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You are here: Home > Current Topics > Mind your Business > 20 October 2003 |
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Philip Morris: The company website is littered with references to measures to prevent smoking and the support that the company are giving to measures to reduce smoking and the take up of the habit in the young. The company changed its name in 2003 coming under the group name of Altria Group Inc. The group also includes Kraft foods, which boast such well-known brand names as Nabisco - the cereal, and food giant, Oreo cookies, Philadelphia cheese and Maxwell House. The move was viewed with suspicion by anti-smoking groups, one of whom published a web article suggesting that lung cancer could take on the brand name of Philip Morris, since this name was more universally recognised as being associated with lung cancer than the name 'lung cancer'! Others have suggested the adverts in the UK press are designed to head off any potential legal action in the UK where litigation has been significant by its absence. Others have suggested that there are enough people in less developed countries to fill any gap left by smokers giving up or not starting in Europe. The question many are asking is fairly logical - why would a company who makes its money out of sales of cigarettes want to reduce sales and discourage potential customers from taking up the habit? This is a question addressed by the companies mission statement. The company recognise that in order for it to be successful it must meet the needs of its customers and its wider stakeholders. If responding to such needs means that sales of its products will fall in the future - so be it says the company. Do you believe them? |
A mission statement encapsulates the aims and objectives of a company and is designed to focus attention of all the firms' main stakeholders on that purpose. Such statements may be part of a wider process of social auditing whereby the company assesses, monitors and evaluates the impact of its activities on society and its stakeholders. For companies like Philip Morris, the problem is one of how to satisfy the tension between meeting the needs of its stakeholders when there are clearly going to be conflicts between such needs. Shareholders expect profits to be made, to make profits sales have to be increased and/or costs kept under control. Suggesting to customers that you should not use the product you are supplying them because it is potentially fatal goes against all marketing logic!
Philip Morris would argue that it is keen to target its marketing activities at its core market - adults who have chosen to smoke. Their marketing is designed to attract that group to use its products as opposed to those of a rival manufacturer. By acting in a responsible way in terms of its wider responsibilities the company can claim that its marketing strategy can help meet the needs of its wider stakeholders and satisfy shareholder demands.
In reality, the company also knows that modern day businesses are subject to a range of external pressures, the threat of tighter regulation may be sufficient to moderate the activities of a firm. In addition, legal action is an issue that focuses the minds of many firms. The very use of the term 'light' or 'low tar' might imply that they were 'better for you' than other types of cigarette. It is this that got Philip Morris into trouble in the US. The whole legal issue regarding cigarettes was founded on the fact that cigarette manufacturers knew the risks the product posed but deliberately withheld the evidence from consumers for many years - going back to the 1920s and 30s. Advertising of cigarettes in those days was very different with the implication being that smoking was glamorous and even beneficial in terms of reducing stress and helping people relax.
Opponents of smoking may point out that what tobacco companies are doing is presenting an ethical face to their 'sophisticated' western consumers whilst searching out markets in other countries where the knowledge of the harmful effects of smoking are less widely understood and where regulation is far less. Indeed, evidence suggests that such countries are the places where the market is growing most rapidly and that the market in the west has reached its 'maturity' stage. The company are therefore behaving in exactly the way that traditional profit maximising theory would suggest. They are seeking to allocate resources to gain maximum return and are merely reacting to changing market circumstances.
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(The suggested research sites will give you access to news items about Philip Morris, the views of the company themselves and views of those who are opposed to smoking and wish to highlight the dangers of the habit as well as those who feel that Philip Morris is an example of the 'unacceptable face of capitalism')
The starting point with this question is to explain what the purpose of a mission statement is and then summarise briefly the mission of Philip Morris. Do not be tempted to cut and paste - trying to express their mission in your own words will be far more valuable in terms of learning. You then need to outline the major stakeholder demands on a business. From this you will be able to identify what those demands might mean in practice for a company like Philip Morris; this should then allow you to be able to see where the conflicts are likely to arise. The answer to this question will lie in the ability of the company to strike a balance between the competing demands of the stakeholders. What would shareholders really be satisfied with? If the company were to have to meet even stricter guidelines then would this result in even lower profits or is it indeed prudent for the company to accept its ethical responsibilities because this will help it to survive in the long run? Is the mission statement likely to achieve what it sets out to achieve or is it merely, as some cynics have suggested, 'empty rhetoric' designed to head off further government clampdowns on its business? To be objective here you must take care to look at the evidence you have in front of you; the question invites you to 'support your arguments' this means having some evidence to lend weight to your point rather than just engaging in 'soap box ranting!' The inclusion of supported arguments in your answer is a very important higher order skill and one that needs to be worked on regularly.
In this question you are being asked to use the framework of the Boston Matrix to analyse the product portfolio of the company. You can take this in terms of the tobacco products only or you can look at it in the wider portfolio of the Altria Group. You will have to analyse what position on the matrix the various products are on and to discuss the implications for the firm in your judgement. You might suggest, for example, that tobacco is a problem child, its reputation and image so tarnished that it would be very expensive in the long run to maintain sales or increase sales growth. As a result a sensible strategy would be to get out of the product and focus its attention on other areas of the business. This may be long term but the purpose of the Boston Matrix is to help a business take stock of its position and plan ahead!
When making your judgement in this question you will have to consider the relative costs and benefits to the business of each possible scenario. How serious for example would it be for the business to not be seen to comply with the growing demands being made by government? What might the company expect in terms of the regulations that could be imposed on it? Or are there compelling reasons for the business to focus on its consumers - again putting aside the cynical view that exists might be important here. The theory relates to business objectives, strategic planning and knowledge of the role of mission statements in motivating workers throughout the corporation.
A marketing strategy will be focussed on the marketing model - the scientific approach to developing strategy whereby business objectives drive the strategy, information is collected upon which to base decisions, the strategy is monitored and evaluated and changed in response to the feedback from customers. Factors affecting the success of this approach will therefore depend on the quality of the information being used upon which to make decisions. How good was the market research? How clear are the objectives of the business? How successful have the company been in taking its employees with it? At a more basic level questions can be asked about how far the company can persuade the public that they are serious about cutting smoking in the young! You will need to consider these issues and apportion some form of weight to the various issues so that you can come to some conclusion about which of these factors may be the most important. The command word 'discuss' does imply some form of evaluation is required and you must therefore demonstrate this skill in your answer.
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