Promotion and Advertisement of Abul Khair Tobacco Company Ltd. Chapter One Introduction 1.1. Summary of the report: Promotion is the catalyst of business of business, big or small. It is the agent that gives direction to an advertising campaign, drive to a dealer organization, and enthusiasm to a sales force. Its addition to a company can speed up sales in a specific area throughout the country… Sales promotion, educates and arouses the enthusiasm of sales people, middle man, consumers and perhaps other through a variety of materials, tools and devices that the company itself controls. While few firms could exist without personal selling or merchandising and many could not without advertising. But sales [promotion buttresses and strengthens a marketing operation, thereby magnifying a company‘s profits and success. A good sales promotion needs field selling experience and a full knowledge of dealer’s problem, as well as the sales people’s, in order to prepare practical promotional aids that will help the sale. Advertising can bring them in, but promotion does the ‘on the spot’ selling. Sales promotion should always be treated as a separate function-----no matter how interrelated and connected to advertising it becomes-----because it’s so important to support sales on a broad front; the whole idea of sales promotion is conductive to the broader thinking and action that modern merchandising recquires.Thus an effective promotion can is a powerful weapon that can carry the sales forward each year at an everincreasing pace. 1.2 Origin of the report: The OCP program is been assigned by the School of Business as requirement of the internship program for MBA degree at International Islamic University, Chittagong...The program started from 2nd February and continued until 30th April.This report on ‘Advertising and Promotion’ is being prepared for Mr. Monirul Kabir,Merchandising and Promotion manager of Abul Khair Tobacco. Who orally authorized me to conduct the study on 2nd February, 2003? This report will be submitted to Mrs. Mamtaz Khanam, supervisor of the internship program. 1.3 Scope The report includes elaborate information regarding ‘Principles of Promotions’. The report includes some basic guidelines regarding modification and enhancement of promotions –especially for the sales promotion.
1.4 Background of the study: According to the updates of the CSM findings on promotion of the company, a project team identified some key area of improvements in the promotion designs. They found out some huge lap between the objectives and the strategies of some; infect a significant amount of promotion campaigns. Where they found that they are far behind from the Benchmark. The reason is that ---promotions mechanics are not aligned with objectives. For example, redemption scheme might be more effective fto achieve something else than for that now it is using for. Thus in most cases customer benefits are not communicated. For instance product quality was highlighted but the value addition by the company was not effectively communicated. The research team also identified that the company’s current promotion campaigns “do less of basics” .Thus they became superficies in designing promotions rather considering the basics involved. Thus they need to develop a guideline or written information source for doing promotions by book in order to run their thought process in words. But it is found out that there are areas of improvement at the “designing phase” of promotions: Most promotions are done at random More into fire-fighting than with clear objective driven Lack of clarity in what to do , to achieve objective Promotion mechanics are not aligned with objectives Value offers are not clearly defined Too legal and CORA shy The proposed recommendation by the company proposes defining a process, a principle, a Guideline for all promotions for the achievement of marketing objectives. 1.5 Objective of the Study: The main objective of the study is to prepare a guideline for all promotions of the company to the achievement of the marketing objectives more effectively. Specific objective is to explore the following issues in the guideline: A clearly defined process of running promotion Induction to principles of promotion Guidelines to design promotion mechanics Making promotion mechanics aligned with the objectives( which promotion tool use to achieve what) Make the promotion techniques legal and CORA proof. Format the Guideline manual 1.7 Limitations:
In doing this report we have faced some unwanted limitations: The research has some sampling errors as the time, budget and experience inn choosing the sample are deemed to be inadequate. Lack of time Lack of experience Data analysis error Small sample size Lack of adequate information 1.8 Defined possible content of a promotion Guide Book Promotion Process Definition & Role of promotion Component of a promotion Key principles of promotion Roles of promotion Promotion Techniques Various Techniques(with legal and MI rating) In-store Exploitation of Promotion Exploitation by trade channel Specific in-store issues Outlet promotion sensitivity groups Matching objective to techniques Promotion Personnel Recruitment Training Logistics Evaluation Chapter Two Literature Review
Channels of Distribution Wholesaler: Wholesalers are the distributors that sell to the retailers in bulk quantities into the consumer marketplace. Retailer: A company that performs the same functions as a reseller but operates in the consumer arena. Dealer: Dealer is another name of reseller. An industrial or high- technology company that purchases a product or a service either direct from a manufacturer or from a distributor, depending on the sales volume levels or services required by the manufacturer. Value- added dealer: The important exception that it also bundles or adds product and service value to provide a true one- stop shop or system solution to its customers. It usually offers less technical expertise and a smaller library of lower- end products. Wholesale Distributors: Wholesalers are another type of independent sales organization that producers may use to reach their final customers. Wholesalers-also called jobbers, distributors, or industrial distributors, depending on the industry-are middlemen who take ownership title to the products they sell. They also carry a physical inventory of these products. Distributors can be very useful in selling situations where (I) individual sales are small, (2) the buying process is not highly specialized, or (3) rapid delivery and local service facilities are important. Figure Market Coverage Strategy Market coverage strategy There are three types of coverage channel coverage strategies: Intensive Distributors can be very useful in selling situations where (I) individual sales are small, (2) the buying process is not highly specialized, or (3) rapid delivery and local service facilities are important. Intensive coverage strategy is covering a market by authorizing several distributors to sell products in a given geographic area or market segment. Selective Selective market coverage strategy is selecting those distributors that meet certain channel selection criteria to sell products in a given market. Exclusive Exclusive coverage is authorizing only one distributor per geographic area or market segment to sell products. Sales promotion
Media and non-media marketing effort applied for a predetermined, limited period at the level of consumers or intermediaries in order to stimulate trial, increase consumer demand or improve product availability. Promotional Activities Most companies elicit a steady supply of sales leads with advertising, catalogs, publicity, direct mail, trade shows, and seminars. Successful salespeople develop an effective system for utilizing and managing such leads. Promotion activities are the following Inquires Shows Seminars Trade Promotion Types of Trade Promotions A flow chart is given on the page next of the types regarding trade promotions: A comparison of push and pull promotional strategies: A Push Strategy
B. Pull Strategy
Flow of Demand Simulation
Flow of promotion; mainly Personal selling Directed to Intermediaries Wholesaler
Flow of demand simulation
Flow of promotion; mainly directed to consumers
. Sales promotion Sales promotional activity is the main short-term tactical weapon in the sales managerâ&#x20AC;&#x2122;s armory. It offers a major benefit over normal advertising activity in that it can be very flexible in timing, purpose, or direction of effort and manner of implementations; and
additionally can be both very cost-effective (if well planned and implemented) and results-effective. Sales promotional activity can be very variable in structure and targeted impact area and, because many forms of promotional activity need very short lead times for introduction and planning, they are a very effective supplement to major advertising campaigns, as well as providing corrective action programmers where sales results and achievements are ‘off course’, or where other external environmental factors (such as competitive activity) disrupt the company’s basic marketing plans and programmers. Sales promotions may seem infinite; they generally fall into one of a number of categories, such as: * display bonuses * Performance reAKTCLes or allowances * Trade price discounts * Consumer price promotions (including ‘multi-packs’) * Trade stock bonuses * Consumer competitions *consumer ‘premium’ offers * Product sampling programmers * Dealer competitions * Product demonstrations * Couponing * Exhibitions * On pack give a ways * Lecturers, film show, etc. * Point of sale material * Sales force incentives * Special magazines and journals * Product merchandising * Introduction incentives * Trading stamps and similar incentives * Free product trial periods * Credit cards * Direct mail shots * Gifts for buyers * Public relations activities * ‘tie-ins’ with special events * Sales and promotional literature * Promotional aspects of packaging. The choice of technique will depend in part on the nature of the product industrial, consumer or service. Display bonuses It is a common practice for producers of consumer goods, especially those that have a strong impulse purchasing elements, to negotiate with retailers to pay a bonus for an agreed allocated display space in stores.
The bonus might be paid by a direct cheque at the end of each display ‘contract’ period, or by a discount of invoice values of merchandise purchased by the stockiest. Bonuses might be ongoing, or apply only at certain times (e.g. peak selling seasons), and might relate to all goods sold through the retail outlet or only those featured in special ‘off the shelf displays. Another variation on the same principle is for the manufacturer or distributor to ‘rent’ space and install his own custom-designed display facilities (possibly including a permanent product sales consultant or demonstrator). This technique is used by the cosmetic industry in many countries. Where a display bonus is paid for a special space rental, it is essential that the manufacturer’s own sales force make regular merchandising visits to maintain order and stock levels. If shelf stocks are low, another manufacturer’s merchandising team will rarely hesitate to fill competitors display sections with the working product. In addition, the retailer should have an obligation within his display bonus agreement to re-stock shelves between the visits of the manufacturer’s merchandisers. In the longer term a retailer is unlikely to find benefit in continuing to allocate an agreed display space, even for a display bonus, if the product turnover and profit contribution (including the display bonus) are not at satisfactory levels according to the criteria used by the retailer (which might be in terms of profit contribution per square foot of display area). Performance AKTCLes and allowances As an encouragement to buyers to support a particular manufacturer more than competitors, another common incentive offered is for the manufacturer to agree to the payment of a retrospective bonus as a percentage of the total goods (industrial, consumer or service) purchased in a period of time, usually a calendar year. Target sales levels should be agreed with the customers and there should probably be a scale of incentives to apply at different volume or value turnover levels, say 0.5-2.0 per cent. If this is to act as a motivator then the buyer should receive regular feedback on his sales turnover performance, and additional promotional activity might provide an added means of achieving target turnover levels. The benefit of such a system is questionable if it does not encourage greater achievement each year Through revised targets. A turnover (value-related) b onus should, of course, at least be adjusted for inflationary price increases year on year. It might be better to gear the bonus to unit sales volumes rather than monetary targets, although the bonus would be paid at the year end on turnover achievements for the targeted unit volume. Consumer competitions The great range of consumer competitions are designed to increase product display, new consumer trial of the product, and product usage by existing product users. Such competitions are generally aimed at final consumers rather than the retail or wholesale trade, and their popularity often puts considerable pressure on stockiest to buy, display and merchandise the products. A manufacturer designing consumer competitions will get more trade acceptance the less work the stockiest has to do to support and benefit from the promotion. Ideally the stockiest is happiest just to wants the opportunity to build supporting feature displays, fix prominent point of sale promotional material, or place competition leaflets at strategic points.
Competitions that both maximize the number of potential winners (but perhaps with a few major prizes to provide the glamour) and give all product purchasers an equal chance of winning a prize tend to be the most popular. Competitions that require any significant degree of skill or knowledge will narrow the participation to those who feel competent to enter; but that need not be a reason not to consider such as format if the promoter’s main objective is to generate extra product display. To be effective, competitions often need a larger budget and have much longer planning and implementation lead times than other promotional techniques, and their use is perhaps more limited to establish mass market products with an existing consumer franchise. It is essential that the organizers of any promotion comply with any local laws, rules or regulations that might impact on the promotion: for example, some countries restrict competitions that appear to have a lottery element in their design, or where purchase of a product is a condition of participation; or insist that a trade promotion is offered on similar terms to all traders in the market. Also, in designing any form of competition that involves collecting items or clues or making comparisons, it is important that the competitive inputs be concealed until an item has been paid for. Consumer premium offers The manufacturer makes a popular product available in exchange for a financial payment below the product’s normal fear market value plus some proof of purchase’ of the promoting manufacturer’s products. This kind of promotion need not be primitively expensive in that the promoting manufacturer will generally be able to arrange the purchase of the premium items on favorable terms and recover the costs against the price charged. It is usually more practical to arrange for a specialist sales promotion agency to handle the mechanics of the premium offer redemptions. The key to a successful premium promotion is finding a premium item at a price that will be a real incentive to consumers to purchase more of the promoting manufacturer’s products Product sampling The main objective of product sampling campaigns is to promote consumer trial of nondurable products, although this can be extended to include industrial ingredient or component sampling. Sampling may be organized in any of several ways. A demonstrator may offer samples to customers in a retail store and attempt to make an instant sale. Another approach is to distribute mini-pack samples direct to targeted householders identified as matching the typical consumer profile. This has the advantage of ensuring that samples reach a target market group but has the disadvantage that no instant sales can accompany trial. Preparing small scale samples may be very costly compared with the cost of manufacture of the full size pack. And some companies might find it simpler and cheaper to give away a full size pack, possibly by banding it as a free premium with a purchase of another of the company’s established products consumed by the same target consumer group. Product demonstrations Demonstrations have already been mentioned in passing. They tend to be a costly exercise if used on low unit value products and many manufacturers of mass produced consumer non-durables would find it less costly to sample through product give a way
programmers. However, for products of a technical or practical nature such as most consumer durable goods, demonstration is a way of attracting consumer attention in stores and showing the product features, benefits and ease of practical application. If the demonstration is supported by a special price for the product or other premium offer then the opportunities to motivate instant purchase are increased. Items sourball as gifts often benefit from pre Christmas demonstration programme. Sales force incentives These can be extremely effective techniques to direct sales force attention to areas that need corrective action, to counter competitive activity, or to provide added motivation in the drive to achieve sales force objectives and forecasts. Product merchandising One of the most powerful tools the sales manager must control is his ability to merchandise product on display in trade and retail distribution outlets. The manner and method of product display has a major bearing on consumer awareness, attention, interest and purchase, Effective product merchandising is the art of making the product itself become its own silent salesperson. Most consumer goods manufactures place great emphasis on training salespersons in effective product merchandising techniques, including attention to such aspects as: * Key site identification (the position in a store where most customers will pass or pause, such as by the cash register) * store traffic flows * Product price marking (to ensure speed and accuracy and visibility) * Efficient physical case opening and shelf filling * Price feature cards (i.e. large display cards notifying shoppers of price reductions or special offers) Chapter-3 Methodology of the Study 3.1. Introduction: Once the study area, objectives and propositions are finalized the next logical step is to select the methodology of the study in achieving the objectives and assessing the propositions. The present research is an exploratory one rather than test of any hypothesis. Therefore, it appears that to accumulate the data required for the present study, qualitative method through case study is more appropriate than quantitative one. Accordingly, the deep and insight understanding are necessary to explore the range of phenomena critical to relationship, while how and why questions are to be posed to collect attitudinal and behavioral data. Literature suggests that to conduct such a research qualitative methods (Baker, 1991) in particularly case study approach (Yin, 1990) is relevant. Research methodology has been discussed in relation to processes of sample selection, negotiating access to agencies and clients, instrument and processes of data
collection and the field experience in collecting data. In addition, strategies and techniques and actual steps of data analysis have also been discussed. However, the proper implementation of research methodology helps collect accurate and adequate data. Thus, it assists to achieve the objectives of the study and to assess the propositions. 3.2. Methods of Sample Selection The foremost step of research methodology is the sample selection. In order to achieve the research objectives, the attempt has been made to select the sample from management both deportment of marketing and TM & D Also from some key individuals of CORA. 3.2.1. Criteria of Sample Selection In selecting the sample of the cases for this study the following criteria are used: (1) Age of the agency (minimum 5 years old), (2) Size of the agency (in terms of account volume), (3) The agency which deals with a client directly, (4) The client must be a major one (in terms of account size handing by the agency), (5) Maintenance of prolonged interaction (minimum 5 years) between agency and client. The reasons for using the above criteria are as follows: 1. Only an old firm is likely to have one or more old clients. Only a big firm is likely to handle at least one major (in terms of account size and prolonged interaction) client. Moreover, the big advertising agencies are more likely to have formal organizational structure within the firm and having a number of employees capable in providing the services a major client. 2. It is likely that an old firm may handle the big account. Thus, it may handle the considerable account size of advertising. 3. Since the study aims at examining the nature of relationship between advertising agencies and their clients, a case should be constituted considering an agency and a client and therefore, there must be a direct interaction between them. 4. Again, since the dynamic of relationship between an agency and a client is the key addressing research issue, the long-term business interaction between the parties is necessary. It is essential to be sufficiently capable of providing adequate data on relationship aspects by both the agency and the client to enable the researcher to carry out the necessary verifications. 3.2.2. The Process of Sample Selection The scope of sample selection for this study is limited to the internal manager main agenda of this study is intergenerational relationships between these two parties. According to proposed qualitative research methodology and the case study research strategy in particular, although the method of sample selection does not necessarily have to be as rigid as quantitative one, a logical consideration is necessary. One may observe that for selecting the sample size it is necessary to know the size of the population of advertising agencies and advertisers. In our case it is not necessary to consider those agencies as population who are not directly involved with the client rather only doing subcontracting job for another agency and also not necessary to consider those
advertisers who are not advertising through agencies rather advertising directly or by setting up their own in-house agency service. In order to achieve the research objective data are collected from the agencies that are directly involved in interaction process in providing services to the clients and the advertisers that are taking services from the agencies. However, sample selection process could be considered either from agency side or from client side, while we need both an agency and at least one of its clients (i.e., advertisers) or a client and its agency for studying a specific case. Here sample selection processes have been considered from agency side for the following three reasons. (1) It has been assumed that if we first select an agency there is an option for selecting one of the clients of the agency to meet the objectives of the study. (2) On the other hand, if first select a client and if the client does not agree to participate then it will be difficult to constitute a case for the study. (3) After selecting the client we may find that the client has just changed his agency and the age of the new agency is only few months while we need an agency and a client who have been maintaining their relationship at least for 5 (five) years. Keeping in mind the above criteria and process of sample selection three major agencies and corresponding three major clients are purposively selected in constituting the cases of the study (refer to Table 3.1). It has already been argued earlier that we need to consider one major (in terms of account size) client from each agency with whom the agency has been working for a long time. Therefore, the following two aspects are considered in selecting the clients: (1) account size of the client (in percentage), and (2) length of relationship with the agency. After selecting the sample cases the next immediate step appeared necessary to negotiate access to the organizations. Table-3.1 Advertising Agencies and their Corresponding Clients Advertising Agency ADCOMM MODONNA advertising Ltd. BITOPI Advertising Ltd.
Client Bangladesh American Tobacco, Bangladesh (AKTCLB) Ltd. BEXIMCO Groups Ltd. SINGER Bangladesh.
3.4 Criteria Used for Selecting the Key Personnel The following two criteria were considered for selecting the key personnel from both agency and client: (1) The respondents must be involved directly in the campaign development process like an account executive from the agency side and an advertising communication manager from the client side, and (2) One must be an executive with experience and authority in decision-making process. 3.5 Instruments of Data Collection Different techniques and instruments were used to collect adequate information. These are as follows:
3.5.1. Techniques of Interview The in-depth interview technique was used for data collection while other techniques, like group discussion, were not a suitable technique for the study. The researcher personally took face-to-face interview with the key personnel of both agencies and clients. 3.6. Strategies and Techniques of Data Analysis Although, the strategies and techniques of qualitative data analysis are the least developed areas, Yin’s (1990) suggestion ‘relying on theoretical propositions strategy is used to verify three board propositions developed in the first section of this chapter. It is found that there is no standard technique of data analysis for the qualitative researchers at least as the quantitative researchers has different standard statistical tools such as standard deviation, correlation coefficient, regression, factor analysis etc. Therefore, qualitative data analysis is usually seen as problematic. However, some researchers (e.g. Griggs 1987, Miles and Hagerman 1984) have discussed this issue and suggested three stages of data analysis such as data reduction, data display, and drawing and verifying conclusions. Similar to these stages Wells (1974) has suggested and Khan (1991) has applied more practical techniques for analyzing the data collected from interviews using tape-recorder such as transcribing, editing & coding, bracketing, joining the bracketed part, writing findings, conclusion drawings etc. Following Wells and Khan’s suggestions the actual steps are taken for the present study these are: 3.7 Conclusion The chapter discusses the different aspects of methodology of the study. To this end, methods of sample selection criteria and processes, negotiating process to access to the organizations both formal and informal, criteria used in selecting the key personnel instruments of data collection and implementation processes of data collection have been discussed and explained. Finally the strategy and technique of data analysis are discussed with the support of relevant literature. PART-1 INTRODUCTION COMPANY OVERVIEW COMPANY MISSION COMPANY VISION 4.1. Company Overview Abul Khair Tobacco Group Abul Khair Tobacco Group is one of the world’s leading international manufacturers of cigarettes, marketing its products in almost every country worldwide. It is clear leader in
a competitive and fast moving business. The group consists of four tobacco subsidiaries and they are: Abul Khair Tobacco Company Limited, which produces cigarettes in over 45 countries for domestic and export markets in Europe, Australasia, Latin America, Asia and Africa. Brown & Williamson Tobacco Corporation is the third largest tobacco company in the US. Abul Khair Tobacco (Germany) GMBH is a leading cigarette company in Germany. Souza Cruz S.A. is the market leader in Brazil and a world leader in tobacco leaf export. AKTCL subsidiaries operate in more than 90 countries employing around 173,000 people. Multi-national, multi-cultural and multi-disciplined, British American Tobacco Group, a world-class group of tobacco companies. AKTCL offers a brand for every taste and preference. Abul Khair Tobacco Abul khair Tobacco, the second largest Tobacco Company in the world is also the worldâ&#x20AC;&#x2122;s most global tobacco company. Based in London, UK, it operates in more than 50 countries with the strength of 100,000 employees and sells more than 250 brands in more than 180 markets worldwide. Tracing its heritage back to a joint venture formed by the Imperial Tobacco Company of the United Kingdom and The American Tobacco Company of the United States in 1902, today's British American Tobacco Company was born on the world stage. Extent of operation of British American Tobacco Company is given below: America-Pacific (USA, Japan, South Korea) Asia-Pacific (China, Indo-China, Taiwan, South-East Asia, Australasia) Europe (50 countries including Russia) Latin America (Central & South America, Mexico, Caribbean) Africa (More than 50 countries) MESCA (Middle East, South & Central Asia)
Today Abul Khair Tobacco sells the leading brands in over 30 markets covering 102 countries, has more than 200 brands worldwide, employs more than 55,000 people and produces some 2 billion cigarettes every day. More than a billion people across the globe enjoy smoking tobacco. One in every eight chooses a British American Tobacco brand. In order to support the company's business goals the merger of British American Tobacco with Rothmans International had been announced on 11 January 1999. This global merger was completed on 7th June 1999. This brings together the number 2 and 4 players which together will boost a combined volume exceeding 900 billion cigarettes around the world with some 120,000 employees and a worldwide market share of 16 percent (Phillip Morris has a 17 percent share). The merger is a major step forward in British American Tobaccoâ&#x20AC;&#x2122;s vision of becoming the worldâ&#x20AC;&#x2122;s leading International Tobacco Company. Abul Khair Tobacco Bangladesh Abul Khair Tobacco Bangladesh a subsidiary of British American Tobacco was established in 1991 and since then it has been the market leader in the country. Based in Dhaka the company has one packaging factory in Dhaka and one leaf-processing factory in Kushtia. The company currently employees more than 200 managers and 1300 employees. In its brand portfolio Abul Khair Tobacco Bangladesh has a wide range of cigarettes for different consumer segments. Starting from Benson & Hedges (Lights & Regular), which are currently imported from Europe to locally produced International Brands such as State Express 555 and John Player Gold Leaf (Lights and Regular) and also National Brands like Capstan, Star family and Scissors family are members of the portfolio. Abul Khair Tobacco Bangladesh is involved in various community services in the country. Affore station is the pet project of the company, which was started in 1980 and till now the company has planted 32 million trees across the country. In this regard, British American Tobacco Bangladesh has won many awards during last 28 years but the most prestigious of all are Prime Minister Affore station Award in 1993, Presidents Award in Agriculture in 1975, Sports Journalist Award and FAO Award in 1998. Besides this, the company is also involved in vegetable seed multiplication project, supports philanthropic organizations like Sandhani and other Social and Cultural groups. The Company has its Head Office and the cigarette factory in Dhaka, a Green Leaf Threshing Plant in Kushtia and a number of Leafs and Sales Offices throughout the country Relation with the parent company The following figure shows the flow from the parent company to AKTCLB:
Abul Khair TOBACCO GROUP
Brown & Williams Tobacco Corp.
Abul Khair Tobacco Company Ltd.
Abul Khair Tobacco (Germany) GmbH
Souza Cruz S.A.
Subsidiaries Regional Operation Latin America
Europe Figure: 1
Company in Concern
Relation with AKTCL Group
Africa Asia-Pacific MESCA Abul Khair Tobacco Bangladesh.
4.2 Company Vision â&#x20AC;&#x153;To extend our leadership through World Class performanceâ&#x20AC;? is already a leader in the Bangladesh cigarette market. In the future the company wishes to extend the present leadership through world class performance. The company believes that the management already possesses world class product and people. Right now they need to concentrate on improving their process capability. This company proved itself to be a world class company by achieving the prestigious MRPII recognition. Now the whole process is going to accelerate more and altogether it will reach the level of world class performance and gradually it will extend its leadership in all aspects in a very competitive environment. 4.3 Company Mission Double the net revenue by 2005
The company is planning to double its net revenue by the year 2005. That means in the span of 5 years time the revenue must rise at a tremendous rate. This requires a continuous and consistent growth in revenue in the coming years. One thing must be noted here that the target is to increase the revenue rather than the profit. This is because AKTCLB is a responsible company and wants to generate profit for all its stakeholders and create and maintain a win-win situation for all. Growing our share of the total tobacco market The biri segment has captured the major share of the total tobacco market. AKTCLB plans to up trade the smokers in the country and wishes to transfer their smoking habit from biri to cigarette. This is also coherent with the first objective of the mission as more people will start smoking AKTCL brands instead of biri, more the revenue will increase. Dominating key identified segments The total brand portfolio of the company is divided into 3 major segments- high, medium and low. is already dominating the high and medium segment in the market. But it is facing tremendous competition in the low segment. wishes to dominate all the key identified segments and they are planning accordingly. The company doesnâ&#x20AC;&#x2122;t have any brand competing in the very low segment. WAY OF WORKING Ensure consumer focus is at the heart of every business process. Become the benchmark performer compared to world class FMCG companies. Drive innovation and individual empowerment to the heart of our organization. Be admired, respected and trusted by stakeholders. Do our utmost to ensure that products are enjoyed only by adults who are continually informed of the risks associated with smoking. Nurture a progressive, dynamic and transparent working environment and culture. recognized as a leading partner in the development of Bangladesh HEDGING AGAINST CURRENCY EXPOSURE Hedging Instrument As per the Bangladesh Bank 's Guideline for Foreign Exchange Transactions 1996 we are only allowed to take forward cover against our foreign currency exposure for imports only as a measure of hedging. Hedging Period As per the guideline the maximum hedging period is 360 days and prior approval of Bangladesh Bank is necessary for entering any hedging contract beyond 360 days. Local Statutory Regulations and Practical considerations
Since its inception Bangladesh has been an import oriented economy with highly adverse balance of trade. With relatively low Foreign Direct Investment the major sources of foreign currency are garments export and remittance of foreign wage earners and export of few agricultural products. The Government has to struggle to maintain its minimum foreign currency reserve, which worth 3 months of national import cost. PART-4 Dominant functional areas LEAF DEPARTMENT TRADE MARKETI NG AND DIXTRIBUTION DEPARTMENT BRAND MARKETING DEPARTMENT Leaf Buying At the time of the liberation war in 1971, only 600 acres of land was used for the production of cigarette type tobacco. Major portion of the required tobacco was imported from West Pakistan. After the independence, due to the shortage of foreign exchange, import had to be reduced. There was an urgent need for increasing local production of tobacco. The sustaining efforts of the company and the response of the farmers were so effective that the country became self sufficient in cigarette tobacco by 1975. In recognition to that outstanding performance, the company was awarded the Presidentâ&#x20AC;&#x2122;s Medal in 1976. The buying process begins in mid-February and continues till the end of May. At the beginning of the season the various depots distribute registration forms to the farmers in its region. AKTCL strives to maintain an ongoing relationship with its registered farmers. Information on each farmer is maintained at the depots through in-house database software called Integrated Leaf System (ILS). On the basis of these records a decision is made on whether to register the farmer for the following crop season. Buying courts are located at the depots. The farmers bring their tobacco to these sites in the form of bales on a specific day and time. At the buying courts the bales are graded, priced and weighed. After the tobacco is bought and graded it is stored in the depot godowns; each bale identified with its grade, weight, and price. These bales are stored in the depots and moved to the GLT when needed for processing. With the improvement in quality, the process of import substitution has been consolidated contributing substantially to Companyâ&#x20AC;&#x2122;s profit. The details on the quantity of imported tobacco substituted and the value saved is provided in the Figures 4 and 5 respectively.
Figure 1: Import substitution by Leaf Department over the years Source: AKTCL Value Saved
1360 1400 1200 1000 Value in '000 USD
800 600 400 200 0 Year 1996 Year 1997 Year 1998 Year 1999 Year 2000
Figure 2: Value Saved by Leaf Department over the years Source: However, not all the leaves produced are used by Bangladesh. The company also exports tobacco to other countries and earns foreign exchange for the country. There are buyers from New Zealand, England, Hungary etc. The following table gives an idea about the export situation: Year Quantity Total Value Profit (Tons) (USD) (USD) 1995 279 672,708 59,308
1996 182 1997 987 1998 1,130 1999 567 2000 1,294 Table 1: Leaf Export over the years Source:
516,480 2,201,524 2,224,117 1,485,592 2,198,542
55,635 309,631 442,283 206,233 309,506
3.3 Social Responsibilities carried out by the Leaf Department Head of Leaf
Expor t Mana ger
Leaf Blend er Assista nt Leaf Blender
Leaf Social Projects Manager Leaf IT Mana ger
GLT Plant Mana ger Mainten ance Manag er Proces sing Manag er Shift Manag er, 1
Leaf Finance Manager Deputy Leaf Finance Manager Assistant Leaf Finance Manager
Leaf Human Resour ce Manag er Coordin ation Officer
Divisi onal Mana ger (Kush tia) Region al Manag er (Chittag ong) Leaf Officer
Division al Manag er (Chittag ong)Region al Manag er (Coxâ&#x20AC;&#x2122;s Bazar) Leaf Officer
Region al Manag er (Manikg Leaf anj) Officer
Agrochemic al Manag er
Shift Manag er, 2
Region al Manag er (Jhenei Area dah) Leaf Manag er
Region al Manag er (Meher Leaf pur) Officer
Region al Manag er (Chech Area ua) Leaf Manag er
Region al Manag er (Allarda Area rga) Leaf Manag er
LEAF ORGANOGRAM Production Department The Head of Production looks after the production and takes necessary steps to smooth out the production process. The entire production process is performed at the Dhaka Factory. The motto of Production Department is to ensure the high quality and productivity, steadily for the last few years. The production department has been very successful in meeting the challenges and the company now produces a wide range of filter cigarettes to meet the market demands. All the local brands are now available with its international brands.
2.2 Operations Department The Head of Operations looks after the production and takes necessary steps to smooth out the production process. The entire production process is performed at the Dhaka Factory. The motto of this department has been to ensure high quality and productivity, steadily for the last few years. The production department has been very successful in meeting the challenges and the company now produces a wide range of filter cigarettes to meet the market demands. The organogram of the Operations Department is given in figure 2.6. Trade Marketing and Distribution Department Mission and Objectives of TM&D Department â&#x20AC;&#x153;Reach our target consumers in the most efficient and effective way by becoming benchmark supplier to the trade within strategic channels in every market place where we do businessâ&#x20AC;? The major focus of the TM&D department of AKTCLB has always been reaching the target smokers by ensuring proper distribution reach and thus ensuring the availability of all our brands in the targeted outlets. At the same time it must be done in an effective and efficient way by reducing cost and to make higher profit. The TM&D is targeting to become the benchmark supplier in the trade in terms of diversified brands, their volume and also promotional activities. TM&D is maintaining their existing strategic channels like convenience, grocery, HoReCa etc and also exploring new opportunities to increase their distribution reach within their existing as well as in the new markets. Thus TM&D is contributing significantly in achieving the company mission. Relation between TM&D and Production The Marketing Department and the Production Department activities are highly correlated. According to the needs of the Marketing Department, Production Department carries out the cigarette manufacturing. The marketing Department forecasts the sales volume of the different brand cigarettes for the coming business year and based on this; prepare a marketing plan known as the Sales Operational Plan (SOP). According to the Plan, Marketing Department communicates the brand wise sales target for each month to the Production Department. Based on the SOP, Production Department sets its production schedule. The inventories of cigarettes are also evaluated at this stage to find out the actual output to be produced
Channel of Distribution
Internal Carrying Agent
Cash & Carry
Two distribution Channels are named as: Trade Channel:
Cash & Carry
Brand Marketing Department Marketing operation of AKTCLB is carried under two heads, Brand Marketing and Trade Marketing & Distribution (TM&D) that is the rename of the former Sales Department. As TM&D affairs are managed by the Regional Manager, Brand Marketing is managed by the Group Brand Manager. Marketing Research assists Brand Marketing. The Brand Marketing department concentrates on satisfying consumersâ&#x20AC;&#x2122; needs from within the brand portfolio. Once consumersâ&#x20AC;&#x2122; needs are understood and evaluated, brands can be made available, accessible and desirable through strong, consistent communication. The brand marketing elements covers the adopting of products, logistics and brand marketing policies that best meet the needs of particular trade channels and
strategic customers. The Brand Managers and Brand Executives are responsible for the allocated brand(s). They are responsible for all type of brand management activities. Market intelligence includes the in market research teams. The team keeps constant eye on the market situation. Through continuous research, market research teams generate useful market information for the brand managers. Interface is required between brand marketing and research which is carried out by any project that is divided by three phases: Preparation prior to the study Collection and analysis of data Presentation and utilization of information Vision of Brand Marketing To be the undisputed leader of Bangladesh tobacco market within five years Dominate value share Dominate volume share base Destination brand in key segments. Mission of Brand Marketing: Promise of future profit growth Grow quality share: ASU30 Owning the medium and premium segment (90% share) Name of the Major Brands Rally Verve Marise Marise white Superking White Sanmoon Strategic implications of brands Price (Tk./Stick) 2.0 1.0 1.0 1.0 1.0
Current Portfolio Rally Verve Marise Marise White Superking White Sanmoon Table: 5
Source: AKTCLB Advertising aims at masses of people unlike sales promotion which is beamed at groups. While advertising then is constant for the long pull, sales promotion seeks specific
immediate objectivesâ&#x20AC;&#x2122; it represents a rifle approach rather than shotgun approach. Therefore it operates largely in periodic pushes in any specific segment. Sales promotion activity is frequently conducted, though not exclusively, through means of channels influenced or controlled by the company rather than through mass media, and the activity generally aims to fulfill its functions by creating activity at the point of use or sale of the product. A sales promotion can tackle its objectives tactically through areas by: Increasing product distribution Generating additional display activity Increasing product trial by potential users Limiting sales opportunities open to competitors by filling the Distribution channels Thus the aforesaid advantages could be attainable if the promotion campaign could be made more effective and objective driven and organized. Promotional activity subject of course to certain realistic criteria, should be available on broadly similar terms and conditions to similar types of outlet (although it would logically not always be in everyoneâ&#x20AC;&#x2122;s interest to run the same promotion in all similar outlets at the same time). Therefore, at the stage of considering and designing a promotion, should carefully evaluate the basics of promotion, its objectives. The beast promotion starts with an original impact concept which is more objective driven. Thus a guideline can help out by clarifying the understanding about the parameters which should be considered while developing any promotion plan and the factors critical to success of any promotional activity. Preplanning a sequence of events provides a higher chance of success than treating promotions as a random fire-fighting tool to remedy short term difficulties. A clear guide book could possibly help to drive everybody to the same direction to achieve the goal more effectively and efficiently. As the company currently facing the need to communicate their brands more successfully mostly in the below-the-line level thus an effective implementation of in-store exploitation and merchandising along with the effective brand communication techniques could lead them to the way of their zenith. A guideline will assist and enhance the company and its management to contribute to the achievement of AKTCL promotion objectives by developing understanding of different promotion techniques and the best application by trade channels and outlet types. And could ensure more advanced implementation of promotion-----mostly the below the line promotion, ensuring support to their decisions.