Marketing - Management budget
Only few players know how to use Management budget to increase efficiency of production, because it is not clearly described in the official manual and extremely difficult to test in practice. But if you have a couple of thousand management reports, then making correct analysis is a matter of technique.
Management budget has the strongest effect on:
- Decreasing % of broken parts in the manufacture. Real decreasing percent of broken parts is not high and slightly affects on company, but will be a nice addition to financial result
- Decreasing force majeure. Information about influence in detail you can read in article about Insurance plan
- Demand grows
According to the results of numerous tests, optimal value of Management budget is about 13-14% of administrative expenses. Optimal value should be predicted for all 5 periods as a constant and set in 1 period.
Test 1 - scenario 12C1-RU 2013-1 MSK
Increasing Management budget from 180 to 200 (from 14.6% to 16.2% of administrative expenses):
1 period - demand grows by 1.5% (⅔ effect)
2 period - demand grows by 2.2% (full effect)
3 period - demand grows by 2.6%
Test 2 - scenario 12C1-RU 2013-1 MSK
Increasing Management budget from 180 to 220 (from 14.6% to 17.7% of administrative expenses):
1 period - demand grows by 2.9% (⅔ effect)
2 period - demand grows by 4.5% (full effect)
3 period - demand grows by 5.1%
Test 3 - scenario 12C1
Increasing Management budget in 1 period. Vertical - relative demand change compared with company without increasing Management budget. Horizontal - absolute values of Management budget.
Test 4 - 12C3 scenario
A similar diagram for scenario 12C3, increasing Management budget in the 1 period.
- Demand grows in scenario 12C1 and 12C3 practically identical, which means that function of Management budget does not depend on competitors in the group. So it refers to the internal demand factors of the company.
- Management budget has ⅔ from full effect in the current period, the full effect occurs in the next period. Effect of competitors is absent or it is insignificant.
- Demand growth is equal for all markets and products.