Philip Morris Ethical Issues Essay
Philip Morris Ethical Issues
The Philip Morris founded a cigarette company in 1847 London. They specialized in hand-rolled cigarettes and were very much a small, family ran business. In 1902 the company moved to New York City and had a new demographic in a new country. The company remained small and was actively only the sixth largest tobacco company in the United States. With the famous “Marlboro Man” advertising campaign the company gained popularity and in 1983 Philip Morris was the largest cigarette company in the United States. From there, the company began to expand into other businesses expanding on its international market.
Philip Morris acquired Miller Brewing Company in 1970 and General Foods in 1985. The same year Philip Morris Companies was incorporated as a publicly traded company. Philip Morris continued their expansion with the takeover of Kraft in 1988 and the merger between South African Breweries with Miller Brewing in 2002. Philip Morris Companies changed its name to Altria Group Inc. in 2003 and spun off Kraft Foods in 2007. (4) They then gained the international business of Philip Morris as a separate company and acquired U. S. Smokeless Tobacco Company.
The holding company owns Philip Morris USA, U. S. Smokeless Tobacco Company, Philip Morris Capital Corp and Nu Mark, a new company that produces Nicotine Lozenges. Company Success and Campaigns Today Philip Morris is still top in the cigarette market. The company’s cigarette brands have about half of the cigarette market in the United States. The other Philip Morris brands include Parliament, Virginia Slims, Merit, Cambridge, and Basic. The majority of the company success comes from their genius advertising in the 1950’s. (4) Widely regarded as one of the most successful marketing campaigns of all time the “Marlboro Man” helped Philip Morris bring itself to the top of the industry.
Marlboro used the image of a rugged cowboy enjoying a cigarette on horseback quickly adapt men into enjoying their brand. Released in 1955 the success of the advertisement was incredible. In 1954 Marlboro sales accounted for $154 million in cigarette sold. From there the campaign expanded into other professions including sports stars, racing drivers, and other “manly-men” to boost bran recognition. (6) The campaign continued through 1999 and is still widely recognized in today’s pop-culture. A lot of Philip Morris’s success can be attributed to the fact that their product is addictive.
Having customers with a physical dependency to their product makes customer loyalty an easy thing especially when demand is high. Tobacco Regulation and its Effect on the Company While Philip Morris enjoyed uncontested financial success throughout the latter half of the 20th century it appears trouble is coming. Through the 60’s smoking was a lifestyle in the United States. It was associated with a life of glamor and practically had everyone smoking. By 1963 American adults were smoking an average of 12 cigarettes per day. In 1963 the Surgeon General released the linking of cigarette smoking and cancer.
Since then the tobacco industry has only become more regulated. A year later the Cigarette Labeling and Advertising Act was passed which required all cigarettes sold to carry the Surgeon General’s warning. As research into the negative effects of smoking grew stronger the regulations and bans began. In 1990 smoking was banned on buses and domestic flights the first movement in the prohibition of smoking and its dangers to others. With these regulations came lawsuits against the industry from individual smokers and various parties.
The tobacco companies settled in 1998 to gain immunity from future lawsuits from government groups in return for $246 billion to be paid out over the course of 25 years. (4) While big tobacco was able to avoid these trials general concern for health caused sales to fall. At first Philip Morris and other tobacco companies publicly disclaimed any link between lung cancer and smoking but this was not enough. To combat these health claims cigarette companies released filtered cigarettes that claimed to limit the amount of dangerous particles in tobacco smoke.
The filtered cigarettes were in fact just as harmful as regular cigarettes because consumers would take bigger drags to make up for the lack of smoke. In 2006 the District of Columbia District Court ruled the tobacco companies had made many offenses including lying about health risks and marketing to children. (8) As a result tobacco companies are now required to remove misleading statements about filtered cigarettes being safer and to provide more insight into company procedures. Increased regulation has had Philip Morris dealing with a constantly increasing tobacco tax.
The government directly taxes cigarettes in all state owned property. These taxes have led to the drastic increase in cigarette prices. Philip Morris and other companies push the tax down towards their customers. The current state of the tobacco industry is not what it use to be but Philip Morris remains profitable with their large involvement in all markets. (4) Despite a clear public understanding of health risks millions of addicted smokers continue their habit. As Philip Morris continues to make money off a product that is addictive and damaging to its customer it is easy to question the moral roots of the company.
An Ethical Look on a “Evil” Company With full speculation as corporations go Philip Morris is certainly on the list as a “Evil company. The fact is that the company sells a harmful addictive products that kill almost 20% of Americans each year. In addition the company has long known about the dangers of smoking despite repeatedly denying the medical claims. Although these accusations Philip Morris is taking steps to change their business outlook. The steps to gain a more favorable public opinion shows that the company is not acting unethically.
When the reports about health issues came along with smoking Philip Morris made an unprecedented decision. Instead of targeting the health problems and looking to manufacture “safer” cigarettes Phillip Morris began marketing to the younger crowd. (6) While not necessary breaking the law by physically selling to minors it is clear that the company believes that targeting a younger more impressionable crowd is the solution. It’s hard to pinpoint the moral beliefs of Philip Morris. The company is still extremely successful and their success comes with the expense of the well being of their customers.
Philip Morris and Positive Ethical Behavior Philip Morris a company speculated for its concerned about its stakeholders has also still had initiatives that benefit society. Unlike most of its smaller competitors Philip Morris has never manufactured flavored cigarettes. Other tobacco companies came under serious fire for flavored blends like Twista Lime, Mandarin Mint, Beach Breezer. These flavored cigarettes provided a way to appeal to a younger crowd. Philip Morris has never engaged in this kind of behavior and in some cases has made an effort to even deter minors from smoking.
Since 1998 the company has spent a self reported $1 billion on youth smoking prevention including its “Think Don’t Smoke” campaign that was started in the 2000’s. (3) The Philip Morris website is packed with information on the dangers of smoking and the company even supported FDA regulation of tobacco which was eventually allowed by the Tobacco Control Act in 2009. Most recently Altria was listed on Fortune Magazine’s Top 100 most admired companies of 2011 for positive business behavior. In the Socially Responsible category they ranked fourth.
The company donated $54 million to multiple nonprofit organizations including the Red Cross, the Smithsonian, and the United Negro College Fund. Looking at the company they engage in parts of an ethically sound corporation that values the impact it can have on society. However once the nature of the business that Philip Morris is engaged in is known only then will the company be hindered. Company Views and the Utilitarian Approach There is no doubt that Philip Morris’s public relation division are hard at work. Despite their social outreach its intention is misguided.
The company’s social agenda is arguably just another operating cost to help improve the reputation of Philip Morris as the best of the worse. The company’s support of FDA tobacco regulation might have seemed like a moral move but FDA regulation of tobacco ends up helping Philip Morris. FDA regulation makes it much harder for smaller cigarette companies to survive. Only Philip Morris has the supply chain and brand recognition to remain profitable as cigarettes become more regulated. Additionally FDA regulation makes the industry unattractive heightening the barriers that Philip Morris’s has gaining a competitive advantage. (1)
Applying the Utilitarian approach provides an interesting insight into the ethical breakdown of the company. The Utilitarian thinking is the ideal society that starts in an original position where everyone is equal. From there changes in equality should be open to everyone and the changes in equality are to everyone’s advantage. Essentially this approach with an unequally high proportion of wealth, assets, or abilities would have an affect on this type of company. With an equal chance to have an unequal proportion of wealth, assets, or abilities every individual would fight to make unequal distribution to benefit society.
Looking at Philip Morris through the Utilitarian approach shows that the company is not acting fairly. Philip Morris engages in many business activities to help maintain their competitive advantage including supporting FDA regulation that would kill their competitors. On a more broad scale the inequality of wealth that Philip Morris has amassed over the years has not been to the advantage of society as a whole. In fact the success of the company has come at the expense of the health and well being of society.
While it’s apparent that Philip Morris does not abide by this approach it is hard to blame the company. The Fact of the Matter for Philip Morris Because the negative effects of smoking are widely known and well supported the right to a healthy life falls on the individual to uphold in this situation because smoking is known to be detrimental to that right. That being said the addictive properties of nicotine make this argument known. Philip Morris for years repeatedly denied claims about the health issues of smoking and released filtered cigarettes that claimed them to be healthier.
In many ways avoiding helping to deprive people of their right to live healthily would have been directly in opposition of their business. This makes Phillip Morris an interesting situation. Tobacco has been in western culture for around 500 years and for the majority of that time it was a large part of culture and was celebrated as a luxury. It helped bring the colonies money. Today tobacco is frowned upon and the companies that were once so wildly successful and respected in America are being asked to limit business.
To ask Philip Morris to act completely ethically would be asking them to shut down operations completely. They sell a product that takes years off of lives and is responsible for 440,000 deaths each year. (4) While they can continue to pursue “healthier” forms of smoking and ingesting nicotine there is no way for the company to operate without harming someone. What makes tobacco an anomaly in the business ethics debate is the willingness for their customers to purchase products that will end up harming them.
When we think of business ethics it is normally thought of as creating negative actions in the environment. In the case of Philip Morris the negative actions fall on the company’s customers who willingly accepts them. The solution to this problem does not lie in the hands of Philip Morris or any of the other tobacco companies.
In Conclusion While in the past the company has made unethical business decisions like covering up health concerns or trying to convince the public that their cigarettes are safer the industry is at a point now where they are acting as ethically as possible. They are simply providing a product that has strong demand. It is within our government’s duty to protect citizens when they are incapable of making smart decisions as individuals. From this report the real danger here is nicotine the addictive substance in cigarettes. This matter should be controlled by the FDA and needs to be limited. Until then tobacco and its and its suppliers will always be contested and Philip Morris will continue doing what they have been doing.