Philip Morris - Case Study

PHILIP MORRIS INC.
Name of case Country Firm Sector

Main issue
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Philip Morris.
USA. Philip Morris. Consumer Manufacturer of Tobacco, Food and Beer.

despite the increase in operating revenue, firms operating profit was decreasing due to strict and enlarged legislation and legitimating. Firm diversified in other businesses but still more dependent on tobacco segment for revenue.
GENERAL Nicotine is an addictive drug Medical studies established the fact the mortality rate is high due to smoking. General awareness about the lungs cancer. No capital requires for the advertisement and less research involved. Researches on cure for cancer
INDUSTRY FIRM Companys strong financial budget. Well known brands in cigarette market. Merging or forming strategic alliances with local corporations in foreign markets Essential corporate culture. Advertisement on TV and Radio were banned in 1971. Increasing tax rates on cigarettes especially in U.S. and Western Europe. The barriers against outside producers in china, Korea, Taiwan, Japan. Campaigns against cigarette. Compensation expenditures. No capital is required for the advertisement and less research involved. Advancement in the field of tobacco industry by making fire free or smokeless cigarette. Monopolistic tobacco market of USbarrier to enter. Decreasing costs due to the developments of new Technologies. Memorandum of understanding (MOU) with its competitors.
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Acquire Kraft and General food. Incremental costs of alternative marketing strategiessponsorship etc. Diversify into other businessfood, beer, real estate and financial services. Operating revenue was increasing since 1990 to 97 due to increase in excise tax, price increase, favorable volume / mix. Operating profit due to legitimate was decreased by 22% in 1997. Other businesses got a little momentum but tobacco remained the dominant business. Tobacco revenue were decreased in domestic market but showing an increasing figure in international markets due to new potential markets.
STRENGTH Expertise in sales and marketing. Well known brands in cigarette market Prestigious image of MarlboroMarlboro man35% of domestic market share. Large tobacco consumption market of US. Companys strong financial budget. Ability to diversify, before the imposition of legitimate. Successful partners in growing new foreign markets. Monopolistic tobacco market of USbarrier to enter. Using the key personal of food industry for reducing expenses by leveraging common resources. Close alliance with wholesaler and retailerStrong distribution channels. Strong finance supports the acquisition of Kraft foodsleader of package food in USA.
WEAKNESSES Diversified firm but over 65% profit coming from tobacco segmentdependency on tobacco.
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Not using the technology of fireless cigarette and smokeless tobacco. Heavy fine/pretax on the firm reduce the profitability. Past attributes. Inadequate communication with publicdiscontinue to minors and eliminating nicotine. Operating profit due to legitimate was decreased by 22% in 1997.
OPPORTUNITIES Growing new markets in developing countries for tobacco consumption. Chance to use brands in different sectors. Decreasing costs due to the developments of new Technologies. Increasing buying power of the consumers in developing countries. Merging or forming strategic alliances with local corporations in foreign markets. Consumption of tobacco in Teenagers and women are increasing. Comprising new advertisement methods through internet.
THREATS Aggressive marketing campaigns of competitors. Shrinking old markets in developed countries. Social campaigns against cigarette. Medical studies established the fact the mortality rate is high due to smoking. Legal barriers against cigarette consumption and advertisements. Increasing prices in agricultural productstobacco. Litigation and Competition lead to low price of tobacco product. Deaths due to cigarette consumption. Probable compensationscases filed against the firm. Uncertain about the future proposed/pending legislation...effecting the reputation.
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Unpredictable losses (financial, image, lose of customer) to the firm due to ongoing cases.
INTERNAL FACTOR EVALUATION (IFE) MATRIX Key Internal Factor S.No 1. 2. 3. 4. 5. 6. 7. Strength Expertise in sales and marketing. Well known brands in cigarette market Large tobacco consumption market of US. Strong financial position Ability to diversify Weakness Major dependency on tobacco. Not using the available technology Weight 0.2 0.1 0.1 0.1 0.05 0.2 0.1 Rating 4 3 3 3 3 1 2 Weighted Score 0.8 0.3 0.3 0.3 0.15 0.2 0.2
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8. 9.
Heavy fines Past attributes
0.1 0.05 1.0
2 1
0.2 0.05 2.5
EXTERNAL FACTOR EVALUATION (EFE) MATRIX Key External Factor S.No Opportunity 1. New potential markets in developing countries. 2. Forming strategic alliances with local corporations in foreign markets. 3. Chance to use brands name in different sectors. 4. Product Development due to the new Technologies. 5. Increased Consumption of tobacco in Teenagers and women. Threat 6. Shrinking old markets in developed countries. 7. Medical studies established the fact that mortality rate is high due to smoking. 8. Legal barriers against cigarette consumption and advertisements. 9. Increasing prices in agricultural productstobacco. 10. Uncertain about the future proposed/pending legislation effecting reputation Weight 0.2 0.05 0.1 0.1 0.05 Rating 3 2 3 1 2 Weighted Score 0.6 0.1 0.3 0.1 0.1
0.2 0.05 1.5 0.05 0.05 1.0
2 1 1 1 1
0.4 0.05 1.5 0.05 0.05 1.7
RECOMMENDED STRATEGIES
Problem 1 Government increased litigation and legislation on the sale and consumption of tobacco and Heavy fines were paid, reducing the profits, by PM and no. of undergoing cases effecting the reputation. Company should adopt diversification (as they did). Using strong marketing skills and brand name, PM should move into other businesses (food, finance and beer). Use of technology (avoid nicotine and smokeless cigarette) PM should participate more in social causes and should form an NGO/social organization that deals with environment and general public concerns for the improvement of its image. PM donate to Red Cross or others.
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Campaign against the sale of cigarette to underage at national level should be executed.
Problem 2 Established markets of Phillip Morris were shirking. Focus through brand name to retain the market share in existing markets Increase the sale through women and teenager (not underage). Entering into new markets of India, China, Philippine etc. International collaborations in new markets to better understand the dynamics of those markets.
Problem 3 Ban on advertisements creating the marketing problem for the firm. Active participation in sports or Sponsoring events. Distribute small gifts to the customers like key holder, t-shits, pen etc. Investing in social care. Smoking places/cabins in public places, people do not smoke are not affected by smoke. The place/cabin showing logo is itself a marketing.
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PHILIP MORRIS INC.

Name of case Country Firm Sector

USA. Philip Morris. Consumer Manufacturer of Tobacco, Food and Beer.

Heavy fines Past attributes

0.1 0.05 1.0

0.2 0.05 2.5

0.2 0.05 1.5 0.05 0.05 1.0

0.4 0.05 1.5 0.05 0.05 1.7

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