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Medium Market Entry Revenue Forecasting Policy Analysis

Sisha: Just Blowing Smoke?

#Public Sector #Government/Public Sector #Tobacco #Taxation
ProHub Comment

This is a culturally sensitive market entry case that requires candidates to balance revenue optimization with ethical considerations around tobacco legalization in an Islamic country. The case tests quantitative modeling skills (licensing structure comparison, revenue projections) alongside strategic thinking about social and health implications of legalizing a previously banned product.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
Over the past five years, the government of Saudi Arabia has been focused on reducing economic dependence on oil by diversifying the domestic economy. As part of this effort, the government has evidenced a willingness to relax certain social norms. As part of the diversification initiative, the government hired us to forecast the potential revenue impact of taxing shisha consumption.

Clarifying Information

  1. What is shisha? Shisha is an instrument for vaporizing and smoking flavored tobacco. In the Arab world and Middle East, people smoke waterpipes as part of the cultural traditions.
  2. How will the Saudi government make money off of shisha? Institutions must apply and pay for an annual license to sell shisha. Additionally, sales tax and import tariffs are levied by the government as appropriate.
  3. Is there a specific revenue target in mind? No, the Saudi government only wishes to maximize revenue over a 3-year period.
  4. How much revenue does the Saudi government currently earn? 2.5 trillion Saudi riyal annually. Tobacco and other related products currently generate 500 million SAR in revenue.
  5. Are there any social norms we should be aware of? Islam is widely practiced by Saudis citizens and governs their personal, political, economic and legal lives. Additionally, public consumption of shisha is currently banned but is widely consumed at home.