Foundations of Business Management

Line managers are managers who are directly responsible for achieving the main objectives of the organisation, such as production and sales. They have the authority to direct the work of subordinates and to make decisions in the chain of command, e.g. production manager and sales manager.

Derivative planning means the plans that are developed to support and carry out the master (strategic) plan. They are derived from the main plan and are made at lower levels, e.g. departmental budgets, schedules, programmes and operational plans.

1. Workers are motivated not only by money but also by social and psychological factors, such as recognition, belonging and attention.
2. Informal groups and group norms strongly influence worker behaviour and productivity, and good human relations and participative supervision improve morale and output.

1. The only social responsibility of business is to increase profits for its owners (shareholders).
2. Business must do so within the rules of the law and ethical custom.
3. Managers are agents of the shareholders, so spending the owners' money on social causes is wrong.
4. Solving social problems is the job of government and individuals, not business.

1. Define the problem clearly and collect adequate, accurate information.
2. Involve the people affected in the decision (participation) and use group decision making or brainstorming.
3. Generate and evaluate several alternatives, using tools such as cost-benefit analysis and decision trees.
4. Follow up and evaluate the results, learning from feedback.

1. It speeds up decision making, because decisions are made at the level where the problem arises.
2. It reduces the burden on top managers, who can concentrate on strategic matters, and it develops managerial talent and motivation in lower levels.

Organisational culture is the set of shared values, beliefs, norms, assumptions and ways of behaving that members of an organisation hold in common. It shapes how people act and how work is done, and distinguishes one organisation from another.

• PEST: Political, Economic, Social and Technological (analysis)
• ISO: International Organization for Standardization
• TQM: Total Quality Management
• QWL: Quality of Work Life

Team conflict is a disagreement or clash among team members arising from differences in goals, opinions, values, personalities, roles or interests, which disturbs the harmony and work of the team. It may be harmful if badly handled, but constructive conflict can stimulate new ideas.

1. Dependence on monsoon rain and lack of irrigation facilities.
2. Small, fragmented landholdings and traditional, low-productivity farming methods.
3. Shortage of capital and credit, and of fertilisers, quality seeds and technology.
4. Poor roads, storage and market access, with weak prices for farmers' produce. (Others: climate change, labour migration.)

Henry Mintzberg classified the work of managers into ten roles in three groups.

1. Interpersonal roles (arising from authority and status)

• Figurehead: performs ceremonial and symbolic duties, such as receiving visitors and signing documents.
• Leader: motivates, guides and directs subordinates, and hires and trains staff.
• Liaison: builds contacts and relationships with people outside the unit.

2. Informational roles

• Monitor: collects information from inside and outside the organisation.
• Disseminator: passes information to subordinates and other members.
• Spokesperson: gives information to outsiders such as the press, government and the public.

3. Decisional roles

• Entrepreneur: starts changes and improvements and takes up new opportunities.
• Disturbance handler: takes corrective action in crises and conflicts.
• Resource allocator: decides how to distribute money, time, people and materials.
• Negotiator: bargains with unions, suppliers, customers and others for the organisation.

Unethical behaviour in business has several roots.

1. Individual factors: weak personal values, greed, selfishness, low moral development and lack of integrity.
2. Organisational pressure: unrealistic targets, pressure to hit profits and sales, and a culture or leaders that tolerate or reward cheating.
3. Weak controls: lack of a code of ethics, poor supervision, and weak enforcement or punishment.
4. Competitive pressure: the need to survive or beat competitors can push firms to cut corners, bribe or mislead customers.
5. Social and legal environment: corruption in society, weak laws and law enforcement, and a lack of public awareness, as well as pressure from peers and "everyone does it" attitudes.
6. Lack of ethical training and awareness: employees do not know what is right or wrong in the job, or fear speaking up.

The planning process consists of the following steps.

1. Being aware of opportunities: scanning the internal and external environment (SWOT) to find chances and threats.
2. Setting objectives: stating clearly what is to be achieved, and by when, for the organisation and its units.
3. Developing premises: making assumptions about the future conditions (forecasts, policies, market) under which plans will work.
4. Identifying alternatives: finding the different ways to reach the objectives.
5. Evaluating alternatives: comparing them on cost, benefit, risk and feasibility.
6. Selecting an alternative: choosing the best course of action.
7. Formulating derivative (supporting) plans: preparing budgets, schedules, programmes and departmental plans to support the main plan.
8. Implementation and follow-up: putting the plan into practice, monitoring results and making changes where needed.

A strong, positive culture contributes to business success in these ways.

1. Identity and unity: it gives members a shared sense of identity, purpose and belonging, and unifies different people.
2. Guides behaviour: shared values and norms guide how people act and make decisions without constant supervision.
3. Motivation and commitment: a healthy culture raises morale, loyalty and job satisfaction, and lowers turnover.
4. Competitive advantage: a distinctive culture is hard for rivals to copy, and can encourage quality, innovation and customer service.
5. Adaptability: a culture that welcomes change helps the firm respond to its environment.
6. Attracts talent and customers: a good reputation attracts skilled employees and builds trust with customers and other stakeholders.
7. Coordination and control: it reduces conflict and improves co-operation, communication and teamwork.

Common barriers to effective communication are as follows.

1. Physical (environmental) barriers: noise, distance, poor equipment or bad weather that distort or block messages.
2. Semantic (language) barriers: unclear words, jargon, ambiguity and different meanings.
3. Psychological barriers: emotions, prejudice, fear, attitudes, inattention, and differing perceptions of sender and receiver.
4. Organisational barriers: complex hierarchy, long communication channels, poor structure, and information overload or filtering.
5. Cultural barriers: differences in language, customs, values and gestures.
6. Personal barriers: poor listening, lack of trust, status differences, and lack of skill or interest.
7. Technological barriers: failures of equipment, the wrong choice of medium, and lack of feedback.

These can be reduced by clear messages, active listening, feedback, a suitable channel and trust.

Teams are needed in organisations for the following reasons.

1. Better performance: combining different skills, knowledge and experience produces more output and quality than individuals working alone.
2. Better decisions and creativity: several minds generate more ideas and solutions to complex problems.
3. Motivation and satisfaction: members feel belonging, recognition and shared responsibility, which raises morale.
4. Flexibility: teams respond quickly to change and can handle cross-functional tasks.
5. Sharing of workload and risk: responsibility and pressure are spread among members.
6. Development: members learn from one another, which builds skills and future leaders.
7. Reduces supervision and cost: self-managed teams need less control and speed up work.

Challenges in Nepal's service sector (tourism, banking, telecom, health, education, transport) can be reduced by the following measures.

1. Skilled human resources: train staff in professional skills and customer service, and improve the quality of education and training institutions.
2. Infrastructure: improve roads, airports, electricity, internet and communication.
3. Policy and regulation: the government should provide a stable, simple and supportive policy, reduce red tape and corruption, and ensure fair competition.
4. Finance: easier credit, tax incentives and investment support, especially for small firms.
5. Technology: adopt digital services such as e-banking and online booking to improve efficiency and reach.
6. Quality and standards: set and enforce service standards, and build customer trust through ethical practices.
7. Marketing and promotion: promote Nepali services abroad and improve branding.
8. Political stability and security: needed to attract investment and visitors.

Contingency theory (situational approach) holds that there is no single best way to manage. The most effective management style, structure or leadership depends on (is contingent upon) the situation, such as environment, technology, size, people and task. Its core rule is "if-then": if the situation is X, then the appropriate action is Y. Writers include Fiedler, Lawrence and Lorsch, Woodward, Burns and Stalker, and Hersey and Blanchard.

The statement that managers should not stick to a particular theory fits this view, because classical (Taylor, Fayol), behavioural and quantitative theories each work only in certain conditions.

Contingency variables

• External environment: stable or dynamic, simple or complex, which decides mechanistic or organic design (Burns and Stalker).
• Technology: unit, mass or process production needs different structures (Woodward).
• Organizational size and life cycle stage: a small firm can use informal control, a large one needs formal rules.
• People: skill, maturity and motivation of employees, which decides leadership style (Fiedler, Hersey and Blanchard).
• Task nature: routine tasks suit rules and supervision, creative tasks suit autonomy.

Applications

• Leadership: a directive style for new, unskilled staff; a participative style for experienced staff.
• Organization design: a rigid hierarchy for a stable bank branch, a flexible team structure for a software or tourism start-up.
• Decision making and control: centralised during crisis (for example Covid-19), decentralised in normal times.

Critical evaluation

Strengths

• Realistic and flexible, and it encourages managers to diagnose the situation before acting.
• It integrates earlier theories rather than rejecting them, using each where it fits.
• It suits the unstable Nepalese business environment (political change, load-shedding, import dependence, market swings).

Limitations

• It lacks a unified theory, and it is hard to list every contingency variable.
• Managers need considerable skill and information to read situations, and wrong diagnosis leads to wrong action.
• Constant change may confuse employees and reduce consistency.
• Many prescriptions are tested only in Western settings, so their application in Nepal needs care.

Conclusion: Contingency theory is a useful and practical guide. Managers should blend principles from different theories according to the situation, and the statement is therefore valid, provided it is applied with sound judgement.

Organization design is the process of choosing the structure (departmentalisation, authority, span of control, coordination) that best helps an organization reach its goals. Organization architecture is the wider whole: structure, culture, systems, people and technology fitted to strategy. Traditional tall, functional hierarchies are being replaced because of globalisation, technology and competition.

Emerging issues

1. Flatter and leaner structures. Delayering reduces middle levels to speed decisions and cut cost. Nepali banks and telecoms (Nepal Telecom, Ncell) have reduced layers and widened spans of control.
2. Team-based and project structures. Cross-functional teams and matrix structures are used for projects such as hydropower, construction and IT work.
3. Network and virtual organizations. Firms outsource non-core work (IT, security, cleaning, distribution) and coordinate partners electronically. Remote work grew strongly after Covid-19.
4. Boundaryless organization. Barriers between departments, levels and outside partners (suppliers, customers) are reduced; examples are digital banking, e-commerce platforms and ride-sharing apps such as Pathao.
5. Empowerment and decentralisation. Authority is pushed to front-line staff, giving faster customer service.
6. Learning organization. Continuous training, knowledge sharing and innovation are built into the design.
7. Technology and digital transformation. Mobile banking, e-wallets (eSewa, Khalti), ERP and AI automate tasks and change jobs and reporting lines.
8. Diversity, flexible work and work-life balance. Flexible hours, part-time and contract staff, and a multi-ethnic, multi-generational workforce need adaptable designs.
9. Ethics, social responsibility and sustainability. Designs include compliance and CSR units; rules from Nepal Rastra Bank and other regulators matter.

Adoption by Nepalese organizations

• Large private firms, banks, insurance, telecom and NGOs/INGOs are moving toward flatter, team-based and technology-enabled forms.
• Many family-owned and public enterprises still keep tall, bureaucratic, centralised structures with political interference and slow decisions.
• Small firms use simple structures with one owner-manager.

Barriers: resistance to change, weak IT infrastructure, lack of skilled managers, rigid labour and government rules, and limited capital.

Conclusion: Nepalese organizations are gradually adopting flexible, flat and technology-driven designs. They should match design to strategy and environment, and build skills and culture to support it.

Michael E. Porter's Five Forces model analyses the structure and attractiveness (profit potential) of an industry. Stronger forces mean lower profit. The model is used by a new entrant to decide whether to enter, and by existing firms to choose strategy.

The five forces and their application

1. Threat of new entrants. Depends on entry barriers: capital requirement, economies of scale, brand loyalty, access to distribution, government policy and switching cost. Example: in Nepal's cement or banking industry, licensing and heavy capital are high barriers; for a small restaurant or retail shop barriers are low, so entry threat is high.
2. Bargaining power of suppliers. Strong when there are few suppliers, unique inputs, or high switching cost. Example: Nepali manufacturers dependent on imported raw materials from India and China, or the fuel (Nepal Oil Corporation) supplier, have little power over the supplier.
3. Bargaining power of buyers. Strong when buyers are few or big, purchase in volume, or have many alternatives and low switching cost. Example: consumers of mobile data and noodles can easily switch; bulk buyers such as the government negotiate low prices.
4. Threat of substitutes. Products from other industries meeting the same need. Example: online meetings substituting travel, electric vehicles substituting petrol vehicles, or e-wallets substituting cash.
5. Rivalry among existing competitors. High with many equal competitors, slow industry growth, high fixed cost, low differentiation and high exit barriers. Example: the intense rivalry among commercial banks, telecoms and instant noodles.

Steps in application

• Define the industry and its boundaries.
• Rate each force as low, medium or high using the factors above.
• Combine to judge overall profitability.
• Select strategy: cost leadership, differentiation or focus; build barriers, reduce supplier or buyer dependence, and offer unique value.

Limitations: it is static, ignores complementors and the government role, and suits stable industries better than fast-changing ones.

Conclusion: A business should apply the model before starting, so that it enters an attractive industry and designs a strategy that defends against the strongest forces.

Nepalese business operates in a small, landlocked, developing economy. Its major problems are as follows.

1. Political instability and policy inconsistency. Frequent changes of government and policy discourage long-term investment and make planning difficult.

2. Infrastructure weakness. Poor roads, unreliable electricity in the past, limited industrial estates, weak transport and high logistics costs raise the cost of production.

3. Shortage of capital and high cost of finance. High interest rates, tight collateral conditions and liquidity crises limit expansion, especially for small and medium enterprises.

4. Dependence on imports and trade. Raw materials, fuel and machinery are mostly imported, mainly from India and China. This exposes firms to price, exchange rate and border disruptions, and it produces a large trade deficit.

5. Small market size and low purchasing power. Limited domestic demand prevents economies of scale; export competitiveness is also low.

6. Lack of skilled manpower and labour problems. Migration of youth abroad creates shortages of skilled workers; labour unrest, strikes (bandhs) and low productivity also hurt.

7. Weak technology and innovation. Low research and development, and slow adoption of modern technology.

8. Bureaucracy, red tape and corruption. Slow approvals, complicated registration and tax processes, and informal payments raise cost and delay.

9. Informal economy and unfair competition. Smuggling, under-invoicing and tax evasion harm legitimate business.

10. Family-business management. Many firms lack professional management, governance and succession planning.

11. Natural and external shocks. Earthquake (2015), floods, Covid-19 pandemic and the India blockade (2015) caused heavy losses.

12. Limited access to market information and weak product quality standards for exports.

Critical examination: Some problems are external and need government action (stability, infrastructure, simpler laws, industrial security), but others are internal and can be solved by the firms themselves: professional management, technology, quality, training and exploring export markets. Nepal also has opportunities in hydropower, tourism, agriculture and IT, which can be utilised if problems are tackled in a coordinated way between government and private sector.

(a) Major problem areas and causes of conflict

Major problems identified

• Poor organization structure. There are no departmental managers. One manager, Mr. Thapa, controls purchasing, receiving, storing, payroll, cost accounting, dispatch, filing, secretarial work and production. This is excessive span of control and overload.
• Weak division of work and unclear responsibility. Five office assistants handle sales, advertising, credit and receivables with no fixed duties; finance is run by a junior part-time staff member.
• Lack of specialisation and internal control. The same person purchases, receives, stores and pays, which invites errors and fraud.
• No management information system. The General Manager must contact several sources for information; reports are delayed.
• Operational and customer problems. Delayed and wrong deliveries, payment problems, and customer complaints.
• Poor resource use. Idle office equipment.
• Human resource problems. Rising employee turnover, dissatisfaction and no reporting system.
• Dependence on imports and foreign designers and exposure to the pandemic.
• Figures inconsistent: a turnover of Rs. 2.7 million against Rs. 16 m. initial capital suggests low returns.

Probable causes of conflict between Mr. Thapa and the employees

• Autocratic style: no consultation or participation.
• No direct reporting relationship or clear authority; role ambiguity and role overload.
• Centralised authority and no delegation.
• Poor communication, gossip and mistrust.
• Low pay and motivation for subordinates; unfair workload.
• Personality clash and lack of feedback or grievance handling.
• Lack of clear policies and job descriptions.

(b) Decision-making process and its problems

Process in ABC: The General Manager, Mr. Shrestha, handles executive functions, but practically all operational decisions (purchasing, receiving, storing, payroll, costing, dispatch) are taken by Mr. Thapa alone. Subordinates are not consulted, and information is collected from several scattered sources before decisions are taken. So decisions are centralised, one-man and informal, following the steps: problem noticed, information hunted manually, decision by Thapa, order issued, with little feedback.

Problems diagnosed

• Over-centralisation and bottleneck at one manager, causing delay.
• No participation, so poor acceptance and low morale.
• Inadequate and late information, so poor-quality decisions.
• No clear authority levels, no specialists, unclear accountability.
• No control or review (no feedback), leading to repeated errors such as wrong deliveries.
• Reactive decisions with no planning; strategic and operational decisions mixed together.

(c) SWOT analysis

(d) Proposed organizational structure

A functional departmental structure under the General Manager:

                 General Manager (Mr. Shrestha)
                              |
  --------------------------------------------------------------
  |            |            |            |            |
Production  Purchasing   Finance and   Marketing   HR and
 Manager    and Store    Accounts      and Sales   Admin
            Manager      Manager       Manager     Manager
  |            |            |            |            |
Supervisors  Store/       Accountant,  Sales, ad,   Secretary,
and workers  receiving    payroll,     credit and   filing,
             staff        cost, A/R    dispatch     grievance

• Mr. Thapa takes a defined managerial role (for example Production or Operations) rather than controlling everything.
• Each manager has defined authority, responsibility and reporting line; the office assistants are given fixed duties.
• Separate purchasing, receiving, storing and payment duties to improve internal control.
• Appoint a full-time qualified accountant and introduce computerised information system (MIS/ERP).
• Establish a customer service and dispatch unit, regular meetings, feedback, grievance handling and participative decisions.