External Environment Macro Analysis Pest Analysis Marketing Essay

External Environment Macro Analysis Pest Analysis Marketing assayPolitical -. European Union and world avocation union had contributed massively in the globalisation that had promoted globalisation but due to recession especially in US and European trade the goernments of the countries energise started pursuing protectionism policies. In UK and USA the government is promoting the policy of giving job opportunities to their citizens prime(prenominal) then the outsiders. such(prenominal) policies would sire a big change in dodging formulation of many companies.Economic the GDP developing of the developed countries exhaust been falling in the finis five years. to a greater extentover the year 2009 would experience more big fall in GDP whereas the BRIC countries have shown secure development of more than 7% in last five years but due to recession in the world trade there leave alone be fall in their growth similarly due to global impactSocial- due to globalization in last two decades a convergence approach has been observed the world over of accepting global dishonor irrespective of their culture. Purchasing power in developing countries have increased which had made them spend more on luxuries crops. a same women and children segment has also become an active segment in the last one decade.Technological -globalization had given rise to tough competition among the MNC, they ar invest huge amount on research and development to bring parvenu improved products to attract customers. Providing differentiated products from the competitors is generally the aim of giant companies.external surroundings o t midland environment sWSWOT ANALYSIS skim is engaged in the manufacture, seagulleting and sale of cig arttes and other tobacco products. The groups brand portfolio accepts over 300 global and regional brands. Strong brands fork up the group with the flexibility to frequently launch new products as brand extensions. strong brands provide a compe titive advantage to the group in the limitet place. However, increasing advertisement restrictions whitethorn negatively impact the group sales, as advertising is grievous in driving tobacco sales.StrengthsStrong brand portfolioThe groups brand portfolio includes over 300 global and regional brands. The groups world-wide Drive Brands (GDB) including Kent, Dunhill, Lucky Strike and wear down Mall, account for more than 26% of the group global volumes.Strong brands provide the group with the flexibility to frequently launch new products as brand extensions. More all-important(a)ly, strong brands provide a competitive advantage to the group in the market place.Diversified revenue streams convulse has a wide geographic presence. It operates in 180 markets in Europe, Asia Pacific, Latin America, Africa, the Middle East and the American Pacific region by dint of a large number of subsidiaries and associate companies.Continuous orientation course towards research and developmentThe group has been continuously strengthening its research and development (RD) activities in recent past. The group devotes significant resources and attention to product development, process engineering science and consumer insight research to develop consumer-preferred products with innovative and distinctive features. This is evident from the fact that the group incurred 105.1 million in the RD activities in FY2008.The RD provides support for the groups current range of products . It also provides guidance on the use of ingredients in products to help to improve the quality and standard of the products as intumescespring as comply with national legislative requirements.RD world-class helps flail to innovate and introduce new products in line with changing consumer preferences.WeaknessesLow employee productivityBATs revenue per employee is humiliateder than that of its adjacentst competitor.The group record revenues of 12,122 million in FY2008, with a total number of 56,170 em ployees. The groups revenue per employee stood at $400,365.0 in FY2008, significantly lower than that of its closest competitor, over-embellished Tobacco.In FY2008, the revenue per employee of Imperial Tobacco stood at $952,078.4,Lack of scaleThe group lacks scale when comp bed to its competitors in the market. Many of its competitors, such(prenominal) as Philip Morris International and Imperial Tobacco ar much larger in size and in terms of revenues.Philip Morris $63,640.0,Imperial Tobacco 20,528BAT, 12,122 million in FY2008.The groups small scale of operations could turn out to be a disadvantage in the fiercely competitive market. Lack of scale also reduces the bargaining power of the group.OpportunitiesAcquisitions to strengthen the market gear upThe group has get ined into some(a) strategic acquisitions in the recent past. As a result of these acquisitions, the company now has a much stronger market position in Tur light upon, Denmark, Sweden, Norway and Poland and both ac quisitions have performed in line with expectations, while contributing positively to earnings. These strategic acquisitions would continue to benefit the group in future as well.Growing global tobacco industryThe global tobacco industry is forecasted to witness growth through 2013. Volume declines are evident in developed markets. However, some developing markets in Eastern Europe and East Asia are recording growth.The performance of the industry is forecast to accelerate, with an anticipated CAGR of 4.1% for the five-year period 2008-13, . This would give a positive boost to the revenues of groups general business.Declining oil footingsThe oil pr scraps have been declining in the international markets. declining oil prices is plausibly to positively affect the groups operations. Declining oil prices would reduce its bell, and so enabling it to increase its operating(a) margins.ThreatsIncreasing advertising restrictionsAdvertising, promotion and brand building, which are crit ical to the tobacco industry, are facing increasing regulatory obstacles across the globe.Growing illicit tradeIllicit trade in the form of counterfeit products, smuggled genuine products and locally manufactured products on which applic able-bodied imposees are evaded, represents a significant and ripening threat to the legitimate tobacco industry. The illicit trade constitutes a larger portion of the total tobacco industry across the world.Economic slowdown in Euro zoneBAT derives major portion of its revenues from the European market Representing 39.1% of the total revenue.A weak economic outlook for the Euro zone is likely to depress the admit for the groups products, impacting the revenues of the group in the immediate future.external environmentFIVE FORCES ANALYSISBuyer PowerThe main retail outlets for the US tobacco market include independent retailers, service stations, and supermarkets/hypermarkets. The concentration of retail outlets selling tobacco products is relative ly low here, as there are number of outlets where the products can be sold. In the US, independent retailers are the close to predominant diffusion channel, with 27.6% donation of total distribution Furthermore, tobacco products are not the scarcely products sold by most retailers and in most faces retailers are not reliant upon tobacco sales therefrom boosting buyer power. Customers are likely to be susceptible to brands, so capability pull-through of end-consumer demand on retailers exists, weakening buyer power somewhat. Overall, buyer power is moderate.Supplier PowerTobacco is an agricultural product and therefore key suppliers to the tobacco market include tobacco leaf farmers. These farmers lack power in the supply chain due to their smaller size, with many farms being family suffer businesses, particularly those in developing countries. Further inputs to the market include processing aids, humectants (which keep the tobacco moist and pliable), preservatives and brands pecific flavors. Other key inputs include packaging materials, such as paper/card, plastic, and foil to protect and preserve the products of this market. More specifically, packaging manufacturers supply the market with in-line rotogravure printed hinge-lid blanks and soft packs, RYO (Roll Your Own) tobacco booklet covers, as well as printed OPP film (Oriented Polypropylene film), bundle wraps and tobacco pouches. Due to the relative size of such suppliers, their respective influence over the market is increased. There are limited alternative raw materials in this market, so players are unlikely to switch in the midst of suppliers boosting their power somewhat. Overall, supplier power is moderate.New EntrantsThe dominance of existing brands is notable within the US tobacco market, with leading players such as Altria Group or Reynolds American benefiting from scale economies. Legislation and Government regulation with regards to gage also continues to get more and more stringent w ithin this market, i.e. a complete ban for smoking in public places has been implemented in a number of states. Current tobacco potency strategies seek primarily to decrease the demand for cigarettes through measures that encourage individuals to adopt healthier behaviors, raising entry barriers. Such regulations could effectively deter the threat of new entrants.Furthermore, shelf-space in retail outlets is finite and retailers may be unwilling to substitute other established brands in army to stock those of an entirely new, unproved brand. Overall, there is a moderate from new entrants to the US tobacco market.SubstitutesTobacco products are non-durable goods, and substitutes for tobacco products may include non-homogeneous other non-durable consumer goods, for example nicotine gum, nicotine patches, and herbal cigarettes. However, there are inter-segmental substitutes apparent within this market, alternatives to cigarettes and fine cut tobacco products include smokeless toba ccos, cigars and pipe tobacco. Players and consumers alike may substitute one tobacco product for another, with players who specialize in the manufacture of cigarettes diversifying into cigars as an example.However, inter-segmental substitution still involves essentially the same product. The benefits of substituting tobacco products for jump-start non-durable consumer goods are especially notable in concern to consumer health, largely due to the health seeks associated with smoking (e.g. increased risk of lung cancer, heart disease etc.). These alternative products match consumers need for nicotine, without the harmful effects of inhaling smoke. Unlike tobacco products that face restrictions on advertising in many markets, nicotine replacement products are highly promoted through a variety of media. Overall, there is a strong threat from substitutes to the US tobacco market.RivalryThe US tobacco market is concentrated, with Altria Group and Reynolds American collectively belong ings over 76% share of the markets value. Product differentiation is essentially limited between the core tobacco products, which include chewing tobacco, cigars and cigarillos, cigarettes and loose tobacco, which increases rivalry. Illicit tobacco supplies have a negative impact upon players revenues and it is estimated that over 10% of tobacco consumption (around 600 billion cigarettes) a year, globally, is supplied by smuggled or counterfeit trade, which will serve to boost rivalry. Overall, there is a moderate degree of rivalry in the US market.Company analysisMARKET sectionalization I tooshie sales constitute the largest share of the US tobacco market, accounting for 93% of the total revenues. In comparison, sales of chewing tobacco generate 3.3% of the markets value.MARKET SEGMENTATION IIThe United States accounts for 21.8% of the global tobacco markets value. In comparison, Europe generates 41.2% of the markets revenues.Company analysisCOMPANY VIEWA statement by Jan du Pless is, Chairman at BAT is given below.company strategy growth, productivity, responsibility and building a winning organization.Growthcompany continued focus on our 4 Global Drive Brands (GDBs) has played a major character reference in theseachievements. Last year, our 4 GDBs grew by 16 per cent, with about a quarter of the increase traceable to successful brand migrations.Kent rose by 18 per cent andPall Mall by 22 per centLucky Strike increased by 9 per cent andDunhill by 7 per cent.GDB volume now represents over 26 per cent of our total volume, providing us with a significantopportunity to correspond scale to our key competitive innovations.ProductivityWe have also made further progress with our productivity savings and we are very much on tracktowards our get of reducing our costs by 800 million by 2012,ResponsibilityIn 2008, for the seventh year running, we were included in the Dow Jones Sustainability Indexes and we published our first Sustainability Report.Winning organizatio nEmployee opinion at British American Tobacco compared favorably with other FMCG companies in the comparator group.Earnings, dividends and share buy-backAdjusted diluted earnings per share grew by 19 per cent to 128.8p. the benefit from the share buy-back programme were partially offset by higher(prenominal) net finance costs, a higher tax rate and an increase in minority interests.LiquidityArguably the most satisfying feature of our results last year was the high level of cash generation. let loose cash flow rose 52 per cent. they continue to maintain investment grade credit ratings.OutlookWe remain alert to the possibility of down trading. However, our well balanced portfolio of brands covers all major price points, while our geographic diversity further mitigates the risks for shareholders. We are very much aware of the potential challenges but the native strength of our businesses, our brands and our people should fetch us more resilient than most.Current strategyACQUISITIONS AND MERGERSIt is one the most popular strategies which are being used by the modern corporate for the purpose of diversification. In this most of the tobacco industry it is becoming increasingly popular strategies for the purpose of acquiring market leadershipIn this BAT are tried to acquire many companies globly for its core competencies, market shares, brands well known R and D and their special technologiesThe main reasons for acquisition and mergers are the followingIt is the strategy by which the BAT is severe to get market leadership and as an edge over its rivals especially in the tobacco industry . BAT is operating in the tobacco industry is attempting mergers and acquisitions as strategy for expanding operations in the world.By exploitation the strategy the corporate are trying to increase their geographical coverage which is a most crucial strategy or technique by which it is a able to target its final consumers thus it is an effective strategy by which the customers are being targeted in a neat span for its main benefit is the integration which helps the firms to increase their outlets.Acquisitions and mergers helps in expanding of the end product that leads to achievement of economies of scope which in turn increases the earning capacity or the profit margins of the firms using such a strategy.This helps in the using of the brand name of BAT by the acquiring firm which helps in providing benefits to BAT, by using strong brand name for increasing their customer force.ACQUISITIONS AND MERGERS PROBLEMSProblems of integration- if the subsidiary organization is not able effectively integrate with the parent organizations operation then the whole exercise of acquisitions and mergers can be into a big problem. In case of BAT has everlastingly maintained its independence and culture.Problems concerning the human resources-If the resources especially its human resources are not being utilized properly in accordance then in such cases the usage of such strategies for the purpose of acquiring company can be futileProblems concerning the conversion of the subsidiary company into the parent companies culture- The acquiring company has to catch that the subsidiary company should not have much problem in converting in accordance to the BAT framework.Future entry strategyThere are many ways to enter the impertinent market as explained in the diagram aboveAcquisitionsProbably the most important reason for this method of market expansion is that associated with the particular assets of the company brands, market share, core competencies and special technologies may all represent reasons for purchase Mergers.Mergers are similar to acquisitions in the sense of two companies combining. However, mergers usually arise because neither company has the scale to acquire the other on its own.Joint opines and alliances-A joint venture is the formation of a company whose shares are owned jointly by two parent companies. It usually shares some of the assets and skills of both parents. Cereal Partners Inc. is a 50/50 joint venture between Nestle and General Mills (US) whose purpose is to attack Kelloggs breakfast cerealsFranchise-A claim is a form of licensing agreement in which the contractor provides the licensee with a pre-formed package of activity. It may include a brand name, technical service expertise and some advertising assistance. Payment is usually a percentage of turnover. McDonalds Restaurants are among the best-known claims. surmisalThe main advantages and disadvantages of the various methods of market expansion are summarised Methods of expansion advantages and disadvantages-AdvantagesDisadvantagesAcquisition Can be relatively fast Premium paid expensive may reduce competition from a rival, although such a move usually has to be sanctioned by government competition authorities High risk if wrong company targeted Best targets may have already been acquired Cost savings from economies of scale or savings in s hared overheads Not of all time easy to dispose of unwanted parts of company Maintenance of company exclusivity in technical expertise Human relations problems that can arise later on the acquisition probably the cause of more failures than any other Extend to new geographical area Problems of clash of national cultures, particularly where target foreign Buy market size and share Financial reasons associated with purchase of undervalued assets that may then be resoldJoint venture Builds scale quicklyControl befuddled to some extent Obtains special expertise quickly Works best where both parties contribute something different to the mix Cheaper than acquisition Can be rocky to manage because of need to share and because parent companies may interfere Can be used where outright acquisition not feasible Share shekels with partner Control lost to some extent Can be used where similar product availableAlliance Can build close contacts with partner Slow and plodding approach Uses join t expertise and commitment Needs constant work to keep relationship sound Allows potential partners to visualize about Partners may only have a limited joint commitment to make alliance a successeach other supposed(prenominal) to build economies of scale Locks out other competitors Slow and plodding approachFranchise Lower investment than outright purchase Depends on quality of franchise round of primary testing of business proposition undertaken by franchise holder lower risk Part of profits paid over to franchise holder Exclusive territory usually granted Risk that business built and franchise withdrawn Lower investment than outright purchase Some of basic testing of business propositionFuture entry strategyThree main criteria for deciding how to invest or enter new market are Risk of losing proprietary disciplinein case of direct investment and exporting the risk is very low, whereasin case of licensing and joint venture risk is medium)Resources if companyhas less resources it should go for licensing and exporting,if it has medium resources it should go for joint venture andif has high resources then direct investmentControl if company wantsto have full control it should go for direct investment or export with own staff,if medium control then joint venture andlicensing and low control then exporting with middlemenin case of BAT the firm should go for acquisition merger because it would give the company full control on the brands of the acquired company. thus freedom to take their own decisions.Secondly the risk of losing proprietory information would be very less as acquired company would not copy such informationThirdly the company has enough resources to go for such moveCurrent strategy or company analysisMarketing mix strategy piece of music entering in different countries BAT has to take decision or formulate strategy relating to four factors of marketing mix -product-promotion price placeBAT would be mainly has to decide about the Problem relat ing to standardization or adaption-Standardising or adapting the international marketing mixProduct as BAT has to enter in the new market they have to take decision relating to product positioning and formulation. The company has to analyse the culture of the country and then take catch decision whether to use same brand names or to lanch changed brands or products in the market. the changes if required might be done in many areas like design, service offering, brand name, pack designPromotion- BAT has to decide whether advertising proposition, creative presentation, sales promotion, personal selling style needs changes or not. in the main if the products are changed that definitely requires changes in promotion strategy according to the culturePrice especially in case of developing countries prices pay major role on the decision of the customers purchase. Therefore appropriate decision have to be taken by BAT for price, discount structure, credit termsdistribution channels- di stribution channels have to used which are more famous in the new market to reach the products to customers in time. Therefore the company need to make changes in such direction.Future strategyAnsoff matrixIn market penetration, a firm seeks to expand the sales of its present products in its present markets through more intensive distribution, aggressive promotion, and competitive pricing.In market development, a firm seeks greater sales of present products from new markets or new product uses. It can enter new markets, appeal to segments it is not yet satisfying, reposition products, and use new distribution methods.In product development, a firm develops new or modified products to appeal to present markets. It emphasizes new patterns, better quality, and other minor innovations and markets them to loyal consumers.In diversification, a firm becomes involved with new products aimed at new markets. The products may be new to the industry or to the company. Distribution and promotio n orientations are different from those traditionally used by the firm.BAT would be using market development strategy to avoid many problems like illegal trading of their products in the market where they havent entered. The main reasons for choosing this strategy are BAT has good experience in entering successfully in new market, at present they are already in 113 countries.BAT has to aggressively stick with this strategy to increase its sales where the market is showing high growthThrough this strategy the company can avoid illegal trading of their products in the market where they have not entered.Current strategygeneric strategiesWe begin our exploration of environment-based options by considering the generic Definition strategies first outlined by professor Michael Porter of Harvard Business School. Generic strategies are the three basic strategies of cost leadership, differentiation and focus (sometimes called niche) open to any business.The Porter generic strategy model ide ntifies two key planning impressions and the alternatives availablefor eachi) competitive scope (broad or narrow target). It is possible to target the organisations products as a broad target covering most of the market place or to pick a narrow target and focus on a niche within the market.ii) Competitive advantage (lower cost or differentiation). There are fundamentally only two sources of competitive advantage. These are differentiation of products from competitors and low costs.The following three basic strategies are identified (see Figure)Cost leadership-broad market and low cost position.Differentiation-large market and unique strategy. steering-narrow target segment and either low cost position or a unique strategy.Cost leader ship and differentiation strategies are alternatives for large firms a focus strategy isavailable to smaller firms.Porter modified the concept to split the niche sector intoniche differentiationniche low-cost leadership.Cost Leadership strategy this generic strategy calls for being the low cost producer in anindustry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals or below the average industry prices to gain market share. The cost leadership strategy usually targets a broad marketii. Differentiation dodge This strategy calls for the development of a product or service that offers a unique attributes that are valued by the customers and customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Firms that succeed in differntiation strategy often have the following internal strengthsAccess to leading scientific research.Highly skilled and creative product development team.Strong sales team with the ab ility to successfully communicate the perceives strengths of theiii. Focus Strategy this strategy focus on narrow segment and within that segment attempts toachieve either a cost advantage or differentiation. The inclose is that the needs of the group can be better serviced by focussing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directlydifferentiation focus super premium ice cream segmentcost focus economy ice cream segment.In the global car market, Rolls-Royce and Ferrari are clearly niche players they have only a minute percentage of the market worldwide. Their niche is premium product and premium price.BAT should pursue cost leadership strategy because -as the company is using its financial resources in acquiring other companies therefore the company should pursue strategy in which they can earn more profit by spending less or by reducing the cost of producti on. This strategy would enable the company to earn more profit.Company current analysisBCG Model- product portfolioThe BCG Matrix, named after the Boston Consulting Group (BCG), is perhaps the most famous 22 matrix. The matrix measures a companys relative market share on the horizontal axis and its growth rate on the vertical axis.market growth rate for each product, the market growth rate of the product category. Market growth rate is important because markets that are growing rapidly offer more opportunities for sales than lower growth markets.THE GROWTH SHARE MATRIX- the market growth rate on the vertical axis indicates the annual growth rate of the market in which the business operates. It ranges from 0 to 20 percent. A market growth rate above 10 percent is considered high. Relative market share, which is measured on the horizontal axis, refers to the SBUs market share relative to that of its largest competitor in the segment.The growth share matrix is split into four cells, each indicating a different type of businessstarscash flowquestion markdogshigh growthhigh sharelow growthhigh sharehigh growthlow sharelow growthlow sharein this case the business is likely to generate enough cash to be self sustainingFirm can further promoteExpand more in the service and product.Invest in R and D Stars are high-growth, high-share businesses.Very often, they need heavy investment for financing their rapid growth.Eventually, their growth slows down and they turn into cash cows.in this case business can be used to support the other business unit-due to high share these units are generating cash to support other sbuThey may generate enough surplus to maintain themselves.due to low share the business unit is not able to maintain market share question marks, are low-share business units, in a high-growth market.-They require a lot of cash, for maintaining the market share.-Any business has to think between building a question mark into stars or whether they have to be phased out.in this case the business is a cash trap as both are low-limited futureshort term focus and avoid risky projects.Dogs are low-growth and low-share businesses.Current situationBCG matrix Many of the brand of BAT are in star position in certain countries and some are in cash cow position in certain countries, some are in question mark and certain are in dogs position.Benson and hedges, dunhill, lucky 7 and john player are in star position in many countries. These brands are having good market share and good market growth therefore the company should keep investing in such brands.In case of 555 and Viceroy they are in cash cow position in certain developed countries where the market growth has decreased but