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The Tobacco-Cigarette Industry: An Oligopoly Market Structure

by Sison, Serrano, Valmores, Villa-Real, Villarico an

pam villa-real

on 17 September 2012

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Transcript of The Tobacco-Cigarette Industry: An Oligopoly Market Structure

by Sison, Serrano, Valmores, Villa-Real,
Villarico and Wongchuking The Tobacco-Cigarette Industry:
An Oligopoly Market Structure 23.9 million Filipinos exposed to tobacco smoke daily
17, 723, 216 males
3, 848, 908 females TOBACCO INDUSTRY Common Cigarette Brands Marlboro
Philip Morris
Mild Seven
Aside from being embedded in Philippine history and culture,
this industry is a big component of our economy Oligopolies few firms
similar/identical products
barriers to exit and entry Characterized by: Hope
Gudang Garam
Black Bat market structure behaviors
the study of decision making in situations where strategic interaction (moves and countermoves) between rivals occurs. game theory To maximize industry profit, the firms in an oligopoly must agree on a monopoly price and agree to maintain it by limiting production and allocating market shares. firms choose a dominant
strategy best choice for them regardless of the others' decisions mr = mc economies of scale
non-price competition
constant prices
collusions Philippine oligopolies are non-collusive therefore shows in product differentiation in terms of quality and price
relatively cheaper in the Philippines rely heavily on value sales effect on the economy Phil. economy a key player in world class tobacco production
17.5% steady growth in 2007
79.33 million kilos in 2011 (NTA)
10 companies and wholesale tobacco dealers (NTA)
2.9mil employed dependent on tobacco industry
79.07 million kilos as of October 2011 with value of 5.26 billion highly profitable for farmers as compared to other crops
NTA tobacco contract growing system provides assistance to farmers from production to sales.
increasing marginally for past three years
exports development by exporting full-flavored tobacco in demand by international companies
increase in exports thanks to government assistance and direction (NTA) EFFECT ON COUNTRY 2010 Philippine Global Adult Tobacco Survey (GATS) states that 17.3 million people 15 years old and up are smokers, at least 13.8 million of which smoke daily

The survey also showed that 94% of the surveyed smokers were aware of the diseases that could develop from over consumption Government Intervention RA 9211: Tobacco Regulation Act
controls advertisements, packaging
"government warning" stickers
no sales to minors
implementation of "non smoking areas" RA 5727: "The Sin Tax Bill"
excise taxes on alcohol and tobacco products in line with Filipino culture increasing trend in smoking - cheap form of entertainment industry makes 90 sticks annually -
huge consumer market within the country as well The Philippines is an agricultural country - tobacco culture stems as far back as colonial era (Spanish tobacco monopoly) The income of consumers is a deciding factor in their preferences for cigarette brands
"image" for higher class consumers
taste and cheap price for middle-lower class consumers
Full transcript