Budgeting in a global arena

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Market demand = Production + Import – Export D = P + M –X

If P=0 → D = somme M

The market demand consists of gathering information of the present and future demand. It also has become crucial to find out the share pf imported goods in relation with total consumption.

Import penetration rate = import/D x 100 but it is good to look at solvent demand (demande solvable). This ratio shows the degree to which domestic demand is potentially satisfied by imports.

Export coverage ratio = export/import x 100

It is the share of % of a country’s own imports that are subject to non-tariff barriers.

A import penetration rate : 38,46% export coverage ratio : 80% → the most attractive as an exporter because its consumption is the highest and it is more open to foreign products as its imports are higher than its exports.

B 20% - 133%

C 25% - 150%

Chapter 2 – Measuring managerial performance

Measuring managerial performances, provides corporate management with a solid information necessary for the success of the organisation

General management to develop the firm and increase profitability → KPIs : sales volume, return on sales (ROS), return on equity (ROE), return on capital employed (ROCE)

Sales management to increase in turnover and in operating profit (EBIT) → KPIs : sales volume growth and growth of EBIT

Sales force to increase in market share regarding each area, regarding each product and increase sales for each product → KPI : growth rate for each item.

Return on sales (ROS) = profit for the year/sales revenue

Return on equity (ROE) = profit for the year/average shareholder’s equity

return on capital employed = operating profit/average shareholder’s equity + interest bearing liabilities (short and long)

Equity = fonds propres

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Criteria for assessing performance:

- Profitability

- Net profit

- Rate of return

- Market position

- Market share → benchmark

- Product leadership

- Sales analysis

- Sales force performance

- Productivity

- Output per man hour

- Cost per unit

- Capacity utilisation rates

- Value added per employee

- Rate of innovation

- Order backlogs (carnet de commandes)

- Personnel development

- Percentage of employees satisfied with their promotion projects

- Cost of recruiting personnel

- Personnel turnover in other words ratio of leaving staff in relation to the total number of personnel in the organisation

- Achievement of long term corporate plans

- Corporate audits

- Ratio analysis

There are 3 major types of measurement tools that can be distinguished for corporate control:

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Control on achievement of corporate objectives by checking

- Profitability through

- Branch/outlet/subsidiary

- Various product/service offered

- Customer types (retail vs corporate)

- Business volume through

- Branch/outlet/subsidiary

- Various product/service offered

- Customer types or segments (retail vs corporate)

- Market share through

- Branch/outlet/subsidiary

- Various product/service offered

- Customer types or segments (retail vs corporate)

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The organisational structure

The strategy chosen by multinational companies are closely connected with the design of the organisation and the ownership of the subsidiaries intiled to implement it. For the manager, organisational structure is important in determining the ability of the enterprise to co-ordinate the numerous member units to overcome the diseconomies of scale and to apply skills in many different countries.

A company can organise as a domestic firm with an international division. The formation of an international division is a recognition of the need for specialist management of foreign operations.

However as it is (management of foreign operations) in importance, so top management set up a central planning to have a global view.

Planning and responsibility move upwards and new divisions are created based on function, product, and geographical area depending on the firm.

Each division in the organisation resembles the functional hierarchy of a functional structure, except that finance is removed from divisions and administered from head office.

Branch : the company that operates itself. Any power, can’t take initiative, it depends on the home company. The manager depends on headquarter.

Subsidiary : independent entity that belongs to several companies. The manager has more power than a manager of a branch. Local taxation but dividends are taxed where there is the headquarter.

The role of the managing director is of determining strategy