You are on page 1of 69


Set 1 _____________________________________________________________________ Q1. Explain in brief the origins of Just In Time. Explain the different types of wastes that can be eliminated using JIT. Ans. Just in Time (JIT) is a management philosophy aimed at eliminating waste and continuously improving quality. Credit for developing JIT as a management strategy goes to Toyota. Toyota JIT manufacturing started in the aftermath of World War II. Although the history of JIT traces back to Henry Ford who applied Just in Time principles to manage inventory in the Ford Automobile Company during the early part of the 20th Century, the origins of the JIT as a management strategy traces to Taiichi Onho of the Toyota Manufacturing Company. He developed Just in Time strategy as a means of competitive advantage during the post World War II period in Japan. The post-World War II Japanese automobile industry faced a crisis of existence, and companies such as Toyota looked to benchmark their thriving American counterparts. The productivity of an American car worker was nine times that of a Japanese car worker at that time, and Taiichi Onho sought ways to reach such levels. Two pressing challenges however prevented Toyota from adopting the American way: 1. American car manufacturers made lots or a batch of a model or a component before switching over to a new model or component. This system was not suited to the Japanese conditions where a small market required manufacturing in small quantities. 2. The car pricing policy of US manufacturers was to charge a mark-up on the cost price. The low demand in Japan led to price resistance. The need of the hour was

thus to reduce manufacturing costs to increase profits. To overcome these two challenges, Taiichi Onho identified waste as the primary evil. The categories of waste identified included overproduction inventory or waste associated with keeping dead stock time spent by workers waiting for materials to appear in the assembly line time spend on transportation or movement workers spending more time than necessary processing an item waste associated with defective items Taiichi Onho then sought to eliminate waste through the just-intimephilosophy, where items moved through the production system only as and when needed. Q2. What is Value Engineering or Value Analysis? Elucidate five companies which have incorporated VE with brief explanation. Ans. Value Engineering(VE), also known as Value Analysis, is a systematic and functionbased approach to improving the value of products, projects, or processes.VE involves a team of people following a structured process. The process helps team members communicate across boundaries, understand different perspectives, innovate, and analyze. When to use it Use Value Analysis to analyze and understand the detail of specific situations. Use it to find a focus on key areas for innovation. Use it in reverse (called Value Engineering) to identify specific solutions to detail Problems. It is particularly suited to physical and mechanical problems, but can also be used in other areas. Quick X Long Logical X Psychological Individual X Group How it works Value Analysis (and its design partner, Value Engineering) is used to increase the value of products or services to all concerned by considering the function of individual items and the benefit of this function and balancing this against the costs incurred in delivering it. The task then becomes to increase the value or decrease the cost. Q3. Explain different types of Quantitative models. Differentiate between work study and motion study. Ans. Quantitative models are needed for a variety of management tasks, including (a) identication of critical variables to use for health monitoring,

(b) antici- pating service level violations by using predictive models, and (c) on-going op- timization of congurations. Unfortunately, constructing quantitative models requires specialized skills that are in short supply. Even worse, rapid changes in provider congurations and the evolution of business demands mean that quantitative models must be updated on an ongoing basis. This paper de-scribes an architecture and algorithms for on-line discovery of quantitativemodels without prior knowledge of the managed elements. The architecture makes use of an element schema that describes managed elements using the common information model (CIM). Algorithms are presented for selecting a subset of the element metrics to use as explanatory variables in a quantitative model and for constructing the quantitative model itself. We further describe a prototype system based on this architecture that incorporates these algo-rithms. We apply the prototype to on-line estimation of response times for DB2 Universal Database under a TPC-W workload. Of the approximately 500 metrics available from the DB2 performance monitor, our system chooses 3 to construct a model that explains 72% of the variability of response time. Q4. What is Rapid Prototyping? Explain the difference between Automated flow line and Automated assembly line with examples. Ans. Rapid prototyping is the automatic construction of physical objects using additive manufacturingtechnology. The first techniques for rapid prototyping became available in the late 1980s and were used to produce models and prototype parts. Today, they are used for a much wider range of applications and are even used to manufacture production-quality parts in relatively small numbers. Some sculptors use the technology to produce complex shapes for fine arts exhibitions. In production and operations management, models refer to any simple representation of reality in different forms such as mathematical equations, graphical representation,pictorial representation, and physical models. Thus a model could be the well knowneconomic order quantity (EOQ) formula, a PERT network chart, a motion picture of anoperation, or pieces of strings stretched on a drawing of a plant layout to study themovement of material. The models help us to analyze and understand the reality. Thesealso help us to work determine optimal conditions to for decision making. For example,the EOQ formula helps us to determine the optimum replenishment quantities thatminimize the cost of storing plus replenishing.The number of different models we use inproduction and

operations management run into hundreds, or even more than athousand. These are really too many to enumerate in a place like these. I am listing belowa random list of broad categories of models used in production and operations model. Operations research models. This is actually a very broad classification and covers many of the other categories in the list given here. o Inventory models o Forecasting models o Network models o Linear programming models o Queuing models o Production planning and control models o Engineering drawings o Photographs and motion pictures used in time and motion studies. o Material movement charts o Process flow diagrams o Systems charts o Statistical process control charts. o Variance analysis o Regression analysis o Organization chart o Fishbone chart

Work study and motion study

Work study includes a wide field of measurement tools and techniques. Motion study or method study is concerned with analyzing individual human motions (like get object, put object) with a view to improving motion economy. Automated flow lines : When several automated machines are linked by a transfer system which moves the parts by using handling machines which are also automated, we have an automated flow line. After completing an operation on a machine, the semi finished parts are moved to the next machine in the sequence determined by the process requirements a flow line is established. The parts at various stages from raw material to ready for fitment or assembly are processed continuously to attain the required shapes or acquire special properties to enable them to perform desired functions. The materials need to be moved, held, rotated, lifted, positioned etc. for completing different operations. Sometimes, a few of the operations can be done on a single machine with a number of attachments. They are moved further to other machines for performing further operations. Human intervention may be needed to verify that the operations are taking place according to standards. When these can be achieved with the help of automation and the processes are conducted with self regulation, we will have automated flow lines

established. One important consideration is to balance times that different machines taketo complete the operations assigned to them. It is necessary to design the machines in such a way that the operation times are the same throughout the sequence in the flow of the martial. In fixed automation or hard automation, where one component is manufactured using several operations and machines it is possible to achieve this condition or very nearly. We assume that product life cycles are sufficiently stable to invest heavily on the automated flow lines to achieve reduced cost per unit. The global trends are favouring flexibility in the manufacturing systems. The costs involved in changing the set up of automated flow lines are high. So, automated flow lines are considered only when the product is required to be made in high volumes over a relatively long period. Designers now incorporate flexibility in the machines which will take care of small changes in dimensions by making adjustments or minor changes in the existing machine or layout. The change in movements needed can be achieved by programming the machines. Provision for extra pallets or tool holders or conveyors are made in the original design to accommodate anticipated changes. The logic to be followed is to find out whether the reduction in cost per piece justifies the costs of designing, manufacturing and setting up automated flow lines. Group Technology, Cellular Manufacturing along with conventional Product and Process Layouts are still resorted to as they allow flexibility for the production system. With methodologies of JIT and Lean Manufacturing finding importance and relevance in the competitive field of manufacturing, many companies have found that well designed flow lines suit their purpose well. Flow lines compel engineers to put in place equipments that balance their production rates. It is not possible to think of inventories (WorkIn Process) in a flow line. Bottlenecks cannot be permitted. By necessity, every bottleneck gets focused upon and solutions found to ease them. Production managerssee every bottleneck as an opportunity to hasten the flow and reduce inventories. However, it is important to note that setting up automated flow lines will not be suitable for many industries Automated Assembly Lines : All equipments needed to make a finished product are laid out in such a way as to follow the sequence in which the parts or subassemblies are put together and fitted. Usually, a

frame, body, base will be the starting point of an assembly. The frame itself consists of a construction made up of several components and would have been assembled or fabricated in a separate bay or plant and brought to the assembly line. All parts or subassemblies are fitted to enable the product to be in readiness to perform the function it was designed to. This process is called assembly. Methodologies of achieving the final result may vary, but the basic principle is to fit all parts together and ensure linkages so that their functions are integrated and give out the desired output. Product Layouts are designed so that the assembly tasks are performed in the sequence they are designed. You will note that the same task gets repeated at each station continuously. The finished item comes out at the end of the line The material goes from station 1 to 5 sequentially. Operation 2 takes longer time, say twice as long. To see that the flow is kept at the same pace we provide two locations 2a and 2b so that operations 3, 4 an 5 need not wait. At 5, we may provide more personnel to complete operations. The time taken at any of the locations should be the same. Otherwise the flow is interrupted. In automated assembly lines the moving pallets move the materials from station to station and moving arms pick up parts, place them at specified places and fasten them by pressing, riveting, screwing or even welding. Sensors will keep track of these activities and move the assemblies to the next stage. An operator will oversee that the assemblies are happening and there are no stoppages. The main consideration for using automated assembly lines is that the volumes justify thehuge expenses involved in setting Up the system. Q5.Explain Break Even Analysis and Centre of Gravity methods. Explain Product layout and process layout with examples. Ans. Break Even Analysis refers to the calculation to determine how much product a company must sell in order to break even on that product. It is an effective analysis to measure the impact of different marketing decisions. It can focus on the product, or incremental changes to the product to determine the potential outcomes of marketing tactics. The formula for a break even analysis is: Break even point ($) = (Total Fixed Costs + Total Variable Costs).

Total Variable Costs = Variable cost per unit x units sold Unit contribution (contribution margin) = Price per unit Variable cost per unit. When looking at making a change to the marketing program, one can calculate the incremental break even volume, to determine the merits of the change. This determines the required volume needed such that there is no effect to the company due to the change. If making changes to fixed costs (changing advertising expenditure etc.): Incremental break even volume = change in expenditure / unit contribution. Thus if a company increased its advertising expenditure by $1 million, and its unit contribution for the specific product is $20, then the company would need to sell an additional 50,000 units to break even on the decision. If making changes to the unit contribution (change in price, or variable costs): Incremental break even volume = (Old Unit Volume x (Old Unit Contribution New Unit Contribution)) / New Unit Contribution. Thus if a company increased its price from $15 to $20, and had variable costs of $10, it is increasing its unit contribution from $5 to $10, assume also an old unit volume of 1 million. It could therefore reduce its volume by 500,000 to break even on the decision. When making changes to a specific product, cannibalization of other products may occur. To calculate the effect of cannibalization, the Break Even Cannibalization rate for a change in a product is: New Product Unit Contribution / Old Product Unit Contribution. New Product is the planned addition to a product line (or change to a product within a product line), Old Product is the product that loses sales to the new product (or the product line that loses sales). The cannibalization rate refers to the percentage of new product that would have gone to the old product, this must be lower than the break even cannibalization rate in order for the change to be profitable. In manufacturing, facility layout consists of configuring the plant site with lines, buildings, major facilities, work areas, aisles, and other pertinent features such as department boundaries. While facility layout for services may be similar to that for manufacturing, it also may be somewhat differentas is the case with offices, retailers,

and warehouses. Because of its relative permanence, facility layout probably is one of the most crucial elements affecting efficiency. An efficient layout can reduce unnecessary material handling, help to keep costs low, and maintain product flow through the facility. Firms in the upper left-hand corner of the product-process matrix have a process structure known as a jumbled flow or a disconnected or intermittent line flow. Upperleft firms generally have a process layout. Firms in the lower right-hand corner of the product-process matrix can have a line or continuous flow. Firms in the lowerright part of the matrix generally have a product layout. Other types of layouts include fixed position,combination, cellular, and certain types of service layouts.

PROCESS LAYOUT Process layouts are found primarily in job shops, or firms that produce customized, lowvolume products that may require different processing requirements and sequences of operations. Process layouts are facility configurations in which operations of a similar nature or function are grouped together. As such, they occasionally are referred to as functional layouts. Their purpose is to process goods or provide services that involve a variety of processing requirements. A manufacturing example would be a machine shop. A machine shop generally has separate departments where generalpurpose machines are grouped together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore, facilities that are configured according to individual functions or processes have a process layout. This type of layout gives the firm the flexibility needed to handle a variety of routes and process requirements. Services that utilize process layouts include hospitals, banks, auto repair, libraries, and universities. Improving process layouts involves the minimization of transportation cost, distance, or time. To accomplish this some firms use what is known as a Muther grid, where subjective information is summarized on a grid displaying various combinations of

department, work group, or machine pairs. Each combination (pair), represented by an intersection on the grid, is assigned a letter indicating the importance of the closeness of the two (A = absolutely necessary; E = very important; I = important; O = ordinary importance; U = unimportant; X = undesirable). Importance generally is based on the shared use of facilities, equipment, workers or records, work flow, communication requirements, or safety requirements. The departments and other elements are then assigned to clusters in order of importance. Advantages of process layouts include: Flexibility. The firm has the ability to handle a variety of processing requirements. Cost. Sometimes, the general-purpose equipment utilized may be less costly to purchase and less costly and easier to maintain than specialized equipment. Motivation. Employees in this type of layout will probably be able to perform a variety of tasks on multiple machines, as opposed to the boredom of performing a repetitive task on an assembly line. A process layout also allows the employer to use some type of individual incentive system. System protection. Since there are multiple machines available, process layouts are not particularly vulnerable to equipment failures. Disadvantages of process layouts include: Utilization. Equipment utilization rates in process layout are frequently very low, because machine usage is dependent upon a variety of output requirements. Cost. If batch processing is used, in-process inventory costs could be high. Lower volume means higher per-unit costs. More specialized attention is necessary for both products and customers. Setups are more frequent, hence higher setup costs. Material handling is slower and more inefficient. The span of supervision is small due to job complexities (routing, setups, etc.), so supervisory costs are higher. Additionally, in this type of layout accounting, inventory control, and purchasing usually are highly involved. Confusion. Constantly changing schedules and routings make juggling process requirements more difficult.

PRODUCT LAYOUT Product layouts are found in flow shops (repetitive assembly and process or continuous flow industries). Flow shops produce high-volume, highly standardized products that require highly standardized, repetitive processes. In a product layout, resources are arranged sequentially, based on the routing of the products. In theory, this sequential layout allows the entire process to be laid out in a straight line, which at times may be totally dedicated to the production of only one product or product version. The flow of the line can then be subdivided so that labor and equipment are utilized smoothly throughout the operation. Two types of lines are used in product layouts: paced and unpaced. Paced lines can use some sort of conveyor that moves output along at a continuous rate so that workers can perform operations on the product as it goes by. For longer operating times, the worker may have to walk alongside the work as it moves until he or she is finished and can walk back to the workstation to begin working on another part (this essentially is how automobile manufacturing works). On an unpaced line, workers build up queues between workstations to allow a variable work pace. However, this type of line does not work well with large, bulky products because too much storage space may be required. Also, it is difficult to balance an extreme variety of output rates without significant idle time. A technique known as assembly-line balancing can be used to group the individual tasks performed into workstations so that there will be a reasonable balance of work among the workstations. Product layout efficiency is often enhanced through the use of line balancing. Line balancing is the assignment of tasks to workstations in such a way that workstations have approximately equal time requirements. This minimizes the amount of time that some workstations are idle, due to waiting on parts from an upstream process or to avoid building up an inventory queue in front of a downstream process.


Advantages of product layouts include: Output. Product layouts can generate a large volume of products in a short time. Cost. Unit cost is low as a result of the high volume. Labor specialization results in reduced training time and cost. A wider span of supervision also reduces labor costs. Accounting, purchasing, and inventory control are routine. Because routing is fixed, less attention is required. Utilization. There is a high degree of labor and equipment utilization. Disadvantages of product layouts include: Motivation. The systems inherent division of labor can result in dull, repetitive jobs that can prove to be quite stressful. Also, assembly-line layouts make it very hard to administer individual incentive plans. Flexibility. Product layouts are inflexible and cannot easily respond to required system changesespecially changes in product or process design. System protection. The system is at risk from equipment breakdown, absenteeism, and downtime due to preventive maintenance.


MBA 2nd SEM Subject Code MB0045 Book ID B1134 FINANCIAL MANAGEMENT Set 1
Q1. What are the 4 finance decisions taken by a finance manager. Ans. A firm performs finance functions simultaneously and continuously in the normal course of the business. They do not necessarily occur in a sequence. Finance functions call for skilful planning, control and execution of a firms activities. Let us note at the outset hat shareholders are made better off by a financial decision that increases the value of their shares, Thus while performing the finance function, the financial manager should strive to maximize the market value of shares. Whatever decision does a manger takes need to result in wealth maximization of a shareholder.


Investment Decision Investment decision or capital budgeting involves the decision of allocation of capital or commitment of funds to long-term assets that would yield benefits in the future. Two important aspects of the investment decision are: (a) the evaluation of the prospective profitability of new investments, and (b) the measurement of a cut-off rate against that the prospective return of new investments could be compared. Future benefits of investments are difficult to measure and cannot be predicted with certainty. Because of the uncertain future, investment decisions involve risk. Investment proposals should, therefore, be evaluated in terms of both expected return and risk. Besides the decision for investment managers do see where to commit funds when an asset becomes less productive or non-profitable. There is a broad agreement that the correct cut-off rate is the required rate of return or the opportunity cost of capital. However, there are problems in computing the opportunity cost of capital in practice from the available data and information. A decision maker should be aware of capital in practice from the available data and information. A decision maker should be aware of these problems. Financing Decision Financing decision is the second important function to be performed by the financial manager. Broadly, her or she must decide when, where and how to acquire funds to meet the firms investment needs. The central issue before him or her is to determine the proportion of equity and debt. The mix of debt and equity is known as the firms capital structure. The financial manager must strive to obtain the best financing mix or the optimum capital structure for his or her firm. The firms capital structure is considered to be optimum when the market value of shares is maximized. The use of debt affects the return and risk of shareholders; it may increase the return on equity funds but it always increases risk. A proper balance will have to be struck between return and risk. When the shareholders return is maximized with minimum risk, the market value per share will be maximized and the firms capital structure would be considered optimum. Once the financial manager is able to determine the best combination of debt and


equity, he or she must raise the appropriate amount through the best available sources. In practice, a firm considers many other factors such as control, flexibility loan convenience, legal aspects etc. in deciding its capital structure. Dividend Decision Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distribute all profits, or retain them, or distribute a portion and retain the balance. Like the debt policy, the dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one that maximizes the market value of the firms shares. Thus if shareholders are not indifferent to the firms dividend policy, the financial manager must determine the optimum dividend payout ratio. The payout ratio is equal to the percentage of dividends to earnings available to shareholders. The financial manager should also consider the questions of dividend stability, bonus shares and cash dividends in practice. Most profitable companies pay cash dividends regularly. Periodically, additional shares, called bonus share (or stock dividend), are also issued to the existing shareholders in addition to the cash dividend. Liquidity Decision Current assets management that affects a firms liquidity is yet another important finances function, in addition to the management of long-term assets. Current assets should be managed efficiently for safeguarding the firm against the dangers of illiquidity and insolvency. Investment in current assets affects the firms profitability. Liquidity and risk. A conflict exists between profitability and liquidity while managing current assets. If the firm does not invest sufficient funds in current assets, it may become illiquid. But it would lose profitability, as idle current assets would not earn anything. Thus, a proper trade-off must be achieved between profitability and liquidity. In order to ensure that neither insufficient nor unnecessary funds are invested in current assets, the financial manager should develop sound techniques of


managing current assets. He or she should estimate firms needs for current assets and make sure that funds would be made available when needed. It would thus be clear that financial decisions directly concern the firms decision to acquire or dispose off assets and require commitment or recommitment of funds on a continuous basis. It is in this context that finance functions are said to influence production, marketing and other functions of the firm. This, in consequence, finance functions may affect the size, growth, profitability and risk of the firm, and ultimately, the value of the firm. To quote Ezra Solomon The function of financial management is to review and control decisions to commit or recommit funds to new or ongoing uses. Thus, in addition to raising funds, financial management is directly concerned with production, marketing and other functions, within an enterprise whenever decisions are about the acquisition or distribution of assets. Various financial functions are intimately connected with each other. For instance, decision pertaining to the proportion in which fixed assets and current assets are mixed determines the risk complexion of the firm. Costs of various methods of financing are affected by this risk. Likewise, dividend decisions influence financing decisions and are themselves influenced by investment decisions. In view of this, finance manager is expected to call upon the expertise of other functional managers of the firm particularly in regard to investment of funds. Decisions pertaining to kinds of fixed assets to be acquired for the firm, level of inventories to be kept in hand, type of customers to be granted credit facilities, terms of credit should be made after consulting production and marketing executives. However, in the management of income finance manager has to act on his own. The determination of dividend policies is almost exclusively a finance function. A finance manager has a final say in decisions on dividends than in asset management decisions. Financial management is looked on as cutting across functional even disciplinary boundaries. It is in such an environment that finance manager works as a part of


total management. In principle, a finance manager is held responsible to handle all such problem: that involve money matters. But in actual practice, as noted above, he has to call on the expertise of those in other functional areas to discharge his responsibilities effectively. Q.2 What are the factors that affect the financial plan of a company? Ans. To help your organization succeed, you should develop a plan that needs to be followed. This applies to starting the company, developing new product, creating a new department or any undertaking that affects the companys future. There are several factors that affect planning in an organization. To create an efficient plan, you need to understand the factors involved in the planning process. Priorities In most companies, the priority is generating revenue, and this priority can sometimes interfere with the planning process of any project. For example, if you are in the process of planning a large expansion project and your largest customer suddenly threatens to take their business to your competitor, then you might have to shelve the expansion planning until the customer issue is resolved. When you start the planning process for any project, you need to assign each of the issues facing the company a priority rating. That priority rating will determine what issues will sidetrack you from the planning of your project, and which issues can wait until the process is complete. Company Resources Having an idea and developing a plan for your company can help your company to grow and succeed, but if the company does not have the resources to make the plan come together, it can stall progress. One of the first steps to any planning process should be an evaluation of the resources necessary to complete the project, compared to the resources the company has available. Some of the resources to consider are finances, personnel, space requirements, access to materials and vendor relationships. Forecasting


A company constantly should be forecasting to help prepare for changes in the marketplace. Forecasting sales revenues, materials costs, personnel costs and overhead costs can help a company plan for upcoming projects. Without accurate forecasting, it can be difficult to tell if the plan has any chance of success, if the company has the capabilities to pull off the plan and if the plan will help to strengthen the companys standing within the industry. For example, if your forecasting for the cost of goods has changed due to a sudden increase in material costs, then that can affect elements of your product roll-out plan, including projected profit and the long-term commitment you might need to make to a supplier to try to get the lowest price possible. Contingency Planning To successfully plan, an organization needs to have a contingency plan in place. If the company has decided to pursue a new product line, there needs to be a part of the plan that addresses the possibility that the product line will fail. The reallocation of company resources, the acceptable financial losses and the potential public relations problems that a failed product can cause all need to be part of the organizational planning process from the beginning. Q.3 Show the relationship between required rate of return and coupon rate on the value of a bond. Ans. It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section, we will run through some bond price calculations for various types of bond instruments.Bonds can be priced at a premium, discount, or at par. If the bonds price is higher than its par value, it will sell at a premium because its interest rate is higher than current prevailing rates. If the bonds price is lower than its par value, the bond will sell at a discount because its interest rate is lower than current prevailing interest rates. When you calculate the price of a bond, you are calculating the maximum price you would want to pay for the bond, given the bonds coupon rate in comparison to the average


rate most investors are currently receiving in the bond market. Required yield or required rate of return is the interest rate that a security needs to offer in order to encourage investors to purchase it. Usually the required yield on a bond is equal to or greater than the current prevailing interest rates. Fundamentally, however, the price of a bond is the sum of the present values of all expected couponpayments plus the present value of the par value at maturity. Calculating bond price is simple: all we are doing is discounting the known future cash flows. Remember that to calculate present value (PV) which is based on the assumption that each payment is re-invested at some interest rate once it is receivedwe have to know the interest rate that would earn us a known future value. For bond pricing, this interest rate is the required yield. (If the concepts of present and future value are new to you or you are unfamiliar with the calculations, refer to Understanding the Time Value of Money.) Here is the formula for calculating a bonds price, which uses the basic present value (PV) formula: C = coupon payment n = number of payments i = interest rate, or required yield M = value at maturity, or par value The succession of coupon payments to be received in the future is referred to as an ordinary annuity, which is a series of fixed payments at set intervals over a fixed period of time. (Coupons on a straight bond are paid at ordinary annuity.) The first payment of an ordinary annuity occurs one interval from the time at which the debt security is acquired. The calculation assumes this time is the present. You may have guessed that the bond pricing formula shown above may be tedious to calculate, as it requires adding the present value of each future coupon payment. Because these payments are paid at an ordinary annuity, however, we can use the shorter PV-of-ordinary-annuity formula that is mathematically equivalent to the summation of all the PVs of future cash flows. This PV-of-ordinary-annuity formula replaces the need to add all the present values of the future coupon. The following


diagram illustrates how present value is calculated for an ordinary annuity: Each full moneybag on the top right represents the fixed coupon payments (future value) received in periods one, two and three. Notice how the present value decreases for those coupon payments that are further into the future the present value of the second coupon payment is worth less than the first coupon and the third coupon is worth the lowest amount today. The farther into the future a payment is to be received, the less it is worth today is the fundamental concept for which the PV-ofordinaryannuity formula accounts. It calculates the sum of the present values of all future cash flows, but unlike the bond-pricing formula we saw earlier, it doesnt require that we add the value of each coupon payment. (For more on calculating the time value of annuities,see Anything but Ordinary: Calculating the Present and Future Value of Annuities andUnderstanding the Time Value of Money. ) By incorporating the annuity model into the bond pricing formula, which requires us to also include the present value of the par value received at maturity, we arrive at the following formula: Lets go through a basic example to find the price of a plain vanilla bond. Example 1: Calculate the price of a bond with a par value of $1,000 to be paid in ten years, a coupon rate of 10%, and a required yield of 12%. In our example well assume that coupon payments are made semi-annually to bond holders and that the next coupon payment is expected in six months. Here are the steps we have to take to calculate the price: 1. Determine the Number of Coupon Payments: Because two coupon payments will be made each year for ten years, we will have a total of 20 coupon payments. 2. Determine the Value of Each Coupon Payment: Because the coupon payments are semi-annual, divide the coupon rate in half. The coupon rate is the percentage off the bonds par value. As a result, each semi-annual coupon payment will be $50 ($1,000 X 0.05). 3. Determine the Semi-Annual Yield: Like the coupon rate, the required yield of 12% must be divided by two because the number of periods used in the calculation has doubled. If we left the required yield at 12%, our bond price would be very low and


inaccurate. Therefore, the required semi-annual yield is 6% (0.12/2). 4. Plug the Amounts Into the Formula: From the above calculation, we have determined that the bond is selling at a discount; the bond price is less than its par value because the required yield of the bond is greater than the coupon rate. The bond must sell at a discount to attract investors, who could find higher interest elsewhere in the prevailing rates. In other words, because investors can make a larger return in the market, they need an extra incentive to invest in the bonds. Accounting for Different Payment Frequencies In the example above coupons were paid semi-annually, so we divided the interest rate and coupon payments in half to represent the two payments per year. You may be now wondering whether there is a formula that does not require steps two and three outlined above, which are required if the coupon payments occur more than once a year. A simple modification of the above formula will allow you to adjust interest rates and coupon payments to calculate a bond price for any payment frequency: Notice that the only modification to the original formula is the addition of F, which represents the frequency of coupon payments, or the number of times a year the coupon is paid. Therefore, for bonds paying annual coupons, F would have a value of one. Should a bond pay quarterly payments, F would equal four, and if the bond paid semiannual coupons, F would be two. Q.4 Discuss the implication of financial leverage for a firm. Ans. The financial leverage implies the employment of source of funds, involving fixed return so as to cause more than a proportionate change in earnings per share (EPS) due to change in operating profits. Like the operating leverage, financial leverage can be positive when operating profits are increasing and can be negative in the situation of decrease in such profits. In view of these, financial leverage will affect the financial risk of the firm. An important analytical tool for financial leverage is the indifference point at


which the EPS/market price is the same for different financial plans under consideration. The objective of this study was to provide additional evidence on the relationship between financial leverage and the market value of common stock. Numerous empirical studies have been done in this area, and, concurrently, many theories have been developed to explain the relationship between financial leverage and the market value of common stock. Because of the methodological weaknesses of past studies, however, no conclusions can be drawn as to the validity of the theories. Theories on financial leverage may be classified into three categories: irrelevance theorem, rising from value indefinitely with increase in financial leverage, and optimal financial leverage. Empirical implications of these categories along with the consequences of serious confounding effects are analyzed. The implications are then compared with evidence from actual events involving financial leverage changes, and distinguished from each other as finely as possible, using simple and multiple regression analyses, normal Z-test, and a simulation technique. The evidence shows that changes in the market value of common stock are positively related to changes in financial leverage for some firms and negatively related for other firms. This evidence is consistent with the existence of an optimal financial leverage for each firm, assuming that financial leverages of firms with a positive relationship are below the optimum and those of firms with a negative relationship are above the optimum. The results of the study do not depend upon the definition of the market portfolio, the definition of the event period, or the choice of financial leverage measure. Betas estimated from equally weighted market portfolios were generally higher than those estimated from value weighted market portfolios during 1981-1982. However, the results of the study were the same for both portfolios. Abnormal returns were computed for seven and two day event periods, and the results


were the same for both periods. Seven different definitions of financial leverage were tested, and the results were the same for all measures. ASSIGNMENTS

MBA 2nd SEM Subject Code MB0046 Book ID B1135 MARKETING MANAGEMENT Set 1
Q.1 What is Marketing Information System? Explain its characteristics, benefits and information types. Ans. A Marketing Information System can be defined as a system in which marketing information is formally gathered, stored, analysed and distributed to managers in accord with their informational needs on a regular basis. Set of procedures and practices employed in analyzing and assessing marketing information, gathered continuously from sources inside and outside of a firm. Timely marketing information provides basis for decisionssuch as product development or improvement, pricing, packaging, distribution, media selection, and promotion. Characteristics of MIS Philip Kotler defines MIS as a system that consists of people, equipment and procedures to gather,sort, analyze, evaluate and distribute needed, timely and accurate information tomarketing decisionmakers.Its characteristics are as follows: 1. It is a planned system developed to facilitate smooth and continuous flow of information. 2. It provides pertinent information, collected from sources both internal and external to the company, for use as the basis of marketing decision making. 3. It provides right information at the right time to the right person. A well designed MIS serves as a companys nerve centre, continuously monitoring the market environment both inside and outside the organization. In the process, it collects lot of data and stores in the form of a database which is maintained in an organized manner. Marketers classify and analyze this data from the database as needed. Benefits of MIS(Marketing Information System)


Various benefits of having a MIS and resultant flow of marketing information are given below: 1. It allows marketing managers to carry out their analysis, planning implementation and control responsibilities more effectively. 2. It ensures effective tapping of marketing opportunities and enables the company to develop effective safeguard against emerging marketing threats. 3. It provides marketing intelligence to the firm and helps in early spotting of changing trends. 4. It helps the firm adapt its products and services to the needs and tastes of the customers. 5. By providing quality marketing information to the decision maker, MIS helps in improving the quality of decision making. Types of Marketing Information A Marketing Information System supplies three types of information. 1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly, quarterly, or annual interval. This includes data such as sales, Market Share, sales call reports, inventory levels, payables, and receivables etc. which are made available regularly. Information on customer awareness of companys brands, advertising campaigns and similar data on close competitors can also be provided. 2. Monitoring Information is the data obtained from regular scanning of certain sources such as trade journals and other publications. Here relevant data from external environment is captured to monitor changes and trends related to marketing situation. Data about competitors can also be part of this category. Some of these data can be purchased at a price from commercial sources such as Market Research agencies or from Government sources. 3. Problem related or customized information is developed in response to some specific requirement related to a marketing problem or any particular data requested by a manager. Primary Data or Secondary Data (or both) are collected through survey


Research in response to specific need. For example, if the company has developed a new product, the marketing manager may want to find out the opinion of the target customers before launching the product in the market. Such data is generated by conducting a market research study with adequate sample size, and the findings obtained are used to help decide whether the product is accepted and can be launched. Q.2 a. Examine how a firms macro environment operates. b. Mention the key points in Psychoanalytic model of consumer behaviour. Ans. The term micro-environment denotes those elements over which the marketing firm has control or which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the companys customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed the marketing mix which is a combination of all the ingredients in a recipe that is designed to prove most attractive to customers. In this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the four Ps. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix together with an explanation of how they fit into the overall notion of marketing. A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: Political Economic Social Technological The acronym PEST (or sometimes rearranged as STEP) is used to describe a


framework for the analysis of these macroenvironmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram: Environmental Scan /\ External Analysis Internal Analysis /\ Macroenvironment Microenvironment | P.E.S.T. Political Factors Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include: tax policy employment laws environmental regulations trade restrictions and tariffs political stability Economic Factors Economic factors affect the purchasing power of potential customers and the firms cost of capital. The following are examples of factors in the macroeconomy: economic growth interest rates exchange rates inflation rate Social Factors Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness population growth rate age distribution career attitudes emphasis on safety Technological Factors Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: R&D activity automation technology incentives rate of technological change External Opportunities and Threats


The PEST factors combined with external micro environmental factors can be classified as opportunities and threats in a SWOT analysis. The Psychoanalytical Model: The psychoanalytical model draws from Freudian Psychology. According to this model, the individual consumer has a complex set of deepseated motives which drive him towards certain buying decisions. The buyer has a private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by appealing to these desires and longings. The psychoanalytical theory is attributed to the work of eminent psychologist Sigmund Freud. Freud introduced personality as a motivating force in human behavior. According to this theory, the mental framework of a human being is composed of three elements, namely, 1. The id or the instinctive, pleasure seeking element. It is the reservoir of the instinctive impulses that a man is born with and whose processes are entirely subconscious. It includes the aggressive, destructive and sexual impulses of man. 2. The superego or the internal filter that presents to the individual the behavioral expectations of society. It develops out of the id, dominates the ego and represents the inhibitions of instinct which is characteristic of man. It represents the moral and ethical elements, the conscience. 3. The ego or the control device that maintains a balance between the id and the superego. It is the most superficial portion of the id. It is modified by the influence of the outside world. Its processes are entirely conscious because it is concerned with the perception of the outside world. The basic theme of the theory is the belief that a person is unable to satisfy all his needs within the bounds of society. Consequently, such unsatisfied needs create tension within an individual which have to be repressed. Such repressed tension is always said to exist in the subconscious and continues to influence consumer behavior. 4. The Sociological Model: According to the sociological model, the individual buyer is influenced by society or intimate groups as well as social classes. His buying decisions


are not totally governed by utility He has a desire to emulate, follow and fit in with his immediate environment. 5. The Nicosia Model: In recent years, some efforts have been made by marketing scholars to build buyer behavior models totally from the marketing mans standpoint. The Nicosia model and the Howard and Sheth model are two important models in this category. Both of them belong to the category called the systems model, where the human being is analyzed as a system with stimuli as the input to the system and behavior as the output of the system. Francesco Nicosia, an expert in consumer motivation and behavior put forward his model of buyer behavior in 1966. The model tries to establish the linkages between a firm and its consumer how the activities of the firm influence the consumer and result in his decision to buy. The messages from the firm first influence the predisposition of the consumer towards the product. Depending on the situation, he develops a certain attitude towards the product. It may lead to a search for the product or an evaluation of the product. If these steps have a positive impact on him, it may result in a decision to buy. This is the sum and substance of the activity explanations in the Nicosia Model. TheNicosia Model groups these activities into four basic fields. Field one has two subfieldsthe firms attributes and the consumers attributes. An advertising message from thefirm reaches the consumers attributes. Depending on the way the message is receivedby the consumer, a certain attribute may develop, and this becomes the input for FieldTwo. Field Two is the area of search and evaluation of the advertised product and otheralternatives. If this process results in a motivation to buy, it becomes the input for Three Fields. Three consists of the act of purchase. And Field Four consists of the use of the purchased item.

Q.3 Explain the key roles played and various steps involved in organizational buying. Ans. Point 1 Introduction.


The need for an understanding of the organizational buying process has grown in recent years due to the many competitive challenges presented in business-tobusiness markets. Since 1980 there have been a number ofkey changes in this area, including the growth of outsourcing, the increasing power enjoyed by purchasing departments and the importance given to developing partnerships with suppliers. Point 2 The organizational buying behaviour process. The organizational buying behaviour process is well documented with many models depicting the various phases, the members involved, and the decisions made in each phase. The basic five phase model can be extended to eight; purchase initiation; evaluations criteria formation; information search; supplier definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice implementation (Matbuy, 1986). Point 3 The buying centre. The buying centre consists of those people in the organizational who are involved directly or indirectly in the buying process, i.e. the user, buyer influencer, decider and gatekeeper to who the role of initiator has also been added. The buyers in the process are subject to a wide variety and complexity of buying motives and rules of selection. The Matbuy model encourages marketers to focus their efforts on who is making what decisions based on which criteria. Point 4 Risk and uncertainty The driving forces of organizational buying behaviour. This is concerned with the role of risk or uncertainty on buying behaviour. The level of risk depends upon the characteristics of the buying situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and cause certain desired behavioural reactions by the use of information and the implementation of certain actions. The risks perceived by the customer can result from a combination of the characteristics of various factors: the transaction involved, the relationship with the supplier, and his position vis-a-vis the supply market. Point 5 Factors influencing organizational buying behaviour. Three key factors are shown to influence organizational buying behaviour, these are, types of buying situations and situational factors, geographical and cultural factors and


time factors. Point 6 Purchasing Strategy. The purchasing function is of great importance because its actions will impact directly on the organizations profitability. Purchasing strategy aims to evaluate and classify the various items purchased in order to be able to choose and manage suppliers accordingly. Classification is along two dimensions: importance of items purchased and characteristics of the supply market. Actions can be taken to influence the supply market. Based on the type of items purchased and on its position in the buying matrix, a company will develop different relationships with suppliers depending upon the number of suppliers, the suppliers share, characteristics of selected suppliers, and the nature of customer-supplier relationships. The degree of centralization of buying activities and the missions and status of the buying function can help support purchasing strategy. The company will adapt its procedures to the type of items purchased which in turn will influence relationships with suppliers. Point 7 The future. Two activities which will be crucial to the future development of organizational buying behaviour will be information technology and production technologies. Point 8 Conclusion.Organizational buying behaviour is a very complex area, however, an understanding of the key factors are fundamental to marketing strategy and thus an organizations ability to compete effectively in the market place. Q.4 Explain the different marketing philosophies and its approach. Ans. Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. According to the American Marketing Association, Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goods There are six competing philosophies under which organizations conduct marketing


activities the production concept, product concept, selling concept, marketing concept, customer concept; and societal concept. 1) The Production Concept: The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in products availability and low prices. This philosophy makes sense in developing countries, where consumers are more interested in obtaining the product than its features. It is also used when a company wants to expand the market. 2. The product Concept Product concept holds that consumer will favour these products that offer the most quality, performance and innovative features. Managers in these organizations focus on making superior products and improving them over time. They assume that buyers admire well-made products and can evaluate quality and performance product oriented companies often trust that their engineers can design exceptional products. They get little or no customer input, and very often they will not even examine competitors products. 3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organizations products. The organization most, therefore, undertakes an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is epitomized by the thinking that The purpose of marketing is to sell more stuff to more people for more money in order to make more profit Most firms practice the selling concept when they have over capacity. Their aim is to sell what they make rather then make what market wants.


4. The Marketing Concept: The marketing concepts hold that the key to achieving its organizational goals consists of the company being more effective then competitors in creating, delivering and communicating superior customer value to its chosen target markets. The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. There is a contrast between selling and marketing concepts: Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the sellers need to convert his product into cash; marketing with the ideas of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it. 5. The customer Concept: Under customer concept, companies shape separate offers, services and messages to individual customers. These companies collect information on each customers past transactions, demographics, psychographics and media and distribution preferences. They hope to achieve profitable growth through capturing a larger share of each customers expenditures by building high customer loyalty and focusing on customer lifetime value.The ability of a company to deal with customers are at a time become practical asa result of advances in factory customization, computers, the internet and database marketing software. 6. The Societal Marketing Concept: The societal marketing concept holds that the organizations goal is to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumers and the societys well being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the oftenconflicting criteria of company profits, consumer want satisfaction and public interest. Companies see cause-related marketing as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales and increase press coverage. They believe that consumers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits.


Q. 5 What are the various stages involved in decision process when a consumer is buying new product? Also, explain the adoption process. Ans. Stages of the Consumer Buying Process Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexitydiscussed next. The 6 stages are:

1. Problem Recognition(awareness of need)difference between the

desired state and the actual condition. Deficit in assortment of products. HungerFood. Hunger stimulates your need to eat. Can be stimulated by the marketer through product informationdid not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

2. Information search

o Internal search, memory. o External search if you need more information. Friends and relatives

(word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is 1.o chinese food o indian food o burger king o klondike kates etc

2. Evaluation of AlternativesNeed to establish criteria for evaluation,

features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by framing alternatives.

1. Purchase decisionChoose buying alternative, includes product,

package, store,


method of purchase etc. 2. PurchaseMay differ from decision, time lapse between 4 & 5, product availability. 3. Post-Purchase Evaluationoutcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead. Adoption Process Adoption is an individuals decision to become a regular user of a product. How do potential customers learn about new products, try them, and adopt or reject them? The consumer adoption process is later followed by the consumer loyalty process, which is the concern of the established producer. Years ago, new product marketers used a mass market approach to launch products. This approach had two main drawbacks: It called for heavy marketing expenditures, and it involved many wasted exposures. These drawbacks led to a second approach, heavy user target marketing. This approach makes sense, provided that heavy users are identifiable and are early adopters. However, even within the heavy user group, many heavy users are loyal to existing brands. New product marketers now aim at consumers who are early adopters. The theory of innovation diffusion and consumer adoption helps marketers identify early adopters. An innovation is any good, service, or idea that is perceived by someone as new. The idea may have a long History, but it is an innovation to the person who sees it as new. Innovations take time to spread through the social system. The Innovation diffusion process is defined as oethe spread of a new idea from its source of invention or creation to its ultimate users or adopters. The consumer adoption process is the mental process through which an individual passes from first hearing about an innovation to final adoption. Adopters of new products have been observed to move through five stages: 1. Awareness : The consumer becomes aware of the innovation but lacks information about it. 2. Interest : The consumer is stimulated to seek information about the


innovation. 3. Evaluation: The consumer considers whether to try the innovation 4. Trial: The consumer tries the innovation to improve his or her estimate of its value. 5. Adoption : The consumer decides to make full and regular use of the innovation. Q. 6 Explain briefly the marketing mix elements for an automobile company giving sufficient examples. Ans. Marketing mix is the combination of elements that you will use to market your product. There are four elements: Product, Place, Price and Promotion. They are called the four Ps of the marketing mix. The objectives of this lesson about marketing mix is to give you: -The tools you need for establishing your detailed marketing plan and forecasting your sales. 1. 2. 3. 4. 5. 6. 7. 8. Challenge Product Place Price Promotion Sales strategy Do it Yourself Coaching

1-CHALLENGE You have gotten a rough idea about the market situation and the possible positioning of your product. Of course, its far to be sufficient. Now, you must write your detailed planning. It means that brainstorming is ended and that you have to go to the specifics in examining and checking all the hypothesis you had made in the preceding chapters. You will use the marketing mix. Some people think that the four Ps are old fashionable and propose a new paradigm: The four Cs! Product becomes customer needs; Place becomes convenience, price is replaced by cost to the user, promotion becomes communication. It looks like a joke but the Cs is more customer-oriented. 2-PRODUCT A good product makes its marketing by itself because it gives benefits to the


customer. We can expect that you have right now a clear idea about the benefits your product can offer. Suppose now that the competitors products offer the same benefits, same quality, same price. You have then todifferentiate your product with design, features, packaging, services, warranties, return and so on. In general, differentiation is mainly related to: -The design: it can be a decisive advantage but it changes with fads. For example, a fun board must offer a good and fashionable design adapted to young people. -The packaging: It must provides a better appearance and a convenient use. In food business, products often differ only by packaging. -The safety: It does not concern fun board but it matters very much for products used by kids. -The green: A friendly product to environment gets an advantage among some segments. In business to business and for expensive items, the best mean of differentiation are warranties, return policy, maintenance service, time payments and financial and insurance services linked to the product 3-PLACE-DISTRIBUTION A crucial decision in any marketing mix is to correctly identify the distribution channels. The question how to reach the customer must always be in your mind. -Definition: The place is where you can expect to find your customer and consequently, where the sale is realized. Knowing this place, you have to look for a distribution channel in order to reach your customer. In fact, instead of place it would be better to use the word distribution but the MBA lingo uses place to memorize the 4 Ps of the marketing mix! 4-PRICE Price means the pricing strategy you will use. You have already fixed, as an hypothesis a customer price fitted to your customer profile but you will have now to bargain it with the wholesalers and retailers. Do not be foolish: They know better the market than you and you have to listen their advices. 5-PROMOTION


Advertising, public relations and so on are included in promotion and consequently in the 4Ps. Sometimes, packaging becomes a fifth P. As promotion is closely linked to the sales, I will mention here the most common features about the sale strategy. -Definition: The function of promotion is to affect the customer behavior in order to close a sale.Of course, it must be consistent with the buying process described in the consumer analysis. Promotion includes mainly three topics: advertisement, public relations, and sales promotions. -Advertisement: It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have to take notice about three important notions: Reach is the percentage of the target market which is affected by your advertisement. For example, if you advertise on radio you must know how many people belonging to your segment can be affected. Frequency is the number of time a person is exposed to your message. It is said that a person must be exposedseven times to the message before to be aware of it. Reach*frequency gives the gross rating point. You have to evaluate it before any advertisement campaign. Message: Sometimes, it is called a creative. Anyway, the message must: get attraction, capture interest, create desire and finally require action that is to say close the sale. Down-earth-advice: There are some magical words that you can use in any message: -Your-YouI-Me-MyNow-Today -Fast-Easy-Cool-New-Fun-Updated-Free-Exciting-Astonishing -Success-Love-Money-Comfort-Protection-Freedom-Luck. -Public relations: Public relations are more subtle and rely mainly on your own personality. For example, you can deliver public speeches on subjects such as economics, geoeconomics, futurology to several organizations (civic groups, political groups, fraternal organizations, professional associations) 6-SALES STRATEGY Sales bring in the money. Salesmen are directly exposed to the pressure of finding prospects, making deals, beating competition and bringing money.



MBA 2nd SEM Subject Code MB0047



Q1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some Disadvantage of MIS? Ans. Definition : Organized approach to the study of information needs of a management at every level in making operational,tactical, and strategic decisions. Its objective is to design and implement man-machine procedures, processes, and routines that provide suitably detailed reports in an accurate, consistent, and timely manner. Modern, computerized systems continuously gather relevant data, both from inside and outside the organization. This data is then processed, integrated, and stored in a centralized database (or data warehouse) where it is constantly updated and made available to all who have the authority to access it, in a form that suits their purpose. Characteristics of MIS: MIS is mainly designed to take care of the needs of the managers in the organization. MIS aids in integrating the information generated by various departments of the organization. MIS helps in identifying a proper mechanism of storage of data. MIS also helps in establishing mechanism to eliminate redundancies in data. MIS as a system can be broken down into sub systems.The role and significance of MIS in business and its classification is explained. It is possible to understand the various phases of development in MIS based on the type of system required in any organization. Functions of MIS 1. Data processing It includes the collection, transmission, storage, processing and output of data. It simplifies the statistics and reduces to the lowest cost by supplying an unified format. 2. Function of prediction It predicts the future situation by applying modern mathematics, statistics or simulation. 3. Function of plan It arranges reasonably the plans of each functional department in accordance with the


restrictions afforded by enterprises and provides the appropriate planning reports according to different management. 4. Function of control It monitors and inspects the operation of plans and comprises with the differences between operation and plan in accordance with the data afforded by every functional department, and be assistant to managers to control timely each method by analyzing the reasons why the differences comes into being. 5. Function of assistance It derives instantly the best answers of related problems by applying to various of mathematics mode and analyzing a plentiful data stored in computers in the hope of using rationally human resource, financial resource, material resource and information resource for relative abundant economic benefits. Disadvantages of MIS 1.highly senstive requires constant monitoring. 2.buddgeting of MIS extremely difficult. 3.Quality of outputs governed by quality of inputs. 4.lack of flexiblity to update itself. 5.effectiveness decreases due to frequent changes in top management 6.takes into account only qualitative factors and ignores non-qualitative factors like morale of worker, attitude of worker etc. Q2. Explain Knowledge based system? Explain DSS and OLAP with example? Ans. Knowledge-based system focuses on systems that use knowledgebased techniquesto support human decision-making, learning and action it is a computer system that is programmed to imitate human problem-solving by means of artificial intelligence and reference to a database of knowledge on a particular subject. Also it based on the methods and techniques of artificial intelligence and their core components are the knowledge base and the inference mechanisms. Decision Support Systems (DSS) DSS is an interactive computer based system designed to help the decision makers to use all l the resources available and make use in the decision making. In management many a time problems arise out of situations for which simple solution may not be possible. To solve such problems you may have to use complex theories. The models that would be required to solve


such problems may have to be identified. DSS requires a lot of managerial abilities and managers judgment. You may gather and present the following information by using decision support application: Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts Comparative sales figures between one week and the next Projected revenue figures based on new product sales assumptions The consequences of different decision alternatives, given past experience in a context that is described. Manager may sometimes find it difficult to solve such problems. E.g. In a sales problem if there is multiple decision variables modeled as a simple linear problem but having multiple optima, it becomes difficult to take a decision. Since any of the multiple optima would give optimum results. But the strategy to select the one most suitable under conditions prevailing in the market, requires skills beyond the model. It would take some trials to select a best strategy. Under such circumstances it would be easy to take decision if a ready system of databases of various market conditions and corresponding appropriate decision is available. A system which consists of database pertaining to decision making based on certain rules is known as decision support system. It is a flexible system which can be customized to suit the organization needs. It can work in the interactive mode in order to enable managers to take quick decisions. You can consider decision support systems as the best when it includes highlevel summary reports or charts and allow the user to drill down for more detailed information. A DSS has the capability to update its decision database. Whenever manager feels that a particular decision is unique and not available in the system, the manager can chose to update the database with such decisions. This will strengthen the DSS to take decisions in future. There is no scope for errors in decision making when such systems are used as aid to


decision making. DSS is a consistent decision making system. It can be used to generate reports of various lever management activities. It is capable of performing mathematical calculations and logical calculation depending upon the model adopted to solve the problem. You can summarize the benefits of DSS into following: Improves personal efficiency Expedites problem solving Facilitates interpersonal communication Promotes learning or training Increases organizational control Generates new evidence in support of a decision Creates a competitive advantage over competition Encourages exploration and discovery on the part of the decision maker Reveals new approaches to thinking about the problem space

Online Analytical Processing (OLAP) OLAP refers to a system in which there are predefined multiple instances of various modules used in business applications. Any input to such a system results in verification of the facts with respect to the available instances.A nearest match is found analytically and the results displayed form the database. Theoutput is sent only after thorough verification of the input facts fed to the system. The system goes through a series of multiple checks of the various parameters used in business decision making. OLAP is also referred to as a multi dimensional analytical model. Many big companies use OLAP to get good returns in business. The querying process of the OLAP is very strong. It helps the management take decisions like which month would be appropriate to launch a product in the market, what should be the production quantity to maximize the returns, what should be the stocking policy in order to minimize the wastage etc. A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box. Each adjoining faces with common vertex may be considered to represent thevarious parameter of the business situation under consideration. E.g.: Region, Sales & demand, Product etc.

Decision Support Systems (DSS) DSS is an interactive computer based system designed to help the decision makers to useall l the resources available and make use in the decision making. In management many a time problems arise out of situations for which simple solution may not be possible. To solve such problems you may have to use complex theories. The models that would be required to solve


such problems may have to be identified. DSS requires a lot of managerial abilities and managers judgment. You may gather and present the following information by using decision support application: Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts Comparative sales figures between one week and the next Projected revenue figures based on new product sales assumptions The consequences of different decision alternatives, given past experience in a context that is described. Q3.What are Value Chain Analysis & describe its significance in MIS? Explain what is meant by BPR? What is its significance? How Data warehousing & Data Mining is useful in terms of MIS? Answer:BPR The existing system in the organization is totally reexamined and radically modified for incorporating the latest technology. This process of change for the betterment of the organization is called as Business process re-engineering. This process is mainly used tomodernize and make the organizations efficient. BPR directly affects the performance. Itis used to gain an understanding the process of business and to understand the process to make it better and re-designing and thereby improving the system. BPR is mainly used for change in the work process. Latest software is used and accordingly the business procedures are modified, so that documents are worked upon more easily and efficiently. This is known asworkflow management. Signification of BPR Business process are a group of activities performed by various departments, various organizations or between individuals that is mainly used for transactions in business. There may be people who do this transaction or tools. We all do them at one point or another either as a supplier or customer. You will really appreciate the need of process improvement or change in the organizations conduct with business if you have ever waited in the queue for a longer time to purchase 1 kilo of rice from a Public Distribution Shop (PDS-ration shop). The process is called the check-out process. It is


called process because uniform standard system has been maintained to undertake such a task. The system starts with forming a queue, receiving the needed item form the shop, getting it billed, payment which involves billing, paying amount and receiving the receipt of purchase and the process ends up with the exit from the store. It is the transaction between customer and supplier. Data Warehousing Data Warehouse is defined as collection of database which is referred as relational database for the purpose of querying and analysis rather than just transaction processing. Data warehouse is usually maintained to store heuristic data for future use. Data warehousing is usually used to generate reports. Integration and separation of data are the two basic features need to be kept in mind while creating a data warehousing. The main output from data warehouse systems are; either tabular listings (queries) with minimal formatting or highly formatted formal reports on business activities. This becomes a convenient way to handle the information being generated by various processes. Data warehouse is an archive of information collected from wide multiple sources, stored under a unified scheme, at a single site. This data is stored for a long time permitting the user an access to archived data for years. The data stored and the subsequent report generated out of a querying process enables decision making quickly. This concept is useful for big companies having plenty of data on their business processes. Big companies have bigger problems and complex problems. Decision makers require access to information from all sources. Setting up queries on individual processes may be tedious and inefficient. Data Mining Data mining is primarily used as a part of information system today, by companies with a strong consumer focus retail, financial, communication, and marketing organizations. It enables these companies to determine relationships among internal factors such as price, product positioning, or staff skills, and external factors such as economic indicators, competition, and customer demographics. And, it enables


them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to drill down into summary information to view detail transactional data. With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individuals purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments. Q4. Explain DFD & Data Dictionary? Explain in detail how the information requirement is determined for an organization? Answer:Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the processes convert the input data into output. They do not explain how the processing takes place. DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD can easily illustrate relationships among data, flows, external entities an stores. DFD can also be drawn in increasing levels of detail, starting with a summary high level view and proceeding o more detailed lower level views. Rounded rectangles represent processes that transform flow of data or work to be done. Rectangle represents external agents- the boundary of the system. It is source or destination of data. The open-ended boxes represent data stores, sometimes called files or databases. These data stores correspond to all instances of a single entity in a data model. Arrow represents data flows, inputs and outputs to end from the processes. A number of guideline should be used in DFD Choose meaningful names for the symbols on the diagram. Number the processes consistently. The numbers do not imply the sequence. Avoid over complex DFD. Make sure the diagrams are balanced Data Dictionary The data dictionary is used to create and store definitions of data, location, format for


storage and other characteristics. The data dictionary can be used to retrieve the definition of data that has already been used in an application. The data dictionary also stores some of the description of data structures, such as entities, attributes and relationships. It can also have software to update itself and to produce reports on its contents and to answer some of the queries. Q5. What is ERP? Explain its existence before and its future after? What are the advantages & Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural Networks? Answer:Manufacturing management systems have evolved in stages over the few decades from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP). ERP Before and After Before Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain information on the department, reporting structure, and personal details of employees. The payroll department would typically calculate and store paycheck information. The financial department would typically store financial transactions for the organization. Each system would have to rely on a set of common data to communicate with each other. For the HRIS to send salary information to the payroll system, an employee number would


need to be assigned and remain static between the two systems to accurately identify an employee. The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on. This provided complications. For instance, a person could not be paid in the payroll system without an employee number. After ERP software, among other things, combined the data of formerly separate applications. This made the worry of keeping numbers in synchronization across multiple systems disappears. It standardized and reduced the number of software specialties required within larger organizations. Advantages and Disadvantages Advantages In the absence of an ERP system, a large manufacturer may find itself withmany software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve: A totally integrated system The ability to streamline different processes and workflows The ability to easily share data across various departments in an organization Improved efficiency and productivity levels Better tracking and forecasting Lower costs Improved customer service Disadvantages Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used. While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced: Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the


workforce to quickly adapt to the new system. Customization in many situations is limited The need to reengineer business processes ERP systems can be cost prohibitive to install and run Technical support can be shoddy ERPs may be too rigid for specific organizations that are either new or want to move in a new direction in the near future. Artificial Intelligence Artificial Intelligence is the science and technology based on various functions to develop a system that can think and work like a human being. It can reason, analyze, learn, conclude and solve problems. The systems which use this type of intelligence are known as artificial intelligent systems and their intelligence is referred to as artificial intelligence. It was said that the computer dont have common sense. Here in AI, the main idea is to make the computer think like human beings, so that it can be then said that computers also have common sense. More precisely the aim is to obtain a knowledge based computer system that will help managers to take quick decisions in business. Artificial Intelligence and Neural Networks Artificial intelligence is a field of science and technology based on disciplines such as computer science, biology, psychology, linguistics, mathematics and engineering. The goal of AI is to develop computers that can simulate the ability to think, see, hear, walk, talk and feel. In other words, simulation of computer functions normally associated with human intelligence, such as reasoning, learning and problem solving. AI can be grouped under three major areas: cognitive science, robotics and natural interfaces. Cognitive science focuses on researching on how the human brain works and how humans think and learn. Applications in the cognitive science area of AI include the development of expert systems and other knowledge-based systems that add a knowledge base and some reasoning capability to information systems. Also included


are adaptive learning systems that can modify their behavior based on information they acquire as they operate. Chess-playing systems are some examples of such systems. Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve semi-structured problems with incomplete knowledge by developing approximate inferences and answers, as humans do. Neural network software can learn by processing sample problems and their solutions. As neural nets start to recognize patterns, they can begin to program themselves to solve such problems on their own.Neural networks are computing systems modeled after the human brains mesh likenetwork of interconnected processing elements, called neurons. The human brain is estimated to have over 100 billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the interconnected processors in a neural network operate in parallel and interact dynamically with each other. This enables the network to operate and learn from the data it processes, similar to the human brain. That is, it learns to recognize patterns and relationships in the data. The more data examples it receives as input, the better it can learn to duplicate the results of the examples it processes. Thus, the neural networks will change the strengths of the interconnections between the processing elements in response to changing patterns in the data it receives and results that occur Q 6. Distinguish between closed decision making system & open decision making system? What is what ifanalysis? Why is more time spend in problem analysis & problem definition as compared to the time spends on decision analysis? Answer:If the manager operates in an environment not known to him, then the decision-making system is termed as an open decision-making system. The conditions of this system in contrast closed decision-making system are: a) The manager does not know all the decision alternatives. b) The outcome of the decision is also not known fully. The knowledge of the outcome


may be a probabilistic one. c) No method, rule or model is available to study and finalize one decision among the set of decision alternatives. What if analysis Decisions are made using a model of the problem for developing various solution alternatives and testing them for best choice. The model is built with some variables and relationship between variables considered values of variables or relationship in the model may not hold good and therefore solution needs to be tested for an outcome, if the considered values of variables or relationship change. This method of analysis is called what if analysis. Decision Analysis by Analytical Modelling Based on the methods discussed, a decision is made but such decision needs to be analyzed for conditions and assumptions considered in the decision model. The process is executed through analytical modeling of problem and solution. The model is analysed in four ways. What if analysis Goal Seeking Analysis Sensitivity analysis Goal Achieving analysis. ASSIGNMENTS

MBA 2nd SEM Subject Code MB0048 Book ID B1137 OPERATION RESEARCH Set 1
Q1. a. Explain how and why Operation Research1 methods have been valuable in aiding executive decisions. b. Discuss the usefulness of Operation Research in decision making process and the role of computers in this field. Ans. Churchman, Aackoff and Aruoff defined Operations Research as: the application of


scientific methods, techniques and tools to operation of a system with optimum solutions to the problems, where optimumrefers to the best possible alternative. The objective of Operations Research is to provide a scientific basis to the decisionmakers for solving problems involving interaction of various components of the organisation. You can achieve this by employing a team of scientists from different disciplines, to work together for finding the best possible solution in the interest of the organisation as a whole. The solution thus obtained is known as an optimal decision. You can also define Operations Research as The use of scientific methods to provide criteria for decisions regarding man, machine, and systems involving repetitive operations.OR Operation Techniques is a bunch of mathematical techniques. b. Operation Research is an aid for the executive in making his decisions based on scientific methods analysis. Discuss the above statement in brief. Ans. Operation Research is an aid for the executive in making his decisions based on scientific methods analysis. Discussion:Any problem, simple or complicated, can use OR techniques to find the best possible solution. This section will explain the scope of OR by seeing its application in various fields of everyday life. i) In Defense Operations: In modern warfare, the defense operations are carried out by three major independent components namely Air Force, Army and Navy. The activities in each of these components can be further divided in four sub-components namely: administration, intelligence, operations and training and supply. The applications of modern warfare techniques in each of the components of military organisations require expertise knowledge in respective fields. Furthermore, each component works to drive maximum gains from its operations and there is always a possibility that the strategy


beneficial to one component may be unfeasible for another component. Thus in defense operations, there is a requirement to co-ordinate the activities of various components, which gives maximum benefit to the organisation as a whole, having maximum use of the individual components. A team of scientists from various disciplines come together to study the strategies of different components. After appropriate analysis of the various courses of actions, the team selects the best course of action, known as the optimum strategy. ii) In Industry: The system of modern industries is so complex that the optimum point of operation in its various components cannot be intuitively judged by an individual. The business environment is always changing and any decision useful at one time may not be so good some time later. There is always a need to check the validity of decisions continuously against the situations. The industrial revolution with increased division of labour and introduction of management responsibilities has made each component an independent unit having their own goals. For example: production department minimises the cost of production but maximise output. Marketing department maximises the output, but minimises cost of unit sales. Finance department tries to optimise the capital investment and personnel department appoints good people at minimum cost. Thus each department plans its own objectives and all these objectives of various department or components come to conflict with one another and may not agree to the overall objectives of the organisation. The application of OR techniques helps in overcoming this difficulty by integrating the diversified activities of various components to serve the interest of the organisation as a whole efficiently. OR methods in industry can be applied in the fields of production, inventory controls and marketing, purchasing, transportation and competitive strategies. iii) Planning: In modern times, it has become necessary for every government to have careful planning, for economic development of the country. OR techniques can be fruitfully applied to maximise the per capita income, with minimum sacrifice and time. A government can thus use OR for framing future economic and social policies.


iv) Agriculture: With increase in population, there is a need to increase agriculture output. But this cannot be done arbitrarily. There are several restrictions. Hence the need to determine a course of action serving the best under the given restrictions. You can solve this problem by applying OR techniques. v) In Hospitals: OR methods can solve waiting problems in out-patient department of big hospitals and administrative problems of the hospital organizations. vi) In Transport: You can apply different OR methods to regulate the arrival of trains and processing times minimise the passengers waiting time and reduce congestion, formulate suitable transportation policy, thereby reducing the costs and time of transshipment. vii) Research and Development: You can apply OR methodologies in the field of R&D for several purposes, such as to control and plan product introductions.

Q2. Explain how the linear programming technique can be helpful in decision making in the areas of Marketing and Finance. Ans. Linear programming problems are a special class of mathematical programming problems for which the objective function and all constraints are linear. A classic example of the application of linear programming is the maximization of profits given various production or cost constraints. Linear programming can be applied to a variety of business problems, such as marketing mix determination, financial decision making, production scheduling, workforce assignment, and resource blending. Such problems are generally solved using the simplex method. MEDIA SELECTION PROBLEM. The local Chamber of Commerce periodically sponsors public service seminars and


programs. Promotional plans are under way for this years program. Advertising alternatives include television, radio, and newspaper. Audience estimates, costs, and maximum media usage limitations are shown in Exhibit 1. If the promotional budget is limited to $18,200, how many commercial messages should be run on each medium to maximize total audience contact? Linear programming can find the answer. Q3. a. How do you recognise optimality in the simplex method? b. Write the role of pivot element in simplex table? Ans. Simplex method is used for solving Linear programming problem especially when more than two variables are involved SIMPLEX METHOD 1. Set up the problem. That is, write the objective function and the constraints. 2. Convert the inequalities into equations. This is done by adding one slack variable for each inequality. 3. Construct the initial simplex tableau. Write the objective function as the bottom row. 4. The most negative entry in the bottom row identifies a column. 5. Calculate the quotients. The smallest quotient identifies a row. The element in the intersection of the column identified in step 4 and the row identified in this step is identified as the pivot element. The quotients are computed by dividing the far right column by the identified column in step 4. A quotient that is a zero, or a negative number, or that has a zero in the denominator, is ignored. 6. Perform pivoting to make all other entries in this column zero. This is done the same way as we did with the Gauss-Jordan method. 7. When there are no more negative entries in the bottom row, we are finished; otherwise, we start again from step 4. 8. Read off your answers. Get the variables using the columns with 1 and 0s. All other variables are zero. The maximum value you are looking for appears in the bottom right hand corner. Example Niki holds two part-time jobs, Job I and Job II. She never wants to work more than a


total of 12 hours a week. She has determined that for every hour she works at Job I, she needs 2 hours of preparation time, and for every hour she works at Job II, she needs one hour of preparation time, and she cannot spend more than 16 hours for preparation. If she makes $40 an hour at Job I, and $30 an hour at Job II, how many hours should she work per week at each job to maximize her income? Solution: In solving this problem, we will follow the algorithm listed above. 1.Set up the problem. That is, write the objective function and the constraints. Since the simplex method is used for problems that consist of many variables, it is not practical to use the variables x, y, z etc. We use the symbols x1, x2, x3, and so on. Let x1 = The number of hours per week Niki will work at Job I. and x2 = The number of hours per week Niki will work at Job II. It is customary to choose the variable that is to be maximized as Z. The problem is formulated the same way as we did in the last chapter. Maximize Z = 401 + 302 Subject to: x1 + x2 12 21 + x2 16 x1 0; x2 0 2. Convert the inequalities into equations. This is done by adding one slack variable for each inequality. For example to convert the inequality x1 + x2 12 into an equation, we add a nonnegative variable y1, and we get x1 + x2 + y1 = 12 Here the variable y1 picks up the slack, and it represents the amount by which x1 + x2 falls short of 12. In this problem, if Niki works fewer that 12 hours, say 10, then y1 is 2. Later when we read off the final solution from the simplex table, the values of the slack variables will identify the unused amounts. We can even rewrite the objective function Z = 401 + 302 as 401 302 + Z = 0. After adding the slack variables, our problem reads Objective function: 401 302 + Z = 0 Subject to constraints: x1 + x2 + y1 = 12 21 + x2 + y2 = 16 x1 0; x2 0 3. Construct the initial simplex tableau. Write the objective function as the bottom


row. Now that the inequalities are converted into equations, we can represent the problem into an augmented matrix called the initial simplex tableau as follows. x1 x2 y1 y2 Z C 1 1 1 0 0 12 2 1 0 1 0 16 40 30 0 0 1 0 Here the vertical line separates the left hand side of the equations from the right side. The horizontal line separates the constraints from the objective function. The right side of the equation is represented by the column C. The reader needs to observe that the last four columns of this matrix look like the final matrix for the solution of a system of equations. If we arbitrarily choose x1 = 0 and x2 = 0, we get Which reads y1 = 12 y2 = 16 Z=0 The solution obtained by arbitrarily assigning values to some variables and then solving for the remaining variables is called the basic solution associated with the tableau. So the above solution is the basic solution associated with the initial simplex tableau. We can label the basic solution variable in the right of the last column as shown in the table below. x1 x2 y1 y2 Z 1 1 1 0 0 12 y1 2 1 0 1 0 16 y2 40 30 0 0 1 0 Z 4. The most negative entry in the bottom row identifies a column. The most negative entry in the bottom row is 40, therefore the column 1 is identified.

x1 x2 y1 y2 Z 1 1 1 0 0 12 y1 2 1 0 1 0 16 y2 40 30 0 0 1 0 Z
Q4. What is the significance of duality theory of linear programming? Describe the general rules for writing the dual of a linear programming problem. Ans. Linear programming (LP) is a mathematical method for determining a way to achieve the best outcome (such as maximum profit or lowest cost) in a


given mathematical model for some list of requirements represented as linear relationships. Linear programming is a specific case of mathematical programming. More formally, linear programming is a technique for the optimization of a linear objective function, subject to linear equality and linear inequality constraints. Given a polytope and a real-valued affine function defined on this polytope, a linear programming method will find a point on the polytope where this function has the smallest (or largest) value if such point exists, by searching through the polytope vertices. Linear programs are problems that can be expressed in canonical form: where x represents the vector of variables (to be determined), c and b are vectors of (known) coefficients and A is a (known) matrix of coefficients. The expression to be maximized or minimized is called theobjective function (cTx in this case). The equations Ax b are the constraints which specify a convex polytope over which the objective function is to be optimized. (In this context, two vectors are comparablewhen every entry in one is less-than or equal-to the corresponding entry in the other. Otherwise, they are incomparable.) Linear programming can be applied to various fields of study. It is used most extensively in business and economics, but can also be utilized for some engineering problems. Industries that use linear programming models include transportation, energy, telecommunications, and manufacturing. It has proved useful in modeling diverse types of problems in planning, routing, scheduling, assignment, and design. Duality: Every linear programming problem, referred to as a primal problem, can be converted into a dual problem, which provides an upper bound to the optimal value of the primal problem. In matrix form, we can express the primal problem as: Maximize cTx subject to Ax b, x 0; with the corresponding symmetric dual problem, Minimize bTy subject to ATy c, y 0. An alternative primal formulation is: Maximize cTx subject to Ax b; with the corresponding asymmetric dual problem,


Minimize bTy subject to ATy = c, y 0. There are two ideas fundamental to duality theory. One is the fact that (for the symmetric dual) the dual of a dual linear program is the original primal linear program. Additionally, every feasible solution for a linear program gives a bound on the optimalvalue of the objective function of its dual. The weak duality theorem states that the objective function value of the dual at any feasible solution is always greater than or equal to the objective function value of the primal at any feasible solution. The strong duality theorem states that if the primal has an optimal solution, x*, then the dual also has an optimal solution, y*, such that cTx*=bTy*. A linear program can also be unbounded or infeasible. Duality theory tells us that if the primal is unbounded then the dual is infeasible by the weak duality theorem. Likewise, if the dual is unbounded, then the primal must be infeasible. However, it is possible for both the dual and the primal to be infeasible


MBA 2nd SEM Subject Code MB0049



Q.1 Describe in detail the various phases of Project management life cycle. Ans. Projects too have to chore through their life-cycles adhering to a system. Every project irrespective of its size, scope has to adapt a system. A system in the project management refers to the existence of interrelationship of activities in a project. The absence of a system makes a project die. No matter what project it is that youre preparing for, the project management life cycle can assist you in narrowing your focus, keeping your objectives in order and finishing said project on time, on budget and with a minimum of headaches. Every project management life cycle contains five steps: Initiation, Planning, Execution, Monitoring/Control and Closure. No one step is more important than the other and each step plays a crucial role in getting your project off the ground, through the race, down the stretch and across the finish line. Phases of Project management life cycle 1) Initiation In this first step you provide an over-view of the project in addition to the strategy you plan on using in order to achieve the desired results. During the Initiation phase youll appoint a project manager who in turn will -- based on their experience and skills -select his team members. And lest you think you need to be a Bill Gates or Donald Trump in order to see your project take on a life of its own, fear not: there are some great technological tools available to get you through the Initiation phase of the project management life cycle. 2) Planning The all-important second step of any successful project management life cycle is planning and should include a detailed breakdown and assignment of each task of your


project from beginning to end. The Planning Phase will also include a risk assessment in addition to defining the criteria needed for the successful completion of each task. In short, the working process is defined, stake holders are identified and reporting frequency and channels explained. 3 & 4) Execution and Control Steps Three and Four take you into deeper water. When it comes to the project management cycle, execution and control just may be the most important of the five steps in that it ensures project activities are properly executed and controlled. During the Execution and Control phases, the planned solution is implemented to solve the problem specified in the project's requirements. In product and system development, a design resulting in a specific set of product requirements is created. This convergence is measured by prototypes, testing, and reviews. As the Execution and Control phases progress, groups across the organization become more deeply involved in planning for the final testing, production, and support. 5) Closure By the time you reach Step Five -- Closure -- the project manager should be tweaking the little things to ensure that the project is brought to its proper conclusion. The Closure phase is typically highlighted by a written formal project review report which contains the following elements: a formal acceptance of the final product (by the client), Weighted Critical Measurements (a match between the initial requirements laid out by the client against the final delivered product), lessons learned, project resources, and a formal project closure notification to higher management. The Project Management Cycle saves time and keeps everyone on the team focused. Fortunately, modern technology provides a variety of templates that will take you from A-to-Z (or in this case from Start-to-Finish) making the Project Management Cycle user friendly no matter what your level of management experience! Q.2 List and explain the various aspects of programme management.


Ans. Project Management Project management is the planning, organizing, directing, and controlling of company Resources. It is clear from this definition that project management is concerned with the dynamic allocation, utilization, and direction of resources (both human and technical), with time -- in relation to both individual efforts and product delivery schedule -- and with costs, relating to both the acquisition and consumption of funding. As a corollary, it is safe to say that without the direction project management provides, work would have to proceed via a series of negotiations, and/or it would not align with the goals, value proposition, or needs of the enterprise. Within a program, these same responsibilities (i.e., allocation, utilization, and direction) are assigned to people at three levels in the management hierarchy; the higher the level, the more general the responsibilities. For example, at the bottom of the management hierarchy, project managers are assigned to the various projects within the overall program. Each manager carries out the management responsibilities we described above. At the middle of the hierarchy is the program manager/director, whose major responsibility is to ensure that the work effort achieves the outcome specified in the business and IT strategies. This involves setting and reviewing objectives, coordinating activities across projects, and overseeing the integration and reuse of interim work products and results. This person spends more time and effort on integration activities, negotiating changes in plans, and communicating than on the other project management activities we described (e.g., allocating resources, ensuring adherence to schedule, budget, etc.). At the top of the program management hierarchy are the program sponsor(s) and the program steering committee. Their major responsibility is to own and oversee the implementation of the program's underlying business and IT strategies, and to define


the program's connection to the enterprise's overall business plan(s) and direction. Their management activities include providing and interpreting policy, creating an environment that fosters sustainable momentum for the program (i.e., removing barriers both inside and outside the enterprise), and periodically reviewing program progress and interim results to ensure alignment with the overall strategic vision. These individuals receive periodic summary reports and briefings on funding consumption, resources and their utilization, and delivery of interim work products and results. Typically, they will focus on these reports only if there is significant deviation from the plan. So, let's return to the questions we posed at the start of this section: What is program management? Is it really management at all? If you think of management activities strictly as those we defined for project management, then the answer to the second question is "No," or maybe "Partly." At the project level, managers do still perform these activities, but the program manager/director addresses a different set of program goals or needs, which requires a different "bag of tricks" as well as a different view of what is happening and what needs to get done. And at the top of the hierarchy, the executive leaders who set goals and oversee the program certainly do not perform the same detailed activities as project managers Q.3 Write a short note on the following: a. Project progress control tools and mechanisms b. Process in bringing about a change in project management. Ans. Project progress control tools and mechanism Project monitoring and control also provides information to support status reporting, progress measurement, forecasting and updating current cost and schedule information. During this process, it is also important to ensure that implementation of approved changes are monitored when and as they occur. As for tools and techniques used in facilitating project monitoring and control, automated project management information systems and Earned Value are among the most commonly used. Both are also used to update information. Earned Value also


provides a means for forecasting future performance based upon past performance. Status reports are used for communicating project progress and status. Variance Analysis reports are typically used to identify variances and the information often used as a basis for determining corrective actions. The ideal suite of project management tools would provide fully integrated functionality such that: tools share the same communication medium to the team (eg Web, Intranet, Exchange server, EMail, Client/Server) information can be automatically transferred to other tools, or, better still, be held only once (eg team names, task lists, EMail addresses, distribution lists) efficiency and effectiveness is supported by automatic messaging and workflow control - the applications will always prompt those responsible for action.

The tools that are used in project planning are 1. Project organization Process Skills and activities Initiation Prepare an outline project justification, plan and project budget Selection and briefing of the project team, assigning roles and organization Feasibility study- risk and key success factors Planning Project definition and project plan Communicate to the team Execution Allocating and monitoring the work and cost Ensuring work and team cohesion Reporting progress Control Monitoring progress and managing changes Helping the team to solve project problems Close Satisfactory delivery Compiling lessons from project experience 2. Project structure Development plan, project tracking and oversight. 3. Project Key personnel Identify those business areas that are within the scope or directly interface with the scope boundary and list them in the Business area column


of the project assignment worksheet Identify the key personnel for each area and list them in the Person column of the project assignment worksheet. 4. Project management team It is a senior management team, which will be accountable for the project. Identify project sponsor, client representative and technical representative. Stage managers- who will plan and manage the project on a day-to-day basis for this stage Project coordinators- client coordinator and technical coordinator Clearly define these coordination, control activities and identify the brief suitable personnel to carry them out 5. Key stakeholders Identify management level personnel who are critical to the success of the project. Document the responsibilities of stakeholders 6. Stage teams Identify appropriate personnel required for the stage, define the team structure and appoint team leaders Document the time commitment and responsibilities to be performed by the team members. 6. Key resources Individuals assigned to a key resource role may work towards gathering Business key resources and Technical key resources. They are project coordinators and team invitees. 7. Work Breakdown Structure (WBS) The entire process of a project may be considered to be made up on number of sub process placed in different stage called the Work Breakdown Structure (WBS). A typical example of a work breakdown structure of a recruitment process is indicated below : This is the technique to analyze the content of work and cost by breaking it down into its component parts. Project key stages form the highest level of the WBS, which is then used to show the details at the lower levels of the project. Each key stage comprises many tasks identified at the start of planning and later this list will have to be validated.


WBS is produced by Identifying the key elements, breaking each element down into component parts and continuing to breakdown until manageable work packages have been identified. These can then be allocated to the appropriate person.The WBS does not show dependencies other than a grouping under the key stages. It is not time basedthere is no timescale o the drawing. 8. Task duration Identifying lead and lag times helps in working out task duration. Lead time: An amount of time, which a successor task can overlap with its predecessor task, i.e. the time before the completion of the predecessor at which the successor can start. Lag time: An amount of time, between a predecessor and a successor task, i.e. the time after the completion of the predecessor that the start of the successor is delayed Q.4 Describe in brief the various phases of the quality control process. Ans. The definition of the ISO 8204 for quality: Totality of characteristics of an entity that bears on its ability to satisfy stated and implied needs. This means that the Software product conforms to requirements defined. Description of Phases: Software Quality Management (SQM) describes the processes that ensure that the Software Project would reach its goals i.e. meet the clients expectations. Any phase of SDLC has its own independent stages of planning, execution, monitoring, control & reporting. Likewise Software Quality Management has the following three categories or key phases: 1. Quality Planning 2. Quality Assurance 3. Quality Control Quality Planning: Quality Planning is one of the most important parts of Software Quality Management. It is the start activity of SQM. Through proper planning we can ensure that the processes that make a product are audited correctly to meet the overall project objective. The staring of Quality Planning process is followed differently by different Organization. It


has been described in different Quality Policy and Documentation across various Organizations. Other industry standards related to the Software Project can be referred to Planning phases when needed. These act as Standard inputs for some specific projects. The Planning stage is having following inputs:1. Quality Policy of a Company 2. Organization Standards 3. Referencing Industry Standards 4. Regulatory compliances 5. Statement Of Work 6. Project specific Requirements Quality planning process can ensure that standards are as per clients expectations. The outcomes of Quality Planning process are as follows:1. Standards defined for the project 2. Quality Plan Various tools and techniques are used to create the quality plan. Few of these tools and techniques are briefly described in this article. Here are some over views:Benchmark: Deciding on the present product standards by comparing with the performances of similar products which is already exist in the market. Cost of Quality: The total cost of quality is a summation of prevention, appraisal and failure costs. Design of Experiments: Statistical data can be used to determine the factors influencing the Quality of the product. Other tools: There are various tools used in the Planning process such as Cost Benefit Analysis, Cause and Effect Diagrams, System Flow Charectistics. All of the above key points aids in the formation of a Quality Management Plan for a particular project. Quality Assurance: Quality Plan which is created during planning is the input to Quality Assurance Process. The Assurance stage is having the following inputs: 1. Quality Audits 2. Various Techniques used to evaluate performance of project


Quality Assurance Process helps us to ensure that the Project is following the Quality Management Plan. The tools and techniques which are used in Planning Process such as System Flow Charectistics, Design of Experiments, Cause and Effect Diagrams can be implemented here too, as per requirements. Quality Control: The next step to Quality Assurance Process is Quality Control. The Control stage is having following inputs: 1. Quality Management Plan. 2. Quality Standards for the Project. 3. Actual Observations and Measurements of the work done or work in Progress. The Quality Control Processes use various tools to Observe and Measure if the work done or not. If the Work done and it is found that the deliverable is not satisfactory then it can be sent back to the development team for fixes. If the work done meets the requirements as defined then it is accepted and released to the clients. Q.5 Write short note on the following Project Management tools: a. Quality Certification b. Strategic inflection point c. Force field analysis d. Information risk management Ans. Quality Certification Quality certification has become extremely important in competitive markets and especially in gaining foothold in exports. To avail the certification of ISO9000, a unit has to undertake significant costs; the small scale industries have been found wanting mainly on account of resource crunch to implement quality systems to obtain this certification. However, as a paradigm shift, SSI must make 'Quality' a way of life. It has been decided to push the quality upgradation programme in the SSI Sector in a big way. A scheme has been launched to give financial incentive to those SSI units who acquire ISO-9000 certification, by reimbursing 75% of their costs of obtaining certification, subject to a maximum of Rs. 0.75 lacs per unit.


In order to promote modernisation and technology upgradation in SSI, the units are assisted in improving the quality of their products. A new scheme has been launched to assist SSI units in obtaining ISO-9000 or an equivalent international quality standard. Subject to an upper ceiling of Rs. 075 lacs, each unit is given financial assistance equal to 75% of the costs incurred in acquiring the quality standard. The SSI units are also encouraged to participate in quality awareness and learning programmes organised specially for their benefit. Strategic inflection point Point at which a corporation facing a new situation must alter the path it is on and adapt, or fall into decline. The term was coined by Hungarian-born US computer entrepreneur Andy Grove, chairman of microprocessor company Intel. Grove believes strategic inflection points occur when a company's competitive position goes through a transition. The idea concerns how companies recognize and adapt to paradigm changes. At a strategic inflection point the way a business operates, and the concept of it as a business, undergoes a change. Force field analysis Force field analysis is an influential development in the field of social science. It provides a framework for looking at the factors (forces) that influence a situation, originally social situations. It looks at forces that are either driving movement toward a goal (helping forces) or blocking movement toward a goal (hindering forces). The principle, developed by Kurt Lewin, is a significant contribution to the fields of social science, psychology, social psychology, organizational development, process management, and change management. Lewin, a social psychologist, believed the "field" to be a Gestalt psychological environment existing in an individual's (or in the collective group) mind at a certain point in time that can be mathematically described in a topological constellation of constructs. The "field" is very dynamic, changing with time and experience. When fully


constructed, an individual's "field" (Lewin used the term "life space") describes that person's motives, values, needs, moods, goals, anxieties, and ideals. Lewin believed that changes of an individual's "life space" depend upon that individual's internalization of external stimuli (from the physical and social world) into the "life space." Although Lewin did not use the word "experiential," (see experiential learning) he nonetheless believed that interaction (experience) of the "life space" with "external stimuli" (at what he calls the "boundary zone") were important for development (or regression). For Lewin, development (or regression) of an individual occurs when their "life space" has a "boundary zone" experience with external stimuli. Note, it is not merely the experience that causes change in the "life space," but the acceptance (internalization) of external stimuli. Lewin took these same principles and applied them to the analysis of group conflict, learning, adolescence, hatred, morale, German society, etc. This approach allowed him to break down common misconceptions of these social phenomena, and to determine their basic elemental constructs. He used theory, mathematics, and common sense to define a force field, and hence to determine the causes of human and group behavior. Information risk management Information Risk Management follows information as it is created, distributed, stored, copied, transformed and interacted with throughout its lifecycle. Three Pillars to an Information Risk Strategy 1) Information-centric approach: Begin by understanding what information is critical to key business initiatives, such as growth through acquisitions or expanding partnerships. Then diligently follow the data to gain a more holistic view of all the places where it exists across the organization, where the points of vulnerability are, and what events could put your business at risk. 2) Risk/Reward analysis: Security investments should be prioritized, based on the


amount of risk a given activity entails relative to the potential business reward, and in keeping with the organizations appetite for risk. 3) Ensuring repeatability: Once enterprise information has been located and a risk assessment performed, the next step is to implement controls including policies, technologies, and tools to mitigate that risk. Here, organizations often turn to frameworks like ISO 27002 and the PCI Data Security Standard. Q.6 List and describe in brief the various types of review used for improving performance of a project. Ans.Performance Measurement Most of us have heard some version of the standard performance measurement cliches: what gets measured gets done, if you dont measure results, you cant tell success from failure and thus you cant claim or reward success or avoid unintentionally rewarding failure, if you cant recognize success, you cant learn from it; if you cant recognize failure, you cant correct it, if you cant measure it, you can neither manage it nor improve it," but what eludes many of us is the easy path to identifying truly strategic measurements without falling back on things that are easier to measure such as input, project or operational process measurements. Performance Measurement is addressed in detail in Step Five of the Nine Steps to Success methodology. In this step, Performance Measures are developed for each of the Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. The focus on Strategic Objectives, which should articulate exactly what the organization is trying to accomplish, is the key to identifying truly strategic measurements. Strategic performance measures monitor the implementation and effectiveness of an organization's strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency. Good Performance Measurement


Focus employees' attention on what matters most to success Allow measurement of accomplishments, not just of the work that is

performed Provide a common language for communication Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality, expected value(targets), and thresholds Are valid, to ensure measurement of the right things Are verifiable, to ensure data collection accuracy Problems in Performance Appraisals: discourages teamwork evaluators are inconsistent or use different criteria and standards only valuable for very good or poor employees encourages employees to achieve short term goals managers has complete power over the employees too subjective produces emotional anguish Solutions Make collaboration a criterion on which employees will be evaluated Provide training for managers; have the HR department look for patterns on appraisals that suggest bias or over or under evaluation Rate selectively(introduce different or various criteria and disclose better performance and coach for worst performer without disclosing the weakness of the candidate) or increase in frequency of performance evaluation. Include long term and short term goals in appraisal process Introduce M.B.O.(Management By Objectives) Make criteria specific and test selectively{Evaluate specific behaviors or results} Focus on behaviors; do not criticize employees; conduct appraisal on time.