Altria Corporation

Altria Corporation

1. What is your impression of the world wide operation of the company?

The impression I got from the Altria Corporation is they are a company that utilizes the Conglomerate Diversification Growth Strategy. With conglomerate diversification the company will diversify into an industry that is not related to the industry they are currently in. Usually strategic managers that adopt this strategy are more concerned with financial concerns of cash flow or risk reduction. This is a good strategy to use if your company can transfer its excellent management system to a less excellent managed firm. Conglomerate diversification is a good strategy to use when you can no longer grow in your current industry and want to move into a different industry where there are more opportunities.

Altria is the parent company of Kraft Foods, Philip Morris International, Philip Morris USA, and Philip Morris Capital Corporation. Altria produces products like tobacco and packaged food and beverages. Altria is primarily operating in USA and Europe. Altria receives 65.8% of its revenue from the tobacco industry, 33.9% of its revenue from the food and beverage industry, and .3% of its revenue from the financial service industry. Altria is not more dependant on any one region or product segment (Altria Group, Inc., 2007). Altria acquired General Foods in 1985 and acquired Kraft in 1988 in order to diversify its business (Schneiderman, 2007).

2. Conduct a SWOT Analysis of Altria.

IFAS:

Factors Weight Rate Weighted Score Comments

Strengths

Many Product Lines .15 4.0 .6 Parent to Kraft Foods, Philip Morris USA, Philip Morris International and Philip Morris Capital Corporation.

Good Marketing Techniques .10 4.0 .4 Simultaneously marketing for adults to smoke and for children not to smoke, following every marketing law in every country.

Broad Market Coverage .10 4.5 .45 Tobacco sales in US and nation wide, selling of food goods, selling of beer.

Good Financial Management .20 5.0 1 Generating consistent returns on invested capital of 21.4% over 5 years.

Weaknesses

Bad Reputation .15 2.0 .3 Tobacco kills 5 million people annually worldwide.

Lower operating income in North America food division .10 3.0 .3 Operating income has declined by almost 16.9% since 2003, steady decline has a negative affect on overall profitability.

Weak position in emerging markets .20 3.0 .6 Trails the competition in emerging markets, company has ineffective strategy and execution in foreign regions.

Total 1.0 25.5 3.65

EFAS:

Factors Weight Rate Weighted Score Comments

Opportunities

Company Spin offs .15 5.0 .75 Spin off of Kraft and PMI, Altria retains 30% of all revenue.

Exploit New Market Segments .20 4.0 .8 Experimenting with smokeless tobacco.

Lack of Dominant Competitors .15 2.5 .375 Competitors are doing little to meet Federal Regulations.

Threats

Change in foreign policies .15 3.0 .45 China will ban all tobacco ads by 2011.

Change in economic factors .15 3.0 .45 Banning tobacco and smoking in public places and schools, Bill 10.

Climate and Weather Conditions .05 4.0 .2 Current drought is increasing growing challenges, tobacco is infected with black shank disease.

Tax Increases .15 3.5 .525 Taxes have increased in 17 states in past two years causing consumers to try substitute products.

Total 1.0 25 3.55

3. Does Altria have a competitive advantage and/or a competitive strategy? Justify your answer.

Altria seems to have a competitive advantage while using a competitive strategy. The competitive strategy they are using is the differentiation strategy. With Altria's skilled product development team and their ability to market their product, they have an immense competitive advantage. Altria is able to market their product by making their customers believe that if you smoke their cigarettes you will be more of a man. They advertise this with the Marlboro Man in a desert scene and an open atmosphere appealing to the more rugged, or want to be rugged, men (Global Value Chain). Altria offers a unique experience with their product that could be considered a type of different lifestyle by alleging that if you smoke Marlboro cigarettes you will become a man. Altria promotes high quality and innovation with their cigarette product lines.

4. Describe the components of the company's value chain.

There are certain steps the company must do in order to get the finished product into their customer's hands. The tobacco industry is no different. Altria has a chain of steps they must follow to get their consumers

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