Philip Morris
1. How would you describe Marlboro 's competitive position in early 1993?
Marlboro, the leading cigarette brand for Philip Morris, was the dominant player in the premium priced market. While RJR was the second largest player in the market, RJR’s cigarette brands were fragmented. At the end of 1992, Marlboro had 24.4% unit market share, while each of the RJR brand cigarettes had less than 7% market share. Philip Morris, at 53% operating contribution margin, was significantly more profitable than RJR, at 34% operating contribution margin.
Marlboro was essentially backed by the biggest, most profitable player – Philip Morris. Philip Morris was also the consistent market share leader, at least since 1988, over RJR and other much smaller companies. The industry had sustained profitability over time. There we can conclude that there are significant barriers to entry in the cigarette market. Additionally, the need for a strong distribution network with retailers and wholesalers added to the barriers to entry into the market.
Threat
Discussed on more detail later, Marlboro was facing stuff competition in the 90s from discount brands, particularly RJR brands. While Marlboro, a premium brand, suffered a steadily declining market share since 1989, discount brands were quickly gaining market share.
2. What is Marlboro 's marketing strategy at this time?
Marlboro positioned itself as a premium brand cigarette. While it played in the discount segment as well, it was second to RJR brands in the discount segment. Marlboro spent a significant amount of money in advertising and promotions to command its premium pricing. Marlboro became synonymous with Iconic imagery such as the “Marlboro man” and wild western country images. This led to Marlboro’s strong hold amongst young men. Marlboro outspent its competitors in advertising - spending $3.5 million per percent market share in 1992, compared to $2.1 million spend per percent market share by RJR. (RJR was focused
Marlboro, the leading cigarette brand for Philip Morris, was the dominant player in the premium priced market. While RJR was the second largest player in the market, RJR’s cigarette brands were fragmented. At the end of 1992, Marlboro had 24.4% unit market share, while each of the RJR brand cigarettes had less than 7% market share. Philip Morris, at 53% operating contribution margin, was significantly more profitable than RJR, at 34% operating contribution margin.
Marlboro was essentially backed by the biggest, most profitable player – Philip Morris. Philip Morris was also the consistent market share leader, at least since 1988, over RJR and other much smaller companies. The industry had sustained profitability over time. There we can conclude that there are significant barriers to entry in the cigarette market. Additionally, the need for a strong distribution network with retailers and wholesalers added to the barriers to entry into the market.
Threat
Discussed on more detail later, Marlboro was facing stuff competition in the 90s from discount brands, particularly RJR brands. While Marlboro, a premium brand, suffered a steadily declining market share since 1989, discount brands were quickly gaining market share.
2. What is Marlboro 's marketing strategy at this time?
Marlboro positioned itself as a premium brand cigarette. While it played in the discount segment as well, it was second to RJR brands in the discount segment. Marlboro spent a significant amount of money in advertising and promotions to command its premium pricing. Marlboro became synonymous with Iconic imagery such as the “Marlboro man” and wild western country images. This led to Marlboro’s strong hold amongst young men. Marlboro outspent its competitors in advertising - spending $3.5 million per percent market share in 1992, compared to $2.1 million spend per percent market share by RJR. (RJR was focused