IntroductionBudgeting is a process in which every company must be involved not only with the board of directors (principal) who authorizes the budget, but also with the management team (agent) who uses. In other words, budgeting requires communication with all levels of company employees to build the company's goal or strategy. Furthermore, budgets are an instrument of power as well as being a reflection of power (Ashton et. al., 1995, p.289). Budgets that are not based on well-understood activities and costs are poor indicators of performance (Drury, 2005). Nowadays, in the age of information and technology, the conventional budget is not good enough to withstand the rivalry in the global market. As Hope and Fraser, 2000, cited by Young, 2006, state that the traditional performance management model cannot reflect today's discontinuous change economy, which is why they point out that the annual budget model can be seen as having a number of inherent weaknesses and which acts as a barrier to the effective implementation of alternative models to be used for successful strategic change. Therefore I separate my essay into two parts. First, point out and criticize five inherent weaknesses of the annual budget model. Second, explain the ways in which the conventional budget process can be seen as an obstacle to achieving the objectives of benchmarking, balanced scorecards and activity-based models for achieving strategic change. Discussing the Inherent Weakness of the Annual Budget Model There are many weaknesses in the traditional budget model and it has been the subject of considerable quibbles. From recent research by Libby and Linsay, 2010 cited by Hansen et. al., 2003 encapsulated several discussions about budgets and… halfway through the document… activities are prepared on an incremental basis or called incremental budgets. This means that ongoing operations and the current budget allocation for existing activities are taken as a starting point for the preparation of the next annual budget. The base is then adjusting to changes such as changes in product mix, volumes and pricing that are expected to occur during the new budget period. For example, the allowance for budgeted expenses may be based on your previous budgeted allowance plus an increase to cover higher prices caused by inflation. The main disadvantage of the incremental approach is that most of the spending, associated with the "base level" of activity, remains unchanged. Therefore, non-unit level activity costs become fixed, and past inefficiencies and waste inherent in the current way of doing things are perpetuated (Drury, 2005).