Evaluate weaknesses of GEM’s current budgeting system and whether it is suitable for the environment

Case Study The medical supplies industry is a heterogeneous, innovative, and dynamic market. The global market for medical supplies is huge, and account for a significant proportion of health care costs as well as tremendously impacts the quality of living standard. Over the past few decades, the demand for medical supplies has been growing, mainly due to the growing prevalence of chronic diseases, respiratory illness, increasing cases of accidents & injuries which are escalating the market on the global platform. Additional factors driving the growth of the market include improving economic conditions and the increase demand for good health care. Recognizing the substantial burgeoning, the Market Research Philip centre (MRPC), recently published a report confirming that the global medical supplies market will be touching a valuation over Ringgit Malaysia 428 billion by 2022. The medical supplies business delivers a wide range of healthcare materials ordered/prescribed by physicians and public, ranging from consumables and disposable to electronic medical devices. This market appears to be fiercely competitive and fragmented due to the presence of several matured as well as small but considerable players. These players try to sustain their market positions and gain a competitive advantage by means of acquisition, strategic partnership, expansion, product/technology launch, and market development. To achieve their goals, they must invest substantially and transpire massive investments in R&D to develop a cost-competitive portfolio. Such strategic initiatives not only help them to move into new markets, expand the sales team, and build the portfolio of medical products but also substantially help to off-load their burdens of debts. The key players driving the global medical supplies market include Medtronic plc (Ireland), 3M Company (U.S.), B. Braun Melsungen AG (Germany), Johnson & Johnson (U.S.), Boston Scientific Corporation (U.S.), Baxter International Inc. (U.S.), Halyard Health, Inc. (U.S.), and Thermo Fisher Scientific Inc. (U.S.) among others. Global Epitome Medical (GEM) Global Epitome Medical (GEM) Berhad is a local based company and was originally established by a few licensed registered physicians in January 2010. Their main purpose of establishing the company is to deliver quality medical supplies to enhance the lives of people and encourage personal independence. It has gradually grown by acquisition of other small medical suppliers and is now listed on the Malaysian Stock Exchange. GEM’s primary objective is to remain as one of the leading national medical supply manufacturer. The firm has since expanded to offer health and wellness products. Currently the company produces over 40,000 products from wound plasters to personal protection medical supplies. They strive to create innovative and quality products at a reasonable fair price. Among the personal protection medical supplies produced and sold, the two distinct products which are gaining tremendous demand are: surgical masks and surgical N95 respirator masks. The surgical masks product are manufactured by the Northern division and N95 respirators masks are produced by the southern division. Both Divisions operate with considerable autonomy and have diverse IT systems and practices which have been inherited from the smaller companies that GEM acquired. The localised systems and practices make little difference to the work of the individual Divisions but affect centralised co-ordination and monitoring. Personal Protection Medical Supplies (PPMS) The surgical masks or respirators are design and developed to meet the different hazard level of a specific work environments. Particularly, there are different protective properties 3 imbedded for each type of personal protective product. Surgical and respirator masks are product that people consume(wear) to decrease the risk of infectious disease transmission between infected and noninfected persons. Since there is limited historical information on the effectiveness of surgical and respirator masks for the control of influenza during any previous pandemics, the effectiveness of surgical and respirators masks have been inferred on the basis of the mode of influenza transmission, particle size and professional judgment. Respirator marks are mainly designed to reduce a worker's exposure to airborne contaminants. Respirators come in various sizes and must be individually selected to fit the wearer's face and to provide a tight seal. A proper seal between the user's face and the respirator forces inhaled air to be pulled through the respirator's filter material and not through gaps between the face and respirator. Respirators offer the best protection for workers who must work closely (either in contact with or within 6 feet) with people who have influenza-like symptoms. However, surgical masks are used as a physical barrier to protect the user from hazards, such as splashes of large droplets of blood or body fluids. Surgical masks also protect other people against infection from the person wearing the surgical mask. Such masks trap large particles of body fluids that may contain bacteria or viruses expelled by the wearer. Surgical masks are not designed or certified to prevent the inhalation of small airborne contaminants. These particles are not visible to the naked eye but may still be capable of causing infection. Surgical masks are not designed to seal tightly against the user's face. During inhalation, much of the potentially contaminated air can pass through gaps between the face and the surgical masks. Their ability to filter small particles 4 varies significantly based upon the type of material used to make the surgical mask, so they cannot be relied upon to protect workers against airborne infectious agents. Additional, surgical masks are not the same as respirators. Surgical masks are made to act as barriers to splashes or aerosols (such as the moisture from a sneeze), and they fit loosely to the face. Respirators are made to filter out airborne particles such as viruses and bacteria, and create a seal around the mouth and nose. They come in various grades including N95, N99, and N100, depending on the percentage of particles they are supposed to filter out. For instance in the case of N100 respirators, 99.97% of particles are prevented by using the mask. The authorised surgical respirators are approved by the NIOSH (the National Institute for Occupational Safety and Health) You are required: 1. Evaluate the weaknesses of GEM’s current budgeting system and whether it is suitable for the environment in which, GEM operates. 2. Suggest how the implementation of different types of budgeting systems could help mitigate the weaknesses of GEM. 3. Identify and explain the weakness of the existing financial statement as a management report. Suggest ways to improve the current statement which, would help Southern Division manager to better manage his department effectively. Justify your proposal format over the existing format. 4. Discuss why it is necessary when designing a management accounting control system to consider the behavioural consequences and environment changes of its application. 5. Discuss how the methods by which annual budgets can be formulated to overcome the behavioural factors that likely to cause detrimental effects on the efficiency and effectiveness of budgeting