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Midterm

MGSC05H3 Study Guide - Midterm Guide: Rjr Nabisco, Big Tobacco, Joe Camel

2 pages83 viewsFall 2017

Department
Management
Course Code
MGSC05H3
Professor
scottpratt
Study Guide
Midterm

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Big Tobacco
Steve F. Goldstone - CEO - RJR Nabisco Holding Corporation (owns R.J. Reynolds)
- oversee production of Camels, Winstons, and Dorals
- pushing drugs to children
- argue that his company never manipulated the nicotine levels in cigarettes
- argue that never marketed its products to teenagers
- argue never thought Joe Camel would be attractive to 5 year olds
- hero: legislate his industry into oblivion without his help
- pulling out was not a completely rash action because CEO knew Republican Congress's
election-year conversion to anti-tobacco cause
Congress:
- tax increase on tobacco?
- allow Food and Drug Administration regulate the nicotine out of cigarettes
Wall Street:
- tobacco companies = Sloan-Kettering views smoking
RJR is highly leveraged company, and its stock price is so depressed that the company's market cap--
the total value of all outstanding shares is actually exceeded by its debt
- informing shareholders that this is a "slow and manageable decline in an increasingly obsolete
industry"
OUTCOME
- Goldstone + 40 state attorneys general = pay states $368.5 billion over 25 years, end many
forms of advertising, and accept FDA oversight of their product → hopes to achieve
protection against future lawsuits
- June 1997 signing - clear to public-health lobby (White House and Congress - people that got
to legislate settlement into law) = too nice of a deal
o nine months after signing the agreement - John McCain, Arizona Republican -
introduced bill that would double the tax on a pack of cigarettes proposed in the
settlement with the states → Goldstone pullout
- McCain's Commerce Committee stripped Big Tobacco's lobbyist from the bill-writing
process = I don't understand why you are pulling out
o we need industry cooperation though
o the goal is to cut rate of teen smoking not raising tax revenue = Clinton get Goldstone
back
Goldstone:
- convince American smokers that Congress is trying to oppress them with new taxes
- the slowdown in momentum is the result of $50 million of advertising by the tobacco
companies
Geoffrey C. Bible - CEO Philip Morris
- "what do you think smokers would do if they didn't smoke? - beat wife, drive fast"
- fighting for market share in low shirking business - but meet regularity, discuss common
strategy because usually are all attacked together
o e.g. unanimous decision on several key issues in a recent state anti-tobacco case in
Minnesota - settle for 6.5 bill
- fought war for freedom - freedom to choose argument
o ideas that individuals are influencing the whole nation (Dr. Koop and Dr. David
Kessler - former Commissioner of the FDA)
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