You are on page 1of 75


MBA – 2nd SEM Subject Code – MB0044 Book ID – B1133 PRODUCTION & OPERATIONS MANAGEMENT Set – 2 Q1. Explain Logical Process Modelling and Physical Process Modelling. What are the ingredients of business process? Ans. Logical Process Modelling Logical Process Modeling is the representation of putting together all the activities of business process in details and making a representation of them. The initial data collected need to be arrange in a logical manner so that, links are made between nodes for making for the workflow smooth. The steps to be followed to make the work smoother are given below: 1. Capture relevant data in detail to be acted upon. 2. Establish controls and limit access to the data during processes execution 3. Determine which task in the process is to be done and also the subsequent task in that process. 4. Make sure that all the relevant data is available for all the tasks. 5. Make the relevant and appropriate data available for that task. 6. Establish a mechanism to indicate acceptance of the results after every task or process. This is to have an assurance that flow is going ahead with accomplishments in the desired path. Some of these activities may occur in a sequential order whereas, some of them run parallel. There may even be circular paths, like re-work loops. Complexities arise when the processes activities are not connected together. Logical processes model consists of only the business activities and shows the connectivity among them. The process model is a representation of the business activities different from the technology dependent ones. Thus, we have a model that is singularly structured only for business activities. Computer programmes are also present in the total system. This allows the business oriented executives to be in control of the inputs, processes and outputs. The logical process model

improves, control on the access to data. It also indentifies, who is in possession of data at different nodes in the dataflow network that has been structured. A few of the logical modeling formats are given below. 1. Process Descriptions with task sequences and data addresses. 2. Flow chart with various activities and relationships 3. Flow diagrams 4. Function hierarchies 5. Function dependency diagram Every business activity, when considered as a logical process model, can be represented by a diagram, it can be decomposed and meaningful names can be given to the details. Verb and noun form combinations can be used to describe at each level. Nouns give the name of the activity uniquely and are used for the entire model meaning the same activity. PHYSICAL PROCESS MODELLING Physical process modeling is concerned with the actual design of data base meeting the requirement of the business. Physical modeling deals with the conversion of the logical model into a relation model. Object gets defined at the schema level. The objects here are tables created on the basis of entities and attributes. A database is defined for the business. All the information is put together to make the database software specific. This means that the objects during physical modeling vary on the database software being used. The outcomes are server model diagrams showing tables and relationships with a database. BELOW ARE THE INGREDIENTS OF BUSINESS PROCESS. The ingredients that might be used in a business process can be briefly outlined as shown below.   The data which accomplishes the desired business objective. Acquisition, storage, distribution, and control of data which undertakes the process across tasks.   Persons, teams, and organizational units which helps to perform and achieve the tasks. Decision which enhances the value of data during the process.

Q.2 Explain Project Management Knowledge Areas. With an example explain work breakdown structure. Ans. The knowledge areas of project management are the following:     Project integration management, cost management, communications management. Project scope management, quality management, risk management. Project time management, human management, procurement management. For a project to be successful, it is necessary to understand its relationship with other management disciplines. Other management supporting disciplines are business legal issues, strategic planning, logistics, human resource management, and domain knowledge.











WORK BREAK DOWN STRUCTURE. The entire process of a project may be considered to be made up on number of sub process placed in different stage called the work breakdown structure (WBS). WBS is the technique to analysis the content of work and cost by breaking it down into its component parts. Projects key stages from the highest level of the WBS, which is then used to show the details at the lower levels of the project. Each key stage comprises many tasks identified at the start of planning and later this list will have to be validated.

WBS is produced by indentifying the key elements, breaking each element down into component parts and continuing to breakdown until manageable work packages have indentified. These can then be allocated to the appropriate person. The WBS does not shown dependencies other than a grouping under the key stages. It is not time based- there is no timescale on the drawing. Chart showing the example of work break down structure.
A Work Breakdown Structure is a results-oriented family tree that captures all the work of a project in an organized way. It is often portrayed graphically as a hierarchical tree, however, it can also be a tabular list of "element" categories and tasks or the indented task list that appears in your Gantt chart schedule. As a very simple example, Figure 1 shows a WBS for a hypothetical banquet.



Q.3 Ans.      

Take an example of any product or project and explain project management life cycle. A life cycle of a project consists of the following steps. Understanding the scope of the project. Establishing objectives of the projects Formulating and planning various activities. Executing the project Monitoring and controlling the project resources. Closing and post completion analysis

Phases of Project Management Life Cylce. Project management life cycle has six phases: 1. Analysis and evaluation phase. 2. Marketing phase 3. Design phase 4. Execution phase 5. Control-inspecting, testing, and delivery phase 6. Closure and post completion analysis phase.

1. Analysis And Evaluation Phase: Analysis and evaluation phase is the initial phase of any project. In this phase, information is collected from the customer pertaining to the project. From the collected information, the requirements of the project are analyzed. According to the customer requirement, the entire project is planned in a strategic manner. The project manager conducts the analysis of the problem and submits a detailed report to the top management. 2. Marketing Phase: A project proposal is prepared by a group of people including the project manager. This proposal has to contain the strategic adopted to market the product to the customer. 3. Design Phase: Design phase involves the study of inputs and outputs of the various project stages. a. Inputs received consist of project feasibility study, preliminary project evaluation details, project proposal, and customer interviews. b. Outputs produced consist of system design specifications, functional specifications of the project, design specifications of the project and project plan.

4. Execution Phase: In execution phase, the project manager and the term members work on the project objectives as per the plan. At every stage during the execution, reports are prepared.

5. Control- Inspecting Testing and Delivery Phase: During this phase, the project teams works under the guidance of the project manager. The project manager has to ensure that the team working under him is implementing the project designs accurately. The project has to be tracked or monitored through its cost, manpower, and schedule. The project manager has

to ensure ways of managing the customer and marketing the future work, as well as ways to perform quality control work

6. Closure and Post Completion Analysis Phase: Upon satisfactory completion and delivery of the intended product or service the staff performance has to be evaluated. The project manager has to document the lessons from the project. Reports on project feedback are to be prepared and analyzed. A project execution report is to be prepared.

Let us have a quick recap of what is involved in the above phases a. Analysis and evaluation phase: The preparation stage involves the preparation and approval of project outline, project plan, and project budget. b. Assigning task to the team members: The next stage involves selecting and briefing the project team about the proposals, followed by discussions on the roles and responsibilities of the project member and the organization. c. Feasibility study: The feasibility or research stage establishes whether the project is feasible or not and establishes the risk factors likely to be faced during the course of the project execution and the related key factors to overcome the problem d. Execution phase: A detailed definition and plan for the project and its execution is prepared by the team and coordinated by the project manager. e. Implementation stage: The implementation stage involves the execution of the project as per the plan, this also involves careful monitoring of the project progress and managing the changes, if any, within the scope of the project framework.

7. Closure and post completion analysis phase: The final stage involves satisfactory delivery of the product/service to the customers. Upon completion, a project review is to be conducted by the project manager along with team member, sponsors, and customer. A project review process involves discussions about the progress, performance, hurdles that were overcome and problems faced, so that, such instances could be avoided in future projects.

Example No.1

Example No.2

Example No.3


Explain PMIS. What Is Difference Between Key Success Factor (Ksf) And Knowledge (K) Factor ? Explain With Examples.

Ans. PMIS (Project Management Information System) An information system is mainly aimed at providing the management at different levels with information related to the system of the organization. It helps in maintaining discipline in the system. An information system dealing with project management tasks is the project management information system. It helps in decision making in arriving at optimum allocation of resources. The information system is based on a database of the organization. A project management information system also holds schedule, scope changes, risk assessment and actual results.

The information is communicated to managers at different levels of the organization depending upon the need. Let us find how a project management information system is used by different stakeholders.

WHO NEEDS INFORMATION AND WHY? Upper managers To know information on all project regarding progress, problem, resource usage, costs and project goals. This information helps them take decisions on the projects. They should review the projects at each milestone and arrive at appropriate decision. To see each project schedule, priority and use of resources to determine the most efficient use across the organization. To see schedule, task lists and specification so that they know what needs to be done next.

Project manager and department managers

Project team members

The four majors aspects of a PMIS are: 1. Providing information to the major stakeholder. 2. Assisting the team members, stakeholders, managers with necessary information and summary of the information shared to the higher level managers. 3. Assisting the manager in doing what if analysis about project staffing, proposed staffing changes and total allocation of resources. 4. Helping organizational learning by helping the members of the organizations lean about project management. Usually, the team members, and not the systems administrators of the company, develop a good PMIS. Organisations tend to allocate such responsibility by rotation among members with a well designed and structured data entry and analytical format.

Different Between Key Success Factors (KSF) And Knowledge (K) Factor Key success factors (KSF) Knowledge (k) factor

The KSF should be evolved based on a Knowledge is the most powerful mover of the basic consensus document (BCD) wheels of progress Knowledge (k) factor is an index of the extent KSF will also provide an input to effective to which one can manager today with exit strategy (EES) yesterday’s knowledge content and also the extent to which today’s knowledge will be used tomorrow. Broad level of KSF should be available at K factor would render the development process the conceptual stage and should be firmed more productive. The k factor of course, up and detailed out during the planning undergoes correction through obsolescence, stage. The easiest way would be for the since changes are now phenomenal. team to evaluate each step for chances of success on a scale of ten. KSF should be available to the Leaders should recognize the knowledge management, duly approved by the project potential of the younger managers. Seniority is manager before execution and control no more an automate scale for knowledge. It is stages. equally important for younger member not suppress their knowledge potential from its application. KSF rides normal consideration of time and Here time and cost does not matter, knowledge cost- at the levels encompassing client is to be updated time to time to get better expectation and management perception- results. time and cost come into play as subservient to these major goal. In order to provide complete stability to As age and experience advance wisdom gains, fulfillment of goals, a project manager but knowledge should always be updated and needs to constantly evaluate the key success utilized. It is the task of every team members to factor from time to time. maximize the k factor in all directions.

Example of Key success factor
According to, a turnkey project is "a project in which a builder/developer contracts to construct a completed facility that includes all items necessary for use and occupancy." Unfortunately, many turnkey businesses never capture the interest of the buyers. Whether you're building in brick and mortar or building in computer code, there are several factors critical to the success of your turnkey project.

Know the Business Several businesses can be set up as turnkey businesses, from food service to copy management to telemarketing and sales. Whichever you decide, it is important to have an intimate knowledge of the business you are building. One key factor in a successful turnkey business is being able to anticipate the needs and desires of the potential owners before they are brought on board. A salesman, for example, looking to purchase a turnkey sales business will need an office as a base of operations; but since so much of the sales process is done through phones, computers and other electronic devices, the turnkey developer may want to include additional power outlets in the construction of the building, or desks with onboard power strips and surge protectors. These small additions can make a turnkey project a success.

Know the Area Internet businesses often have nationwide access to clientele, but brick-and-mortar turnkey operations sometimes run into trouble in areas poorly suited to the service they offer. For example, an outdoor food service stand opening in Wilkes-Barre, Pennsylvania, will not do as much business (at least during the winter months) as one opening in an Orlando, Florida, theme park. Knowing the area where you are constructing your turnkey business includes knowing the weather conditions, the dominant demographic, the current popularity and number of businesses like the one you are creating and the average income of the public. Planning a turnkey business that uses these factors to its advantage will make the business more readily sellable.

Make Connections Turnkey businesses are designed to be ready to operate as soon as the buyer takes ownership. Still, once they are sold, many businesses of this type run into problems when it comes to resupplying, logistics and advertising. Because of this, many buyers are wary of turnkey operations. One way to quell any "down the road" fears is to have this part of the infrastructure accounted for. Make contact with businesses which help advertise businesses, ship products, supply copy paper and any other stock the owner might require. Obtain discounts from as many as possible

Example of Knowledge (k) factor ABSTRACT Most organisations are aware that in today’s highly competitive environment managing effectively their knowledge is the only way to achieve a sustainable competitive advantage. One of the primary areas to which knowledge management can be applied is the field of project management. An increasing number of business sectors are adopting a project approach to carry out a range of essential activities where valuable knowledge is gained. Knowledge from projects is an important resource for further projects, because projects solve innovative and interdisciplinary tasks. However, the majority of organisations do not manage the information gained through past projects. Failure to transfer knowledge from past to future projects leads to wasted activity and unnecessary expenses by ‘reinventing the wheel’. Therefore, knowledge management is a critical success factor for many projects. The purpose of this Management Report is to approach knowledge management from the perspective of project management. The main objective is to define how knowledge management can be enhanced within a project by analysing suitable tools and relevant theories. The research is based on the high-speed train project XY of the company XXX. This project is an important milestone for XXX to improve its market position in Spain. The knowledge gained through the XY project will be the key factor for the success of the further high-speed train projects. The main finding of the case study highlights that there is a lack of formal knowledge management activities at the project. The project team focuses mainly on personal interaction for transferring knowledge and information technology is not used to its full potential. A hybrid approach to knowledge management for project environments is suggested, taking into account technical as well as human-specific aspects. The main recommendation is to determine a knowledge management strategy, which preferably focuses on transferring tacit knowledge and gives information technology a support function. Other areas of improvement are creating an open and constructive project culture, including knowledge initiatives in reward systems and fostering documented project review sessions. Finally, general conclusions are provided to answer the main research question of this management report.


Explain the seven principal of supply chain management. Take an example of any product in the market and explain the scenario of Bullwhip effect.

Ans: Seven Principles Of SCM are: 1. Group customer by needs: Effective SCM groups customers by distinct service needs, regardless of industry and then tailors services to those particular segments. 2. Customize the logistics networks: In designing their logistic network, companies need to focus on the service requirement and profit potential of the customer segments identified. 3. Listen to signals of market demand and plan accordingly: sales and operations planners must monitor the entire supply chain to detect early warning signals of changing customers demand and needs. This demand driven approach leads to more consistent forecast and optimal resource allocation. 4. Differentiate the product closer to the customer: companies today no longer can afford to stockpile inventory to compensate for possible forecasting errors. Instead, they need to postpone product differentiation in the manufacturing process closer to actual consumer demand. This strategy allows the supply chain to respond quickly and cost effectively to changes in customer needs. 5. Strategically manage the sources of supply: By working closely with their key suppliers to reduce the overall costs of owning materials and services, SCM maximizes profit margins both for themselves and their suppliers. 6. Develop a supply chain wide technology strategy: As one of the cornerstones of successful SCM, information technology must be able to support multiple levels of decisions making. It also should afford a clear view and ability to measure the flow of products, services and information. 7. Adopt channel spanning performance measures: Excellent supply chain performance measurement systems do more than just monitor internal functions. They apply performance criteria to every link in the supply chain-criteria that both service and financial metrics.

BULLWHIP EFFECT IN SCM An organization will always have up and downs. It is necessary that the managers of the organization keep track of the market conditions and analyze the changes. They must take decisions on the resources and make necessary changes within the organization to meet the market demands. Failing to do so may results in wild swings in the orders. This may adversely

affect the functioning of the organization resulting in lack of coordination and trust among supply chain members. The changes may affect the information and may led to demand amplification in the supply chain. The Bullwhip effect is the uncertainty caused from distorted information flowing up and down the supply chain. This has its affect on almost all the industries, poses a risk to firms that experience large variations in demand, and also those firm which are dependent on suppliers, distributors and retailers. A bullwhip effect may arise because of:   Increase in the lead time of the project due to increase in variability of demand Increase in the stocks to accommodate the increase demand arising out of complicated demand models and forecasting techniques.    Reduced service levels in the organization. Inefficient allocation of resources. Increased transportation cost.

How to prevent it ? Bullwhip effect may be avoided by one or more of the following measures:        Avoid multiple demand forecasting. Breaking the single order into number of batches of orders. Stabilize the prices, avoid the risk involved in overstocking by maintaining a proper stock Reduce the variability and uncertainty in point of sale (POS) and sharing information Reduce the lead time in the stages of the project Always keep analyzing the past figures and track current and future levels of requirement. Enhance the operational efficiency and outsourcing logistics to a capable and efficient agency

Example of one product the effect Bullwhip theory. The beer game was developed at MIT by the Systems Dynamic Group in the 1960s. The game involves a simple production/distribution system for a single brand of beer. There are three players in the game including a retailer, a wholesaler, and a marketing director at the brewery. Each player's goal is to maximize profit.

A truck driver delivers beer once each week to the retailer. Then the retailer places an order with the trucker who returns the order to the wholesaler. There's a four week lag between ordering and receiving the beer. The retailer and wholesaler do not communicate directly. The retailer sells hundreds of products and the wholesaler distributes many products to a large number of customers. The following represents the results of a typical beer game:-

3.1 The Retailer Week 1: Lover's Beer is not very popular but the retailer sells four cases per week on average. Because the lead time is four weeks, the retailer attempts to keep twelve cases in the store ordering four cases each Monday when the trucker makes a delivery. Week 2: The retailer's sales of Lover's beer doubles to eight cases, so on Monday, he orders 8 cases. Week 3: The retailer sells 8 cases. The trucker delivers four cases. To be safe, the retailer decides to order 12 cases of Lover's beer. Week 4: The retailer learns from some of his younger customers that a music video appearing on TV shows a group singing "I'll take on last sip of Lover's beer and run into the sun." The retailer assumes that this explains the increased demand for the product. The trucker delivers 5 cases. The retailer is nearly sold out, so he orders 16 cases. Week 5: The retailer sells the last case, but receives 7 cases. All 7 cases are sold by the end of the week. So again on Monday the retailer orders 16 cases. Week 6: Customers are looking for Lover's beer. Some put their names on a list to be called when the beer comes in. The trucker delivers only 6 cases and all are sold by the weekend. The retailer orders another 16 cases. Week 7: The trucker delivers 7 cases. The retailer is frustrated, but orders another 16 cases. Week 8: The trucker delivers 5 cases and tells the retailer the beer is backlogged. The retailer is really getting irritated with the wholesaler, but orders 24 cases. 3.2 The Wholesaler The wholesaler distributes many brands of beer to a large number of retailers, but he is the only distributor of Lover's beer. The wholesaler orders 4 truckloads from the brewery truck driver each week and receives the beer after a 4 week lag. The wholesaler's policy is to keep 12 truckloads in inventory on a continuous basis. Week 6: By week 6 the wholesaler is out of Lover's beer and responds by ordering 30 truckloads from the brewery. by

Week 8: By the 8th week most stores are ordering 3 or 4 times more Lovers' beer than their regular amounts. Week 9: The wholesaler orders more Lover's beer, but gets only 6 truckloads. Week 10: Only 8 truckloads are delivered, so the wholesaler orders 40. Week 11: Only 12 truckloads are received, and there are 77 truckloads in backlog, so the wholesaler orders 40 more truckloads. Week 12: The wholesaler orders 60 more truckloads of Lover's beer. It appears that the beer is becoming more popular from week to week. Week 13: There is still a huge backlog. Weeks 14-15: The wholesaler receives larger shipments from the brewery, but orders from retailers begin to drop off. Week 16: The trucker delivers 55 truckloads from the brewery, but the wholesaler gets zero orders from retailers. So he stops ordering from the brewery. Week 17: The wholesaler receives another 60 truckloads. Retailers order zero. The wholesaler orders zero.

The brewery keeps sending beer. 3.3 The Brewery The brewery is small but has a reputation for producing high quality beer. Lover's beer is only one of several products produced at the brewery. Week 6: New orders come in for 40 gross. It takes two weeks to brew the beer. Week 14: Orders continue to come in and the brewery has not been able to catch up on the backlogged orders. The marketing manager begins to wonder how much bonus he will get for increasing sales so dramatically. Week 16: The brewery catches up on the backlog, but orders begin to drop off. Week 18: By week 18 there are no new orders for Lover's beer. Week 19: The brewery has 100 gross of Lover's beer in stock, but no orders. So the brewery stops producing Lover's beer. Weeks 20-23. No orders. At this point all the players blame each other for the excess inventory. Conversations with wholesale and retailer reveal an inventory of 93 cases at the retailer and 220 truckloads at the wholesaler. The marketing manager figures it will take the wholesaler a year to sell the Lover's beer he has in stock. The retailers must be the problem. The retailer explains that demand increased from

4 cases per week to 8 cases. The wholesaler and marketing manager think demand mushroomed after that, and then fell off, but the retailer explains that didn't happen. Demand stayed at 8 cases per week. Since he didn't get the beer he ordered, he kept ordering more in an attempt to keep up with the demand. The marketing manager plans his resignation.

3.4 Lessons from the Beer Game 1. The structure of a system influences behavior. Systems cause their own problems, not external forces or individual errors. 2. Human systems include the way in which people make decisions. 3. People tend to focus on their own decisions and ignore how these decisions affect others.

3.5 Lessons Related to the Learning Disabilities 1. People do not understand how their actions affect others. 2. So they tend to blame each other for problems. 3. Becoming proactive causes more problems. 4. The problems build gradually, so people don't realize there is a problem until it’s too late. 5. People don't learn from their experience because the effects of their actions occur somewhere else in the system.

Stock variability amplification in a supply chain due to Bullwhip Effect

Q6. Time taken by three machines on five jobs in a factory is tabulated below in table below. Find out the optimal sequence to be followed to minimize the idle time taken by the jobs on the machines.

Ans. Consider M1 and M3 Job A B C D E Machine 1 (M1) 6 4 5 3 4 Machine 3 (M3) 7 3 7 6 4



MBA – 2nd SEM Subject Code – MB0045 Book ID – B1134 FINANCIAL MANAGEMENT Set – 2 Q.1 Discuss the objective of Profit Maximization vs Wealth Maximization. Ans. The financial management co mes a lo ng way by shift ing it s focus fro m tradit ional approach to modern approach. The modern approach focuses on wealth maximization rather than
maximization. This gives a longer term horizon for assessment, making way for sustainable

performance by businesses. A myopic person or business is mostly concerned about short term benefits. A short term horizon can fulfill objective of earning profit but may not help in creating wealth. It is because wealth creation needs a longer term horizon Therefore, Finance Management or Financial Management emphasizes on wealth maximization rather than maximization. For a business, it is not necessary that profit should be the only objective; it may concentrate on various other aspects like increasing sales, capturing more market share etc, which will take care of profitability. So, we can say that maximization is a subset of wealth and being a subset, it will facilitate wealth creation. Giving priority to value creation, and managers has now shifted from traditional approach to modern approach of financial management that focuses on wealth maximization. This leads to better and true evaluation of business. For e.g., under wealth maximization, more importance is given to cash flows rather than profitability. As it is said that profit is a relative term, it can be a figure in some currency, it can be in percentage etc. For e.g. a profit of say $10,000 cannot be judged as good or bad for a business, till it is compared with investment, sales etc. Similarly, duration of earning the profit is also important i.e. whether it is earned in short term or long term. In wealth maximization, major emphasizes is on cash flows rather than profit. So, to evaluate various alternatives for decision making, cash flows are taken under consideration. For e.g. to measure the worth of a project, criteria like:

Present Value Of Its Cash Inflow – present value of cash outflows (net present value) is taken. This approach considers cash flows rather than profits into consideration and also use discounting technique to find out worth of a project. Thus, maximization of wealth approach believes that money has time value.

An obvious question that arises now is that how can we measure wealth. Well, a basic principle is that ultimately wealth maximization should be discovered in increased net worth or value of business. So, to measure the same, value of business is said to be a function of two factors - earnings per share and capitalization rate. And it can be measured by adopting following relation: Value of business = EPS / Capitalization rate At times, wealth maximization may create conflict, known as agency problem. This describes conflict between the owners and managers of firm. As, managers are the agents appointed by owners, a strategic investor or the owner of the firm would be majorly concerned about the longer term performance of the business that can lead to maximization of shareholder‘s wealth. Whereas, a manager might focus on taking such decisions that can bring quick result, so that he/she can get credit for good performance. However, in course of fulfilling the same, a manager might opt for risky decisions which can put-on stake the owner‘s objectives. Hence, a manager should align his/her objective to broad objective of organization and achieve a tradeoff between risk and return while making decision; keeping in mind the ultimate goal of financial management i.e. to maximize the wealth of its current shareholder she objections are:(i) Profit cannot be ascertained well in advance to express the probability of return as future is uncertain. It is not at possible to maximize what cannot be known. (ii) The executive or the decision maker may not have enough confidence in the estimates of future returns so that he does not attempt future to maximize. It is argued that firm's goal cannot be to maximize profits but to attain a certain level or rate of profit holding certain share of the market or certain level of sales. Firms should try to 'satisfy' rather than to 'maximize' (iii) There must be a balance between expected return and risk. The possibilities of higher expectedyields are associated with greater risk to recognise such a balance and wealth Maximization is brought in to the analysis. In such cases, higher capitalization rate involves. Such combination of expected returns with risk variations and related capitalization rate cannot be considered in the concept of profit maximization. (iv) The goal of Maximization of profits is considered to be a narrow outlook. Evidently when profit maximization becomes the basis of financial decisions of the concern, it ignores the interests of the community on the one hand and that of the government, workers and other concerned persons in the enterprise on the other hand.

Keeping the above objections in view, most of the thinkers on the subject have come to the conclusion that the aim of an enterprise should be wealth Maximization and not the profit Maximization. Prof. Soloman of Stanford University has handled the issued very logically. He argues that it is useful to make a distinction between profit and 'profitability'. Maximization of profits with a view to maximising the wealth of shareholders is clearly an unreal motive. On the other hand, profitability Maximization with a view to using resources to yield economic values higher than the joint values of inputs required is a useful goal. Thus the proper goal of financial management is wealth maximization.

Q2. Explain the Net Operating Approach to Capital Structure. Ans. Net operating income approach examines the effects of changes in capital structure in terms of net operating income. In the net income approach discussed above net income available to shareholders is obtained by deducting interest on debentures form net operating income. Then overall value of the firm is calculated through capitalization rate of equities obtained on the basis of net operating income, it is called net income approach. In the second approach, on the other hand overall value of the firm is assessed on the basis of net operating income not on the basis of net income. Hence this second approach is known as net operating income approach. The NOI approach implies that : (i) Whatever may be the change in capital structure the overall value of the firm is not affected. Thus the overall value of the firm is independent of the degree of leverage in capital structure. (ii) (ii) Similarly the overall cost of capital is not affected by any change in the degree of leverage in capital structure. The overall cost of capital is independent of leverage. If the cost of debt is less than that of equity capital the overall cost of capital must decrease with the increase in debts whereas it is assumed under this method that overall cost of capital is unaffected and hence it remains constant irrespective of the change in the ratio of debts to equity capital. How can this assumption be justified? The advocates of this method are of the opinion that the degree of risk of business increases with the increase in the amount of debts. Consequently the

rate of equity over investment in equity shares thus on the one hand cost of capital decreases with the increase in the volume of debts; on the other hand cost of equity capital increases to the same extent. Hence the benefit of leverage is wiped out and overall cost of capital remains at the same level as before. Let us illustrate this point. If follows that with the increase in debts rate of equity capitalization also increases and consequently the overall cost of capital remains constant; it does not decline. To put the same in other words there are two parts of the cost of capital. One is the explicit cost which is expressed in terms of interest charges on debentures. The other is implicit cost which refers to the increase in the rate of equity capitalization resulting from the increase in risk of business due to higher level of debts. Optimum capital structure This approach suggests that whatever may be the degree of leverage the market value of the firm remains constant. In spite of the change in the ratio of debts to equity the market value of its equity shares remains constant. This means there does not exist an optimum capital structure. Every capital structure is optimum according to net operating income approach.

Q.3 What do you understand by Operating Cycle. Ans. An operating cycle is the length of time between the acquisition of inventory and the sale of that inventory and subsequent generation of a profit. The shorter the operating cycle, the faster a business gets a return on investment (ROI) for the inventory it stocks. As a general rule, companies want to keep their operating cycles short for a number of reasons, but in certain industries, a long operating cycle is actually the norm. Operating cycles are not tied to accounting periods, but are rather calculated in terms of how long goods sit in inventory before sale. When a business buys inventory, it ties up money in the inventory until it can be sold. This money may be borrowed or paid up front, but in either case, once the business has purchased inventory, those funds are not available for other uses. The business views this as an acceptable tradeoff because the inventory is an investment that will hopefully generate returns, but keeping the operating cycle short is still a goal for most businesses so they can keep their liquidity high.

Keeping inventory during a long operating cycle does not just tie up funds. Inventory must be stored and this can become costly, especially with items that require special handling, such as humidity controls or security. Furthermore, inventory can depreciate if it is kept in a store too long. In the case of perishable goods, it can even be rendered unsalable. Inventory must also be insured and managed by staff members who need to be paid, and this adds to overall operating expenses. There are cases where a long operating cycle in unavoidable. Wineries and distilleries, for example, keep inventory on hand for years before it is sold, because of the nature of the business. In these industries, the return on investment happens in the long term, rather than the short term. Such companies are usually structured in a way that allows them to borrow against existing inventory or land if funds are needed to finance short-term operations. Operating cycles can fluctuate. During periods of economic stagnation, inventory tends to sit around longer, while periods of growth may be marked by more rapid turnover. Certain products can be consistent sellers that move in and out of inventory quickly. Others, like big ticket items, may be purchased less frequently. All of these issues must be accounted for when making decisions about ordering and pricing items for inventory.

Q4. Ans.

What is the implication of Operating Leverage for a firm.

Operating leverage: Operating leverage is the extent to which a firm uses fixed costs in producing its goods or offering its services. Fixed costs include advertising expenses, administrative costs, equipment and technology, depreciation, and taxes, but not interest on debt, which is part of financial leverage. By using fixed production costs, a company can increase its profits. If a company has a large percentage of fixed costs, it has a high degree of operating leverage. Automated and high-tech companies, utility companies, and airlines generally have high degrees of operating leverage. As an illustration of operating leverage, assume two firms, A and B, produce and sell widgets. Firm A uses a highly automated production process with robotic machines, whereas firm B assembles the widgets using primarily semiskilled labor. Table 1 shows both firm’s operating cost structures.

Highly automated firm A has fixed costs of $35,000 per year and variable costs of only $1.00 per unit, whereas labor-intensive firm B has fixed costs of only $15,000 per year, but its variable cost per unit is much higher at $3.00 per unit. Both firms produce and sell 10,000 widgets per year at a price of $5.00 per widget. Firm A has a higher amount of operating leverage because of its higher fixed costs, but firm A also has a higher breakeven point—the point at which total costs equal total sales. Nevertheless, a change of 1 percent in sales causes more than a 1 percent change in operating profits for firm A, but not for firm B. The “degree of operating leverage” measures this effect. The following simplified equation demonstrates the type of equation used to compute the degree of operating leverage, although to calculate this figure the equation would require several additional factors such as the quantity produced, variable cost per unit, and the price per unit, which are used to determine changes in profits and sales: Operating leverage is a double-edged sword, however. If firm A’s sales decrease by 1 percent, its profits will decrease by more than 1 percent, too. Hence, the degree of operating leverage shows the responsiveness of profits to a given change in sales. Implications: Total risk can be divided into two parts: business risk and financial risk. Business risk refers to the stability of a company’s assets if it uses no debt or preferred stock financing. Business risk stems from the unpredictable nature of doing business, i.e., the unpredictability of consumer demand for products and services. As a result, it also involves the uncertainty of long-term profitability. When a company uses debt or preferred stock financing, additional risk—financial risk—is placed on the company’s common shareholders. They demand a higher expected return for assuming this additional risk, which in turn, raises a company’s costs. Consequently, companies with high degrees of business risk tend to be financed with relatively low amounts of debt. The opposite also holds: companies with low amounts of business risk can afford to use more debt financing while keeping total risk at tolerable levels. Moreover, using debt as leverage is a successful tool during periods of inflation. Debt fails, however, to provide leverage during periods of deflation, such as the period during the late 1990s brought on by the Asian financial crisis.


A company is considering a capital project with the following information: The cost of the project is Rs.200 million, which consists of Rs. 150 million in plant a machinery and Rs.50 million on net working capital. The entire outlay will be incurred in the beginning. The life of the project is expected to be 5 years. At the end of 5 years, the fixed assets will fetch a net salvage value of Rs. 48 million ad the net working capital will be liquidated at par. The project will increase revenues of the firm by Rs. 250 million per year. The increase in costs will be Rs.100 million per year. The depreciation rate applicable will be 25% as per written down value method. The tax rate is 30%. If the cost of capital is 10% what is the net present value of the project.


Total outflow Rs. 150 Million + Rs. 50 Million = Rs. 200 Million

Incremental approach Revenue – Cost Rs. 250 Million – Rs. 100 Million = 150 Million Pr factor @10% for 5 years = 3.790  150 X 3.790 = Rs. 568.62 Calculation of depreciation:

150 25%

Year 1 2 3 4 5

Dep 37.5 28.125 21.09 15.82 11.87

Tax saving 11.25 8.4375 6.327 4.746 3.561

PV@10% 0.909 0.826 0.751 0.683 0.621

Tax saving 10.226 6.969 4.751 3.241 2.211 27.398

Total inflow: 568.62 + 27.398 = 596.018

+ Inflow in 5th year 50+48 = 98 60.858 x 0.621 = 656.876

Net Present Value

= 656.876 -200 = 456.876 (Ans)


Given the following information, what will be the price per share using the Walter model. Earnings per share Rs. 40 Rate of return on investments 18% Rate of return required by shareholders 12% Payout ratio being 40%, 50%, or 60%.

Ans. D = 40 % EPS = 40 DPS=16 1. (for40%) = 16 / 12% + (40-16) /12% x 18 % = 169.33 2. (for 50%) = 20 / 12% + (40-20) /12% x 18 % = 196.66 3. (for 60%) = 24 / 12% + (40-24) /12% x 18 % = 224

      

MBA – 2nd SEM Subject Code – MB0046 Book ID – B1135 MARKETING MANAGEMENT Set – 2

Q.1 What is product mix? What are the strategies involved in product mix and product line? Ans. Product Mix The number of individual products produced or sold by an organization. The mix is defined by the industry and manufacturing environment, and management strategies that position the company as a specialty, niche or broad-based supplier of goods and services. Instances where the product mix varies widely from period to period often requires more investment in facilities and inventory, and may result in lower levels of customer service. It is extremely important for any organization to have a well-managed product mix. Most organizations break down managing the product mix, product line, and actual product into three different levels.Strategies involved in product mix and product lineProduct-mix decisions are concerned with the combination of product lines offered by the company. Management of the companies' product mix is the responsibility of top management. Some basic product-mix decisions include 1. Reviewing the mix of existing product lines; 2. Adding new lines to and deleting existing lines from the product mix; 3. Determining the relative emphasis on new versus existing product lines in the mix; 4. Determining the appropriate emphasis on internal development versus external acquisition in the product mix; 5. Gauging the effects of adding or deleting a product line in relationship to other lines in the product mix; and 6. Forecasting the effects of future external change on the company's product mix. Product-line decisions are concerned with the combination of individual products offered within a given line. The product-line manager supervises several product managers who are

responsible for individual products in the line. Decisions about a product line are usually incorporated into a marketing plan at the divisional level. Such a plan specifies changes in the product lines and allocations to products in each line. Generally, product-line managers have the following responsibilities: 1. Considering expansion of a given product line; 2. Considering candidates for deletion from the product line; 3. Evaluating the effects of product additions and deletions on the profitability of other items in the line; and 4. Allocating resources to individual products in the line on the basis of marketing strategies recommended by product managers. Decisions at the first level of product management involve the marketing mix for an individual brand/product. These decisions are the responsibility of a brand manager (sometimes called a product manager). Decisions regarding the marketing mix for a brand are represented in the product's marketing plan. The plan for a new brand would specify price level, advertising expenditures for the coming year, coupons, trade discounts, distribution facilities, and a five-year statement of projected sales and earnings. The plan for an existing product would focus on any changes in the marketing strategy. Some of these changes might include the product's target market, advertising and promotional expenditures, product characteristics, price level, and recommended distribution strategy managing the product mix for a company is very demanding and requires constant attention. Top management must provide accurate and timely analysis (BCG) of their company's product mix so the appropriate adjustments can be made to the product line and individual products.


What is a Distribution Channel? Explain the factors to be considered while setting up a distribution channel.


Distribution channel A path through which goods and services flow in one direction (from

vendor to the consumer), and the payments generated by them that flow in the opposite direction (from consumer to the vendor). A marketing channel can be as short as being direct from the vendor to the consumer or may include several interconnected intermediaries such as wholesalers,

distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer. Also called channel of distribution or marketing channel. Distribution is also a very important component of Logistics & Supply chain management. Distribution in supply chain management refers to the distribution of a good from one business to another. It can be factory to supplier, supplier to retailer, or retailer to end customer. It is defined as a chain of intermediaries; each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.

Factors to be considered for setting up Distribution channel. The selection of distribution is affected by many of factors, which play significant role while choosing the channel for distribution. It may include the buying pattern of consumer, type of the product is perishable, or auto mobile, weight and bulk and it also depends on the company's resources. The main affecting factors are following : 1. Organization objectives - If company objective is to have mass appeal and rapid market penetration. 2. Type of product - Perishable products should have a short distribution channel, FMCG goods should have a wide reaching, intensive distribution channel. 3. Nature and extent of market- Distribution to consumer market or industrial markets would be different channel structures. 4. Existing channel for comparable product- company may chose it's existing channel of distribution for relative product. 5. Buying habit of customers- Understanding consumer needs and criteria for buying. 6. Channel Availability- Channels may not be available. And other factors like: (i) (ii) (iii) (iv) Customer Characteristics Product Attributes Type of Organization Competition Marketing Environmental Forces and Characteristics of Intermediaries

CHANNELS A number of alternate 'channels' of distribution may be available: (i) (ii) (iii) Distributor, who sells to retailers, Retailer (also called dealer or reseller), who sells to end customers. Advertisement typically used for consumption goods.

Distribution channels may not be restricted to physical products alike from producer to consumer in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc. process of transfer the products or services from Producer to Customer or end user. There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services - the latter offering anything from televisions through tools. There has also been some evidence of service integration, with services linking together, particularly in the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas. Channel decisions. Channel Sales is nothing but a chain for to market a product through different sources. 1. Channel strategy 2. Gravity & adventure 3. Push and Pull strategy 4. Product (or service) 5. Cost 6. Consumer location

Managerial Concerns The channel decision is very important. In theory at least, there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods manufacturers could never justify the cost of selling direct to their consumers, except by mail order. Many suppliers seem to assume that once their product has been sold into the

channel, into the beginning of the distribution chain, their job is finished. Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if they have any aspirations to be market-oriented, their job should really be extended to managing all the processes involved in that chain, until the product or service arrives with the end-user. This may involve a number of decisions on the part of the supplier: (i) (ii) (iii) Channel membership Channel motivation Monitoring and managing channels

Q.3 Discuss the communication development process with examples. Ans. In ‘development communication’, you see that there are two words-‘development’ and ‘communication’. Communication is a message understood or sharing of experience. When we refer to communication, in the context of development, we refer to various types of communication like interpersonal, group and mass communication. Development, It is not easy to define this as it depends on the context. Development is about change. It is about changing for the better. It could be about social or economic change for improvement or progress. When we refer to development communication, it is about such communication that can be used for development. It is about using communication to change or improve something. Here we use different types of messages to change the socio-economic condition of people. These messages are designed to transform the behaviour of people or for improving their quality of life. Therefore, development communication can be defined as the use of communication to promote development. Those who write or produce programmes on issues related to development are called development communicators. Role of a development communicator (i) The development communicator plays a very significant role in explaining the development process to the common people in such a way that it finds acceptance. (ii) In order to achieve this objective a development communicator has to understand the process of development and communication should possess knowledge in professional techniques and should know the audience; (iii) Prepare and distribute development messages to millions of people in such a way that they are received and understood, accepted and applied.

If they accept this challenge they will be able to get the people to identify themselves as part of a society and a nation. This identity will help in bringing human resources together for the total welfare of the individual and the community at large.

DEVELOPMENT COMMUNICATION USING VARIOUS MEDIA The history of development communication in India can be traced to rural radio broadcasts in the 1940s in different languages. Have you ever heard a rural programme on radio? If you come from a rural area, you probably would have heard. People who present these programmes speak in a language or dialect that the people in your area speak. The programmes may be about farming and related subjects. The programme may comprise of interviews with experts, officials and farmers, folk songs and information about weather, market rates, availability of improved seeds and implements. There would also be programmes on related fields. During the 1950s, the government started huge developmental programmes throughout the country. In fact, when Doordarshan started on 15th September 1959, it was concentrating only on programmes on agriculture. Many of you might have seen the ‘Krishi Darshan’ programme on Doordarshan. Later in 1975, when India used satellites for telecasting television programmes in what is known as SITE (Satellite Instructional Television Experiment), the programmes on education and development were made available to 2400 villages in the states of Andhra Pradesh, Bihar, Karnataka, Madhya Pradesh, Orissa and Rajasthan. As far as the print media is concerned, after Independence when the Five Year Plans were initiated by the government for planned development, it was the newspapers which gave great importance to development themes. They wrote on various government development programmes and how the people could make use of them. If the print media have contributed to development communication, the electronic media – radio and television especially All India Radio and Doordarshan have spread messages on development as the main part of their broadcasts. However, amongst all the media that are used for development communication, traditional media are the closest to people who need messages of development like the farmers and workers. Such forms of media are participatory and effective. You may have seen construction workers cooking their meal of dal and rice over open fires in front of their tents set up temporarily on the roadside. They need to be educated about the values of balanced nutrition, cleanliness, hygiene and water and sanitation. In various parts of India, groups of volunteers use street theatre as a medium for development communication. This is done through humorous skits and plays through which the

importance of literacy, hygiene etc. are enacted. The content for the skits is drawn from the audience’s life. For example, they are told about “balanced nutrition” . This means supplementing their staple diet of dal and rice with green leafy vegetables known to cure night blindness, an ailment common among construction workers. Similarly, female construction workers and their children are taught how to read and write. However, problems in communicating a message in an effective way have been a matter of concern to development workers. How can people be taught new skills at a low cost? What would be a good way to deal with sensitive topics such as health issues? How can complicated new research, like that in agriculture for example, be simplified so that ordinary people can benefit? One option has been the use of comics. But, in order to achieve the desired results, these comics should be created locally. But what are ‘comics’ ? You must have all at some point of time read a comic. Comics involve story telling using visuals which must follow local ideas and culture in order to be understood correctly by people. The important thing about comics is that they are made by people on their own issues in their own language. So, readers find them closer to their day-to-day lives. Programs are organized in the remote areas of Jharkhand, Rajasthan, Tamilnadu, and the North East to provide training to rural communicators to enable them to use comics in development communication. Information on sensitive health issues such as HIV/AIDS has been communicated through the medium of comics in several states. However, you must understand that development communication using various media is possible only with the active involvement of the following: (i) (ii) (iii) (iv) Development agencies like departments of agriculture. Voluntary organizations Concerned citizens Non governmental organizations (NGOs)

Examples: One of the first examples of development communication was Farm Radio Forums in Canada. From 1941 to 1965 farmers met in groups each week to listen to special radio programs. There were also printed materials and prepared questions to encourage group discussion. At first this was a response to the Great Depression and the need for increased food production in World War II. But the Forums also dealt with social and economic issues. This model of adult education or distance education was later adopted in India and Ghana.

In 1999 the U.S. Government and D.C. Comics planned to distribute 600,000 comic books to children affected by the Kosovo War. The comic books are in Albanian and feature Superman and Wonder Woman. The aim is to teach children what to do when they find an unexploded land mine left over from Kosovo's civil war. The comic books instruct children not to touch the antipersonnel mines and not to move, but instead to call an adult for help. In spite of the 1997 Ottawa Treaty which attempts to ban land mines they continue to kill or injure 20,000 civilians each year around the world. Since 2002, Journalists for Human Rights, a Canadian based NGO, has operated long term projects in Ghana, Sierra Leone, Liberia, and the DR Congo. jhr works directly with journalists, providing monthly workshops, student sessions, on the job training, and additional programs on a country by country basis.

Q.4. Select any mobile handset and mobile company and then evaluate its positioning strengths or weakness in terms of attributes, benefits, values, brand name and brand equity. Ans. ABSTRACT In the late 1990s, Nokia overtook then leader Motorola to emerge as a behemoth in the global mobile phone industry. Nokia's dominance continued into the first few years of the 2000s, but it suddenly came under threat in 2003-2004, when smaller Asian vendors started making their presence felt with better products at lower prices. The company's problems also had internal causes and analysts said one of the reasons could be that it had become too complacent with its success and lost its agility in reading and responding to market signals. This case study discusses the various problems Nokia faced in 2003-2004, including the company's tardiness in introducing the clamshell phones that had become very popular and its resistance to manufacturing operator specific handsets. It also discusses the efforts Nokia made to recover its market once it realized that its performance was slipping. The case concludes with an analysis of the challenges the company faced in the future and the various options ahead of it.


To understand the difficulties faced by an erstwhile giant in the global mobile phone industry in 2003-2004.

  

To appreciate the importance of innovation in a dynamic and volatile industry. To analyze the effect of changing market conditions on companies. To appreciate the importance of keeping abreast with changing market conditions and adapting to them speedily.

To examine future challenges that the company faced and the various options available to it.

“We want to be the company that brings this industry to the next phase. And if we have a little bit of a bump in the road in 2004, that's immaterial." - Jorma Ollila, CEO of Nokia, in mid 2004.1 "Nokia didn't have the coolness factor. They didn't really do flip phones; they were a little late with cameras, and they didn't push them. Coolness in the consumer space is a big deal, and they were stodgy." -Jack Gold, vice president of Meta Group, a Connecticut-based technology consulting firm, in 2005.2 Positive Signs The announcement of Nokia Corporation's (Nokia) quarterly results in April 2005 was a much awaited event as far as the global mobile phone industry was concerned. The company, which had emerged as an industry leader in the late 1990s, had run into rough weather in 2003-2004, with sales and earnings falling below expected levels. So much so that when the company announced poor results in the first quarter of 2004, several analysts declared that it was the beginning of the end of Nokia's dominance in the industry. However, Nokia was not ready to throw in the towel quite so easily. The company put up a tough fight over the second half of 2004 to recapture its lost position in the market. It introduced several new models, modified designs, and aggressively promoted products with a view to increasing its market share, which had fallen to a low of around 28 percent in early 2004 from an average of 35 percent over the previous three years. Nokia's efforts started paying off by late 2004. The company announced satisfactory results for the fourth quarter of 2004 and market share for the year 2004 also stabilized at 32 percent by the

end of the year. Jorma Ollila (Ollila), Nokia's CEO, while acknowledging that 2004 had been a challenging year, declared that the company was poised to recover in 2005. Ollila's prediction came true when the company announced better than expected results for the first quarter of 2005, ending March 31. In the first quarter of 2005, Nokia's sales increased 17 percent over the corresponding quarter of the previous year to $9.65 billion. Net profit rose 18 percent to $1.1 billion. Global handset sales rose 11 percent, prompting Nokia to increase its estimate of the size of the global handset market in 2005 by 100 million to 740 million.Commenting on Nokia's improved performance, Jussi Hyoty (Hyoty), an analyst at securities firm FIM Securities, said, "Nokia's result was definitely better than expected, and it shows that it's a growth company again."3 However, despite these positive signs, several analysts wondered whether Nokia would ever be able to dominate the industry as it did in the late 1990s and the first two years of the new century, especially in light of the aggressive competition posed by several new Asian companies as well as more established players like Motorola and Sony Ericsson.

Background Despite the relatively recent emergence of the mobile phone industry globally, Nokia's company history goes back to the 1800s. The company was first set up on the banks of the river Nokia (after which it was named) in southwestern Finland in 1865 by Fredrik Idestam, who was a mining engineer. The original Nokia was a forest industry enterprise that primarily manufactured paper. In 1898, Carl Henrik Lampen, a shopkeeper, and J.E. Segerberg, an engineer, set up the Finnish Rubber Works Ltd. (FRW) to manufacture rubber and associated chemicals. In 1912, Konstantin Wikstrom, an engineer, set up the Finnish Cable Works (FCW) to manufacture electrical cables for lighting purposes. These three companies had business dealings with each other through the early 1900s and eventually merged in 1967 to form the Nokia Corporation. The new company had four major businesses - forestry, rubber, cable and electronics. By 1980, Nokia was a large business conglomerate with several businesses ranging from tires to televisions and computers to telecommunications.

Excerpts The Rise to the Top Nokia drew on its experience of setting up Nordic cellular networks (which were more advanced than those used by Japan, the rest of Europe, and the US at that time) to successfully adopt the GSM standard. The company was listed on the New York Stock Exchange in 1994. Over the 1990s, Nokia became one of the most successful mobile phone manufacturers in the world and began to enter non-Scandinavian markets as well. Nokia was also one of the first mobile manufacturers to realize the importance of the design element in mobile phones and its phones were more aesthetically designed than those of competitors. In 1998, Nokia overtook Motorola to become the largest mobile manufacturer in the world...Designed for InnovationNokia was the first mobile phone manufacturer to realize in the late 1990s that phones no longer played only a functional role; they were also becoming fashion symbols. Until Nokia began emphasizing the design aspect, mobile phones were bulky, bricklike devices with an external antenna and a standard keypad. Manufacturers emphasized functionality over aesthetic appeal. Nokia broke new ground in 1999, when it launched its 8200 handset on the catwalk at a Paris fashion week...The Decline In mid-2004, The Economist wrote, "When a firm dominates its market, especially one that is driven by constant technological advances, it risks becoming so fixated with trying to ward off what it reckons to be its most powerful challenger that it leaves itself vulnerable to attack from other directions. "Analysts said this statement accurately characterized what happened with Nokia. In the early 2000s, Microsoft Corp (Microsoft) announced its decision to enter the mobile phones market. The announcement set alarm bells ringing in Nokia as Microsoft had the reputation of being an aggressive competitor...Efforts at Recovery Soon after announcing disappointing results in the first quarter of 2004, Nokia realized that it was in trouble and began to take steps to correct matters. The company not only cut prices on certain handsets to increase market share, but also fine-tuned its portfolio to adjust products to meet market needs. It killed some outmoded models and brought forward the launch of several others, including a number of clamshell phones. In June 2004, Nokia launched five new models of phones, out of which three were clamshells. Nokia's new models were the 6260 model, a clamshell whose cover not only flipped open but also swiveled, the 6630, which Nokia claimed was the world's smallest camera phone,

designed for 3G networks, another clamshell, the 6170, and two low end models, the 2650 and 2600. Several other models were also marketed aggressively. For instance, the low end 1100 model for emerging markets and the 6230 mid range model became very popular in 2004. (The 6230 was so popular in some markets that at times, Nokia was not able to meet the demand)... A Challenging FutureDespite Nokia's laudable efforts in the direction of recapturing its lost market position, the opinions of analysts on its turnaround were mixed. While the company's detractors believed that Nokia had lost its competitive advantage in the mobile phone market, its supporters said the company's inherent strengths and stable financial position would help it sail through the difficulties it had faced in 2003-2004 to recover in the future. However, most of them agreed that the mobile phone industry was undergoing a vast change. In the early 2000s, mobile phones were expected to perform a variety of functions in addition to looking stylish and being easy to operate. Nokia's competitors had understood this and were in the process of launching several models that were style statements in themselves...

Exhibits Exhibit 1: The Phone Feature of N-Gage

Q5. Ans.

What is retailing? Explain the functions and different types of retailing with its key features. Retailing involves selling products and services to consumers for their personal or family

use. Department stores, like Burdines and Macy’s, discount stores like Wal-Mart and K-Mart, and specialty stores like The Gap, Zales Jewelers and Toys ‘R’ Us, are all examples of retail stores. Service providers, like dentists, hotels and hair salons, and on-line stores, like, are also retailers. Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.

Sorting Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units. The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers’ Stop targets the elite urban class, while Pantaloons is targeted at the middle class.

Breaking Bulk Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailer, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.

Holding Stock Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.

Additional Services Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the

retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.

Channel of Communication Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.

Transport and Advertising Functions Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover


a. What is CRM? What are its objectives? b. Write a short note on Brand development.

Ans. CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers’ needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends. CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers.

Objectives of CRM CRM, the technology, along with human resources of the company, enables the company to analyze the behavior of customers and their value. The main areas of focus are as the name suggests: customer , relationship , and the management of relationship and the main objectives to implement CRM in the business strategy are:
    

To simplify marketing and sales process To make call centers more efficient To provide better customer service To discover new customers and increase customer revenue To cross sell products more effectively

The CRM processes should fully support the basic steps of customer life cycle . The basic steps are:
   

Attracting present and new customers Acquiring new customers Serving the customers Finally, retaining the customers

Brand Development A plan to improve the performance of a particular product or service. for example: as part of brand development a firm may initiate a new advertising campaign that includes free samples.


MBA – 2nd SEM Subject Code – MB0047 Book ID – B1136 MARKETING MANAGEMENT Set – 2 Q1. How hardware & software support in various MIS activities of the organization? Explain the transaction stages from manual system to automated systems?

Ans. Generally hardware in the form of personal computers and peripherals like printers, fax, machines, copier, scanners etc are used in organization to support various MIS activities of the organization. Computers are widely used to support in MIS activities. Some of the types commonly used in business are desktop computer, notebook computer, PDA etc. Advantage of PC in Organization for MIS activities 1. Speed: A PC can process data at a very high speed. It can process millions of instructions within fractions of seconds. 2. Storage: A PC can store large amount of data in a small space. Information can easily transform from one place to another place. 3. Communication: PC with internet is used as a powerful tool of communication for every business activity. 4. Accuracy: A PC is highly reliable in the sense that it could be used to perform calculations continuously for hours with a great degree of accuracy. 5. Conferencing: A PC with internet offers facility of video conferencing worldwide. Business people across the globe travel a lot to meet their business partner, colleague and customer etc to discuss about business activities. Software support in MIS activities 1. MS-Windows: Windows is an operating system. It supports various applications like MSOffice, Lotus Smart Suite, Outlook etc. 2. MS-Excel: It is used to make charts, graphs, pivot tables and MIS reports etc. 3. MS-WORD: It is used for letter drafting. 4. MS-Power Point: Power point is used for presentation


Explain the various behavioral factors of management organization? As per Porter, how can performance of individual corporations be determined?

Ans: Behavioral Factors The implementation of computer based information systems in general and MSS in particular is affected by the way people perceive these systems and by how they behave in accepting them. User resistance is a major behavioral factor associated with the adoption of new systems. The following are compiled by Jiang et al. (2000); reasons that employees resist new systems:       Change in job content Loss of status Change in interpersonal relationships Loss of power, Change in decision making approach Uncertainty or unfamiliarity or misinformation Job security The major behavioral factors are a) Decision styles symbolic processing of AI is heuristic; DSS and ANN are analytic b) Need for explanation ES provides explanation, ANN does not, DSS may provide partial explanation. Explanation can reduce resistance to change c) Organizational climate ± some organizations lead and support innovations and new technologies whereas others wait and lag behind in making changes ‘ v:shapes=”_x0000_i1025″> d) Organizational expectations ± over expectation can result in disappointments and termination of innovation. Over expectation was observed in most early intelligent systems. e) Resistance to change can be strong in MSS because the impacts may be significant.

Performance Out of many possible interpretations of a strategy an organization adopts in business, it is found that a majority is concerned with competition between corporations. Competition means cultivating unique strengths and capabilities, and defending them against imitation by other firms. Another alternative sees competition as a process linked to innovation in product, market, or technology. Strategic information systems theory is concerned with the use of information technology to support or sharpen an enterprises competitive strategy. Competitive strategy is an enterprises plan for achieving sustainable competitive advantage over, or reducing the edge of, its adversaries. The performance of individual corporations is determined by the extent to which they manage the following (as given by Porter) a) The bargaining power of suppliers; b) The bargaining power of buyer; c) The threat of new entrants; d) The threat of substitute products; and e) Rivalry among existing firms. f) Porters classic diagram representing these forces is indicated below

Porters Forces Driving Industry Competition (Porter 1980) There are two basic factors which may be considered to be adopted by organization in their strategies: a) low cost, b) Product differentiation Enterprise can succeed relative to their competitors if they possess sustainable competitive advantage in either of these two. Another important consideration in positioning isµ competitive scope, or the breadth of the enterprises target markets within its industry, i.e. the range of product varieties it offers, the distribution channels it employs, the types of buyers it serves, the geographic areas in which it sells, and the array of related industries in which it competes. Under Porters framework, enterprises have four generic strategies available to them whereby they can attain above-average performance.

They are: a) Cost leadership; b) Differentiation; c) Cost focus; and d) Ffocused differentiation.

Q 3.

Compare various types of development aspect of Information System? Explain the various stages of SDLC?

Ans: Development of Information Systems a) Development and Implementation of the MIS Once the plan for MIS is made, the development of the MIS, calls for determining the strategy of development. As discussed earlier, the plan consists of various systems and subsystems. The development strategy determines where to begin and in what sequence the development can take place with the sole objective of assuring the information support. The choice of the system or the sub-system depends on its position in the total MIS plan, the size of the system, the users understanding of the systems and the complexity and its interface with other systems. The designer first develops systems independently and starts integrating them with other systems, enlarging the system scope and meeting the varying information needs. Determining the position of the system in the MIS is easy. The real problem is the degree of structure, and formalisation in the system and procedures which determine the timing and duration of development of the system. Higher the degree of structured-ness and formalisation, greater is the stabilization of the rules, the procedures, decision-making and the understanding of the overall business activity. Here, it is observed that the users and the designers interaction is smooth, and their needs are clearly understood and respected mutually. The development becomes a method of approach with certainty in input process and outputs. b) Prototype Approach When the system is complex, the development strategy is Prototyping of the System. Prototyping is a process of progressively ascertaining the information needs, developing

methodology, trying it out on a smaller scale with respect to the data and the complexity, ensuring that it satisfies the needs of the users, and assess the problems of development and implementation. This process, therefore, identifies the problem areas, inadequacies in the prototype vis-à-vis fulfillment of the information needs. The designer then takes steps to remove the inadequacies. This may call upon changing the prototype of the system, questioning the information needs, streamlining the operational systems and procedures and move user interaction. In the prototyping approach, the designers task becomes difficult, when there are multiple users of the same system and the inputs they use are used by some other users as well. For example, a lot of input data comes from the purchase department, which is used in accounts and inventory management. The attitudes of various users and their role as the originators of the data need to be developed with a high degree of positivism. It requires, of all personnel, to appreciate that the information is a corporate resource and all have to contribute as per the designated role by the designer to fulfil the corporate information needs. When it comes to information the functional, the departmental, the personal boundaries do not exist. This call upon each individual to comply with the design needs and provide without fail the necessary data inputs whenever required as per the specification discussed and finalized by the designer. Bringing the multiple users on the same platform and changing their attitudes toward information, as a corporate resource, is the managerial task of the system designer. The qualification, experience, knowledge, of the state of art, and an understanding of the corporate business, helps considerably, in overcoming the problem of changing the attitudes of the multiple users and the originators of the data.

Stages of SDLC System development cycle stages are sometimes known as system study. System concepts which are important in developing business information systems expedite problem solving and improve the quality of decision-making. The system analyst has to do a lot in this connection. They are confronted with the challenging task of creating new systems an planning major changes in the organization. The system analyst gives a system development project, meaning and direction. The typical breakdown of an information systems life cycle includes a feasibility study, requirements, collection and analysis, design, prototyping, implementation, validation, testing and operation. It may be represented in the form of a block diagram as shown below:

a) Feasibility study: It is concerned with determining the cost effectiveness of various alternatives in the designs of the information system and the priorities among the various system components. b) Requirements, collection and analysis: It is concerned with understanding the mission of the information systems, that is, the application areas of the system within the enterprise and the problems that the system should solve. c) Design: It is concerned with the specification of the information systems structure. There are two types of design: database design and application design. The database design is the design of the database design and the application design is the design of the application programs. d) Prototyping: A prototype is a simplified implementation that is produced in order to verify in practice that the previous phases of the design were well conducted. e) Implementation : It is concerned with the programming of the final operational version of the information system. Implementation alternatives are carefully verifies and compared. f) Validation and testing: It is the process of assuring that each phase of the development process is of acceptable quality and is an accurate transformation from the previous phase.


Compare & Contrast E-enterprise business model with traditional business organization model? Explain how in E-enterprise manager role & responsibilities are changed? Explain how manager is a knowledge worker in E-enterprise?

Ans: Managing the E-enterprise Due to Internet capabilities and web technology, traditional business organisation definition has undergone a change where scope of the enterprise now includes other company locations, business partners, customers and vendors. It has no geographic boundaries as it can extend its operations where Internet works. All this is possible due to Internet and web moving traditional paper driven organisation to information driven Internet enabled E-business enterprise. Ebusiness enterprise is open twenty-four hours, and being independent, managers, vendors, customers transact business anytime from anywhere. Internet capabilities have given E-business enterprise a cutting edge capability advantage to increase the business value. It has opened new channels of business as buying and selling can be done on Internet. It enables to reach new markets across the world anywhere due to communication capabilities. It has empowered customers and vendors / suppliers through secured access to information to act, wherever necessary. The cost of business operations has come down significantly due to the elimination of paper-driven processes, faster communication and effective collaborative working. The effect of these radical changes is the reduction in administrative and management overheads, reduction in inventory, faster delivery of goods and services to the customers. In E-business enterprise traditional people organisation based on µCommand Control principleis absent. It is replaced by people organisations that are empowered by information and knowledge to perform their role. They are supported by information systems, application packages, and decision-support systems. It is no longer functional, product, and project or matrix organisation of people but E-organisation where people work in network environment as a team or work group in virtual mode. E-business enterprise is more process-driven, technology-enabled and uses its own information and knowledge to perform. It is lean in number, flat in structure, broad in scope and a learning organisation. In E-business enterprise, most of the things are electronic, use digital technologies and work on databases, knowledge bases, directories and document repositories. The

business processes are conducted through enterprise software like ERP, SCM, and CRM supported by data warehouse, decision support, and knowledge management systems. Today most of the business organisations are using Internet technology, network, and wireless technology for improving the business performance measured in terms of cost, efficiency, competitiveness and profitability. They are using E-business, E-commerce solutions to reach faraway locations to deliver product and services. The enterprise solutions like ERP, SCM, and CRM run on Internet (Internet / Extranet) & Wide Area Network (WAN). The business processes across the organisation and outside run on E-technology platform using digital technology. Hence today’s business firm is also called E-enterprise or Digital firm. The paradigm shift to E-enterprise has brought four transformations, namely: 1. Domestic business to global business.

2. Industrial manufacturing economy to knowledge-based service economy. 3. Enterprise Resource Management to Enterprise Network Management.

4. Manual document driven business process to paperless, automated, electronically transacted business process. These transformations have made conventional organisation design obsolete. The basis of conventional organisation design is command & control which is now collaborates & control . This change has affected the organisation structure, scope of operations, reporting mechanisms, work practices, workflows, and business processes at large. In E-enterprise, business is conducted electronically. Buyers and sellers through Internet drive the market and Internet-based web systems. Buying and selling is possible on Internet. Books, CDs, computer, white goods and many such goods are bought and sold on Internet. The new channel of business is well-known as E-commerce. On the same lines, banking, insurance, healthcare are being managed through Internet E-banking, E-billing, E-audit, & use of Credit cards, Smart card, ATM, E-money are the examples of the E-commerce application. The digital firm, which uses Internet and web technology and uses E-business and Ecommerce solutions, is a reality and is going to increase in number. MIS for E-business is different compared to conventional MIS design of an organisation. The role of MIS in E-business organization is to deal with changes in global market and enterprises. MIS produces more knowledge-based products. Knowledge management system is formally recognized as a part of MIS. It is effectively used for strategic planning for survival and growth, increase in profit and productivity and so on.

To achieve the said benefits of E-business organisation, it is necessary to redesign the organisa- tion to realize the benefits of digital firm. The organisation structure should be lean and flat. Get rid of rigid established infrastructure such as branch office or zonal office. Allow people to work from anywhere. Automate processes after re-engineering the process to cut down process cycle time. Make use of groupware technology on Internet platform for faster response processing. Another challenge is to convert domestic process design to work for international process, where integration of multinational information systems using different communication standards, country-specific accounting practices, and laws of security are to be adhered strictly. Internet and networking technology has thrown another challenge to enlarge the scope of organisation where customers and vendors become part of the organisation. This technology offers a solution to communicate, co-ordinate, and collaborate with customers, vendors and business partners. This is just not a technical change in business operations but a cultural change in the mindset of managers and workers to look beyond the conventional organisation. It means changing the organisation behaviour to take competitive advantage of the E-business technology. The last but not the least important is the challenge to organise and implement information architecture and information technology platforms, considering multiple locations and multiple information needs arising due to global operations of the business into a comprehensive MIS.


What do you understand by service level Agreements (SLAs)? Why are they needed? What is the role of CIO in drafting these? Explain the various security hazards faced by an IS?

Ans. A service level agreement (frequently abbreviated as SLA) is a part of a service contractw here the level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted delivery time (of the service) or performance. As an example, internet service providers will commonly include service level agreements within the terms of their contracts with customers to define the level(s) of service being sold in plain language terms (typically the (SLA) will in this case have a technical definition in terms ofM TTF,M TT R, various data rates, etc.)

A service level agreement (SLAs) is a negotiated agreement between two parties where one is the customer and the other is the service provider. This can be a legally binding formal or informal “contract” (see internal department relationships).Contracts between the service provider and other third parties are often (incorrectly) called SLAs as the level of service has been set by the (principal) customer, there can be no “agreement” between third parties (these agreements are simply a “contract”). Operating Level Agreements or OLA(s), however, may be used by internal groups to support SLA(s). Role of CIO in drafting SLAS One of the major responsibilities of the CIO is to establish the credibility of the systems organization. The systems department should not only focus on providing better service to the various lines of business but also help businesses operate better. If the CIO wants to be taken seriously, he needs to do what other executives do and have his own business metrics and performance measurements, so that he can effectively measure his internal business performance. Other business departments have them, but CIOs generally do not because IT has always been viewed as a cost center. Measurements in IT tend to be vague and lacking in context. For example, ‘I had 14 projects last year, and I did them well.’ But there is no real business measurement there. How many projects should the manager have had? Did he really have the capacity to handle 14 projects? ACIO should explore running their area more like a service operation rather than a cost center, and develop metrics that track the performance of the information systems staff, as well as the equipment comprising the applications, infrastructure, and networks under the CIO’s control. The first step, they say, is to implement service level agreements (SLAs) with business units. It sets the expectation on the technical areas of theCIO’s operations.At a minimum, they should set up what is expected and what levels of service the equipment will provide. The underlying SLAs should be some sort of a chargeback system with business units, particularly when it comes to apportioning staff time. If information systems are now providing a service, the staff needs to understand where the service is being used to be properly remunerated or to demonstrate where the value is. The second part of the IT operations equation is computer equipment, and CIOs must have a firm handle on how that equipment is being used. There are softwares to help with the people picture, and there are other products that can monitor hardware performance, such as network and server uptime. One of the major roles of the CIO is to make the organization information systems savvy and increase the technological maturity of the information systems organization.A major part of the CIO’s job is to make the users aware of the opportunities

arising as a result of technical innovations, how this can help them perform better, and familiarizing them with computers and information systems applications. The information systems management also has the job of helping the end users adapt to the changes caused by information systems, and to encourage their use. Finally, CIOs need to institute life cycle management with their applications and computer equipment. Most IT organizations do not have any idea of the life cycle of an application how long they want it to last, and when it needs to be refurbished, replaced, or disposed of. Lacking this knowledge, it is easy for applications to linger long after they should be gone, and for companies to spend far too much money on maintaining ailing applications.

Security Hazards faced by an Information system: Security of the information system can be broken because of the following reasons: i) Malfunctions: In this type of security hazard, all the components of a system are involved. People, software and hardware errors course the biggest problem. More dangerous are the problems which are created by human beings due to the omission, neglect and incompetence. ii) Fraud and unauthorized access: This hazard is due to dishonesty, cheating or deceit. This can be done through a) b) c) iii) Infiltration and industrial espionage, Tapping data from communication lines, Unauthorized browsing through lines by online terminals, etc.

Power and communication failure: In some locations they are the most frequent hazards than any other else because availability of both of them depends upon the location. Sometimes communication channel are busy or noisy. There are power cuts and sometimes high voltage serge destroys a sensitive component of the computer.

Q6. Ans.

Case Study: Information system in a restaurant. CASE SUMMARY A waiter takes an order at a table, and then enters it online via one of the six terminals

located in the restaurant dining room. The order is routed to a printer in the appropriate preparation area: the cold item printer if it is a salad, the hot-item printer if it is a hot sandwich or the bar printer if it is a drink. A customers meal check-listing (bill) the items ordered and the respective prices are automatically generated. This ordering system eliminates the old three-carbon-copy guest check system as well as any problems caused by a waiters handwriting. When the kitchen runs out of a food item, the cooks send out an out of stock message, which will be displayed on the dining room terminals when waiters try to order that item. This gives the waiters faster feedback, enabling them to give better service to the customers. Other system features aid management in the planning and control of their restaurant business. The system provides up-to-the-minute information on the food items ordered and breaks out percentages showing sales of each item versus total sales. This helps management plan menus according to customers tastes. The system also compares the weekly sales totals versus food costs, allowing planning for tighter cost controls. In addition, whenever an order is voided, the reasons for the void are keyed in. This may help later in management decisions, especially if the voids consistently related to food or service. Acceptance of the system by the users is exceptionally high since the waiters and waitresses were involved in the selection and design process. All potential users were asked to give their impressions and ideas about the various systems available before one was chosen


MBA – 2nd SEM Subject Code – MB0048 Book ID – B1137 OPERATION RESEARCH Set – 2 Q1. What are the essential characteristics of Operation Research? Mention different phases in an Operation Research study. Point out some limitations of O.R?

Ans. Characteristics of Operations Research Operations research, an interdisciplinary division of mathematics and science, uses statistics, algorithms and mathematical modeling techniques to solve complex problems for the best possible solutions. This science is basically concerned with optimizing maxima and minima of the objective functions involved. Examples of maxima could be profit, performance and yield. Minima could be loss and risk. The management of various companies has benefited immensely from operations research. Operations research is also known as OR. It has basic characteristics such as systems orientation, using interdisciplinary groups, applying scientific methodology, providing quantitative answers, revelation of newer problems and the consideration of human factors in relation to the state under which research is being conducted. Systems Orientation This approach recognizes the fact that the behavior of any part of the system has an effect on the system as a whole. This stresses the idea that the interaction between parts of the system is what determines the functioning of the system. No single part of the system can have a bearing effect on the whole. OR attempts appraise the effect the changes of any single part would have on the performance of the system as a whole. It then searches for the causes of the problem that has arisen either in one part of the system or in the interrelation parts. Interdisciplinary groups The team performing the operational research is drawn from different disciplines. The disciplines could include mathematics, psychology, statistics, physics, economics and engineering. The knowledge of all the people involved aids the research and preparation of the scientific model.

Application of Scientific Methodology OR extensively uses scientific means and methods to solve problems. Most OR studies cannot be conducted in laboratories, and the findings cannot be applied to natural environments. Therefore, scientific and mathematical models are used for studies. Simulation of these models is carried out, and the findings are then studied with respect to the real environment. New Problems Revealed Finding a solution to a problem in OR uncovers additional problems. To obtain maximum benefits from the study, ongoing and continuous research is necessary. New problems must be pursued immediately to be resolved. A company looking to reduce costs in manufacturing might discover in the process that it needs to buy one more component to manufacture the end product. Such a scenario would result in unexpected costs and budget overruns. Ensuring flexibility for such contingencies is a key characteristic of OR. Provides Quantitative Answers The solutions found by using operations research are always quantitative. OR considers two or more options and emphasizes the best one. The company must decide which option is the best alternative for it. Human Factors In other forms of quantitative research, human factors are not considered, but in OR, human factors are a prime consideration. People involved in the process may become sick, which would affect the company’s output . PHASES OPERATIONS RESEARCH

Formulate the problem: This is the most important process, it is generally lengthy and time consuming. The activities that constitute this step are visits, observations, research, etc. With the help of such activities, the O.R. scientist gets sufficient information and support to proceed and is better prepared to formulate the problem. This process starts with understanding of the organizational climate, its objectives and expectations. Further, the alternative courses of action are discovered in this step.

Develop a model: Once a problem is formulated, the next step is to express the problem into a mathematical model that represents systems, processes or environment in the form of equations, relationships or formulas. We have to identify both the static and dynamic structural elements, and device mathematical formulas to represent the interrelationships

among elements. The proposed model may be field tested and modified in order to work under stated environmental constraints. A model may also be modified if the management is not satisfied with the answer that it gives.

Select appropriate data input: Garbage in and garbage out is a famous saying. No model will work appropriately if data input is not appropriate. The purpose of this step is to have sufficient input to operate and test the model.

Solution of the model: After selecting the appropriate data input, the next step is to find a solution. If the model is not behaving properly, then updating and modification is considered at this stage.

Validation of the model: A model is said to be valid if it can provide a reliable prediction of the system’s performance. A model must be applicable for a longer time and can be updated from time to time taking into consideration the past, present and future aspects of the problem.

Implement the solution: The implementation of the solution involves so many behavioural issues and the implementing authority is responsible for resolving these issues. The gap between one who provides a solution and one who wishes to use it should be eliminated. To achieve this, O.R. scientist as well as management should play a positive role. A properly implemented solution obtained through O.R. techniques results in improved working and wins the management support.


Dependence on an Electronic Computer: O.R. techniques try to find out an optimal solution taking into account all the factors. In the modern society, these factors are enormous and expressing them in quantity and establishing relationships among these require voluminous calculations that can only be handled by computers.

Non-Quantifiable Factors: O.R. techniques provide a solution only when all the elements related to a problem can be quantified. All relevant variables do not lend themselves to quantification. Factors that cannot be quantified find no place in O.R. models.

Distance between Manager and Operations Researcher: O.R. being specialist’s job requires a mathematician or a statistician, who might not be aware of the business problems.

Similarly, a manager fails to understand the complex working of O.R. Thus, there is a gap between the two.

Money and Time Costs: When the basic data are subjected to frequent changes, incorporating them into the O.R. models is a costly affair. Moreover, a fairly good solution at present may be more desirable than a perfect O.R. solution available after sometime.

Implementation: Implementation of decisions is a delicate task. It must take into account the complexities of human relations and behaviour.


What are the common methods to obtain an initial basic feasible solution for a transportation problem whose cost and requirement table is given? Give a stepwise procedure for one of them?

Ans. Transportation Problem & its basic assumption This model studies the minimization of the cost of transporting a commodity from a number of sources to several destinations. The supply at each source and the demand at each destination are known. The transportation problem involves m sources, each of which has available. i (i = 1, 2, …..,m) units of homogeneous product and n destinations, each of which requires bj (j = 1, 2…., n) units of products. Here a i and bj are positive integers. The cost cij of transporting one unit of the product from the ith source to the jth destination is given for each i and j,

The objective is to develop an integral transportation schedule that meets all demands from the inventory at a minimum total transportation cost.It is assumed that the total supply and the total demand are equal.i.e. Condition (1) The condition (1) is guaranteed by creating either a fictitious destination with a demand equal to the surplus if total demand is less than the total supply or a (dummy)

source with a supply equal to the shortage if total demand exceeds total supply. The cost of transportation from the fictitious destination to all sources and from all destinations to the fictitious sources are assumed to be zero so that total cost of transportation will remain the same. Formulation of Transportation Problem The standard mathematical model for the transportation problem is as follows. Let xij be number of units of the homogenous product to be transported from source i to the destination j Then objective is to Theorem: A necessary and sufficient condition for the existence of a feasible solution to the transportation problem (2) is that


a. What are the properties of a game? Explain the “best strategy” on the basis of min max criterion of optimality. b. State the assumptions underlying game theory. Discuss its importance to business decisions.

Ans. a) Minimax (sometimes minmax) is a decision rule used in decision theory, game theory, statistics and philosophy for minimizing the possible loss while maximizing the potential gain. Alternatively, it can be thought of as maximizing the minimum gain (maximin). Originally formulated for twoplayer zero-sum game theory, covering both the cases where players take alternate moves and those where they make simultaneous moves, it has also been extended to more complex games and to general decision making in the presence of uncertainty.

Game theory In the theory of simultaneous games, a minimax strategy is a mixed strategy which is part of the solution to a zero-sum game. In zero-sum games, the minimax solution is the same as the Nash equilibrium.

MINIMAX THEOREM The minimax theorem states: For every two-person, zero-sum game with finitely many strategies, there exists a value V and a mixed strategy for each player, such that (a) Given player 2′s strategy, the best payoff possible for player 1 is V, and (b) Given player 1′s strategy, the best payoff possible for player 2 is −V. Equivalently, Player 1′s strategy guarantees him a payoff of V regardless of Player 2′s strategy, and similarly Player 2 can guarantee himself a payoff of −V. The name minimax arises because each player minimizes the maximum payoff possible for the other—since the game is zerosum, he also maximizes his own minimum payoff. This theorem was established by John von Neumann,[1] who is quoted as saying “As far as I can see, there could be no theory of games … without that theorem … I thought there was nothing worth publishing until the Minimax Theorem was proved”.[2] See Sion’s minimax theorem and Parthasarathy’s theorem for generalizations; see also example of a game without a value. EXAMPLE The following example of a zeroB chooses B1 B chooses B2 B chooses B3 −2 0 −3 +2 +4 +1

sum game, where A and B make A chooses A1 +3 simultaneous moves, illustrates A chooses A2 −1 and minimax solutions. Suppose each A chooses A3 −4 player has three choices consider the payoff matrix for A

displayed at right. Assume the payoff matrix for B is the same matrix with the signs reversed (i.e. if the choices are A1 and B1 then B pays 3 to A). Then, the minimax choice for A is A2 since the worst possible result is then having to pay 1, while the simple minimax choice for B is B2 since the worst possible result is then no payment. However, this solution is not stable, since if B believes A will choose A2 then B will choose B1 to gain 1; then if A believes B will choose B1 then A will choose A1 to gain 3; and then B will choose B2; and eventually both players will realize the difficulty of making a choice. So a more stable strategy is needed. Some choices are dominated by others and can be eliminated: A will not choose A3 since either A1 or A2 will produce a better result, no matter what B chooses; B will not choose B3 since some mixtures of B1 and B2 will produce a better result, no matter what A chooses.

A can avoid having to make an expected payment of more than 1/3 by choosing A1 with probability 1/6 and A2 with probability 5/6, no matter what B chooses. B can ensure an expected gain of at least 1/3 by using a randomized strategy of choosing B1 with probability 1/3 and B2 with probability 2/3, no matter what A chooses. These mixed minimax strategies are now stable and cannot be improved. b) Brandenburger and Nalebuff discuss how game theory works and how companies can use the principles to make decisions. The authors state that managers can use the principles to create new strategies for competing where the chances for success are much higher than they would be if they continued to compete under the same rules. A classic example used in the article is the case of General Motors. The automobile industry was facing many expenses due to the incentives that were being used at the retailers. General Motors responded by issuing a new credit card where the cardholders could apply a portion of their charges towards purchasing a GM car. GM even went so far as to allow cardholders to use a smaller portion of their charges towards purchasing a Ford car, allowing both companies to be able to raise their prices and increase long term profits. This action by GM created a new system where both GM and Ford could be better off, unlike the traditional competitive model where one company must profit at the expense of another. The authors state that while the traditional win-lose strategy may sometimes be appropriate, but that the win-win system can be ideal in many circumstances. One advantage to win-win strategies is that since they have not been used much, they can yield many previously unidentified opportunities. Another major advantage is that since other companies have the opportunity to come out ahead as well, they are less likely to show resistance. The last advantage is that when other companies imitate the move the initial company benefits as well, in contrast to the initial company losing ground as they would in a win-lose situation. The authors also state that there are five elements to competition that can be changed to provide a more optimal outcome. These elements are: the players (or companies competing), added values brought by each competitor, the rules under which competition takes place, the tactics used, and the scope or boundaries that are established. By understanding these factors, companies can apply different strategies to increase their own odds of success. The first way that companies can increase their chances of success involves changing who the companies are that are involved in the business. One way that companies can improve their

odds of success is by introducing new companies into the business. For example, both Coke and Pepsi wanted to get a contract to have Monsanto as a supplier. Since Monsanto had a monopoly at the time, they encouraged Holland Sweetener Company to compete with Monsanto. Since it seemed Monsanto no longer had a monopoly on the market, they were able to get more favorable contracts with Monsanto. Another way that companies can improve their chances is by helping other companies introduce more or better complimentary products. Companies can also change the added values of themselves or their competitors. Obviously, companies can build a better brand or change their business practices so they operate more efficiently. However, the authors discuss how they can also lower the value of reducing the value of other companies as a viable strategy. Nintendo reduced the added value of retailers by not filling all of their orders, thus leaving a shortage and reducing the bargaining power of the stores buying its products. They also limited the number of licenses available to aspiring programmers, lowering their added value. They even lowered the value held by comic book characters when they developed characters of their own that became widely popular, presumably so that they wouldn’t have to pay as much to license these characters. Changing the rules is another way in which companies can benefit. The authors introduce the idea of judo economics, where a large company may be willing to allow a smaller company to capture a small market share rather than compete by lowering its prices. As long as it does not become too powerful or greedy, a small company can often participate in the same market without having to compete with larger companies on unfavorable terms. Kiwi International Air Lines introduced services on its carriers that were of lower prices to get market share, but made sure that the competitors understood that they had no intention of capturing more than 10% of any market. Companies can also change perceptions to make themselves better off. This can be accomplished either by making things clearer or more uncertain. In 1994, the New York Post attempted to make radical price changes in order to get the Daily News to raise its price to regain subscribers. However, the Daily News misunderstood and both newspapers were headed for a price war. The New York Post had to make its intentions clear, and both papers were able to raise their prices and not lose revenue. The authors also show an example of how investment banks can maintain ambiguity to benefit themselves. If the client is more optimistic than the investment bank, the bank can try to charge a higher commission as long as the client does not develop a more realistic appraisal of the company’s value.

Finally, companies can change the boundaries within which they compete. For example, when Sega was unable to gain market share from Nintendo’s 8-bit systems, it changed the game by introducing a new 16-bit system. It took Nintendo 2 years to respond with its own 16-bit system, which gave Sega the opportunity to capture market share and build a strong brand image. This example shows how companies can think outside the box to change the way competition takes place in their industry. Brandenburgr and Nalebuff have illustrated how companies that recognize they can change the rules of competition can vastly improve their odds of success, and sometimes respond in a way that benefits both themselves and the competition. If companies are able to develop a system where they can make both themselves and their competitors better off, then they do not have to worry so much about their competitors trying to counter their moves. Also, because companies can easily copy each other’s ideas, it is to a firm’s advantage if they can benefit when their competitors copy their idea, which is not usually possible under the traditional win-lose structure.

This article has some parallels with the article “Competing on Analytics” by (). The biggest factor that both of these articles have in common is how crucial it is for managers to understand everything they can about their business and the environment in which they work. In “Competing on Analytics”, the authors say that it is important to be familiar with this information so that managers can change the way they compete to improve their chances of success. At the end of “The Right Game: Use Game Theory to Shape Strategy”, the authors discuss how in order for companies to be able to change the environment or rules under which they compete they need to understand everything they can about the constructs under which they are competing. Whether a manager intends to use analytics or game theory to be successful, he or she must first have all available information and use that information to understand how to make the company better off. However, the work shown in “Competing on Analytics” tends to place an emphasis almost exclusively on the use of quantitative data to improve efficiency or market share of the company. “The Right Game”, however focuses more on using information to find creative ways of changing the constructs or rules applied between companies, often yielding a much broader impact.

Q4. a. Compare CPM and PERT explaining similarities and mentioning where they mainly differ. Ans. The Major Differences and Similarities between CPM and PERT CPM (Critical Path Method) & PERT(Program Evaluation and Review Technique) 1) PERT is a probabilistic tool used with three where CPM is a deterministic tool, with only

single Estimating the duration for completion of estimate of duration. 2) PERT is basically a tool for planning where CPM also allows and explicit estimate of and

control of time. costs in addition to time, therefore CPM can control both time and cost. 3) PERT is more suitable for R&D related where CPM is best suited for routine and those

projects where the project is performed for projects where time and cost estimates can the first time and the estimate of duration be accurately calculated are uncertain. 4) The probability factor i major in PERT but The deterministic factor is more so values or so

outcomes may not be exact. Outcomes are generally accurate and realistic. Extensions of both PERT and CPM allow the user to manage other resources in addition to time and money, to trade off resources, to analyze different types of schedules, and to balance the use of resources. Tensions of both PERT and CPM allow the user to manage other resources in addition to time and money, to trade off resources, to analyze different types of schedules, and to balance the use of resources. Graphs _ In mathematics, networks are called graphs, the entities are nodes, and the links are edges _ Graph theory starts in the 18th century, with Leonhard Euler _ The problem of Königsberg bridges _ Since then graphs have been studied extensively.

Graph Theory _ Graph G=(V,E) _ V = set of vertices _ E = set of edges _ An edge is defined by the two vertices which it connects _ optionally: A direction and/or a weight _ Two vertices are adjacent if they are connected by an edge _ A vertex’s degree is the number of its edges Graph G=(V,E) V = set of vertices E = set of edges Each edge is now an arrow, not just a line -> direction 1 3 2 4 5 1 3 2

The indegree of a vertex is the number of incoming edges The out degree of a vertex is the number of outgoing edges 5 4


MBA – 2nd SEM Subject Code – MB0049 Book ID – B1138 PROJECT MANAGEMENT Set – 2 Q1. Ans. Explain the nine steps which take project management to a New Horizon. The following nine steps are suggestive measures to provide new dimensions to the

management of projects. Step 1: Believing in discontinuity and not continuity with incremental improvements Continuity or the status quo is a function of quantum of changes. Incremental improvements are valid only when the rate of change is not excessive. Both the continuity and incremental improvements are linked with the rate of change and quantum. Beyond a threshold of rate of change, one cannot go with the continuity and incremental improvements. The modern day Internet and technological based world has witnessed the unprecedented rate of change and explosion in the quantum of changes. It is this process which has resulted in making continuity theory as baseless. Continuity in principle is to preserve the past where as discontinuity breaks the linkage with the past to the extent it can have fewer constraints to move into the future. There is no choice except to believe in discontinuity as only then mind and body is prepared to accept the unknowns and be ready to face it and control thereafter. Step2: Owning the problems and sharing the solutions More one owns problem, more he becomes experienced. It is not the number of years of service one has performed for a company but how much number of problems was faced and owned is now becoming the benchmark to define an experienced person from inexperienced. The true spirit of entrepreneurial outlook is to own the problems and solve the same and in this process make Money. The fixed mould mentality is to empower the problems to be faced outside than oneself and get the credit for solutions. Step 3: Breaking the status quo mentality No change means perpetuation of the Present into the Future. This is in contradiction to the nature as Future is not the extension of Present. Breaking the status quo mentality implies in taming

the future as it is the future which becomes Present at some point of time. Focusing into Future and affecting the Present is antiestablishment and require concerted efforts to move out from the comfortable zones. Project managers can hardly afford to have status quo mentality as day in and day out they are involved in acting in present to affect Future. At times, when we do not get away from the status quo mentality, contradictions fall apart everywhere in the project between the two types of group- the champions of future and those who believe in extending Present. Step 4: Stepping out of comfortable zone As apart of the step 3 and in a way extension of it, the comfortable zone is to dear to break and cross. Fear of uncertainties makes the comfortable zone more comfortable than if the fear did not exist. The project managers of tomorrow are those who have so called comfortable zone carve out from that area which conventionally is uncomfortable and that is the zone of uncertainties. If we seek comforts in conquering the uncertainties with planning and indomitable spirit of winning, then we are able to provide project leadership and inspire the team members to plunge into risk taking. Step 5: Human Capital by passing Financial Capital While the agriculture society witnessed the Nature as the foremost, the 20th century saw the men-machine interaction as the key factor for the capital formation. 21st century in this Internet age is beginning to see the human capital surpassing the financial capital. Venture capitalists were all over the place to fund any idea, which they thought would create a brave new world. Its consequent failure in the last couple of years could not be attributed to the over faith in Human capital but absence of effective filtering mechanism from good to bad idea. While Return On Investment (ROI) could be seen as financial driven phenomena, Return On Time Invested (ROTI) is basically based human efforts and its deployment. ROTI will be more meaningful to ROI in the context of new processes on their way to unfold in the beginning of 21st century. Step 6: Transform work culture from 5 to 7 dimensions Conventionally we all live in the conventional 5 dimensions of space i.e. X, Y and Z, Time and Mind. We need to supplement on these 5 dimensions the additional 2 dimensions of Passion and Joy If we do what we want do then the gap between Wish and Reality is so little that one is in position to provide its very best. It is his/her added 2 dimensions, which make the total difference. The new miracles in project management will take place when we bring the work of joy like in the art domain of music and paintings in our project work.

Step 7: Real number of encounters replacing number of years of experience The experience profile should be redefined by the number of encounters and problems faced instead of number of years. The wisdom evolved based on encounters is far richer than accumulated simply by repeating the same encounters n number of times in one’s employee ship. The secret is to increase the encounters meaningful to ones own dream or passion profile. Step 8: Seeking meaning out of change Change is first degree. It is a must. Change can be threat or an opportunity. It depends how one looks at it. If change is resisted, it becomes all the more difficult to see the real outcome of the change as it is partly distorted. Project implies change and that too a temporary one. It is essential to make people to have a real communication about the change. One of the major strategies to bring about a change is to communicate, communicate and communicate. Step 9: Detachment from the fruits of the results To act is within one’s control. To get the reward as a reaction to the action is not within one’s purview. Too much emphasis on that part, which is not within our control, is a wasteful exercise instead concentrates on actions to the best of one’s ability. The results so arrived at must be analyzed from the cause and effect relationship and constant learning must be made out of all such actions or group of actions. Attachment with the results of the actions often dilute one’s own energy and may shift one’s focus from the main road to its detour. Detachment from the results does not imply one should not demand or expect materialistic benefits, no, it only means that in case you do not get what you deserve, leave it and move forward rather than brooding over that part which is not within one’s control. The journey comes to a standstill if we get attached to the surroundings and to the results of the present beyond a small time frame. Project managers and team members are never stationary. They must move on. In summary, the new discovery or dimensions in project management heavily depends on the human factor of breaking ceilings, getting motivated all the time, working with passion, detachment with the results rather than with the actions, human capital surpassing that of financial capital, breaking the status quo mentality, owning the problems and solutions and creating discontinuity. The journey has just begun and it must continue as in the human race, there is no finishing line.

Q.2 Ans.

Discuss the traits of a successful project manager.

Ten Traits of a Successful Project Manager This short article highlights some of the best traits of a successful project manager. He or she has many of these abilities: 1. In Touch – Regularly checks the “pulse” of the project. The balance is in checking often enough for scope and length of the project, without over-checking. 2. Good Vibrations – Has inner and outer warmth. The manager understands people, and can use humor as a relief. 3. Rock-solid – Has a solid character. Everyone respects and trusts the manager and his actions. 4. Does the Job – Has a preference for action – doesn’t wait for issues to resolve themselves. 5. Good Reactions – Anticipates problems and plans as he can to handle or avoid them. 6. Not Scattered – Can handle mulitple tasks with proper focus. His management style is balanced between multi-tasking and focusing on the important details and tasks. This trait is connected to good time management. 7. Focused Picture – When buried in details, she can also look at the big picture, and understands how the teams efforts are integrated in the whole of the project. 8. Quality Workmanship - Through leading by example, quality outcomes and products are achieved. 9. Bends, but Unbreakable – Has flexibility, but can make firm decisions. It is a key trait to be able to understand when decisions have to be made by the manager (as opposed to letting others intercede or make decisions for the manager by default.) 10. Leverages Tools – Learns and uses tools to help manage projects. A good PM doesn’t get buried learning complex project management tools – especially if she does not yet know the theories or uses behind techniques (such as earned-value management or PERT charts).


Define the change management model.

Ans. Change management is a systematic approach to dealing with change, both from the perspective of an organization and on the individual level. A somewhat ambiguous term, change management has at least three different aspects, including: adapting to change, controlling change, and effecting change. A proactive approach to dealing with change is at the core of all three aspects. For an organization, change management means defining and implementing procedures and/or technologies to deal with changes in the business environment and to profit from changing opportunities Successful adaptation to change is as crucial within an organization as it is in the natural world. Just like plants and animals, organizations and the individuals in them inevitably encounter changing conditions that they are powerless to control. The more effectively you deal with change, the more likely you are to thrive. Adaptation might involve establishing a structured methodology for responding to changes in the business environment (such as a fluctuation in the economy, or a threat from a competitor) or establishing coping mechanisms for responding to changes in the workplace (such as new policies, or technologies). Terry Paulson, the author of Paulson on Change, quotes an uncle’s advice: “It’s easiest to ride a horse in the direction it is going.” In other words, don’t struggle against change; learn to use it to your advantage. In a computer system environment, change management refers to a systematic approach to keeping track of the details of the system (for example, what operating system release is running on each computer and which fixes have been applied).

The Change Management Model The model follows a 3-phase, 8-step process which is represented graphically below. Click on the graphic below to view the phase and step descriptions. A change management model Dealing With The Truths of Change Leaders of change take note: • Emotional reactions are at least as important as any other aspect of implementing change. • The higher the involvement in change, the less negative the inevitable reactions. • The intensity of emotional reaction is proportionate to the speed of change. • The unresolved effects of change are cumulative.

• The longer a group / individual / situation has remained static, the greater the investment in the status quo. Therefore, the greater the resistance and reaction. • Rewards and incentives can cause people to change, but they will not neutralise their feelings of loss. Dealing With Change Misconceptions • Change happens quickly • Survivors are glad they have a job • Time takes care of everything • Everyone who is not on board has something wrong with them • The weak people are the ones who leave • During change, those who appear OK really are • People “hear” what senior management communicates • People take senior management communication at face value • If the communication is done “right” the first time, it is enough • By changing the formal relationship, how we “do business” will change • The transition behaviour of the senior management is invisible to the rest of the organisation • Pressures that caused the change will be seen in a rational manner We suggest these misconceptions require a thoughful approach from those leading change. What Happens when your Organisation Undergoes Change? People frequently feel overwhelmed when there are major changes within their organisation. They are often uncertain of their future, and the future of their colleagues in the organisation. Consequently the following fear of change reactions may occur. People generally feel smaller, ie. Self-conscious - the only one feeling the effects Missing - opportunities, job, status, security taken away Alone - nobody understands, the unlucky one Lethargic- commitment goes, energy levels drop Limits - each person has limits to the amount of change they’re comfortable with Enough - when those limits are reached they cry enough and resist further change Revert - people easily revert back to known behaviours

Because we are all individuals we react differently. Some of the common reactions to change result in the following behaviours at work:        Drop in morale Drop in work outputs and Drop in productivity Drop in Manager’s credibility Drop in Commitment to the organisation and work Drop in levels of service Staff resisting change or conflict and making life difficult. This especially happens when people have been in the organisation for a long time. Staff “bad mouthing” the organisation/management or behaving in negative ways because they feel angry and/or threatened and want to hit back at the organisation. Effective leaders of change are aware of these not uncommon individual reactions to change. They plan how to deal with change by acccepting that employee anticipation and fear of change is a significant organisational risk unless people can be encouraged to learn and engage with the change and reflect upon the choices and options available to them. “The dogmas of the quiet past are inadequate to the stormy present.The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew” Abraham Lincoln

Q.4 Describe the three major classification and categories of Risk management. Ans. Risk management is a structured approach to managing uncertainty related to a threat, a sequence of human activities including: risk assessment, strategies development to manage it, and mitigation of risk using managerial resources.

About Types of Risk Management Commercial enterprises apply various forms of risk management procedures to handle different risks because they face a variety of risks while carrying out their business operations. Effective handling of risk ensures the successful growth of an organization. Various types of risk management can be categorized into the following:

Operational risk management: Operational risk management deals with technical failures and human errors

Financial risk management: Financial risk management handles non-payment of clients and increased rate of interest.

Market risk management: Deals with different types of market risk, such as interest rate risk, equity risk, commodity risk, and currency risk

Types of Risk Management Techniques Risk management is a business process in which a business analyzes risk in an effort to miminize the effects of such risk. Organizations must identify risks and assess how dangerous each risk could be to the organization. Taking steps to eliminate risks will reduce the possibility of a financial loss. Risk management should be continuous and revisited at intervals the organization deems appropriate.

Q.5 List and explain the 10 rules which serve as the guidelines for development of high technology. Ans. Guidelines for development of high technology Some guidelines in the form of rules which help organization to be strong in this area. Rule1. Identify the critical technology and make a deliberate choice for indigenous development. Rule2. Always aim one step higher in performance. Rule3. Focus on multi use technologies. Rule4. Spot the competency of divisions and empower them for technology development.

Rule5. Ensure redundancy for critical systems and technologies. Rule6. Focus efforts through Programme/Projects/Mission oriented approach. Rule7. Build concurrency into every activity. Rule8. Build long term partnership with all the stake holders. Rule9. Focus on Problem Forecasting and Prevention. Rule10. Ensure continuous and integrated Performance Measurement.