case 26 - cigarette industry Business Economic
-
Upload
mahammad-khadafi -
Category
Economy & Finance
-
view
80 -
download
1
description
Transcript of case 26 - cigarette industry Business Economic
![Page 1: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/1.jpg)
L/O/G/O
Case Study:
The Objective and Strategy of Firms in The Cigarette Industry
Case Study:
The Objective and Strategy of Firms in The Cigarette Industry
Syndicate 5Muhammad Ridwan – 29112555
Machadi Dhana – 29112303
Mahammad Khadafi – 29112324
Pedro Putu Wirya – 29112565
Seto Kusparyanti – 29112306
Yuliani Dewi Risanti – 29112321
Rahdianto Maulana – 29112554
![Page 2: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/2.jpg)
Cigarette IndustryCigarette Industry
• The objective of the firms: maximization of long-run profits or firm value
• The doubling of the federal excise tax on cigarettes and rise in other taxes since 1983 resulted in a sharp increase in cigarette prices and a reduction in consumotion
![Page 3: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/3.jpg)
Cigarette IndustryCigarette Industry
• Out of 6 major producers, three companies creates generic cigarettes:– Cheaper tobacco– Plain black and white packages– Advertised very little– Sell at less than half the price of name brands
![Page 4: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/4.jpg)
Cigarette IndustryCigarette Industry
• The other three companies followed the strategy of marketing proliferation– Introduced new brands– Big advertising – Discount products, cost more than generic but
less than the traditional brands
![Page 5: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/5.jpg)
Price WarPrice War
• Generic cigarettes had bigger market share than branded ones
• Philip Morris cut the prices of Marlboro cigarettes and its other premium brands by 20 percent
• RJR Nabisco followed the same price cut strategy
![Page 6: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/6.jpg)
Abroad MarketAbroad Market
• In some countries, antismoking campaigns are still in their infancy and cigarette media advertisings are permitted
• Both groups of cigarette producers greatly expanded sales abroad
• Sales in domestic are declining and sales in abroad market are growing rapidly
![Page 7: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/7.jpg)
Health RegulationHealth Regulation
• World Health Organization and national government of the countries started global antismoking campaign
• The regulation affected on reducing advertising and marketing practices
![Page 8: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/8.jpg)
Courts and LawsuitsCourts and Lawsuits
• In 1998, pay $206 billion over 25 years to recoup public health costs linked to somiking
• In 1999, charged of $25 billion for defraud and mislead the public about health effect of smoking and to recover the spending of smoke-related illnesses
![Page 9: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/9.jpg)
Courts and LawsuitsCourts and Lawsuits
• In 2000, a Miamy jury ordered 5 US tobacco companies to pay $145 billion
• Tobacco companies became more vulnerable to private lawsuits and charged of multimillion dollar compensation for damages
![Page 10: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/10.jpg)
Companies StrategyCompanies Strategy
• American tobacco companies have increased prices for lawsuits settlements and higher taxes– 45 cents in November 1998– 22 cents in August 1999
• Shift assets to other lines of business in oreder to limit resources available to settle pending and future private legal suits
![Page 11: case 26 - cigarette industry Business Economic](https://reader036.fdocuments.in/reader036/viewer/2022082915/5455bbfab1af9fc0638b4a6c/html5/thumbnails/11.jpg)
L/O/G/O
Thank You!Thank You!