The following study has discussed the impacts of the covid-19 pandemic on the global tobacco industry and British American Tobacco in various aspects. The introduction part of the study has provided key research aims, objectives, questions and ethical considerations. On the other hand, a thematic literature review and proper methodologies have illustrated through which the study is going to be executed and analysed. The results and findings sections along with recommendations are also given to highlight key outcomes of this project.
British American Tobacco is a UK-based multinational organisation that sells tobacco, cigarettes, and other nicotine items. Founded in 1902, the firm currently holds the title of biggest tobacco manufacturing organisation on the entire planet based on net sales. The headquarters of British American Tobacco is situated in London, England from where it operates in more than 180 countries across the world. In 2020, the organisation has successfully produced£25.776 billion of revenue due to the downfall in sales in the pandemic (Bat, 2021). The international business of the firm has been greatly impacted by Covid-19 as tobacco users possess high risks of being infected by the virus. According to a study, cigarettes also stimulate the spread of the covid-19 disease. Many researchers believed in the fact that the use of tobacco damages the immune system thus increasing the potentiality of adverse outcomes and increasing the severity of the coronavirus.
This particular research aims to determine the negative impacts of the Covid-19 pandemic on the multinational business operations of British American Tobacco.
In the annual financial report of 2020, the organisation has seen a drop in the gross revenue generated from across 180 nations. At the same time, almost 51% of global citizens have stopped using tobacco-based products due to the growing concerns of the covid-19 disease and its severity on the lungs (Vázquez, and Redolar-Ripoll, 2020). These negative consequences have forced the organisation to conduct a study where the research will uncover the key reason for the decline in sales and performance of the company.
Since the emergence of the Covid-19 pandemic British American Tobacco has been facing a decline in sales due to the growing concern of tobacco users regarding their health. However, with proper marketing campaigns and encouragement of the sales team, the organisation can take its business performance to the pre-pandemic levels. The evaluated outcomes and findings from the research project can assist the firm to reach higher business goals and ensure sustainability. The research project has been focused to improve the international business performance of British American Tobacco and helping it to develop appropriate strategies for any kind of future catastrophe.
This specific chapter has outlined major topics of the covid-19 pandemic and its impacts on the global tobacco industry. The literature review summarises information gathered from secondary resources such as books, online journals, organisational reports, and so on. The following literature review has described the impacts of the coronavirus crisis on the business performance of multinational tobacco organisations via analysing published information and key themes.
The main topic of this particular literature review is aimed to explore the impacts of a global pandemic on tobacco manufacturing organisations.
As stated by Yingst et al. (2021), present evidence supports the fact that the severity of Covid-19 disease increases with the increase in the use of tobacco-based products since it greatly decreases immunity. The overall cigarette sales have fallen by 10% as compared to the previous year (2019). The rise in taxes in different nations and the worldwide lockdown has caused this downfall in sales. The last steepest fallout in cigarette sales was found in 2015 when the global tobacco sales rates have dropped to 8.2%. Although the stocks of tobacco manufacturing companies are going upwards, the pandemic has created a global awareness and rise of concerns among normal and tobacco users. However, during the first phase of 2020, global sales of cigarettes are going upwards due to the rise of anxiety, depression, and stress among individuals. Unfortunately, the sharpest drop around 39% comes in April when WHO (the world health organisation) declared the serious consequences of coronavirus upon human lungs. Exports have stated that many people in the last year sought to quit smoking or any kind of use of tobacco due to their struggling mental health conditions. The current and also former smokers are at a higher risk of severe illness from the coronavirus. They are most likely to be hospitalised and nearly even likely to die as compared to the people who never smoked.
According to Gendall et al. (2021), although the damages of the coronavirus crisis are limited only in 2020 it can provide the details of potential threats to the tobacco sector in general. The present year’s circumstances proposed some possible threats since many multinational suppliers are worried about lower consumption levels. The closure of many factories has resulted in stock shortages which ultimately leads to lower production and sales volumes at the end of the year. The pandemic has also caused the tobacco manufacturing organisation to exploit many opportunities such as engagement with the governments and support in relief programs. The vigilant policymakers in low-income and middle-income nations also contributed to creating various obstacles for the tobacco manufacturing firms. CSR (corporate social responsibility) is another major concern for the industry according to the secretary of WHO FCTC (World health organisation framework convention on tobacco control). Many parties have rejected the partnerships with the tobacco industry during the pandemic.
In agreement with Sokolovsky et al. (2021), according to a study, most of the users felt the pandemic situation does not affect their consumption of tobacco. However, those who have felt that the pandemic has impacted their use of tobacco-related products have some common factors. As per the research, the non-availability of tobacco products (45%) is a major cause of low sales and consumption. In addition, some users (27%) observed that the pandemic is a remarkable opportunity for them to completely quit the use of such products. 27% of users have faced difficulties in buying tobacco products due to their increased prices in the pandemic. Lastly, only 4% of people in the world have started or increased their use of tobacco because of increased stress and depression. Hence, it can be said that the effects of the covid-19 pandemic will be felt by the tobacco industry for several years to come. The economic recession caused by the virus crisis may increase the consumption of tobacco products however the entire industry is still struggling to make the growth of revenue. The governments of a large number of countries have increased the taxes during the pandemic hence it will boost the inevitable fuel chronic consumer downs trading.
After analysing the adverse impacts of the pandemic on the global tobacco industry it has been revealed that the unexplored topic is the influence that the sector has made during that time. During the tough times of the crisis, the tobacco companies have taken steps to a great extent. They have made various strategies to engage with the relief efforts, governments and influence policies. From the study of global tobacco industry interference 2021, almost 10 countries are designated to make tobacco products essential during the global pandemic. The countries with the most restaurant to tobacco sector interference are counted as Uganda, Iran, the UK, New Zealand, and France (Schnitzer et al., 2021). However, to improve the engagement and create opportunity, the tobacco sector and its associated organisations have made donations to the relief funds to enhance their criteria for CSR. The industry has offered various support to its highest smoking prevalence region in Europe. By providing medical equipment and even cash to ministries and hospitals. To portray as a goodwill wisher and a major contributor to the worldwide society tobacco organisations have donated hand sanitisers, PPE (personal protective equipment), and testing kits across various nations. Although, the governments need to create a code of conduct for associating with the tobacco industry. The specialised agencies of WHO needs an integrated approach to force the countries to apply for the code of conduct and raise awareness of the health departments on the planet.
The research methodology comprises certain procedures and methods used to identify, choose, and examine the information about the impacts of covid-19 in British American Tobacco (Kamiński et al., 2020). For this purpose, an observational method is used to get a proper understanding of this matter.
It is a set of phases through which the researcher must pass while developing an effective research methodology. Research onion suggests analysts that the conducting study can incorporate action research, interviews, surveys, and experiments if it was a primary approach.
Figure 1: Research Onion
(Source: Cimperman et al., 2018)
One of the key benefits of using is that it will help to understand the impacts of the pandemic on the organisation in a detailed fashion. By using various stages such as philosophy, approach, strategies, choice, and time horizon a researcher will fully understand the chosen matter effectively.
It is also known as a belief among researchers in which they shape the data about a matter that should be collected, examined and utilised. A research philosophy mostly deals with the nature, origin, and advancement of knowledge. Being aware of the core beliefs and assumptions is a must and research philosophy states the same thing (Corti, 2018). The scope of business incorporates four main research philosophies including positivism, realism, pragmatism, and interpretivism. In this context, this particular research study has implemented an interpretivism philosophy to study the global business secondary data. In interpretivism, philosophy researchers have interpreted the various elements regarding the impacts of the pandemic on British American Tobacco. Hence, this philosophy has helped to comprehend the subjective views of different bodies, emotions, values, and opinions efficiently.
A research approach deals with the procedures and plans of the study and executes them in the span of steps for widener assumptions to detailed techniques of data analysis, connection and interpretation. To conduct a secondary research approach, the study has taken a common systematic investigation in which the analysts depend on existing information on journals, magazines, and online articles (Matos et al., 2021). The secondary research has executed an explanatory approach that usually aims to explain the various aspects of the chosen subject. The use of exploratory research will bring inconclusive and tentative outcomes. In addition, it is extremely cost-effective and helps to lay the foundation of the research. The research approach has also ensured the analysis of data from verified and trusted secondary sources.
A research strategy refers to a phase-to-phase plan through which the researcher can create a plan of action and make a way for the thinking process. Thus, a systematic framework is formulated through the strategy (Pearse, 2019). The secondary research through verified origins can introduce the key principles associated with the covid-19 influence on the tobacco sector and their businesses. The data collected through existing reading material offered structured research questions, objectives, and the available time along with philosophical underpinning.
It is the process of gathering, analysing, and measuring the information and gaining accurate insights by using standardised and valid methods. A researcher can only find possible findings and evaluate hypotheses depending on the collected data (Ryan, 2018). The data regarding covid-19 impacts on British American Tobacco is collected based on UK government publications, public records, official business documents, international trading journals, and statistical documents.
Data analysis is the process of systematically applying logical techniques to define and illustrate the interpreted data. Most of the researchers analyse the collected data through various patterns and observations (Alharahsheh and Pius, 2020). The data of covid-19 impacts on British American Tobacco that someone else has selected for their purpose is going to be utilised to examine the research questions and objectives. In the same way, the secondary data analysis has measured various internal and external data on the organisation and global sector respectively. The analysis of secondary data can provide deeper insights and viewpoints which may produce impactful recommendations.
A study that has been conducted by maintaining all values, beliefs and ethical guidelines of society can provide the desired solutions or findings. Ethical considerations are important factors that need to be followed or taken into account while executing the study. In this context, the data must be used de-identified before revealing it to the analyst, use of information in selected topics should not result in any damage or danger.
The finding of the research refers to any sort of output or result that the activities have concluded in the end. The findings gained from the literature review and applying methodologies can provide fascinating insights into the topic. Similarly, the impact of the coronavirus pandemic has impacted British American Tobacco in different ways.
Over the years’ health and wellness has become more important than ever. Similarly, the significance of stimulation and pleasure has contributed to the anticipated growth of tobacco and nicotine products. British American Tobacco believes that this demand and growth can nullify the offset of sales caused by the global decline in cigarette consumption and pandemic. The previous fiscal year (2019) was a satisfactory time for British American Tobacco since the global tobacco trade touched£608.40 billion. According to a study, there are 5,200 billion cigarettes consumed annually on this planet and this number has significantly reduced during the pandemic especially due to unavailability and health concerns. In addition, the changing attitudes of global customs and societies have also contributed to the decline in sales leading to lower revenues. However, over 19% of the total estimated population on earth still chooses to smoke tobacco despite the serious consequences. Moreover, one of the key reasons behind the sales decline is the constant rise in illicit consumption of products. One of the factors of illicit cigarette trade is that the global tobacco industry is a reliable tax generator for governments worldwide.
Figure 2: Revenue Growth of British American Tobacco
(Source: Cole and Trinh, 2017)
Hence, the macroeconomic pressures due to the global recession, price differentials between various markets, and regulatory alterations have direct relations with lower sales of British American Tobacco. From a study, the global tobacco industry is one of the most taxed and regulated sectors in the world that contributes over £148 billion to the treasuries of different governments. The impact of the pandemic in sales volumes has been felt by the firm varying to different geographic locations (Johnston, 2017). The resilience towards tobacco products is seen mostly in developed countries rather than developing countries. British American Tobacco also stated that their operating economically developing markets have turned into illicit markets during the pandemic. The lockdown has substantially influenced the supply chains of the organisation due to which the quality produced monthly has decreased suddenly. The production of principal raw material in tobacco is known as tobacco leaf. This material was in shortage during the pandemic causing a radical downfall in dealing with consumer demands across the continents.
During the first phase of the pandemic due to nationwide lockdown and social distancing measures, the organisation has faced minimum impacts allowing it to function swiftly and safely. In the same way, British American Tobacco has successfully ensured the safeguard and well-being of its 55000+ employees worldwide during the pandemic. However, after a few times, it has seen various disruptions in the product, supply chain, and sales rates because of the restrictions. The global pandemic has also caused negative impacts on the key activation programs in some of its major markets such as the US, Japan, and Europe (Vardavas and Nikitara, 2020). The firm has also been criticised due to its maintenance of CSR activities. A large number of relief funds have ignored the offer of the organisation due to personal beliefs and logical values. The brand image of British American Tobacco has diminished during the time mainly because of growing health concerns and negative downsides of the virus affecting the lungs. British American Tobacco and its various subsidiaries have been forced to stop supplying operations due to the US-China trade war characteristics. In addition, the CEO of the firm Kingsley Wheaton Stated that 2021 can be a critical year for the entire business since the world and GDP per capita of global people has decreased due to last year’s recession and unemployment rates (Novacek et al., 2020).
Figure 3: Market share of British American Tobacco
(Source: Denckla et al., 2020)
The rise of the black market is a massive threat for the organisation, especially in the post-pandemic era. Large access to unregulated tobacco products and organised crimes in the tobacco sectors are some of the new and prominent challenges for the organisation. However, to fight the international black market the organisation needs effective internal governance and supply chains that were already weakened from the pandemic. In addition, engagement with international bodies and working with authorities has also become difficult due to the concerns of CSR activities. Moreover, the pace of change created by the sudden lockdown and travel restrictions have greatly influenced the attitudes and purchasing behaviours of global citizens. It automatically resulted in variations of tobacco products consumption rates. The health and safety of the employees associated with British American Tobacco was another concern during the crisis since the leading issues in growth, revenue and operational costs are all dependent on the workforce. Other than, supply chains and workforce safety various other minor challenges have created a large number of barriers for the firm to reach its fullest potential. Law and legislation is a prominent obstacle for the firm in the pandemic since its various subsidiaries and their operations are forced to close down due to lockdown regulations.
The impacts of the Covid-19 pandemic on British American Tobacco can be classified into various elements such as political, economic, environmental, social and legal. As per the study, mostly older peoples are at the highest risk in the pandemic, which causes young individuals to continue their activity on tobacco products, which is a major social factor for the firm causing continued functioning of sales despite lockdowns. Being in the essential lists of 10 countries, British American Tobacco has faced considerably low damages from the users’ concerns. However, the growing health issues and negative consequences of the immune system from smoking has caused an increased amount of awareness among global residents. The Brexit incident in 2020, also caused a large number of adverse impacts on the organisation. Shortage of employees and lack of proper migrant talent has reduced the overall productivity and efficiency of the organisation. Furthermore, the WHO FCTC (World health organisation framework convention on tobacco control) has forced governments across the world to impose strong tobacco control laws and take proper measures to minimise the health-related risks during thecris is (Newman et al., 2021). For instance, the South African government banned tobacco use during the pandemic which directly lowered the sales and market share of British American Tobacco. In addition, the Brazilian government has proposed a class action suit for recovery of the damages the firm has created by selling deadly products in the country. Growing climate change, global warming and Paris climate agreements have forced the organisation to minimize its operations in the pandemic. Similarly, the organisation has undoubtedly exploited the opportunities that can be gained from the radical changes made by the Covid-19 pandemic. It has suffered to connect with governmental bodies. The polyamines and increased tax regulations have also caused a major downfall of profitability for British American Tobacco. Lastly, the high unemployment rates across the world and resistance from developed countries especially from Europe has limited its activities thereby lowering the revenue mark from 2019.
The above research project summarised the impacts of the Covid-19 pandemic on British American Tobacco which is the biggest tobacco supplier in the world by sales volumes. It is quite common that the pandemic has adversely influenced almost every business sector that exists. However, despite growing demands for cigarettes and other tobacco items, the firm has faced a sharp downfall in the revenue produced annually. The aim, objective and questions of the research are all about analysing the impacts of a pandemic on the firm and global tobacco sector in general. In this context, the literature review consists of the best information that can be found on the selected topic. The LR is illustrated by key themes that describe the entire context of pandemics influencing the tobacco business in a detailed fashion. In addition, this particular project is executed by a selective methodology that can facilitate the study to provide higher understandings and knowledge. For instance, the utilisation of research onion, philosophy, and approach has been made through implementing interpretivism, and systematic investigation techniques. A secondary research strategy is incorporated to collect information from previously published sources that are verified and genuine in quality. Some ethical considerations are also taken to ensure the successful completion of the project without potential difficulties. Lastly, the research findings have provided key insights which can be used to service impactful recommendations for the firm.
After observing the whole matter, the recommendations that can provide better solutions and future implications to British American Tobacco are given below
Consequently, research limitations are considered as defects that can impose restrictions on deriving proper findings and outcomes from a study. It is important for understanding the place for research findings in the context. There are various drawbacks of using a secondary approach in research. To illustrate, the information collected from government reports, business articles and journals can be outdated and inaccurate. By being completely dependent on the data gathered by the primary researchers there is always a tendency of collecting vague information which reduces the decision-making capabilities. The data used to generate secondary analysis can be small since the impacts of the covid-19 pandemic on British American Tobacco are very limited in online and offline sources (Olszynski et al., 2017). In addition, the limitations of research greatly depend on the objectives of the study. To minimise the limitations of the research study, the analysts are required to convince reviewers that it does not affect the conclusion of the study.
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Yingst, J.M., Krebs, N.M., Bordner, C.R., Hobkirk, A.L., Allen, S.I. and Foulds, J., 2021. Tobacco use changes and perceived health risks among current tobacco users during the COVID-19 pandemic. International journal of environmental research and public health, 18(4), p.1795.
|Author||Name of themes||Article|
|Yingst, J.M., Krebs, N.M., Bordner, C.R., Hobkirk, A.L., Allen, S.I. and Foulds, J.,||“The steepest dip of cigarette sales in last two decades due to Covid-19 pandemic”||“Tobacco use changes and perceived health risks among current tobacco users during the COVID-19 pandemic. International journal of environmental research and public health, 18(4), p.1795.”|
|Gendall, P., Hoek, J., Stanley, J., Jenkins, M. and Every-Palmer, S.,||Different challenges of pandemic and their influence in the global tobacco industry|| “Changes in Tobacco Use During the 2020 COVID-19 Lockdown in New Zealand. Nicotine and Tobacco Research, 23(5), pp.866-871.”
|Sokolovsky, A.W., Hertel, A.W., Micalizzi, L., White, H.R., Hayes, K.L. and Jackson, K.M.,||The impacts of coronavirus crisis in the tobacco industry and consumers||“Preliminary impact of the COVID-19 pandemic on smoking and vaping in college students. Addictive Behaviors, 115, p.106783.”
Table 1: Thematic analysis
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