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The tobacco industry

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  1. Introduction.
  2. History of tobacco industry.
  3. Overview of the tobacco market.
    1. Market definition.
    2. The tobacco industry from a demand side perspective.
  4. Study of concentration.
    1. Global overview.
    2. The American case.
  5. Cost Structure of the industry.
  6. Dynamic process and structure of the industry.
    1. The entry and exit process.
    2. Possibility of collusion in the tobacco industry.
  7. Conclusion.
  8. References.

The origin of tobacco is quite old, and it became an industry when European discovered it. But the future of this particular industry is uncertain. Tobacco is not really an innocent product, since it has been proved to be addicting and to favour diseases such as cancer. Consequently, tobacco firms have been subject to many critics concerning their harmful products and tendency to hide information concerning danger of tobacco for the last 30 years. Tobacco is still a profitable industry, thanks its lack of atomicity, but legal risk is constantly growing. Tobacco use was common in most parts of native America. Some evidences reveal its consumption is at least dating from 900 A.D. It was widely distributed throughout the continent. Tobacco was smoked, sometimes with pipes. The first Europeans to meet Native American, sailors of Christopher Columbus, were astonished by this practice, and a little disgusted. But no sooner have they tried it than they like the feeling, and they introduce tobacco in Spanish ports.

[...] In some way, it can be said that for smokers, tobacco is a luxury that becomes a necessity. The goods in tobacco industry are homogenous to the degree that they fulfill the same general purpose. However the products are differentiated by their reputation, and their taste. The consumer's perception of the product is an important issue for tobacco manufacturers, and in consequence advertising is extensively used. But the last evolution in law made the frame of advertising more restrictive in western countries especially. [...]


[...] The famous four? of the American tobacco industry appear clearly. We note also that concentration is still growing between 1996 and 2001, as indicated by both Four largest index and HHI Cost Structure of the industry The tobacco industry is a very particular sector since its cost structure is by large dominated by taxes and fees. These account for 72% of all costs. Taxes on tobacco products are growing, because more and more countries became conscious of the negative externalities of the use of tobacco. [...]


[...] But even since 1946, cigarette firms have, for long periods, been able to price cigarettes above competitive levels, and to raise constantly prices at a rate higher than inflation Conclusion The history of tobacco production show how we passed from a traditional use to a large industry that lay on an international division of work and interactions. To gain a place on the market, the players had to build a specific identity to their brand, to limit the natural homogeneity of products that the industry offers. [...]

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