Philip Morris

International
Final Project
Date of Submission: 15th December, 2014
Fall 2014

GROUP MEMBERS
Joyanta Sen (1110109030)
Imroj Ahmed (1110069030)
Farabi Amin (1110063030)
Sajedul Haque (1120359030)
Faiyad Bin Khaled (1110162030)
Farhan Abid Chowdhury (1110196030)
Mushfiqur Rahman Farazi (1130007030)

SUBMITTED TO
Mohammad Hannan Miah
Senior Lecturer,
School of Business

North South University

Letter of Transmittal
15th December 2014

To
Mohammad Hannan Miah,
Faculty Member, Department of Management
School of Business
North South University
Baridhara, Bashundhara, Dhaka

Subject: Submitting the project report on Strategic Management of Philip Morris International

Sir,
We would like to present our term paper, on Philip Morris International. While preparing this
term paper we had learned and acquired so many knowledge on strategic management. We had
also learned about teamwork, writing, observing, analyzing and most importantly how to sketch
a businesss strategies, which they apply on their business to achieve their goals. It was highly
exhilarating and appreciable task, assigned for us. We were greatly inspired, while working on
the project.
Thank you for guiding us and providing us an opportunity to demonstrate our potentials, talents
and skills on Strategic Management.

Sincerely,
Mushfiqur Rahman Farazi
On behalf of the Group 04 of Sec: 07

Acknowledgement
Making this project has been a great task for all of us. Since the beginning of our work we have
come through many confusions and dead-ends, but still, we managed at the end. First of all, we
would like to thank almighty Allah for giving us patience and strength in order to complete this
project successfully.
We would like to extend our gratitude to our faculty Mohammad Hannan Miahfor his immense
support. We are grateful to him for guiding us and helping us to finish this project.
Our honest respect goes to Mr. Sheikh Mohammad Zillani, Consumer Engagement Specialist,
PMI. Without his vast help and support it would not be easy for us to make a report on PMI.
Finally, we would like to thank each other for the wonderful cooperation we had shared among
ourselves as group members. Our dedication and strong teamwork has resulted in the successful
completion of this project. We have learned extensively on different strategies of a leading
Tobacco company.
This project has helped us to gain some knowledge and has exposed some interesting answers.

Group Members of this Project

Joyanta Sen (1110109030)
Imroj Ahmed (1110069030)
Farabi Amin (1110063030)
Sajedul Haque (1120359030)
Faiyad Bin Khaled (1110162030)
Farhan Abid Chowdhury (1110196030)
Mushfiqur Rahman Farazi (1130007030)

Table of Contents
Introduction................................................................................................................ 9
About the company.................................................................................................. 10
Mission..................................................................................................................... 11
Vision........................................................................................................................ 11
Why we have chosen this company.........................................................................11
Purpose.................................................................................................................... 12
Which industry PMI belongs to.................................................................................13
Industry Analysis...................................................................................................... 14
Industry Structure and Major Players of the Industry............................................15
Controlling forces of profitability & Industry Profitability.......................................16
Segments of Cigarette........................................................................................... 17
Market Shares....................................................................................................... 18
Industry Life Cycle................................................................................................. 18
General Environment Analysis..................................................................................19
Political................................................................................................................ 19
Economic............................................................................................................... 19
Social..................................................................................................................... 21
Technological......................................................................................................... 22
Environmental....................................................................................................... 22
Legal...................................................................................................................... 23
Competitive Environment Analysis...........................................................................25
Porters Five Forces Analysis..............................................................................25
Threat of new entrants.......................................................................................... 25
Barriers to entry...................................................................................................... 25
Government and legal conditions.................................................................................25
Huge capital requirements.......................................................................................... 26
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Economies of scale.................................................................................................. 26
Access to distribution channel..................................................................................... 26
Product differentiation.............................................................................................. 27
Cost advantage independent of size.............................................................................. 27
Expected retaliation.................................................................................................. 27
Bargaining power of suppliers...............................................................................28
Supplier concentration.............................................................................................. 28
Switching cost........................................................................................................ 28
Threat of forward integration...................................................................................... 28
Threat of Substitutes............................................................................................. 29
Bargaining Power of Buyers................................................................................... 30
Intensity of Rivalry................................................................................................ 31
Industry Rival......................................................................................................... 32
Rivalry intensify...................................................................................................... 32
Macro-environment affecting Porters Five Forces....................................................33
Demographic.......................................................................................................... 33
Economic................................................................................................................. 34
Political and legal....................................................................................................... 34
Sociocultural............................................................................................................. 34
Technological............................................................................................................ 35
Global..................................................................................................................... 35
Physical................................................................................................................... 35
3I Analysis................................................................................................................ 36
Immediate competitors..................................................................................... 36
Core Competency of BAT.......................................................................................... 36
Impending Competitors.................................................................................... 36
Invisible Competitors............................................................................................. 37
SWOT Identification.................................................................................................. 38
Matching External Analysis with Opportunities and Threats..................................38
Matching Internal Analysis with Strengths and Weaknesses....................................................39
SWOT Identification Table...................................................................................... 40
Business Canvas Model of PMI.................................................................................... 0
4

Business Canvas and Current Model of Philip Morris International.............................0

Key Partners............................................................................................................ 0
Equity Partners..................................................................................................... 0
Event Management Partners................................................................................ 0
Partnership with government agencies and regulators........................................1
Other Strategic Partnership.................................................................................. 1
Key activities........................................................................................................... 1
Key Resources......................................................................................................... 2
Strong Customer Base.......................................................................................... 2
Brand Value and Recognition............................................................................... 2
Financial Resources.............................................................................................. 2
Human Resources................................................................................................ 2
Physical resources................................................................................................ 3
Value proposition..................................................................................................... 3
Customer relationship............................................................................................. 3
Channel................................................................................................................... 4
Customer segment.................................................................................................. 4
Cost Structures........................................................................................................ 5
Cost of Purchasing of raw materials.....................................................................5
Fixed Costs and Employee Benefit Plans..............................................................5
Marketing and Advertising Costs..........................................................................5
Revenue Stream...................................................................................................... 6
Current Business Model of PMI................................................................................... 7
Core Competency....................................................................................................... 1
Corporate Level Strategy............................................................................................ 2
Mission.................................................................................................................... 2
Vision....................................................................................................................... 2
Ultimate objective................................................................................................... 3
Strategic Alliance................................................................................................. 3
Product Diversification......................................................................................... 4
The Relation between Corporate Level Strategy of Philip Morris and Its Mission........5

Corporate Risk Management...................................................................................... 6

Brand name to capture the market............................................................................7
Subsidy from India and Malaysia............................................................................. 7
Business level Strategy.............................................................................................. 8
Key Issues of Business Level Strategy.....................................................................8
Who will be served?................................................................................................ 8
Current Customer Segment..................................................................................... 9
Future Customer Segment....................................................................................... 9
What needs to be satisfied?..................................................................................10
How those needs to be satisfied?..........................................................................10
Five generic business level strategies...................................................................11
Differentiation strategy......................................................................................... 11
Competitive positioning and value creation frontier..............................................13
Product Life Cycle.................................................................................................. 15
Match between Business Level Strategy and Corporate Level Strategy...................18
Functional Level Strategies....................................................................................... 19
Management Division............................................................................................ 19
Corporate Strategy and Decision making Wing..................................................19
Corporate Affairs................................................................................................ 19
Service development and Management................................................................20
Corporate sales.................................................................................................. 20
Marketing Division.............................................................................................. 20
Marketing Strategies............................................................................................. 22
Marketing Mix........................................................................................................ 23
Finance Division.................................................................................................... 25
Central Accounts................................................................................................ 25
Costing and Factoring......................................................................................... 25
Revenue Assurance............................................................................................ 26
Taxation.............................................................................................................. 26
Employment Opportunities and Facilities PMI....................................................27
Some Terms of Employment PMI........................................................................27
6

Linking the Resources, Core Competency, Capabilities with Functional Level

Strategies for Value Creation................................................................................. 29
Company Structure and Control System..................................................................33
Division and departments..................................................................................... 33
Top Management................................................................................................... 35
Company structure and control system.............................................................................44
Value chain analysis................................................................................................. 45
Primary activities................................................................................................... 46
Support activities.................................................................................................. 47
Strategic Analysis (4P).............................................................................................. 48
Position.................................................................................................................. 48
SWOT Analysis........................................................................................................ 51
Strength................................................................................................................ 51
Weaknesses........................................................................................................... 53
Opportunities........................................................................................................ 54
Threats.................................................................................................................. 54
Proposed Business Model......................................................................................... 55
Cost Minimization Strategy................................................................................... 56
Conclusion.................................................................................................................. 0
Recommendation....................................................................................................... 1
Corporate Level Strategies...................................................................................... 1
Business Level Strategies........................................................................................ 2
Functional Level Strategies..................................................................................... 4

Executive Summary
This report has been conducted on Philip Morris International, a global tobacco company,
entered in Bangladesh with the collaboration of local giant Akij Group. The purpose of the study

remains at the core of finding the three level strategies pursued by PMI to sustain in the
competitive industry and also to safeguard their business and growth. However, to satisfy the
purpose we have conducted a systematic analysis externally as well as internally on PMI and the
tobacco industry in determining the competitive position it acquires compared to its competitors.
In finding the reason behind the success entrance of PMI, its core competency for instance, the
worldwide brand recognition and leading-edge R&D came into the view in every aspect of the
study. Because of the fact that PMI will have to go long way to be the market leader, PMI has
been recommended with a proposed business model and some alterations in three level strategies
so that the company can cherish the triumph even in the long run.
Furthermore, due to a lack of time allowed to compute all the data a very deep tentative research
was not possible, however a satisfactory analysis of the company within the time frame was
constructed.

Introduction
Its been almost three thousand years tobacco has been smoked. In a magazine Lafferty (2014),
told about the history of smoking, Christopher Columbus found it when he landed in the
Americas in 1492, but ancient temple carvings show tobacco being smoked in Central America
as long ago as 1,000 BC. From the very beginning tobacco has arrived, it has divided opinion,
sparked controversy and generated substantial revenue through tax.
Tobacco consuming rate in Bangladesh is also very high. According to research of Barkat (2012),
Over 58% of men and 29% of women use some form of tobacco, whether smoked (both
cigarettes and bidis) or smokeless. In 2012, an estimated 46.3 million adults used some form of
tobacco product, smoked or smokeless. Most smokers are male 28.3% of adult men smoke
manufactured cigarettes and 21.4% smoke bidis. In contrast, smokeless tobacco use is substantial
across both genders, with 26.4% of men and 27.9% of women using some form of smokeless
tobacco. The companies doing business in Bangladesh in this industry are: British American
Tobacco, Philip Morris International, Dhaka Tobacco Company, Alpha Tobacco Company, Sonali
Tobacco, Abul Khair Group, Nasir Gold Tobacco, Imperial Tobacco etc. Because tobacco, the
main constituent of cigarettes, is the single greatest cause of preventable death globally and
is addictive, the company's operations (and its competitors) are highly controversial and are
increasingly the subject of litigation and restrictive legislation from governments concerned
about the health impacts of its products.

About the company

Philip Morris International Inc. (PMI) is the leading international tobacco company, with the
worlds top international brands, including Marlboro, the worlds best-selling cigarette brand.
According to data of PMI (2013), PMI held an estimated 15.7% share of the total international
cigarette market outside of the United States, or 28.3% excluding the Peoples Republic of China
and the United States. 2013 was the sixth consecutive year that saw them meet or exceed their
mid- to long-term adjusted diluted earnings per share (EPS) growth target of 10-12%. This
consistent level of double-digit currency-neutral EPS growth puts us at the forefront of all major
global consumer products companies.
Phillip Morris International entered in Bangladesh Tobacco Market by doing an agreement with
Akij Group of Industries in the year 2008. Later on, both the companies came into an agreement
that the production and distribution of the brand Marlboro will be done in collaboration with
Dhaka Tobacco of Akij Group but the management, executive and other legislative departments
will be directly supervised by Phillip Morris Management SA. Thus PMI launched their only
brand in Bangladesh Marlboro.

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Mission
Invest in Leadership: We will invest in excellent people, leading brands and external
stakeholders important to our businesses' success.
Align with Society: We will actively participate in resolving societal concerns that are relevant to
our businesses.
Satisfy Adult Consumers: We will convert our deep understanding of adult tobacco consumers
into better and more creative products that satisfy their preferences.

Vision
Provide high quality and innovative products to adult smokers, generate superior returns for
shareholders, and reduce the harm caused by smoking while operating our business sustainably
and with integrity

Why we have chosen this

company
Philip Morris International Inc. (PMI) is an American global cigarette and tobacco company,
with products sold in over 200 countries with 15.6% of the international cigarette market outside
the United States. Their international and local brands are sold in more than 180 markets. They
have the industrys strongest and most diverse brand portfolio, led by Marlboro, the worlds
number one selling brand.

11

In Bangladesh, British American Tobacco Bangladesh (BATB) is the number one tobacco
company in tobacco industry of Bangladesh, which was incorporated in 1972. Accrding to the
research of Rahman (2010), The market share of BATB is around 44% in the Dhaka Metro. In
this high competitive market PMI is also doing well. So, we have chosen this company because
we wanted to study how they are doing their business. Moreover, we wanted to find out what are
the strategies that they use to sustain in this competitive industry and what are their core
competencies.

Purpose
In Bangladesh tobacco industry they are doing good business in highly competitive market. PMI
is fighting with leading brands BATB. So, we wanted to study on their business strategies which
are helping them to succeed and do a research on the industry it belongs to.

12

Which industry PMI belongs to

Philip Morris International Inc. (PMI) belongs to the tobacco industry. Its the leading
international tobacco company, with seven of the worlds top 15 international brands, including
Marlboro, the worlds best-selling cigarette brand.
In Bangladesh, British American Tobacco Bangladesh (BATB) is on the top in tobacco industry
of Bangladesh, which was incorporated in 1972 and it alone has 44% share in Dhaka city. So,
PMI is still fighting in this highly competitive market.
About 58% of men and 28.7% of women smoke or chew tobacco in one of the cheapest tobacco
countries across the globe making up 43% of its total adult population, it showed. Bangladesh
ranked among top tobacco consuming countries where 57,000 people over the age of 30 die each
year from tobacco-related illness.
The survey revealed that tobacco consumption in Bangladesh sharply rose in recent years, with
cigarette sales going up by 40% and tobacco use in the form of bidi increased by 80% between
1997 and 2010. Compared to 50.9 billion cigarettes bought in 1997, the consumption was 71.8
billion pieces in 2010, while bidi sales climbed from 43bn in 1997 to over 81bn in 2010.

13

Industry Analysis
Bangladesh ranked among top tobacco consuming countries where about 58% of men and
28.7% of women smoke or chew tobacco (HDRC, 2010). According to Global Adult Tobacco
Survey (2009), the total smokers in Bangladesh are 20.3 million. The tobacco industry is mainly
driven by young population growth and innovative value chain strategy. The overall tobacco
industry can be divided into two market segments: Bidi market and Cigarette market. The Bidi
market is comprised of 69% of the tobacco industry and by far it dominants the industry.
However, recently the Bidi market is experiencing decline in sales. The other segment of the
tobacco industry is the Cigarette market. Cigarette is one of the leading segments in the tobacco
industry of Bangladesh that is comprised of 31% of the industry. The Cigarette market can
further be divided into four segments: Premium, High, Medium and Low market segments.
Bangladeshs annual cigarette sales are now estimated at more than Tk 10,000 crore. The
cigarette industry is growing at a rate of 3.4%.
The cigarette industry of Bangladesh has been approached to maturity stage in the recent years.
Overall cigarette industry experienced a slump in 2013 because of turbulent external factors
which progressively worsened towards the end of the year. Moreover, the consistent rise in
excise duty and regulatory restrictions are the biggest challenges for the sector. Therefore,
companies try to find innovative strategies in terms of qualities, pricing and marketing to cope up
with the challenging environment where they can operate and maintain competitive advantages.
The segment growth varied during the year. The Low segment, which was growing over the last
few years, witnessed a slow down this year. The Medium and High segments were more resilient

14

due to product quality and favorable market dynamics. The Medium segment took a sharp
decline in the first half but made a partial recovery during the latter half of the year. The High
segment which was on a declining trend in previous years started to recover in 2013 due to
prudent pricing and distribution expansion. However, the Premium segment once again came
under heavy pressure and experienced a decline after the mid-year price increase.
Price hikes by cigarette manufacturers in the second half of the year resulted in an improvement
of the profit margins despite a low sales volume. Historically in the cigarette segment, sales
volume decline due to price hikes has always been temporary and has recovered within a shorttime span. The trend is expected to continue this round and cigarette manufacturers are expected
to show better revenue and profit growth in the upcoming years.

Industry Structure and Major Players of the Industry

The current cigarette industry of Bangladesh is oligopoly in nature with limited number of
players. Cigarette industries follow different segments for marketing and satisfying customers.
Due to high entry Barriers such as huge capital requirements, strict rules & regulations,
incumbency advantage, unequal access to distribution channel, economies of scale and have
made it difficult for new firms to enter the industry. Currently there are four market segments in
tobacco industry- Premium, High, Medium and the Lower segments. Not all the companies in
tobacco industry cover these segments. Dhaka Tobacco covers the premium and lower segments,
Sonali Tobacco, Abul Khaier Tobacco and Alpha Tobacco operates in the lower segments of the
tobacco industries. Only BATB operates in all the segments of the market. However, there are
some individual importers who import some branded cigarette like Dunhill, Camel, Black etc. In
every segment there are various brands which may cause the brand dilution.

15

Premium brand is the higher brand of cigarette in the market. There are various brands which
could be considered as the premium brand. Basically in Bangladesh there are Benson & Hedgesregular, lights and Marlboro- regular and lights are the two brands which operate in the premium
segment. Market of the premium segment is not very big and this is not a cash cow too for any
firm, but it provides the brand image. Now in Bangladesh there are only two companies
operating in this segment. Even though British American Tobacco is the market leader of tobacco
industry in Bangladesh, it faces fierce competition from the new entrant Marlboro of Philip
Morris International. Marlboro entered the Bangladesh market in partnership with Dhaka
Tobacco Industry, a concern of local tobacco giant Akij Group. In the premium cigarette
segment, BATB holds approximately 66% of the market share and rest of the market share held
by Philip Morris Bangladesh.

Controlling forces of profi tability & Industry Profi tability

Controlling forces for profitability for the cigarette industry in Bangladesh are;

Quality of the product

Consumption
Efficient Distributing Channel
Customer satisfaction
Cost and time Efficient
Innovative marketing strategy like below the line marketing activity
Government rules and regulation

Industry profitability includes major key points like:

Customer base and strong customers relationships

Growth of the country
Customer demand and usage
16

Government rules and regulations

Role of suppliers
Role of the local distributors

Segments of Cigarette

Segments

BATB

PMI & Dhaka

Abul Khair

Sonali Tobacco

Premium

B&H- FF and

Tobacco
Malboro-Red

Tobacco
N/A

N/A

BG
Gold Leaf

and Gold

High

N/A

N/A

Medium

JPGL, Pall Mall

Castle

Low

Star, Capstan,

Navy, GoldMine,

Marise, Top10,

Gold Hill,

Pilot, Scissors,

K2, Sheikh

Gold Life

Sunmun

Gold Flake

17

Market Shares

Premium Segment (Dhaka Metro)

2%
BATB

32%

Philip Morris

66%

Imports

Industry Life Cycle

18

General Environment Analysis

Political
Political factors have a positive effect on the industry

Political instability is a common scenario in Bangladesh. The clash between the two major
parties hampering the economic growth of this country. Bangladesh economy had faced a
difficult time in 2013 as the clash between the two parties and their allies was very intense.
Tobacco industry as a whole suffered a lot, as the production and the distribution system was
affected by the political instability. The political clashes has reduced a lot after the controversial
5th January election. Awami league as a ruling party has a strong position and from the recent
action of the opposition it is clear that the political situation of this country will remain same for
at least next few months. Current governments have a favor towards the tobacco industry and it
didnt increase the tax for last three years due to lobby by the lawmakers. Politicians consider the
Tobacco industry owners and the workers as their potential vote bank, so many MPs are trying
to make sure that the tobacco business stays out of trouble.

Economic
Economic factors have positive effect on the industry

19

In Bangladesh, the gross domestic product (GDP) in Fiscal Year 2013 (ended 30 June 2013)
grew by 6.1%. This growth rate is not good compare to last few years but it is still good enough
for a developing country like Bangladesh. The foreign exchange is a key factor for our economy
because As Industry grew by 9.0% and our industrial capital goods are heavily relies on imports.
For this we need a stable exchange rate and the good sign is that its stable and still in a good
move since 2012.

Inflation is a key indicator of an economy because purchasing powers of individuals heavily rely
on inflation. The current inflation rate is 7.44 which is still good compare to 2010. Due to
political instability it is really difficult to keep it in this figure but it is still in good figure because
food inflation is not rising too much as it is predicted.
The unemployment rate is on average near about 5% in last five years. The problem is that the
most unemployed people are underemployed. People are engaged more in agricultural sector
than it requires are the main reason of the underemployment. But people are slowly but gradually
moving to the manufacturing sector for searching a better live hood. Though they are not skilled
20

in this sector but as the labor cost is still low and as they are interested in this sector it is not
difficult task to make them skilled workforce through the training process.
The access of credit is not so easy at this moment because some loan manipulation has occurred
in last years. But it is not yet tough if the business idea and process is good enough. Besides at
this moment bank has excess money supply because political uncertainty deterred investment.
So it is easy to get the credit at lower interest rate and it is really helpful for a business. After all
we have a close look in global economy because global economy influences a lot in our local
economy because of globalization.

Social
Social factors have a negative effect on the industry
According to the World Health Organization (WHO) Bangladesh is worlds one of the highest
tobacco consuming country. According to them Bangladesh has about 20 million male smoker.
So it is obvious that cancer patients in Bangladesh is high. The tobacco related death rate is 5%
higher than India. People are becoming aware of the causes and consequences of cancer, but
many people smokes even after knowing that it causes death. There are social causes behind this.
In this densely populated country people are having different kind of problems and frustration
regarding various issues is growing among them. It is seen that smokers smoke a lot when they
are under pressure. Adventure seeking teens sometimes try smoking and they get used to it and
they cant give up, sometimes kids see their parents smoking and try to copy them, sometimes
friends are the reason behind smoking. Many people dont like smokers and there are many
organization who prefer to recruit nonsmokers. Government and social organizations runs
different anti-smoking campaign to make people aware. Anti-tobacco campaigns are getting
success, many people giving up smoking or trying to give it up. There is also a pressure from the
21

family members to give up smoking, many parents today talks about the bad effects of smoking
and discourages their kids.

Technological
Technological factors have positive effect on the industry
Technological factors affect the operations of any industry. In Bangladesh almost all the existing
tobacco companies follows the same technology. For e.g. inspirer of being an international
organization Phillip Morris uses the same technology and factory as the local company Aziz . Where
Aziz produces cheap cost biri and PMR produces high quality cigarettes. The making process of all
the cigarette are almost the same. It is the raw materials that is different. The tobacco industry in
Bangladesh are offering different flavors and taste of cigarettes. This is because of the available
technology are enough for the industry to offer new things every once in a while.

Environmental
Environmental factors have negative effect on the industry
Tobacco industry can be identified as an enemy of the environment. This is because tobacco are
plants that needs to be cultivated but these plants make the land fertile for growing more tobacco
and makes it incapable of growing any other thing. In a country like ours where we are highly
dependent on agriculture the entry of tobacco in agriculture is bad for the environment. It is
making the land incapable of producing crops that are really needed. Moreover growing tobacco
are getting more attractive to the farmers because of the financial assistance from the tobacco
industry and also higher income. If more and more farmers gets interested in cultivating tobacco
it is a real danger for the environment because the amount of fertile lands will decrease.

22

Tobacco industry also leads to extensive deforestation because they need to make room for new
crops and also the need for timber to fuel the heaters to dry tobacco leaf.
The environmental impact of tobacco production has been taken up by the major tobacco
companies as part of their portfolio for corporate social responsibility. The major tobacco
companies display their environmental credentials by describing on their websites their adoption
of sustainable and low-impact practices from farm to factory. But no matter how clean or green
tobacco production can be, ameliorating environmental concerns ignores the most obvious
environmental impact of tobacco productionthe deaths of almost five million people
worldwide each year.
Currently British American tobacco is cultivating tobacco in Bangladesh on the other hand
Phillip Morris is importing their tobacco from other countries. But it is only a matter of time.
Soon they are also expected to start their cultivation operation in Bangladesh.

Legal
Legal factors have a negative effect on the industry
When doing a business in a particular country a company must follow the rules and regulations
of that country. Legal issues has a huge influence on the industry. Laws varies from country to
country, state to state. Bangladesh has laws that regulates the tobacco industry and it became a
Party to the WHO Framework Convention on Tobacco Control on June 14, 2004.
The Smoking and Tobacco Products Usage (Control) Act, 2005, which is amended by the
Smoking and Tobacco Products Usage (Control) (Amendment) Act, 2013, is the principal law
governing tobacco control in Bangladesh. The Smoking and Using of Tobacco Products

23

(Control) Rules, 2006 provide further guidance to the extent they do not contradict with
provisions of the Act. The most important features of the amended law are:
All kind of smokeless tobacco came under law. Accordingly leaves, roots, branches and other
parts of tobacco or such plants should be treated as intoxicants. In addition to smoking tobacco,
tobacco powder (gul), aromatic tobacco (jorda), processed tobacco (khoyni) and white leaves
(Sada pata) of tobacco will be considered as tobacco products.
Pictorial warnings, covering 50% of the surface, on both tobacco packet sides (also for chewing
tobacco and bidis) are included. They should be combined with written messages.
The definition of public places & public transports is elaborated. Covered restaurants,
workplaces & festival venues are to be considered as public places. The fines for smoking at
public places or transports has been increased from 50 taka to 300 taka. Furthermore,
owners/managers of public places/transports will also be liable for ensuring their
places/transports to be smoke free.
All direct and indirect advertisements and promotions for tobacco products are banned. Also
sponsorships and CSR (corporate social responsibly) propaganda by tobacco companies are
banned. Additionally, smoking scenes in films, video documentaries or in TV dramas are a
punishable offence.
The sale of tobacco to or by minors is banned. The fine for violation is 5.000 taka.
The law also formally established the National Tobacco Control Cell (NTCC) at the Ministry of
Health & Family Welfare. NTCC will work for the proper implementation of the law, monitor
tobacco control activities, research on tobacco control and do related activities/actions on
tobacco control.
24

Bangladeshs tobacco tax structure is complex. In Bangladesh an excise tax is imposed as a

percent of price of the tobacco products. This excise tax varies significantly across tobacco
products and brands. Cheaper brands have much lower tax rates than expensive ones. The tax
structure for cigarette is a tiered structure that imposes different ad-valorem taxes based on retail
price slabs. A VAT of 15% on all tobacco products is applied to all tobacco products.

Competitive Environment Analysis

Porters Five Forces Analysis
Threat of new entrants
Tobacco industry of Bangladesh is now in a maturity stage as the people of Bangladesh are
aware of the product and there is a huge group of customers who enjoys smoking and have
chosen their preferred brands. However, threat of new entrants is low because of following
reasons:
Barriers to entry
Tobacco industry contains some sophisticated rules and regulations. There are certain numbers of
legal barriers to enter this market because tobacco is injurious to health and it also creates
negative impact on the environment. Some foreign well known cigarette producers are already in
the market, some local investors also has joined the race. So, it will be very difficult for a new
company or brand to compete with those existing market pioneers.
Government and legal conditions
Government and legal barriers are very high for new entrants as tobacco contains nicotine which
is very dangerous for human health as well as the environment. Health concerns have fostered
25

legal and regulatory pressures and it limits the growth prospects of this mature industry.
Moreover government has strong barrier of marketing and advertising such kinds of products. At
the moment, there are two main tobacco industry associations i.e. Bangladesh Cigarette
Manufacturers Association (BCMA) and Bangladesh Biri Manufacturers Association (BBMA)
representing the industry. These associations also have strict policies of producing cigarettes.
Huge capital requirements
To compete with the existing companies a new company has to invest a lot of money. Tobacco
industry needs a great amount of capital investment. Technological advancement now has taken
the industry in a new standard and the existing companies are using new technologies to give the
consumers more value. To compete with them a new company has to invest a great amount of
money for buying modern equipment and machineries.
Economies of scale
The existing firms are running their operation for many years. So it is hard for a company to
enter with a new spirit to compete against the cost advantage of other competitors. The industry
is very price sensitive in nature. It is also a stick selling market, which means that most of the
tobacco consumers normally buy tobacco in sticks, not in packs. These two features-price
sensitive and stick selling-influences the business philosophies of the companies. So it is a
disadvantage for the new company.
Access to distribution channel
Bangladesh government has strict policy against direct advertisement of tobacco. So distribution
channel needs to be very strong to sell the product and increase the consumption of tobacco.

26

Moreover, a new entrant may have to persuade the distribution channels to accept its product by
providing extra incentives which reduce profits.
Product differentiation
Product differentiation creates a barrier to entry by forcing entrants to incur expenditure to
overcome existing customer loyalties. Tobacco industry of Bangladesh is no longer in a growth
stage. The existing companies have different categories of cigarettes for different customer
segments. This is a very challenging task for the new entrants because consumers are familiar
with the existing products and they are habituated in consuming these. A new company has to
recruit a trained workforce who can accept the challenge.
Cost advantage independent of size
Existing companies has cost advantage not related to size. The existing firms has expanded their
business for many years. They are enjoying cost advantage because of their land, technology,
management, supply chain system, know-how, distribution channel and loyal customer base. For
a new entrants it is very difficult to compete with these points.
Expected retaliation
Expected retaliation from the competitors are very high because strong and powerful companies
are involved in this industry. The new entrants in this marketplace will be treated seriously by
existing firms, they may find themselves under attack by these incumbents. The number of
competitors who will retaliate is high, they are holding a large portion of the economy, and they
are capable of controlling the access of resource and distribution channel, last of all they have
capability to influence government and local bodies.

27

Bargaining power of suppliers

The main components of production of cigarettes are cigarette paper, seam glue, tiffin paper,
tiffin glue, filter paper, plasticizer, tobacco, ink, cigarette butt or filter. The bargaining power of
suppliers are low because of following reasons:
Supplier concentration
This is an advantage of supplier. But in the tobacco industry this advantage is missing. Because
the companies like British American Tobacco, Dhaka Tobacco Industries, Abul Khair Tobacco,
Nasir Tobacco, Azizudin Industries and New Age Tobacco produces their tobacco in the rural
areas of Bangladesh. Philip Morris imports its tobacco. Other components are also imported by
them. So the suppliers are fragmented and their bargaining power is also low.
Switching cost
There is no point of switching cost because the companies are engaged in vertical integration as
the companies produces their raw materials by using their own resources.
Threat of forward integration
Threat of forward integration is very low because the companies produces their raw materials.
Only they import their machineries from different organization but they are not really a threat
because they are operating in a different manufacturing industry. Moreover, it is a risk for the
new entrants because the industry switching cost and legal barriers are very high.

28

Threat of Substitutes
Though cigarettes are by far the most common form of tobacco product used in the whole world,
it is not the only form. There are many substitute tobacco products for cigarettes. Most of these
products are very often used by the people who are in a period of quitting the habit of smoking.
All the substitute products and the level of threat posed by them is given below
Bidis: Threat of smoking bidis is very low as these are products that consist of hand-rolled tendu
leaves containing low-grade tobacco and are tied up with string. Thus premium cigarette smokers
are not likely to convert towards bidis.
Chewing tobacco: Chewing tobacco like Jorda is very popular in Bangladesh. They have a
very large number of consumers. Usually they come up with Beatle-nut and posing a constant
low level threat as a substitute of cigarette.
Cigars: The threat of smoking cigar is moderate. The appeal of many flavors, cigars have
traditionally been taxed at a much lower rate than cigarettes, resulting in much lower consumer
prices.
Pipes: Pipes use black tobacco which carries a higher risk giving a mortality rates of 20 - 40%
higher. Water pipes, also called Hookahs or Shisha have become more popular in very recent
years among teens and young adults. Therefore the threat seems to be pretty much moderate.
Natural cigarettes: Threat is high as these cigarette brands are advertised and heavily promoted
as safer because they are additive-free but they contain chemicals which are extremely dangerous
when burned and inhaled.
PREPS: This stands for "Potentially Reduced Exposure Products". These are alternative tobacco
products put out by various tobacco companies with the explicit or implied claim that they are
29

less harmful than mainstream products. They have been approved to help with smoking cessation
and obviously posing a very high threat.
Herbal Cigarettes: Herbal cigarettes also called tobacco-free cigarettes or nicotine-free cigarettes
are cigarettes that do not contain any tobacco, instead being composed of a mixture of various
herbs and other plant material. They are often used as a substitute for standard tobacco products,
and many times are promoted as a tobacco cessation aid. So the threat from this is very high.
E-cigarettes: An electronic cigarette is a battery-powered vaporizer which simulates tobacco
smoking by producing a vapor that resembles smoke. As people have a perception that ecigarettes are safer than smoking tobacco products and possibly as safe as other nicotine
replacement products, therefore it is also posing a very high threat to this cigarette industry.

Bargaining Power of Buyers

Considering the fact that cigarette is an individual consumer product, the buyers that can be
detected for cigarette industry is just the consumers and the retailers.
Consumers: The consumers are the ultimate buyers of the cigarettes. Illustrating some factors of
the consumers of cigarette industry like the high brand loyalty of consumers, habituation factor
and addictiveness makes the consumers a bit weaker in terms of the bargaining power. The
consumers usually do not shift to other brands than what they are habituated to smoke. Moreover
it is not a habit that can be easily ceased which puts the consumers in a position not to pose very
high power while bargaining. On the other hand considering the economic and pricing factor,
many of the consumers in a consumer insight generation survey by Phillip Morris International
in 2014 inferred that constant increase in price due to high duty on cigarettes might cause them

30

to shift towards lower priced brands or reduce smoking or quit. Therefore, analyzing the above
situation the bargaining of consumers can be taken as moderate in cigarette industry.
Retailers: Another primary buyer of cigarette industry is the retailers who sell cigarettes to the
consumers. A retailer insight generation survey by Phillip Morris International in 2014 reveals
that the bargaining power of retailers in cigarette industry is low as because of the consumer
demand and other trade marketing factors, they have very little to say in case of exerting their
power.

Intensity of Rivalry
The competitive rivalry in the Tobacco industry of Bangladesh is very high. Since the inception
of Marlboro brand in Bangladesh in the year 2008, the intensity of rivalry in the 10 billion
premium cigarette market has been increased multiple times. There are also some different
factors that are fueling the rivalry among the companies in Tobacco Industry of Bangladesh.
The process of new technology creation, utilization, and commercialization ultimately leads to
changes in organizational patterns, and in particular, strategic alliances and mergers and
acquisitions as firms restructure themselves around the opportunities being created. For example
to enter in the market and compete with the market leader BATB, PMI went for strategic alliance
with volume leader of Tobacco industry of Bangladesh Akij Group. Besides, innovative
technology, marketing and branding strategies are constantly used by the two major competitors
in premium market, BATB & PMI to compete with each other. Besides, new technologies are
being used constantly to market innovative products. The new launched high technological
product of BATB is B&H Fine Cut. To compete with PMI is bringing another high technological
product with ultra-modern technology to provide smell free smoking and charcoal filter. So the
rivalry in premium market is extreme. Besides in medium and low segment the competition is
31

not as fierce as the premium segment, although in low segment Navy & Star are tough rivals
competing each other.
Industry Rival
In Bangladesh Tobacco industry, competitors are heterogeneous. Companies differ themselves in
terms of resources and capabilities and seek to differentiate their products from competitors. For
example BATB has the most efficient supply chain for which taking advantage greater
availability of their product and thus outperforming immediate competitor PMI in premium
cigarette category.
Rivalry intensify
Competition in Tobacco Industry of Bangladesh is too much intensified because many almost
equally balanced competitors are there in every segment. Industry growth as mentioned earlier is
somewhat moderate which a big issue is also. Moreover, fixed cost and storage cost is very high
in Tobacco industry. Lastly, the exit barrier is also very high in Tobacco industry of Bangladesh
due to specialized assets, fixed costs of exit, strategic interrelationship, emotional barriers,
government and social restriction etc.

32

Macro-environment affecting
Porters Five Forces
The macro-environment is grouped into seven environmental segments:
1.
2.
3.
4.
5.
6.
7.

Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical

In Tobacco industry, to successfully deal with uncertainty in the external environment and
achieve strategic competitiveness, companies must be aware of these segments. These are the
segments which indirectly creates both opportunities and threats for the companies.
Demographic
Demographic segments are commonly analyzed on a global basis because of their potential
effects across countries borders and because many firms compete in global markets. Population
size, Age structure, Geographic distribution, Ethnic mix and Income distribution are the factors
that are playing a big role in the tobacco industry of Bangladesh. As a result this segment is
inducing bargaining power of buyer

33

Economic
Usually price increased do not affect the brand loyal segment, but the lower segment gets
influenced with the price increase. Price increase may depend on lot of factors, like increase in
tax or the price increase of the raw materials. And with his increase in the purchasing power and
economic emancipation, consumers will shift to higher segment brands. This segment induces
threat of buyers and threat of competitive rivalry.
Political and legal
Due to political instability Tobacco industry as a whole suffer a lot, as the production and the
distribution system is affected. Besides, legal issues has a huge influence on this industry. The
regulations for a tobacco company is usually more than other FMCG companies. In Bangladesh
it is even getting stricter day by day because of recent amendments. This segment induces threat
of suppliers and threat of new entrants.
Sociocultural
Increasing awareness of the consumers might well affect the sale of the brands. Increasing health
campaign, awareness and lifestyle of people also affect the consumption of cigarettes. Like more
stressful life can lead to more consumption of cigarettes. People also get influenced in choosing
their brands influenced by their peer or reference group. Threat of substitute and threat of buyer
is covering this segment.

34

Technological
The production of cigarettes and quality control and checking can have influence on the overall
production process to a great extent. Import of new machinery includes a lot of internal
communication with the factory workers to make them understand the operation and also to
reduce their fear of getting laid off because of the new machinery. Threat of suppliers is an issue
in this segment.
Global
Global market has very little to influence the tobacco industry of Bangladesh interms of direct
product import. As directly importing tobacco has a very high excise duty so importing globally
produced is not an efficient way to cigarette business in Bangladesh. On the contrary most of the
machineries that are being used to produce cigarettes are imported. Thus bargaining power of
buyers is a factor of this segment.
Physical
This segment refers to potential and actual changes in the physical environment and business
practices that are intended to positively respond to and deal with those changes. Considering the
factors like Minimizing a firms environmental footprint, Availability of water as a resource,
Producing environmentally friendly products, Reacting to natural or man-made disasters;
obviously a tobacco cannot go with this factors as cigarette is a product that instead harms people
health. But corporate social responsibilities done by these tobacco companies can be major issue
to cover this segment. All the five forces of porters induce this segment.

35

3I Analysis
3I represents Immediate, impediment and invisible competitors for a company. The 3I analysis of
Philip Morris Bangladesh is given below

Immediate competitors
Philip Morris only produces Marlboro cigarette in Bangladesh and it is a premium brand. They
have two types of cigarette one is Marlboro Red and another one is Marlboro Gold. Both of them
are same in price. The immediate competitor to them is British American Tobacco and if we
consider as brand then it would be Benson & Hedges. It has four sub brands within the same
price range of the Marlboro cigarettes. These are Benson & Hedges Full Flavour, Benson &
Hedges Blue Gold, Benson & Hedges Switch and Benson & Hedges Fine Cut.

Core Competency of BAT

BAT has a very strong distribution channel. Their system of monitoring is very up to date.
Benson & Hedges is coming up with new flavors of cigarettes within the same price
range.

Impending Competitors
If the other tobacco companies with low market share operating in Bangladesh come up with a
premium brand then they can become impending competitors of Philip Morris. Currently along
with BAT there are Abul Khair Tobacco, Nasir Tobacco, Alpha Tobacco and Azizuddin Tobacco
who are dominating the medium and low price segment of cigarette. If they come up with a

36

premium brand they can become an immediate competitor of Philip Morris. But currently they
are the impending competitor of Philip Morris.

Invisible Competitors
The potential invisible competitor is Japan Tobacco International or JTI. JTI, acquired in 1999
from R.J. Reynolds, is an operating division of Japan Tobacco Inc., handling the international
production, marketing and sales of the group's cigarette brands. It sells Camel, Salem, and
Winston brands outside the USA. They can enter into Bangladesh with their widely held brand
Camel & Winston which are also seems to be popular among many of the Bangladeshi
Consumers. Among this two Winston falls under premium cigarette category which might be a
potential competitor in the premium cigarette market of Bangladesh.

37

SWOT Identification
Matching External Analysis with Opportunities and Threats
PESTLE
Political- Positive
Economical- Positive
Social- Negative
Technological- Positive
Legal- Negative

Opportunities:

Number of smokers increasing. According to WHO

there are 21.9 million smokers in Bangladesh.

The young people (15 to 24) is 20% of the countrys
total population, so there is a huge market opportunity

Environment: Negative

considering these young customers.

Purchasing power increased as a result migration from

Porters 5
Forces

cheaper cigarettes to premium brands increasing.

Increasing push sales through retailers by providing

Threat of new entrantsLow

Bargaining power of
buyers- Moderate
Bargaining power of
suppliers- Low
Threat of substitutesModerate
Rivalry among firms-

them attractive incentives and training.

Introducing light cigarettes and smokeless cigarettes
Introducing a High end product to compete Gold Leaf.
Adding value by introducing new technologies

Threats:

Anti-smoking campaigns are getting popular and awareness is increasing.

Tobacco regulation laws and taxation policies are very strict.
Pressure from the environmentalists, as tobacco has a very adverse effect on the environment.
Intense competition between the existing firms
BAT and other tobacco companies already have loyal customer base.
Political situation is mostly unstable; a change in government may seriously affect the entire
industry.

38

Matching Internal Analysis with Strengths and Weaknesses

Strengths:

Industry wants
the following
factors:

Core competencies

Investing heavily in brand development and

innovation

Strong Brand Recognition

Continually researching to improve customer

satisfaction and creating loyal customer
group
Unique
promotional
and
aggressive
marketing strategies
Forming strategic alliance with local player
Akij Group
Strong and dedicated management team
The parent company Philip Morris
International, USA is a top class cigarette
manufacture and its brand Malboro is
widely recognized

Leading-Edge R&D

Strong Customer
Base

Continually
Innovation and
Product
Development

Core competencies of
competitors
Strong distribution channel

Customer
Responsiveness

Diversified portfolio of
products

Complying with
tobacco rules and
regulations
Efficient
Distribution
Channel
Efficient Supply
Chain
Management
Brand Recognition
Diversified
portfolio of
products

Weaknesses:

Due to limited manufacturing facilities PMI cannot offer all of its popular brands
(like L&M, Camel etc)
Not diversified in terms of geographical operations(e.g. their current market is
mainly in Dhaka and Chittagong) and products both
Even though the companys performance is good, still BATB is the dominant player
in the industry (especially in premium cigarette market)
The immediate competitor BATB has World class operations (Supply chain) and
Inventory management system
The companys distribution channel is not strong enough compare to its competitor
BATB

39

SWOT Identifi cation Table

Strengths
Weakness
Investing heavily in Due to limited

Opportunity
Number of smokers

Threats
Anti-smoking

brand

increasing. According

campaigns are

development manufacturing

and innovation

facilities PMI cannot to WHO there are 21.9

getting popular and

offer all of its

million smokers in

awareness is

popular brands (like

Bangladesh.

increasing

L&M )
Continually

Not diversified in

The young people (15

Tobacco regulation

researching to

terms of

to 24) is 20% of the

laws and taxation

improve customer

geographical

countrys total

policies are very

satisfaction and

operations(e.g. their

population, so there is a strict

creating loyal

current market is

huge market

customer group

mainly in Dhaka and

opportunity

Chittagong) and

considering these

products both

young customers.

Unique promotional

Focusing only on

Purchasing power

Pressure from the

and aggressive

premium market

increased as a result

environmentalists,

marketing strategies

segments where as

migration from cheaper

as tobacco has a

BATB currently

cigarettes to premium

very adverse effect

offering medium and brands increasing.

on the environment

medium segments
customers besides its
Forming strategic

premium brand
Even though the

Increasing push sales

Intense competition

alliance with local

companys

through retailers by

between the existing

player Akij Group

performance is

providing them

firms

good, still BATB is

attractive incentives

the dominant player

and training.
40

in the industry
(especially in
premium cigarette
market)
Strong and dedicated

The immediate

Introducing light

BATB and other

management team

competitor BATB

cigarettes and

tobacco companies

has World class

smokeless cigarettes

already have loyal

operations (Supply

customer base.

chain) and Inventory

management system
The parent company

The companys

Introducing a High end

Political situation is

Philip Morris

distribution channel

product to compete

mostly unstable, a

International, USA is

is not strong enough

Gold Leaf

change in

a top class cigarette

compare to its

government may

manufacture and its

competitor BATB

seriously affect the

brand Malboro is

entire industry

widely recognized
Adding value by
introducing new
technologies

Business Canvas Model of PMI

41

Business Canvas and Current

Model of Philip Morris
International
Key Partners
Equity Partners

Philip Morris International Bangladesh operates as a subsidiary of Philip Morris International,

Inc. Phillip Morris International entered in Bangladesh Tobacco Market by signing an agreement
with Akij Group of Industries in the year 2008. Both the companies unite their respective
business activities by transferring selected assets and liabilities, with each party holding an equal
economic interest. Later on, both the companies came into an agreement that the production and
distribution of the brand Marlboro (in the premium segment) will be done in collaboration with
Dhaka Tobacco of Akij Group but the management, executive and other legislative departments
will be directly supervised by Phillip Morris Management SA.
Event Management Partners
Due to strict tobacco control regulations, tobacco companies are not allowed to promote their
products directly through print and electronic media. Therefore, Philip Morris International took
a strategy to promote their product in an indirect way by arranging different luxurious events.
PMI arranges different concert Rock Nation, Rock City, Rock Town and style (premium event)
through which they promote their brand. To organize these types of events, they rely on their
strategic event management partners Live Square, PaperFox, Bitopi Spotlight.

Partnership with government agencies and regulators

To comply with the rules and regulation Philip Morris International closely work with regulators
and law enforcement agencies. Moreover, PMI also work closely with retailers and other partners
to implement youth smoking prevention programs.
Other Strategic Partnership
Philip Morris International has signed a global partnership with US-based NGO Verit to
improve the working conditions on firms in the countries (including Bangladesh) where tobacco
is purchased for PMI products. Verit has played a critical role, providing experience, advice and
hands-on support from conception, to implementation, to monitoring of the ALP (Agricultural
Labor Practices) Program.

Key activities
Few key activities of PMI is giving them an extra edge. Being a global premium brand they need
to maintain quality. So, to make it sure they import best ingredients for Marlboro. Another thing
is a global organization can never run well if they dont hire best and qualified people. So, PMI
also do that very carefully.
To reach the customer and ensure satisfaction they make their product available everywhere and
sometimes they are doing direct marketing as they cannot go for open advertising because of
legal issues. Their creative employees keep working for different product innovation (like
packaging), programs, events and other activities to reach their customer.

Key Resources
Strong Customer Base
PMI is one of the leading cigarette companies in the tobacco industry with approximately 17000
premium consumers out of a total market of approximately 54000 consumers (based on
operations in the premium segment only in Dhaka City). BATB is their only direct competitor
which is also the market leader having approximately 35000 consumers in the premium segment.
Brand Value and Recognition
PMI has brand recognition around the world for its quality products and it is continually trying to
boost its brand value even further by going through different important strategic alliances and
partnerships. PMI has taken the different types of initiative to create its brand value and
recognition for its premium brand Malboro. PMI heavily involve in consumers engagement to
enhance its brand value by arranging different types of events like Rock Nation Concert, Be the
One (a grooming session for upcoming business leaders) etc.
Financial Resources
As PMI is a subsidiary of Philip Morris International Inc., therefore, it has a strong financial
support from its parent company. Moreover, PMI Bangladesh has also the access to get the
financial support from the countrys one of the successful tobacco giant Akij Group.
Human Resources
Every enterprise requires human resources, but people are particularly prominent for this certain
business model. Human resources are crucial in knowledge-intensive and creative industries like

Tobacco industry because they rely heavily on human resources of experienced scientists and a
large and skilled sales force.
Physical resources
As a manufacturing company PMI heavily rely on capital intensive physical resources like
manufacturing facilities, buildings, machineries, vehicles and distribution network.

Value proposition
First of all, PMI produce Marlboro and it's an American global brand which is a premium class
cigarettes. So, it has a brand value which gives the user a status that they belongs to social class
A/B. Another thing is though Marlboro is a premium brand and they are comparatively lighter
version compare to other still they have a Marlboro regular version which is a bit stronger. So
that they can stick with the brand.
For the variation they make innovative packaging and limited edition version which makes
customer a bit different. PMI cannot do their advertising things openly because of legal issues so
that they sponsor different events and sell limited edition cigarette with free gifts.
Sometimes, they also go for direct marketing by their attractive and persuasive representative
and make a very short survey afterward give some souvenir to them.

Customer relationship
To maintain a good relation with customers PMI discourage their customers by showing safety
and awareness issues like "Smoking kills" this things are written on the packet which reflects
care for their customer.

PMI targets basically below 30 aged people who are young and fun loving so for them they
arrange concerts and other programs for young people. In those events they also sell Marlboro's
limited edition with souvenir and those sells people are very smart, friendly, attractive and
persuasive.

Channel
Most of the time channel they use to deliver the value is individual small stores near us and
another way is selling in different HORECAs. They also deliver the value through direct
marketing and in different events they sponsor by their highly qualified employees.
Usually non premium brand don't have particular shelf for Marlboro in superstores but as a
premium brand PMI does that for Marlboro.

Customer segment
The main product of PMI is Marlboro which they divide into different segments by finding out
common interest of them. In segmentation they have made a link in geographic, demographic,
psychographic and behavioral segment.
First in geographic segment most of the customers of them are urban people who can afford
Marlboro cigarettes. Marlboro is a premium brand which everyone cannot afford. Basically they
are target age is legal age of smoking to 29, that means young people who belongs to social class
only A and B. Most of them have high income or come from pretty well of family and they are
educated. In this sense like BAT they dont have products targeting every segment.

Now, if we think about their segment according to their behavior we found that most of them are
young and enthusiastic. They pick Marlboro because they are not heavy smoker or sometimes
occasional smoker who likes lighter version of cigarettes.

Cost Structures
Cost structure of an organization is very important in determining the business model. PMI has
quite a bit expensive cost structure as it is the largest cigarette companies in Bangladesh.
Cost of Purchasing of raw materials
PMI purchases the high quality tobacco leaf from the farmers from more than 30 countries
including Bangladesh. Therefore, PMI each year incur huge amount of costs for purchasing high
quality raw materials which is a major source of the expense of the company.
Fixed Costs and Employee Benefit Plans
The company has to bear large amount of fixed costs because of their production facilities,
machineries, buildings and other equipment. Moreover, PMI provides a range of benefits to their
employees to attract the most talented people in the industry. The employees benefit plans
include employee pensions, postretirement health care and postemployment benefits (primarily
severance). At December 31, 2010, our discount rate was 5.40% for their pension and
postretirement plans. This rate was 50 basis points lower than 2009 discount rate.
Marketing and Advertising Costs
To compete in this competitive industry PMI has flourished them by spending huge amount of
money in advertising and marketing. With this strategy PMI has now captured almost 32%
market share. The main target market of PMI is urban people. Through organizing different
7

luxurious events they have reached almost 17000 premium customers but for that they had to
bear lot of cost.

Revenue Stream
PMI has only one revenue stream which is coming from the product they are offering
Marlboro. As PMI follows the fixed pricing strategy, therefore, their revenue and earnings will
boost up only when they could sell large volumes of cigarette. They constantly facing fierce
competition from BATB in the premium cigarette segment, therefore, they are working hard to
increase their revenue stream by targeting new market segments and trying to survive in the
industry.

Current Business Model of PMI

As described in the business level, corporate level and functional level strategy of Philip Morris,
they are upholding their flagship brand Marlboro using several strategies formulated by business,
corporate and functional level strategy. To be specific, Differentiation strategy is the business
level strategy they are following. Strategies like, strategic partnership, consumer engagement,
trade marketing & promotions, quality control, regulation, research & development, effective
branding, insight generation and all other strategies have led Marlboro for differentiation.

Core Competency
To point out, Philip Morris International has started operation in Bangladesh in the year 2008
with their flagship brand Marlboro. Since then its capturing the market share of premium
cigarette segment. Now, the question definitely arises that on what basis in terms of competitive
advantage, PMI is proceeding in the industry. After analyzing several resources and capabilities
of Philip Morris International, it is inferred that the global brand image and recognition is the
competitive edge that Phillip Morris have in the industry over their competitors. To mention,
Phillip Morris International is the no.1 tobacco company which has operation in 180 countries.
And regarding Marlboro, it is the only cigarette brand to be in the top ten most valued brand list
globally. Therefore reputation of Marlboro globally is itself giving the brand a competitive edge
over its competitors.

Corporate Level Strategy

Corporate level strategy is the key driver of a companys business model. A company fights for
its position in a particular industry and the industry is evaluated and determined by the manager
ranked higher in an organization. The main purpose of corporate level strategy is to make
decision about which industry the company will run its operation.
Another big role the corporate strategy plays is to determine the use of limited resources. Other
strategy has to be linked up with corporate level strategy of an organization to get their
preferable resources. It also determines the efforts and activities done with the business and
functional level strategy. Now here will be a brief description about how the corporate level
strategy works in the Philip Morris internationals Bangladesh operation.

Mission
By providing better and more creative product; related to tobacco and gaining customer
satisfaction is the main focus of Philip Morris. To compete with other brands and to ensure
excellence in value creation for the customers Philip Morris will use their experience which was
gained by operating in this particular industry for a long period of time.

Vision
Provide high quality and innovative products to adult smokers, generate superior returns for
shareholders, and reduce the harm caused by smoking while operating our business sustainably
and with integrity.

Ultimate objective
As a company which is newly operating in the market of Bangladesh, the ultimate objective of
Philip Morris is to grab most of the market share of tobacco industry. Their main focus is on the
consumers who are consuming or willing to consume premium cigarettes by providing them a
smoother and perfectly blended tobacco smoking experience.
Philip Morris is an US based company and now they are targeting the people of Bangladesh.
They are focusing towards the Asian market more and more. Even they have operation in India
but they dont have their operation in China as well. So we think that they are operating in
Bangladesh to capture the Asian market slowly. So, there concern will be not to lose their brand
value and by keeping this in mind we are analyzing their corporate level strategy. In Bangladesh
Philip Morriss corporate level strategy:
1) Strategic Alliance
2) Product Diversification

Strategic Alliance
Philip Morris is one of the largest players in the tobacco industry. Recently in the year 2008
Philip Morris started their operation in Bangladesh. It was a clean whistle towards the market
leader British American Tobacco. Because the main cigarette brand of Philip Morris is Marlboro
which is the bestselling brand in the world. Marlboro is considered as a premium brand and
obviously its closest competitor is Benson and hedges which is a premium brand of British
American Tobacco.
One of the strategies Philip Morris international uses is strategic alliance. They entered into a
joint venture with Dhaka Tobacco of Akij Group. Dhaka tobacco is a local tobacco giant and it
holds 40 percent shares of the local market by manufacturing mid and lower segment cigarettes.
3

By making a strategic alliance named joint venture with Dhaka tobacco Philip Morris is basically
using their agreement to produce and develop their product for the market of Bangladesh. Akij
has launched the global tobacco leader Philip Morris's brand as a franchisee.
After starting the operation in Bangladesh Philip Morris which is the US-based world's largest
tobacco company audited, evaluated and validated the factory where the premium brand would
be produced. As Philip Morris is using imported roasted tobacco and they are at the same time
very much quality focused so they valued the facility of Dhaka tobacco as the most reliable
source to produce its premium brand Marlboro. It helped them to introduce their flagship product
Marlboro to Bangladesh.
By using the agreement with Dhaka tobacco, Philip Morris has made their way to Bangladeshi
tobacco industry smoother. Using the production and distribution of Dhaka Tobacco, PMI has
captured almost 30% market share in the premium cigarette segment of Dhaka City. The
operation of PMI is still limited to Dhaka City. Using the distribution chain they are planning to
expand by the year 2015.
Product Diversification
Product Diversification is a primary form of corporate level strategy. In Bangladesh if we
consider the whole market the number of consumers smoking a premium brand cigarette is very
low. To compete and sustain in the tobacco market of Bangladesh launching a mid or lower
brand cigarette is highly preferable to increase the market share and profitability. Keeping in
mind Philip Morris is thinking about trying this concept within Bangladesh as well.
In Bangladesh half of the people live below the poverty line but the tobacco consumption rate
among this group is relatively high. In a research it has been found out that 10 million people in
4

Bangladesh currently malnourished could have an adequate diet if money spent on tobacco were
spent on food instead. So the number of consumers in this lower category segment is really high.
To serve this segment BATB and different local tobacco companies have several brands.
Moreover this lower category segment gives a large amount of revenue to the companies.
According to an official of Philip Morris Bangladesh they are going to follow this product
diversification strategy very soon. They are going to introduce lower brand cigarette for
Bangladeshi market. And it can be said that if they launch lower brand cigarette their target
market as well as revenue will increase. They will also be able to compete in a different segment.

The Relation between Corporate

Level Strategy of Philip Morris and
Its Mission
So the corporate level strategies of PMI are Strategic Alliance and Diversification and their
mission is By providing better and more creative product, related to tobacco and gaining
customer satisfaction is the main focus of Philip Morris. To compete with other brands and to
ensure excellence in value creation for the customers Philip Morris will use their experience
which was gained by operating in this particular industry for a long period of time
The strategic alliance strategy has helped both of the companies. It has helped PMI to use the
facilities of Akij and as well as to use their distribution channel. Akij already has 40 percent
shares in the local market who only produces the mid and lower segment cigarettes. With the
help of Akijs distribution channel Philip Morris has already captured 30% of the market share in
the premium cigarette segment of Dhaka city. They have different types of cigarette in the same

price which helps them to grab more consumers in the premium brand segment. Philip Morris is
a very experienced player in this industry. They have found that if they could refine the tobacco
more and make the filter with more quality they will be able to capture the premium cigarette
market. This has helped Philip Morris to grab a good amount of share in a very small time. Using
the channel of Akij they are planning to expand throughout the country by 2015.
The main goal of PMI is to gain consumer satisfaction by offering them better and creative
products. In order to compete in heavily in the tobacco industry of Bangladesh where most of the
people live under poverty line coming up with a lower brand will be helpful. In order to compete
in the lower brand segment Philip Morris is planning to come up with a lower brand cigarette
very soon. This strategy will help Philip Morris to gain more consumers from different segments.
Moreover If they come up with the lower brand segment it is expected that their this move will
be very successful as they are a very strong and old player in this industry and this will also help
to the consumers to enjoy the brands of such a renowned cigarette manufacturer who ensures
international quality. This will help Philip Morris to snatch the market dominance of British
American Tobacco and other local cigarette manufacturer.

Corporate Risk Management

Corporate risk management is used to reduce every kind of possible risks of the organization.
Corporate level management keeps eye on the risks of business level management and functional
level management and give guidance to its operation. It also monitors the economic and social
risks of the area of operation.

Brand name to capture the

market
Philip Morris recently started their operation in Bangladesh tobacco industry. It is a strategic
decision of the company to capture the Asian market more strongly. In these case the company is
using their brand name to make it easier for their business level management by making it
different from their rivals. They launched Marlboro in Bangladesh to compete with British
American Tobaccos pioneer brand Benson and Hedges. So the brand name of Marlboro itself is
a key to advertisement to the consumers.
If they tried to enter the market with a new brand that will definitely slow down their operation
in Bangladesh as people have to gather knowledge about a new product and sometimes it takes a
lot of time to make people educated about a new product.

Subsidy from India and Malaysia

Philip Morris operates its business internationally. In Asian market they are operating in India,
Indonesia, Malaysia, Pakistan, Vietnam, Singapore, and Japan and now they set up their
operation in Bangladesh. Bangladesh is a country where the tobacco industry is already
established so it will take time to be the owner of major shares in this industry. Already British
American Tobacco is dominating in this market.
In Bangladesh the laws and regulations against cigarettes are strong but not as strong as the
developed countries and maximum number of people are under the line of poverty so there is a
huge price sensitive market which is really potential. But as cigarette is a price elastic product so
people who are buying British American Tobaccos brand will keep consuming their favorite
7

brand. Now as Bangladesh is not strong enough in implementing law suits and there are scopes
to falsify the quality assurance so it is easier for other companies to start their business and keep
running its business with loopholes. Keeping in mind Philip Morris decided to use subsidy from
India and Malaysia if they face any challenges.

Business level Strategy

An organizations main focus should be provide value to the customers. To do so, they have to
think about the strategies by which they can gain competitive advantage. Competitive advantages
separate a company from its rivals. To gain competitive advantage company has to focus on their
core competencies. Business level strategy is very important because companys long term
performance depends on it.

Key Issues of Business Level Strategy

There are some key issues of business level strategies which are concerned about the customers
Of an organization and satisfying customers is the foundation of successful business strategies.
Therefore, before discussing about the business level strategies of Philip Morris, key issues in the
business level strategies are being discussed below:

Who will be served?

Philip Morris started its operation in Bangladesh by doing a strategic alliance with Akij. The
company now sells its premium brand cigarette Marlboro in Bangladesh. As they are selling the
premium brand cigarette the main target market is the people who are very quality conscious
instead of price in terms of smoking. Basically the high income people are the target market of

Philip Morris. Higher Income people means the people of middle class, upper middle class, and
upper class.
Moreover Philip Morris is planning to come up with lower brand cigarette in Bangladesh. If they
come up with the lower brand cigarette then then their target consumer will be the people of
middle class and lower class. They are the people who are price sensitive when it comes to
smoking.

Current Customer Segment

Philip Morris

Consumer
Segment

Higher Income
Group of people
who are quality
conscious in terms
of smoking

Future Customer Segment

Philip Morris

Consumer
Segment

Higher Income
Group of people
who are quality
conscious in terms
of smoking

Lower Income
Group of people
who are price
sensitive in terms of
smoking

10

What needs to be satisfi ed?

Philip Morris wants to fulfill customer satisfaction by giving its consumer creative, better
products and the best smoking experience. Currently they are selling premium cigarettes and
giving a variety of flavor in the same price. The company focuses to give the consumers best
smoking experience with quality ingredients and attractive ingredients. Moreover the company is
planning to come up with lower brand cigarette to grab the whole market and to meet the
smoking need of the lower and middle class people

How those needs to be satisfi ed?

Philip Morris has got very popularity in the premium brand cigarette in a very short period of
time. They have almost captured the 30% market share in the premium cigarette segment of
Dhaka city. To give consumers best smoking experience Philip Morris gives quality ingredients
in their cigarette which includes imported tobacco, better quality filter. The premium product
Marlboro has 3 different types of flavors in the same price range. This allows consumers to
choose from a variety of product. If we consider the case of premium brand cigarette their
attractive packaging is also an addition here which to some extent attracts consumes. Philip
Morris will come up with lower brand cigarette very soon. If they come up with it they will
fulfill the need of the lower income people of Bangladesh by giving them a cigarette in a price
which they can easily afford.

Five generic business level strategies

11

Figure: Five generic business level strategies

Diff erentiation strategy

Philip Morris has entered the Bangladesh tobacco industry with their most selling brand
Marlboro. Currently they are operating in the premium market of tobacco industry. The customer
who consumes premium brands of cigarettes are not conscious about the price what they
basically look for is the quality offered by the producer. Thus, rather than following the cost
leadership strategy, they are following differentiation strategy in the Market.

12

Philip Morris tried to enter the market using their brand name and brand value to differentiate
their products from others. By operating for long time in the tobacco industry they have gained
their experience regarding how to satisfy customers of a particular segment. So when they were
looking for a company to make a strategic alliance they were very choosy and they evaluated
each and every aspect of production system of the local cigarette manufacturers who offered to
make a joint venture.
After all the inspections they find out Dhaka tobacco as the most deserving one. So all the efforts
show how they are ensuring their quality. They also tried to make their production system
compatible with their mission by using imported tobacco which gives the customer the
opportunity to taste the cigarette which maintains international quality. Philip Morris refines their
tobacco and blends it very neatly to reduce the hazardous elements and also uses the finest and
smooth cigarette paper. They also conscious about the filters which also holds the value of a
premium brand.
Philip Morris also cares about the customer tastes. They are using some unique selling points of
their product to create the difference with the competitors. To mention, the recently launched
new flavor of Marlboro named Marlboro Advance has the USP of less smelling Technology with
Charcoal Filter. Another point of differentiation is their packaging. Packaging of every flavored
cigarettes maintains the elegant look. That ensures the premium quality of cigarettes with
premium pricing.
Now there is an opportunity towards them is to grab the other segments, if they want to do this
they have to enter the mid and lower level market segment. They are trying to figure out the
strategies to enter those market. If they want to maintain their premium brands they will look for

13

different strategies. They may come up with cigarettes with new brand name and follow cost
leadership or integrated cost leadership and differentiation strategy for those brands.

Competitive positioning and value creation frontier

Figure: value creation frontier

Philip Morris has chosen differentiation strategy to compete in Bangladesh tobacco industry. In
the value creation frontier they are trying to achieve quality as excellence. They launched
Marlboro recently in Bangladesh and it is a premium brand. So to compete with other brands it
has to communicate its product as a better quality product than others. Keeping in mind they
have selected the production plant of Dhaka tobacco to produce their cigarettes. It also assures
responsiveness to customer by using Akijs distribution channel and also they have come up
14

with image stores to give knowledge to the customers about their presence in the market and
ensures the availability of the product.

Figure: Competitive Positioning (M= Marlboro, B&H= Benson and Hedges, JP= John Player
Gold leaf, PM= Pall Mall, Navy)
In this figure we can see that Philip Morris wants to create this perception in consumers mind
that they will offer better quality at same price than their closest rival British American
Tobaccos premium brand Benson and Hedges.

15

Product Life Cycle

The tobacco industry of Bangladesh is already in Maturity stage. So Companies which are
fighting in this industry are more likely trying to differentiate them in terms of value providing.

Figure: Product Life Cycle of Tobacco Industry

The tobacco industry of Bangladesh is mostly dominated by British American tobacco and other
local companies. More than half of all men and about one in three women in Bangladesh
consume cigarettes. British American Tobacco's Benson and Hedges is the lone player in the Tk
10 billion premium tobacco market. The company sells about 200 million B&H sticks a month.
But Philip Morris International believes that it can make an early impact in this market because
of its global fame.
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Now to strengthen the trade marketing segment, PMI is largely focusing on the creating good
reputation in the trade market. They are creating Image Stores in all the areas of Dhaka City.
Approximately they have now almost 37 image stores solely for the purpose of strengthening the
trade market relationship. Philip Morris International has captured almost 30% market share in
the premium cigarette segment of Dhaka City.

Ansoff s Matrix

The Ansoff Matrix is a marketing planning tool which usually aids a business in determining its
product and market growth. This is usually determined by focusing on whether the products are
new or existing and whether the market is new or existing. Therefore after the analysis it can be
said that in the case of Bangladesh operation Philip Morris followed the market development
strategy. Philip Morris is a US based company which has expanded its operation in Bangladesh

17

through strategic alliance with Akij group. Currently it produces its number one selling cigarette
brand Marlboro in Bangladesh and with this bestselling cigarette they started serving Bangladesh
market which was completely new market to them. So it can be said that they are followed
market development strategy.
To give consumers a best smoking experience recently Marlboro came up with a new brand
which is Marlboro Advance. Moreover we have found out that Philip Morris will come up with
lower brand cigarette in future. Therefore it can be said Philip Morris is now pursuing Product
Development Strategy as the company has introduced and will introduce new products in the
existing market.

The BGC Matrix

The BCG matrix is based on the product life cycle theory. The tobacco industry of Bangladesh is
at maturity stage. Currently there are large foreign companies and a good amount of local
companies are there in the market who are competing with each other in different segments. If
we consider about the market growth rate it is relatively low as there are a good amount of
company operating in the industry so the market growth rate is low. In case of the market share it
is seen that Philip Morris is offering different flavors of cigarette in the same price range in order

18

to capture the premium cigarette market. Moreover the company is also planning to come up
with lower brands. Using the distribution channel of Akij Philip Morris has already captured
30% share in the premium brand cigarette in Dhaka city. So it can be said that market share is
high and is expected to get higher as they expand their operation. So after the analysis Philip
Morris can be identified as Cash Cow with high relative market share and low market growth
rate

Match between Business Level

Strategy and Corporate Level
Strategy
Philip Morris is following differentiation strategy targeting the middle class to upper class people
of Bangladesh and selling their premium brand Marlboro. Philip Morris International has
separate business level management for their operations in Bangladesh. Business level
managements strategy is very effective to gain the performance wanted by the corporate level
management. Philip Morris international, a US based Cigarette manufacturer started their
operation in Bangladesh recently. So they are using market development strategy to enter a new
market which is Bangladesh with their existing product Marlboro.
Corporate level management wants to grab the market in a shorter time frame and business level
has used the brand name to differentiate their products from the other competitor. Now Marlboro
captured 30% of the market share of premium brand cigarettes in a very short time. They are
using differentiation strategy because the consumer of premium brands are not price sensitive,
they are more quality conscious. They have used their experience to struggle in a matured

19

market. They ensured premium quality to make the customer satisfied and consumer also feels
their money is spend in a right place.

Functional Level Strategies

Organizations main objectives are not only to fulfill customers needs by providing them what
they want but also to sustain in the business. PMI is doing the same. But due to late entry in the
market they are not market leader but they are competing with market leader to be the next
leader in the market and hopefully they will be able to be so.
PMIs product Marlboro is a premium cigarette in Bangladesh. Most of the customers in
Bangladesh either Consumes PMIs Marlboro or BATs Benson and hedges. This is a sort of
addiction to its consumers.
To sustain in the market PMI followed some excellent functional level strategies. With their
strategies they can ensure efficiency, quality, innovation, and customer responsiveness.

Management Division
Management division of PMI is comprised of 5 unitsCorporate Strategy and Decision making Wing
This unit decides the corporate strategies that PMI uses and takes the decisions. Before
implementing any important decisions, the approval of this unit is required.
Corporate Affairs
This unit is basically a communication unit, the key responsibility of this wing is to communicate
with higher authorities and policy makers. In order to run the business an organization need to
ensure that it dont face any action from the administration or the policy makers. Meetings with
20

different ministries and Parliamentary committees plays a very important role in running
business smoothly.

Brand
This particular unit is responsible for branding and promotional activities. This unit monitors
market trends and oversees advertising and marketing activities to ensure the right message is
delivered for their product or service. Brand unit works with different teams, including product
developers, R&D, marketing personnel and creative agencies to make sure their company brand
values and image are followed.

Service development and Management

This unit main focus is on developing their service facilities, it is their responsibility to manage
the Dealers and the Agents.
Corporate sales
They are the one who are responsible for overall sales of Phillip Morris International. One of the
important duty of this unit is to forecast the sales of PMI. This unit helps the corporate strategy
and decision making wing in decision making by providing the necessary forecasting data.
Marketing Division
The marketing division Of Phillip Morris International has 3 parts

Product development Team

The main function of the product development team is to find out new scopes for existing
products. Through various surveys the product development team are trying to find out what
consumers want. Due to this team they were able to introduce new flavor of cigarettes. This

21

teams function is not only to meet new consumer needs but also see what the competitors are
doing. If the competitors are introducing a new flavored cigarette this team needs to find out
about it and see its market potential. If it is lucrative than this team needs to do something about
it. In most cases they come up with a similar product to compete with the rivals.

Media Team

One of the most important teams in the marketing division for PMI is the media team. The main
function that this team performs are monitoring the media, trade promotions, Consumer insights,
Holding events. Since PMI cant directly promote their product due to certain regulations they do
the following
I.

Trade promotions- The function of people engaged in this work is to offer different

discounts to the vendor. This discounts are not only limited to cash but also this can be free
merchandise, For example free t-shirt if the vendor sales a certain amount. They can also get a
instant cash back if they buy certain amount of Products at a time. Moreover the vendors are also
offered image stores. These stores are funded and decorated by PMI. The only thing that they
need to do is exclusively sell PMIs product. Most of the vendors in Bangladesh take this offer.
II.

Researches for Insight Generation The function of this team is to take surveys from

Consumers who consumes cigarettes. These surveys lead to massive insight of consumers wants
and needs. This way they can customize their product according to customers needs.
III.

Events- The function of this team is to hold different events sponsored by PMI. These

events are very prestigious. Because they cant directly promote their products they hold this
events to enhance their brand image. Some of their events are Style mania, Style matic etc. In
these events they dont directly use their names. They sponsor these events as a shadow.

22

Creative Team

The function of this team is to develop creative ideas of promoting the product. This department
identifies different creative ways in which PMI can promote their product without directly
involving their brand name.

Marketing Strategies
PMI is grabbing the market share very fast. To grab market shares they are using aggressive and
innovative marketing strategies. Some of them are discussed below:

PMI is offering image stores to get more and more vendors to exclusively sell their

products

PMI is using direct marketing through sales representatives. These representatives takes

surveys in the end they offer to try PMIs cigarettes. Sometimes they give offers to buy 2
cigarettes pack at a time to get a free lighter.

PMI indirectly sponsors many events that their usual target market craves to attend.

Through this events they can enhance their brand image.

PMI offers different souvenirs to their loyal consumers and vendors. For example t-shirts,

lighter, umbrella etc.

PMI arranges activation program like be the one. These programs not only promote the

brand but also it helps PMI to screen out talented individuals for their company.

23

Marketing Mix
The 8ps of marketing mix of Phillip Morris international
Product

PMI is one the leading tobacco industry In Bangladesh. It offers many different kinds of
cigarettes internationally. But in Bangladesh they only offer Marlboro. Marlboro is directly
competing with British American tobaccos Benson and hedges. It has 3 different types
1.

Marlboro Gold

2.

Marlboro Red

3.

Marlboro Advanced

Price
Their Pricing for all the 3 products are similar. Their Retail price for each pack of cigarette is 182
taka it can vary up to 200 taka. If they sell separately each stick of cigarette cost 10 taka.
Place
PMIs products can be found all over Bangladesh in almost every store that sells cigarettes. Their
Network is huge. But in the Major cities they have a limited number of image stores. In Dhaka
there are 37 image stores. They dont have any helpline for customer service outlet. If the
consumers have any complaints they complain these retailers which are eventually forwarded to
PMI.
Promotion
PMI cant get directly involved in any promotional activity due to certain regulations. So they
have to promote indirectly. Their marketing team constantly focus on inventing new and

24

innovative ways of promoting their product. They as a new entrant in the market were successful
to grab a huge number of share in a short span of time.
Some of their Promotional activities are

Activation program- Be the one

Event Sponsorship
Souvenir
Direct Sales
Image Stores

People
PMI has different layers of staff. Each of them are assigned to different types of tasks. Some of
their employees are field marketing executives whose job is to supervise sales team. They also
have sales representatives whose job is to make direct sales. They have R/A who are females
operating in different events. They are faces of PMI. They have people in all the departments like
finance, Human resource, Marketing and management that are expert in doing their jobs.
Process
The Process of getting PMIs product is simple. The consumer only needs to visit any point of
sales to get their product. The retailers get the product through different distributors which they
sell to the consumers directly. PMI dont sell directly to consumers. So only way to get their
product is different point of sales.
Physical Evidence
PMI is a product selling company. So their products are their major physical evidence.
Some other Physical evidences are:

PMIs Office
Image Stores
Activation program
Cigarette packs
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Productivity and Quality

PMI has a huge customer base. A lot of people are their regular customers which allows them to
make huge sales and reduce their unit cost resulting in economies of scale. Moreover they have
enhanced machineries which can produce more with less input. They are also trying to make
their own raw materials like BAT. But unfortunately they still couldnt execute it. So they are
dependent on imports. If they can start making raw materials here they can increase productivity
more. But they are providing high quality cigarettes to their customers which are attracting more
customers daily. So hopefully their productivity and quality will improve more day by day.

Finance Division
The finance division is comprised of 4 units:Central Accounts
Central Accounts unit plays a very important role in the organization, they deals with budgeting
and fixed assets of PMI. The unit observes the overall budgeting process of different
departments. They also keeps track of accounts payable and accounts receivable and they also
prepares report on the financial activities of overall organization.
Costing and Factoring
Costing and forecasting unit forecasts the costing of different departments and apply them
regarding the expected expenditure of any alternation.

26

Revenue Assurance
This unit consists of the revenue assurance and fraud management. Revenue assurance units
responsibility is to monitor transactions and it assures all protection of the finances. On the other
hand, Fraud management unit protects the fraudulences take place in the daily transactions.
Taxation
This unit takes care of the tax related issues, it calculates the tax that has to be paid and also
closely observe governments taxation policies and prepares accordingly. In a word this unit
takes care of the tax, VAT and tariffs of the company.

Human Resource Management

PMI has achieved success in a very short span of time which was only possible because of the
excellent people working there. PMI tries to hire the best and talented employees. They hire
these employees through different activation program like be the one. These are talent hunt
programs funded by PMI. The human resource strategy of PMI is to hire the best and train them
to be perfect. Their employees are there at the heart of their company. Without them PMI cant
sustain. PMI always tries to find out the maximum potential of their employees by assigning
them different tasks. They have a very good system to measure the performance. Based on their
performance there are incentives which motivates the employees a lot. Finally they promote the
best within their organization so that the employees always gives their best. In a word they
motivate their employees a lot.

27

PMIs Strategy to attract top management

As a leading company in Tobacco Industry, PMI recruits hardworking and talented employees
with right set of intellect and allows them accelerated carrier progression in the company. It has
been successfully recruiting quality people and retaining talents from the day of its inception.
PMI actively pursues hiring the best fit according to business need and respecting
organizational values through proper human resource planning, using effective assessment,
methodology, ensuring efficient process and establishing and maintaining strong employer brand.
Employment Opportunities and Facilities PMI
PMI recognize and reward their employees for their contribution to the success of PMI. Their
Total Remuneration approach is designed to be competitive, promote performance, and
encourage superior achievement while ensuring internal equity. They benchmark their
remuneration practices against other selected high-performing companies to offer their
employees market-competitive compensation and benefits. Their compensation and recognition
programs are designed to reward the employees for their capabilities and accomplishments.
Some Terms of Employment PMI
Probation
The who are employees recruited on a permanent basis have to go through a period of six
months as probationary period to ascertain their capability and suitability for employment and
are judged with a performance appraisal at the end of fifth month.

28

Punctuality
PMI is concerned about time. Their employees are required to arrive at work within 8:30 am.
The employees are encouraged to attend on time. If anyone fails to enter within official time it is
recorded on a register. The employees cannot leave the office before 4.00 am without any
reasonable excuse.
Duration and Procedure of Leave at PMI
In order to motivate and make the employee effective PMIs HR department offer their
employees the following leave system or vacations

Medical Leave
Accident Leave
Maternity Leave
Leave Without Pay

Salary and Benefits

PMI offers a great career opportunity, their benefits programs aim to support the employees in
their short- and long-term well-being, and to address specific individual needs. It makes the
employees as the integral part of the company and helps them to contribute in the companys
operations, some of the lucrative benefits that employees of PMI enjoy are:

Leave Fair Assistance;

Hospitalization Insurance for employees and their spouse and children
Festival and Performance Bonuses
Provident Fund

29

Career development
PMI is an international company and working for it is a prestigious things. If any local employee
works well in the organization he has a better chance of getting sent overseas for international
job with a better package. They can also get promoted within the organization if they meet their
goals in time.
Motivation
Motivation is a very important thing to satisfy all the employees. To motivate PMIs employees
they have the following offerings:

Performance Bonus
Reward and recognition
Safety and security
Social and voluntary activities
Scholarship program
Donations
Punishment
Medically Boarding Out
Overseas Operation

Linking the Resources, Core Competency, Capabilities with

Functional Level Strategies for Value Creation
In order to gain competitive advantage, an organization need to become efficient and innovative
by using their resources and capabilities and build core competency. Utilizing the resources and
capabilities a firm becomes efficient and innovative and build its core competency. The core
competencies can be transformed into comparative advantage by implementing effective
strategies at different level.
PMIs resources includes

Strong Customer Base

Brand Value and recognition

30

Financial resources
Innovative Research and Development
Advanced production technology

Capabilities of PMI include

Providing premium quality cigarettes to customers

Marketing and branding
Maintaining customer relationship
Introducing High quality tobacco technologies in market
Products are convenient and easily accessible
Providing special service to customers through 37 image stores

The above capabilities and resources have enabled PMI to develop core competency of Brand
recognition. It has given them comparative advantage over their competitor BAT and other local
tobacco companies with greater brand recognition among target customer base.
PMI has been able to maintain and sustain their competitive advantage through the following
means:

Superior efficiency
PMI has achieved efficiency through their trade marketing and consumer engagement
department. PMI has established image stores in different places and they are attracting retailers
through trade promotions. PMIs research teams continuously works on retailer insight
generation. They try to understand what the retailers want and work on it to make sure that
retailers are promoting their products. They also have research teams to get informations
regarding customers perception and deliver superior products. They offer different gift items to
their customers and organize different events to promote their brand. As the company has entered
31

the Bangladesh market recently, its main focus is on promotional activities. Through promotional
activities they are creating a perception on consumers mind and ensuring efficiency.
Superior Quality
Each of PMIs product raw materials are imported and these are high quality materials. They
have an international quality inspection team which ensures that all the production facilities all
over the world is following the same standard. They use high quality imported tobacco and
charcoal filter that makes their product special. Use of high quality materials has helped PMI
immensely in maintaining superior brand recognition over their rivals.
Innovation

They have a very good R&D unit which is working on new technologies, they have come up
with special filters and papers for the cigarettes, and they produce high quality tobacco. PMI is
the first company in Bangladesh to introduce charcoal filter and less smelling technology in
cigarettes. Their research teams collects consumers insights and transfers those data to R&D and
R&D works on quality product development.
Superior customer responsiveness:
PMI has recruited young talented people as Brand Promoter, Brand catalyst and Brand
ambassador, these people take part in promotional activities and collects customer feedback.
They have selected some lounges where young people goes a lot, they organizes various events
in those locations. They have recruited RAs who visit lounges and public places and observes
customers and they collect customers feedbacks and other information. The collected
information helps PMI to understand their customer.

32

33

Company Structure and Control

System
Division and departments
The Bangladesh operation of Philip Morris is consist of four divisions. These divisions are
marketing, sales, human resources and finance. A country head is being appointed. Under
country head there are head are head of the departments. Each department head controls their
respective departments. Under the each department they have a number of employees who work
to make the department successful.
1) Marketing Division:
This a very active division of Philip Morris. They are solely trying to help the
organization to grab the tobacco industry of Bangladesh. This marketing division is
divided into 5 sub divisions. The divisions are consumer engagement, brand, planning
and innovation, HoReCa and Product R&D. Each of the departments their manager who
are leading the sub divisions. The consumer engagement division basically focuses on
consumer and try to collect data from the consumers about their tastes and preferences.
Yearly or periodically they arrange several image building generic events, concerts like
Rock Nation, Rock City, Rock Town as well as premium event named Style Then the
brand team. Their main activity to focus on the brand, Then the HoReCa team. This team
basically focuses on the hotels restaurants and cafes and tries to make alliances with
them. The Product R&D team focuses on the reseach and developments of the product.
The planning and Information team focuses on the planning process and tries to collect
data from its consumers for the betterment of the company.
2) Finance Division
34

Finance department plays a very crucial role as they are responsible for budgeting.
Finance department has the liability to finance the proposal used by the business and
functional level management. Finance division is responsible for the costing and
factoring. They sanctions the salary and other facility cost. They are also responsible for
the procurement. Revenue assurance and taxation is one of the major activities of finance
division. This division is divided into 3 sub divisions. These sub divisions are: Internal
control, Procurement and Finance operation.
3) Human Resource Division:
Human resource division is responsible for recruitment of the young talents. Philip
Morris recently done a campus recruitment and voting process to hunt the new talents.
They decide the compensation and bonus. Human resource is responsible for the
development of the employees as employees are like family members to Philip Morris.
So they have training and motivational program for the betterment of the employees. This
is the smallest division of Philip Morris Bangladesh. Under HR they have an position
named Fleet executive and admin who basically looks over the operation of the bikes and
cars that is being used for the company purpose.
4) Commercial Division:
Basically the commercial division is mixture of several divisions. The sales division is
also a part of this division. The Commercial Manager is the head of this division. Under
the commercial manager there are 2 area sales manager. 1 key account manager and 1
Trade marketing manager. All the sales related activity are done under this division.
Moreover the trade related activities are also is the part of this division.

Top Management
35

Country Head
Peter Day

Finance
Manager

Marketing
Manager

(Nirmol
Sarker)

(Ali Hussain)

HR Manager
(Hosne ara
Loma)

Commercial
Manager
(Salman Yasin)

36

Human Resource Division:

Head of HR
(Hosne ara Loma)

Fleet Executive &

Admin

HR Executive
(Maria Mujib)

(Md Abu Jafar)

Finance Division
Finance Manager
(Nirmol Sarker)

Intenal Control Specialist

Procurement Specialist

Finance Operaton
Specialist

37

Commercial Division:

Commercial Manager
(Salman Yasin)

Area Sales
Manager

Area Sales
Manager

Key Account
Manager

Trade Marketing
Manager

(Hasib Ron)

(Jitu Jobayed)

(Shantunu
Mostafa)

(Tanvir Ahmed)

Territory Sales
Executive

Cycle Planning
Executive

Merchandising
Executive

Trade Programe
Executive

38

Marketing Division
Marketing Manager
(Ali Hussain)

Brand Manager

Product & R&D

Consumer
Manager
engagement
manager
(Md Majedul
(Jahangir Islam)

HoReCa Manager

Brand Specialist

Consumer
Product & R&D
Engagement
Executive
Specialist

HoReCa
Specialist

Brand Executive

Consumer
Engagement
Executive

(Khondokar
Mahmud)

(Shakhawat
Hossain)

Planning &
Informtion
Manager
(Quazi Nazmus

HoReCa
Executive

Planning &
Informtion
Specialist

Planning &
Informtion
Executive

39

Corporate Governance
Board of Directors

Louis C. Camilleri
Harold Brown
Andr
Chairman of the
Director since 2008
Calantzopoulos
Board
Chief Executive
Director since 2008
Officer
Director since 2013

Mathis
Jennifer LiJ.Dudley Fishburn
Cabiallavetta
Director since 2010
Director since 2008
.Director since 2008

Kalpana Morparia
Lucio A. Noto
Sergio Marchionne
Director since 2011
Director since 2008
Director since 2008

Robert B. Polet
Stephen M. Wolf
Carlos Slim Hel
Director since 2011
Director since 2008
Director since 2008

40

Philip Morris is a leading player in global tobacco industry. So there is no separate board of
directors for the Bangladesh operation. The company maintains transparency and accountability
and also have a good corporate governance in all their operations around the world along with
Bangladesh. To regulate their operation they are empowering their divisions and enjoying 30%
share in the premium cigarette market segment.

Shareholder
Companys long time profitability ensures the benefit of their shareholders. Shareholders
encourages the operations of Philip Morris and the result reflects in their strategy and outcomes.
The revenue and the stock price is a great identity of strong commitment towards shareholders.

Auditors:
Internal Auditor
Philip Morris international has transparency in each and every sector. Internal auditors audits the
data of Philip Morris and they provide the statement of which increases efficiency and adequacy
of the company. Internal Audit committee is regulated under the Chief Financial Officers
monitoring and they supplies the report to the audit committee of the board of directors. There is
a special authority of auditors that they can evaluate any data without any interference of the
management.
External Auditor

41

At the time of Annual General Meeting external auditors are selected by the shareholders and it
is a process generated annually. External auditor are appointed as per the consideration of their
quality and previous experience and they have to report their findings to the shareholders.

Control System
Control system is very important for an organization. It enhance the efficiency of the employees
and keep them more involved to the organizations function. It helps the employees to make
them more effective towards their works. Which mutually benefits the organization and
employees both. To make the control system effective organizations apply various activities.
1. Personal Control
2. Output Control
3. Behavior control

Personal Control
Personal control refers to the desire to shape and influence the behavior of a person who is
working inside the company. It also develops face to face interaction of the person to achieve the
companys goal. This is applicable for the Bangladesh operation of Philip Morris as well because
the functional level people are directly accountable to the management.

42

Output control
Output control is a system where the managers who are involved in different strategic divisions
estimate the appropriate performance goals for their division. Philip Morris is operating in the
tobacco industry for a long period of time in global market. In Bangladesh they are focusing on
the premium cigarette market till now. In this case managers assign activities for the employees
and they have a set of standards. So they can easily evaluate the employees work output by
comparing their work with the given standard. Thus they also motivates the employees and pay
attention in the sector of their weakness. Employees also directly participates in the question
answer session about their work experience and outputs.
Behavior Control
Philip Morris gives the knowledge of what to do and what not to do to their employees so
employees are clear about their standard behavior. To enhance the capabilities Philip Morris has
tried to establish all the three types of behavior control system.
Input
Philip Morris has a system of one month long training session to provide the knowledge about
their desired activities in the very beginning of their operation. They share all the related issues
and knowledge to enhance the capabilities of the employees. They also empowers the division to
work freely and encourages participation in decision making process.

43

Conversation activities
Philip Morris has established certain rules and regulations which have to be strictly followed by
the employees. They communicate with their employees and try to know if they have any
problem or objection regarding doing their work.
Output
Philip Morris is a very reputed multinational company. Their Bangladesh operation management
control the employee and evaluate them to find the gap between what the employees have done
and what they should done. The gap they find has to be fulfilled and to compensate the gap
management takes necessary steps as per the requirement.
The result of the controlling activities are reflected in the financial and annual reports of Philip
Morris. Employees are like family members because by their cooperative effort company can
achieve their required output. So proper policies and motivational activities will surely lead to
the greatest outcome from the employees.

44

Company structure and control system

Organizational Design

Organizational

Strategic

Organizational

Structure

Control System

Culture

Tall structure
4 divisions
Many sub divisions
Country head is the
main person
Manager has
individual tasks

Personal control:
Functional level people
are directly accountable
to the management.
Management team is
accountable to top
management.

Output control
Managers assign activities
for the employees and they
have a set of standards.
They can easily evaluate
the employees work
output by comparing their
work with the given
standard.

Behavioral control:
one month long
training session,
communicate with
employees,
Find the gap between
what the employees
have done and what
they should done.

Centralized
Main goals and strategies
are set by the top
management
Main goal is to give
customer a smooth
smoking experience

Coordinate and Motivate

Efficiency :

Quality :

Innovation :

Customer responsiveness

Through personal and behavior

control employees are becoming
more efficient. They are working
hard to achieve the goal set by
each department.

Through the whole control

process quality is ensured
because the standard is
predetermined and outputs are
evaluated according to
standard.

Research and
development always tries
to improve the products
and innovate new flavors.

Through the evaluation of

customer opinion comes up with
new flavors and customer
engagement programs leads to
valuable experience.
45

Value chain analysis

A value chain analysis provides information relative to primary (inbound/outbound logistics,
operations, marketing & sales, and service) and secondary (firm infrastructure, human resources
management, technological developments and procurement) activities.

A value chain

representation of PMIs primary and support activities is presented in the diagram below. This
information can be used to establish a business strategy which targets select activities to create a
sustainable competitive advantage.

Inbound
logistic

Operatio
ns

Outboun
d logistic

sales &
marketin
g

Brand
Image

Primary
activities

Infrastr
ucture,
Admini
strative
&

Human
Resour
ce
Manag
ement

R&D

Procu
reme
nt

Support
activities
46

Primary activities
Inbound logistic
To stand out the crowd PMI need to make sure best quality. To do so, PMI has best source for
raw materials and other stuffs. They are producing Marlboro at Akiz's factory. So all the raw
materials to make Marlboro comes to the factory then using the must updated technology they
make Marlboro and after packaging is done they are sent to the storehouse.
Operations
To perform better in the market with their highly qualified employees they ensure that their every
task meets perfection. People give their best to manufacture the product and continuously try to
improve their quality along with some minor changes in product and package. Along with the
existing product they also spend on market research for product development and innovation.
Outbound logistic
Distribution channel plays a big role for every company. Its also same for PMI. With the strong
distribution channel PMI ensure Marlboros availability. So they took different activities to sell
out from their inventory.
Sales and marketing
Tobacco industry cannot give any advertisement works publicly so they need to be creative in
selling Marlboro and they do their job in more effective way. Being a premium brand first of all
their target group is adult young people. So, after ensuring their product availability they go for
47

different activities to increase their sales. They sponsor different programs for young people
where they sell Marlboro in a very attractive way by persuasive talking and giving free gifts with
every purchase. They also bring limited edition of Marlboro to attract new people and also attract
existing customer to stick with the brand.

Support activities
Administrative, finance and infrastructure
PMI has big infrastructures in different zone to ensure the work efficiency. Their admin
department gives enough support to other departments so that they can ensure smooth flow of
work. Also, their strong financial support gives them extra edge to work better.
Human Resource Management
Without having best employee its almost impossible to ensure the quality and effectiveness of
work. So, to do so, PMI tries to hire best employees from the pool of candidates. HR department
keep working for all the employees related issues so that all the employees remain happy and
ultimately PMI can reach its goal by their employees contribution.
Product and Technology development
PMI has very strong R&D department. They are continuously working for product development
so that they can hold their position in the market and keep on attracting customers. Recently they
brought slow burning paper for Marlboro which is safe and will reduced fire burning issues
caused by cigarettes. They are also worked on Marlboros packaging. They often bring limited
edition of Marlboro and also they brought very unique flip box of Marlboro.
48

Procurement
Marlboro is a global brand. So, PMI import many ingredients from outside to maintain global
quality. In Bangladesh they are also using Dhaka Tobacco which is sister concern of Akizs plant
to manufacture and they also use their distribution channel. Its a contract between them. By
having contract with local company it gives them to understand local customer and situation
better.

Strategic Analysis (4P)

To understand a companys strategy strategic analysis is used. A strategic analysis is based on the
companys Position, Priorities, Payments and performance. We tried to analyze the strategies of
PMIs through the 4P framework.
After we complete the frame work we can analyze the companys priorities their investments to
achieve these goals and their measure of the accomplishments of these goals.

Position
Position includes the mission, vision and values of a company.
Mission PMI pursues their mission by focusing on 4 strategies
I.

Invest in leadership- We will invest in excellent people, leading brands and

II.

external stakeholders important to our businesses success

Align with Society- We will actively participate in resolving societal concerns that

III.

are relevant to our business.

Satisfy adult customers- We will convert our deep understanding of adult tobacco
consumers into better and more creative products that satisfy the preferences.

49

Vision- Provide high quality and innovative products to adult smokers, generate superior returns
for shareholders, and reduce the harm caused by smoking while operating their business
sustainably and with integrity

Values
The values shared by PMI are the foundation for fulfilling their Mission and business strategies.
They strive to demonstrate these Values:

Integrity, trust and respect

Passion to succeed

Executing with quality

Driving creativity into everything we do

Sharing with others

50

Priorities
The priorities set by Phillip Morris International are discussed below:

Increase revenue
Be the market leader
Actively perform in social activities
Developing product that decreases harm caused by smoking
Meet diversified customer demands

Payments
Payments is a companys way of investment or other costs that may be incurred by the company.
It can also be said the investment to achieve their priorities. PMIs is spending a lot in research
and development to come up with cigarettes that reduces risk of tobacco related diseases. They
are also funding different activation programs and concert. Through these fundings they are
more getting more customer exposure since they are not allowed to do marketing of their
products.

Performance
The performance is a measure of the companys success. PMI is gaining more and more market
share in Bangladesh. In spite of entering into the market late it is catching up with the market
leader. People are now more aware about PMIs existence more than ever. The concerts,
activation programs have made them popular among their consumers. They are engaging their
51

customers through these events. They were also able to introduce new models of cigarettes
through their research and development. Their latest model of cigarette includes the technology
which reduces tobacco related diseases due to its consumption. To remain sustainable in the
market they are also considering environmental factors in their production process.

SWOT Analysis
From the previously done SWOT identification of Philip Morris International, the Strength,
Weakness, Opportunities and threats has been analyzed which is exhibited below.

Strength
Strength is the internal potency that Philip Morris International have. As the strengths identified
in the previous part were basically done depending on the internal analysis of Philip Morris
International which is mainly PMIs core competencies. As recognized, the core competency of
Philip Morris International is primarily the global brand recognition, brand image, brand value of
its Marlboro brand in the cigarette industry. Moreover, the leading-edge, innovative and
pioneering research and development department to produce high quality, innovative and less
harmful product as mentioned in their mission and vision, is considered to be there another core
competency in the present context of Bangladesh tobacco industry.
ANALYSIS

OF

STRENGTH UTILIZATION

RELATING WITH CORE COMPETENCIES

Considering their differentiation business level strategy for creating value we can relate that PMI
is efficiently using their core competency which is the brand image and formulating strategy
revolving it. Their unique strategies for providing premium experience through their premium
events and providing best quality international tobacco with smooth taste and premium feel as
52

the global standard of Marlboro is the reflection of the utilization of their strength. Moreover,
highly enriched R&D department is always doing research to generate consumers insight for the
development of the product, provide better satisfaction and also to reduce harmfulness which is
also clearly stated in the vision of the company. Now the value creating strategies or else can be
considered as the functional level strategy can be related with their aggressive promotional and
unique marketing strategies of PMI maintain the regulation is another strength PMI is utilizing
and has utilized all over the world to establish itself as the top tobacco company. Also their R&D
department is working for the innovation as described earlier. The introduction of LEP pack of
Marlboro and Marlboro Advance is the illustration of that. Besides, the world class top
management and the most skilled management team leading the operation of Bangladesh is also
helping to maintain efficiency within the company. Lastly, the strategic alliance with the local
giant in the tobacco industry Akij Group to use their sister concern Dhaka Tobacco for the
production purpose is one of their strength and also an excellent corporate level strategy to enter
in Bangladesh Tobacco Industry.
EXPANSION THROUGH IMPROVEMENT

OF THE UTILIZATION OF STRENGTHS

As considered to the Tobacco industry of Bangladesh, in the premium cigarette segment, the only
immediate competitor of Philip Morris International is British American Tobacco. BATB is the
current market leader in this industry. Benson & Hedges is premium brand which is the direct
competitor of Marlboro. Since the full-fledged operation of PMI in the year 2008, it has been
doing really great by capturing almost 17000 consumers in only Dhaka city. They are growing at
an increasing rate while utilizing their strengths. Therefore, efficiency is at satisfactory level in
terms of utilization of resources. But to capture the position of BATB in the market they need to
achieve the highest efficiency level in terms of the three core strategies.
53

Weaknesses
As like as strengths, PMI also poses some weaknesses. As a new entrant in the market,
comparing with competitor, the weaknesses are more in case of PMI. The weaknesses are already
been identified in the previous sections. As weaknesses are based on the internal analysis of the
company, therefore the core competency of the immediate competitors are must to take into
consideration. As it seems in the premium segment of cigarette the immediate competitor of PMI
is BATB. The core competency of BATB which is identified is the strong distribution channel
and diversified portfolio of products. The weaknesses are already identified in the previous
section. Compared to BATB, the weaknesses of PMI is very intensive and thus to become the
dominant player in the market they need to improve their weaknesses.
TURNING WEAKNESSES INTO STRENGTHS
In the SWOT identification part the weaknesses of Philip Morris International considering the
core competencies and strengths of competitors has been identified. Now, after the analysis of
the weaknesses it has been discovered that to be the market leader PMI needs to convert these
weaknesses into their strengths. First of all, the weak distribution channel with which geographic
expansion automatically comes. Strong distribution channel will eventually lead to geographical
expansion which will let PMI acquire increased profitability and thus adopt the integrated cost
leadership and differentiation strategy. Besides, improving corporate level strategy through
acquisition of local tobacco company will let PMI achieve economies of scale and eventually let
them introduce lower brand cigarettes in the market.

Opportunities

54

The identified opportunities previously described says that Bangladesh cigarette market have in
total 21.8 million smokers and the number is growing each day. Therefore exploring this huge
market is undoubtedly a big opportunity for PMI. Moreover, the target market of PMI is LA29
which means legal aged to 29 years. Students and professionals fall under this segment. Statistics
shows that around 20-30% of the total population falls under this age segment. Besides, entering
into lower brand cigarette segment and flourishing that market segment is another big
opportunity for Philip Morris International.
EXPLORING THE OPPORTUNITIES
Philip Morris international is the number one tobacco company of the whole world. The
Marlboro brand is the only cigarette brand that is listed in the top ten most valuable brand of the
whole world. Marlboro is four times larger than the second largest cigarette brand in terms of
Brand Value. Therefore, Philip Morris International has the capability through the improvement
of their different strategies to be the market leader of Bangladesh. With its global profitability,
PMI can easily achieve the economies of scale through acquisition, product diversification and
geographical expansion. Thus, it can use opportunities to increase the strengths of PMI.

Threats
CREATION OF THREATS
Threats of a tobacco is more than any of its other components. As tobacco as well as smoking is
harmful for health and environment, therefore, these companies ae more exposed to threats.
People are getting more aware of the harmfulness of Cigarettes, and thus started anti-smoking
activities which is a potential threat for PMI as well. This reflect that bargaining power of
supplier is more or less high. Besides, new government regulations also posing serious threats on
55

tobacco companies. Here we can see the political & legal factor of PESTLE is playing role
while continuously increasing the threat of PMI. Lastly, the main competitor BATB itself is a
threat for Philip Morris International.
THREATS BECOMING WEAKNESSES
As compared to the immediate competitor BATB, if this threats are not been supervised and if
overlooked, at a time it can become a serious weakness for PMI. Removing the threats through
proper strategic decision is the only way to hedge this risk. Increasing health awareness and
aiding NGOs will increase the reputation and goodwill of PMI which will remove the threats.
Moreover, PMI will get a competitive edge over BATB. Besides, the mid aged smokers are
nowadays more likely to shift towards half cigarettes to quite premium cigarettes which is a huge
threat. Thus, before BATB interfere, PMI should enter into that segment. Thus, threats can be
tuned into strengths.

Proposed Business Model

Philip Morris International has started its operation in Bangladesh in the year 2008 with the
collaboration with one of the biggest domestic company of Bangladesh, Akij Group of
Industries. Since then they have successfully applied all their strategies and was able to enter
successfully in Bangladesh cigarette industry. Though several times it was mentioned in the
report that they were successful, still their major competitor BATB is the market leader in
premium segment where PMI operates. For Philip Morris International it is still long way to
achieve the market leadership. Therefore analyzing the current situation and future prospect
basing on their current business model we are proposing another business model that will let
them achieve their deserving position in the market.

56

Cost Minimization Strategy

Undoubtedly Philip Morris International have been doing great in terms of capturing the market
of Bangladesh. But the question arises at what cost? PMI has entered in the market by agreeing
for strategic alliance with the local giant Akij Groups Dhaka Tobacco. But on the other hand the
major competitor of PMI in premium segment, BATB has been more efficient because of their
production and distribution facility they have built up over the years. So, obviously BATB has a
competitive edge over PMI in terms of cost minimization. Therefore, to compete with BATB in
terms of Market Share, Market Position and Profitability PMI must introduce this facility instead
of depending on Dhaka Tobacco for production and distribution which is also increasing the
bargaining power of Akij group over PMI. Moreover, in a world of integrated cost-leadership and
differentiation strategy, following only differentiation strategy in a developing country like
Bangladesh is definitely not the right choice to do. Therefore, we are proposing that PMI should
also include cost-minimization strategy maintaining their standard. This cost-minimization
strategy can be achieved through several means.
1. Efficiency of Scale: Achieving economies of scale should be a very important focus for
Philip Morris International. As PMI is depending on Dhaka Tobacco for their production,
therefore they need adopt strategies thatll give them the facility to supervise their own
production which will ultimately lead them to economies of scale. To do that, they must
adopt a new corporate level strategy thatll introduce their production facility as well as
improve their distribution channel. Firstly, going for acquisition of local tobacco company
will be a good strategy to bring up the production facility within the control of PMI. Besides
they are using the distribution channel of Dhaka Tobacco but the supervision is under.

57

Introducing efficient distribution will also lead them to efficiency of scale and that will
eventually lead to cost minimization.
2. Geographic Expansion: PMI is currently operating only in Dhaka metro and in some place
of Chittagong city. It is a matter of common sense that to increase their profitability and
decrease cost they need to expand their operation in other prospective areas like Sylhet also.
Though the initial investment for expansion is high but for long term purpose anyway they
have to do the expansion.
3. Product Diversification: The only product of PMI that is currently available in the market is
Marlboro which a product of premium segment. PMI still have not introduced its lower brand
cigarette. The market of this lower brand cigarette is huge and BATB is operating in the midlevel market with their product John Player Gold Leaf without any competitor. So to increase
the profitability rather than only focusing on premium segment, PMI should introduce their
lower brands like Camel, L&M etc. Product diversification will also cause initial investment
but in the long run because of huge market they will eventually achieve cost efficiency.
4. Improving employees efficiency: To achieve economies of scale and thus cost
minimization, improving employees efficiency is a very big factor. To improve that an
efficient human resource department is very important. Selecting effective, skilled and best
suited employees for PMI is a must for improving efficiency. Besides, using learning effect to
improve efficiency is another strategy that PMI can take. Through continuous motivation and
training PMI can achieve there targeted efficiency and thus can achieve cost minimization.

58

59

Conclusion
PMI has established itself as a Major Player in the Tobacco Industry, it is a worldwide famous Tobacco brand. They have entered the
Bangladeshi market few years ago, when their main competitor BAT has already made a strong position here. So it will be difficult for
them to become the top player in this market. But becoming the best is not impossible. The company has all the resources required to
become a strong player. Their core competency is their Brand Image. Before entering in the market officially, PMIs products already
had a customer base. Most smokers have idea about their famous Cigarette Brand Marlboro. This is an advantage for the company.
The market is very competitive, there are many local company who are performing well, and there is a strong competitor like BAT
who is leading the market. So, PMIs differentiation strategies may not be feasible for a very long time PMI should focus on cost
minimization and adopt cost leadership strategy to survive in the market.
Even though current strategic decisions have helped the organization achieve better performance. But these strategies need to be
improved and redesigned to become a market leader. Rapid growth of the industry and increasing number of competitors are driving
the need for functional level, business level and corporate level strategic decisions. PMI must reevaluate and improve functional,
business and corporate level strategies to prepare itself to survive in the intense competition. Implementation of following functional,
business and corporate level strategic recommendations should help the company to protect its position in the market.

Recommendation
Corporate Level Strategies
Backward vertical Integration
PMIs major competitor is BAT, which produces its major amount of Tobacco in Bangladesh. Producing tobacco in Bangladesh allows
the company to have cost advantage. PMI should think about producing tobacco in Bangladesh, because the Bangladeshi soil is fertile,
the climate is favorable for the tobacco plants and the labor is very cheap. By cultivating tobacco in Bangladesh PMI will be able to
save a huge amount of money. They can bring high quality plants from other countries and have more production. PMI has an
excellent R&D department, which can play an important role in the production process.
PMI can also process the tobacco in Bangladesh, The Bangladeshi labor is very cheap compared to many other countries where they
have production facility. They use imported raw materials in the cigarette. By using advanced technology they can have almost same
level of production in Bangladesh.
Introducing Local Brand

The products that PMI is selling in Bangladesh is mostly the premium quality products. They dont have any Product to compete in
any other segment. Their main competitor BAT has products for different class. PMI should come up with new products which will
have advanced technology and attractive price to fulfill customers need.
Most of the people in Bangladesh lives below poverty line and people here consumes tobacco in different forms. Gul, Jorda, Bidis are
the most popular tobacco items. These things are mostly consumed by the lower class people. If PMI can come up with a cigarette
which will have a better taste than Bidis and the price will be within the range of most customer they can grab a huge market and also
compete with BAT.
PMI is the first ever company in Bangladesh to introduce smokeless cigarette in Bangladesh, this product was very successful. People
liked the technology used in the cigarette. They have used improved filter in the cigarette. So PMI can come up with more and more
advanced technology to become successful, because the people like to have something new and better tasting.

Acquisition
If they want to enter the low end and other segments Acquisition can be a good option for them. In Bangladesh there are many
cigarette companies and those companies have their own ways of doing business, have expertise and have already an established
network. PMI has the financial and managerial resources to acquire an existing company and turn it into a profitable business by using
the Brand Image of PMI.
2

Business Level Strategies

Differentiation for Premium Brands
PMI is famous for its premium Brand cigarette Marlboro. If the introduce localized products they should maintain differentiation
strategy for the premium brands. If they go for cost leadership strategy for premium brands the brand image of overall company may
get affected by it. They can introduce more premium Brand cigarettes in Bangladesh market as there is good demand for the imported
cigarettes in many places.

Cost Leadership for Local Brands

To become successful in the long run PMI needs to focus more on becoming the cost leader among the companies in the industry. As
plenty of competitors are coming in, the differentiated strategy of PMI surely will be imitated. But continuous innovation should also
be a priority; reducing the cost and charging less prices for their services will be the key to sustainability. Most of the people in
Bangladesh belong to poor and middle class. So cost is an important factor for the Bangladeshi customers. It is possible for the
company to lower the cost in many ways. There are many opportunity for the company to have the cost effective strategy. Lowering of
the cost depends on the employees and other channel members. So they need to find a solution to make sure that the price of the
product at the retail level stays reasonable. They must have a well-structured employee management system, which will continuously
3

evaluate the performance of the employees, fill up the employee needs. They must get rid of unproductive and unnecessary
employees. The compensation and benefits packages should be designed in a way that it will boost the employees performance and
have better result from them.

Functional Level Strategies

Expansion of Distribution channel:
Currently PMI has fully fledged distribution network in Dhaka and it has limited operation in Chittagong. But as an International
company they must enter the major cities of Bangladesh. If they acquire a local Company they will have the advantage of an
established network. Distribution network has huge importance. Any problem in the distribution may seriously damage the whole
business. The special incentive packages for the retailers and the distributors should be designed to ensure the better performance from
them.

Quality control:
PMI has a worldwide reputation for its quality control activities. They have a quality control unit at different levels of their business.
They have a quality control engineers who monitors the production performance to ensure the better quality products. In Bangladesh
PMI do not have an active Quality control team, a team from their International Business Headquarter comes and visits the operation
time to time. But in order to ensure the maximum performance they need to have a quality control team stationed in their major
activity areas.

Becoming more customer responsive:

PMI has many teams who continuously works with the customers. PMI should use the informations that the Brand ambassadors,
Brand analysts and RAs generates. They must find out what the customers are looking for, what suggestions the customers have for
them. Based on the customers need they should improve the products and become more customer responsive. PMI should also make
attractive offers to their customers, but that should be done within the local rules and regulation. Satisfying the customers is a difficult
thing, but organizations should try to serve the customers need as much as possible. So they should continuously work on different
concepts that may help them to become more customer responsive.