SWM - Mark Moore

its product (indirectly), the threat is even higher. Cigarettes have become a huge target ofgovernments because of the health risks imposed by the inhalation of tobacco smoke. “Actionsto restrict or prohibit advertising and promotion of cigarettes or other tobacco products, to limitsmoking in public places and to increase taxes on such products, are intended to discourage theconsumption of cigarettes and other such products” (SWM 10K). Despite competing againstsubstitute products, the tobacco paper industry is indirectly being targeted.Considering how tobacco paper producers have nothing to do with the creation ofcigarettes, it is hard to come up with many substitutes. One substitute tobacco companiescould use is to replace premium tobacco paper products, which are fire safe, with the previouslyused regular paper that does not have a lower propensity for ignition. Another substitute wouldbe smokeless tobacco, which is 98% safer than smoking cigarettes, according to the AmericanCouncil on Science and Health.Buyers Willingness to SwitchThe number of customers in the tobacco paper industry is few, but they each buy asignificant amount of a tobacco paper’s inventory. Therefore, if a firm were willing to switch toa substitute product, it would have a huge affect on any firm. The demand for the tobaccopaper is dependent on the buyer’s ability to sell their product. If there is a decrease in theamount cigarettes demanded then there would be a decrease in the demand for paper productsas (1) their inventory increases and (2) they no longer need tobacco paper. This would alsohave an effect on consumer’s willingness to switch. The benefits may outweigh costs whenconsidering this.Would a consumer be willing to switch back to the previous forms of tobacco paper?Currently, the U.S. is in the process of requiring all cigarette manufacturers to have paper thathas low ignition propensity. Therefore, for any firm planning to operate in the U.S this wouldnot be feasible. Consumers would be unwilling to switch and lose a whole market in thewestern hemisphere.Also, although consumers have the option to switch to smokeless tobacco, most wouldbe unwilling to take away from their cigarette production. According to the Center for DiseaseControl and Prevention, approximately 3% of adults currently use smokeless tobacco. Becausethis market share is so small, it is doubtful that they would even attempt to increase this35