Competitive Advantage in Bat

Topics: Tobacco, Strategic management, Porter generic strategies Pages: 5 (1570 words) Published: December 18, 2012
The second largest tobacco producers in the world, British American Tobacco (hereinafter called the BAT), is a British multinational tobacco company headquartered in London, United Kingdom, it is also a primary listing company on the London Stock Exchange, and ranked as 6th out of the 100 companies in the FTSE 100 Index, as at 30 November 2012. Being the second largest in the industry, BAT has over 200 brands which are selling in an approximate of 180 markets around the world. In 2011, according to the company’s financial annual report, they have a sales volume of more than 700 billion cigarettes and generated a large sum of revenue of £15,399 million and this was achieved by its leadership position in more than 50 markets worldwide. The company is proud of themselves for being a part of the world’s top 12 companies by market capitalization for almost a century since 1912, based on report shown, BAT has a market capitalization of £65.6 billion, one of the six largest companies listed on London Stock Exchange.

Sustainable business practice is a main focus in BAT, according to its Chief Executive, Nicandro Durante, and to maintain its leadership in the global tobacco industry, the company emphasizes on quantity as well as quality of the business. To achieve a higher growth in the business, the company tends to focus on the their Global Drive Brands through the increment of global market share. The company believes that with a great productivity and by being a responsible and winning organization, they are able to shift the company to a higher level and thus offer their valued shareholders a higher returns, as well as creating the best interest for the stakeholders. This essay will discuss on the topic of resources and capabilities of BAT and how these competences have successfully helped the company to sustain its competitive advantage.

Resource-based view of the company
Over the past decades, there is an obvious revitalization of interest on how a firm’s strategy’s foundation is based on the firm resources and how these resources help the firm to sustain its competitive advantage. This is called as the Resource-based theory. Grant (1991) in his research underpins that the direction of a firm’s strategy and the main source of profit for the firm lies on the internal resources and capabilities a firm has possessed. Grant (2005) defined that resources are the assets owned by the firm, which they are made up of tangible resources, intangible resources and human resources; whereas capabilities are the ways a firm deal with these resources. Resources have to work together to create organizational capability, and eventually the firm will be able to draw up their own unique competitive advantage. Competitive advantage can be sustained and controlled by resources and capabilities. Resource-based view (RBV), Barney (1991) and Grant (2005) in their researches outlined that a firm must have differentiated and unique resources in order to sustain a competitive advantage.

Resources and capabilities in British American Tobacco group. Tangible resources : financial, physical
Being one of the largest tobacco producers in the world and to continue holding on the leadership position, chairman of BAT said that the year of 2011 was an successful year as the company’s operating environment improved while the economic downturn continues. The results for the year 2011 are driven by continuous growth in revenue which then resulted in an improved operating profit. According to its 2011 annual report’s financial review, it is reported that the group’s revenue grew by 3 per cent from £14,883 million to £15,399 million. And that the adjusted profit from operations too have increased 11 per cent from £4,984 million in 2010 to £5,519 million in 2011. Despite of the declining market share growth which was about 0.4 per cent, the Group was still managed to achieve a higher returns for shareholders. To strengthen the company’s shareholders’...
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