Base on the Case Study please answer the following questions

1) What do you think of the public nature of budget discussions at Real Madrid? What would be the consequences of doing this in a publicly traded company, say GE or IBM? How would it affect what you put in the budget?

2) Should it be used to evaluate Jos? ?ngel S?nchez?s performance? How would you judge his performance? Should S?nchez?s targets be stretched? What are the benefits and costs of stretch targets?

3) There is a stream of thought in business literature that recommends abandoning budgets. Do you think Real Madrid could or should abandon budgets?

4) What is the level of uncertainty in the budget? If this is high, would you recommend producing a budget?

5) Would you want to produce an activity-based budget for Real Madrid? If so, how would you do it?

?

Transcribed Image Text:

Hala Madrid: Managing Real Madrid Club de Fútbol, the Team of the Century Introduction In June 2004, Carlos Martínez de Albornoz, corporate general manager for Real Madrid, a leading Spanish soccer team, was reviewing the Club's 2004-05 budget in preparation for a press conference scheduled by its president, Florentino Pérez. In the two previous years, members of the Spanish press had predicted a financial catastrophe for Real Madrid after the Club signed Brazilian striker Ronaldo and British megastar Beckham. However, after Florentino's¹ election as president in 2000 the team won seven official titles, including two Spanish "Ligas" and one European Champions League, and Real Madrid had become one of the wealthiest soccer clubs in the world. Despite these successes, poor team results during the last two months of the 2003-04 season² (including being eliminated from the European Champions League and losing a record five games in a row during the national competition) had left executives, players, and fans alike with a bitter feeling, just when Florentino was up for reelection. The 2004-05 budget challenge was to include the cost of acquiring new players who could recapture the support of the team's fans while avoiding the excesses that had nearly bankrupted the team before Florentino's arrival. Martínez de Albornoz thought of the decisions to be made during the planning process, knowing that Florentino would be probed on those decisions during his face-to-face with the press. Journalists enjoyed speculating on how many more player acquisitions³ the team would make and who would be the next star to join the Real Madrid "galaxy." Although the media touted Real Madrid as an organization with limitless resources, its management team knew that overspending would bring certain failure. Hala Madrid: Managing Real Madrid Club de Fútbol, the Team of the Century Introduction In June 2004, Carlos Martínez de Albornoz, corporate general manager for Real Madrid, a leading Spanish soccer team, was reviewing the Club's 2004-05 budget in preparation for a press conference scheduled by its president, Florentino Pérez. In the two previous years, members of the Spanish press had predicted a financial catastrophe for Real Madrid after the Club signed Brazilian striker Ronaldo and British megastar Beckham. However, after Florentino's¹ election as president in 2000 the team won seven official titles, including two Spanish "Ligas" and one European Champions League, and Real Madrid had become one of the wealthiest soccer clubs in the world. Despite these successes, poor team results during the last two months of the 2003-04 season² (including being eliminated from the European Champions League and losing a record five games in a row during the national competition) had left executives, players, and fans alike with a bitter feeling, just when Florentino was up for reelection. The 2004-05 budget challenge was to include the cost of acquiring new players who could recapture the support of the team's fans while avoiding the excesses that had nearly bankrupted the team before Florentino's arrival. Martínez de Albornoz thought of the decisions to be made during the planning process, knowing that Florentino would be probed on those decisions during his face-to-face with the press. Journalists enjoyed speculating on how many more player acquisitions³ the team would make and who would be the next star to join the Real Madrid "galaxy." Although the media touted Real Madrid as an organization with limitless resources, its management team knew that overspending would bring certain failure.

Answer rating: 100% (QA)

1 A budget is an accounting plan It is a formal plan of action expressed in monetary terms It could be seen as a statement of expected income and expenses under certain anticipated operating condition... View the full answer