Growth Options
Before deciding which growth strategy the company should adopt in the 21st century, it is worth looking at the potentials and weaknesses of each method of growth if adopted. In fact, it is clear that the company has the potential to apply any growth strategy- organic, cooperative strategy, and acquisitions. For a company that has been in the cigarette market for decades, Philip Morris Inc needs to determine the most potential growth method for its future growth. In addition, the current economic, social, and cultural factors affecting its growth need to be analyzed to determine which of the three strategies are best suited to promote the company’s future growth.
In fact, with increased efforts to decrease the number of smokers and the number of cigarettes smoked in various nations, the company faces a number of social, political, and economic hurdles that limit or affect its future growth. As such, it has become difficult to maintain its growth in America and Europe because the market seems to be reducing every year. In addition, the recent economic crises in America and Europe have affected the company’s growth in these regions, which, together with the efforts to reduce tobacco use in these areas, have really affected the company’s financial performance over the last five years. However, new and emerging potential markets for tobacco are evident in other areas of the world.
As aforementioned, India is increasingly becoming a potential market for tobacco, with various companies eyeing the emergent market as their new point of focus in the coming years. With its Marlboro brand, Philip Morris Inc has the potential to venture into the new markets in India, China, Africa, and other parts of Asia that have promising progress. However, the question is, ‘how should Philip Morris venture into the new markets? What growth strategies should it adopt in these new markets? In addition, what growth strategies should the company adapt in the old markets in Europe and American to improve its performance and develop a healthy financial performance in the future? To answer these questions, it is important to look at the worthiness of each of the growth strategies the company may use in relation to the target areas.
First, organic growth involves a process through which a company expands by using its resources. It involves business expansion through increasing the overall customer base, increase in sales, output per consumer or a combination of these methods. In contrast with mergers and acquisitions and alliances (inorganic growth), organic growth implies that the company has to flex its muscles beyond its current growth status through a strategies application of the resources it has in disposal, including the existing business. There is no point in purchasing existing businesses because a company has its own resources to use in meeting the demands for setting up new departments, offices, production units, sale outlets or other forms of businesses in which the company specializes. In other words, not all other forms of income obtained from the company’s activities in inorganic development are involved. No profits and gains obtained from these activities are included in determining a company’s organic growth at a given period.
Should Philip Morris expansion of its Marlboro products focus on organic growth?
An answer to this question requires an in-depth analysis of the possible weaknesses and strengths the company is likely to obtain when applying organic growth in a given market. As such, organic growth allows the companies to involve and create customer centricity, in which the focus for a company’s growth is on the customer as an important aspect of the business. In this way, a comp any has to ensure that it creates quality in the product to satisfy customer needs in a diverse market.
In case of Philip Morris and its Marlboro product, there is need for the company to apply this form of growth in its new markets. It is worth noting that tobacco industry is largely based on customer satisfaction in terms of taste, product quality and product class. Many smokers are looking for a taste in a given cigarette product as well as the quality in satisfying their need. In addition, consumers are looking for a product that will raise or maintain their esteem and feeling of worthiness in a given society. Marlboro has a long history of being a product that not only meets quality and taste needs, but also attempts to create a class of its own. With its cowboy advertisement, consumers develop a sense of belonging because they feel that they belong to the class of the much chastised cowboy community.
In addition, organic growth ensures that the company focuses on the ability to deliver unique value proposals. With this method, companies are sure of building brands as well as marketing channels that will ensure that they serve their customers with diligence. As such, there is need for the companies to take risks because they involve disciplined focus on growth strategies. Moreover, organizational efficiency becomes an integral part of the business. In the case of marketing Marlboro, Philip Morris need to note that investing in customer satisfaction is the most crucial aspect of the business that is increasingly declining in the western world. There is need for the company to maintain a strategic approach to local markets.
For instance, investing in efforts to encourage people to smoke less number of cigarettes in a day ensures that the company minds the welfare of its clients. On the other hand, this is likely to reduce the number of smokers and thus the market. As such, there is need for the company to ensure that it invests in efforts to ensure that it creates a brand that meets the demands of the consumers in terms of taste, class and price. In addition, it needs to ensure that efficiency in production and distribution is part of business at all times.
With organic growth, Philip Morgan is likely to know its market for Marlboro in and out. In other words, it is likely to have a first hand knowledge of the market, market needs, market dynamism and the effects that they have on the demand curve. As such, with the changing market needs due to public health concerns over cigarette smoking in America and Europe, using organic growth is likely to ensure that the management at Philip Morris takes the advantage of its knowledge in local marketplaces to develop better ways of dealing with changes and to satisfy the consumer needs at a given location.
Should the company use inorganic growth?
Inorganic growth, on its part, includes such strategies as mergers and acquisitions. Since a company acquires an already existing company or unit of company, its ability to reduce competition in the target market is reduced with effectiveness. In addition, the only role that the acquiring company plays is to ensure that it introduces its brands or products to a service line that is already in existence. In this case, the company obtains a better way of reaching out to a pool of customers that is already in existence rather than attempting to create its won customer base. It is also worth noting that the company will benefit from already established channels of marketing, economies of scale, management skills and knowledge of the local market.
It is strongly recommend that Philip Morris, as it attempts to introduce Marlboro in India and other emerging markets, focus on acquisition and mergers with the local companies. This will ensure that Marlboro is only introduced as a new brand to already existing product lines. Advertisement and other expenses will greatly be reduced. For instance, by acquiring already existing companies in the targeted markets, the company will benefit from the existing channels of distribution, advertising and brand communication. In addition, this strategy is likely to reduce competition that would have risen if company decides to enter the market by establishing its own factories, stores and other outlets. In fact, there is a possibility of creating friendly partnerships with the local companies when allowing them to market the new brands rather than creating competition for their markets.
Recommended changes in growth strategies at Philip Morris
In an attempt to market Marlboro, Philip Morris should consider the nature of the target market, its demands and dynamics. For instance, there is little need for the company to expand its growth in Europe and America through mergers and acquisitions because it is not new to the market. In fact, the company should attempt to create stiff competitions by using its vast resources to improve its image among the customers. Consumer demand should be part of the company’s strategy in these areas.
On the other hand, it is necessary for the company to create a strong competitive advantage against both BAT and Benson & Hedges by focusing on mergers and acquisitions as it enters the new markets in India and other areas outside Europe and North America. As these markets are dynamic and promising, there is little need for the company to use its resources to develop its branches in these areas. Rather, there is need for the company to find and access worth and potential partners to develop mergers or acquire them if possible in order to ensure that it saves its resources, decreases costs of establishment and brand communication in addition to reducing competition from local companies.
From this analysis, it is worth concluding that the company would benefit from retaining organic growth in its previous markets, especially in American and Europe, but enter Indian market using inorganic strategies such as joint ventures, mergers and acquisitions.