Abstract
The paper contains an application of important macroeconomic concepts towards the competitive strategies of the RJ Reynolds Company, which operates in the tobacco industry. It contains an evaluation of the differences between market structures and identification of a group of competitive strategies consistent with the market structure that best aligns with the market in which the organization competes. The paper also includes discussion of how the market structure positively and negatively affects the firm and evaluation of the efficacy of the structure's competitive strategies.
Tobacco Industry Structure
The tobacco industry is one of the most active and widespread businesses. Tobacco companies all over the world grow, process, ship and distribute tobacco and tobacco related products in the global or regional market. As a matter of fact, tobacco is widely used in many countries, despite the negative consequences for health. A great deal of cigarettes has been sold by a variety of tobacco companies. These companies use various marketing strategies and implement business incentives to increase their revenue and capture the desired part of the market share.
There are ten huge companies that compete in the global market. The companies are Philip Morris USA Inc. (subsidiary of Altria Group, which sells cigarettes under the names: Parliament, L&M, Marlboro), RJ Reynolds Tobacco Holdings, Inc. (Pall Mall, Camel, Winston), Brown and Williamson Tobacco Corporation (Lucky Strike, Capri), Carolina Group (Kent, Maverick, Old Gold), British American Tobacco (Dunhill, Kent, Pall Mall, Lucky Strike), Japan Tobacco (Camel, Salem, Seven Stars), Gallaher Group (Benson & Hedges, Silk Cut, Dorchester), Altadis (Ducados, Fortuna, Gitanes), Imperial Tobacco Group (Davidoff, Rizla) and Swedish Match AB (pipe tobacco, Cricket, snuff, cigars). All these companies produce cigarettes and tobacco related products. The key issues of tobacco business incentives are a richness of tobacco flavour, tobacco product diversity, packaging design, advertisement slogans and cigarette dimensions. However, companies are also targeted at improvement of business, functional and marketing strategies; marketing responsibility and structural features.
The number of companies testifies to high competitiveness within the tobacco industry structure. All mentioned companies are characterized as those producing diversified product (tobacco, cigarettes, snuffs, nicotine gums and other tobacco related products), but at the same time all companies produce homogeneous products. Such competitiveness leads to economic efficiency (Samuelson & Nordhaus, 2005) autonomously regulated price policy. Thus, RJ Reynolds operates within Perfect Competition market structure under global market conditions and Oligopoly market structure in the United States market.
RJ Reynolds Market Strategies
Under these different market conditions RJ Reynolds faces different challenges. In perfect competition as well in oligopoly market structure it has to compete with multiple companies and minimize product cost. In order to reduce maintenance costs, and therefore total production costs, RJ Reynolds changed their vehicle replacement planning in 2009. This change had been recommended by PHH Corporation. The recommendation was to defer the replacement of 137 (out of 448) vehicles from Spring to Fall. (RJ Reynolds saves over $300,000 through replacement planning, 2009). Savings opportunity had been counted to be …