Tobacco

In: Business and Management

Submitted By rdawood
Words 1217
Pages 5
Philip Morris International (PMI), the global leader in tobacco products, is currently experiencing risks to its profitability and future operations, particularly from increasing taxes and prohibitive public policy. PMI must balance strategies which address the heightening involvement of western governments in the tobacco industry with the growth opportunities in developing markets. The following outlines the three most significant risks facing PMI and identifies existing strategies in comparison to competitors.
The first significant risk facing PMI is government restrictions on advertising. Governments globally are increasingly restricting the means by which PMI can actively market to consumers. As a result, the branded tobacco industry has been limited to select sponsorship and online marketing efforts. The latest restriction involves mandating plain packaging. Australia is set to become the first country to introduce plain packaging for cigarettes in December 2012, thereby eliminating a critical brand marketing vehicle for the industry, a precedent that will have worldwide repercussions. Such measures are anticipated to expand to other regions, which restrict PMI’s ability to launch new (and differentiated) brands and to command a premium price. In the event that the tobacco product industry becomes a commodity market, with no way to differentiate other than price, production cost-reduction initiatives will serve to partially mitigate against the risk to profitability. In response to advertising restrictions, the industry has moved to new promotions using largely unregulated online advertising to establish new customers and maintain existing ones. For example, PMI has launched Marlboro's Outwit the West, a “by-invitation if you're a smoker” 4-member team-based online competition with a million dollars in prize money. More generally, PMI has been using Marlboro’s…...

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