarettes do attract a lot of teenagers and they try taking e-cigarettes more when compared to the conventional one as it is been more healthier compared to the conventional cigarettes. The advertising done by the companies making e-cigarettes has increased at a good pace and as a result the market awareness about the product has increased at a great extent. Customers are getting attracted to the way the product is been showcased in the advertisements and also with the increasing advertisements of the disadvantages of the conventional cigarettes the customers are looking to prefer the e-cigarette more over the conventional one. This has been able to attract a huge number of customers on a continuous basis and as a result the e-cigarette making companies are been able to increase their sales volume by a huge margin year after year (ESTERL 2013). This is affecting the tobacco companies in a huge way and as a result the demand for tobacco is going down immensely which is affecting the tobacco developing countries also immensely. The export of tobacco from the tobacco developing countries has reduced to a huge extent and as a result of which the there is huge stock of tobacco that is been kept without any use in the tobacco developing countries like china affecting a huge loss for them because of the huge stock. Conclusion and Recommendation Thus looking at this research which is been done using he secondary data collected from scholarly articles and sources, over the topic related to the increasing growth of electronic cigarette in the global market and its impact over the tobacco companies it can be understood how the companies are been affected because of the increasing growth of the e-cigarettes in the market. It can be seen that most of the people around the world are trying to become more health conscious and as a result are looking to quit smoking and along with it there are many new governmental policies that are been set up by various governments of different countries over cigarette smoking. All this has resulted in a he way in the decline of the demand for conventional cigarettes in the market and as a result people are looking for substitute things and the best most nearby substitute that they are getting is the electronic cigarette which is less harmful and also has a good look. Thus customers are looking to shift their preference from conventional cigarettes to the electronic cigarettes so that they can enjoy their drug and also cause less harm to their health, these e-cigarettes do eliminate very less amount of smoke as a result of which the customers are able to take it even in the public places where smoking is been banned by the governments of various countries. Thus the growth in demand of the e-cigarette has affected the growth of the tobacco companies and also has played a major role in the tobacco developing countries as the demand for the conventional cigarettes have gone down by a huge amount. Thus it can be recommended to the tobacco companies that they also try and come out with e-cigarettes as their product in the global market to get more customers and have their constant growth as early. They should look to conduct quality functional deployment to know the exact needs of the customers and based on which they can manufacture and launch the products in the market to again hold a good market share in the global market. Works cited Action on smoke and health. 2009. “Electronic cigarettes”. Oct 2009. Accessed May 29, 2014. http://www.dhs.wisconsin.gov/rl_dsl/Publications/pdfmemos/10-014attach1.pdf. Action on smoke and health. 2014. “Electronic cigarettes”. May 2014. Accessed May 29, 2014. http://ash.org.uk/files/documents/ASH_715.pdf. Bathe, Thomas. 2014. “Tobacco companies investing in e-cigarettes”. Accessed May 29, 2014. http://www.tobaccotactics.org/index.php/E-cigarettes. ESTERL, MIKE. 2013. “Holy Smokes: E-Cigarette Ads Debut on TV”. The Wall Street Journal. 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