British American Tobacco in South Korea

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Case Details:

Case Code : BSTR254
Case Length : 22 Pages
Period : 1998-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : British American Tobacco
Industry : Tobacco
Countries : South Korea

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

BAT was one of the first foreign tobacco companies to enter the market by establishing a regional headquarters in Seoul in 1998.

The company was able to increase its market share in South Korea from just 1% in 1999, by localizing its brands and setting up a factory in Sacheon⁵, to produce cigarettes locally.

According to John Taylor (Taylor), Former President of BAT Korea, "You have to become Korean to be successful here. We have never considered Korea as our second home but our only home while operating here."⁶

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Background Note

The origin of BAT dates back to the year 1902. The American Tobacco Company (ATC) of the US and the Imperial Tobacco Company (ITC) based in the UK, which had been indulging in an intense trade war, decided that it would be in their mutual interests to set up a joint venture.

Both companies agreed not to trade in each other's territories (US and the UK) and the tobacco businesses of both in countries other than the US and the UK were transferred to BAT.

Thus, from its inception, BAT operated in several countries, which included Canada, Japan, Germany, Australia, South Africa, and China. James Buck Duke was the first Chairman of the company. He followed the strategy of developing new products, pricing them as low as possible, hiring the best people available, and merchandising the products. During the first decade of its operations, BAT expanded to several other countries including West Indies, India, Egypt, Sri Lanka (then Ceylon), Holland, Belgium, Sweden, Norway, Indonesia, Malaysia (then Malaya), and East Africa. In the year 1911, ATC divested itself of its stake in BAT and BAT was listed on the London stock exchange...

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5] Sacheon is located in South Gyeongsang province.

6] Park Hyong-ki, "Tesco, BAT Represent Success Story in Korea,"The Korea Times, May 25, 2006.