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Adam Smiths Theories Of Economic Growth Economics Essay

Abstract: The purpose of essay wants to explain Adam Smith’s theories of economic growth contributing to the current economic development through investment and capital accumulation. Moreover, this will also shows the role of agriculture in the industry sector and the division of labor in the agricultural sector to the industry sector in the economic development.
The great classical economists of the eighteenth centuries were all development economist writing about forces determining the progress of nations as the countries of embarked on the process of industrialization. The question of why the pace of development differs between countries has been at the forefront of economic enquiry ever since. One of the Adam Smith’s most important contributions was to introduce into the notion of increasing returns based on the division of labor and balanced between agriculture and industry. He emphasized that the growth of output and living standards is first and foremost on investment and capital accumulation. [1] What is the outcome of the investment and capital accumulation for developing country?
First, to know the relationship between the economic growth coming from the investment and capital accumulation, we should know what the capital accumulation means. The capital accumulation is that it enhances a country’s capacity to produce goods in the future and enables it to growth fast. There are many types of capital goods [2] such as first, plant and machinery, used in the factories and offices, which yield no utility directly but produce consumption goods and services, infrastructure investment, which partly provides goods and services directly and the same time makes other forms of investment more productive, for example transport facilities, telecommunications, power generation, the provision of water facilities and so on, second, expenditure on the research and development (R

An analysis of japans tobacco company

Japan Tobacco is the world’s third-largest tobacco company. It is part of the Nikkei 225 index. In 2009 the company was listed at number 312 on the Fortune 500 list. The company is headquartered in Tokyo. JT’s domestic tobacco business continues to maintain a significant competitive position in the Japanese market, and the international tobacco business is delivering remarkable performance as the driver of profit growth for the JT Group. As future pillar businesses, the pharmaceutical business pursued strategic licensing to world-leading pharmaceutical companies such as Merck, and the foods business continued to expand profit levels steadily.
Corporate History JT used to be a public firm owned by Japanese government and dominated cigarette market in Japan. In 1985, Japanese government sold its 50 percent of shares and JT was privatized. At that time, government abolished monopolies i.e. Japanese cigarette market was opened for global competitors, such as Phillip Morris and British American Tobacco. So competition in Japan market became very keen. In addition, demand was declining continually. In fact, in 1985, number of total cigarette consumption in Japan was 310 billion sticks and JT’s share was about 98 percent. However, in 2006, market size decreased 20 percent and competitors grabbed 35 percent share from JT. In this back ground, Japan tobacco have taken globalization and diversification strategies.
Corporate Vision Japan Tobacco’s corporate vision is “A global growth company that develops diversified value-creating businesses.” Presently, JT operates all over the worlds. The exhibit 2-1 shows the results of JT’s globalization and diversification strategies. With regard to cigarette business, JT sell its products more than 120 countries. It operates cigarette manufacturing factories in 15 countries. JT’s core markets are Japan, Spain, France, Italy, Russia, Taiwan etc. Especially, in Japan, Taiwan and Russia market, JT has a no.1 position. As for pharmaceutical business, although it does not generate profit at the present time, it has some strong potential pipeline that was made in research laboratory in Japan and United States. Also, JT food business has some subsidiaries in Asian counties, such as China, Thailand and Australia. It focuses on processed frozen food, beverage and seasoning.
[Exhibit 2-1]
(Source: Japan Tobacco’s annual report 2007)
Historical Strategies The time period from 1993 to 1999 is the stage for progress of diversification. In 1993, JT started pharmaceutical business. Then, in 1998, JT also started food business by acquiring two food business firms. And in this year JT also acquired Torii pharmaceutical co., ltd., leading medium-sized pharmaceutical enterprise listed on the first section of the Tokyo Stock Exchange. In 1999, there was one of biggest event for JT. It has agreed to purchase the international tobacco business of RJR Nabisco Holdings for 7.83 billion US dollars to become the world’s third-largest tobacco producer. The purchase is the largest acquisition price ever paid by a Japanese company.
Next stage from 2003 to 2005 was restructuring phase for Japanese cigarette market. JT struggled with decreasing cigarette demand in its mother market. Therefore, Japan tobacco decided to close its 15 cigarette factories in Japan and layoff more than 4,000 employees that are almost half of total Japanese employees.
These strategies came good. This is because JT’s operating profit has been increasing steadily since 2000 (See Exhibit 2-2).
[Exhibit 2-2] Operating Profit
(Source: Japan Tobacco annual reports)
SWOT Analysis Strength (Core competencies) Strong brand portfolio JT own 3 of top 5 worldwide brands, Mild Seven, Winston and Camel. The tobacco product marketing has distinctive style as below:
Tough guidelines applicable to advertising tobacco products
Restrictions on sponsorship
All promotional activities are limited to verified adult smokers etc.
These means creating new brand and strengthening brand would be more difficult than other products i.e. Cigarette brand value is sustainable. Therefore, strong brand portfolio is core competency for JT.
[Exhibit 2-3] Top 5 Brands by Sales Volume Worldwide
Abundant cash In general, tobacco business is a cash cow business i.e. tobacco firm generate steady cash flow. As for JT, it generated around 200 billion yen per year during 2002 to 2006. As a result, JT had 1,186 billion yen excess cash and D/E ratio was only 0.11. This financial strength means JT already prepared to acquire new targets.
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