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THIS paper reports on research into the sales budgeting process in two successive years in a retail chain of between 300 and 400 shops operating in oligopolistic situations in each of its local markets.The annual budgeting procedure is probably the most important single decision and control routine of a firm from both the organizational and economic management viewpoints. As such it assumes the role of an internal market by which resources are allocated within the firm.From the Organizational viewpoint the annual forecast of expected costs and revenues is a means through which, in terms of a behavioural theory of the firm', the managerial coalition is able to agree on a planned allocation of resources which will maintain the coalition and thus the organizational stability of the f i r m . Thus it is a means by which managerial conflicts can be resolved and the careers of managers partly determined through the pattern of resource allocation to departments of the firm.From the economic viewpoint, the short-term budget is usually an important determinant of a number of economic decisions. The outcome measured by the projected net revenue and cash flows will normally present either the problems of an insufficiency (if low) or of an over-abundance (if high). In both cases a review of current and capital expenditure plans is likely to follow and, in addition, pricing and output policies may be questioned.In the company we studied projected net revenue fell short of an 'aspired' profit level and hence expenditure plans were reviewed. It resulted in adjustments to a number of departmental budgets* and through a residual funds approach af€ected the investment pr~gramme.~ There is also the possibility that the pricing policy and employment decisions may be reviewed though our evidence only indirectly reveals the latter through the effect of the shortfall on managerial attitudes towards pay claims.The budgeting mechanism, like the external market, is by no means perfect embodying as it does both complementary and competing objectives in See Cycrt, R. M. and LMarch J, G., A Behavioral Theory of the Firm, Prentice-Hall. 1963.Funds available for investment were calculated on the basis of expected net profits plus * For example the advertising and training budgets were cut. depreciation charges less tax and dividend appropriations.

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The Need for a Sjystem THE need for a planning and control system within a business organization flows from certain general characteristics of the nature of business enterprises, the chief of which are as follows: firstly, the enterprise has (by definition) organizational objectives, as distinct from the separable and individual ones of the members constituting the 'managerial coalition';l secondly, the managers of the sub-units of the enterprise must necessarily be ambivalent in view of their own personal goals, as well as have a good deal of discretion in deciding how they should behave and in formulating their part of any overall plan to achieve organizational objectives; thirdly, business situations (and people's behaviour) are full of uncertainty, internal4 as well as externally to the business enterprise; fourthly, there is a necessity to economize, in human endeavours we are invariably concerned with an allocation of effort and resources so as to achieve a given set of objectives using the minimum amount of total economic resources and effort; or alternatively put, to achieve a maximum amount of objective attainment, given a specified amount of resources and effort. Pur-ose of a SystemThe purpose of a unified management control system is to ensure that actions are in accordance with the firm's plans to achieve its objectives.Hence, planning and controlling are inseparable parts of an overall effective management control system and looked at in this way such a system is primarily concerned with the construction of an organization and with long range planning. Looked at from a functional viewpoint it is an attempt to enforce the integration of separate control devices2 and of the separate functional areas of the firm (marketing, production, product development, personnel, accounting, etc.) into one information-for-control network so as As defined in Cyert, R. M., and March, J. G., A Behavioural Theory o f t h e Firm, Englewood Cliffs, N.

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