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Business Policy

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Essay study book Principles of Management 3.0 of Talya Bauer, Jeremy Short, Berrin Erdogan, Mason Carpenter - ISBN: 9781453375020 (Home Assignment)

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  • June 23, 2021
  • 8
  • 2020/2021
  • Essay
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Running Head: BUSINESS POLICY AND STRATEGY 1




Business Policy and Strategy

Student Name

University Name

, BUSINESS POLICY AND STRATEGY 2


B1

Mandated Approach

This is the top-down approach of budget design. The senior management prepares the

budget which is based on the management objectives and it is passed down to the departmental

managers for implementation. Managers pass on their recommendations before the preparation

of the budget however, it is up to senior management's discretion to consider these or not.

According to this approach, departments are given specific allocations and goals. The

management considers past budgets and their experiences along with market conditions to

prepare the budget. Changes in legislation, profitability levels in the industry and increase or

decrease in salary levels, etc. are considered while preparing the budget. It is a good approach in

the sense that the senior management sees the big picture better. However, the lower level

management could get its motivation lowered as a result of the mandated budget as they do not

feel to be a part of the process.

Participative approach

In this approach, people at lower management levels in the organization get involved in

the budgeting process. Thus, the responsibility is shared with the lower levels as well and

managers at these levels get a sense of ownership of the business. These budgets are usually

achievable as lower-level management is better positioned to implement the budget (CFI,

2019b). This type of budgeting is used in organizations in which the top management trusts its

staff. Employees are motivated better to work. The disadvantages include too much time

consumption and the fact that the lower management employees might fail to see the big picture

and might not steer the organization in the right direction.

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