A REPORT
ON
British American
Tobacco Bangladesh
Course Code: I 650
Title of the course: International Business
Date: 09-07-2017
Submitted to Submitted by
Dr. Md. Shariful Islam Rifaz Ahmed Ruman (02)
Associate Professor,
Institute of Business Administration
University of Rajshahi.
Institute of Business Administration
2
British American Tobacco Bangladesh
University of Rajshahi
Executive summary
As a well renowned successful industry British American Tobacco Bangladesh has proved
its standing in counting prominent industry in Bangladesh. It plays a great significant role
in Bangladeshi economy. As we know British American Tobacco Bangladesh is one of the
largest multinational companies in the country and has been operating for over 100
years more than 180 markets around the world.
Corporate and regulatory affairs are responsible for maintaining the process and internal
communication is a part of that. Internal is responsible for communicating corporate
projects, events, achievement; providing counseling service for cross functional teams
and generating positive shift in employee comprehension of company objectives and
directions. It helps to ensure that the employee at all levels have an understanding of the
business and are able to engage and inspire individuals them to deliver winning
performance.
With all its quality services and commitments the industry has won many hearts and as
well as the confidence of the consumers over them. In business analysis at different
situation BATB has to go under different strategies.
The best companies around the world are discovering a powerful new source of
competitive advantage. It's called supply-chain management and it encompasses all of
those integrated activities that bring product to market and create satisfied customers.
The Supply Chain Management Program integrates topics from manufacturing
operations, purchasing, transportation, and physical distribution into a unified program.
Successful supply chain management, then, coordinates and integrates all of these
activities into a seamless process. It embraces and links all of the partners in the chain. In
addition to the departments within the organization, these partners include vendors,
carriers, third party companies, and information systems providers.
Within the organization, the supply chain refers to a wide range of functional areas. These
include Supply Chain Management-related activities such as inbound and outbound
transportation, warehousing, and inventory control. Sourcing, procurement, and supply
management fall under the supply-chain umbrella, too. Forecasting, production planning
and scheduling, order processing, and customer service all are part of the process as well.
Importantly, it also embodies the information systems so necessary to monitor all of these
activities.
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British American Tobacco Bangladesh
Table of Content
Title Page no
History 5-8
Present Product and Business 9-12
Competition and Strategies 13-14
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British American Tobacco Bangladesh
Introduction
Throughout the whole report we have tried our level best to bring out the authentic
information about British American Tobacco as well as its operations in Bangladesh.
Since British American Tobacco is one of the leading multinational companies in
Bangladesh, so, after completing the report we believe that you will have clear idea
about the topics on which we have made this report. So, have patience and lets begin
with history.
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British American Tobacco Bangladesh
History of British American Tobacco
1902 to 2000
James Buchanan Duke
The company was formed in 1902, when the United Kingdom's Imperial
Tobacco Company and the American Tobacco Company of the United
States agreed to form a joint venture, the British-American Tobacco
Company Ltd. The parent companies agreed not to trade in each other's
domestic territory and to assign trademarks, export businesses and
overseas subsidiaries to the joint venture. James Buchanan Duke became
its chairman and the British American Tobacco business began life in
countries as diverse as Canada, China, Germany, South Africa, New
Zealand and Australia, but not in the United Kingdom or in the United
States.
In China, BAT inherited a factory in the Pudong district of Shanghai
from W.D. & H.O. Wills, one of the precursor companies of Imperial
Tobacco. Under the management of James Augustus Thomas
fromRockingham, North Carolina, USA, by 1919 the Shanghai factory
was producing more than 243 million cigarettes per week. Thomas
worked closely with the local Wing Tai Vo Tobacco Company, which
developed into BAT's principal Chinese partner after its success with the
"Ruby Queen" cigarette brand.
In 1911 the American Tobacco Company sold its share of the company.
Imperial Tobacco gradually reduced its shareholding, but it was not until
1980 that it divested its remaining interests in the company.
At its peak, in 1937 BAT manufactured and distributed 55 billion
cigarettes in China. The company's assets were seized by the Japanese in
1941 following their 1937 invasion. In 1953 the company was ejected
from China following the foundation of the People's Republic.
In 1976 the group companies were reorganised under a new holding
company, B.A.T Industries. In 1994 BAT acquired its former parent,
American Tobacco Company (though reorganised after anti-trust
proceedings). This brought the Lucky Strikeand Pall Mall brands into
BAT's portfolio.
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British American Tobacco Bangladesh
In 1999 it merged with Rothmans International, which included a share in
a factory in Burma. This made it the target of criticism from human rights
groups. It sold its share of the factory on 6 November 2003 after an
"exceptional request" from the British government.
2000 to present
The Globe House: British American Tobacco's current headquarters
In 2002, BAT lost a lawsuit about the right to sell cigarettes under
the Marlboro brand name in the UK. It had acquired Rothmans, which
had previously bought a licence to use the name from Philip Morris.
Philip Morris' attorneys invoked a get-out clause for the case of a major
change of ownership.
In 2003, BAT acquired Ente Tabacchi Italiani (ETI) S.p.A, Italy's state
tobacco company. The important acquisition would elevate BAT to the
number two position in Italy, the second largest tobacco market in the
European Union. The scale of the enlarged operations would bring
significant opportunities to compete and grow ETI's local brands and
BAT's international brands.
In August 2003, BAT acquired a 67.8% holding in the Serbian tobacco
company Duvanska Industrija Vranje (DIV), allowing local manufacture
of its brands, freeing them from import duties. In the longer term, export
opportunities are planned as neighbouring countries in south east Europe
developed free trade agreements.
In July 2004 the U.S. business of British American Tobacco (Brown &
Williamson) was combined with that of R. J. Reynolds Tobacco Company
(R. J. Reynolds), under the R. J. Reynolds name. R. J. Reynolds and
Brown & Williamson were the second and third-ranking U.S. tobacco
companies prior to the combination. When they combined, R. J. Reynolds
became a subsidiary of Reynolds American, with BAT holding a 42%
share. In January 2007, BAT closed its remaining UK production plant
in Southampton with the loss of over 600 jobs. However, the global
Research and Development operation and some financial functions will
continue on the site.
Then in 2008 BAT acquired Turkey's state-owned cigarette maker Tekel.
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British American Tobacco Bangladesh
In July 2008, BAT acquired the cigarette and snus operations of
the Scandinavian Tobacco Company.
BAT acquired 60% of Indonesia's Bentoel Group in 2009 before
increasing its stake to 100% the following year.
In May 2011 BAT acquired the Colombian company Productora
Tabacalera de Tabacos S.A. (Protabaco).
In October 2016, BAT offered to buy the remaining 57.8 percent of U.S.
cigarette maker Reynolds American in a $47 billion takeover that would
create the world's biggest listed tobacco company with brands including
Newport, Lucky Strike and Pall Mall. In January 2017, Reynolds agreed
to an increased $49.4 billion deal, expected to close in the third quarter of
the year after approval from both companies' boards of directors.
In April 2017 the company announced the acquisition of a number of
Bulgarian cigarette brands from Bulgartabac for more than 100 million.
History of British American Tobacco Bangladesh
BAT Bangladesh began its operations in the sub-continent in 1910 as
Imperial Tobacco Company Ltd. After the Partition, Pakistan Tobacco
Company (PTC) came into existence with its head office in Karachi in
1949. PTCs East Pakistan office at that time was situated in Armanitola,
Dhaka and ultimately moved to Motijheel, Dhaka. After independence,
Bangladesh Tobacco Company Pvt. Limited was formed in 1972 with
British American Tobacco holding majority shares. In March 1998,
Bangladesh Tobacco Company changed its name and identity to British
American Tobacco Bangladesh pronouncing its common identity with
other operating companies in the Group. British American Tobacco
Bangladesh is one of the oldest and largest multinational companies
operating in Bangladesh. The British American Tobacco Group
holds65.91% share in the Company. The Government of Bangladesh
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British American Tobacco Bangladesh
owns 26.57% through several of its agencies, while 7.52% is owned by
other shareholders.
We are a public company listed on the Dhaka and Chittagong stock
exchanges. The Board of Directors has nine members a Non-
Executive Chairman, four Non-Executive Directors and four
Executive Directors. We are also a leading business organisation in
the industrial sector employing more than 11,000 people directly and
a further 60,000 indirectly as farmers, distributors and suppliers. We
have business contracts directly with approximately 45,000
registered farmers who produce high quality tobacco leaf.
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British American Tobacco Bangladesh
Products/Services offerings
British American Tobacco Bangladesh has been present in Bangladesh for a very long
time and it is still doing its business dominantly with four of its key drive brands i.e.
Benson & Hedges, John Player Gold Leaf, Pall Mall and Star. Among the
competitors, Dhaka tobaccos Navy gives good competition to Star into he
Taka 1 segment. The other brands present in the market are:
Bangladesh Cigarette Market : Major Brands
Company BAT Dhaka Nasir Abul Khair Akiz
Segment
Premium Benson &
Hedges
Lights,
Benson &
Hedges Full
Flavors,
State
Express 555
Medium John Player
Gold Leaf,
Pall Mall Full
Flavors,
Castle, Pall
Mall Lights,
Pall Mall
Menthol,
Capstan
Filter
Low Star Filter, Navy, Royal Asian Marine Gold Hill
Scissors Special
Filter Legend
Very Low K2, Red & Nasir Gold, Sun Moon Wilson
White Five Top Ten
Star, Surma
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British American Tobacco Bangladesh
The Cigarette industry is segmented into the following:
Segment % Share
Premium 5.4
Medium 18.17
Low 54.68
Very low 21.75
Total 100
Premium
Launched in 1997, Benson & Hedges (B&H) maintains our dominance in Premium
segment and drives the growth of Premium price segment in Bangladesh market.
Within a short time Bangladesh became a leading B&H market across the British
American Tobacco world. Although the price of B&H was unilaterally increased in
2004, B&H remains a successful brand in our portfolio. BAT Bangladesh was the first
market to launch the new pack of B&H at the beginning of September 2005. In 2008
B&H has achieved 3 billion stick volume marks for the first time.
Medium
Launched in 1980, John Player Gold Leaf is one of the highest selling brands of our
Company - dominating the High price segment. In 2005, we launched three flavoured
Limited Edition Product and Packs under the Taste the World campaign, which were
extremely well received by consumers. In July 2006, three Limited Edition Product
and Pack (LEPP) were launched under the campaign Blenders Choice. BAT
Bangladesh launched John Player Gold Leaf Smooth in December 2008. The new
cigarette with its enhanced filtration and perforated long filter is geared to offer
smokers a smoother smoking experience with a full bodied flavor.
Pall Mall: Pall Mall is the first Global Drive Brand launched in Bangladesh on 19
March 2006. Pall Mall Lights was the first brand to unleash a mainstream Lights
segment, while Pall Mall Menthol tapped into a latent Menthol segment. As the first
brand to offer a range of product choices, 13 stylish beveled edge packs and designer
sticks, Pall Mall was able to create particular appeal to the ASU30. Pall Mall Smooth
was launched in Bangladesh market in June 2009
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British American Tobacco Bangladesh
Low
Star, launched 40 years ago, is still a dominant brand in this segment. Currently it is
the highest volume generating brand for the Company. At the same time, the cigarette
sticks carried a new look with brighter paper and bi-color dye. Executive Summary:
Very Low
BAT Bangladesh launched Pilot on 11 October in the lowest segment of the countrys
cigarette market. Insignificant presence in Very Low segment prompted BAT
Bangladesh to launch a Tk 1 brand in the segment, which accounts for nearly half of
the countrys cigarette market. BAT Bangladesh does not participate in the
birisegments.
Structure of the organization
The structure is much decentralized with the parent company retaining aLlth0l-ity for
overall strategic direction of the Firm and financial control. BATB operates in the
operates in the following functional areas:
Operations (Production and Supply Chain) a
Leaf
Finance
Human resource
Marketing (Brand and Trade Marketing- Demand Chain)
Legal & Company Secretarial
Information Technology
Corporate & Regulatory Affairs (CORA)
Overall activities of tile company arc governed by the "Board of Directors" and
Executive. The "Board of Directors" is composed of 10 members headed by a
chairman. Chief Executive of British American Tobacco Bangladesh is called the
"Managing Director" who is normally appointed by "BAT Holdings". Managing
Director of the company is the chairman of the executive Committee. This committee
includes the head of all the functional departments.
The decision making, infrastructure is participatory to a very high extent. All the plans
and decisions that are made are communicated from the top level of the organization
and the decisions are made after discussing the issue with the related authority and the
grass root level. Every possible input from every relevant level of workforce is taken
before getting into any decision.
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British American Tobacco Bangladesh
Core Business Activities
BATB's core business is to manufacture and market cigarettes. In addition to this, the
company also exports tobacco and vegetables. The main activities taking place in the
business are:
Tobacco Leaf Growing: There are registered farmers who grow the tobacco in the
regions of Kushtia, Chittagong and Rangpur.
Leaf Processing: The leaf is processed in two factories; the green leaf threshing
factory where the stern is separated fromthe leaf and the Dhaka Factory (Primary
Department) where the leaf cut to make it ready for production.
Cigarette Manufacturing: The cut tobacco is sent to secondary manufacturing
department or the Dhaka Factory where it is combined with wrapping materials to
make the final product. The factory runs in three shifts for 24 hours to give a daily
production of around 60 million sticks.
Distribution: The product is sent out to various distribution houses across the
country. The distributors work with the BATB trade marketing team I ensuring
distribution to all retail outlets in the country.
With ever increasing number of outlets (currently , this is one of the major
challenges the company faces.
Brand Activities: With the ban on promotion activities, the company has to look
towards innovative ways of communicating their brands to the cigarette consumers.
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British American Tobacco Bangladesh
Strategies and Competition of British American Tobacco
Growth Strategy
BAT gives importance to the rise of global market share by evolving into new markets
and wants to grow their capacity by organic growth, merger and acquisition.
For organic growth, BAT is more focused on their strategic global sectors, which offer
good brand expectation for long run, especially Premium and International Brands.
According to 2007 annual financial report, Global Drive brands have growth by 10%
while International brands by 5%. BAT has target of optimizing the role of Global Drive
Brands and are ready to utilize opportunities for their expansion in "Value for Money"
and "Low Price Segments". They also want to maintain or establish good stances in
priority markets by defining itself as the leading and the greatest profitable ever. They
also consider carrying on with their development, innovation and offering customers
distinctive products within their brands. BAT also concentrates in trade marketing and
distribution by focusing on Direct Store Sales that helps to develop excellent and
profitable relationships with the potential customers.
For productivity, BAT concerns about best utilizing its worldwide resources to boost
profits and raise finances for reinvesting in the industry. To be competitive, BAT has cut
costs over supply chain while improving product quality and pace for emerging into the
global market, also utilizing its people and capital effectively.
For Responsibility, BAT strictly follows their Business Principles with the stakeholders,
which is comprised of Mutual Benefit, Excellent Corporate Conduct and Responsible
Product Stewardship. BAT conducts qualitative standards of business with employees
globally. They also encourage sensible tobacco regulation by balancing consumers' choice
and social interests, reducing harm and ascertain the company sustain and flourish. For
harm reduction strategy, BAT will lessen the tar and toxins consistently from the products
and launch a new generation product that has fewer risks to health.
Lastly, for building a Winning Organization, BAT provides good working environment
and follows strategy that produce leaders who have devotion, be innovative and who can
facilitate team in order to build the company worldwide.
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British American Tobacco Bangladesh
During 1990, BAT was intended to concentrate completely on tobacco that provoked and
altered the Group. Later in 1995, BAT considered to have confidence and an aim to be the
leader amongst tobacco industries and hence developed a strategy. To lessen supply chain
complications and accumulate expenditure, which were also part of the strategy, BAT
closed some of its loss incurring companies, like, in 2005, South Hampton plant was
closed down.
Shareholder business also plays significant role for BAT strategy. For more than 5 years,
the net return of shareholders provided by BAT was a noteworthy fact, like, investor who
kept 100 in 2004 would get return of 268 by 2009, plus share cost increment along with
dividends, while FTSE100 would have provide 135 only over same investment and time
span.
Being consistent in strategy, BAT has made profits of 14, 208 million by the end of
2009, 17.2% more from 2008. The operating profit and net profit was 4,101 million and
2,713 million, i.e. 14.8% and 10.4% more than 2008, respectively. All the revenues so
far that BAT has made were due to proper pricing management, growth volume,
outstanding employees performances, good exchange rate and nevertheless, from their
responsibilities towards stakeholders and consumers.
Industry Peers
BATS
Market Cap mill Net Income Mil
British American Tobacco PLC (GBP) 96,523 4,648
Philip Morris International Inc (EUR,USD) 158,951 7,027
Swedish Match AB (SEK) 53,687 4,649
Philip Morris CR AS (CZK) 40,779 2,766
Imperial Brands PLC (GBP) 33,051 1,016
Scandinavian Tobacco Group A/S (DKK) 10,506 618
Karelia Tobacco Co Inc SA (EUR) 839 60
Slantse Stara Zagora Tabac AD
Bulgartabac Holding AD (GBP,BGN) -59
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British American Tobacco Bangladesh
Industry Average
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British American Tobacco Bangladesh
Conclusion
Certainly, tobacco is harmful and can cause major health risks to the smokers. Being
aware of the fact, BAT produces and sells cigarettes responsibly; by making the
product legal, prohibited advertisements and displays, working through dialog,
regulations on packets etc. and affirmed in public to lessen the damage while meet
both public demands and communal expectations. Besides, with the cooperation of
outstanding employees who have the passion and ability to service better
performance, BAT aimed to be known as the leader and be the first priority for NGOs,
governments, shareholders etc. It already possesses the second position in the world
tobacco industry with a successful even strategy, sustainable operations and quality
products, while constructing long-term shareholder value. Over more than 100 years
of business, BAT has established a strong global recognition for high quality tobacco
products in order to meet customers' various preferences.
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British American Tobacco Bangladesh
Reference
1. Donald R. Cooper/Pamela S. Schindler (9th
Edition) Business Research Methods.
2. Porter ,ME(1996)what is strategy? Harvard Business Review, November
December, 61-78. The value chain.
3. The Horizontal Corporation".Business Week.1993-12-20.
4. Michael Porter in his 1985 best seller, competitive Advantage: Creating and
Sustaining superior performance
5. Micrilinks (2009)[ value chain Development Wiki http://apps.develebridge.net/
Amp/index.php/value Development]
6.http://www.bat.com/group/sites/uk
7.http://www.linkdin.com/title/territory+officer/atbritish+American.bd
8. http://batb.bdjobs-server.com/SubLinks.aspx?subId=63
9.http://batb.bdjobs-server.com/
10.http://en.wikipedia.org/wiki/Value_chain
