Problem: Create a Budget based on the virtual organization illustrated below. Please outline some of the different types of budgets.
The Boffy Company 3 Year Plan
• History
• Business Objectives
• 3 year Plan
Aims:
The aims result from the size of the company, its situation in the supply chain and from the uncertainty on the types of strains that can occur. They are stated in the company 3 year plan and are oriented to:
• Adaptability in terms of product, customer services and production process
• Balanced portfolio of products between new products (phase 1) and products coming to maturity (phase 3 or 4) while looking for the same portfolio variety
• Profitability by means of a substantial gross margin on sales ratio instead of high volume of sales
• Flexibility, with keeping active subcontractors for 5% to 20% of fabrication output at each stage of the production cycle
• Market share at a fair level of some 35% on traditional market
• As much as possible anticipation of market needs
• Think the company as global
Objectives:
These objectives are fully defined in the budget. Some excerpts:
• To increase turn over by 20% mainly on new geographic areas: America, Asia.
• To have a minimum of 2 commercial outlets to reach each end-consumer industry customer.
• Gross margin on variable production cost to keep at a minimum of 40%.
• Net cash flow at around 10% of the Turn Over.
• One new product to be launched.
• To enhance marketing mix by adding a new service to existing customers.
• To start acting to reach ISO 14000 certification at 2006 ending.
• To keep alive a survey system for each department: commercial, R&D, production technology, raw material, social regulations, data ...
The Boffy Company Business Objectives
• History
• Business Objectives
• 3 year Plan
Over the past ten years, the Chief Executive Officer and the Chair of the Board (respectively 55 and 47 years old, the latter being the President of the firm that purchased this company), have worked as a team along the following business objectives:
• The company must be profitable in a sustainable way and must continually maintain a positive cash flow.
• The company's profitability must stem from distinctive and differentiating skills, rather than volume.
• The company must maintain its market leadership without extending its market share on its traditional geographical area.
• Direct competition is beneficial because it reassures customers as to the permanence of supply. The company regards competition neither with disregard nor with contempt.
• The company must monitor indirect competition, which will most likely oblige it to leave some market segments or products.
• The company must account for, and accept, the constraints related to its European base: high labor costs, meddlesome labor laws and public administrations. It is important that the company scrupulously complies with regulations in all countries in which it operates.
• Furthermore, the company must regard these constraints as opportunities for improvement: its success in Europe makes its geographical expansion both possible and desired.
• All departments of the company must be able to evolve, and must evolve, depending on market needs, on external constraints, and on technological opportunities.
• A key mission of managers is to propose evolutions, and subsequently to lead their implementation if they are accepted. Managers need to ensure that the methods and tools implemented as part of these changes do not hinder the company's flexibility.
• Each manager in the company must be aware that there won't be individual success without collective success. Managers will need to know and to use transversal work methods that will facilitate collective success.
• The company's managerial style is based as much as possible on delegation, except in case of crisis.
• The leaders' vision for the company is a lean and efficient organization capable of rapid evolution.
Boffy International was founded fifty years ago based on the mastery of specific technical skills, and operates in highly demanding industrial areas: automotive, aeronautics, and other general manufacturing sectors. The firm is structured as a French Société Anonyme à Conseil de Surveillance (a French corporate legal structure where management is led by a Board of Directors under the monitoring of a Surveillance Council - respectively called "Directoire" and "Conseil de Surveillance").
Over the years, the company has managed to adapt its technologies and products to the demands of its customers, all of which are businesses.
The company took advantage of the European Community and extended its geographical scope. It now regards the whole Europe as its domestic market, from England to Greece and from Norway to Portugal.
Daniel Boffy, the founder and owner, did not have children and sold his business to a manufacturing company that operates in a related industry ten years ago. Other financial investors own minority stakes in the company.