Silk Road LLC is a large sizzed business that manufactures fabric for prominent companies operating in garments industry such as Pull &Bear, Lee, and Bershka. Silk Road does not manufacture for fringe companies in the market. Silk Road operates in Turkey, the emerging market country in which there are so many factors affecting the national economy and the demand level for all goods and services.

Fluctuations in Turkish Lira exchange rate and complicated geopolitical conditions are the most important factors that affect the demand level on Pull &Bear, Lee, and Bershka products. In order to make the right decisions regarding the future, senior managers in Silk Road depend on budgeting, costing systems, pricing strategies, and strategic planning tools such as PESTLE, and Balanced Scorecards.

On the other hand, managers in Silk Road need to overcome some financial problem such as:

- Lack of liquidity; sometimes Silk Road LLC experiences high level of profits but at the same times has a cash problem because top managers adopt credit selling strategy (selling on account) and they accept paying cash for raw materials purchases!! They argue that paying in cash helps the company earn valuable discounts on purchases.

- Changing demand level; sometimes Silk Road experiences good times in which the demand level increases beyond top managers’ expectations, while in others, demand level decreases causing excess inventory costs.

- Depreciated exchange rate of Turkish lira, which affects the costs of machines, direct and indirect manufacturing materials.

P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary control.

M3 Analyse the use of different planning tools and their application for preparing budgets and forecasts.

Answer rating: 100% (QA)

Budgetary control Budgetary control i... View the full answer