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Phillip Morris Case Study

By Choo-Zhen-Whei Apr 26, 2015 2037 Words
Table of Content
No.
Particular
Page
1.0
Obtain information on the current consumption pattern of cigarettes in Turkey. How has this changed in the last 10 years? What kind of research should Philip Morris is doing to gain market share in Turkey?

2 - 3
2.0
What kind of information should Philip Morris obtain to decide on a marketing and distribution strategy in Turkey? How can Philip Morris obtain this information?

4 - 5
3.0
Is it ethical for Philip Morris to covertly alter the taste of its cigarettes over a period of time for its own profit?

6
4.0
References
7

1. Obtain information on the current consumption pattern of cigarettes in Turkey. How has this changed in the last 10 years? What kind of research should Philip Morris is doing to gain market share in Turkey?

Turkey is a country with a population of 76, 446, 053 people with the size of 783, 562km². Turkey’s population is almost equivalent to 1,05% of the total world population. As of 2014, Turkey is ranked at 18th in the list of countries by population. The population density is around 97 people per km². Turkey is one of the top 10 countries in terms of tobacco consumption in the world (Kilavuzoglu 2015). According to a survey conducted in 2008, The 2008 Global Adult Tobacco Survey, it showed that 31.2% of adults, including 50% of all men and 15% of women are heavy smokers which consumes over 20 cigarettes each day. The consumption of cigarettes in the late 20th century, rose steadily from the year 1980 to 1999. However, after the peak cigarette consumption during the year 1999, cigarette consumption started to decrease gradually until the year 2008. The reason for this decrease is the increase in people smoking loose tobacco, pipe, and also water pipe tobacco. Table 1 shows the volume of tax-paid sales of tobacco products in Turkey.

Source: http://www.who.int/tobacco/en_tfi_turkey_report_feb2011.pdf

We can see that as the years go by, cigarette consumption gradually decreases from the year 2002 – 2006 and slowly hike up again until the year 2008. As for the people who smokes from the pipe and loose tobacco, the amount is steadily increasing. From the year 2008 – 2013, the introduction of a ban on having to smoke in public enclosed areas by the government has made people of Turkey consume 16.2 billion fewer cigarettes (Ankara 2014). The government also doubled the taxes of tobacco so that it will lead 0.9 million current smokers to quit and prevent 0.7 million youngsters to initiate smoking, preventing 0.5 million premature deaths among Turkey’s population. Plus, it would generate an additional 4.1 billion Turkish Lira in tax revenue which could be used for other products or services that could benefit the people of Turkey in a positive way. Annual consumption of cigarettes fell by 15% between the year 2008 and 2013 (Taco Tuinstra, 2014). In Turkey, occupations that are looked up to have high smoking rate. This is evident as we see that 50% of school teachers, including lower institutions, 44% of physicians and 27% of parliamentarians are smokers. Judging by the current consumption patterns in Turkey, Phillip Morris should focus their research onto the prefrence of white collar consumers in order to gain market share in Turkey. Problem Identification Research is needed to point out certain problems faced by Phillip Morris. As market shares are measured via profits, units sold, or even income. So, Phillip Morris has to align their objectives and tactics towards finding a solution for their problems. Research will assist in providing information such as flavour preferences of certain customers, and purchasing habits of the consumers. Such researches will provide a new and fresher preference of consumers instead of always having the same sort of cigarette with no excitement or different experience. Apart from that, Phillip Morris can also see whether the changes made are acceptable for consumers or not. As from the research, majority of cigarette consumption in Turkey come from white collar workers with higher profession and better income. This allows them to have stable income to afford cigarettes in Turkey as it is 82% taxed from its retail price, making cigarettes in Turkey one of the highest priced in Europe (Taco Tuinstra, 2014). Therefore, not much people are able to afford it with ease apart from these white collar workers. So, Phillip Morris should introduce new flavours of cigarettes according to the preferences of the consumers in order to be able to compete with water pipe tobacco to gain more market share in Turkey.

2. What kind of information should Philip Morris obtain to decide on a marketing and distribution strategy in Turkey? How can Philip Morris obtain this information?

Before Phillip Morris decide on which marketing and distribution strategy to use in Turkey, Phillip Morris will need to do Problem-Solving Research. This includes Product, Place, Price and Promotion research.

Segmentation
Firstly, Phillip Morris can conduct a segmentation research. The segmentation research focuses on the place of the potential markets. Determining the basis of segmentation is one of the key points to conducting this research. Segmentation involves finding groups with various preferences and different levels of willingness to pay and creating products and offers that targets these groups. Apart from that segmentation research also helps establish market potential and responsiveness for different segments. In this case, Phillip Morris can determine the Turkish lifestyle and their smoking habits.

Product
The Product Reseiarch is an important part of new product development. At every stage of the prodcut development process, product research enables the identification of key issues and prevention of high cost mistakes. The test concept can be conducted to evaluate consumer response to the product idea prior to the introduction of a product to the market. Test concept can also psychologically alter the attitudes of the consumer towards a certain product. Phillip Morris can conduct a concept testing to first see the response of potential customers towards the different cigarettes that will be launched in the near future. This will allow Phillip Morris to be mentally prepared for the outcome of the sales of that certain cigarette. Apart from that, Phillip Morris can also improve in any other way in accordance to the consumer behaviour during the testing.

Promotional
Promotional Research are normally conducted to ensure that existing customers are satisfied and retain the customers. Another purpose of the promotion is to encourage people to use the product and also create a positive attidtude towards the product in order to improve the chances of customer loyalty. Promotional research is done to obtain the optimal promotional budget so that it is still profitable for the company. Also, in order to attract customers, creative advertising testing is essential so that it hits the customers that they need to get this certain product. Other than that, it creates the brand awareness that would lead to a company gaining market share. Phillip Morris can conduct a promotional research such as having roadshows and even sample cigarettes for the people in Turkey. However, it must be worthwhile and worth spending the budget on these promotional activities. Advertising is also very effective in changing the mindsets of consumers. Phillip Morris can do this to show it’s competitors that they really mean business in gaining the market share in Turkey.

Pricing
Phillip Morris has now gain the power to market, price and distribute its own cigarette. However, the pricing policies proposed by the government still need to be followed. This can be seen when all cigarettes sold in Turkey needs to be taxed at 82% of their retail price. Pricing research can be done to also determine the importance of price in brand selection. This will allow consumers to see which product is good in quality and also affordable to buy. The product line pricing can also show consumers which product in Phillip Morris is a premium and which one is the normal ones.

Distribution
Distribution research refers to the collection and analysis of information related to the sales of a product and its distribution through different retail channels. This enables the management to make better decisions. Distribution research about a brand provides information related to its retail presence, market size and share, sales attained, how successful is the competitor in terms of sales and also the seasonality of demand. Marketing and distribution research is the main key yo understanding and analyzing the marketing environment and thereby helping eliminate any weak links present. Phillip Morris can gain insights onto better management of sales channels with enhanced knowledge such as knowing where to distribute its products. It also helps the understanding the centers of influence within a sales channel.

3. Is it ethical for Philip Morris to covertly alter the taste of its cigarettes over a period of time for its own profit?

Ethics means to have moral values, which guides us on how we are supposed to behave, such as respect, honesty, fairness and responsibility. Business ethics relates to what is wrong or right in a workplace and doing the things that are right. Ethics in a workplace ensures that when leaders and managers are struggling in times of crises and confusion, they still stick to their ground of moral values.

From my moral perspective, changing the taste of the cigarettes without disclosing the information to the public may not affect much to the public as smoking cigarettes are still harmful to the human body regardless of the taste. It does not change the harm level to the consumers. By altering the taste of the cigarettes for its own profits means using lower quality product for its cigarettes and selling it at the same retail price. Some consumers may not even notice the change as they are most probably addicted to smoking cigarettes. However, ingredients shown at the back of the cigarette box might change slightly but normal consumers do not really take close notice onto the contents of the cigarettes. Phillip Morris may gain more profits by doing this.

By altering the taste of the cigarettes towards the local taste can help increase market share as it adapts to the preference of the consumers in Turkey. With the technologies in the factory of Phillip Morris, wine infused cigarettes allow consumers to have a special taste and it is also addictive. With the variety of cigarettes that Phillip Morris provide, it is assured that Phillip Morris will gain more customers and hence, sales. However this will encourage more and more smoking from young adults, adults and even teenagers. Youngsters nowadays want to follow the trend and thinks that smoking is cool. Now, with the various flavour infused cigarettes, it will definitely attract more of these youngsters. People tend to smoke when they are under stress and also fatigue.

However from the business perspective, by altering the taste, Phillip Morris may lose some customers who prefer the previous taste but then will gain additional customers from the new taste cigarettes. Customers who prefer the previous taste would not have much choice but to still purchase the cigarettes as they are most likely addicted to it already. So, it will definitely help Phillp Morris to gain more profits.

As a conclusion, I feel that by altering the taste of the cigarettes is not ethical as it harms the human well being and also the environment. As the old saying says health is wealth. Reference:
Anon, (2015). [online] Available at: http://global.tobaccofreekids.org/files/pdfs/en/Turkey_Tobacco_Economics_en.pdf Anon, (2015). [online] Available at: http://www.who.int/tobacco/en_tfi_turkey_report_feb2011.pdf Hurriyetdailynews.com, (2015). ECONOMICS - Turkey ranks fifth in cigarette consumption. [online] Available at: http://www.hurriyetdailynews.com/turkey-ranks-fifth-in-cigarette-consumption.aspx?pageID=238&nid=21885 Mbaskool.com, (2015). Distribution Research | Definition and Concept | Marketing | MBA Skool-Study.Learn.Share.. [online]

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