(Strategic Audit of BAT) : Submitted To

[Strategic Audit Of BAT] [2013]
Report on
Strategic Audit of BAT
Course & Code: Strategic Management
(MGT- 435!
Su"mitted To:
Mohammad Ahshanullah
Assistant Professor
School of Business and Economics
United International University
Su"mitted "#:
Md.Shafikul Islam
111 091 390
Md.a!mul "assan 1110#$1%1
&ahirul Islam 11109139#
Md.Ismile "ossain 111091$'1
Anisur (ahman 1110910)'
Md.San*ar "ossain 111091'+$
$ate of Su"mission
%
t&
ma# '()3
Letter of Transmittal
[Strategic Audit] Page 1
7
th
may, 2013
Mohammad Ahshanullah
Assistant Professor
School of Business and conomics
!nited International !ni"ersity
#hanmondi, #haka$120%.
Su&'ect( Request for accepting report.
#ear Sir,
)ere is the re*ort on British American +o&acco,s strate-ic audit.com*etiti"e analysis /hich you ha"e
recommended to us as the term *a*er for the Strate-ic Mana-ement course. As you read the re*ort, you
/ill -et clear idea a&out the strate-ic and com*etiti"e analysis of British American +o&acco.
I, therefore, *ray and ho*e that you /ill encoura-e our /ork &y acce*tin- this re*ort and if you ha"e any
further 0ueries a&out the re*ort you can contact me.
Sincerely 1ours,
Md. 2a3mul )assan
I#( 111042151
6n the &ehalf of the -rou* mem&ers
Acknowledgement
[Strategic Audit] Page $
7irst /e /ould like to thank almi-hty Allah for hel*in- us all the /ay, /ho -i"es us the a&ility to
do this term *a*er. s*ecially /e /ould like to thank our teacher, Mohammad Ahshanullah sir
/ho hel*ed us a lot to do this re*ort successfully &y -i"in- instruction and makin- our *ractical
kno/led-e throu-h this term *a*er. 8ithout his instruction /e /ould not a&le to *re*are this
re*ort. 7inally, /e /ant to -i"e thanks to our all the -rou* mem&ers for their hard /orks. All of
their hel* has made us a&le to com*lete this re*ort.
Executive Summary
British American +o&acco is a British multinational to&acco com*any head0uartered in 9ondon,
!nited :in-dom. It is the /orld,s second$lar-est 0uoted to&acco com*any &y market share ;after
Phili* Morris International<, and has a leadin- *osition in o"er 50 countries and o*erations in
more than 140 countries. Its &rands include #unhill, :ent, 9ucky Strike and Pall Mall. BA+ has
a *rimary listin- on the 9ondon Stock =chan-e and is a constituent of the 7+S 100 Inde=. As
of > ?uly 2012 it had a market ca*itali3ation of @>5.> &illion, the si=th$lar-est of any com*any
listed on the 9ondon Stock =chan-e. It has a secondary listin- on the ?ohannes&ur- Stock
=chan-e.
7rom the /hole mana-ement research, /e come to kno/ a&out the ori-in of British American
+o&acco, its or-ani3ational structure, mana-ement strate-y, nature of mana-ement *ro&lems it
faced, rele"ant industry trend, o**ortunity and threats, and cultural influence in the &usiness etc.
[Strategic Audit] Page +
Table of Contents
,a-le of .ontents........................................................................................................................ %
Analysis of industry structure/.................................................................................................... 10
1.1Attractiveness of industry/ 0Porter % forces model1/...........................................................10
1.1.1 Potential entrants/...................................................................................................... 10
1.1.$Industry rivalry/........................................................................................................... 11
1.1.3Bar2ainin2 3o*er of -uyers/....................................................................................... 13
1.1.+ Bar2ainin2 3o*er of su33liers/...................................................................................13
1.1.% Su-stitutes/................................................................................................................ 13
1.$ 4ey success factor/.......................................................................................................... 1+
.......................................................................................................................................... 1+
1.$.1 ,echnolo2y related 4S5s/.......................................................................................... 1+
1.$.$ Manufacturin2 related 4S5s/......................................................................................1+
1.$.3 6istri-ution related 4S5s/ ......................................................................................... 1%
1.$.+ Mar7etin2 related 4S5s/ ........................................................................................... 1%
1.$.% S7ill and ca3a-ility related 4S5s/...............................................................................1'
1.$.) 8ther ty3es of 4S5/................................................................................................... 1'
1.3 833ortunities and threats/................................................................................................ 1#
1.+ (elevant industry trend *ith im3lications for firm 3erformance and strate2y/...................1#
1.+.1 .ustomer/ ................................................................................................................. 1#
1.+.$ .osts/........................................................................................................................ 19
1.+.% .om3etitors/.............................................................................................................. 19
1.+.) 9overnment/.............................................................................................................. $0
Bat Business Model................................................................................................................... $1
Assessment of firm strate2y....................................................................................................... $3
$.1 Strate2y diamond of British American ,o-acco................................................................$3
$.1.1 A(EA...................................................................................................................... $+
$.1.$ :ehicle....................................................................................................................... $+
$.1.3 6ifferentiator.............................................................................................................. $+
$.1.+ Sta2in2 ...................................................................................................................... $+
[Strategic Audit] Page %
$.1.% Economic lo2ic........................................................................................................... $%
$.$ ,he firm;s 2eneric strate2y/ ............................................................................................. $%
$.$.1 ,he .ost Strate2y/ .................................................................................................... $)
$.$.$ .ost Structure analysis/ ............................................................................................ $)
$.$.3 :alue .hain Analysis/................................................................................................ $'
$.$.+ 6ifferentiation Strate2y/............................................................................................. $#
$.3 (esources and .a3a-ilities of British American ,o-acco.................................................$9
$.3.1 ,A9IB<E assets ..................................................................................................... 30
$.3.$ I,A9IB<E assets ................................................................................................. 31
$.+ Mc 4insey;s 'S model for BA,......................................................................................... 31
$.+.1 Strate2y .................................................................................................................... 3$
$.+.$ Structure ................................................................................................................... 3$
$.+.3 Systems .................................................................................................................... 3$
$.+.+ Shared values= s7ills= style and staff .........................................................................3$
$.% Evaluation of internal resources and ca3a-ilities..............................................................33
$.%.1 :(I8 frame*or7 for BA,........................................................................................... 3+
$.) Identifyin2 2ro*th o3tions of BA,.....................................................................................3%
$.).1 9ro*th o3tions of BA,............................................................................................... 3%
$.).$ 83tions for 2ro*th/ diversification..............................................................................3)
$.).3 83tions for 2ro*th/ 3artnershi3s= >oint ventures= mer2ers and ac?uisitions................3'
$.).+ Partnershi3s and >oint ventures..................................................................................3'
Analysis 8f firm sco3e............................................................................................................... 3#
3.1 :ertical Inte2ration........................................................................................................... 39
3.1.1 <eaf su33ly chain....................................................................................................... 39
3.1.$ ,y3es of :ertical Inte2rations/....................................................................................+1
3.$ "ori!ontal Inte2ration....................................................................................................... +$
3.$.1 ,echni?ues of "ori!ontal Inte2ration..........................................................................+$
Economies of Scale................................................................................................................ +$
Economies of Sco3e.............................................................................................................. +3
Increasin2 Mar7et Po*er........................................................................................................ +3
International ,rade................................................................................................................. ++
6ominate Mar7et.................................................................................................................... ++
@ron2 Syner2ies.................................................................................................................... ++
[Strategic Audit] Page )
EAecutin2 these strate2ies and 7ey 3oints to remem-ers.......................................................++
3.3 9ro*th 83tion.................................................................................................................. +%
3.3.1 Ac?uisition................................................................................................................. +%
3.3.$ Mer2er....................................................................................................................... +)
3.3.3 Alliance...................................................................................................................... +'
3.3.+ Internal eA3ansion...................................................................................................... +#
3.+ 9eo2ra3hic sco3e............................................................................................................ +#
3.+.1 .lassification mar7et accordin2 to 2eo2ra3hic sco3e................................................+9
3.+.$ (oute to mar7et......................................................................................................... +9
(ecommendations for future firm strate2y.................................................................................%0
(eference/................................................................................................................................. %1
[Strategic Audit] Page '
Company Profile
BA+ is the worlds second largest quoted to!acco group !y glo!al market share" with
!rands sold in around #$% markets. 8ith more than 200 &rands in BA+,s *ortfolio, BA+
makes the ci-arette chosen &y one in ei-ht of the /orld,s one &illion adult smokers. It holds
ro&ust market *ositions in each of our re-ions and has leadershi* in more than 50 markets. In
2011, BA+,s su&sidiary com*anies sold 705 &illion ci-arettes. In the same year, its su&sidiaries
ena&led -o"ernments /orld/ide to -ather more than @30 &illion in ta=es, includin- e=cise duty
on our *roducts, almost nine times the Arou*,s *rofit after ta=. BA+ has sustained a si-nificant
-lo&al *resence for o"er 100 years. BA+,s &usiness /as founded in 1%02 and &y 1%12 had
&ecome one of the /orld,s to* do3en com*anies &y market ca*itali3ation.
Vision and strategy of British American Tobacco
&ision
British American +o&acco ;BA+< has a "ision to achie"e leadershi* of the -lo&al to&acco
industry, not 'ust in "olume and "alue, &ut also in the 0uality of its &usiness. +o &e industry
leader, it continues to sho/ that it is a res*onsi&le to&acco com*any /ith e=cellent *eo*le,
&rands and su*erior *roducts.
Strategy
BA+,s relia&le strate-y for achie"in- the "ision is &ased on -ro/th, funded &y *roducti"ity and
deli"ered &y a /innin- or-ani3ation that acts res*onsi&ly at all times.
[Strategic Audit] Page #
Growth
BA+,s strate-y to con0uer its "ision starts /ith -ro/th and its aim to increase its -lo&al market
share, /ith a focus on its Alo&al #ri"e Brands and its other international &rands. It continues to
attain sustaina&le and *rofita&le -ro/th dri"en &y a &etter use of inno"ations and an em*hasis on
im*ro"in- the e=ecution of its strate-y. Its Alo&al #ri"e Brands ;A#Bs< and other international
&rands continue to contri&ute stron-ly to its &usiness *erformance. Its &alanced *ortfolio
continues to *ro"ide a successful formula for -ro/th.
Productivity
Producti"ity continues to &e a "ital *art of its strate-y, *ro"idin- the ca*a&ilities and resources it
needs to su**ort in"estment in its &rands to -ro/ share in its key markets. Its -lo&ally$inte-rated
su**ly chain is e"ol"in- as efficiency and effecti"eness im*ro"e, and it is focused on makin- its
o*erations fle=i&le, a-ile and truly consumer$centric. +his is a key as*ect of its strate-y and it
/ill continue to control its su**ly chain to further su**ort the -ro/th of the &usiness.
Winning organization
By &ein- a /innin- or-ani3ation, BA+ can ensure that it attracts, de"elo*s and retains the &est
*eo*le it needs to deli"er its strate-y for -ro/th. It can only maintain a stron- /orkforce if it
nurtures and de"elo*s its *eo*le. It "alues its em*loyees, di"erse *ers*ecti"es and encoura-es
them to *erform to their &est.
Responsibility
BA+ and its *eo*le are re0uired to act res*onsi&ly at all times and it seeks to reduce the harm
caused &y its *roducts and its en"ironmental foot*rint. Bes*onsi&ility is inte-ral to e"erythin- it
does and is es*ecially im*ortant to a &usiness like it /here the *roducts *ose real risks to health.
Its determination to act res*onsi&ly s*ans the /hole &usiness, from its commitment to addressin-
the issues of child la&our and /orkin- /ith farmers, to lookin- at ho/ it can hel* to reduce the
harm from its *roducts and lessen its en"ironmental im*act. It also su**orts -uidelines that
maintain a &alance &et/een consumer *references and the interests of society, /hile also
ena&lin- its &usiness to continue to com*ete commercially.
AA!"#$# %& $'(#T)" #T)(CT()*+
1,1Attracti-eness of ind.stry+ /Porter 0 forces model1+
1,1,1 P%T*T$A! *T)AT#+
Threats of New Entrants=LW
Economics of scale( +hrou-h mass *roduction BA+ /ant to decrease cost of
*roduct and increase market share.
'rand loyalty( British American +o&acco has &een in &usiness for more than
100 years. +he &usiness /as formed in 1%02. It is "ery old &rand. So it has &rand
loyalty com*are to others com*etitors. )ere customers are more loyal &ecause it
is already a esta&lish &and. It also creates difficulties for ne/ entrants. It has hu-e
market share.
A!solute cost advantage( throu-h is an old and esta&lish &rand BA+ don,t need
to think a&out cost. It has more loyal customer all o"er the /orld. It is a threat for
ne/ entrants. Bats ha"e more e=*ertise in *roduction unit, /here they try to
reduce cost. Bat char-e a"era-e *rice com*are to Marl&oro.
)overnment regulation( BA+ has to maintain certain rules and re-ulation to
enter into a country, &ecause it is a to&acco industry, /hich is harmful for *eo*le
health. And it is not en"ironment friendly *roduct.
Current *layers try to &uild hi-h entry &arrier to *rohi&it ne/ comes from
enterin-.
1,1,2 $'(#T)" )$VA!)"+
Competitive rivalry in the Industry=HIGH
*ndustry competitive structure( BA+s final *roducts are distri&uted to more than
135,300 retailers throu-hout the entire Central American and Cari&&ean Be-ionD of these,
%1 thousand outlets are "isited &y their o/n sales force and the remainder &y their
com*any,s distri&utors. +he mission of the +rade Marketin- and #istri&ution #e*artment
is to reach their tar-et consumer efficiently and effecti"ely, makin- them the trade,s
*referred su**lier /ithin the strate-ic channels in each country /here BA+ o*erate.
+o&acco China 2ational Cor*oration is &y sales the lar-est sin-le manufacturer of
to&acco *roducts in the /orld. It &oasts a "irtual mono*oly in the Peo*leEs Be*u&lic of
China, /hich accounts for rou-hly 30F of the /orld,s total consum*tion of ci-arettes.
Price com*etition continues all com*etitors and ad"ertisement for ci-arettes is no/
*rohi&ited in many countries.
+emand condition( 2o/ demand of BA+ ci-arette is -ro/in-. Peo*le consumes more
than &efore. B!+ e=chan-e rate mo"ements are e=o-enous to the Com*anyEs
*erformance. Moreo"er, the Com*anyEs o*erations in emer-in- economies makes it is
susce*ti&le to sudden sto*s that lead to ra*id de"aluation of a countryEs currency and
reduces demand.
Manufacturin- *remium to&acco *roducts &e-ins /ith hi-h 0uality to&acco. Phili*
Morris Production System ;PM$PS< focuses on continuous im*ro"ement for ma=imum
*roducti"ity. PM$PS -uides the /ay /e /ork across our manufacturin- o*erations. PM
achie"in- consistency and 0uality are central to e=ceedin- the e=*ectations of our adult
to&acco consumers. PMs #emand is -ro/in-.
,ost conditions( +he international nature of British American +o&acco and its *resence
in o"er 140 markets, the com*any is forced to conduct its o*erations in many different
currencies. British American +o&acco &enefited from these mo"ements o"er the *ast t/o
fiscal years.
BBI+IS) American +o&acco com*any has raised ci-arette *rices for most of its &rands &y
&et/een 53 and 45 *ercent after the increase in e=cise duty. Increased the e=cise duty on locally
*roduced ci-arettes from !SG7 to !SG10 *er 1 000 sticks. +he e=cise duty on im*orted ci-arettes
/as also increased from H0 *ercent *lus !SG5 *er 1 000 sticks to H0 *ercent *lus !SG7 *er 1 000
sticks. BA+Es 2e/&ury =tra Mild and :in-$si3e no/ cost !SG1,50 a *ack of 20 ci-arettes from
!SG1 and !SG1,20 for Berkeley =tra Mild from !S>5c.
Prices for Madison +oasted, :in-s-ate kin-$si3e and "erest menthol ha"e &een increased to
!SG1 from !S>5c *ack of 20 ci-arettes. Prices for #unhill 7ull 7la"or and 9i-hts remain
unchan-ed. !sually BA+ don,t chan-e their *rice strate-y /ithout any "alid reason.
Baises *rices of Phili* Morris !SAEs ci-arette and suns to&acco &rands. +he )enrico County$
&ased com*any is raisin- the list *rice &y > cents *er *ack on all of its ci-arette &rands. Phili*
Morris !SA makes the nationEs to* sellin- ci-arette &rand, Marl&oro. +he a"era-e con"enience
store *rice *er *ack for Marl&oro is G5.71 nationally, /hile the lo/est effecti"e a"era-e ci-arette
*rice in stores is GH.23.+he com*any also is raisin- the list *rice on Marl&oro Snus &y 5 cents.
Snus is a ty*e of smokeless, *ouch to&acco.
[Strategic Audit] Page 1$
1,1,3 BA)2A$$2 P%3*) %& B("*)#+
Bargaining Power of Buyers=LOW
2o/ BA+ has lar-e num&er of customer. But only some &uyers ha"e little &ar-ainin- *o/er.
8ho *urchase a lar-e amount of *roduct from them, they can claim for some discount or cash
reduction. 8ho *urchase a"era-e or little amount of *roduct they don,t ha"e &ar-ainin- *o/er.
+hey ha"e to *ay fi=ed rate /hat BA+ char-es. Because BA+ ha"e to face ta= *olicies, Ao"t.
re-ulation and rules in different country. So if they -i"e &ar-ain *o/er to &uyer they can make
their a"era-e le"el of *rofit. BA+ al/ays tries to -i"e less *rice com*are to com*etitors. BA+ is
a *rice sensiti"e com*any they are not usually chan-e or raisin- their *rice /ithout any
declaration and rele"ant cause. 9o/ s/itchin- costs in terms of *rice
1,1,4 BA)2A$$2 P%3*) %& #(PP!$*)#+
Bargaining Power of Suppliers=LOW
)ere *roduct su**ly is "ital. Al/ays ci-arette has fe/ su&stitutes, so it is an o**ortunity for
BA+. BA+ ha"e num&er of su**liers for same *roduct, they can easily ca*ture the -lo&al market
and easily reach to customers destination. +hey char-e a"era-e *rice for su**ly the *roduct. If
customer /ants 0uick ser"ice they ha"e to *ay more. Su**liers don,t ha"e much control o"er
smokers. Ci-arette com*anies are &i- and ha"e direct access to distri&ution channel and addicted
&uyers.
1,1,0 #(B#T$T(T*#+
hreat of Su!stitute Produ"t=LOW
)er&al Ci-arettes /ere launched, &ut did not &ecome *o*ular ;no emotional "alue< 2icotine
*atch is another su&stitute I &ut a-ain no com*arison /ith ci-arettes in terms of *o*ularity and
usa-e. Artificial ci-arette /ere also launched &ut customer don,t like to ado*t it. +here are no
threats of su&stitute *roduct.
1,2 5ey s.ccess factor+

1,2,1 T*C6%!%2" )*!AT*' 5#&#+
British American +o&acco installs technolo-y to ensure BlackBerry a"aila&ility 9otus
a**lications. +hey ha"e installed technolo-y from 2e"er fail to *rotect its communications and
critical head0uarters a**lications from une=*ected do/ntime. +he to&acco -iant, /hich has more
than 55,000 em*loyees /orld/ide, uses BIM,s BlackBerry de"ices to ensure its e=ecuti"es ha"e
round the clock access to key cor*orate information and communications, /here"er they are in
the /orld.
1,2,2 7A(&ACT()$2 )*!AT*' 5#&#+
Manufacturin- to&acco *roducts is a lar-e$scale -lo&al o*eration and /e ha"e H> ci-arette
factories in 3% countries. i-ht of this *lus one se*arate *lant also make either ci-arillo, roll their
o/n or *i*e to&acco. +hey also ha"e a factory makin- smokeless snus. As /ell as to&acco leaf,
BA+ *urchases a /ide "ariety of other -oods and ser"ices from su**liers all o"er the /orld.
+)1 *romote continuous im*ro"ements amon-st our su**liers in &usiness *ractices,
[Strategic Audit] Page 1+
efficiency, 0uality, inno"ation and cor*orate res*onsi&ility. +o learn more a&out ho/ /e en-a-e
/ith our su**liers "isit 8orkin- /ith our su**liers.
As a multinational &usiness, BA+ /ork to ensure that their costs are -lo&ally com*etiti"e and
that /e use our resources as effecti"ely as *ossi&le. +o im*ro"e *roducti"ity and to continue
&uildin- a sustaina&le &usiness, they com*anies ha"e had to take some si-nificant and difficult
decisions to reduce manufacturin- o"erca*acity &y closin- some factories and do/nsi3in-
others. +hey fully reco-ni3e the im*acts of these decisions and /ork hard to miti-ate the
outcomes for em*loyees and the /ider community. +hese chan-es are also ena&lin- us to
rationali3e our machine technolo-y to esta&lish a more cost$effecti"e o*erational &ase for the
future. Most machinery in factories &ein- closed or do/nsi3ed is transferred else/here and /e
aim to standardi3e machinery at each location
1,2,3 '$#T)$B(T$% )*!AT*' 5#&#+
BA+s final *roducts are distri&uted to more than 135,300 retailers throu-hout the entire Central
American and Cari&&ean Be-ionD of these, %1 thousand outlets are "isited &y their o/n sales
force and the remainder &y their com*any,s distri&utors. +he mission of the +rade Marketin- and
#istri&ution #e*artment is to reach their tar-et consumer efficiently and effecti"ely, makin-
them the trade,s *referred su**lier /ithin the strate-ic channels in each country /here /e
o*erate. BA+ ha"e stron- distri&ution channel -lo&ally.
1,2,4 7A)5*T$2 )*!AT*' 5#&#+
Successful marketin- is the &edrock of -ro/th for any fast mo"in- consumer -oods ;7MCA<
&usiness and /e are no e=ce*tion.
But /hen BA+ talk a&out -ro/th, there,s a &i- *oint to make clear. By -ro/th, BA+ don,t
mean Jsellin- smokin-, to &oost the num&er of *eo*le in the /orld /ho smoke or the amount
they smoke. +hey mean -ro/in- their share I more s*ecifically, the "alue of their share I of the
lar-e num&er of adults /ho choose to &e to&acco consumers. It is a /ell kno/n &rand name.
+hey use cle"er ad"ertisin- &ecause their *roduct is not en"ironment friendly.
[Strategic Audit] Page 1%
BA+ has a mature market I one /here e"eryone already kno/s /hat to&acco is. +here /ould &e
no commercial sense in tryin- to *romote to&acco *roducts to *eo*le /ho kno/ /hat they are
and ha"e decided they don,t /ant them.
BA+ in"ests in *ositionin- our hi-h 0uality &rands com*etiti"ely for the adults /ho,"e decided
they do /ant to &uy to&acco. And BA+ ha"e sho/n that throu-h focus, intelli-ence,
res*onsi"eness and a hi-h *riority on res*onsi&ility, BA+ can successfully &uild the &rand
loyalty of adults /ho ha"e chosen to &e to&acco consumers and /in consumers a/ay from
com*etitor &rands.
A &illion adults /orld/ide choose to consume to&acco. BA+ aim is not 'ust to ma=imi3e our
share of sales I "alue and 0uality are hi-h on our a-enda. +hey aim to kee* addin- "alue for our
consumers, trade customers and shareholders throu-h an a**roach /e call J/in$/in$/in,. +his
means -i"in- our consumers *remium "alue throu-h *remium 0uality and uni0ue, differentiated
&rands, ena&lin- our trade customers to &enefit from *remium mar-ins and, &y satisfyin- &oth
consumers and trade customers, deli"erin- lon- term sustaina&le "alue for our shareholders.
BA+ estimate that sales &y our su&sidiary com*anies account for 13 *er cent of the -lo&al
ci-arette market.
British American +o&acco is one of the fi"e lar-est to&acco com*anies in the /orld. Althou-h it
mana-es and sells o"er 300 &rands, the Com*any considers #unhill, :ent, 9ucky Strike, and Pall
Mall to &e its four Alo&al #ri"e Brands.
Ma'or Brand
+unhill $ H1 &illion ci-arettes sold
-ent $ >1 &illion ci-arettes sold
Lucky Strike $ 2> &illion ci-arettes sold
.all /all $ >4 &illion ci-arettes sold
[Strategic Audit] Page 1)
Aeo-ra*hic Be-ions
Asia0.acific $ 23F of net sales
Americas $ 22F of net sales
1estern Europe $ 27F of net sales
Eastern Europe $ 11F of net sales
Africa and /iddle East $ 1>F of net sales
1,2,0 #5$!! A' CAPAB$!$T" )*!AT*' 5#&#+
BA+ takes only skill and kno/led-ea&le /orker. 8ho ha"e &etter kno/led-e a&out ne/
technolo-y, *roduct inno"ation and kno/led-e a&out all o"er the /orld. And /ho can ado*t
chan-in- ne/ technolo-y and en"ironment easily. It has -lo&al distri&ution ca*a&ility.
1,2,8 %T6*) T"P*# %& 5#&+
Su*erior strate-y.
Success throu-h res*onsi&ility.
Success throu-h di"ersification.
Controlling Prices to enhance performance: 8hile official im*orts /ere su&'ect to
im*ort 0uotas and tariffs, offerin- relati"e *oor cor*orate *rofita&ility, BA+ stood to earn
hu-e *rofits &y careful *ricin- of contra&and ci-arettes. An im*ortant consideration /as
ho/ *rice could &e used to esta&lish &rand status /ithin the market. +hese efforts /ere
a**arent for the *remium &rand State =*ress 555, /hich en'oyed intrinsic e=clusi"ity
and *resti-e. +he com*any /as keen to &uild market share, in com*etition /ith other
international &rand, &ut /anted to a"oid the threat of o"ersu**ly of S7: KState =*ress
7ilter :in-sL to erode *rice.ima-e. BA+ /as es*ecially a/are of Phili* Morris ;PM<.
[Strategic Audit] Page 1'
+here is e"idence that BA+ tried to Menhance *erformanceN &y controllin- the *rices of ille-al
im*orts. BA+ thus sou-ht to *rice its leadin- &rand at a carefully 'ud-ed *remium o"er those of
its com*etitors, nota&ly PM, intendin- that State =*ress 555 should Mmaintain a 50 cent
*remium o"er Marl&oro in &oth the official ;C2+C< and 7ree Market, the *recise differential
"aryin- &y channel and re-ion.
+he a&ility to influence *ricin- of &oth le-al and ille-al im*orts /as *redicated on control of
su**ly. +he challen-e /as to ensure sufficient su**ly of BA+ &rands to com*ete /ith domestic
and other international &rands, /ithout e=ertin- do/n/ard *ressure on *rices. Indeed, the
com*any /as a/are of the a&ility of free market to si-nificantly undercut retail *ricin- of
official duty *aid outlets.
1,3 %pport.nities and threats+
2pportunities Threats
Acquisitions. Competition.
Financial markets (raise money
through debt, etc).
Cheaper technology.
nline. !"ternal changes (go#ernment, politics, ta"es,
etc).
Product and ser#ices e"pansion. !"change rate fluctuations.
$akeo#ers. %ariety customer&s e"pectation in different
country'culture.
(aturing categories, products, or
ser#ices.
1,4 )ele-ant ind.stry trend 9ith implications for firm performance and
strategy+
1,4,1 C(#T%7*)+
BA+ al/ays tries to meet customer,s e=*ectation. Althou-h they ha"e to increase their *rice for
some reason. But customers are satisfied /ith that. +hey ha"e no *ro&lem a&out these. Bat
[Strategic Audit] Page 1#
al/ays try follo/ the trend &ecause o*erate their &usiness all o"er the /orld. BA+S earn hu-e
*rofits &y careful *ricin- of contra&and ci-arettes. An im*ortant consideration /as ho/ *rice
could &e used to esta&lish &rand status /ithin the market. +hey already ha"e -ood/ill and
re*utation all o"er the /orld. Customer -i"es "alue to this &rand and likes to stay /ith these.
1,4,2 C%#T#+
BA+ al/ays try to maintain their cost, they follo/ their *ricin- strate-y strictly. And try to -i"e
&etter *erformance. 2o/ BA+ has to -i"e more ta=, and ha"e to follo/ many additional rules. In
these years BA+ *aid hi-hest ta=es in Ban-ladesh.BA+ *erform in same /ay thou-h there are
many &arriers in all o"er the /orld.
BBI+IS) American +o&acco com*any has raised ci-arette *rices for most of its &rands &y
&et/een 53 and 45 *ercent after the increase in e=cise duty. Increased the e=cise duty on locally
*roduced ci-arettes from !SG7 to !SG10 *er 1 000 sticks. +he e=cise duty on im*orted ci-arettes
/as also increased from H0 *ercent *lus !SG5 *er 1 000 sticks to H0 *ercent *lus !SG7 *er 1 000
sticks. BA+Es 2e/&ury =tra Mild and :in-$si3e no/ cost !SG1,50 a *ack of 20 ci-arettes from
!SG1 and !SG1,20 for Berkeley =tra Mild from !S>5c.
Prices for Madison +oasted, :in-s-ate kin-$si3e and "erest menthol ha"e &een increased to
!SG1 from !S>5c *ack of 20 ci-arettes. Prices for #unhill 7ull 7la"or and 9i-hts remain
unchan-ed.
1,4,0 C%7P*T$T%)#+
Com*are to com*etitors BA+ char-es a"era-e or lo/ *rice. And al/ays try to -i"e &etter
*erformance than com*etitors. In case of skill em*loyee, technolo-y, /orkin- en"ironment BA+
*lays "ital role and -i"e &etter ser"ice than com*etitors. Althou-h it has /ell &rand name it has
more loyal customer. BA+ al/ays *erform in &etter /ay and satisfyin- their customer /ith
&etter ser"ice.
British American +o&acco has fi"e ma'or com*etitors in the to&acco industry, they are(
,hina 3ational To!acco ,ompany( +he lar-est ci-arette com*any in the /orld, China
2ational +o&acco Com*any is o/ned and mana-ed &y the Chinese -o"ernment, and sells
1.5 trillion ci-arettes annually, all in China.
.hilip /orris *nternational 4./5 ( Phili* Morris is &est kno/n for its Marl&oro &rand
and is the &est sellin- ci-arette &rand in the /orld.
6apan To!acco *nternational 46A.A75 ( +his Com*any o/ns and mana-es three of the
to* fi"e intentional ci-arette &rands, 8inston, Camel, and Mild Se"en, as /ell as other
ci-arette &rands and to&acco *roducts.
Altria )roup 4/25 ( Altria sells &rands such as Marl&oro, Co*enha-en, Skoal and Black
O Mild, throu-h its four o*eratin- com*anies, Phili* Morris !SA, !.S. Smokeless
+o&acco Com*any, and ?ohn Middleton. In addition to ci-arettes and to&acco *roducts,
Altria sells *remium /ines throu-h Ste. Michelle 8ine states and has a 25.4F
o/nershi* stake in SABMiller.
*mperial To!acco )roup 4*/T0L35 ( +he Com*any has sales in o"er 1>0 countries and
a *ortfolio of &rands, led &y #a"idoff.
1,4,8 2%V*)7*T+
2o/ -o"ernment chan-es different *olicies, rules, re-ulation and method of *ayin- ta=. BA+
ado*ts all ne/ rules and re-ulation to sustain the &usiness and a**ly it.. +a= rate are increased all
most all o"er the /orld.BA+ *ay ta= /ith chan-es rate. 7or increasin- *ayment ta= rate and
other thin-s BA+ ha"e to increase their *rice rate. Customer acce*ts it. +hey ha"e /illin-ness to
*ay. Althou-h A6P+ raisin- ta= rate BA+ also raise their *rice &ut customer ha"e *ositi"e
im*act on BA+. A6P+ include ne/ &arriers to entry and other sector &ut BA+ has no *ro&lem
on that, they face the challen-es and try to o"ercome those.
[Strategic Audit] Page $0
BAT B(#$*## 7%'*!
6ur &usiness model is desi-ned to deli"er sustaina&le -ro/th in earnin-s. It is consumer$led and
science$&ased.
8ow our !usiness works
,onsumers
BA+ success de*ends on really understandin- the different *rofiles and *references of
consumers. BA+ in"ests in -atherin- com*rehensi"e insi-hts into smokers, *references and
&uyin- &eha"ior. +his dri"es their marketin- and allo/s them to *romote *roducts to adult
to&acco consumers in /ays that satisfy their *references, /hile res*ondin- to stakeholder
e=*ectations a&out ho/ BA+ should market their *roducts.
Sourcing
BA+ has a si-nificant interest in to&acco -ro/in- and it /ork directly /ith around 70 *er cent of
the farmers /ho su**ly our leaf. BA+ mana-es /hole su**ly chain res*onsi&ly and /orks /ith
su**liers to create a shared understandin- of our social, en"ironmental and economic im*acts.
+his ena&les and our su**liers to mana-e risks &etter, /hile ensurin- that are a-ile and fle=i&le,
so that can use resources as effecti"ely as *ossi&le
.roduction
Manufacturin- to&acco *roducts is a lar-e$scale o*eration and /e ha"e factories all o"er the
/orld. BA+ /ork to ensure that our costs are -lo&ally com*etiti"e and that /e use our resources
as effecti"ely as *ossi&le. Com*anies ha"e closed or do/nsi3ed some factories and consolidated
*roduction else/here in recent years. +hese chan-es ena&le to rationali3e our machinery and
technolo-y to esta&lish a more cost$effecti"e o*erational &ase for the future.
Science0!ased R9+
7or o"er 50 years, /e ha"e had an e=tensi"e scientific research *ro-ramme. More recently, BA+
ha"e &een focusin- research on modified ci-arettes and lo/$to=icant smokeless to&acco
*roducts. BA+ are committed to hel*inde"elo* the scientific and re-ulatory frame/ork /e
need to deli"er a "aried *ortfolio of *roducts in the future, includin- alternati"e re-ulatory$
a**ro"ed nicotine *roducts, to meet the e"ol"in- needs of adult smokers.
'rands
BA+ has a successful &rand marketin- strate-y &ased on inno"ation, res*onsi&ility and consumer
choice. 8e reco-ni3e that &usiness starts /ith consumers and &rand *ortfolio is desi-ned to meet
key consumer needs, es*ecially in strate-ic consumer se-ments. BA+ four Alo&al #ri"e Brands
I #unhill, :ent, 9ucky Strike and Pall Mall I and other international &rands account for more
than 50 *er cent of total ci-arette "olumes.
*nnovative products
BA+ make si-nificant in"estment in &rands and the de"elo*ment of su*erior, differentiated
*roducts to dri"e -ro/th. BA+ *roduct and *acka-in- inno"ations, such as Con"erti&les and
Beloc, "ary across &rands, &rand "ariants and markets and a**roach ena&les com*anies to ada*t
their offers fle=i&ly to local *references. BA+ focus /hen desi-nin- these inno"ations is on
rele"ance to the consumer and *otential s*eed to market.
[Strategic Audit] Page $$
A##*##7*T %& &$)7 #T)AT*2"
2,1 #trategy diamond of British American Tobacco
Arenas
Consumer$ centric
inno"ati"e *roducts
1oun- and adult
customers
8orld/ide market
Pehicles
Internal or-anic
e=*ansion
Ac0uisitions
#ifferentiators
Belia&le *roduct
Quality *roduct
9o/ to=icant *roduct
Modified *roduct
Stron- distri&ution
channels
Sta-in-
Ba*id international
e=*ansion &y re-ion
arly footholds in each
country and fill in later
conomic lo-ic
conomies of scale for
standardi3ed *roduct
conomies of sco*e for
e=*ertise kno/led-e
Premium *rice for lo/
to=icant inno"ati"e
*roducts
7igure 0 Strategy diamond of 'ritish American To!acco
British American +o&acco is remarka&ly successful -lo&al to&acco com*any. Its strate-y o"er
the *ast 50 years has &een hi-hly coherent, /ith all fi"e elements ;arena, "ehicle, differentiator,
sta-in- and economic lo-ic< reinforcin- each other.
2,1,1 A)*A
+he arenas in /hich BA+ o*erates are /ell defined( the com*any sells consumer$centric
inno"ati"e *roducts. Its tar-et market is youn- and adult $ *rimarily /hite$collar customers. +he
-eo-ra*hic sco*e is /orld/ide, or at least all countries /here socioeconomic and infrastructure
conditions su**ort the conce*t. Currently, it is o*eratin- in more than 140 countries and is a
leader in more than 50 countries. It maintains control of *roduct desi-n to ensure the inte-rity of
its uni0ue ima-e and to accumulate unri"alled e=*ertise in desi-nin- for efficient manufacturin-.
2,1,2 V*6$C!*
As its *rimary "ehicle for -ettin- to its chosen arenas, BA+ en-a-es in or-anic e=*ansion,
&uildin- its /holly o/ned su&sidiaries. It has chosen to make or-anic internal e=*ansion throu-h
su&sidiaries such as +ekel, Bentoel Arou*, Sou3a Cru3, and 2iemeyer and to make the
ac0uisitions of fe/ to&acco com*anies such as ac0uisition of ci-arette &usiness of Prota&aco, the
second lar-est to&acco com*any in Colom&ia. +his reflects to* mana-ement,s &elief that the
com*any needs to fully control -lo&al e=ecution of its hi-hly inno"ati"e *roduct conce*t.
)o/e"er, the com*any also has in"estments in fe/ associates and 'oint "entures such as
Beynolds American Inc and I+C 9td to e=tract &enefits from these com*anies.
2,1,3 '$&&*)*T$AT%)
BA+ attracts customers and &eats com*etitors &y offerin- se"eral im*ortant differentiators. +he
com*any is stren-thenin- its &rand ima-e &y deli"erin- differentiated and su*erior to&acco
*roducts. 7irst, its *roducts are of "ery relia&le 0uality. Second, it is offerin- lo/er to=icant
to&acco *roducts accordin- to to&acco consumers, needs and /ants. And third, the com*any
stri"es to make customer fulfilment &y modified ci-arettes. S*ecifically, BA+ hel*s to carry an
e=tensi"e in"entory at each store &y its stron- distri&ution channels, /hich allo/s a customer to
ha"e *roducts deli"ered immediately.
2,1,4 #TA2$2
As for sta-in-, or BA+,s s*eed and se0uence of mo"es, once mana-ement reali3ed that its
a**roach /ould /ork in a "ariety of countries and cultures, the com*any committed itself to
ra*id international e=*ansion, &ut only one re-ion at a time. In -eneral, the com*any,s a**roach
has &een to use its limited resources to esta&lish an early foothold &y o*enin- a sin-le &ranch in
each tar-eted country. ach such entry is su**orted /ith a--ressi"e *u&lic relations and
ad"ertisin-, in order to lay claim to the radically ne/ *roduct conce*t in that market. 9ater, it
comes &ack into each country and fills in /ith more &ranches.
[Strategic Audit] Page $+
2,1,0 *C%%7$C !%2$C
+he economic lo-ic of BA+ rests *rimarily on scale economies and efficiencies of re*lication.
Althou-h the com*any doesn,t sell a&solutely identical *roducts in all its -eo-ra*hic markets,
BA+ has enou-h standardi3ation that it can take -reat ad"anta-e of &ein- the /orld,s lar-est
to&acco *roduct manufacturer. Its costs from lon-$term su**liers are e=ceedin-ly lo/, and made
e"en lo/er &y BA+,s *ro*rietary, easy$to$manufacture *roduct desi-ns. In each re-ion, BA+ has
enou-h scale to achie"e su&stantial distri&ution and *romotional efficiencies. And each
indi"idual su&sidiary is set u* as a hi-h "olume o*eration, allo/in- further economies in
in"entories, ad"ertisin-, and staffin-. BA+ is securin- *remium *rices from its customers, &y
offerin- lo/ to=icant inno"ati"e to&acco *roducts. BA+,s *hased international e=*ansion has
allo/ed e=ecuti"es to &enefit, in country after country, from /hat they ha"e learned a&out site
selection, su&sidiary desi-n, su&sidiary o*enin-s, and on-oin- o*erations. +hey are "i-ilant,
astute learners, and they *ut that learnin- to -reat economic use.
2,2 The firm:s generic strategy+
+here are a lot of "ariation in the -eneric strate-ies that the firms use, mainly &ecause each
com*any,s strate-ic a**roach entails customer$desi-ned actions to fit its o/n circumstances and
&usiness en"ironment. +he British American +o&acco is usin- the differentiation strate-y for
their *roduct. +he differentiation of the *roduct refers to *roduce *roduct and the *rocess of the
*roducin- the *roduct in a uni0ue /ay that could lead in a com*etiti"e ad"anta-e o"er the ri"als
of the &rand.
+he differentiation strate-y has t/o ty*es one is the Broad #ifferentiation strate-y and the other
is the 7ocus #ifferentiation strate-y. )ere the British American Com*any uses &oth the
strate-ies to their *roduct.
[Strategic Audit] Page $%
2,2,1 T6* C%#T #T)AT*2"+
+he British American +o&acco achie"ed cost ad"anta-e throu-h a**roaches such as stron-
*ursuit of cost reductions and o"erhead control, cost minimi3ation in areas such as sales and
ad"ertisin-.
2,2,2 C%#T #T)(CT()* AA!"#$#+
+he e=*enses that British American +o&acco must take into account /hen manufacturin- the
*roduct is -i"en &elo/, here is the 5 years summery of the income statement, &alance sheet,
earnin-s *er share mentioned.
*ncome statement
#or the years ended $% &e"em!er
Earnings .er share
'alance Sheet
[Strategic Audit] Page $)
2,2,3 VA!(* C6A$ AA!"#$#+
+he British American to&acco,s o"erall "alue chain is a com&ination of the su**ort acti"ities and
the *rimary acti"ities of the firm. 8here the Su**ort acti"ities contains firms infrastructure,
human resource mana-ement, technolo-y and *rocurement. And the *rimary acti"ities contain
the in&ound lo-istics, o*eration of firm, out&ound lo-istics, marketin- and sales and ser"ice of
the firm.
Support activities( Su**ort acti"ities contain firms infrastructure, human resource mana-ement,
technolo-y and *rocurement.
!ir"#s infrastructure( +his acti"ity of British American +o&acco includes and is dri"en &y
cor*orate or strate-ic *lannin-. It includes the Administrati"e, 7inance infrastructure,
Mana-ement Information System ;MIS<, 9e-al, and other mechanisms for *lannin- and control
such as the accountin- de*artment.
$u"an Resource %anage"ent( m*loyees are an e=*ensi"e and "ital resource so the British
American +o&acco em*hasi3ed stron-ly in this sector of "alue chain. +he or-ani3ation mana-es
recruitment and selection, trainin- and de"elo*ment, and re/ards and remuneration. +he mission
and o&'ecti"es of the or-ani3ation /ould &e dri"in- force &ehind the )BM strate-y. +he firm is
really concerned a&out the *ersonnel they ha"e in their firm /eather &lue collar or /hite collar
they are.
[Strategic Audit] Page $'
Technology( +echnolo-y is an im*ortant source of com*etiti"e ad"anta-e. British American
+o&acco inno"ated strate-y to reduce costs and to *rotect and sustain com*etiti"e ad"anta-e.
+his could include *roduction technolo-y, lean manufacturin-, Customer Belationshi*
Mana-ement ;CBM<, and many other technolo-ical de"elo*ments. +hey are usin- ad"anced
technolo-y to *roduce to&acco in a inno"ati"e /ay that /ill reduce the side effects of the
surroundin- en"ironment that may cause for to&acco *roduction.
Procure"ent( +his function is res*onsi&le for all *urchasin- of -oods, ser"ices and materials
made &y the British American +o&acco. +he aim is to secure the lo/est *ossi&le *rice for
*urchases of the hi-hest *ossi&le 0uality.
.rimary Activities( Primary acti"ities contain the in&ound lo-istics, o*eration of firm, out&ound
lo-istics, marketin- and sales and ser"ice of the firm.
&nbound Logistics( )ere ra/ materials are recei"ed &y British American +o&acco from a
com*anyEs su**liers. +hey are stored until they are needed on the *roduction. Products are
mo"ed around the British American +o&acco.
perations( +his is /here *roducts are manufactured. Packa-in-, *roduction, control of the
in"entory, 0uality control is done here.
utbound Logistics( +he *roducts are no/ finished, and they need to &e sent alon- the su**ly
chain to /holesalers, retailers or the final consumer.
%ar'eting and (ales( In true customer orientated fashion, at this sta-e the British American
+o&acco *re*ares the offerin- to meet the needs of tar-eted customers. +his area focuses
stron-ly u*on marketin- communications and the *romotions mi=.
2,2,4 '$&&*)*T$AT$% #T)AT*2"+
As the com*any has lot of *roducts like Pall Mall, Marl&oro, Benson and )ed-es, #unhill etc.
7or these different *roducts the British American +o&acco uses &road differentiation strate-y and
some time focused differentiation strate-y.
'road +ifferentiation strategy(
[Strategic Audit] Page $#
+he Broad #ifferentiation strate-y a ty*e of differentiation strate-y /here the com*any could &e
a&le to char-e a *remium *rice for there *roduct, it /ill increase the sale of the *roduct ;&ecause
of -ainin- additional &uyers &y usin- differentiatin- features then others<, It could -ain &rand
loyalty as for the differentiatin- factors it has. +he &road differentiation hel*ed the British
American +o&acco,s *roducts like Pall Mall and Marl&oro to -ain &uyers o"er its com*etitors.
As the follo/in- *roducts uses the differentiation strate-y it /ill result in
Incor*orates features that raise *roducts outcomes to the &uyers
It /ill enhance &uyer,s satisfaction in noneconomic or intan-i&le /ay
#eli"ers "alue to customers &y differentiatin- on the com*etencies and com*etiti"e
ca*a&ilities that ri"als don,t ha"e.
7ocused +ifferentiation(
A focused strate-y keyed to differentiation aims at securin- a com*etiti"e ad"anta-e /ith a
*roduct offerin- carefully desi-ned to a**eal to the uni0ue *reference and needs of a narro/,
/ell defined -rou* of &uyers. Successful use of focused differentiation strate-y de*ends on the
e=istence of a &uyer se-ment that is lookin- for s*ecial *roduct attri&utes. 8here the consumers
are /illin- to *ay a *remium *rice for *roducts /hich is ser"in- a niche se-ment of market and
had distincti"e features from others. As this *a*er is all a&out British American +o&acco it also
has some of his niche or focused differentiated *roducts like Benson and )ed-es, #unhill etc.
2,3 )eso.rces and Capabilities of British American Tobacco
It is "ery difficult and *ro&a&ly im*ossi&le to o&tain a true and fair *icture of the com*any,s
internal resources and ca*a&ilities /ithout insider kno/led-e. +he internal strate-ic analysis is
therefore limited in its sco*e and /ill only &e a minor *art of the o"erall strate-ic analysis. 7or
the *resentation and analysis, t/o models are chosen. +he first di"ides the internal resources into
t/o -rou*s( intan-i&le resources and tan-i&le resources. +he second, Mc :insey,s 7S model,
/ill try to catch the more difficult accessi&le areas, as for instance strate-y and systems. 7inally,
the resources and ca*a&ilities /ill &e e"aluated a-ainst the PBI6 frame/ork, /hich indicates the
factors /hich are most likely to &e com*etiti"e resources or ca*a&ilities for BA+.
+he resources that BA+ has can &e classified into t/o -rou*s I tan-i&le and intan-i&le.
2,3,1 TA2$B!* A##*T#
BA+,s tan-i&le assets consist of freehold *ro*erty, leasehold *ro*erty, *lant and e0ui*ment and
assets in the course of construction. BA+ currently o*erates a&out 250 *roduction facilities in
140 countries. More than half of the *roduction facilities are located in uro*e. +hese
manufacturin- *lants are mostly o/ned. It has some manufacturin- *lants that are leased &ut has
'AT
Resources
Tangi!le Resources
Plant
0ui*ment
9easehold *ro*erty
7reehold *ro*erty
Assets in the course of
construction
7inancial de*artment
*ntangi!le Resources
Brand name
Aood/ill
+rademark
Patents
Mana-erial kno/$ho/
+alented key em*loyees
)i-h$tech kno/led-e
o*tion to &uy them /ithin t/enty years. )o/e"er, a "alua&le asset for BA+ is its financial
de*artment, /hich hel*s to finance its acti"ities.
2,3,2 $TA2$B!* A##*T#
+he &rand *ortfolio of BA+ has &een e=tended se"eral times, there&y al/ays kee*in- in mind
ho/ the &rands are *ercei"ed &y customers. It has al/ays &een in BA+,s s*irit to ha"e &rands of
hi-h "alue /ith *remium status in their res*ecti"e markets. Besides, alon- /ith the &rand
-ood/ill and trademark are im*ortant intan-i&le assets for the com*any.
6ne of the cornerstones of BA+,s success is its a&ility to create the ne/ and une=*ected. +hey
ha"e ac0uired their skills in research and de"elo*ment o"er se"eral years, no/ makin- them a&le
to dra- on "alua&le kno/led-e for future de"elo*ments. Palua&le is also BA+,s ac0uired
kno/led-e a&out customers and their *references, /hich makes BA+ a&le to antici*ate and
res*ond to the market.
6ther intan-i&le resources are the hi-hly skilled em*loyees /orkin- in the BO# de*artments.
+hey ha"e &een a&le to esta&lish a close connection amon- BA+ &rand, desi-n and technolo-ical
in"entions.
2,4 7c 5insey:s ;# model for BAT
Mc :insey,s 7S ;strate-y, structure and system, shared "alues, skills, style and staff< model is
used to hi-hli-ht the different areas im*actin- the internal strate-ic o*tions and decisions.
2,4,1 #T)AT*2"
+he o"erall strate-y of BA+ is called strate-y num&er one. +o &e a leader in the to&acco market,
it has set a -rand strate-y. Its strate-y is to increase market share &y *roducti"ity, /innin-
or-ani3ation and res*onsi&ility. It has also strate-y to reduce costs throu-h the use of standard
com*onents, &enefittin- from the economies of scale.
2,4,2 #T)(CT()*
BA+ has a ty*ical cor*orate structure and is com*ara&le to its com*etitors in many /ays. It has
se"eral &oards and of those the most im*ortant is the mana-ement and the ad"isory &oard. +he
mana-ement &oard takes care of the daily o*erations and the strate-ic de"elo*ment of the
or-ani3ation. +he ad"isory &oard is there to su**ort the decision makin- in the mana-ement
&oard. It sho/s that cor*orate -o"ernance is a ma'or issue for BA+. #ue to BA+,s focus on the
structure of the or-ani3ation its com*any structure must &e re-arded as an ad"anta-e com*ared
to com*anies.
2,4,3 #"#T*7#
+he systems of an or-ani3ation can &e di"ided into three( technical$, social$ and administrati"e
system. +he di"ision makes it easier to -ras* all as*ects and infer ho/ the systems are
interconnected. +he te"hni"al system deals /ith *roduction *rocesses and *roduction facilities.
+his ena&les the com*any to *roduce /ith a "ery small amount of defects. +he results are
satisfied customers and fe/ costly call$&acks of to&acco *roducts. +he so"ial system com*oses
the attitudes and norms esta&lished &et/een em*loyees, de*artments and -eo-ra*hical distinct
su&sidiaries. +he administrative system ensures that the technical$ and social systems are
/orkin- fine and li"in- u* to the tar-ets set &y the or-ani3ation.
2,4,4 #6A)*' VA!(*#< #5$!!#< #T"!* A' #TA&&
+he shared "alues, /hich should &e *art of e"ery em*loyees consciousness /ithin BA+ are(
hi-h 0uality standards, customer focus, continuous im*ro"ements and sustaina&ility. +he
skills of em*loyees /ere under the intan-i&le resources identified as "alua&le. +he condition of
staff and style is assumin-ly -ood, /ith com*etent, moti"ated and committed em*loyees
coachin- and moti"atin- ne/ly arri"ed em*loyees. +his assum*tion &uilds on the outline -i"en
[Strategic Audit] Page 3$
&y the BA+, statin- in their strate-y num&er one that the em*loyees are their most "alua&le
asset and therefore a ma'or *riority. Moreo"er, the em*loyees, /hich are /orkin- at BA+
are hi-hly skilled and some of the &est in their res*ecti"e areas. +he hi-h moti"ation and
satisfaction of em*loyees is ensured throu-h continuous em*loyee satisfaction sur"eys. 7or
0uality man*o/er, BA+ a**oints students -raduated from the reno/ned uni"ersities of the
/orld.
2,0 *-al.ation of internal reso.rces and capabilities
Internal resources and ca*a&ilities of BA+ are e"aluated &y the PBI6 7rame/ork. +he resources
/hich /ere found throu-hout the internal analysis are no/ e"aluated in order to see /hether
they are ca*a&le of *ro"idin- BA+ /ith a sustaina&le com*etiti"e ad"anta-e. A resource or
ca*a&ility is *laced in one out of four cate-ories, ran-in- from a com*etiti"e *arity to a
sustaina&le com*etiti"e ad"anta-e.
BA+,s access to hi-hly educated *ersons is e"aluated to &e a tem*orary com*etiti"e ad"anta-e.
It is &oth "alua&le and rare to rank at the to*, /hen uni"ersity students are asked a&out their
*reference for future em*loyment. If BA+ is a&le to retain this resource they /ill ha"e an
ad"anta-e to some of their com*etitors.
7urther BA+,s ac0uisition of Prota&aco does create a tem*orary com*etiti"e ad"anta-e. +he
ac0uisition is "alua&le, &ecause BA+ can o&tain some of the &enefits from &ein- a "olume
*roducer. It is rare &ecause Prota&aco /ill not &e ac0uired &y other com*any. +his ac0uisition
could e"en &e classified as a sustaina&le com*etiti"e ad"anta-e, &ecause the ac0uisition one
could ar-ue is so difficult to imitate. 6nly fe/ to&acco *roducers are so s*eciali3ed in the
*roduction of to&acco *roducts as Proto&aco is. 7indin- an ade0uate com*any /ith as much
market kno/led-e and /here the same economies of scale are created /ould &e almost
im*ossi&le. It /ould hence &e costly for a com*etitor to create a similar ac0uisition /here the
&enefits /ould &e com*ara&le.
Sustaina&le com*etiti"e ad"anta-es are found in the areas of( Brandin-, inno"ati"e ca*a&ilities
and the focus on sustaina&le solutions. BA+ /ith its *ossession of many *remium &rands is of
course in a uni0ue *osition /ith res*ect to its ima-e. +his *osition can hardly &e imitatedD it is at
least not *ossi&le for com*etitors to totally imitate the &rand. Com*etitors may ho/e"er /ant to
a**roach it, if BA+,s &rand remains as *rofita&le as it has &een until no/. +o create &rands /ith
the same /ide s*read *remium re*utation /ould ho/e"er &e e=tremely costly for
com*etitors, so BA+,s &rands are definitely core resources.
BA+,s -ood re*utation is created throu-h se"eral thin-s, &ut one thin-, /hich is *rominently
mentioned, is their a&ility to &e inno"ati"e. Possessin- a /orkforce and a /ork en"ironment,
/hich creates so many inno"ati"e solutions, is not only "alua&le, it is also rare and costly for
com*etitors to imitate. 9astly, BA+,s focus on sustaina&le solutions must &e hi-hli-hted. +his
*oint can &e seen as an e=tension to &oth their &rand and their inno"ati"e ca*a&ilities, &ecause
the sustaina&le solutions are created throu-h the e=cellent inno"ati"e ca*a&ilities in order to
sha*e the &rand for the future.
2,0,1 V)$% &)A7*3%)5 &%) BAT
&alua!le Rare ,ostly:difficult
to imitate
Exploita!le
!y the firm
,ompetitive
implication
Expected
competitive
economic
performance
Resources : capa!ilities
$ $ $ $ Com*etiti"e
#isad"anta-e
Belo/
normal
RRR
1es 2o 2o 1es Com*etiti"e
Parity
2ormal )ead0uarter in 9ondon
Stron- distri&ution
channel
Market kno/led-e
Partly decentrali3ed
com*any structure
Close contact /ith
0ualified su**liers
8orld/ide *roduction
facilities
In house financial
de*artment
1es 1es 2o 1es +em*orary
Com*etiti"e
Ad"anta-e
A&o"e
normal
Accessi&le to hi-hly
educated em*loyees
Ac0uisition of Prota&aco
1es 1es 1es 1es Sustaina&le
Com*etiti"e
Ad"anta-e
A&o"e
normal
Brand *ortfolio
Stron- &rand
Inno"ati"e ca*a&ilities
7ocus on sustaina&le
solution
[Strategic Audit] Page 3+
2,8 $dentifying gro9th options of BAT
Common /ays to e=*and a &usiness include makin- a strate-ic ac0uisition or mer-in- /ith
another &usiness. An ac0uisition is /hen /e &uy another &usiness and end u* controllin- it. A
mer-er is /hen /e inte-rate our &usiness /ith another and share control of the com&ined
&usinesses /ith the other o/ners. BA+ has sco*e in strate-ic ac0uisition to e=*and the &usiness.
BA+ also is a**ro*riate for "ertical alliance to e=*and the &usiness.
2,8,1 2)%3T6 %PT$%# %& BAT
BA+ focus chan-es as it mo"es &eyond the start$u* *hase. Identifyin- o**ortunities for -ro/th
&ecomes a *riority to ensure the BA+ sustaina&ility.
8e can measure -ro/th &y lookin- at key statistics such as(
turno"er
market share
*rofits
sales
staff num&ers
)o/e"er, determinin- /hich measure deli"ers the most accurate *icture of the &usinessE
*erformance de*ends on &oth the ty*e of &usiness and /hat sta-e it has reached.
[Strategic Audit] Page 3%
1here to !egin
"en if BA+ is ha**y /ith your current *erformance, itEs im*ortant to kee* lookin- for /ays to
de"elo*. Aoin- for -ro/th may therefore &e-in &y "ertical inte-ration of the com*any. +his /ill
hel* ensure BA+ is *ro*erly structured and resourced to make the -ro/th strate-y "ia&le.
2,8,2 %PT$%# &%) 2)%3T6+ '$V*)#$&$CAT$%
#i"ersification can take se"eral forms, includin-(
ne/, related *roducts or ser"ices to e=istin- customers
ne/ markets for e=istin- *roducts
ne/ *roducts for ne/ markets
[Strategic Audit] Page 3)
2,8,3 %PT$%# &%) 2)%3T6+ PA)T*)#6$P#< =%$T V*T()*#< 7*)2*)# A' AC>($#$T$%#
Successful co$o*eration can deli"er(
more resources
sharin- of the mana-erial load
lar-er skills and talent &ase
&i--er *ool of contacts
increase in markets
di"ersification and or-anic -ro/th usin- increased resources
reduced commercial risk
2,8,4 PA)T*)#6$P# A' =%$T V*T()*#
Partnershi*s and 'oint "entures can offer &oth *artners si-nificant &enefits, includin- sharin-
e=*erience, skills, and *eo*le, e0ui*ment and customer &ases. +hrou-h a *artnershi* or 'oint
"enture arran-ement /ith a com*lementary, non$com*etiti"e &usiness, BA+ may &e a&le to o*en
ne/ markets or im*ro"e the offer to e=istin- ones.
[Strategic Audit] Page 3'
AA!"#$# %& &$)7 #C%P*
#irection
)ori3ontal condition
BA+ is an or-ani3ation /ho follo/s the t/o strate-ies "ertical and hori3ontal at the same time
&ecause this is a lar-e or-ani3ation /ho /ants to en'oy the &enefit of the &oth strate-ies.
[Strategic Audit] Page 3#
Mana-ement consciousness for
an inte-rated mana-ement
system
Syner-y of mana-ement actions, resources allocation, "alues,
common &eliefs O learned lessons
Inte-rated in o*erational
acti"ities throu-h *rocess
&ased desi-n.
#ocumentation
inte-ration
P
e
r
t
i
c
a
l

c
o
n
d
i
t
i
o
n
3,1 Vertical $ntegration
In microeconomics and mana-ement, the term vertical integration descri&es a style of
mana-ement control. Pertically inte-rated com*anies in a su**ly chain are united throu-h a
common o/ner.
8hen a com*any e=*ands its &usiness into areas that are at different *oints on the same
*roduction *ath, such as /hen a manufacturer o/ns its su**lier and.or distri&utor. Pertical
inte-ration can hel* com*anies reduce costs and im*ro"e efficiency &y decreasin- trans*ortation
e=*enses and reducin- turnaround time, amon- other ad"anta-es. +hat,s /hy /e can
say, yes the de-ree of "ertical inte-ration s a**ro*riate for BA+ and Bat follo/s the "ertical
inte-ration for their leaf su**ly chain.
3,1,1 !*A& #(PP!" C6A$
+he leaf su**ly chain is the most "ertically inte-rated in the to&acco industry and continues to
*ro"ide a com*etiti"e ad"anta-e. +hrou-h the *ro"en e=*ertise in leaf BA+ is in a stron-
*osition to address ne/ consumer needs and the effects of *roduct$&ased re-ulation. +he leaf
foot*rint ensures sustaina&ility of su**ly and -uarantees access to 0uality sources of leafD it also
-i"es the a&ility to mana-e short$term "ariations in *ricin- dri"en &y e=ternal commodity *ricin-
*ressures.
.ro!lems and !enefits
+here are internal and e=ternal ;e.-. society$/ide< -ains and losses due to "ertical inte-ration.
+hey /ill differ accordin- to the state of technolo-y in the industries in"ol"ed, rou-hly
corres*ondin- to the sta-es of the industry lifecycle.
*nternal gains
9o/er transaction costs
Synchroni3ation of su**ly and demand alon- the chain of *roducts
9o/er uncertainty and hi-her in"estment
A&ility to mono*oli3e market throu-hout the chain &y market foreclosure
Strate-ic inde*endence ;es*ecially if im*ortant in*uts are rare or hi-hly "olatile in *rice,
such as BM<
*nternal losses
)i-her coordination costs
[Strategic Audit] Page +0
)i-her monetary and or-ani3ational costs of s/itchin- to other su**liers.&uyers
8eaker moti"ation for -ood *erformance at the start of the su**ly chain since sales are
-uaranteed and *oor 0uality may &e &lended into other in*uts at later manufacturin-
sta-es
'enefits to society
Better o**ortunities for in"estment -ro/th throu-h reduced uncertainty
9ocal com*anies are &etter *ositioned a-ainst forei-n com*etition
Losses to society
Mono*oli3ation of markets
Bi-id or-ani3ational structure, ha"in- much the same shortcomin-s as the socialist
economy ;cf. ?ohn :enneth Aal&raithEs /orks<
3,1,2 T"P*# %& V*)T$CA! $T*2)AT$%#+
+here are &asically 3 classifications of Pertical Inte-ration namely(
1. 'ackward integration I +he e=am*le discussed a&o"e /here in the com*any tries to
o/n an in*ut *roduct com*any. 9ike a car com*any o/nin- a com*any /hich makes
tires.
$. 7orward integration I 8here the &usiness tries to control the *ost *roduction areas,
namely the distri&ution net/ork. 9ike a mo&ile com*any o*enin- its o/n Mo&ile retail
chain.
3. 'alanced integration I 1ou -uessed it ri-ht, a mi= of the a&o"e t/o. A &alanced
strate-y to take ad"anta-es of &oth the /orlds.
3,2 6ori?ontal $ntegration
)ori3ontal inte-ration ;also kno/n as lateral inte-ration< sim*ly means a strate-y to increase
your market share &y takin- o"er a similar com*any. +hese take o"er . mer-er . &uyout can &e
done in the same -eo-ra*hy or *ro&a&ly in other countries to increase your reach.
3,2,1 T*C6$>(*# %& 6%)$@%TA! $T*2)AT$%
)ori3ontal inte-ration can &e done either &y ac0uirin- a com*any or &y mer-in- /ith it.
Ac0uisition ha**ens /hen one com*any *urchases or ac0uires another com*any and &ecomes
the ne/ o/ner, /hereas mer-er is a strate-y /hen t/o com*anies mer-e /ith each other /ithout
losin- their indi"idual identities, to form a ne/ com*any for a *artici*atin- share.
*conomies of #cale
conomies of scale *ro"ide cost ad"anta-e to the com*anies throu-h e=*ansion of their *roduct
out*ut. 8hen -oods are *roduced in lar-er 0uantities, the a"era-e cost *er unit reduces, thus
[Strategic Audit] Page +$
increasin- the *rofita&ility of the com*any. Manufacturin- to&acco *roducts is a lar-e$scale
o*eration and /e BA+ has factories all o"er the /orld. +hey /ork to ensure that their costs are
-lo&ally com*etiti"e and that they use their resources as effecti"ely as *ossi&le. +heir com*anies
ha"e closed or do/nsi3ed some factories and consolidated *roduction else/here in recent years.
+hese chan-es ena&le them to rationali3e their machinery and technolo-y to esta&lish a more
cost$effecti"e o*erational &ase for the future. Inte-ratin- hori3ontally *ro"ides the com*anies
/ith &roader access to different unreached markets, resultin- in an increase in demand of their
*roduct. Beachin- to economies of scale &y hori3ontal inte-ration can hel* a com*any to achie"e
cost mono*oly and eliminate com*etition from the market.
*conomies of #cope
)ori3ontal inte-ration hel*s the com*anies to achie"e economies of sco*e. conomies of sco*e
*ro"ide cost ad"anta-e in *roduction of t/o or more *roducts. Com*anies can share resources
common to different *roducts, the -lo&al dri"e &rands of BA+ are dunhill, kent lucky srike and
in *allmoll and in 2011 they *ro"ided around 35F re"enue. And other international &rands
include "o-ue, "ictory, Bohmans, cool, *eter Stuy"esant, Benson O hed-es, State e=*ress 555
and 'hon *layer -old leaf. 6ur &rands are sold in around 140 market /orld/ide. +hus remo"in-
cost redundancy. Inte-ratin- /ith another com*any can increase the num&er of *roducts
*romoted at the same ad"ertisin- cost and also results in reduction in *er$unit distri&ution cost.
)ori3ontal inte-ration creates syner-ies &et/een the com*anies.
$ncreasing 7arAet Po9er
Inte-ratin- hori3ontally consolidates the industry and creates mono*oly. +his hel*s the
com*anies to -ain *o/er in the market, as /ell as dominate su**lies and do/nstream channel
mem&ers in terms of cost and 0uality. 8e ha"e a successful &rand marketin- strate-y &ased on
inno"ation, res*onsi&ility and consumer choice. 8e reco-ni3e that our &usiness starts /ith our
consumers and our &rand *ortfolio is desi-ned to meet key consumer needs, es*ecially in our
strate-ic consumer se-ments. 6ur four Alo&al #ri"e Brands I #unhill, :ent, 9ucky Strike and
Pall Mall I and our other international &rands account for more than 50 *er cent of our total
ci-arette "olumes.
$nternational Trade
Inte-ratin- hori3ontally hel*s a com*any to enter forei-n markets directly. +his reduces the cost
of international trade &y allo/in- the com*any to &oth *roduce and sell the *roduct in the
forei-n market. BA+ has international reach and /ell$de"elo*ed distri&ution channels /ith
critical ena&lers of their -ro/th strate-y, allo/in- them to roll out inno"ations on a -lo&al scale.
Accordin- to them, /e continuously re"ie/ our route to market to ensure /e remain
com*etiti"e. +his includes our relationshi*s /ith /holesalers, distri&utors and lo-istics
*ro"iders, as /ell as our direct to store sales o*eration, /hich is often the most effecti"e /ay of
ser"in- retailers and &uildin- &usiness *artnershi*s
'ominate 7arAet
)ori3ontal inte-rations consolidate the market &y allo/in- com*anies to ac0uire or mer-e /ith
other com*anies, *uttin- small com*anies out of &usiness. +he ne/ com*any tries to dominate
the su**lies, "endors and customers, in terms of *rice and 0uality of the *roduct. Customers are
&ound to *urchase at hi-her *rice due to una"aila&ility of similar *roducts in the market.
3rong #ynergies
Syner-y creation is the main o&'ecti"e of hori3ontal inte-ration. )o/e"er, sometimes com*anies
fail to materiali3e the antici*ated -ain &ecause they do not focus ade0uately on creatin-
cor*orate syner-y &efore inte-ration.
*Bec.ting these strategies and Aey points to remembers
Pertical and )ori3ontal inte-ration strate-y -enerally can &e done &y &usinesses /hich ha"e
esta&lished themsel"es and *ro&a&ly ha"e a sta&le life as com*ared to ones /hich ha"e to
address risks on a re-ular &asis. +he immediate ad"anta-e of im*lementin- them is to
1. )a"e economies of scale
2. =*and your kno/led-e and ca*a&ilities
3. Increase market ;and *rofits<
[Strategic Audit] Page ++
H. 6/n the /hole life cycle so that you can chan-e it the /ay re0uired
5. Beduce com*etition ;&y mer-in- /ith them rather than com*etin-<
>. Pro"ide &etter ser"ices
7. Many more.
+he &enefits of "ertical inte-ration come from the -reater ca*acity it -i"es or-ani3ations to
control access to in*uts ;and to control the cost, 0uality and deli"ery times of those in*uts<.
3,3 2ro9th %ption
3,3,1 AC>($#$T$%
A third /ay a com*any can achie"e hori3ontal inte-ration is throu-h an ac0uisition, /hich is
another form of e=ternal e=*ansion. British American to&acco ;BA+< follo/s this -ro/th o*tion
[Strategic Audit] Page +%
to increase their market share. An ac0uisition is one com*any ac0uirin-, or takin- o/nershi* of,
another com*any. +his is achie"ed &y *urchasin- the com*any outri-ht and takin- *ossession of
it or &uyin- 51 *ercent or more of the shares of the com*any and thus achie"in- a controllin-
interest. An ac0uisition is different from a mer-er in that a mer-er com&ines the mer-ed
com*anies into one entity. An ac0uired com*any is a&sor&ed into the e=istin- com*any that took
it o"er.
)ori3ontal inte-ration refers to e=*ansion of &usiness at the same *oint in the su**ly chain. +his
strate-y is ado*ted /hen com*anies ha"e their e=istence in the same *roduct line or market. +he
-oal of hori3ontal inte-ration is to consolidate the market &y ac0uirin- or mer-in- like
com*anies and e=*loit the market &y mono*oli3in- the industry. +he *henomenon is also
referred to as hori3ontal e=*ansion &ecause it is an e=*ansion of a firm /ithin an industry for
increasin- its market share for a *articular *roduct.
+he to&acco industry remained fairly sta&le durin- 2011, /ith little MOA acti"ity amon- the
leadin- industry *layers. 6n 2> May 2011, the Arou* announced that it had a-reed to ac0uire
100 *er cent of *ri"ately$o/ned Prota&aco, the second lar-est ci-arette com*any in Colom&ia.
+he transaction /as com*leted on 11 6cto&er 2011 and the deal /as financed from internal
resources. 6ur cor*orate acti"ity in 200% has &een confined to relati"ely small ac0uisitions, such
as Bentoel in Indonesia, rather than the lar-e scale, transformational deals that ha"e seen
Si-nificant consolidation in our market*lace.BA+ is lookin- to -ro/ their &usiness and
accordin- to them they /ant to say, /e &elie"e /e can meet our financial o&'ecti"es throu-h
or-anic -ro/th alone. )o/e"er, /e continue to monitor ac0uisition o**ortunities around the
/orld and /ill *artici*ate /here it makes financial and strate-ic sense to do so.
3,3,2 7*)2*)
A com*any also can achie"e hori3ontal inte-ration throu-h e=ternal e=*ansion. +his is
accom*lished &y a mer-er /ith another com*any at the same sta-e of *roduction. +his can allo/
the com*any to achie"e di"ersification into com*lementary &ut dissimilar *roduct markets. If the
*roducts that the com*anies sell are similar, ho/e"er, the mer-er is referred to as a mer-er of
[Strategic Audit] Page +)
com*etitors. A mer-er is referred to as a mono*oly /hen all *roducers of a s*ecific *roduct or
ser"ice mer-e and an oli-o*oly /hen the ma'ority of the *roducers mer-e.
3,3,3 A!!$AC*
An alliance is an a-reement or friendshi* &et/een t/o or more *arties, made in order to ad"ance
common -oals and to secure common interests.
Businesses use strate-ic alliances to(
achie"e ad"anta-es of scale, sco*e and s*eed
increase market *enetration
enhance com*etiti"eness in domestic and.or -lo&al markets
enhance *roduct de"elo*ment
de"elo* ne/ &usiness o**ortunities throu-h ne/ *roducts and ser"ices
e=*and market de"elo*ment
increase e=*orts
di"ersify
create ne/ &usinesses
Beduce costs.
Strate-ic alliances are &ecomin- a more and more common tool for e=*andin- the reach of your
com*any /ithout committin- yourself to e=*ensi"e internal e=*ansions &eyond your core
&usiness.
[Strategic Audit] Page +'
3,3,4 $T*)A! *CPA#$%
A com*any can achie"e this -ro/th throu-h internal e=*ansion. +his can occur /hen a retailer
increases the "ariety of *roducts it sells in a s*ecific cate-ory. 7or e=am*le, a hair salon that sells
a limited num&er of sham*oo &rands may add other &rands to its sham*oo offerin-s in order to
a**eal to a /ider and more di"erse customer &ase.
3,4 2eographic scope
Aeo-ra*hic sco*e is the co"era-e that com*uters ha"e /ithin a certain -eo-ra*hic area.
It is also ho/ far the com*uter alon- /ith its net/ork can reach -eo-ra*hically. 9ocal net/orks
use dedicated data channels and consist of *ri"ate &ranch e=chan-es and local area net/orks.
8ide$area net/orks use telecommunication channels and also include "alue added net/orks.
[Strategic Audit] Page +#

3,4,1 C!A##$&$CAT$% 7A)5*T ACC%)'$2 T% 2*%2)AP6$C #C%P*
+he market, accordin- to the -eo-ra*hic sco*e, can &e classified as local, re-ional, national and
international. Currently, the &orders are increasin-ly *ermea&le and com*etition is characteri3in-
&y &ein- transnational.
Althou-h the im*ortance of the international market -ro/s day &y day, the local market, re-ional
and national remain much rele"ance, es*ecially for small and medium$si3ed.
3,4,2 )%(T* T% 7A)5*T
+he route to market of BA+ is critical and allo/s us to roll out inno"ations faster on a -lo&al
scale as /ell as to fully meet consumer demand at the *oint of sale. 8here a**ro*riate, /e
&elie"e that direct to store sales ;#SS< are an effecti"e /ay of ser"in- retailers and &uildin-
sustaina&le &usiness *artnershi*s. #SS -i"es us "isi&ility and control o"er the sales and
distri&ution *rocess, allo/in- us access to &oth the market and consumer information. It also
*ro"ides a direct commercial link to our most strate-ic retail accounts. )alf of our -lo&al "olume
is sold to retailers throu-h our o/n distri&ution ca*a&ility in key markets includin- Canada,
Bra3il, South :orea, Australia, Bussia, Bomania, South Africa and 2i-eria. In other markets, /e
/ork /ith third *arties to ensure our *roducts are effecti"ely sold and deli"ered to retailers.
)*C%77*'AT$%# &%) &(T()* &$)7 #T)AT*2"
I recommend to not chan-e the BA+ *resent strate-y, &ecause the *resent strate-y is "ery
effecti"e and efficient. +he com*any is -ro/in- fast &y im*lementin- *resent strate-y.
+he or-ani3ation de"elo*ment and market share is im*ro"in- at *resent time. So it,s not
necessary to chan-e the strate-y of BA+ at *resent time.
+here is some o**ortunity for BA+ to em*loy re"olutionary strate-y &y considerin- the
demand of time. +he /orld &usiness en"ironment is chan-in- "ery fast so sometimes the
or-ani3ation should take some ste* in contin-ency &asis.
Chan-e in strate-y often in"ol"es a chan-e in /hat the com*any is offerin- to consumer.
Chan-e in strate-y is sometimes chan-in- the o"erall marketin- mi= of the com*any.
Chan-in- the strate-y sometimes means chan-in- the *rocess ho/ to deli"er "alue to
customer, /here the com*any is -oin- to com*ete. BA+ should not chan-e the all facets
of strate-y diamond to u*-rade e"erythin- rather BA+ can ada*t to the chan-e of market
&y im*lementin- the contin-ency *lan.
1es, in our recommendation /e stated a&out the term Mstrate-ic interactionN or you could
say the *ossi&le com*etitor,s res*onse to the mo"e of BA+. )ere as it is like a -ame
e"ent /here the ri"als of the *articular firm are de*ends on the other firms mo"e and &oth
*arties are a/are of the future ste* that their ri"al could take. 8e think it is an ad"anta-e
to BA+ as if they are the market leader in their industry.
[Strategic Audit] Page %0
8e also ha"e demonstrated the feasi&ility of our recommendation in the o"erall *a*er
that /e *re*ared /hich is ali-nin- /ith the o"erall firm,s as*ect.
)*&*)*C*+
htt*(..///.&at.com.-rou*.sites.ukRR3mnfen.nsf."/Pa-es8e&9i"e.#652A#>)S
o*endocumentOS:2T1
htt*(..///.&at.com.-rou*.sites.ukRR3mnfen.nsf."/Pa-es8e&9i"e.#652A#7AS
o*endocumentOS:2T1
htt*(..en./iki*edia.or-./iki.BritishRAmericanR+o&accoU6*erations
[Strategic Audit] Page %1
htt*(..///.&ata.com.au.-rou*.sites.BA+R781:A4.nsf."/Pa-es8e&9i"e.#6781:SQS
o*endocumentOS:2T1
htt*(..markets.ft.com.Besearch.Markets.+earsheets.SummarySsTBA+S(9S
htt*(..///.-uardian.co.uk.&usiness.&ritishamericanto&acco
And other *df files from BA+,s /e&site.
[Strategic Audit] Page %$

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