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Essay on Philip Morris USA
Introduction
he tobacco industry is a highly profitable one despite the burden of litigation and current legal cases. A few companies creating an oligopoly dominate the tobacco industry. Philip Morris dominates a little over half the market followed by competitors R.J. Reynolds, Brown & Williamson, and Lorillard.
The tobacco industry would be considered mature in its life cycle, which constitutes its slow growth yet stable profitability. There is competition for market share and the trend line for the industry usually follows the economy. When considering their business cycle, it is defensive. This means that performance is stable and demand for this product is inelastic. The state of an economic downturn rarely affects the demand for tobacco due to brand loyalty and the addiction effect.
Philip Morris is the world’s largest packaged goods company. They operate in nearly 200 countries. Their diverse lines of business include some of the world’s most successful companies, with total operating revenues over $80 billion in 2000. It is the largest cigarette company in the United States, with a 50% market share. Together, Kraft Foods North America and Kraft Foods International, is the world’s second-largest food company. Miller Brewing Company is America’s second-largest brewer.
Philip Morris relies a lot on the tobacco industry, as that is where most of their revenue is derived from. About 60% of their total revenue comes from the tobacco industry alone. Their food market comes in second with about 33% and beer and financial services lag behind at about 6%.
Philip Morris strives to be the best and biggest consumer goods company in the world. They consistently try to reinvest their businesses and brands and meet the changing demands of consumers through innovation and new product development. A very import practice to them is to enhance shareholder value. They do this by raising the dividend and repurchasing shares....
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