Organizational Direction of British American Tobacco Nigeria limited Essay Example

local sourcing of sun-cured tobacco for VFM production requires involving more small rural farmers in BATNL's business area to meet the raw material needs for the growing demand in the VFM segment.

As for forward integration, it includes developing a broader and more efficient distribution network by incorporating selected strategic clients into an electronic distribution system and providing financial assistance. The country's strategic location can be utilized to establish it as an export hub for other West and Central African countries, offering cost-saving advantages to the group, particularly in terms of cheaper labor, shipping, and import taxes.

Procuring both forward and backward integration, along with establishing the fabrication mills in Nigeria as export centers, would make it possible to maintain capacity utilization and reap the benefits of economies of scale. In the current situation, increasing market share will be challenging, so the focus should be on expanding the overall market instead of taking from competitors. Switching from other brands would be a difficult task considering the large market size enjoyed by BATNL. To boost sales, the emphasis should be on capturing the market growth as a whole. Implementing these ideas would ensure a sustainable competitive advantage, aiming to increase profitability.

Organizational Strategic Objectives

Current Strategic Objectives

In the early 1990s, BAT made the decision to concentrate solely on tobacco, which then regulated and transformed the Group.

In 1995, BAT set out to become the top company in the global tobacco industry by implementing a strategy. This section provides an overview of BATNL's strategy, which they believe will help them establish and maintain a sustainable business in the tobacco industry.

Ultimate Strategic Goal - Achieving Leadership in the Tobacco

Industry

BATNL aims to become the leading company in the tobacco industry, with a vision of creating long-term value for their stakeholders. They recognize that being a leader not only leads to financial success but also makes them an attractive partner for key stakeholders. Additionally, they place high importance on being perceived as a sustainable company. The concept of leadership is defined by both quantitative and qualitative factors.

BATNL aims to be both volume leading and value leading in comparison to its international rivals. The company understands that its success is contingent upon attracting mature consumers and therefore places a strong emphasis on being consumer driven. However, simply taking quantitative measures is not enough for BATNL to fulfill its responsibilities as a company. It takes a long-term approach, focusing on the quality of its business practices and operations. As a result, BATNL strives to be acknowledged as an industry leader and the preferred partner for governments, NGOs, investors, and potential employees.

< p > BATNL is committed to demonstrating its responsibility as a tobacco Group and maintaining a sustainable business, while offering exceptional products. To achieve its company vision, BATNL has established a strategy based on four elements: Growth, Productivity, Responsibility, and Winning Organization. < /p >
< h3 > Component Parts for Achieving the Ultimate Strategic Aim < /h3 >
Winning Organization: A key aspect of BATNL's strategy is to have the right people in the right work environment. This forms the foundation of the Winning Organization scheme, where outstanding individuals who possess the skills and drive necessary for competitive advantage and superior performance are recruited.

The company's goal is to attract, develop and retain talented individuals. They also

emphasize the importance of having a learning culture, where knowledge is shared quickly, mistakes are learned from, and successful practices are replicated. To be successful, British American Tobacco must also provide a positive work environment that encourages change, innovation, and is guided by the company's principles. This will inspire employees to perform at their best and enjoy their work. Additionally, a winning strategy requires developing leaders at all levels who have a clear vision for the business, promote innovation, and can motivate and empower their teams to contribute to the company's global growth. British American Tobacco Nigeria aims to increase its market share in West Africa through both organic growth and mergers and acquisitions.

For organic growing, the company is focusing on key strategic segments of the market that present the best opportunities for long-term growth, including Premium and International Brands. In addition to continuing to focus on the growth of Global Drive Brands, BATNL is also open to pursuing opportunities for profitable volume growth in Value for Money and Low Price Segments. The company also aims to maintain or strengthen its positions in priority markets, which are defined as the largest and most profitable ones. BATNL believes that it is important to continuously develop and offer innovative, differentiated products that provide added value to consumers under its brands.

In terms of productivity, BAT's overall approach is to utilize its global resources to increase profits and generate funds for reinvestment in its business. Today, all companies are actively seeking ways to reduce costs.

BAT 's objective is to reduce costs, improve product quality, and increase market speed, as well as enhance effectiveness in deploying resources. BATNL prioritizes consumers

and efficiently allocates marketing resources. Maintaining a strong balance sheet involves focusing on capital efficiency, including managing inventory levels and effectively utilizing assets, funding, and capital. BATNL remains committed to balancing commercial objectives with the expectations of various stakeholders in order to maintain a sustainable business.

The company communicates with all stakeholders about its Business Principles, which explain how the business should be operated responsibly. The company's three Business Principles, Mutual Benefit, Responsible Product Stewardship, and Good Corporate Conduct, are supported by a set of Core Beliefs. In terms of regulatory matters, BAT promotes balanced tobacco regulation that considers both consumer preferences and societal interests. BAT also advocates for an open-minded and objective approach to harm reduction policies and ensures that its businesses can compete and succeed. BAT acknowledges that its products can be harmful to consumers' health and has publicly stated a goal to reduce this harm to meet consumer needs and societal expectations. To achieve this, BAT aims for a progressive reduction in harmful substances in its products and the successful launch of a new generation of tobacco products that are recognized by scientific and regulatory authorities as posing significantly reduced health risks.

In terms of the strategic plan, there are various factors that affect it. One factor is the contextual environment of Nigeria, which gained independence in 1960 but experienced military rule for over 35 years until 1999.Nigeria is being governed by democratically elected civilian authorities.

Under the new fundamental law adopted in 1999, a strong presidency appoints a federal executive council that consists of authorities curates and curates from each of Nigeria's 36 provinces. Although the 36 authorities enjoy more freedom than under

the previous military rule, they still rely on the federal government for support. This arrangement creates a system of decentralized power centers, with the president holding the highest authority and making political negotiations challenging. The estimated GDP for 2006 is $116.7 billion, and the expected economic growth rate is 5.4%.

The high inflation rate of 8.7% has a negative impact on the economic public presentation. The People's Democratic Party (PDP) has been in power since 1999 and implemented the National Economic Empowerment and Development Strategy (NEEDS) to boost growth in non-oil sectors and improve the macro-economy. Additional funds have been allocated by the government for road infrastructure, with efforts being made to attract investments in the power sector, which could lead to better infrastructure. However, progress in port reform is expected to be limited.

Both factors would have a positive impact on BAT Nigeria's supply chain. Non-oil company corporate profits are taxed at 30%. The Value Added Tax (VAT) for tobacco products is 7.5%, while other goods are charged at 5%. Since January 1st, 2004, cigarette sales promotion through billboards has been prohibited to regulate smoking.

Federal authorities and NGOs are pressuring authorities to ban tobacco product promotions through electronic and print media. Additionally, pressure groups are expressing concerns about tobacco farming as it makes land unsuitable for other crops.

Transactional environment

Nigeria has a population of 140 million, with only 2.9 million adult smokers, indicating significant growth potential for the tobacco industry. Despite BAT Nigeria already catering to a wide range of markets and consumer segments, further opportunities for increasing market penetration have been identified through various analyses.

The current market size of AFS is only 14%, indicating significant growth

potential. To capitalize on this segment, there is a need to develop brands specifically targeting Adult Female Smokers (AFS). Furthermore, premium brands identified through strategic group analysis should expand their geographical reach and increase market penetration. It is important to protect the super premium product line from brand dilution and enhance their presence in the market through specialized channels such as HoReCa. Upon evaluation of BAT Nigeria's product offerings across different segments, potential offerings for categories A, B, C, and D were identified, including pipe tobacco and cigars, limited editions, flavored varieties, and value-for-money brand variations. The supply chain of BAT Nigeria faces challenges in procuring Virginia tobacco due to a limited number of international suppliers, notably Argentina and Brazil.

There are several challenges with locally sourcing sun-cured tobacco, including a lack of suitable land for tobacco farming, a limited number of farmers involved in tobacco agriculture, and threats from pressure groups. Recently, Japan Tobacco Inc. acquired the Gallaher Group, making JTI the second largest market player in Nigeria with a 14.4% market share, following BAT Nigeria with 85.1%. However, we believe that the biggest threat to BAT Nigeria comes from Philip Morris Inc. (PMI).

The history of PMI's entry into new markets is characterized by quickly capturing a significant portion of the market within three years. This trend can be seen in Benin. While PMI's global flagship brand is Marlboro Lights, they are indirectly expanding their presence in the Nigerian market through Kraft Foods, a subsidiary of their parent company Altria Inc. According to the competitor analysis, BAT Nigeria's products are perceived to have a key advantage against other competitors, particularly PMI, due to their availability.

Stakeholder's

Influence and Progress towards Strategic Aim

Core Resources

In 2009, the BAT group reported a net income of ?1896m, which was attributed to stockholders' equity.

The fiscal strength of the BAT group is explicitly indicated in this passage. BAT Nigeria receives direct funding from its parent corporate structure, giving it access to ample funds that set it apart from other competitors. This has placed BAT Nigeria among the top organizations with substantial financial resources. Since signing a Memorandum of Understanding (MoU) with the federal government in November 2000, BAT has enjoyed a privileged status and strong rapport with the government, allowing it to establish production facilities in Zaria and Ibadan. These state-of-the-art units are unique to BAT Nigeria, as no other tobacco company has a cigarette factory in Nigeria. Additionally, BAT Nigeria has further enhanced its core resources by investing funds and efforts into developing dedicated supply chain intermediaries.

Core Competences

Although the MoU expired in April 2007 with the end of the PDP presidency, the strong relationship with the government has played a crucial role in developing a nationwide distribution network and increasing domestic tobacco agriculture.

BAT Nigeria has enhanced the efficiency and integration of its distribution network through the implementation of SAP (ERP faculty) and Siebel (CRM faculty). The core competency of BAT Nigeria is its integrated electronic supply chain with local access to raw materials. Through this process, and through continuous efforts in corporate social responsibility (CSR), BAT Nigeria has fostered strong social relationships and local knowledge. The BAT Foundation has been utilized to meet these strategic needs.

Aside from these local factors, BAT Nigeria has benefitted from the inheritance and technological expertise of its parent company. As a

result, the process of developing high-quality BAT products has been a key source of competitiveness.

Futuristic Strategic Position

Path to Sustainable Competitive Advantage

After analyzing the contextual and transactional environment, core resources and competences of BAT Nigeria, I propose a strategy that includes recommendations for strengthening the upstream and downstream supply chain [7], maximizing capacity utilization, developing Nigeria as an export hub for West African countries, and utilizing the BAT foundation in a mutually beneficial manner (for both BAT Nigeria and stakeholders). This strategy aims to provide BAT Nigeria with a sustainable competitive advantage. The production of internationally recognized brands of premium and value-for-money cigarettes is dependent on imported Virginia tobacco from Argentina and Brazil.

The reliance on foreign providers for the production of international Super premium, Premium and VFM trade names is influenced by political, economical, and ecological factors in exporting countries. To overcome the dominance of international providers and address the limited supply of raw materials, Virginia tobacco supplier base can be expanded by importing the same quality Virginia from alternative source countries such as Cuba, Mexico, Puerto Rico, and Venezuela. These source countries have a significant tobacco export trade activity and have broad international tobacco trade regulations, making it feasible to establish trade channels. The geographical location of these alternative source countries would not result in significant additional shipping costs. To meet the demand for local trade brands of VFM cigarettes, the cultivation of Sun cured tobacco needs to be increased. As part of this process, BATNL should negotiate with the government to implement a 'Land Use Decree' that facilitates farmers in gaining ownership of land.

Secondly, by providing land ownership and assisting farmers with mortgage

loans, advanced farming technology, and improved tobacco seeds, farmers can enter into a legal two-way contract with BAT Nigeria to ensure local cultivation and supply of Sun cured tobacco in exchange for a guaranteed purchase agreement.

Justification for the strategic choice

According to competitor analysis, consumers perceive PMI's products to be of equal or better value than BAT's products, despite lesser availability. Therefore, in order to maintain BATNL's current dominance, it is essential to establish a wide, efficient, dedicated, and controlled distribution network. In addition to strategic partnerships with Global Brand Nigeria Ltd. (GBNL) and Global Apex Ltd., downstream members of the distribution channel should be integrated into the electronic distribution platform of SAP and Siebel (CRM).

BATNL could benefit from financial and technological assistance for mediators in two ways: by having higher control over their channels and by promoting efficiency and financial ties with downstream channel members. The SWOT analysis indicates that BATNL's weakness lies in its reliance on cash sales. In order to protect against disruptions in BATNL's logistics network, the company needs to give up the exclusive use of cash sales and start offering credit facilities to wholesalers and distributors. Additionally, to maintain a high market share of 85.1%, it is important to heavily promote the premium brands and implement associated promotional activities and rewards/rebates for the selling channel. It is also crucial to prevent brand dilution for the premium brands and continuously enhance their image as brand ambassadors.

The potential for growth in the upmarket specialised HoReCa[ 10 ]channel is significant for the proliferation of ace premium trade name products. Currently, there is a problem of low cooperation from HoReCa owners,

which has made BATNL dependent on them for promotional purposes. This problem can be overcome by offering half-yearly or yearly contracts of brand association instead of relying on event-based approaches. To increase the involvement of rural small-holder Nigerian farmers in tobacco agriculture and business with BATNL, the BATN Foundation should focus on addressing issues related to the lack of access to modern agricultural machinery, developing new agricultural practices and innovations, providing production recognition, and offering fair and transparent marketing opportunities. Both local production facilities are currently underutilized, partly due to less demand compared to their full production capacity and partly due to constraints in the supply of raw tobacco.

Improving the supply of natural tobacco internationally and locally, while also developing Nigeria as an export hub for neighboring West and Central African countries, would assist BATNL in establishing a sustainable competitive advantage. This can be achieved by increasing economies of scale through capacity utilization and becoming a dominant player in the regional tobacco industry.