Case Study Description of R.J. Reynolds Tobacco Co.
Following the company's purchase as a part of a leveraged buyout, the new management team of R.J. Reynolds Tobacco Co. had to decide what to do about the build-up of excess inventory of its independent wholesale customers. The case introduces students to the problems that changing inventory levels can create in interpreting financial results. Also raises ethical issues about the effect of such practices on company management, investors, wholesalers, and ultimately customers.
Authors :: William J. Bruns Jr., Charles A. Nichols
Swot Analysis of "R.J. Reynolds Tobacco Co." written by William J. Bruns Jr., Charles A. Nichols includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that R.j Reynolds facing as an external strategic factors. Some of the topics covered in R.J. Reynolds Tobacco Co. case study are - Strategic Management Strategies, Costs, Customers, Ethics, Growth strategy, Operations management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the R.J. Reynolds Tobacco Co. casestudy better are - – increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing energy prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic ,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of R.J. Reynolds Tobacco Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in R.J. Reynolds Tobacco Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the R.j Reynolds, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which R.j Reynolds operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of R.J. Reynolds Tobacco Co. can be done for the following purposes –
1. Strategic planning using facts provided in R.J. Reynolds Tobacco Co. case study
2. Improving business portfolio management of R.j Reynolds
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of R.j Reynolds
Strengths R.J. Reynolds Tobacco Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of R.j Reynolds in R.J. Reynolds Tobacco Co. Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For R.j Reynolds digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. R.j Reynolds has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the R.J. Reynolds Tobacco Co. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– R.j Reynolds is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– R.j Reynolds is one of the leading recruiters in the industry. Managers in the R.J. Reynolds Tobacco Co. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of R.j Reynolds
– The covid-19 pandemic has put organizational resilience at the centre of everthing that R.j Reynolds does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– R.j Reynolds is one of the most innovative firm in sector. Manager in R.J. Reynolds Tobacco Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– R.j Reynolds has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled R.j Reynolds to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of R.j Reynolds in the sector have low bargaining power. R.J. Reynolds Tobacco Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps R.j Reynolds to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– R.j Reynolds is present in almost all the verticals within the industry. This has provided firm in R.J. Reynolds Tobacco Co. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Finance & Accounting industry
– R.J. Reynolds Tobacco Co. firm has clearly differentiated products in the market place. This has enabled R.j Reynolds to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped R.j Reynolds to invest into research and development (R&D) and innovation.
Training and development
– R.j Reynolds has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in R.J. Reynolds Tobacco Co. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– R.j Reynolds has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in R.J. Reynolds Tobacco Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses R.J. Reynolds Tobacco Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of R.J. Reynolds Tobacco Co. are -
Low market penetration in new markets
– Outside its home market of R.j Reynolds, firm in the HBR case study R.J. Reynolds Tobacco Co. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at R.j Reynolds has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of R.j Reynolds products
– To increase the profitability and margins on the products, R.j Reynolds needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the R.J. Reynolds Tobacco Co. HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though R.j Reynolds has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, R.j Reynolds has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, firm in the HBR case study R.J. Reynolds Tobacco Co. has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract R.j Reynolds 's lucrative customers.
Aligning sales with marketing
– It come across in the case study R.J. Reynolds Tobacco Co. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case R.J. Reynolds Tobacco Co. can leverage the sales team experience to cultivate customer relationships as R.j Reynolds is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, R.j Reynolds needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As R.J. Reynolds Tobacco Co. HBR case study mentions - R.j Reynolds takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, R.j Reynolds is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study R.J. Reynolds Tobacco Co. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study R.J. Reynolds Tobacco Co., in the dynamic environment R.j Reynolds has struggled to respond to the nimble upstart competition. R.j Reynolds has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities R.J. Reynolds Tobacco Co. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study R.J. Reynolds Tobacco Co. are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for R.j Reynolds in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help R.j Reynolds to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, R.j Reynolds can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, R.J. Reynolds Tobacco Co., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for R.j Reynolds to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, R.j Reynolds is facing challenges because of the dominance of functional experts in the organization. R.J. Reynolds Tobacco Co. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help R.j Reynolds to increase its market reach. R.j Reynolds will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. R.j Reynolds can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. R.j Reynolds can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of R.j Reynolds has opened avenues for new revenue streams for the organization in the industry. This can help R.j Reynolds to build a more holistic ecosystem as suggested in the R.J. Reynolds Tobacco Co. case study. R.j Reynolds can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– R.j Reynolds can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– R.j Reynolds has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, R.j Reynolds can use these opportunities to build new business models that can help the communities that R.j Reynolds operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Leveraging digital technologies
– R.j Reynolds can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats R.J. Reynolds Tobacco Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study R.J. Reynolds Tobacco Co. are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of R.j Reynolds business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. R.j Reynolds will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, R.j Reynolds can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study R.J. Reynolds Tobacco Co. .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study R.J. Reynolds Tobacco Co., R.j Reynolds may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of R.j Reynolds.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. R.j Reynolds can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents R.j Reynolds with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– R.j Reynolds needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. R.j Reynolds can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for R.j Reynolds in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– R.j Reynolds can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High dependence on third party suppliers
– R.j Reynolds high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. R.j Reynolds needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of R.J. Reynolds Tobacco Co. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study R.J. Reynolds Tobacco Co. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study R.J. Reynolds Tobacco Co. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study R.J. Reynolds Tobacco Co. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of R.J. Reynolds Tobacco Co. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that R.j Reynolds needs to make to build a sustainable competitive advantage.
