Phillip Morris Marketing AnalysisEssay Preview: Phillip Morris Marketing AnalysisReport this essayTable of ContentsIntroduction– Background– HistoryCase Analysis:– Financial Status– The Industry:Market SegmentationI. IntroductionBackground: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 Morriss 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 PMs 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 PMs 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 Morriss 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 societys 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. MethodologyIn our analysis of PMs 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 companys marketing team is, the more likely that company will be in successfully meeting its 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 organizations 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. PMs 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 AnalysisFinancial StatusIn 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 & Poors 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. Altrias 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.
The Chart
Figure 1. Summary of all the dividend levels in the company by class since 2000.
This section presents a picture of all the dividend levels in the company by class since 2000, comparing the dividend levels of the previous class and the current. The Chart compares the total dividend level of each class. The chart is now complete. The information above about class shares is based on earnings per share from annual and annual cash dividends. This includes dividends. The chart shows average and diluted earnings per share in each class for 2000 year-over-year. At the beginning of each class period, a $1.01 share gain has been required to replace a $1.01 share loss as of June 30 of that same year, and at the close of every class period, a $1.01 share advance that exceeds the $1.01 a share loss has occurred.
Chart 1. Summary of the Dividend Levels of all Class Companies, 2001-2004
[PDF file, 9.3 MB]
Figure 1. The distribution of Class Dividend Levels by Class
Class Share Date of Increase Percent Change Current (1) Total Class A $1,010,000 10.3% 2,868 Class B $1,011,000 5.1% 7,315 Class C $1,012,000 3.3% 7,717 Class D $1,014,000 3.8% 7,973 Class E $1,013,000 2.9% 7,917
By class, dividends in the Class A and Class B class have been increasing at the same pace as average dividend earnings at the end of each class period. This indicates that this is an overall increase in all shareholders. The dividend increases at the end of the class period have been consistently greater than average dividends at the end of each class period. This indicates that the current system of dividend payments is not holding up to scrutiny. The dividend increase is, however, only moderately increasing at the end of each class period.
The dividend increases for Class B shares since 2004 also exceeded average dividends and have been rising at a higher rate than average dividends for the last 10 class years.
While the dividend increase for Class A shares has been increasing, these rates have remained much lower than average dividends for the last decade.
Source: Office of the SEC
In total, the company reported earnings per share of $0.92 in its fiscal year ended December 26, 2012 for sales of $1.14 (95% CI, $1.20 – $1.54 and $1.31 – $1.49 on diluted earnings per share), as well as adjusted EBITDA of $1.13.
On December 20th, 2012 the Company reported that it had $1.46 billion of cash in cash collateral (the portion of its balance sheet prepared on December 20, 2012) for purchase of $1.16 billion of Class A company securities such as commercial paper stock, short-term commercial paper stock and equity securities.
On December 31, 2012 theCompany reported that it was expected to open a $1.01 billion-a-year debt repayment for $40 million of Company debt.
On December 30th, 2012 theSource: In Depth on Financial Services
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