MGT603 Strategic Management Assignment No. 01 Fall 2014 Ideal Solution

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MGT603 Strategic Management Assignment No. 01 Fall 2014 Ideal Solution & Discussion Close Date December 02, 2014


“Industry Analysis”
Assignment
For a long time, the tobacco industry was seen as a static and unprofitable one.
Between the late 1980s and 2000 most of the tobacco producers were working at
national level which were often state owned and frequently unsuccessful. However
more than 05 independent Tobacco companies’ went into loss and ultimately
collapsed.
In 2006 PTC Tobacco Company paid 50 million to buy tobacco from its local market and
ultimately became the Pakistan largest Tobacco Company. During the following year
LAKSON Tobacco bought 20 million tobaccos from its local market.
New entrants
In the last 5 years Khyber Tobacco got more popularity in the target market and
SUNAIR Tobacco had been investing in new production facilities.
Substitutes
There is much technology involved in the industry and now companies bring new
machines. KTC got new technological best filter rod machine as a substitute machine in
filter of cigarette.Buyer power
Buying power of cigarette is in the age bracket of 18 to 30 years. So now every Tobacco
company is reducing its prices.
Competitive rivalry
Every company wants to get maximum profit form its target market. For this purpose,
they do more advertisement, good packaging and especially reduce their prices.
Supplier power
Most of the Tobacco companies have their own suppliers.
The Requirement:
According to porter’s five forces model, which forces have more positive impact on
Tobacco industry and which have negative impact on it?
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Substitute:-
The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. For example, tap water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar product. Increased marketing for drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase consumption of all soft drinks), albeit while giving Pepsi a larger slice at Coke's expense. Another example is the substitute of traditional phone with a smart phone.
Buyer power:-
The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. The buyer power is high if the buyer has many alternatives. The buyer power is low if they act independently e.g. If a large number of customers will act with each other and ask to make prices low the company will have no other choice because of large number of customers pressure.
Competitive Rivalry:-
A starting point to analysing the industry is to look at competitive rivalry. This term describes the intensity of competition between existing players (companies) in an industry If entry to an industry is easy then competitive rivalry will likely to be high.If it is easy for customers to move to substitute products for example from coke to water then again rivalry will be high.
Suppliers Power:-
The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.