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Lakson Tobacco Company

INTRODUCTION
Tobacco business is a centuries old business. It has a very high growth rate
and has seen many ups and downs. It has also been controversial over the period
of time and has been subject to many types of criticisms. But apart from all these
things people do smoke and people want to keep on smoking. I start my discussion
with the history of tobacco.

HISTORY OF TOBACCO

EARLY TOBACCO USE

 1,000 BC Ancient temple carvings depict Mayan priests in Central America


smoking tobacco through a pipe. Tobacco leaves become widespread in
medicine for use on wounds as a means of reducing pain. Later the Aztecs
incorporate smoke inhalation into religious rituals. Two castes of smokers
emerge: the pipe smokers at the court of Montezuma and lesser Aztecs who roll
the leaves into crude cigars.
 470 - 630AD Mayan tribes begin to scatter - and tobacco travels with them.
The leaf moves southwards to South America where it is wrapped in maize and
palm leaves and smoked - and north where it is introduced to the native
Americans in the Mississippi area. In North America pipes are made from clay,
marble or lobster claws. Some pipes, with two stems, are used for inhaling
through the nostrils. Tobacco chewing is common, especially in South America
where the leaf is mixed with lime.
 1492 Arawak people in the Bahamas, on an island Christopher Columbus
christens San Salvador, offer the explorer-dried leaves. Not understanding their
significance, Columbus discards them. A month later Rodrigo de Jerez and

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Lakson Tobacco Company

Luis Torres – returning from a trip into the interior of Cuba - stumble on
villagers inhaling the smoke from burning dried tobacco leaves through a
hollow Y-shaped piece of cane called a tobago or tobaca. Jerez is thought to be
the first smoker outside the Americas. When Jerez returns to his home town of
Ayamonte, during the Spanish Inquisition, the holy inquisitors accuse him of
"consorting with the devil" when they see smoke coming from his mouth. He is
imprisoned for seven years. By the time he is released, smoking is a custom in
Spain. Jerez perhaps sets a precedent for the plant's controversial future.
 1492: Arawak people in the Bahamans North America give Christopher
Columbus burning leaves, pipes are made from clay, marble or lobster claws.

USE OF TOBACCO IN 20th CENTURY


 1900 The Anti Cigarette League publishes a pamphlet claiming links between
cigarette smoking and brain disease.
 1902 The Imperial Tobacco Company of the United Kingdom and The
American Tobacco Company of the United States agree to end a trade war by
forming a joint venture, the 'British-American Tobacco Company LTD'. James
B. Duke, becomes the venture's first chairman.
 1908 The New York City authority bans women from smoking in public. Two
weeks later Katie Mulcahey is arrested for violating the rule. As she is led
away she declares, "No man shall dictate to me". Cigarette smoking was often
seen as a symbol of women's emancipation.
 1914Outbreak of World War I. General John J. Pershing, commander-in-chief
of the American forces in France in 1917 calls tobacco "indispensable to the
daily ration". In Europe troops use cigarettes to pass time and to try to calm
their nerves. The popularity of cigarettes in the armed forces associates tobacco
with patriotism.

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Lakson Tobacco Company

 1925 Despite the bans, cigarette sales continue to increase. The American
Mercury reports, "The more violently it has been banned, the more popular it
has become."
 1941 Roosevelt makes tobacco a protected crop as part of the World War II war
effort. His wife Eleanor was dubbed "the first lady to smoke in public".
 1945 During World War II, smoking increases. By the middle of the next
decade, more than a quarter of American women and more than half of
American men smoked cigarettes.
 1952 Two British researchers, Richard Doll and A. Bradford Hill report the
results of a four-year study comparing 1,465 lung cancer patients to an equal
number of patients with other diseases, matched for age, sex and region. They
conclude that lung cancer patients are considerably more likely to be smokers
and much more likely to be heavy smokers.
 1960s Public health warnings emerge.
 1964The American Surgeon General publishes a 387-page report stating,
"Cigarette smoking is a health hazard of sufficient importance in the United
States to warrant appropriate remedial action." For the first time smoking is
banned in the State Department auditorium
 1980s The tobacco industry sees substantial annual duty increases which result
in cigarette taxation increasing by 85 per cent or more in several countries
including the UK.

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Lakson Tobacco Company

SEED TO STICK JOURNEY


SEED
The tobacco plant is a member of the same botanical family as tomatoes, potatoes,
peppers or eggplants. An adaptive species, it can be grown economically from 50°
Northern to 40° Southern latitude. More than 100 countries grow tobacco. China is
the largest producer, followed by the United States, Brazil, India, Zimbabwe and
Turkey.Tobacco thrives in poorer soils, providing farmers with a welcome
alternative crop. In many cases, it provides a higher income than any other
smallholder crop. As a crop, it integrates well into environmentally friendly
rotations, and its inclusion benefits subsequent crops like maize. A typical farmer
in rural Uganda, for example, with two to three hectares of land can earn a good
income from only a small part of that land being planted with tobacco. British
American Tobacco can help the farmer by providing seeds and fertilizer and by
giving advice on planting, growing, harvesting and curing tobacco and other crops.

There are some 13,000 seeds in a gram -looking rather like powdery instant
coffee. The seeds are so small that they must be nurtured in specially prepared and
protected seedbeds for 60 days before transplanting to the field. After a couple of
weeks, soil is banked up around the seedlings to protect them and to allow them to
develop a good root system. Two months later, the plants' flowers and some of the
upper leaves are 'topped' in order to concentrate growth in the remaining leaves (in
the same way that tomatoes are 'pinched out'). All the time, the farmer needs to
provide the appropriate nutrition for the plant and watch out for pests as the crop
grows towards the harvesting stage.

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Lakson Tobacco Company

HARVEST
With the exception of some countries such as the United States (where the
crop is mechanically harvested), the farmer will typically harvest by hand,
sequentially taking off 2-4 leaves per plant as the leaves ripen from bottom to top,
which stretches the harvesting period from over 2 to 4 months. The typical
Ugandan farmer will harvest about 15,000 plants, each with 22 leaves.

TOBACCO TYPES
Virginia is named after the US state where it was first cultivated. It is also
called "bright tobacco" because of its yellow to orange color, achieved during the
flue-cure. This type grows particularly well in subtropical regions with light
rainfall, such as Georgia (USA), Southern Brazil and Zimbabwe. Classic English
brands like Benson & Hedges or Dunhill use exclusively Virginia tobacco.
Burley is slightly lighter green than Virginia is. After being air-cured, the
tobacco turns brown with virtually no sugar, giving it an almost cigar-like taste. It
requires heavier soils and more fertilizer than Virginia does. The best Burley is
grown in the USA, Central America, Malawi and Uganda. Together with Virginia
and Oriental tobacco, it makes up an American Blend, as used in brands like
Lucky Strike or Pall Mall.
Oriental is the smallest and hardiest of all tobacco types, grown into the
hot summer of the Balkans, Turkey and the Middle East. These conditions and a
high planting density create an aromatic flavor, enhanced by sun curing, as in a
traditional Turkish cigarette.

CURING
Curing is a carefully controlled process to achieve the texture, color and
overall quality of a specific tobacco type. During the cure, leaf starch is converted

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Lakson Tobacco Company

into sugar, the green color vanishes and the tobacco goes through color changes
from lemon to yellow to orange to brown like tree leaves in autumn.
There are four main curing methods.

1-Air-Curing

Air cured tobacco, for example Burley, is hung in unheated, ventilated


barns to dry naturally until the leaf reaches a light to medium brown color. At this
point, there are virtually no sugars left in the leaf.

2-Flue-Curing
Heat is introduced into a barn via pipes from an exterior furnace like
radiators connected to the central heating system. This controlled heat allows the
leaves to turn yellow/orange at which point they are fixed. These leaves now
contain a high amount of sugar. Virginia tobacco is flue-cured.

3-Sun-Curing

Leaves are strung out on racks and exposed to the sun. The whole process
takes from 12 to 30 days. The sun's direct heat fix the leaves at a yellow to orange
color with a high sugar content. Oriental is the most prominent among the sun-
cured tobaccos.

4-Fire-Curing

Fire curing follows the same principle as producing smoked ham.


Brushwood is burnt under the tobacco leaves, which dries the tobacco and
produces a Smokey fragrance. This type is principally used in some pipe tobaccos
such as Dunhill Morning Mixture, or roll-your-own brands like Samson or
Javanese Jongens.
After curing, the farmer grades the leaves into different leaf positions,
qualities and colors and packs his grades into what is known as a farmer bale of
30-50kg. He then takes his bales to a buying center or auction for sale.

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Lakson Tobacco Company

PROCESSING
The cured leaf is then processed through a Green Leaf Threshing Plant. The
main purpose of the processing is to remove sand, dust, scraps and foreign matter.
Separate the lamina from the stem (threshing). Drive down the tobacco to a safe
'keeping moisture' content. Processed tobacco is packed into 200kg cardboard
boxes, for shipping to manufacturing sites.

MANUFACTURING
At the factory, the matured tobacco is checked for quality and then carefully
blended with other ingredients which the brand recipe may call for, such as
flavorings or pre-processed tobacco. Keeping track of the various types of tobacco
and blend components is key and computers are increasingly used to track
production runs. Moisture content is crucial. Too dry and the tobacco leaf will
crumble; too moist and it may spoil during storage. The blended tobacco is treated
with just the right amount of steam and water to make it supple, and then cut into
the form in which it appears in the cigarette. Excess moisture is then removed so
that the cut tobacco can be given a final blending and quality check.
Cigarette making, once done entirely by hand, is today almost fully
automated with the cut tobacco, cigarette paper and filters continuously fed into
the cigarette-making machines. The technology has advanced dramatically over
the years, but quality is not forgotten; each cigarette is automatically quality
controlled to ensure that it meets every aspect of its specification. As packing
machines put them into the familiar brand packs, wrap the packs in protective
film, and group them into cartons and cases, further testing takes place at each
stage to make sure the cigarettes are properly protected. The completed cases,
time-dated to ensure the freshest product possible, are then ready for distribution.

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Lakson Tobacco Company

TRADE MARKETING & DISTRIBUTION


Finished products are distributed to more than 15 million retail outlets
throughout the world. As a leading consumer goods company, Company aims to
get our products to the retail outlets in the most efficient and cost-effective
manner, and in the best possible condition. Company constantly monitors and
evaluates global supply chain network to guarantee that brands are delivered by
the best distribution methods.

"As a leading consumer goods company, company aims to get our products to
the retail outlets in the most efficient and cost-effective manner, and in the
best possible condition."

The retail outlets include supermarkets, convenience stores, hotels,


restaurants, cafes, tobacconists and duty free shops. It's the job of trade marketing
to work with retailers, to enable adult consumers to buy brands where they want,
when they want and in sufficient quantity.
Company’s big goal is customer satisfaction. Its trade marketing and
distribution has earned Lakson Tobacco Company recognition in the retail trade in
several of its major markets, as a leading cigarette manufacturing company in
terms of professionalism, service levels and speed of response.

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Lakson Tobacco Company

INDUSTRY OVERVIEW
Tobacco production in Pakistan is forecast to increase to 98,500 metric tons (MT)
due to an expected increase in area and yield. Area is forecast to increase in
response to stronger demand and better prices from cigarette manufacturers.
Vegetables and sugarcane compete with tobacco and farmers have started inter-
cropping tobacco to increase returns.
Tobacco is grown mainly in the North West Frontier Province (NWFP) and
Punjab. Flue-cured and burley tobaccos are used primarily in higher-quality
cigarettes. Oriental varieties (known locally as White Patta) are used in low-
quality cigarettes and for chewing tobacco. Dark air-cured varieties are largely
used for filler,while light air-cured varieties are used primarily for traditional
Pakistani tobacco products.
Yields in Pakistan are about twice those for neighboring countries largely due to
the extension services provided by the industry. Quality, however, is improving
only slowly due to problems related to climate and soil.
In 2000 tobacco consumption is forecast to increase to 81,200 MT as a result of
increased demand for tobacco products. An estimated two-thirds of the tobacco
produced in Pakistan is utilized for cigarettes and the remainder for other tobacco
products.
About 24 companies manufacture cigarettes in Pakistan. Two of the largest--
Lakson Tobacco Company and Pakistan Tobacco Company--account for 52 and 41
percent of total cigarette production respectively.

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Lakson Tobacco Company

BRIEF INTRODUCTION OF LAKSON GROUP OF


COMPANIES
Lakson group of companies is a national base group of companies. It comprises
of different companies. There are 29 companies in the Lakson group of companies.
Lakson group deals in garments, leather, cloth, paper, packaging, textile, tobacco
industry and many other areas of business in all over the country.

The board of directors consists on


Mr. Sultan Ali Lakhani
Iqbal Ali Lakhani
Amin Lakhani
Zulfiqar Ali Lakhani.

The chairman of the group is Mr. Sultan Ali Lakhani.

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Lakson Tobacco Company

BRIEF HISTORY

OF

LAKSON TOBACCO COMPANY

Lakson Tobacco Company is one of the largest tobacco companies in the tobacco
industry of Pakistan. In 1952, Mr., Abdul Samad, formed a cigarette company,
named premier tobacco industries. Miss Fatima Jinnah inaugurated it.
Mr. Abdul Samad was its first chairman.
The premier launched its first product in 1953. In 1957, the famous brand K-2 was
launched which dominated the industry for many years.
In 1958, Mr. Sadar-Ud-Din Hashwani purchased the PTI industries but could not
handle it due to lack of experience.
Lakson Tobacco Company was established in 1971 by Mr. Hassan Ali kara Bhai.
In September 1971, they launched their first brand Lakson King. In 1983, with
collaboration of Ruthman International, they launched Ruthman NT.
In 1983, Lakhani brothers purchased the main controlling shares of PTI. It was a
big merger indeed. In this way Lakson Premier group was established. In January
1997, by the decision of Sindh High court, they changed the name as Lakson
Tobacco Company.
Now Muhammad Iqbal Ali Lakhani is the chairman of the Lakson tobacco
company.

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Lakson Tobacco Company

MISSION STATEMENT OF THE COMPANY


“To provide best quality products to our valued customers and consumers, and to
strengthen national economy by contributing with new business units which will
help to decrease unemployment to some extent and to generate more revenue for
the government for the sake of prosperous Pakistan”.

OBJECTIVES OF THE COMPANY


“Lakson Tobacco Company got no. 1 position in cigarettes industry since 1996;
now the main objective of the company is to maintain its no.1 position and to
capture more market shares with planning, organizing and implementation of sales
and marketing activities”.

HEAD OFFICE OF THE COMPANY


The company’s head office is in Karachi. The head office controls all the activities
of the company.

PRODUCTION UNITS
THE production of all the products of the lakson tobacco company takes place in
the five factories located in the districts of

• karachi
• Sahiwal
• Dadu
• Rawalpindi

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Lakson Tobacco Company

• Swabi

GODOWNS
There are sixteen godowns, which are providing the company with the facility of
efficient distribution.
• Karachi • Faisal abad
• Hyderabad • Sargodha
• Rohri • Lahore
• Bahawalpur • Jehlum
• Multan • Islamabad
• D.G.Khan • Rahim Yar khan
• Sahiwal • Bhakkar
• Bahawal Nagar
• Mardan

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Lakson Tobacco Company

DISTRICT OFFICES
The company has efficient distribution network. There are fifteen district offices
situated in the following cities.

• Karachi • Sukkur
• Hyderabad • Gujranwala
• Bahawalpur • Peshawar
• Multan • Lar kana
• Sahiwal • Quita
• Faisalabad • Sargodha
• Lahore • Jehlum
• Islamabad

MARKET SHARES IN TOBACCO INDUSTRY


Lakson Tobacco Company is the market leader with 51% share of the total market.
The market share of Pakistan Tobacco Company is 33%. Remaining part of market
is capture by the other tobacco companies of Mardan.

EMPLOYEES OF THE LAKSON TOBACCO


COMPANY
There are more than 2500 employees are working. In this strength of the
employees, approximately 1700 employees are working in marketing and selling
department.

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Lakson Tobacco Company

COMPETITORS
In tobacco industry, there are too many brands including international ones
operating in Pakistani market but the company recognizes the following
companies as the close competitors of LTC.

 Pakistan Tobacco Co.

 Mardan Based Companies.

 International Companies.

These are the competitors which the company feels “ are closely competing in the
market. The recognition of competitors is generally made on the following basis.
• The statistical data, which shows that the sale of Lakson Tobacco and that of its
competitors is highly competitive.
• Feedback from field force and personal judgment of the brand manager.
For the identification of competitors, all the information regarding competitors is
collected by the brand manager and then analyzed by the planning department to
have an overall view of the competitors.

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COMPETITORS BRANDS
These are the following competitor brands.

• GOLD LEAF • MILD SEVEN


• GOLD LEAF LGHTS • RANGER
• CAPSTON • CHIEF
INTERNATIONAL • DERBY
• CAPSTON FILTER • MARVI
• GOLD FLAKE • HILTON
• WILLS KINGS • TANDER
• WILLS NAVY CUT • STYLE
• EMBASSY FILETR • TICKET
• EMBASSY KINGS • MEMBER
• 3-CASTLE • HOLIDAY
• MELBURN • ADVISOR
• FOLKS OWN • POWER
• TIME SQUARE • CITY
• WILSON • PARTY
• FLIGHT • WONDER

INTERNATIONAL BRANDS

• DUNHILL
• 555
• BENSON & HEDGES
• MARLBRO

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• MORE

NAME OF PACKING
BRAND PACKING
Premier Classic, Red & White, Diplomat, HL
Royals Etc.
Lord, K-2, Hylite, Princeton Etc. SC
Embassy Filter, Capstan Filter (Of Ptc) SS
Dunhill (Imported) EP

* HL --- Hinge Lid


* SS ----- Shell & Slide
* SC ----- Soft Cup
* EP ----- Emperor Pack

CLASSIFICATION OF CIGARETTES
Some brands are classified according to length and sizes. Brands of LTC
classified according to size and length are as follows;
 KSFT King size filter
 RSFT Regular Size Filter
 LSFT Long size filter
The Packing is also given different names according to their classification and
their variety.
 HL Hinge Lid
 SS Shell & Slide
 SC Soft Cup
 EP Emperor Pack

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CIGARETTE PARAMETERS THAT CAN AFFECT
QUALITY
1) Length
2) Circumferences
3) Moisture
4) Cigarette paper
5) Pressure drop
6) Tip leakage
7) End loss
8) Firmness
9) Blend chemistry

CIGARETTE COMPONENTS AND THEIR


FUNCTIONS
1. TOBACCO BLEND

Purpose

 Delivering taste
 Delivering psychological satisfaction

Composition

 Fuel cured tobacco


 Air cured tobacco
 Burley tobacco
 Stem
 Top flavors

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2. CIGARETTE PAPER

Purpose

 To contain tobacco blend


 To control air dilution
 To control burning rate

Composition

 Largely cellulose
 Contain fiber such as calcium carbonate

3. FILTER

Purpose

 Cigarette filter reduce tar/nicotine


 Act as a mouth pipe keeping tobacco away from smoker’s mouth.

Composition

 Mostly cellulose acetate

4. PLUG WRAP

 Porous and non porous

5 Tipping Paper

 Ventilated and non ventilated.

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BRANDS OF LTC

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Lakson Tobacco Company

PREMIER CLASSIC 20HL


RED & WHITE 20HL
RED & WHITE 10HL
MORVEN GOLD 10 HL
MORVEN GOLD 20 HL
MORVEN GOLD 40 BOX
PRINCETON 20SC
DIPLOMAT 10HL
DIPLOMAT 20HL
DIPLOMAT40HL
K-2 FILTER 20SC
LORD KSF 20SC
HYLITE KSF 20SC
ROYALS FILTER 20HL
STRUCTURE

OF
MARKETING DEPARTMENT

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Lakson Tobacco Company

Chairman

Executive Director

Director Marketing
And Sales

General Manager National Sales


Marketing Manager

Brand Manager Regional Sales


Manager

Sr.District Sales
Brand Executive Manager

District Sales Manager

Sr.Area Sales Manager

Area Sales Manager

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Lakson Tobacco Company

ROLE OF MARKETING DEPARTMENT


Marketing is the delivery of right product to the right costumer at the right place at
the right time at the right place through the communication and promotion.
Sales and marketing department is go into the marketing and selling for the
company’s products that are cigarettes. Huge sales force is working in the field.
There are many district, area sales managers in the regions of the sales department.
The achievement of the targets is very necessary for this department.
Sales force of the company is very much skilled and motivated towards its tasks.
In Lakson tobacco company the marketing is defined as
“ Marketing is the backbone of the company, which plays a vital role in
company sales, building brands and company image”.
Introduction of marketing department
In Lakson Tobacco Company, marketing department consists of the following
heads.
 General manager marketing
 Marketing managers
 Brand manager
 Brand executives
ROLE OF MARKETING DEPARTMENT IN THE COMPANY
All functions of marketing department are very much important to the Lakson
tobacco company.
“TO CREATE THE FAVORABLE IMAGE OF THE BRANDS AND COMPANY IN
THE MINDS OF THE CUSTOMERS WHICH RESULTS IN SALES ON WHICH
COMPANY EXISTS”.
The marketing department of the Lakson Tobacco Company does the marketing,
sales, and research.

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Lakson Tobacco Company

LTC has divided the whole country into five regions to facilitate sales and
marketing activities. Following are the Regional Offices of the LTC.

Karachi

Lahore

Faisalabad

Islamabad

Hyderabad

LAHORE REGION
In the head of Lahore region four districts are working these are
 Lahore
 Gujranwala
 Sahiwal
 Bahawalpur

FAISALABAD REGION
Faisalabad region consist of the following districts
 Faisalabad
 Multan
 Sargodha
 Jehlum

ISLAMABAD REGION
Islamabad region contains the district of Islamabad, Peshawar and quita.

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Lakson Tobacco Company

HYDERABAD REGION
In the head of Hyderabad Region the district of Sukhar, Larkana & Hyderabad are
working.

AREAS
Each district is further divided into four to five areas under the head of Area
Managers.
Faisalabad region is divided into following district and areas
Faisalabad (Regional Office)

Multan (D. Faisalabad (D.O) Jehlum (D.O Sargodha (D.O)

Muzafar garh T.T. Singh Chakwal Bhakar


D.G.Khan Jaranwala Gujrat Mianwali
Khanewall Faisalabad(a) Jehlum Sargodha
Multan Faisalabad(b)
Shekhu pura

AREA SALES MANAGER

WORKING OF ASM
Each district office has a team of area managers that is supervised by a senior
district manager. Their responsibilities include following.

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Lakson Tobacco Company

1- Go to the filed practically and keep a liaison with the distributors and with
the retailers on the behalf of the company.
2- To keep and eye on the working of distributor and to keep on checking the
distributors records.
3- To be present in the wholesale market and keep working of the whole sale
market smother and trouble free.

JOB PURPOSE
To achieve area sales forecast, by planning organizing and implementation of
selling, merchandising distribution and field promotion activities in line with
action plan.

DUTIES AND RESPONSIBILITIES

Sales Forecast

To prepare with guideline/assumption by the divisional sales manager.


Monthly planning conference
To actively participate in monthly planning conference of the DSM for
implementation of area action plan or other related activities.

Statistics

Area demo graphs.

Training

To regularly conduct training briefs to all field force. Employees including D.D.
salesmen with on the job training and also to educate/motivate the distributors on
line with company policies.

Touring

To prepare annual tour plan


To carry out a minimum of 150/175 days tour in each year as per policy.

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Lakson Tobacco Company

Field activities

To ensure that the action plan is being implemented by random check of the staff.
To keep abreast of brands trends and market opportunities.

Selling arrangement

To prepare the distributor history card. To prepare and monitor distributors


monthly target. To carry out regular and random visit to whole-
sellers/retailers/local/outstation. To check D.D service and brand availability. To
review distributors financial investment periodically.

Administrative

 To maintain divisional leave record of his staff members.


 To verify all expense statements/ distributors claims or any other claims.

DISTRIBUTION SYSTEM
From the factory, when the cigarette manufacturing process finished and then after
stocking period, then there is a stage when it is to be shipped and delivered to the
customers. In this whole system following parties are involved:
 Area sales managers
 District sales managers
 Head office
 Factory manager
 Godown incharges
 Transporters
 Distributors
 Whole sellers

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Lakson Tobacco Company

 Retailers

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Lakson Tobacco Company

PROCEDURE
First of all it is the responsibility of the area sales managers to evaluate the
demand of the market of his own area and sets the targets of the distributors. He
sends this target report to the district manager who moves it next to the head office
Karachi. Then after the complete documentation the head office send requisition to
the factories. From the factories the stock is transferred to the company godowns
in all the district head quarters. Then godown in charge on the order of the
distributor make him delivery by the companies own transportation. Then finally
distributor delivers the stock to the wholesalers, retailers and direct to the
customers.

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Lakson Tobacco Company

PROMOTION OF THE BRANDS


The next major function performed by the marketing department is the sales
promotions. For this purpose, a team of sales promoters goes practically to the
field and performs the sales promotion functions. The sales promoters help in
placing posters and other temporary merchandising materials. They have to go to
the every retailer of the area and have to decorate the shop not only with posters
but also buntings and other sales promotion stuff that is given to him, according to
the currently going on promotion activities.
LTC is very well aware of importance of promotion and for this purpose
different campaigns are run periodically. SDS/MDS has to participate / sponsor
various promotion events in order to implement the agreed sales promotion plan
by exploiting various promotional opportunities in the territory. Following steps
are taken by SDS/MDS.

 Participate in all major Melas/Fairs in the territory.


 Identify plan and organize special events like sports, tournaments,
exhibitions, sponsorship and musical concerts.
 Maintain contacts with local authorities for organizing sales promotion
activities.
 Devise/invent new methods and concepts for promotion.
Sales promotion is based on the marketing activities, other than personal selling,
advertising and publicity. This stimulates consumers to buy. The examples are the
displays, shows, exhibitions, demonstrations and various non-current selling
efforts not in the ordinary routine.
Lakson Tobacco Company in also involved in sales promotion activities. It offers
different schemes not only for retailers but for consumers as well. In these
schemes, the company offers different type of incentives to both retailers and
consumers.

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STRATEGIES FOR SALES PROMOTION


 Identify the brand to be promoted keeping in view the market and consumer
profile.
 Operate joint consumer promotion with melas, circus and magic shows.
 Consumer promotion like lucky draws and other gimmicks to be organized
melas through stalls.
 Discount coupons scheme pertaining to different brands is introduced.
 Scheme awareness is done through banners, posters, and through sales
promoters.
Head Office approves the budget for the merchandising and promotional
activities. The MSPO sends the proposal to Head Office. In the proposal all the
activities are listed related to the merchandising and promotion aids. After seeing
the proposals the Head Office sends a final budget then MSPO works out his
activities accordingly.

SALES PROMOTION TOOLS FOR CONSUMERS


Lakson Tobacco Company gives incentives to consumers as well. The purpose is
to make the consumer more familiar with the Company’s brands with the objective
of increasing the sale.
Here the sales force selects different spots to establish a direct contact with
consumers. The sales persons meet different consumers and have a talk with them
and then offer different gifts to make a strong relationship with the company and
the consumers.

Publicity

Publicity is any form of non-paid commercially significant news or editorial


comment about ideas, products or institutions.

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Lakson Tobacco Company

According to the Company, the following things are used for publicity purpose.
• Posters
• Shop banners
• Road banners
• Buntings
• Mobiles

MARKETING OF CIGARETTES
As we now that by marketing a product can flow from producers to
consumers. All cigarette manufacturing organizations spending lot of money for
advertising and other promotional activities. Now a days in Pakistan cigarette
advertisement in TV is banned during prime time. So there are lot of difficulties
are being faced by tobacco companies for the promotion of their brands.
For this purpose they are heavily spending on merchandising and on other
promotional activities so that people should know about their brands. For these
purposes LTC spend money for Cricket events, arranges Meals in village’s etc.
This all is being done to create good will among the people about the LTC and its
brands.

TARGET MARKET
Target market for different products is different. Identification of target market in
tobacco industry is likely to be very difficult. People have misconception about
market segmentation on the basis of income. To segment the market just on the
basis of people’s income is not correct in all situations. Theoretically, people with
higher income are supposed to smoke high-priced cigarettes, yet it is not the case
in all contexts. For instance, many students who tend to smoke Gold Leaf have
little money.

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Lakson Tobacco Company

Actually, the isolation of target market is dependent upon the blend of tobacco.
Different people want different blends of tobacco in cigarettes. Each brand of
cigarette has its own distinct blend and each brand has its own target market. For
example, some people dislike K-2 or Royals due to their strong blend of tobacco.
Lakson Tobacco Company has launched a new brand of Diplomat for a segment of
people who like light blend of tobacco.
During the internship, I found out that people had the same liking for blend of
tobacco in one particular geographic area. For example, Royals Kings gives higher
sales in Muzafar Garh and Multan area than in any other area of Pakistan.

PERSONAL SELLING
Lakson Tobacco Company. Of course, is using personal selling as a promotional
tool in its promotional mix. The company understands its need and considers it as
an important element in promotional mix. In personal selling, the Company’s
Merchandising Department plays an important role. Here the term merchandising
does not mean as it is used in Accounting, but this department that is concerned
with personal selling is called the merchandising department. The sales person
meets different retailers during their visit to make their relationship more strong
with them and in this way they make their salesmen convenient.
During their visit, salesmen give some gifts to retailers. These gifts are specially
prepared for the purpose of personal selling.
These gifts include liters, key rings, telephone directories, pens, and many other
things. On these gifts, the different brand names of the Lakson Tobacco Company.
are written to get more popularity not only among the customers but also among
retailers themselves.

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Lakson Tobacco Company

The sales persons are consistently doing the personal selling to retain their
customers. Area Sales Manager also helps his sales force by himself visiting
retailers and customers.
District Sales Manager is also involved in personal selling. He himself visits the
spots along with Area Sales Managers.

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Lakson Tobacco Company

MERCHANDISING
As we know promotional activities play an important role in the failure or
success of any product. If these are designed in a perfect manner then it will not be
wrong to say that the product for which these activities have been designed, will
get good position in the mind of people and vice versa. LTC is aware of this fact
and for this purpose management designs periodical promotional campaigns in
which Tele advertisements print advertisements and merchandising, etc. are
included. Also LTC conduct certain shows, concerts and competitions.
In every district there is an MSPO which is responsible for all
merchandising and promotional activities. He also has to develop sales promotion
plans. The execution should be carried out in effective and efficient manner so as
to exploit the sales potential and image of brands of LTC consequently leading to
the overall profitability and long-term growth of company.

RESPONSIBILITIES OF MSPO.

 Designs and implement merchandising and sales promotions plan.


 Ensures the display of brands at every outlet with the help of its staff.
 Checks the maintenance of merchandising material of outlets.
 Prepares decentralized communication budget for the merchandising and
promotion activities.
 Planning
 Managing People
 Merchandising
 Promotion
 Trade Offers
 Public Relations

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Lakson Tobacco Company

MERCHANDISING ACTIVITIES
The merchandising installation is based on segmentation of brands volume,
e.g. if a specific markets highest selling brand is Morven Gold, then outlet in that
market will not be merchandised with K-2 or any other brand of LTC. Following
are the “types of merchandising”.

TEMPORARY MERCHANDISING
It includes posters, wobbles, stickers, mobiles etc.

PERMANENT MERCHANDISING
It includes Fascia, Counter, and Wall Clock etc.

OUT DOOR

The material placed at streets, roads are outdoors merchandising. It includes


Hoarding Wall Painting, billboards etc.

IN STORE

The merchandising material placed in side of a shop is called in store


merchandising. It includes, modular tube, counters etc.

OUT STORE

The material, which is placed out of the outlet. It includes Fascia,


nameplate, Neo signs etc.

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Lakson Tobacco Company

MAINTENANCE OF MERCHANDISING MATERIALS


It is also ensured that all the merchandising material and fixtures are properly
maintained in top-notch condition. For this purpose retailers are encouraged to
clean their modular, tube shades, etc. regularly. In addition, MDS’s also take part
in cleaning exercises. If repair work is needed such as, changing of modular sheet,
or replacement of tube lights, MDS ensure that things are fixed up in no time.
MSPO periodically visits such retail shop and assess the merchandising and the
maintenance work. If need be, quick action is taken pertaining to maintenance
work.

DISTRIBUTORS
Lakson tobacco company has a wide distribution network to cover the whole
country. LTC has divided the whole country into five regions and there are about
more than 1000 distributors.
A person heaving the rights given by company for making the goods of company
available at wholesaler’s outlet and retailer’s outlet.

WORKING OF DISTRIBUTORS
The distributor is the cigarette agency called in general. The functions of
distributor includes following.
1- To purchase the stock from the company and to sell it to the whole sale and
retail market. There are following kinds of sales.
1. DD Trivans (tricycle) or Vans
2. S/S Shop Sale
3. VDD Village Sale
4. W/S Wholesale sale

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Lakson Tobacco Company

2- To keep all the sales record and maintain all the documents that are
required and asked by the company. These records include following
main categories.
1- Daily sales summary
2- Monthly record of sales in the register
3- Cash Memos
First week I was deputed at distribution to get knowledge about the basic terms of
the sale point of the company. I spent the second week of my internship program
with the salesmen.
There are four distributors in the Faisalabad town.
My first attachment was with the distributor for Faisalabad (a). The distributor
shop and godown is located at Allama Iqbal Road near Ghanta Ghar, Faisalabad.

The main functions of the distributors are

• Visits to outlets periodically.


• Making sure the availability of all the products.
• Helps LTC in promotion campaign.
• Introduce the retailers and wholesalers with schemes.

In the first week I was attached with the distributor of LTC here in Faisalabad
named Haji Muhammad Amin And Co.
The office staff at distribution office is
Md Haji Muhammad Naeem
Manager Mr. Umair
Casher Mr.Muhammad Raza

Sales Supervisors Mr Abdul Sattar


Mr Intakhab Alam
Godown Incharge Muhammad Riaz

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Lakson Tobacco Company

I also had a chance to observe the working in the distributor’s office. I was shown
different documents such as OCF, stock register form, retailer/wholesaler cash
memo, ledger and salesmen voucher.
 OCF is the order control form; it gives information about when to place
orders. Usually the distributors keep the safety stock of three days then
place the order.
 Stock register form, is the document in which daily stock statements were
fed into details.
 Retailer/wholesaler cash memo is the document in which stock sold to the
retailers and wholesalers is kept and bill is charged.
 Sales men voucher, is a document, which provide information about how
much stock was issued to sales men and how much stock was returned.
 Also documents such as weekly sales report and monthly sales reports were
shown to me.

There were two sales supervisors in the distributor’s office. Their main job was to
make sure that salesmen supply stock at each shop properly on the specified day.
They also manage and control the sales men.

The job of the cashier was to deal with cash i.e. receive cash from salesmen,
deposit it in the bank, and note down the detail of cash in the financial book.
Manager was responsible to control all the activities and working of the staff.

Salesmen

A distributor has number of salespersons that supply the product from distributor’s
shop to the outlets.
My next attachment was with the salesmen.
There are 10 salesmen to supply stock in the Faisalabad (A) market. Salesmen use
van, motorcycle carriage and tricycle vans to distribute the product of LTC. Seven

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Lakson Tobacco Company

salesmen use tricycle vans; two use motorcycles, and one use delivery van, each
sale man visits the shop twice in a week. Routes for salesmen are well defined and
planned. Every salesman visit his own territory.
Every salesman is issued stock in the morning and it is noted in the salesman’s
voucher. When salesman return godown keeper receives the unsold stock and he
again notes it in the salesman voucher. If salesman can sell all the stock and he
needs more stock, then it could be delivered on desired location on demand.
Salesman makes contact to the distributor on phone line and asks for the desired
stock.
I visit seven local areas with the salesmen during my attachment. These include all
the bazaars around Ghanta Ghar, GTS, bus stand, vegetable and grain market, and
timber market and Lal Mill Bazaar,Ghang road and Rehmania Chock. I got the
opportunity to visit these areas along with the experienced salesmen. I observed
the working off salesmen very keenly. Salesmen were very efficient in taking
orders, delivering stock and receiving cash. Salesmen spent 4 to 5 minutes in each
shop and then moved to the next shop.

WAREHOUSE
My next attachment was with Mr. Muhammad Anees, who is warehouse in-charge.
Distributors fax or hand over the cash voucher or draft to warehouse along with
the order. LTC has account in all the branches of UBL in all over the country.
Distributors transfer cash to the LTC account and then send this receipt to the
warehouse in-charge. The company management for the company transport
vehicles that makes the supplies very systematic defines specific routes.

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Lakson Tobacco Company

INVENTORY SYSTEM
The distribution manager of the godown told me that they are using the perpetual
inventory system; it means that they record the transactions as they occurred.

FIFO(FIRST IN FIRST OUT METHOD)

Mr. Muhammad Anees told me that all the depots of the company are using FIFO
method for the sake of inventory management.

REASONS FOR USING FIFO

 He told me following reasons for using this method for the record of inventory the
inventory that are cigarettes is perishable products. With the passage of time inventory
can loose its taste and quality so FIFO method is most favorable for the company
because in this method the production that first comes go out first.
 The second reason of using the FIFO method is that cigarettes are the products that
are easily convertible into cash, we can say that these are cash products and prices of
the cigarettes always go for rising not falling so it is highly advisable for such
products to use FIFO methods to avail the opportunities which increase the company's
profits.
 The third reason for using the FIFO is that in case of FIFO method for Tobacco
products, this method is helpful for reduction of taxes and excise duties.

COMPUTERIZATION
All of the godowns of the company are using computerized most advanced
systems for inventory management. The company itself develops all the software
that are using in the company. The separate department of the company is
working for serving this purpose that is computer division.
The software that is especially used for inventory management is “SMASH” that
is developed by the Lakson Group Of Companies itself.

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Lakson Tobacco Company

The whole procedures for the handling and managing the inventory were fully
computerized in 1995, 1st July.
The distribution manager is fully empowered for placing order at any time to any
factory of the company that is working in any part of the country of his desired
quantity.
He is also responsible for maintaining and minimizing for carrying, ordering and
storage costs of the inventory. The company set a fixed budget for distribution
expenses. the distribution manager has achieved his targets with in the limits of
his budget that is allocated by the head office.
The evaluation process of the godowns is continuously takes place by the head
office.

Transportation mode

There are three modes that are commonly used by the Lakson Tobacco Company
These are:
 Twenty two wheeler container
 Ten wheeler container
 Four wheeler mazda
Some years back, the trucks were used for delivering and handling the stock.
But by using this transportation mode there were high chances of losses because of
rain and other mishaps and it was due to the nature of the products.
In case of rain, the whole truck was damaged and company has to face huge losses
in this regard.
But now, the company is using covered container for delivering the inventory.
This has decreased the chances of damages and decreases the transportation and
carrying cost.

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Lakson Tobacco Company

WITH SALES AND DISTRIBUTOR SUPERVISOR

My next attachment with SDS Intakhab Alam. During attachment with SDS I had
to spent a week in Jhang because of Mela. During Mela the job of SDS is to
supply stock to the temporary shops and also promote the LTC by offering
promotional schemes. We were also having a mobile film unit (MFU) with us.
Two movies were shown each night during the mela to the public. Also during the
mela I did posting of posters, bunting at the shops along with the SDS and MDS.
During posting I was told that the life of a poster is of few hours. Poster and
buntings were posted to create awareness about the promotional schemes offered
by Morven gold and Diplomat.
The basic responsibility of a SDS is to survey the market, including both the
consumer and retailer survey, and coordinate the relationship between the
company and distributor. If there is any consumer promotion plan then distributor
sends all the flappers to the company office. Then SDS counts them and makes
their claims. SDS visits to distributor, wholesaler, and retailer periodically. He
monitors the performance of distributor and salesman. Sales supervisor also
checks that distributor and supplies regularly. They report to AM about the trend
of their concerning market.
Distribution officer also informed about that types of sales- which are
DD Direct delivery
S|S Shop sale
VDD Village sale
W\S Wholesale
The sales promoters help in placing posters and other temporary merchandising
materials.

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Lakson Tobacco Company

WITH MERCHANDISING OFFICER

My next attachment was with merchandising officer Khawaja Muhammad


Kamran. The role profile of MSPO is that he is action man, he is mobile
personality. He is to be outgoing as he spends a lot of time in the market. He
should have one eye over market. He is to develop rapport with retailers. MSPO is
to identify outlets and get merchandised till due date.
The selection of an outlet for merchandising depends on factors such as traffic
flow, key location i.e. it is visible to smokers. MDS is under the MSPO. He is
responsible for checking that which shop should have modules, wall clock etc.
also in case of any breakage of merchandising material, he ensures the
maintenance, and where necessary recommend replacement.
MSPO places purchase orders and gives deadline for supplies after consulting with
merchandising coordinator. During my attachment I visited one of the suppliers of
LTC named “Chishty Advertisers” who supplied merchandising material. The
design was painted on hoarding by following the instructions in the design manual
provided by LTC. I was attached to the MSPO when he was making preparation
for Rahim Shah Music Night.
Most critical task of MSPO is to plan and execute and then evaluate
merchandising activities in his region. Merchandising activity has a tremendous
effect on the final point of sale bottle. MSPO always strives to improve the
existing merchandising material.

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Lakson Tobacco Company

DEPARTMENTS OF LAKSON TOBACCO


COMPANY
There are many departments that are working in the Lakson tobacco company.
Some of them are as under.

 Operation and administration department

 Production department

 Finance department

 Product, research and development department

 Sales and Marketing department

 Leaf department

 Data processing department. (Computer division)

 Engineering department

 Safety and environment department

 Employees Relation department.

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Lakson Tobacco Company

BRIEF FUNCTIONS OF EACH DEPARTMENT

Safety and Environment Department

LTC management is very much concerned with safe operation and environment
that is why, there is a separate section named as Safe.
Operation & Environment department (SO&E) responsible for the safe operation
and maintenance activities and providing the timely help at a time of emergencies
like accidents, explosion and fire.

OBJECTIVES:

Safe Operation & Environment section is responsible for the safety of:

 Equipment
 Material
 Persons
 Environment

Operation and Administration Department

This department is responsible to carry the operations of the company


successfully. The integration of all the departments of the company is the
important task of this department.

Production Department

Production department is very important for the company. Because it is directly


related to the production of the company’s products.
This department is responsible to fulfill the needs of the distribution department.
This department is comprised on the five manufacturing units of the company that
are working in all over the country.

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Lakson Tobacco Company

The production department is divided into three sections.


 Primary department
 Making department
 Packaging department

Primary Department

From the godown of the factory, the tobacco in the form of bails brings in the primary
department for starting production process.

Bail Slighter

This is a part of the primary department in which the workmen for the purpose of the
heat up of the tobacco bails put the bails of the tobacco.

Casing

After the bail slighter, the heated bails of tobacco come into the casing through pipeline
that linked the bail slighter to the casing. The main function that is performed by the
casing is that it at once crushes the bails that are already heated into the desired form of
the tobacco.

Reordering Vessels

After cutting the bails into small-required pieces, the tobacco come in the reordering
vessels. Reordering vessels are the very big containers that are used for the further
process of heating and provide required wet that is necessary for the further production
process.

Cutters

In this part, the tobacco is taking the ultimate shape of cigarettes that we find after
finishing the process.

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Lakson Tobacco Company

Making Department

This department is used for the storage purposes of the inventory that the making
department gets from the primary department that is very small pieces of tobacco. It is
called cut tobacco store. In this store tobacco is stored for some days.
It contains very big pots that have big caps for the covering of the tobacco. There are
eight pots for the production of different brand of cigarettes.
After the process of pots the inventory go into the big vessels of glass. In these glass
vessels ordering the cigarettes in the form that is helpful for further processing.

Packaging Department

Because the tobacco takes the form of cigarettes in the making department, so after the
completion of this process, the cigarettes come in the packaging department for the
packaging.
It consists of a computerized packaging machine. The making ordering vessels are
directly attached with the packaging machine. The production come in this machine and
take the for of packets of cigarettes that consist twenty cigarettes each. The packet
consists of three layers. First consist on seven cigarettes the second layer consist on six
cigarettes and the third and last one also consist on the line of seven cigarettes.
One part of this machine has the empty packet of the cigarettes.
After getting the shape of packets, the packets go to another machine in which they are
covered by a transparent paper and a s3al is also take place on the packets in the
machine.

PACKAGING

Outer
It contains the ten packets of cigarettes that 200 cigarettes.
Carton
It contains 50 outers that are 10000 cigarettes.
Packet

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Lakson Tobacco Company

It consists of 20 cigarettes.

Product, Research & Development Department

Research and development provide improvement and innovative ideas emerge


which help in surviving in the competitive market. LTC’s research and
development help in coping with the new consumer taste and requirements. The
basic aim of the research and development is to produce highest quality cigarettes
that are not made for the sake of profit but to meet the requirements of the
smokers. R&D includes farmers suppliers of tobacco and how better grades of
tobacco can be produced and properly used for the right taste.
This department is responsible to manage the products and brands of the company
and it is also working for preparing new products for the company. Research and
development is the main task of this department. There are two-research labs in
the Lakson tobacco company for research and development purposes. Research
and development is the continuous process in the Lakson tobacco company for
competing in the tobacco industry in Pakistan.

Data Processing Department. (Computer Division)

This department is responsible for the operations of the business that are computer
technology- oriented. Development of new software, maintenance of existing
devises, communication within the offices and go downs and
Communication within the companies of the Lakson group is carrying on with the
help of this data processing department.
All the soft wares that area using by the company is it’s own and developed by this
department. Copyrights of these soft wares are a also reserved for Lakson groups
of companies.

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Lakson Tobacco Company

Engineering Department

This department is responsible for maintenance of equipments and plants of the


companies. Purchasing of new equipments and plant is also take place with the
consultation and assistance of the department.

ROLE OF ENGINEERING DEPARTMENT

 To keep the plant in running condition by providing efficient and timely


maintenance and repair.
 Do the preventive maintenance for avoiding any damage.
 To repair the faults if is occurred.
 To assess and arrange the requirements of materials, equipment, resources
and manpower for executing its maintenance activities.
 To have close liaison with inventory management and commercial
department to maintain the necessary level of spares required.

QUALITY CONTROL DEPARTMENT


The objective of LTC quality control department is summarized asunder:
To produce high quality product, conforming to the standard specification.
Quality check of the purchased material helps in achieving the required
specification. Inspection of the various maintenance jobs help in gaining huge
saving by reducing the maintenance error cost Weight and packing check before
dispatching help in building the good image in customer mind.

THE SUCCESS STORY OF THE COMPANY

The heart of LTC is quality. It is the first company in the tobacco industry
of Pakistan to have achieved the highest Quality Award. The ISO registration,
which gives LTC. The international recognition as the producer of Red & White
and Premier Classic. Besides it, LTC was conferred the management excellence
award by the Management Association of Pakistan for demonstrating the best

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Lakson Tobacco Company

Corporate Performance on quality in the Engineering Sector of Pakistan for the


year 1993 and 1994.
In LTC quality is a dynamic state associated with the products, services,
people, processes and environment that meets or exceeds the expectations of their
customers and it is a strong edge on the basis of quality against the competitors.
There is well-established Quality Control department in the company that assures
quality by incorporating other departments.

TOTAL QUALITY MANAGEMENT


“Total Quality Management is an approach to doing business that attempts
to maximize the competitiveness of organization through the continual
improvement of the quality of its products, services, people, processes and
environment”.

In LTC management has been taking the following steps for Total Quality
Management.

EDUCATION AND TRAINING

The management has established a training center in the premises of the company
for training to the managers and workers to increase the performance at every
level. This improvement in performance is directed towards satisfying such cross-
functional goals as quality, schedule, and others activities. Before audit of ISO
implementation in the company all the employees who are concerned with quality
were given training so that all the employees could understand all the documented
procedures, authorities and responsibilities of each other in the company. Some
managers were sent to different seminars and workshops to learn about ISO.

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Lakson Tobacco Company

TEAMWORK

In LTC there is strong existence of teamwork. These are the managed group
of the employees doing their best competitive efforts to cope with the barriers,
rivalries and distrust among different departments to improve the quality of the
their products.

OBSESSION WITH QUALITY

For obsession with quality the employees are trained from time to time to learn
the philosophy “ how can we do better ” the suggestion given by the employees
about quality are appreciated in the company.

CONTINUAL IMPROVENENT OF SYSTEM

The management of LTC has taken many steps to improve their system in
order to continually improve the quality of products and services. Employees are
trained from time to time and new technologies are adopted.

Personnel Department/Corporate Affairs

This department deals with the affairs of the employees of the company. Selection
of the employees, firing of the workers is also the duty of this
Department. Other inter industry and intra industry affairs are also bring into the
account by this department.

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Lakson Tobacco Company

Sales and Marketing Department

Sales and marketing department is go into the marketing and selling for the
company’s products that are cigarettes. Huge sales force is working in the field.
There are many district, area sales managers in the regions of the sales department.
The achievement of the targets is very necessary for this department.
Sales force of the company is very much skilled and motivated towards its tasks.
In Lakson tobacco company the marketing is defined as
“ Marketing is the backbone of the company, which plays a vital role in
company sales, building brands and company image”.
Introduction of marketing department
In Lakson Tobacco Company, marketing department consists of the following
heads.
 General manager marketing
 Marketing managers
 Brand manager
 Brand executives
ROLE OF MARKETING DEPARTMENT IN THE COMPANY
All functions of marketing department are very much important to the Lakson
tobacco company.
“To Create the favorable image of the brands and company in the minds of the
customers which results in sales on which company exists”.

LEAF DEPARTMENT

Leaf is a natural product and the main ingredient of the cigarette. Because the
production of the natural product can vary due to climate and seasonal variation,
which can as a result affect the leaf requirement for manufacturing.
LTC does not own land for the cultivation of the leaf but fulfills its requirements
by contracting with the independent farmers. LTC provides the farmers with free

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Lakson Tobacco Company

extension advice in agriculture skills and environmental support on the range of


crops and guarantee the purchase at the pre defined prices of all tobacco they
produce. For the sensitive smoker right leaf blending is very important to create
good taste. Leaf department makes sure that blends for each brand have a
consistent desirable taste, year on year.

FINANCE DEPARTEMENT

All firms raise money and control the financial aspects of their business. In the
finance department three cost accountants perform their jobs with the clerical staff,
then present the report to the director finance.
The cost accountants deal with the following sections
 Wages and payroll system
 Production expense system
 Ledger section
 Variable cost section
 Cash and excise section
The following are the main functions of the finance department
 To link all departments with each other financially
 Arrange monitory resources at proper time
 Allocate resources through out organization
 Deal with banks investment firms, govt agencies and tax department.
 Carry out final auditing and financial records prepared
 Details of calculations of salaries, income tax and funds for loans
 Calculate different expenses of the company

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Lakson Tobacco Company

EMPLOYEES RELATIONS DEPARTMENT

In LTC employees are considered a resource in the organization. For the


proper management of employees related issues “employee relation department”
functions under the departmental head Mr.Ikram-ul-Hq.

DUTIES AND RESPONSIBILITIES OF THE DEPARTMENT

1. Approve training agencies, which give the training to the personnel of LTC.
2. Ensure hygiene and housekeeping of the factories.
3. Approve job contract contractors.
4. Conducts and arranges training programs.
5. Implement measures that are helpful to motivate the personnel of the
company.

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Lakson Tobacco Company

GODOWN MANAGEMENT INFORMATION


SYSTEM (GMIS)
The logistics functions have been made very easy with the help of
computerized Godown management information system. It is a computerized
database that is centrally connected to head office and all the warehouses are
linked with each other. It is programmed in the FOX PRO. It performs following
functions.
 Keeps a detailed record of stock receipts
 Keeps and detailed account of the stock that has been shipped to the
distributors or have left the warehouse under any conditions
 Have a complete record of all the orders that have been placed during a
year and have a complete record with their complete details.
 Have a complete record of all the damages and claims that have been raised
through out the year.
It also generates the system reports and system queries that are required by
head office for the purpose of analysis. It includes following
 Daily sales report
 Zone wise Sales
 Freight expenses Payable
 Transit Duration Analysis
 Monthly Stock reconciliation
 Distributor wise sales
 Godown Wise transfers

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Lakson Tobacco Company

COMPETITIVE EDGE OF THE COMPANY


The main product of the company is Morven Gold, which comes in competition
with Gold Flake. The other products of the company are also very popular in the
market. They have the competitive edge over their competitors on the following
grounds.
• The company’s market coverage is better than its competitors.
• Availability of the brands is made at each and every spot.
• The company’s sales force is more efficient then its competitors.
• The penetration of the company’s products in villages or remote areas,
where the 70% of the population lives, is very high.

COMPETITIVE EDGE OF THE COMPETITORS


Lakson’s close competitor is Pakistan Tobacco Company with its popular brand
Gold Leaf -one of the most successful “A” category brand in urban areas.
The secondary competitors are International brands, which are available at cheaper
prices in Pakistani markets.

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Lakson Tobacco Company

PRODUCT POSITIONING

Positioning is to fit a product one or more segments of broad market to set it apart
from its competitors.
Lakson Tobacco Company has adopted two positioning strategies to position their
different brands of cigarettes. These two positioning strategies are:
• Positioning by price
• Positioning by competitors

POSITION BY PRICE
Positioning by price means to communicate the product image by price. There are
four cigarettes of different brands of cigarettes with respect to price.

CATEGORY
LAKSON’S BRAND PTC’S BRAND
A NO BRAND GOLD LEAF
B PREMIER CLASSIC CAPSTON
C RED & WHITE WILLS KING
D MORVEN GOLD GOLD FLAKE
E ROYALS FILTER, LORDS, DIPLOMAT, K-2 EMBASSY

POSITIONING BY COMPETITORS
Positioning by competitors means to communicate the product image with respect
to competitor. It is to create the image of the brand where competitors brand exists.

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Lakson Tobacco Company

ADVERTISING
Any paid form of non-personal persuasive communication by an identified
sponsor with predominant use of the media of mass communication.
Each brand is controlled by its Brands Manager who is fully responsible for the
decision of the advertisement of the brand.
Following are the different responsibilities of a Brand Manager regarding
advertisement of a particular brand.

DEVELOPMENT OF ADVERTISEMENT

Message

For the development of new advertisement of different brands, the Brand Manager
uses different messages.
Here are the examples of different messages for different brands.

Name of Brand Message

RED & WHITE 21ST CENTURY STYLE


K-2 HAMAISHA KA SAATH
ROYALS FILTER JANBAZON KA INTEKHAB
HYLITE APNI REWAYAT PER QAIM
DIPLOMAT LUTF KE LAMHAT
MORVEN GOLD SHARE THE TASTE OF
ADVENTURE

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Lakson Tobacco Company

2. SELECTION OF MODEL
Brand Manager has the authority to make a final decision on the selection of
model for the particular advertisement.

3.SELECTION OF LOCATION
Different locations are selected for the advertisement purposes. For example:
Brand name Location
RED & WHITE INDIA
MORVEN GOLD AUSTRALIA
ROYALS FILTER SCOTLAND

4. PLACEMENT OF ADVERTISEMENT

Media selection

Lakson Tobacco Company has a large target market. Therefore, the following
electronic and print media are used to cover the target market.

Electronic Media

Television
Television has become the most popular media particularly in urban areas. Games
are sponsored through television.

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Lakson Tobacco Company

Radio
Although television has become the most popular media yet we can not ignore the
role of radio in advertisement particularly in rural areas.
Rural areas are a big market for cheaper brands. Usually, the population of rural
areas is not ready to buy expensive brands of cigarettes.
Radio is the best way to advertise cheaper brands in rural areas.
Some other media channels are as follow

Cinema advertisement

Print media

Magazines

FREQUENCY
The frequency of advertisements of cigarettes on television is five to seven times a
day except national events.

EVENTS
The company also sponsors different events. It as recently sponsored a football
world cup 2002 held in Japan.
Different games are sponsored by different brands. The detail is as follows.

Brand Name Games


RED & WHITE POLO
RED & WHITE SNOOKER
K-2 HOCKEY
ROYALS FILTER WOLLY BALL
DIPLOMAT FOOTBALL
MORVEN GOLD CRICKET
K-2 KARATTE

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Lakson Tobacco Company

Timing

Besides sponsoring different events, the Company also advertises its products on
television before or after the Khabarnama or Dramas.

5. EVALUATION OF ADVERTISEMENT
The company evaluates the advertisement result by the sales volume and the
feedback from retailers and consumers. Other sources of evaluation of
advertisement are as follows.

• Change in sale
• Sales force information
• Retailers and wholesalers
• Customers response

OBJECTIVES OF ADVERTISEMENT
Different advertisements have their own objectives, which provide performance
standards of measurement of effective advertisement. Some objectives of ads are:

1. To increase awareness in public.


2. To increase sale.
3. To increase public relations.

If the particular objectives are not achieved by the ad then the ad campaign is
considered to be unsuccessful and it is the responsibility of the Brand Manger to
revise the whole campaign to make an effective ad.

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Lakson Tobacco Company

SELECTION OF ADVERTISING

AGENCY
Selection of advertising agency is based on many factors such as, how much
creativity is done by that agency. What is the previous reputation of agency?
What are the equipment and which agency using them? Which technology is
used? What is the reputation regarding timely delivery? All these factors are of
great importance to organization
The advertising agency, Lakson Tobacco Company is using is Star Sports. They
are using latest equipment for the development of promotional material.

ROLE OF ADVERTISING AGENCY

Role of advertising agency can be seen as it is the service that is providing the
development of literature while the initial point is only the raw information
available regarding the product.
It takes usually fifteen days to develop a literature and another fifteen days to
finalizing and printing the literature. Advertising agency also suggest the type and
the quality of the gifts for the product whose material is developed by them. The
process of developing literature is quite difficult but systematic.
Firstly, the organization just gives raw information about the product. Advertiser
gathers them and arranges them. Designing is also much important during
arrangement. Advertiser then makes dummy literature for the Company, which
afterwards is used for final changes and then finally is made available for printing

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Lakson Tobacco Company

TAXES
No tobacco product is traced more heavily then cigarettes. LTC is one of
the major tax paying organization of Pakistan, according to representative of LTC
the Morven Gold Pack price 12/= and from these 7/= RS is paid to government in
the form of different taxes, only 5/= RS are kept by the LTC.

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Lakson Tobacco Company

FINANCIAL ANALYSIS OF LAKSON TOBACCO


COMPANY

SALES ANALYSIS

During the year ended June of 2001, sales at Lakson Tobacco Company Limited
were 15.46 billion Pakistan Rupees (US$257.06 million). This is an increase of
4.9% versus 2000, when the company's sales were 14.73 billion Pakistan Rupees.
This was the fifth consecutive year of sales increases at Lakson Tobacco Company
Limited (and since 1996, sales have increased a total of 1,445%).

Recent Sales at Lakson Tobacco Company Limited

14.7 15.5

5.4
4.5

1.0 2.4

1996 1997 1998 1999 2000 2001


(Figures in Billions of Pakistan Rupees)

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Lakson Tobacco Company

RATIO ANALYSIS

Price / Earnings Ratio 4.91 Dividend Yield 18.36%

Price / Sales Ratio 0.14 Payout Ratio 90.17%

% Held by
Price / Book Ratio 14.82 N/A
Insiders

SALES COMPARISONS (FISCAL YEAR ENDING 2001)

Company Year Sales Sales Largest Region

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Lakson Tobacco Company

Ended (US$m) Growth


Lakson Tobacco Company Limited Jun 2001 257.055 4.9% N/A
VST Industries Limited Mar 2001 66.305 3.2% India (100.0%)
Godfrey Phillips India Limited Mar 2001 112.000 7.3% India (100.0%)
Pakistan Tobacco Company Limited Dec 2001 330.601 N/A N/A

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Lakson Tobacco Company

DIVIDEND ANALYSIS

During the 12 months ending 12/31/01, Lakson Tobacco Company Limited paid
dividends totaling 10.83 Pakistan Rupees per share. Since the stock is currently
trading at 59.00 Pakistan Rupees, this implies a dividend yield of 18.4%. This
company's dividend yield is higher than the three comparable companies (which
are currently paying dividends between 0.0% and 4.2% of the stock price). The
company has paid a dividend for 6 straight years.

During the same 12 month period ended 12/31/01, the Company reported earnings
of 12.01 Pakistan Rupees per share. Thus, the company paid 90.2% of its profits as
dividends.

PROFITABILITY ANALYSIS

In 2001, earnings before extraordinary items at Lakson Tobacco Company Limited


were 394.71 million Pakistan Rupees, or 2.6% of sales. This profit margin is lower
than the level the company achieved in 2000, when the profit margin was 3.2% of
sales. The company's return on equity in 2001 was 43.7%. This was significantly
worse than the already high 66.2% return the company achieved in 2000.
(Extraordinary items have been excluded).

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Lakson Tobacco Company

FINANCIAL POSITION

As of June 2001, the company's long term debt was 185.59 million Pakistan
Rupees and total liabilities (i.e., all monies owed) were 1.82 billion Pakistan
Rupees. The long term debt to equity ratio of the company is 0.16.

As of June 2001, the accounts receivable for the company were 168.00 million
Pakistan Rupees, which is equivalent to 4 days of sales. This is an improvement
over the end of 2000, when Lakson Tobacco Company Limited had 4 days of sales
in accounts receivable.

LT Debt/
Company Year
Equity

Lakson Tobacco Company Limited 2001 0.16

VST Industries Limited 2001 1.20

Godfrey Phillips India Limited 2001 0.04

Pakistan Tobacco Company Limited 2001 0.14

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Lakson Tobacco Company

LAKSON MEDICAL TRUST

Lakson Tobacco Company has greater contribution in the social welfare program.
The northwest frontier province for the social program has given a special award.
For the welfare of the community in general along with this social program, LTC
gives the mobile dispensaries in the remote areas.

LAKSON MEDICAL COMPLEX BUILDING

INAUGURATION
The foundation stone of Lakson Medical Trust Hospital (LMTH) was layed by
Mrs.Gul Bano Hasanali Chief Patron of the Lakson Medical Trust on March
13,1998,. The Hospital started its function on May 11, 2001. Equipped with 14
beds, it is the first specialized hospital for eye diseases in N.W.F.P. It is currently
deemed among the most developed hospitals in the region in terms of high

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Lakson Tobacco Company

medical technology with its diagnostic and surgical equipments, which covers all
requirements for examination diagnosis and treatment of different eye diseases.

BREIF ABOUT LAKSON MEDICAL TRUST


Lakson Medical Trust has embarked upon an ambitious program to increase its
cataract surgeries. For permanent solution and to provide better treatment with
latest technology, the Trust decided to have a modern Hospital, having all
facilities, equipped with the following units:
The project has been completed with the cost of Rs.32.00 million. The Hospital
including an operation theatre, equipped with latest instruments, has started
operation from 11th May 2001 under the supervision of Trustees and qualified
Surgeons/Doctors with well-trained staff.

FREE EYE CAMPS


LMT arranged 9 Free Eye Camps at various locations from November,1994 to
May,2001. During this period 65,035 OPD patients were treated and provided
medical aid, 3,973 persons were operated and 27,308 glasses were distributed to
the needed persons.

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Lakson Tobacco Company

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Lakson Tobacco Company

STRENGTHS
WELL-ESTABLISHED BRANDS

Lakson Tobacco Company has strong portfolio of brands on its credit. The
brands of LTC are well established in the country. Most of the people are quite
familiar with these brands and these brands are in market for a number of years.
LTC has well-known brands in its portfolio such as
 Red & White.
 Morven Gold.
 K-2.
 Diplomat.
 Royals Flt.

BRAND LOYAL CUSTOMERS

The customers of LTC are very much brand loyal and they do not switch
over to other brands for any reason like sales promotional campaign, price or any
other factor. For example if a person smokes and buys Morven Gold then it is
unlikely that he is going to switch over to any other brand.

WIDE DISTRIBUTION NETWORK

Lakson Tobacco Company has wide distribution network to cover the


whole country. LTC has divided the whole country into five regions and there are
more than 1000 distributors in the country.

STRONG COMMUNICATION

Lakson Tobacco Company maintains strong communication with its


employees, distributors and customers. Due to the fact that working environment
is very friendly and cooperative, any employee can give suggestion regarding

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Lakson Tobacco Company

improvements. Also due to strong communication employees have clear


understanding of their responsibilities and what is expected from them.
Similarly distributors and management of LTC work closely to solve the
problems being faced by any partner.
The promotional campaigns launch by LTC gain popularity among the
consumers and these campaigns are very much effective in creating awareness
among the customers.

LATEST TECHNOLOGY
The manufacturing factories are equipped with latest technology and
equipment available. The top management continuously seeks for new innovative
technology and plant equipment to remain cost effective and competitive in
market.

MARKETING KNOWLEDGE

Lakson Tobacco Company has been in business since 35 years. And due To
this reason LTC has in depth knowledge of every market that they are serving.
Also LTC uses new marketing techniques to promote its Products. LTC has set
many benchmarks in the field of marketing.

ACCESS TO FINANCIAL RESOURCES

Lakson Tobacco Company has ready access to financial resources due to


better credit rating and repute in the industry.

COMPETENT & MOTIVATED WORKFORCE

Lakson Tobacco Company has a well competent and motivated workforce.


LTC gives salary and fringe benefits to its employees, which are lucrative in
industry. Due to this fact LTC is able to attract competent people in its workforce
Lakson Tobacco Company also conducts training workshops to motivate and
teach new skills to its employees.

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Lakson Tobacco Company

MORE FOCUS ON MERCHANDISING

Lakson Tobacco Company is putting more efforts on merchandising as


compared to its main competitor Pakistan Tobacco. Lakson Tobacco Company has
been able to control the retailers due to the demand of its brands. Lakson Tobacco
is investing heavily on merchandising the retailer shops and is in position to
control the retailers.

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Lakson Tobacco Company

WEAKNESSES

FAILURE TO LAUNCH NEW BRANDS

Lakson Tobacco Company has been unable to launch new brands


successfully in recent past in the competition of Gold Leaf. LTC is generating its
significant proportion of revenues and profits from brands that are already
established and successfully in the market. LTC should launch new brands of a
class successfully to further diversify its portfolio of brands.

RELIANCE ON FEW BRANDS

Lakson Tobacco Company relies heavily on few strong brands for its
revenues and contribution margin. Especially LTC is relying heavily on Morven
gold.

OPPORTUNITIES
RELATED DIVERSIFICATION

Lakson Tobacco Company can diversify its products by offering cigars,


menthol cigarettes and pipe tobacco in Pakistani market for upper middle and
upper class.

UNRELATED DIVERSIFICATION

Lakson Tobacco Company can opt for unrelated diversification to reduce


risk associated with tobacco business due to social resistance and health hazards.

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Lakson Tobacco Company

THREATS
FORGED PRODUCTS

Lakson Tobacco Company is trying its utmost to control forged products


but could not do so because of the state authorities and poor implementation of
laws and regulation. Forged products are threat for LTC because they destroy
product image and company repute.
Forged brands also cause irritation & dissatisfaction to customers and this can
result in lost customers and sales.

SOCIAL RESISTANCE

Generally smoking is not liked in our society, it is considered as a bad habit


because of the link between tobacco and drugs. Since smoking causes health
problems people have a negative view about cigarette manufacturers, as they
believe that they are selling devices for death. Recently cigarette- manufacturing
companied in USA had to suffer heavy losses due to lawsuits filed by different
people who suffered from smoking.

GOVT. REGULATIONS

Government regulations also pose a big threat to cigarette manufacturers as


these regulations encourage people not to smoke. These regulations include ban on
smoking at public places, ban on cigarette advertisements etc.

STRONG COMPETITION

Strong competition is also of concern to cigarette manufacturers as it


initiates the battle for survival. Due to strong competition, prices decrease and
profits are foregone. Only that cigarette manufacturer will survive who will be
efficient and effective.

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Lakson Tobacco Company

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Lakson Tobacco Company

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