5f911fae3d6bd - NRB Officer Management Note Part 1

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1. Management System
Concept and Foundations of Management
Management has important role in business and organizations as it coordinates the efforts of people to achieve goals and
objectives using available resources competently and successfully. Resourcing includes the deployment and handling of
human resources, financial resources, technological resources, and natural resources. Management is also an academic
discipline, a social science whose object of study is the social organization. There are four basic concepts of management,
such as plan, organize, direct, and monitor. Kreitner defined that management is a problem solving process of effectively
achieving organizational objectives through the efficient use of scarce resources in a changing environment. George R
Terry describes management as "a process consisting of planning, organizing, actuating and controlling performed to
determine and accomplish the objectives by the use of people and resources". He stated that management is a process-a
systematic way of doing thing using four managerial functions namely planning, organizing, actuating and controlling.
'Planning' means thinking of the manager's action in advance. Other theorists like Joseph L Massie described
"Management is the process by which a cooperative group directs actions towards common goals". The activities of the
managers are based on logic, plan or some method instead of guessing. Organizing means coordinating machines,
materials and human resources of the organization. Actuating means motivating, directing the subordinates. 'Controlling'
means manager must ensure that there is no deviations from plans.
Definitions of Management
(a) Functional Based Definitions:
“Management is what a manager does”. –– Louis Allen
“To manage is to for caste and plans, to organise, to command, to coordinate and to control”. –– Henry Fayal
These two definitions reveal management as a process and management is what a manager does.
(b) Human Relation Based Definitions:
“Management is the art of directing and inspiring people”. –– J. D. Moony and A. C. Railey
“Management is the art of getting things done through and with people informally organized groups”. –– Harold Koontz
“Management consists of getting things done through others. Manager is one who accomplishes the objectives by
directing the efforts of others”. –– George Terry
The above definitions reveal that a manager works with cooperation of others and through formal organization structure.
(c) Productivity Based Definitions:
“Management is the art of knowing what you want to do and to do it in the best and cheapest way”. –– F. W. Taylor
“Management may be defined as the art of securing maximum prosperity with a minimum of effort so as to secure
maximum prosperity and happiness for both employer and employee and give the public the best possible service”. ––
John. F. Mee
Thus, the above definitions reveal that management as an art of increasing productivity in an organization.
(d) Leadership and Decision Based Definitions:
“Management means decision-making”. –– Rose More
“Management is the art and science of decision making and leadership”. –– Donald J. Clough
Thus, the above definitions consider the management as an art of making qualitative decisions and leading a people
effectively in the formally organized organizations.
(e) Integration Concept Based Definitions:
“Management is the force that integrates man and physical plant into an effective operating unit”. –– Keith and Gubellini
The above definition views the management as the co ordinations of human and material resources.
Thus, from the above definitions it is clear that management has been defined in different senses emphasizing different
aspects of management.
Nature of management
Management principles, concepts and techniques are modified from time to time. The nature of management can be
explained in many ways. It is multidisciplinary as it pulls ideas and concepts from various disciplines like economics,
sociology, psychology, statistics, and operations research. Management incorporates the ideas taken from various
disciplines and presents innovative concepts which can be implemented. The incorporation of these ideas is the major
contribution of management. Secondly, Principles are developed by combination of ideas from various disciplines
supported by realistic evidence. These principles are flexible and change with the environment in which organization
works. Researchers explore continually to develop new principles and replace many older principles.
Evolution of Management Thoughts
Page No. 1 Note of Nepal Rastra Bank Assitant Director Prepared By : Pradip Khatiwada.
Management is studied in business academics since earlier times and it is considered as an integral part to understand
business operations. People have been changing and redesigning organizations for centuries. Though the 20th century is
noticeable in history as an 'Era of scientific management', still it does not indicate that management tactics were not used
in yester years. Many studies indicated that Management theory evolved with "scientific" and "bureaucratic" management
that used measurement, procedures and routines as the basis for operations. Firms developed hierarchies to apply
standardized rules to the place of work and penalized labour for violating rules. With the "human relations" movement,
companies emphasized individual workers. Modern management theories, including system theory, contingency theory
and chaos theory, focus on the whole organization, with employees as a key part of the system.
The evaluation of management can be categorized in to different parts:
• Pre-Scientific Management Era (before 1880),
• Classical management Era (1880-1930),
• Neo-classical Management Era (1930-1950),
• Modern Management era (1950-on word).
Classical Management includes Scientific Management School, Administration Management School, and Bureaucracy
Management. Neo- classical Management includes Human relation school and Behavioural Management School. Modern
Management includes Social system school, Decision theory school, Quantitative Management School, System
Management School, and Contingency Management School.
Evaluation of managementManagement Thoughts
Early Management Thought
The period of 1700 to 1800 emphasizes the industrial revolution and the factory system highlights the industrial revolution
and the importance of direction as a managerial purpose. Thus, the development of management theory can be recognized
as the way people have struggled with relationships at particular times in olden periods. Many economic theorists during
this period described the notion of management. Adam Smith and James Watt have been recognized as two theorists who
launched the world toward industrialization. Adam Smith brought about the revolution in financial thought and James
Watt's steam engine provided cheaper power that revolutionized English commerce and industry. Both provided the base
for modern concepts of business management theory and practice. Adam Smith explicated the concept of division of
labour and Jacques Turgot described the importance of direction and control. Smith stated that market and competition
should be the controllers of economic activity and that tax policies were destructive. The specialization of labour was the
basis of Smith's market system. According to Smith, division of labour provided managers with the maximum opportunity
for improved output. In the period of 1771–1858, Robert Owens studied for concern for the workers. He was repulsed by
the working conditions and poor treatment of the workers in the factories across Scotland. Owen became a reformer. He
reduced the use of child labour and used ethical influence rather than physical punishment in his factories. He reproached
his fellow factory owners for treating their equipment better than they treated their workers.
In quantitative approach of early management thought, Charles Babbage (1792–1871) is recognized as the supporter of
operations research and management science. Babbage's scientific innovations are mechanical calculator, a versatile
computer, and a punch-card machine. His projects never became a commercial reality. However, Babbage is considered
the creator of the concepts behind the present day computer. The most popular book of Babbage, On the Economy of
Machinery and Manufacturers, described the tools and machinery used in English factories. It discussed the economic
principles of manufacturing, and analysed the operations and the skills used and suggested improved practices. Babbage
considered in the benefits of division of labour and was a supporter of profit sharing. He developed a method of observing
manufacturing that is the same approach utilized today by operations analysts and consultants analysing manufacturing
operations. Other theorists who contributed in quantitative approach of early management thought were Robert Owen,
Andrew Ure and Charles Dupin, Henry Robinson Towne.
Another theorist Baptiste, explained the significance of planning. But management is appeared as a different discipline in
the second half of 19th century with the beginning of Joint Stock Company. This type of enterprises separated
management of business from their ownership and gave emphasis to labour incompetence and improper systems of wage
payments. To resolve such problem, people began to identify management as a separate field of study. During 20th
century, Management has become more scientific discipline with standard principles and practices.
The Classical Approach

The classical approach is the earliest thought of management .The classical approach was associated with the ways to
manage work and organizations more efficiently. The classical approach are categorized into three groups namely,
scientific management, administrative management, and bureaucratic management.
I. Scientific Management: Scientific management which is also referred to Taylorism or the Taylor system is a theory of
management that evaluates and synthesizes workflows, with the aim of improving labour productivity. In other words,
conventional rules of thumb are substituted by accurate procedures developed after careful study of an individual at work.
Universal approaches of Scientific management are developed for Efficiency of workers, Standardization of job
roles/activities and Discipline - the role of managers and the business hierarchy. The scientific management theory had an
enormous impact on the business industry at the beginning of the 20th century. Many big and victorious organizations,
such as McDonalds hamburger chain or call centres, utilised a modern version of scientific management. Among famous
theorist, Taylor's contribution in the area of scientific management is invaluable. The components of scientific
management are determination of the task, planning, proper selection and training of workers improvement in methods,
modification of organization and mental revolution such as 'job specialization'. As a result, it became more concerned
with physical things than towards the people even though increased the output. Scientific Management focuses on worker
and machine relationships. Organizational productivity can be increased by enhancing the competence of production
processes. The competence viewpoint is concerned with creating job that economizes on time, human energy, and other
productive resources. Jobs are planned so that each worker has a specified, well controlled task that can be performed as
instructed. Principle of scientific management are replacement of old rule of thumb method, scientific selecting and
training, labour management co-operation, maximizes output, equal division of responsibility. There are four scientific
management systems such as develop a science for each element of the job to replace old rule of thumb method,
Scientifically select employees and then train them to do the job as described in step, supervise employees to make sure
they follow the prescribed method for performing their job and continue to plan the work but use worker to actually get
the work done.
Taylor's Scientific Management: Academic records indicated that F.W. Taylor and his colleagues developed the first
systematic study in management. He initiated an innovative movement in 1910 which is identified as scientific
management. Frederick Taylor is known as the father of Scientific Management and he published Principals of Scientific
Management in which he proposed work methods designed to boost worker productivity. Taylor asserted that to succeed
in these principles, it is necessary to transform completely the part of management and labour. His philosophy was based
on some basic principles. The first principle is separation of planning and doing. In the pre-Taylor era, an employee
himself used to choose or plan how he had to do his work and what machines and equipment would be necessary to
perform the work. But Taylor divided the two functions of planning and doing, he stressed that planning should be
delegated to specialists. Second principle of Taylor's management approach is functional foremanship. Taylor launched
functional foremanship for administration and direction. Under eight-boss-scheme of functional foremanship, four persons
like route clerk, instruction card clerk, time and cost clerk and disciplinarian are associated with planning function, and
the remaining four speed boss, inspector, maintenance foreman, and gang boss are concerned with operating function.
Third principle is elements of scientific management. The main constituents of scientific management are work study
involving work important and work measurement using method and time study, standardization of tools and equipment
for workmen and improving working conditions, scientific Selection, placement and training of workers by a centralized
personal department. Fourth principle is bilateral mental revolution. Scientific management involves a complete mental
change of employees towards their work, toward their fellow-men and toward their employers. Mental revolution is also
necessary on the part of management's side, the foreman, the superintendent, the owners and board of directions. Fifth
principle is financial incentives. In order to encourage workers to give better performance, Taylor introduced differential
piece-rate system. According to Taylor, the wage should be based on individual performance and on the position which a
worker occupies. Economy is other principle of management devised by Taylor. According to him, maximum output is
achieved through division of labour and specialization. Scientific Management concentrates on technical aspects as well
as on profit and economy. For this purpose, techniques of cost estimates and control should be adopted. Taylor concluded
that science, not rule of thumb, Harmony, not discord, Cooperation and not individualism, Maximum output, in place of
restricted output.
(ii) Administrative Management: Administrative Management emphasizes the manager and the functions of
management. The main objective of Administrative management is to describe the management process and philosophy
of management. In contradiction of scientific management, which deals mainly with jobs and work at individual level of
scrutiny, administrative management gives a more universal theory of management.
Henry Fayol's Administrative Management (1841–1925): Henri fayol is known as the father of modern Management. He
was popular industrialist and victorious manager. Fayol considered that good management practice falls into certain
patterns that can be recognized and analysed. From this basic perspective, he devised a blueprint for a consistent policy of
managers one that retains much of its force to this day. Fayol provided a broad analytical framework of the process of
management. He used the word Administration for Management. Foyal categorized activities of business enterprise into
six groups such as Technical, Financial, Accounting, Security, and Administrative or Managerial. He stressed constantly
that these managerial functions are the same at every level of an organization and is common to all firms. He wrote
General and Industrial Management. His five function of managers were plan, organize, command, co-ordinate, and
control. Principal of administrative management: 1.Division of labour, 2.Authority & responsibility, 3.Discipline, 4.Unity
of command, 5.Unity of direction, 6.Subordination of individual interests to general interest, 7.Remuneration of
personnel, 8.Centralization, 9.Scalar chain, 10.Order, 11.Equity, 12.Stability of tenure, 13.Initiative and14 .Esprit de corps
(union of strength). These 14 principles of management serve as general guidelines to the management process and
management practice. His principles of management are described below.
1. Division of work: This is the principle of specialization which is detailed by economists as an important to efficiency
in the utilization of labour. Fayol goes beyond shop labour to apply the principle to all kinds of work, managerial as
well as technical.
2. Authority and responsibility: In this principle, Fayol discovers authority and responsibility to be linked with the letter,
the consequence of the former and arising from the latter.
3. Discipline: This discipline denotes "respect for agreements which are directed at achieving obedience, application,
energy and the outward marks of respect". Fayol declares that discipline requires good superiors at all levels, clear and
fair agreement, and judicious application of penalties.
4. Unity of command: This is the principle that an employee should receive orders from one superior only.
5. Unity of direction: Fayol asserted that unity of direction is the principle that each group of activities having the same
objective must have one head and one plan. As distinguished from the principle of unity of command, Fayol observes
unity of direction as related to the functioning of personnel.
6. Subordination of individual interest to general interest: In any group the interest of the group should supersede that of
the individual. When these are found to differ, it is the function of management to reconcile them.
7. Remuneration of personnel: Fayol recognizes that salary and methods of payment should be fair and give the utmost
satisfaction to worker and boss.
8. Centralization: Fayol principle of centralization refers to the extent to which authority is concentrated or dispersed in
an enterprise. Individual circumstances will determine the degree of centralization that will give the best overall yield.
9. Scalar chair: Fayol believe of the scalar chair as a line of authority, a 'Chain of Superiors" from the highest to the
lowest ranks and held that, while it is an error of subordinate to depart 'needlessly' from lines of authority, the chain
should be short-circuited when scrupulous following of it would be detrimental.
10. Order: Breaking this principle into 'Material order' and 'Social Order', Fayol thinks of it as the simple edge of "a place
for everything (everyone), and everything (everyone) in its (his) place". This is basically a principle of organization in
the arrangement of things and persons.
11. Equity: Fayol perceives this principle as one of eliciting loyalty and devotion from personnel by a combination of
kindliness and justice in managers dealing with subordinates.
12. Stability of tenure of personnel: Finding that such instability is both the cause and effect of bad management, Fayol
indicated the dangers and costs of unnecessary turnover.
13. Initiative: Initiative is envisaged as the thinking out and execution of a plan. Since it is one of the "Keenest
satisfactions for an intelligent man to experience", Fayol exhorts managers to "Sacrifice Personal Vanity" in order to
permit subordinates to exercise it.
14. Esprit de corps: This is the principle that 'union is strength' an extension of the principle of unity of command.
(iii) Bureaucratic Management:.
Bureaucratic management denotes to the perfect type of organization. Principal of Bureaucracy include clearly defined
and specialized functions, use of legal authority, hierarchical form, written rules and procedures, technically trained
bureaucrats, appointment to positions based on technical expertise, promotions based on competence and clearly defined
career paths. The German sociologist, Max Weber recognized as father of modern Sociology who appraised bureaucracy
as the most logical and structure for big organization. With his observation in business world, Weber summarized that
earlier business firms were unproductively managed, with decisions based on personal relationships and faithfulness. He
proposed that a form of organization, called a bureaucracy, characterized by division of labour, hierarchy, formalized
rules, impersonality, and the selection and promotion of employees based on ability, would lead to more well-organized
management. Weber also argued that authoritative position of managers in an organization should be based not on
tradition or personality but on the position held by managers in the organizational hierarchy.
Max Weber (1864-1920) devised a theory of bureaucratic management that emphasized the need for a firmly defined
hierarchy governed by clearly defined regulations and lines of authority. He considered the perfect organization to be a
bureaucracy whose activities and objectives were reasonably thought out and whose divisions of labour were clearly
defined. Weber also believed that technical capability should be emphasized and that performance evaluations should be
made completely on the basis of merit. Presently, it is considered that bureaucracies are huge, impersonal organizations
that put impersonal competence ahead of human needs. Like the scientific management theorists, Weber sought to
advance the performance of socially important organizations by making their operations predictable and productive.
Although we now value innovation and flexibility as much as efficiency and predictability, Weber's model of bureaucratic
management evidently advanced the development of vast corporations such as Ford. Bureaucracy was a particular pattern
of relationships for which Weber saw great promise. Although bureaucracy has been successful for many companies, in
the competitive global market of the 1990s organizations such as General Electric and Xerox have adopted bureaucracy,
throwing away the organization chart and replacing it with ever-changing constellations of teams, projects, and alliances
with the goal of unleashing employee creativeness.
Chester I. Barnard: Chester Barnard (1886-1961) also devised components to classical theory such as Follett that would
be further developed in later schools. Barnard, who became president of New Jersey Bell in 1927, used his work
experience and his wide reading in sociology and philosophy to devise theories about organizations. Barnard stated that
people join in formal organizations to accomplish such goals that cannot be fulfilled by working alone. But as they follow
the organization's goals, they must also gratify their individual needs. Barnard came to conclusion that an enterprise can
operate efficiently and survive only when the organization's goals are kept in balance with the aims and needs of the
individuals working for it. Barnard denotes a principle by which people can work in stable and mutually constructive
relationships over time. Barnard believed that individual and organizations purposes must be in balance if managers
understood an employee's zone of indifference that is, what the employee would do without questioning the manager's
authority. Apparently, the more activities that fell within an employee's zone of indifference the smoother and more
cooperative an organization would be. Barnard also believed that managers had a duty to inspire a sense of moral purpose
in their employees. To do this, they would have to learn to think beyond their narrow self-interest and make an ethical
promise to society. Although Barnard emphasized the work of administrative managers, he also focused substantial
attention on the role of the individual employee as the basic strategic factor in organization.
Modern Management Approaches
Behavioural Approach: Numerous theorists developed the behavioural approach of management thought as they observed
weaknesses in the assumptions of the classical approach. The classical approach emphasized efficiency, process, and
principles. Some management scholars considered that this thought ignored important aspects of organizational life,
particularly as it related to human behaviour. Therefore the behavioural approach concentrated on the understanding of the
factors that affect human behaviour at work. This is an improved and more matured description of human relations
approach. The various theorists who have great contribution in developing principles of management in this are Douglas
Mc Gregor, Abraham Maslow, Curt Levin, Mary Porker Follelt, Rensis Likert. Behavioural Scientists hold the classical
approach as highly mechanistic, which finds to degrade the human spirit. They choose more flexible organization
structures and jobs built around the capabilities and talent of average employees. The behavioural approach has based the
numerous principles.
Decision-making is done in a sub-optimal manner, because of practical and situational constraints on human rationality of
decision-making. The behaviourists attach great weight age on participative and group decision-making.
Behavioural Scientists promote self-direction and control instead of imposed control.
Behavioural Scientists believe the organization as a group of individuals with certain goals.
Behavioural scientists perceive that the democratic-participative styles of leadership are enviable, the autocratic, task
oriented styles may also be appropriate in certain situation.
Behavioural scientists propose that different people react differently to the same situation. No two people are exactly
similar and manager should tailor his attempts to influence his people according to their needs.
Behavioural scientists identify that organizational variance and change are predictable.
Approach of Mary parker follett: Mary Parker Follett (1868-1933) developed classic structure of the classical school.
However, she initiated many new elements particularly in the area of human relations and organizational structure. In this,
she introduced trends that would be further developed by the talented behavioural and management science schools.
Follett was persuaded that no one could become a whole person except as a member of a group. Human beings grew
through their relationships with others in organizations. In fact, she explained management as "the art of getting things
done through people." She took for granted Taylor's statement that labour and management shared a common purpose as
members of the same organization, but she considered that the artificial difference between managers and subordinates is
vague in this natural partnership. She believed in the power of the group, where individuals could combine their diverse
talents into something bigger. Moreover, Follett's "holistic" model of control took into account not just individuals and
groups, but the effects of such environmental factors as politics, economics, and biology. Follett's model was significant
precursor of the idea that management meant more than just what was happening inside a particular organization.
Maslow's theory of self-actualisation: His theory is recognized as Hierarchy of Needs. It is illustrated in a pyramid and
elucidates the different levels and importance of human's psychological and physical needs. It can be used in business by
managers to better understand employee motivation. The general needs in Maslow's hierarchy include physiological needs
(food and clothing), safety needs (job security), social needs (friendship), self-esteem, and self-fulfilment or actualisation.
Maslow's Hierarchy of Needs relates to organizational theory and behaviour because it explores a worker's motivation.
Some people are prepared to work just for money, because of friends, or the fact that they are respected by others and
recognized for their good work. The final level of psychological development that can be achieved when all basic and
mental needs are fulfilled and the "actualization" of the full personal potential takes place. In the organizational situation,
if an employee's lower need on the hierarchy is not met, then the higher ones are ignored. For example, if employees are
worried that they will be fired, and have no job security, they will be concerned about friendship and respect.
Douglas McGregor theory of management suggested that there is need to motivate employees through authoritative
direction and employee self-control and he introduced the concept of Theory X and Y. Theory X is a management theory
focused more on classical management theory and assumes that workforce need a high amount of supervision because
they are inherently lazy. It presupposes that managers need to motivate through coercion and punishment. Theory Y is a
management theory that assumes employees are determined, self-motivated, exercise self-control, and generally enjoy
mental and physical work duties. Theory Y is in line with behavioural management theories. Theory X and Theory Y
relates to Maslow's hierarchy of needs in how human behaviour and motivation is the main priority in the workplace in
order to maximize output. Theory X: The theory that employees are inherently lazy and irresponsible and will tend to
avoid works unless closely supervised and given incentives, contrasted with Theory Y. Theory Y: The theory that
employees are capable of being ambitious and self-motivated under suitable conditions, contrasted with Theory X.
An influential theorist in behaviour approach of management thought was Likert. His principles based on four System
such as supportive relationships between organizational members, multiple overlapping structures, with groups consisting
of superiors and their subordinates, group problem solving by consensus within groups and overlapping memberships
between groups by members who serve as linking pins.
Human Relations Approach: The human rationalists which is also denotes to neo-classicists, focused as human aspect of
business. These theorists emphasize that organization is a social system and the human factor is the most vital element
within it.
There are numerous basic principles of the human relations approach that are mentioned below:
Decentralization: The concept of hierarchy employed by classical management theorists is replaced with the idea that
individual workers and functional areas (i.e., departments) should be given greater autonomy and decision-making power.
This needs greater emphasis on lateral communication so that coordination of efforts and resources can occur. This
communication occurs via informal communication channels rather than the formal, hierarchical ones.
Participatory Decision-Making: Decision-making is participatory in the sense that those making decisions on a day-to-day
basis include line workers not normally considered to be "management." The greater sovereignty afforded individual
employees and the subsequent reduction in "height" and increase in span of control of the organizational structure requires
that they have the knowledge and ability to make their own decisions and the communication skill to coordinate their
efforts with others without a nearby supervisor.
Concern for Developing Self-Motivated Employees: The importance on a system of decentralized and autonomous
decision-making by members of the organization necessitates that those members be extremely "self-motivated". Goal of
managers in such an organization is to design and implement organizational structures that reward such self-motivation
and autonomy. Another is to negotiate working relationships with subordinates that foster effective communication in
both directions.
Therefore, the human relations approach implies modifications in the structure of the organization itself, in the nature of
work, and in the association between manager and assistant. Each of these changes depends upon assumptions about the
individual, the organization, and communication, just like any other theory of organizations. Elton Mayo and others
conducted experiments that was known as Hawthorne experiments and explored informal groupings, informal
relationships, patterns of communication, and patterns of internal leadership. Elton Mayo is usually popular as father of
Human Relations School. The human relationists, advocates the several factors after conducting Hawthorne experiments
which are mentioned below.
Social system: The organization in general is a social system consists of numerous interacting parts. The social system
established individual roles and establishes norms that may differ from those of formal organization.
Social environment: The social climate of the job affects the workers and is also affected.
Informal organization: The informal organization does also exist within the frame work of formal organization and it
affects and is affected by the formal organization.
Group dynamics: At the place of work, the workers often do not act or react as individuals but as members of group. The
group plays an important role in determining the attitudes and performance of individual workers.
Informal leader: There is an appearance of informal leadership as against formal leadership and the informal leader sets
and enforces group norms.
Non-economic reward: Money is an encouraging element but not the only motivator of human behaviour. Man is
diversely motivated and socio psychological factors act as important motivators.
Behavioural Science: Behavioural science and the study of organizational behaviour emanated during 1950s and1960s.
The behavioural science approach was a natural development of the human relations movement. It concentrated on
applying conceptual and analytical tools to the problem of understanding and foresees behaviour in the place of work. The
behavioural science approach has contributed to the study of management through its elements of personality, attitudes,
values, motivation, group behaviour, leadership, communication, and conflict, among other issues.
Contingency Approach: This approach of management thought focuses on management principles and concepts that
have no general and universal application under all conditions. Joan Woodward in the 1950s has contributed to develop
this approach in management. Contingency school states that management is situational and the study of management
recognize the important variables in the situation. It distinguishes that all the subsystem of the environment are
interconnected and interrelated. By studying their interrelationship, the management can find resolution to specific
situation. Theorists stated that there is not effective way of doing things under all business conditions. Methods and
techniques which are extremely effective in one situation may not give the same results in another situation. This
approach proposes that the role of managers is to recognize best technique in particular situation to accomplish business
goals. Managers have to develop situational understanding and practical selectivity. Contingency visions are applicable in
developing organizational structure, in deciding degree of decentralization, in motivation and leadership approach, in
establishing communication and control systems, in managing conflicts and in employee development and training. The
contingency approach is associated with applying management principles and processes as dictated by the sole
characteristics of each situation. It depends on various situational factors, such as the external environment, technology,
organizational characteristics, characteristics of the manager, and characteristics of the subordinates. Contingency
theorists often implicitly or explicitly disapprove the classical approach as it focuses on the universality of management
principles.
The Quantitative Approach Of Management Thought
The quantitative approach aimed at enhancing the process of decision making through the use of quantitative techniques.
It is evolved from the principles of scientific management.
Management Science (Operations Research): Management science which is also known as operations research utilized
mathematical and statistical approaches to resolve management issues. It was developed during World War II as
strategists attempted to apply scientific knowledge and methods to the intricate troubles of war. Industry started to apply
management science after the war. The introduction of the computer technology made many management science tools
and concepts more practical for industry
Production and Operations Management: This approach emphasizes the operation and control of the production
process that changes resources into manufactures goods and services. This approach is emerged from scientific
management but became a specific area of management study after World War II. It uses many of the devices of
management science. Operations management underlines productivity and quality of both manufacturing and service
organizations. W. Edwards Deming exercised a great influence in developing contemporary ideas to improve productivity
and quality. Major areas of study within operations management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and inventory control, quality control, computer integrated
manufacturing, just-in-time inventory systems, and flexible manufacturing systems.
Systems Approach Of Management Thought
The systems approach deals with the thoroughly understanding the organization as an open system that converts inputs
into outputs. The systems approach has great impact on management thought in the 1960s. During this period, thinking
about managing practices allowed managers to relate different specialties and parts of the company to one another, as well
as to external environmental factors. The system approach focuses on the organization as a whole, its communication with
the environment, and its need to achieve equilibrium.
To summarize, there are important theories of Management and each theory has distinct role to knowledge of what
managers do. Management is an interdisciplinary and global field that has been developed in parts over the years.
Numerous approaches to management theory developed that include the universal process approach, the operational
approach, the behavioural approach, the systems approach, the contingency approach and others. F W Taylor, Adam
Smith, Henry Fayol, Elton Mayo and others have contributed to the development of Management concept. The classical
management approach had three major categories that include scientific management, administrative theory and
bureaucratic management. Scientific management highlighted the scientific study of work methods to improve worker
efficiency. Bureaucratic management dealt with the characteristics of an perfect organization which operates on a rational
basis. Administrative theory explored principles that could be used by managers to synchronise the internal activities of
organizations. The behavioral approach emerged mainly as an outcome of the Hawthorne studies. Mary Parker Follet,
Elton Mayo and his associates, Abraham Maslow, Douglas McGregor and Chris Argyris were main players of this school.
Emerging concept of Management
1. Conflict Management
Conflict can be defined as a disagreement among two or more individuals, groups or organizations. Organizations have
different groups and their expectations are different. Because of such difference in the interest of groups or individuals,
conflict is obvious in organizations. Traditionally, conflict was considered as harmful factor to the organizations and tried
to avoid it. But nowadays, negative view regarding conflict has changed. Organizations have accepted that conflict is
natural and obvious outcome of groups. If it is managed properly, conflict can be highly constructive. Solving the
conflicts of the organization using various techniques is known as conflict management.
The level of conflict can be broadly categorized into four groups:

Intra-personal Conflict: This is the type of conflict that arises within the individual. When the individual is expected to
play multiple roles in an organization, this type of conflict arises. Many times, when the individual is demanded to play
divergent role they faces the problem of choosing among the competing goal which results in arisen of conflict. If the role
are materially different and the individual meets one expectation at the cost of other expectation then this type of conflict
arises.
Inter-personal Conflict: In an organization, when two or more persons interact with one another, there is the chance of
arising inter-personal conflict. This type of interaction may take place between subordinates or seniors. When the
individual is unable to confirm to the norms of the group, this type of conflict arises. Personality differences, perceptions,
clash of value and interest power and status differences are some of the main cause of the interpersonal conflict.
Inter-group Conflict: When there is conflict between two or more groups of an organization, it is called inter-group
conflict. This conflict arises when there are organizational causes. Conflict between line and staff, different departments,
management versus union are some of the examples of inter-group conflict. When there is less resource or joint decision
making, this conflict arises in an organization.
Inter-organizational Conflict: The conflict that arises between two different organizations is known as organizational
conflict. In the market, there are various competition going on, the price, production quality creates disputes among the
organization. This is the result of organizational conflict. In most of the cases, there involves the organizations that are
engaged in similar types of services and are the obstacles for the other.
Knowledge Management
Knowledge management is a new branch of management for achieving breakthrough business performance through the
synergy of people, process and technology. Knowledge management refers to the process by which an organization
creates captures, acquires and uses knowledge to support and improve the performance of the organization. It focuses on
the management of change, uncertainty and complexity. In other words, Knowledge management refers to the creation,
storage and collaborative sharing of employee information within the business environment. The focus of knowledge
management is on ‘doing the right things’ instead of doing things right. It provides a framework within which the
organization views all its processes as knowledge processes and all business processes involve creation, discrimination
and application of knowledge towards organizational survival.
Knowledge management is a new branch of management for achieving breakthrough business performance through the
synergy of people, process and technology. Knowledge management refers to the process by which an organization
creates captures, acquires and uses knowledge to support and improve the performance of the organization. It focuses on
the management of change, uncertainty and complexity. In other words, Knowledge management refers to the creation,
storage and collaborative sharing of employee information within the business environment. The focus of knowledge
management is on ‘doing the right things’ instead of doing things right. It provides a framework within which the
organization views all its processes as knowledge processes and all business processes involve creation, discrimination
and application of knowledge towards organizational survival.
The knowledge management cycle involves the following process:

Creating knowledge: In the first stage of management cycle, it creates new and advanced ways of doing things or
develops know-how. This involves the entry of knowledge into the system for the development of the organization.
Capturing knowledge: This stage represents the new knowledge in the reasonable way. The knowledge must be captured
to refine it from external source and the new knowledge must be innovated inside the organization.
Refining the knowledge: On the basis of necessity of the organization, the new acquired knowledge from the internal and
external sources must be filtered. The facts of the knowledge also should be refined by considering the organizational
needs.
Storing knowledge: While storing the useful knowledge, it must be stored in the reasonable format so that others in the
organization can access it. This allows the knowledge to be preserve and to remain in the system.
Managing knowledge: The knowledge must be kept in systematic form. It must be reviewed to verify that it is relevant
and accurate. It is a must to use knowledge for achieving goals. The systematic management of knowledge is essential to
make it up to date and relevant to the current environment.
Disseminating knowledge: Knowledge must be made available in a useful format to anyone in the organization who needs
it. This includes the activities and events connected members for the use of business purpose. This includes
communication, translation, conversion, filtering and rendering.
Participative Management
The concept of participative management is closely relates with the concept of industrial democracy. It means involving
workers in the decision making process. Participative management is based on the concept that when the worker invests
his time and ties his fate to the workplace, he should be given an opportunity to express his view and due importance
should be given to them by the management while farming policies and decisions. Participative management was first
developed in western countries and was very successful. Therefore, it has acquired world-wide recognition and popularity.
The advantages of participative management are as follows:

Better decision: Every member of the organization either he may be the superior or the subordinate is involved in decision
making process and the subject matter goes through every member which results in the effective decision in an
participative management.
Improve efficiency: In participative management, there are various people working together and shares their knowledge
and idea to solve the organizational problems which results in improvement of the efficiency of member and be a merit
for the productivity maximization.
Promote team work: This management also emphasizes and focuses on the team work and group effort. All the members
are involved in a team and work effectively to solve the problems and try to achieve the goals in organization through
participative management.
Job satisfaction: As the subordinates are working and are involved in decision making process with their respective
superior, their ideas and knowledge are also taken into consideration and it helps to satisfy the employees in their
performance.
Practice of self control: Through the participative management, subordinates have knowledge about the decisions and its
benefits for the organization and return to them. This helps to develop the practice of self control among the employees.
Improve employee relation: Working together in the group lets the employees to share their views and gains the mutual
cooperation among the employees. They get chance to interact among each other which also helps to improve employee
relation in an organization.
Some of the techniques of participative management are given below:

Problem Solving: This is a step-by-step process of conflict management. Facts are collected by conducting face-to-face
meeting with conflicting pasties and such facts are analayzed so that causes of conflicts can be identified. Everyone’s
views are considered carefully and problems are resolved through open discussion.
Avoidance: If the conflict is not so serious then manager can ignore such conflicts. No attention is given to the conflict.
The assumption is that conflicts are automatically resolved after the passage of time.
Communication: Most of the conflicts in the organization arise due to confusion of information or communication gap.
An organization can improve the communication system and techniques which help to resolve the conflict.
Reassign: A manager can change the job of one conflicting party so that the conflict can be resolved. Sometimes due to
lack of skills and knowledge for performing assigned job, employees create conflicts. Such conflict can be resolved
changing the job of the employees.
Forcing: Management uses its formal authority and power to resolve the conflict. Management forces to both the
conflicting parties to follow the decision taken by the management which helps to resolve conflict.
Compromise: Negotiation helps for the settlement of conflicts usually through intervention of the managers. Under this
technique, each conflicting parties leaves something.
Expansion of resources: Most conflicts arise due to shortage of resources and their allocation. When manager expands the
resource base then everyone gets the required amount of resources so the conflict can be resolved.
Diversity management refers to organizational actions that aim to promote greater inclusion of employees from different
backgrounds into an organization’s structure through specific policies and programs. Organizations are adopting diversity
management strategies as a response to the growing diversity of the workforce around the world.
Diversity Management
Advancements in technology now allow companies to hire and manage employees from around the world and in different
time zones. Companies are designing specific programs and policies to enhance employee inclusion, promotion, and
retention of employees who are from different backgrounds and cultures. The programs and policies are designed to create
a welcoming environment for groups that lacked access to employment and more lucrative jobs in the past.
The concept of diversity started in North America in the mid-1980s, spreading to other parts of the world afterward. The
then United States President, Ronald Reagan, originally vowed to dismantle the equality and affirmative action laws that
were viewed as legal constraints. Equality and affirmative action employees presented the argument that diversity
management should be seen as a competitive advantage to US companies rather than as legal constraints. The discussion
attracted research into the concept of diversity and benefits of diversity management. The globalization of the world
economy and the spread of multinational corporations brought a new twist into the concept, in that diversity management
does not solely refer to the heterogeneity of the workforce in one country but to workforce composition across countries.
Types of Diversity Management

The following are the two types of diversity management:
Intranational diversity management
Intranational diversity management refers to managing a workforce that comprises citizens or immigrants in a single
national context. The diversity programs focus on providing employment opportunities to minority groups or recent
immigrants.
Cross-national diversity management
Cross-national, or international, diversity management refers to managing a workforce that comprises citizens from
different countries. It may also involve immigrants from different countries who are seeking employment.
Contemporary challenges for managers

Challenge - 1. Globalisation:
Almost all home companies face the challenge of competition with their international counterparts. Small retailers, big
manufacturers, all are competing with the international products. It has resulted in greater complexities, greater economic
and political risk and uncertainty. The problems of internationalization are faced in the fields of goods and services,
finance, human resource and advertising. An important question that managers have to answer, therefore, is “Should we
focus on globalisation or regionalism?”
“Globalisation means that activities be managed from an overall global perspective as part of an integrated system.
Regionalism involves managing within each region with less regard for the overall organisation”. It is observed that most
companies manage their finance and manufacturing activities at the global level and human resource and advertising at the
regional level.
Challenge - 2. Quality and Productivity:
Companies compete with international competitors with respect to quality and productivity of goods and services.
Successful companies have been able to maintain and enhance the quality of goods and services with fewer resources
(productivity). Managers must, therefore, focus on producing more and better with fewer resources.
Quality is “the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or
implied needs”. Productivity is “an economic measure of efficiency that summaries the value of outputs relative to the
value of the inputs used to create them”. Quality and productivity are important determinants of business that affect its
success.
Challenge - 3. Ownership:
Another area that concerns managers is ownership. Large foreign investors are buying stocks of home companies and
ownership can be transferred in their hands. Profitability and productivity, thus, may suffer.
Challenge - 4. Environment:
Environment is changing at a fast rate. Organisations have to change with the competitive environment to maintain their
customers. Managers should develop deep understanding of the internal and external environmental factors and their
application to business operations.
Challenge - 5. Strategy Formulation:
Just as everything around is constantly changing, business firms must watch the strategies and strategic management.
Strategies keep changing according to environmental changes. “Strategic management is a way of approaching business
opportunities and challenges—it is a comprehensive and ongoing management process aimed at formulating and
implementing effective strategies.”
It keeps managers constantly involved and promotes healthy interaction between the organisation and the environment.
Managers who frame effective strategies will remain in the market and those who fail to do so will leave the market.
Strategy formulation, therefore, requires constant attention of contemporary managers.
Challenge - 6. Ethics and Social Responsibility:

Firms which do not adhere to ethical standards and social responsibilities are not accepted by the society. It is, therefore, a
challenge for managers to define relationships with the social environment. Organization that violates social expectations
has the risk of legal interference, loss of goodwill and even loss of business.
Challenge - 7. Workforce Diversity:
Diversity in the workforce exists when members differ along dimensions like race, colour, caste, creed, nationality, gender
etc. Traditionally, organisations were managed by workforce with no or very little diversity, like all men, all whites or all
Indians but today almost all organisations experience tremendous change in the composition of workforce. Firms employ
people from diverse sets of cultural, social, economic and ethical backgrounds at almost every organisational level.
Though diversity offers competitive advantage in terms of cost, resource acquisition, marketing, creativity, problem-
solving and systems flexibility, it also becomes a source of conflict in many organisations. People native to the
organisation may not readily accept to work with people of other cultural backgrounds.
Even if they agree to do so, there may arise a fear, distrust or individual prejudices in the work environment. If the Indian
manager praises the U.S. worker publically, it may create unhappiness amongst the Indian workers.
The organisations, therefore, face the challenge of addressing a variety of issues, opportunities and problems created by
the diverse workforce. In the globalized world, diversity cannot be avoided. Managers have to radically devise means to
overcome the problems of diversity. Though largely it has been done, problems, if any, have to be overcome.
Challenge - 8. Change:
Change is a continuous process. If firms want to compete in the complex, dynamic and diverse environment as they are
facing today, where expectations from managers and their organisations are on an ever increase, they must accept the
changes that confront their every day life.
Firms which do not change their operations with the changing environment (internal and external) may have to close their
operations. Managers have to continuously respond to change and look to future with hope and optimism.
Challenge - 9. Empowerment:
Though management is ‘the art of getting things done through others,’ the others/subordinates will not do things if they
have to merely carry out the orders and instructions of managers. Workers want more information about the organisation
to perform and control their jobs. Participative decision-making and formation of groups and work teams help in
fulfillment of individual, group and organisational goals.
The basic requirement, therefore, is to communicate with the external environment and their workforce. Communication
is a major task of managers today. They must convey organisational goals to individuals and understand their individual
goals, in turn. Failure to do so will result in loss of empowerment. This will affect organisational goals, both quantitative
and qualitative.
Challenge - 10. Information Technology:

Information technology “refers to the resources used by an organisation to manage information that it needs to carry out
its mission”. Information is an important part of communication and managers have to be careful in selecting the amount
and type of information (out of the large quantity of information available) for carrying out the business operations. Lack
of control over use of information can result in lack of control over business operations.
Managers have to carefully collect the right information, use it effectively and ensure that right information is leaving the
organisation to enter the environment. Management Information System (MIS) has largely taken care of this.
Social Responsibility
Social responsibility denotes differentiating right from wrong and doing the right thing. It means being a good corporate
inhabitant. Social responsibility is management's obligation to make choices and take actions that contributes to the well-
being and interests of society as well as the organization. The concept of CSR is a new phenomenon in the corporate
world, the theoretical structure reveals that this concept is developed since many decades. Windsor stated that during
1920, some business leaders hold the idea of responsibility and responsiveness practices (Windsor 2001). Experts describe
that social responsibilities can be defined as the obligation of management towards the society and others concerned. The
issue of social responsibility highlighted to public standing as a result of highly-publicized events such as the fall down of
Enron and the James Hardie asbestos scandal in Australia.
Executives of organizations are more concerned to develop moral values in business operations. Social responsibility can
be explained as "the obligation of the firm to use its resources in ways to benefit society, through committed participation
as a member of society, taking into account the society at large and improving the welfare of society at large independent
of direct gains of the company" (Weile et al., 2001).
Many experts have shown the significance of Social responsibility in boosting the performance of private sector firms.
Business professionals, government bureaucrats, and researchers are inclined to execute the doctrine of corporate social
responsibility in business operations. Basically, business scholars and corporate senior executives sincerely work for
organization to maximize revenue for stakeholders. But scenario is changed in business culture today. Corporate must
think for public interest and behave in socially responsible manner. Lantos stated that social responsibility approach
consists of three components which include ethical, philanthropic and strategic (2001).
Companies strive to survive by the resourceful use of the factors of production and other facilities of the culture. This
process puts organizations in an interdependent relation with the government, the community at large and the
environment. Such interdependence gives rise to a series of broader responsibilities to society in general (Mullins, 2005).
Mullins further demonstrates that the social responsibilities are both internal and external to the organisations. Social
responsibilities of companies towards their workers extend beyond the terms and conditions of the contract to include
justice in treatment, democratic functioning of the organisation, training in new skills and technologies, effective
personnel and employment relations policies and practices, and provision of social and leisure facilitates (Mullins, 2005).
Social responsibility approach has some dimension which includes human resources management, health and working in
safe environment, adjustment to changing situations and smooth management of environmental impact and natural
resources. Externally, this approach considers local communities, business, collaborators, contractors and customers,
human rights and global environmental issues. Briefly, social responsibility has positive affiliation with the social
structure which is an essential factor in improving the economy of country.
Many business experts assert that social standard influence greatly in decision making on major issues for business.
Palmer and Hartley argue that there is a major basis for business organizations to behave in a socially responsible manner.
Philosophically, organization maintains moral values to serve consumer and other social institutions such as educational
and the religious institutions.
Practically, organizations must consider society values, to survive in competitive business world. Business organizations
plan strategies for manufacturing products and develop ethical standards according to customer's requirement which is the
most instantaneous, powerful and targeted stakeholder. It is a hot issue whether the customer makes appropriate choice in
purchasing the goods and services from a company. Although the social responsibility is advantage for social and business
organizational, but scholars argue for and against business social responsibility. In an organization, the managers must
adopt strategies of social responsibility.
Firms have a moral commitment to help society to deal with its problems and to contribute for its welfare. It is the moral
practice to do by the business organizations. A measurement should be made of whether the organization is doing such
activities as producing goods and services that people need, creating jobs for society, paying fair wages, and ensuring
worker protection. Social responsibility to workers extends beyond terms and conditions of the formal contract of
employment and gives recognition to the workers as a human being. People today have more expectations of the quality
of working life, include justice in treatment, opportunities for consultation and participation, training in new skill and
technologies, effective personal and industrial relations policies, and provision of social and leisure facilities.
Organization should be given due consideration to the design of work organization and job satisfaction, make very
reasonable effort to give security of employment, and provide employment opportunities for marginal groups. Even
successful companies took initiative for creating moral cultures and system by involving individual employees in
corporate affairs. By providing or supporting some benefits to the workforce can lead to good communities in the business
organizations. Good communication in the internal business leads to avoid miss understanding of each other.
To summarise, social responsibility is explained in management literature as the obligation and commitment of managers
to take necessary steps to guard and improve society's welfare along with protecting their own interest.
Corporate Social Responsibility

Concept of Corporate Social Responsibilities (CSR) Corporate Social Responsibility indicates the responsibilities of an
organization for the social and environmental impacts of its business operations. It is the continuing commitment by a
business to behave ethically and contribute to economic development while improving the quality of life of the workforce
and its families as well as the local community and society at large.1 It means treating the stakeholders of the firm
ethically or in a responsible manner.2 It is obligations of the firm to society, or more specifically, the firm's stakeholders-
those affected by corporate policies and practices.3 The concept of CSR is based on the fact that an organization operates
in the society and uses its resources; therefore, it has some moral responsibility towards the society. It is the concept that
as an organization has to pay back/ compensate for using the resources of the society. A healthy society cannot be
imagined in absence of healthy business organizations and vice versa. This article aims to explain the concept of
Corporate Social Responsibility (CSR), its benefits, its legal obligation and its practices in Nepal. Practice of CSR seems
to have been started from very primitive time in Nepal. Our ancestors used to construct Dharmashala, Padhero, Chautaro,
etc for the convenience of the travelers/pilgrims during their travel from one place to another or while going for
pilgrimages, when there was no any means of transport. Further, Sankhadhar Sakhwa, an ancient merchant and a national
hero of Nepal, freed the people of Kathmandu from their debts and started a new era known as Nepal Era (Nepal Sambat)
for which he can be symbolized as a pioneer in CSR activities in Nepal. CSR thus cannot be considered new to Nepalese
society. In recent practice, regulated sectors like banks and financial institutions and some big corporate houses seem to
practice CSR in Nepal. It seems that organizations are either participating in the CSR activities due to legal provisions for
it or participating in such activities as a part of philanthropic perspective and pervasive concept of CSR as charity. There
are no any standards or norms for CSR in Nepal and most of the CSR activities seem to have been carried out with
philanthropy. The voluntarily practiced CSR activities also seem to be guided by the concept of charity. However, the
concept is gradually changing as activities like environmental cleaning, financial literacy, have been practiced as CSR in
recent days. CSR can be explained using a simple pyramid known as Carroll's CSR Pyramid. It explains four
responsibilities of an organization regarding CSR. As per the pyramid, CSR has economic responsibility as its base which
means profit must come first to the business. Economic responsibilities state that business must be profitable and it is the
only way for survival and for providing long-term benefit to the society. Legal responsibilities state that business must
ensure its compliance with all the applicable laws and regulations. Similarly, ethical responsibilities state that business
should act morally and with ethics. Lastly, the philanthropic responsibilities state that business should give back to the
society. The above figure shows Carroll's CSR pyramid – the pyramid of four responsibilities.
In CSR two diverging schools of thought are found. First states that it is only the regulations which can be effective for
implementing CSR. Second states that CSR should be implemented voluntarily by the organization i.e. the organization
should itself feel CSR as its responsibility rather than burden. In Nepal, the big corporate houses seem to have been
practicing CSR philanthropically and the banking sector seems to practice them due to legal requirements from the
regulatory body.
Benefits of CSR
CSR is very essential and beneficial for an organization as well as its stakeholders. It might not be a legal requirement but
operating in ethical way with social responsibility is important. CSR is win-win situation for all the stakeholders. There
are numerous benefits of CSR; few of them have been listed below:
1. It enhances the public image of the organization. It enhances the brand recognition in the society which is beneficial to
the organization ultimately.
2. It results sustainable business environment.
3. It promotes protection of consumer rights; human rights and rights of employees.
4. It promotes environmental protection.
5. It results competitive advantages and profitability to the organization.
Legal provisions of CSR
In Nepal, the Government of Nepal and Central Bank of Nepal- Nepal Rastra Bank (NRB) have addressed the legal
aspects for CSR activities to the industries and banks and financial institutions (BFIs), respectively. Nepal Rastra Bank in
its Unified Directvies, 2075 Directive 6(16) to the Bank and Financial Institutions has required them to allocate at least
one percent (1%) of net profit and deposit the same in a separately created CSR fund. The fund allocated is to be utilized
in the subsequent fiscal year. The areas of utilization of the fund have been categorized in the following manner;
• Direct and indirect use of fund in programs related to education, health, disaster management, environment protection,
cultural promotion, infrastructural development in remote areas, and improvement in earning capabilities of socially
backward groups, financial literacy and customer protection. Projects ought to be chosen through proposal with public
notice by extremely recognized organizations working in the related field.
• Direct expenditure towards providing grant for education and health of backward classes or expenditure in
construction of infrastructures, buying of vehicles and cost of operating them, etc. for organizations working towards
the same cause.
• Direct and indirect expenditure towards achievement of goals set in the 17 areas recognized by the Sustainable
Development Goals, 2016-2030.
• The cost borne by BFIs while setting up a Child Day Care Centre for their employees
• Direct expenditure towards providing grant for orphanages; children organizations and old age homes established
other than for business purposes.
Bank and Financial Institutions should not use the funds for branding purpose but they can use their name in their CSR
activities as courtesy. Also, they should not restrict the utilization of funds to a specific geographical area and subject
matter. Further, the utilization of the fund should not be made so as to acquire personal or political gain in any manner to
the BOD members. They are required to implement internal procedure for implementation of CSR fund via BOD. The
BFIs should disclose the provisions of the CSR fund & expenditure from CSR fund in the Notes to Account of their
annual financial statements. As per the recent circular of NRB, commercial banks and national level financial institutions
should spend minimum 10% from the fund separated for CSR, in each province to promote activities promoting financial
literacy.5 As per the Industrial Enterprises Act, 2016, the industries have to contribute to the fund as required. The Act has
made it mandatory to allocate at least 1% of the annual profit to be utilized towards CSR. The CSR requirement is
applicable to all medium, large, cottage and small industries having annual turnover more than NPR 150 million. The fund
created for CSR is to be utilized on the basis of annual plans and programs in the sectors that are prescribed under the Act,
which are yet to be specified by the Act.
Practice of CSR
In recent years, CSR has been practices by most of the organizations in Nepal, especially regulated sectors like Banks and
Financial Institutions (BFIs) and the big corporate houses. The CSR activities in Nepal have philanthropic perspective in
general. Child and women developments, religious activity, games and sports activities, blood donations are considered as
the areas for CSR activities. Hence, there seems to be a misconception in Nepal that CSR is limited to charitable projects.
Some organizations like BFIs, Nepal Telecom, Himalaya Airlines, Surya Nepal, etc has been involved in CSR activities
consistently. Some of the CSR activities practiced by Nepalese organizations as stated in their websites are stated below:
• Nepal Bank Limited provided cash assistance to Shree Sipateenghare Sanskrita Madhyamik Bidhyalaya –based in
Sindhupalchok for the reconstruction of 2 storey building which was devastated in the mega earthquake -2015.
• Rastriya Banijya Bank Limited handed over a cheque to the chairman of Muskan Sewa Nepal
• located at Sipadole, Bhaktapur to prepare residence for homeless and orphan children. It also organized Financial
Literacy Campaign to the people affected from the Budhigandaki river in Durbhung, Gorkha as a part of bank's
corporate social responsibility initiative.
• Nabil Bank partnered with Association of St. Mary's Alumnae Nepal (ASMAN) to support the education and nutrition
of burn victims.
• Everest Bank has been undertaking different welfare activities to preserve cultural heritage of the country as a part of
its Corporate Social Responsibility. In this endeavor, the bank recently distributed dustbins to Shree Budhanilkantha
Temple with the objective to maintain cleanliness inside the Temple Premises.
• Nepal Investment Bank Limited has donated to United Nations High Commissioner for Refugee Agency (UNHCR) as
a part of its ongoing support for providing educational supplies for Bhutanese refugee students. The organization has
been working on securing the rights and well-being of Bhutanese refugees in Nepal for almost two decades now.
• The Bagmati River Clean-Up campaign has been a social initiative of Nepal Telecom focusing on environmental
protection. The company on a weekly basis has been sending bulk SMS to its customers inviting them to participate in
the campaign held each week and also donates cleaning material and resources required for the campaign.
• Himalaya Airlines associated with TEWA, a philanthropy organization, has been contributing one round-trip flight
ticket of worth NPR 50,000.00 to its grant making program: Walk-a-Thon.
• Surya Nepal Private Limited (SNPL) has been practicing an Integrated CSR Strategy in the four main areas of
community empowerment, tourism, ecological conservation and health with a stated objective of “Creating Enduring
Value for the Society", and have been conducting CSR activities namely, SNPL Asha, SNPL Khelparyatan, SNPL
Prakriti and SNPL Suswasthya.
The above stated CSR activities show that in recent years, Nepalese business organizations have been highly aware and
involved in the CSR activities. However, it seems that most of the business organizations in Nepal assume giving
donations to support needy people, school, colleges, hospital, religious activities and sponsoring sports only as CSR.
There is no doubt that philanthropy is considered as a part of CSR in Nepal. Other aspects of CSR such as gender
equality, ecofriendly product, conducive working environment, etc. have been still under shadow. In Nepal, it seems that
organizations wait for some bad event
Good Governance
The concept of "governance" is not new. It is as old as human civilization. Simply put "governance" means: the process of
decision-making and the process by which decisions are implemented (or not implemented). Governance can be used in
several contexts such as corporate governance, international governance, national governance and local governance. Since
governance is the process of decisionmaking and the process by which decisions are implemented, an analysis of
governance focuses on the formal and informal actors involved in decision-making and implementing the decisions made
and the formal and informal structures that have been set in place to arrive at and implement the decision.
Government is one of the actors in governance. Other actors involved in governance vary depending on the level of
government that is under discussion. In rural areas, for example, other actors may include influential land lords,
associations of peasant farmers, cooperatives, NGOs, research institutes, religious leaders, finance institutions political
parties, the military etc. The situation in urban areas is much more complex. Figure 1 provides the interconnections
between actors involved in urban governance. At the national level, in addition to the above actors, media, lobbyists,
international donors, multi-national corporations, etc. may play a role in decisionmaking or in influencing the decision-
making process. All actors other than government and the military are grouped together as part of the "civil society." In
some countries in addition to the civil society, organized crime syndicates also influence decision-making, particularly in
urban areas and at the national level.
Similarly formal government structures are one means by which decisions are arrived at and implemented. At the national
level, informal decision-making structures, such as "kitchen cabinets" or informal advisors may exist. In urban areas,
organized crime syndicates such as the "land Mafia" may influence decision-making. In some rural areas locally powerful
families may make or influence decision-making. Such, informal decision-making is often the result of corrupt practices
or leads to corrupt practices.
According to World Bank, Good governance entails sound public sector management (efficiency and economy),
transparency, legitimacy, justice and respect for human rights and law.
In this way, the dominant idea of good governance promotes multiparty democracy form of system and it is nearly
neglecting any other forms of political system. It can easily be argued, what if other forms of system of governance are
able to make general public more happier than that of multiparty system.
Good governance has 8 major characteristics. It is participatory, consensus oriented, accountable, transparent, responsive,
effective and efficient, equitable and inclusive and follows the rule of law. It assures that corruption is minimized, the
views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-
making. It is also responsive to the present and future needs of society.
Characteristics/Components of Good Governance
1. Participation
Participation by both men and women is a key cornerstone of good governance. Participation could be either direct or
through legitimate intermediate institutions or representatives. It is important to point out that representative democracy
does not necessarily mean that the concerns of the most vulnerable in society would be taken into consideration in
decision making. Participation needs to be informed and organized. This means freedom of association and expression on
the one hand and an organized civil society on the other hand.
2. Rule of law
Good governance requires fair legal frameworks that are enforced impartially. It also requires full protection of human
rights, particularly those of minorities. Impartial enforcement of laws requires an independent judiciary and an impartial
and incorruptible police force.
3. Transparency
Transparency means that decisions taken and their enforcement are done in a manner that follows rules and regulations. It
also means that information is freely available and directly accessible to those who will be affected by such decisions and
their enforcement. It also means that enough information is provided and that it is provided in easily understandable forms
and media.
4. Responsiveness
Good governance requires that institutions and processes try to serve all stakeholders within a reasonable timeframe.
5. Consensus oriented
There are several actors and as many view points in a given society. Good governance requires mediation of the different
interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how
this can be achieved. It also requires a broad and long-term perspective on what is needed for sustainable human
development and how to achieve the goals of such development. This can only result from an understanding of the
historical, cultural and social contexts of a given society or community.
6. Equity and inclusiveness
A society’s well being depends on ensuring that all its members feel that they have a stake in it and do not feel excluded
from the mainstream of society. This requires all groups, but particularly the most vulnerable, have opportunities to
improve or maintain their well being.
7. Effectiveness and efficiency
Good governance means that processes and institutions produce results that meet the needs of society while making the
best use of resources at their disposal. The concept of efficiency in the context of good governance also covers the
sustainable use of natural resources and the protection of the environment.
8. Accountability
Accountability is a key requirement of good governance. Not only governmental institutions but also the private sector
and civil society organizations must be accountable to the public and to their institutional stakeholders. Who is
accountable to whom varies depending on whether decisions or actions taken are internal or external to an organization or
institution. In general an organization or an institution is accountable to those who will be affected by its decisions or
actions. Accountability cannot be enforced without transparency and the rule of law.
Conclusion
From the above discussion it should be clear that good governance is an ideal which is difficult to achieve in its totality.
Very few countries and societies have come close to achieving good governance in its totality. However, to ensure
sustainable human development, actions must be taken to work towards this ideal with the aim of making it a reality.
Principles of Good Governance

Principle 1
Fair Conduct of Elections, Representation and Participation
Elections are conducted freely and fairly, according to international standards and national legislation, and without any
fraud.
Principle 2
Responsiveness
• Objectives, rules, structures, and procedures are adapted to the legitimate expectations and needs of citizens.
• Public services are delivered, and requests and complaints are responded to within a reasonable timeframe.
Principle 3
Efficiency and Effectiveness
• Results meet the agreed objectives.
• Best possible use is made of the resources available.
• Performance management systems make it possible to evaluate and enhance the efficiency and effectiveness of
services.
• Audits are carried out at regular intervals to assess and improve performance.
Principle 4
Openness and Transparency
• Decisions are taken and enforced in accordance with rules and regulations.
• There is public access to all information which is not classified for well-specified reasons as provided for by law
(such as the protection of privacy or ensuring the fairness of procurement procedures).
Principle 5
Rule of Law
• Rules and regulations are adopted in accordance with procedures provided for by law and are enforced impartially.
Principle 6
Ethical conduct
• The public good is placed before individual interests.
• There are effective measures to prevent and combat all forms of corruption.
• Conflicts of interest are declared in a timely manner and persons involved must abstain from taking part in relevant
decisions.
Principle 7
Competence and Capacity
• The professional skills of those who deliver governance are continuously maintained and strengthened in order to
improve their output and impact.
• Public officials are motivated to continuously improve their performance.
• Practical methods and procedures are created and used in order to transform skills into capacity and to produce better
results.
Principle 8
Innovation and Openness to Change
• New and efficient solutions to problems are sought and advantage is taken of modern methods of service provision.
• There is readiness to pilot and experiment new programmes and to learn from the experience of others.
• A climate favourable to change is created in the interest of achieving better results.
Principle 9
Sustainability and Long-term Orientation
• The needs of future generations are taken into account in current policies.
• The sustainability of the community is constantly taken into account.
• Decisions strive to internalise all costs and not to transfer problems and tensions, be they environmental, structural,
financial, economic or social, to future generations.
Principle 10
Sound Financial Management
• Charges do not exceed the cost of services provided and do not reduce demand excessively, particularly in the case of
important public services.
• Prudence is observed in financial management, including in the contracting and use of loans, in the estimation of
resources, revenues and reserves, and in the use of exceptional revenue.
Principle 11
Human rights, Cultural Diversity and Social Cohesion
• Cultural diversity is treated as an asset, and continuous efforts are made to ensure that all have a stake in the local
community, identify with it and do not feel excluded.
Principle 12
Accountability
• All decision-makers, collective and individual, take responsibility for their decisions.
• Decisions are reported on, explained and can be sanctioned.
2. Strategic Planning
Strategic planning is the art of formulating business strategies, implementing them, and evaluating their impact based on
organizational objectives. The concept focuses on integrating various business departments (accounting and finance,
research and development, production, marketing, information systems, management) to achieve organizational goals.
The term strategic planning is synonymous with strategic management, only that the former is used in the corporate world
and the latter in the academic setting.
The concept of strategic planning originated in the 1950s but only became popular in the mid-1960s and the mid-1970s.
During that time, managers and the entire corporate world believed that strategic planning provided answers to most if not
all business problems. In the 1980s, however, the hype reduced since some plans did not produce the expected returns. Its
application was later revived in the 1990s and remains relevant in modern business.
Strategic Planning Process

The application of strategic planning in business is a result of difficult managerial decisions that comprise good and less
desirable courses of action. The development and execution of strategic plans is a well-thought-out plan performed in
three critical steps:
1. Strategy Formulation
In the formulation of strategies, the business assesses its current situation by performing an internal and external audit.
Strategy formulation also involves identifying the organization’s strengths and weaknesses, as well as opportunities and
threats (SWOT Analysis). As a result, managers get to decide which new markets they can venture or abandon, how to
allocate the required resources, and whether to expand its operations through a joint venture or mergers.
Business strategies result in long-term effects on organizational success; only top business executives understand their
impact and are authorized to assign the resources necessary for their implementation.
2. Strategy Implementation
After the strategy formulation, the company needs to establish short-term goals (usually one-year goals), devise policies,
and allocate resources for their execution. It is also referred to as the action stage and is the most important phase of
strategic planning. The success of the implementation stage is determined by the firm’s ability to nurture an environment
and a culture that motivates employees to work. A manager’s interpersonal skills are critical during this stage.
Effective strategy implementation also involves developing a functional organizational structure, maximum utilization of
information systems, and redirecting marketing efforts.
3. Strategy Evaluation
Any savvy business person knows that success today does not guarantee success tomorrow. As such, it is important for
managers to evaluate the performance of various strategies after the implementation phase. Strategy evaluation involves
three crucial activities: reviewing the internal and external factors affecting the implementation of the strategies,
measuring performance, and taking corrective steps.
All the three steps in strategic planning occur in three hierarchical levels: the corporate, middle, and operational levels.
Thus, it is imperative to foster communication and interaction among the employees and managers in all the levels so as to
help the firm to operate as a functional team.
Elements of a Strategic Plan
A strategic plan is a document that establishes the direction of an organization. It can be a single page or fill up a binder,
depending on the size and complexity of the business and work.
Most managers can benefit from having a strategic plan. The process of developing a plan helps the manager (and the
team) step back and examine where they are, where they want to go, and how to get there. In the absence of a plan, work
still gets done on a day-to-day basis but often lacks a sense of purpose and priority.
There are seven basic elements of a strategic plan. While there can be much more included in the plan, these seven
elements will help you get started.
1. Vision Statement
A vision statement describes the way you envision your business. As such, it should communicate that dream to your
employees and customers in an inspirational manner. A vision statement should be reviewed continuously to ensure it is
still aligned with the way you see your company.
2. Mission Statement
While a vision describes how you view your business to your customers and stakeholders, a mission statement describes
what you do currently. It often describes what you do, for who, and how. Focusing on your mission each day should
enable you to reach your vision. A mission statement could broaden your choices, and/or narrow them.
3. Core Values
Core values describe your beliefs and behaviors. They are the beliefs you have that will enable you to achieve your vision
and mission.
• The Coca-Cola Company lists it's core values as:
• Leadership: The courage to shape a better future
• Collaboration: Leverage collective genius
• Integrity: Be real
• Accountability: If it is to be, it's up to me
• Passion: Committed in heart and mind
• Diversity: As inclusive as our brands
• Quality: What we do, we do well
4. SWOT Analysis
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. A SWOT analysis provides businesses a
situational investigation into their position in the market. It allows you to spot and name the important aspects,
happenings, and adversaries of your business.
A business' strength could be its ability to attract local customers, while its weakness might be an inability to break into a
non-local consumer base. A local competitor with ties to non-local customers could be facing a financial situation, giving
this business an opportunity.
5. Long-Term Goals
Long-term goals are statements that drill down a level below the vision and describe how you plan to achieve it. This set
of goals usually starts three years out and extends to around five years into the future, directly aligning with the mission
and vision statements.
6. Yearly Objectives
Each long-term goal should have a few one-year objectives that advance your goals. Each objective should be as SMART
as possible: Specific, Measurable, Achievable, Realistic, and Time-based.
7. Action Plans
Each objective should have a plan that details how it will be achieved. The amount of detail depends on the amount of
flexibility you want your managers and team to have.
SWOT ANALYSIS
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and
Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition,
Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its
environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align
an organization’s resources and capabilities to the requirements of the environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely
opportunities and threats from the external environment. It views all positive and negative factors inside and outside the
firm that affect the success. A consistent study of the environment in which the firm operates helps in
forecasting/predicting the changing trends and also helps in including them in the decision-making process of the
organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-
1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis
on which continued success can be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise
in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give
your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes
human competencies, process capabilities, financial resources, products and services, customer goodwill and
brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt,
committed employees, etc.
2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our
full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are
the factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities,
narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and
eliminated. For instance - to overcome obsolete machinery, new machinery can be purchased. Other examples of
organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow
product range, large wastage of raw materials, etc.
3. Opportunities - Opportunities are presented by the environment within which our organization operates. These
arise when an organization can take benefit of conditions in its environment to plan and execute strategies that
enable it to become more profitable. Organizations can gain competitive advantage by making use of
opportunities.
Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the
targets that will best serve the clients while getting desired results is a difficult task. Opportunities may arise from
market, competition, industry/government and technology. Increasing demand for telecommunications
accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with
existing firms for revenue.
4. Threats - Threats arise when conditions in external environment jeopardize the reliability and profitability of the
organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest
among employees; ever changing technology; increasing competition leading to excess capacity, price wars and
reducing industry profits; etc.
Advantages of SWOT Analysis
SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective
element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct
their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall
business environment and recognize and exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following manner-
a. It is a source of information for strategic planning.
b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive
environment in which the firm operates.
SWOT ANALYSIS FRAMEWORK
Limitations of SWOT Analysis
SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because
of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects
as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in
market. SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization
can identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of management. These include-
a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import restrictions; etc.
Internal limitations may include-
a. Insufficient research and development facilities;
b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc
SWOT ANALYSIS OF GOOGLE COMPANY
Introduction
Google is probably the world’s best-known company for pioneering the search engine revolution and providing a means
for the internet users of the world to search and find information at the click of a mouse. Further, Google is also known for
its work in organizing information in a concise and precise manner that has been a game changer for the internet economy
and by extension, the global economy because corporations, individuals, and consumers can search and access
information about anything anywhere and anytime. Moreover, Google also goes with the motto of “Do not be Evil” which
means that its business practices are geared towards enhancing information and actualizing best practices that would help
people find and search information. Though its business practices in China and elsewhere where the company was
accused of being complicit with the authoritarian regimes in censoring information were questionable, on balance, the
company has done more good than harm in bringing together information and organizing it.
Strengths
Market Leader in Search Engines
Perhaps the biggest strength of Google is that it is the undisputed leader in search engines, which means that it has
a domineering and lion’s share of the internet searches worldwide. Google has more than 65% of the market share
for internet searches and the competitors do not even come close to anywhere that Google does.
Ability to Generate User Traffic
Google is a household brand in the world, its ability to drive internet user traffic is legendary, and this has helped
it become one of the most powerful brands in the world. Indeed, Google averages more than 1.2 Billion hits a
month in terms of the unique searches that users perform on the site. This gives it an unrivaled and unparalleled
edge over its competitors in the market.
Revenue from Advertising and Display
Its revenue model wherein it garners humungous profits through partnerships with third party sites has held the
company in good stead as far as its ability to mop up resources and increase both its top-line as well as bottom-
line is concerned. This is another key strength of the company that has helped it scale greater heights.
Introduction of Android and Mobile Technologies
The last of the strengths discussed here relates to its adoption of Android and Mobile technologies, this has
resulted in it becoming a direct competitor of Apple as far as these devices, and operating systems are concerned.
Weaknesses
Excessive Reliance on Secrecy
Google does not reveal its algorithm for searches or even its basic formula as far as internet searches are
concerned leading to many experts slamming the company for being opaque and hiding behind the veneer of
secrecy. However, in recent years, Google has taken steps to redress this by providing a bare bones version of its
unique search engine algorithm.
Falling Ad Rates
In recent years and especially in 2013, the company has been faced with declining revenues from ads and as a
result, the profitability of the company has taken a hit. This is partly due to the ongoing global economic
slowdown and partly because of competitors snapping at its heels in a more aggressive manner. Indeed, Apple has
already taken steps to garner search engine revenues in its devices and hence, Google must be cognizant of the
challenges that lie ahead.
Overdependence on Advertising
Google’s business model relies heavily on advertising and the numbers reveal that it gets more than 85% of its
revenues from ads alone. This means that any potential dip in revenues would cost the company dearly (literally
as well as metaphorically). The point here is that Google has to devise a more robust business model that
embraces e-commerce and mobile commerce along with its current business model that is based on ad revenues
alone.
Lack of Compatibility with next generation devices
Another weakness for Google is that it is not compatible with many next generation computing platforms
including mobile and tablet computers and this remains an area of concern for the company.
Opportunities
Android Operating System
Perhaps the biggest opportunity for Google lies in its pioneering effort in providing the Android OS (Operating
System) which has resulted in its becoming a direct competitor to Apple and Samsung.
Diversification into non-Ad Business Models
As discussed earlier, the company has to diversify into non-ad revenues if it has to remain profitable and current
indications are that it is adapting itself to this as can be seen from the push towards commercial transactions using
its numerous sites like Google Books, Google Maps etc.
Google Glasses and Google Play
The introduction of Google Glasses and Google Play promises to be a game changer for Google and this is a
significant opportunity that the company can exploit. Indeed, this very aspect can make the company take the next
evolutionary leap into the emerging world of nano-computing.
Cloud Computing
Cloud Computing remains a key opportunity for Google as it is already experienced in providing storage and
cloud solutions. Indeed, if not anything, it can move into the enterprise market using the cloud-computing
paradigm.
Threats
Competition from Facebook
The advent of Social Media has seriously threatened Google’s dominance in the internet world and the company
has to pull an ace to deal with the increasing features available on Facebook and Twitter.
Mobile Computing
Another threat to Google is from the emerging area of mobile computing that threatens to pass the company by as
newer companies seize the opportunity to ramp up their mobile computing presence.
BCG matrix
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or SBUs
on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry growth rate factors to evaluate the
potential of business brand portfolio and suggest further investment strategies.
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand
portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate
of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the
business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the
analysis is to help understand, which brands the firm should invest in and which ones should be divested.
BCG matrix is divided into 4 cells: stars, question marks, dogs and cash cows.
Relative market share. One of the dimensions used to eval evaluate
uate business portfolio is relative market share. Higher
corporate’s market share results in higher cash returns. This is because a firm that produces more, benefits from higher
economies of scale and experience curve, which results in higher profits. None
Nonetheless,
theless, it is worth to note that some firms
may experience the same benefits with lower production outputs and lower market share.
Market growth rate. High market growth rate means higher earnings and sometimes profits but it also consumes lots of
cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth
industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the
future.
There are four quadrants into which firms brands are classified:
1. Dogs. Dogs hold low market share compared to competitors and operate in a slowly ggrowing rowing market. In general, they
are not worth investing in because they generate low or negative cash returns. But this is not always the truth. Some
dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simplesim act as
a defense to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or
SBU to make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidat
liquidation
2. Cash cows.. Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible.
The cash gained from “cows” should be invested into stars to support their further growth. According to growth-share
growth
matrix, corporates shouldld not invest into cash cows to induce growth but only to support them so they can maintain
their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that
are capable of innovating new products or pro processes,
cesses, which may become new stars. If there would be no support for
cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment
3. Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash
users. They are the primary units in which the company should invest its money, because stars are expected to become
cash cows and generate positive cash flows. Yet, not all stars becbecome
ome cash flows. This is especially true in rapidly
changing industries, where new innovative products can soon be outcompeted by new technological advancements, so
a star instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integratio
integration,
n, horizontal integration, market penetration, market development,
product development
4. Question marks. Question marks are the brands that require much closer consideration. They hold low market share
in fast growing markets consuming large amount of cash aand nd incurring losses. It has potential to gain market share
and become a star, which would later become cash cow. Question marks do not always succeed and even after large
amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very
close consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture
BCG matrix quadrants are simplified versions of the reality and ca cannot
nnot be applied blindly. They can help as general
investment guidelines but should not change strategic thinking. Business should rely on management judgement, business
unit strengths and weaknesses and external environment factors to make more reasonable investment decisions.
Steps of BCG Analysis
Page No. 23 Note of Nepal Rastra Bank Assitant Director Prepa

epared By : Pradip Khatiwada.
BCG analysis has lost its importance due to many limitations, it can still be a useful tool if performed by following these
steps:
• Step 1. Choose the unit
• Step 2. Define the market
• Step 3. Calculate relative market share
• Step 4. Find out market growth rate
• Step 5. Draw the circles on a matrix
Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or a firm as a unit itself.
Which unit will be chosen will have an impact on th thee whole analysis. Therefore, it is essential to define the unit for which
you’ll do the analysis.
Step 2. Define the market. Defining the market is one of the most important things to do in this analysis. This is because
incorrectly defined market may lead to poor classification. For example, if we would do the analysis for the Daimler’s
Mercedes-Benz
Benz car brand in the passenger vehicle market it would end up as a dog (it holds less than 20% relative market
share), but it would be a cash cow in the luxury ca carr market. It is important to clearly define the market to better understand
firm’s portfolio position.
Step 3. Calculate relative market share. Relative market share can be calculated in terms of revenues or market share. It is
calculated by dividing your own brand’s market share (revenues) by the market share (or revenues) of your largest
competitor in that industry. For example, if your competitor’s market share in refrigerator’s industry was 25% and your
firm’s brand market share was 10% in the same year year,, your relative market share would be only 0.4. Relative market share
is given on x-axis.
axis. It’s top left corner is set at 1, midpoint at 0.5 and top right corner at 0 (see the example below for this).
An imae shows how to calculate relative market share. R Relative

elative market share is equal to to your company's market share
or revenue divided by the largest competitor's market share or revenue.
Step 4. Find out market growth rate. The industry growth rate can be found in industry reports, which are usually available
availa
online for free. It can also be calculated by looking at average revenue growth of the leading industry firms. Market
growth rate is measured in percentage terms. The midpoint of the yy-axisaxis is usually set at 10% growth rate, but this can
vary. Some industries
ustries grow for years but at average rate of 1 or 2% per year. Therefore, when doing the analysis you
should find out what growth rate is seen as significant (midpoint) to separate cash cows from stars and question marks
from dogs.
Step 5. Draw the circless on a matrix. After calculating all the measures, you should be able to plot your brands on the
matrix. You should do this by drawing a circle for each brand. The size of the circle should correspond to the proportion
of business revenue generated by that brand.
GE MATRIX
• In the 1970s, General Electric (GE) commissioned McKinsey & Company to develop a portfolio analysis matrix for
screening its business units. This matrix or GE Matrix is a variant of the Boston Consulting Group (BCG) portfolio
analysis.
• Thee GE McKinsey Matrix has also many points in common with the MABA analysis. MABA is an acronym that
stands for Market, Attractiveness, Business position and Assessment.
• The GE McKinsey Matrix also compares product groups with respect to market attractiveness
attractivene and competitive power.
Another name for this type of analysis is Portfolio analysis. The portfolios of businesses consist of all combinations of
products and/ or services that are offered to the market/ target groups. Originally, this Matrix made an analysis
ana of the
composition of the portfolio of GE business units. Later, this matrix proved to be very useful in other companies as
well.

The GE McKinsey Matrix comprises two axes. The attractiveness of the market is represented on the y-axis and the
competitiveness and competence of the business unit are plotted on the x-axis. Both axes are divided into three categories
(high, medium, low) thus creating nine cells. The business unit is placed within the matrix using circles. The size of the
circle represents the volume of the turnover.
The percentage of the market share is entered in the circle. An arrow represents the future course for the business unit.
GE McKinsey Matrix factors

It is possible to determine in advance whether a market is attractive enough to enter.
This can be done by using the following factors:
• Market size
• Historical and expected market growth rate
• Price development
• Threats and opportunities (component of SWOT Analysis)
• Technological developments
• Degree of competitive advantage
Other factors are used to determine competitiveness:
o Value of core competences
o Available assets
o Brand recognition and brand strength
o Quality and distribution
o Access to internal and external finance resources
Strategies of GE Matrix
Three different strategies can be distinguished and adopted using the GE McKinsey Matrix:
1. Invest/ grow
Growth is facilitated by expanding the market or making investments.
2. Hold
By making careful investments, the current market is consolidated.
3.Harvest / sell
No extra investments but mainly focusing on maximizing returns. By assigning a weight to each factor, the GE McKinsey
Matrix can be used more effectively. Based on these weights, the scores for competitiveness and market attractiveness can
be calculated more accurately for each business unit.
Steps of GE Matrix
This analysis is characterized by seven steps that must be followed:
• Define the Product Market Combinations (PMC’s). Who are the customers of an organization and what are its
products and/or services?
• Define the aspects that determine the attractiveness of the market. Certain weight factors can be assigned to certain
aspects. Market attractiveness is a critical factor that has to be considered carefully.
• Define the aspects that determine the competitive power of the organizations.
• Assign scores to the different PMC’s. Have this done by several people within and outside of the organization. This
will ensure a fair representation.
• Calculate the final scores. By comparing the final scores for market attractiveness and competitive power with the
maximum score, it is possible to determine their position on the matrix.
• Draw the matrix and plot market attractiveness on the x-axis and competitive power on the y-axis. The higher the
volume in turnover of a PMC, the larger the circle.
• Evaluate and discuss. The matrix can serve as the basis for a discussion about strategic decisions.
Limitations of GE Matrix
• A major assumption behind the GE-McKinsey matrix is that it can operate when the economies of scale are
achievable in production and distribution. Unless the same holds true, the concept of leveraging the competencies of
the firm and the SBU falls flat.
• Also some of the factors of competitive strength and market competitiveness may be extremely important for a
particular instance, while another instance may even require even other factors. The top management of the
organization should decide upon these factors very carefully as there is no generic set of factors with which all SBUs
may be evaluated.
• The relative weightage given to each of the factors of competitive strength and market competitiveness is often
arbitrary. While some methodology such as the Analytic Hierarchy Process may be used to compute the relative
importance of such factors, such is mostly not done. Thus the overall position of the SBU on the matrix could come
under criticism.
• The core competencies of the firm or the corporation are not represented in this analysis. The core competencies may
be leveraged across SBUs and can be a deciding factor while judging the competitive strength of the SBUs
Strategy implementation and control
Strategy Implementation
• Strategy Implementation refers to the execution of the plans and strategies, so as to accomplish the long-term goals of
the organization. It converts the opted strategy into the moves and actions of the organisation to achieve the
objectives.
• Simply put, strategy implementation is the technique through which the firm develops, utilises and integrates its
structure, culture, resources, people and control system to follow the strategies to have the edge over other
competitors in the market.
Strategy Implementation is the fourth stage of the Strategic Management process, the other three being a determination of
strategic mission, vision and objectives, environmental and organisational analysis, and formulating the strategy. It is
followed by Strategic Evaluation and Control.
Process of Strategy Implementation

• Building an organization, that possess the capability to put the strategies into action successfully.
• Supplying resources, in sufficient quantity, to strategy-essential activities.
• Developing policies which encourage strategy.
• Such policies and programs are employed which helps in continuous improvement.
• Combining the reward structure, for achieving the results.
• Using strategic leadership.
The process of strategy implementation has an important role to play in the company’s success. The process takes places
after environmental scanning, SWOT analyses and ascertaining the strategic issues.
Prerequisites of Strategy Implementation
1. Institutionalization of Strategy: First of all the strategy is to be institutionalized, in the sense that the one who framed
it should promote or defend it in front of the members, because it may be undermined.
2. Developing proper organizational climate: Organizational climate implies the components of the internal
environment, that includes the cooperation, development of personnel, the degree of commitment and determination,
efficiency, etc., which converts the purpose into results.
3. Formulation of operating plans: Operating plans refers to the action plans, decisions and the programs, that take place
regularly, in different parts of the company. If they are framed to indicate the proposed strategic results, they assist in
attaining the objectives of the organization by concentrating on the factors which are significant.
4. Developing proper organisational structure: Organization structure implies the way in which different parts of the
organisation are linked together. It highlights the relationships between various designations, positions and roles. To
implement a strategy, the structure is to be designed as per the requirements of the strategy.
5. Periodic Review of Strategy: Review of the strategy is to be taken at regular intervals so as to identify whether the
strategy so implemented is relevant to the purpose of the organisation. As the organization operates in a dynamic
environment, which may change anytime, so it is essential to take a review, to know if it can fulfil the needs of the
organization.
Even the best-formulated strategies fail if they are not implemented in an appropriate manner. Further, it should be kept in
mind that, if there is an alignment between strategy and other elements like resource allocation, organizational structure,
work climate, culture, process and reward structure, then only the effective implementation is possible.
Aspects of Strategy Implementation

• Creating budgets which provide sufficient resources to those activities which are relevant to the strategic success of
the business.
• Supplying the organization with skilled and experienced staff.
• Conforming that the policies and procedures of the organisation assist in the successful execution of the strategies.
• Leading practices are to be employed for carrying out key business functions.
• Setting up an information and communication system, that facilitate the workforce of the organisation, to perform
their roles effectively.
• Developing a favorable work climate and culture, for proper implementation of the strategy.
• Strategy implementation is the time-taking part of the overall process, as it puts the formulated plans into actions and
desired results.
Strategic Control
Strategic control involves the monitoring and evaluation of plans, activities, and results with a view towards future
action, providing a warning signal through diagnosis of data, and triggering appropriate interventions, be they either
tactical adjustment or strategic reorientation
Strategic controls are intended to steer the company towards its long-term strategic direction. After a strategy is
selected, it is implemented over time so as to guide a firm within a rapidly changing environment. Strategies are
forward-looking, and based on management assumptions about numerous events that have not yet occurred.
Traditional approaches to control seek to compare actual results against a standard. The work is done, the manager
evaluates the work and uses the evaluation as input to control future efforts. While this approach is not useless, it is
inappropriate as a means to control a strategy.
Managers responsible for a strategy and its success are concerned with two sets of questions:
1. Are we moving in the proper direction? Are our assumptions about major trends and changes correct? Do we need
to adjust this strategy?
2. How are we performing? Are we meeting objectives and schedules? How are costs, revenues and cash flows
matching projections? Do we need to make operational changes?
Tyes of Strategic Control

Type # 1. Premise Control:
Every strategy is founded on certain assumptions relating to environmental and organisational forces. Certainly some
of these forces or factors are very sharp and any change in them is sure to affect the strategy to a great extent. Hence,
premise control is a must to identify the key postulations and keep track of any change in them in order to assess their
impact on strategy and, therefore, its implementation.
Type # 2. Implementation Control:

In order to implement a chosen strategy, there is need for preparing quite good number of plans, programs and
projects. Again resources are allocated for implementing these plans, programs and projects. The purpose of
implementation control is to evaluate as to whether these plans, programs and projects are actually guiding the
organisation towards its pre-determined goals or not.
Type # 3. Strategic Surveillance:
If premise and implementation strategic controls are more specific by nature, strategic surveillance, is more
generalised and overriding control which is designed to monitor a broad range of events both inside and outside the
organisation which are likely to threaten the very course of a firm’s strategy.
Such strategic surveillance can be done through a broad- based, general monitoring based on selected information
sources to uncover events that are likely to affect the strategy of an organisation.
Professor David A. Aker, in his book “Developing Business Strategies—Published by John Wiley and Sons of N.Y in
1984 P. 128, suggests a “formal yet simple strategic information scanning system which can enhance the effectiveness
of the scanning effort and preserve much of the information now lost within the organisation.”
Type # 4. Special Alert Control:

This special alert control is based on a trigger mechanism for a rapid response and immediate reassessment of a given
strategy in the light of a sudden and unexpected event. Special alert control can be exercised via the formulation of
contingency strategies and assigning the responsibility of handling unforeseen events to crisis management teams.
The instances of such sudden and unexpected events can be say, sudden fall of government at centre or even state,
terrorist attacks, industrial disaster or any natural calamity of earthquake, floods, fire and so on.
Strategic control process
1. Setting performance standards,
2. Measuring actual performance,
3. Analysing variance, and
4. Taking corrective actions.
1. Setting Performance Standards:
Every function in the organizations begins with plans which specify objectives or targets to be achieved. In the light
of these, standards are established which are criteria against which actual results are measured. For setting standards
for control purposes, it is important to identify clearly and precisely the results which are desired. Precision in the
statement of these standards is important.
After setting the standards, it is also important to decide about the level of achievement or performance which will be
regarded as good or satisfactory. The desired level of performance should be reasonable and feasible. The level should
have some amount of flexibility also, and should be stated in terms of range— maximum and minimum.
2. Measuring Actual Performance:
The second major step in control process is the measurement of performance. The step involves measuring the
performance in respect of a work in terms of control standards. The presence of standards implies a corresponding
ability to observe and comprehend the nature of existing conditions and to ascertain the degree of control being
achieved.
The measurement of performance against standards should be on a continuous basis, so that deviations may be
detected in advance of their actual occurrence and avoided by appropriate actions. Appraisal of actual or expected
performance becomes an easy task, if standards are properly determined and methods of measuring performance can
be expressed explicitly.
3. Analysing Variance:
The third major step in control process is the comparison of actual and standard performance. It involves two steps –
(i) finding out the extent of variations, and (ii) identifying the causes of such variations. When adequate standards are
developed and actual performance is measured accurately, any variation will be clearly revealed. When the standards
are achieved, no further managerial action is necessary and control process is complete.
However, standards may not be achieved in all cases and the extent of variations may differ from case to case. When
the variation between standard and actual performance is beyond the prescribed limit, an analysis is made of the
causes of such a variation. For controlling and planning purposes, ascertaining the causes of variations along with
computation of variations is important because such analysis helps management in taking up proper corrective
actions.
4. Taking Corrective Actions:
This is the last step in the control process which requires that actions should be taken to maintain the desired degree of
control in the system or operation. An organization is not a self-regulating system such as thermostat which operates
in a state of equilibrium put there by engineering design. In a business organization, this type of automatic control
cannot be established because the state of affairs that exists is the result of so many factors in the total environment.
Thus, some additional actions are required to maintain the control.
Contribution of Strategic Control

Strategic control, though very important phase of strategic management is often overlooked by strategists on the
premise that once they have formulated a strategy and implemented it, their role in strategic management is over.
They remain mired with daily control reports which can be taken even at lower levels. This approach may be alright
when there is not high stake involved in a strategy but fatal when the stake is high. Without strategic control,
strategists have no means to measure whether the chosen strategy is working properly or not.
When strategic control is undertaken properly, it contributes in three specific areas:
1. Measurement of organizational progress,
2. Feedback for future actions, and
3. Linking performance and rewards.
1. Measurement of Organizational Progress:
Strategic control measures organizational progress towards achievement of its objectives. When a strategy is chosen,
it specifies the likely outcomes which are relevant for achieving organizational objectives. The strategy is not an end
in itself; it is a means for achieving something valuable to organizational success.
Therefore, measuring this success as a result of strategy implementation is a prime concern for every strategist. This
measurement should be undertaken during the process of strategy implementation as well as after implementation to
ensure the progress as quickly as possible so that remedial actions are taken at appropriate time.
2. Feedback for Future Actions:
Strategic management being a continuous process with no apparent beginning and end, control provides clues for
recycling various actions which are relevant for achieving organizational objectives. This is possible only when
strategic planning and control are well integrated.
Thus, control activities are undertaken in the light of criteria set by a strategic plan. But at the same time, control
provides inputs either for adjusting the same strategic plan or taking future strategic plans. This is the way
organizations progress over the period of time. They take a strategic action, implement it, and find its results. If the
results are in tune with what were intended, the similar types of strategic actions are taken in future. Thus, there is a
chain of strategic plan, actions, and control.
3. Linking Performance and Rewards:
This is the most crucial aspect of strategic control but many organizations fail in linking performance and rewards.
This happens not only at the level of different organizations but even for a country as a whole. For example, Abegglen
has observed that “the dispension of part of the rewards by the organizations without regard to performances is more
common in the less modern parts of the country than in the more advanced ones, and in less developed than in more
developed countries. It is one of the reasons why organizational control is less effective in less developed countries.”
Thus, linking performance and rewards is a big issue. If taken objectively, control provides inputs for relating
performance and rewards. This linking is vital for motivating organizational personnel more so in an era when there is
not only fight for market share but for human talent too. A performance-based motivation system works better than
the one which considers factors other than performance.
Red ocean strategy vs Blue ocean strategy
A Red Ocean Strategy is a strategy which aims to fight and beat the competition. Red Ocean Strategies have the
following common characteristics:
• They focus on competing in a marketplace which already exists.
• They focus on beating the competition.
• They focus on the value/cost trade-off. The value/cost trade-off is the view that a company has the choice between
creating more value for customers but at a higher cost, or reasonable value for customers at a lower cost. In
contrast, those who attempt a blue ocean strategy aim to achieve differentiation and at the same time, low cost.
• They focus on exploiting existing demand.
• They focus on execution (better marketing, lower cost base etc).
A Red Ocean Strategy ultimately leads to an organization choosing to follow one of two strategies – differentiation or
low cost. Whichever is chosen the organization must align all activities with one of these strategic directions.
Blue Oceans can be thought of as markets that do not exist yet. The microwave oven would have been a blue ocean in
the 1970s. Conversely, Red Oceans can be thought of as all the marketplaces which currently exist. So, whilst
microwave ovens were definitely blue ocean in the 1970’s, today they are definitely a red ocean space.
Red oceans are all the industries in existence today – the known market space. In red oceans, industry boundaries are
defined and accepted, and the competitive rules of the game are known.
Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets
crowded, profits and growth are reduced. Products become commodities, leading to cutthroat or ‘bloody’ competition.
Hence the term red oceans.
Blue oceans,, in contrast, denote all the industries not in existence today – the unknown market space, untainted by
competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is
both profitable and rapid.
In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an
analogy to describe the wider, deeper potential to be found in unexp
unexplored
lored market space. A blue ocean is vast, deep,
and powerful in terms of profitable growth.
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost
value trade-off.
Align the whole system of a firm’s activities with its strategic choice of Align the whole system of a firm’s
fir
differentiation or low cost. activities in pursuit of
differentiation and low cost.
3. Organizational Structure
An organization is a social unit of individuals that is designed and managed to achieve collective goals. As such
organizations are open systems that are greatly affected by the environment they operate in. Every organization has its
own typical management structure that defines and governs the relationships between the various employees, the tasks
that they perform, and the roles, responsibilities and authority pr
provided
ovided to carry out different tasks.
An organization that is well structured achieves effective coordination, as the structure delineates formal communication
channels, and describes how separate actions of individuals are linked together.
Organizational structure
tructure defines the manner in which the roles, power, authority, and responsibilities are assigned and
governed, and depicts how information flows between the different levels of hierarchy in an organization.
The structure an organization designs depends greatly on its objectives and the strategy it adopts in achieving those
objectives.
An organizational chart is the visual representation of this vertical structure. It is therefore very important for an
organization to take utmost care while creating the oorganizational
rganizational structure. The structure should clearly determine the
reporting relationships and the flow of authority as this will support good communication – resulting in efficient and
effective work process flow.
Common Organization Structures
Managements need to seriously consider how they wish to structure the organization. Some of the critical factors that
need to be considered are −
• The size of the organization
• Nature of the business
• The objectives and the business strategy to achieve them
• The organization environment
Functional Organization Structure
The functional structure is the most common model found in most organizations. Organizations with such a structure are
divided into smaller groups based on specialized functional areas, such as operations, finance, marketing, Human
Resources, IT, etc.

The organization’s top management team consists of several functional heads (such as the VP Operations, VP
Sales/Marketing). Communication generally occurs within each functional department and is communicated across
departments through the department heads.
This structure provides greater operational efficiency as employees are functionally grouped based on expertise and
shared functions performed. It allows increased specialization as each group of specialists can operate independently.
In spite of the above benefits there are some issues that arise with this structure. When different functional areas turn into
int
silos they focus only on their area of responsibility and do not support other function
functional
al departments. Also expertise is
limited to a single functional area allowing limited scope for learning and growth.
Product Organizational Structure
This is another commonly used structure, where organizations are organized by a specific product type. Each Ea product
category is considered a separate unit and falls within the reporting structure of an executive who oversees everything
related to that particular product line. For example, in a retail business the structure would be grouped according to
product lines.
Organization structured by product category facilitates autonomy by creating completely separate processes from other
product lines within the organization. It promotes depth of understanding within a particular product area and also
promotes innovation. It enables clear focus with accountability for program results.
As with every model, this model also has a few downsides like requirement of strong skills specializing in the particular
product. It could lead to functional duplication and poten potential
tial loss of control; each product group becomes a
heterogeneous unit in itself.
Geographic Organizational Structure
Organizations that cover a span of geographic regions structure the company according to the geographic regions they
operate in. This is typically
pically found in organizations that go beyond a city or state limit and may have customers all across
the country or across the world.

It brings together employees from different functional specialties and allows geographical division. The organization
responds
esponds more quickly and efficiently to market needs, and focuses efforts solely on the objectives of each business unit,
increasing results.
Though this structure increases efficiency within each business unit, it reduces the overall efficiency of the organization,
org
since geographical divisions duplicate both activities and infrastructure. Another main challenge with this model is that it
tends to be resource intensive as it is spread across and also leads to duplication of processes and efforts.
Matrix Organizational Structure
A matrix structure is organized to manage multiple dimensions. It provides for reporting levels both horizontally as well
as vertically and uses cross-functional
functional teams to contribute to functional expertise. As such employees may belong
belon to a
particular functional group but may contribute to a team that supports another program.
This type of structure brings together employees and managers across departments to work toward accomplishing
common organizational objectives. It leads to eff
efficient
icient information exchange and flow as departments work closely
together and communicate with each other frequently to solve issues.
This structure promotes motivation among employees and encourages a democratic management style where inputs from
team members
bers are sought before managers make decisions.
However, the matrix structure often increases the internal complexity in organizations. As reporting is not limited to a
single supervisor, employees tend to get confused as to who their direct supervisor is and whose direction to follow. Such
dual authority and communication leads to communication gaps, and division among employees and managers.
Key Elements for Proper Organizational Structure
• Work Specialization:: To what degree are articles subdivided into sseparate jobs?
• Departmentalization:: On what basis jobs will be grouped?
• Chain of Command:: To whom will individuals and groups report?
• Span of Control:: Up to how many individuals can a manager efficiently direct?
• Centralization vs Decentralization
Decentralization: Who will be the sole maker of decisions?
• Formalization:: To what degree will there be rules and regulations to direct employees and managers?
Organizational design
Organizational design is a step-by-step step methodology which identifies dysfunctional aspects of work flow,
procedures, structures and systems, realigns them to fit current business realities/goals and then develops plans to
implement the new changes. The process
ocess focuses on improving both the technical and people side of the business.
For most companies, the design process leads to a more effective organization design, significantly improved results
(profitability, customer service, internal operations), and employees who are empowered and committed to the
business. The hallmark of the design process is a comprehensive and holistic approach to organizational improvement
that touches all aspects of organizational life, so you can achieve:
Excellent customer service
Increased profitability
Reduced operating costs
Improved efficiency and cycle time
A culture of committed and engaged employees
A clear strategy for managing and growing your business

By design we’re talking about the integration of people with core business processes, technology and systems. A well-
designed organization ensures that the form of the organization matches its purpose or strategy, meets the challenges
posed by business realities and significantly increases the likelihood that the collective efforts of people will be
successful.
As companies grow and the challenges in the external environment become more complex, businesses processes,
structures and systems that once worked become barriers to efficiency, customer service, employee morale and
financial profitability. Organizations that don’t periodically renew themselves suffer from such symptoms as:
Inefficient workflow with breakdowns and non value-added steps
Redundancies in effort (“we don’t have time to do things right, but do have time to do them over”)
Fragmented work with little regard for good of the whole (Production ships bad parts to meet their quotas)
Lack of knowledge and focus on the customer
Silo mentality and turf battles
Lack of ownership (“It’s not my job”)
Cover up and blame rather than identifying and solving problems
Delays in decision-making
People don’t have information or authority to solve problems when and where they occur
Management, rather than the front line, is responsible for solving problems when things go wrong
It takes a long time to get something done
Systems are ill-defined or reinforce wrong behaviors
Mistrust between workers and management
Centralization and Decentralization

Centralization and Decentralization are two modes of working in any organization. In centralization, there is a hierarchy of
formal authority for making all the important decision for the organization.
And in decentralization decision making is left for the lower level of organization. Let us learn the difference between
centralization and decentralization in detail with their advantages and other factors.
Suggested Videos
Centralization and Decentralization

A simple way to understand if an organization is working in a centralized or decentralized manner is by looking at two
important aspects:
1. The place of the decision-making authority in the hierarchy of the management i.e. Centralized.
2. The degree of decision-making power at the lower echelons in the organization i.e. Decentralized.
An organization has a greater degree of decentralization if the number of decisions made and functions affected at the lower
level are higher.
Further, while decentralization and delegation of authority might seem similar, you must not confuse one with another. A
decentralized way of working is more about the philosophy of the organization.
Unlike delegation, it is not just about handing over a part of the authority to a subordinate but a way of approaching the
decision-making process in the organization.
Decentralization is a choice, while delegation is a must. Let’s take a quick look at the advantages of centralization and
decentralization:
Advantages of Centralization
• The organization can strictly enforce uniformity of procedures and policies.
• It can help in the elimination of overlapping or duplicate activities and save costs.
• The organization has a better chance of utilizing the potential of its outstanding employees.
• It offers a better control over the activities of the organization by ensuring consistency in operations and uniformity in
decision-making.
Advantages of Decentralization
• Faster decision-making and better quality of decisions
• Improves the effectivity of managers.
• Offers a democratic environment where employees can have a say in their governance.
• Provides good exposure to mid and lower-level managers and creates a pool of promotable manpower with managerial
skills.
• Since managers can see the results of their own actions, they are more driven and have improved morales.
Both centralization and decentralization have their own advantages and disadvantages. Even if an organization is working in a
decentralized manner, some functions are usually centralized. Next, let’s look at the factors that determine the degree of
decentralization.
Factors determining the Degree of Decentralization
While the degree of decentralization depends on a wide range of factors which are different for different organizations, here is
a common list:
Significance of the decision
Decisions which are costly either in terms of money, goodwill of the company, employee morale and other such decisions
which are significant to the organization are centralized at the top-levels of the organization.
Therefore, even in a decentralized organization, these decisions are made in a centralized manner. It is not that high-level
managers do not commit mistakes.
However, the enterprise expects them to commit fewer and less-critical mistakes. This is because they are trained,
experienced, and have the right information to arrive at the best decision.
From observation, it is evident that the primary factor behind centralizing authority is the weight of responsibility since
delegating authority does not imply delegating responsibility.
Size of the Enterprise
The size of the organization is an important factor which determines the degree of decentralization. A larger firm needs more
decisions. Also, a large-sized company has numerous departments and levels.
Coordinating all of them and consulting several specialists and executives can take a lot of time, delaying the decision.
And delayed decisions tend to cost more. Segregating the organization into smaller decentralized units enhances efficiency
and minimizes costs.
Organizations try to ensure that the size of each unit is such that it is easily manageable and decentralize authority accordingly.
The Attitude and Philosophy of the Management
Decentralization is the dispersal of authority. Therefore, the attitude of senior management plays an important role in the
extent and mode of authority dispersal. Usually, senior executives with a traditional mindset are a little skeptical about
decentralizing authority.
On the other hand, executives with a rational managerial temperament rely on the participative approach of doing work. These
executives try to make the best out of individual initiative and opt for decentralization.
Control Techniques
In most organizations, senior management believes that some vital aspects like the price of the product, credit offered, etc.
must have a uniform policy.
Delegation vs Decentralization
Points Delegation Decentralization
It usually involves two people a It involves the entire organization from the top
Nature
manager and his subordinate. management to individual departments.
The manager or the delegator The control lies with the concerned departments or
Control
controls it. sections.
All organizations need delegation

to get things done. Delegating This is an optional mode of working. Organizations
Need
authority is essential to assign can also work in a centralized manner.
responsibility.
The delegator can delegate

The head of the department is responsible for the
authority but the responsibility
Responsibility activities performed under him. Therefore,
remains with him. The delegator
responsibility is fixed at the department-level.
is accountable for the task.
Creates better superior-

Relationship Helps in the creation of semi-autonomous units.
subordinate relationships.
Emerging concept in organizing
1. Team structure: - Team consists of group of people with diversified skill and knowledge who work together
for common purpose. Teams are considered today as the most effective means to organize people and work
activities. Team concept is getting popular as it breaks down departmental barriers and decisions are push down to
work team. Organization perform complex task through teams. Teams achieve flexibility and increase
productivity. Team based environment enhance performance reduce stress and promotes the climate of creativity
and innovation in organization. Teams may be of different types.
a) Problem solving teams: - It is formed from the same department to solve departmental problem.
b) Cross functional team: - This team consists of members from various departments. Complex task and
problems are assigned to this team.
c) Self managed team: - This is very much powerful team which has well defined responsibility and
authority. They have authority to make solution of the problem and implement solution. This team is also
called autonomous team.
d) Quality circle: - This team consists of members from the same department which work for quality
improvement for product service and activities. They regularly meet and think about quality improvement.
Small organizations themselves are team and in big organization there are teams at operational level.
2. Virtual organizations: - Virtual organization is a temporary network of companies. They come together to
quickly exploit fast changing opportunities. Its foundation is strong information technology platform. The essence
of virtual organization is outsourcing. All managerial activities are outsources to other companies. Outsourcing is
the process of giving jobs to other companies in contract which were previously performed by organization itself.
The objective of outsourcing is to improve quality and reduce cost. Distribution, packaging, accounting, trading,
recruitment and selection and even manufacturing. Activities are outsourced what leave them a little. Hence, it is
called virtual organization. Management can concentrate on strategy formulation, policy formulation and
coordination.
3. Boundary less organization: - These organizations are known as barrier free or modular organization. A
boundary less organization is one in which there are no barriers in information flow where they are best needed. It
is not bound by chain of command and span of management. Members of these organizations do not have face to
face conversation or contact. They establish relationship through modern important jobs. They are linked
basically through computers. People are utilized where there services are needed. But, they are not formal
member of organization.
4. Organizational downsizing: - Organization downsizing is the planned reduction in jobs and positions.
Common approach to downsizing improves eliminating functions, positions, hierarchical levels, dropping those
products which continuously include loss. It is thus the process of becoming slimmer, smaller and faster by
reducing the size of work force or eliminating divisions or business. Therefore, downsizing is the process of
eliminating positions, jobs departments and hierarchical levels. The purpose of downsizing is to bring the
organization in right size. The methods of downsizing are: -
a) Firing
b) Transfer
c) Reduced work weeks
d) Early retirement
e) Lay off
f) Job sharing
5. Process reengineering: - The process reengineering emerged in management literature in 1950. Reengineering
is a radical redesigning is the part of all business work process to achieve major gains in cost, quality, service and
speed. In other words, it is concerned with radical redesigning work process to achieve improvement in critical
area such as cost, quality service and speed.
Currently reengineering has become popular, redesigning strategy. It is the popular restructuring organization.
When old structure does not function in changing environment, new structure must be designed. The important
elements of process reengineering are: -
a) It focus is on work process,
b) It is a radical process improvement strategy,
c) It applies to individual as well as organizational process,
d) It tries to maximize the value added content and minimize those that does not add value,
e) It aims to improve performance by redesigning work process.

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The Classical Approach

Systems Approach Of Management Thought

Emerging concept of Management

The level of conflict can be broadly categorized into four groups:

The knowledge management cycle involves the following process:

The advantages of participative management are as follows:

Some of the techniques of participative management are given below:

Types of Diversity Management

Contemporary challenges for managers

Challenge - 6. Ethics and Social Responsibility:

Challenge - 10. Information Technology:

Corporate Social Responsibility

Principles of Good Governance

Strategic Planning Process

Steps of BCG Analysis

Page No. 23 Note of Nepal Rastra Bank Assitant Director Prepa

An imae shows how to calculate relative market share. R Relative

Page No. 24 Note of Nepal Rastra Bank Assitant Director Prepa

GE McKinsey Matrix factors

Strategy implementation and control

Process of Strategy Implementation

Aspects of Strategy Implementation

Tyes of Strategic Control

Type # 2. Implementation Control:

Type # 4. Special Alert Control:

Contribution of Strategic Control

Red ocean strategy vs Blue ocean strategy

Page No. 30 Note of Nepal Rastra Bank Assitant Director Prepa

Page No. 31 Note of Nepal Rastra Bank Assitant Director Prepa

Page No. 32 Note of Nepal Rastra Bank Assitant Director Prepa

Centralization and Decentralization

Centralization and Decentralization

Points Delegation Decentralization

All organizations need delegation

The delegator can delegate

Creates better superior-

Emerging concept in organizing

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