Porter’s Five Force Model
Analysis For
Indian Cigarette Industry
Author: Angshu © www.tnmg4u.com. All rights reserved.

Threats of New Entrants=LOW
•New Product differentiation
Very Tough – already cigarettes
at different price points, flavors,
brand images
• Access to distribution channel
is tough – big & established
players are present (e.g. ITC)
• Capital requirement is very
high for a pan India launching;
• Local launch can not catch up
scale – Can’t use Economies of
scale
• Government policy – high tax,
no TV/Radio Ads

Bargaining Power of Suppliers=LOW
•Many inputs are required but in small amount – paper,
tobacco, filter
•There are many small scale, unorganized suppliers
•Cigarette companies are big and have direct access to
distribution channel and addicted buyers. Suppliers
don’t have much control over smokers.

Bargaining Power of Buyers=LOW
•Addicted customers - even after knowing harms –
people can’t leave it
•Smoking has lot of symbolic and emotional values
attached with it
•Product quality not much important to smokers –
Research shows most people cannot differentiate
among the brands in a blind taste
•Low switching costs in terms of price

Threat of Substitute Product=LOW
•Herbal Cigarettes (e.g. Nirdosh) were launched –
but did not become popular (no emotional value)
•Nicotine patch is another substitute – but again no
comparison with cigarettes in terms of popularity
and usage

Competitive Rivalry in the
Industry=HIGH
•Many competing players: ITC, Godfrey
Philips, VST, GTC etc - see chart below
•Price competition continues
•Advertisement for cigarettes is now
prohibited in India
•Replacement for ads – event
sponsorships and sales promotions
•All making new product launches

Thank You
Author: Angshu © www.tnmg4u.com. All rights reserved.