Strategy Paper- Philip Morris - Case Study Example

Task Case Study Philip Morris was one of the 50 principal firms in the United s in 1977 with revenues of about $5.2 billion as well as an asset base of approximately $4 billion. Philip Morris was established in the 19th century and its prime business until 1960s was manufacture and sale of cigarettes. The company acquisition of the soft drink company-Seven-Up will demand that the company should implement some key strategies to make sure that the acquisition becomes profitable. Before undertaking the acquisition, there is need for Morris to form risk management team.

The risk management team will undertake research on the potential risks that may arise as a result of the acquisition. Risks pose many challenges to the business, thus it is important to study them and make some key decisions. This will assist Morris to make decisions regarding the acquisitions of the soft drink company (Hoffmann 58). Pricing is important based on the rivalry in the beverage industry. The management should study the prices offered by the rivals through market research. This is because pricing need to put into consideration prices offered by the rival companies in the same industry.

Because the company deals with cigarette products, it means that it has to identify different market segments to sell the soft drinks. This will be based on the prices offered by the rival firms. The pricing strategy should be based on differentiation on potency, taste, and feel concerning the new product. Morris should get information regarding prices from market research through interviewing customers (Hoffmann 58). There is need for Morris to understand the probability of the success that the acquisition carries.

The management should evaluate the feasibility of acquiring the soft drink firm. This is because not all acquisition will be profitable. The means that the company should carry out valuation of the company to make sure that there is high chance of the company availing profits. This will also avert risks because the valuation process will be used to make decisions on whether to acquire the company or not. Therefore, rather than Morris looking at acquisition as a portfolio, they should look at them as individual event (Hoffmann 59).

It has been established that acquisition is an expensive undertaking, therefore, there is a need to have sufficient capital to acquire the company. Just acquiring the company is not enough, but the company should set aside some funds that will used settle any eventually and make the business rolling. Morris should make sure that there are sufficient funds to make the company successful. The company has well established funds, but this is not enough based on the fact there are several risks that may come along.

There is the option of seeking additional funds from financial institutions in terms of management (Hoffmann 59). Morris has the responsibility of analyzing the market for the new product and determining if it will be feasible to pursue the acquisition. This will entail ascertaining the extent at which the competitors have dominated the market. Understanding the nature of competition is very paramount towards making business decisions. Furthermore, he should consider looking at potential laws that govern the acquisition to avoid possible litigations after acquisition.

Morris should intensively probe the Seven-Up to make sure that they clear any form of litigation. The element of taxation should be ensured it will affect the performance of the business. In some cases, may be the company has been evading paying taxes. This will avert any form of litigation arising from such acquisition (Hoffmann 59). Work Cited Hoffmann, Norman W. Mergers and Acquisitions Strategy for Consolidations: Roll-up, Roll- Out, and Innovate for Superior Growth and Returns. New York, NY: McGraw-Hill, 2012. Print.