Answers to Sample Paper 4 1, (d) Call money The consumer must be aware of different brands makes an intel (©) Controlling (@) Leadership 5. (a) Organising 13. 4 15. 16. 17. 18. 9. 20. 2. ent cho Feedback includes all actions of receiver indicating that he has received and understood the message of sender. . (d) All of these (b) Regulatory function False (a) Political . Staffing If the demand of a product is inelastic, the firm is in a better position to fix higher prices whereas in case, it is elastic, lower prices should be fixed. () Warehousing (0) It helps the company to float new issues. (a) Cash Reserve Ratio Ina boom period, both sal of the firm will also be larger. (b) Right to be heard (6) National Commission (d) Both (a) and (6) True, as the Reserve Bank of India influences the interest rates, controls the flow of money in the economy and regulates the working of banks. ‘and production are likely to be larger so the working capital requirement Bas Capital Market Money Market, (a) Participants (&) Investment outlay (©) Liquidity The participants in capital market are financial institutions, banks, corporate cotities, foreign investors and members from general public. The unit value of capital market securities is generally low. They are generally multiples of 5, 50 oF so. Capital Market securities can be marketed in the stock exchange, it is possible that ‘a share may not be actively traded and it may not find a buyer easily. The participants in money market are RBI, commercial banks, non-bank finance companies (NBFCs) and State Governments Investment outlay for money market transactions is huge as instruments are quite expensive. The Money Market instruments are more liquid than capital market instruments. The Discount Finance House of India provides a ready market for money market instruments, Business Studies — 12 o22, Sahil failed to achieve the target because he was not given sufficient authority to fulfl his responsibility. He could have achieved the production of target units, if he had the authority to employ 20 more workers. This imbalance made the subordinate ineffective. While giving responsibility to the subordinate, the manager should see that equal authority is given to ensure that the targets are met. 23. (a) Divisional Structure, because this organisation structure is suitable for thos organisations which are concerned with manufacturing of different products of distinctive characteristics. (b) Two limitations of divisional structure are: (® There may be conflicts among different divisions over allocation of funds, (ii) Similar activities may lead to duplication of work and increase in expenditure. m4. Basis Single-use Plan Standing Plan (@) Usage (©) Purpose (©) Duration These plans are used only once. The purpose of these plans is to meet the requirement of some specific situation, The duration of this plan is for as long as the situation persists. Once the situation is over these plans are not used. ‘These plans are used again and again for long period of time and are called recurring plans. ‘The purpose of these plans is to provide guidance for proper function of the organisation, ‘The duration of these plans is longer. 25, Environment scanning means a process by which organisations monitor their relevant environment to identify its strengths, opportunities and threats affecting th ir bus ness. By monitoring the environment through environmental scanning, an organisation can consider the impact of the different events, trends, issues and expectations on its strategic management process. This helps it in deciding what ‘opportunities can best be pursued by Efficiency means “ Or joing things right” and effectiveness means “doing the right thing.” It output” concept. An efficient manager is one who achieves output that justify the and the future course of action, in “input- puts (labour, materials and time) used to achieve them. In management, efficiency of resource utilisation is, thus, minimi Effectiveness in contrast, involves choosing goal-say producing mainly larg even if the large cars are produced with maximum efficiency. tion of cost and maximisation of benefits resulting in achievement of goals. ight goals, A manager who selects an inappropriate 1s when demand for small cars is high is an ineffective manager No amount of efficiency can make up for lack of effectiveness. So effectiveness is the key to an organisation’s success. It «a pre-condi jon for an efficient management. Therefore, it is important for management to achieve goals (effectiveness) with minimum resources, ie,, as efficiently as possible, maintaining a balance between effectiveness and effi ney. 26. (a) The external source of recruitment is opted for. Its two benefits are: (i It brings competi fe spirit among employees, (i) I helps in bringing fresh talent in the organisation, Business Studies — 12 @(b) The two external sources of recruitment are: (i) Direct recruitment: A notice is placed on the notice board of the enterprise specifying the details of the jobs available. It is followed usually for casual vacancies of unskilled or semi skilled jobs. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. (ii) Casual eallers: Unsolicited applicants both at the factory gate or through walk- constitute an important source of personnel. The qualification of unsolicited applicants will depend on economic considerations, the organisation's image and the perceived type of jobs that might be available. (ii) Employment exchange: It was designed both to help the job seekers to find suitable employment and to help the employers find suitable workers. All states provide employment services. The records of employment exchange are often not up to date and many candidates referred by them may not be found suitable (any two) interviews 27. Organising is considered as an important function of management because of following reasons: (a) Benefit of Specialisation (i) In the proc on the basis of similarity. (i) As worker performs a specific task regularly. (ii) Repetitive performance of a particular task allows himyher to gain experience in that area and it ultimately leads to specialisation (b) Clarity of Authority and Responsibility Relationships (The establishment of working relationship clarifies lines of communication and specific who is to report to whom. s of Organising, the activities are grouped very carefully into specialised jobs (ii) The jobs of managers and non-managers are clearly defined and differentiated. (iii) It helps to remove duplication of work and fixation of responsibility. (i) It minimizes conflict and conflict about the respective powers and privileges of managers. (©) Optimum utilisation of resources. (i) Organising leads to the proper usage of all materials, financial and human resources. (ii) The proper assignment of jobs avoids overlapping of work and also makes possible the best use of resources, (ii) Also, it helps in minimizing the wastage of resources and effects. (@) Effective management (®) Organising provides a clear description of jobs and related duties. This helps to avoid confusion and duplication. (i) Clarity in working relationship enables proper execution of work. This brings effectiveness in administration, (e) Adaptation of change. (i) The process of Organising allows a business enterprise to adapt itself according to changing business environment. (ii) Itallows the organisation structure to be suitably modified and the revision of interrelationships ‘amongst the members of the organisation. Business Studies — 12 ®28. 29. () Development of Personnels (i Organising stimulates creativity amongst the managers. (i) Effective delegation allows the manager reduce their workload by assigning routine jobs to their subordinates. (iii) The reduction in work load by delegation gives them the time to explore areas for growth and the opportunity to innovate. This strengthens the company's competitive position. (g) Expansion and Growth (Organising helps in the growth and diversification of enterprise by enabling it to deviate from existing norms and taking up new challenges, (any four) Or The importance of planning function of management is as follows: (a) Makes objectives clear and specific: The planning exercise makes the goals clear and specific because it begins with the determination of objectives, (b) Makes activities meaningful/Provides directions: Due to planning, employees and managers know how their activities relate to organisational goals. Everyone is conscious of his own contribution towards achievement of organisational goals. In this way, planning makes activities meaningful. (©) Reduces the risks of uncertainty: Planning helps to reduce the risks associated with uncertainties, In the process of planning, attempt is made to look into the future and predict it. Planning helps to identify potential threats of future and help to develop contingency plan to deal with them, (d) Facilitates decision-making: Planning ensures foresceing future and choosing the best alternative amongst the various alternatives. The manager evaluates the positive and negative aspect of each alternative and choose the one with least negative consequence, having feasibility and profitability, Through this, a direction is provided to all the activities of the organisation which gives the basic guidelines to the manager for decision making. (c) Promotes innovative ideas: Planning assists managers in developing new ideas that provide a platform for building concrete plans. Such innovative ideas provide a direction towards the growth and prosperity of the business. (any four) “Bending the customer according to the product’ is selling concept and ‘Developing the product according to the customer needs’ is marketing concept. The difference between the two is as follows: Basis Selling Concept Marketing Concept \(a) Focus Selling existing products Satisfaction of customers’ needs |(b) Means Selling and promotion Integrated marketing techniques Io) Ends Profit through higher sales volume Profit through customer satisfaction Management is considered as a science because it has an organised body of knowledge which contains certain universal truth, Itis called an art because managing requires application of certain skills which are the personal possession of a manager. A manager should be an applied scientist. He should possess not only specialised knowledge of management but also the skills to put his knowledge into practice. Management has features of both art and science, The managers work on the basis of principle of management but its application is an art which a manager gains with experience and practice. The Business Studies — 12 co)31. art of management cannot be learnt alone from books but needs practice and creative application. ‘Management is an “Inexact Science’ because the outcomes of these experiments cannot be accurately predicted. Ma tion cannot be accurately predicated. agement deals with human beings and human behaviour and therefore its appli Thus, management is a sciences as well as art, complementing both of them. Or ‘The importance of management may be outlined as follows: (a) Helps in achieving group goals: It assembles and organises available resources for the to the efforts of a group of accomplishment of the goals of an enterprise. It adds effectivenes sd 10 achieve given objectives. persons organi (b) Increases effi with reducing cost of production and increasing the output. Through better planning, organising and control, and the use of various cost reduction techniques, efficient management leads to reduced cost and increased output. (c) Helps in achieving personal objectives: A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organisational objective. (d) Helps in the development of society: It helps in providing good quality goods and services, c employment opportunities, adopts new technology for the greater good of the people and helps in the development of society. (e) Creates a dynamic organisation: Mana: environment so that the organisation is able to maintain iey/Reduces costs: To secure efficiency of operations, management is concerned ement helps people to adapt to the constantly changing competitive edge. (a) “No one showed concern and enquired about her health”. Affiliation Needs/Belonging Needs: These are related to the natural desire to socialize or interact with others. In other words, these are needs for belongingness, friendship, love, affecting, affection and social acceptance. (b) @ Esteem Need: and attention from others. Th of employee: (ii) Self-Actualisation Needs: These needs are the highest level needs in the hierarchy of needs These needs arise after the satisfaction of all previous needs i.e. physiological needs, safety and security needs, affiliation needs and esteem needs. ‘stem needs include factors like self-respect, autonomy, statues, recognition needs, when fulfilled, enhance self-confidence and prestige ‘The different dimensions of business environment quoted in the lines are: (@) Legal environment: “The court passed an order that all schools must have water purifiers.” (b) Social environment: “Society in general is more concerned about quality of life.” (c) Technological environment: “Innovative techniques are being developed to manufacture water purifiers at competitive rates.” (@) Economic environment: “Incomes are rising.” (©) Poli ‘Government is also showing positive attitude towards the water purifier business.” ical environment Business Studies — 12 6Or (a) Scalar Chain: Scalar Chain is the formal line of authority and communication from highest to the lowest ranks. Scalar Chain shows the path of flow of authority and communication and in normal course of formal organisation, it should not be violated, For example, the head, A, has two lines of authority under him. If E wants to communicate with J the communication will flow through the route E-D- CBAG-HI. However, in case of emergency, E can directly contact J through a Gang Plank, However, they need to inform their superiors about it later on. Gang Plank is a shorter route provided so that communication is not delayed. (b) Discipline: Discipline means obedience to organisational rules and employment agreement. Fayol considers it necessary for the working of an organisation and advocates that good superiors at all levels, clear and fair agreements and judicious application of penalties will enable discipline in the organisation. Thus, the subordinates must honour their commitment towards the organisation by working efficiently and effectively. Similarly, the management should also keep their promises and fulfil them by giving proper increment, promotion and rewards to its employees. For example, to revive a company out of loss, its workers agreed to work for extra hours without any additional payment, and the management promised to increase the wages of the workers on successful accomplishment of the targets set, then discipline here means, both the workers and the management should honour their commitments. 32, The factors to be considered while determining the requirements of working capital of the company are: (a) Nature of Business: The basic nature of a business influences the amount of working capital required. A trading concern requires less working capital as there is no processing, ie., sales are generally made immediately upon receipt of materials, (b) Scale of Operations: The firms, which operate at large-scale require more working capital as their inventory level, debtors, etc. are generally high, However, firms operating at small-scale need less working capital due to low level of activit (©) Production Cycle: In case of long production cycle, raw material alongwith labour and overheads gets tied up for a long period, whereas firms with shorter production cycle can manage with less working capital (a) Credit allowed to Customers: Credit policy of the company determines the average time period needed to collect the sale proceeds. It depends on competition level and credit worthiness of customers. A company following liberal credit policy needs more working capital due to more debtors. However, in case of a strict policy, less working capital is needed, Or The factors affecting the requirement of fixed capital are: (a) Scale of operations: A large organisation operating at a higher scale needs bigger plant, more space ete. so, it requires higher investment in fixed assets as compared to smaller organisations operating on a smaller scale. Business Studies — 1233. (b) Choice of technique: A capital intensive organisation needs to invest more in plant and machinery. Labour intensive organisations rely more on manual labour. So, the fixed capital requirement will be more in case of a capital intensive organisation than a labour intensive organisation, (c) Technology upgradation: An organi fixed capital as there is a frequent need of upgrading the technology and changing of fixed assets. Thus, the fixed assets requirement is more in this type of organisation, ion, whose assets are prone to obsolescence, requires more (d) Financing alternatives: A developed financial market may provide leasing facility to an organisation. A firm can take an asset on lease instead of outright purchase. In such a case, it has to only pay rental for it and by doing so the need of huge sum of funds required to purchase the asset can be avoided. This reduces the fixed capital requirement. Pricing affects the revenue and profits of a firm. The factors which help in determining price are: (a) Product Cost: One of the most important factors affecting its price is the cost of the product or service. This includes the cost of producing, selling and distributing. ‘The cost set the minimum price of floor price at which the product may be sold. There are broadly three types of costs fixed costs, variable costs and semi-variable costs. (b) Utility and Demand: The utility provided by the product and the intensity of the demand of the buyers sets the upper limit of the product, which a buyer would be prepared to pay. The buyer may be ready to pay upto the point where the utility from the product is equal to the sacrifi made in terms of the price paid. (©) Extent of Competition in the Market: The prices will can be set higher if there is lower degree of competition while under higher degrees of competition the prices will tend to set at lowest level (@) Government and Legal Regulat In order to protect the interest of public against unfair practices in the field of price fixing, government can intervene and regulate the price of commodities. Government can declare a product as essential product and regulate its price. (e) Marketing Methods used: Price fixation process is also affected by other elements of marketing such as quality of salesman employed, product differentiation, credit facility ete. Or ‘The various rights provided by the Consumer Protection Act, 1986 are: (a) Right to Safety: According to this right, a consumer has the right to be protected against goods and services which are hazardous to life and health. For example, electrical goods which are manufactured with substandard products or do not conform to the safety norms might cause serious injury. Thus, consumers are educated that they should use electrical goods which have ISI mark as this would be an assurance for such products in meeting quality specifications (b) Right to be Informed: According to this right, a consumer has the right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use ete. (c) Right to Choose: According to this right, consumer has freedom to choose from a variety of products at competitive prices. This implies that the marketers should offer a wide variety of products in terms of quality, brand, prices, size ete. and allow the consumer to make a choice from amongst these. Business Studies — 12 ——_____ ”(d) Right to be Heard: According to this right, consumer has the right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells. Many consumer organisations are also working towards this direction and helping consumers in redressing their grievances. (c) Right to Seek Redressal: According to this right, a consumer has the right to get relief in case the product or service falls short of his expectations. The Consumer Protection Act provides a number of reliefs to the consumers including replacement of the product, removal of defect in the product, compensation paid for any loss or injury suffered by the consumer etc. () Right to Consumer Education: According to this right, a consumer has the right to acquire knowledge and to be well informed, He should be aware about his rights and the reliefs available to him in case of a product or service falling short of his expectations. Many consumer organisations and businesses are taking an active part in educating consumers in this respect. (a) Clarify the ideas before communication: Any issue to be communicated to a subordinate should be clearly and completely studied and analysed by the superior. Moreover, it should be stated in such a manner that can help a subordinate easily to understand it in the same sense in which the superior wants him to receive it (b) Communicate according to the needs of receiver: The level of understanding of the receiver must be very clear to the sender. Sender should try to communicate according to the level of (©) Consult others before communicating: Consulting the subordinates before communi message, helps to gain ready acceptance and willing cooperation of subordinates. (@) Be aware of language, tone and content of message: The language, tone and content of a message to be communicated are very important aspects for an effective communication. The language should be clear, simple and easily understandable. Similarly, the content of the message should not hurt the sentiments of listeners rather it should stimulate them to give proper response. (c) Ensure proper feedback: Proper feedback helps in improving the communication process. The sender should ask appropriate questions regarding message conveyed by him and the receiver should be encouraged to respond to same. (P). Follow up communications: Regular follow up and review of the instructions given to subordinates help in removing difficulties in implementing the instructions. Business Studies — 12 ®