Managerial Accounting Project # 9

1.

Procter & Gamble (P&G) strategy for success relies on its product

leadership and customer value proposition. Proctor & Gambles annual report states that they focus on two moments for consumers, first when a customer chooses a shelf product among their many competitors, which displays product leadership. Second they focus on when the consumer uses the product and they determine if it meets their expectations, which is their customer value proposition. If P&G is not successful in attracting consumers at these two vital moments, their hopes of competitiveness are unlikely. 2. P &G faces numerous business risks, which are described throughout the

annual report. Some examples of these risks include if their efforts for market globalization fail to increase sales. To control this risk P&G can continue to invest in market development in foreign places in order to research the target market and ensure they a providing a product they could use. Another risk they can face is with their competitors. If competitors start to produce new innovative products they can threaten P&Gs product leadership. To control this risk they can create a competitive intelligence department that can keep track of competitors plans and new ideas. Lastly another risk they can face to threaten their product leadership would be if their pipeline product innovations weaken. To control this it is vital to invest in research and create programs that monitor the patents compared to their investments.

3.

P&Gs quarterly sales (in millions) for 2005 were as follows:

September 30th- $13,744 December 31st- $14,452 March 31st- $14,287 June 30th- $14,258 Federated Department Stores had quarterly sales (in millions) in 2004 of: March 31st- $3,517 June 30th- $3,548 September 30th- $3,491 December 31st - $5,074 P&Gs quarterly sales trend is relatively consistent, however Federateds sales increased dramatically in the fourth quarter. Federated has strong sales during the yearend holiday season, but P&G sells products that are daily essentials are sold year round. The Federated Department Stores will most likely have greater cash budget concerns. These companies need to have enough cash available to buy large amounts of inventory even though their cash flows may not be received for months.

4.

Proctor &Gamble operates 33 manufacturing plants in 21 different states in the

United States. P&G also operates 91manufacturing facilities in 42 other countries. P&Gs three Global Business Units (GBUs) are P&G Beauty, P&G Family Health, and P&G Household Care. P&G Beauty includes five of the companys billion dollar brandsPantene, Olay, Head & Shoulders, Wella, and Always. P&G Family Health includes six of the companys billion dollar brandsPampers, Charmin, Bounty, Crest, Actonel, Lams. P&G Household Care includes the remaining six billion dollar brands Folgers, Downy, Tide, Pringles, Dawn, and Ariel. The annual report mentions that P&G markets a total of over 300 branded products in more than 160 countries. The companys Market Development Organization operates in 80 countries.

5.

Five uncertainties that complicate P&Gs efforts to accurately forecast

its sales and expenses are 1) raw material cost variations 2) global economic and political conditions 3) changes in the regulatory environment 4) competitor advertising and pricing and 5) unforeseen challenges integrating acquisitions such as Gillette and Wella.

6.

Differences in two organizations budgeting practices could be

responsible for creating cultural differences in terms of accountability and internal communication. For example, a top - down approach to budgeting could create a different cultural environment in terms of internal communication than a bottom - up participative approach to budgeting. The top - down approach would create a environment of one-way communication

where the knowledge of those closest to the customer is disregarded. The bottom - up approach would allow subordinates to improve the quality of the budget by sharing their knowledge while at the same time recognizing the need for oversight from senior managers. Also, if one company uses inflexible and non-negotiable budget targets to blame its employees it would create a counterproductive culture of accountability. This would be hindering to a company in contrast to a company that uses budgets to plan, coordinate, and improve its operations, rather than to assign blame.