British American Tobacco (BATO) SWOT Analysis / TOWS Matrix / MBA Resources
Tobacco
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for British American Tobacco (Malaysia)
Based on various researches at Oak Spring University , British American Tobacco is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is backlash against globalization, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, wage bills are increasing, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of British American Tobacco
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that British American Tobacco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the British American Tobacco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which British American Tobacco 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 British American Tobacco can be done for the following purposes –
1. Strategic planning of British American Tobacco
2. Improving business portfolio management of British American Tobacco
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Tobacco sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of British American Tobacco
Strengths of British American Tobacco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of British American Tobacco are -
High brand equity
– British American Tobacco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled British American Tobacco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of British American Tobacco in Tobacco industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– British American Tobacco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – British American Tobacco staying ahead in the Tobacco industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Tobacco industry
– British American Tobacco has clearly differentiated products in the market place. This has enabled British American Tobacco to fetch slight price premium compare to the competitors in the Tobacco industry. The sustainable margins have also helped British American Tobacco to invest into research and development (R&D) and innovation.
Analytics focus
– British American Tobacco is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Tobacco industry. The technology infrastructure of Malaysia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Tobacco industry
- digital transformation varies from industry to industry. For British American Tobacco digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. British American Tobacco 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.
Ability to lead change in Tobacco
– British American Tobacco is one of the leading players in the Tobacco industry in Malaysia. Over the years it has not only transformed the business landscape in the Tobacco industry in Malaysia but also across the existing markets. The ability to lead change has enabled British American Tobacco in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– British American Tobacco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. British American Tobacco has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management in the Tobacco industry
– British American Tobacco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of British American Tobacco in the Consumer/Non-Cyclical sector have low bargaining power. British American Tobacco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps British American Tobacco to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– British American Tobacco is present in almost all the verticals within the Tobacco industry. This has provided British American Tobacco 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.
Learning organization
- British American Tobacco is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at British American Tobacco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at British American Tobacco emphasize – knowledge, initiative, and innovation.
Weaknesses of British American Tobacco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of British American Tobacco are -
Low market penetration in new markets
– Outside its home market of Malaysia, British American Tobacco needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on British American Tobacco ‘s star products
– The top 2 products and services of British American Tobacco still accounts for major business revenue. This dependence on star products in Tobacco industry has resulted into insufficient focus on developing new products, even though British American Tobacco has relatively successful track record of launching new products.
Lack of clear differentiation of British American Tobacco products
– To increase the profitability and margins on the products, British American Tobacco needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at British American Tobacco, in the dynamic environment of Tobacco industry it has struggled to respond to the nimble upstart competition. British American Tobacco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though British American Tobacco has some of the most successful models in the Tobacco industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. British American Tobacco should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, British American Tobacco has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tobacco industry over the last five years. British American Tobacco even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners in Tobacco industry
– because of the regulatory requirements in Malaysia, British American Tobacco is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Tobacco industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of British American Tobacco supply chain. Even after few cautionary changes, British American Tobacco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left British American Tobacco vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that British American Tobacco needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tobacco industry have deep experience in developing customer relationships. Marketing department at British American Tobacco can leverage the sales team experience to cultivate customer relationships as British American Tobacco is planning to shift buying processes online.
High operating costs
– Compare to the competitors, British American Tobacco has high operating costs in the Tobacco industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract British American Tobacco lucrative customers.
Compensation and incentives
– The revenue per employee of British American Tobacco is just above the Tobacco industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
British American Tobacco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of British American Tobacco are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tobacco industry, but it has also influenced the consumer preferences. British American Tobacco can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, British American Tobacco 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 British American Tobacco to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at British American Tobacco can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Tobacco industry.
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. British American Tobacco can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, British American Tobacco can use these opportunities to build new business models that can help the communities that British American Tobacco operates in. Secondly it can use opportunities from government spending in Tobacco sector.
Better consumer reach
– The expansion of the 5G network will help British American Tobacco to increase its market reach. British American Tobacco 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.
Using analytics as competitive advantage
– British American Tobacco has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tobacco sector. This continuous investment in analytics has enabled British American Tobacco to build a competitive advantage using analytics. The analytics driven competitive advantage can help British American Tobacco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for British American Tobacco 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tobacco industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. British American Tobacco can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. British American Tobacco can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Use of Bitcoin and other crypto currencies for transactions in Tobacco industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for British American Tobacco in the Tobacco industry. Now British American Tobacco can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, British American Tobacco can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for British American Tobacco to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for British American Tobacco to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects British American Tobacco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats British American Tobacco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of British American Tobacco are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, British American Tobacco may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tobacco sector.
Shortening product life cycle
– it is one of the major threat that British American Tobacco is facing in Tobacco sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– British American Tobacco needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Tobacco industry regulations.
High dependence on third party suppliers
– British American Tobacco 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.
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 British American Tobacco.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, British American Tobacco 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 British American Tobacco prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tobacco industry are lowering. It can presents British American Tobacco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tobacco sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for British American Tobacco in Tobacco industry. The Tobacco industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Tobacco industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. British American Tobacco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of British American Tobacco
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of British American Tobacco.
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.
Technology acceleration in Forth Industrial Revolution
– British American Tobacco has witnessed rapid integration of technology during Covid-19 in the Tobacco industry. As one of the leading players in the industry, British American Tobacco needs to keep up with the evolution of technology in the Tobacco sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of British American Tobacco Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at British American Tobacco 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 British American Tobacco 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 British American Tobacco 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 British American Tobacco 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 British American Tobacco needs to make to build a sustainable competitive advantage.