Musimundo

MBAD 6213 WE

CASE 6: Musimundo

Group 6: (Steven Lawlor, Julissa Rogers, Melissa Alexander, Brian Long, and Salem Nashnoush)

Q: Describe the strategic context in which Quintana should judge Musimundo’s performance. What are the characteristics of the environment that Musimundo competes in? What are Pegasus’s strategic objectives for Musimundo? How do these factors affect the budgeting process?

Discussion: The management report for Musimundo produced a positive outlook with year-to-date sales 9% above budget and sales forecasted to be 7% above target by year’s end. Taking everything into account, the company looks healthy when the numbers for all of their 54 stores are combined together. However, there is clear indication that some of their stores were struggling to meet their sales goals. A more in-depth look at each store’s sales performance should be taken into account before making any decisions. A flexible budget should be prepared for each store to isolate activity variances as well as revenue and spending variances in order to isolate exact problem areas (or identify which areas have been successful). Once problem areas are identified then a solution should be developed. The flexible budget reports for independent stores could uncover incorrect assumptions in stores that have been reporting solid upward sales or overall better sales targets could be developed to challenge all stores to capture more market share. Quintana should also take into consideration the fact that a 2003 budget was virtually nonexistent. The company as a whole was in disarray with hardly any merchandise to sell due to unhappy suppliers who reduced shipment of merchandise due to debt renegotiations. Without any merchandise to sell sales dropped. Comparing the 2003 and 2004 budgets creates a false standard point-of-reference because in 2003 Musimundo did not have merchandise for people to buy.