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Unit –III

PERSONALITY personality : an individual’s unique pattern of thoughts, feelings & behaviors that persist over time and across situations – unique differences – stable & enduring Personality Types You will undoubtedly encounter many different types of personalities in the work place, each with their own unique blend of nuances. But there are four basic types of personalities from which they are based, which is commonly referred to as A, B, C, and D. Although volumes have been written on such personality traits, here is a synopsis: Type "A" Personality - Is a highly independent and driven personality, typically representing the leaders in business. They are blunt, competitive, no-nonsense types who like to get to the point. They are also strong entrepreneurial spirits (risk takers). As such, they embrace change and are always looking for practical solutions for solving problems. Type "B" Personality - Represents highly extroverted people who love the spotlight. Because of this, they are very entertaining and possess strong charisma (everyone likes to be around them). Small wonder these people are sales and marketing types. They thrive on entertaining people and are easily hurt if they cannot sway someone (such as "bombing" on stage). Type "C" Personality - The antithesis of Type "B"; they are introverted detailists as represented by such people as accountants, programmers, and engineers. They may have trouble communicating to other people, but are a whirlwind when it comes to crunching numbers or writing program code. They tend to be very cautious and reserved, and will not venture into something until after all the facts have been checked out. Type "D" Personality - Is best characterized as those people who resist any form of change and prefer the tedium of routine, such as in clerical assignments. They are not adventurous, resist responsibility and prefer to be told what to do. It is not uncommon to find people with a blend of personalities, particularly A-B and C-D. But these basic personality types explain why some people work well together and others do not. For example Type-A clashes with Type-D simply because one is more adventurous than the other, and Type-B clashes with Type-C as one exhibits an extroverted personality and the other is introverted. Conversely Type-A works well with Type-B, and Type-C works well with Type-D.


DETERMINANTS OF PERSONALITY Biological Factors Heredity: • It refers to physical stature, facial attractiveness, sex, temperament, muscle composition and reflexes, energy level, and biological rhythms are characteristics that are considered to be inherent. • It plays an important part in determining an individual's personality. • Heredity approach argues that the ultimate explanation of an individual's personality is the molecular structures of the genes, which are located in the chromosomes. • Recent research studies shows that young children lend strong support to the power of heredity and finding shows that some personality traits may be built into the same genetic code that affects factors like height and hair color. Brain: • Brain is the second biological approach to determine personality. • It plays an important role in determining personality. • Electrical Stimulation of the Brain (ESB) and Split brain psychology results indicates that a better understanding of human personality and behavior might come from a closer study of the brain. • The definite areas of the human brain are associated with pain and pleasure. Research study shows that these things are true. Biofeedback: • It is third biological approach to determine personality. • Physiologists and psychologists felt that biological functions like brainwave patterns, gastric and hormonal secretions, and fluctuations in blood pressure and skin temperature were beyond conscious control. Recent research shows that these functions can be consciously controlled through biofeedback techniques. • For this purpose, individual can learns the internal rhythms of a particular body process through electronic signals that are feedback from equipment which is wired to body. • In this process, the person can learn to control the body process through questions. • It is one of the interesting topics to do future research work in personality. Physical Features: • It is third biological approach to determine personality. • It is vital ingredient of the personality, it focus an individual person's external appearance which also determined the personality. • Physical features like tall or short, fat or skinny, black or white. These physical features will be influenced the personal effect on others and also affect self concept of individual. • Recent research studies shows that definitely this features influence to individual personality in an

organization. In totally, heredity would be fixed at birth and no amount of experience can be altering them through creation of suitable environment. Apart from this, personality characteristics are not completely dictated by heredity. There are other factors also influenced to determining personality. Cultural Factors "Each culture expects, and trains, its members to behave in ways that are acceptable to the group. To a marked degree, the child's cultural group defines the range of experiences and situations he is likely to encounter and the values and personality characteristics that will reinforce and hence learned". -Paul H Mussen • Cultural factors are also major factors which influence to determine individual personality. • It refers to traditional practice, customs, procedure, norms and rules and regulation followed by the society. • It significantly influence to individual behavior compare to biological factors. • Cultural factors determine attitudes towards independence, aggression, competition, cooperation, positive thinking, team spirit, and a host of the human being and discharge his/her duties towards valuable responsibilities to society. • Western culture influence to Indian society. It is best example of the cultural factors also determine the personality. Family Factors • Family factors are also major factors which influence to determine individual personality. • Family consists of husband and wife and their children's. • Family role is very important for nurturing and personality development of their children. • Family will be guided, supervised, take care of all family members, cooperation, Organizational Behavior coordination and cooperation in work and also explained the role and responsibilities towards the family, society and real life. • Family either directly or indirectly influence to person for development of individual personality. Social Factors • Social factors are also major factors which influence to determine individual personality. • It involves the reorganization of individual's in an organization or society. • It refers to acquiring of wide range of personality by acquiring and absorbed by themselves in the society or an organization. • Socialization process is starting from home and extending to work environment in an organization or society. • It focuses on good relationships, cooperation, coordination and interaction among the members in the society or an organization or a family. In totally, environment factors consist of cultural factors, family factors, and social factors. Situational Factors

The id is best described as chaotic and impulsive and based on the pleasure principle.). the psychoanalytic theory of personality is a dynamic relationship among three components of the mind which balance bodily energies to achieve a healthy existence of the physical unit. parents. the id is sexual energy (sacral chakra) fueled to seek sexual pleasure but most of the time attempts are “sublimated” and “repressed” (1958. it also influence to personality of individual person. Demands made by the superego also cause anxiety and conflict. and other moral officials in society. personality is stable and consistent and it does change in different situations. The ego has to balance demands of the id with what is best and most viable in reality. The ego functions in relation to the reality principle to pursue a healthy state by means of postponing the need to satisfy impulses. The third component is the superego which functions as the moral agent. 78). The desexualized energy of the ego allows for more control and mediation. and even evil are non-existent to the knowledge of the primitive id.. • In general term. PERSONALITY THEORIES Psychoanalytic Theory of Personality As defined and developed by Psychologist Sigmund Freud. 625). beliefs. which is highly demanding. In sum. Morals. Its main purpose is to ensure the “limitations of satisfactions” of the id 4 . The balancing of “bodily needs on one hand and motor activity on the other” require mediation by an organization called the ego (1958. Ego: In an attempt to deal with anxiety brought by the id’s repression of impulses. The pleasure principle pursues pleasure and avoids pain. It is considered the oldest mental component and has not progressed in development. 12). 77). Superego: The superego is simply our conscious. Sexual drives and instincts are at the very pinnacle of the id’s goals. p. goodness. p. 55).• Situational factors also influence to determine of personality. It is driven by authorities. respectively the ego and the id (Freud & Brill (Ed. p. The Interaction of Personality and Situational Factors are outlined: • Strong situational pressures • Personality may not predict behavior • Example: enforcement of rules • Weak Situational pressures • Personality may predict behavior • Example: Customer sales representative • A strong situation can overwhelm the effects of individual personalities by providing strong cues for appropriate behavior. 1966. p. the id is the “obscure inaccessible part of our personality” (p. • Situational factors are very important to change the individual behavior in a different circumstance at different situations. The conflict is best described as a struggle between the “ethical self” and the “primitive self”. The id’s energy is derived from sources directly of “somatic processes” (1958. If there are conflicting interactions among the mechanisms. neurotic and psychotic disturbances are created. Id: According to Freud (1958). The ego is in control of the demands placed by the innate instincts of the id. the ego developed from the id.

therefore. if ego reverts to transgression). the ability to push into an incredibly hostile environment and not only hold its own. biological force to develop one's capacities and talents to the fullest. In relation to the ego. views about life. is an endless process of creatively moving forward. capacities. 149) by placing judgment on the ego’s decisions (i. The main tenets of his theory will be focused upon here. Representing traditional and innate influences of the past and hereditary are the only common factors among the superego and id. On the other hand. on the other hand. but experiences are being accurately symbolized and continually and freshly valued in terms of the satisfactions experienced by the individuals. Self-Actualizing Tendency Rogers' person-centered theory emphasized the concept of "self-actualization. Carl Rogers (1902-1987) istruly the central figure in the humanistic orientation. but to adapt. The individual's central motivation is to learn and to grow. and through that struggle develop new aspects of their skills. he observed how seaweeds resisted against the heavy pounding of the sea waves crushing upon them. the concept of ‘self’ is presenting him just like a tiny dot and it grows and develops as the age of child increases. Rogers theory of personality development is based upon nineteen propositions but the central focus is on the concept of ‘self’. and become itself. p. developing out of interpersonal relationships and striving for consistency.” Organism Valuing Process According to Rogers. It draws people toward experiences that are growth producing and away from those that would inhibit growth. attitudes and opinions that each person holds to be true about his or her personal existence. the self is the central ingredient in human personality and personal adjustment. struggle to master then. the ego is developed by personal experiences. the superego is “like a strict father with a child” (1958. the forward thrust of life. Hence human beings instinctively value some things and abhor some. 149) and punishment is served by submission to the superego. even if only in small ways. In Rogers' view. Self Rogers believed that when a child comes into this world. p. The seaweeds took the blows of waves upon them but after every attack they would stand erect again which shows their innate urge to live life. Life. Rogers says. Positive Regard 5 .. Carl Rogers Self Theory Since the study of personality began. Rogers has related his experience of watching seaweeds on a seaside. it is an ongoing process in which values are never fixed or rigid. Rogers described the self as a social product. “Here in this palm like seaweed was the tenacity of life." This concept implies that there is an internal. and dynamic system of learned beliefs. develop.e. The process is a subconscious guide that evaluates experience for its growth potential. Self-concept is defined as the totality of a complex. Regarding this “self-actualization”.(1958. Growth occurs when individuals confront problems. personality theories have offered a wide variety of explanations for behavior and what constitutes the person. organized.

When people show conditional positive regard it means that an individual is taken not as a ‘self’ and an entity but as a collection of behaviors. And since these standards were created without keeping each individual in mind. and we are forced to live with conditions of worth that are out of step with organism valuing. 6 . we develop instead an "ideal self". This gap between the real self and the ideal self. A condition of worth develops when one’s behavior is evaluated as more or less worthy of self-regard by others. Hence. you will become. a child gets his favorite chocolate only when he performs well in a class test. more often than not he finds himself unable to meet them. respect. self-worth. It is the "you" that. Rogers is of the view that it hampers the positive growth of ‘self’ and as a result conditional positive self-regard develops. On the other hand.Among many things that human organisms instinctively value is positive regard. Rogers is suggesting something not real. Rogers believes that unconditional positive regard inessential to healthy development. It is a positive attitude towards the self which is no longer directly dependent on the attitude of others. It means that one begins to like oneself only if he meets up with the standards others have applied to him. something that is always out of our reach. It is one’s perception of some self-experience of another which makes a positive difference ionone’s field of experience resulting in a feeling of warmth. to the extent that our society is out of sync with the actualizing tendency. rather than2 when he truly actualizes his potentials. Thus one is appreciated only on showing acceptable behaviors. and a positive self-image. needs and receives positive regard and self-regard. By ideal. the "I am “and the "I should" is called in congruity. Conditions of Worth The need for positive self-regard leads to a selective perception of experience in terms of the conditions of worth that are made by others. the standard we cannot meet. But this positive self-regard is achieved by experiencing the positive regard others show us over our years of growing up. sympathy and acceptance towards others. Conditional Positive Regard Getting positive regard “on condition” Rogers calls conditional positive regard. People who have not experienced it may come to see themselves in the negative ways that others have made them feel. liking. and receive only conditional positive regard and self-regard. Positive Self-regard Positive self-regard is self-esteem. Incongruity Rogers identifies the "real self" as the aspect of one's being that is founded in the actualizing tendency. follows organism valuing. Unconditional positive regard Unconditional positive regard is blanket acceptance and support of a person regardless of what the person says or does. and therefore unable to maintain any sense of self-esteem. if all goes well. Hence with awareness of the self the need for positive regard develops and it is essential to the proper growth of one’s self.

believe they can be effective agents in reaching desired goals (i. 7 . the results are not determined by luck). Competition is in general extrinsic because it encourages the performer to win and beat others. In one study demonstrating this effect. Motivation concepts Intrinsic and extrinsic motivation Intrinsic motivation refers to motivation that is driven by an interest or enjoyment in the task itself.[clarification needed] Students are likely to be intrinsically motivated if they:  attribute their educational results to factors under their own control (e.   Extrinsic motivation: It comes from outside of the individual. guides and maintains goal-oriented behaviors. Intrinsic motivation has been studied by social and educational psychologists since the early 1970s. A crowd cheering on the individual and trophies are also extrinsic incentives. the effort expended).e. The needs for positive regard from others and positive self-regard would match organism ic evaluation and there would be congruence between self and experience. with full psychological adjustment as a result.g. not to enjoy the intrinsic rewards of the activity. rather than just rote-learning to achieve good grades. Social psychological research has indicated that extrinsic rewards can lead to over justification and a subsequent reduction in intrinsic motivation. children who expected to be (and were) rewarded with a ribbon and a gold star for drawing pictures spent less time playing with the drawing materials in subsequent observations than children who were assigned to an unexpected reward condition and to children who received no extrinsic reward Selfdetermination theory proposes that extrinsic motivation can be internalised by the individual if the task fits with their values and beliefs and therefore helps to fulfill their basic psychological needs. are interested in mastering a topic. an individual may develop optimally and avoid the previously described outcomes if they experience only "unconditional positive regard" and no conditions of worth develop. Common extrinsic motivations are rewards like money and grades. Motivation is what causes us to act. whether it is getting a glass of water to reduce thirst or reading a book to gain knowledge. This ideal human condition has been called "fully functioning person" by Rogers.. He listed characteristics of fully functioning persons: MOTIVATION Definition: Motivation is defined as the process that initiates. coercion and threat of punishment.Fully Functional Individual According to Rogers. Research has found that it is usually associated with high educational achievement and enjoyment by students evaluation theory. and exists within the individual rather than relying on any external pressure.

Basic drives could be sparked by deficiencies such as hunger. All these need are inter-related because each individual is an integrated organized whole. Unifying force means the drive to actual his our image of himself. self-development and self actualization which act as powerful though unconscious. he becomes to some extent mentally ill and such frustrated man cannot be motivated any further until his essential need is satisfied. clothes and shelter and (b) Ego-satisfaction including self-esteem. which motivates a person to seek food. recognition from others. Frustration of Basic Needs Makes a Man Sick:. opportunities for achievements. yet unmotivated to dedicate this intelligence to certain tasks. Inner motivation can be more devisor for behaviour than any external influence. 6. There are two desiring factors in motivation-(a) Fundamental needs. A soon as the goal is achieved he would be no longer interested in work. The outline of a person's self image are fairly well checked in early childhood and there after do not act 8 . Goals are Motivators:-Goals and motives are inseparable. Characteristics of Motivation 1. it is very essential for the management to know his goal to push him to work. 2. Therefore. The treat motivates the animals to perform the trick consistently. the role of extrinsic rewards and stimuli can be seen in the example of training animals by giving them treats when they perform a trick correctly.Man is a social animal. Yale School of Management professor Victor Vroom's "expectancy theory" provides an account of when people will decide whether to exert self control to pursue a particular goal. The whole Individual is motivated. Motivation is a psychological Concept :. a person may be highly intelligent according to a more conservative definition (as measured by many intelligence tests).Self-control The self-control of motivation is increasingly understood as a subset of emotional intelligence. It is an unending process so the process of motivation is also unending to induce the person to satisfy is innumerable wants. 3. whereas more subtle drives might be the desire for praise and approval. 5. motivator of behaviour. These are thought to originate within the individual and may not require external stimuli to encourage the behavior. Drives and desires can be described as a deficiency or need that activates behavior that is aimed at a goal or an incentive. Wants are innumerable and cannot be satisfied at on time. As a social animal he has innumerable wants which induce him to work. By contrast. Man works to achieve the goals. The self-concept as a Unifying Force :. not part of Him:-A person's basic needs determine to a great extent what he will try to do at any given time. such as food. 4.If anybody fails in trying to mt a need which the feels is essential for him. which motivates a person to behave in a manner pleasing to others. If one basic need is adequately satisfied for a given individual it loses power as a motivator and does into determine his current behaviour but at the same time other s needs continue to emerge. Motivation is an unending Process:. even later when the treat is removed from the process.Motivation should come from inside each individual.According to Geller-man unifying forces run through each individual's history.

or gaining social capital will make them happier.F. or if negatively received people are less likely to act in this manner. while hoping for B. drinking water. two things that individual is always trying to do are (a) to act like the person. As opposed to in drive theory. a person towards them. reap harmful effects that can jeopardize your goals. stimuli "attract". Positive reinforcement is demonstrated by an increase in the future frequency or magnitude of a response due to in the past being followed contingently by a reinforcing stimulus. such as engaging in activities that are expected to be profitable. Incentive theory in psychology treats motivation and behavior of the individual as they are influenced by beliefs. Applying proper motivational techniques can be much harder than it seems. motivation is mediated by environmental events. such as B. will if possible try to behave tt way in later life.e. 9 . Thus. incentive theory involves positive reinforcement: the stimulus has been conditioned to make the person happier. and the concept of distinguishing between intrinsic and extrinsic forces is irrelevant. and other people. tangible or intangible. is presented after the occurrence of an action (i. This is done by associating positive meaning to the behavior. or if they drink when thirsty. a person knows that eating food. a person has come to know that if they eat when hungry. to mean that a person's actions always have social ramifications: and if actions are positively received people are more likely to act in this manner. For example. and decreases as duration lengthens. which involves negative reinforcement: a stimulus has been associated with the removal of the punishment-. Steven Kerr notes that when creating a reward system. Skinner and literalized by behaviorists. Incentive theory is promoted by behavioral psychologists. Negative reinforcement involves stimulus change consisting of the removal of an aversive stimulus following a response. such as drive theory. Positive reinforcement involves a stimulus change consisting of the presentation or magnification of an appetitive stimulus following a response.inertly change for example. behavior) with the intent to cause the behavior to occur again. From this perspective. in the direction of the motivation. For instance. he things he is . to use the term above. In incentive theory. Studies show that if the person receives the reward immediately. Motivation comes from two sources: oneself. it will eliminate that negative feeling of thirst. Repetitive action-reward combination can cause the action to become habit. A reinforcer is any stimulus change following a response that increases the future frequency or magnitude of that response. it will eliminate that negative feeling of hunger. and in the process. Incentive theory distinguishes itself from other motivation theories. respectively. a child who easily seems himself as a leader. it can be easy to reward A. and (b) to get what he things. the effect is greater. In terms of behaviorism.the lack of homeostasis in the body. Motivational theories Incentive theory A reward. These two sources are called intrinsic motivation and extrinsic motivation. he can. especially by Skinner in his philosophy of Radical behaviorism. As opposed to the body seeking to reestablish homeostasis pushing it towards the stimulus. Reinforcers and reinforcement principles of behavior differ from the hypothetical construct of reward.

it is clear that drive reduction theory cannot be a complete theory of behavior. beliefs. which combine with drives for "food" in order to explain cooking render it hard to test. The first problem is that it does not explain how secondary reinforcers reduce drive. Maslow developed the Hierarchy of needs consistent of five hierarchic classes. the whole behavior of a human will be oriented to satisfy this deficit. It shows the complexity of human requirements. such as hunger. or a hungry human could not prepare a meal without eating the food before he finished cooking it. Need theories Need hierarchy theory The content theory includes the hierarchy of needs from Maslow and the two. that leave the validity of drive reduction open for debate. such as a thermostat. Basically it is oriented on a future need for security. Subsequently we do have the second level. In addition. feeling. or actions. They decide about to be or not to be. however. after the food has been consumed. They do this by changing their attitudes. which awake a need for security.factor theory from Herzberg. As time passes the strength of the drive increases if it is not satisfied (in this case by eating). per se. the drive model appears to be compatible with sensations of rising hunger as the food is prepared. from not satisfying a drive (by adding on other traits such as restraint). The theory is based on diverse ideas from the theories of Freud to the ideas of feedback control systems. 10 . in retrospect. money satisfies no biological or psychological needs. Secondly. For example. The basic requirements build the first step in his pyramid. Maslow says that first of all the basic requirements have to be satisfied. While not a theory of motivation. Drive theory has some intuitive or folk validity. that another decision may have been preferable. a consumer may seek to reassure himself regarding a purchase.Drive-reduction theories There are a number of drive theories. There are several problems. or adding additional drives for "tasty" food. blaming. and denying. cognitive dissonance occurs when an individual experiences some degree of discomfort resulting from an incompatibility between two cognitions. The ability of drive theory to cope with all kinds of behavior. Dissonance is also reduced by justifying. Upon satisfying a drive the drive's strength is reduced. Cognitive dissonance theory Suggested by Leon Festinger. It is one of the most influential and extensively studied theories in social psychology. a drive. The Drive Reduction Theory grows out of the concept that we have certain biological drives. making the drive a homuncular being—a feature criticized as simply moving the fundamental problem behind this "small man" and his desires. the theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. such as hunger. a decrease in subjective hunger. but a pay check appears to reduce drive through second-order conditioning. and. is viewed as having a "desire" to eat. The American motivation psychologist Abraham H. For instance when preparing food. Abraham Maslow's theory is one of the most widely discussed theories of motivation. If there is any deficit on this level. For example.

from the basic to the complex. The person advances to the next level of needs only after the lower level need is at least minimally satisfied." Herzberg's theory has found application in such occupational fields as information systems and in studies of user satisfaction (see Computer user satisfaction). but "respect for me as a person" is one of the top motivating factors at any stage of life. the more individuality. concludes that certain factors in the workplace result in job satisfaction. status.g. while the top of the hierarchy comprise the self. satisfied needs do not.a. thirst. listed from basic (lowest-earliest) to most complex (highest-latest) are as follows: Physiology (hunger. (e. which form the third stage. (e. but. job security. intrinsic/extrinsic motivation. recognition. Only unsatisfied needs influence behavior.realization So theory can be summarized as follows: Human beings have wants and desires which influence their behavior. if absent. He distinguished between: Motivators. The name Hygiene factors is used because. responsibility) which give positive satisfaction. sleep. The further the progress up the hierarchy. the motives shift in the social sphere.g. but absence can cause health deterioration. The theory is sometimes called the "Motivator-Hygiene Theory" and/or "The Dual Structure Theory. the presence will not make you healthier.k. result in demotivation. and Hygiene factors. humanness and psychological health a person will show.After securing those two levels. salary and fringe benefits) that do not motivate if present. challenging work. they are arranged in order of importance. like hygiene.) Safety/Security/Shelter/Health Belongingness/Love/Friendship Self-esteem/Recognition/Achievement Self actualization Herzberg's two-factor theory Frederick Herzberg's two-factor theory. Alderfer's ERG theory 11 . a. they don't lead to dissatisfaction but no satisfaction. Psychological requirements consist in the fourth level. The needs. but if absent.The factors that motivate people can change over their lifetime. etc. Since needs are many.

this end state is a reward in itself. As a result. competence feedback. A goal's efficiency is affected by three features: proximity. These include the intrinsic component from Maslow's esteem category and the characteristics included under self-actualization. focuses on the importance of intrinsic motivation in driving human behavior. The second group of needs are those of relatedness. Notably. Self-determination theory Self-determination theory. and growth. SDT posits a natural tendency toward growth and development. The Achievement Motivation Inventory is based on this theory and assesses three factors (17 separated scales) relevant to vocational and professional success.Alderfer. This explains why some children are more motivated to learn how to ride a bike than to master algebra. Drive Theory. hence the label: ERG theory. it simplifies the field of motivation considerably and allows findings from one theory to be translated into terms of another. and relatedness. Like Maslow's hierarchical theory and others that built on it. expanding on Maslow's hierarchy of needs. including Incentive Theory. Achievement Motivation is an integrative perspective based on the premise that performance motivation results from the way broad components of personality are directed towards performance. and they align with Maslow's social need and the external component of Maslow's esteem classification. They include the items that Maslow considered to be physiological and safety needs. created the ERG theory. difficulty and specificity.g. At the same time 12 . Introduced in their 2007 Academy of Management Review article. not too hard or too easy to complete. A goal should be moderate. Cognitive theories Goal-setting theory Goal-setting theory is based on the notion that individuals sometimes have a drive to reach a clearly defined end state. Alderfer isolates growth needs' an intrinsic desire for personal development. however. Integrating theories of motivation. most people are not optimally motivated. relatedness. Self-Efficacy and Goal Setting. In both cases. Also. The existence group is concerned with providing our basic material existence requirements. Especially it integrates formerly separated approaches as Need for Achievement with e. Finally. An ideal goal should present a situation where the time between the initiation of behavior and the end state is close. The primary factors that encourage motivation and development are autonomy. Often. social motives like dominance. as many want a challenge (which assumes some kind of insecurity of success). integrative theory of motivation is Temporal Motivation Theory. Need Theory. This theory posits that there are three groups of core needs — existence. These social and status desires require interaction with others if they are to be satisfied. Broad theories The latest approach in developing a broad. SDT does not include any sort of "autopilot" for achievement. it includes a range of dimensions that are relevant to success at work but which are not conventionally regarded as being part of performance motivation. Unlike these other theories. it synthesizes into a single formulation the primary aspects of all other major motivational theories. developed by Edward Deci and Richard Ryan. but instead requires active encouragement from the environment.the desire we have for maintaining important interpersonal relationships.

Most children have no idea how much effort they need to reach that goal. It can support the translation of intentions into action. an object. Attitudes are either positive or negative. respectively. however. or negative. motivation and volition refer to goal setting and goal pursuit. Specificity concerns the description of the goal in their class. consumer products. Therefore. An example of such a motivational and volitional construct is perceived self-efficacy. Motivation is seen as a process that leads to the forming of behavioral intentions. etc. or against. ATTITUDE Defintion: An attitude is the psychological response to a person. Attitudes typically have three components. groups of people. Several self-regulatory constructs are needed to operate in orchestration to attain goals. The cognitive component is made up of the thoughts and beliefs people hold about the object of the attitude. all can be attitudinal objects. • The affective component consists of the emotional feelings stimulated by the object of the attitude. institutions. Unconscious motivation Some psychologists believe that a significant portion of human behavior is energized and directed by unconscious motives. Self-efficacy is supposed to facilitate the forming of behavioral intentions. products. individual people. to a situation. Volition is seen as a process that leads from intention to actual behavior. • The behavioral component consists of predispositions to act in certain ways toward an attitude object. positive. Both processes require self-regulatory efforts. According to Maslow. Attitude Formation In Social Psychology attitudes are defined as positive or negative evaluations of objects of thought. In other words. They are either for. pro. it is possible to be ambivalent about the attitudinal object and have a mix of positive and negative feelings and thoughts about it. • Attitudes involve social judgments. social trends. the development of action plans. • 13 . Models of behavior change Social-cognitive models of behavior change include the constructs of motivation and volition. and the initiation of action. "Psychoanalysis has often demonstrated that the relationship between a conscious desire and the ultimate unconscious aim that underlies it need not be at all direct. to society and to life itself that generally influence our behaviors and actions. The goal should be objectively defined and intelligible for the individual. The object of an attitude can be anything people have opinions about. or con. A classic example of a poorly specified goal is to get the highest possible grade.people want to feel that there is a substantial probability that they will succeed.

the process requires an unconditioned stimulus (UCS) that produces an involuntary (reflexive) response (UCR). In this case the model is the UCS and our reaction to him. etc. In Pavlov’s research the UCS was meat powder which led to an UCR of salivation. Two events that repeatedly occur close together in time become fused and before long the person responds in the same way to both events. It is based on the “Law of Effect” and involves voluntary responses. or repeatedly for several acquisition trials. which involves behaving differently. Psychological factors involved in Attitude Formation and Attitude Change 1. schools. community organizations.. directed toward a group of people or its individual members. followed by an unpleasant experience).e. Advertisers create positive attitudes towards their products by presenting attractive models in their ads. Prejudices can be either positive or negative. for a variety of reasons we don’t always act on our attitudes. A prejudice is an arbitrary belief. whereas weak attitudes are not very important and have little impact. Attitudes tend to be stable over time. friends. however. Thus. whereas other attitudes may rarely be noticed. Attitudes vary along dimensions of strength and accessibility. the neutral stimulus will lead to the same response elicited by the unconditioned stimulus. but eventually the bell alone caused the dog to salivate. or feeling. usually unfairly. Strong attitudes are very important to the individual and tend to be durable and have a powerful impact on behavior. Behaviors (including verbal behaviors and maybe even thoughts) tend to be repeated if they are reinforced (i. If a neutral stimulus (NS) is paired. Originally studied by Pavlov. followed by a positive experience). however. the attitude is strengthened and is likely to be expressed again. It involves involuntary responses and is acquired through the pairing of two stimuli. or her. Operant Conditioning is a simple form of learning. At first the bell elicited no response from the dog. Classical conditioning is another simple form of learning. the term is usually used to refer to a negative attitude held toward members of a group. At this point the stimulus is no longer neutral and so is referred to as a conditioned stimulus (CS) and the response has now become a learned response and so is referred to as a conditioned response (CR). 2. behaviors tend to be stopped when they are punished (i. either very dramatically on one occasion. The reinforcement can be as subtle as a smile or as obvious as a raise in salary. but a number of factors can cause attitudes to change. or acts out an attitude toward some group. is an automatic positive response.. religious doctrine.e. and this is reinforced by one’s peers. In a similar fashion. Conversely. Direct Instruction involves being told what attitudes to have by parents. The product is the original NS which through pairing comes to elicit a positive conditioned response. toward the members of a group. Stereotypes are widely held beliefs that people have certain characteristics because of their membership in a particular group. pleasant or unpleasant experiences with members of a particular group could lead to positive or negative 14 . if one expresses.• • • • • Attitudes involve a readiness (or predisposition) to respond. 3. Operant conditioning is especially involved with the behavioral component of attitudes. The NS was a bell. Accessible attitudes come to mind quickly. Prejudice may lead to discrimination.

For example. He points to a truism that in any field of scientific inquiry. At the heart of cognitive consistency theories is the assumption that people are motivated to seek coherent attitudes. If they are getting reinforced for certain behaviors or the expression of certain attitudes. the person will not be aware of the unconscious motivation at the time it is operative. Rational Analysis involves the careful weighing of evidence for. Or. Miller 1944). values. social scientists should not have been surprised at the rise of cognitive consistency theories. and the intolerance for ambiguity by those with an authoritarian personality (Adorno. We observe others. 5. Unconscious Motivation. a person who starts out with a negative attitude toward marijuana will experience cognitive dissonance if they start smoking marijuana and find themselves enjoying the experience. Attitude Theories COGNITIVE CONSISTENCY THEORIES Cognitive consistency theories have their origins in the principles of Gestalt psychology. behaviors. but often occurs without conscious awareness. Because it is unconscious. or to stop using marijuana. If these are inconsistent. or affective. Classical conditioning can also occur vicariously through observation of others. Classical conditioning is especially involved with the emotional. they will produce a ”tension state” in the individual.attitudes toward that group. a person who is threatened by his homosexual feelings may employ the defense mechanism of reaction formation and become a crusader against homosexuals. The dissonance they experience is thus likely to motivate them to either change their attitude toward marijuana. and motivate the individual to reduce this tension. 7. 6. a particular attitude. this serves as vicarious reinforcement and makes it more likely that we. feelings or behaviors are inconsistent or contradictory. by making their relevant cognitions consistent. feeling. or behaviors. but may become aware of it as some later point in time. to understanding the relationships between them. a person may carefully listen to the presidential debates and read opinions of political experts in order to decide which candidate to vote for in an election. 1. there is an inevitable movement from description of the elements of the field. according to consistency theories. which suggests that people seek to perceive the environment in ways that are simple and coherent (Kohler 1929). Early consistency theorists drew upon theories of conflict (Lewin 1935. Some attitudes are held because they serve some unconscious function for an individual. 4. component of attitudes. thoughts. For example. and against. BALANCE THEORY 15 . Individuals reduce this tension. Cognitive consistency theories have their beginnings in a number of seemingly unrelated research areas (Eagly and Chaiken 1993). beliefs. Cognitive dissonance creates an unpleasant state of tension that motivates people to reduce their dissonance by changing their cognitions. For example. and Stanford 1950). memory (Miller 1956). someone who feels inferior may feel somewhat better by putting down a group other than her own. Cognitive Dissonance exists when related cognitions. and feelings. too. According to Newcomb (1968a). Levinson. will behave in this manner or express this attitude. Frenkel-Brunswick. This process can be conscious. Social (Observational) Learning is based on modeling.

In other words. two people have a negative attitude toward an issue. and 3) the degree of attitude change that is necessary to balance a triad. all three relationships are negative. According to Heider (1958). Another advantage of this theory is that.g.. and it therefore assumed that tension that is produced by imbalance was objectively of the same strength and effect on the individuals in the triad. Because some attitudes are held with more conviction and are more meaningful and important to us.g.. and the elements in the triad fit together with no stress. or two are negative and one is positive (i.g. Another shortcoming of the theory is that it only deals with relationships between three entities. an issue. to imagine. a balanced triad occurs when all the relationships are positive. or you have a negative attitude toward an issue that your friend favors). imbalanced states can also be rewarding and exciting. a value). the other elements are often another person (o) and another object (e.e. or consistent. Balance.. your friend doesn’t really favor something you dislike. to solve the problem. in order to maintain your friendship and maintain balance. is rewarding. 180). but they like each other). The goal of assessing the structure of a triad is to ascertain whether the relationships (attitudes) between the actors and the other elements are balanced. p. in most other areas where she is concerned) (Eagly and Chaiken 1993). According to balance theory. it stands to reason that triads that involve imbalance with such strongly-held attitudes ought to evoke more tension (Eagly and Chaiken 1993). 2) the strength of the motivation to change an incongruent triad. To address this latter concern.The earliest consistency theory is Heider’s balance theory (1946. and (3) one might cognitively differentiate the relationship one has with a friend. Heider said that sometimes balance can be ”boring” and that ”The tension produced by unbalanced situations often has a pleasing effect on our thinking and aesthetic feelings” (1958. there are three ways to restore balance to an imbalanced triad: (1) one may change one’s attitude toward either the object or the other person. This approach is concerned with an individual’s perceptions of the relationships between himself (p) and (typically) two other elements in a triadic structure. according to Heider. and to understand the mystery of the imbalance. like 16 .CONGRUENCY THEORY A particular advantage of Osgood and Tannen-baum’s (1955. Cartwright and Harary (1956) published a paper that nicely generalized Heider’s theory to account for structures of any size. Interestingly. because imbalance results in tension and feelings of unpleasantness. object.e. (2) one might distort reality to perceive that the relationships are balanced (e. so that the friend’s opposing attitude toward something one favors is separated from one’s positive attitude toward the friend as a person (e. you might compartmentalize a friend’s opposite political views apart from your attitude toward her.. imbalance stimulates us to think further. in order to restore balance. Heider assumed that people prefer balanced states to imbalanced ones. 1958). she really dislikes it). A limitation of Heider’s balance theory is that it did not account for the strength of attitudes between persons and objects in the triad. The attitudes in the structure are designated as either positive or negative. 2. In Heider’s formulation. Tannenbaum 1968) congruency theory is its precision in assessing: 1) the strength of the relationships between p and o.. It merely categorized the relationships as either positive or negative. Imbalance occurs when these outcomes are not achieved (i.

Newcomb’s approach, it takes into account the strength of the attitudes of p and o in evaluating the degree of incongruity in the structure. Osgood and Tannenbaum discuss the Heider triad in terms of p, another individual, termed the source (s) and s’ attitude (termed an ”assertion”) toward another object or concept (x). According to the theory, attitudes can be quantified along a seven-unit evaluative scale, from extremely negative (-3) to neutral (0) to extremely positive (+3). When p’s attitude toward s and x are positive, and s’s assertion is equally strong and of the same valence, there is a ”congruous” structure to the triad. There is no motivation to change one’s attitude toward the object or toward the source. When p’s attitude toward s is positive, and p has an equally positive attitude toward x that s later negatively evaluates, an incongruous structure is established. In this situation, p is motivated to change his or her attitude toward s, or x, or both, in the direction of congruity. Consider the following example. If p’s attitude toward s is a +2, and p’s attitude toward x is a -2, the structure would be congruent if s’s assessment is a -2. If, however, the assessment is a +2, the structure is imbalanced. In this case, p’s attitude toward either x or s needs to change four units to make the triad congruent. Of course, if the relationships are weaker, the degree of attitude change to make the triad congruent is that much less (by the exact amount denoted in the quantitative calculation of all the relations of p, s, and x). Osgood and Tannenbaum also argued that strongly held attitudes would be less likely to be modified in incongruent triads. This was supported in subsequent research (Tannenbaum 1968). 3. AFFECTIVE-COGNITIVE CONSISTENCY MODEL This approach suggests that people seek consistency in order to satisfy a general motivation toward simplicity in cognition, and/or to adhere to norms, traditions, customs, or values that reinforce consistency in one’s cognitions and behavior (Rosenberg 1956, 1968). Another interesting twist on the consistency approach is that in the affective-cognitive consistency model, Rosenberg (1956, 1968) proposed that people are more motivated to maintain cognitive consistency so that other people perceive that they are consistent. In other words, while the individual may occasionally feel some tension as a result of inconsistency, other people find the inconsistency more aversive, because it represents a conflict for those around the individual. Specifically, if o has a positive attitude towardp, butp dislikes x, which o likes, o is caught between being friendly with, and avoiding, p. In this model, o feels tension at this conflict, and must reduce the tension by changing attitudes toward p (e.g., increasing attraction toward p, which would thereby outweigh any conflict with p’s negative attitude toward x) or toward x (e.g., o devalues x, so that p’s dislike of x does not result in o feeling conflicted). 4. COGNITIVE DISSONANCE THEORY Of all the cognitive consistency theories, none has had more influence on researchers and subsequent theories than cognitive dissonance theory (Festinger 1957). A conservative estimate suggests that at least 1,000 articles have been published in which researchers present data bearing upon the theory and their own revisions of the theory (Cooper and Fazio 1984). Many agree withJones’s (1976) assessment that cognitive dissonance theory is ”the most important development in social psychology to date” (p. x). Along the way, the theory has been hailed for its elegant simplicity, and its powerful range of utility (Collins 1992). It has also been criticized for its lack of specificity (Lord 1992; Schlenker 1992).

In formal terms, Festinger’s theory states that two elements (behaviors or thoughts, or both) are in a dissonant relation if, considering these two alone, the obverse of one element would follow from the other” (1957, p. 13). Dissonance, then, refers to a negative arousal brought about by one’s inconsistent thoughts or actions, or both. Essentially, this translates into the following assumptions. If one has opposing thoughts or behaviors, or both, this brings about an aversive state of tension, akin to a drive state like hunger or thirst. This tension motivates the individual to seek relief by eliminating the tension. The tension can be dissipated by changing: 1) either a thought or attitude to make it consonant with the opposing thought or behavior, or 2) one’s behavior, to make it consonant with the opposing behavior or thought. Because it is often much easier to change one’s thoughts rather than one’s behaviors, these are typically the elements that get modified by the person in dissonance reduction. As an example, Festinger (1957) talked about the dissonance experienced by most smokers at some point in their lives. Smokers engage in behavior (smoking) that is harmful to their health. This is at odds with our desire to avoid harming ourselves. This arouses tension in the individual. The smoker could reduce it by changing his or her behavior (quit smoking) or changing the way he or she thinks about the smoking behavior. As mentioned above, changing behavior is often more difficult than changing cognitions, and, as most smokers will affirm, quitting smoking is certainly no exception to this axiom. In this instance, Festinger suggests, smokers eliminate their dissonance by changing their thoughts about smoking. They may: 1) disbelieve the validity of the health consequences of smoking, or distort the information about smoking by thinking that smoking is only harmful if you smoke so many packs a day, or if you inhale cigar smoke, etc., or more fatalistically, 2) convince themselves that ”we all die of something, and I might as well die doing something I enjoy.” All of these changes in thoughts eliminate the dissonance for the smoker. It should be noted that Festinger was not talking about logical inconsistencies. There are certainly conditions under which people think and do logically inconsistent things, yet feel no dissonance, or they feel dissonance, yet are not in a situation where a logical inconsistency is present. Festinger recognized what has become a truism in psychology, that a person’s reaction to a stimulus is not a function of the objective properties of the stimulus itself, but rather the individual’s construal, or perception of, that stimulus. This explains why the presence or absence of logical inconsistencies may or may not be accompanied by dissonance in an individual. The most important and reliable way to predict a person’s behavior in a dissonance situation is to understand how he or she construes the potential dissonance arousing thoughts or behaviors, or both. VALUE Definition: A value is an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence. GROWTH OF SMALL SCALE INDUSTRIES Employment Generation SSI Sector in India creates largest employment opportunities for the Indian populace, next only to


Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector generates employment for four persons.

According to the SSI Sector survey conducted by the Ministry and National Informatics Centre with the base year of 1987-88, the following interesting observations were made related to employment in the small scale sector. Generation of Employment - Industry Group-wise Food products industry has ranked first in generating employment, providing employment to 4.82 lakh persons (13.1%). The next two industry groups were Non-metallic mineral products with employment of 4.46 lakh persons (12.2%) and Metal products with 3.73 lakh persons (10.2%). In Chemicals & chemical products, Machinery parts and except Electrical parts, Wood products, Basic Metal Industries, Paper products & printing, Hosiery & garments, Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%, the total contribution by these eight industry groups being 49%. In all other industries the contribution was less than 5%. Per unit employment Per unit employment was the highest (20) in units engaged in Beverages, tobacco & tobacco products mainly due to the high employment potential of this industry particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu. Next came Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4 was in Repair services line. Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural areas.

5%) made the maximum contribution to employment.5%.7%. Uttar Pradesh (9. In urban areas highest employment per unit was in Beverages. Per unit employment was high .5%) the total share being 27. Madhya Pradesh had the figure of 2. Wood Products and Chemicals and chemical products shared between them 17. Production The small scale industries sector plays a vital role for the growth of the country.17. It contributes 40% of the gross manufacture to the Indian economy. This was followed by Maharashtra (9. Karnataka (6. tobacco products (31 persons) followed by Cotton textile products (18). In metropolitan areas the leading industries were Metal products.6%).5%) and West Bengal (8.6%) together accounted for another 27.2% of employment. 20 . and Punjab (5. Machinery and parts except electrical. Andhra Pradesh (7. Urban As for urban areas.7%). Basic metal industries (13) and Non-metallic mineral products (12). State-wise Employment Distribution Tamil Nadu (14. Sikkim and Dadra & Nagar Haveli. in Chemicals & chemical Nagaland.8% of employment.1%. Tripura and Delhi. Non-metallic mineral products. 16 and 14 respectively . Gujarat (7.6%).However.7% to employment generated in rural areas. Machinery and parts except electrical and Paper products & printing (total share being 33. Non-metallic mineral products and Basic metal industries per unit employment was higher in rural areas as compared to metropolitan areas/urban areas.5%).7%). Food Products accounted for 21. It was 12 in Maharashtra. Food Products and Metal Products almost equally shared 22. and Chemicals & chemical products between them accounted for 26. In all other cases it was around the average of 6.4%. Rural Non-metallic products contributed 22.

credit squeeze.21 lakhs in the year 1999. The growth rates during the various plan periods have been very impressive. 45%-50% of the Indian Exports is being contributed by SSI Sector.The positive trend is likely to strengthen in the coming years. it instills confidence in the resilience of the small scale sector.It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector produces 4. shortage of raw material etc. The number of small scale units has increased from an estimated 8. From the year 1990-91 this sector has exhibited a comparitively lower growth trend (though positive) which continued during the next two years. it is estimated that small scale industrial units contribute around 15% to exports indirectly. The estimates of growth for the year 1995-96 have shown an upswing. They may also be in the form of export orders from large units or the production of parts and 21 .74 lakhs units in the year 198081 to an estimated 31. When the performance of this sector is viewed against the growth in the manufacturing and the industry sector as a whole.This trend augurs a bright future for the small scale industry. The transition period of the process of economic reforms was also affected for some period by adverse factors such as foreign exchange constraints. However. this has to be viewed in the background of the general recession in the economy. Direct exports from the SSI Sector account for nearly 35% of total exports.62 lakhs worth of goods or services with an approximate value addition of ten percentage points. Export contribution SSI Sector plays a major role in India's present export performance. The small scale sector has grown rapidly over the years.The growth of SSI sector has surpassed overall industrial growth from 1991 onwards. trading houses and export houses. Besides direct exports. This takes place through merchant exporters. demand recession. high interest rates. The number of small scale units that undertake direct exports would be more than 5000.

It would surprise many to know that non traditional products account for more than 95% of the SSI exports. The exports from SSI sector has been clocking excellent growth rates in this decade. The opportunities in the small scale sector are enormous due to the following factors : Less Capital Intensive Extensive Promotion & Support by the Government 22 . woollen garments and knitwear. leather and gems and jewellery units from this sector. processed food and leather products. readymade garments. SSI sector has made significant contributions to employment generation and also to rural industrialisation. by infusion of technologies. It has been mostly fuelled by the performance of garment.components for use for finished exportable goods. capital and innovative marketing practices. plastic products. Opportunities Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification. The lucrative product groups where the SSI sector dominates in exports. are sports goods. By its less capital intensive and high labour absorbtion nature. This sector is ideally suited to build on the strengths of our traditional skills and knowledge.

However.Reservation for Exclusive Manufacture by small scale sector Project Profiles Funding Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tools & Tools utilisation support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to overall economic growth Increasing Export Potential for Indian products Growth in Requirements for ancillary units due to the increase in number of greenfield units coming up in the large scale sector. It may be said that the outlook is positive. It is therefore an excellent sector of economy for investment. . There will be flourishing and well grounded markets for the same product/process. So this is the opportune time to set up projects in the small scale sector. value added and sophistication. have ensured the presence of this sector in an astonishing range of products. The promotional and protective policies of the Govt. the bug bear of the sector has been the inadequacies in capital. attract the infusion of just these things in the sector. This characteristic of the Indian economy will allow complementary existence for various diverse types of units. particularly in consumer goods. The diversity in production systems and demand structures will ensure long term co-existence of many layers of demand for consumer products / technologies / processes. differentiated by quality. Economic Indicators The Small Scale Industry today constitutes a very important segment of the Indian economy. The process of liberalisation will therefore. The development of this sector came about primarily due to the vision of our late Prime Minister Jawaharlal Nehru who sought to develop core industry and have a supporting sector in the form of small scale enterprises.The sector's contribution to employment is next only to agriculture in India. . This expectation is based on an essential feature of the Indian industry and the demand structures. it accounts for nearly 35% of the gross value of output in the manufacturing sector and over 40% of the total exports from the country. Small Scale Sector has emerged as a dynamic and vibrant sector of the economy. 23 .Today. indeed promising. . technology and marketing.In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector. given some safeguards.

The entrepreneur. A business started by only one person is called sole proprietorship. • • • 24 . Co-operative Society Characteristics of an ideal form of organization Before we discuss the features. merits and demerits of different forms of organization. Private Limited Company: 3. Adequacy of Capital: The form of organization should facilitate the raising of the required amount of capital at a reasonable cost. The formation should not involve many legal formalities and it should not be time consuming. The characteristics of an ideal form of organization are found in varying degrees in different forms of organization. From the point of view of risk. the preconditions for attracting capital from the public are a) safety of investment b) fair return on investment and c) transferability of the holding. let us know the characteristics of an ideal form of organization. the firm may not be managed efficiently.FORMS OF BUSINESS ORGANIZATION Introduction: Business concerns are established with the objective of making profits. Sole Proprietorship 2. Partnership Firm 4. If the owners have no control on the management. should consider the following factors. Public Limited Company: 5. If the enterprise requires a large amount of capital. while selecting a form of organization for his business. Limit of Liability: A business enterprise may be organized on the basis of either limited or unlimited liability. Control and Management: The responsibility for management must be in the hands of the owners of the firm. • Ease of formation: It should be easy to form the organization. Direct relationship between Ownership. They can be established either by one person or by a group of persons in the private sector by the government or other public bodies in the public sector. The business started by a group of persons can be either a Joint Hindu Family or Partnership or Joint Stock Company or a Co-operative form of organization Thus there are various forms of business organization 1. limited liability is preferable. It means that the liability of the owner as regards the debts of the business is limited only to the amount of capital agreed to be contributed by him. Unlimited liability means that even the owners’ personal assets will be liable to be attached for the payment of the business debts.

Motivation: As all profits belong to the owner.• Continuity and Stability: Stability is essential for any business concern. • Sole Proprietorship Meaning: A sole proprietorship or one man’s business is a form of business organization owned and managed by a single person. The nature of organization should be such as to be able to adjust itself to the changes without much difficulty. 5. 7. and so the business lacks perpetuity. 25 . he will take personal interest in the business. but there may be legal restrictions on the setting up of particular type of business. The proprietor has complete freedom of action and he himself takes decisions relating to his firm. 4. This freedom promotes initiative and self-reliance. He is entitled to receive all the profits and bears all risk of ownership. Changes may take place either in market conditions or the states’ policy toward industry or in the conditions of supply of various factors of production. The proprietor may take the help of members of his Family in running the business. Quick Decision: No need for consultation or discussion with anybody. Features: The important features of sole proprietorship are: 1. The risk is borne by a single person and hence he derives the total benefit. It means that his personal assets are also liable to be attached for the payment of the liabilities of the business. Ease of formation: As no legal formalities are required to be observed. no legal formalities are necessary. Advantages 1. The liability of the owner of the business is unlimited. 4. Freedom of Action: There is none to interfere with his authority. 6. 3. 3. Flexibility of Operations: another ideal characteristic of a good form of organization is flexibility of operations. The business is owned and controlled by only one person. The business firm has no separate legal entity apart from that of the proprietor. Uninterrupted existence enables the entrepreneur to formulate long-term plans for the development of the business concern. To set up sole proprietorship. 2. 2.

Unlimited Liability: Will be discouraged to expand his business even when there are good prospects for earning more than what he has been doing for fear of losing his personal property. whose liability is limited. This may raise the cost of production. 6. If the sole proprietor dies. A private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business. Advantages  Continuity of existence  Limited liability  Less legal restrictions  Disadvantages  Shares are not freely transferable  Not allowed to invite public to subscribe to its shares 26 . Limited resources: one man’s ability to gather capital will always be limited. No Economies of Large Scale: As the scale of operations are small. 7. his business may come to an end. 5. the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. Private Limited Company: A private limited company is a voluntary association of not less than two and not more than fifty members. This helps him to earn goodwill. Social Utility: Encourages independent living and prevents concentration of economic power. Business Secrecy: Maintaining business secrets is very important in today’s competitive world. 4. Disadvantages 1. Limited Managerial Ability 3. 8. 2. the owner cannot secure the economies and large scale buying and selling.5. Lack of Continuity: uncertain future is another handicap of this type of business. Flexibility: Can adapt to changing needs with comparative ease. Personal Touch: comes into close contact with customers as he himself manages the business.

professional firms like charted accountants. Advantages  Continuity of existence  Larger amount of capital  Unity of direction  Efficient management  Limited liability  Disadvantages 27 . Scope for promotional frauds  Undemocratic control Partnership Firm: Partnership is defined as a relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all. The owners of a partnership business are individually known as the "partners" and collectively as a "firm". attorney or law firms etc. therefore has a separate legal existence and the liability of whose members is limited. small service concerns like transport agencies. real estate brokers. This may include small scale industries. doctors' clinic. Public Limited Company: A public limited company is a voluntary association of members which is incorporated and. Advantages  Ease of formation  Greater capital and credit resources  Better judgement and more managerial abilities  Disadvantages  Absence of ultimate authority  Liability for the actions of other partners  Limited life  Unlimited liability Partnership is an appropriate form of ownership for medium sized business involving limited capital. wholesale and retail trade.

overhead and profit. even by a very less percentage will give rise to a greater profit. We will not discuss trusts further. Trusts are usually formed upon the death of an individual and are designed to provide continuity of the investments and business activities of the deceased individual. Moreover the materials management being a staff function. and cannot have more than 100 shareholders. which schedule materials requirements and may also control inventories of both raw materials and in-process materials. An S-corporation must have at least one shareholder. Some managers would associate materials management with their material or production control departments. There is no general agreement about precisely what activities are embraced by materials management. the S-Corp must pay that shareholder a reasonable salary. Scope for promotional frauds  Undemocratic control  Scope for directors for personal profit  Subjected to strict regulations S-Corporations have features similar to a partnership. This salary is a separate payment from distributions of profits or losses. the introduction of new techniques to reduce the cost of the product is much easier than in any other field. Only the rest is for labour. IV – Unit SCOPE AND FUNCTIONS OF MATERIALS MANAGEMENT INTRODUCTION: Materials management is one of the important activities of business. Others would associate it with the activities of their purchasing departments in dealing with outside suppliers. If we analyze the total cost of any product nearly 60 to 70% is because of materials. If any shareholder provides services to the business. So any reduction in the material cost. 28 .

Materials Handling & Traffic.Hence. In order to achieve this. the budget allocated for the materials will also be critically reviewed. There are four basic purchasing activities. d) Looking for new products. Standardization and Variety Reduction. and suppliers that can contribute to 29 . Fixed assets constitute capital already sunk and only scope for improving the Return on Investment (ROI) lies in the efficient management materials which constitute the bulk of current assets. For the given output ‘C’ the profit margin has increased by X2. 2. because of the greatest percentage of cost associated with materials and also any possible reduction in material cost will result in the increase of profit. As materials constitute the major cost component. negotiating and issuing purchase orders. the industries are now thinking of introducing the concept of scientific materials management. one way is to increase the capital turnover ratio. 7. purchasing is to be done. Store Keeping. 5. 3. c) Acting as liaison between suppliers and other company departments. the rate of return on capital employed is of prime concern and is given by the Ratio: Profit Rate of Return (ROR) = --------------------------------Capital employed Profit Sales = -------------X -------------------------------------------------Sales Fixed Assets + Current Assets = Profitability X Capital turnover ratio So as to increase the rate of return on investment. Because of reducing the cost the breakeven point shifted to B. The function of material planning department is to plan for the future procurement of all the required materials as per the production schedule. If we analyze the above graph we find that previously the breakeven point was at A. Inspection and Despatching. So. Purchasing department buys material based on the purchase requisitions from user departments and stores departments and annual production plan. SCOPE OF MATERIALS MANAGEMENT: Materials Management strives to ensure that the material cost component of the total product cost be the least. the control is exercised in the Following fields. 4. large amount of capital is locked up in materials with the associated burden interest which further increases the cost of the product. Value Analysis. materials. After material planning. for better control. a) Selecting suppliers. At the time of material planning. For this if capital employed is reduced. Receiving. from X1 to (X1 – X2) amount. Purchasing. b) Expediting delivery from suppliers. 6. Inventory Control. naturally capital turnover ratio will go high. 8. Material Preservation. 1. Disposal of Scrap and Surplus. Materials Planning.

fixing the safety stock limits. d) Developing techniques to reduce transportation cost. perishable tools. b) Tracing in-bound shipments of material in short supply as requested by purchasing. labeling and loading of end products in the trades. Assisting customers in tracing outbound shipments when asked. needed for operations or b) Manages inventories of non-production materials and prepares purchase requisitions for needed material when stocks drop to the re-order point. production control or c) Auditing invoices from carriers and filing claims for refunds of excess charges or for damaged shipments when required. analysis of tariffs. The responsibility of Receiving. the stores department a) Maintains physical stocks of non-production items to be drawn on as maintenance. NON-PRODUCTION STORES: Techniques and procedures used to control non-production material (office supplies. minimize losses from pilferage and spoilage and prevent stock-outs. 30 . inspection and dispatching department is to receive the materials when delivered by the suppliers. After receiving it. the goods will be accepted. At the time of purchase. and negotiation of any number of special arrangements for handling certain traffic. in reducing the materials cost. It also reduce the number of varieties and also helps in finding the substitute for the materials at lesser cost. The duties of the inventory control department is to decide about the types of ordering system.Company objectiveness. the quantity and quality must be checked. There are four basic traffic activities. a) Selecting common or charter carriers and routings for dispatch / shipments as required. Finally the disposal of scrap and surplus must be done periodically to release the capital locked in those items. fixing up the reorder level & maximum / minimum stock level. Materials handling section is responsible for the transport of materials to various departments. greater care must be taken during storage. and operating supplies) resemble those used for production material. although they are usually less elaborate. repair. When the items are purchased. and maintenance. e) The activity includes packaging of finished product. to derive maximum benefit. This may involve negotiation with competing shippers. Sometimes to protect the quality. proper storage facilities must be provided so that. at the lowest possible cost and select the efficient purchasing system. c) Keeps records and maintains controls to prevent duplication of inventories. The Value Analysis and Standardization offer greatest scope. special studies n selecting the most advantageous plant location for new products. When once it is as per the specifications given. Non-production items are also reviewed. right quantity and quality of materials must be purchased at right time. the wastage is reduced to a minimum. Production parts and materials are checked against blueprints and specifications. Purchasing is done based on ‘make or buy’ decisions and also using PERT / CPM effectively. Specifically.

a clear cut accountability is established. ADAPTABILITY TO EDP : The centralization of the materials function has made it possible to design data processing system. All information with regard to materials function is centralized under the integrated materials management function. leading to better decisions. ADVANTAGES IN INTEGRATED MATERIALS MANAGEMENT CONCEPT : Organizations which have gone in a big way for the integrated materials management usually enjoy the following advantages : BETTER ACCOUNTABILITY : Through centralization of authority and responsibility for all aspects of materials function. This has facilitated the collection and analysis of data. Integration also helps in the rapid transfer of data. results in greater co-ordination and better control. The user departments also find that they have to approach one department for discussing and solving their materials problems. through effective and informal communication channels. This is crucial as the materials management function usually involves handling a vast amount of data. This creates an atmosphere of trust and generally better relations between the user departments and the materials management department. in turn. integrating the various functions ensures that message channels are shortened and the various functions identify themselves to a common materials management department which. MISCELLANEOUS ADVANTAGE : 31 . greater speed and accuracy results in improved communication. the materials manager is responsible to exercise control and coordinates with an overview that ensures proper balance of conflicting objectives of the individual functions. the departments under the materials manager create an identity which is common. BETTER PERFORMANCE : As all the inter-related functions are integrated organizationally. better inventory in paper work.NEED FOR INTEGRATED CONCEPT : In an integrated set-up. This results in better support and co-operation in the accomplishment of the materials function. This helps in evaluating the performance of materials management in an objective manner. Therefore. Advanced and efficient electronic data processing systems can be economically introduced under in integrated set-up. All this calls for judicious decisions leading to lower costs. BETTER CO-ORDINATION : When a central materials manager is responsible for all functions. Need for materials is promptly brought tonotice by materials planning. Purchase department is fed with stock levels and order status by stores and inventory control departments.

delivery reliability. However. and compatibility with existing facilities. The results of the preliminary examination are available up on request. although any information considered confidential by Osaka Gas will be excluded. a team spirit is inculcated and this results in better morale and cooperation. please apply to the Purchasing Department. facility capacity. and make a comprehensive evaluation based on the following criteria:  Necessity of the product(s). the product(s) you wish to provide us and the terms of supply. maintenance and service systems. technological capacity. The opportunities and exposure available for the individuals for growth and development are better in an integrated set-up. we conduct a preliminary examination of your company and the product(s) you wish to supply. 32 . reliability.Under a Centralized Materials Manager. supply capacity. price. please describe your company's financial status. the information and data on your company and products will be stored and managed in our files as "Companies from Which Estimates Can Be Requested". Information and data on your company and your product(s) will be stored and managed in our files as "Products and Suppliers". After passing the preliminary examination. and brochures on the product(s) and technical data.  Whether the product(s) can satisfy the standards set by Osaka Gas regarding quality. safety. if deemed necessary. In doing so. These details should be provided by using a brochure or company profile statements explaining the company's financial position. Information for the preliminary examination can be in any format as long as it provides sufficient data for evaluating the above criteria. The information will be used for selecting the companies to which we ask to submit estimates. PURCHASING PROCEDURE Preliminary procedure If you wish to supply products to Osaka Gas for the first time. Osaka Gas may request additional information. to be used in selecting those companies to which we ask to submit estimates. as well as the company's financial condition.   Should it be the first time you wish to supply materials or equipment for which Osaka Gas has clearly defined purchase conditions. performance. It is important that you can explain the advantage of your products to Osaka Gas in the light of our basic purchase policies. product samples and/or explanation. You may be required by Osaka Gas to submit Japanese translation of the foregoing documents if such documents are not prepared in Japanese. such as delivery time and product specifications. and the benefits that a business relationship with your company could bring to Osaka Gas.The merit of establishing a business relationship with the new supplier will also be considered.

As a rule. inspection and method of inspection. devices and materials are determined by the department(s) that will be using the product(s) or materials. Selection is made by comprehensivly evaluating such factors as the quality and performance of the equipment. During this process. only one company may be specified for estimate submission in such special cases as those concerned with industrial property rights. device(s) or materials to be purchased. The selection of such a company shall be made by Osaka Gas at its sole discretion. delivery time. degree of reliability. those requiring maximum levels of safety that only one specific supplier can ensure. etc. The Purchasing Department conducts purchase activities based on purchase requests submitted by the/these department(s). performance standard.   As a rule. Osaka Gas will commence negotiation with the company with the most attractive proposal to discuss the amount of the contract and other terms and conditions.   Specification sheets submitted by potential suppliers at their own expense are checked by the Purchasing Department and the department(s) that will be using the product(s). The selected companies will be asked to submit cost estimates and specifications to Osaka Gas prior to a specified date. All products must pass this examination. in order to determine whether the required standards are met by the product(s). selects companies from which estimates will be sought. product requirements including safety. size. cases where only one specific supplier can assure compatibility with existing facilities. or in case of urgency. Osaka Gas will set out a specification from listing Osaka Gas's requirements in respects of quality. compatibility with existing facilities. Osaka Gas may request additions or changes to the specifications.   The Purchasing Department. technical requirements. "Companies from Which Estimates Can Be Requested" and "Products and Suppliers". Osaka Gas asks several companies to submit estimates. the scale of the order.Details of purchasing procedure The specifications and number/quantity and delivery of equipment. Contract terms and conditions will be decided upon mutual agreement.   After valid cost estimates and specifications have been comprehensively evaluated in respect of price. when requesting an estimate from a company that it has selected. after-sale service and the company's previous business record.   33 . However. at its sole discretion. Suppliers are selected from the files of "Companies with Previously Established Business Relationships".

materials.uct itself (e. work-in-process and partly finished products formed at various stages of production. it must remain idle for three weeks for movement to warehouse. The obligations and liabilities of Osaka Gas arise only when such contract is concluded.I=S x T Where. tools. etc. Petroleum products like petrol. Delivered equipment. kerosene. the plant stock on an average must be equal to three weeks' sale in transit. (3) M. In fact. then the average inventory needed will be 110 units x 3 weeks = 330 units. INVENTORY CONTROL TYPES OF INVENTORIES Inventories may be classified as under:(1) Raw materials and production inventories: These are raw . and I the movement inventory needed.) (4) Finished goods inventories: Complete finished products ready for sale. jibs and fixtures. Inventories may also be classified according to the function they serve. device(s) or materials must pass inspections conducted by the relevant department(s) of Osaka Gas. machinery and plant spares.   Payment will be made according to the payment terms specified in the contract. an interim inspection may be conducted during the manufacturing process.g. in the form of a written document if necessary. (2) In-process inventories: Semi-finished parts. if it takes three weeks to move materials to aware house from the plant and if the warehouse sells 110 per week.R. various oils and lubricants. weekly or monthly average) and T the transit time required to move from one place to another. parts and components which enter into the product Direct during the production process and generally form part of the product. POL.O. such as. (a) Movement and transit inventories: This arises because of the time necessary to move stocks from one place to another. As for example. 34 . Precise details of the delivery schedule will be agreed between the supplier and the relevant department(s) of Osaka Gas. when a unit of finished product is manufactured and ready for sale.   Delivery dates specified in the contract must be strictly observed. Inventories: Maintenance. The average amount can be determined mathematically thus. Therefore.The business will be established upon conclusion of a contract. S represents the average rate of sales (say. diesels. When deemed significant. repairs and operating supplies which are consumed during the production process and generally do not form part of the prod.

As such. the Lot-size. and to be sure. (d) Anticipation inventories: Such inventories are carried out to meet predictable changes in. of the types of inventories discussed above. even if they are efficiently maintained. receipt. to see that the working capital is blocked to the minimum possible extent). consumption and accounting for materials is an important objective. demand. 2. It is common practice to buy some raw materials in large quantities in order to avail of quantity discounts. inspection and transport and handing charge slow. when to order and how much to order and how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales. general practice of serving the customer better is the reason for holding such type of inventories. Scientific inventory control aims at maintaining optimum level of stock of goods required by the company at minimum cost to the company. Fluctuation and Anticipation Inventories may be said to he 'Organization Inventories'. To maintain timely record of inventories of all the items and to maintain the stock within the desired limits. Efficient purchasing.(b) Lot-size inventories: In order to keep costs of buying. basic types of inventories are carried into stock. Meaning of Inventory Control Inventory control is a planned approach of determining what to order. To ensure adequate supply of products to customer and avoid shortages as far as possible. obsolescence and capital costs associated with maintenance of large quantities grow at a faster rate than the inventories themselves. handled and properly located. As the size increases. the balancing of opposite costs. 5. but they are not absolutely essential in the sense that such stocks are always uneconomical. Objectives of Inventory Control 1. 4. storing. These questions are answered by the use of inventory models. 35 . Rather than taking what they can get. Inventory control basically deals with two problems: (i) When should an order be placed? (Order level). larger quantities are bought than are necessary for immediate use. As more of these. lie at the heart of all inventory control problems. for which cost analyses are necessary to which we shall turn in this chapter now. But the difficulty is that gains are not directly proportional to the size of inventories maintained. The scientific inventory control system strikes the balance between the loss due to non-availability of an item and cost of carrying the stock of an item. In case of seasonal variations in the availability of some raw materials. and (ii) How much should be ordered? (Order quantity). Striking a balance in a complex business situation through intuition alone is not easy. To ensure timely action for replenishment.. 3. manufacturing and dispatching. the basic problem is to strike a balance between the increase in costs and the decline in return from holding additional inventories. Costs. (c) Fluctuation inventories: In order to cushion against unpredictable demands these are maintained.e. less coordination and planning are required. To make sure that the financial investment in inventories is minimum (i. it is of inventory and also to some extent economical to build up stocks where consumption pattern may be reasonably uniform and predictable. Also less clerical and administrative efforts are needed and greater economies can be obtained in handling. gains from additional stock become less and less prominent The cost of warehousing.

work in process inventory. Smooth and uninterrupted production and. 2. 4. following are the benefits of inventory control: 1. Benefits of Inventory Control It is an established fact that through the practice of scientific inventory control. "It is nearly impossible to overemphasize the importance of keeping inventory levels under control. and finished 36 . Efficient utilisation of working capital. however. To provide a reserve stock for variations in lead times of delivery of materials. 7. He recommended that business managers examine the accuracy and effectiveness of their: bills of materials (BOM). while also minimizing their inventory carrying costs. manufacturing. because the space and financial resources invested in the goods can often be put to better use elsewhere. At the same time. 3. The basic measure of inventory turnover is defined as cost of goods sold divided by average inventory on hand. 5. The purchasing. Inventory control systems help companies to find the delicate balance between too little and too much inventory. Storing excess inventory is costly. "Whether the problems incurred are caused by carrying too little or too much inventory. manufacturers need to become aware that inventory control is not just a materials management or warehouse department issue. and warehouse locator systems. Improvement in customer’s relationship because of the timely delivery of goods and service. Eliminates the possibility of duplicate ordering. no stock out. To provide a scientific base for both short-term and long-term planning of materials. Helps in minimising loss due to deterioration. Economy in purchasing." Ronald Pachura wrote in an article for IIE Solutions. hence.6. engineering changes. But Pachura noted that managers may gain more information by segmenting average inventory into raw materials. and accounting departments all contribute to the accuracy of the inventory methods and records." Pachura created a checklist to aid companies in assessing their inventory controls. The inventory turnover ratio is a tool that can help companies to determine whether they are producing and carrying too much inventory. inadequate inventory stores can result in costly production shutdowns or delays in filling customer orders. scrap reporting. receiving policies. obsolescence damage and pilferage. vendor lead times. engineering. INVENTORY CONTROL SYSTEMS Inventory control (also known as inventory management) refers to the systems and strategies businesses use to ensure that they have adequate supplies of raw materials for production and finished goods for shipment to customers. reorder triggers. receiving.

and anticipating inventory needs. such as accounts receivable. But for firms operating in industries that feature high volume turnover of raw materials and/or finished pro-ducts. Godwin Udo described telecommunications technology as a critical organizational asset that can help a company realize important competitive gains in the area of inventory management. Writing in Production and Inventory Management Journal. the recent development of powerful computer programs capable of addressing a wide variety of record-keeping needs—including inventory management—in one integrated system have also contributed to the growing popularity of electronic inventory control options. recording and retrieval of item storage locations.goods. including counting and monitoring of inventory items. so it doesn't come back to bite the bottom line. shoe stores. But many analysts indicate that productivity —and hence profitability—gains that are garnered through use of automated systems can be increased when a business integrates its inventory control systems with other systems. Comparing these figures often reveals opportunities for improving inventory controls. manufacturers. Indeed. computerized tracking systems have emerged as a key component of business strategies aimed at increasing productivity and maintaining competitiveness. business executives are "increasingly integrating financial data. for some businesses—such as convenience stores. Certainly. there are plenty of small retail outlets. to better manage inventory levels." David Cahn. According to Dennis Eskow in PC Week. Key components of an integrated system … are general ledger. The goal: to control inventory quarter to quarter. a director of product strategy for business applications at a firm in New York. companies that make good use of this technology are far better equipped to succeed than those who rely on outdated or unwieldy methods of inventory control. Automation can draidatically affect all phases of inventory management. Moreover. and then computing a separate turnover figure for each. even many smaller businesses have come to rely on computerized inventory management systems. including inventory handling requirements. and other businesses that still rely on manual means of inventory tracking. database connectivity. According to Udo. COMPUTERS AND INVENTORY In today's business environment. such as accounting and sales. electronic data interchange. or nurseries—the purchase of an electronic inventory tracking system might constitute a wasteful use of financial resources. recording changes to inventory. it is little wonder that business experts commonly cite inventory management as a vital element that can spell the difference between success and failure in today's keenly competitive business world. Given such developments. This is true even of stand-alone systems that are not integrated with other areas of the business. with sales information that includes customer histories. and connections to a range of vertical business applications. confirmed this view in an interview with Eskow: "What drives 37 .

profitability. These arrangements place the responsibility for inventory management squarely on the shoulders of the vendors. But according to these executives. user-friendly warehouse layout can be of enormous benefit to business owners." Another development of which business vendors should be aware is a recent trend wherein powerful retailers ask their suppliers to implement vendor-managed inventory systems. based on their needs and financial liquidity. "Integrated inventory systems may range in platform and complexity. the vendors obtain warehouse or point-of-sale information from the retailer and use that information to make inventory restocking decisions." he noted. the intelligent part of the system is sophisticated software which automates and controls all aspects of warehouse operations. A well-organized. Real-time processing in the warehouse uses combinations of hardware. Tom Andel and Daniel A. Citing various warehousing experts. Systems investments must be considered in context of future systems objectives. business observers have suggested that "stand-alone" systems are falling into disfavor. The amount of control you have on inventory equals the optimization of the capital. especially if they are involved in processing large volumes of goods and materials. and. including material handling and data collection technologies. ultimately. business owners have a variety of system integration options from which to choose. cited a study by the International Mass Retail Association in Transportation and Distribution: "The study concludes that stand alone Warehouse Management System (WMS) packages acquired today to perform individual functions will probably be abandoned in just a few years because they do not integrate well with other systems." THE FUTURE OF INVENTORY CONTROL SYSTEMS In the late 1990s many businesses were investing heavily in integrated order and inventory systems designed to keep inventories at a minimum and replenish stock quickly. effective warehousing design. Sarah Bergin contended in Transportation and Distribution magazine that "the key to getting productivity gains from inventory management … is placing real-time intelligent information processing in the warehouse. Conversely. 38 . WAREHOUSE LAYOUT AND OPERATION The move toward automation in inventory management naturally has moved into the warehouse as is optimization of working capital. customer service. Kind. Under such an agreement. At the same time that these integrated systems have increased in popularity." Another important component of good inventory management is creation and maintenance of a sensible. for instance. This empowers employees to take actions that achieve immediate results. That's why it's so important to integrate the inventory data with everything else. an inefficient warehouse system can cost businesses dearly in terms of efficiency. But as Eskow noted.

Such systems are also capable of providing "a strategic stocking analysis which looks at the customer's equipment locations to determine which strategic 39 . however. keyboard entry. A running record will be maintained of the stock number. including individual rack tier positions. this can be a valuable investment if the business's warehouse requirements are significant. lot number. SonicAir. provide businesses with the ability to do real-time updating of inventory. verification. It recommended that companies utilize the following tools: • Stock locator database: "The stock locator database required for proactive decision making will be an adjunct of the inventory file in a state-of-the-art space management system. and should be user-friendly so that workers can quickly locate currently stocked items and open storage spaces alike." wrote Bergin. cross-docking and dispatch. for one. or voice recognition. provides companies with an analysis of products and spare parts. makes it possible for the warehouse computer system to interact with terminal displays on the forklifts themselves. said Bergin. Such facilities often utilize forklift machinery that can be used more effectively if their operators are not required to periodically return to a central assignment area. Instead. and task completion can be confirmed by scanning. and current installations and locations of vendor's distribution centers. • Communication systems: Again. Grid coordinates of the reserve area.Transportation and Distribution magazine cited several steps that businesses using warehouse storage systems can take to help ensure that they get the most out of their facilities. businesses should settle on a strategy that eases traffic congestion and reduces problems associated with ongoing turnover in inventory. and number of pallet loads in each storage location. "Task assignment can then be made by visual display or printout. Current technology. "This allows a company that isn't as confident in running their own warehousing operations to concentrate on their core business and let the experts worry about keeping track of their inventory. evaluations of their time sensitivity. and the pallet load capacity of all storage locations must be incorporated into the database." observed Transportation and Distribution. • Maximization of storage capacity: Warehouses that adhere to rigid "storage by incoming lot size" storage arrangements do not always make the best use of their space." • Grid coordinate numbering system: The warehouse numbering system should be developed in conjunction with the storage layout. "There are third party services available for managing warehouse operations." Inventory control systems such as the one utilized by SonicAir. OUTSOURCING WAREHOUSE RESPONSIBILITIES Some companies choose to outsource their warehouse functions. and up-to-the-minute tracking of inventory item location. must therefore be established.

as well as their feelings about relinquishing that level of control. and when the existing stock of inventories reaches this point of falls below it. Economic ordering quantity(EOQ): Economic ordering quantity is that quantity of material which are to be ordered in one time in order to minimize ordering cost. The prescription of re-order level (ROL) is an important technique of inventory control. When the inventories fall below a particular level. It is a method of recording store after every receipt & every issue and their current balances to avoid closing down the firm for stock taking. It is indispensable for each and every manufacturing concern. The ROL is mentioned in the bin-card of each inventory item. Store / Inventory control technique is the important tool in the hands of the modern management. size of the order is determined on the basis of the economic ordering quantity (EOQ) which is also an important technique of inventory control. and projected fill rate. It fundamentally deals with ‘when to order’ to replenish the inventories. The following are the important techniques of store control. it may be adjusted by preparing debit note and credit note.stocking locations should be used. carrying cost as well as cost of holding stock. If there is any discrepancy between the two. What should be the quantity of replenishment order is also a matter of policy. The Techniques We Used In Store Inventory Control. they are replenished by the fresh purchases. Generally. Detailed treatment is given to this technique separately. the expected transit time. Perpetual inventory system: Perpetual inventory system is defined as "a system of records maintained by the controlling department which reflects the physical movement of stocks and their current balances. The re-order level is decided for each important item of inventory on the basis of following considerations: 1) Lead time 2) Average periodic consumption (daily consumption) 3) Safety stock Re-order level is decided as under: ROL= (Lead time x average daily consumption) + safety stock 40 . These are the following stock levels which help for planning of materials." added Bergin. Re-order level is predetermined point." Bin card and store ledger constitute the bedrock of perpetual inventory system. the purchase action is initiated to replenish them. Re-order level (ROL): Receiving and issuing of inventories are the common and recurring phenomena in a manufacturing organization. Fixation of various stock level: Under this method various stock levels are fixed scientifically to avoid over stocking and under stocking of materials. businesses weighing whether to outsource such a key component of their operation need to consider the expense of such a course of action. To ensure accuracy the physical verification may be made which must have to agree with the balance of Bin Card & store ledger. Of course. Over stocking of materials leads to unnecessary blockage of materials and investment and under stocking of material leads to disputation in production.

Offsetting The final step is 'offsetting'. Netting The next step is 'netting'. The phasing of the demand may reflect the availability of the plant to respond. of what components. netting 3. The supplier may be the upstream process within the plant or an outside supplier. This is the anticipated time for manufacturing. and is determined by how far ahead demand is known and by the lead times through the operation. Exploding Explosion uses the Bill of Materials (BOM). A `time bucket' is the unit of time on which the schedule is constructed and is typically daily or weekly. Together with MRP II it is probably the most widely used planning and scheduling tool in the world. The remainder of the schedule is derived from the MPS. To do so a 'lead time' has to be assumed for the operation. • • • Materials Requirements Planning (MRP) MRP is a planning tool geared specifically to assembly operations. EOQ (Economic Order Quantity): EOQ is the level of inventory order that minimizes the total cost associated with inventory management. exploding 2. This is an amalgam of known demand. giving the quantity of each item needed to manufacture the required finished products. BOM's are characterised by the number of levels involved. 41 . MRP was created to tackle the problem of 'dependent demand'. Thus a car requires five wheels including the spare. This determines when manufacturing should start so that the finished items are available when required. final assembly. Two key considerations in setting up the MPS are the size of `time buckets' and the `planning horizons'. following the structure of assemblies and sub assemblies. Average Usage: Average usage means average consumption in a particular time period. This lists how many. Master Production Schedule The process starts at the top level with a Master Production Schedule (MPS). Safety Stock: Safety stock is the minimum level of stock that is to be maintained to avoid delay. The aim is to allow each manufacturing unit to tell its supplier what parts it requires and when it requires them.Re-order level is the point of remaining stock when the new order is to be send. Advances in computer hardware made the calculation possible. are needed for each item (part. In order to calculate the reorder pint. determining how many of a particular component is required knowing the number of finished products. following term should be known: • Lead Time: Lead time is the time normally takes by the supplier in sending goods after placing the order. There are three distinct steps in preparing an MRP schedule: 1. sub assembly. in which any stock on hand is subtracted from the gross requirement determined through explosion. offsetting. finished product) of manufacture. Thus a given number of finished products is exploded to see how many items are required at the final assembly stage. The `planning horizon' is how far to plan forward. forecasts and product to be made for finished stock. The first level is represented by the MPS and is 'exploded' down to final assembly.

These will give the requirements and timings to outside suppliers. in advance. either purchased or produced. is that there is sufficient capacity available. concerned with the difficulties in obtaining critical listed materails to produce war material. Essential spare parts: Are those spares which are essential for the production to continue. 2. His mission was to find adequate material and component substitutes for critical listed material to manufacture needed war equipment. Analysis: A. Desirable spare parts: Are those spares which are needed but their absence even a week or more will not lead to stoppage of production. information systems.B. it indicates how quickly the stocks are converted in to sale.C. Lawrence D Miles to the Purchasing department.E. analysis is always a better control system. or can be estimated.D. C. processes. and possibly the most important. B. Items of high value and small in numbers termed as 'A' Items of moderate value and moderate in number is termed as 'B' Items of small in value and large in number is termed as 'C' V. and the flow of materials involved. 3. Value Analysis efforts began in earnest during WW II. It examines the materials. Under this method inventory items are classified in to three categories such as A. B. A. Vital spare parts: Are those spares whose cost of stock out is very high. The third is that the date the order is required can be used as the starting date from which to develop the schedule. • • The second is that the lead times are known. For this reason MRP is sometimes called infinite capacity scheduling. The number of items and the value of each class is expressed as percentage of the total and categorize as under. In his search. GE. Miles found that each 42 . VED is the symbol of 1.The whole process is repeated for the next level in the BOM and so on until the bottom is reached. There are three major assumptions made when constructing an MRP schedule: • The first. Analysis: This method is used for control of spare parts. basing upon its value and cost significance. Inventory turn over ratio: Inventory turn over ratio is one of the method of store control. assigned an engineer. Low inventory turn over ratio indicates the inefficient management in inventory & high inventory turn over ratio is always implies favorable situation. ValueAnalysis: Value analysis is a systematic effort to improve upon cost and/or performance of products(services). C.

Miles discovered that he could meet or improve product performance and reduce its production cost Material Requirements Planning: MRP calculates and maintains an optimum manufacturing plan based on master production schedules. production schedules and more: Master Production Schedule (MPS) Bill of Materials (BOM) Quantity on Hand (QOH) Part Lead Times Sales Order Quantities / Due Dates Scrap Rate Purchase Order Quantities / Due Dates Lot Sizing policies for All Parts Safety Stock Requirements MRP will plan production so that the right materials are at the right place at the right time.material has unique properties that could enhance the product if the design was modified to take advantage of those properties. MRP will provide you with the ability to be pro-active rather than re-active in the management of your inventory levels and material flow. If you want the productivity improvements that MRP can deliver. MRP uses the following elements to plan optimal inventory levels. sales forecasts. MRP is easy to operate and adds dramatically to profits. inventory status. It is the single most powerful tool in guiding inventory planning. buy materials and add manufacturing value. 43 . Proper Material Requirements Planning can keep cash in the firm and still fulfill all production demands. open orders and bills of material. purchase management and production control. If properly implemented. purchases. Implementing or improving Material Requirements Planning can provide the following benefits for your company: 1 Reduced Inventory Levels 2 Reduced Component Shortages 3 Improved Shipping Performance 4 Improved Customer Service 5 Improved Productivity 6 Simplified and Accurate Scheduling 7 Reduced Purchasing Cost 8 Improve Production Schedules 9 Reduced Manufacturing Cost 10 Reduced Lead Times 11 Less Scrap and Rework 12 Higher Production Quality 13 Improved Communication 14 Improved Plant Efficiency 15 Reduced Freight Cost 16 Reduction in Excess Inventory 17 Reduced Overtime 18 Improved Supply Schedules 19 Improved Calculation of Material Requirements 20 Improved Competitive Position The consultants at Inventory Solutions can provide an un-biased review of your operations and make suggestions on how you can improve your process. MRP determines the latest possible time to product goods. it will reduce cash flow and increase profitability.

His method was . -Kotler.want. value analysis can result in reduced material use and cost reduced distribution costs reduced waste improved profit margins increased customer satisfaction increased employee morale MARKETING MANAGEMENT Definition: Marketing management is a business discipline which is focused on the practical application ofmarketing techniques and the management of a firm's marketing resources and activities. anticipates and satisfies customer requirements profitably. identifying those functions of concern and soliciting ideas for improving). Importance Implemented diligently. There are three key perspectives on the marketing environment 44 . utility value . Marketing definition : Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with understanding and addressing the intended function of the product. -The Chartered Institute of Marketing (CIM).need). during the production of the product. Refine (selecting the most value adding. Create (detailed analysis of the disassembled products. MARKETING ENVIRONMENT The marketing environment surrounds and impacts upon the organization. Marketing is the management process that identifies. The Defense Department described Value Engineering as a "before the fact" activity applying the value methodology during the product design phase and Value Analysis as "after the fact" activity.worth. exchange value . The key element in Miles' work is that he separated Function (what it must do) from the characteristics of the design (how it does it). cost-effective ideas and preparing a business case for the implementation of the proposals) . Value = Function/Cost (esteem value .the VA Tear Down Analysis. US Navy adopted this in 1945 as Value Engineering.Blast (dissecting products to discern key competitive advantages). practicing the value process following design release.

as income rises. entertainment). Direct competitors are firms competing for the same customers with the similar products (ex. Competition exists among all organizations that compete for the consumer's purchasing power (ex. For example. and the marketer needs to compensate for changes in culture. income affects consumer spending which affects sales for organizations. inflation. the percentage of income spent on food decreases. and the company needs to be flexible to adapt. 45 . and income. Competitive Environment Adopting the marketing concept means that an organization must provide greater customer value than its competitors.It is continuously changing. while the percentage spent on housing remains constant. Three levels of competition exist. Economic factors include business cycles. 3. According to Engel's Laws. It is impossible for an organization to develop strong competitive positioning strategies without a good understanding of its competitors and the strengths and weaknesses of the competitors. The wider environment is also ever changing. Changes in major economic variables have a significant impact on the marketplace. Economic Environment The economic environment consists of factors that affect consumer purchasing power and spending patterns. but that are out of their direct control. economics and technology. 1. There may be aggressive competition and rivalry in a market. politics. interest rates. 2. Being good is not good enough if a competitor is better. Competition exists between products that can be substituted for one another (ex. A company does not generally influence any laws . unemployment.MACRO ENVIRONMENT This includes all factors that can influence an organization. grocery stores). Globalization means that there is always the threat of substitute products and new entrants. margarine for butter).

having adopted some of the shopping habits of those with less income. Technological developments are the most manageable uncontrollable force faced by marketers. price. Indeed. Changes in the demographic environment can result in significant opportunities and threats presenting themselves to the organization. Cultural Environment Social/cultural forces are the most difficult uncontrollable variables to predict. achievement. It is important for marketers to understand and appreciate the cultural values of the environment in which they operate. Organizations hire lobbyists to influence legislation and run advocacy ads that state their point of view on public issues. Political and Legal Environment Organizations must operate within a framework of governmental regulation and legislation. which create new product and market opportunities. and secularism. dryers. values and beliefs include equality. Government relationships with organizations encompass subsidies. Technological Environment The technological environment refers to new technologies. and other statistics. distribute. perceptions. clothes washers. social interaction. The political environment includes governmental and special interest groups that influence and limit various organizations and individuals in a given society. ethnic and educational mix. and changing consumerexpenditure patterns. patriotism. occupation. putting more constraints on marketers. and behaviors.S. materialism. conformity. age. and the world around them and movement toward self-fulfillment. where they are. there is little visible difference between the poor and nonpoor. which affects sales of products. If you consider access to telephones. immediate gratification. etc. Technology has a tremendous effect on life-styles. a changing age. selfactualization.People spend. Changes in social/cultural environment affect customer behavior. practicality. humanitarianism. and deregulation of industries. and acceptance of responsibility. and promote their products. Special interest groups have grown in number and power over the last three decades. youthfulness. low savings and high debt. microwaves. consumption patterns. invest and try to create personal wealth with differing amounts of money. 46 . individualism. race. and geographical shifts in population. The cultural environment is made up of forces that affect society's basic values. Major trends for marketers in the demographic environment include worldwide explosive population growth. An example of response by marketers to special interests is green marketing. location. and stimulate entirely separate markets. Advances in technology can start new industries. density. the use of recyclable or biodegradable packing materials as part of marketing strategy. The public expects organizations to be ethical and responsible. import quotas. Demographic Environment Demographics tell marketers who current and potential customers are. others. and the economy. The rapid rate at which technology changes has forced organizations to quickly adapt in terms of how they develop. How people deal with their money is important to marketers. Trends in the economic environment show an emphasis on global income distribution issues. preferences. religious and moral orientation. save.. freedom. Demography is the study of human populations in terms of size. mastery over the environment. courage. and how many are likely to buy what the marketer is selling. recent figures indicate that the affluent are shopping at discount stores. U. new types of households. tariffs. Trends in the cultural environment include individuals changing their views of themselves. Organizations need to be aware of new technologies in order to turn these advances into opportunities and a competitive edge. efficiency. sex. radically alter or destroy existing industries. progress.

which need to be monitored. positive and cooperative relationships between the organization and its suppliers can lead to enhanced service and customer satisfaction. The intermediaries between an organization and its markets constitute a channel of distribution. Goodwill can be built by voluntarily engaging in pollution prevention activities and natural resource MICRO ENVIRONMENT The Market Organizations closely monitor their customer markets in order to adjust to changing tastes and preferences. as well as in the United States. Environmental consciousness has a strong presence in Western Europe and Japan. how to reach them and when customers' needs change in order to adjust its marketing efforts accordingly. Suppliers Suppliers are organizations and individuals that provide the resources needed to produce goods and services. marketing intermediaries are an important part of the system used to deliver value to customers. It is imperative for an organization to know their customers. Marketing Intermediaries Like suppliers. These include middlemen (wholesalers and retailers who buy and resell merchandise). Each target market has distinct needs. If there is a breakdown in the link between the organization and its suppliers.Ecosystem Environment The ecosystem refers to natural systems and its resources that are needed as inputs by marketers or that are affected by marketing activities. On the other hand. Government markets are agencies that buy goods and services in order to produce public services or transfer them to those that need them. Marketers must watch supply availability and monitor price trends of key inputs. Physical distribution firms help the organization to stock and move products from their points of origin to their destinations. Organizations can limit their energy usage by increasing efficiency. the result will be delays and shortages that can negatively impact the organization's marketing plans. advertising agencies. Financial intermediaries help finance transactions and insure against risks and include banks. Warehouses store and protect the goods before they move to the next destination. Marketing intermediaries are independent organizations that aid in the flow of products from the marketing organization to its markets. organizations can use renewable resources (such as forests) and alternatives (such as solar and wind energy) for nonrenewable resources (such as oil and coal).Business markets buy goods and services for further processing or for use in their production process. International markets consist of buyers in other countries. Green marketing (the greening of America) or environmental concern about the physical environment has intensified in recent years. 47 . They are critical to an organization's marketing success and an important link in its value delivery system. Consumer markets are individuals and households that buy goods and services for personal consumption. and insurance companies. and the willingness to spend it. The federal government is the largest buyer in the United States. Amarket is people or organizations with wants to satisfy.Reseller markets buy goods and services in order to resell them at a profit. money to spend. The market is the focal point for all marketing decisions in an organization. credit unions. To avoid shortages in raw materials. and media firms. Marketing service agencies help the organization target and promote its products and include marketing research firms.

It pervades our economic and social life. radio advertisement.’ Essentially we use marketing approaches to aid communication and change management. (Arenes 1996) 2. product. The internal environment is as important for managing change as the external.Daniel 2000) 7. All factors that are internal to the organization are known as the ‘internal environment’. or services. or idea from an identified sponsor. television commercial. & disseminated through channels of mass communication to promote the adoption of goods. ideas. The element of the marketing communication mix that is non personal paid for an identified sponsor. (Kotler et al. They are generally audited by applying the ‘Five Ms’ which are Men. Any paid form of non-personal communication about an organization. consumers and the society in general. (Wells. outdoor advertising or direct mail. including mass media such as newspaper. The importance of advertising can be classified into three different heads: • Importance of Advertising to producers and Traders. (Zikmund & D'amico 1999) 6. quickly and economically. Ingram. • Importance of Advertising to customers. It helps to disseminate information which is useful to businessmen. & Moriaty 1998) 4. Definition: 1. Materials and Markets. although political and ideological advertising is also common. We will precisely deal with Importance of Advertising to producers and traders in this topic. ADVERTISING Advertising is a form of communication used to persuade an audience (viewers. Money. magazines. Hair & Mc. Paid non-personal communication from an identified sponsor using mass media to persuade influence an audience. An informative or persuasive message carried by a non personal medium & paid for by an identified sponsor whose organization or product is identified in some way.. one way communication about a product or organization that is paid by a marketer. Impersonal. Most commonly. person or ideas. or new media such as websites and text messages. Machinery. & Laforge 1998) 5. 48 . readers or listeners) to take some action with respect to products.THE INTERNAL ENVIRONMENT. Burnett. Any paid form of non-personal presentation and promotion of ideas. Through it one can create an indirect and impersonal link with his prospects easily. 2006) Importance of Advertising Advertising has become an indispensable function in modern business due to cut-throat competition and mass production. • Importance of Advertising to society. (Bearden. the desired result is to drive consumer behavior with respect to a commercial offering. The non-personal communication of information usually paid for & usually persuasive in nature. Advertising messages are usually paid for by sponsors and viewed via various traditional media. about products (goods & services) or ideas by identified sponsor through various media. services.service. Let us now discuss the Importance of Advertising to Producers and Traders.goods or services by an identified sponsor. (Lamb. As marketers we call the process of managing internal change ‘internal marketing. (Blech & Blech 1998) 3.

Goodwill : Advertising helps in creating a good image of the firm and reputation for its products.. advertising provides a sense of security to employees and improves their morale. Steady demand: Advertising creates regular demand by smoothening out seasonal and other fluctuations. have become household names. You know what you are doing but the targets do not know. 49 . Mass distribution and steady demand lead to large scale and regular production. etc. several economies of scale become available and cost of production per unit is reduced.Advertising provides various benefits to the producers and traders and it can be summed up under the following head." By building goodwill advertising enables business firms to obtain repeat orders. advertising is used to emphasize hot and cold uses of coffee to maintain regular sales both during summer and winter. Economies of scale: Advertising facilitates mass distribution of goods. The importance of Advertising lies in the fact that it creates preference for a particular product opens doors for salesmen and reinforces point of purchase display. It is through effective advertising that Tatas. executive have a feeling of pride and job satisfaction which is necessary for better performance. A favorable image increases the capacity of the firm to survive competition and depression. Direct distribution and rapid sales turnover help to reduce costs of distribution. Higher sales volume: Advertising helps to increase demand. By informing consumers about the new product. Salesmen feel happy as their task becomes easier when the product and its producer are known to customers. DIFFERENT TYPES OF ADVERTISING Advertising is the promotion of a company's products and services carried out primarily to drive sales of the products and services but also to build a brand identity and communicate changes or new product /services to the customers. it helps to maintain sales and market share. For instance. Through repeated advertising. As a result. Advertising is an essential technique of mass selling. thereby reducing the costs of creating and maintaining demand. It has rightly been observed that "doing business without advertising is like winking at a girl in the dark. It creates new wants and increases sales. Dealers prefer to handle well advertised products. Effective advertising helps in overcoming consumers’ resistance to new products. It reduces dependence on middlemen as dealers are more willing to stock and sell well advertised goods. throughout the year. advertising helps to maintain demand. By creating brand loyalty. a producer can create new customers and enter new markets. expand markets and enhance sales of existing products. Investment in inventories can be reduced. In a well reputed firm. Advertising has become an essential element of the corporate world and hence the companies allot a considerable amount of revenues as their advertising budget. Meeting competition: Advertising is an important means for facing competition. By suggesting new and more frequent uses of product. Employee morale: By building reputation of the firm. There are several reasons for advertising some of which are as follows: • Increasing the sales of the product/service • Creating and maintaining a brand identity or brand image. It supplements personal selling and sales promotion. Birlas. Introduction of new product: Advertising is helpful in introducing new products by creating awareness and gaining their acceptance. Steady demand enables regular production. advertising stimulates their interest and persuades them to buy it.

Mentioned below are the various categories or types of advertising: Print Advertising Newspapers. Increasing the buzz-value of the brand or the company. the company can organize several events that are closely associated with their field. Tradeshows and Events Outdoor advertising is also a very popular form of advertising. If not this.Billboards. There 50 . Fliers The print media have always been a popular advertising medium. The company can organize trade fairs. Television advertisements have been very popular ever since they have been introduced. For instance an advertisement in a relatively new and less popular newspaper would cost far less than placing an advertisement in a popular newspaper with a high readership. The price of print ads also depend on the supplement in which they appear. which is evident in the fact that many people still remember and enjoy the popular radio jingles. Thus. and of course the popularity of the television channel on which the advertisement is going to be broadcasted. radio or the Internet. kiosks. Outdoor Advertising . The cost of television advertising often depends on the duration of the advertisement. the time of broadcast (prime time/peak time). The radio might have lost its charm owing to the new age media however the radio remains to be the choice of small-scale advertisers. For instance a company that manufactures sports utilities can sponsor a sports tournament to advertise its products. Advertising products via newspapers or magazines is a common practice. several reasons for advertising and similarly there exist various media which can be effectively used for advertising. The most common examples of outdoor advertising are billboards. Brochures.Advertising in Movies Covert advertising is a unique kind of advertising in which a product or a particular brand is incorporated in some entertainment and media channels like movies. Magazines. television shows or even sports. for example an advertisement in the glossy supplement costs way higher than that in the newspaper supplement which uses a mediocre quality paper. Radio and the Internet Broadcast advertising is a very popular advertising medium that constitutes several branches like television. Covert Advertising . the position of the advertisement (front page/middle page). Based on these criteria there can be several branches of advertising. Broadcast advertising . which makes use of several tools and techniques to attract the customers outdoors. the print media also offers options like promotional brochures and fliers for advertising purposes. Organizing several events or sponsoring them makes for an excellent advertising opportunity. as well as the readership of the publications. Often the newspapers and the magazines sell the advertising space according to the area occupied by the advertisement. The radio jingles have been very popular advertising media and have a large impact on the audience. and also several events and tradeshows organized by the company. The kiosks not only provide an easy outlet for the company products but also make for an effective advertising tool to promote the company's products.Television. or even exhibitions for advertising their products. Introduction of a new product or service.• • • Communicating a change in the existing product line. Kiosks. In addition to this. The billboard advertising is very popular however has to be really terse and catchy in order to grab the attention of the passers by.

Advertising Indirectly Surrogate advertising is prominently seen in cases where advertising a particular product is banned by law. there exist a section of advertisers that still bank upon celebrities and their popularity for advertising their products. poverty and so on. Using celebrities for advertising involves signing up celebrities for advertising campaigns. political integrity.". Oglivy once said. Today public service advertising has been increasingly used in a non-commercial fashion in several countries across the world in order to promote various social causes. there are several factors that a business must take into account: • • What does the promotion cost – will the resulting sales boost justify the investment? Is the sales promotion consistent with the brand image? A promotion that heavily discounts a product with a premium price might do some long-term damage to a brand 51 . which are often seen to promote their brand with the help of surrogate advertising.Advertising for Social Causes Public service advertising is a technique that makes use of advertising as an effective communication medium to convey socially relevant messaged about important matters and social welfare causes like AIDS. or the use of Cadillac cars in the movie Matrix Reloaded. Others are targeted at intermediaries (such as agents and wholesalers) or at the firm’s sales force. which consist of all sorts of advertising including. When undertaking a sales promotion. deforestation. David Oglivy who is considered to be one of the pioneers of advertising and marketing concepts had reportedly encouraged the use of advertising field for a social cause. Advertisement for products like cigarettes or alcohol which are injurious to health are prohibited by law in several countries and hence these companies have to come up with several other products that might have the same brand name and indirectly remind people of the cigarettes or beer bottles of the same brand. Surrogate Advertising . Sales promotion is designed to be used as a short-term tactic to boost sales – it is not really designed to build longterm customer loyalty. Public Service Advertising . the radio and television stations are granted on the basis of a fixed amount of Public service advertisements aired by the channel. In USA. SALES PROMOTION Sales promotion is the process of persuading a potential customer to buy the product. television ads or even print advertisements. energy conservation. Some of the famous examples for this sort of advertising have to be the appearance of brand Nokia which is displayed on Tom Cruise's phone in the movie Minority Report. Some sales promotions are aimed at consumers. no commercial in the entertainment but the brand or the product is subtly( or sometimes evidently) showcased in the entertainment show. Common examples include Fosters and Kingfisher beer is much too powerful a tool to use solely for commercial purposes. "Advertising justifies its existence when used in the public interest . Celebrity Advertising Although the audience is getting smarter and smarter and the modern-day consumer getting immune to the exaggerated claims made in a majority of advertisements.

off. Loyalty cards can offset the discounts they offer by making more sales and persuading the customer to come back. 4. Effect on consumer behaviour: As sales promotions are mostly announced for a short period. they think it advisable to advertise in local media. started the scheme on 20th august 2001. • Loyalty cards – e. Often such price discrimination are offered in specific cities in the country. Offer valid only till stocks last. display stands – ways of presenting the product in its best way or show the customer that the product is there. where by if you buy a Bajaj Spirit two-wheeler you get Rs. Effect on trade behaviour: Short-term promotions present an opportunity and encourage dealers to forward buy. Buy 2 dozen shampoo sachets & get 2 sachets free.g. where customers earn points for buying certain goods or shopping at certain retailers – that can later be exchanged for money. when and what do they buy? This is very valuable marketing research and can be used in the planning process for new and existing products. Regional Differences: 52 • .With every 500g pack of Tang. The main advantages and disadvantages of sales promotion are: Advantages of Sales Promotion Sales promotions have a significant effect on the behaviour of consumers and trades people. They encourage the customer to return to the retailer by giving them discounts based on the spending from a previous visit.g.Bajaj Auto Ltd. you get a free Tang glass. They can charge different prices to different consumers and trade segments depending on how sensitive each segment is to particular prices. posters. Price discrimination: Producers can introduce price discrimination through the use of sales promotions. including: Money off coupons – customers receive coupons.• Will the sales promotion attract customers who will continue to buy the product once the promotion ends.Coupons. Such promotions can bring in more profits for the manufacturers because they permit price discrimination.3000/. special sales events. Nectar and Air Miles. These actions help in increasing the store traffic. arranged displays and offer attractive promotion deals to consumers. They are persuaded to act now rather than later. valid only in Ahmedabad. or cut coupons out of newspapers or a products packaging that enables them to buy the product next time at a reduced price • Competitions – buying the product will allow the customer to take part in a chance to win a prize • Discount vouchers – a voucher (like a money off coupon) • Free gifts – a free product when buy another product • Point of sale materials – e. This forward buying ensures that retailers won’t to go out of stocks. 3. goods or other offers Loyalty cards have recently become an important form of sales promotion. clearance sales anddiscounts are examples to explain the phenomenon. customers may feel a sense of urgency and stop comparing the alternatives. They also provide information about the shopping habits of customers – where do they shop. 1. 2. As dealers have more than the normal stocks. or will it simply attract those customers who are always on the look-out for a bargain? There are many methods of sales promotion.

2. a promotion is speed up the killing of a bad product. Heavy use of sales promotion. consumer in particular. or may be he thinks the effort required is more than the commission/benefit derived. may be responsible for causing brand quality image dilution. This gives a boost to sales for a short period. 1. while the Keralite is more international in his outlook. the routine sales at the market price are lost and the profit margin is reduced because of the discounts to be offered during sale-season. they created a special campaign “The Super Star of the House” and made the cine idol Rajnikant their brand ambassador as in that state he is popularly known as “Superstar”. 3. In mid 80s. Promotions mostly build short-term sales volume. Thus. The retailer might not be willing to give support because he does not have the place. or the product does not sell much in his shop. the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated.The South is generally characterised by greater degree of going out and people tend to drink outside the house. they launched their brand as “Mega Star of the House” as Chiranjeevi was taken as their brand representative. ‘The Diwali Bonanza Offers’ on electronic goods. in Andhra Pradesh. The Smyle Powder offer of “Buy 1 and get 2 free” went on and on. Sales promotion was done by organizing various ‘super shows’ and ‘mega-shows’ for the masses in states of Tamil Nadu and Andhra Pradesh respectively. Quality image may become tarnished: If the promotions in a product category have been rare. Both these campaigns became a major success. Disadvantages of Sales Promotion While sales promotion is a powerful and effective method to produce immediate short termpositive results. 4. Consumers may start suspecting that perhaps the product has not been selling well. Whereas. Difference Between Advertising and Sales Promotion 53 . Such factors have to be taken into consideration while providing incentives to the customers. This short-term orientation may sometimes have negative effects on long-term future of the organization. In fact. which is difficult to maintain. This is true even for brands where brand loyalty exists. the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The Tamilian. The Bangalorean is as Cosmopolitan as his Mumbai or Delhi counterpart. Merchandising support from dealers is doubtful: In many cases. rational and looks up to film stars. Increased price sensitivity Consumers wait for the promotion deals to be announced and then purchase the product. is value oriented. it is not a cure for a bad product or bad advertising. Philips decided to launch a special project in Tamil Nadu and Andhra Pradesh for their rural buyers. for the Tamil Nadu market. Short-term orientation: Sales promotions are generally for a short duration. Ultimately people stopped asking for the product as the on-going sales promotion strategy made the customers perceive it to be a cheap and an inferior product. So. in certain product categories. Customers wait and time their purchases to coincide with promotional offers on their preferred brands. the promotions could have a negative effect about its quality image.

• Marketers can better predict how consumers will respond to marketing strategies. 54 . To get sales quickly or to induce trial. therefore need to analyze the what. Actual purchasing is only one stage of the process. to buy a product or service. Stages of the Consumer Process Six Stages to the Consumer Buying Decision Process (For complex decisions). They have differences in there use and utility.. determined by the degree of complexity. Eg: Good Network.Advertising and Sales Promotion are different. Appeals are emotional or functional in nature. Eg: the current ad of “Wherever you go. • The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages. Promises and Delivers. WIll try to explain it with example of HUTCH (Orange) to facilitate our understanding. Need to understand: • • • why consumers make the purchases that they make? what factors influence consumer purchases? the changing factors in our society. where. Direct in approach to induce consumers to buy a product or service immediately by temporarily changing the existing price-value relationship of the product or service. our network follows” Time-frame is long term..discussed next. What is Consumer Behavior? Definition of Buying Behavior: Buying Behavior is the decision processes and acts of people involved in buying and using products. Appeals are rational It justifies whatever it says. For new users. 1HUTCH no is given free for 1 month & sms is free for 3 months. Indirect and subtle approach towards persuading customers to buy a product or service. they offer incentive to the consumers to buy the product or service now. Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. ADVERTISING SALES PROMOTION By using a variety of persuasive appeals. The primary objective is to create an enduring brand image. Time frame is short term. when and how consumers buy. A firm needs to analyze buying behavior for: • Buyers reactions to a firms marketing strategy has a great impact on the firms success. it offers reasons Besides giving reasons in the form of different appeals.

Can be stimulated by the marketer through product information--did not know you were deficient? I.The 6 stages are: 1.E. Purchase--May differ from decision. May decide that you want to eat something spicy. want to go out and eat. time lapse between 4 & 5. method of purchase etc. comparison shopping. Information from different sources may be treated differently. 6. evoked set is o o o o chinese food indian food burger king klondike kates etc 3. indian gets highest rank etc. after sales communication etc. Deficit in assortment of products. After eating an indian meal. Friends and relatives (word of mouth). Importance and intensity of interest in a product in a particular situation. Purchase decision--Choose buying alternative. Marketers try to influence by "framing" alternatives. and the higher the risk the higher the involvement. Evaluation of Alternatives--need to establish criteria for evaluation. 5. the evoked set. Hungry. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Hunger stimulates your need to eat. • Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others. Rank/weight alternatives or resume search. Types of Consumer Behavior Types of consumer buying behavior are determined by: • Level of Involvement in purchase decision. store. features the buyer wants or does not want. Can you think of another restaurant? Look in the yellow pages etc. high priced goods. Marketer dominated sources. 2. Cognitive Dissonance. Information search-o o Internal search. products visible to others. Hunger--Food. package. A successful information search leaves a buyer with possible alternatives. memory. Types of risk: • Personal risk • Social risk • Economic risk The four type of consumer buying behavior are: 55 . may think that really you wanted a chinese meal instead. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. 4. have you made the right decision. External search if you need more information. see a commercial for a new pair of shoes. includes product.. This can be reduced by warranties. If not satisfied with your choice then return to the search phase. product availability. stimulates your recognition that you need a new pair of shoes. public sources etc. High involvement purchases--Honda Motorbike.

MASLOW hierarchy of needs!!      Physiological Safety Love and Belonging Esteem Self Actualization Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases. Extensive Decision Making/Complex high involvement. PERSONAL Unique to a particular person. unfamiliar. Examples include cars. Limited Decision Making--buying product occasionally. store personnel etc. expensive and/or infrequently bought products. Who in the family is responsible for the decision making? Young people purchase things for different reasons than older people. Actions are effected by a set of motives. Examples include Clothes--know product class but not the brand. Impulse buying. snack foods. If marketers can identify motives then they can better develop a marketing mix. High degree of economic/performance/psychological risk. When you need to obtain information about unfamiliar brand in a familiar product category. Personal 2. homes. Sex. • • The purchase of the same product does not always elicit the same Buying Behavior. Examples include soft drinks. Race. Spend alot of time seeking information and deciding. Go through all six stages of the buying process. Social The marketer must be aware of these factors in order to develop an appropriate MM for its target market. milk etc. making a purchase decision will be affected by the following three factors: 1. whether it is an anniversary celebration. education. perhaps. For example: Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all). Requires a moderate amount of time for information gathering.• • Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items. Information from the companies MM. no conscious planning. Age etc. friends and relatives. Demographic Factors. Categories that Effect the Consumer Decision Process A consumer. PSYCHOLOGICAL FACTORS Psychological factors include: • Motives-A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal. but limited decision making for someone else. need very little search and decision effort. 56 . not just one. purchased almost automatically. computers. The reason for the dinner. Product can shift from one category to the next. Psychological 3. or a meal with a couple of friends will also determine the extent of the decision making.

Knowledge is the familiarity with the product and expertise. Examples include:             Workaholism Compulsiveness Self confidence Friendliness Adaptability Ambitiousness Dogmatism Authoritarianism Introversion Extroversion Aggressiveness Competitiveness. Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy. Learning... uniqueness arrives from a person's heredity and personal experience. need to give them new information re: product. Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior.. satisfies current needs. organizing and interpreting information inputs to produce IE we chose what info we pay attention to.. Therefore to change consumers' behavior about your product. organize it and interpret it.  Attitudes Knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible.MCI and AT&T. buyers must process information. A current example. changes in a person's behavior caused by information and experience. 57 ..  Personality All the internal traits and behaviors that make a person unique.. living or non... intensity of input changes (sharp price drop). because they assume that the greater price indicates greater quality. When making buying decisions.Drive perceptions Individual learns attitudes through experience and interaction with other you ever get confused?  Ability and Knowledge Need to understand individuals capacity to learn. hearing. Perception What do you see?? Perception is the process of selecting. Non-alcoholic Beer example: consumers chose the most expensive six-pack. have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product. Information inputs are the sensations received through sight. taste.. smell and touch. Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an sample etc.. Selective Distortion-Changing/twisting current received information. inconsistent with beliefs. Advertisers that use comparative advertisements (pitching one product against another).

. Lifestyles are the consistent patterns people follow in their lives. 58 . social class and culture. The Family life cycle: families go through stages.. reference groups. older married couples. natural lifestyle.  Lifestyles Recent US trends in lifestyles are a shift towards personal independence and individualism and a preference for a healthy. People have many roles. Consumers buy products that are consistent with their self concept. Gatorade etc. Marketers try to match the store image to the perceived image of their customers. Sun tan not considered fashionable in US until 1920's.things you should do based on the expectations of you from your position within a group. Marketers try to attract opinion leaders.  Opinion leaders Spokespeople etc. head retired solitary survivor. young. Individuals role are continuing to change therefore marketers must continue to update information. Husband. no children living at home. in labor force solitary survivor. There is a weak association between personality and Buying Behavior. this may be due to unreliable measures. retired Modernized life cycle includes divorced and no children. father. McDonalds. older married couples with dependant children empty nest I. motives etc.. Family is the most basic group a person belongs to.... SOCIAL FACTORS Consumer wants.. no children.. Now an assault by the American Academy of Dermatology. are influenced by opinion leaders. Michael Jordon (Nike.most of BUAD301 newly married.they actually use (pay) spokespeople to market their full nest I. person's family.)  Roles and Family Influences-Role. Marketers must understand: o o o o o that many family decisions are made by the family unit consumer behavior starts in the family unit family roles and preferences are the model for children's future family (can reject/alter/etc) family buying decisions are a mixture of family interactions and individual decision making family acts an interpreter of social and cultural values for the individual. youngest child under 6 full nest II.Traits effect the way people behave. youngest child 6 or over full nest III. head in labor force empty nest II. employer/ee. each stage creates different consumer demands: o o o o o o o o o o bachelor stage. Nike ads. EXAMPLE healthy foods for a healthy lifestyle. older married couples with no children living with them. learning.

 Social Class An open group of individuals who have similar social rank. Culture determines what people wear. civic and professional organizations. reference groups and social classes are all social influences on consumer behavior. education. eat. The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group.2%. Social class influences many aspects of our lives. 38%. and attitudes that are accepted by a homogenous group of people and transmitted to the next generation. college graduates. aristocratic names. US is not a classless society. 32%. Lower-upper class. Membership groups (belong to) Affinity marketing is focused on the desires of consumers that belong to reference groups. 9%. individualism and freedom. income. IE change in meals. US criteria. quantity of products that a person buys or uses. quality. working. do not engage in much prepurchase information gathering.!! Aspiration groups (want to belong to) Disassociate groups (do not want to belong to). ideas. Cultural values in the US are good health. not on welfare Lower-lower class. attitudes or behaviors of the group members. ethnic groups and possessions. occupation. race. Lower class people tend to stay close to home when shopping. Credit Cards etc. Big impact on international marketing. managers and professionals Middle Americans-middle class. IE upper middle class Americans prefer luxury cars Mercedes. the types. friends. • Culture and Sub-culture-- Culture refers to the set of values. o o o o o o o Upper Americans-upper-upper class. Culture also determines what is acceptable with product advertising.5%. In american culture time scarcity is a growing problem. Stores project definite class images. Any group that has a positive or negative influence on a persons attitude and behavior. 1.3%. 7%. Reference Groups Individual identifies with the group to the extent that he takes on many of the values. average pay blue collar workers Lower Americans-lower class. inherited wealth. Families. 12. reside and travel. Marketers get the groups to approve the product and communicate that approval to its members. Family. from current professionals and corporate elite Upper-middle class. average pay white collar workers and blue collar friends Working class. All operate within a larger culture. newer social elite. sororities. Culture can be divided into subcultures: o geographic regions 59 . on welfare Social class determines to some extent. . wealth. education.

We must assume that the company has adopted the Marketing Concept and are consumer oriented. 60 . Culture effects what people buy.Understanding Consumer Buying Behavior offers consumers greater satisfaction (Utility). how they buy and when they buy.o human characteristics such as age and ethnic background.