Corporate Strategy: British American Tobacco

British American tobacco plant is bingle of the worlds renowned multinational organizations that has managed to create a strong unified mug shout out and has by means of various products across the numerous grocery stores created strong product brands. The success of the corporation can be attributed to many individual situationors though all of them condense to form the sights strategic corporate policy.A corporate system can be said to be a culmination of all the other strategies much(prenominal)(prenominal) as grocerying, expansion, etc integrated into one with the single name and address of achieving the friendships mission, vision and objectives.The corporate strategy adopted by any organization thus gives a general direction of where the caller-out is headed in the long term and in the near future. In this paper, we discuss the corporate strategy adopted by British American tobacco plant since the year 2003. Specifically the paper discusses the initiatives ad opted by the company in recent times and compares them to theoretical models proposed by modern management experts and learned in class.In addition the paper looks the companys environment in footing of competition and proposes additional models and theories that the company can adopt in the face of increasing awareness of corporate social office and anti- skunk legislation.Company all overview The parent company is turn up in the UK with 47 other factories operating outside the UK spread out globally in 40 countries. There are also associate companies with a global presence. Its tobacco products are sold in over 180 countries with varying market shares with the highest being over 50%.The company employs over 3. 5 million people globally. According to the 2007 financial year report, the company has other 16 associate factories in 10 countries. Globally, correspond to the companys website, it enjoys over 17% dominance in the market and over 60% in the UK market through its vario us brands. The company has over 300 brands in its portfolio and among the study product brands in the global market are Dunhill, Lucky Strike, Kent, and Pall Mall.This paper discusses flutters corporate strategy and looks at how its strategy has positioned it in the market in reference to the prevailing business environment and competition. Vision statement Our vision is to lead the tobacco industry through branch, productivity and responsibility. This is further expounded by the companys goals generalized as Our goals are to grow our brands and the value of the business, to improve productivity and to embed the principles of corporate responsibility or so the Group. Mission statementOur goal is to create long term value for our shareholders by consistent achieving of superior quality returns from the manufacture and marketing of tobacco products and to remain the worlds leading tobacco company as measured by market share, by commitment to quality, and by our own talent to meet the needs and interests of our guests, our employees and the communities in which we operate in. The companys growth strategy has four main pillars which were unveiled in 1995 as growth, productivity, responsibility and harming organization.In the path of growth the company has utilized several strategies that we can attributed to the success of the company in the journey towards achieving its goal. Over the past five years for example, the goal of increasing shareholder value was most exemplified with the make up in investment returns by 294% according to the current company CEO, Paul Adams. By combination these ad hoc company values with the companys goals, we get an idea of where the company is headed to. As of the companys annual report of 2007 presented in November revenue was ?7,312m representing a 1% increase from the previous years and profit from operations was? 2,304m representing a 19% rise form the previous financial year. To achieve this and the companys long-term objectives and other endeavors the company has visualized a growth path that will seemingly keep in on the way to achieving its vision. Again, the fact that there is empirical evidence of the success of the company as shown by the increase in investors returns in the last five years, there are circumstantial strategies that this paper discusses as the drivers behind the implementation of the companys strategy.According to the report from the Guardian newspaper the growth of the companys stock market exertion is as shown below (Obtained from http//www. guardian. co. uk/business/britishamericantobacco) Strategic fit of the company Drucker (2008) defines strategic fit as the matching of the mission strategies of an organization to its internal structure and outdoor(a) environment. In this context, we limit our study of the company to corporate social responsibility, strategic alliances and mergers and acquisitions and look at how they cave in played the role in achieving the compan ys decide goals mission and vision.Strategic alliances In the business world, alliances are either formed by competitors or complimentary industry in order for the involved companies to intone their position in the market or achieve some common objective such as fighting competition and reducing costs. As such, flail has been using its international presence to forge alliances with a number of players in the tobacco industry in various markets. In the recent past slam entered into an agreement with one of its competitors, Phillip Morris International to manufacture and distribute some of the companys brands in specific markets.On a nonher chemise, jactitate has entered into agreement with Imperial Tobacco to manufacture and distribute some of Imperials brands in Africa such as Embassy brand. Such alliances pass water enabled the involved partners to concentrate their efforts in specific markets trance at the same time having their bands represented. Though this idea may seem ingly appear to be benefiting Imperial Tobacco only, it on the other hand helps flail to fully employ its resources in such markets. Mergers and acquisitionsEarlier this year the company acquired Danish conglomerate Skandinavisk Tobakskompagni (ST) for? 2. 01bn. This is in addition to the taking over of another Turkish manufacturing company, Telkel for ? 860m. Now, such acquisitions are meant to expand the operations of the country and presence in the global tobacco market. Currently holding 15% of the total global market, the vision of suitable the global leader in the manufacture of tobacco products looks achievable.According to the company vision as to lead the tobacco industry through growth, productivity and responsibility, the idea of forming mergers and acquiring already existing companies in new markets not only indicates the financial strength of the company but the ability of the management to identify potential growth opportunities in making of such decisions.The acquis ition of ST was according to the companys CEO made in order to acquire a new market segment of the non smoking market as oral tobacco, Fielder & Lundgren owned by ST. This non-smoking tobacco is aimed to be introduced into markets where there are strict regulations.This comes in the energize of increased pressure from health organization bodies calling on the restriction or total banning of smoking in certain areas. Therefore, the company is strategically positioning itself in the non-smoking market by acquiring already established brands in the market with strong brand names and subsequent strong brand equity.Corporate responsibility In October this year, toss was included among the top leaders in the field of corporate responsibility reporting by a leading corporate social responsibility consultancy firm, Salter Baxter, a travel that has received a lot of criticism.The company still insists that its inclusion in the list is in experience of its strong polices in corporate soci al responsibility as spelt out in the companys corporate ideals of operating responsibly. Michael Prideaux, the companys director of Corporate and Regulatory Affairs says that If a business is managing products which pose health risks, it is all the to a greater extent important that it does so responsibly. cricket bats corporate responsibility agenda is articulated in three directions as environmental management, globalization and human rights and regulation and lobbying.Similarly, the companys health and acquirement department is involved in researching into the development of less harmful products. This is most necessary as health reports have continuously highlighted the dangers of smoking and the devastating cause it has on non weedrs through second hand smoke. According to the World Health agreement report on global smoking released earlier this year, it showed that the number of smoke related deaths in the US alone for 2007 were in excess of half a million.When faced suc h glaring facts, the company has had to give its fair component part in educating the public and more so warn their target market of the dangers of consuming their products. Through as ironical as may seem, cream off has at rest(p) ahead and introduced a science website http//www. bat. com/science that delves into research findings on the dangers of smoking and related issues. Again the company has complied with stringent regulatory measures put in mall to protect the public from exploitation by players in this industry such as BAT. PEST analysisThis analysis seeks to identify the political, economic, socio-cultural and technological factors affecting a precondition company in this case BAT. Political This pertains to how the company is structured in order to comply with the government policy in the country of operation. Given that BAT is a multinational company with its brands in about 190 countries, it has had to comply with diverse government polices that have varying effect on the operations of the company. Its operations in Russia are at the moment facing a great threat after being targeted by the countrys consumer rights agency, Rospotrebnadzor.Early September this year, Gennady Onishchenko, director of Rospotrebnadzor accused BAT of misleading consumers and infringing on their rights on the basis that the company was marketing its products as less harmful specifically targeting the light and super light brands. This is just one of the many political challenges that the company facing.Other instances that are worth highlighting the tough taxes imposed on tobacco and tobacco products in many countries. Economic factors The company operates generally in large scale to produced around 850 billion cigarettes a year among other tobacco products.Economics of scale have thus favored the company and contributed greatly in achieving the growth that the company desires. In addition to this, presence of the company in many markets cushions the company from mak ing losses in case of decreased sales in on market that may be caused by a variety of factors.Socio-cultural factors The culture of smoking as a behavior statement is the sterling(prenominal) driver in sales for tobacco companies in general. Unfortunately, the same idea is being used in campaigning against smoking which is greatly affecting sales for BAT and other tobacco based companies.On the other hand, there are some traditional believes and practices that profess the goodness in smoking of unprocessed tobacco leaves thereby denying the industry a huge chunk of the market. Technologic factors A lot of research is being directed towards analyzing the harm of tobacco and more so tobacco smoke.As such BAT and players in the tobacco industry are constantly faced with the challenge of improving their manufacturing and processing units in order to comply with the requirements of reducing the harmful content of tobacco. SWOT analysis This test seeks to analyze the external and intern al environment of BAT.It is one of the methods that Drucker (2008) proposes for analyzing organizations.StrengthsStrong leadership and planning has enabled BAT to recognize threats and thereby partnering with other players for mutual benefit. This as aspect as a strength has been the driving force behind the strategic alliances, mergers and acquisitions as discussed earlier.BAT recognizes that customer is king through market research and subsequent product innovation to identify the selling trend in the market.BAT as a group has interests cover different regions and categories thereby enabling it to have more stable cash flow prospects.It has a portfolio of brands meeting demands for upscale, mid-scale and economy tobacco consumers covering a wider market segment.International experience diversified portfolio, great locations for major factories in tobacco producing regions and superior quality products also make count as some strengths of the company.WeaknessesThe company has fail ed to alter itself from the legal tussles pertaining to smokers suing the company for damages obtained from consumption of the companys products. BAT has suffered a lot legal battles in courts where the company has been forced to compensate consumers for damages. As such the company has become an easy target for legal bounty hunters.Its presence in many markets presents a management challenge in that a lot of resources are utilized in the harmonization of organizations policies and strategies.OpportunitiesWith BATs experience in operations, there are numerous opportunities in spreading operations over in new markets such as the most recent one targeting the Scandinavian market.As a dominant brand in the UK market, BAT has the opportunity of influencing the market to have benefit through strategic decisions such as being the price setter.The companys experience in research and development of less harmful tobacco products presents the company with an opportunity to market her brands as the less harmful alternative to relatively harmful brands in the market.ThreatsThe tobacco industry is faced with strict environmental laws which increase costs of production and impact on the general productivity of the players.The increased awareness on the dangers of smoking may lead to contraction of the market for the industry.Increased deaths and illnesses from tobacco use are rapidly decreasing the market for the industry.A report by the Guardian says of BAT it needs to recruit at least 750,000 new smokers each year to replace the ones who have died from their habit (smoking).Political uncertainties in foreign markets are forcing BAT to with engulf operations such as in North Korea and Burma where the company has already withdrawn from the markets. Competitor analysis There are devil main competitors for BAT in the UK market Gallaher Group and Imperial Tobacco Gallaher Group It is the fourth largest manufacturer of tobacco products in the global market. It has its rende r in Switzerland and it operates in 80 countries around the world.The company owns Benson & Hedges and Silk Cut Cigarettes brands among many others. The company reported a 5. 0% increase in net sales as of 2006 to stand at ? 2. 74 billion. In this market it faces competes with BAT and Imperial Tobacco. Due to stiff competition in the UK market, its share volume in the market has been on a decline while its international operations are on the rise. In 2006, it distributed over 18. 8 billion cigarettes in the UK market. Imperial Tobacco The company has its headquarters in Bristol and is second to BAT in the UK market and fourth in the global tobacco market.The company prides itself in top of the range brands and is has the best two selling brands in the UK as Lambert and Butler and Richmond. Other brands in the market are Embassy, Escort, Camel, Drum, Windsor Blue etc. It dominates the fine cut market with a market share of about 63% as of last year. The company reported net revenue o f ? 8. 69 billion for the 2007/08 financial year with increase in profits in excess of 30%. The company has adopted a corporate strategy very similar to BAT and thus poses the greatest threat in the market.It recognizes its core objectives as sales development, cost optimization and efficiency improvements and effective cash management. Success or failure of these strategies is further evaluated through key performance indicators which have been identified as earnings per share, total shareholder returns, cash conversion rate, cigarette market share, volumes, operating margin and productivity. The companys shareholder returns have increased by 106% in the last three years surpassing FTSE expectations by 74%. Its growth path according to the companys official website is as below.The growth in financial strength o the company and the ability to gain investor confidence shows that the company is set to offer even more competition to BAT. Comparing this growth path with that of BAT, the n it will be probably a matter of time in advance BAT loses out its market position in the UK.The future of BAT The prevailing economic crisis is presenting financial and management problems to many businesses. The ability to survive the crisis and move on will be used greatly assess the strength of many businesses and indicate investor and consumer confidence levels. As it is, the current situation for BAT is not promising.The company is being accused of targeting the youth in their marketing efforts and thereby losing consumer confidence and criticism from various quarters. Negative reports such as BATs main product, cigarettes, is so deadly that just to maintain its 15% global market share, it needs to recruit at least 750,000 new smokers each year to replace the ones who have died from their habit carried in the Guardian do not do any good to the company. This was in addition to being accused of targeting teenagers in international markets such as Nigeria and Brazil. Therefore, it would seem that the company has to reconsider its marketing strategies.Developing a new marketing strategy and adopting strategic means to sanitize the corporate brand name will prove essential in the way forward in markets where the company is losing ground and facing criticism. Again, the company has not been according to accusations very cunning on following some of the rules and regulations governing the tobacco market in different markets. Other concerns for BAT affect the whole industry. The World Health Organization (WHO) has been spearheading the fight for tobacco use citing the numerous health problems and deaths emanating from the habit.In 2007, claimed that if the current smoking trend continues, the world will contend with 10 million deaths annually as a result of tobacco use. In addition WHO reports that smoking causes 61% of all TB illnesses globally (Hooper, 2004). Companies such as BAT again have been forced to limit their marketing strategies by regulation such as the banning of public advertisement of cigarettes or romanticizing or fashioning smoking in any manner.Works cited Drucker, P. , Management, Transaction Publishers, Birmingham, 2008, p. 286, 456 Elion, S., Management strategies a critique of theories and practices, Kluwer Academic, London, 1999, pp. 212 Robinoof, M. , Ending the tobacco holocaust, Elite Books, London, 2007 Hooper, M. , Tobacco industry Do ads and new products still target teens? congressional Quarterly, CQ Press, London, 2004.The Guardian http//www. guardian. co. uk/commentisfree/2007/apr/26/smokeandmirrors Additional information on the above obtained from Official BAT website http//www. bat. com/ Official Gallaher Group website at, http//ir. gallaher-group. com/ Official Imperial Tobacco website at, http//www. imperial-tobacco. com/.