Tobacco Industry Analysis

The tobacco industry involves companies that sell and produce tobacco products all around the world. Tobacco products include cigarette, cigar, pipe, and chewing tobacco. Tobacco smoking is “the single largest cause of preventable death and disease in our community.” (Tobacco. 2006) With a society becoming more prosperous, education is improving and a concern for quality of life is resulting in a strong anti-smoking sentiment on all levels of society. Therefore the present and future marketing activities of the tobacco industry are heavily impacted by forces within its micro and macro environments.

In analysing the changing marketing environment for the Tobacco industry, we look at the micro and macro-environments impacting on this industry.

The micro-environment consists of the forces close to the organisation that affect the customers; the organisation, suppliers, intermediaries, customers, competitors,

and the public. The macro-environment involves the societal forces that impact on the micro-environment; demographic, economic, natural, technological, political, and cultural.

Macro-Environment

Demographic

Smoking rates vary over the different socio-economic levels in society. Education levels show trends in smoking rates with people having obtained higher education levels being less likely to smoke than others with a lesser education. Current smoking rates reflect that smoking is more prevalent in blue collar workers than in white collar. (Tobacco in Australia: Facts and Issues. 1998.) Our population is becoming more educated and the rising numbers of educated people pose a threat to the present and future marketing activities of the tobacco industry. (Fig. 1)

Present statistics show that “Rates of current smoking were highest in young adults. In males, prevalence of current smoking peaked at 34.7% in the 25-34 years age groupвЂ¦Ð²Ð‚¦ In females, the highest rate of current smoking (27.4%) was reported in the 16-24 years age group.”(Smoking prevalence in NSW in 2002 вЂ" NSW Health Survey 2006) (Fig. 2) The young adults group however is presently declining due to the reduced fertility of the 1970’s and the tobacco industry can not rely on increasing the market size in order to increase sales. (Kotler et al. 2006, 85)

The population is aging with a new generation emerging that are more educated and health conscious, Generation Y and Tweens are the future of consumers. The tobacco industry cannot market anywhere near as effectively to these generations as they could to the previous, due to the impact of micro and macro-environmental forces, and in theory, less consumers will begin smoking. With the past generation of consumers growing older and fading out, the tobacco industry is facing serious marketing problems in the future as they begin to deal with a more critical, more highly educated generation of consumers, less likely to begin using their product.

Economic

The western economy has grown strongly over the last twenty years and this has been reflected in the lifestyles and attitudes of society. Income distribution is a factor that can affect the tobacco industry in two ways. With prosperity comes education and educated people are less likely to consume tobacco products. However they also have the ability to buy more commodities. GST is a factor that affects the current and future marketing activities of the tobacco industry, as an increase in the sale price of tobacco products reduces consumption.

Natural

Only requiring a moist warm environment to grow, tobacco crops are farmed globally. Natural factors will always affect the tobacco industry. Weather can affect the quantity of tobacco produced as well as the quality of tobacco crops, affecting the price that farmers can obtain for their produce.

Technological

As a result of increases in farm wages impacting on the tobacco industry, technological changes are occurring with an increase of labour-saving devices. Machines such as harvesting devices and bulk-curing units are creating a less labour intensive process which in turn makes manufacture of tobacco products cheaper. Tobacco companies are then able to pass these saving on to consumers, allowing them to be more competitive with other brands and also combat the severe effects of government tax increases.

Political

The political leverage of the tobacco industry must not be underestimated.

Tobacco lobbying works to ensure that action taken by the governments will have minimal effect on the levels of tobacco consumption.

Health professionals, concerned with bringing about changes to ensure the health of the general public, must unite in order to compete with the considerable power of the tobacco lobby. However, the tobacco industry is currently losing more and more debates, and the government is passing more and more legislation which will have negative effects on tobacco consumption.

Due to the serious health issues surrounding smoking, the government imposes laws and tax increases to act as deterrents to tobacco smoking. These pose a serious threat to present and future marketing activities of the industry. Governments worldwide have approved bans on any advertisement that has the affect of promoting a tobacco product, including electronic and print media advertising. This affects companies marketing within the tobacco industry, on two levels. Anti-smoking organisations claim that advertising for smoking encourages people to start consuming tobacco products. Therefore, bans on advertising affect the industry’s marketing activities by reducing their ability to expand into new markets through product advertisements. Bans on advertising also affect different companies within the industry by reducing their ability to compete for market share. Companies are forced to rely predominantly on limited point of sale advertising.

As a deterrent government legislation requiring picture based warnings to be displayed on tobacco products have also been implemented around the world since the year 2000. This was put into affect in Australia in 2006 with warnings to cover 30% of the front and 90% of the back of each package.

Governments have implemented laws banning smoking in public places globally. There have been bans on smoking at workplaces, cafes, pubs and clubs, this is an initiative to encourage people to quit smoking and poses a