BAT Enterprise Systems Strategy: ERP and SAP Implementation

Introduction to British American Tobacco

British American Tobacco (BAT) is a leading global tobacco company producing approximately 200 brands of cigarettes. The company's global drive brands are Dunhill, Pall Mall, Kent, and Lucky Strike, which together provide 35% of the company's revenue. Other international brands manufactured by the company include Benson & Hedges, Rothmans, Viceroy, Vogue, Kool, Gold Leaf, John Player, and Express 555. BAT operates within the tobacco industry and is the second-largest tobacco company in the world, with a market capitalization of $98.07 billion. The overall market capitalization of the tobacco industry is $356 billion, and within the global tobacco industry, BAT holds approximately 27.55% of the market share. Philip Morris International Inc. is the industry leader, with a market capitalization of approximately $151.2 billion.

British American Tobacco operates in 180 markets, with more than 708 billion cigarettes sold annually. The company's vision is to achieve a leadership role within the global tobacco industry. At the end of the 2011 fiscal year, BAT recorded revenue of £15.4 billion, with a company turnover of £46 billion. The company's business strategy centers on increasing funding for research and development (R&D) and investing in innovation to produce high-quality, less-toxic products for consumers. BAT differentiates itself within the industry by focusing on innovation, which contributes to revenue growth and builds shareholder value.

British American Tobacco has been operating for more than 100 years. The company was formed in 1902 as a joint venture with the UK's Imperial Tobacco Company. Over the last five decades, BAT has focused on acquiring other companies and expanding internationally. By 1970, the company was manufacturing tobacco in 140 factories across 50 countries. In 1976, the company underwent a reorganization process, and within two years it became the third-largest company in the UK and the largest tobacco company globally. Through continuous acquisition, BAT acquired several important brands, including Kent in the 1970s. In 1990, the transition of communist economies to free-market economies provided additional opportunities for British American Tobacco.

In the 1990s, economic liberalization and the break-up of state monopolies opened up new trading opportunities in Central and Eastern Europe and the Far East. BAT acquired Hungary's Pecsi Dohanygyar in 1992. Acquisitions and joint ventures followed rapidly in Ukraine, Uzbekistan, the Czech Republic, Russia, Romania, and Poland (British American Tobacco, 2011, p. 5).

The 2000s brought a further series of opportunities. In 2009, the company concluded a US$580 million acquisition of Bentoel. More recently, BAT concluded a $452 million acquisition of Protabaco, based in Colombia (British American Tobacco, 2011).

The continued success of British American Tobacco has been attributed to significant investment in innovation over the last few years, enabling the company to differentiate itself within the industry. BAT implements the latest technology in product manufacturing and packaging, achieving speed to market. The company also employs the latest technology in developing low-toxicant cigarettes that are less harmful to consumers. Additionally, BAT has implemented Enterprise Resource Planning (ERP) to reduce maintenance costs. Within the tobacco industry, firms implement ERP to integrate data and achieve operational efficiency.

References

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