Philip Morris Analysis
P HILIP MORRIS INTERNATIONAL
Financial Analysis
Executive Summary
In this paper we have analysed the performance of Phillip Morris in order to decide whether or not to invest in the company. We have completed an overview of the competitive scenario, profitability and risk indicators, as well as contingencies and aspects to keep in mind for the future development of the firm. We think that in order to evaluate the current situation of the firm we have to give enough weight to quantitative and qualitative aspects and try to maintain an objective view, regardless of the fact that its products are damaging to human health. We have to keep in mind that we are evaluating the firm from the investor point of view and not as borrowers or consumers. After the detailed analysis we decided to invest our family savings in Philip Morris!
Tobacco Industry Overview
The tobacco industry is made up of a small number of companies that grow, distribute and sell tobacco and related products throughout the world. Barriers to entry to this market are high due to the size of distribution networks required and government restrictions on marketing and promotions.
These restrictions stem from health warnings, which will limit the room for future growth in this already mature market. Companies often use mergers and acquisitions to expand abroad and bring down their costs by taking advantage of economies of scale. They often integrate vertically, meaning they have control over every aspects of the supply chain from production to distribution. Due to these factors, the market can be described as an oligopoly.
The industry is constantly having to deal with tightening regulations as governments look to discourage the use of their products due to health concerns. This is playing a role in decreasing the demand in the developed world, but as of now is not affecting the developing world, in fact the opposite as demand is growing in these countries. A common method used
Financial Analysis
Executive Summary
In this paper we have analysed the performance of Phillip Morris in order to decide whether or not to invest in the company. We have completed an overview of the competitive scenario, profitability and risk indicators, as well as contingencies and aspects to keep in mind for the future development of the firm. We think that in order to evaluate the current situation of the firm we have to give enough weight to quantitative and qualitative aspects and try to maintain an objective view, regardless of the fact that its products are damaging to human health. We have to keep in mind that we are evaluating the firm from the investor point of view and not as borrowers or consumers. After the detailed analysis we decided to invest our family savings in Philip Morris!
Tobacco Industry Overview
The tobacco industry is made up of a small number of companies that grow, distribute and sell tobacco and related products throughout the world. Barriers to entry to this market are high due to the size of distribution networks required and government restrictions on marketing and promotions.
These restrictions stem from health warnings, which will limit the room for future growth in this already mature market. Companies often use mergers and acquisitions to expand abroad and bring down their costs by taking advantage of economies of scale. They often integrate vertically, meaning they have control over every aspects of the supply chain from production to distribution. Due to these factors, the market can be described as an oligopoly.
The industry is constantly having to deal with tightening regulations as governments look to discourage the use of their products due to health concerns. This is playing a role in decreasing the demand in the developed world, but as of now is not affecting the developing world, in fact the opposite as demand is growing in these countries. A common method used