Imperial Tobacco- International Management Report Essay

Imperial Tobacco- International Management Report - Essay Example Imperial predominantly deals in manufacturing, marketing, distribution and sales of a diversified portfolio of cigarettes, tobaccos, cigars, rolling papers and filter tubes. It holds world leader position in premium, high-end cigar and fine-cut tobacco market. The corporation also delivers logistics and distribution services for tobacco and other associated products. In terms of size, it is one of the top four tobacco companies in the world earning operating revenues of ?29,223m in 2011 (Imperial Annual Report, 2011). The four principal tobacco companies: Philip Morris International, British American Tobacco, Japan Tobacco and Imperial Tobacco constitute about 45% of the overall global market or 74% of the total, excluding China (Ash, 2011). Its strong market position, a diversified brand and product portfolio allow Imperial to grow sustainably. However, growing health consciousness, strict government regulations and restrictions on the industry, high excise duties and illicit trade of tobacco products are key threats to Imperial. Overview of Imperial’s Internationalization Owing to increased globalization and competition, volatile environment within nations, Internationalization strategies by corporations have become more and more relevant for their sustainability. With lowering barriers to trade, access to capital and technological innovation, progressively more organizations are exploring options for higher profit and growth by going international. Imperial became public, by listing in London Stock Exchange, in 1996. At that time, Imperial main source of revenues was UK with only 20% of its revenues coming from other parts of the globe (ScanSafe, 2007). Since 1996, the company has accelerated its global expansion plans, acquiring businesses across the world. As of today, the corporation functions in more than 160 markets with 60% of its products sold in the ‘emerging markets’ of Africa, Middle East and Eastern Europe, and 40% in the †˜mature markets’ of Western Europe and USA. Imperial boasts of a strong global footprint with around 50 factories across 160 countries and employing 38,000 people across the globe. The company divides its operations into EU and non-EU countries. Key markets in EU include France, Spain, Germany and UK while key non-EU markets for Imperial are USA, Australia, Morocco, Taiwan, Russia and Ukraine. Since past two decades, the key drivers of internationalization for the company have been declining growth rate in mature markets such as Europe and US, increase in excise duties on tobacco products, overall slump in economy and rise of anti-smoking culture in advanced countries. Non-EU and emerging markets such as North Africa and Asia have indicated favorable macro dynamics such as GDP growth, population growth and female smoking as well as other growth drivers such as consistent market growth in Asia, Africa and Middle East and margin potential in Eastern Europe. Modes of Internatio nalization Like most other companies, Imperial Tobacco Corporation has adopted Internationalization as a key strategy for sustainable growth and maximizing shareholder value. As learnt in the course, there are several modes by which a company enters an international market. These modes include exporting, licensing, international agents and distributors,