Introduction
This is an individual business research report that focuses on the Philip Morris International Corporation (PMI). This paper will critically analyze the corporate elements of the company and evaluate the various strategies employed by Philip Morris (PMI). The critical analysis will culminate in the identification of gaps that would be utilized in drawing a set of recommendations for the company.
Corporate History and Background
PMI is an American company listed on the New York Stock Exchange. It is known for producing and marketing cigarettes and tobacco around the world. PMI is a conglomerate of four major cigarette and tobacco companies including Sampoerna, PMFTC Inc, Rothmans, and Papastratos. Through this network of subsidiaries, PMI sell cigarettes and tobacco products in almost 200 countries around the world. The most popular brand associated to PMI is Marlboro which is sold in almost every country around the world.
PMI is a result of the registration of a British company, Altria Group which was sold on the London Stock Exchange. Altria Group operated in London because the American corporate system was full of many restrictions that was considered to be inappropriate. However, PMI was incorporated in 2008 in the United States to cover the assets of Altria. Currently, it has two headquarters in New York and Lausanne, Switzerland.
PMI has a major reputational issue due to the fact that it is the largest producer of cigarettes which are addictive and known to cause cancer and other deadly diseases and secondhand smoking. In line with this, PMI has set up PMIScience to conduct research into healthier cigarettes and now Malboro is considered to be the safest cigarette brand.
The history of PMI goes back to 1847 when Philip Morris set up a single shop in London. The company was purchased from the founding family in 1894 and commenced the New York branch in 1902. PMI became a household brand in the United States in the 1950s and from then, it continued to expand and grow through acquisition of famous brands around the world.
Corporate Business Strategy
The mission of PMI is “to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products.”. This involves the desire to control the tobacco industry and produce some of the best tobacco for consumers by buying companies and running them in the most efficient way.
In meeting the mission, the vision of what they seek to achieve include:
A desire to develop tobacco products that are least harmful to users;
Provide a wider range of tobacco products for consumers around the world;
Use a responsible approach to lead the tobacco industry around the world;
Grow relationships with stakeholders including tobacco farmers and the society at large
In order to make the mission happen, the following goals are in place throughout PMI:
Invest in leadership;
Align with society;
Satisfy adult consumers;
Create substantial value for shareholders.
The main objectives that must be followed by the company in the quest to meet their goals include:
Integrity and trust;
A passion to succeed;
Executing with quality;
Attaining creativity and excellence;
Sharing with stakeholders.
Corporate Structure of PMI
Philip Morris’s corporate structure is headed by a board of directors. The board is made up of 15 directors of which the president is a member. The president works with a vice president who heads the routine management of affairs.
Figure 1: Corporate Structure of Philip Morris International
Figure 1 presents an organogram that includes the heads of various units including the scientific units and other units that are responsible for dealing with the operations of important activities and affairs. Below the vice presidents and leading directors, there are middle ranked managers who are also assisted by lower level managers who run the affairs of the company.
Corporate Stakeholders
Stakeholders are persons or entities that affect or are affected by the activities of a company. The main stakeholders of PMI include:
Shareholders: These are the individuals and entities that come together to pool their resources to provide capital for PMI. They look forward to getting dividends for the shares they have contributed to PMI and will benefit from return on investments if PMI turns out a profit.
Directors: These are persons given the right by law to use the resources of the company. They have a fiduciary duty concerning governance in the activities of the company. Thus, they delegate powers and monitor activities of all units of PMI.
Management: These are persons delegated with power to meet certain objectives in PMI. They do so by using the resources of the company, taking decisions and seeking the best interest of PMI.
Employees: These are the workers who take instructions from supervisors and managers. They get a salary for their effort.
Consumers: These are persons who by the tobacco and products of PMI. They keep the company going by providing revenue for PMI.
Suppliers: These include tobacco farmers who provide tobacco leaves for the factories of PMI to operate.
Society: These are members of the communities within which PMI operates and sells. They have direct and indirect interests in activities of PMI.
Pressure Groups: These are health and social entities that are against the distribution and sale of tobacco. They protest and exert pressure on authorities to make laws against companies like PMI.
Government and Agencies: These are authorities that regulate countries in which PMI operates. They have the right to make tax laws and other health and safety regulations for the markets within which PMI operates.
Corporate Identity, Image, and Reputation
Figure 2: Philip Morris Logo
The Philip Morris Logo is made up of two horses who stand by a crown with the initials of the company. Philip Morris has a lot of reputation around the world because they control many brand and these brands are respected throughout these countries. There is constant marketing communication between PMI and consumers and the markets. As such, it is known to be popular throughout the world.
On the other hand, PMI is seen as a tobacco producer and a producer of a high-risk product. Their research is criticized by many for being something that corrupts the morals of people in society. As such, they have a lot of criticisms from pressure groups.
Internal Communication Strategies
Internal communications is an important department in PMI branches in the United States and around the world. What they do is that they maintain a close contact with the information technology unit in order to design the best forms of communication. This includes an intranet system that enables staff members to exchange emails and communications. Memos and other forms of information is sent through the intranet system which remains the biggest means of communicating within PMI.
There are numerous forms of communication and data transfer including telephone and other things. The internal communications unit also monitors the communication culture and makes suggestions on improvement by identifying new ways and approaches of communicating.
There is a strong centralized public relations unit that takes up information that relates to external parties. Internal communication is measured on qualitative and quantitative indicators that is used to improve the internal communication systems.
Corporate Social Responsibility Strategies
Corporate Social Responsibility is something that happens at the board level of PMI. This is because the reputation of the company is important and there is always the need to build it by forming trust and connection with the society within which it operates.
They have a sustainability standard that include continuous reduction in energy and water consumption and carbon emissions all by 20%. This includes research and development and improving the technology and systems that is used in conducting activities and affairs in PMI.
PMI also advocates for good and responsible agricultural practices amongst farmers and provides them with support and guidance. This way, they help to ensure the environment is preserved. There are rural community programs that are aimed at targeting the way and manner in which the people will get a better livelihood and will have an improved quality of life as they produce tobacco for PMI.
There are also corporate social responsibility standards including workplace safety and ethics that are meant to ensure that workers’ lives are protected. There is constant research and development to create healthier tobacco for consumers in order to guarantee their quality of life and ensure they use their products without serious health issues and problems.
Corporate Advertising Strategies
The main advertising strategy is based on the need to expose the PMI brand and ensure that it is made a fundamental and important part of every place or area where the company sells its products. This includes sponsoring adult-oriented events and showing the brand in open places where older people.
Another element of the marketing of PMI product is based on an ethical framework which include:
Forbidding marketing to children or persons below the age of majority;
Openly showing the health risks of products and smoking in general and
Maintaining global standards of decency and transposing it to local contexts where they advertise and promote their products
Media Relations Strategy
Basically, PMI knows that it is a company that has some major limitations and is seen as a morally flawed entity. Thus, PMI invests significantly in two things to boost its media-relations strategy. First, they invest in the best media representations and secondly, they invest in science.
In terms of media representations, they find the best public relations professionals and centralize public relations actions. This way, they are able to do things in direct response to the needs and requirements of people in society. This is responsive and comprehensive.
Secondly, science is used as a basis to counter claims made against PMI. As such, they ensure that they have some of the best evidence in order to deal with the media. They engage proactively without issues and also react to incidents that come up from time to time.
Investor Relations Strategy of PMI
Investor relations is done mainly by the board of directors of PMI. The board members have regular meetings with shareholders and also try to engage with potential investors. There is a legal duty of the board members to come up with annual financial statements which is audited and published.
There are meetings and shareholders have the right to vote on major issues. Shareholders can also vote for and against directors and find ways of presenting their views on how things should be done. Potential investors are given information and they are given assistance from senior directors where they seek engagement.
Government Relations Strategies
The director of corporate affairs in PMI is responsible for dealing with government relations and public affairs. This is because government affairs are important and vital as such, they are able to connect with government agencies for important discussions. This include tax issues, compliance matters and many other things. Ensuring that a high-level director is directly in charge of government relations imply that they centralize things and are able to deal with the aftermaths of different circumstances and situations that come up.
Crisis Communication Strategies
Crisis communication leads to the formation of a crisis communication response team in PMI. This is to be authorized by a member of the board of directors of PMI. This is to be responsive and must be done on the basis of a direct view of what the members of the board of directors and management think will be best. The crisis communication response team is to provide information and guidance that is important and vital in order to promote and ensure the best interest of the company.
Recommendations
This research identifies there are some significant gaps in the way PMI operates. It appears that there is a lot of effort put into the creation of a strong and meaningful entity. However, there are some limitations that must be corrected through improved and enhanced methods. This includes:
Stronger stakeholder engagement and proactive methods of dealing with pressure groups in order to limit their actions and processes;
PMI is seen as a company that abuses science. There is the need for science to be used in a more independent manner in order to show that the research work done by scientists for PMI is independent;
The corporate social responsibility strategy is very shallow. PMI must focus more on connecting to communities and providing for societies in order to attain optimal results and better responses from consumers;
Diversify the portfolio and deal with other products to balance the reliance on tobacco which is seen negatively by all.
References
Freeman, E., Harrison, J., & Wicks, A. (2010). Stakeholder Theory: The State of the Art. Cambridge: Cambridge University Press.
Philip Morris Inernational. (2016, December 4). Sustainability. Retrieved from PMI: http://www.pmi.com/eng/sustainability/pages/sustainability.aspx
Philip Morris International. (2016, December 8). Advertising and Marketing. Retrieved from PMI: http://www.pmi.com/eng/tobacco_regulation/regulating_tobacco/pages/advertising_and_marketing.aspx
Philip Morris International. (2016, December 12). Company Overview. Retrieved from PMI: http://www.pmi.com/eng/about_us/company_overview/pages/company_overview.aspx
Philip Morris International. (2016, December 30). Our History. Retrieved from PMI: http://www.pmi.com/eng/about_us/pages/our_history.aspx
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