Altria Group, Inc.

Introduction

I did some research on the Altria Group, Inc. and found that they are using a growth strategy known as conglomerate diversification. What this means is that the industry they are currently in is unrelated to the industry they have entered, through diversification. With this strategy, managers are more concerned with financial concerns such as cash flows. This is usually due to a company's current industry achieving maximum growth and has to enter into other industries to gain more opportunities for future growth. Altria is a parenting company who parents Kraft Foods, Philip Morris International, Philip Morris USA, and Philip Morris Capital Corporation (Altria, 2008). What products they produce are tobacco, packaged food, beverages, and financial services. The USA and Europe are their primary producers.

SWOT Analysis

Strengths:

Versatility--they produce several products such as tobacco, packaged food, beverages, and financial services. Their versatility comes with their cigarette companies. Philip Morris International's leading cigarette brands are Marlboro, L&M, Philip Morris, and Parliament (Altria, 2008). Philip Morris USA's leading cigarette brands are Marlboro, Basic, L&M, Parliament, and Virginia Slims (Altria, 2008). John Middleton, Inc.'s brands include Black & Mild, Carter Hall, Middleton's Club, and Kentucky Club (Altria, 2008).

Diversification--they have recently entered into other industries to achieve more growth such as the Philip Morris Capital Corporation. This is an investment company whose portfolio consists of leveraged and direct finance lease investments and other tax-oriented and third party financing. Altria also has 28.6 percent interest in SABMiller, which is the world's second largest brewer (Altria, 2008).

Strong corporate governance--this company believes in order for a business to have strong performances they have to have good corporate governance. They strive to be transparent in their governance practices and policies. They also strive to be responsive to their shareholders while managing the Company for long-term success.

Constant innovation--this company's growth is driven by their constant innovation. Constant innovation is the key to their enterprises future. When they signed the tobacco settlement agreement in 1988 it fundamentally changed the way cigarettes are advertised, promoted, and sold in the US. This impacts every aspect of Philip Morris USA's marketing practices. While they are complying with this agreement they are also being responsible by marketing to adult smokers. They also have policies and practices in place to address all issues with their primary stakeholders along with their secondary stakeholders such as the general public, public health communities, parents, community leaders, decision makers, and the government (Altria, 2008).

Weaknesses:

Weak position in foreign emerging markets--they are not doing so well entering into the foreign regions. Such problems as ingredient disclosure laws outside the US have enacted legislation or regulations that would require cigarette manufacturers to disclose the ingredients used in the manufacture of cigarettes and, in certain cases, to provide toxicological information. Another challenge is the excised taxes. Cigarettes are subject to substantial taxation abroad. Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted within the United States, the European Union, and in other foreign jurisdictions. These tax increases will have an adverse impact on sales of cigarettes by all companies due to lower consumption levels and to a shift in sales from the premium to the non-premium, the discount segments, or even to sales outside of legitimate channels.

Bad reputation--smoking is bad for your health and not only that for others around you even if they don't smoke. No one wants to hear the truth, but as a smoker I do hear this all the time. According to Truth (2008), "In 2006, over 5 million people around the world died from tobacco products."

Decline in operating income in food segment--in their food segment from 2005 to 2006 they had a 2.0 percent decline in operating incomes from the North America region. They also had a 14.1 percent decline in operating incomes from their international companies. The steady decline will have a major and negative impact on overall profitability.

No new products--they have reached the maximum growth for cigarettes and can not really go forth with a new product right now with the economy against tobacco sales and use. That is why they have had to get creative and enter new industries and become diverse.

Opportunities:

Future growth--with them entering new industries, they do have a chance at growth. They do this through constant innovation and commitment to their shareholders and stakeholders.

Foreign markets--entry into foreign markets would stimulate growth but not in all segments. The cigarette segment is going to be tough.

No dominant competitors--how sweet it is to not have competition. They are the leaders in the cigarette industry. The food industry is not owned by just one company. There is not much competition with financial services either. Most of the competition does not even meet Federal regulations.

New market segments--entering a new market segment are going to be tough with the cigarettes, but they could look into smokeless tobacco. The food segment will be easy to enter but tougher to distinguish a difference from other foods. The financial service segment is doing okay but with customer focus strategies they could have an increase in growth. The opportunity is there it is up to them to take it to the next level.

Threats:

Increased taxes--I am a smoker and for the last 3 years taxes have gone sky high on cigarettes which have made me really think about quitting soon or using substitute products. These taxes are making everyone quit because some of us can not afford the high taxes we are paying. They might as well ban them which I think is next. So, they will have to really focus on entering new market segments.

Foreign policies--there are policies everywhere especially foreign policies. These policies some times make it hard for business to even think about entering a new market or expanding a current market. 80 to 85 percent of un-manufactured tobacco products make up the total of tobacco exports from the country and the rest is made up from the