Competitive Advantage Of Ttc's In The Global Market

During the last 50 years we have seen a trend in increase of tobacco manufacturing and consumption globally. Much of the international tobacco industry is predominantly owned by 6 TTC’s accounting for an 80% stake in the market. Being a multi-billion-dollar market these TTC’s substantially contribute to the economies of various countries as well as support many families by employing them, although the adverse health effects has shone a spotlight on the industry to induce more stringent restrictions on tobacco sales. These TTC’s had accelerated growth during the 1980’s where they had exploited the new markets of Eastern Europe, Asia and Middle East. Consolidation of these tobacco giants through mergers and acquisitions had also led to an increased competitive advantage. Most recent research has focused on the globalisation of the top 4 TTC’s while not much research was done on state owned tobacco companies (SOTC’s). SOTC’s operate in 16 countries and constitute up to half of the global tobacco market while China National Tobacco Corporation (CNTC) accounts for around 43% of the global market share.

Product differentiation, quality and innovation seem to be some the leading factors responsible for TTC’s success in global markets. A large monopolistic company has sufficient funds to carry out extensive research and trials of new products, for example the flavour ball is a recent introduction to the market where a gelatine ball filled with a miniscule amount of mint and or other flavour concentrates are located within the filter of the cigarette. You may burst these flavour balls if desired and enhance or differentiate your smoking experience or you may choose not to pop the balls and enjoy a traditional cigarette. A relatively simple invention is reserved to some of the more elite brands such as Marlboro and Camel (owned by the TTC’s) due to cost and economies of scale where larger buyers will negotiate better prices due to order quantity. This is only one of the ways the TTC’s gain an edge over smaller competitors, packaging does play a massive role in product attractiveness especially the premium looking matte touch boxes with foil like highlights. These finishes add a sense of perceived quality to the buyer which is not found in lower end cigarettes or cigarettes produced by SOTC’s, and although costs more to produce by the TTC’s, add a significant long-term advantage considering brand development. Novelties either bring in new customers to a brand and will further reinforce loyalty with existing customers. Aesthetics and flavour features are simple novelties and do not inherently change the performance of the product as it still is a cigarette similar to any other.

There is rising health concern as CNTC plans on expanding its products into the global market, as China is known to dominate in manufacturing of electronics, cars and appliances hence introduction of these newly introduced brands and new product innovation together with affordable prices may lead to increased consumption. Changes in the global arena include trends in vapour emitting electronic cigarettes and heated non-combustible cigarettes, the TTC’s already have begun ventures into these avenues as this may be the future of nicotine consumption albeit less harmful to human health.