A Level Business Studies - Factors that influence the size of a budget for the next financial year

Explain the factors that might influence the size of Tregory Growers Ltd’s budget for marketing expenditure for the next financial year.

One factor that might influence the size of Tregory Growers’ budget for marketing expenditure is the financial position of the company. The Director of Finance says that they are already increasing their borrowing by £10m and already have a shortage of working capital. They also have current liabilities worth £9.4 million. This is likely to affect Tregory Growers’ marketing budget because it hints at potential cash flow issues and could lead to low profitability. This may call for the marketing expenditure to be restricted in order to retain a strong financial position going into the future. This said, the company could take a risk and have a large marketing budget with the hopes it would pay off and translate into profit; appendix A shows a weak positive correlation because marketing budget size and sales which may push Tregory Growers to see it as an investment. This shows how financial position can influence marketing budget size.

Another factor that may influence the size of the marketing expenditure is competition. Yewande says that “this is a highly competitive, low margin market” which can have an influence on the marketing budget size as they will need to keep costs at a minimum in order to adequately compete. This could mean the company opts for a reduced marketing budget to maintain market share. Tregory Growers would be wise to note the actions of competitions because if they are either increasing or decreasing their own market share, Tregory Growers should follow suit and take appropriate action to ensure they maintain an upper hand and can grow their market share and consumer base. Having lots of competition could mean the company increases the marketing budget in an attempt to promote the product and stand out amongst competitors as offering something different – Kenyan flowers in this case. . Companies with differentiated products may have to have higher budgets than those who sell using cost because of the greater need to sell the quality.  Competition affects marketing expenditure because it can either require more/less from the business as they may need to stand out more in a crowded market.

A final factor that may influence the size of the marketing expenditure is leadership. The Managing Director has been described as having a “dominant personality” and has clear visions and goals for the company to achieve going into the next financial year. Yewande seems very fixated on reducing costs in any way that she can and the Director of Finance was worried the financial estimates were optimistic. The leadership style can influence the marketing budget as an autocratic leader may do all the decision making for the company irrespective of what other employees/managers want, and the work will be highly structured which may lead to tight targets and margins to meet – which can also impact marketing budget size. Yewande’s plan for Tregory Growers seems very different from want Paul Chang wants which shows that they would likely have different marketing budget sizes.