British American Tobacco Company Products - Essay Example

BAT Company is listed in the London Stock Exchange and is a constituent of the FTSE 100 Index. The company reports that as of December 2011, it had market a capitalization of ?59.2 billion. Then, it was ranked sixth largest company listed in London Stock Exchange. The company is not only listed in London Stock Exchange but also in the Johannesburg Stock Exchange (South Africa) and the Nairobi Sock Exchange in Kenya (Britannica Educational Publishing and Rogers 2011 p.177-198). The purpose of this paper is to analyze the demand and supply factors that affect the sales of BAT products.

It will also explore what the company needs to do to be able top operate profitably in this market. The essay will also discuss the impacts of the macroeconomic factors: economic growth, unemployment, inflation, the balance of payment and business cycle on the products. Demand and Supply Demand and supply are the most fundamental concepts of economics and the backbone of a market economy. This is due to the fact that they determine how a particular product or service is sold in the market. Demand by definition refers to the quantity of a service or product desired in a market by buyers.

The quantity demanded on the other hand refers to the amount of product that buyers are willing to purchase at a given price. Price and quantity demanded exhibits a relationship known as demand relationship. Supply refers to the quantity that the market can offer. In this regard, the quantity supplied means the amount of a given products suppliers are willing to supply at a certain price. The relationship between price and quantity supplied in the market is referred to as the supply relationship.

Based on this definitions, it is evident that price is a reflection of demand and supply. Microeconomic Factors Price Price is one of the main factors that affect the demand and supply of a product, which in turn determine the quantity of a product that is sold (Carbaugh 2010 p. 28-42). With regard to demand, the price charged determines to a great extent the quantity of a product that consumers will buy. This is due to fact that that quantity demanded and the price have an inverse relationship.

This implies that the higher the price, the less will be the quantity demanded of the product. This is one factor that has affected the sales of BAT tobacco products. The company management argues that as the cost of product used in the manufacture of tobacco products increases due to drought, they have been forced to adjust their process upwards (Cox 2000 p. 16-39). However, this increase in price did not go well with regard to turnover as many customers reduced the quantity they could purchase.

This is probably due to a shift to other cheap close substitutes. The company managers are, however, quick to assert that they are projecting a decrease in price which would enable customers to purchase more, thus increasing their sales. On the other hand, an increase in supply of the company’s product usually lead to a reduction in price, resulting in an increase in sales as consumers are now able to afford the products. Substitutes The price and availability of close substitutes also affects demand for a product.

When a product has a close substitute, it is a matter of fact that consumers will be willing to shift in case of an increase in price (Carbaugh 2010 p. 28-42). This is what has affected sales of BAT’s tobacco products. The company managers argue that many people nowadays prefer other forms of depressants