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Re-organizing Finance Policy, Guideline Database & AP Process Review in British American Tobacco Bangladesh (BATB)
Organizational Part
2.1 Introduction
British American Tobacco is a pioneer and leading multinational cigarette manufacturer. Based in England, British American Tobacco was formed at the turn of the 20th century with the objective of establishing a worldwide business. British American Tobacco Bangladesh is one of the oldest and largest multinational companies operating in Bangladesh. The UK-based British American Tobacco Group holds 65.91% share in the company. The Government of Bangladesh owns 28.7% through several of its agencies, while 5.39% is owned by other shareholders. British American Tobacco Bangladesh began its operations in the sub-continent in the year 1910 as Imperial Tobacco Company Ltd. Post 1947 after independence, in 1972, Bangladesh Tobacco Company (BTC) was formed with British American Tobacco holding majority of the shares. British American Tobacco Bangladesh was previously known as Bangladesh Tobacco Company (BTC). On March 22, 1998 the company changed its identification and established commitment to the highest international standards. The Company’s main business is tobacco, which involves growing, processing, manufacturing and marketing of tobacco leaf, cigarettes and pipe tobacco. The company also exports processed tobacco leaf in the international market, mainly in the European Countries with its effort to create an international market of its products.
At British American Tobacco Bangladesh, the key factor to their sustainable growth is human resource. Therefore, they have always been committed to good employment practices and have set out the framework of our Employment Principles on workplace practices, employee relations and employee human rights. As we know it is an multinational company so this report includes the theoretical framework of various concepts of Human Resource Management and also contains the practices of Human Resource management in British American Tobacco Bangladesh for the purpose of find Out the benefits and problems they are facing from their widespread work force.
2.2 British American Tobacco (BAT) – An Overview
· Global Tobacco Market
The British American Tobacco Group is one of the world’s leading international manufacturers of cigarettes, marketing its products in almost every country worldwide. The business was founded in 1902 and by 1912 had become one of the world’s top dozen companies by market capitalization. Being listed in the London Stock Exchange, it has an active business presence in 180 markets worldwide. The Head quarter of British American Tobacco is situated in Globe House, Docklands Business District in London. It manufactures and markets worldwide popular cigarette brands like Lucky Strike, Benson & Hedges, Dunhill, Kent, Rothmans, Pall Mall, Viceroy, John Players Gold Leaf, State Express 555 etc. and many regional brands like Star, Wills, Casino, Gold Flake etc.The company –
– Produces some 715 billion cigarettes through 49 factories in 41 countries. 4 of these and 2 separate factories are manufacturing cigars, roll-your-own and pipe tobacco.
– Has global market share of 17% with Rothman’s merger
– Spent £27.2 million last year on environment, health and safety.
· British American Tobacco Group
The British American Tobacco Group is one of the world’s leading international manufacturers of cigarettes, marketing its products in almost every country worldwide. It is clear leader in a competitive and fast moving business. The group consists of four tobacco subsidiaries and they are:
1) British American Tobacco Company Limited, which produces cigarettes in over 45 countries for domestic and export markets in Europe, Australia, Latin America, Asia and Africa.
2) Brown & Williamson Tobacco Corporation is the third largest tobacco company in the US.
3) British American Tobacco (Germany) GMBH is a leading cigarette company in Germany.
4) Souza Cruz S.A. is the market leader in Brazil and a world leader in tobacco leaf export.
BAT subsidiaries operate in more than 90 countries employing around 173,000 people. Multi-national, multi-cultural and multi-disciplined, British American Tobacco Group, a world-class group of tobacco companies.
Ø British American Tobacco Co. Ltd.
British American Tobacco, the second largest Tobacco Company in the world is also the world’s most global tobacco company. Based in London, UK, it operates in more than 50 countries with 85,000 employees selling more than 300 brands in more than 180 markets worldwide. It has 56 factories in 40 countries around the world, 5 regional product centers. Tracing its heritage back to a joint venture formed by the Imperial Tobacco Company of the United Kingdom and The American Tobacco Company of the United States in 1902, today’s British American Tobacco Company was born on the world stage. Extent of operation of British American Tobacco Company is given below:
Figure 1: Extent of operation of BAT
Information of this chapter is provided by BATB.
· America-Pacific (USA, Japan, South Korea)
· Asia-Pacific (China, Indo-China, Taiwan, South-East Asia, Australasia)
· Europe (50 countries including Russia)
· Latin America (Central & South America, Mexico, Caribbean)
· Africa (More than 50 countries)
· MESCA (Middle East, South & Central Asia)
British American Tobacco, better known as BAT, is the mother-company of, at present, around 56 companies worldwide. British American Tobacco (BAT) is the world’s most international tobacco group. With a market share of 15 per cent, they make the cigarette chosen by one in seven of the world’s one billion adult smokers and make nearly two billion cigarette world wide everyday. BAT holds strong market positions in each of its regions and has a leadership in more than 50 markets of the 180 markets where they have an active business presence.
| Gross revenue | £18,143.9 million |
| Net revenue | £1,454.5 million |
| Operating profit pre exceptional | £2,575 million |
| Pretax profit | £1,522 million |
| Adjusted EPS | 57.87p |
| Dividends per share | 29.00p |
| Group volumes | 807 billion |
| Global market share | 16 per cent |
| Assets | 25,076.4 million |
| Stockholders’ equity | 6,918.9 million |
Table 1: A Brief Overview of BAT’s Operation all over the world
In order to support the company’s business goals, the merger of British American Tobacco with Rothmans International had been announced on 11 January 1999. This global merger was completed on 7th June 1999. This brought together the number 2 and 4 players which together will boost a combined volume exceeding 900 billion cigarettes around the world with some 120,000 employees and a worldwide market share of 16 percent (Phillip Morris has a 17 percent share). The merger is a major step forward in British American Tobacco’s vision of becoming the world’s leading International Tobacco Company.
Table 2: A Brief Overview of BAT’s Market Share.
2.3 Vision, Objective and Global Strategies of BAT
“Our vision is to achieve leadership of the global tobacco industry in order to create long term shareholder value. Leadership is not an end in itself, but a company that leads its industry, is the preferred partner for key stakeholders and is seen to have a sustainable business, should be valued more highly.”
BAT has defined leadership in both a quantitative and qualitative sense. In quantitative sense, they seek volume leadership among their international competitors and in the longer term, value leadership. Since success will depend on adult consumers and that, therefore, they must be consumer driven.
Figure 1.1 – Model for achieving VISION
Source: www.bat.com
In order to achieve the vision, BAT’s strategy for creating shareholder value has four elements around which all efforts revolve: Growth, Productivity, Responsibility and Winning Organization.
· Organic Growth: For organic growth, focus is on the key strategic segments of the market that offer the best prospects for long term growth. Much concentration is also put on innovation, product differentiation, and consumer value addition.
· Productivity: In the era where a common strategy for any company is cost cutting, BAT’s approach is to establish a lower cost base while improving the quality of products and the speed they get to the market, as well as their effectiveness in terms of how they deploy our people and capital. In order to maintain a strong balance sheet, capital effectiveness is an important part of BAT’s productivity strategy and includes a focus on inventory levels, utilizing our assets, financing and other uses of capital.
· Responsibility: Several communication programs with stakeholders has been adopted about their Business Principles, which explain the way we expect their businesses to be run in terms of responsibility, and demonstrating how they are following them. Their three Business Principles, Mutual Benefit, Responsible Product Stewardship and Good Corporate Conduct are each underpinned by a number of Core Beliefs.
· Winning Organization: To deliver the vision BAT must have the right people and the right working environment. That is the essence of their winning organization strategy. BAT wants an organization that is constantly learning. This learning culture shares knowledge quickly, learns from its mistakes and replicates success formulas quickly.
2.4 BAT Regions
The Group has a robust position in all regions, which with their broad based portfolio of international, regional and local brand provides them the platform for achieving global leadership of the tobacco industry. As a business that has grown from the international roots, British American Tobacco is not a typical ‘western’ organization. A key feature of the Group is its devolved structure, with each local company having wide freedom of action and responsibility for its market operation through standard marketing practices.
2.5 Historical Background of BATB:
British American Tobacco Bangladesh (BATB) Company Limited, a subsidiary of British American Tobacco, is recognized leader in Bangladesh cigarette market, with along established reputation for providing its consumers with consistently high quality brands. The journey of this company started long back. BATB was established back in 1910 as Imperial Tobacco Company Ltd. with the head office in Calcutta. In the very beginning Imperial Tobacco Company (ITC) launched a branch office at Moulivibazar Dhaka in 1926. Cigarettes were made in Carreras Ltd., Calcutta. Imperial and Carreras merged into a single company in1943. After the partition in 1947, cigarettes were coming freely from Calcutta, but introduction of customs barriers in 1948 between India and Pakistan interrupted the smooth flow of cigarettes from Calcutta to East Pakistan. At March 1949, Pakistan Tobacco Company (PTC) came into existence with head office in Karachi; with the assets and liabilities of ITC Limited held in Pakistan. Then the East Pakistan Office was established in Alico building, Motijheel. In order to meet the increasing demand, the first factory in the East Pakistan was established in Chittagong in 1952.From this time onwards, requirements for cigarettes for East Pakistan markets were met from products manufactured in Karachi. In 1954 PTC established its first cigarette factory although high-grade cigarettes still came from West Pakistan. The Dhaka factory of PTC went into production in 1965. After the War between India and Pakistan in 1965; the import of tender leaf from India for the production of Biri was stopped. This gave a big boost to cigarette business. It was at that time the East Pakistani entrepreneurs set up 16 cigarette factories in this region.
After independence, Bangladesh Tobacco Company (Pvt.) Limited was formed on 02 February 1972 under the Companies Act 1913, with the assets and liabilities of PTC.
Shareholding position for GOB and BAT was 1:2. BTC (Pvt.) was converted into a public limited company on 03 September 1793. It is a policy of BAT that when a daughter company, as BTC was, achieves a certain standard of performance and exhibits at certain level of profitability, its nomenclature is upgraded to represent the original company, BAT. When BTC was successful in producing high quality cigarettes that achieved international standards in mid 1998, it came to be known as British American Tobacco Bangladesh, more commonly BATB.
British American Tobacco played a pivotal role in BTC’s creation in 1972 and since then has been involved in BTC’s development every step of the way. To pronounce the successful relationship with British American Tobacco, BTC has changed its name and identify to British American Tobacco (BAT) Bangladesh Company Limited on March 22, 1998. The company changes its identification to establish commitment to the highest international standards.
| March 1949 | Formation of Pakistan Tobacco Company (PTC) |
| 1954 | PTC opened its first factory in Fouzdarhat, Chittagong |
| 1962 | Opened a branch in Moulavibazar, Dhaka |
| 1965 | Building of a factory in Mohakhali, Dhaka |
| February 1972 | Incorporation of Bangladesh Tobacco Company with a paid up capital of Tk. 400 million. |
| March 22, 19198 | Changed its identity from Bangladesh Tobacco Company (BTC) to British American tobacco Company Limited (BATB) |
Source: BATB
2.6 British American Tobacco Bangladesh (BATB)
British American Tobacco Bangladesh began its operations in the sub-continent in the year 1910 as Imperial Tobacco Company Ltd. Post 1947; Pakistan Tobacco Company (PTC) came into existence with its head office in Karachi. During that time, PTC’s East Pakistan office was in Armanitola which was ultimately moved to Motijheel. After independence, in 1972,
Bangladesh Tobacco Company (BTC) was formed with British American Tobacco holding majority of the shares. It incorporated under the Company Act 1913 on 2nd February 1972.
Figure 1.2: The phases of establishment of BATB
In March 1998, Bangladesh Tobacco Company changed its corporate name into British American Tobacco Bangladesh proclaiming its common identity with other operating companies in the British American Tobacco Group.
Based in Dhaka the company has cigarette factory and one leaf processing factory in Kushtia. The company currently employs more than 220 managers and 1300 employees. The company also provides indirect employment to a further more than 21,000 registered farmers and 40,000 non registered farmer, distributors and suppliers. BATB is one of the first companies listed on the Dhaka and Chittagong Stock Exchange and currently rank amongst the top 26 companies in terms of market capitalization.
In its effort to create an international market for Bangladeshi leaf tobacco the company has been exporting tobacco to markets in developed countries like UK, Germany, Poland, Russia and New Zealand.
BATB has 44% volume share of Bangladesh cigarette market as per retail audit. Consequently, it is also one of the largest private tax payers in the form of Supplementary Duty and Value Added Tax.
The “Board of Directors” and Executive Committee (EXCO) govern the overall activities of the company. The “Board” is composed of 10 members who are called Directors. The Chairman heads the “Board”. Chief Executive of BATB 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. Head of every department (HOD’s) carries out their functions with the help of the line managers. Different departments have different structure according to their functions and responsibilities.
Relation between BAT & BATB:
The parent company of BATB is called BATCO or British American Tobacco Company. They are the major shareholders of BATB. The operations of BATB are regulated according to BATCO regulations and BATCO looks after the management
Aspects of BATB: BATB management is trained by BATCO and in many occasions BATCO sends over its own management to work in BATB. BAT industries (widely known as BATCO) has two major divisions:
- Tobacco Division
- Financial Division
British American Tobacco Bangladesh is a sister concern of British American Tobacco Company (BATCO). The cigarette division is known as “British American Tobacco Holdings (BAT Holdings)”, which operates in more than 78 countries. “BAT Holdings” is a sister concern of BAT industries – a London based world famous business house. BAT industries operate in financial services, paper manufacturing and tobacco sector. BATCO divided its cigarette operation in five regions.
They are:
· North and Central America
· Europe
· South America
· Asia Pacific (ASPAC)
· AMESCA
BATB actually maintains a relationship with BATCO through AMESCA. It is actually a region of BATCO to which BATB reports. AMESCA is made up of: A= Africa, ME = Middle East, S = Subcontinent, CA = Central Asia.
2.7 Relationship with Parent Company
The following figure shows the flow from the parent company to BATB:
Figure 1.3: Relationship with parent company
Source: www.bat.com
2.8 Ownership Status of the Company
British American Tobacco Bangladesh is one of the first companies listed on Dhaka and Chittagong stock exchanges. The British American Tobacco Group holds 65.91% of the shares in British American Tobacco Bangladesh. The shareholders are the Investment Corporation of Bangladesh, Shadharan Bima Corporation, Bangladesh Shilpa Rin Shangstha, Government of People’s Republic of Bangladesh, Sena Kalyan Shangstha and other members of the public.
| Raleigh Investment Co. Ltd. UK | 65.91% |
| Investment Corporation of Bangladesh | 26.99% |
| Sadharan Bima Corporation | 2.86% |
| Bangladesh Silpa Rin Sangstha | 0.84% |
| Government of Bangladesh | 0.65% |
| Sena Kalyan Sangstha | 0.52% |
| Others | 2.23% |
Figure 1.4: Ownership status of BATB
2.9 Short History of BATB
The history of British American Tobacco Bangladesh (BATB) was established back in 1910 as Imperial Tobacco Company Ltd. with head office in Calcutta. In March 01, 1949 Pakistan Tobacco Company (PTC) came into existence with the assets and liabilities of ITC Limited held in Pakistan and a head office in Karachi. In order to meet the increasing demand, the first factory was established in Chittagong in 1952, in the then East Pakistan. After the Liberation War, Bangladesh Tobacco Company, more widely recognized as BTC, was formed on 02 February 1972 under the Companies Act 1913. Shareholding position for GOB and BAT was 1:2. BTC (Pvt.) was converted into a public limited company on 03 September 1973. . It is a policy of BAT that when a daughter company, as BTC was, achieves a certain standard of performance and exhibits at certain level of profitability, its nomenclature is upgraded to represent the original company, BAT. When BTC was successful in producing high quality cigarettes that achieved international standards in mid 1998, it came to be known as British American Tobacco Bangladesh, more commonly BATB.
2.10 BATB VISION
“To extend our leadership through world-class performance”
Corporate Slogan: “Success and Responsibility Go Together”
In order to meet the vision the group’s strategy is based on the following six tactical imperatives:
o Focused brand portfolios communicated through state-of-the –art adult smoker engagement programs.
o Industry leading product portfolio, designed to address consumer needs and societal expectations.
o Optimum product availability through world-class customer services.
o Leading positions in priority markets.
o Recognition as a responsible company in an industry seen as controversial.
o A winning environment inspiring passion for the business, talented people and personal fulfillment.
BATB Mission
* Double the net revenue
The company is planning to double its net revenue. That means in the span of 5 years time the revenue must rise at a tremendous rate. This requires a continuous and consistent growth in revenue in the coming years. It is important to note that the target is to increase the revenue rather than the profit. This is because BATB is a responsible company and wants to generate profit for all its stakeholders and create and maintain a win-win situation for all.
* Growing our share of the total tobacco market
The biri segment has captured the major share of the total tobacco market. BATB plans to upgrade the smokers in the country and wishes to transfer their smoking habit from biri to cigarette. This is also coherent with the Vision as more people will start smoking Bat brands instead of biri, the leadership will be extended automatically.
* Dominating key identified segments
BATB is already dominating the high and medium segment in the market. But it is facing tremendous competition in the low and very low segment. BATB wishes to dominate in the entire key identified segments and key are planning accordingly.
2.11 VALUES OF BATB
A. Achievement:
· Vision: We are inspired by our dreams
· Map: We believe in our plans
· Consumer focus: We live for our customer
B. Commitment:
· Confidence: We will win
· Standard: We keep raising our standard
· Drive: We are innovative and energetic
C. Trust:
· Teamwork: We win as one
· Support: We stand by each other
· Belonging: We are part of one family
2.12 BATB OBJECTIVES
BATCo’s primary objectives are:
· To increase world cigarette market share and sales volume, with particular emphasis on international brands thus enhancing the value of their goodwill.
· To increase sterling earnings per share consistently in ‘real terms.’
· To maximize the generation of Group cash flow
· To provide an environment in which employee can achieve their full potential and in which excellence is rewarded
· To apply the highest international standards of workplace safety and of environment concern
· To maintain the respect and trust of the public, of international, and local authorities, and of customers worldwide.
2.13 Four Guiding Principles of BATB
· Strength from Diversity: Actively utilizing diversity – of people, cultures, viewpoints, brands, markets and ideas – to create opportunities and strengthen performance.
· Open Minded: Being an active listener, genuinely considering others’ viewpoints and not pre-judging.
· Freedom through Responsibility: The freedom to take decisions and act on them obliges BATB to accept personal responsibility for the way they affect BATB’s 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.
2.14 Strategies Taken by BATB
BATB’s strategy is designed to deliver their vision and, as a result, build shareholder value. It is based on growth, funded by productivity and delivered by a wining organization that acts responsibility at all times.
BATB’s strategy for growth aims to increase their market share, with a focus on their Global Drive Brands, while their commitment to productivity provides the resource we need to invest in their brands and grow share in their key markets, helping them to increase profit.
Being a wining organization ensures that they attract, develop and retain the people they need to deliver growth. BATB companies and employees act responsibly at all times and they seek to reduce the harm caused by their products.
2.15 Corporate Social Responsibility
BATB believe that Corporate Social Responsibility is vital in ensuring that their business is sustainable for long-term. BATB also believe that the business has a key role to play in helping society to achieve the necessary sustainable balance of economic growth, environment protection and social progress.
British American Tobacco makes them socially responsible step by step. They are emphasizing their activities with same importance in the way of being a socially responsible corporate.
o Continuously meeting the shareholders exaction of better financial performance
o Becoming responsible to the employees
o Creating an impressive image of reliable partner to the stakeholders
o Feel and perform the responsibilities of society
2.16 Relationship with the Partners/ Stakeholders
British American Tobacco Bangladesh (BATB) is the leading tobacco business organization. Day by day the organization is enlarging itself. At the same time area of their stakeholders are also getting bigger.
BATB identifies their stakeholders as such:
* Consumers
* Government:
o Finance
o Environment & forest
o Health
o Law
o Agriculture
o Police/ BDR/Cost Guard
o Local Administration
* Academicians: Teacher and Researchers
* Legal Community
* Medical Community
* NGOs
* Think Tanks
* Anti Tobacco Group
* Media: Print and Electronic
* Political group
* Business Group BATB’s business partners:
o Distributors
o Retailers
o Suppliers
o Tobacco Growers
* International Organization
* Students
* Human Recourse Organizations
* Neighbors
2.17 Brand Portfolio
BATB is proud of their reputation for manufacturing high quality cigarette brands, which are enjoyed by millions of adult smokers. Their portfolio includes a range of brands for different consumer preferences. In 2007, they introduced international brand Viceroy in the portfolio. BATB markets three different types of cigarettes in the Bangladeshi market.
| CMB (Centrally Managed Brands) | B&H and B&H Lights |
| RB (Regional Brands) | SE555, JPGL, and JPGL Lights |
| LFK (Local Filter Kings) | Star, Scissors and Capstan |
Table 1.5: Three segments of Brand Portfolios
Source: www.weikipedia.com
CMB is the class of cigarettes that are known worldwide for their standards and superiority. The RB is regional brand which operates mainly in the Asia-Pacific region. LFK is the local brand circulating only within the Bangladeshi market. BATB does not operate in the lower level i.e. Biri Market. Profiles of some of the popular brands that are manufactured in BATB are given below.
Benson & Hedges cigarettes were initially made for the Prince of Wales back in 1873. British American Tobacco acquired the rights of the brand in a large number of overseas markets in 1956. Today, British American Tobacco Group companies sell Benson & Hedges in more than 80 countries in the world. In Bangladesh Benson and Hedges was launched in 1997 and it is dominating the premium segment of cigarettes in Bangladesh. B&H has a value of TK 5/ stick and can be found in two different flavors, Special Filters and Lights.
John Player Gold Leaf is one of the oldest brands of BATB in Bangladesh that was launched in 1980 and one of the highest selling brands in the Medium Segment in the market. JPGL is mostly found in the Saudi Arabia, Pakistan and Sri Lanka. JPGL has a value of TK 2.5/ stick.
Pall Mall is an International Brand operating in more than 60 countries in the world. Pall Mall is the First Global Drive Brand launched in Bangladesh in March 2006. Even though Pall Mall is a premium brand worldwide but it is under Medium Segment in Bangladesh. Pall Mall has a price of TK 2/ stick, and can be found in three flavors, Full Flavor, Lights, and Menthol. Pall Mall made record sales in terms of volume in 2007 that was initially maintained by Star brand of BATB.
Star, a local Brand launched 40 years ago still generates leading sales in terms of volume. Star operates in the Low Segment and has a price of TK 1.5/ stick. Star occupies the leadership in the low segment outside Dhaka, where it has tremendous popularity among smokers.
2.18 Structure of BATB
BATB is a public limited company. Managing Director is the operational head and appointed by the British American Tobacco. Head of every department carries out their functions with the help of line managers. Different departments have different structure according to their function and responsibility.
The “Board of Directors” and Executive committee (EXCO) govern the overall activities of the company. The “Board of Directors” is composed of10members who are called Directors. The Chairman heads the “Board of Directors”. Chief Executive of British American Tobacco Bangladesh is called the “Managing Director” who is 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
Figure 1.5: Organogam of BATB
2.19 Functional Areas
BATB has comprehensive operations in Bangladesh. It often terms this as ‘seed to smoke’ which means BATB has operations that starts from growing tobacco to distribution of cigarettes. Its different functions work in an integrated approach with shared goal of achieving the company’s vision and objectives.
BATB has been operating its business under the following major functional areas:
1. Production
2. Leaf
3. Finance
4. Human Resource
5. Marketing
6. CORA
7. Legal & Secretarial
8. Information Technology (IT)
1. Production Department:
The head of Production looks after the production and take necessary steps to smooth pot the production process. The entire production process is preformed at the Dhaka factory. The motto of production department is to ensure the high quality and productivity steadily for the last few years.
The production department has been very successful in meeting the challenges and the company now produces a wide range of filter cigarettes to meet the market demands.
Existing Production Facilities
Capacity Output: The country’s biggest manufacturing plant is owned by BATB with a capacity of 80 million (rounded) sticks of cigarettes per day in shifts.
Actual Output: Presently the factory is producing 60 million sticks per day hence they need 70,000 kg of tobacco leaf.
Reasons for the difference: The market is the main reason for the difference between actual and capacity output. Wastage is approximately 4% – 5%of the tobacco leaf used and it occurs in three from namely – rejection, yield loss and accountability loss.
Raw material used: The following table summarizes the raw materials used for producing cigarettes. The procurement sources are shown in the same table.
Table 4: Source of Raw Materials
| Raw Materials | Source |
| Bulk Tobacco | Locally produced in leaf areas |
| Blending Tobacco | Imported |
| Cigarette Paper | Imported |
| Filter Material | Imported |
| Packing Material | Local |
(Source: BATB)
Initial Storage in Dhaka
Green Leaf Threshing Plant (GLTP): Processed tobacco from the Green Leaf Threshing Plant (GLT) in Kushtia and imported tobacco are brought and stored in the Bangladesh Machine Tools Factory (BMTF) warehouse. BATB has rented 5 warehouses at the location with a total area of around 130,000 square feet. The tobacco is transferred to Dhaka factory for cigarette production as needed. The warehouses are maintained and guarded by outside contractors.
Tobacco is brought in from the BMTF to Dhaka factory as is required for production. Dhaka factory has one bonded warehouse, which is used to store, imported wrapping materials and two non bonded warehouses to store tobacco. The tobacco is released from the warehouses to the production floor as specified by the production schedule. Issues from the bonded warehouse are in control of custom officials and transferred in small quantities as needed. Relevant taxes and tariffs are paid in issue. Issues of tobacco to the production floor from non bonded warehouses conducted daily in large quantities as specified in the production schedule.
Production Process
The Primary Manufacturing Department: The primary manufacturing department (PMD) is responsible for further conditioning the domestic and imported tobacco to make it ready for production. The tobacco passes through a set of integrated and regulated machinery whose purpose is to blend the different ‘packing grades’ in specified proportions, convert the bales into ‘rag’ suitable for use in cigarettes, and bring tobacco to a uniform temperatures and moisture.
The Secondary Manufacturing Department: The secondary manufacturing department (SMD) uses the tobacco that is blended and conditioned by the PMD along with wrapping materials to manufacture cigarettes. The PMD delivers its final processed tobacco to the Cut Tobacco Store (CTS). The CTS has a 50-ton storage capacity and the tobacco is stored there typically for one and a half days before it is used. The SMD brings in the processed tobacco from the CTS as needed for production along with wrapping material.
Currently there are 16 cigarette-making machines at Dhaka factory, which are operated in there daily shifts. Shift engineers and officer’s monitor shift activities to ensure quality production. The flow of tobacco and cigarette paper to the cigarette making machines are regulated by six (Programmable Logic Controlled) PLC controlled feeders. These feeders send in the required quantities at the right time to ensure smooth production. Each brand of cigarette is monitored by a separate feeder. In addition to the tobacco and cigarette wrapping material, filter robs are fed into the machines for cigarette production. The machines combine these three inputs to generate cigarette as output. Defective cigarettes are either identified manually or by built in sensors and removed from the production flow. The tobacco from these wastes is removed and reused for cigarette production. The manufactured cigarettes are deposited in trolleys and carted to the packing machines.
There are currently 18 packing machines at Dhaka factory. These machines are equipped with the wrapping material used to pack the cigarettes. Almost all of the wrapping materials used are imported. Local companies, however, conduct the printing work that is required. The manufactured cigarettes are fed from trolleys into the packing machines, which generate the packed cigarette as output. The flow is monitored closely to identify and eliminate defective products.
In addition to the cigarette manufacturing and packing machines, Dhaka factory has two Secondary Production Units (SPUs). These are used exclusively to promote John Player Gold Leaf. These modern production lines are difficult from the other machinery in that both cigarette manufacturing and cigarette packing can be conducted in one process flow. This reduces the time needed to manually put the cigarettes into trolleys and chart them to the packing machinery. The SPU makes approximately 8000 cigarettes per minute. Defective cigarettes are detected by sensors in the machines and are removed automatically. I n addition manual checking is conducted for quality control purpose.
Filter Rob Department
The filter rob department is responsible for manufacturing the filters needed in each cigarette. It plans its production in coordination with the PMD and SMD to make sure that the right quantity is available at the right time. Two filter sizes are produced-11 mm and 20 mm. There is one machine that produces 3333 robs/minute and 2 others that produce 1800 robs/minute. For filter rob manufacturing, 100% of the materials are imported and therefore, wastage is closely monitored.
The finished cigarette stock is brought in from the holding room at the SMD and kept at the shipping warehouse prior to delivery. The warehouse has a capacity of 260 million cigarettes. Trucks belonging to the outside contractors arrive daily to deliver the stock to the various Regional Trade Marketing Offices (RTMOs) around the country. The marketing department issues a daily shipping program specifying the stock that needs to be allocated. This information is input in software to generate a truck allocation scheme. Trucks going to Dhaka carry 2 million cigarettes per trip and those going outside Dhaka carry 3 million cigarettes per trip. VAT documents are sent along with the trucks.
In the manufacturing area significant progress had been made in the computerization of business process. Planning, scheduling, and material ordering are operating under an integrated system. This approach is likely to reduce stocks in hand thereby releasing cash tied up in working capital. In 1997 wireless networks had been installed in the Kushtia leaf areas linking the four depots and the GLT plant for both voice and data communication. These investments support the core operational processes bring efficiency and productivity gain to these areas.
Production Personnel Activities
Production HR Manager: Production HR Manager deals with the factory personnel department and he is head of this department. Production Training and development Manager and Employee Relations Officer help him to deal with the personnel affairs and trade union.
Operations Development & Regional EHS Manager: He has been assigned the responsibility to ensure the overall safety of the factory. He is responsible for monitoring and maintaining the safety standards in the factory. Management of the factory is very much concerned about safety of the workers at the production premises.
Quality Service manager: Quality Services Manager is responsible for enduring the quality of the products. The quality of the products has been given the prime importance by the management. “Quality First” is the slogan of the company and all products undergo rigorous quality testing.
2. Leaf Department:
At the time of the liberation war in 1971, only 600 acres of land were used for the production of cigarette type of tobacco. Major portion of the total local requirement of cigarettes were imported from West Pakistan. Immediately after the independence, owing to the shortage of foreign exchange, import had to be reduced. There was an urgent need for increasing local production of tobacco. The sustaining efforts of the company and the response of the farmers were so effective that the country became self sufficient in cigarette tobacco by 1975. In recognition to that outstanding performance, the company was awarded the President’s Medal in 1976. In 1996, the company purchased about 5500 tons of tobacco leaf from its registered farmers.
The leaf department is involved in cultivating and purchasing flue-cured tobacco. BAT does not own farmland nor does it employ farmers directly to produce the tobacco it uses for cigarette production. Instead, each year the company registers thousands of farmers along with their land, to grow and cultivate tobacco crop. The company provides seed fertilizer and other loans to the farmers throughout the crop season to ensure quality growth. At the end of the season BAT buys fixed quantities of tobacco from the farmers, paying rates based on the grade of the crop. Tobacco growing and buying activities are conducted throughout the country. The two main areas are Kushtia Leaf Division and Chittagong Development Area.
Green Leaf Threshing Plant (GLT)
The tobacco crop is processed at the Green Leaf Threshing (GLT) plant in Kushtia. The purpose of the GLT is to convert the tobacco into a form suitable for cigarette production. The tobacco is brought to a uniform moisture level and temperature. Initial blending of the different grades of tobacco takes place at the GLT. The processed tobacco is sized and packed before delivery to Dhaka factory.
The Leaf department makes an estimate of the quantity of tobacco that BAT will need to purchase for the based on the input of Sales & Operational Planning (SOP) committee. Based on these estimates the number of farmers and the amount of land, which will have to be registered, are fixed.
The leaf season begins in the month of July. At this time tobacco seedbeds are prepared to generate the seed that will be distributed to the farmers for cultivation. Plantation in the registered lands occurs during October and November. BAT provides the necessary fertilizer, pesticides and other loans to ensure proper growth for the crop. Farmers use their own irrigation and ploughing methodology to prepare the land. Harvesting and curing begins at the end of January and continues till March. Almost 100% of raw tobacco is ‘flue’ cured.
The buying process begins in mid-February and continues till the end of May. The farmers bring in their cured tobacco in the forms of bales to the buying courts in the depots. The tobacco is graded according to set criteria and purchased at these sites. All relevant information is marked on the bales and stored at the depots till shipment to the GLT.
At the beginning of the season the various depots distribute registration forms to the farmers in its region. BAT strives to maintain an ongoing relationship with its registered farmers. Information on each farmer is maintained at the depots through in-house database software called Integrated Leaf System (ILS). On the basis of these records a decision is made on whether to register the farmer for the following crop season.
Buying courts are located at the depots. The farmers bring their tobacco to these sites in the form of bales on a specific day and time. At the buying courts the bales are graded, priced and weighed. After the tobacco is bought and graded it is stored in the depots and moved to the GTL when needed for processing.
Tobacco Processing
The Green Leaf Threshing Plant in Kushtia is used to treat the raw tobacco and convert it to a form suitable for use in cigarette production. It is a seasonal factory operating for six months of the year, on two shifts per day. The remainder of the year is used to clean the machinery and make modifications as necessary.
Each tobacco leaf that is processed at the GLT is separated into four components- tip, lamina, stem, and by product. At the beginning of the process flow, tips of the tobacco leaves are cut off by a calibrated cutter. The leaves are then passed through the sand reel where foreign materials and dirt are separated. The tobacco leaves are then proceeds to the threshing line to separate the lamina from the stem by hitting the leaves. The separated lamina is then dried and the re-dried lamina is then packed at a temperature of about 43 Degrees Centigrade with approximately 12% moisture content for storage. The separated stem, meanwhile, moves to the stem dryer where it is re-dried for storage purposes and then sent to the stem packer. The moisture content level of the stem is brought to around 12% at the time of storage. By-products are sold to the outside contractors.
The GLT’s main objectives are as follows:
- Separate Lamina from Stem
- Retain physical and chemical properties of the leaf
- Removal of foreign materials
- Conversion of bale to packed dry product capable of long storage
After the tobacco is stored in the depots, it is brought to the warehouse at the GLT for processing. The GLT warehouse has a capacity of around 500 tons. The different ‘buying’ grades of tobacco are combined in fixed opportunities to create “packing’ grades. The packing grades are further blended at Dhaka factory. This final blend goes into the different brands of cigarettes.
Although the primary objective of leaf department is to ensure continuous supply of tobacco, leaves were exported in a highly competitive world market as well. Exports of tobacco during 1997 earned BATB in excess of two million dollars, with sales being made to UK, Hungary, New Zealand, Egypt and the USA.
Important functions that Leaf Department carries out
· Provides technical know how, financial assistance and agricultural inputs to the registered farmers.
· Purchases tobacco leaf from the growers.
· Processes tobacco leaf ready for insertion in the Production Department.
· Provides storage and transportation facilities in carrying tobacco to and from the factory.
· Strengthens social relationship through different commodity development projects in the leaf areas, like encouraging and helping to build a vegetable garden at the premises of the growers.
· Exports tobacco leaf
3. Finance Department:
The Supporting Finance managers, Audit Manager and Treasury Manager assist the Head of Finance. They are:
- Treasury: Corporate (L/C opening, fund management, banking relationship etc.)
- Core Finance and Management Accounts: Corporate
- Marketing Finance: Supporting
- Excise Management: Supporting
- Taxation: Corporate
- Audit: Separate
- Insurance: Corporate
The Core Finance and Management Accounts activities includes monitoring and controlling all the accounting and Financing activities of the company such as product costing, invoice pricing, taxation etc. Audit Manager manages all the internal and external auditing of the company.
Finance department of British American tobacco Bangladesh has to deal a wide range of activities. Finance department ensures the custodianship of all company assets by verifying their physical existence, monitors and assesses proper informational needs pertinent to company’s interest, develops accounting procedures and ensures the achievement of financial growth of the company. Finance department finances equipment, personnel and operational facilities. It prepares and verifies consolidated financial statements of all centralized and decentralized cost units. It obtains accounting report from all units in each month, monitors sales collection and process management information using computer and other system and keeps all sorts of financial analysis and calculation update. It carries out auditing by internal, external and international auditors and verifies the efficiency and effectiveness of inventory control, security, wastage, working procedures, supervision of machine maintenance, workers safety, advertising tools etc. It also takes care of hedging, foreign exchange risk coverage, options, futures, insurance, bank account, bank reconciliation, sales ledger, working capital management etc. Finance department is headed by finance director. There is a “Company Secretary” tagged with Finance Director to advice the Finance Director about the interest of the “Board of Directors” and to look after the share dealings.
The main objectives of this department are to ensure custodianship of all company assets, monitor the financing activities and generate useful information pertinent to the company activities to achieve financial growth of the company.
Functions of Finance Department
- Finance company assets, personnel and operational facilities of the cigarette factory, leaf factory and head office.
- Prepare and verify consolidated financial statement of all units of the company.
- Monitor and control all financial activities.
- Monitor sales collections.
- Process Management information.
- Structure capital policy.
- Carry out by auditing internal and external auditors.
5. Human Resource Department:
The Human Resources department bears primary responsibility for creating and sustaining a winning workforce for BAT Bangladesh.
The HR function within BAT Bangladesh takes care of three broad areas:
· Organizational Development
· Reward & Talent Re-sourcing
· Employee Relations
Structure of human Resource Department
Head of Human Resource is the head of the department. The Human Resource Development Manger, Production HR Manager, and Resourcing and Remuneration Manger work under him.
Activities of HR Department:
The HR process is carried out through four ‘Guiding Principles’.
- Open mindedness
- Strength from diversity
- Enterprise spirit
- Freedom through responsibility
BATB believes in the strength of human resource and uses the modern concept of resource utilization. Every job description is carefully designed and modified under dynamic environment. The company believes in the concept of the best fit and trains and develops company personnel as the key ‘human capital’ of the company.
The Human Resource Department thus concentrates all its activities for the development of human resource for the benefit of the company. The department also believes in maintaining harmonious relationship between the management and workers all the times. The department ensures that managerial department contributes to organizational development. The department’s various activities cover setting criteria for the selection procedures like interview techniques, training, standards etc. According to BAT policy guideline, the department maintains the personnel through formulation policies on wages, fringe benefits, annual leave, training calendar, provident fund, performance appraisal etc. Remuneration is managed centrally and there is never any negotiation but settlement. It also settles with the trade union for Long Term Agreement (LTA) between management and workers and the ‘collective burgeoning agents’. The concept behind the industrial relations is always ‘win-win’ situation.
As the competitive world is changing with the speed of light, Training and Development becomes an integrated part of to stay on the top. Thus BATB puts great importance to training and development of managers and employees. The company has Technical Training Centre at Dhaka Head Office, which organizes different training programs for its management people around the year. As a subsidiary of BAT, BATB sends its managers for training to ABT group of companies.
5. Marketing Department:
Marketing operations at British American Tobacco Bangladesh include a range of activities like Brand management, Trade marketing and distribution, Market research and consume dialogue and specialized channel management etc.
Marketing operation of BATB is carried under two heads, Brand Marketing and Trade Marketing & Distribution(TM&D). Trade Marketing & Distribution affairs are managed by the Regional Manager and the Brand Marketing is managed by the Senior Brand Manager.
Brand Marketing Department:
The Brand Marketing department concentrates on satisfying consumers’ needs from within the brand portfolio. Once consumers’ needs are understood and evaluated, brands can be made available, accessible and desirable through strong, consistent communication. The brand marketing elements covers the adopting of products, logistics and brand marketing policies that best meet the needs of particular trade channels and strategic customers. The Brand Managers and brand Executives are responsible for the allocated brand(s). They are responsible for all type of brand management activities.
Market intelligence includes the in market research teams. The team keeps constant eye on the market situation. Through continuous research, market research teams generate useful market information for the brand mangers. Interface is required between brand marketing and research which is carried out by any project that is divided by three phases:
· Preparation prior to the study
· Collection and analysis of data
· Presentation and utilization of information
6. Corporate and Regulatory Affairs (CORA):
The Corporate and Regulatory Affairs Department (CORA) of the company is dedicated towards achieving the company’s strategic imperative, which is: To be a responsible company in an industry seen as controversial.
The CORA Vision: To become the most respected FMCG Company among key stakeholders.
CORA functions with three main wings:
- Managing Regulations
- Promoting Corporate Social Responsibility
- Driving Corporate Communications
7. Legal & Secretarial: