Measuring market orientation of Muscle Pharm Corp. (MSLP:US) British American Tobacco South Africa | Page 9
British American Tobacco South Africa: Evaluating the role and substance of its strategy in achieving sustainable competitive advantage
2.4 Key performance indicators (KPI) and track record
To measure how successful the strategy by the management of BATSA has been executed, the KPI’s
for each strategy pillar will be defined and measured. The results will be considered to determine the
strengths and weaknesses as well as potential threats and opportunities. The KPI business measures
are as follows (BAT, 2014a):
Growth (Market share, GDB volume, total cigarette Volume)
Productivity (adjusted net operating profit, operating margin)
Winning organization (Employee engagement index)
Responsibility (carbon dioxide equivalent, Group energy use)
Overall business model: share price performance vs London Stock Exchange (LSE)
Results table:
BAT Business Unit Africa
Revenue (£mn)
Adjusted profit (£mn)
Volume in bn
Share of group revenue in %
Share price performance
Median FTSE100 FMCG
Operating Margin
Return on Equity
GDB growth
2006
1489
468
104.6
10%
26.90%
27.95%
4%
∆ 2007 (1)*
1445
470
101
- 37.50%
29%
- 30.92%
10%
∆ 2008 (2)*
-3%
1797
0%
536
-3%
120
278% 14.70%
4.70%
8% 29.50%
11% 34.35%
150% 14%
∆
26%
35%
6%
2009
2270
724
127
17%
5% 15.50%
-32% 3.20%
-2% 28.90%
4% 35.87%
-71% 4%
∆
NA
NA
NA
NA
-5%
-84%
6%
-8%
75%
2010
3931
1167
235
26%
14.70%
0.50%
31%
32.98%
7%
∆
2011 (3)*
2%
3990
12%
1311
0%
236
4%
27%
73%
25.40%
3120% 16.10%
17%
35.80%
4%
34.35%
29%
9%
∆ 2012 (4*)
3%
4,105
14% 1,490
-4%
226
0%
27%
-9% 23.10%
-43% 9.20%
4% 37.40%
38% 47.27%
-67%
3%
∆
1%
6%
-4%
0%
NA
NA
NA
NA
NA
Figure 1: track record retrieved from BAT annual reports 2005-2013 – (BAT, 2014)
Market comment South Africa
(1)* In South Africa, despite the weaker average exchange rate, good profit growth was achieved as a result of reductions in illicit trade, an improved product mix and higher margins. The margin improvements were the result of
pricing and productivity improvements across the business. Dunhill recorded its highest ever market share and Peter Stuyvesant continued its growth.
(2)* In South Africa, profit was only slightly higher than last year, adversely impacted by the weaker exchange rate. In local currency, profit growth was achieved as a result of higher prices and an improved product mix, partially
offset by the decline in volumes. Volumes and market share were lower following the termination of the Chesterfield trademark license agreement at the end of 2007. Dunhill and Peter Stuyvesant continued to deliver strong share
performances, while Kent performed well after its migration from Benson & Hedges.
(3)* In South Africa, market share strengthened due to the good performance of the portfolio. There was a significant increase in the incidence of illicit trade and downtrading to the low-priced segment. As a result, profit was in line
with last year.
(4)* Profit grew as a result of price increases but this was more than offset by the adverse exchange rate moveemnt. Volume was lower and market share was slightly down as a result of price competition.
(figure 1: track record table BAT Africa – (BAT,2012; BAT,2011; BAT,2010; BAT,2009 ; BAT, 2008; BAT, 2007)
The data tables above demonstrate that the delivering of growth on a volume basis is negatively
affected by external changes such as health issues, illicit trade and tax increases. However, the strategy
delivers decent growth and increase in net profit mainly due to the strong organic growth of the global
drive brand (GDP) products, excise tax increases, strong market position and increase in efficiency of
production. The BAT stock outperformed the benchmark every year since 2006 by delivering more
sustainable growth at the same time (less volatility).