IMPERIAL TOBACCO

Imperial Tobacco

Imperial Tobacco

Part 1

Introduction

Imperial Tobacco Group is one of the largest tobacco manufacturers in the world, based in Bristol, UK. Imperial Tobacco produces and markets a wide range of tobacco, rolling papers and tubes, available in over 160 markets around the world. Key global brands of the company include Davidoff, West, Gauloises Blondes, Drum, Golden Virginia and Rizla and a strong portfolio of local and regional brands, such as: Lumbert & Butler, JPS, Fortuna, Gitanes, Horizon, Maxim and Excellence. Imperial Tobacco actively pursues three main objectives, namely: sales growth, cost optimization and efficiency improvements, as well as the effective management of liquidity. The company always strives to adhere to the highest standards of corporate governance in its operations. Enjoying a good reputation around the world, the company gives due weight to conduct their business in an open and honest manner. This paper aims at analysing various external factors influencing the company's business strategies and operations. These factors include political, economic, social, technological, legal and environmental factors. There are several indications and regulations implied to the tobacco industry of UK.

In UK companies need to include the health warning on the packaging of the product, the arrangement and charges of excise duty applied on tobacco products which sets the minimum excise duty at 57% of retail price, the advertising and sponsorship of tobacco products which prohibits advertising in print media, information society services and radio broadcasts and prohibits sponsorship of radio programs and international events, the sale of tobacco products is banned to below the age of 18 years (Bacchetti, 2002, 20). There have been several other directives by the government to create the smoke free areas in UK by banning the smoking in certain areas. All these issues are a great threat to the companies which are engaged in the production of tobacco products in UK.

The tobacco products are subjected to high tax payments, This scenario might be causing huge risk to the tobacco industry because the tobacco products are already subjected to high taxes, the customers as well as the companies who are engaged in production of tobacco products are charged with higher tax rate as compared to other products in the category and if the cost of the raw material is increased it will ultimately increase the overall cost of the product and the companies will have to charge extra price; this will require extensive promotional activities so as to retain the customers who are less brand loyal to the organization.

According to the agitators who oppose this idea it is believed that the people who are addicted to smoking there is no need to attract them as they are already addicted to the use of tobacco products (Hund, 2006, 791). However, the people who are not prone to smoking are influenced by such advertisements because of the macho and appealing nature of the advertisement youngsters and kids are influenced and ultimately adapt smoking habit. A 2006 European Commission on European attitudes towards tobacco found the percentage ...