Reference no: EM131001807

1. Using MS Excel and the information provided in Table 1, create an X-Y scatter chart of volume for the U.S. cigarette industry. Attach your X-Y scatter chart to this exam. Your chart must have a chart title, and both your X and Y axis must be appropriately labeled.

Table 1: Volume U.S. Cigarette Industry
	2009	2010	2011	2012	2013	2014
Total U.S. Volume (in Billions)	315.7	303.6	293.1	286.3	273.2	264.6
Growth Rate (%)	-----

Source: Bloomberg Professional

2. What is the U.S. cigarette industry annual growth rate (volume) for the years 2009-2014? Fill in the year-over-year growth rate in the appropriate location (Table 1).

3. Based on your responses to questions 1 and 2 above, how would you describe the volume in this industry during the 2009-2014 period? In other words, describe the trend. Your answer must be provided in complete sentences, and you must refer to numbers in your answer.

4. How many units of cigarettes (in billions) were sold in 2014 by each of the top companies in the U.S.? Fill in your answers in the appropriate locations (Table 2). (See Table 1 for the total volume in units for 2014.)

Table 2: Market Share Top Companies in U.S. Cigarette Industry
Top Companies in U.S. Market	2014 Unit Market Share (%)	# Units Sold by Company (Billions)
Altria Group	42.40%
Reynolds American	23.70%
Lorillard Inc.	12.50%
British American	5.30%
Philip Morris International	4.10%
Imperial Tobacco	3.70%
Vector Group	3.00%
Japan Tobacco	1.30%
Other Companies	4.00%

Source: Bloomberg Professional

5. Based on the numbers provided in Table 2, what is the three-firm concentration ratio for the U.S. cigarette industry?

Three-Firm Concentration Ratio:-

6. Calculate the Herfindahl Index for the U.S. cigarette industry.

Herfindahl Index:-

7. Based on the numbers provided in Table 3, what is the three-firm concentration ratio for the U.S. airline industry's domestic market?

Three-Firm Concentration Ratio:-

Table 3: 2014 RPMs (Revenue Passenger Miles) Units U.S. Domestic Airline Industry - Domestic
	2014 Units Sold (RPM)
Southwest Airlines	108,032.44
Delta Air Lines	98,662.28
American Airlines	125,670.39
JetBlue Airways	38,583.01
SkyWest	31,417.60
Air Canada	28,110.48
Alaska Airlines	27,559.30
Republic	11,574.90
WestJet Airlines	20,945.06
Hawaiian Airlines	13,779.65
American Eagle	22,047.44
Spirit Airlines Inc.	14,330.83
Allegiant Air	7,716.60
Horizon	2,755.93

8. Calculate the Herfindahl Index (HHI) for the U.S. airline industry's domestic market.

Herfindahl Index:-

9. Compare the Three-Firm Concentration Ratio and the Herfindahl Index for the U.S. cigarette industry to those of the U.S. airline industry's domestic market. Include the following in your answer:

A. What kind of information can you get from these two measures? (i.e., Identify and describe what they measure.)

B. What kind of statements can you make based on your answers for both industries? (Make sure you make statements for each industry. You should also compare the two industries.)

10. Use the data presented in Table 4 to create a BCG Matrix for the brands owned by Reynolds American Inc. (RAI US). Calculate the necessary metrics to plot each brand on the BCG Matrix below.

Table 4: 2013-2014 Volume (Unit Sales) Top Cigarette Brands in the U.S. Market
North American Cigarette Brand Share	2013 Volume	2014 Volume
	(in Billions)	(in Billions)
Cigarette Category (Total)	273.2	264.6
Marlboro (MO US)	95.31	98.52
Newport (LO US)	28.88	28.90
Pall Mall (RAI US)	19.77	19.58
Camel (RAI US)	19.46	19.48
Du Maurier (BATS LN)	5.56	5.65
Pyramid (VGR US)	5.54	5.44
Winston (RAI US)	5.51	5.98
Player's (BATS LN)	5.03	4.92
L&M (MO US)	4.75	5.90
USA Gold (IMT LN)	4.51	4.93

11. What suggestions do you have for Reynolds American Inc. (RAI US) based on the results of your BCG Matrix? Explain.

12. Table 5 contains data on cigarette category sales for different geographic areas of the U.S. A cigarette company is interested in determining the geographic markets in which cigarettes are performing the best/worst. Which marketing metric would you recommend lo the company and why?

Table 5: Category Sales Weekly U.S. Cigarette Sales by Region, 2014
	Sales out of 50,000 consumers (age 18+)
South	21,157
Midwest	13,052
Northeast	9,554
West	6,258
In the general population, 57,799 cigarette purchases are made in a population of 231,195 customers (age 18+).

13. Use the information in Table 5 to compute the metric that you suggested in question 12. Do this for all four geographic areas. Place your answers in the blanks below.

South =

Midwest =

Northeast =

West =

14. What interpretations could you make based on your answers in question 13? Write a professional statement communicating your results.

15. What if a cigarette company is interested in determining the popularity of cigarettes in the market as a whole? Which marketing metric would you recommend to the company and why?

Here are some statistics about cigarette purchases in Murfreesboro, TN last week:

- The population of consumers over the age of 18 is 83,633. Assume that only these individuals are part of the market for cigarettes.

- 15,892 of these consumers purchased cigarettes in the past week

- 4,908 consumers purchased Marlboro brand cigarettes

16. Based on the information above, what is Marlboro's penetration share?

17. Interpret your answer by writing a professional statement. What does this tell parent company Altria about Marlboro in the Murfreesboro, TN market?

18. Camel brand cigarettes has brand market share of 7.44%. If penetration share for the brand is 12.75% and heavy usage index is 0.81, what is Camel's share of requirements?

Camel's Share of Requirements:-

19. Provide an interpretation of Camel's Share of Requirements. What does the number mean for Camel?

20. Parent company Reynolds America has a goal of increasing Camel's market share. Based on what you know about the decomposition of market share, what should Reynolds America focus on to increase Camel's market share? What specific recommendations do you have for the company?