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EMBED MSGraph.Chart.8 \s

Moist Snuff Market Share

76%

6%

13%

5%0%

UST

Swedish

Conwood

Life Cycle Stage: The smokeless tobacco segment has been present throughout history and is in its maturity stage with the consumption trend shifting from loose leaf tobacco to moist snuff; nonetheless, there are still a large number of consumers who use both products. This industry has undergone much consolidation over the years and five major players survived the shakeout within the industry. This industry is categorized by hyper-competition and as result futile price-cutting occurs. By looking at the financials of UST and Swedish Match we can see that growth has leveled off. The companies are maximizing there leverage effect and acquiring new companies to expand their reach and market share. Also by looking at both companies financials we can see they have established financial policies which is indicative of companies in a mature industry.

Porter’s Five Forces Model

Threat of New Entrants: The threat of new entrants into the smokeless tobacco market is very low. New entrants face high barriers to entry including fierce competition from incumbents, high fixed costs such as manufacturing equipment and warehousing, high capital requirements for advertising and marketing, and extreme brand loyalty. Entrants lack the access to raw materials, desirable locations, and technology. Within the industry there is a declining consumption trend in all areas of smokeless tobacco except moist snuff, leaving little room for new entrants. The distribution channels such as smoke shops, convenience stores, and super markets are extremely scarce and crowded. Due to government anti-tobacco measures, increase in tobacco taxes, health warnings, and advertising prohibitions make it hard for new entrants to survive. Smokeless tobacco companies have long-term relationships with their buyers and suppliers. To become a significant player in the industry one must acquire or merge with an existing firm to have the necessary knowledge and capital to survive.

Threat of Substitutes is High: There has been an increase in substitutes hurting the profits of the smokeless tobacco companies. Regulation has made smokeless tobacco products and there substitutes very similar in price creating low switching costs for the consumer. Customers have a wide variety of products to use to get their nicotine fix. Nicotine gums and patches, nicotine replacement therapy products such as Nicorette’s In-halator product or Novartis’s Consumer Health’s Nicotinell range serve as substitutes. Also, cigars and cigarettes are the most common form of nicotine substitutes.

Bargaining Power of Buyers: The bargaining power of buyers within the industry is low. The wholesalers are the buyers of the smokeless tobacco products and have no chance of backward integration due to the high fixed costs and capital requirements of the industry. The firms within the industry face minimal switching costs if they were forced to change wholesalers.

Bargaining Power of Suppliers: The bargaining power of suppliers is low. The tobacco farmers and suppliers of other raw materials have no chance of integrating forward into the industry. Tobacco as well as many of the other raw materials are commodity products and can be obtained from various suppliers. The industry has created a monopsony where the tobacco companies can set the prices in which other companies then follow.

Rivalry: Rivalry within the industry is intense. Due to the slow paced growth of the industry, firms are constantly involved in price-cutting and fighting for market share. Due to constant innovation and differentiation firms must continue to develop new products to meet customer demand. UST is the monopoly power nationally in moist snuff creating high strategic stakes within the industry because Swedish Match, Conwood, Swisher, and National all want a piece of the only growing segment. There are also high strategic stakes globally because Swedish Match has a monopoly in the international market and the incumbent firms would like a piece of this market. Finally, the barriers for exit are high due to the specialized nature of knowledge and equipment.

INDUSTRY ATTRACTIVENESS

The smokeless tobacco industry is a consolidated mature industry. It has a highly developed market with fierce rivalry. Both buyers and suppliers have little power due to the high capital costs and due to the vast array of substitutes firms must spend tremendous amounts of money in advertising to keep and attract customers.

New Entrants – The attractiveness for new entrants into this market is extremely low. Due to the tight government regulation, brand loyalty, high capital requirements, and high fixed costs it is very unattractive for new firms to try and enter this market.

Incumbents – The attractiveness for those incumbents within the industry is high. Even though moist snuff is the only market that is growing; the other segments within the industry have great opportunity for sales allowing those within the industry to take advantage. Due to the large amount of smokers nationally and globally who are looking for a socially acceptable substitute; smokeless tobacco can provide this option. Also with the increased health risks of smoking and the large population of smokers, the switch to a smokeless tobacco product rather than a cigarette can increase the total profits throughout the industry. Finally, the incumbents already have brand loyalty and market share enabling them to steal customers from their competition through their brand and innovative products.

Swedish Match – The industry is very attractive to Swedish Match considering it already has the largest market share in the value brand segment of the smokeless tobacco industry. In 2001 Swedish Match’s sales grew 19% in volume through its popular Timber Wolf brand. Swedish Match also has the largest market share in the chewing tobacco or loose-leaf market. Swedish Match has strong brand equity through its product line and as a result has many loyal customers. Through its various acquisitions Swedish Match has gained valuable distribution networks, manufacturing capabilities, and a global presence giving it an edge over the competition. Swedish Match continues to grow through innovation and will continue to be a major player in the industry.

Strategic Group Analysis

Strategic Group for Smokeless Tobacco

Geographic

Global

Multi-

National

National

One Brand Moderate Brands Many Brands

Product Differentiation

Swedish Match competes within the smokeless tobacco industry. There is rivalry among all of the firms within the industry. The strategic group analysis shows that Swedish Match has a monopoly globally, moderate national position, with a moderate number of brands. UST has monopoly power within the U.S. market, but lacks a global presence, but has a large amount of brands. Conwood has moderate position nationally little global presence and moderate amount of brands. Swisher has a small share of the national market with a moderate amount of brands and a greater global presence then Conwood. Finally, National has a few brands with little global and national presence.

Key Success Factors (1 (lowest) through 3 (highest))

Company	Brand	Product Differentiation/Innovation	Market Share (U.S)	Globalization
UST	3	3	3	1
Swedish Match	2	3	1	3

Within the smokeless tobacco industry, consumers are very brand loyal which is a reason why both Swedish Match and UST are so successful within their market. Having brands such as Timber Wolf, Kodiak, Copenhagen, and Skoal between the two they have three of the leading brands in the industry. Both firms are constantly involved in product differentiation through innovation to sustain and attract new customers. Within such a tight industry the only way to gain market share is to differentiate the product from those of the competitor. U.S. market share is extremely important for the industry because the U.S. boasts the greatest use of smokeless tobacco products. UST is the market leader with a 40.5% share and Swedish Match has only 20.5%market share. However, Swedish Match has all the necessary key success factors to remain competitive and grow within the industry. This is shown through their dominance within the global arena.

Competitor Analysis Model

	UST	Swedish Match
Goals	· Further growth of smokeless tobacco consumers. Reaching out to the 40 to 50 million adult cigarette smokers; who are looking for alternative forms of nicotine satisfaction. · The ultimate objective is to build awareness of the smokeless tobacco category, increase social acceptability of its products, and improve the ease of use for adult consumers entering the category. · Increase sales internationally · Increase sales nationally in both the value brand and chewing tobacco segments.	· To grow its niche tobacco and smoking accessories markets, particularly in Europe and North America.
Assumptions	· The players in the tobacco industry will remain the same. · Litigation will stay at the same rate. · There will continue to be only one growing segment in the tobacco industry (snuff).	· Overturning the ban on smokeless tobacco in the European Union. · Cigarette consumption will decrease based on increasing concern about the effects of cigarette smoking on health.
Strategies	· To move into foreign markets · Continue to hold the monopoly power in the U.S.	· To expand operations and marketing in North America/United States. · Continue to hold the monopoly power globally.
Capabilities	· Providing customers with a wide variety of products (Copenhagen, Skoal, Rooster, Red Seal) · Manufacturing of smokeless tobacco. · Marketing and Sales of their brand name.	· Providing customers with a wide arrange of tobacco products (Chewing Tobacco, Snuff, Pipes, lighters and matches). · Strong markets in United States, Germany, France, South Africa, and the Netherlands. · Excellent distribution networks and manufacturing capabilities as a result of acquisitions.
Vulnerability	· Dependent on national market. · Greatest amount of sales and dependency on smokeless segment. · Increasing legal restriction on marketing of tobacco products. This makes it difficult to establish new brands, thereby increasing the value of the existing brands.45 · Lack of globalization.	· Dependent on International buyers and suppliers. · Increasing legal restriction on marketing of tobacco products. This makes it difficult to establish new brands, thereby increasing the value of the existing brands.

Response:

Swedish Match leads the global area of smokeless tobacco and UST leads nationally. Swedish Match is going to have to put forth a strong effort to try and gain market share from this national monopoly power. UST offers a variety of smokeless tobacco products and has the two leading brands with over a billion dollars in sales each. UST may become vulnerable nationally if it tries to expand globally because it could give Swedish Match the opportunity to use its global knowledge to increase its share in America. An increase in government regulation over the years can cause significant harm to UST due to their large dependency on smokeless tobacco. Conversely, Swedish Match provides customers with a wide array of niche tobacco products ranging from chewing tobacco, snuff, pipes, lighters and matches and is better diversified if such a problem may come to exist. Swedish Match’s response is to continue to market its snuff products as substitutes for cigarettes, while continuing to innovate and design more socially acceptable products.

IV. Internal Assessment

Nature of the Firm

Culture

Swedish Match started out as a simple match manufacturing company and throughout the 1900’s has come to be a major competitor in the many segments within the tobacco industry through multiple acquisitions. Efforts have been underway to strengthen Swedish Match’s common, global, corporate culture, to develop synergies and integrate the many company acquisitions made since 1999.

Swedish Match’s corporate culture is centered on its six main core values: communication, teamwork, trust, innovation, recognition, and growth. Through programs such as the International Managers Program or the International trainee program; Swedish Match looks to strengthen its leadership skills, intercultural management, and teamwork. Swedish Match emphasizes teamwork so that all levels within the organization are able to facilitate one another. Swedish Match emphasizes environmental protection putting forward policies that are in line with government regulation and ensuring environment sustainability. As Swedish Match moves ahead in its goals there primary objective is to maximize share-holder value while keeping in mind the interests of all its stakeholders.

Leadership

Swedish Match is headed by Lennart Sunden, who joined Swedish Match in 1999 as the President and CEO and sits on the Board of Directors. Mr. Sunden holds a MBA in Engineering and spent twenty one years at AB Electrolux where he held many management positions ranging from industrial to global operations. When Mr. Sunden first came to the firm he brought with him vast marketing knowledge with the idea of repositioning Swedish Match to focus on a smokeless strategy to capitalize on the health risks associated with smoking and the huge profits that could be captured in the smokeless industry.

Sven Hindrikes is the Executive Vice President and Chief Financial Officer who joined the Swedish Match team in 1998. He holds a MBA in economics and business administration from the Stockholm School of Economics. Mr. Hindrikes has had much experience working in a global atmosphere working in Mexico as a CFO and at ABB Canada where he was president of power distribution and executive vice president.

Massimo Rossi is the Senior Executive Advisor of Swedish Match and has been a member of the Group management since 1992. Mr. Rossi has extensive experience in international business being with Swedish Match for over 24 years. He has been involved with the more than the 60 acquisitions and divestments and has implemented strategic sales of 25 match companies in 25 countries in only two years.

Brent Magnusson sits as Chairman of the Board since 1993.

Swedish Match has five different divisions which include their North American Division, Continental Europe, Northern Europe, Overseas Division, and Match Division all headed by Presidents. Within the Swedish Match organization employee representatives sit on the board of directors and round off the management team. These representatives make sure that the interests of all employees are heard within the organizational chain.

Swedish Match’s management team and Board of Directors are committed to enhancing shareholders value. To further increase senior executives’ involvement in, and ownership of, the Company, the Board of Directors decided in 1999 to introduce an ongoing options program.

Through the global operations of Swedish Match teamwork is extremely necessary and emphasized greatly within the organization. As shown through their management structure and culture, Swedish Match makes sure each individual has a say.

Organizational Structure:

Organizational Structure Analysis

In the years preceding 1999, before Swedish Match divested its cigarette company and began the host of acquisitions from 1999-2001 they had a matrix organizational structure. As a result of the horizontal integration that occurred in 1999-2001, Swedish Match went from this matrix organizational form to a cooperative multidivisional structure with a transnational strategy. As a result of the firm’s corporate culture they emphasize cooperative sharing as emphasized in their core value of teamwork. Through this structure Swedish Match has brought about interdivisional cooperation, with direct profit responsibility, a strengthening market focus, and has created direct links between group management and its operational units. As a result, Swedish Match has successfully achieved economies of scope where they have transferred their capabilities in manufacturing and marketing across their various geographic divisions. Swedish Match can manufacture snuff, chewing tobacco, and cigars at the same plant in numerous geographic areas. They also have the capability of using their various distribution channels to distribute their multiple product lines across many channels. Both of these activities have created a core competence for the firm.

The corporate functions of the firm are centralized at their corporate office and the company is divided into four geographic divisions; Northern Europe, Continental Europe, North America, and Overseas as well as a Match Division. This enables the firm to have centralized strategic planning, but also allows for each unit to make decisions based on local responsiveness. Each geographical division markets and manufactures its own products to relate to the individual and cultural needs within the region.

Value-Chain Analysis

Margin
Firm Infrastructure	S1Infra,S2Infra,	S3 Infra,S4 Infra	S5Infra,S6Infra,	S7Infra
Human Resources	S17HR	S15HR,S16HR
Technology	S11Tech	S11Tech,S12Tech	S13Tech
Procurement	S8Pro		S14Tech	S9Pro,S10Pro
	Inventory and warehousing of tobacco. Raw material selection. W5	Production of Snuff (Snus) and chewing tobacco. Packaging, processing, and grinding. Quality standards	Distribution channels acquired:Leonard Dingier, Maga spa, Brasant in Sweden, South Africa, Italy, Asia, and U.S. Warehousing	Marketing of (Other Tobacco Products) Sell to various outlets. W2 W3 W4	W1
	Inbound Logistics	Operations	Outbound Logistics	Marketing & Sales	Service
Margin

Value Chain Analysis

S1Infra- Results-oriented culture.

S2Infra- Legal team to fight regulation and litigation on snuff.

S3Infra- Core values in firm.

S4Infra- Continuous auditing committee to oversee financials.

S5Infra- Employee Representatives on the Board of Directors ensure that employee interests are aligned with management and shareholders interest.

S6Infra-Constant focus on structural measures through cost efficiency

S7Infra-Experienced and Knowledgeable upper management.

S8Pro- Purchasing tobacco leaves from suppliers in multiple countries.

S9Pro-TEMO carries out comprehensive consumer surveys on behalf of Swedish Match each year .

S10Pro- In late 2000, hired marketing agency DraftWorldwide to overhaul its web marketing strategy with its Swan brand. The aim of the site will be to build the brand’s reputation among youth .

S11Tech- Gothiatek technologies standard for Swedish Snuff during manufacturing and procurement.

S12Tech-Manufacturing (ISO 14001) – Satellite plant

S13Tech- Use of the Internet as an information channel.

S14Tech- Distribution system reaches 140 countries.

S15HR- Trainee Program for all employees.

S16HR- International Managers Program keeps operations consistent.

S17HR- Intellectual Capital for innovating products and developmental programs.

W1 –Lack of service provided.

W2- Decline in pipe tobacco sales.

W3- Decline in lighter segment.

W4- only marketing in Sweden point of sale

W5- Poor supplier relations.

Core competence- Swedish Match’s core competence lies in their quality and innovative product designs and worldwide distribution network. They use their distribution channels to create brand awareness and supply their products throughout the world. There careful material selection and Gothiatek standard helps maintain a differentiated product that is meaningful to the consumer.

Competitive Advantage: Swedish Match’s competitive advantage is their brand equity. Through innovation and quality products Swedish Match creates a strong brand name which is increased through the ease of distribution throughout the world. This competitive advantage allows for customer loyalty and creates above average returns.

Financials

	UST	Swedish Match
	1998	1999	2000	2001	1998	1999	2000	2001
Sales ($M)	1,423	1,484	1,548	1,670	1,068	1,227	1,503	1,776
Cost of Goods Sold ($M)	225.43	239.35	255.2	269.11	509.406	647.51	842.15	965.01
Net Income ($M)	455.28	469	442	492	95	607	150	160
Sales Growth (%)	N/A	4.29	4.31	7.88	N/A	14.96	22.43	18.23
Change in COGS (%)	N/A	6.17	6.62	5.45	N/A	27.11	30.06	14.59
NI Growth (%)	N/A	3.01	-5.76	11.31	N/A	541.33	-75.24	6.50
Margins	1998	1999	2000	2001	1998	1999	2000	2001
Gross Profit Margin	N/A	81.5	81.33	81.19		46.07	45.2	44.33
Operating Profit Margin	N/A	53.58	52.42	51.44		19.11	18.34	16.91
Balance Sheet Data	1998	1999	2000	2001	1998	1999	2000	2001
Short Term Debt ($M)	0	70.97	0	3.3	335.2	121.944	138.23	122.9
Long Term Debt ($M)	100	411	869.18	862.58	273.33	663.53	604.25	660.80
Total Debt ($M)	100	481.97	869.18	865.88	608.53	785.48	742.48	783.70
Ratios	1998	1999	2000	2001	1998	1999	2000	2001
Current Ratio	N/A	2.08	2.59	3.11	N/A	1.43	1.67	1.85
Quick Ratio	N/A	0.48	0.63	0.86	N/A	1	1.16	1.23
FAT Ratio	N/A	4.1008	4.3170	4.5188	N/A	5.0482	4.4771	4.5909
TIE	N/A	55.2329	15.9187	12.8910	N/A	17.4308	5.0047	5.5205
ROA	N/A	56.5800	54.3200	48.7400	N/A	21.7200	20.3100	18.4300
ROE	N/A	2.3357	1.6336	0.8467	N/A	0.7838	0.2488	0.2991
ROI	N/A	27.45	31.18	27.45	N/A	87.09	83.16	73.55
Debt/Equity	N/A	2.4002	3.2124	1.4902	N/A	1.0150	1.2296	1.4654
Inventory Turnover	N/A	.75	.70	.65		2.46	2.50	2.40
Data For Ratios
Property Plant and Equipment ($M)	338.695	361.882	358.586	369.568		243.108	335.61	386.94
EBIT ($M)		865.5	765.85	865.5		733.49	278.41	292.75
Interest Expense		15.67	48.11	67.14		42.08	55.63	53.03
Total Equity (In Millions)		200.8	270.57	581.06		773.88	603.86	534.81

Although both firms have been growing in term of sales, Swedish Match has experienced a more rapid growth in which they surpassed UST in sales in 2001. Over the past 3 years, UST has had a significantly higher return on their assets in comparison to Swedish Match. This is due in large part to the firm maximizing their operating leverage, when they increased their long-term debt in 2000 to $869.18 million.

Profit Margins and Operating Margins have remained steady over the 3-year period for both UST and Swedish Match and show how profitable the company’s are through there operations. UST has both a greater profit and operating margin through 1999-2001. Looking at the value chain one can see Swedish Match has efficient operations in their production which in turn helps profits.

Both Swedish Match and UST are in comfortable positions regarding their leverage. Both companies have around 30% debt to total assets and are more than capable of paying there interest payments as shown by the Time Interest Earned. Swedish Match has a much lower TIE making them unable to pay their annual interest payments if something were to drastically go wrong in the future. Looking at the ROI for both UST and Swedish Match we can see that they have made good returns on invested capital and the return on the owner’s capital is magnified. Looking at the debt to equity, Swedish Match has a debt to equity greater than 1 meaning it has more debt to equity, but should still be able to borrow additional funds.

By examining the quick ratio we can see that UST has more of its money tied up in its inventory meaning they could not pay off its short term obligations without liquidating its inventory putting Swedish Match in a better liquidity position.

Swedish Match turns over its inventory about 2.5 times per year while UST does not even turn its inventory around once a year. This shows that Swedish Match may have a fresher product, which would serve as another capability. If we were to look at the amount of time it takes to acquire accounts receivable; UST averages about 18 days and Swedish Match takes about 70-75 days. This could hurt Swedish Match because it prevents them from investing in productive assets of their firm

In 1999, Swedish Match saw a significant increase in their net income when they divested their cigarette operations. From this divestiture, the company reported a 541% increase in their net income. After Swedish Match finished this sale, the company began to focus more on their core products and was able to increase sales over the next 2 years in comparison to 1999.

IV. STRATEGIC CHOICE

SWOT ANALYSIS

Strengths Results-oriented culture. Legal team to fight regulation and litigation on snuff. Core values in corporate. Continuous auditing committee to oversee financials. Employee Representatives on the Board of Directors ensure that employee interests are aligned with management and shareholders interest. Experienced and Knowledgeable upper management. Purchasing tobacco leaves from suppliers in multiple countries. Gothiatek technologies standard for Swedish Snuff (snus). Use of the Internet as an information channel. Distribution system reaches 140 countries. Trainee Program for all employees. International Managers Program keeps operations consistent. Intellectual Capital for innovating products and developmental programs. TEMO carries out comprehensive consumer surveys on behalf of Swedish Match each year .

Opportunities The sale of moist snuff is increasing at about 3% annually. $1.8 billion market Tobacco demand is inelastic 46 million American smoke, 1 billion worldwide 5 million snuff users have spent some time in college A majority of young adults use smokeless tobacco products Firms have developed alternative means to advertising FTC says smokeless tobacco is better alternative than smoking People are interested in a socially acceptable alternative to smoking Innovation has made smokeless tobacco more acceptable. (snuff pouches, no-spit) Most expansion outside the U.S.

Weaknesses Lack of customer service. Lack of committed supplier relations. Declining lighter segment. Lower volumes in pipe tobacco. Only marketing in Sweden is point of sales.

Threats Cigarettes and smokeless tobacco are similar in price There is move towards customers being price sensitive The amount of young people using the product has caused increase in litigation and taxes. Smokeless Tobacco Health Education Act Advertising ban on certain media Stiff restrictions on snuff in various countries. Snuff ban in European Union Spitting is not socially acceptable Move towards a healthier lifestyle Smokeless tobacco is little known outside the U.S. and Sweden

With an experienced and knowledgeable upper management team and result oriented culture, Swedish Match can take advantage of the $1.8 billion smokeless market and capitalize on the huge potential of switching smokers to smokeless tobacco products. An increase in taxes may cause problems within this area because cigarette and smokeless tobacco products are similar in price. Through Swedish Match’s innovative designs and Gothiatek standards they can improve the social acceptance of smokeless tobacco making it a better substitute for cigarettes. As a result of increasing litigation, taxes, and ban on certain advertising media Swedish Match must use their legal team effectively and find conventional ways to promote their products and brands. Due to the lower volumes in pipe tobacco and declining lighter segment, Swedish Match may turn their focus on the snuff market which is growing at 3% nationally.

General Strategic Orientation

Weakness

Turnaround Defensive

(Over come weakness) (Redirect involvement)

Opportunity Threat

Aggressive Diversification

(Growth) (Opportunities in other markets)

Strength

Since Swedish Match possesses many strengths as a result of its many acquisitions. They should focus on aggressive growth by using its valuable distribution networks and manufacturing expertise to get an edge on the competition. Swedish Match has taken advantage of the many opportunities in other markets and can now focus on growth especially within the United States on their moist snuff and chewing tobacco brands.

Grand Strategy Clusters

Weakening Competitive Position

Turnaround

Concentrated Growth Retrenchment

Vertical Integration Merge with competitor

Horizontal Integration Liquidation

Divestment

Rapid Growth Slow Growth

(consumer satisfied reinforce (Redirect cash flow towards operations)

and hold)

Concentrated Growth Related Diversification

Vertical Integration Strategic Alliances

Concentrated growth

Vertical integration

Improving Competitive Position

Swedish Match should redirect its cash flows to focus on the moist snuff market within the U.S. Since the industry is in slow growth it can capitalize on this market segment and rival UST. The customer is never satisfied within the industry nor can a firm stand still because the result will be loss of customer and market share. As a result, Swedish Match needs to continue building their brand within the U.S. market and globally through concentrated growth. Horizontal Integration is very unlikely to occur within the industry because Swedish Match’s proposed merger with National Tobacco Company, LP was not allowed due to the impairment of competition. As Swedish Match has done in the past related diversification can be an option. Moving into the nicotine replacement therapy market can show possibilities. As an example, in 2001, Swedish Match made an alliance with Burkitt DDB to help design and produce a new nicotine chewing gum. Swedish Match’s emphasis on strategic alliances will prove to be beneficial so that the company can move in many directions strengthening its position globally and within the U.S. Finally, unrelated diversification goes against the firm’s strategy and positioning as a leader in the smokeless tobacco industry and the other tobacco products industry.

Grand Strategy Selection Matrix

(Investment)

Weakness

Turnaround Strategic Alliance

Retrenchment Merge with competition

Divestiture Unrelated Diversification

Liquidation

Internal External

Development (commitment to current (expand base of operations) Development

business solidify position)

Vertical Integration

Joint Venture

Concentrated Growth Related Diversification

Innovation Horizontal Integration

Strategic Alliance

Strength

Swedish Match needs to focus internally on its strengths so that they continue to grow and develop. After a host of acquisitions, which Swedish Match just went through, they must coordinate all their functions to facilitate their brand building both globally and in the U.S. Through innovation they can continue to differentiate their products and provide for customers needs. As a result of the innovations Swedish Match can cut into UST market share and maintain its global position.

BCG Matrix

Problem Child Lighters	Star Chewing tobacco, cigars
Dog	Cow Snuff, matches,

Recommendations

Corporate Level Strategy - Swedish Match must continue to expand its products into emerging markets as they have done in the past. Growth opportunities exist in Asia and Latin America. The early expansion into these new markets has allowed them to capture market share early on in the market’s growth and can only persist. The firm must continue to focus on the American market because it provides the greatest opportunity in increasing profits and is the largest user of smokeless tobacco products in the world. The other tobacco products market and the smokeless tobacco industry must remain Swedish Match’s main focus. It is through this positioning that they have put themselves at the head of the field. Through concentrated growth, related diversification, and innovation Swedish Match can create more brand awareness making it a dominant player in new markets and furthering its position in current markets.

Business Level Strategy – Swedish Match must focus on their core competencies that have evolved as a result of their multiple acquisitions. Swedish Match must focus on a differentiation strategy to distinguish itself from its competitors. Being in a market with such tight competition the only way to get ahead is by creating brand awareness through product innovation and quality. Through Swedish Match’s Gothiatek standard they maintain a high quality differentiated product that is easily accessible due to Swedish Match’s vast distribution network. Swedish Match is already number one in snuff in South Africa and the Nordic countries. They must focus on the growing moist snuff market in the United States which is tightly held by UST. The only way Swedish Match can begin competing in this segment is to focus internally by building on the knowledge and capabilities they have. A continued focus on product development and innovation can lead to greater brand awareness in the snuff market that could in turn bring about new sales from that of the competition.

VII. Managerial Implications

Implementation Issues – Upper level management must put forth an effort to strengthen there position in moist snuff within the U.S. market. Management needs to acquire more firms to continuing expanding its distribution channels to better market its brands. This can easily be accomplished if we were to look at Swedish Match’s financials. Swedish Match is still able to take on more debt and has a very steady revenue stream. Swedish Match must facilitate some form of an intranet so as to create improved communication across the various functions of the organization. This will enable Swedish Match to adjust its direction and respond to customers needs. It is also imperative that Swedish Match maintain the caliber of employees and upper level management that is has obtained over the years. The human resource function will prove to increase the scope and range of Swedish Match. It is through the personnel and experience that comes along with them that has brought Swedish Match into the position they are in today. To maintain Swedish Match’s global position management must divest all of its operations that take away from its strategic focus and can in turn use this money towards research and development and marketing their brand name. Finally, for Swedish Match to expand its market share in the United States management must make a strong effort in distinguishing its brand from the competition. They can use the knowledge that is received through their global operations and focus it towards U.S. expansion.

VIII. References

Swedish

Match

Swisher

Conwood

UST

National

Lighters

Pipe Tobacco

Matches

Pipe Tobacco

Cigars

Matches

Cigars

Pipe Tobacco

Lighters

Corporate and Legal Affairs

Bo Aulin

CFO and Executive Vice President

Sven Hindrikes

Senior Advisor

Massimo Rossi

CEO and President

Lennart Sunden

Matches

Pipe Tobacco

Snuff

Cigars

Chewing Tobacco

Snuff

Snus

North Europe

Stefan Gelkner

Continental Europe

Peter Nilssom

North America

Lennart Freeman

Overseas

Ingemar Olson

Match Division

Graham Jones

FINANCE

ACCOUNTING

COMMUNICATIONS

HUMAN RESOURCES

INFORMATION TECHNOLOGY

High

Market Growth

Low

Market Share

High

Low

� Business and Company Resource Center. “Swedish Match AB History”

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Organization”

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Snuff”

� Swedish Match AB, Annual Report to Shareholders 2001.

� Business Source Premier. Data Monitor “Company Profile/History”

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Strategy”

� Ibid

� “Chewing and Smoking Tobacco and Snuff.” Encyclopedia of American Industries. Online Edition. Gale. Reproduced in Business and Company Resource Center.

� “What Price Glory?” Tobacco Retailer Vol. 3 (2000): 16

� “Chewing and Smoking Tobacco and Snuff.” Encyclopedia of American Industries. Online Edition. Gale. Reproduced in Business and Company Resource Center.

� “Smokeless Tobacco: Chewing on a Deal.” Retail Merchandiser Vol.41 (2001)

� Bierne. Mike. “Dipping into new product pipeline, ailing UST turns to flavored snuff.” Brandweek. 20 Nov.2000: Vol. 41 p5.

� “What Price Glory?” Tobacco Retailer Vol. 3 (2000): 16

� Fairclough, Gordon. “UST is hoping smokers switch to snuff packets.” Wall Street Journal 22 Jan. 2001

� Morse, Robert. “If You Can't Smoke In the Office, Snuff Can Be a Secret Vice.” Wall Street Journal 11 Feb. 2000 A1+

� � HYPERLINK "http://www.oralcancerfoundation.com" ��www.oralcancerfoundation.com� “Higher quantity use by young adults”

� Ibid

� Arnold, Matthew. “The changing habits of tobacco firms” Marketing(UK) May 2001: 20+

�David, Fred R. Strategic Management Cases New Jersey: Prentice Hall, 2003.

� � HYPERLINK "http://www.tobaccofreekids.org" ��www.tobaccofreekids.org� “Increase in Taxes Leads to Greater Switch to Smokeless Tobacco”

� St. James Press. "International Directory of Company Histories, UST Inc." 2003. Business and Company Resource Center. 22 Feb. 2004

� Cross, Dennis. “Report from the Snuff Wars.” Newsweek Fall 2002

� Fairclough, Gordon. “UST is hoping smokers switch to snuff packets.” Wall Street Journal 22 Jan. 2001

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Organization”

� www.tobaccofreekids.org

� Parker Pope, Tara. “Kicking the Habit” Wall Street Journal Online. 2 July 2002

� � HYPERLINK "http://www.ustinc.com" ��www.ustinc.com� “Socially acceptable option to smoking”

� Christoffersen, John. “Greenwich Company introduces spitless smokeless tobacco.” BC Cycle 1Aug. 1 2001Lexis Nexis.

� David, Fred R. Strategic Management Cases New Jersey: Prentice Hall, 2003.

� Bierne. Mike. “Dipping into new product pipeline, ailing UST turns to flavored snuff.” Brandweek. 20 Nov.2000: Vol. 41 p5.

� � HYPERLINK "http://www.ojibwas.com" ��www.ojibwas.com�; � HYPERLINK "http://www.senecasmokes.com" ��www.senecasmokes.com�.

� Deak J. “Most of the expansion for smokeless products will be outside the U.S.” Connecticut Post March 2002

� Parker Pope, Tara. “Kicking the Habit” Wall Street Journal Online. 2 July 2002

� “Trying to Sell Europe on Snuff…And Gearing up to Host an EC Bash.” Business Week 10 April 2001: 4

� www.swedishmatch.com

� St. James Press. "International Directory of Company Histories." UST Inc.. 2003. Business and Company Resource Center. 22 Feb. 2004

� David, Fred R. Strategic Management Cases New Jersey: Prentice Hall, 2003.

�Arnold, Matthew. “The changing habits of tobacco firms” Marketing(UK) May 2001: 20+

�Kleinman, Mark. “Nicotine gum in [pound] 10m UK launch ads” Marketing 10 May 2001.

� David, Fred R. Strategic Management Cases New Jersey: Prentice Hall, 2003.

� � HYPERLINK "http://www.ustinc.com" ��www.ustinc.com�

� Ibid

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Strategy”

� � HYPERLINK "http://www.ustinc.com" ��www.ustinc.com�

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com�

� Swedish Match AB, Annual Report 1999 p.31

� � HYPERLINK "http://www.swedishmatch.com" ��www.swedishmatch.com� “Values”

� Swedish Match AB, Annual Report 2001 p.60

� Ibid

� Ibid

� Ibid

� Swedish Match Corp. Strategy, p.1-3.

� “Striking it Big.” Tobacco Reporter Nov. 2001

� Swedish Match Corp. TEMO.

� Witt, Joanna. “Swedish Match aims at student market.” Marketing. 31 Aug. 2000: p.8. Pro Quest Research Database. Marist College Library, Poughkeepsie, NY.

� Swedish Match Corp. Strategy, p.1-3.

� “Striking it Big.” Tobacco Reporter Nov. 2001

� “Acquisition in Italy.” World Tobacco July 2001: 6

� Swedish Match AB, Annual Report 2001

� Ibid

� “Striking it Big.” Tobacco Reporter Nov. 2001

� � HYPERLINK "http://www.thomsonfinancials.com" ��www.thomsonfinancials.com�; � HYPERLINK "http://www.yahoo.com" ��www.yahoo.com� “Currency Converter.”

� Swedish Match Corp. TEMO.

� “Court Blocks Tobacco Merger.” FTC: WATCH. 18 Dec. 2000: 3

� Kleinman, Mark. “Nicotine gum in [pound} 10m UK launch ads. Marketing 10 May 2001: 1