Philip Morris

(Pakistan)

Limited

Business Strategy

Submitted To

Dr. Zahid Riaz

Submitted by

Abdul Rehman Sohail

Ayesha Majid Donia Ismail

Eleena Naz Minal Zafar

Rimsha Malik Sharmeen Abbas

Date

10-June-2020

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Table of Contents

1 INTRODUCTION ............................................................................................................................................. 3

1.1 BUSINESS MODEL ............................................................................................................................................. 3

1.2 STRATEGIC FOCUS ............................................................................................................................................. 3

1.3 PRODUCT RANGE .............................................................................................................................................. 4

1.4 FINANCIAL OVERVIEW ........................................................................................................................................ 5

1.5 MARKET SHARE ................................................................................................................................................ 7

1.6 MANUFACTURING ............................................................................................................................................. 7

1.6.1 Tobacco Curing ........................................................................................................................................ 7

1.6.2 Cigarette manufacturing process: ........................................................................................................... 8

1.7 TRADE MARKETING AND DISTRIBUTION ................................................................................................................. 8

2 PHILIP MORRIS OVERVIEW .......................................................................................................................... 10

2.1 MISSION ....................................................................................................................................................... 10

2.2 VISION .......................................................................................................................................................... 10

2.3 COMPANY GOALS............................................................................................................................................ 10

2.4 STRATEGIC OBJECTIVE ...................................................................................................................................... 11

2.5 PHILIP MORRIS GUIDED PRINCIPLE ..................................................................................................................... 11

2.5.1 Employment Stability ............................................................................................................................. 11

2.5.2 Financial Stability ................................................................................................................................... 11

2.5.3 Special Recognition Awards ................................................................................................................... 11

2.6 BUSINESS CHALLENGES ..................................................................................................................................... 12

3 INTERNAL ANALYSIS .................................................................................................................................... 14

3.1 REVENUE ....................................................................................................................................................... 14

3.2 INDUSTRY GROWTH ......................................................................................................................................... 15

3.3 PROFITABILITY RATIOS ...................................................................................................................................... 16

3.4 LIQUIDITY RATIOS ............................................................................................................................................ 17

3.5 IFE MATRIX ................................................................................................................................................... 18

3.6 PORTER’S FIVE GENERIC STRATEGIES .................................................................................................................. 19

3.7 SUPPLY CHAIN MODEL ..................................................................................................................................... 19

3.7.1 Value Chain ............................................................................................................................................ 19

3.7.2 Supply Flow ............................................................................................................................................ 20

3.8 MARKETING STRATEGY ..................................................................................................................................... 25

3.9 SALES FORCE STRUCTURE .................................................................................................................................. 25

3.10 SALES STRATEGY ............................................................................................................................................. 26

3.11 TRADE MARKETING ......................................................................................................................................... 27

3.12 SUMMARY ..................................................................................................................................................... 28

4 DISTRIBUTION AND INCENTIVES MODELS ................................................................................................... 29

4.1 MARGIN/COST PLUS/HYBRID COST PLUS 2.0 ...................................................................................................... 29

4.2 POLICY ON DUMPING ....................................................................................................................................... 30

5 GENERAL ENVIRONMENT ............................................................................................................................ 30

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5.1 MAIN COMPETITORS ....................................................................................................................................... 32

6 TAXATION ................................................................................................................................................... 33

6.1 SOCIAL CULTURE & DEMOGRAPHIC TRENDS ......................................................................................................... 34

6.1.1 Social Trends Globally and in Pakistan................................................................................................... 34

6.1.2 Culture Trends Globally and in Pakistan ................................................................................................ 35

6.1.3 Demographic Trends Globally and in Pakistan ...................................................................................... 37

7 INDUSTRY ANALYSIS .................................................................................................................................... 38

7.1 PORTER’S FIVER FORCES MODEL ANALYSIS .......................................................................................................... 40

7.1.1 Threats of New Entrants ........................................................................................................................ 40

7.1.2 Bargaining Power of Suppliers ............................................................................................................... 41

7.1.3 Bargaining Power of Buyers ................................................................................................................... 42

7.1.4 Threats of Substitute Products or Services ............................................................................................. 42

7.1.5 Rivalry among the Existing Competitors ................................................................................................ 42

8 NON-PRICING COMPETITION ....................................................................................................................... 43

8.1 COMPETITOR ANALYSIS .................................................................................................................................... 44

9 COMPETITIVE PROFILE MATRIX ................................................................................................................... 46

9.1 MAJOR OPPORTUNITIES & THREATS TO TOBACCO INDUSTRY ................................................................................... 46

9.1.1 Opportunities ......................................................................................................................................... 46

9.1.2 Threats ................................................................................................................................................... 47

10 EXTERNAL FACTOR EVALUATION MATRIX ................................................................................................... 48

11 OBJECTIVES ................................................................................................................................................. 48

12 STRATEGY RECOMMENDATIONS & ACTION PLAN ....................................................................................... 50

12.1 CROSS SELLING AND UPSELLING OF PRODUCTS ..................................................................................................... 50

12.1.1 Focus on your potential customers .................................................................................................... 50

12.1.2 Offer Free of Cost Trials ..................................................................................................................... 50

12.1.3 Offering Discount or Incentive Programs .......................................................................................... 50

12.1.4 Sales Personnel Propelling ................................................................................................................. 51

12.2 INNOVATING THE PRODUCTS AND SERVICES OF THE COMPANY ................................................................................. 51

12.3 ENHANCE SALES FROM NEW PRODUCT OFFERINGS ................................................................................................ 51

12.4 MONOPOLIZING YOUNG MARKET ...................................................................................................................... 52

13 APPENDIX: INTERNAL ANALYSIS .................................................................................................................. 55

13.1 BCG MATRIX ................................................................................................................................................. 55

13.2 PRODUCT POSITIONING .................................................................................................................................... 56

13.3 SUPPLY CHAIN ................................................................................................................................................ 56

13.4 STAKEHOLDER ENGAGEMENT ............................................................................................................................ 57

14 TABLE OF FIGURES ....................................................................................................................................... 58

15 BIBLIOGRAPHY ........................................................................................................................................... 59

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1 Introduction

1.1 Business Model

Phillip Morris international is one of the leading cigarette manufacturing companies in the world

with the current share price of $73.78 (Philip Morris International). The organization is known

for the making of cigarettes, other tobacco products and nicotine-containing products in

countries outside of the United States. Its portfolio comprises of both global and local brands.

Philip Morris (Pakistan) Limited (“PMPKL”), is a public limited company and is listed on the

Pakistan Stock Exchange. PMPKL is affiliated with Philip Morris International (“PMI”), which

is listed on the New York Stock Exchange and has operational Headquarters in Lausanne and

Corporate Headquarters in New York. The company is one of the largest manufacturers of

cigarettes in Pakistan and contributes in many charitable projects where they source and

manufacture their tobacco. Some of these projects are provision of economic opportunities,

women empowerment and making education available. It currently has 739 employees in 15

offices with 1 cigarette factory and 1 tobacco leaf plant in Pakistan (PMI - Pakistan)

Philip Morris Pakistan follows the business model of Profit Pyramid Model.

1.2 Strategic Focus

The current strategies of Phillip Morris are to manufacture, promote and sell smoke-free

alternatives, and persuade the adult smokers around the world to switch to these alternatives, as

soon as possible, to transfer their resources from cigarettes to smoke-free products, to introduce

policies for regulation that helps in the replacement of cigarettes with smoke-free products, to

encourage the best sustainability programs within the entire value chain. The company employs

the best workforce around the globe, work towards attracting the best talent, share their progress,

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accept discussions and independent criticisms. And lastly, offer maximum returns to the

shareholders. (Philip Morris International)

1.3 Product Range

Phillip Morris is a manufacturer of cigarettes and is now working towards introducing smoke

free alternatives. The brands include Marlboro, Red & White, Diplomat, Philip Morris,

Morven by Chesterfield, L&M and Parliament. (PMI - Pakistan). Along with some non-

tobacco-based products.

Figure 1 Non-Tobacco Products

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Figure 2: Product positioning map

1.4 Financial Overview

For the three months ended 31 March 2020, Philip Morris (Pakistan) Ltd revenues increased 2%

to PKR4.2B. Net income totaled PKR361.4M vs. loss of PKR1.27B. Revenues reflect an

increase in demand for the Company's products and services due to favorable market conditions.

Net Income reflects Impairment Charge on Items of Property, decrease from PKR1.23B

(expense) to PKR0K, Impairment charge on items of property”(Brida and Pulina, 2010).

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1.5 Market Share

PMI had its headquarters in Karachi in the Dolphin Mall. PTC’s market share would be around

45% and PMI’s share would be around 15%. PMI’s most famous brand was Marlboro but its

market share in Pakistan was low. Share of Market depends on Market Availability and not on

off take – if in the Market there were 20 cartons and 10 belonged to PTC and PMI each, Market

Share would be 50% each, irrespective of off-take.

1.6 Manufacturing For manufacturing the cigarettes, the tobacco leaves are first treated and then filled in cigarette sticks

followed by trimming and finishing.

1.6.1 Tobacco Curing

Figure 3: Tobacco curing process

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1.6.2 Cigarette manufacturing process:

Figure 4: Cigarette manufacturing process

1.7 Trade Marketing and Distribution

TPOSM includes branded cupboards, shelf talkers, price jackets, posters, gondolas, trade

letters, buntings, mobile etc. These merchandising tools are a support function of trade and

are the form of contact with the consumer during the time of purchase. PMI uses posters as

their TPOSM and the competition here is tough as have to make their posters really unique

and attractive. PTC payed the retailers not to allow PMI put up their posters where PTC had

them. The problem was that PMI didn’t have enough resources to pay the retailers hence they

faced an issue in this area. Thus, to Sales RSM report Area Managers (5-6), and RCEM

(Regional Consumer Engagement Manager (1), and TME (Trade Marketing Executive) again

(1) – the last two are for the whole of the region. TME has 52 people reporting to him

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working around 2 Agencies (third parties). Out of 52 there would be 1 Project Manager, 7

Supervisors and say 44 Merchandisers.

Distribution Network Types

• Retail Storage with Consumer Pickup for non-smoke products

• Distributor Storage with Delivery for its non-smoke products

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2 Philip Morris Overview

2.1 Mission

Philip Morris is committed to bring best employees and best corporate citizen. We aspire to be

environmentally responsible as well as socially. We are dedicated to fight with all the illegal

activities regarding to the tobacco trade. And proudly support those communities where we

source our product and where are employees work and live.

2.2 Vision

Phillip Morris vision is based upon three major things,

• Trust

• Integrity

• Collaboration

2.3 Company Goals

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According to a research, 67% of the employees are clear about the company’s goal. And they are

fully motivated to invest their time complete time in the company. According to the research, it

is all due to the company’s clear mission and vision statement.

2.4 Strategic Objective

The recent change in their strategy shows that, “Transforming our business” by providing the

best alternative to the smokers with less harmful products to replace cigarettes according to the

expectations of smokers, shareholders and especially the society.

2.5 Philip Morris Guided Principle

Phillip Morris guided principle contains three major things, Employment stability, financial

stability and Special Recognition Awards

2.5.1 Employment Stability

Phillip Morris will not terminate any of their employees during pandemic or any other external

crises. They will just defer the future hiring, in order to remain stable.

2.5.2 Financial Stability

Phillip Morris will continue to provide their employees the compensations and bonus according

to their working abilities, hard work and determination within their assigned duties.

2.5.3 Special Recognition Awards

The company employees, who need to be present physically to the required location (maybe

Warehouses to check inventory or operations), will automatically be awarded with same special

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compensation plan. But company will also provide some necessary safety measure to protect

those employees

Overall the company believes in

Phillips Morris basic core values are honesty, Respect and fairness which incorporate their

commitment in their society. It’s for everyone, as they interact with millions of people both

genders within and beyond the organization.

2.6 Business Challenges

The major challenges the company is facing at this moment, “that whether the tobacco business

is sustainable or not”?

The answer proposed to this is that, the company is try their level best to provide a suitable

alternative for the adult smokers who would continue smoking at every condition.

Lastly, under this pandemic, company has not faced any disruption in their supply chain and

other distribution. However, they have not faced this pandemic, a problem as such.

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Figure 5 PMPK Stakeholders

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3 Internal Analysis

3.1 Revenue

2017 2018 2019

Revenue 13,966,525 16,199,912 13,334,498

Growth % (yearly) (1.77) 15.99 (17.69)

Growth % Average 3 Years (1.16)

The revenues have increased and then decreased over the period of 3 years. The company is

struggling because of decrease in sales revenue. This is due to the illicit trade of cigarettes in

tobacco industry that is on the rise in the recent years.

The graph shows the company’s revenue grew more than the industry revenue in 2018 however

it declined in 2019. This is because the illicit trade of cigarettes hit Philip Morris International

the hardest as compared to the overall industry.

-20

-15

-10

-5

0

5

10

15

20

2017 2018 2019

PMI Revenue growth

Industry Revenue growth

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3.2 Industry Growth

2017 2018 2019

Growth % (Yearly) (2.6) 4.8 5.4

Growth % Average 3 Years 2.53

The graph shows the cigarette production in Pakistan from 2004 to 2018. The production of

cigarette has decreased significantly in 2017. The last column shows the projected figures for

2019.

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3.3 Profitability Ratios

Ratios 2017 2018 2019

Gross Margin % 36.36 37.19 27.82

Operating Margin % 5.7 6.57 0.10

Net Margin % 1.37 3.35 (14.85)

EPS % (1.89) 1.68 (32.15)

ROA % 1.16 2.99 (11.33)

ROE % 1.48 4.31 (17.02)

ROIC % (16.88)

Interest Coverage (Times) 0.28

The decreasing and negative profitability ratios of 2019 shows that the company’s performance

is declining. This is because of the increase in excise rates set by the government which is

coupled with the illicit trade of cigarettes in Pakistan that is on the rise.

Philip Morris (Pakistan)Limited has been trying to improve its profits since 2015 as compared to

Pakistan Tobacco Company which is a tobacco industry market leader. The illicit trade of

cigarettes has negatively affected the whole tobacco industry, but it has affected Philip Morris

the most in its sales.

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3.4 Liquidity Ratios

Ratios 2017 2018 2019

Current Ratio 2.24 1.82 1.60

Quick Ratio 0.47 0.77 0.45

Debt/Equity 27.13 43.99 12.74

The Current Ratio has been decreasing from 2017 to 2019. This is because from 2017 to 2018

the liabilities increased more than the assets. However, from 2018 to 2019 the assets decreased

and the liabilities increased which dropped the current ratio even further. The Quick Ratio

however increased and then decreased from 2017 to 2019. This rise and then drop can be

attributed to the fact that the current assets increased and then decreased over these 3 years.

0

0.5

1

1.5

2

2.5

2017 2018 2019

Current Ratio

Quick Ratio

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3.5 IFE Matrix

Factor Weight Rate Weighted

Rate

Strength

PMPK is the first MNC which started tobacco processing 0.07 3 0.21

Quality is managed consistently 0.05 2 0.1

Delivery time is efficient (3 days after Production) 0.07 4 0.28

Environmental Standards achieved 0.06 3 0.18

Focus on the safety & health of the employees 0.05 2 0.1

Influence on Government 0.04 2 0.08

Leader in the market 0.05 3 0.15

Brand image & brand name is strong amongst consumer 0.06 3 0.18

Strong Distribution Network 0.05 2 0.1

Technology 0.06 3 018

Training and development of the company’s employees 0.05 3 0.15

Weaknesses

Centralized manufacturing & sales system 0.06 3 0.18

Dependent on volume for profit realization due to low profit

margin

0.06 4 0.24

Downsizing fear amongst the employees 0.04 2 0.08

Innovate flavours and products such as electric cigarettes 0.06 3 0.18

Large price gap between premium & average products (in-

between products are absent)

0.07 3 0.21

In comparison to its competitors, there is minimum market 0.05 2 0.1

Other than its three main brands Marlboro, Parliament and

Morven other don’t have a significant demand

0.05 3 0.15

Total 2.75

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3.6 Porter’s Five Generic Strategies

PMPK follows Focus- Low Cost strategy. PMPK focuses on pushing the competitors out of the

market by offering lower prices to the customers and this helps them gain market share as a

result. PMPK is able to execute this strategy of low-cost leadership with the help of backward,

forward and horizontal integration. This strategy results in gaining connections with distributors

and suppliers, capacity utilization is maximized and economies of scale is reached.

3.7 Supply Chain Model

3.7.1 Value Chain

Figure 6 Flow of targets

Area sales manager

Sales rep

Daily sales men

Retailer/Vendor

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3.7.2 Supply Flow

The model followed by Philip Morris Pakistan in Supply Chain activities is as follows:

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3.7.2.1 Tobacco Growing

This includes their whole relationship with farmer from tobacco cultivation to harvesting.

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3.7.2.2 Processing Tobacco is obtained from the farms and the leaves are dried to remove the water content. In this

process the leaves’ color changes from green to brown. This is called tobacco curing. Then he

primary processing takes place where the leaves are crushed and folded in the covering of the

cigarettes. After this it transferred to the next process of packaging.

3.7.2.3 Manufacturing What went into the Cigarette were strip, stem and recon; castings and flavors. What came out

were blended, flavored and cut tobacco cigarettes. The company (PMI) did not own farms but

bought tobacco seasonally from farmers after a lot of quality inspections. It then shipped (sent)

Shipping Cases to Distributors’ warehouses. 1 Shipping Case equaled 50 Outers and 1 Outer

contained 10 packs. Outers were supplied to the retailers while Shipping Cases were supplied to

the Distributors and Wholesalers. Once the Distributor acknowledges receipt of the cases,

ownership changed title.

3.7.2.4 Suppliers and Distributive trade The tobacco industry had two major players, PTC and PMI and the rest of the market was taken

up by Illegal Brands. PTC had 47% SOM, PMPKL 20, Mardan 27 and GND 7. Why was

Distribution such an important part of the tobacco industry? Primarily because cigarettes were

one of the fastest moving among FMCGs: These moved faster than water “Maal market main tez

phainkna parta hai”Ujala Sabir, Junior Sales person PMPKL.

At Philip Morris Pakistan Limited distribution centres play a highly significant and strategic role

in operations and sales force management for the company. The company has outsourced its

Merchandising and distribution. The company do not sell its products on credit hence the sales

are done primarily on cash.

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While for their competitor PTC, main marketing activities are done through trade marketing as it

provides value-added services which are paired with the distribution effort. It manages the

business-to-business relationship with the distributors and retailers. In retail selected stores it

mutually benefits supply-chain partnerships. Primary Sales meant sales to the Distributor. The

distributor then sold it to wholesalers and retailers which was Secondary Sales. But selling to the

Distributor did not mean PMI Salesman job had finished. If they make Primary sales and there

are no secondary sales the headache is of Salesman. Distributor must carry 5 days of stock.

3.7.2.5 Taxation& Illicit Trade

In 2019, 33% of the revenues were lost due to the illicit trade of cigarettes according to Federal

Board of Revenue. It will lose Rs. 77.3 Billion because of the illicit trade.

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Figure 7 Distribution Network Diagram

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3.8 Marketing Strategy

Philip Morris (Pakistan) Limited uses its “push strategy” in order to generate sales as new

customers are not the focus. The forecasted demand is quite accurate as the company produces

cigarettes primarily due to known consumption rates of existing consumers. Through this push

strategy all the product that is produced is sold out since all the cigarettes are sold forcibly to the

smokers.

The company does not focus on gaining new customers because of the SOPs and certain rules set

by the tobacco regulation industry and the government of Pakistan. However, the company target

only those customers who already smoke cigarettes.

3.9 Sales force Structure

Key Sales Personals:

1. Regional Sales Manager (RSM)

2. Zonal Sales Manager (ZSM)

3. Area Sales Manager (ASM)

4. Daily Sales Manager Supervisor (DSMS)

5. Daily Sales Representatives (DSR)

There is one General Manager to whom 4 RSM reports. Every RSM has one ZSM working

under him. 3 ASMs report to ZSM. Under the payroll of PMPK there is a distributor under one

ASM. ASMs are assigned to the distributors and they are responsible for their performance and

activities. Every ASM is further responsible for 4 DSMSs and every DSMS handles 4 to 5 DSRs.

DSRs monitors the performance of 5 – 6 Sales Representatives who are working with them in the

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field. For example, there are 21 DSRs working in the field and making sales in the Gulberg

Distributor.

3.10 Sales Strategy

All company sales are on cash transactions only hence Spot selling is used. There is no specific

selling method followed by PMPK’s sales force. There is no credit selling. The sales force visits

the field and check the demand from the retailers. Once they take the orders, they deliver the

product accordingly.

Cigarette industry is a fast-moving-consumer-goods industry. The sales force has the chance to

directly interact with the retailers and build long term relationship with them. Therefore, the sales

force is equipped with the valuable information about the customers and their demand. It is their

job to anticipate the demand, collect the orders from the retailers and ensure that the demand is

fulfilled with the availability of the product on time.

The company is highly aware of the demand of the market which is usually fixed therefore they

do not use any forecasting method for demand. Since the company caters to existing customers

therefore, they know how much to produce the product and where to deliver and in what

quantity.

The maximum pressure from the company is applied on the Sales Department since they are the

bread earners for the company. However, sales is also where you made the maximum money (in

terms of salaries and commissions).

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PMI had its headquarters in Karachi in the Dolphin Mall. It has two factories (Kotri and

Sahiwal), 4 Zones (North Punjab, South Punjab, Central Punjab, Sindh), 17 sales regions and so

on.

For Pakistan’s cigrates indusrt if PTC’s market share would be around 45% and PMI’s share

would be around 15%. PMI’s most famous brand was Marlboro but its market share in Pakistan

was low. SOM or Share of Market depends on Market Availability and not on Offtake – if in the

Market there were 20 cartons and 10 belonged to PTC and PMI each, Market Share would be

50% each, irrespective of off-take.

3.11 Trade Marketing

TPOSM is again really important for the tobacco companies as no advertising of such products

are allowed by the government so the only form of contact, they can have with the consumer is at

that point. TPOSM is really expensive and important for such companies. TPOSM includes

branded cupboards, shelf talkers, price jackets, posters, gondolas, trade letters, buntings, mobile

etc. These merchandising tools are a support function of trade and are the form of contact with

the consumer during the time of purchase. PMI uses posters as their TPOSM and the competition

here is tough as have to make their posters really unique and attractive. As already mentioned,

the competition is intense and she quoted how PTC payed the retailers not to allow PMI put up

their posters where PTC had them. The problem was that PMI didn’t have enough resources to

pay the retailers hence they faced an issue in this area.

Thus, to Sales RSM report Area Managers (5-6), and RCEM (Regional Consumer Engagement

Manager (1), and TME (Trade Marketing Executive) again (1) – the last two are for the whole of

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the region. TME has 52 people reporting to him working around 2 Agencies (third parties). Out

of 52 there would be 1 Project Manager, 7 Supervisors and say 44 Merchandisers.

3.12 Summary

The two factories in Kotri and Sahiwal shipped cases to some 5 Warehouses of the company

which sent these cases to the Distributors (around 180). Every morning the distributor placed an

order to the company which created an invoice and shipped cases to the distributor. But also note

that:

a) The company set targets both primary and secondary. Even secondary sales had targets.

Why? Because if there were no secondary sales there would be no primary sales. Primary

sales were greater than Secondary sales. Why? Because the Distributor must have some

Reserves. The company kept an eye on stocks of its distributors.

b) If a Distributor “over-achieved” its targets, was it good? One had to be careful as it would

reflect on your target-setting process.

From the Distributor the shipment reached the Retailer. There were some 256,000 retailers in the

country. This process was managed by the DSR (Distribution Sales Representative) who was

over-seen by DSS (Distribution Sales Supervisor) reporting to a Supervisor who reported to the

RSM. Every DSR had its own target with his incentives. So, if his salary was say Rs. 15000, he

would also get some incentives on achieving his targets. These targets were set by the top

management of PMI.

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4 Distribution and Incentives Models

4.1 Margin/Cost Plus/Hybrid Cost Plus 2.0

PMI at first used the most easily understood Margin system. Thus, a Distributor was sold a Case

for say Rs. 50 and he sold it for Rs. 52 and kept Rs. 2 for himself. He would bear all the cost.

Due to various reasons, including changing of prices, brands and packs, consumers were

confused and PMI lost its market share. The great lesson for us that if you are the Market Leader

you have to maintain your share: One mistake can cost you dearly.

So long as the Distributors were making good volumes, the Margin strategy seemed fine. Now

that they lost volume, they started grumbling, complaining and even leaving. That led to

introduction of COST PLUS.

Cost Plus meant the Company would reimburse the Distributor its costs. The costs include its

Sales Force personnel’s salaries, air conditioners, fuel, furniture, whiteboards, fans, exhaust fans,

projector, workstation, stock carrying boxes, toilets, owners’ room, etc. - all the costs necessary

in selling the merchandise. So if the costs were Rs. 100 he was given Rs. 114 with Rs. 14 for

achieving his target. So if he achieved 100% Target then we could give a 2% incentive. If he

achieved a 110% target, we gave 4% incentive. Of course these incentives were not monetized

but were in the shape of stock. These costs were audited.

This led to a new problem: Say Distributor 1 was selling 500 Sc (shipping containers) and D2

was selling 100 but both were costing Rs. 100 – in this case both will be reimbursed Rs. 100 but

D1 would be unhappy. What was the motivation for him? This led to the HYBRID system which

would reimburse the costs, but would also give a margin on how much he was selling. Now both

would be happy.

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4.2 Policy on Dumping

Company has also strict checks on distributor’s free stocks. They have printed bar codes that Is

calibrated with name of distributors so that no distributor can sell the free stock to other

distribution market of some other region.

5 General Environment

The external business environment of a company includes various factors such as

1. Legal

2. Political

3. Economic

The government is well aware that over the years, that tobacco products are one of the major

causes for damaged lungs, cancer and such other diseases. However, the government still does

not fully ban buying and selling of tobacco instead it has imposed high taxes on them with the

aim of reducing the consumption of all tobacco products which is not beneficial for the industry.

There are political factors that can impact this business, these are as follows:

• Any change in legislations

• Political stability

• Mitigation of risk

According to statistics there are two companies in Pakistan; Phillip Morris and Pakistan Tobacco

Company that has 72.3% of the market share in tobacco industry. A majority of the consumers

are found out to be students. Now under the act of “The Prohibition of Smoking and Protection

of Non-smokers Health Ordinance, 2002” it is prohibited to sell cigarettes to children who are

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under the age of 18. Under this law it is obligatory for the shopkeepers to promote and exhibit

warning signs and its adverse effects on health; selling of cigarettes is banned around a 50 meters

radius of all educational institutions, all sorts of advertising and promotional advertising are also

banned. In spite of all these regulations the tobacco industry still manages to attract the young

consumers through their well thought strategies. Other than that there are rising environmental

concerns, because tobacco contains chemicals which are not only harmful to the smoker or the

passive smoker but they are also hazardous for the environment. Many restaurants and cafes also

prohibit smoking and they have smoking free zones. According to the Pakistan Tobacco Board

the legal framework includes Tobacco Marketing Control Rules, 2016, PTB Ordinance 1968 and

PTB Service Rules & Bye-Laws, 1985.

In regard to Phillip Morris’ economic condition, according to The Tribune Express 2011, it was

stated that the company started experiencing financial “squeeze” in Pakistan. It started to cut

down on some of its production operations. The manufacturing process in Mandra (smallest

factory of Phillip Morris) located near Rawalpindi will reduced. The company stated that they

reached to this decision mainly because they were facing “difficult economic conditions” along

with the imposition of high taxes and a decrease in consumer’s buying power. The decision took

by the company was cited as “difficult, but necessary”.

One of the main reasons for taking this step at Mandra factory was government’s ordinance,

“SRO 863(I), this was a legislation made in 2010, under which any marketing and sales

activities of small 10 cigarette packs (on which the company’s operations were mainly

dependent upon) were banned. Now the company was well aware that since Mandra’s major

product offering was announced as “illegal”; this would cause inflated cost for a single

cigarette and as result would prove to be unsustainable in the long run. Thus, the company

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was bound to shut down. The company was left with three factories situated in Mardan,

Sahiwal and Kotri. But it was seen that company continued to face great losses in the previous

years. As cited by Pakistan Today Profit, “Phillip Morris announced an operating loss before

tax of Rs. 2,444 million for the year ended December 31, 2019”. The reason for this loss

revolved around the idea of reorganizing operational footprints by the management therefore,

they had shut down the factory in Kotri. The decision was crucial at that time in order to

assure feasibility of the company in the long run, keeping in mind the unforeseeable external

environment factors. If this wouldn’t be the case, had they not bared a loss for nine months,

the company could earn a profit up to Rs. 836 million before tax but his would have caused

them to pay a heavy tax which would eventually leave them with a loss anyway .This

impacted the lives of approximately 194 employees. However, the CEO stated “Our priority

will be to treat all our employees fairly and with respect and dignity. We appreciate the

contributions that each and every colleague has made over the years and we understand that

this is difficult news for our employees.”

Throughout the year the company faced challenges, other reasons lied behind the losses were

an increase in the cost of sales by 15%, a rise in other expenses and a reduction in net

revenues.

5.1 Main Competitors

33

6 Taxation

Keeping in mind that the company chose to face heavy losses, had to go through challenges and

hardships. The “tax paid industry” faced problems because of the “non tax paid illicit sector”.

The non-tax payers owned approximately 33.9% of the entire tobacco industry. The reason

behind this was the increase in the excise tax from the year 2018 till 2019 by the new

government. This caused the gap in the prices to escalate between the non-tax paid and the tax

paid industry. This increase in tax left people in two different perspectives, according to some

sources it did not affect the illicit sector because they were already selling cigarettes at a lower

rate in the market and charging a little higher did not change their position but it did affect the

local manufacturers, as they had to further charge higher prices to the consumers. As a result,

most of the smokers started opting for low priced and easily accessible “non tax paid illicit”

cigarettes. On the contrary other sources like to believe that the increase in tax gave the local

manufacturers a chance to wipe out their small competitors and strengthen their positions as the

tax regulation was imposed on all, which did affect the illicit sector.

The managing director of Phillip Morris stated “The management team continues to be

committed to improving the overall performance of the Company through various

measures. Growing our gross margin and controlling the cost base remain key

objectives for improving the Company's profitability in a continuously challengin g

environment. We would also like to appreciate and acknowledge the recent

increased enforcement measures taken by the Government, FBR and Customs to

curb non-tax paid illicit trade. This will surely create a level playing field for the

compliant tax paying cigarette manufacturers.”

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6.1 Social Culture & Demographic Trends

6.1.1 Social Trends Globally and in Pakistan

Social standards towards tobacco smoking can be vital sources of impact for smoking intentions,

interest, and termination. Many efforts have been found to reduce smoking frequency and

promote cessation, and smoking frequency has decreased alongside increasingly widespread

tobacco control policies. Smoking is hence conceived to have become increasingly denormalized

in many Western countries. Certainly, a recent study among British youth found that both

prevalence of smoking and prevalence of perceiving that smoking is okay have decreased

between 1998 and 2015. However, in a study these trends in countries like Canada, United

Kingdom, United States, Australia have been assessed that help see the reasoning as to it’s

happening.

Since 2002, the United Kingdom has had the highest, and Australia the lowest, occurrence of

tobacco smoking and in all four countries occurrence has decreased. Socially these are some of

the reasons why people still smoke and consume tobacco in any form.

Even though people who smoke are frowned upon by their loved ones yet. Over Half of

Five Closest Friends Smoke; hence this influences people to smoke in public or private

places.

The reason young people start to smoke is not so simple. Social and environmental challenges

are most influencing in this matter, including exposure to smoking by parents, siblings, friends,

and members of the general public.

Parental smoking actions have been found to play a key role not only initiation but escalation in

smoking as well. Some studies indicate that youth having at least one smoking parent are more

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likely to begin smoking themselves. In terms of smoking initiation, never smokers whose friends

smoke are significantly more likely to begin smoking compared to never smokers whose friends

do not smoke. In Pakistan the recent trends have shown that socially it has become acceptable to

smoke and show it around to people in public places as well. The Sec A and B class has

somehow come to terms with this idea of their friends, family and peers smoking. However in

other SEC classes it is still frowned upon in some areas of Pakistan and cannot be openly

acceptable. In a lot of TV shows and broadcast it is still mentioned there that smoking is

injurious to health. A lot of people have been dying and becoming victims to cancer hence

smoking therefore in Pakistan the thought of smoking is frowned upon.

6.1.2 Culture Trends Globally and in Pakistan

Culturally smoking is glamorized in some areas of the world and there are no culture barriers

towards it in some parts of the world. In US, Canada, Australia and other countries culturally

smoking is accepted as a norm and never contradicts with their culture or religious aspects.

To assess the smoking patterns of people in lower income or high income bracket this image is

attached:

36

Studies have shown that smoking restrictions at home not only reduce the overall exposure of

tobacco, it can also reduce the smoking uptake in youth. If individuals are not allowed to smoke

inside the home, it sends a clear message to youth that smoking is a socially un-acceptable and

non-normative behavior. For example, there is evidence that adolescents are less likely to smoke

if their parents and siblings engage in anti-smoking socialization practices. Such as reducing the

normative acceptability and prestige of smoking. Hence in Pakistan it is culturally frowned upon

and people do not smoke openly in front of their parents which reduced the consumption of

cigarettes.

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6.1.3 Demographic Trends Globally and in Pakistan

Figure 8: Demographic trend

The above figure shows demographically which country has more smokers and occurrences of

smoking:

However in Pakistan in urban areas or cities smoking is considered dangerous for health since

they comprise of educated people and want to protect themselves of health problems. In urban

cities consumption for women and men are not considered the same. However in rural areas men

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and women both smoke and that too openly since it is a norm in villages but the cigarettes are of

cheap quality and there is high risk of cancer with it.

7 Industry Analysis

Everyone in the world is aware of the fact that smoking is harmful for health but yet it remains to

be a business that universally benefits economies and Pakistan is part of gaining this benefit. The

basic raw material that is required in the tobacco industry is tobacco, itself. In Pakistan tobacco

industry is one of the major contributors to GDP i.e. 4.4%, source of revenue for the government

and earns foreign exchange for the country. Moreover, the industry helps in generating

employment; about 350,000 people are directly and indirectly employed in this industry which

makes a collective revenue of almost Rs.300,000 billion per annum; this means the tobacco

industry is the source for sustenance of 1.2 million people in Pakistan. After independence

Pakistan became the fifth biggest manufacturer of tobacco. Pakistan is known to acquire the

second largest tobacco market in South Asia when it comes to usage and consumption of

cigarette. An approximate consumption of cigarette in Pakistan on yearly basis is 88 billion

sticks. Pakistan produces the finest tobacco in the world and because of its superior quality the

demand is not only high in the local market but also in the international market. There are 26

countries which are importing tobacco from Pakistan, some of them are Korea, Malaysia, U.A.E,

UK, Germany, USA, Canada, Singapore, Ukraine, Afghanistan, Yemen, Australia, Italy and so

on. The total quantity exported during 2018-2019 is 10816670 Kgs and the total value is US$

24400491.25.

The tobacco industry includes the farmers growing tobacco crop (about 75,000 farmers are

growing tobacco all over the country), the processors, producers of cigarette, wholesalers,

retailers, distributors and so on. Pakistan’s main farmers reside in Khyber Pakhtunkhaw and

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the main consumers will be found in Punjab. There are 27 factories that manufacture cigarette

and 15 tobacco companies in the industry, these include includes Phillip Morris, Pakistan

Tobacco Company, International Cigarette Industry, Khyber Tobacco Company, Imperial

Cigarette Industry etc. the industry is overlooked by Pakistan Tobacco Board and controlled by

numerous rules and regulations.

However, the industry has two main leading multinational leading players PTC which has a

market share of almost 50% and Phillip Morris having a market sharing of almost 32%. The rest

is owned by the small players in the industry.

Phillip Morris Pakistan Limited is affiliated with Phillip Morris International and was formed in

1969. It is seen that 90% of the cigarette market in Pakistan is running by the sales of low-priced

cigarettes. Only 10% of the consumers are available for high priced cigarettes. Phillip Morris

brands that are available in Pakistan with their market share are shown below.

Brands Market Share

John Player Gold Leaf 9.83%

Marlboro 0.1-0.25%

Gold Flake 38.64%

Morven Gold 37%

Embassy 4.5%

K-2 1.5%

Capstan was doing poorly, now they have introduced Capstan by Pall Mall, started

taking over market shares.

40

There may be fluctuations encountered in terms of supply and demand of tobacco and there can

be various reasons for it. One of it is seasonal fluctuation, there are more consumers in winters as

compared to summers, demographics and activities also play a role. The religious month of

Ramadan is also a factor, the demand decreases in this month as majority of the people are

fasting and those who are not tend to avoid smoking in public out of respect or societal

obligation.

7.1 Porter’s Fiver Forces Model Analysis

Figure 9: Potter's five forces

7.1.1 Threats of New Entrants

New candidates in the cigarette market brings revolution, new strategies and put burden on

Philip Morris International Inc. through lower prices, reduced internal costs , and provide new

value schemes to the customers. This can be tackled by:

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• By inventing new products and services. It will bring new customers but also give old customers

a chance.

• Constructing economies of scale which will help to reduce the fixed cost per unit.

• Increasing volumes and increasing budget on R&D. New entrants are less likely to enter an

active industry where established companies like such as Philip Morris International Inc keep

structuring and setting the standards regularly. It expressively lowers the gap of strange profits

for the new companies in the industry.

7.1.2 Bargaining Power of Suppliers

Leading suppliers can help reduce the margins Philip Morris International Inc. have in the long

run. Giants in Consumer Goods sector take advantage of the negotiating power for quotation of

higher prices. The dynamics of higher supplier bargaining power is that it depresses the

effectiveness of Cigarette industry. This can be attacked by:

• By creating effective supply chain with numerous suppliers.

• By investigating with the design of products so that if prices of on resource increase then they

can shift to another

• Creating relationship amongst suppliers. One of the lessons Philip Morris International Inc. can

learn from Wal-Mart and Nike is how these companies established third party producers whose

business only depends on them thus creating a situation proving that third party users have less

bargaining power compared to others like Nike etc.

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7.1.3 Bargaining Power of Buyers

Best quality and least possible price is what buyers want. If the customer base is small and

powerful then higher the bargaining power of the customers and more ability to look for

discounts and other offers. This can be finished by:

• Creating a large immoral of customers. This will be supportive in two ways. The bargaining

power of buyers will be reduced and also give an occasion to the firm to rationalize its sales and

the process of production.

• Innovation; Customers often pursue discounts and offerings on well-known products so if Philip

Morris International Inc. keep on coming up with new products which will reduce bargaining

power since Philip Morris innovates.

7.1.4 Threats of Substitute Products or Services

The threat of a substitute is high if it offers something different from competitors which can be

eliminated by:

• Service oriented instead of just being product oriented.

• By closely looking at the needs of the customers instead of just their wants.

• An increase in switching costs will also help.

7.1.5 Rivalry among the Existing Competitors

If the competition among the companies in an industry is strong then it will reduce the overall

profitability as prices will decrease. Philip Morris International Inc. industry is very competitive.

This can be fought by:

• Differentiation creation

• Creating a scale or measure to help compete better

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• Cooperating with rival so that market size is increased other than just competing for small

markets in the long run.

8 Non-Pricing Competition

Non pricing competition is method by which companies compete with one another, their goal is

to enhance sales and attract customers through mediums other than pricing. Out of the 4 Ps of

marketing mix if we exclude price, we are left with product, place and promotions.

Phillip Morris International has undergone a transformation. Their goals and strategies now

revolve around delivering a smoke free future with a safe environment. The company states, “To

make our vision a reality we are transforming and staking our entire future on a line of smoke

free products.” They say that entering into a smoke free future is the most significant change

they have brought in the company and it took them many years to introduce smoke free products

as a substitute to cigarettes. It is found out that there over a billion smokers around the globe and

this is an attempt by Phillip Morris to persuade them to quit smoking. For those who are not

ready to give up, for them these smoke free substitutes will be available. However, this update is

only on the international website of Phillip Morris, Pakistani website still remains the same, their

goal is to provide innovative tobacco products.

As per Pakistan’s regulatory body traditional advertising is prohibited therefore the company

opts for non-traditional advertising. Display stands, TPOSM, HoReCa units are very important

for the tobacco companies as no advertising of such products are allowed by the government so

the only form of contact, they can have with the consumer is at that point. Companies TPOSM as

a tool for marketing their products which includes branded cupboards, shelf talkers, price jackets,

posters, gondolas, trade letters, buntings, mobile etc. These merchandising tools are a support

function of trade and are the form of contact with the consumer during the time of purchase.

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Phillip Morris uses posters as their TPOSM and the competition is intense as they have to make

their posters really unique and attractive. With Phillip Morris there was a time when Pakistan

Tobacco Company its main rival paid the retailers not to allow Phillip Morris put up their posters

where PTC had them the problem was that Phillip Morris didn’t have enough resources to pay

the retailers hence, they faced an issue in this area.

8.1 Competitor Analysis JTI

It is an International Tobacco Company

26,000 employees.

Founded in 1999.

Reynolds American makes and also sells cigarettes and other tobacco products.

Founded in 2004

British American Tobacco (BTA)

Founded in 1902

Altria Group

Is a creator and marketer of tobacco, cigarettes and related materials

Founded in 1985

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The following attached graphs show the revenue gaps, Net income amounts and Market

caps of Phillip Morris and its competitors:

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9 Competitive Profile Matrix

Key Success

Factors

Weight Phillip Morris

Rating

Phillip Morris

Score

Pakistan

Tobacco

Company

Rating

Pakistan

Tobacco

Company

Score

Product

Innovation

(R&D)

0.12 3 0.36 4 0.48

Manufacturing

Technology &

Quality

0.12 3 0.36 3 0.36

Human

Resource

0.07 2 0.14 3 0.21

Selling &

Distribution

0.07 2 0.14 3 0.21

Market Share 0.1 3 0.3 4 0.4

Financial

Stability

0.1 2 0.2 3 0.3

Patronage &

Support of an

International

Player

0.2 4 0.8 4

0.8

Government

Lobbying

0.05 3 0.15 3 0.15

Brand Equity 0.12 3 0.36 4 0.48

CSR Activities 0.05 3 0.15 3 0.15

Total Score 1 2.96 3.54

9.1 Major Opportunities & Threats to Tobacco Industry

9.1.1 Opportunities

“Growing tobacco market”: The tobacco market is still profitable even though anti-tobacco

protestors are speaking against it, since it brings billions as revenue to the government as well as

the manufacturers.

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“Benefit of globalization”: Cheap labour costs and cheap production costs are brought by this,

by third world countries. Factories established in China, Nepal bids the company cheap

production of its products hence getting large profits to the company.

“Mergers”: The Company tied its knot with Altria and it recently announced its partnership with

fortune Tobacco Corporation. Mergers like these give a chance to help create opportunities and

greater market share.

9.1.2 Threats

“Anti-Tobacco protestors”: There are controversies with the company since many people hold

it responsible for death of people .For example, activists in Philippines spoke up against the

merger of fortune Tobacco Corporation with Philip Morris.

They were scared that this merger can increase smokers in Philippines

“Government rules and regulations”: The governments’ rule of prohibition of sale of tobacco

related products to people below certain age limits and other instructions related to smoking ban

on public places can decrease the sales of tobacco.

“Awareness amongst the public”: People are more aware about the concerns of tobacco

consumption because of the advertisement of anti-tobacco activists. This has resulted in the

decrease of sales in many markets.

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10 External Factor Evaluation Matrix

Factor Weight Rating Score

Opportunities

Increasing Tobacco Market 0.1 2 0.2

Globalization in the industry 0.3 3 0.9

Mergers and Collaborations 0.1 2 0.2

Threats

Anti-Tobacco Activists 0.05 2 0.1

Government Legislations 0.05 2 0.1

Public Awareness 0.05 2 0.1

Tax Evading Sector 0.15 3 0.45

Changes in taxation 0.1 3 0.3

Local companies gaining market share 0.1 4 0.4

Total Score 1 2.75

11 Objectives

• Improvement of sales revenue of the company

• Foundation of a revised supply chain network

• Revamping of trade marketing

• Devising techniques from prevention of illicit trading of cigarettes

• Innovation in products: production of modified cigarettes, extension of product lines (new

flavors, change in materials)

• Diversification (manufacturing of products other than tobacco)

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Figure 10: PMI 2020 goals

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12 Strategy Recommendations & Action Plan

12.1 Cross Selling and Upselling of Products

One of the most effective way to increase the sale of products by modifying your services for the

people who are regular purchasers of your product. This process is much affordable and its

response rate is extremely higher. Because this depends upon the people who are in association

with you before (prospective buyers).

Following techniques can be devised in order to increase the selling of the products.

12.1.1 Focus on your potential customers

Tap your potential clients and make them believe in your new packages that will attract them and

they will end up buying more products. You can initiate the feedback path in order to win in a

long run. It’s always an attractive thing to give and take from the set of most faithful customers.

12.1.2 Offer Free of Cost Trials

Offering free trials for some period of time to the non-buyers will be beneficial for you as more

people will use the product for free and then in return there will be a future probability of

rebuying. This will not only strengthen the loyal customer base but will improve sales in longer

run.

12.1.3 Offering Discount or Incentive Programs

Giving special free usage for 3 months to the non-regular buyers in order to make them regular

ones. This can have ever lasting effects on them and they will develop a certain level of

affiliation for the brand respectively. The Returns incurred to the company will not be in

financial numbers but the intangible value that will be deeply rooted in the minds of consumers.

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12.1.4 Sales Personnel Propelling

All this can be done if the sales people are doing their jobs in an excellent manner which can be

achieved by offering them certain incentives in order to motivate them to sell more aggressively.

Previous targets set by the company can be revised and can be enhanced. If a certain sales

supervisor, sales representative sells certain amount of volume they will get a fixed bonus from

the company.

12.2 Innovating the Products and Services of the Company

In order to achieve an edge over the competitors the company needs to offer different product

than the rest companies like PTC etc. By investing in R&D, company can decide to introduce

new flavors (lemon, strawberry) of the currently produced some of the cigarette brands like

Marlboro. This would be a line extension as the previously produced products would be revised

with new flavors and packaging. This would attract new set of audiences (probably non-smokers

females or teenagers) who have an utmost interest to try and don’t like the regular taste. While

on the other hand it will excite the frequent smokers and regular consumers and they will end up

trying it. If it would be loved and accepted by audiences it will earn huge million revenues to the

company. It might get the company back to its market leadership in terms of profit margin,

revenues and popularity. This will eradicate the stagnancy of the company’s growth.

12.3 Enhance Sales from New Product Offerings

In the light of current restrictions by the government and increase in awareness of the general

public regarding the harms of tobacco usage it has become difficult to deal. Especially for a

company who just sells deals with tobacco products. So, it is necessary to diversify in order to

survive and to regain the previous market capitalization. As the company is now producing

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cigarettes it can enter in the beverage industry by producing and distributing energy drinks

targeting youth as they are already doing it with the tobacco products. Keeping the current

consumers and giving them a completely new offering can not only make them hook to it but can

also be extremely profitable in tangible (financial returns) and intangible value (brand affinity) to

Philip Morris Pakistan. There is a list of things to be considered before the design and

manufacturing of the new product. Market has several no of energy drinks and they are doing

well not only in terms of ROE plus brand proliferation. Brands like Red bull, Sting, Milo and

Gatarode are currently being sold in the energy drinks category of beverages industry. The

product can be manufactured in different flavors to have an edge over competitors. Strawberry,

mango and cherry would be the fruit flavoured caffeinated energy drinks offered by the

company.

12.4 Monopolizing Young Market

With the progression of usage of energy drinks among youth has proven the trend of such

beverages. Young individuals ranging from 16-30, male/female is the most suitable target

audience for these energy boosters. Due to the change in living habits, people have to work

24*7, either the students or the management trainees working in the big giants everyone needs

their dose of caffeine to stay active and give their best shot at work. While only sticking to this

segment will reduce the different complexities, questions and arising uncertainties. As it would

be easier for the company to understand this chunk of population in detail and attach with their

core strings rather than spending huge dollars in investigating about all the societal segments. As

it’s a tough task for the FMCG’s who produce products for all sets of audiences globally. This

will help not only the new brand but will work wonders for the overall organization as it will

change the company’s perception in the minds of government authorities that they are producing

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beverages apart from cigarettes. Although the company won’t stop producing tobacco products

in the future but the risky perception attached with its brand image will be diluted a bit.

Balance Score Card

Figure 11: Strategic Map

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KPI’s Targets

Financial:

Increase Sales

Increase the dividends

Customers:

Customer satisfaction index

Company’s goal to attain customers

Increase positive customer perception

Internal Processing

Improve Operating Cost

Improve suppliers for resources for the

company

Organizational Capacity

Improve more on Information

Improve more on Supply Chain

Financials

up to 7%

up to 2%

Increase up to 12% (initially)

Increase up to 10%

Increase up to 10%

Reduce to 5-7% (Annually)

Improve the quality of suppliers by investing

approximate 5% more than their original cost,

in order to get efficiency

Continuous time and money in their R&D,

whether for getting alternative product or the

old product, in order to get operational

effectiveness. (add 2% of company revenue on

proper R&D extra, for all products whether it’s

for substitute development or not)

Same goes with Supply Chain, proper identify

the distribution channel, continuous

improvement in technology.

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13 Appendix: Internal Analysis

13.1 BCG Matrix

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13.2 Product Positioning

13.3 Supply Chain

57

13.4 Stakeholder Engagement

58

14 Table of Figures

FIGURE 1 NON-TOBACCO PRODUCTS 4

FIGURE 2: PRODUCT POSITIONING MAP 5

FIGURE 3: TOBACCO CURING PROCESS 7

FIGURE 4: CIGARETTE MANUFACTURING PROCESS 8

FIGURE 5 PMPK STAKEHOLDERS 13

FIGURE 6 FLOW OF TARGETS 19

FIGURE 7 DISTRIBUTION NETWORK DIAGRAM 24

FIGURE 8: DEMOGRAPHIC TREND 37

FIGURE 9: POTTER'S FIVE FORCES 40

FIGURE 10: PMI 2020 GOALS 49

FIGURE 11: STRATEGIC MAP 53

59

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Journal Of Pakistan Medical Association. 2016. https://jpma.org.pk/article-details/2601.

Our Investor Relations. n.d. https://www.pmi.com/markets/pakistan/en/our-business/investor-

information.

Philip Morris International confirms commitment to its employees during pandemic. 08 April 2020.

https://www.pmi.com/media-center/news/philip-morris-international-commits-to-employees-

during-pandemic.

Philip Morris International Inc. Porter Five Forces Analysis, Porter 5 forces analysis. 2018. Philip Morris

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PMPK - Philip Morris (Pakistan) Ltd. Snapshot: Fundamentals ,Technicals and Market data (PE Book

Value Trading Signals EPS ROE ROA). n.d.

http://www.scstrade.com/stockscreening/SS_CompanySnapShot.aspx?symbol=PMPK.

PMPK - Stock quote for Philip Morris (Pakistan) Limited - Pakistan Stock Exchange (PSX). n.d.

https://dps.psx.com.pk/company/PMPK.

PMPK.PK | Philip Morris (Pakistan) Ltd. Financial Statements - WSJ. n.d. https://www.wsj.com/market-

data/quotes/PK/XKAR/PMPK/financials.

Revenue from cigarette industry surges by Rs88.54bn in 2017-18. 05 September 2018.

https://profit.pakistantoday.com.pk/2018/09/05/revenue-from-cigarette-industry-surges-by-

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