HOTEL ADMINISTRATION

FOR POST GRADUATE DIPLOMA IN HOTEL MANAGEMENT
COMPILED BY SANGESH

SYLABUS Unit I: Management – Definition – General Manager Duties and Responsibilities – Difference Between Administration and Management – Planning – organization – Direction – Co-ordination – Motivation (Maslow Theory) – Communication. Unit II: Human Resource Department – Role and Function of HRD- Human Resources Planning – Job Analysis (Specification & Description) – Recruitment, Selection and Training – Wages and Salary administration. Unit III: Financial & Management Accounting – Basic Accounting concept. Financial statement, Fund flow analysis – Cash flow Analysis (Basic concept, Advantage, Disadvantage) Budgetary Control –Meaning – Classification –( simple problem in cash budget & flexible Budget – Cost – Costing – Cost accounting – Classification – Cost Sheet. Unit IV: Sales & Marketing – Concept of Marketing – Marketing Mix – Product – Product Planning & Development – Product Life Cycle – Pricing – Types of Pricing – Factors affecting Pricing- channel of distribution & Types – advantage and Disadvantage – Promotion – Objectives Of Promotion activity – Marketing Strategy. Unit V: Entrepreneurship – Types – Classification – Entrepreneurship Development – Project Report – Institutional Finance to Entrepreneurs (ICICI, IDBI, IFCI, UTI, NARBAD etc.)

Unit – I
Management in all business and human organization activity is the act of getting people together to accomplish desired goals and objectives. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources. Management can also refer to the person or people who perform the act(s) of management.

Management (Traditional Interpretation)
There are a variety of views about this term. Traditionally, the term "management" refers to the activities (and often the group of people) involved in the four general functions listed below. (Note that the four functions recur throughout the organization and are highly integrated): 1) Planning: including identifying goals, objectives, methods, resources needed to carry out methods, responsibilities and dates for completion of tasks. Examples of planning are strategic planning, business planning, project planning, staffing planning, advertising and promotions planning. 2) Organizing resources to achieve the goals in an optimum fashion. Examples are organizing new departments, human resources, office and file systems, re-organizing businesses, etc. 3) Leading, including to set direction for the organization, groups and individuals and also influence people to follow that direction. Examples are establishing strategic direction (vision, values, mission and / or goals) and championing methods of organizational performance management to pursue that direction. 4) Controlling, or coordinating, the organization's systems, processes and structures to reach effectively and efficiently reach goals and objectives. This includes ongoing collection of feedback, and monitoring and adjustment of systems, processes and structures accordingly. Examples include use of financial controls, policies and procedures, performance management processes, measures to avoid risks etc.

leadership is doing the right things. the term "management" probably means the group of people (executives and other managers) who are primarily responsible for making decisions in the organization.By Koontz and Weihrich. Peter Drucker Management by objective works . To most employees. it is the reputation of the business that remains intact. Management Quotations Management is efficiency in climbing the ladder of success. . “Management is the process of designing and maintaining an environment in which individuals working together in groups. quite apart from the traditional view.” . efficiently accomplish selected aims. Peter Drucker The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product. Peter Drucker Most of what we call management consists of making it difficult for people to get their work done. In a nonprofit.Another common view is that "management" is getting things done through others. Stephen Covey When a management with a reputation for brilliance tackles a business with a reputation for bad economics. Peter Drucker Definition of “Management” • • “A set of management functions directed at the efficient and effective utilization of resources in the pursuit of organization goals. Ninety percent of the time you don't. Warren Buffett Management is doing things right. Yet another view. executive director and/or program directors.if you know the objectives. the term "management" might refer to all or any of the activities of the board. Peter Drucker So much of what we call management consists in making it difficult for people to work. leadership determines whether the ladder is leaning against the right wall. asserts that the job of management is to support employee's efforts to be fully productive members of the organizations and citizens of the community.By Griffin.”.

To monitor and control the operations performance Low level management 1. Needed to understand people. 1. To formulate goals and policies 2. It refers to the ability of the manager to work effectively as group members and to build co-operative effort in team leaders. To train &develop workers 2. 1. 1. To give orders and instructions 4. To assign job 3. equipment procedure and techniques. To understand how its various parts and functions mesh together. Lower level management Top level management functions 1. 2. Skills needed for managers: Technical skill It refers to the ability to the tools. To train motives &develop supervisory level 2. Middle level management 3. 2. It is also called as design and problem 2. To report the information about the workers Conceptual skill .1. Top-level management 2. Effective supervision and co-ordination of the work a group members or subordinates. To appoint top executives Middle level management functions. To see the organization and the various component of it as whole 3. To formulate budgets 3. Human skill 1. Management level and functions.

Beyond this. On the other hand. It is the framework within which it must operate. It helps in deciding objectives both in quantitative and qualitative terms. Preparation of a comprehensive plan will not guarantee success. or integration of it with other plans. As such. For management seeking external support. planning has a different meaning depending on the political or economic context in which it is used. that is. but lack of a sound plan will almost certainly ensure failure. What should a plan be? A plan should be a realistic view of the expectations. it combines forecasting of developments with the preparation of scenarios of how to react to them. and the strategy to be followed. which may mean contingencies and flexible processes. it is a fundamental property of intelligent behavior. Two attitudes to planning need to be held in tension: on the one hand we need to be prepared for what may lie ahead. It is blue print of business growth and a road map of development. It is setting of goals on the basis of objectives and keeping in view the resources. the objectives to be met. or meetings to discuss the important issues to be addressed. the plan is the most important document and key to growth. such as the creation of documents diagrams. This thought process is essential to the creation and refinement of a plan.Planning in organizations and public policy is both the organizational process of creating and maintaining a plan.Functions of Management: 1. and the psychological process of thinking about the activities required to create a desired goal on some scale. The term is also used to describe the formal procedures used in such an endeavor. . Depending upon the activities. intermediate range or short range. Planning is a process for accomplishing purpose. our future is shaped by consequences of our own planning and actions. a plan can be long range.

and how and when they can do it. markets and competition. 2.Purpose of Plan Just as no two organizations are alike. The goal should be realistic. It serves the following three critical functions: • Helps management to clarify. and research their business's or project's development and prospects. It is prepared after careful and extensive research. management. Preparing a satisfactory plan of the organization is essential. For a comprehensive business plan. finances. It should be set by a person having authority. It bridges between where we are and where we want to go. Offers a benchmark against which actual performance can be measured and reviewed. focus. Planning helps in forecasting the future. and most importantly. so also their plans. It should be specific. management has to 1. A plan is an important aspect of business. 1. makes the future visible to some extent. Planning is looking ahead. • • Importance of the planning Process A plan can play a vital role in helping to avoid mistakes or recognize hidden opportunities. A well-prepared business plan demonstrates that the managers know the business and that they have thought through its development in terms of products. 3. Essentials of planning Planning is not done off hand. . Clearly define the target / goal in writing. Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years. The planning process enables management to understand more clearly what they want to achieve. It is therefore important to prepare a plan keeping in view the necessities of the enterprise.

even while organizing can be viewed as a simple definition. it can get as complex as organizing the world's information. Specialization improves efficiency. Identify all the main issues which need to be addressed. such as political issues. But it's only ultimately organized if any element has no difference on time taken to find it. Acceptability 5. What will be the likely length of the plan and its structure? 8. 9. Decide budgetary requirement. Identify shortcomings in the concept and gaps. 2. 10. organisation helps in division of work and assigning duties to different people. In specialization. Organizing (also spelled organising) is the act of rearranging elements following one or more rules. 5. . Nature of organization The following are the important characteristics of organisation. organizing can also be defined as to place different objects in logical arrangement for better searching. Review periodically. Organizations are groups of people frequently trying to organize some specific subject. Easily measurable 2.4. 4. Thus. Review past performance. 6. What are requirements and how will they be met? 7. various activities are assigned to different people who are specialists in that area. Strategies for implementation. Division of work or specialization The entire philosophy of organisation depends on the concept of specialization. Focus on matters of strategic importance. So. In that sense. Anything is commonly considered organized when it looks like everything has a correct order or placement. 3.

Differentiated functions The organisation divides the entire work and assigns the tasks to individual in-order to achieve the organizational objectives each one has to perform a different task and tasks of one individuals must be coordinated with the tasks of others. Thus. organisation is the composition of individual and groups. Organisation is a never ending process. Directing and Controlling cannot be implemented without proper organization. machine and method. material. Work should be divided and right people should be given right jobs to reduce the wastage of resources in an organization. . Organisation harmonies the individual goals of the employees with overall objectives of the firm. Composition of individuals and groups Individuals form a group and the groups form an organisation. Staffing. Continues process An organization is a group of people with defined relationship to each other that allows them to work together achieve the goals of the organisation. Organizing is the function employed to achieve the overall goals of the organisation. money. Purpose or importance of organization Helps to achieve organizational goal Organization is employed to achieve the overall objectives of business firms. Optimum use of resources To make optimum use of resources such as men. This relationship do not come to end after completing a task.Orientation towards goals Every organisation has its own purposes and objectives. Organization focuses attention of individual’s objectives towards overall objectives. Organizing. Individuals are grouped into departments and their work is coordinated and directed towards organizational goals. it is necessary to design an organization properly. To perform managerial function Planning.

The design of systems to ensure effective coordination of employees across departments. Work specialization Work specialization (also called division of labour) is the degree to which organizational tasks are sub-divided into individual jobs. Chain of command The chain of command is the unbroken line of authority that links all individuals in an organization. boring job. Many organizations enlarge jobs or rotate assigned tasks to provide greater challenges. organization has adapted the modern concept of systems approach based on human relations and it discards the traditional productivity and specialization approach. 1.clearly defined line of authority in the organization that includes all employees . With too much specialization. Human treatment of employees Organization has to operate for the betterment of employees an must not encourage monotony of work due to higher degree of specialization. resources are deployed. A set of formal tasks assigned to individuals and departments. 3. and departments are coordinated. Organization structure determines the input resources needed for expansion of a business activity similarly organization is essential for product diversification such as establishing a new product line. Now. number of hierarchical levels and span of managers control. Formal reporting relationships. the grouping of tasks into departments and the assignment of authority and allocation of resources across the organization. And it involves the assignment of tasks. including lines of authority. decision responsibility. 2. Applications Organizing. Structure The framework in which the organization defines how tasks are divided. in company’s point of view.one employee is held accountable to only one supervisor Scalar principle . • o o Unity of Command .Facilitates growth and diversification A good organization structure is essential for expanding business activity. tiny. is the management function that usually follows after planning. employees are isolated and do only a single. and specifies who reports to whom.

Subordinates are highly trained and need little direction in performing tasks. 2. It has an influence that derives indirectly from line authority at a higher level.Authority. 6. The superior issues orders and is responsible for the result—the subordinate obeys and is responsible only for executing the order according to instructions. 4. This authority would not be functional but it would rather be staff authority if such interference is "advice" rather than "order". a legal department may have functional authority to interfere in any activity that could have legal consequences. 5. Managers' personal preferences and styles favour a large span. or. . and accountability • • • Authority is a manager's formal and legitimate right to make decisions. Work performed by subordinates is stable and routine. Organizations today tend to encourage delegation from highest to lowest possible levels. Responsibility means an employee's duty to perform assigned task or activities. Delegation can improve flexibility to meet customers’ needs and adaptation to competitive environments. and counsels in the staff specialists' area of expertise and is responsible only for the quality of the advice (to be in line with the respective professional standards etc) It is a communication relationship with management. It is not a real authority in the sense that a staff manager does not order or instruct but simply advises. Subordinates are concentrated in a single location. Managers often find delegation difficult Types of authority (and responsibility) Line authority managers have the formal power to direct and control immediate subordinates. Little time is required in non-supervisory activities such as coordination with other departments or planning. 7. and allocate resources to achieve organizationally desired outcomes. 1. Staff authority is granted to staff specialists in their areas of expertise. showing that the investment will have a yield of at least x%. recommends. Accountability means that those with authority and responsibility must report and justify task outcomes to those above them in the chain of command. Subordinates perform similar work tasks. Functional authority is where managers have formal power over a specific subset of activities. For instance. 8. Rules and procedures defining task activities are available. 3. issue orders. the Production Manager may have the line authority to decide whether and when a new machine is needed but the Controller demands that a Capital Expenditure Proposal is submitted first. Span of management Factors influencing larger span of management. Support systems and personnel are available for the managers. Delegation Delegation is the process managers use to transfer authority and responsibility to positions below them. responsibility.

Decentralization . guide and oversee the performance of the workers to achieve predetermined goals. Direction is said to be consisting of human factors. DIRECTING is said to be a process in which the managers instruct. 3.The location of decision making authority near top organizational levels. decentralization. it can be described as providing guidance to workers is doing work. organizing. Facilitates delegation. Planning. Tight control.common product. Centralization. In field of management. and formalization • • • Centralization . 2.to accomplish specific tasks Network . particularly when a new strategy is developed Changing market conditions or new technology requires change Organizations seek efficiencies through improvements in organizing. Loose control. In simple words.departments are independent providing functions for a central core breaker Importance of organizing • • • Organizations are often troubled by how to organize. Formalization .Tall versus flat structure • • Tall . Functional .A management structure characterized by an overall narrow span of management and a relatively large number of hierarchical levels. staffing has got no importance if direction function does not take place.combination of Functional and Divisional Team . Directing initiates action and it is from here actual work starts. 5. direction is said to be all those activities which are designed to .The written documentation used to direct and control employees.The location of decision making authority near lower organizational levels. Departmentalization The basis on which individuals are grouped into departments and departments into total organizations. 4. Approach options include. Flat .by common skills and work tasks Divisional . Directing is said to be the heart of management process. program or geographical location Matrix . 3.A management structure characterized by a wide span of control and relatively few hierarchical levels. 1.

Therefore. A few philosophers call Direction as “Life spark of an enterprise”. overseeing and instructing people towards accomplishment of organizational goals. inspiring. It is also called as on actuating function of management because it is through direction that the operation of an enterprise actually starts. Continuous Activity . According to Human. direction function becomes important. people become inactive and physical resources are meaningless.Directing function is related to subordinates and therefore it is related to human factor.Direction is a continuous activity as it continuous throughout the life of organization. Direction has got following characteristics: 1. 5. Human behavior is unpredictable by nature and conditioning the people’s behavior towards the goals of the enterprise is what the executive does in this function.Direction function helps in converting plans into performance. Human Factor . Pervasive Function .Direction is supposed to be a function dealing with human beings.encourage the subordinates to work effectively and efficiently.Directing is required at all levels of organization. 4. Without this function. Importance of Directing Function Directing or Direction function is said to be the heart of management of process and therefore. Creative Activity . a subordinate receives instructions from his superior only. is the central point around which accomplishment of goals take place. it provides many benefits to a concern which are as follows:- . “Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned” Therefore.Direction function is carried out by all managers and executives at all levels throughout the working of an enterprise. it is termed as having delicacy in it to tackle human behavior. 2. Every manager provides guidance and inspiration to his subordinates. 6. Delegate Function . Executive Function . 3. Directing is the function of guiding. Since human factor is complex and behaviour is unpredictable. Being the central character of enterprise.

It Initiates Actions – Directions is the function which is the starting point of the work performance of subordinates. efforts of every individual towards accomplishment of goals are required. It is there that direction becomes beneficial. This can be done through persuasive leadership and effective communication. both internal as external. strict supervision and efficient motivation. 4. This can be done by providing incentives or compensation. It Ingrates Efforts – Through direction. effective communication. 5. whether monetary or non – monetary. It Provides Stability – Stability and balance in concern becomes very important for long term sun survival in the market. Stability is very important since that is an index of growth of an enterprise. This can be brought upon by the managers with the help of four tools or elements of direction function – judicious blend of persuasive leadership. 3. subordinates understand their jobs and do according to the instructions laid. Integration of efforts bring effectiveness and stability in a concern.1. For this. the superiors are able to guide. easy adoptions and smooth running of an enterprise. Coping up with the changes – It is a human behavior that human beings show resistance to change. 2. which serves as a “Morale booster” to the subordinates Motivation is also helpful for the subordinates to give the best of their abilities which ultimately helps in growth. Therefore a manager can use of all the four traits in him so that performance standards can be maintained. Effective communication helps in coping up with the changes. an important change in technique of production takes place. Whatever are plans laid. if a concern shifts from handlooms to power looms. Means of Motivation – Direction function helps in achievement of goals. It is through direction the efforts of every department can be related and integrated with others. It is directing function which is of use to meet with changes in environment. A manager makes use of the element of motivation here to improve the performances of subordinates. Adaptability with changing environment helps in sustaining planned growth and becoming a market leader. This helps in clarifications. It is the role of manager here to communicate the nature and contents of changes very clearly to the subordinates. This can be resisted . inspire and instruct the subordinates to work. can be implemented only once the actual work starts. For example. The resulting factors are less of manpower and more of machinery. It is from this function the action takes place.

surely. Indirectly. the General Manager is the executive manager responsible for the overall operation of a hotel establishment. it is rightly said that direction is essence of management process.by the subordinates. overlapping of performances. duplication of efforts. The manager makes use of the four elements of direction here so that work can be accomplished in a proper and right manner. General Manager General Manager (sometimes abbreviated GM) is a descriptive term for certain executives in a business operation. most commonly in the hospitality industry. one can justify that direction. Therefore. is the heart of management process. In hotels. Efficient Utilization of Resources – Direction finance helps in clarifying the role of every subordinate towards his work. The manager here can explain that the change was in the benefit of the subordinates. production increases and thereby the profits. the subordinates are benefited out of that in form of higher remuneration. doesn’t take place. . From the above discussion. direction helps the subordinates to perform in best of their abilities and that too in a healthy environment. It is also a formal title held by some business executives. machine. This helps in maximum possible utilization of resources of men. The General Manager holds ultimate authority over the hotel operation and usually reports directly to a corporate office or hotel owner. In the similar manner. Through more mechanization. the instructions and motivation skill to inspire the subordinates. According to Earnest Dale. the role of subordinates become clear as manager makes use of his supervisory. The resources can be utilized properly only when less of wastages. etc. “Directing is what has to be done and in what manner through dictating the procedures and policies for accomplishing performance standards”. 6. the guidance. Through direction. Heart plays an important role in a human body as it serves the function pumping blood to all parts of body which makes the parts function. materials and money which helps in reducing costs and increasing profits.

Meeting and greeting customers.Common duties of a General Manager include hiring and management of a management team. and many additional duties. While taking a strategic overview and planning ahead to maximize profits. management of emergencies and other major issues involving guests. concierge. local governments. food and beverage operations and housekeeping. Recruiting. purchasing. Typical work activities Typical work activities vary depending on the size and type of hotel. employees. but may include: • • • • • • • • • Planning and organising accommodation. organising and directing all hotel services. including front-of-house (reception. A hotel General manager is responsible for the day-to-day management of a hotel and its staff and has commercial accountability for planning. Planning work schedules for individuals and teams. . payroll. budgeting and financial management. Dealing with customer complaints and comments. accounting. catering and other hotel services. managers often have a specific remit (guest services. and other duties that would usually be handled by other managers or departments in a larger hotel. In larger hotels. and reservations). or the facility. training and monitoring staff. and other businesses. Promoting and marketing the business. for example. Setting and achieving sales and profit targets. creating and enforcing business objectives and goals. Managing budgets and financial plans and controlling expenditure. overall management of hotel staff. human resources. General Managers of smaller hotels may have additional duties such as accounting. managing projects and renovations. setting the example for staff to deliver a standard of service and presentation that meets guests' needs and expectations. public relations with the media. Maintaining statistical and financial records. the manager must also pay attention to the details. and marketing) and make up a general management team. Business and people management are equally important elements. The extent of duties of a hotel General Manager vary significantly depending on the size of the hotel and company.

A significant number of hotel managers are self-employed which often results in a broader set of regular responsibilities.• • • • • • • Addressing problems and troubleshooting. As a manger. Administration must incorporate both leadership and vision. Management is viewed as a subset of administration. health and safety and other statutory regulations. Management is closer to the employees. Ensuring compliance with licensing laws. It stands distinct from executive or strategic work. Administration is over the management and more over the money of the organization and licensing of an organization. and arguably a craft. renovations and furnishings. Ensuring security is effective. Administration manages the outside contacts and the facility as a whole. you can also be administrator but as an administrator. as administrators are judged ultimately by their performance. the manager is much more involved in the hands-on day-to-day running of the hotel. In a smaller establishment. from greeting guests to managing finances. supplies. you may not be a manager. which may include carrying out reception duties or serving meals if the need arises. Carrying out inspections of property and services. . specifically associated with the technical and mundane elements within an organization's operation. Difference between Administration /Management Administration can be defined as the universal process of efficiently organizing people and resources so to direct activities toward common goals and objectives. Administration is both an art and a science (if an inexact one). Dealing with contractors and suppliers. The manager of a large hotel may have less contact with guests but will spend time meeting heads of department to coordinate and monitor the progress of business strategies. Supervising maintenance. Management manages employees. Ensuring events and conferences run smoothly.

Level of authority Administration: It is a top-level activity. These are as follows: Nature of work Administration: It is concerned about the determination of objectives and major policies of an organization. educational. There are many factors according to which administration can be distinguished from management. Nature of status Administration: It consists of owners who invest capital in and receive profits from an enterprise. Scope Administration: It takes major decisions of an enterprise as a whole. Management: It is used in business enterprises. and religious organizations. Management: It is a middle level activity. Nature of usage Administration: It is popular with government. Management: It is a group of managerial personnel who use their specialized knowledge to fulfill the objectives of an enterprise. military.Administration is the paper work. Management is how you deal with the people or people management. . Management: It puts into action the policies and plans laid down by the administration. Management: It is an executive function. Management: It takes decisions within the framework set by the administration. Type of function Administration: It is a determinative function.

government policies. . Main functions Administration: Planning and organizing functions are involved in it. Abilities Administration: It needs administrative rather than technical abilities. Administration handles the business aspects such as finance. Management: Its decisions are influenced by the values. and religious factors. opinions. Management: It requires technical activities Management handles the employers. and beliefs of the managers. social. Management: Motivating and controlling functions are involved in it.Decision making Administration: Its decisions are influenced by public opinion.

MOTIVATION IS THE WILLINGNESS TO EXERT HIGH LEVELS OF EFFORT TOWARDS ORGANISATIONAL GOALS. THE EFFICIENCY OF SUCH BEHAVIOUR – THIS MAY BE TESTED BY THE RESULTANT ACTION. BY DALTON. ASPIRATIONS (A cherished desire) NEEDS DIRECT. WE TRY TO ANSWER THE QUESTION BY UNDERSTANDING THE MEANING OF MOTIVATION. DEFINITION: MOTIVATION REFERS TO THE WAY IN WHICH URGES (A strong restless desire). CONDITIONED BY THE EFFORTS ABLITY TO SATISFY SOME INDIVIDUAL NEED. . CONTROLLED OR IMPLEMENTED THE DESIRED ACTION. ECONOMIC AND MANAGERIAL. MEANING: THE TERM MOTIVATION WAS GENERATED FROM THE LATIN WORD ‘MOVERE’ WHICH MEANS “TO MOVE”. THE DEFINITION OF MOTIVATION INCLUDES THE FOLLOWING: THE FACTORS TO INFLUENCE HUMAN BEHAVIOUR ARE PSYCHOLOGICAL. MOTIVATION PROCESS: UNSATISIFED TENSION  DRIVES  SEARCH BEHAVIOUR  SATISIFACTION OF NEED  REDUCTION OF TENSION. CONTROL OR EXPLAIN THE BEHAVIOUR OF HUMAN BEINGS.Motivation INTRODUCTION MOTIVATION IS THE MOST IMPORTANT CONCEPT IN UNDERSTANDING THE BEHAVIOUR OF THE INDIVIDUAL. SOCIOLOGICAL. DRIVES.ROBBINS. DESIRES. BY STEPHEN P. WHETHER THIS BEHAVIOUR HAS DIRECTED. EVERY ORGANISATION HAS PEOPLE WITH OUTSTANDING ABLITIES WHO PERFORM BETTER THAN THE OTHERS.

THEORY ‘X’ & ‘Y’. THE DESIRE TO SATISFY LOWER-LEVEL NEEDS INCREASES. CLAYTON ALDERFER’S “E R G” THEORY ALDERFER IDENTIFIED AND RE WORKED THREE GROUPS ARE CORE NEEDS: • • • EXISTENCE NEEDS  E R G RELATEDNESS NEEDS  GROWTH NEEDS  E  PHYSIOLOGICAL &SAFETY NEEDS. PORTER-LAWER’S MODEL. R  INTERPERSONAL & SOCIAL NEEDS. G  HIGHER LEVEL NEEDS IS NOT SATISFIED. CLAYTON ALDERFER’S “E R G” THEORY. PROCESS THEORIES: • • • VROOM’S EXPECTANCY MODEL. A . ADAM’S EQUITY THEORY.THEORIES OF MOTIVATION CONTENT THEORIES • • • MASLOW’S HIERARCHY OF NEEDS.

.

.

.

• • • [STRENGTH OF DRIVE TOWARDS ACTION] [STRENGTH OF ONE’S DESIRE FOR SOMETHING] [PROBABLITY OF GETTING IT WITH A CERTAIN ACTION] PORTER-LAWLER MODEL THERE ARE VARIOUS ELEMENTS IN THIS MODEL ARE: EFFORT-THE AMOUNT OF EFFORT THAT EMPLOYEE WILL PUT. THIS MODEL HAS BEEN EXPANDED AND REDEFINED BY PORTER AND LAWLER (1968). PERFORMANCE – ABLITY.VROOM’S EXPECTANCY MODEL • • • • VICTUR VROOM (1964) PRESENTED THIS THEORY AS AN ALTERNATIVE TO CONTENT THEORIES.LEVEL OF PERFORMANCE. EXPLAIN THE ROLES OF THE EMPLOYEES.  MOTIVATION FORCE= VALENCE x EXPECTANCY. . MAKES SURE THAT THE REWARDS ARE THE VALUED BY THE EMPLOYEE. REWARDS . VROOM’S MODEL IS BUILT AROUND CONCEPTS OF VALENCE AND EXPECTANCY AND IS COMMONLY CALLED AS “VIES “THEORY. SATISFACTION – REWARD & PERFORMANCE. IMPORTANCE OF PORTER-LAWLER MODEL: MATCHES THE ABLITIES OF THE INDIVIDUAL TO THE REQUIREMENT OF THE JOB. MOTVATION FORCE IS A PRODUCT OF VALENCE AND EXPECTANCY. EXPLAIN THE EXPECTED LEVEL OF PERFORMANCE TO THE EMPLOYEE.

Communication is commonly defined as "the imparting or interchange of thoughts. paralanguage. a message. and tone of voice. such as body language. Communication requires that all parties have an area of communicative commonality. touch. and writing. sign language. The receiver then decodes the message and gives the sender a feedback. All forms of communication require a sender. feelings or ideas (energy) towards a mutually accepted goal or direction (information). or signs".Communication Communication is a process of transferring information from one entity to another. Although there is such a thing as one-way communication. Communication is a process whereby information is enclosed in a package and is channeled and imparted by a sender to a receiver via some medium. and a receiver. There are auditory means. song. or information by speech. writing. Process of Communication: . such as speech. and there are nonverbal means. eye contact. communication can be perceived better as a two-way process in which there is an exchange and progression of thoughts. opinions. Communication processes are sign-mediated interactions between at least two agents which share a repertoire of signs and semiotic rules.

Non verbal communication can also be in the form of pictorial representations. pitch. The effectiveness of written communication depends on the style of writing. Written communication can be either via snail mail. the hand gestures. a smile or a hug can independently convey emotions. vocabulary used. clarity and precision of language. . grammar. or even photographs. Oral communication can either be face-to-face communication or a conversation over the phone or on the voice chat over the Internet. signboards. The facial expressions also play a major role while communication since the expressions on a person’s face say a lot about his/her mood. The oral communication refers to the spoken words in the communication process. volume and even the speed and clarity of speaking. Types of Communication Based on Communication Channels Based on the channels used for communicating. the process of communication can be broadly classified as verbal communication and non-verbal communication.Types of Communication Communication can occur via various processes and methods and depending on the channel used and the style of communication there can be various types of communication. or email. Spoken conversations or dialogs are influenced by voice modulation. and overall body movements. Verbal communication includes written and oral communication whereas the non-verbal communication includes body language. • Verbal Communication Verbal communication is further divided into written and oral communication. • Nonverbal Communication Non-verbal communication includes the overall body language of the person who is speaking. which will include the body posture. On the other hand gestures like a handshake. sketches and paintings. facial expressions and visuals diagrams or pictures used for communication. The other type of verbal communication is written communication.

Hence formal communication is straightforward. For infants and young children with severe-to-profound hearing loss. The style of communication in this form is very formal and official. meetings and written memos and corporate letters are used for communication. there can be two broad categories of communication. Formal communication can also occur between two strangers when they meet for the first time. • Informal Communication: Informal communication includes instances of free unrestrained communication between people who share a casual rapport with each other. Typically this can include all sorts of business communication or corporate communication. The amount of hearing loss and the age at which it occurs. the choice of communication strategy taught during key “windows of opportunity” early in life may influence the skill sets that can be mastered later in life. • Formal Communication: Formal communication includes all the instances where communication has to occur in a set formal format. which are formal and informal communication that have their own set of characteristic features. Other Methods of Communication In addition to manual language. often influences which strategies are most appropriate. people with hearing problems can use several other communication strategies. Informal communication requires two people to have a similar wavelength and hence occurs between friends and family. Informal communication does not have any rigid rules and guidelines. place or even subjects for that matter since we all know that friendly chats with our loved ones can simply go on and on. Official conferences. . Informal conversations need not necessarily have boundaries of time. official and always precise and has a stringent and rigid tone to it.Types of Communication Based on Style and Purpose Based on the style of communication.

Total Communication – A technique that uses all means of communication for teaching children with severe-to-profound hearing loss. use their hearing as much as they can. One of the most common uses of SEE has been the translation of classic children’s books. the finger spelling alphabet is represented with one hand. children can learn to speak better by listening to other people.A “listener” watches a speaker's lip movements. in other countries. Signed Exact English (SEE) – A technique developed in 1972 in which manual gestures (signs) create an exact word-for-word representation of spoken English. In some countries. and body language to determine what they are saying. Speech Reading (Lip Reading) . . It excludes teaching manual language (sign language). Use other clues to understand what people are saying. cochlear implants or other devices. Eight handshapes (cues) in four positions represent different sounds of speech that look the same on lips (such as "p" and "b"). To talk. This technique can be useful for Deaf people and for those who may not fully understand speech with the use of hearing aids. Auditory / verbal – The auditory-verbal (AV) method teaches children to: Use whatever hearing they have (residual hearing) to listen. Some feel this method broadens communication and learning skills. A combination of SEE and ASL (American Sign Language) is called Pidgin Signed English (or PSE). Often used to help children learn speech reading or for those who may not fully understand speech with the use of hearing aids. The belief is that by listening to other people. This is also called signed supported English or signed supported speech. Children practice with therapist and use hearing aids. Finger spelling – A method in which hand positions represent each letter of the alphabet. Words are spelled out one letter at a time. Cued Speech – A visual system to make speech (lip) reading easier. finger spelling uses two hands. facial expressions. read lips. this usually means a teacher using signed and spoken languages at the same time. like the United States. In a classroom.Auditory / oral – The auditory-oral method teaches children to: Use the child's hearing through amplification and to employ auditory and lip reading training. such as Australia. The goal is to “mainstream” children with hearing problems to live independently in the hearing world. Lip reading is discouraged.

and other personnel issues. . Redundancy 3. The more traditional usage within corporations and businesses refers to the individuals within a firm or agency. Career development 8. This first usage is used more in terms of 'human resources development'. The field draws upon concepts developed in Industrial/Organizational Psychology and System Theory. and can go beyond just organizations to the level of nations. The field has moved from a traditionally administrative function to a strategic one that recognizes the link between talented and engaged people and organizational success. Competency Mapping (Competency mapping is a process an individual uses to identify and describe competencies that are the most critical to success in a work situation or work role.UNIT II Human resources: Human resources are a term used to refer to how people are managed by organizations.) 9. and to the portion of the organization that deals with hiring. Confidential advice to internal 'customers' in relation to problems at work 7. Key functions of Human Resource Management: 1. Time motion study is related to HR Function 10. The original usage derives from political economy and economics. typically referred to as 'human resources management'. Total Rewards: Employee benefits and compensation 6. training. one of four factors of production although this perspective is changing as a function of new and ongoing research into more strategic approaches at national levels. firing. where it was traditionally called labor. Industrial and Employee Relations 4. Recruitment and Selection 2. Performance Appraisal. Human resources have at least two related interpretations depending on context. Record keeping of all personal data 5.

and follows up with the hiring process to establish the new hire with the company. submit that list to the department's hiring manager for approval and selection. They provide consultation to a company's management team to identify what the company's core business and culture is about. publicly. It is not uncommon for a company to filter out those who fail to impress the HR manager first. the HR manager schedules interviews between the department's hiring manager and potential candidates. compile a list of potential candidates. Then HR must field the (many) responses to that job announcement to weed out the qualified from the unqualified applicants. and interview the candidates! Although most interviews are with the hiring manager or their associates. and proceeds to plan and map the company's organizational infrastructure to support those needs. it is the hub of the organization serving as a liaison between all concerned. Once that is completed. Then the HR manager must obtain the job description to formulate a Job Description Sheet for publication either internally. Organizational Development: To ensure its success. 2. 1. In short. For those select few who make it through. The funnel of responsibility is critical to the efficiency of a smoothly operating business entity in which there is a clearly defined understanding of who is responsible for what. not all applicants get to meet with the department's hiring manager right away. They prepare the job description. field the calls. contact the chosen candidates to set up preliminary interviews. a department head must inform the HR manager of an opening in their department. . contact the newspaper. Employee Recruitment and Selection Process: There are many steps to recruiting and selecting qualified employees.Role of Human Resource Department Human Resources are exactly it says: resources for humans – within the workplace! Its main objective is to meet the organizational needs of the company it represents and the needs of the people hired by that company. a company must establish a hierarchal reporting system. run the ad. First. the interview process must be coordinated. or both.

This might include on-going company training. acting as an in-house training center to coordinate training programs either on-site. the HR Department will get involved to act as arbitrator and liaison between legal entities. Employee Compensation Benefits: This covers salaries. regulatory agencies such as Human Rights. When an employee is hired. This often requires an employee to make an informed decision and to provide their signature for processing purposes 5.3. the company's Benefits Coordinator is required to meet with employees one-on-one or in small group settings to explain their benefits package. vacation pay. there needs to be mandatory compliance with governing rules and regulations to ensure fair treatment of employees. and 401k. Whether corporate or union. life. . off-site. 4. race. gender. In short. or even college. a company needs to take certain measures to ensure a highly skilled workforce is in place. The Human Resources Department oversees the skills development of company's workforce. supervisors (who might be falsely accused). Workers' Compensation. and religion discrimination and sexual harassment. or in the field. The Human Resources Department is responsible for developing and administering a benefits compensation system that serves as an incentive to ensure the recruitment and retainment of top talent that will stay on with the company. and insurance policies such as medical. and employees to properly address and resolve the issue at hand. Employee Relations: With the increased rise in unethical practices and misbehaviors taking place in today's workplace such as age. in which case an employee will receive tuition reimbursement upon earning a passing grade. bonuses. sick leave pay. employees need to know they have a place to turn when a supervisor abuses his or her authority in anyway. dental. outside training seminars. Employee Training & Development: As a company and the requirements of a position evolve.

It is very important that you. Whether a job seeker or a HR professional. benefits. and personnel files. monitoring and evaluating productivity levels. These policies and procedures are put in place to provide each employee with an understanding of what is expected of them. These policies can be established company-wide or used to define each department's function. research a company well before applying for a position. If you are considering a career in human resources. 7. A common practice is the development and implementation of an Employee Procedure Manual or Employee Handbook that is either distributed to each employee at the time of hire or a master copy allocated one to a department. the job seeker. Policy Formulation: Regardless of the organization's size.The Human Resources Information Systems: keeps track of the vast amount of data.6. you can choose to become a Generalist or a Specialist. a human resources department must have a good HRIS in place to automate many functions such as planning and tracking costs. these policies and procedural guidelines will assist hiring managers in evaluating their employee's performance. . Similarly. company policies and procedures must be established to ensure order in the workplace. It is Human Resource's responsibility to collaborate with department managers on the formulation of these policies and regulations to ensure a cohesive organization. and the storing and processing of employee records such as payroll. understand how the HR function works – specifically in the area of candidate recruitment.

1. staff may be overstretched. So the questions we ask are: • How can output be improved your through understanding the interrelation between productivity. Alternatively. if the opposite misjudgment is made. We address such questions as: What is human resource planning? How do organisations undertake this sort of exercise? What specific uses does it have? In dealing with the last point we need to be able to say to hard pressed managers: why spend time on this activity rather than the other issues bulging your in tray? The report tries to meet this need by illustrating how human resource planning techniques can be applied to four key problems. a relocation. .Human Resource planning Human Resource Planning: an Introduction was written to draw these issues to the attention of HR or line managers. making it hard or impossible to meet production or service deadlines at the quality level expected. work organisation and technological development? What does this mean for staff numbers? • • • What techniques can be used to establish workforce requirements? Have more flexible work arrangements been considered? How are the staffs you need to be acquired? The principles can be applied to any exercise to define workforce requirements. or the opening of new factory or office. whether it be a business start-up. Determining the numbers to be employed at a new location If organisations overdo the size of their workforce it will carry surplus or underutilized staff. It then concludes by considering the circumstances are which human Resourcing can be used.

Retaining your highly skilled staff Issues about retention may not have been to the fore in recent years. How is the workforce to be cut painlessly. but all it needs is for organisations to lose key staff to realize that an understanding of the pattern of resignation is needed. and whether it is concentrated in particular groups (eg by age. But it will depend on whether the problem is peculiar to your own organisation. while at the same time protecting the long-term interests of the organisation? A question made all the harder by the time pressures management is under. 3.2. Thus organisations should:     Monitor the extent of resignation Discover the reasons for it Establish what it is costing the organisation Compare loss rates with other similar organisations. Having understood the nature and extent of resignation steps can be taken to rectify the situation. These may be relatively cheap and simple solutions once the reasons for the departure of employees have been identified. management may be unaware of how many good quality staff are being lost. gender. both because of business necessities and employee anxieties. Without this understanding. recruitment and induction. redeployment and transfers What the appropriate recruitment levels might be. HRP helps by considering: • • • • • the sort of workforce envisaged at the end of the exercise the pros and cons of the different routes to get there how the nature and extent of wastage will change during the run-down the utility of retraining. Managing an effective downsizing programme This is an all too common issue for managers. but also through a loss of long-term capability. This will cost the organisation directly through the bill for separation. . grade or skill).

If instead the CEO announces on day one that there will be no compulsory redundancies and voluntary severance is open to all staff. These will of course be affected by internal structural changes and external business or political changes. Otherwise processes are likely to be haphazard and inconsistent. how many. and the time taken to meet targets established.Such an analysis can be presented to senior managers so that the cost benefit of various methods of reduction can be assessed. . It is often difficult and expensive to replace lost quality and experience. it has not solved the longer term question of managerial supply: what sort. the danger is that an unbalanced workforce will result. reflecting the take-up of the severance offer. But they recognise that while this may have dealt with a short-term skills shortage. deployment and severance policies can be pursued to meet business needs. Thus appropriate recruitment. They have seen traditional career paths disappear. Where will the next generation of managers come from? Many senior managers are troubled by this issue. 4. They have had to bring in senior staff from elsewhere. Comparing your current supply to this revised demand will show surpluses and shortages which will allow you to take corrective action such as: • • • • • recruiting to meet a shortage of those with senior management potential allowing faster promotion to fill immediate gaps developing cross functional transfers for high fliers hiring on fixed-term contracts to meet short-term skills/experience deficits Reducing staff numbers to remove blockages or forthcoming surpluses. and where will they come from? To address these questions you need to understand: • the present career system (including patterns of promotion and movement. • • This then can be compared with future requirements. of recruitment and wastage) the characteristics of those who currently occupy senior positions the organization’s future supply of talent. in number and type.

Graduate recruitment numbers will be set in ignorance of demand. Most organisations are likely to want HRP systems: • • • • • • which are responsive to change where assumptions can easily be modified that recognize organizational fluidity around skills that allow flexibility in supply to be included that are simple to understand and use Which are not too time demanding. It is surely better if decision makers follow this maxim in the way they make and execute Resourcing plans. If HRP techniques are ignored.” . The immediate products of this analysis are ‘Job Description’ and ‘Job Specifications’. decisions will still be taken.” JOB ANALYSIS Definition 1: (Process of Collecting Information) “Job Analysis is a process of studying and collecting information relating to operations and responsibilities of a specific job. As George Bernard Shaw said: ‘to be in hell is to drift. or management succession problems will develop unnoticed.How can HRP be applied? The report details the sort of approach companies might wish to take. to be in heaven is to steer’. JOB ANALYSIS JOB: “Job is a ‘group of tasks to be performed everyday. but without the benefit of understanding their implications. To operate such systems organisations need: • • • • appropriate demand models good monitoring and corrective action processes comprehensive data about current employees and the external labor market an understanding how Resourcing works in the organisation.

It is a basic technical procedure that is used to define duties and responsibilities and accountabilities of the job. Steps of Job Analysis 1. Writing job description based on information collected to determine the skills.Definition 2: (Systematic Exploration of Activities) “Job Analysis is a systematic exploration of activities within a job. Checking the job information for accuracy 3. . Each job has certain ability requirements (as well as certain rewards) associated with it. Collecting and recording job information 2.” MEANING OF JOB ANALYSIS Job Analysis is a process of collecting information about a job. The process of job analysis results into two sets of data. It helps HR to locate places to obtain employees. which need to be staffed. Also selecting a good candidate also requires detailed job information.” Definition 3: (Identifying Job Requirements) “Job is a collection of tasks that can be performed by a single employee to contribute to the production of some product or service. • Recruitment & Selection: .The numbers and types of personnel are determined by the jobs. Because the objective of hiring is to match the right candidate for right job • Training & Development: Training and development programs can be designed depending upon job requirement and analysis. • • Job Description Job Specification As a result Job analysis involves the following steps in a logical order. Job related information in the form of Job Analysis serves this purpose or use. Selection of trainees is also facilitated by job analysis. provided by the organization.Recruitment precedes job analysis. Job Analysis is a process used to identify these requirements. abilities and activities required 4. It also helps in better continuity and planning in staffing in the organization. knowledge. Updating and upgrading this information PURPOSE OF JOB ANALYSIS: • Human Resource Planning (HRP): .

is facilitated by job analysis by way of fixing standards of job performance. Job Analysis.e. Personnel Information: Job analysis is vital for building personnel information systems and processes for improving administrative efficiency and providing decision support. PROCESS OF JOB ANALYSIS Process 1: Strategic Choices Process 2: Collecting Information Process 3: Processing Information Process 4: Job Description Process 5: Job Specification Strategic Choices: Extent of involvement of employees: Extent of employee involvement is a debatable point. • • Remuneration: Job analysis also helps in determining wage and salary for all jobs. assessments. Too much involvement may result in bias in favor of a job in terms of inflating duties and responsibilities. . Too less involvement leads to suspicion about the motives behind the job. This is possible with the help of job description and specifications. Performance Appraisal: Performance appraisal. • • Safety & Health: Job Analysis helps to uncover hazardous conditions and unhealthy environmental factors so that corrective measures can be taken to minimize and avoid possibility of human injury. levels of details required would be great. promotions. If the purpose were for training programs or assessing the worth of job.• Job Evaluation: Job evaluation means determination of relative worth of each job for the purpose of establishing wage and salary credentials. i. rewards. Level of details of job analysis: The nature of jobs being analyzed determines the level of details in job analysis. Besides it may also lead to inaccurate information. If the purpose is just clarification the details required would be less. Hence extent of involvement depends on the needs of the organization and employee.

Social. Education. Materials. Work schedule) Personal Requirement (Skills. Behaviors. Tools. Following can be sources of data available for job analysis. Movements) Machines. newspapers.Timing and frequency of Job Analysis: When do you do Job Analysis? • • • • • • • Past-oriented and future-oriented Job Analysis: For rapidly changing organization more future oriented approach would be desired. Experience) Human Sources Job Analysis Job Incumbents Supervisors Job Experts Initial stage. For traditional organizations past oriented analysis would be required. Sources of Job Data: For job analysis number of human and non-human sources is available besides jobholder himself. . for new organization New Job is created Changes in Job. Products. However more future oriented analysis may be derived based on past data. Services) Job Context (Physical. Non-Human Sources Existing job descriptions and specifications Equipment maintenance records Equipment design blueprints Architectural blueprints of work area Films of employee working Training manuals and materials Magazines. Equipments and Work Aids (List. Organizational. Training. literatures Collecting Information: Information collection is done on the basis of following 3 parameters Types of Data for Job Analysis: • • • • • Work Activities (Tasks details) Interface with other jobs and equipments (Procedures. Technology and Processes Deficiencies and Disparities in Job New compensation plan is introduced Updating and upgrading is required.

so that it would be useful in various personnel functions. It is useful in large number of staffs and less time consuming. which can be filled and given back to supervisors or job analysts. description of job. The analysts must be fully trained observers. jobholder’s name. reporting staff. Questionnaires: A standard questionnaire is given to jobholder about his job. METHODS OF DATA COLLECTION: Observation: Job Analyst carefully observes the jobholder and records the information in terms of what. which form the next two processes of job analysis. The questionnaire may contain job title. However the accuracy of information leaves much to be desired. list of main duties and responsibilities etc. Specifically job related data would be useful to prepare job description and specifications. how the job is done and how much time is taken. . but is also time consuming and inapplicable to jobs involving mental activities and unobservable job cycles. It can be Structured or Unstructured Interview. Plus there is also a problem of bias. Again this is also a time consuming method in case of large organizations. Interview: In this analyst interviews the jobholders. managers name. his supervisors to elicit information. It is a simple and accurate method.Methods of Data Collection: • • • • • • • • • Observation Interview Questionnaires Checklists Technical Conference Diary Methods Trained Job Analysts Supervisors Job Incumbents Who to Collect Data? Processing Information: Once the job information is collected it needs to be processed.

T – Time 4. However PAQ needs to be completed by trained job analysts only rather than incumbents. particularly for selection and remuneration purposes. P – Possibility of Occurrence of Job 5. Technical Conference: Here a conference of supervisors is used. Diary Methods: In this method jobholder is required to note down their activities day by day in their diary. The PAQ contains 194 job elements on which job is created depending on the degree to which an element is present. demand. This analysis provides a comparison of a specific job with other job classifications. The analysts initiate the discussions providing job details. 1. U – Usability / Use of Job 2. Quantitative Methods of Job Data Collection: Position Analysis Questionnaire (PAQ): PAQ is a highly specialized instrument for analyzing any job in terms of employee activities.Checklists: It is more similar to questionnaire but the response sheet contains fewer subjective judgments and tends to be either yes or no variety. Management Position Description Questionnaire (MPDQ): Highly structured questionnaire. If done faithfully this technique is accurate and eliminates errors caused by memory lapses etc. Functional Job Analysis: - . These elements are grouped together into 6 categories. containing 208 elements relating to managerial responsibilities. However this method lacks accuracy. A – Applicability of Job 6. I – Importance of Job 3. PAQ and MPDQ yield standardized information about the worker and the job. S – Specialty Tasks of Job The primary advantage of PAQ is that it can be used to analyze almost every job. Preparation of checklist is a challenging job itself. restrictions and other position characteristics These 208 elements are grouped under 13 categories.

BARRIERS OF JOB ANALYSIS • • • • Support from Top Management Single means and source. duties and responsibilities of a particular job. Job Identification 2. reliance on single method rather than combination No Training or Motivation to Jobholders Activities and Data may be Distorted JOB DESCRIPTION “Job Description implies objective listing of the job title. tools and materials 6. scope. responsibilities and organizational relationships that constitutes a given job or position. Machines. which attempts to describe the whole person on the job. tasks. Job Summary 3. Definition of unusual terms Format of Job Description • • • Job Title Region/Location Department . Job Duties and Responsibilities 4. It defines continuing work assignment and a scope of responsibility that are sufficiently different from those of the other jobs to warrant a specific title. Work conditions 7. Contents of Job Description 1. Supervision specification 5. Job description is a broad statement of purpose.It is a worker oriented job analytical approach. and responsibilities involved in a job. Work hazards 8.” Job description is a word picture in writing of the duties.

Up to date 2. Psychological characteristics 3. Comprehensive Job Summary 4. Indicates opportunities for career development 10. Personal characteristics 4.” In other words it is a statement of minimum and acceptable human qualities necessary to perform job properly. Specify reporting relationships 8. Clear duties and responsibilities 5. Job specifications seeks to indicate what kind of persons may be expected to most closely approximate the role requirements and thus it is basically concerned with matters of selection. Showcase degrees of difficulties 9. Proper Job Title 3. Offer bird’s-eye-view of primary responsibilities JOB SPECIFICATIONS “Job Specification involves listing of employee qualifications.• • • Reporting to (Operational and Managerial) Objective Principal duties and responsibilities Features of Good Job Description 1. Physical Characteristics 2. screening and placement and is intended to serve as a guide in hiring. Contents of Job Specifications 1. Demographic features. Easily understandable 6. State job requirements 7. . skills and abilities required to meet the job description. These specifications are needed to do job satisfactorily. Responsibilities 5.

PURPOSE AND IMPORTANCE OF RECRUITMENT: 1. FACTORS GOVERNING RECRUITMENT External Factors: • Demand and Supply (Specific Skills) . Reduce the probability that job applicants once selected would leave shortly 5. in practice the activity extends to the screening of applications so as to eliminate those who are not qualified for the job. Though theoretically recruitment process is said to end with the receipt of applications. The Process begins when new recruits are sought and ends when their applications are submitted.” MEANING OF RECRUITMENT: Recruitment is understood as the process of searching for and obtaining applicants for jobs. Determine the present and future requirements in conjunction with personnel planning and job analysis activities 2. Increase the pool of job candidates at minimum cost 3. from among them the right people can be selected. The result is a pool of application from which new employees are selected. Evaluate effectiveness of various recruitment techniques and sources for job applicants. Meet legal and social obligations 6. Identify and prepare potential job applicants 7. 4. 8.RECRUITMENT & SELECTION RECRUITMENT Definition of Recruitment: Finding and Attracting Applications “Recruitment is the Process of finding and attracting capable applicants for employment. Help increase success rate of selection process by reducing number of under-qualified or over-qualified applications.

RECRUITMENT PROCESS Recruitment Planning • • • • • • • • • • • • • • Number of contacts Types of contacts Make or Buy Employees Technological Sophistication Where to look How to look Present employees Employee referrals Transfers & Promotions Former Employees Previous Applicants Evaluation of Internal Recruitment Professionals or Trade Associations Advertisements Recruitment Strategy Development Internal Recruitment (Source 1) External Recruitment (Source 2) .• • • • Unemployment Rate (Area-wise) Labor Market Conditions Political and Legal Environment (Reservations. Labor laws) Image Internal Factors • • • • • Recruitment Policy (Internal Hiring or External Hiring?) Human Resource Planning (Planning of resources required) Size of the Organization (Bigger the size lesser the recruitment problems) Cost Growth and Expansion Plans.

Less Costly 1.• • • • • • • • • • • • • • • • • • • • • • • • • • Employment Exchanges Campus Recruitment Walk-ins Interviews Consultants Contractors Displaced Persons Radio & Television Acquisitions & Mergers Competitors Evaluation of External Recruitment Source activation Selling Screening of Applications Salary Cost Management & Professional Time spent Advertisement Cost Producing Supporting literature Recruitment Overheads and Expenses Cost of Overtime and Outsourcing Consultant’s fees Return rate of applications sent out Suitable Candidates for selection Retention and Performance of selected candidates Recruitment Cost Time lapsed data Image projection Searching Evaluation and Cost Control Evaluation of Recruitment Process INTERNAL RECRUITMENT Advantages Disadvantages 1. Old concept of doing things .

current work may be 4. Recruitment refers to the process of 1. Compliance with reservation policy becomes easy heartburn are avoided. Chances of creeping in false positive . SELECTION MEANING OF SELECTION: Selection is the process of picking up individuals (out of the pool of job applicants) with requisite qualifications and competence to fill jobs in the organization. Adjustment of new employees takes longer time. Benefits of new experiences 3. and encouraging the right candidates from a pool of applicants. Candidates affected 4. It is costly method and false negative errors 4.2. Selection on the other hand is negative prospective employees to apply for 4. Politics play greater roles problem for those not promoted. It abets raiding organization 3. A formal definition of Selection is as under Definition of Selection: Process of differentiating “Selection is the process of differentiating between applicants in order to identify and hire those with a greater likelihood of success in a job. Candidates already oriented towards 2. and 3. 2. Better morale and motivation 2. Organizations have better knowledge about internal candidates enhanced 3.” DIFFERENCE BETWEEN RECRUITMENT AND SELECTION: Recruitment Selection 1. jealousies. Scope for resentment. Morale EXTERNAL RECRUITMENT Advantages Disadvantages 1. associated with internal recruiting is denied 2. Benefits of new skills and talents 1. Selection is concerned with picking up identifying jobs. Employee morale and motivation is 5.

in its application in as much as it seeks to eliminate as many unqualified applicants as possible in order to identify the right candidates. and Ability Tests and are conducted to judge how well an individual can perform tasks related to the job. Psychometric Tests etc. These tests can be Aptitude Tests. Behavioral Interviews. Stress Interviews. Personality Tests. It is considered to be an excellent selection device. The final decision has to be made out of applicants who have passed preliminary interviews. PROCESS / STEPS IN SELECTION 1. Here interview is a formal and in-depth conversation between applicant’s acceptability. the most critical step is the selection decision is to be made. telephone conversations. or Sequential Interviews.2. tests. A job offer is often contingent upon the candidate passing the physical examination. The basic objective is to reject misfits. the candidate is required to undergo a physical fitness test. Interviews can be One-to-One. Reference checks can be through formal letters. Panel Interview. Selection Decision: After obtaining all the information. Employment Interview: The next step in selection is employment interview. On the other hands preliminary interviews is often called a courtesy interview and is a good public relations exercise. final interviews and reference checks. Besides there can be Structured and Unstructured interviews. 5. The views of line managers are considered generally because it is the line manager who is responsible for the performance of the new employee. Medical Tests. Physical Examination: After the selection decision is made. . Graphology Test (Handwriting). Preliminary Interview: The purpose of preliminary interviews is basically to eliminate unqualified applications based on information supplied in application forms. Recruitment is said to be positive in its approach as it seeks to attract as many candidates as possible. 2. 6. Reference & Background Checks: Reference checks and background checks are conducted to verify the information provided by the candidates. 3. 4. Besides this there are some other tests also like Interest Tests (activity preferences). There are various types of tests conducted depending upon the jobs and the company. Selection Tests: Jobseekers who past the preliminary interviews are called for tests. However it is merely a formality and selections decisions are seldom affected by it.

Perception: We all perceive the world differently. Trained the selectors 3. Determine aids to be used for selection process 4. It is made by way of letter of appointment. 2. Help the appointed candidate to succeed by training and management development BARRIERS TO EFFECTIVE SELECTION: 1. containing written contractual terms of employment etc. 5. Validity: A test that has been validated can differentiate between the employees who can perform well and those who will not. Here is a need to prepare a formal contract of employment. 8. relatives. Our limited perceptual ability is obviously a stumbling block to the objective and rational selection of people. bureaucrats. ESSENTIALS OF A GOOD SELECTION PRACTICE 1. Reliability: A reliable test may fail to predict job performance with precision. friends and peers to select particular candidate are also barriers to selection. Pressure: Pressure brought on selectors by politicians. region. Involve line managers at all stages 6. Job Offer: The next step in selection process is job offer to those applicants who have crossed all the previous hurdles. Check competence of recruitment consultants before retention 5. 3.7. However it does not predict the job success accurately. TRAINING & DEVELOPMENT Definition of Training & Development: Improve performance . certain documents need to be executed by the employer and the candidate. Attempt to validate the procedure 7. 4. race or gender etc. Fairness: Barriers of fairness includes discrimination against religion. Contract of Employment: After the job offer is made and candidates accept the offer. Detailed job descriptions and job specifications prepared in advance and endorsed by personnel and line management 2.

An employee undergoing training is presumed to have had some formal education. Any such program has university professors as resource persons to enlighten participants about theoretical knowledge of the topics proposed to discuss. Development and Education. usually by changing the employee’s attitude or increasing his or her skills and knowledge. . Hence we can say that Training is offered to operatives. That any training and development program must contain an element of education is well understood by HR Specialists. Training & Development Need = Standard Performance – Actual Performance We can make a distinction among Training. Education: It is a theoretical learning in classrooms. The education is more important for managers and executives rather than low cadre workers.“Training & Development is any attempt to improve current or future employee performance by increasing an employee’s ability to perform through learning. Distinction between Training and Education Training Application oriented Job experience Specific Task in mind Narrow Perspective Training is Job Specific Education Theoretical Orientation Classroom learning Covers general concepts Has Broad Perspective Education is no bar Training: Training refers to the process of imparting specific skills.” MEANING OF TRAINING & DEVELOPMENT: The need for Training and Development is determined by the employee’s performance deficiency. Anyways education is common to all employees. The purpose of education is to teach theoretical concepts and develop a sense of reasoning and judgment. In fact organizations depute or encourage employees to do courses on part time basis. their grades notwithstanding. computed as follows. No training program is complete without an element of education. CEOs are known to attend refresher courses conducted by business schools.

absenteeism. complaints and turnover of employees.What are the Training Inputs? • • • • • • • Skills Education Development Ethics Problem Solving Skills Decision Making Attitudinal Changes Importance of Training & Development • • • • • • Helps remove performance deficiencies in employees Greater stability. scraps and damages to machinery can be avoided Serves as effective source of recruitment It is an investment in HR with a promise of better returns in future Reduces dissatisfaction. NEED OF TRAINING Individual level • • • • • Diagnosis of present problems and future challenges Improve individual performance or fix up performance deficiency Improve skills or knowledge or any other problem To anticipate future skill-needs and prepare employee to handle more challenging tasks To prepare for possible job transfers Group level . flexibility and capacity for growth in an organization Accidents.

Work Sampling 7. Exit Interviews 6. Quality Circles 8. Performance Appraisals 2. Rating Scales. Organizational Climate Indices 4. Organizational Goals and Objectives 2. Trainers can be informed about the broader needs in advance 2. Analysis of Current and Anticipated Changes Benefits of Training Needs Identification 1. Personnel / Skills Inventories 3. Interviews 3. Customer Satisfaction Survey 9. Training Progress Feedback 6. Efficiency Indices 5. Diagnosis of causes of performance deficiencies can be done. MBO / Work Planning Systems 7. Trainers Perception Gaps can be reduced between employees and their supervisorsTrainers can design course inputs closer to the specific needs of the participants 3. Attitude Surveys 5.• • • To face any change in organization strategy at group levels When new products and services are launched To avoid scraps and accident rates Identification of Training Needs (Methods) Individual Training Needs Identification 1. . Group Level Training Needs Identification 1. Questionnaires 4.

It is not focused on employees own job responsibilities. On the Job Training Methods: 1. Advantage – employee gets to know how his own and other departments also function. 3. Advantages of On-the-Job Training: It is directly in the context of job It is often informal It is most effective because it is learning by experience It is least expensive Trainees are highly motivated It is free from artificial classroom situations. instills team spirit.Methods of Training: On the Job Trainings: These methods are generally applied on the workplace while employees is actually working. usually employees are put on different jobs turn by turn where they learn all sorts of jobs of various departments. Job Coaching: An experienced employee can give a verbal presentation to explain the nitty-gritty’s of the job. The objective is to give a comprehensive awareness about the jobs of different departments. Interdepartmental coordination can be improved. . Disadvantage – It may become too much for an employee to learn. Following are the on-the-job methods. 2. Employees basic talents may remain under utilized. It may be in the form of orders or steps to perform a task. Disadvantages of On-the-Job Training: Trainer may not be experienced enough to train It is not systematically organized Poorly conducted programs may create safety hazards. Job Rotation: In this method. Job Instruction: It may consist an instruction or directions to perform a particular task or a function.

Following are some of the simulation methods of trainings . seminars etc. It is not learning by practice. No feedback mechanism.4. Apprenticeships: Generally fresh graduates are put under the experienced employee to learn the functions of job. and Presentations etc. Advantages – Wide range of realistic examples. Televisions. Advantage – It can be used for large groups. Video. quality control possible.. Disadvantages – Low popularity. No authentic feedback mechanism. Trainers are usually experienced enough to train It is systematically organized Efficiently created programs may add lot of value It is not directly in the context of job It is often formal It is not based on experience It is least expensive Trainees may not be highly motivated It is more artificial in nature Classroom Lectures: It is a verbal lecture presentation by an instructor to a large audience. No flexibility for different audience. It is One-way communication. Disadvantages – One-way communication. Advantages of Off-the-Job Training: • • • • • • • • • 1. Audio-Visual: It can be done using Films. Cost per trainee is low. Simulation: creating a real life situation for decision-making and understanding the actual job conditions give it. Off the Job Trainings: These are used away from work places while employees are not working like classroom trainings. 5. It may consist a part of their educational courses. Likely to boredom. 3. Internships and Assistantships: An intern or an assistants are recruited to perform a specific time-bound jobs or projects during their education. Following are the off-the-job methods. Disadvantages of Off-the-Job Training: Off the Job Training Methods 2.

openness. under different circumstances how an individual will behave himself and towards others. Education degrees lack skills 4. Employers and B Schools operating distantly . Disadvantages – High cost. Disadvantage – Participants may resort to their old habits after the training. Computer Aided Instructions: It is extension of PI method. • Sensitivity Trainings: This is more from the point of view of behavioral assessment. 6. by using computers. material is structured and self-contained. Attitudinal change is another result. It is an ideal method to promote decision-making abilities within the constraints of limited data. tolerance. cost of books. manuals or machinery is expensive. listening skills. It is more emotional orientation and improves interpersonal relationships. 4. Advantages – Provides accountabilities. Non-coordination from workers due to downsizing trends 6. Disadvantages – Scope for learning is less. Advantages – increased ability to empathize. modifiable to technological innovations. There is no preplanned agenda and it is instant. trainees can progress at their own speed. and conflict resolution skills. The cases are generally based on actual organizational situations. These are generally used in MDP. strong motivation for repeat learning. Advantages – Self paced. flexible to time. Programmed Instructions: Provided in the form of blocks either in book or a teaching machine using questions and Feedbacks without the intervention of trainer. Inadequate Training budget 3. Lack of Management commitment 2. Large scale poaching of trained staff 5. • Role Plays: Here trainees assume the part of the specific personalities in a case study and enact it in front of the audience. 5.• Case Studies: It is a written description of an actual situation and trainer is supposed to analyze and give his conclusions in writing. Laboratory Training Barriers to Effective Training: 1.

Managers. Continuous and Ongoing approach 5. or a week. Creations of effective training evaluation system WAGES AND SALARY ADMINISTRATION Wages. analyze and interpret the needs of their employees so that rewards can be decided to satisfy those needs. NATURE AND PURPOSE The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. motivation and rewards. Unions influence.compensation to an employee for service rendered on a weekly. recognition.Aggregate earnings of a employee for his service for a day. The wage and salary administration is concerned with financial aspects of needs. Comprehensive and Systematic Approach 4. Management Commitment 2. The reward may be money or promotion.7. Promoting Learning as Fundamental Value 6. How To Make Training Effective? 1. acceptance etc OBJECTIVES A sound wage and salary administration tries to achieve these objectives FOR EMPLOYEES . It is the price paid for the services of labor in the process of production. or a month . monthly or annual basis. therefore. Includes 2 parts. Training & Business Strategies Integration 3.the basic wages & other allowance Salary.

wage and salary administration have four major purposes To recruit persons for a firm To control payroll costs To satisfy people. to reduce the incidence of quitting grievances. Employee’s morale and motivation are increased because a wage program can be explained and is base on facts. According to Beach. . Employees are paid according to requirements of the job. It enhances an employee’s morale and motivation because adequate and fairly administered wages are basic to his wants and needs.1. they can explain the basis of their wage program because it is based upon a systematic analysis of job and wage facts A wage and salary administration reduces the likelihood of friction and grievances on job inequalities. 2. It attracts qualified employees by ensuring adequate payment for all the jobs. and fractions over pay To motivate people to perform better. TO EMPLOYERS They can systematically plan and control labor costs • • • • • • • • • In dealing with trade union. This eliminates inequalities. the chances of favoritism (while fixing wage rates) are greatly eliminated 3.ie highly skilled jobs are paid more compensation than low skilled jobs. Job sequences and lines of promotion are established wherever applicable. 4.

Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance. However. Besides. financial management covers the process of identifying and managing risks. and • Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested . financial management is important at all levels of human existence because every entity needs to look after its finances. Some experts refer to financial management as the science of money management. It includes the administration and maintenance of financial assets. A financial manager looks at the available data to judge the performance of enterprises.UNIT III Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. Financial Management can be defined as: The management of the finances of a business / organisation in order to achieve financial objectives Taking a commercial business as the most common organizational structure. The primary usage of this term is in the world of financing business activities. The primary concern of financial management is the assessment rather than the techniques of financial quantification. the key objectives of financial management would be to: • Create wealth for the business • Generate cash.

financing and dividends: • Investments must be financed in some way – however there are always financing alternatives that can be considered. In the medium and long term. borrowing from banks or taking credit from suppliers • A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. • There are two main forms of accounting information: (1) Financial Accounts. (2) Financial Control: Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. . funding may be required for significant additions to the productive capacity of the business or to make acquisitions. In the short term. Financial control addresses questions such as: • Are assets being used efficiently? • Are the businesses assets secure? • Do management act in the best interest of shareholders and in accordance with business rules? (3) Financial Decision-making: The key aspects of financial decision-making relate to investment.There are three key elements to the process of financial management: (1) Financial Planning: Management need to ensure that enough funding is available at the right time to meet the needs of the business. For example it is possible to raise finance from selling new shares. If dividends are too high. pay employees and fund sales made on credit. funding may be needed to invest in equipment and stocks. the business may be starved of funding to reinvest in growing revenues and profits further.

measuring and recording the transactions of a business."Should I invest my money in this company?" . To answer their needs. financial accountants draw up the profit and loss account."Should I lend money to this business?" . the following financial statements are prepared to show the performance and position of the business: Profit and Loss Account Balance Sheet Cash Flow Statement Notes to the Accounts Describing the trading performance of the business over the accounting period Statement of assets and liabilities at the end of the accounting period (a "snapshot") of the business Describing the cash inflows and outflows during the accounting period Additional details that have to be disclosed to comply with Accounting Standards and the Companies Act Description by the Directors of the performance of the business during the directors' shareholdings. At the end of a period (typically a year). Financial Accounts .(2) Management Accounts."What are the profits on which this company must pay tax?" Company Law Requirements for Financial Accounts Directors' Report accounting period + various additional disclosures. particularly in relation to .A Definition Financial accounts are concerned with classifying. remuneration etc Financial accounts are geared towards external users of accounting information. balance sheet and cash flow statement for the company as a whole in order for users to answer questions such as: .

Annual accounts for Companies Act purposes generally include: . . A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. Cash flow analysis involves examining the components of your business that affect cash flow. If the total unpaid purchases are greater than the total sales due. A cash-flow statement differs from an income statement in reflecting actual cash on hand rather than money owed (accounts receivable). Cash flow results from three major groups of activities: operating activities.A cash flow statement . Its purpose is to throw light on management's use of its available financial resources and to help in evaluating a company's liquidity. you'll be able to more easily identify cash flow problems and find ways to improve your cash flow. Cash flow analysis is the study of the cycle of your business' cash inflows and outflows. such as accounts receivable.A statement of total recognized gains and losses .A balance sheet .An audit report . Cash flow is essentially the movement of money into and out of your business. investing activities.A directors’ report . and financing activities.A profit and loss account . you'll need to spend more cash than you receive in the next month. inventory. with the purpose of maintaining an adequate cash flow for your business. By performing a cash flow analysis on these separate components. and credit terms. it's the cycle of cash inflows and cash outflows that determine your business' solvency. indicating a potential cash flow problem.Notes to the accounts Cash Flow Analysis Financial and accounting concept. accounts payable. and to provide the basis for cash flow management.

and the income statement summarizes a firm's financial transactions over an interval of time. For example. and net present value. E. even while profitable. These two financial statements reflect the accrual basis accounting used by firms to match . finite period of time. It may be defined by users for their own purposes. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return. etc. or raising additional debt finance. * As an alternate measure of a business's profits when it is believed that accrual accounting concepts do not represent economic realities. A company can fail because of a shortage of cash. a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). Cash flow is a generic term used differently depending on the context. Subset terms include 'net cash flow'. the company may be deriving additional operating cash by issuing shares. evaluating default risk. matching cash requirements. It can refer to actual past flows. It can refer to the total of all the flows involved or to only a subset of those flows.Cash flow refers to the movement of cash into or out of a business. re-investment requirements.g. The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time. or to projected future flows. Measurement of cash flow can be used * To determine a project's rate of return or value. It is usually measured during a specified. Purpose: The cash flow statement was previously known as the flow of funds statement. * To evaluate the risks within a financial product. The cash flow statement reflects a firm's liquidity. * To determine problems with a business's liquidity. operating cash flow and free cash flow. When Net Income is composed of large non-cash items it is considered low quality. In such a case. a project. Being profitable does not necessarily mean being liquid. or a financial product. * Cash flow can be used to evaluate the 'quality' of Income generated by accrual accounting.

The cash flow statement is intended to 1. if the taxes are directly linked to investing activities or financing activities. The cash flow statement is a cash basis report on three types of financial activities: operating activities. such as various timeframes for depreciating fixed assets.revenues with the expenses associated with generating those revenues. they are reported under operating activities.The indirect method is almost universally used. Noncash activities are usually reported in footnotes. The cash flow statement includes only inflows and outflows of cash and cash equivalents. it excludes transactions that do not directly affect cash receipts and payments. indicate the amount. If taxes paid are directly linked to operating activities. liabilities and equity 3. dividends received may be reported under operating activities or under investing activities. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2. improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4. because FAS 95 requires a supplementary report similar to the indirect method if a company chooses to use the direct method. investing activities. and financing activities. . they are reported under investing or financing activities. which might be derived from different accounting methods. Direct method The direct method for creating a cash flow statement reports major classes of gross cash receipts and payments. These Noncash transactions include depreciation or write-offs on bad debts or credit losses to name a few. Under IAS 7. timing and probability of future cash flows The cash flow statement has been adopted as a standard financial statement because it eliminates allocations. Preparation methods: The direct method of preparing a cash flow statement results in a more easily understood report. provide additional information for evaluating changes in assets.

500 Cash flows from (used in) investing activities Proceeds from the sale of equipment 7. makes adjustments for all transactions for non-cash items.500) . An increase in an asset account is subtracted from net income.Sample cash flow statement using the direct method Cash flows from (used in) operating activities Cash receipts from customers 27.000) Net cash flows from operating activities 1. end of year $10. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions.000) Income taxes paid (4.500) Net cash flows used in financing activities (2. Rules The following rules are used to make adjustments for changes in current assets and liabilities.500 Cash and cash equivalents.500 Indirect method The indirect method uses net-income as a starting point.500 Interest paid (2.000 Cash and cash equivalents. and an increase in a liability account is added back to net income.000 Net cash flows from investing activities 10.000) Cash generated from operations (sum) 7. operating items not providing or using cash and no operating items.500 Cash paid to suppliers and employees (20. Net increase in cash and cash equivalents 9. then adjusts for all cash-based transactions.500 Dividends received 3.500 Cash flows from (used in) financing activities Dividends paid (2. beginning of year 1. • • • • Decrease in non-cash current assets are added to net income Increase in non-cash current asset are subtracted from net income Increase in current liabilities are added to net income Decrease in current liabilities are subtracted from net income .

Budgetary control and responsibility centers. b) Expense centers: Units where inputs are measured in monetary terms but outputs are not. Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets. A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. b) Budgetary control: • • A control technique whereby actual results are compared with budgets. An example would be an advertising budget or sales force budget. It helps to co-ordinate the activities of the organisation. . There are four types of responsibility centers: a) Revenue centers: Organizational units in which outputs are measured in monetary terms but are not directly compared to input costs.• Expenses with no cash outflows are added back to net income (depreciation and/or amortization expense are the only operating items that have no effect on cash flows in the period) • • • Revenues with no cash inflows are subtracted from net income Non operating losses are added back to net income Non operating gains are subtracted from net income Budgetary control methods a) Budget: • • • A formal statement of the financial resources set aside for carrying out specific activities in a given period of time. These enable managers to monitor organizational functions.

to anticipate and give the organisation purpose and direction. ROI. Economises management time by using the management by exception principle. • • • • Enables remedial action to be taken as variances emerge. Requires managers of budget centers to be made responsible for the achievement of budget targets for the operations under their personal control. to set out detailed plans for achieving the targets for each department. Inter-departmental sales are often made using "transfer prices". operation and (ideally) each manager. • • Promotes coordination and communication. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and noncontrollable factors. i. Control is provided by comparisons of actual results against budget plan. Improves the allocation of scarce resources. Motivates employees by participating in the setting of budgets. d) Investment centers: Where outputs are compared with the assets employed in producing them.c) Profit centers: Where performance is measured by the difference between revenues (outputs) and expenditure (inputs). Forces management to look ahead. Clearly defines areas of responsibility. . which is probably the most important feature of a budgetary planning and control system. • Provides a basis for performance appraisal (variance analysis). A budget is basically a yardstick against which actual performance is measured and assessed.e. Advantages of budgeting and budgetary control There are a number of advantages to budgeting and budgetary control: • Compels management to think about the future.

"we had better spend it or we will lose it". • • It is difficult to reconcile personal/individual and corporate goals. Standards: base it on established standards of performance. Analysis of costs and revenues: this can be done on the basis of product lines. some costs are under the influence of more than one person. • • Responsibility versus controlling. e. departments or cost centers. Managers may overestimate costs so that they will not be blamed in the future should they overspend. Characteristics of a budget A good budget is characterized by the following: Participation: involve as many people as possible in drawing up a budget. Comprehensiveness: embrace the whole organisation. thus resulting in: a) Bad labor relations b) inaccurate record-keeping. • Departmental conflict arises due to: a) Disputes over resource allocation b) departments blaming each other if targets are not attained. • Budgets can be seen as pressure devices imposed by management.Problems in budgeting Whilst budgets may be an essential part of any marketing activity they do have a number of disadvantages.g. Waste may arise as managers adopt the view. This is often coupled with "empire building" in order to enhance the prestige of a department. i.e. Feedback: constantly monitor performance. power costs. . particularly in perception terms. Flexibility: allow for changing circumstances.

Budget preparation . so there should be a representative from sales. A budget centre may encompass several cost centers. c) Budget Officer: Controls the budget administration the job involves:  liaising between the budget committee and managers responsible for budget preparation  dealing with budgetary control problems  ensuring that deadlines are met  educating people about budgetary control. d) Budget manual: This document:  charts the organisation  details the budget procedures  contains account codes for items of expenditure and revenue  timetables the process  clearly defines the responsibility of persons involved in the budgeting system. marketing and so on. departmental heads and executives (with the managing director as chairman).Budget organisation and administration: In organising and administering a budget system the following characteristics may apply: a) Budget centers: Units responsible for the preparation of budgets. production. Every part of the organisation should be represented on the committee.g. e. including the issue of a manual  Issuing of timetables for preparation of budgets  Provision of information to assist budget preparations  Comparison of actual results with budget and investigation of variances. Functions of the budget committee include:  Coordination of the preparation of budgets. b) Budget committee: This may consist of senior members of the organisation.

e. This limits output. a) Sales budget: this involves a realistic sales forecast. This is prepared in units of each product and also in sales value. determine the principal budget factor. The production manager's duties include:  Analysis of plant utilization  work-in-progress budgets. If requirements exceed capacity he may:  subcontract  plan for overtime  introduce shift work  hire or buy additional machinery  The materials purchases budget's both quantitative and financial. b) Production budget: expressed in quantitative terms only and is geared to the sales budget. sales.g. . This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking.Firstly. Methods of sales forecasting include:  Sales force opinions  market research  statistical methods (correlation analysis and examination of trends)  mathematical models. In using these techniques consider:  company's pricing policy  general economic and political conditions  changes in the population  competition  consumers' income and tastes  advertising and other sales promotion techniques  after sales service  credit terms offered. material or labor.

Hence. stock and debtors  To enable a firm to take precautionary measures and arrange in advance for investment and loan facilities whenever cash surpluses or deficits arises  To show the feasibility of management's plans in cash terms  To illustrate the financial impact of changes in management policy. e.  The materials purchases budget is both quantitative and financial. It summarises monthly receipts and payments.g.c) Raw materials and purchasing budget:  The materials usage budget is in quantities. Its main uses are:  To maintain control over a firm's cash requirements. Receipts of cash may come from one of the following: . Factors influencing a) and b) include:  Production requirements  planning stock levels  storage space  trends of material prices.g. e) Cash budget: a cash plan for a defined period of time. d) Labor budget: is both quantitative and financial. e. This is influenced by:  production requirements  man-hours available  grades of labour required  wage rates (union agreements)  the need for incentives. change of credit terms offered to customers. it highlights monthly surpluses and deficits of actual cash.

Payments of cash may be for one or more of the following:  purchase of stocks  payments of wages or other expenses  purchase of capital items  payment of interest. Cash sales  payments by debtor’s  the sale of fixed assets  the issue of new shares  the receipt of interest and dividends from investments. Steps in preparing a cash budget i) Step 1: set out a pro forma cash budget month by month. dividends or taxation. Month 1 Month 2 Month 3 $ $ $ Cash receipts Receipts from debtors Sales of capital items Loans received Proceeds from share issues Any other cash receipts Cash payments Payments to creditors Wages and salaries Loan repayments Capital expenditure Taxation Dividends Any other cash expenditure Receipts less payments Opening cash balance b/f W Closing cash balance c/f X X Y Y Z ii) Step 2: sort out cash receipts from debtors . Below is a suggested layout.

iii) Step 3: other income iv) Step 4: sort out cash payments to suppliers v) Step 5: establish other cash payments in the month COST In business. Private costs are the costs that the buyer of a good or service pays the seller. but that are not included in transaction prices. in contrast. money is the input that is gone in order to acquire the thing. social. Usually. In this case. a cost is an alternative that is given up as a result of a decision. In business. retail. and psychic costs When a transaction takes place. The bearers of such costs can be either particular individuals or society at large. They include things like pollution. things that society will likely have to pay for in some way or at some time in the future. and further costs of transaction as incurred by the acquirer over and above the price paid to the producer. the cost may be one of acquisition. and hence is not available for use anymore. it typically involves both private costs and external costs. the price also includes a mark-up for profit over the cost of production. Social costs are the sum of private costs and external costs. Costs are often further described based on their timing or their applicability. This acquisition cost may be the sum of the cost of production as incurred by the original producer. External costs: (also called externalities). are the costs that people other than the buyer are forced to pay as a result of the transaction. external. . a cost is the value of money that has been used up to produce something. In economics. Note that external costs are often both non-monetary and problematic to quantify for comparison with monetary values. Comparing private. This can also be described as the costs internal to the firm's production function. in which case the amount of money expended to acquire it is counted as cost. and accounting.

rather than outside users. As a form of management accounting. Cost accounting can be viewed as translating the Supply Chain (the series of events in the production process that. Indirect Expenses / Overhead. cost accounting establishes budget and actual cost of operations. processes. cost accounting need not to follow standards such as GAAP (Generally Accepted Accounting Principles). Elements of Cost 1. Raw Materials 2. profitability or social use of funds. result in a product) into financial values. and what to compute is instead decided pragmatically. because its primary use is for internal managers. in concert. Material o A. Managers use cost accounting to support decision-making to cut a company's costs and improve profitability. departments or product and the analysis of variances. Direct Material . Labor 3. Costs are measured in units of nominal currency by convention.A psychic cost is a subset of social costs that specifically represent the costs of added stress or losses to quality of life. There are various managerial accounting approaches: • • • • • • Standardized or Standard Cost Accounting Lean accounting Activity-based Costing Resource Consumption Accounting Throughput Accounting Marginal Costing / Cost-Volume-Profit Analysis Classical Cost Elements are: 1. Cost accounting: In management accounting.

. (3) As direct and indirect (4) By variability: fixed. or Period costs: these are the costs other than product costs that are charged to. expenses (2) By functions: production. Indirect Material B. 1. development. Selling Overheads 4. Direct Labour B. The important ways of classification of costs are : (1) By nature or element: materials. Distribution Overheads Classification of Costs: Classification of cost means.o B. administration. Indirect Labor They are grouped further based on their functions as. variable. R&D. Indirect Material 2. selling. Labor o o A. and semi-variable (5) By controllability: controllable. Overhead o o A. the grouping of costs according to their common characteristics. labour. distribution. Administration Overheads 3. Indirect Labour 3. abnormal We first classify costs according to the three elements of cost: a) Materials b) Labour c) Expenses Product and Period Costs: We also classify costs as either 1 2 Product costs: the costs of manufacturing our products. Production or Works Overheads 2. uncontrollable (6) By normality: normal.

or written off to the income statement each period. vehicles. The classification of Product Costs: Direct costs: Direct costs are generally seen to be variable costs and they are called direct costs because they are directly associated with manufacturing. Total direct costs are collectively known as Prime Costs and we can see that Product Costs are the sum of Prime costs and Overheads. Indirect labour: Labour costs of people who are only indirectly associated with manufacture: management of a department or area. insurance . the direct costs can include: • • • Direct materials: plywood. assemblers. upholsterers Direct expense: this is a strange cost that many texts don't include. In turn.debited to. glue. includes it. screws. Council Tax. materials labour and overheads. Direct labour: sawyers. Again these costs are classified according to the three elements of cost. rent. cleaners. it has to be an indirect expense. supervisors. Here are some examples include: Depreciation of equipment. for example. Indirect Costs: Indirect costs are those costs that are incurred in the factory but that cannot be directly associate with manufacture. maintenance and repair technicians • Indirect expenses: The list in this section could be infinitely long if we were to try to include every possible indirect cost. Essentially. Direct expenses can include the costs of special designs for one batch. nails. water. if a cost is a factory cost and it has not been included in any of the other sections. but (International Accounting Standard) IAS 2. or run. fabric for the seat and the back. painters. buildings Electricity. telephone. wooden battens. the cost of buying or hiring special machinery to make a limited edition of a set of chairs. machinery. drillers. • • Indirect materials: Some costs that we have included as direct materials would be included here. polishers. of a particular set of tables and/or chairs.

interest on long term loans and interest on short term loans. . Administration costs will include salaries. we can conclude this discussion by saying that the costs of Selling. depreciation. that we use for manufacturing and storage and administration and each area of the business must pay for its share of the total cost under review. Finance Costs: Finance costs are those costs associated with providing the permanent. Finally. Notice that there are costs here such as rent. in such cases. Nevertheless. rent. and so on. we have Conversion Costs: these are the costs incurred in the factory that are incurred in the conversion of materials into finished goods. Administration Costs: Literally the costs of running the administrative aspects of an organisation. it can vary so much according to the organisation. long term and short term finance. our task is to look at the selling process and classify the costs of running that process accordingly: advertising. such a scheme is useful in that it gives us the basic ideas to work on. The same applies to all other classifications of period costs that we might use. Council Tax. the costs of Distribution and the costs of Research are all accumulated in a similar way to the way in which Administration Costs are accumulated. salaries. bonuses. within the section headed finance costs we will find dividends. electricity. Unfortunately. Consequently. telephone. water. we find that they have period costs that might have sub classifications with entirely different names. The classification of Period Costs: The scheme shows five sub classifications for Period Costs. for example.Total indirect costs are collectively known as Overheads. the industry and so on. electricity. this is the nature of the classification of period costs. That is. a potentially infinitely long list. Council Tax. Without wishing to overly extend this listing now. that appear in several sub classifications. within Product Costs. it should be clear that we are paying rent on buildings. When we look at different organisations. market research.

we should say that we can add any number of sub classifications to our scheme if we need to do that to clarify the ways in which our organisation operates. We will also add further sub classifications if we need to refine and further refine out cost analysis.Factory Over Heads: Factory Rent Factory Power Indirect Material Indirect Wages Supervisor Salary Drawing Office Salary Factory Insurance Factory Asset Depreciation Works cost Incurred Add: Opening Stock of WIP Less: Closing Stock of WIP Works cost (2) Add:.Administration Over Heads:Office Rent Asset Depreciation General Charges Audit Fees Bank Charges Counting house Salary Other Office Expenses Cost of Production (3) Add: Opening stock of Finished Goods Less: Closing stock of Finished Goods Cost of Goods Sold Amount Amount *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** . COST SHEET – FORMAT Particulars Opening Stock of Raw Material Add: Purchase of Raw materials Add: Purchase Expenses Less: Closing stock of Raw Materials Raw Materials Consumed Direct Wages (Labour) Direct Charges Prime cost (1) Add :.Finally.

Add:. Selling and Distribution Overheads are recovered as a percentage of works cost.Selling and Distribution OH:Sales man Commission Sales man salary Traveling Expenses Advertisement Delivery man expenses Sales Tax Bad Debts Cost of Sales (5) Profit (balancing figure) Sales Notes:1) Factory Over Heads are recovered as a percentage of direct wages *** *** *** *** *** *** *** *** *** *** 2) Administration Over Heads. .

The term marketing concept holds that achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives. With the customer as the focus of its activities. Marketing is used to create the customer. It is considered a "social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. . to keep the customer and to satisfy the customer. it can be concluded that marketing management is one of the major components of business management. The evolution of marketing was caused due to mature markets and overcapacities in the last decades. clearly the greater the benefit provided the higher transactional value an organisation can charge. Companies then shifted the focus from production more to the customer in order to stay profitable. an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors." It is an integrated process through which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Definition: Philip Kotler defines marketing as 'satisfying needs and wants through an exchange process' Within this exchange transaction customers will only exchange what they value (money) if they feel that their needs are being fully satisfied.UNIT IV Marketing is the process associated with promotion for sale goods or services.

or otherwise sells a product that is in high demand. . this signifies a firm exploiting economies of scale. in the marketing context. essentially concerning consumers and end-users. people would buy and consume the product. relates to a perception or attitude a firm holds towards its product or service. It involves a firm essentially basing its marketing plans around the Needs and 1970 to marketing concept. Earlier approaches The marketing orientation evolved from earlier orientations namely the production orientation. A firm would also 1960s assume that as long as its product was of a high standard.[ Orientation Profit driver Western European timeframe Description Production] Production methods Product Quality of the product Selling Selling methods A firm focusing on a production orientation specializes in producing as much as possible of a given product or service. As an example. use R&D to develop a product attuned to the revealed information. and not determining new consumer desires as such. coupled with a good certainty that consumer tastes do not rapidly alter (similar to the sales orientation). a firm would employ market customers day research to gauge consumer desires. A firm employing a product orientation is chiefly concerned until the with the quality of its own product. and then utilize promotion techniques to ensure persons know the product exists. Consequently. Thus. A firm using a sales orientation focuses primarily on the selling/promotion of a particular product. 1960s Such an orientation may suit scenarios in which a firm holds dead stock. and thus supplying products to suit new Marketing wants of present consumer tastes. and using promotion techniques to attain the highest sales 1950s and possible.Marketing Concept An orientation. the product orientation and the selling orientation. with little likelihood of changes in consumer tastes diminishing demand. until until the the minimum efficient scale is reached. this entails simply selling an already existing product. A production 1950s orientation may be deployed when a high demand for a product or service exists. The marketing orientation is perhaps the most common orientation used in contemporary marketing.

The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. . marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. advertising and communication to the organizations customer is used. and is sometimes called personalized marketing or one-to-one marketing. Western Orientation Profit driver European Description timeframe Relationship Building and Emphasis is placed on the whole relationship between 1960s to marketing / keeping good suppliers and customers. In this context marketing takes place between businesses Building and Business or organizations. because of the ex post status of consumer research. desktop advertising or affiliate marketing. A different form of marketing activities like between day marketing promotion. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. It targets its audience more precisely. such as research and development focused companies. the company pursues product innovation. It tries to perfect the segmentation strategy used in traditional marketing. Many firms. the business marketing or industrial marketing with focus on an organization or institution and the social marketing with focus on benefits to the society. then tries to develop a market for the product. When pursuing a product innovation approach. successfully focus on product innovation. The product focus lies on industrial keeping 1980s to marketing / goods or capital goods than consumer products or end relationships present Industrial products. customer services and therefore build day ] management relations customer loyalty. marketers must ensure that they have a varied and multi-tiered approach to product innovation.Product Innovation In a product innovation approach. The aim is to give the best present Relationship customer possible attention. Many purists doubt whether this is really a form of marketing orientation at all. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. New forms of marketing also uses the internet and are therefore called internet marketing or more generally e-marketing. Contemporary approaches Recent approaches in marketing is the relationship marketing with focus on the customer. However. online marketing. Some even question whether it is marketing.

advertising. depicted below: The Marketing Mix . The Marketing Mix (The 4 P's of Marketing) Marketing decisions generally fall into the following four controllable categories: • • • • Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. packaging. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". personal selling. branding. or selling methods. pricing. distribution channels. promotions. E. The Concept of the Marketing Mix. in either product. The ingredients in Borden's marketing mix included product planning.Social marketing Benefit to society Similar characteristics as marketing orientation but with 1990s to the added proviso that there will be a curtailment on any present harmful activities to society. and fact finding and analysis. day production. physical handling. servicing. display. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing. Borden published his 1964 article.

subject to the internal and external constraints of the marketing environment. penetration. etc. Product Decisions: The term "product" refers to tangible. Here are some examples of the product decisions to be made: • • • • • • • • • Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty Accessories and services Price Decisions Some examples of pricing decisions to be made include: • • • • • • • • Pricing strategy (skim. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination .These four P's are the parameters that the marketing manager can control. physical products as well as services.

that is. promotion represents the various aspects of marketing communication. pull. or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Reverse logistics Promotion Decisions: In the context of the marketing mix. selective. the communication of information about the product with the goal of generating a positive customer response.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget . etc.Distribution (Place) Decisions: Distribution is about getting the products to the customer. Some examples of distribution decisions include: • • • • • • • • • Distribution channels Market coverage (inclusive. Marketing communication decisions include: • • • • • • Promotional strategy (push.

the use of this framework remains strong and many marketing textbooks have been organized around it. the word "product" has referred to anything produced . some authors have attempted to extend its usefulness by proposing a fifth P. people. In marketing. products are called merchandise. Product (business) The word Product is from the verb produce. etc. Today however. product may refer to a single item or unit. process. but a commodity can also be anything widely available in the open market. a secondary but useful result of a production process. such as packaging. the marketing mix most commonly remains based on the 4 P's. or an industrial classification for the goods or services. In general usage. A related concept is subproduct. from the Latin prōdūce(re) '(to) lead or bring forth'. In project management. Commodities are usually raw materials such as metals and agricultural products. Despite its limitations and perhaps because of its simplicity. The economic or commercial meaning of product was first used by political economist Adam Smith. with marketing more integrated into organizations and with a wider variety of products and markets. Since 1575. In manufacturing. Today. In retailing. products are purchased as raw materials and sold as finished goods. a group of equivalent products. Since 1695. products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project. a product is anything that can be offered to a market that might satisfy a want or need. a grouping of goods or services. the word has referred to "thing or things produced". .Limitations of the Marketing Mix Framework: The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy.

and intellectual property protection such as patents and trademarks are obtained. or high skim pricing to recover development costs. thus impacting the marketing strategy and the marketing mix. and decline. the firm seeks to build product awareness and develop a market for the product. This sequence is known as the product life cycle and is associated with changes in the marketing situation. • .The Product Life Cycle A new product progresses through a sequence of stages from introduction to growth. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below: Product Life Cycle Diagram Introduction Stage In the introduction stage. The impact on the marketing mix is as follows: • Product branding and quality level is established. Pricing may be low penetration pricing to build market share rapidly. maturity.

• •

Distribution is selective until consumers show acceptance of the product. Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

Growth Stage In the growth stage, the firm seeks to build brand preference and increase market share.
• • • •

Product quality is maintained and additional features and support services may be added. Pricing is maintained as the firm enjoys increasing demand with little competition. Distribution channels are added as demand increases and customers accept the product. Promotion is aimed at a broader audience.

Maturity Stage At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
• • •

Product features may be enhanced to differentiate the product from that of competitors. Pricing may be lower because of the new competition. Distribution becomes more intensive and incentives may be offered to encourage preference over competing products. Promotion emphasizes product differentiation.

Decline Stage As sales decline, the firm has several options:

Maintain the product, possibly rejuvenating it by adding new features and finding new uses. Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment. Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

Pricing Strategy
One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion. While there is no single recipe to determine pricing, the following is a general sequence of steps that might be followed for developing the pricing of a new product: 1. Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning. 2. Make marketing mix decisions - define the product, distribution, and promotional tactics. 3. Estimate the demand curve - understand how quantity demanded varies with price. 4. Calculate cost - include fixed and variable costs associated with the product. 5. Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc. 6. Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization (status quo). 7. Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts. These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above list serves to present a starting framework.

Marketing Strategy and the Marketing Mix
Before the product is developed, the marketing strategy is formulated, including target market selection and product positioning. There usually is a tradeoff between product quality and price, so price is an important variable in positioning.

Because of inherent tradeoffs between marketing mix elements, pricing will depend on other product, distribution, and promotion decisions.

Estimate the Demand Curve
Because there is a relationship between price and quantity demanded, it is important to understand the impact of pricing on sales by estimating the demand curve for the product. For existing products, experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand. Inelastic demand indicates that price increases might be feasible.

Calculate Costs
If the firm has decided to launch the product, there likely is at least a basic understanding of the costs involved; otherwise, there might be no profit to be made. The unit cost of the product sets the lower limit of what the firm might charge, and determines the profit margin at higher prices. The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced. The pricing policy should consider both types of costs.

Environmental Factors
Pricing must take into account the competitive and legal environment in which the company operates. From a competitive standpoint, the firm must consider the implications of its pricing on the pricing decisions of competitors. For example, setting the price too low may risk a price war that may not be in the best interest of either side. Setting the price too high may attract a large number of competitors who want to share in the profits. From a legal standpoint, a firm is not free to price its products at any level it chooses. For example, there may be price controls that prohibit pricing a product too high. Pricing it too low may be considered predatory pricing or "dumping" in the case of international trade. Offering a different price for different consumers may violate laws against price discrimination. Finally, collusion with competitors to fix prices at an agreed level is illegal in many countries.

attempts to maximize the unit profit margin. recognizing that quantities will be low. so this objective is considered temporary. Current profit maximization may not be the best objective if it results in lower long-term profits.an organization that has other revenue sources may seek only partial cost recovery. In this case. Joel Dean discussed these pricing policies in his classic HBR article entitled. For new products. taking into account revenue and costs. The underlying objective often is to maximize long-term profits by increasing market share and lowering costs.seeks to maximize current revenue with no regard to profit margins. Survival .use price to signal high quality in an attempt to position the product as the quality leader. Partial cost recovery . Common objectives include the following: • Current profit maximization .seeks to maximize current profit. the pricing objective often is either to maximize profit margin or to maximize quantity (market share).in situations such as market decline and overcapacity.Pricing Objectives The firm's pricing objectives must be identified in order to determine the optimal pricing. • Current revenue maximization . • Maximize profit margin . • • • • Status quo . • Maximize quantity . survival may take a priority over profits. To meet these objectives. the goal may be to select a price that will cover costs and permit the firm to remain in the market.seeks to maximize the number of units sold or the number of customers served in order to decrease long-term costs as predicted by the experience curve. skim pricing and penetration pricing strategies often are employed.the firm may seek price stabilization in order to avoid price wars and maintain a moderate but stable level of profit. . Pricing Policies for New Products. Quality leadership .

. Skimming is most appropriate when: • Demand is expected to be relatively inelastic. existence of economies of scale. product differentiation. Large cost savings are not expected at high volumes. There is a threat of impending competition. As such. The company does not have the resources to finance the large capital expenditures necessary for high volume production with initially low profit margins. rate of product diffusion.Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those customers who are less price sensitive. that is. The product is of the nature of something that can gain mass appeal fairly quickly. the pricing policy should be reevaluated over time. barriers to entry. and the product's anticipated price elasticity of demand. The pricing objective depends on many factors including production cost. or it is difficult to predict the cost savings that would be achieved at high volume. the customers are not highly price sensitive. • • Penetration pricing pursues the objective of quantity maximization by means of a low price. Large decreases in cost are expected as cumulative volume increases. It is most appropriate when: • Demand is expected to be highly elastic. Skimming is a strategy used to pursue the objective of profit margin maximization. • • • As the product lifecycle progresses. there likely will be changes in the demand curve and costs. customers are price sensitive and the quantity demanded will increase significantly as price declines. that is. the firm's resources.

There are several types of discounts. • In addition to setting the price level. This price usually is discounted for distribution channel members and some end users.offered to customers who purchase in large quantities. Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not wish to place large individual orders.set the price at the production cost plus a certain profit margin. Psychological pricing .a discount that increases as the cumulative quantity increases. Many software suppliers have changed their pricing to a subscription model in which the customer subscribes for a set period of time. the subscription must be renewed or the software no longer will function. managers may make use of several pricing methods. These methods include: • • • Cost-plus pricing .base the price on the effective value to the customer relative to alternative products. managers have the opportunity to design innovative pricing models that better meet the needs of both the firm and its customers. • Quantity discount . .set the price to achieve a target return-on-investment. as outlined below. • Cumulative quantity discount .Pricing Methods To set the specific price level that achieves their pricing objectives. This model offers stability to both the supplier and the customer since it reduces the large swings in software investment cycles. popular price points. Afterwards. such as one year. and what the consumer perceives to be fair. software traditionally was purchased as a product in which customers made a one-time payment and then owned a perpetual license to the software. Target return pricing . Value-based pricing .base the price on factors such as signals of product quality. For example. Price Discounts The normally quoted price to end users is known as the list price.

a trade discount may be offered to a small retailer who may not purchase in quantity but nonetheless performs the important retail function. Intermediaries are specialists in selling. • • Cash discount . experience and scale of operation which means that greater sales can be achieved than if the producing business tried run a sales operation itself. They have the contacts. using intermediaries’ means giving up some control over how products are sold and who they are sold to.introduction Distribution (or "Place") is the fourth traditional element of the marketing mix. Price and Promotion.• Seasonal discount . Distribution .a functional discount offered to channel members for performing their roles. For example. For example. such as pricing offered by long distance and wireless service providers. The Nature of Distribution Channels Most businesses use third parties or intermediaries to bring their products to market. They try to forge a "distribution channel" which can be defined as "All the organisations through which a product must pass between its point of production and consumption" Why does a business give the job of selling its products to intermediaries? After all. • Promotional discount .extended to customers who pay their bill before a specified date. they also can be based on day of the week or time of the day.based on the time that the purchase is made and designed to reduce seasonal variation in sales. . the travel industry offers much lower off-season rates.a short-term discounted price offered to stimulate sales. The other three are Product. The answer lies in efficiency of distribution costs. Such discounts do not have to be based on time of the year. Trade discount .

Channel 2 contains one intermediary. Panasonic. In consumer markets. Organisations that form any particular distribution channel perform many key functions: Information Promotion Contact Matching Negotiation Physical distribution Financing Risk taking Gathering and distributing market research and intelligence . An example of a direct marketing channel would be a factory outlet store. Numbers of Distribution Channel Levels Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a "channel level". including grading. The figure below shows some examples of channel levels for consumer marketing channels: In the figure above. .g. sell their goods directly to large retailers such as Comet.important for marketing planning Developing and spreading communications about offers Finding and communicating with prospective buyers Adjusting the offer to fit a buyer's needs. Channel 1 is called a "direct-marketing" channel. In this case the manufacturer sells directly to customers. The remaining channels are "indirect-marketing channels". since it has no intermediary levels. Canon etc.Functions of a Distribution Channel The main function of a distribution channel is to provide a link between production and consumption. The question is . The consumer electrical goods market in the UK is typical of this arrangement whereby producers such as Sony.who performs them and how many levels there need to be in the distribution channel in order to make it cost effective. Dixons and Currys which then sell the goods to the final consumers. this is typically a retailer. Many holiday companies also market direct to consumers. bypassing a traditional retail intermediary . holding stock) All of the above functions need to be undertaken in any market. assembling and packaging Reaching agreement on price and other terms of the offer Transporting and storing goods Acquiring and using funds to cover the costs of the distribution channel Assuming some commercial risks by operating the channel (e.the travel agent.

not dominated by a small number of large. direct selling is easy and economical. In order to select the right channel for distributing his product. powerful retailers who have an incentive to cut out the wholesaler. Consumer or industrial market: If the product is meant for industrial users. b. the channel of distribution will be a short one.a wholesaler and a retailer.i. This arrangement tends to work best where the retail channel is fragmented . a small-scale manufacturer should keep in mind the following considerations: 1. sales volume and profits expected from alternative channels of distribution.Channel 3 contains two intermediary levels . But where the product is sold in small . For small retailers with limited order quantities. retailers may have to be included in the channels of distribution. Market Considerations: The nature of the market is a key factor influencing the choice of channels of distribution. the entrepreneur should compare the costs. But in case for goods meant for consumers. c. the use of wholesalers makes economic sense. This is because industrial users buy in a large quantity and the producer can easily establish a direct contact with them. A wholesaler typically buys and stores large quantities of several producers goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. Number and location of buyers: When the number of potential customers is small or the market is geographically located in a limited area.e. CHOICE OF CHANNEL OF DISTRIBUTION While selecting a distribution channel. Size of order: Direct selling is convenient and economical where customers place order in big lots as in case of industrial goods. A good example of this channel arrangement in the UK is the distribution of drugs. The following features of the market should be considered to determine the channels: a. In case of large number of customers. use of wholesalers and retailers becomes necessary.

bricks. the desire for credit. which are subject to frequent changes in fashion and style. f. On the other hand. Product line: An entrepreneur producing a wide range of products may find it .. Perishability: Perishable products like vegetables. middlemen are used to distribute such products. Goods. as they cannot bear the cost of direct selling. etc. are some examples. as the producer has to maintain close and continuous touch with the market.quantities. d. b. c. The important factors with respect to the product are as follows: a. Bulk and weight: Heavy and bulky products are distributed directly to minimize handling costs. 2. Product Considerations: The type and nature of the product influence the number and type of middlemen to be chosen for distributing the product. Coal. Standardized and mass-made goods can be distributed through middlemen. Technical nature: Industrial products requiring demonstration. are generally distributed through short channels. Standardisation: Custom-made and non-standardised products usually pass through short channels due to the need for direct contact between the producer and the consumers. d. stones. e. expensive consumer goods and industrial products are sold directly by the producers. the preference of personal attention and one stop shopping significantly affect the choice of distribution channels. Unit value: Products of low unit value and common use are generally sold through middlemen. as they cannot withstand repeated handling. Customers buying habits: The customer buying habits like the time he is willing to spend. He may sell directly to big retail stores and may use wholesalers to sell to small retailers. fruits and bakery items have relatively short channels. The consumer products of technical nature are generally sold through retailers. installation and aftersale service are often sold directly. A manufacturer may use different channels for different types of buyers.

Middlemen Considerations: The cost and efficiency of distribution depend largely upon the nature and type of middlemen as given in the following factors: a. After deciding the number of middlemen. 3. Age of the product: A new product needs greater promotional effort and few middlemen may like to handle it. Services: Use of those middlemen is profitable who provide financing. Availability: When middlemen as desired are not available. more middlemen may be employed for its distribution. d. b. Attitudes: Middlemen who do not like a firm’s marketing policies may refuse to handle its products. firms with one or two products find it profitable to distribute through wholesalers and retailers. an entrepreneur may have to establish his own distribution network. as they do not like to handle more brands. As the product gains acceptance in the market. c. storage. Costs: Choice of a channel should be made after comparing the costs of distribution through alternative channels. some wholesalers and retailers demand sole selling rights or a guarantee against fall in prices. e. On the other hand. g. an entrepreneur has to select the particular . promotion and aftersale services.economical to set up its own retail outlets. Sale Potential: An entrepreneur generally prefers a dealer who offers the greatest potential volume of sales. For instance. Non-availability of middlemen may arise when they are handling competitive products.

including: sales increases. new product acceptance. o Financial position and credit standing of the dealer. o Degree of co-operation and promotion service he is willing to provide. competitive retaliations. Much of this is intended to be subtle enough for the consumer to be unaware that promotion is taking place. TV. While selecting a particular wholesaler or retailer. or company. historically.dealers through whom he will distribute his products. trade shows The specification of these four variables creates a promotional mix or promotional plan. public relations. and. A promotional plan can have a wide range of objectives. product line. newspapers. Internet.g. o Storage and showroom facilities of the dealer. o Knowledge and experience of the dealer. Mobile Phones. pricing. E.) Promotion is generally sub-divided into two parts: • Above the line promotion: Promotion in the media (e. sales promotion. personal selling. radio. endorsements. o Willingness of the dealer to handle the entrepreneur’s products. the following factors should be taken into consideration: o Location of dealer’s business premises. creation of brand equity. illustrated songs) in which the advertiser pays an advertising agency to place the ad • Below the line promotion: All other promotion. product placement. . A promotional mix specifies how much attention to pay to each of the four subcategories. and place. brand. o Nature of other products. o Ability of the dealer to secure adequate business and to cover the market. or creation of a corporate image. o Capacity of the dealer to provide after sale service. o General reputation of the dealer and his sales force. if any handled by the dealer. Promotion involves disseminating information about a product. direct mail. merchandising. (The other three elements are product marketing. It is one of the four key aspects of the marketing mix. sponsorship.g. and how much money to budget for each. positioning.

The focus on creating messages that convince customers that a need exists has been the hallmark of marketing for a long time with promotional appeals targeted at basic human characteristics such as emotions. informational promotion may be used to help with a product positioning strategy.phrases like "special offer" are more common. long-term. such as when a product is so novel it creates a new category of product and has few competitors. Promotion Objectives The possible objectives for marketing promotions may include the following: • Build Awareness – New products and new companies are often unknown to a market. In other situations. • Provide Information – Some promotion is designed to assist customers in the search stage of the purchasing process. customers must first recognize they have a need before they actively start to consider a purchase. the information is simply intended to explain what the product is and may not mention any competitors. but not normally to the public or the market . . As we saw with our discussion of consumer and business buying behavior. which means initial promotional efforts must focus on establishing an identity. and 2) Tell the market who they are and what they have to offer. fears. In some cases. • Create Interest – Moving a customer from awareness of a product to making a purchase can present a significant challenge. In this situation the marketer must focus promotion to: 1) Effectively reach customers.The term "promotion" is usually an "in" expression used internally by the marketing company. sex. large-scale promotion is My Coke Rewards and Pepsi Stuff. where the product competes in an existing market. An example of a fully integrated. and humor.

and telemarketing. For example. Can be face-to-face or via telephone. brochures and catalogs. radio. or services by an identified sponsor. signs. posters. There are four main aspects of a promotional mix. many retail stores now ask for a customer’s email address so that follow-up emails containing additional product information or even an incentive to purchase other products from the retailer can be sent in order to strengthen the customer-marketer relationship. sales training and incentive programs for intermediary salespeople. goods. promotion can encourage customers to increase their purchasing by providing a reason to purchase products sooner or purchase in greater quantities than they normally do. samples. billboard. the promotional efforts may be directed at getting the customer to try the product. a pre-holiday newspaper advertisement may remind customers to stock up for the holiday by purchasing more than they typically purchase during non-holiday periods.Any paid presentation and promotion of ideas. This is often seen on the Internet where software companies allow for free demonstrations or even free downloadable trials of their products. For instance. Examples: Print ads. a marketer can use promotion to help build a strong relationship that can lead to the purchaser becoming a loyal customer. Web pages. television. in-store displays. motion pictures. • Personal Selling . Examples: Sales presentations. . and emails. These are: • Advertising . For products with an established customer-base. banner ads. In the case of products that a customer has not previously purchased or has not purchased in a long time. • Reinforce the Brand – Once a purchase is made. sales meetings. direct mail.A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation.• Stimulate Demand – The right promotion can drive customers to make a purchase.

product samples. A marketing strategy combines product development. marketing strategy is closely linked with sales. issue advertising. and allocation of resources.Paid intimate stimulation of supply for a product. identifies the firm's marketing goals. relationship management and other elements. Corporate strategies. and corporate goals. prospects. speeches. service. • • Direct Marketing is often listed as a the fifth part of the marketing mix . trade-ins. Marketing strategy is a method of focusing an organization's energies and resources on a course of action which can lead to increased sales and dominance of a targeted market niche. and competitors in the market arena. A marketing strategy should be centered on the key concept that customer satisfaction is the main goal. corporate missions. sweepstakes. It is most effective when it is an integral component of overall firm strategy. Sponsorship is sometimes added as a sixth aspect. self-liquidating premiums. Examples: Newspaper and magazine articles/reports. and explains how they will be achieved. promotion. tie-ins. • Public relations . TVs and radio presentations.Media and non-media marketing communication are employed for a pre-determined. . and exhibitions. and seminars. limited time to increase consumer demand. charitable contributions. positioning. defining how the organization will successfully engage customers. pricing. trade shows. Examples: Coupons. stimulate market demand or improve product availability. ideally within a stated timeframe. marketing mix. contests. distribution.• Sales promotion . Marketing strategy determines the choice of target market segments. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement. or business unit by planting significant news about it or a favorable presentation of it in the media. rebates. As the customer constitutes the source of a company's revenue. Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.

They are partially planned and partially unplanned . via our low cost product. our organization will sell additional. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy.Basic theory: 1. Plans and objectives are generally tested for measurable results. policies. For example: "Use a low cost product to attract consumers. This is why it is important to make each strategy goal measurable. A marketing strategy often integrates an organization's marketing goals. promotion and public relations can be orchestrated. Similarly. which might include advertising. Implementation Tactics and actions A marketing strategy can serve as the foundation of a marketing plan. Once our organization. Many companies cascade a strategy throughout an organization. internet marketing. channel marketing. Marketing strategies are dynamic and interactive. has established a relationship with consumers. higher-margin products and services that enhance the consumer's interaction with the low-cost product or service. Target Audience 2. by creating strategy tactics that then become strategy goals for the next level or group. and action sequences (tactics) into a cohesive whole. the various strands of the strategy . Proposition/Key Element 3. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives." A strategy consists of a well thought out series of tactics to make a marketing plan more effective.

There are three types: o o o Pioneers Close followers Late followers • Growth strategies .Types of strategies Marketing strategies may differ depending on the unique situation of the individual business.strategy on the dimensions of strategic scope and strategic strength. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes.This deals with the firm's rate of the new product development and business model innovation. A brief description of the most common categorizing schemes is presented below: • Strategies based on market dominance . Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.In this scheme. Typically there are four types of market dominance strategies: o o o o Leader Challenger Follower Nicher • Porter generic strategies . However there are a number of ways of categorizing some generic strategies. but the most common gives four answers: o o o o Horizontal integration Vertical integration Diversification Intensification . These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.In this scheme we ask the question. “How should the firm grow?” There are a number of different ways of answering that question. o o Product differentiation Market segmentation • Innovation strategies . It asks whether the company is on the cutting edge of technology and business innovation. firms are classified based on their market share or dominance of an industry.

This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity or necessity. Rewards of working for one are highly satisfying and motivating. Introduction of a new good 2. which consists in the purposeful and organized search for changes. Entrepreneurs assemble resources including innovations. According to Peter Drucker Entrepreneurship is defined as ‘a systematic innovation. 2. He has the power of decision making. Introduction of a new method of production 3. and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation. 3. 4.Entrepreneurship is the act of being an entrepreneur. finance and business acumen in an effort to transform innovations into economic goods. 7. The carrying out of a new organization of industry Benefits of Entrepreneur: 1. 6. Offer opportunities for growth and self development. .’ Schumpeter’s entrepreneurial tasks Schumpeter tied entrepreneurship to the creation of five basic "new combinations. which is a French word meaning "one who undertakes an endeavor". 5. Contributes to the development of the community as one generates employment for others. Provides opportunities for self expression and realization of one’s own passion of doing something new and different. The conquest of a new source of supply 5." 1. Entrepreneur initiates and constitutes change in the economic development and structure of business. Monetary rewards are more. The opening of a new market 4.

Desire for high achievement 3. Family and social risk 3. Excellent communication skills 9.Characteristics ENTPSHP: 1. Roles of entrepreneur: 1. High risk taking capability. Identifying opportunities 2. Adapt according to market changes. Excellent technical knowledge 10. Gather resources (Capital. Organize these resources to develop new product 6. Highly optimistic 4. Psychological risk. Using market information for opportunities. Risk acceptance. 3. Steps in the process of entrepreneurship: 1. Independent 5. Create the product 7. Establish vision 3. . Hardworking 2. Maximizing shareholders’ return 4. Have excellent foresight 6. Types of risk faced by entrepreneur: 1. Persuade others 4. Career risk 4. Have very clear objectives 11. Good organizers 7. Combining factor of production 2. land and manpower) 5. Financial risk 2. Innovative 8.

Personal achievers b. Process 2. Real manager e. Types of entrepreneurs: 1. Planning process of a new enterprise 8. Based on type of business {a. Industrial entrepreneur d. Initiator. Induced entrepreneurs c. Organized form of initiation 3.Difference between Entrepreneur and Entrepreneurship: Entrepreneurship: 1. expert idea generators d. Decision making activity 7. Second generation business owned entrepreneur c. Agricultural entrepreneur} . Organizer 3. Owner manager} 2. Real achievers} 3. corporate entrepreneur e. Innovative process 5. Decision maker 7. Based on personality Traits {a. Entrepreneur: 1. Based on ownership {a. Business enterprise entrepreneur b. Good planner 8. Innovator 5. A visualize 9. Initiating activity of setting up an enterprise. pure entrepreneur b. Risk taker 4. Risk taking activity 4. Crux of leadership 6. Result of a vision 9. Trading entrepreneur c. Franchisee d. Leader 6. Person 2.

First generation entrepreneur b. Innovative entrepreneur b. Super-growth entrepreneur} 7. Women entrepreneur} 8. Based on growth {a. Fabian entrepreneur d. Technical Entrepreneur b. Based on Motivation {a. Classical entrepreneur d. Induced entrepreneur c. Modern entrepreneur c. motivated entrepreneur} 6. Other kinds of entrepreneurs {a.4. Based on use of technology {a. Growth entrepreneur b. Initiative entrepreneur c. Based on stages of development {a. Pure entrepreneur b. Non-technical entrepreneur} 5. Spontaneous entrepreneur d. Drone entrepreneur) Institutional Finance to Entrepreneurs Industrial Finance Corporation of India (IFCI) Industrial Credit and Investment Corporation of India (ICICI) Industrial Development Bank of India (IDBI) .

ICICI Prudential Life Insurance Company. sugar) – Service industries (hotels. IFCI remained solely responsible for implementation of the government’s industrial policy initiatives • Some sectors that have directly benefited from IFCI’s disbursals include: – Consumer goods industry (textiles. cement) – Capital & intermediate goods industries (electronics. telecom services) • IFCI has sanctioned financial assistance of Rs 462 billion to 5707 concerns • IFCI has promoted Technical Consultancy Organizations (TCOs) Industrial Credit and Investment Corporation of India (ICICI) • Incorporated in 1955 at the initiative of the World Bank. miscellaneous chemicals) – Infrastructure (power generation. bonds. synthetic fibers. . paper. basic chemicals.Industrial Finance Corporation of India (IFCI) • Established on July 1. ICICI Venture. fertilizers. stocks – Provision of loans in foreign currency to pay for imported equipment. synthetic. ICICI Securities Limited (i-SEC). 1948 to cater to the long-term finance needs of the industrial sector • Until the establishment of ICICI in 1956 and IDBI in 1964. ICICI Lombard General Insurance Company Limited • Activities: – Underwriting of shares. hospitals) – Basic industries (iron & steel. the Government of India and representatives of Indian industry • Objective of creating a development financial institution for providing medium-term and long-term project financing • ICICI Bank. plastics.

National Securities Depository Services Ltd. financial institutions .Industrial Development Bank of India (IDBI) • Incorporated in 1964 • National Stock Exchange of India (NSE). renovation – Assist financial institution by subscription to shares. bonds – Direct financing of exports – Refinancing industrial loans granted by banks. (NSDL). Stock Holding Corporation of India (SHCIL) are built by IDBI • Services offered: – Loans against securities – Underwriting – Loans for modernization.

Sign up to vote on this title
UsefulNot useful