Altria Group Corporate Strategy: Diversification Analysis
This paper examines the Altria Group's corporate strategy, focusing on its level of diversification, international operations, and recent strategic decisions. It explores how Altria divested Kraft Foods and spun off Philip Morris International to concentrate resources on the domestic U.S. tobacco market. The paper assesses the business logic behind this refocusing strategy, evaluates how well Altria's decisions align with that logic, and offers recommendations for top management. Key topics include the MillerCoors joint venture, the role of Philip Morris Capital Corporation, rising legislative and social pressures on tobacco, and the long-term viability of a domestically focused tobacco business model.
- Overview of Altria Group and Diversification Level: Altria's ownership, brands, and shrinking diversification
- International Operations: SABMiller stake and Philip Morris Capital Corporation
- Recent Events Affecting the Tobacco Industry: Legislative, social, and nicotine-yield pressures on tobacco
- Alliance and Joint Venture: MillerCoors: SABMiller and Molson Coors U.S. cost-saving merger
- Business Logic Behind Altria's Corporate Strategy: Cost management rationale for domestic tobacco focus
- Evaluating Strategy Fit and Recommendations: Strategic coherence assessment and management advice
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What makes this paper effective
- The paper follows a clear, question-driven structure, directly addressing diversification, international operations, strategy logic, and recommendations in sequence, making the argument easy to follow.
- It draws on primary corporate sources (Altria press releases and strategy documents) alongside academic research (Harvard School of Public Health), lending credibility to its claims.
- The analysis moves beyond simple description by connecting external pressures — legislative, economic, and social — to the firm's internal strategic choices, demonstrating applied business reasoning.
Key academic technique demonstrated
The paper demonstrates the technique of strategic fit analysis: it first describes a company's stated strategy, then evaluates whether its operational decisions are logically consistent with that strategy, and finally proposes forward-looking recommendations. This mirrors the classic strategy audit framework used in business case studies.
Structure breakdown
The paper opens with a company overview and diversification assessment, then addresses international scope before turning to industry headwinds. A focused section on the MillerCoors joint venture illustrates portfolio hedging. The final two sections directly answer the prompt's analytical questions — validating the strategy's internal logic and offering concrete management recommendations — giving the paper a tight problem-analysis-recommendation arc typical of undergraduate business case analyses.
Overview of Altria Group and Diversification Level
The Altria Group is the parent company of the well-known tobacco giants Philip Morris and John Middleton. Altria also holds an 8.5% economic interest in SABMiller, the world's second-largest brewing company ("Our Companies and Their Brands," 2008, Altria). Philip Morris alone dominates approximately half of the American tobacco market. However, in terms of diversification, although Altria's companies have strong brand loyalty, Altria is not particularly diversified as an entity. In fact, Altria has grown less diversified in recent years. In 2007, Altria divested itself of its shares in Kraft Foods, the snack food company in which it once held a considerable interest. In 2008, Altria's Board of Directors authorized the spin-off of 100% of the shares of Philip Morris International Inc., Altria's international division ("Corporate Restructuring," 2008, Altria).
Instead, Altria has shifted its focus away from snack products like Kraft and its international potential, intent upon growing — or, as its literature insists, maintaining — its base of domestic smokers. According to its most recent press release at the time, following the sale of Kraft and the divestiture of Philip Morris International Inc., Altria "now has greater focus, with most of our corporate resources directed toward building our leadership position in the U.S. tobacco industry. The U.S. tobacco industry remains one of the largest and most profitable markets in the world, and has additional growth opportunities for Altria Group. Altria Group will have the ability to leverage resources, such as Philip Morris USA's distribution network and strong field sales force, across an array of tobacco products including acquisitions like John Middleton. Altria Group will also have a more flexible capital structure" ("Strategy for Financial Growth," 2008, Altria).
International Operations
Despite the sale of Kraft and the spin-off of its international branch, Altria continues to maintain an international presence through both SABMiller and Philip Morris Capital Corporation, a subsidiary owned by the Altria Group. "The company's portfolio consists primarily of leveraged and direct finance lease investments leased to predominantly investment-grade credits. The portfolio of assets of Philip Morris Capital generates operating companies' income, cash flow, and tax deferral status for Altria" ("Philip Morris Capital Corporation," 2008, Altria). Although one might expect the international market to be a better source for generating new tobacco users, Altria has turned its manufacturing focus toward the domestic arena — where its most loyal brand users reside — while still maintaining an international financial presence to ensure sustained cash flow.
Recent Events Affecting the Tobacco Industry
The revenue of the tobacco industry has been hard hit by recent legislative developments, including the banning of smoking in restaurants in New York City and many other major urban areas. Cigarette taxes have risen in many states, and coupled with the economic downturn and growing social pressures, many Americans are seeking to quit smoking. The tobacco industry continues to receive negative publicity for its marketing efforts aimed at teenagers, as well as for the broader personal and public-policy consequences of tobacco addiction. These pressures could prove problematic for Altria's strategy of focusing on its domestic market to ensure a strong revenue base while reducing overall operating costs.
The tobacco industry has also faced recent scrutiny following the discovery that a "reanalysis of nicotine yield from major brand-name cigarettes sold in Massachusetts from 1997 to 2005 has confirmed that manufacturers have steadily increased the levels of this agent in cigarettes. This independent analysis, based on data submitted to the Massachusetts Department of Public Health by the manufacturers, found that increases in smoke nicotine yield per cigarette averaged 1.6% each year, or about 11% over a seven-year period" (Herman, 2007).
Works Cited
"About Altria Overview." (2008). Altria Group. Retrieved 11 Aug 2008 from
"Corporate Restructuring." (2008). Altria Group. Retrieved 11 Aug 2008 from
Herman, Robin. (18 Jan 2007). "Reanalysis of Cigarette Content Confirms Tobacco Companies Have Increased Addictive Nicotine 11% Over Recent Seven-Year Period." Harvard School of Public Health. Retrieved 11 Aug 2008 from http://www.hsph.harvard.edu/news/press-releases/2007-releases/press01182007.html
"Our Companies and Their Brands." (2008). Altria Group. Retrieved 11 Aug 2008 from
"Philip Morris Capital Corporation." (2008). Altria Group. Retrieved 11 Aug 2008 from
"Strategy for Financial Growth." (2008). Altria Group. Retrieved 11 Aug 2008 from
Sullivan, Rob. (17 Jan 2007). "MillerCoors Joint Venture." Seeking Alpha.
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