Organizational Analysis for it at

Organizational Analysis for it at Imperial Tobacco Canada Description of the Company and Industry Imperial Tobacco Canada competes in the global market for loose-leaf tobacco, tobacco-related products including tobacco tubes and filters. The company relies extensively on an indirect channel of distribution, serving North American markets. The company's distribution channels include in-airport facilities and locations serving Canadian travelers in duty free outlets, in addition to continuing this strategy in the U.S. airports along the northern regions of the country.

Through a partnership with ITL, their U.S.-based retailing partner, Imperial also has created a series of unique retail-based products specific to the American market. The reliance on Channel 2, a wholly-owned subsidiary of Tobacco Canada, is also focused on the retail channels, creating value through the development of in-channel events and programs. The reliance on their distribution channels in conjunction with their supply chains has made the company highly dependent on systems and process integration across their entire value chain.

Primary Competitive Strategy The primary competitive strategy for Imperial Tobacco is to concentrate on adding value to what is primarily a process-oriented good, which is tobacco and its byproducts. For Imperial to stay competitive in its retail channels, the company will need to continually increase on how to continually improve on the processes they rely on for managing their supply chains, the processes that integrate their supply chains and retailing strategies, all coordinated with a synchronized pricing strategy.

At present Imperial Tobacco relies on pricing strategies that are specific to each retail channel, first defined on a product basis. While the company initially concentrated on Profit and Loss (P&L) by product line it is increasingly becoming clear that there is the need to create a more effective approach to defining, managing, and handling pricing exceptions across the many channels the company sells through today. Given the onslaught of competition in the tobacco industry globally, Imperial Tobacco must concentrate on how to turn pricing into a differentiator.

The price/quality relationship that its higher-end competitor's brand rely on to protect their gross contribution margins while also sustaining a high-end brand image has led to Imperial Tobacco attempting to compete purely on price at the lower-end of the market. This has only had short-term success and over time could potentially arm the brands' reputation for quality as well. From a competitive standpoint it is more advisable to seek price optimization across all products and channels and not attempt to incite or compete in price wars in lower-end segments.

Paralleling the stabilization of pricing for Imperial Tobacco is the need for creating a more synchronized multichannel strategy globally. The lack of multi-channel management synchronization at the product level is a competitive disadvantage as evidenced by the diverging direction of Channel 2 as well from both a strategy and product perspective as well.

In summary the competitive strategy of Imperial Tobacco of concentrating on specific channels with specific pricing and product strategies may have been successful in the short-term and even enabled a higher level of performance in specific markets has not been successful in maximizing the level of profits attainable by centralizing pricing. One of the most critical of processes that rely on an enterprise-wide coordination of pricing is the managing of special pricing requests (SPRs) in addition to the ordering of large, customized lots of tobacco products.

The ordering of customized lots of tobacco products is often called package-to-order, a highly collaborative process that is cross-functional in nature requiring coordination of external suppliers and a minimum of four internal departments to ensure accuracy. SPR workflows are in fact a specific sub-process in the package-to-order process. In essence an SPR is a request from a Imperial Tobacco channel partner, distributor, larger retailer or grocery change for a price exception to their existing pricing arrangements.

Competitors to Imperial Tobacco have used these with increasing success at the close of their fiscal financial quarters to gain greater sales in a very short period of time. Value Models Figure 1 provides an overview of the Porter Five Forces Model (Porter, et.al.). The most powerful forces in the tobacco industry are supplier power and threat of substitution.

Using the Porter Five Forces Model to analyze Imperial Tobacco, the critical role of their supply chain becomes apparent as does the many threats to substitution of lower-priced tobacco products and their many substitutes. Rivalries that Imperial Tobacco has started have been accentuated and drawn quick response from competitors due to Buyer Power in the tobacco industry being concentrated in just a few segments. This has been one of the key catalysts in the price wars going on in the global tobacco industry.

For Imperial Tobacco to continually gain new customers it must centralize pricing and make this critical aspect of their strategy more coordinated across all distribution channels and customer segments. The package-to-order process that Imperial Tobacco is relying on to gain incremental sales through existing channels requires that pricing be optimized across all channels first. This will give Imperial the competitive advantage of being able to better compete on price/quality-based differentiation in an effort to win new customers and keep loyal the ones they already have.

Cross-Functional Process Analysis For Imperial Tobacco, the collaboration between their customers, Marketing and Sales, Package-to-Order Process and Tobacco Processing and Products Manufacturing is shown in horizontal swim lanes in Figure 1: Overview of the Package-to-Order Process in Imperial Tobacco. The package-to-order process often takes several iterations of purchase orders to get these highly customized orders correct. Once verified that the customized orders are compatible with existing constraints within the Imperial Tobacco production process, proposals are created and used to create the Order Item Worksheet that begins the Package-to-Order process.

Once this has also been verified with the customer, the Tobacco Processing and Products Manufacturing process begins. Note that this entire process requires intensive collaboration internally and with customers as well. The time required to complete an entire package-to-order process takes up to 21 days, or nearly a month of time to get correct. Translating this into the needs of the customers, they must plan their seasonal products with Imperial Tobacco.