Week 8 paper Market Model Patterns of Change 1. Describe the industry and explain the general pattern of change of the particular market model Health insurance in theUnited Statesproviders represent competitive market because they are numerous, variety of choices, and no single entity has much power over prices.

Week 8 paper Market Model Patterns of Change

1. Describe the industry and explain the general pattern of change of the particular market model

Health insurance in theUnited Statesproviders represent competitive market because they are numerous, variety of choices, and no single entity has much power over prices. The health insurance can be considered as rapid growth industry. Recently, this industry is transforming in a rapid way and evolving into an oligopoly. Insurance markets in many states are eventually controlled and dominated by a few large firms.

There were more than five hundred health insurers involved mergers between 1998 and 2008 (Bakhtiari, 2010). Although there are hundreds of small insurance companies operating in the market, the industry Led by WellPoint, 12 health plans cover two-thirds of the enrollment in theU.S.commercial-insurance market (Bloomberg News, 2010). An analyst’s report cited in the article predicts there will be 100 insurers with around 200,000 members could be forced out of business. Smaller insurers are increasingly unable to invest in the infrastructure and technology to effectively manage care (Bakhtiari, 2010). However, mergers have been the main power rather than small insurers going out of business.

2. Hypothesize the basic short-run and long-run behaviors of the model in the industry you have chosen in a “market economy”

This paper uses Kinked-Demand theory of oligopoly; there is no single theory that explains oligopoly behavior. The kinked demand model assumes that if one firm raises the prices, other firms will not follow to increase. If the firm reduces its price, it is assumed that its competitors will follow suit and reduce their prices as well. The result is a demand curve for the firm that is kinked at the current equilibrium price (Low, 2000). Taking this as assumption, a single health insurer that tries to raise price will lose market share mainly just because other insurers are not following, it will suffer a loss in demand because the competitors’ prices remain low. In contract, if a single firm that cuts prices, all of its competitors will follow to reduce the price. As a result, a firm will have a kinked demand curve.

Firms may operate at a profit in the short-run if demand for the product is high relative to costs. The firm may force to go out of business if it can’t generate enough revenue to even cover the variable costs.

Hence the model predicts that prices in the long run should be fairly rigid in an oligopoly. This could indicate that insurance premiums will remain fairly stable in the health insurance industry. The kinked demand theory suggests there will be price in these markets and the firms will rely more on non-price competition to boost sales, revenue and profits. The result in market share is no gain and relative small increases in quantity demanded (Low, 2000).

3. Analyze at least three (3) possible areas for the industry that could lead to transaction costs, and explain each in detail

In the health insurance industry, transaction cost could arise from acquisition expenses, process outsourcing, and increased product complexity.

Acquisition is the expense of soliciting and placing new insurance business on a company’s books. It includes agent’s underwriting expenses, medical and credit, report fees, commissions, and marketing support services. The significant efforts are made by insurance companies to lower acquisition costs because of the competition.

Outsourcing of processes may become a necessity when firms gather up more and more customers due to mergers, the current workforce will no longer be able to handle jobs. Sometime, hiring more employees could be very costly for some firms because of increasing market salaries; outsourcing could be the better option. Firms will have to pay additional expenses to outsourcing firms that process application and provide customer service. This lead to transaction cost.

Transaction costs may also arise from increase product complexity due to firms grow, merge and consolidation. Products become more complex catering to more segments due to gathering more customer; firms increase product lines. Hence, customers will have to incur transaction costs in searching or inquiring for the best product, and in estimating the quality of the service.

4. Speculate about the behavior that could result from these transactions and propose at least two (2) strategies for dealing with them

It affects consumers’ behavior for reconsidering the health plan when transaction costs arise from product complexity. Any uncertainty arises from product uncertainty; it refers to the difficulties in determining the quality of purchased products (Thompson, 2004). Consumers are likely to inquire more information if purchased services will meet their expectations before they purchase. Consumers rely on the quality examination that insurance agents or references. This product uncertainty may increase transaction cost. This can be dealt with by reinforcing product quality through advertising about the products and services, meeting with potential customers, and providing training to employees to meet better expectation.

When transaction costs arise from enforcement and monitoring, behavioral results are uncertainty. Behavioral uncertainty refers to the inherent difficulties faced by buyers in accurately evaluating the contractual performance of insurance companies (Thompson, 2004). This increases transaction cost as consumers spend more time thinking about buying insurance because the claims may against them or excessive policy. This can be dealt with by ensuring that potential customers understand the nature of the contract.

5. Collect costs, revenue data, or other data from the industry you deem relevant. Explain how you would modify the data in order to make it relevant to decisions a manager must make

Base of the data from Austin & Hungerford, health insurance markets in many local areas are highly concentrated and the exercise of market power in concentrated markets generally leads to higher prices and reduced output. In the data, medical loss ratios among major insurers range from a low of 70.7% to almost 89%. Some major commercial insurers have had significant decreases in medical expense ratios in the past decade. For example, CIGNA HealthCare’s medical loss ratio, 86.3% in 2001, fell to 70.7% in 2008 (Austin & Hungerford, 2009). In general, medical loss ratios can change dramatically from one year to another. This explained by unexpectedly high medical costs or by aggressive pricing intended to increase market share.

The above data help managers understand industry characteristics better than an individual. It is relevant to managers by consolidating all of the medical loss ratio, and combining them in an industry average. The managers have a better feel for industry averages and trends.

6. Explain the major factors that affect the degree of competitiveness in your industry. Use the data to develop at least three (3) measures (e.g., productivity measures) to show how the industry is evolving

The first factor is the number of firms on the market. If there are large number of firms operate in industry, overall prices will be reduced. The second factor is government regulation which affects the degree of competitiveness of the health insurance industry. The third is government provides health insurance. This can change the entire game plan for health industry. Private firms may be unable to compete against government’s insurance plans. That will affect the overall competitiveness of the industry.

These measures to show how the industry is evolving include average prices of health insurance plans, potential buyers, and overall average medical costs. Average price of health insurance will show the industry’s evolution by examining patterns of profit growth in relation to health insurance costs. The number of health insurance buyers will help understand the growth patterns in customer base, and demand for health insurance plans. Medical costs will show the relationship between industry growths, inflation of costs, and increase in general medical care.

References

Austin, A., & Hungerford, T. (2009). The Market Structure of the Health Insurance.

Congressional Research Service.

Bakhtiari, E. (2010, June 30). Is Health Insurance Moving Toward Oligopoly? Retrieved

April 26, 2012, from HealthLeaders Media:

http://www.healthleadersmedia.com/page-1/HEP-253238/Is-Health-Insurance-

Moving-Toward-Oligopoly##

Bloomberg News. (2010, June 24). WellPoint exec sees health insurer ‘oligopoly’ coming.

Retrieved April 25, 2012, fromIndianapolisBusiness Journal:

http://www.ibj.com/wellpoint-exec-sees-health-insurer-oligopoly-coming-

/PARAMS/article/20745

Low, L. (2000). The Economics of Information Technology and the Media. World Scientific Pub

Co Inc.

Thompson, T. (2004). Understanding online shopping behaviour using a transaction cost

economics approach. Int. J. Internet Marketing and Advertising , 1 (1).

 

 

2)  Market Model Patterns of Change

The Coffee Industry 1

The Coffee Industry (Starbucks vs. Dunkin Donuts)

Abstract

There are little facts about the role of obedience when doing evil actions up until now (1961). Most theories suggest that only very disturbed people do horrible actions if they are ordered to do so. Our experiment tested people’s obedience to authority. The results showed that most obey all orders given by the authority-figure. The conclusion is that when it comes to people harming others, the situation a person’s in is more important than previously thought. In contrary to earlier belief, individual characteristics are less important.

Introduction

Current theories focus on personal characteristics to explain wrong-doing and how someone can intentionally harm others. In a survey, professionals such as doctors, psychologist and laymen thought that very few out of a population (1-3%) would harm others if ordered to do so.

In the recent war trial with Adolph Eichmann, he claims to “only have been following orders”. The author wanted to test whether this is true, or just a cheap explanation. Can people harm others because they obey the orders? Are good-hearted people able to do this?

The experiment will test whether a person can keep giving electric shocks to another person just because they are told to do so. The expectation is that very few will keep giving shocks, and that most persons will disobey the order.

Results

Of the 40 participants in the study, 26 delivered the maximum shocks. 14 persons did not obey the experimenter and stopped before reaching the highest levels. All 40 participants continued to give shocks up to 300 volts.

Discussion/Conclusion

Most of the participants became very agitated, stressed and angry at the experimenter. Many continued to follow orders all the time even though they were clearly uncomfortable. The study shows that people are able to harm others intentionally if ordered to do so. It shows that the situation is far more important than previously believed, and that personal characteristics are less important in such a situation.

The Economic Lesson

I suspect Starbucks is very good at thinking at the margin. They start with their basic tall cup of coffee for the frugal customer. Then though, extras are pricey. Order a red eye (a shot of espresso in the coffee), an extra flavor, or a Clover, and the price pops.

Next time you are in Starbucks, check how long you stood in line. They care. To save 14 seconds, for example, Starbucks designed a larger ice scoop which baristas could use for one dip instead of 2. Still though, in a “mystery shopper” survey of “limited service restaurant brands,” Starbucks was #6 in wait time, behind Dunkin’ Donuts (4 minutes 3 seconds) during 2008. Also concerned about line time, the NYC Columbus Circle Whole Foods uses a line manager, a single line system, and an unusually high number of check-out registers.

The science of line movement is called queue management. One researcher says that we respond favorably to a wait time of up to 3 minutes. Then, though it starts to feel longer than the actual time. Also, our response can depend on what we are waiting for. People might not want to wait at a gas station but will accept long lines for new iPhones and concert tickets.

The Economic Lesson

Firms that compete in a market with many consumers and many firms are in a monopolistically competitive market. The characteristics of monopolistic competition include many sellers with a similar product, sellers creating an individual, unique identity, and sellers having some control over price. With Starbucks and Dunkin Donuts in a monopolistically competitive market, they can use their coffee, their product assortment, their image, and their wait time to compete.

When Starbucks raised its prices during the beginning of 2010, it lowered the price of a tall regular to $1.70. But, if you wanted a splash of foam, a shot of espresso, or a touch of flavor, the addition could be expensive. For a triple grande soy vanilla latte, you would have paid a whopping $6.25.

Their goal, I suspect was to attract coffee lovers who would spend a little and those who would spend a lot. For a basic cup of coffee, the price would be low. However, those who were willing and able to pay more would also be satisfied. In that way, Starbucks could retain a dual clientele.

NPR’s Planet Money explains how Groupon takes advantage of the same idea. People willing to expend the time and energy looking for coupons pay less. But businesses still can take advantage of the group who, ignoring the coupons, are willing to pay more. Again, the business owner can benefit. She does not have to offer lower prices to everyone.

The Economic Lesson

Starbucks and Groupon are engaging in what economists call price discrimination. The perfect example is airlines. An airline knows, for example, that a business traveler might be willing and able to pay more than a vacationing student. Their task is figuring out how to charge the businessperson more. The answer? Give discounts to people who stay over a Saturday night. The price discrimination is not explicit and yet, business fliers are charged a higher price.

In economics textbooks, price discrimination is typically discussed in chapters on monopoly. A monopoly and a smaller firm with a unique good or service have pricing power that have enables them to target different customers with their prices and coupons. Movie theaters discriminate by charging senior citizens less.

But now it is about coffee. Increasingly affluent, the Chinese have begun to drink more coffee (in addition to using more oil, eating more meat and buying more handbags). When talking aboutChina, the International Coffee Organization says that coffee is an aspirational commodity. For a culture of tea drinkers, coffee represents “cosmopolitan sophistication.”

Still though, the typical Chinese person drinks lots of tea and (a tiny!) 5 cups of coffee a year. By contrast, inJapan, annual per capita coffee drinking is 300 cups. Recognizing that the Japanese also had been tea drinkers, coffee retailers like Starbucks, with 200 Chinese stores, and Nestle see huge potential inChina. And, the story is the same inIndiaandBrazil.

Meanwhile, on the supply side, coffee yield is down. Citing rains that damaged cherries in key growing areas,Indonesiapredicts 2011 production will decrease 30%. Colombian growers are talking about the massive impact of temperatures that average just 1 or 2 degrees higher. Requiring new planting techniques and bug control, yield has plummeted, price has soared, and Yuban is charging 25% more.

Also, espresso machine orders are up.

The Economic Lesson

Again, we have a classic demand and supply scenario. Demand shifts to the right as people in developing nations decide to conspicuously consume coffee. Supply, perhaps temporarily, shifts to the left as rain and heat diminish productivity. When demand is up and supply is down, price has to rise.

As economists, we know that when price rises, 2 things happen. On the demand side, eventually, people want less. On the supply side, attracted by high prices, producers grow more, new firms enter the market and price drops.

When Starbucks raised its prices during the beginning of 2010, it lowered the price of a tall regular to $1.70. But, if you wanted a splash of foam, a shot of espresso, or a touch of flavor, the addition could be expensive. For a triple grande soy vanilla latte, you would have paid a whopping $6.25.

Their goal, I suspect was to attract coffee lovers who would spend a little and those who would spend a lot. For a basic cup of coffee, the price would be low. However, those who were willing and able to pay more would also be satisfied. In that way, Starbucks could retain a dual clientele.

NPR’s Planet Money explains how Groupon takes advantage of the same idea. People willing to expend the time and energy looking for coupons pay less. But businesses still can take advantage of the group who, ignoring the coupons, are willing to pay more. Again, the business owner can benefit. She does not have to offer lower prices to everyone.

The Economic Lesson

Starbucks and Groupon are engaging in what economists call price discrimination. The perfect example is airlines. An airline knows, for example, that a business traveler might be willing and able to pay more than a vacationing student. Their task is figuring out how to charge the businessperson more. The answer? Give discounts to people who stay over a Saturday night. The price discrimination is not explicit and yet, business fliers are charged a higher price.

In economics textbooks, price discrimination is typically discussed in chapters on monopoly. A monopoly and a smaller firm with a unique good or service have pricing power that have enables them to target different customers with their prices and coupons. Movie theaters discriminate by charging senior citizens less.

Starbucks Corp. reported its biggest quarterly revenue gain since the recession began, but investors worried after the company issued a modest forecast for the year.

The Seattle-based coffee company reported on Thursday after the stock markets closed that fiscal first-quarter revenue grew 16 percent – the largest quarterly gain since 2007. It attracted new customers by adding stores inChinaandMorocco, upgrading locations in theU.S.and rolling out single-serve coffee and other new items at grocery stores.

“Starbucks is firing on all cylinders and taking full advantage of the many global opportunities that lie ahead,” CEO Howard Schultz said in a statement.

Profit rose 10 percent to $382.1 million, or 50 cents per share, for the quarter that ended Jan. 1. That’s up from $346.6 million, or 45 cents per share, in the same quarter last year. Revenue increased to $3.44 billion with growth from all its business lines.

Results beat the 49 cents per share on revenue of $3.29 billion that analysts expected, according to FactSet.

Starbucks said revenue from its stores open at least a year – an important measure because it strips away the impact of recently opened or closed stores – increased 9 percent as more customers visited its cafes and spent more each trip. It was the company’s most successful holiday season ever, with customers buying more peppermint mochas, gingerbread lattes and Starbucks gift cards.

Starbucks also benefited from the addition of 241 new stores during the quarter. It now operates 17,244 stores worldwide, with plans to open another 800 in the coming year.

Additionally, Starbucks delivered major gains in its consumer products business, which sells its new single-serve coffee products, Via instant coffee, Starbucks ice cream and other items for sale in grocery stores and other retailers. Revenue from this segment increased 72 percent and Starbucks expects the business to continue to grow.

The solid quarterly performance was followed by a full-year forecast that was slightly below Wall Street expectations as Starbucks acknowledged that it continues to struggle with higher costs for coffee beans, dairy products and other ingredients it needs.

Starbucks said these costs were $105 million higher for the quarter than this time last year, sending its operating margins down from 17 percent to 16.2 percent for the quarter. Starbucks said commodity costs will add up to $230 million in costs for the full fiscal year but it anticipates the pressure will lesson in the second-half of the year.

Starbucks nudged up the lower-end of its earnings guidance. It now expects to earn $1.78 to $1.82 per share for the full year, up from prior guidance of $1.75 to $1.82 for the year. But it falls just short of analyst expectations of $1.83 per share, according to FactSet.

Jack Russo, an analyst with Edward Jones, said the modest outlook and lower margins drove some investors away in after-hours trading. On the news, the company’s shares fell 54 cents to $47.80 after the markets closed.

Starbucks remains a strong growth company, Russo said, but the stock is already rich. It has hovered near record highs this week. Its shares have traded between $30.75 and $48.39 in the past 52 weeks.

Source

http://www.econlife.com/econoBlog/index.php?tag=Starbucks

http://www.huffingtonpost.com/2012/01/27/starbucks-profits_n_1236722.html

 

 

3)  Ray Betzell’s and Chiu Wai’s Perspectives on Shui Fabrics’ Roi in Terms of the Globe Project Value Dimensions

January 27th, 2012

Vida LoveGriffin

Dr. Grace Onodipe

ECO 550

Assignment 1: Market Models Patterns of Change.

The Tobacco Industry

Describe the industry.

Unit 1: History & Economics of Tobacco: History of Tobacco states that, “Tobacco has a long history in theAmericas. The Mayan Indians of Mexico carved drawing in stone showing tobacco use. These drawings date back to somewhere between 600 to 900 A.D. Tobacco was grown by American Indians before the Europeans

came fromEngland,Spain,France, andItalytoNorth America. Native American smoke

tobacco though a pipe for special religious and medical purposes. They did not smoke every

day. Tobacco was the first crop grown for money inNorth America. In 1612 the sellers of the

first American colony inJamestown,Virginiagrew tobacco as a cash crop. By the 1800s,

many people have begun use in small amounts of tobacco. Some chewed it. Others smoked it

occasionally and a pipe or they hand rolled cigarette or cigar. On the average, people smoked

about 40 cigarettes a year. The first commercial cigarettes were made in 1865 byWashington

Duke on his 300-acre farm inRaleigh,North Carolina. The American tobacco Company was

the largest and most powerful tobacco company until the early 1900s. In 1902 Phillip Morris

Company came out with its marble brand. They were selling cigarettes mainly to men.

Everything changed World War 1(1914-18) and World War II (1939-45). Soldiers overseas

were given free cigarettes every day. At home production increase the cigarettes were

marketed to women too. By 1944 cigarette production was up to 300 billion a year.

Servicemen achieved about 75% of all cigarettes produced. In 1964 the Surgeon General of

theU.S.(the chief Dr. for the country) wrote a report about the dangers of cigarette smoking.

He said that the nicotine and tar levels in cigarettes cause lung cancer. In 1965 the Congress

of theUSpassed the cigarette labeling and advertising act. It seems that every cigarette pack

must have a warning label on the side stating, ‘Cigarettes may be hazardous to your health.’

By the 1980s the tobacco companies had come out with new brands of cigarettes would lower

amounts of tar and nicotine and improved filters to keep their customers buying and to help

reduce their fears. In 1984 Congress passed another law called the Comprehensive Smoking

Education Act. Many cities across theU.S.do not allow smoking in public buildings and

restaurants. Since 1990, airplane flies in theUSthat are six hours or less. State taxes

on cigarettes have increased” (1-5).

Explain the general pattern of change of the particular market model.

Jane Lang Mcgrew’s paper titled, History of Tobacco Regulations explains, “Indicative of changing patterns of consumption, the taxes on cigarettes, as a percentage of the total federal tobacco revenue jumped from 13. 6% in 1910 to 51. 1% in 1920. By 1970 the percentage at 97. 2% for outdistance those revenues derived from other forms of the product (tobacco tax counsel, 1970: 5). Exercise taxes have provided profitable and easy to collect. The revenue schemes are simple all both the federal (26.US.C 5701 et seq) and state levels” (4).

According to NCSL, State Cigarette Excise Taxes: 2010 tells us that, the federal cigarette excise tax increase to $ 1.00 on April 1, 2009. According to the CDC, cigarette smoking was estimated to be responsible for ($96. billion in direct costs and$97 billion and loss productivity)” (2).

Taxation on cigarette costs has risen over the years to bring in phenomenal taxes, which were imposed on cigarette smokers to discourage them from smoking, and also to increase tax dollars on the people who smoke cigarettes and in turn the profits from this taxation has never to this date been accounted for.

Hypothesize the basic short run and long-run behavior of the model in the industry you have chosen in a “market economy.”

I believe that in the short run tobacco industries must identify products that are made in other countries using their name brand to enter the marketing and undercut their prices. Has been happening in urban cities throughout the world, because the cigarette prices are cheaper and the ingredients are more dangerous and the major tobacco companies have turned a blind eye to this behavior and it is causing them to go up on the prices through taxation and the demand for their products is going down.

But in the long run I believe if it is possible for tobacco companies to wean cigarettes off the market because of the health hazards that are associated with them. They could be in come up with stop smoking campaign and products that would increase their popularity and things like bootlegging cigarettes would stop because all ofAmericawith stops smoking and these negative health hazards with stop. Because more and more cities are passing laws that ban smoking in public places and in some cases apartment dwellings. This is why I believe that tobacco companies must join in the fight to save lives instead of making profits on the deaths that their products cause.

Analyze at least (3) possible areas for the industry that could lead to transaction costs and explain each in detail.

The author of the text Robert J Michaels tells us that, “In markets, for example a seller will not invest in specialized facility whose value is at risk if his relationship with the particular buyer ends. In market goods are interchangeable, and so are parties who transacts them” (54).

Since the tobacco industry is suffering from the market changing because it’s transaction cost are increasing, because of the higher taxes on their product the market has changed to include generic forms of cigarettes to enter the market, and consumers are paying less for the cheaper brands and therefore demand is going down while the supply has increased because cigarettes sit in the warehouse longer due to the lessening of the products demands in cigarette retail outlets. In other words the market has shrunk considerably in the present when the man was high in the past.

The author goes on to say, “A contract is a set of promises intended to create economic value and enforced by a court of some other agency, such as an arbitrator. Often a buyer and a seller can increase the economic value they create by engaging in unstandardized transactions” (54).

The tobacco industry has never really had a contract other than putting warnings on the packs of cigarettes that the sale stating the health risk, and that contract had been broken many years before it even came into existence, because many of the owners of the tobacco companies stated that, “cigarettes were not dangerous”. So you can see that when a contract which is intended to be between the buyer and the seller is endangering their health and there could not really be a contract.

Finally the author explains, “the determination in payment of prices is fundamental in transaction governed by markets or contracts. By contract hierarchies are commanded -based systems in which prices usually play a relatively small role. You cannot order a seller in a market to deliver goods without agree to perform price, unless both agreed to change the parties to a contract can trade only at price specified in it. A hierarchy that gives certain persons rights to give orders and others and obligation to follow them resolve the problem without going to the market and without the cost of writing the contract” (55).

In the case of the tobacco companies the Surgeon General who holds official in government deems cigarette smoking dangerous to a person’s health. This hierarchy supersedes any arguments among the makers of tobaccos and the buyers to stop using tobacco products in order to save their lives.

Speculate about the behavior that could result from these transactions and propose at least two strategies for dealing with them.

The first strategy for dealing with the behavior of the consumer is important because their lives are at stake from using a product that causes serious damage to themselves and other people who do not you the product. This needs to stop and tobacco companies need to develop ways to undo the damage that they have done by selling a product that clearly causes death. Taking cigarettes off the mark it would be beneficial to the health and safety of all people in the world or entitled to clean and in a healthier way of life.

Secondly if I have the power I would simply stop tobacco companies from making cigarettes that are dangerous because of the chemicals that they use to process the product. But with that being said I would also charge the companies to insist in ways to improve the health of future generations by insisting on a future without tobacco products in them. I strongly believe that if a person can make a product that destroys lives then they should be contracted to improve their behavior by helping to stop people from smoking by no longer making that product and producing products that we’ll promote life rather did take life away.

Collect cost, revenue data, or other data from the industry that you deem relevant. Explain how you would modify the data in order to make your revenant to decisions a manager must make.

Tobacconomics, is an Internet article that shares with us, “tobacco companies have a long history of misleading politicians and the public. As understanding develop of the adverse effects has owned life expectancy and well-being. Industry pro – tobacco arguments diversified. Three major pro – tobacco arguments developed by the industry and its lobbyist which are recycled again and again for each new policy intervention, can be some arise as follows:

Standing up for small businesses and defendant workers jobs.

Raise an alarm about, counterfeit and smuggled tobacco.

Denying the effectiveness of tobacco control measures” (1).

According to, All Business and Finance: The Economics, “the biggest Western firms are diving in, Phillip Morris International (PMI) brought Indonesia’s Sampoema for $5 billion in 2005, and now controls 30% of the market; the firm says it is ‘optimistic’ about is prospects in the region. British American Tobacco brought an 85% stake in Bentoel for nearly $500m in 2009. Both companies saw sales volumes increased inIndonesialast year – mainly for kretek clove cigarettes, which account for over 90% of theIndonesiamarket. A data -analysis firm in Jakarta says, on the condition of anonymity for itself and its clients, data tobacco giant hired it to identify and approach Indonesian ‘influencers’ on Face book, twitter and other social media, so they could be offered incentives to plug its brand.

The article goes on to say, “thePhilippinesalso combine growth with light regulations. Last year PMI already a big invest in the country, formed a joint venture with Fortune Tobacco, which makes cigarettes for low -to middle income Filipinos. The two companies now have 90% of a $1.7 billion market, in what local news media turns a ‘kiss of death’ to Filipinos. East Asia fewer than one in 10 women smoke, compare what about 40 -70% of men. This is a much bigger gap than in Africa andLatin America. A 2009 study across seven countries, by the South East Asian tobacco control alliance, found that smoking rates words rising significantly among under -16 girls in the Philippines, Malaysia, Indonesia and Vietnam”(1-2).

In this chart below you can see that all these affected countries have far more men who smoke than women this is alarming mainly because men who should be the breadwinners in the family are risking higher death rates than women who in turn supports the family due to the high death rates of man due to cancer from smoking this chart was designed in 2008.

[pic]

Explain the major factors that affect the degree of current patent business in your industry. Use the data to develop at least (3) measures (e.g, productivity measures) to show how the industry is evolving.

How Tobacco Companies Fight Tobacco Control, written by Thomas Zeltner, M.D., David A. Kessler, M.D., Anke Martiny, PhD, and Fazel Randera, M.D. states that, “the tobacco companies are among the world’s most sophisticated and successful marketers. They spend billions of dollars to promote their deadly products, prevent governments from protecting their people and mislead tobacco users and potential tobacco use regardless of the impact on public health. Tobacco use kills about 5 million people in the world each year and is set to keel 1 billion people in this century.

The tools exist to reduce tobacco use and the number of people who die from tobacco use. Increase tobacco taxes, smoke -free workplace laws, mass media campaigns, tobacco advertising bans, and large, graphic warning labels have been proven to work when implemented and are endorsed by the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC).

The tobacco companies recognize the impact of these approaches and actively fight against these efforts because they curve their sales. Time atomically and they have used their resources to kill these policies, water them down when they cannot stop them altogether, and undermine their enforcement when they are passed. The efforts take many forms.

That’s why government should curtail tobacco companies’ involvement in public health policy. Article 5.3 of the FCTC obligates parties to ‘protect these [public health] policies from commercial and other vested interests of the tobacco industry”(1).

They go on to say, “How the Tobacco Industry Influence Policy and Thwarts Effective Regulation:

Using trade agreements to attack public health measures.

Distort the science of the health effects of tobacco use, and secondhand smoke.

Challenging ad bans, restrictions on secondhand smoke and tax increases.

Promoting illicit tobacco trade (smuggling).

Suing or threatening to sue governments.

Demanding a seat at the table in order to prevent consensus.

Drafting and then exploiting tobacco -friendly loophole ridden legislation.

Promoting and funding ineffective ‘youth smoking prevention’programs.

Interfere with the FCTC ratification.

Challenging Governments timelines for implementing laws.

Influencing legislators with combinations and attempted to Brian legislators.

Gaining favors by bankrolling governments health incentives on other issues in return for in action on tobacco.

Providing funds directly to government regulatory bodies.

Using PR efforts claiming to be responsible corporations to mask their harmful behavior.

Promoting ineffective voluntary regulation as a substitute for enforceable laws”(1-2).

Unfortunately the industry is still evolving when it should clearly be eliminated. The only answer is for the two above questions would be the deregulation of this industry to ensure the future health, growth, and development of generations to come. There should be no productivity in the direction of encouraging major tobacco distributors to continue on this clearly destructive course.

 

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