Activity Based Management: A Study of Management Accounting Change

This project delves into the significance of Activity Based Management (ABM) in the UK manufacturing sector, with a specific focus on Glaxo Smith Kline (GSK) PLC. The study aims to assess ABM's advantages over traditional methods, analyzing its impact on cost allocation, performance improvement, and overall business growth. The research includes a literature review, a detailed methodology involving qualitative research, and data collection through questionnaires and secondary sources. The project addresses key research questions regarding the benefits of ABM, the appropriateness of its cost allocation methods, and its potential to enhance GSK PLC's performance. The study emphasizes the importance of ABM in identifying strengths and weaknesses, improving cost transparency, and aiding in more informed management decisions. The project is designed to be completed within 13 weeks, culminating in recommendations for GSK PLC to enhance its reliance on ABM for improving manufacturing processes and overall profitability. Ethical considerations regarding data collection and usage are also addressed, ensuring the integrity of the research.

ACTIVITY BASED
MANAGEMENT- A STUDY OF
MANAGEMENT ACCOUNTING
CHANGE

TABLE OF CONTENTS
Aim and objectives......................................................................................................................1
Brief presentation of dissertation................................................................................................1
Main question to answer for research.........................................................................................1
Importance of Research Area......................................................................................................2
Rationale of Research.................................................................................................................2
Topic Justification.......................................................................................................................2
Methods of Research...................................................................................................................2
Literature Review........................................................................................................................3
Timeline of Research..................................................................................................................5
REFERENCES................................................................................................................................7

Title- Activity Based Management- A study of Management Accounting Change
Aim and objectives
Aim-
“To assess the importance of Activity Based Management over the traditional method in
the UK manufacturing sector- A study on Glaxo Smith Kline (GSK) PLC”
Objectives
 To analyse the trend of ABM prevailing in the manufacturing sector of UK.
 To increase knowledge about significance of ABM for imparting benefits to Managers of
GSK PLC
 To ascertain value of ABM in GSK PLC for enhancing overall performance and growth
by eradicating traditional method.
 To provide recommendation to GSK PLC for increasing its reliance on ABM method for
enhancing manufacturing of products.
Research Questions
Q1. What are the benefits of ABM over traditional method to GSK PLC?
Q2. Do allocating costs as per ABM is appropriate in comparison to traditional method?
Q3. Do management of GSK PLC's performance can be improved by applying ABM?
Brief presentation of dissertation
The topic of dissertation is chosen which is to assess the importance o Activity Based
Management over the traditional method in the UK manufacturing sector. It is dedicated to
analyse how ABM is useful over traditional methods being inappropriate. GSK PLC which is
multinational organisation operating in pharmaceuticals will be analysed and how ABM is
helpful in effectively meeting out costs and allocating the same for improving upon efficiency
and maximising profitability up to a major extent.
Main question to answer for research
The main question which will be focused on the research study is to provide transparency
regarding the importance of ABM over the conventional or traditional method which do not
allocate costs on the basis of activities consumed during manufacturing. This does not give real
picture of the costs being incurred and as a result, organisation is unable to trace costs that leads
to unnecessary increase in costs and impact of profitability can be seen. The research will focus
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on ABM which will help organisation to effectively ascertain and allocate costs and initiate
adequate production for attaining healthy profits.
Importance of Research Area
The research area in the context of ABM is important as it has several benefits to
company in maintaining costs and reduce unnecessary wastage in manufacturing quite
effectively. The traditional method were not adequate as allocating overhead costs and activities
could not be done in precise manner. However, ABM which identifies strengths and weaknesses
in operations and every aspect of profitability could be increased with the help of it. Thus, it has
served as the crucial research topic and GSK PLC which is pharmaceutical manufacturing
company has been chosen on which entire research will be based.
Rationale of Research
ABM is based on Activity Based Budgeting and business can easily allocate overhead
costs in the best manner possible. For ascertaining importance of ABM over traditional method,
study will be conducted. The research questions will be answered and knowledge will be added
in the subject area by conducting thorough research on the significance of ABM over traditional
method and theoretical aspect will be judged in a better manner. Moreover, rationale of choosing
ABM is to provide benefits to GSK PLC which will help in eradicating inefficiency in allocating
costs in effective manner.
Topic Justification
The topic is justified as ABM has effectively helped company in gaining transparency
regarding costs. Moreover, ABM is useful technique for identifying strengths and weaknesses in
the best manner possible (Agarwal. 2018). On the other hand, company will be able to attain
efficiency by implementation of this management accounting technique. Furthermore,
management will be able to make enhanced and better decisions for improving operational
performance of organisation quite effectually.
Methods of Research
Research Type-
There are two type of researches such as quantitative and qualitative. The research study
will focus on Activity Based Management (ABM) and as a result, qualitative research will be
applied for ascertaining qualitative theories and concepts in effective manner.
Research Approach-
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The research approach is used are mainly of two types such as inductive and deductive.
In current research, scholar will use deductive research approach for forming specific theory
quite effectually.
Research Design-
The research design imparts clear direction to researcher for getting conclusive results of
research. Mainly two types of research design are used which are descriptive and experimental
(Ledford and Gast, 2018). In order to describe theoretical framework of ABM, scholar will use
descriptive design for making deeper analysis.
Research Philosophy-
Researcher mainly utilises interpretivism and positivism philosophies. In present study,
use of positivism philosophy will be made in order to understand significance of ABM in Tesco
PLC for initiating management accounting change.
Sampling-
The sampling is required on behalf of overall population. In relation to this, simple
random sampling technique will be used by taking sample of 30 managers of organisation. This
will state the purpose of research (Quinlan and et.al., 2019).
Data Collection-
Primary and secondary data will be used by researcher. For primary data, questionnaire
will be distributed to sample size. While, reliable articles on internet, journals and books will be
used for gathering secondary data.
Data Analysis-
Data needs to be analysed once collected. In relation to this, themes will be prepared on
the basis questionnaire being asked to sample population. Hence, thematic analysis will be used
for analysing data and results will be generated (Bilau, Witt and Lill, 2018).
Literature Review
Theme 1- Activity Based Management and Conceptualising Management Accounting
Change
As per the views of Krajnc, Logožar and Korošec (2012), Activity Based Management
(ABM) is useful process of business to effectively identify strengths and weaknesses. It seeks out
areas where company is losing money and as a result, those activities are eradicated for
improving profitability of business in the best manner possible. This provides clarity to business
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in order to analyse costs of equipments, facilities, distribution, overhead and related factors for
determining and allocating activity costs. The profitability can be improved with the help of
ABM analysis leading to preparation of more accurate budgets and financial forecasts. ABM can
be used for both financial and non-financial measures of performance. Business performance can
be effectively improved as when costs are traced on the basis of activities consumed, it becomes
easier for management to eradicate costs and increase profits along with production.
Appel-Meulenbroek, Groenen and Janssen (2011) says that management accounting
change is being observed as ABM has proved to be more beneficial to company in making
adequate cost analysis for enhancing overall business performance. This has also led to
attainment of cost transparency which has benefited business to take into account desired costs
and eradicate unnecessary costs to improve upon profitability. The role of management
accountant has been fruitful to organisation in meeting ongoing audit and analysis of project
performance against goals quite effectually. With the help of ABM, flexible costing of products
can be made which helps management to take enhanced decisions regarding imparting overall
efficiency of production by minimising costs.
Theme 2- Innovation in Management Accounting Practice and efficiency of ABM over
tradition method
Stout and Propri (2011) argues that creation of data warehouse has benefited business in
ascertaining transparency with relation to data. It is a large store of data which is accumulated
from wide range of sources in a company which is really helpful in taking out vital management
decisions. The ABM technique is useful as it provides more accurate and more precise
breakdown of indirect costs. The systems are hard or complex to implement but provides
effective services to company in meeting out its production costs and maintain efficiency. ABM
focuses on management of activities as the route for improving value received by consumer and
profit gained by providing this value in effective manner. ABM has main focus on accountability
for activities rather than costs and make emphasis on enhancement of whole system performance
rather than individual performance.
As per the views of Anderson and Young (2012), ABM allocates indirect costs to
products on cost driver rate. The costs are assigned on the usage of activities which forms
effective part in ascertaining efficiency. With the help of this, organisation to properly
implementing costs, but this helps to reduce significant under-costing and over-costing helping
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to initiate cost transparency. ABM follows simple steps that products consume activities, and in
turn, activities consume resources. For reducing commodity's cost, management will likely have
to change all the activities product consumes during production.
Ethical Consideration
The ethical considerations are to be taken into account so that research may be conducted
in a better manner. It can be analysed that for gathering primary data from the sample of
population, researcher will seek permission for using the data so that no ethical considerations
will be harmed. By concerning with respondents and obtaining permission from them, data will
be used for conducting research.
Timeline of Research
Activities 1 2 3 4 5 6 7 8 9 10 11 12 13
Research
proposal
formulation
Listing aim and
objectives
Background of
study
Implementing
methods of
research
Data collection
through primary
and secondary
data
Examining data
collected
Interpreting data
for ascertaining
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results
Listing
conclusion and
recommendation
s
Submitting
report
The above timeline shows that research study will get completed within 13 weeks and
results will be ascertained.
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REFERENCES
Books and Journals
Anderson, S. W. and Young, S. M., 2012. Implementing management innovations: Lessons
learned from activity based costing in the US automobile industry. Springer Science &
Business Media.
Appel-Meulenbroek, R., Groenen, P. and Janssen, I., 2011. An end-user's perspective on activity-
based office concepts.Journal of Corporate Real Estate. 13(2). pp.122-135.
Bilau, A. A., Witt, E. and Lill, I., 2018. Research methodology for the development of a
framework for managing post-disaster housing reconstruction. Procedia engineering. 212.
pp.598-605.
Krajnc, J., Logožar, K. and Korošec, B., 2012. Activity-based management of logistic costs in a
manufacturing company: a case of increased visibility of logistics costs in a Slovenian
paper manufacturing company. Promet-Traffic&Transportation. 24(1). pp.15-24.
Ledford, J. R. and Gast, D. L., 2018. Single case research methodology: Applications in special
education and behavioral sciences. Routledge.
Quinlan, C. and et.al., 2019. Business research methods. South Western Cengage.
Stout, D. E. and Propri, J. M., 2011. Implementing time-driven activity-based costing at a
medium-sized electronics company. Management Accounting Quarterly. 12(3). p.1.
Online
Agarwal. 2018 Activity Based Management (ABM): Definition, Importance and Areas [Online].
Available Through: <http://www.yourarticlelibrary.com/accounting/management-accounting/
activity-based-management-abm-definition-importance-and-areas/53113>.
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