What is the reason for RJR’s failure in international tobacco markets? What is R

Question

What is the reason for RJR’s failure in international tobacco markets?

What is RJR’s current principal business strategy?

How does RJR expect to achieve success in the future?

Please write the answer in 2 to 4 lines.

5 SMOXE ALARMSA 36-1 CaSe 36 BusinessWeek SMOKE ALARMS AT RJR 1 Steven F. Goldstone bas bocn a busy guy. As head of RJR Nabisco Holdings Corp, he has spent the past year jetting from city to city as the tobacco industry's point man in & dramatic effort to reshape the most vilified business in Ametica. Penitent, he admitted before Congress that his product is ad dictive. Then, defiant, ho led a succossfiul drive to kill federal legislation once it became clear the in- dustry would have to pay billions of doilars mare than it had agreed to in settlement talks with state attorneys general. Throughout, Goldstone has been front and center engaging in what he describes as a "publio-policy debate on the issues that affect our indnstries and our castomers. 2Only problem is, while CEO Goldstone works tirelessly to exticate Big Tobacco from its legal quagmire, his conpany is being eaten alive oa the operating front. At home, industry giant Philip Mornis Cos. is kicking No. 2 RJR's cigarette batts with its Marlboro brand, outmarketing and out spendiag its smaller riral to steal almost a full percentage point ofU.S. market share so far this year. Things are even worse abrcad. Allhough foreign markets are widely considered the tobacco makers' most fartile grounds for growth, RJR has let the opportunity slip away amid managemeat missteps and economic malaise. It now plans to unload its hobbled international tobacco unit. To top things oft, RJR's usually reliable profit machine, the Nabisco food division, is losing out to more nimble Op competitors as its cookie and cracker line grows stale as a week-old Oreo. 3 RJR's numbers show more smoke than fire. While Philip Morris posted third-quarter operating gains up 10%, RJR's operating profits slumped 14%. For the full year, analysts expect RJR's earn- -ings to drop 11%, to $3.1 billion, on slightly lower sales of $16.9 bmian. That's after operating earn. ings rose a patty 3% last year. 4 The bottora line: Whatever comes oflawsuit-sottlement discussions between tobacco S. compames ead the sintes, RJR is in deep trouble. And the poor operating performance it has turaed in latoly has convinced many investors that patt of the problem is Goldstone himsolf. While few doubt his smarts es a legal strategist, Wall Street has Htle regard for his management prowess. Critics complain ho is too far removed from the fray. This company has boen very badly run," says Stophon Smith, axocu- tive vice-president of Brandywine Asset Management Inc., owner of 1 million RR sharos. "They ck et- re noed someone who can really turn it eround." rst LOOKING TO SPLIT? 5 But then, many investors admit that isn't the reason they're sticking around. They view Goldstone as a sort of Mikhail Gorbachsv, presiding over the last days of a decrepit empire. They're ounting on the lift that could come if the industry settles and Goldstose can then follow drough with plans to splt RIR in throe. Says Arthur Cecil of T. Rowe Price Associates Inc, which owns 4 million RJR shares: "We're really, really banking on a reversal of fortune. 6 Goldstone, who admits his operational knowhow is limited, lets the divisioa chiefs alone while be grapples with legal and financial matters. "I' not going to follow their every footstep," says Gold- stone, who after his slevatioa to CEO in December, 1995, replaced all three division heads. Industry insiders and analysts generally praise the credentials of that team-Andrew Schindler, prosident oi R.J. Reynolds, Reynolds Intenational President Pierre do Labouchere, and Nabisco President James M. Kilts. But they question their ability to rejuvenate RJR when the goal of the boss is to break np Sou a ight hNew Yut, with r Kui InTokyo, Carol Macackin Moscow, tnd bura eports,"Smoke Alns at RJR, Brsinee libak Nov tabor 16, 1998; and Carol Made ? ia Masco A Long Hud Slog on te Russian Pr t nu hess eak: November 16, 1598

Explanation / Answer

1. The failure of RJR in the international market can be attributed to the bad leadership and decision making of the company. Another attribute to its failure was the inefficiency in the operational processes in the cigarette manufacturing plants. Their economies of scale were also not faring well, which paved the way for their failure.

2. RJR’s current principal business strategy was to internationalize its operations based on the feasibility of entering new market and leveraging on the brand equity of the competitors. They however, often lacked in-depth research, which primarily led to their failure.

3. RJR’s future strategy is to unload its international tobacco unit and direct its focus towards strengthening the domestic business. They need to create a strong foothold in the local market before getting into any kind of overseas ventures.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.