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By Sashika Wijeratne
Student NO: UWIC/MBA/MT/14/05
Assignment 1
Master of Business
Administration
Signature
: Sashika Wijeratne
Date
: 20/01/2013
Master of Business
Administration
Executive Summary
This report consist of internal and external environmental factors which affect the
Ceylon Tobacco Company which is enjoying the monopoly of tobacco industry in Sri
Lanka and strategic position of the organization as at now and possible factors which
may cause an impact to the organizational performance of Ceylon Tobacco Company
and critical areas for the board of directors to focus on the sustainability of business in
terms of short term as well as long term.
Master of Business
Administration
Contents
1.
Introduction........................................................................................... 5
1.1 Overview to the Ceylon Tobacco Company......................................................5
2. Situation Analysis.................................................................................... 6
2.1 Analyzing the External Environment..............................................................6
2.1.1 Political Environment...........................................................................6
2.1.2 Economical Environment......................................................................6
2.1.3 Social Environment.............................................................................. 7
2.1.4 Technological Environment....................................................................7
2.1.5 Environmental Analysis........................................................................7
2.1.6 Legal Environment.............................................................................. 8
2.2 Analyzing the Micro Environment..............................................................9
3. Strategy................................................................................................. 10
3.1 SWOT Analysis................................................................................. 10
3.2 Marketing Stratergy..........................................................................10
3.3 Segmentation................................................................................... 10
3.4 Strategic Targeting.................................................................................. 11
3.5 Strategic Positioning................................................................................ 12
4. Factors Affecting the Future performance of the organisation...............14
5. Conclusion & recommendations for Board of Directors.........................15
5. References............................................................................................. 17
Master of Business
Administration
1. Introduction
1.1 Overview to the Ceylon Tobacco Company
Ceylon Tobacco Company a member of the global tobacco giant British American
Tobacco Group is the only legal manufacturer for cigarettes in Sri Lanka. British
American Tobacco group operates in more than 180 countries in the world and Sri
Lankan Operation has started in the year 1906 and is the single largest tax payer in the
country for Sri Lankan government.
Company operates in highly regulated environment and 86% of the revenue is paid
back to the government as taxes and operates ina model called seed to smoke which
means total process of growing tobacco plant to manufacturing cigarette happens in
the country. In the year 2011 company sold over 4.5 billion cigarettes and annual
turnover for the year was Rupees 76 billion and profit after tax was close to Rupees
6.6 billion.
Master of Business
Administration
2. Situation Analysis
2.1 Analyzing the External Environment
Looking at factors of external environment which creates an impact to the operations
of Ceylon Tobacco Company, those can be analyzed critically using PESTEL analysis.
2.1.1 Political Environment
Looking at the political scenario of the country where traditionally government
heavily relies on the tax amounts generated through tobacco but under the political
manifesto of the President His Excellency Mahinda Rajapaksha it is going on
controlling the usage of tobacco and alcohol and preventing the youth being addicted
to them. Main parties in the political arena who have interests in the operation of
Ceylon Tobacco Company are finance ministry and health ministry.
Full stop to Intoxication (Mathata Titha) is evident through Mahinda Chinthana
vision which is the political manifesto of the president which came in to light during
his first tenure as the president and is continuing on this tenure as the president for the
second terms as well. This made the volumes to decline annually. Also due to high
taxation it creates a lucrative market to smuggled duty not paid cigarettes which is
mainly handled by the henchmen of politicians.
Master of Business
Administration
Master of Business
Administration
Master of Business
Administration
Competitive Rivalry in
Tobacco Industry Low
Threat of New Entrants (Moderate)
CTC owning major
Although Operating in share
a highly regulated
environment and significantly
of
almost
lower volumes in numbers
salescigarettes
of cigarettes profits gained by the
99%for of
business in Sri Lanka is the
highest in the
Asian region for BAT.
market
in South
the
country
competition
-This may make competitors
interested
in entering in to the market
is minimal.
Only in the very low
value
segment
which
competes
with Beedi there is a
International
College of Business
and Technology
competition
but in
Page 9 of 19
segments
where
values is generates
it
is
entirely
Master of Business
Administration
Bargaining Power of
Suppliers - High
Bargaining Power of
Customers low
With Government
promoting food crop
among farmers with
subsidized rates for
fertilizers high returns
can now be gained
through food crop.
To attract farmers to
grow tobacco higher
prices should be paid
which increases
bargaining power of
suppliers.
3. Strategy
From the earlier chapter it explains the external environment which is
related to Ceylon Tobacco Company in terms of micro and macro
environment. From that it explains us that although this business which is
regarded as highly controversial and regulated still attractive to invest on.
This chapter will look in to the internal environment of the company.
Master of Business
Administration
Master of Business
Administration
Nielson company shows that main brand Gold leaf is smokers are spread across all
socio economic classifications.
Master of Business
Administration
Depending on the strategy which is product expansion Bowmens Strategy clock can
be used to determine the Competitive positioning of the brands which need to be
focused on for growth.
Master of Business
Administration
Due to the internal and external environment impacts as well as the capability of the
organization where key strength of Ceylon Tobacco Company lies with tobacco
business and the organizational culture also rallied around it and purpose of the
organization is to grow the value of the business in a sustainable manner focused
differentiation is identified. Introducing new products from brands in the portfolio
which have higher perceived value at a higher price will be the strategy to look
forward to. From this value growth of the business can be achieved.
Master of Business
Administration
Master of Business
Administration
Company there for having a cordial relationship with government is very important to
the organization due to the very nature of the business it is engaged in.
Being the benchmark for corporate excellence is another critical factor which will
shape up the future of the organization where being transparent in its transactions with
all stake holders of the organization and living up to the four guiding principles which
are enterprising spirit, strength through diversity, open minded and freedom through
responsibility will keep the organization moving forward. In the current changing
business context the organization should be dynamic enough to adapt to the changes
happening around through clear strategies and implementing those strategies in to the
actions.
For that the strategy should be evaluated on whether it fits with the current
environment and does it exploit the key resources of the organization as well as
whether it is a sustainable one and whether the elements of the strategy you are
adopting is internally consistent and also whether the organization has enough
resources to pursue the selected strategy and whether it is an implementable one.
Threat of competitors entering the market will affect the organization heavily where if
that happens there is a possibility on losing the market share to the competitor which
will hit the bottom line off the company performances.
Master of Business
Administration
Master of Business
Administration
6. References
Master of Business
Administration
Tobacco
Company
PLC,
Marketing
Finance
Sharing
7. Marcilien,
C.
(2012).
Strategic
Capability
Strategic
Marketing Management
[Course notes]
10.Kariyawasam, C. (2012). SWOT Analysis : Marketing Management
[Course notes]
11. British American Tobacco website
http://www.bat.com