British American Tobacco (BATS) SWOT Analysis / TOWS Matrix / MBA Resources
Tobacco
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for British American Tobacco (Germany)
Based on various researches at Oak Spring University , British American Tobacco is operating in a macro-environment that has been destablized by – increasing commodity prices, there is backlash against globalization, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, increasing energy prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, 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 Germany
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 -
Organizational Resilience of British American Tobacco
– The covid-19 pandemic has put organizational resilience at the centre of everthing British American Tobacco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Innovation driven organization
– British American Tobacco is one of the most innovative firm in Tobacco sector.
Highly skilled collaborators
– British American Tobacco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tobacco industry. Secondly the value chain collaborators of British American Tobacco have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Tobacco
– British American Tobacco is one of the leading players in the Tobacco industry in Germany. Over the years it has not only transformed the business landscape in the Tobacco industry in Germany 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.
Cross disciplinary teams
– Horizontal connected teams at the British American Tobacco are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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 Germany 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.
Ability to recruit top talent
– British American Tobacco is one of the leading players in the Tobacco industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of British American Tobacco comprises – understanding the underlying the factors in the Tobacco 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.
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.
High switching costs
– The high switching costs that British American Tobacco has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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 -
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 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.
Interest costs
– Compare to the competition, British American Tobacco 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.
Workers concerns about automation
– As automation is fast increasing in the Tobacco industry, British American Tobacco 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.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of British American Tobacco, it seems that company is thinking out the frontier risks that can impact Tobacco industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Capital Spending Reduction
– Even during the low interest decade, British American Tobacco has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Tobacco industry using digital technology.
High bargaining power of channel partners in Tobacco industry
– because of the regulatory requirements in Germany, 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.
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 -
Manufacturing automation
– British American Tobacco can use the latest technology developments to improve its manufacturing and designing process in Tobacco sector. 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.
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.
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.
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.
Leveraging digital technologies
– British American Tobacco 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.
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for British American Tobacco in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tobacco industry, 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 British American Tobacco 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.
Loyalty marketing
– British American Tobacco 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.
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.
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 -
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.
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.
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. British American Tobacco 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.
Environmental challenges
– British American Tobacco 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. British American Tobacco can take advantage of this fund but it will also bring new competitors in the Tobacco industry.
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.
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.
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.
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. British American Tobacco needs to understand the core reasons impacting the Tobacco industry. This will help it in building a better workplace.
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.
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.
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.
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.
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.