George Mai invented a special valve for application in the paper manufacturing industry. At the time of its development, he could not find any company willing to manufacture the valve. As a result, he formed Maiton Company to manufacture and sell the valve.
Maiton Company grew quite slowly. George Mai found it difficult to persuade paper companies to try this new valve designed and manufactured by an unknown company. However, the company has prospered and now has a number of smaller paper companies as regular customers. In fact, there is increasing interest by a number of large paper companies because of the very good results experienced by the smaller paper companies.
The size of the potential new customers and their probable needs over the next several years will dramatically increase the sales of the valve. George Mai was an engineer for a large company prior to his invention. His business experience is limited to the activities of Maiton Company.
Required:
(1) Explain why it is important for George Mai to introduce business planning and budgeting activities into his company at this time.
(2) Identify major problems that likely would be disclosed as Maiton Company attempts to prepare a 5-year plan. Explain why the problems identified were selected.