1. What Are the Company’s Strengths, Weaknesses, Opportunities and Threats?
UST Inc. is the newest wholly owned subsidiary of Altria Group as of 6 January 2009 for US$11.7 billion. Through the acquisition, UST Inc. was able to pass off its debt amounting to US$1.3 billion to the acquiring company. (Altria, 2009) Altria Group is a multinational company actively engaged in the food, wine and tobacco sectors. Before the acquisition, Altria Group already owned a number of smoked tobacco and wine brands. The acquisition of UST Inc. diversified its wine product brands and added smokeless tobacco product line. On the part of UST Inc., the acquisition settled its debt, widened its distribution network, and expanded its market reach (MindTools, 2009). The change in the organizational structure and processes following the acquisition means that UST Inc. needs to develop a new strategy by considering shifts in its internal strengths and weaknesses and external opportunities and threats (MindTools, 2009.
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§ Strong brand names
§ Specialized marketing knowledge
§ Access to niche market distribution networks in the U.S.
§ Product innovativeness
§ Trade secrets
§ High cost structure
§ Weak financial management
§ Operational inefficiency
§ Dependence on a small customer base
§ Weak procedures or processes
§ Developing the online market
§ Movement into untapped market segments
§ Entry into new foreign markets
§ Solidify control of the moist smokeless tobacco market
§ Diversify moist smokeless tobacco products
§ Entry of new competitors
§ Consolidation of the industry
§ Emergence of substitute products
§ Change in consumer taste
§ More stringent regulations
UST Inc. needs to maintain brand equity and take advantage of its specialized knowledge in smokeless tobacco and wines to develop new and unique products (UST Inc., 2009) as a means of differentiating its products and the company from its competitors. The company also needs to address its areas of weakness such as its high cost structure and weak management strategies causing the company to fall in debt despite its favorable market position, especially in the smokeless tobacco sector. It should also consider the sustainability of its reliance on a small customer base (Datamonitor, 2008).
Its wider distribution network, wider market reach, and capital infusion opens the opportunity for market and product expansion to UST Inc. including the online market and promising foreign markets. It could also create or move into new market segments, secure its position in the smokeless tobacco market, and diversity its smokeless tobacco products. To secure strategic success, UST Inc. has to guard against competing products and competitors, keep track of changes in consumer tastes, find a favorable position amidst consolidation (Datamonitor, 2008), and develop contingency plans for the impact of regulatory changes.
Based on the internal strengths and weaknesses; and external opportunities and threats faced by UST Inc., it is in better position because of the opportunities that opened following the acquisition that the company can realize by capitalizing on its strengths, addressing its weaknesses, and preparing or preventing the expected threats.
2. Are the Company’s Prices and Costs Competitive?
Understanding the situation of UST Inc. to support strategic development is by considering its value chain (MindTools, 2009). The primary activities comprising the operations of the company include supply chain management, product innovation, packaging, marketing and distribution to bring its products to consumers. Its premium pricing is largely due to its wide engagement in product innovation involving a significant area of investment. Apart from marketing, production innovation is a significant contributor to cost.
Supply Chain Management
Human Resource Management
Its support activities are procurement for supply chain management, human resource management for marketing and product innovation, and a range of infrastructure activities such as quality control, administration and finance planning. These support services are equally important so that these more or less equally contribute to costs that reflect on the premium price of UST Inc. products (UST Inc., 2009). However, investing in people development and finance planning would require slightly higher investments since these strongly support product innovation and marketing.
The priority cost items of UST Inc. reflects sound strategic decision because the company’s competitive strategy of differentiation requires its heavy investment in product innovation supported by human resource management and finance planning.
UST Inc. competes in the tobacco and wine sectors. In the tobacco sector, the company competes with Altadis, British American Tobacco, and Philip Morris International Inc. (Hoovers, 2009). These are all multinational companies competing in the global market. A consideration of the relative price of the product lines and brands of the competing firms show that the prices of UST Inc. not competitive primarily because of its premium pricing when all its competitors have low-end brands. The offering of low-end brands means that the companies were able to cut back cost through economies of scale and mass marketing. UST Inc. is not in this favorable situation. Its premium pricing targets a niche market. In the wine sector, the primary competitor of UST Inc. is Kendall-Jackson (Hoovers, 2009). In this sector, the price of UST Inc. is competitive because of similarities in the price range of its wine brands with its competitor.
In employing benchmarking analysis (MindTools, 2009), it appears that the cost and concurrent prices of UST Inc. is not competitive in the tobacco sector but competitive in the wine sector. This has implications on strategy. In tobacco sales, UST Inc. could expand its niche market to capture the global market and it can develop a low-end brand for its smokeless tobacco product. In its wine products, UST Inc. can manage its cost to secure profit at the premium price or it can also diversify by introducing a low-cost brand of wine.
Altria. (2009). Altria completes acquisition of UST. Retrieved February 2, 2009, from http://www.altria.com/investors/02_00_NewsDetail.asp?reqid=1240832
Datamonitor. (2008). UST Inc. company profile. Retrieved February 2, 2009, from
MindTools. (2009). Problem solving techniques. Retrieved February 2, 2009, from http://www.mindtools.com/pages/main/newMN_TMC.htm
Hoovers. (2009). UST Inc. Retrieved February 2, 2009, from http://www.hoovers.com/ustinc./--ID__11533--/free-co-factsheet.xhtml
UST Inc. (2009, 2 February). Company overview. BusinessWeek. Retrieved February 2, 2009 from
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