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Published by: Darden Business Publishing
Published in: 2004

Abstract

In January 2003 Philip Morris USA (PMUSA) announced a wholesale price promotion of 65 cents per pack on Marlboro cigarettes. As a result, the company?s first quarter U.S. cigarette shipments fell 16.1 percent relative to the first quarter of 2002. However, relative to the fourth quarter of 2002, Philip Morris? share of industry shipments had risen from 48.3 percent to 49.7 percent. Johnson now faced several important decisions. Should the promotion be extended? Should the promotion be replaced with a permanent cut in wholesale prices? And, should the prices of the company?s discount brands be altered in any way?

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Abstract

In January 2003 Philip Morris USA (PMUSA) announced a wholesale price promotion of 65 cents per pack on Marlboro cigarettes. As a result, the company?s first quarter U.S. cigarette shipments fell 16.1 percent relative to the first quarter of 2002. However, relative to the fourth quarter of 2002, Philip Morris? share of industry shipments had risen from 48.3 percent to 49.7 percent. Johnson now faced several important decisions. Should the promotion be extended? Should the promotion be replaced with a permanent cut in wholesale prices? And, should the prices of the company?s discount brands be altered in any way?

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