QUESTIONS AND ANSWERS

Chapter I – Nature and Significance of Management

(total marks allotted=1+2+8=11+practical)
SECTION-A
1.What is Efficiency?
Ans:- Efficiency means doing the task correctly and with minimum cost.
2.What is Effectiveness concerned with?
Ans:- It is concerned with the end result.
3.Give an example for top level management.
Ans:- Chairman, the chief executive officer, chief operating officer, president and vice-
president (any one)
4. Give an example for middle level management.
Ans:- Production Manager is an example for middle level management.
5. Give an example for supervisory level management.
Ans:- Foremen, supervisors is an example for supervisory level management.
6.Which of the following is not a function of management
(a) Planning (b) Staffing (c) Cooperating (d) Controlling
Ans:- (c) Cooperating
7. Management is
(a) an art (b) a science (c) both art and science (d) neither
Ans:- (c) both art and science
8. The following is not an objective of management
(a) earning of profits (b) growth of the organization
(c) providing employment (d) policy making
Ans:- (d) policy making
9. Policy formulation is the function of
(a) Top level management (b) Middle level management
(c) Operational management (d) All of the above
Ans:- (a) Top level management
10. Coordination is
(a) Function of management (b) The essence of management
(c) An objective of management (d) None of the above
Ans:- (b) The essence of management
SECTION-B
1.Define Management.
Ans:-According to Harold Koontz and Heinz Weihrich “Management is the process
of designing and maintaining an environment in which individuals, working together in

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groups, efficiently accomplish selected aims.”

2.State any two Organizational Objectives of Management.

Ans:- Two Organizational Objectives of Management are
(i)Survival: Survival is basic objectives of Management.
(ii) Profit:Earning of profits is another Organizational Objectives of Management

3.Define Coordination.
Ans:-According to McFarland “ Coordination is the process whereby an executive
develops an orderly pattern of group efforts among his subordinates and secures unity of
action in the pursuit of common purpose.”

4.Justify the importance of coordination by any two factors.

Ans:-Two Importance of coordination are
(i) Growth in size: For organisational efficiency, it is important to harmonise individual
goals and organisational goals through coordination.
(ii) Specialisation: Some coordination is required by an independent person to reconcile
the differences in approach, interest or opinion of the specialists.

SECTION-C
1.Explain the Objectives of Management.
Ans:- (i)Organisational Objectives: These are survival, profit and growth.
(a)Survival: The basic objectives of any business is survival. Management must strive to
ensure the survival of the organisation. In order to survive, an organisation must earn
enough revenues to cover costs.
(b)Profit: Mere survival is not enough for business. Management has to ensure that the
organisation makes a profit. Profit is essential for covering costs and risks of the
business.
(c)Growth: A business needs to add to its prospects in the long run, for this it is
important for the business to grow.
(ii) Social objectives: It involves the creation of benefit for society. As a part of society,
every organisation whether it is business or non-business, has a social obligation to
fulfill. This includes using environmental friendly methods of production, giving
employment opportunities to the disadvantaged sections of society and providing basic
amenities like schools and crèches to employees.
(iii)Personal objectives: Organisations are made up of people who have different
personalities, backgrounds, experiences and objectives. These vary from financial needs
such as competitive salaries and perks, social needs such as peer recognition and higher
level needs such as personal growth and development.
2.Give any four grounds to say Management is important. (importance
of Management)
Ans:-Four importance of management are

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(i) Management helps in achieving group goals: Management is required not for itself
but for achieving the goals of the organisation. The task of a manager is to give a
common direction to the individual effort in achieving the overall goal of the
organisation.
(ii) Management increases efficiency: The aim of a manager is to reduce costs and
increase productivity through better planning, organising, directing, staffing and
controlling the activities of the organisation.
(iii) Management creates a dynamic organisation: All organisations have to function in
an environment which is constantly changing. It is generally seen that individuals in an
organisation resist change as it often means moving from a familiar, secure environment
into a newer and more challenging one.
(iv) Management 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.
SECTION-D
1..Explain the characteristics of Management.
Ans:- The important characteristics of Management are
(i)Management is a goal-oriented process: An organisation has a set of basic goals
which are the basic reason for its existence. These should be simple and clearly stated.
Different organisations have different goals

(ii) Management is all pervasive: The activities involved in managing an enterprise are
common to all organisations whether economic, social or political.

(iii) Management is multidimensional: Management is a complex activity that has

three main dimensions. These are:
(a) Management of work: All organisations exist for the performance of some work. In a
factory, a product is manufactured, in a garment store a customer’s need is satisfied and
in a hospital a patient is treated. Management translates this work in terms of goals to
be achieved and assigns the means to achieve it.

(B)Management of people: Human resources or people are an organisation’s greatest

asset. Despite all developments in technology “getting work done through people” is still
a major task for the manager.

C )Management of operations: No matter what the organisation, it has some basic

product or service to provide in order to survive. This requires a production process
which entails the flow of input material and the technology for transforming this input
into the desired output for consumption.

IV. Management is a continuous process: The process of management is a series of

continuous, composite, but separate functions (planning, organising, directing, staffing
and controlling). These functions are simultaneously performed by all managers all the
time.

V. Management is a group activity: An organisation is a collection of diverse

individuals with different needs. Every member of the group has a different purpose for
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joining the organisation but as members of the organisation they work towards fulfilling
the common organisational goal.

VI. Management is a dynamic function: Management is a dynamic function and has to

adapt itself to the changing environment.

VII. Management is an intangible force: Management is an intangible force that

cannot be seen but its presence can be felt in the way the organisation functions.

2..“Management as an art and a science are not mutually exclusive,

but complement to each other”-
Ans:- ManageMent as an art:- What is art? Art is the skillful and personal
application of existing knowledge to achieve desired results. It can be acquired through
study, observation and experience. Since art is concerned with personal application of
knowledge some kind of ingenuity and creativity is required to practice the basic
principles learnt. The basic features of an art are as follows:
(i) Existence of theoretical knowledge: (ii) Personalised application: (iii) Based on
practice and creativity:
Management can be said to be an art since it satisfies the following criteria:
(i) A successful manager practices the art of management in the day-to-day job of
managing an enterprise based on study, observation and experience. There is a lot of
literature available in various areas of management like marketing, finance and human
resources which the manager has to specialise in. There is existence of theoretical
knowledge.
(ii) There are various theories of management, as propounded by many management
thinkers, which prescribe certain universal principles. A manager applies these scientific
methods and body of knowledge to a given situation, an issue or a problem, in his own
unique manner.
(iii) A manager applies this acquired knowledge in a personalised and skillful manner in
the light of the realities of a given situation. He is involved in the activities of the
organisation, studies critical situations and formulates his own theories for use in a
given situation.
ManageMent as a scIence:- The basic features of science are as follows:
(i) Systematised body of knowledge(ii) Principles based on experimentation: (iii)
Universal validity:
Based on the above features, we can say that management has some characteristics of
science.
(i) Management has a systematised body of knowledge. It has its own theory and
principles that have developed over a period of time, but it also draws on other
disciplines such as Economics, Sociology, Psychology and Mathematics. Like all other
organised activity, management has its own vocabulary of terms and concepts.
(ii) The principles of management have evolved over a period of time based on repeated
experimentation and observation in different types of organisations. However, since
management deals with human beings and human behaviour, the outcomes of these

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experiments are not capable of being accurately predicted or replicated. Therefore,
management can be called an inexact science.
(iii) Since the principles of management are not as exact as the principles of science,
their application and use is not universal. They have to be modified according to a given
situation. However, they provide managers with certain standardised techniques that
can be used in different situations. These principles are also used for training and
development of managers.
Management as an art and a science are therefore not mutually exclusive, but
complement each other.
3..Define Coordination. Explain the characteristics of Coordination.
Ans:- According to McFarland “ Coordination is the process whereby an executive
develops an orderly pattern of group efforts among his subordinates and secures unity of
action in the pursuit of common purpose.”
characteristics of Coordination are as follows:-
(i) Coordination integrates group efforts: Coordination unifies unrelated or diverse
interests into purposeful work activity. It gives a common focus to group effort to ensure
that performance is as it was planned and scheduled.
(ii) Coordination ensures unity of action: The purpose of coordination is to secure
unity of action in the realisation of a common purpose. It acts as the binding force
between departments and ensures that all action is aimed at achieving the goals of the
organisation.

(iii) Coordination is a continuous process: Coordination is not a one-time function but

a continuous process. It begins at the planning stage and continues till controlling.

(iv) Coordination is an all pervasive function:Coordination is required at all levels of

management due to the interdependent nature of activities of various departments. It
integrates the efforts of different departments and different levels.

(v) Coordination is the responsibility of all managers: Coordination is the function of

every manager in the organisation.
(vi) Coordination is a deliberate function: A manager has to coordinate the efforts of
different people in a conscious and deliberate manner.
4.‘Management is a series of continuous interrelated functions’- Comment.
Ans:_ Management is described as the process of planning, organising, directing and
controlling the efforts of organisational members and of using organisational resources
to achieve specific goals.
(i)Planning is the function of determining in advance what is to be done and who is to
do it. This implies setting goals in advance and developing a way of achieving them
efficiently and effectively Planning cannot prevent problems, but it can predict them and
prepare contingency plans to deal with them if and when they occur.
(ii)Organising is the management function of assigning duties, grouping tasks,
establishing authority and allocating resources required to carry out a specific plan.
Once a specific plan has been established for the accomplishment of an organisational
goal, the organising function examines the activities and resources required to
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implement the plan. It determines what activities and resources are required. It decides
who will do a particular task, where it will be done, and when it will be done.

(iii)Staffing simply stated, is finding the right people for the right job. A very important
aspect of management is to make sure that the right people with the right qualifications
are available at the right places and times to accomplish the goals of the organisation.
This is also known as the human resource function and it involves activities such as
recruitment, selection, placement and training of personnel
(iv)Directing involves leading, influencing and motivating employees to perform the
tasks assigned to them. This requires establishing an atmosphere that encourages
employees to do their best. Motivation and leadership are two key components of
direction. Directing also involves communicating effectively as well as supervising
employees at work.
(v)Controlling is the management function of monitoring organisational performance
towards the attainment of organisational goals. The task of controlling involves
establishing standards of performance, measuring current performance, comparing this
with established standards and taking corrective action where any deviation is found.

The various functions of a manager are usually discussed in the order given above,
suggesting that a manager first plans, then organises, puts staff in position, then
directs, and finally controls. In reality, managers are rarely able to carry out these
functions in isolation. The activities of a manager are interrelated and it is often
difficult to pinpoint where one ended and the other began.
SECTION-E (Practical oriented questions)
1.Assuming that you are the manager of an organization, draw the neat
diagram of different Levels of Management to specify that authority
responsibility relationships create different levels of management.

Note:-As per blue prints four marks ( section-C) questions not asked in
this chapter. This section included only for tests and midterm exams.

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 II CHAPTER(TOTAL MARKS ALLOTTED=1+2+4=7+PRACTICAL)
PRINCIPLES OF MANAGEMENT
SECTION A

1.Who is known as Father of General Management ?

Ans : Henry Fayol is known as Father of General Management
2.Name any one new technique of management developed on the basis of
principles of management ?
Ans : Operations Research or cost Accounting is one new technique of
management developed on the basis of principles of management.(any one)
3.Who is called the Father of Scientific management ?
Ans : F. W Taylor (Fredrick Winslow Taylor) is called the father of scientific
management
4.Who advocated separation of planning and execution of functions in any
organization ?
Ans : F. W. Taylor advocated separation of planning and execution of function in
the organization.
5.What is standardization according to Taylor ?
Ans : Standardization refers to the process of setting standards for every business
activity.
6.How simplification differs from standardization according to Taylor ?
Ans : Standardization refers to the process of setting standards for every business
activity. Simplification aims at eliminating unnecessary diversity of
products.
7. What is the aim of simplification according to Taylor ?
Ans : Simplification aims at eliminating unnecessary diversity of products.
8.Who strongly advocated piece wage system ?
Ans : F. W. Taylor strongly advocated piece wage system.
9.State the number of principles of management pro pounded by Henry
Fayor ?
Ans : 14 Principles of management pro pounded by Henry Fayor.
10.Which management principle of Fayol advocates that there should be
only one boss for each individual employee ?
Ans : Unity of command is the principle of Fayol advocates that there should be
only one boss for each individual employee.
11.Principles of management are not
a) Universal b) Flexible
c) Absolute d) Behavioural
Ans : Absolute
12.How are principles of management formed ?
a) In a Laboratory b) By experience of managers
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 c)By experiences of customers d) by propogation of social scientists
Ans : By experiences of managers

13.Which of the following statement best describes the principle of ‘Division

of Work’
a) Work should be divided into small tasks
b) Labour should be divided
c) Resources should be divided among jobs
d) It leads to specialization
Ans : Work should be divided into small tasks

14.She / He keeps machines, materials, tools etc., ready for operations by

concerned workers whose work is described by this sentence under
functional foremanship
a) Instruction card clerk
b) Repair boss
c) Gang Boss
d) Route clerk
Ans : (c) Gang Boss

SECTION B

1.Give the meaning of mental revolution as pro pounded by Taylor

Ans : Mental revolution involves a change in the attitude of workers and
management towards one another from competition to co-operation.
2.What is discipline according to Fayol ?
Ans : Discipline is the obedience to organisational rules and employment agreement
which are necessary for the working of the organisation.
3.State two differences between unity of command and unity of direction ?
Ans : 1) Unity of command prevents dual subordination unity of
direction prevents overlapping of activities.
2) Unity of command affects an individual employee unity of
direction affects the entire organization.

4.What is Scalar chain ?

Ans : The formal lines of authority from highest to lowest ranks are known
as scalar chain.

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5.What is Gang Plank ?
Ans : Gang Plank is a shorter route in a scalar chain which allows
employees at the same level to communicate with each other directly.
It should be used only in case of emergency
SECTION C

1.Discuss the significance of principles of management by explaining any

four points
Ans : The significance of principles of management can be discussed in terms of
the following points :
(i) Providing managers with useful insights into reality : The principles of
management provide the managers with useful insights into real world add to
their knowledge, ability and understanding of managerial situations and
circumstances. It will also enable managers to learn from past mistakes and
conserve time by solving recurring problems quickly.
(ii)Optimum utilization of resources : Human and material resources available
with the company are limited. They have to be put to optimum use. The resources
should be used in such a manner that they should give maximum benefit with
minimum cost.
(iii) Scientific decisions :Principles of management helps in thoughtful decision
making. They emphasize logic management decisions are based on the objective
assessment of the situation.
(iv)Meeting changing environment requirements :Although the principles are
in the nature of general guidelines but they are modified and as such help
managers to meet changing requirement of the environment.
2.Explain the principles of management contributed by Taylor.
Ans : The following are the principles of management contributed by Taylor.
(i) Science not rule of thumb:- Taylor believed that there was only one best
method to maximize efficiency. One method should be developed through
study and analysis, it should substitute “Rule of thumb” throughout the
organization scientific method involved investigation of traditional methods
through work study, unifying the best practices and developing a standard
method.
ii) Harmony not Discard:- Taylor emphasized that there should be complete
harmony between the management and workers. Both should realize that
each one is Important. To achieve this state, Taylor called for complete mental
revolution on the part of both management and workers should transform their
thinking.
iii) Co-operation, not individualism:-There should be complete co-operation
between the labour and the management instead of individualism. This principle
is states that competition should be replaced by co-operation both should realize
9
that they need each other. Employees should be rewarded for their suggestions
which results in reduction of costs and if any important decisions are taken into
confidence.
iv) Development of each and every person to his or her greatest efficiency
and prosperity:-According to Taylor each person should be scientifically
selected. Then work assigned should suit her/his physical, mental intellectual
capabilities. To increase efficiency, they should be given the required training.
Efficient employees would produce more and earn more. This will ensure their
greatest efficiency and prosperity for both company and workers.
3.Explain the 4 aspects of work study developed by Taylor
Ans ; 4 aspects of work study developed by Taylor as follows:-
(i)Method Study:- The objective of method study is to find out one best way of
doing the job. To determine the best way there are several parameters. Right from
procurement of raw materials till the final product is delivered to the customer
every
activity is part of method study.
(ii)Motion Study:- Motion study refers to the study of movements like lifting,
putting objects, sitting and changing positions etc., which are undertaken while
doing typical job. Unnecessary movements are sought to be eliminated. So that it
takes less time to complete the job efficiently.
(iii)Time Study:-It determines the standard time taken to perform a well defined
job. The standard time is fixed for the whole of the task by taking several
readings. The method of time study will depend upon volume and frequency of
the task, the cycle time of the operation and time measurement costs. The
objective of time study is to determine the number of workers to be employed
frame suitable incentive schemes and determine labour costs.
(iv)Fatigue Study:-Fatigue study seeks to determine the amount and frequency
of rest intervals in completing a task. There are many causes for fatigue like long
working hours, doing unsuitable work having uncordial relations with the boss or
bowl working conditions etc., such hindrances in good performance should be
removed.

SECTION D (This section only for mid term and class exams)
1.Explain the functional foremanship of Taylor
ANS:-
In the factory system, the foreman represents the managerial figure with whom the
workers are in face-to-face contact on a daily basis. Foremen is the lowest ranking
manager and highest ranking worker. Taylor identified a list of qualities of a good
foreman and found that no single person could fit them all. This promoted him to
suggest functional foremanship through eight persons. Taylor advocated
separation of planning and execution function. It was known as functional
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foremanship. Under planning incharge four personnel namely instruction clerk,
route clerk, time and cost clerk and a disciplinarian worked. These four personnel
would draft instructions for the workers, specify the route of production prepare
time and cost sheet and ensure discipline respectively. Under production
incharge personnel who would work were speed boss, gang boss, repair boss and
inspector. These respectively were responsible for timely and accurate completion
of job keeping machines and tools etc., ready for operation by workers ensure
proper working condition of machines and tools and check the quality of work.
Each worker will have to take orders from these eight foremen in the related
process or function of production. Taylor proposed eight specialists. Each
specialist is to assigned work according to his or her qualities for example those
with technical mastery intelligence and grit may be given planning work. Those
with energy and good health may be assigned execution work.
2.Explain the nature of principles of management
Ans : Nature of principles of management are explained below:-
(i)Universal applicability :-The principles of management are intended to apply
to all types of organizations, business as well as non-business, small as well
large, public sector as well as private sector, manufacturing as well as the service
sectors. However the extent of their applicability would vary with the nature of the
organization, business activity, scale of operations and the like.
(ii)General guidelines :-The principles are guidelines to action. But do not
provide readymade solutions to all managerial problems. This is so because real
business situations are very complex and dynamic and are a result of many
factors.
(iii)Formed by practice and experimentation :-The principles of management
are formed by experience and collective wisdom of managers as well as
experimentation. For example in order to remedy the problem of fatigue of
workers in the factory, an experiment may be conducted to see the effect of
improvement of physical conditions to reduce stress.
(iv)Flexible :-The principles of management are not rigid. They are flexible and
can be modified by the manager when the situation so demands. For example the
degree of concentration of authority or its dispersal well defend upon the
situations and circumstances of each enterprise.
(v) Mainly behavioural in Nature :-Management principles aim at influencing
behavior of human beings. It is not that these principles do not pertain to things
and phenomenon at all it is just a matter of emphasis more over principles enable
a better understanding of the relationship between human and material resources
in accomplishing organizational purposes.
(vi)Cause and effect relationships :-The principles tells us if a particular
principle was applied in a particular situation what would be its likely effect.
Principles of management assists managers in establishing these relationships

11
(cause and effect) to some extent and are therefore useful. In situations of
emergencies it is desirable that someone takes charge and others just follow.
(vii)Contingent :-The application of principles of management are contingent.
The application of principles has to be changed as per requirements. For example
employees deserve fair and just remuneration. But what is just and fair is
determined by multiple factor. They include contribution of the employee and also
prevailing wage rate for the occupation under consideration.
Conclusion :-Having described the inherent qualities and characteristics of
management principles, it should be easy for you to appreciate the significance of
these principles in managerial decision making.
SECTION E
(Practical Oriented Question)
1.As a General Manager list out any ten Fayol’s Principles of Management which
you would like to adopt in your business organization.
Ans : As a General Manager I would like to adopt the following ten
principles of Fayol in our organization
(i)Division of work (ii)Authority and responsibility
(iii)Discipline (iv)Unity of command
(v)Unity of direction (vi)Remuneration of employees
(vii)Scalar chain (viii)Centralization and Decentralization
(ix)Order (x)Equity
(xi)Stability of personnel (xii)Intiative(xiii)Subordination of individual interest to
general interest (xiv) Espirit De Corps: (team spirit) (WRITE ANY TEN OUT OF 14
PRINCIPLES)

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 Chapter 3 --Business Environment
(TOTAL MARKS ALLOTTED=2+4=6+PRACTICAL)
SECTION-A
1.What is Business Environment?
Ans:- It means the sum total of all individuals, institutions and other forces that
are outside the control of a business enterprise but that may affect its
performance.
2.Which of the following does not characterize the business environment?
(a) Uncertainty (b) Employees (c) Relativity (d) Complexity
Ans:- (b) Employees
3.Which of the following is an example for social environment?
(a) Money supply in the economy (b) Consumer Protection Act
(c) The Constitution of the country (d) Composition of family
Ans:- (d) Composition of family
4.Liberalization means
(a) Integration among economies (b) Reduced government controls and
restrictions (c) Policy of planned disinvestments (d) None of the above
Ans:- (b) Reduced government controls and restrictions
5.Which of the following does not explain the impact of Government
policy changes on business and industry?
(a) More demanding customers (b) Increasing competition
(c) Change in agricultural prices (d) Market orientation
Ans:- (c) Change in agricultural prices

SECTION-B
1.Give the meaning of Globalization.
Ans:- Globalisation means the integration of the various economies of the world leading
towards the emergence of a cohesive global economy.
2.What is Privatization?
Ans:- The new set of economic reforms aimed at giving greater role to the private
sector in the nation building process and a reduced role to the public sector.
SECTION-C
1.Explain any four features of Business Environment.
Ans:- Four features of Business Environment are as follows:-
(i) Totality of external forces: Business environment is the sum total of all things
external to business firms and, as such, is aggregative in nature.
(ii) Specific and general forces: Business environment includes both specific and
general forces. Specific forces (such as investors, customers, competitors and suppliers)
affect individual enterprises directly and immediately in their
day-to-day working. General forces (such as social, political, legal and technological

13
conditions) have impact on all business enterprises and thus may affect an individual
firm only indirectly.
(iii) Inter-relatedness: Different elements or parts of business environment are closely
interrelated. For example, increased life expectancy of people and increased awareness
for health care have increased the demand for many health products and services like
diet Coke, fat-free cooking oil, and health resorts. New health products and
services have, in turn, changed people’s life styles.
(iv) Dynamic nature: Business environment is dynamic in that it keeps on changing
whether in terms of technological improvement, shifts in consumer preferences or entry
of new competition in the market.
2. Explain any four points to explain how important the understanding
of Business Environment for managers is.
Ans:- . The importance of business environment and its understanding by managers
can be appreciated if we consider the following facts:
(i) It enables the firm to identify opportunities and getting the first mover
advantage: Opportunities refer to the positive external trends or changes that will help a
firm to improve its performance. Environment provides numerous opportunities for
business success. Early identification of opportunities helps an enterprise to be the first
to exploit them instead of losing them to competitors.
(ii) It helps the firm to identify threats and early warning signals: Threats refer to
the external environment trends and changes that will hinder a firm’s performance.
Besides opportunities, environment happens to be the source of many threats.
Environmental awareness can help managers to identify various threats on time and
serve as an early warning signal.
(iii) It helps in tapping useful resources: Environment is a source of various resources
for running a business. To engage in any type of activity, a business enterprise
assembles various resources called inputs like finance, machines, raw materials, power
and water, labour, etc., from its environment including financiers, government and
suppliers.
(iv) It helps in coping with rapid changes: Today’s business environment is getting
increasingly dynamic where changes are taking place at a fast pace. It is not the fact of
change itself that is so important as the pace of change.
3.Explain any four challenges that were to be faced by business and
industry due to changes in Government Policy.
Ans:- The following four challenges that were to be faced by business and
industry due to changes in Government Policy.
(i) Increasing competition: As a result of changes in the rules of industrial licensing
and entry of foreign firms, competition for Indian firms has increased especially in
service industries like telecommunications, airlines, banking, insurance, etc. which were
earlier in the public sector.
(ii) More demanding customers: Customers today have become more demanding
because they are well-informed. Increased competition in the market gives the customers
wider choice in purchasing better quality of goods and services.
(iii) Rapidly changing technological environment: Increased competition forces the
firms to develop new ways to survive and grow in the market. New technologies make it
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possible to improve machines, process, products and services. The rapidly changing
technological environment creates tough challenges before smaller firms.
(iv) Necessity for change: In a regulated environment of pre- 1991 era, the firms could
have relatively stable policies and practices. After 1991, the market forces have become
turbulent as a result of which the enterprises have to continuously modify their
operations.

SECTION-D
1.Explain the features of business environment.
Ans:- Features of business environment are explained below:-
(i) Totality of external forces: Business environment is the sum total of all things
external to business firms and, as such, is aggregative in nature.
(ii) Specific and general forces: Business environment includes both specific and
general forces. Specific forces (such as investors, customers, competitors and suppliers)
affect individual enterprises directly and immediately in their day-to-day working.
General forces (such as social, political, legal and technological conditions) have impact
on all business enterprises and thus may affect an individual firm only indirectly.
(iii) Inter-relatedness: Different elements or parts of business environment are closely
interrelated. For example, increased life expectancy of people and increased awareness
for health care have increased the demand for many health products and services like
diet Coke, fat-free cooking oil, and health resorts. New health products and services
have, in turn, changed people’s life styles.
(iv) Dynamic nature: Business environment is dynamic in that it keeps on changing
whether in terms of technological improvement, shifts in consumer preferences or entry
of new competition in the market.
(v) Uncertainty: Business environment is largely uncertain as it is very difficult to
predict future happenings, especially when environment changes are taking place too
frequently as in the case of information technology
or fashion industries.
(v i ) Complexity: Since business environment consists of numerous interrelated and
dynamic conditions or forces which arise from different sources, it becomes difficult to
comprehend at once what exactly constitutes a given environment. For example, it may
be difficult to know the extent of the relative impact of the social, economic, political,
technological or legal factors on change in demand of a product in the market.
(vii) Relativity: Business environment is a relative concept since it differs from country
to country and even region to region. Political conditions in the USA, for instance, differ
from those in China or Pakistan. Similarly, demand for sarees may be fairly high in India
whereas it may be almost non-existent in France.

2.Explain, with examples, the various dimensions of business environment.

Ans:- A brief discussion of the various factors constituting the general environment of
business is given below:
(i) Economic Environment: Interest rates, inflation rates, changes in disposable
income of people, stock market indices and the value of rupee are some of the economic
factors that can affect management practices in a business enterprise. Short and long
term interest rates significantly affect the demand for product and services. For example,
in case of construction companies and automobile manufacturers, low longer-term rates
are beneficial because they result in increased spending by consumers for buying homes
and cars on borrowed money. Similarly, a rise in the disposable income of people due to
15
increase in the gross domestic product of a country creates increasing demand for
products. High inflation rates generally result in constraints on business enterprises as
they increase the various costs of business such as the purchase of raw materials or
machinery and payment of wages and salaries to employees.
(ii) Social Environment: The social environment of business include the social
forces like customs and traditions, values, social trends, society’s expectations from
business, etc. Traditions define social practices that have lasted for decades or even
centuries. For example, the celebration of Diwali, Eid, Christmas, and Guru Parv in
India provides significant financial opportunities for greetings card companies, sweets or
confectionery manufacturers, tailoring outlets and many other related business. Values
refer to concepts that a society holds in high esteem. Social trends present various
opportunities and threats to business enterprises. For example, the health-and fitness
trend has become popular among large number of urban dwellers. This has created a
demand for products like organic food, diet soft drinks, gyms, bottled (mineral) water
and food supplements. This trend has, however, harmed business in other industries
like dairy processing, tobacco and liquor.
(iii) Technological Environment: Technological environment includes forces
relating to scientific improvements and innovations which provide new ways of
producing goods and services and new methods and techniques of operating a business.
For example, recent technological, advances in computers and electronics have modified
the ways in which companies advertise their products. It is common now to see CD-
ROM’s, computerised information kiosks, and Internet/ World Wide Web multimedia
pages highlighting the virtues of products. Similarly, retailers have direct links with
suppliers who replenish stocks when needed. Manufacturers have flexible
manufacturing systems. Airline companies have Internet and World Wide Web pages
where customers can look for flight times, destinations and fares and book their tickets
online. In addition, continuing innovations in different scientific and engineering fields
such as lasers, robotics, biotechnology, food preservatives, medicine, telecommunication
and synthetic fuels have provided numerous opportunities and threats for many
different enterprises.
(iv) Political Environment: Political environment includes political conditions such
as general stability and peace in the country and specific attitudes that elected
government representatives hold towards business. The significance of political
conditions in business success lies in the predictability of business activities under
stable political conditions. On the other hand, there may be uncertainty of business
activities due to political unrest and threats to law and order. Political stability, thus,
builds up confidence among business people to invest in the long term projects for the
growth of the economy. Political instability can shake that confidence. Similarly, the
attitudes of government officials towards business may have either positive or negative
impact upon business. For example, even after opening up of our economy in 1991,
foreign companies found it extremely difficult to cut through the bureaucratic red tape to
get permits for doing business in India. Sometimes, it took months to process even their
application for the purpose. As a result these companies were discouraged from
investing in our country. The situation has improved over time.
(v) Legal Environment: Legal environment includes various legislations passed by
the Government administrative orders issued by government authorities, court
judgments as well as the decisions rendered by various commissions and agencies at
every level of the government— centre, state or local. It is imperative for the management
of every enterprise to obey the law of the land. Therefore, an adequate knowledge of rules
and regulations framed by the Government is a pre-requisite for better business
16
performance. Non-compliance of laws can land the business enterprise into legal
problems. In India, a working knowledge of Companies Act 1956; Industries
(Development and Regulations) Act 1951; Foreign Exchange Management Act and the
Imports and Exports (Control) Act 1947; Factories Act, 1948; Trade Union Act; 1926;
Workmen’s Compensation Act, 1923; Industrial Disputes Act, 1947, Consumer
Protection Act, 1986, Competition Act, 2002 and host of such other legal enactments as
amended from time to time by the Parliament, is important for doing business. Impact of
legal environment can be illustrated with the help of government regulations to protect
consumer’s interests. For example, the advertisement of alcoholic beverages is
prohibited. Advertisements, including packets of cigarettes carry the statutory warning
‘Cigarette smoking is njurious to health’. Similarly, advertisements of baby food must
necessarily inform the potential buyer that mother’s milk is the best. All these
regulations are required to be followed by advertisers

SECTION-E
1.Show the different Elements of Business Environment that influence
the success of business Enterprises with a neat diagram.

17
 ANSWER- Chapter 4(Total marks allotted=1+2+4=7+practical)
4.Planning
SECTION-A
1.What is Planning?
ANS:- Planning is deciding in advance what to do and how to do.
2.Which function of management involves decision making?
ANS:-Planning function of management involves decision making.
3.State the first step in Planning Process.
ANS:- The first and foremost step is setting objectives.
4.What is Single Use Plan?
ANS:- A single-use plan is developed for a one-time event or project.
5.What is Standing Plan?
ANS:- A standing plan is used for activities that occur regularly over a period of time.
6.Give an example for Single Use Plan.
ANS:- Budget is an example for Single Use Plan.
7.Give an example for Standing Plan.
ANS:- Procedures is an example for Standing Plan.
8.Give an example for a plan which is neither single nor standing plan.
Ans:- A strategy is an example for a plan which is neither single nor standing
plan.
9.State the meaning of ‘Rule’
Ans:- :- Rules are specific statements that inform what is to be done.
10.What is a ‘Budget’?
Ans:- A budget is a statement of expected results expressed in numerical terms.
11.Which of the following statement is not correct with regard to
planning?
(a) It is a mental exercise (b) It provides direction for the future actions (c) It
is end function in the process of management
(d) It involves setting objectives and developing courses of actions.
Ans:- (c) It is end function in the process of management
12.Which of the following is not the feature of the planning?
(a) It focuses on achieving objectives (b) It involves identification and
division of work (c) It is the primary function of the management
(d) It is a pervasive function
Ans:- (b) It involves identification and division of work
13.Which of the following is an example for the single use plan?
(a) Policy (b) Procedure (c) Budget (d) Method
Ans:- (c) Budget

18
 SECTION-B
1.State any two features of Planning.
Ans:- Two features of Planning are
(i) Planning focuses on achieving objectives
(ii) Planning is a primary function of management
2.Give the meaning of Planning Premises.
Ans:- Planning is concerned with the future which is uncertain and every planner is
using conjecture about what might happen in future. Therefore, the manager is required
to make certain assumptions about the future. These assumptions are called Planning
premises.
3.What do you mean by ‘Objectives’?
Ans:- Objectives can be said to be the desired future position that the management
would like to reach.
4.What is a ‘Strategy’?
Ans:- . It refer to future decisions defining the organisations direction and scope in the
long run.
5.What is a ‘Policy’?
Ans:- Policies are general statements that guide thinking or channelise energies towards
a particular direction.
6.What is ‘Procedure’?
Ans:- Procedures are routine steps on how to carry out activities. They detail the exact
manner in which any work is to be performed.
7.Give the meaning of ‘Programme’.
Ans:- Programmes are detailed statements about a project which outlines the
objectives, policies, procedures, rules, tasks, human and physical resources required
and the budget to implement any course of action.
SECTION-C
1.Explain the importance of Planning with any four points.
Ans:_Four Importance of Planning are as follows:-
(i) Planning reduces the risks of uncertainty:Planning is an activity which enables a
manager to look ahead and anticipate changes. By deciding in advance the tasks to be
performed, planning shows the way to deal with changes and uncertain events. Changes
or events cannot be eliminated but they can be anticipated and managerial responses to
them can be developed.
(ii) Planning reduces overlapping and wasteful activities: Planning serves as the basis
of coordinating the activities and efforts of different divisions, departments and
individuals. It helps in avoiding confusion and misunderstanding. Since planning
ensures clarity in thought and action, work is carried on smoothly without interruptions.
Useless and redundant activities are minimised or eliminated. It is easier to detect
inefficiencies and take corrective measures to deal with them.
(iii) Planning promotes innovative ideas: Since planning is the first function of
management, new ideas can take the shape of concrete plans. It is the most challenging
activity for the management as it guides all future actions leading to growth and
prosperity of the business.

19
(iv) Planning facilitates decision making: Planning helps the manager to look into the
future and make a choice from amongst various alternative courses of action. The
manager has to evaluate each alternative and select the most viable proposition.
Planning involves setting targets and predicting future conditions, thus helping in taking
rational decisions.

2.Explain any four features of Planning.

Ans:-Four features of Planning are as follows:-
(i) Planning focuses on achieving objectives: Organisations are set up with a general
purpose in view. Specific goals are set out in the plans along with the activities to be
undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning
unless it contributes to the achievement of predetermined organisational goals.
(ii) Planning is a primary function of management: Planning lays down the base for
other functions of management. All other managerial functions are performed within the
framework of the plans drawn. The various functions of management are interrelated
and equally important. However, planning provides the basis of all other functions.
(iii) Planning is pervasive: Planning is required at all levels of management as well as in
all departments of the organisation. It is not an exclusive function of top management
nor of any particular department. But the scope of planning differs at different levels and
among different departments. For example, the top management undertakes planning
for the organisation as a whole. Middle management does the departmental planning. At
the lowest level, day-to-day operational planning is done by supervisors.
(iv) Planning is continuous: Plans are prepared for a specific period of time, may be for
a month, a quarter, or a year. At the end of that period there is need for a new plan to be
drawn on the basis of new requirements and future conditions. Hence, planning is a
continuous process. Continuity of planning is related with the planning cycle. It means
that a plan is framed, it is implemented, and is followed by another plan, and so on.
3.Explain any four limitations of Planning.
Ans:-Four limitation of Planning are as follows:-
(i) Planning leads to rigidity: In an organisation, a well-defined plan is drawn up with
specific goals to be achieved within a specific time frame. These plans then decide the
future course of action and managers may not be in a position to change it. This kind of
rigidity in plans may create difficulty. Managers need to be given some flexibility to be
able to cope with the changed circumstances.

(ii) Planning may not work in a dynamic environment: The business environment is
dynamic, nothing is constant. The environment consists of a number of dimensions,
economic, political, physical, legal and social dimensions. The organisation has to
constantly adapt itself to changes. It becomes difficult to accurately assess future trends
in the environment if economic policies are modified or political conditions in the
country are not stable or there is a natural calamity. Competition in the market can also
upset financial plans, sales targets may have to be revised and, accordingly, cash
budgets also need to be modified since they are based on sales figures.
(iii) Planning reduces creativity: Planning is an activity which is done by the top
management. Usually the rest of the members just implement these plans. As a
consequence, middle management and other decision makers are neither allowed to
deviate from plans nor are they permitted to act on their own. Thus, much of the
initiative or creativity inherent in them also gets lost or reduced. Most of the time,
employees do not even attempt to formulate plans. They only carry out orders. Thus,
planning in a way reduces creativity since people tend to think along the
20
same lines as others. There is nothing new or innovative.
(iv) Planning involves huge costs: When plans are drawn up huge costs are involved in
their formulation. These may be in terms of time and money for example, checking
accuracy of facts may involve lot of time. Detailed plans require scientific calculations to
ascertain facts and figures. The costs incurred sometimes may not justify the benefits
derived from the plans. There are a number of incidental costs as well, like expenses on
boardroom meetings, discussions with professional experts and preliminary
investigations to find out the viability of the plan.
4.Explain any two types of Plan.
Ans:- (i)Objectives The first step in planning is setting objectives. Objectives, therefore,
can be said to be the desired future position that the management would like to reach.
Objectives are very basic to the organisation and they are defined as ends which the
management seeks to achieve by its operations. Therefore, an objective simply stated is
what you would like to achieve, i.e., the end result of activities. For example, an
organisation may have an objective of increasing sales by 10% or earning a reasonable
rate of return on investment, earn a 20% profit from business. They represent the end
point of planning. All other managerial activities are also directed towards achieving
these objectives. They are usually set by top management of the organisation and focus
on broad, general issues.
(ii)Strategy:- A strategy provides the broad contours of an organisation’s business. It
will also refer to future decisions defining the organisations direction and scope in the
long run. Thus, we can say a strategy is a comprehensive plan for accomplishing an
organisation objectives. Whenever a strategy is formulated, the business environment
needs to be taken into consideration. The changes in the economic, political, social, legal
and technological environment will affect an organisation’s strategy. Strategies usually
take the course of forming the organisation’s identity in the business environment. Major
strategic decisions will include decisions like whether the organisation will continue to
be in the same line of business, or combine new lines of activity with the existing
business or seek to acquire a dominant position in the same market.

SECTION-D
1.Explain the importance and limitations of planning.
Ans:- Importance of Planning are as follows:-

(i) Planning reduces the risks of uncertainty:Planning is an activity which enables a

manager to look ahead and anticipate changes. By deciding in advance the tasks to be
performed, planning shows the way to deal with changes and uncertain events. Changes
or events cannot be eliminated but they can be anticipated and managerial responses to
them can be developed.
(ii) Planning reduces overlapping and wasteful activities: Planning serves as the basis
of coordinating the activities and efforts of different divisions, departments and
individuals. It helps in avoiding confusion and misunderstanding. Since planning
ensures clarity in thought and action, work is carried on smoothly without interruptions.
Useless and redundant activities are minimised or eliminated. It is easier to detect
inefficiencies and take corrective measures to deal with them.
(iii) Planning promotes innovative ideas: Since planning is the first function of
21
management, new ideas can take the shape of concrete plans. It is the most challenging
activity for the management as it guides all future actions leading to growth and
prosperity of the business.

(iv) Planning facilitates decision making: Planning helps the manager to look into the
future and make a choice from amongst various alternative courses of action. The
manager has to evaluate each alternative and select the most viable proposition.
Planning involves setting targets and predicting future conditions, thus helping in taking
rational decisions.
limitation of Planning are as follows:-
(i) Planning leads to rigidity: In an organisation, a well-defined plan is drawn up with
specific goals to be achieved within a specific time frame. These plans then decide the
future course of action and managers may not be in a position to change it. This kind of
rigidity in plans may create difficulty. Managers need to be given some flexibility to be
able to cope with the changed circumstances.

(ii) Planning may not work in a dynamic environment: The business environment is
dynamic, nothing is constant. The environment consists of a number of dimensions,
economic, political, physical, legal and social dimensions. The organisation has to
constantly adapt itself to changes. It becomes difficult to accurately assess future trends
in the environment if economic policies are modified or political conditions in the
country are not stable or there is a natural calamity. Competition in the market can also
upset financial plans, sales targets may have to be revised and, accordingly, cash
budgets also need to be modified since they are based on sales figures.
(iii) Planning reduces creativity: Planning is an activity which is done by the top
management. Usually the rest of the members just implement these plans. As a
consequence, middle management and other decision makers are neither allowed to
deviate from plans nor are they permitted to act on their own. Thus, much of the
initiative or creativity inherent in them also gets lost or reduced. Most of the time,
employees do not even attempt to formulate plans. They only carry out orders. Thus,
planning in a way reduces creativity since people tend to think along the
same lines as others. There is nothing new or innovative.
(iv) Planning involves huge costs: When plans are drawn up huge costs are involved in
their formulation. These may be in terms of time and money for example, checking
accuracy of facts may involve lot of time. Detailed plans require scientific calculations to
ascertain facts and figures. The costs incurred sometimes may not justify the benefits
derived from the plans. There are a number of incidental costs as well, like expenses on
boardroom meetings, discussions with professional experts and preliminary
investigations to find out the viability of the plan.
2.What is Planning? Explain the various features of Planning.
Ans:- Planning is deciding in advance what to do and how to do. It is one of the basic
managerial functions.
Various features of Planning are as follows:-
(i) Planning focuses on achieving objectives: Organisations are set up with a general
purpose in view. Specific goals are set out in the plans along with the activities to be
undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning
unless it contributes to the achievement of predetermined organisational goals.
(ii) Planning is a primary function of management: Planning lays down the base for
other functions of management. All other managerial functions are performed within the

22
framework of the plans drawn. Thus, planning precedes other functions. This is also
referred to as the primacy of planning. The various functions of management are
interrelated and equally important. However, planning provides the basis of all other
functions.
(iii) Planning is pervasive: Planning is required at all levels of management as well as in
all departments of the organisation. It is not an exclusive function of top management
nor of any particular department. But the scope of planning differs at different levels and
among different departments. For example, the top management undertakes planning
for the organisation as a whole. Middle management does the departmental planning. At
the lowest level, day-to-day operational planning is done by supervisors.
(iv) Planning is continuous: Plans are prepared for a specific period of time, may be for
a month, a quarter, or a year. At the end of that period there is need for a new plan to be
drawn on the basis of new requirements and future conditions. Hence, planning is a
continuous process. Continuity of planning is related with the planning cycle. It means
that a plan is framed, it is implemented, and is followed by another plan, and so on.
(v) Planning is futuristic: Planning essentially involves looking ahead and preparing for
the future. The purpose of planning is to meet future events effectively to the best
advantage of an organisation. It implies peeping into the future, analysing it and
predicting it. Planning is, therefore, regarded as a forward looking function based on
forecasting. Through forecasting, future events and conditions are anticipated and plans
are drawn accordingly. Thus, judgement. It is basically an intellectual activity of
thinking rather than doing, because planning determines the action to be taken.
However, planning requires logical and systematic thinking rather than guess work or
wishful thinking. In other words, thinking for planning must be orderly and based on
the analysis of facts and forecasts.
3.Explain any four types of Plans.
Ans:-Four types of plan are as follows:-
(i)Objectives The first step in planning is setting objectives. Objectives, therefore, can be
said to be the desired future position that the management would like to reach.
Objectives are very basic to the organisation and they are defined as ends which the
management seeks to achieve by its operations. Therefore, an objective simply stated is
what you would like to achieve, i.e., the end result of activities. For example, an
organisation may have an objective of increasing sales by 10% or earning a reasonable
rate of return on investment, earn a 20% profit from business. They represent the end
point of planning. All other managerial activities are also directed towards achieving
these objectives. They are usually set by top management of the organisation and focus
on broad, general issues.
(ii) PolIcy:-Policies are general statements that guide thinking or channelise energies
towards a particular direction. Policies provide a basis for interpreting strategy which is
usually stated in general terms. They are guides to managerial action and decisions in
the implementation of strategy. For example, the company may have a recruitment
policy, pricing policy within which objectives are set and decisions are made. If there is
an established policy, it becomes easier to resolve problems or issues. As such, a policy
is the general response to a particular problem or situation. There are policies for all
levels and departments in the organisation ranging from major company policies
23
to minor policies. Major company policies are for all to know i.e., customers, clients,
competitors etc., whereas minor polices are applicable to insiders and contain minute
details of information vital to the employees of an organisation. But there has to be some
basis for divulging information to others.
(iii) Procedure:- Procedures are routine steps on how to carry out activities. They detail
the exact manner in which any work is to be performed. They are specified in a
chronological order. For example, there may be a procedure for requisitioning supplies
before production. Procedures are specified steps to be followed in particular
circumstances. They are generally meant for insiders to follow. The sequence of steps or
actions to be taken are generally to enforce a policy and to attain pre-determined
objectives. Policies and procedures are interlinked with each other. Procedures are steps
to be carried out within a broad policy framework.
(iv)Rule:- Rules are specific statements that inform what is to be done. They do not
allow for any flexibility or discretion. It reflects a managerial decision that a certain
action must or must not be taken. They are usually the simplest type of plans because
there is no compromise or change unless a policy decision is taken.
SECTION-E
1. As a manager what logical steps you follow in Planning process
before executing a project? ( 7 steps)

Ans:- Logical Steps followed in Planning process before executing a

project are
1. Setting objectives
2. Developing premises
3. Identification of alternative courses of action.
4. Evaluating alternative courses.
5. Selecting an alternative
6. Implement the plan.
7. Follow up action

24
 5.Organising
(Total marks allotted=1+2+8=11+practical)
SECTION-A
1.Which management function translates the plans into action?
Ans:- Organising function translates the plans into action.
2.What is Organisation Structure?
Ans:- Organisation structure is the outcome of the organising process.
3.Which type of organisation structure is suitable for enterprises
having large variety of products?
Ans:- Divisional Structure structure is suitable for enterprises having large
variety of products
4.What is Delegation?
Ans:- Delegation refers to the downward transfer of authority from a superior to a
subordinate.
5.What is Authority?
Ans:- Authority refers to the right of an individual to command his subordinates and
to take action within the scope of his position.
6.What is Responsibility?
Ans:- Responsibility is the obligation of a subordinate to properly perform the assigned
duty.
7.Can Accountability be delegated?
Ans:-No. It Cannot be delegated at all.

8.When can one say that an organisation is centralized?

Ans:- An organisation is centralised when decision-making authority is retained by
higher management levels.
9.What is Decentralisation?
Ans:- Those organisations in which such authority is shared with lower levels are
called Decentralisation.
10.Which of the following is not an element of delegation?
(a) Accountability (b) Authority (c) Responsibility (d) Informal organisation
Ans:- (d) Informal organisation
11.A network of social relationship that arise spontaneously due to
interaction at work is called
(a) Formal Organisation (b) Informal Organization
(c) Decentralisation (d) Delegation
Ans:- (b) Informal Organization

25
12.Which of the following does not follow the scalar chain?
(a) Functional Structure (b) Divisional Structure
(c) Formal Organisation (d) Informal Organization
Ans:- (d) Informal Organization
13.For delegation to be effective, it is essential that responsibility be
accompanied with necessary
(a)Accountability (b) Authority (c) Responsibility (d) Informal Organization
Ans:- (b) Authority
14. Span of management refers to
(a) Number of managers (b) Length of term for which a manager
appointed
(c) Number of subordinates under a superior (d) Number of members in top
management
Ans:- (c) Number of subordinates under a superior
15. Grouping of activities on the basis of functions is a part of
(a) Decentralized organization (b) Divisional organisation
(c) Functional organisation (d) Centralised organisation
Ans:_ (c) Functional organisation

SECTION-B
1.Define Organizing.
Ans:-According to Theo Haimman “Organising is the process of defining and
grouping the activities of the enterprise and establishing authority relationships among
them.”
2.Give the meaning of Organizing.
Ans:- . Organising can be defined as a process that initiates implementation of plans
by clarifying jobs and working relationships and effectively deploying resources for
attainment of identified and desired results (goals).
3.Write any two differences between Functional and Divisional
Structures.
Ans:- Two differences between Functional and Divisional Structures are as
follows:-
Basis Functional Structure Divisional Structure
Formation Formation is based on Formation is based on product
functions lines and is supported by
functions.
Specialisation Functional specialisation. Product specialisation.

4.Give the meaning of Formal Organisation.

Ans:- Formal organisation refers to the organisation structure which is designed by the
management to accomplish a particular task.
26
5.Compare and contrast Authority and Accountability(any two).
Ans:-
Basis Authority Accountability
Meaning Right to command. Answerability for outcome of the assigned
task.
Delegation Can be delegated. Cannot be delegated at all.

6.State any two differences between Delegation and Decentralisation.

Ans:- Two differences Delegation and Decentralisation:
Basis Delegation Decentralisation

Nature Delegation is a compulsory Decentralisation is an optional

act because no individual can policy decision. It is done
perform all tasks on his own. at the discretion of the top
management.

Freedom of action More control by superiors Less control over executives

hence less freedom to take hence greater freedom of
own decisions. action.

SECTION-C
1.Explain the steps in the process of Organising
Ans:- The following steps emerge in the process of organising:
(i)Identification and division of work: The first step in the process of organising
involves identifying and dividing the work that has to be done in accordance with
previously determined plans. The work is divided into manageable activities so that
duplication canbe avoided and the burden of work can be shared among the
employees.
(ii) Departmentalisation: Once work has been divided into small and manageable
activities then those activities which are similar in nature are grouped together. Such
sets facilitate specialisation. This grouping process is called departmentalisation.
Departments can be created using several criteria as a basis
(iii) Assignment of duties: It is necessary to define the work of different job positions
and accordingly allocate work to various employees. Once departments have been
formed, each of them is placed under the charge of an individual. Jobs are then
allocated to the members of each department in accordance to their skills and
competencies. It is essential for effective performance that a proper match is made
between the nature of a job and the ability of an individual. The work must be
assigned to those who are best fitted to perform it well.
(iv) Establishing reporting relationships: Merely allocating work is not enough. Each
individual should also know who he has to take orders from and to whom he is
accountable. The establishment of such clear relationships helps to create a hierarchal
structure and helps in coordination amongst various departments.

27
2.State any two advantages and two disadvantages of Functional
Structure.
Ans:-Two advantages of Functional Structure are as follows:-
(a) It promotes control and coordination within a department because of similarity in
the tasks being performed.
(b) It helps in increasing managerial and operational efficiency and this results in
increased profit.
Two disadvantages of Functional Structure are as follows:-
(a) A functional structure places less emphasis on overall enterprise objectives than the
objectives pursued by a functional head. Such practices may lead to functional
empires wherein the importance of a particular function may be overemphasised.
Pursuing departmental interests at the cost of organisational interests can also hinder
the interaction between two or more departments.
(b) It may lead to problems in coordination as information has tobe exchanged across
functionally differentiated departments.

3.Write any two advantages and two disadvantages of Divisional

Structure.
Ans:- Two advantages of Divisional Structure are as follows:-
(a) Product specialisation helps in the development of varied skills in a divisional head
and this prepares him for higher positions. This is because he gains experience in all
functions related to a particular product.
(b) It promotes flexibility and initiative because each division functions as an
autonomous unit which leads to faster decision making.
Two disadvantages of Divisional Structure are as follows:-

(a) Conflict may arise among different divisions with reference to allocation of funds and
further a particular division may seek to maximise its profits at the cost of other
divisions.
(b) It may lead to increase in costs since there may be a duplication of activities across
products. Providing each division with separate set of similar functions increases
expenditure.

4.State any four features of Formal Organisation.

Ans:- Features of Formal Organisation
(a) It specifies the relationships among various job positions and the nature of their
interrelationship. This clarifies who has to report to whom.
(b) It is a means to achieve the objectives specified in the plans, as it lays down rules
and procedures essential for their achievement.
(c) Efforts of various departments are coordinated, interlinked and integrated through
the formal organisation.
(d) It is deliberately designed by the top management to facilitate the smooth
functioning of the organisation.
(e) It places more emphasis on work to be performed than interpersonal relationships
among the employees. (write any four)

28
5.Mention any four features of Informal Organisation.
Ans:- Features Informal organisation
(a) An informal organisation originates from within the formal organisation as a result of
personal interaction among employees.
(b) The standards of behaviour evolve from group norms rather than officially laid down
rules and regulations.
(c) Independent channels of communication without specified direction of flow of
information are developed by group members.
(d) It emerges spontaneously and is not deliberately created by the management.
(e) It has no definite structure or form because it is a complex network of social
relationships among members. (write any four)

6.State any two advantages and disadvantages of Informal

Organisation.
Ans:- Two advantages of Informal Organisation are as follows:-
(a) Prescribed lines of communication are not followed. Thus, the informal organisation
leads to faster spread of information as well as quick feedback.
(b) It helps to fulfil the social needs of the members and allows them to find likeminded
people. This enhances their job satisfaction since it gives them a sense of belongingness
in the organisation.
Two disadvantages of Informal Organisation are as follows:-
(a) When an informal organisation spreads rumours, it becomes a destructive force and
goes against the interest of the formal organisation.
(b) The management may not be successful in implementing changes if the informal
organisation opposes them. Such resistance to change may delay or restrict growth.
7.Distinguish between Formal and Informal Organisation by taking any
four bases.
Ans:- Differences between Formal and Informal Organisation
Basis Formal organisation Informal organisation
Meaning Structure of authority Network of social
relationships created by the relationships arising out of
management interaction among employees
Origin Arises as a result of company rules Arises as a result of social
and policies interaction
Authority Arises by virtue of position Arises out of personal qualities
in management
Behavior It is directed by rules There is no set behaviour pattern

8.Explain briefly the elements of Delegation.

Ans:- The following essential elements of delegation:
(i) Authority: Authority refers to the right of an individual to command his
subordinates and to take action within the scope of his position. The concept of
authority arises from the established scalar chain which links the various job positions
and levels of an organisation. Authority also refers to the right to take decisions
inherent in a managerial position to tell people what to do and expect them to do it. In
the formal organisation authority originates by virtue of an individual’s position and
the extent of authority is highest at the top management levels and reduces
29
successively as we go down the corporate ladder. Thus, authority flows from top to
bottom, i.e., the superior has authority over the subordinate.
(ii) Responsibility: Responsibility is the obligation of a subordinate to properly
perform the assigned duty. It arises from a superior–subordinate relationship because
the subordinate is bound to perform the duty assigned to him by his superior. Thus,
responsibility flows upwards i.e., a subordinate will always be responsible to his
superior. An important consideration to be kept in view with respect to both authority
and responsibility is that when an employee is given responsibility for a job he must
also be given the degree of authority necessary to carry it out.
(iii) Accountability: Delegation of authority, undoubtedly empowers an employee to
act for his superior but the superior would still be accountable for the outcome:
Accountability implies being answerable for the final outcome. Once authority has been
delegated and responsibility accepted, one cannot deny accountability. It cannot be
delegated and flows upwards i.e., a subordinate will be accountable to a superior for
satisfactory performance of work. It indicates that the manager has to ensure the proper
discharge of duties by his subordinates. It is generally enforced through regular
feedback on the extent of work accomplished. The subordinate will be expected to
explain the consequences of his actions or omissions.
In conclusion, it can be stated that while authority is delegated, responsibility is
assumed, accountability is imposed. Responsibility is derived from authority and
accountability is derived from responsibility. The Table in the previous page provides a
summarised view of the elements of delegation.
9.Explain the importance of Delegation (any four points).
Ans:- Effective delegation leads to the following benefits:
(i)Effective management: By empowering the employees, the managers are able to
function more efficiently as they get more time to concentrate on important matters.
Freedom from doing routine work provides them with opportunities to excel in new
areas
(ii) Employee development: As a result of delegation, employees get more
opportunities to utilise their talent and this may give rise to latent abilities in them. It
allows them to develop those skills which will enable them to perform complex tasks
and assume those responsibilities which will improve their career prospects. It makes
them better leaders and decision makers. Thus, delegation helps by preparing better
future managers. Delegation empowers the employees by providing them with the
chance to use their skills, gain experience and develop themselves for higher positions.
(iii) Motivation of employees: Delegation helps in developing the talents of the
employees. It also has psychological benefits. When a superior entrusts a subordinate
with a task, it is not merely the sharing of work but involves trust on the superior’s
part and commitment on the part of the subordinate. Responsibility for work builds
the self-esteem of an employee and improves his confidence. He feels encouraged and
tries to improve his performance further.
(iv) Facilitation of growth: Delegation helps in the expansion of an organisation by
providing a ready workforce to take up leading positions in new ventures. Trained and
experienced employees are able to play significant roles in the launch of new projects
by replicating the work ethos they have absorbed from existing units, in the newly set
up branches.

30
 SECTION-D
1.Explain the importance of Organizing.(1 for introduction + 7)
Ans:- The management function of organising ensures that efforts are directed
towards the attainment of goals laid down in the planning function in such a manner
that resources are used optimally and people are able to work collectively and
effectively for a common purpose.
The following points highlight the crucial role that organising plays in any business
enterprise:
(i) Benefits of specialisation: Organising leads to a systematic allocation of jobs
amongst the work force. This reduces the workload as well as enhances productivity
because of the specific workers performing a specific job on a regular basis. Repetitive
performance of a particular task allows a worker to gain experience in that area and
leads to specialisation.
(ii) Clarity in working relationships: The establishment of working relationships
clarifies lines of communication and specifies who is to report to whom. This removes
ambiguity in transfer of information and instructions. It helps in creating a
hierarchical order thereby enabling the fixation of responsibility and specification of
the extent of authority to be exercised by an individual.
(iii) Optimum utilization of resources: Organising leads to the proper usage of all
material, financial and human resources. The proper assignment of jobs avoids
overlapping of work and also makes possible the best use of resources. Avoidance of
duplication of work helps in preventing confusion and minimising the wastage of
resources and efforts.
(iv) Adaptation to change: The process of organising allows a business enterprise to
accommodate changes in the business environment. It allows the organisation
structure to be suitably modified and the revision of inter-relationships amongst
managerial levels to pave the way for a smooth transition.
(v) Effective administration: Organising provides a clear description of jobs and
related duties. This helps to avoid confusion and duplication. Clarity in working
relationships enables proper execution of work. Management of an enterprise thereby
becomes easy and this brings effectiveness in administration.
(vi) Development of personnel: Organising stimulates creativity amongst the
managers. Effective delegation allows the managers to reduce their workload by
assigning routine jobs to their subordinates. The reduction in workload by delegation is
not just necessary because of limited capacity of an individual but also allows the
manager to develop new methods and ways of performing tasks. It gives them the time
to explore areas for growth and the opportunity to innovate thereby strengthening the
company’s competitive position.
(vii) Expansion and growth: Organising helps in the growth and diversification of an
enterprise by enabling it to deviate from existing norms and taking up new challenges.
It allows a business enterprise to add more job positions, departments and even
diversify their product lines. New geographical territories can be added to current areas
of operation and this will help to increase customer base, sales and profit.

31
2.State the advantages and disadvantages of Formal Organization.
Ans:- Advantages of Formal organisation are as follows:-
(a) It is easier to fix responsibility since mutual relationships are clearly defined.
(b) There is no ambiguity in the role that each member has to play as duties are
specified. This also helps in avoiding duplication of effort.
(c) Unity of command is maintained through an established chain of command.
(d) It leads to effective accomplishment of goals by providing a framework for the
operations to be performed and ensuring that each employee knows the role he has to
play.
(e) It provides stability to the organisation. This is because behaviour of employees can
be fairly predicted since there are specific rules to guide them.
Disadvantages of Formal Organization are as follows:-
(a) The formal communication may lead to procedural delays as theestablished chain of
command has to be followed which increases the time taken for decision making.
(b) Poor organisation practices may not provide adequate recognition to creative talent,
since it does not allow any deviations from rigidly laid down polices.
(c) It is difficult to understand all human relationships in an enterprise as it places
more emphasis on structure and work. Hence, the formal organisation does not
provide a complete picture of how an organisation works.
3.What is Decentralization? Explain its importance. (2+6)
Ans:- An organisation is centralised when decision-making authority is retained by
higher management levels. Decision making authority is shared with lower levels and
is consequently placed nearest to the points of action.
Importance of Decentralisation
(i)Develops initiative among subordinates: Decentralisation helps to promote self-
reliance and confidence amongst the subordinates. This is because when lower
managerial levels are given freedom to take their own decisions they learn to depend on
their own judgment. It also keeps them in a state wherein they are constantly
challenged and have to develop solutions for the various problems they encounter
(ii) Develops managerial talent for the future: Formal training plays an important
part in equipping subordinates with skills that help them rise in the organisation but
equally important is the experience gained by handling assignments independently.
Decentralisation gives them a chance to prove their abilities and creates a reservoir of
qualified manpower who can be considered to fill up more challenging positions
through promotions
(iii) Quick decision making: The management hierarchy can be looked upon as a
chain of communication. In centralised organisation because every decision is taken
by the top management the flow of information is slow as it has to traverse many
levels. Response also takes time. This reduces the speed of decision making and
makes it difficult for an enterprise to adapt to dynamic operating conditions.
(iv) Relief to top management: Decentralisation diminishes the amount of direct
supervision exercised by a superior over the activities of a subordinate because they
are given the freedom to act and decide albeit within the limits set by the superior.
Also, personal supervision is generally replaced by other forms of control such as
return on investment etc. Decentralisation also leaves the top management with more
time which they can devote to important policy decisions rather than occupying their
time with both policy as well as operational decisions.
(v) Facilitates growth: Decentralisation awards greater autonomy to the lower levels of
management as well as divisional or departmental heads. This allows them to function
in a manner best suited to their department and fosters a sense of competition amongst
32
the departments. Consequently, with each department doing its best in a bid to outdo
the other, the productivity levels increase and the organisation is able to generate more
returns which can be used for expansion purposes.
(vi) Better control: Decentralisation makes it possible to evaluate performance at each
level and the departments can be individually held accountable for their results. The
extent of achievement of organisational objectives as well as the contribution of each
department in meeting the overall objectives can be ascertained. Feedback from all levels
helps to analyse variances and improve operations.

SECTION-E
1.Draw the Organization Chart showing Divisional and Functional
Structure.

QUESTIONS & ANSWERS (Total marks allotted=1+4+8=13+practical)

6.Staffing
SECTION-A
1.What is Staffing?
ANS:- Staffing is that part of the process of management which is concerned with
obtaining, utilising and maintaining a satisfactory and satisfied work force.
2.Name one internal source of recruitment.
ANS:- Transfers Is one internal source of recruitment.
3.Name any one external source of recruitment.
ANS:- Direct Recruitment Is one external source of recruitment
4.Mention the first step in selection process.
ANS:- Preliminary Screening is the first step in selection process.
5.State any one type of selection tests.
33
ANS:- Intelligence Tests is one type of selection tests.
6.What is meant by Interview in Selection Process?
ANS:- Interview is a formal, in-depth conversation conducted to evaluate the applicant’s
suitability for the job.
7.What is Training?
ANS:- . Training is a process of learning new skills and application of knowledge.
8.What is the meaning of ‘Development’ in Staffing Process?
ANS:- Development refers to the learning opportunities designed to help employees
grow.
9.Name on-the-job training method given to plumbers, electricians or iron
workers.
ANS:- Apprenticeship training given to plumbers, electricians or iron workers.
10.State the off-the-job training method given to employees before handling
sophisticated machinery and equipment.
ANS:- Vestibule Training method given to employees before handling
sophisticated machinery and equipment.
11.Which one of the following is not a function of staffing
(a)Recruitment (b) Training (c) Compensation (d) Directing
ANS:- (d) Directing
12.Which one of the following is an internal source of recruitment
(a)Transfer (b)Employment exchange (c)Advertisement (d)Campus
recruitment
ANS:- (a)Transfer
13. Promotion of employees results in
(a) Increase in pay (b) Increase in responsibility
(c) Increase in job satisfaction (d) All of the above
ANS:- (d) All of the above
14. Which of the following is On–the-Job method of training?
(a) Case study (b) Coaching (c) Vestibule Training (d) Computer modeling
ANS:- (b) Coaching
SECTION-B
1.Why is staffing both a line as well as staff activity?
ANS:- . Staffing is both a line as well as a staff activity i.e., an essential function of the
manager as well as an advisory role played by the Human Resource Department.
2.Write any two factors which influence the way of recruitment, selection
and training of employees in any organisation.
ANS:-(i) supply and demand of specific skills in the labour market
(ii) unemployment rate
3.What is Recruitment?
ANS:- Recruitment may be defined as the process of searching for prospective
employees and stimulating them to apply for jobs in the organisation.
4.Give the meaning of Selection.
ANS:- Selection is the process of choosing from among the pool of the prospective job
candidates developed at the stage of recruitment.

34
5.What is Placement?
ANS:- Placement refers to the employee occupying the position or post for which the
person has been selected.
6.What is Orientation?
ANS:- Orientation is introducing the selected employee to other employees and
familiarising him with the rules and policies of the organisation.
7.Give the meaning of ‘Transfer’ as an internal source of recruitment.
ANS:- Transfer involves shifting of an employee from one job to another, one
department to another or from one shift to another, without a substantive change in the
responsibilities and status of the employee.
8.State the two types of direct financial payments which an organisation
can adopt to pay its employees.
ANS:- (i)Time based payments (ii) performance based payments
9.State any two differences between Training and Development.
ANS:-

10.What is Job Rotation?

ANS:- Job Rotation involves shifting the trainee from one department to another or
from one job to another.
11.State any two merits of external sources of recruitment.
ANS:- (i) Qualified Personnel: By using external sources of recruitment, the
management can attract qualified and trained people to apply for vacant jobs in the
organisation.
(ii) Wider Choice: When vacancies are advertised widely, a large number of applicants
from outside the organisation apply. The management has a wider choice while selecting
the people for employment.
12.Write any two demerits of external sources of recruitment.
ANS:- 1. Dissatisfaction among existing staff: External recruitment may lead to
dissatisfaction and frustration among existing employees. They may feel that their
chances of promotion are reduced.
2. Lengthy process: Recruitment from external sources takes a long time. The business
has to notify the vacancies and wait for applications to initiate the selection process.
13.Mention any two merits of internal sources of recruitment.
ANS:- (i) Employees are motivated to improve their performance. A promotion at a
higher level may lead to a chain of promotion at lower levels in the organisation.
ii) Internal recruitment also simplifies the process of selection and placement.
14.Mention any two demerits of internal sources of recruitment.
ANS:- (i) The spirit of competition among the employees may be hampered; and
(ii) Frequent transfers of employees may often reduce the productivity of the
Organisation.
35
 SECTION-C
1.Explain any four types of tests used for selection of employees.
ANS:- Four Tests Used for Selection of Employees:
(a) Intelligence Tests: This is one of the important psychological tests used to measure
the level of intelligence quotient of an individual. It is an indicator of a person’s learning
ability or the ability to make decisions and judgments.
(b) Aptitude Test: It is a measure of individuals potential for learning new skills. It
indicates the person’s capacity to develop. Such tests are good indices of a person’s
future success score.
(c) Personality Tests: Personality tests provide clues to a person’s emotions, her
reactions, maturity and value system etc. These tests probe the overall personality.
Hence, these are difficult to design and implement.
(d) Trade Test: These tests measure the existing skills of the individual. They measure
the level of knowledge and proficiency in the area of professions or technical training.
2.Explain the internal sources of recruitment.
ANS:- Internal Sources:- There are two important sources of internal recruitment,
namely, transfers and promotions, which are discussed below:
(i) Transfers: It involves shifting of an employee from one job to another, one department
to another or from one shift to another, without a substantive change in the
responsibilities and status of the employee. It may lead to changes in duties and
responsibilities, working condition etc., but not necessarily salary. Transfer is a good
source of filling the vacancies with employees from overstaffed departments. It is
practically a horizontal movement of employees. Shortage of suitable personnel in one
branch may be filled through transfer from other branch or department. Job transfers
are also helpful in avoiding termination and in removing individual problems and
grievances. At the time of transfer, it should be ensured that the employee to be
transferred to another job is capable of performing it. Transfers can also be used for
training of employees for learning different jobs.

(ii) Promotions: Business enterprises generally follow the practice of filling higher jobs
by promoting employees from lower jobs. Promotion leads to shifting an employee to a
higher position, carrying higher responsibilities, facilities, status and pay. Promotion is a
vertical shifting of employees. This practice helps to improve the motivation, loyalty and
satisfaction level of employees. It has a great psychological impact over the employees
because a promotion at the higher level may lead to a chain of promotions at lower levels
in the organisation.
3.How does training and development of employees benefit the organizations?
ANS:- The benefits of training and development to an organisation are as follows:
(i) Training is a systematic learning, always better than hit and trial methods which lead
to wastage of efforts and money.
(ii) It enhances employee productivity both in terms of quantity and quality, leading to
higher profits.
(iii) Training equips the future manager who can take over in case of emergency.
(iv) Training increases employee morale and reduces absenteeism and employee
turnover.
(v) It helps in obtaining effective response to fast changing environment – technological
and economic.

36
 SECTION-D
1.Explain the stages in Staffing Process.
ANS:- (i) Estimating the Manpower Requirements: You are aware that while
designing the organisational structure, we undertake an analysis of the decisions and
the decision-making levels, activities as well as relationship among them with a view to
evolving the horizontal and vertical dimensions of the structure. Thus, various job
positions are created. Clearly, performance of each job necessitates the appointment of a
person with a specific set of educational qualifications, skills, prior experience and so on.

(ii) Recruitment: Recruitment may be defined as the process of searching for

prospective employees and stimulating them to apply for jobs in the organisation. The
information generated in the process of writing the job description and the candidate
profile may be used for developing the ‘situations vacant’ advertisement. The
advertisement may be displayed on the factory/ office gate or else it may be got
published in print media or flashed in electronic media. This step involves locating the
potential candidate or determining the sources of potential candidates.
(iii) Selection: Selection is the process of choosing from among the pool of the
prospective job candidates developed at the stage of recruitment. Even in case of highly
specialised jobs where the choice space is very narrow, the rigour of the selection
process serves two important purposes:
(i) it ensures that the organisation gets the best among the available, and (ii) it enhances
the self-esteem and prestige of those selected and conveys to them the seriousness with
which the things are done in the organisation.
(iv) Placement and Orientation: Joining a job marks the beginning of socialisation of
the employee at the workplace. The employee is given a brief presentation about the
company and is introduced to his superiors, subordinates and the colleagues. He is
taken around the workplace and given the charge of the job for which he has been
selected. This process of familiarisation is very crucial and may have a lasting impact on
his decision to stay and on his job performance. Orientation is, thus, introducing the
selected employee to other employees and familiarising him with the rules and policies of
the organisation. Placement refers to the employee occupying the position or post for
which the person has been selected.
(v) Training and Development: What people seek is not simply a job but a career. Every
one must have the opportunity to rise to the top. The best way to provide such an
opportunity is to facilitate employee learning. Organisations have either in-house
training centers or have forged alliances with training and educational institutes to
ensure continuing learning of their employees. The organisations too benefit in turn. If
employee motivation is high, their competencies are strengthened, they perform better
and thus, contribute more to organisational effectiveness and efficiency.
(vi) Performance Appraisal After the employees have undergone a period of training and
they have been on the job for some time, there is a need to evaluate their performance.
All organisations have some formal or informal means of appraising their employee’s
performance. Performance appraisal means evaluating an employee’s current and/or
past performance as against certain predetermined standards.
(vii) Promotion and career planning It becomes necessary for all organisations to
address career related issues and promotional avenues for their employees. Managers
need to design activities to serve employees’ long-term interests also. They must
encourage employees to grow and realise their full potential. Promotions are an integral
part of people’s career. They refer to being placed in positions of increased responsibility.
They usually mean more pay, responsibility and job satisfaction.

37
(viii) Compensation All organisations need to establish wage and salary plans for their
employees. There are various ways to prepare different pay plans depending on the
worth of the job. Basically the price of the job needs to be determined. Compensation,
therefore, refers to all forms of pay or rewards going to employees. It may be in the form
of direct financial payments like wages, salaries, incentives, commissions and bonuses
and indirect payments like employer paid insurance and vacations.

2.Describe the steps involved in Selection Process.

ANS:- Process of Selection:- The important steps in the process of selection are as
follows:
(i) Preliminary Screening: Preliminary screening helps the manager eliminate
unqualified or unfit job seekers based on the information supplied in the application
forms. Preliminary interviews help reject misfits for reasons, which did not appear in the application
forms.
(ii) Selection Tests: An employment test is a mechanism (either a paper and pencil test
or an exercise) that attempts to measure certain characteristics of individuals. These
characteristics range from aptitudes, such as manual dexterity, to intelligence to
personality.
Important Tests Used for Selection of Employees:
(a) Intelligence Tests: This is one of the important psychological tests used to measure
the level of intelligence quotient of an individual. It is an indicator of a person’s learning
ability or the ability to make decisions and judgments.
(b) Aptitude Test: It is a measure of individuals potential for learning new skills. It
indicates the person’s capacity to develop. Such tests are good indices of a person’s
future success score.
(c) Personality Tests: Personality tests provide clues to a person’s emotions, her
reactions, maturity and value system etc. These tests probe the overall personality.
Hence, these are difficult to design and implement.
(d) Trade Test: These tests measure the existing skills of the individual. They measure
the level of knowledge and proficiency in the area of professions or technical training.
Interest tests are used to know the pattern of interests or involvement of a person.
(iii) Employment Interview: Interview is a formal, in-depth conversation conducted to
evaluate the applicant’s suitability for the job. The role of the interviewer is to seek
information and that of the interviewee is to provide the same. Though, in present times,
the interviewee also seeks information from interviewer.
(iv) Reference and Background Checks: Many employers request names, addresses,
and telephone numbers of references for the purpose of verifying information and,
gaining additional information on an applicant. Previous employers, known persons,
teachers and university professors can act as references.
(v) Selection Decision: The final decision has to be made from among the candidates
who pass the tests, interviews and reference checks. The views of the concerned
manager will be generally considered in the final selection because it is he/she who is
responsible for the performance of the new employee.
(vi) Medical Examination: After the selection decision and before the job offer is made,
the candidate is required to undergo a medical fitness test. The job offer is given to the
candidate being declared fit after the medical examination.
(vii) Job Offer: The next step in the selection process is job offer to those applicants who
have passed all the previous hurdles. Job offer is made through a letter of
appointment/confirm his acceptance. Such a letter generally contains a date by which
the appointee must report on duty. The appointee must be given reasonable time for
reporting.
38
(viii)Contract of Employment: After the job offer has been made and candidate accepts
the offer, certain documents need to be executed by the employer and the candidate.
One such document is the attestation form. This form contains certain vital details
about the candidate, which are authenticated and attested by him or her. Attestation
form will be a valid record for future reference.
3.Explain the four methods of On-the-Job and any four methods of Off-the-Job training.
ANS:- Four methods of On the Job Methods are as follows:-
(i) Apprenticeship Programmes: Apprenticeship programmes put the trainee under the
guidance of a master worker. These are designed to acquire a higher level of skill. People
seeking to enter skilled jobs, to become, for example, plumbers, electricians or iron-
workers, are often required to undergo apprenticeship training. These apprentices are
trainees who spend a prescribed amount of time working with an experienced guide, or
trainer. A uniform period of training is offered to trainees, in which both fast and slow
learn here, are placed together. Slow learners may require additional training.
(ii) Coaching: In this method, the superior guides and instructs the trainee as a coach.
The coach or counselor sets mutually agreed upon goals, suggests how to achieve these
goals, periodically reviews the trainees progress and suggests changes required in
behavior and performance. The trainee works directly with a senior manager and the
manager takes full responsibility for the trainee’s coaching. Classically the trainee is
being groomed to replace the senior manager and relieve him from some of his duties.
This gives a chance for the trainee to learn the job also.
(iii) Internship Training: It is a joint programme of training in which educational
institutions and business firms cooperate. Selected candidates carry on regular studies
for the prescribed period. They also work in some factory or office to acquire practical
knowledge and skills.
(iv) Job Rotation: This kind of training involves shifting the trainee from one
department to another or from one job to another. This enables the trainee to gain a
broader understanding of all parts of the business and how the organisation as a whole
functions.
Four methods of Off the Job Methods are as follows:-
(i) Class Room Lectures/Conferences: The lecture or conference approach is well
adapted to conveying specific informationrules, procedures or methods. The use of
audio-visuals or demonstrations can often make a formal classroom presentation more
interesting while increasing retention and offering a vehicle for clarifying more difficult
points.
(ii) Films: They can provide information and explicitly demonstrate skills that are not
easily represented by the other techniques. Used in conjunction with conference
discussions, it is a very effective method in certain cases.
(iii) Case Study: Taken from actual experiences of organisations, cases represent
attempts to describe, as accurately as possible real problems that managers have faced.
Trainees study the cases to determine problems, analyse causes, develop alternative
solutions, select what they believe to be the best solution, and implement it.
(iv) Computer Modelling: It simulates the work environment by programming a
computer to imitate some of the realities of the job and allows learning to take place
without the risk or high costs that would be incurred if mistake were made in real life
situation.
4.Explain the benefits of training and development to the organization and
to the employees
ANS:- Benefits to the organisation:- The benefits of training and development to an
organisation are as follows:

39
(i) Training is a systematic learning, always better than hit and trial methods which lead
to wastage of efforts and money.
(ii) It enhances employee productivity both in terms of quantity and quality, leading to
higher profits.
(iii) Training equips the future manager who can take over in case of emergency.
(iv) Training increases employee morale and reduces absenteeism and employee
turnover.
(v) It helps in obtaining effective response to fast changing environment – technological
and economic.
Benefits to the Employee:-The benefits of training and development activity to the
employees are as follows:
(i) Improved skills and knowledge due to training lead to better career of the individual.
(ii) Increased performance by the individual help him to earn more. individual help him
to earn more.
(iii) Training makes the employee more efficient to handle machines. Thus, less prone to
accidents.
(iv) Training increases the satisfaction and morale of employees.
SECTION-E
1.Assuming that you are the HR manager of an organization, state any 10
sources you would look into while recruiting employees.
Ans: The following are the 10 sources through which employees can be recruited:
1. Promotions & transfers. 2.Direct interview
3. Causal callers 4.Advertisement
5. Employment exchanges 6.Placement agencies
7. Campus recruitment. 8.Labour contractors
9. Telecasting ( Television) 10. Web Publishing.

QUSTION BANK- Chapter 7(Total marks allotted=1+2+8=11+practical)

7.Directing
SECTION-A
1.What is Directing?
ANS:- Directing means giving instructions and guiding people in doing work.
2.State any one element of Directing.
Ans:- Supervision
3.What is a ‘Motive’?
Ans:- A motive is an inner state that energises, activates or moves and directs
behaviour towards goals.
4.State any one assumption of Maslow’s Hierarchical Theory of Needs.
Ans:- People’s needs are in hierarchical order, starting from basic needs to other higher
level needs.
5.State any one Leadership style.
Ans:- Autocratic or Authoritarian leader.

40
6.State any one pattern of formal communication.
Ans:- Vertical communication
7.Name any one type of Grapevine network.
Ans:-Gossip network.
8.Which one of the following is not an element of direction?
(a) Motivation (b) Communication
(c) Delegation (d) Supervision
Ans:- (c) Delegation
9.The motivation theory which classifies needs in hierarchical order is
developed by
(a)Fred Luthans (b) Scott (c) Abraham Maslow (d) Peter F. Drucker
Ans:- (c) Abraham Maslow
10.Which of the following is not an element of communication?
(a)Decoding (b) Communication (c) Channel (d) Receiver
Ans:- (b) Communication
11. The highest level need in the Need Hierarchy of Abraham Maslow is
(a) Safety Need (b) Belongingness Need
(c) Self Actualization Need (d) Prestige Need
Ans:- (c) Self Actualization Need
12. Grapevine is
(a) Formal Communication (b) Barrier to Communication
(c) Lateral Communication (d) Informal Communication
Ans:- (d) Informal Communication
13. Status comes under the following type of barriers
(a) Semantic barrier (b) Organisational Barrier
(c) Non semantic barrier (d) Psychological barrier
Ans:- (b) Organisational Barrier
14. The software company promoted by Narayana Murthy is
(a) Wipro (b) Infosys (c) Satyam (d) HCL
Ans:- (b) Infosys
15. The process of converting the message into communication
symbols is known as
(a) Media (b) Encoding (c) Feedback (d) Decoding
Ans:- (b) Encoding
16. The communication network in which all subordinates under a
supervisor communicate through supervisor only is
(a) Single Chain (b) Inverted V (c) Wheel (d) Free flow
Ans:- (c) Wheel

SECTION-B
1.What do you understand by Supervision?
Ans:- The process of guiding the efforts of employees and other resources to accomplish
the desired objectives are called ‘Supervision’.
2.Define Motivation.
41
Ans:-According to William G. Scout “Motivation means a process of stimulating
people to action to accomplish desired goals”
3.State any two features of Motivation.
Ans:- (i) Motivation is an internal feeling. The urge, drives, desires, aspirations, striving
or needs of human being, which are internal, influence human behaviour.
(ii) Motivation produces goal directed behaviour.
4.Define Leadership.
Ans:- According to Glueck ‘Leadership is a set of interpersonal behaviours designed
to influence employees to cooperate in the achievement of objectives. ‘
5.Write any two features of Leadership.
Ans:- (i)Leadership indicates ability of an individual to influence others.
(ii) Leadership tries to bring change in the behaviour of others.
6.What is communication?
Ans:- Communication is a process by which people create and share information with
one another in order to reach common understanding.
7.State any two elements of communication process.
Ans:- (i) Sender: Sender means person who conveys his thoughts or ideas to the
receiver. The sender represents source of communication.
(ii) Message: It is the content of ideas, feelings, suggestions, order etc., intended to be
communicated.
8.State any two psychological barriers to communication.
Ans:- (i) Premature evaluation: Some times people evaluate the meaning of message
before the sender completes his message. Such premature evaluation may be due to pre-
conceived notions or prejudices against the communication.
(ii) Lack of attention: The preoccupied mind of receiver and the resultant non-listening
of message acts as a major psychological barrier.
9.State any two personal barriers to communication.
Ans:- (i) Fear of challenge to authority: If a superior perceives that a particular
communication may adversely affect his authority, he or she may withhold or suppress
such communication.
(ii) Lack of confidence of superior on his subordinates: If superiors do not have
confidence on the competency of their subordinates, they may not seek their advice or
opinions.
SECTION-C
1.Explain the characteristics of Directing as a managerial process.
Ans:- (i) Directing initiates action: Directing is a key managerial function. A manager
has to perform this function along with planning, organising, staffing and controlling
while discharging his duties in the organisation. While other functions prepare a setting
for action, directing initiates action in the organisation.
(ii) Directing takes place at every level of management: Every manager, from top
executive to supervisor performs the function of directing. The directing takes place
wherever superior – subordinate relations exist.
(iii) Directing is a continuous process: Directing is a continuous activity. It takes
place throughout the life of the organisation irrespective of people occupying managerial
positions. We can observe that in organisations like Infosys, Tata, BHEL, HLL and the
managers may change but the directing process continues because without direction
the organisational activities can not continue further.

42
(iv) Directing flows from top to bottom: Directing is first initiated at top level and
flows to the bottom through organisational hierarchy. It means that every manager can
direct his immediate subordinate and take instructions from his immediate boss.

2.Explain any four points which emphasise the importance of Directing.

Ans:- (i) Directing helps to initiate action by people in the organisation towards
attainment of desired objectives.
(ii) Directing integrates employees efforts in the organisation in such a way that every
individual effort contributes to the organisational performance. Thus, it ensures that the
individuals work for organisational goals.
(iii) Directing facilitates introduction of needed changes in the organisation. Generally,
people have a tendency to resist changes in the organisation. Effective directing through
motivation, communication and leadership helps to reduce such resistance and develop
required cooperation in introducing changes in the organisation.
(iv) Effective directing helps to bring stability and balance in the organisation since it
fosters cooperation and commitment among the people and helps to achieve balance
among various groups, activities and the departments.
3.Briefly explain any four benefits of Motivation.
Ans:- (i) Motivation helps to improve performance levels of employees as well as the
organisation. Since proper motivation satisfies the needs of employees, they in turn
devote all their energies for optimum performance in their work. A satisfied employee
can always turnout expected performance.
(ii) Motivation helps to change negative or indifferent attitudes of employee to positive
attitudes so as to achieve organisational goals
(iii) Motivation helps to reduce employee turnover and thereby saves the cost of new
recruitment and training. It also helps to retain talented people in the organisation.
(iv) Motivation helps to reduce absenteeism in the organisation. Some important reasons
for absenteeism are–bad working conditions, inadequate rewards, lack of recognition,
poor relations with supervisors and colleagues etc. Through sound motivational system,
all these deficiencies can be covered.

4.Explain briefly any four semantic barriers to communication.

Ans:- (i) Badly expressed message: Some times intended meaning may not be
conveyed by a manager to his subordinates. These badly expressed messages may be an
account of inadequate vocabulary, usage of wrong words, omission of needed words etc.
(ii) Symbols with different meanings: A word may have several meanings. Receiver
has to perceive one such meaning for the word used by communicator. Wrong
perception leads to communication problems.
(iii) Faulty translations: Sometimes the communications originally drafted in one
language (e.g., English) need to be translated to the language understandable to workers
(e.g., Hindi). If the translator is not proficient with both the languages, mistakes may
creep in causing different meanings to the communication.
(iv) Unclarified assumptions: Some communications may have certain assumptions
which are subject to different interpretations. For example, a boss may instruct his
subordinate, “Take care of our guest”. Boss may mean that subordinate should take care
of transport, food, accommodation of the guest until he leaves the place. The
subordinate may interpret that guest should be taken to hotel with care. Actually, the
guest suffers due to these unclarified assumptions.
5.Briefly explain any four organisational barriers to communication.

43
Ans:- (i) Organisational policy: If the organisational policy, explicit or implicit, is not
supportive to free flow of communication, it may hamper effectiveness of
communications.
(ii) Rules and regulations: Rigid rules and cumbersome procedures may be a hurdle to
communication. Similarly, communications through prescribed channel may result in
delays.
(iii) Status: Status of superior may create psychological distance between him and his
subordinates. A status conscious manager also may not allow his subordinates to
express their feelings freely.
(iv) Complexity in organisation structure: In an organisation where there are number
of managerial levels, communication gets delayed and distorted as number of filtering
points are more.

SECTION-D
1.What is Supervision? Explain the role played by a supervisor. (1+7)
Ans:- The process of guiding the efforts of employees and other resources to accomplish
the desired objectives are called ‘Supervision’.
The role played by a supervisor as follows:-
(i) Supervisor maintains day-to-day contact and maintains friendly relations with
workers. A good supervisor acts as a guide, friend and philosopher to the workers.
(ii) Supervisor acts as a link between workers and management. He conveys
management ideas to the workers on one hand and workers problems to the
management on the other. This role played by supervisor helps to avoid
misunderstandings and conflicts between management and workers/employees.
(iii) Supervisor plays a key role in maintaining group unity among workers placed under
his control. He sorts out internal differences and maintains harmony among workers.
(iv) Supervisor ensures performance of work according to the targets set. He takes
responsibility for task achievement and motivates his workers effectively.
(v) Supervisor provides good on the- job training to the workers and employees. A skilled
and knowledgeable supervisor can build efficient team of workers.
(vi) Supervisory leadership plays a key role in influencing the workers in the
organisation. A supervisor with good leadership qualities can build up high morale
among workers.
(vii) A good supervisor analyses the work performed and gives feedback to the workers.
He suggests ways and means of developing work skills.

2.Explain any four financial incentives and four non financial incentives.
Ans:- Four financial incentives are as follows:-
(i) Pay and allowances: For every employee, salary is the basic monetary incentive. It
includes basic pay, dearness allowance and other allowances. Salary system consists of
regular increments in the pay every year and enhancement of allowances from time-to-
time. In some business organisations, pay hike and increments may be linked to
performance.
(ii) Productivity linked wage incentives: Several wage incentive plans aims at linking
payment of wages to increase in productivity at individual or group level.
(iii) Bonus: Bonus is an incentive offered over and above the wages/ salary to the
employees.

44
(iv) Profit Sharing: Profit sharing is meant to provide a share to employees in the
profits of the organisation. This serves to motivate the employees to improve their
performance and contribute to increase in profits.
Four non financial incentives are as follows:-
(i) Status: In the organisational context, status means ranking of positions in the
organisation. The authority, responsibility, rewards, recognition, perquisites and prestige
of job indicate the status given to a person holding a managerial position. Psychological,
social and esteem needs of an individual are satisfied by status given to their job.
(ii) Organisational Climate: Organisational climate indicates the characteristics which
describe an organisation and distinguish one organisation from the other. These
characteristics influence the behaviour of individuals in the organisation.
(iii) Career Advancement Opportunity: Every individual wants to grow to the higher
level in the organisation. Managers should provide opportunity to employees to improve
their skills and be promoted to the higher level jobs. Appropriate skill development
programmes, and sound promotion policy will help employees to achieve promotions.
Promotion works as a tonic and encourages employees to exhibit improved performance.
(iv) Job Enrichment: Job enrichment is concerned with designing jobs that include
greater variety of work content, require higher level of knowledge and skill; give workers
more autonomy and responsibility; and provide the opportunity for personal growth and
a meaningful work experience. If jobs are enriched and made interesting, the job itself
becomes a source of motivation to the individual.

3.Explain the qualities of a good leader.

Ans:- Some of the qualities of a good leader are explained below:
(i) Physical features: Physical features like height, weight, health, appearance
determine the physical personality of an
individual. It is believed that good physical features attract people. Health and
endurance help a leader to work hard which inspires others to work with same tempo.
(ii) Knowledge: A good leader should have required knowledge and competence. Only
such person can instruct subordinates correctly and influence them.
(iii) Integrity: A leader should posses high level of integrity and honesty. He should be a
role model to others regarding the ethics and values.
(iv) Initiative: A leader should have courage and initiative. He should not wait for
opportunities come to his way, rather he should grab the opportunity and use it to the
advantage of organisation.
(v) Communication skills: A leader should be a good communicator. He should have
the capacity to clearly explain his ideas and make the people to understand his ideas. He
should be not only good speaker but a good listener, teacher, counsellor and persuader.
(vi) Motivation skills: A leader should be an effective motivator. He should understand
the needs of people and motivate them through satisfying their needs.
(vii) Self Confidence: A leader should have high level of self confidence. He should not
loose his confidence even in most difficult times. In fact, if the leader lacks self-
confidence, he can not provide confidence to his followers.
(viii)Decisiveness: Leader should be decisive in managing the work. Once he is
convinced about a fact, he should be firm and should not change opinions frequently.
(ix) Social skills: A leader should be sociable and friendly with his colleagues and
followers. He should understand people and maintain good human relations with them.
4.Suggest the suitable measures to improve communication effectiveness.
Ans:-The following measures to improve communication effectiveness.

45
(i) Clarify the ideas before communication: The problem to be communicated to
subordinates should be clear in all its perspective to the executive himself. The entire
problem should be studied in depth, analysed and stated in such a manner that is
clearly conveyed to subordinates.
(ii) Communicate according to the needs of receiver: The level of understanding of
receiver should be crystal clear to the communicator. Manager should adjust his
communication according to the education and understanding levels of subordinates.
(iii) Consult others before communicating: Before actually communicating the
message, it is better to involve others in developing a plan for communication.
Participation and involvement of subordinates may help to gain ready acceptance and
willing cooperation of subordinates.
(iv) Be aware of languages, tone and content of message: The contents of the
message, tone, language used, manner in which the message is to be communicated are
the important aspects of effective communication. The language used should be
understandable to the receiver and should not offend the sentiments of listeners.
(v) Convey things of help and value to listeners: While conveying message to others,
it is better to know the interests and needs of the people with whom you are
communicating.
(vi) Ensure proper feedback: The communicator may ensure the success of
communication by asking questions regarding the message conveyed. The receiver of
communication may also be encouraged to respond to communication.
(vii) Communicate for present as well as future: Generally, communication is needed
to meet the existing commitments to maintain consistency, the communication should
aim at future goals of the enterprise also.
(viii) Follow up communications: There should be regular follow up and review on the
instructions given to subordinates. Such follow up measures help in removing hurdles if
any in implementing the instructions.
(ix) Be a good listener: Manager should be a good listener. Patient and attentive
listening solves half of the problems. Managers should also give indications of their
interest in listening to their subordinates.
SECTION-E
1. Draw the neat diagram of Maslow’s Need Hierarchy.(Triangular diagram)

46
 Chapter 8 Controlling
(Total marks allotted=1+2+4=7+practical)

SECTION-A
1.What is meant by Controlling?
ANS:- controlling means ensuring that activities in an organisation are performed as
per the plans.
2.What is ‘Standard’ in controlling process?
ANS:- Standards are the criteria against which actual performance would be measured.
3.Expand PERT/CPM/MIS.
ANS:-PERT:- Programme Evaluation and Review Technique
CPM:- Critical Path Method
MIS:- Management Information System (EACH ONE MARKS)
4.What is Ratio Analysis?
ANS:- Ratio Analysis refers to analysis of financial statements through computation of ratios.
5.Controlling function of an organisation is
(a) Forward looking (b) Backward looking
(c) Forward as well as backward looking(d) None of the above
ANS:- (c) Forward as well as backward looking
6.Management audit is a technique to keep a check on the performance of
(a) Company (b) Management of the company
(c) Shareholders (d) Customers
ANS:- (b) Management of the company
7.Budgetary control requires the preparation of
(a) Training schedule (b) Budgets
(c) Network diagram (d) Responsibility centres
ANS:- (b) Budgets
8.Which of the following is not applicable to responsibility accounting?
(a) Investment Centre (b) Accounting centre
(c) Profit centre (d) Cost centre
ANS:- (b) Accounting centre

47
 SECTION-B
1.Define Managerial Control.
ANS:- According to Koontz and O’ Donnel “Managerial Control implies the
measurement of accomplishment against the standard and
the correction of deviations to assure attainment of objectives according to plans.”

2.State any two traditional techniques of managerial control.

ANS:- (i)Personal Observation This is the most traditional method of control. Personal
observation enables the manager to collect first hand information.
(ii) Breakeven Analysis Breakeven analysis is a technique used by managers to study the
relationship between costs, volume and profits.
3.State any two modern techniques of managerial control.
Ans:-(i) Return on Investment :-Return on Investment can be used to measure overall
performance of an organisation or of its individual departments or divisions.
(ii) Ratio Analysis Ratio Analysis refers to analysis of financial statements through
computation of ratios.
4.Give the meaning of Break-even Analysis.
Ans:- The sales volume at which there is no profit, no loss is known as breakeven point.
5.What do you understand by Budgetary Control?
Ans:- Budgetary control is a technique of managerial control in which all operations are
planned in advance in the form of budgets and actual results are compared with budgetary
standards.
6.What is Responsibility Accounting?
Ans:- Responsibility accounting is a system of accounting in which different sections, divisions
and departments of an organisation are set up as ‘Responsibility Centres’. The head of the centre
is responsible for achieving the target set for his centre.
SECTION-C
1.‘A good control system helps an organisation in many ways’-Justify
this statement with any four points.
Ans:- (i) Accomplishing organisational goals: The controlling function measures progress
towards the organisational goals and brings to light the deviations, if any, and indicates
corrective action. It, thus, guides the organisation and keeps it on the right track so that
organisational goals might be achieved.

(ii) Judging accuracy of standards: A good control system enables management to verify
whether the standards set are accurate and objective. An efficient control system keeps a careful
check on the changes taking place in the organisation and in the environment and helps to
review and revise the standards in light of such changes.

(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce
wastage and spoilage of resources. Each activity is performed in accordance with predetermined
standards and norms. This ensures that resources are used in the most effective and efficient
manner.

48
 (iv) Improving employee motivation: A good control system ensures that employees know well
in advance what they are expected to do and what are the standards of performance on the basis
of which they will be appraised. It, thus, motivates them and helps them to give better
performance.

2.Explain the limitations of Controlling.

Ans:- (i) Difficulty in setting quantitative standards: Control system loses some of its
effectiveness when standards cannot be defined in quantitative terms. This makes measurement
of performance and their comparison with standards a difficult task. Employee morale, job
satisfaction and human behaviour are such areas where this problem might arise.

(ii) Little control on external factors: Generally an enterprise cannot control external factors
such as government policies, technological changes, competition etc.

(iii) Resistance from employees: Control is often resisted by employees. They see it as a
restriction on their freedom. For instance, employees might object when they are kept under a
strict watch with the help of Closed Circuit Televisions

(iv) Costly affair: Control is a costly affair as it involves a lot of expenditure, time and effort. A
small enterprise cannot afford to install an expensive control system.

3.Explain briefly the relationship between planning and controlling.

Ans:- Relationship between Planning and Controlling Planning and controlling are
inseparable twins of management. A system of control presupposes the existence of certain
standards. These standards of performance which serve as the basis of controlling are provided
by planning. Once a plan becomes operational, controlling is necessary to monitor the progress,
measure it, discover deviations and initiate corrective measures to ensure that events conform to
plans. Thus, planning without controlling is meaningless. Similarly, controlling is blind without
planning. If the standards are not set in advance, managers have nothing to control. When there
is no plan, there is no basis of controlling. Planning is clearly a prerequisite for controlling. It is
utterly foolish to think that controlling could be accomplished without planning. Without
planning there is no predetermined understanding of the desired performance. Planning seeks
consistent, integrated and articulated programmes while controlling seeks to compel events to
conform to plans. Planning is basically an intellectual process involving thinking, articulation
and analysis to discover and prescribe an appropriate course of action for achieving objectives.
Controlling, on the other hand, checks whether decisions have been translated into desired
action. Planning is thus, prescriptive whereas, controlling is evaluative. Thus, planning and
controlling are both backward-looking as well as a forward-looking function.

4.Explain briefly the steps involved in Controlling Process.

Ans:- Controlling Process Controlling is a systematic process involving the following steps.
Step 1: Setting Performance Standards: The first step in the controlling process is setting up
of performance standards. Standards are the criteria against which actual performance would be
measured. Thus, standards serve as benchmarks towards which an organisation strives to work.
Standards can be set in both quantitative as well as qualitative terms.
Step 2: Measurement of Actual Performance: Once performance standards are set, the next
step is measurement of actual performance. Performance should be measured in an objective
and reliable manner. There are several techniques for measurement of performance. These

49
include personal observation, sample checking, performance reports, etc.
Step 3: Comparing Actual Performance with Standards: This step involves comparison of
actual performance with the standard. Such comparison will reveal the deviation between actual
and desired results. Comparison becomes easier when standards are set in quantitative terms.
Step 4: Analysing Deviations: Some deviation in performance can be expected in all activities.
It is, therefore, important to determine the acceptable range of deviations.
Step 5: Taking Corrective Action: The final step in the controlling process is taking corrective
action. No corrective action is required when the deviations are within acceptable limits.
SECTION-E
1.As a manger of an organization, what are the modern techniques of
controlling you would like to adopt? (Any 5 out of 6 techniques)

Ans:- (i) Return on investment

(ii) Ratio analysis

(iii) Responsibility accounting

(iv) Management audit

(v) PERT and CPM

(vi ) Management information system (ANY FIVE)

CHAPTER 9---Financial Management

(TOTAL MARKS ALLOTTED=1+2+4=7+PRACTICAL)

SECTION-A
1.What is Business Finance?
ANS:- Money required for carrying out business activities is called business finance.
2.State the primary objective/aim of financial management.
ANS:- The primary aim of financial management is to maximise shareholders’ wealth.
3.What do you understand by ‘Capital Structure’?
ANS:- Capital structure refers to the mix between owners and borrowed funds.
4.Write the meaning of ‘Financial Risk’.
ANS:- Financial risk refers to a position when a company is unable to meet its fixed
financial charges namely interest payment, preference dividend and repayment
obligations.
5.Give an example for fixed asset.
ANS:- Plant and machinery, furniture and fixture, land and building, vehicles, etc.(ANY
ONE)
6.Give an example for current asset.
ANS:- Inventories, debtors, bills receivables, etc. .(ANY ONE)
7.How do you calculate Net Working Capital?
ANS:- NWC = CA – CL (i.e. Current Assets - Current Liabilities.)

50
8.The cheapest source of finance is
(a) Debenture (b) Equity share capital (c) Preference share (d) Retained earnings
ANS:- (d) Retained earnings
9.The decision of acquiring a new machine or opening a new branch is an example
For
(a)Financing decision (b) Working capital decision
(c) Investment decision (d) None of the above
ANS:- (c) Investment decision
10.The decision of how much to be raised from which source is an example for
(a) Financing decision (b) Working capital decision
(c) Investment decision (d) None of the above
ANS:- (a) Financing decision
11. Companies with higher growth pattern are likely
(a) to pay lower dividends (b) to pay higher dividends
(c) that dividends are not affected by growth issues (d) none of the above
ANS:- (a) to pay lower dividends
12. Current assets are those assets which get converted into cash
(a) within six months (b) within one year
(c) between 1 and 3 years (d) between 3 and 5 years
ANS:- (b) within one year
13. A fixed asset should be financed through
(a) a long term liability (b) a short term liability
(c) a mix of ling and short term liabilities (d) None of the above
ANS:- (a) a long term liability

SECTION-B
1.What do understand by Financial Management?
ANS:- Financial Management is concerned with optimal procurement as well as the
usage of finance.
2.Give the meaning Investment Decision with an example.
ANS;- The investment decision relates to how the firm’s funds are invested in different
assets. For example, making investment in a new machine to replace an existing one or
acquiring a new fixed asset.
3.What is Financing Decision? Give an example.
ANS:- The quantum of finance to be raised from various long-term sources are called
Financing Decision. Raising funds through issue of shares are example for Financing
decision.
4.Give the meaning of Dividend Decision.
ANS:- It is the decision relating to how much of the profit earned by company
(after paying tax) is to be distributed to the shareholders and how much of it
should be retained in the business.
5.State the twin objectives of Financial Planning.
ANS:- (i)To ensure availability of funds whenever required:
(ii) To see that the firm does not raise resources unnecessarily:

51
6.What is Financial Leverage? Write the formula to calculate Financial Leverage.
ANS:- The proportion of debt in the overall capital is called financial leverage.

Formula to calculate Financial Leverage =

7.Give the meaning of ‘Trading on Equity’.
ANS:- Companies often employ more of cheaper debt to enhance the EPS. Such
practice is called Trading on Equity.
8.Write the formula to calculate Debt Service Coverage Ratio.

ANS:-

SECTION-C
1.Explain any four factors affecting financing decisions.
ANS:- Four factors affecting financing decisions are

(a) Cost: The cost of raising funds through different sources are different. A prudent
financial manager would normally opt for a source which is the cheapest.
(b) Risk: The risk associated with each of the sources is different.
(c) Floatation Costs: Higher the floatation cost, less attractive the source.
(d) Cash Flow Position of the Company: A stronger cash flow position may make debt
financing more viable than funding through equity.
(e) Fixed Operating Costs: If a business has high fixed operating costs (e.g., building
rent, Insurance premium, Salaries, etc.), It must reduce fixed financing costs. Hence,
lower debt financing is better. Similarly, if fixed operating cost is less, more of debt
financing may be preferred.

2.Explain any four factors affecting dividend decisions.

ANS:- Four factors affecting dividend decisions are
(a) Amount of Earnings: Dividends are paid out of current and past earning. Therefore,
earnings is a major determinant of the decision about dividend.
(b) Stability Earnings: Other things remaining the same, a company having stable
earning is in a better position to declare higher dividends. As against this, a company
having unstable earnings is likely to pay smaller dividend.
(c) Stability of Dividends: Companies generally follow a policy of stabilising dividend
per share. The increase in dividends is generally made when there is confidence that
their earning potential has gone up and not just the earnings of the current year. In
other words, dividend per share is not altered if the change in earnings is small or seen
to be temporary in nature.
(d) Growth Opportunities: Companies having good growth opportunities retain more
money out of their earnings so as to finance the required investment. The dividend
in growth companies is, therefore, smaller, than that in the non– growth companies.
3.What is Capital Budgeting decision? Explain briefly the factors affecting capital
budgeting decisions.

52
ANS:- . A long-term investment decision is called a Capital Budgeting decision. It
involves committing the finance on a long-term basis.
Factors affecting Capital Budgeting Decision:- There are certain factors which affect
capital budgeting decisions.

(a) Cash flows of the project: When a company takes an investment decision involving
huge amount it expects to generate some cash flows over a period. These cash
flows are in the form of a series of cash receipts and payments over the life of an
investment. The amount of these cash flows should be carefully analysed before
considering a capital budgeting decision.
(b) The rate of return: The most important criterion is the rate of return of the project.
These calculations are based on the expected returns from each proposal and the
assessment of the risk involved. Suppose, there are two projects, A and B (with the
same risk involved), with a rate of return of 10 per cent and 12 per cent, respectively,
then under normal circumstance, project B should be selected.
(c) The investment criteria involved: The decision to invest in a particular project
involves a number of calculations regarding the amount of investment, interest rate,
cash flows and rate of return. There are different techniques to evaluate investment
proposals which are known as capital budgeting techniques. These techniques are
applied to each proposal before selecting a particular project.

4.Explain with any four points the importance of financial planning.

ANS;- The importance of financial planning can be explained as follows:
(i) It helps in forecasting what may happen in future under different business situations. By
doing so, it helps the firms to face the eventual situation in a better way. In other words,
it makes the firm better prepared to face the future.
(ii) It helps in avoiding business shocks and surprises and helps the company in
preparing for the future.
(iii) If helps in co-ordinating various business functions, e.g., sales and production
functions, by providing clear policies and procedures.
(iv) Detailed plans of action prepared under financial planning reduce waste, duplication
of efforts, and gaps in planning.
5.Explain any four factors affecting the fixed capital requirement of an
organisation.

ANS:- Factors affecting the Requirement of Fixed Capital

1. Nature of Business: The type of business has a bearing upon the fixed capital
requirements. For example, a trading concern needs lower investment in fixed assets
compared with a manufacturing organisation; since it does not require to purchase
plant and machinery, etc.
2. Scale of Operations: A larger organisation operating at a higher scale needs bigger
plant, more space etc. and therefore, requires higher investment in fixed assets when
compared with the small organisation.
3. Choice of Technique: Some organisations are capital intensive whereas others are
labour intensive. A capital-intensive organisation requires higher investment in plant
and machinery as it relies less on manual labour. The requirement of fixed capital
53
for such organisations would be higher. Labour intensive organisations on the other
hand require less investment in fixed assets. Hence, their fixed capital requirement is
lower.
4. Technology Upgradation: In certain industries, assets become obsolete sooner.
Consequently, their replacements become due faster. Higher investment in fixed assets
may, therefore, be required in such cases. For example, computers become obsolete
faster and are replaced much sooner than say, furniture. Thus, such organisations
which use assets which are prone to obsolescence require higher fixed capital to
purchase such assets.

6.Explain any four factors affecting the working capital requirement of an

organisation.
ANS:- FACTORS AFFECTING THE WORKING CAPITAL REQUIREMENTS
1. Nature of Business: The basic nature of a business influences the amount of working
capital required. A trading organisation usually needs a smaller amount of working
capital compared to a manufacturing organisation. This is because there is usually no
processing. Therefore, there is no distinction between raw materials and finished goods.
Sales can be effected immediately upon the receipt of materials, sometimes even before
that. In a manufacturing business, however, raw material needs to be converted into
finished goods before any sales become possible. Other factors remaining the same, a
trading business requires less working capital. Similarly, service industries which
usually do not have to maintain inventory require less working capital.
2. Scale of Operations:For organisations which operate on a higher scale of operation,
the quantum of inventory and debtors required is generally high. Such organisations,
therefore, require large amount of working capital as compared to the organisations
which operate on a lower scale.
3. Business Cycle: Different phases of business cycles affect the requirement of working
capital by a firm. In case of a boom, the sales as well as production are likely to be larger
and, therefore, larger amount of working capital is required. As against this, the
requirement for working capital will be lower during the period of depression as the sales
as well as production will be small.
4. Seasonal Factors: Most business have some seasonality in their operations. In peak
season, because of higher level of activity, larger amount of working capital is required.
As against this, the level of activity as well as the requirement for working capital
will be lower during the lean season.

54
 SECTION-E
1. As a Financial Consultant, give the list of any ten factors which
affect the choice of Capital Structure. (Any 10 out of 14 points.)

ANS:- 1. Cash Flow Position:

2. Interest Coverage Ratio (ICR):

3. Debt Service Coverage Ratio (DSCR):

4. Return on Investment (RoI):

5. Cost of debt:

7. Cost of Equity

8. Floatation Costs:

9. Risk Consideration:

10. Flexibility:

11. Control:

12. Regulatory Framework:

13. Stock Market Conditions:

14. Capital Structure of other Companies: (Any 10 out of 14 points.)

QUSTIONS AND ANSWERS Chapter 10 (Total marks allotted=1+4+8=13 no practical

question in this chapter)
10.Financial Markets
SECTION-A
1.Expand IPO/BSE/NSEI/SEBI/NASDAQ/OTCEI/CSDL
ANS:- IPO- Initial public Offer /BSE- BOMBAY STOCK EXCHANGE LTD /NSEI-
NATIONAL STOCK EXCHANGE OF INDIA /SEBI-. The Securities and Exchange Board of
India /NASDAQ-National Association of Securities Dealers Automated
Quotations/OTCEI- Over the Counter Exchange of India /CSDL- The Central
Depository Services Limited
2.What is Money Market?
ANS:- The money market is a market for short term funds which deals in monetary
assets whose period of maturity is upto one year.
3.What is Stock Exchange?
ANS:- A stock exchange is an institution which provides a platform for buying and
selling of existing securities.

55
4.What is the benchmark index of BSE?
ANS:- The SENSEX is the benchmark index of the BSE.
5.What is the benchmark index of NSE?
ANS:-NIFTY is the benchmark index of NSE.
6.Name the first and the largest depository presently operational in India.
ANS:- National Securities Depositories Limited (NSDL) is the first and largest depository
presently operational in
India.
7.What is meant by Depository?
ANS:- Depository is like a bank and keeps securities in electronic form on behalf of the
investor.
8.Give the meaning of Dematerialisation.
ANS:- The process of holding securities in an electronic form is called dematerialisation.
9.Primary and secondary markets
(a) Compete with each other (b) Complement each other
(c) Function independently (d) Control each other
ANS:- (b) Complement each other
10.The settlement cycle in NSE is
(a) T+5 (b) T+3 (c) T+2 (d)T+1
ANS:- (c) T+2
11.The National Stock Exchange of India was recognized as Stock Exchange in the
year
(a) 1999 (b) 1993 (c) 1994 (d) 1995
ANS:- (b) 1993
12. A Treasury Bill is basically
(a) An instrument to borrow short term funds (b) An instrument to borrow long term
funds (c) An instrument of capital market (d) None of the above
ANS:- (a) An instrument to borrow short term funds
SECTION-B(NO QUESTION IN THIS SECTION)
SECTION-C
1.Explain briefly the functions of a Financial Market.
ANS:- i. Mobilisation of Savings and Channeling them into the most Productive
Uses: A financial market facilitates the transfer of savings from savers to investors. It
gives savers the choice of different investments and thus helps to channelise surplus
funds into the most productive use.
ii. Facilitating Price Discovery: You all know that the forces of demand and supply
help to establish a price for a commodity or service in the market. In the financial
market, the households are suppliers of funds and business firms represent the
demand. The interaction between them helps to establish a price for the financial asset
which is being traded in that particular market.

iii. Providing Liquidity to Financial Assets: Financial markets facilitate easy purchase
and sale of financial assets. In doing so they provide liquidity to financial assets, so that
they can be easily converted into cash whenever required. Holders of assets can readily

56
sell their financial assets through the mechanism of the financial market.
iv.Reducing the Cost of Transactions: Financial markets provide valuable information
about securities being traded in the market. It helps to save time, effort and money that
both buyers and sellers of a financial asset would have to otherwise spend to try and
find each other. The financial market is thus, a common platform where buyers and
sellers can meet for fulfillment of their individual needs. Financial markets are classified
on the basis of the maturity of financial instruments traded in them. Instruments with a
maturity of less than one year are traded in the money market. Instruments with longer
maturity are traded in the capital market.
2.Explain any four methods of floating new issues in the primary market.
ANS:- i. Offer through Prospectus: Offer through prospectus is the most popular
method of raising funds by public companies in the primary market. This involves
inviting
subscription from the public through issue of prospectus. A prospectus makes a direct
appeal to investors to raise capital, through an advertisement in newspapers and
magazines. The issues may be underwritten and also are required to be listed on at least
one stock exchange. The contents of the prospectus have to be in accordance with the
provisions of the Companies Act and SEBI disclosure and investor protection guidelines.
ii. Offer for Sale: Under this method securities are not issued directly to the public but
are offered for sale through intermediaries like issuing houses or stock brokers. In this
case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell
them to the investing public.
iii. Private Placement: Private placement is the allotment of securities by a company to
institutional investors and some selected individuals. It helps to raise capital more
quickly than a public issue. Access to the primary market can be expensive on account
of various mandatory and no mandatory expenses. Some companies, therefore, cannot
afford a public issue and choose to use private placement.
iv. Rights Issue: This is a privilege given to existing shareholders to subscribe to a new
issue of shares according to the terms and conditions of the company. The shareholders
are offered the ‘right’ to buy new shares in proportion to the number of shares they
already possess.
3.Write any four advantages of ‘Electronic Trading System’ in Stock exchanges.
ANS:- i. It ensures transparency as it allows participants to see the prices of all
securities in the market while business is being transacted. They are able to see the full
market
during real time.
ii. It increases efficiency of information being passed on, thus helping in fixing prices
efficiently. The computer screens display information on prices and also capital market
developments that influence share prices.
iii. It increases the efficiency of operations, since there is reduction in time, cost and
risk of error.
iv. People from all over the country and even abroad who wish to participate in the stock
market can buy or sell securities through brokers or members without knowing each
other. That is, they can sit in the broker’s office, log on to the computer at the same time

57
and buy or sell securities. This system has enabled a large number of participants to
trade with each other, thereby improving the liquidity of the market.
4.Distinguish between primary market and secondary market (any four points).
ANS:-

5.State the objectives of Securities and Exchange Board of India.

ANS:- Objectives of SEBI
i. To regulate stock exchanges and the securities industry to promote their orderly
functioning.
ii. To protect the rights and interests of investors, particularly individual investors and
to guide and educate them.
iii. To prevent trading malpractices and achieve a balance between self regulation by the
securities industry and its statutory regulation.
iv. To regulate and develop a code of conduct and fair practices by intermediaries like
brokers, merchant bankers etc., with a view to making them competitive and
professional.

SECTION-D
1.Explain any four money market instruments.
ANS:- MONEY MARKET INSTRUMENTS
i. Treasury Bill: A Treasury bill is basically an instrument of short-term borrowing by
the Government of India maturing in less than one year. They are also known as Zero
Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government
to meet its short-term requirement of funds. Treasury bills are issued in the form of a
promissory note. They are highly liquid and have assured yield and negligible risk of

58
default. They are issued at a price which is lower than their face value and repaid at par.
The difference between the price at which the treasury bills are issued and their
redemption value is the interest receivable on them and is called discount.Example:
Suppose an investor purchases a 91 days Treasury bill with a face value of Rs. 1,00,000
for Rs. 96,000. By holding the bill until the maturity date, the investor receives
Rs. 1,00,000. The difference of Rs. 4,000 between the proceeds received at maturity and
the amount paid to purchase the bill represents the interest received by him.
ii. Commercial Paper: Commercial paper is a short-term unsecured promissory note,
negotiable and transferable by endorsement and delivery with a fixed maturity period. It
is issued by large and creditworthy companies to raise short-term funds at lower rates of
interest than market rates. It usually has a maturity period of 15 days to one year. The
issuance of commercial paper is an alternative to bank borrowing for large companies
that are generally considered to be financially strong. It is sold at a discount and
redeemed at par. The original purpose of commercial paper was to provide short-terms
funds for seasonal and working capital needs. For example companies use this
instrument for purposes such as bridge financing.
iii. Call Money: Call money is short term finance repayable on demand, with a maturity
period of one day to fifteen days, used for inter-bank transactions. Commercial banks
have to maintain a minimum cash balance known as cash reserve ratio. The Reserve
Bank of India changes the cash reserve ratio from time to time which in turn affects the
amount of funds available to be given as loans by commercial banks. Call money is a
method by which banks borrow from each other to be able to maintain the cash reserve
ratio. The interest rate paid on call money loans is known as the call rate. It is a highly
volatile rate that varies from day-to-day and sometimes even from hour-to-hour.
iv. Certificate of Deposit: Certificates of deposit (CD) are unsecured, negotiable, short-
term instruments in bearer form, issued by commercial banks and development
financial institutions. They can be issued to individuals, corporations and companies
during periods of tight liquidity when the deposit growth of banks is slow but the
demand for credit is high. They help to mobilise a large amount of money for short
periods.
2.What is Stock Exchange? Explain the functions of stock exchange.
ANS:- A stock exchange is an institution which provides a platform for buying and
selling of existing securities.
The following are some of the important functions of a stock exchange.
i. Providing Liquidity and Marketability to Existing Securities: The basic function of
a stock exchange is the creation of a continuous market where securities are bought and
sold. It gives investors the chance to disinvest and reinvest. This provides both liquidity
and easy marketability to already existing securities in the market.
ii. Pricing of Securities: Share prices on a stock exchange are determined by the forces
of demand and supply. A stock exchange is a mechanism of constant valuation through
which the prices of securities are determined. Such a valuation provides important
instant information to both buyers and sellers in the market.
iii. Safety of Transaction: The membership of a stock exchange is wellregulated and its
dealings are well defined according to the existing legal framework. This ensures that the
investing public gets a safe and fair deal on the market.
iv. Contributes to Economic Growth: A stock exchange is a market in which existing

59
securities are resold or traded. Through this process of disinvestment and reinvestment
savings get channelised into their most productive investment avenues. This leads to
capital formation and economic growth.
v. Spreading of Equity Cult: The stock exchange can play a vital role in ensuring wider
share ownership by regulating new issues, better trading practices and taking effective
steps in educating the public about investments.
vi. Providing Scope for Speculation: The stock exchange provides sufficient scope
within the provisions of law for speculative activity in a restricted and controlled
manner. It is generally accepted that a certain degree of healthy speculation is necessary
to ensure liquidity and price continuity in the stock market.

3.Briefly explain the steps in the Screen based Trading and Settlement procedure
in a Stock Exchange.
ANS:- The following steps are involved in the screen-based trading for buying and
selling of securities:

i.If an investor wishes to buy or sell any security he has to first approach a registered
broker or sub-broker and enter into an agreement with him. The investor has to sign a
broker-client agreement and a client registration form before placing an order to buy
or sell securities.
ii. The investor has to open a ‘demat’ account or ‘beneficial owner’ (BO) account with a
depository participant (DP) for holding and transferring securities in the demat form. He
will also have to open a bank account for cash transactions in the securities market.
iii. The investor then places an order with the broker to buy or sell shares. Clear
instructions have to be given about the number of shares and the price at which the
shares should be bought or sold. The broker will then go ahead with the deal at the
above mentioned price or the best price available. An order confirmation slip is issued to
the investor by the broker.
iv. The broker then will go on-line and connect to the main stock exchange and match
the share and best price available.
v. When the shares can be bought or sold at the price mentioned, it will be
communicated to the broker’s terminal and the order will be executed electronically. The
broker will issue a trade confirmation slip to the investor.
vi. After the trade has been executed, within 24 hours the broker issues a Contract
Note. This note contains details of the number of shares bought or sold, the price, the
date and time of deal, and the brokerage charges. This is an important document as it is
legally enforceable and helps to settle disputes/claims between the investor and the
broker.

vii. Now, the investor has to deliver the shares sold or pay cash for the shares bought.
This should be done immediately after receiving the contract note or before the day when
the broker shall make payment or delivery of shares to the exchange. This is called the
pay-in day.
viii. Cash is paid or securities are delivered on pay-in day, which is before the T+2 day
as the deal has to be settled and finalised on the T+2 day. The settlement cycle is on
T+2 day on a rolling settlement basis, w.e.f. 1 April 2003.
ix. On the T+2 day, the exchange will deliver the share or make payment to the other
60
broker. This is called the pay-out day. The broker then has to make payment to the
investor within 24 hours of the payout day since he has already received payment from
the exchange.
x.The broker can make delivery of shares in demat form directly to the investor’s demat
account. The investor has to give details of his demat account and instruct his
depository participant to take delivery of securities directly in his beneficial owner
account.

4.How does the Demat System works? Explain.

Ans:- Working of the Demat System
1. A depository participant (DP), either a bank, broker, or financial services company,
may be identified.
2. An account opening form and documentation (PAN card details, photograph, power of
attorney) may be completed.
3. The physical certificate is to be given to the DP along with a dematerialisation request
form.
4. If shares are applied in a public offer, simple details of DP and demat account are to
be given and the shares on allotment would automatically be credited to the demat
account.
5. If shares are to be sold through a broker, the DP is to be instructed to debit the
account with the number of shares.
6. The broker then gives instruction to his DP for delivery of the shares to the stock
exchange.
7. The broker then receives payment and pay the person for the shares sold.
8. All these transactions are to be completed within 2 days, i.e., delivery of shares and
payment received from the buyer is on a T+2 basis, settlement period.

5.Explain the functions of Securities and Exchange Board of India.

ANS:- Functions of SEBI
Keeping in mind the emerging nature of the securities market in India, SEBI was
entrusted with the twin task of both regulation and development of the securities
market. It also has certain protective functions.
Regulatory Functions
1. Registration of brokers and subbrokers and other players in the market.
2. Registration of collective investment schemes and Mutual Funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers
and the business in stock exchanges and any other securities market.
4. Regulation of takeover bids by companies.
5. Calling for information by undertaking inspection, conducting enquiries and audits of
stock exchanges and intermediaries.
6. Levying fee or other charges for carrying out the purposes of the Act.
7. Performing and exercising such power under Securities Contracts (Regulation) Act
1956, as may be delegated by the Government of India.
Development Functions
1. Training of intermediaries of the securities market.
2. Conducting research and publishing information useful to all market participants.
61
3. Undertaking measures to develop the capital markets by adapting a flexible approach.
Protective Functions
1. Prohibition of fraudulent and unfair trade practices like making misleading
statements, manipulations, price rigging etc.
2. Controlling insider trading and imposing penalties for such practices.
3. Undertaking steps for investor protection.
4. Promotion of fair practices and code of conduct in securities market.
NOTE:-SECTION-E(NO QUESTION IN THIS SECTION)
QUSTION BANK- Chapter 11(Total marks allotted=1+2+4x2+8=19+practical)
11. Marketing
SECTION-A
1.State any one Marketing Philosophy or concept.
ANS:- The Production Concept
2.Give an example for the marketing of services.
ANS:- Services rendered by a doctor
3.Give the meaning of Product?
ANS:- Product means goods or services or ‘anything of value’, which is offered to the
market for sale.
4.What is Packaging?
ANS:- Packaging refers to the act of designing and producing the container or wrapper
of a product.
5.What is Labelling?
ANS:- . The label may vary from a simple tag attached to the product (such as in case of
local unbranded products like sugar, wheat, pulses, etc.) indicating some information
about the quality or price, to complex graphics that are part of the package.
6.State any one feature of convenience goods.
ANS:- (a) These products are purchased at convenient locations, with least efforts and
time;

7.What is a Brand?
ANS:- : A brand is a name, term, sign, symbol, design or some combination of them,
used to identify the products.
8.Name any one Distribution Channel.
ANS:- Manufacturer-Retailer Consumer
9.What do you mean by Zero Level distribution channel?
ANS:- The goods are made directly available by the manufacturers to customers,
without involving any intermediary. This is called zero level channel.
10.What is Publicity?
ANS:- Publicity is similar to advertising, in the sense that it is a non-personal form of
communication.
62
 SECTION-B
1.What is Marketing?
ANS:- Marketing is a process whereby people exchange goods and services for money or
for something of value to them.
2.Define Marketing.
ANS:- Phillip Kolter has defined marketing as, “a social process by which individual
groups obtain what they need and want through creating offerings and freely exchanging
products and services of value with others”.

3.Define Marketing Management.

Ans:- Philip Kotler has defined Marketing management as the art and science of
choosing target markets and getting, keeping and growing customers through creating,
delivering and communicating superior customer values of management.

4.State any two features of Marketing.

Ans:- i. Needs and Wants: The process of marketing helps individuals and groups in
obtaining what they need and want.
ii. Creating a Market Offering: On the part of the marketers, the effort involves creation
of a ‘market offering.
5.State any two examples for the things that can be marketed other
than product?
Ans:_(i) a service (ii)an idea
6.What is Standardization?
Ans:- Standardisation refers to producing goods of predetermined specifications, which
helps in achieving uniformity and consistency in the output.
7.What is Grading of products?
Ans:- Grading is the process of classification of products into different groups, on the
basis of some of its important characteristics such as quality, size, etc.
8.How do you describe Marketing Mix?
Ans:- Marketing mix is described as the set of marketing tools that a firm uses to
pursue its marketing objectives in a target market.
9.What do you mean by Consumer Goods?
Ans:- Products, which are purchased by the ultimate consumers or users for satisfying
their personal needs and desires are referred to as consumer goods. For example, soap,
edible oil, eatables, textiles, toothpaste, fans, etc.
10.Give two examples for Convenience goods.
Ans:- Examples of such products are cigarettes, ice creams, medicines, newspaper,
stationery items toothpaste. etc.
11.Name any two examples for Durable Products.
Ans:- cigarettes, ice creams, medicines, newspaper, stationery items toothpaste. etc.

63
12.How do you describe Shopping Products?
Ans:- Shopping products are those consumer goods, in the purchase of which buyers
devote considerable time, to compare the quality, price, style, suitability, etc., at several
stores, before making final purchase.
13.State any two functions of packaging.
Ans:- (i) Product Identification: Packaging greatly helps in identification of the
products. For example, Colgate in red colour, or Ponds cream jar can be easily identified
by its package.

(ii) Product Protection: Packaging protects the contents of a product from spoilage,
breakage, leakage, pilferage, damage, climatic effect, etc.
14.State any two objectives of Pricing.
Ans:- (a) Obtaining Market Share Leadership:
(b) Surviving in a Competitive Market
15.State any two distinguishing features of advertising.
Ans:- (i) Paid Form: Advertising is a paid form of communication. That is, the sponsor
has to bear the cost of communicating with the prospects

(ii) Impersonality: There is no direct face-to-face contact between the prospect and the
advertiser.
16.What is Personal Selling?
Ans:- Personal selling involves oral presentation of message in the form of conversation
with one or more prospective customers for the purpose of making sales.
SECTION-C
1.Discuss briefly any four differences between Selling and Marketing.
Ans:- (i) Part of the Process vs Wider Term: Selling is only a part of the process of
marketing and is concerned with promoting and transferring possession and ownership
of goods from the seller to the buyer. Marketing is a much wider term consisting of
number of activities such as identification of the customer’s needs, developing the
products to satisfy these needs, fixing prices and persuading the potential buyers to buy
the same. Thus, selling is merely a part of marketing.

(ii) Transfer of T itle vs Satisfying Customer Needs: The main focus of selling is on
affecting transfer of title and possession of goods from sellers to consumers or users. In
contrast, marketing activities put greater thrust on achieving maximum satisfaction of
the customer’s needs and wants.

(iii) Profit through Maximising Sales vs Customer Satisfaction: All selling activities
are directed at maximising sales and, thereby, the profits of the firm. In other words, the
emphasis is on profit maximisation through maximisation of sales. Marketing, is
concerned with customer satisfaction and thereby increasing profit in the long run. A
marketing organisation, thus, attaches highest importance to customer satisfaction as a
route to profit maximisation.

64
(iv) Start and End of the Activities: Selling activities start after the product has been
developed while, marketing activities start much before the product is produced and
continue even after the product has been sold.

2.Explain the elements of Marketing Mix.

Ans:- The marketing mix consists of various elements, which have broadly been classified into
four categories, popularly known as four Ps of marketing. These are: (i) Product, (ii) Price, (iii)
Place, and (iv) Promotion. These are briefly discussed as follows:

i. Product: Product means goods or services or ‘anything of value’, which is offered to

the market for sale. The concept of product relates to not only the physical product as
mentioned in the above examples but also the benefits offered by it from customer’s view
point (for example toothpaste is bought for whitening teeth, strengthening gums, etc.).
The concept of product also include the extended product or what is offered to the
customers by way of after sales services, handling complaints, availability of spare parts
etc.

ii. Price: Price is the amount of money customers have to pay to obtain the product. In
case of most of the products, level of price affects the level of their demand. The
marketers have not only to decide about the objectives of price setting but to analyse the
factors determining the price and fix a price for the firm’s products. Decisions have also
to be taken in respect of discounts to customers, traders and credit terms, etc. so that
customers perceive the price to be in line with the value of the product.

iii. Place: Place or Physical Distribution include activities that make firm’s products
available to the target customers. Important decision areas in this respect include
selection of dealers or intermediaries to reach the customers, providing support to the
intermediaries .

iv. Promotion: Promotion of products and services include activities that communicate
availability, features, merits, etc. of the products to the target customers and persuade
them to buy it. Most marketing organisations, undertake various promotional activities
and spend substantial amount of money on the promotion of their goods through using
number of tools such as advertising, personal selling and sales promotion techniques . A
large number of decisions are to be taken in each of the area specified above.

3.State any four features of speciality products.

Ans:- Four features of speciality products are as follows:-
(a) The demand for speciality products is limited as relatively small number of people
buy these products;

(b) These products are generally costly and their unit price is very high;

(c) These products are available for sale at few places as the number of customers is
small and are willing to take extra efforts in the purchase of these products;

65
(d) An aggressive promotion is required for the sale of speciality products, in order to
inform people about their availability, features, etc.; and

(e) After sales services are very important for many of the speciality products.

4.Briefly explain any four characteristics of industrial products.

Ans:- The important characteristics of industrial products are given below:
i. Number of Buyers: As compared to the consumer products, the numbers of buyers of
industrial products are limited. For example, sugarcane is purchased by few producers
of sugar, but sugar, which is a consumer product, is purchased by crores of people in
our country.

ii. Channel Levels: Because of limited number of buyers, the sale of industrial products
is generally made with the help of shorter channels of distribution, i.e., direct selling or
one level channel.

iii. Geographic Concentration: Because of location of industries at certain points or

regions, industrial markets are highly concentrated, geographically. For instance, the
demand for power loom comes from Bombay, Sholapur, Bangalore, etc. where the textile
industry is concentrated in our country.

iv. Derived Demand: The demand for industrial products is derived from the demand
for consumer products. For example, the demand for leather will be derived from
demand for shoes and other leather products in the market.

5.State any four considerations to be kept in mind while choosing a

brand name.
Ans:- (i) The brand name should be short, easy to pronounce, spell, recognise and
remember e.g., Ponds, VIP, Rin, Vim, etc.

(ii) A brand should suggest the product’s benefits and qualities. It should be
appropriate to the product’s function. e.g., Rasika, Genteel, Promise, My Fair Lady and
Boost.

(iii) A brand name should be distinctive e.g., Liril, Sprit, Safari, Zodiac.

(iv) The brand name should be adaptable to packing or labelling requirements, to

different advertising media and to different languages.

(v) The brand name should be sufficiently versatile to accommodate new products, which
are added to the product line e.g., Maggie, Colgate.

(vi) It should be capable of being registered and protected legally. (vii) Chosen name
should have staying power i.e., it should not get out of date.

66
6.How does packaging acquire significance in the marketing of goods?
Ans:- Packaging has acquired great significance in the marketing of goods and services,
because of following reasons

: (i) Rising Standards of Health and Sanitation: Because of the increasing standards
of living in the country, more and more people have started purchasing packed goods as
the chances of adulteration in such goods are minimised.

(ii) Self Service Outlets: The self-service retail outlets are becoming very popular,
particularly in major cities and towns. Because of this, some of the traditional role
assigned to personal selling in respect of promotion has gone to packaging.

(iii) Innovational Opportunity: Some of the recent developments in the area of

packaging have completely changed the marketing scene in the country. For example,
milk can now be stored for 4-5 days without refrigeration in the recently developed
packing materials. Similarly, in the area of pharmaceuticals, soft drinks, etc., lots of new
innovations have come in respect of packaging. As a result, the scope for the marketing
of such products has increased.

(iv) Product Differentiation: Packaging is one of the very important means of creating
product differentiation. The colour, size, material etc., of package makes real difference
in the perception of customers about the quality of the product. For example, by looking
at the package of a product say Paint or Hair Oil, one can make some guess about
quality of the product contained in it.

7.Explain any four functions performed by a label.

Ans:- The various functions performed by a label are as follows:
i. Describe the Product and Specify its Contents: Let us look at some of the labels of
the products used by us in our day to day life. The label on the package of a local tea
company describes the company as ‘Mohini Tea Company, an ISO 9001:200C Certified
Company’; a popular brand of Prickly Heat Powder, describes how the product provides
relief from prickly heat and controls bacterial growth and infection, giving caution
forbidding its application on cuts and wounds. Thus, one of the most important
functions of labels is to describe the product, its usage, cautions in use, etc. and specify
its contents.

ii. Identification of the Product or Brand: The other important function performed by
labels is to help in identifying the product or brand. For example, the brand name of any
product, say Biscuits or Potato Chips imprinted on its package helps us to identify, from
number of packages, which one is our favourite brand. Other common identification
information provided by the labels include name and address of the manufacturer, net
weight when packed, manufacturing date, maximum retail price and Batch number.

iii. Grading of Products: Another important function performed by labels is to help

grading the products into different categories. Sometimes marketers assign different
grades to indicate different features or quality of the product. For example, a popular
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brand of Hair Conditioners comes in different categories for different hair, say for
‘normal hair’ and for other categories. Different type of tea is sold by some brands under
Yellow, Red and Green Label categories.

iv. Helps in Promotion of Products: An important function of label is to aid in

promotion of the products. A carefully designed label can attract attention and give
reason to purchase. Labels play important role in sales promotional schemes launched
by companies. For example the label on the package of a Shaving Cream mentions, ‘40%
Extra Free’ or package of a toothpaste mentioning, ‘Free Toothbrush Inside’, or ‘Save
Rs15’.

8.Explain briefly any four objections against advertising.

Ans:- i. Adds to Cost: The opponents of advertising argue that advertising
unnecessarily adds to the cost of product, which is ultimately passed on to the buyers in
the form of high prices. An advertisement on TV, for a few seconds, for example, costs
the marketers several lakhs of rupees. Similarly an advertisement in print media say in a
newspaper or a magazine costs the marketers a large amount of money. The money
spent adds to the cost, which in an important factor in fixation of the price of a product.
ii. Undermines Social Values: Another important criticism of advertising is that it
undermines social values and promotes materialism. It breeds discontent among people
as they come to know about new products and feel dissatisfied with their present state of
affairs. Some advertisements show new life styles, which don’t find social approval. This
criticism is not entirely true.
iii. Confuses the Buyers: Another criticism against advertisement is that so many
products are being advertised which makes similar claims that the buyer gets confused
as to which one is true and which one should be relied upon. For example, we may note
similar claims of whiteness or stain removing abilities in competing brands of detergent
powder or claims of whiteness of tooth or ‘feelings of freshness’ in competing brands of
toothpaste that it is sometimes confusing to us as to which one to buy.
iv. Encourages Sale of Inferior Products: Advertising does not distinguish between
superior and inferior products and persuade people to purchase even the inferior
products. In fact superiority and inferiority depends on the quality, which is a relative
concept. The desired level of quality will depend on the economic status and preferences
of the target customers.
9.Explain any four functions performed by public relations department
of an organisation.
Ans:- i. Press relations: Information about the organisation needs to be presented in a
positive manner in the press. Generating news requires skill in developing and
researching a story and getting the media to accept press releases is a difficult task. The
public relations department is in contact with the media to present true facts and a
correct picture about the company. Otherwise news can get distorted if taken from other
sources.
ii. Product publicity: New products require special effort to publicise them and the
company has to sponsor such programmes. The public relations department manages

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the sponsoring of such events. The company can draw attention to new products by
arranging sports and cultural events like news conferences, seminars and exhibitions.
iii. Corporate Communication: The image of the organisation needs to be promoted
through communicating with the public and the employees within the organisation. This
is usually done with the help of newsletter, annual reports, brochures, articles and
audio-visual materials. Companies rely on these materials to reach and influence their
target markets.
iv. Lobbying: The organisation has to deal with government officials and different
ministers in charge of corporate affairs, industry, finance with respect to policies relating
to business and the economy. The government also seeks to maintain a healthy
relationship with associations of commerce and industry and solicits the opinion of
major stakeholders while formulating industrial, telecom, taxation policies, etc. The
public relations department then has to be really proactive in promoting or decoding
regulations that affect them.

SECTION-D
1.Explain any eight functions of Marketing.
Ans:- i. Gathering and Analysing Market Information: One of the important functions
of a marketer is to gather and analyse market information. This is necessary to identify
the needs of the customers and take various decisions for the successful marketing of
the products and services. This is important for making an analysis of the available
opportunities and threats as well as strengths and weaknesses of the organisation and
help in deciding what opportunities can best be pursued by it.
ii. Marketing Planning: Another important activity or area of work of a marketer is to
develop appropriate marketing plans so that the marketing objectives of the organisation
can be achieved. For example a marketer of colour TV, having 10 per cent of the current
market share in the country, aims at enhancing his market share to 20 per cent, in the
next three years. He will have to develop a complete marketing plan covering various
important aspects including the plan for increasing the level of production, promotion of
the products, etc. and specify the action programmes to achieve these objectives.
iii. Product Designing and Development: Another important marketing activity or
decision area relates to product designing and development. The design of the product
contributes to making the product attractive to the target customers. A good design can
improve performance of a product and also give it a competitive advantage in the market
iv.Standardisation and Grading: Standardisation ensures the buyers that goods
conform to the predetermined standards of quality, price and packaging and reduces the
need for inspection, testing and evaluation of the products. Grading is the process of
classification of products into different groups, on the basis of some of its important
characteristics such as quality, size, etc. Grading is particularly necessary for products
which are not produced according to predetermined specifications, such as in the case of
agricultural products, say wheat, oranges, etc. Grading ensures that goods belong to a
particular quality and helps in realising higher prices for high quality output.
v. Packaging and Labelling: Packaging refers to designing and developing the package
for the products. Labelling refers to designing and developing the label to be put on the
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package. The label may vary from a simple tag to complex graphics. Packaging and
labelling have become so important in modern day marketing that these are considered
as the pillars of marketing.
vi. Branding: A very important decision area for marketing of most consumer products
is whether to sell the product in its generic name or to sell them in a brand name (such
as Pollar Fan or Rottomac Pen). Brand name helps in creating product differentiation,
i.e., providing basis for distinguishing the product of a firm with that of the competitor,
which in turn, helps in building customer’s loyality and in promoting its sale.
vii. Customer Support Services: A very important function of the marketing
management relates to developing customer support services such as after sales
services, handling customer complaints and adjustments, procuring credit services,
maintenance services, technical services and consumer information. All these services
aim at providing maximum satisfaction to the customers, which is the key to marketing
success in modern days. Customer support services are very effective in bringing repeat
sales from the customers and developing brand loyality for a product.
viii. Pricing of Product: Price of product refers to the amount of money customers have
to pay to obtain a product. Price is an important factor affecting the success or failure of
a product in the market. The demand for a product or service is related to its price.
Generally lower the price, higher would be the demand for the product and vice-versa.
The marketers have to properly analyse the factors determining the price of a product
and take several crucial decisions in this respect, including setting the pricing
objectives, determining the pricing strategies, determining the price and changing the
prices.

2.What is Branding? Explain briefly its advantages to marketers and

customers.
ANS:- The process of giving a name or a sign or a symbol etc., to a product is called
branding.

Advantages to the Marketers

(i) Enables Marking Product Differentiation: Branding helps a firm in distinguishing

its product from that of its competitors. This enables the firm to secure and control the
market for its products.

(ii) Helps in Advertising and Display Programmes: A brand aids a firm in its
advertising and display programmes. Without a brand name, the advertiser can only
create awareness for the generic product and can never be sure of the sale for his
product.

(iii) Differential Pricing: Branding enables a firm to charge different price for its
products than that charged by its competitors. This is possible because if customers like
a brand and become habitual of it, they do not mind paying a little higher for it.

(iv) Ease in Introduction of New Product: If a new product is introduced under a

known brand, it enjoys the reflected glory of the brand and is likely to get off to an
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excellent start. Thus, many companies with established brand names decide to
introduce new products in the same name.

Advantages to Customers

(i) Helps in Product Identification: Branding helps the customers in identifying the
products. For example, if a person is satisfied with a particular brand of a product, say
tea leaves or detergent soap, he need not make a close inspection every time, he has to
buy that product. Thus, branding greatly facilitates repeat purchase of the products.

(ii) Ensures Quality: Branding ensures a particular level of quality of the product.
Thus, whenever there is any deviation in the quality, the customers can have recourse to
the manufacturer or the marketer. This builds up confidence of the customers and helps
in increasing his level of satisfaction.

(iii) Status Symbol: Some brands become status symbols because of their quality. The
consumers of those brands of products feel proud of using them and adds to the level of
satisfaction of the customers.

3.What is Pricing? Explain the factors affecting price determination.

Ans:- . The amount of money paid by a buyer (or received by a seller) in consideration of the
purchase of a product or a service are called Price.
Factors Affecting Price Determination

There are number of factors which affect the fixation of the price of a product. Some of the
important factors in this regard are discussed as below:

1. Product Cost: One of the most important factor affecting price of a product or service
is its cost. This includes the cost of producing, distributing and selling the product. The
cost sets the minimum level or the floor price at which the product may be sold.
Generally all marketing firms strive to cover all their costs, at least in the long run Total
Costs are the sum total of the fixed, variable and semi-variable costs for the specific level
of activity, say volume of sales or quantity produced.

2. The Utility and Demand: While the product costs set the lower limits of the price,
the utility provided by the product and the intensity of demand of the buyer sets the
upper limit of price, which a buyer would be prepared to pay. In fact the price must
reflect the interest of both the parties to the transaction—the buyer and the seller. The
buyer may be ready to pay up to the point where the utility from the product is at least
equal to the sacrifice made in terms of the price paid. The seller would, however, try to at
least cover the costs. According to the law of demand, consumers usually purchase more
units at a low price than at a high price. The price of a product is affected by the
elasticity of demand of the product. The demand is said to be elastic if a relatively small
change in price results in large change in the quantity demanded. Here numerically, the
price elasticity is greater than one. In the case of inelastic demand, the total revenue
increases when the price is increased and goes down when the price is reduced. If the
demand of a product is inelastic, the firm is in a better position to fix higher prices.

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 3. Extent of Competition in the Market: Between the lower limit and the upper limit
where would the price settle down? This is affected by the nature and the degree of
competition. The price will tend to reach the upper limit in case there is lesser degree of
competition while under conditions of free competition, the price will tend to be set at
the lowest level. Competitors’ prices and their anticipated reactions must be considered
before fixing the price of a product. Not only the price but the quality and the features of
the competitive products must be examined carefully, before fixing the price.

4. Government and Legal Regulations: 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. For example, the cost of a drug manufactured by a company having
monopoly in the production of the same come to Rs 20 per strip of ten and the buyer is
prepared to pay any amount for it, say Rs 200. In the absence of any competitor, the
seller may be tempted to extort the maximum amountof Rs 200 for the drug and
intervene to regulate the price. Usually in such a case, the Government does not allow
the firms to charge such a high price and intervene to regulate the price of the drug.
This can be done by the Government by declaring the drug as essential commodity and
regulating its price.

5. Pricing Objectives: Pricing objectives are another important factor affecting the
fixation of the price of a product or a service. Generally the objective is stated to be
maximise the profits. But there is a difference in maximising profit in the short run and
in the long run. If the firm decides to maximise profits in the short run, it would tend to
charge maximum price for its products. But if it is to maximise its total profit in the long
run, it would opt for a lower per unit price so that it can capture larger share of the
market and earn greater profits through increased sales.

4.Explain the advantages and limitations of advertising.

Ans:- Merits of Advertising Advertising,
as a medium of communication, has the following merits:
(i) Mass Reach: Advertising is a medium through which a large number of people can be
reached over a vast geographical area. For example, an advertisement message placed in
a national daily reaches lakhs of its subscribers.
(ii) Enhancing Customer Satisfaction and Confidence: Advertising creates confidence
amongst prospective buyers as they feel more comfortable and assured about the
product quality and hence feel more satisfied.
(iii) Expressiveness: With the developments in art, computer designs, and graphics,
advertising has developed into one of the most forceful medium of communication. With
the special effects that can be created, even simple products and messages can look very
attractive.
(iv) Economy: Advertising is a very economical mode of communication if large number
of people are to be reached. Because of its wide reach, the overall cost of advertising gets
spread over numerous communication links established. As a result the per-unit cost of
reach comes low.

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 Limitations of Advertising
The following are the major limitations of advertising as a tool of promotion:
(i) Less Forceful: Advertising is an impersonal form of communication. It is less forceful
than the personal selling as there is no compulsion on the prospects to pay attention to
the message.
(ii) Lack of Feedback: The evaluation of the effectiveness of advertising message is very
difficult as there is no immediate and accurate feedback mechanism of the message that
is delivered.
(iii) Inflexibility: Advertising is less flexible as the message is standardised and is not
tailor made to the requirements of the different customer groups
(iv) Low Effectiveness: As the volume of advertising is getting more and more expanded
it is becoming difficult to make advertising messages heard by the target prospects. This
is affecting the effectiveness of advertising.

5.State any eight differences between Advertising and Personal selling.

Ans:- Eight differences between Advertising and Personal selling
Advertising Personal selling
1 Advertising is an impersonal form Personal selling is a personal form of
of communication. communication.

2 Advertising involves transmission In personal selling, the sales talk is

of adjusted keeping view customer’s
standardised messages, i.e., same background and needs.
message is sent to all the
customers
in a market segment.

3 Advertising is inflexible as the Personal selling is highly flexible. As the

message can’ t be adjusted to the message can be adjusted.
needs of the buyer.

4 It reaches masses, i.e., a large Only a limited number of people can be

number of people can be contacted because of time and cost
approached. considerations.

5 In advertising the cost per person The cost per person is quite high in the
reached is very low. case of personal selling.

6 Advertising can cover the market Personal selling efforts take a lot of time
in a to cover the entire market.
short time.

7 Advertising makes use of mass Personal selling makes use of sales staff,
media which has limited reach.
such television, radio, newspaper,
and magazines.

8 Advertising lacks direct feedback. Personal selling provides direct and

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 Marketing research efforts are immediate feed back. Sales persons
needed to judge customers’ come to know about the customers’
reactions to advertising. reactions immediately.

9 Advertising is more useful in Personal selling plays important role at

creating and building interest of the awareness stage of decision making.
the
consumers in the firms products.

10 Advertising is more useful in Personal selling is more helpful in selling

marketing to the ultimate products to the industrial buyers or to
consumer’s who are large in intermediaries such as dealers and
numbers. retailers who are relatively few in
numbers.

SECTION-E
1. As a marketing manager, suggest any five Sales Promotion
activities to boost up the sales.

1. Rebate

2. Discount:

3 . Refunds

4. Product Combinations:

5. Quantity Gift:

6. Instant Draws and Assigned Gift:

7. Lucky Draw

8. Usable Benefit:

9. Full finance @ 0%:

10. Sampling

11. Contests:(ANY FIVE)

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QUSTION BANK-- Chapter 12(Total marks allotted=1+2+4=7+practical)
Consumer Protection
SECTION-A
1. State any one unfair trade practice of manufacturers and service providers by
which consumers are exploited.
ANS:- Adulteration, Misleading advertising, Black marketing,
2. State any one regulation which provides legal protection to the consumers.
ANS:- : i..The Consumer Protection Act 1986 ii.The Sale of Goods Act 1930
3. In which year the Consumer Protection Act was enacted?
ANS:- The consumer protection act was enacted in1986
4. Who is a Consumer?
ANS:- A consumer is generally understood as a person who uses or consumer goods or
a avail of any service.
5. Name any one redressal machinery/agency set up under Consumer Protection
Act to redress consumer grievances.
Ans: i.District Forum ii. State commission iii. National commission(ANY ONE)
6. What is the monetary limit of claim in District Consumer Disputes Redressal
Forum?
Ans: The compensation claimed does not exceeds Rs. 20 lakhs.
7. State the monetary limit of claim in State Consumer Disputes Redressal
Commission.
ANS:- The compenssion claimed exceeds Rs. 20 lakhs does not exceed Rs.1 crore.
8. What is the monetary limit of claim in National Consumer Disputes Redressal
Commission?
Ans: The compensation claimed exceeds Rs. 1 crore.

9. Name any one Consumer Organisation/NGO engaged in protecting and

promoting consumers’ interests.
ANS:- i.Karnatak consumer service society Bangalore, ii.Consumers Association Kolkata,
iii. Mumbai Grahak Panchayat Mumbai, (ANY ONE)

SECTION-B
1. What is Consumer Protection?
Ans: Consumer protection refers to protection of physical, economics and other interest
of the consumers from exploitation by the business community.
2. State any two reasons to emphasise the importance of consumer protection
from Consumers’ point of view.
Ans: i.Consumer ignorance ii. Unorganised consumers iii. Widespread explitation of
consumers.
3. State any two reasons to emphasise the importance of consumer protection
from the point of view of Business.
Ans: i.Long term interest of Business ii. Social Responsibility
iii. Moral Justification iv. Government Intervention.
4. Write any two Consumer Rights.
Ans: i.Rights to Safety ii.Rights to Informed
iii. Rights to Choose iv. Rights to Seek redreesed.

5. Who can file a complaint before the appropriate consumer forum? (any two)
Ans: i. Any Consumer ii. Any Registered Consumers Association
iii. The Central Government or any State Government.
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 SECTION-C
1.Explain any four Rights of consumers.
ANS:- I. Right to Safety: The consumer has a right to be protected against goods and
services which are hazardous to life and health. For instance, electrical appliances 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
appliances which are ISI marked as this would be an assurance of such products
meeting quality specifications.
II. Right to be Informed: The consumer has a right to have complete information about
the product he intends to buy including its ingredients, date of manufacture, price,
quantity, directions for use, etc. It is because of this reason that the legal framework in
India requires the manufactures to provide such information on the package and label
of the product.
III. Right to Choose: The consumer has the 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, etc. and allow the consumer
to make a
choice from amongst these.
IV. Right to be Heard: The consumer has a 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 redressal of their grievances.

2.State any four responsibilities of consumers while purchasing, using and

consuming goods and services.
ANS:- (i) Be aware about various goods and services available in the market so that an
intelligent and wise choice can be made.
(ii) Buy only standardised goods as they provide quality assurance.

Thus, look for ISI mark on electrical goods, FPO mark on food products, Hallmark on
jewelry etc.
(iii) Learn about the risks associated with products and services, follow manufacturer’s
instructions and use the products safely.
(iv) Read labels carefully so as to have information about prices, net weight,
manufacturing and expiry dates, etc.
(v) Assert yourself to ensure that you get a fair deal.
(vi) Be honest in your dealings. Choose only from legal goods and services and
discourage unscrupulous practices like black-marketing, hoarding etc.(ANY FOUR)

3.Explain any four ways in which the objective of consumer protection can be
achieved.
ANS:- I. Self Regulation by Business: Enlightened business firms realise that it is in
their long-term interest to serve the customers well. Socially responsible firms follow
ethical standards and practices in dealing with their customers. Many firms have set up
their customer service and grievance cells to redress the problems and grievances of
their consumers.

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II. Business Associations: The associations of trade, commerce and business like
Federation of Indian Chambers of Commerce of India (FICCI) and Confederation of
Indian Industries (CII) have laid down their code of conduct which lay down for their
members the guidelines in their dealings with the customers.
III. Consumer Awareness: A consumer, who is well-informed about his rights and the
reliefs available to him, would be in a position to raise his voice against any unfair trade
practices or unscrupulous exploitation. In addition to this, an understanding of his
responsibilities would also enable a consumer to safeguard his interests. In this regard,
the Department of Consumer Affairs, GOI, has been undertaking the campaign, Jago
Grahak Jago through multimedia awareness.
IV. Consumer Organisations: Consumer organisations play an important role in
educating consumers about their rights and providing protection to them. These
organisations can force business firms to avoid malpractices and exploitation of
consumers.

4.State any four directions which can be issued by the consumer court to the
opposite party.
ANS:- (i) To remove the defect in goods or deficiency in service.
(ii) To replace the defective product with a new one, free from any defect.
(iii) To refund the price paid for the product, or the charges paid for the service.
(iv) To pay a reasonable amount of compensation for any loss or injury suffered by the
consumer due to the negligence of the opposite party.
(v) To pay punitive damages in appropriate circumstances.
(vi) To discontinue the unfair/ restrictive trade practice and not to repeat it in the future.
(ANY FOUR)
5.State any four functions of Consumer Organizations and NGOs for the protection
and promotion of consumer interests.
(i) Educating the general public about consumer rights by organising training
programmes, seminars and workshops.
(ii) Publishing periodicals and other publications to impart knowledge about consumer
problems, legal reporting, reliefs available and other matters of interest.

(iii) Carrying out comparative testing of consumer products in accredited laboratories to

test relative qualities of competing brands and publishing the test results for the
benefit of consumers.
(iv) Encouraging consumers to strongly protest and take an action against
unscrupulous, exploitative and unfair trade practices of sellers.
(v) Providing legal assistance to consumers by way of providing aid, legal advice etc. in
seeking legal remedy.
(vi) Filing complaints in appropriate consumer courts on behalf of the consumers.
(ANY FOUR)

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 SECTION-D (NO QUESTION IN THIS SECTION)
SECTION-E
1. As an exploited consumer, write a complaint letter to your nearest
District Consumer Forum claiming reasonable redressal.

Form:
Kiran Kumar
#34 . Car Street,
Shivamoga.
To,
The President
District Consumer Forum,
Shivamoga.
Sir,
On 10th March. 2014, I purchased whirlpool washing machine for Rs.
28,000/-from M/S Shakti Home Appliances. Its working became improper
after a week of its use. I brought this to the notice of lathe dealer, who could
provide repairs. Even after repair, we could not get the best results. I
requested him to refund the amount or replace the defective machine, which
was invain. As a result, I and my family are dissatisfied with heavily spent
product, for which we demand justice. So I request you to provide us justice
and a compensation of Rs. 5000/- for the mental agony caused by the dealer.
Necessary cash memo, repair slips are enclosed with this application for
reference.

Thanking you,
Place:SHIMOGA yours faithfully

Date:25-03-2018 (kiran kumar)

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 CHAPTER : 13 ENTREPRENEURSHIP DEVELOPMENT
(TOTAL MARKS ALLOTED 1+2+2=5+PRACTICAL)
SECTION – A
1. Who is an Entrepreneur?
Ans: A person who set-up his business is called Entrepreneur.
2.Who is introduced the term “ ENTREPRENEUR” for the first time?
Ans: Richard Cantillon
3. Expand N-Ach./N-pow./N-Aff./N-Aut.
N-Ach.= Need for Achivement
N-pow.=Need for Power
N-Aff.= Need for Affilliation
N-Aut.= Need for Autonomy
4. Entrepreneurs undertake ……….
a]Calculated risks b]High risks c]Low risks d] Moderate and
calculated risks
Ans: d] Moderate and calculated risks

5.In economics , which of the following is not a function of the entrepreneur?

a]Risk-taking b]Provision of capital and organization of production

c]Innovation d]Day to day conduct of business

Ans: c]Innovation

6.Which of the following statements does not clearly distinguish between

entrepreneupship and management?

a]Enterpreneurs found the business; managers operate it.

b]Entrepreneurs are the owners of their businesses; managers are employees.

c]Entrepreneurs earn profits; managers earn salaries.

d]Entrepreneurship is once for all activity; management is a continuous activity

Ans: D]Entrepreneurship is once for all activity; management is a continuous
activity.

7.In the roles and functions of the entrepreneur identified by Kilby, Which of the
following is not an aspect of ‘political administration”?

a]Dealing with public bureaueracy

b]Managing human relations within the firm.

c]Introducing new production techniques and products.

d]Managing customer and supplier relations.

Ans: C]Introducing new production techniques and products.

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8.Which of the following attitudes is not generally associated with successful
entrepreneurship.

a]Investing in R and D b]Live your business day by day

c.Innovate and improvise continually d]Produce as per customers’
requirements.

Ans: a]Investing in R and D

SECTION –B

1.What is Entrepreneurship?
Ans : Entrepreneurship is the process of setting up one’s own business as distinct from
pursuing any other economic activity be it employment or practicing some profession.
2. State any two characteristics of Entrepreneurship?
Ans: 1. Systematic Activity
2. Innovation
3. Organisation of product
4. Risk Taking.

3. Expand KASH as explained to the conterst of Entrepreneurship competencies.

Ans K=Knowledge A=Attitude S=Skills H=Habits

4. Draw the SVO analogy Figure.

SVO Analogy

Entrepreneur Entrepreneurship Enterprise

The person/Actor The process/The Act The out come/Results

5.Differentiate between Entrepreneurship and Management by taking any two

points.

Basis of Differentiation Entrepreneurship Management

1 Approach to the task Infomal Formal
2 Primary motivation Achivement Power
3 States vis-avis the enterprise owner Employee
4 Primary economic reward profit salary
5 Scale of opertions Small business Large business
6.State any two reaction of entrepreneurs in relation to economic development.
Ans: 1. Contribution to G.D.P.
2. Capital formation
3. Generation of Employment
4. Generation of Business opportunities for others

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7. Draw IDS Analysis for Entrepreneurial opportunites IDS.

Ans: IDS Analysis for Entrepreneural opportunities

International State of the State of the sector

Environment Domestic Economy /Industry

8. State any four competencies for Entrepreneurship as Identified by EDI

Ans: 1. Initiative
2. Persistence
3. Information seeking
4. systematic planning
5. self-confedence
6. Monitoring

SECTION - E PRACTICAL ORIENTED QUESTION

1. Draw the neat diagram of Efficacy –Desirability matrix to check the ability
and willingness of Entrepreneurs.

ARUNA KUMAR
PRINCIPAL
GOVT INDEPENDENT GIRLS P U COLLEGE-SAGAR
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