Chang/Shang-Jen/Oct 25 chapter 7/page 305/ 1, 10

1.

Advantages of top down marketing

Aggregate budgets can often be developed quite accurately

Budgets are stable as a percent of total allocation

The statistical distribution is also stable, making for high predictability

Small yet costly tasks do not need to be individually identified

The experience and judgment of the executive accounts for small but important tasks to

be factored into the overall estimate

Advantages of bottom-up budgeting marketing

Individuals closer to the work are apt to have a more accurate idea of resource

requirements

The direct involvement of low-level managers in budget preparation increases the

likelihood that they will accept the result with a minimum of aversion

Involvement is a good managerial training technique, giving junior managers valuable

experience.

The most important task for top management to do in bottom-up budgeting is:
the lower-level management overstate budget and the Top management needs to verify if

budget is realistic.

Work-Experience Application: When I was in my previous company, our budget plan

followed the bottom-up rule. Especially in a bidding project, the bottom-up regulation

could let our high-class supervisors know how much money we should tender for it and

how much profit we should earn. However, this is an ideal situation. Frankly, high-class

supervisors usually cut our budget plan because they wanted to win the bidding project.

We all knew that our supervisors would cut our budget plan. So, we usually provided a

little higher price budget plan for our supervisors to let them cut.

10.

Risk analysis:

Assume the probability distributions that characterize key parameters and variables

associated with a decision use to estimate the risk profiles of the outcomes of the

decision.

Simulation software:

mathematical model, find outcome(s) of the decision

Show outcomes in statistical distribution.

Object show the decision maker the distribution of the outcomes.

Outcome: is a risk profile used to assess the decision + other relevant factors (e.g.

strategic concerns, socio/political factors/ impact on market share)

Work-Experience Application: Actually, in my previous company, we seldom made the

risk analysis. If my previous company should make a risk analysis, it should create a new

department that consists of risk analysis experts. Those experts should include different

level, different department, and experienced workers. And my previous should buy some

software to let those experts calculate the possibility of a risk. So, this risk analysis

system might be a high price. But we usually made a more accessible risk analysis before

we made any decision. Those risk analyses were created by our normal sense or from our

past experience. Therefore, it is cheaper than building a risk analysis department.