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What strategies can Malawi use to overcome problems relating to a change in demand of its main export, tobacco?

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Introduction

QUESTION- what strategies can Malawi use to overcome problems relating to a change in demand of its main export, tobacco? Malawi, a LEDC, located in Southern Africa, has a population of 10 million. Tobacco, the main export, provides the majority of the countries export revenues. It has become dependant on exporting tobacco to firms based in MEDC's such as the United States. Demand for cigarettes has recently decreased because of health and ethical reasons. Cigarettes, has reached the end on its product lifecycle. However South East Asia remains a growing market, because of the effects of globalisation and dumping. The decrease in demand is a major problem for Malawi, a country that is not market orientated or market aware. Decline in demand for cigarettes will obviously have a direct effect on demand for tobacco because they are complimentary products. With decreased demand for its crops of tobacco, Malawi will find itself in a very dangerous situation that will not only threaten its economic position but the very lives of its population. Another concern that Malawi must take into account is the state of the tobacco industry. At present the market could be described as an oligopoly (see appendix) ...read more.

Middle

This would require diversifying a primary sector agricultural country into secondary sector activities (infant industries). With the funds received Malawi would have an increased influence on global markets. At present Malawi's factors of production are geared towards production of tobacco. Malawi could further expand this agricultural market and develop it so that it becomes more industrialised. It could possibly approach, the foreign companies involved with buying tobacco, and offer to produce the complete product, cigarettes, within the country. Outsourcing is an attractive prospect for multinationals because it allows them to cut costs making their products more profitable. They will be able to save transportation costs if they produce cigarettes in Malawi rather than exporting tobacco. Also Malawi is strategically positioned for excellent access to south East Asia the only growing market for cigarettes. Although wages will be extremely low it will provide thousands of jobs because this industry is labour intensive, allowing many families to feed provide for themselves. Revenues will increase because they have added value to their main export, tobacco. If this is a success, Malawi will become more attractive to other investors, who may also want to exploit low wages and low production costs. ...read more.

Conclusion

cigarette maker with Camel, Magna, More, Salem, Vantage, Winston and other brands. Brown & Williamson is the third largest tobacco company in the U.S. They recently purchased American Brands, producers of the top two selling cigarette brands in the UK, thus increasing their market share in the U.S. by 6.7%. The parent company of B&W is BAT Industries previously known as the British American Tobacco Company. BAT is the second largest private cigarette manufacturer in the world. WITHIN THE UK (BRANDS): Two firms, Gallaher and Imperial Tobacco, who between them, control around 80% of the market, dominate the cigarette and tobacco market in the United Kingdom. One other major firm, British American Tobacco (BAT), manufactures cigarettes in the UK but sells almost all of them abroad. In 1999 BAT merged with Rothmans International thereby increasing its share of the world tobacco market to 15.4%, just behind the world leader Philip Morris which controls 17% of the global market. Top 10 UK cigarette brands: 2001[1] % share of UK cigarette market Manufacturer Lambert & Butler KS 11.9 Imperial Tobacco Benson & Hedges KS 9.7 Gallaher Mayfair KS 5.2 Gallaher John Player Superkings 5.1 Imperial Tobacco Marlboro Lights KS 4.8 Philip Morris Silk Cut KS 4.4 Gallaher Rothmans Royals KS 4.3 BAT Regal King Size 3.9 Imperial Tobacco Embassy No 1 KS 3.2 Imperial Tobacco Sovereign KS 3. ...read more.

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