H. Waqar Akhtar (Waqar7618@Live - Com)

H. Waqar Akhtar( waqar7618@live.
com) Pak Hero Industries (PVT) LTD
HISTORY AND BACKGROUND
Pak Hero Industries (Pvt.) Ltd. was incorporated in June 1996 as a Private
Limited Company under Companies Ordinance 1984 with an Authorized Capital of Rs.10
million. The sole object of the company was to manufacture and assemble.
• auto rickshaws
• motor cycles
• scooters
Presently company is manufacturing and assembling indigenous auto rickshaws of 175
cc, 33 PH. Head office of the company is located at 111 Noor Arcade, Lytton Road,
Lahore whereas the factory is located at Raiwind Road with an area of 36 canals.
Organization chart and Structural dimensions of organization and other information

related to production is given in Appendix A. When the company had first setup this
department in 1998, it had only one objective: controlling purchases to have the lowest
cost of production. After all, the positioning of the organization was done on the cost
leadership strategy by the senior management. The marketing department had been doing
a lot to promote this tagline – “Lowest cost with comparable quality”. The description of
this department is given as under
SALES & MARKETING DEPARTMENT
GENERAL MANAGER
SALES & MARKETING
MANAGER SALES
ASSISTANT ASSISTANT
MANAGER MANAGER
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H. Waqar Akhtar( waqar7618@live.com) Pak Hero Industries (PVT) LTD
Raw material is the first factor of production, and its quantitative, qualitative, and
economic acquisition, determines the overall cost of the product and efficiency of the
Organization. Pak-Hero Industries (Pvt.) Limited, a manufacturer of auto rickshaws,
motor bicycles and scooters, had set up the purchase department to procure and to furnish
materials, specialized services and the spare parts etc., either locally or from abroad for
the production department of the company.
The purchase department is small, had three levels of hierarchy (its structure is given in
Appendix C). The Chief Accountant, although belonging to the finance and accounting
department (details in Appendix D).
It all started in the year 2002 when the industry saw a booming demand of motorcycles
from the customers. Pak-Hero’s competitors Honda and Yamaha were well aware of the
situation and were operating overtime to develop schedules to meet the demands of
customers. Pak-Hero’s sales and marketing department’s head announced in a board
meeting that the forecast for the sales of bikes for the next three years was excellent and
the company needed to speed up its production. The production department was certainly
overwhelmed yet excited by this news. Rapid growth in the market meant rapid growth
for the company which translated into better salaries for the factory workers. According
to a source at senior management strategic plans were developed by the executives to
deal with this exciting development.
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Analysis &
Recommendations
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Goals, Strategies & Effectiveness
Mission Statement or Official Goals:

Official goal statements typically define the business operations and may focus on the
values, products, markets and customers that distinguish the organization. As the case
highlights, the company’s main focus is to be cost effective. In Pak-Hero the official goal
or mission statement of the organization is to produce products at prices that are
affordable by a wide range of customers and to enhance its relationship with the
customers that can result in customer loyalty by offering them products of comparable
quality. The organization values internal efficiency, control and productivity in business
operations and for achieving its mission the organization needs to cut its costs.
Operative Goals:
1) Resources:
Resource goals pertain to the acquisition of needed material from the
environment. As indicated in the case study, the purchase manager insisted on
following the same policies that he did as he wanted to have the most cost-
effective suppliers. Thus, in the context of Pak-Hero Industries the resource goal
of the organization is to find less expensive sources of raw materials so that they
can meet their official goal of cost-effectiveness.
2) Market:
Market goal relates to the market share or market understanding desired by the
organization. The market goal of Pak-Hero is to increase its market share as it
wants to become a leader in offering products at the lowest price. Its example is in
the case study where the marketing manager was alarmed at the company’s
performance due to its low market share as compared to the competitors.
3) Employee Development :
Employee development pertains to the training, promotion, safety and growth of
employees. In Pak-Hero the employee development goal is to give promotions to
those workers who are more productive so that they can maintain a motivated and
committed workforce and simultaneously achieve their productivity goal.
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4) Productivity:
The productivity goal concerns the amount of output achieved from the available
resources. The productivity goals are stated in terms of “cost per unit of
production”, “units produced per employee” or resource cost per employee. As
the demand of motor cycles is increasing day-by-day and the organization
predicts an increase in sales so to avoid any shortages in the future the
organization needs to speed up the production of motor bikes and in such a
situation the productivity goal of the organization is to increase the units produced
per employee per day. Another productivity goal is to decrease the cost per unit of
production to increase their profits. As highlighted in the case, the demand for
motorbikes is still excellent and these goals are thus necessary for the company to
meet this demand.
ORGANIZATIONAL STRATEGIES
Porter’s Competitive Strategies:
Porter has described three competitive strategies: low cost leadership, differentiation and
focus. We have evaluated the organizations against two dimensions that are competitive
advantage and competitive scope. In competitive advantage it is seen that whether the
organization is competing by offering the lowest cost by offering the unique products that
can command a premium price. On the competitive scope dimension it is seen whether
the organization has a broader scope that is dealing in many customer segments or it has a
narrow scope that is dealing in selected customer segments.
Low-Cost Leadership:
The competitive advantage of Pak-Hero industries is low cost this can be seen from the
fact that the organization wants to achieve low cost by using less expensive raw material
as they believe that the cost of the product and the efficiency can only be determined by
assessing the cost of the material used for making it. The organization wants to increase
its market share by providing low cost as compared to the competitors as discussed in the
case. Also, the organization is using this strategy as their primary concern is stability
rather than risks or seeking new opportunities for innovation and growth. Stability means
that they are more concerned with controlled production, efficiency and productivity.
This also shows that the main objective of the organization is to undercut competitor’s
prices i.e. to offer lowest prices in the town but at the same time to offer comparable
quality products to its customers and earn a reasonable profit on it. To meet this objective
the organization tries to select the quotation of the supplier that is providing the lowest
price but at the same time quality material.
The competitive scope of the organization is broad as it is not serving to a selected
segment of customers in the market but to a wide range of customers that include the
rickshaw drivers and the customers of motorcycles and scooters.
Miles & Snow’s Strategy:
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The basic idea behind the strategies is that the managers seek to formulate strategies that
will be congruent with the external environment. Under this regard thy developed four
strategies that were the prospector, the defender, the analyzer and the reactor. Our
analysis shows that Pak Hero uses the defender strategy.
Defender Strategy:
Pak-Hero is using a defender strategy as in the defender strategy the organizations do not
take any risks , carry out experiments for adapting to the environment needs and also do
not find out any opportunities in the environment rather they are more concerned with the
stability .In Pak-Hero the organization is mainly concerned with stability in the sense that
there goals are to maintain internal efficiency and control to produce reliable products for
their steady customers instead of finding new markets and new customers. The case
analysis shows that the organization is focusing on cutting cost so that they can offer
lowest prices as compared to the competitors and to take advantage in case new
competitors emerge in the industry as this can enable them to prevent their market share.
Internal efficiency and control is also required so that they can offer quality products that
are affordable. The environment is stable. Any increase in demand is easily predictable as
case analysis shows that the Pak-Hero competitor’s Honda and Yamaha have predicted
the expected growth in sales due to increased demand from the customer and are making
plans to meet the demand and avoid any supply shortages so that they can increase their
market share.
Balanced Effectiveness Approaches:

Each of the balanced effectiveness approaches, that is, stakeholder approach and
competing values approach is discussed with respect to Pak Hero as under:
a) Constituency/stakeholder Approach:
In the stakeholder approach the satisfaction of the internal and external stakeholder’s
of the organization are considered to be the indicators of organization performance.
Each stakeholder will have a different criterion of effectiveness because it has a
different interest in the organization.
Owners:
The owners’ effectiveness criteria are profit and maximization of wealth. The
company’s introduction in Appendix A shows that the owners are satisfied from the
company’s operations as there is a great demand for their products and company is
progressing day by day by increasing their product sales across different regions of
Pakistan. This shows that the organization is performing effectively in terms of profit
maximization.
Customers:
The customers judge the effectiveness of an organization if they are getting good
quality products that are free from any defects at the same time improved services.
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The increase in the demand of the motorcycles by the customers shows that
customers are satisfied from the quality as well as price of the motorcycles being
offered by the organization. That means that the organization is effective in terms of
quality and cost.
Suppliers:
The suppliers measure the effectiveness of the organization in terms of satisfactory
transactions. However, till now the organization has not been able to form a long-
term relationship with its suppliers, which suggests a lack of trust. In the case, it is
mentioned that the purchase department often takes 10 days to send a PO to a
supplier. The supplier is not satisfied from the organization’s operations as the
supplier receives the purchase order after such a long time after they had received the
quotation. This shows that the organization is ineffective in satisfying the
expectations of its suppliers.
Employees:
The employees measure the organization’s effectiveness in terms of their salary and
job satisfaction. In Pak-Hero as the organization is generating profit on the basis of
their cost leadership strategy therefore the employees are receiving a good salary
package. Along with this in Pak-Hero those workers who are contributing to
productivity are provided promotions, which shows that the organization is also
committed towards employee development and as there is a growing demand of the
product that the workers produce therefore the workers are expecting a future raise in
their salaries. No labor force issues have been noticed in our analysis so it can be
deduced that the workers are satisfied from their job from all aspects whether it is
regarding the work place, pays and incentives etc. So from employees’ perspective
the organization is performing effectively.
Recommendations:
Based on our analysis, we recommend the following actions:
♦ Pak Hero should look more closely at its approach for satisfying the needs of
its key stakeholder- suppliers. Our analysis shows that the organization is well
aware of the fact that it doesn’t have any strong relations with its suppliers
primarily because of the fact that it keeps switching between different
suppliers. The company should conduct a survey of all the suppliers once and
for all and evaluate them on all necessary characteristics such as price, quality,
delivery etc. and choose the best suppliers to build relationships with. This
will not only help the organization in reducing its purchase time, it’ll also lead
to a more trustworthy relationship with the suppliers.
♦ Pak Hero should not overly concentrate on cost as the only measure of
effectiveness as far as customers are concerned. It should not forget the all
important aspect of service and provide the customers with more service
centers in different locations in all the cities that it sells. Complacency with
regards to customers should be avoided at all costs.
b) Competing Values Approach:
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The competing values approach measures the organization’s effectiveness against two
dimension’s focus and structure. The focus could be internal or external to the firm. In
the internal focus the organization is concerned with the efficiency and well-being of the
employees and in external focus the management is concerned with the well-being of the
organization with respect to the external environment. The second value dimension is the
structure that can be stable or flexible. Stability of a structure means that the organization
values efficiency and top-down control whereas flexibility represents value for learning
and change. My analysis suggests that the rational goal model in the competing values
approach is most suitable for Pak Hero.
Rational Goal Model:
In Pak-Hero the rational goal model applies as the organization’s focus is external. This
can be seen from the fact that the main goal of the organization is to follow a cost leader
ship strategy in order to gain market share and increase its profit. Another goal of the
organization is to achieve productivity that also gives an indication that the organization
falls under the rational goal model. They want to cut their cost in producing the products
so that the customer could be offered the lowest price goods. From the structural
perspective, Pak-Hero has a stable structure. This can be seen from the fact that they
prefer top-down control and efficiency to innovation and learning as shown in various
hierarchies in the organization/departmental charts. This also shows that the main
emphasis of the organization is not on human resource. Employees have to implement the
policies and procedures made by the top management and no autonomy in decision-
making is given to them. On the basis of all the indications it can be said that the
organization is following a Rational Goal Model approach.
The External Environment
ENVIRONMENTAL DOMAIN
Since organizational environment is defined as all elements that exist outside the
boundary of the organization and have the potential to affect all or part of the
organization, so, we have to identify the organizational environment for Pak Hero
Motors. For this, we have to see organization’s niche and find out those external sectors
with which the organization will interact to accomplish its goals i.e. its domain. We will
analyze its task environment as well as general and international context to see where
organization is standing at the moment.
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Task Environment:
For analyzing task environment, we have to see with which sector, organization directly
interact.
1. Industry:
Pak Hero has direct link with industry as it is competing with Honda and Yamaha
and also making plans to have competitive edge on sales and prices in comparison
to them by using cost leadership strategy.
2. Raw materials:
As mentioned in the case, raw material is the first factor of production and its
quantitative, qualitative and economic acquisition determines the overall cost of
the production and efficiency of the organization. Pak Hero’s low cost leadership
strategy cannot be implemented without having control on sources of raw
materials i.e. without having strong relationships with suppliers. So, they are very
much dependent upon efficient suppliers for raw materials.
3. Market Sectors:
Market sector is also influencing as Pak Hero has to make proper plans as the
market demand rises. Capturing market share is also one of the main objectives
which Pak Hero has established. This was market demand that compelled Pak
Hero to focus more on production of motorcycles instead of rickshaws. Hence, the
strategies change with the market situations.
General Environment:
These sectors do not have direct impact on Pak Hero but they indirectly influence it. They
include many sectors which are analyzed below.
1. Government:
Government influences in a way that its one decision for increasing tax leads the
company to higher cost of production and as a result high prices of finished
goods. This all can affect the sales as well as profits for Pak Hero. However, taxes
on import of raw materials (which competitors import) and subsidiaries provided
by government give boost to the sales and profit.
2. Socioculture conditions:
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Socioculture conditions are in the favor of the company as the inclination of

young age group people toward motorcycles is increasing, that is why the chance
for greater market share for Pak Hero is rising. Moreover, when people decided to
ban the consumption of foreign goods, Pak Hero being a Pakistani company gets
advantage. Its market share has considerably increased in recent times.
3. Economic conditions:
Since inflation rate is almost stable from last few years, this condition allows Pak
Hero to predict accurately about future sales and costs. This is a helpful situation
as they can maintain their low cost leadership strategy in a more effective manner
by focusing accurately on price cut mechanisms.
4. Technology:
This is a very sensitive area. Pak Hero has to specifically focus on it as a little
change in technology of motorcycles and rickshaws which if not used by the
company can readily decline sales. Moreover, they have to find new and
innovative ways so that they can serve better in the niche that will be created.
International Context:
At the moment, most of the spare parts are manufactured locally, so Pak Hero, which is
using them, can offer at half the prices of their international brands. Various import duties
are making other brand’s products costly, that is why they cannot compete with Pak Hero
in prices. But in 2005, due to WTO, the duties and customs are reducing, that will cut
down the prices of imported brands. Pak Hero can have problems as imported items
produced by advanced technology. So, Pak hero has to fully aware of international
technologies and various other factors to maintain its market share. Moreover, if it plans
to export its products in the future, it also have to take care about various market
requirements internationally it has to face.
Since uncertainty increases the risk of failure for organizational responses and makes it
difficult to compute costs and probabilities associated with decision alternatives, we have
to find the environmental uncertainty for Pak Hero to have complete control on it. From
the above mentioned environmental domain, we can find environmental uncertainty for
the company easily.
ENVIORNMENTAL UNCERTAINITY
Simple-Complex Dimension:
From environmental domain it is clear that Pak Hero’s environment is somewhat

complex. It has direct and indirect concern with many diverse sectors and has to control
and manage work properly according to them.
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Stable-Unstable Environment:
All the sectors of environmental domain are almost stable i.e. they are not changing
abruptly. But due to high demand, the environment is becoming unstable but not with
high rate. Overall we can conclude that environment is almost stable.
From above mentioned data, we can develop a framework for accessing environmental
uncertainty.
Complex + Stable =
Low –Moderate Uncertainty
1. Large number of external elements

and elements are dissimilar.
2. Elements remain the same or change

slowly.
Framework for Accessing Environmental Uncertainty
Recommendations:
On the basis of the above analysis we have given the following recommendations so that
it deals with its environment in a more effective way:
Adapting to Environment Uncertainty:
As we have found out that the environment is somewhat low –moderate uncertain, so we
have to determine the right fit between internal structure and external environment i.e. we
have to adopt internal structure in a way to fit according to our external environment.
Following are some of our recommendations through which Pak-Hero can adopt
according to environmental uncertainty.
1. Positions and Departments:
The number of departments and positions within the organization increases with
increase in uncertainty. Pak Hero’s environment is not too much uncertain, so,
different departments and their various positions can handle it, i.e. we don’t have
to merge or eliminate departments, as they are working with best fit with
environment. No huge change in structure of organization is required here.
Moreover, since products are almost same and there is no huge variation in
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product line, decentralization cannot be better option to control working here.

Centralized structure can give in-depth knowledge and economies of scale which
is needed in such environment.
2. Buffering and Boundary spanning:
Buffering role is to absorb uncertainty from the environment, while boundary

spanning roles link and coordinate an organization with key elements in the
external environment. Buffering and boundary spanning is essential to work in
highly complex and uncertain environment. The environment for Pak Hero is not
very complex, so there is not much need of boundary spanning and buffering
roles. As competitors are less, so to keep eye on them is not difficult and without
a large scale boundary spanning, information about their working and future steps
can be collected easily. However, top managers should always keep an eye on
external developments. Conducting situation analysis informally every one or two
months is a feasible option for the managers. This practice can help the
organization to keep abreast of the latest trends and technologies in the
automobile industry and in the society at large.
3. Differentiation and Integration:
When the external environment is complex and rapidly changing, organizational

departments become highly specialized to handle uncertainty in their external
sectors. Success in each sector requires special expertise and behavior of
employees as well as management. This means the environment require
maximum differentiation. On the other hand, integration, which is quality of
collaboration among departments, is needed necessarily when environment is
highly uncertain. Pak Hero stands in moderate environment i.e. needs moderate
integration and differentiation because all its departments do not have to
differentiate for specialized parts of products as product line is not big. Also
integration role is also not very large as only a few products are manufactured and
sold by the company. However, as the case indicates lesser integration between
departments often leads to inter-departmental conflicts. Therefore it is necessary
that all the departments work cooperatively to achieve the common goals of their
company. We recommend that a liaison role be created to integrate departments.
4. Organic vs Mechanistic structure:
The structure required for Pak Hero is between organic and mechanistic. Only one
structure cannot help in completing goals here. But at the moment, economies of
scale and efficiency is the main focus, so, the structure should more be of
mechanistic type with some qualities of organic structure like the one with
formalization and rules but not strict rules. Learning and sharing of knowledge
should be encouraged by managers too. Moreover, high formalizations and long
rules and procedures should be reduced as we have seen in the case study that
main problem come due to lengthy procedures which are decreasing efficiency
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instead of increasing. Face to face communication, which is the quality of organic

structure, should be implemented so that the managers can directly and on-time
talk to other managers for any problem or delay occurs instead of waiting for the
formal meeting call etc.
5. Planning and Forecasting:
As the demand is increasing, proper planning and forecasting will help the
company to focus on its sales and meet the demand for market. As in the case
study, the flaws in proper planning results in mismanagement and delay of
delivery of finished goods to the market. If they plan properly and forecast about
final time of delivery of products and raw materials, no problem will come.
Planning for day to day operations is not the only thing required; long term plans
such as five year sales forecasts should be developed to give direction to the
organization. The above mentioned information can be presented in a framework
for the organization as:
Low- Moderate Uncertainty
1. Somewhat Mechanistic
structure: formal and centralized.
2. Many departments, some

boundary spanning.
3. Few integrated roles.
4. Some planning.
Contingency Framework for Environmental Uncertainty and Organizational

Responses
Interorganizational Framework
INTERORGANIZATIONAL RELATIONSHIPS
To survive in this highly competitive world, organizations have to build, develop and
foster relations with other organizations. Companies have always been dependent on
other organizations for supplies, material and information etc. So, they choose to develop
positive and trusting relationships which could stay for long and give advantage in the
long run as well as in short run. Depending upon organizational types, various
relationships between organizations are formed. Pak Hero’s managers must carefully
watch them and make strategies accordingly.
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Recommendations:
Pak Hero requires a strong and long term relationship with its suppliers because it is
depending upon resources to meet its demand. As the case study shows that all the main
problems for the organization arise because purchase department has no relations with its
suppliers, no trust is developed between them; the result is long processes and delays in
stock delivery. This situation also leads to highly uncertain environment as depending on
other organizations for resources can bring negative effects on performance. Pak Hero
has to minimize their dependence on suppliers for the supply of important resources and
try to influence the market to make resource available. Pak Hero has to make long term
contract or joint ventures to lock in necessary resources, or building long term
relationships. In this way, on-time and quick delivery of resources will be possible.
Technology
ORGANIZATIONAL LEVEL TECHNOLOGY
According to manufacturing process, Pak Hero has medium technology complexity

which means that the manufacturing process is done by both the workers and machines.
Out of the three basic technology groups i.e. small batch, large batch and continuous, Pak
Hero lies in the second group.
In this category manufacturing process is characterized by long production runs of
standardized parts. So because of mass production, the direct and indirect labor ratio and
manager /personnel ratio is medium but worker’s skill level and verbal communication
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between them is low. Formalized procedures, centralization, and amount of written

communication are very high. The mechanistic structure of Pak Hero supports all these
characteristics associated with its production process.
Recommendations:
• Pak Hero can improve its efficiency by using the CIM (computer integrated
manufacturing) technology. CIM links together manufacturing components that
previously stood alone. Because of CIM, the organization would be able to deliver
a wide variety of motorbike and rickshaw models at low mass production cost.
• Through CIM, Pak Hero would be able to compete with large low cost foreign
companies when WTO is fully implemented in Pakistan.
To implement CIM, Pak Hero will have to apply the following technologies:
1. Computer-aided design(CAD):
Through it, the organization can improve the drafting, design and engineering of new
parts. This will also help Pak Hero in achieving its goal of low costs as CAD will lead
to less faulty and more efficient designs and parts.
2. Computer-aided manufacturing(CAM)
Pak hero can speed up its manufacturing by using it. CAM also permits a production
line to shift rapidly from production of one product to another just by changing the
instruction tape or software in the computer. This will also help Pak Hero in the
future if it plans to develop new products for this market or even diversify into other
industries.
3. Integrated information network

Pak Hero can integrate its entire department like accounting, purchasing, marketing,
inventory control, design, production etc by using this network. However, the use of
this network will largely depend on how quickly the organization changes its culture
from hiding information to sharing information. In the long run, this system will be
necessary, if not essential, for the company to face the cut-throat competition.
DEPARTMENTAL TECHNOLOGY FRAMEWORK
Perrow’s Framework:
According to Perrow’s framework there are 2 dimensions of departmental activities.

These are variety and analyzability. This framework was applied to Pak Hero by
analyzing the variety and analyzability of tasks of its different departments. For this
purpose, a questionnaire was distributed amongst 100 employees of different departments
of Pak Hero which determined how variable and analyzable the tasks were. This
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questionnaire is attached as Appendix E. The results of the questionnaire are described

below.
Results of the questionnaire:
We distributed 100 questionnaires in the office as well as in the factory of Pak Hero. But
we got back only 37 filled questionnaires. The analysis of the results of these
questionnaires shows that according to the employees of Pak Hero 73% of their work
consists of routine activities. The breakdown of the results with respect to different
departments is given as under:
• Employees of production department said that almost 90% of their work is the
same everyday because they just have to assemble the parts.
• Sales and marketing departments’ tasks have 61% analyzability.
• Finance and purchase procedures are highly analyzable (almost 85%).
• Employees of IT and HR departments reported to have 67% and 79% non-routine
tasks respectively.
According to production department’s staff, their work is almost completely repetitive.

IT, purchase and finance departments’ employees consider their work to be routine to a
medium extent routine. But HR and Marketing grade their activities to be routine to a
very less extent.
92% employees of the organization think that they have to do the same job in the same
way most of the time. But remaining 8% disagree with this point and most of them
belong to the HR department.
According to all departments’ staff, there is a clearly known way to do the major types of
work which normally they encounter and defined rule or practices that can guide them in
doing their work. Also, they almost always follow a sequence of steps in doing their
work. The results of this study can be summarized with respect to Perrow’s framework in
the following way:
1. Variety
It is the frequency of unexpected and novel events that occur in the conversion
process. It is the tasks which are performed by the workers these could be routine as
well as non routine. In Pak Hero the variety is low because the tasks are almost
similar every time.
2. Analyzability
Analyzability refers to the fact that if you can develop rules and procedures for
solving the problems it means that the tasks are routine .But if there are no clearly
defined rules then the tasks are not analyzable. If the rules cannot be set then it means
that the tasks are non routine.
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In Pak Hero the work at lower level or at factory level is almost routine because it is
just to assemble the products. But at the upper level some times the tasks are non
routine because sometime they face problems which are new to them.
Implication for Departmental Design:
The overall structure of Pak Hero is bureaucratic. Routine technologies are associated
with a mechanistic structure and processes, with formal rules and rigid management
processes.
The implications for departmental design are following:
1. Formalization
As there are routine tasks in Pak Hero and because of it the routine technologies are
characterized by standardization and division of labor into small tasks that are
governed by formal rules and procedures. The variety is low so there are more formal
procedures.
2. Decentralization
Because of the routine technology in Pak Hero, most decision-making about tasks
activities is centralized. Most of the decisions are thus taken or approved by the top
management.
3. Worker skill level

Little education and experience is required for Pak Hero work staff of production
department because their tasks are routine having low variety so they have no need of
special education.
4. Span of control
Span of control is narrow in Pak hero because of the vertical structure e.g. as the case
illustrates the purchase manager has only two persons reporting to him. Thus, the
manager to employee ratio is very low.
5. Communication and coordination

Because of low task variety the communication activity and frequency is also low n
the organization. The direction of communication is vertical because of routine tasks.
Because the tasks are analyzable so the communication is through written documents
as memos, letters, reports, rules and procedures.
Information Technology:
Currently Pak Hero does have an IT department but it does not perform any activity
which can make an impact on the working of the organization. There are only a handful
of people working at the department and the bulk of their task is to type, print or scan
documents or prepare Excel sheets. The only big achievement of this department has
been the establishment of a website with the help of another software house. The
homepage of Pak Hero www.pakhero.com is shown in Appendix F.
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Recommendation:
The information revolution has had a tremendous impact on organization in all industries.
Pak Hero can be much more successful by using IT to collect, store, distribute and use
information. Through IT, organization can evolve a variety of applications to meet
organization’s information needs. Operation application can be applied to well define
tasks at lower level and efficiency can be improved. These include transaction processes
systems, data warehousing, and data mining. Management information systems,
executive information system and decision support systems can be used as business
resources at middle and upper management level. Networking, intranets and enterprise
resource planning can be used to support greater internal coordination and flexibility.
Extranet can be used to for better relationship with dealers. Organization can leverage the
tacit and explicit knowledge by using IT. The reason behind this is to encourage the
employees to share knowledge. However, this requires a special interest and desire from
the management in actually making use of Information Technology. Management must
be ready to make investments in soft wares and devices if it wants to reap the benefits of
IT and use it to improve processes at Pak Hero.
INTERDEPENDENCE AMONG DEPARTMENTS
Interdependence means that the extent to which departments depend on each other for
resources or materials to accomplish their tasks. Low interdependence means that
departments can do their work independently. But high interdependence is opposite to it.
Considering this background, it can be concluded that there is low interdependence
among the departments with the exception of Purchase and Production departments. The
interdependence among these two departments is sequential at Pak Hero i.e. the parts and
raw materials purchased by the department become the input of the production
department to be used in producing motorbikes.
Recommendation:
In the existing structure this type of interdependence among departments of Pak Hero is
fairly understandable. However, managers must take appropriate actions to develop rules
and procedures which are standardized. Each department should use the same procedures
and financial statements so the outcomes of all departments can be pooled and measured.
However, as far as the purchase and production departments are concerned, we
recommend that there should be extensive communication between the two departments.
A liaison officer could be used to coordinate among the linked departments. Extensive
planning and scheduling should be done to avoid any misunderstandings.
Implications for the structure:
Pak Hero can use various levels of interdependence as:

• Reciprocal interdependence can be used among the design, engineering,
purchasing, manufacturing, and sale department for new product development.
18
Horizontal structure or cross functional teams could be used to handle the back
and forth flow of information and resources.
• When the product is designed, the sequential interdependence can be used for its
actual manufacturing with a flow of goods from one department to another, such
as among purchasing, inventory, production control, manufacturing and assembly.
• Pooled interdependence can be used for ordering and delivery of products.
CULTURE AT PAK HERO
Our observation shows that the company’s culture is largely rigid and bureaucratic.
However to confirm our observations we conducted a survey in which we asked
employees questions pertaining to the language used at Pak Hero. This technique was
used because language is a strong indicator of the culture at the company. Special
company slogans, metaphors or titles used for referring to customers or supervisors can
convey a lot of information about the type of values and beliefs a company has. Our
results show the following:
• All the workers of the production department call their supervisor with the name
of “Sir Jee” but the employees at other departments call their managers as “Sir “.
• Clients of the company are referred to as “MARKET”, “KHARIDAR” or

“DEALERS”.
• The most commonly used word in Pak Hero according to the employees is “Sir”
which represents that how often workers have to consult their seniors for doing
every task.
• No company specific terminologies were identified by the employees. This shows
that the collective spirit of the company is quite low.
The analysis of the questionnaire shows that the culture in Pak Hero is rigid and vertical.
Rules and procedures are strictly followed. Every person work has been defined and he
has to do the work according to it. There is no empowerment. Span of control is short. All
are working just like machines with no coordination in a closed atmosphere.
Recommendation:
Our recommendation for Pak Hero’s management will be to lighten up a bit and give the
employees more freedom. Treating the employees as assets rather than liabilities is a key
to turning the culture from that of mistrust to trust. The management should work to
provide more opportunities of workers from different departments to interact together.
Also, the distance between the supervisors and the subordinates must be reduced by
training managers to treat workers with more respect and dignity. Managers must be
encouraged to mingle with their workers to find out their problems. A bi-annual
congregation all managers and workers in an informal atmosphere can also be arranged
by the company to decrease distances.
19
Organizational size, Life cycle & Control
The life cycle of Pak Hero Industries tells us about its growth and change. Organization
structure, leadership style and administrative systems follow a fairly predictable pattern
through stages in the life cycle. Among the four stages of the organization life cycle, Pak
Hero has crossed the first two and is currently in the formalization stage. Each of the
three life cycle stages Pak Hero has passed through are discussed below:
1. Entrepreneurial Stage:
20
Pak Hero Industries (Pvt.) Ltd. was incorporated in June 1996 as a Private Limited
Company under Companies Ordinance 1984. At that time the emphasis was on creating a
product and surviving in the market place. Mr. Jaffer Iqbal (Managing Director) and
other entrepreneurs devoted their full energies to the technical activities of production
and marketing. The organization’s structure was informal and non-bureaucratic. Control
was based on the personal supervision of Mr. Jaffer. Top management style used at that
time was individualistic and entrepreneurial.
As Pak Hero Industries stared to grow, the increasing number of employees started
causing problems. The creative and technically oriented owners were confronted with
management issues but they preferred to focus their energies on making or selling the
product and inventing new products which they could produce. At that time the visionary
leadership of Mr. Jaffer helped Pak Hero Industries to expand further.
2. Collectivity Stage:
Under the strong leadership of Mr. Jaffer Pak Hero Industries was able to develop clear
goals and directions. Departments like marketing, finance, sales and production were
established along with the hierarchy of authority, job assignments and a beginning
division of labor within months.
In this period employees identified with the mission of Pak Hero Industries to
manufacture low cost products and spent long hours helping the organization succeed.
Members felt part of a collective, communication and control is mostly informal although
a new formal system was beginning to appear. Many dealers were beginning to show
confidence in the company.
At that time Pak Hero Industries started selling its products to all four provinces of
Pakistan. Due to high quality in commensurate with the international quality standards
Pak Hero had gained a good reputation among dealers and ultimate buyers and the
company is achieving significant increase in product sale in all the provinces of Pakistan.
Pak Hero Industries was in the collectivity stage during the rapid growth years from 1998
to 2001.
3. Formalization Stage:
This is the stage Pak Hero is currently in. Pak Hero is right now involved in making
rules, policies, procedures and control systems. Currently our research shows that
communication is less frequent and more formal. More and more technical engineers,
human resource specialists and other support staff are being hired. Top management of
Pak Hero Industries is now concerned with issues such as strategy and planning and has
left the operation of Pak Hero Industries to middle management like purchase managers,
sales and marketing managers, finance managers etc. Pak Hero is working continuously
21
on its low cost leadership strategy and is devoting all its energy to cutting costs. Incentive
systems are currently based on performance as well as designation.
However, bureaucracy is generally taking over the company. The case highlights how
piles of rules have made it difficult for the purchase department to finalize purchases
efficiently. At this phase new coordination and control systems will enable the Pak Hero
Industries to continue growing by establishing linkage mechanisms between top
management and field units.
Recommendations:
Pak Hero is currently in the formalization stage and the rules and procedures are
gradually overwhelming the employees. Following are our recommendations for
decreasing red tape:
♦ Certain amount of independence in different departments is also emerging. As the
case highlights, the departments are too engaged in managing their functions and
are not giving due attention to fulfilling company goals collectively. What is
needed at this stage is that the company should try to introduce teamwork within
bureaucracy. A link between different departments having varying interests like a
liaison role should be established to effectively integrate the various departments.
♦ Managers should be given more training for confronting problems, working
together and resolving conflicts.
♦ Job rotation across departments can be one option for the company to enable
employees to understand the problems of other departments.
♦ A separate research department may also be established to invent new ways of
cutting costs across the departments and introduce more cost effective systems
and technologies.
As the company grows larger and introduces more products, it may also opt for a
team based structure where teams work on specific processes and move on to the
elaboration stage of the organization life cycle. Currently, however, this option is not
feasible as the organization’s main focus is on cutting cost.
Approach Used for Control in Pak Hero
Management of Pak Hero Industries uses the market control system for control. In Pak
Hero Industries price competition is used to evaluate the output and productivity of the
organization. The top management of Pak Hero Industries considers that price is an
efficient form of control because managers can compare prices and profits to evaluate the
efficiency of their corporation. This technique can be applied in this company because: a)
its outputs are sufficiently explicit for a price to be assigned e.g. motorbikes and
rickshaws and b) competition exists e.g. Honda is a competitor of Pak Hero in the
motorbikes industry. Top managers of production, marketing and finance departments
always use the price mechanism to evaluate performance in Pak Hero Industries. The
corporate sales and costs are summarized in a profit and loss statement that can be
compared against Pak-Hero’s competitors Honda and Yamaha. The company also uses
some elements of management control systems for control such as operating procedures
22
and operating budget. Operating procedures include rules and regulations and policies
that prescribe correct behavior and is a continuous process.
Recommendations:
Although the current control systems seem to work effectively in Pak Hero it still has
some deficiencies. We recommend that the organization being fairly bureaucratic in
structure should consider using certain elements of management control systems for
control. These elements are:
1. Statistical Reports
The company can use periodic statistical reports to monitor non-financial
performance such as output volume and quality. These measures will help the
management to identify problems in the early stages instead of leaving them to swell.
The case study has shown that Pak Hero was quite late in recognizing that its supply
of motorbikes was inadequate as compared to the demand. This problem could have
been easily detected early on if a practice of measuring output volume against that of
competitors was being applied in the organization.
2. Reward Systems
The company, with the exception of the production department, currently does not
have a reward system to encourage the outstanding employees. We recommend that
the human resources and administrative department should immediately initiate a
reward system which offers incentives for managers and employees to improve
performance and meet departmental goals. For this purpose the management may use
any performance appraisal system such as Management By Objectives (MBO) to
evaluate performance and set targets for next year. This way employees and managers
will be more motivated to perform and at the same time the organization can also
ensure that its goals and objectives are met adequately by all departments.
Conclusion
Our analysis shows that there are many problems in Pak Hero like lack of coordination
and communication between departments, weak relationship with its suppliers and a lot
of bureaucracy which limits information and little utilization of information technology.
Span of control is narrow because of vertical structure and as the culture is rigid so
changes are applied very late. The company can overcome these problems by following
the recommendations we have given in the report and achieve its goal to be a low cost
leader while providing products of comparable quality to its market.
23
24
Appendices
Appendix: A
PAK HERO INDUSTRIES (PVT) LTD.

Organizational chart is given below.
25
PRODUCTION:
Currently factory is producing 180 cc, 333 PH auto rickshaws. Auto rickshaws are
proliferated in 8 brakes each rickshaw contains 12 volt CDI system for front lights and
have loading capacity of 280 Kg. Average weight of auto rickshaw is 210 Kg. Price of
the auto is half that of imported vehicle, so as to enable an average buyer to have an
access to the price. Two months comprehensive guarantee and five years guarantee on
frame is given on sale of auto. All the spare parts of the rickshaw are internally
manufactured which includes gear box, wheel box, chassis, and wheel brake with 280
Kg. power. Management also intends to launch 120 cc motor cycle and 180 cc scooter in
26
the market in near future. These products will be sold at half the prices of other locally
manufactured products with international brands.
AREA OF OPERATION:
Presently company’s product is sold in all the four provinces of Pakistan. Due to high
quality in commensurate with the international quality standards Pak Hero has gained a
good reputation among dealers and ultimate buyers and the company is achieving
significant increase in product sale in all the provinces of Pakistan. The products the
company is currently producing are:
1) Motor cycle
2) Rikshaw
3) Scooter
Motorcycle: In Pakistan, the ratio of the people using 70CC motor cycles is
higher than the users of other motor cycles. PAK HERO introduced PH 70CC
motor cycle to fulfill the demand of people who wish to have 70CC motor cycle.
PH 70CC is cost effective and has capacity to travel 70 km per liter.
Rickshaw: PAK HERO auto rickshaw is wholly manufactured and assembled in
Pakistan with the consultancy of the foreign experts. PAK HERO rickshaw is
manufactured according to the international standards. PAK HERO auto rickshaw
has the following competitive advantages over its competitors.
1- Less Consumption of Petrol
2- Best Pickup
3- Varied Colors
4- Less smoke releasing
5- Easy to drive
6- Control on noise
Scooter: PAK HERO” has launched its scooter in the market with the following
distinctive features.
1. Available in 5- different colors
2. Comfortable Seats
3. More Safety
4. Less Petrol consumption
STRUCTURAL DIMENSIONS OF ORGANIZATION:

As there is vertical hierarchy showing narrow span of control, standardize procedures are
being followed in the organization. The structure is also centralized. As this industry is
highly competitive, the company provides frequent training to its employees.
a) The strict policies and procedures are being followed which show formalization. Some
are given below for different departments:
27
1. FUNCTIONS OF MARKETING DEPARTMENT:
1)Developing sales forecasts and preparing budgets for the marketing department.
2) Devising advertising and publicity material.
3) Selecting appropriate publicity media.
4) Organizing and conducting other sales promotional activities.
5) Conducting special consumer survey.
6) Preparing research and publicity budgets.
7) Arranging and recommending and appointment of dealers to the Commercial
Manager.
8) Negotiating credit terms and arranging to fix credit limit with the dealers in
coordination with the Finance Department.
9) Submitting periodical reports to the Management or appraising the progress and
initiating control action.
2. Functions of Purchase Department:

The purchase department deals with the purchase procedures in connection with the
purchase and payables and the duties and responsibilities connected thereto have been
indicated as follows.
1. Maintaining an up to date list of suppliers and keep on exploring fresh and
competitive sources of supply.
2. Receiving Purchase Requisitions for procurement of materials, spare parts,
and specialized services both from the local market and abroad.
3. Initiating inquiries, receiving and reviewing quotations, consulting the
requisitioner about technical specification and finalizing the terms of
purchase order.
4. Preparing Purchase Demand and getting them approved by the appropriate
authority and informing the requisitioner if his purchase request has been
rejected.
5. Issuing Purchase Orders, following up with the suppliers, receiving Goods
Received Reports from the General Store, and settling the bills (invoices) of the
supplier.
6. Communicating annual requirement of Parts to the Management and
suppliers.
28
7. Arranging a contract of purchase of parts and services with the suppliers and
brokers on the basis of annual requirement.
8. Arranging lifting of spare parts from the suppliers within the specified
period.
9. Obtaining import licenses from the Government authorities for materials to
be imported.
10. Coordinating with the Chief Accountant for opening Letters of credit and
subsequent processing of documents for clearance purpose.
11. Remaining in contact with the clearing agent to ensure prompt clearance of
goods and their safe delivery to the Mills.
12. Keeping cordial relations with different brokers, Customs Department, the
Ministries of industry and commerce and Supply.
13. Submitting reports and proposals to the CEO which may help in
initiating control action.
14. Keeping all the records of the department under lock and key and to treat
them as confidential.
15. Helping the internal Audit staff in conducting periodical internal audits.
3. Functions of Production Department:
• To maintain statistical records of inputs of raw materials and production of

rickshaws, motorbikes and scooters.
• To work out daily efficiency reports for the Assembly Department
• To prepare daily performance report for Quality Control Section.
• To prepare and dispatch all Government returns concerning production
data, as and when due.
• To take stock in process in assembly, on the 1st day of each month and at
the close of Financial Year and submit the summary to the Cost Accountant.
• To prepare monthly reconciliation accounts and complete them by 10th of
every month for:
o Raw materials consumed;
o Products manufactured;
• To keep under lock and key the production and other records of the section
and to treat them as confidential.
29
• To adhere to the Managerial Policies and to submit any other reports which
may help in planning and initiating control section.
Functions of the Cost Control Department:

Cost control is the sub department in the organization. Its functions are given as follows:
1. To prepare monthly cost allocation sheets from the monthly Trial Balance.
2. To allocate service department cost to production cost centers on an equitable
basis.
3. Based on above, to work out unit cost of all the raw materials.
4. Valuation of stocks in process and finished goods lying in the factory
(excluding finished goods lying in the warehouse).
5. To prepare monthly cost control sheets for each cost centre compared with the
budgeted figures and that of the last month, for control purposes.
6. To prepare such analysis that may be required by the Management for its
policy decisions.
7. To adhere to the Managerial policies and to submit any other report/analysis as
required by the Management for initiating control action.
8. To keep all the records of the cost section under lock and key and to adopt
such appropriate measures which are necessary for the safe custody of the
same, and to treat all the records as confidential.
Appendix: B
SALES & MARKETING DEPARTMENT
GENERAL MANAGER
30
SALES & MARKETING
MANAGER SALES
ASSISTANT ASSISTANT
MANAGER MANAGER
Appendix: C
PURCHASE DEPARTMENT
PURCHASE MANAGER
31
MANAGER LOGISTIC STORE AND PARTS

PURCHASER
ASSISTANT ASSISTANT ASSISTANT ASISTANT

LOCAL IMPORT
PURCHASE
Appendix: D
FINANCE & ACCOUNTS DEPARTMENT
32
GENERAL MANAGER
FINANCE & ACCOUNTS
FINANCE MANAGER CHIEF ACCOUNTANT
CHIEF ACCOUNTANT
33
CASHIER SALES & PURCHASES & SALES TAX AND

RECEIVABLES PAYABLES ACCOUNTANT
ACCOUNTANT ACCOUNTANT
GENERAL
ACCOUNT
ASSISTANT
SALES TAX
ACCOUNTANT
FINISHED GOODS
STORE ACCOUNTANT
STORES AND SPARES

ACCOUNTANT HEADING TWO
STORE ACCOUNTANT
34
FINANCE MANAGER
EXPORT L/C.AND RECEIVABLES BANK ACCOUNTANT

ACCOUNTANT
ASSISTANT BANK
ACCOUNTANT
35
Appendix: E
This study is being carried out to determine the variety and analyzability of the tasks and the
culture at your organization. Your participation will provide us useful insights for our research
project. Your attitudes, preferences, and opinions are important to this study; they will be kept
strictly confidential.
DIRECTIONS: PLEASE READ EACH QUESTION CAREFULLY. ANSWER THE QUESTION

BY MARKING THE APPROPRIATE BOX THAT REPRESENTS YOUR RESPONSE(S).
1. Which department do you work in at Pak Hero Industries? (PLEASE FILL IN THE ONE
APPROPRIATE BOX)
□ Production □ Sales & Marketing □ Information Technology
□ Purchase □ HR & Administration □ Finance & Accounts
2. About how many of the tasks which you perform daily are same?
□ Almost All □ Almost 3/4th □ Almost Half
□ Almost None
3. To what extent would you call your work routine or repetitious?

□ A large extent □ A little extent □ Somewhere between large and little
4. How much do you agree with the following statement:

“People in this department do the same job in the same way most of the time.”
□ Definitely agree □ Generally agree □ Neither agree nor disagree

□ Generally disagree □ Definitely disagree
5. To what extent is there a clearly known way to do the major types of work you normally
encounter?
6. To what extent is there a clearly defined rule or practices that can guide you in doing your
work?
7. To what extent is there a sequence of steps that you follow in doing your work?
Now just a few more questions to get an insight about the culture that prevails in Pak
Hero.
36
(continued)
8. How do you address your immediate senior or supervisor (e.g. Sir, by name etc.)?
9. Which word(s) are used to refer to your clients?
10. Are there some phrases that are specific to the company (e.g. store hall or store room)?
11. Which word(s) do you think you use the most in a day’s work at Pak Hero (e.g. Sir, file, pen)?
37
Appendix: F
PAK HERO’S WEBSITE
38
39

H. Waqar Akhtar (Waqar7618@Live - Com)

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H. Waqar Akhtar( waqar7618@live.

com) Pak Hero Industries (PVT) LTD

HISTORY AND BACKGROUND

Organization chart and Structural dimensions of organization and other information

Goals, Strategies & Effectiveness

Mission Statement or Official Goals:

Porter’s Competitive Strategies:

Miles & Snow’s Strategy:

Balanced Effectiveness Approaches:

b) Competing Values Approach:

Rational Goal Model:

The External Environment

Socioculture conditions are in the favor of the company as the inclination of

From environmental domain it is clear that Pak Hero’s environment is somewhat

1. Large number of external elements

2. Elements remain the same or change

Framework for Accessing Environmental Uncertainty

Adapting to Environment Uncertainty:

1. Positions and Departments:

product line, decentralization cannot be better option to control working here.

2. Buffering and Boundary spanning:

Buffering role is to absorb uncertainty from the environment, while boundary

3. Differentiation and Integration:

When the external environment is complex and rapidly changing, organizational

4. Organic vs Mechanistic structure:

instead of increasing. Face to face communication, which is the quality of organic

5. Planning and Forecasting:

Low- Moderate Uncertainty

2. Many departments, some

3. Few integrated roles.

Contingency Framework for Environmental Uncertainty and Organizational

ORGANIZATIONAL LEVEL TECHNOLOGY

According to manufacturing process, Pak Hero has medium technology complexity

between them is low. Formalized procedures, centralization, and amount of written

3. Integrated information network

DEPARTMENTAL TECHNOLOGY FRAMEWORK

According to Perrow’s framework there are 2 dimensions of departmental activities.

questionnaire is attached as Appendix E. The results of the questionnaire are described

Results of the questionnaire:

According to production department’s staff, their work is almost completely repetitive.

Implication for Departmental Design:

3. Worker skill level

5. Communication and coordination

INTERDEPENDENCE AMONG DEPARTMENTS

Implications for the structure:

Pak Hero can use various levels of interdependence as:

CULTURE AT PAK HERO

• Clients of the company are referred to as “MARKET”, “KHARIDAR” or

Organizational size, Life cycle & Control

Approach Used for Control in Pak Hero

PAK HERO INDUSTRIES (PVT) LTD.

STRUCTURAL DIMENSIONS OF ORGANIZATION:

1. FUNCTIONS OF MARKETING DEPARTMENT:

2. Functions of Purchase Department:

3. Functions of Production Department:

• To maintain statistical records of inputs of raw materials and production of

Functions of the Cost Control Department:

SALES & MARKETING DEPARTMENT

SALES & MARKETING

MANAGER LOGISTIC STORE AND PARTS

ASSISTANT ASSISTANT ASSISTANT ASISTANT

FINANCE & ACCOUNTS DEPARTMENT