This addresses the impact of competitors' budgeting data.
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While I believe many companies do analysis on all the public information their competitor's release, in the end the company still has to know what to do
with that information. If a company attempts to use the data and does it poorly or wrong they could be worse off than when they started.
Do you believe that companies use other company's data when planning their own budgets? Or do you believe they only slightly "reference" the data?
Finally, do you think other companies data has a significant impact on a company?
I would believe many companies competing with each other analyze each other's financial information because it is public knowledge. From the descriptions in the text to me it sounds if the indirect method would be more of an advantage to a competing company. The reason is because the indirect method focuses on the differences between net income and net cash flow from operating activities. Knowing this data as a competitor I believe is more valuable because the source activity of cash is available. This data would allow to target these activities. Would you agree?
The balance between full (and adequate) disclosure, the needs of shareholders, and the competitive threats that accompany over-disclosure.
Do you think that the needs of the public at large (and the requirements that accompany a free-market, open system) outweigh the concerns associated with giving too much information to the competition? Comments??
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The solution thoroughly discusses each question presented involving the use of competitors' budgeting data.
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Do you believe that companies use other company's data when planning their own budgets? Or do you believe they only slightly "reference" the data?
I think it depends on the companies, and the general structure of the companies. When we look at companies that are very large and highly competitive, like Apple or Nike, their analysts definitely use the information from their top competitors to their advantage, and in strategically planned ways. This would be a crucial step for the top companies because they must retain the greatest percentage of market share in order to remain on top. If they used the information poorly or didn't use the information at all, they would likely lose their competitive advantage, which would give their competitor the upper hand, and that competitor would be able to gain more market share and would dominate the industry. With the smaller companies, the competitor's information may not be used as much because we will find that the analysts in many small companies aren't sure how to really analyze and extract the necessary data in order to gain a competitive advantage. It depends on the industry, and what the goals of the company are. With companies like Apple and Nike, their goal would be to stay ahead of the competition, while with smaller companies, we may see goals like cutting expenses and figuring out how our competitors cut expenses, or in what ...
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