Unit 1: Introduction to Management

The term “management” has been originated from the French word
‘menagement’ and from the Latin word ‘manu agere’ which means
‘directing’ and ‘to lead by the hand’ respectively.

Management brings together all six M’s i.e. Men, Money, Machine,
Materials, Method and Markets and uses these resources for achieving
the objectives of the organization such as high sales, maximum profit,
business expansion etc.

Management is a universal phenomenon and used in all types of

organization i.e. business, political, cultural or social.

the purpose of management is to formulate effective organizational

strategies and to achieve them efficiently based on mission, objectives
and goals.
“Management is the art of getting things done through people”
Theo Haimann’s concept of management
• Management as a process:
refers to the series of interrelated functions performed by
managers for the productive use of materials and human
resources.
process of planning, decision-making, organizing, staffing, leading
and controlling the efforts of organizational members to obtain
the set goals.
• Management as discipline:
specialized branch of human knowledge, skills, competencies
which involves in the study of principles and practice of
management.
• Management as noun:
collective noun which consists of Board of Directors (BoD),
Managing Directors (MD), General Managers (GM), Department
Heads, who are involved in policy making, supervisory and
controlling for achieving organizational goal.
The basic elements of management system
 Characteristics of Management

Some of the characteristics of management are described below:

• Goal oriented:
management contributes greatly for the efficient and effective
use of different resources to achieve the goal.
“Management is the instrument to achieve the
predetermined goals”
The main objective of management is to maximize the
productivity through minimum sources.
• Universal activity:
It is universal in nature and practiced in almost all types of
organization.
The principles of management are universally applicable.
• Group activity:
Management is a group activity as different people are involved
in carrying out different functions of management.
Management represents team, class or section of people
working together for the common goal.
• Dynamic activity:
Management is a continuous and dynamic activity. The principles
of management are flexible as per the need and requirements
of time and organization.
Management also need to modify its style and system as per
the time, situation and need of the organization.
• Multidisciplinary in nature:
The principles of management draw the knowledge and
concepts of different disciplines like economics, sociology,
psychology, statistics etc to manage the organization and to
make decisions.
• Both art and science:
A manager has to play the role of both scientist and an
artist.
It is a science in a sense that it is universally applicable.
It is a art in a sense that it requires skill, experience and ability
to perform managerial functions.
• Distinct process:
Management is a distinct process as it uses different resources
i.e. physical, capital, informational through human resources.
It has clear defined process and does not consider the hit and
trail to make the woke done to achieve it’s target.
• Social process:
management is a social process as the activities of
management are performed by the use of human.
It utilizes and mobilizes the human resources for the
achievement of organizational goals.
• Intangible in nature:
Management cannot be seen but it can be
felt/experienced.
The functions of managers cannot be seen with our open
eyes but the consequences or result of management can
be felt.
 Functions/process of management

“Management is an art of knowing what to do, when to do and see

that it is done in the best and cheapest way.”
Management undertakes and utilizes all the available resources in
the organization to attain it’s objectives.
The main functions of management are listed and described below:
Planning, organizing, staffing, directing, & controlling
• Planning:
It involves selecting and determination of objectives, policies,
procedures and programs to realize the pre- determined goals of
an organization.
“It is the activity of deciding in advance about the future course
of action”
It also helps in minimizing the future uncertainties and risk.
• Planning:
It consists of following steps:
Evaluate environment factors and organizational resources.
Establish objectives and goals of the organization.
Establish planning drafts.
Develop alternatives strategies and course of action (plans) for
achieving the stated goals and objectives.
Evaluate alternatives.
Selection of course of action i.e. plan.
Formulate policies, programmees, procedures, methods, rules
for implementing the plan.
• Organizing:
It is the process of identifying the major activities and grouping them
into jobs and assigning the jobs to different departments and
individuals to implement plans successfully.
It is concerned with collecting and gathering various resources to
achieve the planned goals.
It also includes delegating necessary authority to fulfill the given
responsibility so that people can perform their activities effectively.
The process of organizing consists of the following steps:
i. Identifying and defining the activities to perform for accomplishing the
organizational goals.
ii. Grouping of the activities.
iii. Assigning the activities to the departments individuals or to the
groups.
iv. Delegating necessary authority to the departments, individuals or to
the groups.
v. Fixing responsibilities for the performance of these activities.
• Staffing:
It is the activity related with recruitment, selection,
appointment and placement of right person at right time
for the right job.
It is concerned with human resources and determines the
total manpower required in the organization.
It is also related with organizing seminar, workshops,
trainings etc for the growth and development of
employee’s skills and competencies.
Staffing is also concerned with the performance evaluation,
promotion, transfer of employees, planning proper
remuneration, reward management and maintenance.
“Staffing is the process of planning, recruiting, selecting,
training, developing, compensating, promoting, and
maintaining human resources in the organization.
• Directing:
Directing is concerned with instructing, supervising, guiding and
inspiring the subordinates to achieve the desired organizational
goal.
The direction function includes supervision, motivation,
communication, and coordination.
In the simple words, directing means influencing and mobilizing
individuals and groups in an organization to do desired tasks
through leadership.
Directing function involves following sub-functions.
Leadership:
It is the process of guiding and influencing the behavior of
subordinates or employees to work willingly for attaining goals and
objectives of an organization.
Every leaders must develop and adopt different leadership styles
those can best inspire individuals and groups for higher, effective and
rewarding performance.
• Motivation:
Every managers need to motivate his/her
subordinates by using various motivational techniques
including intrinsic vs extrinsic; positive vs negative
motivation; financial vs non-financial, to enhance their
productivity.
Motivation leads to higher performance, moreover,
motivated workers or employees can readily adopt the
organizational changes.
• Communication:
Communication is the process of transmitting ideas
and information from one person or group to another
person or group effectively and efficiently.
Every managers need to develop sound two way
communication system.
• Supervision:
It is the process of ensuring performance of subordinates or
employees in accordance with the plans, policies, programs,
procedures, methods, rules, regulations etc.
every managers should have ideas of effective supervision to
supervise subordinates or employees to work as per plans
and standards.
Controlling:
It is the process of measuring and comparing the actual
performance with that of planned performance and taking
corrective actions.
It checks whether the activities are performed as per the
plan or not and brings uniformity in action.
“The main objectives of controlling is to take corrective
action rightly by using right techniques to avoid deviation
during course of action”
Controlling:
In other words, controlling is related with identifying,
comparing and measuring the actual performance with
that of planned performance and taking corrective action to
achieve the predetermined goals.
The controlling function involves following steps:
Establishing standards of performance of every activity.
Measuring actual performance.
Comparing actual performance with set standards.
Identifying variations and taking corrective steps to
remove significant variations for ensuring performance as
per the plans.
 Types of Managers

Managers types can be classified on the basis of following:

On the basis of level
Top level (executive)
middle level
lower level (supervisory)
On the basis of nature of job
Generalist managers
functional managers
staff managers
Managers by levels
•Top level managers:
Top managers are those who belongs in the highest level of
managerial hierarchy.
Top level managers include, i.e. Managing Director (MD) Chief
Executive Officer (CEO), Executive Director (ED), Board of
Directors (BoD).
determine the goal, formulate plan, policies, strategies, make
master budget for attaining the organization goals.
involves in making key decisions of the organizations.
Perform all the functions including direction, controlling,
motivation, communication among others.
Involves in delegation and decentralization of authority.
exercise control over the activities of the organization.
represent the organization to the external environment like
government officials, executives of other organizations.
• Middle level managers
the managers who work under the guidance of top level
managers are the middle level managers.
It includes all the department heads of the organizations i.e.
account head, finance, marketing, production, human
resource, personal relations, division and section head.
They have more authority in compared to lower level
managers and acts as a bridge between top and first line
managers.
Their main task is to interpret, implement and control the
plans and policies formulated by the top level managers.
Select, train, develop and motivate line-managers.
To monitor performance of departmental activities and take
corrective steps if necessary.
To achieve co-ordination among various departments
To report to the top management time to time.
• Lower level managers:
The managers who lie at the lowest level of managerial hierarchy are lower
level managers.
It includes supervisors, coordinators, office managers etc they are known as
first line managers or operating level of managers.
involved in implementation of plans and policies formulated by the top
and middle level managers.
Lower level managers are delegated less authority as compared to middle
level managers.
the main functions of lower level managers are:
To make day to day operative plans within the goals set by the middle level
managers.
To maintain inventory levels of materials, tools and equipments.
To assign jobs and tasks to the operating employees
To maintain discipline and congenial atmosphere at the work place.
to correct performance by continuously measuring evaluating activities and
taking corrective steps.
To report management about the performance and problems of
subordinates.
 On the basis of nature of job
Managers can be divided into three different types.
• Generalist manager
managers, who are not assigned a particular type of jobs are called generalist manager.
have a set of broad skills that allow them to manage multiple areas of the organization.
perform different types of jobs in an organization as per the situations and
requirements.
i.e. CEO, ED, Presidents, GM, deputy general manager.
• Functional managers/Line managers
managers are responsible for a particular function of a firm.
experts in a specific function/department, i.e. departmental heads, production manager,
finance manager, marketing manager etc.
they are middle level managers.
• Staff managers
work toward supporting line/functional managers, i.e. legal officer, CA
They are not part of the chain of command
provide support, advice, expertise to line managers, they have advisory authority
 Managerial Roles

‘Managerial roles are result of the manager’s authority and

status’

According to Henry Mintzberg (1973), a well known

management theorist, described ten different roles of managers.
These roles are grouped into three broad and distinct categories
of roles:
interpersonal,
informational and
decisional.
Roles of managers
Figure: Role of Managers
• Interpersonal roles:
managers provide direction and supervision to employees.
managers develop contacts and build relationships with people
inside and outside the organization.
they communicate with peers, subordinates, suppliers, customers
and bankers, both formally and informally.
Figurehead role:
i.e. ceremonial work as greeting and receiving visitors, chairing
board meetings and symbolically representing the organization.
leader role:
directing, coordinating, motivating, staffing and controlling
activities.
Liaison role:
maintains relations internally with different units and externally
with society for building the image, gathering resources.
• Informational role:
mangers develop network of contacts and relations within and
outside the organization for collection, processing, and
dissemination of such information.
monitor role:
it relates with assessment and watching over the activities taking
place in and around the organization.
disseminator role:
provides information to subordinates and keep them informed
what’s going on and around, precautions to be taken etc.
spokesperson role:
representing the unit/organisation to explain organizational
members and outsiders about the related works/issues
• Decisional role:
decision making involves negotiations and compromises with competing or
conflicting interests.
managers develop strategies to deal with such negotiations and uncertainties and
put them into action to attain goals.
decisional roles are associated with the methods managers use to plan strategy and
utilize resources.
Entrepreneurship role:
concerned with planning and initiating change within the organization.
Disturbance handler role:
maintains congenial working environment and organizational stability be containing
problems, disagreements and conflicts.
Resource allocator role:
deals with the managerial function of allocating resources i.e. money, people, time,
equipments, to different units.
Negotiator role:
involves representing, protecting organizational’s interest in dealing with inside and
outsiders to add value to work.
 Managerial skills

“Skills refers to the ability of an individual to perform a

given task effectively.”
Robert Katz identified three basic kinds of skills (technical,
human conceptual) for managers.
In general most successful managers have a strong
combination of technical, interpersonal, conceptual and
diagnostic skills.
A manager needs these skills to carryout various
management functions in the organizations.
It is illustrated in the graph in the next slide.
Managerial roles and skills
• Conceptual skills:
It refers to the manager’s ability to think in abstract.
Managers with conceptual skills can see opportunities and threat
that exists in the market.
In other words, conceptual skill refers to the ability to understand
relationships between the organizations and its external
environment and to co-ordinate the organizational activities.
To think and visualize total system of the organization.
To identify and understand relationship among its sub-systems.
To deal with these sub-systems in co-ordinated way.
It is important for top level managers as they are responsible for
making plans, policies, strategies, objectives, budget of the
organization.
• Human skills:
It refers to the ability of the managers to understand,
motivate, lead and work with the people in the organization.
It is also known as interpersonal skills and required to solve
human related problems that surface in the organization.
It is required for managers for the following reasons:
To interact and communicate with subordinates and
outsiders.
To understand people and their problems, need and
feelings.
To develop abilities of the subordinates.
To maintain discipline and resolve conflicts among
subordinates.
To provide counseling to the subordinates.
• Technical skills:
It refers to the ability of managers in using the equipments,
techniques and knowledge of a specified field.
Technical skills are important for the first-line mangers as high
level managers do not directly supervise and control the day to
day activities.
These skills are also required by the professionals like engineers,
doctors, supervisors, production managers among others.
It helps to solve the technical problems rather than the human
problems.
Technical skills are needed by all the managers but lower level
managers require a high degree of technical skills for the
following reasons:
To provide technical and instructions to the subordinates
To monitor and correct daily activities of the subordinates.
 Changing job of managers
Tradition job of managers
• ensure the organization's competitiveness
• lower level managers and employees job security
• lower-level managers and employees implement top management's
strategy with loyalty and obedience

Contemporary job of managers

• Empowered lower-level mangers
• employees are responsible for the organization's competitiveness and
their own development
• Top management support personnel development and ensure
employability.
Figure: Changing job of managers
 Emerging challenges for management

Continuous changes in external environment i.e. political, economical, social,

technological and legal have brought challenges for management.
The following are the emerging challenges of management:
Globalization
Continuous improvement
Quality revolution
Developing and implementing strategies
Managing workforce diversity
Environmental changes
Work ethics and social responsibility
Empowerment of employees
Technological development
Changing customer expectations
Knowledge management
Changing culture
• Challenges of globalization:
Globalization means free flow of goods, services, capital,
information, capital, people from one nation to another without
any restriction or barriers.
It has challenged management to manage global competition,
foreign language, unfamiliar laws, new practices, unknown
attitudes and overseas work ethics.
• Challenges of continuous improvement:
Today’s management or managers should always be attentive of
how continually to improve and develop their real improvements to
edge over competitors.
• Challenges of quality revolution:
As customers are aware of latest innovations and developments,
economies are under pressure to open up and globalization is
leading to open competitions both in domestic and foreign market.
This has forced management to become conscious about quality,
productivity, price and consumer satisfaction.
• Developing and implementing strategies:
Management is responsible for knowing, developing and
implementing the strategies of the organization.
It is also responsible in providing the platform for their
organizational for competitive advantage through competence in
management activities.
• Challenges of managing workforce diversity:
In modern management, managing diverse workforce i.e. people
coming from various background, ethnicity, culture, tradition,
attitude, belief, values, education among others, is a great
challenge.
• Challenges of environmental changes:
Business environment is very dynamic in nature.
Global level awareness, understanding political and legal changes,
tackling socio-cultural and economic changes and it’s influence,
understanding and coping with the speed of technological
changes are really challenging for both the managers and
management.
• Challenges of work ethics and social responsibility:
Management have to honor and confirm to the
ethical demands from society and customers.
Managers will have to be become more actively
involved in the development and management of work
ethics and social responsibility.
• Challenges of empowerment of employees:
It involves giving more power to those who, at
present, have little control over what they do and little
ability to influence the decisions being made.
The challenges of employee empowerment are:
understand and feel good about employees.
relate to each other with empathy and respect.
• Technological development
integrating the technology in the work process
matching the human factor and technology and cost benefits analysis of the
technology employed.
• Changing customer expectations:
understanding customer taste, preference and choice and adjusting with
technological choice of customer is a challenge.
• Knowledge management
it’s a process of creating, capturing, storing and transferring of knowledge.
challenging due to people, process and technology factors.
• Outsourcing:
It’s a process of sub-contracting work to the outsiders.
It’s impact on the overall HR policies of the organization.
 Task and General environment of business
The external environment can be further classified into two interrelated
sub-categories, those in the general (macro) environment and those in
the more task (micro) environment.
General environment:
the general environment affects the organization and its task environment.
It is composed of a set of forces that are outside the organization’s
operating system that is, Political, Economic, Social, Technological and
Legal (PESTAL), global environment.
Task environment:
Forces in the task environment result from the actions of suppliers,
distributors, customers, and competitors.
The task environment is also called the competitive or operating
environment.
It affects the manager’s ability to obtain resources and dispose of outputs.
It consists of customers, suppliers, government, special interest groups,
financial institutions, media and competitors.
Types of business environment
• Political environment:
Politics is a universal social activity. Government, on
the other hand, is concerned with the pursuit and
exercise of power.
The power is exercised to make laws and decisions,
which affect the lives of a substantial number of
people.
The exercise of power by the government is based on
the ideological foundation.
Business firms also have to cope with a large number
of other tensions like ideological conflicts, terrorism,
traditional hostilities, government interventions,
labour activism and so on.
some of the components of political environment are:
a). Constitution:
It is a political, legal document and fundamental law of a country.
b). Political ideology:
defined as set of ideas, principles and philosophy. Some of the main
political ideas are:
Democratic:
power is vested on people. Fundamental rights are ensured.
Totalitarian:
power is centralized to the government, political parties are banned.
c). Political parties and institutions:
they are regarded as the pillars of democratic system.
Political parties have different ideological orientation and it guides
them in making policies when they come to power.
d). Government and its organs:
It involves legislative, executive, judiciary and other constitutional
bodies.
Legislative:
formulates and enacts laws.
Executive:
responsible for overall administration of the nation.
Judiciary:
responsible for settling disputes and interpreting the rules
and laws if required.
Other constitutional bodies:
created by the constitution i.e. CIAA, Office of the Auditor,
Public Service Commission, Election Commission among others.
• Legal environment:
it consists of constitution, business related laws, courts and law
administration.
Constitution
fundamental law of a country
Business laws
consists of array of laws that regulate business activities.
Courts of law
institutions to define and solve legal disputes
Law administration
law enforcement agencies ensures implementation of laws
as well as judgments made by courts.
• Economic environment
refers to the nature and direction of the economy in which firm competes and
operates.
Economics is the study of how scarce resources are used to create wealth and how-
wealth is distributed.
economic environment dramatically affects organization’s ability to function effectively
and influences their strategies and choices.
some of the elements of economic environment are as follows:
a) Economic system
An economic system is a means by which societies or governments organize and
distribute available resources, services, and goods across region.
Free market economy
based on private ownership of the factors of production
Centrally planned economy
based on public ownership of the factors of production
Mixed economy
It’s a combination of both
b). Economic policies
An economic policy is a course of action that is intended to influence or
control the behavior of the economy.
Monetary policy:
deals with money supply, interest rates, credit availability,
and exchange rate.
Fiscal policy
concerned with taxation and government expenditure
Industrial policy
concerned with industrial licensing, location, incentives,
facilities, foreign investment, technology, transfer and
nationalization of industries.
c). Economic condition
It represent economic soundness of a country.
GDP
represents the total market value of all goods and services produced in the country. i.e.
4 %.
Inflation
increase in price of goods and services and decrease in the value of currency. Nepal’s
inflation rate is 5.97%
Employment indicators
involve number of jobs created, active and unemployed workforce.
Balance of Payment
Nepal’s BoP is in deficit, imports outweigh export
Income distribution
it shows how a nation’s GDP is distributed among its population.
Per Capita Income
measures individual purchasing power capacity i.e. Nepal’s PCI is $1096
• Globalization (global forces)
movement of goods, services, capital, people, technology, information
from one country to another without any restriction.
i.e. political, economical, cultural, technology, information are forms of
globalization.
promotes cooperation, and free trade among the countries.
i.e. SAARC, ASEAN, EU, NATO, WTO
• Socio-cultural environment
It is the sum of all the cultural elements that affects the operation of a
business directly or indirectly.
i.e. norms, value, belief, attitudes, language, symbols, behavior are
learned and developed collectively form culture.
Attitude
judgment over people, place and thing, i.e. positive or negative,
acceptable or unacceptable, right or wrong, desirable or undesirable.
 Beliefs
descriptive thoughts about something based on knowledge,
experience and religion.
Religion
it reflects and shapes culture based on common belief, values
and rituals i.e. Hindu, Muslim, Buddhism, Christianity.
Language
it’s a medium of communication based on different ethnic
groups.
Education
important for developing and nurturing culture.
Family structure and social organizations
family structure may be joint, nuclear.
social organizations are in form of common interest groups
• Technological environment
includes the institutions and activities involved in creating new
knowledge and translating it into new products, processes and materials.
Some of the important elements of technological environment are:
Level and nature of technology
it may be manual, mechanized, automated, computerized and robotized
technology.
Place of technological change
stage and speed of the technological change
Technology transfer
shows the transfer of technology from one to another
Research and development budget
spending by the government and business organization for technological
adaptation, upgradation, and development.
 Task environment

“It consists of outside forces that are immediately relevant for the
achievement of the goals of business organization.”
Some of the elements of task environment are as follows:
• Customer:
focus on addressing the changing needs, demands of customers and
build long term relationship with them.
• Suppliers:
need to build good relationship with suppliers for delivery of quality,
timely, economical inputs for production.
• Financial institutions:
Provides loans for short term, long term, i.e. banks, financial
institutions
Sound relationship helps to create opportunities for business
• Distributors
enables a business to avail the product to customers
provide strong manpower and cash support to suppliers in promotional efforts
essential to have close relationship with the distributors.
• Media
largely influences the image of the businesses
• Government agencies
formulates policies and regulate business activities.
protect the interest of consumers as well as general public.
• Pressure groups
i.e. environmentalists, consumer advocates, women’s group exert pressure to
business on price, quality, employment, environment protection.
• Strategic partners/alliances
combine resources and capabilities to create a mutual benefits i.e. Everest
Bank,
 Analysis of task environment using Porter model

“Porter's five forces is a framework for analyzing a company's

competitive environment.”
• The model was published in Michael E Porter's book, “Competitive
Strategy: Techniques for analyzing industries and competitors" in
1980.
• The five forces model is widely used to analyze the industry structure
of a company as well as its corporate strategy.
• Porter's five forces is a model that identifies and analyzes five
competitive forces that shape every industry and helps to determine
an industry's weakness and strengths.
• Five force analysis can be used to guide business strategy to increase
competitive advantage.
Figure: Porter’s five forces model
1. Threat of new entrants:
new entrants bring additional production capacity,
threaten the market share of the existing competitors.
forces existing firms be to more efficient and competitive.
new entrants will face barriers to entry and retaliation from the existing
competitors.
competing firms will develop entry barriers to prevent potential competitors, due to
following reasons.
• Economies of scale:
It occurs when more units of goods or service can be produced on a larger
scale with fewer input costs.
firms running in economies of scale pose barriers for new entrants i.e. increase
competition, increases cost and lower profits.
• Capital requirement:
risky for new firms to invest heavily in market, if the capital requirement
is high, no guarantee of return.
• Product differentiation:
the new entrants may offer products at lower prices
product differentiation enhances customer loyalty may be barriers for the
new firms.
• Access to distribution channel:
new entrants may not have strong distribution channel which creates entry
barrier to them.
• Switching costs:
high switching cost of the products of existing firms creates entry barrier
for the new firms.
It’s the one time costs customers pay when they buy from a different
supplier.
• Government policy:
government also control entry into an industry through licensing and
permit requirements.
i.e. banking, liquor retailing, radio and TV broadcasting.
• Cost disadvantages:
cost advantage of the existing firms always creates entry barrier to
new firms.
i.e. technology, access to raw materials, government subsidies.
The high level of retaliation by the existing firms creates entry barrier to the
new firms. i.e. telecom industry in Nepal.
2. Threats of substitutes:
substitutes products are the goods or services that perform similar
functions as a product that the industry produces.
i.e. newspaper by internet sources among others.
Price of substitutes goods are lower with similar quality or performance.
There are different forms of substitution:
• Product for product substitution:
product substitutes another product. i.e. substitution of tea by coffee.
• Substitution of needs:
substitution of existing product by a new product. i.e. paper by e-mail
• Generic substitution:
substitution of a prescribed branded drug by a different form of the
same active substance.
The following are the factors that determine the threats of substitution:
• Relative price performance of substitutes:
if the substitute product’s price is lower or its quality or performance
are equal, there is possibility of substitution.
• Switching cost:
if the switching cost of the substitutes is relatively low, the threat of
substitution is very high.
i.e. substitution of NTC mobile service by Ncell
• Buyers’ propensity/inclination to substitute:
if the propensity to the buyers towards the substitutes is high, there is
always a high threat of substitute. i.e. youth’s propensity towards IPhone.
3. Buyer’s power:
buyers always want to buy products at the lowest possible cost,
buyer’s bargain for higher quality, greater levels of service, low cost
Buyer’s are powerful in the following situations:
Large buyer:
if the buyer purchase large portion of an industry’s totoal output, they
become powerful.
large number of suppliers:
high number of suppliers increases the bargaining power of customers.
Lack of product differentiation:
low product differentiation makes customer powerful
high material cost:
search for more favorable price and conditions which makes them strong.
Low switching cost:
low switching cost makes the buyers more powerful
price sensitive customers
sensitive customers follow many suppliers and become strong and powerful.
Backward integration:
purchases company that supplies raw materials needed
4. Bargaining power of supplier:
some of the conditions in which suppliers become more powerful.
• Large and monopoly supplier:
if the supplier is large and enjoy monopoly, their bargaining power is
high.
• Few substitutes:
low number of substitutes, supplier bargaining power is high.
• Powerful brand:
strong brand enables them to secure high bargaining power
• Forward integration:
acquisition of all or part of a distribution chain by a firm that sells the
goods.
5. Competitive rivalry:
The following are some of the conditions in which the competitive rivalry is high.
• Large number of competitors:
large number of competing firms increase competitive rivalry.
• Balance among competitors:
size and capacity of the firms also intensifies competition.
• High exit barrier:
it also increases rivalry among firms due to high exit barrier
• Lack of product differentiation:
no product differentiation, low switching cost increases rivalry
• Capacity utilization:
means low price, leads to price war and intensifies competition.
• Global customer:
global customers make the firm compete with better resources, increases
competition at global level.