The importance of reputation to British American Tobacco
BAT (British American Tobacco) is a multinational Tobacco organisation that has its headquarters in London and operates in approximately 180 countries across the globe (Vance, 2011). The company has had several controversies in the past, which have in a number of ways deteriorated its reputation (Vance, 2011). These include the; Canadian class action lawsuit, HMRC fine due to oversupplying, Australian lawsuit, bribery in Kenya, Burundi and Rwanda, and Pakistan lobbying efforts, among others (Freeman & Chapman, 2010).
However, the company has put several measures to rebuild good reputation, owing to its benefits in the current ever-changing business environment. This essay therefore discusses the importance of reputation to BAT and how health issues affect its operations.
The importance of reputation to British American Tobacco
Reputation refers to opinions and perceptions that people, or customers have about a specific entity. BAT can enjoy many benefits for having a good reputation. To start with, a good corporate reputation is important for BAT because the company can use it as a promotional and marketing tool. In reference to Diermeier (2011), customers always remember unique or outstanding services and products, and they never forget or forgive products or services that fail to satisfy them.
However, if BAT products, for example, satisfy the needs of its target audiences, then these audiences can act as unofficial spokespersons of the company by convincing their friends and relatives to try the products. As such, it can be concluded that a good corporate reputation can reduce the advertising costs of BAT because the company does not need to spend a lot of money on employing or seeking services of agencies of advertising to convince its target audiences.
Moreover, with a good reputation as an already established brand, consumers of tobacco are more likely to prefer being associated with BAT, an indication that a good reputation can act as a promotional and marketing tool for BAT.
Secondly, according to Morphet (2015), a good reputation enhances integrity and credibility. Acknowledging that reputation describes its identity or organisation culture, BAT can become a credible organisation, and prove its integrity whenever people talk negatively about its products or services. This implies that instead of spreading bad reviews and warnings about the company’s products, customers can recommend and promote BAT’s businesses.
Thirdly, a good corporate reputation establishes confidence, trust, superb customer relationships and loyalty (Diermeier, 2011). BAT can enjoy this benefit by avoiding all sorts of controversies and scandals. However, in reference to Morphet (2015), achieving untainted reputation is not about avoiding scandals and controversies; it is more of satisfying the needs of target audiences.
As such, by building a good reputation through observing continuous perfection, BAT can earn a strong sense of security. This implies that the company’s customers can be assured that they will always get satisfactory results if they consume BAT’s products.
Fourth, having good reputation enables an organisation to increase its business opportunities (Komisarjevsky, 2012). As such, having a good reputation can enable BAT to not only attract customers, but also catch the attention of interested business partners and investors. In other words, having a good reputation can help BAT to generate many possibilities for expansion and growth of its business.
Moreover, according to Komisarjevsky (2012), a good reputation can enable a company to survive in a highly competitive market. This implies that with a well-established reputation, BAT is likely to lessen its worries about customers switching to other tobacco providers. This is because the company’s outstanding reputation can make consumers to prefer its products regardless of how expensive they might be because they trust that the products can satisfy their needs.
From a different perspective, Morphet (2015) postulates that a good reputation is important to the careers of CEOs. As such, by having a good reputation, the CEO of BAT is likely to benefit because it is likely to evaluate the CEO’s performance, and make necessary changes. This is because the reputation of an organisation is directly linked to the performance of a CEO (Komisarjevsky, 2012).
Megatrends in Tobacco industry: Health Issues surrounding BAT
Health issue is one of the megatrends in the tobacco industry, which affect BAT’s business operations (McInnes & Lee, 2013). This issue can be discussed further by looking at how regulation, legislation, education, among other factors affect the operations of BAT across the globe. With regards to regulation, World Health Organisation (WHO) drafted a convention on tobacco control measures to ensure high health standards (Lueddeke, 2016).
This convention acts as a regulatory strategy, which not only addresses the addictive tobacco substance, but also promotes awareness of the side-effects the consumption of tobacco has on human health (Miller & Cross, 2014). It holds that tobacco creates a global health epidemic, and this has resulted in many governments across the globe developing a series of restrictive measures such as standardised packing, and bans and warnings of consuming flavoured tobacco (McQueen, 2013).
Health-based regulations, for example, those requiring organisations to print messages such as ‘smoking kills’ or ‘smoking is harmful to your health’ on their packets, and banning of advertisements related to tobacco affect the competitiveness of BAT and other companies operating in the industry (McInnes & Lee, 2013). Additionally, the enactment of WHO convention regulations that are not evidence-based increase complexity and costs and interfere with the ability of tobacco companies (Proctor, 2012).
Education is another factor linked to the health issues in the tobacco industry. Public education and awareness of the health issues of tobacco consumption continues to increase in all parts across the globe (Lueddeke, 2016). For instance, the well-financed anti-smoking education programmes in schools, social media, and societies provide emotionally engaging, detailed, and prominent information about the hazardous effects of smoking tobacco, thus, reduce the demand for tobacco products (McQueen, 2013).
Such programmes also warn target audiences that tobacco companies entice people to smoke their products through different types of advertisements (Freeman, Hawkes & Bennett, 2014). However, some companies in the industry have been in the forefront in sponsoring programmes associated with youth drinking as a way of building their reputation in the public eyes and minds (Proctor, 2012).
This includes partnering with governments and less sophisticated public health groups, and this has enabled them to reduce the opposition of their industry operations in different regions (McInnes & Lee, 2013). This clearly indicates that their purpose is not to reduce youth smoking, but instead serve the tobacco industry’s needs, for example, marginalisation of public health advocates, control of harsh regulations on them, participation in policy making, and diffusion of opposition from educators, among others (Lueddeke, 2016).
In other words, it is evident that in the current tobacco business world, despite the increasing efforts in anti-smoking education and public awareness, little success has been achieved from the anti-smoking campaigns. This indicates that the demand for tobacco companies’ products is still on the rise.
With regards to legislation, many health-related laws have been adopted pursuant to the Tobacco Act by governments across the globe to control the sale, manufacturing, labelling, promotion, and consumption of tobacco (McQueen, 2013). However, public consultations are pursued whenever new laws are developed (Freeman, Hawkes & Bennett, 2014).
One of the new laws regulating the tobacco industry is Tobacco Products Labelling Act which stipulate the health-related labels that must be displayed tobacco products. This law reduces the smoking rates, thus reducing the demand for tobacco products of BAT and other companies in the industry (Lueddeke, 2016). Additionally, the 2010 Prevent All Cigarette Trafficking Act, which some of its acts is still under litigation prohibits mailing of tobacco products and requires mail order and sales retailers to comply with requirements pertaining age verification (McInnes & Lee, 2013).
For instance, this law requires retailers to pay appropriate taxes for tobacco products. However, due to health concerns, many governments across the globe have and continue to raise taxes associated with tobacco business pursuant to Tobacco Act (Proctor, 2012). This law not only reduces the demand for tobacco products from companies such as BAT, but also increases the price of tobacco products and restricts companies from expanding to countries with stringent tobacco laws (Miller & Cross, 2014).
However, despite taking appropriate health-related measures through regulations, legislations, and education or public awareness, the issue of tobacco addiction still remains a difficult issue to solve in many countries across the globe (McQueen, 2013). The addicted victims continue to boost the tobacco business because they can do without it.
However, most governments across the globe have taken effective rehabilitation measures to counter the issue of tobacco addiction, which in a number of ways have proved to be successful (McInnes & Lee, 2013). Therefore, the issue of health reduces the demand of tobacco products, thus, reduces growth and expansion of BAT and other companies operating in the tobacco industry.
The benefits of reputation to BAT include; reduces the advertising costs, enhances integrity and credibility, establishes confidence, trust, superb customer relationships and loyalty, enables an organisation to increase its business opportunities, and is important to the careers of CEOs. Regulation, legislation, education, among other factors affect the operations of BAT across the globe. These factors reduce the demand for tobacco products, thus, restrict the growth and expansion of BAT in its global tobacco business.
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