Philip Morris (0M8V) SWOT Analysis / TOWS Matrix / MBA Resources
Tobacco
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Philip Morris (United Kingdom)
Based on various researches at Oak Spring University , Philip Morris is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
geopolitical disruptions, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Philip Morris can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Philip Morris, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Philip Morris operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Philip Morris can be done for the following purposes –
1. Strategic planning of Philip Morris
2. Improving business portfolio management of Philip Morris
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Tobacco sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Philip Morris
Strengths of Philip Morris | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Philip Morris are -
Training and development
– Philip Morris has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Philip Morris is one of the most innovative firm in Tobacco sector.
Low bargaining power of suppliers
– Suppliers of Philip Morris in the Consumer/Non-Cyclical sector have low bargaining power. Philip Morris has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Philip Morris to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Tobacco
– Philip Morris is one of the leading players in the Tobacco industry in United Kingdom. Over the years it has not only transformed the business landscape in the Tobacco industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Philip Morris in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Tobacco industry
- digital transformation varies from industry to industry. For Philip Morris digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Philip Morris has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Sustainable margins compare to other players in Tobacco industry
– Philip Morris has clearly differentiated products in the market place. This has enabled Philip Morris to fetch slight price premium compare to the competitors in the Tobacco industry. The sustainable margins have also helped Philip Morris to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Philip Morris are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Philip Morris is one of the leading players in the Tobacco industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Philip Morris is present in almost all the verticals within the Tobacco industry. This has provided Philip Morris a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of Philip Morris comprises – understanding the underlying the factors in the Tobacco industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Philip Morris is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Philip Morris is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Philip Morris emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Philip Morris has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tobacco industry. Secondly the value chain collaborators of Philip Morris have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Philip Morris | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Philip Morris are -
High bargaining power of channel partners in Tobacco industry
– because of the regulatory requirements in United Kingdom, Philip Morris is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Tobacco industry.
Interest costs
– Compare to the competition, Philip Morris has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Philip Morris supply chain. Even after few cautionary changes, Philip Morris is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Philip Morris vulnerable to further global disruptions in South East Asia.
High dependence on Philip Morris ‘s star products
– The top 2 products and services of Philip Morris still accounts for major business revenue. This dependence on star products in Tobacco industry has resulted into insufficient focus on developing new products, even though Philip Morris has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Philip Morris has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tobacco industry over the last five years. Philip Morris even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Philip Morris has some of the most successful models in the Tobacco industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Philip Morris should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Philip Morris has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Tobacco industry using digital technology.
Employees’ less understanding of Philip Morris strategy
– From the outside it seems that the employees of Philip Morris don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Philip Morris is dominated by functional specialists. It is not different from other players in the Tobacco industry, but Philip Morris needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Philip Morris to focus more on services in the Tobacco industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Philip Morris has a high cash cycle compare to other players in the Tobacco industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Philip Morris is slow explore the new channels of communication. These new channels of communication can help Philip Morris to provide better information regarding Tobacco products and services. It can also build an online community to further reach out to potential customers.
Philip Morris Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Philip Morris are -
Use of Bitcoin and other crypto currencies for transactions in Tobacco industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Philip Morris in the Tobacco industry. Now Philip Morris can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Philip Morris can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– Philip Morris can use the latest technology developments to improve its manufacturing and designing process in Tobacco sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Philip Morris to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Philip Morris to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Philip Morris has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tobacco industry, but it has also influenced the consumer preferences. Philip Morris can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Philip Morris can use these opportunities to build new business models that can help the communities that Philip Morris operates in. Secondly it can use opportunities from government spending in Tobacco sector.
Better consumer reach
– The expansion of the 5G network will help Philip Morris to increase its market reach. Philip Morris will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Philip Morris can improve the customer journey of consumers in the Tobacco industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Philip Morris can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Tobacco industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Philip Morris can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Philip Morris can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Philip Morris External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Philip Morris are -
High dependence on third party suppliers
– Philip Morris high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Tobacco industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Philip Morris can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Philip Morris.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tobacco industry are lowering. It can presents Philip Morris with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tobacco sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Philip Morris can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Philip Morris prominent markets.
Shortening product life cycle
– it is one of the major threat that Philip Morris is facing in Tobacco sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Philip Morris has witnessed rapid integration of technology during Covid-19 in the Tobacco industry. As one of the leading players in the industry, Philip Morris needs to keep up with the evolution of technology in the Tobacco sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Philip Morris needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Tobacco industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Philip Morris needs to understand the core reasons impacting the Tobacco industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Environmental challenges
– Philip Morris needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Philip Morris can take advantage of this fund but it will also bring new competitors in the Tobacco industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Philip Morris in the Tobacco sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Philip Morris in Tobacco industry. The Tobacco industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Philip Morris Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Philip Morris needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Philip Morris is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Philip Morris is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Philip Morris to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Philip Morris needs to make to build a sustainable competitive advantage.