Describe about The Impact of Causal Ambiguity on Competitive Advantage and Rent Appropriation?
Key areas of research and sources:
The group efforts demanded some key research by group members in most of the areas related to the company. All the members had to undergo several reliable sources to gather important information. It is learnt that generally tobacco refers to the most highly used addictive substances in the world. This industry comprises of individuals as well as companies that engage within the process of its production, packaging, and distribution along with other tobacco based products.
Some important information included about BAT which is a multinational firm with its headquarters in Britain and considered as the second largest tobacco producer in terms of sales volume. The firm was founded in 1902 followed by a merge amidst American Tobacco Company as well as that of the United Kingdom’s Imperial Tobacco Company. This meant to allay the semblance of existing competition that brewed between the two nations and hence resulted in a joint venture. The two companies decided not to trade within each other’s territory; hence all businesses related to export as well as trademarks have been delegated to this joint venture. The company had experienced rapid growth as well as expansion since such a joint venture had increased the utilization of cigarettes exponentially during World War One(Ambrosini and Bowman, 2010).
It is learnt from the group assignment that the company had a strong presence in countries like China whereby smoking was common. Evers since acquisition of status of public limited company in 1998, the firm had continued manufacturing, distributing and marketing tobacco products. Their products include cigarettes, cigar, pipe tobacco, smokeless snuffs and latest electric cigar. These products are offered under varied brands namely, Viceroy, Mall, Kool, Kent, Rothman’s, Lucky Strike, Pall Mall among others. However with the imposing of regulatory laws by governments at all level, banning cigarette smoking at public places has been made mandatory. It is also seen as hazardous to health(British American Tobacco, 2014). Furthermore, tobacco trafficking, increased competition and globalization, and campaigns driven towards the prevention of youth smokers, are some of the challenges BAT has been facing within the industry they operate. Thus since it became overwhelmingly tough for BAT to sell products within the United States, the company has been on the constant attempt to seek for alternative markets to expand in. This is nothing but an effort of BAT for maintaining relevance as well as enhancing market share while attempting to abide by the regulations as well as policies enforced by authority.
Discussion on Strategic Capabilities: New Trends & Product Innovation
Some additional information was gathered by the group members from the group assignment. The individual works of each member enabled the learning about the innovation brought about by the company. These include e-cigarette and the healthier cigarette.
This new concept of e-cigarette is an option to the existing traditional tobacco products. It is a device with battery power to provide inhale doses of nicotine in vapor form. Apart from nicotine, a flavor is provided by the vapor with a physical sensation quite similar to the inhaled smoke of tobacco. But no combustion or tobacco or smoke is involved in it. Several flavors are available in electronic cigarette with varied nicotine concentrations. In fact some varieties resemble that of traditional types like menthol or regular tobacco, and some even that of Camel or Marlboro. These also exist in varied candy flavors like vanilla, orange, coffee, strawberry, etc. As per toxicological studies of electronic cigarette it has been identified that these electronic cigarettes are quite less harmful than that of traditional ones. Such an advanced technology allows smokers to enjoy the benefits of smoking anywhere as bans on smoking make it quite difficult to satisfy desire for nicotine in public areas.
The “Healthier” cigarette
Since decades, the increased movement of consumer goods as well as food industries has enhanced products with added vitamin or other substances. In the year 2007, the tobacco group worked along with a partner US firm that produced water with enhanced vitamin so as to market the first vitamin-E added cigarette. This is said to enhance the features of cigarette with a soothing flavor for minimizing the inevitable irritation which usually occurred in conventional cigarettes(British American Tobacco, 2014). This new product addressed the international trendy consumers to be highly aware as well as responsible for using tobacco products. This may be interpreted as both a threat as well as an opportunity. Several companies are on attempts to manufacture safer cigarettes to reduce health risks related to tobacco intake. For instance, BAT has been marketing a type of cigarette that uses tobacco which undergoes treatment for producing lower level of chemical named carcinogen that causes cancer. It even introduces an innovative filter that removes remaining toxins.
As the cigarette market within the developed countries has been on a shrink, the corporate strategy of BAT (British American Tobacco) has been laid on increasing margins as well as maintaining sales volume. The firm successfully achieves this by enhancing the product prices while enhancing cost efficiency. With context to this, BAT has acquired Imperial Tobacco which is the fourth largest rival within the cigarette market, thus allowing Bat to overtake Phillip Morris International. This certainly allowed BAT to gain leadership within the industry with pricing power as well as valuable market. The seven purports of McKinsey suggested that to achieve success an organization needs to effectively align its seven needs with equal reinforcement. These seven needs are structure, strategy, skills, systems, staff, style and shared values. The model represents how effective an organization may be positioned for achieving its objectives. The Company British American Tobacco applied the 7s s follows:
Key ideas of Organizational Strategy:
The undertaking of group research enabled deep insight into the organizational strategies of BAT. The company’s vision is to enhance its market share which means maximizing shareholder’s wealth. On a quantitative note, BAT seeks leadership in volume amidst counterparts.
It even aims at increasing its value share of the world tobacco industry by means of organic growth, research and development of product along with mergers as well as acquisitions.
The company believes that the concept of customer satisfaction acts as the key to be a leader within the industry. Hence, the company strives to address all needs and concerns of customers through the strategy of most effective customer service, product information and customer support(Davis, 2008).
The value proposition of BAT is to sell effective quality products for fostering efficient customer loyalty and brand preference that would maximize organizational profits and wealth of shareholders.
The company possesses a board of directors to answer queries of shareholders. It is highly responsible for the governance as well as overall strategic direction of the company.
Majority of the board excluding the chairperson comprises of independent non-executive directors. They have not been engaged in managerial positions of the group(Freeman and Chapman, 2010).
A management board functions and is chaired by the Chief Executive Officer, comprising of the Finance Director, Chief operating Officer and regional executives. This board controls implementation of all policies as well as strategies as set by the lead directors.
An effective system used by Bat is SAP (Special Access Program) System.
SAP enables Bat to manage larger volumes of data on a regular basis, thereby enabling the organization to meet specific regulations of the industry as set out by the WHO (world Health Organization).
It also enables tracking as well as tracing cigarettes with the use of barcodes. This would reduce the cases of trafficking. In fact BAT was one of the first firms to use this SAP system.
In BAT staffs are considered to be professional individuals and comprises of employees who work within departments like Legal, Marketing, Finance, R&D, Sales and distribution, Operations & Information Technology, and Corporate & Regulatory(Gilmore, McKee and Collin, 2007).
The company is said to employ more than around 57000 employees across the globe. Some key skills involve customer support, agronomy, technical support, innovators, and competitive management. The company is known for its pioneer operations in R&D and being the first to introduce e-Cigarette in the market.
The company has a management that utilizes Matrix Management style for leading employees. This type management style whereby employees having similar kind of skills are grouped together for jobs leading to single reporting line with several managers(Hass, 2011).
Bat has been focusing upon improvement of its product quality to reduce any sort of harm to its customers.
The company works immensely hard for addressing key environmental adverse impacts of its products, and hence implementing Health, Environment and Safety management system.
It is learnt from the group effort that the company has a vision to enhance its market share as well as maximizing wealth of the shareholders with the availability of quality products happen to be an effective strategy. The firm has been conducting business effectively upon its value proposition by investment in R&D for enhancing product quality.
Also, effective customer service along with high quality products would have a multiplier impact upon volume growth. When customers feel satisfied with the quality products they would continue to buy such products from the company (Huang et al., 2015).
With respect to organizational structure, the existence of main board varied from management board act as a step towards a right direction. It would attract significant investors with fostering of transparency.
The application of Matrix management style promotes labor division to enhance productivity.
The SAP system acts as industrial asset. The implementation of this system by BAT exhibits their adamant on adherence to strict regulations, thereby cracking upon illegal trading of tobacco(Jakpor, 2012).
The introduction of the new concept of e-cigarette has been a good attempt of BAT as this serves effectively as an alternative for tobacco products.
The group report has been possible only with the joint contribution of each of the members. The strategic approach conducted by during the group work imparted information like the strategy of productivity of BAT allows efficient and effective deployment of the BAT’s resources so as to reduce unnecessary complexity, while enhancing efficacy in use of the company’s cash or other assets. In addition, BAT has an unrelenting strategy to be a global Winning Organization(Lawrence, 2009). This strategic drive has been the propellant of the company since its recovery from the 2013 commercial downfall. In sum, the company’s strategic focus elements have fostered the achievement of the mission that aims at championing informed customer choice and ensuring commitments(Lee, 2004).
Notably, tobacco is the core of BAT, and the product is the one to provide opportunities for future growth. In the words of the board members, the company aims to develop and promote future growth by adopting a wider range of tobacco and other nicotine products. In hindsight, the vision of the company is much focussed on the current issues or consumer satisfaction while leaving a gloom future. In 2011, the company revitalized its quest to achieve improved performance by incorporating the strategy of sustainability in its operations. As a result, the global drive brand (GDB) of BAT increased in volume by 9%. The growth was particularly attributed to the increase in the sales of Kent brand to 67 billion compared to 55 billion in the previous year.
Critical Analysis of Key Strategic Issues:
Policies as well as regulations framed by significant regulatory bodies like WHO impart lot of challenges for operating in the industry.
The illegal trade of cigarettes imposes a serious threat to the industry as well as profitability. Such a behavior is risky with induction of increased number of laws upon industrial companies(Liberman, 2002).
Due to the nature of its own products as well as harmful impacts upon health, the company needs to spend increasingly on research and development, thereby let going of other investment opportunities.
The reduction in the level of consumption of tobacco within mature markets as a result of enhanced health consciousness has been on eof the key issues that BAT faces being a major market player(MacKenzie, 2004).
The company’s product particularly Pall Mall ahs been losing its presence within the market with major competitor of Marlboro that maintains lead position in context to sales volume. BAT also needs to increase its market share for becoming the real leader within the industry (Williamson and Proctor, 2007).
Adequate research on the topic by the group members has supported our learning that the company BAT takes immense pride in its responsible manner to run its business and manage operations. The company is said to operate focusing mainly on its social responsibilities and also towards its employees. The British American Tobacco is the first tobacco company to get included in the Dow Jones Sustainability Index in 2002 and the every henceforth year. The company group well understands that the central aspect of incorporating effective sustainable business is through that of increased responsibility and integrity. Effective governance is considered as the key to enable the company to live up to the expectations of its stakeholders as well as customers(Nakkash and Lee, 2008). With effective coordination all its employees as well as stakeholders, the British American Tobacco group has been performing quite effectively towards the social cause of mankind.
In several nations, the group is one of the top employers and also most preferred company for individuals employed at every level of its supply chain. It is committed towards effective corporate governance and achieving business objectives in the most transparent, honest as well as accountable manner. It also states the expectations of the stakeholders so that it may become more responsible towards fulfilling their requirements and demands(Otanez, 2006). The corporate social responsibility performance of the group is well monitored by a Board CSR Committee both at local and regional levels with combined audit as well as CSR committees. This mechanism aids the embedding of CSR as well as sustainable principles throughout the group, thereby allowing effective performance against the established standards(SCOTT and WALKER, 2010).
It may be concluded that the group work has immensely helped each of the students in gathering adequate knowledge about the company BAT. It is also learnt that use of tobacco would cause health risks to smokers and with this in mind, the company Bat has attempted to educate its customers upon product effects and also enhance its product quality. We also get a fair idea about the fact that the company highly values its customers and by virtue of strong organizational structure as well as skilled professionals, it has aimed at providing high quality effective products as well as services for maximizing its shareholders’ wealth.
Although the group work had been quite effective in stating the key issues, yet the study would be even more worthwhile if every member of the group jointly discussed the key outcomes of individual effort. It would provide opportunities to every individual to learn something from each other. It has been learnt from the assignment that the company must accelerate its frequency of acquisitions within the emerging economies, thereby gaining a competitive advantage since markets are shifting towards south (Collin, 2004). Adequate research from the weaker aspect of BAT’s strategic formulation is ineffective brand positioning that is crucial since the present market of cigarette sales are basically driven by brands. This Company needs to enhance its research and development department for counter emerging within socio-political trends with focus upon healthier options like e-cigarette as well as snus for capturing increased market share. Bat should also target at its R&D efforts within operative efficiency with potential strive for emulating flexible manufacturing for ensuring all its operations are highly efficient as well as productive.
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