Product details

The case illustrates the transformation of Philip Morris International (PMI) that surfaced in late 2014 with the launch of IQOS, after a long period of laying the groundwork internally. For decades, PMI focused on a low-tech, standardized, simple business: cigarettes. Earlier attempts to diversify out of tobacco displayed little impact on PMI’s financials. However, six years after the launch of IQOS, PMI makes almost a quarter of its revenues from a product category that was inexistent before. The success of IQOS paved the way for a new business model, which moves PMI closer to Apple and Samsung than to British American Tobacco, Japan Tobacco International and Imperial Brands. The case describes the profound changes in the company’s traditional business model and the conditions for the success of its transformation. It relies on in-depth interviews with the company’s senior management, highlighting information on the evolution of the industry and on the rationale behind key strategic decisions. Publicly available data over more than a decade was used to complement the insights gathered from management. The case offers insights on how to drive a major strategic shift, as well as detailing the changes in the organizational structure, the role of science and innovation, the importance of consumer centricity and the role of CEO leadership.