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My business idea is to introduce two editions of shorter cigarettes in a market. We will offer 10 pack of short cigarettes that will have low levels of nicotine and a triple filter. The idea is to concentrate only on the selling of our product.
Shorter in size decrease the costs for producing of the product because less raw materials are used in the production and packaging process of the product.
Our product is designed to appeal to smokers who now can only take short smoking breaks and for smokers who want a cheaper cigarette and might as well used by smokers that will try to quit smoking.
In this report I will try to examine the essential requirements and desirable characteristics a country would ideally have by examining the macro (PESTLE, see appendix 2) and the micro characteristics (Porter's 5 Forces, see appendix 1) of the industry.
Political system is responsible for law making of the country. Governments affect the industry by imposing legislation against smoking and by raising taxes which increase cigarette prices. (See appendix 2, note 2) "Higher tobacco taxes that lead to higher cigarette prices encourage smokers to quit, reduce the number of cigarettes smoked, and prevent initiation among potential new users." "In a China 10 percent increase in cigarette price would reduce consumption by 5 percent "(Tobaccoatlas.org 2009) .
Despite the fact that our product is cheaper than other brands we want a country that has got a relatively low total tax as a proportion to the total price (See appendix 3). That is because price increases affect the demand for cigarettes and their prices are generally high then there will be a decrease in consumption.
Governments also impose tariffs on imports and taxes paid to the government in order to operate in the country. (See Appendix 2, note2). Taxation policies affect the costs of the business and eventually increase the prices of the products to allow a certain amount of profit for the business.
For the selected country we have to analyze the business regulation policies (See Appendix 5) because we want fewer regulations that will increase our costs; keeping our costs low well as our prices low and be able to compete with the other cigarette companies in the market. The competition in certain countries (See appendix 1, internal rivalry) is very high because most cigarette markets around the world are dominated by big companies such as Phillip Morris International, British American Tobacco e.t.c. so it is essential for us to have low costs in order to keep our prices low and compete successfully with the other companies in the market.
Moreover we want a country that it is still allowed to promote cigarettes in point of sales like convenience store, since is one of the few ways we have to promote our products and if we are not allowed to do so then we will struggle in the market because consumers will not be aware of the presence of the product. "Displaying cigarettes in shops could be banned in England under government plans being considered to cut smoking and discourage children from starting." (Bbc.co.uk 2008)
In addition we want a country that will introduce or has already introduced the smoking ban. Since our product is designed for the smoking ban it is preferable for us to operate in a country that doesn't allow smoking in public places. (See appendix 2, note 2)
Also we want a country that has political stability. Political uncertainty might lead to a wave of violent unrest and strikes which will affect the country and the businesses operating in it. ''Major political changes might lead to changes in trade agreements or general changes in policies and regulations towards business.'' (L. Hamilton & P. Webster 2008)
Although the barriers of entry in the industry are high (see appendix 1, barriers to entry) the strong growth of the industry encourages new entrants to the industry. The number of smokers is constantly raising mainly due to world population increases. "The tobacco industry need not fear the FCTC, as between 2010 and 2025 the number of smokers worldwide is predicted to rise from 1.4 billion to 1.7 billion. "(FCTC)
The World Bank states that high-income countries respond less to cigarette price changes than low-income countries. '' Tax increases reduce tobacco consumption in low- and middle-income countries; effects of tax increases will be more marked in these countries than in high-income countries." (World Bank 2007) We want a country with low GDP because people with low GDP have less disposable income and are more by prices sensitive.
For the social cultural factors we have to concentrate on the market demographics of a country. For example we want a country that there is a high percentage of smokers for both sexes in the country (see appendix 5) and that there is a balance between the ages of smokers. If there are high percentages of smokers present in the country then we will have more potential customers because of the market size. In addition we want a balance between the ages of smokers because researches of the "World of Health Organization" show that older people are less likely to quit smoking as they are more nicotine addicted than younger smokers. Also we want a country that not a lot of anti-smoking pressure groups are present because they might influence the government to increase the laws and regulations regarding smoking. Presence of such groups might as well encourage more smokers to quit smoking and prevent the initiation of new smokers through campaigns, demonstrations, advertising and antismoking programs. The mission of Smoke free America's is "to motivate youth to stay tobacco free, and to empower smokers to quit." (Anti-smoking.org 1995)
An efficient transport and communication network is necessary to us to operate more efficiently. If there is a good transport and communication network then we will be able to keep our costs. "Countries with well developed infrastructures are better than developing countries because they facilitate market growth and offer cheaper and better transport and communication networks" (L. Hamilton & P. Webster)
Also a good quality road networks and ports are important so that we won't have problems importing and transporting our products throughout the country.
In our attempt to reduce operating costs we will encourage our retailers to place online orders so we want good internet services. Furthermore through the internet we will design a website and be able to promote our products.
There is a strong threats from substitutes in the Cigarette Industry "Many smokers who want to quit, attempt to do so by substituting tobacco products for products such as nicotine gum, or patches. These products fulfill the consumer's need for nicotine, without the harmful effects of inhaling smoke." (Datamonitor.com). Nicotine replacements products are highly advertised through media unlike the tobacco products that are not allowed to be advertised at all. "In the March 2007 Budget, it was announced VAT on nicotine replacement products would be reduced from 17.5% to 5%." (Mintel.com)
We will try to find a country that doesn't have a lot of quitting resource availability such as nicotine replacement therapy and some clinical cessation services, with either NRT or cessation services. Smokers that want to quit will try to find other ways to quit smoking and they might try our cigarettes.
An analysis of the macro and micro environment of an industry is essential for a business to succeed in a market. Through it businesses build and adjust the business plans in order to be more competitive and run more efficiently in.
Through the research I have conducted I have fully identified the important factors that an ideal country should have; the next step is to make a research to find a country that is closest to the above criteria.
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