Question

1. How do changes in consumer taste and government regulation affect consumer's decision whether to buy/how much/ tobacco products? 2. Why new products are assumed to help regain the lost markets? 3. How is demand for tobacco products different in developed and developing countries? 4. Why PM feels the urge to act fast as "the manufacturers are needing to spot potential first, act rapidly on a national level rather than on a regional level?"

Answer 1

1. Consumer tastes refer to products which consumers consciously choose over others. When government regulates tobacco products, in some or the other way product marketing of tobacco is restricted and whenever it is done, it depicts a negative picture of tobacco and nationwide efforts are made to block tobacco product sales to youth and the general public. Because of these restrictions which are often by way of increased taxation, the prices of tobacco products increase which lead to fewer consumers being able to afford this product and thus in less quantity.

2. New products which companies hope would be near perfect substitutes are assumed to replace the market for the lost product as companies are certain that as there are no restrictions on new products, government wouldn't restrict the use of products such as e-cigarettes and the scale of the lost market makes it all the more lucrative for new products to regain the market.

3. It has been estimated that most of the world's smokers reside in developing countries where quitting tobacco use is rare. In addition general awareness of risks of smoking is relatively low in developing countries, because of all these reasons demand is quite high in developing countries for such products as there is limited consumer awareness regarding the harmful effects of tobacco.

4. Acting on a national level increases the scope of reach and the economic scale is also advantageous as spotting the potential and doing it on a regional level leads to other manufacturers seeking the potential in other regions, limiting the scope of the previous manufacturer who first initiated the products.