Hewlett-Packard Company

Individual Report Extended Business Project

BRITISH AMERICAN TOBACCO

Alina Enache
6/6/2017

Tutor: Tracy Mncube Alina Enache

Student ID:ENA16423254 Words Count :2049
Table of Contents
Introduction 2

Background of British American Tobacco (BAT) 2

Strategic plan of BAT 3

Internal analysis of BAT: 3

Product differentiation 3

Human resources management3

Supply chain management 5

External Environment of BAT 6

The treats of new entrants 6

Bargaining power of buyers 6

Bargaining power of suppliers 7

Threats of substitutes 7

Rivalry between existing competitors 8

Recommendations 8

Conclusion: 9

References 10

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Introduction
British American Tobacco (BAT) is globally recognized tobacco manufacturing company
and the firm is one of the leading tobacco suppliers in present market. The BAT is doing
business which means producing finished goods from raw materials and supplying
those goods to the customers who demand that (Maon & Sen, 2013). While doing
business many factors influence the activities of business and the factors both internal
and external have been analysed in this assignment with respect to the BAT.
Furthermore, the last part of the assignment will focus on some recommendations that
helps the company to be market leader and increase market share through ensuring
cost minimization.

Background of British American Tobacco (BAT)

British American Tobacco, a renowned multi-national manufacturing company which
has been given concentration on producing cigarettes was established in 1902 and the
brand has market share over 200 markets. Among these markets the brand has leading
market shares all but 55 countries and has been enlisted as one of the top ten
companies which have been trading in London Stock Exchange (Cheng & Choi, 2011).
The firm manufactures its products in 42 countries through 44 factories and its portfolio
includes many famous brands.

According to the Annual Report-2016 the firm has been able to produce and sell 665
billion cigarettes which are Kent, Pall Mall, Dunhill, Rothmans and Lucky Strike. The
firm has many international competitors’ brands such as Peter Stuyvesant, Vogue and
State Express 555 (BAT, 2017).

Though cigarettes are the main products of the firm its products range also include
Cigars, Fine Cut and Swedish Style Snus. Recently the firm is working to bring the

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products which are less risky than regular products and those forefront products have
been named “Next Generation Products” (Maon & Sen, 2013).

Strategic plan of BAT

Strategic plan ensures competitive advantages which have been emphasized by
Porter’s model for better performance and the BAT has to consider both internal and
external factors while making strategic plan (Cheng & Choi, 2011). The firm has taken
new strategy for the purpose of increasing market share and the strategy is to
differentiate its products through improving quality, making them less risky for health
and ensuring low price of products around global market.

Internal analysis of BAT:

Product differentiation
It means delivering unique products in market for the purpose of getting competitive
advantages since such products attract customers and it’s a competitive strategy of the
BAT (Kroger, 2008). The BAT expects that it will differentiate its products through
reducing health risks and the strategy of the firm will ensure leading position of its
products in market. Moreover, products are differentiated by the need and demand of
the customers and that’s why research and development department of the BAT should
be more innovative (Ferrell, 2013).

Human resources management

The BAT delivers its tobacco products around globe and as an international
manufacturing company the firm has to deal with thousands of customers. In order to
ensure efficiency of its operation the firm requires numerous employees who required
being efficient enough to operate manufacturing activities and deal with customers
(Cheng & Choi, 2011). The Human Resource Department of BAT is responsible for
hiring, training and retaining skilled and efficient employees for the firm (BAT, 2016).

The performance of the BAT largely depends on the performance of every single
employee and for ensuring better performance of the employees they are required

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being trained to be more skilled and efficient so that they are able to produce effectively
and maintain good customer relationship. The performance management department
defines goals and objectives of each department and evaluate performance after
specific period. The HR department enables the performance management department
to make its goal accomplished through increasing ability of human resource (Kroger,
2008). Based on the performance management report the HR department decides
which types of training should be provided and besides this the department also makes
the employees trained up to make them aware of their responsibilities.

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Supply chain management
Supply chain management means ensuring proper flows of raw materials and finished
goods and through managing proper supply chain of goods flows the BAT can minimize
cost of managing inventory and also can ensure proper supply of finished goods by the
market demand (Kroger, 2008).

The market share of the BAT is increasing day after day and that’s why the firm is
required manufacturing more tobacco for which it requires ensuring availability of raw
materials. The manufactured products also required being supplied on time so that the
customers are satisfied getting their desired products prepared for consumption. The
supply chain management department ensures such relationship between demand and
supply through ensuring availability of raw materials in BAT and finished goods in
market (BAT, 2017).

The BAT should establish more effective and efficient supply chain management in
which the production department and all customers will have easy access so that
customers are able to order for required finished goods and the production department
may order for required raw materials. Thus, required products will be produced by
market demands and company will be able to minimize maintaining cost and generate
high profit. Moreover, through supply chain management the firm will get competitive
advantages since products are supplied by market demands on time (Hartline, 2010).

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External Environment of BAT
The external factors influence performance of the BAT and that’s why the firm has to
make innovative strategies. Here the Porter’s five forces model which is an analytical
framework of specific industry to define competition is used to explain the external
factors those have influence on the performance of BAT (Cheng & Choi, 2011).

The treats of new entrants

The BAT is a multinational manufacturing firm concentrating on the tobacco and it is
one of the market leading companies. According to Porter’s Five Forces model
entrepreneurs are attracted to make investment in profitable sectors and thus entrance
of new firm reduces the revenue of all existing firm of that industry (Kroger, 2008).

Since new entrants reduce profit of the BAT the firm has to block the opportunity of
entrance that will increase the cost of firm and such revenue will be reduced. Moreover,
new entrants increase competition in the industry and that’s why the BAT has to be
more strategic and make strategic plan to get competitive advantages (Maon & Sen,
2013). To maintain and improve market situation the firm has to make expenditures that
minimizes profit.

Thus, according to Porter’s model the BAT may reduce revenue due to new entrance in
the industry and to face this external factor effectively the firm is required being more
strategic (Cheng & Choi, 2011).

Bargaining power of buyers

The success of any organization is dependent on the buyers or market share and that’s
why the firm has to set reasonable price of products. If the buyers are so powerful that
means they can influence the price of products the BAT has to set lower price which will
generate low profit for the firm. The buyers are so powerful if they have many other
alternatives in market and then they can pressurize the firm to set lower price (Cheng &
Choi, 2011). Moreover, if the customers are organized they also may pressurize the firm
and customers are generally price sensitive. So, the firm has to set lower price to retain

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customers and thus though firm can generate high revenue the firm is not able to
ensure satisfactory margin (Maon & Sen, 2013).

The BAT may reduce the impact of customers or the buyers’ power through establishing
customer loyalty and maintaining good relationship with customers through ensuring
quality products at minimum price on time. And thus the firm will be able to get
competitive advantages over its nearest competitors which will enable the firm to make
high profit.

Bargaining power of suppliers

The power of suppliers also impacts the productivity of BAT; for instance, if there is
only few suppliers but many manufacturers the BAT has to compete to get services
from the suppliers. Because of any misunderstanding with suppliers, the suppliers may
ignore to supply raw materials to BAT and this must hamper productivity (Cheng & Choi,
2011).

If suppliers increase the price of raw materials the BAT has also to increase price of
finished goods in the same proportion and due to such increament in price the firm may
loose competitive advantages in market. Because the nearest competitors like Imperial
Tobacco delivers products at lower price whether te BAT has to deliver at higher price
and such price difference leads the customers to switch to the competitors products.

Threats of substitutes
The tobacco industry is so profitable and competitive and much tobacco industry is
working here to supply required products. All the competitors are doing competition with
each other’s and trying to grasp more market share which may reduce market share of
another competitor (Cheng & Choi, 2011). For instance, if the BAT increases its market
share, on the contrary its competitors will lose market share which will reduce the profit
of the firm.

To reduce such threat the BAT is required ensuring quality of its products and price also
required being reasonable so that customers don’t switch to the competitors like
Imperial Tobacco (Bradley, 2005). The existing market share may be replaced by the
nearest competitors of the same industry and existing customers may move their

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demand to another competitor of the BAT and such situation must reduce profit of the
firm (BAT, 2017). In this threat, the BAT is required providing quality goods at minimum
price to retain the existing customers and spread its market share over global market.

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Rivalry between existing competitors
In the previous sections, it has been said that the tobacco industry is so profitable and
competitive and that’s why many tobacco manufacturing companies are working to
produce demanded quantity of tobacco. The BAT, the Imperial Tobacco and the
Chinese Tobacco companies are the market leading tobacco manufacturers and
suppliers and these organizations are competitors of each other’s
(BritishAmericanTobacco, 2017). The tobacco companies are engaged in competition
which increases expenditures of the firm in term of advertising expenses, marketing
cost and research and development cost. Due to rivalry among manufacturers of the
same industry the BAT generates low profit margin and required making innovative and
strategic plan to get competitive advantages over other competitors (Cheng & Choi,
2011).

Porter’s has said that rivalry among competitors increases expenditures of the firms and
such rivalry leads to increment in price but sometimes price doesn’t increase in the
same proportion which leads to low profit margin.

Recommendations
Though there are many suppliers of tobacco in international markets the BAT should
focus on expanding in products line to ensure large market share. According to the
Annual Report-2016 the firm has all but 200 markets but it has leadership only in 55
countries and that’s why the firm should give focus on taking market leadership in more
countries (BritishAmericanTobacco, 2017).

The tobacco products are too harmful for human body and these products are cause of
great diseases. The BAT may concentrate on this to manufacture and deliver less risky
products than that of the competitors and thus reducing health risks the firm may attract
more customers and grasp more market share (Kroger, 2008).

The firm also required concentrating on advertising and marketing activities to inform
new customers and retain existing customers. In this case electronic and print media
may be used as communication medium along with these media social media like face

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book and website of the firm may be updated with new information so that the
customers are attracted to the products of the firm.

The firm should be concerned about the CSR activities through which the well being of
society is ensured and thus customers will be attractive to the products of BAT and it
will get competitive advantages over competitors (BAT, 2017).

Conclusion:
Tobacco industry is a profitable and competitive business field and the manufacturers in
this industry like BAT faces different problems while operating their business activities.
The factors are classified both internal and external in where external factors are more
dynamic and difficult to control and cause of increasing firm’s expenditures. Whatever
the position of the firm in market the BAT is suggested making innovative and strategic
plan and participating in social activities to attract customers and increase market share.

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References

BAT. (2017, June 01). About us. Retrieved from BAT: http://www.bat.com/

BritishAmericanTobacco. (2017, June 01). British American Tobacco PLC (BTI).

Retrieved from 2017: http://www.reuters.com/finance/stocks/companyProfile?
symbol=BTI

Cheng, T. C., & Choi, T.-M. (2011). Innovative Quick Response Programs in Logistics
and Supply Chain Management. New York: Spring.

Kroger, W. (2008). Careers in Supply Chain Management. New York: Wet Fleet .

Maon, F., & Sen, S. (2013). Sustainable Value Chain Management: A Research
Anthology. London: Routledge .

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