Shape memory phenomena including pseudoelasticity, shape memory effect, thermal transformation cycling and two-way shape memory are modelled using the modified Eshelby theory developed in Part I [Zhang and McCormick. Acta metall., 2000, 48, 3081]. It is shown that fully aligned martensitic variants Form above a critical stress, which increases linearly with fraction transformed. If the applied stress is less than the critical stress, a self-accommodating variant structure forms. In pseudoelastic deformation the applied stress exceeds the critical stress over the entire transformation. For thermal cycling under load the variant structure is dependent on the value of applied stress relative to the critical stress. It is shown that plastic strain accompanying transformation cycling causes the critical stress to decrease. The decrease in the critical stress with transformation cycling is shown to be responsible for two-way shape memory behaviour. (C) 2000 Published by Elsevier Science Ltd on behalf of Acta Metallurgica Inc.