Appraisal of Accountants’ Role in Strategic Pricing Formulation

ABSTRACT

In any business today, has been their key . This is so because the  rate with which business is growing coupled with the worldwide inflationary trends, more dimensions will be added to the problem of pricing.

In any market where goods and services are traded, pricing is very crucial as the prime mover of trade, for instance, pricing ration out scarce good. This is a rise in price of good indicates that the good is in relative short supply.

Pricing can be used to discourage unnecessary pressure on some commodities; this is price serving as a gauge. Price indicate the direction of want and also pricing as a means by which factors of production are awarded and as a result, many professionals in business are beginning to play major roles in pricing decision and strategic pricing formulation.

This study was done on the appraisal of accountants’ role in strategic pricing formulation. Its objectives were: (i) to determine the extent to which accountants participate in strategic price formulation;

To find out if accountants are responsible for the computation of a company’s product worth alongside considerations for the company’s cost of capital and owners’ returns; and (iii) to examine the functions of accountants in strategic pricing formulation development.

The design of the study was a cross sectional survey. Primary data were only used and were collected from a randomly selected 95 accounting staff of PRODA and JUHEL Pharmaceutical Co. Ltd. Enugu State Nigeria.

All the data collected were presented and analyzed using cross-tabulations, frequencies and percentages. Hypotheses were tested through the use of chi-square (X2) and Pearson’s Product Moment Correlation Coefficient (r), which was run on SPSS version 15.0.

The study found that accountants significantly participate in strategic pricing formulation. It further found that they (accountants) are responsible for the computation of companies’ product worth alongside considerations for cost of capital and owners’ returns.

Finally, the study found that accountants have significant functions/roles that they carry out in strategic pricing formulation. It was however concluded that accountants play chief roles in strategic pricing formulation. They were recommended for constant trainings and development.

TABLE OF CONTENTS

Title Page ………………………………………………………….. i
Approval page………………………………………………………….. ii
Certification page …………………………………………………… iii
Dedication ………………………………………………………….. iv
Acknowledgement …………………………………………………… v
Abstract ………………………………………………………….. vii
Table of content……………………………………………………… viii

Chapter one: INTRODUCTION

1.1 Background of study …………………………………….. 1
1.2 Statement of problem ……………………………………. 3
1.3 Objectives of the study …………………………………… 4
1.4 Research question ………………………………………….. 4
1.5 Research Hypothesis ……………………………………. 5
1.6 Significance of Study …………………………………… 5
1.7 Scope of Study …………………………………………… 6
1.8 Limitation of the Study ……………………………………. 6
1.9 Definition of Terms ……………………………………… 7
References …………………………………………………………. 9

Chapter two: LITERATURE REVIEW

2.1 The Meaning of Related Concepts ……………………….. 10
2.2 Choosing a Pricing Objective and Associated Strategy………. 17
2.3 Accountants’ Roles In The Process Of Strategic Pricing Formulation 26
2.4 Empirical Review on General Roles of Accountants…………. 38
References ………………………………. 42

Chapter three: METHODOLOGY 

3.1 Introduction …………………………………………… 48
3.2 Research Design ……………………………………………. 48
3.3 Sources of Data ……………………………………………. 48
3.4 Population of the Study …………………………………….. 48
3.5 Sample Size Determination ……………………………… 50
3.6 Sampling Technique …………………………………….. 51
3.7 Description of Data Collection Instrument ………………… 51
3.8 Validity of the Research Instrument ……………………… 52
3.9 Reliability of the Research Instrument ………………. 52
2.10 Data Analysis Methods Used …………………………….. 54
References………………………………………………………….. 55

Chapter four: DATA PRESENTATION, ANALYSES AND INTERPRETATION

4.1 Analysis of Administered Questionnaires ……………… 56
4.2 Analyses of the Responses of the Respondents against the Questions on the Questionnaire 56
4.3 Test of Hypotheses …………………………………… 64

Chapter five: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS  69

5.1 Summary of Findings ……………………………………. 69
5.2 Conclusion …………………………………………………. 69
5.3 Recommendations……………………………………………. 70
BIBLIOGRAPHY …………………………………………… 72
APPENDIX …………………………………………… 77
QUESTIONNAIRE ……………………………………………. 78

INTRODUCTION

1.1 Background of the Study

Pricing is one of the most powerful levers to increase profitability. Studies over the years have shown on average that, a 1% increase in price leads to a 7-8% increase in profits- making optimal pricing more effective than improving volumes or variables and fixed costs (HSB Consulting, 2008).

Also, pricing is one of the first, if not the most significant signals a firm sends to the market place about its product, its business and its competitive positioning (Strickland, 2010).

According to this author, the pricing may be developed on a product-by-product basis, as a company-wide strategy, or somewhere in between these.

Whatever the approach, the price a firm puts on its product tells everyone where the firm is positioning itself viz-a-viz other players and what it believes customers are thinking, feeling or ultimately valuing its products with.

Failing on ‘product pricing’ can lead to a failure on the entire market opportunity for a product; failure to connect with customers or a market; and not getting any chance to adjust the price and try again.

The reality is that, pricing is more art than science (Strickland, 2010). It requires an understanding of market conditions, customers, and competitive factors that matter most to customers, cost structures and many other elements that relatively few businesses have traditionally included in their pricing process.

BIBLIOGRAPHY

Agbaeze, k. (2004). Research Methodology in Business and Social Sciences. Owerri: Canon Publisher, P.56
Ahrens, T., And Chapman, C.S. (1999) ‘The Role of Management Accountants in Britain and Germany’. Management Accounting, pp. 42-43.
Ahrens, T., And Chapman, C.S. (2000) ‘Occupational Identity of Management Accountants in Britain and Germany’. The European Accounting Review, 9(4), pp. 477-498.
Baker, A.C, Tim, E. (2000), Accounting for Micro Businesses. Journal of Business Management, Vol.2(5), Pp.37-48.
Baldvinsdotti, G. (2005) ‘An Institutional Perspective of Accountants’ New Roles — the Interplay Of Contradictions and Praxis’. European Accounting Review, 14(4), pp. 725-757.
Bettis, R.A., And Prahalad, C.K. (1995) ‘The Dominant Logic: Retrospective And Extension’. Strategic Management Journal, 16(1), pp. 5-14.