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CONTENTS
S
...
II
Chapter wise Chapter Summary and Practice Questions
02
1
...
Principles of Management
16
3
...
Planning
44
5
...
Staffing
71
7
...
Controlling
104
9
...
Financial Markets
125
11
...
Consumer Protection
166
III
PROJECT WORK
175
IV
GUIDELINES FOR PRACTICALS, THEORY PAPER AND
187
HOW TO STUDY BUSINESS STUDIES
V
Practice Questions
Chapter – 1 –Pg – 191
Chapter – 5–Pg -208
Chapter – 9–Pg -228
Chapter – 2–Pg -197
Chapter – 6–Pg - 214
Chapter – 10–Pg - 236
Chapter – 3–Pg -202
Chapter – 7–Pg - 221
Chapter – 11–Pg - 241
Chapter – 4–Pg -204
Chapter – 8–Pg - 225
Chapter - 12–Pg - 248
Class XII/ Business Studies: Study Material/ 1
RATIONALE, GENERAL LEARNING OBJECTIVES, METHODOLOGY
AND SYLLABUS FOR THE ACADEMIC YEAR 2015-16: BUSINESS STUDIES
The courses in Business Studies and Accountancy are introduced at + 2 stage of Senior Secondary Education as
formal commerce education is provided after first ten years of schooling
...
Business is a dynamic process that brings together technology, natural resources and human initiative in a
constantly changing global environment
...
Globalization has changed the way firms transact their business
...
Computerised systems are fast replacing other systems
...
The course in Business Studies will prepare students to analyse, manage, evaluate and respond to changes
which affect business
...
It
recognizes the fact that business influences and is influenced by social, political, legal and economic forces
...
Therefore, to acquire basic knowledge of the business world, a course in Business Studies would be useful
...
General Learning Objectives of the Subject:
To develop in students an understanding of the processes of business and its environment;
To acquaint students with the dynamic nature and inter-dependent aspects of business;
To develop an interest in the theory and practice of business, trade and industry;
To familiarize students with theoretical foundations of organizing, managing and handling operations
of a business firm;
To help students appreciate the economic and social significance of business activity and the social
cost and benefits arising there from;
To acquaint students with the practice of managing the operations and resources of business;
To prepare students to function more effectively and responsibly as consumers, employers, employees
and citizens;
To help students in making the transition from school to the world of work including selfemployment;
To develop in students a business attitude and skills to be precise and articulate
...
A handout to cover topics not given adequately in the text will be given wherever required
...
Assignments to cover previous year Board questions will be given for writing practice
...
A monthly class test will be given to assess learning of students
...
Introduction to Management
Marks
80
marks
Marks: 50
Periods
16
14
2
...
Business Environment
12
4
...
Organizing
6
...
Directing
18
8
...
Financial Management
Marks:50
120
Marks:
Periods
15
22
10
...
Marketing Management
20
15
12
...
Management as Science, Art and Profession
...
Coordination- concept and importance
...
Objectives - organizational, social and personal
...
Management as science- Features of science and the existence of these features in management
...
Levels of management-Functions of management at top, middle and supervisory levels with names of job
positions
...
Explain the importance of coordination
...
Fayol's principles of management
...
Meaning of principles of management
...
Significance or need of principles of management
...
Management given by Taylor- Science, not rule of thumb; Harmony, not discord;
Cooperation, not individualism; Development of each and every person to his or her greatest efficiency and
prosperity
...
Differential piece wage system
...
Unit 3: Management and Business Environment
Business Environment- concept and importance
...
Impact of Government policy changes on business with special reference to liberalization,
privatization and globalization in India
...
Appreciate the managerial
response to changes
Unit 4: Planning
Concept, importance and limitations
...
Objectives, Strategy, Policy, Procedure, Method, Rule, Budget
and Programme
...
Meaning of single use and standing plans
...
Organising Process
...
Formal and informal
organisationconcept
...
Decentralization: concept and importance
...
Formal and informal – concept, advantages, disadvantages of formal and informal organization
...
Unit 6: Staffing
Concept and importance of staffing
...
Staffing process
Recruitment- sources
Selection -process
Training and Development- Concept and importance
...
Recruitment Sources- Internal-promotion, transfer; External -Direct recruitment, Casual callers,
Advertisements-(newspapers, journals, television), Employment Exchange, Placement Agencies and
Management Consultants, Campus Recruitment, Web Publishing, Labour Contractors, Recommendations of
employees
...
induction training, vestibule training,
apprenticeship training and internship training
...
- Motivation- concept, Maslow's hierarchy of needs, Financial and non-financial incentives
...
- Communication-concept, formal and informal communication; barriers to effective
communication, how to overcome the barriers
...
Formal and informal communication- concept;
Barriers to effective communication- semantic barriers ( badly expressed message, symbols with different
meanings, faulty translations, unclarified assumptions, technical jargon), psychological barriers (premature
evaluation, lack of attention, distrust), organizational barriers (organisational policy, rules and regulations,
complexity in organisational structure, organizational facilities), personal barriers ( fear of challenge to
authority, lack of confidence of superior on his subordinates,unwillingness to communicate, lack of proper
incentives)
...
Unit 8: Controlling
Concept, nature and importance
Relationship between planning and controlling
Steps in the process of control
Part B: Business Finance and Marketing:
Unit 9: Financial Management
Concept and objectives of financial management
...
Financial planning – concept, objectives and importance
...
Fixed and Working Capital - Concept and factors affecting their requirements
...
Factors affecting financing decision-cash flow position of the company, cost, risk, floatation costs, fixed
operating costs, control considerations, state of the capital market, Return on investment, tax rate, flexibility,
regulatory framework
...
Factors affecting fixed capital requirement- Nature of business, scale of operations, choice of technique,
technology upgradation, growth prospects, diversification, financing alternatives, level of collaboration
...
Unit 10: Financial Markets
Financial Markets: Concept and types
...
Capital market and its types (primary and secondary)
Stock Exchange- Functions and trading procedure
...
Meaning of depository
services and Demat account as used in the trading procedure of securities
...
Money market instruments- Treasury bill, commercial paper, call money, certificate of deposit, commercial
bill
...
Differences between: Capital and money markets; Primary and Secondary markets
Class XII/ Business Studies: Study Material/ 6
Unit 11: Marketing Management
Selling, Marketing – Concept, features of Marketing, difference between marketing and selling
...
Marketing Functions
...
Marketing Mix - Concept & elements
o Product-Concept, branding, labeling and packaging
...
o Physical Distribution- concept, components of Physical distribution, channels of
distribution: types, facors determimimg choice of channels
...
Marketing mix elements- Product, price, place, promotion
Branding, labeling, packaging- concept and functions
...
Consumer Protection Act 1986
o Meaning of consumer and consumer protection
o Rights and responsibilities of consumers
o Who can file a complaint and against whom?
o Redressal machinery
...
Consumer awareness-Role of consumer organizations and NGOs
Class XII/ Business Studies: Study Material/ 7
Introduction To Management
Definition
According to Koontz and O‟Donnell,” Management is creating an internal environment of an
enterprise where individuals working together in groups perform efficiently and effectively
towards achievement of group goals
...
There are certain terms which require elaboration
...
These functions are planning, organising, staffing, directing and controlling
Effectively: Being effective or doing work effectively basically means finishing the given task
...
In other words, it is concerned with the end result
...
There is a kind of costbenefit analysis involved and the relationship between inputs and outputs
...
If the firm is able to achieve the target of 5,000 units but spends Rs 27,00,000 then
the firm is effective but not efficient
...
Features/Characteristics of Management
1
...
Management unites the efforts of
different individuals in the organisation towards achieving these goals
2
...
3
...
This is done in terms of problems to be solved, decisions to be made,
plans to be established, budgets to be prepared, responsibilities to be assigned and
authority to be delegated
...
Management make people
work towards achieving the organisation‘s goals, by making their strengths effective
and their weaknesses irrelevant
...
This is interlinked with both the
management of work and the
management of people
...
Continuous process: mgt
...
Class XII/ Business Studies: Study Material/ 8
5
...
Team work and coordination of individual effort in a common direction enables all its
members to grow and develop as needs and opportunities change
...
Dynamic function: Management adapts itself to the changing environment
...
7
...
Objectives of Management
Objectives are
1 Ends towards which activities of an organization are directed
2 Standards against which performance is assessed
...
objectives
for
the
organisation
...
Survival(earn
enough revenue
to cover costs)
2
...
Growth(in the
long run in terms
of ↑in sales, no
...
Giving
employment
opportunities
disadvantaged sections of society
...
to 1
...
Good working conditions
2
...
Opportunities for training
crèches to for employee‘s children
...
Providing good quality goods at fair prices
personal growth
4
...
Participation in
management
5
...
Conducting business in a lawful manner
5
...
7
...
Optimum
utilization of
resources
Class XII/ Business Studies: Study Material/ 9
Nature of Management
I Management as an Art
Art implies personal application
of knowledge with ingenuity,
skill and creativity to achieve
desired results
III Management as a Profession
Profession can be defined as an
occupation backed by specialized
knowledge and training
...
Existence
of
theoretical
knowledge
2
...
)
3
...
It contains principles and
facts which explain a phenomenon
Features of science:
1
...
)
2
...
Principles
have
universal
validity
4
...
There is a lot of literature
available w
...
t various areas
of mgt such as mkt, finance
etc
...
Manager
applies
this
acquired knowledge in a
personalized and skillful
manner in the light of the
realities of a given situation
giving rise to different styles
of management
...
It is the art of getting work
done by others
...
r
...
Principles of management are
based on repeated experiments
and observations
...
Principles ≠ exact so not
universal
...
Conclusion:
Management satisfies some of the
features of science but not all
...
Concerned
with
human
behavior which can‘t be
studied
under
controlled
experiments and can‘t be
predicted
with
absolute
accuracy
...
Body of knowledge:
2
...
Professional association
4
...
Service motive (by rendering
dedicated
and
committed
services)
There is a lot of literature
available w
...
t various areas of
mgt such as mkt, finance etc
...
But professional
knowledge and training is
desirable
There are associations such as
AIMA and they lay down a
code
of
conduct
but
membership is not compulsory
...
Conclusion:
Management satisfies some of the
features of profession but not all
...
2
...
4
...
Importance of Management
Management helps in achieving group goals: The task of a manager is to give a common
direction to the individual effort in achieving the overall goal of the organisation
...
Management creates a dynamic organisation: Environment is constantly changing
...
Management helps people adapt to these changes →organisation →maintain its
competitive edge
...
Motivation and
leadership → individuals to develop team spirit, cooperation and commitment to group success
...
o
Levels of Management - Top, Middle, Supervisory
The Chain of superiors and subordinates from the highest level to the lowest is known as chain
of command or management hierarchy or scalar chain
...
Generally this chain is divided into three categories
...
Integrate diverse elements and
coordinate activities of different
departments in one direction
...
Responsible for welfare and
survival of the organization
...
Determining overall objectives
and
strategies
for
their
achievements
...
Responsible
for
business
activities and its impact on
society
...
Organizing activities to be
performed by persons working
at the middle level
6
...
7
...
Link between top and lower
levels of management
...
Implementing
and
controlling
plans
and
strategies formulated by top
management
...
Interpretation of the policies
of
the
top
level
management
...
Ensure that their department
has necessary personnel
...
Assign
duties
and
responsibilities
to
the
personnel
in
their
departments
...
Motivating
persons
to
achieve desired objectives
...
Co-operate
with
other
departments
...
Responsible for first line
Lower Level
Functions:
1
...
Pass on instructions of
middle level management to
the workers
...
Maintain
standards
of
quality, minimize wastage
and ensure steady flow of
output
...
Maintain safety standards
...
Motivate the employees
...
Represent
problems/grievances
of
workers before middle level
management
...
Help
middle
level
management in recruiting,
selecting and appointing the
Class XII/ Business Studies: Study Material/ 11
managers
...
authority from different functional
levels
...
Lower Level
Designations:
Supervisors, Foremen, Clerk
(Also called Supervisory Level/
Operational
Level
Management)
Management Functions or Steps in the Process of Management
Management is described as the process of planning, organising, directing and controlling the efforts
of organisational members and of using organisational resources to achieve specific goals
...
Planning
o
It refers to ―deciding in advance what to do, how to do, when to do and who is going to do it
...
‖
Cannot prevent problems but can predict it and prepare contingency plans to deal with them
...
2
...
It involves assigning duties, grouping tasks, establishing authority and allocating resources
required to carry out a specific plan
...
Organizing process involves the following steps:
1 Identifying the activities necessary to achieve the objectives
2 Grouping similar activities into manageable units or departments
3 Assigning duties and responsibilities
4 Delegating necessary authority to carry on the assigned task
5 Defining working relationships among individuals
3
...
Staffing refers to the manning of the organization and aims at putting the right person at the right
job
...
It also refers to the human resources function of management and involves the foll: activities:
Class XII/ Business Studies: Study Material/ 12
1
2
3
4
5
Manpower planning
...
e
...
Directing
Once the employees are appointed, there is need to instruct them and get the work done
...
Managers act as friends,
counselors, leaders to guide the employees
...
Controlling
Controlling involves monitoring organizational performance and comparing it with the
organizational objectives
...
It involves the following steps:
1 Setting standards for desired performance
2 Measuring actual performance
3 Comparing actual performance with the set standards
4 Finding out deviations
5 Analyzing deviations and taking corrective actions
...
”
Force that binds all other forces of management
...
Implicit and inherent in all management functions
...
Coordination integrates group efforts: unifies unrelated or diverse interests into purposeful work
activity +gives a common focus to group effort +ensure that performance is as it was scheduled
...
Coordination ensures unity of action: binding force between departments and ensures that all
action is aimed at achieving the goals of the organisation
...
Coordination is a continuous process: begins at the planning stage and continues till controlling
...
Coordination is an all pervasive function: all levels , all departments
...
Coordination is the responsibility of all managers:
Top level managers →coordinate with their subordinates to ensure that the overall policies for
the organisation are duly carried out
...
Operational level management →activities of its workers to ensure that work proceeds
according to plans
...
Coordination is a deliberate function: coordination must be a conscious and deliberate effort
...
Coordination, therefore, is not a
separate function of management, but its very essence
...
Co-ordination therefore brings harmony
...
So, there is more need to relate and bring together activities of different sections as they are
a part of one organization only as all depts
...
3) Specialization:
Specialists tend to focus on their area of specialization and may tend to overlook the overall
picture of the organization
...
This will help reconcile the differences in approach, interest or opinions of experts
...
Therefore it is necessary to co-ordinate them so that
the organization can achieve its goals
...
Co-ordination integrates group
efforts:
2
...
Co-ordination is a continuous
process:
4
...
Co-ordination is the responsibility
of all mangers:
6
...
Essence of management:
Needed in all departments as well as at all levels of
management
...
But of
managers at all levels
...
The middle level management
o Co-ordinate their departmental plans with the
plans of the other departments
...
Co-Ordination As The Essence Of Management
Co-ordination plays a vital role in all the functions of management
...
i
...
it is required in all the functions of management
...
Co-ordination and Controlling
1
2
3
In ‗Controlling‘ co-ordination is required between:
Standards fixed and actual performance
Type of deviation and corrective measures
Correction of deviation and achievement of objectives
...
Principles of Management
Principles of management are broad and general guidelines for managerial decision making and behavior (i
...
they guide the practice of management)
...
Pure science principles
Basis
Management Principles
Pure Science Principles
1
...
Applicability
Applied with creativity as they
influence human behaviour
Applied in absolute/static manner
3
...
Principles
1
...
3
...
5
...
7
...
practicing techniques
...
Nature of Management Principles:
Universal Applicability:
General Guidelines:
Formed By Practice And Experimentation:
Flexible:
Mainly Behavioral:
Cause And Effect Relationship:
Contingent/Relative:
1
...
3
...
5
...
7
...
They are ethical in nature and
have moral connotations
...
Significance of Management Principles:
Providing Useful Insights To Managers:
Optimum Utilization Of Resources:
Scientific Decisions:
Meeting Changing Environmental Requirements:
Fulfilling Social Responsibilities:
Management Training, Education And Research
Effective Management
Nature of Management Principles:
Universal Applicability: Apply to all types of business organizations but extent of their applicability varies
with nature of firm, scale of operations etc
...
Class XII/ Business Studies: Study Material/ 16
Formed By Practice And Experimentation: By experimentation and the collective wisdom and experience of
managers
...
Mainly Behavioral: Aimed at influencing human behavior + Enable a better understanding of the relationship
between human and material relationships in achieving organizational goals + help to improve working
relationships
Cause and Effect Relationship: Tell us that if a particular principle is applied in a situation, what might be the
effect
...
Significance of Management Principles:
Providing Useful Insights To Managers: Improve knwledge, ability and understanding of managers under
managerial situations + Enables managers to learn from their mistakes and conserve time
Optimum Utilization Of Resources: Firm has limited resources and have to be used in a manner that they give
maximum benefit with minimum cost + Principles of management provide guidance for optimum
utilization of resources
...
They must be objective decisions, free from bias + Emphasize on logic rather than blind
faith and help managers to settle problems systematically
...
Fulfilling Social Responsibilities: Direct businessmen to discharge their social responsibilities towards various
groups
...
(refer to examples given in pages 35-40 as you may be given these examples ans asked to identify
the feature/importance)
F
...
TAYLOR (1856-1915)
Major contributions of Taylor
Introduced scientific methods in management, as opposed to the rule of thumb
...
Sought to increase the efficiency of workers by eliminating wastage of all types
...
Class XII/ Business Studies: Study Material/ 17
Wrote a book on ‗shop floor‟ and an article, on‘ principles of Scientific Management‟, based on his findings and
experiments
...
‘and gave a new thinking to management
...
Scientific Management
According to Taylor, ‘Scientific Management is knowing exactly what you want your men to do and
seeing that they do it in the best and the cheapest way‟
...
Principles of Scientific Management
a
...
c
...
Science and not rule of thumb
Harmony and not discord
Co-operation and not individualism
Development of each and every person to
his/her greatest efficiency and prosperity
Techniques of Scientific Management
1
...
3
...
5
...
7
...
o One best method of doing a job must be developed to maximize efficiency
...
o Management should be willing to share gains of the firm with the workers and workers should
work hard and accept change for the good of the firm and not go on strikes
...
(eg –Japanese culture) (Similar to Principle of Espirit De Corps given by Fayol)
Co-operation and not individualism:
o Extension of harmony and not discord
...
o Management should give importance to suggestions made by the workers and workers must
desist from going on strikes and making unreasonable demands
...
o Efficiency should be built in right from the process of employee selection, assignment of work on
the basis of their capabilities, giving training when needed
...
Functional Foremanship
Factory Manager
Planning Incharge
Route Clerk
Time & Cost
Clerk
Instruction
Card Clerk
Production Incharge
Disciplinarian
Inspector
Gang
Boss
Speed
Boss
Repair
Boss
Workman
Taylor suggested division of work of the factory manager into two sub- departments: planning
department and production department
...
Out of them, four would work under the planning incharge and would be responsible for planning
and the other four would work under the production incharge and would be responsible for
execution
...
Route Clerk: would specify route/sequence production operations
2
...
3
...
Cost sheet to determine expenses for material, labour and other overheads
...
Disciplinarian: would ensure systematic performance of jobs by enforcing rules and regulations
...
Gang Boss: would do all preliminary work—keeps materials, machines, tools etc
...
2
...
3
...
4
...
Class XII/ Business Studies: Study Material/ 19
Standardization and Simplification of Work
Methods of production should be analyzed scientifically and the best method should be developed by
conducting various work studies (time, method, motion and fatigue)
...
i
...
iii
...
Standardization refers to the process of setting standards for every business activity
...
It is
done with a view to:
To reduce a given line or product to fixed types, sizes and characteristics
...
To establish standards of excellence and quality in materials
...
i
...
iii
...
Therefore standardization ensures:
The product is according to a predetermined type, form, design, size, weight, quality etc
...
Standards are established as regards quality of manufactured goods
...
Simplification aims to eliminate unnecessary diversity in products as more varieties would mean more
inventory, more machinery, more labour cost etc
...
3
...
This is done with a purpose of producing maximum possible output of the best quality at
minimum costs
...
a
...
To conduct time study, the job is broken into a number of elements and the time taken to complete
each element is noted with the help of a stopwatch
...
Many techniques such as process charts, operation research etc are used for this
purpose
...
Standard time required to do a job and number of workers to be employed
...
A standard task/fair day‘s work for the workman
iii
...
To determine labour costs and to frame suitable incentive schemes
...
Motion Study
It is a technique to closely observe movements of body of a worker involved in performing a
job in order to eliminate unnecessary movements
...
The study is generally conducted with the help of a movie camera
...
Then they instruct and educate workers how to eliminate the
unnecessary/ unproductive movements so that the workers get to know the best way of doing
a job
...
Finding the best method of doing work by developing the ideal sequence of motions
...
Identifying and eliminating unnecessary movements
...
Increase efficiency and reduce labour costs
...
Reduce human fatigue
...
Method Study
There may a number of possible methods of performing a job with different cost requirements
...
The purpose of method study is to minimize
production costs and use organization‘s resources such as land, labour, capital etc
...
Methods of production should not be decided by ‗rule of thumb‘ but after trying all methods and the
method that maximizes benefits with minimum cost must be selected
...
This technique
was used successfully by Ford Motor company and is used by the auto companies even today
...
Fatigue Study
This technique is conducted to find out:
1
...
duration of rest intervals
3
...
If an employee keeps working without rest pauses, physical and mental fatigue affects the health and
efficiency of workers
...
Taylor suggested that the time and frequency of the rest intervals should not be decided by manager‘s
wish/ experience
...
Duration, after which, an average worker starts getting tired and his efficiency starts
decreasing
...
Duration within which the worker gets refreshed to resume working
...
Meaning
2
...
1
...
2
...
1
...
Reduce human fatigue
3
...
*3
...
movie camera which keeps an eye on
(not the main diff:)
workers movements
...
Differential Piece Rate Plan
Taylor was a strong advocate of differential piece rate plan
...
This is the amount of work which an average worker working under proper working
conditions can perform during a working day
...
E
...
Workers producing Standard output or more, would get
Rs
...
40 per unit
...
50 = Rs
...
40 = Rs
...
190 would be enough to motivate the inefficient
worker to perform better
...
Also when the payment is given according to the number of units
produced, automatically the production will be maximized
...
Taylor gave the foll; techniques to apply scientific management:
Time Study+Motion Study +Method Study+Fatigue Study
Standardisation and Simplification
Functional Foremanship
Differential Piece Rate Plan
But it was realized that some of the techniques are not universally applicable
...
Functional Foremanship - This technique involves supervision of workers by 8 specialist foremen
...
2
...
This system of wage payment is also not universally applied
...
Also when products
are not homogeneous and require special care for quality, this method is not suitable
...
g can‘t be
applied in works of arts and craftsmanship
...
3
...
to enhance efficiency, while Simplification means eliminating
unnecessary diversity in products
...
E
...
Similarly simplification may not suitable
for organizations having the objective of wider diversification and expansion of line of products and
varieties
...
However
Firstly, some of the techniques are not universally applicable
...
They may not be
suitable for the overall management of all kinds of enterprises
...
Management should share a part of the profits or surplus with the workers
...
The latest development in scientific management is ‗LEAN MANUFACTURING‘
...
Class XII/ Business Studies: Study Material/ 23
HENRY FAYOL(1841-1925)
His career profile and his achievements:
Started working as an engineer in coal mining company in France in 1860
Became the managing director of the company in 1888
...
Major contributions of Fayol
Fayol was the first one to identify four functions of management: Planning, Organizing,
Directing and Controlling
...
He also suggested that activities of a firm should be divided into tecTechnical; Commercial;
Financial; Security; Accounting and Managerial
...
Based on his own experience, Fayol developed his concept of administration and propounded
14 principles of management, which act as guidelines for managers to perform managerial
activities
...
1
...
This will lead to specialization, improvement in performance, and speed and accuracy in doing
the jobs
...
Positive effects of following the principle
Improves efficiency of work
Facilitates specialization
Increases output
Increases speed, accuracy and quality of work
...
No specialization
Example: In a company, we have separate departments for finance, marketing, production and
Human resource development
...
2
...
Authority may be
official(formal and positional) or personal (informal)
...
There should be a balance between the authority and responsibility granted to a personality
...
Class XII/ Business Studies: Study Material/ 24
Positive effects of following the principle of
Parity Of Authority And Responsibility
Achieving targets on time
No misuse of authority
...
Difficulty in achieving target/Delay in work due
to less authority
Difficulty in fixing responsibility
Decline in confidence of employees
...
The sales manager should also have the authority to appoint sales representatives to achieve the
requisite sales target
...
3
...
According to Fayol, discipline requires good superiors at all levels, clear and fair agreements and
judicious application of penalties
...
Decline in reputation of the organization and
efficiency of employees
...
On the other hand superiors must also meet their commitments by meeting
their promises of increments, promotions and wage revisions etc
...
Unity Of Command
According to Fayol there should be one and only one boss for every individual employee
...
He felt that if this principle is violated “authority is undermined,
discipline is in jeopardy, order disturbed and stability threatened”
...
This principle resembles a military organization
...
No ego clashes between superiors/ cordial working
environment
...
In this situation the employee will get confused as to whose instructions must be followed by
him
...
Unity Of Direction
One head one plan- one manager and one plan for all operations having the same objective
...
Better co-ordination and control because
managers supervises all activities of the
group
...
Specialization
...
Each division
must plan its target and every employee of that division must put his efforts towards the achievement
of plan of their division under the direction of one head only
...
Subordination Of Individual Interest To General Interest
Management and employees must reconcile the interest of the individuals and general interest of
the firm
...
Class XII/ Business Studies: Study Material/ 26
Positive effects of following the principle of
Subordination Of Individual Interest To General
Interest
Organization benefits, and all benefit
equally, so it leads to everyone‘s welfare
Organization‘s objectives are fulfilled on
time
...
Mutual understanding and co-ordination
...
Conflicts and jealously among members
...
8
...
That is, it must enable employees to maintain a reasonable standard of living and must be within
the paying capacity of employer, be as per the minimum wages Act of the government and
comparable to average wage rate for similar work in the industry
...
Enhanced efficiency
...
Encouragement to dishonesty
Example: If in a particular year the organization has earned more profit, then apart from giving extra
profit to shareholders and owners, some part of the profit must also be given to employees in the form
of bonus
...
9
...
” The degree of centralisation
will depend upon the circumstances in which the company is working
...
Systematic delegation of authority across all levels in the firm = decentralization
...
Class XII/ Business Studies: Study Material/ 27
Positive effects of following the Principle
Of Centralisation And Decentralisation
Reduced workload of superiors
Better and quick decision making
Trains employees to be future
managers
Enhances confidence of employees
Adverse effect of violation of thePrinciple Of Centralisation
And Decentralisation
Complete centralization would lead to unnecessary
increase in workload of superiors, would discourage
initiative on the part of workers and reduce their
confidence level
...
Example: Determination of overall objectives and formulation of policies and procedures should be
centralized, while activities of routine work like purchase of raw materials, carrying out production
can be decentralized
...
Principle Of Scalar Chain
According to Fayol, “Organisations should have a chain of authority and communication that
runs from top to bottom and should be followed by managers and the subordinates
...
C
B
A
D
E
Ordinarily, communication should flow from A to B
to C to D to E
...
Positive effects of following Scalar Chain
Orderly flow of information
Systematic functioning and no communication
gap
...
Chaos and indiscipline in the organization
...
Similarly reports on results achieved should be passed from lower to
higher levels through intermediate managers
...
Principle Of Order
According to Fayol,“People and materials must be in suitable places at appropriate time for maximum
efficiency
...
Order refers to orderly arrangement of men and materials i
...
No loss of time in finding and obtaining
resources
...
Also
toolkit for keeping tools should be kept in the factory/shop because of its easy approach for workers
...
12
...
This principle emphasises kindliness and justice in the
behaviour of managers towards workers
...
Equal, kind, fair and just treatment of subordinates by superiors and no discrimination on any
basis – religion, language, caste etc
...
It is in fact necessary to maintain discipline
...
Employees will get motivated, and it will
enhance their loyalty and devotion
...
Increase in absenteeism and labour turnover
Decline in efficiency of good workers
...
There should be same rules for availing medical
leave and the performance of the employees should be appraised on the same basis
...
Stability Of Tenure Of Personnel
“Employee turnover should be minimized to maintain organizational efficiency”, according to
Fayol
...
...
Increase their confidence and job
satisfaction
Helps in retaining good employees in
the organisation
...
Atmosphere of mistrust in the organization
...
Heavy recruitment expenses to replace staff
...
Example: A typist is shifted from production department to purchase department and then to another
department within a span of 4 months
...
13
...
Initiative means taking the first step with self-motivation
...
According to Fayol,
employees should be allowed to think and execute plans, to bring about improvements in work
related matters
...
They must observe
discipline
...
Positive effects of following the
Principle Of Initiative
Enhances creativity and motivation
Leads to enhanced sense of belongingness
and participation
Ensures co-operation from employees in
implementation targets
Adverse effect of violation of the
Principle Of Initiative
It suppresses creativity on the part of
employees
...
Example:
Before setting up the plan, the manager must welcome the suggestions and ideas of
employees to allow maximum participation
...
Class XII/ Business Studies: Study Material/ 30
14
...
Fayol emphasized on team work and harmony among
employees
...
A manger should replace I with we in organizational communication
...
If two report sick, then rest of the 8 should cooperate and achieve the target on time
...
Meaning It means that a subordinate should receive It advocates ‗one head, and one plan‘ for a
orders and instructions from one boss only
...
The activities should be directed
towards the common goals
...
Scope
This principle is related to the functioning This principle is related to the functioning of
of personnel
...
Purpose
The main purpose of unity of command is The purpose of unity of direction is to direct
to avoid confusion and fix up the the efforts of employees of one department
responsibility of the employee
...
4
...
overlapping of various activities
...
Fayol
Points of distinction
Taylor
Fayol
1
...
Concerned more with efficiency
administration or managers
...
Level/
perspective
Shop floor level of a factory
...
Started his studies and approach from the
top level and then proceeded downward
with emphasis on unity of command, unity
of direction and co-ordination
...
Emphasis
On standardization of work and tools
...
shop level
...
Focus
Improve productivity of workers and Develop principles
eliminate all kinds of wastes
...
5
...
They can be
principles to enhance production at the applied in all functional areas like purchase,
shop(factory ) level
...
Etc
...
Personality
That of a scientist
That of a researcher and practitioner
7
...
Universally applicable
Applicability
8
...
Unity of command
...
Stress on human Taylor focused more on increasing Fayol showed more regard for human
productivity rather than human resources
...
10
...
Basis
formation
General Theory of Administration
of Observation and experiments
12
...
Unity
Command
Scientific Management
He was called
Management‘
...
Did not feel that it is important as under
functional
foremanship a worker received orders from
eight specialists
...
Division of Work
2
...
Discipline
Formalised Controls
Informal, Peer pressure controls
4
...
Unity of Direction
Functions have only one plan and one Functions have
boss
multiple bosses
6
...
Remuneration
personnel
committed
of Reasonable Pay reward system
to
multiple
plans
the Organisation is committed
employees and vice versa
to
and
the
Performance based reward system
8
...
Scalar Chain
Hierarchical,
communication channel
10
...
11
...
obtained
system
for
through Commitment obtained through a sense of
ownership
12
...
Initiative
Managers conceive and implement new Workers conceive and implement new
ideas
ideas
14
...
He developed ‗The General Theory of management‘
...
He developed ‗Scientific Management‘
...
Realized that problem of personnel and its management is the key to industrial progress
...
Developed their ideas through practical experience and experiments and expressed them
through their books
...
Class XII/ Business Studies: Study Material/ 33
Conclusion
Thus we see that Taylor and Fayol belonged to different schools of thought, but their approaches
are mutually complementary
...
Thus works of Taylor and Fayol are important and complement each other since no organization
can function effectively without mutual help and co-operation of managers and employees
...
Here
Forces = economical, social, political, technological etc
Institutions = suppliers, customers, competitors etc
It includes all those constraints and forces external to a business within which it operates
...
Influence of Business Environment
Positive (I
...
opportunities)
Features of Business Environment:
Negative (I
...
Constraints/Threats)
Importance of Business Environment:
(benefits of environment scanning)
1
...
Specific and General Forces:
3
...
Enables
The
Firm
To
Identify
Opportunities And Getting First Mover
Advantage:
5
...
Helps Firms To Identify Threats And
Early Warning Signals For Adverse
Conditions:
6
...
Helps In Tapping Useful Resources:
7
...
Helps In Coping With Rapid Changes:
4
...
Helps In Assisting In Planning And
Policy Formulation:
6
...
Totality of External Forces:
Business environment is the sum total of ALL factors external to the business
...
Specific and General Forces:
Specific forces affect the business directly and immediately in their day to day working
...
Inter-Relatedness:
Different aspects of the business are inter-related
...
4
...
5
...
6
...
It becomes very difficult to comprehend the exact effect that different components have
on a particular factor
...
Relativity:
That is, it differs from country to country and region to region
...
The process
by which firms monitor their relevant environment to identify opportunities and threats affecting their
business is called Environment Scanning
...
Enables The Firm To Identify Opportunities And Getting First Mover Advantage:
Helps the firm to capitalize on early opportunities
...
2
...
E
...
MNCs introducing new products to compete with Indian firms
...
Helps In Tapping Useful Resources:
The business needs several inputs such as finance, raw materials, labour etc to carry out its
activities
...
Business depends on the envt for its inpouts and as an outler for its outputs
...
Class XII/ Business Studies: Study Material/ 36
4
...
In order to cope with the pace at which environment is changing, managers must
understand the environment and develop suitable courses of action
...
Helps In Assisting In Planning And Policy Formulation:
Since environment is a source of both opportunities and threats, its understanding is the
basis of planning and policy formulation
...
g: if the firm is anticipating an increase in competition, it will plan its policies
accordingly
...
Helps In Improving Performance:
Enterprises that monitor and adapts to changes happening in the environment not only
improve its present performance but also continue to succeed in the long run
...
The firm can alter or modify these factors to suit the requirements
of specific situations and therefore these are referred to as
controllable variables
...
The firm‘s
success depends, to a large extent, on its adaptability to the
environment and its ability to properly design and adjust
controllable variables to suit the business environment
...
They
include:
1
...
3
...
5
...
They include:
1
...
3
...
5
...
The firm‘s success depends, to a large extent, on its adaptability to the environment and its
ability to properly design and adjust controllable variables to suit the business environment
...
Economic Environment:
2
...
economic systems prevailing in the external
environment of a business
...
demand for products especially luxury goods
like TV, radio etc increases
...
Legal Environment:
4
...
rules that have to be followed by all members of
Examples: ↑ in employment of women => ↑in
the business community
...
control production, supply and distribution of
and trading in commodities essential for human
beings
...
Technological Environment
Includes new approaches to producing of goods and services e
...
new procedures/ equipments etc
...
Class XII/ Business Studies: Study Material/ 38
General Environment
1
...
Economic Conditions= inflation rate, level of income, distribution of income and wealth,
consumers‘ income, debt and spending, employment rate, balance of payment, stage of
development of economy etc
...
g
...
Economic Systems= influences freedom of operations or openness of business
...
Therefore we see that the business influences freedom of operations or openness of business
environment consists of a large number of factors that exercise a strong influence on firms‘ policies
and actions
...
India is a mixed economy and so Public and Private sectors Coexists
...
Except for industries of national significance (e
...
defense) the private sector was
allowed to invest in all industries
...
Social Environment: Describes the characteristics of the society in which the organisation exists
...
Examples:
↑ in employment of women => ↑in demand for consumer durables such as refrigerators
and other household items
...
As awareness of society and focus on environment ↑, business focuses on environment
friendly production techniques and avoiding unethical business practices
...
The ideology of the government in existence,
the governments attitude to industries, lobbying efforts of interest groups etc are all examples of
the factors in the political environment
...
A number of MNCs wound up operations in the ‗70s because of the Janta party‘s policy of
restricting growth of MNCs in the country but with the opening up of the economy in the ‗90s,
there has been a boost to foreign investment and entry of MNCs in the country has seen a
renewal
...
Legal Environment:
It includes various legislations passed by the parliament and State Legislatures and prescribes
rules that have to be followed by all members of the business community
...
The Standards of Weight and Measurement Act, 1976 = Applicable for those goods that are
sold or distributed by weight or measure or number
...
Consumers Protection Act, 1986 =it provides for better protection of consumers‘ interests
...
r
...
Industries (Development and Regulation) Act, 1951 = to control the volume and quantity of
production and distribution
...
Foreign Exchange Management Act = regulates stock and flow of foreign exchange in India
...
3
...
g
...
These factors bring about improvement in techniques of production and may lead to economy
in cost, time etc or better quality products
...
Examples :
o Colour TV took away the share of Black and white TVs
...
Features of NEP (New Economic Policy) 1991:
Since ‘91, India has been following a threefold strategy of Globalization, Liberalisation and
Privatization
...
Class XII/ Business Studies: Study Material/ 40
The three main strategies adopted for the above may be defined as follows:
1
...
It leads to the emergence of a cohesive
global economy
...
These regulations were with respect to (a) licensing of imports, (b) tariff restrictions
and (c) quantitative restrictions
...
Import Liberalisation
b
...
Reforms w
...
t foreign exchange
2
...
That is relaxing rules and regulations which restrict the growth of the private sector and allowing
the private sector to take part in economic activities that were earlier reserved for the government
sector
...
Abolishing licensing
b
...
Removal of restrictions on movement of
goods and services
...
Freedom in fixing prices
...
Reduction in tax rates and unnecessary
controls
f
...
Making it easy to attract foreign capital
...
Privatization:
Refers to the reduction of the role of the public sector in the economy of a country
...
Sale of all/some asses of the public sector enterprises
...
Leasing of public enterprises to the private sector
...
Transfer of management of the public enterprise to the private sector
...
Adopted a policy of planned disinvestment of the public sector
b
...
► Small –scale sector accorded due recognition and assured of all help
The broad features of this Policy are:
a
...
b
...
c
...
Policy towards foreign capital investment and technology import was liberalized – the share of foreign
equity participation was increased and in many activities 100% FDI was permitted
...
Automatic approval for technology agreements for priority industries allowed within specified
parameters (lump sum payment not exceeding $20 lakhs and royalty up to 5% on domestic sales and
8% on imports)
e
...
Very Important: Impact of Changes in Government Policy on Business and Industry
1
...
This competition is from MNCs, imports, existing firms and new entrants to the industry
...
2
...
Thus now the business
is faced with more demanding consumers
...
Rapidly Changing Technological Environment:
Because of protected environment, earlier the Indian firms‘ expense on research and
development was much lower than the world average
...
But increased competition forced the firms to focus on competitive advantage and core
competencies and therefore, investment in R & D and innovation have become inescapable
for Indian firms
...
o Positive = innovation and changes in products + saving in production costs
o Negative = firms investment ↑+ tough challenges for smaller firm
4
...
But post 91, the conditions have now changed drastically and the firms can no longer use
the lessons learnt from their past mistakes to act as a guide to future decision making
...
The market forces also are now more turbulent as a result of which
enterprises have to constantly modify their operations
...
Need For Developing Human Resources:
Indian enterprises have always faced a shortage of trained staff
...
o Positive = better qualified and more efficient employees + higher salary structures
o Negative = firms investment ↑
6
...
The market was a sellers‘ market with
little emphasis on cost reduction, improvement in quality, up gradation of technology
consumers‘ convenience etc
...
After ‘91, the government removed restrictions investment takes place in areas of demand and
there has been a shift from shortages in the various sectors to surplus and therefore it has now
become a buyers‘ market and now firms have to analyse the market first and then produce
goods accordingly
...
Loss Of Budgetary Support To The Public Sector:
The public sector has realized that in order to be more effective, they have to be more
efficient and raise their own resources and the central government‘s budgetary outlay has
gone down over the years
...
Interaction between business and environment
2
...
It is one of the basic managerial functions
...
Koontz and O‘Donnell - ―Planning is deciding in advance what to do, how to do, when to do, and
who to do it
...
It makes it
possible for things to occur which would not otherwise happen
...
1
...
- If goals are well defined, employees are aware of what the org
...
- Departments and individuals in the org
...
2
...
- Planning pre-assesses the future uncertainties + enables the firm to face these uncertainties with
minimum wastage of resources
...
3
...
depts
...
- Avoid misunderstandings, eliminates useless activities &provides clarity of thought &action so
work is carried out smoothly w/o interruption
...
Promotes Innovative Ideas
- Planning is an intellectual process – looks for scope for finding better ideas, methods and procedures
to perform particular job
...
Class XII/ Business Studies: Study Material/ 44
5
...
- Involves choice among various alternatives & activities →examining & evaluating each alternative &
choosing the most appropriate one
...
6
...
-
Establishes Standards Of Control
...
determines the ‗what‘, ‗why‘ and ‗how‘ of everything
...
By comparing actual work performance with standards, deviations are found and corrective action
is taken
...
Specifies the objectives to be attained in the future and steps necessary to achieve them
...
Thus planning is purposeful
...
goals
...
Primary Function Of Management:
- Precedes all other functions & all other functions are done within framework of the plans drawn
...
3
...
in all organization, all levels & all depts
...
as a whole
Middle M → Prepares dept
...
4
...
- Prepared for specific time period, after which, new plans have to be prepared
...
Futuristic:
- Considered to be forward looking, as it requires looking ahead & forecasting future events
(customers‘ demand, competition, government policies etc
...
6
...
- It involves choosing the best course among various alternative courses of action available
...
Class XII/ Business Studies: Study Material/ 45
7
...
Intellectual activity that requires logical & systematic thinking rather than empty guesswork
...
Limitations of Planning:
1
...
- But circumstances may change & following the plan may actually turn out to be detrimental to the
org if there is no scope for flexibility
...
This leads to rigidity
...
May Not Work In A Dynamic Environment
- The environment consists of a no
...
- External dynamic factors (govt
...
They keep changing and disturb the functioning of the org
...
3
...
Middle M & others only follow & carry
out the orders in a manner laid down in the plan
...
4
...
- Also there may be incidental costs (e
...
expenses on boardroom meetings, discussions w/ experts
etc
...
e
...
5
...
for collection, analysis & interpretation of info for planning
...
May become impractical during emergencies & crisis when on the spot & quick decisions are
necessary
...
6
...
- Secondly, Planning provides a base for analyzing future courses of action
...
So even previously tried & tested successful plans may not work again because of
change in circumstances
...
Class XII/ Business Studies: Study Material/ 46
-
CONCLUSION:
Above points show that performing the function of planning does not automatically ensure success
for an org
...
But that does not mean that managers should stop planning
...
External limitations of planning are:
Planning sometimes fails despite the best efforts of managers
...
These are:
Natural calamities
Changes in economic policy
Changes in technology
Changes in fashion, tastes etc
...
Planning Process (Steps of Planning)
1
...
- Objectives can be set for the entire org
...
within the org
...
would contribute towards overall objectives
...
- E
...
Objective could be to achieve sales, expansion of business etc
...
-
Developing Premises:
Plans are made on the basis of some assumptions
...
All managers involved in planning should be familiar w/ them, cuz plans are expected to operate &
reach their destination subject to these
...
•External premises: Changes in technology, population growth, competition, govt
...
Identifying Alternative Courses Of Action:
- After setting the objectives, managers make a list of alternatives through which the org
...
- E
...
Sales could be increased through any of the following ways:
By enhancing advertising expenditure
Appointing salesmen for door-to-door sales
By offering discounts
By adding more product lines
...
Evaluating Alternative Courses Of Action
- Positive & negative aspects of each &every proposal need to be evaluated to determine their
feasibility and consequences in the light of each objective to be achieved
...
g
...
Riskier the investment, higher the returns it is
likely to give
...
of earnings, taxes, earnings per share etc
...
5
...
-
Selecting The Best Alternative
Real point of decision-making→ Best plan has to be adopted and implemented
...
Most plans may not be subjected to mathematical analysis
...
Sometimes a combination of plans may be selected instead of one best course
...
For implementing the plans, managers start organizing & assembling resources for it
...
g
...
This step
would also involve organizing for more labour and purchase of machinery
...
Follow Up Action
- This involves monitoring the plans and ensuring that activities are performed according to the
schedule
...
Secondary/derivative/Supporting plans*
Secondary plans flow from the basic plan
...
The secondary plans are always in conformity with the basic plan e
...
are prepared
...
Derivative plans are pillars
for the achievement of the master plan
...
Single use plans apply to activities that do not recur or repeat
...
Such Plan is developed to meet the needs of a unique situation
...
Examples : budgets, programmes and projects
...
They are usually made once and retain their value over a period of years while undergoing
revisions and updates
...
Include policies, procedures, methods and rules
...
Strategy, Objective
Objectives:
Desired future position that the firm wants to reach
...
They are given in quantitative term
Are generally written
Contain a time deadline
Should be challenging but achievable
E
...
earn 20% profits in the next financial year
...
Define boundaries within which decisions can be
made
...
Define broad parameters and managers use their
discretion in applying a policy
...
g
...
Method
Formalized and standardized ways of
accomplishing repetitive and routine jobs
...
Helpful in simplification, standardization and
systematization of work specially where
alternatives exist
Saves time, money and effort and increases
efficiency
...
g written down or straight line method of
recording deprecation
Strategy:
Provides broad contours of a firm‘s business
...
Includes 3 dimensions:
o Determining long term objectives
o Adopting a particular course of action
o Allocation of resources necessary to achieve
the objective
...
Into consideration
Forms firms‘ identity
...
g
...
Procedure
Set of sequential steps determined in advance for
handling (that is initiating, carrying thro and
completing) future activities
Are given in a chronological order
...
Enforce a policy and to attain pre-determined
objectives
E
...
selection procedure
...
Serve as guides and leave no scope for discretion
...
Guide action without specifying a time sequence
E
...
no smoking in the factory premises
Class XII/ Business Studies: Study Material/ 49
Budget
Programme
Statement of expected result expressed in numerical
terms
It is a single use plan that deals with allocation of
resources and expected results
...
E
...
Cash budget
Detailed statement of a project that outlines the
objectives, policies, procedures, task assignment,
resource flows and budges to implement any
course of action
...
Types of Plans
A) OBJECTIVES:
- Objectives are the ends towards which the physical & human energies of the enterprise are
channelized
...
are integrated, coordinated and directed to achieve this end
...
They are set by the top level management
...
-
Reduce quality rejects to 2%
Increase sales by 10%
Cross the 30,000 crore mark turnover
To improve the communication system to hold
regular staff meetings and publish a newsletter
...
- This comprehensive plan will include (3 dimensions):
a
...
Adopting a particular course of action
c
...
Features
• Plans are made in view of the
competitors
and
other
environmental
factors
(economic, political, social,
legal)
that
affect
the
organization
...
A company‘s marketing strategy has to address certain
questions like:
a) Who are the customers
b) What is the demand for the product/
c) What is the pricing policy/
d) How do we advertise the product?
• Formulated
by
management
...
Similarly if an Indian firm anticipates entry of an MNC into the
Indian market with new substitutes it may decide one of the
following strategies to make the entry of the rivals difficult
...
top
Class XII/ Business Studies: Study Material/ 50
C) POLICY:
- Org
...
- These are general statements/ understandings, which guide thinking & decision-making
...
‘s intention to act in certain ways when specific types of circumstances arise
...
-
Features
General response to particular problem: guide managers in view of the repeated appearance of
similar problems/situations
Basis for objectives: Policies provide the routes to objectives
...
Discretionary: provide scope for executive judgment
...
For operational purposes,
managers at all levels also formulate their own policies
Examples: Recruitment policy, Pricing policy (for elite segment); ‗We don‘t sell on credit‘ is a policy
of the sales dept
...
- It gives a series of actions directed towards a goal
...
So it saves time
...
Cuts across all dept
...
g
...
)
Help in implementation of policies
Examples
Admission procedure, Selection procedure for employees, Passport/Visa, Procedure for placing an
order
...
Features:
•Methods are formalized/-standardized ways of doing routine jobs
•These are standard ways of doing jobs, though there is no penalty for violation of methods
•These are defined to increase efficiency
•They are usually manual/ mechanical ways to perform an operation
-
Examples
Depreciation methods: Straight line method, Written down value method
Methods of stocktaking: LIFO, FIFO, Training methods (e
...
orientation programmes, lectures etc
...
It is a combination of goals, policies, task assignments, resources flows etc
...
It spells out clearly the steps to be taken, resources to be used and the time taken to complete the
task
...
Example - Launching a new product
...
Advertising program
...
G) RULE:
- A rule requires that a specific and definite action be taken with respect to a situation
...
and elsewhere to do or not to do things, to
behave or not to behave in particular ways
...
•They help to improve efficiency
•Help in maintain discipline in the org
...
-
-
Features:
Presents the objectives of the enterprise in financial/Quantitative terms
...
Co-ordinates activities of various depts
...
Since budgets specify measurable goals to be achieved within a specific period of time (usually a one
year), they inject a sense of clarity in directing and performing the activities of the org
...
Class XII/ Business Studies: Study Material/ 52
Organizing
Meaning
Once the objectives and plans are laid down, management has to identify and establish productive
relationships between various activities and resources for implementing plans
...
The aim of organizing is to enable people to work together for a common purpose
...
‘
According to Louis Allen,‘ Organising is the process of identifying and grouping the work to be performed,
defining and delegating responsibility and authority and establishing relationships for the purpose of enabling
people to work most effectively together in accomplishing objectives
...
Clarity in working relationships
Assignment
positions)
Establishing reporting relationship
of
duties(
to
different
job
1
...
Optimum utilization of resources
4
...
Effective administration
6
...
Expansion and growth
IMPORTANCE (i
...
of creating a sound org
...
Benefits Of Specialization:
- The work is divided into different parts or ‗Jobs‘ and competent persons are appointed to handle all
the sub works
...
- Repetitive performance →worker to gain experience in that area →specialization
...
Class XII/ Business Studies: Study Material/ 53
2
...
- This removes ambiguity in transfer of information and instructions
...
3
...
- This helps in preventing confusion and minimizing wastage of resources and efforts and leads to
proper usage of material, financial and human resources
...
Adaptation To Change
- A properly designed = flexible where working relationships can be modified to suit changing
conditions in the environment and achieve smooth transition
...
- Provides much needed stability to the enterprise and it can survive and grow despite changes
...
-
Effective Administration
Organizing provides a clear description of jobs and working relationships
...
Clarity in working relationships → proper execution of work → management becomes easy →
effectiveness in administration
...
Development Of Personnel
- Under the process of organizing, delegation of authority is practiced
...
7
...
- New geographical territories can be used to increase the customer base, sales and profit
...
Koontz O‘Donnell, ―Organization is a process by which manager brings order out of chaos, removes
conflicts b/w people over work or responsibility and establishes an environment suitable for
teamwork
...
Identification & Division Of Work:
- The total work to be done should be divided into specific jobs as according to predetermined plans
...
It should have specific and
definite tasks to be performed
...
- Division of work → specialization of efforts and skills + avoids duplication of work
...
2
...
It facilitates specialization
...
- Aims at achieving co-ordination and facilitate unity of action
...
•Products: Textiles, chemical, power division etc
...
3
...
Once departments are formed, the dept is placed under the charge of an individual
...
Qualifications, experience, ability and aptitudes of people should be matched with duties
...
g
...
g
...
A‘s
...
Establishing Reporting Relationships:
- Granting requisite authority to enable employees to perform the job satisfactorily
...
- Creates management hierarchy = a chain of command from the top manager to the individual at the
lowest level
...
CONCLUSION: To sum up in the words of Koontz and O‘Donnell, ‗Organizing is the process by which
manager brings order out of chaos, removes conflict between people over work and responsibility and
establishes an environment suitable for teamwork
...
It is a framework within which managerial and operating tasks are performed
...
It may be vertical(authority responsibility relationships
...
Class XII/ Business Studies: Study Material/ 55
Types of Organisation Structure:
o
o Functional Structure:
Activities are grouped according to the specific functions to be performed
...
Suitability
1
...
2
...
3
...
4
...
Advantages of Functional structure
Limitations of Functional structure
1
...
Less emphasis on overall firm‘s objective
2
...
2
...
Facilitates control and coordination within a
department
4
...
Conflict in interest if departments are not
compatible
4
...
Makes training of employees easier
6
...
Benefits Of Specialization:
- Activities are divided into depts
...
- This results in more and better work being accomplished in much lesser time
...
&
are able to improve performance
...
Facilitates Coordination And Control Within The Department:
- There is similarity in the tasks performed
...
know what is expected out of them & that leads to effective
control over their activities
...
Increases Managerial & Operational Efficiency:
- Similarity in the tasks being performed → specialization → improved operational efficiency
...
4
...
, unnecessary duplication of effort is eliminated
...
- E
...
Function of finance is only carried by the finance dept
...
5
...
- E
...
employees of production department are given training of production techniques only
...
Ensures That All Functional Areas Get Due Attention
Limitations of Functional Structure:
1
...
head gives more weight to their departmental objectives → overall org
...
- Pursuing dept
...
interests can also hinder interaction b/w 2 or more depts
...
g
...
may make a very high quality product going contrary to
the org
...
2
...
- If dept
...
coordination becomes difficult
...
Conflict In Interest If Departments Are Not Compatible:
- Managers try to build their own functional empires & undermine the role of other depts
...
- E
...
: Sales dept
...
Such
dissension can prove to be harmful in terms of fulfillment of org
...
- Inter-departmental conflicts can also arise in the absence of clear separation of responsibility
4
...
- Functional heads do not get training for top management positions because they are unable to
gather experience in diverse areas
...
Suitability
1
...
2
...
Where different productive resources, manufacturing technologies and marketing methods are
required for different products
...
Firms having wide coverage or wide geographical area or having different market segments
...
Where an organization is in an expansions mode
...
e wants to grow, add more departments
...
Development of generalist managers
1
...
Proper basis for performance evaluation and 2
...
mistakes
...
3
...
decision making
4
...
Increase in costs due to duplication
Managers may ignore interests of the firm
Underutilization of performance*
Not suitable for medium or small scale
operations*
Advantages of Divisional Structure:
1
...
- This is because he gains experience in all the functions related to a particular product
...
Proper Basis For Performance Evaluation And Ease In Fixation Of Responsibilities For Mistakes
- All the activities of each div
...
Hence the divisional results (P/L) can be
assessed easily
...
- Hence, in cases of poor performance of the division, appropriate remedial action can be taken
...
Promotes Flexibility And Innovation And Faster Decision Making:
- As every div
...
independently w/o consulting other divisional managers
...
Facilitates Expansion And Growth
...
Conflicts Among Divisions
- Conflicts → specially w
...
t allocation of funds and between divisional heads
...
Consequently it hits the interest of the concern as a whole
2
...
g
...
) is reqd
...
- Gives rise to duplicity of efforts among divisions
...
3
...
managers have a lot of autonomy & with time, gain a lot of power & may ignore org
...
DIAGRAM:
Chief
Executive
Textiles
Production
Cosmetics
Department
Purchase
Soaps
Marketing
Finance
Class XII/ Business Studies: Study Material/ 59
Basis of differences between functional and divisional structure:
Basis
Functional structure
Divisional structure
1
...
Product specialization
2
...
Responsibility
(for profits)
Cannot be fixed on one department
Can be
products
4
...
Easier, autonomy as well as the
chance to perform multiple
functions helps in managerial
development
5
...
6
...
Easy, because all functions
related to a particular product
are integrated in one department
...
Difficult because of decentralization of
authority at divisional level
...
FORMAL ORGANIZATION:
-
Refers to the org
...
It specifies clearly the boundaries of authority & responsibility and there is a systematic coordination
among the various activities to achieve organizational goals
...
Features of Formal Organization:
1
...
This clarifies who has to report to whom
...
Means To Achieve Organizational Objectives
- It is a means to achieve the objectives specified in the plans
...
3
...
are coordinated, interlinked & integrated through the formal org
...
Deliberately Designed By Top Management
- The top management deliberately creates this org for successful achievement of objectives of org
...
Emphasis On Work:
- It places more emphasis on work to be performed than inter personal relationships among
employees
...
Easy To Fix Responsibilities: Since mutual relationships are clearly defined
...
Avoids Duplication Of Effort: In FO, work is systematically divided among various depts
...
∴ No chance of overlapping of work
...
Maintains Chain Of Command : FO clearly defines superior subordinate relationships, i
...
who
reports to whom
d
...
e
...
FO brings stability in the org
...
Working continues in spite of old employees leaving and new employees joining
...
Work is bound by rules & while following the scalar chain of command, decisions & actions get
delayed
B) Rigidity/ Curbs Creativity
In this org
...
Thus, their initiative gets slackened
Poor org
...
Does not allow deviations from set policies
...
Works
FO gives importance to work only
...
Does not give a complete picture of how an org
...
Class XII/ Business Studies: Study Material/ 61
-
IV
...
This network of social & friendly groups forms another structure in the org
...
structure
...
& its main purpose is psychological
satisfaction
...
Features of Informal Org:
1
...
- IO emerges to meet the social and psychological needs of the people
2
...
But there are group norms to be
observed
...
g
...
and belonging to a particular community form a separate group
in an informal way and gradually some norms emerge and all the members are bound to observe
them
...
Independent Channels Of Communication
- Info flows in all directions and it is very difficult to trace the source of information
...
Emerges Spontaneously
- An IO is not deliberately created by management but comes into existence on the basis of personal
interaction, relationships, common interest, tastes, languages, likes etc
...
No Definite Structure Or Form
- It is a complex network of social relationships and it cannot be defined because an employee at the
lowest level can have relationship at the top level
...
Faster Spread Of Communication And Quick Feedback
- IO cuts across formal channels of communication
...
- Through IO, the managers can get to know the real feedback on various policies and plans
2
...
They have an outlet to
release all their emotions and feelings and provide relief from the monotony created by FO
...
- This enhances their job satisfaction since it gives them a sense of belongingness in the org
...
Compensates For Inadequacies In The Formal Structure
- E
...
: Improper and arbitrary use of authority by managers can be challenged so managers act
carefully
...
Spreads Rumors
- IO is a breeding ground for rumors esp
...
- An outbreak of rumor can cause serious harm to the enterprise and its management by
carrying incorrect information throughout the organization
...
Resistance To Change
- IO generally prefers status quo & the existing work routine
...
- Thus, management has to face resistance to new work methods
...
3
...
- An IO evolves its own norms
...
In such a case it becomes very difficult to achieve the
goals of the formal org
...
Meaning
Structure
relationships
management
authority
by the
Network of social relationships
arising out of interaction among
employees
2
...
Authority
Arises by virtue of position in
management
Arises out of personal qualities
4
...
Flow of
Communication
Communication
takes
through the scalar chain
6
...
Leadership
Managers are leaders
...
of
created
Informal Organization
place
Flow of communication is not
through a planned route
...
Class XII/ Business Studies: Study Material/ 63
Differences Between Formal And Informal Organisations:
NCERT Points
Non NCERT Points
Meaning
Formation *
Origin
Stability*
Authority
Adherence to rules*
Behavior
Inter-dependence*
Flow of communication
Rigidity*
Nature
Focus*
Leadership
Depiction in Organisation chart*
Structure*
Purpose*
Delegation
According to Louis Allen, ‟Delegation is the process a manager follows in dividing the work assigned
to him so that he performs that part which only he, because of his unique organizational placement, can perform
effectively and so that he can get others to help him with what remains‟
...
Delegation does not mean abdication
The manager, who assigns the job to the subordinates, shall still remain accountable for the
performance of the assigned tasks
...
It can never be passed or
delegated
...
o
Features of Delegation:
o
o
Does
not
mean
responsibility
abdication
of
o
Does not diminish authority of superior
o
Delegated from higher to lower level
o
Accountability retained by managers
Importance of Delegation:
1
...
Employee development
3
...
Facilitation of growth
5
...
Better coordination
7
...
- Moreover, the authority granted to a subordinate can be taken back and re delegated to another
person
...
B) Delegated From Higher To Lower Level:
- Delegation refers to the downward transfer of authority from a superior to a subordinate
...
because it enables a manager to use his time
on high priority activities
...
- It also satisfies the subordinate‘s need for recognition & provides them w/ opportunities to develop
& exercise initiative
o
Importance of Delegation:
1
...
Thus, the manager is able to concentrate on more important aspects of his work
...
Employee development:
Subordinates are required to exercise their authority to handle situations and to solve
managerial problems
...
Through the experience and competence acquired, they are prepared to take up higher
responsibilities in course of time
...
Motivation of employees:
Delegation provides a feeling of status and importance to subordinates, builds their
self-esteem and enhances their job satisfaction and confidence level
...
4
...
These trained and experienced employees are able to play significant roles in the launch
of new projects
...
Basis of management hierarchy:
Delegation of authority establishes superior subordinate relationships, which are the
basis of management hierarchy
...
It
gives meaning and content to the managerial jobs
...
Better coordination:
Delegation helps to define the authority, responsibility and accountability related to the
various positions in the organization
...
Conclusion: From the above discussion it is clear that delegation of authority is necessary for the
smooth functioning of work and facilitates higher efficiency levels in the organization
...
Class XII/ Business Studies: Study Material/ 65
In the words of Allen,‘ Once a man‟s job grows beyond his personal capacity, his success lies in his
ability to multiply himself through his people
...
Assignment of Work/ Responsibility = obligation to perform certain activities
...
Delegation of Authority = it is the right to decide, to direct others and to take action in
achieving the organisational objectives
...
Creation of Accountability = it is the obligation to carry out responsibilities and exercise
authority in terms of established performance standards
...
Implies right to us resources and control
others
Is bound by limits imposed by laws and
rules and regulations of the firm
Can be delegated
Flows downwards
...
Includes all activities that
must be performed to carry
out a certain duty
...
Flows upwards
Being answerable for
the final outcome
Created because of
delegation of authority
and responsibility
...
Cannot be delegated
Flows upwards
Basis
Authority
Responsibility
Meaning
Right to command
...
Delegation
Can be delegated
...
Origin
Arises
from
position
...
subordinate to superior
...
Accountability
perform
an Answerability for outcome
of the assigned task
...
delegated Arises from responsibility
...
Responsibility arises out of authority and accountability arises out of responsibility
...
E
...
They are
also answerable for the results of their departments
...
Entrustment Of Responsibility
- In the process of delegation every superior has to define the jobs to be performed by his
subordinates
...
He has to further decide on the allocation of
duties to his subordinates
...
Grant Of Authority
- It is giving the right to subordinates to decide & act & use the necessary resources & report to
superior
...
- Managers at all levels derive authority granted by his superiors and confer a part of it on his subs
...
Creation Of Accountability
- The subordinates are assigned responsibility that creates obligation to carry out the tasks assigned
...
o
o
o
Decentralization
Decentralisation of authority means dispersal of authority to take decisions throughout the
organization, upto the lower levels
...
This empowers lower levels to take decisions
regarding problems faced by them without having to go to the upper levels
...
‟
Centralization = authority retained at top level and Decentralization = Systematic delegation of
authority at all levels and in all departments of a firm
...
o
o
In case of a decentralized firm, Top level retains authority for:
o
Policies and decisions w
...
t the whole firm
o
Overall control and coordination
Middle and lower levels have authority to take decisions w
...
t tasks allocated to them
...
Develops initiative among subordinates
Helps to promote self-reliance and confidence amongst the subordinates
...
2
...
They learn how to decide
and develop managerial skills
...
3
...
- As a result more accurate and faster decisions can be taken
...
4
...
They can devote greater time
and attention to important policy matters by decentralizing authority for routine operational
decisions
...
5
...
Each department or
product division is given sufficient autonomy for innovations and creativity
...
Better control
- Managers at all levels have adequate authority to make changes in work assignment, to change
production schedules, to recommend supervision and to take disciplinary actions
...
- Control can be made effective by the evaluating the performance of each decentralized unit in the
light of clear and pre determined standards
...
Decentralisation must always be
balanced with centralisation in areas of major policy decisions
...
Definition/
It refers to entrustment of responsibility
and authority from a superior to his
subordinate
...
It refers to systematic delegation of authority to
the lower levels in the organization
...
2
...
3
...
Control is exercised in a general manner
...
4
...
Decentralisation is not compulsory
...
Purpose
To reduce the burden the burden of a
manager
...
6
...
Decentralisation is not a process
...
7
...
It involves the entire organization
...
8
...
The executive remains
liable to his superior even after delegation
...
The executives holding authority
are held liable
...
Freedom of
action
There is lesser freedom of action because
there is a constant and continuous
supervision by the manager
...
Once the
authority is decentralized there is only periodic
appraisal and no constant supervision
...
Withdrawal of
authority
Delegated authority can be withdrawn by
the delegator
...
Decentralisation authority cannot be
withdrawn easily
...
According to the
principle of span of control, there is a limit to the number of subordinates which a manager can supervise and
control
...
Factors affecting span of control
1
...
i
...
2
...
3
...
On the contrary unskilled employees need more guidance, so narrow span of control is needed
...
Nature of job: If routine jobs have to be performed, then there can be wide span, but for specialized and
challenging jobs, a narrow span of control is preferred
...
This is
achieved by identifying requirement of work force, followed by recruitment, selection, placement,
promotion, appraisal and development of personnel to fill the roles designed into the organisation
structure
...
Role Of Staffing Function In A New Enterprise
o
o
o
In a new enterprise, the staffing function follows the planning and organising functions
...
Once the number and types of personnel to be selected is determined, management starts with the
activities relating to recruiting, selecting and training people, to fulfill the requirements of the
enterprise
...
Need for Staffing:
o
(i
...
why is staffing function needed by a firm and is considered to be a field of study)
1
...
Basically, staffing fills the positions as shown in the organisation structure
...
Emphasis on the Human element as qualities like the aptitude, attitude, commitment of
employees: help in fitting the right person to the right job
...
Hence, staffing is the most
fundamental and critical drive of organisational performance
...
Human resources
are the most important asset of an organisation
...
The ability of an organisation to achieve its goal depends upon the quality of its human
resources
...
4
...
Researches on various
aspects of staffing i
...
, recruitment, selection, compensation and incentives, train-ing and
development, can be utilised for better results
...
e
...
Helps in discovering and obtaining competent personnel for various jobs;
b
...
Ensures the continuous survival and growth of the enterprise through the succession
planning for managers;
d
...
By avoiding ‗over manning‘,
it prevents under-utilisation of personnel and high labour
costs
...
Improves job satisfaction and morale of employees through objective assessment and fair
reward for their contribution
...
Some of these responsibilities will include
a
...
c
...
e
...
In a large organization, as the number of persons employed increases, a separate department called
the human resource department is formed which has specialists in managing people
...
The number of human resource specialists and size of this department gives an indication of the size
of the business as well
...
Their duties are:
a
...
e
...
Analysing jobs, collecting information about jobs to prepare job descriptions
...
Developing compensation and incentive plans
...
Training and development of employees for efficient performance and career
growth
...
Maintaining labour relations and union management relations
...
Handling grievances and complaints
...
Providing for social security and welfare of employees
...
As organizations grow and number of people employed increases, a separate department called
the human resource department is formed which consists of specialists who are experts in dealing
with people
...
But today staffing is a part of HRM which encompasses not only staffing but also a number of
other specialized services such as job evaluation, management of labour relations
...
Its purpose is to enable every human being working in the organization to make his best possible
contribution
...
These are:
1
...
3
...
Human resource planning
Recruitment
Selection
Developing compensation and
incentive plans
5
...
Performance Appraisal of employees
7
...
Providing for social security and welfare of
employees
o
Thus we see that human resource management is a much broader concept and includes a wide
range of activities and staffing is an integral part of human resource management
...
o Industrial Revolution--- led to trade unions---(Labour welfare Officer)
o Introduction of factory system led to employment of large number of labour under
one roof-- (Personnel Officer/Manager)
o Human Relations Approach--- (Human Resource Manager)
Staffing is both a function of management just like planning, organising, directing, and controlling as
well as a distinct functional area of management just as marketing management and financial
management
...
e
...
Class XII/ Business Studies: Study Material/ 73
Steps in Staffing Process:
1
...
2
...
Selection
4
...
This would reduce turnover,
absenteeism and accidents and increase the morale of employees
...
5
...
But in small organisations the line manager is required to perform all
the functions of management viz, planning, organising, staffing, directingandcontrolling
...
6
...
Promotion and carer planning
8
...
a
...
b
...
In fact such an
exercise would reveal whether we are understaffed, overstaffed or optimally staffed
...
Translate the manpower requirements into specific job description and the desirable
profile of its occupant — the desired qualifications, experience, personality
characteristics etc
...
The information
generated in the process of writing the job description and the candidate profile may be used
for developing the ‗situations vacant‘ advertisement
...
Both internal and external sources of recruitment may be
used
...
The selection process
serves two
important purposes:
a
...
it enhances the self-esteem and prestige of those selected and conveys to them the
seriousness with which the things are done in the organisation
...
He is taken around the
workplace and given the charge of the job for which he has been selected
...
Orientation is, thus, introducing the selected employee to other
employees and familiarizing him with the rules and policies of the organization
...
(v) Training and Development: By offering the opportunities for career advancement to their
members, organisations are not only able to attract but also retain its talented people
...
But in small organisations the line manager is required to perform all
the functions of management viz, planning, organising, staffing, directing and controlling
...
(vi) Performance Appraisal: After the employees have undergone a period of training and they
have been on the job for some time, there is a need to evaluate their performance
...
The employee is expected to know what the standards are
and the superior is to provide the employee feedback on his/her performance
...
(vii)
Promotion and career planning: Promotions are an integral part of people‘s career
...
It usually means more pay,
responsibility and job satisfaction
...
It may be in the form of direct financial payments like wages, salaries
...
time based: A time based plan means salary and wages are paid either daily, weekly or
monthly or annually
...
performance based
...
For example, a worker may be paid according to the number of
units produced by him/her
...
c
...
d
...
Primary/Major Aspects of Staffing
= Recruitment (identifying and attracting staff) + Selection(assessment, evaluation and final match) +
Training(acquainting and skill development)
...
The various activities involved with the process of recruitment includes
Identification of the different sources of labor supply,
Assessment of their validity,
Choosing the most suitable source or sources, and
Inviting applications from the prospective candidates, for the vacancies
...
Motivated
employees
and higher morale of
employees
...
Simple and reliable
3
...
Surplus staff can be
moved to areas that have
shortage
5
...
inbreeding
2
...
Filling all vacancies thro
internal source is not
possible
4
...
Reduce productivity of
employees
1
...
Wider choice
3
...
Competitive Spirit
1
...
Lengthy process
3
...
Economy
2
...
Extent of choice
4
...
Quality of recruitment
Q
...
An enterprise has to tap external sources for various positions because all the vacancies cannot be
filled through internal recruitment
...
Class XII/ Business Studies: Study Material/ 76
to
I
...
Transfers:
It involves shifting of an employee from one job/department/ shift to another, without a
substantive change in the responsibilities and status of the employee
...
, but not
necessarily salary
...
helpful in avoiding termination and in removing individual problems and grievances
...
Transfers can also be used for training of employees for learning different jobs
...
Promotions:
Promotion leads to shifting an employee to a higher position, carrying higher
responsibilities, facilities, status and pay
...
Improves motivation, loyalty and satisfaction level of employees
...
Motivated employees and higher morale of employees
...
Employees become committed, loyal and have job satisfaction => organizational peace
...
Simple and reliable
Simplifies selection process = evaluation = accurate and economical
...
3
...
Ind Tr ≠ needed as candidates are already a part of the firm
4
...
5
...
Limitations - Internal Sources
1
...
2
...
3
...
Competition hampered
5
...
External Sources Of Recruitment:
1
...
Job seekers assemble outside the firm on the specified date & selection is done on spot
...
Such workers are known as
casual or ‗badli‘ workers and theyare paid remuneration on daily wage basis
...
Suitable for filling casual vacancies when there is a rush of work or when some permanent workers
are absent
...
Casual Callers:
- Many reputed biz orgs keep a database of unsolicited applicants in their offices
...
- A list of such job-seekers can be prepared & can be screened to fill the vacancies as they arise
...
3
...
- Most of the senior positions of industry as well as commerce are filled by this method
...
- Advertisement gives the management a wider range of candidates from which to choose
...
4
...
are regarded as a good source of recruitment forunskilled
and skilled operative jobs
...
Benefits:
- Help to match personnel demand &supply by serving as link b/w employees and employers
...
- Many of the candidates referred by them may not be found suitable
...
-
Placement Agencies & Management Consultants:
Placement agencies provide a nationwide service in matching personnel demand and supply
...
Of candidates & recommend suitable names to their clients
...
Benefits:
Management consultancy firms help the orgs to recruit technical, professional & managerial
personnel
...
Class XII/ Business Studies: Study Material/ 78
6
...
- Many big orgs maintain a close liaison with the universities, vocational schools and management
institutes to recruit qualified personnel for various jobs
...
Recommendation Of Employees:
- Applicants introduced by present employees, or theirfriends and relatives may prove to be a good
source of recruitment
...
- A type of preliminary screening takes place because the present employees know both the company
and the candidates and they would try tosatisfy both
...
Labor Contractors:
- Labor contractors maintain close contacts with laborers and they can provide the reqd
...
Of
unskilled workers at short notice
...
-
Disadvantages:
If the contractor himself decides to leave the org
...
9
...
- The detailed requirements of the job and the qualities required to doit are publicized along with the
profile of the org where vacancy exists
...
Web Publishing:
- Internet is becoming a common source of recruitment these days
...
- In fact, websites such aswww
...
com, www
...
com etc
...
Merits - External Sources
1
...
2
...
3
...
4
...
Dissatisfaction among existing staff
As they feel that their chances of promotions reduce
...
Lengthy process
Time period for notifying vacancies, receiving applications and then starting the
selection process
...
Costly process
Because of expenses on advertisements and processing of applications
...
PROCESS OF SELECTION
1
...
- Preliminary interviews help reject misfits
...
Selection Tests:
- An employment test is a mechanism (either a paper &pencil test or an exercise) that attempts to
measure certain characteristics of individuals
...
- Important Tests Used for Selection of Employees:
-
-
Intelligence Tests:
This is one of the imp psychological tests used to measure the level of intelligence quotient of an
individual
...
Aptitude Test:
It is a measure of individuals potential for learning new skills
...
Such tests are good indices of a person‘s future success score, potential to acquire skills and the later
the actual skills possessed
...
These tests probe the overall personality
...
-
Trade Test:
These tests measure the existing skills of the individual
...
-
Interest Tests:
Every individual has fascination for some job than the other
...
Class XII/ Business Studies: Study Material/ 80
3
...
The role of the interviewer is to seek info and that of the interviewee is to provide the same
...
4
...
- Previous employers, known persons, teachers and university professors can act as references
...
Selection Decision:
- The final decision has to be made from among the candidates who pass the tests, interviews and
reference checks
...
6
...
- The job offer is given to the candidate being declared fit after the medical examination
...
-
Job Offer:
Joboffer to those applicants who have passed all the previous hurdles
...
Such a letter generally contains a date by which the appointee must report on duty
...
-
Contract of Employment:
Certain documents need to be executed by the employer and the candidate
...
This form contains certain vital details about the candidate, which are authenticated and attested by
him or her
...
There is also a need for preparing a contract of employment
...
-
-
Training and Development
Training:
The term training is used to indicate the process by which attitudes, skills&abilities of employees to
perform specific jobs are increased
...
It is to enable the employee to do the job
better
...
Class XII/ Business Studies: Study Material/ 81
o
Development:
Refers to the learning opportunities designed to help employees grow
...
The term development means growth of individual in all respects
...
Also, development includes training
...
Imparts qualities of mind, character and understanding of the basic principles and develops the
capacities of analysis, synthesis and objectivity
...
Need for training:
Benefits to the firm:
1
...
2
...
Equips future managers(to take over in emergencies)
4
...
response to fast changing environment
6
...
Improved skills an knowledge so better
career opportunities
2
...
Less accidents
4
...
Employees learn by doing
...
Advantage => employees can learn about practical
problems while working on the job + promotes selflearning
...
Training the employees by taking them away
from work position =>employees are given a
break from the job and sent for training
...
The employer specifically arranges the training
programme/ workshop by calling in experts
...
Advantage => enables the trainees to concentrate
better because they are free from job pressure
...
Types: Apprenticeship Program and Internship
Types: Vestibule Training and Induction Training
Class XII/ Business Studies: Study Material/ 82
Apprenticeship Programme/training:
Induction Training :
o
Persons who want to enter skilled jobs such as o
plumbing, iron smithy, electrician‘s job are sent for
apprenticeship programme
...
o
When the learner becomes an expert then he is
given the full charge of the job position
...
The
duration of such type of training may be from a few
hours to a few days
Vestibule Training:
An agreement between the professional institutes o
and the corporate sector, whereby the professional
Institutes send their students to various companies
so that they can practice the theoretical knowledge
o
acquired through these professional Institutes
...
On the other hand students get a chance
to practice under the real work situation
...
Employees learn their jobs on the equipment that
they will be using, but the training is conducted
away from the workplace
...
This method is suitable when the employees are
required to handle sophisticated machinery and
equipment and it provides the benefit of the on the
job methods
...
Increase in labour turnover
d
...
Inexperienced personnel
e
...
As a tool for controlling
f
...
It is to enable the employee to do the job better
...
introduction of new technology
Development
It is a process of learning and growth
...
It is a career oriented process
Class XII/ Business Studies: Study Material/ 83
Points of distinction Between Training and Development
1
...
Time/duration
2
...
Initiative
3
...
Suitability
4
...
What should be done in case of over staffing or understaffing?
It may be pointed out that neither over-staffing nor under-staffing is a desirable situation
...
A situation of understaffing would necessitate the starting of the recruitment process
...
Methods of Training:
o On the Job Methods,
Coaching, Internship Training, Job Rotation:
o Off the Job Methods:
Class Room Lectures/Conferences, Films, Case Study, Computer Modelling,
Programmed Instruction
...
”Directing is a complex managerial function that includes everything that
a manager does to encourage subordinates to work effectively- instructing, guiding, counseling,
supervising, motivating and leading them
Features Of Directing:
Importance Of Directing:
1
...
Initiates Action
1
...
Takes Place At Every Level 2
...
Guides Employees To Realize
3
...
Flows From Top To Bottom
Elements Of Directing:
2
...
Leadership
4
...
Facilitates Introduction Of Change
5
...
Initiates Action:
- A manager has to perform this function along with planning, organizing, staffing and controlling
while discharging his duties in the organization
...
2
...
- The directing takes place wherever superior – subordinate relations exist
...
Continuous Process:
- It takes place throughout the life of the organization irrespective of people occupying managerial
positions
...
Flows From Top To Bottom:
- First initiated at top level& flows to the bottom through organizational hierarchy
...
Importance of Directing:
1
...
- E
...
: If a supervisor guides his subordinates & clarifies their doubts in performing a task, it will help
the worker to achieve work targets given to him
...
Integrates Employees Efforts:
- Directing ensures that every individual effort contributes to the organizational performance and
work for organizational goals
...
g
...
3
...
- A good leader can always identify the potential of his employees and motivate them to extract work
up to their full potential
...
Facilitates Introduction Of Change:
- Generally, people have a tendency to resist changes in the organization
...
cooperation in introducing changes in the org
...
g
...
But, if manager explains the purpose, provides training and motivates with
additional rewards, the employees may accept change and cooperate with manager
...
Stability & Balance In The Org:
- Fosters cooperation & commitment among the people and helps to achieve balance among various
groups, activities and the departments
...
Supervision = element of directing + function (multiple roles performed by supervisor)
performed by supervisors
...
Acts as a counselor and guide
2
...
Supervision, as an element of directing:
process of guiding the efforts of employees 3
...
Ensures performance of work as per standards
5
...
6
...
Gives feedback
and guiding employees
...
Carried out at all levels but more important at
the lower levels therefore the term ‗Supervisor‘
is used at the operatives‘ level of management
...
Acts As A Counsellor & Guide:
- Supervisor maintains day-to-day contact and maintains friendly relations with workers
...
2
...
He conveys management ideas to the workers & workers problems to the management
...
3
...
- He suggests ways and means of developing work skills
...
Helps In Maintaining Group Unity:
- Supervisor plays a key role in maintaining group unity among workers placed under his control
...
5
...
- A skilled & knowledgeable supervisor can build efficient team of workers
...
Ensures Performance Of Work As Per Standards:
- Ensures performance of work according to the targets set
...
7
...
- A supervisor with good leadership qualities can build up high morale among workers
...
SUPERVISION
Overseeing people at work (what
subordinates are doing) and giving
instructions to ensure optimum
utilization
of
resources
&achievement of work targets
...
Includes motivation, leadership and
communication as well
...
Has lesser scope
...
Very important activity
operating level of m
...
MEANING
SCOPE
all
levels
of
element
at
of
the
Involves face-to-face contact b/w
supervisors & subordinates
...
Incitement or inducement
to act/move
...
Process of stimulating
people to action to
accomplish desired goals
...
Motivation
Features of Motivation:
1
...
Produces goal directed behavior
3
...
Can be positive or negative
(positive=rewards; negative=punishments)
4
...
o Arises out of unsatisfied needs =>causes restlessness
...
Motivators:
o Technique used to motivate people
...
= pay, bonus, promotion, recognition etc
...
Improves performance level of employees:
Motivation satisfies employees needs=>satisfied employees have better performance
...
Change negative/indifferent attitude to positive attitude :
With suitable rewards, praise and encouragement, employees develop a positive attitude
towards work
...
Reduce employee turnover:
By identifying motivational needs and providing suitable incentives
...
4
...
5
...
Class XII/ Business Studies: Study Material/ 88
Maslow‟s Hierarchy Of Needs:
Maslow‘s need hierarchy is considered to be fundamental to the understanding of motivation and
plays an important role in motivation
...
The manager must understand the needs and wants of people in order to motivate them and
improve their performance levels
...
NEED
Examples Of Need
Management Can Satisfy This Need By
(Individual Example)
(Organizational Example)
1
...
Hunger,
thirst, shelter, sleep
...
Safety/Security
Security and protection from physical
Needs:
and emotional harm, stability of Income
etc
...
Affiliation/Belonging Refer
to
affection,
sense
Needs
belongingness,
acceptance
friendship
...
Esteem Needs
Offer monetary incentives e
...
Good
salary/wages and comfortable working
conditions
...
of The firm can encourage team building and
and permit the workers to opportunity to
interact socially and so develop cordial
relations with colleagues
...
of accomplishment, provide important job
titles etc
5
...
These needs include
providing them with opportunity to learn
growth,
self-fulfillment
and
things, encouraging creativity, leading to
achievement of goals
...
Class XII/ Business Studies: Study Material/ 89
Maslow’s theory: Assumptions:
Merits of his theory:
Simple and easy to apply
1
...
Satisfaction
Indicates how to motivate employees
of such needs influences their behaviour
...
People‘s needs are in hierarchical order, starting from
Demerits of his theory:
basic needs to other higher level needs
...
A satisfied need can no longer motivate a person; only
Hierarchy is not necessarily followed n case
next higher level need can motivate him
...
A person moves to the next higher level of the hierarchy
Water-tight classification of needs is not
only when the lower need is satisfied
...
The process of fixing incentives =
Determine standard time and expected performance
Fix guaranteed minimum wages
Add additional remuneration for time saves or cost reduced etc(bonus or premiums)
Financial incentives = directly in money form or Non-financial incentives= main emphasis is to provide
measurable in monetary terms
...
Not
measurable in monetary terms
...
Pay and allowance
2
...
Status
3
...
Organizational climate
4
...
Career advancement opportunities
5
...
Job enrichment
6
...
Employee recognition programmes
7
...
Job security
7
...
Employee empowerment
iii
...
Meaning
b
...
Role/level at which it is
used
d
...
Examples
Financial Incentives
1
...
Salary system consists of regular increments in the pay every year and enhancement of
allowances every year
...
Productivity linked wage incentives:
include plans/schemes under which employees can be motivated by linking their productivity
with their salary, that is increment in salary is according to increase in their productivity
...
Bonus:
A one-time extra reward offered to the employees for sharing high performance
...
Some companies offer bonus to their employees during the festival time (e
...
It could
also be offered in the form of free trips to foreign countries, paid vacations etc
...
Profit sharing:
employees are given a share in surplus profits on the assumption that they contribute to profit
earning
...
5
...
Such an allotment of shares creates a feeling of ownership to the employees and makes them to
contribute towards the growth of the organization
...
In infosys, the scheme
of the stock option has been implemented as a part of managerial compensation
...
Retirement benefits:
Several retirement benefits such as provident fund, pension and gratuity provide financial
security to employees after their retirement
...
7
...
over and above the salary
...
Non-financial Incentives
1
...
The rank of an employee is directly
linked with prestige of the job, recognition, his authority, responsibility, rewards and
perquisites attached to the job position
...
Organisation Climate:
It refers to the working system within the organization
...
3
...
Managers can facilitate this by providing opportunities to the employees to improve their
skills, so that they can be promoted to the higher level jobs
...
4
...
They enjoy doing jobs which offer them
variety and opportunity to show their skill
...
Class XII/ Business Studies: Study Material/ 91
5
...
Examples:
i
...
ii
...
iii
...
iv
...
v
...
6
...
Negative aspect of job security - When people feel that they are not likely to lose their jobs,
they may become complacent
...
Employee participation
Involving employees in decision making of the issue affecting them
...
8
...
He feeling that their jobs are important has a positive impact on their job performance
...
Importance of Leadership:
1
...
2
...
3
...
So overcomes resistance to change with minimum discontent
...
Handles conflict
Does not allow adverse effects
...
5
...
Class XII/ Business Studies: Study Material/ 92
Features:
Qualities Of A Good Leader:
1
...
Tries to bring about
a change in the
behavior of others
3
...
Exercised to achieve
common goals of
the firm
5
...
Physical features – appearance, personality, heath and endurance
inspires followers to work with the same tempo
...
Knowledge – knowledge and competence to instruct and influence
subordinates
...
Integrity – the leader should be a role model regarding ethics, values,
integrity and honesty
...
Initiative – grab opportunities instead of waiting for them
...
Communication – capacity to explain his ideas and also be a good
listener, teacher, counselor and persuader
...
Motivation skills – understand followers needs and devise suitable
means to satisfy them
...
Self-confidence – so that he can provide confidence to followers
8
...
Social skills – sociable, friendly and maintain good relations with
followers
...
Behavioral pattern which the leader reflects in his role as
a leader is often described as the style of leadership
...
It also depends upon the type of followers
and the atmosphere prevailing in the organization
...
1
...
He determines the policies
for the group without consulting them
...
Under this style, all
decision making power is centralized in the leader as shown in the diagram
...
It is like ―bossing people
around
...
Class XII/ Business Studies: Study Material/ 93
o
o
o
o
o
o
o
An autocratic leader gives orders and expects his subordinates to obey those orders
...
This leader is dogmatic i
...
, does not change or wish to be contradicted
...
Quick decision-making is also facilitated
...
Ulhas, CEO of I Create India, distributes the work for the month
...
Ranju, Ms
...
Geeta and Mr
...
(Mr
...
A is the leader – Boss – Centered – Leadership
A
B
C
D
2
...
He never asks people to do things without
working out the long term plans on which they are working
...
This improves the attitude of the
employees towards their jobs and the organization thereby increasing their morale
...
o A democratic leader will develop action plans and makes decisions in
consultation with his subordinates
...
o This kind of leadership style is more common now-days, since leaders also
recognize that people perform best if they have set their own objectives
...
o Mr
...
Geeta, the work will not get
over as scheduled
...
Everybody decided to do over time and planned to stay back accordingly
...
Ulhas is behaving as a democratic leader)
Class XII/ Business Studies: Study Material/ 94
o A is the leader – Group Centered – Leadership
C
B
A
D
E
3
...
Such a leader avoids use of power
...
Group members work themselves as per
their own choice and competence
...
o NOTE: This is also known as laissez faire which means no interference in the
affairs of others
...
]Such a leader does not believe in the use of power unless it is absolutely
essential
...
o The group members work on their own tasks resolving issues themselves
...
o At the same time, the subordinate assumes responsibility for the work to be
performed
...
Leadership is Subordinate – Centered – Leadership
B
C
A
D
E
Conclusion:
Depending upon the situation a leader may choose to exercise a combination of these styles
when required
...
Class XII/ Business Studies: Study Material/ 95
-
Leader Vs manager( differences between the two on the basis of)
o Formal authority structure
o Concern/focus
o Based on
o Scope
o Skills required
Communication
Meaning = Exchange of ideas, facts, opinions, information and understanding between 2/ more
persons
...
So he
represents the source of communication
...
intended to be communicated
...
- Media: It is the medium/path through which encoded message is transmitted to the receiver
...
g
...
- Decoding : It involves interpreting the meaning of the message as intended by the sender
...
- Feedback : Feedback is the response that the receiver sends back to the sender after
understanding his message
...
It may be caused to the
sender, message or the receiver
...
o Inattentive receiver
o gestures or postures that may distort the message
...
Encoding
Sender
Message
Decoding
Media
Receiver
NOISE
Feedback
Class XII/ Business Studies: Study Material/ 96
Importance of Communication: An efficient system of communication :
1
...
2
...
When communication stops, organised activity ceases to exist
...
Acts as a basis of decision making:
Provides relevant information for decision making
...
Increases managerial efficiency:
Ensures quick and effective performance of managerial functions
...
5
...
6
...
7
...
Assists workers in adjusting with physical aspects of work
Basis of democratic management
...
Directions =
Vertical:
o Downward-superior to subordinates
–sending notices, passing guidelines,
asking them to complete assigned
work
...
Horizontal- between departments – about
schedule of product delivery, product
design etc
...
Systematic
of
Informal
Communication
to
1
...
Source can be easily located
2
...
Support to authority
3
...
Responsibility can be easily fixed
5
...
Co-ordination
a
...
Message is not usually distorted
b
...
Employees reactions can be ascertained
d
...
Slow
1
...
impersonal
2
...
Accurate information may not be transmitted
3
...
Confidential information may leak out
5
...
Meaning
4
...
Source and direction
2
...
Direction of flow
8
...
Fixing responsibility
6
...
Rumors
10
...
A→B→C→D
Wheel
A
B
C
One superior (E) communicates with all subordinates
...
D
Class XII/ Business Studies: Study Material/ 98
Circular
One person communicates with the two adjoining members in
a group
...
Free flow
All members communicate with one another
...
So it is faster
...
Gossip
One person tells many, on a non selective basis
...
Some of them tell
few others whom they trust and so on
...
Semantic Barriers
Sometimes the language of the sender may be very technical or incomprehensible to the
receiver
...
They are:
i
...
ii
...
g use
of the words ‗value‘, ‗right‘ etc
...
Faulty translations – If the communications are originally drafted in one language and
are then translated to the language understandable to the workers and if the translator
is not proficient with both languages, mistakes may creep in causing different meanings
to the communication
...
Unclarified assumptions – when the worker does not understand, or may
misunderstand the assumptions that the sender feels are implied
...
g the superior may
instruct the subordinate ‗to take good care of the goods‘
...
v
...
vi
...
If the verbal combination does not match his body language, then the
employees may get confused and may misunderstand the meaning
...
Psychological Barriers
The state on mind of both the sender and receiver may affect the communication and how it is
comprehended
...
g a worried person may not be able to communicate properly
...
i
...
iii
...
Premature evaluation - Sometimes people evaluate the meaning of the message even
before it is completed by the sender
...
Lack of attention - Sometimes when the sender is communicating, the receiver does not
pay proper attention
...
e
...
Boss does not understand the message and the employee is disappointed
...
Also people may not be
able to retain the information for a long time if they are inattentive or not interested
...
Class XII/ Business Studies: Study Material/ 100
III
...
i
...
iii
...
v
...
E
...
Rules and regulations - Rigid rules and regulations may create barriers as this may lead
to red tapism and delay in action
...
Complexity in organization structure - When the information passes through various
levels, there can be screening or filtering of information at different levels
...
g while
giving feedback, the subordinates filter their negative points and only highlight their
positive points
...
Lack of these facilities create communication problems
...
Personal Barriers
The personal factors of both the sender and the receiver may exert influence on effective
communication
...
Fear of challenge to authority - Sometimes superiors withhold or suppress information,
if they fear of losing their authority over subordinates
...
Lack of confidence of superior on his subordinates - If the superiors do not trust the
competency of the employees, they don‘t pay any attention to their advice, opinion or
suggestions
...
Unwillingness to communicate - Sometimes subordinates don‘t feel free to approach
and communicate to the superior
...
iv
...
E
...
Improving Communication Effectiveness
1
...
The entire idea, should be analysed in depth first by the superior and then
stated in a manner that is clearly conveyed to the subordinates
...
Communicate according to the needs of the receiver - The manager should adjust his
communication according to the education and understanding levels of the subordinates
...
3
...
Participation of subordinates may help gain ready acceptance and
willing co-operation of subordinates
...
Be aware of languages, tone and content of message - For an effective communication, the
words and tone in a message must be selected carefully
...
The message should be stimulating to evoke response from the
listeners
...
Convey things of help and value to listeners - Before conveying, it is better to know the
interests and the needs of the people you are communicating
...
6
...
He should encourage the subordinates to respond to the
communication
...
Communicate for present as well as future - Communication must meet the needs of the
present as well as future
...
8
...
This follow up helps to remove hurdles, misunderstanding of
instructions given by the manager to his subordinates
...
Be a good listener - Manager should be a good listener
...
ii
...
Semantic barriers:
iii
...
Result on account of use of wrong
words, faulty translations, different
interpretations etc
...
Examples are:
o
Badly expressed messages
o
Symbols with different
meanings
o Faulty translations
o Unclarified assumptions
o Technical jargon
Psychological barriers:
a
...
b
...
Personal barriers
c
...
Examples are:
authority relationships, rules and
o Fear
of
challenge
to
regulations
...
Examples are:
o Lack of confidence of
o Organizational policies
superiors
on
his
o Rules and regulations
subordinates
o Status
o Unwillingness
to
o Complexity
in
communicate
organizational structure
o Lack of proper incentives
o Organizational facilities
o Selective reception
Class XII/ Business Studies: Study Material/ 102
-
Improving communication effectiveness:
1
...
3
...
5
...
7
...
9
...
Principles of Directing
2
...
If there is
any difference or deviation, then finding the reasons for such difference and taking corrective
measures or action to stop those reasons so that they don‘t re-occur in future and that
organizational objectives are fulfilled efficiently
...
”
Nature/ Features:
- Goal oriented
- Pervasive
- Continuous
- Forward looking
- Involves looking back
-
-
-
Extra points:
Action oriented*
Primary function- performed at all level*
Brings back management cycle back to
planning*
Importance:
1
...
Judging accuracy of standards
3
...
Improving employee motivation
5
...
Facilitating coordination in action
Limitations of Controlling:
a
...
Little control on external factors
c
...
Costly affair
Steps In The Process Of Control:
a
...
c
...
Setting performance standards
Measurement of actual performance
Comparing actual performance with standards
Analyzing deviations
Critical point control
Management by exception
e
...
Goal oriented: Controlling is directed towards accomplishment of organizational goals in
the best possible manner
...
Pervasive: Controlling is an essential function of every manager and exercised at all levels
of management
...
Continuous: It is not an activity to be pursued in the end only; it has to be done on a
continous basis
...
Controlling is looking back: Controlling involves measurement of actual performance and
its comparison with the desired performance
...
5
...
6
...
7
...
8
...
9
...
In fact it links back to planning
...
Thus controlling not only
completes one cycle of management process and also helps to improve planning in the next
cycle
...
1
...
Controlling ensures that all activities in the organization take place according to the plans
...
Helps in judging accuracy of standards:
Enables management to verify whether the standards set are accurate, achievable and
objective
...
Class XII/ Business Studies: Study Material/ 105
3
...
When each activity is performed according to the pre-determined standards and norms it
ensures that work is done in the most efficient and effective manner
...
Helps to improve employee motivation:
Employees know well in advance what they are expected to do and what are the standards of
performance on the basis of which they will be appraised
...
to the employees
...
5
...
Subordinates are under a vigil (check) at all times and they perform their functions
efficiently
...
6
...
This leads to unity of direction and ensures overall accomplishment of organization
objectives
...
Difficulty in setting quantitative standards:
Control system loses its effectiveness when standards of performance cannot be defined in
quantitative terms
...
e
...
2
...
etc
...
Resistance from employees:
Control is resisted by the employees as they feel that their freedom is restricted
...
g
employees may resist and go against the use of cameras to observe them minutely
...
Costly:
Control involves a lot of expenditure, time and effort
...
Managers must ensure that the cost of installing and operating a control system should not
exceed the benefits derived from it
...
Setting performance standards:
A standard is a criterion against which actual performance is compared
...
o
Managers fix standards in the light of organizational goals
...
They should satisfy the foll requirements:
o Standards should be simple and easy to understand both for short and for long term
...
E
...
)
o Should be flexible enough to be modified when the need arises, in view of the changes
taking place both in the internal as well as external business environments
...
Measurement of actual performance:
Performance should be measured in the same units in which standards are set as this would make
the comparison easier
...
o
Measurement of work can be done:
After the task is completed or
During the performance wherever it is possible
...
g in case of assembling task each part
produced should be checked before assembling
...
at periodic intervals
...
Efficiency in production may be measured by counting the number of pieces produced etc
...
So certain pieces could be checked at random
...
3
...
If there is a match between them then controlling ends there only
...
Class XII/ Business Studies: Study Material/ 107
4
...
Deviations in key
areas of business need to be attended more urgently as compared to deviations in certain
insignificant areas
...
Deviations can be
analyzed in two ways:
o Critical point control:
It is neither economical nor easy to keep a check on every activity in an
organization
...
This is because if anything goes wrong at the critical points, the entire
organization suffers
...
g In a manufacturing organization, an increase of 5% in
labour cost may be more alarming than a 15% increase in postal charges
...
So he should make a priority list and bring to the notice of top management
only significant deviations which go beyond the permissible limits
...
Taking corrective action:
When the deviations are within acceptable limits, no corrective action is required
...
Corrective action may involve:
o Training of employees if targets could not be met/ assigning additional employees or
equipments to the project and permission for overtime work etc
...
o So plans need to be re-framed if they are over stated (when performance can‘t be
improved further) or under stated ( when performance is higher than the standards
...
If the control is to be effective and economical, it must focus attention on factors critical to
performance
...
Therefore every manager must prepare his list of priorities and put more concentration on
important matters and ignore minor deviations (because if he involves himself in all the activities
then he will not be able to control even a single activity effectively)
...
g if a group of 50 workers fail
to achieve the production target due to inefficiency of 3 workers, then only 3 of them should be
sent for training instead of wasting resources on all 50 workers
...
On the other hand if labour costs rise by even 1% it should receive managerial attention
...
It saves time and efforts of managers ( as they deal with only significant deviations
...
It focuses managerial attention on important areas
...
3
...
This way it facilitates delegation of authority
and increases morale of the employees
...
It identifies critical problems which need timely action to keep the organization on the right track
...
Relationship between Planning and Controlling
Planning and controlling functions are very closely related
...
Meaning:
Planning is the basic function of every enterprise as in planning we decide what is to be
done, how it is to be done and by whom it must be done
...
Controlling means keeping a check that everything is in accordance with the plan and if
there is a deviation taking preventive measures to stop that deviation
...
2
...
A system of control pre supposes the existence of certain standards
...
K or not
...
g If a
worker has produced 800 units, the manger can know whether it is adequate or not only
when there is a standard output set by the planners
...
So the base for comparison/ yardstick to check is given by the planning function to the
controlling function
...
Controlling makes sure that everyone follows the plan strictly
...
So Planning without controlling is meaningless and
controlling without planning is blind
...
3
...
However this is not completely correct
...
Similarly controlling is not only done with a view to do a post mortem
but also with a view to improve future performance
...
Therefore they are both inter-related and they re-inforce each other
...
Planning based on facts makes controlling easier and effective; and
2
...
(Note: Shorten the answer according to marks)
Techniques of controlling are given in NCERT but are not in your syllabus
...
It is indispensable for survival and growth of business, for
production and distribution of goods and meeting day to day expenses etc
...
According to B
...
Wheeler:‖ Financial Management includes those business activities that are
concerned with acquisition and conservation of capital funds in meeting the financial needs and
overall objectives of a business enterprise
...
It is concerned with procurement and usage of funds
Aims of Financial Management:
i
...
Keep risks under control
iii
...
Ensure availability of sufficient funds while avoiding idle funds
...
Examples of areas affected
1
Size and composition of fixed assets
2
Quantum of current assets and
their
break-up
into
cash,
inventories and receivables
3
Amount of long and short term
financing to be used
4
Break up of long term financing
5
All items in P&L a/c
Explanations
Depend directly upon investment decision
...
e how much
capital the company is planning to invest
...
Also depend on credit policy, inventory management etc
...
Long term sources give more liquidity but also involve a
higher cost also as compared to current assets
...
Good financial management aims at mobilization of financial resources at lower cost and
deployment of these funds in most lucrative activities
...
r
...
o ‗Owners‟ of a company are the shareholders
...
The market price of shares is linked to three basic financial decisions:
Investment decision
Financing decision and
Dividend decision
Market price of a share will increase if benefits from a decision are greater than the cost involved
in it
...
Increase in the market price of shares is an indicator of the financial health of a firm
...
Investment Decision
2
...
Dividend Decision
1
...
A firm must choose where to invest so as to
earn the highest possible profits
...
Capital Budgeting decisions – Long Term investment decisions
...
Capital Budgeting Decisions:
Working Capital Decisions:
1
...
Helps to maintain earning capacity
...
2
...
r
...
Important because:
inventories and debtors
...
Size and competitiveness of a
3
...
business is affected by this decision
...
Influence liquidity as well as profitability
...
Involves huge costs
5
...
Irreversible except at a huge cost
...
o
Receivables management
Factors affecting Capital Budgeting decisions:
Cash Flows:
o Rate of Returns:
o Investment Criteria
Factors Affecting Capital Budgeting Decisions:
Cash Flows:
o Investment decisions are taken so as to earn returns for the firm
...
o E
...
Rate of Returns:
o Expected rate of returns from each proposal should be compared with the risks associated with
the projects before taking an investment decision
...
g If there are two investment proposals A and B with a rate of return of 10% and 12%, then
project B should be selected
...
Some investment
proposals bring higher rate of return but at the same time involve huge risks
...
Huge risks may lead to insolvency
...
o These are based on calculations w
...
t amt of investment, interest rates, cash flows and rate of
returns associated with proposals
...
Class XII/ Business Studies: Study Material/ 113
2
...
r
...
(short term = working capital management)
Financing decisions involve:
a) Decision whether or not to use a combination of ownership and borrowed funds
...
Firm needs a judicious mix of debt and equity as :
o Debt involves ‗Financial Risk‘ = risk of default on payment of interest on borrowed
funds and the repayment of the principle amount whereas
o Shareholders‘ funds involve no fixed commitment w
...
t payment of returns or
repayment of capital
...
Debt fund: They can be compared on the basis of factors such as
examples, interest/dividend payout and repayment of principle, tax deductibility, and risk
and floatation costs
...
Debt is cheaper and the company should opt for the cheapest source
...
Should assess the different risks associated with the sources-Debt has a
higher financial risk as compared with equity
...
o Floatation costs:
Floatation cost of debt is lower than the floatation cost of equity
...
o Cash flow position of the business:
Strong cash flow position makes debt more attractive as the firm will be able
to meet the fixed costs associated with debt
...
g rent , salaries etc), it must
opt for a source with lesser fixed financial costs i
...
Not choose debt
...
So if the company wants to avoid takeover bids, they will issue debt
...
3
...
e
...
It results in current income for the shareholders
...
Class XII/ Business Studies: Study Material/ 114
Dividend decision= whether to distribute earnings to shareholder as dividends or retain
earnings to finance long-term profits of the firm
...
Factors affecting Dividend Decision:
a) Earnings:
Dividends can only be paid out of current earnings or accumulated profits
...
b) Stability of earnings:
If earnings are stable – high payout ratio i
...
Greater portion of the earnings can be given a
dividends
...
e
...
Dividend per share is not altered if change in earnings is temporary
...
Div in growth companies si smaller than in the non-growth companies
...
g
...
But if most shareholders want the company to grow by reinvesting its earnings and give them
a capital gain in terms of an increase in the market price of shares, have a low payout ratio
...
If tax rate on dividends is lower, shareholders will prefer more dividends and vice versa
...
So if the firm is planning to issue shares etc in the near future, have a high payout ratio
...
If it is difficult to raise funds, firm should have a low payout ratio, retain funds so that it can
generate funds internally
...
If a firm earns profits, it cannot not declare dividends for more than 3 years in a row
...
Class XII/ Business Studies: Study Material/ 115
FINANCIAL PLANNING:
It involves preparation of a financial blueprint of an organization
...
Objectives of Financial Planning:
To ensure availability of funds whenever they are required
o Includes estimation of the funds required for different purposes (long term assets/wk
cap requirement)
o Estimate the time at which these funds need to be made available
...
To see that the firm does not raise resources unnecessarily:
o Shortage of funds => firm cannot meet its payment obligations
...
In words of Gerstenbug: Financial Planning includes:
o Determination of amount of finance:
o Determination of source of funds:
o Determination of suitable policies for administration of capital
Difference between Financial management and financial planning*
Basis
Financial Management
Meaning
It refers to the efficient acquisition, It aims at smooth operations by
utilization and disposal of surplus for the focusing on fund requirements and
smooth flow of an organization
...
Scope
It is wider in scope and includes financial It is narrow in scope as it is one of
planning
...
Objective
Objective of Financial management is to Objective of financial planning is to
increase the wealth of shareholders
ensure
timely
availability
of
adequate funds
...
Focus = capital expenditure programmes
and determining the debt-equity mix
...
Class XII/ Business Studies: Study Material/ 116
Process of Financial Planning:
1
...
2
...
3
...
4
...
5
...
Importance of Financial Planning:
1
...
Also, if the company has some expansion programmes in
the pipeline, Financial Planning would help to identify the sources from which funds can be
raised to finance such programmes
...
Helps in avoiding business shocks and surprises:
By preparing plans to meet eventualities in advance, Financial Planning aims at studying
various factors that have an impact on the business and helps in predicting the probability of
their occurrence
...
3
...
The overall financial plan lays down objectives, policies, procedures etc
...
4
...
It, therefore, helps to avoid confusion and waste such as loss of time, goodwill and
financial resources
...
Links the present with the future:
Financial Planning helps to estimate future requirements and prepares plans in the present to
balance requirements of funds with availability of funds
...
Provides a link between the investment and the financing decisions:
Investment decision involves selection of the best investment proposal from the available
alternatives
...
Financial planning links both by identifying the requirement of long and short term
funds required for the selected proposal and searching for alternative sources of funds
...
Makes evaluation of performance easier:
Financial Plans or ‗Budgets‘ are the basis of financial controls
...
The deviations that are identified then can be corrected
and necessary steps can be taken to prevent their re-occurrence
...
Owners funds = equity share capital + preference share capital + reserves and surpluses +
retained earnings = EQUITY
Borrowed funds = loans + debentures + public deposits = DEBT
Capital Structure = The mix of long-term sources of funds
Refers to the proportion of debt and equity used for financing the operations of a business
...
Cost of debt < cost of equity as lenders risk < owners risk
...
Interest on debt is a tax deductible expense so brings down the tax liability for a
business whereas dividends are paid out of profit after tax
...
Any default w
...
t payment of interest or repayment of principle amt may lead to
liquidation
...
Optimal Capital Structure is that combination of debt and equity that maximizes the market
value of shares of that company
Financial Leverage:
Financial leverage = proportion of debt in the overall capital structure
...
Cost of funds = cost of debt + cost of equity
...
As It refers to use of any source of long-term funds that carry a fixed rate of interest to increase
the earnings available to equity holders
...
Rate of return on investment is more than cost of debt
ii
...
iii
...
Use of Financial Leverage, however, involves a risk to equity holders because even a small
change in EBIT will cause a great change in EPS and return on Equity as we can see in example
II
...
Rate of earning is higher than the rate of interest on debt
...
The company‘s earnings are stable are regular to pay at least the interest on debentures
...
There are sufficient fixed assets to offer as security to lenders
...
Expected rate of return in
15% and tax rate is 30%
...
The calculations of EBT (Earnings before Tax), EAT (Earnings after taxes) and EPS (Earning per
Share) under the above two alternatives can be given as:
Particulars
Plan A
Capital
Plan B
(in Rs)
(in Rs)
(in Rs)
Equity =30,00,000
Equity = 20,00,000
Equity =10,00,000
Debt = nil
Debt = 10,00,000
Debt = 20,00,000
Total = 30,00,000
Total = 30,00,000
CAPITAL EMPLOYED Total = 30,00,000
EBIT
Plan C
Rs 4,50,000
Rs 4,50,000
Rs 4,50,000
Nil
(-Rs 1,00,000)
(-Rs 2,00,000)
Rs 4,50 ,000
Rs 3,50 ,000
Rs 2,50 ,000
(– Rs1,35,000)
(– Rs1,05,000)
(– Rs 75,000)
Rs 3,15,000
Rs 2,45,000
Rs 1,75,000
3,00,000
2,00,000
1,00,000
(- Cap Empd * Rate of Return)
[ = 15
* 30,00,000 ]
100
(- Interest @ 10%)
[ = 10
* Debt ]
100
EBT
( -Taxes @30%)
EAT
No
...
05
EAT
Rs 1
...
75
)
No of Shares
In the above example, we see that Plan C has a higher EPS as:
a
...
b
...
Number of shareholders under Plan C = 1,00,000 which is much lesser than that under plan
A(3,00,000) or B (2,00,000)
...
Expected rate of return in
5% and tax rate is 30%
...
Class XII/ Business Studies: Study Material/ 119
The calculations of EBT (Earnings before Tax), EAT (Earnings after taxes) and EPS (Earning per
Share) under the above two alternatives can be given as:
Particulars
Plan A
Capital
Plan B
(in Rs)
(in Rs)
(in Rs)
Equity =30,00,000
Equity = 20,00,000
Equity =10,00,000
Debt = nil
Debt = 10,00,000
Debt = 20,00,000
Total = 30,00,000
Total = 30,00,000
CAPITAL EMPLOYED Total = 30,00,000
EBIT
Plan C
Rs 1,50,000
Rs1,50,000
Rs 1,50,000
Nil
(-Rs 1,00,000)
(-Rs 2,00,000)
EBT
Rs 1,50 ,000
Rs 50 ,000
(Rs 50,000)
( -Taxes @30%)
(– Rs45,000)
(– Rs15,000)
Rs 1,05,000
Rs 35,000
(Rs 50,000)
3,00,000
2,00,000
1,00,000
(- Cap Empd * Rate of Return)
[ = 5 * 30,00,000 ]
100
(- Interest @ 10%)
[ = 10
* Debt ]
100
EAT
No
...
35
Rs 0
...
Factors affecting capital structure are:
i
...
The size of the projected cash flows must be considered before deciding the capital
structure of the firm
...
b
...
Normal business operations
ii
...
Meeting debt service commitments
as well as provide a sufficient buffer
...
Interest coverage ratio :
a
...
b
...
Class XII/ Business Studies: Study Material/ 120
iii
...
v
...
vii
...
ix
...
xi
...
xiii
...
Debt Service Coverage Ratio:
a
...
Pref
...
A higher Debt service coverage ratio, in which the cash profits generated by the
operations are compared with the total cash required for the service of debt and the
preference share capital, the better will the ability of the firm to increase debt
component in the capital structure
...
Low Debt service coverage ratio => debt ≠ used
...
If return on investment of the company is higher, the company can choose to use
trading on equity to increase its EPS, i
...
, its ability to use debt is greater
...
More debt can be used if cost of Debt is low
...
A higher tax rate makes debt relatively cheaper and increases its attraction as compared
to equity
...
when the company uses more debt, the financial risk faced by equity holders increase
so their desired rate of return increases
...
If debt is used beyond a point, cost of equity may go up sharply and share price may
decrease in spite of increased EPS
...
Cost of Public issue is more than the floatation cost of taking a loan
...
The floatation cost may affect the choice between debt and equity and hence the capital
structure
Risk Consideration:
a
...
If a
firm‘s business risk is lower, its capacity to use debt is higher and vice versa
...
If the firm uses its debt potential, it loses the flexibility to use more debt
...
To maintain flexibility the company must maintain some borrowing power to take care
of unforeseen circumstances
...
Debt normally does not cause dilution of control whereas a public issue makes the firm
vulnerable to takeovers
...
To retain control, firm should issue debt
...
Public issue of shares and debentures have to be made under SEBI guidelines
...
It is relatively easier to get a loan as compared to issuing shares to the public
...
If the stock markets are bullish, equity shares are more easily sold even at a higher
price
...
However, during a bearish phase, a company, may find raising of equity capital more
difficult and it may opt for debt
...
There are usually some industry norms which may help
...
Class XII/ Business Studies: Study Material/ 121
MANAGEMENT OF FIXED CAPITAL
Factors affecting Fixed Capital Requirement::
1)
2)
3)
4)
Also called Investment or Capital Budgeting decisions and involves allocation of firm‟s capital
to different projects or assets with long term implications for the business
...
o Affects growth prospects, profitability and risk of the business in the long run
...
Examples of Capital Budgeting decisions are expenditures on:
o Acquisition, expansion, modernization and replacement of assets
...
Importance of Capital Budgeting Decisions:
1
...
2
...
Risk involved:
4
...
Nature of business: manufacturing needs more investment in fixed assets than trading
concerns
2
...
Choice of technology: Firms needing capital intensive technique higher investment in
plant and machinery as it relies less on manual than firms using labor intensive technique
...
Technology up gradation: In some industries, assets become obsolete faster and need
frequent replacement
...
3
...
4
...
5
...
6
...
Class XII/ Business Studies: Study Material/ 122
MANAGEMENT OF WORKING CAPITAL
Working Capital = short term finance (invested in a business for a short period usually up to
one year)
It is required to meet day to day operating expenses
...
They help a firm meet its payment obligations
...
o Examples are cash in hand/cash at bank, marketable securities, bills receivable,
debtors, finished goods inventory, Work in progress, Raw materials, Prepaid expenses
etc
...
o Examples = bills payable, creditors, o/s expenses, advances from customrs
...
Trading and manufacturing concerns need working capital to finance
operations during this time gap
...
Working capital is required to sustain the operations of a business during this period as:
o Minimum cash balance needs to be maintained
o Stock of raw materials will have to be stored to ensure uninterrupted production
process and finished goods stocked to meet orders from customers
...
What amount of the working capital is required will be determined by the operating cycle of
the firm
...
that do not earn any returns
...
Shortage of investment in working capital might lead to situation where stock is not available
when required and there is no cash to finance day-to-day operations eventually leading to loss
of sale and of reputation when firm is unable to meet its debts
...
Nature of business: Trading concerns needs lesser WC than Manufacturing concerns as
trading concerns do not process raw materials and so have lesser stocks and goods are
converted into sales immediately on their receipt
...
Class XII/ Business Studies: Study Material/ 123
2
...
3
...
Seasonal factors: in peak seasons when demand is high, they need more working cap
than during lean season
...
Production cycles: = time taken to convert Raw materials into finished goods
...
6
...
7
...
8
...
9
...
10
...
11
...
Also
...
12
...
Class XII/ Business Studies: Study Material/ 124
Financial Markets
Introduction
Financial Intermediation = process of allocating funds from saving surplus units (E
...
households)
to saving deficit units (e
...
industries, government etc)
...
It is a market for
the creation and exchange of financial assets
...
The term ‗Market‘ here does not refer to a particular place in a geographical sense
...
If allocative function is performed well:
1
...
Rate of return earned by the households will be higher
...
Money Market
2
...
2
...
4
...
Mobilization of savings and channelising them into the most productive uses:
Facilitates transfer of savings from the savers to the investors
...
Facilitate mobilization of savings of people and their channelisation into the most
productive uses
...
Facilitate Price Discovery:
Price of anything depends upon the demand and supply factors
...
3
...
Whenever the investors want, they can invest their savings into long term investments and
whenever they want, they can sell the investments/ instruments and convert them into
cash
...
Reduce the cost of transactions:
By providing valuable information to buyers and sellers of financial assets, it helps to saves
time, effort and money that would have been spent by them to find each other
...
This way financial markets facilitate transactions at a very low cost
...
Mkt for low risk, unsecured and short term debt instruments that are highly liquid are traded
everyday
...
Helps to:
o raise short term funds
o Temporary deployment of funds
(Money Market Instruments Used By)
Govt
...
Pvt
...
Securities
Commercial Papers
PSU Bonds
Certificate of Deposit
Features of Money market instruments
1
...
High liquidity
2
...
High safety
instruments is high
6
...
Duration = 1 day to 1 year
to long term securities
...
2
...
4
...
Short Term
Features of Instruments
Location
Helps to/Purpose
Participants:
Features of Money market:
6
...
8
...
10
...
Short Term: The money market is a market for short term securities with a maturity period
up to one year
...
Features of Instruments: It is a market where low risk, unsecured and short term debt
instruments are traded
...
Location: It has no physical location but is an activity that is carried on over the telephone
and through the internet
...
Helps to/Purpose: It enables raising of short term funds for meeting temporary shortages
of cash as well as the temporary deployment of excess funds for earning returns
...
Participants: The major participants are the Reserve Bank of India, Commercial Banks,
Non-Banking Finance Companies, Mutual Funds and Financial Institutions
...
Main Instruments: The main instruments traded in the money market are Treasury bills,
Trade Bills, Commercial Papers and Certificate of Deposits
...
Amount of Money Required: Investment in money market entails huge sums of money as
the unit value of instruments are high
...
Liquidity: Money market enjoys a high degree of liquidity as they are short term
instruments and are issued by financial instruments, banks or reputed companies
...
Expected rate of return: The expected rate of return is generally low as the money is
invested only for a short duration
...
Class XII/ Business Studies: Study Material/ 127
Money Market Instruments
Treasury Bills
Commercial Paper
Call Money
Certificate
of Commercial Bill
Deposit
Issued by
RBI on behalf of the Companies
Banks
Commercial Banks Firms
government
Maturity period
14 days to 364 days
Minimum amount Rs
of instrument
25,000
15 days to 365 days
and Rs 5,00,000
1 day to 15 days
91 days to 365 days
90 days
Variable
Rs 5,00,000
Variable
multiples thereof
Proceeds are used Meet
to
and DFIs
short
term Meet
financial needs
...
redeemable
the issued by
capital and seasonal pool of day-to-day commercial Banks
Issued at a discount needs
...
(funds
used
funds and Development
to
that
have
meet temporary
floatation costs for deficit
...
Mobilize funds
and redeemable at
during period of
par
...
deposit rate is low
...
When a trade bill is
discounted
with
a
commercial
bank,
it
becomes a commercial
bill
...
short-term
bonds( that is, sold
bonds
at a discount and
a
redeemed at par)
redeemed at par)
Highly liquid
Used
Freely transferable
Issued
as
promissory
discount
by
and
well
reputed and large
a
as
bank
an
are Short term ,negotiable
instruments
issued by bank
against deposits
only to cash
by
unsecured
default as they are
promissory note
...
companies
issued
Negotiable
&
other institutions
transferable
by
for a period of 91
the
government
Buyers are banks,
basically over-the-
kept
Negligible risk of
by
delivery
NBFCs, LIC, UTI, Buyers are banks,
GIC etc
...
Freely
tradable
insurance
in the secondary
companies,
market
mutual funds etc
...
Nature of Capital Markets:
a
...
c
...
e
...
Performs trade-off functions
g
...
Helps in capital formation
i
...
Provide long term funds
b
...
Duration more than 1 year
d
...
Lower safety
f
...
Difference between Capital and Money markets are:
1)
2)
3)
4)
5)
Meaning
Participants
Investment outlay
Duration
Liquidity
6) Safety
7) Expected returns
8) Cost of transactions
9) Instruments traded in
10) Use of funds
Primary Markets
New issues markets
Transfers investible funds from savers to entrepreneurs
...
Features:
1
...
3
...
Concerned with new issues
No specific geographical location
Comes before secondary market
Various methods of flotation
5
...
Prices
are
determined
by
management
7
...
IPO=Initial Public offer = First time sale of securities
...
Offer though prospectus:
Prospectus provides details about an issue and therefore helps he potential
investor to understand and evaluate the issue
...
Offer for sale:
Securities are sold enblock at an agreed price through an intermediary like
issuing houses or stock brokers who then sells them to the general public at a
higher price
...
Private placement:
Allotment of shares to institutional investors and some selected individuals
...
E-IPO‟s:
2
...
2
...
Existing shareholders are offered the ‗right‘ to buy new shares in proportion to
the number of shares they already possess
...
The shareholder can either accept the offer himself/herself; assign a part of or
all of his right in favor of another or ‗rescind‘( give up) this right altogether
...
Secondary Market
6
...
7
...
It is between two investors
...
Features of Secondary market are:
1) Creates liquidity
2) Fixed location
3) Comes after primary market
4) Encourages new investment
9
...
Features of Stock Exchange:
a
...
c
...
e
...
a
...
Pricing of securities(dd and ss)
c
...
Contributes to economic growth (ensures that
savings are channelized to most productive
investment avenues)
e
...
Provides scope for speculation (in a restricted
and controlled environment)
Class XII/ Business Studies: Summary and Questions/ 132
Trading Procedure in Stock Exchanges
1) Selection of a Broker:
The first step is to select a broker who will buy / sell securities on behalf of the speculator/
investor
...
He has also to provide certain other details and information such as PAN number
(mandatory) , Bank account details, Depository account details etc
...
He will also have to open a bank account for cash transactions in the securities market
...
The broker
will then go ahead with the deal at the above mentioned price or the best price available
...
Only the securities of
listed companies can be traded on the stock exchange
...
5)
When the shares can be bought or sold at the price mentioned, it will be communicated to
the broker‘s terminal and the order will be executed electronically
...
6) After the trade has been executed, within 24 hours the broker issues a Contract Note
...
7) Settlement:
This is the last stage in the trading of securities done by the brokers on behalf of their
clients
...
Should be done
immediately on receiving the contract note/ before the day when broker makes the
payment/delivers the shares to the Stock Exchange on the Pay In Day
...
Equity spot markets follow a T +
2 rolling settlement w
...
f 1 April 2003
...
All trading on stock exchanges takes place between 9:55 am
and 3:30 pm, Indian Standard Time, Monday to Friday
...
Class XII/ Business Studies: Summary and Questions/ 133
9) Cash is paid or securities are delivered by the investor on the pay-in day, and on the T+2
day, the exchange will deliver the share or make payment to the other broker
...
Payment for shares/ delivery of shares has to be made within 24
hrs of the pay-out day
...
investor has to give details of his demat account
and instruct his DP to take delivery of his shares in his BO account
...
They act as
intermediaries between buyers and sellers
...
After the trade has been executed, within 24 hours the broker issues a Contract Note
...
It is signed by the broker
...
This is an important document as it is
legally enforceable and helps to settle disputes/claims between the investor and the
broker
...
The settlement cycle is on T+2 day on a rolling settlement basis, w
...
f
...
9
...
This is called the pay-out day
...
Benefits of Electronic trading systems or screen-based trading :
Electronic trading systems or screen-based trading has certain advantages:
1
...
They are able to see the full market during real time
...
It increases efficiency of information being passed on, thus helping in fixing prices efficiently
...
3
...
4
...
That is,
they can sit in the broker‘s office, log on to the computer at the same time and buy or sell
securities
...
5
...
Thus, all the trading centers spread all over the country have been brought
onto one trading platform, i
...
, the stock exchange, on the computer
...
Shares can be held either in physical form or an electronic book entry form of holding and
transferring shares can also be adopted
...
Class XII/ Business Studies: Summary and Questions/ 134
Dematerialisation and Depositories
‗Dematerialisation of Securities‟
Purchase and sale of securities involve exchange of money in return for share certificates
...
To eliminate
these problems, an electronic book entry form of holding and transferring securities has been
introduced
...
A ‗D-Mat‘ account works in the same form as a bank account where the share certificates held
by the account holder can be deposited with the bank and after that any purchase and sale of
such shares does not require physical transfer of the certificates
...
)
Demat (Dematerialized) account refers to an account which an Indian citizen must open with
the depository participant (banks, stockbrokers) to trade in listed securities in electronic form
...
Physical shares can be converted into electronic form or electronic holdings can be reconverted
into physical certificates (rematerialisation)
...
These demat securities can even be pledged or hypothecated to get loans
...
It is the broker‘s responsibility to credit the investor‘s
account with the correct number of shares
...
Depository:
•
Just like a bank keeps money in safe custody for customers, a depository also is like a bank and
keeps securities(e
...
shares, debentures, bonds, mutual funds etc
...
In the depository a securities account can be opened, all shares can be
deposited, they can be withdrawn/ sold at any time and instruction to deliver or receive shares
on behalf of the investor can be given
...
It has no paper work relating to share
certificates, transfer, forms, etc
...
•
At present In India there are two depositories in India:
i
...
) is the first and largest depository presently
operational in India It was promoted as a joint venture of the IDBI, UTI, and the
National Stock Exchange
...
CDSL (Central Depository Services Ltd
...
Class XII/ Business Studies: Summary and Questions/ 135
•
Depository interacts with the investor through intermediaries who are electronically connected
to the depository and serve as contact points with the investors and are called depository
participants
...
Financial institutions, banks, clearing corporations, stock brokers and
nonbanking finance corporations are permitted to become depository participants
...
A depository participant (DP), either a bank, broker, or financial services company, may
be identified
...
An account opening form and documentation (PAN card details, photograph, power of
attorney) may be completed
...
The physical certificate is to be given to the DP along with a dematerialization request
form
...
If shares are applied in a public offer, simple details of DP and demat account are to be
given and the shares on allotment would automatically be credited to the demat
account
...
If shares are to be sold through a broker, the DP is to be instructed to debit the account
with the number of shares
...
The broker then gives instruction to his DP for delivery of the shares to the stock
exchange
...
The broker then receives payment and pay the person for the shares sold
...
All these transactions are to be completed within 2 days, i
...
, delivery of shares and
payment received from the buyer is on a T+2 basis, settlement period
...
Every stock exchange prepares a ‗LIST‘ of companies that have permission to
trade in that particular exchange and only companies that fulfill the stringent conditions laid
down by the exchanges w
...
t submission of documents, filing and publishing of records etc are
allowed to be listed
...
‗Demutualisation‟ refers to the process of separating the ownership of stock exchanges from
the trading rights of members
...
Demutualisation‘ reduced this conflict of interest and the chance of brokers using stock
exchanges for personal gains
...
SEBI was set up to
protect the interests of investors, development and regulation of stock markets
...
ii) Provide adequate protection to investors
...
Basic Purpose and Role of SEBI:
SEBI meets the needs of 3 interest groups:
o
Issuers: provide a market place where they can raise finances in an easy, fair &
efficient manner
...
o
Intermediaries: Offer a competitive, professionalized & expanding market with
adequate & efficient infra structure so that they are able to render better service to
the investors & issuers
...
o
Head office = Mumbai and regional offices in Kolkata, Chennai and delhi
...
This may be elaborated
as follows:
1
...
2
...
3
...
4
...
, with a view to making them competitive and professional
...
secondary market (e
...
Price securities market
rigging
&
misleading
statement)
ii) Prohibit insider trading
ii) Investor education
iii) Registration of collective investment
schemes & mutual funds
...
iv) Promote fair practice & iv) Conducting research & iv) Prohibition of fraudulent & unfair
code of conduct in securities publish information useful trade practices
...
to all market participants
...
approach
(e
...
Internet
trading etc
...
enquires & audits of stock exchanges &
intermediaries
...
of India
...
These are prohibited because they can defraud /
cheat investors
...
Prohibits „Insider Trading‟:
‘Insider’ is a person connected with the company who is reasonably expected to have
access to price sensitive information (w
...
t
...
E
...
of insiders are Directors, Promoters etc
...
III)
SEBI undertakes steps to educate investors so that they are able to evaluate securities of
various cos
...
IV)
Promotes fair practices & code of conduct in securities market
...
r
...
debenture holders:
Co
...
Co
...
2) W
...
t
...
3) W
...
t
...
Topics in NCERT but not in your syllabus:
1)
2)
3)
4)
5)
6)
National Stock Exchange
Objectives of NSE
Market Segments of NSE
Over the counter exchange of india
Advantages of OTC market
Organization structure of SEBI
Class XII/ Business Studies: Summary and Questions/ 139
Marketing Management
MEANING OF SOME IMPORTANT TERMS:
Needs = basic human requirements
...
Wants= desire for a particular product
...
Demand- willingness to buy is backed by purchasing power
Utility – want satisfying power of a product
...
It refers to anything that satisfies a need
or want
...
e
...
‗Marketers‟ =
o Anyone taking a more active role in the process of exchange is called a marketer
...
But in certain situations, it may also be the buyer
...
o Sellers as marketer are the deliverers or providers of satisfaction
...
They can be divided into:
Goods marketers (such as Hindustan Lever)
Services marketers (such as Indian Airlines)
Others marketing experiences (such as Walt Disney) or places (like tourist
destinations)
...
Market is:
o Place where buyers and sellers meet and conduct buying and selling activities
...
g
...
o In the modern marketing sense, it refers to a set of actual or potential buyers of a
product or service i
...
all customers who share a particular need or want and are able to
buy the product (also referred to as target markets)
Class XII/ Business Studies: Summary and Questions/ 140
Marketing( V imp)
o
Traditionally it has been defined as performance of business activities that direct the
flow of goods and services from producers to consumers
...
o
In modern times thinkers like Philip Kotler have defined marketing as ‗a social process
by which individual groups obtain what they need and want through creating offerings
and freely exchanging products and services of value to each other‘
...
Need and Want:
• The primary motivation for people to engage in the process of marketing is the satisfaction
of some need or want
...
2
...
A good market offer is one that is developed after analyzing the needs and preferences of
potential buyers
...
Customer Value:
A product will be purchased only if the buyers‘ perception of its value is more than the
price that he has to pay for the product
...
4
...
For any exchange to take place, it is important that the following conditions be satisfied:
a
...
Each party must have something perceived as valuable by the other
...
Each party must have the ability to communicate with the other and deliver the
product or the service
...
It must be voluntary- that is, each party must have the freedom to accept or to reject
the other party‘s offer
...
The party should be willing to enter into transaction with each other
...
According to Philip Kotler ‗Marketing Management is the analysis, planning,
implementation and control of programmes designed to create, build and maintain
mutually beneficial exchange relationships with target markets for the purpose of achieving
organisational goals
...
Choosing a target market
ii
...
)
iii
...
Marketing management not only is concerned with creating a demand for the firm‘s product
but also managing the products demand effectively as per the situation in the market
...
But sometimes, if the demand is ‗OVERFULL‘, that is, more than what the company can
handle, the marketer will try to restrict the demand
...
Services : Insurance, Health Care, Business Process Outsourcing,Security, Easy Bill service,
Financial Services(Investment),Computer Education, Online Trading
...
Persons : For Election of Candidates for Certain Posts
...
Experience : Customised Experiences as Dinner with a cricketer (say Dhoni); Lunch with a
celebrity (say Bill Gates or Aishwarya Roy) or experience of Baloon Riding,
mountaineering, etc
...
Events : Sports events (say Olympics, Cricket series), diwali mela, fashion show, music
concert, film festival, elephant race (Kerala Tourism)
...
Organisations : For boosting their public image organisations such as Hindustan Lever,
Ranbaxy, Dabur, Proctor and Gamble,communicate with people
...
Class XII/ Business Studies: Summary and Questions/ 142
Basis Of Difference
Selling
Marketing
1
...
The focus Marketing is a much wider term
Process Vs
...
Term - Scope
product from the seller to the buyer
...
Has a narrower scope than marketing
2
...
Satisfaction Of possession of goods from seller to customer needs and wants
...
Profit
Thro
Maximizing Sales
Vs
...
Start And End Of
Activities
Activities directed at maximizing sales Focus on customer satisfaction as a
and thereby the profits available to a route to profit maximization in the long
business in the short run
...
Starts with production and ends with Start much before production and
sale, which is transfer of ownership
...
5
...
6
...
in Involves efforts such as promotion and Uses integrated marketing efforts
persuasion
...
Marketing Management Philosophies
Marketers attempt to identify customers‘ wants and needs and accordingly create products, price
them, promote and distribute them to satisfy the demand of customers
...
The process of creation of an offer and the interaction with the market, that is, the marketing
efforts may be guided by different philosophies, which are as follows:
i
...
iii
...
v
...
So, anyone who was
able to produce goods could
easily find buyers for the same
...
increase in scale of production→
competition among the sellers → Product
quality and availability alone did not
ensure survival as a large number of firms
were now selling products of similar
quality
Assumption
potential exchange would be potential exchange would be potential exchange is realized only if firms
realized simply if the products are realized when the products are of undertake
aggressive
selling
and
widely available and inexpensive
...
Drawback
Customers do not always buy customers do not always buy such technique can succeed in the short run
products only as they are products only as they are of high but not in the long run
...
quality if they do not need it
...
and rely upon the powers of advertising and
other persuasion techniques to influence
customers
...
Class XII/ Business Studies: Summary and Questions/ 144
SOCIETAL MARKETING CONCEPT
MARKETING CONCEPT
Firms must perform marketing in a fashion that societal Marketers believes that potential exchange will be realized when
well being is enhanced i
...
attention must be paid to
firms develops products and services that customers want and not
social, ethical and ecological aspects of marketing
just what the firm can produce and therefore satisfies customers
better than competitors
...
resources, drug abuse etc
...
Key points in the marketing concept are:
Thus it holds that the task of a firm is to identify the
needs and wants of the target market and deliver the
desired satisfaction in an effective and efficient manner
so that the long term well being of the consumers and
the society as a whole is taken care of
...
o
Development of products to satisfy the needs and wants of
target market
...
o
Doing all these at a profit
...
Firm must keep a constant check on customers and
factors that influence customer needs as this will help them in shaping
products and services in accordance with changing customer needs
...
of Quality,
Existing
performance
product
and features of
product
Integrated
marketing
Functions of Marketing NCERT Pg 309 – For examples
Gathering And Analyzing Market Information:
Marketing planning :
systematic investigation of facts
SWOT analysis
Necessary to identify needs
Decisions can be wrt
...
Data is available both from primary as well as
secondary sources
...
It also must specify the action programs
...
g if a marketer aims at enhancing his market share in
the country in the next three years, then his marketing
plan should include various important aspects like plan
for increasing level of production, promotion of
products etc
...
Done by anticipating customer needs and developing
new products or improving existing products to satisfy
these needs
...
E
...
ISI
mark for electrical goods
...
Packaging protects the products from damage , risks of
spoilage, breakage and leakage
...
‗Labeling‘= designing a label to be put on the package
...
Branding
Whether to sell the product in its generic name or in a
Brand name
...
Decision = whether each product will have a separate
brand name or the same brand name to be used for all
products
...
secure repeat sales from customers and developing
brand loyalty for a product
Price is defined as the exchange value in terms of
money and Pricing of Products refers to the process of
fixing up the price of a product
...
Factors affecting pricing decisions are cost of
production, demand of the product, degree of
competition etc
...
Examples of promotional activities are advertising,
personal selling, publicity and sales promotion
Essential for creating, maintaining and increasing the
demand of a product
...
Ensure that the goods move from the production center
and reach the consumers in the consumption center
...
Transportation:
Storage and warehousing:
Producers need to hold and preserve goods during the
time gap between production/purchase and sale/resale
of products
...
Protect goods
b
...
Helps a firm to manufacture
anticipation of demand
...
Minimizes price fluctuations
...
Removes hindrance of
place and creates place
Not only finished goods but raw materials are also
transported
...
It involves decisions such as mode of transportation,
route planning etc
...
products
in
Manufactures/retailers may maintain their own
warehouses or fire services of warehousing companies
...
• It, thus, helps in focusing the activities of an
organization on the needs and wants of the
customers
...
• The product will then be :
o Designed according to the needs of the
potential customers
o Made available through outlets convenient to
the customers
o Priced at a level the target customers can
afford
...
Acts as a catalyst in the economic development of the
country and helps in raising the standard of living of the
people
...
• Overcomes obstacles posed by high prices due to
imbalances in the levels of production and consumption
...
• By linking the business and consumption centers, it
accelerates the economic activities leading to higher
incomes, more consumption and increased
saving and investments
...
Marketing Mix
There are a large number of factors that affect marketing decisions
...
To develop marketing tools, marketing managers use the
abovementioned controllable factors and the set of marketing tools that a firm uses to pursue its
marketing objectives in the target market is described as Marketing Mix
...
Thus, an ideal marketing mix would need:
Producing satisfying products
Offered to buyers at a reasonable price
Conveniently available
About which communication is offered
...
Product:
Product mix relates to decisions regarding planning, developing and producing the right
type of products and services for the consumers
...
It relates to not only the physical product but also the
benefits offered by the product from the customers‘ point of view
...
this decision is more important for durable
products
...
b
...
It is a source of revenue for the seller
...
Decision also includes pricing methods, pricing strategies, pricing policies, price changes,
discounts to be offered, credit terms etc
...
c
...
It includes all the activities involved in transferring ownership and physical possessions of
the product o the consumer
...
o Physical distribution-managing inventory, storage, warehousing and transportation of
goods from the place where they are produced to the place where it is required by the
buyer
...
Promotion :
These are activities undertaken to persuade and motivate people to buy their products
...
Tools used include advertising, sales promotion, personal selling etc
...
Describe the product and
specify its contents
2
...
Grading of products
4
...
Providing information required
by law
Classifications:
(NOT IN YOUR SYLLABUS)
Consumer products:
o Durability basis
o Shopping effort involved
...
Primary packing
2
...
Transportation packing
• Importance:
1
...
Sanitation
...
Self-Service Outlets
4
...
Product differentiation
Functions
1
...
Product Protection
3
...
Product Promotion
Branding:
Definition, Terms
Advantages to the marketers:
1
...
Helps in advertising and display programmes:
3
...
Ease in introduction of a new product
• Advantages to Customers:
1
...
Ensures quality:
3
...
Short, easy to pronounce, spell and remember
...
Distinctive
3
...
Suggest product benefits and quality
5
...
6
...
It includes goods, services, ideas, persons and places in the concept of product
...
Once that is analysed, a layer of values can be added to provide a
greater satisfaction to the customers
...
E
...
for an automobile
transportation
...
E
...
fuel efficiency, desired mileage etc
...
E
...
finance options etc
...
From the customers‘ point of view, the customer seeks 3 types of benefits:
o Functional Benefits (motorcycle =>transportation)
o Psychological Benefits (motorcycle =>need for prestige and esteem)
o Social Benefits (motorcycle =>acceptance from a group)
Branding:
Generic name:
Branding:
Brand
:
Brand Name :
Brand mark :
Trade Mark
:
Name of the whole class of the product
...
Toothpaste, wrist watch etc
...
It is the process of using a
name, term, symbol or design individually or in some combination to identify a
product
...
Part of a brand that can be spoken
Part of brand that is in the form of symbols, design, color scheme or lettering that
cannot be uttered but can be recognized
...
Advantages to the marketers:
Advantages to Customers:
Enables product differentiation:
...
Helps in advertising and display programmes:
Without a brand, the advertiser can only create an
awareness about the generic product and not be sure
of the sale of his brand
...
Ensures quality:
deviation in quality, customers can
have
a
recourse
to
the
manufacturer/marketer
...
Short, easy to pronounce, spell and remember(Rin, Vim, Ponds)
2
...
Distinctive (Zodiac, Safari)
4
...
5
...
Capable of being registered and protected legally
7
...
Packaging
Act of designing and producing an appropriate container or wrapper of a product
...
Primary packing –product‘s immediate container
...
Secondary packing –additional layer of protection till the product is used( cardboard box for
toothpaste)
3
...
( corrugated boxes containing 10, 20, or 100 units)
Importance:
o
o
o
o
Rising Standards Of Health And Sanitation - As chances of adulteration in such goods are minimized
Self-Service Outlets – so some of the traditional role assigned to personal selling w
...
t promotion has
gone to packaging
...
g
...
Product differentiation – colour, size, material etc of packaging makes a difference in perception of
customers about the quality of the product
...
Facilitating Use Of The Product – convenient to open, handle and use the product
...
Product Promotion - colour scheme, phoyographs or typeface may be used tp attract customers
...
Labeling
Attached to the product package
...
Providing necessary information to the consumers
...
Page 152 of Consumer Protection
Functions:
1
...
r
...
Identification of the product or brand
And common identification information w
...
t name and address of the manufacturer, net
weight when packed, manufacturing date, maximum retail price and Batch number
...
Grading of products
Into different categories on the basis of features, quality etc
...
Help in promotion of products
Attract attention and give reason for purchase – 40% extra, free gift inside
...
Providing information required by law
Statutory warnings,
Detailed Discussion On The Components Of Marketing Mix: Price Mix
Price =
Sum of values that consumers exchange for the benefit of having or using the product Price may therefore
be defined as the amount of money paid by a buyer (or received by a seller) in consideration of the
purchase of a product or a service
Normally expressed in monetary terms
...
It is the value passed by the customer to the seller in lieu of the product/service provided
...
o Used to regulate the demand of the product
...
Factors determining price determination:
1
...
Includes costs of producing, distributing and selling the product
...
Price should recover Total costs (Fixed costs/overheads + Variable costs+ Semi-variable costs) in
the long run, but in certain circumstances(introduction of a new product/entry into a new market)
product price may not cover all the costs for a short while
...
a
...
b
...
Semi-variable costs
...
Utility and demand:
Utility provided by the product and the demand of a product set the upper limit of price that a
buyer would be willing to pay for a product
...
Law of demand = consumers purchase more at a lesser price
...
Demand = elastic if a small change in price results in a large change in quantity
demanded
...
3
...
Greater the similarity between
the products, the higher is the degree of loss of freedom to fix prices
If there are competing firms, prices get fixed at a lower level
...
4
...
For example, government can declare a product as essential product and regulate its prices
...
5
...
Apart from profits maximization other objectives may be:
Market leadership - prices will be at a lower level to attract more customers
...
6
...
Detailed Discussion On The Components Of Marketing Mix: Place Mix
A set of decisions needs to be taken to make the product available to customers for purchase and
consumption
...
...
Page 154 of Consumer Protection
a) Channels Of Distribution:
Includes a series of firms/individuals/people/institutions/merchants and functionaries who form a
network which helps in the transfer of title to a product from the producer to the end consumer
...
Thus, intermediaries in the channel of distribution help to:
Assist in transferring title to goods from the producers to consumers
...
b) Physical Distribution
o
o
o
o
Involves physical handling of and movement of goods from the place of production to the place of
consumption
...
Creates time and place utility
Involves decisions wrt inventory, storage and warehousing, transportation and order processing
...
o A good order processing system should provide for an accurate and speedy processing of orders, in the
absence of which goods would reach the customers late or in the wrong quantity or specifications
...
Inventory control:
o
o
o
o
o
Maintaining adequate inventory ensures product availability as and when demand arises and this prevents
out-of-stock situation
...
Higher inventory = higher level of satisfaction of the consumers but also
higher costs
...
Factors determining inventory level:
Policy w
...
t customer service to be offered
...
Responsiveness of the distribution system
Cost of inventory
Correct estimation of demand and inventory helps firm to:
Reduce their cost levels
Maintain production at a consistent level
Page 155 of Consumer Protection
Transportation:
Physical movement of goods to place where they are required
...
Means of carrying goods and raw materials from the points of production to the point of sale
...
Modes available = rail water, air, pipeline or trucks
...
o
o
o
o
o
Warehousing:
Act of storing and assorting products in order to create time utility
...
Larger the number of warehouses=>lesser the time taken to serve customers at different locations=> but
greater the cost of warehousing
...
Products requiring long term storage (agricultural products)=>warehouses located near production sites
=>minimises transportation charges
...
Modern warehouses perform various specialized functions such as grading, labeling, packing etc
...
They help to overcome time, place and possession gaps that separate the goods and services from
those who need/want them from those who want them
Types of Channels:
o Direct/zero level channel:
Producer → consumer
...
g
...
E
...
Eureka Forbes
...
Page 156 of Consumer Protection
-
Two level channel =
Producer →wholesaler →retailer → consumer
...
Usually used for consumer goods like soaps , salt etc
...
Done when manufacturers cannot approach wholesalers directly or when they carry a limited
product line and has to cover a wide market
...
Sorting: into homogenous groups on the basis of some common characteristics
...
Accumulation: into homogenous lots and this helps to maintain continuous flow of
supplies
...
Allocation: Breaking homogenous stock into smaller marketable lots
...
Assorting: Middlemen procure a variety of goods from manufacturers and then supply
them in the desired combination to the users
...
Product Promotion: Middlemen participate in activities such as displays, contests etc
...
Negotiation: W
...
t price, quality, guarantee etc so that the transfer of ownership is properly
affected
...
Risk Taking: on account of price and demand fluctuations, spoilage, destruction etc
...
Product Related Factors:
o Industrial/consumer product Industrial products are technical, made to order, expensive and purchased by few buyers so
require a shorter/ direct channel involving few middlemen
...
o
o
o
Perishability of product:
Fruits, vegetables and dairy products= perishable => short channel as long channel would hurt
customer service levels
...
Unit value of product:
Convenience goods = For low unit value of products with a high turnover such as stationary etc
= less margin per unit so need to reach a wider market to be profitable =>long channels
...
Degree of complexity:
Complexity=>industrial/engineering products that are technical=>short channels
...
customization:*
For customized product, direct contact between buyer and seller is required to evolve desired product
parameters and so direct selling is preferred
...
Bulk and weight*
Heavy and bulky products require shorter channels to minimize hauling charges
...
Company Characteristics:
o Financial strength:
Direct channel = requirement of large amt of funds for space + sales force
...
o Degree of control desired on distribution
Mgt wants to have greater control on distribution =>direct channel
...
But lesser
known companies have to rely on middlemen to sell their products
...
3
...
4
...
of buyers=>short channel
...
o Geographical concentration of buyers:
Industrial products= Buyers are concentrated in a small area=>short channel
...
o Order size/quantity purchased:
Industrial products= size of order is large =>short channel
...
5
...
o In a depressed economy marketers use shorter channels to distribute their goods in an economical
way
...
It is an important element of marketing mix by which marketers makes use of various tools of
communication to encourage exchange of goods and services in the market
...
Page 158 of Consumer Protection
o
o
Various tools used in promotion mix are:
o
Advertising: Paid form of non-personal presentation and promotion of ideas, goods and services by an
identified sponsor
...
It
includes a variety of non-recurrent activities like samples, coupons etc
...
o
Public Relations: Public Association Relations‘ defined public relations as ― The art and social science of
analyzing trends, predicting their consequences, counseling organizational leaders and implementing
planned programme of action which will serve both the organization and the public interest
...
Advertising
o
Impersonal form of communication that is paid for by the marketers(sponsors) to promote a good or service
...
Paid Form –sponsorer has to bear the costs of communicating with the prospective buyer
...
Impersonality – no direct face to face contact between prospects and advertisers
...
3
...
o
Merits Of Advertising:
1
...
2
...
Expressiveness – due to development in art, computer designs and graphics, special effect can be created
that makes simple products and messages look attractive
...
Economy- because of its wide reach, overall cost of advertising gets spread over a wide audience and per
unit cost of reach ↓
...
Less Forceful – than personal selling as no compulsion on prospect to pay attention
...
Lack Of Feedback – no immediate and accurate feedback mechanism to check delivery of message
...
Inflexibility – as message is standardized and not tailor-made to suit the requirements of different age
groups
...
Low Effectiveness – as volume of advertisements ↑, becomes tougher to make advertising message heard
by target prospects
...
Adds To Cost:
advertising unnecessarily adds to the cost of the product, which is ultimately are passed on to the
consumers in the form of higher prices
...
But
Advertisements also increase the demand for the product as large number of potential buyers come to
know about the availability of the product and its features and are persuaded
...
Thus, The ‗per unit‘ cost comes down which lessens the burden of consumers rather than adding to it
...
Undermines Social Values:
Another important criticism of advertising is that it undermines of social values and promotes
materialism
...
Some advertisements show new lifestyles which don‘t find social approval
...
If the
buyers are not about these products they may be using inefficient products
...
Whether to buy or not to buy is a decision that must be made
by the buyers according to their needs
...
3
...
E
...
we may note similar claims of whiteness or stain removing abilities in competing brands of
detergent powder of claims of whiteness of tooth or ‘feeling of freshness‘ in competing brands of
toothpaste that it becomes confusing for the buyers to make a choice
...
Buyers can clear their confusion by comparing and analyzing the information provided on the
advertisements and other sources before taking a decision to purchase a product
...
Encourages sale Of Inferior Products:
Advertisements do not distinguish between superior and inferior goods and persuades people to buy
inferior products also
...
They make false and exaggerated claims and innocent buyers are
deceived
But
Superiority and inferiority depends on the quality, which is a relative concept
...
Production of inferior goods is not necessarily a disservice, as a section of population cannot afford to
buy the high quality expensive products and need a cheaper variety
...
This should be avoided and marketers indulging in such practices should be prosecuted
...
Some Advertisements Are In Bad Taste:
Some advertisements are in a bad taste
...
E
...
Some advertisements distort the relationship between the employer and employees and as far possible,
such advertising should be avoided
...
Conclusion: After seeing the views of the opponents and proponents of advertising, it can be said that most of
the criticism against advertising is not true
...
It is not a social waste rather it adds value to the social cause by
giving a boost to production and by generating employment
Personal Selling
o
Features Of Personal Selling:
1
...
2
...
o
Merits :
1
...
2
...
3
...
o
Role: Importance To
Businessmen:
1
...
2
...
3
...
4
...
5
...
6
...
7
...
8
...
Page 161 of Consumer Protection
Customers
1
...
2
...
r
...
3
...
Induces Customers – to purchase products that satisfies their needs in a better way and thereby
helps them improve their standards of living
...
Converts Latent Demand – leading to more jobs, more incomes and more products and services =>
ECONOMIC GROWTH
...
Employment Opportunities –greater income and employment to unemployed youth
...
Career Opportunities - with greater opportunities for advancement and job satisfaction as well as
security, respect, interest and independence to young men and women
...
Mobility Of Sales People – which promotes travel and tourism
...
Product Standardization - ↑ standardization and uniformity in consumption patterns in a diverse
society
...
Physical qualities: Tidy appearance, good posture, cheerful smile etc
2
...
Technical quality: Full technical knowledge about the product,
4
...
Honesty,
6
...
Persistent- must not give up as one additional argument can close a sale
...
Capacity to inspire trust
Public Relations
The concept of Public Relations involves a variety of programmes to promote and protect a company‘s
image or its products
...
It is done through – news, speeches by corporate leaders, organizing events like
sports events, concerts, seminars etc
...
‖
―The Chartered Institute of Public Relations‖ defines Public Relations as „a strategic management function
that adds value to an organization by helping it to manage its reputation
...
It also involves a mix of promoting specific
products, services and events and promoting the overall brand of an organization, which is an ongoing
tact
...
Other widely known Tools include- Brochures, Newsletters and Annual
Reports
...
Public relations itself is an important tool in the hands of the marketing department, which can be used to the
advantage of the business
...
Press relations:
i
...
ii
...
iii
...
Otherwise news can get distorted if taken from other
sources
...
Product publicity:
i
...
ii
...
3
...
= communicating with the public and the employees within the organisation
...
This is usually done with the help of newsletter, annual reports, brochures, articles and
audio-visual materials
...
Speeches by the company‘s executives at a meeting of trade associations or trade fairs
can really boost the company‘s image
...
4
...
The organisation has to deal with government officials and different ministers in charge of
corporate affairs, industry, finance with respect to policies relating to business and the
economy
...
The government also seeks to maintain a healthy relationship with associations of commerce
and industry and solicits the opinion of major stakeholders while formulating industrial,
telecom, taxation policies, etc
...
The public relations department then has to be really proactive in promoting or defeating
regulations that affect them
...
Counselling:
i
...
ii
...
Such cause-related activities help in
promoting public relations and building goodwill
...
Building awareness: Public relations department → build marketplace excitement before the product
reaches the market or media advertising takes place
...
ii
...
iii
...
Retailers and dealers also
feel it is easier to sell the product to the ultimate consumer
...
Lowers promotion costs: Maintaining good public relations costs much less than advertising and direct
...
Sales Promotion
Sales Promotion refers to short term incentives/ other promotion activities that seek to stimulate interest,
trial or purchase
...
They aim to:
1
...
2
...
These steps are targeted at customers
who would not otherwise buy the product
...
Enhance repeat purchase
...
Gain shelf space
5
...
Sales promotion may be directed at Customers, middlemen or the firm‘s own sales force
Merits of Sales Promotion:
1
...
2
...
3
...
Limitations Of Sales Promotion – if used frequently:
a
...
b
...
Page 164 of Consumer Protection
Commonly Used Activities:
1
...
E
...
10,000, for a limited period
...
Discount: A certain percentage of the price is reduced as a discount from the list price
...
e
...
3
...
e
...
4
...
Induces customers to switch brand
...
5
...
e
...
6
...
7
...
These
draws are taken by names of customers who have bought the goods
...
Usable Benefits: Discount voucher of related products or a free gift given with product, get a discount
voucher for accessories on apparel purchase of Rs
...
9
...
g washing machines, T
...
But one has to be careful about ‗file charges‘ recovered by firms
...
Sampling: Offer of free samples of the product to potential customers
...
11
...
e
...
Free in Mail Premium: Customers are required to correspond with marketers by sending proof of purchase (e
...
wrappers) to claim benefits/ gifts
...
Container Premium: Special containers that can be reused by the customers are used to pack the products
...
Trade Shows: Organized by manufacturers‟ associations where members participate and display their goods in a
stall
...
As a result of this, consumers may be exposed to risks due to unsafe products- that is, he may be cheated,
may have to pay a higher price etc
...
With growing competition, Marketers may attempt to engage in unscrupulous, exploitative and unfair trade
practice
...
Thus; there is a need to provide adequate protection to
consumers against such practices
...
o Use of false weights and measures
o Spurious and adulterated products
o Rough behavior of salesman
o Unsatisfactory after sales services
...
Importance of Consumer Protection
From The Consumers‟ Point Of View:
1
...
So it becomes important to educate them about the
same
...
Unorganized Consumers –
o consumers are not organized in the form of consumer associations that take care of their
interests, as a result, adequate protection has to be given to consumers till these organizations
become powerful enough to protect and promote consumer interests
...
Widespread Exploitation Of Consumers –
Consumers need protection from widespread unscrupulous, exploitative and unfair trade
practices like defective and unsafe products, adulteration, false and misleading advertising,
hoarding, black-marketing etc
...
Long-term Interest of Business:
o It is in the long-term interest of business to satisfy their customers
...
o It leads to long-term profit maximization through customer satisfaction
...
Business uses Society’s Resources:
o Business organizations use resources which belong to the society
...
3
...
o Consumers form an important group among the many stakeholders of business and like other
stakeholders; their interest has to be well taken care of
...
Moral Justification:
o It is the moral duty of any business to take care of consumer‘s interest and avoid any form of
their exploitation
...
5
...
This can impair and tarnish the image of the company
...
They perform several functions such as:
1
...
2
...
3
...
4
...
5
...
in seeking legal
remedy
...
Filing complaints in appropriate consumer courts on behalf of the consumers
...
Public Interest Litigations(PILs) - Taking an initiative in filing cases in consumer courts in the interest
of the general public, not for any individual
...
Recognizes consumer rights
Redressal agencies- set up a three-tier agency to address consumer grievances
...
r
...
A person who hires or avails of a service for a consideration or any beneficiary of such services
when such use is made with the approval of the buyer
...
This definition does not include people who avails services for some commercial purpose or obtain goods
for resale or for some commercial purpose
...
o
Time limit for disposal of cases: As speedily as possible-
Within 3 months or
Within 5 months if complaint requires testing or analysis of goods
...
Replace defective goods with one with no defects
Refund price paid
Pay a reasonable amount of compensation for any loss or injury suffered
...
Discontinue unfair/restrictive trade practice
Not to offer hazardous goods and services for sale
Withdraw hazardous goods from sale
Cease manufacturing hazardous goods
Pay an amount to consumer welfare fund/ person (not less than 5%) to be utilized in the
prescribed manner
Issue corrective advertisement to neutralize the effect of misleading ads
...
Consumer Rights:
1
...
Right to seek redressal:
Protection against products, production
Consumer who suffers a loss or injury due to
processes and services that are hazardous to
unfair trade practice or restrictive trade practice
health and life
...
He
can
claim
Consumers‘ immediate safety requirements a
repair/replacement of defective goods, refund
well as their long term interests must be
of money or compensation of loss or injury
taken into account
...
Example, for products like gas cylinders,
The government has set up district, state and a
pressure cookers,
national commission for redressal of consumer
grievances
...
Right to be heard:
4
...
a variety of products at competitive prices
...
techniques to sell these products
...
Page 169 of Consumer Protection
5
...
Right to be informed:
be an informed consumer
...
Unfair and restrictive trade practices, relevant
laws enacted to prevent UTPs and protect
This is important to ensure that the consumers
consumer interests
...
o If consumers are educated:
Also applicable to information related to public
1
...
2
...
Consumer Responsibilities:
1
...
This would serve as a proof of the purchase made
...
Be aware
About various goods and services available in the market so that an intelligent and wise choice
can be made
...
Buy only standardized goods
As they provide quality assurance
...
4
...
5
...
6
...
7
...
Choose only from legal goods and services and discourage unscrupulous practices like blackmarketing, hoarding etc
...
File a complaint in an appropriate consumer forum
In case of a shortcoming in the quality of goods purchased or services availed
...
9
...
10
...
Avoid waste, littering and contributing to pollution
...
Self Regulation by Business:
o It is in the long-term interest of businesses to serve the customers well
...
o Many firms have set up their customer service and grievance cells to redress the problems and
grievances of their consumers
...
Business Associations:
o Examples of associations of trade, commerce and business - Federation of Indian Chambers of
Commerce of India (FICCI) and Confederation of Indian Industries (CII)
o They have laid down their code of conduct which lay down for their members the guidelines in
their dealings with the customers
...
Consumer Awareness:
o A consumer, who is well informed about his rights and the reliefs available to him, would be in
a position to raise his voice against any unfair trade practices or unscrupulous exploitation
...
4
...
o Force business firms to avoid malpractices and exploitation of consumers
...
Government:
o Enacting various legislations
...
o The most important of these regulations is the Consumer Protection Act, 1986
...
Page 171 of Consumer Protection
Three Tier Mechanism Set Up By the Consumer Protection Act, 1986
Basis
District Forum
State Commission
National Commission
When value of goods and o Appeals against any order of any o Appeals against any order of
1
...
compensation
claimed
state
...
o When value of goods and
services and/or compensation
complaints against)
services and/or compensation
claimed is more than one crore
...
2
...
3
...
Composition
o
A
president
who o
is/has
been/
is
qualified to be a
district judge
...
If an appeal against an order of o
the district forum is filed then the
prescribed fees is:
50% of the amount
payable as per such order
OR
Rs 25,000
- Whichever is lesser
...
If an appeal against an order of
the State Commission is filed
then the prescribed fees is:
50% of the amount
payable as per such order
OR
Rs 35,000
- Whichever is lesser
...
A president who is/has been/ is o
qualified to be a state that is
High Court judge
...
A president who is/has been/ is
qualified to be a judge of the
Supreme Court
...
Page 172 of Consumer Protection
5
...
by All appointments are by the State
on Governments
...
o President – after consultation
with the Chief Justice of the High
Court
All appointments are by the Central
Government
...
o President – after consultation
with the Chief Justice of India
...
o If required, the goods or samples thereof shall be sent for testing to a laboratory
...
Page 173 of Consumer Protection
Legal Protection to Consumers – Not in Syllabus
Name of the Act
Objective/applicable to
Protects
Consumers
Against
1
...
2
...
commodities, checking inflationary black marketers
...
3
...
Contract
...
4
...
1937
livestock products
...
5
...
Certification
thro
certification
quality Protection Mechanism:
Manufacturers allowed using the ISI mark only on ensuring that
BIS
goods conform to prescribed standards
...
6
...
1976
measure or number
...
The Trade Marks Act
...
The Competition Act,2002
Replaced
Monopolies
and Protects Consumers Against:
restrictive trade practices act, 1969
Malpractices adopted by businessmen which hamper competition
in the market
9
...
Provides safeguards and relief to buyers if goods purchased do not comply with expressed or implied
1930
conditions or warranties
...
The Prevention Of Food Check adulteration of food articles to ensure purity so as to maintain public health
...
The project is to be done on inter-leaf sheets
...
The project should be presented in a neat folder
...
Students have to be prepared to give a 3 minute presentation of the project in
the class
...
The projects must be neat and well presented and must be completely handwritten
...
In case of any
mistakes, redo the sheet
...
Color graphs and pie charts (if it is relevant for any aspect of your project) to
make them look attractive
...
Initiative, cooperativeness and participation
1
2
...
Content, observation and research work
2
4
...
Viva
4
TOTAL
10
Class XII/ Business Studies: Summary and Questions/ 176
ORDER FOR FINAL PRESENTATION OF PROJECTS
1
...
CERTIFICATE OF AUTHENTICITY ( TO BE PASTED)
3
...
ACKNOWLEDGEMENTS (Acknowledging the institution, the
places visited and the persons who have helped)
...
PREFACE:
Name Of Project: Problem Statement / Objective Of
Project:
6
...
Introduce the topic studied
giving some historical
background if possible
...
PLANNING
AND
ACTIVITIES
DONE
DURING
THE
PROJECT
8
...
CONCLUSIONS(summarized suggestions or findings, future
scope of study)
...
LEARNING FROM PROJECT
11
...
TEACHER’S OBSERVATION
...
She/he has successfully completed her/his project under my
guidance
and
supervision
towards
the
fulfillment
of
the
practical examination in Business Studies conducted by the
4 Board of Secondary Education for the academic year
Central
2016-17
...
They can choose
one from this list or any other
...
Toothpaste
2
...
Shampoo
4
...
Washing detergent
6
...
Lipstick
8
...
Shoe polish
10
...
Shoes
12
...
Mobile
14
...
Sauces/ketchup
16
...
Body spray
18
...
Hair oil
20
...
Jeans
22
...
Squashes
24
...
Salt
26
...
Butter
28
...
Razor
30
...
e –Wash
32
...
Air Conditioners
34
...
Sunglasses
36
...
Fruit candy
38
...
Bathroom cleaner
40
...
Shoe polish
42
...
Baby Diapers
44
...
Adhesives
46
...
Ladies footwear
48
...
RO system
50
...
Mixers
52
...
Learning Toys
54
...
Microwave oven
56
...
Pencil
58
...
Water bottle
60
...
Newspaper
62
...
Pen drive
64
...
Car
66
...
Cosmetology product
68
...
Breakfast cereal
70
...
Coffee
72
...
Crayons
74
...
Water storage tank
76
...
Saris
78
...
Bike
80
...
Camera
82
...
Washing machine
84
...
Identify one product/service from the above which the students may like to
manufacture/provide [pre assumption]
...
They need
to create their own brand name etc
...
Why have they selected this product/service?
2
...
3
...
What are your competitors Unique Selling Proposition
...
S
...
]?
5
...
What is the name of your product?
7
...
8
...
9
...
10
...
11
...
Which channel of distribution are you going to use? Give reasons for selection?
13
...
14
...
What is the selling price of your competitor‘s product?
(i) Selling price to consumer
(ii) Selling price to retailer
(iii) Selling price to wholesaler
Class XII/ Business Studies: Summary and Questions/ 180
16
...
Wholesaler
...
17
...
What cost effective techniques will you follow for your product
...
PROMOTION
19
...
20
...
What is going to be your ‗U
...
P?
22
...
OPTION 2: ELEMENTS OF BUSINESS PRINCIPLES
The Student Can Select Any One Element Of The Following:
1: They are required to observe the application of the 14 general Principles of
management advocated by Fayol
...
Class XII/ Business Studies: Summary and Questions/ 181
2: They may enquire into the application of scientific management techniques by
F
...
Taylor in the unit visited
...
HOW TO GO ABOUT THE PROJECT:
1
...
A departmental store
...
An Industrial unit
...
A fast food outlet
...
Any other organisation approved by the teacher
...
The observations could be on the basis of
The different stages of division of work resulting to specialisation
...
Visibility of order and equity in the unit
...
Communication levels and pattern in the organisation
...
Methods of wage payments followed
...
Derivation of time study
...
Organisational chart of functional foremanship
...
It is advised that students should be motivated to pick up different areas of visit
...
4
...
Examples; worksheets,
questionnaire, interviews and organizational chart etc
...
Changes witnessed over the last few years on mode of packaging and its
economic impact
...
The changes in transportation of fruits and vegetables such as
cardboard crates being used in place of wooden crates, etc
...
b
...
c
...
d
...
e
...
f
...
g
...
Cost being borne by the
consumer/manufacturer
...
2
...
The students may be asked to enquire about Reasons of stopping the
manufacturing of the above mentioned drinks in India THEN
...
Re entry of Coke and introduction of Pepsi in the Indian market
...
Other linkages with the above
...
Different local brands venturing in the Indian market
...
The survival and reasons of failure in competition with the
international brands
...
Changing role of the women in the past 25 years relating to :
a
...
Women as a bread earner of the family,
c
...
4
...
5
...
6
...
7
...
8
...
9
...
(
Dish washer, Atta maker, etc)
10
...
Washing machines, micro waves, mixers and grinder
...
Need for crèche, day care centre for young and old
...
Ready to eat food, eating food outside, and Tiffin centres
...
Change in the man-machine ratio with technological advances resulting in
change of cost structure
...
Effect of changes in technological environment on the behavior of employee
...
This project also teaches important lessons about the economy,
mathematics and financial responsibility
...
Students then study the results and buy and sell as they see fit
...
The students will have to study the prices of companies in a particular Stock
Exchange
...
The students are already exposed to the Stock Exchange under Globalization in the
Economics Unit of Social Science Syllabus of class X
...
The project work will enable the students to:
Understand the topics like sources of business finance and capital market
Understand the concepts used in stock exchange
Inculcate the habit of watching business channels, reading business
journals/newspapers and seeking information from their elders
...
Develop a brief report on History of Stock Exchanges in India
...
Prepare a list of at least 25 companies listed on a Stock Exchange
...
To make an imaginary portfolio totaling a sum of Rs
...
d
...
e
...
They will also come across with terms like
closing prices, opening prices, etc
...
During this period of recording students are supposed to distinctively record
the daily and starting and closing proves of the week other days under the
negotiable instrument act so that they acquire knowledge about closing and
opening prices
...
The students may conclude by identifying the causes in the fluctuations of
prices
...
Change of seasons
...
Festivals
...
Spread of epidemic
...
Strikes and accidents
e
...
f
...
g
...
h
...
i
...
j
...
k
...
l
...
h
...
i
...
o
News paper clippings to reflect the changes of share prices must be
attached to the project
...
Change of seasons, festivals, natural and human disasters
...
It does not matter if they have made profits or losses
...
Initiative, cooperativeness and participation
1
2
...
Content, observation and research work
2
4
...
Viva
4
TOTAL
10
Class XII/ Business Studies: Summary and Questions/ 187
GUIDELINES FOR THE 90 MARK THEORY PAPER
In the reading time allotted don‘t try to read or solve all the questions
...
Plan
and organize your answers in your mind
...
Do not change the order of questions
...
Take
practice papers to find out what works for you
...
Finish questions worth 30 marks in every hour
...
Leave one line after every point in answer and at least 3 lines between answers
for questions carrying 1 or 3 marks
...
always
write a new answer from a new page
...
o
Best way to highlight is to leave a line after the heading or write the
heading in caps
...
But wherever there isn‘t any
explanation asked or is not given in the book write double the number of
points to be on the safer side
...
For eg: importance of
business environment:
o
First mover advantage: explain the meaning of the term
How is it an advantage, explain that
Example if possible
...
Class XII/ Business Studies: Summary and Questions/ 188
Explanation of each point should not be more than 3 sentences(Where the
number of points to be given are specifically mentioned in the question, give only
that many)
Try to write headings given in N
...
E
...
T or as given by teacher
...
(Write and explain whatever you know rather than leaving
question completely)
Leave time for revision
...
(Especially in questions of Differential Piece
wage system, Trading on Equity etc
...
Leave the questions you are
unsure about for the end
...
Follow a serial order
...
e
...
For questions carrying 1 mark:
o
Only read the 1 markers if you are sure of attempting the paper from 1 to
30
...
o
1 mark questions should not be answered in more than 2 sentences
...
o
There have been instances where for 1 mark the question was what ‗Work
Study‘ is
...
For questions carrying 4-6 marks:
o
4 and 5 markers are usually tricky so think carefully and frame what you
are going to write carefully
...
o
5-6 markers need an introduction sentence
...
o
If the question carries a statement or a case study, such statement or case
study HAS to be quoted in your answer
...
If 4 points have
been asked for 6 marks it means each point is worth 1 ½ marks
...
Follow the same rule, what is the meaning of the term,
and what is its relation with the question
...
o
Eg: question: ―Internal sources of recruitment are better than external
sources‖ Explain any five reason in support of this statement
...
If the question
asks for steps in a process, you lose marks if you do not write the steps in an
order
...
g
...
(5 Marks)
o
Start answer with your view Ans: Yes, I agree that Directing is the
heart of management process
...
Example: Scalar
Chain,
Communication
Networks ,
Controlling process,
Functional
structure, Divisional structure etc
...
Here, you have to give two
points of view with a conclusion
...
o
List/enumerate are same
...
Basis of difference should
also be given
...
GUIDELINES FOR PRACTICALS
Project draft has to be preserved and produced with your final file on the date of
your viva
...
File must be prepared on the basis of the guidelines given
...
So timely
submission will ensure that your project will be corrected thoroughly and you
will get adequate time to correct mistakes, if any
...
On the date of the practical examination,
You are required to come to school in your correct school uniform and
present yourself for a Viva that will be conducted by an external
examiner
...
You can be asked any question about :
The topic you have selected,
The chapter concerned from your text (i
...
Marketing Management or
Business Environment or Principles of Management depending on the
project you have selected)
The firm you have studied
Any question or specific principle that you have covered as a part of your
project
Your findings and Learnings from the project
...
Try
explaining the points to yourself or someone else to see if you have
understood it correctly
...
Prepare your own point
notes or you can use the one given in your smart skills
...
Once the second term is over, practice papers will be available in school
...
Learning happens when the mind is completely fresh and alert
...
Some students find it easy to learn theory while taking a break from
numerical subjects like Mathematics and Accountancy
...
You have to discipline your mind, and it does not happen in a day or two
...
Do the course consistently rather than finishing it and leaving it
A thorough base makes it easier to assimilate information
...
Marking scheme of CBSE requires brief and to the point answer, therefore
you should avoid writing long answers , you don't get more marks by
writing longer answers, but you waste your time
...
You may forget, but every time you read and answer again, it only gets reenforced in your mind and things begin to fall in place on their own when
you enter the examination hall
...
So trust your ability to think sensibly and do not lose heart
...
ALL THE BEST
Class XII/ Business Studies: Summary and Questions/ 192
Chapter 1: Introduction to Management
―Management is the process of designing and maintaining an environment in which
individuals working together in groups efficiently accomplish selected aims
...
Match the following:
a
...
Management is all pervasive
c
...
Management unites the effort of different
individuals to achieve the common goals
...
Management is continuous
iv
...
e
...
Management is a complex activity having
many dimensions
...
Management is a process consisting of a
series of steps, simultaneously performed
all the time
...
Management
should
provide
opportunities to the diverse members to
grow and develop
...
A petrol pump needs to be managed, so
does a school, an army and a house
...
f
...
a
g
...
Identify the category of objectives of management: (mention the sub-category
also)
a) All the employees who complete 10 years of service with our organization will
receive a special bonus
...
20,000 net profit every week to cover our costs
...
27,500 is must to cover the production cost at least
...
……………………………………………………………………………………………
e) We will introduce one variant of the fruit juices processed by us every six months
for the next 4 years
...
Which aspect of importance of management is highlighted in the following
statements?
a
...
……………………………………………………………………………………………
b
...
……………………………………………………………………………………………
c
...
……………………………………………………………………………………………
d
...
……………………………………………………………………………………………
e
...
……………………………………………………………………………………………
4
...
a
...
…………………………………………………………………………………………
5
...
a
...
…………………………………………………………………………………………
6
...
Entry restricted through an exam or completion of a course
...
Compulsory membership of an association of professionals
...
Code of conduct
d
...
Restriction on transfer of interest
f
...
Moderate risk
7
...
Company X is facing a lot of problems these days
...
The
company‘s margins are under pressure and the profits and market share are
declining
...
The finance
department blames both production and marketing for declining return on
investment and bad marketing
...
What quality of management do you think the company is lacking? Explain
briefly
...
A company wants to modify its existing product in the market due to decreasing
sales
...
What
decisions/steps should each level of management take to give effect to this
decision?
4
...
On several occasion it finds that plans are
not being adhered to
...
Advise
remedy
...
Define Management
...
What are the objectives of management? Explain with examples
...
Explain the importance of Management
...
Explain Management as
o Science,
o Art and
o Profession
...
What do you mean by Levels of management?
6
...
7
...
8
...
What are the features of coordination?
10
...
11
...
‘ Which characteristic of management is highlighted in this statement?
Class XII/ Business Studies: Summary and Questions/ 195
1
Q2
Define management
...
Offers employment to physically 1
challenged persons
...
What do you mean by the terms ‗effectiveness‘ and ‗efficiency‘ in context with 4
management? Illustrate through examples
...
‖ Explain any five
reasons to justify the above statement
...
‖ Do you agree? Give reasons
...
The truth seems to 5
be somewhere in between
...
Name the managerial level at 1
which he is working
...
Top level management
b
...
c
...
Management Functions
Q3
1
Q4
‗To manage is to forecast and plan, to organize, to command, to co-ordinate and to 5
control‘
...
Co-ordination- Nature and Importance
Q1
What is the purpose of co-ordination?
1
Q2
Why is coordination required at all levels of management?
3
Q3
Explain the nature of Coordination
...
5
Class XII/ Business Studies: Summary and Questions/ 196
Chapter 2: Principles of Management
1
...
―The overall compensation of employees should be fair to both the employees
and the organization‖
...
………………………………………
b
...
………………………………………………………………………………………………
…………………………………
...
―A manager should have the right to punish a subordinate for willfully not
obeying a legitimate order but only after sufficient opportunity has been given to
the person to present his case
...
…………………………………………
d
...
‖
………………………………………………………………………………………………
…………………………………
...
It requires obedience to organizational rules and employment agreement which
are necessary for the working of the organization
...
……………………………
f
...
………………………………………………………………………………………………
………………………………………………………
...
The result of application of this principle is that an employee in a formal
organization is answerable to only one superior
...
……………………………
h
...
………………………………………………………………………………………………
………………………………………………………
...
―Organizations should have a chain of authority and communication that runs
from top to bottom and should be followed by managers and the subordinates
...
……………………………
j
...
‖
………………………………………………………………………………………………
………………………………………………………
...
―Specialization is the most efficient way to use human effort
...
……………………………
l
...
‖
………………………………………………………………………………………………
………………………………………………………
...
This principle emphasizes kindliness and justice in the behavior of managers
towards workers
...
……………………………
n
...
But once selected they should be kept at their post for a minimum fixed tenure
...
……………………………
o
...
………………………………………………………………………………………………
………………………………………………………
...
As an application of this principle, employees‘ suggestion system has been
created
...
……………………………
Class XII/ Business Studies: Summary and Questions/ 198
q
...
………………………………………………………………………………………………
………………………………………………………
...
There needs to be a balance between subordinates‘ involvement with managers‘
retention of final authority
...
……………………………
Basic Questions for Practice
1
...
3
...
What are Principles of Management?
Explain the features of management principles
...
Also, for each principle,
give 2 benefits of following the principles and 2 impacts of no following the
principles
...
Explain the principles of Taylor‘s Scientific Management
...
Explain the techniques of Taylor‘s Scientific Management
...
Lately the business was expanding due to good
quality and reasonable prices
...
New players were also coming to cash in on the new
trend
...
But this resulted in many problems
...
Sometimes the
subordinates had to work for more than one superior resulting in declining
efficiency
...
This resulted in a lot of overlapping and
wasteage
...
The spirit of teamwork, which
had characterised the company, previously was beginning to wane
...
The quality of the products was
beginning to decline and market share was on the verge of decrease
...
Questions
1
...
2
...
3
...
In order to rectify the situation it appointed management
consultant ‗M‘ consultants to recommend a restructure plan to bring the company
back on the rails
...
The company should introduce scientific management with regard to
production
...
Production Planning including routing, scheduling, dispatching and feedback
should be implemented
...
In order to separate planning from operational management ‘Functional
foremanship‘ should be introduced
...
‗Work study‘ should be undertaken to optimise the use of resources
...
‗Standardisation‘ of all activities should be implemented to increase efficiency
and accountability
...
To motivate the workers ‗Differential Piece Rate System‘ should be
implemented
...
It was expected that the changes will bring about a radical transformation in the
working of the company and it will regain its pristine glory
...
Do you think that introduction of scientific management as recommended by M
consultants will result in intended outcome?
2
...
Principles of Management - Meaning, Nature and Significance
Q1
‗The principles of management are different from those used in pure science
...
1
Q3
Explain the meaning of management principles and state how they are derived
...
3
Q5
Explain by giving any five reasons, why a proper understanding of management 5
principles is necessary
Fayol's Principles of Management
Q1
Q2
The subordinates in a company receive orders regarding their work from different 1
operative heads for the same task
...
What might have been the prevailing situation?
Class XII/ Business Studies: Summary and Questions/ 200
Q3
An organization does not follow the principles of management
...
Q4
An organization follows the principles of management
...
But he does not give him the authority to requisition tools and materials from the
stores department
...
In your school, you observe that books are kept in office, chalks in the library and office 3
records in the staffroom
...
Q6
Q1
Q2
Q3
Q4
Scientific Management - Principles and Techniques
List any two principles of ‗Scientific Management‘ formulated by Taylor for managing an
organization scientifically
...
One of them is ‗Fatigue study‘
...
Q6
Name and explain the wage payment method recommended by Taylor with the help of
an example
Q7
Do you agree that Taylor‘s principles of Scientific Management and Fayol‘s principles of 5
management are complementary? Give reasons
...
If the question asks
‗Compare Works of Taylor and Fayol or Works of Taylor and Fayol are mutually
complementary
...
)
Class XII/ Business Studies: Summary and Questions/ 201
5
Chapter 3: Business Environment
1
...
2
...
Explain the following dimensions of Business Environment with the help of
examples:
o Economic,
o Social,
o Technological,
o Political and
o Legal
4
...
5
...
NCERT
Questions: Long Answer Type
a
...
b
...
Explain, with examples, the various dimensions of business environment
...
What economic changes were initiated by the Government under the Industrial
Policy, 1991? What impact have these changes made on business and industry?
e
...
Several factors have prompted their decisions in this regard
...
People have developed a taste for better quality products
even though they may have to pay more
...
The
government has also liberalised its economic policies in this regard and permitted
even cent percent foreign direct investment in some sectors of retailing
...
Identify changes in business environment under different heads — economic,
social, technological, political and legal that have facilitated the companies‘
decisions to plan significant investments in organised retailing
...
What has been the impact of these changes with regard to globalisation and
privatisation?
Class XII/ Business Studies: Summary and Questions/ 202
Business Environment - Meaning And Importance
Q1
‗Environment provides a business with constraints and opportunities
...
Q2
Classify the business environment into two major categories and give one example of 3
each
...
Q4
Sound understanding of environment provides a competitive edge
...
3
Dimensions of Business Environment
Q1
What is the impact of economic environment on business?
2
Q2
What is meant by political environment of business?
1
Q3
What is the impact of social environment on business?
2
Q4
Distinguish between general and specific environment of a business
...
Briefly discuss any two dimensions of
general environment of business
...
‘ Explain each in brief
...
‘
Q3
Explain any 5 negative and 5 positive impacts of globalization and liberalization on 5
Business and Industry in India
...
…………………………………………………………………………………………
…………………………………………………………………………………………
Following Are Some Points Jumbled Up
...
2
...
4
...
6
...
8
...
10
...
12
...
14
...
16
...
18
...
20
...
_______
2
...
_______
4
...
_______
6
...
_______
8
...
_______
10
...
_______
12
...
_______
14
...
_______
16
...
_______
18
...
_______
20
...
Explain why rules are the simplest type of plans?
…………………………………………………………………………………………
2
...
3
...
4
...
Planning requires logical and systematic thinking rather than guess work
...
Following a pre decided plan which may not work because the circumstances
have changed, brings to light which limitation of planning?
…………………………………………………………………………………………
………………………………………………………………………………
State the type of plan in each case:
Example
Type of Plan
1
...
ROI must be 20%
3
...
Employees will be selected only after a written test
5
...
The age for retirement is 60 years with an extension up to 2 years
7
...
The new range of biscuits will be advertised on TV at prime time
9
...
A company needs a detailed plan for it s new project‘ construction
of a shopping mall‘
...
A plan which is a control device as well
12
...
A plan in which the smallest details are worked out within the
broad framework of a policy
Write the PLANNING PROCESS in the correct order:
Implement the plan
Identifying alternative courses of action
Setting objectives
Follow-up action
Developing premises
Selecting an alternative
Evaluating alternative courses of action
1
...
3
...
5
...
7
...
Define Planning
...
Explain the features of planning
...
Explain the importance of planning
...
Explain the limitations of planning
...
Explain the steps in the process of Planning
f
...
Define the following with examples:
i
...
Procedure,
ii
...
Method,
iii
...
Rule,
vii
...
Programme
NCERT Case Studies and Questions
Short Answer Type
1
...
2
...
Do you think planning can work
in a changing environment?
3
...
Why are rules considered to be plans?
5
...
Long Answer Type
1
...
What are the main features to be considered by the management while
planning?
3
...
Is planning actually worth the huge costs involved? Explain
...
is facing a problem of declining market share due to
increased competition from other new and existing players in the market
...
For quality conscious consumers, the company is introducing new models
with added features and new technological advancements
...
Prepare a model business plan for C Ltd
...
You
need not be very specific about quantitative parameters
...
2
...
3
...
Q1
What is the purpose of planning?
1
Q2
Explain how planning facilitates decision making?
3
Q3
A firm does not believe in the process of planning
...
5
Q5
‗Planning is the basis of control, action its essence, delegation its key and information its
guide
...
(relate planning with controlling, directing and organising)
5
Q6
‗Planning is not guarantee for success for any organization
...
Statement explanation- 1 mk
...
Explain briefly
...
5
Planning Process
Q1
Explain the meaning of supportive plans or derivative plans with examples
...
Explain, in
brief, the other steps in this process
...
Construction of a Shopping Mall
...
Which of the following is not an element of delegation?
(a) Accountability
(b) Authority
(c) Responsibility
(d) Informal organisation
2
...
Which of the following does not follow the scalar chain?
(a) Functional structure
(b) Divisional structure
(c) Formal organisation
(d) Informal organisation
...
A tall structure has a
(a) Narrow span of management
(b) Wide span of management
(c) No span of management
(d) Less levels of management
5
...
For delegation to be effective it is essential that responsibility be accompanied
with necessary
(a) Authority
(b) Manpower
(c) Incentives
(d) Promotions
7
...
The form of organisation known for giving rise to rumors is called
(a) Centralised organisation
(b) Decentralised organisation
(c) Informal organisation
(d) Formal organisation
9
...
Grouping of activities on the basis of functions is a part of
(a) Decentralised organisation
(b) Divisional organisation
(c) Functional organisation
(d) Centralised organisation
Short Answer Type
a
...
What are the steps in the process of organising?
c
...
d
...
Under what circumstances would functional structure prove to be an
appropriate choice?
f
...
g
...
h
...
Comment
...
Why is delegation considered essential for effective organising?
b
...
Decentralisation is an optional policy
...
d
...
Distinguish between centralisation and decentralisation
...
How is a functional structure different from a divisional structure?
Application Type
o Neha runs a factory wherein she manufactures shoes
...
This will enable her to market her business unit as the one stop
for working women
...
Can the production manager blame the
foreman if he is not able to achieve the desired target? Give reasons
...
The production
manager could not achieve the revised production target
...
The company manufactures the
consumer products
...
It has a functional organisational structure with separate
departments for Production, Marketing, Finance, Human Resources and
Research and Development
...
Prepare a report regarding organization structure giving concrete reasons
with regard to benefits the company will derive from the steps it should
take
...
It is facing lot of
problems in delays in decision-making
...
The work force is also not motivated since they
cannot vent their grievances except through formal channels, which involve red
tape
...
Its market share is also declining due to
changed circumstances and business environment
...
Give reasons in terms of benefits it will derive from the changes
suggested by you
...
Its business was very good till 1991
...
With the result the market share of X limited has declined
...
Before 1991 this business model had served
the company very well as consumers had no choice
...
What organisation structure changes should the company bring about in
order to retain its market share?
How will the changes suggested by you help the firm? Keep in mind that
the sector in which the company is FMCG
...
State any two bases to complete departmentalization
...
The other name for reporting relationships is …………………
...
Give any reason to show why it is necessary to identify and divide the work in to
jobs
...
...
After the process of organizing, similar jobs are grouped together
...
…………………
...
5
...
...
Which structure is suitable for the following (Give your reason also
...
……………
c) Software developers
……………………………
...
How is the span of management related to determination of levels in an
organization?
………………………………………………………………………………………………
………………………………………………………………………………………………
7
...
...
How is
it overcome in the formal organization?
………………………………………………………………………………………………
8
...
State the direction of flow of:
Responsibility ……………………………………
...
Accountability …………………………………………
...
―How well one delegates determines how well one manages‖
...
………………………………………………………………………………………………
………………………………………………………………………………………………
11
...
Why? State any one reason
...
How do the concepts of delegation and decentralization differ on the basis of
freedom of action allowed to the subordinates?
………………………………………………………………………………………………
………………………………………………………………………………………………
Basic Questions
1
...
3
...
5
...
What is an organisation structure?
Explain the importance of organizing
...
Explain the features, merits, limitations and suitability of:
o Functional structure and
o Divisional structure
...
Define Formal organization
...
7
...
Explain its features, merits and limitations
...
Define Delegation
9
...
Explain the features of delegation
...
Define Decentralization
...
Explain the importance of decentralisation
...
Identify the function and give its importance
...
Q2
Describe the steps involved in the process of Organizing
...
He also wants to diversify into children‘s
garments
...
Distinguish between Functional and 6
Divisional structure on the following bases :
i
...
Managerial development
iii
...
Suitability
Q4
What is meant by Functional organizational structure? State any two advantages & two 6
disadvantages of such structures
...
3
4
Q2
‗Formal and informal organization is supplementary to each other‘
...
Q3
The employees of Manik Ltd
...
Name the type of organization so formed and state its three features
...
‖ Explain the statement
...
But he does not give him the authority to requisition tools and materials from the
stores department
...
Q3
Can an over-burdened manager take help from his subordinates? How? Explain the three 3
important things which he should keep in mind while taking such a help
...
Meaning and Importance of Decentralization
Q1
―If we delegate authority, we multiply it by two, and if we decentralize it, we multiply it 5
by many
...
5
Q4
‗A firm cannot function without delegation but it can function without decentralization
...
Q5
Can a large size organization be totally centralized or decentralized?
Q1
Difference between Delegation and Decentralization
Distinguish between delegation & decentralization of authority on the following bases:
(i) Nature
(ii) Purpose
(iii) Freedom of action
(iv) Level of authority
Class XII/ Business Studies: Summary and Questions/ 214
4
4
Chapter 6: Staffing
1
...
State true or false with a valid reason:
a) Staffing includes ‗defending the company in law suits and avoiding legal
complications‘
...
……………………………………………………………………………………
……………………………………………………………………………………
c)
In a new firm, internal sources of recruitment are not useful
...
……………………………………………………………………………………
……………………………………………………………………………………
e) A job offer is the same thing as contract of employment
...
Why can‘t recruitment be done before selection?
…………………………………………………………………………………………
…………………………………………………………………………………………
4
...
Give an example of a combination of time and performance based compensation
plan in a manufacturing firm
...
Give one benefit of ‗Transfers‘ as an internal source of recruitment
...
Those who are not promoted are unhappy and their efficiency may decline
...
What is the chief demerit of labour contractors as an external source of
recruitment?
…………………………………………………………………………………………
…………………………………………………………………………………………
9
...
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
………
10
...
Give an example of a job where intelligence test is not required
...
Training reduces the use of hit and trial methods
...
Give an example of a job where medical examination may become the first step in
the selection process
...
How do on the job training methods contribute to the development of future
managers?
…………………………………………………………………………………………
…………………………………………………………………………………………
Class XII/ Business Studies: Summary and Questions/ 216
15
...
Apprenticeship training ……………………………………………………………
b
...
c
...
Give one reason for the popularity of campus recruitment as a source of
recruitment
...
2
...
4
...
6
...
8
...
10
...
12
...
14
...
16
...
Explain the importance of staffing
Write a short note on Staffing as a part of Human Resource Management
Explain the steps in the Staffing process
Explain the internal sources of recruitment
...
Critically analyse the external sources of Recruitment
Name the sources that can be used to recruit:
a
...
Government employees
c
...
Workers
Explain the steps in the Selection process
Name the tests used in the election process
...
What are ‗On the job‘ and ‗Off the job‘ methods of training?
Explain the following:
a
...
Vestibule Training
c
...
Internship Training
...
How would you estimate the manpower 1
requirements of your firm with the help of workload analysis?
Q2
Why is staffing considered to be the key to other functions of management?
Class XII/ Business Studies: Summary and Questions/ 217
3
o
Q1
Staffing As A Part Of Human Resource Management
‗Staffing is the responsibility of all managers and not the Human Resource department
alone‘
...
o
5
Steps in Staffing Process
Q1
Name the concept relating to the following:
Assessing the present and future requirement of workers
Determining the competence of workers
Streamlining the attributes of a person required for doing a job
Searching for prospective candidates
1
Q2
State the steps involved in the process of Staffing
...
Q3
Your school has some vacancies of teachers
...
Explain any four ways through which right-type of people may be invited to fill
up rest of the vacancies
o
Selection - Meaning, Process
...
3
Q2
A firm provides security services and thus needs candidates who are reliable and do not
leak out secrets of their clients
...
3
Is selection a negative process? Why? What kind of tests will primarily be used and why
to select the following :
(i) An- interior-decorator,
(ii) A Computer-operator,
(iii) A Public-dealing officer, and
(iv) A School Teacher
5
Q3
Q4
5
Training and Development - Meaning, Need and Distinction, Methods
Q1
A newly appointed manager does not believe in training the workers
...
Briefly enumerate the important sources of recruitment
...
What is meant by recruitment? How is it different from selection?
3
...
How is it different from education?
4
...
5
...
What is the importance of staffing function in today‘s environment?
Long Answer Type
1
...
Explain the procedure for selection of employees
...
What are the advantages of training to the individual and to the organisation?
4
...
Explain
...
The workers of a factory are unable to work on new machines and always
demand for help of supervisor
...
Suggest the remedy
...
The workers of a factory remain idle because of lack of knowledge of hi-tech
machines
...
How can this problem be removed
...
The quality of Production is not as per standards
...
What could be the way to improve the accuracy?
4
...
It requires such candidates who are
reliable and don‘t leak out the secrets of their clients
...
5
...
It produces 100000
plates and bowls each day
...
Advise how the company will fulfill its order and
which method of recruitment would you suggest
...
A company X limited is setting up a new plant in India for manufacturing auto
components
...
Many reputed car manufacturers source their auto components from
here
...
To achieve these targets it requires a highly trained and motivated work force
...
While giving
answers keep in mind the sector the company is operating
...
Outline the process of staffing the company should follow
...
Which sources of recruitment the company should rely upon
...
c
...
d
...
2
...
Their competitor was attracting
most of the qualified, potential employees in their market
...
‘ This resulted in
the client having to choose from candidates who had the ‗soft‘ skills needed for the
job, but lacked the proper ‗hard‘ skills and training
...
As an HR manager what problems do you see in the company?
b
...
A Public transport corporation has hired 1000 buses for the different routes for the
passengers of metropolitan city
...
) of these buses have been found to be wanting in satisfactorily dealing
with public and daily commuters
...
Questions
a
...
Is it possible to modify their behaviour by planning a suitable type of
training? Suggest one
...
Ms
...
A few months from now a large steel manufacturing company
appointed her as its human resource manager
...
Ms
...
Questions
a
...
What problems do you foresee in her job?
c
...
How significant is her role in the organisation?
Class XII/ Business Studies: Summary and Questions/ 220
Chapter 7: Directing
―Directing refers to the process of instructing, guiding, counselling, motivating and
leading people in the organization to achieve the objectives
...
Identify which aspect of importance of directing is highlighted in the
following statements:
A supervisor has clarified the doubts regarding the plans made
...
A good leader is one who is able to convince every employee in the organization
to make maximum effort
...
A manager as to identify the potential of his employees
...
Through explanation, manager was able to seek cooperation for implementing
new methods of performance appraisal
...
Through the directing techniques, a manger seeks to develop commitment and
cooperation in the organization
...
Directing initiates ………………………………………………………………
...
Directing takes place at …………………………………………………… level of a
firm
...
Directing flows from …………………………………
...
Directing is a …………………………………
...
1
...
3
...
5
...
7
...
9
...
11
...
13
...
What are the elements of Directing?
Explain the importance of directing
...
Define Motivation
...
Explain the Maslow‘s hierarchy of needs and its application in management
...
Explain the financial incentives that can be used by organisations
...
Who is a leader?
Explain the following leadership styles:
Class XII/ Business Studies: Summary and Questions/ 221
14
...
16
...
18
...
20
...
Define Communication
...
What are its advantages and disadvantages?
Explain the formal communication networks with the help of diagrams
...
What are its advantages and disadvantages?
Explain the informal communication networks with the help of diagrams
...
The workers always try to show their inability when any new work is given to
them
...
Due to sudden rise
in demand a firm wants to meet excess orders
...
Suggest ways for the supervisor to handle
the problem
2
...
The
production manager finds himself overburdened
...
3
...
They take least
initiative and fear to express their problems before the manager
...
In an organisation all the employees take things easy and are free to approach
anyone for minor queries and problems
...
It has also resulted in
loss of secrecy and confidential information being leaked out
...
Case problem:
Y limited is a bank functioning in India
...
Lately, the government of India has allowed the private sector to gain entry
in the insurance business
...
But now with liberalisation of the economy and to make the field
competitive other companies have been given licenses to start insurance business
under the regulation of ‗Insurance Regulatory and Development Authority‘
...
Questions
a
...
What benefits will the company derive from effective
supervision?
b
...
What benefits will the
company get from them?
c
...
e
...
Identify the qualities of leadership in this line of business that the company
managers must possess to motivate employees and agents
...
Give a model of formal communication system that the company can
follow
...
How can they be removed?
f
...
Explain how it contributes to the success of a firm
...
Supervision - Meaning and Functions
Q1
What is Supervision?
1
Q2
A firm does not have effective supervision
...
Do you agree?
6
Q3
6
Motivation - Meaning , Maslow’s Hierarchy of Needs, Financial
And Non-Financial Incentives
Q1
Rajat a sales manager achieved his sales targets one month in advance
...
1
...
2
...
3
...
Q2
Maslow‘s need hierarchy is considered fundamental to the understanding of motivation
...
Q3
Explain ‗profit sharing‘, ‗co-partnership‘ and ‗suggestion system‘ as monetary incentives
Q4
‗Money is the only motivator/ human beings can be motivated only thro the use of 6
monetary incentives
...
(Give incentives+ monetary and non-monetary incentives + Maslow‟s theory and how monetary
incentives satisfy 1st and 2nd order needs but not the others)
6
Leadership – Meaning, leadership styles
Q1
Leadership is a process of influence
...
Class XII/ Business Studies: Summary and Questions/ 223
3
Q2
Give situations that will call for application of different leadership styles
...
1
Q2
Distinguish between ‗upward‘ and ‗downward‘ communication
3
Q3
State any three personal barriers to communication
...
Also state the
problem which may arise in this type of communication
...
as Production and Sales Manager 1+3
respectively
...
(a) Identify the type of communication used in the above example
...
Class XII/ Business Studies: Summary and Questions/ 224
Chapter 8: Controlling
NCERT QUESTIONS
Short Answer Type
1
...
2
...
‘ Comment
...
‗An effort to control everything may end up in controlling nothing
...
4
...
5
...
Long Answer Type
1
...
2
...
3
...
What are the problems
faced by the organisation in implementing an effective control system?
4
...
5
...
6
...
7
...
Explain the relationship between planning and controlling
9
...
For
each item, choose the behavior that management must keep a check to ensure an
efficient control system
...
Biased performance appraisals
2
...
Asking a person to violate
company‘s rules
4
...
Overlooking boss‘s error to prove
loyalty
6
...
Reporting a violation on noticing it
8
...
Taking longer than necessary to do
the job
10
...
It had enjoyed a substantial market share and also had
a loyal customer following
...
Also
mobile market in India has grown tremendously and new players have come with
better technology and pricing
...
It is
planning to revamp its controlling system and take other steps necessary to rectify
the problems it is facing
...
Identify the benefits the company will derive from a good control
system
...
How can the company relate its planning with control in this line of
business to ensure that its plans are actually implemented and targets
attained
...
Give the steps in the control process that the company should follow to
remove the roblems it is facing
...
What techniques of control can the company use?
In all the answers keep in mind the sector of business the company is in
...
3
Q2
Controlling is looking back as well as forward looking
...
Do you agree? Give four reasons 5
in support of your answer
...
‘ Explain
...
Class XII/ Business Studies: Summary and Questions/ 226
1
Q2
Which two steps in the process of control are concerned with compelling events to 1
confirm to plan?
Q3
The essence of control lies in action
...
Comment
...
The target production is 200 units per day
...
However, over the last 2
months the production has varied between 150-165 units per day
...
Identify the management function required to correct the above situation and
state the procedure to be followed for the same
...
what steps will you take to ensure that the actual performance is in accordance
with the established standards
Q7
Taking corrective/remedial action is the last step in the process of one of the functions of
management
...
(b) Explain the other steps of the above mentioned function
...
‘ Do you agree with this 6
statement? Explain
...
2
...
4
...
6
...
8
...
10
...
12
...
14
...
The firm is extremely successful having a good track record and always gets
sufficient time to repay the bills due
The raw material has to be imported, which takes over a month
The firm has a high debtors turnover ratio
In 2 months time, the production will have to be doubled as the demand is
increasing
There is stiff competition posed by other sellers of our commodity, in the
market
The inflation rate has touched an all time high
The firm is supplying designer clothes on order
STATE IN EACH OF THE FOLLOWING CASES WHETHER THE FIXED
CAPITAL REQUIREMENT WILL BE LESS OR MORE?
1
...
3
...
5
...
7
...
9
...
The firm is manufacturing led tv‘s
World over economy is witnessing tremendous growth
The firm is manufacturing components of mobile phones
The firm has a number of branches having a high turnover
The firm produces and sells handicraft items
In 2 months time, the production will have to be halved as the demand is
falling
The firm is a leading cosmetic manufacturer and is planning to launch a new
range of colour cosmetics at the fashion week
The firm is textile firm planning to start a cement manufacturing plant
For the new factory the land can be leased
The leading men‘s clothing brand will sell its new range through popular and
major retail outlets
Class XII/ Business Studies: Summary and Questions/ 228
FINANCIAL MANAGEMENT – WORKSHEET – II
1
...
Financial
management
aims
at
…………………
...
……………………………………
……………………………………………………………………………………………
...
A decision to raise money for long term capital needs of the business from certain
sources is called……………………………………………
...
Two criteria for taking financing decision …………………………………………
and
...
Floatation
cost
means
……………………………………………
...
6
...
...
Which
component
of
capital
structure
determines
financial
risk?
...
8
...
...
How
is
market
value
of
the
shares
of
a
company
maximized?
...
10
...
c) Cash inflow are unpredictable and unstable ………………………
...
e) Presently the economy is undergoing recession……………………
...
Should as company declare dividend or retain the earnings in the following
cases:
a) There is a financially profitable project coming up in one month for the
company requiring huge investment ……………………………
Class XII/ Business Studies: Summary and Questions/ 229
b) The earnings in the past have been unstable ……………………………
...
d) The
present
tax
rate
on
receiving
dividend
is
high
………………………………
Basic Questions
1
...
2
...
3
...
Investment decision
b
...
Dividend Decision
4
...
Explain the factors affecting Financing decision
6
...
Define Financial planning
...
Explain the importance of Financial Planning
...
Define Capital Structure
...
Explain the factors that affect Capital Structure of a firm
...
What is fixed capital? Explain the factors that affect the fixed capital
requirements of a firm
...
What is working capital? Explain the factors that affect the fixed capital
requirements of a firm
...
It is enjoying a buoyant
demand for its products as economic growth is about 7%-8% and the demand for
steel is growing
...
It is estimated that it will require about Rs
...
Questions
a
...
What is the importance of having a financial plan for this company? Give an
imaginary plan to support your answer
...
What are the factors, which will affect capital structure of this company?
d
...
Give reasons with regard to both in
support of your answer
...
Class XII/ Business Studies: Summary and Questions/ 230
1
Q2
What is meant by financial management?
1
Q3
Why is dividend decision called a residual decision?
3
Q4
Primary objective of financial management is to maximize wealth
...
5
Financial Decisions: Meaning and Factors Affecting
Q1
A company wants to establish a new unit in which machinery worth Rs 10 Lakhs is
involved
...
1
Q2
Length of production cycle affects the working capital requirements of a firm
...
3
Q3
‗Every manager has to take three basic decisions while performing the finance function‘
...
6
Financial Planning - Meaning and Importance
Q1
Which process prepares a blue print of an organization‘s future preparations relating to
Finance? Give any two reasons why this process is needed?
3
Capital Structure - Meaning and Factors
Q1
Explain 5 essentials of an optimum capital structure
Q2
The directors of a manufacturing company are thinking of issuing Rs 20, 00,000 additional 5
debentures for the expansion of their production capacity
...
What are the risks involved in it? What factors other than
risk should the directors keep in mind before taking the above decision?
Hint:Risks =
o
In case the rate of return on the investment is lower than the cost of debentures,
the company may find it difficult to meet its fixed interest obligations
o If the company is unable to repay the principal amount on the debentures, the firm
will face the risk of insolvency
Factors determining the capital structure of s business(any three)
Class XII/ Business Studies: Summary and Questions/ 231
5
Financial Leverage/ Trading on equity Capital Gearing
Example 1: A company requires Rs __________________ to finance its operations
...
=
=
Rs
Rs
The calculations of EBT (Earnings before Tax), EAT (Earnings after taxes) and
EPS (Earning per Share) under the above two alternatives can be given as:
Particulars
Plan A
Plan B
Capital
EBIT
(- Interest @____%)
[=
R
100
* Debt ]
EBIT =
EBT
(_-Taxes @ 10%)
EAT
No
...
Example 2: A company has
Equity capital of Rs 10,00,000( 1,00,000 equity shares of Rs 10 each)
Earnings before interest and taxes = Rs 50,000
...
The prevailing tax rate is
30%
...
Should the company proceed with its plans? Give reasons
...
This will have a negative effect on the financial leverage of the
company
...
c) This will also will be reflected in the market prices of shares, which will go down,
and as a result, the wealth of shareholders will also be reduced
...
(– Rs 15,000)
Rs 40,000
...
Of shares
1,00,000
1,00,000
EPS
Rs 0
...
28
Capital
EBIT
(- Interest @ 7%)
[ 7 * 5,00,000 ]
100
EBT
(-Taxes @ 30%)
EAT
(=
EAT
No of Shares
)
Example 3: A company has
Equity capital of Rs 10,00,000( 1,00,000 equity shares of Rs 10 each)
Earnings before interest and taxes = Rs 1,50,000
...
The prevailing tax rate is
30%
...
Should the company proceed with its plans? Give reasons
...
This will have a positive effect on the financial leverage of the
company
...
f) This will also be reflected in the market prices of shares, which will go up, and as
a result, the wealth of shareholders will also be increased
...
(– Rs 45,000)
Rs 1,90,000
...
Of shares
1,00,000
1,00,000
EPS
Rs 1
...
33
Capital
EBIT
(- Interest @ 7%)
[ 7 * 5,00,000 ]
100
EBT
(-Taxes @ 30%)
EAT
(=
EAT
No of Shares
)
Fixed and Working Capital - Meaning and Factors Affecting Both
Q1
What is fixed capital? Explain any 4 factors that influence fixed capital requirement of a 6
firm
...
State with Reasons In Each Of The Following Cases Whether The Working Capital
Requirement Will Be Less Or More?
1
...
The firm is a coaching centre
3
...
World over economy is undergoing recession
5
...
The firm is manufacturing led tv‘s
7
...
Class XII/ Business Studies: Summary and Questions/ 234
8
...
The raw material has to be imported, which takes over a month
10
...
In 2 months time, the production will have to be doubled as the demand
is increasing
12
...
The inflation rate has touched an all time high
14
...
The firm is manufacturing led tv‘s
2
...
The firm is manufacturing components of mobile phones
4
...
The firm produces and sells handicraft items
6
...
The firm is a leading cosmetic manufacturer and is planning to launch a
new range of colour cosmetics at the fashion week
8
...
For the new factory the land can be leased
10
...
What is meant by capital market? Name any two segments of the capital
market
...
State the two parts of capital market
...
Nature of the capital market can be well explained by its features
...
(3)
3
...
State the different methods of floating new issues in the primary market Or
Briefly explain the concept of ‗Initial Public Offer‘ Or Explain the various
methods through which the securities can be issued in the primary market
...
What is meant by rights issue?
6
...
(5/6)
7
...
(3)
8
...
State any
three such features of money market
...
What do you understand by the term Treasury bill? (1)
10
...
(1)
11
...
(1)
12
...
(1)
13
...
Distinguish between capital market and money market
...
Define the term ‗stock exchange‘
...
Explain any five functions of a stock exchange
...
Do you agree? Give
any four reasons in support of your answer
...
Why was the SEBI set up?(1)
18
...
State the main objectives of SEBI
...
State any five regulatory functions of SEBI
...
What are the functions of SEBI? Explain them briefly
...
Why was the need for the establishment of SEBI felt? (4)
Class XII/ Business Studies: Summary and Questions/ 236
FINANCIAL MARKETS – WORK SHEET 2
1
...
Define:
i
...
...
ii
...
...
3
...
A company‘s securities can be traded on a stock exchange only if it is
…………
...
ii
...
……
iii
...
iv
...
v
...
4
...
5
...
Gives ………………
...
To existing securities
ii
...
…………
...
Contributes to ……………………
...
Spreading of …………………………
vi
...
Write any three:
a
...
-----------------------------------------------------------------------------------------------------ii
...
--------------------------------------------------------------------------------------------------b
...
-----------------------------------------------------------------------------------------------------ii
...
--------------------------------------------------------------------------------------------------c
...
-----------------------------------------------------------------------------------------------------ii
...
---------------------------------------------------------------------------------------------------Basic Questions
Define Financial markets
...
Define Capital market
...
What is a Primary market?
How can securities be issued in the primary market?
What is a secondary market?
Differentiate between Primary and secondary markets
...
What are the functions that are performed by a stick exchange?
Explain the trading procedure followed in Stock Exchanges
...
What were the objectives of establishing Securities and Exchange Board of
India (SEBI)
18
...
2
...
4
...
6
...
8
...
10
...
12
...
14
...
16
...
NCERT QUESTION
‗R‘ Limited is a real estate company which was formed in 1950
...
Lately, this sector is witnessing a boom due to the fact that the Indian economy is on
the rise
...
More people can afford to buy homes
for themselves due to easy availability of loans and accompanying tax concessions
...
Market, whether to raise money from domestic market or international market or
Class XII/ Business Studies: Summary and Questions/ 238
Combination of both, whether to raise the necessary finance from money market or
capital market
...
To make its offerings attractive it is planning to offer host of
financial plans products to its stakeholders and investors and also expand it‘s listing
at NSE after complying with the regulations of SEBI
...
What benefits will the company derive from listing at NSE?
b
...
How does the SEBI exercise control over ‗R‘ Limited in the interest of
investors?
Concept of Financial Market: Money Market and its Instruments
Q1
1
Each
Name the concepts relating to the following:
1
...
2
...
3
...
4
...
5
...
Q2
Define the following terms:
1
...
Unorganized capital
markets
2
...
Price rigging
3
...
Insider Trading
1
Each
Q3
Nature of money market can well be explained with the help of its features
...
Q4
Who are the users of funds in the Capital markets?
1
Q5
Who are the suppliers of funds in the financial markets?
1
Q6
Who are the intermediaries in the financial markets?
1
Capital Market: Types - Primary and Secondary Market
Q1
What is meant by capital market? Explain its nature
Q2
The directors of a company want to modernize its plant and machinery by making a 5
public issue of shares
...
Advise the
director whether to approach the stock exchange or a consultant for the new public issue
of share and why? Also advise about the different methods available for making the new
public issue of shares
...
Securities traded in
b
...
Flow of funds
Q4
5
d
...
Prices
f
...
b
...
d
...
Liquidity
f
...
Expected returns
Stock Exchange - Functions And Training Procedure
...
Q1
Why are stock exchanges treated as Economic barometers of the country?
3
Q2
Explain the procedure of trading in a stock exchange
5
Q3
Explain 5 functions of a stock exchange
5
Securities and Exchange Board of India (SEBI) - Objectives and Functions
Q1
What is meant by ‗insider trading?
Q2
What does the abbreviation SEBI
...
How many shares 1
constitute sensex?
Q3
Explain any 4 regulatory functions of SEBI
...
4
Class XII/ Business Studies: Summary and Questions/ 240
1
Chapter 11: Marketing Management
Practice Questions
1
...
Identify the two concepts
...
‗Bending the customer according to the product‘ and ‗development of the
product according to the customer needs‘ are the two important concepts of marketing
management
...
……………………………………………………………………………………………………
………………………………………………………………………………………………
3
...
……………………………………………………………………………………………………
...
4
...
Which
communication tool is the marketer using by sending a salesman at your doorstep?
……………………………………………………………………………………………………
...
…
5
...
……………………………………………………………………………………………………
...
6
...
...
You are a toothpaste manufacturer and you have introduced a new brand of
toothpaste in the market
...
………………………………………………………………………………………………………
………………………………………………………………………………………………………
8
...
Class XII/ Business Studies: Summary and Questions/ 241
9
...
...
It is an impersonal form of communication, over which the manufacturer does not have
any control
...
……………………………………………………………………………………………………
...
11
...
……………………………………………………………………………………………………
...
…
12
...
……………………………………………………………………………………………………
...
13
...
……………………………………………………………………………………………………
...
14
...
Identify and
define the concept
...
...
One of the popular TV News Channel (in Hindi) seeks viewer‘s choice (through
SMS) on which of the given four or five main news stories the day would be broadcasted
as detailed story at the prime time, to ensure that the viewers get to listen to the story of
their own choice
...
…………………………
16
...
Bulbs: …………………………………………………
b
...
c
...
Pulses: ……………………………………………
...
Customized jewellery: ………………………………
...
‗Many advertisements of washing detergents, each claiming to offer the whitest wash‘
highlights which objection to advertising
...
18
...
Which merit/ feature of personal selling is
highlighted here? …………………………………………………………………………………
...
Which tool of promotion mix can be used to promote: (be as specific as you can be)
a
...
b
...
Amusement park: ……………………………
d
...
A campaign to promote eye donation: ………………………………………
...
School: ……………………………………………………
...
Glue stick: ……………………………………………………
...
Tea: ………………………………………………………………
...
2
...
4
...
6
...
8
...
10
...
12
...
14
...
16
...
18
...
20
...
22
...
24
...
26
...
Basic Questions
Define Marketing
...
Differentiate between the Marketing management philosophies
...
What are the components of the Product mix?
What is meant by branding?
What are the features of a good brand name?
What is labeling? What information should be included in the label?
What is packaging? What are the levels of packaging?
What are the functions performed by packaging?
Define price
...
What is Physical distribution?
What are the types of channels of distribution?
Name the factors governing the choice of channels of distribution
...
What are the elements of promotion?
Define advertising
...
What are the objections against Advertising?
Define personal selling
...
Define sales promotion
...
Explain the role of public relations
...
As marketing manager of a big hotel located at an important tourist
destination, what societal concerns would be faced by you and what steps
would you plan to take care of these concerns? Discuss
...
Suppose you are the marketing vice president of an insurance company,
planning to design a new mediclaim policy for senior citizens
...
3
...
Make a list and specify what factors influenced the purchase of
each of these products
...
What information is generally placed on the package of a food product
...
5
...
Case Problem:Nokia takes four-lane road to consumers
...
The mobile handset manufacturer has embarked upon a brand new retail
strategy that is based on a classification of its consumers into four major groups that
separates people in terms of usage, income level and lifestyle
...
It studied the impact
lifestyle choices and attitudes have on the mobile devices consumers buy and how
they use them
...
While the nitty-gritty of the new strategy is still being worked out, it is
likely that the company would follow separate marketing strategies for the four
different segments
...
Nokia‘s entire product portfolio has now been re-aligned towards these four groups
to address the specific needs of each
...
―These may be functional phones but the target group for these phones range from
SEC C (low socio-economic class) to SEC A1+ (very high socioeconomic class)
markets,‖ says Nokia India marketing head Devinder Kishore
...
Accordingly, phones in this segment would have GPRS, camera
and music capabilities
...
For example, Achieve segment
looks at enterprise users who need to have business functionalities in their phones
...
Aimed at high-end lifestyle users,
Explore would be the most prominent segment for the company in the coming years
...
It will look at five different areas –
applications, imaging, mobile TV, music and gaming
...
‖
Class XII/ Business Studies: Summary and Questions/ 244
Nokia acquired music solution and content provider LoudEye and GPS solution
provider Gate5
...
Says Taneja, ―There is increasing demand for convergence and multiple
functionalities in high-end handsets
...
‖ Nokia
feels that the new platform strategy wherein different handsets are launched under a
platform, like the N-Series, will become a status and style statement and drive
numbers
...
economictimes
...
com
Question:
1
...
2
...
What do you mean by realignment of product portfolio? Illustrate this from
the case above
...
4
...
3
Q5
Define Grading
...
5
Q7
How can marketing help a firm build its goodwill in the market?
3
Marketing Management Philosophies
Q1
Which concept of Marketing suggests that the organisation should earn profits thro
consumer satisfaction and social welfare?
Q2
‗Blindly following the goal of customer satisfaction and profit maximization has led to 3
many social and environmental evils
...
Q2
Explain the components of marketing mix
...
1
Q2
At which level of packaging, the immediate container is referred to?
1
Q3
Explain any three advantages of labeling
...
What is a product? How can products be classified?
3
Q5
Q6
6
6
You have been appointed Brand Manger of Ford Motors
...
The name of the car is yet to be decided
...
Before the suggestions come forward
you have to briefly explain the participants as to what constitutes a good brand name
with the help of suitable examples
...
Q2
Explain the major activities involved in physical distribution of goods
...
‘
(a) Name and explain the concerned element of marketing mix
...
Q4
What do you mean by ‗Direct channels of distribution
...
3
Q4
‗Advertising encourages sale of inferior and dubious products‘ and ‗Advertising confuses 6
rather than helps‘
...
Q5
Distinguish between advertising and publicity
...
Name the technique and
explain two other techniques with examples
...
Differentiate between them
...
Name and explain the two most commonly used non-personal tool of promotion
which is paid for by the marketer
...
Explain any two merits and two demerits of this tool
...
‘ Comment
Q10 ‗It pays to advertise
...
6
4
Q11 The manager of ‗Impact Enterprises‘ dealing in cosmetics is facing the problem of poor 3
sales
...
Q12 ‗The present system of marketing is consumer oriented rather than product oriented
...
Price: Factors Influencing Pricing
Q1
Determination of the price of a product is influenced by many factors
...
Q2
You have published a new book on Marketing management
...
As an aware consumer which quality mark would you find on the package
of the following products?
Products
II
...
Food colours
6
...
Fruit juice
7
...
Jams
8
...
Gas geyser
9
...
Refined oil
10
...
a
...
………………………………………………………………………………………
b
...
………………………………………………………………………………………
c
...
………………………………………………………………………………………
...
ICICI bank has published a series of advertisements enlightening the
consumers about use of credit cards, and hidden conditions in seeking loans
...
e
...
…………………………………………………………………………………………
f
...
…………………………………………………………………………………………
...
Which responsibility of a consumer has not been fulfilled in the following
cases?
a
...
………………………………………………………………………………
...
The loose spices purchased by Aditi were adulterated
...
Saahil found a worm in a chocolate but did not tell anyone as he thought it is
small amount, so there is no point in making a complaint
...
d
...
…………………………………………………………………………………
...
Rohit did not take cash memo for his mobile to save the sales tax
...
1
...
3
...
5
...
7
...
Who is a consumer?
What is meant by consumer protection?
Explain the Rights of consumers
...
Filing a complaint in a consumer court‘s
going to get a lot easier by the end of this year, virtually
...
The project, called
Confonet (Computerisation and Computer Networking of Consumer Fora), is being
executed on a turnkey basis by the National Informatics Centre (NIC)
...
Of Rs 48
...
56 crore so far, the official added
...
At present, computer systems and system software have been delivered to 25 state
commissions and 300 district fora — never mind the fact that it‘s sometimes a long
wait before the hardware is finally unpacked and set up in some of the districts
...
‖But just setting up an online complaint filing
system won‘t ensure a strong consumer protection movement in the country — for
that we‘re working on GenNext and the best way to do that is to go to schools,‖ the
official said
...
Part of the funding for running the club is to come from various state governments,
with an equally matching grant from the Centre
...
Source: www
...
indiatimes
...
What new measure is the ministry of consumer affairs taking to make filing
of complaint easy?
2
...
What scenario of consumer protection do you foresee when the measures
proposed in the above news report are implemented?
Importance of Consumer Protection
Q1
Who is a consumer according to the consumer Protection Act?
3
Q2
Explain in brief any six reasons as to why consumer protection is needed in India
...
Consumer Responsibilities
6
Q1
Rita wants to buy a packet of juice
...
Q3
A shopkeeper sold you some spices claiming that they were pure
...
What precautions should you have taken before buying and what remedies are
available to you now
...
1
Role of Consumer Organizations and NGOs
Q1
Non-Government Organisations perform several functions for the protection and 6
promotion of consumers
...
Class XII/ Business Studies: Summary and Questions/ 250
6