Strategic Management in a Hostile Environment: Lessons from the Tobacco Industry

Strategic Management in a Hostile Environment: Lessons from the Tobacco Industry

Strategic Management in a Hostile Environment: Lessons from the Tobacco Industry

Strategic Management in a Hostile Environment: Lessons from the Tobacco Industry

Synopsis

This study focuses on fifty years of evolution in the tobacco industry from the vantage point of the strategic actions taken by its member firms in response to the anti-smoking environment. It details the growth of the industry from a collection of old-style single-brand companies to its modern status as a strategic group of diversified multi-brand competitors. The work of management guru Michael Porter provides the framework for the study. The strategic choices made by the six companies are examined in light of Porter's management theories by focusing on the firms' attempts at both product and market diversification. The book is a timely and instructive overview of an industry successfully operating in an increasingly hostile business and social environment.

Excerpt

The cigarette industry has undergone three major shifts in its historical environment. the first was a structural change wrought by the government when it dissolved James B. Duke’s tobacco trust in 1911. the break-up of the trust resulted in four successor companies (American Tobacco, R.J. Reynolds, Liggett and Myers, and the P. Lorillard Company), all of which are still active in the industry in 1995.

The second major environmental shift was that from a consumer demand for dark Turkish tobacco cigarettes to a preference for lighter American blend tobacco-type cigarettes. This change in consumer preference was facilitated by World War I. the war interrupted the supply of Turkish leaf from the Mid-east and hence the production of dark cigarettes. Thus, the masses of men undergoing the military socialization process were introduced only to lighter American blend-type cigarettes. This was the cigarette habit the doughboys came home with after the war. This dissemination of lighter blend cigarette preference, combined with the action of the cigarette companies’ national advertising campaigns for their respective major brands, triggered the tremendous growth experienced by the cigarette manufacturers between 1915 and 1950. a similar shift from dark to light tobacco has occurred on a global basis over the last thirty-five years of the century.

The third major impact on the industry was the modern anti-smoking movement that commenced in the 1950s and continues unabated today. the first wave of anti-smoking activities (publicity by health organizations, the surgeon general, and activists; advertising bans for the industry) led to the search for a safer cigarette. This search has resulted in the consumption of filter cigarettes rather than nonfilters. in 1995, filter cigarettes accounted for 97.2% of cigarette consumption as opposed to essentially 0% in 1950. This desire for a . . .

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