Philip Morris International SWOT Analysis

Marlboro was first manufactured outside the US in 1957 in Switzerland. Ten years later, in 1967, Philip Morris & Co. , Ltd., Inc. Established separate companies to each be responsible for specific parts of the company’s operations: Philip Morris Industrial, Philip Morris International and Philip Morris Domestic. Philip Morris International organized a license agreement with Japan Tobacco to begin manufacturing Marlboro cigarettes in Japan. PM opens its largest factory in the Netherlands in 1980. This factory is still Mi’s largest in the world today. PM is incorporated as an operating company of Philip Morris Companies Inc. N 1987 and two years later, PM operating income tops $1 billion. In 1992, the largest single investment by a U. S. company in Europe at the time, PM acquires a majority holding in Czech Republic Tab AS, a state-owned company, for $420 million. In 2008, PM spins off from Altair, becoming the world’s largest international tobacco company. (Philip Morris International, 2014) “Our goals are to provide high quality and innovative products to adult smokers, generate superior returns for warehouses, and reduce the harm caused by smoking while operating our business sustainable and with integrity. “

Organizational Strengths and Weaknesses

Strength

PM owns Marlboro:

• Marlboro has been the number one selling cigarette brand in the world since 1972. (Philip Morris International, 2014)
• Owning Marlboro, the number one brand in the world, is a distinctive competence because it is a huge advantage over its competitors. Marlboro has been the number one selling brand in the tobacco competitors combined. To become the bestselling brand in the industry, and maintain that standing for 42 years, shows the competence and grasp that Philip Morris International has on the worldwide tobacco industry.

Strength: PM owns 7 of the world’s top 15 cigarette brands .

Owning 7 of the world’s top 15 selling cigarette brands is a strength because it is a big advantage to own almost half of the top selling brands in a market.  With Marlboro taking a distinctive lead on the list and L as the third top selling cigarette in the world, PM has a distinct advantage over their competitors. With PM owning almost half of the top 15 selling brands, and he other half being owned by several different competitors, PM has a much better chance of a cigarette purchase being one of their brands than anyone else.

Weakness

In the tobacco industry c.  It is an organizational weakness to be in the tobacco industry because, while as one point tobacco was a growing market, due to legislation, taxation and public opinion, the industry is weakening. Philip Morris International can minimize its weakness of being in the tobacco industry by increasing its development of Reduced- Risk Products (Raps). Reduced-Risk Products refer to products that could possibly reduce the risk of using tobacco products compared to smoking a combustible cigarette.

PM is currently working on this as shown in the opening of its first plant designed for the production of Raps Just outside Bologna, Italy. PM is currently in the construction phase of a larger facility, with the same purpose, in Crestfallen, Italy. It is expected to be operational by year’s end 2016. (Philip Morris International, 2014)  Second Organizational Weakness. Reason it is considered a weakness . Discuss how the organization can minimize this weakness.

Opportunities / Threats

Opportunity: Chinese market . This opportunity comes from Mi’s external environment.

The force creating this opportunity is a political/legal force because it is the government that has to allow PM access in to the Chinese tobacco market. The Chinese tobacco industry, while being almost completely state owned, accounts for more than 40% of cigarettes consumed globally. This is the largest tobacco industry in the world.

Opportunity: E-cigarette market. The E-cigarette market is an opportunity stemming from the company’s external environment. It is driven by the socioeconomic force as societies, globally, are legalizing the health risks that come with traditionally smoking cigarettes. The E-cigarette market is growing at a rapid rate due to the health risks that come from smoking traditional cigarettes. As the awareness of these risks grows globally, the e-cigarette market will become a socially acceptable replacement around the world.

Threat: Higher tobacco-related taxes. Higher tobacco-related taxes are a threat that originates from the organization’s external environment. The force it is coming from is a political/legal force because the various governments dictate excise taxes. 2Governments impose increased taxes on tobacco products for two reasons: public health issues and revenue. These countries. These tax increases and other unfavorable changes to the structure of how these taxes are figured lead to less demand due to higher prices. (Trifles, 2014)

Threat: Proposed anti-tobacco legislation. Ann-tobacco legislation is a threat that originates in the organization’s external environment. The force it is coming from is political/legal because legislation comes from the government. Governments discourage cigarette and tobacco use by initiating anti-tobacco laws and legislation. Legislation such as limiting where you can smoke (I. E. Only in designated areas or not indoors of businesses) discourages tobacco use. This then leads to reduced sales and therefore reduced profits. Anti-tobacco legislation, such as legislation calling for disclosure in various countries and mandating plain or generic packaging for tobacco products, can result in the government taking or modifying the property rights of a tobacco company’s trademarks for what it deems as being in the best interest of the people.

Summary

Philip Morris, through a license agreement with state owned Chinese National. Tobacco Corporation, in the only international company to have such an agreement. However, until the Chinese government decides to open the market to foreign companies, operations in the country remain limited and it is not expected to make any significant growth. PM is working to develop some low-risk products to use as an alternative route to enter the Chinese market to help give it a competitive advantage. (Trifles Team, 2013) Because the tobacco industry is primarily state owned in China, the government has complete control over when Philip Morris International can take advantage of this opportunity.

PM has developed a new product called Headstock, as an alternative to traditional cigarettes, to allow it to compete in this market. The headstock will be produced and manufactured under the Marlboro name. Current e-cigarettes use liquid nicotine, while the Headstock will use actual tobacco. The Headstock will heat tobacco to 660 degrees Fahrenheit causing a vapor to be inhaled instead smoke as when burning the tobacco. Similar products “represent a potential paradigm shift for the industry, public health and adult smokers,” says CEO Andre Callousness’s. Philip Morris to debut e-gig with real tobacco, 2014). As anti-tobacco legislation and increased taxes drive down the demand for tobacco products in developed countries, international tobacco companies, like Philip Morris International, have directed their efforts in developing and transitional economies around the world, like the Asian market. They are creating demand in these countries through advertising, producing and selling tobacco products. It has shown to be an effective means of overcoming legislation in developed countries, as 84% of tobacco users live in these areas.