Essay: Philip Morris Pakistan Ltd (PMPKL)

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 Published: 26 August 2016*
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Introduction

The history of Philip Morris can be traced back to Mr. Philip Morris opening a small shop on London’s Bond
Street in 1847, by selling tobacco and ready-made cigarettes. The business was taken over by his wife,
Margaret and brother, Leopold after Philip Morris’s death. The company went public in 1881. The company
left the founding family’s control in 1894. It was taken over by William Curtis Thomson and his family. The
year 1919 was an important one for the company as the coronet logo. The same year saw the acquisition of
the firm by an American company; with its incorporation in Virginia under the name of Philip Morris & Co.,
Limited. The company is headquartered in New York and have 53 manufacturing facilities.

Philip Morris International Inc. (PMI) is the leading tobacco company in the world with seven of the world’s
top 15 international brands. Their international and local brands are sold in over more than 180 countries.
The company has a very diverse product portfolio and Marlboro is the world’s number one selling brand.

Philip Morris Pakistan (PMPKL) is an affiliate of Philip Morris International and is a public limited company
which is listed on the Karachi and Lahore Stock Exchange. Philip Morris acquired a major share in Lakson
Tobacco Company in 2007 which was incorporated in 1969. The name of the company was however
changed in 2011. The company also runs an extensive tobacco leaf agronomy program in the tobacco
growing areas of Khyber ‘ Pakhtunkhawa. The company is also involved in CSR initiatives namely education,
environmental sustainability and disaster relief sectors. The company offers 10 of its main brands;
international and local such as Marlboro, Red & White, Morven Gold, Diplomat and K2.

At Philip Morris Pakistan Limited, the business follows the highest level of integrity according to its vision
statement. They are committed towards continuous betterment of the employees by providing them with
professional training, emphasizing on team work efforts, a clean and safe working environment and
leadership imbued with humility. Business Goal ‘More Cigarettes, More Leaders’ Business Ambition ‘Be
admired by the strength of our results, the caliber of our Leaders and Warriors and the integrity in how we
conduct our business’
Business Goal
‘More Cigarettes, More Leaders’
 Business Ambition
 ‘Be admired by the strength of our results, the caliber of our Leaders and Warriors
and the integrity in how we conduct our business’
We had a formal interview with the area sales manager, Mr. Hassan Shafi. In this
Interview he said that currently they have four leading brands under PMPKL which
are listed below.
 1. Morven Gold
 ‘ King Size Filter Chesterfield ( Red Package)
 ‘ Morven Royal Rich ( Blue Package)
 2. Red and White
 3. Malbro
 ‘ Light
 ‘ Hard
 4. K2 and Diplomat
 

He stated that Morven Gold is our flagship brand; it focuses on catering Sec C
needs and its retailer price in Rs. 65. Now it has increase to 67 PKR/- according to
the new regulations from the government implemented by the company (Business
Recorder, 2016).

Each carton has 50 sticks of cigarettes which is 500 packs (Rs: 39,070/-).
500 packs x 20 = 10,000 sticks
 

Area sales manager is always in contact with sales rep and daily sales men. On
average a sales rep covers 55 shops every day. And currently the company has
deployed 21 salesmen in Gulberg and 10 Sales men in Cantt.
 

Goals and Objectives at Philip Morris Pakistan Limited

 Lahore Region:
 ‘ Achieve maximum possible sales volumes per year.
 ‘ Achieve maximum employee productivity on the field as sales representatives.
 ‘ Future goals and objectives as assigned to the area sales manager of Lahore
region:
 Sales quota targets to be achieved which is 1.6 billion sticks of cigarettes to be
successfully sold for the fiscal year 2016.
 High Selling Brands:
 Morven and Capstan are placed in front on shelves in less urban/ less affluent
shops, whereas Marlboro is brand for Sec A so it is preferred to be placed on
premium shops.
 Problems with brands:
 ‘ As mandi stocks are cheaper, so as a result retailer products are not at all sold out
 ‘ At the time of budget the sales of the company drops as retailers hold stock and
wait for the prices to go up. As a result the company experiences less sales in
budget time period and shortage of product occurs in the market.
 ‘ Automation devices are given to the sales reps but as they are not educated and
trained enough they are sometimes unable to use it and company has to face
uncertain losses in terms of both data and money.
 ‘ Sales reps don’t go to all of their assigned shops as they achieve their quotas buy
bulk selling on certain shops. So that they can save their time. As a result the
availability of the company’s product becomes less.
 

Industry Analysis
 The cigarette industry is highly monopolized and it has a few major players in the
market who deal in this business. Pakistan Tobacco Company is one of the largest
industries in Pakistan contributing to approximately more than 4.5% in the GDP and
providing employment to 1 million people in the country according to the 2013
industry statistics. Philip Morris comes up next according to its market share.
 Pakistan’s consumption of cigarettes: 86 billion
 
According to the coalition of Tobacco Control, there are about 22 million smokers
in Pakistan; and 55% of the local households had at least one individual who
smoked tobacco in 1999 during the time of the control.
 

Pakistan’s legal domestic sales are estimated to be at approximately 64 billion

cigarettes for the year recorded in 2012. Whereas, British American Tobacco
Company and Philip Morris International constitutes virtually 99.7% of the legal
sales in Pakistan overall, according to the International tax and Investment Center
2014 statistics. Moreover, approximately more than 5% above of all taxes comes
from the tobacco industry. PMPKL paid up to $1 billion in taxes per year that is 60
to 70% in taxes in 2015, according to the company executives themselves.
 

Tobacco Taxes
 According to the 2013 statistics, estimated tax losses from illicit consumption
increased from PKR 24,332 million to PKR 26,851 million. And the loss in sales tax
revenues resulted in PKR 5943 million and had an increasing trend.
 The Pakistani government earned Rs. 55 billion from the tobacco industry in terms
of the taxes and excise duties on tobacco related products which was the highest
during the 2010 and 2011 years.

Studies show that cigarettes are being sold in Pakistan at the cheapest rates
compared to global prices in the market. Cheapest rates of cigarettes according to
the statistics of 2012, are of the following countries:

COUNTRY NAME CIGARETTE RATES (in $)

 Srilanka 2.83
 India 1.65
 Nepal 0.84
 Afghanistan 0.51
 Pakistan 0.33
 
Pakistan burnt almost Rupees 200 million on smoking in 2011 and the rate kept
increasing till date as the production was over 65.4 billion cigarettes during the
fiscal years 2010-2011. Also there has been a consistent incremental increase by
1.7% in growth of the demand of cigarettes in the developing countries ever since
2002 (Pakistan Tobacco Industry).

Pakistan burnt almost Rupees 200 million on smoking in 2011 and the rate kept
increasing till date as the production was over 65.4 billion cigarettes during the
fiscal years 2010-2011. Also there has been a consistent incremental increase by
1.7% in growth of the demand of cigarettes in the developing countries ever since
2002 (Pakistan Tobacco Industry).
 After the industrial maturity of 2009, is on a gradual verge of decline. PMI which is
the world’s largest tobacco company, has been operating in Pakistan since 2008 has
been experiencing decline in its sales volume. Company’s leading brands such as
Morven Gold & R&W both are experiencing continuous decline year on year basics.
It’s the biggest cause of concern for the company as it is resulting in decline in
revenues. One of the biggest reason for this decline has been the rise of illicit trade
which is causing a dent in company’s revenues. As illustrated in the figure below;
 Since the market is no longer growing, therefore the key competition is to maintain
the existing market share and retain those customers that are already users of
cigarettes. The increasing competition of local and Mardan brands in what alarms
the big giants like PTC and PMI to work on neutralizing their increasing market
share inorder to survive in the market.
 Competitors
 Philip Morris Pakistan Limited has basically one major competitor, Pakistan
Tobacco Company (also known as British American Tobacco Company).
 Also there is an informal sector competing in the cigarettes industry as unbranded
products under ‘Mardaan Brands’ which produces ‘khulay – loose cigarettes’. Due to
the rising threat of this informal segment, the private companies are facing
problems from the price sensitive target market customers from lower income
brackets who are a major chunk of the population as well as of the loyal customers.
 In Pakistan, the main competitor for PMI is PTC (Pakistan Tobbaco Company),
which holds the major market share because of its brands and wide distribution
network.
 PTC Current Sales Force Structure
 The GM Pakistan is responsible for three other countries with Pakistan, namely Sri
Lanka, Bangladesh and Burma. All these countries have a similar terrain so
distribution of the products are be done effectively and efficiently. The Key
Purchasing Officer ads the supporting function in which forecasts of the products
are by him/her. The Director of Marketing in PTC makes the key decisions regarding
sales performances because he/she is concerned with the performance of the
region. Under DOM, it is the National Sales Manager, who communicates the
information to employees under him.
 There are a total of 4 Regional Sales Manager, who report to directly to the
National Sales Manager. Under Regional Sales Manager, there are 22 Area Sales
Manager, in which 2 ASM look after Lahore. Under RSM there are 190 territories
executives in change of the distributors and the sales Report.
 

Sales Operations:
 PTC adopts many various technical techniques for the sales forecasting, which are
done on the yearly basis. It helps them to match their expected and actual
performance. Similarly, the RSM distribute the sales quotas to territories and which
is passed onto the territories executives. The ASM has the right to change the quota
if ASM thinks that the quota is not realistic then it is revised by RSM. The revised
sales quota is known as the ‘outlook’. A percentage of different brands is expected
to be sold. A daily sales report is checked by area managers to have an overview of
the work and performance indicators.
 

Sales Process:
 The sales process consists to two sales categories, primary and secondary sales. In
primary sales are done to the distributors, whereas, secondary sales are done to
wholesalers. They have a total of 200 distributors, who can only work with PTC. So,
the distribution is bifurcated to perform activities only for one tobacco company.
PTC owns 12 self-owned distributors. The purpose is to distribute the quantities to
the distributors and the whole sellers through those warehouses. In the process, the
sales men go on their daily route, who ensure that each and every shop is catered.
And their routes are designed in a cost effective way.
 ‘
 Methodology
 We would be using a combination of qualitative and quantitative research for the
analysis of the sales force program at PMPKL. We have conducted two in depth
interviews of the sales department executives of the company, who are as follows:
 1. Area Sales Manager (ASM) of Lahore Region: MR. HASAN SHAFI
 2. Sales Supervisor: MR. OMER LIAQUAT
 3. Zonal Manager: MR. MUHAMMAD USMAN
 4. Sales Representative: MR HAFIZ TAHIR
 Also one on one interviews leading to discussions have been conducted of the
entire sales force at the Lahore region specifically targeting the sales employees of
Gulberg and Cantt territory. Our focus area is Lahore Gulberg where we visited
different cigarette selling units and pan shops and actually interacted with different
retailers and sales reps and company order takers through questions and answers.
We physically followed their bikes while the daily sales rep and the daily salesmen
supervisor interacted with the retailers to sell their products on regular basis.
 Qualitative Research
 ‘ In-depth Interviews of sales executives
 ‘ Panel discussions with sales force team
 ‘ On field follow up of sales reps
 ‘
 Current Strategy

MARKETING STRATEGY AT PMPKL:

 Philip Morris Pakistan Limited uses a Push Strategy to make sales. As the company
produces cigarettes so the demand is already very known and forecasted evidently
according to known consumption rates presumably. Therefore, all supply forces are
directed towards selling all cigarettes forcibly as it is a push strategy so all
produced is sold.
 However, the target market and targeted consumers are very specifically only the
ones who are smokers already. Acquiring new customers is not the policy of the
company in any case as it follows the specific rules and SOPs laid by the
government and the tobacco regulation industry. New customers is not the focus,
thus push strategy is followed.
 Salesforce Structure
 Key:
 – RSM = Regional Sales Manager.
 – ZSM = Zonal Sales Manager.
 – ASM = Area Sales Manager.
 – DSMS = Daily Sales Manager Supervisor.
 – DSR = Daily Sales Representatives.
 There is only one General Manager, who is responsible for 4 RSM and the activities
run in their regions. Each RSM has a one ZSM, which further is reported by 3 ASM.
These ASM are present at each distributor performing the functions for Phillip
Morris. The distributor has only one ASM, which is on the payroll of PMI, except
everyone was the paycheck of the distributor. The ASM is responsible of the
activities and responsible of the performance for the distributor.
 Now each ASM has 4 DSMS, in which each of them looks for 4 to 5 DSR. And every
week they check the performance of 5 to 6 sales representatives out with them in
the field. In the Gulberg Distributor, there area total of 21 DSR performing the sale
functions in the market. Each sales rep has been allocated in 150 countries, which
sums to be 1.5 m shops. And the sales rep were allowed to meet their family twice a
week. A total of 50-55 shops would be visited by each sales reply on the daily basis.
So, ASM directly interacts with the sales representatives and the DSMS report the
performance of the sales representative. The warehousing manager has the duty to
maintain an adequate level of inventory of varipus different brands in PMI. Lastly,
the Key Purchasing Officer ads the supporting function in which forecasts of the
products are by him/her.
 DISTRIBUTION MODEL:
 At Philip Morris Pakistan Limited, the strategy followed in their distribution centers
is highly significant in playing a strategic role for the company in its operations as
well as its sales force management. Mr. Hasan Shafi, the area sales manager, told us
about the 50 ‘ 80 distribution model followed at PMPKL in its Lahore region.
Merchandising and distribution of the company is outsourced. Cash selling the
main type of selling they use and mainly sales are not done on credit.
 The 50 ‘ 80 distribution model applied at PMPKL represents that the 80 percent of
the sales volumes earned are coming from 50 percent coverage of the sales
territory in Lahore region. This shows that maximum of the sales revenues and
profit margins are earned from some specific areas for example Cantt area out of
Lahore region. On average 55 shops are covered in Lahore region by the daily sales
men along with their sales men supervisors.
 Also the CSR policy is followed at PMPKL which is: C4 is the legal binding for the
company.
 Name of Distributor: Consolidated Marketing
 Clients: Phillip Morris and Colgate Palmolive
 Earnings of distributor
 Cost Plus
 There are different ways of accommodating the profits and earnings of distributor.
One of the new and improved method of doing so is through ‘Cost Plus’ method.
This method is entirely different form Pakistan Tobacco Company’s margin base
system where they are given the SKUs at a cheaper price which is sold to retailer at
a margin. All the capital and expenditure is recovered through that profit margin.
 Whereas in cost plus the distributor aggregate its cost including logistics, rent etc
and is compensated on that. It is distributor’s job to hire the competent salesforce
team working under company employed Area Sales Manager. Distributors are also
assigned with quotas and target which when achieved are rewarded with
compensations as follows;
 ‘ If 105% of target was achieved, 16% of the cost base is given to distributor
 (Cost base for the month of March 2016 = Rs: 1,360,000)
 Target Achieved Percentage commission of cost base
 105% 16%
 100-104.9% 14%
 98-99.9% 9%
 95-97.9% 7%
 90-94.9% 5%
 Less than 90% 3%
 (Appendix C)

Incentives
 Apart from cost plus method distributor is also accommodated on the bases of
meeting upto the quality standards of warehousing, salesforce and distribution. It
includes all those factors that are considered while evaluating a distributor.
(Appendix D)
 Wint fall
 This means of income involves holding/purchasing extra stock before the budget
period and taking advantage of the price increase after the budget.
 Hence there are many ways through which a distributor can make money and still
lie within the acceptable criteria of the company.
 Distribution Channel
 Primary Sales
 The total stocks dispatched from warehouse or directly from the factory to a
particular area are known as PRIMARY SALES of that area. The primary sales can be
calculated by the monthly dispatches to an area.
 Secondary Sales
 The total stock sold by the distributors of an area to retail and wholesale market is
known as SECONDARY SALES. Secondary sales are given by distributor of an area. It
can be calculated by a simple equation
 SEC SALES = Opening stock + Monthly Purchase ‘ Closing Stock + Claim
Adjustment
 Consumer Off-Take
 The consumer off-take is the ‘sales being done by retailer to end consumer’ the
consumer off-take is being calculated by Neilson by surveyors. Neilson conducts
Retail Audit on monthly basis and submits report to regional offices and head office
on monthly basis.
 Classification of customers
 Primary Secondary Customer Consumers
 Distributor Retailer End consumer
 PMPKL work on the philosophy that secondary customer are their direct
consumers, since they are a key player in running the demand and sales of their
products. Therefore a lot of activities and rewards are provided to facilitate their
needs. For some retailers leverage of a few hours is given to highly profitable shops.
Such shops are high end shops which are awarded with the award of Trade King
 Trade King is an incentive package given to the retailers , these retailers are the
shining starts of the company which achieve the targets of merchandising and shelf
space in their shops/ Khokhas.
 There are two main types of incentives given to retailers;
 If the retailers are able to achieve the set targets they are given incentives in terms
of cash ranging from 500 to 6000Rs and other than that they are also given
cigarette packs relative to the incentive amount. By this the company benefits as
they earn more profit by this method.
 1. Cigarette ‘ Lighter Scheme
 Lighters are given to highly profitable retail shops for improving sales
 2. Collaboration with Match stick distributor:
 This is a mutual selling process of matchboxes and cigarettes together. The
locations of distribution hubs are closely situated. Therefore when the cartons of
cigarettes are being distributed Hockey match boxes are also sold along with them
to the retailers.

SALES STRATEGY
 Spot selling is used by the company and all sales are on cash transactions only. No
credit purchases or selling method is enabled by the sales force. The sales men
personally visit shops on the field daily and take orders and deliver orders
according to the specific on ground demand of the retailers.
 It is like the Fast moving goods selling industry so they are always working on the
go. This is a type of industry in which sales force is highly empowered as they have
a face to face interaction and relationship building with different retail customers.
They have to meet demand and ensure order fulfillment according to the desired
retailer orders which are asked and offered on spot. Moreover, strong competition
from PTC Brands exists so it is quite obvious for PMPKL to ensure it is fulfilling the
needs of the retailers providing them enough incentives to cater to the shelf
placement of their brands.
 There is a very fixed predictable demand for the product and the company knows
approximately how much to produce and how much to deliver. No formal
forecasting method is implemented at the company.
 Sales Force Automation (SFA) is the standard operating procedure currently
implemented at PMPKL for making sales. Automated devices are used by the sales
men on every day basis. These are devices used to automatically record and enter
data about the order taking, bills, receipt checking, inventory management,
booking order for the next day, cash deposit and delivery transactions on the
devices. Transactions are recorded on the server and money is received on daily
basis. The system is highly organized and automated and it is easier for the
responsible area sales head to follow up on the performance of the sales reps.
 However, these are complicated battery operated and technical devices so training
is needed and it is strongly given to the sales reps at Philip Morris for using these
SFA devices. For the sales reps, sales on the job training programs are followed
rigorously as the sales men are the most valuable source of income and a means of
sales quotas achievement for the company.
 Sales Process
 Since the product is a fast moving commodity it solely relies on traditional
personal selling. Qualify of retailers is done based on their sales and shelfing. PMI
has some fixed rules/procedures that are necessary for carrying on a sale. They
make sure that the process is followed by the DSM. The process and steps include;
 Roles performed by salesmen
 DSM is the front line force & back bone of a distributing network. Following are
the roles of DSM.
 ‘ Market visit

 Availability of stock in DD & Wholesale.

 ‘ Effective area coverage
 ‘ Target achievement
 ‘ Market exploration & penetration
 ‘ Stock check at shop
 ‘ Visibility of stock
 ‘ Complaint handling
 ‘ PR development
 ‘ Administration
 ‘ Evaluation
 Logistics
 Mechanical Resources
 Type of Assets No of Items Requirements
 1 Motorcycles 100cc 32 32
 2 Qinqi 5 5
 3 Ravi 3 3
 4 Motorcycles 70cc 6 6
 Each bike can carry 3 to 5 shipping cases, while each Qinqi can carry upto 15 to 18
and lastly ravis can carry large quantity of cases i.e. 50 which are suitable for
deliveries to wholesalers.
 Salesmen Salary
 Following formula can best describe the take home of sales man
 Fixed Amount + commission = Take Home
 Commission rates are fixed for a sales rep which is as follows;
 Commission = Rs: 4000 (For achieving the individual target) + Rs:2000 (if the entire
distribution achieves the target)
 ‘ Observation
 ‘ Fixed commission doesnot motivate the DSR to excel and pitch more than the
 ‘ Some salesmen are not mentally satisfied with their salaries in comparison with
the work they do. It can affect their performance & motivation level.

Sales Forecasting
 At Phillip Morris, jury of executive opinion method of sales forecasting is used in
combination with the quantitative approach of moving averages. Top management,
including Zonal sales manager of each zone, sits together with general manager
and in light of previous year’s sales along with their judgment of economic growth
and growth insurance sector, a sales forecast is set. In case of cigarettes the rate is
on constant decline due to increasing taxes therefore the targets and quotas are
usually applied a negative rate. Along with the demand trends, the fiscal year’s
budget and the time when it’s going to be announced is also pondered upon when
setting the budgets and quotas. Once the annual sales figure is decided, this lump
sum figure is given to regional sales managers, who further break it into sub
forecasts for the area sales managers; the area sales manager then further break it
down in form of sales quota down the hierarchy. This way each manager along the
hierarchy is assigned a specific task in terms of Rupee sales quotas. There is no over
indexing of quotas down the hierarchy.
 In sales forecasting, a top to bottom approach is followed i.e. no of inputs is taken
from the sales force with respect to annual sales target, as the company believes in
setting a target and then motivating the sales force to an extent where they deliver
the targets. Although each area sales manager is responsible of reporting his
‘Average Monthly Volume’ (AMV) for annual forecasting. Refer to Exhibit 2 for the
table of the calculations of Annual Monthly Volume table.

NEW SALES STRATEGY

 Problem 1:
 Compared to current sales force structure:
 Each daily salesmen supervisor is responsible for 5-6 salespersons; as a result there
is a flaw in the sales on the daily basis. As the supervisor cannot accompany them
all at the same time so the sales reps make the order taking, cheque filling, sales
quota fulfillment mistakes and also face difficulty in using the sales automation
devices as they are not fully educated and trained by the company.
 Solution
 Therefore each Daily salesmen supervisor should be assigned maximum 1 or 2
salesperson, so that they can easily follow them on their routes and ensure that the
selling process in done at its best. This will also eliminate another problem of the
salesperson, as they do not go to every shop to make the sale, as a result all the
shops are not covered, therefore the availability and the accessibility of Phillip
Morris products increases.
 Solution
 There should be 1 DSMS supervising 1 salesman on daily basis, as a result there
will be a chck and balance and the products will be available at shops shelf.
 Problem 2: (MAJOR problem)
 Salesmen do not fill in the receipts at all shops although they have automation
devices they are still able to dodge the company. The problem mainly lies in the
dishonest salespersons.
 Recommended Solution:
 1. Install RFIDs at retail shops, This RFID system would be used to detect salesmen
presence and receipt cheque being filled out at all shops and stores on daily basis.
 2. Finger print readers at all retail stores should be installed to ensure that all the
salesperson paid a visit to that respective shop on daily basis despite the fact the
sales are made or not made. This method will ensure the visit of each salesmen at
every shop and dishonesty amongst them will decrease.
 3. Placement of barcode readers at every shop. Using the barcode system will
manage salesmen work as they would check for:
 ‘ GPS
 ‘ Salesmen visit assurance
 ‘ Give details of the quantity of products to be sold
 ‘ At what time they were sold
 ‘ Which salesmen sold the products
 ‘ Monthly business with that respective shop
 ‘ Retailers demand and supply
 ‘ Forecasting of stock outs and profitability dependent on demand and supply
patterns
 RFID (New System Introduction)
 ‘ Ensure transparency of information and also allowing continuous replenishment
of cigarette stocks.
 ‘ Activated devices allow for order takers to be detected with each shop and at
each receipt filed.
 ‘ The devices (RFIDs) would ensure that all sales reps are taking orders at all shops
i.e. reaching out to full potential (55shops daily) rather than completing the
monthly quotas by cutting bills on few high volume shops.
 Problem 3:
 From on field observations we realized that the sales representatives lacked the
technical know-how of the SFA devices and in case of any error in feeding the right
information, they were unable to rectify that mistake without assistance from sales
supervisor. Along with technical understanding they also lacked in Basic English and
grammar. In some cases they had to add data and fill out retailer form which they
clearly had difficulty in. Refer to the interview in the appendix A for the interview
insights.
 Solution:
 Training
 Current training programs at PMPKL are not enough. There are no formal method
or technique being used by PMPKL to evaluate sales person performance during
the training period. Moreover, training period is too short for a newly recruited
sales person to understand market dynamics and company policies. Furthermore,
the current training program does not enhance/polish sales skills i.e. persuading
power. There should an evaluation form for the DSMS to rate and access the
performance of each sales reps. Refer to appendix F for the complete
recommended structure of the employee evaluation form. Also the criteria for
evaluation and its indicators as well as its ratings (scale of 1 to 5) are mentioned.
The option of giving formal and informal training is also specified if it is necessary
or not which is going to be recommended by the supervisor for each sales rep.
 Changes in commission packages
 Since the regions are divided into territories keeping in mind the potential of each
territory however, the majority of the sales as mentioned by the sales rep in the
interviews comes from the major cities of each province. Secondly, there are areas
in which making sales is almost impossible due to security concerns and purchasing
power of the people. Therefore, in territories like NBU of KPK, Sindh and Baluchistan
the base salary of the sales rep will be increased to Rs. 20,000 as these areas seems
to require more sales efforts.
 Problem 4:
 Routes
 Currently Phillip Morris does not have fixed routes for its DSM, all they know is the
number of shops they will visit per day, which leaves the decision of visiting specific
shops first up to the DSM. This usually results in overlapping of same route, which
increases the unproductive travelling time. Although SFA has the information
regarding the shops to be visited but it lacks the order of visiting. Through proper
routes calculated by algorithms can help prevent time wastages which eventually
can help cater to greater number of shops per day.
 Solution:
 Fixed routes assigned to each sales rep and no over lapping routes given to avoid
unproductivity.
 Problem 5:
 Future possible threats to the company:
 Considering the declining trend and the dwindling sales situation of the overall
tobacco industry as the government is highly discouraging the use of cigarettes by
levying taxes and increasing the rates each year as the international tobacco taxes
go up. According to the regulations set recently, price for Morven increased from
PKR 65 to 67/- (Business Recorder, 2016). Philip Morris does have a global threat of
going out of business in the tobacco industry so they need to have a backup
solution for that. Also refer to Sales Financials of year end 2015, there are increasing
losses incurred by the firm from 2014 to 2015 annual report. The taxation increased
from Rupees 30,814 to Rupees 361,931 (2014-2015). This shows huge potential for
decline.
 Solution:
 Diversify into other businesses like production of similar products like for instance
soya bean, tea, coffee, etc. This would save PMI from wearing out of business and
expand into a variety of different products with a diverse product range which will
help it grow in future.
 RECOMMENDATIONS
 These recommended changes in the sales force program could help improve the
capabilities and capacities of the sales rep at Phillip Morris. Thus leading to
improved success of PMPKL and enhancing productivity of the salesmen, making
sales at their full potential. This would also lead to the integration of the sales force
being aligned and fully informed.
 The company can implement RFID systems for the sales force reps assurance of
making sales so that it would ensure making sales and every shop and the stock
status can be known to the distributor. Secondly, they can use of Finger print
readers or/and barcodes reading systems to ensure that stocks sales are achieved
at all the shops for full coverage. It will avoid fakes on every shop whereas the sale
is made on few shops which covers the sales rep quotas so it will automatically
ensure that their stock is present on every shop hence customers would get their
products at each store. It is very important to train sales reps for using SFA devises
because it will increase their productivity and work can be done more effectively
and efficiently. And they should make a criteria for hiring sales persons which
should be based on specific education because it would increase the overall
distributor productivity. Sales reps should be identified, motivated & acknowledged
on the sense uniforms for the sales people should be mandatory because it would
be easy for the shops to recognize them and it could be used as a promotional
technique.
 Lastly, the merchandising is the main important reason for the promotion of PMI
products therefore flex posters should be displayed & posted on motor bikes &
automobiles of sales reps so to ensure enough marketing efforts are put in.

Appendix A
 Interview 1
 Interviewee Profile:
 Name: Hafiz Tahir
 Designation: Sales Representative
 Age: 28
 Experience: 2 years
 Salary: Basic salary = Rs: 13,000 + Commission of Rs: 6,000 if 60 shipping cases are
sold per month
 Job Description:
 ‘ Have to achieve the quota assigned
 ‘ Cover 55 shops daily, whereas the total shops assigned are 150. It takes three
days to cover the total shops assigned which are covered twice a week
 ‘ The products should be available at all shops
 ‘ They need to motivate the retailers to increase the sales by giving them more
incentives
 ‘ Ensures that conflicts between retailer and company are avoided and removed
 ‘ If shopkeeper refuses to buy the stock from them they give exceptional benefits
to them in form of free Marlboro lighters, thus ensuring that bills are cut from all
assigned shops.
 ‘ Have a benchmark of educational background in order to know how to operate
Sales Force Automation devices.
 Interview Insights
 From on field observations we realized that the sales representatives lacked the
technical know-how of the SFA devices and in case of any error in feeding the right
information, they were unable to rectify that mistake without assistance from sales
supervisor. Along with technical understanding they also lacked in Basic English and
grammar. In some cases they had to add data and fill out retailer form which they
clearly had difficulty in.
 Similarly, it’s a common norm that key clients get the leverage of credit sales in
almost every industry except for those who carryout spot selling like Phillip Morris.
In such circumstances they only provide credit service to star shops that are bring
set by the company based on their performance indexes and quota completions.
Even the credit policies for them are too stringent, they are only allowed the credit
for 1 day, where they are supposed to pay before the day’s closing.
 In every sales related jobs the major motivator to perform an extra mile is to give
commissions for the extra effort put in. The reward for the sales representatives of
Phillip Morris is on selling of minimum 60 shipping cases per month. The very first
reward is of Rs: 6,000 from where it keeps on building up. That’s the key to
motivate the sales force to pitch in extra sales.
 ‘
 Interview 2
 Interviewee Profile:
 Name: Mr. Hasan Shafi
 Designation: Area Sales Manager
 Age: 27
 Experience: 1.5 years in PMPKL
 Interview Details
 We had a formal interview with the area sales manager, Mr Hassan Shafi. In this
Interview he said that currently they have four leading brands under PMPKL which
are listed below.
 5. Morven Gold
 ‘ King Size Filter Chesterfield ( Red Package)
 ‘ Morven Royal Rich ( Blue Package)
 6. Red and White
 7. Malbro
 ‘ Light
 ‘ Hard
 8. K2 and Diplomat
 He stated that Morven Gold is our flagship brand, It focuses on catering Sec C
needs and its retailer price in 65rs. Now it has increase to 67 PKR/- according to the
new regulations from the government implemented by the company (Business
Recorder, 2016)
 Area sales manager is always in contact with sales rep and daily sales men. On
average a sales rep covers 55 shops every day. And currently the company has
deployed 21 salesmen in Gulberg and 10 Sales men in Cantt.
 ‘
 Interview 3
 Interviewee Profile:
 Name: Mr. Omer Liaquat
 Designation: Sales Supervisor
 Age: 32
 Experience: 3 years in PMPKL
 Job Description: Regulates accomplishment of quotas from daily sales men.
 Span of control:
 There are total of 4 DSMS in a territory, with each of them having 6 daily sales
representatives working under them. Amongst the six, five of them caters to
retailers which one caters to the wholesale customer.
 Interview Insights
 Tasks performed by the supervisor
 The task performed by the DSMS are divided into two categories;
 ‘ Work with
 Where the DSMS spends the entire day in the field with the DSRs for the
supervision and observations concerning the performance of the sales rep. In this
way he can evaluate their performance based on the criteria set by the company.
 ‘ Work along
 He inspects to the arising queries of the customers (retailer, wholesalers) and
regulates smooth performance and routes of DMS from the back end i.e.
distributor. In short it is the on phone supervision of the supervisor that keeps him
in the loop of daily activities performed by the sales force. Moreover, irrespective of
merchandising being out sourced to a third party, DSMS also performs a second
check on ‘Bellow The Line’ merchandising i.e. whether placed correctly, according to
the SOPs of the company or not. He is also responsible for giving incentives to
‘TRADE KINGS’ retailers for achieving a specific sales volume for the month. They
act as a continuity trade promotion program that keeps of accumulating till the
month end. The reward is based on cigarettes which is equivalent to cash. Level of
incentives are as follows;
 ‘ Rs: 500 worth of Morven packs
 ‘ Rs: 1,000 worth of Morven
 ‘ Rs: 1,500 worth of Morven
 ‘ Rs: 2,000 worth of Morven
 The reason they are only given Morven is because it’s a fast moving product which
brings quick and easy money for the retailer.
 ‘ Daily sales men was not authorized to issue incentives, they were automatically
calculated by the sales force automation device based on the purchases made by
the retailers on daily bases.
 ‘ The incentives were to be signed by the retailer and the sales supervisor in order
to ensure receiving and delivery. All the record of incentives was maintained on a
Trade King log provided my PMPKL as illustrated in Exhibit
 ‘ The receipts had three carbon copies, one remained with the retailer, one with the
distributor while the third was sent to PMPKL head office.
 ‘
 Interview 4
 Interviewee Profile:
 Name: Mr. Muhammad Usman
 Designation: Zone Manager PMPKL
 Agenda:
 Aim of the interview was to identify the problems in distribution and sales structure
of the company what steps PMPKL is taking to counter the problems. The interview
was done in an extremely cordial atmosphere and we tried our best to get into the
depth of the problem.
 Transcription
 Currently what is the biggest issue that the company is facing in Pakistan?
 Muhammad Usman: the most important issue that is keeping the management
awake at night is growth of the illicit trade. It can be divided into three components.
First the GND (genuine non domestic) products which are non-duty paid products.
Although these are genuine but are smuggled into the country and relevant taxes
are not paid. This includes dunhill, benson & hedges and Marlboro and several
others. They are generally priced 30 to 50PKR above the local products sometimes
even more depending on the type of variant and its demand. There are also other
types of GNDs, like PINE, which are targeting the value-price segment at around
40PKR pack. This pretty much explains the GND landscape in Pakistan – it is no
more than 10-15 percent of consumption but with room to grow if not tackled
 Secondly the biggest portion of the illicit market is comprised of domestic players
who are selling way below the minimum legal price in the market. They are defining
an uneven playing field, meaning if you buy a pack of Morven Gold, you pay 60PKR
per pack. If you go and buy a domestic illicit brand, you can pay as low as 10PKR, or
as high as 40PKR. They generate bulk of their revenue from the 10 to 30 PKR
segment. Thirdly there is the counterfeit segment which is pretty much nonexistent
in Pakistan
 This creates several problems. First, we the legal players are unable to compete.
Secondly, the government is losing a large amount in taxes. Last fiscal year, the
legal industry’s contribution to the government revenue was PKR103 billion and
according to various sources the government lost a revenue of approximately
PKR25 billion due to the illicit sector. And this problem is only getting bigger and
uglier. I believe this is one of those areas where we need to find simple, effective
solutions, in collaboration with the government, to arrest the proliferation of such
products.
 What is the current market distribution like in terms of market share?
 MU: The total cigarette market of Pakistan in terms of consumption is estimated to
be 80-85 billion sticks annually. The contribution of the legal sector is 60-62 billion
(sticks consumed per year), and about 20 to 23 billion for the illicit players,
including the GNDs.
 What is the distribution within the illicit market?
 MU: It is 90-10. The domestic, non-taxpaying players make 90 percent of the illicit
market while the genuine non-duty (smuggled) products account for 10 percent.
 But don’t you think that smuggling has come down over the years?
 MU: According to different studies that are carried out on a more regular basis,
both GND and domestic illicit are going up. The trend is certainly upwards. Even if
you go buy a pack of duty-evaded cigarettes, and ask the retailer, he will tell you
that it’s going up.
 We are much more interested in the dynamics of the illicit business – where is it
growing and how are they bypassing the system in place. The answer we get on
those two fronts is yes, it is growing, and it is penetrating more rural areas with
strong growth in urban centers of Pakistan as they continue to spread distribution
with more and more outlets handling these types of products. In other to curb this
menace there should collaboration between ourselves and the government in terms
of policies aimed to curtail such trends in the market.
 How has the government response been so far?
 MU: It is not a new problem. FBR has a good understanding of the problem and is
working to curtail it. However, due to the magnitude of the issue more resources
are required to tackle the problem and this is why the legal industry and the
government need to work together. What I can say is the longer we wait, the bigger
it will get. The government is trying to hear from a variety of parties different
aspects to a holistic solution. It will definitely need more collaboration and co-
ordination on many fronts; the problem is complex and it will not be easy to tackle
overnight.
 Could you shed some light on the solution?
 MU: The ability and willingness to enforce is the key. It’s not that we or the
government are standing still. The government has for example has many issues on
its agenda and it is difficult to assess in which position the illicit problem sits on
their priority list.
 I think what we are saying is not different to what other industries are saying. If you
talk to the pharma industry, for example, they will use the word counterfeit a lot
more intensely. The problem is an opportunity loss. Greater co-operation from the
authorities to create a levelled playing fields is the need of the hour.
 What are PMPKL’s future plans?
 MU: Ours plans are very simple; as our manifesto says we want to become the
most admired and respected company in Pakistan.
 We are going to be aggressive and bold. There is a lot of room for us to grow,
from 30 percent market share to 100 percent market share in the formal sector as
an example. We are trying to make Pakistan (Philip Morris Pakistan) more of PMI
and less of what is used to be – Lakson. We have only been here for eight years;
and we want to make sure we do the right things in the time to come
 ‘
 REFERENCES
 International Tax and Investment Center. (2013). Asia-11 Illicit Tobacco Indicator
2012. Oxford
 Economics.
 Pakistan’s tobacco consumption: The most in South Asia. (2013, Februray 7).
Retrieved Februray 29, 2014, from Pakistan Today:
http://www.pakistantoday.com.pk/2013/02/pakistans-tobaccoconsumption-the-
most-in-south-asia/
 Recorder, B. (2013). Pakistan among top Asian states in illicit tobacco consumption.
 Business Recorder. (2013, August 21). Retrieved from
http://www.brecorder.com/companynews/235/1223325/
 Tobacco Industry in Pakistan. (2002 , June 18). Retrieved from YesPakistan:
http://www.yespakistan.com/people/tobacco.asp
 Khan, A. (2011, Febuary 24). Pakisan Today. Retrieved from
http://www.pakistantoday.com.pk/2011/02/24/comment/editors-mail/smoking-
trend/
 Philip Morris International. (n.d.). Retrieved from
http://www.pmi.com/eng/about_us/charitable_giving/pages/charitable_giving.aspx
Philip Morris Pakistan. (n.d.). Retrieved from
http://www.philipmorrispakistan.com.pk/companyprofile.htm’
 Appendix AB
 Industrial Trend
 ‘
 Appendix B
 Exhibit 1
 Territory Design (Southern Canal)
 ‘
 Appendix C
 Distributor Cost Plus
 Exhibit 1
 Back Office
 Type of Assets No of Items Requirements
 1 Writing Table 54 54
 2 Chair 54 54
 3 Cabinets 50 50
 4 Desktop/Laptop 3 3
 5 Printer 2 2
 6 UPS 2 2
 7 Water Dispenser 2 2
 8 Stock Carrying Boxes 32 32
 9 Wooden Pallets 26 26
 10 Fire Extinguisher 2 2
 11 Meeting Table 2 2
 12 Chairs 14 14
 13 Projector 2 2
 14 White Board 2 2
 Exhibit 2
 Mechanical Resources
 Type of Assets No of Items Requirements
 1 Motorcycles 100cc 32 32
 2 Qinqi 5 5
 3 Ravi 3 3
 4 Motorcycles 70cc 6 6
 Exhibit 3
 Human Resource
 Type of Assets No of Items
 1 Total Salesman 34
 2 Relief Salesman 3
 3 Sales Supervisor 6
 4 Distribution Manager 1
 5 Cashier 2
 6 Key Punch Operator 2
 7 Warehouse Incharge 2
 8 Security Guard 4
 9 Field Driver 0
 Appendix D
 Targets 2015
 Exhibit 1
 Exhibit 2
 AMV 2015
 LAHORE C 32.35M
 GULBERG 23.23M
 CANTT 9.12M
 Marlboro 3.1M
 R&W 2.83M
 MbC 100’s 1.37M
 MbC 23.89M
 Appendix E
 Trade king’s Segregation
 Exhibit 1
 Platinum Gold Silver Total Top 35% Below 35%
 OUTLETS 129 43 103 275 275 0
 Appendix F
 Evaluation Form
 MANAGEMENT TRAINING NEED FORM
 CONFIDENTIAL
 Name: _______________________ Grade: _____ Department: _________________
 Location: ____________________ Time in Present Position: _____ Age on 30 Sep:
_________
 Supervisor Name: ___________ Supervisor Title: ___________ Review Date: ______________
 STATEMENT OF PHILOSOPHY
 This training form is designed to evaluate an employee’s performance over a
specified period of time. The objective of this process is that the employee and
his/her supervisor plan together to build on strengths and develop those areas
needing improvement via training.
 SUPERVISOR In evaluating an employee’s performance you are to identify
strengths and areas of performance which require improvement/training. In the
appraisal meeting, give as many examples as you can to illustrate/justify the ratings
you have given. Follow up the development plans; mutually established by you are
the employees.
 EMPLOYEES The more involved you are in the training need process, the more
effective the process is likely to be. Discuss freely your concerns over the rating
given by your supervisor.
 Signature Appraiser/Dept Head Signature GM/Board
 Date: Date:
 FORM INSTRUCTION
 ‘ Complete management training need form for the employee.
 ‘ Schedule meeting to discuss the training needs.
 ‘ Conduct performance appraisal.
 ‘ Provide copy of signed appraisal form to the employee.
 ‘ Place original signed management appraisal in the employee’s departmental file.
 ‘ Rate the overall performance on each objective/task using the following rating.
 1 Unsatisfactory Employee must demonstrate improved work performance within
immediate period of time (e.g. 3 months)
 2 Development Needed Performance standards are not fully achieved, employee
needs to improve performance during next appraisal period. (e.g. 12 month).
 3 Successful Work is fully satisfactory; employee consistently meets and
occasionally may exceed performance standards. This represents the expected level
of performance as established by the supervisor.
 4 4 Above Expectations Work is fully satisfactory and often exceeds performance
standards.
 5 Exceptions Work performance consistently exceeds performance standards.
 ‘ Place a tick in the ‘DAR’ column if you think Development Action (Training, wider
experience, counselling etc.) is to be taken
 ‘ Place a tick in ‘I or F’ column to indicate
 I ‘ Action by Dept Head/GM (coaching, planned experiences, etc)
 F ‘ Formal training
 PERFORMANCE MEASURE N/A 1 2 3 4 5 DAR I OR F
 JOB KNOWLEDGE/ FUNCTIONAL & TECHNICAL SKILLS
 Has achieved required level of knowledge and
 skills in position-related areas.
 Applies knowledge and skills to meet job
 requirements
 Keeps up to date in all relevant knowledge and
 skills areas to meet job requirements
 INTERPERSONAL COMMUNICATION
 Relates well to all people – up, down, and
 across – internally and externally to the
 School/Department.
 Establishes rapport; builds and maintains
 effective working relationships
 Practices attentive and active listening
 Uses diplomacy and tact; can diffuse
 high-tension situations comfortably
 ORGANIZING AND PLANNING
 Prioritizes multiple activities and assignments
 effectively and adjusts as appropriate
 Determines tasks and secures appropriate
 resources to get things done
 Uses time effectively and stays focused to
 ensure work is completed
 Meets commitments and deadlines consistently
 PERFORMANCE MEASURE N/A 1 2 3 4 5 DAR I OR F
 QUALITY OF WORK
 Ensures a high-quality output of work (resultingin minimal acceptable/zero errors)
 Attentive to all details and aspects of a job or
 process to ensure a complete, high quality
 output
 WORK HABITS
 Conducts work within the established (and
 accepted) department practices
 Conducts work according to the established
 and approved work schedule
 Demonstrates professionalism and workplace
 etiquette
 – Select Rating — Select Rating — Select Rating -Examples that Support Rating
 PROBLEM SOLVING
 Identifies problems in a timely manner
 Gathers and analyzes information skillfully
 Develops alternative solutions
 Resolves problems in early stages
 INITIATIVE
 Volunteers readily
 Undertakes self-development activities
 Seeks increased responsibilities
 Takes independent actions and calculated risks.
 SUMMARY OF CURRENT YEAR OBJECTIVES
 ””’
 IDENTIFY DEVELOPMENT OPPORTUNITIES
 ””’
 SUPERVISOR’S OVERALL SUMMARY AND RATING
 SUMMARY:
 RATING
 ””’
 Employee Signature/Date Supervisor Signature/Date
 Print Name: ” Print Name:
 ‘
 Appendix G
 Fig 1
 Targets for DSMs which are updated daily in order know number of SKUs left to be
sold to achieve or exceed the target
 Fig 2A
 Record of Trade King Incentives. Currently undergoing the receiving of the
respective rewards
 Fig 2B
 List of trade kings to be awarded the rewards
 ‘
 Fig 3
 Retailer receipt printed from portable printer attached with SFA device
 ‘
 Fig 4
 SFA device along with the portable printer
 Fig 5
 Distributors inventory checks
 ‘
 Fig 6A
 Merchandising
 Fig 6B
 LATEST SALES FINANCIALS 2015
 INCOME STATEMENT OF THE FISCAL YEAR 2015

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(PHILIP MORRIS (PAKISTAN) LIMITED, 2022)

March 10, 2022

Philip Morris (Pakistan) Limited
announces financial results for the
year ended December, 2021

Pakistan, Karachi, 8th March, 2022: Philip Morris (Pakistan)

Limited (PMPKL) posted a profit after tax of PKR 2,307 million
for the year ended December 31, 2021, compared to profit after
tax of PKR 1,765 million for the same period prior year. The
Company's net turnover during the same period stood at PKR
17,459 million reflecting an increase of 5.2% versus last year.
PMPKL continued to extend its role for strengthening the
economy through Company’s contribution to the National
Exchequer, in the form of excise duty, sales tax, and other
government levies, stood at PKR 26,673 million, with an increase
of 14.8% vs. last year, reflecting 60.5% of the Gross Turnover.

The tax-paying cigarette industry continues to face challenges

due to the lack of a level playing field due to the tax evasion and
violations under tobacco control laws by the non-tax paid illicit
cigarette manufacturers. The Government has made efforts to
curb the non-tax paid illicit sector to help strengthen the
economy by improving the contribution to the National
Exchequer.  No change in excise rates for the last two fiscal
years led to consumer price stability of the legitimate cigarette
brands which is critical to ensure that the price gap with non-tax
paid brands doesn’t stretch further (current price gap between
legitimate and non-tax paid brands is over 200%). This wide
price-gap between tax-paid and tax-evaded cigarette brands has
been the primary driver for the growth of illicit cigarette trade in
Pakistan. Excise driven price increases have contributed to the
growth of the illicit segment, which has been addressed by the
FBR by not increasing excise duty on cigarettes during the
federal budget. This policy move by the FBR witnesses a positive
outcome for the tax-paid cigarette industry and the growth in
Government Revenue.

The FBR has recently issued the license for track and trace
system for the tobacco industry in Pakistan, which is currently in
the process of being implemented. We believe this can be a very
effective tool to counter illicit cigarette trade, however, it is
important to recognize that without an effective enforcement
mechanism this initiative may not prove to be successful. It is
therefore critical that across-the-board implementation is
ensured for affixing tax stamps on each packet sold in the market
to help curb the non-tax paid illicit sector through identification of
non-tax paid cigarette brands.

Commenting on the effects of illicit on the overall economy,

Roman Yazbeck, Managing Director at PMPKL said, “We are
fully committed to contribute to Pakistan’s economy by
generating employment and through our contribution to the
national exchequer. While Pakistan’s economy is facing
challenges due to existing macroeconomic factors, the non-tax
paid illicit sector continues to add to economic woes. These non-
tax paid players not only create an uneven playing field for the
compliant tax-paying sector they also violate tobacco marketing
 and promotion restrictions and also damage the economy with
massive tax evasions”.

Talking about the sustainability initiatives PMPKL undertook

during last year, Yazbeck added, “In line with our sustainability
agenda PMPKL has been taking continuous measures to reduce
our carbon footprint and to conserve the environment.
Conversion of leaf boiler plant from furnace oil to LPG at our
Green Leaf Threshing Plant in Mardan and driving behavioral
change through clean up drives across the country are part of
our commitment towards environment sustainability.  PMPKL
also played a key role by paving way for sustainable solutions for
socio-economic issues while enabling the youth of the country by
supporting startups and entrepreneurs. In addition, the Company
introduced work policies to support an equal workplace
environment for which it also received recognition across
multiple platforms. We are determined to create social
environmental and economic value for all our stakeholders and
for the society at large”.

PHILIP MORRIS (PAKISTAN) LIMITED

  +92 (21) 35209600-01

 pmpk.info@pmi.com
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