IITD DMS PI Kit

IT Compendium
Department of Management Studies

INDIAN INSTITUTE OF TECHNOLOGY DELHI
(Institute of Eminence, Govt. of India)
IT COMPENDIUM
Contents
1. Overview of IT Industry ..................................................................................... 3
1.1 SWOT Analysis of IT Sector: ............................................................................. 3
1.2 Sector Composition: ............................................................................................ 4
2. Market Size of Indian IT Industry..................................................................... 5
3. Recent Technologies and Buzz words ................................................................ 5
3.1 Enterprise Resource Planning ............................................................................ 5
3.2 E-commerce .......................................................................................................... 6
4. Popular Business Analytics and Reporting Tools ............................................ 7
4.1 Tableau ................................................................................................................. 7
4.2 5G .......................................................................................................................... 8
4.3 Robotic Process Automation............................................................................... 8
5. Data Science, Artificial Intelligence and Machine Learning........................... 9
5.1 Data Science……………………………………………………………………..9
5.2 Artificial Intelligence ......................................................................................... 10
5.3 Machine Learning.............................................................................................. 10
6. Industry 4.0 ........................................................................................................ 13
7. Metaverse............................................................................................................ 14
8. Cryptocurrency .................................................................................................. 16
9. NFTs .................................................................................................................... 17
10. Role of IT in different sectors ........................................................................... 18
DEPARTMENT OF MANAGEMENT STUDIES 2

IT COMPENDIUM
1. Overview of IT Industry
Contributing approximately 55% market share to Global Service Sourcing Business,
India is continuously growing faster than the overall worldwide IT-BPM industry.
Rapid industrialization, growth of IT parks, partial privatization of telecommunication,
development of SEZ, government policies, and low operating cost contribute to its
development.
Information Technology (IT) is a business sector that deals with computing, including
hardware, software, telecommunications and generally anything involved in the
transmittal of information or the systems that facilitate communication. Indian
software product industry is expected to reach US$ 100 billion by 2025. Indian
companies are focusing to invest internationally to expand global footprint and
enhance their global delivery centers. As of FY21, the IT industry employed 4.5
million people.
1.1 SWOT Analysis of IT Sector:
• Strengths:
▪ Skilled, abundant, and cheaper manpower
▪ Operational excellence
▪ Conducive business environment
▪ Favorable government policies
▪ Quality assurance
▪ Software Economic Zones (SEZ) and Software Technology Parks (STP)
• Weakness:
▪ High attrition rate

▪ Cost of telecom higher than western countries
▪ Weak hardware industry
▪ Political opposition from developed countries
▪ Lack of strict norms on Data privacy and security

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• Opportunity:
▪ Market potential
▪ Cheap data rates per GB
▪ New policies and initiatives by the Indian government like Smart Cities, Smart
Industries, Automation, Industry 4.0
▪ India can be branded as a quality assurance
▪ Globalization, Privatization of industries
▪ Large scale digitalization in many sectors
• Threat:
▪ Data Security
▪ Other countries like China, Indonesia, the Philippines, etc. have an edge on the
hardware cost factor
▪ Instability of the Indian political system
▪ Uncertainty around the US political landscape
1.2 Sector Composition:
The four key sectors of IT market are:

1. IT Services
2. Business Process Management
3. Software Products and Engineering Services
4. Hardware
It can be seen in the sector-wise break-up of Indian IT Market the major market
revenue of Indian IT Sector comes from IT Services, whereas India really lacks in
Hardware market. China has a significant edge in Hardware market due to low cost of
hardware.
To know more: https://www.ibef.org/industry/information-technology-india.aspx

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2. Market Size of Indian IT Industry

Although the Indian IT industry took a small setback in 2020 due to pandemic, with
the increase in digitalization and automation in all other sectors, it is expected to
boom in upcoming years. The global IT industry is worth $5 trillion, with China as a
major global tech market player.
• Revenue
The contribution of IT industry's revenue has grown impressively. IT industry's

revenue is estimated to be $195 billion in FY21, growing at 7.7% y-o-y. By 2025, it is
expected to reach
$350 billion. The domestic revenue of IT industry was estimated at $45 billion and
export revenue at $150 billion in FY21.
• Employment
Leading Indian IT firms like Infosys, Tech Mahindra, TCS, Wipro, HCL are the major
employers. In FY21, the IT sector added 3.75 lakh jobs, up from 2 lakh jobs in FY20,
taking the overall workforce to 4.85 million.
• GDP
India is the world's largest sourcing destination with the largest qualified talent pool of
technical graduates globally. IT and ITES (IT Enabled Services) currently adds 8% to
the GDP of India. With the advancement in this sector, IT applications, and
digitalization in almost all other sectors, it is expected to contribute 10% by 2025.
3. Recent Technologies and Buzz words

3.1 Enterprise Resource Planning
Enterprise resource planning (ERP) is business process management software that

allows an organization to use a system of integrated applications to manage the
business and automate many back-office functions related to technology, services and
human resources. ERP software typically integrates all facets of an operation —
including product planning, development, manufacturing, sales and marketing — in a
single database, application and user interface.
Today most organizations implement ERP systems to replace legacy software or to
incorporate ERP applications because no system currently exists. In fact, a 2016 study
by Panorama Consulting Solutions, LLC., indicates that organizations implement ERP
for the following reasons:

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Fig 1. ERP Systems
● To replace out-of-date ERP software (49%)

● To replace homegrown systems (16%)
● To replace accounting software (15%)
● To replace other non-ERP systems / had no system (20%)
3.2 E-commerce
E-commerce is an activity of electronic merchandise. It is a business model that lets

firms and individuals buy and sell things over the internet. There are notably three
areas of e-commerce. They are online retailing, electronic markets, and online auctions.
E-commerce operates in all four market segments – Business to business (B2B),
Business to consumer (B2C), Consumer to Consumer (C2C), and Consumer to
Business(C2B). It provides a wider market presence for a business and helps the
business to have more efficient distribution channels. Stores can now offer a wide array
of products online, and consumers also get to choose from the wide variety of available
online options. Examples include Amazon, Flipkart, eBay, and Alibaba.com.
E-commerce in pandemic
During the lockdown due to the pandemic in 2020, global retail website traffic hit 14.3
billion visits, signifying the unprecedented growth of e-commerce. Some businesses
that did not have their presence on e-commerce scrambled to create their online
merchandise. For other businesses, it was an opportunity as people turned to purchase
everything online. In India, all age groups have migrated online for shopping. First

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time shoppers have emerged, and there is also a growing trend of shoppers from Tier II
and Tier III cities. In one survey, it is noted that in US, as many as 29% of surveyed
shoppers stated that they never go back to shop in person again, and in the UK, 43% of
surveyed customers state that they would like to keep on shopping online after the
lockdown is over. Experts feel that the pandemic has accelerated the growth of e-
commerce to the extent that would have otherwise taken four to six years.
4. Popular Business Analytics and Reporting Tools

Analytics and Reporting tools play a vital function in business operations, allowing
analytics teams to generate constantly updated snapshots of vital areas of the business,
which can then be passed to other parts of the team for monitoring, making
adjustments or just generating an overall "sixth sense" about how things are going.
Here are some of the most popular tools used by firms for reporting:
4.1 Tableau
Tableau is a software company that offers collaborative data visualization software for
organizations working with business information analytics. Tableau provides reporting,
dashboarding and scorecards, ad hoc analysis and queries, online analytical processing,
data discovery, BI search, spreadsheet integration and other data analytics and analysis
functions. By making the data easier to understand, managers, analysts and executives
can see the relationships between different data points, regardless of their technical
skill levels.
Tableau visualization and analytics product offerings include:
Tableau Desktop: It is used to connect to data, explore data, do analytics, and create
reports, dashboards and story boards.
Tableau Online: It is a software as a service (SaaS) offering for enterprises, offering

the same functionality as the on-premises version and hosted by Tableau on its servers.
Tableau Server: It is a platform that lets enterprises share reports, dashboards and
data sources across the enterprise. It's either hosted on premises or through Amazon
Web Services (AWS). Tableau Server supports large enterprises by providing
governance, security, scalability and performance.
Tableau Mobile: a free app for iPad, iPhone, Android tablet and mobile browsers,
enabling users to author a dashboard once, then view or edit it anywhere, on any

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device.
Tableau Public: It is a free platform that anyone can access and is commonly used by
journalists, bloggers, and data enthusiasts to analyze public and private data.
4.2 5G
5G is the 5th generation mobile network. It is a new global wireless standard after 1G,
2G, 3G, and 4G networks. 5G enables a new kind of network designed to connect
virtually everyone and everything together, including machines, objects, and devices.
5G wireless technology is meant to deliver higher multi-Gbps peak data speeds, more
reliability, massive network capacity, increased availability, and a more uniform user
experience to more users. Higher performance and improved efficiency empower new
user experiences and connects new industries.
5G is driving global growth.
● 13.2 trillion dollars of global economic output
● 22.3 million new jobs created
● 2.1 trillion dollars in GDP growth
Through a landmark 5G Economy study, we found that 5G's full economic effect will
likely be realized across the globe by 2035—supporting a wide range of industries and
potentially enabling up to $13.2 trillion worth of goods and services.
This impact is much greater than previous network generations. The new 5G network's
development requirements are also expanding beyond the traditional mobile
networking players to industries such as the automotive industry.
4.3 Robotic Process Automation
Robotic Process Automation is the technology that allows anyone today to configure
computer software, or a "robot" to emulate and integrate the actions of a human
interacting within digital systems to execute a business process. RPA robots utilize the
user interface to capture data and manipulate applications just like humans do. They
interpret, trigger responses, and communicate with other systems in order to perform
on a vast variety of repetitive tasks. An RPA software robot never sleeps and makes
zero mistakes.
Business benefits of RPA:
● Better accuracy: Robotic Process Automation software robots are programmed
to follow rules. They never get tired and never make mistakes. They are
compliant and consistent.
● Improved compliance: Once instructed, RPA robots execute reliably, reducing

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risk. Everything they do is monitored. You have the full control to operate in
accordance with existing regulations and standards.
● Fast cost savings: RPA can reduce processing costs by up to 80%. In less than
12 months, most enterprises already have a positive return on investment, and
potential further accumulative cost reductions can reach 20% in time.
● Super scalable: Across business units and geographies, RPA performs a
massive number of operations in parallel, from desktop to cloud environments.
Additional robots can be deployed quickly with minimal costs, according to
work flux and seasonality.
● Increased speed and productivity: Employees are the first to appreciate the
benefits of RPA as it removes non-value-add activities and relieves them from
the rising pressure of work.
5. Data Science, Artificial Intelligence and Machine

Learning
5.1 Data Science
Data science is the study of data. Like biological sciences is a study of biology, physical
sciences, it’s the study of physical reactions. Data is real, data has real properties, and
we need to study them if we’re going to work on them. Data Science involves data and
some signs.
It is relevant today because we have millions of data available on single data or for
single data. We didn’t use to worry about the lack of data. Now we have tons of data.
In the past, we didn’t have defined algorithms, now we have algorithms. In the past, the
software was not affordable by everyone because it was too expensive, so only
industries with big-bucks can use it but now it is open source and freely available.
Applications of Data Science:
Following are some of the applications that makes use of Data Science for its services:
• Internet Search Results (Google)
• Recommendation Engine (Spotify)
• Intelligent Digital Assistants (Google Assistant)
• Autonomous Driving Vehicle (Waymo)
• Spam Filter (Gmail)
• Abusive Content and Hate Speech Filter (Facebook)
• Robotics (Boston Dynamics)
• Automatic Piracy Detection (YouTube)

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5.2 Artificial Intelligence

Humans have been, are, and will forever be thirsty to invent things that would make
their lives easier and better by a thousandfold. The capacity of what a human mind can
do has always baffled me. One such major invention would be what is called as AI-
Artificial Intelligence.
AI can be broadly classified into two:
1. Narrow AI: This type of AI is also referred to as “weak AI”. Narrow AI usually
carries out one particular task with extremely high efficiency which mimics
human intelligence. An example would be any computer game where one player
is the user and the other player is the computer. What usually happens is, the
machine is fed with all the rules and regulations of the game and the possible
outcomes of the game manually. In turn, this machine applies these data to beat
whoever is playing against it. A single particular task is carried out to mimic
human intelligence.
2. Strong AI: Also referred to as “general AI”. Here is where there is no difference
between a machine and a human being. This is the kind of AI we see in the
movies, the robots.
Why AI?
Today, the amount of data in the world is so humongous that humans fall short of
absorbing, interpreting, and making decisions of the entire data, no, even part of the
data. This complex decision-making requires beings that have higher cognitive skills
than human beings. This is why we’re trying to build machines better than us, in other
words, AI. Another major characteristic that AI machines possess but we don’t is
repetitive learning.
AI is used in various fields like:
• Health Care
• Retail
• Manufacturing
• Banking
5.3 Machine Learning

Machine Learning is a system of computer algorithms that can learn from example
through self-improvement without being explicitly coded by a programmer. Machine
learning is a part of artificial Intelligence which combines data with statistical tools to
predict an output which can be used to make actionable insights.
In machine learning, the machine learns how the input and output data are correlated
and it writes a rule. The programmers do not need to write new rules each time there is

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new data. The algorithms adapt in response to new data and experiences to improve
efficacy over time.
The core objective of machine learning is the learning and inference. First of all, the
machine learns through the discovery of patterns. This discovery is made thanks to
the data. One crucial part of the data scientist is to choose carefully which data to
provide to the machine. The list of attributes used to solve a problem is called a feature
vector. You can think of a feature vector as a subset of data that is used to tackle a
problem. The machine uses some fancy algorithms to simplify the reality and transform
this discovery into a model. Therefore, the learning stage is used to describe the data
and summarize it into a model.
The life of Machine Learning programs is straightforward and can be summarized in
the following points:
1. Define a question
2. Collect data
3. Visualize data
4. Train algorithm
5. Test the Algorithm
6. Collect feedback
7. Refine the algorithm
8. Loop 4-7 until the results are satisfying
9. Use the model to make a prediction
Machine learning can be grouped into two broad learning tasks: Supervised and
Unsupervised. There are many other algorithms.
Supervised learning:
An algorithm uses training data and feedback from humans to learn the relationship of
given inputs to a given output. For instance, a practitioner can use marketing expense
and weather forecast as input data to predict the sales of cans.
You can use supervised learning when the output data is known. The algorithm will
predict new data.
There are two categories of supervised learning:
• Classification task
• Regression task
Classification
Imagine you want to predict the gender of a customer for a commercial. You will start
gathering data on the height, weight, job, salary, purchasing basket, etc. from your
customer database. You know the gender of each of your customer, it can only be male
or female. The objective of the classifier will be to assign a probability of being a male
or a female (i.e., the label) based on the information (i.e., features you have collected).
When the model learned how to recognize male or female, you can use new data to
make a prediction. For instance, you just got new information from an unknown

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customer, and you want to know if it is a male or female. If the classifier predicts male
= 70%, it means the algorithm is sure at 70% that this customer is a male, and 30% it is
a female.
The label can be of two or more classes. The above Machine learning example has only
two classes, but if a classifier needs to predict object, it has dozens of classes (e.g.,
glass, table, shoes, etc. each object represents a class)
Regression
When the output is a continuous value, the task is a regression. For instance, a financial
analyst may need to forecast the value of a stock based on a range of feature like
equity, previous stock performances, macroeconomics index. The system will be
trained to estimate the price of the stocks with the lowest possible error.
Unsupervised learning
In unsupervised learning, an algorithm explores input data without being given an
explicit output variable (e.g., explores customer demographic data to identify patterns)
You can use it when you do not know how to classify the data, and you want the
algorithm to find patterns and classify the data for you
Challenges and Limitations of Machine Learning

The primary challenge of machine learning is the lack of data or the diversity in the
dataset. A machine cannot learn if there is no data available. Besides, a dataset with a
lack of diversity gives the machine a hard time. A machine needs to have heterogeneity
to learn meaningful insight. It is rare that an algorithm can extract information when
there are no or few variations. It is recommended to have at least 20 observations per
group to help the machine learn. This constraint leads to poor evaluation and
prediction.
Applications of Machine Learning

Augmentation:
• Machine learning, which assists humans with their day-to-day tasks, personally or
commercially without having complete control of the output. Such machine
learning is used in different ways such as Virtual Assistant, Data analysis,
software solutions. The primary user is to reduce errors due to human bias.
Automation:
• Machine learning, which works entirely autonomously in any field without the
need for any human intervention. For example, robots performing the essential
process steps in manufacturing plants.
Finance Industry
• Machine learning is growing in popularity in the finance industry. Banks are

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mainly using ML to find patterns inside the data but also to prevent fraud.
Government Organization
• The government makes use of ML to manage public safety and utilities. Take the
example of China with the massive face recognition. The government
uses Artificial Intelligence to prevent jaywalker.
Healthcare industry
• Healthcare was one of the first industry to use machine learning with image
detection.
Marketing
• Broad use of AI is done in marketing thanks to abundant access to data. Before
the age of mass data, researchers develop advanced mathematical tools like
Bayesian analysis to estimate the value of a customer. With the boom of data,
marketing department relies on AI to optimize the customer relationship and
marketing campaign.
6. Industry 4.0
From the first industrial revolution (mechanization through water and steam power) to
the mass production and assembly lines using electricity in the second, the fourth
industrial revolution will take what was started in the third with the adoption of
computers and automation and enhance it with smart and autonomous systems fuelled
by data and machine learning.
The term Industry 4.0 encompasses a promise of a new industrial revolution—one that
marries advanced manufacturing techniques with the Internet of Things to create
manufacturing systems that are not only interconnected, but communicate, analyse, and
use information to drive further intelligent action back in the physical world. At the
very core, Industry 4.0 includes the (partial) transfer of autonomy and autonomous
decisions to cyber-physical systems and machines, leveraging information systems.
Industry 4.0 is often used interchangeably with the notion of the fourth industrial
revolution. It is characterized by, among others,
• even more automation than in the third industrial revolution,
• the bridging of the physical and digital world through cyber-physical systems,
enabled by Industrial IoT,
• a shift from a central industrial control system to one where smart product defines
the production steps,
• closed-loop data models and control systems and
• personalization/customization of products.
In essence, the technologies making Industry 4.0 possible leverage existing data and
ample additional data sources, including data from connected assets to gain efficiencies
on multiple levels, transform existing manufacturing processes, create end-to-end

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information streams across the value chain and realize new services and business
models.
Benefits of adopting an Industry 4.0 model for businesses-
• Gain a competitive edge- In order to stay competitive, businesses need to invest
in technology and solutions that help improve and optimize operations. The
systems and processes should be in place to allow you to provide the same or
better level of service to your customers and clients that they could be getting
from your competitors.
• Makes you more attractive to the younger workforce- Companies that invest in
modern, innovative Industry 4.0 technologies are better positioned to attract and
retain new workers.
• Makes your team stronger and more collaborative- Companies that invest in
Industry 4.0 solutions can increase efficiency, boost collaboration between
departments, enable predictive and prescriptive analytics, and allow people
including operators, managers, and executives to more fully leverage real-time
data and intelligence to make better decisions while managing their day-to-day
responsibilities.
• Allows you to address potential issues before they become big problems-
Predictive analytics, real-time data, internet-connected machinery, and
automation can all help you be more proactive when it comes to addressing and
solving potential maintenance and supply chain management issues.
• Allows you to trim costs, boost profits, and fuel growth- Industry 4.0
technology helps you manage and optimize all aspects of your manufacturing
processes and supply chain. It gives you access to the real-time data and insights
you need to make smarter, faster decisions about your business, which can
ultimately boost the efficiency and profitability of your entire operation.
7. Metaverse
The metaverse is a concept of an online, 3D, virtual space connecting users in all
aspects of their lives. It would connect multiple platforms, similar to the internet
containing different websites accessible through a single browser.
The concept was developed in the science-fiction novel Snow Crash by Neal
Stephenson. The metaverse will be driven by augmented reality, with each user
controlling a character or avatar.
Besides supporting gaming or social media, the metaverse will combine economies,
digital identity, decentralized governance, and other applications. Even today, user
creation and ownership of valuable items and currencies help develop a single, united
metaverse. All these features provide blockchain the potential to power this future
technology.

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While we don't yet have a single, linked metaverse, we have plenty of platforms and
projects similar to the metaverse. Typically, these also incorporate NFTs and other
blockchain elements.
SecondLive
SecondLive is a 3D virtual environment where users control avatars for socializing,

learning, and business. The project also has an NFT marketplace for swapping
collectibles. In September 2020, SecondLive hosted Binance Smart Chain's Harvest
Festival as part of its first anniversary. The virtual expo showcased different projects in
the BSC ecosystem for users to explore and interact with.
Criticisms and Concerns

• Privacy: Information privacy is an area of concern for metaverses because
related companies will likely collect users' personal information through
interactions and biometric data from wearable virtual reality devices. Meta
Platforms (previously Facebook) is planning on employing targeted advertising
within their metaverse, raising further worries related to the spread of
misinformation and loss of personal privacy
• Addiction and problematic social media use: User addiction and problematic
social media use is another concern. Internet addiction disorder, social media,
and video game addiction can have mental and physical repercussions over a
prolonged period of time, such as depression, anxiety, and various other harms
related to having a sedentary lifestyle such as an increased risk
for obesity and cardiovascular disease.

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To know more: https://youtu.be/7ODuQMkZWK8
8. Cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a
medium of exchange through a computer network that is not reliant on any central
authority, such as a government or bank, to uphold or maintain it.
Individual coin ownership records are stored in a digital ledger, which is a computerized
database using strong cryptography to secure transaction records, to control the creation
of additional coins, and to verify the transfer of coin ownership. Cryptocurrency does
not exist in physical form (like paper money) and is typically not issued by a central
authority. Cryptocurrencies typically use decentralized control as opposed to a central
bank digital currency (CBDC). When a cryptocurrency is minted or created prior to
issuance or issued by a single issuer, it is generally considered centralized. When
implemented with decentralized control, each cryptocurrency works through distributed
ledger technology, typically a blockchain, that serves as a public financial transaction
database.
A cryptocurrency is a tradable digital asset or digital form of money, built on
blockchain technology that only exists online. Cryptocurrencies use encryption to
authenticate and protect transactions, hence their name. There are currently over a
thousand different cryptocurrencies in the world, and their supporters see them as the
key to a fairer future economy. Few popular crypto-currencies are:
• Bitcoin
• Ethereum
• Dogecoin
• Litecoin
• Binance coin
How does crypto fit into the metaverse?
Crypto can offer the other key parts required, such as digital proof of ownership,
transfer of value, governance, and accessibility.
If, in the future, we work, socialize, and even purchase virtual items in the metaverse,
we need a secure way of showing ownership. We also need to feel safe transferring
these items and money around the metaverse. Finally, we will also want to play a role in
the decision-making taking place in the metaverse if it will be such a large part of our
lives.
Many developers use crypto and blockchain as an option. Blockchain provides a
decentralized and transparent way of dealing with the topics.
Blockchain developers also take influence from the video game world. Gamification is

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common in Decentralized Finance (DeFi) and GameFi. The key aspects of blockchain
suited to the metaverse are:
1. Digital proof of ownership: By owning a wallet with access to your private
keys, you can instantly prove ownership of activity or an asset on the blockchain.
For example, you could show an exact transcript of your transactions on the
blockchain while at work to show accountability. A wallet is one of the most
secure and robust methods for establishing a digital identity and proof of
ownership.
2. Digital collectability: Just as we can establish who owns something, we can also
show that an item is original and unique. For a metaverse looking to incorporate
more real-life activities, this is important. Through NFTs, we can create objects
that are 100% unique and can never be copied exactly or forged. A blockchain
can also represent ownership of physical items.
3. Transfer of value: A metaverse will need a way to transfer value securely that
users trust. In-game currencies in multiplayer games are less secure than crypto
on a blockchain. If users spend large amounts of time in the metaverse and even
earn money there, they will need a reliable currency.
4. Governance: The ability to control the rules of your interaction with the
metaverse should also be important for users. In real life, we can have voting
rights in companies and elect leaders and governments. The metaverse will also
need ways to implement fair governance, and blockchain is already a proven way
of doing this.
5. Accessibility: Creating a wallet is open to anyone around the world on public
blockchains. Unlike a bank account, you don't need to pay any money or provide
any details. This makes it one of the most accessible ways to manage finances
and an online, digital identity.
6. Interoperability: Blockchain technology is continuously improving
compatibility between different platforms. Projects like Polkadot
(DOT) and Avalanche (AVAX) allow for creating custom blockchains that can
interact with each other. A single metaverse will need to connect multiple
projects, and blockchain technology already has solutions for this.
To know more: https://youtu.be/8NgVGnX4KOw
9. NFTs
Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique
identification codes and metadata that distinguish them from each other.
Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This

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differs from fungible tokens like cryptocurrencies, which are identical to each other
and, therefore, can be used as a medium for commercial transactions.
The distinct construction of each NFT has the potential for several use cases. For
example, they are an ideal vehicle to digitally represent physical assets like real estate
and artwork. Because they are based on blockchains, NFTs can also be used to remove
intermediaries and connect artists with audiences or for identity management. NFTs
can remove intermediaries, simplify transactions, and create new markets.
Like physical money, cryptocurrencies are fungible i.e., they can be traded or
exchanged, one for another. For example, one Bitcoin is always equal in value to
another Bitcoin. Similarly, a single unit of Ether is always equal to another unit. This
fungibility characteristic makes cryptocurrencies suitable for use as a secure medium of
transaction in the digital economy.
Non-fungible tokens are an evolution over the relatively simple concept of
cryptocurrencies. Modern finance systems consist of sophisticated trading and loan
systems for different asset types, ranging from real estate to lending contracts to
artwork. By enabling digital representations of physical assets, NFTs are a step forward
in the reinvention of this infrastructure.
Advantages of NFT:
Perhaps, the most obvious benefit of NFTs is market efficiency. The conversion of a
physical asset into a digital one streamlines processes and removes intermediaries.
NFTs representing digital or physical artwork on a blockchain removes the need for
agents and allows artists to connect directly with their audiences. Non-fungible tokens
are also excellent for identity management. Consider the case of physical passports that
need to be produced at every entry and exit point. By converting individual passports
into NFTs, each with its own unique identifying characteristics, it is possible to
streamline the entry and exit processes for jurisdictions. Expanding this use case, NFTs
can be used for identity management within the digital realm as well. NFTs can also
democratize investing by fractionalizing physical assets like real estate. It is much
easier to divide a digital real estate asset among multiple owners than a physical one.
To know more: https://youtu.be/NNQLJcJEzv0
10. Role of IT in different sectors

• IT in Finance
Storing, sharing, and publishing financial data is easy now. More accuracy and
automation in the process of financial management saves cost and reduces risks and
errors. ERP packages for planning, automation in customization of reports, better
forecasting of company's financial statements, increased security with cybersecurity

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applications, and blockchain technologies for transactions are some of IT's application
in Finance. The increase in digitalization in payments, transactions, trading,
automated loan advancements, continuous access to credit scores, etc., adds to BFSI
and FinTech industries' future.
• IT in Marketing
Internet marketing saves cost and time. Its global and targeted reach and real-time
updates help MarTech industries to prosper. CRM is one of the significant
applications of E-Marketing. The main aim of CRM is to maintain a healthy and long-
term relationship with customers and keep track of consumer behaviors,
characteristics, and preferences. This can be in the form of chat forums, e-catalogs,
websites, automated calls, etc.
Digital Marketing, wherein products and services are promoted through digital
distribution channels, reach consumers directly in a timely, relevant, and cost-
effective manner. Google Ads, SEOs, blogs, pop-up ad notifications, email marketing,
social media, web marketing, marketing through SMS, etc., are ways by which
marketers are promoting their brands.
• IT in HR
HR is leveraging IT for organizational learning, effective communication with
employees, appraisals, recruitments, payrolls, audits, etc. Virtual recruitment portals
for virtual interviews and tests, job postings, resume screening, e-learning portals,
Employee Self Service Portals (ESS), portals for performance management, appraisals
and feedbacks, payroll services, Human Resources Management Systems HRMS to
input and store employee profiles, attendance, schedules, etc. and Human resource
information systems (HRIS) which are data- driven solutions that allow HRs to craft
in-depth reports for the purposes of audits, are some of the applications of IT in the
field of HR.
• IT in Operations
Supply chain Management, Cost reduction by optimizing process and distribution,
Customer Relations Management, increasing productivity, reducing wastages,
decision-making, and increasing accuracy by automation. With production units being
converted into Smart factories, Automation, Industry 4.0 (Industry 5.0 coming soon),
applications of IoT devices, AI and ML for Quality Management and predictive
analytics and fault prediction to avoid failures, data-driven decision and planning, and
analytics in supply chain and logistics management the industries have seen an
increase in production efficiency and reduction in the overall cost of production.

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Contents
1. Finance ................................................................................................................................................ 4
1.1 What is finance? ......................................................................................................................................... 4
1.2 Finance vs Accounting vs Economics ....................................................................................................... 4
1.2.1 Accounting ........................................................................................................................................................... 4
1.2.2 Economics ............................................................................................................................................................ 4
1.2.3 Finance ................................................................................................................................................................. 4
1.3 Financial Service Industry ........................................................................................................................ 5
1.3.1 Investment Banking .............................................................................................................................................. 5
1.3.2 Banking ................................................................................................................................................................ 5
1.4 Reserve Bank of India................................................................................................................................ 5
1.4.1 Basel Norms ......................................................................................................................................................... 6
1.4.2 Basel I Norms ....................................................................................................................................................... 6
1.4.3 Basel II Norms...................................................................................................................................................... 7
1.4.4 Basel III norms ..................................................................................................................................................... 7
1.4.5 Non-Performing Assets ........................................................................................................................................ 8
1.4.6 Factors that led to the rise of NPAs in India ......................................................................................................... 8
1.4.7 Steps taken to curb NPA crisis include................................................................................................................. 8
1.5 Financial Markets ...................................................................................................................................... 8
1.6 Capital Markets ......................................................................................................................................... 9
1.7 Primary Markets ........................................................................................................................................ 9
1.8 Secondary Markets .................................................................................................................................. 10
1.9 Initial Public Offerings ............................................................................................................................ 10
1.10 Fixed Income Securities ......................................................................................................................... 10
1.10.1 Bonds ................................................................................................................................................................ 10
1.10.2 Treasury Bills ................................................................................................................................................... 11
1.10.3 Money Market Instruments .............................................................................................................................. 11
1.10.4 Asset-backed Securities (ABS) ........................................................................................................................ 11
1.11 Risks of investing in fixed income securities ........................................................................................ 11
1.12 Derivatives .............................................................................................................................................. 11
1.12.1 Futures .............................................................................................................................................................. 12
1.12.2 Forwards ........................................................................................................................................................... 12
1.12.3 Swaps ............................................................................................................................................................... 12
1.12.4 Options ............................................................................................................................................................. 12
2. Accounting ......................................................................................................................................... 13
2.1 Types of businesses .................................................................................................................................. 13
2.2 Accounting Standards.............................................................................................................................. 13
2.3 Financial Statements ................................................................................................................................ 14
2.4 Balance Sheet ............................................................................................................................................ 14
What is on a balance sheet? ......................................................................................................................................... 14
2.5 Profit & Loss statement (Income Statement) ........................................................................................ 16
2.5.1 What is in a P&L statement? .............................................................................................................................. 17
2.6 Cash Flow Statements.............................................................................................................................. 19

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2.6.1 How to use a CFS? ............................................................................................................................................. 19

2.6.2 How is Cash Flow calculated? ............................................................................................................................ 19
2.6.3 Direct Cash Flow Method .................................................................................................................................. 19
2.6.4 Indirect Cash Flow Method ................................................................................................................................ 19
2.7 Relation between the three financial statements ................................................................................... 20
2.8 Financial Ratios ........................................................................................................................................ 21
2.8.1 What are financial ratios? ................................................................................................................................... 21
2.8.2 Liquidity Ratios .................................................................................................................................................. 22
2.8.3 Efficiency Ratios ................................................................................................................................................ 22
2.8.4 Solvency Ratios .................................................................................................................................................. 23
2.8.5 Coverage Ratios ................................................................................................................................................. 23
2.8.6 Profitability Ratios.............................................................................................................................................. 23
2.8.7 Market Value Ratios ........................................................................................................................................... 24
2.9 Additional Accounting Concepts ............................................................................................................ 24
2.9.1 Time Value of Money ........................................................................................................................................ 24
2.9.2 Discounting ........................................................................................................................................................ 24
2.9.3 Compounding ..................................................................................................................................................... 25
2.9.4 Net Present Value ............................................................................................................................................... 25
2.9.5 Internal Rate of Return (IRR) ............................................................................................................................. 25
3. Economics .......................................................................................................................................... 26
3.1 Economic Indicators ................................................................................................................................ 26
3.2 Attributes of Economic Indicators ......................................................................................................... 26
3.2.1 Procyclical .......................................................................................................................................................... 26
3.2.2 Countercyclical ................................................................................................................................................... 26
3.2.3 Acyclical............................................................................................................................................................. 26
3.3 Types of Economic Indicators ................................................................................................................. 26
3.3.1 Leading Indicators .............................................................................................................................................. 26
3.3.2 Lagging Indicators .............................................................................................................................................. 26
3.4 National Income ....................................................................................................................................... 27
3.5 Different Concepts on National Income ................................................................................................. 27
3.5.1 Gross Domestic Product ..................................................................................................................................... 27
3.5.2 Net Domestic Product (NDP) ............................................................................................................................. 27
3.5.3 Gross National Product (GNP) ........................................................................................................................... 27
3.5.4 Net National Product (NNP)............................................................................................................................... 27
3.5.5 NNP at Factor Cost ............................................................................................................................................. 28
3.5.6 NNP at Market Price .......................................................................................................................................... 28
3.5.7 India last 10-year GDP ....................................................................................................................................... 28
3.6 India’s GDP Calculation Process............................................................................................................ 28
3.6.1 Two Methods ...................................................................................................................................................... 29
3.6.2 The Factor Cost Figure ....................................................................................................................................... 29
3.6.3 The Expenditure Method .................................................................................................................................... 29
3.7 Other Economic Indicators ..................................................................................................................... 30
3.7.1 Consumer Price Index – CPI .............................................................................................................................. 30
3.7.2 Producers Price Index – PPI ............................................................................................................................... 30
3.7.3 Wholesale Price Index – WPI ............................................................................................................................. 30
3.7.4 Sovereign Rating ................................................................................................................................................ 31
3.7.5 Sovereign Credit Rating ..................................................................................................................................... 31
3.8 Monetary Policy ....................................................................................................................................... 31

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3.9 Inflation..................................................................................................................................................... 32
3.10 Inflation Targeting ................................................................................................................................. 33
3.11 Budget Deficits ....................................................................................................................................... 33
3.11.1 Revenue Deficits .............................................................................................................................................. 33
3.11.2 Fiscal Deficits ................................................................................................................................................... 33
3.11.3 Primary Deficits................................................................................................................................................ 33
3.12 Fiscal Policy ............................................................................................................................................ 34
4. Statistics ............................................................................................................................................. 35
4.1 Descriptive Statistics ................................................................................................................................ 35
4.2 Inferential Statistics ................................................................................................................................. 35
4.3 Types of Data ............................................................................................................................................ 35
4.3.1 Categorical.......................................................................................................................................................... 35
4.3.2 Numerical ........................................................................................................................................................... 35
4.4 Measurement levels .................................................................................................................................. 35
4.4.1 Qualitative .......................................................................................................................................................... 35
4.4.2 Quantitative ........................................................................................................................................................ 36
4.5 Population vs. Sample .............................................................................................................................. 36
4.6 Bessel’s Correction................................................................................................................................... 36
4.7 Randomness .............................................................................................................................................. 36
4.8 Representativeness ................................................................................................................................... 36
4.9 Mean .......................................................................................................................................................... 36
4.10 Variance .................................................................................................................................................. 36
4.11 Standard Deviation ................................................................................................................................ 37
4.12 Standard Error....................................................................................................................................... 37
4.13 Covariance .............................................................................................................................................. 37
4.13.1 Use in finance ................................................................................................................................................... 37
4.14 Correlation Coefficient .......................................................................................................................... 38
4.14.1 Use in finance ................................................................................................................................................... 38
4.15 Correlation and Causation .................................................................................................................... 38
4.16 Distribution ............................................................................................................................................. 38
4.16.1 Normal Distribution.......................................................................................................................................... 38
4.16.2 Z-Score ............................................................................................................................................................. 39
5. Commonly asked questions in Finance ............................................................................................ 40

6. Additional Resources ......................................................................................................................... 41
7. Latest Trends in Finance .................................................................................................................. 41

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1. Finance
1.1 What is finance?
Finance is a field that is concerned with the allocation (investment) of assets and liabilities
over space and time, often conditions of risk or uncertainty. Finance can also be defined
as the art of money management.
1.2 Finance vs Accounting vs Economics
To understand the difference between Accounting, Economics and Finance, let us look at
each one of them individually.
1.2.1 Accounting
• Recording of financial transactions to maintain the financial records of a company.
• It is a record of the past of the company. It deals with historical transactions and
financial information.
• Accounting is often used to deliver the financial information of the organization to
recognize its financial health.
1.2.2 Economics
• Economics is the study of the internal as well as external environment in which a
company is doing business.
• Studies the production, consumption, transfer of wealth and distribution of goods
and services.
• It identifies the potential consequences of national policies and events on business
conditions for the company.
• Helps in understanding the impact of predictions and the macroeconomic
conditions on the company’s stocks, markets, consumers, and so on.
1.2.3 Finance
• Finance = Analysis + Decision Making
• It uses the information provided by accounting and economics to make better
decisions for the organization.
• Informs business managers and investors on how to evaluate business proposals
and efficiently allocate funds.
• Finance deals with the future of the company based on the past and the present
prevailing conditions.
• In doing so it deals with risk and uncertainty, which forms a major part of financial
analysis which also includes optimal financial structures and the quantification of
risk.

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1.3 Financial Service Industry

1.3.1 Investment Banking
Investment Bank (abbreviated as IB) is a financial institution or a division of a bank that
acts as an intermediary between investors (people who want to invest money) and
corporations (who require capital to grow or run their business). Below are some of the
tasks and their explanation that investment banks undertake –
• Underwriting: It is the process of raising capital by selling stocks or bonds to
investors on behalf of corporations.
• Mergers & Acquisitions: An advisory process where Investment Banks help
corporations to find, evaluate and complete acquisitions of businesses.
• Sales & Trading: The functional process where they call upon institutional
investors with ideas and opportunities. Play a key role in Initial Public Offerings
(IPOs) to help sell the required number of shares in the secondary market that the
IB has underwritten.
• Equity Research: The process that provides investors with detailed financial
analysis and recommendations on whether to buy, hold or sell an investment.
Usually used as a support function to IB and Sales and trading to provide high
quality information and analysis.
Popular investment banks include Goldman Sachs, Morgan Stanley, Citi Bank, etc.
1.3.2 Banking
A bank is a financial institution that accepts deposits from the public and simultaneously
lends money to the public. There are different types of banks and are listed below:
• Central Bank
• Cooperative banks
• Commercial banks
• Regional Rural Banks
• Local Area Banks
• Specialized Banks
• Small Finance Banks
• Payments Banks
1.4 Reserve Bank of India
It is the central bank of India. It was established on April 1, 1935, in accordance with the
provisions of the Reserve Bank of India Act, 1934.
The main functions of RBI are as follows:
• Monetary Authority

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o Formulates, implements, and monitors the monetary policy.

o Objective: maintaining price stability while keeping in mind the objective of
growth. At the same time, it must ensure that the Consumer Price Index (CPI)
inflation in the country remains in the 2% - 6% range (inflation targeting)
• Regulator and supervisor of the financial system
o Prescribes broad parameters of banking operations within which the
country's banking and financial system functions.
o Objective: maintain public confidence in the system, protect depositors'
interest, and provide cost-effective banking services to the public.
• Manager of Foreign Exchange
o Manages the Foreign Exchange Management Act, 1999.
o Objective: to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India
• Issuer of currency
o Issues and exchanges or destroys currency and coins not fit for circulation.
o Objective: to give the public an adequate quantity of supplies of currency
notes and coins and in good quality
• Developmental role
o Performs a wide range of promotional functions to support national
objectives
• Regulator and Supervisor of Payment and Settlement Systems
o Introduces and upgrades safe and efficient modes of payment systems in the
country to meet the requirements of the public at large.
o Objective: maintain public confidence in payment and settlement system
• Related Functions
o Banker to the Government performs merchant banking function for the
central and the state governments; also acts as their banker
o Banker to banks maintains banking accounts of all scheduled bank
1.4.1 Basel Norms
Basel norms or Basel accords are the international banking regulations issued by the Basel
Committee on Banking Supervision. Such regulations are extreme as banks and the
financial systems are exposed to different types of risks. Thus, the Basel Committee on
Banking Supervision (BCBS), a committee of banking supervisory authorities that was
established by the central bank governors of the G-10 countries in 1974, set the global
standards to strengthen the global financial system.
1.4.2 Basel I Norms
It was introduced in 1988 and focused almost entirely on credit risk, which is the
possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual

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obligations. The Basel I norms defined the capital and structure of risk weights for banks.
The minimum capital requirement was fixed at 8% of risk-weighted assets (RWA). RWA
refers to the assets with different risk profiles. For example, an asset backed by collateral
would carry lesser risks as compared to personal loans, which have no collateral. These
norms were adopted by India in 1999.
1.4.3 Basel II Norms
These norms were released by BCBS in 2004. These were the refined and reformed
versions of Basel I accord. Basel II norms set up risk and capital management
requirements to ensure that a bank has adequate capital for the risk the bank exposes itself
to through its lending, investment, and trading activities.
The Basel II norms are based on 3 pillars:
• Capital Adequacy Requirements: Banks should maintain a minimum capital
adequacy requirement of 8% of risk assets
• Supervisory Review: According to this, banks were needed to develop and use
better risk management techniques in monitoring and managing all the three types
of risks that a bank faces, viz. credit, market, and operational risks
• Market Discipline: This needs increased disclosure requirements. Banks need to
mandatorily disclose their CAR, risk exposure, etc to the central bank.
These norms are yet to be fully implemented though they are being followed in India.
1.4.4 Basel III norms
These norms were released by BCBS in 2010. These guidelines were introduced in
response to the financial crisis of 2008. It was realized that the banks in the developed
economies were under-capitalized, over-leveraged, and had a greater reliance on short-
term funding. These accords were aimed at further strengthening the risk management
aspects for the banking sector, thereby making them more resilient.
These norms focus on 4 vital banking parameters - capital, leverage, funding, and
liquidity. Through these norms:
• The quality, consistency, and transparency of the capital base will be raised
• Strengthening risk management by increasing the capital requirements for
counterparty credit risk exposure
• Enhanced leverage ratio to reduce market risk
• A countercyclical capital buffer to protect against future stress
• Institution of a liquidity coverage ratio to decrease short-term liquidity risk.
These norms are yet to be implemented in India.

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1.4.5 Non-Performing Assets

An asset, including a leased asset, becomes non-performing when it ceases to generate
income for the bank i.e., the assets where the borrowers fail to pay back the principal or
interest. Based on the RBI guidelines, if the borrower has failed to make interest or
principal payments for 90 days, the loan is considered to be a non-performing asset.
The NPAs are further classified into Substandard, Doubtful, and Loss assets:
• Substandard Asset - Asset which has remained NPA for a period less than or equal
to 12 months
• Doubtful Asset - An asset would be classified as doubtful if it has remained in the
substandard category for a period of 12 months.
• Loss Asset - It is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted, although there may be some
salvage or recovery value
The NPAs in PSBs in India increased from Rs. 2,79,016 crores in 2015 to Rs. 11,18,000
crores in 2018, before declining to Rs. 9,08,000 crores in 2019 and Rs. 8,21,000 crore at
the ends of 2020.
1.4.6 Factors that led to the rise of NPAs in India
• GDP slowdown due to COVID
• Most of the loans which are classified as NPAs, originated in the mid-2000s, at a
time when the economy was booming, and the business outlook was very positive.
However, after the 2008 financial crisis, the economic growth slowed down, and
the repayment capability of the firms decreased. At this stage, banks resorted to
evergreening of the loans. This effectively pushed the recognition of these loans as
non-performing to a later date but did not address the root causes of their
unprofitability.
• Frauds of high magnitude
1.4.7 Steps taken to curb NPA crisis include
• The Insolvency and Bankruptcy Code, 2016 (IBC)
• 4R’s strategy, which is aimed at recognition of NPAs, resolution and recovery of
value from stressed accounts, recapitalization of PSBs, and reforms in the wider
ecosystem
• Amendments to Banking Law, such as bad banks to give RBI more power - to
create oversight committees.
1.5 Financial Markets
Financial markets are where traders buy and sell assets. These include stocks, bonds,
derivatives, foreign exchange, and commodities. The markets are where businesses go to

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raise cash to grow. It’s where companies reduce risks and investors make money. There
are so many financial markets, and every country is home to at least one, although they
vary in size. Some are small while some others are internationally known, such as the
New York Stock Exchange (NYSE) that trades trillions of dollars daily. Here are some
types of financial markets.
• Bond market: The bond market offers opportunities for companies and the
government to secure money to finance a project or investment. In a bond market,
investors buy bonds from a company, and the company returns the amount of the
bonds within an agreed period, plus interest.
• Stock market: The stock market trades shares of ownership of public companies.
Each share comes with a price, and investors make money with the stocks when
they perform well in the market. It is easy to buy stocks, the real challenge is in
choosing the right stocks that will earn money for the investor. There are various
indices that investors can use to monitor how the stock market is doing, such as the
Dow Jones Industrial Average (DJIA) and the S&P 500. When stocks are bought
at a cheaper price and are sold at a higher price, the investor earns from the sale.
• Commodities market: The commodities market is where traders and investors buy
and sell natural resources or commodities such as corn, oil, meat, and gold. A
specific market is created for such resources because their price is unpredictable.
There is a commodities futures market wherein the price of items that are to be
delivered at a given future time is already identified and sealed today.
• Derivatives market: Such a market involves derivatives or contracts whose value
is based on the market value of the asset being traded. The futures mentioned above
in the commodities market is an example of a derivative.
1.6 Capital Markets
Capital Market is a type of financial market where entities trade different financial
instruments. It deals with the long-term debt and equity backed securities where they can
be both bought and sold, unlike the money market, where the short-term finance needs
are satisfied. It acts as a channel where the surplus wealth of suppliers can be put into
productive use by those who need capital. Thus, it brings together suppliers and buyers
to a place where securities can be exchanged by entities to improve transactional
efficiencies. The entities that have capital include retail and institutional investors while
those who seek capital are businesses, governments, and people. Some of the most
common capital markets are the stock market and bond market.
1.7 Primary Markets
A place where new securities are issued. Primary markets are open to specific investors
who buy securities directly from the issuing company. These securities are offered as
primary offerings or initial public offerings (IPOs). The funds can also be raised through

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private placement, rights issue and offer through prospectus. When a company goes
public, it sells its stocks and bonds to large-scale and institutional investors such as hedge
funds and mutual funds. The companies raise money in the primary market through
securities such as shares, debentures, loans and deposits, preference shares etc.
1.8 Secondary Markets
The secondary market includes venues overseen by a regulatory body like the Securities
and Exchange Commission (SEC) where existing or already issued securities are traded
between investors. Here the securities include bonds, debentures, bills, shares, etc. Issuing
companies do not have a part in the secondary market. The New York Stock Exchange
(NYSE) and BSE (Bombay Stock Exchange) are examples of the secondary market.
1.9 Initial Public Offerings
An initial public offering (IPO) refers to the process of offering shares of a private
corporation to the public in a new stock issuance. Public share issuance allows a company
to raise capital from public investors.
Some start-ups to file IPOs in India are Zomato, Policy Bazaar, Nykaa, Paytm and
Delhivery.
1.10 Fixed Income Securities
The term fixed income refers to the interest payments that an investor receives, which are
based on the creditworthiness of the borrower and current interest rates. Many examples
of fixed income securities exist, such as bonds (both corporate and government), Treasury
Bills, money market instruments, and asset-backed securities.
1.10.1 Bonds
Bonds are long-term debt instruments used by business firms and governments to raise
money. Most bonds pay interest semi-annually at a stated interest rate with an initial
maturity of 10 to 30 years with a face value of $1,000 that must be repaid at maturity. A
company sells its bonds, in the sense that it gives a promise of future payments in return
for current cash.
• Private issues are sold to a small group of investors, often big institutional
investors like mutual funds and insurance companies. These bonds can trade
among institutional investors in private markets. Under the federal securities laws,
formal disclosure is not required for privately issued bonds.
• Public issues are sold to dispersed investors, usually through an underwriting
syndicate of securities firms. These bonds often trade in public markets, such as
the NYSE. The federal securities laws require that publicly issued bonds be
registered with the SEC.

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1.10.2 Treasury Bills

Considered the safest short-term debt instrument, Treasury bills are issued by the US
federal government. With maturities ranging from one to 12 months, these securities most
commonly involve 28, 91, and 182-day (one month, three months, and six months)
maturities. These instruments offer no regular coupon, or interest, payments. Instead, they
are sold at a discount to their face value, with the difference between their market price
and face value representing the interest rate they offer investors. As a simple example, if
a Treasury bill with a face value, or par value, of $100 sells for $90, then it is offering
roughly 10% interest.
1.10.3 Money Market Instruments
Money market instruments include securities such as commercial paper, banker’s
acceptances, certificates of deposit (CD), and repurchase agreements (“repo”). Treasury
bills are technically included in this category, but since they are traded in such high
volume, they have their own category here.
1.10.4 Asset-backed Securities (ABS)
Asset-backed Securities (ABS) are fixed income securities backed by financial assets that
have been “securitized,” such as credit card receivables, auto loans, or home-equity loans.
ABS represents a collection of such assets that have been packaged together in the form
of a single fixed-income security. For investors, asset-backed securities are usually an
alternative to investing in corporate debt.
1.11 Risks of investing in fixed income securities
Principal risks associated with fixed-income securities concern the borrower’s
vulnerability to defaulting on its debt. Such risks are incorporated in the interest or coupon
that the security offers, with securities with a higher risk of a default offering higher
interest rates to investors. Additional risks include exchange rate risk for securities
denominated in a currency other than the US dollar (such as foreign government bonds)
and interest rate risk – the risk that changes in interest rates may reduce the market value
of fixed-income security that an investor holds. For example, if an investor holds a 10-
year bond that pays 3% interest, but then later interest rates rise and new 10-year bonds
being issued offer 4% interest, then the bond the investor holds that pays only 3% interest
becomes less valuable.
1.12 Derivatives
Derivatives are financial contracts that derive their value from an underlying asset. The
value of the underlying asset keeps on changing depending on the market conditions. The
derivatives can be traded by predicting the future price movement of the underlying asset.
Common types of derivates are mentioned below.

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1.12.1 Futures
Futures contracts—also known simply as futures—are an agreement between two parties
for the purchase and delivery of an asset at an agreed upon price at a future date. Futures
trade on an exchange, and the contracts are standardized.
1.12.2 Forwards
Forward contracts—known simply as forwards—are like futures, but do not trade on an
exchange, only over the counter. When a forward contract is created, the buyer and seller
may have customized the terms, size, and settlement process for the derivative. As OTC
products, forward contracts carry a greater degree of counterparty risk for both buyers
and sellers.
1.12.3 Swaps
Swaps are another common type of derivative, often used to exchange one kind of cash
flow with another. For example, a trader might use an interest rate swap to switch from a
variable interest rate loan to a fixed interest rate loan, or vice versa.
1.12.4 Options
An options contract is like a futures contract in that it is an agreement between two parties
to buy or sell an asset at a predetermined future date for a specific price. The key
difference between options and futures is that, with an option, the buyer is not obliged to
exercise their agreement to buy or sell. It is an opportunity only, not an obligation—
futures are obligations. As with futures, options may be used to hedge or speculate on the
price of the underlying asset.

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2. Accounting
2.1 Types of businesses
1. One Person Company (OPC): Company that has only one person as to its member.
2. Sole Proprietorship: A business where there is only one owner. He/she has
complete liability i.e., he/she is responsible for all the liabilities of the company
3. Partnership: When a company or a business is owned by 2 to 100 owners, it is
known as a partnership. As the name suggests, the risk factor is divided among the
owners, along with the profit that the business makes. The profits that the owners
make from the business are shown in their personal tax returns. All the partners
(regardless of their ownership percentage) share the complete liability of the debt
that the business owes.
4. Limited Liability Companies (LLCs): In this type of business structure, the owners
have a limited liability partnership, where the liability of individual owners is
limited to the capital contributions that the owner makes. There are two types of
LLCs - public and private
2.2 Accounting Standards
The transactions of businesses are recorded according to guidelines set by the standard-
setting bodies and approved by the regulatory authorities. Many countries across the
world follow international standards such as the IFRS (International Financial Reporting
Standards), and US GAAP (Generally Accepted Accounting Principles) in addition to the
local standards. India follows the Indian Accounting Standard (Ind AS). These accounting
standards serve the purpose of comparative analysis and transparency. The accounting
principles are:
• Money Measurement Concept – The financial statements record only those
transactions that can be expressed in monetary terms.
• Going Concern Concept – Assumption that the firm will continue to operate in
the future
• Cost Concept – The assets of the firm are recorded at the purchase price and not
the market value/current value.
• Conservative Concept – Use of conservatism while recording business
transactions. Anticipate profits only after they are realized but provide for all the
probable future losses.
• Accounting Period Concept – The financial statements must be prepared at
regular periodic intervals. All the transactions are recorded in the books of accounts
on the assumption that profits on these transactions are to be ascertained for a
specified period.
• Accrual Concept – Expenses incurred for a particular accounting period should
be recognized in the same period, irrespective of the exchange of cash during the

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same accounting period. Similarly, revenues earned in a specific accounting period

are recognized as incomes of the same period, irrespective of the exchange of the
cash during that period.
• Matching Principle – It requires the matching of expenses/costs incurred to realize
revenues in an accounting period.
• Consistency Principle – There must be consistency in the accounting methods
used by the business over time.
2.3 Financial Statements
Financial statements are written records that convey the business activities and the
financial performance of a company. Financial statements are often audited by
government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing,
or investing purposes. The three financial statements are:
1. Balance sheet
2. Profit and loss (P&L) statement
3. Cash flow statement
2.4 Balance Sheet
A balance sheet is a financial statement that reports a company's assets, liabilities, and
shareholders' equity at a specific point in time and provides a basis for computing rates
of return and evaluating its capital structure. It is a financial statement that provides a
snapshot of what a company owns and owes, as well as the amount invested by
shareholders. The balance sheet has two parts, assets, and liabilities (including
shareholder’s equity). As the name balance sheet suggests, at any given point, these two
should balance each other out.
Assets = Liabilities
For example, if a company takes out a five-year, Rs.5,00,000 loan from a bank, its assets
(specifically, the cash account) will increase by Rs.5,00,000. Its liabilities (specifically,
the long-term debt account) will also increase by Rs.5,00,000, balancing the two sides of
the equation. All revenues the company generates more than its expenses will go into the
shareholders' equity account. These revenues will be balanced on the assets side,
appearing as cash, investments, inventory, or some other asset.
What is on a balance sheet?
1. Assets: Within the assets segment, accounts are listed from top to bottom in
order of their liquidity – that is, the ease with which they can be converted into
cash. They are divided into current assets, which can be converted to cash in one
year or less; and non-current or long-term assets, which cannot. The general order
of listing within the assets’ column is given below:

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a. Cash and cash equivalents are the most liquid assets and can include
Treasury bills and short-term certificates of deposit, as well as hard currency
and bank balance.
b. Marketable securities are equity and debt securities for which there is a
liquid market.
c. Accounts receivable refers to money that customers owe the company,
perhaps including an allowance for doubtful accounts since a certain
proportion of customers can be expected not to pay.
d. Inventory is goods available for sale, valued at the lower of the cost or
market price.
e. Prepaid expenses represent the value that has already been paid for, such as
insurance, advertising contracts, or rent paid in advance.
f. Long-term investments are securities that will not or cannot be liquidated
in the next year.
g. Fixed assets include land, machinery, equipment, buildings, and other
durable, generally capital-intensive assets.
h. Intangible assets include non-physical (but still valuable) assets such as
intellectual property and goodwill. In general, intangible assets are only
listed on the balance sheet if they are acquired.
2. Liabilities: Liabilities are the money that a company owes to outside parties,
from bills it must pay to suppliers to interest on bonds it has issued to creditors to
rent, utilities and salaries. Even in liabilities, current liabilities are those that are
due within one year and are listed in order of their due date, and long-term liabilities
are due at any point after one year.
Below are some of the current liabilities –
a. Current portion of long-term debt is any amount of outstanding debt a
company holds that has a maturity of 12 months or longer
b. Bank indebtedness is any amount of outstanding debt a company holds that
has a maturity of 12 months or longer
c. Interest payable is the amount of interest on its debt and capital leases that
a company owes to its lenders and lease providers as of the balance sheet
date
d. Wages payable refers to the wages that a company's employees have earned,
but have not yet been paid
e. Customer prepayments are the advance payments that the customer have
made to the company
f. Dividends payable are dividends on a common stock that have been
declared by a company but have not yet been paid to shareholders

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g. Earned and unearned premiums - An earned premium represents

premiums earned on the portion of an insurance contract that has expired.
The premiums associated with the active portion of an insurance contract are
considered unearned, as the insurance company.
h. Accounts payable are amounts due to vendors or suppliers for goods or
services received that have not yet been paid for.
The non-current liabilities include –
a. Long-term debt: interest and principal on bonds issued
b. Pension fund liability: the money a company is required to pay into its
employees' retirement accounts
c. Deferred tax liability: taxes that have been accrued but will not be paid for
another year
3. Shareholder’s equity: Shareholders' equity is the money attributable to a

business’s owners, meaning its shareholders. It is also known as net assets since it
is equivalent to the total assets of a company minus its liabilities. Retained earnings
are the net earnings a company either reinvests in the business or use to pay off
debt; the rest is distributed to shareholders in the form of dividends.
Practice Exercise – Try and find the balance sheet of any listed Indian
Company and apply the concepts you learned to read it. Balance sheets
are available to download in company’s annual reports which can be
found on company website as well as sites like NSE, BSE or
moneycontrol.
2.5 Profit & Loss statement (Income Statement)

The profit and loss (P&L) statement is a financial statement that summarizes the revenues,
costs, and expenses incurred during a specified period. This is usually a fiscal quarter or
year. The P&L statement is synonymous with the income statement. These records
provide information about a company's ability or inability to generate profit by increasing
revenue, reducing costs, or both. Some refer to the P&L statement as a statement of profit
and loss, income statement, statement of operations, statement of financial results or
income, earnings statement, or expense statement. A profit and loss statement (P&L), or
income statement or statement of operations, is a financial report that provides a summary
of a company’s revenues, expenses, and profits/losses over a given period. The P&L
statement shows a company’s ability to generate sales, manage expenses, and create

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profits. It is prepared based on accounting principles that include revenue recognition,

matching, and accruals.
2.5.1 What is in a P&L statement?
A company’s statement of profit and loss is portrayed over a period of time, typically a
month, quarter, or fiscal year. The main categories that can be found on the P&L include:
• Revenue (or Sales)
• Cost of Goods Sold (or Cost of Sales)
• Selling, General & Administrative (SG&A) Expenses
• Marketing and Advertising
• Technology/Research & Development
• Interest Expense
• Taxes
• Net Income
• Let us take an example of Sun Pharmaceuticals Ltd. Below image shows the profit
and loss statement of Sun Pharma – (all figures in ₹ million)

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Figure 1Profit & Loss statement of Sun Pharma (all figures in ₹ million)

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2.6 Cash Flow Statements

The statement of cash flows, or the cash flow statement, is a financial statement that
summarizes the amount of cash and cash equivalents entering and leaving a company.
The cash flow statement (CFS) measures how well a company manages its cash position,
meaning how well the company generates cash to pay its debt obligations and fund its
operating expenses. The cash flow statement complements the balance sheet and income
statement.
2.6.1 How to use a CFS?
The CFS allows investors to understand how a company's operations are running, where
its money is coming from, and how money is being spent. The CFS is important since it
helps investors determine whether a company is on a solid financial footing. Creditors,
on the other hand, can use the CFS to determine how much cash is available (referred to
as liquidity) for the company to fund its operating expenses and pay its debts.
2.6.2 How is Cash Flow calculated?
Cash flow is calculated by making certain adjustments to net income by adding or
subtracting differences in revenue, expenses, and credit transactions (appearing on the
balance sheet and income statement) resulting from transactions that occur from one
period to the next. These adjustments are made because non-cash items are calculated
into net income (income statement) and total assets and liabilities (balance sheet). So,
because not all transactions involve actual cash items, many items must be re-evaluated
when calculating cash flow from operations. As a result, there are two methods of
calculating cash flow: the direct method and the indirect method.
2.6.3 Direct Cash Flow Method
The direct method adds up all the various types of cash payments and receipts, including
cash paid to suppliers, cash receipts from customers, and cash paid out in salaries. These
figures are calculated by using the beginning and ending balances of a variety of business
accounts and examining the net decrease or increase in the accounts.
2.6.4 Indirect Cash Flow Method
With the indirect method, cash flow from operating activities is calculated by first taking
the net income off of a company's income statement. Because a company’s income
statement is prepared on an accrual basis, revenue is only recognized when it is earned
and not when it is received. Net income is not an accurate representation of net cash flow
from operating activities, so it becomes necessary to adjust earnings before interest and
taxes (EBIT) for items that affect net income, even though no actual cash has yet been
received or paid against them. The indirect method also adjusts add back non-operating
activities that do not affect a company's operating cash flow. For example, depreciation
is not a cash expense; it is an amount that is deducted from the total value of an asset that
has previously been accounted for. That is why it is added back into net sales for

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calculating cash flow. The only time income from an asset is accounted for in CFS
calculations is when the asset is sold.
• Accounts Receivable and Cash Flow: Changes in accounts receivable (AR) on
the balance sheet from one accounting period to the next must also be reflected in
cash flow. If accounts receivable decreases, this implies that more cash has entered
the company from customers paying off their credit accounts—the amount by
which AR has decreased is then added to net sales. If accounts receivable increases
from one accounting period to the next, the amount of the increase must be
deducted from net sales because, although the amounts represented in AR are
revenue, they are not cash.
• Inventory Value and Cash Flow: An increase in inventory, on the other hand,
signals that a company has spent more money to purchase more raw materials. If
the inventory was paid with cash, the increase in the value of inventory is deducted
from net sales. A decrease in inventory would be added to net sales. If inventory
were purchased on credit, an increase in accounts payable would occur on the
balance sheet, and the amount of the increase from one year to the other would be
added to net sales. The same logic holds true for taxes payable, salaries payable,
and prepaid insurance. If something has been paid off, then the difference in the
value owed from one year to the next must be subtracted from net income. If there
is an amount that is still owed, then any differences will have to be added to net
earnings.
• Cash from Investing Activities: Investing activities include any sources and uses
of cash from a company's investments. A purchase or sale of an asset, loans made
to vendors or received from customers, or any payments related to a merger or
acquisition is included in this category. In short, changes in equipment, assets, or
investments relate to cash from investing.
• Cash from Financing Activities: Cash from financing activities includes the
sources of cash from investors or banks, as well as the uses of cash paid to
shareholders. Payment of dividends, payments for stock repurchases, and the
repayment of debt principal (loans) are included in this category.
Self-Exercise – Try to find the cash flow statement of Sun

Pharmaceuticals from the internet and apply the concepts to read it.
2.7 Relation between the three financial statements

The three financial statements above are linked to each other. How they are linked is
given below:

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• Net Income & Retained Earnings: Net income from the bottom of the income
statement links to the balance sheet and cash flow statement. On the balance sheet,
it feeds into retained earnings and on the cash flow statement, it is the starting point
for the cash from operations section. Net income from the income statement flows
to the balance sheet and cash flow statement.
• PP&E, Depreciation, and Capex: Depreciation and other capitalized expenses on
the income statement need to be added back to net income to calculate the cash
flow from operations. Depreciation flows out of the balance sheet from Property
Plant and Equipment (PP&E) onto the income statement as an expense, and then
gets added back in the cash flow statement. Depreciation is added back, and Capex
is deducted on the cash flow statement, which determines PP&E (Property, Plant
& Equipment) on the balance sheet.
• Financing activities mostly affect the balance sheet and cash from finalizing, except
for interest, which is shown on the income statement.
• The sum of the last period’s closing cash balance plus this period's cash from
operations, investing, and financing is the closing cash balance on the balance
sheet.
For getting a better picture use the Balance sheet, Profit and Loss and
Cash Flow statement of the same company for the same year and
analyse them
2.8 Financial Ratios

2.8.1 What are financial ratios?
A financial ratio or accounting ratio is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Often used in accounting, there are
many standard ratios used to try to evaluate the overall financial condition of a
corporation or other organization. Financial ratios may be used by managers within a
firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors.
Financial analysts use financial ratios to compare the strengths and weaknesses of various
companies.
Types of Financial Ratios: There are six categories of financial ratios that business
managers normally use in their analysis. Within these six categories are 15 financial ratios
that help a business manager and outside investors analyse the financial health of the firm.
Financial ratios are only valuable if there is a basis of comparison for them. Each ratio
should be compared to past time periods of data for the business. They can also be
compared to data for other companies in the industry.

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2.8.2 Liquidity Ratios

The liquidity ratios answer the question of whether a business firm can meet its current
debt obligations with its current assets. There are three major liquidity ratios that business
managers look at:
• Working capital ratio: This ratio is also called the current ratio (current assets –
current liabilities). These figures are taken off the firm's balance sheet. It measures
whether the business can pay its short-term debt obligations with its current assets.
• Quick ratio: This ratio is also called the acid test ratio (current assets -
inventory/current liabilities). These figures come from the balance sheet. The quick
ratio measures whether the firm can meet its short-term debt obligations without
selling any inventory.
• Cash ratio: This liquidity ratio (cash + cash equivalents/current liabilities) gives a
financial manager a more conservative view of the firm's liquidity since it uses only
cash and cash equivalents, such as short-term marketable securities, in the
numerator. It indicates the ability of the firm to pay off all its current liabilities
without liquidating any other assets.
2.8.3 Efficiency Ratios
Efficiency ratios, also called asset management ratios or activity ratios, are used to
determine how efficiently the business firm is using its assets to generate sales and
maximize profit or shareholder wealth. They measure how efficient the firm's operations
are internally and in the short term. The four most used efficiency ratios calculated from
information from the balance sheet and income statement are:
• Inventory turnover ratio: This ratio (sales/inventory) measures how quickly
inventory is sold and restocked or turned over each year. The inventory turnover
ratio allows the financial manager to determine if the firm is stocking out of
inventory or holding obsolete inventory.
• Day’s sales outstanding: Also called the average collection period (accounts
receivable/average sales per day), this ratio allows financial managers to evaluate
the efficiency with which the firm is collecting its outstanding credit accounts.
• Fixed assets turnover ratio: This ratio (sales/net fixed assets) focuses on the firm's
plant, property, and equipment, or its fixed assets, and assesses how efficiently the
firm uses those assets.
• Total assets turnover ratio: The total assets turnover ratio (sales/total assets) rolls
the evidence of the firm's efficient use of its asset base into one ratio. It allows the
financial manager to analyse how efficiently the asset base is at generating sales
and profitability.

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2.8.4 Solvency Ratios

A business firm's solvency, or debt management, ratios allow the financial manager to
appraise the position of the business firm regarding the debt financing, or financial
leverage, that they use to finance their operations. The solvency ratios gauge how much
debt financing the firm uses as compared to either its retained earnings or equity
financing. There are two major solvency ratios:
• Total debt ratio: The total debt ratio (total liabilities/total assets) measures the
percentage of funds for the firm's operations obtained by a combination of current
liabilities plus its long-term debt.
• Debt-to-equity ratio: This ratio (total liabilities/total assets - total liabilities) is
most important if the business is publicly traded. The information from this ratio is
essentially the same as from the total debt ratio, but it presents the information in a
form that investors can more readily utilize when analysing the business.
2.8.5 Coverage Ratios
The coverage ratios measure the extent to which a business firm can cover its debt
obligations and meet the associated costs. Those obligations include interest expenses,
lease payments, and, sometimes, dividend payments. These ratios work with the solvency
ratios to give a financial manager a full picture of the firm's debt position. Here are the
two major coverage ratios:
• Times interest earned ratio: This ratio (earnings before interest and taxes
(EBIT)/interest expense) measures how well a business can service its total debt or
cover its interest payments on debt.
• Debt service coverage ratio: The DSCR (net operating income/total debt service
charges) is a valuable summary ratio that allows the firm to get an idea of how well
the firm can cover all of its debt service obligations.
2.8.6 Profitability Ratios
Profitability ratios are the summary ratios for the business firm. When profitability ratios
are calculated, they sum up the effects of liquidity management, asset management, and
debt management on the firm. The four most common and important profitability ratios
are:
• Net profit margin: This ratio (net income/sales) shows the profit per dollar of sales
for the business firm.
• Return on total assets (ROA): The ROA ratio (net income/sales) indicates how
efficiently every dollar of total assets generates profit.
• Basic earning power (BEP): BEP (EBIT/total assets) is similar to the ROA ratio
because it measures the efficiency of assets in generating sales. However, the BEP
ratio makes the measurement free of the influence of taxes and debt.

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• Return on equity (ROE): This ratio (net income/common equity) indicates how
much money shareholders make on their investment in the business firm.
2.8.7 Market Value Ratios
Market Value Ratios are usually calculated for publicly held firms and are not widely
used for very small businesses. Some small businesses are, however, traded publicly.
There are three primary market value ratios:
• Price/earnings ratio (P/E): The P/E ratio (stock price per share/earnings per
share) shows how much investors are willing to pay for the stock of the business
firm per dollar of profits.
• Price/cash flow ratio: A business firm's value is dependent on its free cash flows.
The price/cash flow ratio (stock price/cash flow per share) assesses how well the
business generates cash flow.
• Market/book ratio: This ratio (stock price/book value per share) gives the
financial manager another indicator of how investors view the value of the business
firm.
2.9 Additional Accounting Concepts
2.9.1 Time Value of Money
It shows that the value of the same amount of money received at different times is not the
same. It holds that money in the present is worth more than the same sum of money to be
received in the future. Suppose someone offers to pay you Rs. 1000 today or Rs. 1100 in
a year, what option would you choose? It depends on the rate of interest you can earn on
that money. If Rs. 1000 is invested at a 10% interest rate compounded annually for a year,
it would earn an amount of Rs. 1100 after a year. So, if you can earn more than a 10%
interest rate on Rs.1000 by investing today for a year, you should take Rs. 1000 today.
However, if you earn less than a 10% interest rate by investing the money for a year, you
should opt for taking Rs. 1100 after a year.
2.9.2 Discounting
Discounting is the process of determining the present value of a payment or a stream of
payments that is to be received in the future.
𝐹𝑉
𝑃𝑉 = 𝑛𝑡
𝑖
(1 + (𝑛))
Where PV is present value, FV is future value, i is the annual rate of return, n is the
number of compounding periods in a year and t is the total number of years taken into
consideration.

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2.9.3 Compounding
Compounding typically refers to the increasing value of an asset due to the interest earned
on both a principal and accumulated interest. This is due to the reinvestment of the asset's
earnings over time. The formula for the future value (FV) of a current asset relies on the
concept of compound interest.
𝑛𝑡
𝑖
𝐹𝑉 = 𝑃𝑉 ∗ (1 + ( ))
𝑛
Where PV is present value, FV is future value, i is the annual rate of return, n is the
number of compounding periods in a year and t is the total number of years taken into
consideration.
2.9.4 Net Present Value
Net Present Value (NPV) is the difference between the present value of cash inflows and
the present value of cash outflows from a particular investment or project over a period.
It is used to analyse the profitability of a project or investment.
𝐶𝑖 𝐶𝑜
𝑁𝑃𝑉 = −
(1 + 𝑟)𝑡 (1 + 𝑟)𝑡
Where, Ci= Cash inflows Co= Cash outflows r = discount rate t = time period.
It is assumed that an investment with a positive NPV will be profitable, and an investment
with a negative NPV will result in a net loss. This concept is the basis for the Net Present
Value Rule, which dictates that only investments with positive NPV values should be
considered.
2.9.5 Internal Rate of Return (IRR)
The internal rate of return is a metric used in financial analysis to estimate the profitability
of potential investments. The Internal Rate of Return (IRR) is the discount rate that makes
the net present value (NPV) of a project zero. In other words, it is the expected compound
annual rate of return that will be earned on a project or investment. Hence, if the IRR is
greater than or equal to the cost of capital, the company would accept the project as a
good investment. If the IRR is lower than the hurdle rate, then it would be rejected.
However, it is to be noted that this method doesn’t consider the external factors affecting
the project.

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3. Economics
3.1 Economic Indicators
An economic indicator is a metric used to assess, measure, and evaluate the overall state
of health of the macroeconomy. Economic indicators are often collected by a government
agency or private business intelligence organization in the form of a census or survey,
which is then analysed further to generate an economic indicator.
3.2 Attributes of Economic Indicators
An economic indicator may possess one of the three following attributes:
3.2.1 Procyclical
It is an indicator that moves in a direction similar to the economy. For example, GDP is
procyclical because it increases if the economy is performing well. If the economy is not
doing well (i.e., recession), GDP decreases.
3.2.2 Countercyclical
It is an indicator that moves in the opposite direction of the economy. For example, the
unemployment rate declines if the economy is thriving.
3.2.3 Acyclical
It is an indicator that bears no relationship to the economy at all.
3.3 Types of Economic Indicators
3.3.1 Leading Indicators
A leading indicator is any measurable or observable variable of interest that predicts a
change or movement in another data series, process, trend, or other phenomena of interest
before it occurs. Leading economic indicators are used to forecast changes before the rest
of the economy begins to move in a particular direction and help market observers and
policymakers predict significant changes in the economy.
Examples are Stock Market Performance, Retail Sales Figures, Building Permits and
Housing Starts, Level of Manufacturing Activity, and Inventory Balances.
3.3.2 Lagging Indicators
A lagging indicator is an observable or measurable factor that changes sometime after the
economic, financial, or business variable is correlated with changes. Lagging indicators
confirm trends and changes in trends. They can be useful for gauging the trend of the
general economy, as tools in business operations and strategy, or as signals to buy or sell
assets in financial markets. Examples are GDP growth, Income and wage growth/decline,
unemployment rate, CPI (inflation), Interest rate, etc.

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3.4 National Income

National income is the monetary value of all final goods and services produced by the
residents of a country. To calculate net national product, depreciation of plant and
machinery used in the production process is deducted. National income is calculated for
a particular period, normally a financial year (In India, the financial year means April 1
to March 31 of next year). Net factor income from abroad is added to the domestic product
to get the value of National Income.
National Income = C + I + G + (X – M)
where, C = Total consumption expenditure I = Total investment expenditure G = Total
government expenditure X – M = Export – Import
3.5 Different Concepts on National Income
3.5.1 Gross Domestic Product
Gross domestic product is the value of all final goods and services produced within the
boundary of a nation for one year. In India one year means from 1st April to 31st March
of the next year. GDP calculation includes income of foreigners in a country but excludes
income of those people who are living outside of that country.
3.5.2 Net Domestic Product (NDP)
NDP is calculated by deducting the depreciation of plant and Machinery from GDP.
NDP = Gross Domestic Product – Depreciation
3.5.3 Gross National Product (GNP)
GNP is the value of all final goods and services produced by the residents of a country in
a financial year (i.e., 1st April to 31st March of the next year in India). While Calculating
GNP, income of foreigners in a country is excluded but income of people who are living
outside of that country is included. The value of GNP is calculated based on GDP.
GNP = GDP + X – M,
where,
X = income of the people of a country who are living outside of the country
M = income of the foreigners in a country
3.5.4 Net National Product (NNP)
Net National Product (NNP) in an economy is the GNP after deducting the loss due to
depreciation.
NNP = GNP – Depreciation

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3.5.5 NNP at Factor Cost

It is the value of NNP when the value of goods and services is taken at the production
cost.
3.5.6 NNP at Market Price
It is the value of NNP at consumer cost.
NNP at market cost = NNP at factor cost + Indirect taxes – Subsidies
3.5.7 India last 10-year GDP
3.6 India’s GDP Calculation Process

Who calculates: Central Statistics Office (CSO)
How is it calculated: Its processes involve conducting an annual survey of industries and
compilation of various indexes such as the Index of Industrial Production (IIP) and the
Consumer Price Index (CPI).
• To collect and compile the data needed to calculate the GDP and other statistics,
CSO coordinates with multiple federal and state government agencies and
departments.

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• For instance, the Price Monitoring Cell in the Department of Consumer Affairs
under the Ministry of Consumer Affairs collects and calibrates data points related
to manufacturing, crop yields or commodities, which are used for the Wholesale
Price Index (WPI) and CPI calculations.
3.6.1 Two Methods
1. Based on economic activity (at factor cost)
2. Based on expenditure (at market prices)
Further calculations are made to arrive at nominal GDP (using the current market
price) and real GDP (inflation-adjusted). Among the four released numbers, the
GDP at factor cost is the most followed figure and reported in the media.
3.6.2 The Factor Cost Figure
The factor cost figure is calculated by collecting data for the net change in value for each
sector during a particular time period. The following eight industry sectors are considered
in this cost:
• Agriculture, forestry, and fishing
• Mining and quarrying
• Manufacturing
• Electricity, gas, and water supply
• Construction
• Trade, hotels, transport, and communication
• Financing, insurance, real estate, and business services
• Community, social and personal service
3.6.3 The Expenditure Method
The expenditure (at market prices) method involves summing the domestic expenditure
on final goods and services across various streams during a particular time period. It
includes consideration of expenses towards household consumption, net investments (i.e.,
capital formation), government costs, and net trade (exports minus imports).
The GDP numbers from the two methods may not match precisely, but they are close.
The expenditure approach provides a clear insight about the contribution of various parts
to the Indian economy. For instance, it can be inferred that higher domestic consumption
is the reason why India remains largely unaffected when there is slowdown in parts of the
world. A country heavily dependent on exports will be more likely to be affected by a
global recession.

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3.7 Other Economic Indicators

3.7.1 Consumer Price Index – CPI
The Consumer Price Index (CPI) is a measure that examines the weighted average of
prices of a basket of consumer goods and services, such as transportation, food, and
medical care.
• Calculated by taking price changes for each item in the predetermined basket of
goods and averaging them.
• Changes in the CPI are used to assess price changes associated with the cost of
living.
• One of the most frequently used statistics for identifying periods of inflation or
deflation and for measuring the effectiveness of the government’s economic policy.
• Gives the government, businesses, and citizens an idea about price changes in the
economy and can act as a guide to make informed decisions about the economy.
3.7.2 Producers Price Index – PPI
The PPI measures price movements from the seller's point of view. It also measures the
change in average prices that a producer receives. In other words, the average change in
the price of goods and services at the place of production before they reach the market.
Purchasing Managers' Index - PMI
PMI The Purchasing Managers' Index (PMI) is an index of the prevailing direction of
economic trends in the manufacturing and service sectors.
• It consists of a diffusion index that summarizes whether market conditions, as
viewed by purchasing managers, are expanding, staying the same, or contracting.
• The purpose of the PMI is to provide information about current and future business
conditions to company decision-makers, analysts, and investors.
In the US, the PMI is based on a monthly survey sent to senior executives at more than
400 companies in 19 primary industries, which are weighted by their contribution to the
U.S. GDP. PMI is a number from 0 to 100. A PMI above 50 denotes an expansion when
compared with the previous month. A PMI below 50 denotes a contraction, and a PMI =
50 indicates no change. The further away from 50 the greater the level of change.
3.7.3 Wholesale Price Index – WPI
A wholesale price index (WPI) is an index that measures and tracks the changes in the
price of goods in the stages before the retail level. This refers to goods that are sold in
bulk and traded between entities or businesses (instead of between consumers).
Usually expressed as a ratio or percentage, the WPI shows the included goods' average
price change; it is often seen as one indicator of a country's level of inflation.

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3.7.4 Sovereign Rating

A sovereign credit rating is the evaluation of the credit risk of a sovereign entity to
determine its ability to pay back debts due. The sovereign credit rating of a country may
determine its ability to access funds in the national and international bond markets. The
three influential credit rating agencies include Moody’s, Fitch Ratings, and Standard &
Poor’s.
3.7.5 Sovereign Credit Rating
Usually, a credit rating agency will evaluate a country’s economic and political
environment at the request of the government and assign a rating stretching from AAA
grade to grade D. By allowing external credit rating agencies to review its economy, a
country shows that it is willing to make its financial information public to investors. The
level of sovereign credit risk depends on various factors, including a country’s debt
service ratio, import ratio, growth of domestic money supply, etc.
3.8 Monetary Policy
Monetary Policy is the action taken by the central bank of a nation to control the money
supply and achieve macroeconomic goals that promote sustainable economic growth. The
primary objective is to maintain price stability while keeping the growth objective in
mind. A six-member Monetary Policy Committee (MPC) is responsible for determining
the policy interest rate to achieve the inflation target of 2%-6%. RBI has many tools at its
disposal to implement the monetary policy. They are listed below:
• Repo Rate
o It is defined as the (fixed) interest rate at which the RBI lends money (on an
overnight basis) to the banks against the collateral of government and other
approved securities under the Liquidity Adjustment Facility (LAF)
o The Repo Rate in India = 4% (as of Jan 31, 2022)
• Reverse Repo Rate
o It is defined as the (fixed) interest rate at which the RBI absorbs liquidity,
on an overnight basis, from banks against the collateral of eligible
government securities under the LAF
o The Reverse Repo Rate in India = 3.35% (as of Jan 31, 2022)
• Liquidity Adjustment Facility (LAF)
o A tool that allows banks to borrow money through repurchase agreements
(repos) or to make loans to the RBI through reverse repo agreements.
• Marginal Standing Facility
o This mechanism allows scheduled commercial banks to borrow an additional
amount of overnight money from the Reserve Bank by dipping into their
Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of
interest

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o This comes into play when the inter-bank liquidity dries up completely
o The MSF rate is pegged to 100 basis points or a percentage point above the
repo rate.
• Bank Rate
o It is the rate at which RBI is ready to buy or rediscount bills of exchange or
other commercial papers
o The difference between the Bank rate and the repo rate is that there is no
collateral involved in the bank rate
• Cash Reserve Ratio (CRR)
o The percentage of its’ net demand and time liabilities (NDTL) that a bank
needs to maintain with the RBI
o It means the banks do not have access to that much amount for any economic
activity or commercial activity. Banks cannot lend this money to corporates,
individual borrowers, or for any investment purposes.
o So, the CRR amount remains in the current account with RBI and banks do
not earn any interest on that.
o CRR = 4% (as of Jan 31, 2022)
• Statutory Liquidity Ratio (SLR)
o The share of NDTL that a bank is required to maintain in safe and liquid
assets, such as unencumbered government securities, cash, and gold.
o In SLR, the money goes into investment predominantly in the central
government securities as mentioned earlier, which means the banks earn a
small amount of interest on that investment as against CRR where it earns
zero.
o SLR = 18% (as of Jan 31, 2021)
• Open Market Operations (OMO)
o Outright purchase and sale of government securities by RBI, for injection
and absorption of durable liquidity, respectively.
• Market Stabilisation Scheme (MSS)
o Excess liquidity due to large capital inflows into the economy is absorbed
through the sale of short-dated government securities and treasury bills
3.9 Inflation
Inflation refers to the general rise in the price level in an economy. Inflation leads to a
decline in the purchasing power per unit of money. Inflation is measured as the rate of
change in a common price index such as the Consumer Price Index (CPI), Wholesale
Price Index (WPI) over time. A healthy amount of inflation is essential to promote growth
as people will spend money in the immediate future instead of postponing it if they feel
that the prices will increase further. Thus, the aggregate demand will serve as an engine
of growth for the economy.

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Inflation in an economy depends on the money supply in the economy. The money supply
in the economy can be controlled through the instruments available with the RBI. The
increase in the repo rate decreases the money supply in the market and increases inflation.
On the other hand, a decrease in the repo rate increases the money supply in the market
and decreases inflation. Similarly, an increase in the CRR and SLR decreases the money
supply in the market and increases inflation. On the other hand, a decrease in the CRR
and SLR repo rate increases the money supply in the market and decreases inflation.
3.10 Inflation Targeting
It is a monetary policy approach where the central bank sets a specific inflation rate as its
target and utilizes the various monetary policy tools to achieve the same. This approach
is based on the belief that long-term economic growth is best achieved by maintaining
price stability, and price stability is achieved by controlling inflation. The RBI panel has
hiked the inflation target for fiscal 2021-22 to 5.7 per cent.
3.11 Budget Deficits
There can be different types of deficits in a budget depending upon the types of receipts
and expenditure we take into consideration - Revenue deficit, Fiscal deficit, and Primary
deficit.
3.11.1 Revenue Deficits
A revenue deficit indicates that the government doesn't have sufficient revenue for the
normal functioning of the government departments. In other words when the government
starts spending more than it earns it results in a Revenue Deficit. Revenue Deficit forces
the government to disinvest or cover the shortage by borrowing.
In the case of Revenue Deficit, the government usually tries to curtail its expenses or
increase its tax and non-tax receipts. This can be done by introducing new taxes or
increasing the tax on people in higher-earning slabs.
3.11.2 Fiscal Deficits
Simply put, a Fiscal Deficit is a measure of how much the government needs to borrow
from the market to meet its expenditure when its resources are inadequate.
Some of the measures can be reducing public expenditure in the form of subsidies,
reduction in expenditure on bonuses, LTC, Leaves encashment, etc. Alternatively,
measures to increase the revenue are also taken in form of broadening tax base
restructuring and sale of shares in public sector units, etc.
3.11.3 Primary Deficits
Primary Deficit shows the amount of government borrowings specifically to meet the
expenses by removing the interest payments. Therefore, a zero Primary Deficit means the
need for borrowing to meet interest payments.

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Primary deficit = Fiscal Deficit - Interest payments

A higher Primary Deficit reflects the amount of new borrowings in the current year. Since
this is the amount on top of already existing borrowings (Fiscal Deficit) similar measures
can be taken to reduce the number of borrowings.
3.12 Fiscal Policy
Fiscal policy refers to the measures adopted by the Governments to stabilize and drive
economic growth, specifically by manipulating the levels and allocations of taxes and
government expenditures. Fiscal policy is used in tandem with the monetary policy to
achieve economic goals such as growth, inflation, and employment among others. It can
be either expansionary or contractionary. An expansionary fiscal policy is one that is used
at times of slowdown of the economy. During such times, Government cuts taxes and
increases government spending to spur economic growth. On the other hand, a
contractionary fiscal policy is aimed at lowering inflation as it tends to reduce the
quantum of money by raising taxes and reducing spending.

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4. Statistics
There are two main branches of statistics –
• Descriptive
• Inferential
4.1 Descriptive Statistics
Analysis of data that helps describe, show, or summarize data in a meaningful way such
that, for example, patterns might emerge from the data. No conclusion beyond the data is
made.
Descriptive statistics can be broken down into measures of central tendency and measures
of variability (spread).
A. Measures of central tendency include the mean, median, and mode
B. Measures of variability include standard deviation, variance, minimum and
maximum variables, and kurtosis and skewness.
4.2 Inferential Statistics
Inferential statistics are used to make predictions or comparisons about a larger group (a
population) using information gathered about a small part of that population. Thus,
inferential statistics involves generalizing beyond the data, something that descriptive
statistics does not do.
4.3 Types of Data
Types of data that may be divided into groups – Categorical and Numerical
4.3.1 Categorical
Examples of categorical variables are race, sex, age group, and educational level.
4.3.2 Numerical
Numerical is further classified as –
• Discrete - can only take certain values. Example: the number of students in a class
• Continuous - can take any value (within a range) A person's height: could be any
value (within the range of human heights)
4.4 Measurement levels
4.4.1 Qualitative
• Nominal - Nominal scale is a naming scale, where variables are simply “named”
or labelled, with no specific order. (Pass or Fail)
• Ordinal - Ordinal scale has all its variables in a specific order, beyond just naming
them. (grading system of A, B, C, D and E)

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4.4.2 Quantitative
• Interval - The interval scale of measurement is a type of measurement scale that
is characterized by equal intervals between scale units. Example, the Fahrenheit
scale is made up of equal temperature units, so that the difference between 40o and
50o Fahrenheit is equal to the difference between 50o and 60o Fahrenheit.
• Ratio - A ratio scale is a quantitative scale where there is a true zero and equal
intervals between neighbouring points. Unlike on an interval scale, a zero on a ratio
scale means there is a total absence of the variable you are measuring. Length, area,
and population are examples of ratio scales.
4.5 Population vs. Sample
Population Sample
• Collection of all items of interest • A subset of the population
• Parameters are numbers that • Statistics are the numbers that
summarise data for entire summarize the data from a sample
population
4.6 Bessel’s Correction
In statistics, Bessel's correction is the use of n − 1 instead of n in the formula for the
sample variance and sample standard deviation, where n is the number of observations in
a sample. This method corrects the bias in the estimation of the population variance.
However, the correction often increases the mean squared error in these estimations.
4.7 Randomness
A random sample is collected when the members of the sample are chosen from the
population strictly by chance.
4.8 Representativeness
A representative sample is the subset of the population that accurately reflects the
members of the entire population.
4.9 Mean
The average of the data values.
∑𝑛1 𝑥𝑖
𝑀𝑒𝑎𝑛, 𝑥̅ =
𝑛
4.10 Variance
The sample variance, s2, is a popular measure of dispersion. It is an average of the squared
deviations from the mean.
2
∑𝑛1(𝑥𝑖 − 𝑥̅ )2
𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒, 𝑠 =
𝑛

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4.11 Standard Deviation

The sample standard deviation, s, is a popular measure of dispersion. It measures the
average distance between a single observation and the mean. It is equal to the square root
of the sample variance.
∑𝑛1(𝑥𝑖 − 𝑥̅ )2
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛, 𝑠 = √
𝑛
4.12 Standard Error

The standard error of the mean, a measure of the variation of the sample mean about the
population mean, is computed by dividing the sample standard deviation by the square
root of the sample size.
𝑠
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐸𝑟𝑟𝑜𝑟 =
√𝑛
4.13 Covariance
Covariance is a measure of the relationship between two random variables. The metric
evaluates how much – to what extent – the variables change together. In other words, it
is essentially a measure of the variance between two variables. However, the metric does
not assess the dependency between variables.
Positive covariance: Indicates that two variables tend to move in the same direction.
Negative covariance: Reveals that two variables tend to move in inverse directions.
Zero Covariance: If two random variables are independent, the covariance will be zero.
However, a zero covariance does not necessarily indicate that variables are independent.
A non-linear relationship can exist, and the covariance may be zero.
Sample Formula Population Formula
∑𝑁
𝑖=1(𝑥𝑖 − 𝑥̅ )(𝑦𝑖 − 𝑦
̅) ∑𝑁
𝑖=1(𝑥𝑖 − 𝑥̅ )(𝑦𝑖 − 𝑦
̅)
𝑁−1 𝑁
4.13.1 Use in finance
The concept is primarily used in portfolio theory. One of its most common applications
in portfolio theory is the diversification method, using the covariance between assets in a
portfolio. By choosing assets that do not exhibit a high positive covariance with each
other, the unsystematic risk can be partially eliminated.

FINANCE COMPENDIUM
4.14 Correlation Coefficient

The correlation coefficient is a statistical measure of the strength of the relationship
between the relative movements of two variables. The values range between -1.0 and 1.0.
𝐶𝑜𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒(𝑥, 𝑦)
𝐶𝑜𝑟𝑟𝑒𝑙𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 =
𝜎𝑥 × 𝜎𝑦
The interpretations of the values are:
• -1 indicates perfect negative correlation. The variables tend to move in opposite
directions (i.e., when one variable increases, the other variable decreases).
• 0 indicates no correlation. The variables do not have a relationship with each
other.
• 1 indicates perfect positive correlation. The variables tend to move in the same
direction (i.e., when one variable increases, the other variable also increases).
4.14.1 Use in finance
The concept is primarily used in portfolio management. A thorough understanding of this
statistical concept is essential to successful portfolio optimization.
4.15 Correlation and Causation
Correlation must not be confused with causality.
What does the expression “correlation does not mean causation” mean? If two variables
are correlated, it does not imply that one variable causes the changes in another variable.
The correlation only assesses relationships between variables, and there may be different
factors that lead to the relationships. Causation may be a reason for the correlation, but it
is not the only possible explanation.
4.16 Distribution
A distribution is a function that shows the possible values for a variable and how often
they occur. A probability distribution is a function that describes the likelihood of
obtaining the possible values that a random variable can assume.
4.16.1 Normal Distribution
The normal curve is a bell-shaped, symmetrical graph with an infinitely long base. The
mean, median, and mode are all located at the centre. A value is said to be normally
distributed if its histogram is the shape of the normal curve. The probability that a
normally distributed value will fall between the mean and some z-score z is the area under
the curve from 0 to z.
1 1 𝑥−𝜇 2
𝑓(𝑥) = 𝑒 −2( 𝜎
)
𝜎√2𝜋

FINANCE COMPENDIUM
Properties –
• The mean, mode and median are all equal.
• The curve is symmetric at the centre (i.e., around the mean, μ).
• Exactly half of the values are to the left of centre and exactly half the values are to
the right.
• The total area under the curve is 1.
4.16.2 Z-Score
The z score tells you how many standard deviations from the mean your score is.
A z-score of 1 is 1 standard deviation above the mean. The empirical rule tells you what
percentage of your data falls within a certain number of standard deviations from the
mean:
• 68% of the data falls within one standard deviation of the mean.
• 95% of the data falls within two standard deviations of the mean.
• 99.7% of the data falls within three standard deviations of the mean.

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5. Commonly asked questions in Finance

• What is finance?
• What is the difference between profit and revenue?
• What is the full form of GAAP?
• What’s Income Tax? Do you know how to calculate it?
• What do you understand by the term ‘listed company’?
• How does one determine a discount rate?
• What is India's Foreign Exchange Reserve?
• What do you understand about Investment Banking?
• What do you have to say about the current condition of the Indian Economy?
• “The Russia-Ukraine war can affect the global trade and financial markets.”
Comment on this.
• Tell me something about double-entry bookkeeping.
• Tell us about accounts and taxation.
• What are the different types of taxes?
• What is capital budgeting?
• What is the difference between book value and market value?
• What is ICWA, a balance sheet?
• What is the Fixed Cost, Variable Cost, and Break-Even point?
• What is Indirect tax?
• What is liquidity?
• What is Marginal Costing?
• What is market capitalization?
• What is the P/E ratio?
• What is the difference between Options and Futures?
• Who invented Double Entry Bookkeeping?
• What is the internal rate of return formula?
• What is the Net Present Value formula?
• What is the relation between income statement and balance sheet?
• What is the role of an auditor?
• What is the importance of inflation in an economy?
• What are the current CRR and SLR rates of India?
• Name a few Indian FinTech companies you know about.
• At what valuation would you consider a start-up unicorn?
• Questions about the FY22-23 budget

FINANCE COMPENDIUM
6. Additional Resources
• FinTree YouTube Channel
• Economics Crash Course Playlist
• Excel Crash Course for Finance Professionals
• MIT Statistics for Application, Fall 2016
• Wharton Course: Private Equity
For other sources kindly read the following –
• The Ken
• Finshots
• Investopedia articles on relevant topics
• Blockchain by IBM
• India Economy and Business
• Chicago Booth Review
7. Latest Trends in Finance

• Blockchain in Finance
• Emergence and Growth of FinTech in India
• Cryptocurrency in India: The Past, Present and Uncertain Future

Consulting and
Strategy
Compendium

HR COMPENDIUM
Contents
1. Overview of Strategy and Consulting ................................................................ 3
2. Types Of Consulting ............................................................................................ 3
3. Qualities a consultant should possess ................................................................ 5
4. Top Consulting Firms in the World................................................................... 6
5. Business Strategy Frameworks .......................................................................... 8
5.1 SWOT Analysis ..................................................................................................... 8
5.2 BCG Matrix ......................................................................................................... 10
5.3 PEST Analysis ..................................................................................................... 10
5.4 Porter’s 5 Forces .................................................................................................. 11
5.5 CAGE Distance Framework ................................................................................ 12
5.6 VRIO Framework ................................................................................................ 14
5.7 McKinsey’s 7S Model ......................................................................................... 15
5.8 3Cs Model: Corporation, Competition, and Customer ....................................... 16
6. Guesstimates ....................................................................................................... 17
6.1 MECE Framework ............................................................................................... 18
7. Some Interview Questions................................................................................. 19
SWOT Matrix: ............................................................................................................... 19
BCG Matrix: .................................................................................................................. 19
PEST Analysis: .............................................................................................................. 20
Guesstimates: ................................................................................................................. 20

HR COMPENDIUM
1. Overview of Strategy and Consulting
Strategy can be defined as "A plan to realize long-term goals". Organizations across
the globe regularly engage with strategy consultants for support in developing and
implementing business strategies. Consulting means "engaged in the business of giving
expert advice to people working in a specific field." The true meaning of consulting is
helping people solve problems and move from their current state to their desired state.
Check out this link to tackle interview questions on why you want to get into Strategy
and Consulting.
So, what is a consultant? A consultant has some level of expertise that a particular
group of people find valuable, and people within that group are willing to pay the
consultant to access their knowledge.
2. Types Of Consulting
The consultancy industry is one of the most diverse markets within the professional
services industry, and, therefore, several different types of consultants are found in the
industry.
Moreover, being a 'consultant' is not a protected professional title like most other
professions, making it possible for anyone to title themselves strategy, management,
business, finance, HR, or IT consultant.
• Strategy Consulting
Strategy consulting is when an organization seeks help from a third party to offer an
outside, expert perspective on their business challenges.
Strategy consultants usually have considerable industry knowledge and are expected to
assess high-level business issues objectively. They take a holistic look at specific
problems companies are dealing with and advise how they should approach them.
Strategy consultants operate at the highest level of the consultancy market, focusing on
corporate and strategic issues like corporate and organizational strategy, economic
policy, government policy, and functional strategy.
Given that nature of strategy consulting differs from the other more implementation
and operation-driven areas, strategy consultants generally have a different profile from
their peers. Their focus lies more on quantitative/analytics skills, and their job
description revolves more around advising than overseeing implementation.
• Management Consulting
Management consultants, also known as business consultants or organizational

advisors in practice, are consultants who focus on all sorts of organizational concerns,

HR COMPENDIUM
from strategy to a variety of elements within management. In the methodology upheld

by Kennedy as well as Consultancy.in, Management Consulting is a collective term
used for all services that fall under Strategy Consulting, Operations Consulting, and
HR Consulting. Therefore, more than half of all advisors can be defined as a
management consultant.
• Operations Consulting
Operations consulting deals with advisory and implementation services that improve a
company's internal processes and performance in the value chain.
Operations consultants are responsible for creating more effective client operations by
advising on and supporting the implementation of changes to the target operating
model, functional business processes, management systems, culture, and other
elements part of the value chain.
The market for operations consulting and management services consists of eight
disciplines: Organizational Operations, Sales & Marketing, Supply Chain, Sourcing &
Procurement, Finance, Business Process Management, Research & Development, and
Outsourcing.
• Financial Advisory Consulting
Consultants who operate in the Financial Advisory segment works on questions that
address financial capabilities and, in many cases, also the analytical capabilities within
an organization. Subsequently, the profiles of consultants active in this segment can
vary greatly, from M&A and corporate finance advisors to risk management, tax
restructuring, or real estate consultancy. Consultants specialized in forensic research
and support disputes also fall under the Financial Advisory segment. Most financial
consultants work for large combined accounting and consulting firms, or else for niche
advisory offices.
• Human Resource Consulting
HR consultants help clients with human capital questions within their organizations
and improve the HR department's performance. Chief topics central to HR consultants'
job descriptions are organizational changes, change management, employment,
learning & development, talent management, and retirement. Organizations also bring
in HR consultants to help transform the business culture within their organization or
transform their HR department, including changes in organizational design, processes,
and systems.
• IT Consulting
Technology consultants, also known as IT, ICT, or digital consultants, focus on helping

HR COMPENDIUM
clients with the development and application of Information Technology (IT) within
their organization. IT consultants focus on transitions (projects) in the ICT landscape,
contrary to regular IT employees, who work on day-to-day IT operations (so-called
'business as usual.' activities). Most ICT consultants work on implementation projects,
for instance, extensive ERP systems applications, where their role may vary from
project management to process management or system integration. Within IT
consulting, the fastest-growing markets are digital, data analytics (also known as data
science), cybersecurity, and IT forensics.
• Marketing Consulting
Whether you need a new logo for your company, a new market position for one of your
brands, or a new social media strategy to interact with your customers, or planning and
implementing a marketing strategy, a marketing consultant helps in all marketing
aspects of a firm’s business.
• Compliance and Legal Consulting
These consulting services help firms ensure that they adhere to federal and local laws
and regulations. A compliance consultant must have a sound knowledge of local laws
and regulations as it’s essential for successful businesses to be compliant with local and
federal laws.
3. Qualities a consultant should possess

Not everyone is suited for every career option, and Consulting is no exception. Though
consultants are paid higher than their peers, they also have their fair share of
challenges. Few of the many skills that consultants must possess-
• Teamwork: Consultants always work with a team. Be it within their

organization or the client company. Consultants need to work collaboratively
with cross-functional teams and even with consultants from the other firm that
the client may have hired. In short, teamwork is essential to survive as a
consultant.
• Academic Curiosity: Consultants are often put up in various distinct projects in

different domains. The level of academic curiosity needed to be able to analyze
the clients' problems is top-notch.
• Willing to work long hours: Cracking the problem requires an undetermined

amount of working hours. It can be a few, and it can be a lot. More often than
not, it's the latter. An average consultant works around 70 hours per week.

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• Multitasking: The consulting assignments vary significantly in duration,

location, and function. It may require context switching from one deliverable to
another. You need to be flexible enough to handle these anomalous switching.
• Travel: Consultants spend a large portion of their time on client sites. They end
up traveling in whatever free time they have available. As a consultant, you will
most probably spend a lot of time away from family and on the roads.
4. Top Consulting Firms in the World
• McKinsey and Company
McKinsey & Company has been providing strategic advice to corporations and other
organizations since 1926, when James O. McKinsey, a University of Chicago
professor, opened a consulting office in Chicago. Currently Headquartered in New
York, they have offices in over 130 cities spread across the globe and more than 27000
employees.
McKinsey has been working in India for 25 years now, partnering with companies and
public institutions, and currently has four offices in India.
• Boston Consulting Group
Founded in 1963, The Boston Consulting Group (BCG) is a global management-

consulting firm. BCG helps corporations and other organizations innovate and achieve
sustainable competitive advantage. The Boston-based company has an annual revenue
of $8.5 billion and has over 21000 employees.
BCG formally started operations in India in 1995, opening its offices after nearly a
decade of work in India. It currently has offices in Mumbai, Gurugram, and Chennai.

HR COMPENDIUM
• Bain & Company
Bain and Company is a top consulting firm specialized in the area of management
consultancy. It was founded in the year 1973, and its headquarters are located in
Boston, Massachusetts. It has an annual revenue of $4.3 billion for the fiscal year
ending on Dec 30, 2019 and has over 12,000 employees.
Since 2006, Bain India has advised clients in India and beyond on their biggest issues
and opportunities. It currently has offices in Mumbai, Bengaluru, and Gurugram.
• Deloitte
Deloitte is a professional services firm offering audit, advisory, tax, and consulting
services across more than 20 industries. Deloitte is one of the Big Four accounting
organizations and the largest professional services network in the world by revenue and
number of professionals, with headquarters in London, England. Deloitte employs
more than 300,000 professionals across 150 countries.
In India, Deloitte has two entities: Deloitte India and Deloitte US-India (USI), which is
a region within the Deloitte US organization, with offices across four cities in India
(Hyderabad, Mumbai, New Delhi, and Bengaluru). Deloitte India caters to clients
within India, while Deloitte USI is an entity of Deloitte US that is geographically
located in India and caters to the US member firm's clients.
• PricewaterhouseCoopers
PricewaterhouseCoopers LLP (PwC) provides professional services. The Company

offers business advisory services such as auditing, accounting, taxation, strategy
management, and human resource consulting services. The company's headquarters is
based in London, United Kingdom, and is known as the second-largest professional
services firm and has its name amongst the Big Four Auditors.

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It has about 275,000 employees working worldwide. PwC has a network of firms in
158 countries, at 743 locations. It has 28 offices in India in 13 cities employing over
30000 professionals.
EY (Ernst & Young)
Ernst and Young is a globally recognized multinational professional service company

based in the United Kingdom. It is one of the largest professional services firms
globally and is one of the "Big Four" accounting firms.
It was founded in 1989. EY has its headquarters in London, United Kingdom. The
company generated $37.2Billion in 2020 and has a working staff of 290,000 across the
world with 700 offices in 150 countries. EY has a pan Indian presence with offices in
many Indian cities.
5. Business Strategy Frameworks
Frameworks are useful tools that help you analyze the issue, structure your thinking
and communicate recommendations. Business frameworks can help you articulate
goals with strong business writing and develop a blueprint for success. You can take a
broader conceptual framework and scale it to fit your needs. A business framework
also gives you a starting place and a common vocabulary that you can edit to fit your
client's goals.
In this compendium, we will look at eight business strategy frameworks for consulting:
5.1 SWOT Analysis
SWOT, which stands for Strengths, Weaknesses, Opportunities, and Threats, is an

analytical framework that can help your company face its greatest challenges and find

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its most promising new markets. SWOT analyses are often used during strategic
planning. They can serve as a precursor to any company activities, such as exploring
new initiatives, making decisions about new policies, identifying possible areas for
change, or refining and redirecting efforts mid- plan.
The components of SWOT analysis are:
Strengths: These detail the strengths that an organization possesses that gives it an
advantage over others.
Weaknesses: The shortcomings that an organization possesses that the other players in
the industry might exploit.
Opportunities: Events or changes in the external environment that an organization
could use to its advantage.
Opportunities: Events or changes in the external environment that an organization

could use to its advantage.
Threats: Events or changes in the external environment that can cause the organization
to lose its competitive advantage.
(PRO-TIP: Try doing a SWOT analysis of your existing organization or, if you're a
fresher, then of your dream company. This can be asked during your interviews)

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5.2 BCG Matrix
The Boston Consulting group's product portfolio matrix (BCG matrix) is designed to
help with long-term strategic planning, help a business consider growth opportunities by
reviewing its portfolio of products to decide where to invest, discontinue, or develop
products. It is also known as the Growth/Share Matrix
The Matrix is divided into four quadrants based on an analysis of market growth and
relative market share, as shown in the diagram below.
Dogs: These are products with low growth or market share.
Question marks or Problem Child: Products in high growth markets with low market
share.
Stars: Products in high growth markets with high market share
Cash Cows: Products in low growth markets with a high market share
5.3 PEST Analysis
PEST helps you understand the broader Political, Economic, Socio-Cultural, and
Technological environment in which you operate. PEST is a helpful tool when you are
beginning operations in a new country or region. We use the prompts of PEST to
brainstorm relevant factors. Next, we identify information that applies to these factors
and then we draw conclusions.

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PEST analysis helps in making strategic business decisions, planning marketing

activities, product development and research.
Things that get covered under each factor of PEST analysis are:
5.4 Porter’s 5 Forces
Porter's Five Forces is a simple but powerful tool for understanding the
competitiveness of your business environment, and for identifying your strategy's
potential profitability. This helps us in understanding the forces in our environment or
industry that can affect our profitability, according to which we can adjust our strategy.
In an existing industry, market entry and survival are determined by various forces that
prevail in the industry. The main five factors or forces that drive competition are:
• Competitors or Rival Firms: This looks at the number and strength of your
competitors. The existing rivalry between firms can take a firm’s profits to zero
and may lead to shut down. In a competitive environment, a firm’s decision is
highly influenced by what the competitors do.
• Threat of New Entrants: The threat of new entrants to the market determines
the sustainability of the estimated market share. It is evaluated in terms of
market entry barriers which may be in the form of high fixed cost, product
differentiation etc. Your position can be affected by people's ability to enter your
market. So, think about how easily this could be done.
• Threat of Substitutes: There is always a threat of substitute products replacing
the existing product(s) of a firm. A substitution that is easy and cheap to make
can weaken your position and threaten your profitability.
• Suppliers: This is determined by how easy it is for your suppliers to increase

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their prices. How many potential suppliers do you have? How unique is the
product or service that they provide, and how expensive would it be to switch
from one supplier to another? A competitive market with limited suppliers
brings with it a high level of bargaining power of suppliers.
•
• Buyers: Here, you ask yourself how easy it is for buyers to drive your prices
down. How many buyers are there, and how big are their orders? How much
would it cost them to switch from your products and services to those of a rival?
Are your buyers strong enough to dictate terms to you? Multiple products of the
same category give the buyers an advantage in bargaining, thus the high
bargaining power of buyers exists in multi-brand products.
5.5 CAGE Distance Framework
The CAGE Distance Framework is a tool that can be used to uncover important
differences between various countries that companies should take into account when
deciding on their strategy. The acronym CAGE stands for Culture, Administrative,
Geographical, and Economic. The CAGE Distance Framework helps companies
because it can evaluate countries and determine the distance between them. This does
not only involve physical geographical distance, but also figurative distances between
various cultures, economies, and working methods.
The cultural differences found in a CAGE Distance framework include:
• Different languages and dialects

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• Different ethnicities and networks

• Different belief systems and religions
• Different online behaviour such as social networks or search engines
• Different values and social norms
• Different attitudes on issues
The administrative differences found in a CAGE Distance framework include:
• Colonial ties
• Trade agreements & policies
• Currency differences
• Political situation
The geographic differences found in a CAGE Distance framework include:
• Physical distance between home country and new market country

• Border structure (land or sea)
• Timezone differences
• Physical size of country and location of major cities
• Transport and communication ease
The economic differences in a CAGE Distance framework include:

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• Country resources
• Rich and poor social divides
• Infrastructure
• Average income levels and country wealth
5.6 VRIO Framework
The VRIO framework is an internal analysis tool, used by organizations to categorize

their resources based on whether they hold certain traits outlined in the framework. This
categorization then allows organizations to identify the company resources that are
competitive advantages.
There are four dimensions that make up the framework, which create the acronym
VRIO: Valuable, Rare, Inimitable, Organized
Valuable: When a resource is valuable, it's providing the organization with some sort of
benefit. However, a resource that is valuable and doesn't fit into any of the other
dimensions of the framework, is not a competitive advantage. An organization can only
achieve competitive parity with a resource that is valuable and neither rare nor hard to
imitate.
Rare: A resource that is uncommon and not possessed by most organizations is rare.
When a resource is both valuable and rare, you have a resource that gives you a
competitive advantage. The competitive advantage achieved from a resource that is both
valuable and rare is usually short lived though. Competitors will quickly realize and can
imitate the resource without too much trouble. Therefore, it's only a temporary
competitive advantage.

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Inimitable: Resources are hard to imitate if they are extremely expensive for another
organization to acquire them. A resource may also be hard for an organization to imitate
if it's protected by legal means, such as patents or trademarks.
Resources are considered a competitive advantage if they're valuable, rare, and hard to
imitate. However, organizations that aren't organized to fully take advantage of the
resource, may mean the resource is an unused competitive advantage.
Organized to capture value: An organization's resource is organized to capture value

only if it is supported by the processes, structure, and culture of the company. A
resource that is valuable, rare, hard to imitate, and organized to capture value is a long-
term competitive advantage.
A resource cannot confer any advantage for a company if it’s not organized to capture
the value. Only a firm that is capable to exploit valuable, rare, and imitable resources
can achieve sustained competitive advantage.
5.7 McKinsey’s 7S Model
The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational

design.” The goal of the model is to depict how effectiveness can be achieved in an
organization through the interactions of seven key elements – Structure, Strategy, Skill,
System, Shared Values, Style, and Staff.
The focus of the McKinsey 7s Model lies in the interconnectedness of the elements that
are categorized by “Soft Ss” and “Hard Ss” – implying that a domino effect exists when
changing one element in order to maintain an effective balance.
The model can be applied to many situations and is a valuable tool when organizational
design is at question. The most common uses of the framework are:
• To facilitate organizational change
• To help implement new strategy
• To identify how each area may change in a future
• To facilitate the merger of organizations
Structure: Structure is the way in which a company is organized – chain of command

and accountability relationships that form its organizational chart.
Strategy: Strategy refers to a well-curated business plan that allows the company to
formulate a plan of action to achieve a sustainable competitive advantage, reinforced by
the company’s mission and values.

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Systems: Systems entail the business and technical infrastructure of the company that
establishes workflows and the chain of decision-making.
Skills: Skills form the capabilities and competencies of a company that enables its
employees to achieve its objectives.
Style: The attitude of senior employees in a company establishes a code of conduct

through their ways of interactions and symbolic decision-making, which forms the
management style of its leaders.
Staff: Staff involves talent management and all human resources related to company
decisions, such as training, recruiting, and rewards systems
Shared Values: The mission, objectives, and values form the foundation of every
organization and play an important role in aligning all key elements to maintain an
effective organizational design.
5.8 3Cs Model: Corporation, Competition, and Customer
The primary goal should be the interest of the customer and not those of the
shareholders because a company that is genuinely interested in its customers will
automatically take care of shareholder interests, as well as they need a full
understanding of who the competition is, and what that competition is capable of doing.
If a company can bring together those 3 C’s successfully in the strategy, they should be
able to find the way into the right part of the market.

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Customers: The customers have needs and want and the company understands the
requirements of the customers. The company should be able to understand, meet, and
cater to the needs and demands of the customers rather than of the shareholders of the
company.
Competitors: The business needs to conduct a thorough competitive analysis in the

market figuring out that who are the direct competitors and who are the indirect
competitors. Finding out their core strengths, business strategies, values, objectives,
sales strategies, marketing strategies, and other such crucial facets is important to work
out the plan to beat the competition and gain the advantage.
Corporation: The company should be genuinely interested in the customers as doing

the same will automatically take care of the shareholders, profits, sales, and other
crucial objectives of the business. The customer should always be at the focal point of
every business aspect.
6. Guesstimates
Guesstimate is one of the most common strategies and consulting interview questions.
It tests the candidate's strategic approach how he/she could solve an unquantifiable
problem and come up with a quantifiable answer
How to approach Guesstimates:
Approach any guesstimate question in 4 steps:
Clarity: Understand the situations, extract all information required to continue with
your estimation. Come up with possible sets of assumptions you will be taking to reach

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to the conclusion.
Structure: Use MECE to structure your analysis effectively. Device a logical approach
for your estimation. You can use top-down, bottom-up, process mapping (production,
consumption side approach), layout centric or critical comparison to reach a number.
Analyze: Decide the approach you want to proceed with. Think of 3-4 steps ahead of
your approach. This is the most important part of a guesstimate as it tests your logical
thinking.
Conclude: Leverage your assumptions and approach to reach a conclusion.
6.1 MECE Framework
MECE stands for Mutually Exclusive Collectively Exhaustive segmentation. The

contents of segments should not overlap with one another. All the statements taken
together should be able to give the overall idea.
Although there are many approaches you can take, we are discussing two main
approaches to proceed with guestimates
Top-down Approach- In this approach, we start with bigger population size and keep
on segmenting until we reach a conclusion. The segmentation can be done based on
(depending on the case):
1. Geography (Rural, semi-urban, urban)

2. Gender (Male, Female)
3. Age
4. Income
5. Profession
6. Preferences (Choice of brands, lifestyles etc.)
7. Time of day (Morning, Evening, Day, Night etc.)

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Depending on the case, we have to opt the appropriate segmentation method.
Bottom-up Approach- In this approach, we start with a low-level block and logically
extrapolate the results based on assumptions and trends and move up to the answer. If
we scale up correctly, we can get a better result from this approach.
Q) Find out the number of Shaving Razor users in India.
Using top-down approach:
Starting with the total population of India = 1.3 billion
Gender-wise bifurcation = Males (60%) & Females (40%) => Males = 0.78 billion
Age-wise segmentation in Males (18+) 75% of total males in India = 0.585 billion
Preference segmentation (those who trims vs those who shaves) (Assuming 30% trims
and 70% shaves) => 0.4095 million
Hence, we can reach the conclusion that there are ~0.4 million or ~4 lakhs shaving users
in India.
7. Some Interview Questions

SWOT Matrix:
• Perform a SWOT analysis of Flipkart?

• Or what are the strengths and Weaknesses of Patanjali?
• The candidates are advised to prepare for such questions in advance, i.e., to
practice SWOT analysis of few top companies of India and the world.
BCG Matrix:
• BCG Analysis of Amazon?

• As Amazon into a lot of business segments, the product portfolio is huge. The
candidates should clearly describe the four elements in BCG matrix Stars, Cash
Cows, Question marks, and Dogs for a given company.
(The candidates must be clear about why they put certain products or services in a
particular BCG matrix bracket.)

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Porter's Five Forces:
• A candidate is usually given the name of an established company like HUL,

Apple etc.
• Then they are asked how Porter's five forces influence in the decision-making of
these companies?
• How can these companies' competitors use Porter's five forces theory to gain
market share?
• How easy or difficult for a new entrant to enter a given market and why?
PEST Analysis:
• XYZ Solutions, an IT company is planning to open its branch in the US.

• What trading policies impact business?
• What regulations must you follow, and have they changed in the last 5, 10, 20
years?
• How much does globalization affect your market share?
• What taxes must you follow, and how does it affect your service offerings (if at
all)?
• Is the population demographic growing or slowing down and if so, how is it
affecting your business?
• What technology is critical for your day-to-day operations?
• What new technology is available that could streamline decision-making and
product development?
• Do you depend on 3rd parties for any tech support or solutions?
Guesstimates:
• How many silver cars are there in New Delhi?

• What is the number of Two-wheelers in your district?
• What is the number of smartphones in your home state?
• How many drinking water bottles (1 liter) are sold in Mumbai per day?
• How many people are there in Statue of Liberty right now?
• How many iphones phones are currently being used in India?
• How many masks were sold in the month of december 2021?
• How many trees are there in Delhi?
• How many cups of Tea were consumed in Mumbai last month?
• How many Cars are there in Hyderabad?
• What is the size of Laptop market in India?
• How many Tennis balls can fit in a Bus?

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• How many Refrigerators are sold in India every year?

• How many School teachers are there in Hyderabad?
• Estimate the volume of a plane (Boeing 747)
• Estimate the size of the diaper market in India
• Estimate the total number of ATMs in India
• Estimate the number of hours spent on smartphones by all Indians in a day.
• Estimated the monthly revenue of a hair salon
• How many volleyballs can you place inside the room we are in?
• How many weddings are held in India each day?
• How many people fly in and out of Mumbai Airport every day?

Operations
Compendium

OPERATIONS COMPENDIUM
Contents
1. Operations Basics ................................................................................................ 5
1.1 Production Planning .............................................................................................. 5
1.2 MRP II – Manufacturing Resource Planning ........................................................ 8
2. Inventory Management ....................................................................................... 9
2.1 Why to keep inventory? ......................................................................................... 9
2.2 What is Inventory Control? ................................................................................... 9
2.3 What are the benefits of Inventory Control? ....................................................... 10
2.4 Various techniques of Inventory Control ............................................................ 10
3. Process Analysis Terms ..................................................................................... 13
4. Forecasting ......................................................................................................... 16
4.1 Types of Forecasting ........................................................................................... 16
4.2 Types of Qualitative Methods of forecasting ...................................................... 16
4.3 Types of Quantitative Methods of forecasting .................................................... 18
5. Project Management ......................................................................................... 21
5.1 Float/Slack ........................................................................................................... 22
5.2 Project Management Methodologies ...................................................................... 23
6. Supply Chain Management .............................................................................. 26
6.1 Why Supply Chain? .............................................................................................. 27
6.2 What are various activities of Supply Chain Manager? ......................................... 28
6.3 What are various elements of the Supply Chain?.................................................... 29
6.4 Challenges in Supply Chain Management .............................................................. 30
7. Value Chain ........................................................................................................ 32
Bullwhip effect ............................................................................................................... 34
8. Logistics Management ....................................................................................... 35
8.1 Purpose of Logistics Management ......................................................................... 36
8.2 How does logistics add value?............................................................................. 36

8.3 Various functions of Logistics Management .......................................................... 37

8.4 Logistics Models ................................................................................................... 37
8.5 Reverse Logistics ................................................................................................. 38
9. Procurement ....................................................................................................... 39
9.1 Procurement Activities ......................................................................................... 41
10. Risk Management .............................................................................................. 41
10.1 Risk Management Process ................................................................................... 41
10.2 Risk Strategy ........................................................................................................ 42
10.3 Risk Register........................................................................................................ 42
11. Operations in Other Services Companies ....................................................... 42
12. Lean ..................................................................................................................... 44
12.1 Types of Waste .................................................................................................... 45
13. Solutions with Lean Approach ......................................................................... 46
13.1 Kaizen .................................................................................................................. 46
13.2 Kanban ................................................................................................................. 47
13.3 Jidoka ................................................................................................................... 47
13.4 5s .......................................................................................................................... 47
13.5 Heijunka ............................................................................................................... 48
13.6 Just-In-Time (JIT)................................................................................................ 49
13.7 Poka-Yoke ........................................................................................................... 49
13.8 Poka-Yoke ........................................................................................................... 50
14. Theory Of Constraints ...................................................................................... 50
15. Six Sigma ............................................................................................................ 51
15.1 Six Sigma Manufacturing Practices History ....................................................... 51
15.2 What is Six Sigma?.............................................................................................. 52
15.3 Mathematical Interpretation ................................................................................ 52
15.4 Zero Defects......................................................................................................... 54
15.5 Basic tools of Six Sigma Check Sheets ............................................................... 55

16. DMAIC and DMADV Approach ..................................................................... 56

16.1 DMAIC ................................................................................................................ 56
16.2 DFSS .................................................................................................................... 58
17. Supply Chain Risk Management ..................................................................... 58
18. Sustainable Supply Chain ................................................................................. 59
18.1 Why a 'sustainable supply chain?' ....................................................................... 60
19. Blockchain .......................................................................................................... 60
19.1 Blockchain Offerings ........................................................................................... 61
19.2 Blockchain Applications...................................................................................... 62
20. Cold Chain for Covid Vaccine.......................................................................... 62
21. Impact of Covid on Supply Chain .................................................................... 64
22. Impact of Farm Bills 2020 on Agriculture Supply Chain.............................. 66
23. Internet of Things in Operations/Supply Chain ............................................. 67
24. Questions to ponder upon ................................................................................. 68

1. Operations Basics
Operations management involves planning, organizing, and supervising processes, and
making necessary improvements for higher profitability. The adjustments in the
everyday operations have to support the company’s strategic goals, so they are preceded
by deep analysis and measurement of the current processes.
Operations management was previously called production management, clearly
showing its origins in manufacturing. Still, it was not until Henry Ford took a twist on
manufacturing with his famous assembly line concept, otherwise known as “bring work
to men,” that the management of production for improving productivity became a hot
topic.
As the economies in the developed world were gradually shifting to be service-based,
all the corporate functions, including product management, started to integrate them.
The service side also began its approach by applying product management principles to
the planning and organizing of processes, to the point where it made more sense to call
it operations management.
Operations management is now a multidisciplinary functional area in a company, along
with finance and marketing. It makes sure the materials and labour, or any other input,
are used in the most effective and efficient way possible within an organization – thus
maximizing the output.
Operations management requires being familiar with a wide range of disciplines. It
incorporates general management, factory- and equipment maintenance management by
tradition. The operations manager has to know about the common strategic policies,
basic material planning, manufacturing and production systems, and their analysis.
Production and cost control principles are also of importance. And last, but not least, it
has to be someone who is able to navigate industrial labour relations.
1.1 Production Planning
Manufacturing is complex. Some firms make a few different products, whereas others
make many products. A good planning system must answer four questions:
• What are we going to make?

• What does it take to make it?
• What do we have?
• What do we need?
There are five major levels in the manufacturing planning and control (MPC) system:
• Strategic business plan.

• Production plan (sales and operations plan).

• Master production schedule.
• Material requirements plan.
• Purchasing and production activity control.
Since each level is for a different time span and for different purposes, each differs in
the following:
• Purpose of the plan.
• Planning horizon—the time span from now to sometime in the future for which
the plan is created.
• Level of detail—the detail about products required for the plan.
• Planning cycle—the frequency with which the plan is reviewed.
Production Plan
Given the objectives set by the strategic business plan, production management is
concerned with the following:
• The quantities of each product group that must be produced in each period. The
desired inventory levels.
• The resources of equipment, labor, and material needed in each period The
availability of the resources needed. The level of detail is not high.
For example, if a company manufactures children’s bicycles, tricycles, and scooters in

various models, each with many options, the production plan will show major product
groups, or families: bicycles, tricycles, and scooters. The planning horizon is usually 6
to 18 months and is reviewed perhaps each month or quarter.
Master Production Schedule
The master production schedule (MPS) is a plan to produce individual end items. It
breaks down the production plan to show, for each period, the quantity of each end item
to be made.
For example, it might show that 200 Model A23 scooters are to be built each week.
Inputs to the MPS are the production plan, the forecast for individual end items, sales
orders, inventories, and existing capacity.
The level of detail for the MPS is higher than for the production plan. Whereas the
production plan was based upon families of products (tricycles), the master production
schedule is developed for individual end items (each model of tricycle). The planning

horizon usually extends from 3 to 18 months but primarily depends on the purchasing
and manufacturing lead times.
Fig. Production Plan
Material Requirements Plan
The material requirements plan (MRP) is a plan for the production and purchase of the
components used in making the items in the master production schedule. It shows the
quantities needed and when manufacturing intends to make or use them. The level of
detail is high. As with the master production schedule, it usually extends from 3 to 18
months.
Bills of Material
The Association for Operations Management defines a bill of material (BOM) as “a

listing of all the subassemblies, intermediates, parts, and raw materials that go into
making the parent assembly showing the quantities of each required to make an
assembly.”
Fig. A simplified BOM

Purchasing and Production Activity Control
The time comes when plans must be put into action. Production activity control (PAC)
is responsible for executing the master production schedule and the material
requirements plan. At the same time, it must make good use of labor and machines,
minimize work-in- process inventory, and maintain customer service. The material
requirements plan authorizes PAC to manage day-to-day activity and provide the
necessary support.
The planning horizon is very short, perhaps from a day to a month. The level of detail is
high since it is concerned with individual components, workstations, and orders. Plans
are reviewed and revised daily.
Fig. Overview of production planning
1.2 MRP II – Manufacturing Resource Planning
Manufacturing Resource Planning (MRP II) is an integrated information system used by

businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials
Requirement Planning (MRP) systems by including the integration of additional data,
financial planning in dollars and labor requirements. MRP II provides coordination
between marketing and production. Marketing, finance, and production agree on a total
workable plan expressed in the production plan. Marketing and production must work
together on a weekly and daily basis to adjust the plan as changes occur. Order sizes
may need to be changed, orders canceled, and delivery dates adjusted.
It is made up of a variety of processes, each linked together: business planning,
production planning (sales and operations planning), master production scheduling,
material requirements planning and capacity requirements planning. The system is
designed to centralize, integrate, and process information for effective decision making
in scheduling, design engineering, inventory management and cost control in
manufacturing.

2. Inventory Management
Inventory refers to the materials in stock. It is also called the idle resource of an
enterprise. Inventories represent those items which are Either stocked for sale or they
are in the process of manufacturing or they are in the form of materials, which are yet to
be utilized.
Inventory management refers to the process of ordering, storing, using, and selling a
company's inventory. This includes the management of raw materials, components, and
finished products, as well as warehousing and processing of such items.
Appropriate inventory management strategies vary depending on the industry. An oil
depot is able to store large amounts of inventory for extended periods, allowing it to
wait for demand to pick up. While storing oil is expensive and risky—a fire in the UK
in 2005 led to millions of pounds in damage and fines—there is no risk that the
inventory will spoil or go out of style. For businesses dealing in perishable goods or
products for which demand is extremely time-sensitive—2021 calendars or fast-fashion
items, for example—sitting on inventory is not an option, and misjudging the timing or
quantities of orders can be costly.
2.1 Why to keep inventory?
• To stabilize production: The demand for an item fluctuates because of a number

of factors, e.g., seasonality, production schedule etc. The inventory is kept to take
care of this fluctuation so that the production is smooth.
• To meet the demand during the replenishment period: The lead time for
procurement of materials depends upon many factors like location of the source,
demand supply condition, etc. So inventory is maintained to meet the demand
during the procurement (replenishment) period.
• To take advantage of price discounts: Usually the manufacturers offer
discounts for bulk buying and to gain this price advantage the materials are
bought in bulk even though it is not required immediately. Thus, inventory is
maintained to gain economy in purchasing.
• To prevent loss of orders (sales): In this competitive scenario, one has to meet
the delivery schedules at 100 percent service level, which means they cannot
afford to miss the delivery schedule which may result in loss of sales. To avoid
this, organizations have to maintain inventory.
2.2 What is Inventory Control?
Inventory control is a planned approach of determining what to order, when to order

and how much to order and how much to stock so that costs associated with buying and
storing are optimal without interrupting production and sales. Inventory control
basically deals with two problems:

• When should an order be placed? (Order level), and

• How much should be ordered? (Order quantity)
2.3 What are the benefits of Inventory Control?
There are numerous benefits of Inventory Control. Few among those are:
• Improvement in customer’s relationship because of the timely delivery of goods

and service
• Smooth and uninterrupted production and, hence, no stock out.
• Efficient utilization of working capital. Helps in minimizing loss due to
deterioration, obsolescence damage and pilferage
• Economy in purchasing
• Eliminates the possibility of duplicate ordering
2.4 Various techniques of Inventory Control
In any organization, depending on the type of business, inventory is maintained. The

control can be for order quality and order frequency. Various prominent techniques
used are:
Always Better Control (ABC) Analysis

This technique divides inventory into three categories A, B & C based on their annual
consumption value. It is also known as Selective Inventory Control Method (SIM). This
method is a means of categorizing inventory items according to the potential amount to
be controlled. ABC analysis has universal application for fields requiring selective
control.
There is no fixed threshold for each class, different proportion can be applied based on
objective and criteria. ABC Analysis is like the Pareto principle in that the 'A' items will
typically account for a large proportion of the overall value but a small percentage of
number of items.
Example of ABC class

‘A’ item – 20% of the item accounts for 70% of the annual consumption value of the
items. ‘B’ items -30% of the item accounts for 25% of the annual consumption value of
the items.
‘C’ item -50% of the item accounts for 5% of the annual consumption value of the Items

Fig. ABC Categorization
Advantages of ABC Analysis

• Helps to exercise selective control Gives rewarding results quickly
• Helps to point out obsolete stocks easily.
• In case of “A” items careful attention can be paid at every step such as an
estimate of requirements, purchase, safety stock, receipts, inspections, issues, etc.
& close control is maintained.
• In case of “C” items, recording & follow-up, etc. may be dispensed with or
combined. Helps better planning of inventory control
• Provides a sound basis for allocation of funds & human resources
Disadvantages of ABC Analysis
• Proper standardization & codification of inventory items are needed.

• Considers only money value of items & neglects the importance of items for the
production process or assembly or functioning.
• The Periodic review becomes difficult if only ABC analysis is recalled.
• When other important factors make it obligatory to concentrate on “C” items
more, the purpose of ABC analysis is defeated

VED Classification
VED stands for Vital, Essential & Desirable classification. VED classification is based
on the criticality of the inventories.
• Vital items – Its shortage may cause havoc & stop the work in the organization.
They are stocked adequately to ensure smooth operation.
• Essential items -Here, reasonable risk can be taken. If not available, the plant
does not stop; but the efficiency of operations is adversely affected due to
expediting expenses. They should be sufficiently stocked to ensure regular flow
of work.
• Desirable items – Its non-availability does not stop the work because they can be
easily purchased from the market as & when needed. They may be stocked very
low or not stocked.
It is useful in capital-intensive industries, transport industries, etc. VED analysis can be

better used with ABC analysis in the following pattern:
FSN Analysis
FSN: Fast moving, slow moving & non moving

FSN is one of the inventory management techniques and it is about segregating products
based on their consumption rate, quantity, and the rate at which the inventory is used.
Fast-moving inventory, as the name suggests, comprises the stock that moves quickly
and needs to be replenished very often. Generally, the stock that lies in this category has
an inventory turnover ratio of more than 3 and constitutes around 10-15% of the total
inventory.
Slow-moving inventory is the inventory that crawls slowly through the supply chain and
has an inventory turnover ratio between 1-3. It is generally 30-35% of the total stock.
The inventory that rarely moves with the inventory turnover ratio below 1 and makes
60-65% of the total stock is called the Non-moving inventory.

What is EOQ? How it is calculated?
Economic order quantity (EOQ) is the size of the order which gives maximum economy
in purchasing any material and ultimately contributes towards maintaining the materials
at the optimum level and at the minimum cost.
In other words, the economic order quantity (EOQ) is the amount of inventory to be
ordered at one time for purposes of minimizing annual inventory cost.
The quantity to order at a given time must be determined by balancing two factors:
• The cost of possessing or carrying materials and
• The cost of acquiring or ordering materials.
Purchasing larger quantities may decrease the unit cost of acquisition, but this saving
may not be more than offset by the cost of carrying materials in stock for a longer
period of time.
The carrying cost of inventory may include:

• Interest on investment of working capital
• Property tax and insurance
• Storage cost, handling cost
• Deterioration and shrinkage of stocks Obsolescence of stocks
Formula of Economic Order Quantity (EOQ):
𝐸𝑂𝑄 = √2𝐶𝑂/𝑆
Where:
C = Annual consumption of the material
O = Ordering cost per order
S = Annual storage cost per unit
3. Process Analysis Terms
Process Analysis can be understood as the rational breakdown of the production process
into different phases, that turn input into output. It refers to the full-fledged analysis of
the business process, which incorporates a series of logically linked routine activities,
that uses the resources of the organization, to transform an object, with the aim of
achieving and maintaining the process excellence.

Process Capacity:
The capacity of the process is its maximum output rate, measured in units produced per
unit time. The capacity of the series of tasks is determined by the lowest capacity in the
string. Whereas the capacity of the parallel strings of tasks is the sum of the capacities
of the two strings, except for the cases in which the two strings have different outputs
that are combined. In such cases, the capacity of two parallel strings of tasks is that of
the lowest capacity parallel string.
Capacity Utilization:
The percentage of the process capacity that is actually being used
Takt Time:
Takt time is the rate at which you need to complete the production process to meet the
customer demand.
Net production time = Time available for production (till the delivery to the customer)
Customer Demand = Order placed by the customer
NOTE: Takt time is customer demand based and cannot be measured by a stopwatch.
Let us break this calculation down a little further:
Available production time - for the purposes of this definition, we assume the
electronics manufacturer operates an 8-hour shift, 5 days a week. 8 hours x 60 minutes
equates to 480 total minutes. Assuming there are 2 x 10-minute tea breaks, 30 minutes
for lunch and another 20 minutes in total consumed at the start and end of each day for
miscellaneous activities, the "available" production time is in fact 410 minutes.
Customer demand - this relates to the number of units the customer requires each day.
We will assume it is 100 per day for this definition
Takt time - if we take our available production time (410 minutes) and divide that by
our customer demand (100), the takt time equates to 4.1 minutes or 246 seconds. This
means a completed unit must be finished every 246 seconds or there is a danger the
electronics manufacturer will not meet their customer's demand.

Cycle Time
The time between the completion of two discrete units of production.
NOTE: Cycle time is work process based and can be measured using a stopwatch.
It is the time between successive units as they are output from the process. In other
words, a cycle time of the process is equal to the longest task cycle time, when the
production of an item requires various units to be produced in succession and each unit
has a different cycle time.
Lead Time
Lead time is the time it takes for one unit to make its way through your operation from
front to end (i.e. from taking an order to receiving payment). In other words, time
taken between product to be ordered by customer and customer receiving the product.
Throughput Time
Throughput Time is a measure of the time required for a material, part or sub-assembly
to pass through a manufacturing process following the release of an order to dispatch of
the product.
Throughput Time includes the following time intervals:

• Processing time: This is the time spent transforming raw materials into finished
goods.
• Inspection time: This is the time spent inspecting raw materials, work-in-process
and finished goods, possibly at multiple stages of the production process.
• Move time: This is the time required to move items into and out of the
manufacturing area, as well as between workstations within the production area.
• Queue time: This is the time spent waiting prior to the processing, inspection and
move activities.
Idle Time
The time when no activity is being performed. For example, when an activity is waiting
for a work to arrive from the previous activity. The term can be used to describe both
machine idle time and worker idle time.
Changeover Time
It is the time taken to modify the production line for different products or new batches
of the same product. Setup and changeover are sometimes used interchangeably. Setup

is viewed as a component of changeover that is focused on configuring a machine for a

different product type. Both setup and changeover are non-value-added operations and
so should be minimized as much as possible. It is recommended to use the term
‘changeover’ when talking about switching between products, and ‘setup’ when
focusing on what is going on with the machine or process.
Buffer
In manufacturing, the concept of buffering is defined as maintaining enough supplies to
keep operations running smoothly. These supplies often include the raw materials
needed for production, and also the inventories of finished products waiting for
shipment. For example, a manufacturer will want to keep enough raw materials
inventory to tide it over in case its supplier is unable to deliver its shipments on time.
4. Forecasting
Forecasting is the process of making predictions of the future based on past and present
data and analysis of trends.
4.1 Types of Forecasting
Qualitative methods: These types of forecasting methods are based on judgments,

opinions, intuition, emotions, or personal experiences and are subjective in nature. They
do not rely on any rigorous mathematical computations.
Quantitative methods: These types of forecasting methods are based on mathematical

(quantitative) models and are objective in nature. They rely heavily on mathematical
computations.
4.2 Types of Qualitative Methods of forecasting
Four of the better-known qualitative forecasting methods are executive opinions, the
Delphi method, sales-force polling, and consumer surveys:
Executive Opinions
The subjective views of executives or experts from sales, production, finance,

purchasing, and administration are averaged to generate a forecast about future sales.
Usually, this method is used in conjunction with some quantitative methods, such as
trend extrapolation. The management team modifies the resulting forecast, based on
their expectations.
Advantages: The forecasting is done quickly and easily, without the need of elaborate
statistics. Also, the jury of executive opinions may be the only means of forecasting

feasible in the absence of adequate data.

Disadvantages: This, however, is that of groupthink. This is a set of problems inherent
to those who meet as a group. Foremost among these are high cohesiveness, strong
leadership, and insulation of the group. With high cohesiveness, the group becomes
increasingly conforming through group pressure that helps stifle dissension and critical
thought. Strong leadership fosters group pressure for unanimous opinion. Insulation of
the group tends to separate the group from outside opinions, if given.
Delphi Method
This is a group technique in which a panel of experts is questioned individually about

their perceptions of future events. The experts do not meet as a group, in order to reduce
the possibility that consensus is reached because of dominant personality factors.
Instead, the forecasts and accompanying arguments are summarized by an outside party
and returned to the experts along with further questions. This continues until a
consensus is reached.
Advantages: This type of method is useful and quite effective for long-range
forecasting. The technique is done by questionnaire format and eliminates the
disadvantages of group thinking. There is no committee or debate. The experts are not
influenced by peer pressure to forecast a certain way, as the answer is not intended to be
reached by consensus or unanimity.
Disadvantages: Low reliability is cited as the main disadvantage of the Delphi method,
as well as lack of consensus from the returns.
Sales Force Polling
Some companies use as a forecast source salespeople who have continual contact with
customers. They believe that the salespeople who are closest to the ultimate customers
may have significant insights regarding the state of the future market. Forecasts based
on sales force polling may be averaged to develop a future forecast. Or they may be
used to modify other quantitative and/or qualitative forecasts that have been generated
internally in the company.
Advantages: It is simple to use and understand. It uses the specialized knowledge of
those closest to the action. It can place responsibility for attaining the forecast in the
hands of those who most affect the actual results. The information can be broken down
easily by territory, product, customer, or salesperson.
Disadvantages: Salespeople are overly optimistic or pessimistic regarding their
predictions and inaccuracies due to broader economic events that are largely beyond
their control.

Consumer Surveys methods:

es of associative
Regression and
Some companies conduct their own market surveys regarding specific consumer
Correlation
purchases. SurveysAnalysis
may consist of telephone contacts, personal interviews, or
questionnaires as a means of obtaining data. Extensive statistical analysis usually is
Using
appliedRegression Analysis
to survey results to Forecasting
test hypotheses regarding consumer behavior.
4.3 Types
Standard ErrorofofQuantitative
the EstimateMethods of forecasting
Correlation Coefficients
There are two for Regression
types of quantitative forecasting:
Lines Multiple-Regression Analysis
Time Series
The objective of the time series methods is to discover the pattern in the past values of a
variable. Assuming that the historical pattern will continue, this method extrapolates it
into the future and use it to predict future values of the variable of interest.
Advantage: Require historical data of one variable only; useful when historical data
pattern does not change
Disadvantage: It cannot evaluate the impact of changes in other variables
Types of Time series model:

• Naive Approach
• Moving Averages
• Exponential Smoothing
• Exponential Smoothing with Trend Adjustment
• Trend Projections
• Seasonal variations in data
• Cyclical variations in data
Associative (Casual Method)
Make use of the relationship between the variable to be forecast and the other variables
that explain its variation to do the forecast.
Advantage It can evaluate the impact of changes in other variables.
Disadvantages: It is difficult to identify other variables. Require historical data on all
variables of the model. Depends on the future values of the other variables.
Types of associative methods:

• Regression and Correlation Analysis
• Using Regression Analysis for Forecasting

• Standard Error of the Estimate

• Correlation Coefficients for Regression Lines
• Multiple-Regression Analysis
Exponential Smoothing
• It is a form of weighted moving average.

• Weights decline exponentially
• Most recent data weighted most Requires smoothing constant (α) Ranges from 0
to 1
• Subjectively chosen
• Involves little record keeping of past data
New forecast = Last period’s forecast + α*(Last period’s actual demand – Last
period’s forecast)
𝐹𝑡 = 𝐹𝑡−1 + 𝛼 (𝐴𝑡−1 − 𝐹𝑡−1)
where 𝐹𝑡 = new forecast
𝐹𝑡−1 = previous forecast
α = smoothing (or weighting) constant (0 ≤ α ≤ 1) When α=1 it becomes Naïve
approach
𝐹𝑡 = 𝐴𝑡−1
Difference between Trend and Seasonal and Cyclical Variations
Time Series Components:
Trend:
• Persistent, overall upward or downward pattern
• Changes due to population, technology, age, culture, etc.
• Typically, several years duration
Cyclical:
• Repeating up and down movements
• Affected by business cycle, political, and economic factors

• Multiple years duration

• Often causal or associative relationships
Seasonal:
• Regular pattern of up and down fluctuations
• Due to weather, customs, etc.
• Occurs within a single year
Random:
• Erratic, unsystematic, ‘residual’
• Fluctuations due to random variation or unforeseen events
• Short duration and nonrepeating
Least Square Method

Least-squares method is the approach which results in a straight line that minimizes the
sum of the squares of the vertical differences or deviations from the line to each of the
actual observations.
A least-squares line is described in terms of its y-intercept (the height at which it
intercepts the y-axis) and its expected change (slope). If we can compute they-intercept
and slope, we can express the line with the following equation:
y= a + bx
where y = computed value of the variable to be predicted (called the dependent

variable) a
= y-axis intercept
b = slope of the regression line (or the rate of change in y for given changes in x) x =the
independent variable (which in this case is time)
This method is used in linear regression forecasting technique.

Coefficient of Correlation and Coefficient of determination
Coefficient of Correlation (𝑟): is the degree of relationship between two variables say
x and y. It can go between -1 and 1. 1 indicates that the two variables are moving in
unison. They rise and fall together and have perfect correlation. -1 means that the two
variables are in perfect opposites. One goes up and other goes down, in perfect negative
way. Any two variables in this universe can be argued to have a correlation value. If
they are not correlated, then the correlation value can still be computed which would be
0. The correlation value always lies between -1 and 1 (going thru 0 – which means no
correlation at all – perfectly not related). Correlation can be rightfully explained for
simple linear regression – because you only have one x and one y variable.
Coefficient of Determination (𝑟2): It is simply the square of the sample correlation

coefficient. It indicates the proportion of the variance in the dependent variable that is
predictable from the independent variable.
Tracking Signal
A tracking signal is a measure1nent of how well a forecast is predicting actual values.

As forecasts are updated every week, month, or quarter, the newly available demand
data are pared to the forecast values.
The tracking signal is computed as the correlative error divided by the mean absolute
deviation (MAD): Tracking signal = Cumulative error/MAD
Positive tracking signals indicate that demand is greater than forecast. Negative signals
mean that demand is less than forecast. A good tracking signal-that is, one with a low
cumulative error-has about as much positive error as it has negative error. In other
words, small deviations are okay, but positive and negative errors should balance one
another so that the tracking signal centers closely around zero. A consistent tendency for
forecasts to be greater or less than the actual values (that is, for a high absolute
cumulative error) is called a bias error. Bias can occur if, for example, the wrong
variables or trend line are used or if a seasonal index is misapplied.
5. Project Management
A project is a temporary endeavor undertaken to create a unique product, service, or
result. Temporary indicates that it has a definite beginning and end. Projects involve
doing something that has not been done before and is therefore unique. Outcome of the
project can be tangible or intangible.
Project Management is the application of Knowledge, Skills, Tools and Techniques to
Project activities to meet Project requirements.

5.1 Float/Slack
In project management, float or slack is the amount of time that a task in a project
network can be delayed without causing a delay to:
Subsequent tasks (free float): Free Float is the amount of time that an activity can be
delayed without delaying the early start date of any successor activity.
Project completion date (total float): Total Float is the amount of time that an activity
can be delayed from its early start date without delaying the project finish date.
A Float is a key piece of the critical path method (CPM), a system used by project
managers to efficiently schedule project activities. A critical path may have 'unused
time' expressed as a total float. For example, a project to measure seasonal variation in
sunrise would take a one-minute measurement every day, followed by 23 hours and 59
minutes of total float. Sunrise is on the critical path and there is no way to schedule
around it. Total float is associated with the path. If a project network chart/diagram has
4 non-critical paths then that project would have 4 total float values. The total float of a
path is the combined free float values of all activities in a path.
Fig. Float Calculation

There are 3 paths ACE, BCE & BDE. ACE will be the critical path with a total float 0
and the critical path length 18.
Activities A, C & E will be having even free float 0 (no kind of float/flexibility for
critical path activities)
Total float for B is 1 (LF-EF OR LS-ES) & activity D is 6.
Out of B & D which activity can have free float? Activity B is not satisfying the free
float definition. i.e., B can be delayed w.r.t C (6-4-1=1) but not w.r.t D (5-4- 1=0). So, if
“ANY” part of the definition is not satisfying i.e. B can’t be delayed without impacting
ANY successor of it.
Free float for activity D = 14-7-1 = 6. This activity satisfies the definition along with
point 4 and there is no dependency/constraint in example which can hinder activity D
having flexibility.

5.2 Project Management Methodologies
Psychologist David McClelland's acquired-needs theory divides employee needs into

three. Achievement, affinity, and power are the three categories.
Waterfall Model of Project Management
The original Waterfall method, as developed by Royce. The steps include Requirements
Determination, Design, Implementation, Verification, and Maintenance. Other models
change the Requirements phase into the Idea phase (or break the Requirements phase
out into Planning and Analysis. Furthermore, some models further break the Design
phase out into Logical and Physical Design sub-phase, however, the basic underlying
principles remain the same.
Fig. Waterfall Model
The Waterfall method assumes that all requirements can be gathered upfront during the
Requirements phase. Communication with the user is front-loaded into this phase, as
the Project Manager does his or her best to get a detailed understanding of the user's
requirements. Once this stage is complete, the process runs "downhill".
The Design phase is best described by breaking it up into Logical Design and Physical
Design sub-phases. During the Logical Design phase, the system's analysts make use of
the information collected in the Requirements phase to design the system independently
of any hardware or software system. Once the higher-level Logical Design is complete,
the systems analyst then begins transforming it into a Physical Design dependent on the
specifications of specific hardware and software technologies.
The Implementation phase is when all of the actual code is written. Phase belongs to
the programmers in the Waterfall method, as they take the project requirements and

specifications, and code the applications.

The Verification phase was originally called for to ensure that the project is meeting
customer expectations. However, under real-world analysis and design, this stage is
often ignored. The project is rolled out to the customer, and the Maintenance phase
begins.
During the Maintenance phase, the customer is using the developed application. As
problems are found due to improper requirements determination or other mistakes in the
design process, or due to changes in the users' requirements, changes are made to the
system during this phase.
The Waterfall method does have certain advantages, including:
• Design errors are captured before any software is written saving time during the
implementation phase.
• Excellent technical documentation is part of the deliverables and it is easier for
new programmers to get up to speed during the maintenance phase.
• The approach is very structured and it is easier to measure progress by reference
to clearly defined milestones.
• The total cost of the project can be accurately estimated after the requirements
have been defined (via the functional and user interface specifications).
• Testing is easier as it can be done by reference to the scenarios defined in the
functional specification.
Unfortunately, the Waterfall method carries with it quite a few disadvantages, such as:
• Clients will often find it difficult to state their requirements at the abstract level
of a functional specification and will only fully appreciate what is needed when
the application is delivered. It then becomes very difficult (and expensive) to re-
engineer the application.
• The model does not cater to the possibility of requirements changing during the
development cycle.
• A project can often take substantially longer to deliver than when developed
with an iterative methodology such as the agile development method.
Agile Project Management
Agile Project Management is one of the revolutionary methods introduced for the
practice of project management. This is one of the latest project management strategies
that is mainly applied to project management practice in software development.
Therefore, it is best to relate agile project management to the software development
process when understanding it.
From the inception of software development as a business, there have been several

processes following, such as the waterfall model. With the advancement of software
development, technologies and business requirements, the traditional models are not
robust enough to cater the demands. Therefore, more flexible software development
models were required to address the agility of the requirements. As a result of this, the
information technology community developed agile software development models.
'Agile' is an umbrella term used for identifying various models used for agile
development, such as Scrum. Since agile development model is different from
conventional models, agile project management is a specialized area in project
management.
The Agile Process
It is required for one to have a good understanding of the agile development process to
understand agile project management.
There are many differences in agile development model when compared to traditional
models:
The agile model emphasizes the fact that the entire team should be a tightly integrated
unit. This includes the developers, quality assurance, project management, and the
customer.
Frequent communication is one of the key factors that make this integration possible.
Therefore, daily meetings are held in order to determine the day's work and
dependencies.
Deliveries are short-term. Usually, a delivery cycle ranges from one week to four weeks.
These are commonly known as sprints.
Agile project teams follow open communication techniques and tools which enable the
team members (including the customer) to express their views and feedback openly and
quickly. These comments are then taken into consideration when shaping the
requirements and implementation of the software.
Scope of Agile Project Management
In an agile project, the entire team is responsible for managing the team and it is not just
the project manager's responsibility. When it comes to processes and procedures, the
common sense is used over the written policies.
This makes sure that there is no delay in management decision making and therefore
things can progress faster. In addition to being a manager, the agile project management
function should also demonstrate the leadership and skills in motivating others. This
helps retain the spirit among the team members and gets the team to follow discipline.
The Agile project manager is not the 'boss' of the software development team. Rather,
this function facilitates and coordinates the activities and resources required for quality
and speedy software development.

Responsibilities of an Agile Project Manager
The responsibilities of an agile project management function are given below. From one
project to another, these responsibilities can slightly change and are interpreted
differently.
Responsible for maintaining the agile values and practices in the project team. The agile
project manager removes impediments as the core function of the role.
Helps the project team members to turn the requirements backlog into working software
functionality.
Facilitates and encourages effective and open communication within the team.
Responsible for holding agile meetings that discuss the short-term plans and plan to
overcome obstacles.
Enhances the tool and practices used in the development process.
The agile project manager is the chief motivator of the team and plays the mentor role
for the team members as well.
6. Supply Chain Management
Supply chain management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management
activities. Importantly, it also includes coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third-party service providers, and
customers.
The supply Chain Management thus integrates all the processes that are involved in the
manufacture to the distribution of the goods. It is therefore a cross-functional approach
that includes the movement of raw materials into an organization and their processing,
certain aspects of the internal processing of materials into finished goods, and the
movement of these finished goods out of the business and towards the final consumer,

hence the definition.

Ex. A car manufacturer has a supply chain which begins from mining of the metals, the
mined metals are processed by the same or different company. Then the conversion of
the metal to usable form (sheet, rods) may be done by a third party. Later the sheet
metal is consumed by Car Company to build cars and purchased by common man. If we
evaluate each step, it will be evident that there is a supplier, some sort of processing and
a consumer. It includes all of the logistics management activities noted above, as well as
manufacturing operations, and it drives coordination of processes and activities with and
across marketing, sales, product design, finance, and information technology.
Fig. How a Supply chain Design of Product Industry looks like
It includes all of the logistics management activities noted above, as well as

manufacturing operations, and it drives coordination of processes and activities with and
across marketing, sales, product design, finance, and information technology.
6.1 Why Supply Chain?
In this age of competition where companies are trying their level best to improve their
efficiency to minimize the cost, supply chain plays a very vital role. Supply and
logistics related costs account for about 20-25% of a typical firm’s total cost.
Supply Chain Management broadly tries to address four issues involving the following
which are namely-

• Distribution Network Management- This involves the management of the

various production facilities and warehouses along with distribution centers. This
is very vital because all organizations tend to have numerous suppliers and
distributors along with storage facilities and the integration of all these is
extremely essential.
• Distribution Channels- This involves the various strategies employed and
involves methods such as cross docking, direct shipment, pull or push strategies,
third party logistics etc. The various distribution channels are encompassed under
this method.
• Information Channels- This involves the integration of the various systems and
processes in the supply chain for sharing valuable information and also involves
predicting demand, forecasts, inventory and transportation.
• Inventory Management- This process involves managing the quantity and
location of inventory including raw material, work-in-process and finished goods
from service providers to consumers.
The Supply Chain Management thus tries to integrate the various processes so as to
improve their efficacy as a whole. Supply Chain Management has three levels of
activities that different parts of the company will focus on:
• Strategic: At this level, company management will be looking at high level

strategic decisions concerning the whole organization, such as the size and
location of manufacturing sites, partnerships with suppliers, products to be
manufactured and sales markets.
• Tactical: Tactical decisions focus on adopting measures that will produce cost
benefits such as using industry best practices, developing a purchasing strategy
with favored suppliers, working with logistics companies to develop cost
effective transportation, and developing warehouse strategies to reduce the cost of
storing inventory.
• Operational: Decisions at this level are made each day in businesses that affect
how the products move along the supply chain. Operational decisions involve
making schedule changes to production, purchasing agreements with suppliers,
taking orders from customers and moving products in the warehouse.
6.2 What are various activities of Supply Chain Manager?
It involves the daily planning, production and scheduling of the various processes so as
to improve their efficacy.

Another function of supply chain manager is demand planning and forecasting,

coordinating the demand forecast of all customers and sharing the forecast with all
suppliers. This helps both the suppliers and the producers be aware of the exact
requirements and hence prepare accordingly so as to minimize the inventory storage
costs.
Inbound operations and outbound operations where the inbound operations involve the
transportation from suppliers and receipt of inventory and the outbound operations
involve transportation to customers.
Based on the movement of products and services the supply chain can be divided into
three major portions-
• Product Flow- This involves all the movement of goods from raw materials to
finished goods.
• Information Flow-This involves the flow of information throughout the supply
chain which is extremely essential and broadly includes the transmitting of
orders, updating the status of delivery etc.
• Finance Flow-The financial flow is extremely important in the supply chain and
consists of credit terms, payment schedules, and consignment and title ownership
arrangements.
6.3 What are various elements of the Supply Chain?
A simple supply chain is made up of several elements that are linked by the movement
of products alongside. The supply chain starts and ends with the customer.
• Customer: The customer starts the chain of events when they decide to purchase
a product that has been offered for sale by a company. The customer contacts the
sales department of the company, which enters the sales order for a specific
quantity to be delivered on a specific date. If the product has to be manufactured,
the sales order will include a requirement that needs to be fulfilled by the
production facility.
• Planning: The requirement triggered by the customer’s sales order will be
combined with other orders. The planning department will create a production
plan to produce the products to fulfill the customer’s orders. To manufacture the
products the company will then have to purchase the raw materials needed.
• Purchasing: The purchasing department receives a list of raw materials and
services required by the production department to complete the customer’s
orders. The purchasing department sends purchase orders to selected suppliers to
deliver the necessary raw materials to the manufacturing site on the required date.

• Inventory: The raw materials are received from the suppliers, checked for quality
and accuracy and moved into the warehouse. The supplier will then send an
invoice to the company for the items they delivered. The raw materials are stored
until they are required by the production department.
• Production: Based on a production plan, the raw materials are moved from
inventory to the production area. The finished products ordered by the customer
are manufactured using the raw materials purchased from suppliers. After the
items have been completed and tested, they are stored back in the warehouse
prior to delivery to the customer.
• Transportation: When the finished product arrives in the warehouse, the
shipping department determines the most efficient method to ship the products so
that they are delivered on or before the date specified by the customer. When the
goods are received by the customer, the company will send an invoice for the
delivered products.
To ensure that the supply chain is operating as efficiently as possible and generates the
highest level of customer satisfaction at the lowest possible cost, companies adopt
Supply Chain Management processes and associated technology.
6.4 Challenges in Supply Chain Management
Globalization of manufacturing operation

With the globalization of manufacturing operations, having a global procurement
network that can support and react to your supply chain needs is important. According
to many chief procurement officers, selecting a strategic supplier that provides
manufacturing locations with consistent global quality and a reliable local service, is a
challenge.
Safety and quality products

The pressure on manufacturers to produce high-quality products that are safe is an
increasing challenge. The number of product recall cases is growing each day. It can
damage a company’s reputation and is expensive to its bottom line. Manufacturers have
to meet a lot of standards and compliance norms.
Shorter lead time, less inventory and better throughput

With shorter product life cycles and changing market demands, companies are forced to
embark on a lean journey. It is important to note that the supply strategies in a lean
environment support the operations strategy. The challenge is always to find not just a
lean concept, but a working lean solution.

Supplier base consolidation

Consolidation of the supplier base can bring many advantages. It eliminates supply base
variances and overheads, especially in the supply of critical parts. The challenge is to
find a supplier with solutions and experience in supplier-based consolidation processes.
Fig, Supplier Base Consolidation
Complexity of supply chains

Serving many different customers with a wide variety of products and services may
result in a complex, global, network of suppliers, factories, warehouses, transporters,
customers and others. The complexity of such a network is hard to unravel and makes it
difficult to find where and why problems occur.
Finding and holding on to Supply Chain talent

Although supply chain management is now a generally accepted and understood
function in a company, it is difficult to find true supply chain talent. Supply chain
management covers multiple disciplines, and it can therefore be difficult to find that all-
round supply chain person
Customer Preferences
As stated above, global supply chains are complex. Add to that product features that are
constantly changing, and the challenge is even greater. A product is released and
customers rapidly pressure companies to come up with the next big thing. Innovation is
important since it allows companies to stay competitive in the market, but it‘s also a
challenge. To enhance a product, companies must redesign their supply network and
meet market demand in a way that’s transparent for customers.
Market Growth
Another factor that presents a challenge is the pursuit of new customers. The cost of a
developing a product, from R&D to product introduction, is significant. Therefore,
companies are trying to expand their distribution to emerging markets to grow revenues

and increase market share. Companies all around the world are expected to expand in
their home and foreign markets. The introduction to new markets is difficult due to
trading policies, fees, and government policies.
7. Value Chain
A value chain is a set of activities that a firm operating in a specific industry performs in
order to deliver a valuable product or service for the market. The activity of a diamond
cutter can illustrate the difference between cost and the value chain. The cutting activity
may have a low cost, but the activity adds much of the value to the end product, since a
rough diamond is significantly less valuable than a cut diamond.
Rather than looking at departments or accounting cost types, Porter's Value Chain
focuses on systems, and how inputs are changed into the outputs purchased by
consumers. Using this viewpoint, Porter described a chain of activities common to all
businesses, and he divided them into primary and support activities. Look at the below
figure for Value chain analysis.
Fig. Value Chain Analysis

Primary Activities:
• Inbound Logistics: arranging the inbound movement of materials, parts, and/or

finished inventory from suppliers to manufacturing or assembly plants,
warehouses, or retail stores
• Operations: concerned with managing the process that converts inputs (in the
forms of raw materials, labor, and energy) into outputs (in the form of goods
and/or services)
• Outbound Logistics: is the process related to the storage and movement of the
final product and the related information flow from the end of the production line
to the end user.
• Marketing and Sales: selling a product or service and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.
• Service: Includes all the activities required to keep the product/service working
effectively for the buyer after it is sold and delivered.
Support/Secondary activities
• Infrastructure: consists of activities such as accounting, legal, finance, control,

public relations, quality assurance and general (strategic) management.
• Technological Development: pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation
of inputs into outputs.
• Human Resources Management: consists of all activities involved in recruiting,
hiring, training, developing, compensating and (if necessary) dismissing or laying
off personnel.
• Procurement: the acquisition of goods, services or works from an outside
external source
Functional Product
This type of product is very stable and does not have variety or undergoes changes with
high frequency. So, it is of less variety (low customization) and has Stable demand and
thus does not undergo rapid changes.
For a functional product an efficient supply chain is the fit, where demand and supply
uncertainties are minimum. In an efficient supply chain, we maintain less or no
inventory.

Fig. Efficient vs Responsive Supply Chains

Innovative Product
This type of product undergoes frequent changes and this leads to variation in demand
• There is a high level of customization.
• Demand is not stable
• Product undergoes rapid changes
For an innovative product, responsive supply chain is the fit, where we maintain a large
inventory to tone down the sudden surge in the demand
Bullwhip effect
The bullwhip effect on the supply chain occurs when changes in consumer demand
cause the companies in a supply chain to order more goods to meet the new demand.
The effect can be best explained as an extreme change in supply position that is
generated by a small change in demand downstream. Inventory can quickly move from
being back ordered to being in excess due to serial nature of communicating up the
supply chain and the delays in moving products down the supply chain.
Fig. Bullwhip Effect

Irregular orders in the lower part of the supply chain develop to be more distinct higher
up in the supply chain. This variance can interrupt the smoothness of the supply chain
process as each link in the supply chain will over or underestimate the product demand
resulting in exaggerated fluctuations.
Irregular orders in the lower part of the supply chain develop to be more distinct higher
up in the supply chain. This variance can interrupt the smoothness of the supply chain
process as each link in the supply chain will over or underestimate the product demand
resulting in exaggerated fluctuations.
8. Logistics Management
Logistics management activities typically include inbound and outbound transportation

management, fleet management, warehousing, materials handling, order fulfillment,
logistics network design, inventory management, supply/demand planning, and
management of third- party logistics services providers. In short Logistics management
encompasses everything from material handling, packing & warehousing to
transportation.
To varying degrees, the logistics function also includes sourcing and procurement,
production planning and scheduling, packaging and assembly, and customer service.
Logistics management is an integrating function, which coordinates and optimizes all
logistics activities, as well as integrates logistics activities with other functions
including marketing, sales manufacturing, finance, and information technology.
Logistics ensures the availability of the right product, in the right quantity and right
condition:
• At the right place
• At the right time
• At the right cost
• For the right customer
Objective: Minimize cost, minimize investment and maximize customer service
Logistics is all pervasive. Some excellent examples of value adding logistics services
are:
Dabbawalas of Mumbai: Reliable, fool proof logistics system of delivering lunch

boxes to over 5,00,000 office goers every day without letting the wrong lunch box
reach the wrong office and also ensuring the boxes reach on time.

The Indian Postal Services: One of the largest logistics networks in the world today,
which delivers letters in the most cost-effective manner across six lakh villages, one
hundred and twenty cities and several thousand of towns covering the length and
breadth of the country within twenty-four to forty-eight hours and serving more than
hundred and seventy countries with Indian source stations/ customers and/or
destinations as mentioned earlier.
8.1 Purpose of Logistics Management
The key purposes of logistics management are:

Reduction of inventory: Inventory is one of the key factors, which can affect the profit
of an enterprise to a great extent. In the traditional system, firms had to carry a lot of
inventory for satisfying the customer and to ensure excellent customer service. But,
when funds are blocked in inventory, they cannot be used for other productive purposes.
These costs will drain the enterprise’s profit. Logistics helps in maintaining inventory at
the lowest level, thus achieving the customer goal. This is done through small, but
frequent supplies.
Economy of freight: Freight is a major source of cost in logistics. This can be reduced
by following measures like selecting the proper mode of transport, consolidation of
freight, route planning, long distance shipments etc.
Reliability and consistency in delivery performance: Material required by the
customer must be delivered on time, not ahead of the schedule or behind the schedule.
Proper planning of the transportation modes, with availability of inventory will ensure
this.
Minimum damage to products: Sometimes products may be damaged due to improper
packing, frequent handling of consignment, and other reasons. This damage adds to the
logistics cost. The use of proper logistical packaging, mechanized material handling
equipment, etc. will reduce this damage.
Quicker and faster response: A firm must have the capability to extend service to the
customer in the shortest time frame. By utilizing the latest technologies in processing
information and communication will improve the decision making, and thus enable the
enterprise to be flexible enough so that the firm can fulfil customer requirements, in the
shortest possible time frame.
8.2 How does logistics add value?
Logistics delivers value to the customer through three main phases:
• Inbound logistics: These are the operations, which precede manufacturing.

These include the movement of raw materials, and components for processing
from suppliers.

• Process logistics: These are the operations, which are directly related to
processing. These include activities like storage and movement of raw materials,
components within the manufacturing premises.
• Outbound logistics: These are the operations, which follow the production
process. These include activities like warehousing, transportation, and inventory
management of finished goods
8.3 Various functions of Logistics Management
Order Processing: Processing the orders received from the customers is an activity,
which is very important by itself and also consumes a lot of time and paperwork. It
involves steps like checking the order for any deviations in the agreed or negotiated
terms, price, payment and delivery terms, checking if the materials are available in
stock, producing and scheduling the material for shortages, and also giving
acknowledgement to the owner, by indicating any deviations
Inventory Planning and Management: Planning the inventory can help an
organization in maintaining an optimal level of inventory which will also help in
satisfying the customer. Activities like inventory forecasting, engineering the order
quantity, optimization the level of service, proper deployment of inventory etc. are
involved in this.
Warehousing: This serves as the place where the finished goods are stored before they
are sold to the customers finally. This is a major cost center and improper warehouse
management will create a host of problems.
Transportation: Helps in physical movement of the goods to the customer’s place.
This is done through various modes like rail, road, air, sea etc.
Packaging: A critical element in the physical distribution of the product, which also
influences the efficiency of the logistical system.
8.4 Logistics Models
1PL - First-Party Logistics

An enterprise that sends goods or products from one location to another is a 1PL. For
example, a local farm that transports eggs directly to a grocery store for sale is a 1PL.
2PL - Second-Party Logistics

An enterprise that owns assets such as vehicles or planes to transport products from one
location to another is a 2PL. That same local farm might hire a 2PL to transport their
eggs from the farm to the grocery store.

3PL - Third-Party Logistics

In a 3PL model, an enterprise maintains management oversight, but outsources
operations of transportation and logistics to a provider who may subcontract out some
or all of the execution. Additional services may be performed such as crating, boxing
and packaging to add value to the supply chain. In our farm-to-grocery store example, a
3PL may be responsible for packing the eggs in cartons in addition to moving the eggs
from the farm to the grocery store.
4PL - Fourth-Party Logistics

In a 4PL model, an enterprise outsources management of logistics activities as well as
the execution across the supply chain. The 4PL provider typically offers more strategic
insight and management over the enterprise's supply chain. A manufacturer will use a
4PL to essentially outsource its entire logistics operations. In this case, the 4PL may
manage the communication with the farmer to produce more eggs as the grocery store's
inventory decreases.
5PL - Fifth-Party Logistics

A 5PL provider supplies innovative logistics solutions and develops an optimum supply
chain network. 5PL providers seek to gain efficiencies and increased value from the
beginning of the supply chain to the end through the use of technology like blockchain,
robotics, automation, Bluetooth beacons and Radio Frequency Identification (RFID)
devices.
The 4PL may coordinate activities of other 3PLs that handle various aspects of the
supply chain. The 4PL functions at the integration and optimization level, while a 3PL
may be more focused on day-to-day operations
The primary advantage of a 4PL relationship is that it is a strategic relationship focused

on providing the highest level of services for the best value, as opposed to a 3PL that
may be more transaction focused.
A 4PL provides a single point of contact for your supply chain. With a 3PL, there may
be some aspects that you still have to manage. The 4PL should take over those
processes for you, acting as the intermediary for 3PLs, carriers, warehouse vendors and
other participants in your supply chain.
8.5 Reverse Logistics

A complete supply chain dedicated to the reverse flow of products and materials for the
purpose of returns, repair, remanufacture and/or recycling. It is moving the items from

the consumer back to the producer for repair or disposal. There are two main categories
of reverse logistics: asset recovery, which is the return of actual products, and green
reverse logistics, which represents the responsibility of the supplier to dispose of
packaging materials or environmentally sensitive materials such as heavy metals and
other restricted materials.
Fig. Logistics Models

Goods are returned for many reasons that can include:
• Quality demands by final customers (both real and perceived)
• Damaged or defective products
• Inventories that result from over-forecast demand Seasonal inventories
• Out-of-date inventories
• Remanufacturing and refurbishment of products
Returned goods can be:
• Returned to inventory Refurbished for resale Sold into alternate markets
• Broken down into reusable components
• Sorted to recover valuable materials (further reducing disposal costs)
Example: recycling of used soft drink glass bottles, refurbishment of used Apple
iPhone, returnable packaging in automotive industry

9. Procurement
Procurement is the process of finding and agreeing to terms, and acquiring goods,
services, or works from an external source, often via a tendering or competitive bidding
process. It generally involves making buying decisions under conditions of scarcity. An
important distinction should be made between analyses without risk and those with risk.
Where risk is involved, either in the costs or the benefits, the concept of best value
should be employed.
Various terminologies associated with procurement are:
Purchase Requisition: Purchase Requisition (PR) is a document stating the requests of

a user or a department concerning the procurement of materials or services. SAP ERP
through its Material Management functionality creates this document in the first phase
of the procurement cycle (called Determination of Requirements). This document will
contain information such as the material or service to be procured, a required date of
delivery, and a quantity. It can be created manually or automatically and it is an internal
document issued by a user or a department to the purchasing department in an
organization.
It allows the purchasing department to:
• Identify where goods and/or services are needed
• Explore discounts and favorable terms offered by vendors
• Create the best purchase order for each vendor
Purchase Order: PO is a document that shows the intent of a buyer to buy a certain
quantity of product at a certain price from a specific vendor. SAP ERP Materials
Management module generates this document in the fourth phase of the procurement
cycle known as the purchase order processing. This document will contain the same
information as the purchase requisition but will also have some other details concerning
agreed conditions between the client and the vendor. It can be created manually or
automatically and it is an external document issued by the purchasing department to be
sent to a supplier.
Request For Information (RFI): The request for information (RFI) is used by
organizations seeking to develop a bid list or prequalify potential suppliers. Generally,
the RFI asks suppliers to submit general information about their companies, such as
size, financial performance, years in business, market position, product lines etc.

Request for Proposal (RFP): The RFP is used when a specification or statement of
work (SOW) has not yet been developed, or when the buyer has a general requirement
and wants to solicit various ideas on how that requirement can best be met.
Request for Quotation (RFQ): It is used when a specification or SOW has already
been formulated and the buyer needs only to obtain price, delivery, and other specific
terms from the suppliers in order to select the most appropriate source. The
specifications are sent to prequalified suppliers soliciting prices and other terms and
conditions.
9.1 Procurement Activities
• Direct Spend - Direct spend refers to the production-related procurement that

encompasses all items that are part of finished products, such as raw material,
components and parts.
• Direct Procurement – Direct procurement is the focus in supply chain
management, directly affecting the production process of manufacturing firms.
• Indirect Spend - Indirect procurement concerns non-production-related
acquisition: obtaining "operating resources" which a company purchases to
enable its operations. Indirect procurement comprises a wide variety of goods and
services, from standardized items like office supplies and machine lubricants to
complex and costly products and services like heavy equipment, consulting
services, and outsourcing services.
10. Risk Management

10.1 Risk Management Process
Risk identification and Assessment Process: This is the process where procurement
recognizes the risk and seeks to minimize the probability of occurrence and impact.
Effective risk management recognizes that there is an ‘upside’ and ‘downside’ to every
risk. Upside refers to new opportunities and downside refers to threats and
vulnerabilities, any risk management strategy should seek to exploit ‘upside’ and
mitigate ‘downside’. The risk management process is made of 5 phases:
• Phase 1: Identify: Identify the risk and source

• Phase 2: Establish: Establish probability of occurrence
• Phase 3: Assessment: Evaluate impact of occurrence
• Phase 4: Investigate: Investigate risk reduction options
• Phase 5: Control: Deploy mitigating strategies and monitor against plan

10.2 Risk Strategy
Risk mitigation strategy is those actions taken by procurement to manage supply chain
risk; these usually fall under the 4T’s framework.
Terminate: Procurement recognizes the risk and it is deemed too risky to proceed and
terminated. The need to terminate the risk arises because effective mitigating strategies
are too risky, complex or expensive to contemplate.
Tolerate: Under this strategy, the risk is tolerated. This is usually after the risk has been
identified and it is established that the probability of occurrence is low or the risk has
been reduced to levels commensurate with risk appetite.
Transfer or part transfer: The risk is identified, and the most effective way to manage
or resolve the risk is to transfer it to a third party. Outsourcing or insurance are ways of
achieving this strategy. Part transfer is also a way of risk sharing with a third party, in
this approach some elements of the risk are transferred to a third party. The elements
transferred should always be those the business is incapable of managing.
Treat: Procurement recognizes the likelihood of occurrence and impact to supply and
actively manages the risk by implementing mitigating strategies. Treating the risk will
not eliminate it, rather, it reduces it to an acceptable level with an element of residual
risk. The residual risk can be tolerated or transferred.
10.3 Risk Register
A risk register is an important element in risk management and it is crucial to an

effective risk management process. The risk register is where the outcome of a risk
assessment and mitigating strategies are logged and made visible to stakeholders. The
risk register should contain a definition of the risk, probability of occurrence and
impact, control or mitigating strategy, proposed action plan and an assigned owner.
Managing supply relationships is challenging, and risk will always be a factor in these
relationships. The task for procurement is to recognize these risks, manage them
effectively and insulate the business from supply chain risks and vulnerabilities.
Operations professionals are involved in developing new systems in order to maximize
efficiency and profitability for the bank. They also ensure each transaction is cleared,
settled and reconciled according to regulatory and control requirements.
11. Operations in Other Services Companies

Many financial services organizations have found that their attempts to cut costs and
improve efficiency in the wake of the financial crisis have been far less successful than
hoped and are already proving difficult to sustain. There is a particular risk that knee-
jerk operational shake- ups could damage customer service or jettison the talent the
business needs to capitalize on an upturn.

Banking and Financial Industries
The operations team is responsible for the processing and settlement of all the financial
transactions made at an investment bank or investment management firm.
The operations division, also known as 'back office', provides support to the client
facing departments, such as trading, corporate finance, and corporate banking -
sometimes known as the 'front office'. The front office generates business for the bank,
and operations ensure that the business is administered in an efficient, controlled, risk-
free and timely manner.
They ensure that products, services and money change hands how they are supposed to.
FMCG Industry
Food & FMCG Supply Chain in India can be classified as Perishable and Non-
Perishable, and both are distinctly unique from each other. The complexity of Food
Supply Chain arises out of perishable nature of food items, shorter shelf life of products,
food safety, regulatory requirements, etc. The non-perishable FMCG products have
shelf life ranging from 3 to 18 months that requires strict monitoring of FEFO so that
products reaching the consumers are left with enough shelf life. Lack of consumer
loyalty in this sector makes it all the more important for this sector to ensure availability
of products at the selling locations, else lose sale. It needs demand driven and
responsive supply chain solutions.
Fig. FMCG Industry
Auto Industry
On the canvas of the Indian economy, auto industry occupies a prominent place. Due to
its deep forward and backward linkages with several key segments of the economy,
automotive industry has a strong multiplier effect and is capable of being the driver of

economic growth. A sound transportation system plays an essential role in the country’s
speedy economic and industrial development.
Many factors play a dominant role and affect decisions made in the automotive world.
Consumer preferences decide the current styles, consistency, and presentation standards
of vehicles. Government trade, safety, and environmental regulations found incentives
and requirements for upgrading and change in design or production.
Fig. Auto Industry
Retail and E-Commerce Industry
Fig. Supply Chain Design of E-Commerce Industry

12. Lean
Lean means doing more with less by employing 'lean thinking'. Lean manufacturing is
an iterative process which involves never ending efforts to eliminate or reduce 'muda'
(Japanese for waste or any activity that consumes resources without adding value) in
design, manufacturing, distribution, and customer service processes with maximizing
the process flow.
It was developed by Toyota Executive Taiichi Ohno during post Second World War
reconstruction period in Japan. The primary elements of Lean are:
To have only the required inventory when needed; To improve quality to zero defects;
To reduce lead times by reducing setup times, queue lengths, and lot sizes; To
incrementally revise the operations themselves;
To accomplish these things at minimum cost.
Toyota’s view is that the main method of lean is not the tools, but the reduction of three
types of waste:
• muda (“non-value-adding work”)
• muri (“overburden”)
• mura (“unevenness”)
12.1 Types of Waste
Unnecessary Transportation: This waste refers to any unnecessary transportation,

such as that commonly associated with the transit of materials or parts. Transportation is
not a value-add activity as it does not help transform the product into the customer
requirement and can add further problems through delays, damage or items being lost.
Unnecessary Processing: Over processing is typified by carrying out more work on a

product than is required – this might be using more precision tools than are required
through to, in the example of office activity, bureaucratic approval systems for
documents requiring multiple signatories or reviews. Removing over processing
requires careful consideration to ascertain the actual requirement and ensuring that the
process is engineered to meet this without any further burden.
Unnecessary Motion: An effective working environment can help reduce motion for a
given process. This may entail providing tools and equipment at point of use or making
material handling processes more efficient. A common tool used to analyze motion is
the spaghetti diagram which can be very effective at highlighting issues.
Inventory: Any parts or materials that are not immediately required are considered
waste
– Inventory is one of the seven wastes that are most easy to spot in that it is easy to

physically see around the business. Inventory is waste as it ties up resources to manage
it for example storage space, personnel, capital outlay and processing.
Waiting Time: It is very common – take looks at your business are parts stacked up
waiting for next part of the assembly process? Are office in-tray‘s piled high with
documents waiting to be processed? A number of causes can result in waiting
often with product batch sizes being a primary trigger.
Defects: Getting it wrong results in waste – whether that‘s manufacturing faulty parts
that require rework or at worst being scrapped or documents that are incorrectly
completed which can result in confusion or mistakes. Defects have a very real impact on
the bottom line of your business and can be one of the key contributors to inefficiency.
Overproduction: Producing more of something than is required by the customer is

waste – close attention to batch sizes and change over time can be imperative in not
over producing. The impact of overproducing can be considerable
13. Solutions with Lean Approach

13.1 Kaizen
Kaizen is a Japanese word for the philosophy that defines management’s role in
continuously encouraging and implementing small improvements involving everyone.
It is the process of continuous improvement in small increments that make the process
more efficient, effective, under control, and adaptable.
It focuses on simplification by breaking down complex processes into their sub
processes and then improving them.
Fig. Kaizen

13.2 Kanban
Kanban is a “pull” system that involves cascading or signaling production and delivery
instructions from downstream to upstream activities in which nothing is produced by
the upstream supplier until the downstream customer signals a need.
All production is based on consumer demand, with nothing "pushed" downstream.
Simply said, nothing is produced without a signal from the next station in the line.
Kanban acts as the means of signaling used for material & information movement.
The goal of Kanban is to identify potential bottlenecks in your process and fix them so
work can flow through it cost effectively at an optimal speed or throughput. It is a
method for managing the creation of products with an emphasis on continual delivery
while not overburdening the development team. Kanban is based on 3 basic principles:
• Visualize what you do today (workflow): seeing all the items in context of each
other can be very informative
• Limit the amount of work in progress (WIP): this helps balance the flow-based
approach so teams don’t start and commit to too much work at once
• Enhance flow: when something is finished, the next highest thing from the
backlog is pulled into play. Kanban promotes continuous collaboration and
encourages active, ongoing learning and improvement by defining the best
possible team workflow.
13.3 Jidoka
The term jidoka used in the TPS (Toyota Production System) can be defined as
"automation with a human touch." Providing machines and operators the ability to
detect when an abnormal condition has occurred and immediately stop work. This
enables operations to build in quality at each process and to separate men and machines
for more efficient work.
Jidoka sometimes is called autonomation, meaning automation with human intelligence.
This is because it gives equipment the ability to distinguish good parts from bad
autonomously, without being monitored by an operator. This eliminates the need for
operators to continuously watch machines and leads in turn to large productivity gains
because one operator can handle several machines, often termed multi-process handling.
13.4 5s
It is a systematic approach to organize and standardize the workplace. It is done in
order:
• To improve efficiency and productivity.
• To maintain safety and cleanliness.

• To maintain good control over the processes.

• To maintain the good product quality.
Steps:
1. Sort (Seiri)(tidiness) - Remove unnecessary items from each area

2. Set In Order (Seiton) (orderliness) - Organize and identify storage for efficient
use
3. Shine (Seiso) (cleanliness) - Clean and inspect each area regularly
4. Standardize (Seiketsu) (standardization) - Incorporate 5S into standard operating
procedures
5. Sustain (Shitsuke) (discipline) - Assign responsibility, track progress, and
continue the cycle
Fig. 5S Methodology
13.5 Heijunka
A technique to facilitate Just-In-Time (JIT) production, levelling the type and quantity
of production over a fixed period of time. This enables production to efficiently meet
customer demands while avoiding batching and results in minimum inventories, capital
costs, manpower, and production lead time through the whole value stream.
Example:
A hat producer receives orders for 500 similar hats per week: 200 orders on Monday,
100 on Tuesday, 50 on Wednesday, 100 on Thursday, and 50 on Friday. Instead of
trying to meet demand in sequence of the orders, the hat producer would use Heijunka
to level demand by producing an inventory of 100 hats near shipping to fulfill
Monday’s orders. Every Monday, 100 hats will be in inventory. The rest of the week,

production will make a 100 hats per day – a level amount. The inventory might look a
little suspicious to Lean purists, but it has its fans – it is the method the Toyota
Production System uses today. What if the situation involves multiple types of hats?
Consider that orders are being placed for hat models A, B, C and D. A mass producer
will want to minimize waste around equipment changeovers. Its production schedule
will look something like this: AAAAABBBCCDD.
13.6 Just-In-Time (JIT)

Just-in-time is an inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production process,
thereby reducing inventory costs.
This method requires producers to forecast demand accurately.
This inventory supply system represents a shift away from the older just-in-case
strategy, in which producers carried large inventories in case higher demand had to be
met.
The main objective of JIT manufacturing is to reduce manufacturing lead times. This is
primarily achieved by drastic reductions in work-in-process (WIP).
The result is a smooth, uninterrupted flow of small lots of products throughout
production.
Example:
Dell has leveraged JIT principles to make its manufacturing process a success. Dell’s
approach to JIT is different in that they leverage their suppliers to achieve the JIT goal.
They are also unique in that Dell is able to provide exceptionally short lead times to
their customers, by forcing their suppliers to carry inventory instead of carrying it
themselves and then demanding (and receiving) short lead times on components so that
products can be simply assembled by Dell quickly and then shipped to the customer.
13.7 Poka-Yoke
Poka means “Mistake” or “Error” and Yoke means “Proofing” or “Avoid”.
In other words, Poka-Yoke means Error Proofing or Mistake Proofing or Avoidance of
Error.
Poka-Yoke is a Japanese improvement strategy for mistake-proofing to prevent defects
(or nonconformities) from arising during production processes.
The Poka-Yoke concept was created in the mid-1980s by Shigeo Shingo, a Japanese
manufacturing engineer.
Mistake Proofing is a method for avoiding errors in a process. The simplest definition of
‘Mistake Proofing’ is that is a technique for eliminating errors by making it impossible
to make mistakes in the process. It is often considered the best approach to process
control.

Example:
Electric plugs have an earth pin that is longer than the other pins and is the first to
contact the socket. The protective shield of the neutral and earth sockets is then opened
safely.
The device could be a clamp that can be placed only in a certain way A lid that can be
turned in only one direction.
In McDonald’s, the French fry scoop and standard size bag used to measure the correct
quantity are poka-yokes. Checklists are another type of poka yoke.
13.8 Poka-Yoke
Place of Production (Gemba) is a term that is often used to describe ‘where the action
occurs’ or in the case of most manufacturing facilities, the shop floor. A related term
gemba walk, means to get out of your office and go out to the shop floor where the
actual work is performed.
The idea behind gemba walks, and gemba in general, is to end the trend of managers
sitting in their offices and making decisions based exclusively on reports or second-
hand information. While this type of information is critical, it is no substitute for
actually seeing how things are running and interacting with the front-line employees.
Gembutsu –
The Actual Product Looking at the actual end product and the product at various stages
of manufacturing helps you see where the value is added throughout the manufacturing
process.
It helps you to streamline its creation by eliminating costly or time-consuming steps that
don’t add significant value to the customers. This is critical because anything that
expends the facility’s time or other resources without adding value in the eyes of the
customer is a significant form of waste.
Genjitsu –
The Facts Genjitsu means ‘the facts.’ In this context it means that managers need to
work hard to find the facts of any given situation. Many people mistake this for
meaning they need to find out who or what to blame for problems, but that is not the
case. Making an effort to determine the facts of the matter will give you the information
needed to make changes required to avoid problems and eliminate waste wherever
possible.
Even if it is determined that someone is doing something wrong, that does not
necessarily mean that they need to be disciplined or even fired. Instead, it should be
looked at as a learning opportunity for both the employee and the whole team.

14. Theory Of Constraints

The core concept of the Theory of Constraints is that every process has a single
constraint and that total process throughput can only be improved when the constraint is
improved.
A very important corollary to this is that spending time optimizing non-constraints will
not provide significant benefits; only improvements to the constraint will further the
goal (achieving more profit).
The Five Steps of the Theory of Constraints:
Identify the System Constraint: Identify the current constraint (the single part of the
process that limits the rate at which the goal is achieved).
Decide How to Exploit the Constraint: Make quick improvements to the throughput
of the constraint using existing resources (i.e. make the most of what you have).
Subordinate Everything Else: The non-constraint components of the system must be
adjusted to a "setting" that will enable the constraint to operate at maximum
effectiveness. Once this has been done, the overall system is evaluated to determine if
the constraint has shifted to another component. If the constraint has been eliminated,
the change agent jumps to step five.
Elevate the Constraint: If the constraint still exists (i.e. it has not moved), consider
what further actions can be taken to eliminate it from being the constraint. Normally,
actions are continued at this step until the constraint has been “broken” (until it has
moved somewhere else). In some cases, capital investment may be required. This step is
only considered if steps two and three have not been successful. Major changes to the
existing system are considered at this step.
Return to Step One, But Beware of "Inertia": What are Constraints?
Constraints are anything that prevents the organization from making progress towards
its goal. In manufacturing processes, constraints are often referred to as bottlenecks.
Interestingly, constraints can take many forms other than equipment.
15. Six Sigma

15.1 Six Sigma Manufacturing Practices History
1970s- Dr. Noriaki Kano introduces his two-dimensional quality model and the three
types of quality.
1986- Bill Smith, a senior engineer and scientist introduces the concept of Six Sigma at
Motorola.

1994- Larry Bossidy launches Six Sigma at Allied Signal. 1995- Jack Welch launches
Six Sigma at GE.
15.2 What is Six Sigma?
Six Sigma is a data driven, customer centric and result oriented methodology which
uses statistical tools and techniques to eliminate the defects and inefficiencies to
improve the process.
The following characteristic is a feature of Six Sigma:
• Customer Centric
• Process focused
• Data driven performance gains
• Validation through business results
• Structured improvement
Focus of Six Sigma

• Reduce Variation
• Reduce Defects Delighting Customer
• Reduce Cost
• Reduce Cycle time
Organizations embrace the Six Sigma way as this methodology systematically and
measurably enhances the value of the organizations by making them competitive,
quality- conscious, customer-centric, and forward-looking.
Some of the benefits that the organizations derive from the Six Sigma initiatives are:
• Waste prevention
• Defect reduction
• Cycle time reduction
• Cost savings
• Market share improvement
15.3 Mathematical Interpretation
Sigma stands for standard deviation from mean. Six sigma represents six standard
deviations from the mean.

USL - Upper specification limit for a performance standard. Any deviation above this is
a defect. (+6 sigma)
LSL – Lower specification limit for a performance standard. Any deviation below this
is a defect. (-6 sigma)
Target – Ideally, this will be the middle point between USL and LSL. (Between +6
sigma and -6 sigma)
Fig. Sigma level, PPM and Yield
Recommended Case Study-

Mumbai’s Dabbawalla are at more than Six Sigma Level. The significance of 2.8 Sigma
is that it is 99% good:
• 20,000 lost articles of mail/hour
• 5000 incorrect surgical operations per week

The significance of 6 sigma level is that it is 99.99967% Good and equates to 3.4
defects per million opportunities:
• Seven articles lost per hour
• 1.7 incorrect operations per week
15.4 Zero Defects
The Theory and Implementation Zero defects theory ensures that there is no waste
existing in a project. Waste here refers to all unproductive processes, tools, employee
etc. So, anything that is unproductive and does not add value to a project should be
eliminated from the project. By doing this, you reduce waste and thus cut down the cost
involved in the waste.
Besides eliminating waste, there should be a process of improvement. Any scope of
improvement that is possible in a project should be experimented. This ensures the
movement towards perfection.
Zero defects theory also closely connects with “right first time” phrase. This means that
every project should be perfect at the very first time itself. Here, again perfect refers to
zero defects. Zero defects theory is based on four elements for implementation in real
projects.
Quality is a state of assurance to requirements. Therefore, zero defects in project mean
fulfilling requirements at that point of time. Quality should be taken care of at the very
first go rather than solving problems at a later stage. Quality here is measured in
financial terms. One needs to judge waste, production and revenue in terms of money.
Performance should be judged as per zero defects theory, i.e. near to perfection. Just
being good is not good enough.
Pros
Zero defects ensure that all waste existing in a project is eliminated in the very first go
itself leading to cost reduction. Thus, zero defects lead to waste reduction along with
cost cutting. All these processes improve services and therefore, there is improvement in
quality leading to happy customers.
Cons
As there is a quest for perfection and zero defects, more people and processes might be
involved to find out the defects which will lead to extra cost. Also, over strictness might
hamper the work culture and production in projects. To overcome the cons, along with
following zero defects theory, one needs to ensure continual service improvement as
well.

15.5 Basic tools of Six Sigma Check Sheets
Check sheets are very important tool for data collection. Inputs gathered from check
sheets can be used for creation of Pareto diagrams, Fishbone diagrams etc.
The purpose of check sheets is to ease the compilation of the data in such a manner that
they may be used / analyzed comfortably.
It is a simple and convenient recording technique for collecting and determining the
occurrence of events.
It is constructed with each observation to give a clearer picture of the facts.
Histogram
• It is a visual representation of variable data.
• It organizes data to describe process performance.
• It displays centering of the data and pattern of variation.
• It demonstrates the underlying distribution of the data. Histogram can be used to
check whether the data is Normally distributed or not.
• It provides valuable information for predicting future performance.
• It helps to identify whether the process is capable of meeting requirements.
Flow chart/process map

It is a graphical representation of processes in an organization displaying the sequence
of tasks performed and their relationships. It is a prerequisite to obtain an in depth
understanding of a process, before application of quality management tools such as
FMEA, SPC etc.
Process maps are progressively elaborated: i.e. a high level process map is defined early
on in the six sigma project which shows major processes and this will be made more
explicit and detailed as project team develops a better and more complete understanding
of all the processes. Standard symbols are used in creation of process maps.
Cause and Effect diagram

It is a graphic representation of possible causes for any particular problem under study.
This tool was developed by Kaoru Ishikawa in 1960’s to determine and break down the
main causes of a given problem.
This tool is employed where there is only one problem and the possible causes are
hierarchical in nature.

Ishikawa Diagram
This diagram is also known as Fish bone diagram (because of its fish bone like
structure) or Ishikawa diagram.
It gives the relationship between quality characteristics and its factors. It focuses on
causes and not the symptoms.
Pareto Analysis
It is a ranked comparison of factors related to a quality problem. Pareto diagram
displays the relative importance of problems in a simple visual format.
Since availability of money, time and other resources are restricted, Pareto analysis
helps the team to consider only vital few problematic factors out of trivial many, which
if addressed with due care, will bring greatest rewards with minimum resources.
Pareto diagram is based on the Pareto principle, also known as 80-20 rule, which states
that a small number of causes (20%) is responsible for a large percentage (80%) of the
effect
Scatter Diagram
It is a graphical representation that depicts the possible relationship or association
between two variables, factors or characteristics.
It provides both a visual and statistical means to test the strength of a relationship.
Construction of a Scatter diagram:
Collect the data on both variables, preferable sample size of 20 or more.
Plot the data points on a XY plane where variable 1 is plotted along X axis and variable
2 is plotted along Y axis.
Identify the linear relationship between them if it exists.
Identify the strength of the linear relationship as strong/ weak positive, and strong/ weak
negative.
16 . DMAIC and DMADV Approach

16.1 DMAIC
The DMAIC process should be used when an existing product or process requires
improvement to meet or exceed the customer’s requirements. This initiative should be
consistent with the business goals of the organization.
Example.
Companies using DMAIC Methodology: GE, Motorola, etc. D – DEFINE the problem

The Define Phase is used to identify the areas of improvement and define goals for the
improvement activity and ensure that resources are in place for the improvement
project.
The Define Phase will focus on a customer requirement and identify project CTQs
(Critical to quality). A CTQ is a product or service characteristic that satisfies a
customer requirement or process requirement
M – MEASURE the outcome (Y)
The Measure Phase evaluates the process to determine the current process performance,
that is, the baseline.
It uses exploratory and descriptive data analysis to help in understanding the data. The
Measure phase allows you to understand the present condition of the process before you
attempt to identify improvements. The inputs to the measure phase are the outputs of the
Define phase.
A – ANALYZE, identify X’s (root causes of the defects, variation sources)
The Analyze phase is used to identify few vital causes from a list of potential causes
obtained from the Measure phase, actually affecting project outcome using six sigma
methodologies. The data collected in the Measure phase are examined to determine a
prioritized list of the sources of variation.
I – IMPROVE the process by eliminating the defects

The improve phase of Six Sigma is used to improve the system to do things better,
cheaper or more rapidly by finding optimum solution for Y, implement the new
approach and validate using statistical methods. The main objective of the improve
phase is to improve the process by eliminating defects.
C – Control X’s for sustained performance
The control phase of Six Sigma is used to develop and implement process control plan
to ensure sustenance of the improved process. The major activities in the control phase

are to validate measurement system, verify process improvement and develop control
mechanism. So far we have identified the best settings for each of the vital ‘X’.
The key now is to ensure that the X’s don’t fluctuate away from the targeted setting.
Process control is an important tool to ensure that the Six Sigma project delivers lasting
benefits.
16.2 DFSS
Design for Six Sigma (DFSS) is an application of Six Sigma which focuses on the
design or redesign of the different processes used in product manufacturing or service
delivery by taking into account the customer needs and expectations.
DMADV is a common DFSS methodology used to develop a process or product which
does not exist in the company. DMADV is used when the existing product or process
doesn't meet the level of customer specification or six sigma level even after
optimization with or without using DMAIC.
Companies using DFSS: GE, Motorola, Honeywell, etc.
17 . Supply Chain Risk Management
If we look at the past few years, the supply chain all around the world has shown drastic
vulnerabilities and has been severely disrupted. This has caused huge losses to
industries ranging from electronics and automotive to pharmaceuticals and consumer
goods. There are several reasons for these vulnerabilities, but at the core, is the lack of a
robust process to identify and manage the associated risks.
Broadly, supply chain risks can be of two types i.e., Known Risks and Unknown Risks.
Known Risks
These are the types of risks that can be identified and it is possible for the organizations
to measure them and take actions to manage and control them. For example, bankruptcy
of a supplier that could impact the supply chain.
Now, such types of risks can be measured on the basis of their probability and
appropriate systems can be put in place to prevent the supply chain and manage these
risks.
Organizations can use the following steps in a structured manner along with the digital
tools to manage these known risks:
Identify and Document Risks: This step involves detailed assessment of the complete
supply chain and mapping all the risks in a risk register. This Register Risk is
continuously tracked and updated throughout the process.

Developing a supply chain risk management framework: Basically, once the risk
register has been formed, each risk has to be scored in it on the basis of 3 parameters
which are its impact if risk happens, probability of materialization of risk and
organization’s preparedness to deal with that risk. This would help companies prioritize
risks and take actions.
Monitor Risk: In this step, various systems are developed to monitor the risk which
further helps in deriving its score through the above-mentioned framework. Various
digital tools have enabled companies to even monitor risks in quite complex supply
chains.
Institute governance and regular review: This is a critical step and entails
development of a mechanism with which cross-functional teams across the supply chain
can periodically review risks and take definite actions.
Unknown Risks
These are the types of risks that are very difficult to predict. For such risks, what
organizations should focus on is in reducing their probability of occurrence and
simultaneously increase the speed of response when they do occur. Organizations
should try to develop a risk-aware culture in order to build the capability to manage
these risks if they occur. This can be done through acknowledging the mistakes and
learning from them, building a transparent system, enhancing the response on external
triggers and ensuring that employees are aligned with the organization and don’t take
unnecessary risks.
18 . Sustainable Supply Chain
Sustainable supply Chain management begins from product design and development to
material selection (including raw material extraction or agricultural production),
manufacturing, packaging, transportation, warehousing, distribution, consumption,
return, and disposal. Sustainable supply chain management involves integrating
environmentally and financially viable practices throughout the entire supply chain
lifecycle.
Environmentally sustainable supply chain management and practices may help
businesses not only reduce their total carbon footprint, but also optimize their end- to-
end operations to save money and make more money. Sustainable techniques can be
used to improve all supply chains.
Sustainable supply chain management begins with an understanding of your company's
environmental, social, and economic effects, as well as implementing the required

changes to mitigate them. Everything from a warehouse's electricity source to products

transportation and beyond can be a part of the operation.
If your warehouse produces goods, your sustainability strategy will entail a study of the
full manufacturing process, including the sustainability practices of all raw material
suppliers, product assembly in the plant, and waste disposal and recycling.
18.1 Why a 'sustainable supply chain?'
The supply chain is responsible for the bulk of its environmental impact. By their very
nature, supply chains often involve energy-intensive production and transportation as
goods are made and moved around the globe. Therefore, organisations can often make
the biggest difference by making changes to their supply chain rather than other
business operations.
Beyond the obvious benefits of reducing overall carbon footprint, and reducing energy
and resource consumption, there are many other reasons why organisations should care
about sustainability in their supply chains:
Better bottom line — research and experience have proven that sustainability
significantly improves financial results.
Consumers and Wall Street recognize the importance of green practises and
sustainability -- which more and more drives increased sales and share valuation.
Governmental initiatives in the United States and elsewhere provide tax and investment
incentives to companies that employ sustainable practices. In a growing number of
regions of the world, sustainable practices are governmentally mandated as law. This
trend is escalating rapidly.
Sustainability is equated with corporate social responsibility and stewardship – with
being a good global citizen. The positive public relations exposure from identifying and
implementing sustainable supply chain practices can yield numerous benefits for
companies.
Suppliers and corporate customers are increasingly requiring sustainable practices of
their vendors.
The elimination of waste in the supply chain is a hallmark of sustainability.
19 . Blockchain
Blockchain is a method of storing data in such a way that it is difficult or impossible to

alter, hack, or cheat it.
A blockchain is a digital log of transactions that is duplicated and distributed across the
blockchain's complete network of computer systems. Each block in the chain contains a

number of transactions, and each time a new transaction takes place on the blockchain, a
record of that transaction is added to the ledger of each participant. Distributed Ledger
Technology (DLT) is a decentralized database that is administered by various
participants.
Blockchain is a sort of distributed ledger technology in which transactions are recorded
using a hash, which is an immutable cryptographic signature.
19.1 Blockchain Offerings
Enterprise can transform their supply chain using Blockchain as it offers following
advantages-
Tradability: It is a one-of-a-kind blockchain solution that reimagines the traditional
marketplace model. By separating an object into shares that digitally indicate
ownership, one can "tokenize" an asset using blockchain. This fractional ownership
allows tokens to represent the worth of a shareholder's stake in a certain item, similar to
how a stock exchange permits trading of a company's shares. These tokens can be
traded, and users can transfer ownership without having to exchange tangible assets.
Traceability: By mapping and visualizing enterprise supply networks, traceability
increases operational efficiency. A growing percentage of customers want to know
where they may get information on the things they buy. Blockchain enables businesses
to better understand their supply chains and engage customers with data that is real,
verifiable, and unchangeable.
Transparency: It fosters trust by capturing critical data points such as certificates and
claims and making them publicly available. Its authenticity may be validated by third-
party attestors once it is registered on the blockchain. In real time, the data may be
updated and evaluated.

19.2 Blockchain Applications
Cold chain Monitoring- Food and pharmaceutical items have unique storage
requirements. Furthermore, rather than investing in their own warehouses and
distribution centers, businesses see the advantage in sharing them. Temperature,
humidity, vibration, and other external factors can be recorded by sensors on sensitive
products.
After that, the readings can be kept on a blockchain. They are tamper-proof and
permanent. Each member of the blockchain will be notified if a storage condition
differs from what was agreed upon.
Meet traceability- Distributed ledger systems (blockchains) can be used by businesses
to track product status at each stage of production. The records are irreversible and
permanent. They allow each product to be traced back to its source. Walmart, a global
retailer, uses blockchain to track pork sales in China. The company can see where each
piece of beef comes from, as well as each processing and storage stage in the supply
chain and the products' sell-by date, thanks to its technology. The corporation can also
see which batches are affected and who bought them in the event of a product recall.
Automotive Supplier Payments- Because transactions are done directly between
payer and payee, blockchain allows for the movement of money anywhere in the globe
without the need for traditional banking transactions.
Replacing slow, manual processes- Even though supply chains can now manage
enormous, complicated data sets, many of their procedures, particularly those in the
lowest supply tiers, are slow and rely exclusively on paper—as is still the case in the
shipping industry. Blockchain can be advantageous here to increase efficiency.
20 . Cold Chain for Covid Vaccine
Covid-19 vaccine has been the most anticipated product launch ever and going wrong in
the supply chain for this one is not an option. As billions of people eagerly await
vaccination over the coming months and years, it will arguably be the most complex
large- scale logistical exercise the world has ever witnessed.
As governments, industry and other entities begin COVID-19 vaccine distribution
efforts worldwide, cold chain management has emerged as a crucial factor for ensuring
vaccine safety and effectiveness.
Cold chain management entails maintenance of necessary refrigeration levels for highly
temperature-sensitive coronavirus vaccines across manufacturing, storage,
transportation, and distribution processes. Effective vaccine cold chain management
will require varying degrees of coordination and cooperation among multiple and
distinct stakeholders:

• Pharmaceutical manufacturers
• Specialized laboratory equipment manufacturers (temperature gauges, sensor
devices, hospital-grade freezers)
• Laboratory equipment manufacturers that produce climate-controlled packaging
and container materials
• Logistic providers
• Healthcare providers and point-of-care (POC) retail pharmacies
Effective cold chain management involves ensuring not only that, temperatures to
maintain vaccine viability are held constant, but also that adequate technologies are in
place to allow stakeholders at various points in vaccine storage, transport, and
distribution chains to verify stability of required temperatures.
Vaccine cold chain management comprises a patchwork of processes, methods, and
practices across several industries; these processes, in turn, have their own safety and
performance standards as well as national (and in some cases international) regulations
to which they comply and/or demonstrate conformity.
Risk management approaches for effective vaccine cold chain efforts should entail
rigorous gap assessments focused particularly on real-time process audits for two areas:
Chain of Custody for tracking and documenting cold chain materials through storage,
transportation, and distribution; and Chain of Conditions for supporting consistent
temperatures as vaccines are transported.
Cold chain stakeholders should pay careful attention to labelling and safe handling
instructions and ensure that these materials clearly articulate storage requirements,
expiration data and transport requirements for non-experts.
Distributors will also need to consider the possibility of recalls, which will heavily
burden an already over-taxed supply chain. Since it is logistically impossible to
vaccinate everyone in a first wave, distributors will need to develop standalone
strategies for multiple waves. With many companies still relying on decades-old
technology, the distribution of the vaccine will witness a never-seen-before demand and
complexity.
The ageing back-office systems that many logistics companies are relying on are not
capable of managing the scale and complexity of the task at hand. Therefore, many
organizations are turning to flexible and scalable SaaS applications for supply chain and
rearchitecting their operations to be able to leverage innovative technologies like
Artificial Intelligence, Internet of Things and blockchain to improve efficiency.

21 . Impact of Covid on Supply Chain
The COVID-19 pandemic that has swept through the world this year has caused
unprecedented health and economic distress globally. To curb the rapid spread of
infection through their populations, several countries imposed and continue to impose
widespread lockdowns. This has caused significant disruption in demand and supply
around the world. Availability and supply of a wide range of raw materials, intermediate
goods, and finished products have seriously disrupted. Global supply chains (GSCs),
which had shown a high level of robustness and resiliency against several disruptions in
recent decades, are genuinely compromised.
The Logistics & Supply chain (L&SC) arm of retail is one of the main constituents of a
country’s economy. An efficient supply chain management has a cascading impact on
all aspects of retail – from sourcing of raw materials based on demand forecast and then
speeding up the production to getting the product to the store and finally to the
consumer, everything depends on the L&SC. The pandemic, which took the world
pretty much by surprise, has pushed up the demand of essential goods. Unfortunately,
the COVID crisis has created a serious risk to supply chains, as manufacturers and
retailers face the possibility that suppliers will halt production, and they won’t be able to
replenish run- down stockpiles.
Challenges for Supply Chain Industry Amidst COVID-19:
• Transportation: Transportation is the backbone of the supply chain. With
around 80-85 percent share in the value terms currently, the percentage of
transportation will always remain high in coming years. However, the lockdown
has imposed major restrictions, as a result air, rail and road services are feeling
the heat in fulfilling the demand supply. A large part of Indian retail industry is
still dependent on the transportation via roads and therefore, despite the measures
and support from the government, the supply chain industry is feeling the
pressure.
• Manpower: With millions of migrant workers back home or under lockdown,
supply chains and other retail businesses are struggling to deploy even 20 percent
of the required labor force. For maintaining inventory in warehouses, a skilled
workforce is required, which seems a distant probability in the new normal. Aside
from this, factories of essential goods have been operating with restricted
working hours, reduced staff, and shortage of trucks.
• Hygiene: With hygiene becoming the new standard by which industries are being
judged today, the country’s supply chain management needs to put in that extra
effort and time in maintaining the sanitation process during transportation and
delivery of products.
• Lack of inventory: The sudden spread of COVID-19 caught most retailers
unawares, not giving them enough time to stock up on products. With the

lockdown in place, retailers are left with limited stock of products, with a lot of
inventory stuck in the state specific or local warehouses. This in turn is becoming
challenge in supply chain management.
Way Forward
A McKinsey study titled ‘Supply-chain recovery in coronavirus times- plan for now and
the future’ says that in the current landscape, we see that a complete short-term response
means tackling six sets of issues that require quick action across the end-to-end supply
chain.
• Create transparency on multi-tier supply chains, establishing a list of critical
components, determining the origin of supply, and identifying alternative sources.
• Estimate available inventory along the value chain- including spare parts and
after- sales stock- for use as a bridge to keep production running and enable
delivery to customers.
• Assess realistic final-customer demand and respond to (or, where possible,
contain) shortage-buying behavior of customers.
• Optimize production and distribution capacity to ensure employee safety, such as
by supplying personal protective equipment (PPE) and engaging with
communication teams to share infection-risk levels and work-from-home options.
• Identify and secure logistics capacity, estimating capacity and accelerating, where
possible, and being flexible on transportation mode, when required.
• Manage cash and net working capital by running stress tests to understand where
supply- chain issues will start to cause a financial impact.
Digitization at the Ground Level:
The logistics systems and warehouses involved in the supply chain in Tier I cities are
technically advanced and automated. As a result, they are still functioning and can
process demand despite working with limited restrictions.
Regrettably, Tier IV, V and beyond are mostly labour intensive, requiring vast amounts
of paperwork among other formalities. In the current COVID-19 pandemic,
governments and businesses with strong digital infrastructure and enabling regulations
such e-signature and e-transactions laws, are dealing with the supply chain disruptions
much better than those without. Digitization will make the entire process very fast and
organized.
Prepare for the Future:

A supply chain initiative needs constant upgradation. In India, the need of the hour is to
implement supply chain finance programs to support suppliers in dire financial straits
and make the value chain more capital efficient.

Prioritize products and manage demand volatility:

The current COVID-19 pandemic has caused disruption with various degrees of impact.
Retail priorities and supply chain issues are changing quickly. It is time for companies
to rapidly assess, recover, and respond quickly to numerous obstacles and challenges
that still stand in the way. While the retail environment will stabilize at some point in
the future, it is difficult to predict our ‘new normal’ might look like.
Going forward, retailers and suppliers must join hands to counter the logistical and
transportation slowdown and reinvent supply chain management. They must explore
newer distribution channels that is technologically sounder to counter a calamity of the
scale of COVID-19. Reinventing the Indian supply chain model will be a key challenge
post lockdown for the Indian retail industry- something which would indeed be a true
game- changer.
22 . Impact of Farm Bills 2020 on Agriculture Supply Chain
The new legislations that look to rejig India’s vast and fragmented agriculture markets
together with amendments to the Essential Commodities Act are significant structural
changes brought in by the Indian government. So far protests by farmers have largely
concentrated in north- western India, in Punjab and Haryana, but the legislations are
likely to have far reaching impact over the next few years across states.
The government hopes competitive markets and higher private investments in the food
supply chain will improve farm-gate prices. But the impact of the recent farm bill on
Agriculture sector will be.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill aims at
opening agricultural sale and marketing outside the notified Agricultural Produce
Market Committee (APMC) mandis for farmers. Earlier these mandis had a monopoly
on the trade of agricultural produces. You needed a license from them to be in the
business. The mandis can regulate the trade of farmers’ produce by providing licences
to buyers, commission agents, and private markets. They also levy market fees or any
other charges on such trade.
Vegetables, rice, and pulses are expensive, but farmers are poor. The middlemen make
all the money, and it is the mandi system that made money in the middle. Removing
these middlemen will increase the money in the hands of the farmers and makes it
cheaper to buy food.
Contract farming is legal in India, provided you register them with mandis. Despite
huge potential, the mandis never allowed contract farming to take off in India. Free
from the clutches of local mandi committees, contract faming can now finally flourish
in India.

It removes barriers to inter-state of agricultural produces, creating a unified market

across India and provides a framework for the electronic trading of agricultural produce.
It also prohibits states from collecting any fee, cess, or levy for trade outside the APMC
markets.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm
Services Bill introduces contract farming in India for the first time. It provides a
framework on trade agreements for the sale and purchase of farm produce. The mutually
agreed remunerative price framework envisaged in the legislation is touted as one that
would protect and empower farmers.
The important thing is that businesses can now bypass the mandi and directly procure
from farmers, provide capital and assured procurement, and even pay for insurance,
ensuring a better outcome for farmers!
The Essential Commodities (Amendment) Bill removes cereals, pulses, oilseeds, edible
oils, onion, and potatoes from the list of essential commodities. The amendment
deregulates production, storage, movement, and distribution of these specified
commodities.
This reform is intended to attract private sector capital/FDI into the agriculture sector as
it will remove fears of private investors of excessive regulatory interference in business
operations. We can also expect more investment for infrastructures like cold storages,
aggrotech start-ups, and food supply chains.
23 . Internet of Things in Operations/Supply Chain
Since the late 1700’s, there have been four recognized shifts in manufacturing process
and technology. The fourth wave, Industry 4.0, has begun to emerge. This will the era of
cognitive manufacturing- where IoT sensors, big data, predictive analytics, and robotics
will forge the future of manufacturing operations.
Manufacturers have been collecting and storing data for the purposes of improving
operations since the first Industrial Revolution. By analyzing both structured data being
collected in databases, and unstructured data such as photos or video footage, it is
possible to bring more certainty to decision-making and business operations.
Using IoT, cognitive process and operations, businesses can:
• Improve productivity of the production line through inventory and scrap
reductions.
• Expedite service calls and repairs and reduce warranty costs.
• Improve quality and yield due to improved quality practices.
• Prevent production delays and improve production line performance.

24 . Questions to ponder upon
"More responsible supply chains are being demanded by societies." Comment on the
assertion based on global supply chain observations.
Which can be an example for Engineer to order fulfilment strategy and why?
a) Soaps
b) Laptops
c) Mobile phones
d) Ships
Which of the following is easier to forecast and why?

a) Winner of cricket world cup
b) Sales of Tesla in the next month
c) Sales of IPhone X in the next week in India
d) Sales of thumbs up bottles in the next 24 hrs in a supermarket
Describe the supply chain that went into creating the Santoor soap bar you just bought
from your local convenience store.
Customers who want to buy a book can do so either online through Amazon and flipkart
or in person at a book store near them. What are the differences between these two
supply chains? Are clients expecting the same level of service from both businesses?
Engineering students who are not trained software professionals have been hired by
Indian IT organizations. IT companies invest a lot of money in training these recent
graduates. Should they delegate software training to the colleges where these students
are recruited?
By selling its plant and machinery, a company can boost its return on investment.
Should businesses sell their factories and machinery and outsource their whole
manufacturing operations? Is there a flaw in the logic presented above?
Amazon.com has established new warehouses in various locations of the United States
of America over time. Why would an e-retailer require many warehouses in various
locations around the country? Elaborate.
What kind of seasonality are you likely to see in the following fields?
a) Retail chain in a metropolitan area
b) ATM
c) Restaurant

Marketing
Compendium

MARKETING COMPENDIUM
Contents
1. Marketing Definition ............................................................................................. 6
2. Sales VS Marketing ............................................................................................... 6
3. Needs, Wants, Demands, And Desires .................................................................. 7
• Needs .............................................................................................................. 7
• Wants............................................................................................................... 7
• Demands and Desires: .................................................................................... 8
4. Segmentation, Targeting & Positioning (STP)...................................................... 8
• Segmentation .................................................................................................. 8
• Why do we need segmentation? ............................................................................................................. 8
• Targeting......................................................................................................... 9
• Positioning .................................................................................................... 10
• Elements of Positioning:......................................................................................................................... 10
5. MARKETING MIX ............................................................................................ 11

• 4Ps of Marketing .......................................................................................... 11
• Product ................................................................................................................................................... 11
• Price........................................................................................................................................................ 11
• Placement............................................................................................................................................... 11
• Promotion .............................................................................................................................................. 12
• 4P Analysis of KitKat ................................................................................... 12

• Extended P’s ................................................................................................. 13
• People..................................................................................................................................................... 13
• Process ................................................................................................................................................... 13
• Physical Evidence ................................................................................................................................... 13
6. Product Mix – Length & Breadth ........................................................................ 13

• Product Mix .................................................................................................. 13
• Product Line ................................................................................................. 13
• Product Mix Breadth .................................................................................... 14
• Product Line Depth....................................................................................... 14

• Length of the Product Mix ........................................................................... 14

7. PUSH V/S PULL MARKET ............................................................................... 15
8. Go-To-Market Strategy ....................................................................................... 15
• Why a Go-To-Market Strategy is needed .................................................... 15
9. Product Life Cycle ............................................................................................... 16
10. Profit Curve ......................................................................................................... 16
• Stage 1: Product Development (Phase 1: Introduction) ............................... 16
• Stage 2: Introduction Stage (Phase 1: Introduction) .................................... 16
• Stage 3: Growth ............................................................................................ 17
• Stage 4: Maturity .......................................................................................... 17
• Stage 5: Decline ............................................................................................ 17
11. Product Life Cycle Extension .............................................................................. 18
PLC extension is a way for firms to compete for sales and market share. This can
take place in several ways: .................................................................................. 18
12. Brand Extension................................................................................................... 18
• Benefits: ........................................................................................................ 18
• Disadvantages of Brand Extension: ............................................................. 19
Brand dilution: .............................................................................................................................................. 19
Brand confusion: ........................................................................................................................................... 19
Cannibalization:............................................................................................................................................. 19
13. Pricing Strategies ................................................................................................. 19

• Captive Pricing- ............................................................................................ 19
• Predatory Pricing-......................................................................................... 20
• Penetration Pricing- ...................................................................................... 20
• Skimming Pricing-........................................................................................ 20
14. Commodification ................................................................................................. 20
• Bharat Matrimony .................................................................................................................................. 20
• Bottled Clean Air .................................................................................................................................... 20
15. Marketing Myopia ............................................................................................... 21

16. 4C’s of Marketing ................................................................................................ 21

• Customer....................................................................................................... 22
• Cost ............................................................................................................... 22
• Convenience ................................................................................................. 22
• Communication ............................................................................................ 22
17. Maslow’s Theory of Needs.................................................................................. 23
18. Blue Ocean and Red Ocean Strategy................................................................... 24
• Red Ocean Strategy: ..................................................................................... 24
• Blue Ocean Strategy: .................................................................................... 24
19. Ansoff Matrix ...................................................................................................... 25
• Market Penetration: ...................................................................................... 25
• Product Development: .................................................................................. 25
• Market Development: ................................................................................... 25
• Diversification: ............................................................................................. 26
20. BCG Matrix ......................................................................................................... 26
• Breakdown of the BCG Matrix .................................................................... 27
• Stars:....................................................................................................................................................... 27
• Cash Cows: ............................................................................................................................................. 27
• Dogs:....................................................................................................................................................... 27
• Question Marks: ..................................................................................................................................... 28
21. Porter’s 5 Forces .................................................................................................. 28

22. Abell’s Framework .............................................................................................. 29
• The Three Dimensions ................................................................................. 30
• Customer Needs: .................................................................................................................................... 30
• Technologies: ......................................................................................................................................... 31
• Customer Groups: .................................................................................................................................. 31
• Limitations .............................................................................................................................................. 31
23. ATL, BTL, and TTL Marketing .......................................................................... 31

• Above the Line (ATL) Advertising .............................................................. 31
• Below the Line (BTL) Advertising .............................................................. 32
• Through the Line (TTL) Advertising ........................................................... 32

24. Brand Equity ........................................................................................................ 33

• MANAGING BRAND EQUITY ................................................................. 33
• Brand Revitalization ................................................................................................................................ 33
• Brand Reinforcement ............................................................................................................................. 34
25. GUERRILLA MARKETING.............................................................................. 35

26. Digital Marketing................................................................................................. 36
• Types of Digital Marketing .......................................................................... 36
27. Digital Marketing Funnel .................................................................................... 40
• Engagement .................................................................................................. 40
• Education ...................................................................................................... 40
• Research........................................................................................................ 40
• Evaluation ..................................................................................................... 41
• Justification................................................................................................... 41
• Purchase ........................................................................................................ 41
• Adoption ....................................................................................................... 41
• Retention....................................................................................................... 41
• Advocacy ...................................................................................................... 41
• Expansion ..................................................................................................... 41
28. Surrogate Marketing ............................................................................................ 42
29. Neuro-Marketing ................................................................................................. 42
30. Business Models .................................................................................................. 42
• B2B Model (Business 2 Business) ............................................................... 42
• B2C Model (Business 2 Customer) .............................................................. 43
• C2C Model (Customer 2 Customer) ............................................................ 43
31. Marketplace Model vs Inventory Model ............................................................. 43
• Marketplace model ....................................................................................... 43
• Inventory model............................................................................................ 43

1. Marketing Definition
Marketing is the process by which a firm profitably translates customer needs
into revenue. It includes advertising, selling, and delivering products to
consumers or other businesses.
As per the American Marketing Association: Marketing is an art and science of
choosing target markets and getting, keeping, and growing customers through
creating, offering, and freely exchanging products and services of value with
others.
Marketing is the science of exploring, creating, and delivering value to satisfy the
needs of a target market at a profit. Marketing identifies unfulfilled needs and
desires. It defines, measures, and quantifies the size of the identified market and
the profit potential. It pinpoints which segments the company can serve best and
it designs and promotes the appropriate products and services – Dr. Philip Kotler
2. Sales VS Marketing

3. Needs, Wants, Demands, And Desires

• Needs
Needs are basic human requirements
They are states of felt deprivation for basic human requirements
These may include:
• Physical Needs: Food, clothing, shelter, clean air
• Social Needs: Belonging and affection
• Individual Needs: Knowledge and self-expression
Generally, the products which fall under the needs category of products do not require
apish.
Given below are the different types of needs:
• Wants
Wants are need satisfiers; they are described in terms of objects that will satisfy
needs. Wants are shaped by culture, society, and individual personality.
Ex: A hungry person in Australia may want a hamburger, chips, and a cola while
someone from Singapore may want noodles and someone from the South Pacific
region may want mango, coconuts, and beans
Thus, wants are not mandatory part of life.

• Demands and Desires:

• Demands are wants backed by consumer purchasing power i.e., wants for specific
products backed by an ability to pay for them
• Companies must measure not only how many people want their product but how
many are willing and able to buy it
• Customers view products as bundles of benefits and choose products that give
them the best bundle for their money
• Desire is the basic difference between wants and demands.
4. Segmentation, Targeting & Positioning (STP)
• Segmentation
Segmentation is a practice that seeks out pieces of the total market that contain
customers with identifiable characteristics, as defined by income, age, personal
interests, ethnic background, special needs, and so forth. The point of
segmentation is to break a mass market into submarkets of customers who have
common needs.
• Why do we need segmentation?

• Not all individuals have similar needs. Individuals have different needs based
on various factors which define them or their lifestyle like needs of men, women
and kids differ from each other completely, or the needs of married individuals

would differ from bachelors or needs of people from different countries will be
different, when they are to be satisfied using various products and services.
Identifying these segments makes it possible to do two things:
• Create goods and services that are better tailored to the needs of specific
customers and
• Focus marketing resources more efficiently
• Targeting
Target Marketing involves breaking a market into segments and then
concentrating your marketing efforts on one or a few key segments consisting of
the customers whose needs and desires are first identified and then attempted to
be met by your product or service offerings. It can be the key to attract new
business, increasing your sales or profitability.

• Positioning
Positioning is defined as the act of designing the company’s offering and image to
occupy distinctive place in the target market ‘s mind.
Positioning is all about perception. As perception differs from person to person,
so do the results of the positioning map e.g., what one perceives as quality, value
for money in terms of worth, etc. will be different to any other person ‘s
perception. However, there will be similarities in certain cases.
GSK’s ENO, an antacid, has always positioned itself as an instant reliever

from acidity. Positioning statement: Take ENO for fast relief from
acidity. It gets to work in 6 seconds.
“To acidity-stricken people, ENO is a powdered antacid that gives
instant relief in 6 seconds”
• Elements of Positioning:
• Target Audience: For whom the product is intended.
• Points of Parity (POP): Attributes like other products in the category. Points of
parity are important because customers expect basic offerings from a category.
• For example, when purchasing a toothpaste, a customer will expect that it should
have freshness as well as it tastes well.
• Points of Difference (POD): Attributes that differentiate the product from others
in the same category. The more the number of PODs, the better is the positioning.
PODs should satisfy the following criteria
It should be desired by the customer
It should be sustainable for the producer
It should be differentiated from its competitors
Apple introduced the fingerprint scanner to unlock device in the iPhone models. This was a
POD until Samsung and all other manufacturers used the same technology to make it into a
POP, thus nullifying Apple’s unique POD

5. MARKETING MIX
Its purpose is to make a marketing strategy for a new market or an existing market.
• 4Ps of Marketing
• Product
This represents an item or service designed to satisfy customer needs and wants.
To effectively market a product or service, it is important to identify what
differentiates it from competing products or services. It is also important to
determine if other products or services can be marketed in conjunction with it.
• Price
The sale price of the product reflects what consumers are willing to pay for it.
Marketing professionals need to consider costs related to research and
development, manufacturing, marketing, and distribution, otherwise known as
cost-based pricing. Pricing based primarily on consumers' perceived quality or
value is known as value- based pricing.
• Placement
The type of product sold is important to consider when determining areas of
distribution. Basic consumer products, such as paper goods, often are readily
available in many stores. Premium consumer products, however, typically are
available only in select stores. Another consideration is whether to place a product

in a physical store, online, or both.

• Promotion
Joint marketing campaigns also are called a promotional mix. Activities might
include advertising, sales promotion, personal selling, and public relations. A key
consideration should be for the budget assigned to the marketing mix. Marketing
professionals carefully construct a message that often incorporates details from
the other three Ps when trying to reach their target audience. Determination of the
best mediums to communicate the message and decisions about the frequency of
the communication also are important.
• 4P Analysis of KitKat

• Extended P’s
In case of a service 3 more Ps are added to the marketing Mix, together they make
7 Ps for an extended marketing mix of a service.
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Physical Evidence
7. Process
• People
People refer to employees who represent a company as they interact with clients
or customers.
• Process
Process represents the method or flow of providing service to the clients and
often incorporates monitoring service performance for customer satisfaction.
• Physical Evidence
Physical evidence relates to an area or space where company representatives and
customers interact.
6. Product Mix – Length & Breadth

• Product Mix
The complete set of all products that a company offers to the market is called as
the product mix of the company. For example, this is the product mix for ITC.
• Product Line
A product line is a group of products within the product mix that are closely
related, either because they function in a similar manner, are sold to the same
customer groups, are marketed through the same types of outlets, or fall within

given price ranges.
• Product Mix Breadth

The breadth (or width) of the product mix consists of all the product lines that the
company has to offer to its customers. If we take P&G, for example, the breadth
of the major product lines would consist of hair products, oral care, soaps and
detergents, baby care, and personal care. This means that the product mix breadth
is five.
• Product Line Depth

The number of products in a product line refers to its product line depth. The
depth of product blend refers to how many variants are offered of each product
in the line
For example, Dove has 10 different types of shampoos for
different hair needs (Rejuvenated Volume, Rejuvenated
Repair, Split-End Rescue, Nourishing Oil Care, Intense
Repair, Hair Fall Rescue, Daily Shine, Dandruff Care,
Dryness Care, Oxygen Moisture), it contains a depth of 10.
• Length of the Product Mix

It refers to the whole number of items in the mix. For example, if a company has
5 product lines and 10 products each under those product lines, the length of the
mix will be 50 [5 x 10].

7. PUSH V/S PULL MARKET

In PUSH, uses the manufacturer ‘s sales force, trade promotion money, or other
means to induce intermediaries to carry, promote, and sell product to the end users.
This strategy is appropriate when there is low brand loyalty, brand choice is made
in the store, the product is an impulse item and the benefits are well understood.
In a pull strategy the manufacturer uses advertising, promotion, and other forms
of communication to persuade consumers to demand the product from
intermediaries, thus inducing the intermediaries to order it. This strategy is
appropriate when there is high brand loyalty, high involvement and the
consumers choose the brand before they go to the store.
8. Go-To-Market Strategy
A go-to-market (GTM) strategy is the way in which a company brings a product
to market. It generally includes a business plan outlining the target audience,
marketing plan, and sales strategy. Each product and market are different,
therefore each GTM strategy should be thoroughly thought out, mapping a market
problem and solution a product offers.
• Why a Go-To-Market Strategy is needed
For large companies with existing products, their GTM strategies might revolve
around correct communication and branding for new markets. For those of us who
are building new businesses, an incorrect GTM strategy can cost years in going

the wrong direction with development and marketing.

If a company is confident that they can build a product they can focus on picking
a big market and nailing the pain point, the brand, messaging, content, ads, emails,
and sales model needed to reach that market. The companies which are confident
can pull this off. First-time business founders are not. Most of us them products
and figure out the marketing afterward or do some half-baked version of both
together.
9. Product Life Cycle
PLC describes the various stages that a product goes through from the time it
was initially thought of until it is finally removed from the market.
10. Profit Curve
• Stage 1: Product Development (Phase 1: Introduction)

This is the stage where the product is conceived and developed. This stage is
characterized by high R&D costs and losses in the form of manufacturing costs.
Example: Apple Car an autonomous EV is an example of product development
phase.
• Stage 2: Introduction Stage (Phase 1: Introduction)

This is the stage where products are introduced to the market. Companies either

create a new product market or they enter with breakthrough, or they come up with
competitive products to the existing products. This stage is characterized by high
marketing costs since the company invests a lot in creating awareness for the
product. Sales growth is slow in this stage due to which the company experiences
huge losses during this period. Due to the inability to continuously sustain losses,
the failure at this stage is the highest.
• Stage 3: Growth
This stage is marked by a sharp increase in sales and the product becomes
profitable in this stage. Company spends on marketing to strengthen market share
and capture market share. This stage also experiences competition from new
entrants who now see value in entering the segment. This stage also experiences
the highest profits.
• Stage 4: Maturity
This stage sees stagnation in profits and the sales after growing for a certain
period start going down. Companies often spend a lot on innovation and
promotions to sustain this stage as long as possible. This is also a stage that is
characterized by strong competition since the segment is now an established one.
A product might be in this stage for months or for decades.
• Stage 5: Decline
This is the stage when players start moving out of the segment because it has been
replaced by better and more lucrative alternatives. Companies reduce their
marketing spends and do not invest in innovations and the product sells by itself.

11. Product Life Cycle Extension
PLC extension is a way for firms to compete for sales and market
share. This can take place in several ways:
Increase use of the product among current users
Obtain more varied use among current users
Identify new users in product line extension
Android has been continuously

bringing out new versions of its
software version to extend its
product life cycle
12. Brand Extension

Brand extension is a method used by companies to launch a new product by using
an existing brand name. Brands extension falls into general categories:
• Benefits:
Allows company to leverage its existing customer base and brand loyalty to
increase profits and promote new products with reduced promotional costs
because the new lines or brands benefit from being part of an established name.
Achieves success much quicker than it would have as an original brand

• Disadvantages of Brand Extension:
Brand dilution:
It occurs when consumers start thinking less of the brand. If a firm launches
extensions consumers find inappropriate, they may question the brand integrity or
become confused or even frustrated.
E.g., Tata Nano being launched as a “cheap” vehicle hit the positioning of Tata
Motors hard.
Brand confusion:
Line extensions may cause the brand name to be less strongly identified with one
product.
E.g., By getting into powdered milk, soups and beverages, Cadbury ran the risk of
losing its more specific meaning as a chocolate and candy brand
Cannibalization:
Consumers may switch to extensions from parent- those consumers have already
purchased. The customer cannot avoid purchasing the components, such as
replacement razor blades, without sacrificing the value of the core product, such
as the razor itself, enabling the company to achieve much higher profit margins
than are possible for regular products.
13. Pricing Strategies

Approaches to pricing offerings are driven by strategic considerations and have
long- term implications for a firm. There are numerous strategic pricing
approaches, some of the notable ones are mentioned below-
• Captive Pricing-
Captive product pricing is the pricing of products that have both a “core product”
and a number of “accessory products.” It's a pricing strategy that takes advantage
of a product that will be used primarily to attract a large volume of customers.

• Predatory Pricing-
Predatory pricing" is generally used to describe the adoption of a pricing policy
that somehow restricts competition by driving out existing rivals or by excluding
potential rivals from the market. This kind of pricing behavior involves a reduction
of price in the short run to drive competing firms out of the market or to discourage
the entry of new firms to gain larger profits via higher prices in the long run than
would have been earned if the price reduction had not occurred.
• Penetration Pricing-
The strategy of deliberating assigning a low price to an offering, which is often
new to the market, to accomplish objectives including rapidly gaining market
share (which may further lead to scale economies for the firm) and discouraging
other firms from entering the market with competing products.
• Skimming Pricing-
A marketing strategy for maximizing profits on higher-priced products. This is
based on a retailing attitude, which consumers willing to consider buying
expensive products will pay whatever is asked for them. The price is therefore
pitched at a premium cream’ – level, which can be skimmed effectively without
loss of customer interest.
14. Commodification
Commodification describes the process by which something without an economic
value gains economic value that can replace other social values. The process
changes relationships that were previously untainted by commerce into
relationships that essentially become commercial in everyday use. Not everything
useful is a commodity. What makes anything a commodity is a possibility of
trading it for profit. Apples grown in someone‘s back yard are not commodities;
apples become commodities only when they are grown for sale.
• Examples
• Bharat Matrimony
Bharat matrimony is a company that has commodified matchmaking.
Traditionally it was the uncles, aunts, and other relatives who used to bring
marriage prospects.
Bharat Matrimony and many other companies have successfully and creatively
utilized commodification and revolutionized matchmaking
• Bottled Clean Air

Until a few years ago fresh air was the only few things available for free to us.
Thanks to the pollution we now have many companies like Auzair, Vitality Air,
and Indian brand Pure Himalayan Air which have come up with bottled fresh air.
These companies have commodified the free air and presented it to us as a luxury
commodity.
15. Marketing Myopia

The concept was first coined and explained by Harvard business school professor
Theodore Levitt, in a 1960 article by the same name. Levitt argues that companies
are too focused on producing goods or services and don‘t spend enough time
understanding what customers want or need. In short, companies tend to move
towards the road of failure if the focus shifts from buyers (marketing) to sellers'
side (selling). It occurs because companies believe that they are in an everlasting
growth business and became myopic towards a future vision. The companies then
become product-centric rather than customer-centric. The focus is shifted from
satisfying customer needs to sell the product.
For example: Perhaps the most famous is the railroad lines, which Levitt argues
fell into steep decline because they thought they were in the train business rather
than the transportation business. If those leaders had seen themselves as helping
customers get from one place to another, they might have expanded the business
into other forms of transportation like cars, trucks, or airplanes. Unfortunately,
they let other companies seize those opportunities and steal away their passengers
instead. Way around this is focusing on the customers in the long rather than solely
on product. This is where 4 Cs of marketing come in handy.
16. 4C’s of Marketing

The 4 C ‘s of marketing, which consist of Consumer wants and needs, Cost,
Convenience, and Communication, are arguably much more valuable to the
marketing mix than the 4 P ‘s. They focus not only on marketing and selling a
product but also on communication with the target audience from the beginning
of the process to the very end.
The 4 P ‘s focus on a seller-oriented marketing strategy, which can be extremely
effective for sales. However, the 4 C ‘s offers a more consumer-based perspective
on the marketing strategy. Many marketing specialists now see the 4Ps as too
product-oriented and have adopted the 4Cs marketing mix, which looks at
marketing from the customer ‘s point of view.

• Customer
The first C in this marketing mix is the customer ‘s wants and needs. Instead of
focusing on the product itself, the first C focuses on filling a void in the customer
‘s life.
This marketing strategy is important for businesses that are interested in seeking
an understanding of their customers. Once you understand your customer, it
becomes much easier to create a product that will be of benefit to them. The
customer makes the purchase decision and is, therefore, the most valuable resource
in any marketing strategy.
• Cost
The Second C in this marketing mix is cost. Don‘t confuse the cost of your product
with its price. Price is only a small segment of the overall cost of buying a product
to a customer. It is important to determine the overall cost – not the price – of your
product to the customer.
Cost not only includes the price of the item but also may include things such as
the time it takes for the customer to get to your location to buy your product or the
cost of gas that it takes to get them there. The cost can also include the product ‘s
benefit, or lack-there-of, to the customers.
• Convenience
The Third C within this marketing mix is convenience. Convenience is similar to
―place in the 4P ‘s marketing strategy. However, these two are very different.
Place simply refers to where the product will be sold. Convenience is a much more
customer-oriented approach to this marketing strategy.
Once you have analyzed your customer ‘s habits, you should be able to know
whether they shop online or in stores as well as what they are willing to do to buy
your product. The overall cost of the product will determine in part its convenience
to your target audience. The goal is to make the product cost-effective and simple
enough for the customer to attain the product without having to jump through
hoops.
• Communication
The fourth and final C in this marketing mix is communication. Communication
is always key to business marketing; without it, the 4 C ‘s would not be effective.
Communication is like the fourth P, promotion; however, it is very different.

Promotion of a product is used to sway customers to get them to buy a product.

Promotion can often be manipulative and ineffective. However, communication is
(again) a customer- oriented approach to the task of selling products.
Communication requires interaction between the buyer and seller. This marketing
strategy can very easily be implemented using social media.
Marketing a product on your social media sites, or even including links to your
social media profiles can be very beneficial to your customers. This allows them
to interact with your brand on a personal level and will eventually lead to greater
brand loyalty among your customers.
17. Maslow’s Theory of Needs

The hierarchy of needs theory as developed by Abraham Maslow considers human
needs as consisting of five categories in ascending order: physiological or
biological needs (e.g., food, water, sleep), safety needs (e.g., physical security,
financial security), belongingness, and love needs (e.g., friends, relationships,
intimacy), esteem needs (respect, status), and self- actualization needs (e.g.,
making the most of one ‘s unique abilities).
This theory works on the principle that human needs are categorical and
hierarchical, where itis not until certain categories of lower-level needs are met or
reasonably well satisfied that other higher-level categories of needs can be
attended to.

18. Blue Ocean and Red Ocean Strategy
• Red Ocean Strategy:

Red ocean strategy focus on building advantages over the competition, usually by
assessing what competitors do and striving to do it better. Here, grabbing a bigger
share of the market is seen as a zero-sum game in which one company's gain is
achieved at another company’s loss. Hence, competition, the supply side of the
equation, becomes the defining variable of strategy. Here, cost and value are seen
as trade-offs and a firm chooses a distinctive cost or differentiation position.
Because the total profit level of the industry is also determined by structural
factors, firms principally seek to capture and redistribute wealth instead of creating
wealth. They focus on dividing up the red ocean, where growth is increasingly
limited.
• Blue Ocean Strategy:
Blue oceans denote all the industries not in existence today—the unknown market
space, untainted by competition. In blue oceans, demand is created rather than
fought over. There is ample opportunity for growth that is both profitable and
rapid. There are two ways to create blue oceans. In a few cases, companies can
give rise to completely new industries, as eBay did with the online auction
industry.
But in most cases, a blue ocean is created from within a red ocean when a company
alters the boundaries of an existing industry. Incumbents often create blue
oceans—and usually within their core businesses. GM, the Japanese automakers,
and Chrysler have established players when they created blue oceans in the auto
industry. So were CTR and its later incarnation, IBM, and Compaq in the
computer industry. And in the cinema industry, the same can be said of palace
theaters and AMC.
Of the companies listed here, only Ford, Apple, Dell, and Nickelodeon were new
entrants in their industries; the first three were start-ups, and the fourth was an
established player entering an industry that was new to it. This suggests that
incumbents are not at a disadvantage in creating new market spaces. Moreover,
the blue oceans made by incumbents were usually within their core businesses.
Most blue oceans are created from within, not beyond, red oceans of existing
industries. This challenges the view that new markets are in distant waters. Blue
oceans are right next to you in every industry.

19. Ansoff Matrix

The Ansoff Matrix also called the Product/Market Expansion Grid, is a tool used
by firms to analyze and plan their strategies for growth. The matrix shows four
strategies that can be used to help a firm grow and analyses the risk associated
with each strategy.
The matrix was developed by applied mathematician and business manager, H.
Igor Ansoff, and was published in the Harvard Business Review in 1957. The four
strategies of the Ansoff Matrix are:
• Market Penetration:
This focuses on increasing sales of existing products to an existing market. This
can be done by one or a combination of the following ways:
Decreasing prices to attract new customers
Increasing promotion and distribution efforts
Acquiring a competitor in the same marketplace
• Product Development:
Focuses on introducing new products to an existing market. This can be done by
one or a combination of the following ways:
Investing in R&D to develop new products to cater to the existing market.
Acquiring a competitor’s product and merging resources to create a new product
that better meets the need of the existing market.
Forming strategic partnerships with other firms to gain access to each partner’s
distribution channels or brand.
• Market Development:
This strategy focuses on entering a new market using existing products. The
market development strategy may involve one of the following approaches:
Catering to a different customer segment
Entering a new domestic market (expanding regionally)
Entering a foreign market (expanding internationally)

• Diversification:
Focuses on entering a new market with the introduction of new products. There
are two types of diversification a firm can employ:
Related diversification: There are potential synergies to be realized between the
existing business and the new product/market.
For example, a leather shoe producer that starts a line of leather wallets or
accessories is pursuing a related diversification strategy.
Unrelated diversification: There are no potential synergies to be realized between
the existing business and the new product/market.
For example, a leather shoe producer that starts manufacturing phones is pursuing
an unrelated diversification strategy.
20. BCG Matrix

The growth-share matrix is, put simply, a portfolio management framework that
helps companies decide how to prioritize their different businesses. It is a table,
split into four quadrants based on an analysis of market growth and relative
market growth, each with its unique symbol that represents a certain degree of
profitability: question marks, stars, pets (often represented by a dog), and cash
cows.
By assigning each business to one of these four categories, executives could then
decide where to focus their resources and capital to generate the most
value, as well as where to cut their losses. It is also called as product
portfolio matrix and Growth-Share Matrix.

• Breakdown of the BCG Matrix

• Stars:
The business units or products that have the best market share and generate the
most cash are considered stars. Monopolies and first-to-market products are
frequently termed stars. However, because of their high growth rate, stars consume
large amounts of cash. This generally results in the same amount of money coming
in that is going out. Stars can eventually become cash cows if they sustain their
success until a time when a high growth market slows down. A key tenet of BCG
strategy for growth is for companies to invest in stars.
• Cash Cows:
A cash cow is a market leader that generates more cash than it consumes. Cash
cows are business units or products that have a high market share but low growth
prospects. Cash cows provide the cash required to turn a question mark into a
market leader, cover the administrative costs of the company, fund research, and
development, service the corporate debt, and pay dividends to shareholders.
Companies are advised to invest in cash cows to maintain the current level of
productivity or to "milk" the gains passively.
• Dogs:
Dogs, or pets as they are sometimes referred to, are units or products that have
both a low market share and a low growth rate. They are frequently break- even,
neither earning nor consuming a great deal of cash. Dogs are generally considered
cash traps because businesses have money tied up in them, even though they are
bringing back basically nothing in return. These business units are prime
candidates for divestiture.

• Question Marks:
These parts of a business have high growth prospects but a low market share. They
consume a lot of cash but bring little in return. In the end, question marks lose
money. However, since these business units are growing rapidly, they have the
potential to turn into stars in a high growth market. Companies are advised to
invest in question marks if the product has the growth potential or to sell if it does
not.
21. Porter’s 5 Forces
Porter's Five Forces is a simple but powerful tool for understanding the
competitiveness of your business environment, and for identifying your strategy's
potential profitability.
The tool was created by Harvard Business School professor Michael Porter, to
analyze an industry's attractiveness and likely profitability. Since its publication
in 1979, it has become one of the most popular and highly regarded business
strategy tools.
Porter recognized that organizations likely keep a close watch on their rivals, but
he encouraged them to look beyond the actions of their competitors and examine
what other factors could impact the business environment. He identified five
forces that make up the competitive environment, and which can erode your
profitability.

22. Abell’s Framework

The Abell matrix is a three-dimensional tool most often is referred to as the three-
dimensional business definition model. The model is used to analyze the scope of
operation for a business. This may include areas such as the technologies and
products a business operates in a market or the audience that it targets. A detailed
analysis of the business ‘s current activities can help create strategies for the future
that will help the business stay tuned to the changes that may occur within the
market.
The three dimensions of the business are the customer groups (who will be served
by the business), customer needs (what are the customer needs that will be met),
and technology or distinctive competencies (how are these needs going to be met).
A major point of importance in this matrix is to focus on understanding the
customer rather than the industry and its products and services. Through these
three dimensions, this tool helps define a business by its competitive scope
(narrow or broad) and the extent of competitive differentiation of its
products/services.
Abell described the strategic planning process as the starting principle for an
organization ‘s business. This process in turn is driven by the mission statement
which provides direction, focus, and the basis for strategies to be further
elaborated and driven down. Abell used three key questions as the three
dimensions on his model and these are the foundation for the formulation of the
mission statement itself.

What are the customers of the organization?

How can the organization meet the needs of its customers?
What techniques are employed by the organization to meet these customer needs?
When plotted on a three-dimensional model, the horizontal axis is taken as the
customer groups, the vertical axis as their buying needs, and the inclined axis is
taken as the applied technologies. Taken together, a summarized version of the
organization ‘s business model can be viewed in one glance.
This overview helps provide the company with a quick glance at the factors most
important to the development of a marketing concept. The framework can be
optimized by sorting the different factors that make up all three dimensions by
their relative importance for the company. The most important factors should be
closest to the 0 axes and should be given the highest priority and will be
immediately visible to the company.
• The Three Dimensions
• Customer Needs:
This leg of the model identifies and lists down all the customer needs that are
relevant to the company in question. Customer needs are identified based on the
product offering and a link is made to customer benefits. As an example, a
software developer who has studied customer needs in relation to their product
will respond by providing easy to install software packages and may provide other
useful options such as anti-virus, a software cleanup option as well as manuals and
tech support.

• Technologies:
Unlike the name suggests, the word technologies is taken here in a broader context
to describe all those technologies that are used to create a product as well as put
in on the market. Issues here include things as diverse as the marketing campaign
being use or the way market research must be conducted. Taking our software
example further, the manufacturer will use the latest technologies in the product
itself as well as proving a helpdesk that provides the best possible and most
relevant information.
• Customer Groups:
There would be no market without customers purchasing products on offer.
Therefore, marketing is all about the buyers. It is vital for every organization to
understand how to segment the market and which segments to target in order to
successfully sell a product to them. Once the market has been segmented, the
company needs to work toward acquiring as much knowledge as possible about
the different target groups and offer specific products or campaigns to these
segments. Our software manufacturer may choose to serve both business and
customers and will need a separate strategy and account managers for its B2B and
B2C lines of business.
• Limitations
There is a strict marketing emphasis within the Abell model, which limits the
framework from being widely used and as a key approach used to define
competitive strategies for a business. In addition, there is no room to accommodate
external factors such as governments and other regulating bodies. The three-
dimensional model also makes the analysis more complex than a two dimensional
one. There is only a provision for abstract growth directions and the model does
not provide support to determine the appropriate size and scale of the business.
23. ATL, BTL, and TTL Marketing
• Above the Line (ATL) Advertising

ATL strategies focus on directing the communication towards the mass market.
All promotional messages are untargeted, meaning they do not focus on a specific
target group. The idea behind this is to inform customers about the availability of
the product. Marketers seek to encourage customers to visit stores and actively
seek the product. These strategies help companies reach a larger audience and
create brand visibility.
Implementing ATL activities:

Television: Advertising campaigns directed at the regional or national level

Print media: Promotional messages in newspapers, online articles, and
advertisements
Radio: Pan-country or pan-city radio broadcasts
• Below the Line (BTL) Advertising

BTL activities are more focused and are directed towards specific groups of
customers. They are highly targeted, with advertisements being created keeping
in mind the demographic and psychographic characteristics of customer segments.
The communication is highly personalized, and the objective is to gain
conversions.
The major advantage of BTL advertising is that the results of the campaign can be
easily tracked. ROI is also higher here. Additionally, campaigns can be tailored
for different subsets of consumers within a single segment.
Implementing BTL activities:
Outdoor advertisements: Billboards, fliers, banners, sandwich boards, and so on
Direct marketing: SMS, emails, social media posts, pamphlets
Sponsorship: Events, competition
• Through the Line (TTL) Advertising
TTL advertising involves an integrated approach where both ATL and BTL
strategies are combined. The objective here is to get a holistic view of the market
and communicate with customers in every way possible. Considering that both
ATL and BTL activities are used here, all TTL strategies lead to better brand
visibility and brand recall.
The major challenge of TTL activities is the cost associated with implementing
various promotional campaigns. It is usually only established or financially secure
companies that can implement TTL activities successfully.
Implementing TTL activities:
360-degree marketing: Using both ATL and BTL activities – for example, a
television advertisement supplemented with pamphlets of the product attached to
newspapers.
Digital marketing: Online banners and buttons, social media posts, blog articles.

24. Brand Equity
Brand Equity is the value premium that a company realizes from a product with a
recognizable name as compared to its generic equivalent. Companies can create
brand equity for their products by making them memorable, easily recognizable,
and superior in quality and reliability. Mass marketing campaigns can also help to
create brand equity.
Starbucks’ customers choose its brand of coffee over others both because of its
quality and the kind of personalized experience it offers. A customer really likes
it when their name is called out once the order arrives. Starbucks can build an
emotional connect with the consumers. Also, it remains the largest roaster and
retailer of Arabica coffee beans and specialty coffees.
Therefore, due to the brand equity, consumers are ready to pay a premium for the
coffee.
• MANAGING BRAND EQUITY
• Brand Revitalization
Focus to capture lost sources of brand equity and identify and establish its new
sources. This may include brand modification or brand positioning. In short it is
to make a brand comeback.

• Brand Reinforcement
Focus on maintaining the brand equity by keeping the brand alive among both
the existing and new customers.
A brand needs to be carefully managed, so its value does not depreciate. Brand
leaders of 70 years ago that remain leaders today — companies such as Amul,
Nirma washing powder, Parle-G, Coca Cola — only do so by constantly striving
to improve their products, services, and marketing. Marketers can reinforce brand
equity by consistently conveying the brand ‘s meaning in terms of:
What products it represents, what core benefits it supplies, and what needs it
satisfies
How the brand makes products superior, and which strong, favorable and unique
brand associations should exist in consumers’ minds.
Ex- The Dancing girl of Nirma was created 44 years ago but she is still seen in
Nirma advertisements every day. A little girl in a frilly white dress twirls her way
into a pack of detergent to the tune of a catchy jingle. This petite mascot that
appeared in every commercial back then was none other than Nirma Group
founder Karsanbhai Patel's daughter
The Amul girl was created in 1966. Half a century later, she is still seen in
witty advertisements every day. The ads funnily address pressing issues
yet are able to evoke nostalgia for one of India's most loved mascots.
Parle-G, the 80-year-old biscuit brand with striped, yellow packaging

featuring the iconic Parle girl, has tweaked its advertising strategy to talk
to millennials and highlight the immense nostalgia associated with it. The
brand is still talking to people through its “You’re my Parle-G campaign”.

25. GUERRILLA MARKETING

Guerrilla Marketing is an advertising strategy that focuses on low-cost
unconventional marketing tactics that yield maximum results. The original term
was coined by Jay Conrad Levinson in his 1984 book ‗Guerrilla Advertising‘.
In other words, guerrilla marketing is the act of executing an unusual or
unexpected marketing activity in a common, everyday place in order to generate
a buzz for products or services. The main point of guerrilla marketing is to get
your business's name in front of as many people as possible in an unexpected way.
Guerrilla marketing is usually a low or no- cost form of marketing that can reap
substantial profits if implemented correctly.
Thus, it is a marketing tactic in which a company uses surprise and/or
unconventional interactions to promote a product or service. Guerrilla marketing
is different than traditional marketing in that it often relies on personal interaction,
has a smaller budget, and focuses on smaller groups of promoters that are
responsible for getting the word out in a particular location rather than through
widespread media campaigns.
For instance, (clockwise from top left), Adidas opened stores that were shaped
liked their shoe boxes to attract customers; Axe creatively used the exit signs to
demonstrate its position as a deodorant that helps men attract women; Marvel
Studios placed giant hammers on the streets to advertise for Avengers; Duracell
placed torches at places to create an image of it emitting light.

26. Digital Marketing

Digital marketing encompasses all marketing efforts that use an electronic device
or the internet. Businesses leverage digital channels such as search engines, social
media, email, and other websites to connect with current and prospective
customers. Digital marketing is defined using numerous digital tactics and
channels to connect with customers where they spend much of their time: online.
From the website itself to a business's online branding assets -digital advertising,
email marketing, online brochures, and beyond — there's a spectrum of tactics that
fall under the umbrella of "digital marketing."
• Types of Digital Marketing
• Search Engine Optimization (SEO)

This is the process of optimizing your website to "rank" higher in search engine
results pages, thereby increasing the amount of organic (or free) traffic your
website receives. The channels that benefit from SEO include websites, blogs, and
infographics.
There are several ways to approach SEO to generate qualified traffic to your
website. These include:
On-page SEO:
This type of SEO focuses on all the content that exists "on the page" when
looking at a website. By researching keywords for their search volume and intent
(or meaning), you can answer questions for readers and rank higher on the search
engine results pages (SERPs) those questions produce.
Off-page SEO:
This type of SEO focuses on all the activity that takes place "off the page" when
looking to optimize your website. "What activity not on my own website could
affect my ranking?" You might ask. The answer is inbound links, also known as
backlinks. The number of publishers that link to you, and the relative "authority"
of those publishers, affect how highly you rank for the keywords you care about.
By networking with other publishers, writing guest posts on these websites (and
linking back to your website), and generating external attention, you can earn the
backlinks you need to move your website upon all the right SERPs.

Technical SEO:
This type of SEO focuses on the backend of your website, and how your pages are
coded. Image compression, structured data, and CSS file optimizations are all
forms of technical SEO that can increase your website's loading speed — an
important ranking factor in the eyes of search engines like Google.
Content Marketing
This term denotes the creation and promotion of content assets for the purpose of
generating brand awareness, traffic growth, lead generation, and customers. The
channels that can play a part in your content marketing strategy include:
Blog posts:
Writing and publishing articles on a company blog help you demonstrate your
industry expertise and generates organic search traffic for your business. This
ultimately gives you more opportunities to convert website visitors into leads for
your sales team. eBooks and whitepapers: eBooks, whitepapers, and similar
long-form content help further educate website visitors. It also allows you to
exchange content for a reader's contact information, generating leads for your
company, and moving people through the buyer's journey.
Infographics:
Sometimes, readers want you to show, not tell. Infographics are a form of visual
content that helps website visitors visualize a concept you want to help them learn.
Social Media Marketing

This practice promotes the brand and content on social media channels to increase
brand awareness, drive traffic, and generate leads for your business.
The channels a brand can use in social media marketing include:
o Facebook
o Twitter
o LinkedIn
o Instagram
o Snapchat
o Pinterest

Pay Per Click (PPC)

PPC is a method of driving traffic to a company’s website by paying a publisher
every time the company’s ad is clicked. One of the most common types of PPC:
Google Ads, which allows you to pay for top slots on Google's search engine
results pages at a price "per click" of the links you place.
Other channels where PPC is used include:
Paid ads on Facebook: Here, users can pay to customize a video, image post, or
slideshow, which Facebook will publish to the newsfeeds of people who match
your business's audience.
Twitter Ads campaigns: Here, users can pay to place a series of posts or profile
badges to the news feeds of a specific audience, all dedicated to accomplishing a
specific goal for your business. This goal can be website traffic, more Twitter
followers, tweet engagement, or even app downloads.
Sponsored Messages on LinkedIn: Here, users can pay to send messages directly
to specific LinkedIn users based on their industry andbackground.
Affiliate Marketing
This is a type of performance-based advertising where you receive a commission
for promoting someone else's products or services on your website.
Affiliate marketing channels include:
Hosting video ads through the YouTube Partner Program.
Posting affiliate links from your social media accounts.
Native Advertising
Native advertising refers to advertisements that are primarily content-led and
featured on a platform alongside other, non-paid content. BuzzFeed-sponsored
posts are a good example, but many people also consider social media advertising
to be "native" — Facebook advertising and Instagram-advertising, for example.
Marketing Automation
Marketing automation refers to the software that serves to automate your basic
marketing operations. Many marketing departments can automate repetitive tasks
they would otherwise do manually, such as:
Email newsletters: Email automation doesn't just allow you to automatically send
emails to your subscribers. It can also help you shrink and expand your contact
list as needed so your newsletters are only going to the people who want to see
them in their inboxes.

Social media post scheduling: If you want to grow your organization's presence
on a social network, you need to post frequently. This makes manual posting a bit
of an unruly process. Social media scheduling tools push your content to your
social media channels for you, so you can spend more time focusing on content
strategy.
Lead-nurturing workflows: Generating leads, and converting those leads into
customers, can be a long process. You can automate that process by sending leads
specific emails and content once they fit certain criteria, such as when they
download and open an eBook.
Campaign tracking and reporting: Marketing campaigns can include a ton of
different people, emails, content, webpages, phone calls, and more. Marketing
automation can help you sort everything you work on by the campaign its serving,
and then track the performance of that campaign based on the progress all these
components make over time.
Email Marketing
Companies use email marketing as a way of communicating with their audiences.
Email is often used to promote content, discounts, and events, as well as to direct
people toward the business's website. The types of emails sent in an email
marketing campaign include:
Blog subscription newsletters.
Follow-up emails to website visitors who downloadedsomething.
Customer welcome emails.
Holiday promotions to loyalty program members.
Tips or similar series emails for customer nurturing.
Online PR
Online PR is the practice of securing earned online coverage with digital
publications, blogs, and other content-based websites. It's much like traditional PR
but in the online space. The channels you can use to maximize your PR efforts
include:
Reporter outreach via social media: Talking to journalists on Twitter, for example,
is a great way to develop a relationship with the press that produces earned media
opportunities for your company.
Engaging online reviews of your company: When someone reviews your company
online, whether that review is good or bad, your instinct might be not to touch it.
On the contrary, engaging company reviews help you humanize your brand and
deliver powerful messaging that protects your reputation.

Engaging comments on your personal website or blog: Similar to the way you'd
respond to reviews of your company, responding to the people who are reading
your content is the best way to generate productive conversation around your
industry.
27. Digital Marketing Funnel

The traditional marketing funnel revolved around awareness, interest, and desire.
Customers had to be aware that a kind of product existed and had to be interested
in obtaining the product. They also needed desire to make the purchase.
There are two major differences between the traditional marketing funnel and the
digital marketing funnel.
The first is that customers experience the funnel in a different way. Before the
internet, customers tended to experience the marketing funnel in the same order.
Now, customers can experience stages of the funnel out of order, or even skip
phases entirely. People demand a more customized experience, and the marketing
funnel has adapted to that demand.
The second major difference is an increased focus on the brand/customer
relationship. Customers have become more aware of marketing and being
―sold to, so brands must work harder to ensure that their interactions with
customers are positive, authentic, and valuable.
The digital marketing funnel goes beyond the purchase state
• Engagement
This stage of the digital marketing funnel is concerned with ensuring that
customers ‘interactions with your brand are positive and that they‘re open to future
interactions. Many brands use social media sites like Facebook and Twitter to
engage with potential customers.
• Education
It is specifically, helping potential customers realize that they have a problem that
you can solve for them. For example, potential user might not even know that
automation, drones, and robotics could increase efficiency on a job site; the
education stage is about identifying that pain point.
• Research
At this point, marketing still isn‘t focused on selling a product, but rather on
helping customers identify how they can benefit from solving the problem.

• Evaluation
Customers may be looking at multiple competing solutions to their problem, so
your focus should be on showing customers why your product is their best
solution.
• Justification
The justification stage is about finding ways to overcome objections, obstacles, or
inertia. Perhaps the customer isn‘t the one with the ability to make buying
decisions. Maybe the customer is simply fine with the status quo and solving the
problem isn’t a high priority. Provide customers with reasons why it is a priority
or with information they can use to convince those with buying power.
• Purchase
The purchase stage is all about the sale. Make sure customers are comfortable with
the purchase, that you‘ve answered all their questions, and that they‘re confident
in the value your product will provide for them.
• Adoption
Adoption, the first post-purchase stage of the digital marketing funnel, necessitates
making good on your promises, so that the customer has a good experience with
your product.
• Retention
Satisfied customers become repeat customers. To retain customers, give them help
when they need it and provide them with educational materials on how to get the
most out of your product.
• Advocacy
Extremely satisfied customers can help you expand your customer base further.
They become brand advocates and do part of the work of selling your product to
their peers
• Expansion
This might mean selling customers additional products or services, upgrading their
service, or getting them interested in a completely different product that solves a
different problem. The key to reaching this stage is helping the customer see your
brand as dependable and an authority on the products you sell and the problems
you solve.

28. Surrogate Marketing

Surrogate marketing uses the marketing campaign of a brand or product, to convey
a message which is related to another brand or product. This is done due to various
reasons. Primary reason is to circumvent the ban on advertising for a particular
type of product(s).
Example: This is an advert in India for Club glasses manufactured by Carlsberg.
A company which is proud about its beer quality and states that it is gives the best
beer in the world is not able to advertise its beer. And therefore, it must advertise
its club glasses which can symbolize for its beer.
29. Neuro-Marketing
Nobel Laureate Francis Crick called it the astonishing hypothesis: the idea that all
human feelings, thoughts, and actions—even consciousness itself—are just the
products of neural activity in the brain. For marketers, the promise of this idea is
that neurobiology can reduce the uncertainty and conjecture that traditionally
hamper efforts to understand consumer behavior. The field of neuro-marketing—
sometimes known as consumer neuroscience— studies the brain to predict and
potentially even manipulate consumer behavior and decision making.
30. Business Models
• B2B Model (Business 2 Business)

It is a type of commerce transaction that exists between businesses, such as those
involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business
to business refers to business that is conducted between companies, rather than
between a company and individual consumers. For instance, the tires, batteries,
electronics, hoses and door locks may be manufactured elsewhere and sold
directly to the automobile manufacturer.

• B2C Model (Business 2 Customer)

Business or transactions conducted directly between a company and consumers
who are the end- users of its products or services. While most companies that sell
directly to consumers can be referred to as B2C companies, the term became
immensely popular during the dotcom boom of the late 1990s, when it was used
mainly to refer to online retailers, as well as other companies that sold products
and services to consumers through the Internet.
• C2C Model (Customer 2 Customer)
A type of business model that facilitates interaction between customers. Customer
to customer businesses provides individuals with a place to converse, exchange
and interact with other people. Many C2C businesses have online operations.
Online auctions and classifieds such as eBay and Craig's List are examples of very
successful customer to customer business models. These sites don't look to directly
sell goods to their members, instead the customers are exchanging with other
customers.
31. Marketplace Model vs Inventory Model
• Marketplace model
E-commerce refers to providing an information technology platform by an e-
commerce entity on a digital and electronic network to act as a facilitator between
buyer and seller. Marketplaces are platforms that enable a large, fragmented base
of buyers and sellers to discover price and transact with one another in an
environment that is efficient, transparent, and trusted. The main feature of the
marketplace model is that the e-commerce firm like Flipkart, Snapdeal, Amazon
etc. will be providing a platform for customers to interact with a selected number
of sellers. When an individual is purchasing a product from Flipkart, he will be
buying it from a registered seller in Flipkart. The product is not directly sold by
Flipkart. Here, Flipkart is just a website platform where a consumer meets a seller.
Inventory, stock management, logistics etc. are not supposed to be actively done
by the ecommerce firm.
• Inventory model
E-commerce means an ecommerce activity where inventory of goods and services
is owned by e-commerce entity and is sold to the consumers directly. The main
feature of inventory model is that the customer buys the product from the
ecommerce firm. He manages an inventory (stock of products), interfaces with
customers, runs logistics and involves in every aspect of the business. Alibaba of
China is following the inventory model.

HR Compendium

HR COMPENDIUM
Contents
1. Organizational Behavior ..................................................................................... 3
1.1 What is Organizational Behavior?......................................................................... 3
1.2 Levels of Organizational Behavior:....................................................................... 3
2. Organizational Behavior and Human Resource Management ....................... 4
3. Human Resource Management .......................................................................... 4
3.1 What is Human Resource Management? .............................................................. 4
3.2 7 Pillars of Human Resource Management ........................................................... 4
4. Human Resource Development .......................................................................... 6
4.1 Purpose of Human Resource Development ........................................................... 6
4.2 Types of Human Resource Development .............................................................. 6
4.3 Advantages of an HRD system.............................................................................. 7
5. Personality ............................................................................................................ 7
5.1 Myers-Briggs Type Indicator (MBTI) Personality Framework ............................ 7
5.2 The OCEAN Personalities ..................................................................................... 8
6. Motivational Theory Frameworks ................................................................... 10
6.1 Maslow’s Hierarchy of Needs ............................................................................. 10
6.2 McClelland's Human Motivation Theory ............................................................... 11
6.3 Herzberg's Two Factor Theory ............................................................................ 12
7. Changes in the role of HR post-COVID .......................................................... 12
8. Changing Trends in HR .................................................................................... 13

HR COMPENDIUM
1. Organizational Behavior
1.1 What is Organizational Behavior?
“Organizational behavior is directly concerned with the understanding, prediction, and

control of human behavior in organizations.” — Fred Luthans.
It is the systematic investigation and application of information about how individuals

and groups behave in the workplace. OB is a unique field that pulls from a variety of
disciplines.
That is, it considers the complete individual, the whole group, the whole organization,
and the whole social system when interpreting people-organization relationships.
Its goal is to improve human, organizational, and social interactions by accomplishing
human, organizational, and societal goals.
1.2 Levels of Organizational Behavior:
There are three levels in organizational behavior are:
• Individual level: Each individual person within an organization is included at the

individual level. Each person behaves in a unique way, which has an impact on
group dynamics and the organization as a whole. Although it is hard for a firm to
examine every single employee's behavior, it is critical for a company to establish
norms and expectations that will attract individuals who exhibit good behaviors.
• Group level: Any groups within an organization are included at the group level.
The size of a group might range from a number of persons working together to
dozens or hundreds of people. Individuals can influence a group, and a group can
influence an organization, as we just stated. Individuals can be affected by a
group, and organizations can be affected by a group.
Fig 1. Levels of Organizational Behavior

HR COMPENDIUM
2. Organizational Behavior and Human Resource

Management
Individuals and groups inside organizations are studied in the field of organizational
behavior and human resource management. They look into how to improve an
organization's human capital's effectiveness in order to get a competitive edge and
achieve organizational goals. Personality/dispositions, emotion and affect, motivation,
social concept and identity, decision making and cognition, justice and trust,
organization and work attachment, leadership, groups and teams, and organizational
culture and climate are all topics covered by the OB field, whereas HR covers job
analysis, recruitment, selection, training and development, performance appraisal,
compensation, quality of work life, workforce diversity, and strategic human resource
management.
3. Human Resource Management

3.1 What is Human Resource Management?
Human Resource Management, or HRM, is the practice of managing people to achieve

better performance. It is the process of hiring people, teaching them, rewarding them,
creating policies for them, and devising retention methods. HRM has evolved
significantly during the previous two decades, allowing it to play an even more critical
role in today's enterprises. HRM used to involve processing payroll, sending birthday
gifts to staff, coordinating business outings, and double-checking forms—in other
words, more of an administrative duty than a strategic position critical to the
organization's success.
3.2 7 Pillars of Human Resource Management
HRM involves seven primary responsibilities in any enterprises, according to most

experts. They are:
• Recruitment & Selection: The most visible aspects of HR are probably

recruitment and selection. A significant HR role is to recruit applicants and select
the best ones to come work for the organisation. People are the organization's
lifeblood, and finding the perfect fit is a critical effort. HR can utilise a variety of
selection tools in this process to locate the best individual for the job. Interviews,
various tests, reference checks, and other recruitment processes are among them.
• Performance Management: Performance management becomes critical after
staff are on board. The second HR fundamental is performance management. It

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entails assisting employees in being their best selves at work, hence improving
the company's bottom line. Employees often have a specific set of responsibilities
that they must fulfil. Performance management is a framework that allows
employees to receive feedback on their work in order to improve their
performance. Successful performance management is a joint effort between HR
and management, with the direct manager taking the lead and HR providing
assistance. It's critical to have a good performance management system in place.
Fig 2. Pillars of Human Resource Management
• Learning & Development: People are a combination of their life experiences,

the country and age in which they grew up, and a variety of cultural influences.
Learning and development in HR ensures that personnel are able to adapt to
changes in processes, technology, and societal or legal changes. Employees can
reskill and upskill with the support of learning and development. HR is in
charge of learning and development (L&D), and strong policies can assist the
firm achieve its long-term objectives.
• Succession Planning: The practice of arranging contingencies in the event that
key personnel leave the organization is known as succession planning. If, for
example, a key senior manager leaves, having a replacement on hand ensures
continuity and can save the organization a lot of money. Performance ratings
and L&D initiatives are frequently used in succession planning. As a result, a
talent pipeline is established. This is a pool of qualified people who are ready to
fill (senior) positions if someone leaves. Good people management requires the
creation and nurturing of this pipeline.

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• Human Resource Information System: The final two HR fundamentals are

not HR practices, but rather tools for doing HR better. The Human Resource
Information System, or HRIS, is the first. All of the pillars we outlined earlier
are supported by an HRIS. For example, HR professionals frequently utilise an
Applicant Tracking System, or ATS, to keep track of applications and
employees during the recruitment and selection process. A performance
management system is used to keep track of individual goals and assign
performance ratings for performance management. A Learning Management
System (LMS) is utilized in L&D for internal material distribution, and other
HR tools are used to handle budgets and training approvals.
To learn more: https://youtu.be/aPEUKLxxh_k
4. Human Resource Development
Human Resources Development (HRD) is the broad field of training and development
offered by businesses to improve their employees' knowledge, skills, education, and
talents. The human resources development process in many firms begins with the
employment of a new employee and continues throughout that employee's time with the
company.
Many personnel enter a company with just rudimentary skills and experience and
require training to do their positions effectively. Others may already possess the
requisite abilities for the job, but lack knowledge of the organization in question. HR
development is intended to provide employees with the information they require to
adapt to the culture of the firm and perform their jobs effectively.
4.1 Purpose of Human Resource Development
The purpose of human resource development is to help organizations achieve their

objectives. The expense and effort spent on staff development and training are only
worthwhile if it directly aids the employees in improving their performance, which in
turn improves the organization's performance.
As a result, HR development has only one goal: to improve employees. HR
development's goal is to give employees the 'coaching' they need to improve and expand
their existing knowledge, skills, and talents. The purpose of development and training is
to improve employees' performance.
4.2 Types of Human Resource Development
There are varied types of human resource development techniques such as:

HR COMPENDIUM
• On-the-job training: refers to learning the aspects of a job while one is doing the
job. An employee may know the basics of what the job requires, but specifics like
which forms to use, where materials are stored, and how to access the computer
systems may require on-the-job training.
• Job shadowing is similar in that the employee watches another employee do the
job in order to develop the proper skills.
• Intellectual or Professional Development, which includes college or
certification courses or job-specific trainings and seminars related to how to do
one's job better.
4.3 Advantages of an HRD System
Appropriate HRD provides unlimited benefits to the concerned organization. Some of

the important benefits are being given here:
• HRD (Human Resource Development) makes people more competent. HRD
develops new skill, knowledge, and attitude of the people in the concern
organizations. An environment of trust and respect can be created with the help of
human resource development.
• It enhances the employees' overall development. HRD also increases the
organization's team spirit. They become more outgoing in their actions. As a
result, new values can be created.
• It also aids in the establishment of an efficiency culture within the firm. It
improves the efficiency of the organization. Resources are better utilized, and
objectives are met more effectively.
• It increases the employee's involvement in the organization. This enhances the
worker's role, and employees feel a sense of satisfaction and accomplishment
when executing their duties.
• It also aids in the gathering of meaningful and objective data on employee
programs and policies, allowing for better human resource planning.
5. Personality
5.1 Myers-Briggs Type Indicator (MBTI) Personality Framework
The Myers-Briggs Personality Type Indicator is a self-assessment tool that helps

people figure out their personality type, strengths, and preferences. Isabel Myers and
her mother Katherine Briggs created the test based on their research into Carl Jung's
personality types hypothesis. The MBTI personality test is now one of the most

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extensively utilised psychological tests in the world.

Jung's notion of psychological types enthralled Myers and Briggs, and they saw how it
could be applied in the actual world. They began investigating and constructing an
indicator that could be used to better identify individual differences during World War
II, and they created a test.
People are classified into one of 16 personality types based on their responses to the
inventory's questions. The MBTI's purpose is to help people better understand and
explore their own personalities, including their likes, dislikes, strengths, weaknesses,
potential job choices, and compatibility with others. The questionnaire itself is made up
of four different scales:
• Extraversion and Introversion: The first pair of styles are concerned with the
direction of your energy. If you prefer to direct your energy to deal with people,
things, situations, or "the outer world," then your preference is for Extraversion.
If you prefer to direct your energy to deal with ideas, information, explanations
or beliefs, or "the inner world," then your preference is for Introversion.
• Sensing and Intuition: The second pair concerns the type of information/things
that you process. If you prefer to deal with facts, what you know, to have clarity,
or to describe what you see, then your preference is for Sensing. If you prefer to
deal with ideas, look into the unknown, generate new possibilities, or to
anticipate what isn't obvious, then your preference is for intuition. The letter N is
used for intuition because it has already been allocated to Introversion.
• Thinking and Feeling: The third pair reflects your style of decision-making. If
you prefer to decide on the basis of objective logic, using an analytic and
detached approach, then your preference is for Thinking. If you prefer to decide
using values - i.e., on the basis of what or who you believe is important - then
your preference is for Feeling.
• Judgment and Perception: The final pair describes the type of lifestyle you
adopt. If you prefer your life to be planned and well-structured, then your
preference is for Judging. This is not to be confused with 'Judgmental', which is
quite different. If you prefer to go with the flow, to maintain flexibility and
respond to things as they arise, then your preference is for perception.
When you put these four letters together, you get a personality type code—having four
pairs to choose from means there are sixteen Myers-Briggs personality types.
To learn more: https://youtu.be/NXcWZnQPUXw
5.2 The OCEAN Personalities
According to several experts, there are five essential personality qualities. The "big
five" personality qualities are broad categories of personality characteristics. While

HR COMPENDIUM
there is a substantial amount of data that supports the five-factor model of personality,
researchers aren't always in agreement on the specific names for each dimension.
When trying to remember the big five traits, you might find it beneficial to utilize the
abbreviation OCEAN (openness, conscientiousness, extraversion, agreeableness, and
neuroticism). Another often used abbreviation is CANOE (for conscientiousness,
agreeableness, neuroticism, openness, and extraversion).
It's worth noting that each of the five personality traits comprises a spectrum spanning
two extremes. Extraversion, for example, is a spectrum that ranges from severe
extraversion to extreme introversion. In reality, most people fall somewhere in between
these two extremes.
• Openness: This trait features characteristics such as imagination and insight.

People who are high in this trait also tend to have a broad range of interests.
They are curious about the world and other people and eager to learn new things
and enjoy new experiences.
• Conscientiousness: Standard features of this dimension include high levels of
thoughtfulness, good impulse control, and goal-directed behaviors.1
Highly conscientious people tend to be organized and mindful of details. They
plan ahead, think about how their behaviour affects others, and are mindful of
deadlines.
• Extraversion: Extraversion (or extroversion) is characterized by excitability,
sociability, talkativeness, assertiveness, and high amounts of emotional
expressiveness. People who are high in extraversion are outgoing and tend to
gain energy in social situations. Being around other people helps them feel
energized and excited.
• Agreeableness: This personality dimension includes attributes such as trust,
kindness, affection, and other prosocial behaviours. People who are high in
agreeableness tend to be more cooperative while those low in this trait tend to be
more competitive and sometimes even manipulative.
• Neuroticism: Neuroticism is a trait characterized by sadness, moodiness, and
emotional instability. Individuals who are high in this trait tend to experience
mood swings, anxiety, irritability, and sadness. Those low in this trait tend to be
more stable and emotionally resilient.
To learn more: https://youtu.be/IB1FVbo8TSs

HR COMPENDIUM
6. Motivational Theory Frameworks

Following are the most popular theories in the field of management:
6.1 Maslow’s Hierarchy of Needs
Abraham Maslow's hierarchy of needs is one of the best-known theories of motivation.

Maslow's theory states that our actions are motivated by certain physiological needs. It
is often represented by a pyramid of needs, with the most basic needs at the bottom and
more complex needs at the top.
Fig 3. Maslow’s Need hierarchy Pyramid
• Physiological Needs: The physiological needs are fairly apparent and include
the needs that are vital to our survival. Some examples of physiological needs
are food, water, breathing. In addition to the basic requirements of nutrition, air,
and temperature regulation, physiological needs also include such things as
shelter and clothing.
• Safety and Security Needs: As we move up to the second level of Maslow’s
hierarchy, the needs start to become a bit more complex. At this level, the needs
for security and safety become primary. People want control and order in their
lives. So, the need for safety and security contributes largely to behaviours at
this level. Some of the basic security and safety needs include: financial security,
health and wellness, and safety against accidents and injury.
• Love and Belongings Need: The social needs in Maslow’s hierarchy include
such things as love, acceptance, and belonging. At this level, the need for
emotional relationships drives human behaviour. Some of the things that satisfy
this need include friendships, romantic attachments and family.
• Esteem Needs: At the fourth level in Maslow’s hierarchy is the need for
appreciation and respect. Once the needs at the bottom three levels have been

HR COMPENDIUM
satisfied, the esteem needs begin to play a more prominent role in motivating
behaviour. People have a need to accomplish things, then have their efforts
recognized. In addition to the need for feelings of accomplishment and prestige,
esteem needs include such things as self-esteem and personal worth.
• Self-Actualization Needs: At the very peak of Maslow’s hierarchy are the self-
actualization needs. Self-actualizing people are self-aware, concerned with
personal growth, less concerned with the opinions of others, and interested in
fulfilling their potential. "What a man can be, he must be," Maslow explained,
referring to the need people have to achieve their full potential as human beings.
6.2 McClelland's Human Motivation Theory
Psychologist David McClelland's acquired-needs theory divides employee needs into

three. Achievement, affinity, and power are the three categories.
• Employees who are highly accomplishment motivated are motivated by a
desire to master new skills. They prefer to work on activities of intermediate
complexity where the results are the result of their effort rather than chance.
They value constructive criticism on their work.
Fig 4. McClelland's Human Motivation Theory
• Affiliation-motivated employees are motivated by the need to form and

maintain social relationships. They want to feel loved and welcomed and
appreciate being a part of a group. They may not be successful managers
because they are overly concerned with how others perceive them.
• Power-motivated employees are motivated by a desire to influence, teach, or
encourage others. They enjoy their jobs and place a strong emphasis on
discipline. They may, however, take a zero-sum approach to group labour, in
which one person must lose or fail for another to win or succeed. However, if
channeled correctly, this can assist individuals in the group feel capable while
also supporting group goals.

HR COMPENDIUM
6.3 Herzberg's Two Factor Theory
According to the two-factor theory (also known as Herzberg's motivation-hygiene

theory), job satisfaction and discontent exist on separate continuums, each with its own
set of factors. This contradicts the traditional understanding of job satisfaction, which
holds that job satisfaction and unhappiness are linked.
Fig 5. McClelland's Human Motivation Theory
In their original study, Herzberg and his colleagues looked at fourteen aspects that affect
job satisfaction and classified them as either sanitary or motivational. Job satisfaction is
increased when motivation elements are present, while job discontent is avoided when
cleanliness aspects are present.
Although other theories of motivation have largely superseded it in academia, the two-
factor motivation theory continues to impact popular management philosophy and
research technique in various parts of the world.
7. Changes in the role of HR post-COVID
There isn't a single business function that hasn't been influenced by the pandemic-
induced modifications that businesses have been obliged to adopt in order to stay afloat.
The one function that has witnessed a particularly drastic transformation in purpose and
operations is Human Resources.
Because of the exponential growth of remote work in response to the COVID pandemic,
the overall role of HR and the everyday duties performed by HR professionals have
shifted significantly.
Human resources professionals have had to learn how to be productive and effective in
their own positions while working from home, in addition to guiding their firms and
people through the shift to a more digital and distributed work environment.
Both have prompted HR professionals to learn new skills in order to fulfil jobs for

HR COMPENDIUM
which they were not equipped.

For much of 2020 and the early half of 2021, HR was in crisis mode, figuring out how
to allow workers to work from home, attempting to provide additional mental and
physical health care, and focusing more than ever on C-level tactics to keep their
companies running. The job of HR has fundamentally shifted as the dust settles and
businesses adjust to a new normal.
HR has always been important, but in this new world of flexible work and new
opportunities and challenges, there is an opportunity for HR to define and develop new
skills and processes in order to optimize what is expected of them—that is, to ensure
that a corporation's human capital is seriously engaged, inspired, and believing. It's
beneficial to be happy. We need to figure out how to make sure that happens.
To learn more:
• https://www.shrm.org/hr-today/news/hr-magazine/summer2020/pages/how-the-
coronavirus-pandemic-will-change-the-way-we-work.aspx
• https://www.shrm.org/hr-today/news/hr-magazine/fall2021/pages/pandemic-
expands-role-of-hr.aspx
• https://eightfold.ai/blog/pandemic-role-of-human-resources/
8. Changing Trends in HR
• Recruiting using Technology: HR managers can quickly locate and hire top-
notch specialists thanks to advanced screening and sourcing technology.
Unfortunately, not everyone has access to these resources. Having the right
technology at your fingertips makes it easier for recruiters and HR to locate,
source, and choose prospects. They can concentrate on data-driven decisions,
which is widely regarded as the best way to hiring operations.
• HR as a service: The transition from project-focused HR to product-focused HR
is one of the most notable HR trends we're seeing right now. This is a significant
shift in the way HR functions. HR has traditionally operated with a project-based
mentality. A project has a defined timetable, deliverables, and resources, and it is
designed to be conducted efficiently. On the other hand, a product is continuing.
It doesn't have to have a conclusion and attempts to generate value, with (more)
resources allocated as the impact grows. This shift in mentality will not only
improve HR's service delivery quality, but it will also allow HR to better develop
the competencies that will assist businesses improve their bottom line.
• The transition from People Analytics to Data Literacy: In the last five years,
people analytics has had a huge impact on how we manage people. However,

HR COMPENDIUM
whereas only a few years ago, firms were primarily looking for people analytics
knowledge, this has now transformed. Businesses are increasingly realizing that
they need to do more to properly integrate people analytics in their (HR)
departments. One of the major impediments is a lack of data literacy among HR
professionals in general. HR business partners, for example, require a better grasp
of data in order to utilize people analytics results effectively in their enterprises.
HR analysts will also be more effective if they can back up their findings with
data.
• Virtual Employee Experience: The trend of remote working has had a domino
effect, causing various other traditional HR activities to fall by the wayside. In-
person talks have traditionally been used for activities such as hiring and
terminating employees, onboarding, and training. HR is faced with the task of
performing all of these tasks virtually. The focus of recent HR trends 2022 in
HRM has been on organizing an employee's virtual experience. Some companies,
for example, have begun holding "virtual fun meetings," in which staff
collaborate and share their innovative ideas.
To learn more:
• https://www.greenhouse.io/blog/focus-on-the-latest-trends-in-human-resources-
management
• https://www.aihr.com/blog/hr-trends/
• https://www.startuphrtoolkit.com/hr-trends/

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IT Compendium

Department of Management Studies

DEPARTMENT OF MANAGEMENT STUDIES 2

1.1 SWOT Analysis of IT Sector:

▪ Skilled, abundant, and cheaper manpower

▪ High attrition rate

DEPARTMENT OF MANAGEMENT STUDIES 3

1.2 Sector Composition:

The four key sectors of IT market are:

DEPARTMENT OF MANAGEMENT STUDIES 4

2. Market Size of Indian IT Industry

The contribution of IT industry's revenue has grown impressively. IT industry's

3. Recent Technologies and Buzz words

Enterprise resource planning (ERP) is business process management software that

DEPARTMENT OF MANAGEMENT STUDIES 5

Fig 1. ERP Systems

● To replace out-of-date ERP software (49%)

E-commerce is an activity of electronic merchandise. It is a business model that lets

DEPARTMENT OF MANAGEMENT STUDIES 6

4. Popular Business Analytics and Reporting Tools

Tableau Online: It is a software as a service (SaaS) offering for enterprises, offering

DEPARTMENT OF MANAGEMENT STUDIES 7

4.3 Robotic Process Automation

DEPARTMENT OF MANAGEMENT STUDIES 8

5. Data Science, Artificial Intelligence and Machine

DEPARTMENT OF MANAGEMENT STUDIES 9

5.2 Artificial Intelligence

5.3 Machine Learning

DEPARTMENT OF MANAGEMENT STUDIES 10

DEPARTMENT OF MANAGEMENT STUDIES 11

Challenges and Limitations of Machine Learning

Applications of Machine Learning

DEPARTMENT OF MANAGEMENT STUDIES 12

DEPARTMENT OF MANAGEMENT STUDIES 13

DEPARTMENT OF MANAGEMENT STUDIES 14

SecondLive is a 3D virtual environment where users control avatars for socializing,

Criticisms and Concerns

DEPARTMENT OF MANAGEMENT STUDIES 15

To know more: https://youtu.be/7ODuQMkZWK8

How does crypto fit into the metaverse?

DEPARTMENT OF MANAGEMENT STUDIES 16

To know more: https://youtu.be/8NgVGnX4KOw

DEPARTMENT OF MANAGEMENT STUDIES 17

To know more: https://youtu.be/NNQLJcJEzv0

10. Role of IT in different sectors

DEPARTMENT OF MANAGEMENT STUDIES 18

DEPARTMENT OF MANAGEMENT STUDIES 19

DEPARTMENT OF MANAGEMENT STUDIES 1

2.6.1 How to use a CFS? ............................................................................................................................................. 19

DEPARTMENT OF MANAGEMENT STUDIES 2

5. Commonly asked questions in Finance ............................................................................................ 40

DEPARTMENT OF MANAGEMENT STUDIES 3

DEPARTMENT OF MANAGEMENT STUDIES 4

1.3 Financial Service Industry

DEPARTMENT OF MANAGEMENT STUDIES 5

o Formulates, implements, and monitors the monetary policy.

DEPARTMENT OF MANAGEMENT STUDIES 6

DEPARTMENT OF MANAGEMENT STUDIES 7

1.4.5 Non-Performing Assets

DEPARTMENT OF MANAGEMENT STUDIES 8

DEPARTMENT OF MANAGEMENT STUDIES 9

DEPARTMENT OF MANAGEMENT STUDIES 10

1.10.2 Treasury Bills