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Advertising Promotion and Other Aspects of Integrated Marketing Communications 9th Edition by Terence Shimp, Craig Andrews
Edition 9ISBN: 978-1111580216Advertising Promotion and Other Aspects of Integrated Marketing Communications 9th Edition by Terence Shimp, Craig Andrews
Edition 9ISBN: 978-1111580216 Exercise 2
What is the distinction between top-down (TD) and bottom-up (BU) budgeting Why is BUTD used in companies that are more marketing oriented, whereas TDBU is found more frequently in finance driven companies
Explanation
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Distinction between Top-down (TD) and Bottom-up (BU) Approach
TD budgeting approach allows senior management to decide how much funds each sub-unit receives to spend on their activities. While in BU budgeting approach managers of sub-units (such as product category level) determine how much funds are needed to achieve their objective. Under BU approach all the tasks steps are identified with the resources required to fulfill those tasks then to determine budget for entire project. This helps in setting accurate budget as long as no tasks have been forgotten. The problem with BU approach is it leaves the decision on few managers who are identifying tasks and steps.
In TD approach top level determine how much funds may require for fulfilling particular activity. The advantage is it can facilitate centralization of decision related to finance. Top-down, bottom-up budgeting (TDBU) is more prevalent in finance sector while Bottom-up, top-down budgeting (BUTD) is used by companies that are more of marketing oriented. Marketing oriented companies usually deals in competitive conditions that are less predictable, thus the people on field can determine tasks and resources better than senior managers. Secondly, strategies are designed and updated on daily basis in marketing communication based on prevailing market conditions that may require updating financial requirements too. Thus, bottom-up budgeting is used in marketing oriented companies.
Financial firms such as insurance, banking and securities adopt TDBU budgeting approach for financial management. The aim in such firms here is to maximize the revenue in quantitative terms more that may require control of expenditure. The budget is defined by top level managers and assigned to lower levels that act as standard budget under which all activities has to be performed. The job in finance oriented companies are more of well defined and are less affected by market changes thus, tasks can easily be identified with accurate resources. While in marketing oriented firms marketing team has to deal with unforeseen changes and people who are dealing with such changes have better idea about the tasks resources to manage competitive market. Thus, BUTD budgeting is used by marketing oriented firms.
TD budgeting approach allows senior management to decide how much funds each sub-unit receives to spend on their activities. While in BU budgeting approach managers of sub-units (such as product category level) determine how much funds are needed to achieve their objective. Under BU approach all the tasks steps are identified with the resources required to fulfill those tasks then to determine budget for entire project. This helps in setting accurate budget as long as no tasks have been forgotten. The problem with BU approach is it leaves the decision on few managers who are identifying tasks and steps.
In TD approach top level determine how much funds may require for fulfilling particular activity. The advantage is it can facilitate centralization of decision related to finance. Top-down, bottom-up budgeting (TDBU) is more prevalent in finance sector while Bottom-up, top-down budgeting (BUTD) is used by companies that are more of marketing oriented. Marketing oriented companies usually deals in competitive conditions that are less predictable, thus the people on field can determine tasks and resources better than senior managers. Secondly, strategies are designed and updated on daily basis in marketing communication based on prevailing market conditions that may require updating financial requirements too. Thus, bottom-up budgeting is used in marketing oriented companies.
Financial firms such as insurance, banking and securities adopt TDBU budgeting approach for financial management. The aim in such firms here is to maximize the revenue in quantitative terms more that may require control of expenditure. The budget is defined by top level managers and assigned to lower levels that act as standard budget under which all activities has to be performed. The job in finance oriented companies are more of well defined and are less affected by market changes thus, tasks can easily be identified with accurate resources. While in marketing oriented firms marketing team has to deal with unforeseen changes and people who are dealing with such changes have better idea about the tasks resources to manage competitive market. Thus, BUTD budgeting is used by marketing oriented firms.
Advertising Promotion and Other Aspects of Integrated Marketing Communications 9th Edition by Terence Shimp, Craig Andrews
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