HI5014 International Business Across Borders: BAT Analysis Report

This report provides a comprehensive analysis of British American Tobacco (BAT), a multinational entity. It delves into BAT's foreign entry strategies, highlighting acquisitions and market-seeking approaches. The report examines the competitive dynamics within the tobacco industry, identifying key competitors like Philip Morris and discussing challenges such as anti-tobacco regulations. BAT's organizational structure is explored, including its global divisions and decentralized approach. The report also assesses BAT's knowledge management practices, focusing on sustainable agriculture and information utilization. The analysis covers the company's innovation strategies and how it adapts to global market conditions. The report covers the key aspects of the assignment brief and provides a detailed overview of BAT's operations and strategies.

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ANALYSIS OF MULTI NATIONAL ENTITY
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Executive Summary
The report focuses towards the effective analysis of a multi-national entity. The
strategies, dynamics, organizational structure, management of knowledge and
innovation have been given more importance towards evaluating the given organization.
The most important areas that have been addressed are foreign entry strategy,
competitive dynamics, organizational structure, knowledge management and
innovation. The business operations have been evaluated in relation to both current and
future business prospects.

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Table of Contents
Introduction........................................................................................................................3
Foreign Entry Strategy.......................................................................................................3
Competitive Dynamics.......................................................................................................4
Organizational Structure....................................................................................................5
Knowledge Management...................................................................................................7
Innovation..........................................................................................................................8
Conclusion.........................................................................................................................9
References.......................................................................................................................10

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Introduction
The study is focused towards the effective analysis of a multi-national entity. The
strategies, dynamics, organizational structure, management of knowledge and
innovation have been given more importance towards evaluating the given organization.
The organization chosen for the report is British American Tobacco. Organizations that
are present in the current global corporate scenarios need to constantly engage with the
global competitive markets to survive, grow and develop. The development of the
various organizations are important in the context of the rapidly changing global market
scenarios. It is in these situations that the entry strategies, the competitive dynamics,
structural efficiency and innovation comes into play. This is because these are the most
important aspects that can determine the global success of the present day
organizations. British American Tobacco is a multi-national cigarette and tobacco
manufacturer based in the UK. They are headquartered in London and is currently the
second-largest maker of cigarettes in the world. The organization is a market leader in
around 50 countries. However, the operations of the organization span more than 180
countries in the world. The British American Tobacco company was formed as a result
of the joint Venture between the British Imperial Tobacco Company and the US based
American Tobacco Company It has some of the largest selling brands in the world.
They are Benson and Hedges, US brands Lucky Strike Kent and Pall Mall and the
native UK brand Dunhill. The current revenue of the organization is 24.4 billion pounds
(Bat.com 2019). The number of global employees of the organization are 55,000.
Foreign Entry Strategy
Foreign entry strategies are important as they can determine the effectiveness of
the revenue that can be earned from the foreign markets. It is important to assess the
effectiveness of the foreign market entry strategies in light of the customer base that
can be created as a result of the same. The foreign entry strategy of British American
Tobacco has been important in its historical development as an effective organization.
One of the most effective strategies implemented by the British American Tobacco
Company was acquisition. Another important factor contributing to the international
development and expansion of the organization was the acquisition of the foreign

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factories. These factories helped in rapidly increasing the production that helped to
serve the growing number of customers for the company. Similar strategies had helped
it to acquire factories in China and later Burma. The series of mergers and acquisitions
continued as it merged with the Rothmans International in 1999, acquired Ente Tabacci
Italiani in 2003 and acquired holding in a Serbian company named Duvanska Industrija.
Later on the most effective acquisitions of the British American Tobacco
Company (BAT) were Scandinavian Tobacco Group in 2008, Benotel Group in 2009,
Protabaco of Colombia in 2011 and the Croatian Tobacco Company in 2015 (Bat.com
2019). The entry mode strategies of BAT has been important towards determining its
effective placement in the markets of the various countries. This has subsequently given
rise to a better and more focused revenue earning strategy of the organization (Tulung
2017). The foreign entry strategies have focused on Natural Resource Seeking FDI,
Efficiency seeking FDI and Capability-enhancing FDI. Hence the organization has
opened its operations at places where the raw materials for the manufacturing products
were already available. Moving forward the products are sold in the same countries as
well as shipped to other locations like the US and the UK. The emphasis of the foreign
entry strategies as implemented by BAT were on market-seeking and natural resource
seeking capabilities. The larger part of the entry strategies of BAT depended on the full
acquisition of the already established businesses of the country. Acquisitions of many
similar businesses across Europe, Asia and South Americas have provided the
company with not only a larger customer base but at the same time has also provided
BAT with large resources. Many of these acquisitions have been in the more developing
economies of the world (Lee, Eckhardt and Holden 2016). Thereby contributing greater
to the expansion potential for the British American Tobacco Company.
Competitive Dynamics
The competitive dynamics are the various factors related to the competition that
are prevalent in the market environments. It is a number of combined actions and
reactions that take part in an organizational business environment. As mentioned above
BAT is one of the most successful tobacco manufacturing companies in the world. The
worldwide operations of the company helps it to become optimally efficient in the

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production and selling of cigarettes and other tobacco products. In 2012, BAT became
the second largest cigarette and tobacco manufacturing company in the world. Apart
from significant competition some of the important issues that are currently faced by the
company is continuous scrutiny due to the harmful nature of tobacco towards the
human body. There are large scale taxation of the tobacco products in the market that
significantly reduce the profitability of the organization.
Concerning the more direct and biggest competitors of the organization Philip
Morris is the most important organization. Phillip Morris is currently the largest tobacco
manufacturing organization in the world and the biggest competing company of BAT
(Pmi.com 2019). Apart from Phillip Morris, the other very significant competitors of the
British and American Tobacco Company are Imperial Brands, China Tobacco and
Japan Tobacco International. Together with all the mentioned competitors BAT make up
the five biggest tobacco manufacturers in the world. Philip Morris is an American
multinational tobacco company that specializes in innovative tobacco products. One of
the most important brands of the organization is Marlboro, a greatly recognized brand
name in the world. The company has provided tough competition to BAT with products
such as the e-cigarettes. BAT has tried to manufacture similar products but have been
unsuccessful in doing so. Other brands like the China and Japan Tobacco companies
have been highly successful in the various international markets as well as the Asian
markets (Lee, Eckhardt and Holden 2016). It is important to note that Japan Tobacco is
an important competitor of BAT due to the fact that it has co-ownership of some of its
most important brands. The Benson and Hedges brand of BAT is owned by Japan
Tobacco and the Phillip Morris Tobacco based on various regions (Qian et al. 2016).
The high competition in the cigarette market is due to the fact that the big five
companies are striving towards releasing products that provide much less harm to the
consumers. The anti-tobacco laws and regulations being passed all across the world
are greatly contributing to the loss in revenue of the firms.
Organizational Structure
Organizational structure is important as it governs greatly, the type of strategies
that are to be implemented for the growth and development of companies. BAT has an

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organizational structure that helps it to maintain a vast number of operational areas
across various countries of the world (O'Neill, Beauvais and Scholl 2016). The global
operations of the company are divided into various zones to ease the operational
functions. The regions are divided into the USA, the North, South and Central Americas,
The Sub-Saharan Africa, Europe, North Africa, Asia Pacific and the Middle East
(Bat.com 2019). To ease the global operations the organization has a network of more
than 90 thousand farmers that are directly contracted. BAT has created its
organizational structure on the basis of the most important international market goals.
The organizations wants to create a more decentralized and organic structure.
This is because the diverse geographic locations across the world where the
organization operates. Hence, a multidivisional structure is used by the organization to
improve the performance potential over the larger global markets where it essentially
operates. There are various subdivisions of the organizations that operate across the
world. The leadership structure is based on the various projects and products that are
operated by the organization. A certain amount of independence is given to the global
subsidiaries to develop their own strategic functions (Longoni and Cagliano 2015).
These functions are dependent on the type of global audiences that are being catered
to by the organization. The decentralized system is utilized by the organization to
develop area specific functions. These in the end help the subsidiary companies to
develop their own ways to reaching the customers. The higher leadership of BAT
however is mechanistic to a certain extent. This means that the functions are greatly
centralized in these areas.
The top management makes most of the decisions for the organization. The CEO
and the board members of the organization takes most of the decisions for the
organization. The management board consists of the major leadership divisions of the
organization. The CEO is responsible for supervising the implementation of the group
strategies. The management board oversees the management of talent within the
various regions of the operations of the company. There are also newer directors that
are utilized by the organization for the innovative functional areas. Their roles are
director of new categories, director of digital information and more similar roles. It is

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important to understand that the structural elements are also very much connected with
the supply chain, processing and the procurement functions of the organization which
are very important considering the overall operations of the organization.
Knowledge Management
Knowledge management become much important in the context of the BAT
organization due to the fact that the knowledge of the products are necessary to create
a better and more effective production management and manufacturing system. In
regards to the new knowledge management frameworks that are being implemented
across the organization there are two important areas (Omotayo 2015). These areas
are focused support provided to the farming communities and the development of
sustainable agriculture programs. Hence, it is important to note that a large part of the
knowledge management that takes part in the organization depends on the sustainable
agricultural systems that are developed. Along with the same the sustainable
agricultural development is an important aspect.
The focus is on gathering more knowledge about the varieties of tobacco plants
that are available at the various geographic locations and utilizing the same information
towards incorporating more value within the product manufacturing processes (Donate
and de Pablo 2015). The information of the various tobacco types that can be cultivated
across the various parts of the world are collected. Moving forward the information
gathered is used to form knowledge base of the same. This information is then used to
develop strategies for manufacturing items that would be most suitable for the various
world markets. This is useful as the people at different parts of the world have different
tobacco usage patterns and the assign different values with the tobacco that they use. It
is important that the company utilizes the same information to use at various stages of
manufacturing the product.
Knowledge management is aligned with all the important strategies of the
organization. KM is used to develop better marketing, promotion and operational
strategies. The information gathered from the various sources are used to create better
and more effective strategies for the organization. ICTs are extensively used for
knowledge transfer and creation. At the same time ERP devices are utilized for

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understanding the inventory and resource management systems. Information is very
important for the organization in all contexts (Zhang 2018). It helps in the formation of
effective strategies that can guide the strategic development of the organization.
Information gathered hence is utilized for the development of innovative practices. In
essence, the KM systems of the organization helps to develop more improved functional
areas. This has contributed towards the continuous growth of the BAT organization.
Knowledge management is a very important function attributed to the global
developmental strategies of BAT.
Innovation
Innovation is one of the most important strategic areas of the BAT Company in
the present global operational scenarios. In the global tobacco industry innovation has
become a very important aspect. It has helped in the development of further
contemplation about the future products that would be available in the market. The
focus is on making tobacco products lesser harmful for the consumers. In this regard it
has become important that the innovative practices are implemented after much
research and development. The development of the newer electronic tobacco products
by the company is important in the current market environment that the company is
having to endure. In this sense, the most important product is the Glo (Bat.com 2019).
This is an innovative tobacco heating product that uses electricity to heat tobacco. It
uses lesser charge and can be used in the same way for more than 30 sessions. This is
a specific product that the organization wants to introduce to develop a better and more
effective innovation prospect for the organization.
At the same time other similar types of vapor products are being planned to be
released in the market by the company. The company focuses on rapid product
innovation to continuously strive towards a better and more effective market presence. It
is important that the products are utilized in accordance with their value towards the end
consumers. One of the most important strategic elements that guide the innovative
practices of the organization is the empowerment of the consumers through choice.
This means that the customers are to be provided a broad range of products to choose
from. In essence, this practice can help to gain more exposure for the products as well

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as more product offerings for the interested customers. The products that are currently
being developed by the company are including products of vapor, tobacco heating
products and the modern oral products. All these products are developed keeping in
mind the new age customers. There is the development of better, more effective and
innovative products that are more focused towards the health of the consumers.
Additionally, this is a much important strategy given the global increase in preventive
taxes on tobacco products. Hence, manufacturing more acceptable products are thus
an important strategy for the organization.
Conclusion
The implications of the report suggest that the British American Tobacco
company has been able to create a better and more effective strategy for the global
expansion of their business. The acquisition strategies that have been implemented by
the organization has greatly helped the development of the organization throughout the
various stages. It is important to understand that the value that has been created by the
organization due to the global sourcing of raw materials has contributed to the overall
success of the product. The analysis of the foreign entry strategy, the competitive
dynamics, the structure of the organization, knowledge management and innovation are
important in determining the value of the organization. The company has been greatly
successful due the effective design of the corporate functions. In this case it becomes
much important that the greater goals of the organizations are given more preference
concerning the growth and developmental values that can be achieved by the
organization moving forward. It is important to understand that the continuous scrutiny
by the governmental authorities on tobacco products can only be tackled through the
development of more innovative and health friendly products. The BAT Company has
been effective in its operations, however, more important strategies need to be
developed.

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References
Bat.com. (2019). British American Tobacco - British American Tobacco. [online]
Available at: https://www.bat.com/
Bat.com. (2019). British American Tobacco - Geographic expansion of glo™ continues
with launch in Russia. [online] Available at:
https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOASAEHC
[Accessed 19 Sep. 2019].
Donate, M.J. and de Pablo, J.D.S., 2015. The role of knowledge-oriented leadership in
knowledge management practices and innovation. Journal of Business Research, 68(2),
pp.360-370.
Hollender, L., Zapkau, F.B. and Schwens, C., 2017. SME foreign market entry mode
choice and foreign venture performance: The moderating effect of international
experience and product adaptation. International Business Review, 26(2), pp.250-263.
Hu, T.W., Mao, Z., Shi, J. and Chen, W., 2016. The role of taxation in tobacco control
and its potential economic impact in China. In Economics of Tobacco Control in China:
From Policy Research to Practice (pp. 149-168).
Lee, K., Eckhardt, J. and Holden, C., 2016. Tobacco industry globalization and global
health governance: towards an interdisciplinary research agenda. Palgrave
communications, 2(1), p.16037.
Longoni, A. and Cagliano, R., 2015. Environmental and social sustainability priorities:
Their integration in operations strategies. International Journal of Operations &
Production Management, 35(2), pp.216-245.
Omotayo, F.O., 2015. Knowledge Management as an important tool in Organisational
Management: A Review of Literature. Library Philosophy and Practice, 1(2015), pp.1-
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O'Neill, J.W., Beauvais, L.L. and Scholl, R.W., 2016. The use of organizational culture
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perspective. Journal of Behavioral and Applied Management, 2(2), p.816.

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Pmi.com. (2019). Philip Morris International | Homepage. [online] Available at:
https://www.pmi.com/ [Accessed 19 Sep. 2019].
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Tulung, J.E., 2017. Resource Availability and Firm’s International Strategy as Key
Determinants Of Entry Mode Choice. Jurnal Aplikasi Manajemen, 15(1), pp.160-168.
Zhang, T., 2018, December. Research on Technological Innovation Capability of
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