Analysis of British American Tobacco Marketing Research

Analysis of British American Tobacco
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Analysis of British American Tobacco
British American Tobacco (BAT) is the second leading tobacco manufacture in the world according to Dow Jones world index. Although there are several barriers and restrictions in this sector, the company continues to thrive while providing top quality tobacco products. The company invests averagely £105 million on research and development and produces more than 700 billion tobacco products in a year. Despite this heavy investments, Bat has managed to be a market leader in more than 50 markets among the more than 170 across the world. BAT has more than 250 brands providing its customers with a variety of products to choose from. Besides cigarettes, it is also involved in the production of Pipe tobacco, Cigars, Smokeless Snus and Roll-your-own. Its brands in the international markets include Kool, Dunhill, Viceroy, Vogue, Kent, Benson & Hedges, and Pall Mall among others. It also strives at providing its customers with less risky alternatives to the common cigarettes. They have named this alternative choices and Next Generation Products or E-cigarettes. BAT has a characteristic of a wide geographic and well proportionate portfolio that is aimed at providing value to its customers at a varied price criterion.
History
British American Tobacco was established in 1902 as a joint venture between American Tobacco Company of the United States and Imperial Tobacco Company of the United Kingdom with an agreement that both companies were to keep off each other’s local market but use each other’s trademark and brands within their respective regions. This agreement led to its expansion into new markets such as Japan, China and Canada in 1904. In 1905, it expanded to Ceylon, India and Egypt, in 1906, it penetrated to Sweden, Holland, Norway, and Belgium. In 1908 it entered East Africa, Indonesia and Finland. In 1911, American Tobacco disassociated itself from the joint venture as it entered Malaysia. However, despite the withdrawal of the American Tobacco Company, BAT continued to expand into other markets such as Argentina and Brazil in 1913 and 1914 respectively. BAT entered Central America, Venezuela, Mexico and Chile in 1921. It expanded to North Carolina during its 25th anniversary that is in 1927. In 1990 it established its operations in Far East as well as in Central East Europe. Two years later it entered into Ukraine, Russia, Hungary, Czech Republic, Poland, Uzbekistan and Romania. In 1994, BAT merged again American Tobacco Company. In 2001, BAT expanded its operations to Turkey, South Korea and Vietnam. In 2007, BAT stopped its operations in the UK (British American Tobacco, 2017). BAT’s headquarters are located in London and is being utilized by more than 55,000 individuals across the world. It has maintained a diversified working environment and its structure gives local workplaces independency of choosing its own actions. Decision-making by local stakeholders based on the local situation but within the set policies and principles.
Macro Environment Analysis
The PESTEL/PEST analysis helps in defining the threats and opportunities that BAT faces as well as helps in the visualization of external aspects that may not be controlled and have significant impact to the company.
Political/Legal Factors
The tobacco industry is faced with strict regulations such as heavy taxes and duties from the government. It is also restricted on marketing, product exhibitions and it is advised to avoid certain descriptions such as nicotine, and prohibition of smoking in public places. To address these aspects, BAT has employed lawyers who provides it with legal advice on marketing, social responsibility and stakeholder matters. In addition, BAT did not escape the effects of Brexit. The Political upheaval triggered by Brexit may have potential effects such as lose of ties and increase in taxes and duties which increases the price of its products.
Economic Factors
At the wake of Brexit, several changes appeared at the EU such as the depreciation of the British pound against the dollar and the euro. It also created economic turmoil in the region which led to an increase in custom duties and taxation (Ross & Meakin, 2017).
Social and Cultural Factors
With dynamic changes in different lifestyles due to an increase in the number of chronic disease, the number of smokers have also reduced. Among the generations, the aged population is considered to be the one with the highest number of smokers, therefore, this population may act as a market opportunity for BAT products. BAT is also working closely with relevant authorities to address the issue of advertisement and prohibition of smoking in public places.
Technological Factors
Technological advancements have led to the automation of cigarette production. Now technology is incorporated into the production of cigarettes from tobacco processing to cutting of cigarettes and filters. BAT has also automated the packaging of its products and every location is installed with machines that have the current technology (British American Tobacco, 2017). BAT also participates in technological progress by conducting its own research within its institutions.
Porter’s Five Forces Analysis
Threat of Substitutes (Low)
There is no close substitute for tobacco products both in its traditional and price ranges. Moreover, based on the volumes of tobacco products produced by large scale companies such as BAT, it is almost impossible for the substitute producers to produce such large volumes at the prices that have already been set by the large scale economies. However, since tobacco products are not crucial in human life, the only substitute is to quit smoking completely which is not easy to do. Therefore, the threat of substitutes is low.
Bargaining Power of Suppliers (Low)
BAT has a wide base of suppliers who provide it with the necessary materials. BAT purchases a variety of goods and services from various suppliers across the world, both local and international ones. This makes it not to depend much from a single supplier. Additionally costs of changing suppliers are not high to BAT since they tend to have a say than the suppliers themselves. Therefore, with several suppliers, BAT’s suppliers do not possess sufficient power to bargain much from BAT.
Bargaining Power of Buyers (Low)
The bargaining power of buyers is considered to be high when there exists substitutes in the market, but with no substitute they have no such power. Buyers are price sensitive and before making a decision to buy a certain product or service, they compare the prices by moving from one shop to another. Since there are no providers of what BAT provides, the customers will not compare the prices before making a buying decision, they have to buy it at the provided price.
Threat of New Entrants (High)
BAT do not have any control over the entry and exit of new firms into the market, therefore, those firms that desire to venture into this industry are free to do so without seeking permission from British American Tobacco...