Research on Tobacco Sector-

The Indian Tobacco Sector is a relatively untouched sector where only 4-5 prominent names are there
like ITC, VST, Godfrey Phillips etc. Out of them only ITC is large cap rest all comes under small and
middle cap.

Porter Five Forces-

 Threat of new entrants: Weak

1. New product differentiation is very tough- already cigarettes at various price point, flavor is available.
2. Access to proper distribution channel is tough for new firms as behemoth like ITC is there.
3. High capital requirement
4. Small regional launch will not be lucrative
5. Govt. interference, regulations, laws and taxes are too much

 Threat of substitutes: Weak

1. Herbal cigarette (nirdosh) and nicotine patches were launched but not successful
2. E cigarette was banned by government
3. Substitute will also require govt approval

 Bargaining power of buyers: Weak

1. Addicted customers- even after knowing about harm they can’t leave smoking
2. Smoking has high symbolic and emotional values attached to it
3. Low switching cost but people are used to one particular brand
4. Most people cannot differentiate between taste of different brand hence no question of switching
5. Usually low priced and addicted goods have low bargaining power in buyers

 Bargaining power of suppliers: Weak

1. Inputs like paper, filter required but in small amount
2. Suppliers of tobacco and other inputs are small in size and regional
3. Unorganized supplier
4. No access of info about customer to these suppliers.

 Competitive Rivalry in the industry: Moderate

1. Major player ITC has around 65% share in market and rest is taken by Godfrey philips, vst etc.
2. Only 4-5 known companies in India with diversified brand names.
3. Major competition can come from foreign brand as it is a status symbol