Phillip Morris Companies and Kraft Inc. Case Study
Philip Morris saw the writing on the wall. The company had been generating most of its sales and profits from its tobacco business segment. Unfortunately, since the peak in 1981, tobacco consumption had been on the decline for the seventh year in a row. Philip Morris's immediate reaction to combat the loss of revenues was to increase cigarette sales abroad. Exports were projecteTTd to increase by 15% in 1988. But Phillip Morris had something else up there sleeve. The time had come for the company to consider a more diversified portfolio. Diversification strategies apply where it becomes beneficial to spread market risks. Adding products to the exiting lines of business can be viewed as analogous to an investor who invests in multiple stocks to "spread the risks".
