Techniques Used by Qualitative Researchers - Research Proposal Example

Qualitative Data Analysis There are different techniques that have been used by qualitative researchers for the analysis of qualitative data. Some of the most popular techniques are: the narrative method, ideal types, successive approximation, the illustrative method, path dependency, and contingency, domain analysis, and analytic comparison (Neuman, 2006). In order to know about the capital budgeting techniques used in the Libyan oil sector and to test the Financial Appraisal Profile (2005) model theory this study used the illustrative method. This method was selected because it can be used to test, illustrate or anchor a theory. With this method it is possible to apply a theory to a specific case or single situation and organize data on the basis of prior theory. Pre-existing theory is used as a guide to collect the data. Then the researcher analyzes and interprets the data to confirm or reject the theory (Neuman, 2006). Interviews were recorded on a digital tape recorder, and a full transcript was made by the researcher. Later the data was translated into English again by the researcher. Inevitably when a transcription from a tape recorder onto a piece of paper is made some data are lost (Wengraf, 2001). To remedy this loss, the researcher took de-briefing notes after each interview. The researcher worked on the Arabic transcripts and once the categories and important themes were identified these were later translated into English. Scholars suggest that the accuracy of the interpretative analysis is enhanced if the analyst is involved with the data collection and transcription (Knodel, 1993). In this case, the data collection, transcription, and analysis were all undertaken by the researcher. All transcriptions were made using a computer-based word-processing programme. It took the researcher about eight hours to transcribe a one hour and fifteen minutes interview. All data was in textual form, whether recorded interviews, document analysis or notes from interviewees’ observations at meetings. Analysis and Interpretation of Data In this chapter, the data gathered from the Waha Oil Company employees interviewed in Libya are presented and analysed. This chapter discusses the results of the interview responded to by 23 respondents in the said locale of the study. Prior to the initiation of the interviews process, the purpose, significance and objectives of the study were relayed to the participants. They were also assured that all the information they had provided would be solely for the purpose of the study and their identities would remain confidential. For a clearer presentation, the findings of the interviews are presented in tables. To give an appropriate flow to the discussion, findings are also divided into sections. Section one gives a summary of the managerial profile of the participants used in the study. This profile was categorized according to the respondents’ employment status, profession and experience. The discussion of the company’s activity and capital budgeting practice status within Waha Oil Company (WOC) as described by the respondents is presented in the second section. On the third section, focus is on the respondents’ responses to the capital budgeting practice, risk and risk assessment. Section four will present the financial appraisal profile model (FAP). Finally, the overall analysis of the data gathered in the semi-structured interviews pertaining to the managers’ concrete experiences, satisfaction level, as well as their suggestion on how current capital budgeting practice and procedures within Waha Oil Company (WOC) may be improved. Section (A): managerial Profile A total of 23 respondents were used for the data gathering process of the study. The participants were employees working at Waha Oil Company (WOC). For the purpose of gathering pertinent and reliable data, respondents who were members of top management, senior management and low level management were included in the sample. Of the 23 participants, the sample was divided equally according to three categories. These categories include top management, senior management and low level management as shown in the next category. Categories of the interviewees 1) Top level management ( departmental managers[decision – makers]). For example: Finance manager (FM), exploration manager [EXM), Engineering Manager [ENM), Operations Manager [OM), Planning Manager [PM] 2) Senior management (superintends [accountants, geologists, engineers]). For example: superintendent of budget and financial information analysis [SFBFIA], superintendent of properties [SFP], superintendent planning [SP], superintendent of geological activity [SGA) 3) Low level management (accountants, engineers ). For example : Accountant [FA], Engineer [EN], Geologist [GE) The interview transcripts were read and dated the day and coded with a black pen initially. The same transcripts were coded a second time and dated, this time with a blue pen, to indicate that the transcripts had been analysed twice by the researcher. The second analysis was done because further insight may be gained after the researcher had become more familiar with the data and had more time to think about them (1) Profession of the respondents All the respondents were asked about their profession. Some of them are accountants, engineers, and geologists. The table number (1.1) shows the professional designation for all the respondents Table (1.1) the respondents’ profession Profession frequencies Percentage Accountant 14 1 60.8% Engineer 7 30.5% geologist 2 8.7% others 0 0 Total 23 100% As can be seen from the table above, the majority of the interviewees were accountants. There were 14 accountants in this samples which about 60% of the total. This is due to the fact that the capital budgeting practice is based on the finance and accounting discipline and those employees are involved in real life finance and accounting practice. There were 7 engineers which is about 30% of the total. Almost all of them were managers of different departments at the company except one manager from the (NOC) who are the projects and maintenance manager and responsible for follow up projects. They were involved in the capital budgeting process at the company directly or indirectly. (2) The experience of the respondents The researcher asked all of the respondents about their experience. The experience plays a crucial role for managing firms and companies. The answers of the interviewees were as shown on the table number (1.2) Table (1.2) the experience of the employees Year of experience frequencies Percentage 1 -3 1 24.3% 3-5 1 4.3% 5- 10 5 21.7% Over 10 16 69.7% Total 23 100% As can be seen from the above table that the majority of the respondents are highly experienced as the number of the interviewees who has more than ten years experience are 16 which is about 69.5% from the sample. Section (B): Activity of the waha company related to the oil All interviewees were asked about the activity of the Waha Oil Company within the Libyan oil industry. For example, aspects such as Exploration, Production, Seismic activity, Oil service and Gas processing. The interviewer started with the fundamental question about the main activity conducted by the company. The table number (1.3) shows the respondents ‘answers Table (1.3) the main activity in the company The activity in the Waha Oil Company Frequency Percentage Exploration 18 3 78% Production, 3 13.% Oil service 2 9% Gas processing 0 0 Others...... 0 0 Total 23 100% As can be seen from the table above, the majority of the respondents revealed that the main activity of the company is exploration as 18 of them answered this question-- 78%-- and 3 of the respondents said production which is 13% respectively. In addition to that 2 of the respondents consider the oil service is part of the main activity at the company. The operations manager supported these answers when he stated that: “As you know our company has been established since 1950s. The main purpose was to discover and produce the oil in Libya”. (OM) And the drilling superintendent confirms that as he said: “When the NOC established this company, it was the main objectives are to explore and produce the oil in order to support the Libyan economy” (EM) Capital budgeting practice and risk In this part of the interviews the researcher asked the respondents about the capital budgeting at the company: for example, the process itself, capital budgeting techniques applied, the decision-makers of these processes, and the risk. Moreover, the type of risk in the oil sector has been asked about and the assessment of the risk. (1) The effectiveness of the existing capital budgeting process in the company Table (1.4) the current capital budgeting process the current capital budgeting process Frequencies Percentage Strongly agree 15 465% Agree 6 26% Disagree 0 0 strongly disagree 0 0 Do not know 2 9% Total 23 100% As can be seen in the table above, 15 of respondents, which is about 65% out of the sample, strongly agreed that the current process of the capital budgeting in the company is adequate and effective because of the policy and the process which has been used. Six respondents from the sample, which is about 26%, agreed with others. However, 2 of these respondents have no idea because they respond that they just work as part of team to aggregate and collect the data so they have not a full picture of the process. They believed they could not evaluate the process. This interpretation might also be supported by the following statement made by an accountant “The company will lose millions through incorrect investment decisions. So it should carefully consider the capital budgeting process and techniques to avoid losing their money in investment projects with random decisions” (FA). And the finance manager who is a member of the capital budgeting team at the company stated that: “We do follow the capital budgeting techniques in order to evaluate capital projects. Because as you know we are working in the very high risky sector in Libya and we deal with projects which cost the company Millions of money. These projects if not followed by a strong procedure, the company will lose its money. We strongly use a procedure that used by the international companies and we experienced these producers in the past and it was sufficient and successful” (FM) (2) The decision makers of the company especially for investment appraisal decisions The researcher asked the respondents about the decision-making procedure at the company and the decision-makers, especially decisions which are related to investment appraisal. Table (1.5) the decision – makers in Waha Oil Company The decision - makers frequency percentage The owners 3 513.1% The directors 20 86.9% Others….. 0 0 Total 23 100% From the above table, it is apparent that 20 of the respondents which is 86.9% answered that the directors of the company are responsible for these decisions, whereas 3 of these respondents which is 13.1% answered that the owners are responsible about the decisions-making of the company. This interpretation might also be supported by the following statement made by the operations manager of the Company as he stated: “With regard to decisions in general, the head of each department of the company prepare the proposed decision and send it to the committee (the board of directors) for consideration and approved of these decisions. Whereas, the investment decisions especially which needs to spend Millions of money, this kind of decisions are considered by the committee (the board of directors) and most be approved by the owners of the company which is the (NOC). (OM) (3)The use of capital budgeting techniques by the company Capital budgeting techniques which involved (Pike, 1988a, 1988b; Drury, 2000; Ryan, 2006; Smid & Yao 2007) risk assessment especially in the oil industry projects, for instance the FAP model as a capital budgeting tool to evaluate capital projects (Lefley & Ryan 2005) and whether this model be applied as a tool to evaluate oil investment projects in the Libyan oil industry and whether it would improve the current capital budgeting process in this industry. These areas are the keys objectives of this research. For this purpose, all interviewees were requested to explain how the Company uses these techniques and why it chooses specific technique when evaluating investment projects. In addition, the current status of the capital budgeting process among all business organisational levels was explored. Furthermore, the interviewees were asked about the FAP model as a capital budgeting tool to evaluate capital projects (Lefley & Ryan 2005) and whether this model could be applied as a tool to evaluate oil investment projects in the Libyan oil industry and whether this model improves the current capital budgeting process in this industry. All these areas of enquiry represent the concept suggested. In this study, the researcher engaged in more in-depth discussion with interviewees about the capital budgeting phenomenon. All interviewees were asked about how they perceive and deal with the capital budgeting practice and capital budgeting techniques which is used and applied in the current oil industry practice. During the discussion all issues relating to these areas were covered in detail. The respondents and their perceptions are recorded and presented in table (1.6) below Table (1.6) Capital budgeting techniques applied in the company Capital budgeting techniques used Frequency Percentage Net Present Value 18 678.2% Payback period 10 43.4% Accounting Rate of Return 4 17.3% Internal Rate of Return 5 21.7% Combination of more one technique 2 8.6% From the above table, it is apparent that capital budgeting techniques under study differ in the degree of capital budgeting process and most of the interviewees believe that Net Present Value (NPV) is more effective in organizational investment decision-making than techniques such as Accounting Rate of Return (ARR) and Payback period (PB). For example, the average Net Present Value is 78.2%, the average of the Payback period is 43.4% and the average of Accounting Rate of Return is 17.3%. Whereas, the average of the Internal Rate of Return is 21%. These indicators shows the current applied of the NPV in practice which has been supported by the evidence. This interpretation might also be supported by the following statement made by one of the Key decision-makers of the company, who states : “We do calculate the NPV because it has been considered as the first economic indicator in industry. It is simple and easy to use but logical”. (FM) And one of the respondents who has more than 20 years experience at the company said that: “Usually when the company considering investment projects the top management of the company wants this decision be quick with low risk and take in to account the time value of money, so the NPV is the appropriate one”. (FA) “I would say Expected Monetary Value (EMV) would tend to be used where you have got significant levels of risk of failure, where you are probably more likely to fail than to succeed and that would typically be in an exploration venture. NPV would definitely be used when you have found something and you are going a head”. (FA) These answers from respondents support the view of Drury (1997) and Ryan (2006) (4) Risk the risk assessment approach All interviewees were asked about how they perceive and deal with the risk and uncertainty which is used and applied in the current oil industry practice. Furthermore, types of risk have been asked about. During the discussions all issues relating to these areas were covered in detail. The respondents and their perceptions are recorded and presented in table (1.7) below Table (1.7) types of risk in oil sector Type of risk in oil industry frequency Percentage Geological risk 18 78.2% Price risk 4 17.3% Political risk 1 4.5% Total 23 100% From the above table it is apparent that the type of risk under study differ in the degree and most of the interviewees believed that geological risk is the prior in the oil industry than other types of risk such as political risk and price risk. For example, 18 of the respondents with the average of 78.2%, answered that the geological risk is the highest type of risk should be take into account by the management and 1 respondent which is 4.5% answered political risk, whereas, 4 respondents which are 17.3% considered the political risk .These indicators which have been supported by this interpretation might also be supported by the following statement made by the respondents of the company as he states that: “With regard to the type of risk, it is known in the oil sector that the geological risk is the highest risky part in the industry. For example, if the company commenced an exploration in the oil industry, the geological interpretation (seismic) would be very important. Otherwise it will spend more money and lose it. In case there was dry well”. (SGA) And: “Yes it is the highest risk in oil industry. I mean the clearest geological seismic which is done by the geologist, the less risk the company will face. It is very crucial part in deciding the percentage of the risk. So my responsibility is to provide clear interpretations for the management”. (GE) These statements have been supported by one of the investment decision-maker of the company regarding the risk the assessment of it as he states that: “One way in which we can assess the effects of risk and uncertainty in project appraisal is by Decision Tree Analysis. These are particularly useful when looking at project risk in field development decision, and in exploration decision making”. (EXM) (5) The assessment of the risk in the oil projects Table (1.8) the assessment of the risk in Waha Oil Company Risk assessment approach Frequencies Percentage Probability risk analysis 0 0 Sensitivity risk analysis 3 13.1% Decision Tree analysis 17 73.8% Monte Carlo simulation 0 0 Do not know 3 13.1% Total 23 100% As can be seen from the above table, 3 respondents which is 13.1% answered that the sensitivity risk analysis were the current approach to assess the risk at the company. Whereas, the majority of the respondents which are 17 (73.8%) answered that the Decision Tree Analysis is the current approach at the company. Three of the respondents, which is 13.1%, did not give their answers for this question. The geologist explains the current approach applied in the company to assess the risk as he stated: “We have applied the Decision Tree Analysis in which we can calculate the expected value to drill the well based on earlier seismic which has implied the existence of structure. This approach can help us to think about the risk logically, to provide us with a solution to the decision to be taken and give us the means to analyse our perceptions and to examine the sensitivity of the results”(GE) (6) Factors influence the capital budgeting process Table (1.9) factors influence the capital budgeting process factors frequency Percentage Environmental 0 0 Organizational 4 17.4% Morale of the decision – makers 5 21.7% Political 9 39.2% Economic 5 21.7% Total 23 100% As can be seen from the above table, 4 respondents which is 17.4% considers the organasational factor is the influential factor in the capital budgeting process in the company and 9 of these respondents which is 39.2% answered that the political is the influential factor whereas, 10 respondents answered that both the economic factor and the morale of the decision-makers are the influential factor in the capital budgeting process in the company. Section (D) the Financial Appraisal profile Model (FAP) Qualitative analysis of collected data was used to explore the capital budgeting techniques used in Waha Oil Company (WOC) and to examine whether the Financial Appraisal Profile (2005) model of investment appraisal is an adequate conceptualisation of the Libyan Oil industry. The researcher believes that the scope of the study required an interpretative and deductive reasoning, making the qualitative approach more suitable to address the objectives of the research. In doing that, the three main components of the Financial Appraisal Profile (1990) model were tested to see if they apply within the Libyan oil sector. In this part of the interviews the researcher start this section in each interview by explain in details about this model and its three components (Net Present Profile (NPVP), the project risk profile (PRP) and strategic Index (SI). Moreover, the researcher sent an email which containing a full information and details about the model to the respondents before the interview in order for them to have an idea about this model and during the discussion all issues relating to these areas were covered in detail. 1. The awareness of the Financial Appraisal Profile model Table (1.10) the Financial Appraisal Profile model model frequency Percentage Financial Appraisal Profile model 0 0 All the respondents have been asked whether they have knowledge or a simple idea about this model. It was not well known. One of the respondents stated that: “ I have heard about a number of models in the literature to evaluate capital projects such as NPV,PB, but this model I have no idea at all” (FA) 2. From your point of view, do you think the NPVP improve the traditional NPV technique? Table (1.11) the Net Present Profile (NPVP) The NPV profile Frequencies Percentage Strongly agree 7 30.4% Agree 13 56.5% Disagree 0 0 strongly disagree 0 0 Do not know 3 13.1% Total 23 100% As can be seen from the above table, 20 of the respondents which is almost 87% of the sample are agreed that the Net Present Profile (NPVP) is an improvement of the Net Present Value. Although the company applied the Net Present Value as a tool to evaluate capital projects. They thought that due to the fact that the NPVP takes into account the time value of money and considers the abandonment values for each project which normally cannot be found in the NPV. In addition to that, it is thought that using this model needs to show longer payback than that in traditional Payback period. Whereas, (3) of the sample has no answer about this theme because they consider this question to be more technical than any other questions so they prefer not to comment as they stated that they have not any idea about this criterion. An accountant has stated that: “I think this criterion is well – complicated and organized as containing the NPV, DPB and MGR so it is much complimented technique which takes into account the time value of money and period of project and then the abandonment value which is very important to evaluate projects, make preference between more than one project and measure of the project’s time - risk. Thus, it is workable model and laudable initiative” (FA) In addition to that the finance manager gives his view: “As long as this model take into account the time value of money and the average recovery period when the investment decision-making of the project. If this model of an integrated and consistent so as to assess the financial aspects and risk assessment associated with the project and consider the strategic benefits associated. So I consider it an effective and efficient”. (FAM) From you point of view, do you think, the Project risk profile (PRP) is effective in assessing and controlling the risk in oil projects? Table (1.12) the Project Risk Profile (PRP) Project Risk Profile Frequencies Percentage Strongly agree 5 21.7% Agree 13 56.5% Disagree 2 8.6% strongly disagree 0 0 Do not know 3 13.2% Total 23 100% As can be seen from the above table, 18 of the respondents which is almost 78% of the sample are agreed that Project risk profile (PRP) is an effective criterion in assessing the risk , the company apply the Decision Tree analysis (DTA) as a criterion to assess the risk in the oil projects especially exploration projects. Whereas, 2 of the sample disagree with that and they consider this criterion is productive and effective, however, they believe that the Decision Tree Analysis is a technique to cover more complicated problems which involve a series of connected decisions and more than one outcome. An accountant has stated that: “With regard to the risk assessment, we do apply Decision Tree Analysis criterion which is simply a diagram showing a sequence of decision points and their possible outcomes. It is very positive technique used when the company is considering conducting an exploration program which involves deciding whether or not to conduct a seismic survey, and also whether on not to drill a well” (FA) Whereas a geologist give his a view regarding the exploration risk assessment as he stated that: “We do assess the risk when we conduct an exploration and to assess the quantitative value of risk we do relay on risk – weighing, expected concept and the probability analysis in general. Also the impact of this risk into the company and we do assess the risk in other areas at the company which related to the project under evaluation the impact of this risk into the exploration department, operations department and planning department” (GE) 4. From your point of view do you think, the Strategic Index (SI) is beneficial in evaluating the strategic benefits in the oil sector projects? Table (1.13) the Strategic Index Profile (SI) The Strategic Index Profile Frequencies Percentage Strongly agree 7 30.5% Agree 11 47.8% Disagree 2 8.7% strongly disagree 0 0 Do not know 3 13.% Total 23 100% As can be seen from the table above, 7 respondents which is 30.5% from the sample strongly agreed that the strategic index profile is beneficial to evaluate the strategic benefits in the oil projects, and 11 of them agreed with this opinion. On the other hand 2 of the respondents disagree with this opinion, whereas 3 of the respondents did not give their answer about this issue. As one of the respondents stated: “Strategic benefits are crucial part in capital budgeting process. When these factors are highly considered then I think the company could evaluate the projects accurately” (FA) “This model uses a strong criterion for considering strategic benefits which is important for the company to take into account .therefore , it is very useful tool to use in the oil projects”(FA) 5. Do you think, the Financial Appraisal Profile Model will improve, if applied in your company, the capital budgeting process and make it efficient? Table (1.14) the application of the FAP model The FAP model Frequencies Percentage Strongly agree 16 69.5% Agree 5 21.7% Disagree 0 0 strongly disagree 0 0 Do not know 2 8.8% Total 23 100% As can be seen from the table above 16 of the respondents, which is 69.5%, strongly agreed with the idea of the application of the Financial appraisal profile model (FAP) in the Libyan oil sector and that it will improve the capital budgeting process, 5 respondents ,which is 21.7%, agreed with them with this opinion, Whereas, 2 respondents did not give their opinion to this question. this interpretation might also be supported by the following statement made by the finance manger as he revealed: “This [FAP] model takes into account the three criteria financial, risk and strategic benefits. As we know all these criteria are very important to assess projects especially for oil projects. Also as this model relay on the opinion of the management categories to specify the risk impact in all management departments which is useful to avoid the risk .And also to assess the strategic benefits using a rigid approach, I think this model would be valuable and applicable in this strategic and a high risky sector” (FAM) And the operations manager gives his view about this model as he stated: “It seems to me this model has the potential to work in the oil projects, especially in the exploration projects where as you know the risk is very high. So if this model assess this risk using very simple criteria but it is beneficial so I think it would be effective and would be a good model to use in future oil projects. (OM) 6. Do you think the FAP model will result in more efficient and effective decision – making in the Waha Oil Company Table (1.15) of the efficiency and effectiveness of the FAP model The FAP model Frequencies Percentage Strongly agree 7 30.4% Agree 11 47.8% Disagree 3 13% strongly disagree 0 0 Do not know 2 8.8% Total 23 100% As can be seen from the above table, 16 respondents which is about 30.4% strongly agreed with the idea that the financial appraisal profile model will result in effective and efficient decision-making at the company. Eleven respondents, which is about 47.8%, agreed with them in this opinion; on the other hand 3 of them disagree with this opinion, and 2 respondents did not give their opinion in this question. These interpretations might also be supported by the following statement made by the exploration manager, who stated that: “As we seen this model consider the project from three very crucial criteria. So in my opinion it would be a good and adequate approach to evaluate oil projects” (EXM) Read More