Phillip Morris Marketing Analysis

Table of Contents

Introduction

- Background

- History

- Purpose / Objective..........................................................3

Methodology...................................................................4

Case Analysis:

- Financial Status

- The Industry:

Market Segmentation

SWOT analysis..........................................................5

I. Introduction

Background:

To most, Philip Morris (PM), is only known as a dominant force in the manufacturing and marketing of cigarettes. However, over the past thirty years, as a result of numerous acquisitions and diversification strategies, PM has become a highly respectable participant in many markets. These markets not only include the tobacco industry but also the beer brewing, food processing, and financial services industries. In fact, PM has become the largest cigarette company in the United States, the second largest beer brewer in the United States, and the second largest food processing company in the world.

Philip Morris's offices are headquartered in Richmond, VA. Its services at this location include manufacturing, processing and support offices; it also has a manufacturing facility in Cabarrus County, North Carolina; a material conversion plant in Louisville, Kentucky; sales offices crisscrossing the U.S.; and an office in The Commonwealth of Puerto Rico.

History:

Since its origin in England, the majority of PM's growth came through various acquisitions. One of its most major investments included the purchase of 53% of Miller Brewing Company in 1969. Another major investment included the purchase of General Foods Corporation for 5.6 billion dollars in 1985. The most recent transaction included PM's acquisition of Nabisco Corporation in 2000. (see complete table on Exhibit A).

Purpose/Objective:

The purpose and objective of this report is to demonstrate the various strategic approaches that Philip Morris has taken to grow in the industry by adjusting to market trends and consumer needs. We believe that PM stands by its mission statement. A mission statement reflects the long-term direction of where an organization wants to be. Therefore, by discussing the various marketing approaches that PM has implemented through the years, and more importantly, the success that PM has achieved as a result of these approaches, we will be able to demonstrate this.

Philip Morris's mission statement is as follows:

"Our goal is to be the most responsible, effective, and respected developer, manufacturer, and marketer of consumer products, especially products intended for adults. Our core business is manufacturing and marketing the best quality tobacco products to adults who use them."

"We will support our mission by proactively engaging with our stakeholders to enhance our ability to act in a way that is consistent with society's expectations of a responsible company."

This organization has executed their mission statement by engaging with stakeholders to enhance their ability to act in manner consistent with societal expectations of a responsible organization.

II. Methodology

In our analysis of PM's marketing strategies, we used the SWOT Model and the Product Market Strategy to evaluate their marketing tactics. It is evident that the better positioned a company's marketing team is, the more likely that company will be in successfully meeting it's long term objectives of sustaining a clear advantage over its competitors.

The SWOT model helps uncover and explain the strengths, weaknesses, opportunities, and threats that face PM. This is a very valid research method that can be clearly assessed, and can also allow individuals to gain perspective and understanding of an organization's current standing at a particular time. The Product Market Strategy focuses on how a company penetrates the market, develops its own market, develops it own products, and diversifies into other domestic and global segments. PM's marketing team can use these models to answer questions such as "What market should we serve?," " What products can we develop?," "How can we attract new customers and maintain existing customers?", which will ultimately allow PM to continue increasing its market share.

By using these two methods we were able to gain a better understanding of how PM strategically plans for their future and where they stand in relation to their competitors.

III. Case Analysis

Financial Status

In the US, Philip Morris continues to be the leader in the tobacco industry. Its current market share continues to be near the 50% mark (49.9% reported on its website as of

April, 2005). The following chart demonstrates where PM stands in comparison with its competition.

Phillip Morris reported total shareholder return on stock at 18.4% for 2004, exceeding that of the Standard & Poor's 500 by 7.5%. Their operating companies employed effective strategies that focused on developing breakthrough innovation; building brand equity and superior product quality; reducing costs; investing in marketing infrastructure and research & development; increasing geographic expansion; effectively managing price gaps; and securing fair tobacco excise taxes. Altria's net revenues increased 10.2% to $89.6 billion, while earnings from continuing operations increased 3.3%to $9.4 billion. Diluted earnings per share from continuing operations rose 2% to $4.57. Dividends raised 7.4%, to an annual rate of $2.92 per common share. This would be the 37th time in 35 years that the dividend has been increased.

In the domestic tobacco business, PM USA 's net revenues increased 3.0% to $17.5 billion, and operating companies income grew 13.3%to $4.4 billion for the year. This was