businness plan

Running Head: Sheetal Farm House 2014

i

Business Plan

For

Sheetal Farm House

Dhikure, Nuwakot, Nepal

Prepare by:

Sushil Aryal

Business Strategy

BBA VI semester

131 “B”

Presented to:

Mr. Nischal Thapa

Faculty Member

Business Strategy

Collage of Applied Business

Tangal, Kathmandu, Nepal

We are part of your daily life


ii

Acknowledgement

This project is assigned to us as a part of our practical examination under Business

Strategy by Tribhuvan University, aimed at giving practical knowledge of working

environment. Apart from the University Examination, this project is almost like on the

job training. So the knowledge we had gained during this fieldwork study is very

important for us.

I would like to express my gratitude and appreciation to all those who gave me the

possibility to complete this report. Special thanks go to our teacher Mr. Nischal Thapa,

whose stimulating suggestions and encouragement helped me to maintain my progress in

track and complete this report.

I would also like to acknowledge with much appreciation the crucial role of the staff of

Computer Laboratory and Library who gave the permission to use all required and the

necessary material to complete this project.

Special thanks goes to my team mate, Damodar Bassyal, Rohit Bhattarai, Saphal Subedi,

Suvash Timalsina, who help me to assemble the information and gave suggestion about

related aspects in agricultural industry for the completion of this report.

Last but not the least; I would like to appreciate the guidance and support given by my

friends as well as relatives for their valuable comment and tips for bringing the report to

this level. I owe my depth of gratitude to all people who directly and indirectly helped me

to complete this report.


iii

Executive Summary

Sheetal Farm House engages in the production of variety of vegetable items and different

species of fishes. The company is dedicated in providing the highest quality customer

service by meeting the agreed delivery dates and keeping the prices controlled in

accordance with the ongoing market prices.

This report provides the analysis of external and internal environment and finding the

opportunities & threats and strength & weakness of this farm house respectively.

Considering the SWOT analysis the appropriate strategies are formulated and their

suitability, acceptability and feasibility analysis is conducted.

Implementation is the integral part of strategic decision because without implementing

the strategies there are no use of formulating the strategies, no matter how good strategies

you make. So the above formulated strategies are put into actions. The implemented

strategies are the best alternatives among the possible alternatives.


iv

Table of Contents

Contents Page Number

Acknowledgement ............................................................................................................... ii

Executive Summary ........................................................................................................... iii

List of Tables ...................................................................................................................... vi

List of Figures .................................................................................................................... vii

List of Abbreviation ......................................................................................................... viii

CHAPTER I: INTRODUCTION TO ORGANIZATION ................................................... 1

1.1 Introduction of Farm House ................................................................................... 1

1.2 Location Selection ................................................................................................. 1

1.3 Products.................................................................................................................. 1

1.4 Target market ......................................................................................................... 2

1.5 Cost Estimation ...................................................................................................... 2

1.6 Vision, Mission and Objectives ............................................................................. 2

1.6.1 Vision .............................................................................................................. 2

1.6.2 Mission ............................................................................................................ 2

1.6.3 Objectives ....................................................................................................... 3

CHAPTER II: ANALYSIS OF INTERNAL ENVIRONMENT ........................................ 4

2.1 Introduction to internal environment ..................................................................... 4

2.2 Strategic Advantage Profile ................................................................................... 4

CHAPTER III: ANALYSIS OF EXTERNAL ENVIRONMENT ...................................... 7

3.1 Introduction to external environment..................................................................... 7

3.2 ETOP analysis ........................................................................................................ 8

3.3 Competitive Environment Analysis (porters’ five forces Model) ....................... 10

CHAPTER IV: FORMULATION OF STRATEGY ......................................................... 12

4.1 Introduction to strategy formulation .................................................................... 12

4.2 Corporate Strategies ............................................................................................. 13

4.2.1 Expansion strategy ........................................................................................ 13

4.3 Business Strategies............................................................................................... 13

4.3.1 Focused Differentiation ................................................................................ 13

4.4 Functional Strategies ............................................................................................ 13


v

4.4.1 Marketing Strategies: .................................................................................... 13

4.4.2 Financial and Accounting Strategies: ........................................................... 14

4.4.3 Human Resources and Management Strategies: ........................................... 14

4.4.4 Production and Research & Development: ................................................... 14

4.5 Criteria for Strategic Choices............................................................................... 14

4.5.1 Suitability ...................................................................................................... 15

4.5.2 Feasibility ...................................................................................................... 15

4.5.3 Acceptability ................................................................................................. 15

4.6 Techniques of Strategic Selection ........................................................................ 16

4.6.1 BCG Matrix .................................................................................................. 16

CHAPTER V: STRATEGY IMPLEMENTATION ......................................................... 17

5.1 Introduction to strategy implementation .............................................................. 17

5.2 McKinsey 7S Framework .................................................................................... 17

CHAPTER VI: CONCLUSION ........................................................................................ 21

Appendix I ......................................................................................................................... 22

Bibliography ...................................................................................................................... 24


vi

List of Tables

Tables Page Number

Table 1: Initial cost estimation ............................................................................................. 2

Table 2: SAP of Sheetal Farm House .................................................................................. 4

Table 3: Strength and weakness of Sheetal Farm House ..................................................... 6

Table 4: ETOP for Sheetal Farm House .............................................................................. 8

Table 5: Opportunity and threats of Sheetal Farm House.................................................... 9

Table 6: SWOT analysis of Sheetal Farm House .............................................................. 12


vii

List of Figures

Figures Page Number

Figure 1: Porters’ Five Forces Model ................................................................................ 10

Figure 2: BCG Matrix ........................................................................................................ 16

Figure 3: McKinsey 7S framework .................................................................................... 17

Figure 4: Organizational Structure of Sheetal Farm House ............................................... 18


viii

List of Abbreviation

BCG= Boston Consultancy Group

ETOP= Environmental Threat and Opportunity Profile

FMCG= Fast Moving Consumer Goods

HR= Human Resources

NASAA= National Association for Sustainable Agriculture, Australia

R&D= Research and Development

SAP= Strategic Advantage Profile

SWOT= Strength Weakness Opportunity and Threats


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CHAPTER I

INTRODUCTION TO ORGANIZATION

1.1 Introduction of Farm House

Sheetal Farm House is an exciting new company that meets the unfulfilled need of

customer for quality agro products. This company has the motto of serving the

people with the quality products in agriculture industry.

The company engages in the production of variety of vegetable items and different

species of fishes. The company is dedicated in providing the highest quality

customer service by meeting the agreed delivery dates and keeping the prices

controlled in accordance with the ongoing market trends.

Sheetal Farm House is basically a family owned and managed business with Mr.

Arya Tsu Cil as an executive chairman and other three members holding the position

of managing directors and executives of Marketing, Finance and Production

departments. Along with them there are five manual workers working in the farm.

1.2 Location Selection

Sheetal Farm House spreads over eight roopani of land which is situated at Dhikure,

Nuwakot, Nepal. This site is selected because of following reasons:

۩ Lower cost of land for leasing

۩ Availability of fresh water in large quantity

۩ Availability of labor force in low cost

۩ Not too far from the market place(35 km from new bus park)

Even the cost of transportation increases as the increase in distance but it is profitable

due to lower operation cost i.e. lower labor land and water supply cost and these are

elementary resources of farm houses.

1.3 Products

Products are the factor that satisfies the customer wants and needs. For satisfying the

customer needs and retaining the, Sheetal Farm House is producing these products:

۩ Different species of fishes

۩ Seasonal and unseasonal vegetable items (organic)

۩ Seasonal fruits


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Company’s main product is organic vegetable items and fishes. The water once used

in fishery can be reused in vegetable farming; this can help in reuse of the wastage.

Later in long run frits can also be expanded.

1.4 Target market

Since we are the producer, and aims at providing customers with better services with

better quality products; the products need to need to be supplied effectively to every

customer wanting the products. Initially our target market will be every hotels,

restaurants, guesthouses, schools and collages canteen. And later we will reach to all

customers by opening company owned vendors in different places considering the

movement (flow) of people and density of population.

1.5 Cost Estimation

For establishment; following costs are estimated to be incurred

Table 1: Initial cost estimation

Particulars Amount (in Rs.)

Land leasing for one year 60,000

Farm construction(including pond for fish rearing) 280,000

Cost of water supply(2500per month) 30,000

Cost of seeds, small fish, compost fertilizer, feeds and misc 51,000

Cost for equipments 42,000

Working capital 200,000

Reserve (cash in bank or in hand) 663,000

Total 1,000,000

1.6 Vision, Mission and Objectives

1.6.1 Vision

“We intend to become the best player in local as well as global market in agro

business”

1.6.2 Mission

Our mission is to ensure the consumer welfare by providing a high quality, safe,

competitive priced products that are produced in an environmentally responsible


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manner with the maximum opportunity of profitability by realizing the customers

as we are the part of daily life agro essentials.

1.6.3 Objectives

The objectives of Sheetal Farm House are as follows. They are divided into

different time phases.

Below one year (primary objectives)

۩ To make fresh product easily available in the hand of the customers

۩ Ensure the quality of products to customers with affordable prices.

۩ To establish good relationship with customers (knowing who the customers are)

۩ Timely supply of products to the customers in right quantity

One to Five years

۩ Maintain good relationship with customers and retain them

۩ Improving the quality of products by research and development

۩ Finding and going contract with hotels, guesthouses, schools and collage’s

canteens for supply of products to them

۩ Expand the business with the increase in profitability

۩ Establishing company owned retail outlets of reaching each and every customer.

۩ Developing websites for online order tracking and purchasing system

۩ Lobbying government for making favorable legal framework for the industry

Above five years

۩ Sustainable utilization of natural resources

۩ Develop it as a profitable, competitive and innovative sector

۩ Monitoring good governance framework to support for the modernization of this

sector

۩ To become a part of customers daily life essentials

۩ Positioning the brand with a unique brand name

۩ Building a good public relation by organizing different campaigns and social

programs

These are the objectives that are set for their accomplishment. Our company will

be successful.


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CHAPTER II

ANALYSIS OF INTERNAL ENVIRONMENT

2.1 Introduction to internal environment

The internal environment refers to all the factors within an organization that provides

strength and weakness of the firm. It is located within the business organization. It is

based on scanning of internal environment.

Strength is an inherent capacity which an organization can use to gain strategic

advantage e.g. core competencies, resources, assets, experiences people, knowledge,

data and capabilities etc. Weakness inherent the limitations and constraints which

create strategic disadvantage e.g. gaps in capabilities, overdependence in single

product line, inefficient human resources, loose management and control etc.

(Kazmi, 2009)

Internal environment is the process of identifying organization specific

characteristics like resources, core competencies and capabilities. It looks at

organizations current vision, mission, objectives and strategies. This helps to identify

and evaluate strength and weakness of organization.

The internal environment of Sheetal Farm House can be analyzed using Strategic

Advantage Profile (SAP) which is one of the techniques of internal environment

analysis.

2.2 Strategic Advantage Profile

Strategic advantage profile (SAP) is the profile that presents the factors of internal

environment and states their nature of impact in business organization. It is prepared

as follows:

Table 2: SAP of Sheetal Farm House

Capability Factors Nature

of

impact

Competitive strength and weakness

Financial

↑

Cost for the sources of fund is lower less debt capital and

low cost of repayment because there is privilege given by


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co-operative institution for organic firms.

Loans from the government costs lower interest payment

but large amount of fund cannot be taken at a time

Marketing

Product

Price

Place

↑

↑

↓

Variety of products are produced which are organic.

These products are made attractive by standard packaging

system.

Comparatively lower price is charged then competitors.

This is possible because our cost of operation is

comparatively lower.

Covers only specific (niche) marketplaces so cannot

cover large market and market share is also low.

Operation

Machinery

Inbound

logistics

Outbound

logistics

Raw

material

purchase

↑

Small machinery and tools are required which do not

charge high or procurement and government too provides

some tools for agricultural sectors.

Costs are moderately high due to suppliers are located in

distance but they are not frequently purchasing goods

Costs are high because the products that are produced

need to be brought to our retail stores. This could be

reduced if marketing job was given to wholesalers and

distributors.

No huge amount of raw material is required so the costs

are moderate.

Personal ↑

No absenteeism and safe working environment because

all workers are from local place.


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↑

↑

Employees are experienced in agricultural works and they

are also given timely trainings for development.

High level of organizational loyalty proves to provide

strength to organization to perform efficiently and

effectively.

(Up arrow indicates strength, down arrow indicates weakness and horizontal arrow

indicates neutral impact)

Overall strength and weakness:

Table 3: Strength and weakness of Sheetal Farm House Strength Weakness

o Customized products with

differentiation

o Highly loyal employees with better

competencies

o Lower cost of operation as compared

to competitors

o NASAA certified company

o Cannot produce products in large

quantity

o Currently company is not able to

capture whole market where there is

high potential


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CHAPTER III

ANALYSIS OF EXTERNAL ENVIRONMENT

3.1 Introduction to external environment

Every organization exists in business environment like everything exists in physical

environment. The external environment includes all the factors outside the

organizations which provide opportunities and poses threats to the organizations.

Opportunity is the favorable condition in the organizations environment which

enables it to consolidate and strengthen its position. For e.g. economic boom,

favorable demographic shift, unfulfilled customer needs etc. Threat is an unfavorable

condition in the environment which creates a risk for or cause damage to the

organization. For e.g. new competitors, new demanding regulations, unfavorable

political situation etc. (Kazmi, 2009)

The external environmental analysis concludes with a plan on the business to

overcome or minimize its threats that are prevailing in the environment. Due to the

limited control over the external environment makes it difficult for a business house

to make changes according to it. However, once they identify the major elements of

environmental forces it will make easy to readjust their strategies, plans and

programs.

Sheetal Farm House being small and family owned business is not isolated from the

impact of external environment. Some changes in the external forces can result in

both negative and positive impacts. The factors/forces of external environment are:

o Political Environment

o Economic Environment

o Socio-cultural Environment

o Technological Environment

o Legal Environment

Analysis of external environment can be done with the help of ETOP analysis,

competitive environment analysis.


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3.2 ETOP analysis

Environmental Threats and Opportunity Profile (ETOP) is prepared for analyzing the

factors to find weather they provide threats or opportunity to the organizations. It

involves dividing the environment into different sectors and analyzing their impact

on organization. It is prepared as follows:

Table 4: ETOP for Sheetal Farm House

Environmental

Factors

Nature of

Impact

Environmental Threats and opportunities

Economic ↑

↑

Rising disposable income and living standards of people

gives rise in disposable income

Budget of fiscal year 2071/2072 has the provision where

agricultural sector is provided with greater facility and

has higher budget allocation.

Political ↓

Political instability and frequent change in government

brings problem in transportation because of bandh.

Democratic party system with mixed economic system

give importance to privatization thus has positive impact

in private business.

Market ↑

↑

Increase in number of potential customers

Our largest competitor has loosed its market share and

image too.

Socio-cultural ↓

↑

Due to people’s rigid belief; it is hard to make them

persuaded about organic (no use of insecticides or

pesticides) products.

People have changing trends towards their consumption

behavior. When the quality products are provided with

differentiation and ease to consume (purchase) there is

chance to make loyal customers.


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Technological Farm house does not require huge and sophisticated

technology, so technology is not costly to procure. And

government also provides allowance in purchase of

machines.

Supplier

↓

↑

The suppliers are in distance place, this give rise in

inbound logistics.

There is close relationship with the supplier so no need of

sock any kind of materials. This reduces inventry cost.

Legal ↑

↑

Financing is made easy by government for small private

sectors to promote investment.

Government banned those vegetable farm house those

who use insecticides and pesticides. In which our large

competitor includes; so there is big opportunity for us to

gain image and market share.

International ↑ Organic products are getting popular in foreign countries

and demand is also increasing rapidly. Knowing two

supplier in Japan and Denmark increased the opportunity

for supply of products

(Up arrow indicates opportunity, down arrow indicates threats and horizontal arrow

indicates neutral impact)

Overall opportunity and threats

Table 5: Opportunity and threats of Sheetal Farm House

Opportunities Threats

o Increasing number of potential

customers

o Over 187 species of fishes can be

reared. So it may lead new

business to produce decorative

fishes as well

o National as well as international

o Not able to persuade customer for

the first time

o Not able to produce in large

quantity

o Unable to cover large market even

there is open opportunity


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market

o Losing market share by largest

competitors due to government

rules

3.3 Competitive Environment Analysis (porters’ five forces Model)

Competitive environment analysis is a framework for industry analysis and business

strategy development formed by Michael E. Porter of Harvard Business School in

1979. It is also called porters’ five forces model. It is the structural analysis of

competitive environment. This model states that the competition is the composite of

five forces. They are provided below:

Figure 1: Porters’ Five Forces Model

Potential Entrants: Since entering into such farm house does not require huge

investment and also no sophisticated technology is required; so it is very easy to

enter into the industry which poses a threat for the existing firms. The extremely low

switching cost provides threat of losing the customers.

Buying Power of Buyers: As these are FMCG customer have high bargaining

power because the customer can shift from one vendor to next vendor easily next to

us if we are unable to fulfill their needs. There is large number of suppliers near of

same products. They can have substitutes to the product easily.

Threat of Substitute: There is not any other substitution of vegetables but it is

vegetable itself. But to the fishes people can have meat of other like buff chicken etc.

The threat lies at the time when customer changes vendor.

Threat of substitute

products

Bargaining power

of suppliers

Bargaining power

of buyers

Threat of entry

Potential Entrants

Substitute Products

Buyers Suppliers Competitive

Rivalry

Other stakeholders

Trade Union,

Government etc.


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Suppliers Bargaining Power: Here in case of Vegetable the supplier has lower

bargaining power because there are large number of supplier of seeds and other

material in one places. And once we buy we can produce it for the next time

ourselves. Related to compost fertilizer supplier; we have very good relationship

with him, so no need to keep inventry and also the bargaining power is also moderate

low. Overall the lower switching cost provides advantage of bargaining power with

the suppliers.

Competitive Rivalry: There is moderate level of rivalry among the firms because

they are not located near and the target customers are not the same but similar. We

go towards the segmented customers where competitors go towards whole

customers.

These are the five forces that indicate the competitive position of the firm. Later

porter has added next force i.e. stakeholders including trade union and government.

In our industry there is no influence of trade union. And government is our like

partner; it plays the role of facilitator. We sometime lobby government to change the

rules and regulations that suit our business.


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CHAPTER IV

FORMULATION OF STRATEGY

4.1 Introduction to strategy formulation

Strategy is a broad game plan to achieve desired objectives. It provides direction and

scope to the organizations over the long-term. Strategies are prepared considering

strategic elements, SWOT analysis, strategic options and finally evaluating those

options and selecting best alternatives (R, 2012). A brief SWOT analysis is presented

in table below.

Table 6: SWOT analysis of Sheetal Farm House

Opportunities Threats

o Increasing number of potential

customers

o Over 187 species of fishes can be

reared. So it may lead new

business to produce decorative

fishes as well

o National as well as international

market

o Losing market share by largest

competitors due to government

rules

o Not able to persuade customer for

the first time

o Not able to produce in large

quantity

o Unable to cover large market even

there is open opportunity

Strength Weakness

o Customized products with

differentiation

o Highly loyal employees with better

competencies

o Lower cost of operation as

compared to competitors

o NASAA certified company

o Cannot produce products in large

quantity

o Currently company is not able to

capture whole market where there is

high potential

On the basis of above mentioned elements following strategies are prepared.


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4.2 Corporate Strategies

They provide long-term direction and scope to the organization. It determines what

business the organization should be in. it is concerned with managing the portfolio of

business and allocating resources to them. Once they are implemented they are hard

to change. Following are corporate strategies of Sheetal Farm House.

4.2.1 Expansion strategy

On the one hand there is highly competition and challenging environment between

the firms and on the other hand there is increasing number of potential market; the

company needs to expand their business for grabbing the market and be competitive

in the industry. The company aims to expand its business in different geographic

locations and also going to acquire two companies. BCG matrix also supports for

expansion and diversification with huge investment when company has forecasted

with expansion and there is high market growth rate.

4.3 Business Strategies

Business strategies are concerned with strategic business units. Sheetal Farm House

prepared following business level strategies.

4.3.1 Focused Differentiation

Company aims differentiation on products by making them different through product

parameters like packaging, leveling etc. Brand uniqueness is also be kept in the mind

of the customers by providing quality products in comparatively lower price. Product

information will be provided with the packaging. Niche marketing will be our market

for achieving preliminary objectives. However we will be targeting broad market in

long-run with differentiation.

4.4 Functional Strategies

They are concerned with functions of the SBUs. They deal with operations of the

organizations. They aim to create higher customer value. Sheetal Farm House has

following functional strategies.

4.4.1 Marketing Strategies: Following are the marketing Strategies:

Opening company owned retail stores in different places considering flow of

customers and density of population for supplying the product in the hand of the

customer.


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E-commerce application will be developed to help in business activities and to

customers too.

New potential market will be identified.

4.4.2 Financial and Accounting Strategies: Following are the strategies under financial

and accounting strategies:

Acquisition of “Puspa Nursery” which is operating successfully and it occupies

seven roopani of land in Shankarnagar, Rupandehi.

Computerized accounting system

“Gorkha Fish House” will be acquired which is located in Taklung Gorkha.

Taking eight roopani of land in lease located at Shankarnagar, Rupandehi.

Organization maintains record of every financial transaction in a computerized

system.

The projected financial statement of Sheetal Farm House is shown in Appendix.

4.4.3 Human Resources and Management Strategies: Following are strategies related

to human resource management:

Recruiting experienced employees and also provide training for them to be

efficient.

Job rotation in every 6 months is done.

Fringe benefit like stay facility, extra bonuses, company transportation facility etc.

4.4.4 Production and Research & Development: Production and Research &

Development (R&D) strategies are as follows:

Customization of the product will be done without compromising in quality.

Quality control is important to make sure that qualitative products are reached to

customers.

Better inventry management.

4.5 Criteria for Strategic Choices

Choosing one action among several actions selected by the firm to respond to the

changes in the environment, in order to benefit from opportunities or to avoid

unhealthy effects from threats is strategic choice. The main intention is to achieve the

strategic fit between the organization and its environment in order to accomplish the

firm’s objectives by using its strengths to overcome its weakness. The strategic

choice should meet one of all of the following criteria.


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4.5.1 Suitability

Suitability refers to considerations as the ability of the strategy to tackle major

problems, improve competitive standing, exploit strengths, and the extent to which

it meets corporate objectives. The strategy that we have selected is suitable because

it helps to exploit the strength and grab the opportunity. By looking at ETOP

analysis and Porters’ five forces model all the strategies from corporate level to

functional level are suitable to implement in the present situation. The strategy is

congruent with the firm’s existing culture and in alignment with the broader

environmental, political, and social context.

4.5.2 Feasibility

Feasibility focuses on whether the organization has the resources to pursue the

strategic choices. Feasibility analysis is an evaluation of the internal capabilities of

the company. The performance of strategy in this case is measured in terms of

return, risk and stakeholder reactions. Numerous internal analytical models are

available to the check feasibility of strategic choice. The most common is the 6M

model, which stands for money, machinery, manpower, markets, materials, and

make-up. Sheetal Farm House is capable in all terms. We have all 6Ms to put the

strategy into action.

4.5.3 Acceptability

Acceptability focuses on two other aspects of the strategic choices: the financial

aspect and the stakeholder aspect. The financial aspect focuses on the return to risk

profile of each alternative. The stakeholder aspect focuses on the interaction

between the strategic choices and the stakeholders’ reaction to these choices. In

Sheetal Farm House the stakeholders have positive reaction towards the expansion

because we produce organic products where there is no use of any insecticides and

pesticides, which cause health problems. So government also supports for the

establishment and uplift of this business.


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4.6 Techniques of Strategic Selection

Among the various strategic options the right option need to be selected. To do this

different techniques are available. Here BCG matrix is prepared.

4.6.1 BCG Matrix

This technique was developed by Boston Consulting Group. It uses the relationship

between market share and market growth to balance the portfolio. Market share is the

share in relation to the largest competitor. Market growth is the annual market

growth rate. BCG matrix is divided into four cells as follows:

Figure 2: BCG Matrix

On the above matrix, Sheetal Farm House lays in Question Mark. It represents the

situation where the market share of the company is low and there is high market

growth. It suggests that more investment need to be done to increase the market

share otherwise we may have to quit from the industry. We have chosen growth as

our corporate strategy, so to make our strategy live we need to invest more to capture

market share.


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CHAPTER V

STRATEGY IMPLEMENTATION

5.1 Introduction to strategy implementation

Implementation refers to putting the things in action. Strategy formulation is related

to thought where strategy implementation is related to action. Strategy

implementation is the “proof of the pudding is in the eating” phase (Kazmi, 2009). A

strategy becomes meaningful only when it is implemented. Objectives can be

achieved only when strategies are in action. The effective implementation of the

strategies can be achieved by following the model known as McKinsey 7s

Framework.

5.2 McKinsey 7S Framework

The McKinsey 7S Framework is a management model developed by well-known

business consultants Robert H. Waterman, Jr, and Tom Peters in the 1980s. This was

a strategic vision for groups, to include business, business units, and teams. The 7S

are structure, strategy, systems, skills, style, staff, and shared values. It is presented

in following figure:

Figure 3: McKinsey 7S framework

Staff

Skills

Strategy

Style

Structure

System

Shared

values


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Strategy: Sheetal Farm House has the strategy of expansion. This can only be

achieved if there is favorable condition for the expansion. Favorable condition here

refers to the condition where the company is making profit from the existing business,

there is potential market after expansion, and resources are fully available for

expansion. From our business in first fiscal year we are able to identify ourselves in

the market as a branded company. And also we are able to make a profit of around

twelve million. This supports us for expansion strategy.

Structure: An organizational structure defines how activities such as task allocation,

coordination and supervision are directed towards the achievement of organizational

goals. This describes how the organization is organized and includes the information

of who is accountable to whom. The structure should also support for the

implementation of strategy. For achieving targeted objectives following

organizational structure is prepared.

Figure 4: Organizational Structure of Sheetal Farm House

Owner

Branch Head

(Dhikure)

marketing

Finance

operation

Branch Head

(shankar Nagar)

marketing

Finance

operation

Branch Head

(Gorkha)

marketing

Finance

operation


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System: Systems are the daily activities and procedures that staff members engage in

to get the job done. System defines flow of activities involved in the daily operation

of business, including its core processes and its support systems and how decisions

are made. Sheetal Farm House has a system of HR training and development,

monthly payment system (i.e. salary) is used for payment to employees along with

bonuses. There is a system of tracking the progress of the business in every month

including skills development of employees.

Style: Style represents the way the company is managed by top-level managers, how

they interact, what actions do they take and their symbolic value. In other words, it is

the management style of company’s leaders. Here in Sheetal Farm House the

decentralized decision making system is used. Branch Head is responsible for the

activities to be performed. Participative decision making and problem solving

techniques are used for motivating employees and making them feel something to the

organization.

Staff: Staff element is concerned with what type and how many employees will need

in organization and how they will be recruited, trained, motivated and rewarded.

Sheetal Farm House hires those employees who are experienced in agricultural

activities. They are provided training on the field they are lacking and also new

method and procedure are also taught timely. What every employee seek from

organization is satisfaction and fulfillment of their objectives, so we provide various

motivating factors and rewards like participative management, bonus, timely

payment of salary, job security etc.

Skills: Skills are the abilities that firm’s employees perform very well. They also

include capabilities and competences. During organizational change, the question

often arises of what skills the company will really need to reinforce its new strategy

or new structure. For implementing strategy of Expansion the new staff does not

need some extra qualification but the existing capabilities are most for performing

jobs.

Shared Values: Shared Values are at the core of McKinsey 7s model. They are the

norms and standards that guide employee behavior and company actions and thus,

are the foundation of every organization. This is a set of traits, behaviors, and


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characteristics that the organization believes in and the assumptions that shape how

an organization behaves. This would include the organization’s mission and vision.

Sheetal Farm House seeks positive attitude and mindset of each and every members

of the organization. The shared values are the factors that help to shape the

organizational image so it must be maintained in a coordinated manner.

This is how we implement strategies. Sometimes in strategy literature, we often

come across statements like ‘it’s much more difficult to implement a strategy than to

formulate it’. It is indeed true that doing is more difficult than thinking about doing.

Strategies often fail not because they were not formulated well, but for the reason

that they were not implemented effectively. There is considerable gap between the

time a strategy is formulated and when it is implemented. The process of

implementation is itself time-consuming. During this interval, there is possibility that

the assumption made while formulating the strategy do not remain same or valid or

no longer be relevant. So evaluation and control are required for ensuring that the

expected performances are matched with the actual performance. (Kazmi, 2009)

The control can be done by following these steps.

Step1: Identify what is to be controlled

Step2: Setting standards of performance

Step3: Measuring actual performance

Step4: Analyzing variances and

Step5: Taking corrective actions.


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CHAPTER VI

CONCLUSION

Sheetal Farm House is one of the private businesses that have become a leading company

in short period of time. The business got success in short period because of effective

management and better implementation of the strategy formulated. However there are

some weakness and threats in the environment, the company is able to minimize some ot

then to become competitive in the industry.

The main disadvantage in this industry is that it is easy to enter in the industry which

poses threat to other firms and it is hard to sustain. For becoming success in any kind of

business the manager must be capable of managing everything.


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Appendix I

Projected Income Statement of Sheetal Farm House

Year

2071 2072 2073

Particulars Amount(Rs) Amount(Rs) Amount(Rs)

Sales Revenue:

sales of vegetable items 10800000 11340000 11907000

sales of fishery items 6480000 7452000 8569800

Total Sales Revenue 17280000 18792000 20476800

Less: Purchases and related Expenses 8400000 8820000 9261000

Gross Margin 8880000 9972000 11215800

Less: Operating Expenditure

salary 4656000 4795680 4891593.6

wages 780000 803400 819468

electricity and charges 72000 74160 75643.2

house and rent 864000 889920 907718.4

stationary 25000 28750 33062.5

6% bank loan 12000 12600 13200

communication and

transportation 35000 36050 36771

Total Operating Expenses 6444000 6640560 6777456.7

Earnings Before Tax (EBT) 2436000 3331440 4438343.3

Less: Tax (15%) 365400 499716 665751.495

Net Profit/ Earning After Tax (EAT) 2070600 2831724 3772591.805


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Projected Balance Sheet of Sheetal Farm House

Year

2071 2072 2073

Liabilities Amount(Rs) Amount(Rs) Amount(Rs)

Current Liabilities

Account Payable 21000 26000 31000

Wages Payable 12000 18000 24000

Creditors 175000 185000 195000 Income tax

provision 365400 499716 665751.495

Total Current Liabilities 573400 728716 915751.495

Long Term Liabilities

Bank Loan 200000 210000 220000

Total Long Term Liabilities 200000 210000 220000

Total Liabilities 773400 938716 1135751.495

Reserve and Surplus 2070600 2831724 3772591.805

Total Liabilities and Equity 2844000 3770440 4908343.3

Assets

Current Assets

Cash in Hand 240000 250000 290000

Cash at Bank 130000 145000 160000

Debtors 40000 52000 59000

Account Receivable 89000 96000 125000

Total Current Assets 499000 543000 634000

Fixed Assets

Lease Hold 316000 316000 316000

Equipments 95000 105000 125000 Furniture and

Fixtures 25000 30000 45000

Total Fixed Assets 436000 451000 486000

Investments 1909000 2776440 3788343.3

Total Assets 2844000 3770440 4908343.3


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Bibliography

Kazmi, A. (2009). Strategic Management and Business Policy. New Delhi: Tata

McGraw-Hill Publishing Company Limited.

R, A. G. (2012). Business Strategy and Strategic Management in Nepal. Kathmandu: Raj

Offset Press.