Chapter 1 Nature and Significance of Management

CASE STUDIES

Question 1:
Josh Enterprises decides to have a meeting of all the key employees of different
departments in the organisation. The main motive is to tell the employees to keep the
target of 20% increase in sales as the main objective when they work throughout the
year. The meeting is full of ideas regarding the employees and processes involved.
Various plans are made to harness the potential of the employees and streamline the
processes. However with the passage of a few days the external business environment
checks the capability of the organisation to adapt to the situations. The company
successfully comes out at the end of the year with flying colours.
What are the various characteristics of management you can find highlighted here? Also
identify the lines in which these characteristics have been highlighted.
Answer:
The various characteristics of management involved here are:

1. Goal Oriented. The main motive is to tell the employees to keep the target of 20%
increase in sales as the main objective when they work throughout the year.
2. Multidimensional. Various plans are made to harness the potential of the
employees and streamline the processes. Employees—People, and Streamline
the process—Operations.
3. Dynamic. However with the passage of a few days the external business
environment checks the capability of the organisation to adapt to the situations.

Question 2:
XYZ Ltd. is a management oriented company. Time and again all the employees learn
from their seniors various ways of dealing with diverse situations. They are provided
training whenever required. They are also given incentives both financial as well as non
financial. The result is employees see their development in the organisation. The
organisation tries to behave as a responsible constituent of society and ahvays creates
good quality products. It has a very good image in the market. The training modules are
superb and the employees always try to find unique ways of providing solutions in the
context of rapidly changing business environment. This has helped the organisation to
adjust frequently in a very good manner.
Which importance of management is highlighted here? Also identify the lines.
Answer:
The importance of management highlighted here are:

1. Development of personnel. They are also given incentives both financial as well
as non financial. The result is employees see their development in the
organisation.
2. Development of society. The organisation tries to behave as a responsible
constituent of society and always creates good quality products.
 3. Helps in becoming dynamic organisation. The training modules are superb
and the employees always try to find unique ways of providing solutions in the
context of rapidly changing business environment.

Question 3:
Gold Land Pvt. Ltd. is a wheat producing company. Daily 5000 bags of wheat weighing
10 kg each are produced here. In comparison to the previous year this ere has been
less number of bags produced on a per day basis. The number is around 4500 which is
less than the target of 5000 set by the company. The company however has been able
to reduce the costs involved in comparison to last year’s spending on the production
and packaging of each bag. The quality of bags has also been up to the mark.
Identify the concept of management ignored here.
Answer:
The concept ignored here is that of effectiveness as the quantity produced here is
lesser than targeted. Effectiveness requires output to be in required quantity, time and
quality.

Question 4:
A floor manager of a mall is a very good manager as he utilizes all the functions of
management to minimize cost of maintenance of his area. He directs all the staff
members under him to follow the targets and advises them to put their efforts in the
direction of achievement of these targets. Under his guidance the employees admit that
they learn a lot and are able to meet their targets. This has led to the increase in their
salaries. Identify the importance of management highlighted above.
Answer:
The importance of management highlighted here are:

1. Management increases efficiency. A floor manager of a mall is a very good

manager as he utilizes all the functions of management to minimize cost of
maintenance of his area,
2. Management helps in achieving group goals. He directs all the staff members
under him to follow the targets and advises them to put their efforts in the direction
of achievement of these targets.
3. Management helps in achieving personal objectives. This has led to the
increase in their salaries.

Question 5:
ABCD Inc. is a company which deals with providing car service at home and on road.
There are different departments in this company like Human Resources, Marketing,
Finance, Research & Development and Operations. The top management of the
company tries its level best to synchronize the activities of different departments in the
best possible manner. The result is the increased efficiency and attainment of goals.
However with the passing of time the size of the company has grown and now there are
many branches of this company. The synchronization has turned more important with
the increase in the size of the company and the number of employees. The
Departmental Heads cf the company are specialists in their respective areas and the
top management tries to work with them not with authority but by respecting their views
on the subject. Their ego clashes are avoided to ensure smooth functioning of the
organisation.
Identify the concept of management highlighted above. Write two benefits highlighted in
the above paragraph of this concept.
Answer:
The concept of management highlighted above is that of Coordination. The top
management of company tries its level best to synchronize the activities of different
departments in the best possible manner.
The importance of coordination:

1. Growth in size. When the organisation grows in size coordination plays an

important role in synchronizing all the activities as the number of employees and
branches increases. The synchronization has turned more important with the
increase in the size of the company and the number of employees.
2. Specialisation. The specialists like the departmental heads cannot be tackled just
by unity of command. They have their own egos. Here the best way to tackle them
is to ensure coordination among them. Their ego clashes are avoided to ensure
smooth functioning of the organisation.

Question 6:
Alpha Beta Inc. decided to go for perfect coordination in the various aspects of the
company. They focus on synchronization of all the activities of the organisation. For this
they know coordination will be the key. At the stage of thinking of what is to be done
throughout the year they decide to take into consideration the harmony between the
goals of the organisation and those of the individual departments. When they hire
employees they pay them only after evaluating their worth in terms of how efficient they
are. Finally when the last month of production comes they, time and again check the
deviation between the set targets and the actual production done.

In the above paragraph the main focus is on coordination. However various functions of
management also come into picture. You have to identify the three functions of
management highlighted above in which coordination can be seen.
Answer:
The various functions of management highlighted above are:

1. Planning. At the stage of thinking of what is to be done throughout the year they
decide to take into consideration the harmony between the goals of the
organisation and those of the individual departments.
2. Staffing. When they hire employees they pay them only after evaluating their
worth in terms of how efficient they are.
3. Controlling. Finally when the last month of production came they were time and
again checking the deviation between the set targets and the actual production
done.
Question 7:
Saagar Ltd. believes in coordination among departments and activities. The company
relies heavily on professional coordination. For this the company takes steps throughout
the year. Coordination is kept in mind by all the managers regardless of the level they
are working at. Throughout the year the various activities are synchronized without
failure. Every department ensures that within it every employee and operation is guided
by the theme of proper coordination. Whenever an employee takes an action he
consults others, whenever needed, thus properly contributing to his team. The process
of coordination is just not limited to the employees. Even at the departmental level the
various departments use this binding force to create perfect harmony among them so
that the organisational goals can be fulfilled. All the coordination that occurs in the
organisation is a result of proper training and premeditated attempts by the company to
get the best results possible. .
The above case represents all the characteristics of coordination. Identify the lines
which represent them and also name the characteristics.
Answer:

1. Coordination is the responsibility of all managers. Coordination is kept in mind

by all the managers regardless of the level they are working at.
2. Coordination is a continuous process. Throughout the year the various
activities are synchronized without failure.
3. Coordination is all pervasive. Every department ensures that within it every
employee and operation is guided by the theme of proper coordination.
4. Coordination is a group activity. Whenever an employee takes an action he
consults, others whenever needed, thus giving properly contributing to his team.
5. Coordination involves unity of action. Even at the departmental level the
various departments use this binding force to create perfect harmony among them
so that the organisational goals can be fulfilled.
6. Coordination is a deliberate function. All the coordination that occurs in the
organisation is a result of proper training and premeditated attempts by the
company to get the best results possible.

Question 8:
Radio XYZ is a company which has improved its functioning by proper management.
The company has been good in fixing and completing targets. The main reason for its
success has been the involvement of all of the employees. The company tries to keep
its targets in front of the employees so that each one of them can contribute to the
completion of goals. Though their activities may be different yet they contribute to the
common targets or goals of the organisation. The company has won the prize for the
best organisational climate. This has been possible due to the impact of great
managerial discipline which might not be visible to an outsider in the first look but he
realises it when he stays in the organisation. Gradually the organisation has developed
itself into a very successful company. It has produced different types of radios according
to the needs of the customers. During last decade it has adapted to the requirements of
the market and produced different type of radios suiting the needs of the customers.
The management of three components is always significant to the company —
employees, process and amount of work to be done. Controlling these three areas is
always a top priority to the company. Recently a meeting was held which laid stress on
the need of taking good management to all levels and departments of the organisation.
In the above case find all the characteristics of management and highlight the lines
which help you identify them.
Answer:
The following characteristics of Management have been highlighted:

1. Management is a goal oriented process. The company has been good in fixing
and completing targets.
2. Management is a group activity. Though their activities may be different yet
they contribute to the common targets or goals of the organisation.
3. Management is an intangible force. This has been possible due to the impact
of great managerial discipline which might not be visible to an outsider in the first
look but he realises it when he stays in the organisation.
4. Management is a dynamic function. During last decade it has adapted to the
nequire-ments of the market and produced different type of radios suiting the
needs of the customers.
5. Management is multidimensional. The management of three components is
always significant to the company—employees, process and amount of work to be
done.
6. Management is all pervasive. Recently a meeting was held which laid stress on
the need of taking good management to all levels and departments of the
organisation.

Question 9:
Dheeraj, Neeraj and Suraj are three friends. They work in the same company. They are
managers but they belong to three different levels of management. Every day they meet
and discuss their work with each other. One day they were having a conversation.
Dheeraj said, “These days I am having a lot of problems motivating the people at Shop
Floor. I have decided to purchase two new machines. I know I will have to set an
example by being the best leader.”
Neeraj said, “I am having problem with knowing the exact requirement of people in my
department. Different polices have to be informed to the employees so that they
become aware of our company’s goals. I also have to coordinate with other
departmental heads to know their requirements.”
Suraj said, “I have to decide for long term. I know I will be ultimately responsible for
every activity. All the policies and strategies require a lot of planning before formulation.”
In the above case identify the different levels of management these three friends belong
to.
Answer:

1. Dheeraj belongs to lower level of management. Lower level manager works at

the Shop Floor level. Shop Floor is the place where workers work and machines
are kept.
 2. Neeraj belongs to middle level management. Middle level manager decides the
number of employees to be required in his department. He also has to coordinate
with other departmental heads though at the same level.
3. Suraj belongs to the Top level of management. Top level manager is required
to plan for long term basis. He is responsible for all the activities in the
organisation. Policies and strategies are formulated by the Top management.

Question 10:
In a country named Wonderland acting is considered as a profession. Whosoever has
to become an actor has to read books written about acting. These books tell the
nuances of acting and without reading these books one can’t be considered as an actor.
To judge the ability of an actor an examination is conducted and then a degree is
assigned to the qualified persons who can then act in films. There is also a body which
provides membership to all actors. There are about thirty thousand actors in wonderland
who are compulsorily members of this organisation.
What are the three features of profession highlighted here? Also identify the lines
highlighting these features?
Answer:
The three features of profession highlighted here are:

1. Well-defined body of knowledge. An actor has to read books written about

acting.
2. Restricted Entry. To judge the ability of an actor an examination is conducted
and then a degree is assigned to the qualified person who can act in films.
3. Professional Association. Actors in wonderland who are compulsorily members
of this organisation.

Question 11:
Faulty works Inc. has a very dynamic Plant Superintendent, Amit, who is fond of dealing
with tough situations. He is a perfectionist who believes in doing quality management.
Every week he prepares a schedule which helps in minimization of wastage of efforts
and time of the department. He however is upset with the cutthroat competition among
the employees which is having a negative impact on the overall production. Even after
all such problems he is managing the situation very well. On 26th Feb he informs his
boss that the target given to him has been achieved and with the best quality.
The best part was that still two days were remaining for the dead line to be over which
was 28th Feb. However his boss was not pleased as the cost incurred by his team for
the completion of project is more than the allowed limit.
In the above case find out the concepts of management violated and the concepts
lollowed? Also tell at which level of management does Amit work?
Answer:
The concepts of management which have been violated are:

1. Cooperation. There is so much competition among the employees that there is

negative outcome of it.
 2. Efficiency. There has been more than expected spending of resources which has
led to increase in overall costs incurred.

The concepts of management which have been followed are:

1. Coordination. Every week he prepares schedule and thus brings down wastage
of efforts.
2. Effectiveness. As the work is completed before time and with required quality.
Amit works at the middle level management as Plant Superintendent is a middle
level manager.

Question 12:
Pricey Medicines was a world level medicine manufacturing company. However recently
its fame had come down under the impact of resignations put forth by two of its
departmental heads. These departmental heads were experts in their fields. One was
leading the.marketing department and the other was a scientist of repute who headed
the manufacturing department. In the top level management meeting it was found that
such departmental heads who were specialists in their areas can’t be tackled by unity of
command. They were egoistic as they were specialists.
After the meeting things started to change for the organisation as all the departments
started to work with one single target of giving the company its lost fame. There was a
combined effort which doubled the revenue of the organisation. A special regulation
system of including every level manager was brought into action. Thus the overall
functioning of the organisation was improved.
In this case a concept of management was missing. Identify it. Also identify its
characteristics highlighted here.
Answer:
After meeting the things started to change for the organisation as all the departments
started to work with one single target of giving the company its lost fame. There was a
combined effort which doubled the revenue of the organisation. A special regulation
system of including every level manager was brought into action. Thus the overall
functioning of the organisation was improved.
The concept of management which was missing was Coordination (such departmental
heads who are specialists in their areas can’t be tackled by unity of command).
The two characteristics of coordination which are highlighted are:

1. Unity of Action—as all the departments started to work with one single target of
giving the company its lost fame; and
2. Responsibility of all managers—A special regulation system of including every
level manager was brought into action.

Question 13:
Ice Air Manufacturers are the leading AC manufacturers. On meeting the record target
they decided to give prize to the best worker of the year. Rajesh who is a very devoted
worker wins the prize of the best worker. He is very happy. Mr. Kulkarni who is the CEO
of the company gives a heart-touching speech. He tells all the workers present that the
company should reach new heights this year. Their contribution will be immense. He
tells them that the revenue this year should exceed cost so much so as to reduce the
business risk. So that in the coming years company could show increase in the number
of workers, number of products produced and also the sales turnover. The speech ends
with the promise made by the labour union head that the company will get the full
support from the workers.
In the above case which type of objectives are discussed by Mr. Kulkarni in the speech?
What is the other term used for this category of objectives? At which level of
management does Rajesh work in the company?
Answer:
The type of objectives discussed are Organisational Objectives since

1. Profit—revenue this year should exceed cost so much so as to reduce the

business risk; and
2. Growth—increase in the number of workers, number of products produced and
also the sales turnover are discussed here.
The level at which Rajesh works is the non-managerial level since all the workers
work at this level and he is a worker (Rajesh who is a very devoted worker).

Question 14:
Shiva Computers Ltd. is a leading company in Computer Technology and IT services.
The CEO of the company attributes the success of the Company to its managerial team
spirit, which have helped to handle rapid changes in technologies and to transform
threats into opportunities. Like any other business enterprise profits are important for
survival and growth of Shiva Computers Ltd. The management of the company believes
that a satisfied employee creates a satisfied customer; who in turn creates profits that
lead to satisfied shareholders.
The company has a strong sense of social responsibility. It has set up many educational
institutions in the field of management, engineering and computer education, in which
half of the students are girls.
On the basis of the given information about Shiva Computers Ltd. answer the following

(a) Identify and explain the objectives of the company discussed in the above para. Also
quote the lines for the identified objectives.
(b) Identify any two values which the company is trying to communicate to the society.

Answer:
(a) “Like any other business enterprise profits are important for survival and growth of
Shiva Computers Ltd.”
Objective—Organisational objectives. Organisational objectives include proper
utilisation of material and human resources to fulfill the economic objectives of the
business. These economic objectives include the following:

1. Survival. Management has to ensure the survival of the organisation. An

organisation must generate sufficient revenue so that it is able to cover its costs.
 2. Profit. Management must ensure that business earns profit so that it can
continue its operations in the long rim.
3. Growth. It involves adding to the prospects of the business in the long run.
Growth
of the business is indicated by increase in sales volume, increase in number of
employees, increase in investment, etc.

“The management of the company believes that a satisfied employee creates a

satisfied customer, who in turn creates profits that lead to satisfied
shareholders.”

Objective—Personal objectives. Various people join a particular organisation to satisfy

their diverse needs that range from financial needs to affiliation needs. Management
aims at reconciling personal goals with organisational goals for the purpose of creating
harmony. “The company has a strong sense of social responsibility. It has set up many
educational institutions in the field of management, engineering and computer
education, in which half of the students are girls.
Objective—Social objectives. Social objectives involve creation of benefit by the
business for the society. It involves creation of economic value for the benefit of the
members of the society.

(b) Values:

1. Team Spirit and Good work culture.

2. Women’s Empowerment.
3. Fulfilling social responsibility by showing concern for the society. (any two)

Question 15:
White Camel Sports Ltd. has recently given job to two employees. Rajesh
work experience as Rajesh is a bit older and had worked in an MNC earlier. However
both are paid equally. Every person in their department knows that Rajesh is more
efficient than Suresh. Definitely they see a mismatch in the salaries and the efficiencies
of the employees in the company. The marketing department of the same company has
this year set a monthly target of 10000 units of sports items to be sold. In the month of
March 6000 items were sold and the deviation was 4000 units. In the month of April
8000 units were sold and the deviation was 2000 units. Despite these deviations no
effort is being made to track the performance of the company to minimize the gaps.
In the above case which two functions of management have been discussed? A very
important concept of management has also been overlooked. Identify it.
Answer:
The functions of management discussed above are—
(i) Staffing (The company has recently given jobs to two employees)
and Controlling (Deviations are being discussed above).
The concept of management which is missing in the above case is coordination. There
is lack of coordination in staffing (they see a mismatch in the salaries and the
efficiencies of the employees in the company) and controlling (no effort is being made
to track the performance of the company to minimize the gaps).

Question 16:
Cyclone Cycles is a leading bicycle manufacturing company. The company decides to
manufacture 5000 bicycles by the end of the month. The bicycle manufacturing cost is
to be kept below Rs.750 per unit. The bicycles have to be manufactured at the set
toughness enduring capacity at the scale of 8 out of 10. With all these parameters in
mind the company kick starts its manufacturing. By the 28th of the month the company
is able to achieve the manufacturing of 5050 bicycles. The toughness endurance scale
is well above 8.25 out of 10. When everything seems to have gone well the
manufacturing department reveals that per unit cost of each bicycle is Rs.780.
In the above case do you think that the company has been able to achieve
Effectiveness? 1
Answer:
Yes the company has achieved Effectiveness. Since the quality (toughness scale—
8.25 well above 8), quantity (5050 units well above 5000 units) and dead line (the target
is achieved on 28th) have been achieved. The company lacks in efficiency as per unit
cost has gone above the set target by Rs.30.

Question 17:
Mr. Sanjeev is responsible for the welfare and survival of his organisation. After few
years of gaining work experience he decides to write a book on management.
In his book he broadly gives five valuable suggestions:

1. Management of a company is good if it is able to calm down the resistance of the

employees. Whenever the employees find something new they tend to resist. It is
in the favour of the company and the employees must be guided to accept the
change and thus bring down the resistance. They must learn only change is
constant.
2. Unless and until the betterment of employees is achieved management is
useless. A good management helps its employees by giving them recognition,
increment in salary, promotion, etc.
3. Management should earn profits but it should also produce good products. It
should also involve itself in providing facilities to society without any profit motive.
Further it should help to provide employment in backward areas by focusing on
these areas also.
4. Management should apply all the functions of management like planning,
organizing, staffing, directing and controlling. The essence of management which
is coordination should be present in every function of management.
5. Management should provide common direction to its employees. They will always
diverse interests and their efforts will go off the track but it is important to guide
them in the required direction.
At which level of management does Sanjeev work? What will be the outcomes of
these five suggestions?
Answer:
Sanjeev works at the top level to management of the company as he is responsible for
the welfare and survival of his organisation.
Now the consequences of his suggestions will be:

1. Management helps in making a Dynamic Organisation. If it is able to calm down

the resistance of the employees.
2. Management helps in achieving Personal Objectives of the employees. *A good
manage¬ment helps its employees by giving them recognition, increment in
salary, promotion, etc.
3. Management helps in Development of Society. Produce good products, involve
itself in providing facilities to society without any profit motive and provide
employment in backward areas by focusing on these areas also.
4. Management helps in improving efficiency. Efficiency is achieved when
management applies all the functions of management like planning, organizing,
staffing, directing and controlling.
5. Management helps in achieving group goals. Provide common direction to its
employees. Their efforts may be diverse and unrelated but they should be
provided a common direction.

Question 18:
In an island there is a famous ship company. Hundreds of workers work here. All of
them belong to a culture where they help each other. The environment in the company
is about helping each other thus leading to a great environment in the company.
However the company lacks professionalism. Most of the workers are school dropouts
and they hardly know how to make their work synchronized as a team. Failing of plans
is common in this company.
After reading the above case find out the concept of management which is followed and
its advantage. Also find out one concept of management which is violated and its
outcome on the company. 4
Answer:
The concept of management which is followed is Cooperation. Since the workers help
each other and the general environment in the company is of cooperation. The
advantage of cooperation is that there is satisfaction within the employees in its
presence.
The concept of management which is violated is Coordination. They hardly know how
to make their work synchronized as a team. One disadvantage of not following
coordination is the wastage of effort and time.

Question 19:
A very innovative firm has decided to increase its sales. The company is good but they
have noticed that their growth has stagnated for the last couple of years. The top
management calls for an emergency meeting. For this they have outlined a series of
activities to be performed by each person. The people are told the activities they have to
perform. Thus the work is divided among individuals. The efforts taken by the firm turn
out to be very productive for the organisation and it gains huge profit. The newspapers
and management institutes also praise the company for its high standards of
management. However as time passes the size of the organisation grows and thus they
think of bringing another concept of management with a lot of precision. This concept of
management is not voluntary but rather based on a lot of clear cut thinking in advance.
The main idea is to reduce confusion among the employees regarding any of the
activities they have been assigned.
Identify the functions of management highlighted in the above lines which the company
follows. Also Identify in the above lines a concept of management discussed which the
company tries to bring. Find out one importance and one characteristic of this concept
highlighted above. 5
Answer:
The functions of management highlighted above are Planning (The company has
decided to increase its sales) and Organising (The work is identified and divided among
individuals).
The concept of management highlighted above is Coordination.
The importance of coordination when the size of the organisation increases is told
here and the characteristic highlighted is coordination is deliberate. The concept of
management is not voluntary but based on a lot of clear cut thinking in advance.

Question 20:
Management has evolved like other disciplines. There are umpteen numbers of books
of management. One can see that the various theories of management are getting
absorbed in the competitive work environment. We can see students of various courses
like MBA, BBA, etc. acquiring learning of the systematic knowledge in their syllabus.
When these students come in the actual industry environment, not all of them are
successful. Success in actual work environment depends upon the intelligent
application and mastery of the basic principles of management. Today various
companies are considering them as responsible components of society and have
started including Corporate Social Responsibility in their main program. These
companies have realised that they will be requiring support from Government and
people if they want to achieve some important feats in this field.
In the above paragraph one feature is each of science, art and profession has been
discussed. Identify each of them.
Answer:
Management as Science—Systematised body of knowledge. We can see students
of various courses like MBA, BBA, etc. acquiring learning of the systematic knowledge
in their syllabus.
Management as an Art— Based on practice and creativity. Success in actual work
environment depends upon the intelligent application and mastery of the basic
principles of management.
Management as a Profession—Service Motive. Companies are considering them as
responsible components of society and have started including Corporate Social
Responsibility in their main program.

Question 21:
Aman, Ahmad and Ally are partners in a firm engaged in the distribution of dairy
products in Maharashtra state. Aman is a holder of Senior Secondary School :ate from
Central Board of Secondary Education with Business Studies as one of his elective
subjects. Ahmad had done his post graduation in History and Ally in dairy farming. One
day there was a serious discussion between Ahmad and Ally regarding the nature of
management. Ahmad argued that management was a profession. Whereas Ally argued
against it saying that the legal and medical profession are the only professions because
they fulfill all the conditions of profession. Aman on the basis of his knowledge of
business studies explained the nature of management as a profession to Ahmad and
Ally.
Explain, how Aman would have satisfied both Ahmad and Ally.
Answer:
Aman would have satisfied both Ahmad and Ally by explaining the following features of
management as a profession.

1. Well-defined body of knowledge. All professions are based on a well-defined

body of knowledge that can be acquired through instruction.
Management too is based on a systematic body of knowledge comprising well-
defined principles. This feature of profession is present in management.
2. Restricted entry. The entry to the above stated profession is restricted through a
prescribed qualification. But there is no restriction on anyone being appointed as a
manager in any business enterprise. So, presently this feature of profession is not
present in management.
3. Professional association. Legal and medical professions are affiliated to a
professional association like bar council and medical council which regulates
entry, grants certificates of practice and formulates and enforces a code of
conduct. There are several associations of practising managers in India, like the
AIMA that has laid down a code of conduct to regulate the activities of their
members. There is, however, no complusion for managers to be members of such
an association. So, presently this feature of profession is not present in
management.
4. Ethical code of conduct. Legal and medical professions are bound by a code of
conduct which guides the behaviour of its members. AIMA has devised a code of
conduct for Indian managers but there is no statutory backing for this code. So,
presently this feature of profession is not present in management.
5. Service motive. The motive of legal and medical profession is to serve their
client’s interests by rendering dedicated and committed service. The basic
purpose of management to help the organisation achieve its goals by providing
good quality products at reasonable prices, thereby serving the society, is being
increasingly recognised. So, presently this feature of profession is not fully present
in management. This shows that management does not satisfy all the criteria of a
profession. So, Aman would have been able to satisfy both Ahmed and Ally by
making them understand that Management is a profession but not a full fledged or
a true profession.

Question 22:
Kamal, Khan and Devid are partners in a firm engaged in the distribution of dairy
products in Madhya Pradesh. Kamal is a holder of Senior Secondary School Certificate
from Central Board of Secondary Education with Business Studies as one of his elective
subjects. Khan had done his post graduation in Hindi literature and Devid in Dairy
Farming. One day there was a serious discussion between Khan and Devid regarding
the nature of ‘Management as a Science’. Khan argued that management was not a
science whereas Devid was of the opinion that Management is a Science. Kamal
intervened and corrected both Khan and Devid about the nature of Management as a
Science with the help of his knowledge of Business Studies.
Explain, how Kamal would have been able to satisfy both Khan and Devid?
Answer:
Kamal would have satisfied both Khan and Devid by giving the following points for
considering management as a science:

1. Existence of a systematized body of knowledge. Like science, management

has its own theory, techniques and principles. It also draws some principles from
various disciplines such as Economics, Sociology, Psychology and Mathematics.
So this feature of science is present in management.
2. Principles based on observation and experimentation. Management principles
have been developed on the basis of scientific observation and experiments in
different types of organisation.
3. Universal validity and application. The principles of management are not as
exact as the principles of science and their application and their use is not
universal. They have to be modified according to a given situation. However, they
provide managers with certain standardized techniques that can be used in
different situations irrespective of the area, region and country.
4. Cause and effect relationship. Principles of management like science establish
cause and effect relationship between different variables. For example, Lack of
unity of command would lead to confusion and indiscipline. So, this feature of
science is also present in management.
Hence management has some features of science that is the reason why it is
considered as an inexact science not a pure science. It is a soft science or a
social science as management is concerned with human beings whose behaviour
cannot be predicted with absolute accuracy.

Question 23:
Dinesh is a versatile manager. However due to the nature of his job most of the time of
his day is occupied with planning. One day his friend who runs an advertising company
calls him for a lunch. Dinesh finds his friend very busy as his friend tells him that the
company he is working in is very busy these days in finding the right person for the right
job. Soon Dinesh leaves after having a detailed discussion with his friend. During that
lunch he learnt many things from his friend and applied the things learnt in his company
the best outcome was the adaptable nature of the company that turned out to be after
application of this learning. The company earned more revenue by the end of the year.
Which level of management Dinesh belongs to? What function was performed by his
friend’s company? Which particular characteristic of management was achieved by
Dinesh for his company? Also identify the concerned lines.
Answer:
The level at which Dinesh is working is Top level of management (most of the time of
his day is occupied with planning).
The function performed by his friend’s company is Staffing. The company he is working
in is very busy these days in finding the right person for the right job.
The characteristic of management achieved by Dinesh is Dynamic Function. The best
outcome was the adaptable nature of the company that turned out to be after
application of this learning.

Question 24:
Ashutosh Goenka was working in ‘Axe Ltd.’, a company manufacturing air purifiers. He
found that the profits had started declining from the last six months. Profit has an
implication for the survivial of the firm, so he analysed the business environment to find
out the reasons for this decline.
(a) Identify the level of management at which Ashutosh Goenka was working.
(6) State three other functions being performed by Ashutosh Goenka.
Answer:
(a) Top level management.
(b) Following are the three functions performed by Ashutosh being a top level manager.

1. Integrating the diverse elements and coordinating the activities of different

departments as per the overall objectives of the organisation.
2. Formulating overall organisational goals and strategies for their achievement.
3. Taking the responsibility for all the business activities and for its impact on the
society.

Question 25:
Rishitosh Mukerjee has recently joined AMV Ltd;> a company manufacturing
refrigerators. He found that his department was under-staffed and other departments
were not cooperating with his department for smooth functioning of the organisation.
Therefore, he ensured that his department has the required number of employees and
its cooperation with other departments is improved.

1. Identify the level at which Rishitosh Mukerjee was working.

2. Also, state three more functions required to be performed by Rishitosh Mukerjee
at this level.

Answer:
(a) Rishitosh Mukerjee is working at the Middle Level management. Nature &
Significance of Management
(b) Three functions performed at this level are:

1. Interpreting the policies faced by the top management.

2. Assigning necessary duties and responsibilities to the subordinates.
3. Motivating the personnel to achieve desired objectives.
Question 26:
Clean Sanity ware is a big company. Managing many employees at the same moment
is a challenge which this company always faces. Since the company has many
departments it is necessary for the company to ensure unity of action among various
departments. The various departments are human resources, marketing, finance,
operations and sales. The employees are always concerned about the company and
are a useful resource to their organisation. Though they have diverse interests and have
to perform different activities the management ensures that the efforts of the employees
should be given a focus so as to achieve the organisation goals. The different
departments have their own interests but due to proper coordination the conflicts of
interest in the departments is minimized to a nil. When it comes to the employees the
organisation shows its concern. The career of employees is shown a developmental
path through proper training modules and job enrichment. Rajeev is a manager who
takes care of all the duties and responsibilities to be assigned to his employees in the
department. He uses all sources to develop a proper communication with them and
leaves no attempt to motivate them. This year the company has decided to give the best
manager award to Rajeev for his contribution to the organisation.
Which characteristics of coordination have been highlighted in the above case? Which
type of objective is fulfilled here? At which level of management does Rajeev work?
Which function of management does he perform here? Also identify the lines in each
case. 6
Answer:
The characteristics of coordination involved above are:

1. Coordination ensures unity of action (characteristic of coordination). Since

the company has many departments it is necessary for the company to ensure
unity of action among various departments.
2. Coordination integrates group efforts (characteristic of
coordination). Though they have diverse interests and have to perform different
activities the management ensures that the efforts of the employees should be
given a focus so as to achieve the organisation goals.
3. Functional Differentiation (Importance of coordination). The different
departments have their own interests but due to proper coordination the conflicts
of interest in the departments is minimized to a nil.

The objective which is fulfilled here is the Personal Objective. The career of employees
is shown a developmental path through proper training modules and job enrichment.
Rajeev works at the middle level of management. Rajeev is a manager who takes care
of all the duties and responsibilities to be assigned to his employees in the department.
Rajeev is following the Directing function of management. He uses all sources to
develop a proper communication with them and leaves no attempt to motivate them.
 Chapter 2 Principles of Management

Question 1:Rajeev is a middle lever manager. He keeps all his subordinates under
a lot of discipline. His employees however complain of wastage of time and
efforts as they feel that nothing is being assigned in a proper way and a proper
place, also no proper schedule is made for working. Which principle of
management is violated here?

Answer:The principle of management which is violated here is the Fayol’s

principle of ‘order’. Fayol’s principle of order says that everything has a place and
everything should be at its place.

Question 2:
Rajesh wants to become an ideal manager. For this he reads many management
books. After reading various broad and general guidelines he prepares f to apply them
and make his work more meaningful. The necessary outcome will be his improved
output.
Which concept of management has been highlighted here? 1
Answer:
The concept of management which is highlighted here is ‘principles of management’.
Management principles are the broad and general guidelines which help employees in
behavior and decision making. .

Question 3:
Pakka employment is a company which takes care of the fact that the confidence of the
employees should always be at its peak. For this reason they give surety to their
employees for employment for a minimum fixed tenure of time. Which principle of
management is followed here?
Answer:
The principle of management which is followed here is ‘stability of personnel’.

Question 4:
A floor manager of a Mall is very capable as he utilises all the functions of management.
He lays stress on developing mutual trust and spirit of cooperation amongst the
employees. Under his guidance the employees admit that they learn a lot and are able
to meet their targets. This has led to increase in their salaries.
Identify the principle of Fayol followed by the floor manager in the above case.
Answer:
Esprit De Corps
Question 5:
The plant superintendent of a company is very sad. When he was on leave he was
expecting his subordinates to take the remaining work to the finish. However he finds a
new way of dealing with this problem. He develops a system of suggestion building from
the side of workers. For this a suggestion/complain box is to be kept where the workers
can drop their advice and hence take steps from their side.
Which principle of management has been implemented here off late by the plant
superintendent?
Answer:
The principle of Fayol—’initiative’ was initially not followed and the establishment of
suggestion/complaint box is a step in following it.

Question 6:
Suresh works in a bulb manufacturing company. Each bulb which is manufactured is of
standard size and quality. Further if there is any unrequired type of bulb manufactured
then its production is stopped. Last month when the company came to know that 10
watt bulbs were no more liked by customers, their production was stopped. He works in
the purchase department. His job is to purchase the filaments required to make bulbs.
This time when he purchases the filament he gets the instruction from the seller that
some special care needs to be taken in the first hour of fixing the filaments inside the
bulb. Suresh knows this information should be given immediately to the production
department before the assembling process starts. However he finds that his company’s
policies only allow him to give the message to his immediate boss who will further pass
this message to his boss. The passing of this message will continue till it reaches the
desired person in the production department.
Which technique of management is followed here? Also name the principle of
management followed here by the company? Which option is now available to Suresh
since the company is not allowing him to interact with the concerned worker in the
production department? 4
Answer:
The technique of management which is followed here is Standardisation (Each bulb
which is manufactured is of standard size and quality) and Simplification (Further if
there is any unrequired type of bulb manufactured then its production is stopped).
The principle of management which is followed here is Scalar Chain. However he finds
that his company’s policies only allow him to give the message to his immediate boss
who will further pass this message to his boss.
The option which is now available to Suresh is the use of Gang Plank as this is an
emergency situation. Suresh knows that this information should be given immediately to
the production department.

Question 7:
Every year a meeting is organized in the lawns of the owner of a company. In this
meeting the owner of the company grants some funds for the benefit of the families of
the employees. The employees on the other hand never resist any change or put
excessive demands. The general environment in the company is very supportive to the
employees. The employee turnover ratio is very low.
Which concept of management is discussed here? Which principle of management will
be easily followed here?
Answer:
The concept of management discussed here is Mental Revolution. The owner of the
company grants some funds for the benefit of the families of the employees. The
employees on the other hand never resist any change or put excessive demands.
Since the employee turnover ratio is low the principle of management which must have
been followed is ‘stability of personnel’. Whenever there is violation of this principle of
Fayol the employee turnover ratio increases. The increased employee turnover ratio is
not good for an organisation and should be minimised.

Question 8:
Bhatkaav Enterprises is facing huge losses. The owner of the company is an MBA pass
out. Even then many things in the organisation are happening which are indicative of
lack of proper management in the company. First of all there is no specific sharing of
work and any time any employee is asked to do anything. This has lead to wastage of
efforts. Further due to negligence in proper work sharing there has been no
specialisation development in the nature of the jobs done by the employees.
There are no clear and fair agreements between the workers and the management.
This has led to a lot of frustration in the workers. Management has quite often been
found to be ignorant of not fulfilling promises done by it. There are also no strict rules
and regulations binding on the conduct of the workers.
The departmental heads who are the middle level managers in the company and hold
key positions always favour their relatives. They quite often don’t turn up for job on time.
They are always looking for special relaxations from the top management. This has led
to feeling of resentment among the employees who are also demanding special favours
and threatening strike in the coming days.
Identify the three principles of Fayol violated in the above case.
Answer:
In the first paragraph of the case the principle of Fayol which is violated is ‘Division of
Work’. In the second paragraph of the case the principle of Fayol which is violated is
‘Discipline’.
In the third paragraph of the case the principle of Fayol which is violated
is ‘Subordination of individual interests to general interests’.

Question 9:
Ramesh is the owner of a printing press. The size of his organisation has y/increased
during the recent past. There are many employees who work in his organisation. The
organisation is considered good and has earned a lot of reputation in the market.
However when it comes to making key decisions in the organisation related to many
things he never considers the opinions of his subordinates. Even though the size of the
organisation has increased yet he tries to take all the key decisions on his own.
Which principle of Fayol has been violated by him?
Answer:
The principle of Fayol which has been violated here is ‘Centralisation and
Decentralisation’. This principle explains the need of balance between Centralisation
and Decentralisation. He is making all the decisions on his own and he is not giving any
decision making authority to his subordinates so he is not following this principle.

Question 10:
Mohan works on the floor of a mall as a manager. He is very hard working but is unable
to produce results for his organisation. His target for last month was a sale of 10 lakh
rupees from his floor. However by the end of the month the sale was only 8 lakh rupees.
He is very regular and takes all the necessary steps to complete the target. However his
staff is not as competent as he himself is. When he tries to take action against
disobedient employees the top management doesn’t allow him to do so. They haven’t
given him the power to fire employees or take any strict action against them.
Which principle of Fayol is violated here by the Organisation? 1
Answer:
The principle of Fayol which is violated here is ‘Authority and Responsibility’. The
amount of responsibility put on the shoulders of the floor manager is not in proportion to
the amount of authority given to him. He can’t take any strict action against his
subordinates.

Question 11:
Enlightened Souls Pvt. Ltd. is a tube light manufacturing company. Before the start of
the year they had promised their employees for bonus for extra production. It was also
decided that those who will put extra time will be paid extra according to the number of
hours. However people in the HR department who worked very hard later complained
that they were not compensated for the extra number of hours that they used to stay in
the office.
Which principle of Fayol is violated here?
Answer:
The principle of Fayol which is violated ‘Discipline’.

Question 12:
Rohan and Amit are working in the purchase department of a company. Rohan is the
brother-in-law of the managing director of the company whereas Amit has been
recruited from an external source. They both have been performing below average for
the last couple of months. Many people in the organisation talk about their lack of
responsibility. When the managing director of the company came to know about their
irresponsible behaviour he immediately suspended Amit but did not take any action
against Rohan.
Identify the principle of Fayol which has not been followed by the managing director in
the above case. 1
Answer:
Equity

Question 13:
Aditi who is heading the campus recruitment program of the firm that she is working in,
gets an immediate order from the marketing head of the organisation. Mr. Rupesh asks
her to hire only those candidates who have two years experience in the field of
marketing and offer them a higher package. Moments later when she is about to enter
the campus she gets another call from the HR head who asks her to hire candidates
with zero experience. He gives her the logic that such candidates would be expecting
lower packages in comparison to the candidates having experience in the industry.
Which principle of Fayol stands violated here? What is the immediate outcome of the
violation of this principle? State the principle. 3
Answer:
The principle of Fayol which is violated here is ‘Unity of command’.
The Unity of command states that an employee should take orders only from one boss.
The immediate outcome of the violation of this principle is dual subordination.

Question 14:
Aapka Apna Vehicles is a vehicle manufacturing company. The company has the same
unit producing both scooters and cars. This leads to confusion among the employees
regarding the reporting as well as differentiation of work.
Which principle of Fayol is violated here? Why? State the principle. Give an immediate
outcome of the violation of this principle. 4
Answer:
The principle of Fayol which is violated here is ‘Unity of Direction’.
Unity of Direction is violated here as there should have been separate departments for
the two types of vehicles.
This principle says that there should be one boss and one plan. The related activities
should be placed in one department. So there should be separate departments for the
production of cars and the scooters.
The immediate outcome of the violation of this principle is overlapping of activities which
will affect the whole organisation.

Question 15:
. Twenty new employees have started their career in XYZ Ltd. The employees are new
to the environment of the organisation and have no idea about the demanding jobs. The
management has decided to give them three months of time to show their results.
Which principle of Fayol is followed here? How does this principle help the
organisation?
Answer:
The principle of Fayol which is followed here is ‘Stability of Personnel’.
This principle helps the organisation by reducing Employee Turnover. Thus the
efficiency of the organisation is increased.

Question 16:
Enigma Coolers are the leading manufacturers in their area. They have decided to
increase the productivity of their workers. For this they have chalked out a plan. They
will be hiring operational managers who to work at the lower level of management. They
have decided to keep eight managers over a single worker. Thus every worker will have
to report to all these eight managers.
Which technique of scientific management is followed here? What will be the benefit?
Also tell which principle of Fayol will be violated here?
Answer:
The technique of Scientific Management which is used here is Functional
Foremanship.
The benefit will be that every worker cannot have all the qualities like intelligence,
special knowledge, energy, honesty, etc. Individually each of the functional foremen like
gang boss, speed boss, etc. will look after all these qualities.
The principle of Fayol which will be violated here will be principle of ‘Unity of
Command’ as a single worker will have to report to eight different people.

Question 17:
ABCDEF Ltd. has decided to become the market leader in selling water bottles. The
company decides to take care of all the departments. The top management decides to
set standards for all the business activities right from the purchase of raw material to
manufacturing and packaging of the water bottles.
Which scientific technique of management is used here? Name three advantages of this
technique. 4
Answer:
The scientific technique used is ‘Standardization’.
The three advantages of standardization are:

1. Standards of performance of men and machine can be established.

2. Standards of excellence and quality in materials can be established.
3. Machines and their components of standard size can be interchanged over
different areas and conditions.

Question 18:
‘Work is Worship’ is a leading construction company. The organisation has grown from
strength to strength because of its innovative ideas and scientific approach of working.
Ten years back the organisation went through a revolution. All the operations and
activities were properly noticed and the standard time taken to perform them was noted.
This took a few months and now the company could find out the amount of workers
required and the number of days to be involved in the various manufacturing processes.
A year later they moved to another level by considering the stress involved in the lives
of the workers. The amount and frequency of rest intervals in finishing a particular task
were noted. This helped the company in optimizing the rest intervals for the workers so
that their outputs could be increased. After six more months the company decided to
reward the efficient workers. A different rate of wage payment was decided for those
workers who performed above the standard. The standard was decided. This led to a
revolutionary change in the perspective of the workers who now started giving their full
efforts in order to increase their wages.
Which concept of management has been discussed in the above case? Name the three
types of this management concept highlighted above. Also identify the lines where
these types have been indicated. 4
Answer:
The concept of management which is discussed above in the whole case
is Techniques of Scientific Management.
The various types of techniques used are:

1. Time Study. All the operations and activities were properly noticed and the
standard time taken to perform them was noted.
2. Fatigue Study. The amount and frequency of rest intervals in finishing a
particular task were noted.
3. Differential Piece Wage System. A different rate of wage payment was
decided for those workers who performed above the standard.

Question 19:
Sanchit, after completing his entrepreneurship course from Sweden returned to India
and started a coffee shop ‘Aroma Coffee Can’ in a famous mall in elhi. The speciality of
the coffee shop was the special aroma of coffee and a wide variety of flavours to
choose from. Somehow, the business was neither profitable nor popular. Sanchit was
keen to find out the reason. He appointed Sandhya, an MBA from a reputed college, as
a Manager to find out the causes for the same.
Sandhya took feedback from the clients and found out that though they loved the
special unique aroma of coffee but were not happy with the long waiting time being
taken to process the order. She analysed and found out that there were many
unnecessary obstructions in between which could be eliminated. She fixed a standard
time for processing the order.
She also realised that there were some flavours whose demand was not enough. So,
she also decided to stop the sale of such flavours. As a result within a short period
Sandhya was able to attract the customers.
Identify and explain any two techniques of scientific management used by Sandhya to
solve the problem.
Answer:
Sandhya has used the following two techniques of scientific management:
 1. Time Study. Time study aims at determining the standard time taken by a
worker of reasonable skill to perform a well defined job. For this purpose time
measuring devices are used and standard time is fixed for the task after taking
several readings. The main idea behind this is to determine the number of
workers to be employed, frame appropriate incentive schemes and determine
labour cost.
2. Simplification of Work. Simplification of work aims at eliminating superfluous
varieties, sizes and dimensions. The main idea behind is to eliminate
unnecessary diversity of products. It saves cost of labour, machines and tools.
It leads to reduction in stock and helps in fuller utilisation of equipment.
Moreover, it leads to an increase in turnover.

Question 20:
A scientist working in a factory for the betterment of the operational aspect studied all
the steps involved in the manufacturing of the product. He very attentively noticed all
sorts of movements to arrive at a simpler way of doing all the activities possible. With
his hard work he was able to bring down the number of activities for the manufacturing
of the final product from 34 to 22. This work was able to bring down the labour charges
and decrease the total time of production. Thus he gave the organisation an added
advantage.
Which type of scientific technique is discussed here?
Answer:
The type of scientific technique discussed here is Motion Study.

Question 21:
‘Kanpur Leather Ltd.’ is the manufacturer of leather products. It is pro¬ducing on large
scale and its organisational structure is functional. In the production department various
foremen have been employed. Each foreman has been made responsible for production
planing, implementation and control. This has led to a situation of confusion and
uncertainty. Suggest a technique of scientific management to Kanpur Leather Ltd. which
may help it to effectively organise planning and its execution.
Answer:
Functional Formanship is the technique of Scientific management which may help
Kanpur Leather Ltd. to effectively organise planning and its execution.
In order to apply specialisation at the supervisory level, Taylor developed the concept of
functional foremanship. He suggested that under the factory manager there are a
planning incharge and a production incharge.
The main function of the planning incharge is to plan all aspects of the job to be
performed. Under the planning incharge four personnel are appointed:

1. Route Clerk concerned with determination of the exact sequence in which

various operations are to be performed.
2. Instruction Card Clerk who issues instructions to workers for handling their
jobs.
 3. Time and Cost Clerk who frames the time schedule and keeps record of the
cost of operations.
4. Disciplinarian concerned with enforcing the rules and regulations and
maintaining discipline in the factory.

Under the production incharge, the following four personnel are appointed concerned
with the execution of plans:

1. Gang Boss to arrange machines, tools, materials, etc., for the workers.
2. Speed Boss to check whether the work is progressing as per schedule and
instructions issued.
3. Repair Boss to check and maintain machines and tools in proper working
conditions.
4. Inspector for checking quality of the work done by the workers.

Question 22:
ABCDEF is a world renowned retail chain store. The customers here are very much
pleased with the products and services provided in the stores. The customer
satisfaction and internal efficiency indicator of the organisation is rated best in the
industry. However there have been a few steps taken by the organisation which provide
the organisation this edge. The organisation has used a special type of software which
integrates all the stores and brings uniformity in its billing and working pattern.
Which principle of management is mentioned here?
Answer:
The principle of management which is followed here is ‘Science not Rule of
Thumb’ as the organisation tries to bring uniformity in its approach.
Question 23:
Star Limited is a garment manufacturing company which has been performing quite
well. The company got a major order of 2000 shirts which it is supposed to manufacture
and supply within two weeks time. On an average the company manufactures around
50 to 60 shirts in a day. Therefore, it is a very challenging task for the organisation. The
management of the company asked its labour to put in extra hours without any
additional payment to achieve this objective. In return, management has promised the
workers that their wages will be increased on a permanent basis as soon as the project
is over. The labour agreed to the management’s proposal and completed the assigned
task within the allotted time frame. As per its promise the management increased the
wages of the workers and the project became a great success. Both management and
labour honoured their commitment.
Identify the principle of Henri Fayol which has been highlighted in the above case.
Answer:
Discipline

Question 24:
‘We are the Best’ Public School though is a disciplined organisation, It lacks well
defined rules and regulations. With passage of time the management of the finds out
that if there are proper rules and regulations for the students and the teachers the result
of the school improves.
Which nature of principles of management is highlighted here?
Answer:
The nature of principle of management which is highlighted here is ‘Principles of
management are formed by practice and experimentation’.

Question 25:
In a huge manufacturing company there was a constant training programme running for
the workers throughout the year. The workers were trained about the machines as the
management realised that management is all about the relationship among workers and
their proper handling of the machines. As the size of the organisation increased the
management decided to release their hold on day to day activities of the organisation. A
more decentralised approach was adopted where the workers could decide about the
machines and the amount of raw material required instead of the traditional centralized
approach as per the needs. The management knew that the external environment is
dynamic. In order to meet stiff competition they clarified to the workers that their
instructions should not be taken strictly and should be moulded as per the requirements
of the organisation at the level where actual action takes place.
Which natures of principles of management have been highlighted in the above case? 3
Answer:
The various natures of principles of management highlighted above are:
 1. Mainly Behavioural. The workers were trained about the machines as the
management realised that management was all about the relationship among
workers and their proper handling of the machines.
2. Flexible. A more decentralised approach was adopted where the workers
could decide about the machines and the amount of raw material required
instead of the traditional centralized approach as per the needs.
3. General Guidelines. In order to meet stiff competition they clarified to the
workers that their instructions should not be taken strictly and should be
moulded as per the requirements of the organisation at the level where actual
action takes place.

Question 26:
VLPS Hotels is a disciplined organisation. It has many branches. The organisation tries
to apply discipline in all its branches with equal effectiveness.
However it knows that the nature and location of different branches are different. They
work under the impact of different cultures and work environments. Even then discipline
as an important management principle is applied to all its branches —big or small,
within the country or at foreign locations. Recently it formed a special body of five
members to do research on cross functional expertise. The organisation has learnt
through the experience of the competitors that understanding among various functional
departments is important for increasing the productivity of the organisation. So broadly it
can be understood how such body is going to affect the organisation through others’
experience. When it comes to remuneration of employees the organisation adopts
payment of different salaries for the same post. The logic given by the organisation is
that remuneration is based on situations and depends upon the employee’s capacity
and the expenses involved in a particular city.
Which natures of principles of management have been highlighted in the above case?
Answer:
The natures of principles of management highlighted above are:

1. Universal Applicability. The principles of management can be applied to all

types of
organisations and their branches regardless of their sizes and nature.
However they should be applied with some change. Even then discipline as an
important management principle is applied to all its branches—big or small,
within the country or at foreign locations. .
2. Cause and Effect relationships. A cause and effect relationship is
established by the management principles. However this cause and effect is
exact as conditions are not same and differ. So broadly it can be understood
how such body is going to affect the organisation through others’ experience.
3. Contingent. A principle of management is applied according to a given
situation. The logic given by the organisation is that remuneration is based on
situations and depends upon the employee’s capacity and the expenses
involved in a particular city.
Question 27:
Example Pvt. Ltd. is an organisation which is governed by people who are egoistic and
consider themselves as the most intelligent. All the suggestions made by the workers
are not even attended which has resulted in many strikes during last couple of months.
The result is lack of productivity. However recent reports from the organisation say that
there is a training module going on for the employees so that their individual
development can take place to the maximum. Some training modules are thought of
being implemented. This may take the organisation out of its current bad performance.
This training module which is now to be followed at the main branch will be later given a
uniform format and will be applied to all branches of the organisation. .
Identify the principle of management which is violated initially and the principle of
scientific management which is followed later on. Which concept of scientific
management is discussed in the last part of the above case? 3
Answer:
The principle of management which is violated initially is Cooperation not
Individualism as the suggestions were overlooked and the strikes happened. All the
suggestions made by the workers are not even attended which has resulted in many
strikes during last couple of months.
The principle of management which is followed later on is Development of Each and
Every Person to His or Her Greatest Efficiency and Prosperity. However recent
reports from the
organisation say that there is a training module going on for the employees so that their
individual development can take place to the maximum.
The concept of management which is discussed in the last part of the case
is Standardisation. This training module which is now to be followed at the main
branch will be later given a uniform format and will be applied to all branches of the
organisation.

Question 28:
Enigma Footwear is a very innovative organisation. The company has the policy of
paying proper attention to the training of the managers. The organisation teaches
various management principles to the managers whenever required so that they can
apply them and understand the practical aspects of business through them. Year by
year the organisation is able to increase its revenue. This is because the managers are
able to economically use the funds of the organisation and increase the output of the
workers through various principles like discipline and science not rule of thumb. This
year the company will be opening its 14th branch in India. The firm has decided to start
the campaign for adopting poor children. This year the target is 500 poor children due to
be adopted. This will help the organisation put noticeable example in front of others who
can learn a lot from this initiative of the company.
Which points of importance of principles of management are highlighted in the above
case? Identify the lines. 3
Answer:
The points of importance of principles of management highlighted above are:
 1. Providing managers with useful insight into reality. The organisation teaches
various management principles to the managers whenever required so that
they can apply them and understand the practical aspects of business through
them.
2. Optimum utilisation of resources and effective administration. This is because
the managers are able to economically use the funds of the organisation and
increase the output of the workers through various principles like discipline and
science not rule of thumb.
3. Fulfilling social needs. The firm has decided to start the campaign for adopting
poor children.

Question 29:
Kona Kona construction is a well known firm. It has many employees. Its core
competence is in construction work but it has many other operations to tackle also.
These operations are connected to public relations, advertising, finance, etc. With
changing times the company has decided to outsource these services from the experts,
of these fields. Thus it has decided to save time and concentrate on its main business.
There is team of civil engineers who form the main body of the decision group. This
group takes decision related to future construction projects after making thoughtful and
justifiable conclusions. The newspapers of the country have also appreciated the efforts
made by Kona Kona construction in giving better housing facilities to the people in
general. Company wants to walk shoulder to shoulder with other international firms in
the industry. For this it time and again prepares its employees through proper training
modules which educate them about the changing situations at the global level. The net
worth of the company is expected to touch ?20,000 crores this year which is going to be
a landmark achievement in the history of this firm. The company is also ranked high in
fulfilling Corporate Social Responsibility initiatives.
Which points of importance of principles of management have been highlighted in the
above case? Also identify the lines.
Answer:
The points of importance of principles of management which are highlighted in the
above case:

1. Meeting changing environment requirements. With the changing times the

company has decided to outsource these services from the experts of these
fields.
2. Scientific decisions. This group takes decision related to future construction
projects after making thoughtful and justifiable conclusions.
3. Management training, education and research. For this it time and again
prepares its employees through proper training modules which educate them
about the changing situations at the global level.
4. Fulfilling social responsibility. The Company is also ranked high in fulfilling
Corporate Social Responsibility initiatives.
Question 30:
Wellness Water Purifier has seen a lot of ups and downs during last five years as a
company. The most important learning the company has got is through its experiences.
First three years of its existence were full of high employee turnover. The blames quite
often put by the leaving employees was that of partial behavior whether it was
concerned with salary, management, duty assignment, leaves, and the list can go on.
Later the management after a brainstorming session realised that it was wrong in
committing partial behavior towards its employees. Next two years it adopted the
Fayol’s principle of ‘Equity’ in letter and spirit.
Which nature of principle of management has been highlighted in the above case?
Answer:
In the above case the company has learned from its experience on the basis of practice
and experimentation that the principle of ‘Equity’ should be adopted to avoid problems
and increase its output. Thus in the above case the nature of principle of management
highlighted is that Management principles are formed by practice and
experimentation.
 Chapter 3 Business Environment
Question 1:
‘The first masters’ is a leading advertising company in its industry. Recently they had a
meeting in which all the reasons which were outside the control of the organisation were
discussed. The organisation wanted to maintain its supremacy in the market. They
decided to break the meeting into two parts. In the first part customers, competitors,
suppliers, etc. were discussed where as in the second part the political, economic,
social conditions in the country were discussed. It was concluded that company was
doing extremely well in the domestic market and the client base was expanding.
However when the company’s performance in foreign markets was evaluated it was
found that conditions were different in different countries so the strategies adopted
would have to be different. After the meeting the company was looking forward to
making new gains.
Which features of Business Environment have been highlighted in the above case? Also
identify the lines.
Answer:
The features of Business Environment which have been highlighted are:

1. Totality of external forces. Recently they had a meeting in which all the
reasons which were outside the control of the organisation were discussed.
2. Specific and general forces. In the first part customers, competitors, suppliers,
etc. were discussed where as in the second part the political, economic, social
conditions in the country were discussed.
3. Relativity. However when the company’s performance in foreign markets was
evaluated it was found that conditions were different in different countries so the
strategies adopted would have to be different.

Question 2:
Bright Services is a taxi service provider. The company is targeting a revenue of 50
crore rupees this year. However with the passage of time it has found entrance of new
service providers in the market which was not expected at one stage of time. It has a
good team of technicians, drivers, software providers, etc. The company has decided to
make it adaptable to such continuously changing circumstances. It knows that if it has to
expand in new countries it will have to learn the basic differentiating factors like traffic
rules, technological aspects, etc. Thus it understands that conditions are different in
different countries.
Which features of Business Environment are discussed in the above case? Which force
is discussed above?
Answer:
The various features of Business Environment which are discussed above are:

1. Uncertainty. However with the passage of time it has found entrance of new
service providers in the market which was not expected at one stage of time.
 2. Dynamic nature. The company has decided to make it adaptable to such
continuously changing circumstances.
3. Relativity. Thus it understands that conditions are different in different countries.
The type of force which is discussed above is General Force —Legal (Traffic
rules), Technological (Technical aspects).

Question 3:
ABCDEF Ltd. decided to start its new venture in Delhi. For this they needed to
understand the Business Environment of the area. It was realised by the
company that the Business Environment of Delhi was very hard to understand unless
and until it was divided into different business dimensions like legal, political, economic,
social and technological conditions. After understanding the business situations the
company started to study the close links between different elements of the Business
Environment. They
gave a proper shape to their research and the business got started with full force. Later
they realised that the products they were selling in Delhi were more fit for the European
culture and decided to start a new branch in Belgium where the demand of their
products was very high from the first day. The company came to be recognized and in
few years became a global brand. The reason for its success in different countries was
the adaptability’ it showed in meeting the changing environment. The company kept
track of all happenings and did a periodic survey of the choices of the customers. It
recognized that there was no surety in the nature of market and it was very
unpredictable.
Which features of Business Environment have been highlighted in the above case?
Identify the lines which highlight these features.
Answer:
The various features of Business Environment which are highlighted in the above
case are:

1. Complexity. It was realised by the company that the Business Environment of

Delhi was very hard to understand unless and until it was divided into different
business dimensions like legal, political, economic, social and technological
conditions. As we can see it is very difficult to.understand the business
environment unless it is broken into its dimensions.
2. Interrelatedness. After understanding the business situations the company
started to study the close links between different elements of the Business
Environment.
3. Relativity. Later they realised that the products they were selling in Delhi were
more fit for the European culture and decided to start a new branch in Belgium
where the demand of their products was very high from the first day.
4. Dynamic nature. The reason for its success in different countries was the
adaptability it showed in meeting the changing environment.

Question 4:
A company is a component of market. It utilises various raw materials, labour force,
human resources, power, water, other sources, etc. When all these resources are
utilized output is produced. But before output is produced the input has to go through
various operations. These operations convert the raw materials into final products which
are then sold in the market.
In the above paragraph which importance of Business Environment is highlighted?
Answer:
The importance of business environment which is highlighted above is — Helps in
tapping useful resources.

Question 5:
The market is flooded with better quality toys of foreign origin. The result is fall in
revenue of the indigenous or local companies as their products are much interior and
are also costlier in less demand in the market.
Which dimension of Business Environment can be seen here affecting the local
companies’ revenue? 1
Answer:
The dimension of Business Environment which is affecting the indigenous companies is
Technological Environment. Since the products are technologically advanced they
are replacing the locally made inferior products.

Question 6:
The sale of sarees increases in the months of the year when a large number of
marriages take place in India. The saree manufacturing companies make special plans
of sale for these months.
Which dimension of business environment comes into picture here?
Answer:
The dimension of business environment which is covered here is
the “Social” dimension of business environment as marriages come under the social
dimension.

Question 7:
We can expect high sale of sarees in India but we can’t expect the same in Which
feature of business environment is discussed in the previous line?
Answer:
The feature of business environment which is discussed above is “Relativity” as the
business environment varies from place to place. The choice of people, their culture and
purchasing capacity are different in different areas.

Question 8:
Advertisements of a protein supplement must inform the potential buyer that the product
if taken beyond a given dose can be harmful to the diabetics.
Which dimension of business environment is highlighted here?
Answer:
The dimension of business environment which is highlighted here is
the “Legal” environment as it comes under the legal laws to clearly state the necessary
information as directed by the government.

Question 9:
Long Drive Manufacturers is a leading vehicle manufacturing company. It claims that it
can create a fuel in its laboratory which can run the newly designed car. The company
is ready to provide this fuel to its customers for free for one year provided they buy the
car.
Which dimension of business environment is affected here by the company’s innovative
solution? 1
Answer:
The dimension of business which is affected here by the company’s innovation is
the “Technological” environment.

Question 10:
Identify the various dimensions of business environment:

1. With the election of a new government the sensex drops by 748 points.
2. A particular channel refrains from showing the advertisement of a particular
product as it is banned by the government.
3. A software is in high demand among the industrial buyers as it can connect all
the branches of a company as a single integrated unit.
4. At the time of holi a large number of manufacturing firms get involved in making
colours which are used in the celebration of this colourful festival.
5. It is not advisable to open a luxury car showroom in the middle of an economy
where per capita income is very low.

Answer:
The various dimensions of business environment highlighted above are:

1. Political environment.
2. Legal environment.
3. Technological environment.
4. Social environment.
5. Economic environment.

Question 11:
A recent rate cut in the interest on loans announced by the Banks encouraged Amit, a
science student of Progressive School to take a loan from State Bank of India to
experiment and develop cars to be powered by fuel produced from garbage. He
developed such a car and exhibited it in the Science Fair organized by Directorate of
Education. He was awarded first prize for his invention.
Identify and explain the dimensions of business environment discussed in the above
case.
Answer:
Following are the dimensions of business environment discussed in the above
para:

1. Economic Environment. Economic dimension of business environment includes

various economic factors like inflation, interest rates, currency value, income of
people, etc. Both short and long term interest rates affect the demand for various
goods and services in the economy. Lower interest rates lead to higher demand
while higher interest rates lead to less spending by consumers leading to reduced
demand.
2. Technological Environment. Scientific improvements and innovations are
included in the technological dimension of business environment. It provides new
ways and methods of producing goods and services. For example, technological
developments in the field of computers and information technology have changed
the ways in which companies promote their goods and services.

Question 12:
With change in the consumption habits of people, Neelesh, who was running a sweets
shop shifted to chocolate business. On the eve of Diwali he offered chacolates in
attractive packages at reasonable prices. He anticipated huge demand and created a
website chocolove.com for taking orders online. He got lot of orders online and earned
huge profit by selling chocolates.
Identify and explain the dimensions of business environment discussed in the above
case.
Answer:
Following dimensions of business environment are discussed in the given para:

1. Social Environment. Social Environment consists of attitudes, beliefs, desires,

customs and traditions, level of education, composition of working population,
culture, religion, values, etc. Values refer to concepts which are held by the
society in high esteem and traditions include social practices that have been
followed by the society for a long period of time.
2. Technological Environment. Scientific improvement and innovations are
included in
the technological dimension of business environment. It provides new ways and
methods of producing goods and services. For example, technological
developments in the field of computers and information technology have changed
the ways in which companies promote their goods and services.

Question 13:
“World Softwares” is a software giant. It has many branches throughout the world. The
company knows that it has great opportunities in its path. When it it was limited only to
its native country. With the passage of time within 20 years the economies of various
countries have integrated. This has come as a great advantage to this company which
has expanded. In many of the countries where it has its, branches the control of
government in the public sector enterprises has diluted leading to more control in the
hands of the private sector. One of the major reasons for the success of the company
has been the role of the initiator the company has played as it was the first company of
its kind to enter the market.
Identify the two important concepts highlighted above. Which type of advantage has
been indicated in the last line of the above case?
Answer:
Globalisation. With the passage of time within 20 years the economies of various
countries have integrated.

1. Disinvestment. In many of the countries where it has its branches the control of
government in the public sector enterprises has diluted leading to more control in
the hands of the private sector.
2. First mover advantage. The role of the initiator the company has played as it
was the first company of its kind to enter the market.

Question 14:
Metlapp Networks and Technologies Ltd. is a leader in technology innovation in the
United States, creating products and solutions for connecting the world. It has a large
research and development team which invented the first smart watch, named as W-7.
The watch besides showing the time, also monitors few health parameters like heart
beat, blood pressure etc.
While in search of markets abroad, the company found that in India, the reform process
was underway with the aim of accelerating the pace of economic growth. The company
decided to take advantage of simplified export procedure and removal of quantitative as
well as tariff restrictions in India.
It set up its office in Jamnagar with a view to capture the Indian market. In a short span
of time, the company emerged as a market leader. Success of the company athtected
many other players to enter the market. Competition resulted in reduction in prices,
thereby benefiting the customers.

1. In the above paragraph, two major concepts related to government policy have
been discussed. Identify and explain these concepts.
2. Also, explain briefly any three impacts of these concepts on Indian business and
industry.

Answer:

1. The two major concepts related to government policy discussed in the

given para are as follows:
o Liberalisation. Liberalisation means removing unnecessary control and
restrictions over the business. It refers to those government policies that
promote economic growth by lessening the restrictions and regulations
placed on the business.
 oGlobalisation. It is an economic reform that aims at integration of markets
in the global economy leading to the increased inter-connectedness of
national economies. It simply means the integration of the various
economies of the world leading towards the emergence of a cohesive
global economy.
2. Three impacts of liberalisation and globalisation on Indian business.
o Increase in competition. In today’s Indian economy, competition has
increased due to liberalised imports and entry of MNCs (foreign
Multinationals). Although, it is good for consumers, but some of the Indian
industrial units, particularly small-scale and medium scale industries are
facing problems.
o More demanding customers. Customers are well informed and so they
have become more demanding. They have a wider choice and can now
purchase better products and services.
o Technological development. Increasing competition has forced the
companies to develop new technologies. New technologies make it
possible to improve machines, production process, products and services.
The rapidly changing technological environment has created tough
challenges before small firms.
o Necessity for change. Since Economic Reforms of 1991 market forces
have been changing rapidly. Therefore, business firms have to continuously
modify their operations.
o Need for developing human resources. The new market conditions
require people with higher qualifications, competence and greater
commitment. Hence there is a need to train and upgrade human resources.

Question 15:
The internet has taken the whole world by surprise. The government has also been
lenient in giving the online companies a chance to flourish in the changing business
scenario. Interneters Online is an entrepreneurial initiative by a group of young
engineers. The company has entered in the domain of providing products online. Many
new firms have also entered after seeing them enter this mode of business and many of
these firms are foreign in origin. The companies dealing in online business know that in
today’s world customer has many options. The customer is no more dependent on a
single company for the product he requires. This has empowered the customer who has
more choices and the result is a fragmented market. The firms selling with monopoly in
the market are the stories of the past. The products offered by the companies are going
through different types of technological changes. The companies are trying to give
variety of products which are technologically advanced. “Interneters Online” is a firm
which is right now selling 200 products online. Recently if tried to increase the number
of products to be sold by 15 but it realised that many of these products were not allowed
by the government to be sold in their territory.
Identify three impacts of government policy changes on Business and Industry
highlighted in the above case. Also identify the dimension of business environment
highlighted above.
Answer:
The three impacts of government policy changes on Business and Industry
highlighted above are:

1. Increasing Competition. Many new firms have also entered after seeing them
enter this mode of business and many of these firms are foreign in origin.
2. More demanding customers. This has empowered the customer who has more
choices and the result is a fragmented market.
3. Rapidly changing technological environment. The companies are trying to
give variety of products which are technologically advanced.
The dimension of business environment which is highlighted above is Legal
environment. It realised that many of these products were not allowed by the
government to be sold in their territory.

Question 16:
The Indian companies after the year 1991 have especially paid attention to the need of
having a manpower which can adjust to the changing competitive environment. The
new market situations require employees with greater talent and higher level of
competence.
In the above paragraph which one important impact of Government policy change on
business is highlighted?
Answer:
Need for developing human resource.

Question 17:
With the abolition of licensing requirements a company has decided to enter into a new
industry and the government’s support is making the movements of goods easier. The
company has lost its foothold in the previous industry in which it was once a leader. All
this happened because of the opposition of a project which the company had
undertaken in a village. The villagers started to gather and the incidence caught the
attention of media. There were protests and the result was the closure of the plant. The
biggest competitor of the company wanted to ensure that they gain from this situation.
They started their vigorous efforts to increase their business output. This company
knows that all the inputs are the resources from the outside environment and they have
to be converted into successful products. Five years back the company used to make
products which used to suit its production requirements. Now it has decided to
manufacture products according to the requirements of the potential customers. The
product can only reach customers in the best possible manner only if the company
prepares itself. For this the company invests a lot in its employees so that they can
meet the best standards of providing services which suit the customers. The revenue of
the company can decline in the next few years. The reason for this could be the
different types of innovative practices involved by various competitors in producing
goods with the latest technology. For this the company will have to prepare itself.
Which economic reform is highlighted in the initial lines of the above case? Which
dimension of business is affected here in the initial lines of the passage? Which
importance of business environment is highlighted here? Name three different types of
impacts of government policy changes on business and industry you can find here.
Answer:
The economic reform which is highlighted in the initial lines of the above case is
Liberalisation. With the abolition of licensing requirements, the company has decided to
enter into a new industry and the government’s support is making the movements of
goods easier.
The dimension of business which is affected in the above lines is Political. There were
protests and the result was the closure of the plant.
The importance of business environment which is highlighted here is Tapping useful
resources. There were protests and the result was the closure of the plant.
Three different types of impacts of government policy changes on business and
industry we can find here are:

1. Market Orientation. Now it has decided to manufacture products according to

the requirements of the potential customers.
2. Need for developing human resource. For this the company invests a lot in its
employees so that they can meet the best standards of providing services which
suit the customers.
3. Rapidly changing technological environment. The reason for this could be the
different type of innovative practices involved by various competitors in producing
goods with the latest technology.

Question 18:
It’s high time that the government should finalise the industrial and monetary policies.
The various economic indices like national income, per capita income, rate of savings
and investment, etc. should be taken care of while deciding any economic plans for
future.
Which concept can be seen discussed in the above paragraph?
Answer:
The concept which has been discussed in the above paragraph is “Economic
Environment”.

Question 19:
ABCDE Ltd. has opened a customized shoe business in 23 cities. The organisation has
done a lot of research on the nature of business environment in which it is doing
business. The market has fragmented as there are many players, brand loyalties of the
customers keep on changing, customers are more demanding and there is intense
competition in the market. Every week on Saturday the board of directors sits for a
meeting and decides the future course of action. They rely on their surveys and past
performances of other companies to achieve policy making and deciding future course
of action. The company devotes its lot of time in understanding the external
environment. With all the research the company has realised that the business
environment does tend to have a lot of impact on the organisation so it is necessary to
continuously monitor it.
Name the various importance of management highlighted above?
Answer:
The various importance of business environment highlighted above:

1. It helps in coping with rapid changes. The market has fragmented as there are
many players, brand loyalties of the customers keep on changing, customers are
more demanding and there is intense competition in the market.
2. It helps in planning and policy formulation. They rely on their surveys and past
performances of other companies to achieve policy making and deciding future
course of action.
3. It helps in improving performance. With all the research the company has
realised that the business environment does tend to have a lot of impact on the
organisation so it is necessary to continuously monitor it.

Question 20:
A greeting card making company in USA is flourishing well. The company makes cards
for different occasions. During the time of Christmas and New Year, the production and
selling of cards reaches a new high. The company exists in an environment which is
democratic and there are rules for every business firm. Once you step out of the
company there are customers, competitors, government authority and almost everything
one can think of. The company appears to have a promising future. However the
firm will have to understand the close relationship between various elements of the
business environment around it.
In the above case which dimension of business environment is highlighted? Which
features of business environment are highlighted in the above case?
Answer:
The dimension of business environment which is highlighted above is “Social”. The
Company makes cards for different occasions. During the time of Christmas and New
Year Eve. The production and selling of cards reaches a new high.
The features of business environment which are highlighted above are:

1. Totality of external forces. Once you step out of the company there are
customers, competitors, government authority and almost everything you can
think of.
2. Inter-relatedness. However the firm will have to understand the close
relationship between various elements of the business environment around it.

Question 21:
‘Raise the Bar’ is a sports equipment company. It has different branches in different
parts of the world. However, the requirements of the sports equipments are difterent in
different branches. This is due to the change in cultures and lifestyles of people in the
different countries. The market in which it is dealing is known for awareness of health.
The more the awareness the more is the demand for such equipments. Company
knows that the demand for these products ic unpredictable as new designs keep on
coming and the industry keeps on changing frequently. There is a Research and
Development Department which keeps on updating the equipments in material and
design. However the outside business environment is characterized by changing
customer preferences, entry of new competitors making it change. A meeting was
organized recently to understand the external business environment. However, after the
meeting it was realised that business environment can’t be understood in totality it can
only be understood by breaking it into its dimensions. The result of a successful meeting
could be seen later in the performance of the company which created record sales in
the coming year.
Identify the features of business environment highlighted here.
Answer:
The different features of business environment highlighted above are:

1. Relativity. This is due to the change in cultures and lifestyles of people in the
different countries.
2. Uncertainty. Company knows that the demand for these products is
unpredictable as new designs keep on coming and the industry keeps on
changing frequently.
3. Dynamic nature. However, the outside business environment is characterized
by changing customer preferences, entry of new competitors making it change.
4. Complexity. However after the meeting it was realised that business
environment can’t be understood in totality it can only be understood by breaking
it into its dimensions.

Question 22:
GHJ Private Ltd. is concerned about the external environment of business. It is busy
analyzing various factors which are going to affect its business. However with a lot of
understanding it developed about the business it found two types of factors; one which
affected the firm directly and the other which affected all the firms in the business. With
the passage of time the challenges for the company have increased. The company finds
new competitors and technological challenges which are posing new changes for it. The
company at the end of the year decides to have a survey. This survey is about knowing
the business environment properly. Even after spending a lot of money on the surveys
the company comes to conclusion that it’s not easy to understand the business
environment and it is properly understood only in parts. The company is ready to seek
advice from experts and is eager to notice changes in the business environment. When
a multinational company enters the market the company is eager in taking preventive
measures like improving the product, aggressive advertising, etc. A special team of
experts have been created. The team observes the changes taking place like changing
branding loyalty, more demanding customers, etc. as it knows the pace of change is
more important than the change itself. The painstaking efforts of the company don’t go
unrewarded. The company by the end of the year makes huge profit and by
understanding the business environment is able to increase its revenue.
Which features of business environment have been highlighted in the above case? Also
identify the various importance of business environment highlighted above.
Answer:
The various features of business environment which are highlighted in the above
case are:
 1. Specific and general forces. However with a lot of understanding it developed
about the business it found two types of factors; one which affects the firm directly
and the other which affected all the firms in the business.
2. Dynamic nature. The Company finds new competitors and technological
challenges which are posing new changes for it.
3. Complexity. Even after spending a lot of money on the surveys the company
comes to a conclusion that it’s not easy to understand the business environment
and it is properly understood in parts.

The various benefits of business environment highlighted in the above case are:

1. It helps the firm to identify threats and send early warning signals. When a
multinational company enters the market the Company is eager in taking
preventive measures like improving the product, aggressive advertising, etc.
2. It helps in coping with rapid changes. The team observes the changes taking
place like changing branding loyalty, more demanding customers, etc. as it knows
the pace of change is more important than the change itself.
3. It helps in improving performance. The Company by the end of the year
makes huge profit and by understanding the business environment, is able to
increase its revenue.

Question 23:
Identify the dimensions of business environment in the following cases:

1. Hand-woven carpets are banned in some European countries as they think there
can be involvement of child labour in the manufacturing of these carpets.
Products produced through the involvement of child labour are banned in these
countries.
2. With the winning of a new party in a particular country an automobile company
has decided to take back its plan of opening 15 plants in that country.
3. In the month of October a greeting card manufacturing company has decided to
increase its scale of production of New Year Greeting Cards.
4. A chocolate making company has decided to make more sweetened chocolates
for people living in a particular country.
5. A super bike producing company has decided to withdraw its earlier proposal of
opening 10 new plants in a country as it finds the per capita income of that
country too low to purchase its bikes in large numbers.
6. Advertising of a particular brand is taken back as it is expected to hurt the
sentiments of a particular section of society. The company takes this decision on
a conscientious level.

Answer:
The various dimensions of business environment highlighted above are:

1. Legal Environment.
 2. Political Environment.
3. Social Environment.
4. Social Environment.
5. Economic Environment.
6. Social Environment. Since nothing is preventing the company legally, the
decision is taken after taking into consideration the social feelings of the people.

Question 24:
‘On Your Marks’ is a good shoe manufacturing company. The company is the first to
start a shoe having a unique technology giving it a long life. However the company
knows that it exists in an environment where everything around it counts; so everything
around it matters. Therefore, it is trying to observe every small aspect of the business
environment. There are various factors which are closely related to each other and can’t
be understood in isolation like change in lifestyle which can be linked to the improved
demand of technologically advanced shoes. However, the company can’t be self
satisfied. It will have to adjust to rapidly changing technology, fragmentation of market,
changing brand loyalties, etc. It has got good man power and a very well established
production department. It knows that various resources in the form of inputs have to be
transformed into the best products and sold for increasing its revenue. However, there
are various challenges which the company is facing. These are in the form of protests
done by labour unions throughout the country which sometimes assume the form of
strikes. The board of directors is keen to adapt to this difficult situation. Government is
playing a very positive role, like it did a few years back, and is freeing the business
environment from unnecessary restrictions and government controls. The company is
hopeful of emerging as a winner under such government support.

Which features of business environment are highlighted in the above case?

Identify the importance of business environment highlighted in the above case?
Which dimension of business environment is highlighted above?
Which economic reform is discussed in the last part of the case?

Answer:
The features of business environment highlighted in the above case are:

1. Totality of external forces. However, the company knows that it exists in an

environment where everything around it counts; so everything around it matters.
2. Inter-relatedness. There are various factors which are closely related to each
other and can’t be understood in isolation like change in lifestyle which can be
linked to the improved demand of technologically advanced shoes.

The importance of business environment highlighted in the above case:

1. It helps in coping with rapid changes. It will have to adjust to rapidly changing
technology, fragmentation of market, changing brand loyalties, etc.
 2. It helps in tapping useful resources. It knows that various resources in the
form of inputs have to be transformed into the best products and sold for
increasing its revenue.

The dimension of business environment which is highlighted in the above case

is ‘Political Environment’. These are in the form of protests done by labour unions
throughout the country and about to assume the form of strikes.
The economic reform which is discussed in the last part of the case
is ‘Liberalisation’. Government is playing a very positive role, like it did a few years
back, and is freeing the business environment from unnecessary restrictions and
government controls.

Question 25:
‘Runners Ahead’ is an emerging software consultancy company. The a specific manner
but political, social and economic conditions affect it in a general way. The company has
decided to prepare an emergency plan to meet unpredictable challenges which change
the business in a very fast manner particularly in the field of Information Technology.
The changes in the IT sector are very fast. So the chances of success are high; like in
the case of new software launched where the company has the advantage of entering
the market early. However, things are not so easy. Every time circumstances pose new
challenges. The organisation has decided to monitor the external business environment
so that it can adopt suitable measures to increase its client base.
Recently the company has been given a project by the government to study and
analyse its new policy. The policy of the government is to give a bigger role to the
private sector by reducing its own role in the Public Sector Undertakings.
In order, to meet new challenges the company has to exploit various aspects of
business. Recently it has invented a new type of advanced software for social
networking sites for the aged people catering to their specific needs. The company is
expecting huge rise in its revenue through the help of this project.
Which features of business environment is highlighted in the above case? 2
Identify the importance of business environment highlighted in the above case. 2
Which economic reform is highlighted in the above case in the second paragraph of the
above case? 1
WTiich dimension of business environment is highlighted in the above case? 1
Answer:
Recently the company has been given a project by the government to study and
analyse its new policy. The policy of the government is about giving a bigger role to the
private sector by reducing its own role in the Public Sector Undertakings.
In order, to meet new challenges the company has to exploit various aspects of
business. Recently it has invented a new type of advanced software for social
networking sites for the aged people catering to their specific needs. The company is
expecting huge rise in its revenue through the help of this project.

The features of business environment highlighted in the above case are:

 1. Specific and general forces. The company finds its business affected by
customers, competitors, tax taking authorities in an isolated manner but political,
social and economic conditions affect it in a general way.
2. Uncertainty. The Company has decided to prepare an emergency plan to meet
unpredictable challenges which change the business in a very fast manner
particularly in the field of Information Technology.

The importance of business environment highlighted above:

1. It enables the firm to identify opportunities and get the first mover
advantage. So the
chances of success are high; like in the case of new software launched where the
company has the advantage of entering the market early.
2. It helps in improving performance. The organisation has decided to monitor
the external business environment so that it can adopt suitable measures to
increase its client base.

The economic reform highlighted in the above case is ‘Privatisation’. The policy of the
government is about giving a bigger role to the private sector by reducing its own role in
the Public Sector Undertakings.
The dimension of business environment which is highlighted above is ‘Social’. Recently
it has invented a new type of advanced software for social networking sites for the aged
people catering to their specific needs.

Question 26:
‘Shaktishali Steel’ is a steel manufacturing company. The owner’s brother is a director in
a public sector undertaking. He advises his brother to make his company run properly
otherwise they can also face the same result which less performing PSU’s have faced.
The Public Sector Undertakings now have changed and are trying to generate high
revenues for their own functioning, as the government support has declined.
In the above case which impact of government policy changes on business has been
highlighted?
Answer:
Loss of budgetary support to the public sector.

Question 27:
After the adoption of various economic reforms by the Indian government, the business
scenario in the country has changed. Earlier, the firms used to produce first and go to
the market for sale later. But now-a-days firms analyse the needs and wants of the
consumers first and then produce goods accordingly.
Identify the impact of government policy changes on business and industry in India,
mentioned in the above case.
Answer:
Market Orientation
Question 28:
Identify the dimensions of Business Environment in the following cases:

1. The demonetisation move of the government has resulted in the accumulation of

lakhs of crores of rupees in the banks. Now the banks will give more loans to the
people at lower interest rate. General public can now afford home loans more
easily.
2. Small business will now move towards transaction of business affairs in plastic
money. This will lead to use of internet, new gadets, etc. and reduce dependence
on cash. Report generation of these transactions will be helpful in acting as proof
for the betterment of future business.

Answer:

1. Economic environment. Since the demonetisation move results in lowering of

interest rates.
2. Technological environment. Due to demonetisation move, there will be
technological advancement in the way business transactions will be done.
 Chapter No 4 Planning
Question 1.
A shoe manufacturing company wants to become a market leader. For this a detailed
planning is required. The first step taken by the firm is to set targets for the three
months duration for selling maximum number of shoes in the market which they set as
2,50,000. The team doesn’t want to make any mistake so they decide to do proper
planning. They decide to chalk out alternative plans so that they can arrive at the best
possible plan. However the team is surrounded with doubts. To remove doubts it goes
for judging the plans to get the most profitable one. The plan is taken to the whole
organisation and the concerned persons. Ultimately it is put into action. Without much
caring for the results the company starts working on the other project simultaneously.
Identify the steps in the planning process which have been applied by the organisation
in the above case?
Answer:
In the above case the steps of planning which are applied are:

1. Setting Objectives. The first step taken by the firm is to set targets for the three
months duration for selling maximum number of shoes in the market which they
set as 2,50,000.
2. Identifying alternative courses of action. They decide to chalk out alternative
plans so that they can arrive at the best possible plan.
3. Evaluating the different courses of action. To remove doubts it goes for
selecting the plan which can be considered as the most profitable.
4. Selection of the best plan. The best plan is finalised.
5. Implementation of the plan. Ultimately it is put into action.

Question 2.
‘Indian Drugs and Pharmaceuticals Ltd.’ is engaged in the manufacturing and
distribution of medicines. The company has set-up an objective of increasing its
sales turnover by 20%. To achieve this objective the company has decided to
diversify into baby health care products. Since the company has already set its
objectives and developed the premises based on the same, it wants your help for
the remaining steps to be taken in this process. Explain briefly these steps. [2016
Comptt. D]
Answer:
Following are the remaining steps in the planning process.
 1. Identifying alternatives. In this step various alternative courses of
action are identified. The identified course of action can either be
routine or innovative in nature. An innovative course of action
involves sharing of ideas by more and more people.
In important projects more and more alternatives should be
generated and discussed.
2. Evaluating alternative courses. In this step the positive as well as
negative aspects associated with each and every alternative course
of action is evaluated and analysed. In other words, the pros and
cons of each alternative is studied.
3. Selecting an alternative. In this step the best plan is adopted and
implemented. That plan is selected which has minimum negative
aspects. The ideal plan should be the one which is most feasible and
profitable.
4. Implementing the plan. In this step plans are put into action. All
other managerial functions come into picture in this step. It involves
doing what is required for the purpose of implementation of plan.
5. Follow-up action. This step involves monitoring of the plans. This
step ensures that plans are being implemented and activities are
performed as per schedule.

Question 3.
In the above case identify the steps of the planning process which are not indicated?
Answer:
The steps of the planning process which are not indicated in the above case are:

• Developing premises
• Follow up

Question 4.
‘Serious Business’ is a balloon manufacturing firm. With the arrival of foreign firms it is
feeling the pressure of improving its business strategy. Because of the firm’s advance
planning it could not suddenly bring changes in its plans as the whole organisation had
started implementing the decided plan. But this year the organisation wants to ensure
success. However, the firm knows that the external environment is changeable and
continues to vary in a fast manner. The organisation wants to prepare in advance for a
better future. It has decided to allocate a portion of its budget specifically for proper
planning as it knows there are going to be expenses like Expert’s fee, survey charges,
etc.
Which limitations of planning have been identified in the above case?
Answer:
The limitations of planning highlighted in the above case are:
 1. Planning leads to rigidity. Because of the firm’s advance planning it
could not suddenly bring changes in its plans as the whole
organisation had started implementing the decided plan.
2. Planning may not work in a dynamic environment. However, the
firm knows that the external environment is changeable and
continues to vary in a fast manner.
3. Planning involves huge costs. It has decided to allocate a portion
of its budget specifically for proper planning as it knows that there are
going to be expenses like Expert’s fee, survey charges, etc.

Question 5.
‘Flows Technology’ deals in bulb manufacturing business. It plans for a successful
year of production and sale this year. It has in advance given targets to all its
departments and employees. The departments and employees are happy about this.
They know that now they won’t have to do unconcerned activities thus leading to more
focused approach resulting in saving of resources. The company is thinking of starting
two new plants in the southern portion of India. For this some concrete plan has to be
made. The main core team of the company has decided to weigh all the options and
then choose the best one. The road might be long but the company is geared to face all
the challenges.
In the above case identify importance of planning highlighted.
Answer:
The importance of planning indicated in the above case are:

1. Planning provides directions. It has in advance given targets to all its

departments and employees.
2. Planning reduces overlapping and wasteful activities. They know that
now they won’t have to do unconcerned activities thus leading to
more focused approach resulting in saving of resources.
3. Planning facilitates decision making. The main core team of the
company has decided to weigh all the options and then choose the
best one.

Question 6.
An established firm has fifty years of experience in shipping industry. The company time
and again proves itself as one of the dominant figures in the market. The plan for the
whole year is given a lot of importance. According to the owner of the company their
plans are the basic structures upon which other important functions of management
rest. It is important that the plans are communicated to the employees. The top
management ensures that the plans are communicated and implemented at all levels
and in all departments. To learn from past mistakes is a habit of this successful
company. They prepare plans for short term as well as long term where it can be seen
that throughout the year the plans are prepared one after another. Shipping industry
needs such dedicated companies. The goals are specific and the activities to achieve
these specific goals are undertaken. The company has planned a growth of 20% in
revenue this year. Let’s see how much it’s possible for it to achieve it by the end of the
year.
In the above case identify the various features of planning highlighted.
Which type of plan is indicated in the above case?
Answer:
The features of planning highlighted above are:

1. Planning is a primary function of management. According to the

owner of the company their plans are the basic structures upon
which other important functions of management rest.
2. Planning is pervasive. The top management ensures that the plans
are communicated and implemented at all levels and in all
departments.
3. Planning is continuous. They prepare plans for short term as well
as long term where it can be seen that throughout the year the plans
are prepared one after the other.
4. Planning focuses on achieving objectives. Goals are specific and
the activities to achieve these specific goals are undertaken.

The type of plan which is indicated in the above case is ‘Objective’. The Company has
planned a growth of 20% in revenue this year. Here the plan is precise and quantified.
When a goal is quantified it becomes an objective.

Question 7.
Sukumar is an energetic middle level manager. He tries to make best plans. For this he
involves foresight and intelligent imagination. Within three years many of his projects
have been very successful. His high success rate is due to his good plans. He always
makes alternative plans and selects the best out of them after considering relevant
aspects. However, he knows it is not necessary that his all plans will be successful. He
knows that sometimes his concern for making very good plans eats a lot of time and
energy. His friend Jyoti suggests him to take suggestions from others when he makes
his plans and also consider plans made by others. Even after so much painstaking
Sukumar knows that his plans can yet fail in the uncertain business environment. He
has recently decided to plan carefully in future.
Which features of Planning have been highlighted in the above case?
Which limitations of Planning have been highlighted in the above case?
Answer:
The features of Planning which have been highlighted in the above case are:

1. Planning is a mental exercise. For this he involves foresight and

intelligent imagination.
2. Planning involves decision making. He always makes alternative
plans and selects the best out of them after considering relevant
aspects.

The limitations of Planning which have been highlighted are:

1. Planning is a time consuming process. He knows that sometimes

his concern for making very good plans eats a lot time and energy.
2. Planning does not guarantee success. Even after so much
painstaking Sukumar knows that his plans can yet fail in the
uncertain business environment.

Question 8.
Identify the types of plans:

1. Ramesh is a senior middle level manager. He is busy in allocating

resources to his staff, he has also finalised the objectives and
decided the course of action to be followed. He is expecting energy
in his staff for the whole season but he will have to be caucious.
2. Suresh is giving a speech to the workers of his factory. He is the
owner of a toy manufacturing factory and has 123 workers. He tells
them that this year’s target of production is 7.5 lakh toys.
3. On the wall of ‘Health is Wealth’ hospital a board is hanging. On this
board. It is written ‘We care for the health of senior citizens as our
topmost priority’. This hospital is known for treating people aged
more than 60 years.
4. Rakesh calls his new subordinates for a meeting. He is a top level
manager. He arranges for a power point presentation to train his
subordinates who are all middle level managers. He tells them the
 way of doing task of treating suppliers through a new software
system to be installed within next 30 days.
5. Dinesh takes a meeting and guides his employees in a type of plan
which is chronological in nature and is situation specific. It is a
collection of various methods in a step wise sequence.
6. Amit has given a detailed statement of expected results in numerical
terms. This plan is conveyed to the subordinates by him in a special
meeting.

Answer:
The different types of plans are:

1. Strategy
2. Objective
3. Policy
4. Method
5. Procedure
6. Budget

Question 9.
Two years ago Madhu completed her degree in food technology. She worked for
sometime in a company manufacturing chutneys, pickles and murabbas. She was not
happy in the company and decided to have her own organic food processing unit for the
same. She set the objectives and the targets and formulated action plan to achieve the
same. One of her objective was to earn 10% profit on the amount invested in the first
year. It was decided that raw materials like fruits, vegetables, spices, etc. will be
purchased on three months’ credit form farmers cultivating organic crops only. She also
decided to follow the steps required for marketing of the products through her own
outlets. She appointed Mohan as a production Manager who decides the exact manner
in which the production activities are to be carried out. Mohan also prepared a
statement showing the number of workers that will be required in the factory throughout
the year. Madhu informed Mohan about her sales target for different products, areawise
for the forthcoming quarter. While working on the production table a penalty of ?100 per
day for not wearing the caps, gloves and apron was announced.
Quoting lines from the above para identify and explain the different types of plans
discussed.
Answer:
The different types of plans are:
 1. ‘One of the objective was to earn 10% profit on the amount invested
in the first year.’
Objective. An objective is the end result towards which all
managerial efforts and organizational activities are directed.
2. ‘Raw materials like fruits, vegetables, spices, etc. will be purchased
on three months credit from farmers cultivating organic crops only.
Policy. A policy is a part of the general standing plan of a business.
It is the general course of action to be followed in a particular
situation.
3. ‘To follow the steps required for marketing of the products.’
Procedure. A procedure is a series of related tasks that make up the
chronological sequence and establish a way of performing the work.
4. ‘Statement showing the number of workers that will be required in the
factory throughout the year.’
Programme. A budget is a plan which states expected results of a
given future period in numerical terms. It may be expressed in time,
money or physical units.
5. ‘Penalty of f 100 per day for not wearing the caps, gloves and apron.’
Rule. A rule is a statement that specifies what is to be done or not to
be done.

Question 10.
In an annual general meeting a company sets its targets for the year. The
manufacturing department has decided to manufacture 2.5 million units of the product
and has decided to monitor the performance so as to control it accordingly. The survey
done by the company has shown a number of cities in the north which are showing
increased demand for the product. The company in its research during the last three
months generated various options and decided to follow the best one. The HR team is
also concerned about its output. The HR head revealed that there can be shortage of
MBA pass outs which can reduce the quality of manpower in the near future so it has
decided to arrange HR workshops in different colleges to get the best candidates. The
board meeting ends on a positive note.
In the above case identify the importance of planning and the concerned lines.
Answer:
The importance of planning highlighted above:

1. Planning establishes standards for controlling. The

manufacturing department has decided to manufacture 2.5 million
units of the product and has decided to monitor the performance so
as to control it accordingly.
2. Planning facilitates decision making. The Company in its research
during the last three months generated various options and decided
to follow the best one.
 3. Planning reduces the risk of uncertainty. The HR head revealed
that there can be shortage of MBA pass outs which can reduce the
quality of manpower in the near future so it has decided to arrange
HR workshops in different colleges to get the best candidates.

Question 11.
‘Dhulai’ is a washing machine manufacturing company. The company decides to enter
into music system manufacturing industry. The company has a committed top
management. It knows that there are various challenges in the market where its
decisions regarding the new industry might fail. Still the top management doesn’t want
to waste a lot of resources on its plans. It knows that sometimes plans take more time in
making than getting implemented. However, the company wants to proceed with a
positive approach. It has decided to study all the aspects of its competitors, to set all its
objectives and to allocate the required resources. The company did well in its previous
business. At that time they took planning very seriously as they knew everything the
company would do had to be based on concrete plans. The company will start its
operations from next month.
Which function of management has been discussed in the above case? Which
limitations of planning have been highlighted in the above case? Which type of plan is
indicated in the above case? Which feature of planning is highlighted above?
Answer:
The function of management which is discussed in the above case is ‘Planning’. The
company decides to enter into music system manufacturing industry.
The various limitations of planning highlighted above are:

1. Planning does not guarantee success. It knows there are various

challenges in the market where its decisions regarding the new
industry might fail.
2. Planning involves huge costs. Still the top management doesn’t
want to waste a lot of resources on its plans.
3. Planning is a time consuming process. It knows that sometimes
plans take more time in making than getting implemented.

The type of plan indicate above is ‘Strategy’. It has decided to study all the aspects of
its competitors, to set all its objectives and to allocate the required resources.
The feature of planning highlighted above is Planning is a primary function of
management. At that time they took planning very seriously as they knew everything
the company would do had to be based on concrete plans.
Question 12.
Dheeraj is a very hard working manager. After working for the implementation of his well
chalked out plan he, from the start of July, decides to see in what ways and up to what
accuracy has his plan been implemented.
Which step of the planning process will be involved by Dheeraj from the starting of July?
Answer:
The step of the planning process involved by Dheeraj will be the last step:
‘Follow through’

Question 13.
Suraj is the CEO of a company. He in accordance with the other board members
decides to formulate a general statement which will be guiding the thinking
of the employees. He further goes on to formulate many such statements in the next six
months. These statements could be divided into two categories.
Which type of plan is indicated above? What are the two types of this plan? Also give
one example of this plan.
Answer:
Suraj is the CEO of a company. He in accordance with the other board members
decides to formulate a general statement which will be guiding the thinking of the
employees. He further goes on to formulate many such statements in the next six
months. These statements could be divided into two categories.
The type of plan highlighted in the above case is ‘Policy’ (He decides to formulate a
general statement which will be guiding the thinking of the employees).
The two types of policies are major policies and minor policies.
One example of Policy is ‘Recruitment Policy’.

Question 14.
A specific statement was given by an HR head. This statement had no scope for any
flexibility. It was the simplest type of plan. Identify the type of plan. Give one more
characteristic of this plan. Which plan is the widest type of plan?
Answer:
The type of plan is ‘Rule’.
One more characteristic of this plan. It tells which action must or must not be taken.
The widest type of plan is ‘Programme’.
Question 15.
Ramesh is a supervisor in a company. He works at the lower level of management. He
teaches ‘on the job training’ the ways in which a task is to be done by the workers at the
shop floor level. He meets his boss on ce a week day and gives him a numerical
statement quantifying the numbers needed in various activities at the shop floor for next
6 months. The boss approves his requirements and gives him a job to set targets in
figures about the next plan he thinks is good for the manufacturing unit. Ramesh’s
dedication is noticed by all.
In the above case which types of plans have been highlighted? 2
Which step of planning process is highlighted in the above case?
Answer:
The types of plans which have been highlighted above are:

1. Method. He teaches ‘on the job training’ the ways in which a task
has to be done by the workers at the shop level.
2. Budget. He gives him a numerical statement quantifying the amount
needed in various activities at the shop floor.
The step of planning process highlighted in the above case
is ‘Setting Objectives’. The boss approves his requirements and
gives him a job to set targets in figures about the next plan he thinks
is good for the manufacturing unit.

Question 16.
Rajesh is at the real point of decision making in the course of his planning. He has
arrived at this point after identifying various alternative courses of action. After
identification he was thoroughly involved in the evaluation of each of these alternatives.
He later got involved into making several permutations and combinations of these
alternatives to arrive at this point.
Through which stage of the planning process is Rajesh going? Also give the next two
steps of planning process.
Answer:
Rajesh is at the real point of decision making in the course of his planning. He has
arrived at this point after identifying various alternative courses of action. After
identification he was thoroughly involved in the evaluation of each of these alternatives.
He later got involved into making several permutations and combinations of these
alternatives to arrive at this point.
The stage through which Rajesh is going is ‘Selecting an alternative’. The real point of
decision making is selecting an alternative.
The next two steps in the process of planning are ‘Implementing the plan’ and ‘Follow
through’.
Question 17.
Naman is a very intelligent planner. He knows the market pretty well. For last 15 years
he has been leading several successful projects for his company. Company gives him
responsibility to start a new project in S. America. With his experience he makes
assumptions about all the possible future scenarios.
Which step of the planning process is the above paragraph related to?
What is the other term used for assumptions in planning process?
What is the base material for developing premises?
Answer:
The step of the planning process referred to here is ‘Developing Premises’ (second
step of the planning process).
The other term used for assumptions in planning process is ‘Premises’.
The base material for developing premises is forecasts, existing plans or any past
information.

Question 18.
‘High Voltage’ – a company which manufactures microwaves is known for its flawless
planning. However the top management of the company accepts that some of its plans
have failed in the past as the outside business environment is unpredictable and
dynamic. The company invests a huge portion of its revenue on planning related issues.
Recently in a newspaper the company was blamed for preventing its employees from
doing new things due to the plans which are decided by the top management. Rajesh a
middle level manager in the company in a seminar said that the planning aspect of a
company should be dealt cautiously. There should be specific goals and activities to
reach these goals should also be properly executed. Company has many serious
competitors in the market. Even they unanimously agree that without planning no other
function of management can exist and it’s the basic platform on which the whole
structure of management is laid. When it comes to follow up of plans it becomes very
important to know the standards. The success of a plan can only be checked when it is
known how much of the set target has been met because it is at the stage of planning
these targets are set. It’s not about the past. It’s for the coming time and challenges that
a company formulates a plan. Rajesh knows this well. He uses his intelligent
imagination and foresight while formulating the plans.
Which limitations of planning have been highlighted in the above case?
Which features of planning have been indicated in the above paragraph?
Which importance of planning do you find sighted in the above case?
Answer:
The limitations of planning highlighted in the above case are:
 1. Planning may not work in a dynamic environment. (However the
top management of the company accepts that some of its plans have
failed in the past as the outside business environment is
unpredictable and dynamic).
2. Planning reduces creativity. (Recently in a newspaper the
company was blamed for . preventing its employees from doing new
things due to the plans which are decided by the top management).

The features of planning indicated in the above case are:

1. Planning helps in achieving objectives. There should be specific

goals and activities to reach these goals should also be properly
executed.
2. Planning is the primary function of management. Even they
unanimously agree that without planning no other function of
management can exist and it’s the basic platform on which the whole
structure of management is laid.
3. Planning is a mental exercise. He uses his intelligent imagination
and foresight while formulating his plans.

The importance of planning highlighted in the above paragraph:

• Planning sets standards for controlling. The success of a plan

can only be checked when it is known how much of the set target has
been met because it is at this stage of planning such targets are set.

Question 19.
It is deciding in advance what to do and how to do? It is one of the basic managerial
functions. It requires that before doing something, the manager must formulate an idea
of how to work on a particular task. This function is closely connected with creativity and
innovation. It seeks to bridge the gap between where we are and where we want to go
and is performed at all levels of management.
In spite of this the function of management referred above has a number of limitations.
Explain any two such limitations.
Answer:
Planning function of management has been referred above.
Two limitations of the planning function of management are:
1. Rigidity. One of the limitations of planning is rigidity. The existence
of,a plan puts the managerial activities in a rigid framework.
Programmes are carried out according to the plan and deviations are
considered to be highly undesirable.
2. Reduces creativity. Planning involves deciding in advance what is
to be done, how is it to be done, when is it to be done and by whom
is it to be done. There is very little scope for deviating from the plans.
This blind conformity with the pre-determined guidelines discourages
individual initiative and freedom.
 Chapter 5 Organising

CASE STUDIES

Question 1.
‘Rats & Fleas’ is a pesticide producing company. The company identifies the various
types of activities to be done. For this it divides the work into various departments. The
company then gets involved in its business with a lot of zeal.
After one year of successful run the company decides to transfer the decision making
authority to the lower most level of the employees. For this a major policy decision is
taken.
Identify the function of management highlighted above and another concept also. Give
the next two steps of this function. Also give one importance of the other concept which
you have identified.
Answer:
The function of management highlighted in the above case is ‘Organising’. This can be
seen in the first paragraph.
The other concept of management which is highlighted in the second paragraph is
‘Decentralisation’. After one year of successful run the company decides to transfer the
decision making authority to the lower most level of the employees. For this a major
policy decision is taken.
The next two steps of this function ‘Organising’ is

• Assignment of duties and

• Establishing reporting relationships.

One importance of ‘Decentralisation’ is Relief to the top management.

Question 2.
Alliance Ltd. is engaged in manufacturing plastic buckets. The objective of the company
is to manufacture 100 buckets a day. To achieve this, the efforts of all departments are
coordinated and interlinked and authority-responsibility relationship is established
among various job positions. There is clarity on who is to report to whom.
Name the function of management discussed above.
Answer:
Organising.

Question 3.
To make the annual function of the school successful the principal of the school divided
all the activities into task groups each dealing with a specific area like rehearsals,
decoration, stage management, refreshments etc. Each group was placed under the
overall supervision of a senior teacher. Identify the function of management performed
by the Principal in doing so.
Answer:
Organising.

Question 4.
To make the sports day of the school successful the Headmaster of the school divided
all the activities into task groups each dealing with a specific area like holding of event,
arrangement of medals, refreshments etc. Each group was placed under the overall
supervision of a senior teacher. The physical education teacher was made responsible
for holding different events, the home science teacher for refreshments and the Maths
teacher for medals.
Identify the function of management performed by the Headmaster in doing so.
Answer:
Organising.

Question 5.
An Indian information technology company presently employing 10,000 people, desires
to expand its business in manufacturing, trading, etc. It wants to become a global
company. To achieve its objectives it has started shifting from a centralised to a
decentralised management system.
Identify the management function being performed by the company to become a
decentralised company.
Answer:
Organising.

Question 6.
Due to proper organizing and division of work, a company goes for systematic
assignment of jobs among the employees, wmch importance of organizing is highlighted
here? Give three more importance of organizing?
Answer:
The importance of organizing which is highlighted here is ‘Benefits of specialisation’.
Three more importance of organizing:

• Clarity in working relationship.

• Adaptation to change.
• Effective administration.

Question 7.
A school principle believes in proper organizing. He time and again tells his staff to be
organized as he believes that through proper organising they can move away from
present norms and accept new challenges with success. They will be able to add more
activities and projects in their yearly plan.
Which importance of organizing has been indicated in the above paragraph?
What is Organisation Structure? Which type of organisation is ‘School’?
Answer:
A school principle believes in proper organizing. He time and again tells his staff to be
organized as he believes that through proper organising they can move away from
present norms and accept new challenges with success. They will be able to add more
activities and projects in their yearly plan.
The importance of organizing which is indicated above is ‘Expansion and Grdwth’.
Organisation structure is the framework within which managerial and operational tasks
are performed within an organisation. It explains the relationship between people, the
work to be done by them and the resources to be utilized by them.
School is a formal organisation.

Question 8.
‘Aasmaan Colours’ is a profit making colour producing company. The company deals in
making different types of colours used in painting. The organisation has always been
systematic in its approach and due to good organizing has seen a continuous increase
in its revenue. Workers are given their respective jobs clearly which leads to gaining of
experience since they do their respective jobs on a regular basis leading to high
productivity. The organisation has many challenges and it wants to improve. There is no
doubt in the lines of communication and everyone knows who has to report whom. With
passage of time, there is more need to connect with the employees. They are the most
important asset to the organisation. When managers delegate work to their
subordinates they set themselves free from routine jobs and this leads to great amount
of learning for the subordinates in practical situations.
Which importance of organizing has been highlighted in the above case?
How would a company adapt to changes with the help of organizing?
Answer:
The importance of organizing highlighted in the above case:

1. Benefits of specialisation. Workers are given their respective jobs clearly which
leads to gaining of experience since they do their respective jobs on a regular
basis leading to high productivity.
2. Clarity of working relationships. There is no doubt in the lines of communication
and everyone knows who has to report to whom.
3. Development of personnel. When managers delegate work to their subordinates
they set themselves free from routine jobs and this leads to great amount of
learning for the subordinates in practical situations.

The company would adapt to the changes in the environment by modifying the
organisation structure according to the requirement. The relationships among various
job positions can be altered or changed according to the requirements. Even if a change
is required in the managerial levels the Company may have to go ahead with it.

Question 9.
An organisation is working by clubbing similar related jobs under different departments.
The HR department is not in direct touch with the Marketing Department and this has
created problems. The HR head feels that he only knows about the HR department and
similar is the case with the Marketing department. However the truth is both of them
have limited and specific skills.
Which type of organisation structure does this organisation has? What will be the
outcome of this mode of thinking in the near future for the organisation? Name one
more disadvantage of this type of organisation structure?
Answer:
The type of organisation structure which is present is functional structure. Similar
related jobs are clubbed under one department.
The reason for the limited scope of vision for both these department heads is their
limited set of skills and knowledge only about their departments. In the future these
departmental heads won’t be able to reach the top most level of management. This
means their managerial development will not reach its peak because people at the top
management should have knowledge about every department.
One more disadvantage of this type of structure is the resulting of conflicts.

Question 10.
Identify the following into formal and informal organisation:

1. Mountain cold storage has a well defined structure of authority relationships. This
structure is created after a lot of planning by the top level management.
2. Tanuj Drinks is an organisation which helps quench the thirst of people sitting on
roadside and parks on Sundays. This organisation has originated from Mountain
cold storage spontaneously.
3. An organisation holds its meeting according to the mood of the members. It has
no set pattern of behavior.
4. An organisation which is run in Central Delhi is known for its rigid nature.
5. Cricket Club is an organisation in which the authority of the members, constituting
it, is because of their positions in the management.
6. Translife is an organisation in which only the managers are the leaders.

Answer:

1. Formal Organisation. As it is a structure of authority relationships.

2. Informal Organisation. It emerged spontaneously from a formal organisation.
3. Informal Organisation. No set pattern of behaviour is there.
4. Formal Organisation. It has rigid nature.
5. Formal Organisation. Authority of the members is due to their position in the
management.
6. Formal Organisation. Only managers because of their formal positions are
leaders not because of their personal qualities.

Question 11.
‘Steelo Ltd/ decided to set-up its steel manufacturing factory in the backward area of
Orissa where very less job opportunities were available. People of that area welcomed
this effort of ‘Steelo Ltd.’ To attract people to work in its factory it also decided to provide
many other facilities like school, hospital, market, etc. in the factory premises.
‘Steelo Ltd.’ started earning huge profits. Another competing company asked its
production manager ‘Aslam’ to investigate the reasons of earning huge profits by ‘Steelo
Ltd.’
Aslam found that in both the companies there was systematic coordination among the
various activities to achieve organizational goals. Every employee knew who was
responsible and accountable to whom. The only difference was that in his organization
communication took place only through the scalar chain whereas ‘Steelo Ltd.’ was
allowing flow of communication in all the directions as per the requirement which lead to
faster spread of information as well as quick feedback.

1. Identify the type of organization which permits ‘Steelo Ltd.’ the flow of
communication in all the directions.
2. State another advantage of the type of organization identified in (a) above.
3. State any two values which ‘Steelo Ltd.’ wanted to communicate to the society

Answer:

1. Informal organization
2. Advantage. Informal organization helps in fulfilling the social and affiliation needs
of the members of the organization and thus enhances the level of job
satisfaction.
3. Two values communicated by Steelo Ltd. are:
o Development of backward area thereby fulfilling social responsibility.
o Providing employment to the needy and creating employment opportunities.

Question 12.
In the above cases identify the ‘basis’ on which these organisations are categorized into
formal or informal.
Answer:
The basis of each case is given:

1. Basis: Definition or Meaning

2. Basis: Origin
3. Basis: Behaviour
4. Basis: Nature
5. Basis: Authority
6. Basis: Leadership

Question 13.
Lalit has joined a manufacturing firm as a worker. He has recently started working on
the shop floor. The management is quite liberal and has allowed the workers to form a
hockey club. The workers assemble and play hockey in the evening after the completion
of their work. However the management is a little worried about the outcomes. The
management is trying to change the schedule of the workers but they are unsure about
the reaction of the workers. Though majority of the workers are sincere, like Lalit, yet
the management is concerned about their companions in the hockey club.
Which type of organisation is the hockey club? Name two disadvantages which you can
predict from the above case?
Answer:
The type of organisation which is discussed above is Informal Organisation (Hockey
Club). The two disadvantages which can come up in the above case are:

1. The management may be unsuccessful in implementing changes. As here the

management is trying to implement changes and the hockey club members may
oppose them by showing unity.
2. The informal organisation (hockey club) may pressurize the workers to agree to its
demand and this can affect the interests of the organisation in a bad manner.

Question 14.
Identify the type of organisation structure in the following cases:

1. Apexa Glue is a manufacturing company based upon functions and has important
departments like HR, Marketing, Finance, etc.
2. Ravi runs a company in Hyderabad. The company is known for its product
specialisation and has a lot of reputation in the market.
3. Nitin is an owner of a reputed manufacturing company. However in his firm it is
difficult to fix responsibility on a particular department.
4. Archana is a dynamic CEO. In her organisation she allows for autonomy and
opportunity to perform multiple functions. This had led to managerial development
in her employees.
5. Rajiv Bulbs is a city based flourishing company. Recently it has won award for
being the most economical company as the functions are not duplicated in it.
6. Synchronisation of efforts is easy in Sigma Tubelights Ltd. as all the related
functions related to a particular product are integrated within one department.

Answer:

1. Functional structure
2. Divisional structure
3. Functional structure
4. Divisional structure
5. Functional structure
6. Divisional structure

Question 15.
A company has been registered under the Companies Act with an authorized share
capital of Rs.20,000 crores. Its registered office is situated in Delhi and manufacturing
unit in a backward district of Rajasthan. Its marketing department is situated in Bhopal.
The company is manufacturing Fast Moving Consumer Goods (FMCG).
 1. Suggest with the help of a diagram a suitable organisation structure for the
company.
2. State any three advantages of this organisation structure.

Answer:

1. Divisional structure:

2. Advantages of Divisional Structures:

o Product specialisation helps in development of varied skills.
o Helps in fixation of responsibility.
o Promotes flexibility as each division is autonomous.
o Facilitates expansion and growth.

Question 16.
Ajanta Foods Ltd. is engaged in the trading of ‘Noodles’. It has its registered office in
Kolkata, manufacturing unit in Solan and marketing department at Delhi. Which type of
organisational structure the company should adopt to achieve its target?
Answer:
Functional Organisation Structure.

Question 17.
In the above cases (in Question 9) identify the ‘basis’ on which the organisation
structures are categorized into functional or divisional.
Answer:

1. Basis: Formation
2. Basis: Specialisation
3. Basis: Responsibility
4. Basis: Managerial development
5. Basis: Cost
6. Basis: Coordination

Question 18.
A Company named Mahi Cycles has decided to start a new branch in the Middle East.
The company has recognised the amount of work to be done in number of hours. The
company has found out that it will take 25000 hours of man work and has subsequently
divided the number of hours for different operations. The real challenges of the
company begin here. Very methodically responsibility of the recognized amount of work
has been given to different individuals according to their capabilities.
Which function of management is highlighted above? Identify the two steps of this
function indicated above.
Answer:
The function of management which is highlighted above is ‘Organising’.
The two steps of Organising which are indicated in the above case are:

1. Step 1: Identification and division of work. The Company has found out that it will
take 25000 hours of man work and has subsequently divided the number of hours
for different operations.
2. Step 2: Assignment of duties. Very methodically responsibility of the recognized
amount of work has been given to different individuals according to their
capabilities.

Question 19.
Rolling Eagle is an organised firm. The firm has been considered as one of the major
producers of steel in the manufacturing industry. A group of people from foreign
countries have come to India to find out the reason for their success. They found that
there is proper utilisation of resources and this has led to a great control of management
over every aspect. The company has reached this place after a lot of research and its
application. Every person knows what he has to do and this has led to the achievement
of great skill development at ‘per employee level’. The company has a monitoring cell
which keeps track of all the major developments around. This has made it possible for
the company to change itself according to the requirements of the outside environment.
In the above case which concept of management is highlighted? Discuss its three types
highlighted in the above case?
Answer:
The concept of management which is highlighted above is ‘Importance of Organising’.
The three different types of’Importance of Organising” indicated above are:

1. Optimum utilisation of resources and effective administration. They found

that there is proper utilisation of resources and this has led to great control of
management over every aspect.
2. Basis of specialisation. Every person knows what he has to do and this has led
to the achievement of great skill development at ‘per employee level’.
3. Adaptation to change. This has made it possible for the company to change
itself according to the requirements of the outside environment.

Question 20.
Kaamna is a bright young management trainee. After six months of testing by her
organisation she is given charge of her office as an assistant manager. She starts her
job with a lot of enthusiasm but realises that it won’t be possible for her to continue
without sharing her tasks. She keeps a secretary who takes orders from her. This has
reduced her burden of work and has helped her to focus on priority assignments.
Which concept of management is discussed in the above case? Name two importance
of this concept.
Answer:
The concept of management which is discussed above is ‘Delegation’.
The two importance of Delegation:

• Delegation helps in the development of employees.

• Delegation acts as the basis of management hierarchy

Question 21.
Aman Chadha started ‘Bulls Eye’ a company for providing cyber security solutions to
businesses. Its objective is to prevent, detect and respond to cyber attacks and protect
critical data. He was a hardworking software engineer and an expert in cyber security.
His reputation grew by leaps and bounds as he was not only a person of integrity but
also did his work with utmost honesty and sincerity.
The business started growing day by day.
He was delighted when he was offered a big project by the Ministry of Defence. While
working on the project, he found that the volume of work made it impractical for him to
handle all the work by himself. He decided to expand the team. The company
maintained a close liaison with a local engineering college. During a campus placement,
Ishan and Vrinda were appointed to work for the new project.
He found the new employees capable, enthusiastic and trustworthy. Aman Chadha was
thus, able to focus on objectives and with the help of Ishan and Vrinda, the project was
completed on time. Not only this Aman Chadha was also able to extend his area of
operations. On the other hand Ishan and Vrinda also got opportunities to develop and
exercise initiative,

1. Identify and briefly explain the concept used by Aman Chadha in the above case
which helped him in focusing on objectives.
2. Also, state any four points of importance of the concept identified in (a) above.

Answer:

1. The concept used by Aman Chadha in the above case is delegation. Delegation is
the entrustment of responsibility and authority to another and the creation of
accountability for performance which helps a manager to extend his area of
operations.
2. Importance of delegation:
o Effective management. By delegation managers get freedom from doing
routine work. They get more time to concentrate on important matters.
o Employee development. As a result of delegation, employees get more
opportunities to develop new skills. It makes them better future managers.
 o Motivation of subordinates. Delegation of authority enhances the status of
subordinates; and provides motivation to them, to improve their
performance.
o Facilitates organisational growth. Delegation helps in growth and
expansion of the organisation by providing a ready workforce to take higher
level responsibilities.
o Basis of management hierarchy. Delegation of authority establishes
superior- subordinate relationship which is the basis of hierarchy of
management.

Question 22.
Alpha Tonics is a progressive company which has achieved new records in the field of
medicines. Recently the company decided to go for a major shift in policy decision by
handing over the decision making authority to the lower most level of employees. For
this the company went for a thorough planning. Within four months the positive results
of this major policy decision was recognizable. The employees felt a lot of development
in their skill of taking first step to manage things on their own. Some major newspapers
also covered this development. The production of the company increased. The
company’s top management could now focus on new areas of innovation as the
employees turned more reliable.
One day it so happened that the company’s manufacturing branch in south could not
fulfill even half of its production target and the operations manager was held answerable
for the assigned target. He was called in the office. When he was questioned it was
found that his right to command the workers was insufficient and it should have been
more to create results. The management decided to listen to him and he was given
more power. When he went to the shop floor he told the workers that the standard of
behavior of the workers should come from the official rules and procedures.
In the above case which concept of management has been related to in the first
paragraph of the case?
Which two advantages of this concept have been highlighted in the above case?
Which two elements of delegation have been highlighted in the second paragraph of the
case?
Which one feature of the informal organisation has been opposed by the operations
manager in the above case?
Answer:
The concept of management highlighted in the first paragraph of the case is
‘Decentralisation’. Recently the company decided to go for a major shift in policy
decision by handing over the decision making authority to the lower most level of
employees.
The two advantages highlighted of this concept are:

1. It helps in development of initiative among subordinates. The employees felt

a lot of development in their skill of taking first steps to manage things on their
own.
 2. It helps in developing managerial talent for the future. The Company’s top
management could now focus on new areas of innovation as the employees
turned more reliable.

The two elements of delegation highlighted in the second paragraph of the case are:

1. Accountability. The operations manager was held answerable for the assigned
target.
2. Authority. When he was questioned it was found that his right to command the
workers was insufficient.

The feature of informal organisation which is opposed here is ‘the standards of behavior
originate from the group norms’ which should not be the case in a formal organisation
bounded by rules and procedures.

Question 23.
Arnav Electricals is a company which has in recent years adopted the decentralized
method of running the organisation. The company has grown dynamically and the
decisions taken by the lower level management are implemented which saves time as
people taking decisions are near the point of action. However, recently chairman of
another manufacturing firm who is also a good friend of Arnav, chairman of Arnav
Electricals, met him and asked him how he could evaluate performance of employees in
case he goes for a decentralized approach. A few hours later Amav’s secretary calls
him and asks for the list of works to be done the next day. He narrates him all the
important tasks to be executed.
Which importance of decentralisation has been highlighted in the above case?
What advice do you think Arnav should give to have better control in a decentralized
organisation?
Which concept of organizing is taking place between Arnav and his secretary?
Which type of scope does this concept have?
Answer:
The importance of decentralisation which is highlighted above is Quick decision making.
(The company has grown dynamically and the decisions taken by the lower level
management are implemented which saves time as people taking decisions are near
the point of action).
The advice that Arnav should give in order to get a better control is to make the
departments answerable for the final outcomes. Better control systems like balance
score card, management information system and observation through CCTV cameras
to be adopted to keep track of the employees’ performance.
The concept of organizing which is taking place between Arnav and his secretary is
‘Delegation’. As it is a superior subordinate relationship involving sharing of tasks of
Arnav, the manager, here.
Delegation has a narrow scope as it is limited to superior and his immediate
subordinate.
Question 24.
‘Pappu Sweets Makers’ is a sweets making company which has turnover in crores. In
order to manage the work in the organisation the departments have been created on the
basis of functions.
Examine the following situations of this organisation and give answers accordingly:
Situation 1: It is expected that employees who are performing similar tasks work under
the same department. So the company now has HR, Marketing and Finance
departments. The division is based on specific functions.
Situation 2: There are similarities in the tasks performed within the same department.
Situation 3: The profit is increasing month by month due to the success of this structure
of the organisation.
Situation 4: There has been minimum duplication of efforts as the same department is
taking care of single function.

1. Which type of organisation structure is discussed in the above case?

2. What type of specialisation exists in the above case in the organisation according
to Situation 1?
3. What will be the outcome of Situation 2?
4. Why do you think the profit is increasing as given in Situation 3?
5. What will be the result of Situation 4?

Answer:

1. The type of organisation structure which is discussed in the above case is

Functional Structure.
2. The type of specialisation which exists in the Situation 1 is ‘Occupational
Specialisation’.
3. The outcome of Situation 2 will be increase in control and coordination.
4. The profit is increasing as given in Situation 3 as there is increase in managerial
and operational efficiency.
5. The result of Situation 4 will be the resulting of economies of scale due to
attainment of specialisation which will lead to lowering of cost.

Question 25.
Mr. Atul is the owner of a garment manufacturing company. He finds the spreading of
message in his organisation a problem as a lot of time is taken. On many occasions he
tried to bring different equipments and software systems to increase the speed of
spreading of message. In the month of February this year a new type of machine was
installed in the production department. He wanted to have a candid opinion about the
utility of the machine from the employees but no one had the courage to tell him about
the flaws of the machine on his face. After three months when there were shortcomings
in the production of garments he realised his limitation. With passage of time he found
the motivation level of employees too low. Many of the employees and workers were
new and found the place unfamiliar and didn’t have friends which resulted in the
lowering of production.
 1. What would you suggest to Mr. Atul in this scenario?
2. Identify the three problems in the above case and give the outcomes of your
solution given in the previous question on these problems.

Answer:

1. Mr. Atul should promote the growth of an informal organisation like cricket club,
hockey club, etc. within his organisation for the workers.
2. The three problems which are highlighted in the above case and the outcomes of
the respective solutions are:
o The spreading of message in his organisation is a problem as a lot of time is
taken. An informal organisation results in faster spread of information as the
prescribe lines of communication are not followed.
o Employees’ reaction towards plans and steps of the organisation are not
clear to the management. Through the informal organisation a candid
opinion of the employees can be found.
o The social needs of the employees are not fulfilled. An informal organisation
helps in the fulfillment of social needs which increases the confidence and
satisfaction level of employees.

Question 26.
Mr. Manuj is an efficient manager working in a multinational company. He is fond of
completing all his work by himself. As a human being he is very good and supportive
and due to this he doesn’t want to put burden of work on others. Sometimes he is so
much involved in doing different types of works in the office that he even misses the
priorities areas.
Which concept of management is seen violated here? What is going to be another
disadvantage of this violation? Also identify one disadvantage given in this case.
Answer:
The concept of management which is violated here is ‘Delegation’. He is fond of
completing all his work by himself.
Another disadvantage. Employees need for recognition won’t be satisfied. They won’t
be able to develop their skills if they will not share tasks in actual work environment.
The disadvantage of violating delegation given in the case is the lack of priority given by
the manager to key areas as he is involved in tasks which can be handled by his
subordinates.
Sometimes he is so much involved in doing different types of works in the office that he
even misses the priorities areas.

Question 27.
‘Money Makers’ is a leading toy manufacturing company. With the help of proper
delegation it has enabled the existence of proper workforce to take up leading positions
in several challenging projects. The company has been in news for good reasons
related with innovation. Due to proper delegation the relationships between the
superiors and the subordinates are properly defined at various levels leading to creation
of a strong management structure. Last year it was awarded for good administration.
Due to proper delegation there is no overlapping of duties and duplication of efforts as
there is clarity of working relationships.
The company is acting as a role model for other players in the industry. The productivity
of the organisation has improved as it is very organized. Specific jobs are done only by
specific workers resulting in increase of efficiencies at individual levels. The company is
now thinking of going global and has recently opened a branch in Europe. However the
conditions are going to be different there. Keeping in mind the strong organizing of the
company it is expected that it will be able to modify its organisational structure and
prove its superiority there also.
Recently a meeting is held by the top management. It is decided that the organisation
will go for a major shift in policy decision and involve the lower level of management in
decision making. The size of the company is growing so it will require more participation
from the employees.

1. Identify the three advantages of delegation highlighted above.

2. Identify the two advantages of organizing highlighted above.
3. Find the concept given in the third paragraph of the above case.

Answer:

1. The three advantages of delegation indicated above are:

o It helps in facilitation of growth. With the help of proper delegation it has
enabled the existence of proper workforce to take up leading positions in
several challenging projects.
o It acts as the basis of management hierarchy. Due to proper delegation
the relationships between the superiors and the subordinates are properly
defined at various levels leading to creation of a strong management
structure.
o It helps in better coordination. Due to proper delegation there is no
overlapping of duties and duplication of efforts as there is clarity of working
relationships.
2. The two advantages of organizing highlighted above are:
o Benefits of specialisation. Specific jobs are done only by specific workers
resulting in increase of efficiencies at individual levels.
o Adaptation to change. It is expected that keeping in mind the strong
organizing of the company it is expected that it will be able to modify its
organisation structure and prove its superiority there also.
3. The concept of management highlighted in the third paragraph of the above case
is ‘Decentralisation’.

Question 28.
Samir Gupta started a telecommunication company, ‘Donira Ltd.’ to manufacture
economical mobile phones for the Indian rural market with 15 employees. The company
did very well in its initial years. As the product was good and marketed well, the demand
of its products went up. To increase production the company decided to recruit
additional employees. Samir Gupta, who was earlier taking all decisions for the
company had to selectively disperse the authority. He believed that subordinates are
competent, capable and resourceful and can assume responsibility for effective
implementation of their decisions. This paid off and the company was not only able to
increase its production but also expanded its product range.

1. Identify the concept used by Samir Gupta through which he was able to steer his
company to greater heights.
2. Also explain any three points of importance of this concept.

Answer:

1. Concept used—Decentralisation
2. Importance of Decentralisation:
o Reduces the burden of top management: A decentralized structure lays
emphasis on the delegation of authority at all levels. This relieves the top
management of routine and time-consuming tasks. Decentralisation
reduces the burden of top executives and provides them enough time to
concentrate on other important functions.
o Develops initiative among subordinates: Decentralization creates self-
confidence amongst the subordinates. This is because when lower
managerial levels are given freedom to take their own decisions, they learn
to depend on their own judgement. It works as an initiative and helps to
promote creativity in them.
o Develops managerial talent for the future: As a result of decentralization,
employees get more opportunities to develop new skills. It makes them
better future managers.
o Prompt decisions: Decentralisation provides more freedom to lower level
managers to take their own decisions. There is no more need to get
approval from higher level. It helps in quicker and better decision-making.

Question 29.
In a progressive company the HR department decided to go for a unique way of
controlling the performance of the employees. They decided to give every employee a
balance score card through which their performance could be measured. The top brass
could leave the decision making on the employees. Due to this change in the approach
of the management the evaluation of employees and departments became easier.
Since the decisions were not to be taken now by the top management only, the speed
at which the decisions were taken got increased. The top management could now see
the changes in the organisation. It was quite obvious that they could now sit, relax and
focus on other areas.
Since this organisation is a formal organisation. In a recent assessment meeting by the
top management it was found that the company was meeting the following criteria:
 1. Mutual relationships among the employees were clearly defined.
2. Duties of all the employees were clearly specified.
3. There was a definite framework and each employee knew his role.

In the above case identify the highlighted advantages of decentralisation.

In the second part of the case the advantages of formal structure of the organisation are
given. What are going to be the outcomes of each of these advantages?
Answer:
The advantages of decentralisation highlighted above are:

1. Decentralisation helps in better control. Due to this change in the approach of

the management the evaluation of employees and departments also started to
become easier
2. Decentralisation helps in quick decision making. Since the decisions were not
to be taken now by the top management only, the speed at which the decisions
were taken got increased.
3. Decentralisation provides relief to the top management. It was quite obvious
that they could now sit, relax and focus on other areas.

The respective outcomes of the advantages of the formal organisation given in the case
are:

1. It became easier to fix responsibility on the employees and the

departments (as mutual relationships among the employees were clearly
defined).
2. There was no scope for any doubt about the role of the employees (as duties
of all the employees were clearly specified).
3. The goals were effectively achieved (as there was a definite framework and
each employee knew his role).

Question 30.
Identify the category of ‘Organisation A’ in the following cases:

1. Organisation A originates from an organisation B which runs on rules and

procedures. It has originated due to personal interaction among employees of
organisation B.
2. Organisation A follows independent channels of communication.
3. Organisation A has a definite framework for the fulfillment of operational tasks.
4. Organisation A emerges spontaneously and is not willingly created by the
management.
5. Organisaiton A helps in coordinating and streamlining the functioning of different
departments.
6. Organisation A gives more stress on targets to be completed than the
interpersonal relationships among the workers.
 7. The behavior of members of Organisation A is not dependent on the rules and
procedures of the parent organisation B (from which it has emerged).
8. There is lot of delay in decision making as the established chain of command is
followed in Organisation A.
9. Organisation A helps in fulfilling the social needs of the members as they find
likeminded people.
10. Organsiation A is deliberately created by the top management.

Answer:

1. Informal organisation
2. Informal organisation
3. Formal organisation
4. Informal organisation
5. Formal organisation
6. Formal organisation
7. Informal organisation
8. Formal organisation
9. Informal organisation
10. Formal organisation

Question 31.
Gargi Chemicals has many branches throughout the country. The company has recently
adopted the decentralisation model. This has given the freedom to the lower level
managers to take decisions on their own and have faith on their own judgments. This
has really helped the organisation in taking the business to new heights. The employees
are handling the projects independently and the experience thus gained can help them
rise in the organisation earning them responsible positions in the management in the
future.
The organisation knows that there is no substitute to delegation. In the past when the
optional policy decision of decentralisation was not adopted even then the company
was doing good. The managers knew that through proper delegation they could leave
the routine work on subordinates and focus on priority areas. This was how the
company grew. It was due to delegation that superior-subordinate relationship got
established and there was clarity of reporting relationships.
The company works on product specialisation. We can see that in the future the
managers will have full scope to develop their managerial talents.
In the above case identify the advantages of decentralisation.
Delegation is must for the organisation. What advantages of delegation are indicated in
the above case?
What type of organisation structure does the company have?
Why will managers be able to maximize their potential in the above organisation
structure?
Answer:
The company works on product specialisation. We can see that in the future the
managers will have full scope to develop their managerial talents.
The advantages of decentralisation highlighted above are:

1. Development of initiative among subordinates. This has given the freedom to

the lower level managers to take decisions on their own and have faith on their
own judgments.
2. Development of managerial talent in the subordinates for the future. The
employees are handling the projects independently the experience thus gained
can help them rise in the organisation earning them responsible positions in the
management in the future.

The advantages of delegation highlighted above are:

1. Delegation helps in effective management. The managers knew that through

proper delegation they could leave the routine work on subordinates and focus on
priority areas.
2. Delegation acts as basis of management hierarchy. It was due to delegation
that superior-subordinate relationship got established and there was clarity of
reporting relationships.

The type of organisation structure present is divisional structure as there is product

specialisation.
The managers will be able to maximize their potential in the above structure because all
concerned skills and abilities related to a particular product will be known to him as he
will be responsible for the product. Such managers will have knowledge of all the
departments and will be able to rise to the top in the management hierarchy.

Question 32.
Identify the type of organisation structure in the following cases:

1. A manager gains experience of all the related functions like HR, Marketing,
Finance, etc.
2. A particular division may try to increase its profit at the cost of others in an
organisation.
3. This type of structure is suitable for large business enterprises where several
products are there for sale. It is easy to add new departments as new products
are added.
4. The organisation believes in occupational specialisation and lays stress on
specific functions.
5. In this type of organisation less focus is given on overall enterprise targets.
6. The size of organisation is large and there is a need for higher degree of
specialisation.
7. There is a similarity of tasks within a department and more chances of control and
coordination.
 8. Problems of improper coordination may result as message will flow between
functionally different departments.
9. There can be blame game as conflict of interests may arise between functionally
different departments.
10. There are chances of flexibility and initiative as the departments function as
autonomous units.
11. A manager supervises all the situations and functionalities related to a particular
department. Here the authority is more than the other type of organisation
structure.
12. The expansion and growth is easier as new units can be adjusted without
disturbing the ongoing operations.
13. The training of managers is easier as the limited sets of skills are targeted for a
particular employee.

Answer:

1. Divisional structure
2. Divisional structure
3. Divisional structure
4. Functional structure
5. Functional structure
6. Functional structure
7. Functional structure
8. Functional structure
9. Functional structure
10. Divisional structure
11. Divisional structure
12. Divisional structure
13. Functional structure
 Chapter 6: Staffing

Question 1:
In a leading manufacturing company there was a meeting regarding the importance of a
function of management which was very much required in meeting the growing needs of
good employees and solving complicated issues related with human behavior at the
workplace. They also discussed about the most important resource of an organisation.
Which function of management is indicated here in the above case? Give one
advantage of this function.
Which most important resource of an organisation is indicated here?
Answer:
The function of management which is indicated here is Staffing.
One advantage of staffing is:

1.Staffing helps in obtaining competent personnel for the organisation.

o The most important resource of an organisation indicated here is
‘Human Resource’.

Question 2:
Alpha Enterprises is a company manufacturing water geysers. The company has a
functional structure with four main functions— Production, Marketing, Finance and
Human Resource. As the demand for the product grew, the company decided to hire
more employees.
Identify the concept which will help the Human Resource Manager in deciding the actual
number of persons required in each department.
Answer:
Concept: Workload Analysis.

Question 3:
Bhagwati Enterprises is a company engaged in the marketing of air- conditioners of a
famous brand. The company has a functional structure with four main functions —
Purchase, Sales, Finance and Staffing. As the demand for the product grew, the
company decided to recruit more employees.
Identify the concept which will help the Human Resource Manager to find out the
number and type of personnel available so that he could decide and recruit the required
number of persons for each department.
Answer:
Workforce Analysis.

Question 4:
Pluto Utensils is a very old manufacturing company. Recently it was found by the
management that the employees who were working in the organisation were lethargic
with limited skills. The management compared its organisation with that of others and
found a huge difference. When a proper analysis of job positions and their occupants
was done it was found that many of them were not working at places suitable to them.
This increased the worry of the management. The organisation had already spent five
decades in the industry and was worried about the successful continuation of business
which required capable future managers but the current employees were not much
capable. The company had recently suffered huge losses. It was running out of budget.
To add to its problems the number of employees was more than required so the
company had to bear additional cost. It is said that one bad thing leads to another. This
came true for the company when there was some negative reporting about its HR
practices in a daily newspaper where it was mentioned that the employees were not
satisfied and suffered with low morale. The scene forty years back was different when
the company used to be the number one brand in its segment.
Which function of management doesn’t seem to be working well for the company in the
above case? 1
Identify the different benefits, associated with the proper utilisation of this function, the
company would have enjoyed if everything had worked in its favour. 5
Answer:
The function of management which doesn’t seem to be working well for the organisation
is
‘Staffing’.
The benefits of staffing highlighted above are:

1.Competent Personnel. Recently it was found by the management that the

employees who were working in the organisation were lethargic with limited
skills.
2.Right person for right job. When a proper analysis of job positions and their
occupants was done it was found that many of them were not working at places
suitable to them.
3.Succession Planning. The organisation had already spent five decades in the
industry and was worried about the successful continuation of business which
required able future managers but the current employees were not much
capable.
4.Optimum utilisation of human resources. To add to its problems the number
of employees were more than required, so the company had to bear additional
cost.
5.Improves job satisfaction and morale of the employees. This came true for
the company when there was some negative reporting about its HR practices in
a daily newspaper where it was mentioned that the employees were not
satisfied and suffered with low morale.

Question 5:
‘Seven Colours’ is a progressive company with a very good HR record. Recently it
created a pool of prospective candidates for jobs to be given in various departments.
The company is always willing to complete its HR duties properly. Various job positions
exist in the company. The company makes it compulsory for the HR department to
prepare job descriptions so that necessary information about the jobs could be created.
For its decent HR practices the company has won several awards. It knows that the
most important asset of an organisation is its image and to protect it the company
should always be ready to do extra efforts. Last year when a few groups filed a
complaint against the company it made great efforts to fight legally and came out
victorious. It has a very good set up to promote the interests of the employees. In order
to give them a familiar environment the company promotes various informal
organisations and proper celebration of all festivals. It is very responsive towards its
workers and always attends to their problems. There is a special cell in the HR
department which is very responsive to the complaints made by the employees
regardless of the level at which they work. Recently a national newspaper made a very
favourite mentioning of the absence of strikes in the company as the management-
labour relations are very good and a lot of importance is given to the demands of the
labour unions. A very peaceful environment exists in the organisation.
In the above case there are highlighted various duties of the HR department. Identify
them.
Answer:
The various duties of the HR department highlighted above are:

1.Recruitment is done in order to create the pool of candidates who can then
be made to go through the process of selection. Recently it created a pool
of prospective candidates for jobs to be given in various departments.
2.Analysing jobs and preparing job descriptions. The Company makes it
compulsory for the HR department to prepare job descriptions so that
necessary information about the jobs could be created.
3.Defending the company in case any law suit is filed against the
company. Last year when a few groups filed a complaint against the company
it made great efforts to fight legally and came out victorious.
4.Helps in fulfilling social needs thus providing welfare and social security. In
order to give them a familiar environment the company promotes various
informal organisation and proper celebration of all festivals.
5.Handles grievances of the employees and makes timely attention to the
complaints made by them. There is a special cell in the HR department which
is very responsive to the complaints made by the employees regardless of the
level at which they work.
6.Maintaining proper relations between labour and management. Recently a
national newspaper made a very favourite mentioning of the lack of strikes in
the company as the management-labour relations are very good and a lot of
importance is given to the demands of the labour unions.

Question 6:
Mr. Naresh recently completed his M.B.A. from one of the Indian Institutes of
Management in Human Resource Management. He has been appointed as Human
Resource Manager in a Truck Manufacturing Company. The company has 1,500
employees and has an expansion plan in hand that may require additional 500 persons
for various types of jobs. Mr. Naresh has been given the complete charge of the
company’s Human Resource Department.
List out the specialised activities that Mr. Naresh is supposed to perform as the Human
Resource Manager of the company.
Answer:
Being Human Resource Manager of the company Mr. Naresh is supposed to perform
the following specialised activities:

1.Recruitment
2.Job analysis, collecting information about jobs in order to prepare job description.
3.Developing compensation and incentive plans.
4.Making arrangements for training and development of employees.
5.Maintaining good relations with labour unions.
6.Handling grievances and complaints.
7.Taking care of social security and welfare of employees.
8.Protecting the company against law suits, and avoiding legal complications.

Question 7:
Aditya Rubbers is thinking of knowing the worth of its employees but it is unable to do
so yet. The firm now has decided to include a step in its staffing process through which
it can judge the performance of its employees.
Name the step the organisation will include.
Name two more other steps in the staffing process which precede this step.
Answer:
The step discussed here is ‘Performance Appraisal’.
The following two steps in the process of staffing are:

1. Placement and Orientation.

2. Training and Development.

Question 8:
Company A requires new employees. For this the company has started making efforts.
The financial condition of the company is not very good but the requirement of
employees at key positions is required.
Company B doesn’t want too much complication in the process of selection and
placement. It wants to keep the process simple. The targets of production are already
very demanding for the top management. They want a way where their least efforts are
required to form the required taskforce to be involved for special projects.
Company C is struggling with lack of balance in the composition of its workforce. There
are certain departments in which the number of employees is surplus whereas there are
certain departments in which there is shortage of required number of employees.
How can Company A solve its problem? 1
Which type of recruitment will be good for Company B?
What do you think could be the solution for Company C?
Answer:
The Company A can solve its problem by going for Internal Recruitment as in this way
the process of selection and placement will be simplified. The candidates who are
already part of the organisation can be more easily judged and evaluated. The reliability
component will also be high in this type of recruitment.
The Company B should go for Internal Recruitment. This mode of recruitment will be
cheaper and the Company can thus save money which is required more in case of
external recruitment.
The Company C should opt for Internal Recruitment as employees can be transferred
from surplus areas to areas where there is shortage of employees. So an optimum
balance can be achieved within the departments.
The concept of management which is highlighted in the above case is ‘Merits of Internal
Recruitment’.

Question 9:
In ‘Amazing Kids’ which is a school of reputation the ^principal has decided to improve
the performance of teachers through proper motivation. He has planned to promote
some of the good performing teachers to the post of supervisors in their respective
wings. The adjoining school after knowing this decides to do the same but the school is
new and there is no scope of filling the higher slots with the teachers of the school as all
of them are new too.
This school then goes for external sources of recruitment for which two sources are
checked:

1.They approach a government office for this purpose. Here in this government
agency link between job seekers and employers is matched and people who
are unemployed get registered for skilled as well as unskilled jobs.
2.They check the data of people who applied for the jobs of teachers but were
unable to
98 44 Business Studies—Case Studies Tapan Pathak
make it. There was a chance that these people could be easily recruited since
they were interested in the jobs last year.

A friend of the principal of ‘Amazing Kids’ is a factory owner. He told him that finding
workers for his factory is easy as he generally requires unskilled labour. Daily
notification is put outside the factory building and people apply and get selected on spot.

1.In the above case which type of recruitment is attempted by the principal of
‘Amazing
Kids’?
2.Which limitation is discussed in the last part of first paragraph of the case?
 3.Identify the two external sources of recruitment involved by the second school in
the
above case.

Answer:
In ‘Amazing Kids’ which is a school of reputation the principal has decided to improve
the performance of teachers through proper motivation. He has planned to promote
some of the good performing teachers to the post of supervisors in their
respective wings.

1.Internal source of recruitment. He has planned to promote some of the good

performing teachers to the post of supervisors in their respective wings.
The adjoining school after knowing this decides to do the same but the problem
with them is that the school is new and there is no scope of filling the higher
slots with the teachers of the school as all of them are new too.
2.Limitation of internal recruitment. The school is new and there is no scope of
filling the higher slots with the teachers of the school as all of them are new too.
This school then goes for external sources of recruitment for which two
sources are checked:
o They approach a government office for this purpose. Here in this
government agency link between job seekers and employers is
matched and people who are unemployed get registered for
skilled as well as unskilled jobs.
o They check the data of people who applied for the jobs of teachers but
were unable to make it. There was a chance that these people could
be easily recruited since they were interested in the jobs last year.
3.The two external sources of recruitment used by the second school are:
o Employment exchange. This government agency creates a link
between job seekers and employers. People who are unemployed get
registered for skilled as well as unskilled jobs.
o Casual callers. Since they were interested in the jobs last year but
were unable to make it.A friend of the principal of ‘Amazing Kids’ is a
factory owner. He told him that finding people for jobs is easy for his
factory is easy as he generally requires unskilled labour. Daily
notification is put outside the factory building and people apply
and get selected on spot.
4.Direct recruitment. As he generally requires unskilled labour. Daily notification
is put outside the factory building and people apply and get selected on the
spot.

Question 10:
Anjana chemicals is looking for qualified and talented people to apply for vacant jobs in
the organisation. With the passage of time the organisation has learned a lot with its
experience. It knows when it goes for final selection of candidates, if will have to
design different tests. They want to test the employees on the basis of their learning and
decision making ability. The company wants to ensure proper testing of the recruited
candidates. After this the candidates will be judged on the basis of in-depth formal
conversation.
After the selection the candidates are placed and trained. Employees have to be trained
on the equipment they will be using but this training will take place away from the
workplace.

1.Which type of recruitment should the company depend upon?

2.Which type of test should be conducted done by the organisation to suit their
need?
3.Which stage in the selection process is highlighted after the written test?
4.What type of training is given to the candidates?

Answer:

1.The company should depend upon external recruitment to meet its needs.
Anjana chemicals is looking for qualified and talented people to apply for vacant
jobs in the organisation.
2.The type of test needed by the organisation to suit their need is intelligence test.
They want to test the employees on the basis of their learning and decision
making ability.
3.The stage in the selection process which is highlighted after the written test is
employee interview. After this a stage in the selection process will come when
the candidates will be judged on the basis of in-depth formal Conversation.
4.The type of training given to the candidates is vestibule training. Employees have
to be trained on the equipment they will be using but this training will take place
away from the workplace.

Question 11:
Though the company XYZ has started its recruitment timely the process is
T1 ore it has decided to use internet for its help so that it can get qualified personnels.
The organisation knows that its challenges are not going to be over. It decides to have
different types of good quality tests at the stage of selection.
The three types of tests are:

1. Test A will involve measuring the ability of the employees to learn new skills.
This test can somehow foretell the ability of an individual to develop.
2. Test B will involve measuring the current existing skills of the employees. These
skills are the ones which are already possessed by the employees.
3. Test C will check the applicant’s reaction to emotions evaluating, value based
and maturity evaluating questions. However these tests are tough to be
designed and would pose challenge to the organisation.
 o Which specific type of external recruitment is later adopted by the
company?
o Which one more benefit will occur with this new adoption?
o Identify the different tests given in the above case.

Answer:
In the above case:

1.The Company is doing external recruitment. Since the process is taking a lot of
time.
2.The specific type of external recruitment which is adopted by the company is web
publishing. The Company then decides to use internet for its help.
3.Since it is an external source of recruitment it will give a wider choice to the
organisation in terms of employees. A large number of people can apply as
large number of people will have access to the net.
4.The three different tests given in the above case are:
o Test A is aptitude test. Measuring the potential of the employees to
learn new skills.
o Test B is trade test. Measuring the current existing skills of the
employees.
o Test C is personality test. Checking the applicant’s reaction to
emotions evaluating, value based and maturity evaluating questions.

Question 12:
Sharmila, a very able HR manager, is called by her boss. He tells her to judge whether
there is under manning or over manning in the organisation. She takes her work
sincerely and finds out that the total number of employees in the organisation is less
than required. Then she starts a process of searching potential employees for the
organisation. In her efforts to do so she adopts three ways:

1.She goes to various MBA colleges to find out new talent.

2.She talks to the existing employees for information about candidates in their
know-ledge who can be recruited in the organisation.
3.She asks for data base of the candidates who applied last year but could not
make it to the organisation.
o Which type of analysis is done by Sharmila?
o Which process is started by Sharmila to meet the problem of under
manning?
o Identify different types of sources of external recruitment highlighted in
the above case.

Answer:
 1.The type of analysis done by Sharmila is workforce analysis. Her boss tells her to
judge whether there is under manning or over manning in the organisation.
2.The process started by Sharmila to meet under manning is recruitment. She then
starts a process of searching potential employees for the organisation.
3.The different types of sources of external recruitment highlighted in the above
case are:
o Campus recruitment. She goes to various MBA colleges to find out
new talent.
o Employee recommendation. She talks to the existing employees for
information about candidates in their knowledge who can be recruited
in the organisation.
o Casual callers. She asks for data base of the candidates who applied
last year but could not make it to the organisation.

Question 13:
Name one advantage of each source of external recruitment highlighted in the case in
the previous question.
Answer:
The advantages of each source of external recruitment highlighted in the above
case are:

1.Campus recruitment. The organisation can have young enthusiastic talent hired
from colleges. The young talented employees can be better moulded and their
energy harnessed in a better manner. The expectation in terms of salary is also
less thus saving cost.
2.Employee recommendation. The employees who are already part of the
organisation would recommend people who are in their knowledge and are
capable of joining the organisation. Such types of references generate
employees whose backgrounds are properly known.
3.Casual callers. These are the potential candidates who were unable to make it to
the organisation in the previous attempts. The candidates can be employed at a
lower salary and this can prove to be a cost saving strategy for the organisation.
Such candidates are almost equal in capability but were rejected due to tough
competition.

Question 14:
Ashish, the Marketing Head, Raman, the Assistant Manager and Jyoti, the Human
Resource Manager of ‘Senor Enterprises Ltd/ decided to leave the company. The Chief
Executive Officer of the company called Jyoti, the Human Resource Manager and
requested her to fill up the vacancies before leaving the organization. Informing that her
subordinate Miss Alka Pandit was very competent and trustworthy, Jyoti suggested that
if she could be moved up in the hierarchy, she would do the needful. The Chief
Executive Officer agreed for the same. Miss Alka Pandit contacted ‘Keith Recruiters’
who advertised for the post of marketing head for ‘Senor Enterprises Ltd. They were
able to recruit a suitable candidate for the company.
Raman’s vacancy was filled up by screening the database of unsolicited applications
lying in the office.

1.Name the internal/external sources of recruitment used by ‘Senor Enterprises

Ltd.’ to fill up the above stated vacancies.
2.Also state any one merit of each of the above identified source of recruitment.

Answer:

1.Sources of recruitment used by ‘Senor Enterprises Ltd.’:

o Promotion—for the post of Human Resource Manager
o Placement Agencies and Management Consultants—for the post of
Marketing Head
o Casual Callers—for the post of Assistant Manager
2.One merit of each source of recruitment:
o Promotion. Promotion of employees helps in improving their motivation,
loyalty and satisfaction level.
o Management Consultants. Management Consultancy firms help the
organization to recruit technical, professional and managerial
personnel. They recommend suitable names to their clients.
o Casual Callers. Maintaining a database of unsolicited applicants in their
offices helps the organization in reducing the cost of recruiting
workforce. It is the cheapest source of recruitment.

Question 15:
Radhika Garments Ltd. are the manufacturers of ‘Ladies Designer Suits’ with their own
trade mark. During the year 2013-14 the company employed 30 senior technicians to
work on machines imported from France for manufacturing of ‘Ladies Designer Suits’.
The technicians were employed on a probation of one year and were put on their
respective jobs after 10 days of on-the-job training. Because of the faulty selection
process they could not perform well. Ten of them left the job on their own and 12 had to
be removed by the company during the probation period. Now the company is in the
process of selecting new technicians. Advice the company about any three types of
selection tests, describing each in about 20 words, that may be used for selecting the
desired technicians.
Answer:
Three types of selection tests:

1.Intelligence tests. Such tests are designed to check the level of intelligence of
the candidates. It reflects the learning ability of an individual along with his
ability to make judgments and decisions.
 2.Aptitude test. Aptitude test is designed to measure the potential of an individual
for learning new skills. It reflects the candidate’s capacity to develop in the
future.
3.Personality test. Such tests help in judging the overall personality of an
individual. These indicate about the person’s reactions to emotions, maturity
level and value system.

Question 16:
Identify the type of recruitment in the following cases:

1.In a cotton cloth manufacturing company the productivity has declined during last
couple of years. When the senior management decides to go into the root
cause they find that there is lack of new talent in the organisation and the
organisation is suffering from ‘inbreeding’.
2.In ‘Make my dress’, a company with a vision, employees have a low spirit of
competition and their enthusiasm level is very low as they find it difficult to have
a good level of competition.
3.In a company there are many highly qualified personnel who are trained in
different scenarios. They have a lot of experience and knowledge about the
latest in the market.
4.A company XYZ is enjoying wider choice of employees and is doing great.
5.There is a lot of dissatisfaction among the existing employees in an organisation.
This
is due to reduced chances of promotion.
6.A budding organisation has a confused approach towards staffing. There have
been
frequent transfers resulting in the reduction of productivity.
7. An organisation has a policy of time bound promotions which has made the
employees lethargic.
8.The recruitment process of an organisation is very costly. They have to spend a
lot of
money on expenses like advertisement.

Answer:
1. Internal recruitment
2. Internal recruitment
3. External recruitment
4. External recruitment
5. External recruitment
6. Internal recruitment
7. Internal recruitment
8. External recruitment
Question 17:
Mohit Gupta is working with ‘Yellow Security Services ltd.’ He is also recruiting security
guards for the company. The company provide security services in Delhi and Noida at
short notice to various companies. The guards are recruited on temporary basis. The
guards provided by this company are known for their honesty and punctuality. Mohit
Gupta is well known in his village for providing employment to unskilled people.

1.Name the source of recruitment used by ‘Yellow Security Services Ltd.’

2.State any one disadvantage of this source of recruitment.
3.Identify the need of ‘Security Guards’ which is being fulfilled by the company as
per Maslow’s need hierarchy.
4.Identify any tivo values communicated to the society in the above stated case.

Answer:

1.External source of Recruitment—Labour contractor.

2.The main disadvantage of this source of recruitment is that in case the contractor
leaves the organisation, all the workers employed through him will also quit.
3.Basic Physiological needs.
4.Two values communicated to the society are as follows:
o Social responsibility by creating employment opportunities.
o Upliftment of the weaker section of the society.

Question 18:
‘Safal Hain Hum’ is a company having a very good HR department. It provides learning
opportunities that are designed to assist the employees to achieve w . With the passage
of time the organisation has learned several methods of training. In one of the methods
the trainee is put under the guidance of a master worker for skilled jobs. Moreover,
things are not easy for the organisation at the stage of selection process. The
recruitment process followed is very lengthy and costly for the firm. Secondly, a very
large number of candidates appear for the different posts after recruitment is started.
However, at the first stage of the selection process the managers eliminate unqualified
and unsuitable applicants on the basis of the reasons which are not found in their
application forms as they are not fit to meet basic requirements.

1.What concepts does ‘Safal hain Hum’ help achieve its employees?
2.Which type of ‘on-the-job’ training is provided by the organisation to its
employees?
3.At which stage of the selection process do the managers get rid of unqualified
candidates?
4.Which type of recruitment is used by the company to get the potential
candidates?
Answer:

1.‘Safal hain Hum’ helps employees achieve development. It provides learning

opportunities which are designed to assist the employees to achieve growth.
2.The type of training provided by the organisation to its employees is
apprenticeship.
Under this training the trainee is put under the guidance of a master worker.
3. The stage of the selection process at which the managers get rid of unqualified
and unsuitable candidates is preliminary screening. At the first stage of the
selection process the managers eliminate unqualified and unsuitable applicants
on the basis of the reasons which were not found in their application forms.
4.The type of recruitment which is used by the company to get the potential
candidates is external recruitment. This process is very lengthy and costly.

Question 19:
Identify the type of training involved and also categorise whether it is ‘on the job’ training
or ‘off the job training’:

1.In a shoe manufacturing company a group of new recruits are being trained.
They are trained under an experienced trainer Mr. Arun. He is training them
skills which will require at least six months of dedication under real work
environment.
2.A student of ABC MBA College is having a combined training analysis where he
is having two mentors. One mentor is from the college and the other is from the
company. The idea is to give real knowledge about the corporate functioning.
3.In a steel plant training is given to the new employees on sophisticated machines
which are not being operated at the workplace. These machines are kept away.
Actual
work environment is created inside the classroom and the trainees are guided
properly there itself.

Answer:
The types of training involved in the above cases are:

1.Apprentice Programme (On the job training)

2.Internship training (On the job training)
3.Vestibule training (Off the job training)

Question 20:
A company manufactures very sophisticated switch gears used in auto¬matic cars. For
this the company uses hi-tech machines. Most of the times the workers of the factory
remain idle because of lack of knowledge regarding the use of these hi-tech machines.
The frequent visits by the engineers and constant supervision of the foreman results
into high overhead charges. Explain the way by which this problem can be overcome.
Also state how this helps the employees.
Answer:
The problem faced by the firm can be solved by providing training to the employees
(factory worker in this case).
Benefits of training to employees:

1.Training increases satisfaction and morale of the employees.

2.Training makes the employees more efficient, hence chances of accidents are
reduced.
3. Training helps the employees to earn more due to improved performance.
4. Training helps in promotion and career growth due to improved skills and
knowledge.

Question 21:
Ashish Steel Makers’ has decided to include a team of dynamic managers in the
Company. For this they want to judge the pattern of interests of the potential managers.
After giving this test they want to further know how much the candidate is useful for
organisation. They decide to take another test which can measure the existing skills of
the candidates. Rajeev, an exceptional candidate, is given certain document which
contains information like job title, pay, allowances, responsibilities, etc. After the
employees join they are given a very good training. The Company doesn’t want to stop
at ‘training’ which is a job related process. They want to bring a concept which is a
career related process.

1.Which two type of selection tests are highlighted in the above case?
2.Which document is given to Rajeev?
3.Name one benefit that employees will have from training.
4.Which career related process is here referred to?

Answer:

1.The two types of selection tests highlighted in the above case are:
o Interest test. They want to judge the pattern of interests of the
potential managers.
o Trade test. Test which can measure the existing skills of the
candidates.
2.The document which is given to Rajeev is contract of
employment. Document which contains information like job title, pay,
allowances, responsibilities, etc.
3.One benefit that employees will have from training. It will help them give an
effective response to external business environment which is changing fast.
 4.The career related process which is referred to here is development. A
concept which is career related process.

Question 22:
Identify the concept of staffing highlighted here:

1. ABCD is a new organisation. All the employees are new and the management
has no idea about the nature, performance and attitude of the employees. The
organisation is unable to use promotion as a way of filling the upper posts or
transfer as a way of balancing the man power in different departments.
2.The process of selection and placement has got simplified in an MNC as the
employees which are already part of the organisation can be more easily
evaluated.
3.A company during the selection process relies heavily on a formal in-depth
conversation of the applying candidate. Information is sought and personality of
the applicant is judged.
4.An important psychological test conducted to know the level of a person’s ability
to learn and make decisions and judgments.
5.When an employee passes all the tests, clears the interview and is confirmed
after reference and background checks, he has to go through this stage. The
concerned manager’s decision is to be considered here as he will be
responsible for the performance of the new employee.
6.This source of recruitment is for requirement of unskilled workers at a short
notice. The agent involved here himself is the employee of the organisation and
is in direct contact with the labourers.
7.Government agencies acting as good source of recruitment. They provide both
skilled as well as unskilled job seekers. These agencies act as link between job
seekers and job providers.
8.This process helps an organisation get assessment of the number and types of
employees required for the performance of various jobs in order to achieve
organisational objectives. (ix) Raman who is a senior manager in a company
decides to judge the performance of the employees of his department. He
makes sure that in this step of staffing process he judges their past as well as
present performance. He asks his team of five members set for this purpose to
make standards on which the employees could be judged.

Answer:
The different concepts of staffing highlighted above are:

1.Limitations of internal sources of recruitment.

2.Merits of internal sources of recruitment.
3.Employment interview.
4.Intelligence tests.
5.Selection decision.
 6.Labour contractors.
7.Employment exchange.
8.Workload analysis.
9.Performance appraisal.

Question 23:
In a shoe manufacturing company a group of new recruits are being trained. They are
put under the guidance of a master worker Mr. Arun. Mr. Arun is guiding them to acquire
a higher level of skills. The training programme for the workers is supposed to last for
around four months.
Identify the training method discussed in the above para.
Answer:
Apprenticeship Training

Question 24:
Identify the type of training mentioned in the following case:
Navin is a newly recruited candidate in a company. Being new to the organisation he is
taken around the office premises by the HR Manager to familiarise him with the work
environment and the other members of the organisation. The basic idea behind is to
outline the basic overview of the business and its functioning and Navin’s role in the
environment.
Answer:
Induction/Orientation Training

Question 25:
Ravi who has three years of work experience in the shipping industry has recently
joined a new company. The new job is challenging and requires him to go through a
training programme offered by the company. The fourteen-day programme will help him
gain practical knowledge and skills related to his job.
Identify the type of training highlighted above.
Answer:
Internship Training
 Chapter 7: Directing
Question 1:
‘Classic Rocks’ is a pioneering advertisement making company. Mr. Anuj is a dynamic
manager who has recently joined the organisation. He receives complete support from
the management. There is proper infrastructure, planning mechanism and subordinate
support. He gives orders and starts the actual working of a new unit from the 1st of May.
His schedule becomes very hectic. The demanding work involves him almost
throughout the day. He is busy giving messages, talking to his subordinates or seniors,
etc. throughout the day. One day he meets his friend Vijay who is working at the lower
level management though he himself is a part of middle level management. He finds
that even Vijay is involved in communicating and supervising his employees throughout
the year though he works at the lower level management. Similar is the case with his
seniors working at the higher level management. He feels relaxed after knowing this
and continues his work with even more dedication.

1.Which function of management is highlighted in the above case?

2.Identify the features of this function of management highlighted in the above
case.

Answer:

1.The function of management which is highlighted in the above case is directing.

The features of directing highlighted in the above case are:

1.Directing initiates action. He gives orders and starts the actual working of a
new unit from the 1st of May.
2.Directing takes place at every level of management. He finds that even Vijay
is involved in communicating and supervising his employees throughout the
year though he works at the lower level management. Similar is the case with
his seniors working at the higher level of management.
3.Directing is a continuous process. He is busy giving messages, talking to his
subordinates or seniors, etc. throughout the day.

Question 2:
Ramesh who has recently received award of the most talented manager is very able.
He has helped the starting of various halted projects by guiding his subordinates and
removing their doubts through proper directing. This has helped the workers achieve
their targets on time. He knows that every member of the team is important for the
completion of a project. So he guides his team in such a manner that every single effort
of every single employee matters and is directed towards the achievement of objectives.
There is a lighter side to his personality also. He is very jovial. He cares about his team.
This has helped him bring cooperation and commitment among his team members thus
bringing a unique balance between activities and the group. However this has not
prevented him from having a keen vision of a leader. Whenever the subordinates resist
any change he tries to bring their cooperation by proper explanations and consistent
efforts. The top level management also sees a big role for him in the future.
Identify the importance of directing highlighted in the above case.
Answer:
The importance of directing highlighted in the above case are:

1.Directing helps in initiating action. He has helped the starting of various halted
projects by guiding his subordinates and removing their doubts through proper
directing.
2.Directing helps in integrating efforts. So he guides his team in such a manner
that every single effort of every single employee matters and is directed towards
the achievement of objectives.
3.Directing helps in bringing stability and balance in the organisation. This
has helped him bring cooperation and commitment among his team members
thus bringing a unique balance between activities and the group.
4.Directing helps in introducing changes. Whenever the subordinates have
resisted any change he has tried to bring their cooperation by proper
explanations and consistent efforts.

Question 3:
Subhash is a lower level manager. He stays at the shop floor. He oversees and guides
the workers, instructs them whenever required and ensures optimum utilisation of
resources so that the goals at the shop floor could be achieved. He is very hard
working. He tries to stay in touch with the workers on a regular basis. He has made a
weekly advice taking programme. This programme in which suggestions from workers
are taken is very important for creating a feeling of common group. He himself was a
worker for 15 years before he became a lower level manager. This is the reason why he
knows everything about the machines and situations on the shop floor. He gives
guidance to the workers as they do their job, tells them how to tackle the machines and
continuously improve their output. Workers are very friendly with him. He ensures that
the workers do their work properly and gives his approval or disapproval about their
work on a continuous basis. The workers respect him. He is acting as a role model to
them and has motivated them to work more and more by setting his own example. The
middle level management is thinking of giving Subhash a bigger role in future.
Which element of directing is displayed by Subhash in the above case?
Identify the importance of this element highlighted in the above case. Also identify the
lines.
Answer:
The element of directing displayed by Subhash is Supervision. He oversees and guides
the workers, instructs them whenever required and ensures optimum utilisation of
resources so that the goals at the shop floor could be achieved.
The importance of supervision highlighted in the above case:
 1.Supervision helps in achieving day to day contact with the workers. He tries
to stay in touch with the workers on a regular basis.
2.Supervision helps in achieving group unity. This programme in which
suggestions from workers are taken is very important for creating a feeling of
common group.
3.Supervision helps in providing on the job training to the workers. He gives
guidance to the workers as they do their job, tells them how to tackle the
machines and continuously improve their output.
4.Supervision helps in providing feedback to the workers. He ensures that the
workers do their work properly and gives his approval or disapproval about their
work on a continuous basis.
5.Supervision helps in influencing others. He is acting as a role model to them
and has motivated them to work more and more by setting his own example.

Question 4:
Identify the elements of directing in the following cases:

1.Arun who is the departmental head of his organisation decides to improve the
performance of his department. He decides to give some financial and non
financial incentives to his subordinates. He knows these incentives will satisfy
their needs. Therefore they will be stimulated to take actions from their side.
2.Rajeev is an HR manager leading a team of 12 people. He knows that the duties
and responsibilities of an HR employee are challenging. He knows in order to
make his team work with a positive frame of mind, he will have to set a personal
example as a role model and influence their behaviour and working style to
increase the output of his team.
3.Priya and Raghav are discussing about an element of directing. They say that
without this element no group or people can achieve a common understanding.
This element requires effort from both the sides and consumes 90% of the time
of a manager.
4.Rajesh who works at the shop floor is a lower level manager. He is heading a
team of 25 workers. He oversees and guides their efforts on a regular basis and
tries to maximize the output of his unit by timely giving them feedback. His team
has group unity and works with dedication to complete their targets on time.
5.Kavita is a CEO. She has recently replaced Mr. Anuj who was an unsuccessful
CEO. The profits of the company fell to a new low during his time. Kavita has a
lot of challenges in front of her, major being the lack of enthusiasm in the
organisation. In order to set things right she is trying to set a personal example
in front of the employees by working with dedication and putting 16 to 17 hours
in her job on a daily basis.
6.Akash works in a telecom company. He is leading a team of more than 100
employees. Daily he drops messages to them, convenes meeting and arranges
a suggestion box in his department. He listens to the advices and suggestions
of his subordinates very carefully and tries to implement them whereever
 possible. He is quite clear in his delivery of messages and conveys his thoughts
properly.

Answer:
The elements of directing identified in respective cases are:

1.Motivation
2.Leadership
3.Communication
4.Supervision
5.Leadership
6.Communication

Question 5:
Atul is a branch manager of a bank in a suburban area of a city. The employees of this
branch have not been able to do very well in the recent past. He is upset due to their
poor performance and decides to know the reason behind it. After some research he
finds out that each employee has some reason to join the bank. This reason if satisfied
could improve the performance of that person.
Which element of directing has been identified by Atul here?
Name one more interrelated concept.
Answer:
The concept of directing identified by Atul is motive.
One more interrelated concept is motivation.

Question 6:
Identify the steps of motivation process in the following cases:

1.Rajeev is concerned about his new job. He has got a good job but the problem is
distance. He is very far from his home and his family needs his support.
2.Sudeep got transferred to various departments and companies. He is a pass-out
from a good college. That is why he never had shortage of availability of jobs.
Finally he got settled in a department of operations. He is happy as he feels
here is where he can make difference to his company since his favourite
subject was operations management.
3.Ramesh is trying to get the job of his nature. He is applying to various
companies. He is searching for new options at concerned websites.
4.Joy has got a job of a branch manager in a company. He was offered a decent
salary of ?50,000 per month. However when he started receiving payment at
the end of the month he got only ?42,000. Now he considers this salary as
insufficient.
Answer:
The steps of motivation highlighted in the above cases respectively are:

1.Tension (Step 2)
2.Reduction of Tension (Step 6)
3.Search Behaviour (Step 4)
4.Unsatisfied need (Step 1)

Question 7:
‘Brightest Papers’ is a leading paper manufacturing company. The enthusiasm level of
employees in this organisation is very high. The management has applied a process of
directing where the financial and non financial needs of the employees are identified
and are satisfied accordingly. The result has been amazing for the organisation. The
output levels of the employees have touched a new high. Recently an award was also
given to the HR department of the organisation for doing its job in the best manner in
the industry. Two years back when the organisation had not applied this process the
employees were leaving the organisation and were not loyal but now the situation has
changed and there has been increase in the number of applicants for various jobs in the
company. The organisation believes that its best resource is the human. The idea is to
maximize the output of the human resources. There are many steps taken to increase
the input of the employees and for this the work environment is made interesting in
order to increase their regularity which has obviously increased the labour input during
the recent years. The company is now among the most inspiring organisations in the
industry.

1.Which element of directing has been applied by the management?

2.Which benefits of this element are highlighted in the above case?

Answer:

1.The element of directing applied by the management is motivation. The

management has applied a process of directing where the financial and non
financial needs of the employees are identified and are satisfied accordingly.
2.The benefits of Motivation highlighted in the above case are:
o Motivation helps in increasing the performance level of the
employees and the overall organisation. The output levels of the
employees have touched a new high.
o Motivation helps in reducing the employee turnover of the
company and thus helps the organisation in retaining
employees. Two years back when the organisation had not applied
this process the employees were leaving the
organisation and were not loyal but now the situation has changed and
 there has been increase in the number of applicants for various jobs in
the company.
3.Motivation helps in reducing absenteeism in the organisation. There are
many steps taken to increase the input of the employees and for this the work
environment is made interesting in order to increase their regularity which has
obviously increased the labour input during the recent years.

Question 8:
Manav wanted to bring some changes in his company. One of those changes was the
establishment of new software in the organisation. The software has the capability to
judge the performance of all the employees. Thus it makes them more accountable.
However, recently it so happened that the employees resisted Manav’s decision. After a
lot of thinking on the issue he decided to call a meeting to address their needs and
performance. He told them that with the installation of the new software their needs
would be fulfilled and the best performing employee would be rewarded. Thus he was
able to bring down the resistance level of the employees.

1.Which concept of directing is applied by Manav in the above case?

2.Which one benefit of this concept has been highlighted in the above case?

Answer:

1.Manav had applied motivation in the above case.

2.The benefit of motivation highlighted in the above case is that it is able to
introduce changes in the organisation by putting down the resistance of
the employees.

Question 9:
A company has a number of employees who don’t harbour good feelings for the
organisation. They don’t care whether the organisation is progressing or not. Some of
them are even having negative attitude towards the management. When a local
newspaper wanted to find out the reason for the declining productivity of the
organisation it was found that it was mainly due to the lack of any incentives in the
organisation. Employees were not awarded for increasing the output of the organisation.

1.What do you think needs to be done in such circumstances?

2.What could be the positive outcome of your step?

Answer:
 1.The organisation should apply the process of motivation here. They
should identify the needs of the employees and satisfy them. There should
be a proper reward/award system for the better performers.
2.By applying the process of motivation it can be expected that the neutral or
negative attitude of the employees will be turned into positive. This will
bring progress for the organisation.

Question 10:
Identify the Maslow’s needs applicable in the following cases of organisational set up:

1.Virendra works in an organisation. He is part of the organisation for last 20 years.

During all these years inspite of his best performance in the organisation he
hasn’t yet reached the post of vice president.
2.Vandana works in a software firm. She goes to office which is situated at a
distance of 20 kms from her house. Her husband earns very well and is a pilot
with a leading
Airline. Though she belongs to a good earning family yet she has decided to
keep on going to her job which she feels helps her gain acceptance in her
social circle.
3.Kavita has recently passed out from a decent MBA college with her major in
marketing. A lot of money of her parents has been spent for paying her
education fee. Now she has applied for a job in a company of reputation. Her
main concern is good salary which will give her financial security.
4.Mehak has been an outstanding student throughout her life. She did her
graduation from a very good college. When the placement started she decided
to withdraw her name. A month later she started her own NGO which provided
education to poor children. Her NGO sets targets of educating a definite
number of poor students and she feels if she is able to achieve a goal of
teaching 5,000 students by the end of 5 years she will be very successful.

Answer:

1.Esteem need.
2.Affiliation need.
3.Basic physiological need.
4.Self actualisation need.
5.Safety/security need.

Question 11:
An organisation has the policy of providing incentives in the form of monetary terms. It
knows that to improve the performance of the employees their needs must be satisfied.
The company has come up with a plan of increasing wages of workers who perform
beyond a definite level. By the end of the year the company has some other plans. It
wants to give an incentive to the workers over and above the wages. The workers have
started putting more efforts. The company has announced that after the month of March
it will be giving shares to the exceptionally performing workers. Company is hoping to
get a good response from the employees through this announcement in terms of better
performance and contribution.

1.Which type of incentive is highlighted in the above case?

2.Identify the various types of these incentives highlighted in the above case.

Answer:

1.The type of incentive highlighted in the above case is financial incentive. The
Company is providing incentives in the form of monetary terms.
2.The various types of incentives highlighted in the above case are:
o Productivity linked wage incentive. The Company has come up with
a plan of giving more wages to workers who perform beyond a definite
level.
o Bonus. It wants to give an incentive to the workers over and above the
wages.
o Profit sharing. The Company has announced that after the month of
March it will be giving shares to the exceptional employees.

Question 12:
Rajesh works in a software company. This company is growing by leaps and bounds.
The employees are happy as they get timely salaries, their basic incentive, ey are also
supported by regular increments in their salaries every year. The HR department these
days is busy calculating the various expenditures the company will have to incur in
paying the employees. The company however has decided to increase the fringe
benefits like car allowance, foreign trips, etc. With this step the company will enter into
the list of few chosen companies to do so. For the elderly members of the organisation
the company has decided to include gratuity in the list of benefits along with already
given benefits like pension and provident fund. However there are a few more steps
taken by the company in the direction of providing financial incentives which can be
considered truly unique. It is about providing company’s shares at price lower than the
market price. All these steps have lifted the morale of the employees.
Which financial incentives have been highlighted in the above case?
Answer:
The financial incentives highlighted in the above case are:

1.Pay and allowances. The employees are happy as they timely get their salaries,
their basic incentive, and they are also supported by regular increments in their
salaries every year. Here the Company is also giving dearness allowance which
is a yearly increase in the salary overcoming the impact of inflationary forces.
 2.Perquisites. The Company however has decided to increase the fringe benefits
like car allowance, foreign trips, etc. One more thing one needs to understand is
the difference between perquisites and allowances. Where allowances are paid
directly in the form of money, perquisites are the benefits given which have their
own monetary value, for example a trip to Malaysia funded by the Company is a
fringe benefit or a perquisite.
3.Retirement benefits. For the elderly members of the organisation the company
has decided to include gratuity in the list of benefits along with already given
benefits like pension and provident fund.
4.Co-partnership/stock option. It is about providing company’s shares at a price
lower than the market price. All these steps have lifted the morale of the
employees.

Question 13:
In a renowned hospital having 300 beds, the CEO of the hospital
congratulates the exceptionally performing employees by meeting in person.
Sometimes the name of the employee of the month is displayed on the notice board at
the main entrance along with his/her photograph. Recently the company went a step
ahead and distributed T-shirts to the employees who have been among the top 3
performers. On the Employee Day every year employees who contribute a lot are either
rewarded or awarded.

1.In the above case which type of incentive has been used by the company to
improve employee performance?
2.Which type of incentive is this?
3.Also give the definition of this type of incentive.

Answer:

1.The type of incentive used to improve performance in the above case

is Employee Recognition.
2.Employee Recognition is a non-financial incentive.
3.Non-financial incentives are the incentives which are given to improve the
psychological and emotional satisfaction of an employee. So the needs of the
employees which are not satisfied by monetary means are satisfied by non-
financial incentives.

Question 14:
‘Hats Off’ is an apparel making company. It has recently decided to make the job
environment better by redefining the workplace for the employees by designing jobs
having greater variety of content. This has definitely increased the interest of employees
in their work. This step of the Company has earned a favourite mentioning in a national
newspaper. The promotion policy of the Company has now been made more effective
by allowing employees to grow to the higher levels. Many of the employees had earlier
complained of fear of getting fired. The Company has clarified its stance on this and told
them not to worry by assuring them permanency after crossing the ad hoc period of six
months. With everything going right for the organisation the top management has
started devoting a lot of time on special features of the internal environment which will
distinguish the organisation from other companies in the industry. The employees know
that working in this organisation will only add to their good track record. The Company
assures the employees a higher ranking in the organisational set up, provided one
works hard, with authority, rewards, recognition and better perquisites. With such an
effort, the organisation is geared to touch new heights.
Which non-financial incentives have been highlighted in the above case?
Answer:
The various non-financial incentives highlighted in the above case are:

1.Job enrichment. It has recently decided to make the job environment better by
redefining the workplace for the employees by designing jobs having greater
variety of content.
2.Career advancement opportunity. The promotion policy of the Company has
now been made more effective by allowing employees to grow to the higher
levels.
3.Job security. The Company has clarified its stance on this and told them not to
worry by assuring them permanency after crossing the ad hoc period of six
months.
4.Organisational climate. With everything going right for the organisation the top
management has started devoting a lot of time on special features of the
internal environ¬ment which will distinguish the organisation from other
companies in the industry.
5.Status. The Company assures the employees a higher ranking in the
organisational set up, provided one works hard, with authority, rewards,
recognition and better perquisites.

Question 15:
‘Alfa Ltd/ was dealing in renewable energy. To get the business, the team leader and
his team used to travel to different states to give presentation to their clients. As per the
policy of the company, the leader used to travel by air, whereas his team travelled by
road / train. It was not only time consuming but also at time forced female team
members to travel alone.
As a result, the subordinates were not acting in a desired manner to achieve
organizational goals. The CEO came to know about it. He called the team leader,
discussed the matter with him and decided to change the travel policy of the company.
It was decided that all the members including the leader would travel together in future
and would usefully utilize the travelling time in discussion with the subordinates about
presentation to be given to the clients. This made a positive impact and every member
of the team started acting in a manner as desired by the team leader.
State the features of the element of the function of management used by the CEO.
Answer:
The element of the function of management used by the CEO in the above’ case
is ‘motivation’.
Following are the features of motivation:

1.Motivation is an internal feeling. Human behaviour is influenced by internal

factors like aspirations, drives, usage, needs, etc.
2.Motivation produces goal directed behaviour. For example, pay of an
employee may be increased to improve his/her performance.
3.Motivation can either be positive or negative. Positive motivation provides
rewards like higher pay, promotion, recognition, etc. Negative motivation
includes the use of negative means like punishments, penalties, threat, etc.
4.Motivation is a complex process as human beings are different from each
other. They are heterogeneous in nature. Any particular type of motivation may
not have the same effect on all the employees. Motivation varies from one
individual to another.

Question 16:
Identify the non-financial incentives in the following cases:

1.A leading software company has set up a suggestion box system in order to
involve its employees. This exercise is allowed only to the members of the
organisation. The result is an increased involvement of the employees in issues
related to the organisation.
2.A company has given more autonomy to its employees with an assurance of
greater responsibility for them. They will also be involved in the decision making
process of the organisation. This has made the employees feel that their work is
very important to them. The positive outcome of this feeling is the tapping of
skills and talents of the employees to a higher degree which is benefitting the
organisation.
3.‘Step up’ is a leading soft drinks maker. They have made up arrangements at the
work place for the employees to make their work more meaningful. They will be
provided opportunity for personal growth. The outcome has been an increase in
motivation for the employees at the place of work itself.
4.An automobile company is making arrangements for appropriate skill
development programmes. They have chalked out a sound promotion policy to
give more growth opportunities to the employees.

Answer:
The non-financial incentives highlighted in the above cases are:

1.Employee participation.
2.Employee empowerment.
3.Job enrichment.
 4.Career advancement opportunity.

Question 17:
Smita had been working as an assistant manager with ‘Johnson Enterprises’ for the last
ten years. She was very popular amongst her colleagues because of her commitment
and dedication towards the work. When the manager senior to her retired, all her
colleagues thought that now Smita would be promoted. But to everyone’s surprise the
vacant post was filled by an outsider, Mrs. Rita. Smita felt demoralised and her
performance started declining. She would abstain herself often and could not meet her
targets.
Mrs. Rita was a good leader, who would not only instruct her subordinates but would
also guide and inspire them. She noticed Smita’s behaviour and felt that her
performance could be improved. She started involving Smita in decision making-issues
related to the organisation and made her a part of high level joint-management
committee. Smita was now punctual in office and her performance started improving.

1.Identify the function of management being performed by Rita.

2.Name the element of the above function of management which helped Rita to
improve Smita’s behaviour.
3.State any three features of the element identified in (ii) above.

Answer:

1.Function of Management—Directing
2.Motivation
3.Features of Motivation:
o Motivation is an internal feeling that can arise as an urge, drive, desire,
aspiration or need.
o It produces goal directed behaviour.
o Motivation can be both positive and negative.

Question 18:
Shilpa is a senior middle level manager. She is a departmental head of marketing in a
very progressive company. She is very good at conveying what she means to the
subordinates, and not just that, she goes beyond that by staying a very patient listener.
Her rise in the organisation has been very fast. She has led her team successfully on
several occasions. The reason for her exceptional success has been her ability to
understand the needs of her team and getting extra work done by satisfying them. Since
her college days her level of courage is high. She has the ability to grab opportunities
and use them to her best ability. People of other departments like finance, operations,
etc. have also been a part of her fan club. They say that she knows a lot about her core
area and this has made her irreplaceable in the department. Everybody hopes that she
is going to be a part of the higher management one day as her company wants to
benefit maximum by tapping her potential.
 1.Which concept of directing has been highlighted in the above case?
2.Identify the types of this concept in the above case.

Answer:

1.The concept of directing highlighted in the above case is ‘qualities of a good

leader’.
2.The types of ‘qualities of a good leader’ highlighted in the above case are:
o Communication skills. She is very good at conveying what she
means to the subordinates, and not just that, she goes beyond that by
staying a very patient listener.
o Motivation skills. The reason for her exceptional success has been
her ability to understand the needs of her team and getting extra work
done by satisfying them.
o Initiative. She has the ability to grab opportunities and use them to her
best ability.
o Knowledge. They say without doubt that she knows a lot about her
core area and this has made her irreplaceable in the department.

Question 19:
A group in a well established company is going through the process of exchange of
concepts and ideas on different issues connected with the proper
functioning of different operations in the company. The whole group has arrived at a
common understanding about the time, delivery and arrangement of schedules and
machines.
Identify the process indicated in the above case.
Answer:
The process indicated in the above case is communication.

Question 20:
Identify in the following cases various elements of communication which are highlighted:

1.A department ‘X’ has sent an encoded message to department ‘Y’ through
internet. What is the role of internet here?
2.Atul is making gestures so that he can send a message to Raman. What is Atul
doing here?
3.Raman is trying to understand the message sent by Atul by reading his gestures.
What is Raman doing here?
4.Ramesh picks up his phone and finds a message on it. He reads the message
carefully. What is the role of Ramesh here?
5.Mr. Suraj who is a senior manager is informing his team for convention, a day
later, by giving a common message of timing and venue to all. What is the role
of Mr. Suraj here?
 6.Ramit tried several times but his mom is unable to listen to what he is saying. It’s
all because of a faulty telephone connection. What will you call this faulty
connection here?

Answer:

1.Media
2.Encoding
3.Decoding
4.Receiver
5.Sender
6.Noise

Question 21:
Arun is working in multinational company in Gurgaon. He was running temperature for
the last many days. When his blood was tested, he was found positive for dengue with a
very low platelet count. Therefore, he was admitted in the hospital and a blood
transfusion was advised by the doctors. One of his colleagues sent a text message
about it to his immediate superior ‘Mr. Narain’. ‘Mr. Narain’ in turn sent a text message
to the employees of the organization requesting them to donate blood for Arun. When
the General Manager came to know about it, he ordered for fumigation in the company
premises and cleanliness of the surroundings.

1.From the above para quote lines that indicate formal and informal
communication.
2.State any two features of informal communication.
3.Identify any two values that are being communicated to the society in the above
case.

Answer:

1.(i) Informal communication. ‘One of his colleagues sent a text message about it
to his
immediate superior ‘Mr. Narain’.’
Or “Mr. Narain’ in turn sent a text message to the employees of the organization
requesting them to donate blood for Arun.’
(ii) Formal communication. ‘When the General Manager came to know about
it, he ordered for fumigation in the company premises and cleanliness of the
surroundings.’
2.Two features of informal communication:
o Informal communication arises out of the social needs of the
employees to exchange their ideas and views.
o It does not follow the formal or official lines of communication.
 3.Two values being communicated are:
o Concern and sympathy for employees.
o Cleanliness and hygiene of the surroundings.
o Concern for safety of human beings.

Question 22:
Rajeev started working in an MNC. He was very devoted towards his job. However,
whenever he used to communicate with his subordinates they were unable arstand him.
The reason behind this problem was that he himself was unsure about the concept he
used to explain to the subordinates. This problem was taking place on a daily basis.
One day he got an order form his senior to fly to Goa for a project meeting. There he
started explaining his concept to others but there were many aspects which the team of
Goa wanted to explain to him. He was more concerned about speaking than listening.
This resulted in the failure of the meeting which was very important. When Rajeev
returned back to his home town he was sad. In this hopelessness he forgot to review
the instructions he had given to his subordinates about a very important programme to
be organized in his home town. Definitely Rajeev is facing problems related with
communication effectiveness.
What measures would you suggest to Rajeev so that he could improve his
communication effectiveness?
Answer:
The measures we would suggest him to adopt to improve his communication
effectiveness are:

1.Rajeev should clarify his ideas before communication. The reason behind
this problem was that he himself was unsure about the concept he used to
explain to the subordinates.
2.Rajeev should become a good listener. He was more concerned about
speaking than listening.
3.He should try to follow up communications. He forgot to review the
instructions he had given to his subordinates about a very important programme
to be organized in his home town.

Question 23:
A strike took place in a cloth manufacturing company. The workers were demanding a
few things which the management knew were impossible for them to agree to. Nikita
who was an MBA pass out from a very high rated college was given the responsibility to
negotiate with the workers on the behalf of the top management. However when Nikita
communicated her ideas to the workers, they were not able to understand as her
language was too complex and many of the words she used were generally understood
only by graduates. Most of the workers had gone to school only up to 8th standard.
What one measure would you suggest her to improve her communication
effectiveness?
Answer:
She should communicate according to the needs of the receiver. When Nikita
communicated her ideas to the workers, they were not able to understand as her
language was too complex and many of the words she used were generally understood
only by graduates.

Question 24:
Mr. Sikka is an exceptional team leader. He knows that for a team to achieve its goals
and progress nicely communicative effectiveness is required. He always maintains what
he says, focuses on future goals of the organisation and never goes against his
commitments. You can find him most of the times busy communicating with his
superiors or subordinates. When he once delivers the message he always checks
whether his team is able to understand the concept he is trying to communicate and he
does it through proper questioning. He has a very pleasing personality. Whenever he
delivers a speech he focuses on his language, his voice and the sentiments of his
listeners. He is a real team leader. He gives members of his team opportunities to
express themselves. Whenever he is about to make a speech he consults his team
members for developing a plan of communication by their participation and involvement.
He always says that whatever is useless should be rejected and whatever is useful
should be accepted. His purpose of speaking is to help others. He believes that a
speech should be such which takes into consideration interests and needs of the
listeners. There is a lot one can learn from Mr. Sikka’s personality.
In the above case which measures of communicative effectiveness have been adopted
by Mr. Sikka? Identify them.
Answer:
The measures of communicative effectiveness which have been adopted by Mr.
Sikka are:

1.He communicates for present as well as future. He always maintains what he

says, focuses on future goals of the organisation and never goes against his
commitments.
2.After communication he ensures proper feedback. When he once delivers
the message he always checks whether his team is able to understand the
concept he is trying to communicate and he does it through proper questioning.
3.He consults others before communicating. Whenever he is about to make a
speech he consults his team members for developing a plan of communication
by their participation and involvement.
4.He conveys things of help and value to his listeners. He always says that
whatever is useless should be rejected and whatever is useful should be
accepted. His purpose of speaking is to help others.
5.He is always aware of the language, tone and content of the message. He
believes that a speech should be such which takes into consideration interests
and needs of the listeners.

Question 25:
In the following cases identify the type of barrier:
1.Suhasini is a higher level manager. She is concerned about the conditions of
workers in her organisation. Every year she sends a message of greetings and
help to them. She also invites suggestions from their side but there is no
response. One day when she personally went to meet them she found that they
were against her and could not understand her messages. She now realised
that It was due to the presence of various levels and employees that the
message had to go through that it used to get altered.
2.In an organisation having many branches in the city the employees are least
concerned about making any communication from their side with their
immediate bosses. Many times when employees came out with something
useful for the organisation giving it profit they were not given proper incentives.
The result is that now they have become demotivated.
3.Suresh is a very well balanced personality. He is the head of marketing
department.
However he is unable to discuss anything related to his project with one of the
employees named Ramesh. The reason is the lack of faith he has in him. This
has resulted in lack of understanding between the two of them.
4.Mr. Aditya who was the divisional head of a bank told one of his subordinates to
collect cash from the branch. The employee was new so he took the whole
cash to his home to bring it next day to the branch. When Mr. Aditya came to
know about it and was very angry. He actually wanted him to deposit the cash
in the other branch on the same day which usually happened. Since the
employee was new he was unaware of this.
5.An organisation has employees from different countries. They speak different
languages. Once the management decided to draft the message to
congratulate the employees on the New Year in their native languages. For this
they had to translate the same message in different languages. On the 4th of
Jan there was a strike by people belonging to a particular country showing
resentment on the wrong language used in the greetings.
6.In an organisation a message passes from the top management through various
levels before it reaches the point of action. Due to the oral transmission of
message an important portion is generally lost due to forgetfulness and inability
to retain.
7.Rajeshwar is unable to talk to his boss because of his seniority. This has led to a
psychological distance between the two of them. The fault is not entirely
Rajeshwar’s. During the initial days of their interaction his boss used to talk with
a lot of authority and maintained distance. Now Rajesh is unable to express
himself in front of him freely.
8.Reema is not at all prepared to interact with her boss. The reason is she feels
that if she will talk more her boss may give her more work. She always tries to
avoid her boss.
9.Mr. Verma has a very limited vocabulary. He sometimes uses words which have
other meanings also. His subordinates make full use of his this lack of
knowledge and make fun of him. This also sometimes creates an environment
of misunderstanding about the message delivered.
10. Once Ravi was trying to give an explanation to Sanjay. Sanjay was not grasping
his message. When he asked Sanjay about the message he gave to hint he
could not explain. As a matter of fact Sanjay’s mind was preoccupied with some
other thoughts.
11. A student named Sanjay has some problems in Maths. The maths teacher
doesn’t take his problems and quite often ignores his queries. He decides to put
his problem in front of the principal. The vice principal tells him to write an
application. He tells her he is having his exam on the next day. However she
says he will have to take an appointment with the principal as she is very busy.
Though Sanjay needs to meet the principal for a minute or two yet his problem
remains unanswered.
12. Tanya is working on a project at an overseas location under a world renowned
civil engineer. She is among the five people who are in the core team of the
project. The world renowned engineer, Mr. Talwar, who is also her boss rarely,
seeks an advice from her. He thinks that Tanya lacks experience and needs to
learn more.
13. A senior manager who is of European origin gives a speech in an Asian country
in a factory. He intended to give a positive message but what the employees
understood was a negative interpretation. Simply because the language spoken
by him was not in his native language he used some words which had different
meanings than what he had intended.
14. In a board meeting where all the board members were sitting and having
discussion
one of the members said something. He continued to speak but before he could
complete what he had to say the members due to preconceived notions derived
some other meaning and decided to walk out of the room.
15. ‘Sharp Looks’ is a multinational camera making company. Though the company
is of very large size yet it follows a very centralized approach of administration.
The employees are kept away from discussions and decisions related to the
strategic aspects of the business. This has led to an obstructed flow of
communication in the organisation.
16. Prinicipal of a very famous school is known for talking very less with his staff.
Even on occasions of celebration he keeps himself very reserved and talks very
less. This is due to his thinking that mixing with his subordinates may affect the
discipline of the school.
17. Sudeep who was the branch head of a bank started a suggestion box system.
Similarly a complaint box was made in which people could drop their complaints
without mentioning their names. A meeting used to take place every week on
Saturday for ensuring proper communication among the employees so that they
could make their points and suggestions openly. A few weeks ago Sudeep was
transferred to some different branch. A new manager who is not dynamic and
capable like Sudeep is unable to use the system which was designed by
Sudeep like weekly meeting, suggestion box, etc. This has led to creation of
gap in the communication in the branch between the manager and other
employees.
Answer:
Type of Communication barrier in the above cases are:

1.Organisational barrier (Due to the complexity in the organisational structure).

2.Personal barrier (Due to lack of proper incentives).
3.Psychological barrier (Due to distrust between the two of them).
4.Semantic barrier (Due to unclarified assumptions).
5.Semantic barrier (Due to faulty translations).
6.Psychological barrier (Due to loss by transmission and poor retention).
7.Organisation barrier (Due to status).
8.Personal barrier (Due to unwillingness to communicate).
9.Semantic barrier (Due to symbols with different meanings).
10. Psychological barrier (Premature Evaluation).
11. Organisational barrier (Due to rules and regulations).
12. Personal barrier (Due to lack of confidence of superior on his subordinate).
13. Semantic barrier (Due to badly expressed message).
14. Psychological barrier (Due to premature evaluation).
15. Organisational barrier (Due to organisational policy).
16. Personal barrier (Due to fear of challenge to authority).
17. Organisational barrier (Due to improper use of organisational facilities like
meeting, suggestion box, etc.).

Question 26:
Neeraj, a sales representative of ‘Omida Ltd.’ has changed seven jobs in the last one
year. He is a hard working person but is not able to finalise deals with the customers
due to his inadequate vocabulary and omission of needed words. Sometimes he uses
wrong words because of which intended meaning is not conveyed. All this created a
misunderstanding between him and his clients.

1.Identify the communication barrier discussed above.

2.State the category of this communication barrier.
3.Explain any other communication barrier of the same category.

Answer:

1.Communication barrier—Badly expressed message

2.Semantic barrier—Such barriers are concerned with problems and obstructions
in the process of coding and decoding of a message into words and expression.
3.Technical Jargon. These are words used by experts and specialists and are
difficult to understand by people belonging to some other field. Use of such
words can act as a barrier to effective communication.
Question 27:
Jaideep recently joined as the Managing Director of ‘Tivori Ltd/, an apparel designing
company. He observed that the company had a number of experienced fashion
designers on its payroll. They regularly offered useful suggestions which were neither
appreciated nor rewarded by the company. Instead the company outsourced its
services to some renowned fashion designers and paid them a good compensation for
their services. Because of this the employees felt disheartened and stopped giving
useful suggestions.

1.Identify the communiction barrier discussed above .

2.State the category of this communication barrier.
3.Explain any other communication barrier of the same category.

Answer:

1.Communication barrier—Lack of proper incentives.

2.Personal barrier—in this type of barrier, personal factors of both sender and
receiver may exert influence on effective communication.
3.Fear of challenge to authority. According to this personal barrier of
communication, if a superior feels that a particular communication can have a
negative impact on his authority, he may avoid or suppress such
communication.

Question 28:
Mr. Shubhendu Bose is the owner of ‘Bikmac Enterprises’ carrying on the business of
manufacturing various kinds of biscuits. There was a lot of discontentment in the
organization and the targets were not being met. He asked his son, Naval, who had
recently completed his MBA, to find out the reason.
Naval found that all decision making of the enterprise were in the hands of his father.
His father didn’t believe in his employees. As a result both the employer and the
employees were not able to understand each others’ messages in the same sense.
Thus, the employees were not happy and targets were not met.

1.Identify any fivo communication barriers because of which Bikmac Enterprises

was not able to achieve its target.
2.State one more barrier each of the types identified in (a) above.

Answer:
 1.(i) Organizational barrier: Organizational policy. If the organizations policy does
not support free flow of communication, then it hampers the flow of
communication.
(ii) Psychological barrier: Distrust and lack of confidence on the staff leads to
a communication gap in an organization.
2.Other barriers of each identified type:
o Organizational barrier: Rules and regulations —Rigid rules and
regulations may delay communication.
o Psychological barrier: Lack of attention—i.e., non-listening of the
message may act as a major psychological barrier.

Question 29:
Mr. Fernandes is the owner of Unibie Enterprise, carrying on the business of
manufacturing electrical appliances. There is a lot of discontentment in the organization
and targets are not being met. He asked his son, Michel, who has recently completed
his MBA, to find out the reason.
Michel found that all decision making of the enterprise were in the hands of his father.
Moreover, his

father did not have confidence in the competency of the employees. Thus the
employees were not happy.
(a) Identify any tivo communication barriers because of which ‘Unibie Enterprise’ was
not able to achieve its target.
(b) State one more barrier each of the types identified in part (a) above.
Answer:
Two communication barriers:

1.Organizational barrier. Organization policy.

2.Personal barrier. Lack of confidence of superior on his subordinates.

One more barrier of each type:

1.Organizational barrier. Rules and regulations—Rigid rules and regulations may

delay communication.
2.Personal barrier. Unwillingness to communicate—Unwillingness to
communicate on the part of the subordinates may arise if they perceive that the
communication may adversely affect their interests.

Question 30:
Identify the type of leadership displayed in the following cases:
 1.Mr. Umang Patel is the CEO of a leading software company. He is least
concerned about the managerial development of his subordinates. The
communication flows only from top to bottom in his organisation.
2.Ravish is the head of marketing department of his company. Recently he
organised a series of meetings to know the suggestions of his team members
on various issues. His subordinates appreciate his habit of consulting his team
before he takes any major decisions.

Answer:

1.Autocratic/ Authoritarian leadership style

2.Democratic leadership style

Question 31:
Manoj is a manager in a company engaged in production of electrical appliances. He
has been on this position for quite a long time. He is liked by his subordinates as he
encourages their participation whenever he takes an important decision. Being an
experienced manager he believes that only money is not sufficient to motivate the
employees. Therefore, he uses the following non-financial incentives to motivate the
employees:

1.Manoj has set up a suggestion box system in order to involve his subordinates in
decision-making. This has resulted in an increased involvement of the
employees in issues related to the organisation.
2.Manoj has given more autonomy to the employees working under him with an
assurance of greater responsibility from them. Since workers take part in the
process of decision-making hence they feel that their job is important.
3.Manoj has made arrangements at the work place for the employees to make their
work more meaningful. The outcome has been an increase in motivation for the
employees at the place of work itself.
4.Manoj often makes arrangements for appropriate skill development programmes.
He has chalked out a sound promotion policy to give more growth opportunities
to the employees:
o Identify and explain the leadership style followed by Manoj.
o Also identify the various non-financial incentives used by Manoj to
motivate the employees.

Answer:

1.The leadership style followed by Manoj is participative or democratic. Under such

a leadership style a leader develops action plans and makes decisions in
consultation with the subordinates. He encourages participation of workers in
decision-making process.
 2.Following are the non-financial incentives used by Manoj to motivate the
employees:
o Employee participation
o Employee empowerment
o Job enrichment
o advancement opportunity.

Question 32:
Anshul is a Marketing Manager in a firm engaged in production of eatables like chips,
biscuits, namkeens etc. He handles a fairly large number of sales executives on daily
basis. He gives high degree of freedom to his subordinates so that they can formulate
their own objectives and ways to achieve them. He only supports them and provides
them the needed information to complete the assigned task. Anshul does not believe in
the use of powder unless it is absolutely essential to get the things done through his
subordinates. Identify the leadership style followed by Anshul in the above case.
Answer:
Laissez faire or Free rein leadership style

Question 33:
Umang Gupta is the Managing Director of Denver Ltd. The company had established a
good name for itself and had been doing well. It was known for timely completion of
orders. The Production Manager, Ms. Kanta was efficiently handling the processing of
orders and had a team of fourteen motivated employees working under her. Everything
was going on well. Unfortunately she met with an accident. Umang knew that in the
absence of Ms. Kanta, the company may not be able to meet the deadlines. He also
knew that not meeting the deadlines may lead to customer dissatisfaction with the risk
of loss of business and goodwill. So, he had a meeting with his employees in which
accurate and speedy processing of orders was planned. Everybody agreed to work as a
team because the behaviour of Umang Gupta was positive towards the employees of
the organisation. Hence everyone put in extra time and efforts and the targets were met
on time.
Not only this, Umang visited Ms. Kanta and advised her to take sufficient rest.

1.(a) Identify the leadership style of Umang Gupta and draw a diagram depicting
the style,
2.State any two values highlighted by the behaviour of Umang Gupta.

Answer:
 1.Participative/Democratic Leadership style is being following Umang Gupta:
In the given diagram A is the leader and B, C, D and E are subordinates

2.Two values highlighted by the behaviour of Umang:

o Umang displayed team spirit and showed good behaviour towards his
employees.
o Compassion and care for his employees and their well-being.

Question 34:
Pramod was a supervisor at ‘Annapurna Aata’ factory. The factory was producing 200
quintals of aata every day. His job was to make sure that the work goes on smoothly
and there was no interruption in production. He was a good leader who would give
orders only after consulting his subordinates and work out the policies with the
acceptance of the group.
Identify and describe the leadership style being adopted by Pramod.
Answer:

Participative or Democratic leadership style is being followed by Pramod.

In such a style of leadership a leader consults the group and works out the policies with
the acceptance of the group. Participation of employees in decision making is the main
feature of such a leadership style. The leader invites opinions and suggestions from the
employees which increases their morale. It aims at improving the attitude of the
employees towards their jobs as well as the organisation.
Using this style of leadership is of mutual benefit as it allows subordinates to become
part of the team and helps leaders make better decisions.
 Chapter 8: Controlling
Question 1.
Gagan is trying to apply a function of management in his department. First he lets his
team perform according to their best potential. Then in a meeting he calls ody and asks
his team to check what they have performed. One day it was found that the total
number of units produced were 20 less than the set target. It was decided that no
worker will go home unless and until this gap of 20 units is overcome.

1.Which function of management is being performed by Gagan and his team?

2.What is ’20’ in the above case?
3.At which stage of management do you think the target was set? What is its signi-
ficance now?

Answer:

1.In the above case the function performed by Gagan and his team is controlling.
2.’20’ in the above case is deviation. Gap between actual performance and set
standards.
3.The target was set at the planning stage of management. The significance of
planning is that it sets standards in the form of targets so that controlling could
be done by minimizing deviations.

Question 2.
Saurabh is working in an MNC. He has created an atmosphere of proper controlling in
his department. In order to do so he keeps himself aware about any dishonest
behaviour and takes a stern action immediately. Recently he has installed CCTV
cameras to keep vigil on the employees.

1.In the above case which importance of controlling has been implemented by
Saurabh?
2.Name one more importance of controlling other than the above highlighted.
3.Can you suggest one more way by which Saurabh could have implemented
controlling?

Answer:

1.The importance of controlling implemented in the above case by Saurabh is:

Controlling ensures proper order and discipline in the organisation.
2.One more importance of controlling. Controlling helps in making efficient use of
resources.
 3.Saurabh could have implemented controlling by issuing balance score card to
every employee. In this way could check their performance and contribution to
the organisation on a daily basis.

Question 3.
Savita has been assigned the job of quantity controller. She knows this is a tough job
but she also realises the importance of it. Her daily routine is to send alarm to the
manufacturing department about the deviations in the number of units produced so that
the target of the day could be achieved. This helps the whole department to focus
towards its main plan of action. However one day she realises that the number of units
which are to be produced is 500 which is very high and creates chaos at the shop floor.
She discusses it with the management and the target is reduced to 450. This has
helped the manufacturing department in maintaining quality of the work done. There are
10 workers at the shop floor where Savita does inspection. She divided the task into 45
units for each worker so that by the end of the day the target of the department is
completed.

1.Which benefits of controlling have been highlighted in the above case?

2.Name one department where controlling should be applied in proper coordination
with the manufacturing department for proper quality control of the
manufactured products.

Answer:

1.The benefits of controlling highlighted in the above case are:

o Controlling helps in accomplishing organisational goals. Her daily
routine is to send alarm to the manufacturing department about the
deviations in the number of units produced so that the target of the day
could be achieved.
o Controlling helps in judging accuracy of set standards. However
one day she realises that the number of units which are to be produced
is 500 which is very high and creates chaos at the shop floor, she
discusses it with the management and the target is reduced to 450.
o Controlling helps in facilitating coordination in action. She has
divided the task into 45 units for each worker so that by the end of the
day the target of the department is completed.
2.One department where controlling should be applied in proper coordination with
the manufacturing department for proper quality control of the manufactured
products is purchase department. Unless and until input is good output can
never be good. For high quality manufactured product the raw material should
be of high quality and this is the area of concern of the purchase department.

Question 4.
Parasmani Ship Builders is a renowned ship manufacturing company. The company is
doing well but the employees keep on complaining as they say there are no standards
to judge the state of mind of the employees, their motivation and job satisfaction levels.
The HR department is trying to see to the problems which have recently occurred with
the employees. In other areas however company has set some standards and is trying
to effect the control mechanism but the company finds all such efforts expensive. All this
has not been so easy. Employees in other departments like manufacturing, purchase,
marketing, etc. have time and again resisted to the installation of computer monitoring
systems and CCTVs. They say that it is against their freedom. Despite all these great
efforts made by the company it had to face losses last year. Even though all the control
mechanisms are in place there is an entry of competitors with better technology. This
has given some bad time to the company despite its alertness in putting proper
controlling in execution.

1.Which concept of management has been highlighted in the above case?

2.Identify the different types of this concept of management highlighted in. the
above case.

Answer:

1.The concept of management which is highlighted in the above case is ‘limitations

of controlling’.
2.The different limitations of controlling highlighted in the above case are:
o It is difficult to set quantitative standards when it comes to controlling.
The company is doing well but the employees keep on complaining as
they say there are no standards to judge the state of mind of the
employees, their motivation and job satisfaction levels.
o Controlling is costly. In other areas however company has set some
standards and is trying to effect the control mechanism but the
company finds all such efforts expensive.
o Controlling has to face resistance from employees. Employees in other
departments
like manufacturing, purchase, marketing, etc. have time and again
resisted to the installation of computer monitoring systems and CCTVs.
.
o An organisation has little control on external factors. Even though all
the control mechanisms are in place there is entry of competitors with
better technology.

Question 5.
Adarsh is trying to reduce wastage of resources in his company. He is trying to do it in
the best possible manner. He has set standards for performance of different types of
activities and is doing his level best to perform according to these set standards to
minimise wastage of resources. Things are not going to be over for him as he will have
to look into other aspects too. He has set up a good monitoring system which helps him
know how to employees ate performing according to set standards as when the
employees meet these standards they will be given incentives. He is hoping to pull out a
good performance from his team this year.

1.Which function of management has been referred to in the above case?

2.Which benefits of this function of management have been highlighted in the
above case?

Answer:

1.The function of management which has been referred to in the above case is
controlling.
2.The benefits of controlling highlighted in the above case are:
o Controlling helps in efficient utilisation of resources. He has set
standards for performance of different types of activities and is doing
his level best to perform according to these set standards to minimise
wastage of resources.
o Controlling helps in improving employee motivation. He has set up a
good monitoring system which helps him know how employees are
performing according to set standards as when the employees meet
these standards they will be given incentives.

Question 6.
Identify the step of controlling process applicable in the following cases:

1.Esha is keenly observing the quantity of capsules produced in a pharmaceutical

company. She realises that there is no need for any action to be taken as the
deviations are within the acceptable limits. A day later when she comes to work
she finds the situation opposite to that of the previous day. This lime the
deviation wa’S beyond the acceptable range and needed immediate action. She
called her subordinates and told them that this should not happen again.
2.Mahesh who is the owner of a company has decided to focus only on a few
activities of his business. He considers that the rest of all activities are not
critical to the performance of his company. One such area he finds is of labour.
The labour cost recently went up by 4% sending signals of coming danger. Now
he will put his efforts to control this variation by arranging labour at a cheaper
rate.
3.In a company a manager is trying to find out the deviation between the actual
number of fans produced and the desired number. He already knows about the
standard as the company has assigned him a definite quantity of fans to be
produced.
4.Manoj Khanna a senior experience manager is concerned about the 2% rise in
the raw materials. However he knows that this is an acceptable range. He tells
 his staff that if this rise goes beyond 2% it should be brought into the notice of
management. Then he sets a limit of 5% when the management should give it
the priority over other activities.
5.Virendra wants to ran his company in a different manner. He wants to set
standards to be achieved in both qualitative as well as quantitative terms. He
wants to judge the motivation, skill levels and satisfaction of the employees. Ail
these things will require qualitative standards. On the other hand the company
will have to set quantitative standards for the number of units produced.
6.Some employees have been assigned the job of judging the output of production
in a neutral and reliable way. They are applying different techniques for
achieving this aim. Some of these are personal observation, sample checking,
etc. They are also keeping the units of measurement same to that of the units of
set standards.

Answer:
The different steps of the controlling process applicable in the above cases are:

1.Taking corrective action.

2.Analysing deviations. Critical point control is the technique used.
3.Comparing actual and standard performance.
4.Analysing deviations. Management by exception is the technique used.
5.Setting standards.
6.Measurement of actual performance.

Question 7.
‘A.S. Ltd.’ is a large company engaged in assembly of air-conditioners. Recently the
company had conducted the ‘Time’ and ‘Motion’ study and concluded that on an
average a worker can assemble ten air-conditioners in a day. The target volume of the
company in a day is assembling of 1,000 units of air-conditioners. The company is
providing attractive allowances to reduce labour turnover and absenteeism. All the
workers are happy. Even then the assembly of air-conditioners per day is 800 units
only. To find out the reason the company compared actual performance of each worker
and observed through C.C.T.V. that some of the workers were busy in gossiping.

1.Identify the function of management discussed above.

2.State those steps in the process of the function identified which are discussed in
the above paragraph.

Answer:

1.Function of management – Controlling.

2.Following steps of controlling are identified in the given para:
 o Setting performance standards which are the criteria against which the
actual performance would be measured.
‘…. and concluded that on an average a worker can assemble ten air-
conditioners in a day.’
o Measurement of actual performance with the standards in an objective
and reliable maimer.
‘Even then the assembly of air-conditioners per day is 800 units only.’
o Comparing actual performance with standards to find out any
deviations.
‘…. the company compared actual performance of each worker and
observed through C.C.T.V’

Question 8.
Hina Sweets is a renowned name for quality sweets since 1935. Harsh the owner of
Hina Sweets was worried as the sales had declined during the last three months. When
he enquired from the Sales Manager, the Sales Manager reported that there were some
complaints about the quality of sweets. Therefore Harsh ordered for sample checking of
sweets.
Identify the step taken by Harsh that is related to one of the functions of management
Answer:
Sample checking is a technique of Measurement of actual performance (Controlling).

Question 9.
Isha Machnies was a renowned name for quality sewing machines since 1960.
Mr. Suresh, the owner of Isha Machnies, was worried as the production had declined
during the last three months. He directed the Production Manager to find out the reason.
The Product Manager ordered the different supervisor to prepare a performance report
of the workers working under them.
Identify the steps taken by the Production Manager that is related to one of the functions
of management.
Answer:
Measurement of actual performance which is related to (controlling) function of
management.

Question 10.
Peter is a production manager in a tyre manufacturing company. Recently he noticed
that his team could not achieve the target production of 80 units per day. Instead on an
average the production touched the target of only 65 units. On thorough analysis he
found out that the deviation between standard production and actual production is far
beyond acceptable range, on overall analysis he also found out that there has been a
marginal increase in office stationery expenses. Moreover, he detected that the
machine installed for the purpose of manufacturing was not able to perform at its best
Being a management expert suggest Peter how he should deal with the existing
problem.
Answer:
Peter should follow the following principles of managerial control while analysing
deviations:

1.Critical point control. According to this principle of managerial control a

manager should focus on Key Result Areas (KRAs) that are critical to the
success of an organisation. A manager should not waste his precious time on
checking each and every activity in the organisation. He should focus on those
areas which are critical to the success of the enterprise. In the above case
Peter should focus on improving the performance of the machinery either by
repairing it or by replacing it with the new one. Marginal increase in stationery
expenses can be dealt later by him.
2.Management/Control by Exception. As per this principle of managerial control
a manager trying to control everything may end up controlling nothing.
Therefore, only significant deviations that go beyond the permissible limit
should be brought to the notice of management. In the above case poor
performance of machinery needs immediate managerial attention.
 Part B

Chapter 9: Financial Management

Question 1.
Ramit is using ICR (Interest Coverage Ratio) as the indicator of the interest paying
capacity of his company. However one of his old school days’ friends Shobhit tells him
to use DSCR (Debt Service Coverage Ratio) as the indicator to judge it.
Do you agree with his friend?
Give reason for your answer.
Answer:
Yes, I agree with him.
As it is a better indicator of company’s ability to pay fixed financial charges like interest
because it completes the shortcoming in ICR. ICR is unable to show the situation of
cash balance whereas in DSCR cash profits generated by the operations are compared
with the total cash required for the service of the debt.
ICR is the simple ratio of EBIT/Interest.

Question 2.
Identify in the following cases factor affecting the choice of capital:

1.Raj an has an option of taking loan from his relatives. These people have
assured him to give loan at a low interest rate. So he decides to use debt as a
source of financing his project. Now he goes to different relatives and friends to
see if he can get a cheaper source of debt with even lower rate of interest.
2.Prerak Iron Ltd. is thinking of raising finance to further its projects overseas. For
this the company is observing the other companies’ raising of finance. Their
deb^equity ratios are being thoroughly studied by the financial experts of the
company.
3.A company is trying to raise funds after consulting the experts. The owner of the
company has decided to find out the banks which can grant loan under norms.
He will assure that all norms are followed by the company. He has also decided
to gain knowledge about the SEBI guidelines related to public issues of shares
and debentures.
4.The management of a company is very much concerned about the latest
happenings in the stock market. They always w’ant to know whether the
conditions in the stock market are bullish or bearish so that they may know the
feasible time to grow money by issue of shares.
5.A firm has decided not to issue equity this year. The reason they have given is
the involvement of costs like printing charges, brokerage, advertising costs and
underwriter’s commission. The company says all these costs will add on to
become substantial.
6.A company already has high fixed operation costs. If it takes loan its fixed
financial costs will increase leading to an overall increase in payments. Had the
 situation been opposite it would have considered taking loan but now the only
option is to go for equity.
7.A company is thinking of taking debt to meet its finance requirements. It is
thinking so because interest is a tax deductible expense. Due to the new budget
by the government raising debt has become comparatively cheaper and equity
is losing its attractiveness.
8.Mr. Madan Sharma has a company having 10 branches throughout the country.
He is thinking of opening a new branch. For this he requires a good amount of
investment. He talks to his friends, banks and other sources to raise debt as a
source of finance. However he prevents himself from using all possible sources
of finance so that he can maintain his borrowing power.
9.A leading company decides to raise fund. It decides to go for debt as the source
of finance. The reason behind this choice is the possibility of losing
management’s holding in the company if equity is issued. The company already
has been using equity as a source of finance during last couple of years.
10. A company is no more interested in raising funds in the form of debt. The
amount of EBIT that the company has is decreasing in relation to the amount of
interest it has to pay on the debt it has borrowed. If it borrows more of debt than
this ratio EBIT/ Interest will further go down.
11. Neelam has decided to consider debt as the source of raising finance. Her
decision has come after considering the strong buffer of funds she already has.
She has enough amount of funds to cover fixed cash payments. Her business
unit has no problem in running normal business operation and it has low
business risk. Further the financial risk is also low.
12. A company has decided to go for trading on equity as an option. This is being
done to increase the Earning per Share (EPS). Definitely the ability of the
company to use debt is greater.

Answer:

1.Cost of debt
2.Capital structure of other companies
3.Regulatory framework
4.Stock market conditions
5.Floatation costs
6.Risk consideration
7.Tax rate (As with the new budget the tax rate has increased)
8.Flexibility
9.Control
10. Interest Coverage Ratio (ICR)
11. Cash flow position
12. Return on Investment (RoI)

Question 3.
In the previous question case study (b) of Prerak Iron Ltd. what caution do you think that
the company should take?
Answer:
The company should not follow the capital structure of other companies in the industry
in a blind manner.

Question 4.
In Question No. 2 in case study (l) How Return on Investment would matter?
Answer:
If the Return on Investment (Rol) is lower than Cost of Debt then the company should
go for Equity as the option. On the other hand if Return on Investment (Rol) is more
than Cost of Debt then the company can rely more on debt. If it will increase more debt
in its capital structure then the EPS in this case will increase. However in the earlier
case where Rol is less than Cost of Debt the EPS will decrease with increase in the
debt component in the capital structure.

Question 5.
Future Business’ is in whole sale business. The manager in charge is taking care of all
the operations. The branch in Delhi is earning a lot of revenue these days. It requires
fixed capital investment for which it has to borrow money.
What do you think is going to be the size of the investment required?
Answer:
The size of investment required will be low as the ‘Future Business’ is in trading
business. The fixed capital requirement generally is low in trading business.

Question 6.
Atul is thinking of opening a scissors manufacturing plant. He requires capital
investment. He discusses the project with his father. His father after listening to his
project tries to find out the fixed capital requirement for his plant.
What do you think will be the fixed capital requirement for the scissors manufacturing
plant of Atul?
Answer:
The fixed capital requirement for the plant of AtuI will be high as it is a manufacturing
plant. For a manufacturing plant the fixed capital requirement is high since the purchase
of plant and machinery, equipments, etc. is involved.

Question 7.
Vrinda is an MBA pass out from a very good MBA college. Her father has restaurant
business. Their company has 15 restaurants in Europe. As soon as Vrinda joins the
business she decides to take this number to 25 by opening 10 more restaurants in the
major cities of Europe.
What do you think will be the fixed capital requirement here? Why?
Answer:
The fixed capital requirement would be high.
The reason behind the high requirement of fixed capital is ‘scale of operations’. The
restaurant business run by them is already being operated at a large scale with 15
restaurants in operation.

Question 8.
Ravi has started a pizza base manufacturing business. The early morning schedule is
very busy as the product is dispatched as soon as it is made to keep it fresh and is sent
to the various pizza making restaurants or hotels. Daily fresh pizzadbase has to be
delivered on the basis of estimated orders as there is no sure shot consumption pattern
in the city.
What do you think is going to be the working capital requirement of this business? Why?
Answer:
The working capital requirement of this business will be low.
The reason for this low requirement is that the production cycle for Pizza base is short
and as the production is made on estimated order no inventory is required which will
further prevent inventory costs.

Question 9.
‘Hot Winters’ is a premium sweater making company. The sweaters are worn in many
countries and they are of very high quality. For six months of the year the company is
almost without work but the remaining six months it is busy in preparing almost 10
million sweaters for its customers in different parts of the world.
What do you think is going to be the working capital requirement of this company?
Why?
Answer:
The working capital requirement of this company will be high.
Though the company is almost without work for six months yet for the remaining six
months it produces almost 10 million sweaters thus require a huge working capital since
the scale of operations is large.

Question 10.
Dheeraj has opened a company. He has come from Australia to set up a business of his
father here in India. He decides to meet a person who owns huge chunks of property.
He decides to take a piece of land for his company on lease from him. What do you
think is going to be the fixed capital requirement of his company? Why?
Answer:
The fixed capital requirement of Dheeraj’s company will be less.
The reason for this less requirement will be a financial alternative in the form of lease
that he has generated saving his funds which otherwise would have been used in
purchasing the land.
Question 11.
An AC manufacturing company wants to open a plant in Delhi. The owner of the
company called a meeting to find the experts to fix the plant’s requirements. The
recruitment process of the potential employees who will be working in the plant will be
started soon.
What do you think will be the working capital requirement of this company? Why?
Answer:
The working capital requirement of this company will be high.
The reason for the high requirement of working capital will be that in a manufacturing
company the requirement is high. Further the company will have to bear inventory costs
as for the ACs an inventory will have to be maintained.

Question 12.
There are two brothers: Shobhit and Mohit. Shobhit starts a tourist and travel agency.
His idea is to take his business to great heights. Though he doesn’t have experience in
this business yet he wants to give this business a try. He feels that if he gives the best
quality services then his business will reach great heights.
Mohit starts a thermometer manufacturing business. He too like his brother wants to
take his business towards great success. He is new to this business and is busy getting
to know about the technical side of the business as much as possible. He wants to
make the best quality thermometers which are ultrasensitive to temperature changes
and can resist shocks.
Despite all these good ambitions in mind a sudden shock takes place for both the
brothers. The economy shows sign of recession and within a few months is totally
engulfed by it.
What will happen to the working capital requirement of the two businesses described in
the above case?
Which of the two businesses do you think will see greater impact of this change?
Answer:
Shobhit is doing a trading business and Mohit a manufacturing business.
Whenever recession hits an economy both trading and manufacturing businesses see
fall in working capital requirements.
However the manufacturing business is hit more severely by recession. It is hit early by
recession and bears a greater impact so the working capital requirement of Mohit’s
business will fall rapidly than that of Shobhit.

Question 13.
Bharat Express’ specialises in Courier Services. Its ‘wide range of express package and
parcel service’ help business firms to make sure that the goods are made le to the
customers at the right place and at the right time.
State with reason, whether the working capital requirements of ‘Bharat Express’ will be
high or low.
Answer:
The working capital requirements of ‘Bharat express’ will be low as the firm operates in
a service industry and need not invest in buying and maintaining inventory.

Question 14.
‘Indian Logistics’ has its own warehousing arrangements at key locations across the
country. Its warehousing services help business firms to reduce their overheads,
increase efficiency and cut down distribution time.
State with reason, whether the working capital requirements of ‘Indian Logistics’ will be
high or low.
Answer:
The working capital requirement will be ‘low’ as the firm is involved in a service industry
which does not have to buy and maintain inventory.

Question 15.
KJ Ltd. is manufacturing trucks at its manufacturing unit in Kolkata. The demand of its
trucks is high as the economic growth is about 7% to 8%. The company has estimated a
20% increase in the demand of its trucks. It is planning to set up a new truck
manufacturing unit. For this the company will require approximately ?2,000 crores as
fixed capital and ?5G0 crores as working capital. The company has already arranged
for its fixed capital. State any three factors that the finance manager of the company
should keep in mind while arranging its working capital.
Answer:
Factors affecting the requirement of Working Capital:

1.Nature of business. Nature of business is an important factor that influences the

requirement of working capital.
For example: Public utility services like transport concerns, electricity
undertakings where much of the investment is in a fixed form, require less
amount of working capital. On the other hand, trading or manufacturing
concerns have to invest large amounts in raw materials, wages, etc., hence
these require a large amount of working capital.
2.Scale of operation. An organisation which operates on a higher scale, requires
large amount of working capital as compared to the organisation which
operates on a lower scale.
3.Business cycle. Different phases of business cycle affect the requirement of
working
capital of a firm. During boom period, sales as well as production are likely to be
higher, therefore more working capital is needed. During depression, sales and
production are low, as a result the requirement of working capital would be
lower.
4.Seasonal factors. Industries, which produce and sell seasonal goods, require
large working capital during off-season, as this is the period when production is
 carried on to prepare for the season when the products would be sold in
comparison to industries with regular production and sales.
5.Rapidity of turnover. Business units, which sell their products quickly, such as
newspapers, retail shops, bakeries, etc., require a lesser amount of working
capital.

Question 16.
Raghu has started a mobile manufacturing company. The company has decided to
meet the competitor’s market hold by giving liberal credit terms to their customers. They
have decided to check the creditworthiness of their customers before giving them this
facility. They will provide this facility to customers having credit cards.

1.Predict the fixed capital requirement of Raghu’s company.

2.What do you think will be the working capital requirement of his company?

Answer:

1.The fixed capital requirement of Raghu’s company will be high because it is a

manufacturing company. Secondly a lot of technological upgradation is required
for which Raghu will have to prepare for more investment in future.
2.The working capital requirement of this company will be high because the labour
charges will be high as it is a manufacturing business. Secondly the credit
allowed by the company would increase its working capital requirement.

Question 17.
Atul Oil Explorers is a high turnover oil extracting company. It has made a lot successful
explorations of oil in the past. But recently the company has not been doing so well in
the business. The company is trying to diversify in the textile business. The newspapers
are flooded with this news. People are also considering this as a smart move by the
company.
What do you think will happen to the fixed capital requirement of the company because
of this move? Give reason.
Answer:
The fixed capital requirement of the company will increase because of this decision.
Diversification of operations by a company results in the increase of fixed capital
requirement as more investment will be required in the fixed capital.

Question 18.
MM Ltd. is manufacturing small cars at its manufacturing unit in Pune. The demand of
its cars is increasing at the rate of 20% annually. It is planning to set up a new car
manufacturing unit at Indore. For this the company will require approximately ?1,500
crores as fixed capital and ?400 crores as working capital. The company has already
arranged for its working capital. State any three factors that the finance manager should
keep in mind while arranging its fixed capital.
Answer:
Factors affecting the requirements of fixed capital:

1.Nature of business. A trading concern needs lower investment in fixed assets as

152 44 Business Studies—Case Studies Tapan Pathak
compared to a manufacturing concern since it doesn’t require to purchase plant
and machinery.
2.Scale of operations. A larger organisation operating at a higher scale needs
bigger plant and more space and hence higher investment in fixed assets.
3.Choice of technique. A capital intensive organisation requires higher investment
in plant and machinery and thus requires higher fixed capital than a labour
intensive organisation.
4.Technology upgradation. Industries where assets quickly become obsolete
require higher fixed capital in order to replace such assets.

Question 19.
‘Hamara Bank’ has over 1.5 million satisfied customers. However, recently some of
them started leaving the clientele of bank. The reason behind this was that the services
of the bank were extremely good, people always complained about lack of ATM facility
in the bank. To overcome this problem and stop the clients go away, the bank decided
to go for collaboration with ‘Tumhara Bank’. ‘Tumhara Bank’ is a new bank and is no
way near to the competency of Core services of ‘Hamara Bank’ but it has exceptional
ATM facilities.
What do you think is going to be the impact of this collaboration on the fixed capital
investment of ‘Hamara Bank’? Give reason.
Answer:
The result of this will lower the fixed capital requirement of ‘Hamara Bank’.
As both the banks will share each other’s facilities the requirement of the banks to
invest in fixed capital will come down. Like here in this case ‘Hamara Bank’ will not have
to spend on any fixed capital investment for its requirement of ATM facility which will be
accomplished by collaboration with ‘Tumhara Bank’.

Question 20.
Radhika and Vani who are young fashion designers left their job with a famous fashion
designer chain to set-up a company ‘Fashionate Pvt. Ltd.’ They decided to run a
boutique during the day and coaching classes for entrance examination of National
Institute of Fashion Designing in the evening. For the coaching centre they hired the first
floor of a nearby building. Their major expense was money spent on photocopying of
notes for their students. They thought of buying a photocopier knowing fully that their
scale of operations was not sufficient to make full use of the photocopier.
In the basement of the building of ‘Fashionate Pvt. Ltd.’ Praveen and Ramesh were
carrying on a printing and stationery business in the name of ‘Neo Prints Pvt. Ltd.’
Radhika approached Praveen with the proposal to buy a photocopier jointly which could
be used by both of them without making separate investment, Praveen agreed to this.
Identify the factor affecting fixed capital requirements of ‘Fashionate Pvt. Ltd.’
Answer:
Level of Collaboration.

Question 21.
Rizul Bhattacharya after leaving his job wanted to start a Private Limited Company with
his son. His son was keen that the company may start manufacturing of mobile-phones
with some unique features. Rizul Bhattacharya felt that the mobile phones are prone to
quick obsolescence and a heavy fixed capital investment would be required regularly in
this business. Therefore he convinced his son to start a furniture business.
Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya to
choose furniture business over mobile phones
Answer:
Technology Upgradation.

Question 22.
Ramesh is running a real estate construction company. He has to meet clients on a
regular basis in order to make deals. For every decision he makes he has to be really
cautious as he knows once he has made a decision he can’t go back which will mean
abandoning of the project. So he evaluates every decision before he makes it. That is
why he pays a lot of attention to what his clients are saying and figures out which
portion of the deal is in his capacity and favour. Recently his company pumped an
amount of Rs.50 crores in a project and he knows this project can affect the returns of
the firms in the long run both positively as well as negatively. All this is a part of the
business in which he has established himself. He knows that the funds invested are
only likely to give returns in the future and impact the future prospects of his business.
The chances of success in any business are more when one does a lot of research. He
has to involve a considerable portion of his funds and block them in long term projects.
A thorough research is required in order to grow funds at the lowest cost possible. He is
a very stable minded entrepreneur.

1.Which concept of management has been highlighted in the above case?

2.Identify its types highlighted in the above case.

Answer:

1.The concept of management highlighted in the above case is ‘Importance of fixed

capital investment’.
2.The reasons for the importance of fixed capital decisions highlighted in the above
case are:
 o Irreversible decisions. For every decision he makes he has to be really
cautious as he knows once he has made a decision he can’t go back
which will mean abandoning of the project.
o Risk involved. Recently his company pumped an amount of Rs.50
crores in a project and he knows this project can affect the returns of
the firms in the long run both positively as well as negatively.
o Long-term growth. He knows that the funds invested are only likely to
give returns in the future and impact the future prospects of his
business.
o Large amount of funds involved. He has to involve a considerable
portion of his funds and block them in long term projects.

Question 23.
Identify the type of decisions:

1.Ravi wants to open a restaurant and is looking for a proper place to open it. He is
also thinking of the amount of funds which will be required for some of the set
ups like food making and storing machineries.
2.Ravindra is running a toy manufacturing company. He thinks of expanding his
business. He meets his uncle and asks him for a sum of Rs. 2 crores. His uncle
asks for a high interest rate. He agrees to it and promises to pay the money
back within 2 years.
3.A leading marketing company has decided to raise money through the stock
market. It issued IPO in the market last year. The company knows there are
going to be sizeable floatation costs involved in it.
4.A company which has 10 branches in the city has decided to open its 11th
branch. The company has taken this branch on rent. In this way the company
has saved money which it would otherwise have invested in purchasing it.
5.A company has decided to plough back the money in the form of retained
earnings. This decision will save the company at least ‘50 crores. These funds
can be used for the long term growth of the business.
6.‘Rakesh Iron Works’ has been doing a great job in the area of manufacturing
iron. Within two years the company has reached among the top 3 performers of
the industry. The company has made a lot of profit and decided to distribute its
profits to the shareholders who stood with it during the hard times.
7.Raj an Powerlooms, a leading company in its industry has decided not to issue
equity shares this year as they want to keep the management control in their
own hands. The company’s management already has only 60% shares in the
company. So it would avoid any further dilution of its stake in the company.
Company would prefer taking loan.
8.A company has decided to issue debentures as it knows that it will not lead to
any additional costs. These debentures will be carrying a very low rate of return
for the debenture holders but will be a surety for them to get their money back.
Investors who want financial safety would like to go for this option as there will
be an assured definite return. ,
 9.Shuddhi Steel Manufacturers has been a brand but due to some HR related
issues it came into limelight for bad reasons. The issue was related with non-
payment of salaries of the employees but now the company wants to sort this
issue out. The company has decided to pay the salary of all the employees
which were not paid their emoluments since last six months. The company has
done so to avoid any image spoiling to take place.
10. A soft drink company has decided to run an advertisement campaign. It will hire
many famous Bollywood celebrities for this purpose. The advertisement
campaign could involve more than ‘150 crores. Every major newspaper is
mentioning about it.
11. Tarachand and Sons has decided to open a new branch in the middle of the city
in order to increase its business.

Answer:

1.Investment decision
2.Financing decision
3.Financing decision
4.Investment decision (short-term investment decision/working capital)
5.Dividend decision (As out of the EPS one portion will be dividend and the other
retained earnings. This is decided by dividend decision).
6.Dividend decision
7.Financing decision
8.Financing decision
9.Investment decision (Working capital or short term investment decision)
10. Investment decision (Long-term investment decision. Remember running an ad
campaign is not a short term investment decision which confuses the students.
It is a long-term investment decision)
11. Investment decision (Long-term investment decision)

Question 24.
Bharat Steel Ltd., an Indian company producing 50 million tonnes of steel annually and
generating revenue of 38 billion US dollars has recently acquired the 5 second largest
steel producing company, ‘German Steels.’ After this acquisition Bharat Steels Ltd. will
become the World’s largest steel producer. For this acquisition Bharat Steels Ltd. had to
arrange about 50,000 crores of rupees through debt and equity. State the function
performed by the company for arranging the funds through debt and equity.
Answer:
Financing function or Financing decision. It refers to the decision about quantum of
finance to be raised from various long term sources.

Question 25.
‘Trucks India Ltd.’ producing 1,00,000 trucks and generating revenue of Rs.1,000 crores
annually, has recently acquired the world’s second largest truck icturing company. After
this acquisition, ‘Trucks India Ltd.’ will become the world’s largest truck manufacturer.
For financing the acquisition the company had to arrange about Rs.41,000 crores
through debt and equity. State the function performed by the company for arranging the
funds through debt and equity.
Answer:
Financing function or Financing decision.
Financing decision refers to the decision about the quantum of finance to be raised from
various long term sources.

Question 26.
Identify the factors involved in the following dividend decisions:

1.A company is growing by leaps and bounds. Every year it is opening new
branches in the major cities of the country. There are chances that in a few
years to come it will be the market leader in its industry. Newspapers appreciate
the steps taken by the management. However in the field of financial decisions
the company takes a defensive stand. Every year it declares less than expected
dividend for the shareholders.
2.The new government in accordance with its new policy has decided to levy more
taxes on dividends. A company which pays good dividend every year to its
shareholders has decided to keep the retained earnings high this year. This
step will definitely bring the dividend down in comparison to the expectations of
the shareholders.
3.‘Mitra, my neighbour’ is a real estate company. The company has always done
well on the stock market indices. Recently the company has shown good profit
but it is still short of cash. The company has decided to come with a lower
dividend than expected. (d) One of the leading companies of the services sector
has decided to keep the dividend portion of the EPS stable. The decision has
been taken keeping in view the fact that the earning potential of the company
has not gone up since last three years. So, the company has decided not to
change the dividend per share.
4.A lending company ‘A’ has decided to put some constraints on the company ‘B’
to which it has extended loan. The constraints are related to the declaring of
dividends by the company ‘B’. They have signed a contract which puts
restrictions on company ‘B’. So unless and until it pays back the amount taken
from company ‘A’ it can’t enjoy freedom in this regard.
5.A leading telecom giant always gives good dividend to its shareholders. The
company is a great performer on the stock exchange. The shareholders are
very confident of its good performance. It has the liberty to give high dividends
as it has less dependency on retained earnings.
6.A company takes care of the needs of its shareholders. Many of the shareholders
are such who need a constant and stable source of income. Their dependence
is met by the declaring of a stable and permanent dividend. Unlike other
companies w’hich let the market decide the amount of dividend to be paid and
 the payment of which is based on the company’s performance the company
wants to keep its shareholders satisfied majority of whom are retired persons.
7.‘Heartbeat Denim’ is the number one performing jeans manufacturing company
since last 30 years. The company has several branches at different locations of
the world. The revenue of the company has increased over the years. This has
made this company a very stable firm. It is on the stock market since last 15
years. The shareholders of the company are extremely satisfied with its
dividend policy. They never feel insecure about the dividends given as the
company’s products always sell in the market and have a great demand.
8.A newly formed petrochemical company is performing absolutely great. The firm
has listed itself on the stock market. Due to the huge revenue earned by the
organisation it has been able to give high dividend to the shareholders.
9.A company has decided to improve its image in the stock market and wants the
investors to pump more money in its shares. The highly ambitious organisation
has planned to increase the dividends on its shares for the third successive
year. The increase has also been substantial. The idea is to send great news in
the market regarding the performance of the company in order to bolster its
image.

Answer:
The factors involved in the above mentioned dividend decisions are:

1.Growth opportunities.
2.Taxation policy.
3.Cash flow position.
4.Stability of dividends.
5.Contractual constraints.
6.Access to capital market.
7.Shareholder’s preference.
8.Stability of earnings.
9.Amount of earnings.
10. Stock market reaction.

Question 27.
Company ‘A’ has the debt-equity ratio of 3 :1. Another Company ‘B’ has the debt-equity
ratio of 2.5 : 1. Both the companies are part of an industry where the operating costs are
high. Many of the companies in this industry are vulnerable to high business risk.
Which one of the two companies is going to have higher chances of financial risk?
Why do you think the financial risk in the above mentioned industry is going to be
dangerous for the companies?
Answer:
The Company A is going to have higher chances of financial risk as the debt component
is higher. Due to the higher debt component there will be an increase in the fixed
financial costs. In case a company is unable to bear fixed financial costs the financial
risk increases.
If a company is unable to bear operating costs then business risk gets generated. In an
industry where there is already a chance of higher business risk an additional financial
risk will increase the Total risk to a dangerous level.

Question 28.
In the Question No. 26(b) case where do you think taxes are charged on dividend?
What is its significance with respect to the shareholders?
Answer:
The taxes are charged on companies in the form of dividend distribution tax whereas
the dividend in the hands of the shareholders is tax free.
The significance with respect to the shareholders is that they may prefer higher dividend
as in present taxation policy the dividends are taxed lower.

Question 29.
An organisation is busy preparing its financial blueprint for its future operations. The
idea is to create satisfactory amount of money which should be there in the reach of the
organisation at the right time.

1.Which concept of financial management has been highlighted in the above case?
2.What are the financial plans made for a year known as?
3.What are the twin objectives of financial planning?

Answer:

1.The concept of financial management highlighted is ‘Financial Planning’.

2.The financial plans made for a year are known as ‘Budgets’.
3.The twin objectives of financial planning are:
o To ensure proper availability of funds whenever the need arises.
o To ensure that there is no unnecessary raising of funds by the
organisaiton.

Question 30.
A company was expecting a sale increase of 20% in comparison to the last year.
However, due to poor support from the economic situations around the increase turned
out to be only 10%. The company however had prepared itself for this situation. It knew
how to change its expenses in financial case the sales increase goes down in
comparison to the expectations.

1.Identify the concept of financial management which is highlighted in thaabove

case.
 2.What should have been the action taken by the company if the situation had
been different like increase in revenue by 30%.

Answer:

1.The concept of financial management highlighted in the above case is ‘financial

planning’.
2.The company would keep different items of expenditure in the case of 30% as it
would be having more cash in hand. It could start new projects and involve
more man power in its new projects. High revenue may help streamline
operations in a better manner. The company definitely is going to have more
freedom in deciding future courses of action.

Question 31.
A company ‘White White Sheets’ is a successful bed sheet selling company. It sells
Rs.1 crore worth sheets to a corporate customer. The company gives a period of 2
months to the client to pay for the sheets. The company send an invoice to the
customer and the inventory account gets reduced by Rs.1 crore. The account
receivable is increased by Rs.1 crore. When its corporate client pays within the period
of 2 months the cash is increased by Rs.1 crore and the account receivable is reduced
by Rs.1 crore.

1.In the above financial transaction the essential ingredients of which concept of
‘financial management’ have been highlighted?
2.What is the other term used for long term investment decision?
3.Which concept of financial management is related to selection of the best
financing or investment alternative?

Answer:

1.In the above case the essential ingredients of ‘sound working capital
management’ have been highlighted. They are Accounts receivables, Cash and
Inventory.
2.The other term used for long term investment is ‘Capital Budgeting Decision’.
3.The concept of financial management related is ‘financial decisions’.

Question 32.
In the following cases identify the type of financial decision. Also identify the factors
affecting the decisions:
 1.A company has decided to issue equity but it is concerned about the control
management will lose. So after a lot of brainstorming the board of directors
decide to take loan from a bank and debt from other sources.
2.Keeping the concern of raising funds alive a company decides to go for
debenture as the final choice. The people who will be purchasing the
debentures would be assured a definite return after a definite period of time.
The company’s credibility is good so they should not worry about the A
company issues equity shares but the expenses involved are quite a lot. The
organisation has to be aware about the printing charges, advertisement related
expenses, underwriter’s commission and brokerage asked by the middle men.
3. ‘Dheeraj Plants’, a manufacturing company, thinks of starting a project in South
America. The company knows that the project will be a successful venture in
the years to come. It tries to figure out the revenue generated by the project and
the expenses which will be involved in it.
4.Suyash tries to evaluate two projects. The projects have equal level of risk.
According to this parameter he finds both projects at par. However, when it
corhes to knowing the rate of return of the two projects he finds that Project A
will yield a rate of return of 10% and Project B will yield a rate of return of 12%.
So he decides to go ahead with the project B.
5.Shobhit wants to start a movie hall so he decides to evaluate the feasibility of
starting the project. He finds that at place A the movie hall will cost ?20 crore
and at place B it will cost ?30 crore. He decides to go for the first option—
Project A.

Answer:

1.Type of financial decision: Financing decision

Factor affecting: Control considerations
2.Type of financial decision: Financing decision
Factor affecting: Cost
3.Type of financial decision: Financing decision
Factor affecting: Floatation cost
4.Type of financial decision: Investment decision
Factor affecting: Cash flows of the project
5.Type of financial decision: Investment decision
Factor affecting: Rate of return
6.Type of financial decision: Investment decision
Factor affecting: Amount of investment

Question 33.
‘Abhishek Ltd.’ is manufacturing cotton clothes. It has been consistently earning good
profits for many years. This year too, it has been able to generate ^ profits. There is
availability of enough cash in the company and good prospects for growth in future. It is
a well managed organisation and believes in quality, equal employment opportunities
and good remuneration practices. It has many shareholders who prefer to receive a
regular income form their investments.
It has taken a loan of Rs.50 lakhs from I.C.I.C.I Bank and is bound by certain
restrictions on the payment of dividend according to the terms of the loan agreement.
The above discussion about the company leads to various factors which decide how
much of the profits should be retained and how much has to be distributed by the
company. Quoting the lines from the above discussion, identify and explain any four
such factors.
Answer:
Factors affecting divided decision:

1.‘Consistently earning good profits’. It relates to the stability of earnings of the

company as a company having stable income is always in a better position to
pay higher dividend. Companies having inconsistent and unstable earnings do
not prefer declaring high rate of dividend.
2.‘There is availability of enough cash in the company’. The above line reflects
the cash flow position of the business which is another major factor influencing
the dividend decision. In order to declare higher rate of dividend the company
should have enough cash. A company remaining short of cash finds it difficult to
pay dividend.
3.‘It has many shareholders who prefer to receive a regular
income’. Shareholders’ preference is highlighted in the above statement. The
management of the company should keep in mind the preferences of
shareholders while they declare dividend. Some shareholders prefer to receive
a regular income in the from of dividend.
4.‘It has taken a loan of Rs.50 lakhs from I.C.I.C.I Bank and is bound by
certain restrictions on the payment of dividend’. The above statement
highlights contractual constraints due to which the company is bound by certain
restrictions on the payment of dividend. If a company has taken loan, the lender
may impose few restrictions on the declaration of dividend in future. The
dividend policy of the firm should not violate the terms and conditions of the
loan agreement.

Question 34.
Raghav is trying to co-ordinate the functioning of various departments like sales and
production. He has been trying to do this with the help of a concept of financial
management. He quite often calls people of both departments and tells them to work
within means. He has even prescribed a budget for it. During the time, when he is doing
a lot of analysis he connects the decision of present with the outcomes of future. This
can especially he seen in two of the prominent decisions. One is the investment and the
other is the financing decision- so the interlinking of these two decisions is assumed by
him. When the year ends it is easy for him to take some strong decisions. This happens
because he is able to evaluate the performance of various departments in terms of
revenue generated and the expenses incurred. No business is risk proof. However, he
knows that at least business shocks which a business can suffer can be minimised thus
laying foundation for a better future. His involvement in the work is definitely
appreciable.

1.Which concept of financial management has been highlighted in the above case?
2.Identify the types of this concept highlighted in the above case.

Answer:

1.The concept of financial management which is highlighted in the above case is

‘Importance of financial planning’.
2.The importance of financial planning highlighted in the above case are:
o It helps in coordinating various business functions like purchase,
production and sales. Raghav is trying to coordinate the functioning
of various departments like sales and production.
o It helps in linking, the present with the future. During the time when
he is doing a lot of analysis he connects the decision of present with
the outcomes of future.
o It helps in linking the investment decision with the financing
decision. One is the investment and the other is the financing decision-
so the interlinking of these two decisions is assumed by him.
o It helps in the evaluation of actual performance easier. This
happens because he is able to evaluate the performance of various
departments in terms of revenue generated and the expenses incurred.
o It helps in avoiding business shocks and thus prepares the
company for future.
However, he knows that at least business shocks which a business can
suffer can be minimised thus laying foundation for a better future.

Question 35.
‘Yiyo Ltd.’ is a company manufacturing textiles. It has a share capital of Rs.60 lakhs.
The earning per share in the previous year was Rs.0.50. For diversification, the
company requires additional capital of ?40 lakhs. The company raised funds by issuing
10% debentures for the same. During the current year the company earned a profit of
Rs.8 lakhs on capital employed. It paid tax @ 40%.
(a) State whether the shareholders gained or lost, in respect of earning per share on
diversification. Show your calculations clearly.
(b) Also, state any three factors that favour the issue of debentures by the company as
part of its capital structure.
Answer:
(b) Following are the factors that favour the issue of debentures:

• Managerial control. The company has already issued a share capital of ?60
lakhs. Further use of equity can completely dilute the control into the hands of
the shareholders. Hence to have a certain degree of say in management the
company issued debentures.
• Tax deductibility. Interest paid by the company to its debenture holders is tax
deductible. The company is paying 40% tax. Therefore it is better for the
company to issue debentures. High tax rate makes debt relatively cheaper.
• Cost consideration. Raising capital through debentures is cheaper as compared
to equity shares. Raising funds through debt involves low floatation costs.
Moreover interest paid on debentures is a deductible expense. The interest is
deducted from firm’s earnings and then the net amount is used for calculating
tax liabilities. Hence more debt in the capital structure means low cost of overall
capital.

Question 36.
‘Sarah Ltd.’ is a company manufacturing cotton yarn. It has been consistently earning
good profits for many years. This year too, it has been able to generate enough profits.
There is availability of enough cash in the company and good prospects for growth in
future. It is a well managed organisation and believes in quality, equal employment
opportunities and good remuneration practices. It has many shareholders who prefer to
receive a regular income from their investments.
It has taken loan of 40 lakhs from IDBI and is bound by certain restrictions on the
payment of dividend according to the terms of loan agreement.
The above discussion about the company leads to various factors which decide how
much of the profits should be retained and how much has to be distributed by the
company. Quoting the lines from the above discussion identify and explain any four
such factors.
Answer:

1.‘It has been consistently earning good profits for many years’.
It relates to the stability of earnings of the company as a company having stable
income is always in a better position to pay higher dividend. Companies having
inconsistent and unstable earnings prefer not to declare a high rate of dividend.
2. ‘There is availability of enough cash in the company’.
The above line reflects the cash flow position of the business which is another
major factor influencing the dividend decision. In order to declare higher rate of
dividend, the company should have enough cash. A company remaining short
of cash finds it difficult to pay dividend.
3.‘It has many shareholders who prefer to receive a regular income from their
investments’.
Shareholder’s preference is highlighted in the above statement. The
management of the company should keep in mind the preferences of
shareholders while they declare dividend. Some shareholders prefer to receive
a regular income in the from of dividend.
4. ‘It has taken a loan of 40 lakhs from IDBI and is bound by certain
restrictions on the payment of dividend’.
The above statement highlights contractual constraints due to which the
company is bound by certain restrictions on the payment of dividend. If a
company has taken loan, the lender may impose few restrictions on the
declaration of dividend in future. The dividend policy of the firm should not
violate the terms and conditions of the loan agreement.

Question 37.
Somnath Ltd. is engaged in the business of export of garments. In the past, the
performance of the company had been upto the expectations. In line with the latest
technology, the company decided to upgrade its machinery. For this, the Finance
Manager, Dalmia estimated the amount of funds required and the timings. This will help
the company in linking the investment and the financing decisions on a continuous
basis. Dalmia therefore, began with the preparation of a sales forecast for the next four
years. He also collected the relevant data about the profit estimates in the coming
years. By doing this, he wanted to be sure about the availability of funds from the
internal sources of the business. For the remaining funds he is trying to find out
alternative sources from outside.
Identify the financial concept discussed in the above para. Also state the objectives to
be achieved by the use of financial concept, so identified.
Answer:
Financial planning concept has been discussed in the above para.
Following are the two objectives of Financial planning:
1.To ensure availability of funds when required. Financial planning ensures that
sufficient funds are available with the enterprise as and when required. For this
purpose proper estimation of funds are carried out for different purposes like for
the purchase of long-term assets or for meeting day-to-day expenses of
business.
2.To see that the firm does not raise resources unnecessarily. Financial
planning makes sure that an enterprise is adequately funded. It also ensures
that firms do not raise funds unnecessarily. It aims at the best possible use of
financial resources.
 Chapter 10: Financial Market
Question 1.
A very famous article was published in a finance magazine. A portion of that article is
present here:
Financial market is not a usual market where you buy commodities but a special place
where one can have all the necessary information about the different securities traded
in the market. The buyers on the one hand get to know about the securities and they get
a place where securities are sold helping reduce the wastage of time, effort and money.
The financial experts say otherwise the job of the people involved in the securities
transactions would have been really difficult. Securities get a buyer on the one hand and
the seller on the other hand on a common platform—this helps in easy conversion of
securities into cash. In the economies where there is no stock exchange the funds
remain blocked. The money trapped in the houses should come out and flow in the
economy and when they are invested in the shares of a company they have the
capability to attain the maximum value. People would always like to sell securities on
their own conditions. No government intervention can predict the price of securities. The
stock market is a place which runs on the forces of demand and supply thus giving a
security its price depending upon its demand. One wonders how the economy of a
company can grow without the existence of financial market.
Identify explain the functions of financial market discussed in the above case.
Answer:
The various functions of financial market highlighted in the above case are:

1.Financial market reduces the cost of transactions. The buyers on the one
hand get to know about the securities and they get a place where securities are
sold helping reduce the wastage of time, effort and money.
2.Financial market provides liquidity to financial assets. Securities get a buyer
on the one hand and the seller on the other hand on a common platform-this
helps in easy conversion of securities into cash.
3.Financial market helps in mobilization of savings and channelises them to
the most productive use. The money trapped in the houses should come out
and flow in the economy and when they are invested in the shares of a
company they have the capability to attain the maximum value.
4.Financial market helps in facilitating price discovery of financial assets.
The stock market is a place which runs on the forces of demand and supply
thus giving a security its price depending upon its demand.

Question 2.
A bank named ‘Dhan Sangraha Karta’ allows Kapoor family to deposit their money time
and again in it. It gives a definite return to this family which is in the form of interest. To
get this interest the money stored in the household of Kapoor family gets entry into this
bank. Nearby there is a stock exchange, Mr. Raj an Kapoor, who is the head of the
family, goes there and buys securities. He says that in this way more return in earned
by him on his saved money though the risk is also there.
 1.Identify the process in above case performed by the bank and the stock
exchange.
2.What are the roles of the bank and the stock exchange with respect to each
other?
3.Name a condition for the bank to perform its role in this process.
4.Name a condition for the stock market to perform its role in this process.

Answer:

1.The process performed by the bank and the stock exchange is ‘Financial
Intermediation.
2.The bank and the stock exchange are competing intermediaries in the financial
system. The household is making a choice between the bank and the stock
exchange and this choice is given by the financial system to them.
3.The bank should provide a higher rate of return to the household saving then
what it would get by lying passive in the household itself. Since the money will
only decrease in value there will be no return.
4.The stock exchange will help the household invest money in a company’s
security. The chances of growth of money could be highest here as the money
is generally invested in companies which show the chances of the best possible
growth.

Question 3.
3. These days, the development of a country is also judged by its system of transferring
finance from the sector where it is in surplus to the sector where it is needed the most.
To give strength to the economy, SEBI is undertaking measures to develop the capital
market. In addition to this, there is another market in which unsecured and short¬term
debt instruments are actively traded every day. These markets together help the savers
and investors in directing the available funds into their most productive investment
opportunity.

1.Name the function being performed by the market in the above case.
2.Name the market segment other than the capital market segment in which
unsecured and short-term debt instruments are traded. Also, give any three
points of difference between the two.

Answer:

1.Allocative function.
2.Money market.
Difference between Capital and Money market:
 Basis Capital-market Money-market

The participants are financial institutions, banks, The participants are RBI, financial institutions, banks
(i) Participants
corporates, foreign investors and retail investors. and corporates.

Instruments traded are Treasury bills, Commercial

(ii) Instruments Instruments traded are Shares, Debentures and Bonds. papers, Certificates of deposit, Call money and

Commercial bills.

(iii) Investment Outlay Investment outlay is small. Investment outlay is large.

Capital Market deals in medium term and long-term

(iv) Duration Money market deals in shortterm securities.
securities.

Money market securities are comparatively more

(v) Liquidity Capital market securities are comparatively less liquid.
liquider.

Question 4.
Ramesh buys a financial asset from the RBI. This financial asset is an instrument of
short term borrowing. He has bought it because he doesn’t want to take
risk and wants an assured return. This instrument is a promissory note. It is highly
liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written
T-91.

1.Which financial asset is indicated in the above case?

2.On whose behalf does the RBI issue this instrument?
3.Why is this instrument called as the Zero Coupon Bond?
4.What does T-91 denote here?
5.What is the minimum amount for which this instrument is available?

Answer:

1.The financial asset which is indicated in the above case is ‘Treasury Bill’.
2.The RBI issues this instrument on the behalf of the Government of India.
3.The instrument is called as Zero Coupon Bond because the interest rate given by
the bank is not given openly. The interest in fact comes in the form of discount
which is given on the face value. The instrument is redeemed at par (on the
written face value). So the instrument is issued at discount.
4. T-91 here denotes the maturity period of the Treasury bill which is here 91 days.
5.The minimum amount for which T- Bills are available is ?25,000. For a higher
value it is given in the multiples of ,?25,000.

Question 5.
A company uses a financial instrument for bridge financing. The instrument here is short
term, low risk, unsecured and highly liquid. It needed to buy machinery for which it
issued equity. This turned out to be expensive as this issue involved floatation costs.
The company is a large and creditworthy and this method has come up as a great help
to it.

1.Which financial instrument is indicated in the above case?

2.Which type of instrument is this?
3.Name the types of floatation costs which are generally involved?
4.How has this method helped the company?
5.Name two money market instruments which are issued at discount and
redeemed at Par.

Answer:

1.The financial instrument indicated in the above case is ‘Commercial Paper’.

2.This is a money market instrument.
3.The types of floatation costs involved here are:
o Brokerage.
o Publishing costs.
 o Advertising costs.
o Underwriter’s commission.
4.This method has helped the company by providing short-term funds for its
seasonal and working capital needs.
5.The two money market instruments which are issued at discount and redeemed
at par are:
o Treasury bill
o Commercial paper.

Question 6.
‘Ganesh Steel Ltd.’ is a large and creditworthy company manufacturing steel for the
Indian market. It now wants to cater to the Asian market and decides to invest in new hi-
tech machines. Since the investment is large, it requires long-term finance. It decides to
raise funds by issuing equity shares. The issue of equity shares involves huge floatation
cost. To meet the expenses of floatation cost the company decides to tap the money-
market.

1.Name and explain the money-market instrument the company can use for the
above purpose.
2.What is the duration for which the company can get funds through this
instrument?
3.State any other purpose for which this instrument can be used.

Answer:

1.The company can use Commercial Paper.

Commercial paper. It is a short-term unsecured promissory note which is
negotiable and transferable by endorsement and delivery having a fixed
maturity period. It is an instrument issued by large and creditworthy companies
to raise short term funds at lower interest rates.
2.The maturity period of commercial paper is from 15 days to one year.
3.It can be used to raise short term funds for seasonal needs or to finance working
capital requirements of the business.

Question 7.
‘Dhan Samudra’ is a bank, which needs immediate cash. This has been the situation
since the RBI chose to increase the CRR (Cash Reserve Ratio). It is looking for other
banks to meet its cash requirements by borrowing from other banks in the industry.
However, it resorts to a very expensive source of fund. This source of fund has an
inverse relationship with other sources of funds like commercial paper and certificates of
deposit.

1.Which financial instrument is highlighted In the above case?

 2.How does increased CRR change the cash requirements by banks?
3.Why this financial instrument considered an expensive source of finance?
4.What type of inverse relationship exists between this instrument and commercial
paper or certificates of deposit?

Answer:

1.The financial instrument highlighted in the above case is ‘Call Money’.

2.The increase in CRR (Cash Reserve Ratio) makes a bank keep a definite
amount of cash. For example, if CRR is 5% then bank will have to keep 5% of
its money as the cash reserve which it will not touch. Thus the ability of the
bank to give loans is reduced thus reducing liquidity in the market.
3.Call Money is considered an expensive source of finance because it is made
available to the banks at a very short notice. The interest paid by the banks
seeking call money is call rate. The call rate is highly volatile and changes on
an hourly basis.
4.The inverse relationship which exists between call money and these instruments
is that with the rise in the call money rates these sources become cheaper. So
the banks have the option of raising funds from these sources in a
comparatively cheaper manner.

Question 8.
A developmental financial institute issues a money market instrument. It is issued by the
financial institute during the time of tight liquidity. This helps the firm to mobilize large
amount of funds in a short period of time.

1.Which money market instrument is highlighted in the above case?

2.What are the characteristics of a money market instrument?
3.Which other type of body can issue this money market instrument? When?

Answer:

1.The money market instrument which is highlighted in the above case is

‘Certificate of Deposit’.
2.A money market instrument is short-term, highly liquid, unsecured and involves
low risk.
3.The other type of body which can issue certificate of deposit is ‘Commercial
Bank’. It issues certificate of deposit when the deposit growth is slow and the
demand for credit is high.

Question 9.
A business firm issues a money market instrument to finance its working capital
requirements. In order to finance the credit sales of the firm it issues this instrument. A
textile firm which is taking goods on credit from this firm promises to buy on the 25th of
the next month. The selling business firm makes use of this instrument when the’ date
arrives.

1.Which money market instrument is highlighted in the above case?

2.What is the role of commercial bank in the above process?
3.Explain the above process in detail.

Answer:

1.The money market instrument which is highlighted in the above case is

‘Commercial Bill’.
2.When the trade bill is accepted by a commercial bank it becomes a commercial
bill.
3.When the goods are sold on credit the buyer has to make payment on a specific
date in the future. The seller now has an option either to make payment on the
specified date or make use of bill of exchange. Here the seller is known as the
drawer (he draws the bill) . and the buyer is known as the drawee (he accepts
the bill). As soon as the bill is accepted it becomes a trade bill. These bills can
be given to a bank or these bill could be discounted with the bank which makes
it a commercial bill as soon as it accepts it. Here onwards the bank takes the
responsibility of taking money from the buyer. The seller gets a little less than
the actual value. The bills receivable are handed over to the bank.

Question 10.
Identify the type of financial market in the following cases:

1.The value of securities issued by a company is low. It has not set up a huge
financial outlay. Mr. Manuj has purchased 100 units of shares with the value of
?8G each. Though he has small savings yet he is able to invest money in this
financial market.
2.A financial market deals only in short term securities. The securities in the market
may even be issued for a single day.
3.A financial market deals in medium and long term securities such as equity
shares and debentures.
4.The participants in this financial market are institutions like banks, corporations,
large sized companies and members of the public.
5.The securities in this financial market yield low rate of return.
6.The securities return in this market is riskier in relation to both the returns as well
as principal amount. The reason is the performance of the issuing companies.
When these companies perform well there are chances of high return but when
the other way round happens the returns may go down and result in loss of
money to the investors.
 7.In this financial market there is a higher degree of liquidity of the financial
instruments available to the investors as there is an institute which takes
guarantee of this action. The name of this institute is DFHI (Discount Finance
House of India).
8.There is minimum risk of default in this financial market. There is shorter duration
of investment and this provides financial stability to the investors. The issuing
houses have a very good history of creditworthiness.

Answer:
The type of financial market in the above mentioned cases are:

1.Capital Market
2.Money Market
3.Capital Market
4.Capital Market
5.Money Market
6.Capital Market
7.Money Market
8.Money Market

Question 11.
In the above Question 10 find the ‘basis’ on which these distinctions between ‘Capital
Market’ and ‘Money Market’ have been made.
Answer:

1.Investment Outlay
2.Duration
3.Duration
4.Participants
5.Expected return
6.Safety
7.Liquidity
8.Safety

Question 12.
Ramesh the CEO of a company thinks of going with the most popular method of raising
funds used by the public companies. He discussed this option with his immediate
subordinates. After discussion he realises that since his company is a private company
he should think of some other option. Then they think of issuing the securities through
intermediaries like issuing houses or stock brokers. When his nephew comes to know
about his decision, he decides to suggest his uncle another way. He advises him to
involve institutional investors which will help him raise funds more quickly and reduce
many mandatory and non-mandatory expenses. After a lot of discussion the option
suggested by his nephew is chosen as final.
 1.In the above case identify the various methods of floatation highlighted.
2.Which method do you think will be applicable in the primary market?
3.In which type of capital market trading of only existing shares is done?
4.In which type of capital market only buying of securities is possible as securities
can’t be sold here?
5.Which type of capital market doesn’t have fixed geographical location?

Answer:

1.The various methods of floatation highlighted in the above case are:

o Offer through prospectus. Ramesh the CEO of a company thinks of
going with the most popular method of raising funds used by the public
companies.
o Offer for sale. Then they think of issuing the securities through
intermediaries like issuing houses or stock brokers.
o Private placement. He advises him to involve institutional investors
which will help him raise funds more quickly and many mandatory and
non-mandatory expenses could be avoided.
2. The method which will be applicable in the primary market will be ‘offer through
prospectus’.
3.The type of capital market in which trading of only existing share is done is
‘Secondary Market (Stock Exchange)’.
4.Primary Market
5.Primary Market

Question 13.
Meca Ltd. a reputed automobile manufacturer needs Rupees ten crore as additional
capital to expand its business. Atul Jaian, the CEO of the company wanted to raise
funds through equity. On the other hand the Finance Manager, Nimi Sachdev said that
the public issue may be expensive on account of various mandatory and non-mandatory
expenses. Therefore, it was decided to allot the securities to institutional investors.
Name the method through which the company decided to raise additional capital
Answer:
Private Placement.

Question 14.
Sika Ltd., a reputed industrial machines manufacturer, needs Rupees twenty crores as
additional capital to expand the business. Mr. Amit Joshi, the Chief Executive Officer
(CEO) of the company wants to raise funds through equity. The Finance Manager, Mr.
Narinder Singh, suggested that the shares may be sold to investing public through
intermediaries, as the same will be less expensive.
Name the method through which the company decided to raise additional capital.
Answer:
Offer for Sale.
Question 15.
Raman who is a broker in a stock exchange has to face fchallenging questions from
society. His own family sometimes asks him to think about his decision to become a
broker. He however, has full faith in the stock exchange. He knows that the membership
of a stock exchange is properly regulated abiding the legal system and the public doing
investment is safe in making deals. His children one day asked him the reason behind
the ups and downs in the stock market. He clarified their doubt by telling them that
forces of supply and demand decide the prices of securities in the secondary market.
Off late he has decided to write a book on the functioning of stock exchange and its
significance in the Indian economy. He is trying to highlight in his book how through the
process of investment and disinvestment existing securities are sold and resold and
savings are channelized into the most productive opportunities. Definitely Raman is
justifying his presence in his job.

1.What is the meaning of Stock Exchange?

2.Identify and briefly explain the functions of Stock Exchange discussed in the
above case.
3.What is an e-IPO?

Answer:

1.Stock exchange is a collection of individuals, formed as a body or not, constituted

for the objective of helping, controlling and regulating the dealings related to
buying and selling of securities.
2.The different functions of Stock Exchange highlighted in the above case are:
o Ensures safety of transaction. He knows that the membership of a
stock exchange is properly regulated abiding the legal system and the
public doing investment is safe in making deals.
o Helps in deciding pricing of securities. He clarified their doubt by telling
them that forces of supply and demand decide the prices of securities
in the secondary market.
o Helps in contributing to the economic growth. He is trying to highlight in
his book how through the process of investment and disinvestment
existing securities are sold and resold and savings are channelized into
the most productive opportunities.
3.When a company proposes to issue capital to the public with the help of on-line
system of the stock exchange and enters into an agreement with it. This
method of issuing of capital to the public is known as e-IPOs.

Question 16.
Rajni Auto manufacturers have decided to give a special privilege to the existing
shareholders to subscribe to the new issue of shares where they will be given shares
according to the proportion of shares held by them. The company always gives special
treatment to loyal stakeholders. Last year the company was dealing through the capital
market where both the buying and selling of securities were taking place. The owner of
the company is a man of ethical business. He recently wrote an article about the
watchdog of stock market. The article gained a lot of popularity and now is part of the
curriculum of MBA students.

1.Which method of floatation was used by Rajni Auto manufacturers?

2.Which type of capital market was this company dealing in?
3.Which watchdog of the capital market has been referred to in the above case?
4.Name two regulatory functions of this above referred organisation?

Answer:
The method of floatation used by the company is ‘Rights Issue’. Rajni Auto
manufacturers have decided to give a special privilege to the existing shareholders to
subscribe to the new issue of shares where they will be given shares according to the
proportion of shares held by them.

1.The company was dealing with the ‘Secondary Market’.

2.Last year the company was dealing through the capital market where both the
buying and the selling of securities were taking place.
3.The watchdog of the stock market referred to in the above case is ‘SEBI’
(Securities and Exchange Board of India).
4.The two regulatory functions of SEBI are:
o SEBI regulates registration of brokers and sub-brokers in the market.
o SEBI does the regulation of takeover bids by different companies.

Question 17.
Nishant is a big supporter of the vital role played by the stock exchange in securing
wider circulation of ownership of companies to the common people and supports the
education of the common public about the positive effects of making investments.
However, he knows nothing spreads very fast in public and takes its own time. He
knows that it is only due to the presence of the stock markets that a continuous market
is made available to the buying and selling of the securities. People don’t want late
results; they want everything instant. True investor knows that there should be
knowledge before the habit of making investments. The knowledge about the
companies participating should be there before any big decision is taken. Most of the
people however, get attracted to the stock market as it allows speculative activity within
limits which helps in liquidity of the shares in the stock market. We have different news
papers which give a lot of news these days about strictness in the stock market. All this
is happening today because scams took place in the 80s. But now everything takes
place in legal framework providing safe and fair deal in the market. It can be expected
that in the future days to come things are going to get better for investors and issuers,
not to mention the intermediaries.
Identify and explain the functions of stock exchange discussed in the above para.
Answer:
The different types of functions of stock exchange highlighted in the above case are:

1.Stock exchange helps in the spreading of the equity cult. Nishant is a big
supporter of the vital role the stock exchange plays in securing wider circulation
of ownership of companies to the common people and supports the education
of the common public about the positive effects of making investments.
2.Stock exchange helps in providing liquidity and marketability to the traded
securities. He knows that it is only due to the presence of the stock markets
that a continuous market is made available to the buying and selling of the
securities.
3.Stock exchange attracts the investor by providing scope for
speculation. Most of the people however, get attracted to the stock market as it
allows speculative activity with the healthy limits which help in liquidity of the
shares in the stock markets.
4.Stock exchange secures safety of transaction of the securities. But now
everything takes place in legal framework providing safe and fair deal in the
market.

Question 18.
Ashish selects a person who is authenticated to buy or sell securities on his behalf. He
is registered by SEBI. Then through this person Ashish opens an account with a bank.
Then he takes the next step. He gives this person an order in which he specifies the
number and types of securities to be bought or sold. The process moves forward. After
getting the instructions from Ashish the selected person buys and issues d’ paper. The
paper contains the name and price of securities, brokerage charges and the name of
the parties involved. Then comes the concluding stage of the process. Here, the trading
of securities is done by the selected persons on behalf of Ashish.

1.Identify the process highlighted in the above case.

2.Which type of account is being indicated here?
3.What is the role of bank here?
4.What is the role of the person he has chosen?
5.What one condition should be met when giving orders for the purchase of
securities?
6.What is the name of the paper highlighted above?
7.What is the last stage of the process called? Does it have any specific feature?

Answer:

1.The process highlighted in the above case is ‘Trading procedure on a Stock

Exchange’.
2.The type of account indicated here is ‘Demat Account’.
 3.The bank is the ‘Depository Participant’.
4.The person chosen here is the ‘Broker’.
5.The condition which must be met is that the securities traded should be of the
listed companies.
6.The name of the paper which is highlighted above is ‘Contract Note’.
7.The last stage of the process is called ‘Settlement’. The specific feature is the
T+2 rolling settlement feature. It means that the trading of security taking place
on a particular day will get settled after two days. For example trading taking
place on Wednesday will be settled by Friday.

Question 19.
Identify the type of function of SEBI in the following cases:

1.Rajeev was unwilling to buy shares in the stock market as he was told by
someone that stock market is a place where various malpractices take place.
He decides to discuss the matter with his friend who explains to him how SEBI
takes care of the interests of the investors.
2.Pankaj wants to become a stock broker. When he approaches people and asks
them to get started as investor through him they ask for a certificate which the
SEBI must have given him. He becomes aware of the fact that in order to
function as a stock broker he will have to get registered with SEBI.
3.Kirti Steels already has issued shares in the stock market and is a well known
name among the people. Recently it issued shares but had to go through the
proper audition process and thorough inspection about the various
requirements to be fulfilled as an issuer.
4.Recently some people were caught in some of the malpractices like insider
trading. The SEBI has decided to take strict action and cancel their candidature.
Further penalties are also to be imposed on them.
5.A magazine has published a report on how SEBI is serious about training of the
intermediaries and deciding their code of conduct. A lot of research has been
going on in various related areas and the information of use is being published
so that various participants can get useful results from it.
6.Some workshops are being organized to create awareness among the investors.
The programme will not stop here. There is going to be a proper education of
the investors. After the workshop is over a test will be conducted to check the
knowledge and applicative ability of the investors.

Answer:

1.Protective function
2.Regulatory function
3.Regulatory function
4.Protective function
5.Development function
 6.Development function

Question 20.
Mr. Sanjay Nehra was the Chairman of ‘Taran Bank/ The bank was earning good
profits. Shareholders were happy as the bank was paying regular dividends. The market
price of their shares was also steadily rising. The bank was about to announce taking
over of ‘Vena Bank/ Mr. Sanjay Nehra knew that the share price of ‘Taran Bank’ would
rise on this announcement. Being a part of the bank, he was not allowed to buy shares
of the bank. He called one of his rich friends Sudhir and asked him to invest ?5 crores in
shares of his bank promising him the capital gains.
As expected the share prices went up by 40% and the market price of Sudhir’s shares
was now 77 crores. He earned a profit of ?2 crores. He gave ?1 crore to Mr. Sanjay
Nehra and kept ?1 crore with himself. On regular inspection and by conducting
enquiries of the brokers involved, Securities and Exchange Board of India (SEBI) was
able to detect this irregularity. The SEBI imposed a heavy penalty on Mr. Sanjay Nehra.
By quoting the lines from the above para identify and state any two functions that were
performed by SEBI in the above case.
Answer:

Function Lines from the para

‘On regular inspection and by conducting enquiries of the brokers involved

Regulatory
Securities and Exchange Board of India (SEBI) was able to detect this irregularity.
function
’

Protective
‘The SEBI imposed a heavy penalty on Mr. Sanjay Nehra.’
function
 Question 21.
Rajesh is the CEO of a leading petrochemical company. Recently the company issued
equity to meet some costs. However to meet the floatation costs incurred to issue equity
the company decided to do Bridge Financing. So it decided to issue a type of money
market instrument. The requirement of the company was met intelligently by good
decision of its wise CEO. Three months later the company decided to issue a new
equity again for the first time in the primary market. According to the method of
floatation it involved it decided to go for the method adopted mostly by the public
companies and made an appeal to the masses by directly approaching them. Again the
success comes the way of the company and its objectives are achieved. However when
the same type of attempt was made by the company again after another three months
the company had a lot of problem. The problem was about deciding one key aspect
related to the new issued security. The company would not have cared much about this
key aspect if the same process would have taken place in the secondary market.

1.Which type of money market instrument was issued by the company m the
earlier part?
2.Which method of floatation was adopted by the company three months later?
3.What key aspect the company would not have cared about in the secondary
market?

Answer:

1.The type of money market instrument issued by the company in the earlier part is
‘Commercial Paper’ as it involves bridge financing. However to meet the
floatation costs incurred to issue equity the company decided to do Bridge
Financing.
2.The method of floatation adopted by the company three months later is ‘Offer
through Prospectus’.
3.The key aspect about which the company should not have cared in the
secondary market is about the pricing of the securities as the prices are decided
by the demand and supply of the securities whereas in the primary market it is
decided by the management.

Question 22.
A company wanted to raise funds so it reached out to facilities an institutional
arrangements through which long term funds (debt + equity) were raised and invested.
A lot of thinking was done whether the company should have gone for debt or equity.
Finally, it decided to go for equity. The owner of the company decided to follow the
guidelines of SEBI.

1.Which concept of financial market is highlighted in the starting of the case?

2.Name two objectives of SEBI.
Answer:

1.The concept of financial market which is highlighted in the above case is ‘Capital
Market’. A company wanted to raise funds so it reached out to facilities and
institutional arrangements through which long term funds (debt + equity) were
raised and invested,
2.The two objectives of SEBI are:
o SEBI regulates the security industry and the stock exchanges. It
ensures their proper functioning.
o SEBI ensures investors’ protection by taking various steps against
malpractices in stock market.
 Chapter 11: Marketing
Question 1.
Suyash is very thirsty. He is in the middle of a desert. Soon he finds a cold drinks’ shop. He goes
and purchases three bottles and drinks them to satisfy his thirst. After drinking the cold drink he
realises that it has been developed after analyzing the needs and preferences of the potential
customers. On observing the outer side of the bottle he finds details like contents, flavour, size,
prize, etc.

1. What is ‘Cold Drink’ and ‘Thirst’ here in relation to each other?

2. Identify one feature of marketing which has been highlighted here?
3. How is cold drink a good market offer here?

Answer:

1. ‘Cold Drink’ is ‘want’ here and ‘Thirst’ is ‘need’.

2. One feature of marketing which is highlighted here is ‘Creating a Market
Offering’. On observing the outer side of the bottle he finds details like
contents, flavour, size, prize, etc.
3. A cold drink is a good market offer as it has been developed after analyzing
the needs and preferences of the potential customers.

Question 2.
Identify the true exchange mechanisms in the following cases:

1. Rajeev was a hardworking stationery shop keeper. One day when he was
standing in front of the mirror he took money from one of his pockets and
took out a pen from the other. He allocated ?100 for the pen and decided
to keep the pen for his personal use. In the coming days he utilized the pen
properly and was satisfied with if.
2. Kiran was a book seller. One day she was selling books. She approached a
person who was sitting on a pavement. She offered her a book and found
that he was not having enough money to pay. So she willingly gave her the
book without taking money.
Answer:

1. No it was not a true exchange mechanism as a true exchange mechanism

requires at least two parties.
2. No it is not a true exchange mechanism as both the parties should be
capable of giving something of value to each other.

Question 3.
Identify the marketer in the following cases:

1. A coffee making company is making big hoardings to appeal college going

students. A contest is also being organized outside every major company’s
office to lure more and more number of customers. The radio channels are
playing a very special jingle made for coffee lovers at least 3 to 4 times a
day. The company is trying its level best to increase its customer base.
2. A detergent making company has decided to sell organic detergent to suit
the needs of the people with very sensitive skins. This move is to make a
special niche in the market to increase brand loyalty towards the company.
3. A person is searching for a life saving drug for a particular disease. He has
tried several places but he hasn’t been able to find it. One day he comes to
know that a particular company used to make that drug a few years back
on a large scale but now it makes only limited number of tablets of that
drug. He approaches that company and urges them to give him the drug.
4. Country ‘A’ approaches Country ‘B’ and asks it to hand over some nuclear
material. This material is required in the Country ‘A’ to meet its electricity
requirements. Country B is rich in this resource but normally doesn’t export
the nuclear material to any country. However, on repeated urgings of the
Country ‘A’ it agrees to do so.
5. ‘White Wash’ is a car cleaning company having a good turnover. Recently in
the top level meeting it has decided to increase its customer base. For this
the company has decided to go door to door in all the major areas of their
reach and convince the car owners of all income brackets to give them a
chance for their services.

Answer:
 1. The coffee making company
2. The detergent making company
3. The person who is looking for the drug is the marketer here as he is making
more efforts here.
4. Country A (though is a buyer here but since it is making more effort in the
exchange process).
5. The car cleaning company ‘White Wash’ as it is playing the active role here.

Question 4.
Identify the marketing management philosophy involved in the following cases:

1. Geetika scooters are the leading manufacturers of scooters in the industry.

They have the first mover advantage in the industry. When they started
manufacturing scooters no other company was doing it. They manufacture
scooters and the middle class purchases them in a high number. With each
passing year the number of scooters sold is increasing. The company’s main
concern usually is to produce maximum number of scooters. Company’s
profit is governed by the maximum number of scooters they produce.
2. Aman microwaves produce microwaves but they do not try to understand
the needs of the customers. Their main focus is always on the quality of the
product but never on customer requirement. They try’ to include as many
features as possible in their product. This year they have added a special
type of alarm in their product which is a unique feature. The alarm is
available in ten varieties. However, the customers say that the product is
not of much use to them as it consumes a lot of electricity.
3. Ravi coolers is a very progressive company. The owners of the company
feel that unless and until they contribute to society it is worthless to exist
as a company. In a recent move by the government the organisation has
decided to help it. The organisation will be making five teams of hired
environmentalists from foreign countries. This team will help the local
people clean the portions of a polluted river in the country. The costs of
this project will be borne by the company.
4. Rajesh is a manager in a company. His main area of focus is to generate
revenue for the company through repeated sales. He decides to develop a
product for the company which can generate revenue in the long run. For
this he meets a team of R&D (Research & Development) of his company.
After a long meeting they decide to do survey. Based on the survey a
product is made to fulfill needs pf the customers. The product later
produces a lot of revenue through repeated sales in the long run.
5. A company decides to do promotion for a new chips flavour. For this many
contests are organized in different colleges. The youth is the target market
for the chips makers. However, there hasn’t been proper research about
the liking of the flavour among the youth. The company has launched this
product based only on intuition. The company has decided to go ahead
with the promotional campaign even if there is a negative response from
the buyers.
6. Aakriti foods is making a great impact in the food industry. The top
management of the company has been in news for helping the villagers in
the rural areas grow their income. They have made alliances with groups of
people of different villages. They procure handmade food products from
them and help these products find a way to the elite class of metro cities.
The company has its motto of replacement of the western taste with that
of Indian among the elite class. The company is very intelligent to see a
high paying elite class as the target segment.
7. A company is manufacturing a new type of helicopter for the rich people.
The helicopters manufactured are patented products of the company. No
other company has made this type of helicopter yet. The company says
since the helicopter is unique the booking of the product is done in
advance by the buyers. There has been demand in excess. The company is
in no need to market its product. It has to see that it can make the
helicopter available to people who can buy it.
8. An Air Conditioner manufacturing company is busy these days in adding
features to its products. This is being done to increase its customer base.
The company has not done any research to see which types of features are
liked and which are in excess. It is only making its product loaded with new
features. The needs of the customers are not considered. When asked why
they are not doing proper research to know the expectations of the
customers they replied that they have full faith on the performance of their
Air Conditioners.
9. A company which deals in apparels has decided to clear its stock. The
company has a huge pile of clothes to be cleared across its various
branches. The company has decided to give discount on its products. It
even has decided to go for various fashion shows in different colleges. It
has also decided to sponsor a few events. However, people say that the
clothes are not much of current fashion and the company is not
considering the choice of the customers.
10. An automobile company is a leading manufacturing company in its
segment. The company has decided to launch fully solar charged vehicles.
This technology will cost the company ?2000 crores annually. When the
relationship manager of the company was asked about the reason of
bearing so much extra cost he replied that the company considered
environmental friendly techniques as the only solution to increasing
 pollution. The company feels by bearing extra cost it is fulfilling its
responsibility.

Answer:

1. Production concept
2. Product concept
3. Societal marketing concept
4. Marketing concept. Since the word ‘sales’ has been used do not confuse it
with the selling concept. Here customer needs are understood by the
organisation.
5. Selling concept. Though here the word promotion is used it doesn’t mean
that the company is applying the marketing philosophy. The product is not
launched after analysing the tastes and preferences of the potential
customers.
6. Marketing concept. Do not confuse it with Societal Marketing concept. The
main purpose of the company is not social welfare it is only maximization
of profit.
7. Production concept. Since the product is being sold on availability and
affordability of the product.
8. Product concept
9. Selling concept
10. Societal marketing concept

Question 5.
‘Beauty Products Ltd.’ is a natural and ethical beauty brand famous for offering organic beauty
products for men and women. The company uses plant based materials for its products and is the
No. 1 beauty brand in the country. It not only satisfies its customers but also believes in overall
protection of the planet.
Identify the marketing management philosophy being followed by ‘Beauty Products Ltd.’
Answer:
Societal marketing philosophy/concept.

Question 6.
Ginika, Tanish and Rohit were friends from college days and now they are doing different kinds
of business. They regularly meet and discuss their business ideas and exchange notes on
customer satisfaction, marketing efforts, product designing, selling techniques, social concerns
etc.
In one of such meetings, Ginika drew the attention of Tanish and Rohit towards the exploitation
of consumers. She told that most of the sellers were exploiting the consumers in various ways
and were not paying attention towards the social, ethical and ecological aspects of marketing,
whereas she was not doing so.
Tanish told that they were under pressure to satisfy the consumers, but stated that the consumers
would not buy or not buy enough unless they were adequately convinced and motivated for the
same.
Rohit stressed that a company cannot achieve its objectives without understanding the needs of
the customers. It was the duty of the businessmen to keep consumer satisfaction in mind because
business is run by the resources made available to them by the society. He further stated that he
himself was taking into consideration the needs of the customers.
Identify the various types of thinking that guided Ginika, Tanish and Rohit in the marketing
efforts of their business. Also, state one more feature of the various types of thinking identified
that is not given in the above para.
Answer:
Various types of thinking that guided the marketing efforts were:
Ginika – Societal marketing concept/ thinking/ philosophy.
Additonal Feature. Societal marketing concept or philosophy aims at identifying the needs and
wants of the target market and delivering the desired customer satisfaction in an effective and
efficient manner so that a business is able to take care of the long term well-being of the
consumers and the society.
Tanish – Selling concept/thinking/philosophy.
Additonal Feature. Firms following this philosophy undertake aggressive selling and
promotional efforts to make customers buy their products.
Rohit – Marketing concept/ thinking/philosophy.
Additonal Feature. Firms following this concept or thinking take all the decisions from the
point of view of statisfaction of customers. It involves development of products for satisfying
needs of the target market better than the competitors.

Question 7.
‘Extra Calories’ is a profit making potato chips company. The company has entered a foreign
country. It has found that the youth is going to be the appropriate section of society to be
targeted. The marketing head of the company has a vision for the company for another 10 years
to make its mark in the market. The major challenge would be to beat the existing potato chips
selling companies by giving chips of better taste so that the existing young buyers could make
‘Extra Calories’ chips as their favourite brand. The company is quite clear about its objectives. It
has decided to make a net profit of at least Rs. 50 crores in its first year and later on it would like
to increase this profit with passing years. Definitely the vision of the company is quite clear.
Identify the pillars of the marketing concept discussed in the above case.
Answer:
The pillars of marketing concept highlighted in the above case are:
 1. Identification of the market to be chosen for the marketing. It has found
that the youth is going to be the appropriate section of society to be
targeted.
2. Satisfying needs of the target market better than the competitors. The
major challenge would be to beat the existing potato chips selling
companies by giving chips of better taste so that the existing young buyers
could make ‘Extra Calories’ chips as their favourite brand.
3. Doing all the above efforts for a profit (It has decided to make a net profit
of at least ?50 crores in its first year and later on it would like to increase
this profit with passing years).

Question 8.
A garment manufacturing company has decided to identify the needs of the customers to start
successful marketing of the garments produced by it and for this the company is doing SWOT
analysis (Strength, Weakness, Opportunity and Threat Analysis). The company is pursuing its
objectives with full efforts. It has decided to make a blueprint for the amount of production it
will do, the efforts behind promotion it will put and all other major actions it will undertake to
achieve its objectives. However, the company has one weak area which it would like to improve.
The physical movement for its prepared garments was not proper last year and the company
wants to ensure it is done properly this year. For this thing to be done properly it has created a
separate department. Hope the company does better in future.
Which functions of marketing have been highlighted in the above case?
Answer:
The functions of marketing highlighted in the above case are:

1. Gathering and analysing market information. A garment manufacturing

company has decided to identify the needs of the customers to start
successful marketing of the garments produced by it and for this company
is doing SWOT analysis (Strength, Weakness, Opportunity and Threat
Analysis.
2. Marketing Planning. It has decided to make a blueprint for the amount of
production it will do, the efforts behind promotion it will put and all other
major actions it will undertake to achieve its objectives.
3. Transportation. The physical movement of its prepared garments was not
proper last year and the company wants to ensure it is done properly this
year.

Question 9.
Radhika was a student of Business Studies of Class XII. Her father was a farmer who grew
different varieties of rice and was well-versed about various aspects ot rice cultivation. He was
also selected by the government for a pilot-project on rice cultivation. As a project-work in
Business Studies she decided to study the feasibility of marketing good quality rice at a
reasonable price. Her father suggested her to use the internet to gather customers’ views and
opinions. She found that there was a huge demand for packaged organic rice. She knew that there
were no predetermined specifications in case of rice because of which it would be difficult to
achieve uniformity in the output. To differentiate the product from its competitors, she gave it
the name of ‘Malabari Organic Rice’ and classified it into three different varieties namely—
Popular, Classic and Supreme, based on the quality. She felt that these names would help her in
product differentiation. Explain the three functions of marketing, with reference to the above
paragraph.
Answer:
Three functions of marketing referred in the given paragraph are as follows:

1. Analysing and gathering market information. It is an important function

from marketing view point. It is essential for the marketer to identify the
needs of the customers and to take various decisions for successful
marketing of goods and services. It helps the marketer in an analysis of
several opportunities as well as threats along with the strengths and
weaknesses of the business enterprise.
2. Standardisation and Grading. Standardisation is the process of setting
certain standards for the product to provide it uniformity and consistency.
It aims at providing good quality of products to the customers to enhance
their level of satisfaction.
Grading refers to classifying the product into different groups as per certain
predetermined standards. It is necessary for products not having any
predetermined specifications.
3. Branding. It is the process of providing a name to the product so that it can
be distinguished easily from other similar products available in the market.
It helps the customer in identifying the product. It also helps in promoting
the sales and building customer loyalty. A brand name can either be
generic or specific. A marketer has to decide the branding strategy of the
product carefully so it brings in more sales for the business enterprise.

Question 10.
A company wants to increase the sales of its products. To do this the company is applying all
tactics like informing the customers about its products, persuading them to buy these products,
involving personal selling and promotional activities. The sales might pick up with these efforts
but there is something more it is concerned about doing. The issue which is worrying the
company is repeat purchase. For this, the company is taking interest in after sales services,
maintenance services and providing useful information to the customers. With these efforts the
real purpose of the company may get fulfilled. However, the company is avoiding one aspect
which is related to the decision regarding channels of distributing products. The company
doesn’t have a well decided strategy for it. Which functions of marketing have been highlighted
in the above case?
Answer:
The functions of marketing highlighted in the above case are:

1. Promotion. To do this the company is applying all tactics like informing the
customers about its products, persuading them to buy these products,
involving personal selling and promotional activities.
2. Customer support services. For this, the company is taking interest in after
sales services, maintenance services and providing useful information to
the customers.
3. Physical distribution. However, the company is avoiding one aspect which
is related to the decision regarding channels of distributing products.

Question 11.
Atul was a pen manufacturer. He used to make ball point pens in a small factory in the basement
of his house. Daily he would go to the market place and distribute pens to the retailers. Some of
the pens were sold by him of his own by meeting persons on road. He had not kept any name for
his pens. They were just blue, black and red pens. One of his friends suggested him to keep a
good name of his pens. He kept his own name and started selling pens with the name of Atul
Pens. Then there were three categories of pens – Atul Red, Atul blue and Atul black. Gradually
his business started to pick up even more and he made good revenue.

1. Which function of marketing is highlighted in the above case?

2. Which element of promotion mix has been highlighted in the above case?
3. What two types of names do you see in the above case?
4. Which of the above two identified names was better? Why?

Answer:

1. The function of marketing highlighted in the above case is Branding (One of

his friends suggested him to keep a good name for his pens).
2. The element of promotion mix which has been highlighted in the above
case is Personal Selling (Daily he would go to the market place and
 distribute pens to the retailers. Some of the pens were sold by him on his
own by meeting persons on road).
3. The two types of names you see in the above case are—Generic name
(When he had kept no name for his pens and was just selling them as pens)
and Brand name (When he had kept the name of his pens as Atul pens).
4. Brand name was better. The reason being that people can identify products
with their makers only by a name which helps in association with the
product; a generic name can’t differentiate between two makers.

Question 12.
Amav is a distributer of tea to far off places. He has opened a company which deals in tea
selling. He has categorized his tea to be sold into three categories: Green, Yellow and Red. His
brother Ramesh on the other hand is running a mobile manufacturing company. His company
strictly produces mobile according to the pre¬determined specifications. The mobiles of each
variety are of same size, looks and performance.

1. In the above case which function of marketing has been highlighted?

2. Name the four advantages of the above highlighted function.

Answer:

1. In the above case the function of marketing which has been highlighted is
‘Standardisation’ and ‘Grading’.
2. The advantages of Standardisation are:
o The buyers get standard quality products which are
according to the given standards.
o The time of buyer is saved as there is no need to
inspect the product.
The advantages of Grading are:
▪ Grading helps in categorizing
products which are not produced
as per standards for example
natural products like wheat, rice,
etc.
▪ Grading helps in getting good
price for premium quality
 products and saves time of seller
as well as buyer.

Question 13.
Identify the element of marketing mix in the following cases:

1. Naresh bought multi gym equipment from a renowned company. The

company gave a warranty period of 1 year. Naresh used to do workout on
this equipment daily. Everything was going fine till one day some problem
in the wire of the equipment occurred. Naresh called the company and told
them that it is still in the warranty period. A service engineer from the
company visited his home and fixed the problem. Naresh was further told
that the maintenance service for 1 year is free of cost. Which element of
marketing mix is maintenance here?
2. Savita has started a shirt manufacturing business. The shirts are in high
demand in the market. She has made her shirts available to the
intermediaries at the mall. The major concern for her is to make them
available the shirts whenever they need. The inventory kept by the
intermediaries is always kept in mind and wherever there is any shortage
of shirts they are supplied at the earliest. Sometimes prior information is
kept with the head office and any possible shortage in inventory is met in
advance. Which element of marketing mix is inventory here?
3. A vacuum cleaner company made a model which was of unique type. Many
people purchased it. However, after a few years its production had to be
closed down as the demand of the product declined with passage of time.
The company took a wise decision and always kept spare parts available
with it. This was done to maintain the specific type of vacuum cleaners
made by it. So if the customers who had purchased this vacuum cleaner
could buy the spare parts if in case they wanted to repair or run the cleaner
properly. Which element of marketing mix is ‘spare parts’ here?
4. ‘Zero Errors’ is a mobile manufacturing company. The mobiles are of high
quality and are in demand. The company has decided to increase its
customer base by initiating a liberal credit terms to the potential customers
on one of its mobile model. A ?40,000 mobile can now be purchased
through credit and the installments to be paid will be 10 of f4,000 each. It
is expected that this way many people can afford the pricey model of the
mobile. Which element of marketing mix is ‘credit terms’ here?
5. A noodle manufacturing company has started a campaign where it will be
going to different schools during the class timings. During this time free
samples of noodles will be distributed to the students and the teachers.
 The idea is to make them aware about the taste and the quality of the
product in advance. The company is taking this initiative as it has in the
past given very good results to its other products. Through free samples it
will develop first contact of its noodles and its goodness with the potential
customers. Which element of marketing mix is ‘free samples’ here?
6. A TV manufacturing company is very confident about selling its products.
The main focus of the company is always on the features of the products
they make. They always try to add new features and these are added after
having done a lot of research on the subject. The quality is an obsession for
them. They try to keep their quality levels to the highest and for this all
necessary steps in the process of production are undertaken. Simple is to
say that the core strength of the company are quality and features of the
product. Which element of marketing are ‘Quality and Features’ here?
7. ‘Ultimate Luxury’ deals in making watches. The company has maintained its
number one spot in the watch making business. They have always
associated their watches with a class and as soon as the name of this watch
comes an association with luxury comes in the minds of the listeners. The
company has created its brand value by giving extreme attention to quality.
The brand value of the ‘Ultimate Luxury’ is the highest in the industry.
Which element of marketing mix is branding here?
8. A biscuit making company is trying to increase its business. It knows, for
this, the role of the intermediaries is going to be cruciai. A meeting of the
top management is called and factors are highlighted which are responsible
for the underutilisation of the potential of the distributors. In product like
biscuit the intermediaries play a very significant role. The company has
decided to give discounts to them and start a vigorous promotional
campaign to involve the intermediaries. Which element of marketing mix is
highlighted in the above case?
9. A new car has been introduced in the market. The car is breaking records of
selling. The reason behind its success is its mileage. The mileage of the car
is the best in the industry. No car is able to match its mileage. The company
has focused its attention to increase the mileage of the car further. For this
the R&D department is taking all the measures and making efforts to
realise the dream of increasing the car’s mileage. Which element of
marketing mix is ‘mileage’ here?
10. A coffee serving company named ‘Planetcups’ is thinking of increasing its
customer base. Earlier it was serving a medium cup of at a higher price for
the high income group. In order to bring the lower middle class in its reach
it has decided to give an additional cup with a cup of coffee. People have
reacted positively to this step of the company and gradually its customer
base is widening. Which element of marketing mix is going to be affected
by this decision of ‘Planetcups’.
11. ‘Fabulous Organics’ is an FMCG company which only deals in organic
products. The company has its own farms where pure organic food
 products are grown. The packaging is also organic with no use of synthetic
materials like plastic. The company has decided to take the benefits of
consuming organic food products tp the masses. It has decided to arrange
for talk shows, newspaper advertisements, TV advertisements, Celebrity
involvement and organising marathons. All these efforts will be able to
bring the benefits of organic products of this company to the potential
customers. Which element of marketing mix is highlighted in this case?
12. A five star hotel has decided to include picking up of clients from airports
and railway stations. This will definitely improve the image of the hotel. It
will add to the comfort of the clients. The hotel has done this to fight the
tough competition with the new . entrants in the market. This step is
expected to increase the charges of the stay at the hotel.

In the above case which element of the marketing mix will be affected?
In the above case which element of the marketing mix is the ‘additional service of picking up of
clients from airports and railway stations’?
Answer:

1. Maintenance here is an extended form of Product. So it is a product.

2. Inventory comes under Price.
3. Spare parts come under Product.
4. Credit terms come under Price.
5. It is Promotion. Don’t confuse it with Product. The reason is it is type of the
promotional activities taken up by the company.
6. ‘Quality and Features’ will come under Product. Don’t confuse it with
promotion.
7. Branding comes under Product.
8. The element of marketing mix which is highlighted in the above case is
‘Place’. Intermediaries are the main focus of the above case and
intermediaries come under ‘Place’. Do not confuse it with ‘price’ (because
in this line ‘discount’ is mentioned) or with ‘promotion’ (because in the
same line ‘promotional campaign’ is given).
9. Mileage comes under ‘Product’ since it is a benefit given to the customers
and benefits come under ‘Product’ like quality and features.
10. The element of marketing mix which is going to get affected here is ‘Price’.
11. The element of marketing mix highlighted in the above case is ‘Promotion’.
Here the promotion is required to declare benefits of the products. Though
‘benefits’ in themselves are a part of ‘product’ yet here the main focus is
on ‘promotion’.
12. In the above case:
 o The element of marketing mix which is going to get
affected will be ‘Price’ as the five star hotel will charge
additional for this service.
o The ‘additional service of picking up of clients from
airports and railway stations’ will come under
‘Product’ as it is the part of the main product of the
hotel which is services. The extended product is
‘Product’.

Question 14.
‘Energy drinks India Ltd.’ has scanned a profitable opportunity for marketing of soft drinks with
‘Indian Traditional Flavour’. The company wants to market its products in India and in
neighbouring countries. A Board meeting of the company was held on 14.12.2015 wherein the
marketing manager was asked to give a presentation to develop this market offering.
For this it was also decided to set-up its manufacturing unit in a village of Bihar. This will not
only help in the development of the village but will also provide employment to the youth of the
village. The marketing manager chooses a combination of variables to prepare its market
offering. He used a set of marketing tools that firm will use to pursue its marketing objectives in
the target market.

1. Name and state the concept of marketing used by the marketing manager
for creating its market offering.
2. Also, explain briefly the various elements of this concept.
3. State any two values that the company wants to communicate to the
society.

Answer:

1. Marketing Mix. It is the combination of variables chosen by a firm to

prepare its market offering. It is a set of marketing tools that a firm uses to
achieve its marketing objectives.
2. Elements of Marketing mix:
o Product. Product means anything of value that is
offered to the market for sale. Product consists of the
physical product, its quality, brand name, packaging
and label.
o Price. It is the value that a buyer passes on to the seller
in lieu of the product or service provided. It is a source
 of revenue for the seller. Price element includes Price,
Discounts, Allowances, Credit Terms, etc.
o Place (or distribution). Place utility refers to the
activities that are involved in transferring the
ownership to customers and to make the product
available at the right place at the right time. It includes
mode of transportation, channel of distribution and
inventory maintenance.
o Promotion. This element includes activities involved in
informing and persuading the customers. Advertising,
personal selling and sales promotions are different
ways of promotion.
3. Values that the company wants to communicate to the society:
o By creating job opportunities they are leading to
employment generation for the youth.
o Development of backward and rural areas.

Question 15.
‘Hayaram’ is a famous chain selling a large variety of products in the Indian market. Their
products include chips, biscuits, sweets and squashes. It charges a comparatively higher price
than its competitors as it sells quality products. Besides, it offers regular discounts to its
customers and easy credit terms to its retailers. It has five of its own retail shops. It also sells its
products through various grocery stores so that the products are made available to customers at
the right place, in the right quantity and at the right time. It regularly uses different
communication tools to increase its sales.
The above para describes the combination of variables used by Hayaram to prepare its market
offering. Identify and explain the variables.
Answer:
The combination of variables used by ‘Hayaram’ to prepare its market offering is termed as
‘Marketing Mix’.
The marketing mix include the following four points:

• Product
• Price
• Place and
• Promotion.

The four ingredients of marketing mix are discussed briefly as under:

 1. Product. Product means anything of value that is offered to the market Jor
sale. Product consists of the physical product, its quality, brand name,
packaging and label.
2. Price. It is a value that a buyer passes on to the seller in lieu of the product
or service provided. It is a source of revenue for the seller. Price element
includes Price, Discounts, Allowances, Credit Terms, etc.
3. Place (or distribution). Place utility refers to the activities that are involved
in transferring the ownership to customers and to make the product
available at the right place at the right time. It includes modes of
transportation, channels of distribution and inventory maintenance.
4. Promotion. This element includes activities involved in informing and
persuading the customers. Advertising, personal selling and sales
promotions are different ways of promotion.

Question 16.
A TV manufacturing company is spending substantial amount of money to persuade the target
customers to buy its T.V. sets through advertisements, personal selling and sales promotion
techniques. Identify the element of marketing mix referred here.
Answer:
Promotion.

Question 17.
The advertisement of a travel agency states the following:
‘Visit Agra — The city of Love’, ‘Udaipur — The city of Lakes’ and ‘Mysore — The city of
Gardens’. What is being marketed by the agency through the advertisement?
Answer:
Place (Destination)

Question 18.
Mansi took her niece, Ridhima, for shopping to ‘Mega Stores’ to buy her a bag for her her
birthday. She was delighted when on payment of the bag she got a x box along with the bag free
of cost.
Identify the technique of sales promotion used by the company.
Answer:
Product Combinations.
Question 19.
Ramesh has purchased a car. He is from lower middle class and teaches in a college. He has
purchased a luxury car and has definitely prevented himself from buying a house for another 5
years. There were many reasons which stimulated him to take this expensive decision of life. His
friends are from rich backgrounds and have access to all luxuries in their lives. In order to gain
importance in his friend circle he knew he will have to purchase a car which improves his stature
in their eyes. His mother thinks that his son’s decision was not good. She considers it as wastage
of money. She thinks that the purpose of a car is only as a transportation vehicle. However, the
views of his wife differ to that of her mother’s. She thinks that since he has purchased this car his
confidence level has gone high and he is mentally more equipped as he can rely on his car for
several benefits like transportation, prestige, etc. Definitely people have their different
perceptions to a situation. Similar is the case with his family members.

1. In the above case which concept of marketing has been highlighted

throughout the paragraph?
2. Which benefits have been highlighted in the above case related to the
concept in the previous part of this question?

Answer:

1. The concept of marketing which is highlighted in the above case is ‘Product

is a bundle of utilities’.
2. The benefits highlighted in the above case are:
o Social benefit. In order to gain importance in his friend
circle he knew he will have to purchase a car which
improves his stature in their eyes.
o Functional benefit. She thinks that the purpose of a
car is only as a transportation vehicle.
o Psychological benefit. She th inks that since he has
purchased this car his confidence level has gone high
and he is mentally more equipped as he can rely on his
car for several benefits like transportation, prestige,
etc.

Question 20.
A company with an established brand name has launched a new product in the same name. This
is helping the company save a lot of expenses on building reputation and giving an excellent start
to the product. The new product is doing amazingly well and has caught attention of the
newspapers. Since, the product is enjoying a lot of fame the company has decided to charge high
prices for it, in comparison to the same product launch by competitor. The top management of
the company has decided to make an advertisement campaign for the success of the product. The
company need not worry about the success of the advertising campaign as the effect of the brand
is enough to make the audience recall it otherwise had been there no effect of brand the product
would not have got demonstrated properly. The company can expect good revenue from the
product in future. The branding of this product is such that it will stand out different from other
products of the competitors.

1. Which concept of marketing has been highlighted in the above case?

2. Identify the different types of this concept highlighted in the above case.

Answer:

1. The concept of marketing highlighted in the above case is ‘Advantages of

branding to the marketers’.
2. The different advantages of branding highlighted in the above case are:
o Ease in the introduction of the new product. This is
helping the company save a lot
of expenses on building reputation and giving an
excellent start to the product.
o Differential pricing. Since the product is enjoying a lot
of fame the company has decided to charge high prices
for it in comparison to the same product launch by
competitor.
o Helps in advertising and display programmes. The
Company need not worry about the success of the
advertising campaign as the effect of the brand is
enough to make the audience recall it, otherwise had
there been no effect of brand, the product would not
have got demonstrated properly.
o Enables marking product differentiation. The branding
of this product is such that it will stand out different
from other products of the competitors.

Question 21.
Ravi is a CEO in a reputed company. He lives a very comfortable life. There is nothing which
disturbs him when it comes to expenses. Since he works in corporate environment and has to
meet clients of very high level he maintains a level in his lifestyle. He recently purchased a
watch and specs, both of these items were of very pricey brands considered as luxuries, and this
purchase has given him a reason to feel proud of using them and have added to his satisfaction.
One day it so happened that he felt his watch was not functioning properly. He called an
executive of the watch company who ensured him replacement in case there is any fault in the
watch and this further increased his level of confidence in the watch company. Wherever Ravi
goes people look up to him. He has got a very good career track record. After having purchased
the. watch and the specs people complement for his choice and appreciate him for his decision
and from a distance identify the class of his products. Definitely Ravi is a more satisfied man due
to these two amazing brands.

1. Which concept of marketing has been highlighted in the above case?

2. Identify the various types of this concept wherever highlighted in this case.

Answer:

1. The concept of marketing highlighted in the above case is ‘Advantages of

Branding to the customers’.
2. The different advantages of branding highlighted in the above case are:
o Status symbol (He recently purchased a watch and
specs, both of these items were of very pricey brands
considered as luxuries, and this purchase has given him
a reason to feel proud of using them and have added
to his satisfaction).
o Ensures quality (He called an executive of the watch
company who ensured him replacement in case there
is any fault in the watch and this further increased his
level of confidence in the watch company).
o Helps in product identification (After having purchased
the watch and the specs people complement for his
choice and appreciate him for his decision and from a
distance identify the class of his products).

Question 22.
Raunak soap is an established soap in the market. For years people have purchased this soap and
have admired it. The soap has shown great growth in terms of repeated purchase and addition of
new customers. Now that the company has grown the top management of the company has
decided to launch new products. The names to be kept for the new products are giving them new
challenges. The company has decided to launch a cream named ‘Soother’ as it is very good for
skin and makes it very soft and removes dryness. There are other products also which are on its
list. One is hair oil. Since the oil will be sold in different packagings, on different media and in
different regions the name of the oil should suit this requirement. The third new product to be
launched is shampoo. The company wants a name for the shampoo which stands out different
from other players in the market as if it doesn’t happen then it will be just another shampoo in
the market. The company is also considering the release of a detergent powder. For this the
company has decided that the name should be easily remembered as the people of all sections of
society will need it for washing clothes and might find a long or tough name easily forgettable.
The last new product on the list they have decided to launch is a prickly heat powder. They have
invested a lot in the manufacturing of this powder and want to sell this product like they have
been selling Raunak soap for years that is for a long period of time. Definitely the name keeping
exercise is taking a lot of efforts of this company.

1. In the above case identify the various characteristics of good brand name
highlighted.
2. If Raunak soaps want to sell different type of soaps under the same soap
name will it be useful? Give reason.

Answer:

1. The characteristics of a good brand name highlighted in the above case are:
o Suggesting benefits. The Company has decided to
launch a cream named ‘Soother’ as it is very good for
skin and makes it very soft and removes dryness.
o Adaptable. Since the oil will be sold in different
packagings, on different media and in different regions
the name of the oil should suit this requirement.
o Distinctive. The Company wants a name for the
shampoo which stands out different
from other players in the market as if it doesn’t
happen then it will be just another shampoo in the
market.
o Short, easy to spell and remember. For this, the
company has decided that the name should be easily
remembered as the people of all sections of society
will need it for washing clothes and might find a long
or tough name easily forgettable.
 o Should have Staying Power. They have invested a lot in
the manufacturing of this powder and want to sell this
product like they have been selling Raunak soap for
years that is for a long period of time.
2. Yes, it will be useful as, if soaps are considered, the name is versatile and
can accommodate new variety of soaps as all soaps can give shine and
glamour (Raunak).

Question 23.
‘Maruti Vega Ltd.’ entered into the market with coloured television and have now introduced
products like audio system, air-conditioners, washing machines, etc. The company is not only
offering the products but also handling complaints and offering after-sales services.
Identify the element of marketing-mix discussed here.
Answer:
Product or Product mix.

Question 24.
There are some characteristics that should be kept in mind while choosing a brand name. Explain
any two such characteristics that a good brand name should have.
Answer:
Two characteristics of a good brand name arc as follows:

1. The brand name should be short, easy to pronounce, spell, recognize and
remember. For example, Rin, Fena, etc.
2. The brand name should be suggestive about certain qualities, attributes
and benefits of the product like, Fair and Handsome, My Fair Lady, etc.

Question 25.
A consumer products manufacturing company is offering a number of consumer product like
toiletries, detergent powder, food products etc. Identify the 1 element of marketing mix referred
here.
Answer:
Product Mix.
Question 26.
Sharmila is the founder of a new FMCG company. She wants her products to speak to the
potential customers. For this she is working a lot on the packaging of her products. She has
decided to cut down the personal selling efforts of her company by reducing the number of sales
men as she wants that the packaging should speak for itself thus gaining the attention of the
potential customers. She has made other efforts also. She has brought an R&D department in her
organisation and has asked them to invent new types of packaging in order to increase the scope
of marketing as new packaging would ensure safety, environment friendliness and attractiveness.
She knows she will face a lot of competition in the market as already there are many players in
the market who are ready to give challenge to her products. She wants her packaging to be such
that her product should stand apart, be recognized easily and not be lost in the pool of different
products in the market. Their packaging should convey their quality. The nature of the potential
customers has changed over the years. They have become more demanding and informed. They
have more choices now. One thing that the customers always look for in an FMCG product is the
hygiene and purity; these two traits can only be conveyed to the potential customers by proper
packaging. Sharmila’s perception about packaging is really noteworthy.

1. Which concept of marketing has been highlighted in the above case?

2. Identify the different types of this concept highlighted in the lines above.

Answer:

1. The concept of marketing highlighted in the above case is ‘Importance of

Packaging’.
2. The different benefits of packaging highlighted above are:
o It helps in Self Service Outlets. She has decided to cut
down the personal selling efforts of her company by
reducing the number of sales men as she wants that
the packaging should speak for itself thus gaining the
attention of the potential customers.
o It provides an Innovational Opportunity. She has
brought an R&D department in her organization and
has asked them to invent new types of packaging in
order to increase the scope of marketing as new
packaging would ensure safety, environment
friendliness and attractiveness.
o It helps in Product Differentiation. She wants her
packaging to be such that her product should stand
 distinct, be recognized easily and not be lost in the
pool of different products in the market.
o It helps in meeting the expectations of customers as
Standards of Health and Sanitation are rising. One
thing that the customers always look for in an FMCG
product is the hygiene and purity; these two traits can
only be conveyed to the potential customers by proper
packaging.

Question 27.
Manuj went to purchase toothpaste for himself. After entering the mall he went to the place
where all FMCG items were placed. By looking at the packaging of toothpaste he immediately
came to know that it was red gel toothpaste which he preferred. Definitely other items had
different types of packaging like soaps, packaged eatables, etc. As he was walking, it started to
rain. He had no umbrella so he got wet and along with him his toothpaste also got drenched in
water. When he reached home he realised that had the toothpaste packaging not been appropriate
it might have got spoilt. Days passed and he daily used to brush his teeth with the same
toothpaste. In the morning he often used to realise that though he had less time the shape of the
tube containing toothpaste was such that he could squeeze the toothpaste out easily. One month
passed and his toothpaste was about to finish. He realised a lot of information was given about
the toothpaste like its quantity, its flavour, its contents, extra promotional quantity of 50 gm,
brand name, etc. and all this information helped him repurchase another tube of the same
toothpaste. We may not know but good packaging always helps both the company as well as the
customers.

1. Which concept of marketing has been highlighted in the above case?

2. Identify the different types of this concept highlighted in the above case.

Answer:

1. The concept of marketing highlighted in the above case is ‘Functions of

Packaging’.
2. The different functions of packaging highlighted in the above case are:
o Packaging helps in Product Identification. By looking at
the packaging of toothpaste he immediately came to
know that it was red gel toothpaste which he
preferred.
 o Packaging helps in Product Protection. When he
reached home he realised that had the toothpaste
packaging not been appropriate it might have got
spoilt.
o Packaging helps in Facilitating use of the Product. In
the morning he often used to realise that though he
had less time the shape of the tube containing
toothpaste was such that he could squeeze the
toothpaste out easily.
o It helps in Product Promotion. He realised a lot of
information was given about the toothpaste like its
quantity, its flavour, its contents, extra promotional
quantity of 50 gm, brand name, etc. and all this
information helped him repurchase another tube of
the same toothpaste.

Question 28.
In a retail store a product was contained inside boxes of dark colour. The outside surface of
boxes were covered by labels which gave information about the product inside the box and by
reading the labels it could also be identified what were the contents of the material. Atul was one
customer who purchased this item. It was an insecticide. There was a picture of a dead insect and
a signal of warning which showed that the product was poisonous and had the required killing
impact on the insects thus attracting attention of Atul and helped him purchase it. As he carried
the product to his house, his neighbour inquisitively asked about the product in his hand. He told
him it was insecticide. On hearing the neighbour reacted negatively and said that it could be
dangerous for children. He fold him that there was required information printed on the box based
on the directives given by the government which made it mandatory for the company to put
warning. Thus labeling helped in acting as a medium of information between the seller and the
buyer.

1. Which concept of marketing has been highlighted throughout in the above

paragraph?
2. Identify the different types of this concept highlighted in the above case.

Answer:

1. The concept of marketing highlighted in the above case is ‘Functions of

Labelling’.
 2. The different functions performed by label identified in the above case are:
o Label helps in Identifying the Product and Specify its
Contents. The outside surface of boxes were covered
by labels which gave information about the product
inside the box and by reading the labels it could also
be identified what were the contents of the material.
o Label helps in Promotion of Products. There was a
picture of a dead insect and a signal of warning which
showed that the product was poisonous and had the
required killing impact on the insects thus attracting
attention of Atul and helped him purchase it.
o Label helps in Providing Information Required by Law.
He told him that there was required information
printed on the box based on the directives given by the
government which made it mandatory for the
company to put warning.

Question 29.
‘Armada Cables’ deals in cables of all varieties. Recently it has launched a new product to
increase its revenue and take the company to a new height. The company is confused about
keeping the price of a newly launched cable which is meant for all types of household works. In
order to beat the competition it has decided to keep the prices low as there is tough competition
in the market. The company has got a contract from a government institution. This institution
works for non-profit motive and whosoever works for them will have to work at subsidized rates
so the company will have to take less money but will get tax benefits; the impact on the
organisation will be that it will have to provide cables at a low price to support government
initiative. However, the prime objective of company otherwise is profit maximization. For its
metro cities based customers the company has decided to adopt various methods like
improvement in quality of salesmen, innovation in packaging, liberal credit terms, etc.
Whatsoever the conditions the company can’t go beyond a level as far as pricing is concerned.
One such reason is the amount of funds it puts both in the fixed capital like plant & machinery or
working capital like wages of labourers which fixes the lowermost limit of the price. The
management of the company has recently come to know about a great opportunity arising in
Europe for it. It has been contacted by Europe based contractors who are making world class
buildings around the globe. They require the cables in high quantity and the requirement is so
high that they are ready to pay double the price provided the cables are made available to them
within a short period of time. However, the management of the company has decided that in this
case they can lower the prices of the cables. This has been done keeping in mind the presence of
other European competitors who can lower the prices of their cables in order to survive in the
market.
Identify the various factors affecting price determination in the above case.
Answer:
The various factors affecting price determination in the above case are as follows:
 1. Extent of competition in the market. In order to beat the competition it
has decided to keep the prices low as there is tough competition in the
market.
2. Government and legal regulations. This institution works for non-profit
motive and whosoever works for them will have to work at subsidized rates
so the company will have to take less money but will get tax benefits; the
impact on the organisation will be that it will have to provide cables at a
low price to support government initiative.
3. Marketing methods used. For its metro cities based customers the
company has decided to adopt various methods like improvement in
quality of salesmen, innovation in packaging, liberal credit terms, etc.
4. Product cost. One such reason is the amount of funds it puts both in the
fixed capital like plant & machinery or working capital like wages of
labourers which fikes the lowermost limit of the price.
5. Utility and demand. They require the cables in high quantity and the
requirement is so high that they are ready to pay double the price provided
the cables are made available to them within a short period of time.
6. Pricing objectives. This has been done keeping in mind the presence of
other European competitors who can lower the prices of their cables in
order to survive in the market.

Question 30.
Sunny Burgers has many branches throughout the country. The company believes in hiring
places and giving rent to the owners of the places at highly busy places of the cities. However,
the company deals with its customers on its own thus providing
them freshly prepared burgers by its own staff. The company has a wide base of customers. The
company has kept the nature of its channel so because of one main characteristic or nature of the
product it serves. It has always tried to please its customers and for this reason the services are
fast. The company has decided to launch an advertising campaign for creating awareness about
its new product. The world cup of cricket is one such good opportunity where advertising can
create its impact. It has even contacted the number one advertisement making company for this
purpose. However, the top management is concerned about the impact as the potential customers
or the prospects can’t be delivered the message compulsively. So there is one scheme the
company has decided to launch where a burger will be provided with an additional cold drink on
all days of the first week of the month.

1. Which channel of marketing is highlighted above?

2. Which product related factor do you think is responsible for this selection
of channel?
3. Which one component of physical distribution is affected due to the fast
services given by the company?
 4. Which merit of advertising has been highlighted in the above case?
5. Which one limitation of advertising has been highlighted in the above case?

Answer:

1. The channel of marketing highlighted above is ‘Zero Channel’ or ‘Direct

Channel’ (However, the company deals with its customers on its own thus
providing them freshly prepared burgers by its own staff).
2. The product related factor which is responsible for the selection of zero
channel is ‘perishable’ (The company has kept the nature of its channel so
because of one main characteristic or nature of the product it serves).
3. The component of physical distribution which is affected by fast services is
‘order proces¬sing’ (It has always tried to please its customers and for this
reason the services are fast).
4. The merit of advertising highlighted in the above case is ‘mass reach’ (The
world cup of cricket is one such good opportunity where advertising can
create its impact).
5. The limitation of advertising which has been highlighted in the above case
is ‘Advertising is less forceful’ (However, the top management is concerned
about the impact as the potential customers or the prospects can’t be
delivered the message compulsively).
6. The company has decided to use ‘product combination’ as the sales
promotion technique to increase its sales (There is one scheme the
company has decided to launch where a burger will be provided with an
additional cold drink on all days of the first week of the month). The merit
of advertising highlighted in the above case is ‘mass reach’ (The world cup
of cricket is one such good opportunity where advertising can create its
impact)

Question 31.
A car manufacturing & selling company has reached its coverage in three continents. Definitely
the client base is huge. The company deals with its clients through selected showrooms owned
by credit worthy people. The channel related decision is a successful decision of the company. It
could have gone for the direct ownership of the distribution centres but due to the extra amount
of finance involved it didn’t prevented the company from doing so. Recently a car was launched
by a company. The company has decided to make this car available in a new country where the
reach is a little difficult and the company will have to use innovative ideas in one component of
physical distribution. The company is known world over for its innovation in different areas.
When it comes to promotional ideas the company always depends upon one component of
promotion mix which is of paid form and has an identified sponsor. Doing business is always full
of challenges. Last year a competitor blamed the company for using the above referred
component of promotion mix for selling a car which was not upto the standards but even then
people purchased it because of the promotional efforts made by the company.

1. Which type of channel is used by the car company to reach to its

customers?
2. Which factor has resulted in the nature of channel the company has
adopted for selling the cars?
3. Which component of physical distribution has been highlighted in the
above case in which company will have to bring innovation?
4. Which component of promotion mix has been highlighted in the above
case which is used by the company usually?
5. Which objection to the above referred component of promotion mix has
been highlighted in this case?

Answer:

1. The type of channel used by company to reach its customers is ‘indirect

channel (one level)’. The Company deals with its clients through selected
showrooms owned by credit worthy people.
2. The factor which has made the company go for the indirect channel (one
level) is ‘company characteristic’. The Company doesn’t want to take extra
financial burden by owning the distribution centres.
3. The, component of physical distribution in which the company will have to
bring its innovation is ‘transportation’. The company has decided to make
this car available in a new country where the reach is a little difficult and
the company will have to use innovative ideas in one component of
physical distribution.
4. The component of physical distribution highlighted above and used
generally by the company is ‘advertising’. When it comes to promotional
ideas the company always depends upon one component of promotion mix
which is of paid form and has an identified sponsor.
5. The objection to promotion mix which has been highlighted in the above
case is ‘advertising encourages sale of inferior products’. Last year a
competitor blamed the company for using the above referred component
of promotion mix for selling a car which was not upto the standards but
even then people purchased it because of the promotional efforts made by
the company.
Question 32.
Mediquip Ltd. is a company dealing in distribution of meclical equipments. The company
recently imported 15000 units of sugar testing machines to test the sugar levels without taking
blood samples. For deciding the marketing strategy, the Chief Executive Officer of the company
called a meeting of the marketing heads of different zones.
In the meeting, Sandeep, the North Zone Marketing Head, suggested that since the machines
were sophisticated they need to visit hospitals personally, to explain its working to the hospital
staff who would be using the machines. He also suggested that additional trained people may be
recruited for the same.
Himanshu, another Zonal Head, added that since lot of money had been spent on the import of
the machines, the company was short of funds to pay to the additional staff as suggested by
Sandeep.
Rahul, a newly appointed Zonal Head of South Zone suggested that since the size of the order is
not large, a detailed study of the factors determining the choice of channels of distribution is
required before making the right choice.

1. Identify the factors influencing the choice of channels of distribution which

were discussed in the meeting.
2. Also, explain briefly other considerations to be taken care of in each factor
identified in part (a).

Answer:

1. Following are the factors influencing the choice of distribution channels

which were discussed in the meeting:
o Product related factors
o Company characteristics
o Market related factors.
2. Other considerations:
o Product related factors. Unit value of the product and
product complexity also influence the choice of
distribution channel.
o Company characteristics. The degree of control a
company wants to exercise over the distribution
channel or channel members also influences the
choice of distribution channel.
Market related factors. Geographical concentration of
 potential buyers and size of the market also influences
the choice of distribution channel.

Question 33.
A pan masala company recently made an advertisement. In the advertisement it was shown that
an employer was giving promotion and special favours to an employee just because he was
eating that pan masala. The advertisement was not liked by people and the company had to think
of a new strategy. The company wanted to have a way where it could influence the potential
customers in the best manner without wastage of efforts simultaneously ensure repeat purchase
due to development of relationship between them and the company. One of the competitors of
the company is also making a lot of revenue by selling pan masala. This company always
launches new products under the brand name of the parent company. The packaging of their pan
masala is good. Whenever the customers use it they throw the packet of pan masala after eating
it. In order to save itself from the competitors the company has taken a step recently. It has got
one of its flavours patented.

1. Which objection to advertising has been highlighted in the above case?

2. Which component of promotion mix do you think company is thinking of
adopting?
3. Which advantage of branding has been highlighted in the above case?
4. Which type of packaging has been highlighted in the above case?

Answer:

1. The objection to advertising highlighted in the above case is ‘some

advertisements are in bad taste’. In the advertisement it was shown that
an employer was giving promotion and special favours to an employee just
because he was eating that pan masala.
2. The component of promotion mix which the company is thinking of
adopting is ‘personal selling’. The company wanted to have a way where it
could influence the potential customers in the best manner without
wastage of efforts and simultaneously ensure repeat purchase due to
development of relationship between them and the company.
3. The advantage of branding highlighted in the above case is ‘ease in
introduction of the new product’—it is an advantage from the perspective
of marketer. This company always launches new products under the brand
name of the parent company.
 4. The type of packaging which has been highlighted in the above case is
‘primary packaging’. Whenever the customers use it they throw the packet
of pan masala after eating it.
The term related to branding which has been highlighted in the above case
is ‘trade mark’. It has got one of its flavours patented.

Question 34.
An FMCG company has recently launched a new tyPe °f biscuit in the market. The name of the
biscuit is ‘Behetrino’. The company has made the biscuits of the highest quality possible. It
wants to create an irreplaceable place for the new brand in the market. The price of the biscuit is
also the highest in the market suggesting its quality. The CEO of the company in an interview
said that the branding of the new biscuit will help the company to connect with the customers.
An customers can ask for the promised quality in case the company deviates from it. As far as
packaging of the biscuit is concerned it is different from others. The immediate outer covering is
beautiful and an additional layer of cardboard box is provided to ensure protection to the shape
of the biscuits.

1. Which characteristic of the good brand name can be seen in the brand
name of the biscuit kept by the company?
2. What do you think is the pricing objective of the company?
3. Which advantage of branding to the customers has been highlighted in the
above case?
4. Which level of packaging does ‘cardboard box’ come under?

Answer:

1. The characteristic of good brand name highlighted in the above case is that
it is ‘suggesting benefits and qualities of the product’. The name of the
biscuit is ‘Behetrino’. The company has made the biscuits of the highest
quality possible.
2. The pricing objective of the company is ‘quality leadership’. The price of
the biscuit is also the highest in the market suggesting its quality.
3. The advantage of branding to the customers highlighted in the above case
is ‘It is ensuring quality to the customers’. The customers can ask for the
promised quality in case the company deviates from it.
4. The level of packaging which can be seen at the level of card board box is
‘secondary packaging’.
Question 35.
A tea manufacturing company has put labels on its packets stating the variety of tea it is selling.
Currently it has three varieties—red, green and black. The tea of the company comes from a
garden in Assam which is 100 years old. So the price of the tea is high but recently in order to
stay in the market it has lowered down its prices by 20%. The company sells its tea in different
markets of the world. Next year the company is thinking of selling its tea in the market of a
nation having a very high population. The top management hasn’t yet decided the type of
channel it should choose. Two years back the company started selling its tea online, the decision
brought an indirect change in one of the elements of the marketing mix and of course one
element saw change directly.

1. Which function of labelling has been highlighted in the above case?

2. Which factor of price determination has affected the pricing of tea by the
company?
3. Which type of channel do you think the company should choose for the
new country?
4. Which element of marketing mix has changed directly and which
indirectly?

Answer:

1. The function of labelling which has been highlighted in the above case is
‘grading of products’. A tea manufacturing company has put labels on its
packets stating the variety of tea it is selling. Currently it has three
varieties—red, green and black.
2. The factor of price determination which has affected the pricing of tea by
the company is
‘extent of competition in the market’.
3. The type of channel which the company should choose for the new country
is ‘indirect channel of 3 levels’ as when the population of a region is high a
company requires more nurnber of channels.
4. The element of marketing mix which has changed directly is ‘place’. As with
online marketing the number of channels have been reduced) and the
element of marketing mix which has changed indirectly is ‘price’. As with
the introduction of online marketing the number of middlemen has
reduced erasing the price margins given to the intermediaries leading to
reduction in prices.
Question 36.
Ashima purchased a bottle of tomato-sauce from the local grocery shop. The information
provided on the bottle was not clear. She fell sick on consuming it. She filed a case in the District
Forum under Consumer Protection Act and got the relief.

1. Identify the important aspect neglected by the marketer in the above case.
2. Explain briefly the functions of the aspect identified in (a) above.

Answer:

1. Labelling
2. Functions of Labelling:
o Describes the product and specifies its contents. One
of the most important functions of labels is to describe
the product, its usage, cautions in use and to specify its
contents.
o Identification of product/brand. A label helps in
identifying and differentiating the product or brand
from other similar types of products or brands
produced by the company as well as by the
competitors.
o Helps in product promotion. An attractively designed
label entices the customers to buy the product. This is
particularly true for fast moving consumer products
like toothpastes, salt, butter, jams, soaps, etc.
o Grading of products. With the help of labels, products
can be graded and put in different categories.
For example, Brooke Bond Red Label Tea, Brooke Bond
Yellow Label Tea, Green Label Tea, etc. Marketers
assign different grades to different features or
different qualities of the product.
o Providing information required by Law. Labelling also
provides statutory warning or important information
as required by law.

Question 37.
A company is ready to try various sales promotion activities. It lias seven products and for every
product it decides to go for a different sales promotion activity. Since the company is an FMCG
company the seven goods are Biscuits, Noodles, Chocolate, Milk powder, Detergent powder,
Cold drink and Soap. The company has decided to go for providing four extra biscuits for a
packet of ten biscuits leading to a total of fourteen biscuits in a packet now. The product head of
Noodles is also excited about this scheme. However, he tries something different. He allows the
customers to have a take back of Re. 1 after depositing the used wrapper of the product. The
product head of Chocolate goes for another scheme. He offers a surprise gift in the form of a
printed code on the inside of the wrapper and this printed code has to be sent through a message
and the winner will get a gold coin. For Soap, its product head has an entirely different idea. The
company will go to schools, colleges and arrange quiz competitions there and the winners will
get prizes in the form of a bucket full of this soap in various sizes of 50 gm, 100 gm and 150 gm.
The product head of detergent powder has decided to go for a 25% reduction in the price of the
detergent powder. Cold drink has been the most successful product of the company till date. To
make it more successful the company has decided to go for a combination of a free packet of
chips of 100 gm with a cold drink bottle of 3 litres. Definitely the last product head doesn’t want
to get left behind he wants to please the house wives as they generally are the deciders in making
the decision to buy milk powder. On his recommendation free samples of small size of milk
powder are to be distributed in the residential areas to create more awareness about the product.
Identify the various sales promotion techniques applied by the FMCG Company to make its
products successful.
Answer:
The sales promotion activities highlighted in the above case are:

1. For Biscuits: Quantity Gift as extra amount is being given at the same price.
The company has decided to go for providing four extra biscuits for a
packet of ten biscuits leading to a total of fourteen biscuits in a packet
now.
2. For Noodles: Refunding as a part of price is being returned on presenting
wrapper as a proof of purchase. He allows the customers to have a take
back of Re. 1 after depositing the used wrapper of the product.
3. For Chocolates: Instant Draw and Assigned Gift as the prize is assured in an
instant after entering the code. He offers a surprise gift in the form of a
printed code on the inside of the wrapper and this printed code has to be
sent through a message and the winner will get a gold coin.
4. For Soaps: The company will go to schools, colleges and arrange quiz
competitions there and the winners will get prizes in the form of a bucket
full of this soap in Various sizes of 50 gm, 100 gm and 150 gm.
5. For Cold drinks: Product combination as with cold drink another product ‘a
packet of chips’ is offered. To make it more successful the company has
decided to go for a combination of a free packet of chips of 100 gm with a
cold drink bottle of 3 litres.
 6. For Milk powder: Sampling as free samples are to be distributed to the
potential target customers housewives in this case. Free samples of small
size of milk powder are to be distributed in the residential areas to create
more av/areness about the product.
7. For Detergent powder: Contests as it is involving competitions in the form
of quiz contests. The product head of detergent powder has decided to go
for a 25% reduction in the price of the detergent powder.

Question 38.
Ramesh was watching television. He saw many advertisements. Within a. span of five hours he
saw advertisements of five toothpaste selling companies. He that every tooth paste selling
company was claiming its toothpaste to be the best toothpaste recommended by dentists. He
decided to go to his friend who was a personal selling agent of an FMCG. After meeting him he
got assured of the best toothpaste available in the market. However he also liked the quality of
the toothpaste of his friend’s company as his friend gave him some very logical reasons for it.
After returning home Ramesh couldn’t sleep as he could see Ms friend’s struggle in convincing
Mm for half an hour and compared it with the mass reach of an advertisement. Next day he was
on an off from his office. He went to a mobile shop and decided to purchase a mobile worth
?40,000. The company offered him a scheme in which he could purchase the mobile in interest
free ten installments of ?4,000 to be paid every month. However when he was asked to fill a
form, a file charge of ?2,000 was taken from him. He purchased the phone because of the good
quality of the phone and the continuous efforts of the salesman in the mobile shop.

1. Which objection to Advertising has been highlighted in the above case?

2. Which quality of a good salesman do you think his friend possessed?
3. Which limitation of personal selling did Ramesh find in comparison to
advertisement?
4. Which sales promotion technique is highlighted in the above case?
5. Did Ramesh pay any interest on the phone he purchased?
6. Which quality do you think existed in the salesman in the mobile shop?

Answer:

1. The objection to marketing which is Mghlighted in the above case is

‘Advertising confuses the buyers’. He found that every tooth paste selling
company was claiming its toothpaste to be the best toothpaste
recommended by dentists.
 2. The quality of ‘capacity to inspire trust’ was possessed by his friend.
However he also liked the quality of the toothpaste of his friend’s company
as his friend gave him some very logical reasons for it.
3. The limitation of personal selling wMch Ramesh found was the limitation
to reach only a limited number of people due to time and cost
considerations. After returning home Ramesh couldn’t sleep as he could
see Ms friend’s struggle in convincing Mm for half an hour and compared it
with the mass reach of an advertisement.
4. The sales promotion technique Mghlighted in the above case is ‘full finance
@ 0%’ (The company offered him a scheme in which he could purchase the
mobile in interest free ten installments of ?4,000 to be paid every month).
5. Yes, he paid interest in the form of file charges wMch is actually distount
taken in advance. However when he was asked to fill a form, a file charge
of Rs.2,000 was taken from him).
6. The quality which existed in the salesman in the shop was ‘persistence’. He
purchased the phone because of the good quality of the phone and the
continuous effort of the salesman in the mobile shop.

Question 39.
Raj at is the CEO of a mobile manufacturing company. The mobile phones manufactured by the
company come under the ‘fragile category’. Rajat has to ensure that the product reaches the end
customer all over the country. To do this he ensures proper movement of the mobile phones from
the place of manufacturing to the points of selling.

1. Identify the component of physical distribution discussed in the above

case.
2. What are the factors affecting Inventory control?

Answer:

1. The component of physical distribution discussed in the above case is

Transportation.
2. The factors affecting Inventory control are:
o Level of services to be provided to the customer.
When a firm wants to provide high level of services to
the customers, it keeps high inventory.
 o Correctness of sales forecast. The level of correctness
of sales forecast decides the level of inventory to be
maintained. High level of inventory leading to wastage
may occur due to over/ wrong estimation.
o Costs associated with high inventory. High level of
inventory means additional costs in the form of rent,
maintenance, etc.

Question 40.
‘Khubsoorat’ is a company which sells beauty products. The company has been the market
leader in this segment for the last ten years. However, the sales of its fairness cream have come
down due to cases of allergic reactions reported by the users from different parts of the country.
The company has been able to make amendments to the formula to make their product safe for
everybody. Its incapability to communicate with its customers has resulted in the loss of its
br^nd value.

1. Which element of promotion mix should the company use to regain its lost
image?
2. Discuss two marketing objectives of this element,

Answer:

1. The element of promotion mix which the company should use is Public
Relations.
2. The two marketing objectives of Public relations are:
o Stimulating sales force. When the sales force is
convinced about the good quality of the product they
find it easy to convince the potential buyers to buy it.
o Lowering promotion costs. Public relations acts as a
cost effective supplement to advertising. Thus it helps
in reducing the overall burden of cost of the company.

Question 41.
Identify the function performed by the public relations department / mentioned in the following
cases:
 1. An innovative organisation involved in the manufacturing of electronic
products launches its products in the trade fair every year. This is done to
gain attention of the general public towards the quality and technology of
its products.
2. An FMCA company involved in the production of more than two hundred
products has very good relations with the top 5 News Channels. This gives a
great support to the company when it comes to generating positive image
in the eyes of the public.
3. A multi-national company has presence in five continents and thirty
countries. The company manages good relations with the top officials and
the ministers of these countries. This helps the company to keep an eye on
the various possible changes in the laws of the land and their execution.
4. Ramesh who is the head of the Public Relations department of a well
established company utilises PR tools like Brochures, Annual reports,
Newsletters etc. He ensures that the top level managers of the company
connect with TV channels and give
interviews whenever required. All his efforts have resulted in creating a
good image
of the company with its target audience.

Answer:

1. Product publicity
2. Press relations
3. Lobbying
4. Corporate communication.

Question 42
A company was marketing ‘water purifiers’ which were very popular due to their quality and
after sales services provided to the customers. The company was a leading company in the
market and earning huge profits. Because of huge profits the company
ignored the after sales services. As a result its relations with the customers got spoiled and the
image of the company was damaged in the public. Top management became concerned when the
profits for the current quarter fell steeply. On analysis it was revealed that ignoring the after sales
services was its reason. Therefore the company took all possible measures to protect and
promote its favorable image in the eyes of the public. As a result the goodwill of the company
improved in the society.
 1. Name and state the communication tool used by the marketer in the above
case to improve its image.
2. Also explain role of the tool as identified in part (a).

Answer:

1. The communication tool used by the marketer is public relation.

Public relations refers to a variety of programmes to promote and protect a
company’s image or its products in the eyes of the public.
2. Role of public relations:
o Press relations. The Public Relations Department of an
organization remains in touch with the media to pass
on true facts and positive information about the
company. It helps the firm in creating a favourable
image of the organization among the general public.
o Product publicity. The Public Relations Department of
the firm publicizes their new products through
sponsoring events. For this purpose company
participates in sports and cultural events, like,
exhibitions, news, conferences and seminars.
o Corporate communication. In order to promote its
favourable image a firm communicates with
employees as well as with employers and the public
through various corporate tools like reports,
newsletters, brochures, articles, etc. The executives of
a firm conduct speeches and converse with the general
public at trade fairs or other events.
o Lobbying. It involves maintaining good and healthy
relationship with government officials and various
ministers in charge of finance, industry and corporate
affairs. The government’s policies are often guided by
the opinion of big business houses. The public relation
departments try to manipulate various government
regulations that can have a major impact on business
and its functioning.
o Counselling. To create a positive image of the
company, the Public Relations Department guides the
management on general issues. The company can
enhance
its goodwill through charity, contributing towards
 education, health and other issues associated with
general public interest.

Question 43.
Amitabh Bachchan, the legendary bollywood actor is often seen in a television advertisement of
Gujarat tourism. In this particular advertisement he encourages people to visit Gujarat and spend
some time there by quoting a punch line ‘KUCHH DIN TOH GUZARO GUJARAT MEIN’.
Identify what is being marketed by Mr. Amitabh Bachchan in the above case.
Answer:
Place

Question 44
In a popular advertisement on radio and Television, Bollywood actress Vidya Balan talks about
cleanliness and hygiene. The idea behind is to create awareness regarding having a toilet in each
house instead of going out in the open. She included the advertisement with a
punchline ‘JAHAN SOCH VAHAN SHAUCHALAYA’. Identify what is being marketed by
the famous actress in the above case.
Answer:
Information

Question 45.
‘GATA Ltd/ is a large multinational company and operates in many countries of the world. The
company is in the business of Insurance, Health care, Business Process Outsourcing, Computer
Education, Security, etc. What is being marketed by the Company?
Answer:
The company is marketing Services of all kinds.
 Chapter 12: Consumer Protection
Question 1.
Rajiv bought an electric geyser. One day while taking bath he felt an electric shock. He
quickly called the company and asked the concerned person to replace the geyser or fix
the problem. There was no response from the side of the company. The geyser was still
in the warranty period. Later from other neutral sources lie came to learn that many
other people have also felt the same problem and it is because the product is made up
of substandard components.
In the above case identify the consumer rights violated.
Answer:
Following are the consumer rights violated in the above case:

1. Right to Safety. Many other people also have felt the same problem
and it is because the product is made up of substandard
components.
2. Right to Seek Redressal. There was no response from the side of
the company. The geyser was still in the warranty period.

Question 2.
Adesh had some problem walking on the road. He purchased a pair of shoes with high
heels. After some time of using these shoes his pain increased as he did not know that
there were medically recommended shoes available in the market for this problem.
.After a few days of giving himself rest he approached a shop where the medically
recommended shoes were sold. He v,as amazed to learn that the company making the
shoes was holding workshops at different places in order to make the people suffering
with such problem aware of an available option.

1. Which consumer responsibility was not fulfilled by Adesh?

2. Which right has been helped protected by the company selling the
medically recommended shoes?

Answer:
 1. The consumer responsibility not fulfilled by Adesh is ‘be aware about
various goods and services available in the market’. He did not know
that there were medically recommended shoes in the market for his
problem.
2. The right which has been helped protected by the company selling
the medically recommended shoes is ‘Right to be Informed’. The
company making the shoes was holding workshops at different
places in order to make the people suffering with his problem aware
of an available option.

Question 3.
Manuj bought a packet of chips from a local shopkeeper and found that the ingredients
given on the label were not legible. He complained about it to the company. The
company sent a written apology stating that they will make sure that existing packets
are withdrawn from the market and new packets with legible labels are soon made
available.
State the consumer right which Manuj exercised.
Answer:
Right to seek redressal which states that a consumer has a right to get relief such as
replacement of product, removal of defeat in the product, compensation for any loss or
injury suffered by the consumer in case the producer or service falls short of his
expectations.

Question 4.
Suman bought a box of cheese of a reputed brand from a local shopkeeper. On opening
the box she found a piece of stone in the cheese. She reported the matter to jpkeeper
who forwarded her complaint to the concerned company. Within a week the
representative of the company visited Soman’s residence with an apology and as a
replacement offered her a new cheese pack with four other varieties of cheese as
compensation for the inconvenience to her.
State the consumer right which Suman exercised.
Answer:
Right to seek redressal which states that a consumer has the right to get relief such as
replacement of product, removal of defect in the product, compensation for any loss or
injury suffered by the consumer in case the product or service falls short of his
expectations.

Question 5.
In a colony several people purchased mosquito killing rackets from a company. The
majority of rackets turned useless within a period of two months. Rishank who was one
of the residents of the colony decided to take the matter to the consumer court but the
residents were not united and he felt himself alone on the issue. The price of the racket
was ?450. Meanwhile one of the friends of Rishank who was a journalist reported about
the incident in a daily newspaper. When the company learnt about the situation it
decided to take a milestone step. The company decided to lake back or repair all the
faulty rackets from the residents of the society. The whole slory took an interesting twist
when a technician from the company told the management that in the instruction book
provided with the racket it was written to clean the racket with special care after every
one month. When enquired it was found that the residents with faulty rackets including
Rishank didn’t clean their rackets after one month.

1. Which important aspect from consumer point of view is highlighted in

the above case?
2. At which level of consumer court could Rishank apply for the claim of
his loss?
3. What was the important aspect from the point of view of business
which compelled the company to take such a milestone step?
4. Which consumer responsibility was not followed by the residents of
Rishant’s colony?
5. Which consumer right was helped protected by the company?

Answer:

1. The important aspect from consumer point of view highlighted in the

above case is ‘Unorganised Consumers’. Rishank who is one of the
residents of the colony decided to take the matter to the consumer
court but the residents were not united and he felt himself alone on
the issue.
2. Since the compensation claimed by Rishank would have been less
than 10 lakhs (as the price of racket is Rs.450) he could have
approached the District Forum.
3. The important aspect from the point of view of business which
compelled the company to take such a milestone step was ‘Moral
Justification’. The Company came to know for the first time through
newspaper news. Had they been earlier informed and would not
have taken any action the answer would be ‘Government
Intervention’.
 4. The consumer responsibility not followed by the residents of
Rishank’s colony was ‘Following manufacturer’s instructions’. In the
instruction book provided with the racket, it was written to clean the
racket with special care after every one month. When enquired it was
found that the residents with faulty rackets including Rishank didn’t
clean their rackets after one month.
5. The consumer right which was helped protected by the company was
‘Right to be Informed’. The Company from its side gave ‘directions for
use’ which showed that this right of consumer was protected.

Question 6.
On the eve of Diwali Kalpana purchased two kilograms of sweets from VV Koyal
Sweets. On consumption of sweets her two children and husband fell sick and were to
be hospitalized. Kalpana wanted to file a case in the consumer forum but could not
do so because she did not have any proof of buying sweets from Koyal sweets. What
proof could Kalpana have obtained for filing the claim in the consumer court?
Answer:
Kalpana could have obtained cash memo for filing the claim in consumer court.

Question 7.
Nitish went to a shop to purchase a shirt. The shopkeeper offered him three colours of
shirts. Nitish asked him to show him the shirt which was on display. The shopkeeper
told him that he could not buy that shirt and would have to choose from the options
provided by him. Out of necessity and lack of time Nitish purchased a shirt out of the
shirts shown by the shopkeeper. He paid him cash and didn’t take the cash memo.
Later, when he wore the shirt at home and was about to leave, he found one button of
the shirt missing. He went to the shop the next day and asked for replacement. The
shopkeeper bluntly denied that the shirt was purchased from him.

1. Which consumer right of Nitish is violated here?

2. Which consumer responsibility was no! fulfilled by Nitish which led to
this situation?
3. Can Nitish file complaint against the shopkeeper?
4. From the point of view of business which type of interest has been
overlooked by the shopkeeper? Why?

Answer:
 1. The consumer right of Nitish which is violated here is ‘Right to
Choose’. The shopkeeper told him that he could not buy that shirt
and would have to choose from the options provided by him.
2. The consumer responsibility which was not fulfilled by Nitish was
‘Ask for a cash memo after purchasing goods and services’. He paid
him cash and didn’t take the cash memo.
3. No, Nitish can’t file the complaint against the shopkeeper as there is
no proof of purchase since he forgot to take the cash memo from
him.
4. From the point of view of business the interest which has been
overlooked by the shopkeeper is ‘Long-term interest of business’
because a good businessman knows that the customer should be
satisfied for repeat purchase and customer retention which
eventually helps in increasing the customer base.

Question 8.
Amit went to purchase a fridge from a showroom having electrical appliances. He
purchased a fridge for Rs.10,000. However, when he confirmed the price of the fridge
form his friends and searched on the net he found that the price of the fridge was
Rs.9,500. When he contacted the showroom owner he was told that the prices of the
fridge model has come down and that the cash memo handed over to him also had the
billing of Rs.10,000. But at the time the model was introduced the price of the model
was Rs.10,000 only.

1. Do you think Amit should get his Rs.500 back?

2. Do you think Amit has proof of purchase?
3. Which consumer right of Amit has been violated here?

Answer:

1. Amit should get his Rs.500 back because the current price of the
model is Rs.500 less than what he paid.
2. Amit has proof of purchase as he got cash memo from the fridge
seller. The cash memo handed over to him also had the billing of
Rs.10,000.
3. The consumer right of Amit which has been violated here is ‘Right to
be informed’. However when he confirmed the price of the fridge form
his friends and searched on the net he found that the price of the
fridge was Rs.9,500.
Question 9.
Ramit is running an organisation which is beyond the control of
government and the motive of the organisation is welfare of the consumers. One day
Sujata comes to his office and tells that her mom. purchased a fridge two years back.
She is no more and the fridge was purchased in her name. However the warranty
period of the fridge is still active. But the company is denying her the services.

1. Which type of organisation is being ran by Ramit?

2. Name one such example of an organisation.
3. Can Ramit help Sujata file a case against the company?
4. Which consumer right of Sujata has been violated here?

Answer:

1. The type of organisation run by Ramit is an NGO. Ramit is running

an organisation which is beyond the control of government and the
motive of the organisation is welfare of the consumers.
2. One example of such an NGO is Consumer Coordination Council
(Delhi).
3. Yes, Ramit can help Sujata file a complaint against the company
because she is representative of a deceased consumer. Her mom is
no more and the fridge was purchased in her name.
4. The consumer right of Sujata which has been violated here is ‘Right
to Seek RedressaT. However the warranty period of the fridge is still
active. But the company is denying her the services.

Question 10.
‘Amazing Duniya’ is a tourist agency. It also has a group of hotels. The company offers
new types of schemes to the potential customers. Amit was offered a scheme of staying
in a hotel for 6 days and 5 nights for free. However when he reached the destination he
was told that every room of the hotel was booked. He told tlhem that he was told earlier
that his room was booked. He even showed them the confirmation he received on his
mail.

1. Can Amit file a complaint against the tourist agency?

 2. Will he get a relief in this case?
3. Name the relief he will get.
4. Which consumer right has been violated in this case?

Answer:

1. Yes, he can file a complaint against the tourist agency as he has got
the confirmation as the proof. He even showed them the confirmation
he received on his mail.
2. Yes, he will get a relief as he has proof of confirmation of his
booking. He will get relief as his time and money (Fare charges for
travelling purpose) are wasted.
3. The relief he will get is ‘he will be compensated for the loss of time
and money and also for filing the complaint’. The second relief will be
directed towards the company which will have to stop this wrong
trade practice for future.
4. The consumer right which has been violated here is ‘Right to be
Informed’. This was the responsibility of the company to inform him
before hand if the rooms were not available. They did the worse by
giving him confirmation and denying him the hotel room at the last
moment.

Question 11.
Himanshu purchased a new car from ‘Galaxy Motors’ for Rs.25 lakhs. He was offered
free insurance for the first year and three free servicing to be availed after the car had
covered 5,000 km, 10,000 km and 15,000 km respectively. When Himanshu took the
car for the first free servicing, he was told that the car was not new and first service had
already been availed on this car. He felt cheated and filed a complaint in the State
Commission. Being not satisfied with the decision of the State Commission, after two
months he decided to file an appeal against it.
Can Himanshu appeal against the decision of the State Commission? Give reason in
support of your answer.
Answer:
No, Himanshu cannot appeal against the decision of the State Commission as the
aggrieved party can appeal further only within 30 days of the passing of the order.

Question 12.
‘RO Youth Club’ organised a visit of its members to an Old Age Home to inculcate the
habit of social work among them. The visit revealed that the living conditions of the
inmates of the Old Age Home were not hygienic. So, the RO Youth Club members
decided to clean the premises. During their cleanliness drive, they realised that the Old
Age Home also required pest control. But some of the inmates of the Old Age Home
were reluctant for it because they believed that the pest control may create health
problems for them. RO Youth Club, therefore, decided to provide ethical, safe and
odourless pest control. They showed to the inmates of the Old Age Home a pamphlet of
the proposed pest control product which promised easy, inexpensive and long-lasting
pest control. The inmates happily agreed and the pest control was carried out. The
effect of the pest control started wearing off after a fortnight. RO Youth Club contacted
the pest control company which kept on postponing their visit. After waiting for a month,
RO Youth Club filed a case in the consumer court.
The consumer court was satisfied about the genuineness of the complaint and issued
necessary directions to the pest control company.

1. State any six directions that might have been issued by the court.
2. Identify any two values that are being communicated by RO Youth
Club to the society.

Answer:

1. Following are certain directions that might have been issued by the
court:
o Removal of the defect or deficiency in service.
o To give a refund of the charges paid for the
service.
o Discontinuance of unfair/restrictive trade practice
and not repeating the same in the future.
o To issue corrective advertisement to neutralize the
effect of misleading pamphlet.
o To pay a reasonable amount of compensation for
any loss or injury suffered by the inmates of the
old age home due to the negligence of the
opposite party.
o To pay any amount (not less than 5% of the
deficient service) to the credit of Consumer
Welfare Fund or any other organisation, to be
utilized in the prescribed manner.
2. Two values that are being communicated by RO Youth Club:
o Welfare of the society
 o Concern for cleanliness, hygiene and health of the
people.
o Sensitivity towards environment.
o Respect for the elderly.

Question 13.
Raghu purchased a truck worth Rs.35 lakhs. The truck had some inbuilt problems and
after some days stopped starting. Since it was in the guaranty period it was shown to
the company. The people in the company refused to attend to his complaints. It was
heart breaking for him so he decided to file a complaint in the state commission. The
state commission on hearing the pleas from both the parties gave decision in favour of
the truck company. It was shockingly bad news for Raghu.

1. At what level of authority should Raghu file a complaint now?

2. In how many days should he file his complaint at the next level?

Answer:

1. Raghu should now file a complaint at the level of ‘National

Commission’.
2. He should file his complaint at the next level within 30 days.

Question 14.
Suresh has opened an NGO for the welfare of the consumers. He has got a degree in
law. In order to utilize his education he quite often helps people in their legal affairs.
Now that he has started an NGO he assures that whenever a consumer in his
knowledge is deprived of his consumer rights he should file a complaint on his behalf in
the consumer court and fight for his cause. His organisation has some of the people
with journalist background. The three of them along with Suresh from the side of their
NGO have launched a monthly magazine which creates awareness about the rights,
reliefs and responsibilities of the consumers. All the members of this NGO work with a
lot of enthusiasm. Recently in the central part of the city they organized a training
program in which all the information related to the exploitation of consumers, consumer
ignorance, consumer rights and reliefs available to the consumers were the key
highlights. The government has also provided support to their organisation. The
government laboratories are easily in touch with them and are ready for any type of
confirmation of results related to the purity of products. More and more members are
getting attached with the organisation. The membership is increasing. The organisation
recently helped few ladies stage a demonstration outside the showroom of a company
responsible for selling a fake electrical appliance responsible for the death of one man.
In totality the NGO is doing a great job.
In the above case identify the various functions performed by the NGO for the protection
of the interests of the consumers.
Answer:
The various functions performed by the NGO for the protection of the interests of the
consumers are:

1. It helps the consumer to file their complaints in the concerned

consumer courts. Now that he has started an NGO he assures that
whenever a consumer in his knowledge is deprived of his consumer
rights he should file a complaint on his behalf in the consumer court
and fight for his cause.
2. It publishes periodicals to impart knowledge about issues concerned
with consumer interests. The three of them along with Suresh from
the side of their NGO have launched a monthly magazine which
creates awareness about the rights, reliefs and responsibilities of the
consumers.
3. Educates the general public about the issues related with consumer
interests. Recently in the central part of the city they organized a
training program in which all the information related to the
exploitation of consumers, consumer ignorance, consumer rights and
reliefs available to the consumers were the key highlights.
4. Carries out comparative tests of consumer products in the certified
laboratories for getting to the truth. The government laboratories are
easily in touch with them and are ready for any type of confirmation
of results related to the purity of products.
5. Encourages customers to stage a strong protest against exploitative
and unfair practices. The organisation recently helped few ladies
stage a demonstration outside the showroom of a company
responsible for selling a fake electrical appliance responsible for the
death of one man.

Question 15.
Shobhit wants to purchase a sandwich maker. He goes to a nearby mall and enters the
shop where electric gadgets are kept. He asks the salesman about the area where
sandwich makers are kept. The sales man takes him to that place where different types
of sandwich makers are kept. He very patiently observes all the electronic gadgets,
sees their functions, reads their instructions, compares their prices and sees their
warranty periods. After some time when he pays the concerned person, tells him to note
his home address and telephone number for future contact. He also asks him to inform
him about any new products in the market.
 1. In the above case name one consumer responsibility Shobhit should
follow?
2. In the above case when Shobhit reads the instructions which
consumer right is maintained?
3. Which mark should be checked by Shobhit on the electronic
appliance as he purchases it?
4. What is the significance of this mark?

Answer:

1. The consumer responsibility that Shobhit should follow is collecting

Cash Memo so that the proof of his purchase remains with him.
2. When Shobhit reads instructions his ‘Right to be Informed’ is
maintained.
3. The mark which should be checked in the case of any electrical
appliance is an ‘ISI mark.
4. The significance of this mark is that the product is standardised and
is safe to use.

Question 16.
Dr. Ahuja purchased a washing machine of a renowned company. The price of the
machine was Rs.10,000. The company provided the cash memo on purchase. The
money was paid in cash. The machine model was semi-automatic and it was with a
warranty of 3 years. For 3 years 1 month there was no problem in the functioning of the
machine. But due to water logging around the machine while washing clothes the main
rotator of the machine got fused. When the complaint was registered with the company
it was told that the warranty period of the machine had expired and Dr. Ahuja would
have to pay for the service charges as well as the replacement of rotator motor.

1. Is the company justified in not providing free service to Dr. Ahuja?

2. Can Dr. Ahuja file a complaint against the company?
3. Which consumer right of Dr. Ahuja is overlooked here?
4. Was any party at fault?
5. Did Dr. Ahuja fulfill her consumer responsibility?

Answer:
 1. Yes, the company is justified in not providing free service to Dr.
Ahuja as the warranty period of the company had expired. When the
complaint was registered with the company it was told that the
warranty period of the machine had expired.
2. No, Dr. Ahuja can’t file a complaint against the company as the
warrant period of 3 years is over. The machine model was semi-
automatic and it was with a warranty of 3 years.
3. No consumer right of Dr. Ahuja is overlooked here.
4. No party was at fault.
5. Yes, Dr. Ahuja fulfilled her consumer responsibility by taking the cash
memo when she purchased the semi-automatic machine. The
Company provided the cash memo on purchase.

Question 17.
‘Amazing Yummy Cakes’ is a renowned cake making company. The cakes are packed
in beautiful packaging. The company produces both egg containing as eggless cakes.
Once it so happened that 300 cakes containing egg were packed in packaging having
green signs. Vishal who is a strict vegetarian ate it. He realised something different in
the smell of the cake and went on to enquire about the content of the cake. On his
questioning one staff member agreed to the fault committed.
Which consumer right of Vishal was violated here?
Answer:
The consumer right which is violated here is ‘Right to be Informed’.