Comparative Analysis of Swedish Match and Imperial Brands 2016 Reports

This report presents a comparative analysis of Swedish Match and Imperial Brands, focusing on their 2016 annual reports and their adherence to the IASB Framework. The analysis assesses key performance disclosure parameters, including strategic elements, business models, governance, and risk management. The report highlights the accessibility and comprehensiveness of information provided by both companies, with a scoring system indicating Swedish Match's stronger performance. The comparison covers strategy and objectives, business models, risk management, and governance, providing insights into each company's approach to financial reporting and operational strategies. Key findings reveal how each company communicates its strategic vision, manages risks, and structures its governance, offering a comprehensive overview of their financial performance and operational practices.

MANAGERIAL ACCOUNTING
EXECUTIVE SUMMARY
To form a comparative analysis of Swedish Match and Imperial Brands, their Annual
Reports for 2016 were analysed in order to determine how each element responded to
the IASB Framework on Qualitative and Graphical levels. The results have indicated
that in both the depth and breadth of the disclosure given in the Annual Reports, the
companies were, in principle, in consistency with the IASB Framework. In particular,
the following parameters of performance disclosure were assessed, especially in the
areas of:
1. Strategic Elements:
(a) Strategy
(b) Business Model
(c) Governance
(d) Risk Management
2. Performance Elements:
(e) Economic
(f) Segmental
Alignment to the IASB Integrated Reporting Framework
The level of disclosure and comprehensiveness shown in the 2016 Annual Reports of
Swedish Match and Imperial Brands, performance has been largely in consistency with
the performance elements contained within the IASB Value Framework. A main key
finding of this analysis is that the elements show a link with the overall Company’s
strategy.
Accessibility
All of the 5 IASB framework elements were found to be easily accessible within the
2016 Annual Reports of both the companies, showing both qualitative and graphical
representation.
Comprehensiveness
For this analysis to become effective, a marking system has been proposed in this
analysis report, where both the companies were judged on the basis of marks obtained.
The result has been clearly in favour of Swedish Match, which scored 150 marks as
against the 100 scored by Imperial Brands. (See Table at the end)

1. Comparative Analysis: Strategy & Objectives
1.1. Report Extract: Chief Executive’s Strategic Review
SWEDISH MATCH
“Sustainability work for Swedish Match is concentrated in those areas which are most
important for the Company and our stakeholders. We create shareholder value by
offering tobacco consumers enjoyable products of superior quality in a responsible way.
By providing products that are recognized as safer alternatives to cigarettes, we can
contribute significantly to improve public health”. - Lars Dahlgren, President and
CEO, Swedish Match Annual Report 2016, Page-5.
IMPERIAL BRANDS
“Our name may have changed but our strategy and values remain the same. We
continue to run a responsible and successful business that’s focused on maximising
sustainable returns for our shareholders”. Mark Williamson, Chairman, Imperial Brands
Annual Report 2016, Page-5.
1.2. Reporting characteristics that drive ‘Strategies & Objectives’
SWEDISH MATCH
The operations of Swedish Match are characterized by its strong cash flows. Its
management believes that excess funds should be returned to shareholders through
distribution of dividends and share buybacks, (Marchildon & McDowall, 2013).
IMPERIAL BRANDS
Imperial’s strategy is to focus on maximising its sales to deliver a sustainable return to
the shareholders. Imperial wants to achieve this by building the contribution of its
Growth and by improving its quality of growth, while prioritising profit delivery and by
driving performance across the geographic footprint, (Mudra, 2014).
1.3. Extensiveness & Accessibility
SWEDISH MATCH
The ever-increasing levels of regulations and restrictions imposed by governments and
other non-government regulators are reducing consumption of tobacco, most notably,
consumption of cigarettes. These regulations are impacting the growth and production

of tobacco products thus curtailing the availability and accessibility of its products,
(Yona, 2011).
IMPERIAL BRANDS
Imperial uses Key Performance Indicators to measure the progress made in delivering
the group’s strategy. The measures adopted reflect the group’s priorities and these are
used for monitoring and driving business performance. The management focuses on
maximising the available opportunities by building the contribution and strategically
managing the markets for delivering Growth and Returns, (Keown et al, 2012).
1.4. Comprehensiveness
SWEDISH MATCH
• Global tobacco market comprises of smoking tobacco products and smokeless tobacco
products.
• Cigarettes from the largest segment, accounting for 90% of all globally consumed
tobacco.
• In comparison, smokeless tobacco segment, though small, is growing substantially.
IMPERIAL BRANDS
Imperial has policy of supporting any reasonable, but proportionate and evidence-based
regulation, especially those which respects adult freedom and recognises that tobacco
products are being patronised by millions worldwide, (Gibson & Fraser, 2013).
1.5. Conclusion & Strength
SWEDISH MATCH
Swedish Match’s Strategy and Objectives have been well communicated throughout the
report. Although the group has focussed less on its long-term targets, its strategic and
objective performance information is ‘good’.
IMPERIAL BRANDS
However, the strength of Imperial’s Strategy and Objectives performance information
has focussed more on developing the business in the future and I find it to be ‘below
average’.

2. Comparative Analysis: Business Model
2.1. Report Extract: Chief Executive’s Strategic Review
SWEDISH MATCH
“This was another year of strong value creation and I’d like to thank our people across
the business for all their hard work and dedication. Their focus on driving quality
growth, embracing new ways of working and effectively managing cost and cash has
been integral to our success”. - Lars Dahlgren, President and CEO, Swedish Match
Annual Report 2016, Page-5.
STABLE PROFITABILITY AND STRONG CASH FLOW
Swedish Match’s operations are based on a portfolio of high quality brands which provide a solid
foundation of operating profits, with stable margins, and generate strong cash flows.
IMPERIAL BRANDS
Our business model illustrates how we create value. Consistently applying our Sales
Growth Drivers to our Growth and Specialist BRANDS, combined with effective cost
management, delivers quality sales with high operating margins. We use this cash to
reinvest to support growth, pay down debt or return to shareholders through dividends.
Mark Williamson, Chairman, Imperial Brands Annual Report 2016, Page-5.

2.2. Reporting characteristics that drive ‘Strategies & Objectives’
SWEDISH MATCH
Swedish management is apprehensive that global tobacco market has undergone a major
shift in consumption trends of cigarettes. Swedish realises that consumer engagement is
increasingly becoming important in many of its product categories. Hence, educating
the consumer about non-tobacco products and their less harmful health characteristics is
essential to build product awareness, (Greuning, Scott & Terblanche, 2011).
IMPERIAL BRANDS
Imperial believes its portfolio consists of Growth, Specialist and Portfolio BRANDS.
Markets have accepted the Growth BRANDS as they have broader consumer appeal;
Specialist BRANDS too enjoy a strong appeal among specific consumer groups.
Portfolio BRANDS have a mix of the local and regional characteristics, (Richard (ed),
2014).
2.3. Extensiveness & Accessibility
SWEDISH MATCH
Regulations and restrictions on tobacco products are getting widespread to cover more
tobacco products. Hence, adjacent product categories, which are replacements of

cigarettes, need to be brought in consideration and focus so that consumer needs are
met, (Greuning, Scott & Terblanche, 2011).
IMPERIAL BRANDS
In this respect, Imperial BRANDS have been consistently delivering alternate products
and have a track record of following a compliant strategy. This has been helpful in
generating handsome returns to the shareholders and has also helped the group in setting
up a strong platform for the creation of future values, (Moens & Jones (ed), 2013).
2.4. Comprehensiveness
SWEDISH MATCH
In general, consumption of cigarettes and tobacco products has been in a declining stage
in most developed countries over the past decade. Although cigarette consumption is on
an increase in many emerging markets, Swedish Match has not followed the practice to
produce tobacco products and cigarettes, (Schaffer, Agusti & Dhooge, 2014).
IMPERIAL BRANDS
Imperial BRANDS has been following the initiative of comprehensively and actively
directing its investments into those segments of the global markets where it can derive
the best returns and thus avoid those market segments which give unprofitable low
volumes, (Marchildon & McDowall, 2013).
2.5. Conclusion & Strength
SWEDISH MATCH
Despite facing opposition from governments and non-government organizations to
reduce tobacco consumption the Business Model performance information of the group
is ‘good’.
IMPERIAL BRANDS
The group’s performance information about its Business Model is ‘very good’ as the
group’s track record of delivering consistent returns to its shareholders has created a
strong platform for the creation of future values.

3. Comparative Analysis: Risk Management
3.1. Report Extract: Chief Executive’s Strategic Review
SWEDISH MATCH
“While the new regulations, which notably address all products launched since 2007,
and all new products proposed after August 2016, will complicate our work, the tasks
involved are manageable, and we are confident that we will be successful in this new
environment”. - Lars Dahlgren, President and CEO, Swedish Match Annual Report
2016, Page-5.
IMPERIAL BRANDS
“This reinforced the strength of our strategy and highlighted opportunities to drive even
greater focus on our strategic priorities: strengthening our portfolio, developing our
footprint, optimising our cost base and embedding capital discipline”. Alison Cooper
Chief Executive, Imperial Brands Annual Report 2016, Page-11.
3.2. Reporting characteristics that drive ‘Strategies & Objectives’
SWEDISH MATCH
At Swedish Match, appropriate competencies have been in place at the organization
level and in the governance structure where clear responsibilities have been set with
prerequisites defined for risk management at all administrative levels. The group’s Code
of Conduct also ensures that an organizational culture is maintained which helps in
preventing the administrators to take those risks which are deemed to be unacceptable,
(Moens & Jones (ed), 2013).
IMPERIAL BRANDS
At Imperial BRANDS, the management defines ‘risks’ as anything which could prevent
the group from achieving its strategic objectives. The management’s goal is to achieve
the required strategic objectives and let the administrator’s capitalise on the growth
opportunities that require the management to deal effectively with the risks faced,
(Schaffer, Agusti & Dhooge, 2014).
3.3. Extensiveness & Accessibility
SWEDISH MATCH

The Board of Directors of Swedish Match oversees the Company’s risk management
processes, and is empowered to finalise the group’s strategic plans and the risks
associated with it. The risks are tackled on the basis of the recommendations received
from the Group Management Team, (Mudra, 2014).
IMPERIAL BRANDS
At Imperial BRANDS, risk is considered to be an inherent part of the group’s operating
environment. The ambiguous, volatile, complex and the uncertain world in which the
group operates require effective management of the known risks, together with
identification and assessment of any emerging risks, in order to achieve the group’s
strategic objectives, (Keown et al, 2012).
3.4. Comprehensiveness
SWEDISH MATCH
The management of Swedish Match conducts an annual review of the major risks, as
part of its strategic planning process to assess methodologies to avoid such risks. This
review and the assessments held help the management to ensure that it can take
appropriate action, thereby helping the group in reducing and preventing the undesired
risks, (Schaffer, Agusti & Dhooge, 2014).
IMPERIAL BRANDS
The Imperial Group’s risk management framework has been aligned to its operating
model and has been assembled as an integrated approach in the governing policy of the
group. This structure not only encourages communication, it also helps in diffusing
escalation of risk across the Group’s diverse geographical footprint, (Moens & Jones
(ed), 2013).
3.5. Conclusion & Strength
SWEDISH MATCH
The performance information of Risk Management created by Swedish Match through
education and information distribution about Swedish Match’s tobacco products, makes
this feature ‘very good’ especially when it highlights the less harmful health
characteristic of its products as compared to cigarettes.
IMPERIAL BRANDS
Imperial’s risk management approach depends on deployment of technical experts
having knowledge and practical skills for developing appropriate policies, processes and

control structures to support the management. I find it to be an ‘excellent’ way of
mitigating risks.
4. Comparative Analysis: Governance
4.1. Report Extract: Chief Executive’s Strategic Review
SWEDISH MATCH
“This has been an eventful and exciting year for Swedish Match Group, which has been
making good developments for innovative smokeless products both in Scandinavia and
in markets outside of Scandinavia, a record performance for our cigar business in the
US, and the successful IPO and subsequent reduction in ownership of Scandinavia
Tobacco Group”. Lars Dahlgren, President and CEO, Swedish Match Annual Report
2016, Page 3.
IMPERIAL BRANDS
“Imperial BRANDSs continues to be run in an open and transparent manner. You
can find out more about our governance framework and the work of the Board and its
Committees in the Governance Report. The composition of the Board changed during
the year. We have the right strategy, the right BRANDS and the right people, and that
puts us in a strong position to create further value for shareholders over the coming
years”. – Mark Williamson, Chairman, Imperial Brands Annual Report 2016, Page-3.
4.2. Reporting characteristics that drive ‘Strategies & Objectives’
SWEDISH MATCH
The Board of Directors is responsible for appointing, issuing instructions and
monitoring the work of the President. The working procedure for Board of Directors is
established at the statutory Board meeting every year. The working procedure includes
instructions which are related to the roleplayed by the Chairman of the Board, dividing
responsibilities between the Board of Directors and the Company President and
guidelines to be issued for financial reporting to the Board. The Chairman of the Board
has the responsibility to organize as well as to direct the work to be undertaken by the
Board and is also to ensure that the Board fulfils its obligations. The other
responsibilities which the Chairman must fulfil is forwarding of owners’ opinion to the
Board of Directors, (Greuning, Scott & Terblanche, 2011).

IMPERIAL BRANDS
At Imperial Brands, the Directors have the collective responsibility and accountability
towards the shareholders for maintaining the long-term sustainable success of the
Group. On the other hand, the Board is responsible for providing overall leadership and
guidance to the Group Management Team by setting the strategy targets and oversee
their implementation. Hence, being part of the governance framework, it is for the
Board to adopt the schedule of matters and pass the final decision on them. The
schedule of matters includes tasks such as approval of Group’s strategy, dividends,
business plans and make major financial announcements. The Board also has the
responsibility to approve any acquisition or disposal of fixed assets which exceed the
stipulated thresholds, (Gibson & Fraser, 2013).
4.3. Extensiveness & Accessibility
SWEDISH MATCH
Board of Swedish Match has, in the recent years, devoted much time on the strategic
assessment of Scandinavian Tobacco Group (STG). This has been done in accordance
with the financial policy practiced by Swedish Match. The Board had proposed that all
the excess cash which has been derived from divestments and which the company did
not require for its day to day working would be distributed amongst the shareholders.

For all such policy decisions, Swedish Match applies the Swedish Code of Corporate
Governance, (Schaffer, Agusti & Dhooge, 2014).
IMPERIAL BRAND
The Board also delegates responsibility to develop and implement the Group strategy
for day-to-day management to the CEO, who is supported by the Operating Executive
(OPEX), which is chaired by the CEO. Apart from this, there are Board Committees
who are also delegated with other matters. These delegations are controlled by clearly
defined terms and written limits. The OPEX is made up of senior executives who come
from all sections of the Group. Its role is to oversee operational execution and to deliver
the Group’s strategic and financial plans. Apart from this, the OPEX and the Audit
Committee are responsible for the internal controls to function effectively and also
control the risk management processes throughout the Group, (Keown et al, 2012).
4.4. Comprehensiveness
SWEDISH MATCH
Swedish Match is governed by a variety of rules and some of them are – Company’s
Articles of Association, Swedish Companies Act, Swedish Code of Corporate
Governance and Rule Book for Issuers on Nasdaq Stockholm including some other
applicable regulations and laws. The internal regulations and standards which also affect
Swedish Match’s corporate governance, will include Board’s instructions to the CEO,
Board’s Rules of Procedure, Group’s Code of Conduct and any other policy document
which is issued within the Group, (Marchildon & McDowall, 2013).
IMPERIAL BRAND
The OPEX Committee reviews and evaluates the composition of the Board Committees
so that an appropriate knowledge, balance of skills and experience is maintained so as to
enable the committees to function effectively. In place Succession Plans are used for
NEDs, Executive Directors and Group’s senior management and also the OPEX and
these are reviewed periodically. The Committee has to retain an overview of the
development plans keeping in view the wider organisational structure and its talent
management processes, (Greuning, Scott & Terblanche, 2011).

4.5. Conclusion & Strength
SWEDISH MATCH
The Company has not reported any deviation from the applicable Codes and also from
the explanations provided in its Annual Report 2016, the performance information of
Risk Management which has been created by Swedish Match makes this feature ‘very
good’.
IMPERIAL BRAND
The Company has not reported any deviation from the applicable Codes and also from
the explanations provided in its Annual Report 2016, the performance information of
Risk Management which has been created by Swedish Match makes this feature ‘good’.
5. Comparative Analysis: Processes & Supply Chain
5.1. Report Extract: Chief Executive’s Strategic Review
SWEDISH MATCH
“We work with honest and straight-forward relationships with our suppliers, providing
clear indications of expected volumes for next year’s production and consumption and
clear prerequisites on expected quality in delivered product. The blender, procurer and
sustainability expert work together in a team to assure progress in sustainable sourcing
of raw tobacco. We have an integrated approach to procurement and have put quality in

our snus products and the GOTHIATEK® standard first for nearly two decades. This
allows us to pursue traceability further up the chain”. Martin Olsson, Director of Leaf
Operations, Scandinavia Division, Swedish Match Annual Report 2016, Page 35.
IMPERIAL BRANDS
“Our European distribution business Logista has a history of delivering good results and
2016 was no exception. Distribution fees and adjusted operating profit both increased
and the Logista team continues to focus on cost management and new growth
opportunities to further drive the profitable development of the business”. Alison
Cooper Chief Executive, Imperial Brands Annual Report 2016, Page-11.
5.2. Reporting characteristics that drive ‘Strategies & Objectives’
SWEDISH MATCH
Management of Swedish Match contained relevant sustainability frameworks in the
process to define those issues which are material to the group. Materiality has always
been assessed on the basis of issues which are of global context. The group’s actual
impact is based on the management’s potential of directly or indirectly influencing the
issues, as well as its impact on long term viability of the group’s business. The group’s
‘Group Management Team’ has the collective responsibility of Swedish Match’s efforts
on sustainability. The Group Management Team is actively involved in the process of
defining and setting the strategy. In order to make the group’s sustainability strategy a
reality to cover all parts of the group, management has built a parallel organization
across all operating units which back up both, the development and implementation of
the sustainability strategy, (Richard (ed), 2014).
IMPERIAL BRANDS
Overall distribution of our products in all the operational areas is based on the principals
that we follow in our distribution business system named Logista. This system has
created history by delivering good results all through and hence, 2016 was no exception.
The Group was able to maintain a steady outflow in Distribution Fees and the Group’s
operating profit. Through a robust distribution network through the Logista team, both
the factors showed an increased trend which the management hopes to continue. The
management is also focussing on cost management and is constantly looking for new
growth opportunities in order to further drive profitability and development of the
group’s business. Group’s track record of consistent delivery based on its strategical

planning has generated significant returns for the shareholders and has created a strong
platform for future value creation, (Moens & Jones (ed), 2013).
5.3. Extensiveness & Accessibility
SWEDISH MATCH
Swedish Match maintains a Supplier Code of Conduct which is aligned to the group’s
Code of Conduct and is the basis of the group’s relationship with its suppliers. It also
forms an integral part of the majority of the group’s significant business agreements
with its suppliers. Group activities in this context include dialogue and communication
of the group’s requirements, the follow-up on adherence and the issue of proactive
community investments. The group’s focus on tobacco growing is also confined to this
risk assessment. The group also carries out due diligence process for the other direct
materials which are involved. A thorough compliance, risk screening as well as the
supplier’s assessments is carried out involving the purchasers in conjunction with the
suppliers. The group’s process has been tailored to the local conditions and is in fact
less formalized than that used for raw tobacco, (Schaffer, Agusti & Dhooge, 2014).
IMPERIAL BRANDS
Group’s strategy to reduce its number of brands helped the management to align the
group’s global manufacturing and supply chain in delivering operational efficiencies
and also in optimising the working capital needs of Imperial Brands. Along with this,
the management is also adopting new ways to work on lean principles in order to reduce

the overheads and improve supply chain effectiveness. The management has already
established a track record by increasing operating profit margins along with adjusted
earnings per share. The group’s capital discipline has helped in driving a high cash
conversion rate which demonstrates the group’s commitment for growth of dividends,
repayment of debts and more investment in the business, (Moens & Jones (ed), 2013).
5.4. Comprehensiveness
SWEDISH MATCH
With the group’s implementation of the Sustainable Tobacco Programme (STP), the
management is able to build a more in-depth knowledge on the sustainability issues in
the group’s raw tobacco value chain. The management carries out assessments and
reviews on the basis of the seed variety which is based on specific data about the farms
from whom Swedish Match purchases the raw tobacco. The requirements, as contained
in the STP, are very comprehensive and are based on obtaining evidence from suppliers.
These policies will keep the process in a transition period for another two years and the
suppliers will have to adapt to these requirements under the new programme. In the next

three years, after the management has completed a full review cycle of the process, the
management will have formed the new baseline. This will also include a detailed profile
for the farms from whom the raw tobacco is sourced, (Yona, 2011).
IMPERIAL BRANDS
Swedish Match aims at pursuing an integrated approach towards procurement of its raw
tobacco. The management is piloting this comprehensive approach towards its snus
products and the responsibility of the implementation of this programme is with the
Leaf Operations of Scandinavia Division. This division is responsible for the balancing
of all the relevant parameters which are being considered during the procurement
process and these include – product quality, sales prognosis, price as well as the social
and environmental issues, (Marchildon & McDowall, 2013).
5.5. Conclusion & Strength
SWEDISH MATCH
On the basis of the strength of Swedish Match’s Strategy and Objectives performance
information, the processes put in the supply chain management are apt for developing
the group’s business and I find it to be ‘excellent’.
IMPERIAL BRANDS
Strategy and Objectives have been well placed by the management of Imperial Brand
and although the group has not focussed well on its long-term supply chain targets, its
strategic and objective performance information is ‘good’.

CONCLUSIVE ANALYSIS
S.
No. Parameter Value of
Swedish Match
Marks Value of
Imperial Brands
Marks
01. Strategy & Objectives Good + 20 Below Average (-) 20
02. Business Model Good + 20 Very Good + 30
03. Risk Management Very Good + 30 Excellent + 50
04. Governance Very Good + 30 Good + 20
05. Processes & Supply Chain Excellent + 50 Good + 20
Totals 150 100
If these parameters are graded on a scale of 1 to 5 and allocated marks accordingly, the
marking would be –
Scale Classification Marks
1. Bad - 30
2. Below Average - 20
3. Good + 20
4. Very Good + 30
5. Excellent + 50

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