Management Accounting in a German Multinational Company - Research Proposal Example

Research Proposal FACULTY OF BUSINESS ENVIRONMENT AND SOCIETY MASTERS OF SCIENCE IN FINANCE RESEARCH METHODS (M21EFA) BY INSERT YOUR NAMES HERE Table of Contents 1.0.Introduction 3 1.1.Background Information of the Study 3 1.2.Research Question 4 1.3.Research Aim and Objectives 5 1.4.Scope and Limitation of the Study 5 1.5.Motivation and Originality of Contribution 6 2.0.Literature Review 8 2.1.The Scope of Management Accounting 8 2.2.Impact of Management Accounting on Organisations 12 3.0.Data and Methodology 14 3.1.Sample of the Data 14 3.2.Method of Data Collection 14 3.3.Theoretical Framework 14 3.4.Research Hypotheses 15 3.5.Research Variables 15 3.6.Measures for the Variables 16 3.7.Types of data 16 3.8.Sample Selection Process 17 3.9.Data coding/merging 17 3.10.Data analysis 17 MANAGEMENT ACCOUNTING: A CASE STUDY OF A GERMAN MULTINATIONAL COMPANY 1.0. Introduction 1.1. Background Information of the Study Management accounting (MA) remains to be an area that attracts scholars from different levels. MA is currently considered as an approach in understanding the operations of multination companies (Goddard and Assad, 2006). From the one hand, management accounting has been viewed as a planned process where an organization renews its direction, structures and abilities to serve the dynamics of the organization. However, there have been changes in accounting and this has been generated by the need to understand the nature of management accounting. That is, complexities of management accounting practices have been found to transcend the basic economic decisions making processes that are portrayed in books (Govindarajan and Shank, 1992). It is for this reason that there is need to conceptualise management accounting within the context of multinational organisation. Providing insights from perspective of multinational companies have been researched before. However, definitions of MA have been varied and previous studies have taken for granted the survival of companies in competitive global markets. It is therefore essential that MA is addressed in a manner that it assesses contemporary organisations’ theoretical frameworks and challenges affecting decisions on organizational change management. MA should be moved from a framework that merely assesses the success of strategic situations. It is for this reason that scholars such as Hasan and Gould (2001) applied MA as a tool that helps managers to acknowledge change as reactive, unpredictable and discontinuous process. This paper will be more concerned with how MA has been used and perceived in organisations. Indeed, the research seeks to conceptualise how MA helps organisations make sense when producing diversified product portfolio. The research addresses this position from the perspectives of participants in which accounting is used to make sense of high-levels strategic decisions. Background information has indicated that for organisations to attain this point there will be need for a set of diverse set of accounting information. However, little is still known on the possible outcome if a company seeks to concentrate on one or more specific technique of accounting to help a given strategic decision making aimed at reducing the relevant information available. 1.2. Research Question This research seeks to establish how accounting information can be used in a strategic context. To empirically test the impacts of management accounting within a multinational company, the following research question has been generated. The research question not only seek to provide answers within the context of German multination company but one which provides context and background to the theoretical frameworks and problems faced by multinational companies. How is management accounting helping multinational company make sense when producing diversified product portfolio? 1.3. Research Aim and Objectives Based on the current trends among multinational companies, the core aim of this study is to assess the impact of management accounting on multination company. The impact will be confined to the approaches the multinational company uses to make sense when producing diversified product portfolio taking interest in operations of its operations in Germany. To provide answers to the research question, attain the research aim and theoretical models the research objectives have been set as follows: 1. Assess management accounting and their impact in an organisational setting; 2. Establish what management accounting means to organisational actors; 3. Examine complexities of management accounting in an organisational setting 1.4. Scope and Limitation of the Study Germany currently operates over 300 multinational companies that have been struggling with the complexities of management accounting. To ascertain the research question and objectives of the research as established above, this proposal assesses views of management accountants and managers from different levels in the corporate division (Corporate Controlling, Corporate Development, Financial Accounting, and R & D Controlling) within a Germany multinational company. However, within this premise, the proposal faces the following challenge: a. There will be possibility of limitation when it comes to data collections as the corporate divisions aforementioned depends on different assumptions when executing accounting practices in organization. This limitation will force the research to seek external data as may have been published by scholars such as Jönsson (1998). 1.5. Motivation and Originality of Contribution The core phenomena underlying management accounting processes among multinational organizations in present study is the impact of management. The impact of management accounting can be viewed as those decisions management accountants can resort to when it comes to strategic (Lee, 2000). Considering the benefits that have been attributed to management accounting when applied to multinational companies, scholars have focused on aspects such as complex cause-effect relationships that underpin organisational action using interviews, questionnaires and observations. In a given management accounting context Lye, Perera, Rahman (2005) noted that the impact of the same (management accounting) can be supported by purposeful actions management accountants in organisations resort to so as to conceptualise what is going on in an organization. The impacts of management accounting take place in what Mahar (2000) terms as constant and ad hoc basis. However, this study ignored the fact that management accounting and its impact within organizational setting can only be realized by understanding routing management practices like analysis of cost and reporting. As was noted by Parker (2001b), studies have been silent on issues such as firm profitability and capital management especially when looked into the issue from the perspective of multinational companies. Putting this point differently, if the meaning of possible acquisition of a another company (competitor) needs assessment from accounting perspective, then it will require management accountants to evaluate and make sense of what this means for the company. This brings another gap in knowledge that studies such as Parker (2002) have failed to address in their case studies. In addition to this, contemporary accounting developments with a strategic component such as activity-based costing have been suggested when dealing with multination companies. Studies have found that competitor accounting and strategic pricing are the most widely used techniques but some also suggest that the term management accounting is not widely used in companies, and its meaning is not always clear to managers (Rahaman and Lawrence 2001; Roslender and Hart 2002; Scapens and Bromwich 2001). Keeping these concerns under considerations and possibility of contribution of multinational companies to the economy of Germany, there is strong motivation to assess the aspect of management accounting in detail. Therefore the research will seek to evaluate these aspects within the company and answer the research question while at the same time integrating the aforementioned research objectives. The other parts of the proposal are structured as follows; the second part will be dealing with literature review where the study succinctly discusses previous studies that have been linked to the topic. The third section will present research methodology where data analysis approaches, research variables and methods of data collection will be detailed. The next section will lay out the analysis of data based as gathered and interpreted in section three. Discussion of the findings and conclusions from the findings will be found in section four and five respectively. 2.0. Literature Review 2.1. The Scope of Management Accounting The past few years have presented a great deal of interest from scholars researching on management accounting. The interests have been characterized by previous emphases that have been placed on normative research which have been in turn followed by a number of empirical literatures. These studies have concluded that major normative contributions with regard to MA have suggested templates for practices in management accounting like competitive position monitoring and competitor accounting (Tomkins and Carr 1996; Brown, S.L. and Eisenhardt 1997; Carr and Tomkins 1996). In as much as these scholars agree that normative work has immensely contributed towards the understanding of MA, it has failed in addressing contemporary issues in organization because in most cases, it is disconnected from what basically takes place in an organization. The growth of multinational organisations in Germany, Canada and United States has seen studies conducting surveys on MA practices (Carr, Tomkins and Bayliss 1994; Chenhall and Langfield-Smith 1998). These studies found that strategic pricing and competitor accounting are used widely as techniques but some scholars further give suggestions that the term MA has not been widely used in multinational companies and as a result, its meaning has not been clear to managers and accountants (Cravens and Guilding 2001). Scholars who have taken multinational companies as their case studies have adopted contingency theory in understanding MA practices (Cutcliffe 2000; Ericson 2001; Foster and Gupta 1994; Strumickas and Valanciene 2015). These studies have contributed to the general understanding of SM within such context but have again suffered from common setbacks that are related with contingency theory in the sense that their selection of variables as well as research methodologies have been eclectic; not to mention the fact that the selection of their samples have not been comprehensive thus generating conflicting results. Important to consider is that these scholars have been dwelling on accountant instead of shading more light on how management accounting practices can be implemented and used in these companies so that such practices can provide theoretical models and explanations for the practices. Different case studies regarding MA have provided insightful information regarding the applicability and effectiveness of MA practices. Fullerton, Kennedy and Widener (2014) findings indicated that the functions of accounting can gather both specifically and routinely, data regarding the external environment of the operations of a given company, including informing about the performances and plans of competitors. Cooper, Ezzamel and Qu (2016) took a case study on multinational companies in New Zealand including Vodafone with an aim of showing that the techniques of applied by MA may to some extent found in companies, however, the information may not be quantified when it comes to accounting figures. This means that the information may not be collected or used by management accountants. This was similar findings by Ericson (2001) when they took studies on UK companies. Regardless of the position of these scholars, the case studies can be said to have been largely descriptive thus providing little insight theoretically. Cutcliffe (2000) assessed ethnographic materials from a set of Germany, United States and United Kingdom brewers with an aim of exploring ways in which management accountants in these countries conceive of their relationship with process of strategic formulation and management accounting. Similar studies were conducted by Malmi (2016) who also provides an account of strategic management and management accounting in the formulation of strategies among multinational companies in Finland. Both studies concluded that for better understanding of management accounting in firms there is need to develop proper MA tools to capture every tenet of practices in companies. To summarise these studies, in as much as normative approach of researching the effectiveness of MA in organisations have been criticized that they are disconnected from the reality of practices in modern firms, the reality is that the approach has helped in the development of MA besides establishing a number of specific techniques related to MA. Empirical studies considered thus far have investigated ways in which the techniques have been applied in different companies. On the other hand, functionalist empirical studies have indicated that some approaches and techniques are used in organizational setting, even though they may be labeled as MA (Malmi 2016). Differently, empirical studies linked to interpretative has expanded this knowledge adding that MA and related techniques should not be seen as neutral devices that can be adopted and used in the rational way as it has been suggested in the normative literatures aforementioned (Hemmer and Labro 2016)). Despite the in depth analysis, little is still known regarding the relationship between normative and interpretive empirical researches and MA within the context of multinational companies. Malmi (2016) are examples of scholars who have pointed out that interpretive research within multinational companies and MA can add extensively to the already known facts and findings about MA by providing a deeper conceptualization of MA as it is implemented and used in companies. The literatures that have assessed the scope of MA have shown that very little evidence has been given on how firms or companies regard MA with regard to common theories such as grounded theory. It is therefore necessary to combine these approaches and theoretical models in formulating a methodology that helps in undertaking an interpretive research so that it will be possible to address the already existing lacuna. 2.2. Impact of Management Accounting on Organisations Impacts of management accounting in a given organization setting have been discussed extensively with such discussions covering organizations from different parts of the world. These studies consider impact of management accounting within organizational setting as the process where management accountant apply practices which helps in understanding different situations in an organization (Rahaman and Lawrence 2001; Parker 2001b). This definition means that MA will help organisations to be informed about their practices, understanding the direction their organization is taking and understanding broader picture of management practices. Within the context of multinational companies, impact of management accounting has been viewed as a situation where managers are concerned with the construction and reconstruction of new approaches of accountancy (Mahar 2000; Lee 2000; Hasan and Gould 2001). On the other hand, Mahar (2000) considers impact of MA as an activity designed by management and accountant that seeks to influence the meaning of activities within an organization toward a preferred redefinition of practices. Hasan and Gould (2001) define redefinition within this context as those activities that interpret events and develop theoretical models needed for understanding and bringing out meaning of practices in an organization. Far fewer researches have explicitly provided explanation regarding the impact of management accounting in the context of corporate governance and ethics or issues such as corporate accounting. Cutcliffe (2000) is among the few scholars who have attempted to assess the aspect of MA from the perspective of corporate governance and ethics or issues such as corporate accounting. He concluded from his studies that based on the complexities that have been surrounding multinational organisations, “actors have been trying to create islands of meaningfulness and to develop links between such islands” (p. 273). What Cutcliffe (2000) suggests from this statement is that when management accounting is applied within a given setting it will act as a tool that orders processes and that it will also serve as a bridge in the development of a common interpretative scheme. 3.0. Data and Methodology 3.1. Sample of the Data Basing its studies on a multinational company in Germany, the research will investigate a sample of 150 accounting practices. The sample study has been chosen to help predict the expected outcome with regard to data collection and analysis tools that will be used. There is need to gain better comprehension of management accounting where where the company operates. Collecting data from 150 participants will therefore help decipher final answers or decisions and provide an overview of a given accounting phenomenon. 3.2. Method of Data Collection Validity and reliability of the study will play a fundamental role in the acceptability of the findings, conclusions and recommendations emerging from the study. Based on this understanding the research uses secondary data from the company basing on a 10 year trading period (between 2007 June and 2016 June). Different accounting and financial information will be extracted from the company’s financial records. 3.3. Theoretical Framework The theoretical framework deals with people’s views on management accounting of which are further achieved through succinct research problems that not only encompass the literature review but also capture the tenets of dependent and independent variables as will be provided below. As uncertainty is growing predictability over management accounting, theories introduced in this study become vital for comparing quantitative and qualitative data from respondents with a view of integrating such within the research problem. 3.4. Research Hypotheses Hypothesis 1: Management accounting help multinational companies make sense when producing diversified product portfolio The hypothesis is directional where the research attempts to predict the expected outcome with regard to data collection. The hypothesis further tests research validity where validity means findings truly representing the scenario the research is purporting to measure. In other words, it looks towards developing the relationship between research objectives and questions so that findings, data gathering and analysis can be interpreted in a specific paradigm. The second hypothesis also helps in designing a research method. 3.5. Research Variables i. Independent variable: Management Accounting The research will manipulate this variable to see if it makes the dependent variable change. In so doing, the dependent variable becomes the main focus of this proposal. ii. Dependent variable: multinational companies making sense when producing diversified product portfolio Dependent variables include approaches that will be used as interventions and subject characteristics that directly influence independent variables. 3.6. Measures for the Variables The proposal has chosen two levels of measurements because they determine the types of statistical package to be used. They include Statistical Package for Social Science and Cronbach’s Alpha and Pearson Correlations. 3.7. Types of data In as much as the data can be categorised as process based data, outcome data, purpose data, logical data model, these fall under the category of either qualitative and quantitative. Beginning with quantitative, the research will obtain measures of counts or values which are expressed as numbers. Quantitative provide more information regarding management accounting for which there are different views regarding the research topic and offers a direction through which the overall effectiveness of the research will be increased. Qualitative data will be concerned with non-numeric data in regard to phenomenological aspects such as people’s perceptions on management accounting. 3.8. Sample Selection Process Based on the nature of the research and the targeted respondents, samples will be selected using stratified random sampling process. This method has been preferred ahead of other process such as systematic random sample and simple random sample because the research will be targeting a given strata (unique group) within the population. 3.9. Data coding/merging The data obtained from the tools aforementioned are going to be entered in a computer program in form of data base, spreadsheet and statistical program. The study will therefore have variable names that are assigned to the data which will in turn reflect the nominal definitions of these variables. 3.10. Data analysis Data analysis is a mechanism for reducing and organising data to produce findings that require interpretation by the researcher. The scores of the tests will be processed through SPSS software and used in the quantitative analysis. The qualitative analysis of the responses involved interpreting each aspect of the rubric according to the respondents’ view. Descriptive statistics (means and frequencies) will be utilised in the analysis. Pearson’s Correlation analysis will be employed to decipher the relationship between different variables. 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