THE OBJECTIVE AND

STRATEGY OF FIRMS IN
THE CIGARETTE INDUSTRY

Heber Panjaitan 29119109

SYNDICATE 1 Christina Tiurma Novianti 29119228
Meyta Saraswaty Putri 29119089
Hanung Pratama N. 29119010
QUESTION 1
WHAT SHOULD BE THE AIM OF FIRMS IN THE CIGARETTE INDUSTRY?

• Maximization of Long-run profits or firm values

• Decreasing the unemployment rate

SHOULD THEY BE ALLOWED TO SELL A PRODUCT THAT IS HAMFUL

TO HEALTH

• From both of Macro and Micro POV : Yes they allowed selling a
product that is harmful to health because they have a business
value (high market demand)

WOULD YOU WANT TO BE PART OF THE MANAGEMENT TEAM

This question can be answered by Yes or No Subject to depend

on Subjective Policy analysis reflects to the individual view
QUESTION 2
WAS THE DECISION TO LOWER THE PRICE OF CIGARETTES BY THE WEAKER
FIRMS IN THE INDUSTRY CORRECT AFTER TAXES ON CIGARETTES WERE
RAISED ?

Yes it’s the right decision, as one of the strategies of Market Forces ration by
changing price as a way to maintain the competitiveness of the product during
economic changing

WOULDN’T THIS LOWER THE PROFIT ?

No, It’s not completely true because they still can maintain the profit with
decreasing the production cost as well (Contain cheaper tobacco, cheaper
packages, decreasing marketing cost, etc)

MIKRO ECONOMIC POV

MAKRO ECONOMIC POV
WHAT INFORMATION Competitor price
Economic Growth
THAT WE NEED TO KNOW?
(Purchasing Power Parity)
Market behavior
QUESTION 3

They have lost the market

share among the
competitors

STRONGER FIRM ACTION

Competitor price
The Stronger firm didn’t lower
the price because they will
Market behavior and Market Share
have very long profit margin
and also decresing the brand
value positioning Economic Growth
(Purchasing Power Parity)
QUESTION 4
PHILIP MORRIS CUT THE PRICE AS AN ANTICIPATION TO NOT LOSE THEIR
MARKET AMONG ITS COMPETITORS

AND YES THEY’VE REALIZED THAT OTHER COMPETITORS ALSO WOULD RETALIATE

COLLABORATING
WITH OTHER FIRM ?

• BECAUSE THEY’VE ALREADY HAVE

NO THEIR OWN MARKET (MARKET
DOMINANCE)

• IT’S THE WAY TO MAINTAIN THEIR

DOMINANCE IN THE MARKET AND TO
CUTTHROAT OTHER COMPETITORS
QUESTION 5
WHY DID US EXPAND SALES ABROAD ?

Because there’s still great potential demand

The Economic Reality is controlled by 3 forces :

• Economic Forces
• Social and Cultural Forces
• Political and legal forces

That might different in another countries

QUESTION 6
PENALTY IMPOSED

It’s fair because it’s the part of the economic

policies from the Government to allocate the
heavy penalties into the healthcare subsidies
into the societies

HOW ABOUT ALCOHOL?

Yes it should because it’s one of the

economic strategies to influence economic
actions

CLOSE THE CASINO ?

No, because it also has an economic value

QUESTION 7
Would you have entered the e-cigarette market

Yes we would because from our subjective policy

analysis it’s the way to anticipate the restriction
on tobacco marketing and advertising at that time
(The moment when the Regular Cigarette became
less favorable than E-Cigarette Tobacco)
QUESTION 8 SPLITTING TOBACCO PART

Yes we will split the tobacco part for the

company to focus on different each
business portfolio class and it will
automatically increase the profit.
THANK YOU