The Challenges Faced by Tobacco Industry**

Bearing in mind how to start this essay avoiding common places I realized that some threats for tobacco industry are the same in their basic appearance. What have changing nature are interaction and way to deal with them. It’s well known that successful company has to be proactive, to predict and plan activities. In general, tobacco industry will always face challenges like state with legislation and taxation, health threats and agreements, new technologies, scientific facts, and restrictions in sales and advertising.

• Economic crisis Before other issues I want to examine the effect of economic crisis on tobacco industry. There are conflict interests considering tobacco industry. Although state has to deal with health protection and prevention the fact is that additional taxes for tobacco products are important revenue for the state. Wondering how to increase contributed revenue some states, decided to increase the tobacco additional taxes as far as tobacco products are considered luxury goods. It has to be said that elasticity of demand is not dependable of prices, so state doesn’t have a much space for correction because goods like tobacco products always find their way to consumers, either legally or illegally. Possible effects could be decrease in sales of some brands positioned to target average income consumer and increase in sales of low price brands.

• Regulations and legislation In many states, legislation is very restrictive to tobacco companies, insuring control of sales, advertising, shipment, and consummation in public places. And it seems that regulations are going to be more restrictive. There are also active campaigns against smoking. I tried to find some data showing results of such a campaign and how the target audience is affected. But it seems that there is a very low effect on cigarettes users. I want also to underline that in some countries consummation of tobacco product is part of culture, and that state doesn’t have interest to regulate this area.

• The restrictions in marketing tools More that other industries, tobacco industry is facing high level of control, it means constant innovation in proceedings such as marketing, trade marketing, sales, promotion. It is difficult to create image of socially responsible company when there is proved bad effect on people’s health, but it’s not impossible to position business as a service for satisfaction of those adults who have a need to consume tobacco products. In that sense, there are limited tools in hands of tobacco companies, but also tobacco companies create revolutionary approach to marketing and PR.

• New technologies, research Like any other industry, science research, improving quality and developing mixture of ingredients are important issue for tobacco industry. Ten years ago probably no one count slim cigarettes would bring such a market success. And for an ordinary consumer it is hard to predict what new trends will occur, that’s why the company has challenge not to follow, but to create trends.

• New brands Variety of tastes requires adequate company response. Strategy of creating brand portfolio, with brands targeting different consumers seems to be good. Considering changes that occurred in consumers self-consciousness, a move to a lighter cigarettes, was a perfect move to keep market share. In future, maybe the new sort of tobacco products will be introduced. With different filters, ingredients and tastes.

These effects are intertwined and must be considered in global scope. There are differences among high developed countries and developing countries and optimal strategy refers to combination of resources used in creation of profitable business. In tobacco industry be leader is a must, not an option.

** This is the essay written in the first step of application for Student Practice Program in BAT SEE, but unfortunately the author didn't pass second selection round.