companies to be shrinking (Dagnoli, 1990, p. 20). Agreements with foreign countries, including China, have opened new markets in other parts of the world where the company's tobacco products, led by the popular Marlboro brand, have enjoyed much success. Although unable to sell cigarettes in China at this time, the company is engaged in an aggressive marketing plan to create a market for products that will be available in the mid-1990s under a joint venture with the Chinese (Cigarettes to be produced, 1993, p. A4).
The recession has also had an impact on the tobacco business unit, with the result that the company undertook the unusual step of reducing the price of its premiere brand, Marlboro, early in 1993. This had the result of causing the stock price to fall, but was seen as one method by which the company could keep customers loyal to the Marlboro brand in the face of the economic downturn.
The economic slowdown also affects the food part of the company's business. The company entered the food segment through acquisition (Kraft Foods and General Foods, for example, both acquired since the mid-1980s). As other companies have sought to either sell off portions of their business or the entire business, Philip Morris has been able to step in and make the acquisition at favorable terms. Such acquisitions include the cereal segment of from RJR Nabisco and a Mexican company (Fomento Economico Mexicano) from Citicorp, both in late 1992.
The upheaval in former Eastern bloc nations has also provided a number of acquisition opportunities for Philip Morris. During 1993, the company acquired both a Lithuanian tobacco company and a cigarette company based in Czechoslovakia.
The budget deficit is another environmental factor that could affect Philip Morris products in the short-term. In an effort to reduce the deficit, President Clinton has spoken of an excise tax on tobacco and alcohol products, a move which is being called a ...