Counting the costs

MultiBrands is a globally successful consumer products company, which has built up a reputation based on “Honesty, Quality and Innovation”.

Since it started operating ten years ago, it has launched at least two new, high-quality products in different markets every year. However, managers are currently reviewing company policy because of a recent dramatic fall in profits and share price performance. Shareholders believe that this is due to over-diversification, rising costs and failing consumer confidence as a result of complaints that product quality is declining.

Shareholders’ recommendations are:

freeze current policy of developing new products and concentrate on consolidating current successful brands

improve quality

reduce prices

freeze recruitment but avoid layoffs

reduce current budget by 15 per cent

Task 1

In groups, study the information on page 112 and discuss where budget cuts and reallocations could be made in order to achieve a 15 per cent reduction in total operating costs. Consider all the above shareholders’ recommendations before making a final decision.

1  Human resources costs

2  Production operating costs

3  Sales and marketing costs

Task 2

Present your budget proposal with the help of the visual aids.