BUDGETARY AND MANAGEMENT CONTROL PROCESS IN NIGERIAN BREWERIES
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
Nomatter 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.