Item D z Croup Strategy Review
1. The Group Financial Forecast has shown that based or. the Plans for our
existing businesses, we have good prospects over the next 3-5 years of
achieving satisfactory rates of growth in profits.
2. However, much of this growth depends on achieving improvements in
performance and to ensure the continuing success of the Group we will
need to make substantial investments in new businesses with the
potential for sustaining this growth into the longer term future.
3. it has been shown that we have substantial resources that can be made
available and the key question, therefore, is where we should make our
investments.
4. We have agreed previously thac we should invest preferentially in the
four industrial sectors where we are mainly active in Tobacco, Retail,
Financial Services and Paper/Pulp. Ve have also agreed that because
the potential for growth in Tobacco is relatively limited it is to the
other three sectors that we need to look for our expansion.
5. During the past year we have been considering whether we should have
geographical priorities for development similar to our industrial
priorities and have come to the provisional conclusion that, in order
to make the most effective use of our financial and management
resource and to provide the best chance of maintaining a close control
over development, this should be concentrated in the regions where we
are mostly committed at present in North America, the EEC and Brazil.
6. It might be questioned whether an objective to concentrate
development in these countries and industrial sectors is too
restrictive firstly because it fails to capicalise on the Group's
strengths in other parts of the world and secondly, because it fails
co recognise that there may be better opportunities !or growth,
particularly in the Pacific Basin and in other industrial activities
such as Agribusiness, Plastic Mouldings (Europlast) and Scientific
Instruments (VC) where the Group already has some involvement and
where the growth prospects may be better, especially in those
countries where it may not be practicable to develop in Financial
Services or Retail.
7. The current view is that although priority should be given to
mainstream development we should not exclude developments in other
countries and industries, particularly in cases where there Ls a
strong cash flow from Tobacco and where investment in the Group's main
activities and/or repatriation of the surplus funds are not viable
alternatives. However, this is an issue which delegates may wish to
debate with particular reference to the specific quescions as to
whether:-
(a) There should be a more positive strategy to seek opportunities
- in the Pacific Basin
- in Developing Countries
- in Agribusiness.
(b) Whether, on the other hand there should be a more positive
strategy to concentrate the Group's resources by the divestment
of activities outside the main stream, in addition to those where
partial divescmen: has already been agreed to reduce risk (e.g. 0%
in South Africa and Hong Kong). U1
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8 - Perhaps the most appropriate time to discuss these questions Ls at the
end of the conference, after the issues regarding the main-scream
businesses have been considered.
9. Regarding these main stream businesses the first issue that needs to
be considered is the extent to which the Group can continue to depend
on Tobacco as a major source both of profits and, perhaps more
importantly of cash.
10. tt is then necessary to consider the extent of the opportunities for
development in Retailing in Paper/Pulp and Financial Services before
pulling these together to look at the picture for the Group as a
whole.
II. Underlying all of these is the assumption that the Croup can add value
to its individual businesses by transferring expertise from one part
of the Crouv to another. Therefore, the extent to which the Croup can
add this value must be a key issue to be borne in mind throughout the
discussions.
12. A central element of this value added will be the transfer and
development of management expertise and it is for this reason that
there is a specific session on management development which Hr. Dennis
will introduce on Thursday.
13. However, the starting point must be Tobacco and perhaps the most
appropriate way in which to be dn is with an update on the position
regarding the smoking and h
91th controversy, related litigacions and
the implications of rec developments in product liability
legislation.
C)
RS .':.k
tst :ecember 1986 Lrl
BAT Industries document for Province of British Columbia 21 April 1999