Pmi Vs Uy Final

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Non market strategy analysis. CASE: PMI and Uruguay government

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Pmi Vs Uy Final

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

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