MODULE—5: FUNCTIONAL AREAS OF MANAGEMENT

Introduction to functional areas of management, Operations management, Human

resources management, Marketing management, Financial management
Entrepreneurship, Business plans, Corporate social responsibility, Patents and
Intellectual property rights

5.1 INTRODUCTION
Functional areas of management mean the sum total of all those activities which are
performed in an organisation to achieve the objectives of the organisation. These functions
can be of different types but personnel, finance, marketing and production activities have a
special importance.

5.2 OPERATIONS MANAGEMENT

Operations in an organisation can be categorised into Manufacturing Operations and Service
Operations. Manufacturing Operations is a conversion process that includes manufacturing
yields a tangible output: a product, whereas, a conversion process that includes service yields
an intangible output: a deed, a performance, an effort.

Operations system converts inputs in order to provide outputs, which are required by a
customer. It converts physical resources into outputs, the function of which is to satisfy
customer wants.

In some of the organisation the product is a physical good (breakfast in hotels) while in others
it is a service (treatment in hospitals). Bus and taxi services, tailors, hospital and builders are
the examples of an operations system. The basic elements of an operation system show in
Figure 1.3 with reference to departmental stores.

A departmental store's has an input like land upon which the building is located, labour as a
stock clerk, capital in the form of building, equipment and merchandise, management skills in
the form of the stores manager. Output will be serviced customer with desired merchandise.
Random fluctuations will be from external or internal sources, monitored through a feedback
system.
A combination of goods and services may also form a product. For instance, meals served in
a restaurant comprise both the tangible physical core product and intangible services aspects,
such as cleanliness, ambience, delivery, etc.

Operations management refers to planning, organizing, and controlling all resources and
activities to provide goods and services, which applies equally to manufacturing and services
in the private and public sectors and even governments.

Operations management refers to the process which transforms inputs such as materials,
machines, labour, capital and management, into outputs (i.e., goods and services), as shown
in Fig. 5.1.

In the operations management model the inputs include needs of customers, information,
technology, management and labor, fixed assets, and variable assets that are relevant to the
transformation process. Managers and workers use the information and physical factors to
produce outputs. Some physical elements, such as land, plant site, buildings, machines, and
warehouses, are relatively permanent. Other physical elements, such as materials and
supplies, are consumed in the process of producing outputs. The transformation process
incorporates planning, operating, and controlling the system. There are many tools and
techniques available to facilitate the transformation process. The model also reflects a
constant concern for improving the system. Outputs consist of products and services and may
even be information, such as that provided by a consulting organization. The last part of the
model shows that operations are influenced by external factors such as safety regulations or
fair labor practices.

Resources

Resources are the human, material and capital inputs to the production process. Human
resources are the key assets of an organisation. Material resources are the physical facilities
and materials such as plant equipment, inventories and supplies. These are the major assets of
an organisation. Capital in the form of stock, bonds, and/or taxes and contributions is a vital
asset. Capital is a store of value, which is used to regulate the flow of the other resources.

Systems
Systems are the arrangement of components designed to achieve objectives according to the
plan. In turn, it contains subsystem such as personnel, engineering, finance and operations,
which will function for the good of the organisation.

A systems approach to operations management recognises the hierarchical management

responsibilities.

The ability of any system to achieve its objective depends on its design and its control.
System design is a predetermined arrangement of components. It establishes the relationships
that must exist between inputs, transformation activities and outputs in order to achieve the
system objectives. With the most structured design, there will be less planning and decision-
making in the operations of the system.

Transformation and value adding activities

The objective of combining resources under controlled conditions is to transform them into
goods and services having a higher value than the original inputs. The transformation process
applied will be in the form of technology to the inputs.

The transformation process in 'operations' can have different forms, such as:

 Physical: As in Manufacturing Operations

 Locational: As in Transportation or warehouse operations
 Exchange: As in retail operations
 Psychological: As in entertainment
 Physiological: As in health care
 Informational: As in communication
Planning is the activity that establishes a course of action and guide future decision-making.
The operations manager defines the objectives for the operations subsystem of the
organisation, and the policies, and procedures for achieving the objectives. It also involves
product planning, facility designing and using the conversion process.

Organizing is the activities that establish a structure of tasks and authority. Operation
managers establish a structure of roles and the flow of information within the operations
subsystem. They determine the activities required to achieve the goals and assign authority
and responsibility for carrying them out.

Controlling is the activities that assure the actual performance in accordance with planned
performance. To ensure that the plans for the operations subsystems are accomplished, the
operations manager must exercise control by measuring actual outputs and comparing them
to planned operations management.

The effectiveness of the production factors in the transformation process is known as

productivity. The objective of any operation is to use available resources productively. High
productivity translates into lower costs and higher profits for a given price. Thus, operations
are a function or system that transforms inputs into outputs of greater value. The ratio of the
value of the output achieved to the inputs used is also used to express productivity, which is a
measure of how efficiently the resources are used.

Productivity = Output/lnput

The firms overall ratio must be greater than 1, then we can say value is added to the product.
Operations manager should concentrate improving the transformation efficiency and to
increase the ratio.

Therefore in any operation, the economic value of output should be greater than the economic
value of input. To illustrate, a finished automobile has a higher value than raw steel or a
graduating management student should have higher economic value than a fresher.

Role of an operation manager

Operation managers are concerned with planning, organising, and controlling the activities,
which affect human behaviour through models. The operations managers have the prime
responsibility for processing inputs into outputs. They must bring together under production
plan that effectively uses the materials, capacity and knowledge available in the production
facility. Given a demand on the system work must be scheduled and controlled to produce
goods and/or services required. Control must be exercised over such parameters such as
costs, quality and inventory levels.

OPERATIONS MANAGEMENT OBJECTIVES

Objectives of Operations Management can be categorized into Customer Service and

Resource Utilisation.

Customer service

The first objective of operating systems is to utilize resources for the satisfaction of customer
wants. Therefore, customer service is a key objective of operations management. The
operating system must provide something to a specification, which can satisfy the customer
in terms of cost and timing. Thus, providing the ‘right thing at a right price at the right time’
can satisfy primary objective.

These aspects of customer service – specification, cost and timing –They are the principal
sources of customer satisfaction and must therefore be the principal dimension of the
customer service objective for operations managers.

Resource utilisation

Another major objective of operating systems is to utilize resources for the satisfaction of
customer wants effectively. Customer service must be provided with the achievement of
effective operations through efficient use of resources. Inefficient use of resources or
inadequate customer service leads to commercial failure of an operating system.
Operations management is concerned essentially with the utilisation of resources, i.e.
obtaining maximum effect from resources or minimising their loss, under-utilisation or waste.
The extent of the utilisation of the resources’ potential might be expressed in terms of the
proportion of available time used or occupied, space utilisation, levels of activity, etc. Each
measure indicates the extent to which the potential or capacity of such resources is utilised.
This is referred as the objective of resource utilisation.

Operations management is concerned with the achievement of both satisfactory customer

service and resource utilisation. An improvement in one will often give rise to deterioration
in the other. Often both cannot be maximized, and hence a satisfactory performance must be
achieved on both objectives. All the activities of operations management must be tackled
with these two objectives in mind, and because of this conflict, operations managers’ will
face many of the problems. Hence, operations managers must attempt to balance these basic
objectives

MAIN FUNCTIONS OF OPERATION MANAGEMENT

1. Planning

Includes choosing a location for the business and scheduling production. Where a business is
located is directly related to how successful the business will be. This fact is as true for a
company that is opening its first factory or store as it is for an older business that is
expanding into a new area. Among the factors to consider are nearness to markets, raw
materials, labor supply, and transportation facilities.

2. Scheduling

Operations involves setting beginning and ending times for each step in the production
process. It includes planning and checking the use of labor, machinery, and materials so that
production moves smoothly. Scheduling ensures that work will be finished on time whether it
is manufacturing automobiles or books or dry cleaning a blouse or shirt.

3. Organizing

is the activities that establish a structure of tasks and authority. Operation managers establish
a structure of roles and the flow of information within the operations subsystem. They
determine the activities required to achieve the goals and assign authority and responsibility
for carrying them out.

4. Purchasing
In order to do business, a company needs the raw materials to produce its goods or offer its
services. It also must have machinery, office supplies, and any other supplies it uses.
Obtaining raw materials, machines, and supplies is the purchasing function of the production
process and involves getting the best deal for the company. The people who buy goods for a
business have to decide what to buy, from whom, and at what price.

5. Controlling

Is the activities that assure the actual performance in accordance with planned performance.
To ensure that the plans for the operations subsystems are accomplished, the operations
manager must exercise control by measuring actual outputs and comparing them to planned
operations management. Controlling costs, quality, and schedules are the important functions
here.

6. Quality control

Quality control is checking the quality of the goods produced. It involves overseeing the
grade or freshness of goods, their strength or workability, the workmanship or design,
harmlessness, adherence to federal or industry standards, and many other factors. Quality
control systems may be as simple as testing the thousandth item produced or testing each
product as it is finished.

7. Inventory control

Almost all manufacturers and many service businesses, such as dry cleaners, need
inventories, or stockpiles, of the materials they use for making their products or offering their
services. Manufacturers and businesses, such as supermarkets, also keep inventories of
finished goods on hand for sale, but inventories are costly. The more inventory a business
has, the less capital it has for other activities. In deciding how much inventory to keep on
hand, those in charge of inventory control also have other costs to consider. If the price of a
raw material is expected to rise, a business may stockpile it to keep future costs down. Often
a supplier will discount large orders. Some businesses may decide that the discounts
outweigh the other costs of maintaining a large inventory.

ORGANISATION OF OPERATIONS MANAGEMENT

The organization of operations management can be categorized into three specific levels:

(i) Strategic/top level/long term management

(ii) Tactical/functional/medium term/middle level management
(iii) Operational/short term management

The responsibilities of these levels of the management are:

(i) Strategic management

This is the highest level of operations management. Generally they make decisions which
have long-term consequences (more than three years) and which affect the organization as a
whole. Their specific functions include Decisions about:

• Products to make (product development)

• Make or buy decisions
• How to make products (process and layout decisions)
• How much to procure
• Production site location
• How much capacity is needed, (high level capacity decisions)

After assessing the potential within an industry, an overall organizational strategy must be
developed, including some basic choices of the primary basis for competing. In doing so,
priorities are established among the following four characteristics:

• Quality (product performance).

• Cost efficiency (low product price).
• Dependability (reliable, timely delivery of orders to customers).
• Flexibility (responding rapidly with new products or changes in volume)

(ii) Tactical management

This is the second level of management in operations. They make decision related to specific
functions or departments within the organization with medium term consequence (i.e. less
than three years but more than one year). Their specific functions include:

(i) Addressing the material and labor resources within the Constraints.
(ii) Labour planning; how many workers are needed.
(iii) Inventory and replenishment planning: level of stock required and when should it
be delivered.
(iv) Determining shifts needed for work: Whether overtime or subcontractors are
required
(v) Detailed capacity planning

(iii) Operational management

These are the low level managers in operations. They make decisions related to the day to
day functions of the organizations and whose consequence is short-term (less than one year).
Their specific functions include:

(i) Planning, execution and control decisions.

(ii) Scheduling: What to process and when
(iii) Sequencing: What is the order to process requirements
(iv) Loading: How does the work utilize the resources
(v) Assignments: Who does the work
ENTREPRENEURSHIP

Concept of Entrepreneurship:

The word "entrepreneur" is derived from the French verb enterprendre, which means 'to
undertake'. This refers to those who "undertake" the risk of new enterprises. An enterprise is
created by an entrepreneur. The process of creation is called "entrepreneurship".

Entrepreneurship is a process of actions of an entrepreneur who is a person always in search

of something new and exploits such ideas into gainful opportunities by accepting the risk and
uncertainty with the enterprise.

5.6.1 Characteristics of Entrepreneurship:

1. Economic and dynamic activity:

Entrepreneurship is an economic activity because it involves the creation and operation of an

enterprise with a view to creating value or wealth by ensuring optimum utilisation of scarce
resources. Since this value creation activity is performed continuously in the midst of
uncertain business environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation:

Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an

individual to continuously evaluate the existing modes of business operations so that more
efficient and effective systems can be evolved and adopted. In other words, entrepreneurship
is a continuous effort for synergy (optimization of performance) in organizations.

3. Profit potential:

"Profit potential is the likely level of return or compensation to the entrepreneur for taking on
the risk of developing an idea into an actual business venture." Without profit potential, the
efforts of entrepreneurs would remain only an abstract and a theoretical leisure activity.

4. Risk bearing:

The essence of entrepreneurship is the 'willingness to assume risk' arising out of the creation
and implementation of new ideas. New ideas are always tentative and their results may not be
instantaneous and positive.

An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period
(time gap between the conception and implementation of an idea and its results), an
entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume
risk, entrepreneurship would never succeed.

5.6.2 Entrepreneurial Process

1. Idea Generation:
To generate an idea, the entrepreneurial process has to pass through three stages:

a. Germination:

This is like seeding process, not like planting seed. It is more like the natural seeding. Most
creative ideas can be linked to an

b. Preparation:

Once the seed of interest curiosity has taken the shape of a focused idea, creative people start
a search for answers to t e problems. Inventors will go on for setting up laboratories,
designers will think of engineering new product ideas an marketers will study consumer
buying habits.

c. Incubation:

This is a stage where the entrepreneurial process enters the sub-conscious intellectualization.
The sub-conscious mind joins the unrelated ideas so as to find a resolution.

2. Feasibility study:

Feasibility study is done to see if the idea can be commercially viable. It passes through two
steps:

a. Illumination:

After the generation of idea, this is the stage when the idea is thought of as a realistic
creation. The stage of idea blossoming is critical because ideas by themselves have no
meaning.

b. Verification:

This is the last thing to verify the idea as realistic and useful for application. Verification is
concerned about practicality to implement an idea and explore its usefulness to the society
and the entrepreneur.

5.6.3 Types of Entrepreneurship

a) On the Basis of Capital Ownership:

1. Private Entrepreneur ship.

2. State/Public Entrepreneur ship.
3. Joint Entrepreneur ship.
4. Cooperative Entrepreneur ship.

1. Private Entrepreneur ship:

It is started by a person and he is the single risk bearer such as a sole proprietor.

Features:
 (i) It is started with limited capital.
(ii) All responsibilities regarding loss or profit is borne by the owner.
(iii) A person who is a single decision maker, programmer and strategy maker.
(iv) Individual profit earning tendency.

2. Public Entrepreneurship:

When Govt. starts any venture for public welfare all decisions, planning, programmes,
policies & risk borne by the govt, is termed as public entrepreneurship.

Features:

(a) All policies are made by government.

(b) All decisions are taken by government.
(c) Large size of capital and large production.
(d) Advanced technology is used by public sector in venture.
(e) More emphasis on public welfare.
(f) Uninterrupted supply of goods/services to consumer at reasonable price.

3. Joint Entrepreneurship:

It is the combination of private and govt. ownership. It is started by private and govt, sector
jointly including monetary investments also.

Features:

(a) Govt. is more effective in comparison to private sector.

(b) The main motive is to control centralisation.
(c) Encouragement to new entrepreneurs.
(d) Industrial development is helpful in achieving the goals of industrialisation.

4. Co-Operative Entrepreneurship:

It is started by two or more than two persons and they bear all risk and follow govt, rules and
regulations. For example - Dairy federation- Amul, Parag Dairy, Handloom Sector, Ration-
ing Shop, Textile, etc.

b) On the Basis of Attitude towards Changes & Development:

1. Traditional entrepreneurship
2. Modern entrepreneurship

1. Traditional Entrepreneurship:

When the change in venture is very slow, production system is traditional, less (emphasis)
attention towards research work is known as traditional or evolutionary entrepreneur ship.

Features:
(a) Small production system
(b) Less capital
(c) Less risk
(d) Lack of innovation and start up new venture.

2. Modern Entrepreneur ship:

When the new techniques and advanced technology is used in venture and entrepreneur takes
more risk it is known as modern or evolutionary entrepreneurship.

Features:

(a) More attention towards innovation.

(b) Business expansion.
(c) Emphasis on Industrialisation.
(d) Large size of capital and investment.
(e) Advanced technology and new techniques.
(f) More production and more risk.
(g) Attention towards research & survey programmes.

c) On the Basis of Centralisation:

1. Centralised Entrepreneurship
2. Decentralised Entrepreneurship.

1. Centralised Entrepreneurship:

When the maximum industries or the ventures are established in a specific area due to some
specific facilities such as electricity supply, water supply, easily availability of raw material,
market and banking facilities, is called centralized entrepreneurship.

Features:

(a) Industrialisation
(b) Lack of Decentralisation
(c) Limited at specific area.

2. Decentralised Entrepreneurship:

This type of entrepreneurship is situated in different places & areas. The main motive behind
their establishment is to develop the backward areas, generation of employment, reducing
inequalities of income & wealth.

d) On the Basis of Size:

1. Large Entrepreneurship
2. Small Entrepreneurship.
1. Large Entrepreneurship

When capital is invested in venture or business in large scale, production volume is large,
plants & machinery are more utilized, production system is very critical and direction,
controlling & management functions are done by a professionalist. E.g., Chemical industries,
cement industry, steel & iron industries and all medium and heavy sized industries.

2. Small Entrepreneurship

The size of venture is very small; small capital invested; less labour/man power; simple
production system and direction, operation management function, policy making, controlling
are done by an individual. E.g., Handlooms, small and cottage industries.

e) On the Basis of Entrepreneurial Function:

(a) Routine Entrepreneurship

(b) New type Entrepreneurship

1. Routine Entrepreneurship

This type of entrepreneurship is related to managerial function of business. The main function
of entrepreneur is to make sound planning, programme for smooth operation of venture and
conducting business at minimum cost and risk for the success of the venture.

2. New Type Entrepreneurship

This type of entrepreneurship is rela-ted to innovation and creation. The main objective is to
create innovative ideas, to search for new production system, new product, new techniques
and technology, new market and various beneficial opportunities.

f) On the Basis of Leadership:

a. Individual Entrepreneurship
b. Group level Entrepreneurship

1. Individual Entrepreneurship:

In this type of entrepreneurship, all matters of venture/business is looked after by an

individual such as all the management function, direction function, controlling function,
decision making function, production & distribution arc taken by an entrepreneur and the
respective person has the right of ownership and management and he provides leadership to
entire venture. Individualistic entrepreneurship is only possible in context to small business.

2. Group Level Entrepreneurship:

Group level entrepreneurship is based on techno structure of society. It is a result of large

production, labour division, mechanisation and complexity of business. Entrepreneur transfer
or delegate their power and duty to some other person who is an expert in the respective field
and they are not the owner of business, they are promoters.

In group level entrepreneurship, an entrepreneur divides any industry in various department

for running a smooth business, e.g., selling section, mana-gement section, policy making
section, production department, advertisement department, office section etc.

g) On the Basis of Other Entrepreneurship:

1. Urban Entrepreneurship
2. Rural Entrepreneurship
3. Systematic Entrepreneurship

1. Urban Entrepreneurship

Those industries which are established in urban areas. The size of population is more, large
production system, branded product available, skilled manpower, division of labour etc. all
are the characteristics of urban entrepreneurship.

2. Rural Entrepreneurship

Those industries which are established in rural areas having less production and less
investment. In it, production system is based on the traditional system. Handicraft work, less
population, lack of branded product are the characteristics of rural entrepreneurship.

3. Systematic Entrepreneurship

When an entrepreneur establishes industry in a systematic way, follows the rules and
regulation or it is started by an entrepreneur with the help of certain rules, regulations and
principles. The main motive behind systematic entrepreneurship is to search new market, new
opportunities, new customers, techniques and technology.

5.7 BUSINESS PLANS

In simple words, business plan is a written statement of what an entrepreneur proposes to take
up. It is a kind of guide frost or course of action what the entrepreneur hopes to achieve in his
business and how is he going to achieve it. In other words, business plan serves like a kind of
big road map to reach the destination determined by the entrepreneur.

The business plan is termed by different names by its different intended interest audience. For
example, when presented to a bank, it may be called 'loan proposal/ a venture capital group
might call it the 'venture plan' or 'investment prospects' and a common man may term it
'project report.' Let it be called by any name, its basic purpose is the same, i.e. to serve as a
roadmap in setting up a business enterprise.

5.7.1 Steps Involved In Writing a Business Plan

1. Define Purpose:
The business plan will serve its purpose better if its purpose is spelt out in the very beginning.
There may be multiple goals in writing the business plan. For example, the entrepreneur may
be planning on using the business plan to secure bank finance as well as to attract a major
corporation as a strategic partner. It is okay to have multiple goals, but some amount of
customizing should be done before placing it in front of different audiences.

2. Collect Information:

All sorts of information about the business and the industry should be collected. List out all
the information you already have with you, figure out the major gaps in information, and go
out there to get more information. Do not rate the quality of this information; just gather it. At
this point, the more you can find the better.

3. Write Down Things:

After enough information has been gathered, you can plan on starting the actual writing.
Think of a rough structure appropriate for the business plan and start writing. It is important
to note down things on paper without being too particular about sequence and grammar.
Approach it like a brainstorming session. Do not be critical of your efforts. Just make sure
that you are putting enough thoughts on paper.

4. Prepare a Rough Draft:

Now it is time to give shape to your business plan and make it concrete. Correct grammatical
mistakes and break up the written account into meaningful sections. Compare your writing to
your intended outline and make necessary changes. As your work progresses, you will need
to make a note of what else needs to be added. For some topics, more information will be
needed. At this stage of the writing process, you are going to decide on the level of detail
necessary to be included in the business plan.

5. Do Financial Analysis:

The numbers will continue to be important. After all costs and revenue estimates have been
arrived at, pro-forma financial statements are to be drafted. That will lead to drawing up the
sensitivity analysis, the RO1 calculation, the break-even analysis, and other financial rations.
The numbers should be realistic and consistent.

6. Finalize the Plan:

Finalizing the business plan is certainly a hard job. Language and spellings have to be
checked, the numbers have to be scrutinized and formatting has to be completed. Even small
errors can leave a very bad impression. 1 he business plan should not be ornate but should
have a professional look about it. Set a deadline for completing it and adhere to the deadline.
One good way to enforce a deadline is to tell some people that you will be showing them the
business plan by a certain date. Now it will be hard for you to ignore the deadline.

7. Get the Plan Reviewed:

Do not review your business plan yourself. Ask someone else to do it. It could be a family
member, a friend, or a professional acquaintance. Even better would be if you could get a
number of people to do it.

5.7.2 Types of Business Plans

1. Based on Time Span:

On the basis of time span, plan is divided into two types:

i. Short-Term Plan:

This plan relates to a relatively short period. This plan is concerned with the determination of
activities to accomplish short-term objectives of the enterprise. Normally, operational (or
tactical) plans are related to short periods. Short-term plans are developed within the
framework of long-term planning. This plan is normally prepared for a period of one year or
less.

ii. Long-Term Plan:

This plan relates to a relatively long period. This plan is concerned with achieving the long-
term goals for the enterprise. This plan determines long-term objectives of the enterprise. It is
normally made for the period of five years and more. This plan aims at providing the required
information on various elements of the future environment. It provides a broad framework
within which short-term action plans are developed.

2. Based on Scope of Operation:

On the basis of scope of operation, plan is divided into three types:

i. Operational (or Tactical) Plan:

This plan is concerned with the optimum use of available resources for a shorter period of
time. Production plan of a month is an example of operational plan. This plan is concerned
with simple, routine, and repetitive problems. This plan is prepared at middle and lower
levels of management. It facilitates participation and involvement of the middle and lower
level managers. It is a blue print for current actions within the framework of long range plans.

Operational plan is prepared for a short period (i.e., one year or less). It helps in achieving
tangible goals for a short period of time. It divides long-range and strategic plans into various
sub plans and programs. Operational planning is done at the departmental and divisional
levels which deal with performance of operations. This plan involves conversion of long-
range and strategic plans into detailed operational programs. Operational planning is
pragmatic as it requires actual commitment and utilization of resources.

ii. Strategic Plan:

Strategic plan determines how to achieve long-term goals of an enterprise in a dynamic
business environment. This plan involves important strategic decisions for achieving long-
term overall goals of the enterprise. This plan is prepared at higher level of management for
the development of the enterprise. Strategic plan covers vital matters and issues concerning
profitability, development, survival, and growth of the enterprise.

This plan designs the ways and means of achieving growth, diversification, stability, etc. and
develops integrated program of action accordingly. Strategic plan gives special emphasis on
environmental changes and uncontrollable factors. Strategic plan has a long-term perspective,
and it goes beyond five years. This plan needs more managerial judgement and expertise.

iii. Functional Plan:

This plan is prepared for various functional areas (such as purchase, production, finance,
marketing, etc.) of the business enterprise like purchase planning, production planning, and
finance planning, and marketing planning. This plan serves as a guide for the actions of
employees of the concerned functional department. The departmental managers formulate
their functional plans for one year in consultation with their subordinate officers. Functional
plans require approval of the top management with or without modification. The master plan
of an enterprise is based on the functional plans of various departments.

3. Based on Repetitiveness:

Plans may be single-use plans and repeated-use plans. Single use plans lead to the
development of budget, strategy, objectives, and programmes. Repeated-use (standing) plans
lead to the development of policies, procedures, methods, and rules.

i. Single-Use Plan:

A single-use plan is meant for a particular situation. It is designed to accomplish a specific

objective within a relatively short period. It is tailored to fit a specific situation. This plan
ceases to exist once the objective is achieved. It is basically non- repetitive in nature.
Budgets, strategy, objectives, and programmes are examples of a single-use plan.

ii. Standing (or Repetitive-Use) Plan:

A standing plan is a permanent plan. It is used again and again.

It is meant to serve as a standing guideline and criterion on managerial decision-making. It is

repeatedly used for tackling recurring problems and issues. Policies, procedures, methods,
and rules are examples of standing plans.

5.8 CORPORATE SOCIAL RESPONSIBILITY

Profit maximisation was viewed as the sole business objective; putting this view no more
holds good. Business Managers have begun to realise that they owe responsibility to society
as they owe to business enterprises.
CSR denotes the way the companies integrate the general, social, environmental and
economic concerns of the society into their own values, strategies and operations in a
transparent and accountable manner and thereby contribute to the creation of wealth and
improvement in the standard of living of the society at large.

5.8.1 Scope of Corporate Social Responsibility

1. Environment:

This area involves the environmental aspects of production, covering pollution control in the
conduct of business operations, prevention or repair of damage to the environment resulting
from processing of natural resources and the conservation of natural resources.

Corporate social objectives are to be found in the abatement of the negative external social
effects of industrial production, and adopting more efficient technologies to minimize the use
of irreplaceable resources and the production of waste.

2. Energy:

This area covers conservation of energy in the conduct of business operations and increasing
the energy efficiency of the company's products.

3. Fair Business Practices:

This area concerns the relationship of the company to special interest groups.

In particular it deals with:

i. Employment of minorities
ii. Advancement of minorities
iii. Employment of women
iv. Employment of other special interest groups
v. Support for minority businesses
vi. Socially responsible practices abroad.

4. Human Resources:

This area concerns the impact of organizational activities on the people who constitute the
human resources of the organization.

These activities include:

i. Recruiting practices
ii. Training programs
iii. Experience building -job rotation
iv. Job enrichment
v. Wage and salary levels
vi. Fringe benefit plans
 vii. Congruence of employee and organizational goals
viii. Mutual trust and confidence
ix. Job security, stability of workforce, layoff and recall practices
x. Transfer and promotion policies
xi. Occupational health

5. Community Development:

This area involves community activities, heal th-related activities, education and the arts and
other community activity disclosures.

6. Products:

This area concerns the qualitative aspects of the products, for example their utility, life-
durability, safety and serviceability, as well as their effect on pollution. Moreover, it includes
customer satisfaction, truthfulness in advertising, completeness and clarity of labelling and
packaging. Many of these considerations are important already from a marketing point of
view. It is clear, however, that the social responsibility aspect of the product contribution
extends beyond what is advantageous from a marketing angle.

5.8.2 Challenges to CSR Initiatives in India

There are a number of challenges a company would face while implementing its CSR
activities.

Some of these challenges are as follows:

1. Lack of Community Participation:

Inadequate communication between the company and the community limits the scope of
conducting CSR activities. In addition, due to inadequate knowledge of CSR among
communities, coupled with poor communication, problems escalate. There is a general
deterrence to participation by the community.

2. Narrow Perception of CSR Initiatives:

Many NGOs and government agencies presume that companies involved in CSR activities
are only interested in funds. This de-motivates companies to initiate and implement CSR
activities.

3. Transparency Issues:

Challenges may also be caused by the commonly-held view that there may be a lack of
transparency on the part of local implementing agencies, and that they do not make adequate
efforts to disclose information on the progress of social programmes that have been initiated.

In addition, companies and funding agencies are particular that audit mechanisms, impact
assessment, and the utilization of their funds must be well-recorded and shared among
stakeholders. Such a perceived lack of transparency negatively impacts the process of trust-
building between companies and local communities.

4. Need to Build Local Capabilities:

One of the reasons for lack of transparency is inadequate local capabilities. There is a need
for building the capabilities of the local NGOs as there is a serious dearth of trained and
efficient organizations that can effectively contribute to the ongoing CSR activities initiated
by companies. This also limits the ramp up, scope, and size of CSR initiatives. Similarly,
there are also challenges with respect to reaching remote and rural areas, the inabilitv to
assess and identify the real needs of the community and work with the corporate sector to
ensure successful implementation of CSR activities.

5. Lack of Consensus on Implementing CSR Issues:

There is a lack of consensus amongst local communities, agencies, government bodies, and
companies while implementing CSR projects. This lack of consensus often results in
duplication of activities by corporate houses in their areas of intervention. This results in a
competitive spirit between local implementing agencies rather than a collaborative approach.

5.8.3 Examples of CSR

TISCO, Jamshedpur is the first biggest corporate to come up in India around 1916 and it is
the first to voluntarily take up CSR. At a time when there were no rules and regulations for
employee welfare, amenities, timing etc., TICSO the flagship company of lata Group started
giving employee welfare facilities. They started facilities like canteen, leave, medical
assistance, recreation club, training and development. Other Indian companies started
following these measures about 50 years after TISCO started voluntarily.

Now as per Factories Act 1948 and subsequent amendments many of the employees related
welfare measures have become compulsory. Workers also claim facilities by right. During the
period of 1960 to 1980 the Trade Union activity was very strong in India and almost all the
corporate were forced to take care of employee related fair practices. In case of pollution
control measures it has become necessary for government officials to chase the managements
and the process will continue.

Some profit making companies in India on doing exclusive social benefit activities and the
examples are as follows:

(1) Infosys Technologies:

They have their own 'Infosys Foundation which attends social causes like water supply and
toilet facilities to schools, guest houses to cancer patients and their accompanying person,
supply of computers to schools and colleges.

(2) Sahara India:

They sponsor important sports events like cricket, hockey and also have contributed funds to
various national calamity victims.

(3) Birla Trust:

Birla's Trust spends money on educational institutes, temple and old age homes on a regular
basis.

(4) Tata Group:

They invest in 'foot-ball academy', 'hockey academy' and sponsor sports tournament. Give
scholarship to merited students at All India Level. There are many more corporate who
contribute to various social causes and also during restoration process after calamities like
earth quakes, Tsunami floods etc. Many of the Indians settled in Europe and USA and
funding social causes in India.

5.8.4 Advantages of CSR

There are many tangible and intangible benefits due to CSR activities of the companies.
While saying this we must appreciate that only profit making companies can take up social
services which arc of voluntary nature.

Some of the advantages are as follows:

i. It displays care and concern and fellow feeling towards the society we live in.
ii. The owners of the company earn huge profits from a particular state/region or nation.
It becomes their duty to do something in return as gratitude.
iii. The executives who undertake CSR activities are held very high in public opinion and
are honoured by the society and government.
iv. It is not possible for government alone to improve the standard of living of people. If
corporate also collaborate the living conditions of the people improves.
v. The corporate image improves and it helps to sell their products more and more.
vi. The trend of CSR is a motivator to youngsters to take up such activities when they
grow up to become executives or entrepreneurs.