British American Tobacco: Brands, Manufacture and Segments.
1.1 Overview of the Industry:
The industry background includes the background of the product category, current situation of the industry, the competition, the segments in which the companies operate and the environmental analysis.
2.1 Major Brands, Manufacture and Segments:
British American Tobacco Bangladesh has been present in Bangladesh for a very long time and it is still doing its business dominantly with four of its key drive brands i.e.
Benson & Hedges, John Player Gold Leaf, Pall Mall and Star. Among the competitors, Dhaka tobacco’s “Navy” gives good competition to Star into he Tk 1 segment. The other brands present in the market are:
|Bangladesh Cigarette Market : Major Brands|
|Premium||Benson & Hedges Lights, Benson & Hedges Full Flavors, State Express 555|
|Medium||John Player Gold Leaf, Pall Mall Full Flavors, Castle, Pall Mall Lights, Pall Mall Menthol, Capstan Filter|
|Low||Star Filter, Scissors Filter||Navy, Royal Special Legend||Asian||Marine||Gold Hill|
|Very Low||K2, Red & White Five Star, Surma||Nasir Gold, Top Ten||Sun Moon||Wilson|
? The Cigarette industry is segmented into the following:
2.2 Industry Life cycle:
The market (or industry) life cycles describe the evolution of the market. These cycles have a similar shape to the product life cycle and similarly, have a number of distinct stages:
Ø Decline stage
Ø Shake out stage
The industry life cycle has been shown in the following:
The cigarette industry in our country is still in a growth stage mainly because, among all the tobacco products most are Bidi and low priced brands. Among the cigarette brands, the most sold ones are tk 1 brands; like for BAT the brand that sells with the largest volume is star. The following table represents the current situation of the brands sale:
? Monthly sale in million sticks (approx)
|Benson & Hedges||BAT||160|
|John Players Gold Leaf||BAT||600|
The table shows that a higher priced brand that is in the higher segment of the market is far below the sales volume of the other lower priced brands. The highest selling brands are Star and Navy. This shows that the cigarette industry is mainly depending on the high volume but the profit margin is very minimal. With star, BAT is selling a lot, but they are literally making profit near to zero. An industry liked this which is living on volume more than value can be called to be in the growth stage.
2.3 SWOT Analysis:
SWOT analysis is done to find out the factors important to the operation of a business in the environment, both internal and external. The internal factors help to find out the strength and weakness; the threats and opportunities can be comprehended by scanning the external environment. The SWOT analysis of the cigarette industry is given below:
w Because of high regulations, high cost and high entry barriers, new entrants are discouraged, which is good for the current and already established market players.
w As they are not allowed to go for public promotion, the tobacco companies can use their resources for other purposes. Like BAT is investing for and increasing their filed force.
w Dealing with a product which is sensitive in may issues.
w Can not promote their products using public media vehicle.
w A high volume but low value industry
In Bangladesh, tobacco market is pretty strong. Among the sale of all tobacco products, 68% is Bidi and the rest 32% is cigarette. But with the up gradation of purchasing power and good economic condition, high rate of migration from Bidi to cigarette is also expected. Even now; the migration rate is good enough to sustain the cigarette industry. Total no even if reduce, but the migration will make it sustainable. The cigarette market depends not on increasing number of customers, but on switching to cigarette brands.
w Increasing amount of awareness among the consumers about the health hazards caused by smoking.
w Increasing number of regulations and laws imposed by the government about smoking and selling cigarettes.
2.4 PEST analysis:
A PEST analysis is an analysis of the external macro-environment that affects all firms. PEST is an acronym for the political, economic, social and technological factors of the external macro-environment. Such external factors are usually beyond the firm’s own control and sometimes present themselves as threats. For this reason, some say. PEST is an appropriate term for these factors. However, changes in the external environment can also create new opportunities and so the letters can be rearranged to construct the more optimistic team of step analysis. The next page shows how PEST analysis is helpful in analyzing the overall environment.
The following are examples of some of the factors that might be considered in a PEST analysis:
Government regulations have increased in the recent years. Tobacco companies can not use any vehicle to promote any of their products and they also can not organize any event.
Or competition with their brand name. That is the reason BAT had to stop organizing a popular program of their’ – “B & H Star search”.
Usually price increased do not affect the brand loyal segment, but the lower segment gets influenced with he price increase. Like, even if BAT increases the price of B & H, it might not affect the brand loyalty of the customers, but the price increase of JPGL or star may influence the customer to shift to navy. Price increase may depend on lot of factors, like increase in tax or the price increase of the raw materials. And with his increase in the purchasing power and economic emancipation, consumers will shift to higher segment brands; like every year a big number of people migrate to cigarette from bidid.
Increasing awareness of the consumers might well affect the sale of the brands. Increasing health campaign, awareness and lifestyle of people also affect the consumption of cigarettes. Like more stressful life can lead to more consumption of cigarettes. People also get influenced in choosing their brands influenced by their peer or reference group.
The production of cigarettes and quality control and checking can have influence on the overall production process to a great extent. Import of new machinery includes a lot of internal communication with the factory workers to make them understand the operation and also to reduce their fear of getting laid off because of the new machinery.
2.5 History of Tobacco:
? 1,000 BC
Ancient temple caring depicts Mayan priests in Central America Smoking tobacco through a pipe. Tobacco leaves become widespread in medicine for use on wounds as a means of reducing pain. Later the Aztecs incorporate smoke inhalation into religious rituals.
Two castes of smokers emerge: the pipe smokers at the court of Montezuma and lesser Aztecs who roll the leaves into crude cigars.
? 470-630 AD
Mayan tribes begin to scatter and tobacco travels with them. The leaf moves southwards to South America where it is wrapped in maize and palm leaves and smoked and north where it is introduced to the native Americans into him Mississippi area.
In North America pipes are made from clay, marble or lobster claws. Some pipes with two stems, are used for inhaling through the nostrils. Tobacco chewing is common, especially in South America, where the leaf is mixed with lime.
Arawk people in the Bahamas, on an island Christopher Columbus christens San Salvador, offers the explorer dried leaves. Not understanding their significance, Columbus discards them. A month later Rodrigo de Jerez and Luis Torres returning from a trip into the interior of Cuba- Stumble on villagers inhaling the smoke from burning dried tobacco leaves through a hollow Y-shaped piece of cane called a tobacco or tobacco. Jerez is though to be the first smoker outside the Americas.
When Jerez returns to his home town of Ayamonte, during the Spanish Inquisition, the holy inquisitors accuse him of “consorting with the devil” when they see smoke coming from his mouth. He is imp rosined for seven years. By the time he is released, smoking is a custom in Spain. Jerez perhaps sets a precedent for the plants controversial future.
The discoverer Juan de Grijalva lands in Yucatan, Mexico, and sees local people smoking tobacco leaves. The following year, the conquistador Cortez finds Aztecs in the capital of Mexico smoking strong, scented tobacco.
In his history of the West Indies, Fernandez de Oviedo y Valdes writes: “Among other evil practices, the Indians have one that is especially harmful, the inhaling of a certain kinds of smoke which they call tobacco. I cannot imagine what pleasure they derive from this practice.”
Jean Nicot, the French ambassador to Lisobon recommends tobacco snuff to his royal
Patron, Catherine de Medici, who suffers from sever migraines. The snuff provokes a relieving sneeze which astonishes her staff but becomes fashionable. In Nicot’s honors, the tobacco genus Nicotinic was later given its botanical name.
Conquistadors bring tobacco back to Spain as a luxury for the wealthy. But when Seville beggars begin to pick up discarded cigar butts, shared them and roll them in scraps of paper for smoking, they become known as cigarillos, meaning little cigars.
King Philip II of Spain ponders tobacco’s medicinal properties not for the benefit of his subjects, but for commercial gain. He charges Royal Physician Francisco Hernandez with making a study of the plant’s properties.
Nicolo Monardes, a famous physician at the University of Seville, recommends tobacco as a cure for more than twenty ailments, including tooth ache and asthma. Certainly not recommended today!
Sir Francis Drake returns from the Americas with what is through to be the first consignment of tobacco to the UK.
Virginian colonists disembark at Plymouth smoking clay pipes.
A century after Columbus’ voyage, tobacco is grown in Belgium, Spain, Italy, Switzerland and England, and by the turn of the century the crop has spread to the Philippines, India, Java, Japan, West Africa and China- from where merchants take it to Mongolia and Siberia.
By the time of Queen Elizabeth its death, England has become the wealthiest country in Europe (partly thanks to its dominant role in the tobacco trade) and is taxing the crop at 2d (2 shillings) per pound weight.
King James I publishes A Counterblast to Tobacco, one of the first anti-smoking polemics. But his disapproval doesn’t stop the King from increasing the duty on tobacco
by more than 40 times as much as the tax levied by Queen Elizabeth, to 6/10d (£ 6 10 shillings) per pound weight. Consumption of tobacco increases as belief spreads that the leaf helps ward off the plague.
King Phillip III of Spain decrees tobacco could only be grown in Spanish colonies. Production by foreigners is punishable by death.
James I grant two traders exclusive rights to import tobacco-paying £3,500 for the first year, raising to £7,000 each year for the next decade.
King James I bans domestic cultivation of tobacco and announces that it is to become a royal monopoly.
Holy Roman Emperor Ferdinand III bans “tobacco drinking” under threat of indeed but smoking continues.
Pope Urban VIII bans snuff claiming it takes users too close to “sexual ecstasy”. King James I decrees that all tobacco should arrive at the port of London. Smuggling increases and sizeable amounts of duty are lost. The British Government widens the number of ports where tobacco can land.
Following the advice of his minister Cardinal Richelieu, Louis XIII of France levies a tax of 30 sols on every pound of tobacco. Two centuries later Napoleon III would observe: “This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once- as soon as you can name a virtue that brings in as much revenue. “Government monopolies prove so lucrative them persist in several European countries late into the twentieth century.
Turkish sultan Murad IV forbids smoking with the threat of execution. He also demolishes coffee-houses in Constantinople and confiscates the assets of executed
Tsar Michael of Russia declares smoking a deadly sin. Arrested smokers are flogged or have their lips slit. A 1643 visitor to Moscow says: “Those convicted of taking snuff, both men and women, can expect to have their noses taken away.”
The court physician to Louis XIV, Fagon, offers a contemporary view: “When he opened his snuffbox, did he not know that he was opening a Pandora’s Box, from which would spring a thousand ills, each worse than another?” Louis XIV is said to hate tobacco but does not ban it, as it would have meant giving up money from the state monopoly.
An increasing number of protectionist barriers are created, particularly in the eastern United States, to safeguard English interests.
Following the fashion of the day, Pope Benediet XIII allows the use of snuff in St Peter’s Church, reversing a ban imposed 75 years earlier by Innocent X.
Scenting a business opportunity, the Vatican opens its own tobacco factory.
British and French soldiers fighting in Spain during the Napoleonic wars bring cigars back home. Their popularity grows quickly.
A smoking room is established in the British House of Commons.
Cigar consumption increases with the invention of the friction-activated phosphorous match.
The Mexican war leads to a huge increase in the popularity of cigars smoked by soldiers trying to relieve fatigue and quash hunger. Soldiers develop a taste for the darker tobaccos from the south.
In the United States, tobacco is linked to the temperance movement. Reverend George Trask, a former smoker, sets up the American Anti-Tobacco Society for which he serves as president, vice president, secretary, treasurer and auditor.
Smoking compartment is introduced on English railways.
James Bonsack, a Virginian, invents a machine that can produce 120,000 cigarettes a day. James “Buck” Duke, destined to become the first chairman of British-American
Tobacco 21 years later, buys two machines and his family’s tobacco company moves into cigarettes.
In America, 26 states pass laws banning the sale of cigarettes to minors.
Lucy Page Gaston, an Illinois teacher and journalist and member of the Women’s Christian Temperance Union, establishes the Chicago Anti-Cigarette League.
The Anti-Cigarette League publishes a pamphlet claiming links between cigarette smoking and brain disease.
The Imperial Tobacco Company of the United Kingdom and The American Tobacco Company of the United States agree to end a trade war by forming a joint venture, the ‘British-American Tobacco Company Ltd.’ James B. Duke becomes the venture’s first Chairman.
The New York City authority bans women from smoking in public, Two weeks later Katie Mulcahey is arrested for violating the rule. As she is led away she declares, “No man shall dictate to me”. Cigarette smoking was often seen as a symbol of women’s emancipation.
Outbreak of World War I. General John J. Pershing, commander-in-chief of the American forces in France in 1917, calls tobacco “indispensable to the daily ration”. In Europe, troops use cigarettes to pass time and to try to calm their nerves. The popularity of cigarettes in the armed forces associates tobacco with patriotism.
US State of Idaho bans cigarette sales.
Despite the bans, cigarette sales continue to increase. The American Mercury reports, “The more violently it has been banned, the more popular it has become”.
US President Roosevelt makes tobacco a protected crop as part of the World War II war effort. His wife Eleanor was dubbed “the first lady to smoke in public”.
During World War II, smoking increases. By the middle of the next decade, more than a quarter of American women and more than half of American men smoke cigarettes.
Two British researchers, Richard Doll and A. Bradford Hill, report the results of a four year study comparing 1,465 lung cancer patients to an equal number of patients with other diseases, matched for age, sex and region. They conclude that lung cancer patients are considerably more likely to be smokers and much more likely to be heavy smokers.
Public health warnings emerge.
The American Surgeon General publishes a 387 page report stating: “Cigarette smoking is a health hazard of sufficient importance in the United States to warrant appropriate remedial action.” For the first time smoking is banded in the State Department auditorium.
The tobacco industry sees substantial annual duty increases which result in cigarette taxation increasing by 85 percent or more in several countries, including the UK.
Litigation issues tend to dominate the news headlines around the tobacco industry. In the US, five years after the first State lawsuit was filed, major US tobacco companies signed a Master Settlement Agreement with 46. State Attorneys-General, giving these US states more than $200 billion in total over 25 years in settlement of lawsuits seeking reimbursement for the Medicaid costs of treating sick smokers. The Master Settlement Agreement restored stability to the tobacco companies, allowing them to concentrate again on running their business.
? 2000 and beyond
Litigation continues to be a significant issue for the tobacco industry, especially in the US, but the de-certification of lawsuit activity. The Framework Convention on Tobacco Control (FCTC) is adopted by the World Health Organization; it calls for restrictions on tobacco advertising and sponsorships, new labeling standards clean indoor air controls and stronger action against cigarette smuggling. Tobacco companies work with governments to reduce smuggling. Bans on public smoking are enacted in some places and proposed in other; the ban in New York State is unpopular with a majority of voters. British American Tobacco test-markets Swedish-style snus in Sweden and South Africa, giving smokers the chance to enjoy a less harmful form of tobacco, without lighting up.
2.6 About British American Tobacco Bangladesh:
British American Tobacco Bangladesh began its operations in the subcontinent in 1910 as Imperial Tobacco Company Ltd with its head office in Calcutta; where cigarettes were made in Carreras Ltd Calcutta. Imperial and Can-eras merged into a single company in 1943. After the partition Pakistan Tobacco Company (PTC) came into existence with it’s and office in Karachi in 1949. The then PLC’s East Pakistan office was situated in Armanitola and ultimately moved to ALICO Building, Motijheel Dhaka. In 1954 PTC established its first cigarette factory in Chittagong although high-grade cigarettes still came from West Pakistan.
The Dhaka factory of PTC went into production in 1905. Currently, our only Cigarette Manufacturing Factory (Dhaka Factory) along with the 1-Icacl Office premises is situated in Mohakhali, Dhaka while we run the Green Leaf Threshing Plant (GLT) in Kustia. After independence, Bangladesh Tobacco Company Pvt. Limited (BTC) was formed ill 1972 with British American Tobacco holding majol–i1y shares in Bangladesh Tobacco Company. In March 1998 Bangladesh Tobacco Company changed its name and Identity to British American Tobacco, Bangladesh pronouncing its common Identity with all other operating companies of the group.
History of BATB
|1910||Formation of Imperial Tobacco Company|
|1949||Formation of Pakistan Tobacco Company (PTC)|
|1954||PTC opened its first factory in Fouzdarhat, Chittagong|
|1965||Building of a factory in Mohakhali Dhaka|
|1972||Incorporation of Bangladesh Tobacco Company with a paid up capital of Tk 400 million|
|1998||Changed its identity from Bangladesh Tobacco Company (BTC) to British American Tobacco Bangladesh Company Limited (BATB)|
British American Tobacco Bangladesh Company Limited is a subsidiary of British American Tobacco Group and is one of the oldest and largest multinational companies operating in Bangladesh The UK-based BAT group holds G5.91’% share in the company.28.7% is owned by Government of Bangladesh agencies while 5.39% share Is owned by other shareholders.
This leading business organization in the industrial sector is employing more than 1,300 people directly and a further 40,000-+- indirectly as farmers, distributors and suppliers. They have business contracts directly with 18,000 registered farmers who produce high quality tobacco leaf.
In 2002 BATB developed a new corporate slogan “Success and Responsibility go together”.
2.7 Guiding principles and People Management at BATB:
British American Tobacco Bangladesh is 11uidcd by a set or principles and follows n vision of’ “Extending leadership through world class performance”. The four guiding principles describe key characteristics of the organization and guide its employees in their working lives. They attempt to capture the way BAT employees work together, deal with or (Tanzanians, communities, partners and other Companies and are tile key to its success. The company pronounces and interprets its guiding principles in the following manner.
?Strength from Diversity: We actively utilize diversity – of people, cultures, viewpoints, brands, markets and ideas- to create opportunities and strengthen performance.
?Open minded: We strive to be an active listener, genuinely considering other’s viewpoints without pre-judging.
?Freedom through responsibility: The freedom to take decisions and act on them obliges us to accept personal responsibility for the way they affect our stakeholders.
?Enterprising spirit: The confidence to seek out opportunities for success, to strive for innovation, and to accept the considered risk taking that comes with it.
BATB has consistently developed high quality people. At this moment, more than 25 Bangladeshi managers are working in BAT companies around the world. Many of the today’s business leaders in Bangladesh are the ex-employees of BATB. This strong tradition remains even today and BATB still is the employer of choice for the talent pool of Bangladesh.
2.8 BAT Bangladesh’s business:
BATB is the leader in the local cigarette industry currently holding nearly 51°/o volumeshare and 70% value share of the Bangladesh cigarette market. The total volume (18.9 b in 2004) has grown by nearly 90% since the 1999 levels of 10 b. They have also been able to grow annual contribution to the Government revenue to nearly Taka 17 b in 2003 and Taka 18.5 b in 2004.
? Product Profile:
The market presence is summarized as below:
?Super Premium: Dunhill cigars have been launched through an exclusive Cigar Lounge in the Hotel Sheraton.
?Premium: Launched in 1997, B & H maintains BATB’s dominance in premium segment and drives the growth of premium segment in Bangladesh market. Within a short time Bangladesh became a leading B& H market across the BAT world. After a price increase ill Q1 2004, B&I-1 still remains a Successful and happening muscle in our portfolio. British American Tobacco Bangladesh was the first market to launch the new pack of E&1-1 at the beginning of September 2005.
?Medium: Launched in 1980, John Player Gold Leaf is one of the highest selling brands of BATB the medium segment. In 2005 they launched three flavored Limited Edition Product and Packs under the Taste the World campaign, which were extremely well received by consumer-
?Low: Star, launched 40 years ago is till a dominating brand in this segment. Recently a new pack of Star was launched and currently it is the highest volume generating brand for the company (more than 900m per month). On August l3, 2005 the new Anchor Pack of Star was launched in the market while the cigarette stick also wore a new look with brighter paper and bi-color dye.
? Pall Mall
Pall Mall has been launched in March 2006 with three variants full flavor, lights and menthol; it is one of the leading brands in the global BAT portfolio. It offers choice to the adult informed smokers with a full range, great taste and innovative packaging. Pall Mall, with all its innovation, is seen to be offering more value” for the consumers money.
The market situation of the products of BATB can be described with the help of BCG matrix. BCG matrix has two determinants-market share and growth. Based on these two, products are defined as star, question mark, cash cow and dog.
For BATB the BCG Matrix will be like the following:
2.9 About cigarette:
Not all cigarettes are the same. Smokers around the world prefer many different tastes and strengths and our companies aim for excellence in every step of manufacturing.
Cigarette design is more complicated than it may seem. Our companies work to understand the preferences of adult consumers and to design cigarettes to meet them. It’s
the preferences Of adult consumers that guide our tobacco blends- the mix of tobaccos that we use- and we work to ensure that these grades are available long-term to keep the tastes of our products consistent.
?The tobacco in the rod includes tobacco lamina (the flat part of the tobacco leaf), tobacco stern (midribs of the leaf), and expanded lamina.
?The cigarette paper includes paper and adhesive. The filter is made mainly from Cellulose acetate fibers, known as tow. Cellulose acetate is derived from wood pulp. The fibers are bonded together with a hardening agent, triacetin plasticizcr, which helps the – filter to keep its shape. The filter is wrapped in paper and scaled with a line of adhesive Sometimes charcoal is added to filters. The filter paper includes paper and adhesive.
?Nicotine is not added in making cigarettes. It occurs naturally in all varieties of tobacco plants. Design adjustments achieve different strengths and tastes, and can reduce smoke yields of various smoke components, as measured by a standardized machine method.
? Effect of burn cigarette:
To understand cigarette design, it helps to know how a cigarette burns. Itis the combustion process – the burning of the cigarette – that produces tar. If hay were burned instead of tobacco, it would also produce a type of tar. When an item burns, it produces tiny particles mixed with gases – this is smoke. A cigarette filter traps some of these Particles. When a smoker puffs on a cigarette, whole smoke, including both fine particles and access is sucked through the tobacco rod and the filter. Gases pass through the filter, and some particles are trapped in it. It is this particulate matter, minus nicotine and water that is called tar.
Smoke has over 4,000 constituents, many of them also found in the air we breathe and our food. These constituents include the emissions listed on packs, such we branch and our food. These constituents include the emissions listed on packs, such as tar, nicotine and carbon monoxide. Water vapor is also produced by the combustion, because the burning of any organic material breaks down the chemical components and produces water.
Cigarettes often contain a selection or different types of tobacco Leaf from different countries, blended for aroma, taste and character to meet smokers’ taste preferences. Three main types of tobacco are used in cigarettes: Virginia or Flue-cured, Burley and Oriental.
• Virginia, or flue-cured a selection of tobacco, is named after the US state where it was First Cultivated. It is also called `bright tobacco’ because of tile yellow to orange colour it achieves during curing. It grows particularly well in subtropical regions with light rainfall, such as Georgia, Florida and the Carolinas in the USA, Southern Brazil and Zimbabwe. Cigarette brands like Dunhill use effusively Virginia tobacco. Virginia blends contain only flue-cured Virginia tobaccos.
• Burley is a slightly lighter green than Virginia. It requires behavior soils and more fertilizer than Virginia. Some of the best Burley IS “Irown in US statcs such as Maryland and Kentucky, in Central America, Malawi, Ubatllla and Indonesia. After being air-cured, it turns brown with virtually no sugar,it an almost cigar-like taste. Along with Virginia and Oriental tobacco, it makes Lip all American Blend for cigarettes, as used iii brands like Lucky Strike or Pall Mall. Typically, air-cured tobacco is treated with sugars such as molasses or liquorices, and the blend may also contain added flavors.
• Oriental is the smallest and hardiest of all tobacco types, grown in the hot summer of the Balkans, Turkey and the Middle East. These conditions and a high plat} ting density create an aromatic flavors, chanced 1)y sun-curing, as in a traditional Turkish cigarette. An Oriental blend can contain up to 100’% sun cured tobaccos.
Several factors can influence the smoking characteristics, including the variety of plant, how it is harvested and influences such as soil, climate and weather. All these can affect the tobacco’s taste and aroma.
2.10 Ownership Status of the Company:
BATB is a public limited company listed in the Dhaka Stock Exchange with an authorized share capital of “1’k 600,000,000 comprised of 60,000,000 ordinary shares of Tk 10 each. British American Tobacco, London has 66% of the shares. The government initially held 32% of its shares but it gradually sold most ‘of the holdings to different organizations of the country. The companion of shareholders (as of 2004 end) is as follows:
|Raleigh Investment Company Ltd., UK||65.91|
|Investment Corporation of Bangladesh||23.6|
|Shadharan Bima Corporation||2.86|
|Bangladesh Shilpo Reen Shangstha||1.06|
|Govt. of Bangladesh||0.64|
|Shena Kalyan Shanstha||0.52|
2.11 Structure of the organization:
The structure is much decentralized with the parent company retaining aLlth0l–ity for overall strategic direction of the Firm and financial control. BATB operates in the operates in the following functional areas:
Ø Operations (Production and Supply Chain) a
Ø Human resource
Ø Marketing (Brand and Trade Marketing- Demand Chain)
Ø Legal & Company Secretarial
Ø Information Technology
Ø Corporate & Regulatory Affairs (CORA)
Overall activities of tile company arc governed by the “Board of Directors” and Executive. The “Board of Directors” is composed of 10 members headed by a chairman. Chief Executive of British American Tobacco Bangladesh is called the “Managing Director” who is normally appointed by “BAT Holdings”. Managing Director of the company is the chairman of the executive Committee. This committee includes the head of all the functional departments.
The decision making, infrastructure is participatory to a very high extent. All the plans and decisions that are made are communicated from the top level of the organization and the decisions are made after discussing the issue with the related authority and the grass root level. Every possible input from every relevant level of workforce is taken before getting into any decision.
2.12 Core business activities:
BATB’s core business is to manufacture and market cigarettes. In addition to this, the company also exports tobacco and vegetables. The main activities taking place in the business are:
Ø Tobacco Leaf Growing: There are registered farmers who grow the tobacco in the regions of Kushtia, Chittagong and Rangpur.
Ø Leaf Processing: The leaf is processed in two factories; the green leaf threshing factory where the stern is separated fromthe leaf and the Dhaka Factory (Primary Department) where the leaf cut to make it ready for production.
Ø Cigarette Manufacturing: The cut tobacco is sent to secondary manufacturing department or the Dhaka Factory where it is combined with wrapping materials to make the final product. The factory runs in three shifts for 24 hours to give a daily production of around 60 million sticks.
Ø Distribution: The product is sent out to various distribution houses across the country. The distributors work with the BATB trade marketing team I ensuring distribution to all retail outlets in the country.
Ø With ever increasing number of outlets (currently, this is one of the major challenges the company faces.
Ø Brand Activities: With the ban on promotion activities, the company has to look towards innovative ways of communicating their brands to the cigarette consumers.
? Responsible Product Stewardship:
BATB follows a globally accepted set of standards for marketing [lie products. British American Tobacco, Phillip Morris International and Japan Tobacco International – the world’s three largest companies in this sector have committed their compliance with International Tobacco Products Marketing Standard (ITPMS). Besides, they have also initiated tailoring their operations to comply with the newly enacted regulation oil tobacco products in Bangladesh.
The company’s Responsible product stewardship principle suggest that: “Responsible Product Stewardship is about our belief that we should develop, manufacturer and market our products and brands in a responsible manner. Our role is to meet adult consumer demand in a way which recognizes the health risks associated with our products and seeks to address legitimate concerns about them. We need to do this in a way that conforms with our legal and social obligations as well as recognizing our need to innovate and respond to the changing environment.”
2.13 BAT Bangladesh’s Corporate Social Responsibility:
British American Tobacco Bangladesh is unique in the country with respect to the depth of their commitment to be a development partner for Bangladesh while doing business ill the most responsible manner.
2.13.1 International Standard in EHS Practices:
They arc committed to the principles of Environment, Health and Safety (EHS) best practices which include: The country’s only Factory Bio-filter, Zero Lost Workday case (LWC) for three consecutive years which has won us the Group’s Zero Accident Award, high EHS awareness levels among employees, regular, l–:HS reinforcement activities (i.e. EI-1S Week 2004 observed with a lot of Success).
2.13.2 Leaf Tobacco Export:
The company achieved the National Export Trophy (Gold)) for three consecutive years under, the `Agricultural Product’ category for 1999-2000, 2000-2001 and 2001-2002 fiscal. British American Tobacco Bangladesh exported 7.5 mn KGs (worth 12.23 mn USD) of leaf tobacco in 2005. Quality assurance to foreign buyers was the key factor to the increasing trend in tobacco export volume. Increase ill export is a reflection of our dedication to represent Bangladesh as an exporting country in the agricultural sector. This initiative in aligned with the Government focus in the agricultural sector supporting the , country to (Cigarette foreign currency.
2.13.3 Corporate Social Investment:
“Success and responsibility go together” is the philosophy that has driven British American Tobacco Bangladesh over the years. They are the number one taxpayer in the tobacco industry of Bangladesh. One of their core business philosophies is doing business in the most ethical and socially acceptable manner. ‘They are taking forward their commitment for contributing in the development of the country through their endeavors in the various social, economic and environmental sectors of the country.
Dishari- basic IT education centre has been initiated by BATB to contribute to the promising I”1′ sector of the country which is a thrust sector of the Government. The education centre is aimed at providing basic computer education to those who can less afford it.
British American Tobacco Bangladesh initiated this well recognized program to create mass awareness of the need for afforestation with the free sapling distribution program in 19S0. Today, after more than two decades, they have contributed more than 50 million saplings to the country’s affrorestation initiative.
?Community Services Initiative in leaf growing areas:
Thousands of Bangladeshi farmers are benefiting from British American Tobacco Bangladesh’s Community Services Project which has recently kicked off. It reaches out to support nearly 25000 farmers (and their families) who are closely linked with their
Way of life. The initiatives taken under this project are: Education Assistance, Primary Health Care Support, Malarial Prevention, Sanitation Support, Commercial Afforestation, Compost Pits, Green Manuring, Neem Decoction, and Vegetables Growing.
British American Tobacco Bangladesh Is one of the first t companies in the country to embrace biodiversity in its way of work. The objective is t0 raise awareness among company’s internal and external stakeholders promote biodiversity and sustainable use principles in the operations of British American Tobacco Bangladesh, showcase ‘best practice’ examples and influence others to participate in biodiversity conservation.
2.14 About Corporate and Regulatory Affairs (CORA):
“Our Strategy for building sustainable shareholder value is based on growth, productivity, responsibility and being a winning organization. CORA’s particular focus is on responsibility.”
————Michael Prideaux, Director, Corporate and Regulatory Affairs
British American Tobacco is .1 responsible companies in a controversial industry. A major part of helping it to be seen that way is the responsibility of Corporate and Regulatory Affairs (CORA). Our job is to reassure those stakeholders who directly or indirectly influence our business that British AmCr1Ca11 Tobacco is achieving its commercial objectives in a manner consistent with reasonable social expectations of a responsible tobacco company in the 21st century.
As society’s expectations of corporate responsibility change, they are changing some of the ways to address stakeholder concerns. They are engaging in constructive dialogue with a wide ran-c of stakeholders – including governments and their agencies, the media, business partners, employees, investors, non-governmental organizations (NGOs) and local communities – about all aspects of our product. Our social reporting process lends transparency and accountability to this process.
? CORA Strategy:
CORA wants to achieve
To drive recognition as a responsible tobacco company, thus improving long term business suitability.
This can be achieved by developing constructive engagement With those stakeholders who directly or indirectly influence the license to operate to reassure them that the company is meeting the commercial objectives ill a transparent manner, consistent with reasonable public expectations for a responsible tobacco company.. CORA thereby delivers tangible business benefits in the two key -area-,
Ø Proactive reputation management
Ø Proactive regulation management
CORA strategy in a nutshell
? Proactive reputation management
Managing reputation effectively means understanding the stakeholders’ expectations. To do that CORA needs to internalize these expectations and initiate organizational change as appropriate in order to respond to them.
Finally, they need to develop effective two-way communication with the stakeholders and show how the company is responding.
A continuous process of understanding, responding and communicating is the Key CORA reputation management capability.
? Proactive regulation management
In order to effectively manage regulation, e the regulatory environment needs to be anticipated and proactively advocate company views.
Where necessary (as a last resort), they may also need to litigate to ensure that tobacco regulation balances the preferences of consumers with the interests of society, establishes
an open-minded approach to harm reduction as a policy and ensures that the business can compete and prosper.
In BAT Bangladesh CORA roles are clustered within these three sections: • Regulatory
Ø Regulatory Affairs
Ø Corporate Social Responsibility
Ø Corporate Communication
Regulatory Affairs section is responsible, among others, to promote sensible tobacco regulatory environment, to advise marketing on compliance with applicable external and internal standards, and to support Top Team’s engagements on excise and other industry regulation issues. Today, perhaps more than ever, stakeholders expect BAT Bangladesh to use the company’s economic strength for broader social goals and to demonstrate environmental responsibility, to support the communities, and to behave with transparency and accountability.
The Corporate Social Responsibility section oversees BAT Bangladesh’s corporate social investment initiatives such as afforestation, various programs in leaf’ growing areas, corporate donations and IT education. In addition, the section also manages the Company’s social reporting process.
Meanwhile, the Corporate Communication section works closely with Regulatory Affairs and Corporate Social Responsibility to manage the communication of key messages to the external and internal stakeholders of the Company. This team is also responsible for managing the company’s corporate brand.
3.0 Project plan:
3.1 Internal Communication (IC) at BAT Bangladesh:
“The more elaborate our means of communication,
The less we communicate” Joseph Priestley
In today’s rapidly changing business environment the need for clear, engaging, aligned employee communication is greater than ever. While all employees are responsible for communicating effectively, the role OF internal communication teat ions is to facilitate good communication between leaders and teams. BAT does this by providing strategic communications support, operational and change management support and channel management.
Internal Communications is a part 0i ‘the corporate communications team of CORA. It is the function which engages with the internal stakeholders of the company. The recipients of the internal communications are all the 1300+ employees, belonging to both management and nonmanagement.
The responsibilities of Internal Communications include planning and developing appropriate communications tools, methods and messages as well as advising other Functions in developing cross functional communications tools or activities.
3.1.1 Objectives of Internal Communications:
• Communicate corporate projects, events, achievements etc.
• Provide counseling service for cross Functional teams for communicating projects, events, achievements etc.
• Generate positive shift in employee comprehension of company objectives and directions.
3.1.2 Importance of communication process:
British American Tobacco believes that empowered and motivated employees are the prerequisite for creating a winning organization. To this end, it is necessary that employees have the right information and it is Internal Communications that facilitates the information flow. It provides the employees with sufficient information to perform their roles and it aligns them with the company vision and directions. This enables informed decision making and promotes cohesiveness among the business units. Thus Internal Communications helps ensure that the employees at all levels have all, understanding of tile business and are able to engage and inspire individuals around them to deliver winning performance.
Internal Communications also plays a catalytic role in upholding the guiding principle “Open Minded”. This guiding principle requires that one listen actively, communicate openly, value feedback, foster a climate of support, encourage creativity, and constantly challenge the status quo.
3.1.3 Types of Internal Communication:
Internal Communication at BAT is conducted in 3 ways:
¨ Branded two-way: These tools are designed to get feedback of the things communicated. Like
ð Road show
ð Skip level meeting
ð Open Forum
¨ Banded one-way: The name suggests that these tools do not get feedback. These tools include:
ð BATB news
ð SMS (Instanews)
¨ Contingency communication: These tools are designed when some need arise. Like, recently, when the company decided to increase the price of their products, a video was made to educate the brand promoters and the people in the filed.
Each of these tools will be discussed later.
3.1.4 Internal Communication Tools and processes:
The company has to decide what to communicate and how to communicate it and British American Tobacco has a portfolio of tools for the purpose of communication to words its employees. Depending on he number of people infected and the importance of the communication a particular tool or a combination of tools is selected. All these tools are designed to meet specific needs and together they provide a comprehensive communication with no gaps.
For each tool the following are detailed-
· Target audience for that tool
· Core contents to be communicated
· Frequency of communication
· Language and tone
· Tool name – each tool usually has branded name
· Production budget
3.1.5 Focus (Quarterly Magazine):
Focus is a magazine published for the exclusive consumption of the employees.
The magazine’s sore contents are-
· Success Stories – achievements by a person, department or business
· People News- Sharing of experiences by an employee
· Values/Principles- demonstration of values in the work place
· Lifestyle- light articles for entertainment
· Fun/Humorous articles
The contents of the communication are less formal and are people oriented. If an employee were to have shown excellent performance by driving a project, his success would ideally be thought the Focus Magazine. The events are communicated in detail and thus, Focus can act as archive of information as well.
The communication is in the form of articles published in the form of a magazine, each issue contains around 6 to 7articles. Two versions of the magazine are printed-one for the management in English and the other for the non management in Bengali these publications are hand delivered to all the employees in Dhaka and mailed via courier to employees placed outstation.
The frequency of publication is usually once every three months. The magazine content is compiled by Internal Communications with the help of an editorial Board referred to as the IC editors. There are eight members who represent different groups –Finance, Marketing, CORA, HR, and Legal, Leaf, Operations, IT and the Trade Union. Their responsibility is to identify which news/ event from their area should be published in the magazine and also to motivate employees from their area to contribute articles for Focus.
Accompanying the articles pictures have to be selected. Photos of events are usually taken during the event and Internal Communications keeps conies of these photographs. According to need, photos for other articles are obtained from stored photo archives or photo shoots are arranged as and when required.
The design and publication of Focus are done by means of an agency and Internal Communications has to work within a given budget for Focus publication. Often BATB works with two agencies for this purpose- one for the design and artwork and the other for the printing. The design of the magazine is done by an advertising agency and after approval of the design the dummy is sent to a printing agency. The advertising agency usually supervises p