Lorillard Financial Performance - Assignment Example

? Lorillard Financial Performance Lorillard Financial Performance Lorillard Tobacco Company is a company situated in America which is responsible for marketing cigarettes through brand names like Maverick, Max, Old Gold, Satin, Kent and Newport. The company was founded by Pierre Abraham Lorillard in 1760 (Edward, 1989). The company has its headquarters in Greensboro, North California and comprises of over 2,700 employees. Lorillard Inc. has been ranked the third largest manufacturer of tobacco in the United States (Spencer, 2011). This article will focus on the 2011 annual report, by giving a review and analysis of the review according to the stated guidelines. Mission Lorillard’s mission is to supply their clients with the best quality menthol cigarettes (Lorillard, 2009). This is achieved by building capabilities and strong processes that support the strategized vision. This is also guaranteed from the commitment and passion portrayed by the employees and the general board members of Lorillard (Lorillard, 2009). The company also ensures that their staff members are able to provide the highest level of excellence through implementation of new strategic plans aimed at boosting the company’s sales. Lorillard Inc. also ensures that they maintain their retail market share through making more sales internationally, hence; marketing its brands (Lorillard Inc., 2011). Vision Lorillard has a vision of becoming the world’s leading company in the manufacture of cigarettes (Lorillard Inc., 2011). This can be portrayed from the continuously rising net sales, operating income and earnings per share. They also look into executing their core strategies and outperforming the underlying industry trends. Furthermore, their vision also entails the effortless geographic expansion of existing goods and the launching of new products that promote the company’s net sales. As seen from 2011, the net sales amounted to $6.5 billion which was an increase of 9% from the preceding year (Lorillard Inc., 2011). This only entails meeting the client’s requirements that are vital in boosting other related developments. Lorillard Inc. aims at executing three core strategies which include building out processes and capabilities that support their strategic vision, protecting and growing their own menthol cigarette business and carefully pursuing close-in adjacencies (Lorillard Inc., 2011). All the three strategic efforts are aimed in achieving the vision of Lorillard Company. In addition, this helps them to ensure responsible Newport pleasure to all the adult smokers. These outstanding visions have enabled the company to maintain growth in the retail market. The Newport cigarette brand employs the strategy of protecting and growing the menthol cigarette business. Lorillard evidently challenged some of the unwarranted regulations and defended the brand’s freedom in actively operating in debates with the U.S. Food and Drug Administration (FDA) to respect their selflessness of menthol cigarettes. Lorillard also markets the Newport brand in Washington DC. Through expansion of merchandised programs, Lorillard was able to grow vastly with its main target being the adult smokers of Newport (Lorillard, 2009). Furthermore, Lorillard was able to achieve a record annual share and eliminated distraction after signing of a four-year labor contract with the union associates. An analysis from 2008 shows the brand’s growth from a mere 9.7% to 11.9% (Lorillard Inc., 2011). In pursuing close-in cigarette adjacencies, the Newport non menthol brand is brought into focus. It is evident that most of the efforts that the Lorillard Inc. focused on entailed expansion of the Newport brand. This is because the Newport brand makes up to 70 percent of the cigarette industry. According to the first year of Newport’s performance, the non menthol product performed extremely well. Nowadays, Lorillard offers the best menthol products in eight states, in the West. Moreover, they also make considerable profits from the Maverick brand of cigarettes. Lastly, the company strives to build out processes and capabilities. This is achieved through internal capabilities that aim at implementing the vision. Lorillard also made additional improvements which entailed meeting the consumer demands. This presents the commitment of the company in maintaining its relation with their shareholders. This also presents their strong and committed staff aimed at making it better for the coming periods. Financial Summary Lorillard turned into a sovereign publicly traded conglomerate in June, 2008. This saw the company increase its quarterly dividend by 68% (from $0.92 to $1.55). At the end of 2011, Lorillard had made a profit worth more than $1.6 billion, while it paid $723 million in cash dividends (Lorillard Inc., 2011). In addition, Lorillard repurchased $1.6 billion common stock during the same year. The company states that 2011 was an outstanding year in their success. Moreover, their team is now stronger than ever and they are committed in pursuing challenges as stated by the current Chairman, President and CEO, Murray S. Kessler (Lorillard Inc., 2011). Marketing and Competitive Analysis In the United States, marketing of tobacco products only targets individuals who are over the age of 21 (Lorillard, 2009). This is as required by the law that presides over marketing of Lorillard’s products. There are restrictions that have been set forward to ensure that Lorillard enhances its marketing strategies through the methods presented below. 1. In advertisements done by Lorillard, the models should appear to be over 25years. 2. The marketing strategies should not involve an athlete or any other individual who is indispensable to sexual attraction, prominence, or success (Lorillard, 2009). 3. The packaging materials for Lorillard’s products must have the health warning that is required by the federal Family Smoking Prevention and Tobacco Control Act (FSPTCA) (Lorillard Inc., 2011). 4. Lorillard should not use cartons in their product promotion and marketing. 5. The company is also restricted to distribute free cigarette samples. Lorillard anticipates that its employees follow such marketing principalities among others put across by the government. The company is subject to the competitive nature which is a norm in most businesses. Lorillard has a competitive base, and in case the company is not able to compete with other cigarette manufacturing markets in the region, then its profits will dwindle (Lorillard, 2009). To maintain their competitive nature, Lorillard strives to promote its products through efforts that result into adjusting the spending and promotional programs. This competitiveness is also enhanced through the use of technological media to market their products, hence; maintaining their brand. From the report, some of the cigarette manufacturers that pose their competitive nature to Lorillard include Philip Morris USA Inc. and Reynolds Tobacco Company (RJR Tobacco) (Lorillard & Company, 1960). The appropriate strategy that can be applied to Lorillard is ensuring a low cost of their products. Lorillard is valued at the differentiation aspect in their brands, since; they manufacture menthol cigarettes which not all the cigarette manufacturers manage to produce (Lorillard Inc., 2011). However, the company charges extremely high costs to its products due to their high quality. Therefore, they should standardize their product’s prices. For the company, the charge posed on premium brands is higher while, for the discount brands, the charges are extremely lower. Even though, the price can also be determined by the quality, brand and other promotional activities. By rationalizing the prices of their products in different brands, Lorillard will boost their sales and increase their consumer attention. Moreover, this will increase the amount of returns to their shareholders. Lorillard has a variety of brands which are cigarette manufacturers. This scenario involves Maverick, Max, Old Gold, Satin, Kent and Newport (Lorillard Inc., 2011). Among these brands, there are those which are considered as premium brands while others are discount brands. The premium brands are those that are popular to the cigarette consumers in the United States while the discount brands are brands that unpopular. The premium brand that is prominent in the region is Newport. The other brands form the discount brand majority. In the future, a merger of the discount brands may be singularly appropriate to boost the sales of Lorillard. For example, Maverick may join forces with Kent and Max with Old Gold. In this way, Lorillard will ensure that all its brands make exceptional sales inconsiderate of their manufacturing history. This type of amalgamation scenario promotes Lorillard’s sales and product popularity. This can be described as the best scenario that can improve the state of Lorillard Inc. If I was a leader in the organization, I would consider rewarding the employees for maintaining high spirits according to the work contract. For example, organizing a barbecue party for the workers would sound a brilliant idea. The employees have kept the company’s status on a high level, and they deserve a treat of a kind. Additionally, I would also consider giving workers who have shown exemplary performance salary promotions to boost their working capabilities. Looking at the financial status of the company, this can be a fair choice of reward to the employees in general. This type of selection comes handy in most companies, which organize occasional treats for their employees. Most industrious companies perform such acts to their employees as an act of motivation. Some of the other rewards that would be considered include giving them a day rest, organizing a tour to an anonymous location or even giving them monetary rewards according to their efforts in their job descriptions. The current strategy of the company is based on a policy of returning approximately 70-75% earnings to shareholders in the form of bonuses (Lorillard Inc., 2011). This policy is based on the current trend in certain market factors like monetary and fiscal policies, interest rates and inflation. Such like strategies in the company discourage non ethical behaviors in the business arena. This is because each shareholder in the company is entitled to the same dividend rate. In some corporations all over the world, one is able to note the rate of ethical behaviors in a business. This is brought about by factors such as the unfair distribution of dividends among other non ethical behaviors. In conclusion, statistics present that Lorillard shipped up to 40.7 billion cigarette sticks which were sold in parts of the United States and other territories (Lorillard Inc., 2011). This shows that the company has employees who strive for a positive outcome in the business arena. Therefore, the high number of employees in the region has made it possible for the company to achieve its vision. The managerial changes also seem to have influenced the positive growth of the company in a significant way. Individuals all over the world are also encouraged that smoking is dangerous to one’s health since it can cause premature death or infections to both the passive and active smoker (Lorillard Inc., 2011). Scientific evidence is there to prove that most individuals who are exposed to dangers of smoking suffer adverse effects. This report can, therefore, be used as the basis of further legal action against manufacturers of cigarettes including the Lorillard incorporation. References Edward, D. (1989). Philadelphia gentlemen: The making of a national upper class. United States: Transaction Publishers. Lorillard & Company. (1960). Lorillard and tobacco: 200th anniversary. United States: Lorillard Pierre. Lorillard Inc. (2011). Lorillard 2011 annual report. Retrieved from http://lorillard.com/wp-content/uploads/2012/04/Lorillard_AR_Final_forWEB.pdf Lorillard Inc. (2011). Lorillard. Retrieved from http://www.lorillard.com/ Lorillard, P. (2009). P. Lorillard’s thoroughbred stock. United States: Husain Press. Spencer, W. (2011). Cherry and black: The career of Mr. Pierre Lorillard on the turf. New York: HarperCollins Publishers. Read More