PHILIP MORRIS INC.

Name of case : Philip Morris. Country : USA.Firm : Philip Morris. Sector : Consumer Manufacturer of Tobacco, Food and Beer.Main issue : despite the increase in operating revenue, firm’s operating profit was

decreasing due to strict and enlarged legislation and legitimating. Firm diversified in other businesses but still more dependent on tobacco

segment for revenue.

GENERAL

Nicotine is an addictive drug Medical studies established the fact the mortality rate is high due to smoking. General awareness about the lungs cancer. No capital requires for the advertisement and less research involved. Researches on cure for cancer

INDUSTRY

Advertisement on TV and Radio were banned in 1971. Increasing tax rates on cigarettes especially in U.S. and Western Europe. The barriers against outside producers in china, Korea, Taiwan, Japan. Campaigns against cigarette. Compensation expenditures. No capital is required for the advertisement and less research involved. Advancement in the field of tobacco industry by making fire free or smokeless cigarette. Monopolistic tobacco market of US…barrier to enter. Decreasing costs due to the developments of new Technologies. Memorandum of understanding (MOU) with its competitors.

FIRM

Company’s strong financial budget. Well known brands in cigarette market. Merging or forming strategic alliances with local corporations in foreign markets Essential corporate culture. Acquire Kraft and General food. Incremental costs of alternative marketing strategies…sponsorship etc. Diversify into other business…food, beer, real estate and financial services. Operating revenue was increasing since 1990 to 97 due to increase in excise tax, price

increase, favorable volume / mix.

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Operating profit due to legitimate was decreased by 22% in 1997. Other businesses got a little momentum but tobacco remained the dominant business. Tobacco revenue were decreased in domestic market but showing an increasing figure in

international markets due to new potential markets.

STRENGTH

Expertise in sales and marketing. Well known brands in cigarette market Prestigious image of Marlboro…Marlboro man…35% of domestic market share. Large tobacco consumption market of US. Company’s strong financial budget. Ability to diversify, before the imposition of legitimate. Successful partners in growing new foreign markets. Monopolistic tobacco market of US…barrier to enter. Using the key personal of food industry for reducing expenses by leveraging common

resources. Close alliance with wholesaler and retailer…Strong distribution channels. Strong finance supports the acquisition of Kraft foods…leader of package food in USA.

WEAKNESSES

Diversified firm but over 65% profit coming from tobacco segment…dependency on tobacco.

Not using the technology of fireless cigarette and smokeless tobacco. Heavy fine/pretax on the firm reduce the profitability. Past attributes. Inadequate communication with public…discontinue to minors and eliminating nicotine. Operating profit due to legitimate was decreased by 22% in 1997.

OPPORTUNITIES

Growing new markets in developing countries for tobacco consumption. Chance to use brands in different sectors. Decreasing costs due to the developments of new Technologies. Increasing buying power of the consumers in developing countries. Merging or forming strategic alliances with local corporations in foreign markets. Consumption of tobacco in Teenagers and women are increasing. Comprising new advertisement methods through internet.

THREATS

Aggressive marketing campaigns of competitors. Shrinking old markets in developed countries.

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Social campaigns against cigarette. Medical studies established the fact the mortality rate is high due to smoking. Legal barriers against cigarette consumption and advertisements. Increasing prices in agricultural products…tobacco. Litigation and Competition lead to low price of tobacco product. Deaths due to cigarette consumption. Probable compensations…cases filed against the firm. Uncertain about the future proposed/pending legislation...effecting the reputation. Unpredictable losses (financial, image, lose of customer) to the firm due to ongoing

cases.

INTERNAL FACTOR EVALUATION (IFE) MATRIX

Key Internal Factor Weight RatingWeighted Score

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S.No Strength1. Expertise in sales and marketing. 0.2 4 0.82. Well known brands in cigarette market 0.1 3 0.33. Large tobacco consumption market of US. 0.1 3 0.34. Strong financial position 0.1 3 0.35. Ability to diversify 0.05 3 0.15

Weakness6. Major dependency on tobacco. 0.2 1 0.27. Not using the available technology 0.1 2 0.28. Heavy fines 0.1 2 0.29. Past attributes 0.05 1 0.05

1.0 2.5

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Key External Factor Weight RatingWeighted Score

S.No Opportunity1. New potential markets in developing countries. 0.2 3 0.62. Forming strategic alliances with local corporations in

foreign markets.0.05 2 0.1

3. Chance to use brands name in different sectors. 0.1 3 0.34. Product Development due to the new Technologies. 0.1 1 0.15. Increased Consumption of tobacco in Teenagers and

women.0.05 2 0.1

Threat6. Shrinking old markets in developed countries. 0.2 2 0.47. Medical studies established the fact that mortality rate

is high due to smoking.0.05 1 0.05

8. Legal barriers against cigarette consumption and advertisements.

1.5 1 1.5

9. Increasing prices in agricultural products…tobacco. 0.05 1 0.0510. Uncertain about the future proposed/pending

legislation effecting reputation0.05 1 0.05

1.0 1.7

RECOMMENDED STRATEGIES

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Problem 1Government increased litigation and legislation on the sale and consumption of tobacco and Heavy fines were paid, reducing the profits, by PM and no. of undergoing cases effecting the reputation.

Company should adopt diversification (as they did). Using strong marketing skills and brand name, PM should move into other businesses (food, finance and beer).

Use of technology (avoid nicotine and smokeless cigarette) PM should participate more in social causes and should form an NGO/social organization

that deals with environment and general public concerns for the improvement of its image. PM donate to Red Cross or others.

Campaign against the sale of cigarette to underage at national level should be executed. Problem 2Established markets of Phillip Morris were shirking.

Focus through brand name to retain the market share in existing markets Increase the sale through women and teenager (not underage). Entering into new markets of India, China, Philippine etc. International collaborations in new markets to better understand the dynamics of those

markets.

Problem 3Ban on advertisements creating the marketing problem for the firm.

Active participation in sports or Sponsoring events. Distribute small gifts to the customers like key holder, t-shits, pen etc. Investing in social care. Smoking places/cabins in public places, people do not smoke are not affected by smoke.

The place/cabin showing logo is itself a marketing.

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