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I. PESTEL Analysis
In terms of political factors, Reynolds Company aims to participate in the political processes while observing the laws and regulations. Fundamentally, it engages in the political processes in a manner which is consistent with the law. For example, the company cooperates with a number of political leaders and organizations, but does not violate the law. Besides, it takes part in lobbying activities that are within the confines of the law (Reynolds American 2013). It is worth noting that the existing political factors do not considerably affect the operations of Reynolds Company.
The current economic downturn has not significantly affected the tobacco industry. This can be attributed to the fact that cigarettes are addictive in nature. Therefore, it becomes difficult for consumers to stop purchasing this product. Besides, most of the smokers are loyal to their brands; hence, they continue purchasing their favorite cigarettes. However, customers who are cost-conscious will certainly stop buying them. Consequently, the sales of Reynolds Company will considerably decrease. Also, if the unemployment rates increase, fewer consumers will be willing to purchase cigarettes thus affecting the sales of Reynolds Company. Undoubtedly, the existing economic factors such as recession will greatly affect the financial operations of the company.
In reference to socio-cultural factors, there is currently an increase in social acceptability of tobacco use among most of the Americans. Basically, shifts in the government regulations regarding smoking and cultural attitudes have made smoking a less socially acceptable habit. More people stop taking cigarettes. It has become essential for one to give up smoking in order to feel accepted by other people in the community. All these factors have greatly contributed to the overall reduction of cigarette smokers in the United States. This is a major challenge for the company, but it has been able to overcome this by producing smokeless cigarettes.
The main technological factor affecting Reynolds Company is the advancement in nicotine delivery. The pace of innovation in the cigarette industry is quite remarkable. In order to cope with the recent technological changes, the company has started manufacturing smokeless cigarettes through its various subsidiaries such as American Snuff and RJR Tobacco. In this regard, it produces smokeless brands such as Kool, Doral, Winston and Camel.
There are several environmental factors such as waste disposal laws that govern the operations of the Reynolds Company. It abides by all the government laws and regulations concerning the disposal of waste from the manufacturing plants. For example, it does not channel waste to the nearby water sources. Instead, the company disposes of it in a manner that does not affect the environment. Furthermore, consumers of the Reynolds American are environmentally friendly; hence, they will only purchase from the company which conserves the environment. It is the environmental protection laws and waste disposal laws that primarily govern all the activities of the company.
Furthermore, there are legal factors such as the two government regulations that control the consumption of cigarettes. First, there are excise taxes that are charged on every pack of cigarettes. The main function of these taxes is to act as a source of revenue for the government and to reduce cigarette consumption. In reference to Sadler (2003), this clearly affects the company in terms of sales. Currently, the excise taxes are expected to increase steadily in the long term. Indeed, the legal factors are certain to affect the operations of the Reynolds Company.
II. Competitor Analysis
Reynolds American faces stiff competition from other companies. Even though it holds a significant market share of 29%, it has to compete with the Altria Group, which holds a 50% market share. The highly competitive market creates a predicament for the operations of the Reynolds Company. During economic downturns when consumers may switch from premium to value brands, Reynolds Company will benefit immensely. Despite the stiff competition, Reynolds Company is still the second largest cigarette company in the United States.
- SADLER, P. (2003). Strategic management. Sterling, VA, Kogan Page. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=81155.
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- Reynolds American, Inc. SWOT Analysis(2013). Business Source Complete. Datamonitor Plc. http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%2215CX%22&scope=site&site=bsi.