1. How would you describe Marlboro 's competitive position in early 1993?
Marlboro, the leading cigarette brand for Philip Morris, was the dominant player in the premium priced market. While RJR was the second largest player in the market, RJR’s cigarette brands were fragmented. At the end of 1992, Marlboro had 24.4% unit market share, while each of the RJR brand cigarettes had less than 7% market share. Philip Morris, at 53% operating contribution margin, was significantly more profitable than RJR, at 34% operating contribution margin.
Marlboro was essentially backed by the biggest, most profitable player – Philip Morris. Philip Morris was also the consistent market share leader, at least since 1988, over RJR and other much smaller
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RJR
Phillp Morris was also presumably worried about the aggressive price cuts and promotions by RJR to increase its market share.
Goals of Philip Morris Strategy
Philip Morris needed a aggressive competitive response to tacklethe threats of: declining market share, increasing share of discount brands, regulation, and RJR’s promotions and price cuts. They decided to aggressively attack the existing discount brands and make the Philip Morris brand significantly more price competitive.
Philip Morris effectively cut price by 20%, creating 2 tiers of cigarette pricing (from 3 tiers before). Their premium products were now significantly more competitive, compared with the discount brands due to their reduced price and existing strong brand image. Philip Morris were betting that a large portion of consumers would compare their premium product as price competitive with the discount brands, and would chose Marlboro due to its superior brand image and comparable prices. They essentially wanted to win the pricing game and lead with their brand. Surprisingly, they slightly increased the price of their discount brand by a mere 6 cents. This was probably to restrict the range in which the pricing war could be played by other players.
Industry Outlook for Philip Morris
Surely with the consumer behavior shift and the increasingly hostile regulatory climate described above, Philip Morris views the industry margins becoming thinner and realizes
The P.E.R.I.E. process is illustrated in this case by the steps taken to address the issue of smoking rates in adults, being impacted by the rise in adolescent smoking behaviors. The first step of this process is the Problem. In this case, the text indicates, the problem is the growth rate of smoking teens in the 80’s and 90’s (Riegelman & Kirkwood, 2015). This in turn, led to an increase in adult smokers. This would raise rates again, after previously lowering them by approximately 50% (Riegelman & Kirkwood, 2015). The next step is Etiology. In this step we correlate smoking with cancer and the rise of adult smoking rates with the growth of adolescent smoking rates. This in turn, correlates adolescent cigarette smoking, to the rises in cancer (morbidity), and deaths from cancer (mortality). The case study also states, “…it was also found that nearly 90% of those who smoked started before the age of 18…” (Riegelman & Kirkwood, 2015). It was determined through behavior modification (preventing adolescent smoking), the rate of adult smokers would reduce. Thus, recommendations were introduced. The case study reveals, adolescents were targeted in cigarettes advertisements and marketing (Riegelman & Kirkwood, 2015). Cigarette availability was also an issue. Implementations of sales and advertisement campaign policies, were altered in reference to miners. The text reveals, once evaluated, strategies to reduce adolescent smoking
Most of these e-cigs are being advertised to teens along with other tobacco products. This ensures a long lasting profit between the teens and the adult population. In the minds of business CEO’s and the marketing managers;
Tobacco companies should invest more in doing research to do a breakthrough invention so they could produce products that are healthier as the anti-cigarettes campaign is showing definite results. With e-cigarettes that states themselves as healthier products, maybe in the future the demand will shift again to e-cigarettes. Only by discovering new things that satisfy the customer’s want and need will the company be successful.
Pricing has long been one of the most important marketing strategies employed by tobacco companies in the USA and around the world. The profits resulting from this monopoly power in the cigarette markets led American Tobacco to move into the markets for other tobacco products, subsidising the same types of aggressive pricing and marketing strategies that eventually gained it a significant share of these markets as well. Perhaps most important among these strategies were the “fighting brands”—very low priced cigarettes and other tobacco products, including some priced below manufacturing costs—that were used to drive competitors from the market. After a relatively short learning period, pricing in US cigarette markets during the 1920s became
Warner-Lambert, an international pharmaceutical and consumer products company in Ireland, planned to launch a new product in 1990 called Niconil which was made for those people who would like to quit smoking. Niconil were different than the existing smoking cessation products in the market. Managers of the company believed that Niconil had many competitive advantages over its competitors and were very confident of the product. But there were some arguments about pricing strategy and marketing communication: Should Niconil be priced at a premium over cigarettes or on a par with cigarettes?What kind of advertising and promotion method they should use? Before launch the product
Well, the cost of vaping just increased in July too, so it’s cheaper but, people are trying to quit smoking. The juices went up, the pipe tobacco and anything with tobacco or nicotine has also went up from 27-67 percent almost. Though our sales have declined because the price has gone up $2 a pack, now I see it’s coming back up a little more, because some people are saying, ‘screw it, I’m going to smoke anyway.”
Second of all, there are countless more advantageous places to invest your money in than into the hands of cigarette manufacturers. In Hamilton, one pack of cigarettes can cost upwards of $13. Would you rather smoke one pack
Left to its own devices, in the heyday of zero regulation, no taxes and a lot of hype, the e-cigarette industry has experienced unprecedented growth. It is no surprise that the industry has recently drawn the attention of a swarm of interested parties; competitors, supporters and opponents alike. NJOY, an electronic cigarette company, is one such company that has found it self in the midst of this attention and must now navigate its way through to survive. Currently, NJOY is facing a host of problems, which must be overcome to in order to maintain a successful position in the market. E-cigarettes are under close scrutiny by legislative and regulatory bodies in government; decisions made by these parties can have a tremendous impact on the future of the industry. In addition, competition from Big Tobacco poses another big treat. Finally, special interest groups such as Tobacco Free Kids and anti-smoking lobbyists are also pushing their agendas with policy makers in order to play a role crafting the future of the industry. These issues affect almost every aspect of NJOY’s business, thus to successfully compete in the e-cigarette market without selling out to Big Tobacco, NJOY needs to have an integrated market and nonmarket strategy.
Liggett held approximately 1.9% of the total U.S. cigarette market in 1996, which represents a market share decline of 0.3% from 1995. The company was the first major domestic cigarette manufacturer to offer value-priced cigarettes as an alternative to full-priced brands. According to the Maxwell Consumer Report, Liggett's share of the discount market segment was 4.9% in 1996, compared with 5.5% in 1995 and 5.4% in 1994. The company's primary markets are candy and tobacco distributors, the military, and large grocery, drug and convenience store chains. One of Liggett's customers accounted for 13.7% of net sales in 1996.
In 1953, Philip Morris had a survey conducted on American’s smoking habits. The only menthol cigarette on the survey and the only one of any importance in the early 1950s was Kool. The survey showed that only 2% of White Americans preferred the Kool brand. By contrast, the survey reported that 5% of African Americans preferred Kools. This small difference in preference was successfully parlayed by Brown & Williamson executives, and later by the tobacco industry as a whole, into the 70% vs. 30% difference that we see today between Black and White menthol smokers,
Lots of Tobacco companies in the worlds have different strategies to attract consumers. Between the different ways of promotions, the common thing that promoting smoker is start to smoke in teens. The addiction of nicotine at younger age, the facts that half the people are suffering to quit to smoke cigarettes because they started smoking in adolescent years continue to do so far 15 to 20 years. The fact that in 1973, a memo that foreshadowed by Joe Camel, an R.J Reynolds official wrote, “In view of the need to reverse the preference for Marlboros among younger smokers, I wonder whether comic strip-type copy might get a much higher readership among younger people than any other type of copy.” This short memo gave a sign of produce cigarette
Porter’s five competitive forces are threats of new entrants, bargaining power of suppliers, bargaining powers of buyers, threats of substitute products or services, and rivalry among competitors (Kinicki & Williams, 2013). CEO Ron Johnson was already aware of the threats that new entrants would make on Penney’s so he knew that he had to develop a plan to get them into the store and away from the internet as quickly as possible. He used his bargaining power of suppliers by leaning away from the designer lines and focused more on lines that were affordable for consumers. By doing this, it automatically helped with the bargaining powers of buyers. By getting more affordable items, customers are able to buy more items at one location. Again, all
Cigarette companies use over $9,000,000,000 on advertising their product trying to lure in teens and young adults. They say things like, “It’ll feel great!” and “Everyone is doing it.” These companies use anything possible to get one person to buy one pack of cigarettes. Smoking companies will get people captivate and take over people.
Cigarette sales in the United States is the highest selling tobacco product on the market. “During 2016, about 258 billion cigarettes were sold in the