Alternative Strategy Generation

Altria Group Inc: Project 4

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Introduction

Altria Group Inc is a multinational which specializes in the production and sale of tobacco products. The company is quite dominant in the United States, which is relative to its reputable brands and its diversified portfolio. The tobacco industry is undergoing through change which is linked to the dynamic market. Consumers are now shifting from smoking traditional cigarettes to the electronic ones. Other companies have also entered the market intensifying competition for the corporation. Altria management needs to be strategic when choosing the best alternative to bolster sales and retain its market position. The report sheds light on alternative strategy evaluation. All the strategies outlaid in the first and second reports are outlaid and the best three chosen from the pool. The report additionally selects the best plan for Altria Group Inc, which will entice innovative production and support the entity’s venture into international markets.

Alternative Strategy Generation

Altria Group Business Level Strategy

Some of the approaches relative to Altria’s business strategy include;

Revenue Maximization from the tobacco business

Altria is considered one of the biggest tobacco corporations in the United States, owning approximately 50% of the cigarette share market. Altria’s mainly aims at maximizing returns while sustaining its Malboro brand (Trefis Team, 2016, p1). Altria Group owns John Middleton, which produces pipe tobacco and machine-made cigars. Black & Mild stands as its main product and stands as the tool created to foster share increments in the cigar market.

Creation of new revenue streams through innovation.

The smokeless tobacco branch stands as a pioneering manufacturer when it comes to moist smokeless tobacco. Altria Group is working towards increasing its capacity in the smokeless tobacco domain while gaining a retail share in the Skoal and Copenhagen brands (Trefis Team, 2016, p1). Altria is also working towards creating new innovative tobacco brands to capture the United States growing vapour market. The company has already initiated the project through its latest company; Nu-Mark.

Diversified Portfolio management for better financial performance

While Altria garners a substantial proportion of its revenues from tobacco product sales, a given percentage of its profits originate from its Wine domain. As indicated in project 3, the St Michelle Wine Estates is one of Altria investments (Trefis Team, 2016, p1). The Estate encountered a yearly compounded growth of 13% between the year 2010 and 2015. Additionally, a 27% stake in SABMiller paved the way for Altria to take part in the “$36 billion global profit pool.” Between 2010 and 2015, equity earnings from the investment rose from $600 million to about $1 billion (10.9% yearly growth rate) (Trefis Team, 2016, p1).

Global Level Strategies

Global strategies refer to approaches taken by a company to supplement performance at the multinational, international and global domain. They are models designed to empower an entity to attain its goals of international expansion. In the year 2013, Altria gave Phillip Morris Inclusive all the rights relative to selling the MarkTen electronic cigarette in foreign markets (Sun, 2017). In return, Altria gained the right to retail iQOS tobacco products in America. Altria furthered the agreement with Phillip Morris International in the year 2015 so that both could integrate their technologies, research and development in producing new e-cigarettes and other products (Sun, 2017).

The two companies are working towards pooling their resources in changing the tobacco market; a strategy aimed at capturing the international markets. Their partnership is deemed quite interesting as Phillip Morris Chief Executive Officer; Andre Calantzopoulos has always envisioned a future void of traditional cigarettes and full of alternative smoking products. According to BIS Research, executing the move will accord the global e-cigarette market, a yearly growth rate of 22.4% (Sun, 2017). This is estimated to be attained between 2014 and 2025. Colluding with Phillip Morris International will aid Altria to get its products into the international markets and consequently bolster production for the new e-cigarettes.

Corporate level strategies

Corporate level strategies refer to actions rendered in garnering competitive advantage over competitors through management and selection of a mix of businesses operating in several product markets or industries. An illustration of corporate strategy by Altria Group was Nat Sherman acquisition (Sun, 2017). Nat Sherman is a privately owned producers specializing in the manufacture of premium cigars and cigarettes. Altria is working towards expanding the Nat Sherman brand. It is worth noting that the Nat Sherman brand has a constrained local distribution (Sun, 2017). Incorporating the brand will play a huge role in complementing its prime John Middleton cigar brand and its cigarette brands.

Expanding its local cigarette investment will give it a competitive edge over Reynolds which retails renowned brands such as Newport, Natural American Spirit and Camel. It is worth noting that Nat Sherman is “100% natural” and may compete against the Natural American Spirit marketed by Reynolds and publicized as “addictive free.” (Sun, 2017). Additionally, acquiring more cigar brands will not only widen the entities portfolio but will also cater to estimated shipment declines which are paramount in sustaining the markets.

For the external factor analysis featured in project one, the following are are some of the feasible strategies;

According to the internal analysis structure featured in project two, the following table represents some viable strategies that Altria may adopt in curbing its internal challenges and bolstering its operations.

Possible Alternatives

From the pool of strategies outlaid together with the business, corporate and global strategy, the three main viable strategies that may be deployed by Altria Group to accomplish market diversification and achieve product innovation include;

Expanding the Nat Sherman Brand (Acquisition)

Altria stands as an acquisition to Nat Sherman. Nat Sherman prioritizes in the production of premium cigars and cigarettes. However, the company has a constrained domestic distribution. Integrating the brands with Altria’s popular Malboro cigarettes and the Middleton cigars will play a massive role in supplementing both brands (Sun, 2017). The move will expand Altria’s domestic investment giving it a competitive edge over Reynolds which markets and sells reputable brands such as Natural American Spirit, Newport and Camel.

Nat Sherman reputation erupts from the fact that their products are “100% natural” and may viably compete against Reynolds brands which are “addictive free.” Consequently, more cigar and cigarette brand acquisitions will widen Altria’s investment portfolio, which in turn will cater for anticipated shipment declines. Such a move is quite paramount in sustaining markets.

Joint efforts with Phillip Morris International

Altria Group and Phillip Morris are working closely in transforming the tobacco industry; a move aimed at capturing the broader foreign markets (Sun, 2017). The partnership between the two organizations is quite exciting as both have a common interest. The companies envision a future without traditional cigarettes but filled with numerous smoking alternatives. Integrating efforts with Phillip Morris International will help Altria Group get its products into foreign markets and additionally entice innovation (needed for the production of e-cigarettes).

Merging with Phillip Morris International

Assessing tobacco products economically, tobacco is price inelastic. This means that despite a significant change in price, demand change will be small. Therefore, if Altria Group substantially raises their product price, only a tiny proportion of customers will exit the market for substitutes (Trefis Team, 2015). Merging with Phillip Morris with further constrain consumers of their bargaining power as the move will limit the number of alternatives to choose from. The consumers in such an occasion will be forced to buy the products, although price increases as a single entity are selling all brands.

Strategy Prioritization

The bricolage concept is highly applicable in Altria’s case. It prioritizes on strategies geared towards creating new markets which is Altria’s primary goal. Altria wishes to create markets by producing new innovative products or venturing into different domains. Bricolage depicts utilizing resources and materials available in making the creative process successful. Managers employ the bricolage concept upon integrating ideologies from pre-existing businesses to come up with a new company (Mastering Strategic Management, 2014, c6). Altria should, therefore, pay consideration to the first two strategies, that is, expanding the Nat Sherman Brand and integrating efforts with Phillip Morris International. Joint efforts with Phillip Morris International will aid Altria to optimize its technologies and research and development resource in coming up with a new innovative product. On the other hand, Acquiring and expanding the Nat Sherman Brand will aid Altria to develop a unique position in the tobacco industry. The Nat Sherman brands are quite reputable since they are wholly natural, integrating them with the Marlboro cigarettes and Middleton cigars will give Altria a competitive edge over its rivals.

Strategy Selection

Choosing the Best Strategy

The formulation of the strategy involves deciding what to do, how to deliver value and an action plan that will help in achieving the set goals (Reeves, 2017). To find a unique strategy which completely suits the corporate needs, it is essential that a thorough analysis of the business is undertaken (Mastering Strategic Management, 2014, c1). Reeves argues that a clear and reliable strategy can define the area of focus, explain how to utilize resources and assets effectively, and set boundaries on the firm’s capabilities (Reeves, 2017). The key aspects that should be considered include the current organizational situation, vision, high-end and long-term goals, and the company’s mission.

The Current Situation

It is essential to take a look at the organization’s past performance and all the business departments (SmallBizDaily, 2019). Through this analysis, it will become possible to identify the real opportunities, determine the drivers of success, and detect all the loopholes that hinder the organization’s progress (MacDonald, 2015). One great tool that can be used is the SWOT analysis which helps in unravelling all these issues and strengths.

Organizational Vision

Regarding the organization’s long term goals, it is essential to describe the direction in which the organization is moving, its value and purposes (MacDonald, 2015). By acknowledging a firm’s vision, the strategy inevitably formulated will not deviate at any instance from what is expected of the organization.

Long-term and High-end Goals

According to MacDonald, it is essential to acknowledge all the objectives that are aimed by the organizations before making a final decision on what strategy to implement (MacDonald, 2015). For instance, does the company need to secure its market position? Does the company aim at increasing sales instantly? Generally, it is essential to set measurable and specific goals before choosing a strategy.

Organizational Mission

The vision shows the company the exact place where a firm should go to. On the other hand, a mission identifies the various methods and techniques that a business should use to go where the vision had intended (SmallBizDaily, 2019). At this instance, it is essential to study the businesses competition and target audience so that it will become possible to figure out the value proposition (SmallBizDaily, 2019). Such analysis will help in determining the most reliable strategies that should be adopted by a firm and which should be ignored.

Through a step by step analysis of the above factors, it will become possible for an organization to identify its needs and what it should do to ensure that it does not deviate from the original plan.

Best Alternative Strategies

Mergers and Acquisitions

Mergers and acquisitions prove to be the best alternative strategy that should be adopted by Altria. For instance, the firm can merge with Phillip Morris group. A merger with such an influential company will help Altria to widen its product base. There is a potential that there will be the production of better and improved cigarette brands that had not been incorporated by Altria. The merger will also offer the firm an opportunity to gain global recognition. Phillip Morris is a widely recognized firm. Therefore, Atria will have a chance to sell its products to other markets globally. In terms of acquisitions, acquiring small firms will ensure that the level of competition posed by these firms is significantly reduced.

Ideally, the company will acquire the market share previously held by the smaller competitors hence increasing the customer base. Acquisitions also establish the aspect of loyalty and trust among customers. This is because customers desire to be associated with highly competent and productive firms rather than slow-moving organizations. The ability of Altria to acquire new firms shows that it has a strong influence on the market and can effectively meet the changing consumer demands. Generally, the adoption of mergers and acquisitions enhances increased productivity.

The primary reasons why this is the best strategy that should be adopted by the firm include an increased market, global recognition, strong market position, and competitive advantage. There will be an expanded market and strong market position because the company will capture all the customers from the firms the company acquire. Additionally, merging will ensure that the firm’s products reach the global market with ease. Customer loyalty will be established especially due to the firm’s ability to merge with a more powerful company. The firm will develop a competitive advantage because of its broad product base and strong partnerships.

Technological Investments

Another strategy that should be adopted by the firm is an enormous investment in technology. Over the past couple of years, the world has become highly digitalized and has become increasingly aware of less harmful products. Technological advancement by Altria can enhance the development of e-cigarettes which are less hazardous and highly reliable compared to conventional cigarettes. Additionally, substantial technological advancement ensures that the production process is streamlined hence increasing the potential of meeting the changing consumer needs in due time. Technological streamline also facilitates the development of new strategies that could be beneficial to the firm. The recent technological advancements by competitors should also be taken into consideration. These advancements primarily set the pace for companies. Altria should ensure that it incorporated better technologies compared to the competitors. The adoption of better and more advanced technologies is likely to give Altria a competitive advantage over competitors.

The main reason why this strategy is important is that people have recognized the need to use less harmful products. Streamlining operations through technology also enhances the organization’s ability to meet market demands. Technology also leads to an increased competitive advantage for the firm. This is because customers will prefer getting products from technologically advanced firms with the belief that they are more modernized and developed compared to traditional firms. Therefore, Altria is more likely to increase its market share due to improved technological advancement. Generally, keeping up with the pace of technology ensures that a company’s productivity is elevated. In as much as the cost structure of the company might be affected by the investment in technology, it is essential to consider all the benefits which might arise with the use of new technologies. New technologies are likely to bring in additional profits that will surpass the investment costs.

Strategy Recommendations

Goal

The strategy is aimed at increasing organizational productivity while enhancing customer satisfaction. This means that the approach highly considers the value created by consumers towards the organization. Therefore, the firm should emphasize improving consumer and employee satisfaction because they are the critical roadmaps towards attaining sustainable profitability margins. This is because employees’ morale determines their ability to work under pressure and offer excellent customer service. On the other hand, customers define their buying preference. Therefore, if the customers obtain high-quality products, loyalty is established, which in turn leads to increased organizational productivity.

Objective

The primary objective is to enhance customer satisfaction by availing high-quality products. Every organization values its customers and would do anything to ensure that customer loyalty is established in the long-run. This objective relates to the provision of high-quality products which meet the changing market needs. The accommodation of various customer tastes and preferences, as well as a consideration of their health, leads to increased customer loyalty towards a brand. Therefore, customers will be fully satisfied with the products offered by a firm. On the other hand, organizational productivity is enhanced.

Strategy

The main strategies that will be adopted to accomplish the goal are an investment in technology and employee training and development. Making a sustainable technological investment within an organization enhances customer satisfaction because a firm can efficiently meet the market demands. A firm also acquires a competitive advantage over its competitors who use conventional methods. Technology will offer Altria an opportunity to develop e-cigarettes and more natural products as desired by the customers. On the other hand, training and development opportunities help employees to garner knowledge relevant to the use of new technologies within the organization. Employees will also have an easier time since most manual work is reduced. Therefore, there is a likelihood that their morale will be uplifted which translates into the production of high-quality products.

Through training and development opportunities, employees also feel accommodated by the organization. Their level of skills and knowledge is improved through constant training opportunities. Resultantly, an organization can retain a highly competent workforce which in turn offers the best customer service. Generally, investment in technology and offering training and development opportunities prompts employees to be more skilled and provide quality products and services. This translates into increased sales for an organization and competitive advantage.

Strategy Evaluation

Strategy evaluation refers to garnering data or information on how efficient a strategic plan is moving (Mastering Strategic Management, 2014, c9). In other words, it refers to the procedure of determining the efficiency of a particular approach in meeting the business objectives and initiating corrective actions when the need arises (Wright, 2019). This is the final phase of the strategic management process.

Strategy Review and evaluation procedures

The strategy evaluation and review process entails assessing strategic plans and analyzing how one has performed in achieving strategy objectives (Mastering Strategic Management, 2014, c9). It is an internal assessment framework and should be employed in making decisions about the strategy of choice (Wright, 2019). Strategy evaluation for Altria will typically involve offering a response to the following questions;

• How much progress has the company made in achieving its vision?
• Are Altria’s strategic priorities still paramount?
• Which of Altria’s Objectives are no longer relevant?
• Does the Altria Group still have enough projects to meet its objectives?
• Which areas are bound to impact entity performance, and how will the shortcomings be resolved?

It is recommendable to consider evaluating the strategies several times a year (twice or quarterly) (Wright, 2019). If management feels the approach chosen is “too far gone,” it is vital they initiate thorough evaluations on the source of shortcomings. The following are steps towards strategy evaluation;

Step1: Planning

The strategy evaluation procedure begins in the planning phase. At this stage, management will have to determine where they performed well, areas they can improve upon and what they learnt regarding the entity and the entire industry (Wright, 2019).

Step 2: Initiating consistent tools and processes

It is paramount to consider planning for the “strategic rhythm.” (Wright, 2019). This will be achieved by management determining what sets of standardized reports will be utilized throughout the business and what types of details shall be captured on the progress commentaries against the entity’s plans.

Step 3: Empowering teams to assess their strategies

Empowerment plays a significant role in execution. Instead of having management exclusively oversee strategy evaluation, it’s paramount to engage other teams (Mastering Strategic Management, 2014, c9). Groups should carry out their assessment by gauging their performance against Altria’s strategies. This will allow management to analyze team comprehension on approaches. Management will also garner insight into what they would not have thought of.

Step 4: Taking Corrective Actions

In this step, management should begin by figuring whether the goals are still the right ones. This is because corrective actions are meant to address any shortcoming arising (Wright, 2019). Some of the factors that may be initiating struggles in Altria may include conflicting priorities, lack of proper resources, and misalignment of goals and inefficient monitoring of targets (Wright, 2019). The earlier issues are identified, the sooner corrective actions can be initiated.

Evaluative measures at the corporate level

Corporate level evaluation is carried out to analyze the outcomes of strategies, corporate policies, organizational aspects and business processes (Sling, 2019). The board of directors is responsible for overseeing the corporate-level evaluation. Corporate level evaluations prioritize on analyzing performance and results, garnering lessons and noting areas that need improvement and proposing recommendations (Mastering Strategic Management, 2014, c8). Evaluative measures should be carried out once a year or even quarterly.

Business level evaluation involves analyzing the internal achievement level of goals and adherence to policies for distinct sections of an entity (Gaffney, 2019). Business level evaluation is overseen by senior executives such as the Chief Executive Officers or the Chief Financial Officers. The business-level assessment may be carried out on a quarterly or monthly basis. The process involves assessing whether resources are ample enough, establishing whether there is a balance between goals and resources and assessing risk levels (Mastering Strategic Management, 2014, c5).

Functional level evaluation involves assessing the internal achievement of goals by departments. This is overseen by the department heads, such as the production manager (Sling, 2019). It may be carried out in a monthly or daily basis as it works to ensure all the day-to-day operations meet the entity goals. The evaluation will verify functional level alignment with the corporate and business level strategies (Sling, 2019). Areas to be addressed include production targets, rejection levels, brand identification levels and expertise of recruited workers.

Corrective Action Plan

At the corporate level, corrective action plans will be handled by the Board of Directors. This should be done annually or every quarter (Mastering Strategic Management, 2014, c8). For Altria, it will involve cutting down investments, not meeting targets, increasing investments in sectors meeting or surpassing goals.  At the business level, the corrective action is overseen by senior executives. For Altria, it may involve shifting department heads, raising the budget or nullifying a given line of products due to low sales.  For the functional level, corrective actions are undertaken by the department head. For instance, in the HR department, corrective actions to be rendered include employee discipline, inter-department transfers or employment termination. This will help supplement performance from different functions.

References

MacDonald, J. (2015, December 5). Six steps to creating an effective business strategy. Business 2 Community. https://www.business2community.com/strategy/6-steps-create-effective-business-strategy-01391113

Market Publishers. (2020, July 6). Altria Group Inc. First company report, including financial, SWOT, competitors, and industry analysis. Market Research Reports & Global Industry Analysis. https://marketpublishers.com/report/consumers_goods/other_cg/altria_group_inc_swot_analysis_bac.html

Reeves, M. (2017, November 21). How to choose and execute the right strategy. Harvard Business Review. https://hbr.org/webinar/2017/11/how-to-choose-and-execute-the-right-strategy

Reuters. (2019, May 13). Philip Morris suspends social media campaign after using young ‘influencers’ to sell new tobacco device. CNBC. https://www.cnbc.com/2019/05/11/philip-morris-suspends-social-media-campaign.html

SmallBizDaily. (2019, September 22). How to choose a business strategy for your organization’s needs? https://www.smallbizdaily.com/choose-business-strategy-your-organizations-needs/

Sun, L. (2017, July 14). How Altria Group Inc. Has changed in the past two years. The Motley Fool. https://www.fool.com/investing/2017/07/14/how-altria-group-inc-has-changed-in-the-past-two-y.aspx

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Wright, T. (2019). Strategy evaluation – How to do it correctly. Strategy Software for Planning & Execution | Cascade Strategy. https://www.executestrategy.net/blog/strategy-evaluation#:~:text=A%20strategy%20evaluation%20is%20an,we%20made%20towards%20our%20Vision%3F

Mastering Strategic Management. (2014). Selecting Corporate-Level Strategies; Chapter 8. The Saylor Foundation.

Sling. (2019, January 7). Functional level strategy: What it is plus 18 examples. https://getsling.com/blog/functional-level-strategy/

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