Report: Business Environment Analysis of British American Tobacco

This report provides a comprehensive analysis of the business environment surrounding British American Tobacco (BAT). It begins with an introduction defining the business environment and highlighting BAT's market position. The main body delves into industry analysis using Porter's Five Forces and SWOT analysis to assess competitive dynamics, market opportunities, and threats. The report further examines BAT's international trade position, influenced by factors like geographical location, government regulations, and economic development. Political and economic factors, including taxation and exchange rates, are evaluated for their impact. Social and environmental factors are also considered, focusing on consumer preferences and sustainability practices. The report concludes with recommendations for BAT, such as strengthening supplier relationships, improving product quality, and enhancing employee involvement, supported by an overview of the company's performance. The report is available on Desklib, providing students with the necessary AI based study tools.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY .................................................................................................................................3
INDUSTRY ANALYSIS ......................................................................................................3
Porters 5 forces :.....................................................................................................................3
Swot analysis:.........................................................................................................................5
INTERNATIONAL TRADE POSITION:.............................................................................5
POLITICAL AND ECONOMIC FACTOR:..........................................................................6
SOCIAL AND ENVIRONMENTAL FACTOR :................................................................7
Conclusion.......................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment is define as the assemblage of all external and internal factors such
as supply and demand, management, employees, customer needs and their expectations,
suppliers, activities by government, owners, social and economical change, social and market
trends etc. it is very helpful in identifying business opportunities improves the growth of
company by focusing on performance and profitability of business(Andersen, and Hansen
2019). The report has tabbed the British American Tobacco company, this is multinational
company which produce and sell tobacco and nicotine based products. The British American
Tobacco is very old company and world's largest tobacco company and reason behind for
choosing this company is their market value, sustainability and purpose to build a better
tomorrow by decreasing the health impact of their business(Bhuvana, and Aithal, 2020).The
British American Tobacco focus on both microeconomic and macroeconomic policy and the
following report has mentioned the overall analysis of this company based on their social,
economical political and environmental factor(Klimuk. and Lazdins, 2019)
MAIN BODY
INDUSTRY ANALYSIS
It is the tool which is used by business analyst to know the overall competitive dynamic
of an industry. It focus on the overall aspect of company like degree of competition within
industry, demand supply statics, and future prospects of the industry. The important methods for
performing industry analysis are as follows:
Porters 5 forces :
This model is based on competitive forces model introduced by Michael Porter in 1980
and five forces of this model provides accurate and suitable impression of the industry and help
in analysis(Leke, Chironga and Desvaux, 2018).The five forces of Porter which help in
analysing company and competitors are given below.
 Intensity of industry rivalry: It shows the rivalry between companies in form of price
competition, ad campaigns , new product introduction as well as services associated
with products. The British American Tobacco has strong rivalry to other companies like
Japan Tobacco and China Tobacco National Company so British American Tobacco

focus more on research and development to make their product best as well as enhance
market campaigns(Mahmalat, and Curran, 2020).
 Threat of potential Entrants: this force of Porter state that the the entrance of new
business makes the businesses environment competitive and if entrance is difficult for
new business means there is capacity to enjoy benefits for long times(Palmioli, and et.
al., 2020). As there is restriction to advertise and marketing campaign of these tobacco
and nicotinic items in developed countries so it has more difficult for new entrants to
achieve goals like British American Tobacco. The British American Tobacco company
has given their services and products since long time so they faces very low threat from
new entrants.
 Bargaining Power of Buyer: according to this customer have more power in negotiating
the price of products by demanding discount and low price service. Porter's this force is
applied in market when there is more competitors(Parameswaran, 2021). The bargaining
power of buyer emphasises the company to sell their products in low rates But tobacco
and nicotinic item show price sensitivity because it included in luxury items. The British
American Tobacco show high price of these items so it is recommended to this company
to manufacture another alternative product in low price for increasing the customer' s
demand(Slepakov, Novoselova and Khubulova 2018).
 Threats to substitute products: this force arises when competitive business are offering
similar substitutes products. The substitutes products are of two types same product with
higher price rate and same product with lower price rates(Smith, 2019). The British
American tobacco company show moderate threat to substitutes products as no product
is available in market for smoking rather than tobacco and also substitutes products do
not compete with prices which are set by economies.
 Bargaining power of suppliers: according to this force significant influence over the
business needs dependency of suppliers because it affect the price and quality of
product.(Song , Zhang, and Zhang 2021). As suppliers have the ability to negotiate with
farmers in well manner so British American Tobacco must maintain good relation to
suppliers to buy tobacco in low rates and creates impact on their profit in positive way.

Swot analysis:
Swot analysis is a type of industry analysis which is based on strengths, weaknesses,
opportunities and threats. This analysis is very important because it help in understanding the
market conditions. The 4 parameters of swot analysis works on internal as well as external factor
of business and impact on the performance of industry . The 4 parameters of this analysis are as
follows:
 Strengths: it is the characteristics which give advantages over its competitors .it is the
positive part in business analysis and it help in development of organization. The British
American Tobacco has strength of strong brand appreciation in the tobacco industry and
they have diverse revenue model which help the company in diversified revenue stream.
 Weaknesses: it represent the lack of resources and capabilities of the organization. The
British American Tobacco company have weakness which included the lack of loyalty
among suppliers due to lowering the price in supply chain, high turn over of employees,
and gross margin and operating margin.
 Opportunities: this factor of swot analysis identify the profits, growth and market share.
British American Tobacco company indicate their opportunities in approving the new
technology launching new products in market and lowering the cost of new products.
 Threats: this factor of swot analysis, creates potential danger to business due to change of
macroeconomic factor. The threats for British American Tobacco in industry analysis are
lack of skilled human resources , trade relation of US and China. they have lack of
infrastructure and due to vast distances the business of British American Tobacco has not
developed in rural area.
INTERNATIONAL TRADE POSITION:
International trade position is the way of interchanging goods and services at global area
and providing huge contribution in income and consumption. International trade play a very
important role in acquiring large amount of revenue, expanding technology and increasing the
overall economy. The British American Tobacco company is in the second position of producing
tobacco based products and cover 12.2% of total cigarette production at global level(Van Phong,
and Loan, 2018). The various factors affecting the international trade position of British
American Tobacco are given below:

 Geographical Location: the conditions like climate, location and availability of natural
resources affect the efficiency of trading as British American Tobacco have excellent
environmental management system and they focus on biodiversity and sustainable water
management by using less amount of water.
 Impact of government restriction: the government has banned the advertisement of
tobacco and nicotinic based products and increase restriction on trade due to its bad effect
on health and safety policy (White 2019). The government restriction has decreased the
competitors in this trade and this ultimately increase the chance of international trade for
British American Tobacco to exports its products and imports the raw materials.
 Impact of exchange rate: it is the exchanging price of currency in one nation to another
nations. The changes in price rates increase the profit margin and making imports cheaper
and export expensive.
 Level of economic development: this factor states that the highly developed country has
greater scope and ability to participate in international trade so by economical point of
view British American has good international trade position due to its production of
wide varieties of goods and services from tobacco and nicotine.
POLITICAL AND ECONOMIC FACTOR:
The political factor: It consist of rules, regulations and specific policies like taxes, trade
policies, labour law etc. which impact on business. The political factor which impact the British
American Tobacco company in negative way are taxation which consist of high rate of tax and
incentives, wage legislation which provides minimum wage and overtime to workers as well as
risk of military invasion and legislation which banned the advertisement of tobacco products due
to health safety reasons(Xiao and et. al., 2019). The positive impact of political factor is that
government provides loans for commercial products in America in easy way which enhance the
capacity of industry to increase their productivity.
The economical factor which impact on trade of British American Tobacco globally are
economic cycle, exchange rate, capabilities of financial market etc. the economy of British
American Tobacco is related to economy of Germany and economic cycle of British American
Tobacco Company since last two decades has increased due to use of local resources. The
exchange rate of British American Tobacco also affected by exchange rate of Germany because
of investment of Germany since long time.

SOCIAL AND ENVIRONMENTAL FACTOR :
The social factor: the factor which help the company in understanding the customer
preferences as well as help in the doing business. This factor contains culture, health and safety
attitudes, entrepreneurial spirit and demographics. The British American Tobacco follows the
human right by providing the high salary to their workers and support farmers to enhance their
livelihood as well as providing safe working environment for workers, these all social factor
enhance the human resource and increase the productivity, and British American Tobacco work
on policy of creating better tomorrow by reducing the bad impact of business.
Environmental factor helps in sustainability of business and contains safe disposal waste,
safe water treatment, limiting carbon footprints, climate change, laws which regulates pollution
and safe treatment with hazardous materials etc. British American Tobacco company has well
developed waste management system and their government has strict laws for management of
waste in urban areas and focus on recycling the waste. The company also focus on awareness
programme which keep environmental factor at the centre and focus on issues related to these
factors. The company focus on norms that follow the environmental standards to design the
products. The British American Tobacco provides regular scrutiny by environmental agency and
it makes supply chain more flexible.
RECOMMENDATIONS:
The British American Tobacco is largest producing of cigarettes and tobacco items in
worldwide but the company has lack of networking between consumer and farmers so that they
could get raw materials in cheap rates and increase their productivity in feasible rates. When the
manufacturing cost is less then ultimately it decrease the selling cost and products become
affordable to lower economical group. The company has to focus on good quality and different
flavours in cigarettes as it attract the customer. The company has to make a network of direct
connection to farmers because consumer gives low rates to farmers and they take high money
from company so British American Tobacco has enhancing the network in rural area by
improving their vast connection. Another recommendations for British American Tobacco
company is that they should work on quality which they are providing to the customers by
decreasing the poisonous content and increasing the taste by adding the different flavouring
agents. The company has is also required top focus more the employees involvement in the

company as employees are considered to be the main assets of the company. They are required to
be felt important and valued so that they can contribute more to the company.\
Conclusion
From the above analysis, it can be summarised that the term business environment is
explained as the mixture of the various external and internal factors that is supply and demand,
management, employees, customer needs and their expectations, suppliers, activities by
government, owners, social and economical change, social and market trends and many others.
As it is known to be very helpful in relation to identify the business opportunities to enhance the
growth of company by targeting on the level of performance and profitability of the chosen
business. With the help of the report, the information about the chosen company was presented
about the both microeconomic and macroeconomic policy. Under this, swot analysis framework
was also used in order to explain the position of the company which is based on strengths,
weaknesses, opportunities and threats. This analysis is very important because it help in
understanding the market conditions of the extremal factors. Furthermore, the report has
outlined the overall analysis of this company based on their social, economical political and
environmental factor. Some preventive measures were also provided in relation to enhance the
overall performance in the market.

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