E-Cigarettes: Case Study

The favorable market condition of e-cigarettes is pulling in big tobacco companies with not such a favorable reputation. E-cigarette is a new product giving tobacco companies a clean slate for aggressive market toward young consumers. So far there are no FDA regulations on marketing of e-cigarettes which gives tobacco companies favorable macro environment. Big tobacco companies such as Marlboro and Camel can spend a lot more for marketing than smaller companies. This gives big tobacco companies a micro environmental advantage over smaller startups. The opportunities from investing into e-cigarettes are “insurance for potential sales” and “self-funding source of R&D”. Big tobacco companies are desperately trying to re-invent smoking by marketing e-cigarettes as safe alternatives. The companies market e-cigarettes to younger adults as sexy, glamorous, and rebellious. This approach has received a lot of criticism from anti-smoking campaigns and Congress. Many studies of e-cigarettes create opposing opinions which is a good trend for tobacco companies. Cigarette smokers who used an e-cigarette were 60 percent more likely to stop smoking
Currently big tobacco companies are generating small net profits on the sales of e-cigarettes. The reason to stay in this business is not for maximizing short term profits, but to come up with an innovative product and maximize long-term profits. This is a perfect opportunity to gain competitive advantage over the competition by creating a healthier alternative for the future generation. There is still a lot of uncertainty over e-cigarette benefits or flaws, but big tobacco companies have nothing to lose due to “self-funding” mechanism of the industry. Relevant key performance indicators are market awareness and reach to the new customer base. Tobacco companies must increase both indicators in order to educate more people about the benefits of