1. Philip Morris Inc.

2. Philip Morris Inc. History
Named after Great Marlborough Street, the location of its original London factory.
By 1924, advertised as a woman’s cigarette.
launched its filtered end in 1955
In the 1960’s, “Marlboro Country” was created.
By , 52% of high school students smoked Marlboros as opposed to any other brand.
The Phillip Morris brand that we are focusing on is Marlboro, which was named after the Great Marlborough Street in London where the company started production. In the mid-20’s, Marlboro was marketed mainly as a woman’s cigarette company, using the slogan “Mild as May.” The company went into remission and was taken off the shelves for a short while until the end of World War II, when it was distributed to soldiers that created a resurgence of the company upon their return home. Marlboro launched it’s filtered end in 1955 in response to articles in Reader’s Digest in the early 50’s linking smoking to lung cancer. Marlboro country, exemplified by burly cowboys and advertised to this day, was created in the 60’s. Recent surveys have shown that about half of all student smokers in high school and middle school choose Marlboro as opposed to other brands.

3. Mission Statement & Objectives
Philip Morris Inc.
Mission Statement & Objectives
Mission Statement
An operating company of Altria Group, PM USA is guided by Altria Group's mission  to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco consumers with superior branded products.
Organization Objective
Investment in Leadership
Align with Society
Satisfy Adult Consumers
Create Substantial Value for Shareholders
Phillip Morris’ mission statement states that they want to own and develop industry leaders that provide the highest quality tobacco products. They strive to invest in leadership, align with society, satisfy adult customers, and create substantial value for shareholders.

4. Philip Morris Inc. Company Information - Growth - Preparation for sale
Tobacco is one of the 6 most important crops grown by American farmers. It is grown in a transparent-roofed shelter that is low to the ground and then transplanted into a field until it matures.
- Preparation for sale
Tobacco is usually cultivated annually, then cured in a kiln house and aged. After this process, the tobacco leaves are separated into different quality grades.
- Shipment
Until the 1960’s, the United states was the world’s leading manufacturer and exporter of tobacco products.
- Advertisement
There are over 40 million pages of internal documents available to the public revealing the thoughts and processes that go into campaigns.
- Distribution
Stores, bars, and promotional workers that solicit people in various settings for free cigarettes.
Tobacco is a product that goes through several steps en route to the end user. It is one of the 6 most important crops grown in the Unites States and is cultivated once a year from transparent-roofed shelters. The plants are then cured in kiln houses where they are aged for 6-8 months, followed by separation into different grades. The tobacco is then processed and distributed through various means.

5. Philip Morris Inc. Product Information
Marlboro is a brand of cigarettes made by Phillip Morris USA
Phillip Morris is the leading tobacco manufacturer in the US specializing in the production and marketing of cigarettes and smokeless tobacco products
Two forms of tobacco products
Smokeless
Cigarettes
Competition
Reynolds American Inc
Brown & Williamson Tobacco Corporation
Lorillard, Inc
Phillip Morris is the leading tobacco manufacturer in the United states and develops cigarettes as well as smokeless tobacco. It holds many companies, Marlboro being the largest, and is part of the “Big Tobacco,” big three. The other two in the big three are Reynolds American and Lorillard, Inc.

6. Major Competitors Continued Reynolds American (RJR)
Philip Morris Inc.
Major Competitors Continued
Reynolds American (RJR)
– sold about 28% of all cigarettes sold in U.S. in 2006
Markets several tobacco products over a few different companies, including:
Cigarettes – Camel, Pall Mall, Kool, Winston, Salem, Doral, Misty, Capri, and Natural American Spirit brands
Moist snuff – Grizzly and Kodiak
Little cigars – Winchester and Captain Black
Pipe tobacco/roll your own – Bugler and Kite
Lorillard
– 18th oldest company in U.S. and oldest tobacco company
Cigarettes – Newport, Maverick, Old Gold, Kent, True, Satin, and Max
Reynolds American is Phillip Morris’ biggest competition and sold about 28% of all cigarettes in 2006 and hold major companies in cigarettes and chewing tobacco, Camel and Grizzly, respectively. The third of the big three is Lorillard, Inc., which is the oldest tobacco company in the country and produces Newports.

7. Philip Morris Inc. Economics Rising unemployment
- Promotes a change in consumer spending
- Decrease in sales makes it hard for Marlboro to cover operating expenses and make a profit
Subject to largest federal tax increases
- Creates changes in income
- Increase during recession gives more incentive to quit
- 57% of smokers in US are skilled laborer as well as the most likely consumer to feel the effects of
an economic downturn
Rising unemployment has caused a change in consumer spending, most noticeably in the purchase ‘luxury’ items. This decrease in sales makes it difficult for Marlboro to cover operating expenses and make a profit.
Additionally, the largest federal tax increase on this product in history has given consumers a larger incentive to quit.

8. Philip Morris Inc. Political Factors
Federal Cigarette Excise Tax (FET) went up to $1.01 per pack
Wisconsin Taxes have Increased
-On February 4, 2009 the federal government enacted legislation that increased the federal cigarette excise tax (FET) by 61 cents per pack – to $1.01 per pack effective April 1, 2009.
-State excise taxes vary widely, ranging from 7¢ per pack in South Carolina to $3.46 per pack in Rhode Island.
-Federal and state excise taxes alone accounted, on average, for 36.5 percent of the retail price of cigarettes in FY 2008
-promote purchases through untaxed or lower-tax venues;
create incentives for contraband activity;
harm businesses, including retailers and wholesalers; and
do little to solve governments’ systemic fiscal problems.
-The Wisconsin state excise tax on both cigarettes and smokeless tobacco products will increase on September 1, The cigarette excise tax will increase to $2.52 per pack – this represents a $0.75 per pack increase.
-smokeless consumers will pay an additional $0.82 on premium brands

9. Philip Morris Inc. Political Factors Negative Political Factors
Wisconsin Revenue from Cigarettes
Excise Tax Collected (2008): $460,367,717
Master Settlement Agreement (MSA Payments 2008): $149,200,000
Cigarette Sales Tax Revenue (2008): $99,154,504.90
Total Revenue Collected (2008): $708,722,221.90
-Some elected officials are considering banning cigarette sales in pharmacies and other retail outlets. Click on the city below to learn more about retail sales ban that have been enacted. San Francisco and Boston are examples.
-A growing number of state and local governments are banning smoking not only in public places, like workplaces, restaurants and bars, but also in private places like apartment buildings and cars.
-In 2007, the program achieved an average 54 percent reduction in cigarette litter in the communities and venues participating.
Negative Political Factors
Retail sales bans
Smoking restrictions
Cigarette Butt Litter : Keep America Beautiful(KAB)

10. Philip Morris Inc. Natural Environment Materials
Raw materials are taxed by the exporting country and by the US once they arrive.
High gas prices make importing materials and exporting the finished product more expensive.
Pollution and Energy Use
Phillip Morris has worked to decrease the environmental impacts of production to help improve their image.
A percentage of most of the raw materials for cigarettes are imported. This includes tobacco, which comes from Malawi, Brazil, Argentina and Turkey. Expenses of importing tobacco include transportation costs and taxes. The finished product also incurs transportation costs, as it must then be shipped around the country from factories in Virginia and N. Carolina.
In an effort to improve the image of cigarettes, Phillip Morris has take steps to decrease the environmental impacts of production.

11. Philip Morris Inc. Natural Environment
From 2004 to 2008, Phillip Morris has decreased:
Water consumption in manufacturing by 30%.
Energy use by 9.7%.
CO₂ emissions by 15.1%.
Over 4 years, they’ve decreased water consumption by 30%, energy use by 9.7% and CO2 emissions by 15.1%.
Doing so has allowed Phillip Morris to decrease their production expenses in the long run and shown the public that they are committed to a cleaner environment.

12. Technological Environment
Philip Morris Inc.
Technological Environment
The largest arguments against cigarettes are related to health and safety concerns.
Research focuses on reducing health risks.
Funding is given to external research facilities, including the Duke Center for Nicotine and Smoking Cessation Research.
A self-extinguishing paper was developed to help prevent smoking-related fires.
Phillip Morris is continuously trying to improve the reputation of cigarettes. The largest portion of arguments are related to health and safety concerns. Therefore, most of their research focuses on creating a ‘consumer acceptable’ product by reducing health risks.
Funding is given to external research facilities, including the Duke Center for Nicotine and Smoking Cessation Research. This funding is mostly non-directed and independently reviewed.
As a result of such research, a way to prevent the most common safety issue of cigarettes (the accidental starting of fires) was developed. Self-extinguishing paper allows for a cigarette to burn while being smoked and air is being drawn to the fire, but stops burning quickly if the cigarette is left alone.

13. Philip Morris Inc. Cultural Environment
Tobacco use is the leading cause of preventable deaths in the US
Kills 1 in 5 Americans each year
Large law suits are filed against major tobacco manufacturers for misrepresenting side effects of smoking
Cultural shift toward healthy lifestyle
Less likely to spend money on tobacco when living a healthy, active lifestyle
An increase in regulation has forced Phillip Morris to be more proactive in marketing the health side effects of smoking
Makes it difficult for the company to properly promote the product
Constant reminder to the consumer about effects of
smoking and their health
Tobacco has long been an acknowledged health risk. It is the leading cause of preventable deaths in the US, killing 1 in 5 Americans each year. Despite this, sales flourished until a recent shift toward a healthier lifestyle by consumers. Public pressure has lead to an increase in regulations that force Phillip Morris to be more proactive in promotions while constantly reminding consumers of the health effects.

14. Philip Morris Inc. Demographics
Smoking statistics in the United States indicate that 26 million men (25.7%) and about 23 million women (21%) smoke cigarettes. Smoking statistics for those people 18 years of age and older in the U.S. suggest these smoker estimates for the following ethnic groups:
- Caucasians - 26% of all Caucasian men smoke while 22% of all Caucasian women smoke
- Black or African Americans - 29% of all Black men smoke while 21% of Black women smoke
- Hispanics - 24% of all Hispanic men smoke while 12% of all Hispanic women smoke
- Asian and Pacific Islanders - 24% of all Asians smoke while 7% of all Asian women smoke
- American Indians and Alaska Natives - 41% of all American Indians/Alaska native men smoke while the same percentage of women - 41%
The American Heart Association reports additional smoking statistics that indicate that the lesser educated groups of America are more prone to higher percentages of smokers. For example, those with the least amount of education – those educated between 9-11 years – show that 35% of its masses smoke while the most educated group – those educated 16 or more years – show that just under 12% of its masses smoke cigarettes.
Outside of age demographics, there lies the class structure: smoking statistics indicate that 33% of all those living below the poverty level smoke cigarettes.

15. Philip Morris Inc. Demographics
Smoking Age Statistics - from 1988 to 1996 showed that first time use increased 30% for those aged years and first daily use increased 50%.
Age Trends - black adolescents are less likely than white adolescents to smoke (2,3); however, black adults are more likely than white adults to begin smoking after adolescence
Target Market Movement - is a Minnesota Youth Tobacco Prevention Initiative which has cause smoking to drop by 25 percent among year olds in 2002.
-SMOKING STATISTICS - Ten years ago, in a study performed by The National Household Survey on Drug Abuse for the years ranging from 1988 to 1996, smoking statistics showed that first time use increased 30% for those aged years and first daily use increased 50%. In addition, more than 6,000 people under the age of 18 years smoke a cigarette each day and 2,000 people in that age group are daily smokers.
Target Market Movement (2002) - is part of the Minnesota Youth Tobacco Prevention Initiative being funded by the State of Minnesota's Youth Tobacco Endowment, which was created with around eight percent of the Minnesota tobacco lawsuit settlement. During the first year of Target Market, smoking dropped by 25 percent among year olds. The annual budget for the two-year marketing campaign is $6 million. Based on Federal Trade Commission reports, the tobacco industry spends an estimated $144 million marketing in Minnesota each year.

16. Micro & Macro Environments
Philip Morris Inc.
Micro & Macro Environments
Micro
Lawsuits against Marlboro
Corporate responsibility
Macro
Rising unemployment
Increase in federal tax
Increase in government regulation

17. Market Environment Analysis
Philip Morris Inc.
Market Environment Analysis
Key Negative Issues
Political – Government imposing high taxes and anti-tobacco campaigns
Health - Cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers.
Culture - health concerns and anti smoking movements have changed the cultural view of smoking. Smoking is bad and there is no safe cigarette.
Positive Changes
Environmental - Philip Morris has reduced water consumption, reduced pollution, and created a self-extinguishing paper
Political – With the rising price of tobacco products and the down economy customers are looking to the increasing amount of programs to help them quit. Retail bans, public smoking restrictions. An example of a government program would be Tobacco Free Kids.
Health & Culture - PM USA agrees with the overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. There is no safe cigarette.

18. Philip Morris Inc. Sources “CDC”. 21 Sept. 2009. 22 Sept. 2009
“Tobacco Industry.” Wikipedia. 21 Sept Sept <
“Reynolds American.” Wikipedia. 11 July Sept <
“Lorillard Tobacco Company.” 12 June Sept <
Phillip Morris USA Sept <
“Phillip Morris USA.” Wikipedia. 21 Sept Sept <
“Philip Morris USA” 16 Sept Sept. 2009
“Marlboro (cigarette).” Wikipedia. 16 Sept Sept <
“Quit Smoking Hub” 20 Sept Sept. 2009
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