prr.hec.gov.pkprr.hec.gov.pk/jspui/bitstream/123456789/1762/1/1340S.pdf · i Declaration I hereby declare that this dissertation entitled “Strategic Risk Analysis of Transforming

STRATEGIC RISK ANALYSIS OF TRANSFORMING ORGANIZATION’S ENVIRONMENT: A CASE OF

TEXTILE SECTOR IN PAKISTAN

By

ABDUL MAJID

February 2010

Institute of Management Studies University of Peshawar



By

ABDUL MAJID

February 2010

A Dissertation Submitted to the Institute of Management Studies, University of

Peshawar, In Partial Fulfillment of the Requirements for the Degree of

DOCTOR OF PHILOSOPHY





By

Abdul Majid

Approved by

_________________________________ Supervisor

__________________________________ External Examiner

__________________________________ Director, Institute of Management Studies

University of Peshawar

APPROVAL CERTIFICATE

This is to certify that the present research entitled “Strategic Risk Analysis of Transforming Organization’s Environment: A Case of Textile Sector in Pakistan” has been completed by Mr. Abdul Majid under the supervision of the undersigned, towards the partial fulfillment of the requirements for the degree of Doctor of Philosophy.

___________________ ___________________ Director Research Supervisor Institute of Management Studies Prof. Dr. Tanweer Abdullah

DEDICATION

This is dedicated to

my beloved parents,

with great respect and admiration.

i

Declaration

I hereby declare that this dissertation entitled “Strategic Risk Analysis of Transforming Organization’s Environment: A case of Textile Sector in Pakistan” submitted to the Institute of Management Studies, University of Peshawar in partial fulfillment of the requirements for the degree of Doctor of Philosophy is my own work, and has not previously been submitted for any degree nor has it been submitted as part of the requirements for a degree at this or any other institution.

_________________________ ____________________ ABDUL MAJID DATE

ii

Table of Contents

List of Abbrevations ........................................................................................... x

List of Appendices ........................................................................................... xii

List of Tables .................................................................................................. xiii

List of Figures .................................................................................................. xv

Acknowledgements ......................................................................................... xvi

Abstract ......................................................................................................... xviii

PART I: Introduction 1-13

1. Introduction .................................................................................. 1

1.1. Background of the Study .................................................................................. 1

1.2. Key Concepts and Themes................................................................................ 3

1.2.1. Organizational Environment ............................................................... 3

1.2.2. Internal Environmental ....................................................................... 4

1.2.3. External Environment ......................................................................... 4

1.2.4. International Environment .................................................................. 4

1.2.5. Environmental Complexity ................................................................. 4

1.2.6. Organizational Change ........................................................................ 5

1.2.7. Transformational Change .................................................................... 5

1.2.8. Organizational Inertia ......................................................................... 6

1.2.9. Risk ..................................................................................................... 6

1.2.10. Strategic Risk Analysis ....................................................................... 6

1.3. Purposes and Objectives of the Study ............................................................... 7

1.4. Research Questions ........................................................................................... 7

1.5. Research Methodology ..................................................................................... 9

1.6. Benefits of the Research ................................................................................. 10

1.7. Justification for the Research .......................................................................... 11

1.8. Research Schedule .......................................................................................... 12

iii

PART II: Literature Review 14-64

2. Organizational Environment ....................................................... 14

2.1. Introduction ................................................................................................... 14

2.2. What is Environment? .................................................................................... 15

2.3. Foundations of Organizational Environment: Theories, Types, and Dimensions 18

2.3.1. Stage I: Introduction to the Concept of Environment ........................ 19

2.3.1.1. Introduction of Task Environment ................................... 19

2.3.1.2. Mechanistic and Organic Environment and

Development of the Contingency Theory ....................... 20

2.3.1.3. Internal and External Environments ................................. 20

2.3.1.4. Emery and Trist: Four Types of Organizational

Environments ................................................................... 21

2.3.2. Stage II: Development in the Field of Organizational Environment ..... 21

2.3.2.1. Heterogeneity/Homogeneity and Stability/Dynamism ... 22

2.3.2.2. Dimensions of Internal and External Environments ....... 22

2.3.2.3. Macro Aggregation and Task environment ..................... 22

2.3.3. Stage III: Applications of the Concept of Organizational Environment .... 23

2.3.3.1. Resource Dependence Theory ......................................... 23

2.3.3.2. Population Ecology Theory .............................................. 24

2.3.3.3. Institutional Theory .......................................................... 25

2.3.3.4. Modern and Postmodern Perspectives on Organizational

Environment .................................................................... 26

2.4. Environmental Complexity ............................................................................ 28

2.5. Why the Study of Environment is Important? ................................................ 29

2.6. Conclusion ...................................................................................................... 30

3. Organizational Transformation ................................................ 31

3.1. Introduction ................................................................................................... 31

3.2. What is Organizational Change? .................................................................... 32

3.2.1. Organizational Transformation ........................................................ 34

iv

3.2.2. Difference between Transformation and Other Types of

Organizational Change ..................................................................... 35

3.2.3. The Key Processes of Organizational Transformation ...................... 37

3.2.3.1. Chapman’s Approach........................................................ 37

3.2.3.2. Lancourt and Savage’s Approach ..................................... 39

3.2.3.3. Kotter’s Approach ............................................................ 40

3.3. Some Key Aspects of Organizational Transformation ................................... 43

3.3.1. Organizational Learning .................................................................. 43

3.3.2. Transformational Leadership ............................................................ 45

3.3.3. Organizational Inertia ....................................................................... 47

3.3.4. Organizational Mortality ................................................................... 49

3.4. Conclusion ...................................................................................................... 50

4. Risk Analysis ................................................................................ 51

4.1. Introduction ................................................................................................... 51

4.2. The Meaning and Theoretical Basis of Risk .................................................. 52

4.3. Difference Between Risk and Uncertainty ..................................................... 53

4.4. What is Risk Analysis? ................................................................................... 54

4.5. Process of Risk Analysis ................................................................................ 55

4.5.1. Define Objectives of the Project ....................................................... 56

4.5.2. Identification of Risks ....................................................................... 56

4.5.3. Risk Evaluation ................................................................................. 57

4.5.4. Risk Treatement ................................................................................ 58

4.6. Strategic Risk Analysis................................................................................... 59

4.7. Integration of Organizational Transformation, Environmental Complexity .....

and Environmental Risk .................................................................................. 60

4.7.1. Environment: Its Critical Role in Organizational Transformation ... 60

4.7.2. Relationship of Environmental Complexity and Risk ...................... 61

4.7.3. Relationship of Transformational Change and Environmental Risk 63

4.8. Conclusion ...................................................................................................... 63

v

PART III: The Research and Methodological Context 65-97

5. The Research Context of Pakistan ............................................. 65

5.1. Introduction ................................................................................................... 65

5.2. Geo-Political Profile of Pakistan .................................................................... 66

5.3. Economic Profile of Pakistan ......................................................................... 67

5.4. The Textile Sector of Pakistan ........................................................................ 68

5.4.1. History of the Textile Sector in Pakistan .......................................... 69

5.4.2. Contributions of the Textile Sector in the Economy of Pakistan ...... 69

5.5. Composition of the Textile Sector of Pakistan ............................................... 70

5.6. Current Status of the Textile Sector of Pakistan ............................................ 71

5.6.1. Ginning Sub-sector ........................................................................... 72

5.6.2. Spinning Sub-sector .......................................................................... 72

5.6.3. Weaving/Knitting/Finishing Sub-sector ........................................... 72

5.6.4. Garments Sub-sector ......................................................................... 73

5.7. The Case for Examining the Environment of the Textile Sector .................... 73

5.8. Conclusion ........................................................................................................ 75

6. Research Methodology ................................................................ 77

6.1. Introduction ..................................................................................................... 77

6.2. Research Problem ........................................................................................... 78

6.3. Research Hypotheses ...................................................................................... 79

6.4. Explanations, Significances and Justifications of Hypotheses ....................... 80

6.5. The Methodological Framework ..................................................................... 82

6.5.1. Methodological Model to Understand Complexity and Inertia ........ 82

6.5.2 . Methodological Model to Understand the Transformational

Change .............................................................................................. 84

6.5.3. Theory Development ........................................................................ 85

6.6. Development of the Fieldwork Plan ............................................................... 87

6.7. Research Design of Different Research Stages ............................................. 88

vi

6.7.1. Design of Research Stage One .......................................................... 88

6.7.1.1. Sampling Method, Sample Size and Data Collection .........

Process ............................................................................. 88

6.7.1.2. Development of the Questionnaire .................................. 91

6.7.2. Design of the Research Stage Two .................................................... 91

6.7.3. Design of the Research Stage Three .................................................. 92

6.8. Pilot Study ...................................................................................................... 92

6.9. Data Analysis .................................................................................................. 93

6.10. Experience of the Research Context .............................................................. 93

6.10.1. Ginning Sub-sector .......................................................................... 94

6.10.2. Spinning Sub-sector ......................................................................... 95

6.10.3. Weaving/Knitting and Finishing Sub-sector .................................... 95

6.10.4. Garments Sub-sector ....................................................................... 96

6.11. Ethical Considerations .................................................................................... 97

6.12. Conclusion ...................................................................................................... 97

PART IV: Research Data Analysis and Results 98-143

7. Analysis of Internal Environment …..……….…………………98

7.1. Introduction ..................................................................................................... 98

7.2. Analysis of the Selected Sample ..................................................................... 99

7.2.1. The Response Rate of Employees in Each Sub-sector ..................... 99

7.2.2. Classification of the Respondents According to the Nature of Job..100

7.2.3. Classification of the Respondents According to Levels of Education..101

7.2.4. Classification of the Respondents According to Their Job ..................

Experience ................................................................................. …..101

7.2.5. Classification of the Respondents According to the Daily ..................

Work-hours ..................................................................................... 102

7.3. Descriptive Statistics .................................................................................... 103

7.4. Analysis of the Important Question Through Cross-Tabulations ................. 110

7.4.1. Analysis of Question B1 .................................................................. 110

vii

7.4.2. Analysis of Question “B4”............................................................... 111




7.4.6. Analysis of Question “B12”............................................................. 116

7.4.7. Analysis of Question “C3”............................................................... 117

7.4.8. Analysis of Question “C5”............................................................... 118

7.4.9. Analysis of Question “D1” .............................................................. 119



7.4.12. Analysis of Question “E2” ............................................................... 122



7.5. Conclusion .................................................................................................... 125

8. Analysis of External and International Environments…........127

8.1. Introduction ................................................................................................. 127

8.2. Analysis of the Selected Sample ................................................................. 127

8.3. Descriptive Statistics .................................................................................... 128

8.3.1. High Interest Rates ......................................................................... 130

8.3.2. Energy Crisis ................................................................................... 133

8.3.3. Terrorism......................................................................................... 137

8.3.4. Negative Image Portrayed by International Media ......................... 137

8.3.5. Political Instability .......................................................................... 138

8.3.6. Lack of Governmental Support ....................................................... 139

8.3.7. Shortage of Raw Cotton .................................................................. 139

8.4. Conclusion .................................................................................................... 142

viii

PART V: Findings, Recommendations and Conclusion 144-160

9. Research Findings, Recommendations and Conclusion ......... 144

9.1. Introduction ................................................................................................... 144

9.2. Internal Environmental Risks of The Textile Sector .................................... 145

9.3. External Environmental Risks of The Textile Sector ................................... 148

9.4. International Environmental Risks of The Textile Sector ............................ 149

9.5. Recommendations towards the Internal Environment ................................. 150

9.5.1. The Need for Development of Organizational Vision .................. 150

9.5.2. Need for Restructuring .................................................................. 150

9.5.3. Implementation of Contemporary Human Resource Practices ..... 151

9.5.4. Implementation of Change in Managerial Practices ..................... 152

9.5.5. Effective Use of Manufacturing Technology ............................... 152

9.5.6. Increasing the Use of ICTs Mean ................................................. 152

9.5.7. Creating Virtual Relationship and Coordination with Other

Organizations ................................................................................ 153

9.6. Recommendations towards the External Environment ................................ 153

9.6.1. Adoption of Alternate Sources of Energy ..................................... 153

9.6.2. Short-term Arrangements for Energy ........................................... 154

9.6.3. Decreasing the Energy Tarrifs for the Textile Sector ................... 154

9.6.4. Restructuring of Long-term Loans ................................................ 154

9.6.5. Subsidies on Interest Rates ........................................................... 155

9.6.6. Arrangement of Private Equity Partners ....................................... 155

9.6.7. Increasing the Production of Raw Cotton ..................................... 155

9.6.8. Increasing the Governmental Support .......................................... 156

9.7. Recommendations toward the International Environment ........................... 156

9.7.1. Anti-terrorism Policies by the Government .................................. 156

9.7.2. Arranging Seminars, Conferences and Workshops to Develop

a Positive Image ............................................................................ 156

9.8. Methodological Implications ........................................................................ 157

9.9. Contributions of the Research ...................................................................... 157

ix

9.10. Limitations of the Research .......................................................................... 158

9.11. Suggestions for Future Research .................................................................. 159

9.12. Conclusion .................................................................................................... 160

Appendices ............................................................................................ 161

References ............................................................................................. 174

x

List of Abbreviations

APTA All Pakistan Textile Association

APTMA All Pakistan Textile Mills Association

BCF Billion Cubic Feet

BHP

Billiton Petroleum

BP

British Petroleum

BT Cotton Bacillus Thuringiensis Cotton

CEO Chief Executive Officer

CPS Commodity Producing Sector

FY Financial Year

GDP Gross Domestic Product

HDIP

Hydrocarbon Development Institute of Pakistan

HR Human Resource

ICTs Information and Communication Technologies

IIN Industrial Information Network

IPPs Independent Power Producers

KESC Karachi Electric Supply Company

Km Kilo Meter

KSE Karachi Stock Exchange

LASMO London and Scottish Marine Oil

LPG Liquefied Petroleum Gas

MGCL

Mari Gas Company Limited

xi

Mintex Ministry of Textile

MW Megawatt

NEPRA National Electric Power Regulatory Authority

OGDCL Oil and Gas Development Company Limited

OGRA Oil and Gas Regulatory Authority

OMV

Austrian Mineral Oil Authority

OPI Orient Petroleum International

PCFAMEA Pakistan Cotton Fashion Apparel Manufacture Exporters Association

PCGA Pakistan Cotton Ginning Association

POL Pakistan Oil Fields Limited

PPL Pakistan Petroleum Limited

PRGMEA Pakistan Readymade Garments Manufacturers and Exporters Association

R&D Research and Development

SME Small and Medium Enterprises

SPSS Statistical Package for Social Sciences

TCP Trading Corporation of Pakistan

TQM Total Quality Management

TULLOW

Tullow Oil

USD United States Dollar

WAPDA Water and Power Development Authority

xii

List of Appendices

App. No. Title Of Appendix

Page No.

A List of Units Selected as Sample………………………………………

161

B1 Research Questionnaire.………………………………………………

163

B2 Research Questionnaire (Translated in Urdu)………………………...

167

C List of Persons Selected for Fieldwork Interviews……………………

170

D List of Manufacturing Units Selected for Pilot Study…………………

171

E Map of Pakistan…………………………………………………….....

172

F Map of the Textile Sector of Pakistan……………………………….....

173

xiii

List of Tables

Table No Table Title

Page No.

Table 2.1 Key Process of Organizational Transformation………………………

38

Table 5.1 The Sectoral Share in the GDP of the Pakistan ………………………

67

Table 5.2 Contribution of Textile Sector in Pakistan’s Economy……………….

70

Table 5.3 Composition of the Textile Sector ……………………………………

71

Table 7.1 Classification of the Respondents According to Their Job Experience………………………………………………………….....

102

Table 7.2 Classification of the Respondents According to Their Daily Work-hours…………………………………………………………………...

103

Table 7.3 Mode and Frequency of Different Responses against Each Question

103

Table 7.4 Key Indicators of Risks Involved in Successful Transformation …….

109

Table 7.5 (A & B)

Percentage Responses of the Question “B1” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

110

Table 7.6 (A & B)


112

Table 7.7 (A & B)


113

Table 7.8 (A & B)

Percentage Responses of the Question “B7” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………..

114

Table 7.9 (A & B)

Percentage Responses of the Question “B8” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry…................

115

Table 7.10 (A & B)

Percentage Responses of the Question “B12” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry…..………..

116

xiv

Table 7.11 (A & B)

Percentage Responses of the Question “C3” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry…………....

117

Table 7.12 (A & B)

Percentage Responses of the Question “C5” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

119

Table 7.13 (A & B)

Percentage Responses of the Question “D1” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

120

Table 7.14 (A & B)

Percentage Responses of the Question “D3” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………..

121

Table 7.15 (A & B)

Percentage Responses of the Question “D5” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

122

Table 7.16 (A & B)

Percentage Responses of the Question “E2” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

123

Table 7.17 (A & B)

Percentage responses of the Question “E3” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………………...

124

Table 7.18 (A & B)

Percentage Responses of the Question “E7” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry……………...

125

Table 8.1 External and International Environmental Risks ……………..............

129

Table 8.2 Investment in the Textile Sector………………………………………

130

Table 8.3 Fluctuation in Interest Rates by the State Bank of Pakistan...……….

131

Table 8.4 Consumption of Gas and Electricity………………..………………...

134

Table 8.5 Difference between the Demand and Supply of Electricity ……….....

135

Table 8.6 Difference between the Demand and Supply of Natural Gas …….......

136

Table 8.7 Local Production and Import of Cotton (000 Bales)……………….....

141

xv

List of Figures

Figure No. Figure Title.

Page No.

Figure 1.1 Design of schedule for PhD research……………………..………..

13

Figure 6.1 Methodological model to examine the environmental complexity and inertia.………………………………………………………….

83

Figure 6.2 The methodological model of examining organizational transformation ……………………………………………………..

85

Figure 6.3 Identification of variables …………………………………..……...

86

Figure 6.4 The fieldwork research model...……………………..……………..

87

Figure 6.5 Sampling procedure for Research Stage One ……………….……..

90

Figure 7.1 Proportion of each sub-sector relating to response rate of its employees ………………………………………………………….

99

Figure 7.2 Classification of respondents according to the nature of job………

100

Figure 7.3 Classification of respondents according to their education level of education …………………………………………………………..

101

Figure 8.1 Classification of the respondents according to their respective positions …………………………………………………………...

128

Figure 8.2

Fluctuation in interest rates by the State Bank of Pakistan………... 132

xvi

Acknowledgements

I deeply thank the Almighty Allah, the Most Merciful, and the Most Gracious, Who helped

me in completing this PhD dissertation. I deeply acknowledge the unending support and

guidance of my parents throughout my educational pursuits. Their love and motivation

encouraged me to take up the PhD project and complete this dissertation.

I express my heartfelt gratitude to my PhD research supervisor Professor Dr.

Muhammad Tanweer Abdullah, for his guidance, intensive and frequent reading of the

entire dissertation, productive comments, intellectual motivation, and timely feedback.

Without his contributions, it may not have been possible for me to complete this research

project in time.

I am also thankful to the Graduate Studies Committee: Dr. Shahjahan Khan, also

the Director Institute of Management Studies; Professor Dr. Abdul Qaiyum Khan; and

Professor Abdul Wahid, for their academic and administrative support. I am also thankful

to Dr. Bushra Hamid, Professor, Institute of Management Studies; Dr. Sajjad Ahmad Khan,

Associate Professor, Institute of Management Studies; and Mr. Amir Hussain, the Office

Manager of the IMS; as well as the academic and administrative staff of the Institute of

Management Studies and the University of Peshawar for their respective support during my

research.

I am also thankful to Professor Dr. Bahadur Shah, Dean, Faculty of Law and

Administrative Sciences; Chairman, Department of Management Sciences, Hazara

University Mansehra, and Dr. Qamr-uz-zaman, Associate Professor, Department of

Statistics, University of Peshawar, for their encouragement and academic support towards

the completion of this research project.

I must also acknowledge the Higher Education Commission of Pakistan for

funding my PhD studies. I express my gratitude to all the staff of the Higher Education

Commission, especially Miss Madiha Anwar, Research Associate, PhD indigenous

xvii

Fellowship Program, for her untiring administrative support and patience concerning all the

administrative and financial matters related to the Higher Education Commission.

I wish to thank all the associations of the textile sector including APTMA,

Peshawar and Lahore regions; PCGA, Multan region; and PRGMEA, Lahore and Karachi

regions etc. for providing administrative support toward the fieldwork. My special thanks

go to the secretary APTMA of the Lahore region for his encouragement and cooperation.

Since the collection of the fieldwork data was a major part in this research, I wish to thank

all the respondents for providing me the required data.

I am also grateful to my only and dearest friend, Muhammad Yasir, for his moral

support, frequent suggestions, motivation, and positive feedback throughout the writing up

of this dissertation.

xviii

Abstract

Strategic Risk Analysis of Transforming Organization’s Environment: A case of Textile Sector in Pakistan

Abdul Majid

This research focuses on the environmental analysis of the textile sector in Pakistan. It

identifies and examines the potential risks of internal, external and international dimensions

of the organizational environment. This research shows that organizational analysis and

management practice in the developing countries has not attended to the complexities and

potential risks that are folded in environmental factors. Consequently, the environmental

risks and complexities associated with organizational change and development remain

unexplored. This thesis identifies these risks and complexities and suggests further that for

any successful implementation of transformational change, the identification and

management of complexities and risks are essential.

To identify and examine the environmental complexities and risks, a study of the

textile sector of Pakistan is taken up as a case. This research develops a theoretical as well

as methodological framework for examining the context of Pakistan, and focuses on the

data collection process in three stages: analysis of the internal environment; analysis of the

external and international environment; and a review of the secondary data on the textile

sector published by various sources. A set of findings and recommendations are put

forward for managing the complexities and risks for a successful implementation of

transformational change in the textile sector of Pakistan.

The research claims various contributions to existing theory and practice. Firstly,

it takes up the context of Pakistan, a developing country, for an analysis of organizational

environment. Secondly, this research recommends a detailed examination of the external

and international environmental risks and complexities for business organization in the

developing countries in general, and the textile sector of Pakistan, in particular. Thirdly, in

a similar domain, it identifies a range of complex variables and risks that adversely affect

the organization’s transformation process in the textile sector of Pakistan.

PART I: INTRODUCTION

CHAPTER ONE

Introduction

1.1. Background of the Study

This research dissertation focuses on the key aspects of organizational environment. It

attempts to develop an understanding of the environment of transforming organization,

particularly in the context of the developing countries. This research also aims at filling

in the gaps in the literature on transforming organization’s environment and strategic risk

analysis.

This research focuses upon the organizational environment and other related

variables with reference to the developing countries. Taking up the case of the textile

sector in Pakistan, I carry out the strategic risks analysis of the organizational

environments and attempt to determine the effects of strategic risks on organizational

transformation. This approach would also help in explaining a range of similar cases in

other industrial sectors of Pakistan as well as in similar other developing economies.

The fundamental assumption raised in this research thesis is that: “It is easier to

implement transformational change in a static environment due to less contaminating

variables, but difficult to implement the same in dynamic environments that have a higher

prevalence of contaminating variables”. In this research, researcher have identified and

Chapter-1

2

presented the ‘contaminating factors’ as the environmental risks. The time period of

carrying out this research has been very important factor, because the environmental risks

in Pakistan have been increasing since 2001. These risks create inertia for transforming

organization, hence, making it difficult to implement transformational change. Therefore,

this research would be helpful for the business owners, managers and other stakeholders

in the textile sector to understand the problems of textile organization in Pakistan, and in

providing guidelines to its transformation with regards to open competition in the

international market.

Mixed methods approach has been used for this research. In this regard, this

research attempts to contribute to the existing knowledge by identifying and analyzing

organizational change and environmental risks that can affect the transformation process

in the developing countries like Pakistan. The qualitative investigation mainly focuses on

the identification of risks and the development of models of transformation based on it.

The organizational environment with its internal, external, and international dimensions

that have a significant effect on organization, have been analyzed by using the

quantitative research methods.

This chapter gives a step-by-step description of the thesis development. Initially, I

describe the key concepts of this research, the purpose of this research, and the research

questions that were raised initially. This chapter then introduces the research

methodology, followed by the benefits expected from it, justification of research and the

schedule of this research.

Chapter-1

3

1.2. Key Concepts and Themes

In contemporary organization studies the analysis of organizational environment

especially in the context of the developing countries could be fairly challenging for

researchers. This research investigates the environmental risks affecting the process of

transformational change in the complex environment of Pakistan, whereby various risks

are identified that could cause the inertia and compel the textile sector organization to

maintain the status quo. The key concepts employed in this research are outlined in the

following subsections.

1.2.1. Organizational Environment

In the literature on organizational theory, researchers have defined and discussed the

concept of organizational environment in several ways. There are different research eras

of intensive development in the understanding of organizational environment: from

classical management to the postmodernism there are various view points about it. Here I

present the most commonly referred definition to understand the notion of organizational

environment, presented by Duncan (1972)1, who suggests that environment is considered

as the totality of factors including physical and social factors that have the potential to

influence the organization in one way or the other.

1 The publication manual of the American Psychological Association (5th Ed.) has been followed for the writing style and format of this PhD dissertation.

Chapter-1

4

1.2.2. Internal Environment

Internal environment is considered as all the elements and forces within the organization

(Griffin, 2006; Robbins & Coutler, 2007). Some of the internal forces include employees,

management, organizational culture, and organizational structure etc.

1.2.3. External Environment

External environment is considered as all the forces outside the defined organizational

boundaries that have the potential to affect it (Griffin, 2006).Bateman and Snell (2004)

explain external environment as “all the relevant forces outside the organization

boundaries (p.40)” Some examples of the external forces include customers, suppliers,

competitors, demographics, political forces, and regulators etc.

1.2.4. International Environment

In this research, international environment includes only forces that have the potential to

affect the performance of the textile sector of Pakistan. Some of the forces include

terrorism, propaganda of international media, and international trade barriers etc.

1.2.5. Environmental Complexity

According to organizational researchers, environmental complexity is the number and

heterogeneity of factors existing in the organizational environment (Chae & Hill, 1997;

Mason, 2007). In the same way, Simon (1996) defines complexity as “One made up of a

large numbers of parts that have many interactions (p.15)”

Chapter-1

5

1.2.6. Organizational Change

Organizational change is interpreted as a multifaceted phenomenon in contemporary

organizational theory. Grundy (1993) defines organizational change as the reshaping of

business strategy, its structure and culture over a period of time.

In contemporary management, organizational researches have defined more than

one kind of change (Weiss, 1996). In this regard, three major types of organizational

change are: incremental change (Ackerman, 1986), transitional change (Jick, 1993), and

transformational change (Kotter, 1995). Incremental change improves the existing

operations of the business rather than creating something new. Transitional change on the

other hand replaces the existing system with one that is completely new or modified.

1.2.7. Transformational Change

Transformational change is considered to be the kind of change that introduces new and

radically different forms of organization’s mission, culture and leadership (Ackerman,

1986). According to Child and Smith (1987), it includes not only radical change but also

incremental change. In the case of organizational transformation, the change process is

more formal and structured. It is a systematic process of the renewal of organization by

implementing new systems and structures for innovation and change, and by removing

those components of the organization that do not work properly (Head, 1997). In

organizational transformation, the starting point has to be the vision of the organization.

Besides, it focuses on some other important issues like understanding the nature of

change (Heather, Laschinger, Finegan & Shamian, 2002), authentic leadership (Beugre,

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6

Acar & Braun, 2006), knowledge about organizational culture (Huber, 1991), and all

those processes that can support change in the organization

1.2.8. Organizational Inertia

According to Hannan and Freeman (1984), the loyalty of the organization with its current

strategy is considered as inertia. Organizational inertia does not stop the change process,

but make it slow.

1.2.9. Risk

In organizational studies, risk is considered as the expected value of a loss (Hines &

Montgomery, 1990), or possibility of an undesirable outcome (Fillmore & Atkins, 1992).

1.2.10. Strategic Risk Analysis

Strategic risk analysis is a new technique to analyze the environmental risks, and discover

their strategic effects on different dimensions of the organization (Emblemsvag &

Kjolstad 2002). It deals with the scanning of the environmental dimensions to determine

the key influences and their impact on the organization, and especially to gauge the

strengths and weaknesses of political, social and the economic environment. Strategic

risk analysis is a useful technique for looking at all the forces against the business

objectives. It helps to weigh the importance of these factors and decide whether a plan is

worth implementing (Emblemsvag & Kjolstad, 2002). Strategic risk analysis is a

systematic process having formalized steps. Vose (2008) suggests the following four

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7

steps of strategic risk analysis: defining objectives of the project; identification of risks;

risk evaluation; and risk treatment.

1.3. Purposes and Objectives of the Study

The main purpose of this research is to explore the environmental complexities in the

developing countries like Pakistan. While investigating into complexities this research

focuses on identification of potential risks that adversely affect the process of

organizational transformation, and compel the organization to maintain the status quo.

The primary objectives of this research include the following:

1. To analyze the process of organizational transformation in the context of the

developing countries;

2. To review and analyze the dynamics and complexities of organizational

environment, especially with reference to the textile sector of Pakistan;

3. To analyze the risks associated with environmental complexities of the textile

sector by identifying their levels and categories; and

4. To analyze the existing and newly emerging risks in Pakistan’s economy,

especially energy crisis, and terrorism etc.

1.4. Research Questions

Organizational complexities, strategic risk analysis, and organizational transformation are

amongst the emerging debates in contemporary organization theory. Although a fair

amount of research has been carried out in these emerging fields, for example, Mosleh

and Mohaghegh (2009), they discuss the complex socio-technical system and identify

Chapter-1

8

various challenges to develop a model of organizational safety performance. Despite the

available literature, most managers in the developing countries, especially in Pakistan,

may not be aware of the ways to implement it. Most research in these fields has been

done in the context of the developed countries. Their areas of research interventions,

methodologies, units of analysis, and environmental conditions, etc are related to the

developed countries, whereas, in this research these concepts have been with a special

reference to the developing countries.

In this thesis, research questions have been categorized into two stages i.e.

primary questions and secondary questions. The first stage covers theoretical questions,

such as the following:

1. How do environmental complexities and risks influence the success of

organizational transformation?

2. Why do continuous environmental analysis and risk analysis are essential for

successful transformation process?

In the second stage, the questions arising from the mainstream practices are put

together as the following:

1. What are the elements of organizational environment in the developing countries?

2. Is it possible to transform organization within the existing environmental

conditions in Pakistan?

3. How could the risks in complex environments be treated to minimize their effect

on organizational transformation?

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9

4. Which type of environment is the riskier than others in adversely affecting the

transformation process?

5. How could the textile sector in Pakistan benefit from organizational

transformation?

1.5. Research Methodology

This research aims to identify the environmental risks of organization to facilitate the

process of transformational change in the context of the developing countries. Strategic

risk analysis of the organizational environment is essential for investigating into the

complexity and identifying the potential risks that can adversely affect the organization’s

strategic goals. Initially, the theories of complexities and contemporary models of risk

analysis have been used for this purpose, and are followed by an examination of

contemporary theories of transformation.

In the case of the textile sector of Pakistan, the primary data has been collected

directly from different textile Units. According to the Economic Survey of Pakistan

(2008-09) the textile sector of Pakistan is composed of 1221 ginning units, 521 spinning

and composite units, 1196 weaving, knitting and finishing units, and 1500 garments

manufacturing units. For my research, I selected the sample size from these sub-sectors

through random sampling technique which is discussed in detail in Chapter Six. The data

has been collected from the executives, managers, business owners, and

operational/technical staff from each sample unit using questionnaires. Moreover,

extensive interviews of business owners, executives, members of various textile

associations of the textile sector and government officials have also been carried out.

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10

The secondary data has been collected by making use of the statistical information

on textile sector provided by various governmental and non-governmental sources.

Published material on the subject e.g. books, journals, newspapers, and online resources

etc. have also been consulted for balance assessment of the issues.

1.6. Benefits of the Research

This research is a unique opportunity to examine the emerging concepts like

environmental complexities, transformation and risk analysis in the context of the

developing countries. This research attempts to provide procedures and guidelines for

environmental analysis and successful transformation for restructuring of the textile

sector organization. If implemented successfully, the organizational transformation will

increase the overall efficiency of the organization and help them to gain a sustainable

competitive advantage in the global marketplace.

As strategic risk analysis is an important part of this research, therefore, this

research attempts to provide guidelines to deal with the environmental risks to reduce

their adverse effects on strategic goals.

Since the textile sector of Pakistan serves as the unit of analysis, therefore it

would specifically be benefited by this research. It would be advantageous for the

organization, especially the textile sector organization to use this research for a successful

transformation and to minimize potential risks and create a competitive advantage.

Alongside the textile sector, this research shall be helpful for other sectors in

Pakistan for its holistic approach. Through this approach, I attempt to analyze the

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11

external and international environmental variables to understand their complexities;

therefore, this approach would provide a framework and a set of guidelines to other

sectors in terms of identifying their environmental risks and understanding their relevant

complexities.

1.7. Justifications for the Research

After analyzing the available literature on change management, it has been presumed that

the success of the various change management techniques in the developed countries

bring new paradigms for the manufacturing and engineering sectors. They have a

comparative advantage in many fields e.g. cost of production, technology, supply chain

management, and customer relationship etc. But due to different environmental context,

their models of organizational change and development e.g. punctuated equilibrium

model (Romanelli & Tushman, 1994) are not as effective for the developing countries as

they are in the developed countries. In the developing countries there is a need of

modified models of change for restructuring and transformation of the organization. This

research attempts to develop the modified model of change that could be implemented in

complex environment and to provide guidelines to restructure the organization through

organizational transformation.

Complexity in any environment is not a hidden phenomenon, but the major

problem in studying the complex environment is managerial and researchers’ inefficiency

to portray it accurately (Buzzell, 1980). In complex environment, there is heterogeneity

and diversity in environmental sub-factors (Chakravarthy, 1997). This heterogeneity and

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diversity creates a number of variables that can influence organizational performance

(Conner & Egeren, 1998). The effect of these variables can also create problems for a

successful transformation. This research attempts to identify the variables or risks that

affect the organizational transformation in a complex environment. This research also

provides a systematic procedure to manage risks and to mitigate their effect on the

transformation process.

Beside these, there is a strong need for strategic change and a viable

opportunity to examine the textile sector in Pakistan to suggest how to transform and

restructure it for its own survival and long-term growth.

1.8 Research Schedule

The PhD level research is a methodical and time consuming activity. Developing a PhD

thesis, and writing up a presentable dissertation demands time and efforts in the part of

researchers. I spent about five years writing on my PhD project. The detailed schedule of

activities during this time is outlined in Figure 1.1.

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Course Work

Selection of Research Topic

Proposal Writing and Approval

Literature Review

Development of Fieldwork Plan

Fieldwork and Data Collection

Data Analysis

Dissertation Writing

Editing & Proof Reading

Final Submission

Activities Activity Time (Duration)

One Year (Feb, 2005- Jan, 2006)

Four Months (Feb, 2006-May, 2006)

One Year (June, 2006-May, 2007)

Seven Months (June, 2007-Dec, 2007)

One Month (January, 2008)

Six Months (Feb, 2008-July 2008)

Three Months (Aug, 2008-Oct, 2008)

One Year (Nov, 2008-Oct, 2009)

Three Months (Nov, 2009-Jan, 2010)

Feb-2010

Figure 1.1. Design of Schedule for PhD research

PART II: LITERATURE REVIEW

CHAPTER TWO

Organizational Environment

2.1. Introduction

Organizational environment consists of physical and social factors that have the potential

to influence the organization in various ways. Researchers have attempted to define the

environment by elaborating, classifying and analyzing its structure and role in

organizational performance. Whereas, contemporary organizational environment with its

numerous affecting factors is changing so dramatically that prediction about its behavior

is practically impossible. In the developing countries especially, the complexities of

organizational environment are greater in their number and strength due to greater

uncertainties. Therefore, an understanding of organizational environment and its various

complexities is essential to manage the organization’s activities effectively. This chapter

specifically focuses on the notion of organizational environment and its various

dimensions discussed by organizational researchers in different research eras. A review

of this literature will provide a basis for understanding the complexity of environment of

the developing countries.

In the study of organization, I presume that the major problem a researcher would

face is from where to start the research work? There are a range of dimensions, from

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operational to strategic management and institutional planning, which could be the points

of entry into initiating the research inquiry. But if we thoroughly analyze the

contributions in the field of organizational theory, the starting point in most of the studies

appears to be the analysis of organizational environment, which determines the nature

and form of activities in the organization. The basic questions that are usually raised are:

what is organizational environment? What are different types of organizational

environments? And why is the study of organizational environment important? In this

chapter, I have attempted to discuss these questions through the available literature on

this subject.

2.2. What is Environment?

There is no consensus amongst the contributors of organizational theory on the basic

definition of environment. Over the past fifty years, researchers have used different

approaches to define this concept. Some of the pioneering researchers in this field include

Dill (1958), Emery and Trist (1965), Thomson (1967), and Duncan (1972). Dill (1958)

introduces the notion of task environment, and focuses on the external environmental

factors. According to him these factors have an impact upon organizational goal settings.

He states that: task is cognitive formulation, consisting of goals and usually also of

constraints on behaviors appropriate for reaching the goals (P. 411).

Emery and Trist (1965) categorize organizational environment into four types.

Their work adds considerable importance to understanding the structure of organizational

environment. The research of Emery and Trist (1965) was followed by the work of

Thomson (1967) on the subject of organizational domain, which identifies the area of

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potential dependency for the organization. According to him, potential dependencies

include range of products, population served and services rendered etc. Based on the

works of previous researchers, Duncan (1972) also attempts to define the concept of

organizational environment. He states that:

Environment is thought of as the totality of physical and social factors that are taken directly into consideration in the decision making behavior of individual in the organization (p. 314).

Duncan discusses the physical and social factors that define both internal and

external environments, adding to the work of Rice (1963), which focuses only on the

internal environment of the organization. Osborn and Hunt (1974) describe

organizational environment with respect to relevance of factors. They consider all the

relevant factors like other organizations, association of individuals, and macro forces as

the environment. They also attempted to identify and define the ‘macro’, ‘aggregation’

and ‘task’ environments in the light of work done by earlier scholars e.g. Clarke and

McCabe (1970), and Dill (1958). These concepts are discussed in detail later in this

chapter.

Other researchers who have discussed various aspects of organizational

environment include Lindsay and Rue (1980), Astley and Fomburn (1983), Dess and

Beard (1984), Walter (2003), and Boyne and Meier (2009). Lindsay and Rue (1980)

attempted to investigate the effects of organizational environment on long range

planning. They are of the view that organization tends to adopt the long-range planning

as the complexity and instability of the business environment increases. Astley and

Fomburn (1983) explain the relationship between environment and organizational

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17

autonomy. They hold the view that organization is not an autonomous actor of its

strategic choice. There are many external factors that compel the organization to revise its

strategic planning and implementation.

Dess and Beard (1984) further refine Dill’s notion of task environment, and

suggest its three components: munificence, dynamism, and complexity. They explain

munificence as the extent to which the environment can support long-term organizational

growth. They further describe that, organization looks for an environment that allows for

organizational growth and stability. Such growth and stability may assist the organization

to generate extra resources that could be used for innovation, organizational coalitions

and conflict resolutions. According to Dess and Beard, dynamism includes unpredictable

changes in organizational environment. These unpredictable changes create uncertainties

and complexities for the organization. They viewed these complexities to be

characterized with heterogeneity and the range of organizational activities within the

organizational environment. Dess and Beard also contend that highly complex

environment generates greater uncertainty for the managers than lesser complex

environment. While explaining the environmental complexity, Dess and Beard present it

as a dimension of task environment but most of the other researchers like Child (1972)

and Duncan (1972) consider complexity as a characteristic of organizational

environment.

Walters (2003) explains that new business models like Virtual Organization and

Holonic Organization, are emerging as a result of environmental turbulence. These are

basically the inter-organizational networks, in which organizations with different

capabilities join together to exploit emerging market opportunities. These structures are

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18

characterized as non-hierarchical, self-regulating, and with dynamic equilibrium among

parties.

Boyne and Meier (2009) discuss the relationship between environmental

turbulence and organizational stability, and consider environmental turbulence to have a

damaging effect on organizational stability, growth and performance. Therefore the best

response to environmental turbulence could be internal environmental change.

2.3. Foundations of Organizational Environment: Theories, Types, and Dimensions

After analyzing the available literature on organizational environment, it appears that

there have been three stages of development in the understanding of environment-

organization relationship. The first stage occurred from the late 1950s to mid 1960s. In

this stage the concept of organizational environment was introduced to organizational

theory. Most of the researchers in this stage e.g. Dill (1958), Burn and Stalker (1961),

Rice (1963), and Emery and Trist (1965) concentrated on various structures and types of

organizational environment. This stage is considered as an introductory stage in the

theory of organizational environment in which most of the research effort was focused on

identifying the importance of organizational environment in the context of organizational

theory. The remarkable work of this stage is the development of contingency theory. I

have explained the contingency theory and other developments during this stage in the

subsequent subsections of this chapter.

The second stage of development mainly took place during the late 1960s to late

1970s. In this period researchers like Thomson (1967), Duncan (1968, 1972), and Osborn

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and Hunt (1974) etc. attempted to classify the organizational environment into various

types and categories. This stage is considered as concept development stage.

The third stage of development began in the late 1970s and continues to date. This

period is dedicated to analysis of organizational environment as a significant element

affecting organizational operations. At this stage, the researchers are attempting to find

out the ways in which environment affects the organizational dynamics. The most

significant contributions of researchers during this stage include the addition of three

important theories to the field of organization analysis i.e. resource dependence theory,

population ecology theory, and institutional theory (Hatch, 1997). The detailed

explanation of all the three stages is given as following:

2.3.1. Stage I: Introduction to the Concept of Environment

This stage, extending from late 1950s to mid 1960s, is the introductory period for the

concept of organizational environment. During this period, most of the researchers have

attempted to introduce the concept of organizational environment and its various types.

The major contributions during this period are suggested below:

2.3.1.1. Introduction of Task Environment

Dill (1958) conducted an exploratory study on two Norwegian firms with 250-300

employees. In this study, he focused on one important component of the environment i.e.

task environment, which he considered to have a strong effect on goal setting. Dill

attempted further to operationalize the concept of environment using relevant variables,

like, manufacturing and sale, fashion, marketing, and services etc.

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20

2.3.1.2. Mechanistic and Organic Environment, and Development of the Contingency Theory

Some of the pioneering researchers on organizational environment hold the view that

organizational structure depends upon the types of environment. In static environment,

there is homogeneity of activities and stability of structures in the organization, and in

changing environment organization tends to adopt the flexible structures with

heterogeneity of activities. This phenomenon is the basic theme of contingency theory

that ‘different environmental conditions called for different styles of organizing’ (Burns

& Stalker, 1961). It means that the effective way to organize is contingent upon the

conditions of the environment. The major contribution in contingency theory is made by

Burns and Stalker, by identifying and examining two different structures of environment:

mechanistic and organic. The mechanistic environment has specialization of parts with

more stability and fewer changes in environmental dimensions, while organic

environment has less specialization of its parts, less stability, and more changes in

environmental dimensions.

2.3.1.3. Internal and External Environment

Rice (1963) explains the notion of organizational environment by classifying its structure

into two broad categories: internal environment and external environment. He defines

internal environment as a relationship and interaction amongst the members of the

organization, and considers other organizations and individuals as external environment

of the organization.

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21

2.3.1.4. Emery and Trist: Four Types of Organizational Environment

Following on the work of Rice (1963), the research by Emery and Trist (1965)

categorizes the structure of organizational environment with respect to uncertainty,

complexity and predictability. They identify four types of organizational environment:

1. ‘Placid Randomized environment’ in which goals of the organization remain the

same.

2. ‘Placid clustered environment’ which is comparatively dynamic than the first one.

It is like an imperfect competition, in which there are few buyers and sellers and

survival of every organization depends upon their information of its environment.

3. ‘Disturbed reactive environment’ which consists of a clustered environment in

which there is more than one organization of the same kind i.e. the objectives of

one organization are same as or relevant to other similar organizations. The

existence of the various similar organizations is a major characteristic of this

environment. In clustered environment, some clusters are profitable and others are

not, and every organization desires to move into the profitable cluster of the

environment.

4. ‘Turbulent field’ in which the dynamism of the environment arises not only from

the interactions of constituent organizations but also from the field itself.

2.3.2 Stage II: Development in the Field of Organizational Environment

This stage in the context of organizational environment is considered as concept

development stage. In this period, from late 1960s to late 1970s, most of the researchers

attempted to classify and categorize the concept of organizational environment. Some of

the major contributions during this period include:

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22

2.3.2.1. Heterogeneity/Homogeneity and Stability/Dynamism

Thomson (1967) classifies organizational environment on the basis of two dimensions:

heterogeneity/homogeneity and stability/dynamism. The first dimension describes the

elements of the environment in terms of their similarity or difference from each other.

The second dimension describes the status of change in these elements, that is, whether

these elements are changing or not.

2.3.2.2. Dimensions of Internal and External Environments

Duncan (1968) further expanded the work of Rice (1963) by defining internal and

external environments in details. He holds the view that internal environment comprises

of all the forces operating within the organization, while external environment comprises

all the forces operating outside the organization. Duncan identifies three components of

internal environment and five components of external environment. The internal

environment consists of personnel, functional & staff unit, and organizational-level

components. The five components of external environment are: customers, suppliers,

competitors, socio-political forces and technology.

Duncan (1972) further elaborated these dimensions to identify the relationship of

internal and external environments with uncertainty and decision making (I will discuss

this study in details in Chapter Four).

2.3.2.3. Macro, Aggregation, and Task Environments

Following on Duncan’s work, Osborn and Hunt (1974) suggests that environment is

composed of unlimited elements outside the boundaries of the organization. These

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unlimited elements can be grouped into three broad categories: macro, aggregation, and

task.

1. ‘Macro environment’ consists of the forces that have a reasonable effect on

organizational characteristics and output.

2. ‘Aggregation environment’ consists of special interest groups and constituencies

operating within macro environment. It is difficult to define the aggregation

environment, because some of its dimensions overlap the task environment and

play a considerable role in altering it.

3. ‘Task environment’ affects only specific organization, whereby every

organization has its own task environment, as identified earlier by Dill (1958).

2.3.3. Stage III: Applications of the Concept of Organizational Environment

This stage is dedicated to analysis of the effects of environment on organizational

dynamics. In this period, from late 1970s to date, applications and importance of the

environment in organizational dynamics remain the major issue in most of the research

studies. The most significant work during this period is the development of three

important theories. In the following subsections, I have discussed these theories in detail.

2.3.3.1. Resource Dependence Theory

This theory is developed by Pfeffer and Salancik (1978). It argues that the organization is

managed and controlled by its environment. This theory concentrates on inter-

organizational relations, identifying various types of players in the environment e.g.

suppliers, buyers and mediators, etc. and the dependence of one organization over the

other to obtain its desired resources. Therefore an organization develops the power to

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influence the other organization in various ways. By using this power, the players in the

external environment make demands on other organizations in different ways like

competitive prices and desirable goods and services.

The resource dependence analysis consists of two important steps: identification

of organizational required resources, and tracing the sources to fulfill the need. In inter-

organizational relationships most of the organizations concentrate on capturing the

scarcest resources to obtain maximum power. For obtaining the maximum power,

resource dependence theory concentrates on two important points: comprehensively

understanding the network regarding its players and scarce resources, and looking for the

ways to avoid dependency on other organization.

Practically resource dependence analysis is a highly complex and challenging

task, because it is very difficult for the organization to identify all the sources of its

desired resources. Therefore to solve this problem it is essential to sort sources and

resources out according to their criticality and scarcity.

2.3.3.2. Population Ecology Theory

In population ecology theory, organizational environment is assumed to have the power

to select the organizations from a pool of competitors which best serve its requirements

(Hannan & Freeman, 1977; Aldrich & Mindlin, 1978). This theory is the extension of the

resource dependence theory, in which organizations have the power to select the other

organizations to obtain and to share the scarce pool of resources (Aldrich & Pfeffer,

1976). The adopted patterns of interdependence of different environmental players affect

the survival and success of individual members. Therefore, the basic argument of this

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25

theory is based on the concept of ‘survival of the fittest’ that is, organizations compete for

their survival (Hatch, 1997).

To understand the environment, this theory concentrates on the pool of

organizations, or population of the organizations, rather than individual organization.

This theory attempts to predict various issues like organizational birth, death,

coordination, competition, organization success and organizational failure.

There are various drawbacks in this theory. Firstly, it is impossible to predict the

survival on the basis of resource dependence. Secondly, it also not possible to decide and

study the organizational population especially in difficult types of market structures like

perfect competition and oligopoly.

2.3.3.3. Institutional Theory

Institutional theory focuses on the social structures. Scott (2004) defines the institutional

theory by stating that

Institutional theory attends to the deeper and more resilient aspects of social structure. It considers the processes by which structures, including schemas, rules, norms, and routines, become established as authoritative guidelines for social behavior. It inquires into how these elements are created, diffused, adopted, and adapted over space and time; and how they fall into decline and disuse (p. 408).

In connection with the organizational environment, institutional theory explains

two issues: demands that environment puts on organization, and rewards that

organization receives for effectively and efficiently meeting the environmental demands

(Hatch, 1997). Various researchers like Deephouse (1996), and Suchman (1995) assert

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that environment can put two different types of demands on organization. First, it can

make technical and economic demands, for example production of specific goods or

exchange of services. Secondly, it can make social and cultural demand that requires

organization to fulfill the social and cultural responsibilities. When organization fulfills

the environmental demands, then it will reward the organization in different ways like

conforming to the values, and beliefs of society etc.

In neo-institutional theory some researchers like DiMaggio and Powell (1991)

attempted to move beyond the thoughts of social structures by explaining the process in

which practices and organizations become institutions. Scott (1995) defines

institutionalism as the process in which actions are repeated again and again and given

same meanings by self and others. Therefore, not only social structures and

organizations, but actions can be conceptualized as institution.

2.3.3.4 Modern and Postmodern Perspectives on Organizational Environment

From classical management to the postmodernism, there are various view points on the

notion of environment. Classical management theory is based upon the close system

approach, where internal operations are the major concern of management. Whereas,

modern and postmodern theories are based on the open system approach, and argue that

organization is open to its environment. The modern perspective of organizational

environment concentrates on capitalistic concerns, like industry, market regulation, and

competition etc (Boje & Dennehy, 1993). Whereas, the postmodern analysts reconstruct

the notion of organizational environment by paying special attention to nature; and

consider the modern view as denatured (Shrivastava, 1995). Most of the postmodern

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theorist are in the favor of deconstructing the concept, and redefine it on the basis of

reality, social order, affiliations and roles etc. for example the use of word ‘Developing

Countries’, ‘Developed Countries’, ‘ First World’, ‘Third World’, ‘Africans’, ‘Asians’

etc (Boje & Robert, 1993). All these words indicate different structures of environment.

The most important aspect of the postmodern view of environment is its classification.

They are against the arguments that there are different types of environment. They hold

the view that there is just one highly complex environment and we are dealing with

different aspects of the same environment (Hatch, 1997).

After reviewing the available literature on organizational environment, I presume

that it is relatively difficult to present a coherent and comprehensive concept to

understand the organizational environment because there is no single set of concepts or

models on organizational environment that are widely accepted, as described by

Sharfman and Dean (1991a) in a discussion about environments:

Neither a single set of constructs nor a single set of measures of the organizational environment is widely accepted, making it difficult to build a comprehensive literature on the impact of the environment on the firm...because neither a single approach to conceptualizing the environment nor to measuring it has received widespread acceptance, we have been unable to build a comprehensive, coherent literature about the environment and its impact on the firm. (p. 681)

In the previous discussion on environment, it have been attempted to explain the

viewpoints, arguments, and understandings of various earlier schools of thought

regarding organizational environment. There are several approaches to identify the

environmental elements, but three of the most common are: internal environment,

external environment, and international/global environment (Hatch, 1997). External

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environment consists of three sub-dimensions: task environment, general environment

and inter-organizational networks. Therefore, to examine the organizational environment

for this study, the three elements mentioned above are considered to be the basic

elements in the case of Pakistan.

2.4. Environmental Complexity

In organizational theory complexity is an important variable that characterizes both

organizations and its environment (Anderson, 1999). Environmental complexity remains

the major concern for organizational theorist since the seminal work of Emery and Trist

(1965), who have discussed this concept in the context of environmental turbulence and

change. After their work, different researchers defined this concept in variety of ways.

Thomson (1967) describes complexity as heterogeneity and diversity.

After these two significant contributions, Duncan (1972) operationalized the

concept of environmental complexity by describing two characteristics of complex

environment: complexity in terms of the number of factors, and heterogeneity among

these factors in environment. Moreover, Duncan also introduced the notion of internal

and external complexities. In internal complexity, organizational structure, culture,

technology and personnel are the important components while, customers, suppliers,

competitors and socio-cultural components of the environment are considered as the

integral part of external complexity.

After Duncan’s work, some other significant studies have been carried out in this

field (like Dess & Beard 1984; Singh, 1997; Tung, 1979) but the concentration of these

Chapter-2

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researchers in their subsequent studies remains on the same two basic categories

previously described by Duncan (1972). Hence, environmental complexity could be “the

number of different items or elements that must be dealt with simultaneously by the

organization” (Scott 1992, p. 230).

In more comprehensive terms, environmental complexity is the number and

interactions between the elements of the environment where future behavior of the

environment is unpredictable and frequency of changes in variables is unknown. The

intensity of the interactions between elements is another important component of

environmental complexity (Tsoukas & Hatch, 2001).

On the other hand, organizational complexity can be measured as the number of

activities and subsystems in the organization (Daft, 1992). According to Daft, there are

three dimensions of organizational complexity:

1. ‘Vertical complexity’ which is the number of levels in organizational hierarchy. If

there are more levels in hierarchy, it is said to be a complex organization.

2. ‘Horizontal complexity’ is the number of different jobs to be performed in

organizational structure, and

3. ‘Spatial complexity’ is the number of geographical locations.

2.5. Why the Study of Environment is Important?

Organizational environment is a continuously dynamic phenomenon that creates

problems for management (Milliken, 1987). Different researchers like Harrington and

Kendall (2006) suggest that environmental dynamism consists of unpredictable changes

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taking place in the organizational environments. Due to unpredictable changes in

organizational environment, organizational dynamism and uncertainty has remained the

major concerns for organizational theorists for over three decades (Gerloff, Muir &

Bodensteiner, 1991). The major problem for managers is their lack of understanding of

the behavior and of change patterns in organizational environment which creates

difficulties in various organizational processes like strategic planning, and project

evaluation etc. (Lawrence & Lorsch, 1967). In this regard, most of the researchers

suggest a detailed environmental analysis before preparing an organizational plan

(George, Moone & Vincet, 2007; Miller, 2009).

2.6 Conclusion

In this chapter, some important aspects of organizational environment and the notion of

environmental complexity are discussed. After this review, it has been concluded that

business organization experiences continuous changes due to dynamism in organizational

environment. Most researchers view these changes as systematic rather than random

(Buzzell, 1980). To align with the environmental change, transformational change may

be more relevant than other types of changes like development and transitional changes.

A detailed discussion on these issues is carried out in Chapter Three.

CHAPTER THREE

Organizational Transformation

3.1. Introduction

Environmental conditions and managerial decisions appear to establish the basic pattern

of activities in organization (Boeker, 1989). With the continuance of these activities,

shared understanding of that basic pattern is established (Meyer & Rowan, 1977). This

type of shared understanding in organization creates routineness and homogeneity of the

activities. According to Hannan and Freeman (1984) routineness and homogeneity are the

major causes of organizational inertia. To break this inertia in organizational settings,

new patterns of activities are established as a result of organizational change (Romanelli

& Tushman, 1994).

The concept of change has been studied and documented in the classical

literature1, while business organizational change is fairly contemporary, and has been the

focal point of several organizational studies (Chapman, 2002; Hughes, 2007). Change in

postmodern organizational structures is the result of several factors like volatile and

dynamic environment (Fergusson & Langford, 2006; Hunsaker & Hunsaker, 2008);

deregulation, globalization, and technological innovation (Domberger, 1998) and

1 Morgan (1986) quotes from Heraclitus 500 B.C. who presented the idea of flux and change in the universe. He states that “You cannot step twice into the same river, for other waters are continually flowing on.”

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organizational complexities (Douglas & Sabourian, 2005; Mason, 2007). Others like

Hughes (2007), and Morales, Reche & Torres (2008) also present top management’s

inclination and desire towards change and innovation as a factor affecting organizational

change.

Discussion on organizational environment and complexity especially in the

context of the developing countries introduces new paradigms for successful

transformation. In these emerging paradigms, the major point that has to be discussed is

the component and scope of transformation process and its compatibility with

environmental dimensions. In this chapter, basics of organizational change e.g. definition,

types, and processes etc. and different methodologies and dimensions e.g. learning,

inertia, and leadership etc. of organizational transformation have been discussed.

3.2. What is Organizational Change?

Change is considered to be a multifaceted phenomenon in contemporary organizational

theory (Kanter, Stein & Jich, 1992). The major problem in studying this concept is the

lack of adequate definition of organizational change. However, different researchers have

attempted to define organizational change from their individual perspectives. Clarke

(1994), and Meyer (1982) for example, focus on the need of organizational change.

Clarke (1994) concentrates on organizational change to compete with environmental

pressures and to achieve the targets of continuous survival and growth. Meyer, on the

other hand, focuses on the change to cope with unexpected changes in organizational

environment. According to him, unexpected changes may include workers’ strikes, and

management crises, etc.

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Behavior of the change process and its procedures were studied by Child and

Smith, (1987), with a focus on transformational change in the case of the Cadbury Ltd.

The major variables of their analysis were: objectives of the firm, context of the firm,

collaboration amongst the organizations, and organizational inertia. In addition to this,

other significant contributions have been made by Fomburn & Ginsberg (1990);

Greenwood and Hinning (1996) and Van and Huber (1990).

Fomburn and Ginsberg analyze the organizational strategy that mediates the

relationship between industry structure and organizational performance. In this study,

they concentrate on integration of business and corporate level strategies to remove the

inertia and to increase the shareholders value. The study of Greenwood and Hinning

(1996) focuses on the development of a framework to understand the change in the

context of neo-institutional theory. In this study they analyze the effect of political,

regulatory and technological complexities on organization that compels it for radical

organizational change. The research of Van and Huber (1990) analyzes the process of

organizational change. They discussed various change processes like emerging of change,

growing of change, development of change and termination of change process.

As far as the basic definition of organizational change is concerned, Kanter

(1992) defines organizational change as “the Shift in behavior of the whole organization,

to one degree or another” (p.11). Van and Poole (1995) have similar opinion on the

fundamental definition of change. They describe organizational change as “Change, one

type of event, is an empirical observation of difference in form, quality, or state over time

in an organizational entity (p. 512).”

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In addition to defining the concept of organizational change, different researchers

have attempted to identify and analyze different dimensions of organizational change, for

example, Anderson and Tushman (1990) emphasizes the importance of technological

change in organizational setting. They argue that the core technology of the organization

develops through the incremental changes over a long period of time. Tichy and Ulrich

(1984) focus on the role of leadership in change management. Kegan and Lahey (2001)

highlight the role of conflicts and resistance in change management. They present a

systematic process to reduce the resistance for change and highlight the important steps

to reduce the resistance including knowledge about existing behaviors, examination of

contrary evidence, and an allowance for change in the behavior, and endorsement of new

behavior.

3.2.1. Organizational Transformation

Transformation is viewed as the highest form of organizational change (Ackerman,

1986). In organizational transformation, the effect of change is a paradigm shift (Nutt &

Backoff, 1993) that is; change is considered to be a fundamental way of perceiving,

understanding and valuing the world (Kuhn, 1962). Paradigm shift in this way provides

the basis for organizational transformation taking place in contemporary organization. In

organizational transformation, the change process is corporation-wide: there is a change

in business strategies, systems, structures, line of authority, power distribution, as well as

in corporate values and culture (Nadler, 1982).

As observed by Golembiewski (1979) “Transformation is a redefinition of

relevant psychological space” (p. 413). The process of redefining and renewal of basic

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inputs and dimensions of organization is required to be systematic and formalized rather

than randomized. That systematic process would help the renewal of organization by the

implementation of modern, suitable and compatible systems, structures and cultures, and

removing the organizational components that do not work (Head, 1997). The redefinition

process also concentrates on the change in behavior, perception and continuous learning,

and to create innovation out of the transformation process (Cumming & Worley, 2001).

Therefore, transformation can simply be defined as the basic shift in attitude, belief and

cultural values (Bartunek & Louis, 1988). In more comprehensive terms, as observed by

Ackoff (1981) organizational transformation is the creation of a whole new form of

organization with new functions, structures and mindsets; that new form never existed

before, and is based on continuous learning and actions with knowledge and courage.

3.2.2. Difference between Transformation and Other Types of Organizational Change

When the concept of organizational change was emphasized in early 1950s, it was

primarily focused upon two types of organizational change: basic and incremental

(Lewin, 1951). Due to rapid changes in organizational environment over the last fifty

years, new, structured and well defined concepts of organizational change have emerged,

for example, continuous change and strategic change etc. Therefore, the requirement for

successful change management in contemporary organizational context is to handle these

various types of change in different ways (Wesis, 1994). For this reason, it is quite

relevant to emphasize the difference between transformational change and other types of

organizational change.

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There are various schools of thought having their distinctive view points on the

types of organizational change. Golembiewski, Billingsley and Yeager (1974) classify

organizational change into three types: alpha, beta, and gamma change. In alpha change,

participants extend what they are currently doing. In beta change, the basic standards of

the organization are altered, whereby the gamma change is a transition from one stage to

another stage.

Dunphy (1996) classifies organizational change into two forms: episodic and

continuous. Episodic change tends to be infrequent and discontinuous while continuous

change is ongoing, evolving, and cumulative. The distinguishing characteristic of

continuous change is its small, uninterrupted adjustments that are created simultaneously

across units, and which create cumulative and significant change (Moorman & Miner

1998). The continuous change activities are difficult, time consuming, and resource

dependent (Kanter, 1983).

In subsequent studies by other contributors, organizational change is classified

into three categories: incremental change (Ackerman, 1986), transitional change (Jick,

1993), and transformational change (Kotter, 1995). In this regard, incremental or

developmental change improves what the business is currently doing rather than creating

something new (Romanelli, & Tushman, 1994). It involves alteration and modification of

existing management and business processes (Callan, 1993), whereas, transitional change

replaces what already exists with something that is completely new. The organization

must dismantle and emotionally let go the old ways of operating while the new state is

being put into place (Dunphy & Stace, 1993). Transformational change, on the other

hand, introduces new and radically different form of organization’s mission, culture and

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leadership (Ackerman, 1986). According to Child and Smith (1987), transformational

change includes both radical and incremental change.

3.2.3. The Key Processes of Organizational Transformation

Organizational change is a complex phenomenon and difficult to implement in

organizational setting. All three types of change i.e. incremental, transitional and

transformational change have different protocols of implementations. To discuss the

methodologies of implementing transitional and developmental change is not within the

scope of this research, therefore, in this subsection, only the key processes of

organizational transformation shall be discussed.

In the literature on organizational transformation, different researchers have

identified, discussed and described a number of methodologies to implement the process

of transformation change. While in this subsection of literature review, three important

approaches to understand the process of transformation change will be discussed. These

three approaches are presented by Chapman (2002), Lancourt and Savage (1995), and

Kotter (1995).

3.2.3.1 Chapman’s Approach

Chapman (2002) identified and examined the transformational change process into three

core elements. In the first part, it is necessary to define the nature and scope of

organization and their relationship with change objectives. Secondly, strategy of change

management e.g. primary and secondary change levers and involvement of stakeholders

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should be defined. Lastly, it is necessary to define the role of the change agent. The

details of the Chapman’s approach are presented in the table below:

Table 3.1. Key Process of Organizational Transformation

Central Issues for Organizational Development

Core Elements of Transformational Change

1

Nature and Scope of Organization and the Purpose of Change

Organizations are multiple overlapping systems

Change improves organizational performance, as well as individual development

Interlinks organizational purpose with business partners, society and other networks.

2

Strategy of Change Management

Primary change levers are attitude beliefs and values

Secondary change levers are processes, structure and system

Involvement of stakeholders is informed by the notion of ‘organizational citizenship’

3 Roles of Change Agent

CEO provides visionary leadership and enable change

All members of the systems can be change agents

External consultants partner the change process.

Source: Chapman (2002, p.17)

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3.2.3.2 Lancourt and Savage’s Approach

Prior to Chapman (2002), two prominent researchers Lancourt and Savage (1995)

presented a new idea of successful transformation by dividing it into two parts: redefining

the business and focusing on the customer, and the new role of human resources.

1. Redefining the Business and Focusing on the Customer

Transformational change in organization requires a basic shift in attitude, beliefs, and

cultural values, or redefinition of a relevant psychological space, and giving more

importance to the customer by considering him or her as a real boss. Besides, Lancourt

and Savage (1995) suggest an emphasis on teamwork, job specialization and non-

hierarchical structure for successful transformation process.

2. New Roles for Human Resources

In the second part of organizational transformation, the view of Lancourt and Savage

(1995) describes new roles of human resource. In the new role, development of work

teams and joining of the people on the basis of their competencies and interest is

considered as the basic hallmark of the transforming organization. There are three levels

of the workers or teams in transforming organizations: formal management,

project/change leader, and project coworkers.

In the new role of human resource, all employees (including the CEO) are

expected to work on multiple projects, with atleast one in their core competency and one

in which they feel they can add value to their other competencies or interests. Moreover,

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Lancourt and Savage concentrate on visible leadership that can guide the behavior of the

team members and provide them the following:

1. The freedom of expression and consensus of decision making;

2. Applying management by exception, and giving team members the authority to

make decision in their own circle;

3. Make the coworkers committed to their work; and

4. Fair and justified reward system.

3.2.3.3 Kotter’s Approach

The third and last approach to understand the process of transformation is presented by

Kotter (1995), who describes eight important steps for successful implementation of

transformation change. These steps are considered as the fundamental points for

successful transformation. Kotter’s approach includes the following eight steps:

1. Create a Sense of Urgency

In this step, a manager creates an environment of change in the organization by

“overestimating the need for change” and bringing the employees out of their “comfort

zones” (p. 60). This stage starts from some individuals who are committed to change the

company’s competitive position, market situation, technological trends and financial

performance. The search of the “appropriate leadership”, “change agent”, “identification

of crisis” and “major opportunities” are important characteristics of this stage (p. 61).

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2. Form a Team of Key Stakeholders Who Support the Initiative

According to Kotter (1995), a major change effort is impossible until and unless there are

“working groups with enough power” in organization to make the change efforts

successful (p. 62). These groups should include top executives and managers that they

can encourage the other members of teams to work together.

3. Form a Vision: Appealing and Easy to Understand and Communicate

In this stage of transformation, managers and top executives create an organizational

vision that is easy and understandable for the members of organization. After creating the

vision, the next important step is to design the strategies to achieve newly created vision.

4. Vision Must In-fact be Communicated

This step covers the process of communication of the newly created vision to all the

members of the organization. The method of communication should be appropriate that

all employees from CEO to lower-level workers understand the vision accurately. This

communication is an ongoing activity that will continue throughout the transformation

change process.

5. Obstacles Must be Removed: Identify Barriers and Deal with Them

In this stage “new approaches of doing works”, “modified structures”, “systems and

activities” are adopted to achieve the new vision (Kotter, 1995, p. 64). The old ways of

doing business, ‘traditional ideas’, ‘actions’ and ‘risk avoiding behaviors’ and all

obstacles for change should be removed in this stage of transformation.

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6. Plan for Short-term Wins

In successful transformation, short-term planning and goals setting is an essential

constituent. Short-term planning brings an early success in the organization. This early

success motivates the employees to achieve the long-term goals. For achieving the short-

term goals, rewards and benefits are provided to the employees who were involved in

short-term wins.

7. Consolidating Improvements and Producing More Change

In this stage of transformation, some more activities are performed like “hiring”,

“promoting” and “developing” the employees who can implement change and achieve

the organizational vision (Kotter, 1995, p. 66). In this stage of transformation, new

projects are operationalized and all the outdated structures, policies and processes that do

not fit with the vision are removed.

8. Institutionalizing New Approaches

The last important step in transformation process is “anchoring the changes” in

organizational culture (Kotter, 1995, p. 67). Two factors are considered important for this

purpose: first, to create the consensus amongst the workers that new approaches,

techniques, structures and processes are beneficial for organization as well as for

employees, and secondly, to ensure that successor of top management will continue the

change process.

In the above subsection, I have discussed three important approaches of

transformation change. After discussing these approaches it is necessary to discuss some

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important elements of transformation like organizational learning, leadership and

organizational inertia etc. In the following part these key elements are discussed in detail.

3.3. Some Key Aspects of Organizational Transformation

3.3.1. Organizational Learning

Organizational learning is the capacity or processes within an organization to maintain or

improve performance that is based on experience (Nevis, Di-Bella & Gould, 1995).

Tobin (1996) considers this phenomenon as “transformational learning” that is

identification, acquisition and application of information that enables an organization and

the people within that organization to reach their goals (p. 10). According to him, to

undertake transformational learning one must discover what he needs to know i.e.

uncover their area of unconscious ignorance, and to locate the information they need,

and, lastly, to apply that information into their work.

In the literature on organizational learning various researchers have discussed

different steps of the learning process. Huber (1991), for example, describes four steps in

the learning process: knowledge acquisition, information distribution, information

interpretation, and organizational memory.

In the above mentioned steps of learning, knowledge acquisition is a process of

obtaining the knowledge of work related dimensions. Information distribution is a

process of distributing and sharing the information with others that leads to understanding

and new information generation. Information interpretation is the process by which

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distributed information is given one or more commonly understood interpretations. In the

last step, knowledge is institutionalized for future use.

Moore (2005) identifies the learning process into six important steps, outlined as

the following:

1. ‘Pre-contemplation stage’ in which employees have no idea about the problems

and their deficiencies in knowledge areas.

2. ‘Contemplation stage’ in which employees have some information about the

problem area, but they are not committed to take action and change their behavior

and attitude.

3. ‘Preparation/determination stage’ in which employees are ready to change their

behavior, and to obtain new knowledge in near future. In this stage, employees of

the organization are determined to increase their self-efficacy and commitment for

upcoming actions.

4. ‘Action stage’ in which employees modify their behaviors to overcome the

problems.

5. ‘Maintenance stage’ in which employees are continuously engaged in knowledge

generation and acquisition for a longer period of time, until and unless they have

achieved their targets.

6. ‘Termination stage’ in which employees achieved their desired targets. In this

stage the behaviors and actions of employees are totally changed and there is no

learning after this point in time.

Organizational learning is a complex phenomenon in organizational

transformation. In-depth discussion on this concept is beyond the scope of this research,

but as far as the relationship of learning and transformation is concerned, organizational

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learning has strong relationship with organizational transformation and change.

According to Ehrenberg and Stupak (1994), organizational learning has influenced a

change in many basic dimensions of the contemporary organization. It has modified the

organizational structure from vertical to horizontal (Polly, 1996); changed the control

system from formal to an information sharing system (Hurst, 1995; Rifikin, 1996); and

altered the business strategies from competitive to collaborative (Kumar & Dissel, 1996).

Therefore, in most of the postmodern organization, everyone is engaged in identifying

and solving problem, and enabling the organization to continuously experiment to

improve and increase its capabilities (Daft, 2001).

3.3.2. Transformational Leadership

In the context of transformational change, leadership is an important variable (Hill,

Hazlett & Meegan, 2001). Burns (1978) defines leader as a person who can provide

movement in the organization. In addition to organizational movement, leader also

desires to influence the thinking of people and emphasizes the need for understanding the

change as a process (Heckscher, Eisenstat & Rice, 1994). Simply, leader is a person who

can provide vision and influence the behavior of the people to achieve that vision (Bennis

& Nanus, 1997). On the other hand, leadership is viewed as a relationship between leader

and workers. Ciulla (1998) defines leadership as:

Leadership is not a person or a position. It is a complex moral relationship between people, based on trust, obligation, commitment, emotion, and a shared vision of the good… (p. 15).

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In the literature on organizational theory, most of the earlier researchers have

focused on two types of leadership: transactional and transformational (Bass, 1998a;

Burns, 1978; Tichy, 1986; Vinzant & Crothers, 1998). Transformational leader

concentrates on moving the organization towards new directions, and for achieving better

results and outcomes (Burns, 1978). Pawar and Eastman (1997) define transformational

leader as a person who creates a dynamic organizational vision that often necessitates a

metamorphosis in cultural values to reflect greater innovation.

In transformational leadership, it might be necessary for the leader to understand

the needs of followers, and engage the followers as one person. Moreover, mutual

understanding, trust and evaluation are compulsory element of transformational

leadership that converts followers into leaders and may convert leaders into moral agents

(Burns, 1978). Besides, Bass (1998b) considers charisma, inspirational motivation, and

intellectual stimulation as important elements of transformational leadership. As a final

point, transformational leadership according to different researchers involves in

innovation which creates new pathways in organization to generate new changes for the

organization. (Mink, 1992; Tracey & Hinkin, 1998; Davidhizer & Shearer, 1997).

To be responsible for innovation and change, transformational leadership may

require the following characteristics:

1. Firstly, the transformational leader must focus on his personal transformation

before going to transform other people or organization (Herrington, Bonem &

Furr, 2000). The personal-level transformation will produce self-confidence,

integrity and personal values (Dixon, 1998). These characteristics serve as the

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source of motivation for employees (Keller, 1995), and have a positive effect on

goals achievement in organization (Avolio, 1994; Finkelstein & Hambrick, 1996).

2. Secondly, transformational leader should assess the priorities for people, and try

to modify these with the new ways of thinking (Keller, 1995). This modification

would generate a new culture in the organization.

3. Thirdly, transformational leader should provide a new vision to the organization

and motivate the employees to achieve it (Bennis & Nanus, 1997).

4. Fourthly, transformational leader should concentrate on continues learning

process for individuals as well as for the organization (Mink, 1992). Continuous

learning could implement the transformational change successfully (Dess, Picken

& Lyon, 1998).

5. Fifthly, transformational leader should align internal structure with organizational

vision to achieve long-term goals (Covey, 1991).

Transactional leadership, on the other hand, is the management of planning and

policy (King, 1994). By using the bureaucracy (Tracey & Hinkin, 1998), power, and

existing organizational standards (Davidhizer & Shearer, 1997), transactional leader

concentrates on current system improvements rather than innovation and change.

3.3.3. Organizational Inertia

In a complex and volatile environment, the external dimensions for organization are

changing rapidly (Fergusson & Langford, 2006). Besides the complexity and volatility of

the environment, normal changes in organization’s external environment, for example,

change in the demand of a product, and consumers’ taste etc. and the internal

environment, like development moves, and hiring and firing etc. create pressure on

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organization for change. Consequently, survival of the organization is difficult and

becomes challenging for the managers in both the situations (Milliken, 1990). Therefore,

it becomes significant to understand the environmental dynamics and change

organizational strategies and structures to keep in-line with those dynamics (Hannan &

Freeman, 1984).

The major problem for organizations in this situation is their inability to change

its core features as rapidly as environment change. According to Hannan and Freeman

(1984), the core features of organization include its stated goals, forms of authority,

technology and market strategy. All these features of organization compel it to maintain

the status quo and continue with the current strategy (Nelson & Sidney, 1982). This

strong association of the organization with current strategy has been described as

organizational inertia (Kelly & Amburgey, 1991; Gabor, Laszlo & Hannan, 2000). Gerry

(1987) had previously used the term ‘strategic drift’ for this concept. This phenomenon

refers to the situation in which environment changes rapidly but the organization’s

strategy fail to keep in-line with it. Organizational inertia is considered to be a

contaminating factor for organizational transformation (Hannan & Freeman, 1984). It

does not stop the change process, but makes the change process relatively slower. Due to

the slower process of change, organization cannot exploit the emerging short-term

opportunities on one hand, and on the other, cannot prepare itself to respond to the

environmental changes effectively.

In this research I considered organizational inertia as an intervening variable.

There are several factors in internal and external environments that can create inertia in

organizational settings. Some of the internal factors include inappropriate organizational

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vision, resource deficiency, political coalitions, physical resources, and personnel

deficiencies. In the external factors, I have attempted to analyze the political instability,

energy constraints, international pressures, and some basic economic indicators as the

potential sources to create organizational inertia. These internal and external factors of

environment resist the transformation of the organization in Pakistan and have the

potential to affect the organization of the developing countries.

3.3.4. Organizational Mortality

After analyzing the work of different researchers, it has been considered that it is difficult

to implement the transformational change process. In the mainstream management

practices, it is important to achieve the intended goals of various transitions during the

transformation process successfully. According to organizational researchers, for

example, Bashein, Markus and Riley (1994) and Hammer and Champy (1993), about 70

percent change efforts fail to achieve this goal. The reason is attributed to the difficulty of

transitions of the transformation than what people have anticipated (Champy, 1995).

Many resources including time, money, market share, and other opportunities could be

lost in the process of strategic change (Arthur, 2001).

In the context of organizational mortality, researchers describe a strong

relationship between organizational environment, change and mortality. They hold the

view that change in organization depends upon changes in its environment. Therefore,

organization must attempt to adopt environmental change; otherwise death would be the

fate of that organization (Lawrence & Lorsch, 1967; Pfeffer & Salancik, 1978;

Thompson, 1967). Other researchers like Hannan and Freeman (1977) hold the view that

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only those organizations will remain on the screen that best fit in the environmental

context and fulfill the environmental requirements.

As a final point, it may be argued that the failure in organizational transformation

could adversely affect the organization and produce a disastrous situation for

organization which may ultimately lead to organizational mortality.

3.4. Conclusion

This chapter examined the concept of organizational transformation. In this chapter, some

basic definitions of organizational change, its types and its relationship with

organizational environment were discussed. This review concludes that organizational

transformation is a continuous activity with several phases of transition. Each phase has

its own specific targets. To achieve the targets of all the phases of transitions is a key to

successful transformation. Appropriate leadership, continuous learning, breaking up the

grip of inertia, and following along the proper procedures, are some basic principles for

successful transformation.

CHAPTER FOUR

Risk Analysis

4.1. Introduction

Any study of organizational environment in the context of developing countries,

especially the one that focuses organizational transformation, requires an examination of

complex and challenging issues. The identification of environmental risks is one of these

issues. Organizational researchers suggest that the existence of environmental risks and

their relatively high intensity in the developing countries could be a major factor of

failure in the change efforts. Therefore, it is essential to examine the concepts of ‘risk’

and ‘risk analysis’, which has been carried out in the initial part of this chapter. It is

followed by a discussion on strategic risk analysis.

In the earlier chapters of literature review (Chapter Two and Chapter Three), the

discussion had focused organizational environment and its influence on organizational

transformation. It was concluded that owing to the environmental complexities,

organizational transformation becomes relatively difficult. Because, various

contaminating factors that exist in an organization’s internal and external environment

adversely affect the transformation process, in this research, the contaminating variables

are considered as environmental risks.

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4.2. The Meaning and Theoretical Basis of Risk

There is no consensus amongst the researchers on the origin of the word ‘risk’. Some

researchers (e.g. Bernstein, 1996) are of the view that this word is derived from Italian

word risicare which means ‘to dare’. Researchers like Ewald (2000) hold the opinion that

this word is derived from the French word risqué, which was used in France for the first

time in 1578, and the word was used as both a noun and a verb.

Risk, in general, is considered as a difficult term to define at which no consensus

exists among researchers (Mamilton, Adolphs & Nerlich, 2007). Lack of consensus on

the definition of risk could be due to various reasons (Covello & Merkhofer, 1993), and

owing to various types of risks: economic risks, political risks, and health and safety risk

etc. Meacham (2004) states that in each of these approaches, the interpretation and

measurement of risk is a function of the context under examination. As far as the basic

definition of risk is concerned, different disciplines in this regard offered their unique

perspectives. In social sciences, risk is considered as a social construct not dependent on

numerical values but the social situation and conditional knowledge (Wynne, 1992).

Engineering sciences define risk as a numerical value that is a function of probability and

consequences (Rassmussen, 1990). Psychologists are of an opinion that risk does not

exist outside the mind; it is simply a concept that humans developed to deal with

uncertainties of life (Slovic, 1992).

In organizational studies, researchers define this concept in several ways: Hines

and Montgomery (1990) consider risk as expected value of a loss; Fillmore and Atkins

(1992) consider it as possibility of an unwelcome outcome; whereas, the Project

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Management Institute (2000) explains risk as any factor that keeps the project away from

obtaining its objective(s).

4.3. Difference between Risk and Uncertainty

Risk and uncertainty are viewed differently in organizational studies. The Webster

Dictionary (2006) defines uncertainty as a state of being uncertain. Luce & Raiffa (1957),

Gifford (1979), and Milliken (1987) describe uncertainty in a variety of ways. Luce and

Raiffa (1957) consider it as a more complex phenomenon than risk, with the view that,

uncertainty is a situation where the probability of the outcome of events is unknown as

compared to risk where the event has known probability of outcome. Gifford (1979)

states that:

Uncertainty is the inability to assign probability to outcomes and risk is ability to assign such probabilities based on differing perceptions of the existence of orderly relationship or pattern (p. 459).

Milliken (1987) holds the view that “uncertainty is an individual’s perceived

inability to predict something accurately” (p. 136). He discusses the two basic reasons of

uncertainty: lack of knowledge, and the inability to discriminate between relevant and

irrelevant data.

Despite the contemporary views on uncertainty, there are two models that are

commonly followed by researchers (Ellis & Spielberg, 2003). These are presented by

Duncan (1972), and Millikan (1987). Duncan focuses on the characteristics of

uncertainty, while Millikan discusses its various types. According to Duncan (1972),

there are following characteristics of uncertainties:

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1. Lack of information about the environmental factors associated with the given

decision making situation;

2. Lack of knowledge of the outcome and effects of a specific decision

3. Inability to assign probabilities with any degree of confidence, that is, how

environmental factors affect the success or failure of the decision unit in

performing its functions.

Milliken (1987) categorizes uncertainty into three types: state uncertainty, effect

uncertainty, and response uncertainty. State uncertainty is related with organizational

environment, and suggests that an individual is unable to predict the future changes in

organizational environment or its particular component. In this situation the top

management of an organization is uncertain about the validity of its decisions. Effect

uncertainty, on the other hand, is related with the individual’s ability to predict the effect

of environmental change on organization. According to Duncan (1972), it involves the

lack of understanding of cause and effect relationship, whereby the managers cannot be

sure about the effects of change in environment upon an organization. The response

uncertainty is related with the “response option available to the organization, and what

the value or utility of each response might be” (Milliken, 1987, p. 137). It can be defined

as inability or lack of knowledge of the managers to decide the response options, or to

predict the consequences of each response (Taylor, 1984).

4.4. What Is Risk Analysis?

Beck (1992), a prominent researcher in risk analysis, holds the view that we live in a

society where we face new risks of unprecedented magnitude. As such, risk analysis

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becomes an important tool to cope with such risks and manage the environmental

complexities (Holt, 2004).

Several organizational researchers have attempted to define and examine risk

analysis. Esterman and Kosuke (2005) consider risk analysis as a process of risk

identification, whereas, Borgelt and Falk (2007) discuss it as a process of both

identification and assessment of all risks to produce valid inputs for decision making.

Beck (1992) explains risk analysis as a tool to calculate the degree of risk by multiplying

the negative effects of a bad event with its probability1.

The work of Vose (2008) and Aven (2008) provide a basic understanding of risk

analysis. Vose (2008) states that “risk analysis concerns itself with the quantification of

risk, the modeling of identified risks and how to make decisions from those models” (p.

4), whereas, Aven (2008) defines the concept of risk analysis as “a systematic use of

information to identify hazards, threats and opportunities, as well as their causes and

consequences, and then express risk” (P.6)

4.5. Process of Risk Analysis

Risk analysis is relatively a ‘young field’ in organizational studies (Deisler & Schwing,

2003). With regards to its stages suggested by various organizational researchers (like

Aven, 2008; Mythen & Walklate, 2008), to understand and examine the process of risk

1 There are various research organizations working specifically on risk analysis e.g. mc2 Consulting, Bridge Field Group, and the Institute of Risk Management, etc. All these organizations have different opinions and approaches to risk analysis.

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analysis, the model of Vose (2008) appears to be the most appropriate. It consists of

following four steps:

4.5.1. Define Objectives of the Project

Objectives are an organization’s performance targets i.e. the results and the outcomes it

wants to achieve, while organizational objectives convert managerial statements of

strategic vision into specific workable targets (Thompson & Strickland, 2001). To carry

out risk analysis, a clear definition of business objectives is essential. Without knowing

the objectives of a business/project, managers cannot identify the risks that can arise out

of the context (Emblemsvag & Kjolstad, 2002). Therefore, in the process of risk analysis,

systematic definition of objectives is necessary to identify the potential threats.

4.5.2. Identification of Risks

Risk identification is the process to determine the risks that might affect the project. Risk

identification is a complex process; therefore all the stakeholders including project team,

risk management team, subject experts, customers, outside experts, and the end users, are

all involved in this course of action (Project Management Institute, 2000). There are

various techniques which are used for this purpose. The Institute of Risk Management

(2002) recommends a range of techniques to identify risks: brainstorming, interviews,

delphi technique, expert opinion, experience from other projects, and review of project

information including planning, analysis and designs, and dependency modeling.

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4.5.3. Risk Evaluation

The process of risk evaluation determines the priorities and treatments for risks (Olson,

2005). In this stage, the already identified risks are classified for the purpose of their

treatment. Keeping in view the objectives of risk evaluation, various researchers have

attempted to identify and classify the risks. Robin Holt (2004) discusses two types of

risk: symmetric risks, and asymmetric risks. Symmetric are short-term risks while

asymmetric are long-term risks. The Institute of Risk Management (2002) categories

risks into three types: accepted risks, rejected risks, and significant risks. Accepted risks

are within an acceptable level and do not require any treatment, but are kept under review

(Meacham, 2004). Rejected risks are those risks which have no significant effect on the

project. Significant risks, on the other hand, have a significant effect on the project, and

demand a special treatment. An important point which has to be considered in this regard

is the behavior of risk e.g. several types of consequences of each risk, and/or their

interrelationships. Therefore, before making decision about their treatments, it is

necessary to examine and evaluate all the aspects and dimensions of risk (Holt, 2004). In

this phase some additional planning is required for the purpose of safety e.g. in the case

of accepted risks, it is necessary to decide the risk owner, who would be responsible for

reviewing and monitoring the risks. Similarly, in the case of significant risks, it is

necessary to decide about the elements responsible for rework or extra work if required

for proper treatment of risk.

Irrespective of this classification, the Her Majesty Treasury in the United

Kingdom (2004) has classified risks into four types: external risks, operational risks,

financial risks, and risks related to human resource. External risks arise from the external

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environment, for example, political risks, economic risks, socio-cultural risks, and

legal/regulatory risks etc. An organization cannot control these, but take some action to

moderate their effects on the organization. Operational risks are related to the current

operations, like, lack of resources, and product failure etc. Financial risks are associated

with financial resources, for example, shortage of finance, earlier maturities of liabilities,

and high interest rates etc. The last type of risk is related with human resources, for

example, inefficient work force, strikes, hostile labor unions, and low productivity of

workers etc.

4.5.4. Risk Treatment

In risk treatment phase, the major task is the identification and implementation of

measures to modify risks (Clemen & Winkler, 1999). The preparation of risk treatment

usually requires inputs from different stakeholders like project owner, project manager,

and project financer etc. If there is an unacceptable risk in the project, it is necessary to

inform all the stakeholders regarding the status of risk. In this regard, the most important

component of risk treatment is cost-benefit analysis. Cost includes both tangible and

intangible costs. Therefore, care must be taken to ensure that risk treatment does not

exceed its benefits. There are many approaches to risk treatment, developed by various

prominent researchers. Based on the research of Vose (2008), following treatments of

risks could be identified:

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1. To increase the inputs/resources allocated for the project;

2. To collect more data so as to get better understanding of the risks;

3. To allow for contingency plans regarding the time, cost, and specifications;

4. To implement a plan which allows for minimum number and extent of risks;

5. To share the risks with partners, and contractors etc;

6. To transfer the risk to other parties like insurance companies etc;

7. To cancel the project; or

8. To take no action.

4.6. Strategic Risk Analysis

Strategic risks are those risks which can create problems for the organization to achieve

its strategic objectives (Emblemsvag & Kjolstad, 2002). Strategic risks generate various

strategic issues for the organization e.g. failure of projects, long-term decrease in

profitability, and high production etc. Strategic risk analysis is an in-depth study of risks

and their strategic effects on the organization. In this type of analysis, the major task for

managers is to compare the potential risks with organizational objectives by considering

different strengths and weaknesses of the organization. This will generate new

opportunities and threats for organization in the long-run (Hindle, 2000). Emblemsvag

and Kjolstad (2002) explain strategic risk analysis with regards to the following three

steps:

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1. Identify the objectives of the business;

2. Communicate risks to all the stakeholders, and classify the risks by considering

different strengths, weaknesses, opportunities, and threats; and

3. Calculate the possibilities and consequences of risks.

4.7. Integration of Organizational Transformation, Environmental Complexity and Environmental Risk

Transformational change is a continuous process that affects most of the organizational

dimensions. As mentioned in the previous chapters, transformational change has a strong

relationship with the environment; therefore, any positive or negative change in

organizational environment will ultimately affect the change process. In the following

subsections, I have attempted to create a logical relationship between environmental

complexity, environmental risks and transformational change process.

4.7.1 Environment: Its Critical Role in Organizational Transformation

Organizational environment has a strong influence on organization’s strategic

performance’ is a widespread idea in contemporary management literature (Boyne &

Meier, 2009). Lynn, Heinrich and Hill (2000) hold the view that political, economic,

legal, and social dimensions of environment have direct and indirect effects on

organizational performance, structures, processes and managerial behaviors. The effect of

economic resources, market structure, and political regulation on organizational

performance and change has also been discussed by Boyne (2003).

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In studying the transformational change process, the focal point of most of the

earlier studies was environmental turbulence and complexity (Harris, 2004;

Castrogiovanni, 1991). Turbulence refers to unpredictable changes in organizational

environment (Dess & Beard, 1984; Boyne, 2003) while, complexity refers to the number

of variables in the external circumstances that confront an organization (Fernandez, 2005;

Heinrich & Fournier, 2004). The study of environmental complexity and turbulence is

basically the study of environmental change, which has strong effects on organizational

dynamics, as described in contingency theory by Burn and Stalker (1961). To cope with

environmental changes, organization has limited options to stay with inertia (Miles &

Cameron, 1982; Miller & Friesen, 1984). Because the environment is assumed to have

the power to select a group of those organizations which best serve its needs (Hannan &

Freeman, 1989), organization has no other option but strategic change to align with

environmental changes.

My research focuses on the analysis of environmental risks emerged in the

context of turbulence and complexity. This would be a difficult task in which

organizational environment, organization’s internal dimensions and the feasibility of

transformational change in complex environment are different aspects of analysis.

4.7.2. Relationship of Environmental Complexity and Risk

Environmental complexity is the number and heterogeneity of factors in the environment

as already discussed in Chapter Two. The relationship between environmental

complexity and environmental risks is positive, as elaborated by Fariborz (1996), who

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states that; “the more complex and changing the environment, the higher is the level of

environmental risks and uncertainty (p. 696).”

In complexity theory, the negative relationship of complexity with organizational

performance and its positive relationship with environmental risks are supported by a

wide range of research studies including Fernandez (2005) and Heinrich & Fournier

(2004). Complexity theory deals with the notion of complex systems which have many

parts, interacting with each other in different ways (Tsoukas & Hatch, 2001). The

richness of these interactions forms a complex system that has the capability to undergo

spontaneous self-organization (Stevens & Hassett, 2007). A self-organization of the

factors in environment creates a situation that can affect the organizational performance.

As suggested by Byrne (1998), self organization of factors exists in both internal and

external environment of the organization. This situation according to various researchers

creates a dissipative system in the environment. Dissipative system is the one that is not

in equilibrium (Waldrop, 1993). This disequilibrium of dissipative system is often said

to exist on the edge of chaos (Lewin, 1993; Marion, 1999).

After reviewing the literature on complexity theory, I presume that there are two

types of dissipative system: internal dissipative system, and external dissipative system.

The dissipative system, whether it is internal or external, has many factors that can affect

the organizational performance. These factors are considered by researchers as

environmental risks e.g. Byrne (1998). Therefore, it may be concluded that there is a

positive relationship between environmental complexity and environmental risks.

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4.7.3. Relationship of Transformational Change and Environmental Risk

As outlined in Chapter Three that transformation is a corporate-wide change. In corporate

wide change, especially when it is implemented in a complex environment as explained

by Byrne (1998), the intensity of risks would be relatively higher. This high intensity of

risks exists in both internal and external complexities of the environment (Duncan, 1972).

Therefore, these risks adversely affect the change process, and compel the transforming

organization to maintain the status quo (Hannan & Freeman, 1984).

In the developing countries like Pakistan, organizational transformation

becomes a challenging task. There are several risks existing in organizational

environment that create problems for researchers to understand and analyze the

environment and solve its complexities (Majid & Yasir, 2008; Latham & Braun, 2009).

Therefore, in complex environment of the developing countries, the chances of failure of

transformational change process are more than those of the environmental context of the

developed countries.

4.8. Conclusion

After providing an account of organizational environment and the context of

transformation in the previous chapters, this chapter attempts to analyze the concept of

risks in an organizational setting. The concept of risk has been defined from a variety of

perspectives, followed up by the discussion on different steps in risks analysis. This

chapter also examined the relationships between environmental complexity, risks and

transformational change by discussing various aspects. The discussion concludes that the

environment of the developing countries could be more complex than the environment of

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the developed countries. For this reason, it has relatively higher number of environmental

risks, and the implementation of transformational change could be a difficult task.

The next part of this dissertation discusses the contextual and methodological

issues of this research. This part focuses on macro environment issues like Pakistan’s

economy, textile sector of Pakistan, research methodology, data collection process, and

some methodological concerns of the research.

PART THREE: THE RESEARCH AND METHODOLOGICAL CONTEXT

CHAPTER FIVE

The Research Context of Pakistan

5.1. Introduction

Pakistan is a developing country. Since its independence in 1947, it has remained as an

agricultural economy. Currently, agriculture is the largest sector of Pakistan’s economy

with strong effects on the socio-economic setup. It employed 45 percent of the total

workforce and contributed 25 percent to the total GDP (Ministry of Finance, 2009). This

sector is relatively more developed than most of the other developing nations. Besides

meeting its primary objective i.e. to fulfill the requirements of food for the nation, this

sector has many backward and forward linkages with other sectors e.g. this sector is the

major source of manufacturing inputs to the various industries like paper, textile, and

edible oil industry etc.

As this research specifically focuses on the textile sector of Pakistan, which is

operative virtually since 1947, with few spinning and composite units, working in their

individual capacity. Over the time, textile sector has developed rapidly in the shapes of

different industrial hubs e.g. Multan, Faisalabad, Lahore, and Karachi etc. Currently this

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sector may be called the back bone of Pakistan’s economy. To understand the research

context, this chapter specifically focuses on the textile sector of Pakistan: its contextual

issues like economic profile of Pakistan, background of the textile sector, its composition,

and its contribution to Pakistan’s economy etc.

5.2. Geo-political Profile of Pakistan

Pakistan is located in South Asia. Its constitutional name is Islamic Republic of Pakistan.

It lies between 23-35 to 37-05 north latitude and 60-50 to 77-50 east longitude. It shares

its eastern border with India, north-eastern with China, south-western with Iran, and

north-western with Afghanistan. The Arabian Sea is located at its south with

approximately 1064 km of coastline. Pakistan has total area of 796096 sq km.

Administratively it has four provinces: Punjab, Sindh, North-West-Frontier-Province, and

Baluchistan; as well as the Federally Administered Tribal Area, Gilgit-Baltistan, and the

Azad Jammu and Kashmir. Its total population is 169 million, 49.5 percent of which are

women (Ministry of Economic Affairs and Statistics, 2009). The map of Pakistan is given

out in Appendix-E.

According to the constitution of Pakistan-1973, there must be a Parliamentary

form of government in the country. Parliament consists of two houses: National

Assembly (Lower House) and Senate (Upper House). Military forces are the most

significant element of Pakistan. It has world’s eighth largest army. Military remains a

dominant institution of the country having strong influence upon the political

governments. Whereas, the primary mission of the military is to defend the boundaries of

Islamic Republic of Pakistan, the country has also remained under the rule of military

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dictatorship during 1958-1971; 1977-1988; 1999-2008 (Bureau of South and Central

Asian Affairs, 2009).

5.3. Economic Profile of Pakistan

Economy of Pakistan consists of three major sectors i.e. the agriculture, the industry, and

the services. Agriculture and industrial sectors are jointly called the commodity

producing sector (CPS). Commodity producing sector consists of major and minor crops,

live stock, fishing, forestry, mining and quarrying, large and small scale manufacturing,

construction, and electricity and gas distribution. Services sector consists of transport

storage and communication, wholesale and retail trade, finance and insurance, ownership

of dwelling, public administration & defense and other services (Ministry of Finance,

2009). The sectoral share in the GDP of the country is presented in Table 5.1.

Table 5.1. The Sectoral Share in the GDP of the Pakistan

Source: Ministry of Finance, Government of Pakistan (2009).

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The economy of Pakistan, at present, is facing a number of challenges that have

the potential to adversely affect its performance. The fiscal year 2008-09 has witnessed a

continuous downfall in most of the economic indicators (Ministry of Economic Affairs

and Statistics, 2009). There are four major challenges that economy of Pakistan is

currently facing, these are political instability, war against terrorism, energy crisis and

unfavorable law and order situation. The economy had to suffer heavy losses due to these

challenges during FY 2008-09. In this period the real GDP growth rate was recorded at 2

percent, which is the lowest since 1992-93. There was negative growth of 3.3 percent in

its manufacturing sector as compared to the 20 percent increase during the financial year

2004-05. The negative growth has also been recorded in its export and import items. The

inflation rate during 2008-09 was 23 percent, compared to 10.5 percent in the year 2004-

05. Similar situation has been observed in all the stock exchanges of Pakistan including:

Karachi Stock Exchange, Lahore Stock Exchange, and Islamabad Stock Exchange.

According to the official report of Karachi Stock Exchange, a decrease of 10000 points in

KSE100 index was recorded in the period from June, 2008 to January, 2009 (KSE, 2009).

5.4. The Textile Sector of Pakistan

Textile sector is one of the most significant contributors to the GDP, employment and

exports of Pakistan. As the major focus of this research is upon the textile sector, its

history and contributions in the country’s economy of Pakistan are discussed here in

detail.

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5.4.1. History of the Textile Sector in Pakistan

Textile sector has been operative in Pakistan since 1947 with a few spinning and

composite units. It comprised of yarn manufacturing, weaving, and dyeing plants. Over

the time, the Government of Pakistan announced a number of incentives for the textile

sector which motivated the private investors to install their individual spinning and

weaving units. Most of these units were installed at the places which offered easy

availability of raw material. Therefore, this sector developed in the form of industrial

hubs at various localities. Most of the ginning factories are located around the cities of

Multan, Bahawalpur, Rahim Yar Khan, Nawab Shah and Larkana, whereas, the majority

of spinning mills is located around the cities of Faisalabad and Sheikhupura. Weaving

and dyeing mills are mostly located at Lahore and Faisalabad, while Karachi and Lahore

are the industrial hubs for made-ups and garments. The map of the textile sector is given

out in Appendix-F

The textile sector has remained a major contributor in the GDP of Pakistan, but

after the growing energy crisis in recent years it is in deep trouble. Therefore, the industry

is in need of governmental support to regain its competitive position in the world market.

5.4.2. Contributions of the Textile Sector in the Economy of Pakistan

Textile sector is one of the most important sectors in the economy of Pakistan having

significant impacts upon the exports, employment, GDP growth, and investment. Its

contributions in Pakistan’s economy during the financial year 2008-09 are presented in

Table 5.2.

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Table 5.2. Contribution of Textile Sector in Pakistan’s Economy

Item Contributions in economy Exports 53.80 Percent of total exports

Manufacturing 46.0 Percent of total manufacturing

Employment 39.0 Percent of total industrial workers

GDP 8.50 Percent of total GDP

Investment 31.0 Percent of total country investment

Taxes Rs. 101 billion/annum (approximately)

Interest Rs. 44 billion/annum (approximately)

Salaries & Wages Rs. 5.0 billions/ annum (approximately)

Contribution to R&D Rs. 148 billion/ annum

Investment in last 8 years US$ 7 billion

Source: Ministry of Finance, Government of Pakistan (2009).

5.5. Composition of the Textile Sector of Pakistan

Textile sector of Pakistan consists of the small, medium, and large scale industries. In

which approximately 80 Percent units are operating at small scale, 15 Percent at medium

scale and merely 5 Percent units are operating at large scale (Majeed, 2004). Small and

medium scale units mostly deal in weaving, ginning, hosiery, towel, and finishing, while

most of the large scale units are involved in spinning. Detailed composition of the textile

sector and its production capacity is presented in Table 5.3.

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Table 5.3. Composition of the Textile Sector

Sector No of Units

Production Capacity

Ginning Small 1221 20 Million Bales

Spinning Individual 471

1900 Million Kgs. Yarn Composite 50

Weaving/Knitting/ Finishing

Medium & Large 146 9100 Million Sq. Mtr. Fabric

Small 1050

Garments Medium 600 650 Million Pcs. Small 900 350 Million Pcs.

Source: Industrial information network (2008)

5.6. Current Status of the Textile Sector of Pakistan

Textile is an export oriented industry of Pakistan. During the financial year 2008-09,

most of its export items for example yarn, fabric, readymade garments, towel, and bed

linen have remained under international competitive pressure. Its share in total exports

had declined from 66 Percent in FY 2004-05 to 54 Percent in the FY 2008-09 (Ministry

of Finance, 2009). There are various national and international factors affecting the

performance of the textile sector. Important factors in the domestic environment affecting

the textile sector include: rapid increase in the cost of production, energy crisis, war

against terrorism, and high interest rates etc. While international factors include: global

economic crisis, increase in global supply of textile products, antidumping duties on

Pakistani textile products, and trade barriers. The following subsections describe the

current situation of different sub-sectors of the textile industry.

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5.6.1. Ginning Sub-sector

Ginning is the first phase of value addition in raw cotton. In ginning process, lint is

separated from the seeds. There are 1221 ginning units operating in Pakistan. The total

installed capacity of these units is around 20 million bales on three-shifts basis. Due to

the shortage of raw cotton and energy crisis in the country, most of the ginning factories

are working on single-shift basis, which is considerably reducing the performance of this

sub-sector.

5.6.2. Spinning Sub-sector

Spinning is the largest sub-sector of the textile industry. There are 521 spinning units

operating in Pakistan out of which 471 are individual spinning units, while 50 are

composite units. Spinning sector is technologically more advanced that other sub-sectors

of the textile industry. At present, it is the major loss bearer due to the challenges faced

by the textile sector in general. Unscheduled breakdown of electricity and gas creates

production inefficiency in most of the spinning units. Shortage of raw material is another

major problem that affects the performance of spinning sector. Therefore, it is impossible

for the spinning units to operate at their optimum level. High interest rates are also

creating financial problems for this sector. All these factors are discussed in detail in the

part of data analysis.

5.6.3. Weaving/Knitting/Finishing Sub-sector

This sub-sector comprises of 1196 manufacturing units, in which 146 are medium and

large scale units, while 1050 are small workshops. Its annual production capacity is 9100

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73

million square meters fabrics. Alongside the problems of energy and high interest rates,

this sector is facing the immense shortage of cotton yarn. The major reason behind this

shortage is the selling behavior of the spinning sector which exports its best quality yarn

due to comparatively higher international demand and export prices. Although the

Government of Pakistan has imposed some restrictions on export of yarn, this sector is

still facing the problem of yarn shortage.

5.6.4. Garments Sub-sector

Garments sector provides high value addition in the textile sector of Pakistan. It consists

of medium and small scale units, in which 600 are medium scale manufacturing units

having more than 50 machines, while 900 are small scale units with less than 50

machines (Ministry of Finance, 2009). This sub-sector is currently enjoying the facilities

of duty-free imports of machinery and has shown remarkable performance during the last

five years.

5.7. The Case for Examining the Environment of the Textile Sector

After a discussion of the context of Pakistan and a brief introduction of its economic

performance, it could be easier to infer that the textile sector organization of Pakistan is

operating in a challenging environment. These challenges are associated with various

dimensions of the organizational environment. Some of these challenges include the

problem of energy shortage, high interest rates, and deficiency of raw material,

terrorism, as well as a fairly inefficient workforce. As discussed in the literature review,

the complexity of the environment increases with every addition in the number of

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environmental variables. According to the organizational researchers, complexity is the

number of factors and their heterogeneity in the organizational environment (Anderson,

1999). Therefore these challenges create a form of complexity in the environment of the

textile sector. Byrne (1998) holds the view that the complexity in organizational

environment creates various risks that have the potential to affect the performance of the

organization. Therefore, the complexity due to various challenges in the environment of

the textile sector creates a number of risks that adversely affect its performance.

Keeping in view the challenges faced by the textile sector, there is a desperate

need to transform the current structure of the textile sector organization.

Transformational change is the process of renewal of the organization by implementing

new systems and structures (Head, 1997). The implementation of the new systems and

structures in a complex environment of the textile sector is not an easy task. Because of

the complexity, environmental risks have the potential to affect the transformation

process and compel the textile sector organization to maintain the status quo. This

research specifically focuses on identification of environmental risks, to minimize their

effects on the transformational change process of textile sector organization. To achieve

this objective in a complex environment, a broader environmental analysis is essential.

In the study of environmental analysis, most of the earlier researchers attempted

to analyze organizational environment by developing various models (as discussed in

Chapter Two), in which they placed their units of analysis at the center of the

environment (Hatch, 1997). According to the postmodern perspective, this may not be

the right approach to analyze organization environment. Most of the contemporary

theorists (e.g. Matos & Afsarmanesh, 2005; and Garita, 2004) attempted to analyze

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organization environment by identifying the strategic position of the organization in

inter-organizational networks. The same technique is therefore employed in this

research.

This research is useful for the textile sector because it initiates the attempt to

identify the strategic position of the textile sector in Pakistan’s economy by discussing its

different aspects. After that, researcher have examined the organization environment of

the textile sector as three major and relevant dimensions i.e. internal, external and

international environment. Moreover, to strategically analyze the environment of the

textile sector, it has been attempted to identify potential risks confronting these three

dimensions that have the potential to adversely affect the process of transformation

change. Hence, the strategic risk analysis of the textile sector, provided in this research

could assist this sector in transformation, required to improve its performance. Therefore,

this research is a unique opportunity to examine the unique context of Pakistan which

would analyze the complexities of the textile sector and provide guidelines to identify the

environmental risks and implement the transformational process.

5.8. Conclusion

In this chapter, some contextual aspects of the economy of Pakistan have been discussed.

Here, it has been attempted to describe and analyze the textile sector of Pakistan by

identifying its different sub-sectors and investigating its contributions to Pakistan’s

economy. The contextual analysis concludes that the performance of the economy of

Pakistan is not satisfactory. Its performance indicators show continuous downward trends

over the last several years. During the period from 2006-09, the textile sector of Pakistan

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was a major loss bearer in term of its exports, market share, and profit margin. In such a

situation there is a strong need to transform the textile sector organization so as to make

some visible improvements in it. The next chapter of this part specifically focuses on the

methodological issues, in which some important issues like sampling methods, data

collection process, and fieldwork methodology are discussed.

CHAPTER SIX

Research Methodology

6.1. Introduction

In the previous part of this dissertation, the research themes were discussed with the help

of available literature. In scientific research, the stage following the literature review is

the design of an appropriate empirical research methodology (Cooper & Schindler,

2001). Therefore, this chapter describes the methodology of research which becomes the

basis for empirical investigation through the fieldwork.

Before developing the research design, some of the research efforts in the field of

organizational transformation and strategic change, like, Bernerth (2004); and Isaksen &

Tidd (2006) have been examined. In these studies, various aspects of change like ‘TQM’

and ‘strategic change’ were discussed. The variables of analysis in these studies were

related to the environments of the developed countries. The available literature in this

field is lacking in the discussion and analysis of the environmental context in the case of

the developing countries. Thus, the arguments put forward by researchers of the

developed countries like Whittington and Mayer (2000), that their research is universal

seem to be irrational.

Understanding the models of change and techniques of analysis for the

developing countries requires contextually relevant research. Environmental dynamics,

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nature and behavior of the process of change, and other important variables related with

the developing countries could only be analyzed through these researches. It has been

attempted to design this research not only to fill such gaps in the literature, but also for

providing a framework to understand organizational transformation and environmental

analysis.

This chapter discusses the research problem, followed by research hypotheses,

theory development and the methodological issues of this research.

6.2. Research Problem

The organizational environment in the developed countries is relatively different from the

environment of the developing countries. In the developed countries, business

organization has the environmental context with enhanced organizational characteristics

like the availability of appropriate benchmarks, case studies, and technical proficiencies

for successful change. Therefore, designing and implementing change is comparatively

an easier task. Conversely, in the developing countries, organizational environment is

more complex, having numerous variables and subsystems (known and unknown) that

can affect the organizational operations (Fergusson & Langford, 2006). The complexity

and volatility of such an environment increases over time in an unanticipated way.

In the case of Pakistan, the existence of several contaminating variables in

organizational environment has been presumed. These variables may include the

problems of terrorism, energy crisis, inflation, and international political-economic

pressures, etc. In the presence of several contaminating variables, predicting the behavior

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79

of an environment is difficult. Therefore, designing and implementing the process of

change for organizational development requires extra efforts of researchers, policy

makers and implementers.

Organizational transformation in a complex environment like Pakistan is a

difficult phenomenon to investigate. Due to environmental complexity (as discussed in

Chapter Three), several change efforts were turned into complete failure, while the

majority of these encounters problems and consume more than expected time and

resources (Hammer & Champy, 1993). The key characteristic of a complex environment

is the emergence of new risks with every environmental shift. Most organizations have to

face different situations and challenges in their future interactions, especially for

designing and implementing their policies. Therefore, it has been assumed that

environmental analysis is a prerequisite for developing an appropriate model of strategic

change. In this research, researcher have attempted to investigate into the relationship

between potential risks, organizational transformation and the environmental dynamics of

the developing countries.

6.3. Research Hypotheses

Hypothesis is a supposition or educated guess about the outcomes of a problem (Leddey,

1993). Zikmund (2000) considers hypothesis as an empirically testable proposition. In

contemporary business research, development of a research hypothesis is not mandatory.

However, development of hypotheses converts the problem areas into a testable format.

Researchers like Cooper and Schindler (2001), identify the following benefits of the

research hypotheses. First, hypotheses are the supportive means to make a systematic

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80

relationship between different types of variables. Second, by developing the research

hypotheses, it is relatively easier to identify the contaminating variables, and to control

and to stop them from influencing the relationship of dependent and independent

variables. Third, hypotheses also indicate the expectations of the researchers regarding

the variables and predictions about the results. Fourth, hypotheses provide a direction to

fieldwork investigation.

In this research, researcher has tried to establish a relationship among

organizational transformation, potential risk, environmental complexity, and strategic risk

analysis. The hypotheses developed for my research may therefore be outlined as the

following:

H1: There is an inverse relationship between environmental complexity and


H2: There is an inverse relationship between external environmental risks and


H3: There is an inverse relationship between internal environmental risks and


H4: There is a direct relationship between environmental risks and organizational inertia.

H5: There is an inverse relationship between organizational inertia and organizational

transformation.

6.4. Explanations, Significances and Justifications of Hypotheses

In this research, the hypotheses were developed to validate the relationship between

variables of interest. Five research hypotheses to verify the research claim that

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81

environmental risks have strongly negative effects on organizational transformation have

been developed. The first hypothesis investigates into the inverse relationship between

environmental complexity and organizational change. This hypothesis is extracted from

complexity theory. Complexity theory advocates that the complexity of environment

increases over time and with every increase in complexity the number of environmental

factors and their interaction increases (Senge, 1990). Thus, the newly emerging variables

in complex environment affect the transformation process in an unanticipated way.

Therefore, the relationship between environmental complexity and transformational

change is negative.

There are several variables in the external environment of Pakistan e.g. terrorism,

law and order situation, financial crisis etc. which can resist the change and force an

organization to maintain status quo. These variables are the major reasons of failure of

the transformational change efforts. Therefore, the relationship between these variables

and transformation process is negative, which is the main theme of the second research

hypothesis. Two justify this hypothesis; data was collected through semi-structured

interviews. The details of the interviews conducted are available in chapter eight.

In the literature review, it has been attempted to explain the work of various

contemporary researchers who suggest a strong relationship between internal

environment and organizational change. In the developing countries like Pakistan, a

number of variables in the internal environment can resist the process of change e.g. a

lack of effective leadership, employee’s resistance, and operational inefficiencies etc.

Therefore, these variables have an inverse relationship with organizational transformation

which is the main theme of the third hypothesis. To justify this hypothesis, self

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82

administered questionnaires were distributed amongst different levels of the work force

to collect the required information.

Internal and external environmental risks, for example, governmental regulations,

technological change, structural barriers and operational procedures resist the

transformation process in several ways, and compel the organization to maintain the

status quo. This situation is termed as organizational inertia by Hannan and Freeman

(1984). Thus the relationship between environmental risks and organizational inertia is

positive, and the relationship between organizational inertia and transformation process is

negative. These are two themes of the fourth and fifth research hypotheses. In Chapters

Seven and Chapter Eight, the above mentioned hypotheses with help of relevant data will

be tested. To justify the fourth and fifth hypotheses, the data collected through

questionnaires and semi-structured interviews have been used, because of the inter-

relationship between environmental risks and organizational transformation and inertia.

6.5. The Methodological Framework

In this subsection, methodological models to understand complexity, inertia, and

transformational change have been discussed separately. These models are used to

identify the variables examined in this research.

6.5.1. Methodological Model to Understand Complexity and Inertia

In the developing countries, external and international environments have various

interacting variables like behaviors of customers and suppliers, inter-organizational

networks, volatile government policies, political instabilities, financial crisis,

demographics and international socio-economic pressures etc. These variables in the

ex

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Methodolog

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83

cture,

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Chapter-6

84

In Figure 6.1 the interaction of variables in the external and international

environments are identified. These interactions create complexity in the external

environment of an organization. This complexity generates new risks which affect the

internal dimensions of organization like structure, culture, and physical resources etc.

Emergence of risks creates inertia which has the potential to resist the process of

transformational change.

The basic purpose of this model is to understand and analyze different inter and

intra-environmental interactions of the variables that create a complex situation and

inertia in the organization. Later, this model could be used to present some valuable

suggestions to improve the current situation of the textile sector in Pakistan.

6.5.2. Methodological Model to Understand the Transformational Change

The textile sector of Pakistan is currently facing a complex situation, especially created

by its external environment (Ministry of Textile, 2009). For its survival and strength in

the national as well as the international market, it is necessary to examine the process of

transformation of the existing organizational structure of the textile sector. In this regard,

Figure 6.2 describes the different transition phases to understand the process of


Chapter-6

85

Phases of transition

Figure 6.2. The methodological model of examining organizational transformation

In the phases of transition, especially in a complex environment, various

environmental risks affect the change process and make it difficult for the business

organization to achieve its desired state of transformation. Therefore, to achieve the

targets of successful transformation, it is necessary for the textile sector organization to

minimize the effects of environmental risks on the various phases of transitions.

6.5.3. Theory Development

This research is an exploratory study to find out the effects of environmental

complexities and risks on the process of transformation change. There are a number of

potential risks in organizational environment that adversely affect the transformation

process. Most of these risks have already been identified, analyzed, and discussed in the

studies of earlier organizational researchers. Besides, there are some contextually

dependent risks especially associated with the environment of the developing countries.

To understand the effect of these risks on the process of organizational change, a context

dependent analysis of the variable is essential.

Desired state of transformation

Chapter-6

86

In this research, it has been attempted to identify and discuss a range of risks that

have not been investigated so far in any other organizational research. In the theoretical

framework of this study, the areas of risk have been divided into three types dealing with

three dimensions of the organizational environment. These are the risks associated with

internal, external (general and task), and the international environment. These three

dimensions of risks are proposed as the major categories of independent variables.

Organizational transformation is proposed as a dependent variable in this framework.

There is also a proposed intervening variable in the form of organizational inertia.

Risk associated with Internal Environment (+) (+) (-) External Environment

(+) International Environment Independent Variables Intervening Variable Dependent Variable

Figure 6.3. Identification of variables

The theoretical framework model in Figure 6.3 shows the relationship between

different variables. It describes a positive relationship between independent and

intervening variables, and negative relationship between intervening and dependent

variables. There is also a negative relationship between independent and dependent

variables.

Organizational Transformatio

Organizational Inertia

Chapter-6

87

6.6. Development of the Fieldwork Plan

In this research, I divided the data collection process into three stages. In the first stage,

research methods were designed to collect the data on internal environment of the

organization of textile sector. The second stage was dedicated to data collection with

regards to the external and international environments. The third stage of the research

process was tailored to collect the secondary data produced on the subject by various

governmental and non-governmental sources during the last eight years.

Figure 6.4. The fieldwork research model

S S S T T T A A A G G G E E E 1 2 3

Strategic Risk analysis of transforming Organization’s Environment

Short listing of the Organizations from APTMA, APTA, PRGMEA, and PCGA etc. on certain criteria, and administering the questionnaires focusing different variables of internal environment that can affect the transformation process

Extensive interviews conducted withdifferent academician, politician, executives and business owners to find out the effect of external environmental variables and potential risks on organizational transformation

In-depth review of the material published by different agencies, government institutions and private associations of the textile sector vis-a-vis the environment of Pakistan, potential threats and other related variables

Chapter-6

88

6.7. Research Design of Different Research Stages

In this research, researcher has attempted to analyze the organizational environment from

three different dimensions i.e. internal, external, and international. For collecting the

required data, fieldwork was divided into three stages. Subsequently, three different

approaches and research methodologies were designed to collect the relevant data vis-a-

vis the research hypotheses.

6.7.1. Design of Research Stage One

In the first stage of fieldwork plan, a methodology to assess the internal environment for

identifying the risks that can adversely affect the transformation process has been

developed. In this stage, the primary data was collected through self administered

questionnaires. The sampling method, sample size, and data collection process adopted

for this stage are outlined in the subsections below.

6.7.1.1. Sampling Method, Sample Size and Data Collection Process

Sampling is the process of using a small number of items from a large set of data to make

inferences about the large data (Zikmund, 2000). The large number of data set is called

population. In this research, the textile sector is taken as the unit of analysis, so all the

manufacturing units in the textile sector of Pakistan were considered to be the target

population.

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89

The textile sector of Pakistan consists of the ginning, spinning, weaving, and

garments manufacturing sub-sectors. According to the Economic Survey of Pakistan:

2008-2009, there are 1221 ginning units in ginning sector, 521 spinning and composite

units in spinning sector, 1196 weaving, knitting and finishing units in weaving sector, and

1500 garments manufacturing units in garments sector (Ministry of Finance, 2009). Most

of the manufacturing units of the textile sector are the members of various associations

like APTMA, PCFAMEA, PCGA, and PRGMEA, etc. There are some units which have

no affiliation with any association of the textile sector which have been identified in this

research as the ‘independent units’. Sample has been selected only from those units

which had some form of membership or registration with any textile association.

In the cotton ginning and garments manufacturing sub-sectors, 15 units from each

sub-sector were randomly selected, while in the weaving, and spinning sub-sectors, the

manufacturing units have been arranged in a systematic way, and then randomly selected

15 units from different categories of each sub-sector. The systematic arrangement of units

from these sub-sectors is explained in the following paragraphs.

In spinning sub-sector, the spinning units have been divided into two categories.

These two categories were spinning units and composite units. In weaving sub-sector, the

manufacturing units have been divided into three categories. The division was made on

the basis of manufacturing processes. These three categories included the simple weaving

units with looms, knitting units and finishing units. The rationale behind the selection of

15 units was that in each sub-sector or different categories of individual sub-sector, the

manufacturing process was identical. Therefore 15 units as a sample were good enough to

Chapter-6

90

depict the reasonable picture of sub-sector. From the independent units, no manufacturing

unit was selected. The list of sample units is given-out in Appendix-A.

Figure 6.5. Sampling procedure for Research Stage One

Textile Sector of Pakistan

Spinning Sector Units

Weaving/Knitting Sector Units

Garments Sector Units

Spinning Units

Composite Units

Weaving Units Knitting Units

Members of PCGA

Members of APTMA & PCFAMEA

Members ofPRGMEA

Independent/non‐ member units

No Unit Was

Selected

Randomly Selected 15

Units

Ginning Sector Units

Finishing Units


Units


Units


Units


Units


Units


Units

Chapter-6

91

6.7.1.2. Development of the Questionnaire

In the first stage, primary data was collected directly from the units selected as sample.

For collecting the primary data, self-administered questionnaires were employed. The

format of the questionnaire was very simple and is presented in Appendix-B1. It

consisted of five sections ranging from ‘A’ to ‘E’. In section A, the demographic

information about the respondents was collected. The next four sections of the

questionnaire were dedicated to different dimensions of the internal environment of the

manufacturing units for the purpose of highlighting the potential risks.

6.7.2. Design of the Research Stage Two

Stage Two of the fieldwork plan was dedicated to the data collection process of external

and international environments of the textile sector organization. In this stage, different

variables of the external (task and general) and international environments, that can affect

the successful transformation process, were identified. Keeping in view the focus of this

research stage, it was necessary to use the purposive sampling, in which, the purpose is

not to establish a representative sample, but to identify the individuals having context-

specific knowledge and expertise about the issue (Patton, 1990; Gummesson, 1991). In

pursuing this objective, the data was collected through semi-structured interviews of

individuals from four stakeholder groups: politicians, corporate managers, business

owners, and officials from different associations of the textile sector manufacturing units.

A list of the individuals, interviewed the fieldwork is given-out in Appendix-C.

From the politicians, researcher discussed some of the dimensions of external and

international environments like international socio-economic pressures, government

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92

policies, subsidies, energy crisis and the future plans of the Government of Pakistan to

uplift the textile sector. From the business owners and corporate managers, some

important aspects of external environment like inter-organizational coordination, the role

of textile associations, as well as their future plans and understanding of contemporary

problems of the textile sector in Pakistan have been discussed.

6.7.3. Design of the Research Stage Three

This stage was designed to draw the relevant data from governmental and non-

governmental sources. In pursuing this objective, the relevant data produced on the

subject, published by various government and non-governmental sources from 2002 to

2009 has been collected. Some of these included the annual publications of the Economic

Survey of Pakistan by the Federal Ministry of Finance, the trade policy by the Ministry of

Commerce and Trade, and, the Yearly Book of Textile by the Ministry of Textile Industry

etc. Beside these, the relevant information was also retrieved from the websites of All

Pakistan Textile Mills Association (APTMA), the Pakistan Readymade Garments

Manufacturers and Exporters Association (PRGMEA), the Pakistan Cotton Ginning

Association (PCGA), and the Industrial Information Network (IIN) etc.

6.8. Pilot Study

Before conducting the fieldwork, and collection of the required data, a pilot study was

conducted to test the validity of the contents of the questionnaire and the interview. To

conduct the pilot study, three manufacturing units were selected from the Industrial

Estate of Gadoon-Amazai. After that, the required data was collected from five selected

Chapter-6

93

respondents from each unit. These five respondents included one manager, two

operational workers, one engineer and one business owner. Resercher distributed the

questionnaires amongst the workers, managers and engineers and conducted the

interviews of the business owners. The list of three selected sample units for conducting

the pilot study is given-out in Appendix-D.

6.9. Data Analysis

The data related to the internal environment of the textile sector manufacturing units is

analyzed by making use of modes and frequencies. The major purpose of analyzing the

data of internal environment is the identification of internal environmental risks.

Therefore, the questionnaire was designed in such a way that the responses having the

mode of ‘3’ or less than ‘3’ could be considered as risks indicators. Whereas, the data

related to the external and international environments is descriptively analyzed with the

help of graphs, tables and percentages.

The software of Statistical Package for Social Sciences (SPSS-16) is used for

analysis purpose. This package has been specifically designed for social science research;

therefore, it is widely used and recommended by the social science researchers.

6.10. Experience of the Research Context

This research was carried out on four sub-sectors of the textile industry i.e. ginning,

spinning, weaving/knitting/finishing, and garments manufacturing. The organizational

environmental of these sub-sectors differed with respect to the nature of product,

production processes, manufacturing technology, human resource, as well as their

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94

behavior toward organizational research. Spinning and weaving/knitting sub-sectors were

operating on a large-scale while, finishing, ginning, and garments manufacturing were

operating on medium and small scale. The following subsections provide an overview of

my research experience about each sub-sector.

6.10.1. Ginning Sub-sector

The ginning sub-sector is scattered around the regions where cotton is grown like Multan,

Bahawalpur, Raheem Yar Khan, Nawabshah and Larkana. Most of the production units

of ginning sub-sectors were operating on a small-scale. They were using the similar

technology for ginning purposes. The technology being used for the ginning was locally

made and very outdated. Therefore, this sector is practically unable to produce the quality

lint. Relative to the other sub-sectors, ginning is the most neglected sector of the textile

industry. To improve the performance of this sub-sector, no policy has been developed by

the Government of Pakistan during the last two decades.

Due to the similarity of work and production technology, required data was

collected from randomly selected fifteen units. Most of the employees of selected units

were illiterate and unable to understand the questionnaire. To collect the relevant data,

initially the questionnaire was translated into Urdu language, and then asked the

respondents to respond to the questions. The format of the questionnaire in Urdu

Language is given-out in Appendix-B2. The second problem that researcher faced during

fieldwork was the behavior of the top-level executives, who were reluctant to access the

workers for the purpose of data collection. Therefore, the data collection process was

quite demanding in the ginning sub-sector.

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95

6.10.2. Spinning Sub-sector

Spinning is the largest sub-sector of the textile industry. Technologically, this sub-sector

is more advanced, and the manufacturing units within this sub-sector are operating on a

large-scale. The most important aspect of this sub-sector is the proper organizational

structure of its manufacturing units. Most managers and executives in this sub-sector

were highly qualified and had the idea of the research initiative that researcher had

undertaken.

The data collection process in the spinning sub-sector was time consuming

activity. To collect the fieldwork data, it was necessary to take the consent of the owners

or top-level executives of the units, and most of the owners and top-level executives were

not ready for that. Secondly the offices and production units were located at two different

regions e.g. in the case of one spinning mill, its head office was located in Gulberg

Lahore, while the production unit was established in Faisalabad. For collecting the data in

Faisalabad, I had to visit the city of Lahore to take consent from the head office.

In the spinning sub-sector, the data was collected by distributing the

questionnaires as well as by conducting the semi-structured interviews. Besides the above

mentioned challenges, the overall behavior of this sub-sector was encouraging and

helpful to conduct the research.

6.10.3. Weaving/Knitting and Finishing Sub-sector

Weaving sub-sector exists around the cities of Lahore, Faisalabad and Sheikhupura. Most

of the units in weaving/knitting sub-sector were operating at medium and large scale,

while finishing sub-sector was operating at medium-scale. Most of the managers of

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96

weaving and knitting units were experienced, and were involved in applying the

contemporary techniques of fabrics manufacturing. On the other hand, most of the

operational workers and first-line managers were illiterate and were unable to understand

the questionnaire.

In this sub-sector, the data collection was fairly challenging. Due to energy crisis

and shortage of yarn, most of the sample units were operating at minimum level.

Therefore, the average workforce working at the time of fieldwork was very low. During

the fieldwork in this sub-sector, researcher had faced the same problem as discussed in

the subsection of ginning, that most of the workers were reluctant to fill the

questionnaire, because of the problem of understanding the English language. Therefore,

to collect the required data, the questionnaires were translated into Urdu language before

the respondents; then they responded to the questions accordingly.

6.10.4. Garments Sub-sector

This sub-sector is located around the cities of Lahore and Karachi. Most of the units in

this sub-sector were operating at the small and medium scale. The majority of the

manufacturing units in this sub-sector was well organized and was successfully exporting

their products in the international market, and generating huge amount of foreign reserves

for Pakistan. During the fieldwork, researcher faced the same problems as discussed in

the subsections of ginning, spinning and weaving sub-sectors.

Chapter-6

97

6.11. Ethical Considerations

Ethical Considerations are significant for any research inquiry. From designing the

research questions to an appropriate research methodology as well as interpretation of

findings, it is necessary for the researcher to consider the research ethics of every stage.

In the following paragraph, the ethical practices observed during this research are

discussed.

During the fieldwork, purpose of the research was explained to the respondents so

that they can understand the nature of research and its possible impacts upon them. The

participation of the respondents was voluntary and individuals were not coerced into

participation. The information gathered through fieldwork was kept confidential and any

information gathered from one stakeholder was not shared with any other stakeholder.

Researcher also tried my level best not to discuss the sensitive issues like gender,

ethnicity, and religion etc. especially while collection data from the female respondents.

6.12. Conclusion

This chapter was based on the methodology used in this research. This chapter discussed

the important activities of research like the identification of research problem,

development of research hypothesis, theoretical framework, research plan, and pilot

study. After discussing the research methodology, the next chapter explains the

procedures and results of data analysis.

PART FOUR: RESEARCH DATA ANALYSIS AND RESULTS

CHAPTER SEVEN

Analysis of Internal Environment

7.1. Introduction

The data collected for any empirical research remains ineffective unless some useful

analytical techniques are applied on it to extract the relevant information. For this

purpose, data collected through questionnaires related to the internal environment of the

textile sector manufacturing units was analyzed by making use of statistical techniques.

The application of these statistical techniques presents the data in the form of averages,

and frequencies. The results obtained from the application of these techniques were used

to understand the problem, and the recommendations on the basis of these are outlined in

Chapter Nine.

Survey method was adopted in the Stage One of the fieldwork, in which

questionnaires were distributed amongst the categories of workforce in different sub-

subsectors of the textile industry.

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99

7.2. Analysis of the Selected Sample

In the Research Stage One, 525 questionnaires were distributed amongst the respondents

in the selected sample of 105 manufacturing units of the textile sector. The criteria for the

selection of sample size have already been discussed in Chapter Six. The response rate of

the questionnaires was 18.60 percent. On the whole, 98 questionnaires were returned,

partially or fully filled in by the respondents. For the collection of data, technical and

administrative support was provided by APTMA (Peshawar and Lahore offices), APTA

(Faisalabad office), PRGMEA (Lahore office), and PCGA (Multan office).

7.2.1. The Response Rate of Employees in Each Sub-sector

In the Stage One, data collection process was carried out in all the sub-sectors of the

textile industry. The relative proportion of each sub-sector according to the response rate

of its members is presented in Figure 7.1.

Figure 7.1. Proportion of each sub-sector relating to response rate of its employees

18.7

39.8

20.41

18.37 Ginning

Spinning/Composite

Weaving/Knitting/Finishing

Garments

Chapter-7

100

Figure 7.1 reveals that 18.7 percent respondents were from the ginning sub-sector,

while the respondents from spinning\composite sub-sector were 39.80 percent.

Proportions of the respondents from weaving\knitting\finishing and garments

manufacturing sub-sectors were 20.41 percent and 18.37 percent, respectively.

7.2.2. Classification of the Respondents According to the Nature of Job

In order to minimize the margin of error, relevant data was collected from the employees

at various levels of manufacturing unit i.e. manager, executives, and technical as well as

operational workers. Their relative proportion in this survey is presented in Figure 7.2.

Figure 7.2. Classification of respondents according to the nature of job

Figure 7.2 reveals that 14.29 percent respondents were top-level executives, while

33.67 percent were middle-level managers. On the other hand, technical staff was 8.16

percent, while operational-level workers were 43.88 percent of the total respondents.

14.29

33.67

8.16

43.88

Top Level Executives

Middle Level Managers

Technical Staff

Operational Staff

Chapter-7

101

7.2.3. Classification of the Respondents According to the Levels of Education

Qualification of the respondents was also analyzed in this research. Their classification

according to the level of education is presented in Figure 7.3.

Figure 7.3. Classification of respondents according to their education level of education

The Figure 7.3 reveals that 37.76 percent respondents were illiterate, while, 11.22

were under-graduate. Besides, the 17.35 percent respondents had graduate-level

education, and 33.67 percent respondents had qualification at the postgraduate-level.

7.2.4. Classification of the Respondents According to Their Job Experience

To make this research more productive and generalized, it was necessary to analyze the

job related experience of the workforce. This practice was necessary for balanced

assessment of the subject matter. The classification of the respondents according to their

relevant work experiences is given out in Table 7.1.

37.6

11.2

17.35

33.67

0

5

10

15

20

25

30

35

40

Illiterate Under‐graduate Graduate Post‐graduate

Chapter-7

102

Table 7.1. Classification of the Respondents According to Their Job Experience

Experience

Percent (%)

Valid Percent

Cumulative Percent

Up to 2 years 25.50 25.50 25.50

Up to four years 34.70 34.70 60.20

Up to six years 26.50 26.50 86.70

Up to eight years 4.10 4.10 90.80

More than eight years 9.20 9.20 100

Total 100 100 100

Table 7.1 indicates that most of the respondents could be categorized as

experienced. There were around 25.50 percent respondents with two years or lesser than

two years of experience, and 34.70 percent respondents with up to four years of work

experience. The workforce with more than four years of work experience accounted for

40.50 percent of the respondents.

7.2.5. Classification of the Respondents According to the Daily Work-hours

Work hours per day served as another basis to categorize the work force of the textile

sector. A classification of the respondents according to their work-hours per day is

presented in Table 7.2.

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103

Table 7.2. Classification of the Respondents According to Their Daily Work-hours

Work-hours

Percent Valid Percent Cumulative Percent

Eight hours a day 92.90 92.90 92.90

More than Eight hours a day

7.10 7.10 100

Total 100 100

Table 7.2 indicates that 92.90 percent respondents of this survey worked for eight

hours a day, while, the remaining 7.10 percent respondents worked for more than eight

hours a day.

7.3. Descriptive Statistics

To identify the potential risks in the internal environment of the textile sector

manufacturing units, all the responses in the questionnaire have been analyzed by using

statistical techniques of the mode, and corresponding frequencies as given out in Table

7.3. The mode shows the most frequent response to each question.

Table 7.3. Mode and Frequency of Different Responses against Each Question

Q. No Questions N Mode Frequencies

Q.\B1 Do the top-level executives and other administrative staff in this manufacturing unit ever talk to you regarding the problems of this unit?

91 1

Never 33

Rarely 12

Some time 19

Often 17

Always 10

Q.\B2 Do you think that the behavior of managers in this manufacturing unit is the same with all the workers?

87 4

Never 22

Rarely 17

Some time 14

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104

Often 30

Always 4

Q.\B3 Do you have trust in your management? 89 4

Never 1

Rarely 2

Some time 23

Often 43

Always 17

Q.\B4 Does the management motivate you to achieve the goals of this manufacturing unit?

88 2

Never 9

Rarely 29

Some time 19

Often 21

Always 10

Q.\B5 Do you think that the jobs in this manufacturing unit are clearly defined, and everyone is doing his\her specialized work?

93 4

Never 1

Rarely 3

Some time 8

Often 43

Always 38

Q.\B6 Are you satisfied with the human resource practices in this manufacturing unit e.g. hiring, firing, promotions, and disciplinary matters etc?

93 1

Never 41

Rarely 3

Some time 2

Often 39

Always 8

Q.\B7 Have you received any training during your job in this manufacturing unit whenever the changes are implemented in your area of work?

92 1

Never 47

Rarely 6

Some time 12

Often 5

Always 22

Q.\B8 Did you receive any rewards for better performance?

91 2

Never 18

Rarely 35

Some time 18

Often 16

Always 4

Q.\B9 Do you think that this manufacturing unit rewards only those employees who really deserve it?

91 4

Never 9

Rarely 12

Some time 28

Often 29

Always 13

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Q.\B10 Do the managers in this manufacturing unit follow any standard procedures in monitoring all operations?

93 4

Never 3

Rarely 18

Some time 23

Often 33

Always 16

Q.\B11 How often do the management and employees find a solution to the problems without any conflicts?

94 4

Never 8

Rarely 4

Some time 6

Often 45

Always 31

Q.\B12 Does the management negotiate with employees and accept their demands if conflicts arise?

94 2

Never 7

Rarely 25

Some time 25

Often 16

Always 21

Q.\B13 Does this manufacturing unit treat all the employees equally and justly?

94 4

Never 1

Rarely 5

Some time 28

Often 34

Always 26

Q.\C1 Do you think that the work of this manufacturing unit is of routine nature?

94 5

Never 0

Rarely 1

Some time 4

Often 23

Always 66

Q.\C2 Is there any difference in the production and operations of this manufacturing unit and the other units working in this sub-sector?

92 4

Never 35

Rarely 4

Some time 2

Often 42

Always 9

Q.\C3 Does the top management consult you, whenever it chooses to make important decisions?

96 1

Never 46

Rarely 15

Some time 9

Often 11

Always 15

Q.\C4 Does the top management consult you, whenever a problem arises in your area of work?

96 5

Never 24

Rarely 12

Some time 7

Often 15

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Always 38

Q.\C5 Do you know the vision, mission or primary objectives of this manufacturing unit?

96 1

Never 45

Rarely 23

Some time 10

Often 3

Always 15

Q.\C6 Do you think that you have all the necessary information required to perform your work?

95 5

Never 1

Rarely 2

Some time 5

Often 33

Always 54

Q.\C7

Do you have informal relationships with the other workers working in your department, or other department of this manufacturing unit?

96 4

Never 10

Rarely 17

Some time 9

Often 31

Always 29

Q.\D1 Do you think that this manufacturing unit utilizes its existing technology efficiently?

94 3

Never 1

Rarely 20

Some time 36

Often 21

Always 16

Q.\D2

Have you ever experienced any technological changes taking place in this manufacturing unit since you started your job?

91 4

Never 4

Rarely 22

Some time 29

Often 35

Always 1

Q.\D3 Do you feel that there is a need for technological changes to make your work more efficient?

91 3

Never 2

Rarely 15

Some time 42

Often 31

Always 1

Q.\D4 Are the technological problems solved immediately after they arise?

90 5

Never 0

Rarely 1

Some time 7

Often 30

Always 52

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Q.\D5

Do you ever use the means of information and communication technology like mobile phones, landline phone, fax, internet or intranet in the daily business operations?

98 1

Never 52

Rarely 17

Some time 11

Often 6

Always 12

Q.\D6 Does this manufacturing unit have any business relationship with the other similar units?

76 4

Never 12

Rarely 15

Some time 22

Often 23

Always 4

Q.\E1 Have you ever experienced any organizational change in this unit since you started your job?

90 4

Never 3

Rarely 10

Some time 27

Often 41

Always 9

Q.\E2 Were the changes implemented previously in this manufacturing unit mostly related to the human resource?

91 3

Never 1

Rarely 19

Some time 36

Often 26

Always 9

Q.\E3 Do you feel the need for structural changes in this manufacturing unit?

88 3

Never 0

Rarely 2

Some time 48

Often 35

Always 3

Q.\E4 If the top management demands a change in your job related behavior, would you accept that?

84 4

Never 0

Rarely 3

Some time 11

Often 41

Always 29

Q.\E5 If a change effort does not negatively affect your present position, would you be ready to cooperate for it?

84 4

Never 0

Rarely 0

Some time 3

Often 42

Always 39

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Q.\E6

If you do not understand the purpose of change, but you trusts the top management, would you be ready to change your behavior as desired by the top management?

84 5

Never 14

Rarely 9

Some time 9

Often 26

Always 27

Q.\E7 Would you perform better if paid more than what you are earning now?

86 3

Never 3

Rarely 15

Some time 39

Often 20

Always 9

Q.\E8 Do you work independently i.e. your co-workers do not force you to behave in a certain specific manner?

86 5

Never 0

Rarely 2

Some time 1

Often 30

Always 53

Q.\E9 Does this manufacturing unit have any external source of finance that it can use at the time of crisis?

27 4

Never 0

Rarely 0

Some time 3

Often 12

Always 12

Q.\E10 Does this unit retain a part of its profits to cover the contingencies?

20 5

Never 2

Rarely 1

Some time 5

Often 2

Always 10

In this stage, the internal environment of the textile sector manufacturing unit was

analyzed. In this stage, the primary objective was to identify the areas which could affect

the process of successful transformation. To collect the required data, the five point

Likert Scale, ranging from ‘1’ to ‘5’ was used, where ‘1’ represented ‘Never’ and ‘5’

represented ‘Always’.

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In Table 7.3, the corresponding frequencies of different responses against each

question have been calculated, out of which the modes have been calculated. The mode

provides the most frequent response against each question. In the Likert Scale, the

responses that have a mode value of ‘3’ or lesser than ‘3’ as already discussed in Chapter

Six are considered as the risk indicators.

In Table 7.4, potential risk indicators are identified using the results of modes.

Successful transformation in the textile sector might not have been possible without

improving the key areas related with these indicators of risks. Therefore, these variables

justify the claim of this research that there is an inverse relationship between internal

environmental risks and organizational transformation, and positive relationship between

internal environmental risks and organizational inertia. In next subsection these areas are

further analyzed through cross-tabulation method.

Table 7.4. Key Indicators of Risks Involved in Successful Transformation

Key Areas Dimensions Mode

Leadership and Human Resource Management

Q.\B1 1

Q.\B4 2

Q.\B6 1

Q.\B7 1

Q.\B8 2

Q.\B12 2

Organizational Structure Q.\C3 1

Q.\C5 1

Technology

Q.\D1 3

Q.\D3 3

Q.\D5 1

Organizational Change

Q.\E2 3

Q.\E3 3

Q.\E7 3

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7.4. Analyses of the Important Questions through Cross Tabulation

This subsection analyzes the key risk indicators identified in Table 7.4. For this purpose,

cross-tabulation method is used. In cross-tabulation method, the frequency table shows

the results of the tabulation at each level of observation (Forthofer & Lee, 1995). In the

following subsections, key risk indicators are cross-tabulated on the basis of the nature of

work and sub-sectors of the textile industry.

7.4.1. Analysis of Question “B1”

For the question “B1”, there was a significant difference between the responses of work

force. Table 7.5 reveals that 36.30 percent respondents held the view that the

organizational problems were never discussed with them, out of these respondents, 35.20

percent were operational-level workers. Whereas, 13.20 percent responded that

organizational problems were rarely discussed with them. Most of the managers and

executives responded that organizational problems were mostly discussed with them.

Table 7.5 (A&B). Percentage Responses of the Question “B1” on the Basis of the

Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total

Ginning Spinning Weaving\Knitting Garments

Never 7.70% 14.30% 9.90% 4.40% 36.30%

Rarely 2.20% 4.40% 2.20% 4.40% 13.20%

Some Times

6.60% 7.70% 3.30% 3.30% 20.90%

Often 2.20% 9.9% 3.30% 3.30% 18.70%

Always 3.30% 1.10% 6.60% 11.00%

Total 18.70% 39.60% 19.80% 22.00% 100.00%

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(B)

Nature of work Total

Executive Managerial Technical Operational

Never 1.10% 35.20% 36.30%

Rarely 3.30% 3.30% 6.60% 13.20%

Some Times

15.40% 3.30% 2.20% 20.90%

Often 1.10% 12.10% 2.20% 3.30% 18.70%

Always 9.90% 1.10% 11.00%

Total 11.00% 33.00% 8.80% 47.30% 100.00%

In the textile sector of Pakistan, top management was found to be reluctant to

discuss the organizational problems with employees. The structure of the textile sector

could be the possible reason behind it, in which most of the executives were also the

owners of the manufacturing units. Therefore, it was their general practice to take the

critical decisions without consulting the organizational employees.


In question “B4” there was a significant difference among the responses of workforce.

Table 7.6 reveals that 43.20 percent respondents were never or rarely motivated to

achieve the organizational goals. Whereas, 21.60 percent responded that they were not

motivated on regular basis to achieve the organizational goals. 35.30 percent respondents

held the view that the top management uses motivation tools to achieve the

organizational goals and objectives; most of these respondents were managers.

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Table 7.6 (A&B). Percentage Responses of the Question “B4” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 10.20% 10.20%

Rarely 8.00% 12.50% 6.80% 5.70% 33.00%

Some Times

2.30% 4.50% 6.80% 8.00% 21.60%

Often 8.00% 9.10% 5.70% 1.10% 23.90%

Always 1.10% 2.30% 1.10% 6.80% 11.30%

Total 19.30% 38.70% 20.50% 21.60% 100.00%

(B) Nature of work

Total Executive Managerial Technical Operational

Never 1.10% 9.10% 10.20%

Rarely 4.50% 2.30% 26.10% 33.00%

Some Times

10.20% 3.40% 8.00% 21.60%

Often 1.10% 13.60% 3.40% 5.70% 23.90%

Always 6.80% 4.50% 11.40%

Total 8.00% 34.10% 9.10% 48.90% 100.00%

In the textile sector, most of the employees, especially at operational and technical

levels, were not motivated to achieve the organizational objectives, which was a great

risk for successful transformation. There were few reasons behind this problem; some

include high employee’s turnover, and no formal job agreement etc.


In question “B6” there was a significant difference among the responses, 49.4 percent

respondents were not satisfied, while 50.6 percent were satisfied with the human resource

practices in the textile sector of Pakistan. Some of the reasons behind this dissatisfaction

included no job security, lesser bonuses and rewards; comparatively more work hours, no

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weekend breaks, no fringe benefits, as well as marginal salaries. On the other hand,

managers and executives were enjoying high salaries, high fringe benefits and moderate

work hours. Therefore, the members of executive and managerial class were satisfied

with their jobs.


(A)

Sub-sectors Total


Never 11.00% 17.00% 7.60% 8.50% 44.10%

Rarely 1.10% 2.10% 8.60% 3.20%

Some Times

2.10%

2.10%

Often 9.20% 22.0% 3.20% 7.50% 41.9%

Always 1.20% 5.30% 1.10% 1.10% 8.6%

Total 19.40% 38.80% 19.40% 22.60% 100.00%

(B) Nature of work


Never 2.20% 12.10% 29.80% 44.10%

Rarely 3.2% 3.20%

Some Times

2.10%

2.10%

Often 30.70% 8.10% 3.10% 41.9%

Always 7.2% 1.40% 8.6%

Total 11.80% 33.30% 8.60% 46.20% 100.00%

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In question “B7” there was a significant difference among the responses, 51.80 percent

respondents had not received any training during their whole work-life. Most of the

employees responded that, the practice of employee training did not exist in the textile

sector of Pakistan. In most of the sub-sectors, especially in spinning, ginning and

garments manufacturing, trainings was not provided to employees because of the routine

nature of their work. This would be a great risk for successful transformation. In

transformational change, there is a continuous need to develop the workforce. On the

other hand, there were few units in the textile sector, that I visited during my fieldwork,

which initiated the training programs for managers and operational-level workers e.g.

Interloop Private Limited.


(A)

Sub-sectors Total


Never 15.00% 21.20% 9.40% 6.40% 51.80%

Rarely 1.20% 3.40% 1.90% 6.50%

Some Times

3.20% 5.20% 4.40% 1.10% 13.00%

Often 4.10% 1.30% 5.40%

Always 13.70% 6.30% 3.30% 23.3%

Total 19.60% 39.20% 19.60% 21.70% 100.00%

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(B) Nature of work


Never 2.80% 8.70% 40.30% 51.80%

Rarely 4.30% 2.20% 6.50%

Some Times

8.20% 4.80%

13.00%

Often 1.80% 2.10% 1.50% 5.40%

Always 15.10% 5.70% 2.50% 23.3%

Total 10.90% 33.70% 8.70% 46.70% 100.00%


In question “B8” there was no significant difference amongst the responses. Employees

except executives and top-level managers were not rewarded with the rewards for doing

comparatively better job. 78.10 percent responded that they were never or some time

rewarded with extra benefits. Therefore, there was no source of motivation for most of

the employees. However, there was a general practice of granting annual bonus to

employees in the textile sector of Pakistan. These bonuses were granted to employees

irrespective of their work and efficiency.


(A)

Sub-sectors Total


Never 2.20% 13.20% 1.10% 3.30% 19.80%

Rarely 5.50% 16.50% 6.60% 9.90% 38.50%

Some Times

8.80% 3.30% 5.50% 2.20% 19.80%

Often 2.20% 4.40% 5.50% 5.50% 17.60%

Always 2.20% 1.10% 1.10% 4.40%

18.70% 39.60% 19.80% 22.00% 100.00%

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(B) Nature of work


Never 1.10% 5.50% 2.20% 11.00% 19.80%

Rarely 11.00% 5.50% 22.00% 38.50%

Some Times

1.10% 11.00% 1.10% 6.60% 19.80%

Often 5.50% 06.60% 5.50% 17.60%

Always 2.20% 2.20% 4.40%

9.90% 34.10% 8.80% 47.30% 100.00%


In question “B12” there was a significant difference among the responses. 60.60 percent

respondents especially operation-level workers responded that top management do not

negotiate with employees in most of the cases, and are reluctant to accept their rational

demands at the time of conflict. The reasons of this could be the same as discussed

previously, which include short working life, and conservative approaches of executives

and corporate owners. On the other hand, 39.30 percent responded that management

negotiates with them at the time of conflict. Most of these respondents were executives

and top-level managers.


(A)

Sub-sectors Total


Never 4.30% 3.20% 7.40%

Rarely 7.40% 9.60% 5.30% 4.30% 26.60%

Some Times

3.20% 12.70% 4.30% 6.40% 26.60%

Often 1.10% 6.40% 6.40% 3.20% 17.00%

Always 3.20% 7.50% 3.20% 8.50% 22.30%

Total 19.10% 39.30% 19.10% 22.30% 100.00%

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(B) Nature of work


Never 1.10% 6.40% 7.40%

Rarely 6.40% 3.20% 17.00% 26.60%

Some Times

8.50%

18.10% 26.60%

Often 8.50% 4.30% 4.30% 17.00%

Always 12.80% 8.50% 1.10% 22.30%

Total 12.80% 33.00% 8.50% 45.70% 100.00%

7.4.7. Analysis of Question “C3”

In question “C3” there was no significant difference amongst the respondents. 72.90

percent responded that mostly executives and top-level managers are consulted at the

time of making important decisions. For example, in the Anum Weaving Mills, Lahore,

visited during my fieldwork, the owners of the unit had decided to stop the production

and close the mills immediately. Only a few top-level executives were consulted before

making this decision. The reason of this behavior was that the owners were acting as

executives as well, and they did not want to consult the workers including first-line

managers at the time of making this decision.

Table 7.11 (A&B). Percentage Responses of the Question “C3” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 11.50% 19.80% 12.50% 4.20% 47.90%

Rarely 8.40% 2.10% 5.20% 15.60%

Some Times

4.20% 2.00% 1.00% 2.10% 9.40%

Often 2.10% 4.20% 2.10% 3.10% 11.50%

Always 1.00% 5.20% 3.10% 6.20% 15.60%

Total 18.80% 39.60% 20.80% 20.80% 100.00%

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(B) Nature of work


Never 8.30% 1.00% 38.50% 47.90%

Rarely 7.30% 5.20% 3.10% 15.60%

Some Times

6.20% 1.00% 2.10% 9.40%

Often 1.00% 8.30% 1.00% 1.00% 11.50%

Always 11.50% 4.20% 15.60%

Total 12.50% 34.40% 8.30% 44.80% 100.00%

7.4.8. Analysis of Question “C5”

In question “C5” there was no significant difference among the responses. 81.30 percent

respondents including managers and executives in most of the sub-sectors did not know

about the vision of the organization. This was also the result of conservative approaches

of the owners as discussed earlier. They were doing business with conservative mentality

of the “Sotar Gali”1, which was to increase profit at any cost. They do not consider the

modern approaches of doing business, and were not ready to adopt new forms of

structures and business portfolios. Therefore, in most of the production units,

organizational vision was not yet developed. The detailed analysis of the responses of the

workforce is presented in Table 7.12.

1 Sotar Gali is a traditional bazaar of Faisalabad, famous for textile and textile related product like cotton, and yarn etc. It is a Punjabi language phrase meaning “the yarn street” Most of the giants of the textile business in Pakistan had started their business from this place. They had started their operation with a few spindles or traditional weaving machines. With the passage of time they expanded their business, but their approaches and techniques of doing business have remained the same as they had in Sotar-Gali.

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Table 7.12 (A&B). Percentage Responses of the Question “C5” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 13.50% 19.80% 6.20% 7.30% 46.90%

Rarely 4.20% 7.30% 6.20% 6.20% 24.00%

Some Times

7.30% 2.10% 1.00% 10.40%

Often 1.00% 1.00% 1.00% 3.10%

Always 1.00% 3.10% 5.20% 6.20% 15.60%

Total 18.80% 38.60% 20.80% 21.90% 100.00%

(B) Nature of work


Never 9.40% 3.10% 34.40% 46.90%

Rarely 2.10% 7.30% 4.20% 10.40% 24.00%

Some Times

9.40% 1.00%

10.40%

Often 3.10% 3.10%

Always 11.50% 4.20% 15.60%

Total 13.50% 33.30% 8.30% 44.80% 100.00%

7.4.9. Analysis of Question “D1”

In the textile sector of Pakistan, most of the units were not efficiently using the available

technology. There were many reasons behind it. These were identified as the problem of

power shortage, scarcity of raw material, and inefficient workforce etc. 60.70 percent

respondents including executives and managers of different sub-sectors as presented in

Table 7.13 responded that their organization was not using its technological resources

efficiently. This would be a great risk for successful transformation.

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Table 7.13 (A&B). Percentage Responses of the Question “D1” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 1.10% 1.10%

Rarely 16.00% 4.30% 1.10% 21.30%

Some Times

13.80% 14.90% 8.50% 1.10% 38.30%

Often 4.30% 1.10% 4.30% 12.80% 22.30%

Always 1.10% 6.40% 2.10% 7.40% 17.00%

Total 19.10% 39.30% 19.10% 22.30% 100.00%

(B) Nature of work


Never 1.10% 1.10%

Rarely 2.10% 3.20% 2.10% 13.80% 21.30%

Some Times

1.10% 13.80% 2.10% 21.30% 38.30%

Often 10.60% 2.10% 9.60% 22.30%

Always 10.60% 4.30% 2.10% 17.00%

Total 13.80% 33.00% 8.50% 44.70% 100.00%


Table 7.14 reveals that 80 percent respondents (including executives and managers)

responded that there is a strong need to improve the existing technology of their

manufacturing units. Although, there was a gradual increase in investment to upgrade the

existing technology of the textile sector especially in spinning sub-sector, however, its

ginning and weaving sub-sectors were still underdeveloped. They were using

conventional technologies for ginning and weaving. Therefore, there is a strong need to

improve the technologies in these sub-sectors.

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(A)

Sub-sectors Total


Never 1.10% 1.10% 2.20%

Rarely 9.90% 5.50% 1.10% 16.50%

Some Times

12.10% 14.30% 8.80% 11.00% 46.20%

Often 7.70% 10.90% 5.50% 9.90% 34.10%

Always 1.10% 1.10%

Total 19.80% 37.3% 19.80% 23.10% 100.00%

(B) Nature of work


Never 1.10% 1.10% 2.20%

Rarely 3.30% 7.70% 1.10% 4.40% 16.50%

Some Times

5.50% 16.50% 4.40% 19.80% 46.20%

Often 3.30% 9.90% 3.30% 17.60% 34.10%

Always 1.10% 1.10%

Total 13.20% 34.10% 8.80% 44.00% 100.00%


Information and communication technology (ICTs) is a prerequisite for successful

transformation. The results of this survey show that there is a marginal use of ICTs in the

business operations of the textile sector. 81.60 percent respondents including managers

and executives do not use ICTs in their business operations. To achieve the targets of

successful transformation, fast and relevant flow of information using ICTs is essential.

Therefore, insignificant use of ICTs in the textile sector is a great risk for successful

transformation.

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(A)

Sub-sectors Total


Never 10.20% 19.40% 13.30% 10.20% 53.10%

Rarely 2.00% 6.10% 3.10% 6.10% 17.30%

Some Times

2.00% 4.10% 1.00% 4.10% 11.20%

Often 2.00% 3.00% 1.00% 6.10%

Always 2.00% 7.10% 2.00% 1.00% 12.20%

Total 18.40% 39.80% 20.40% 21.40% 100.00%

(B) Nature of work


Never 1.00% 7.10% 6.10% 38.80% 53.10%

Rarely 4.10% 9.20% 2.00% 2.00% 17.30%

Some Times

2.00% 7.10%

2.00% 11.20%

Often 1.00% 4.10% 1.00% 6.10%

Always 6.10% 6.10% 12.20%

Total 14.30% 33.70% 8.20% 43.90% 100.00%

7.4.12. Analysis of Question “E2”

In question “E2” there was no significant difference among the responses, 78.10 percent

respondents held the view that changes implemented in their industry previously were

mostly human in nature. The problem of high turnover mostly existed in spinning sub-

sector. There was a common practice called “Jobbers” in which there is a group of

employees attached with one group leader. If any employee suffered due to any reason,

then all the members of his\her group were not ready to work with the employer, and the

whole group shifted to the new location. This practice was a major cause of bad

personnel culture in spinning sub-sector. Especially for a transforming organization, high

turnover rate is an indicator of failure; therefore, it should be handled with appropriate

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123

management efforts. The percentage of responses in different sub-sectors and different

types of workforce is presented in the Table 7.16.

Table 7.16 (A&B). Percentage Responses of the Question “E2” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 1.10% 1.10%

Rarely 1.10% 13.20% 3.30% 3.30% 20.90%

Some Times

5.50% 5.50% 9.90% 13.20% 39.60%

Often 12.10% 9.90% 6.60% 5.50% 28.60%

Always 9.90% 9.90%

Total 19.80% 38.5% 19.80% 22.00% 100.00%

(B) Nature of work


Never 1.10% 1.10%

Rarely 5.50% 7.70% 3.30% 4.40% 20.90%

Some Times

3.30% 9.90% 4.40% 16.50% 34.10%

Often 14.30% 1.10% 18.70% 34.10%

Always 1.10% 1.10% 7.70% 9.90%

Total 11.00% 33.00% 8.80% 47.30% 100.00%


In this survey, most of the respondents (about 96.60 percent) especially in ginning and

weaving sub-sectors, responded that management should implement some changes in

organizational dimensions as organizational structure, technology, and human resource

practices etc. Therefore, there is a need to analyze the rational demands of workforce;

otherwise successful transformation would be a difficult task.

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Table 7.17 (A&B). Percentage responses of the Question “E3” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Rarely 2.20% 2.30%

Some Times

14.80% 19.30% 10.20% 10.20% 54.50%

Often 5.70% 13.60% 8.00% 12.50% 39.80%

Always 1.10% 2.30% 3.40%

Total 20.50% 36.40% 20.50% 22.70% 100.00%

(B) Nature of work


Rarely 1.10% 1.10% 2.30%

Some Times

5.70% 17.00% 5.70% 26.10% 54.50%

Often 5.70% 13.60% 3.40% 17.00% 39.80%

Always 1.10% 2.30% 3.40%

Total 12.50% 33.00% 9.10% 45.50% 100.00%


The findings of this survey demonstrate that the employees were not satisfied with the

human resource practices of managers in the textile sector of Pakistan. Therefore, they

were not working at their optimum performance level. However, they argued that they

could improve their performance if some incentives would have been provided to them.

Table 7.18 indicates that 79.10 percent respondents were not working on their optimum

capacity (they were mostly technical and operational workers). On the other hand, there

was a significant difference among the responses of executives and operational worker.

Most of the executives responded that they were performing at their best possible level;

therefore, they could not improve their performance with higher rewards.

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Table 7.18 (A&B). Percentage Responses of the Question “E7” on the Basis of the Nature of Work and Sub-sectors of the Textile Industry

(A)

Sub-sectors Total


Never 2.40% 1.20% 3.50%

Rarely 1.20% 8.30% 4.70% 3.50% 17.40%

Some Times

9.30% 15.10% 11.60% 9.30% 45.30%

Often 7.00% 8.10% 1.20% 7.00% 23.30%

Always 2.30% 5.90% 2.30% 10.50%

Total 19.80% 30.50% 20.90% 19.80% 100.00%

(B) Nature of work


Never 1.20% 2.30% 3.50%

Rarely 3.50% 9.30% 3.50% 1.20% 17.40%

Some Times

1.20% 11.60% 5.80% 26.70% 45.30%

Often 5.80% 17.40% 23.30%

Always 5.80% 4.70% 10.50%

Total 5.80% 34.90% 9.30% 50.00% 100.00%

7.5. Conclusion

In this chapter, the internal environment of the textile sector has been analyzed. The

various environmental risks that could adversely affect the transformation process were

the focal points of discussion. There were three research hypotheses (3, 4, and 5; as

mentioned in Chapter Six, subsection 6.3), related to the internal environment of the

textile sector. After the analysis of internal environment, it is relatively easier to justify

the research claim that internal risks have an inverse relationship with successful

transformation and a direct relationship with organizational inertia. Due to the positive

relationship between inertia and risks in the internal environment, the relationship

between successful transformation and organizational inertia is negative.

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126

After justifying the relationship between internal environmental risks, inertia, and

organizational transformation, the three hypotheses in the research design have been

proved. In the following chapter of data analysis, it has been attempted to analyze the

organization’s external and international environments.

CHAPTER EIGHT

Analysis of External Environment

8.1. Introduction

In the second stage of analysis, the data related to external and international environments

of the textile sector manufacturing units is analyzed. This stage presents the results of

semi-structured interviews that were conducted to obtain the relevant data from corporate

owners, top-level executives, politicians, and officials of the associations of

manufacturing units in the textile sector. Beside this, the relevant data collected from the

material produced on the subject, by different government and non-government sources,

during the period of 2002-09 has been analyzed as well.

The techniques of descriptive statistics are used in the form of pie-chart, and

percentages to present the results of the collected data. The tables, graphs, and figures are

also used to analyze and interpret the results of the data.

8.2. Analysis of the Selected Sample

To collect the required data for this stage, 30 individuals were selected for semi-

structured interviews. These included the top-level executives, corporate owners, officials

of various textile associations, and politicians. Initially, the response rate was very low,

and after several reminders, only 13 persons gave their consent for the interview. The

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128

number of respondents and their respective positions are presented in the form of a pie

chart in Figure 8.1 below.

Figure 8.1. Classification of the respondents according to their respective positions

8.3. Descriptive Statistics

After detailed discussions with the respondents, seven key risk indicators have been

identified that could adversely affect the process of transformation change in the textile

sector of Pakistan. These seven risk indicators with their respective percentage of

responses are presented in Table 8.1.

2

5 3

3

Politicians

Top-level Executives

Business Owners

Officials of Associations

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129

Table 8.1. External and International Environmental Risks

S.No Problem Area % In-favor

% Against

1. High Interest Rates 77.0 23.0

2. Energy Shortage 100 0.0

3. Terrorism 100 0.0

4. Negative Image Portrayed by International Media

61.0 39.0

5. Political Instability in the Country 46.0 54.0

6. Lack of Governmental Support 100 0.0

7. Shortage of Raw Cotton 69.0 31.0

Table 8.1 shows that 77 percent respondents considered high interest rates as a

potential risk for transformation, while 23 percent were against it. There was no

difference in the responses regarding the problems of terrorism, energy shortage, and lack

of governmental support to the textile sector. All the interviewees responded that, these

problems are the major risk indicators for successful transformation. As far as political

instability is concerned, 46 percent respondents considered it as a threat for successful

transformation. Moreover, the negative publicity of international media against Pakistan

is another potential risk for transformation. 61 percent interviewees responded that this

variable could be the major risk indicator for exports of the textile sector in upcoming

period. The shortage of raw cotton was also considered by a group of respondents as

potential risk for transformation. In the following subsections, all these environmental

risks are discussed in detail.

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130

8.3.1. High Interest Rates

Like most of the other developing countries, Pakistan also has a history of annual budget

deficits. There are several other factors like high inflation rate, massive debt financing,

and pressure of international financial institutions which affect the fiscal and monitory

policies of its central bank.

In the year 1996, the interest rate on industrial and commercial loans was 20

percent per annum. Later on, there was a gradual decrease in the interest rates until it

reached at about 7.5 percent per annum in the year 2002. This rapid decrease in the

interest rates motivated the textile sector for technological up-gradation and expansion.

The investment made during this period in the textile sector is presented in Table 8.2.

Table 8.2. Investment in the Textile Sector

Year Million USD % Change

99-2000 210.9 28.8

2000-01 370.2 75.5

2001-02 406.2 9.9

2002-03 531.9 30.7

2003-04 597.9 12.4

2004-05 928.6 55.3

2005-06 817.24 -11.9

2006-07 502.89 -38.4

2007-08 438.27 -12.92

2008-09 272.37 37.8

Source: Ministry of Finance (2009)

Table 8.2 reveals that the total investment in the textile sector of Pakistan during

the financial year 1999-2000 was 210.90 million USD, while, the interest rate charged by

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131

different financial institutions was 15 percent per annum. Due to a continuous decrease in

the interest rates during subsequent years, there was a continuous increase in investment

on technological up-gradation of the textile sector, until it reached 928.6 million USD in

the year 2004-05.

In the first quarter of the year 2004, the State Bank of Pakistan decided to adopt

an aggressive approach by tightening its monitory policy. As a result of this policy, the

interest rates started increasing from April 2004, mainly to control high inflation rates, to

create a state of balance between demand and supply of money, and to stop the abuses of

loans by the private sector. The details of fluctuations in the interest rates are presented in

the Table 8.3.

Table 8.3. Fluctuation in Interest Rates by the State Bank of Pakistan

Period Interest Rate

(%) Change

(%)

Period Interest Rate

(%) Change

(%)

13-11-96 20.0 19-07-01 13.0 -1.00

17-06-97 19.0 -1.00 17-08-01 12.0 -1.00

28-07-97 18.50 -0.05 22-10-01 10.0 -2.00

29-10-97 18.0 -0.05 23-01-02 09.0 -1.00

01-07-98 16.50 -1.50 18-11-02 07.50 -1.50

04-03-99 14.50 -2.00 11-04-05 09.0 +1.50

03-04-99 14.0 - 0.50 22-07-06 09.60 +0.60

19-05-99 13.0 -1.00 01-08-07 10.0 +0.04

05-01-00 11.0 -2.00 02-02-08 10.50 +0.05

19-09-00 12.0 +1.00 23-05-08 12.0 +1.50

05-10-00 13.0 +1.00 31-03-09 15.0 +2.00

07-06-01 14.0 +1.00

Source: State Bank of Pakistan, (2009).

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Chapter-8

133

APTMA (an association of 500 textile units) holds the view that, the reduction in

interest rates would only decrease the profit margin of different financial institutions, and

has no effect on government’s revenues. Therefore, government should not hesitate to

reduce the interest rates. Alongwith the other benefits, low interest rates would provide

extra financial resources to the textile sector, hence, facilitating the process of

transformation.

Some officials of the APTMA, as well as top-level executives of the

manufacturing units held the view that, the financial cost in Pakistan is relatively higher

than the other Asian countries like India, China and Bangladesh1. Therefore, the officials

and executives in the textile sector demand for the reduction in interest rates, so as to

regain the competitive position in the international market.

8.3.2. Energy Crisis

Energy sector of Pakistan comprises of the power generation sources of electricity,

natural gas, petroleum and coal. As gas and electricity are the major sources of energy for

the textile sector of Pakistan, therefore, this subsection focuses on these two sources of

energy. Pakistan generates electricity with three different sources: hydroelectric (6,463

Megawatts, 33 percent), thermal (12,580 Megawatts, 65 percent), and nuclear (462

Megawatts, 2 percent). There are three major agencies which are generating electricity in

Pakistan; these are the Water and Power Development Authority (WAPDA), Karachi

Electric Supply Company (KESC) and Independent Power Producers (IPP). Their

1 In Bangladesh, the interest rate in 2009 was 9 percent, in India it was 10.25 percent (with 5 percent tax exemption to textile sector), and in China it was 5.58 percent

Chapter-8

134

installed operational capacities are: WAPDA: 11328 MW; KESC: 1755MW and IPPs:

5970 MW (HDIP, 2008).

Natural gas is an environment friendly fuel. There are ten companies which are

engaged in gas extraction in Pakistan. These agencies are OGDCL, PPL, POL, OPI,

LASMO, BHP, MGCL, BP (PAKISTAN), OMV and TULLOW. According to the

statistics given by the oil and gas regulatory authority, the recoverable balance of natural

gas reserves in Pakistan is estimated at 31.266 trillion cubic feet (OGRA, 2009).

Due to a rapid increase in population and industrialization during last twelve

years, the consumption of electricity and gas has increased. The increase in consumption

of electricity and gas is presented in Table 8.4.

Table 8.4. Consumption of Gas and Electricity

(Increase in Gas consumption) (Increase in Electricity consumption)

Gas(Million Cubic Feet)

Electricity(Giga Watt Hours)

Year Consumption %Change Year Consumption %Change

1997-98 607890 1997-98 44,572

1998-99 635891 4.60 1998-99 43,296 -2.90

1999-00 712,101 12.0 1999-00 45,586 5.30

2000-01 768,068 7.90 2000-01 48,584 6.60

2001-02 824,604 7.40 2001-02 50,622 4.20

2002-03 872,264 5.80 2002-03 52,656 4.0

2003-04 1,051,418 20.50 2003-04 57,491 9.20

2004-05 1,161,043 10.40 2004-05 61,327 6.70

2005-06 1,223,385 5.40 2005-06 67,603 10.20

2006-07 1,221,994 -0.10 2006-07 72,712 7.60

2007-08 1,257,212 4.4 2007-08 73,400 0.9

2008-09 1,282,356 2.1 2008-09 75,100 2.3

Average 8.3 Average 5.4

Source: Hydrocarbon Development Institute of Pakistan, (2009).

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135

With an increase in consumption, Pakistan is facing an immense shortfall in the

energy reserves, especially in the electricity and gas. There are many reasons behind this

crisis, some of which include ineffective management of energy resources like dams,

changing policies of the government, lack of accountability of the policy makers, and

inaccurate calculations and forecasts of the future requirements.

The current energy crisis started in the early 1990s. The government engaged

nineteen Independent Power Producers to produce electricity in Pakistan. At the time of

installation, their total capacity was 3158MW and total investment was 4.0 billion USD.

Later on, due to the expansion in their production capacity, the total installed capacity

was raised to 5970MW till March, 2003. Until the year 2005, the aggregate supply was

more than the aggregate demand, but afterwards the ineffective planning and the need for

additional sources of power generation resulted in an increasing gap between demand and

supply (NEPRA, 2007). Difference in the demand and supply of energy, and its future

projection is presented in Table 8.5.

Table 8.5. Difference between the Demand and Supply of Electricity

Year (D- S) Gap % Change

2006-07 2500MW

2007-08 3000MW 20.0

2008-2009 3500MW 17.50

2011 (anticipated) 5500MW 55.0

Source: Hydrocarbon Development Institute of Pakistan (2009).

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136

As far as natural gas is concerned, there was a shortfall of 0.7 billion cubic feet

(BCF)/day in the year 2008-09. According to the Planning Commission of Pakistan, the

country will face huge shortfall of gas if no arrangement are made for the future. Table

8.6 presents the projected shortfall of gas in Pakistan.

Table 8.6. Difference between the Demand and Supply of Natural Gas

Source: National Electric Power Regulatory Authority, (2007).

Most of the interviewees responded that this serious shortfall of energy

(electricity and gas) has adversely affected the productivity of the textile sector in

Pakistan. They said that most of the units are not in a position to afford the alternate

means of energy like furnace oil, liquefied petroleum gas (LPG), or power generators;

over and above it, some of the units have even closed down their operations. According

to a report of the Federation of Pakistan Chamber of Commerce and Industry (2009),

about 180 textile units in Faisalabad, 80 units in Lahore, and 140 units in Multan,

Gujranwala and Sheikhupura have been closed due to power shortage. These units

included both small and large scale manufacturing. In this scenario, the textile sector of

Pakistan requires major initiatives from the government, without which it would become

impossible for most of the small and medium scale manufacturing units to continue their

operations.

Year Shortfall

2012 1.4BCF/day

2015 2.73BCF/day

2020 5.873BCF/day

2025 10.3BCF/day

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137

8.3.3. Terrorism

The geo-strategic location of Pakistan is very important. It shares its border with India,

Iran, Afghanistan, and China. Pakistan is considered to be a major ally of the United

States in its war against terrorism in Afghanistan after the September 11, 2001 attacks in

New York. Therefore, Pakistan has also been a victim of terrorist attacks by the military

insurgents from Afghanistan.

The deteriorating law and order situation in the country has also adversely

affected the performance of business sector organization in Pakistan. So far, the economy

of Pakistan has suffered a net loss of 68 billion USD, and is continuously suffering a loss

of 7 billion USD per year (Ministry of Finance, 2009).

The interviewees of this survey responded that it is a common practice of the

foreign buyers to check the quality of a product during its production processes. Before

making an import decision, they also consider the environment in which the goods are

manufactured. Due to the continuous threats of terrorist attacks in various cities of

Pakistan, the foreign buyers are hesitant to visit and place their orders to the textile

manufacturers in Pakistan. Terrorism in Pakistan has also spoiled the image of its people,

products, and industry in the international markets, which is a major reason of decrease in

the country’s exports.

8.3.4. Negative Image Portrayed by International Media

Some international agencies are actively involved in spreading anti-Pakistan propaganda

through the international media. They convey the message to the foreign investors as well

as the customers that Pakistan is not a safe country to invest and to travel. Besides, the

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138

international (especially Western) media also portrays the products of Pakistan as having

inferior quality. Therefore, many private equity partners and buyers are reluctant to invest

and place their orders in Pakistan. This negative image and misinformation is adversely

affecting the growth of the textile sector of Pakistan and the buyers are searching new

exporters in Bangladesh, India and China etc. Hence, there is a strong need that the

government may make policies favorable for the textile sector manufacturing and

exports.

8.3.5. Political Instability

In 63 years of its history, Pakistan has experienced a great deal of political instability like

dismissals, assassinations of political leaders, military coups, and government changes.

This political instability has always restricted the policy-makers from developing long-

term, consistent policies for economic development (Khan & Farooq, 2009). Most of the

policy making executives in Pakistan could only enjoy a very short stay in their offices

and had to leave before completing their job tenures.

Most of the respondents of this survey held the view that political instability in

Pakistan has adversely affected the performance of the textile sector. This sector is

considered as one of the major loss-bearers in the economy during the past ten years.

They further responded that it is difficult to survive in an environment where there are a

lot of destabilizing elements like long marches, strikes, military rule and the ineligibility

of mainstream politicians. Hence, most of the respondents argued that there is a need to

bring political stability in Pakistan for the betterment of the textile sector.

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139

8.3.6. Lack of Governmental Support

An analysis of data in the earlier subsections of this chapter shows that Pakistan remained

politically instable since the day of its independence. During most of the earlier regimes,

not much attention was provided to the economic development of Pakistan. These days,

the situation is getting worse, due to the higher involvement of government in other

issues like terrorism and law and order situation in the country.

In response to the question about governmental support to the textile sector, most

of the respondents criticized its role due to its lack of interest in resolving the issues like

high interest rates, power shortages, as well as subsidies and tax rebates etc. On the other

hand, the textile sectors of other Asian Nations are enjoying governmental support in a

variety of ways. For example the Government of India provides 5 percent subsidy on

interest rates if invested in textile sector; the Government of Bangladesh provides 5

percent cash rebate if manufacturers use local yarn; and China has increased its rebate

from 11 percent to 17 percent in February, 2009 to support the exports of the textile

sector (APTMA, 2009). These countries are the traditional competitors of the textile

products of Pakistan in the international market. In the presence of a number of problems

faced by the textile sector of Pakistan, it seems very challenging for it to transform and

resolve its problems without a clear support of the government.

8.3.7. Shortage of Raw Cotton

Pakistan is an agricultural country. Most of its labor force is associated with the

agricultural sector. The major crops of Pakistan are cotton, wheat, rice, maize, and

sugarcane. However, the current performance of the agriculture sector is not satisfactory.

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140

The per-acre yield of the major crops including cotton is continuously decreasing for the

past several years. In the year 2008-09 the production of cotton was 11.80 million bales,

which was 9.0 percent lesser than the production of the FY 2006-07. There is also a

prediction of a further decrease in the upcoming years (Mintex, 2009).

On the other side, there has been a huge capital investment in the textile sector

since 1999, which was mainly for the purpose of improving its technology and increasing

its production capacity. Therefore, the gap between demand and supply of cotton has

increased during this period. The present shortfall of raw cotton in the textile sector is 20

percent. In order to meet the deficiency of raw cotton, the textile sector of Pakistan is

importing it from countries like India and Brazil, which turns-out to be quite expensive

for the country as well as the investors. This could be the major reason of the decision

taken by the members of APTMA in their extra-ordinary general meeting held on January

09, 2009 to close their manufacturing units for one day a week2. The production of local

cotton and its import since 1991 is presented in Table 8.7.

2 I participated in the extra-ordinary general meeting with the special permission of the secretary of the APTMA, Peshawar region.

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141

Table 8.7. Local Production and Import of Cotton (000 Bales)

Year Carry Over

Stock Local

Production Imports Total

1991-92 1,188 12,822 25 14,035

1992-93 3,024 9,054 33 12,111

1993-94 1,692 8,041 627 10,360

1994-95 759 8,697 645 10,101

1995-96 1,005 10,595 200 11,800

1996-97 879 9,374 364 10,617

1997-98 1,225 9,184 301 10,710

1998-99 803 8,790 1,313 10,906

1999-00 1,565 11,240 421 13,226

2000-01 2,595 10,732 670 13,997

2001-02 1,934 10,612 1,080 13,626

2002-03 2,694 10,211 1,103 14,008

2003-04 1,760 10,048 2,312 14,120

2004-05 1,997 14,265 2,249 18,511

2005-06 4,120 13,019 1,728 18,867

2006-07 3,619 12,856 2,952 19,427

2007-08 3517 11,655 2852 18024

2008-09 4751 11,819 2134 18704

Source: All Pakistan Textile Mills Association, (2009)

In the world yarn market, the yarn manufactured in Pakistan has relatively high

demand than that of India and China, because of its thickness, better texture, and color.

During this research some of the interviewees responded that if the textile sector

manufacturers in Pakistan reduce their productivity by closing the manufacturing units

for one day in a week, and increase the prices for their best quality yarn, then there would

be only a marginal effect on their total revenue, but this way they would be able to handle

the problem of shortage of yarn in the country. However, the closure of the production

units for one day in a week may not be a viable solution to handle this problem. There is

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142

a need to develop a long-term and comprehensive policy for increasing the production of

cotton and yarn in the country.

Lastly, most of the respondents of this survey criticized the negative policies of

the Trading Corporation of Pakistan (TCP). They held the view that instead of providing

raw cotton to the local industry, TCP was involved in export of raw cotton to the other

countries under the government supervision. Therefore, there is a need to control these

activities so as to make visible improvements in the performance of the textile sector.

8.4. Conclusion

In this chapter data collected from different sources was analyzed. After a detailed

analysis, the variables which could create problems for successful transformation were

identified. During the process of data collection, it has been presumed that the number of

variables affecting in the environment of the developing countries are more than we find

in the case of the environments of the developed countries. Resultantly, the environments

of the developing countries are relatively more complex due to a higher number of

variables and their interactions. In such a highly complex environment, the ratio of

environmental risks is also high. Therefore, there is a positive relationship between

environmental complexity and environmental risks. This positive relationship adversely

affects the transformation process. Therefore, the relationship between environmental

complexity and organizational transformation is negative; here the first hypothesis as

already mentioned in Chapter Six, subsection three of this research has been proved.

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143

In the second part of analysis, variables existing in the external and international

environments were analyzed. These included high interest rates, energy crisis, political

instability, lack of governmental support, shortage of raw cotton, terrorism, and negative

image portrayed by international media. These risks are more harmful than internal risks

for the transforming organization, because due to their greater intensity they can even

force the manufacturing units to stop their production processes.

Hence, for successful transformation, and for breaking the inertia, it is necessary

that the organizations have sufficient sources of finance, reasonable governmental

support, friendly environment and optimum productivity. But all these prerequisites are

not available for the textile sector in Pakistan. Without these prerequisites the textile

sector remains under the influence of inertial forces and achieving the objectives of

successful transformation is impossible.

The research themes depicted in the hypotheses 2, 4, and 5 are related to this part

of analysis. As it is evident from the data that the external and international

environmental risks adversely affect the transformation process, it is established that the

relationship between organizational transformation and external environmental risks is

negative. Moreover, the external environmental risks are the driving force for creating

inertia; therefore, the relationship between inertia and external environmental risks is

positive. Due to the positive relationship of inertia and external environmental risks, and

negative relationship of external environmental risks and transformation process, the

relationship between organizational inertia and transformation process is negative. These

relationships amongst the variables justify the claims of the hypotheses 2, 4, and 5.

PART FIVE: FINDINGS, RECOMMENDATIONS AND CONCLUSION

CHAPTER NINE

Research Findings, Recommendations and Conclusion

9.1. Introduction

This study concentrates on the identification of environmental risks associated with the

process of organizational transformation in the developing countries. Identification of

risks and understanding of the complexities is aimed at helping the managers to better

comprehend the environmental dynamics and prerequisites of transformational change.

Besides that, other purposes of this research included the following:

1. To understand and determine the environmental characteristics of the developing

countries;

2. To analyze the newly emerging risks in the organizational environment of

Pakistan, and

3. To discuss and investigate into the textile sector of Pakistan within the context of


Taking into account the above mentioned purposes, the relevant data was

collected and analyzed from three environmental dimensions: internal, external, and

international. Chapter Seven and Chapter Eight were dedicated to the analysis of

collected data. Both the primary and secondary data were analyzed by using different

statistical techniques like pie-charts, bar-charts, percentages and cross-tables. In this

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145

chapter, the major findings of the environment of the textile sector manufacturing units,

and the recommendations related to these findings are discussed. These are followed up

by the contributions of this research, the research limitations, and the suggestions for

future research.

9.2. Internal Environmental Risks of the Textile Sector

This research focuses on the environmental risks that have a potential to affect the

process of organizational transformation. To achieve the objectives of this research, the

data related to internal environment of the textile sector was collected by using the

questionnaires. The findings below are based on the analysis presented in Chapter Seven.

It is evident that the culture of collective decision making does not exist in the

textile sector of Pakistan, as 70 percent respondents of this research held the view that

organizational problems are discussed mainly with the top-level executives. This problem

mostly exists in the spinning and weaving sub-sectors.

An employees’ motivation is an integral part of organizational change and

development. It is difficult to institutionalize a change without motivation and

commitment of employees. In the textile sector of Pakistan, employees, especially at the

operational and technical levels, were not motivated to achieve the objectives of the

manufacturing unit.

An analysis of the responses indicates that most of the manufacturing units in the

textile sector do not provide training to their workforce. The routine nature of work in all

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146

the sub-sectors is a major reason behind this. About 55 percent respondents visited during

this research had not received any training during their entire professional career.

The results of the responses indicate that most of the respondents were not

satisfied with existing practices of human resources in the textile sector of Pakistan. The

employees’ turnover in the textile sector is very high. It is indicated by the results of this

research which reveal that about 78 percent respondents held the view that the previous

changes implemented in the textile sector were mostly human in nature.

This research indicates that there is a practice of granting annual bonuses to the

employees in the textile sector. These bonuses are granted irrespective of their work or

efficiency, and employees were not rewarded for any improvement in their performance.

Since there is no reward or benefit for better performance, the results of the fieldwork

show that 77 percent respondents were not working at their optimum performance level.

However, they were ready to perform better if extra incentives and benefits were

provided to them.

The behavior of the management and owners at the time of any conflict with

workers was found to be very strict. About 60 percent respondents were of the view that

management does not negotiate with them at the time of conflict, while, in the case of

conflict between top-management and owners, the decisions were made through

consensus.

An organizational vision in most of the organizations was not developed, 80

percent of the respondents did not know about the vision of their manufacturing units.

Therefore, the employees were not clearly motivated to achieve it.

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147

There was evidence indicating the existence of informal pressure groups in the

internal structure of the manufacturing units. These informal pressure groups mostly

existed between operational and technical level workers.

A significant finding of this research is that almost all the respondents were not

satisfied with the existing structure of the manufacturing units, in which owners of the

majority of the manufacturing units were also holding the executives positions.

Although an effective and efficient use of technological resources is necessary for

organizational transformation, most of the manufacturing units were not using their

existing technology effectively and efficiently. Over 60 percent respondents of the

fieldwork research including executives and managers, held the view that their

manufacturing unit were not operating at their optimal level.

Availability of relevant and required information at an appropriate time is an

important element of the process of successful transformation. ICTs are the helpful tools

to achieve this target. The results of this survey reveal that 81.60 percent respondents

were not using ICTs like facsimile technology, and internet etc in their regular operations

of the businesses.

Lastly, the results of this research indicate that most of the organizations are

working individually, and there was no evidence of any network organization or inter-

organizational coordination.

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9.3. External Environmental Risks of the Textile Sector

Analysis of external environment is essential for the strategic analysis of the environment

of any business organization. In the textile sector of Pakistan, external environment was

analyzed to identify the potential risks that have the potential to affect the process of

organizational transformation. The following findings are based on the analysis presented

in Chapter Eight.

The energy crisis was a major threat for the textile sector of Pakistan. In the

energy sector, Pakistan was facing a huge shortfall, especially in the production of

electricity and extraction of natural gas. The shortfall of electricity is 3500 MW, and it is

expected to increase upto the level of 5500 MW in the year of 2011. At present the

shortfall of natural gas is 0.7 billion cubic feet/day, and its projected shortfall for the year

2012 is 1.4 billion cubic feet. This drastic shortfall of energy has adversely affected the

performance of the textile sector. Most of the textile units are working at minimum level

of their production capacity. The alternate arrangements of electricity and natural gas like

LPG, furnace oil, or power generators are not available in most of the manufacturing

units.

Moreover, the high interest rates are creating financial problem for the textile

sector manufacturing units. Currently, most of the manufacturing units are unable to pay

their financial liabilities in time. Their cost of production is also increasing due to high

interest rates.

Political instability and lack of governmental support are among the other factors

that are adversely affecting the performance of the textile sector in Pakistan. During the

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past several years, the Government of Pakistan has not paid the required attention to

improve the performance of the textile sector. Therefore, there have been no signs of

improvement in the textile sector since the year 2005.

The production of raw cotton in Pakistan is also 20 percent lesser than its demand

by the textile sector of Pakistan. Due to this deficiency, the spinning, and weaving sub-

sectors are facing serious problems of manufacturing and supply of the received orders.

9.4. International Environmental Risks of the Textile Sector

Based on the data analysis in Chapter Eight, this research has produced some findings on

the international environmental risks.

In the case of Pakistan, terrorism is adversely affecting the performance of the

textile sector. Due to terrorism and deteriorating law and order situation in the country,

the confidence level of foreign investors and importers of Pakistan’s textile products is

continuously decreasing. All respondents supported the argument that terrorism is

adversely affecting the different dimensions of the textile sector like revenues, sales

volume, output, and competitive position in the international market.

Moreover, some international agencies were also reported to be spreading anti-

Pakistan propaganda, which is also adversely affecting the performance indicators of the

textile sector in Pakistan.

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9.5 Recommendations towards the Internal Environment

The recommendations are divided into three parts vis-à-vis the organization’s internal,

external and international environments. Some recommendations for improving the

policies and planning of the textile sector, and minimizing the effects of the internal

environmental risks on its performance are presented below.

9.5.1. The Need for Development of Organizational Vision

Development of organizational vision is a prerequisite of successful transformation. To

transform the textile sector manufacturing units, it is necessary to decide their long-term

objectives, strategic goals and most importantly the organizational vision. The newly

developed vision should be comprehendible, and properly communicated to all the

stakeholders of manufacturing units. After developing the vision, the next important task

for the textile sector manufacturing units is to develop their individual context-dependent

strategies to achieve that vision.

9.5.2. Need for Restructuring

In the textile sector of Pakistan, there has been a huge investment in technology up-

gradation since the last several years, whereas other important dimensions like human

resources and operational procedures etc. are not modified and aligned accordingly. This

situation has created operational inefficiency in the textile sector manufacturing units. To

achieve the targets of successful transformation, it is therefore necessary to restructure

the textile sector manufacturing units in such a way that the change implemented in one

components of organization might be properly aligned with the change in other

components.

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9.5.3. Implementation of Contemporary Human Resource Practices

Human resource is the most important component of organizational transformation.

Appropriate techniques and approaches to human resource development are essential to

achieve the targets of successful transformation. To successfully transform the textile

sector manufacturing units in the light of analysis given out in Chapter Seven, the

following points are recommended for HR practices:

1. Appointments (recruitment and selection) to be made on merit, rather than any

referrals or through jobbers.

2. Proper training that is essential to achieve the vision must be provided to workers

and managers both.

3. In addition to the practice of awarding annual bonuses, it is necessary to

implement a justified reward system in the textile sector manufacturing units.

4. It is highly recommended that the manufacturing units may develop the work

teams to achieve the targets efficiently, and motivate the employees to join these

teams on the basis of their competencies and interests.

5. It is also recommended that management may sign formal job agreements with

workers to stop the disreputable practice of jobbers.

6. Visionary leadership is necessary to transform the organization. The top

management is required to motivate and facilitate the employees in different lines

of authorities who could take up leadership responsibilities and influence the

behavior of workers to achieve the organizational vision.

7. It is necessary to provide incentives and benefits to workers, in order to motivate

them for working at their optimum performance level.

8. There is a need to consult the representative of the workers’ associations at the

time of making important decisions.

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9.5.4. Implementation of Change in Managerial Practices

In the textile sector of Pakistan, some traditional or conservative practices of managers

and executives with regards to negotiations, trust building, decision making, policy

formulation and targets setting etc. need to be improved. Techniques that may be new but

appropriate may be employed for developing consensus in decision making, applying

game theoretic negotiations and bargaining, and trust building.

9.5.5. Effective Use of Manufacturing Technology

Ineffective use of manufacturing technology increases the cost of production hence

reduces the profit margin of the business. In contemporary business practices, it is

necessary to use the existing technology at its optimum level, not only to increase the

operational leverage but to implement the transformational change successfully.

Therefore, there is a need to remove all the barriers like workers’ inefficiency, power

shortages, raw material deficiency, and the inefficient use of technological resources. In

this way the manufacturing units could receive maximum benefits from their existing

technologies.

9.5.6. Increasing the Use of the ICTs

To achieve the targets of successful transformation, especially in a complex environment,

a fast and timely flow of information amongst the stakeholders is essential. ICTs are

helpful tools to achieve this target. Therefore, it is recommended that the textile sector

manufacturing units may increase the use of ICTs in order to achieve the targets of

successful transformation.

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9.5.7. Creating Virtual Relationship and Coordination with Other Textile Units

In contemporary environment, business organizations are moving towards coordination

and collaboration. They facilitate each other to explore and exploit temporary as well as

long-term market opportunities. Therefore, it is recommended that the players of the

textile sector may cooperate with each other by making virtual relationships to increase

their gains in different fields like bulk purchasing, fulfillment of sale agreements, joint

delivery, and overcoming the foreign competition etc. These activities would increase

their market share, revenues as well as profits.

9.6. Recommendations towards the External Environment

9.6.1. Adoption of Alternate Sources of Energy

According to the estimates of the International Monetary Fund, the energy crisis in

Pakistan is expected to continue till 2015 (IMF, 2009). To cope with the energy crisis, it

is essential to explore the alternate sources of energy like coal, wind, and solar energy

etc. Pakistan has huge resources of coal, especially in Thar. It is expected that the

proposed Thar project would generate 1000 MW electricity per year. On the other hand,

wind energy if exploited only in the coastal areas of Sindh and Baluchistan has the

potential to generate about 50000 MW of electricity per year. Pakistan can also benefit

from the solar energy, which is a huge and non-depletable source of energy (Alternate

Energy Development Board, 2010). These potential sources of energy have not so far

been utilized. To resolve the energy crisis in the country, the Government of Pakistan

may start the projects sooner to exploit these energy reserves.

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9.6.2. Short-term Arrangements for Energy

To cope with the problem of energy shortage, it is necessary for the textile sector

manufacturing units to make some temporary arrangements. These may include the use

of power generators, liquefied petroleum gas (LPG), and furnace oil etc.

9.6.3. Decreasing the Energy Tariffs for the Textile Sector

In Pakistan, the tariffs of electricity and gas are continuously increasing for commercial

users. During the last twenty months the prices of natural gas have been increased by 38

percent, while the electricity prices have been increased by 60 percent during the same

period. This has adversely affected the production cost of the textile sector manufacturing

units. Beside the arrangements of alternate sources of energy, the Government of

Pakistan may decrease the electricity and gas tariffs to facilitate the textile sector.

9.6.4. Restructuring of Long-term Loans

Due to high interest rates and adverse economic situations prevailing in Pakistan as

already discussed in Chapter Eight, it seems impossible for the textile sector

manufacturing units to repay their long-term loans. To facilitate the textile sector, State

Bank of Pakistan could direct different financial institutions to restructure the outstanding

loans, and allow the manufacturing in this sector to repay their outstanding loans on

installments.

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9.6.5. Subsidies on Interest Rates

Besides reducing the interest rates on new loans, the State Bank of Pakistan could

provide subsidy to the textile sector by reducing the interest rates on investment that they

have already made during the last ten years.

9.6.6. Arrangement of Private Equity Partners

In order to cope with the financial crisis, there is a need to motivate the private equity

partners of other countries like United Arab Emirates, and China etc. to invest their

capital in different sub-sectors of the textile.

9.6.7. Increasing the Production of Raw Cotton

In Pakistan, the per-acre yield of cotton is very low as compared to the other countries

like India, China and Bangladesh, which is a major reason of shortage in the supply of

raw cotton. There could be two possible arrangements for increasing the production of

raw cotton i.e. to increase the total cultivated area, or to increase the per-acre yield. To

increase the per acre yield, there is a need to cultivate the hybrid seeds of cotton (e.g. BT

cotton) that have relatively more per-acre yield. Besides, it is suggested to provide special

subsidies to farmers in the form of inexpensive seeds, fertilizers, and pesticides. High

purchase prices of raw cotton and standby loans on easy terms can also play a vital role to

achieve the targets of high productivity.

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9.6.8. Increasing the Governmental Support

The findings of this research indicate that complexity and turbulence in the environment

of Pakistan is prevailing at its extreme levels. In this situation, it seems impossible for the

textile sector manufacturing units to cope with the environmental risks without

governmental support. Therefore, to improve the performance of the textile sector,

Government of Pakistan could facilitate the textile sector through different means like tax

rebate, financial subsidies, low custom duty, and discount on payable interest etc.

9.7. Recommendations toward the International Environment

9.7.1. Anti-terrorism Policies by the Government

During the last decade, terrorism has become a global issue. As far as the textile sector is

concerned, it is beyond its capacities or direct domain to control it. Therefore, the

Government of Pakistan may develop a comprehensive policy on terrorism with the help

of international partners to control and minimize its effects on the economy of Pakistan.

9.7. 2. Arranging Seminars, Conferences and Workshops to Develop a Positive Image

To deal with the negative propaganda of international media, and to minimize its

influence on the minds of foreign investors and importers, there is a need to arrange

conferences, seminars and workshops for international community including customers,

investors, and equity partners etc. Different associations of the textile sector like

APTMA, PCGA, APTA, PCFAMEA and PRGMEA can play a very effective role in this

regard.

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9.8 Methodological Implications

In this research, a strategic risk analysis of the environment of the developing countries

has been carried out, for which the textile sector of Pakistan has been selected as a unit of

analysis. Through the strategic risk analysis, most of the risk indicators have been

identified. Therefore, this research offers a new approach to analyze the organizational

environment of the developing countries, and attempts to identify the potential risk

indicators for any business project.

This research specifically focuses on the need of transformation change. For this

purpose, different dimensions of organizational environment, including the internal,

external and international dimensions have been analyzed. The approach of analyzing the

complex organizational environment for the purpose of transformational change is a new

methodology in which the variables of complex environment are analyzed to find out

their strategic effects on the process of transformational change.

The results of the fieldwork also identify the potential problems that a researcher

could face, for example unwelcoming behavior of the managers, illiteracy of the

respondents to understand the purpose of research and to fill in the questionnaires etc.

The organizational culture of the businesses in Pakistan that does not comply with

research initiatives like mine is also a potential problem.

9.9. Contributions of the Research

Despite several contemporary studies on organizational development, only a few have

been carried out specifically for the purpose of analyzing the organizational environment

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of the developing countries. Most of the existing literature on environmental complexity,

organizational change, and risk analysis concentrates on the dynamics and characteristics

of the environment of the developed countries. Therefore, in this research, I have

specifically addressed the issues related to the organizational environment of the

developing countries.

The results and findings of this research have made significant contributions to

the study of organizational environment as a major field of analysis for organizational

transformation. This study attempted to present a model to understand the environmental

complexities of the developing countries such as Pakistan, by identifying different

transformational risks associated with various environmental dimensions. The

characteristics of the textile sector of Pakistan have been analyzed in this research, in

order to identify its internal weaknesses and potential threats for its transformation and

development.

Finally this research focused on the need of transformation in the context of the

developing countries, to align the organizational internal environment with the

characteristics of complex external environment.

9.10. Limitations of the Research

This research attempts to identify the risks existing in the complex environment of the

developing countries. It examines the environment of Pakistan with regards to the

elements of environmental complexity, which have different dimensions in terms of the

internal, external and international environments. Besides, the concepts of complexity,

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159

environmental risk, and strategic analysis are new for most of the managers, as not much

work has been done previously in these emerging fields in the context of the developing

countries. The major limitation of this research is that it remained ineffective to present

the solutions for some of the environmental risks, for example, the problem of terrorism.

Secondly, the practice of organizational research and subsequent policy

development is quite new in Pakistan. After analyzing the available literature e.g. Khilji

(2004), and Farzana & Khalid (2008) on the subject of the environment of Pakistan, and

my personal fieldwork experience of the textile sector, it could be conclude that the

organizational environment is not research friendly. Therefore the data collection

processes that included observations, interviews, secondary data analysis and especially

the questionnaire survey were very challenging tasks.

The response rate of the questionnaire survey was very low. Scattered clusters of

the textile sector, consent of the manufacturing units to carry out the research, and the

shortage of time appear to be the major reasons behind it. The low response rate might

even affect the generalizeability of the findings, as conceptualized by Cooper and

Schindler (2001).

9.11. Suggestions for Future Research

This research attempted to carry out the strategic risks analysis of the environments of the

developing countries. It deals with the analysis of strategic issues like understanding the

environmental complexities, identification of internal and external risks, and their effects

on the transformation process. The unit of analysis in this study was the textile sector of

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Pakistan. A study of these emerging fields is a viable opportunity for the researchers.

They can explore the effects of these complexities and risks on other manufacturing and

services sectors etc.

The researcher has attempted to produce a holistic study for identifying most of

the environmental risks for a successful transformation. Therefore, it would be a great

opportunity for the researchers to carry out the separate studies on each risk, and discover

the effects on other organizational dimensions like strategic planning, project

management, and product development etc.

9.12. Conclusion

Based on the findings of this research, it could be concluded that environmental risks

adversely affect the transformation process. Therefore, to transform the business

organization in Pakistan, it is necessary to identify the environmental risks through the

process of risk analysis, and manage them with appropriate risk management techniques.

Furthermore, it could be concluded that the effects and intensity of the risks in the context

of the developing countries have more implications than those of the developed countries.

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161

APPENDIX-A

Lists of Units Selected as Sample

GINNING

1 Babar Agro Industries,

2 Bukhari Industries,

3 Roomi Cotton Factory, Unit No.2,

4 Mubarik Cotton Factory,

5 Fatima Enterprises Ltd.

6 Fatima Enterprises Ltd. (Ginning Section No.2,)

7 Channer Cotton Industries,

8 Yousuf Shehzad Cotton Ind.

9 Indus Dyeing & Mfg. Co. Ltd;

10 Bushra Enterprises

11 Al Razzaq Cotton Industries,

12 Progressive Cotton Ginners,

13 Masha Allah Cotton Ginners,

14 Muhammad Rashid Enterprises,

15 Rasheed Furqan Cotton Industries (Pvt) Ltd;

SPINNING/COMPOSITE

1 A. J. Spinning Mills Pvt Ltd. 16 Bilal Textile (Pvt) Ltd

2 Adil Textile Mills Ltd 17 Bisma Textile Mills Limited

3 Ahmad Din Textile Mills (Pvt) Ltd 18 Azgard Nine Limited

4 Ali Akbar Spinning Mills Ltd 19 Chenab Limited

5 Al-Zamin Textile Mills Ltd 20 Mahmood Textile Mills Ltd

6 Anjum Textile Mills (Pvt) Ltd 21 Sargodha Textile Mills Ltd.

7 Arshad Textile Mills Ltd 22 Farooq Ahmad Cotton Mills Ltd.

8 Asim Textile Mills Ltd 23 Murtaza Haseeb Textile Mills Ltd.

9 Ayesha Spinning Mills Ltd 24 Pharmagen Beximco Ltd.

10 Interloop (Pvt) Ltd 25 Bashir Cotton Mills (Pvt) Ltd

11 Ittehad (Pvt) Ltd 26 Bhanero Textile Mills Ltd

12 J. K. Fibre Mills Ltd. 27 Chawla Spinning Mills Ltd

13 J.A Textile Mills Ltd 28 Colony Textile Mills Ltd

14 Kamal Spinning Mills 29 Fawad Textile Mills Ltd

15 Kashir Textile Mills Ltd. 30 Granada Textile Mills Ltd

162

WEAVING/KNITTING/FINISHING

1 Bashir Cotton Mills (Pvt) Ltd 24 Fazal Cloth Mills Ltd

2 Bhanero Textile Mills Ltd 25 Jet Era Textile Mills Ltd

3 Interloop (Pvt) Ltd 26 Kohinoor Looms Ltd.

4 Acme Mills (Pvt) Ltd. 27 Majeed Fabrics

5 Ahmed Fine Textile Mills Ltd 28 Masood Fabrics Ltd

6 Ahmed Fine Textile Mills Ltd 29 Master Textile Mills Limited

7 Bilal Fibres Limited 30 Murtaza Haseeb Textile Mills Ltd.

8 Zahidjee Fabrics Mills Ltd 31 Naveena Industries Pvt Ltd

9 Anum Weaving Mill 32 Nishat Mills Limited

10 Arzoo Weaving Mill 33 Prime Weaving Ltd

11 Khalid Siraj Textile Mills Ltd 34 Prosperity Weaving Mills

12 Malikwal Textile Mills Ltd. 35 Reshi Textile Mills Ltd.

13 Manzoor Textile Mills Ltd 36 Roomi Fabrics Ltd.

14 Arshad Corporation (Pvt) Ltd 37 Artistic Milliners.

15 Fawad Weaving Mills (Pvt) Ltd 38 Jubilee Knitwear Industries.

16 Azgard Nine Limited 39 Service Fabrics Ltd.

17 Barkat Textile Mills Ltd 40 Ghazi Fabrics International Ltd.

18 Bismillah Textiles (Pvt) Ltd. 41 Shafi Texcel Ltd.

19 Blessed Textiles Limited 42 Graf Knits & Woven.

20 Cnc Textiles (Pvt) Limited 43 Shahraj Fabrics (Pvt) Ltd.

21 Crown Textile Mills Ltd. 44 United Towels Exporters.

22 Diamond Fabrics Limited 45 Comfort Knitwears (Pvt) Limited

23 Haral Textiles Ltd.

GARMENTS

1 Stitch Craft Pvt. Ltd

2 Rehman Knitwear

3 Stitch- N-Style

4 M/S Immi Garments

5 Global Apparel

6 United Tex.

7 Delta Garments

8 New Imperial Garments

9 Musterhaft Co.

10 Canter Pvt. Ltd.

11 Body media International

12 Faaz International

13 Ambition Apparel

14 Mash Fashions & Apparel

15 M/S Reet Garments

163

APPENDIX-B1

Dear respondent,

I appreciate your willingness to help me in this research. I am a lecturer at the

Department of Management Sciences, Hazara University Mansehra, and a PhD research

scholar at Institute of Management Studies, University of Peshawar. I am conducting this

research for completing my PhD studies. Furthermore, the findings of this research would

be used to understand the complexities of organizational environment of the developing

countries, and to identify the environmental risks that have the potential to affect the

process of organizational transformation. In this research, the textile sector of Pakistan

has been selected as the unit of analysis; therefore, this sector would equally be benefitted

from the findings of this research.

I would like to request you to please help me in filling these questionnaires. I

thank you in advance for assisting me, and I am sure that you and your organization will

be benefitted from the findings of this research initiative in Pakistan. Please note that

participation in this survey is anonymous, voluntary, and confidential.

Best Regards,

Abdul Majid Lecturer, Hazara University Mansehra. PhD Research Scholar, University of Peshawar.

STRATEGIC RISK ANALYSIS OF TRANSFORMING ORGANIZATION’S ENVIRONMENT:

A CASE OF THE TEXTILE SECTOR IN PAKISTAN

Ref no: ______________

Telephone: +92(333)5098225(c), +92(300)5625538(c), +92(997)300809(h), +92(91)5701808(O) Email: [email protected]

164

RESEARCH QUESTIONNAIRE

Note: You are allowed not to respond to the questions which are not directly relevant to your current job.

A: Introduction

1. Sector

Ginning Spinning/Composite Weaving/Knitting/Finishing Garments

2. What is your employment category? (Please check one)

Executive Managerial Technical Operational

3. What is your job title? ______________________

4. What is your qualification?

5. How long have you been with your current employer or organization? _________ years

6. How many hours (including paid and unpaid overtime) do you work? ________ /day

7. Date: ____________________ 8. Time: ______________________

Using the following scale, please encircle the number that best represents your response.

Illiterate Undergraduate Graduate Postgraduate

1 2 3 4 5 Never Rarely Some times Often Always

Research Theme:

The textile sector in Pakistan is undergoing major change process. This research attempts to examine the

environmental risks (internal and external) that have the potential to affect the process of a successful

transformation. This questionnaire is distributed with the purpose of identifying these potential risks.

165

B: Leadership and Human Resource Management

1. Do the top-level executives and other administrative staff in this manufacturing unit ever talk to you regarding the problems of this unit?

1 2 3 4 5

2. Do you think that the behavior of managers in this manufacturing unit is the same with all the workers?

1 2 3 4 5

3. Do you have trust in your management? 1 2 3 4 5

4. Does the management motivate you to achieve the goals of this manufacturing unit? 1 2 3 4 5

5. Do you think that the jobs in this manufacturing unit are clearly defined, and everyone is doing his/her specialized work?

1 2 3 4 5

6. Are you satisfied with the human resource practices in this manufacturing unit e.g. hiring, firing, promotions, and disciplinary matters etc?

1 2 3 4 5

7. Have you received any training during your job in this manufacturing unit whenever the changes are implemented in your area of work?

1 2 3 4 5

8. Did you receive any rewards for better performance? 1 2 3 4 5

9. Do you think that this manufacturing unit rewards only those employees who really deserve it? 1 2 3 4 5

10. Do the managers in this manufacturing unit follow any standard procedures in monitoring all operations?

1 2 3 4 5

11. How often do the management and employees find a solution to the problems without any conflicts?

1 2 3 4 5

12. Does the management negotiate with employees and accept their demands if conflicts arise? 1 2 3 4 5

13. Does this manufacturing unit treat all the employees equally and justly? 1 2 3 4 5

C: Organizational Structure

1. Do you think that the work of this manufacturing unit is of routine nature? 1 2 3 4 5

2. Is there any difference in the production and operations of this manufacturing unit and the other units working in this sub-sector?

1 2 3 4 5

3. Does the top management consult you, whenever it chooses to make important decisions? 1 2 3 4 5

4. Does the top management consult you, whenever a problem arises in your area of work? 1 2 3 4 5

5. Do you know the vision, mission or primary objectives of this manufacturing unit? 1 2 3 4 5

6. Do you think that you have all the necessary information required to perform your work? 1 2 3 4 5

7. Do you have informal relationships with the other workers working in your department, or other department of this manufacturing unit?

1 2 3 4 5

166

D: Technology

1. Do you think that this manufacturing unit utilizes its existing technology efficiently? 1 2 3 4 5

2. Have you ever experienced any technological changes taking place in this manufacturing unit since you started your job?

1 2 3 4 5

3. Do you feel that there is a need for technological changes to make your work more efficient? 1 2 3 4 5

4. Are the technological problems solved immediately after they arise? 1 2 3 4 5

5. Do you ever use the means of information and communication technology like mobile phones, landline phone, fax, internet or intranet in the daily business operations?

1 2 3 4 5

6. Does this manufacturing unit have any business relationship with the other similar units? 1 2 3 4 5

E: Organizational Change

1. Have you ever experienced any organizational change in this unit since you started your job? 1 2 3 4 5

2. Were the changes implemented previously in this manufacturing unit mostly related to the human resource?

1 2 3 4 5

3. Do you feel the need for structural changes in this manufacturing unit? 1 2 3 4 5

4. If the top management demands a change in your job related behavior, would you accept that? 1 2 3 4 5

5. If a change effort does not negatively affect your present position, would you be ready to cooperate for it?

1 2 3 4 5

6. If you do not understand the purpose of change, but you trusts the top management, would you be ready to change your behavior as desired by the top management?

1 2 3 4 5

7. Would you perform better if paid more than what you are earning now? 1 2 3 4 5

8. Do you work independently i.e. your co-workers do not force you to behave in a certain specific manner?

1 2 3 4 5

9. Does this manufacturing unit have any external source of finance that it can use at the time of crisis?

1 2 3 4 5

10. Does this unit retain a part of its profits to cover the contingencies? 1 2 3 4 5

AAPPENDIX

167

X-B2

168

169

170

APPENDIX-C

List of Persons Selected for Fieldwork Interview

1 Unstructured Interviews/Conversation 1 Provincial Minister For Industry and Trade

2 Unstructured Interviews/Conversation 2 Chief Production Manager-Textile Manufacturing Unit

3 Unstructured Interviews/Conversation 3 Executive- Textile Manufacturing Unit

4 Unstructured Interviews/Conversation 4 Executive- Textile Manufacturing Unit

5 Unstructured Interviews/Conversation 5 Director Finance- Textile Manufacturing Unit

6 Unstructured Interviews/Conversation 6 Assistant Director OD- Textile Manufacturing Unit

7 Unstructured Interviews/Conversation 7 Business Owner- Textile Manufacturing Unit

8 Unstructured Interviews/Conversation 8 Secretary APTMA-Lahore Zone

9 Unstructured Interviews/Conversation 9 Secretary PRGMEA-Lahore Zone


11 Unstructured Interviews/Conversation 11 Research Officer-APTMA Lahore Zone


13 Unstructured Interviews/Conversation 13 Director, Ministry of Textile.

171

APPENDIX-D

List of the Manufacturing Units Selected for Pilot Study

1 A.J Textile Mills Ltd

2 Gadoon Textile Mills Ltd

3 Ithfz Mills Ltd

172

APPENDIX-E

The Map of Pakistan

The MMap of thee Textile SSector of PPakistan

APPEND

173

DIX-F

Documents

prr.hec.gov.pkprr.hec.gov.pk/jspui/bitstream/123456789/1762/1/1340S.pdf · i Declaration I hereby declare that this dissertation entitled “Strategic Risk Analysis of Transforming