2.

They have divisional organization based on broad product categories divisional activities are done by
executive vice presidents. Head office provides a policy. They also work as decentralized department so
head office provides funds and take care of labor relations of bargaining unit. For the various segments
to put an effort the head office gives out budget. Head office take preliminary reports of what the capital
requirements sales and income would be next year head office is not interested in detail but a forecast
of the company since all the budgeting requires 5 years in advance so budget making requires data from
previous years .

After the opinions of vice presidents are in market research goes to work. Then the marketing area
makes a formal statement for the coming years. Then the matter goes to district managers. Head office
and divisional managers will guide the district managers but in the end district sales budget would be
given by district managers then the statements go back to divisional mangers then to marketing
managers.

Divisional vice presidents are involved and they can manipulate the preliminary report data as they want
they can play the game of numbers they want

Having this way of forecasting can assure the uniformity between all divisions and the head office
provides the yardstick so that company’s overall forecast will be reasonable and attainable. So that
everybody is working with head office figures .

3. pros

- takes the input of every department

-works on uniformity of company

-plans for the next years

Autonomy to plant managers for making plans

Cons:

Does not consider uncertainties in planning

System to make reports is slow