1UUIU 1 UU UUU WHICH 9.41 Use of budgeting techniques to assist strategic change ** LO5, 6 Refer to the discussion at the beginning of the chapter regarding the ABC Shop closures. Discuss how budgeting techniques were used by the ABC's financial accountant to assist in making the decision to rationalise operations. BE FIGURE 9.1 Budget cycle ES The following reality check, 'ABC Shops to be closed, jobs to go as retailer moves online', relates to strategic repositioning by ABC's Commercial Division of the ABC Stores which sell branded merchan- dise. The increasing competition from online retailers and customers' preference for online purchases has made the current shopfront store model unviable. Coupled with this is funding cuts of $254 million CHAPTER 9 Budgeting 383 to the national broadcaster. With fewer resources, ABC management had to make decisions as to how best to allocate funds between the different divisions - for example, should they direct funds from broadcasting activities to the ABC Stores? This example highlights the need for both strategic planning and budgeting in such decision making, as management have to determine how to make best use of the available resources so that the focus is on those activities that will allow the business to remain viable into the future. Moreover, it reminds us of the link between the decision made and its future impact on the budgeting process. The remainder of this chapter focuses on issues associated with the preparation, use and influence of budgets. REALITY CHECK ABC Shops to be closed, jobs to go as retailer moves online ABC Shops around the country will be phased out and closed as the national broadcaster moves to an online retail model. The ABC currently has 50 stores around the country and 78 ABC Centres in other retail outlets as part of its bricks and mortar portfolio. ABC Shops largely rely on the sale of CUS, DVDs and some books. That content is now migrating to digital downloads. Last year, the ABC Shops were operating at a loss, and experts have advised it will not be possible for the ABC to run the stores profitably in the future. The ABC will continue to deliver the ABC Shop online, and will look to find partnerships with other retailers to include ABC branded sections in their stores. The move by the ABC comes as 'digital disruption continues to rock the retail environment as consumers spend their money through subscription services, downloads and purchase goods online. The accelerating switch to online purchases means the ABC's costs of maintaining its current retail network has become unviable and that it is no longer possible to sustain its network of stores. Customers are now getting that content through digital downloads and so all our advice is that the shops are now not making money,' the ABC's managing director Mark Scott told AM. They've made a lot of money over the years but they're not making money now. 'It's very hard to project them making significant money in the future and we can't cross subsidise a retail business by taking money out of broadcasting and investing it to prop up a retail business anymore. Source: ABC Shops to be closed, jobs to go as retailer moves online 2015, ABC News, 23 July, www.abc.net.au/ news/2015-07-23/abc-shops-to-be-phased-out-and-closed/6641476. 1UUIU 1 UU UUU WHICH 9.41 Use of budgeting techniques to assist strategic change ** LO5, 6 Refer to the discussion at the beginning of the chapter regarding the ABC Shop closures. Discuss how budgeting techniques were used by the ABC's financial accountant to assist in making the decision to rationalise operations. BE FIGURE 9.1 Budget cycle ES The following reality check, 'ABC Shops to be closed, jobs to go as retailer moves online', relates to strategic repositioning by ABC's Commercial Division of the ABC Stores which sell branded merchan- dise. The increasing competition from online retailers and customers' preference for online purchases has made the current shopfront store model unviable. Coupled with this is funding cuts of $254 million CHAPTER 9 Budgeting 383 to the national broadcaster. With fewer resources, ABC management had to make decisions as to how best to allocate funds between the different divisions - for example, should they direct funds from broadcasting activities to the ABC Stores? This example highlights the need for both strategic planning and budgeting in such decision making, as management have to determine how to make best use of the available resources so that the focus is on those activities that will allow the business to remain viable into the future. Moreover, it reminds us of the link between the decision made and its future impact on the budgeting process. The remainder of this chapter focuses on issues associated with the preparation, use and influence of budgets. REALITY CHECK ABC Shops to be closed, jobs to go as retailer moves online ABC Shops around the country will be phased out and closed as the national broadcaster moves to an online retail model. The ABC currently has 50 stores around the country and 78 ABC Centres in other retail outlets as part of its bricks and mortar portfolio. ABC Shops largely rely on the sale of CUS, DVDs and some books. That content is now migrating to digital downloads. Last year, the ABC Shops were operating at a loss, and experts have advised it will not be possible for the ABC to run the stores profitably in the future. The ABC will continue to deliver the ABC Shop online, and will look to find partnerships with other retailers to include ABC branded sections in their stores. The move by the ABC comes as 'digital disruption continues to rock the retail environment as consumers spend their money through subscription services, downloads and purchase goods online. The accelerating switch to online purchases means the ABC's costs of maintaining its current retail network has become unviable and that it is no longer possible to sustain its network of stores. Customers are now getting that content through digital downloads and so all our advice is that the shops are now not making money,' the ABC's managing director Mark Scott told AM. They've made a lot of money over the years but they're not making money now. 'It's very hard to project them making significant money in the future and we can't cross subsidise a retail business by taking money out of broadcasting and investing it to prop up a retail business anymore. Source: ABC Shops to be closed, jobs to go as retailer moves online 2015, ABC News, 23 July, www.abc.net.au/ news/2015-07-23/abc-shops-to-be-phased-out-and-closed/6641476