Philip Morris Companies, Inc.

Philip Morris Companies, Inc. is a leading consumer products company with three major segments: tobacco, food and beer. Each of these strategic business units (SBUs) is a significant force in its respective market; the company is the largest cigarette company in the United States and the largest American food processor. The company is also the second largest brewer of beer (Shea, 1993, p. 1822). In addition to these significant SBUs, the company also has a smaller concern in the financial services market, which has contributed slightly to activities in recent years. This research examines the current status of Philip Morris with particular regard to the company's position in its industry as it enters the future.

In 1992, Philip Morris dominated the domestic cigarette market with approximately a 45 percent market share. Tobacco products accounted for 43 percent of 1992 revenue and 69 percent of the company's operating profit (Barrett, 1993, p. 317). That dependence on a single business unit makes the company especially vulnerable to legislation and litigation arising from the sale of tobacco products. In recent years, Americans have become increasingly concerned with public health and with the sale and regulation of cigarettes and other tobacco products. Many public facilities now prohibit smoking indoors, and designated smoking areas have become commonplace at restaurants and other private establishments throughout the country. Announcements by the Environmental Pro

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Marlboro by 40 cents per pack on April 2, 1993. The immediate result was a 26 percent decrease in the company's stock due to the estimated loss of $2 billion in profits for 1993 (Morris, 1993, p. 42). The strategy of cutting the price of a premium product in order to gain market share has worked successfully for the company in the past, however. Kraft cheese was losing market share to private label brands during 1990 and 1991, and the company responded by cutting the price of its products. During subsequent quarters, the company has regained and even expanded market share. This is the result that the company hopes to achieve with its domestic cigarette market. In the international tobacco market, earnings and market share are both increasing for Philip Morris. Here, unlike in the United States, consumption is increasing and Philip Morris share in that market is increasing at an even faster rate: up 19 percent for 1992 and 18 percent during the first quarter of 1993 (Morris, 1993, p. 42). The company has been equally aggressive with regard to its strategy at Miller. Anheuser-Busch has doubled market share over the past 14 years, but Miller's share has remained stable during that time (Anheuser's gains were made at the expen

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