Executive Summary of PHILIP MORRIS INTERNATIONAL

In this paper, a multinational company named Philip Morris has been taken to see what business it does and what kind of regulatory frameworks are affecting its business in Australia. It was analyzed that company has to deal with various regulatory frameworks like paying 30% corporate tax. Moreover, the paper has also focused on different agreements and treaties, which have impacted the essence of products and services of the company like it was found that MNC was facing the issue of increased excise tax. In the end, a comprehensive conclusion is made to summarize the fact that how MNCs are impacted by the different legal aspects of international trade.

Information about Multinational Company

Philip Morris is a company that is committed to helping people who want to quit smoking. Since those who get addicted to smoking find it difficult to leave the habit. It is present in number of countries moreover; Philips has a total number of employees around 77,000 (Russell, Wainwright, & Mamudu., 2015). The company takes the social responsibility and environment responsibility in account. The company is against the concept of trading cigarettes illegally. The products that are created by the company are sold in more than 180 markets (Dutra, Grana, & Glantz., 2017). The number of consumers is greater than 150 million. More than 400 scientists are committed to working in the company. The company basically replaces the cigarettes with smoke free products and wants to do this as soon as possible. The scientists in the company are all the time working on finding alternatives to cigarettes (Pmi, 2018).

Question:2

Identify any legislative regulatory framework/s affecting the MNC you have identified which operates in Australia and discuss why and how it affects the company. For example, multinational corporations, like local companies, are subject to 30 per cent corporate tax. (925 words, minimum 3 references)

Legislative Regulatory Framework of Philip Morris International

It is important to understand the fact that international trade cannot be conducted without particular legislative regulatory framework. The multinational companies have to follow certain legal aspects related to international business in various parts of the world so that business can remain fair and in legal parameters. So, different countries come up with different laws and regulations to make sure that multinational companies working in their borders are well regulated. Like many countries, Australia too has developed certain laws through its regulator framework to regulate MNCs in its territory. These laws can have positive or even negative impacts on the business of a MNC, but fact of the matter is that companies have to conform to these laws regardless of their impact. Therefore, it is a fact that there are several other laws that impact MNC’s like Philip Morris in Australia to some extent. These laws include competition laws that are enforced by the Australian competition and consumer commission (ACCC). Moreover, there are fair trading laws that make sure that no business gets involved in unfair trading practices. The fair trade laws are crucial to keep an eye on the business practices of a MNC so that they may not exploit the people or conditions to go with any unfair advantage for their business. There are consumer laws as well in order to keep the consumers safe from exploitation; these laws come under the Australian consumer law (ACL). The countries make consumer laws to make sure that any international company is not able to exploit its consumers by doing any wrongful acts (Raphael Lencucha, 2010). There are privacy laws as well that limit to the level of information that businesses can gain about consumers. These too have been created to keep the customers safe from any sort of exploitation. This law restricts the level of information that businesses can access, store and use related to customers. Moreover, there are regulations on how to handle sensitive information for instance, medical information (Fooks & Gilmore, International trade law, plain packaging and tobacco industry political activity: the Trans-Pacific Partnership, 2014). These particular laws are crucial in so many ways because without their presence, the MNCs cannot be regulated under a legal framework.

Laws and regulation and agreements of Philip Morris International

If we talk specifically we can see that there have been two major regulations that have affected the company to a great extent. The first regulation was related to the packaging of the cigarettes. The regulation stated that it is mandatory for the company to state all the harmful effects of smoking and that to graphically meaning by showing the pictures. It means that as per the Australian laws, the company cannot market its products without having cautions about the dangers of smoking cigarettes. It is one of the laws, which is also applicable in many other parts of the world so that an awareness is spread for the dangerous impacts of migrate smoking on health. The second regulation that impacted the company to a great extent was that the tax will increase up to 12.5% in every 4 years. It looks to be a law, which can have huge impact on profitability of the business as more taxes mean more cuts in the profitability (Gleeson & Friel, Emerging threats to public health from regional trade agreements, 2013). It is quite evident that two Australian laws are asking Philip Morris to follow these conditions, if they want to conduct their business in the country.

Problems with of Philip Morris International

The basic idea behind having scary pictures on the packet of cigarettes is so that the young people especially avoid smoking after having a reflection about how harmful the affects of smoking can be. The idea cannot be prove to be really successful for old smokers. It is a fact that idea may not prove great to stop regular and old smokers, but still, the awareness part of packaging is crucial in so many ways. It can at least aware younger generation that how dangerous cigarette smoking can be. The reason Australian government is so concerned about smoking is that it is a really harmful habit moreover, it has been estimated that in the country in consideration around 15000 people die in each year because of smoking. These people die because that gets disease because of the consumption of tobacco. The tobacco industry however, in general does not support the idea of the government that by making these pain packaging of cigarettes along with scary images would mean that the number of smokers in the country will reduce this is because people who are addicted are less likely to leave smoking. Another major problem that has affected the tobacco companies is that due to these plain packaging of cigarettes it is really hard for the consumers to differentiate between one company’s cigarettes from the other. Product differentiation is some of the basic principle of marketing and it is really difficult for companies to not attract their customers on the basis of packaging. This means that consumers are likely to feel like they are indifferent in buying any packet of cigarette since they all look like the same. The taco companies can basically not use their unique logos, pictures and slogans this was tough to be unfair to the companies. All these measures were also thought increase the level of cigarettes being sold in the black market. It is true that companies like Philip Morris can face various issues regarding these rules and regulations, but the thing is that it is critical to obey these laws to conduct business. The authorities cannot make laws to keep everyone happy, so laws can be good for some companies, and it may be bad for few others, but these laws are important to regulate the international business (Fooks & Gilmore., International trade law, plain packaging and tobacco industry political activity: the Trans-Pacific Partnership, 2014).

Question: 3

Identify any treaties, conventions or agreements that have impacted on the products or services that your chosen MNC provides in Australia. How does it impact the provision of these products and services? (925 words, minimum 3 references)

Information about agreements of Philip Morris International

It is important for multinational companies to understand that when they operate in other countries and conduct their business operations within their borders, then they will have to follow certain regulations and trade agreements, which have been developed over the period of time. It is true that companies may be negatively affected by various trade agreements and laws, but multinational companies have to understand that these laws are important in so many different ways so they should realize their importance, and show compliance with each law and agreement. The MNCs should also understand that international trade laws and agreements are critical to the existence of international business. The international companies cannot be given a free hand to do anything, what they believe is beneficial for their business. There are various aspects of society and environment to be looked at so these laws and agreements are vital to force companies that they must conduct their business in a fair manner. The products and services provided by multinational companies have to follow these agreements so that society as well as consumers is kept safe from any harms. Moreover, MNCs should understand that these laws are vital to conduct business, like if any dispute spurs regarding any product and services, then how it will be settled. The established rules and agreements are the ones, which provide a proper guideline that how disputes will be resolved as per law (Sykes, 1999)

Another regulation that we previously mentioned was that of increased excise taxes.  In 2014 the tax rates war increased by 12.5 percent. The taxes further increased next year by the percentage of 13.7%. With all this increase eon taxes or ices of cigarettes increased too around one dollar of Australia. This means that any smoker living and spending in Australia will an estimate spend around 7000 AUD per year just on smoking. The government on the other hand stated that this increase in tee tax levy has actually increased the government’s revenue to a great extent. To be exacta the value with which the revenue of the government those was $5.3 billion. This increase in revenues has a good effect on the economy as a whole this is because it means that the balance will be easier to achieve o the nation budget. Moreover the government will now have more revenue that could be spend on other activities that will benefit the economy as a whole (Gleeson, Kyla, & Faunce, Challenges to Australia's national health policy from trade and investment agreements., 2012).

It is also important to look at few impacts made by these certain laws and agreements on the business of Philip Morris. It was found out that Plan Packaging Law applied by Australian government in 2013 has been considered one of the most restrictive kinds of law in the globe. The government and multinational companies can have different opinions about such laws and legal agreements of international business, but it is important to see the impact of such laws being made on the business. It was observed as per data released by Australian Bureau of Statistics that during financial year of 2013-14, the 4.9% drop was seen in the tobacco’s household consumption. The other stats released from Commonwealth Bank of Australia showed that 7.6 percent drop was observed for the tobacco and cigarette consumption. If stats are analyzed with a social and country level perspective, the results can be considered welcoming that people are consuming less tobacco, which is good for the society in so many ways. But for companies, it is a bad news as their business profits may decrease. The other law of imposing higher excise taxes has also been making various impacts on products. For instance, it was found that due to rising taxes, the companies like Philip Morris are forced to increase the price of their products. Philip Morris results from 2014 have shown that due to higher taxes and consumer shifts to more affordable products caused a considerable decrease in the market share of the company. The company revealed that its profits are really suffering from such laws implemented by the Australian government. The competition is already tough in the tobacco industry, and such laws and agreements are making huge impact on companies like Philip Morris, making their lives more difficult in the international business (Trefis Team, 2014)

Factors that affect regulation of Philip Morris International

The major effect of this regulation was that Philips Company was forced to pay millions of dollars fee to the Australian regulatory bodies this is because the company failed to meet the laws set by the government of having simple plain packaging. In addition to the plain packaging the government also introduced the law that there will be no advertisements of cigarettes as they thought that decreasing this too will lead to lower tobacco consumption by people. The company tried to take the case to the court but lost. They did not only lose the case but also were accused of abusing the rights. This resulted in financial loss to the company but it also led to bad publicity. The final cost of penalty that the company had to pay was kept a secret but the media estimated that it would be something around $50 million. The Australian government felt like their laws and regulations were challenged by the company hence they had to take strict measures. They said that the company was liable to pay for all the costs and expenses that included travelling extra. These laws are beneficial for government and its authorities by collecting more taxes etc., but their impact on multinational companies is negative in so many terms.

Conclusion on Philip Morris International

Summing up all the discussion from above it is concluded that the increase in the level of pries always has the substitution affect. This affect basically means that the consumer starts to look for cheaper options. This happen in the case o frigates industry as well as the consumers started to look for alternates that were cheap. The big name in the tobacco industry that is British American tobacco did an amazing economic tactic. These were however, the lowest quality cigarettes but the thing is that they were now being sold at a much lower price than its competitors. This move by the company caused the market share of Philips to decrease to 32 percent. Basically Philips lost its market share and market power because it could not lower its prices

References of Philip Morris International

Crosbie, E., & Glantz, S. A. (2014). Tobacco industry argues domestic trademark laws and international treaties preclude cigarette health warning labels, despite consistent legal advice that the argument is invalid. Tobacco control .

Dutra, L. M., Grana, R., & Glantz., S. A. (2017). Philip Morris research on precursors to the modern e-cigarette since 1990. Tobacco control.

Fooks, G., & Gilmore, A. B. (2014). International trade law, plain packaging and tobacco industry political activity: the Trans-Pacific Partnership. Tobacco control .

Fooks, G., & Gilmore., A. B. (2014). International trade law, plain packaging and tobacco industry political activity: the Trans-Pacific Partnership. Tobacco control.

Gleeson, D., & Friel, S. (2013). Emerging threats to public health from regional trade agreements. The Lancet, 1507-1509.

Gleeson, D., Kyla, T., & Faunce, T. (2012). Challenges to Australia's national health policy from trade and investment agreements.

Pmi. (2018). About PMI. Retrieved from https://www.pmi.com

Raphael Lencucha. (2010). Philip Morris versus Uruguay: health governance challenged. The Lancet , 852-853.

Russell, A., Wainwright, M., & Mamudu., H. (2015). A chilling example? Uruguay, Philip Morris international, and WHO's framework convention on tobacco control. Medical anthropology quarterly , 256-277.

Sykes, A. 0. (1999). Regulatory Protectionism and the Law of International Trade. The University of Chicago Law Review, 66(1).

Trefis Team. (2014). Impact Of Strong Regulations On Philip Morris In Australia. Retrieved May 2, 2019, from https://www.forbes.com/sites/greatspeculations/2014/10/08/impact-of-strong-regulations-on-philip-morris-in-australia/#1c44389383dd