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Non market strategy analysis. CASE: PMI and Uruguay government

Non market strategy analysis. CASE: PMI and Uruguay government

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Transcript

  • 1. PHILIP MORRIS VS. URUGUAY
  • 2. MAIN ISSUES
    • Smoking in public closed places is forbidden
    Bill 285/05
    • One cigarette type per brand
    Bill 514/09
    80% of cigarette pack surfaces be devoted to graphic warnings of the dangers associated with smoking
    Bill 287/10 reg. 466/10
  • 3. HOW THE ISSUES AFFECT PHILIP MORRIS INTERNATIONAL (PMI)
    The labeling requirements and recent tax increase harm its investments and infringe on its trademarks in violation of the Switzerland-Uruguay bilateral investment treaty
    Counterfeit cigarettes (more than 50% of market) have a significant advantage because they are not regulated
  • 4. ACTORS
    • Leading international tobacco company,
    • 5. 160 countries
    • 6. Leading brand Marlboro
    • 7. Net revenues $62,080 billion (2009)
    A country with a population of 3 million in South America
    GDP $33,3 billion (2009)
    Economy based in the agro industry
    PMI doubles Uruguay’s GDP.
  • 8. ACTORS
    Unions: Tobacco Workers Union
    World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC)
    General Public:
  • 9. ACTORS (Cont.)
    These groups also offered to provide technical and legal assistance to the government of Uruguay.
  • 10. INFORMATION
    Inelastic cigarrette consumption (10% price increase, 5% consumption decrease)
    Agreement on Trade-Related aspects of Intellectual Property rights (TRIPS) into BIT obligations between Uruguay and Switzerland, that was signed in 1988
    Market share
  • 11. INFORMATION (cont.)
    Agreement with Organización Panamericana de la Salud regarding legislations to fight against tobacco consumption
    Statistics:
    A consumer spends an average of $1.50 per day on cigarettes
    800,000 consumers
    Us$438m per year is the industry size
    Us$ 100m are from PMI
  • 12. INFORMATION (cont.)
    VAT (22%)
    Production taxes (70% of production costs)
    Production costs
    4% of taxes collected comes from cigarettes.
  • 13. INFORMATION (cont.)
    Danger of Smoking
    25% fatality rate of smoking related cancer.
    4500 deaths per year caused by cigarettes
  • 14. INFORMATION
    Social costs:
    Smoking-related health care spending
    Effects on worker productivity.
    Campaign to lower smoking rates among its population, as 50%
    Tabaré Vázquez, a trained medical doctor whose term as the country’s President ended March 1, promoted Uruguay’s anti-smoking laws. On the campaign trail and in declarations since his election, Mujica stressed that he will continue his predecessor's policies.
  • 15. INTERESTS
    Uruguayan Government
    Protect population´s health
    Reduce health costs
    Protect the country´s image of health concerned
    Increase Foreign direct investment
  • 16. INTERESTS (cont.)
    Smokers
    Ease of getting product
    Low Price
    Freedom to smoke freely
    Boxes of cigarettes without unpleasant pictures
    Non Smokers
    • Reduction of second-hand smoke in public places
    • 17. Reduced availability of cigarette sales
    • 18. Advertisements and promotions that deter minors
    • 19. Improved public health
    • 20. Tax increase to raise prices to discourage consumption and improve tax collection
  • INTERESTS
    Philip Morris
    • Philip Morris’s lawsuit is a logical step in the tobacco industry’s push toward new markets, at a time when traditional markets in the developed world are drying up.
    • 21. Freedom to sell and market a product where there is demand
    • 22. Respect of current trademarks and investment treaties in Uruguay
    • 23. Try to discourage other countries from trying to diminish the image of their product
  • ASSETS
    • Power to influence the consumers with political campaigns
    • 24. Ability to propose law revisions
    • 25. Potential alliances with other governments from members of “WHO Framework Convention on Tobacco Control”
    • 26. Economic Strength
    • 27. Intellectual property rights affected by the law
    • 28. Bilateral investment treat between Uruguay and Switzerland
  • ARENAS
    ICSID – International Centre of Settlement of Investment disputes
    PMI asked this court to issue an order for Uruguay to suspend the tobacco regulations, in addition to order an economical compensation for PMI’s losses. The conflict is expected to be dealt at this court.
    PMI states that the Switzerland-Uruguay Investment Treat protects their trademark and intellectual properties, by considering them a way of investment.
  • 29. INTEGRATED STRATEGY
    NON MARKET SCOPE
    MARKET SCOPE
    MANAGEMENT
    Sue URUGUAY on violation of bi-lateral investment treat considering Brands as part of firm´s investment, quite a new idea.
    Manufacture and market brands to tobacco consumers in 160 countries. Owning 7 of world´s most famous 15 brands
    If PMI wins it will set jurisprudencyand make best use of its marketing resources
    2010 Q2: Operating income $2.974 MM ($238MM in LATAM).
    Units: 241 Bill (26 bill in LATAM)
    INTEGRATED STRATEGY
    Implementation coordination
    VALUE CREATION and CAPTURE
    Generate interest in their particular brands
  • 30. IMPORTANCE OF NON MARKET STRATEGY
    In the tobacco industry
    Non Market Strategy is
    key to success because:
    People are becoming
    health conscious
    Governments are
    pressured by the public and health institutions to act against cigarette consumption
    International organizations like WHO are becoming active in preventing cigarrette caused diseases.