BUDGETARY AND
MANAGEMENT CONTROL PROCESS IN NIGERIAN BREWERIES KADUNA
CHAPTER ONE
1.1
INTRODUCTION
BACKGROUND OF THE STUDY
Traditional budgeting has been
criticized for a long time now for its inadequacy as a means of management
control. Criticisms concerning its inadequate practices in a changing business
environment emerged as early as the mid 1980’s with Johnson and Kaplan (1987)
seminal book relevance lost?
It called also note from the work of
Allen (1998). Who stated that the rapid changes in today’s business environment
renders a rigid approach to budgetary control obsolete. It is no longer helpful
in his anything up to 15 months previously. He argues that amongst the
requirements of a more appropriate system, would be the building in of accountability
to explain the differences between actual and planned performance. This demands
a more immediate time frame of information reporting. Thus, there is a need to
integrate strategic management and budgeting. The works of C. Adams
et al (200) called be pointed to this regard. These author, conceptualized that
to be effective, budgets must aligned with the organization’s strategies,
appropriate strategic planning, and performance management process introduced,
and must involve processes that are value based, consequential and continuous.
The work of Tim Blumentritt (2006)
called be viewed as further contributions to the above stand point as he
recognizes the need for organizations to integrate strategic management and
budgeting. What seems rather unfortunate according to Tim Blumetritt (2006) is
the fact that most organizations still great the budgeting and strategic
management processes separately and also, a significant portion of small and
medium sized enterprises do not engage in strategic planning (Tim Blunetritt
2006, p 74).
Hence, the reason for this research
work which is to investigate the question; “what is the budgeting practice in
Nigerian manufacturing company?” The motivation for this study also comes from
the work of Herath and Indrani (2007) who investigated on the “roles of
Budgetary Control System (BCS) as a component of the Management Control System
(MCS) in creating and sustaining competitive advantage” and came up with a
positive conclusion. They concluded that though BCS called play a leading role
in establishing an efficient MCS for creating a sustainable competitive
advantage, budgeting will not function in isolation (P 79). “Instead, it can be
used more effectively oriented knowledge enterprise” (Herath and Indrani; 2007,
P179)
The choice of Nigerian Breweries is
related to the fact that it is a manufacturing company in a very competitive
industry and lots of challenges faces Nigerian manufacturing companies as they
struggle with economic depression and high inflation resulting form IMF world
bank led structural adjustment plan (SAP) implemented by the Nigerian
government. These programs were initiated to promote the liberalization of the
domestic economy, operations efficiency, productivity growth, privately owned
enterprises development, economic growth, trade and investment. The economic
liberalization policies have nurtured on upon economy and have minimized the
hurdles that the manufacturing companies need to clear in order to obtain raw
materials and inputs, and other resources for productive activities. However,
it has created an unprecedented change in their business environment through
increased competition both in the domestic market and from need to development
and implement a well conceived strategic plan is order to be competitive in the
business environment.
1.2
Statement of the Problem
No matter ho well a plan is organized, it cannot produce results on
its own, thereby the need for control strategy through budgeting practices to
check compliance and excesses in the manufacturing industry with particular
reference to Nigerian Breweries. What is the budgeting practice in the Nigerian
manufacturing companies?
1.3
Objectives of the Study
The aim of this study is to
investigate the management control practice (budget being the tool for
management control) in Nigerian breweries. The objectives of this study include
the following:
i.
To
examine the present system of budgeting being practiced in Nigerian Breweries.
ii.
To
examine how budgeting and control system effectively put to use in order to
enhance the accomplishment of the organizational set goals and objectives.
iii.
To
highlight some of the problems that militates against better performance.
1.4
Research Questions
i.
What
is the present system of budgeting being practiced in Nigerian Breweries.
ii.
How
is budgeting and control system effectively used in order to enhance the
accomplishment of organization goal and objectives.
iii.
What
are the problems that militate against better performance.
1.5
Significance of the Study
The target groups of this study are managers,
business practionners and scholars in the field of business management. This
will enhance a deeper knowledge about how better a management control would be
if its essential tools are well integrated.
1.6
Scope and Limitation of the Study
The scope of this study is limited to
the 2005 – 2010 budgeting periods of Nigerian Breweries Plc. The estimates of
both revenue and expenditure of the above years will be examined. The process
of budget preparation, control, management control, implementation and review
will be covered by the study.
Limitation of the Study
The study is limited to Nigerian
Breweries Plc. Kaduna and if they are applying the concepts of budgeting in
their operations and how well. As the organization under consideration is a
manufacturing firm having to contend with competition, we cannot justify the
credibility of all information to be used for the study.
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