1992 STRATEGIC CRITERIA
introduction
The performance in 1992 will be measured by the degree of success achieved
in agreeing and implementing strategies to meet the Group's overall
objective to satisfy shareholders through providing an above-average return
on their investment in B.A.T Industries.
The criteria have been divided into those where the initiative lies
directly with GHQ and those where the responsibility of G1Q is to ensure
that agreed strategies are implemented in the Operations.
Wherever possible, the criteria have been expressed in a form where
performance can be measured either quantitatively or against defined
qualitative objectives for 'milestone' achievements (e.g. the completion of
a defined plan, report or study).
1. Overall Strategy
The current strategy is to achieve the Group's objectives by
concentrating on pursuing growth in Tobacco and Financial Services,
building on the Group's worldwide strengths and establishing
leadership positions in profitable growth markets within these two
sectors.
1.1 Leadership and Growth Potential
Each of the Group's businesses will be assessed against the two
key criteria of leadership and growth potential.
The aim will be to have a high and increasing proportion of the
Group's businesses in leadership positions in profitable growth
markets.
1.2 'Focus
There will also be an aim to reduce the proportion of the
Group's assets in activities outside Tobacco and Financial
Services, measuring the progress made in divesting these
businesses.
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2. Detailed Strategies (GZQ)
The following strategies will be implemented directly by GHQ or will
be coordinated through the Tobacco or Financial Services Strategy
Review Teams.
2.1 Tobacco
There will be a continuing objective to achieve growth in volume
and profits in the Tobacco business.
Key strategies to achieve this will be to strengthen the
competitive position of International Brands, to invest for the
medium term in new markets and to improve intra-Group
co-ordination in marketing and product sourcing.
There will be particular emphasis on upgrading products and
processes and on cost-reduction as a means for improving profit
margins, concentrating on indirect as well as direct costs. The
expansion of Leaf exports will also be promoted.
Recognising, the central importance of management. there will
also be strategies to improve the quality of recruitment and of
management training and development.
Progress will be measured against the following priority &in&:-
(a) To grow volume and market share:-
- For all cigarettes (Budget volumes + 6.9%)
- For International Brands (Budget volumes + 12.7%)
(b) To develop a worldwide strategy for developing business in
new markets and to implement plans for investing in at
least one country from the priority list (Russia, Ukraine,
Yugoslavia-Macedonia, Czechoslovakia, Vietnam, Cambodia,
Burma).
W To complete a review of the implications of the growth in
excise evasion and to develop appropriate strategies.
(d) To improve the measurement of smoking quality and to
institute a programme for upgrading the consumer appeal of
the Group's products, worldwide.
(a) To develop plans to expand Leaf Exports .
(f) To improve the systems for functional management training
and development.
(g) To increase the number of intra-Group management
transfer$.
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(b) To review the impact on the Group's results of changing
the accounting for Souza Cruz and to make appropriate
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3
2.2 Financial Services
There will be a continuing objective to develop strategies for
expanding the Group's interests in Financial Services, concentratin
on Personal Lines products and activities. Because of the less
homogenous nature of the Financial Services activities, there will
be fewer common strategies than in the case of Tobacco. Rowever,
the Centre through the FSSRT and other appropriate means will have
a responsibility to develop strategies for the Group as a whole
and to ensure that there is an appropriate level of co-operation
and information exchange between the operations. Progress will be
measured against the following principal aim :-
(a) To improve the effectiveness of the mechanisms for
intra-Croup co operation, for the exchange of experience and
mportist (e.g. on I. T. systems) and for the discussion and
expertise of issues involving more than one Operation.
(b) To review the impact on the Group's reported results of
changes in accounting methods and to sake appropriate
recommendations.
(c) To agree plans for the further development of the Group's
distribution capabilities for Life and General insurance in
the TJK.
(d) To develop medium-term plans and agree priorities for the
further expansion of the Group's interests in the UK, the US,
Continental Europe and, longer term, the Far last and the
Rest of the World.
(e) To co-ordinate the Group-wide development of better business
managers within the Financial Services operations.
2.3 -Supporting Activities (CRQ)
(a) Public Perception : An assessment should be made of the
degree to which the Group's standing in its major
constituencies has improved during the year.
(b) Environment Policy : Performance should be measured in
relation to the aims:-
To ensure that the Group's environment policy is kept
updated in line with best international practice.
To ensure compliance with this policy.
W Management Development . In addition to ensuring that
recruitment, 2SUSSeMBUt development and succession planning
are maintained at an appropriate standard in each of the
operations, the performance of the Centre should also be
judged against the degree of success achieved in the
recruitment and development of CRQ staff and in the
identification and development of candidates for the most
senior positions in the Croup, including the B.A.T Industries
Board.
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4 -
3. Detailed Strategies (operations)
In addition to ensuring that the Operations play a full part in
supporting the overall strategies described in Section 2 above, CHQ
will also be responsible for ensuring that the following specific
strategies or key actions are implemented within the Operations.
3.1 Br own & Williamson
(a) Review and reduce marketing spend on Richland and M.
(b) Reduce returns from the trade.
W Complete the re-organisation of the Production/Engineering
departments.
(d) Overhaul surplus machinery ready for resale.
(e) Complete the strengthening of International Division
management.
3.2 3=o.
(a) Achieve turnround in Australia, Malaysia and West Africa.
(b) Complete the upgrading of senior management.
(c) carry out post-audits on:-
- The Wills Australia acquisition.
- The Staines project.
(d) Agree plans for increasing the cost-effectiveness of
BATCo./BA= (Rubicon).
(e) Initiate further study of potential savings in 7 and SV
expenses.
M Develop plans for accelerating the growth of International
Brands.
(g) Appoint new Royal Warrant holder for SE 555.
W Hold discussions an excise with authorities in Venezuela,
Pakistan, Nigeria and Mauritius.
W Agree and begin implementing plans for expanding Leaf
Exports.
(j) Achieve significant progress in resolving the Koner
Salgado dispute in Argentina.
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3.3 BATC7
(a)Review options for increasing prices in domestic market.
(b)Review cost structures.
(c)Review options for improving profitability of export and
special business.
(d)Consider options for outside sourcing.
(a)Review strategies/options for Diverse.
(f)Review options for ECE shopping centre investaent.
3.4Sousa Cruz
(a)monitor progress on domestic cigarette prices and
International Brands on a monthly basis.
(b)Agree new excise regime with government.
(c)Obtain advice from Germany/Canada on RYO.
(d)Progress manufacturing rationalisation.
(a)implement the 1992 re-equipment programme.
(f)Review benefits of in-house printing.
(g)Tmpl emen expansion Leaf exports.
(h)Agree a new strategy for Pirahl.
MComplete divestment Maguary.
(j)Review divestment options for Palo.
WAgree re-financing Aracruz.
(1)Prepare plans to take advantage of relaxation of tax rules
for dividends.
3.5Allied Dunbar
(a)Develop a long term strategy for Allied Dunbar.
(b)Review options for alliances/acquisitions to Siva broader
distribution.
(c)Develop plans to increase market orientation and progress
the 'tiering' projects.
(d)Develop proposals to upgrade sales management.
(a)Develop plans for restructuring to reduce expense levels.
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(f)Review 1. T. systems.
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BAT Industries document for Province of British Columbia 23 April 1999