Socio-regulatory upheaval, reference points and strategic evolution of the cigarette industry

Abstract

During the past 3 decades, the US cigarette industry has seen increased social and political turbulence affect market growth. The six major competitors (Phillip Morris (PM), R.J. Reynolds (RJR), American Tobacco, British American Tobacco (BAT), Lorillard and Liggett & Myers) have all responded to the increasingly unattractive environment through diversification efforts. Still, facing similar, hostile environments, the various patterns of product and international diversification of the firms have been divergent in terms of both scope and depth. The integration of strategic reference points offers a preliminary explanation for these divergent strategies. Firms who were industry leaders and industry laggards regarding average industry performance indicators were observed to take greater strategic risks in each decade. Firms performing at the industry median took relatively less risk in each decade.