Company financial analysis/ valuantion and strategy Altadis (Tobacco)

Summary of the Strategy A closer look at the objectives of the company would suggest that it is focused on the development of its brands besides gaining international exposure. Currently, the extensive focus of the firm is on European market however, through strategic acquisition process, it has also been able to show its presence in the developing markets. With increasing competitive pressure in French and Spanish market, presence in emerging markets can offer significant benefits. In the wake of the stronger probability for growth in the emerging markets, relocating to such markets provide an added competitive advantage and offers diversification benefits.
It is critical to note however, that firm is expected to perform better against its competitors in the European market. This fact suggests that the firm has also created a focus strategy wherein it has been able to cater to the needs of a single market through better products. (QuickMBA). In some markets like France, firm may not be able to compete better because of higher external costs such as increased taxes as well as price hikes.
It is also important to note that the firm has been focused on buying back its shares suggesting that the firm is willing to reduce the impact of external stakeholders. Besides, this also suggests that the firm has been able to generate enough cash flows to ensure that it can execute its annual plan to buy-back 5% of the shares.
The overall strategy of the firm seems to be well balanced with focus on growth as well as improving the current markets.
However, with an increased awareness regarding health and potential health damage caused by smoking, the overall demand for the products of the firm may decline in future. Firm seem to have focused on developing and marketing just one product line however, in order to survive in the future and ensure that it can compete, it needs to develop or diversify on the product level also. Since firm has well developed markets, it would be easier for the firm to compete.
The economic value added as a valuation methodology ensures that value of the firm is measured in terms of its economic profit. (Steele). The overall idea is that shareholders should more than what they pay as cost for capital employed by the firm. In this case, it is however, interesting to note that the firm has been engaged into the buying back of its own shares therefore this approach may need to be adjusted on continuous basis in order to capture the changes taking place in the capital structure of the firm as a result of this policy.
The firm’s strategy seems to have an excellent fit between the economic value added methodology in the sense that this approach captures the firm’s economic viability on the holistic level. Since the objective of the firm is to maximize the shareholders’ value therefore return must take into consideration the impact of financing cost of capital in order to provide fair valuation for the firm.
Bibliography
QuickMBA. Porters Generic Strategies. 2011. 23 June 2011 .
Steele, Jeffrey. The Origins of EVA. 1998. 23 June 2011 .