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BBA (Retalling) III Semester

Financial Management
BBA 301
Ans1)i) Working capital is that amount of funds which is required to carry out the day-to-day operations of an
enterprise-whether big or small. It may also be regarded as that portion of an enterprises total capital which is
employed in its short-term operations.
These operations consist of primarily such items as raw materials, semi-processed goods, sundry debtors, finished
products, short-term investments, etc. Thus, working capital also refers to all the short-term assets known as current
assets used in day-to-day operations of an enterprise.
The Accounting Principles Board of the American Institute of Certified Public Accountants, U.S.A. has
defined working capital as follows:
Working capital, sometimes called net working capital, is represented by the excess of current assets over current
liabilities and identifies the relatively liquid portion of total enterprise capital which constitutes a margin of buffer
for maturing obligations within the ordinary operating cycle of the business.
Operating Cycle:
Working capital is also called a circulating capital or revolving capital. That is the money/capital which circulates in
various forms of current assets in a continued manner. For example, at a point of time, funds may be tied up in raw
materials, then later converted into semi-finished products, then into finished/ final products and when these finished
products are sold, it is converted either into account receivables or cash.

II) Ordering costs are the expenses incurred to create and process an order to a supplier. These costs are
included in the determination of the economic order quantity for an inventory item.
Examples of ordering costs are:
Cost to prepare a purchase requisition
Cost to prepare a purchase order
Cost of the labor required to inspect goods when they are received
Cost to putaway goods once they have been received
Cost to process the supplier invoice related to an order
Cost to prepare and issue a payment to the supplier
There will be an ordering cost of some size, no matter how small an order may be. The total amount of
ordering costs that a business incurs will increase with the number of orders placed. This aggregate order cost
can be mitigated by placing large blanket orders that cover long periods of time, and then issuing order
releases against the blanket orders.
iii) In materials management, the ABC analysis (or Selective Inventory Control) is an inventory categorization
technique. ABC analysis divides an inventory into three categories- " items" with very tight control and accurate
records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible
and minimal records.
The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall
inventory cost,[1] while also providing a mechanism for identifying different categories of stock that will require
different management and controls.
The ABC analysis suggests that inventories of an organization are not of equal value. [2] Thus, the inventory is
grouped into three categories (A, B, and C) in order of their estimated importance.

'A' items are very important for an organization. Because of the high value of these 'A' items, frequent value analysis
is required. In addition to that, an organization needs to choose an appropriate order pattern (e.g. Just- in- time) to
avoid excess capacity. 'B' items are important, but of course less important than 'A' items and more important than
'C' items. Therefore, 'B' items are intergroup items. 'C' items are marginally important.
iv) Objective of cash management

1) To make Payment According to Payment Schedule:-

Firm needs cash to meet its routine expenses including wages, salary, taxes etc.
Following are main advantages of adequate cash-
a)To prevent firm from being insolvent.
b)The relation of firm with bank does not deteriorate.
c)Contingencies can be met easily.
d)It helps firm to maintain good relations with suppliers.

(2) To minimise Cash Balance:-

The second objective of cash management is to minimise cash balance. Excessive amount of cash balance helps in
quicker payments, but excessive cash may remain unused & reduces profitability of business. Contrarily, when cash
available with firm is less, firm is unable to pay its liabilities in time. Therefore optimum level of cash should be

v) Operating leverage is a measurement of the degree to which a firm or project incurs a combination of fixed and
variable costs. A business that makes sales providing a very high gross margin and fewer fixed costs and variable
costs has much leverage. The higher the degree of operating leverage, the greater the potential danger
from forecasting risk, where a relatively small error in forecasting sales can be magnified into large errors in cash
flow projections.

Operating leverage may be used for calculating a companys breakeven point and substantially affecting profits by
changing its pricing structure. Because businesses with higher operating leverage do not proportionately increase
expenses as they increase sales, those companies may bring in more revenue than other companies. However,
businesses with high operating leverage are also more affected by poor corporate decisions and other factors that
may result in revenue decreases.

Ans2) Working Capital or Circular Capital or Floating Capital :-

Working capital is the amount of fund which is converted in current assets of a business. A firm needs capital to pay
for its current expenses such as payment to employees, raw martial, bills gas, electricity and cash in hands. The
working capital is converted into cash through the sale of product. The cash which is received, it is again used to
cover the operating cost of a firm. The cash remains in circulation and it is called circulating capital. A sum working
capital is required in that business where the turnover is repaid like retailing. On the other hand if the rate of turnover
is slow like the business or furniture then a large quantity of working capital is needed.

Factors Affecting Working Capital :-

Following are the important factors which affect the working capital :

1. Scale of Business :-
If the scale of business is larger then more amount f working capital will be needed.

2. Nature of Business:-
The need of the working capital also depends upon the nature of business. In the seasonal industries working capital
is required in large amount than others.

3. Risk Factors:-
Risky business requires greater need of working capital than the less risky business.

4. Cost of Production:-
If the cost of production is high than working capital is also required in large amount.

5. Purchase and Sale methods:-

If a firm purchases the raw material on credit and sells the product on cash then less amount of working capital will
be required.

6. Turnover:-
If the turnover velocity of the working capital is greater then lesser amount of working capital is needed.

7. Inflation and Deflation Case:-

In case of rising prices less working capital is needed on the other hand in case of falling prices greater working
capital is needed.

8. Time of Processing:-
If it takes longer time in manufacturing of the product then a greater amount of working capital is needed.

9. Quickly Sale-able Product:-

If the product is quickly sale-able for cash then the amount of working capital is needed. On the other hand greater
amount will be needed.

10 Size of Labour:-
If a large number of workers are employed in any business then a large amount of working capital will be needed.

Financial Management
BBA 301

Ans1)i) Gross working capital is the sum of all of a company's current assets (assets that are convertible to
cash within a year or less). Gross working capital includes assets such as cash, checking and savings account
balances, accounts receivable, short-term investments, inventory and marketable securities. From gross working
capital, subtract the sum of all of a company's current liabilities to get net working capital.

A company needs just the right amount of working capital to function optimally. With too much working capital,
some current assets would be better put to other uses. With too little working capital, a company may not be able to
meet its day-to-day cash requirements. The correct balance is obtained through working capital management.

ii) EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of
goods to be purchased at one time in order to minimize the annual total costs of ordering and carrying or holding
items in inventory.

EOQ is also referred to as the optimum lot size.

The formula to calculate the economic order quantity is the square root of [(2 times the annual demand in
units times the incremental cost to process an order) divided by (the incremental annual cost per unit to carry an item
in inventory)].
iii) The maximum stock limit is upper level of the inventory and the quantity that must not be exceeded without
specific authority from management. In other words, the maximum stock level is that quantity of material above
which the stock of any item should not normally be allowed to go. This level is fixed after taking into account such
factors as: capital, rate of consumption of materials storage space available, insurance cost risk of deterioration and
obsolescence and economic order quantity.
Maximum level or maximum limit can be calculated by the help of following formula:
Maximum limit or level = Re-order level or ordering point Minimum usage Minimum re-order period +
Economic order quantity
Normal usage 100 units per day
Maximum usage 130 units per day
Minimum usage 70 units per day
Re-order period 25 to 30 days
Economic order quantity 5,000 units

Calculate maximum limit or level.

In order to calculate maximum limit of stock we must calculate re-order point or re-order level first.
Ordering point or re-order level = Maximum daily or weekly or monthly usage Maximum re-order
= 130 30
= 39,000 units
iv) Cash management refers to a broad area of finance involving the collection, handling, and usage of cash. It
involves assessing market liquidity, cash flow, and investments.[2][3]
In banking, cash management, or treasury management, is a marketing term for certain services related to cash
flow offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking
accounts) provided to businesses of a certain size, but it is more often used to describe specific services such as cash
concentration, zero balance accounting, and automated clearing house facilities. Sometimes, private
banking customers are given cash management services.

Financial instruments involved in cash management include money market funds, treasury bills, and certificates of
v) Financial Leverage Definition

Financial leverage is the amount of debt that an entity uses to buy more assets. Leverage is employed to avoid
using too much equity to fund operations. An excessive amount of financial leverage increases the risk of
failure, since it becomes more difficult to repay debt.
The financial leverage formula is measured as the ratio of total debt to total assets. As the proportion of debt to
assets increases, so too does the amount of financial leverage. Financial leverage is favorable when the uses to
which debt can be put generate returns greater than the interest expense associated with the debt. Many
companies use financial leverage rather than acquiring more equity capital, which could reduce the earnings
per share of existing shareholders.
Financial leverage has two primary advantages:
Enhanced earnings. Financial leverage may allow an entity to earn a disproportionate amount on its assets.
Favorable tax treatment. In many tax jurisdictions, interest expense is tax deductible, which reduces its net
cost to the borrower.
However, financial leverage also presents the possibility of disproportionate losses, since the related amount of
interest expense may overwhelm the borrower if it does not earn sufficient returns to offset the interest
expense. This is a particular problem when interest rates rise or the returns from assets decline .
The unusually large swings in profits caused by a large amount of leverage increase the volatility of a
company's stock price. This can be a problem when accounting for stock options issued to employees, since
highly volatile stocks are considered to be more valuable, and so create a higher compensation expense than
would less volatile shares.
Ans3) Meaning:
Ratio analysis is the process of determining and interpreting numerical relationships based on financial statements.
A ratio is a statistical yardstick that provides a measure of the relationship between two variables or figures.
This relationship can be expressed as a percent or as a quotient. Ratios are simple to calculate and easy to
understand. The persons interested in the analysis of financial statements can be grouped under three heads,
i) owners or investors
ii) creditors and
iii) financial executives.
Although all these three groups are interested in the financial conditions and operating results, of an enterprise, the
primary information that each seeks to obtain from these statements differs materially, reflecting the purpose that the
statement is to serve.
The following are the limitations of ratio analysis:
1. It is always a challenging job to find an adequate standard. The conclusions drawn from the ratios can be no better
than the standards against which they are compared.
2. When the two companies are of substantially different size, age and diversified products,, comparison between
them will be more difficult.
3. A change in price level can seriously affect the validity of comparisons of ratios computed for different time
periods and particularly in case of ratios whose numerator and denominator are expressed in different kinds of

4. Comparisons are also made difficult due to differences of the terms like gross profit, operating profit, net profit
5. If companies resort to window dressing, outsiders cannot look into the facts and affect the validity of
6. Financial statements are based upon part performance and part events which can only be guides to the extent they
can reasonably be considered as dues to the future.
7. Ratios do not provide a definite answer to financial problems. There is always the question of judgment as to what
significance should be given to the figures. Thus, one must rely upon ones own good sense in selecting and
evaluating the ratios.
Ans4) able of Difference between Funds Flow Statement and Cash Flow Statement

Basis of Funds Flow Statement Cash Flow Statement


1. Basis of Funds flow statement is based on broader Cash flow statement is based on narrow concept
Analysis concept i.e. working capital. i.e. cash, which is only one of the elements of
working capital.

2. Source Funds flow statement tells about the Cash flow statement stars with the opening
various sources from where the funds balance of cash and reaches to the closing
generated with various uses to which they balance of cash by proceeding through sources
are put. and uses.

3. Usage Funds flow statement is more useful in Cash flow statement is useful in understanding
assessing the long-range financial strategy. the short-term phenomena affecting the liquidity
of the business.

4. Schedule of In funds flow statement changes in current In cash flow statement changes in current assets
Changes in assets and current liabilities are shown and current liabilities are shown in the cash flow
Working through the schedule of changes in working statement itself.
Capital capital.

5. End Result Funds flow statement shows the causes of Cash flow statement shows the causes the
changes in net working capital. changes in cash.

6. Principal of Funds flow statement is in alignment with In cash flow statement data obtained on accrual
Accounting the accrual basis of accounting. basis are converted into cash basis.

BBA 302
International Business
Ans1)i) who wish to increase their understanding of global markets and various regions of the world should strongly
consider studying international business. The world's economy is increasingly global. Studying international
business will provide you with insights into the global economic and business climates. Additionally, many

institutions strongly advise (or require) students who major or minor in international business to study a foreign
language and/or to complete an overseas study or internship experience. Taken together, such a course of study can
be particularly beneficial for students who hope to one day work abroad.
ii) "Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the
payment for such supplies is received either in Local currency or in foreign exchange.

Normally the goods do not physically cross the border of the exporting country, neverthless the government
considers this as export for some perks or other benefits, it is called deemed export. Meaning not export practically
but considered as one.

For Example
1.Any supply to a factory in Free Zone Area is deemed Import. Any sale from Free Zone Area is Deemed Export.
2.Supply of Laptops to a company in the Free Zone Area and payment in Foreign currency.

iii) A merger occurs when two separate entities combine forces to create a new, joint organization. An acquisition
refers to the takeover of one entity by another. A new company does not emerge from an acquisition; rather, the
smaller company is often consumed and ceases to exist, and its assets become part of the larger company.
Acquisitions sometimes called takeovers generally carry a more negative connotation than mergers. For this
reason, many acquiring companies refer to an acquisition as a merger even when it is clearly not.

Legally speaking, a merger requires two companies to consolidate into a new entity with a new ownership
and management structure (ostensibly with members of each firm). An acquisition takes place when one company
takes over all of the operational management decisions of another. The more common interpretive distinction is
whether the purchase is friendly (merger) or hostile (acquisition).

In practice, friendly mergers of equals do not take place very frequently. It's uncommon that two companies would
benefit from combining forces and two different CEOs agree to give up some authority to realize those benefits.
When this does happen, the stocks of both companies are surrendered and new stocks are issued under the name of
the new business identity.

Since mergers are so uncommon and takeovers are viewed in a negative light, the two terms have become
increasingly conflated and used in conjunction with one another. Contemporary corporate restructurings are usually
referred to as merger and acquisition (M&A) transactions rather than simply a merger or acquisition. The practical
differences between the two terms are slowly being eroded by the new definition of M&A deals.

iv) Explain four characteristics of US culture.

1. Americans come in all colors, have all types of religions, and speak many languages from all over the world
2. Americans believe in freedom of choice
3. Americans need a lot of elbow room; they like personal space around them
4. Americans and their police follow the law
5. Littering (throwing garbage on the street), graffiti (writing on walls), and loitering (standing around and doing
nothing in public spaces) are against the law and punishable by a fine or jail.

6. Discriminating against or making any insulting statement about someone elses religion or ethnicity is against
the law and could be punishable, known as a hate crime

v) How legal environment affect International Business?

The International Legal Environment

Public international law is the system of rules and principles governing the conduct of and relationships between
states and international organizations as well some of their persons.
Private international law governs relationships between persons and organizations engaged in international
transactions and addresses which laws will apply when the parties are in a legal dispute.
Foreign law is a law enacted by a foreign country.

Conceptual Framework
If your company engages in any transactions overseas, it will have to familiarize itself with the general concepts of
public and private international law as well as foreign law, because all can affect the manner in which you can
engage in business abroad. We'll look at the most essential aspects of the international legal system that are relevant
to businesses.
Q3) The Uruguay round of GATT (1986-93) gave birth to World Trade Organization. The members of GATT
singed on an agreement of Uruguay round in April 1994 in Morocco for establishing a new organization named
It was officially constituted on January 1, 1995 which took the place of GATT as an effective formal, organization.
GATT was an informal organization which regulated world trade since 1948.

1. To improve the standard of living of people in the member countries.

2. To ensure full employment and broad increase in effective demand.
3. To enlarge production and trade of goods.
4. To increase the trade of services.
5. To ensure optimum utilization of world resources.
6. To protect the environment.
7. To accept the concept of sustainable development.
The main functions of WTO are discussed below:
1. To implement rules and provisions related to trade policy review mechanism.
2. To provide a platform to member countries to decide future strategies related to trade and tariff.
3. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of
the world trade.
4. To administer the rules and processes related to dispute settlement.
5. To ensure the optimum use of world resources.
6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal Economic
Policy determination.
Q 4)Explain the importance of supply chain in International Trade.

The Importance of Supply Chain Management
It is well known that supply chain management is an integral part of most businesses and is essential to company
success and customer satisfaction.
Boost Customer Service

Customers expect the correct product assortment and quantity to be delivered.

Customers expect products to be available at the right location. (i.e., customer satisfaction diminishes if an
auto repair shop does not have the necessary parts in stock and cant fix your car for an extra day or two).
Right Delivery Time Customers expect products to be delivered on time (i.e., customer satisfaction
diminishes if pizza delivery is two hours late or Christmas presents are delivered on December 26).
Right After Sale Support Customers expect products to be serviced quickly. (i.e., customer satisfaction
diminishes when a home furnace stops operating in the winter and repairs cant be made for days)
Reduce Operating Costs
Decreases Purchasing Cost Retailers depend on supply chains to quickly deliver expensive products to
avoid holding costly inventories in stores any longer than necessary. For example, electronics stores require
fast delivery of 60 flat-panel plasma HDTVs to avoid high inventory costs.
Decreases Production Cost Manufacturers depend on supply chains to reliably deliver materials to
assembly plants to avoid material shortages that would shutdown production. For example, an unexpected
parts shipment delay that causes an auto assembly plant shutdown can cost $20,000 per minute and millions
of dollars per day in lost wages.
Decreases Total Supply Chain Cost Manufacturers and retailers depend on supply chain managers to
design networks that meet customer service goals at the least total cost. Efficient supply chains enable a firm
to be more competitive in the market place. For example, Dells revolutionary computer supply chain
approach involved making each computer based on a specific customer order, then shipping the computer
directly to the customer. As a result, Dell was able to avoid having large computer inventories sitting in
warehouses and retail stores which saved millions of dollars. Also, Dell avoided carrying computer
inventories that could become technologically obsolete as computer technology changed rapidly.
Improve Financial Position
Increases Profit Leverage Firms value supply chain managers because they help control and reduce
supply chain costs. This can result in dramatic increases in firm profits. For instance, U.S. consumers eat 2.7
billion packages of cereal annually, so decreasing U.S. cereal supply chain costs just one cent per cereal box
would result in $13 million dollars saved industry-wide as 13 billion boxes of cereal flowed through the
improved supply chain over a five year period.
Decreases Fixed Assets Firms value supply chain managers because they decrease the use of large fixed
assets such as plants, warehouses and transportation vehicles in the supply chain. If supply chain experts can
redesign the network to properly serve U.S. customers from six warehouses rather than ten, the firm will
avoid building four very expensive buildings.
Increases Cash Flow Firms value supply chain managers because they speed up product flows to
customers. For example, if a firm can make and deliver a product to a customer in 10 days rather than 70
days, it can invoice the customer 60 days sooner.
Lesser known, is how supply chain management also plays a critical role in society. SCM knowledge and
capabilities can be used to support medical missions, conduct disaster relief operations, and handle other types of
Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts
roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how
to move essential products to people in need as efficiently as possible.

BBA 302
International Business
Ans1)i) An ecosystem is a community of living organisms in conjunction with the nonliving components of their
environment (things like air, water and mineral soil), interacting as a system. [2] These biotic and abiotic
components are regarded as linked together through nutrient cycles and energy flows.[3] As ecosystems are defined
by the network of interactions among organisms, and between organisms and their environment, [4] they can be of
any size but usually encompass specific, limited spaces[5] (although some scientists say that the entire planet is an
Energy, water, nitrogen and soil minerals are other essential abiotic components of an ecosystem. The energy that
flows through ecosystems is obtained primarily from the sun. It generally enters the system through photosynthesis,
a process that also captures carbon dioxide from the atmosphere. By feeding on plants and on one
another, animals play an important role in the movement of matter and energy through the system. They also
influence the quantity of plant and microbial biomass present. By breaking down dead organic
matter, decomposers release carbon back to the atmosphere and facilitate nutrient cycling by converting nutrients
stored in dead biomass back to a form that can be readily used by plants and other microbes.[
ii) Foreign investment is when a company or individual from one nation invests in assets or ownership stakes of a
company based in another nation. As increased globalization in business has occurred, it's become very common for
big companies to branch out and invest money in companies located in other countries. These companies may be
opening up new manufacturing plants and attracted to cheaper labor, production, and fewer taxes in another country.
They may make a foreign investment in another firm outside of their country because the firm being purchased has
specific technology, products, or access to additional customers that the purchasing firm wants. Overall, foreign
investment in a country is a good sign that often leads to growth of jobs and income. As more foreign investment
comes into a country, it can lead to even greater investments because others see the country as economically stable.
iii) The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade.
The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15
April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the
largest international economic organisation in the world.[5][6] The WTO deals with regulation of trade between
participating countries by providing a framework for negotiating trade agreements and a dispute resolution process
aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member
governments[7]:fol.910 and ratified by their parliaments.[8] Most of the issues that the WTO focuses on derive from
previous trade negotiations, especially from the Uruguay Round (19861994).
iv) Regional Integration is a process in which neighboring states enter into an agreement in order to upgrade
cooperation through common institutions and rules. The objectives of the agreement could range from economic
to political to environmental, although it has typically taken the form of a political economy initiative where
commercial interests are the focus for achieving broader socio-political and security objectives, as defined by
national governments. Regional integration has been organized either via supranational institutional structures or
through intergovernmental decision-making, or a combination of both.

Past efforts at regional integration have often focused on removing barriers to free trade in the region, increasing the
free movement of people, labour, goods, and capital across national borders, reducing the possibility of
regional armed conflict (for example, through Confidence and Security-Building Measures), and adopting cohesive
regional stances on policy issues, such as the environment, climate change and migration.
v) The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter
(OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at
current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by
the Credit market.[1]
The main participants in this market are the larger international banks. Financial centers around the world function
as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the
exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a
currency's absolute value but rather determines its relative value by setting the market price of one currency if paid
for with another. Ex: 1 USD is worth X CAD, or CHF, or JPY, etc..
The foreign exchange market works through financial institutions, and operates on several levels. Behind the scenes,
banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign
exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the
"interbank market" (although a few insurance companies and other kinds of financial firms are involved). Trades
between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the
sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions.
Ans2) The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-
counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging
currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world,
followed by the Credit market.[1]
The main participants in this market are the larger international banks. Financial centers around the world function
as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the
exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a
currency's absolute value but rather determines its relative value by setting the market price of one currency if paid
for with another. Ex: 1 USD is worth X CAD, or CHF, or JPY, etc..
The foreign exchange market works through financial institutions, and operates on several levels. Behind the scenes,
banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign
exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the
"interbank market" (although a few insurance companies and other kinds of financial firms are involved). Trades
between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the
sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions.
Absolute Cost Difference:
As Adam Smith pointed out, if there is an absolute cost difference, a country will specialise in the production of a
commodity having an absolute advantage (see Table 1).
Table 1 Cost of Production in Labour Units:
Country A Country Cost Ratio
Commodity X 10 20 10/20 = 0.5

Commodity Y 20 10 20/10 = 2
Ratio: 1 X = 1/2 Y 1 X = 2 Y
It follows that country A has an absolute advantage over in the production of X while has an absolute advantage
in producing Y. As such, when trade takes place, A specialises in X and exports its surplus to and specialises in
and exports its surplus to A.
Equal Cost Difference:
Ricardo argues that if there is equal cost difference, it is not advantageous for trade and specialisation for any
country in consideration (see Table 2).
Table 2 Cost of Production in Labour Units:
Country A Country Cost Ratio
Commodity X 10 15 10 /15 = 0.66
Commodity Y 20 30 20/30 = 0.66
Ratio: 1 X = 1/2 Y 1 X = 1/2 Y
On account of equal cost difference, the comparative cost ratio is the same for both the countries, so there is no
reason for undertaking specialisation. Hence, the trade between two countries will not take place.
Comparative Cost Difference:
Ricardo emphasised that under all conditions, it, is the comparative cost advantage which lies at the root of
specialisation and trade (see Table 3).
Table 3 Cost of Production in Labour Units:
Country A Country Cost Ratio
Commodity X 10 15 10/ 15 = 0.66
Commodity Y 20 25 20/25 = 0.80 25
Exchange Ratio IX = 0.5Y IX = 0.6Y
It will be seen that country A has an absolute cost advantage in both the commodities X and Y. However, A
possesses a comparative cost advantage in producing X. For, comparatively, country As labour cost involved in
producing 1 unit of X is only 66 per cent of Bs labour cost involved in producing X, as against that of 80 per cent in
the case of Y.
On the other hand, country has least comparative disadvantage in production of Y, though she has absolute cost
disadvantage in both X and Y.
It should be noted that, to know the comparative advantage, we have to compare the ratio of the costs of production
of one commodity in both countries (i.e., 10/15 in the case of X in our example) with the ratio of the cost of
producing the other commodity in both countries (i.e., 20/25 in the case of in our example). To state in algebraic
If in country A, the labour cost of commodity X is Xa and that of is Ya, and in B, it is Xb and Yb respectively,
then absolute differences in cost can be expressed as:
Xa/Xb < 1 < Ya/Yb

(Which means that country A has an absolute advantage over country in commodity X and country has over A
in commodity ). And, comparative differences in costs are expressed as:
Xa/Xb < Ya/Yb < 1
(Which implies that country A possesses an absolute advantage over in both X and (Y, but it has more
comparative advantage in X than in Y). If, however, there is an equal cost difference, i.e., Xa/Xb = Ya/Yb will be no
international trade between the two countries.
In our illustration, since country A has comparative cost advantage in commodity X, as per Ricardo s theorem, this
country should tend to specialise in X and export its surplus to country in exchange for (i.e., import of from
B). Correspondingly, since country has least cost disadvantage in producing , she should specialise in and
export its surplus to A and import X.
Ans4) fter the implementation of globalization policy, world has become a small village and now every contry freely
transacts with the other countries of the world. In this context, two statements are prepared to keep a record of the
transactions made by the country internationally; they are Balance of Trade (BOT) and Balance of Payments (BOP).
The balance of payment keeps a track of transaction in goods, services, and assets between the countrys residents,
with the rest of the world.s
Meaning Balance of Trade is a statement that captures the country's export and import of goods with the
remaining world. Balance of Payment is a statement that keeps track of all economic transactions done by the
country with the remaining world.
Records Transactions related to goods only. Transactions related to both goods and services are recorded.
Capital Transfers Are not included in the Balance of Trade. Are included in Balance of Payment.
Which is better? It gives a partial view of the country's economic status. It gives a clear view of the
economic position of the country.
Result It can be Favorable, Unfavorable or balanced. Both the receipts and payment sides tallies.
Component It is a component of Current Account of Balance of Payment. Current Account and Capital
Organizational Behaviour
BBA 303

Ans1)i) Personality is a set of individual differences that are affected by the development of an individual: values,
attitudes, personal memories, social relationships, habits, and skills. Different theorists present their own definitions
of the word based on their theoretical positions. The term "personality trait" refers to enduring personal
characteristics that are revealed in a particular pattern of behaviour in a variety of situations.
ii) Primary Motives:
Primary motives are essential for survival. They must be satisfied first before we can take up any other activity.
Primary motives come to action when the physiological balance of the body is upset. This balance is called

iii) On many levels, power is extremely important in terms of providing direction and assisting in the management
process. When examining it from the top down elements, power and authority can help to give structure to an
organization, assist employees in performing better, and allow short and long term goals to be articulated and
reached. The charting of an organization's success can be largely dependent on top down directives.
iv) Conflict refers to some form of friction, or discord arising within a group when the beliefs or actions of one or
mor members of the group are either resisted by or unacceptable to one or more members of another group. Conflict
can arise between members of the same group, known as intragroup conflict, or it can occur between members of
two or more groups, and involve violence, interpersonal discord conflict. Conflict in groups often follows a specific
course. Routine group interaction is first disrupted by an initial conflict, often caused by differences of opinion,
disagreements between members, or scarcity of resources. At this point, the group is no longer united, and may split
into coalitions. This period of conflict escalation in some cases gives way to a conflict resolution stage, after which
the group can eventually return to routine group interaction once again.
V) A motivated worker generates value for the company. A good manager, therefore, is interested not only into the
employees physical health but also into the mental health, because this last is able to bring the highest results. The
social changes of the 70s introduced an important new concept: health is not a factor to be taken into account when it
is missing, but it is useful to implement policies in order to have a good climate in the organizations; this leads to
study the psychosocial aspects of work [1]. It was increasingly evident the influence on health of both biological and
psychological factors (as well as the importance of their combination and interaction). In the 90s the situation
improved with the creation of the Occupational Health Psychology (OHP), an interdisciplinary topic aimed at
optimizing the quality of the working life and safety. In this perspective, healthy work environments are
characterized by high productivity, good employee satisfaction, good security, lower absenteeism, few turnover and
no violence. The OHP intervened on three basic dimensions: the working environment, the individual and the
relation work/family. Raymond, Wood and Patrick (1990)
Ans2) Introduction Organisations are as old as the human race. As time passed, the people realised that they
could collectively satisfy their wants in a much effective manner. Thus, they got together to satisfy their needs and
wants. Individuals who feel that they have skills, talents and knowledge form groups to produce the goods and
services. Organisation is a group of people who work together to achieve some purpose. The people working
together expect each other to complete certain tasks in an organised way. Organisations are an inevitable part of
human life. Organisation help to increase specialisation and division of labour, use large scale technology, manage
the external environment, helps to economize on transaction costs and to exert power and control. Globalization has
presented many challenges and opportunities for Organisations. It is imperative that the organisations function
effectively. Organisational effectiveness requires that they should provide good quality goods and services at
reasonable cost. Besides, every organisation must satisfy the stake of its stakeholders. The extent of satisfaction
derived by stakeholders shows the effectiveness of the organisation. It is the responsibility of the managers to keep
the interest holders satisfied. Managers are responsible for the functioning of the organisation. They get the work
done through people. They allocate the resources, direct the activities of others, and take decisions to attain
organisational goals. It is here that organisational behaviour comes into play. Organisational behaviour helps the
managers in achieving organisational effectiveness. It helps to harness the necessary expertise, skills and knowledge
to achieve organisational goals. 2. Definitions Organisation- A consciously coordinated social unit, composed of two
or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals.
Organisational Behaviour-According to Stephen P Robins, Organisational Behaviour as a systematic study of the
actions and attitudes that people exhibit within the organisations.

Ans4) We have covered 12 different types of ways people tend to lead organizations or other people. Not all of
these styles would deem fit for all kind of situations, you can read them through to see which one fits right to your
company or situation.
1. Autocratic Leadership
Autocratic leadership style is centered on the boss. In this leadership the leader holds all authority and responsibility.
In this leadership, leaders make decisions on their own without consulting subordinates. They reach decisions,
communicate them to subordinates and expect prompt implementation. Autocratic work environment does normally
have little or no flexibility.
In this kind of leadership, guidelines, procedures and policies are all natural additions of an autocratic leader.
Statistically, there are very few situations that can actually support autocratic leadership.
Some of the leaders that support this kind of leadership include: Albert J Dunlap (Sunbeam Corporation) and Donald
Trump (Trump Organization) among others.
2. Democratic Leadership
In this leadership style, subordinates are involved in making decisions. Unlike autocratic, this headship is centered
on subordinates contributions. The democratic leader holds final responsibility, but he or she is known to delegate
authority to other people, who determine work projects.
The most unique feature of this leadership is that communication is active upward and downward. With respect to
statistics, democratic leadership is one of the most preferred leadership, and it entails the following: fairness,
competence, creativity, courage, intelligence and honesty.
3. Strategic Leadership Style
Strategic leadership is one that involves a leader who is essentially the head of an organization. The strategic leader
is not limited to those at the top of the organization. It is geared to a wider audience at all levels who want to create a
high performance life, team or organization.
The strategic leader fills the gap between the need for new possibility and the need for practicality by providing a
prescriptive set of habits. An effective strategic leadership delivers the goods in terms of what an organization
naturally expects from its leadership in times of change. 55% of this leadership normally involves strategic thinking.
4. Transformational Leadership
Unlike other leadership styles, transformational leadership is all about initiating change in organizations, groups,
oneself and others.
Transformational leaders motivate others to do more than they originally intended and often even more than they
thought possible. They set more challenging expectations and typically achieve higher performance.
Statistically, transformational leadership tends to have more committed and satisfied followers. This is mainly so
because transformational leaders empower followers.
5. Team Leadership
Team leadership involves the creation of a vivid picture of its future, where it is heading and what it will stand for.
The vision inspires and provides a strong sense of purpose and direction.
Organizational Behaviour
BBA 303
Ans1)i) Organizational change is about reviewing and modifying management structures and business processes.
Small businesses must adapt to survive against bigger competitors and grow. However, success should not lead to
complacency. To stay a step ahead of the competition, companies need to look for ways to do things more efficiently
and cost effectively. There is no need to fear change. Instead, small businesses should embrace change as a way to
lay the foundations for enduring success.
ii) Personality is a set of individual differences that are affected by the development of an individual: values,
attitudes, personal memories, social relationships, habits, and skills.[1][2] Different personality theoristspresent their
own definitions of the word based on their theoretical positions.[3] The term "personality trait" refers to enduring
personal characteristics that are revealed in a particular pattern of behaviour in a variety of situations.
iii) Lack of Information
Conflict can arise when one party feels it lacks important information, according to the Free Management Library
website. When employees are continually experiencing changes that they were not informed about, or if there are
decisions being made that the staff feels it should be involved in, this can bring about conflict between employees
and managers.
Lack of Resources
The University of Colorado at Boulder points out that a lack of necessary resources can cause conflict among
employees, and between employees and management. If employees feel there is a lack of resources needed to do
their job, competition will arise among employees for the available resources. The employees who are unable to
obtain what they need to perform their duties will begin to blame management for the lack of necessary resources.
iv) Legitimate Power
Legitimate power is also known as positional power. It's derived from the position a person holds in an
organization's hierarchy. Job descriptions, for example, require junior workers to report to managers and give
managers the power to assign duties to their juniors. For positional power to be exercised effectively, the person
wielding it must be deemed to have earned it legitimately. An example of legitimate power is that held by a
company's CEO.
Expert power
Knowledge is power. Expert power is derived from possessing knowledge or expertise in a particular area. Such
people are highly valued by organizations for their problem solving skills. People who have expert power perform
critical tasks and are therefore deemed indispensable. The opinions, ideas and decisions of people with expert power
are held in high regard by other employees and hence greatly influence their actions. Possession of expert power is
normally a stepping stone to other sources of power such as legitimate power. For example, a person who holds
expert power can be promoted to senior management, thereby giving him legitimate power.
v) There are certain actions performed by Level 5 leaders which separate them from the rest of the leaders and
senior executives.
The first step if their ability to identify and include right people with them towards achieving goals. Unlike
the traditional method of building strategies and then looking for the right people to carry them out, they take
a different route. Its about getting the right people on board and then deciding on the destination.
They also do not shy away from facing and accepting brutal truths and realities of data, numbers and
situations but at the same time they do not lose hope of a better future.
They also strive towards aligning consistent efforts towards a goal, rather than giving one massive push they
believe in small but firm pushes to bring in the momentum.
They also exercise their judgment to understand an aspect, in depth and thoroughly, rather than burdening
themselves with myriad information.
They practice and encourage a disciplined approach towards their work life and as visionaries use carefully
identified technologies to give their businesses strategic advantage.
Ans2) ERG theory is a theory in psychology proposed by Clayton Alderfer.

Alderfer further developed Maslow's hierarchy of needs by categorizing the hierarchy into his ERG
theory (Existence, Relatedness and Growth). The existence group is concerned with providing the basic material
existence requirements of humans. They include the items that Maslow considered to be physiological and safety
needs. The second group of needs is those of relatedness the desire people have for maintaining
important interpersonal relationships. These social and status desires require interaction with others if they are to be
satisfied, and they align with Maslow's social need and the external component of Maslow's esteem classification.
Finally, Alderfer isolates growth needs: an intrinsic desire for personal development. These include the intrinsic
component from Maslow's esteem category and the characteristics included under self-actualization.
Alderfer categorized the lower order needs (Physiological and Safety) into the Existence category. He fit Maslow's
interpersonal love and esteem needs into the Relatedness category. The Growth category contained the self-
actualization and self-esteem needs. Alderfer also proposed a regression theory to go along with the ERG theory. He
said that when needs in a higher category are not met then individuals redouble the efforts invested in a lower
category need. For example if self-actualization or self-esteem is not met then individuals will invest more effort in
the relatedness category in the hopes of achieving the higher need.
Ans4) Psychologist Bruce Tuckman first came up with the memorable phrase "forming, storming, norming, and
performing" in his 1965 article, "Developmental Sequence in Small Groups." He used it to describe the path that
most teams follow on their way to high performance. Later, he added a fifth stage, "adjourning" (which is sometimes
known as "mourning").
Let's look at each stage in more detail.
In this stage, most team members are positive and polite. Some are anxious, as they haven't fully understood what
work the team will do. Others are simply excited about the task ahead.
As leader, you play a dominant role at this stage, because team members' roles and responsibilities aren't clear.
This stage can last for some time, as people start to work together, and as they make an effort to get to know their
new colleagues.
Next, the team moves into the storming phase, where people start to push against the boundaries established in the
forming stage. This is the stage where many teams fail.
Storming often starts where there is a conflict between team members' natural working styles. People may work in
different ways for all sorts of reasons but, if differing working styles cause unforeseen problems, they may become
Storming can also happen in other situations. For example, team members may challenge your authority, or jockey
for position as their roles are clarified. Or, if you haven't defined clearly how the team will work, people may feel
overwhelmed by their workload, or they could be uncomfortable with the approach you're using.
Some may question the worth of the team's goal, and they may resist taking on tasks.
Team members who stick with the task at hand may experience stress, particularly as they don't have the support of
established processes or strong relationships with their colleagues.
Gradually, the team moves into the norming stage. This is when people start to resolve their differences, appreciate
colleagues' strengths, and respect your authority as a leader.
Now that your team members know one another better, they may socialize together, and they are able to ask
one another for help and provide constructive feedback. People develop a stronger commitment to the team goal, and
you start to see good progress towards it.

There is often a prolonged overlap between storming and norming, because, as new tasks come up, the team may
lapse back into behavior from the storming stage.
The team reaches the performing stage, when hard work leads, without friction, to the achievement of the team's
goal. The structures and processes that you have set up support this well.
As leader, you can delegate much of your work, and you can concentrate on developing team members.
It feels easy to be part of the team at this stage, and people who join or leave won't disrupt performance.
Many teams will reach this stage eventually. For example, project teams exist for only a fixed period, and even
permanent teams may be disbanded through organizational restructuring.
Team members who like routine, or who have developed close working relationships with colleagues, may find this
stage difficult, particularly if their future now looks uncertain.
Strategic Management
BBA 304
Ans1)i) Strategic management involves the formulation and implementation of the major goals and initiatives
taken by a company's top management on behalf of owners, based on consideration of resources and an assessment
of the internal and external environments in which the organization competes.[1]
Strategic management provides overall direction to the enterprise and involves specifying the organization's
objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to
implement the plans. Academics and practicing managers have developed numerous models and frameworks to
assist in strategic decision making in the context of complex environments and competitive dynamics.[2] Strategic
management is not static in nature; the models often include a feedback loop to monitor execution and inform the
next round of planning.
ii) PEST analysis (political, economic, social and technological) describes a framework of macro-environmental
factors used in the environmental scanning component of strategic management. It is part of an external analysis
when conducting a strategic analysis or doing market research, and gives an overview of the different macro-
environmental factors to be taken into consideration. It is a strategic tool for understanding market growth or
decline, business position, potential and direction for operations.
Variants that build on the PEST framework include:
PESTEL or PESTLE, which adds legal and environmental factors. Popular in the United Kingdom.[1]
SLEPT adding legal factors.
STEEPLE and STEEPLED, adding ethics and demographic factors.
DESTEP, adding demographic and ecological factors.
SPELIT, adding legal and intercultural factors. Popular in the United States since the mid-2000s.[2]
There is also STEER, which considers socio-cultural, technological, economic, ecological, and regulatory factors,
but does not specifically include political factors.
iii) Competitive advantage is the leverage that a business has over its competitors. This can be gained by offering
clients better and greater value. Advertising products or services with lower prices or higher quality interests
consumers. Target markets recognize these unique products or services. This is the reason behind brand loyalty, or
why customers prefer one particular product or service over another.
Value proposition is important when understanding competitive advantage. If the value proposition
is effective [clarification needed] it can produce a competitive advantage in either the product or service. The value
proposition can increase customer expectations and choices.
Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals:
cost advantage and differentiation advantage. Cost advantage is when a business provides the same products and
services as its competitors, albeit at a lesser cost. Differentiation advantage is when a business provides better
products and services as its competitors. In Porter's view, strategic management should be concerned with building
and sustaining competitive advantage.[1
iv) strategic Management is all about identification and description of the strategies that managers can carry so as
to achieve better performance and a competitive advantage for their organization. An organization is said to have
competitive advantage if its profitability is higher than the average profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which
decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the
general and competitive organizational environment so as to take right decisions. They should conduct a SWOT
Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of
strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment
and shouldnt ignore the threats.
Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is
applicable to both small as well as large organizations as even the smallest organization face competition and, by
formulating and implementing appropriate strategies, they can attain sustainable competitive advantage.
v) Strategic Choice involves a whole process through which a decision is taken to choose a particular option from
various alternatives. There can be various methods through which the final choice can be selected upon. Managers
and decision makers keep both the external and internal environment in mind before narrowing it down to one.
The initial process involves identifying the problem completely. Once, we have the clear picture of the problem in
hand, and then the process of short listing various solutions is undertaken. Then comes up the strategic choice
process where decision for final choice is taken considering the various parameters in mind. Some of these
parameters could be feasibility, prudence, consensus, acceptability, etc.
Some of these strategic choices make up a part of bigger strategic policies of the company. Hence, important
emphasis is given to them and decision makers follows due diligence before coming up with a final strategic choice.
At times, majority shareholder uses his influence for the final strategic choice benefiting his agendas.
In nutshell, we can summarize that, its a combination of intent, analysis and options available.
Ans4) Corporate restructuring is the process of redesigning one or more aspects of a company. The process of
reorganizing a company may be implemented due to a number of different factors, such as positioning the company
to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an
entirely new direction. Here are some examples of why corporate restructuring may take place and what it can mean
for the company.
In general, the idea of corporate restructuring is to allow the company to continue functioning in some manner. Even
when corporate raiders break up the company and leave behind a shell of the original structure, there is still usually a
hope, what remains can function well enough for a new buyer to purchase the diminished corporation and return it to
Purpose of Corporate Restructuring -
To enhance the share holder value, The company should continuously evaluate its:
Portfolio of businesses,
Capital mix, Ownership &
Asset arrangements to find opportunities to increase the share holder's value.
To focus on asset utilization and profitable investment opportunities.
To reorganize or divest less profitable or loss making businesses/products.
The company can also enhance value through capital Restructuring, it can innovate securities that help to reduce cost
of capital.
Corporate Restructuring entails a range of activities including financial restructuring and organization restructuring.
1. Financial Restructuring
Financial restructuring is the reorganization of the financial assets and liabilities of a corporation in order to create
the most beneficial financial environment for the company. The process of financial restructuring is often associated
with corporate restructuring, in that restructuring the general function and composition of the company is likely to
impact the financial health of the corporation. When completed, this reordering of corporate assets and liabilities can
help the company to remain competitive, even in a depressed economy.
Just about every business goes through a phase of financial restructuring at one time or another. In some cases, the
process of restructuring takes place as a means of allocating resources for a new marketing campaign or the launch
of a new product line. When this happens, the restructure is often viewed as a sign that the company is financially
stable and has set goals for future growth and expansion.
Need For Financial Restructuring
The process of financial restructuring may be undertaken as a means of eliminating waste from the operations of the
In some cases, financial restructuring is a strategy that must take place in order for the company to continue
operations. This is especially true when sales decline and the corporation no longer generates a consistent net profit.
A financial restructuring may include a review of the costs associated with each sector of the business and identify
ways to cut costs and increase the net profit. The restructuring may also call for the reduction or suspension of
production facilities that are obsolete or currently produce goods that are not selling well and are scheduled to be
phased out.
Financial restructuring also take place in response to a drop in sales, due to a sluggish economy or temporary
concerns about the economy in general. When this happens, the corporation may need to reorder finances as a means
of keeping the company operational through this rough time. Costs may be cut by combining divisions or
departments, reassigning responsibilities and eliminating personnel, or scaling back production at various facilities
owned by the company. With this type of corporate restructuring, the focus is on survival in a difficult market rather
than on expanding the company to meet growing consumer demand.
All businesses must pay attention to matters of finance in order to remain operational and to also hopefully grow
over time. From this perspective, financial restructuring can be seen as a tool that can ensure the corporation is
making the most efficient use of available resources and thus generating the highest amount of net profit possible
within the current set economic environment.
2. Organizational Restructuring
In organizational restructuring, the focus is on management and internal corporate governance structures.
Organizational restructuring has become a very common practice amongst the firms in order to match the growing
competition of the market. This makes the firms to change the organizational structure of the company for the
betterment of the business.
Need For Organization Restructuring
New skills and capabilities are needed to meet current or expected operational requirements.
Accountability for results are not clearly communicated and measurable resulting in subjective and biased
performance appraisals.
Parts of the organization are significantly over or under staffed.
Organizational communications are inconsistent, fragmented, and inefficient.
Technology and/or innovation are creating changes in workflow and production processes.
Significant staffing increases or decreases are contemplated.
Personnel retention and turnover is a significant problem.
Workforce productivity is stagnant or deteriorating.
Morale is deteriorating.
Some of the most common features of organizational restructures are:
Regrouping of business: This involves the firms regrouping their existing business into fewer business units. The
management then handles theses lesser number of compact and strategic business units in an easier and better way
that ensures the business to earn profit.
Downsizing: Often companies may need to retrench the surplus manpower of the business. For that purpose offering
voluntary retirement schemes (VRS) is the most useful tool taken by the firms for downsizing the business's
Decentralization: In order to enhance the organizational response to the developments in dynamic environment, the
firms go for decentralization. This involves reducing the layers of management in the business so that the people at
lower hierarchy are benefited.
Outsourcing: Outsourcing is another measure of organizational restructuring that reduces the manpower and
transfers the fixed costs of the company to variable costs.
Enterprise Resource Planning: Enterprise resource planning is an integrated management information system that is
enterprise-wide and computer-base. This management system enables the business management to understand any
situation in faster and better way. The advancement of the information technology enhances the planning of a
Business Process Engineering: It involves redesigning the business process so that the business maximizes the
operation and value added content of the business while minimizing everything else.
Total Quality Management: The businesses now have started to realize that an outside certification for the quality of
the product helps to get a good will in the market. Quality improvement is also necessary to improve the customer
service and reduce the cost of the business.
Q. 3. Explain Organization mission, vision, goals & objectives.
Organization Strategy
Vision and mission statements play an important role in strategy development by providing vehicles to generate and
screen strategic options. They also provide organizational identity and understanding of business directions.
Created by consensus. Forms mental image of future to which people can align.
Dream or a picture to
Vision Describes something possible, not necessarily predictable. Provides direction and
be achieved ultimately.
focus. Pulls people, who hold it, towards it.
States the business reason for the organization's existence. Does not state an
outcome. Contains no time limit or measurement. Provides basis for decisions on
Mission Statement of business.
resource allocation and appropriate objectives. Defines current and future
business in terms of product, score, customer, reason, and market price.
Describes ideal states to be achieved at some unidentified future time. Defined
Goals Results to be achieved. consistent with and related directly to vision and mission. Guide everyday
decisions and actions. Do not necessarily deal with measurable results.
How - Actions and Focuses on critical organization issues and milestones. Describe activities to be
Results - to plan to accomplished to achieve goals. Identify dates when specific results are to be
achieve the desired accomplished. Measurable in terms of whether or not they are achieved. They
results. may be changed when necessary for progress towards goals.
Strategic Management
BBA 304

Ans1)i) A mission statement defines what an organization is, why it exists, its reason for being. At a minimum, your
mission statement should define who your primary customers are, identify the products and services you produce,
and describe the geographical location in which you operate.
If you don't have a mission statement, create one by writing down in one sentence what the purpose of your business
is. Ask two or three of the key people in your company to do the same thing. Then discuss the statements and come
up with one sentence everyone agrees with. Once you have finalized your mission statement, communicate it to
everyone in the company.
ii) Ethics or moral philosophy is a branch of philosophy that involves systematizing, defending, and recommending
concepts of right and wrong conduct.[1] The term ethics derives from Ancient Greek (ethikos),
from (ethos), meaning 'habit, custom'. The branch of philosophy axiology comprises the sub-branches of ethics
and aesthetics, each concerned with values.[2]
As a branch of philosophy, ethics investigates the questions "What is the best way for people to live?" and
"What actions are right or wrong in particular circumstances?" In practice, ethics seeks to resolve questions of
human morality by defining concepts such as good and evil, right and wrong, virtue and vice, justiceand crime. As a
field of intellectual enquiry, moral philosophy also is related to the fields of moral psychology, descriptive ethics,
and value theory.
Three major areas of study within ethics recognised today are:[1]

1. Meta-ethics, concerning the theoretical meaning and reference of moral propositions, and how their truth
values (if any) can be determined
2. Normative ethics, concerning the practical means of determining a moral course of action
3. Applied ethics, concerning what a person is obligated (or permitted) to do in a specific situation or a
particular domain of action
iii) Economic Environment Defined
The economic environment consists of external factors in a business market and the broader economy that can
influence a business. You can divide the economic environment into the microeconomic environment, which affects
business decision making - such as individual actions of firms and consumers - and the macroeconomic
environment, which affects an entire economy and all of its participants. Many economic factors act as external
constraints on your business, which means that you have little, if any, control over them. Let's take a look at both of
these broad factors in more detail.
Macroeconomic influences are broad economic factors that either directly or indirectly affect the entire economy and
all of its participants, including your business. These factors include such things as:

Interest rates
Currency exchange rates
Consumer discretionary income
Savings rates
Consumer confidence levels
Unemployment rate
Microeconomic factors influence how your business will make decisions. Unlike macroeconomic factors, these
factors are far less broad in scope and do not necessarily affect the entire economy as a whole.
iv) The process of hiring and developing employees so that they become more valuable to the organization.
Human Resource Management includes conducting job analyses, planning personnel needs, recruiting the right
people for the job, orienting and training, managing wages and salaries, providing benefits and incentives, evaluating
performance, resolving disputes, and communicating with all employees at all levels. Examples of core qualities of
HR management are extensive knowledge of the industry, leadership, and effective negotiation skills. Formerly
called personnel management.
v) The term "corporate control" refers to the authority to make the decisions of a corporation regarding
operations and strategic planning, including capital allocations, acquisitions and divestments, top personnel
decisions, and major marketing, production, and financial decisions. This concept is frequently applied to publicly
traded companies, which may be susceptible to changes in corporate control when large investors or other
companies seek to wrest control from managers or other shareholders.
The notion of corporate control is similar to that of corporate governance; however, it is usually used in a narrower
sense. Corporate control is concerned with who hasand, moreover, who exercisesthe ultimate authority over
significant corporate practices. Governance, by contrast, involves the broader interworkings of the day-to-day
management, the board of directors, the shareholders at large, and other interested parties to formulate and
implement corporate strategy.
Q. 3. Explain the concept of Core competence and competitive advantage in detail.
What is Competitive Advantage?
Competitive advantage occurs when a company is able to achieve a competitive edge with regards to is products,
services, strategies, skills, etc. than its competitors. There are two types of competitive advantage; cost leadership
and differentiation. A competitive advantage is something that will help the company stands out from its
Competitive advantages can be achieved by gaining access to cheaper raw materials, through intellectual property,
first mover position, convenience in location, etc. An example of a competitive advantage would be the edge that
Google has above other search engines. Google is the best at optimizing searches and has pushed technology beyond
what competitors thought was possible. A competitive advantage will aid a firm to differentiate its goods and
services from competitive offerings. Having a competitive advantage can also contribute towards improving
customer loyalty which can go a long way in times of financial difficulty. Building a strong brand name through
creative advertising can aid in marketing a companys competitive advantage.
What is a Core Competency?
Core competency refers to a specific set of skills and expertise that a company may have over its competitors. In
order for a core competency to exist, 3 criteria must be met; those are market access, benefits consumers, unique and
difficult to imitate. One of the most essential aspects of a core competency is that they help gain access to a range of
markets and consumers. Core competencies also bring benefits to consumers in terms of lower cost and better
quality products, and cannot be easily copied or imitated. Core competencies include things like, technological
knowhow, skilled individuals, supply systems and processes, customer relationship management skills, etc. For
example, Tesco has emerged as one of the largest retailers in the world because of their core competencies in
effectively managing supplies through their innovative supply systems, customer focused selling strategies,
personalized customer interface for online shopping, an efficient delivery mechanism, etc.
Competitive Advantage vs Core Competency
Even though these terms may sound quite similar to one another, competitive advantage and core competency are
quite distinct. A core competency is a specific skill set or expertise that can lead to a competitive advantage. For
example, a core competency in innovative supply systems can lead to increased efficiencies and lower costs; the
lower cost being the competitive advantage. Volvos core competency lies in their ability to research and develop
automobiles that offer the high protection and safety standards. The companys competitive advantage lies in
providing a differentiated product valued for its high safety standards that surpass its competitors.
Q. 4. Describe the role of strategic management in business and non business organization.
strategic Management is all about identification and description of the strategies that managers can carry so as to
achieve better performance and a competitive advantage for their organization. An organization is said to have
competitive advantage if its profitability is higher than the average profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which
decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the
general and competitive organizational environment so as to take right decisions. They should conduct a SWOT
Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of
strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment
and shouldnt ignore the threats.
Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is
applicable to both small as well as large organizations as even the smallest organization face competition and, by
formulating and implementing appropriate strategies, they can attain sustainable competitive advantage.
It is a way in which strategists set the objectives and proceed about attaining them. It deals with making and
implementing decisions about future direction of an organization. It helps us to identify the direction in which an
organization is moving.
Strategic management is a continuous process that evaluates and controls the business and the industries in which an
organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential
competitors; and then reevaluates strategies on a regular basis to determine how it has been implemented and
whether it was successful or does it needs replacement.
Corporate Management
BBA 305
Ans1)i) The process of leading, administrating and directing a company. Business tasks often performed by
corporate management might include strategic planning, as well as managing company resources and applying them
toward attaining the company's objectives.
Though its definition is somewhat contentious, the concept of corporate entrepreneurship is generally believed to
refer to the development of new ideas and opportunities within large or established businesses, directly leading to
the improvement of organizational profitability and an enhancement of competitive position or the strategic renewal
of an existing business.
ii) Three multinational corporations in my area are:
1. McDonalds Corp.
2. Starbucks Corporation
3. Wal-Mart Stores, Inc.

McDonalds has global operations; this includes operations in the USA, Europe, the Asia/Pacific, the Middle East,
Africa, Canada, as well as Latin America. The Company is a QSR (Quick Service Restaurant) chain. They sell
hamburgs, fish sandwiches, chicken sandwiches and wraps, salads, soft ice cream sundaes, french fries, breakfast
offerings, various drinks, and they have their specialty coffee McCafes.
Concerning Human Resources, McDonalds looks for enthusiastic and motivated, responsible people as employees.
They offer comprehensive training programs and ample opportunities for advancement. They also offer careers for
veterans.The Company offers their management training and education programs. With this, an individual can earn
up to 46 credit hours toward their two or four -year degree.
Starbucks Corporation also has worldwide operations. Some of the countries they operate in are the U.S.A., Canada,
Spain, Japan, the United Arab Emirates (UAE), New Zealand, Sweden, Turkey, Thailand, Qatar, and a host of
others. The Company's product offerings include coffee, tea, hand-crafted specialty beverages, baked pastries, iced
drinks, salads, sandwiches, oatmeal, as well as yogurt parfaits.
Concerning Human Resources, Starbucks offers barista positions and management positions in their outlets. They
offer opportunities for advancement as well. The Company additionally offers employees their Thrive Wellness
Program, the Elite Athlete Assistance Program, Internal recognition programs, career sabbaticals, and discounted
merchandise at Starbucks and other retailers. Their training programs focus on an employee learning about coffee.
This is typically by way of coffee tasting and roasting events. They look for focused, reliable, and energetic
employees looking to grow with the Company.
Wal-Mart Stores, Inc. operates internationally in the U.S, Canada, Mexico, South America, Africa, Britain, and Asia.
The Company is a department store and food retailer. They market in bricks and mortar locations and on the Internet
as well. Their operations also include restaurants, discount stores, supermarkets, warehouse clubs, and Sams Clubs.
iii) Horizontal Merger
A horizontal merger takes place when two companies offering similar, or compatible, products or services to the
same market combine under single ownership. If the other company sells products similar to yours, your combined
sales give you a greater share of the market. If the other company manufactures products complementary to your
range, you can now offer a wider range of products to your customers. A merger with a company that offers different
products to a different sector of the market enables you to diversify your activities and enter new markets.
Vertical Merger
The main aim of a vertical merger is not to increase revenue, but to improve efficiency or reduce costs. A vertical
merger takes place when two companies that previously sold to or bought from each other combine under single
ownership. The companies are generally at different stages of production. A manufacturer may decide to merge with
a supplier of important components or raw materials, for example, or with a distributor or retailer that sells its
iv) A turnaround is the financial recovery of a company that has been performing poorly for an extended time. To
effect a turnaround, a company must acknowledge and identify its problems, consider changes in management, and
develop and implement a problem-solving strategy. In some cases, the best strategy may be to cut losses by
liquidating the company rather than trying to turn it around.
Possible characteristics of a troubled company in need of a turnaround include revenues that do not cover costs, an
inability to pay creditors, layoffs, salary cuts for officers and a significant decline in stock price. Poor management
and/or social, technological and competitive changes may have caused the products or services the company sells to
be perceived as subpar by consumers. A speculator may profit from a turnaround if he accurately anticipates the
improvement of a poorly performing company.
v) Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship or responsible
business)[1] is a form of corporate self-regulation integrated into a business model. CSR policy functions as a self-
regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law,
ethical standards and national or international norms.[2] With some models, a firm's implementation of CSR goes
beyond compliance and statutory requirements, which engages in "actions that appear to further some social good,
beyond the interests of the firm and that which is required by law". [3][4] The binary choice between 'complying' with
the law and 'going beyond' the law must be qualified with some nuance. In many areas such as environmental or
labor regulations, employers can choose to comply with the law, to go beyond the law, but they can also choose to
not comply with the law, such as when they deliberately ignore gender equality or the mandate to hire disabled
workers. There must be a recognition that many so-called 'hard' laws are also 'weak' laws, weak in the sense that they
are poorly enforced, with no or little control and/or no or few sanctions in case of non-compliance. 'Weak' law must
not be confused with soft law.[5] The aim is to increase long-term profits and shareholder trust through positive
public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate
actions. CSR strategies encourage the company to make a positive impact on the environment
and stakeholders including consumers, employees, investors, communities, and others
Ans2) The seven points below outline the major responsibilities of the board of directors.
1) Recruit, supervise, retain, evaluate and compensate the manager. Recruiting, supervising, retaining, evaluating
and compensating the CEO or general manager are probably the most important functions of the board of directors.
Value-added business boards need to aggressively search for the best possible candidate for this position. Actively
searching within your industry can lead to the identification of very capable people. Dont fall into the trap of hiring
someone to manage the business because he/she is out of work and needs a job. Another major error of value-added
businesses is under-compensating the manager. Managerial compensation can provide a good financial payoff in
terms of attracting top candidates who will bring financial success to the value-added business.
2) Provide direction for the organization. The board has a strategic function in providing the vision, mission and
goals of the organization. These are often determined in combination with the CEO or general manager of the
3) Establish a policy based governance system. The board has the responsibility of developing a governance system
for the business. The articles of governance provide a framework but the board develops a series of policies. This
refers to the board as a group and focuses on defining the rules of the group and how it will function. In a sense, its
no different than a club. The rules that the board establishes for the company should be policy based. In other words,
the board develops policies to guide it own actions and the actions of the manager. The policies should be broad and
not rigidly defined as to allow the board and manager leeway in achieving the goals of the business.
4) Govern the organization and the relationship with the CEO. Another responsibility of the board is to develop a
governance system. The governance system involves how the board interacts with the general manager or CEO.
Periodically the board interacts with the CEO during meetings of the board of directors. Typically that is done with a
monthly board meeting, although some boards have switched to meetings three to four times a year, or maybe eight
times a year. In the interim between these meetings, the board is kept informed through phone conferences or postal
5) Fiduciary duty to protect the organizations assets and members investment. The board has a fiduciary
responsibility to represent and protect the members/investors interest in the company. So the board has to make
sure the assets of the company are kept in good order. This includes the companys plant, equipment and facilities,
including the human capital (people who work for the company.)

6) Monitor and control function. The board of directors has a monitoring and control function. The board is in
charge of the auditing process and hires the auditor. It is in charge of making sure the audit is done in a timely
manner each year.
Ans4) regulator to control Indian capital market. Since its establishment in 1992, it is doing hard work for
protecting the interests of Indian investors. SEBI gets education from past cheating with naive investors of India.
Now, SEBI is more strict with those who commit frauds in capital market.
The role of security exchange board of India (SEBI) in regulating Indian capital market is very important because
government of India can only open or take decision to open new stock exchange in India after getting advice from
If SEBI thinks that it will be against its rules and regulations, SEBI can ban on any stock exchange to trade in shares
and stocks.
Now, we explain role of SEBI in regulating Indian Capital Market more deeply with following points:
1. Power to make rules for controlling stock exchange :
SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI fixed the time
of trading 9 AM and 5 PM in stock market.
2. To provide license to dealers and brokers :
SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any financial product is
of capital nature, then SEBI can also control to that product and its dealers. One of main example is ULIPs case.
SEBI said, " It is just like mutual funds and all banks and financial and insurance companies who want to issue it,
must take permission from SEBI."
3. To Stop fraud in Capital Market :
SEBI has many powers for stopping fraud in capital market.
It can ban on the trading of those brokers who are involved in fraudulent and unfair trade practices relating to stock
It can impose the penalties on capital market intermediaries if they involve in insider trading.
4. To Control the Merge, Acquisition and Takeover the companies :
Many big companies in India want to create monopoly in capital market. So, these companies buy all other
companies or deal of merging. SEBI sees whether this merge or acquisition is for development of business or to
harm capital market.
5. To audit the performance of stock market :
SEBI uses his powers to audit the performance of different Indian stock exchange for bringing transparency in the
working of stock exchanges.
6. To make new rules on carry - forward transactions :
Share trading transactions carry forward can not exceed 25% of broker's total transactions
90 day limit for carry forward.
7. To create relationship with ICAI :
ICAI is the authority for making new auditors of companies. SEBI creates good relationship with ICAI for bringing
more transparency in the auditing work of company accounts because audited financial statements are mirror to see
the real face of company and after this investors can decide to invest or not to invest. Moreover, investors of India
can easily trust on audited financial reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are
doing their duty by ethical way or not.
8. Introduction of derivative contracts on Volatility Index :
For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to introduce derivative
contracts on Volatility Index, subject to the condition that
a. The underlying Volatility Index has a track record of at least one year.
b. The Exchange has in place the appropriate risk management framework for such derivative contracts.
2. Before introduction of such contracts, the Stock Exchanges shall submit the following:
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection
of investors and smooth and orderly trading.
vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading in such contracts,
viii. Details of settlement procedures & systems
ix. Details of back testing of the margin calculation for a period of one year considering a call and a put option on
the underlying with a delta of 0.25 & -0.25 respectively and actual value of the underlying. Link
9. To Require report of Portfolio Management Activities :
SEBI has also power to require report of portfolio management to check the capital marketperformance. Recently,
SEBI sent the letter to all Registered Portfolio Managers of India for demanding report.
10. To educate the investors :
Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010 SEBI imposed
workshop. If you are investor, you can get education through SEBI leaders by getting update information
Corporate Management
BBA 305
Ans1)i) The concept of corporate management has moved through the stage of adhocism, planned policy,
environment strategy interface and corporate planning. Corporate management has the following broad
characteristics: (a) Encompassing entire management process (b) Short term as well as long term (c) All pervasive
integrative and relates to all level of management. (d) Concerned with coping uncertain future with active
intervention. In India corporate planning could not bring desired results. The factor like poor participants,
complicated process, part time interest, domination of routine issues , bring bottlenecks to effectiveness in corporate
planning process. Implementation refers to those activities which are necessary for achieving the plans already
formulated. This administrative task is based on action and decision making. The issues like project, procedure,
resource allocation, behavior and managerial functions need special attention.

ii) Diversification is a corporate strategy to enter into a new market or industry in which the business doesn't
currently operate, while also creating a new product for that new market. This is the most risky section of the Ansoff
Matrix, as the business has no experience in the new market and does not know if the product is going to be
Diversification is one of the four main growth strategies defined by Igor Ansoff's Product/Market matrix:[1]

Ansoff pointed out that a diversification strategy stands apart from the other three strategies. Whereas, the first three
strategies are usually pursued with the same technical, financial, and merchandising resources used for the original
product line, the diversification usually requires a company to acquire new skills and knowledge in product
development as well as new insights into market behavior simultaneously. This not only requires the acquisition of
new skills and knowledge, but also requires the company to acquire new resources including new technologies and
new facilities, which exposes the organisation to higher levels of risk
iii) Management discussion and analysis (MD&A) is the section of a company's annual report in which
management provides an overview of the previous years operations and how the company performed financially.
Management also discusses the upcoming year by outlining future goals and approaches to new projects. The
MD&A is an important document for analysts and investors who want to review the companys
financial fundamentals and management performance.
A company that sells securities to the public must register its stock offerings with the Securities and Exchange
Commission (SEC), which provides oversight and ensures investors receive adequate disclosure for investments.
The SEC requires firms to file periodic disclosures to investors, including Form 10-K annually and Form 10-Q each
quarter. The MD&A section is included with the annual report or the Form 10-K filing.
iv) Turnaround management is a process dedicated to corporate renewal. It uses analysis and planning to save
troubled companies and returns them to solvency, and to identify the reasons for failing performance in the market,
and rectify them. Turnaround management involves management review, root failure causes analysis, and SWOT
analysis to determine why the company is failing. Once gdg analysis is completed, a long term strategic plan and
restructuring plan are created. These plans may or may not involve a bankruptcy filing. Once approved, turnaround
professionals begin to implement the plan, continually reviewing its progress and make changes to the plan as
needed to ensure the company returns to solvency.

v) When a company wishes to grow through a horizontal integration, it is seeking to increase its size, diversify its
product or service, achieve economies of scale, reduce competition, or gain access to new customers or markets. To
do this, one company acquires another company of similar size and operations, in the same industry. Some great
examples of a horizontal integration are Marriott's 2016 acquisition of Sheraton (Hospitality industry), Anheuser-
Busch InBev's (AB InBev) 2016 acquisition of SABMiller (Beer companies), AstraZeneca's 2015 acquisition of ZS
Pharma (Biotech), Facebook's 2012 acquisition of Instagram (Social Media), and Disney's 2006 acquisition of Pixar
(Entertainment Media).
When a company wishes to grow through a vertical integration, it is seeking to strengthen its supply chain, reduce
its production costs, capture upstream or downstream profits, or access downstream distribution channels. To do
this, one company acquires another company that is either before or after it in the supply chain process. Some great
examples of vertical integration include Google's 2011 acquisition of smart phone producer Motorola, Ikea's 2015
purchase of forests in Romania to supply its own raw materials, and Amazon's integration into hardware by
producing Kindle Fire tablets.

When it comes to a vertical integration, a company can either integrate forward in a forward integration or backward
in a backward integration. A backward integration occurs when a company decides to own another company that
makes an input product to the acquiring company's product. An example of this is if a car manufacturer acquires a
tire manufacturing company. A forward integration occurs when a company decides to take control of the post-
production process. An example of this is if the same car manufacturer acquires an automotive dealership.
Ans2) Mergers & Acquisitions can take place:
by purchasing assets
by purchasing common shares
by exchange of shares for assets
by exchanging shares for shares
Types of Mergers and Acquisitions:
Merger or amalgamation may take two forms: merger through absorption or merger through consolidation. Mergers
can also be classified into three types from an economic perspective depending on the business combinations,
whether in the same industry or not, into horizontal ( two firms are in the same industry), vertical (at different
production stages or value chain) and conglomerate (unrelated industries). From a legal perspective, there are
different types of mergers like short form merger, statutory merger, subsidiary merger and merger of equals.
Reasons for Mergers and Acquisitions:
Financial synergy for lower cost of capital
Improving company's performance and accelerate growth
Economies of scale
Diversification for higher growth products or markets
To increase market share and positioning giving broader market access
Strategic realignment and technological change
Tax considerations
Under valued target
Diversification of risk
Principle behind any M&A is 2+2=5
There is always synergy value created by the joining or merger of two companies. The synergy value can be seen
either through the Revenues (higher revenues), Expenses (lowering of expenses) or the cost of capital (lowering of
overall cost of capital).
Three important considerations should be taken into account:
The company must be willing to take the risk and vigilantly make investments to benefit fully from the merger as
the competitors and the industry take heed quickly
To reduce and diversify risk, multiple bets must be made, in order to narrow down to the one that will prove
The management of the acquiring firm must learn to be resilient, patient and be able to adopt to the change owing
to ever-changing business dynamics in the industry
Stages involved in any M&A:
Phase 1: Pre-acquisition review: this would include self assessment of the acquiring company with regards to the
need for M&A, ascertain the valuation (undervalued is the key) and chalk out the growth plan through the target.
Phase 2: Search and screen targets: This would include searching for the possible apt takeover candidates. This
process is mainly to scan for a good strategic fit for the acquiring company.
Phase 3: Investigate and valuation of the target: Once the appropriate company is shortlisted through primary
screening, detailed analysis of the target company has to be done. This is also referred to as due diligence.
Phase 4: Acquire the target through negotiations: Once the target company is selected, the next step is to start
negotiations to come to consensus for a negotiated merger or a bear hug. This brings both the companies to agree
mutually to the deal for the long term working of the M&A.
Phase 5:Post merger integration: If all the above steps fall in place, there is a formal announcement of the
agreement of merger by both the participating companies.
Reasons for the failure of M&A - Analyzed during the stages of M&A:
Poor strategic fit: Wide difference in objectives and strategies of the company
Poorly managed Integration: Integration is often poorly managed without planning and design. This leads to
failure of implementation
Incomplete due diligence: Inadequate due diligence can lead to failure of M&A as it is the crux of the entire
Overly optimistic: Too optimistic projections about the target company leads to bad decisions and failure of the
Example: Breakdown in merger discussions between IBM and Sun Microsystems happened due to disagreement
over price and other terms.
Ans3) Different types of CSR

Environmental CSR: focuses on eco-issues such as climate change.

Community based CSR: businesses work with other organizations to improve the quality of life of the people
in the local community.
HR based CSR: projects that improve the wellbeing of the staff.
Philanthropy: businesses donate money to a good cause, usually through a charity partner.
CSR critics
Although most companies in the world today agree that corporate social responsibility is part of daily business
practice, this idea is not shared by everyone. This is the so-called business to business approach.
Advantages of Corporate Social Responsibility
5 reasons why should you get involved in CSR
In todays digital, fast speed world, each business, small or big, needs to have a CSR program in place. If CSR is not
yet part of your daily business practice, you must act fast. Or else youll loose the trust of the people who are
important to your business.
Believe it or not but the expectations of your staff, customers and the wider community have changed. You
are no longer in control. They are.
So why CSR?
1. Satisfied employees.
Employees want to feel proud of the organization they work for. An employee with a positive attitude towards the
company, is less likely to look for a job elsewhere. It is also likely that you will receive more job applications
because people want to work for you.
More choice means a better workforce. Because of the high positive impact of CSR on employee wellbeing and
motivation, the role of HR in managing CSR projects is significant.

2. Satisfied customers
Research shows that a strong record of CSR improves customers attitude towards the company. If a customer likes
the company, he or she will buy more products or services and will be less willing to change to another brand.
Relevant research:
IBM study Attaining Sustainable Growth through Corporate Social Responsibility: The majority of business
executives believes that CSR activities are giving their firms competitive advantage, primarily due to
favorable responses from consumers.
Better Business Journey, UK Small Business Consortium: 88% of consumers said they were more likely to
buy from a company that supports and engages in activities to improve society.
3. Positive PR
CSR provides the opportunity to share positive stories online and through traditional media. Companies no longer
have to waste money on expensive advertising campaigns. Instead they generate free publicity and benefit from
worth of mouth marketing.
4. Costs reductions
Yes, you read this correctly. A CSR program doesnt have to cost money. On the contrary. If conducted properly a
company can reduce costs through CSR.
Companies reduce costs by:

More efficient staff hire and retention

Implementing energy savings programs
Managing potential risks and liabilities more effectively
Less investment in traditional advertising
5. More business opportunities
A CSR program requires an open, outside oriented approach. The business must be in a constant dialogue with
customers, suppliers and other parties that affect the organization. Because of continuous interaction with other
parties, your business will be the first to know about new business opportunities.
6. Long term future for your business
CSR is not something for the short term. Its all about achieving long term results and business continuity. Large
businesses refer to: shaping a more sustainable society (Vodafone 2010 report):
Deliver a sustainable society in which business and its stakeholders can prosper in the long term