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NOV/DEC-’06/MG1351 – Answer key

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PRINCIPLES OF MANAGEMENT – MG1351 NOV/DEC 2006

PART – A

1. Distinguish between management & administration?
Management is a generic term that includes administration and it has two
subdivisions namely, administrative management, Operative management. It brings the policies
to effect.
Administration lists out the required policies.

2. What is scientific management?
The management which focuses on how to improve the productivity of operative
personnel. It involves in worker and machine relationships.

3. What do you mean by a strategy?
It is the programmes of action and deployment of resources to attain its objectives.

4. What is decision making?
It is the process of choosing a course of action from among alternatives to achieve a
desired goal. It is one of the core process of planning.

5. Why is informal organization needed?
Informal organization gives satisfaction to the workers; it motivates workers and also
maintains the stability of the work. It fills the gap and deficiency of the formal organization.

6. What are the limitations of line & staff authority?
Line authority neglects specialists, overloads a few key executives, requires a high
type of supervisory personnel to meet the challenges imposed in the absence of specialists as
advisors, limited to very small organization.
Staff authority undermines line authority, lack of staff responsibility, and thinking in
vacuum, leads to managerial problems.

7. Distinguish between creativity and innovation?
Creativity may be defined as the ability to think originally & bring out some thing new
or novel.
Innovation forms a part of creativity, ie, creatively is the origin of innovation.

8. List the hierarchy of needs?
Physiological needs, safety needs, social needs, esteem needs, self-actualization needs.

9. What are the uses of computers in handling the information?
Sales forecast and control, payroll, business management, accounting, personnel
management information, cost accounting, manufacturing information control, banking and
credit.


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10. What is globalization?
The commitment of government to integrate Indian economy with the world’s
economy and the changing attitude of government towards business.


PART – B


11 (a) (i) Is Management a science or art? Discuss.
Management is a science because it contains general principles. It is also an art
because it requires certain personal skills to achieve desired results. Management is inexact
science because every organizations human resources are different attitudes, aspirations and
perceptions so that standard results may not be obtained. Management is complex and
unpredictable. Every organization decisions are influenced by the environment.
Art means application of skill in finding a desired result. Art is the way of doing
things skillfully. Management process involves the use of practical knowledge and personal skill,
It is creative and helps to achieve concrete results.

(ii) Discuss the steps in method to study the management.
By far the most influential person of the time and someone who has had an
impact on management service practice as well as on management thought up to the present day,
was F. W. Taylor. Taylor formalized the principles of scientific management, and the fact-
finding approach put forward and largely adopted was a replacement for what had been the old
rule of thumb. He also developed a theory of organizations which altered the personalized
autocracy which had only been tempered by varying degrees of benevolence, such as in the
Quaker family businesses of Cadbury's and Clark's.
Taylor was not the originator of many of his ideas, but was a pragmatist with the
ability to synthesize the work of others and promote them effectively to a ready and eager
audience of industrial managers who were striving to find new or improved ways to increase
performance. At the time of Taylor's work, a typical manager would have very little contact with
the activities of the factory. Generally, a foreman would be given the total responsibility for
producing goods demanded by the salesman. Under these conditions, workmen used what tools
they had or could get and adopted methods that suited their own style of work.
11. (b) Explain the fourteen principles of management, as advocated by Henry fayol.
Division of Work -
The specialization of the workforce according to the skills a person , creating specific personal
and professional development within the labour force and therefore increasing productivity;
leads to specialization which increases the efficiency of labour. By separating a small part of
work, the workers speed and accuracy in its performance increases. This principle is applicable
to both technical as well as managerial work.
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Authority and Responsibility-
The issue of commands followed by responsibility for their consequences. Authority means the
right of a superior to give order to his subordinates; responsibility means obligation for
performance. This principle suggests that there must be parity between authority and
responsibility.. They are co-existent and go together, and are two sides of the same coin.
Discipline-
Discipline refers to obedience, proper conduct in relation to others, respect of authority, etc. It is
essential for the smooth functioning of all organizations.
Unity of Command -
This principle states that every subordinate should receive orders and be accountable to one and
only one superior. If an employee receives orders from more than one superior, it is likely to
create confusion and conflict.
Unity of Direction -
All those working in the same line of activity must understand and pursue the same objectives.
All related activities should be put under one group, there should be one plan of action for them,
and they should be under the control of one manager.
Subordination of Individual Interest
The management must put aside personal considerations and put company objectives first.
Therefore the interests of goals of the organization must prevail over the personal interests of
individuals.
Remuneration -
Workers must be paid sufficiently as this is a chief motivation of employees and therefore
greatly influences productivity. The quantum and methods of remuneration payable should be
fair, reasonable and rewarding of effort.
The Degree of Centralization -
The amount of power wielded with the central management depends on company size.
Centralization implies the concentration of decision making authority at the top management.
Sharing of authority with lower levels is called decentralization. The organization should strive
to achieve a proper balance.


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Scalar Chain -
Scalar Chain refers to the chain of superiors ranging from top management to the lowest rank.
The principle suggests that there should be a clear line of authority from top to bottom linking all
managers at all levels. It is considered a chain of command. It involves a concept called a "gang
plank" using which a subordinate may contact a superior or his superior in case of an
emergency,defying the hierarchy of control.However the immediate superiors must be informed
about the matter
Order -
Social order ensures the fluid operation of a company through authoritative procedure. Material
order ensures safety and efficiency in the workplace.
Equity -
Employees must be treated kindly, and justice must be enacted to ensure a just workplace.
Managers should be fair and impartial when dealing with employees.
Stability of Tenure of Personnel -
The period of service should not be too short and employees should not be moved from positions
frequently. An employee cannot render useful service if he is removed before he becomes
accustomed to the work assigned to him.
Initiative -
Using the initiative of employees can add strength and new ideas to an organization. Initiative on
the part of employees is a source of strength for the organization because it provides new and
better ideas. Employees are likely to take greater interest in the functioning of the organization.
Esprit de Corps -
This refers to the need of managers to ensure and develop morale in the workplace; individually
and communally. Team spirit helps develop an atmosphere of mutual trust and understanding.
12 (a) What is planning? Explain the steps involved in planning.
Planning refers to the process of deciding what to do and how to do it. Planning
occurs at many levels, from day-to-day decisions made by individuals and families, to complex
decisions made by businesses and governments. This paper focuses on community land use and
transport planning, but most principles described apply to any planning activity.
Good planning requires a methodical process that clearly defines the steps that lead to optimal
solutions. This process should reflect the following principles:
• Comprehensive – all significant options and impacts are considered.
• Efficient – the process should not waste time or money.
• Inclusive – people affected by the plan have opportunities to be involved.
• Informative – results are understood by stakeholders (people affected by a decision).
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• Integrated – individual, short-term decisions should support strategic, long-term goals.
• Logical – each step leads to the next.
• Transparent – everybody involved understands how the process operates.
A principle of good planning is that individual, short-term decisions should support
strategic, long-term goals. This requires comprehensive evaluation and negotiation to help
people accept solutions that may seem difficult and costly in the short-term. Good planning is
insightful, comprehensive and strategic. Planners should strive to truly understand problems, not
just a single perspective or manifestation. Effective planning requires correctly defining
problems and asking critical questions. A planning process should not be limited to the first
solution proposed or the concerns of people who attend meetings. For example, downtown
merchants might complain of inadequate customer parking near their stores. This problem can be
defined in various ways – inadequate parking supply, too many vehicles, or inefficient
management of available spaces – each implying different solutions. Some questions to ask to
help understand this problem:
• How much parking exists, including spaces currently unavailable to customers?
• Who currently uses the most convenient spaces?
• Who encounters this problem, when and where?
• How is parking currently managed (including regulations and prices)?
• What is the cost of increasing parking supply?
• What management strategies could help address this problem?
• Who bears the costs and benefits from potential solutions?
• How well do various solutions integrate with strategic planning objectives?
Planners should strive to understand factors that will affect the future.

12 (b) What are objectives? How will you set objectives for a manufacturing organization?
The term “objective” or “goals” are often used interchangeably. Objective are the
end results towards which the activities of attain its objectives.
To set objectives it should cover the main features of the job, it must be clearly
specified in writing, list of objectives should not be too long, it must be set by considering
various factors affecting their achievement, it should be verifiable, it should clearly indicate the
organizational mission, it should be challenging and reasonable, it should yield specific results
when achieved, it should be coordinated with these of other managers and organizational units, it
should provide timely feedback so that the necessary corrective action can be taken, it should be
consistent with long term objectives, it should be periodically reviewed.

13 (a) (i) Explain the nature and purpose of organization.
Organizing is the act of rearranging elements following one or more rules.
Organizations are groups of people frequently trying to organize some specific subject, such as
political issues. So, even while organizing can be viewed as a simple definition, it can get as
complex as organizing the world's information.
Nature of organization
Division of work or specialization
The entire philosophy of organisation depends on the concept of specialization. In specialization,
various activities are assigned to different people who are specialists in that area. Specialization
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improves efficiency. Thus, organisation helps in division of work and assigning duties to
different people.
Orientation towards goals
Every organisation has its own purposes and objectives. Organizing is the function employed to
achieve the overall goals of the organisation. Organisation harmonies the individual goals of the
employees with overall objectives of the firm.
Composition of individuals and groups
Individuals form a group and the groups form an organisation. Thus, organisation is the
composition of individual and groups. Individuals are grouped into departments and their work is
coordinated and directed towards organizational goals.
Differentiated functions
The organisation divides the entire work and assigns the tasks to individual in-order to achieve
the organizational objectives each one has to perform a different task and tasks of one
individuals must be coordinated with the tasks of others.
Continues process
An organization is a group of people with defined relationship to each other that allows them to
work together achieve the goals of the organisation. This relationship do not come to end after
completing a task. Organisation is a never ending process.
Purpose or importance of organization
Helps to achieve organizational goal
Organization is employed to achieve the overall objectives of business firms. Organization
focuses attention of individuals objectives towards overall objectives.
Optimum use of resources
To make optimum use of resources such as men, material, money, machine and method, it is
necessary to design an organization properly. Work should be divided and right people should be
given right jobs to reduce the wastage of resources in an organization.
To perform managerial function
Planning, Organizing, Staffing, Directing and Controlling cannot be implemented without proper
organization.
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Facilitates growth and diversification
A good organization structure is essential for expanding business activity. Organization structure
determines the input resources needed for expansion of a business activity similarly organization
is essential for product diversification such as establishing a new product line.
Human treatment of employees
Organization has to operate for the betterment of employees an must not encourage monotony of
work due to higher degree of specialization. Now, organization has adapted the modern concept
of systems approach based on human relations and it discards the traditional productivity and
specialization approach.
(ii) Explain the qualitative forecasting.
The qualitative methods provide forecasts that incorporate factors such as the
decision maker’s emotions, personal experiences, and intuition.

Jury of executive opinion – The executive of the organization each provides an estimate of
future volume, and the president provides a considered average of these estimates. Experts
possess privileged information; Experts receive accurate and well-summarized feedback about
their forecasts. This method is inexpensive and quick and may be entirely acceptable if the future
conforms to the assumptions the executives have used in estimating.

Delphi method – It is a group decision process about the likelihood that certain events will
occur. It makes use of a group of experts, selected based on the areas of expertise required. It is
an exercise in group communication among a panel of geographically dispersed experts. It
comprises a series of questionnaires sent either by mail or via computerized systems. It is also
used for environmental, marketing and sales forecasting. The technique allows experts to deal
systematically with a complex problem or task. Steps for the Delphi method are formation of a
team to undertake and monitor a Delphi on a given subject, Selection of one or more panels to
participate in the exercise. Customarily, the panelists are experts in the area to be investigated.
Development of the first round Delphi questionnaire.
Testing the questionnaire for proper wording (e.g., ambiguities. vagueness),
Transmission of the first questionnaires to the panelists, Analysis of the first round responses,
Preparation of the second round questionnaires, Transmission of the second round questionnaires
to the panelists, Analysis of the second round responses (Steps 7 to 9 are reiterated as long as
desired or necessary to achieve the stability in results.) Preparation of a report by the analysis
team to present the conclusions of the exercise.

Consumer market survey - This method is mainly useful for predicting the sales forecast when
it is introduced in the market. For a new product, there will be no historic or past data available
to forecast. In this method, field surveys are conducted to gather information on the intentions of
the concerned people.

Sales force opinion composite - In this method, members of the sales force estimate sales in
their own territory. Regional sales managers adjust these estimates for their opinion of the
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optimism or pessimism of individual sales people, and the general sales manager “massages” the
figures to account for new products or factors of which individual salesman are unaware.

13 (b) Explain MBO with a focus on IT industry.
MBO is a management system in which each member of the organization
effectively participates and involves himself.
Features of MBO
MBO focuses attention on what must be accomplished and not how to accomplish the objectives.
It is a goal oriented rather work-oriented approach.
It is an attempt made by the management to integrate the goals of an organization and
individuals. It will lead to effective management.
MBO tries to combine the long range goals of organization with short range of organization.
MBO involves participation of subordinate managers in the goal setting process.
A high degree of motivation and satisfaction is available to employees through MBO.
Periodic review of performance is an important feature of MBO. The review is future-oriented
because it provides the basis planning and corrective actions.
MBO increases the organizational capability of achieving goals at all levels.
MBO’s emphasis is not only on goals but also on effective performance.
MBO provides better guidelines for appropriate systems and procedure to achieve the objectives.
MBO has an evaluative mechanism by which the contribution of each individual can be
measured.
MBO is not a set of rules, procedures or techniques; it is a particular way of thinking about
management. It is an overall philosophy of management that allows management to attain
maximum results from available resources.

Process of MBO
Management by objectives has been recognized as a system for achieving the
organizational objectives. The MBO process consists of the following steps:

Setting Preliminary Objectives
The MBO process begins with the active support of the managing direction who gives
the direction to the organization. Normally, setting of objectives starts from the top-level
management. Then it moves downwards. The definition of organizational objectives states why
the business in started and exists. The long-term objectives are laid down in the key result areas.
Then short-term objectives are framed taking into account the feasibility of achieving the long-
term objectives. These objectives are formed by keeping in view the internal and external
environment of the organization. These objectives are preliminary and tentative subjected to
modification.

Fixing key result areas
Key result areas (KRAs) are identified on the basis of organizational objectives and
planning premises. These are the areas reference to which organizational health can be measured.
Key result areas are arranged on the priority basis. Some examples of KRAs are (i) Profitability,
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(ii) Market standing, (iii) Innovation, (iv)Productivity, (v) Market Performance, (vi) Public
responsibility, etc.

Setting subordinate’s objectives
The organizational objectives are achieved through individuals. Each individual must know what
he is expected to achieve. During setting objectives for subordinates, we should consider the
organizational goals, subordinates ability and resources available to him.
Recycling objectives
Under MBO goal-setting is not the direction from the top level management only. Rather it is a
two-way process in which superior suggests a goal that is acceptable to the subordinates. Thus,
setting bjectives are not only a joint process but also an interactive one.
Matching resources with objectives
Objectives should be carefully matched with the available resources. If certain resources are not
adequately available, the objectives of an organization are changed accordingly. The allocation
and movement of resources should be done in consultation with the subordinates.
Periodic performance reviews
At specified intervals, the superior and subordinates should hold meetings in which they discuss
the progress in the accomplishment of objectives. Such reviews are made to identify
shortcomings and to take timely steps to improve results. Feedback from these reviews is
provided to each individual to facilitate self regulation and control.

Benefits of MBO:
Improvement of managing, clarification of organization, Personnel satisfaction, Team
work, Development of effective control, fast decision making.

Weakness of MBO:
Failure to teach philosophy of MBO, Failure to give guidelines to goal setters,
Difficulty of setting goals, danger of flexibility, time consuming, increased paper work.

14 (a) (i) Explain democratic type of leadership with examples.
The subordinates are consulted and their feedback is taken into decision
making process. Decisions are taken after group discussions. Therefore the authority is
decentralized. The participative leader attaches high importance to both work and people.
The leadership truly desires to hear the ideas of his employees before making
decisions. The organization has communicated its goals and the objectives to the subordinates
and the subordinates have accepted them. The workers are reasonably knowledge and
experienced. The time for task completion allows for the participation. The subordinates desire
active and true involvement in matters that affect them.

Advantages:
The subordinates are motivated by participation in decision making process. This will
also increase job satisfaction. Absence of leader does not affect output. Labour absenteeism and
turn-over will be minimum. The quality of decision is improved. The leader multiplies his
abilities through the contribution of his followers.
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Limitations:
It is time consuming and may result in delays in decision-making. If subordinates are
lazy and avoid work, then controlling them is difficult. It cannot be successfully applied at lower
level of manager and in production activity.

(ii) Discuss two-factor theory of motivation.
Frederick Herzberg and his associates have developed a theory of work motivation
that has broad implications for that management and its effort towards effective utilization of
human resources. Also called as Herzberg motivation maintenance theory or Motivation hygiene
theory.
If a factor is responsible for job satisfaction, the absence of such a factor would not
mean job-dissatisfaction, but it might be called no job-satisfaction. Similarly, the opposite of job-
dissatisfaction is not job satisfaction but it might be no job-dissatisfaction. Thus, these theories
are based on two factors: motivational factors and Hygiene or maintenance factor.
According to Herzberg, maintenance or Hygiene factors are necessary to maintain a reasonable
level of satisfaction among employees. These factors do not provide satisfaction to the
employees but their absence will dissatisfy them. Therefore, these factors are called dissatisfiers.
Herzberg identified some maintenance or Hygiene factors as (i) Company policy and
administration, (ii) Technical supervision, (iii) Interpersonal relations with subordinates, (iv)
Salary, (v) Job security (vi) Personal life, (vii) Working conditions, (viii) Status, (ix) Inter
personal relations with superiors, and (x) Interpersonal relations with peers. Maintenance factors
mostly are related to environment, outside the job.
On the other hand, motivational factors create satisfaction to the workers at the time of
presence but their absence does not cause dissatisfaction. Herzberg identified some motivational
factors as (i) Achievement, (ii) Recognition, (iii) Advancement, (iv) Opportunity for growth, (v)
Responsibility, (vi) Work itself. Since these factors increase level of satisfaction in the
employees, these can be used in motivating them for higher output.

14 (b) (i) Explain how job enrichment helps organizations to maintain competitiveness.
Job enrichment is a non-financial technique of motivation. It has been
derived from Herzberg’s two factor theory of motivation. It is therefore based on the
assumptions that in order to motivate personnel, the job itself must provide opportunities for
achievement, recognition, responsibility, advancement and growth. The job is designed in such a
manner that it becomes more interesting and challenging to the job performer. According to
Robert N.Ford, job enrichment is concerned with designing jobs that include a variety of work
content, require a higher leve1 of knowledge and skill; give the worker more autonomy and
responsibility for planning, directing and controlling his own performance and providing the
opportunity for personal growth and meaningful work experience.
The nature of modern technology such as division of labour, assembly line,
job simplification has made the jobs dull and monotonous. In order to overcome these problems,
a new technique called job enlargement has been made. It attempts to make a job more varied by
removing the dullness associated with performing repetitive operations. As a result, there was a
variety and challenge in the job. Workers will get job satisfaction and there is also an
improvement in their performance. Job enrichment is an extension of job enlargement technique.
In job enrichments, a job may be enriched by variety as well as some of the following
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l. Giving workers more freedom in deciding about such things as work, sequence and pace or the
acceptance or rejection of materials. 2. Encouraging participation of subordinates and interaction
between workers. 3. Giving workers feeling of personal responsibility for their tasks. 4. Taking
steps to make sure that worker can see how their tasks contribute to a finished product and the
welfare of an enterprise. 5. Giving people feedback on their job performance, preferably before
their superiors get it. 6. Involving workers in the analysis and change of physical aspects of the
work environment such as layout of plant, temperature, lighting and cleanliness.
The job enrichment program can only be initiated and implemented
successfully, if the conditions for such a program are highly adequate and receptive. It cannot
work in Vacuum. Its success is dependent upon the existing organizational structure, physical
and conceptual environment, technology etc. For example, if the jobs are already diverse and
challenging, and the workers have reasonable autonomy, further enrichment may not be
necessary. If the employees are not happy with other extrinsic rewards such as pay and fringe
benefits, they may not respond positively to the job enrichment program.

(ii) Explain the barriers in communication.
1. Physical barriers - These barriers are environment factors that reduce the sending
and receiving of communication. It includes physical distance, distracting noises and other
interferences. Difficulty in passing of message mainly increases with increase in physical
distance.
2. Personal or Socio-psychological barriers - It arises from motives, attitudes, judgment and
emotions. Finally, it leads to psychological distances. It may be caused due to problems in
encoding and decoding others sentiments, attitudes and motives. So, receptability and
creditability of messages are subjected to several mental and social barriers.
3. Organizational barriers - Usually, information flows through hierarchical structure in
organization downward communication. So, there may chances of information being filtered.
Example: The information received from the top to bottom may not reach in the same sense.
Sometimes, the information may be colored favorably according to his own situations, it is done
by intermediate person between top and bottom status is also a barrier of communication in a
formal organization. H.Kelley discovered a few interesting effects of status upon communication
as below:
I. Low status members communicate more task irrelevant information than high status members.
2. High status persons appear to be restrained from communication criticison, negative attitudes.
3. Communication with high status persons tends to serve as a substitute for upward locomotion
on the part of low status persons having no real possibility of upward locomotion. Poor
supervision also serves as a communication barrier.
4. Semantic barriers:
It refers to the relationship of signs to their reference. It arises due to limitations of the symbolic
system. Symbols may reach a person’s brain through any of the senses such as feeling or hearing.
Generally, symbols may be classified as language, picture or action.
Language - One of the statics report gives the information about the different time consumption
in communication such as first level supervisors spend 74% of their time in communication,
second level supervisors spend 81% and third level supervisor by 87%. Understanding of
language is a major or difficulty among labour. It leads to context to the receiver.
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Picture - Pictures are visual aids in communication e.g., blueprints, charts, maps, fitions, 3-D
models etc. Sometimes, pictures may create confusion in the mind of the receiver.
Action – It is also known as non-verbal communication. It speaks louder than words. The people
do not listen to what he does. So, it leads to credibility gap.
5. Mechanical barriers:
It includes inadequate arrangement for transmission of new, facts and figure, poor office layout,
defective procedure as and practices.
15 (a) (i) What are requirements of effective controlling.

1. Stability:
A sound control system must suit the needs of the enterprise controls must be tailored to the need
of an organization.
2. Flexibility:
Controlling is a continuous activity, it should be flexible enough to be adopted to change
conditions of an organization.
3. Economical:
The control system should be less expensive. Expensive control should be avoided.
4. Simple:
A good control system should be to understand to the administrator.
5. Motivation:
A good control system should give attention to the human factors. A control system should
increase the performance of the members by motivating them.
6. Forward looking:
A good control system should be directed towards future.
7. Objective:
The good control system should be objective. It is clearly quantifiable and verifiable.
8. Controls should reflect the organization structure and needs:
Effective control system is that which reflects the organizations structure, position and needs and
plans.
9. Control should lead to corrective action:
A good control system must lead to appropriate corrective action. Control system must also
suggest the events of improving the performance.

(ii) What is the role of IT in controlling.
Management needs more advance technology for solving its basic requirements. MIS is
used for decision making in the various functional areas of business. MIS is a new technique
which has brought accuracy and speed to the management. MIS can be defined as “A system of
obtaining, abstracting, storing and analyzing data to produce effective information for use in
planning, controlling and decision making process”. The man machine combination helps to
solve complex business and industrial problems and that too quickly.
Characteristics of Good Management Information System:
1. Information must be clear and conciseness.
2. The information should be relevant the business organization. Unnecessary information’s
should be avoided.
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3. MIS must be simple and easy to understand.
4. It must help in the process of decision-making and corrective actions.
5. MIS should help in solving the complicated problems effectively.




Need of MIS
1. Internal factors:
Resources involves the analysis of available resources in the organization like
money, material, machine etc. Planning and control information is to get required information
about budgets, sales forecasts etc. Operational information evaluates the overall operations of the
business. Production function is required to increase the production, product quality and to
reduce wastages etc. Marking function is to obtain required information for plan sales forecast,
advertising budget consumer satisfaction, sales value competitors etc.
2. External Information Needs:
Political and Government involves information about political fiscal polities, government
policies, procedures, rules and regulations. Economic condition is to get required information
such as money value, GNP, inflation rate interest rate etc. Technology is to get information’s
about new advanced machinery, new process etc.
MIS resources consist of Computer hardware, Software, Data, People.

15 (b) (i) What is productivity? Explain the methods of improving productivity in IT
industry.
Productivity is one of the major concerns of every manager of the organization. It is a
measure of how much input is required to produce a given output ie., the ratio output/input is
called productivity.
Factor affecting productivity are technology, human resources, government policy, machinery
and equipment, skill of the workers – Well trained and experienced employees leads to effective
productivity. Capital - Increased capital investment results in increased productivity. This also
increases other factors like market share, low cost, high profit.
Research and Development - Research and development play a vital role in determining
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productivity. The research includes reduction of cost and wastage.
Trade unions - Some trade unions create some unnecessary problems in the company and start
strike and lock out the company. Efficient top management executives smoothly handling the
unions to carry out the positive effect.
Materials - Productivity of materials can also be increased by using correct process, well trained
workers, and storage facilities.
Plant and equipment - Productivity can be increased through modem tools. Proper maintenance
of plant and equipment increase the productivity.
Land and Buildings - Working environment must be suitable for employees. Poor plant layout
and construction will affect the productivity.
(ii) Explain the impact of liberalization quoting examples from software industry.
It eliminates licensing quantitative restrictions and other regulatory ad
discretionary controls. The liberalization has enormously expanded the scope of the private
sector. Now only a small number of industries are reserved. The Liberalization of the policies
towards foreign capital and technology and import liberalization have given further growth and
competition.
The liberalization has given an enormous boost to private investment in the industrial sector. In
1990 — 91 the year prior to liberalization the total capital mobilized by the private co-operate
factor by equity issues was Rs.1,261 crores. In 1994-95 i.e. four years since the liberalization the
equits capital mobilized increased to about Rs.25,27,621 crores.
After 1970 the industrial policy of the government turned towards liberalization of
industrial licensing with a view to accelerate the growth rate of the industrial sector and to
achieve export promotion on a large scale. In October 1975 the government delicenced 21
industries and permitted unlimited expansion. Later it also announced that 25% of exess
unauthorized capacity was declared legal on the basis of normal activity and another 25% would
be covered in 5 years by automatic licensing.