15933130 PTC Final Project

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Chapter # 1

Organizational Description

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Total number of employees as at December 31, 2008 was 1,655 (2007: 1,668).

Reason for decreasing Employees

Organizational restructuring

Telecom sector attracted many employees of the company at high pays, as a result high

turnover of employee observed. This issue is somewhat now resolved by the company as

it has started paying more incentives to the employees and also giving training and

development courses to its employees.

Awards Won in the current year:The Company was awarded the following Awards:

Corporate Excellence Award by the Management association of Pakistan

BATs Global Environmental Health & Safety Award

BATs Global Leaf Award.

25th Corporate Excellence Award in Business and Industry Category

PTC Annual Report for 2007 was recognized as the best in its category by ICAP

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Focus of the Organization

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The Company focuses on the following operational targets:

Continued strong volume and profit growth.

Increased focus on productivity savings.

Launch of the 3rd cycle of our social reporting dialogues.

Improved corporate governance.

Environment, Health & Safety

Organizational Culture

Our culture consists of values we derive from our 4 guiding principles. We are currently in the

process of launching internal campaigns to further inculcate these values into the daily lives of

our employees. Our guiding principles in brief are:

Guiding principles

We follow four guiding principles that represent:

Strength from Diversity

Open Minded

Freedom through Responsibility

Enterprising Spirit

Our Guiding Principles describe the organization we are and the type of organization we want

to be. They represent the common values at the heart of our success.

1. Strength from DiversityStrength from Diversity reflects the cultural mix within the Company and a work environment

that respects employees individual differences. It also reflects our vision of harnessing diversity

of people, cultures, viewpoints, brands, markets and ideas to create opportunities and

strengthen performance.

For this reason, we are interested in what will differentiate you from others what makes you

unique.

2. Open Minded

Open Minded reflects our openness to change, opportunities and new ideas, including ways of

addressing regulatory issues and changing social expectations. We seek to listen without

prejudice, actively and genuinely considering other viewpoints.

3. Freedom through Responsibility

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Freedom through Responsibility describes how we make decisions: as close to the consumer as

possible. It also affirms our belief that decision-makers should accept

responsibility for their own decisions.

4. Enterprising Spirit

Enterprising Spirit has been a characteristic of our business for more than a century. It is

reflected in our ability to grow our business and its value within challenging environments in

the confidence to seek out opportunities for success, to strive for innovation and to accept

considered risk-taking as part of doing business.

5. Capacity and productionAgainst an estimated manufacturing capacity of 43,991 million (2007: 42,797 million) cigarettes,

actual production was 41,159 million (2007: 38,183 million) cigarettes. Actual production was

sufficient to meet market demand. There was no production through any outside manufacturing

source.

PTC and Corporate Social Responsibility:

Maintaining a large scale Corporate Social Responsibility (CSR) program in the midst ofpolitical change and economic uncertainty was not only a challenge but also a personal stretch

for the people involved. In the past, we have seen and surmounted many hurdles, however, the

kind of problems we faced in NWFP in 2008 were unprecedented. In this context, it is indeed a

testament to the steadfast nature of our resolve that we remain partners of first choice for our

communities, and our CSR initiatives continue undeterred, with the same energy and resolve as

before. Our afforestation program continues, with an expansion of the total plantation area and

increased distribution of saplings. In the area of public health, we have completed construction of

8 water filtration units, with 5 more planned in 2009. Our Mobile Doctors Units continued to

operate extensively treating patients in the underprivileged areas; this was in addition to the 19

medical camps organized in the year. We also held free eye camps and diabetic

screenings in partnership with various organizations such as Merck and Layton Rehmatullah

Benevolent Trust. In education, the Companys Learning Resource Centers saw 588 more

students graduate, with an 11% increase in the number of female students. Some 200 students

have been provided with the Adult Basic Education Society scholarships during the course of the

year. We also continued our tradition to engage with our stakeholders, having initiated

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Stakeholder Dialogue at the end of 2008. Our well establishedsustainability agenda will see us

publishing a Stakeholder Report in 2009. PTC is well aware of the unique challenge of operating

in the field, and is committed to rise to the occasion. I commend their efforts in the year past,

and am confident that despite some testing times ahead, we will continue to contribute to the

communities that we work with. People The people in PTC have always been one of our greatest

asset and we will continue to invest in the same through various initiatives that help us build a

winning organization. These include programs such as WAADA focusing on shop floor

employee morale, continuous investment in focused functional/leadership training programs and

coaching programs for first line leader such as TLDW (Team Leader Development Program). An

Employer Branding campus campaign by the name of Battle of Minds was also launched in

2008, focusing on attracting the right talent to our organization, and this was met with

great success. Demand for our highly developed local talent also remained high andduring 2008,

15 of our managers were sent out for long and short term assignmentsto various Operating Companies of BAT around the globe. Environment Health & Safety

PTC has always been a leader in the field of Environment, Health & Safety. EHS principles are

woven into the fabric of our organization and have now become part of the culture in all areas of

our business from seed to smoke. Our endeavor to improve

environmental programs has been recognized repeatedly by the Parent Group (BAT) with PTC

being awarded the annual EHS Excellence award for the fourth consecutive year in 2008 and

also, being awarded the accident free award for 2008 with No Lost

Work day Case incident reported across the organization during the year.

Core Competencies Business Process Re-engineering

2008 has also been a year of change for PTC with a number of Business Process Re-

engineering initiatives successfully implemented across the Company as the organization

embarked on a challenging and ambitious journey classifying our must do objectives to

succeed in the market as the Big Mountains and focusing our resources behind the same .

The Enterprise Program Office played a vital role in supporting the Company strategy by

setting-up the governance structures and process framework for effective program and project

management. Projects implemented during the year focused on the key areas of Talent,

Growth, Illicit Trade reduction, Productivity improvement and proactive approach toRegulations. PTC is on the forefront of adopting best practices on Corporate Governance and

Reporting standards, as our Annual Report for 2007 was recognized as the best in its category

by ICAP. In addition to the above, PTC won the 25th Corporate Excellence Award in Business

and Industry Category from the Management Association of Pakistan which is recognition of

the excellent management processes in our Company.

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Productivity approach to productivity

Concentrates on smart cost management, marketing efficiency and capital effectiveness deploying our resources effectively to increase profits and generate funds to reinvest in our

business.

People

The people in PTC have always been one of our greatest asset and we will continue to invest

in the same through various initiatives that help us build a winning organization. These

include programs such as WAADA focusing on shop floor employee morale, continuous

investment in focused functional/leadership training programs and coaching programs for

first line leader such as TLDW (Team Leader Development Program). An Employer Branding

campus campaign by the name ofBattle of Minds was also launched in 2008, focusing on

attracting the right talent to our organization, and this was met with great success.

Competitive Advantage of PTC:

Corporate Structure of PTC:

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Competiti

ve Scope


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Chapter # 2

External & Internal Analysis

(A) External Analysis:

Tobacco Industry Analysis

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Industry overview:

The tobacco industry is a source of revenues, employment and foreign exchange for the country.

The industry has to pay very high excise and sales tax while complying with various strict rules

and regulations of the government. During 2007-2008, it contributed above Rs.68 billion as

Central Excise Duty and Sales Tax. Despite its contribution to the economy, the industry is

highly criticized for its negative impacts on the society.

Structure of Industry:

In Pakistan the industry consists of farmers who grow tobacco, firms that convert the raw

materials into finished goods (Cigarettes), exporters and importers of tobacco and its products.

Smuggling of tobacco products to and from neighboring countries is also quite common.

Size and number of sellers:In Pakistan, tobacco cultivation occupies a relatively small area of 0.27% of the total irrigated

land. The country has been divided into various zones depending on the type of tobacco being

grown in that region. The details and amount of production is mentioned in appendix1.

The major firms involved in the manufacture of finished goods and exports include

Pakistan Tobacco Company ,

Lakson Tobacco Company,

Souvenir Tobacco Company,

Saleem Cigarette Industry,

Universal Tobacco Company , Imperial Cigarette Industry,

Khyber Tobacco Company,

International Cigarette Industry,

Walton Tobacco Company

Sarhad Cigarette Industry.

Of these firms Pakistan Tobacco Company is the market leader with lakson Tobacco Company

in second place.

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Number of buyers:

The firms that manufacture finished goods act as purchasers themselves, buying it from the

farmers. They serve as intermediaries that purchase, process and resell.

In the local market, Twenty-nine percent of men and 3.4% of women smoke cigarettes

regularly, concluded the National Health Survey, while the Pakistan Society of Cancer

Prevention says 37% of men and 4% of women over 15 years of age are smokers. According to

Pakistan Pediatric Association, 1,000 to 1,200 children between the ages of 6 and 16 years take

up smoking every day.

Cigarette consumption in Pakistan is five times higher than in India with 620 cigarettes peradult per annum against 119 for India. This shows that the market for tobacco industry is very

immense locally. Chewing tobacco is in demand in the villages.

Along side this; various countries are also acting as buyers for the tobacco industry.

Product differentiation:

The major product differentiation exists between chewing tobacco and cigarettes and cigars.

The main differentiation exists between the manufactured goods in the form of branded

cigarettes. The firms target different segments of the society with different price levels.

Differentiation also exists between imported and local cigarettes and cigars. Consumers are

willing to pay a premium price for the imported product especially cigars.

Entry conditions and government regulations:

There are no entry conditions as such but when a company enters the industry, it has to abide by

all the rules and regulations of government. This is very costly especially in terms of

advertising. The firms have to inform the consumers about the potential health hazards related

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to tobacco products. This implies that in order to enter as a manufacturer, heavy investment is

required.

The government is providing incentives to the tobacco growers in order to promote the industry.

This is being done through the Pakistan tobacco board. The board tries to find out their

problems and to educate them about the cultural operations, plant protection measures, picking

and curing operations. Other responsibilities of the board are to regulate, control and promote

the export of tobacco and tobacco products, and to fix grading standards.

Demand and supply:

The tobacco board also manages the demand and supply in the industry. According to legal

requirements, the tobacco manufacturing and exporting companies are required to inform their

tobacco requirements by the 21st of October to the Pakistan Tobacco Board. After discussions

between the Board and other stakeholders like buyers, growers, dealers, etc. and taking intoaccount factors like crop size, prices, domestic usage and exports, these figures are finalized.

In this way the growers get a rough estimate of how much they should grow. This creates a

balance between demand and supply. The Pakistan Tobacco Board, in collaboration with

tobacco companies, holds meetings in the tobacco growing areas to inform the growers about

the requirements of tobacco companies.

Image:

The industry has a negative image among its consumers and the general public. This is due to

the various health hazards associated with tobacco consumption. People are also blaming thegovernment for its support for the industry. Smoking is the cause of lung cancer in 90% of the

cases. Its users get addicted to it.

Although the companies can not change the nature of their product, they are trying to build a

socially responsible image in the eyes of the consumers. PTC is currently engaged in various

programs such as afforestation, Mobile doctors program, Youth smoking prevention, learning

resource centers. The laskson group has set up Lakson medical center (Sahiwal hospital) and a

Medical complex in Sawabi NWFP.

Price:

The government fixes the lowest price that firms can pay to growers. There is a restriction that

price for the current year can not be lower than that paid in the preceding year. The tobacco

board has specified the criteria for fixing prices.

Smuggling is resulting in revenue leakage for the government. Some groups say that high

taxation on the tobacco industry is encouraging smuggling.

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(B) Internal Analysis:

Pakistan Tobacco Company

SWOT Analysis

Strengths

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Economies of scale in production

Enterprise resource management for quick and cost effective operations

Efficient management Marketing efficiency and capital effectiveness

Business process re-engineering

Weaknesses Wastage of material in production.

Opportunities

Growing demand of cigarettes despite such anti smoking campaigns.

Threats

Illicit sector activities

The illicit sector continues to be the single biggest threat to long term commercial

viability and sustainability of the legitimate sector along with its adverse impact on

Government revenue

Law and Order Situation

The law and order situation has been precarious, culminating in the bombing at the

Marriott hotel which led to collateral damage to our Head Office in Islamabad.

The general security situation in the country continued to deteriorate in 2008 and it was

especially difficult in the tobacco growing areas of NWFP.

Technology

Changing Optimization techniques not only to ensure capacity enhancement but also to

adhere to international Environment, Health and Safety standards.

Available resources

Need of Raw material for meeting rising demand of cigarette

Government intervention for decreasing the cultivation of tobacco

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Social and economic trends

Social trends:

Increasing know how of cigarettes hazards

Anti - cigarette campaigns and litigations

Economic trends:

Rising taxes

High inflation

Rupee devaluation

Rising commodity and oil prices

Sharp increase in energy costs.

Government action

Cigarette use prohibition and awareness in people for hazards of smoking

Ban on sales promotions

Ban on product advertisements including sports sponsorships, TV, radio and outdoor

hoarding.

Changing Consumer needs

Switching to Discount brands due to decreasing purchasing power of the consumers

Threat of rivalry and new entrants

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PTC faces rivalry from Lakson Tobacco Pakistan in major, after it there is no other big

market player and cannot affect the sales of PTC that much.

As there have been the anti tobacco campaigns internationally, there is a threat that theother international industries might direct themselves for the developed countries to

ensure their sustainability. Pakistani market may also be in the threat for the international

companies to enter, as government policies for the entry are much relaxed but afterwards

the company has to abide by the strict rules and regulation for operating in the region.

PORTERS MODEL:

1. Rivalry among existing firms:

In Pakistan only two major companies compete with each other. These are Pakistan tobaccocompany and lakson tobacco company. So rivalry among firms is normal.

2. Bargaining power of buyers:

Cigarette consumption in Pakistan is five times higher than in India with 620 cigarettes per adult

per annum against 119 for India. This shows that the market for tobacco industry is very

immense locally. According to Pakistan Pediatric Association, 1,000 to 1,200 children between

the ages of 6 and 16 years take up smoking every day. Therefore bargaining power of buyers is

relatively low.

3. Bargaining power of suppliers:

Most of the tobacco used by the firms is produced in Pakistan, but still a considerable amount of

tobacco is imported every year so suppliers have some bargaining power regarding the prices

especialy.

4. Potential Entrants:

While the anti-tobacco movement in the USA helped lower cigarette sales, Big Tobacco, the

largest US companies: Philip Morris, R.J. Reynolds and Brown and Williamson have continue to

expand overseas.. They have flooded the markets in Asia and Eastern Europe withadvertisements, promotional products and cut-price brands designed to encourage new smokers.

5. Substitutes:

Substitutes are easily available in Pakistan so people have the option to switch to brands of other firms.

6. Other Stakeholders:

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Every year, the government spends some US$20,000 on anti-smoking messages but Anti-tobacco

campaigners are also playing there role to minimize smoking but cigarette companies spend

millions of dollars annually on advertising so this threat is neutralized upto much extant.

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Industry

Competito

rs

Rivalry

among

existing

firms

Potenti

al

Large

number

of

Low

bargain

ing

power

Medium

threat of

new

Substitut

High threat

of

substitute

Supplie

Bargaini

ng

power

of

Other

stakehold

Relatively is

of medium


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Porters Model

TOWS Matrix

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Large number of brand

loyal customers.

Economies of scale in

production

Good distribution

network

ERP

Wastage of material in

production

Growing Consumer

Market.

Less no. of companiesin the market.

Illicit sector activities

Technology

Social, politico-legal

and economic trends

Threat of rivalry and

new entrants

Retaining Loyal

Customers

Attracting new customersby promotions

Plant replacement

which ensures least

material wastage and

high production

Production of harm

free cigarettes

Pull Strategy to be

adapted

Discount brands to

be focused more


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Chapter # 3

Organizational Strategies

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Corporate Strategy:

In the current conditions prevailing in the country, PTC is undergoing multi- dimensionaldirectional Strategies, from enhancing revenues; profits and market share to cutting down

Cost of production, and somewhat retrenchment (Organizational Restructure) as and when

needed for the organizational interests.

Directional Strategy:

Vertical Integration (Backward Integration)

PTC is in backward integration as it has grown its own tobacco cultivation fields, henceprocuring the raw material from its own resources. But still it is in a limited scope, as the

cultivation place also changes the taste and color of tobacco. Therefore, they have also done

some contracts with farmers on standing field basis i.e. the whole field is purchased from

farmers the before it is harvested by estimating the yield of field.

Portfolio Strategy:

GE Business Screen Strategy

Factors that Affect Market Attractiveness

Market Size Big 10

Market growth High 10

Market profitability Medium 5

Pricing trends Medium 5

Competitive intensity / rivalry Medium 5

Overall risk of returns in the industry Medium 5

Segmentation High 10

Distribution structure (e.g. retail, direct, wholesale High 10

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10-30 = Low

30-60 = Medium

60-90 = High

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actors that Affect Competitive Strength H = 10, M = 5, L = 0

Strength of assets and competencies High 10

Relative brand strength High 10

Market share High 10

Customer loyalty High 5

Relative cost position (cost structure compared withcompetitors)

Medium 5

Distribution strength Medium 5

Record of technological or other innovation High 10

Access to financial and other investment resources Medium 10

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0-30 = Low

30-60 = Medium

60-90 = High

Hence, despite the fact that the Tobacco industry is facing the threats in

external environment, PTC is expected to grow, and should invest more in

order to gain maximum market share.

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Functional Strategies

Marketing Strategy

o Pull Strategy

Distributors are given License for the sale of products. Certain sales

targets are set for them which they are to meet.

The major market the company is focusing now a days is a youth

between the age of 16-20.

o Penetration Pricing

Price war has already been started by PTC in the previous years by

cutting down the prices of the products by half of the current sellingprices. As a result more people are purchasing the products, that has

lead PTC to gain a market share of 46.3%. Discount brands of PTC

including Gold Flake have seen a rigorous growth in sales. Almost

18% sales growth in Gold Flake has been observed as compared to

previous year.

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Financial StrategyDebt to equity ratio is reduced significantly to make the business less

leveraged. The ratio is dragged down from 0.28 to 0.16. hence making

attempts to transform the financial system into a flexible one.

Research and Development strategy

PTC is in Technological leadership as it has a modernized plant and

machinery which produces high number of sticks at a certain time. In

addition to this, a major issue in PTC was a high material wastage which hasbeen drastically reduced after having installed a software made by Sirilankan

Tobacco Company.

Operational Strategy

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o Advanced Manufacturing Technology

Major issue in PTC was a high material wastage which has been drasticallyreduced after having installed a software made on CAD/CAM basis by Sirilankan

Tobacco Company.

o Mass Production

PTC is in mass production and has also achieved economies of scale in it. In 2008

almost 42 Billion sticks had been produced.

Purchasing Strategy

o Multiple Sourcing

Indigenously procured

For most discounted brands like Gold Flake & Capstan local tobacco is

procured which is mostly from NWFP.

Imports

PTC also imports tobacco for its two products;

Gold Leaf- from Brazil

Dunhill- from Belgium

o Just in time Concept

PTC is now adapting Just in Time Concept for the procurement of the material

to ensure the freshness.

Human Resource Management Strategy

o Recently foreign training to unskilled labor was given to make them

working more efficiently.

o High Incentives are paid to the employees to ensure their loyalty

with the company and decreasing the turnover.

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Chapter # 4

Strategy Implementation

Business Process Re-engineering:

A number of Business Process Re-engineering initiatives successfully implemented across the

Company as the organization embarked on a challenging and ambitious journey classifying

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the must do objectives to succeed in the market as the Big Mountains and focusing

resources behind the same.

The Enterprise Program Office played a vital role in supporting the Company strategy by

setting-up the governance structures and process framework for effective program and project

management. Projects implemented focused on the key areas of Talent, Growth, Illicit Trade

reduction, Productivity improvement and proactive approach to Regulations.

Organizational Restructuring:

To enhance the efficiency and productivity of the Company, PTC has reorganized its core

committee The Executive Committee of the Board (ExCo) in 2006. In this context a

subcommittee of the ExCo was created namely The Operations Committee (OpCo) that

comprises of the senior managers from all function of the Company. After this segregationExCos primary responsibility shall be to assist the Board in the formulation and driving of

the strategy whilst the OpCo under the authority delegated by the ExCo shall operate to run

the day to day operations of the Company. This will allow operational issues to be dealt with

the focus and sense of urgency that they deserve, releasing the Executives Directors and the

Head of the Departments to concentrate on strategy formulation and direction setting.

Furthermore the scope of influence of the Board Compensation Committee was expanded to

include all the employees of the Company.

Reward & Recognition (R&R) system:

A well motivated and energized workforce is instrumental for the success of any business. To

achieve this and reinforce a high performing culture a unique Reward & Recognition (R&R)

system was put into place whereby employees are recognized for their efforts and rewarded

instantly.

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Chapter # 5

Evaluation and Control

Evaluation and Control:

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Earning Per Share:

PTC evaluates its performance in terms of earnings per share, as it is public limited companyhaving most of the stake with British American Tobacco. The first priority of the company will

be the shareholders wealth for which the most applicable tool is EPS.

The past trend in EPS is as follows:

The rising EPS with each successive year show the increasing performance of PTC.

So as a result, there will be less deviation from the rate at which the shareholders will be paid.

This consequently leads to stability in the share price as there is less risk associated with the

security.

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Chapter # 6

Case Study

Slump in International Tobacco Industry but Growing PTC:

Pakistan Tobacco industry:Tobacco industry makes a significant contribution to all sectors of the economy, from farming to

manufacturing to retailing. The tobacco industry is the largest employer in NWFP, besides this

the other one million persons are dependent on it countrywide. On the other hand, its

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contribution to the government revenue receipts is very sizeable by the way of federal excise

duty and sales tax. According to a study carried out, the industry is the single largest contributor

to federal excise duty. (Study by The News)

Cigarette production in Pakistan:According to press reports, Pakistans total cigarette market is around 89 billion sticks. While the

legitimate sector supplied 74 billion sticks to the market, the remaining 15 billion is cigarettes

were either smuggled into the country or marketed by counterfeiters and non-duty paid

manufacturers inflicting heavy losses to the federal exchequer. Cigarettes are the most highly

taxed products in the country and up to 78 per cent of the retail price is realized by the federal

government in the form of federal excise duty and sales tax. Pakistan has long porous border

with India, China and Afghanistan which makes it impossible to completely seal them. (Study by

The News)

Cigarette Buyers:The firms that manufacture finished goods act as purchasers themselves, buying it fromthe farmers. They serve as intermediaries that purchase, process and resell.In the local market, Twenty-nine percent (29%) of men and 3.4% of women smokecigarettes regularly, concluded the National Health Survey, while the Pakistan Society ofCancer Prevention says 37% of men and 4% of women over 15 years of age aresmokers. According to Pakistan Pediatric Association, 1,000 to 1,200 children betweenthe ages of 6 and 16 years take up smoking every day.Cigarette consumption in Pakistan is five times higher than in India with 620 cigarettesper adult per annum against 119 for India. This shows that the market for tobacco

industry is very immense locally. (Reference: NUST Research Center)

Image:The industry has a negative image among its consumers and the general public. This isdue to the various health hazards associated with tobacco consumption. People are

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also blaming the government for its support for the industry. Smoking is the cause oflung cancer in 90% of the cases. Its users get addicted to it.

Although the companies can not change the nature of their product, they are trying tobuild a socially responsible image in the eyes of the consumers. PTC is currentlyengaged in various programs such as afforestation, Mobile doctors program, Youthsmoking prevention, learning resource centers. The laskson group has set up Laksonmedical center (Sahiwal hospital) and a Medical complex in Sawabi NWFP. (Reference:NUST Research Center)

International Tobacco Industry overview:

Phillip Morris began his tobacco sales in England in 1847. During their rise to the top, Phillip

Morris & Co., Ltd. has developed into two divisions, Phillip Morris USA and Phillip Morris

International. The combined sales of these cigarettes has given Phillip Morris USA a marketshare of 49.9%, just under half of the total cigarette sales in America (taken from

http://www.phillipmorrisusa.com). This level of excellence is rivaled by their main competitor,

Reynolds American, Inc. Reynolds American, Inc. is the newly formed parent company of the

R.J. Reynolds Tobacco Company and Brown and Williamson Tobacco USA. This merger took

place on July 30, 2004, and combined R.J. Reynolds (the 2nd largest tobacco manufacturer in

the country) with Brown and Williamson Tobacco USA (the 3rd largest tobacco manufacturer in

the country) (taken from http://www.reynoldsamerican.com). This merger created a company

with a market share of approximately 33.3%, the only figure that comes close to Phillip Morris

USAs whopping 49.9%These days, R.J. Reynolds Tobacco and Reynolds American, Inc. have

diversified their product lines to include items not involving tobacco. Their acquisition of food

giant Nabisco shows this trend away from tobacco, and is perhaps the largest reason why their

tobacco products have lost their market share to Phillip Morris.

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Issues and Threats for the Tobacco Industry:

International Industry:In the last decade or so, there has been a large anti-smoking backlash in the UnitedStates. The recent out-of-court settlement of $360 billion between "Big Tobacco" andparticipants in a class action suit has spurred the development of anti-smokingcoalitions in other parts of the world.

The decline in smoking in North America, especially the United States, has been offsetby a strong push from the large tobacco companies to find converts in the developingworld. As tobacco control is tightening in the West, transnational tobacco companies arebecoming more active in developing countries. The result is that tobacco use is

declining at the rate of 1.5% in the West but at the same time it is increasing at the rateof 1.7% in the developing countries.

While the anti-tobacco movement in the USA helped lower cigarette sales, Big Tobacco,the largest US companies: Philip Morris, R.J. Reynolds and Brown and Williamson, aswell as the British American Tobacco Co., have continue to expand overseas. Theyhave flooded the markets in Asia and Eastern Europe with advertisements, promotionalproducts and cut-price brands designed to encourage new smokers.

Some of the government sanctions, which have been primarily handed down from the

FDA, have been a minor hindrance to the tobacco companies themselves, such as

compliance checks for ID requirements where tobacco is sold (Benjamin, 2000).

However, some have been much more damaging to the product and the companies,

requiring a label on the package that would deter customers, the regulations on their

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advertisements, and the lawsuit settlement that resulted in the yearly payment to state

governments (Benjamin, 2000). A dwindling market has been created by these

sanctions. By imposing such sanctions, the government has been changing tobaccos

image to be more ugly and unattractive. This deglamorization of tobacco has lead todecreases in sales margins in recent years (Viscusi, 2002). It also deters the sale to

barely-legal young adults who may want to experiment, causing a potential profit loss

for the tobacco companies.

WASHINGTON (Reuters) May 22, 2009 --Cigarette companies systematically lied foryears in order to sell tobacco products they knew were dangerous, a U.S. appealscourt said on Friday May22, 2009. The U.S. Court of Appeals for the District ofColumbia ruled the companies, including Altria Group Inc. and its Philip Morris USA unit,violated federal racketeering laws by conspiring to lie about the dangers of smoking.

British American Tobacco has become the latest UK Company to be targeted in Russiawith threats of legal action for "misleading" consumers and infringing their rights and for"nicotine genocide", allegedly for making huge profits at the expense of Russians'health, by the country's consumer rights agency, Rospotrebnadzor.

Furthermore, Scotland is going to ban cigarette displays in stores; Crackdown includesoutlawing vending machines after research found underage smokers are among theirmain users.

Tobacco is a pesticides dependent crop as its broad and succulent leaves provide

favorable conditions for the development of many pests and diseases. The pesticidesused in the tobacco cultivation happen to assimilate in the leaves which then sometimesbecome an integral part of the leaf. These leave are then processed and used inmanufacturing the cigarettes, and thus consequently the final consumer also consumessome doze of pesticides during smoking. This leaves some bad impacts on the body incase of continuous smoking like; vomiting, headache, respiratory problems, andconvulsions.

Pakistani Industry:The News Pakistan (May 22, 2009)-- With World No-Tobacco Day on 31st May 2009,expectations run high because nothing short of withdrawal of the controversial Statutory

Regulatory Order (SRO) legitimising the creation of designated smoking areas inPakistan will be acceptable to anti-tobacco networks, alliances, and campaignersworking at both the national as well as the global levels.

On May 27, a collaborative activity has been planned with the Ministry of Railways forimplementation of Article 6 of the No-Smoking Ordinance, which ordains that all publictransport has to be smoke-free. The activities will conclude with a No Smoking

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Awareness Campaign with the Traffic Police on May 30th. More than 8,000 stickersprepared by the Traffic Police will be distributed on the occasion.

PTC Views on the above stated Issues:At Pakistan Tobacco Company, we have long accepted that smoking is risky. Ourbusiness is not about persuading people to smoke; it is about offering quality brands toadults who have already taken the decision to smoke. We strongly believe that smokingshould only be for adults who are aware of the risks.

In a nutshell, our view on smoking is this:

British American Tobacco companies produce fine quality products that providepleasure to many millions of adult smokers around the world. Along with the pleasuresof cigarette smoking come real risks of serious diseases. We also recognise that for

many people smoking is difficult to quit.

Smoking is a cause of various serious and fatal diseases such as lung cancer,respiratory disease and heart disease.The risks associated with smoking are primarily defined by epidemiological (populationstatistical) studies that show that groups of lifetime smokers have a far higher incidenceof certain diseases than comparable groups of non-smokers. These risks tend to begreater in groups that start smoking younger, smoke for longer, and smoke morecigarettes per day.

The statistics, however, do not tell us whether a particular individual smoker will avoid

an associated disease by smoking less, and all smoking behaviours are associated withsignificantly increased health risks. Studies also show that the only way to avoidsmoking-related risks is not to smoke in the first place, and the best way to reduce therisks is to quit.

Similarly, the discussion on the issue of Pesticides inclusion in the tobacco can be

detained to the statement that we have a modernized manufacturing process for the

production of cigarettes, which ensures the removal of such pesticides out of the

tobacco leaves.

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References:

www.thenetwork.org.pk/pressrelease04-01-08.htm

NUST Research Center

The News

Reuters

Business Recorder (www.brecorder.com)

Pakistan Tobacco Board (www.ptc.com.pk)

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