A new era in tobacco?

: a dynamic capabilities perspective on Philip Morris international's strategic shift towards a post-cigarette future

Abstract

This Master thesis examines the strategic shift of Philip Morris International, a significant player in the conventional tobacco industry that has announced its intent to end the sale of traditional cigarettes. For this reason, the company is currently undergoing a transformation of its business model towards a smoke-free future, pioneered by its flagship product, IQOS. This study, centered around the Dynamic Capabilities concept, identifies key factors, categorized in the three pillars sensing, seizing, and transforming, which are contributing significantly to the conversion. Therefore, the response to regulatory and commercial issues, the resource allocation, and internal restructurings will be discussed. The investigation will rely on qualitative approaches, including interviews with internal sources and a comprehensive review of secondary sources. This combined research method will provide insight into the factors influencing Philip Morris International's progress, including substantial investments in research and development and new strategies for product testing and market involvement. The findings indicate that Philip Morris proactive approach has enhanced the company´s position in the emerging smoke-free product sector while also considerable ethical and strategic concerns are raised. Despite the company's efforts in innovation and restructuring, long-term health consequences of the products and potential economic moats may hinder competition. The study's weaknesses including sector specialization, restricted primary data collection, and insufficient data for generalization across industries, indicate the necessity for further research to apply these findings to other sectors. In summary, the thesis offers valuable insights into the application of dynamic capabilities to drive business reinvention in a dynamically evolving environment.

Date of Award	24 Apr 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor)