GROUP PROJECT
INTRODUCTION TO BUSINESS
BUS 1O1.
Instructor Name: Farzan Mitu (FrM)
Section: 8.
.
Group Name: Innovation
Group Members: Akif Uzzaman Khan. ID No. 1030787543
Asif Mahmood.
ID No. 1111343030
Md. Fakrul Islam. ID No. 1030097030
Salman Jasim.
ID No. 1111223030
Shihab Uddin Dhali. ID No. 1030072530.
Date of Submission: 17/04/2011
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British American Tobacco
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Table of Content
Executive Summary………………………………………………………… 4
The Organization…………………………………………………………….5
Marketing Overview…………………………………………………………9
Organizational structure……………………………………………………..12
SWOT Analysis……………………………………………………………..15
Recommendations…………………………………………………………...18
Conclusion…………………………………………………………………..19
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EXECUTIVE SUMMARY
British American Tobacco Bangladesh Company Limited is a subsidiary of the British
American Tobacco Group Plc. The group is the second largest tobacco company in
the world with its Head Quarters in Globe House London. British American Tobacco
Group has its business spread over 180 countries with over 250 brands.
The group is divided into 4 regions which are the 1.) Americas, 2.) Western Europe
(WE), 3.) Eastern Europe Middle East and Africa (EEMEA) 4.) Asia Pacific
(ASPAC).
Each region is then divided into a number of Areas. British American Tobacco
Bangladesh is part of the South Asia Area under the ASPAC region. The Area
headquarters are in Pakistan and it includes Pakistan, Bangladesh and Sri Lanka. The
Regional Headquarters are in Hong Kong.
South Asia Area is the fastest growing Area in the group and one of the most
important areas for the ASPAC region. Within the Area, Bangladesh is responsible for
providing both volume and volume share. It is one of the fastest growing markets of
BAT Group and is considered among the T40 markets or the Top 40 markets which is
one of the highest tiers within the group.
BAT Bangladesh is currently the joint market leader with Dhaka Tobacco Industry in
the cigarette market. It is the only international company in the Bangladesh tobacco
industry and is the value leader of the market. It operates in all segments of the
cigarette industry and locally manufactures and sells a mix of both international and
local brands.
It is listed in the Dhaka and Chittagong Stock Exchanges with majority of its share
held by BAT Group. The company follows very strict international standards in all its
processes and practices and in one of the most reputed companies in the country.
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THE ORGANIZATION
British American Tobacco Bangladesh (BATB)
British American Tobacco Bangladesh Company Limited is one of the largest private
sector enterprises in Bangladesh, incorporated under the Company’s Act 1913 on 2nd
February 1972 and since than it has been the market leader in the country. Currently
the company employees about 310 managers and 1000 people directly and further
40,000 indirectly as farmers, distributors and suppliers. 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 markets major International cigarette brands like Benson & Hedges, Pall Mall
and John Player Gold Leaf, which are complemented by local brands such as Capstan,
Star, Scissors, Pilot and Bristol. The company also markets imported cigar brand
called “Dunhill” and exports processed leaf to various countries around the world.
Afforstation and Safe Drinking Water (Probaho) are the pet projects of the company,
which have started in 1980 and till now the company has planted 42 million trees
across the country and installed 18 filtration plants in parts of the country. In this
regard, British American Tobacco Bangladesh has won many awards during last 28
years but the most prestigious of all are Prime Minister Afforstation Award in 1993,
Presidents Award in Agriculture in 1975, Sports Journalist Award and FAO Award in
1998.
The Company has its Head Office and the cigarette factory in Dhaka, a green leaf
threshing plant in Kushtia, a green leaf re-drying plant in Manikgonj and a number of
Leaf and Sales offices throughout the country.
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Historical Background of BATB
British American Tobacco Bangladesh (BATB) Company Limited is the recognized
leader in Bangladesh cigarette market, with a long 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 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 in 1943. 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. In March 01,
1949 Pakistan Tobacco Company (PTC) came into existence with head office in
Karachi; with the assets and liabilities of ITC Limited held in Pakistan. The then East
Pakistan Office was situated in Alico Building, Motijheel. In order to meet the
increasing demand, the first factory in the then 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 Liberation War, Bangladesh Tobacco Company, more widely recognized
as BTC, 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 1973. 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. In 1998, it came to be
known as British American Tobacco, Bangladesh, more commonly called BATB.
Ownership Status of the Company
British American Tobacco Bangladesh is a public limited company with an authorized
capital of TK. 60 crores listed in the Dhaka and Chittagong Stock Exchanges.
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No
Name of Shareholders
Shares Held
% of Holding
1
Raleigh Investment Co., UK
39,545,358
65.91
2
Investment Corporation of Bangladesh (ICB)
14,081,860
23.47
3
Sadharan Bima Corporation (SBC)
1,692,047
2.82
4
Bangladesh Shilpa Rin Shangstha (BSRS)
637,297
1.06
5
President, Peoples Rep. of Bangladesh
386,824
0.64
6
Sena Kalyan Shangstha (SKS)
314,958
0.52
7
Others
3,341,656
5.58
Total
60,000,000
100
Table: The Composition of Shareholders
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 department 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 of 8 members 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
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 like the functional heads of Marketing, Operations, Finance,
Human Resources, Corporate & Regulatory Affairs and Legal & Secretarial.
Functional Areas of BATB
BATB is a process-based organization. BATB has been operating its business under
the following functional areas:

Supply Chain

Marketing

Corporate and Regulatory Affairs

Human Resource
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
Information Technology

Legal and Secretarial

Finance
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MARKETING OVERVIEW
Products:
The tobacco industry in Bangladesh consists of cigarettes, biri and other tobacco
products cigarettes being the higher priced product of the industry. British American
Tobacco Bangladesh operated only in the cigarette market. The tobacco industry has
been shifting gradually from a biri dominated market to a cigarette based market. The
products of British American Tobacco Bangladesh are given below:
1. Benson & Hedges
2. John Player Gold Leaf
3. Pall Mall
4. Capstan
5. Star
6. Scissors
7. Pilto
8. Bristol
British American Tobacco Bangladesh believes in maintaining a strong and complete
portfolio that is capable of meeting the needs of the majority of the consumers and
thus maintains a large portfolio as opposed to its competitors. The company maintains
brands that are strategic to meet consumer needs as well tactical brands that are
important to face the competition. Within the portfolio of the company there is a mix
of Global and International brands as well as local brands.
Price:
British American Tobacco Bangladesh has brands in all segments of the market to
meet the consumer needs of the segment. The break down is given below;
1. Premium Segment
-
Benson & Hedges
2. Mid Segment
-
John Player Gold Leaf, Pall Mall, Capstan
3. Low Segment
-
Star, Scissors
4. Very Low Segment
-
Pilot, Bristol
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The pricing is based on the government excise, brand value proposition and
competitive scenario.
Promotion:
As a responsible market leader in a controversial industry British American Tobacco
Bangladesh has proactively introduced a Code of Conduct regarding the marketing of
tobacco products. BATB have always conducted BATB’s business responsibly and
BATB are committed to demonstrating that sensible self-regulation is appropriate for
BATB’s products, which carry health risks and should be consumed by adults only.
The Code of Conduct is a set of provisions and principles, which clarifies BATB’s
position on and guides all aspects of BATB’s marketing activities. BATB aims for
this clarification to be established as the industry standard for responsible and
reasonable tobacco marketing activities in Bangladesh. Key features of BATB’s Code
of Conduct are:
The parties subscribing to these Standards (the "Participants") wish to record their
belief that tobacco products should be marketed in a responsible manner and that
reasonable measures should be taken to ensure that the promotion and distribution of
tobacco products is:
-
Directed at adult smokers and not at youth
-
Consistent with the principle of informed adult choice
-
These Standards should be observed in both their letter and intent
-
In subscribing to these Standards, the Participants wish to encourage
-
All others who manufacture or market tobacco products to join them as
Participants
-
All others who are associated with the manufacture, sale, distribution or
marketing of tobacco products to embrace the principles of these Standards
-
The practices of the Participants should not be less restrictive than these
Standards unless required by law, but any more restrictive legal requirement or
voluntary undertaking shall take precedence over these Standards
-
The Participants should incorporate these Standards into their own internal
codes
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-
The Participants intend to support the comprehensive incorporation of these
Standards into national laws
-
These Standards do not apply to the relationship between Participants and their
suppliers, distributors or other trade partners, although those parties are
encouraged to comply with the Standards in any dealings they have with
consumers
-
The Participants shall take reasonable measures to prevent third parties from
using their tobacco product brand names or logos in a manner which violates
these Standards
-
These Standards are not intended to prohibit the use of any trademarks as
brand names or on packaging
-
A Participant shall comply with these Standards as quickly as possible, and in
any event no later than 12 months from the date that it subscribes to the
Standards or, where existing contractual provisions prevent earlier
compliance, in any event by December 31, 2002, provided in all cases
compliance is not in breach of relevant laws. The timetable for compliance
with the Sponsorship Standards is set out in paragraphs 17 and 19
Distribution:
Being a responsible tobacco company and a signatory to the International Marketing
Standards British American Tobacco Bangladesh is required to focus on Trade
Marketing and Distribution for driving its business. Thus at BATB there is a strong
Trade Marketing Team spread all across Bangladesh.
In all the Marketing Team is mainly focused around the Trade Marketing &
Distribution (TM&D) team with other sub processes of the marketing team designed
to support business growth through the retail. As such the marketing team consists of
the following areas:
1. Trade Marketing & Distribution
2. Strategic Planning & Insights
3. Brand Marketing
4. Business Development
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It is the priority of the TM&D team to ensure that the company’s products are
properly distributed as per the distribution guideline of the company. The TM&D
team is headed by the Head of Trade and generic organogram is given below:
Head of Trade
Regional Managers (5)
Area Managers (18)
Territory Officers (50)
Assistant Territory Officers(40)
Distribution Channel
The Company sells their product to the distributors; in turn the distributors sell to the
retailers and cash & carry as well. Cash & carry are nothing but wholesalers. Cash &
Carry are needed because at times the retailers may not have adequate funds to buy
the required quantity.
Factory
Sales Depots
Internal Carrying Agent
Distributors
Retailer
Cash & Carry
Consumer
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Regional Go-down: There are five regional go-downs through out the country to fill
every regional demand just at the time of need, and to overcome various uncertainties
related to physical distribution of products, every regional go-down is directly
controlled by separate Regional Manager to face the regional physical distribution
challenge.
Distribution Warehouse: All distributors have their own warehouse, where cigarette
can be kept safely while not degrading its product quality. Distributors buy the
cigarette from BATB and from that point ownership and all responsibilities of the
products go under the distributors.
Cash & Carry: They are businessmen who sell cigarette directly to consumers and at
the same time they sell cigarette to the retailers.
Retailers: Retailers are at the end of the physical distribution system of cigarette
Selling products directly to the consumer.
Distributors: The financial standing of the distributors, their reputation in the local
region, and prior related business experience are some of the key criteria examined
when a distributor is selected. The regional manager, supply chain manager and head
of trade marketing prior to making a decision check the evaluation forms and field
recommendations. After a distributor is selected, they issue a ‘letter of intent’ that
specifies certain requirements of the company.
After these requirements are
satisfactorily fulfilled, a formal ‘letter of appointment’ is issued.
Distributors buy fixed volumes of cigarettes from BATB at a set price and resell to the
retailers. The company closely monitors their activities and performance and ensures
them to operate in the market at the highest standard. Distributors follow a work
routine set by the company, generating paper work, and reports as required.
Distributors are assigned a certain geographic region within which they sell their
cigarettes. Different routes are assigned within the region that helps to sell their
stock. Vehicles owned and operated by the distributors are responsible for carrying
stock along these routes and selling it to the retailers.
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Retail Outlet Classification
The British American Tobacco Bangladesh has classified all the retail outlets into
three categories, these are - Convenience, Grocery and HoReCa
Convenience Outlet: All shops where consumers generally go without any
purchasing intention fall in this category. The consumers like to buy product on
impulse from this sort of outlets. These outlets generally maintain a limited product
range and do not offer flexibility in prices.
Grocery: These are the outlets where consumers visit on a regular basis with a
purchasing intention. They generally make a list of items before they will visit these
sorts of outlets. These outlets typically offer variety in terms of product range and also
flexibility in prices.
HoReCa: Shops like hotels, restaurants, and cafes are considered in this category. The
prime characteristic of a HoReCa is that the shops must have a seating arrangement.
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SWOT ANALYSIS
Strengths
1. Wide recognition – BATB is widely recognized as good corporate company for its
corporate value and ethics. The good deeds are in terms of highest tax payment,
community services, afforestation and safe drinking water programs.
2. International brand Image – BATB’s manufactured premium and medium
segment brands Benson & Hedges, John Player Gold Leaf and Pall Mall are
internationally recognized & valued by its loyal customers. This is because these
brands are manufactured in different BAT operating companies and dominating in the
world market. Quality of these brands is legendary and consistent, when it is
compared. In order to ensure the quality product BATB use global sourcing of all the
raw material, this is common for all the operating companies in BAT.
3. Strong brand portfolio - BATB offers product in all price segments in the market.
All their products are well positioned offering the right proposition to the consumers.
4. Cigarette share in Bangladesh market- BATB is the dominant market leader in
the Premium and Medium segments of the market which generate good profit and also
ensure that BATB has the value leadership. It is also the clear leader in the Low
segment with its brand Star.
5. Talented workforce - People are BATB’s fundamental advantage-the sources of
all their strength. This include management, workforces and all other business
partners, who are directly involved in the value chain process. People are highly
trained and motivated, productive and team-oriented.
6. Superior technology – Technology used in BATB is superior from the competition
in Bangladesh. Their state of art manufacturing plant in Dhaka is not only
sophisticated but also benchmark facility within the operating companies of BAT in
their ASPAC region. In this industry technology is the key for superior quality
product. Technology revolutionizes the product and production process and BATB
always uses latest technology which smoothing out the production process.
7. Better product quality relative to the rival - As mentioned earlier BAT maintains
its consistent quality with good blend of tobacco through superior technology, thus
BATB is always in an advantages position compare to its competitor.
BAT grows tobacco for their own consumption in Bangladesh and they have
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completely separate function responsible for tobacco growing and processing, which
their competitors do not have.
9. Absorbing economies of scale in producing BAT product - BAT product has a
higher demand in Bangladesh. As the company produces in a large scale, it possesses
economies of scale and hence per unit of cost is comparatively lower in Bangladesh.
On the other hand production sources – land, labor and raw materials are also low in
this country.
Weakness:
1. Strong Trade Union -: Trade union is one of the weaknesses for BATB. They are
resistant to any changes. It takes lot of management effort and time to make the union
leaders to motivate for any minor changes in the entire process. Management in
BATB is working hard to change the culture and practice through different projects
and program.
2. Missing a large number of consumers due to high price - BATB has just
recently entered the Very Low Segment with 2 brands Pilot and Bristol. Although the
brands are performing well its main competitors have already established a strong
foothold in the segment which is the largest and fastest growing segment in the
industry.
3. Higher Cost of Production – As BATB maintains international standards in all its
transactions, policies, practices and processed it has to bear a higher overhead
compared to its competitors. This makes the company less profitable then others in
the industry who operate differently.
Opportunities:
1. Growing Population- The adult population in Bangladesh is on a growth trend as
opposed to developed nations. This suggests that the cigarette consumption in
Bangladesh is also on the rise. Thus the company has more opportunity for increasing
revenue and profits.
2. Economic Growth- The economy of Bangladesh is growing at a healthy rate and
this has increased the disposable income of the people. As a result more and more
smokers are shifting from Biri to cigarettes which is favourable for the company.
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3. Quality Consciousness- In Bangladesh the market is still at a primitive stage with
very simple requirements of the consumers. However, the trend is changing and
consumers are becoming more and more quality conscious and are seeking for more
value from their brands. As such BATB has the biggest opportunity to gain as it
already has very advanced innovations engine based in its Global Headquarters in
London and also in the Regional Product Centre in Malaysia. BATB can readily and
easily introduce new innovations to the market then the competition which is the
leverage of being a Multinational Company.
Threats:
1. Anti smoking lobbies activities - Anti-Smoking lobbies are now getting very
strong in Bangladesh. Bangladesh has been identified as a priority for the WHO in
terms of restricting tobacco consumption and has there fore been allocated the most
amount of funds in ASPAC region for campaigning against tobacco by the anit
tobacco groups
2. Level Playing Field- In Bangladesh, given the general state of Law and Order a
number of the competitors do not abide by the Laws. There are many instances of
violation of the Tobacco Control Act 2005 by the competition. As such BATB often
has to operate in situations where the competition gets an upper hand due to weak law
enforcement and BATB has to stay within its stringent guidelines as per the IMS.
3. Smuggled/ Transit cigarettes- As the excise on cigarettes increases the prices too
are adjusted. The cigarette industry has the highest tax rate of 70% retail price. This
makes the production and sales of counterfeit products very profitable and with lax
law enforcement this is bound to increase. This would result in loss to both the
companies whose products are counterfeited and the government through lost
revenue.
4. International competitors are coming to Bangladesh- Philip Morris international
which is the world’s largest cigarette company has already entered the market with its
flagship brand Marlboro. Though British American Tobacco Bangladesh has so far
been able to restrict Marlboro’s presence and sales to a very negligible level it is
expected that the competition will intensify very soon.
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RECOMMENDATIONS
Though British American Tobacco Bangladesh is currently enjoying a good market
share and profit in the market, in the long run the company may face trouble in it does
not prepare itself for the future. With this aim in mind the company has already
started on the following areas to improve its position over the long run:
1. Full Fledged Portfolio: The company aims to ensure it has the proper relevant
brand portfolio with the right brands in the right segments to drive growth.
They have already introduced 2 new brands in the Very Low Segment over the
last 2 years and working hard to establish them
2. Improved Quality: The company can already boast of superior quality versus
the competition, however, there is a strong feeling that versus other factories
with the BAT group the quality parameters are still no up to the mark. As such
the company has already started work on improving the quality to standards of
its factories in developed nations.
3. Supply Chain Transformation: The company currently has multiple projects on
hand aimed at both increasing the capacity of its factories while at the same
time also modernizing it. This will help not only to cater to growing demands
but also reduce costs by ensure right technology is available.
4. Faster Innovations: As a group BAT has the largest innovations pipeline in the
global industry. A lot innovative products are present in the developed world
and innovation is a competitive advantage for the company. It is important to
role these relevant innovations within the market faster to ensure there is a
clear distinction of the company’s products and brands.
5. Proper Engagement: The company has started to take a more innovative and
comprehensive measure to engage various stakeholders in the country. This
will aim to ensure sensible regulation, excise and proper enforcement of
existing laws.
6. Strengthen the Talent Pipeline: British American Tobacco Bangladesh
believes that its strength comes from and energized and talented workforce. As
such the company has embarked on a mission to ensure development of high
potential managers within Bangladesh who will be able to face the challenges
of the future.
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Conclusion:
British American Tobacco Bangladesh is well poised for a bright future in Bangladesh
as it has the proper plans to ensure not only optimizing current performance but is also
very well in grip of its future direction. The company has already launched its new 5
year strategy which takes into account the possibilities of Bangladesh and is also
aligned with the ASPAC regional directions.
The company is currently receiving a lot of investment from the group in terms of
machineries and branding expenditures. It is also one of the fastest growing company
within the BAT group both in terms of volume and value. This trend is likely to
continue for sometime and BATB is the most well positioned company to gain from
the economic growth of the country.
It is right now focused on extending its dominance in the market by actively gaining
market share in the very low segment. This along with its leadership in the other
segments will ensure its market leadership and future in the country and the industry.
Reference:
Saad Jashim
Human Resource Business Partner
Leaf & GLT
British American Tobacco Bangladesh
Saad_jashim@bat.com
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