In: Business and Management

Submitted By janebackbay
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According to the conditions described in the case, I still can not give a certain suggestion to deal with Mistri’s dilemma, because there are no details about the budget accomplishment in 1983. Since a bottom-up budgeting process at Citibank brought more participation of lower level managers, manager’s incentive compensation was closely combined with budget-related performance, and inexperience staff was a big issue due to high turnover, budgetary slack or budget padding could be possibly happen.
If the result of Citibank Indonesia in 1983 performed not so well in terms of related budget, considering Mistri’s aggressive budget, I thought he should resist Gibson’s requirement. Because the costs of two options--highly risky private loan and bad relations with the government and prime customers, definitely were too significant to implement those two actions. In addition, due to lack of financial information about Citibank indonesia between 1982 and 1983, I assume the growth rate of Citibank indonesia during those years was parallel to the GDP growth rate. Under the pessimistic economic situation, if Indonesia had same or even a little bit better GDP growth rate in 1984 as in 1983, Mistri’s budget was reasonable.
If Citibank Indonesia achieved budget excellent in 1983, I doubt if the budget was made properly in 1982. Perhaps inexperience staff could not have an effective insight about business risk and potentials. Or under bad economy, to get compensation, low level managers understated budgetary profit. The good budget achievement in 1983 was partly because of understated budgetary profit in 1982 and greater GDP growth rate in 1983 than in 1982. Under this circumstance, assuming the same GDP growth rate in 1984, I thought perhaps Mistri could push more to work the increased goal out without bothering those two actions mentioned before. However, if the increased goal…...

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