The topic on the macro economy and problems with interdepartmental coordination: Company New Essence has introduced a new product named Duo Essence. Manufacturing capacity planning concluded one year ago and is built to produce 10,000,000 units per year. Manufacturing is compensated on both volume and quality. Sales management is grouped into Sales division based on geographical territory. Each sales agent is compensated with a minimum salary and commission for sales above budget volume. Budget sales forecast is made at the beginning of the year. Division sales managers are deeply concerned of the upcoming downturn in the economy and is in discussion with senior management about reducing budget sales 6,000,000.
a. Explain the perspective of the sales managers and their incentive to lower sales forecast
b. Explain the perspective of senior management and what tools could be provided to improve the forecasts?
c. Since manufacturing is not in the loop on sales budget forecasts, what are the likely consequences if timely information is not communicated?
d. How should New Essence manage the information flow, incentives and accountability?