CASE STUDY

Case Study: A Note on the Cuban Cigar Industry



Case Study: A Note on the Cuban Cigar Industry

Evaluation of the attractiveness of the Cuban cigar industry through Porter's five forces model

Evaluation of the Cuban Cigar Industry using Porters Five Forces Model

The cigar industry is one of the significant export generating industries in Cuba. The export percentage has declined in the past couple of years due to the regulations, but it still generates a considerable amount of export for the country. Two main exports of Cuba are sugar and cigar. Cuba's environment suits the production of the finest tobacco leaves and wrappers in the world. Cigar brands of the Cuba had high-brand value compare to other newly emerged brands of Cigars that lost momentum of growth due to low quality and less market acceptability. Majority of international companies are entering in the Cigar-making industry to tap the potential of growth. However, expertise of Cubans in Cigar making, long-back history, and country environment provided an effective land to grow the tobacco that is suitable for the making of the finest quality cigar.

Region of Cuba provides an effective atmosphere for the cultivation of tobacco and making of the Cigars in the country. It enables the farmers to generate high yield of the tobacco plant that are used in the making of different types of cigars. Labour force fled from the country resulting in shifting of core potential of Cuba in cigar making. Majority of people tried cultivating the tobacco in other regions of the world. These include Dominican Republic, United States, Cameroon, Central American countries, and Caribbean region countries (Case, p. 5). This resulted in enhancing the industry competition and shifting the core competency of the country to other countries of the world. United States of America was the biggest market for the exports of the Cuban cigars and sugars (Case, p. 6). However, embargo on trade with Cuba and pressure building by the US on other countries for stopping the trade with Cuba created a dramatic shift in the economy of the country. This impact was directly observed on the growth of Cigar making industry in the country (Case, p. 7).

S. No.

Competitive Force

Intensity

1

Rivalry in the Industry

Moderate

2

Threat of New Entrant

Low

3

Substitute Products

None

4

Bargaining Power of Buyers

High

5

Bargaining Power of Suppliers

Low

This section evaluates the attractiveness of the Cuban cigar industry under the aspects of Porter's five forces model. The renowned Cuban cigar was examined under the five competitive forces model, depending on the environment it is operating in and the factors influencing it. The result of each force is summarized below:

There are major international companies, which take over the supply and distribution of the cigar. Thus, investing in Cuban cigar would turn risky if one does not have a strong political connection or high monetary investment to commit for advertising and sales promotion for brand loyal cigar consumers.

Threat of New Entrant

Threat of new entrant in Cuban cigar industry is very low. This is based on industry growth level and impact of external forces on ...