British American Tobacco In India: An Analysis.

EXECUTIVE SUMMARY: This marketing report will briefly summarize an introduction of a particular brand or an existing product in the home country (Australia), and all the factors involved for entering the second largest economy in Asia, India. This report will also contain facts about all the external environmental factors such as political, geographical, legal, social, cultural, economical factors, rules and regulations of the host country, its environmental perspective, and the consumer/ market situation as well. It will also try to provide a brief view about the strategies that this company would take in order to enter into a new market with already existing local, national and international companies in the host country. Further, this report will also provide an internal review a (SWOT) analysis, its strength, weaknesses, opportunities and threats from its key competitors and other such factors. It will give a vague description of its success or failure in India and other sub continental market. INTRODUCTION: “Winfield” one of the most popular cigarette brand in Australia and New Zealand since 1972. They have also spread their market to Europe, Asia, Africa and Canada. This product was first introduced in Australia as a smoking tobacco and this brand is under

the British American tobacco, Australia. Winfield also has a variety of

different flavors and strength, since 1972 this brand has developed into red (16mg), blue (12mg), gold (8mg), sky blue (6mg), and grey (4mg) the color verifies the strength of teach types. it also contained hard packs of 25’s and 20’s, roll your own from 30 grams to 50 grams, but in 2008 the soft packets were stop from production. Winfield also was a sponsor for the Australian rugby league, New South Wales rugby league sponsorship, but soon due to government regulation on advertising and ban on tobacco their sponsorship was stopped. Winfield in Australia came with a big bang with association with Paul Hogan a renowned Australian actor helped to advertise and market this product all over Australia. Winfield also owns around 32% percent on the Australian share market leaving behind its key competitors in Australia such as long beach and Phillip Morris, BATA has developed an absolute safe and sound strategy in advertising this brand and makes it a success in Australia (BATA, 2009).

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The British American tobacco company (BAT) is the second largest tobacco producer in the world. It operates through 81 factories in 64 countries, and it manufactures about 853 billion cigarettes and uses more than 660 million kilos of tobacco per year, its head quarter is in London, England. Even in India they have collaborated with ITC (Indian tobacco Company) and marketed variety of tobacco products, they have even survived business throughout various wars, revolution, as a well as controversy of tobacco related substances throughout the world. The birth of this company was in 1902 due to a joint venture between the British imperial tobacco company and American Tobacco Company founded by James “buck” duke. BATA spread its wings to almost all the continents in the world including Asia, Africa, the Americas, Middle East, Australia, and central Europe and Canada. This company has also experience in doing business with different local and national cultures around the world which has helped them to become one of the leading tobacco companies in the world. India, having the second largest population after china can be a big potential market for BATA “Winfield” cigarettes but as we all know that all countries follow a strict restriction same can be said when it comes to marketing in India specially tobacco related product, but this country seems to be a bit on the lenient side when it comes for marketing and introducing an international brand and tobacco also falls in one of them, hence chances are to be taken just like other companies have set their business in a foreign land by introducing new product , BATA’S “Winfield” chances of success and failure will also be studied and shown as we proceed. ENVIROMENTAL SCANNING: EXTERNAL FACTORS. Economic factor: Indian economy is basically an agriculture based economy, but things have changed since the last decade with a population of almost 1 billion people, and for the last 10 years this country has been a major target for international and multinational cigarette companies along with other Foreign Service and consumer goods. tobacco has been prevalent in India since the 15th century, it is also the third largest producer of

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tobacco in the world. but due to over population and poverty majority of the people just in the or below the poverty line prefers to smoke “bidis” type of a cigar very high content of nicotine and tar which is “hand rolled tobacco in tobacco leaves”, this hand rolled cigarette is also considered a traditional smoke for most rural Indians, while modern cigarettes were still famous even by middle class or the upper class society during the early nineteen century. (Hammond, 1997). Secondly, almost 182 million people in India smokes cigarette which consist of 17 percent of the world smokers. and the tobacco industry annual turnover was approx US $369.6 dollars per year the Indian market for promoting cigarette has almost touched direct serving 1,00,000 markets and about 2.5 million retailers till 2008. These figures and facts are always increasing and it is also expected that the tobacco industry will grow around 20 to 30% in the next couple of years and this could be a positive sign for BATA’S “Winfield” brand to start marketing manufactured tobacco and sell them in India. But this company have to be very careful in selecting its strategy specially in a country like India where there are mixture of all kind of people belonging to different caste, culture, religion, social norms, and also with such a vast number of people under poverty line BATA has to study the Indian economy in details in order set its market target as in whom to choose. (Deb, 2009) GEOGRAPHICAL SETTINGS: India is the seventh largest country in the world a country in south Asia, which also lies on the northern portion of the Indo-Australian plate. It is surrounded by the Arabian Sea and Indian Ocean to the south. The tropic of cancer cuts India into half. The climate in the south of India is basically tropical climate with a high density of rainfall in some of the southern part, the northern part has a moderate climate but also include deserts as you go further into Rajasthan. The western coast comprises of coastal lines which runs along to the south. on top of the northern part you will reach the highest mountain ranges in the world, the Himalayas, the north eastern part also has sub-tropical climate wherein it gets cold in winter and hot in summer (Geography, 2009).

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POLITICAL/ LEGAL ENVIROMENT: The legal system in India is based on British common law system. The government of India can be broadly categorized into three different systems: executive, judiciary, and parliamentary system of government. But there will be only one party that will be majority and run the country with a strong opposition party working against it, this is through the national election that takes place after every four years. Presently most of the Indian states are ruled by the national congress and Sonia Gandhi is the current president of the National Congress Party of India, with having Dr. Man Mohan Singh as the prime minister also belongs to Congress and this party has been in power after the Bharatiya Janata Party (BJP) step down from power in 2002 as a ruling power. In India both the private sector and the government are involved in foreign trade. Before India got its independence in 1947 from the British government they were handling most of the business at private sector level, but after independence the government plays a very vital role in it. Presently Dr. J. Suresh Babu (IAS) is the chairman of the Indian tobacco board followed by Sri. M. Venkeih . Naidu member of the parliament is the next top official of this board. The Indian tobacco board controls all the import and export activities in and outside the country and any multinational or domestic country wishes to set up business have to go through the tobacco board of India. Though BATA has already collaborated with ITC (Indian tobacco Company) and had previously marketed a few cigarette products like the Benson & hedges, and Rothmans’s but they were not available nation wide but only in few stores, this may be due to lack of advertising or poor marketing strategy previously by BAT owned ITC.

But with a

changed attitude and taking “Winfield” seriously it would be easy for BATA to introduce “Winfield” as they already have a platform in India. The Indian tobacco board rules and acts are generally made by the central government, the last act was set in 1984 which was known as the tobacco Cess act rules, 1984 for foreign cigarette companies and they are as follows:  Authority to collect Virginia tobacco should be sold at the auction and excise duty is to be paid by the seller to the secretary general and other board officials.

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 Excise duty will be properly scrutinized by the authority board and refund will be given once commerce begins with the host country. (The Tobacco Board Act, 1984).  Taxation for cigarette companies in India would be increasing due to external pressure

THE SOCIO- CULTURAL CONTEXT: Indian culture is basically a high contextual culture consisting of different norms, traditions, language, societal and religious belief. The Indian value system is also based on traditional cultural and social hierarchy based on factors such as gender, age, caste, wealth, education, political influence, educational qualification, professional and celebrity standing. Smoking tobacco was basically a social taboo in India, this hold a good ground for reducing the bad habit of smoking especially in a country where the population is so high and higher the number of people would be affected from smoking if it was not a social taboo. But as we all know after a certain age or status people gradually start to get addicted with all bad habits, India was no exception when it comes to tobacco consumption. Historically tobacco consumption has been linked with social status, fellowship, and leisure. Even women in India particularly from the rural areas smoke tobacco leaves popularly known as “bidi” (hand rolled tobaccos) in order to relieve their stress from daily chores. Even smokeless tobacco in the form of “gutkha” (chewable tobacco) was introduced specially for women a major cause for mouth and throat cancer is still prevalent in the Indian tobacco market today. On the other hand in the urban area women or men have tended to get hold of cigarettes as a symbol of emancipation and modernity. The socio-cultural trend has been ever evolving from rural to urban ways in India and the people have adopted to various norms have helped them to be aware of the positive and negative effects: with the help of education, television, radio, and internet. The social cultural aspects that promote or protest again smoking or consumption is

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changing, and this change has to be directed towards curbing down of cigarettes and tobacco related substances for the general benefit of the society. (WHO, 2005) CUSTOMER/MARKET ANALYSIS: British American tobacco Australia has many well reputed products such as Dunhill, Benson & hedges, and Rothmans’s etc. Since these companies have been in business for more than a century they have developed adequate experience in tackling different market situation and change with the changing customer demands and restrictions globally. They also follow prohibition of advertising in television, radio, internet, media, and billboard and even stopped tobacco sponsorship in most sports events. Though India has a bigger market and population than Australia and some of the rules and regulations for advertising and marketing is somewhat similar, BATA “Winfield” has to come up with a different strategy by using billboards, magazines, just like its competitors are doing at the same time try to do something different in order to be successful. ENVIROMENTAL SCANNING: INTERNAL FACTOR: The internal factor also comprises of strength, weaknesses, opportunities and threats within and outside the firm. This helped us to have a view of the company’s new strategies, solution, back up plans as well as technical support from its members (Fawcett et al, 2007) SWOT ANALYSIS: STRENGTH:  BAT has an already existing strong market position internationally. Since it is the second largest producer of cigarettes it controls about 22.1% market share in the world and around 300 brands names are under BAT.  British American tobacco, Australia ha a globally recognized and geographically diversified brand product as “Winfield” brand is well known in Europe, Asia and Africa.

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 BAT tobacco industry is massive. They collect around 517,000 tons of tobacco for manufacturing cigarettes annually. So manufacturing or selling cigarettes in a sub-continent like India should not be a problem. WEAKNESSES:  Since majority of the people in India is hit with poverty they do not have food to eat but enough savings for smoking “Bidis”, and it would not be such a great idea to market in such locations. As a result it would only be consumed by only one or two specific segment of the society that too in towns, hence profit might fall.  British American tobacco, Australia (BATA) revenue from major operational process have been declining since a few couple of years its profit margin is also descending because of stiff competition from imperial tobacco company who is its arch rival in the international arena .  It may take a long time to study and understand the taste and preference of the customer. OPPORTUNITIES:  Introduction of low nicotine cigarettes for regular smokers have given a good opportunity for BATA to introduce its product in India. since this country have had problems with tobacco addiction both smoke and no smoking wise such as ( chewing tobacco) are some of the reason for mouth cancer and other diseases also, hence lighter cigarettes could help the people to reduce health hazard due to smoking cigarettes.  Market potential in India:

if in a democratic market like India, BATA”S

“Winfield” can win the heart of Indian consumer they will gain trust. Once trust is gained by the public, even media and critics cannot disturb its operational process in India.  Smokeless tobacco in the form of snuff is very popular in countries such as Sweden, Norway, turkey, India, South Africa, Algeria, etc. BAT has also 7

manufactured snuffs in Europe which helps consumers to reduce nicotine consumption THREATS:  Health concern policies: Due to increasing health concern policies worldwide, there have been a slow but steady decline in the production and profit of all tobacco companies globally and BATA is no exception just like all the major tobacco companies follow the rules and regulation with strict discipline.  Major tobacco manufacture like BAT, are also subjected to pending lawsuits worth billions of dollars. but they are competing against some minor or national group of companies which do not hold any litigation but they are mutually collaborating with each other against these giant companies and these sort of matters might be been annoying for the British American tobacco, and Australia. (BATA)  Studies have shown that approx: in a country more than a billion population half the men population use tobacco while only 2% and 21% person varies among women that to in different regional areas, there are about more than about 2,200 Indians die daily from tobacco related diseases.( Pearson , 2005) CONSUMER BEHAVIOR: The Indian cigarette market is basically oligopolistic in its approach and the cigarette or the tobacco market is highly price sensitive, they change with the change in fiscal budget annually as well as consumer demand. Trade sources estimated that consumption of cigarettes has increased from 300 million pieces in 1993 to around 4 000 million pieces in 1994, 18 000 million pieces in 1995 and over 19 000 million in 1996. However, with the increased excise duty on these cigarettes since the 1996/97 budget, demand has declined, and led to a drift back towards small filter products by some smokers and towards biddies by others. But with the rising level of middle and above middle class people, trends have changed since the late decade; people have shifted and

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have become more brand conscious in choosing their products. Indian tobacco Company’s collaboration with BATA in previous occasion has seen success in the consumer market in India, but all of these products were manufactured in India under local brand names. where as BATA’S “Winfield” brand which is also a local product of Australia and the tobacco is grown and made in new south Wales (NSW), will have to either produce in India itself and develop its distinct flavor specially for manufacturing in the host country and win the taste of the consumer, or may have to manufacture it from Australia and export it to India to maintain its originality might be another idea. but the involvement of supply chain, Research & Development, innovation and technology, which might prove to be an expensive and time consuming affair though it is a very vital and essential part of operational process for the exporters as well as importers doing business in a global basis and in an evolving market. (Fawcett et al, 2007). POTENTIAL COMPETITORS: Besides the Indian tobacco company (ITC) which BATA holds almost 32% of the company’s share, other competitors in the same market would be Godrey Phillip India .ltd in collaboration with Phillip Morris America., R.J. Reynolds tobacco company, GTC industries, VST industries limited, and Kothari private limited, the Indian cigarette brand sector has had a growth of 8% in the last two years , since BAT already in collaboration with Indian tobacco company there should not be much of a difficulty competing with national brands except for Phillip. Morris, and R.J. Reynolds are supposedly two international American companies for cigarettes operating in India, some of its products such as four squares, Cavanders, jaisalmer, steller, red and white, I-GEN, and tipper could be potential competitors. Inside India (Financial express, 2007) RECOMMENDATION: BATA will have to advertise and promote “Winfield” in a careful and correct way. They will also have to use the marketing tool efficiently and get accustomed to new ways of selling its product in a new country. Corporate social responsibilities (CSR) should be taken seriously so that the national sovereignty, and age old custom and tradition are not harmed. BATA should also develop alternate ways and strategies to keep

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up with its competitors. They should be technologically more advanced and innovative than the rest of the tobacco companies in order to gain a positive and a successful recognition in the market scenario.

CONCLUSION: From the above report, we can conclude that Winfield’s chances of promoting, advertising or selling cigarettes in the Indian market with its growing population looks positive in the companies profit point of view, but if we take the health or the human aspect, more harm has been caused so far to many people, and families have been affected due to introduction of cigarettes and smoke related diseases. So stern measure should also be taken so that investing companies are familiar with dos and don’t procedures and should follow rules and regulation of the governing body for the mutual benefit of the firm as well as .society.

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