Strategic Management Case Study Example | Topics and Well Written Essays - 750 words

Strategic Management - Case Study Example This company is now selling their products in almost all countries through out the world. Imperial says that combining the fourth and fifth largest cigarette companies in the world on a friendly basis makes compelling sense and would be a good strategic fit, and analysts say there would be no major competition problems. (UK's Imperial Tobacco makes $15billion bid for Spanish rival Altadis) SWOT Analysis- SWOT analysis is intended to provide information that is appropriate for the company's resources and other factors for the purpose of maintaining its prevailing market position. It means analyzing the Strength, Weakness, Opportunities, and Threats. All these four factors should have an equivalent role in retaining its market strategy. Strength of a company indicates about its competitive advantage, mainly in respect of its patents, brand name etc. "SWOT Analysis highlights the weaknesses of the company and the threats to which it is exposed; the strengths of the company and the way the company has positioned itself to take advantage of the opportunities." (Imperial Tobacco Group PLC, Corporate Analysis). ... At the same time Threat creates a critical situation within the company's environment. It is a framework for the company to analyze the strength and weakness and for matching the company's opportunities with its threats. The major strength of Imperial Tobacco is that of innovation in the whole business areas. The company is delivering high quality products to their customers through which they are retaining and finding loyal customers for selling their products. The industry average in management practice is only up to 87%, but as far as the company is concerned, Imperial Tobacco achieves 88% towards its performance. Thus it becomes evident that they are the leaders in the industry. VRIO framework is a tool for analyzing an organization's capability for operating its business activities in an effective manner. This is a tool, which is internally applied within an organization for reviewing and improving its functioning. VRIO indicates Value, Rarity, Imitability, and Organization. Value means a firm's capability to utilize an opportunity and to defend any threat from others. It also provides a specification about the resource capacity of an organization. It is helpful for planning the future performance of a company and to defend against competitors. It enhances a company's productivity, which is more beneficial for improving its profitability as compared with its competitors. In order to maintain the Value concept, certain elements like corporate culture, effective management system, developing a friendly work atmosphere, and the adaptation of certain innovative techniques are essential. Rarity means an organization's ability to maintain its resources in the han ds of a few personnel. Due to the scarcity of resources, it is not easy

Coporate finace Essay Example | Topics and Well Written Essays - 1000 words - 1

Coporate finace - Essay Example Macquarie group limited 2014 financial report, the share price as at 30 December 2014 was $57.93. The company’s last ten years average total dividends, the return on equity and the payout ratios were $3.76, 11.1% and 66.8%. Dividend in the next period = dividend in the current period * (1+ the growth rate) = $3.76* (1+3.69%) = $3.89. now the three fundamental inputs are available and we can now punch into the equation below to get the return on equity: It is assumed that all investor do aim at maximizing the economic utilities and the asset quantities are fixed. The investors are risk- averse and rational. The investors are price takers and there is no way they can influence market prices. The investors have the same expectations that are related to the market. From the finance point of view, the cost of debt is calculated by using the following formula Kd= where I is the annual interest while P is the current market value of a debenture. The Macquarie group limited had an annual interest of $359m4. However, the market price of the debenture was $3507m. The cost of debt can, therefore, be computed by punching in the above inputs into the formula (359/3507) = 0.1023 hence 10.24%. This is where Re= cost of equity, Rd= cost of debt, E= the market value of the company’s equity, D= the market value of the firms debt, V= total value of debt and equity (E+D). Percentage of financing equity = E/V while the percentage of finance by debt = D/V and Tc = corporate tax rate6. The corporate tax for the company is 30%. From Modigliani miller irrelevant theory, the tax deductibility increases the value of the firm. This is by increasing the cash flows to respective equity shareholders. The tax deductibility of the debt down scales the weighted average cost of capital hence increasing the value of the firm. The cost of equity, Re, is higher than the cost of debt, Rd, but the saving in the cost of debt Rd is more hence making up for it