Imperial Tobacco Research And Development
Political factors affecting the group include the anti-smoking campaign promoted by the British government, resulting from the link between smoking-rates and lung cancer. The government, alongside the NHS, has brought forward a number of initiatives to encourage smokers to quit smoking, such as ‘the Together Program’ and ‘the NHS Stop Smoking Services.
‘ Following successful implementation in Scotland, the ‘Smoking Ban’ was extended into England and Wales, thus meaning that as of July 2007, “smoking [is] no longer permitted in any enclosed or substantially enclosed premises or vehicles that [is] open to the public including pubs, restaurants and all places of work. ” 5 As a result of these initiatives to discourage smoking, it has become increasingly difficult for Imperial Tobacco to expand business activities within the UK market, leading the group to concentrate efforts on expanding into emerging markets where there is less regulation.
6 Economic factors affecting the Imperial Tobacco Group include the current economic downturn. Recent GDP figures in the UK economy have shown a sixth consecutive quarter of negative growth, meaning that consumers have less disposable income. However the addictive properties of nicotine, which lead to dependence on the drug by users, results in Imperial Tobacco facing a highly inelastic demand curve for their products. Therefore it is unlikely that the current economic downturn will lead to a significant loss in sales.
Social factors affecting Imperial Tobacco have changed significantly over the course of the company’s history. In the early-half of the 20th century, it was estimated that 80% of British men were regular smokers. Habits of smoking were often glamorised and as is stated in the Britannica Encyclopaedia: “smoking was an acceptable form of social behaviour in all areas of life-at work, in the home, in bars, and at the cinema.
” 7 Following research done by Richard Doll, in the British Medical Journal in 1950, showing evidence of correlation between smoking and lung-cancer rates, attitudes towards smoking began to change. Nowadays there is increased awareness of the adverse health-risks of smoking, including vascular stenosis, heart attacks and birth defects, leading to an overall decline in smoking rates. Technological innovations have also impacted Imperial Tobacco.
Advancements in technology for cigarette production mean that the production of cigarettes has become a highly automated process. Whereas once the process of rolling cigarettes, inserting filters and packaging was done with human supervision, modern advancements mean that 14,000 cigarettes can be produced per minute and the processes of rolling cigarette paper and packaging are done quickly via machines. The large scale usage of this machinery has lowered unit-costs for Imperial Tobacco.
Imperial Tobacco faces a changing business environment. Threats to the business in the immediate future include current proposals being considered by Parliament to ban the display of tobacco products in retail outlets, which would make it even more difficult for Imperial Tobacco to promote its brand8. In addition, there is currently debate amongst policy-makers to extend the ban on the sale of tobacco-products from persons under 16 to persons under 18, which would further reduce Imperial Tobacco’s declining UK market.
In the short term future, Imperial Tobacco’s strategy should be to increase investment in technology, to further simplify the cigarette-production process and reduce costs to compensate for the effect of indirect taxation by government. In order to offset the decline in market volumes amongst Western markets, in the next few years Imperial Tobacco must set out the framework to shift its resources towards expanding its business within the emerging markets of Asia and Eastern Europe, where market volumes are growing and where there are considerable opportunities to develop their brand-name ahead of their competitors.
