PHILIP MORRIS COMPANIES INC.

STRATEGY ANALYSIS: PHILIP MORRIS COMPANIES INC.

This research presents a strategic analysis of Philip Morris Companies, Inc. The findings of this analysis are presented in the context of (1) a history and current status of the company, (2) a SWOT analysis, (3) recommended strategy, (4) a five-year projection of the recommended strategy, and (5) probable competitive and market reaction to the proposed strategy.

The Philip Morris Companies Inc. is the twelfth largest corporation in the United States. The company was founded in 1847 as a tobacco business (Moskowitz, Katz, and Levering, 1986, p. 784). Tobacco remains an important segment of the firm's business in the 1993 (Barrett, 1993, p. 317). In 1993, the company actively participates in three industries--tobacco (43 percent of revenues), processed foods (49 percent of revenues), and beer (eight-percent of revenues).

When the handwriting began to appear on the wall for cigarette manufacturing industry in the United States, Philip Morris adopted and implemented a series of aggressive diversification strategies. The first major diversification strategy was into the beer industry, where they acquired the Miller Brewing Company. Relatively soon thereafter, the company acquired the Seven-Up Company. Seven-Up was divested, however, and the company no longer participates in the softdrink industry. In 1985, Philip Morris acquired General Foods, which by 1987 was contributing 40 per

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product sales in the United States (Morris, 1993, pp. 42-43). The industry competitors expend a great deal of their marketing budgets in attempts to refute the health claims against their products with decreasing success. Health claims against tobacco products have changed the demographic profile of the consumers of these products. The market in 1993 for Philip Morris tobacco products is comprised of people who are largely young, not particularly well educated, and in the lower income segments of American society. As a consequence, tobacco product manufacturers appear to target young people--primarily teenagers--in their advertising campaigns in the United States (Konrad, 1991, p. 34). Critics of such advertising efforts claim that Philip Morris and other tobacco companies are attempting to exploit a vulnerable market (Bromberg, 1990, pp. 27-28). Philip Morris claims that critics of their advertising are attempting to abridge free speech rights, thereby causing the market segmentation efforts of the tobacco companies to become a constitutional issue (Schlossberg, 1990, pp. 1-2). With respect to the smoking and health issue, cigarette advertising is of paramount importance for Philip Morris. The company's management must c

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