A Note on the Cuban Cigar industry

Essay by bluefantasyUniversity, Bachelor'sB, April 2006

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General Environment Analysis:

1. Economic segment: Cuba is command-economy, and is still a poor country. The GNP per capita of 2002 is just $1700. The domestic market is not in the perfect situation. The government of Cuban still has to face trade deficit, foreign exchange and energy problems. (Mild threat)

2. Political-Legal segment: In 1990s, Cuban government implemented an austerity program to steer through the crisis and Helms-Burton Act added the burden to Cuban economy. However, the US government punished the economy of Cuban. (Threat)

3. Socio cultural segment: In 2002, Cuba had the population of 11,224,321,which including 300 million cigar smokers. The traditional way of making tobacco is through families manufacture. The cigar industry in Cuban has a long history. (Opportunity)

4. Technological segment: In the past, people produced cigar with their hands. Now, people prefer to use machines to produce cigar instead of using hands. Sometimes, hand made and machine-made will be combined in the producing processes.

Except for, the new agricultural methods are introduced to people to improve the quality of tobacco plants. (Opportunity)

5. Global segment: Although the embargo still affects the Cuban exports, former U.S. president's visited in 2002 may improve the relationship between Cuban and the U.S. The market share in 2000 is U.S. 37%, Spain 42%, and France 33%. Cuban cigar exports increase slightly annually. (Opportunity)

Task Environment Analysis:

1. Threat of New Entrants: low. The industry works on economies of scale. Two corporations control the distribution of Cuban cigar worldwide. (Opportunity)

2. Bargaining Power of Suppliers: High. Cuban government is the only buyer of the output from the private farms. (Threat)

3. Bargaining power of buyers: High. The exclusive dealers distribute Havana cigar throughout the world and only these dealers have access to the cigar supply. (Threat)

4. Threat of substitute product:...