Sample Term Paper
As we have discussed several marketing strategies which Philip Morris has adopted throughout the years, one issue which the company is facing is that of counterfeiting. Recently in the year 2009 the company filed lawsuits in the states of New York and New Jersey, against ten retailers who were charged of selling counterfeiting versions of Marlboro brand cigarettes (Business & Finance Week, 2009).
One reason why there is such high tendency of counterfeiting cigarettes is because in most states of the US tax rates on cigarettes’ are so high that counterfeiting becomes a very lucrative market for the smugglers. Recently a tax raise was observed in more than two dozen states which ranged from 39 cents per pack to $1.01. This tax was applicable on all tobacco products and after this act tobacco companies are raising prices by different amount. Before this tax rise the average price per cigarette packets was $5 which is most likely to be raised as the higher tax would be directly hitting the cigarette manufacturers. Research has shown that historically when the there was a 10% increase in the cigarette prices the consumption was reduced by 4%. It also predicts that the present increase in the cigarette prices would force at least 1 million out of 45 million smokers to quit smoking (Koch, 2009).
Bill Phelps who is the spokesman for Philip Morris also expects a decline in the cigarette consumption. He says that the consumption for cigarette has been dropping 3% constantly and for decades and it would further increase due to this raise. He further says that because of this increase in prices some people may quit smoking while other may cut back (Koch, 2009).
According to Nik Modi who is a tobacco analyst cigarette consumption would drop to 9% annually but he believes that the tobacco manufacturing companies won’t be hurt much by this, reason being they have already prepared for this kind of increase. Prior to this increase most of the cigarette manufacturing companies including Philip Morris, R.J Reynolds increased their prices. Marlboro’s price was increased by 71 cents per pack and Camel’s price raised by 42 cents per pack. The highest amount which was recorded as per tax increase was in New Jersey where the combined, federal and state tax totaled about $3.58 per packet (Koch, 2009).
Joe Murillo, vice president and associate general counsel, Altria Client Services believes that, this substantial increase in tobacco products has given rise to counterfeiting and smuggling of tobacco manufactured products. He added that the sale of smuggled cigarette does not only harm the company but it also has a negative effect on the tax revenues of both the states. The revenues which is lost in such illegal activates could be consumed in to support any essential public services. In addition to this by violating the trademark laws the smuggled cigarettes’ are sold without any federal or excise tax (Business & Finance Week, 2009).
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