Review analysis Essay Example
For decades, governments have been constantly trying to increase the health index of the nations; which one of the aims is to reduce the smoking rates by enforcing legislations with the aid of high taxes on tobacco (8). The Australian government recently enforced plain packaging policy on the tobacco, expecting a large decrease in tobacco consumption (2).
Due to the fact that cigarettes advertisements and sponsorship of tobacco were globally prohibited, critics believe tobacco companies have largely invested on the packaging design to attract its consumers as packaging is the remaining advertisement tool (Roland Berger Strategy Consultants 2014) (11). The reason for standardizing all tobacco packaging (i.e, no branding, colors, imagery, corporate, logos and trademarks) is because they believe the tobacco packaging would mislead consumers to consider some tobacco products are comparatively less harmful than others (ibid) (6). By standardizing the packages would decrease its attractiveness and eliminates the misleading concept of less harmfulness. Hence, the demand for both adults and children to smoke will shrink (ibid) (3).
The decrease in the demand of tobacco consumption in the legal market by implementing plain package has show the effectiveness of this policy; however, the overall demand in both legal and illicit market remains unchanged (ibid) (6). From both marketing and economic perception, purchasing behavior of consumers is influenced by the packaging of the product (ibid). According to Roland Berger Strategy Consultant, consumers’ willingness to pay for higher price is decided by brand power and consumer loyalty towards certain brand as it shows more attractive than others (ibid). Brands with a high brand value tend to sell its products at a price premium (i.e, higher price) (ibid). Certainly, the removal of branding on tobacco package decreased consumer willingness to purchase branded tobacco in the legal market as it comes plainer; for that reason, consumer moved their attention towards illicit tobacco as a replacement of branded legal tobacco (ibid) (5). Under circumstances in which branded tobacco would only be available in illicit market, very likely consumer move towards illicit tobacco, and increased the market share of the illicit tobacco in the whole market. In order to remain its market share proportion, legal tobacco companies will decrease its price to compete with the illicit tobacco companies (ibid). The decreasing legal tobacco consumption and price pressure on legal tobacco, causing decrease in tax revenue (ibid) (12). As revenue has a direct relationship with taxes; hence, the decrease in tobacco revenue decreased tax received by the government.
Even though figures regarding purchasing legal tobacco in Australia has decreased, but the growth in illicit tobacco market was not taken into account (1). The main idea of implementing this policy is to decrease consumers’ demand on tobacco (18). However, with the facts that consumers are moving towards illicit market to satisfy wants and price decrease by legal tobacco companies to increase the share proportion in the market, has shows the overall demand for tobacco consumption are more likely remain unchanged; the plain packaging policy is not effective (14).
Standardizing tobacco packing alone will not the required impact through which consumption of tobacco can be reduced. (1) The demand for tobacco is inelastic suggesting that whatever be the price the demand remains the same (2) Standardizing packaging would mean that people would not be able to differentiate between the different brands and won’t be able to differentiate between the products which are less harmful and more harmful (3) All tobacco products are equally harmful and there is no differences between the products offered by different organizations (4) The consumption of tobacco exists as people have become addicted to it so making changes in the price or packaging will have no impact on consumption (5) Price has no impact on the consumption of tobacco as people can shift from cigarettes to bidis if the need arises thereby ensuring that the consumption remains the same (6) Standardizing packing would mean that people would shift towards illicit market where the same products will be available at a slightly price (7) Standardizing packaging would mean a loss to the government in the form of taxes (8) Government taxes would reduce as people would shift towards illicit market which would force the organizations to reduce price thereby impacting the tax collected by the government (Colell, Winston, Michael & Jerry, 1995 ) (9) Past studies have showed that plain packaging or standardizing is not a process through which consumption of cigarette can be reduced as people continue to consume it despite change in price and the impact it will have on people health (10) Raising taxes on cigarette will not have an impact on the consumption of cigarette as the demand for consumption is inelastic and whatever be the price people will continue to consume cigarette as people get addicted to it (11) Despite a ban on promoting cigarette companies have used packaging as a medium to differentiate their product from one another (12) Organizations dealing in cigarette use packaging to catch the attention of people which has resulted in organization having different prices for different cigarette by showing that they are less harmful in comparison to other but actually all cigarettes are equally harmful (13) Government needs to instead create awareness about the harmful effects of cigarettes and ensure a drive which will look at shifting people from the consumption of cigarette to other mediums (14) The focus of the government should be to promote other products which can act as a substitute for cigarette so that by highlighting the same the behaviour of people can be changed and people can start consuming other products (Garg, 2010 ) (15) Control has to be exercised by ensuring that the illicit market is controlled so that all steps which are undertaken ensures maximum results (16) Government need to understand that the reduction in market share of people consuming cigarette doesn’t corresponds to the fact that cigarette consumption has reduced but instead people have shifted towards illicit market (17) While looking to find out the percentage of people consuming cigarette market share of illicit market should also be considered and then it should be decided whether the strategies used by the government was proper or not (18) Awareness should be created so that people understand the harmful effects of cigarette and start reducing the consumption of cigarette for better future and prospects
The article you have provided shows clear evidence of the topic and are clear regarding what it wants to communicate but could become more effective if the sentence number (1) would have been used as the topic sentence. This would have provided the directives through which reader would have been able to understand that demand for cigarette doesn’t gets affected due to pricing or branding. I have looked at using different resources like Microeconomic Theory and Microeconomics: Introductory along with the article which helps to analyze the entire situation from a different angle. The strategy aligns with the article that the user has provided but further dwells in details regarding the manner in which different decisions are being made. The strategy is to reflect the same from an economist point of view as it will help to substantiate the manner in which inelastic demand and other factors results in people consuming cigarettes.
In addition to it the article was analyzed the manner in which the government through the adoption of measures which are aimed at highlighting the different impact cigarettes have can create awareness. This strategy is different from the one that has been used in the article but will help to highlight and work on the point through which better awareness can be spread and the overall process will be aimed towards reducing cigarettes consumption. The overall mechanism thereby looks at maximizing the gains and creating a process through which better control can be exercised.
Colell, M., Winston, A., Michael, D. & Jerry, R. 1995. Microeconomic Theory. 3r Edition, New York, Oxford University Press, Pearson Education
Garg, S. 2010. Microeconomics: Introductory. 7th edition, pp 3.11-9.17, Dhanpat Rai Publication
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