The need for and improvement of budgetary planning in a multinational corporation
The aim of this research is to improve the planning methodology of
Dunlop via an analysis of their annual planning system. This was
approached via an investigation of how the plans were developed;
extensive interviews, which analysed divisional attitudes and approaches
to planning; an analysis of forecast accuracy; and participation in the
planning system itself.
These investigations revealed certain deficiencies in the operating of
the system. In particular, little evidence of formal planning could be
found, and some divisions were reacting ex post to the market, rather
than planning ex ante. The resulting plans tended to lack resilience
and were generally unrealistic, partly because of imposed targets.
Similarly, because the links between the elements of the system were
often inefficient, previously agreed strategies were not always
The analysis of forecast accuracy in the plans revealed divisions to be
poor at most aspects of forecasting. Simple naive models often outperformed
divisional forecasts, and much of the error was attributed to
systematic, and therefore eliminable factors.
These analyses suggested the need for a new system which is proposed in
the form of Budgetary Planning. This system involves conceptual changes
within the current planning framework. Such changes aim to revise
tactical planning in order to meet the needs placed on it by. in
particular, strategic planning.
Budgetary Planning is an innovation in terms of the current planning
literature. It is a total system of annual planning aimed at
implementing and controlling the iteratively agreed strategies within
the current environment. This is achieved by the generation of
tactical alternatives, variable funding and concentration of forecast
credibility, all of which aid both the realism and the resilience of