The economic and environmental factors affecting USTs operations Coursework

The economic and environmental factors affecting USTs operations - Coursework ExampleThe firm that is analyzed in the paper is UST Inc. UST Inc is involved in the retrace of tobacco products which continue to be one of the oldest and most profitable industries. This fact has been borne out not only in the ratios but the fact that the comp either has been set as the most profitable connection in the United States by one of the most trusted sources Forbes. The financial results speak to this fact. However, as in any industry there is competition and what has been happening is that even though the market is growing by 3.7% per annum UST has not been able to grow with it. This is due to the fact that the company has not been responding appropriately to the threats posed by its competitors. However, there are some environmental factors that have been affecting the company and so UST needs to answer these and new(prenominal) questions including What environmental factors affect the op erations of USTs business?What business risks does the company face,Can the company undertake the recapitalisation process effectively?Why is UST considering recapitalisation and what would be the incremental effect on the companys value?What other factors beyond interest rate shields should UST consider in assessing the value of its recapitalisation plan? The environmental factors entangle policy-making/legal, economic, and social issues. In addition to industry factors these affect every business and should therefore be given due consideration. In terms of the political/legal aspects the tobacco industry has been faced with tough regulations. These have had a negative impact on the cigarette industry but much little on the moist smokeless tobacco. However, and restrictions have had a negative impact on the prospects for future growth in the industry. While being saddled with a $100 to $200 million over the next 10 years in payment as settlement in keeping with an agreement arri ved at with Medicaid the company also face restrictions on its advertising and promotional campaign which is aimed at reducing the exposure of the youth population to tobacco products. Additionally, UST has a fewer litigations pending which is the nature of this industry. However, the smokeless tobacco industry has a much lower exposure to health related law-suits. The Medicaid settlement signifies a reduction in net income which cannot be recouped at this time when USTs market dowery is declining. In terms of the economic issues although consumption has been increasing USTs market share has been declining. The growth that has been experienced appears to be going to the companys competitors. UST has a track record of growth and innovation but this has not been the case in recent times. The company is used to the practice of annual price increases sometimes even twice per year but the competition will definitely resist the company from doing so for most of its brands. This trend of increasing prices has been somewhat abated by the introduction of price-value brands by the companys competitors. Although UST is large in comparison to its competitors and has a major share of the market the company has not responded the way that investors and analysts would like and so they are doubtful as to whether UST has not been able to respond in a timely and appropriate manner in order to regain its market share. Additionally, the resignation of the companys chief financial officer (CFO) and the handler of Tobacco in 1997 is a signal to investors that something is fundamentally wrong on terms of both the companies manufacturing operations and its financial management which are two chance on areas. These are key persons within the company and who obviously would have impacted the companys financial results. Like most other companies that are busy in the production of goods the aim is to have products at each stage of the product lifecycle and to have products that will appeal to different groups.