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 – increasing commodity prices, there is backlash against globalization, technology disruption, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels,
increasing transportation and logistics costs, wage bills are increasing, 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 -
Organizational Resilience of Philip Morris
– The covid-19 pandemic has put organizational resilience at the centre of everthing Philip Morris does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
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.
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.
Analytics focus
– Philip Morris is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Tobacco industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Philip Morris has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Strong track record of project management in the Tobacco industry
– Philip Morris is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Philip Morris has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Philip Morris staying ahead in the Tobacco industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Philip Morris | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Philip Morris are -
Skills based hiring in Tobacco industry
– The stress on hiring functional specialists at Philip Morris has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
Compensation and incentives
– The revenue per employee of Philip Morris is just above the Tobacco industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
Aligning sales with marketing
– From the outside it seems that Philip Morris needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tobacco industry have deep experience in developing customer relationships. Marketing department at Philip Morris can leverage the sales team experience to cultivate customer relationships as Philip Morris is planning to shift buying processes online.
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.
Workers concerns about automation
– As automation is fast increasing in the Tobacco industry, Philip Morris needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
Need for greater diversity
– Philip Morris has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Philip Morris Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Philip Morris are -
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Philip Morris to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Philip Morris to hire the very best people irrespective of their geographical location.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Philip Morris is facing challenges because of the dominance of functional experts in the organization. Philip Morris can utilize new technology in the field of Tobacco industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Philip Morris in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tobacco industry, and it will provide faster access to the consumers.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tobacco industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Philip Morris can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Philip Morris can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
Creating value in data economy
– The success of analytics program of Philip Morris has opened avenues for new revenue streams for the organization in Tobacco industry. This can help Philip Morris to build a more holistic ecosystem for Philip Morris products in the Tobacco industry by providing – data insight services, data privacy related products, data based consulting services, 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 -
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Philip Morris will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Philip Morris business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
Stagnating economy with rate increase
– Philip Morris can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Tobacco industry.
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.
