Profiling Phillip Morris, an International

Profiling Phillip Morris, An International Firm

Organization type

Planning

Market Assessment

Marketing Strategy

Organizational Structure

Organizational Culture

Locations of the Organization and Business Operations

Philip Morris position towards environmental, political, social, economic, legal and labor forces of the international economy

Annex

Annex

Annex

The present paper aims at constructing a comprehensive profile of Philip Morris, the tobacco giant, by examining issues like: organization type, its strategy, the planning process within the company, its market assessment, its marketing strategy, organizational structure, organizational culture, its locations, business operations. Additionally, the paper will look into how the analyzed company confronts environmental, political, social, economic, legal and labor force related issues on the international background.

Organization type

Philip Morris is the world leading Tobacco Company, its products being sold in more than 160 countries (PMI, 2008; PMUSA, 2008).

In March 2008, Philip Morris International, Switzerland-based operations in charge of the company's operations outside U.S. span off from the Altria Group's umbrella, for reasons to be analyzed under the "Strategy" headline.

Consequently, today, Philip Morris International acts as a standalone entity from Philip Morris USA. (O'Connell, 2008)

For the purpose of the present paper, the operations of the two Tobacco Businesses, Philip Morris USA and Philip Morris International will be analyzed, in order to create a complete and comprehensive profile of its businesses, strategies and operations all over the world.

With a portfolio built of major brands such as Marlboro, Parliament, Virginia Slims, Basic and L&M - in the U.S. And Marlboro Parliament, Virginia Slims, Chesterfield, Philip Morris in the International Market (Altria, 2008), the company is strengthening its leading position on the world market, with more than one of every three cigarettes smoked currently in the U.S. being a Marlboro (Adbrands.net, 2008) and with a share of 15.6% of the international cigarette market (outside U.S.) held by the Philip Morris International (PMI, 2008).

Strategy

Similar to other leading Tobacco Companies, Philip Morris follows a strategy of expansion in the emerging markets, where fewer restrictions both on smoking and on cigarettes advertising are imposed (BBC News, 2007).

Following the same line of ideas, the split of PMI from Philip Morris USA, wanted to free the giant's international operations of the usual annoyances of legal and public-relations nature in the U.S., that have hindered its international growth in the past.

Consequently, on 30 January 2008, the Board of Directors of Altria Group, Inc. authorized the spin-off of 100% of Philip Morris International's shares to Altria's shareholders (PMI, 2008).

Thus, the standalone entity will be exempt from the harsh U.S. tobacco regulations and far away from the bothering American litigators and public opinion, opening the door for new opportunities such as a broad market for product experimentation (O'Connell, 2008)

Planning

As suggested by the document found on Philip Morris documents website (www.pmdocs.com) andattached as an Annex to the present paper, the strategic planning process within Philip Morris International (and it is a logic conclusion to draw that a similar structure of a strategic planning process would be used for the Philip Morris USA branch) follows the above described flow:

The Country Cross-Functional Team (for PMUSA can be the a Team formed of State Cross-Functional or Regions Cross Functional - responsible members) are in charge of objective setting using as a base inputs from external environment, local market information, etc. With these objectives in mind, the Strategy and Development area develop the Strategic Planning Process that build into the Global Strategy.

The Strategic Planning Process is then applied at local level through the Local Strategies and Action Plans (that are responsibilities of the Local Marketing Teams).

As the dates of the planning related documents found on the PMUSA Documents Site suggest, the Global Strategic Planning was taking place every 5 years, and regionally every year. (PMUSA Docs, Year Unknown).

Even though direct secondary resources have not been found to support this idea, it is most probable that starting with the company's March 2008 breakup, that had been an operation planned for years (despite its concerns regarding the U.S. regulators that could have tried to stop it) (Cordeiro, 2008) all strategically major Philip Morris moves will continue to be planned separately for the Philip Morris International Spin Off and the U.S. Altria's Tobacco Holding Philip Morris USA, as before.

Market Assessment

Growth in global tobacco products market has been restricted for the past several years due to ever more severe government regulation and taxations, allied with increasing health concerns derived from smoking effects over long-term smokers, as well as due to the various lawsuits across the world. With all these issues taken into account, world market value continued to expand at a steady rate, and it is likely to reach a value of around $374 billion by 2010 to be spent on tobacco products (including thus cigarettes and cigars), according to a new report by Global Industry Analysts, Inc. (Industrial Manufacturing News, 2008).

According to Euromonitor International, the current number of smokers reaches 1.3 billion, with more than a third being Chinese (McKay, 2008). See Figure 1 in Annex 2.

The U.S. cigarette market, different from the international markets has been registering declining consumption trends, which makes the international market with its real growth opportunities of significant interest to the cigarette companies, and Philip Morris International is on its way to take the most advantages from it (Norton, 2008).

Marketing Strategy

While Philip Morris USA remained in charge of the home market, Philip Morris International sales its products in about 160 countries, in many of them holding the Number 1 or Number 2 position of market share. As it is much diversified from a geographic point-of-view, it has significantly reduced the regulatory or legislative risk of being tied to a single market.

While on the U.S. market Philip Morris USA holds about 50% market share, in the international market, Philip Morris International accounts only form about 15.4% and has a lot of opportunities to gain more volume from its competitors and thus increase its market penetration. Which is exactly what it does. (Norton, 2008)

On the long-term, the biggest growth driver seems to be the development of its relationship with the state owned China National Tobacco Corporation (CNTC). With an estimated volume of exceeding 2 trillion cigarettes annually and about 350 million smokers, China is the most significant market a cigarette company could work on for two years already Philip Morris international negotiates possible agreements that would help it to enter production and sales in the country, probably by manufacturing Marlboro cigarettes within the CNTC national fabrics (Norton, 2008, McKay 2008). If this type of agreement should enter into force, "PMI could catch fire" from the speed of its growth, as the title of Norton's article states.

The same author mentions in the above mentioned article, that "in contrast to Altria's leaders driving with one foot on the brake, I believe that the PMI management team feels like a turbo-charged sports car let loose on the open road after being constrained to school-zone speeds for far too long."

The most probable strategies to be followed by Philip Morris International are to be related to improved operating performance, development of innovative products and reduction in costs, while management acts will tend to be more aggressive in order to exceeding by far its initial targets (Norton, 2008).

As well as other international tobacco giants, Philip Morris International denies that the company is targeting new smokers or that it is currently seeking to expand in areas with minimal regulation. Nevertheless, they are working on increasing sales volumes in countries where population is growing, where the middle classes are getting thicker and where smoking is perceived as a sign of upward movement in the society. Concomitantly, Philip Morris International is also developing and promoting new or adapted products to attract new consumers, such as shorter cigarettes that respond better to the tobacco restrictions in public places (McKay, 2008).

According to Philip Morris International spokesman, cited by McKay's article "Where there's smoke: Emerging World," the company's goal is "to appeal to adult smokers who've already made the decision to smoke, and get them to smoke our brands."

Organizational Structure

Exact information on "low level" organizational structure for both Philip Morris USA and its International peer could not be encountered at the time of the writing of this paper. Nevertheless, from the sole document publicly available and containing information regarding "high level" organizational structure has been selected the Figure 3 in Annex 3 can be observed the matrix like division of operational responsibilities both on geographic areas, as well as on functional areas.

Organizational Culture

As it is known, Organizational Culture is comprised of the values, assumptions, norms and tangible signs of organization members and their behaviors.

Philip Morris is a company that has kept its image of a company with great people, significant opportunities, interesting and challenging work and corporate and individual responsibility.

It has a relatively low distance to power, thus giving opportunity to ideas to reach fast to the decision makers. Its type of culture it can also be considered as a "Club culture," as information stated on the company's site confirm information such as the one that many employees have started at the bottom and stayed with the organization for years, and that they have been promoted from within, by a company that still gives value to seniority. (PMUSA)

Locations of the Organization and Business Operations

The U.S. unit has various facilities within the country, such as its Center for Research & Technology (CRT), and its manufacturing, processing and also its support facilities in the Richmond, Va., area; in Chester is situated its Park 500 plant and in York its Manufacturing facility near Williamsburg; another manufacturing facility in located in Cabarrus County, N.C.; and its sales offices are crisscrossing both the U.S. And the Commonwealth of Puerto Rico (PMUSA Website)

Regarding Philip Morris International, it owns in total 51 factories in 42 countries. Following the spin-off, its corporate HQ is in New York City, while the company's Operations Center is situated in Lausanne, Switzerland. Officially, Philip Morris International is a U.S.-based entity incorporated in Virginia. (PMI Website)

Philip Morris position towards environmental, political, social, economic, legal and labor forces of the international economy

Given the social, legal and political pressures the tobacco sector - and consequently also Philip Morris - develops its activities, the company's politics regarding each of these factors tend to be strict, respecting the same basic principles, aiming for the goal of being a socially responsible company, both at local and global levels.