Rj Reynolds Case

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Background:

o Reynolds American Incorporated (RAI) was founded as and by RJ Reynolds in1875. o US Corporation headquartered in Winston-Salem, North Carolina. o It manufactures tobacco related products such as cigarettes, additive free tobacco, smokeless tobacco, and cigars that contain nicotine replacement therapy products. o In the 60’s they began diversifying into food and other non-tobacco business and became well known for RJR Nabisco. o In 1987, Kohlberg, Kravis Roberts& Co. (KKK) won control of the company and they turned it private. o In 1997, they withdrew its advertising cartoon character Joe the Camel. o In 1999, the company spun off from Nabisco. o In 2004 RAI was created

SWOTT:

Strengths: o Second largest tobacco company in the US cigarette market o Revenue contributes approximately 85% of RAI’s total sales o Six of the ten best-selling cigarette brands in the US o Innovative leader in the tobacco industry Weaknesses: o Marketing of tobacco to children o Research and development expenses o Diversifying food and non-tobacco products, such as cookies o Limitation to US market only
Opportunities:
o Acquisition of American Snuff o Government influence on producing and trading tobacco o Opportunity to trade internationally o Research and development Threats: o Federal regulations and ongoing litigations o Increase of sales tax on tobacco products o FDA unprecedented control over the manufacture, sale, marketing, and packaging of tobacco products o Restrictions of smoking in public places o Companies like Google and Microsoft to ban advertising of cigarette products on their networks
Trends:
o Smoking or not o Social acceptance of smoking o New advances in technology for nicotine delivery

Financial Analysis:

Profit Margin: Net income 1,113/8,551= 13% Sales
During 2010 their profit margin was 13% which means the company earned 0.13 of each dollar translated into profits.

Return on

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