Category: KSEEB Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 13 Entrepreneurship Development

Exercises

Short Answer Type Questions

Question 1.
Write the meaning of the term ‘entrepreneur’.
Answer:
Entrepreneur: The owner of a business is known as Entrepreneur or we can say that the person who set-up his business. He is the co-ordinator, organizer of resources and gives shape to the business.

Question 2.
Write the meaning of the term of ‘entrepreneurship’.
Answer:
Entrepreneurship: It is the dynamic process of interaction between the person and the environment. It means starting up one’s own business concerned with strategic decisions of resource allocation and involved huge risk to create value and earn profit.

Question 3.
Write the meaning of the term of ‘Enterprise’.
Answer:
Enterprise: The output of the entrepreneurship process is known as the Enterprise. It is something attempted to be performed. It provides employment opportunities, professional opportunities and business opportunities which helps in building up the economy of a nation.

Question 4.
Why is entrepreneurship regarded as a creative activity?
Answer:
Entrepreneurship is a creative activity as an entrepreneur converts raw materials into useful goods and services; it involves creation of value, introduction of new products, discovery of new markets and technologies.

Successful entrepreneurs keep focusing on innovative ideas and skills to produce efficient and effective results. Thus, an entrepreneur is innovator and this process is creative.

Question 5.
“Entrepreneurs undertake moderate risk”. Elaborate this statement.
Answer:
“Entrepreneurs undertake moderate risks”. It implies that an entrepreneur assures various supply of the projects, he agreed to pay salaries, wages, rent whether the venture succeed or not. Secondly, the person who opted a career in entrepreneurship takes a bigger risk as there is no assured pay off. It is said that it is a 50:50 situation means loss and profit both are unpredictable. Success depends upon the observations, calculations of risk, skills and confidence. Risk is not centred to one problem it involves many issues like fluctuation in price, taste and preference fashion, risk of strikes, lock outs etc. It becomes the essential feature of the entrepreneurship which is to be focused more and more.

Question 6.
How entrepreneurship resulted in increasing the spectrum and scope of economic activities?
Answer:
Development does not mean only the betterment of existing but it means the overall betterment across the geographical, sectoral and technological scope. Entrepreneurship results in diversification of economic activities by creating employment, business opportunities, stabilizing the demand and supply factors as underdeveloped countries caught in the vicious cycle on the demand as well as supply side. Thus, it helps in overcome from this situation. GDP originates from industry and services increases. Entrepreneurs through their decisions to direct from the stale sectors and invest in green field sectors bring a virtual transformation of the economy from underdeveloped to developed status. Thus, we can say entrepreneurship result in increasing the spectrum and scope of economic activities.

Question 7.
What are the benefits and risks of becoming an entrepreneur?
Answer:
Benefits of an entrepreneur

• They are the owner of the business.
• No worries of job, compensation and reward.
• They earn profit.
• They have full authority to take decisions.

Question 8.
How can you guard against the risks?
Answer:
Risks of an Entrepreneur

1. Market risk
2. Financial risk
3. Risk in product planning
4. Risk of innovative technologies

In order to secure from the risk, an entrepreneur should analyse the market well, study about the innovative technologies, prepare the business plan so that financial institutions granted the fond, and adopt the best ideas for product planning.

Long Answer Type Questions

Question 1.
Describe briefly the role of achievement motivation in entrepreneurship.
Answer:
Entrepreneurial motivation is important to learn as different individual motivated differently and for the success of an enterprise following needs are to be focused to motivate an entrepreneur
1. Need for Achievement: It implies a desire to accomplish something. In order to accomplish the task one can use the creativity, talent, organize physical resources, explore and use opportunities, overcome from the obstacles and attain a high standard.

2. Need for Power: It is concern with influencing people or the behaviour of others moving in the same direction to attain the objectives. Need for power means authority required to control the activities of an enterprise.

3. Need for Affiliation: It implies among other things a tendency of the people to conform to the wishes and norms of those whom they value. Entrepreneurs are believed to be low on affiliation buy they should focus and trace the elements of affiliation for a successful career and for the development of standardized goods and services for others.

4. Need for Autonomy: It means a desire for independence and being responsible and accountable to oneself rather than some external authority for performance. Everybody needs freedom to some extent as it is very difficult to take orders and work all the time as per the boss

Question 2.
Describe briefly the steps involved in starting a new business.
Answer:
Setting up and running of business unit is a very crucial decision which Is taken by an entrepreneur. He performs several functions like assembling inputs, market analysis, sales strategy, risk factors, financial analysis and many more.

But in order to start a new business following steps are to be taken
1. Scanning the Environment: The complete awareness and understanding of business environment is known as Environment scanning. An entrepreneur scan business opportunities and risks involved. After the analysis, he use these opportunities and market them in much better way.

2. Development of Product: It is second step after scanning the environment an entrepreneur starts assessing scarce resources, assembling inputs and starts the production of goods and services.

3. Feasibility Analysis: It refers to the analysis which helps in knowing the practical possibility. An entrepreneur starts looking the feasibility like technical feasibility helps in knowing that the idea should be converted into reality using available technology, similarly economic feasibility helps in knowing the cost involved in production and after selling it will earn profit or not. The business plan starts after the feasibility report.

4. Funding Agencies: Finance is the backbone for the business activity. An entrepreneur needs finance to carry on the business that’s why they prepare a business plan which is to be submitted before the financial institutions and if they satisfy they fund the project.

5. Establishing of an Enterprise: After getting, the fund, an entrepreneur have to take legal permission and clearance from various agencies in order to establish an enterprise.

Question 3.
Examine the nature of relationship between entrepreneurship and economic development.
Answer:
There is a mutual relationship between economic development and entrepreneurship. Entrepreneurship development leads to economic development of the country by contributing in GDP and process of economic development gives an opportunity for expansion and growth

Following points explain the relationship between economic development and entrepreneurship
1. Contributing to Gross Domestic Product (GDP) Income is generated in the process of production. Entrepreneurs generate income via organization of production; it results in increasing the value of GDP directly.

2. Capital Formation: Entrepreneurs use their own funds and encourage various investment opportunities to invest in companies. This leads to capital formation.

3. Generation of Employment: Every new business gives the opportunity of employment to the people with different abilities, skills and qualifications. It becomes a source of livelihood to those who do neither have capital to earn interest or nor have the land to earn rent.

4. Improves Economic: Efficiency Entrepreneurs improve economic efficiency by improving the process, reducing waste, increasing yield and bring technical progress. In this way, entrepreneurship results in economic development.

On the other hand, economic development provides following opportunities for the growth and expansion of enterprise.
(a) Well-developed financial in the economy.
(b) Opportunities to raise and avail funds from various financial institutions.
(c) Lower rate of interest and moderate inflation.
(d) Availability of factors of production.

Question 4.
Clarify how motivation and abilities impact on individual’s decision to choose entrepreneurship as a career.
Answer:
Motivation and ability can positively reinforce each other. Persons having abilities search for the exposure and focus to start a new business. They take decisions logically with the personal courage and strive hard to acquire the necessary competencies to realize their dreams.

Following competencies contribute towards effective performance and success

1. Entrepreneurs must take initiative to set up an enterprise.
2. Recognize the opportunities and grab them as early as possible.
3. Must strive for success.
4. He must collect important information.
5. Entrepreneurs must set up quality standards.
6. Must be committed to the completion of task.
7. Concern for conservation of time, money and effort.
8. Entrepreneurs must have ability to do product planning.
9. Must have ability to diagnose the problem and take required steps to solve it.
10. Entrepreneur must be confident.
11. Conveying one’s vision and convincing others of its values.
12. He must seek the support of others.
13. Providing leadership.
14. Ensuring the progress of venture.
15. Concern for employee’s welfare.

On the other hand, motivation is required to understand because entrepreneur’s objective is profit maximization and it can only be achieved when employees are motivated in such a manner that fulfilment of enterprise’s objective may also lead to satisfy employees basic needs. In this way, entrepreneurship career proves to be a success for an individual motivation and ability both goes hand to hand.

Question 5.
Anshuman was a very industrious sales executive with a small herbal cosmetic manufacturer. He earned a good salary and commission on the business he brought for the firm and had very good command over the -Delhi market for which he had virtually become indispensable. He was aware of the enviable position he held in the firm and thought aloud: “The key to success in any business is the sale of its products. The beginning and end of the business cycle is nothing but sale and “other” people working in the factory to manufacture products are mere cogs in the business machine set in motion by sales people. So why carry this burden and get only a tiny share of the prosperity of the firm? Instead others enjoying the fruits of my labour, why should I not start my own business?”
Should Anshuman take a leap? Give reasons for your answer.
Answer:
Yes, Anshuman can take a leap because:

• He has all the qualities of successful entrepreneur.
• He has the ability to bear the risk which is a prerequisite to capture a big share in the market.
• He has the calibre to do marketing of the product in an adventurous manner.
• He has the talent to face the competition posed by competitors in the market.

Multiple Choice Questions

Question 1.
Entrepreneurs undertake
(a) Calculated risks
(b) High risks
(c) Low risks
(d) Moderate and calculated risks
Answer:
(b) High risks

Question 2.
In Economics, which of the following is not a function of the entrepreneur?
(a) Risk-taking
(b) Provision of capital and organization of production
(c) Innovation
(d) Day-to-day conduct of business
Answer:
(d) Day-to-day conduct of business

Question 3.
Which of the following statements does not clearly distinguish between entrepreneurship and management?
(a) Entrepreneurs found the business; managers operate it
(b) Entrepreneurs are the owners of their business; managers are employees
(c) Entrepreneurs earn profits; managers earn salaries
(d) Entrepreneurship is once for all activity; management is a continuous activity
Answer:
(d) Entrepreneurship is once for all activity.

Question 4.
In the roles and functions of the entrepreneur identified by Kilby, which of the following is not an aspect of ‘political administration’?
(a) Dealing with public bureaucracy
(b) Managing human relations within the firm
(c) Introducing new production techniques and products
(d) Managing customer and supplier relations
Answer:
(c) Introducing new production techniques and products

Question 5.
Which of the following attitudes is not generally associated with successful entrepreneurship?
(a) Investing in R&D
(b) Live your business day-by-day
(c) Innovate and improvise continually
(d) Produce as per customers requirements
Answer:
(b) Live your business day-by-day.

Case Problems:

Inspiring Feat: Dailywage Labourer Turns Entrepreneur
A landless woman from Bihar has been nominated among the top 25 farmers in Asia by a Mexican website.
Forty-five-year-old Lalmuni Devi was a daily wage labourer when she decided to take destiny into her own hands and transformed herself into a successful mushroom farmer. Today she manages to make Rs. 12,000 every year for an investment of only Rs. 600.

Her feat finds mention on a Mexican website that has grouped her as the top 25 inspirational farmers in its photo gallery.

”I am a poor woman. I thought that mushroom farming would profit henceforth I started it. Now I can earn a living for my family,” said Lalmuni Devi.

Successful enterprise
The success story has caught on with many women in the Azadpur village on the outskirts ofPatna.
’It is effortless farming, which we can even do in our village. Working in the scorching heat is very tiring. Mushroom farming generates more profit,” said Urmila Devi. Lalmuni and other landless women have been encouraged by the Indian Council for Agriculture Research to take up mushroom farming.

’It is to help the poorest ofthe poor through alternative livelihood support system For that we have chosen a village where people have no land and they have to share croppers,” said Dr A.R. Khan, Principal Scientist, ICAR, Patna.

Lalmuni’s efforts have paved the way for many other landless women to take up mushroom farming and earn a livelihood for their family with little effort.

Question 1.
What inspiring feat did Lalmuni Devi perform?
Answer:
Forty – five – years old Lalmuni Devi has become a part of top 25 inspirational farmers in one of the Maxican photo gallery because of her bold step in venture into mushroom farming. With this she has become able to earn Rs. 12,000 every year for an investment of only Rs.600. Prior to that she was a landless woman of Bihar. She has shown a great courage of starting her business and becoming a successful woman.

Question 2.
Do you feel that you can also become an entrepreneur? Elaborate.
Answer:
Yes, we feel that if one has the courage and desire to achieve something, he can become a successful entrepreneurs. Entrepreneurs are not born, they become with the passage of time and hardships of life. Thus, we can also become entrepreneur.

Question 3.
What qualities of an entrepreneur did Lalmuni Devi exhibit?
Answer:
Lalmuni showed the entrepreneurial qualities of initiative, sees and acts on opportunities, persistence and commitment to work contract.

Question 4.
What are the benefits and risks of becoming an entrepreneur? How can you guard against the risks?
Answer:

1. It helps in economic development by accelerating the process of capital formation and providing employment opportunities.
2. It helps in capitalisation of new opportunities.
3. It brings wealth and new jobs,
4. One become job provider.

Risks associated with this procedure:

• Entrepreneurship involves risks of failure,
• It bears threat from competitions.
• Fear of obsolescence.

Measures to overcome these risks:
Risks associated with the entrepreneurial process can be overcome by following the important steps:

• By making proper plans,
• By remaining innovative.
• Organizing resources should be done in a careful manner.
• Involving local people so that conflicts can be avoided.
• Keeping in view the government policy on the proposed subject matter.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 12 Consumer Protection

I. One Mark Questions and Answers

Question 1.
Who is a Consumer?
Answer:
A person who uses a product or a person who consumes a product.

Question 2.
When Consumer’s Rights Day observed?
Answer:
15th March of every year.

Question 3.
State any one consumer right.
Answer:
Right to safety.

Question 4.
Name any one consumer grievances redressal agency.
Answer:
State Commission.

Question 5.
State any one remedy available to the Consumer under the Act.
Answer:
To pay compensation for defective and irreplacable goods.

Question 6.
State any one Consumer Responsibilities
Answer:
Awareness about the rights.

Question 7.
State any one reason for consumer protection.
Answer:
The consumers are ignorant and not aware of their rights, so they cannot raise their voice against the exploitation. Therefore there is a need for consumer protection.

Question 8.
State the monetary limit for claim under the District Forum.
Answer:
Claim should not exceed Rs.20 lakhs.

Question 9.
State the monetary limit for claim under the State Forum.
Answer:
Here the claim exceeds Rs.20 lakhs but not more than Rs. 1 crore.

Question 10.
State the monetary limit for claim under the National Forum.
Answer:
Above Rs. 1 crore.

Question 11.
When was the Consumer Protection Act enacted?
Answer:
In the year 1986.

Question 12.
Who is the king of the Market?
Answer:
Consumer is the king of the market.

Question 13.
What do all marketing activities aim at?
Answer:
Marketing activities aim at satisfying consumer needs and wants.

Question 14.
Mention any one of the malpractices done by businessmen.
Answer:
Adulteration

Question 15.
What do you mean by ‘Caveat Emptor’?
Answer:
Let the Buyer Beware.

Question 16.
What do you mean by ‘Caveat Venditor’?
Answer:
Let the Seller Beware.

Question 17.
Name the act which protects the rights of Consumer.
Answer:
The Consumer Protection Act of1986.

Question 18.
What is Consumer Protection?
Answer:
It refers to protection of the rights of the consumer.

Question 19.
Mention any one Right of Consumer.
Answer:
Right to Safety.

Question 20.
Name any one of the Consumer Grievance Redressal Agencies. District Consumer Disputes Redressal
Answer:
Agency.

Question 21.
What is the span of period for an unsatisfied party to appeal in the higher court in each of the 3 forums.
Answer:
Within 30 days of order given by each forum

Question 22.
Which is the last resort for an unsatisfied party?
Answer:
Supreme Court.

II. Two Marks Question and Answers

Question 1.
Define Consumer?
Answer:
The Consumer Protection Act of 1986 defines consumer as, ‘One buys goods or hires or avails service for some consideration that is paid or payable’.

Question 2.
Name any two consumer grievances redressal agencies.
Answer:
State Commission and National Commission.

Question 3.
List any two importance of consumer protection.
OR
Mention any two needs of consumer protection.
Answer:

1. Consumer’s ignorance: The consumers are ignorant and not aware of their rights, so they cannot raise their voice agains the exploitation.
2. The long-term interest of Business: Business units are bound to protect the consumer interest by providing better quality goods and services at reasonable prices, for their long-term survival.

Question 4.
State the composition of members of National Commission.
Answer:
A National Commission consists of a committee of five persons – a President and four members including one woman member, who are being nominated by the Central Government for a term of five years.

Question 5.
Write any two remedies available to the aggrieved consumer as per the Act.
Answer:
(a) To remove the defect in the product.
(b) To replace the goods.

Question 6.
Mention any two persons who can file a complaint with redressal agencies.
Answer:
(a) A Consumer.
(b) State or Central Government.

Question 7.
Who is a Consumer?
Answer:
A consumer is a person who buys a product for his personal use or for use of others without any intentions of monitory benefits.

Question 8.
What is Consumer Protection?
Answer:
It refers to protection of consumers against exploitation by manufacturers or traders.

Question 9.
Mention any two objectives of Consumer Protection Act of 1986.
Answer:
(a) To safeguard consumers against unfair trade practices.
(b) To provide quick and inexpensive redressal and grievances.

Question 10.
Mention any two rights of Consumers.
Answer:
(a) Right to Safety
(b) Right to be informed.

Question 11.
Mention any two Consumer Responsibilities.
Answer:
(a) Awareness of Rights
(b) A Consumer must be quality conscious.

Question 12.
Mention any two important pieces of information that should be there in a complaint.
Answer:
(a) Name, description and address of complainant.
(b) Name, description and address of other party.

Question 13.
What do you mean by Complaint?
Answer:
Complaint means any allegation in written form made by those who are eligible to file a complaint.

Question 14.
Mention any two Consumer
Answer:
Grievances Redressal Agencies under COPRA 1986.
(a) District Consumer Disputes Redressal Agency.
(b) State Consumer Disputes Redressal Agency.

Question 15.
State the composition of members of District Forum.
Answer:
(a) A President (a District Judge)
(b) Two members out of whom one should be women from the field of education, trade or commerce nominated by State Government.

Question 16.
State the composition of members of State Commission.
Answer:
(a) A President (a High Court Judge)
(b) Two members out of whom one should be women from the field of economics, commerce, law, accountancy, public affairs, administration etc., nominated by State Government.

Question 17.
State the composition of members of National Commission.
Answer:
(a) A President (a Supreme Court Judge)
(b) Four members including one women from the field of economics, commerce, law, accountancy, public affairs, administration etc., nominated by Central Government.

Question 18.
Mention any two remedies available to the Consumers.
Answer:
(a) To remove the defect in the product.
(b) To return the price of the goods.

III. Five Marks Questions and Answers

Question 1.
Explain any five consumer rights.
Answer:
(a) Right to Safety: A right to be protected against the marketing ofhazardous products.
(b) Right to be informed: A right to information like price, level of purity, quality, quantity and usefulness of the product.
(c) Right to Choose: The Sellers cannot force consumers to buy certain products; they have the right to choose the best from the alternatives thatare available in the market.
(d) Right to be heard: The right to exercise the principles of natural justice i.e, the right to being heard of appropriate forums.
(e) Right to Seek Redressal: It implies that consumers should get fair treatment of their claim and compensation for any action of cheating by businessman.
(f) Right to Consumer Education: It suggests that the consumers must be educated about their rights.

Question 2.
Explain any 5 Consumer Responsibilities.
Answer:
(a) A consumer must have adequate information about his rights while purchasing a product.
(b) A consumer should be fully aware of price, quality, utility of the products.
(c) A consumer must file a complaint in case of any defect in the product.
(d) Every consumer should demand for cash bills, receipts for the purchase they make.
(e) A consumer must compare the product and check whether it is similar to that which was promoted in the advertisement.
(f) A consumer should check the date of manufacture, expiry date, directions to use before using the product.
(g) A consumer should not be involved in the purchase of any illegal products.
(h) Consumer should form their own organisations to educate and protect their interest against the market malpractices.
(i) Consumers must avoid wasting of natural resources and protect the environment.
(j) A consumer should not buy any product in a hurry, he should be careful while purchasing the product.

Question 3.
Explain the importance of consumer protection.
Answer:
The importance of consumers proection is viewed from the view point of: a. Consumers and b. Business.
(a) From the view point of consumer, the consumer protection is necessary on the following grounds.

1. Consumers ignorance: The consumers are ignorant and not aware of their rights, so they cannot raise their voice against the exploitation. Therefore, it is necessary to educate them about their rights so as to achieve consumers protection.
2. Unorganised consumers: A the consumers are not organised, they are being exploited by the business community. Therefore, it is necessary for the consumers to get organised against exploitation;
3. Consumers exploitation: The consumers are widely exploited by the business community through unfair trade practices like adulteration, black – marketing, under weighment, deceptive advertisement etc. So it is important to protect them from such unfair trade practices.

(b) From the view point of business, the consumer protection is necessary on the following grounds.

1. Long term interest of Business: Business units are bound to protect the
   consumer interest by providing better quality goods and services at reasonable prices, for their long term survival.
2. Social responsibility: Acceptance of social responsibility
   towards consumers by restricting the unfair trade practices is also one of the important factors of consumer protection.
3. Government intervention: Government takes active interest in the welfare of consumers from time to time by bringing in necessary regultions. therefore it is advisable for the business concerns to voluntarily accept consumer protection.

Question 4.
State the features of District Forum.
Answer:
COPRA 1986 provides for establishment of a District Consumer Forum is each district by concerned State Government.

Features:
(a) Composition: Each District Forum consists of 3 persons in a committee; a President and two members out of whom one must bewomen nominated by State Government for 5 years term.

(b) Qualification: President should have the qualification to be a District Judge and the other two members should be eminent people from the field of education, trade and commerce.

(c) Powers: It will have the power of a Civil Court for enquiring into any complaint.

(d) Jurisdiction: The value of goods and services and compensation should not exceed Rs.20 lakhs.

(e) Redressal Proceedings: Agency can serve notice and ask for sample of defect products and samples are tested in labs.

(f) Remedy: If defect is found, the agency can direct the accused to

• Remove the defect
• Replace the product
• Return the price of the product paid by complainant
• Compensate for the loss suffered
• Discontinue the Unfair Trade Practices.

(g) Appeal: If both or any party is not satisfied with the verdict they can appeal to State Commission within 30 days from the date of order given by District Forum

Question 5.
State the features of State commission.
Answer:
Features:
COPRA 1986 provides for the establishment of a State Commission at state level situated at State capital.
(a) Composition: Each State Forum consists of 3 persons in a committee a President and two members out of whom one must be women nominated by State Government for 5 years term

(b) Qualification: President should have qualification equalent to High Court Judge members should possess adequate knowledge in the field of economics, commerce, law, accountancy, public affairs, administration etc.,

(c) Jurisdiction: The value of goods and services and compensation claim will be exceeding Rs.20 lakhs but not more than Rs. 1 Crore.

(d) Redressal Proceedings: Agency can serve notice and ask for samples for defect products and Samples are tested in laboratories.

(e) Remedy: If defect is found, the agency can direct the accused to

• Remove the defect in the product.
• Replace the product.
• Return the price of the product paid by the complainant.
• Compensate the loss suffered by consumer.
• Discontinue the Unfair Trade Practices. j) Appeal

If both or any party is not satisfied with the verdict, they can appeal to National Commission within 30 days from the date of order given by State Commission.

Question 6.
State the features of National Commission.
Answer:
COPRA 1986 provides for the establishment of a National Commission at National level to be situated in the capital of thecountry.

Features:
(a) Composition: A National Commission consists of a committee of 5 persons, a President and four members among them one must be women nominated by Central Government for a term of 5 years.

(b) Qualification: President should have qualification equilent to Supreme Court Judge and members should possess adequate knowledge in the field of economics, commerce, law, accountancy, public affairs, administration etc.,

(c) Jurisdiction:

• The value of goods and services and compensation of claim will be exceeding one crore.
• Appeals against the orders of any State Commission.

(d) Redressal Proceedings
Agency can serve notice to ask for samples of defect products and samples will be tested in laboratories.

(e) Remedy: If defect is found the agency can direct the accused to

• Remove the defect in the product.
• Replace the product.
• Return the price of the product paid by the complainant.
• Compensate the loss suffered by consumer.
• Discontinue the Unfair Trade Practices.

(f) Appeal: If both or any party is not satisfied with the verdict, they can appeal to supreme court for more favourable justice within 30 days ofthe order given by National Commission.

Question 7.
What are the remedies available to a consumers as per Consumer Protection Act.
Answer:
(a) To remove the defect in the product.
(b) To replace the goods.
(c) To return the price ofthe goods
(d) To pay the compensation.
(e) To discontinue the unfair trade practices.
(f) Not to offer hazardous goods for sale.
(g) To seize the hazardous goods.

IV. Ten Marks Questions and Answers

Question 1.
Explain any five consumer rights and five consumer responsibilities.
Answer:
Five consumer rights.
(a) Right to Safety: A right to be protected against the marketing ofhazardous products.
(b) Right to be informed: A right to information like price, level of purity, quality, quantity and usefulness of the product.
(c) Right to Choose: The Sellers cannot force consumers to buy certain products; they have the right to choose the best from the alternatives that are available in the market.
(d) Right to be heard: The right to exercise the principles of natural justice i.e, the right to being heard of appropriate forums.
(e) Right to Seek Redressal: It implies that consumers should get fair treatment of their claim and compensation for any action of cheating by businessman.
(f) Right to Consumer Education: It suggests that the consumers must be educated about their rights.

Consumer Responsibilities:
(a) A consumer must have adequate information about his rights while purchasing a product.
(b) A consumer should be fully aware of price, quality, utility of the products.
(c) A consumer must file a complaint in case of any defect in the product.
(d) Every consumer should demand for cash bills, receipts for the purchase they make.
(e) A consumer must compare the product and check whether it is similar to that which was promoted in the advertisement.
(f) A consumer should check the date of manufacture, expiry date, directions to use before using the product.
(g) A consumer should not be involved in the • purchase of any illegal products.
(h) Consumer should form their own organisations to educate and protect their interest against the market malpractices.
(i) Consumers must avoid wasting of natural resources and protect the environment.
(j) A consumer should not buy any product in a hurry, he should be careful while purchasing the product.

Question 2.
Explain the features of District Forum and State Commission.
Answer:
COPRA 1986 provides for establishment of a District Consumer Forum is each district by concerned State Government.

Features:
(a) Composition: Each District Forum consists of 3 persons in a committee; a President and two members out of whom one must bewomen nominated by State Government for 5 years term.

(b) Qualification: President should have the qualification to be a District Judge and the other two members should be eminent people from the field of education, trade and commerce.

(c) Powers: It will have the power of a Civil Court for enquiring into any complaint.

(d) Jurisdiction: The value of goods and services and compensation should not exceed Rs.20 lakhs.

(e) Redressal Proceedings: Agency can serve notice and ask for sample of defect products and samples are tested in labs.

(f) Remedy: If defect is found, the agency can direct the accused to

• Remove the defect
• Replace the product
• Return the price of the product paid by complainant
• Compensate for the loss suffered
• Discontinue the Unfair Trade Practices.

(g) Appeal: If both or any party is not satisfied with the verdict they can appeal to State Commission within 30 days from the date of order given by District Forum

Features:
COPRA 1986 provides for the establishment of a State Commission at state level situated at State capital.
(a) Composition: Each State Forum consists of 3 persons in a committee a President and two members out of whom one must be women nominated by State Government for 5 years term

(b) Qualification: President should have qualification equalent to High Court Judge members should possess adequate knowledge in the field of economics, commerce, law, accountancy, public affairs, administration etc.,

(c) Jurisdiction: The value of goods and services and compensation claim will be exceeding Rs.20 lakhs but not more than Rs. 1 Crore.

(d) Redressal Proceedings: Agency can serve notice and ask for samples for defect products and Samples are tested in laboratories.

(e) Remedy: If defect is found, the agency can direct the accused to

• Remove the defect in the product.
• Replace the product.
• Return the price of the product paid by the complainant.
• Compensate the loss suffered by consumer.
• Discontinue the Unfair Trade Practices.

(f) Appeal: If both or any party is not satisfied with the verdict, they can appeal to National Commission within 30 days from the date of order given by State Commission.

Question 3.
Explain the features of National Commision.
Answer:
COPRA 1986 provides for the establishment of a National Commission at National level to be situated in the capital of thecountry.

Features:
(a) Composition: A National Commission consists of a committee of 5 persons, a President and four members among them one must be women nominated by Central Government for a term of 5 years.

(b) Qualification: President should have qualification equilent to Supreme Court Judge and members should possess adequate knowledge in the field of economics, commerce, law, accountancy, public affairs, administration etc.,

(c) Jurisdiction:

• The value of goods and services and compensation of claim will be exceeding one crore.
• Appeals against the orders of any State Commission.

(d) Redressal Proceedings
Agency can serve notice to ask for samples of defect products and samples will be tested in laboratories.

(e) Remedy: If defect is found the agency can direct the accused to

• Remove the defect in the product.
• Replace the product.
• Return the price of the product paid by the complainant.
• Compensate the loss suffered by consumer.
• Discontinue the Unfair Trade Practices.

(f) Appeal: If both or any party is not satisfied with the verdict, they can appeal to supreme court for more favourable justice within 30 days ofthe order given by National Commission.

Question 4.
As an aggrieved consumer, write a complaint to District Forum seeking redressal. Complaint to District Forum seeking redressal
Mangalore
Date…
Mr.X …. Complainant
Sharada Vihar
Mangalore – 575004
Vs
1. Proprietor
M/s Y & Co.
Shrinidhi Towers, Hampankatta,
Mangalore – 575001

2. Managing Director M/s Z. Ltd.
Oberoi Mall ,
Goregaon, Mumbai.
The Hon’ble President and
Members ofDistrict Form .
Mangalore

Dear sir,

Sub: Complaint regarding defective mixer grinder purchased on May 15th, 2018.
I wish to bring to your notice that the above mentioned appliance purchased on the said day abruptly stopped functioning on June 4th 2018. The matter was immediately reported to O.P. No. 1 who directed me to approach their service center for assessing the fault and satisfying the same. The rectified appliance was returned on June 14th 2018, the receipt of which is enclosed for your action.

On using the mixer grinder immediately after repairs it broke down once again after running for hardly five minutes. As a result, a written complaint was made to O.P No. 1 and O.P.2, copies of which are furnished for your action.

Despite repeated reminders and follow up, no action has been taken by either of the opposite parties. In view of the same, I appeal to you to direct the opposite parties to either replace the mixer grinder or to refund the cost of the same along with damages for the physical strain and mental agony suffered by me and my family.

I request you consider my complaint about immediate action.

Thanking you,
Yours sincerely
Mr.X

Enel: (a) Purchase receipt of mixer grinder
(b) Receipt of the Service Centre
(c) Written complaints to O.P. No. 1 and O.P. No.2.

Question 5.
Which consumer right gives the business firm freedom to set up their own consumer service and grievance cell?
Answer:
Right to be heard.

Question 6.
Mallika wants to buy an iron. As an aware customer how can she be sure about the quality of iron?
Answer:
Through ISI mark on the iron.

Question 7.
Anil filed a case against ‘Domestic Cooling ltd.’ in the ‘District Forum’, but was not satisfied with the orders of the District Forum. Where can he appeal further against the decisions of District Forum?
Answer:
Anil can further appeal against the decision of District Forum in the ‘State Commission’ within 30 days.

Question 8.
Vathsala wants to buy ghee. How can she check the quality of product?
Answer:
Through ‘ AGMARK’ symbol.

Question 9.
Jayaram filed a case against ‘Volvo Ltd.’ in the ‘State Commission’. But he was not satisfied with the orders of the ‘State Commission’. Name the authority to which he can appeal against the decisions of ‘State Commission’,
Answer:
Jayaram can further appeal in ‘National Commission’.

Question 6.
Can a consumer file complaint in consumer court without having cash memo?
Answer:
No,without cash memo he cannot file a complaint. Cash memo is the proof of the transaction.

Question 10.
Name any two consumer rights.
Answer:

1. Right to Safety
2. Right to Choice.

Question 11.
List any three consumer organizations in India.
Answer:

1. Consumer Guidance Society of India (Mumbai),
2. Common Cause (New Delhi),
3. Citizen Action Group (Mumbai)

Question 12.
Who is a consumer?
Answer:
According to Consumer protection Act, a consumer is:

1. One who buys goods or hires services.
2. Any use of such good or service with approval of buyer.
3. Anyone who bought the goods for earning livelihood.

Question 13.
Why is consumer protection required in India?
Answer:
Because of the following reasons:

• Poverty and unemployment
• Illiterate consumers
• Consumers are not organized.

Question 14.
Suggest any three remedies or reliefs available to consumer on his complaints.
Answer:

1. Removal of defects from the goods.
2. Replacement of the goods.
3. Refund of the price paid.

Question 15.
Can a consumer appeal against the judgement of National Commission?
If yes, than where?
Answer:
Yes, he can appeal in High Court or Supreme Court.

Question 16.
Who can file a complaint in consumer court?
Answer:

1. Any Consumer;
2. Any Registered Consumers’Association;
3. The Central Government or any State Government;
4. One or more consumes on behalf of numerous consumers having the same interest; and
5. A legal heir or representative of a deceased consumer.

Question 17.
Explain the following as ways and means of consumer protection: (i) Consumer Awareness (ii) Government.
Answer:

1. Consumer Awareness: It is not easy to exploit an educated and well aware consumers. Consumer must be well aware about his rights, responsibilities and relief available to him under Consumer ProtectionAct.
2. Government: The government of India has framed a set of laws and legislations to protect the interests of consumers and the most important act framed by the Government is Consumer Protection Act, 1986. This act has provided three-tier redressal agencies i.e., District Forum, National Commission anil State Commission.

Question 18.
Radhika wants to buy a packet of juice. As an aware customer, how can she be sure about the quality of juice she plans to buy?
Answer:
She should check the ‘FPO’ (Food Product Order) symbol on the product.

Question 19.
When or under what circumstances the complaints can be filed?
Answer:
Complaint can be filed and compensation can be claimed by the consumer with respect to-
(a) Fraudulent practices of traders and manufacturers.
(b) If goods are defective.
(c) If there is any deficiency in the services hired.

Question 20.
Name two consumer rights defined by UNO.
Answer:

1. Right to Basic Need.
2. Right to Healthy Environment.

Question 21.
Rajeeva, a vegetarian was traveling in Rajdhani Express was served food and later he found out that it had a non-vegetarian content. His sentiments were hurt. Will Rajiv be able to claim compensation, which right of the consumer is violated?
Answer:
Yes, Rajeeva will be able to claim the compensation as the railways have violated the Right to Information.

Exercises

Short Answer Type Questions

Question 1.
Explain the importance of consumer protection from the point of view of business.
Answer:
A business cannot survive without paying attention on protecting – the consumers interest and adequately satisfying them.

This is important because of the following reasons
1. Long-Term Interest of business firms should aim at long term profit maximisation through customer satisfaction. Satisfied customers not only lead to repeat sales but also provide good feedback to prospective customers and thus help in increasing the customer base of business.

2. Business uses Society’s Resources Business organisation uses resources which belong to the society, thus they have a responsibility to supply such products and render such services which are in public interest.

3. Social Responsibility A business has social responsibility towards various interest groups. Business organisations make money by selling goods and providing services to consumers. Thus, consumers form an important group among the many stakeholders of business and like other stakeholders; their interest has to be well taken care of.

4. Moral Justification The moral duty of any business is to take care of consumer’s interest and securing them from exploitation. Thus, a business must avoid insecure loss, exploitation and unfair trade practices like defective and unsafe products, adulteration, false and misleading advertising hoarding, black marketing etc.

5. Government Intervention A business engaging in any form of exploitation time trade practices would invite government intervention or action. Thus, it is advisable that business organisation voluntarily resort to such practices, where the customers need and interests will be taken care of.

Question 2.
Enumerate the various Acts passed by the Government of India which help in protecting the consumer’s interest?
Answer:
The Indian legal framework consists of a number of regulations which provide protection to consumers.

Some of these regulations are as under
1. The Consumer Protection Act, 1986: The Act provides safeguards to Consumers against defective goods, deficient services, unfair trade practices etc.

2. The Contract Act, 1982: The Act lays down the conditions in which the promises made by parties to a contract will be binding on each other.

3. The Sale of Goods Act, 1930: The Act provides some safeguards and reliefs to the buyers of the goods in case, the goods purchased do not comply with express or implied conditions or warranties.

4. Essential Commodities Act, 1955: The Act alms at controlling, production, supply, distribution and price of essential commodities.

5. The Agricultural Produce Act, 1937: The Act prescribes grade standards for agricultural commodities and livestock products.

6. The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of foods articles and ensure their purity, so as to maintam public health.

7. The Standards of Weights and Measures Act, 1976: It provides protection to consumers against the malpractice of under- weight or under-measure.

8. The Trade Marks Act, 1999: The Act prevents the use of fraudulent marks on products and thus provides protection to the consumers against such products.

9. The Competition Act, 2002: The Act provides protection to the consumers In case 01 practices adopted by business firms which hamper competition in the market.

10. The Bureau of Indian Standard Act, 1986: The bureau has two major activities: formulation of quality standards for goods and their certification through the BIS certification scheme. The bureau has also set up a grievance cell, where consumers can make a complaint about quality of products carrying the 1SI mark.

Question 3.
What are the responsibilities of a consumer?
Answer:
A consumer should keep in mind the following responsibilities while purchasing, using and consuming goods and services

1. Be aware about various goods and ‘ services available in the market, so that an intelligent and wise choice can be made.
2. Buy only standardised goods as they provide quality assurance. Thus, look for ISI mark on electrical goods. FPO mark on food products and Hallmark on jewellery etc.
3. Learn about the risks associated with products and services.
4. Read labels carefully, so as to have information about prices, weight, manufacturing and expiry dates etc.
5. Assert yourself to get a fair deal.
6. Be honest in your dealings. Choose only from legal goods and services.
7. Ask for a cash-memo on purchase of goods and services. This would serve as a proof of the purchase made.
8. File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed.
9. Form consumer societies which would play an active part in educating consumers and safeguarding their interests
10. Respect the environment, avoid waste, littering and contributing to pollution.

Question 4.
Who can file a complaint in a consumer court?
Answer:
A complaint can be made by

1. Any consumer.
2. Any registered consumer’s association.
3. The Central Government or any State Government.
4. One or more consumers. On behalf of numerous consumers having the same interest.
5. A legal heir or representative of a deceased consumer.

Question 5.
What kind of cases can be filed in a – state commission?
Answer:
A complaint can be made to the appropriate state commission when the value of the goods and services, along with compensation claim exceeds Rs. 20 lakhs but does not exceed Rs. 1 crore. The appeals against the orders of a District Forum can also be filed before the state commission.

Question 6.
Explain the role of consumer organisations and NGOs in protecting and promoting consumers’ interest.
Answer:
Consumer organisations and NGOs , perform several functions for the protection and promotion of interest of consumers.

In India, these associations are performing lots of functions some of them are
1. Educating the general public about consumer rights by organising training programmes, seminars and workshops.

2. Publishing periodicals and other publications to impart knowledge about consumer problems, legal reporting, reliefs available and other matters of interest.

3. Carrying out comparative testing of consumer products in accredited laboratories to test relative qualities of competing brands and publishing the test results for the benefit of consumers.

4. Encouraging consumers to strongly protest and take an action against unscrupulous, exploitation and unfair trade practices of sellers.

5. Providing legal assistance to consumers by providing aid, legal advice etc. in seeking legal remedy.

6. Filing complaints in appropriate consumer courts on behalf of the consumers.

7. Taking an Initiative in filing cases in consumer court in the interest of the general public, not for any individual.

Long Answer Type Questions

Question 1.
Explain the rights and responsibilities of a consumer.
Answer:
The Consumer Protection Act provides six rights to consumers.

They are as follows
1. Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life, e.g., sometimes we purchased the food items of low quality which causes severe problems. Thus, in this case, we should purchased good quality and FPO labelled products,

2. Right to be informed: The consumer has a right to have complete information about the product, which he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use etc. Under the legal framework of India manufactures have to provide such information on the package and label of the product.

3. Right to choose: The consumer has the freedom to choose from a variety of products. The marketers should offer a wide variety of products and allow the consumer to make a choice and choose the product which is most suitable.

4. Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells.

5. Right to Seek Redressal: The Consumer Protection Act provides a number product, of reliefs to the removal of defect consumer including replacement of the in the product, compensation paid for any loss or injury suffered by the consumer etc.

6. Right to Consumer Education: The consumer has a right to acquire knowledge about products. He should be aware about his rights and the reliefs available to him in case of a product, service falling short of his expectations Many consumer organisations and some enlightened businesses are taking an active part in educating consumers in this respect.

Consumer Responsibilities
A consumer must be aware about these responsibilities while purchasing, using and consuming goods and services

1. Consumer must be aware of all their rights.
2. Consumer must be careful while purchasing a product.
3. He should file complaint for the redressal of genuine grievances.
4. Consumer must buy a standardised good.
5. He should ask for a cash-memo on purchase of goods and services.

Question 2.
What are various ways in which the objective of consumer protection can be achieved? Explain the role of consumer organisations and NGOsin this regard?
Answer:
There are various ways in which the objective of consumer protection can be achieved
1. Self-Regulation by Business Socially responsible firms follow ethical standards and practices in dealing with their customers. Many firms have set up their customer service and grievance cells to redress the problems and grievances of their consumers.

2. Business Associations the associations of trade, commerce and business like Federation of Indian Chambers of Commerce of India (FICCI) and Conference of Indian Industries (CII) have laid down their code of conduct which lays down for their members the guidelines in their dealings with the customers.

3. Consumer Awareness A consumer, who is well informed about his rights and the reliefs, would be in a position to raise his voice against any unfair trade practices or exploitation.

4. Consumer Organisations Consumer organisations plays an important protecting role in educating consumers about their rights and them. These organisations can force business firms to avoid malpractices and exploitation of consumers.

5. Government the Government can protect the interests of the consumers by enacting various legislations. The legal framework in India encompasses various legislations which provide protection to consumer, the most important of these regulations is the Consumer Protection Act, 1986. The Act provides for a three- tier machinery at the District, State and National levels for redressal of consumer grievance.

Question 3.
Role of Consumer Orgs and NGOs
Answer:
Consumer organisation and NGOs perform several functions for the protection and promotion of interest of consumers.

In India, these associations are performing lots of functions some of them are
1. Educating the general public about consumer rights by organising training programmes, seminars and workshops.

2. Publishing periodicals and other publications to impart knowledge about consumer problems, legal reporting, reliels available and other matters of interest.

3. Carrying out comparative testing of consumer products in accredited laboratories to test relative qualities of competing brands and publishing the test results for the benefit of consumers.

4. Encouraging consumers to strongly protest and take an action against unscrupulous, exploitation and unfair trade practices of sellers.

5. Providing legal assistance to consumers by providing aid, legal advice etc. in seeking legal remedy.

6. Filing complaints in appropriate consumer courts on behalf of the consumers.

7. Taking an initiative in filing cases in consumer court in the interest of the general public, not for any individual.

Question 4.
Explain the redressal mechanism available to consumers under the Consumer Protection Act, 1986?
Answer:
For the redressal of consumer grievances, the Consumer Protection Act provides for setting up of three-tier enforcement machinery at the District, State and the National levels.
1. District Forum: A complaint can be made to the appropriate District Forum when the value of goods or services, along with the compensation claimed, does not exceed Rs. 20 lakhs. In case the aggrieved party is not satisfied With the order of the District Forum, he can appeal before the State Commission within 30 days.

2. State Commission: A complaint can be made to the appropriate State Commission when the value of the goods or services, along with the compensation claimed. Exceeds Rs. 20 lakhs but does not exceed Rs. 1 crore. The appeals against the orders of District Forum can also be filed before the State Commission. In case the party is not satisfied with the order of the State Commission, he can appeal before the National Commission within 30 days of the passing of the order by State Commission.

3. National Commission: Acomplaint can be made to the National Commission when the value of the goods or services, along with the compensation claimed exceeds Rs. 1 crore. The appeals against the orders of a State Commission can also be filed before the National Commission. An order passed by the National Commission in a matter of its original justification is appealable before the Supreme Court. This means that only those appeals, where the value of goods+services in question, along with the compensation claimed, exceeded Rs. 1 crore and where the aggrieved party was not satisfied with the order of the National Commission, can be taken to the Supreme Court of India.

True or False/State whether the following statements are true or false.

Question 1.
Consumer protection has a moral justification for business.
Answer:
True

Question 2.
In addition to rights, a consumer also has some responsibilities.
Answer:
True

Question 3.
A complaint can be made to a District Forum when the value of the goods or services in question, along with the compensation claimed, exceeds Rs. 20 lakhs.
Answer:
False

Question 4.
The Consumer Protection Act provides for six consumer rights.
Answer:
True

Question 5.
IST is the quality certification mark used in case of food products.
Answer:
False

Question 6.
Under the Consumer Protection Act, a complaint can be filed by a consumer for a defective good and also for deficiency in service.
Answer:
True

Case Problems:

Now, filing complaint is just, a click away. Filing a complaint in a consumer court’s going to get a lot easier by the end of this year, virtually. No matter which part of the country you’re in, it’s going to happen at the click of a mouse.

The project, called ‘Confonet ‘ (Computerisation and Computer Networking of Consumer Fora), is being executed on a turnkey basis by the National Informatics Centre (NIC).

“Online registration of complaints, the government hopes, will promote e- govemance, transparency, efficiency and streamlining of consumer fora”, said an official in the consumer affairs ministry. OfRs. 48.64 Crore set aside for the project, the government has released Rs. 30.56 crore so far, the official added.

“Besides software development and testing, networking and project implementation, integration and site preparation, it will include purchase of hardware for all the 583 District fora, 35 state commissions and the National Commission”, the official said.

At present, computer systems and system software have been delivered to 25 state commissions and 300 District fora-never mind the fact that it’s sometimes along wait before the hardware is finally unpacked and set up in some of the districts. Meanwhile, training of staff, sometimes in the classroom and sometimes through e-leaming sessions, are in foil swing.

“But just setting up an online complaint filing system won’t ensure a strong consumer protection movement in the country for that we’re working on GenNext and the best way to do that is to go to schools”, the official said.

The government is, therefore, involving school children to form consumer clubs, so as to involve them in various consumer welfare activities.

Part of the funding for running the club is to come from various state governments, with an equally matching grant from the Centre. However, a number of state governments are yet to sanction the fund – some of these include Uttar Pradesh, Madhya Pradesh and Kerala

Question 1.
What new measure is the ministry of consumer affairs taking to make filing a complaint easy?
Answer:
Online registration of complaints has been initiated by the ministry of consumer affairs to make filing of complaint easy.

Question 2.
What role can you as a student play to contribute to the cause of consumer protection?
Answer:
A student can play an active role in bringing out an awareness campaign on ‘Consumer Protection’.

1. Special assemblies can be organised to show the display of consumer rights and responsibilities
2. When school organises any exhibition the commerce students can put a stall and give demonstration on responsibilities of a consumer,
3. The Biology and Chemistry laboratories can be used for testing adulterated goods, (e.g milk, paneer, spices etc.).
4. Essay writing competitions, debate competition and quiz can be organised to promote the awareness on consumer protection,
5. Encourage students to boycott goods/ eatables which are adulterated or defective in school canteen.
6. To set up voluntary complaint centre for consumer guidance and counselling,

Question 3.
What scenario of consumer protection do you foresee when the measures proposed in the above news report are implemented?
Answer:
With the implementation of online registration, educated and technology friendly consumer will gain but in my opinion the unaware, ignorant and simple consumers who still are far away from e-govemance would stand in need of the 3 forums working efficiently and effectively. Thus both the systems should work parallel, hand in hand to protect the interests of different types of consumers.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 11 Marketing Management

I. One Mark Questions and Answers

Question 1.
Define Market.
Answer:
According to Philip Kotler ‘A market is an area for potential exchanges’.

Question 2.
Name any one element of Marketing Mix.
Answer:
Price Mix.

Question 3.
Mention one function of Marketing.
Answer:
Pricing.

Question 4.
State a factor affecting pricing decision.
Answer:
Business Objectives.

Question 5.
Name a middleman in the channel of distribution.
Answer:
Wholesaler.

Question 6.
Name any one feature of advertisement
Answer:
It is a paid form of communication. The advertiser needs to pay to the communicator or the media for providing the space or time for exhibiting the message.

Question 7.
Mention any one essentials of an Advertisement Copy.
Answer:
Attention value.

Question 8.
State a feature of personal selling.
Answer:
Personoal selling is informative in nature. The seller or his representatives provide information about the product, its use and benefits to the prospective consumers.

Question 9.
What is a Brand?
Answer:
A brand is any name, letter or symbol which helps the customer to identify the product.

Question 10.
What is Price?
Answer:
Price represents the value of the product in terms of money.

Question 11.
State any one method of Sales Promotion.
Answer:
Discount, Free Samples.

Question 12.
State any one channel of distribution.
Answer:
Producer – Agent-Wholesaler-Retailer- Consumer channel.

Question 13.
Mention any one objective of advertising.
Answer:
To influence the behaviour of prospective buyers favourably towards the product or service of the firm.

Question 14.
Give an example for quantity gift.
Answer:
Offering one shirt free on the purchase of two shirts [Buy 2 get one free]

Question 15.
Mention any one of the elements of Product Mix.
Answer:
Branding.

Question 16.
Mention any one of the factors affecting Pricing Decisions.
Answer:
Cost of Production.

Question 17.
Mention any one channel of Distribution.
Answer:
Producer – Wholesaler – Retailer – Consumer.

Question 18.
Mention any one element of Promotion.
Answer:
Advertising.

Question 19.
Mention any one advantage of Advertising.
Answer:
To support personal selling.

Question 20.
Mention any one feature of Salesmanship.
Answer:
Personal selling is informative in nature.s

Question 21.
Mention any one quality of successful ‘ salesman.
Answer:
Good health and appearance.

Question 22.
Mention any one of the objects of Sales Promotion.
Answer:
To attract potential customers.

Question 23.
What is a Label?
Answer:
It is a piece of paper affixed on product which gives the information of the product.

Question 24.
What is Labelling?
Answer:
It refers to designing and affixing appropriate label to a product or its container.

Question 25.
Mention any one advantage of Advertising.
Answer:
Education to consumers about products.

II. Two Marks Question and Answers

Question 1.
What is Market?
Answer:
Market is an arrangement which provides opportunity of exchanging goods and services for money or money’s worth.

Question 2.
Name any two elements of Marketing Mix.
Answer:
(a) Product Mix
(b) Price Mix

Question 3.
What is Branding?
Answer:
A Brand is a name, term, symbol, mark or design or a combination of them which is intended to identify and differentiate products from other competitors in market.

Question 4.
State the meaning of Grading?
Answer:
It is a process of dividing the commodities into lots that have similar characteristics as to type, size, shape, weight, quality, performance etc.

Question 5.
What is Packing?
Answer:
It includes wrapping, filling or compressing of goods to protect them from spoilage, pilferage, breakage, leakage etc.,

Question 6.
What do you mean by Packaging?
Answer:
It involves designing and producing such appropriate packages for each unit of the product as well as for the bulk units of product.

Question 7.
What is Warranty?
Answer:
It is a written undertaking given by the producer to the customer, promising to repairs, exchange or replace the product if any manufacturing defects are found in the product within mentioned time period from the date of purchase.

Question 8.
What is Guarantee?
Answer:
It is a promise or assurance given by the manufactures about the quality and durability of a product and if there is any defect, the product will be repaired or replaced at free of charge.

Question 9.
What do you mean by Labelling?
Answer:
A label is a pieces, of information affixed on a product, labelling refers to designing and affixing appropriate label to a product or its container.

Question 10.
Give the meaning of Product?
Answer:
A product is a bundle of utilities consisting of various features and accompanying services.

Question 11.
What is Pricing?
Answer:
Pricing is a method adopted by a firm to set its selling price. It usually depends on firms strategies for pricing.

Question 12.
Give the meaning of Publicity?
Answer:
It is a movement of information with the effect of increasing public awareness about a product.

Question 13.
What is Advertising?
Answer:
Advertising is any paid form of non¬personal presentation and promotion ofgoods, services or ideas by an identified sponsor.

Question 14.
What do you mean by Sales Promotion?
Answer:
Sales Promotion are the set of marketing activities undertaken to boost sales of a product.

Question 15.
What do you mean by Personal Selling?
Answer:
It is an act of negotiating, emphasizing inducing and making a prospective buyer to take a decision in favour of products being offered to him.

Question 16.
What do you mean by Advertisement Copy?
Answer:
It represents the text or body of advertisemegbnt, it includes the title, heading, illustrations, pictures, themes etc., intended to pass the message to the prospective buyer.

Question 17.
Write any two differences between Advertisiñg and Personal Selling.
Answer:

Question 18.
Mention any two channels of distribution.:
Answer:

1. One Level Channel (Producer-Retailer-Consumer Channel)
2. Two Level Channel (Producer-Retailer-Consumer Channel)

Question 19.
What is Sweepstakes?
Answer:
It is a promotional tool ¡n which winners are selected through lucky draw among the visitors of the shop and they will be given different types of prizes.

Question 20.
Define Market.
Answer:
According to American Marketing Association ‘A Market is an aggregate demand of the potential buyers for a product / service.

Question 21.
What is Marketing?
Answer:
It is comprised of all those activities which helps the flow of goods fromthe producer to the ultimate user.

Question 22.
Define Marketing?
Answer:
According to Clark and Clark ‘Marketing consists of those efforts which effect transfer in ownership of goods and care of their physical distribution.

Question 23.
What is Marketing Management?
Answer:
Marketing Management refers to planning, organising, directing and control of the activities involved in exchange of goods and services between producers and consumers.

Question 24.
Mention any two functions of Marketing.
Answer:
(a) Buying and Selling.
(b) Storage and Warehousing.

Question 25.
What is Marketing Mix?
Answer:
It is a combination of four inputs that revolves around the consumer satisfaction as the local point.

Question 26.
What are the important variables of Product Mix?
Answer:
Brand, Style, Color, Design, Package.

Question 27.
What is Promotion?
Answer:
It deals with personal and impersonal persuasive communication about the product.

Question 28.
What does Promotion Mix includes?
Answer:
Personal Selling, Advertising, Sales Promotion, Trade Fairs and Exhibition.

Question 29.
What do you mean by Physical Distribution?
Answer:
It is concerned with making available of goods and services at right time, right place.

Question 30.
What is After-Sale Service?
Answer:
It is a function which includes assessing consumers satisfaction upon usage of the product or upon realising the service provided by the seller.

Question 31.
What is Home Delivery?
Answer:
It is a optional service provided by the sellers to their customers to deliver the bought articles to their door-steps.

III. Five Marks Questions and Answers

Question 1.
Briefly Explain any five elements of Product Mix.
Answer:
(a) Brand: A Brand is a name, term, symbol, mark or design or a combination of them which is intended to identify and differentiate products from other competitiors in market.

(b) Grading: It is a process of dividing the commodities . into lots that have similar characteristics as to type, size, shape, weight, quality, performance etc.

(c) Packing: It includes wrapping, filling or compressing of goods to protect them from spoilage, pilferage, breakage, leakage etc.,

(d) Packaging: It involves designing and producing such appropriate packages for each unit of the product as well as for the bulk units of product.

(e) Labelling: A label is a piece of information affixed on a product, labelling refers to designing and affixing appropriate label to a product or its container.

(f) Guarantee: It is a promise or assurance given by the manufactures about the quality and durability of a product and if there is any defect the product will be repaired or replaced at free of charge.

(g) Warranty: It is a written undertaking given by the producer to the customer, promising to repairs, exchange or replace the product if any manufacturing defects are found in the product with in mentioned time period from the date of purchase.

(h) After Sale Service: It is a function which includes assessing consumers satisfaction upon usage of the product or upon realising the service provided by the seller.

(i) Home Delivery: It is a optional service provided by the sellers to their customers to deliver the bought articles to their door-steps.

Question 2.
Write any five factors affecting Pricing Decision,
Answer:
(a) Objectives of the Business.
(b) Cost involves in the production of product.
(c) Quality of materials used in production.
(d) All the other elements of marketing mix.
(e) Demand for the product in the market.
(f) Availability of substitutes of the product.
(g) Pricing policy of the competitors.
(h) Channels of distribution.
(i) Government policies regarding certain products.

Question 3.
Explain briefly the channels of distribution.
Answer:
It refers to the route path in which the product flows fromproducer to consumer.

Important Channels of Distributions:
(a) Direct Channel / Zero Level Channel (Sales without middlemen)
(b) One Level Channel (Producer – Retailer – Consumer Channel)
(c) Two Level Channel (Producer – Whole Saler – Retailer – Consumer Channel)
(d) Three Level Channel (Producer – Agent – Whole Saler – Consumer Channel)

Question 4.
State the objectives of Advertising.
Answer:
(a) To create demand for a product
(b) To retain the demand for existing product
(c) To extend the market for an existing product
(d) To assist the salesman in the effort of sales promotion.
(e) To create brand preference and loyalty
(f) To improve the market share for the product.

Question 5.
What are the merits of advertising?
Answer:
Merits of Advertising: Advertising has been helpful to different groups of the society such as to the producers and sellers, to the customers, to the society etc.

Some of the general benefits of advertising are given below:
(a) Steady demand: Advertising helps to maintain steady and regular demand for the product or service of a concern. This even helps for regular production.

(b) Increase in sales: Constant advertising helps to increase the sales volume for both producers and traders.

(c) Economies of production: Advertising leads to creation of more demand. This in turn leads to large scale production. Large scale production leads to reduction in cost per unit of the product or service.

(d) Convenience: Advertising helps the consumers in making their purchases more convenient and comfortable, as their time and efforts are reduced in shopping.

(e) Education of consumers: Advertising educates the consumers by giving them details about the new products that can satisfy their needs.

(f) Better standard of living: Advertising helps the people to improve their living standards by persuading them to purchase newer and better quality products.

(g) Employment: Advertising create more employment opportunities directly in the advertising industry as well as indirectly in other industries.

(h) Survival of media: Advertisement brings good revenue to all mass media such as newspapers, magazines, T. V., Radio etc., and thereby contributes for their survival.

Question 6.
Give the limitations of advertising. Some of the limitations of advertising are as under:
Answer:
(a) Less effective: It is less effective medium of promotion as there is no face to face interaction between the seller and customer.
(b) Lack of feedback: It is difficult to ascertain the effectiveness of advertising, as there is no immediate feedback from the customers to the producer or seller.
(c) Rigid: Advertisement capy once prepared cannot be changed easily to suit each individual. It gives only a general appeal. It is not as flexible as that of personal selling.
(d) Confusion among customers: Too many advertisements on a similar type of products, making similar claims may result in confusion among customers in choosing the right product.
(e) Additional Cost: Advertising expenses are included in the total cost of the product which increases the cost of the product that is recovered from the customers.
(f) Misleading: Customers are cheated by misleading advertisements. Claims made in advertisements seem to be untrue when product is purchased and put to use practically.

Question 7.
What are the arguments raised against advertising?
Answer:
Advertisement is often criticised as an economic waste or a social waste. The following arguments/objections are raised in this respect.
(a) Increases the needs and wants: Advertisement multiplies the needs and wants of the people by inducing them to buy things which they do not require or cannot afford to buy.

(b) Adds to cost: The expenses spent on advertisement are ultimately absorbed into cost per unit of a product/service. The effect is increase in price to the consumers.

(c) Creates confusion: Many advertisements by different producers of similar product creat confusion among the cusotmers. Hence, customers will not be able make right choice.

(d) Creation of monopoly: Big companies which can spend more money for advertisement create brand monopoly, this hampers the growth and survival of small companies.

(e) Undermines social values: Some advertisements influence the consumers by their design and style rather than their actual performance. Further, few advertisements are indecent and unethical. Such advertisements undermine the social ethics and values.

(f) No – additional demand: Advertising does not always increase the demand and sale of the product. It merely shifts the demand from one product to another. As a result money spent on advertising is a waste from the point of view of the economy

(g) Fails to attract attention: Many advertisements either escape the attention of the people or maybe ignored by them. As a result the amount spent on advertisement becomes wasteful.
Conclusion: Inspite of the above criticisms, advertising is always a favourable tool for marketing in the present economic setup.

Question 8.
What are the essentials of a good Advertisement Copy?
Answer:
(a) Attention Value: The advertisement copy should draw attention of the people by using attractive colors, pictures, music etc.,
(b) Suggestive Value: The advertisement copy should suggest the customer how to use the product and what are its benefits,
(c) Convincing Value: An advertisement copy should convince the consumers the benefits of the product and create a desire in them to buy the product.
(d) Remembrance Value: People must remember the message of the advertisement for a long time. An advertisement copy should have remembrance value.
(e) Sentimental Value: Sentiments influence human behavior hence an advertisement copy should have sentimental value.
(f) Simplicity: Advertisement copy should be as simple as possible and easily understood by others.

Question 9.
What are the features of Personal Selling.
Answer:
(a) It helps in the creation of demand
(b) Salesmanship generates income and provides employment
(c) Direct contact with the customers helps an organisation to understand their needs, tastes and preferences easily.
(d) It avoids the accumulation and stocks.
(e) It enlightens the consumers about a new product.
(f) It increases the standard of living of the people.

Question 10.
Write any five differences between Advertising and Salesmanship.
Answer:
Advertising
(a) It is impersonal in nature
(b) It consumes less time
(c) Advertisements are not flexible
(d) Advertising the beginning salesmanship follows it .
(e) Public response cannot be known immediately

Salesmanship
(a) It is personal in nature
(b) It involves a lot of time and efforts
(c) A salesman can adjust and adopt different strategies to convince different customers
(d) Advertisements
(e) Salesman can understand the reaction of public immediately.

Question 11.
What are the objects of Sales Promotion.
Answer:
(a) An information about a new brand can be passed onto consumers.
(b) Market share of the product can be improved.
(c) To retain the existing customers and to build a strong base for loyal customers.
(d) To create a good image for the product with public.
(e) To attract new and potential buyers as much as possible.
(f) To encourage repurchase among the customers.
(g) To obtain more dealer orders.

Question 12.
Briefly explain any 5 Sales Promotion methods.
Answer:
(a) Discount: A product will be offered at a special rate for a limited period of time and rate would be relatively less compared to the rate ofthe same in other periods.
(b) Refunds: Buyers have to fill a refund offer card and the producers may offer to refund a part of price paid by customers just to push more sales.
(c) Product Compliment: Giving a product absolutely free of cost with the purchase of a particular products. ,
(d) Quality Gift: A method used to give consumers extra quantity of the same product upon purchase.
(e) Instant Draw and Assured gifts: Consumers are induced to buy products because of assured gifts given immediately after purchase.

IV. Ten Marks Questions and Answers

Question 1.
Briefly explain the marketing functions.
Answer:
(a) Collection of Market Information: In this function a marketer collects all the information relating to market conditions and potential for growth.
(b) Market Planning: It involves formulating a series ofplan to achieve marketing objectives.
(c) Product designing and development: After gathering information, a producer has to design a product and develop the product according to the customer needs.
(d) Standardisation and Grading Standardisation refers to prescribing the limits of grades on the basis of which products may be sorted and to which producer of goods must conform. Grading refers to sorting of products as per specified standards.
(e) Packing and Labelling: Packing means providing the product a suitable container, covers or box for protection. Labelling is a process of affixing a label which consists of information regarding the product. ,
(f) Branding: It is an activity of creating a brand to the product which helps the consumers in distinguishing the product from other similar products available in the market.
(g) Pricing: It is one of the most important functions of marketing which is involved in determining the price or value of the product.
(h) Promotion: It deals with personal and impersonal persuasive communication about the product.
(i) Channeling Distribution: This function includes the finalising the channel through which the products can be distributed.
(j) Transportation: Its main objective is to transfer the physical possession of products from seller to buyers.
(k) Warehousing: It involves storing and protection of goods till there is a demand for the product.
(l) Customer Support Services: It includes handling consumer grievances and providing proper feedback for then- enquiries.

Question 2.
What do you mean by Marketing Mix? Explain briefly the elements of Marketing Mix.
Answer:
Marketing Mix is made up of four elements namely product, price, promotion and place, it revolves around the satisfaction of customer needs.

Elements of Marketing Mix
(a) Product Mix: A product is anything which satisfy the needs of customers, the product mix has following important variables, brand, style, color, design, package, warranty etc.,
(b) Price Mix: Price represents the value of the products expressed in terms of money. Price Mix involves, pricing strategy, pricing policy, credit terms, discount, allowances.
(c) Promotion Mix: Promotion deals with informing the potential buyers regarding a product. It includes, personal selling, publicity, advertising, sales promotion.
(d) Place Mix: Place or physical distribution mix is concerned with making the products available at the right time at right place, it includes distribution channels, transport warehousing, inventory.

Question 3.
Explain the factors affecting pricing decisions.
Answer:
(a) Objectives of the Business.
(b) Costinvolvesintheproductionofproduct.
(c) Quality of materials used in production.
(d) All the other elements of marketing mix.
(e) Demand for the product in the market.
(f) Availability of substitutes of the product.
(g) Pricing policy of the competitors.
(h) Channels of distribution.
(i) Government policies regarding certain products.

Question 4.
What are the qualities of a Successful Salesman?
Answer:
1. Physical Qualities
These are some of the most important categories of qualities that improve the personality of a salesman to do his job successfully.

Various physical qualities are as follows:
(a) Good health
(b) Good appearance
(c) Good dress
(d) Good posture
(e) Good speech
(f) Pleasant voice

2. Psychological Qualities:
It improves the personality of a salesman and help him to do his job better.
Various psychological qualities are.
(a) Intelligence
(b) Resourcefulness
(c) Cool temper
(d) Alertness
(e) Sharp memory
(f) Keen observation.

3. Social Qualities:
It contributes to the personality of a salesman and improves sales. Various social qualities are as follows.
(a) Courtesy
(b) Good manners
(c) Enthusiasm
(d) Cheerfulness
(e) Patience
(f) Self-confidence

4. Character Qualities:
It contributes a lot to the personality of a salesman. Various character qualities are as follows.
(a) Honesty
(b) Loyalty
(c) Determination
(d) Courage
(e) Maturity
(f) Reliability

Question 5.
Bring out the Merits and Demerits of advertising.
Answer:
Merits:
(a) It helps in maintaining demand.
(b) It increases the sales of a product.
(c) It creates more demand for the product and leads to large scale production.
(d) It helps consumer in making their purchase decisions.
(e) It educates the consumers by giving them details of the products.
(f) It creates employment opportunities.
(g) It improves the standard of living.

Demerits:
(a) It is difficult to ascertain the effectiveness of advertising.
(b) There is no proper feedback
(c) Advertisements one created cannot be charged easily.
(d) Too many advertisements creates contusion among consumers.
(e) Advertisements are too expensive and a big burden to companie’s if they foil to generate consumers.
(f) Most of the time advertisements are misleading and untrue.

Question 6.
Briefly explain the methods of sales promotion.
Answer:
(a) Discount: A product will be offered at a special rate for a limited period of time and rate would be relatively less compared to the rate of the same in other periods.

(b) Refunds: Buyers have to fill a refund offer card and the producers may offer to refund a part of price paid by customers just to push more sales.

(c) Product Compliment: Giving a product absolutely free of cost with the purchase of a particular products.

(d) Quality Gift: A method used to give consumers extra quantity of the same product upon purchase.

(e) Instant Draw and Assured gifts: Consumers are induced to buy products because of assured gifts given immediately after purchase.

(f) Lucky Draw: A few customers will get costly gifts for their regular purchase and the winner is decided through lucky draw.

(g) Usable Benefit: Customer cards are issued and after each purchase customer gets loyalty points and he can redeem there points to get some benefit or gifts.

(h) Full Finance at Low Rates: It is a method used by producers to provide finance facilities for consumers who do not have money but have a desire to buy, the loans are provided at low rates and consumers can repay in the form of EMI’s

(i) Free Samples Providing samples for free to attract customers, it is mostly done when the product is new in the market,

(j) Sweepstakes: In this winners are selected through lucky draw among the visitors of the shop and they will be given different types of prizes.

Question 7.
As an advertiser, what essentials do you expect in a good advertisement copy?
Answer:
(a) Attention Value: The advertisement copy should draw attention of the people by using attractive colors, pictures, music etc.,
(b) Suggestive Value: The advertisement copy should suggest the customer how to use the product and what are its benefits.
(c) Convincing Value: An advertisement copy should convince the consumers the benefits of the product and create a desire in them to buy the product.
(d) Remembrance Value: People must remember the message of the advertisement for a long time. An advertisement copy should have remembrance value.
(e) Sentimental Value: Sentiments influence human behavior hence an advertisement copy should have sentimental value.
(f) Simplicity: Advertisement copy should be as simple as possible and easily understood by others.

Question 8.
Name one of the first companies in the world to actively study the influence of consumer products on the
environment.
Answer:
Procter and Gamble.

Question 9.
Give two examples of convenience product
Answer:

1. Bread
2. Ice cream.

Question 10.
Name two shopping products.
Answer:

1. Car
2. Furniture
3. Garments.

Question 11.
Name two techniques of sales promotion.
Answer:

1. Discount
2. Premiums.

Question 12.
What factor changes want into demand?
Answer:
Money or purchasing power and willingness to spend the money.

Question 13.
Which goods last long and contribute directly to the making or developing of finished goods?
Answer:
Capital Goods.

Question 14.
Name the elements which are popularly known as 3 p’s of marketing.
Answer:
Physical Evidence, People, Process.

Question 15.
Which goods are of unique character and buyer identifies with them?
Answer:
Speciality goods.

Question 16.
Give some innovative ideas of getting information about the trends/demand pattern in market.
Answer:
Market Survey, Market Research, Online Research, Feedback.

Question 17.
Sony Ltd. introduced a television set with new features in the market at a . high price but when the same features used by other electronic companies in their television sets then the prices of Sony Ltd’s television sets was reduced by the company. Mention the name of strategy the company is following. Also explain the strategy in short.
Answer:
The name of strategy is Price Skimming. Under this strategy a high price is charged for an innovative product and later on the price is reduced when more marketers enter the market with same type of product.

Question 18.
Distinguish between Selling and Marketing on the basis of following points: (i) Focus (ii) Objective (iii) Supremacy.
Answer:

• Focus- Selling focuses on the need of seller whereas marketing focuses on the need of consumer.
• Objective- The main objective of selling is to maximize the profit and sale whereas the main objective of marketing is earning optimum profit with customer satisfaction.
• Supremacy- In selling, producer is considered the kingpin of market whereas in marketing, consumer is considered the kingpin of the market.

Question 19.
Explain any three functions of ‘packaging’.
Answer:

1. Product Identification,
2. Product Protection,
3. Product Promotion.

Question 20.
‘Expenditure on advertising is a social waste.’ Do you agree? Discuss.
Answer:
This statement is only partially correct. The opponents of advertising say that the expenditure on advertising is a social waste as it adds to the cost, multiplies the needs of people and undermines the social values.

Question 21.
Name and explain the concept which concentrates on the need of the customers.
Answer:
Marketing concept.

Question 22.
‘Blindly following the goal of customer satisfaction had led to many social and environmental ills.’ Do you agree? What should be done?
Answer:
Despite of superiority of marketing concept, it faced criticism from the people who are concerned about society and environment. They argue that companies should not blindly follow the goal of customer satisfaction. This may lead to many social and environmental ills. For example a customer may want to have drugs so just to satisfy customer the firms should not supply him drugs. Some products bring harmful effects on environment so these should not be supplied.

Question 23.
‘Product is a bundle of utilities.’ Do you agree? Comment.
Answer:
Yes, product is a bundle of utilities. A product is purchased because of its capability to provide satisfaction of certain needs. A buyer buys a product or service for what it does for her or the benefit it provides to her.

There can be three types of benefits a customer may seek to satisfy from the purchase of a product, viz.,

1. Functional Benefits,
2. Psychological Benefits and
3. Social Benefits.

Question 24.
How does branding help in creating product differentiation? Discuss.
Answer:
The process of giving a name or a sign or symbol, etc. to a product is called branding. It helps a firm in distinguishing its product from that of its competitors. This enables a firm to secure and control the market for its products. Thus, branding enables marking product differentiatioal

Question 25.
List the promotional messages given on the package of any three consumer products of your choice and comment how can these promotional messages help in the sale of these products.
Answer:
Promotional messages given on the package helps in promotion of the product. These messages give reason to purchase the product.

Some promotional messages are:

1. Amla Hair Oil states, ‘baalon mein dum, life mein fun’.
2. Detergent powder says, ‘Keep cloth, look good and your machine in top condition’
3. Tomato Ketchup mentions, ‘20% Extra Free’.

Exercises

Short Answer Type Questions

Question 1.
What is marketing? What functions does it play with process of exchange of goods and services? Explain.
Answer:
Marketing is a total system of business activities designed to plan. Price, promote and distribute want satisfying goods and services to present and potential customers.

Marketing is concerned with exchange of goods and services from producer to consumers which involves many activities.
1. Gathering and Analysing Market Information: This is done to identify the needs of the customers and take various decisions for the successful marketing of the products and services.

2. Marketing Planning: Another important activity or area of work of a marketer is to develop appropriate marketing plans, so that the marketing objective of the organisation can be achieved.

3. Product Designing and Development: The design ofthe product contributes to make the product attractive to the target customers. A good design can improve performance of a product andalso give it a competitive advantage in the market.

4. Standardisation and Grading: Standardisation refers to producing goods of predetermined specification which helps in achieving uniformity and consistency in the output which reduces the need for Inspection, Testing and evaluation of the products. Grading is the process of classification of products into different groups, on the basis of its features such as quality, size etc. It ensures that goods belong to a particular quality helps in releasing higher prices for high quality output.

5. Packaging and Labelling: Packaging refers to designing the package for the products. Labelling refers to designing the label to be put on the package. Packaging provides protection to the product and also helps in its promotion. Labelling helps in self-service.

6. Branding Brand: names help in creating product differentiations i.e., how the product can be distinguished from its competitors.

7. Customer Support Service: Marketing management relates to developing customer support service such as after-sales services, handling customer complaints. All these aims at providing customer satisfaction which is a key to marketing success.

8. Pricing of Product: Price is an important factor affecting the success or failure of a product in the market. The marketers have to analyse properly the factors determining the price of a product.

9. Promotion of products and services involves informing the customers about the firm’s product, its features etc. and persuading them to purchase these products. It includes four method advertising, sales promotion, personal selling and publicity.

10. Physical Distribution the important decisions areas under physical distribution include managing inventory, storage, warehousing and transportation of goods from one place to the other.

11. Transportation involves physical movement of goods from one place to another. Amarketer has to perform this function very efficiently keeping in mind the nature of product. Cost, location of target market etc.

12. Storage or Warehousing In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. Further, there is a need for storage of adequate stock of goods to protect against unavoidable delays in delivery or to meet out contingencies in the demand. Wholesalers and retailers are playing an important role.

Question 2.
Distinguish between the product concept and the production concept of marketing.
Answer:
Difference between Product and Production Concept

Question 3.
Product is a bundle of utilities. Do you agree? Comment.
Answer:
Yes, product is a bundle ofutilities, which is purchased because of its capability to provide satisfaction of certain need. A buyer buys a product or service for what it does or service for what it does for her or the benefits it provides.

There can be three types of benefits, it provides to a customer, they are

1. functional benefits
2. psychological benefits
3. social benefits.

e. g., the purchase of a motorcycle provides functional utility of transportation, but at the same time satisfies the need for prestige and esteem and provides social benefit by the way of acceptance from a group by riding it.

Question 4.
What are industrial products? How are they different from consumer products? Explain.
Answer:
Industrial products are those products. Which are used as inputs in providing other products e.g., raw material, engines, tools, lubricants etc. The difference between consumer products and industrial products is based on their ultimate use and nature of purchases.

Question 5.
Distinguish between convenience product and shopping product.
Answer:
Difference between Convenience and Shopping Product

Question 6.
Products is a mixture of tangible and intangible attributes. Discuss.
Answer:
In marketing, product is a mixture of tangible and intangible-attributes which are capable ofbeing exchanged for a value, with ability to satisfy customer needs. Beside physical objects, include services, ideas, persons and places in the concept of product. Thus, product maybe defined as anything that can be offered in a market to satisfy a want or need. It is offered for attention, acquisition, use or consumption.

Question 7.
Describe the functions of labelling in the marketing of products.
Answer:
Label on a product provides detailed information about the product, its contents, methods of use etc.

The various functions performed by a label are as follows
1. Describe the Product and Specify its Contents: One of the most important functions of labels is that it describes the product, its usage, cautions in use etc. and specify its contents.

2. Identification of the Product or Brand: A label helps in identifying the product or brand e.g., we can easily pick our favourite soap from a number of packages only because of its label.

3. Grading of Products: Labels help grading the products into different categories. Sometimes, marketers assign different grades to indicate features or quality of the product e.g., different type of tea is sold by some brands under Yellow, Red and Green label categories.

4. Help in Promotion of Products: An important function of label is to aid in promotion of the products. A carefully designed label can attract the customer to purchase. So, many labels provide promotional messages, some show discount or other schemes etc.

5. Providing Information Required by Law: Another important function of labelling is to provide information required by law. e.g., the statutory warning on the package of cigarette or pah masala – ‘Smoking is injurious to health’ or ‘Chewing tobacco causes cancer.

Question 8.
Discuss the role of intermediaries in the distribution of consumer nondurable products.
Answer:
The term channels of distribution refers the facility to the movement of goods and services and their title between the point of production and point of consumption, by performing a variety of marketing activities.

Following are the functions performed by the channels of distribution
1. Accumulation: It aims at holding the stock to match between the consumer demand and supply condition, warehousing helps in maintaining continuous flow of goods and services.

2. Promotion: The marketing channels also help in promoting the demand for the product by displaying demonstrating and participating in various promotional activities organised by the producers.

3. Negotiating: The marketing channels are the intermediaries between the producers and the consumers. They attempt to reach final agreement on price and other terms of the offer, so that transfer of ownership is properly affected.

4. Risk Taking: Risk taking is the basic responsibility of the intermediaries. It may arise out of physical deteriorations, changes in price levels, natural calamities, change in fashion etc. These are unavoidable as they hold sufficiently large and variety of inventories till the sale of stock.

5. Grading/Sorting: Grading is the process whereby they sort the products on the basis of different sizes, qualities, moisture contents and so on. It helps us realising the time value for the product and at the same time ultimate consumer feels satisfied with the uniform quality of the product.

6. Packaging: The products are packed in the small tradable lots for the convenience of the consumer.

7. Assembling/Assortment: Marketing channels aim at satisfying the needs of the customers. The products desired by the consumer may not be available in the market. They procure such goods from different sources, assemble or assort them as per the requirements of the consumers.

Question 9.
Explain the factors determining choice of channels of distribution.
Answer:
The choice of channels depend on various factors, which are discussed as follows:
1. Product Related Factors: The important product-related consideration is deciding the channels. It includes whether the’ product is an industrial product or a consumer product. Industrial product require shorter channel and consumer products require longer channel.

2. Company Characteristics: The important company characteristics affecting the choice of channels of distribution include the financial strength of the company and the degree of control it wants to hold on other channel members. Direct selling involves lot of foods to be invested in fixed assets say starting own retail outlets or engaging large number at salesforce. Similarly if the management want to have greater control on the channel number, short channels are used but ifthe management do not want more control over the middlemen, it can go in for longer channel or large number of intermediaries.

3. Competitive Factors: The choice of channel is also affected by what the competitor has selected as its channel. Sometimes, firm may decide to go for the same channel and sometimes absolutely opposite.

4. Market Factors: Important market factors affecting the choice of channel of distribution include size of market, geographical concentration of potential buyers and quantity purchased.

5. Environmental Factors Sometimes environmental factors also help in deciding the channel of distribution, e.q., in a depressed economy, marketers use shorter channels to distribute their goods In an economical way.

Question 10.
Explain briefly the components of physical distribution.
Answer:
The main components of physical distribution are as follows
1. Order Processing: If a firm takes more time to process the order, and then the consumer remains dissatisfied. Therefore, order processing has to be made faster by using information technology.

2. Inventory Control: Inventories ensure the availability of the product as and when consumer demand arises. There are various factors that influence a firm decision regarding the level of inventory e.g., degree of accuracy of sales forecast, cost of blocking of the working capital etc.

3. Warehousing: It refers to the storage of goods from the time of production to the time of consumption, Warehousing is important as it creates time utility.

4. Transportation: It creates place utility, It refers to the carrying of raw materials or finished goods from one place to another, The most important thing to be kept in mind is that the value addition by transportation should be greater than the cost of transportation,

Question 11.
Define advertising, what are its main features? Explain.
Answer:
Advertising is defined as the impersonal form of communication which is paid form by the marketer to promote some goods or services, it is commonly used as the promotional tool of the company, the important features of advertising are as follows

• Paid Form Advertising is a ‘paid form’ of communication which means the sponsor has to bear the cost of communication with the prospects,
• Impersonality There is no direct lace to face contact between the prospect and advertiser, It is, therefore, referred as the impersonal method of promotion,
• Identified Sponsor advertising is % undertaken by some identified individual or company, who makes the advertising efforts and also bears the cost of it.

Question 12.
Discuss the role of ‘Sales Promotion’ as an element of the promotion mix.
Answer:
Sales promotion includes those marketing activities other than personal selling, advertising, and publicity that stimulate consumer purchasing and dealer effectiveness, such as display, shows and exhibitions, demonstrations and various non-current selling efforts not in the ordinary routine,

The main objectives of sales promotion activities are

1. Creation of demand for the product.
2. Educating the consumers about new products or new uses of the old product.
3. Building the brand loyalty for the product among the consumers,

Long Answer Type Questions

Question 1.
Define Marketing, How is it different from selling? Discuss.
Answer:
Marketing is a total system of business activities designed to plan, price, promote and distribute want, satisfying goods and services to present and potential customers.

Question 2.
What is the marketing concept? Ho tv does it help in the effective marketing of goods and services?
Answer:
Orientation of marketing implies that focus on the satisfaction of customers need, is the key to the success of any organisation in the market. All the decisions in the firm are taken from the point of view of the customers, e.g., What product will be produced, with what features and at what price shall it be sold or where shall it be made available for sale will depend on what do the customer wants.

Marketing concept helps in effective marketing of goods and services by using the following

1. Identification of market or customer who are chosen e.s the target of marketing effort.
2. Understanding needs and wants of customers in the target market.
3. Development of products or services for satisfying needs of the target market.
4. Satisfying needs of target market better than the competitors.
5. Doing all this at a profit.

Question 3.
What is marketing mix? What are its main elements? Explain.
Answer:
Marketing mix refers to the combination of four basic elements known as four P’s – Product, Price, Promotion and Place.

The various components of marketing mix are
1. Product Mix: Product mix basically concerns with the features related to a product e.g., range, quality, size, labelling, packaging, branding etc. All products must satisfy consumer needs and expectations. It aims at providing good quality products at fair prices.

2. Price Mix: It includes decisions relating to price determination, discounts and allowances credit terms. It covers pricing objectives and pricing policies. Price should cover not only cost of production and selling expenses but also a reasonable profit margin. The price policy adopted by the enterprise should not only be cost-based but also demand-based and competition-based.

3. Place Mix: Place mix links the seller and buyer. The choice of channels of distribution and transport are the two major issues here. There are various factors which help in deciding the channel e.g., the time and the place, where the goods have to reach or transportation. It is the nature of goods, place of destination, cost and availability etc.

4. Promotion Mix: It refers to all marketing activities to increase the volume of sales of the product of an enterprise. It consists of means of marketing communication with a view to informing and persuading prospective buyers to buy a certain product. It includes advertising, personal selling, publicity and sales promotion.

Question 4.
How does branding help in creating product differentiation? Does it help in marketing of goods and services? Explain.
Answer:
Branding helps a firm in distinguishing its products from that of its competitors. This helps the firm to secure and control the market for its products. If products were sold by generic names, it would be very difficult for the marketers to distinguish their products from its competitors. Thus, most marketers give a name to their product, which helps in identifying and distinguishing their products from their competitors product. This process of giving a name or a sign or a symbol etc to a product is called Branding.

Question 5.
What are the factors affecting determination of the price of a product or service? Explain.
Answer:
There are number of factors which affect the fixation ofthe price of a product.

Some of the important factors in this regard are discussed as below
1. Product Cost: The cost sets the minimum level or the floor price at which the product maybe sold. There are broadly three types of cost-fixed costs, variable costs and semi-variable cost. Total cost IS the sum of all these three. Generally, all firms try to cover all their costs, at least in the long Sun. In addition, they aim at earning a margin of profit over and above the costs.

2. The Utility and Demand: The utility provided by the product and the Intensity of demand of the buyer sets the upper limit of price. Which a buyer would be prepared to pay. In feet the price must reflect the interest of both the parties to the transaction – the buyer and the seller. The buyer may be ready to pay up to the point, where the utility from the product is at least equal to the sacrifice made in terms of the price paid. The seller would, however, try to cover the costs. According to the law of demand, consumers generally purchase more units at a low price than at a high price.

3. The Extent of Competition in the Market: The price is also affected by the nature and degree of competition. The price will tend to reach the upper limit in case there is less degree of competition while under free competition, the price will tend to be set at the lowest level.

4. Government and Legal Regulations: In order to profit the interest of public against unfair practices in the field of price fixing, Government can intervene and regulate the price of commodities. Government can declare a product as essential product and regulate its price.

5. Pricing Objectives: Pricing objectives are another important factor affecting the fixation of the price of a product or a service. Apart from price maximisation, the pricing objectives of a firm may include.
(a) Obtaining Market Share Leadership: If a firm objective is to obtain larger share of the market, it will keep the price of its products at lower level, so that greater number of people are attracted to purchase the products.
(b) Surviving in a Competitive Market: If a firm is facing difficulties surviving in the market because of intense competition or introduction of a more efficient substitute by a competitor.
(c) Attaining Product Quality: Leadership higher prices are charged to cover high In this case, normally quality and high cost of R&D (Research and Development).

6. Marketing Methods used Price Fixation: Price is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts. The type of packaging, product differentiation, credit facility and customer service provided.

Question 6.
What do you mean by ‘Channels of distribution’? What functions do they play in the distribution of goods and services? Explain.
Answer:
People, institutions, merchants, and functionaries, who take part in the distribution of goods and services are called ‘Channels of Distribution’. Channels of distribution are a set of firms and individuals that take title or assist in transferring title, to particular goods or services as it moves from the producers to the consumers. Channels of distribution smoothen the flow of goods by creating possession, place and time utilities. They facilitate movement of goods by overcoming various barriers

The important function performed by middlemen are:
1. Sorting: Middlemen procure supplies of goods from a variety of sources, which is often not of the same quality, nature, and size. These goods are sorted into homogeneous groups on the basis of the size or quality.

2. Accumulation: This function involves accumulation of goods into larger homogeneous stock, which help in maintaining continuous flow of supply.

3. Allocation: Involves breaking homogeneous stock Into smaller, marketable lots to sell them to different types ofbuyers.

4. Assorting: Middlemen build an assortment of products for resale. There is usually a difference between the product lines made by manufacturers and the assortment or combinations desired by the users. Middlemen produce variety of goods from different sources and delivers them in combinations, desired by customers.

5. Product Promotion: Middlemen also participate in some sales promotion activities, such as demonstration, special display, contests etc. to increase the sale of products.

6. Negotiation: Channels operate with manufacturers on the one hand and customer on the other. They negotiate the price, quality, guarantee and other related matters with customers, so that transfer of ownership is properly affected.

7. Risk Taking: In the process of distribution of goods, the merchant middlemen take title of the goods and thereby assume risks on account of price and demand fluctuations, spoilage, destinations etc.

Question 7.
Explain the major activities involved in the physical distribution at products.
Answer:
Physical distribution covers all the activities required to physically move goods from manufacturer to the customers. Important activities involved in the physical distribution include transportation, warehousing, material handling and inventory control.
1. Order Processing: In a typical buyer-seller relationship order placement is the first step. Products flow from the manufacturers to customers via channel members while orders flow from customers to manufacturers. Therefore, a good speedy and accurate system of order processing becomes a necessity.

2. Transportation: It is the means of carrying goods and raw materials from the point of production to the point of sale. It is one of the major elements in the physical distribution of goods. It is important because unless the good are physically made available. The sale cannot be completed.

3. Warehousing: Refers to the act of storing and assorting products in order to create time utility in them.
The basic purpose of warehousing activities is to arrange placement of goods and provide facilities to store them. The need for warehousing arises because there may be difference between the times, a product is produced and the time it is required for consumption. Generally, the efficiency of a firm in serving its customers will depend on, where these warehouses are located and where are these to be delivered.

4. Inventory Control: A very important decision in respect of inventory is deciding about the level of inventory. Higher the level of inventory, higher will be the level of service to customers but the cost of carrying the inventory will also be high because lot of capital would be tied up in the stock. The decision regarding level of inventory involves prediction about the demand for the product. A correct estimate of the demand helps to hold inventory and cost level down to a minimum.

The major factors determining inventory levels include.
(a) Firm’s policy regarding the level of customer service. Higher the level of service, greater will be the need to keep more inventories.
(b) Degree of accuracy of the sales forecast. In case more accurate estimates are available, the need for keeping very high level of Inventory can be minimised.
(c) Responsiveness of the distribution system i. e., ability of the system to transmit inventory needs back to the factory and get products to the market.
(d) Cost of inventory, which includes holding cost, such as cost of warehousing, tied up capital etc and the manufacturing cost

Question 8.
‘Expenditure on advertising is a social waste’. Do yon agree? Discuss.
Answer:
The opponents of advertising say that the expenditure on advertising is a social waste as it adds to the cost, multiplies the needs of the people and undermines social values. The proponents, however argue that advertising is very useful as it increases the reach, brings the per unit cost of production down and adds to the growth of the economy.

Following are the points of criticism
1. Adds to Cost: The opponents of advertising argue that advertising unnecessarily adds to the cost of product, which is ultimately passed on to the buyers in the form of high prices. It is in line that advertisement of a product cost lots of money but it helps to increase the demand for the product as large number ofpotential buyers come to know about the availability of the products, its features etc. and are persuaded to buy it. This increases the demand and therefore the production. As a result, the per unit cost of production comes down as the total co st is divided by larger number of units.

2. Undermines Social Values Advertising: Undermines social values and promotes materialism. It breeds discontentment among people as they come to know about new products and feel dissatisfied with their present state of affairs. This criticism is not entirely true. Advertisement in feet helps buyer by informing them about the new products which maybe improvement over the existing products.

3. Confuses the Buyers another criticism against advertisements is that so many products are being advertised which makes similar claims that the buyer gets confused as to which one is true and which are to be relied upon, e.g., there are so many brands of soaps, shampoos, cars. TVs. cell phones etc. which are advertised. The supporters of advertisement’, however argued that we are all rational human beings who make our decisions for purchase of products on factors, such as price, style, size, etc. Thus the buyers can clear their confusion by analysing the information provided on the advertisements and other sources before taking a decision to purchase a product.

4. Encourages Sale of Inferior Product Advertising does not distinguish between superior and inferior products and persuade people to purchase even the inferiors products. The desired level of quality will depend on the economic status and preferences of the target customers. Advertisements sell products of a given quality and the buyers will buy, if it suits their requirements.

5. Some Advertisements are in Bad Taste Another criticism against advertising is that some advertisements are in bad taste. They show something which is not approved by some people. Some advertisements spoil the relationship between employer and employee, husband and wife etc. From the above discussion, we have learnt that though advertisements are criticised but still they have their own advantages. It is not a social waste, rather it adds value to the social cause by giving a boost to production and generating employment.

Question 9.
Distinguish between advertising and personal selling.
Answer:
Difference between Advertising and Personal Selling

Question 10.
As a marketing manager of a big hotel located at an important tourist destination, what societal concerns would be faced by you and what steps would you plan to take care of these concerns? Discuss.
Answer:
The societal marketing concept holds that the task of any organisation is to identify the needs and wants of the target market and deliver the desired satisfaction in an effective and efficient manner, so that the long term well-being of the consumers and the society is taken care of. In case any business activity encourages pollution, deforestation, storage of resources population explosion, then its benefits cannot be justified. As marketing manager of a big hotel located at an important tourist destination certain care need to be taken regarding environment, they are,

• (i) Proper drainage facility
• (if) In-built plant for re-cycling the waste
• Solar geysers to be used
• Rainwater harvesting
• Proper maintenance of greenery-lawns, parks, gardens
• CNG-based vehicles to be used to provide transport facility to the guests.

Question 11.
Suppose you are the marketing Vice President of an insurance company, planning to design a new medi – claim policy for senior citizens. What information would you like to collect to perform this task and how will, you collect such information? Discuss.
Answer:
The following information about the senior citizens should be collected:

• Age of the senior citizen
• Their source of income
• Medical background
• Present working status

There are various sources of collecting the above information – personal visits, questionnaires, medical reports from nursing homes, doctor clinics, etc.

Question 12.
What shopping products have been purchased by you/your family in the last six months? Make a list and specify what factors influenced the purchase of each of these products.
Answer:
The following shopping goods were purchased by my family

1. Clothes Price, fashion, occasion for which they were bought.
2. Refrigerator Brand, price, features, . books, durability.
3. Shoes Size, price, brand, material used.
4. Furniture (study table) Design, quality, finishing, comfort level, cost.

Question 13.
What information is generally placed on the package of a food product? Design a label for one of the food products of your choice.
Answer:
The following information is normally placed on the package of good product

1. Name of the product
2. Brand name
3. Veg/Non-veg sign (green/red dot)
4. Price
5. Manufacturing date and date of expiry
6. Ingredients
7. Net weight
8. Directions for use
9. FPO mark
10. Preservatives used

Question 14.
For buyers of consumer durable products, what ‘customer care services’ would you plan as a manager of a firm marketing new brand of motorcycle. Discuss.
Answer:
For marketing motorcycles, the following customer care services can be planned

1. Specified period warranties
2. Easy monthly instalments
3. Exchange offer
4. 0% finance scheme
5. Free servicing

Multiple Choice Questions

Question 1.
Marketing Management is the______of choosing target markets and getting, keeping and growing customers through creating, delivering, and communicating superior customer value.
(a) Art
(b) Science
(c) Art and science
(d) None of the above.
Answer:
(c) Art and science

Question 2.
Marketers operate in which marketplaces:
(a) Consumer and business
(b) Global and non-profit
(c) a & b both
(d) None of the above
Answer:
(c) a & b both

Question 3.
“Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefits the organization and its stakeholders” definition is given by
(a) Philip Kotler
(b) The American Marketing Association
(c) The Association ofNational Advertisers
(d) Peter Drucker
Answer:
(b) The American Marketing Association

Question 4.
Marketing people market following entities:
(a) Goods
(b) Services
(c) Experiences
(d) All of the above
Answer:
(d) All of the above

Question 5.
At a fast-food restaurant, what is marketed?
(a) Goods
(b) Service
(c) a & b
(d) None of the above
Answer:
(c) a & b

Case Problems:

Nokia takes four-lane road to consumers. NEW DELHI after having grabbed a king size 79% share of the 15,000 crore mobile handset market in India, Nokia India has found a new way of connecting people.

The mobile handset manufacturer has i embarked upon a brand new retail strategy that is based on a classification of its consumers into four major groups that separates people in terms of usage, income level and lifestyle.

The classification is based on an extensive survey- the Nokia Segmentation Study -that was carried over two years involving 42,000 consumers from 16 countries. It studied the impact lifestyle choices and attitudes have oh the mobile devices consumers buy and how they use them

The strategy, which was announced globally in June last year, is being unfolded in India now. While the nitty-gritty of the new strategy is still being worked out, it is likely that the company would follow separate marketing strategies for the four different segments. The advertising campaigns could be different for the segments.

Nokia’s entire product portfolio has now been re-aligned towards these four groups to address the specific needs of each. The first of these segments Live, aimed at first time users whose basic need is to stay in touch with voice as the main driver, would have basic handsets low on features and price.

‘These may be functional phones but the target group for these phones range from SEC C (low socio-economic class) to SFCAi i (very high socio-economic class) markets”, says Nokia India marketing head Devinder Kishore. The second segment Connect looks at more evolved users who look for more functionality and features and connectivity. Accordingly, phones in this segment would have GPRS, camera and music capabilities.

The next two categories, Achieve and Explore, are aimed at high-end users and have Nokia’s top-end handsets, e.g., Achieve segment looks at enterprise users who need to have business functionalities in their phones. Nokia’s new E-series has been put under this segment with handsets having QWERTY keyboards and full Internet capabilities.

Aimed at high-end lifestyle users, Explore would be the most prominent segment for the company in the coming years. Says Nokia India multimedia business director Vineet Taneja, “This segment would see the most vibrant growth in the coming year. It will look at five different areas-applications, imaging, mobile, TV, music and gaming. We are fast developing the ecosystem to support these areas.”

Nokia acquired music solution and content provider ‘Loud Eye’ and GPS solution provider ‘Gate5’. It is all slated to launch its most high- profile handset, which boasts ofhaving a 5 mega pixel camera and GPS capabilities apart from iPod quality music, in February.

Says Taneja, “There is increasing demand for convergence and multiple functionalities in high-end handsets. The N-series will try to address that”. Nokia feels that the new platform strategy wherein different handsets are launched under a platform, like the N Series, will become a status and style statement and drive numbers.

Question 1.
Identify the four market segments that Nokia plans to address as per the news report above.
Answer:
Live, Connect, Achieve and Explore.

Question 2.
What is the basis of classification of the market used by the company?
Answer:
SEC: Socio-Economic Class, usage and lifestyle

Question 3.
What do you mean by realignment of product portfolio? Illustrate this from the case above.
Answer:
It means that whatever product Nokia is planning to develop now, it will be according to the needs of the consumers. The four different handsets are Live, Connect, Achieve and Explore, being planned keeping the needs of four different types of users.

Question 4.
Identify the points that can be highlighted in marketing campaigns for each segment.
Answer:
The points that can be highlighted in marketing campaigns for each segment can be

1. Latest-model
2. Reasonable price
3. Better performance
4. Advanced technology
5. Consumer-friendly

Question 5.
What are the different considerations in the mind of consumers of each segment while purchasing mobile phones as given in the above case?
Answer:
Different considerations in the mind of each segment while purchasing mobile phones are

1. The first of these segments Live, aimed at first time users whose basic need is to stay in touch with voice as the main driver. So, here price of the phone is the main consideration.
2. The second segment Connect looks at more evolved users who look for more functionality and features and connectivity. So, here the features of the phone as well as an economic price tag are considered,
3. The next two categories, Achieve and Explore, are aimed at high-end users. So here the uniqueness of the handset and its business functionalities are the main points considered by the consumer.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 10 Financial Market

I. One Mark Questions and Answers

Question 1.
Name any one type of financial market.
Answer:
Money market.

Question 2.
Give the meaning of financial market.
Answer:
Financial market is a market comprising of institutions issuing instruments or securities for the purpose of raising funds.

Question 3.
State the minimum and maximum period of maturity in the case of money market instruments.
Answer:
14 days to one year.

Question 4.
Name any one of the Money Market Instruments.
Answer:
Treasury bills.

Question 5.
Name the most important constituent of Indian Money Market.
Answer:
The Reserve Bank of India is the most important constituent of Indian money market.

Question 6.
Name the money market instrument issued by the Government of India.
Answer:
Treasury Bills.

Question 7.
Name any one capital market instrument.
Answer:
Shares.

Question 8.
State any one component of capital market.
Answer:
Primary Capital Market.

Question 9.
What is Demat Account?
Answer:
It is an account in which all securities are held electronically.

Question 10.
What is dematerialisation of securities?
Answer:
Dematerialsiation or Demat is the process by which the paper documents of an investor are cancelled and credited to Demat Account of the investor maintained in electronic form, with a depository.

Question 11.
What is the biggest advantage of on – line Trading on a Stock Exchange?
Answer:
The biggest advantage of on – line trading is that they charge considerably lower brokerage for stock trading in comparison with the traditional stock broker.

Question 12.
Expand SEBI?
Answer:
Securities Exchange Board of India.

Question 13.
State any one objectives of SEBI?
Answer:
Development of Securities Market.

Question 14.
Expand NSEI.
Answer:
National Securities Exchange of India.

Question 15.
Expand NASDAQ.
Answer:
National Association of Securities Dealers Automated Quotations.

Question 16.
Expand BSE.
Answer:
Bombay Stock Exchange.

Question 17.
Expand SENSEX.
Answer:
Sensitive Index.

Question 18.
Name any one speculator in Stock Exchange.
Answer:
Bull

II. Two Marks Question and Answers

Question 1.
What is Money Market?
Answer:
It is a market concerned with buying and selling of short term financial instruments like Treasury bills, Commercial papers etc.,

Question 2.
What is Capital Market?
Answer:
The post of a financial system concerned with raising capital by dealing in shares, bonds and other long term investments.

Question 3.
Write any two Money Market Instruments.
Answer:
(a) Commercial Papers
(b) Commercial Bills

Question 4.
What are Treasury Bills.
Answer:
It is an instrument of short term borrowing by the government of India maturing in less than one year, it varies from 14 days to 364 days and they are highly liquid in nature.

Question 5.
What are Commercial Papers?
Answer:
It is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period of fifteen days to one year.

Question 6.
What is a Certificate of Deposit?
Answer:
These are short term unsecured negotiable instruments in bearer form issued by commercial banks. It bears a maturity date and fixed rate of interest.

Question 7.
What is a Call Money?
Answer:
It is a method by which banks faced with temporary shortage of cash borrow short term finance from other banks, maturity period varies from one to fifteen days.

Question 8.
What is Bankers Acceptance?
Answer:
A banker’s acceptance is a promised future payment, or time draft, which is accepted and granted by a bank and drawn on a deposit at the bank. It specifies the amount of money, the date and the person to whom the payment is due. After acceptance, the draft becomes an unconditional liability of the bank.

Question 9.
What is a Primary Capital Market?
Answer:
It is a new issue market which mobilises the funds from investors to organisations, funds are raised by issue of shares, debentures and bonds.

Question 10.
What is a Secondary Capital Market?
Answer:
It is also known as stock market or stock exchange, it is a market for the purchase and sale of existing securities.

Question 11.
Name the two Depositories operating in India.
Answer:
NSDL (National Securities Depository Limited) and CDSL (Central Depository Service Limited)

Question 12.
State any two depository services.
Answer:

1. A depository helps in converting physical holding of securities into electronic holding.
2. It keeps custody of investor’s holdings.

Question 13.
State any two objectives of SEBI.
Answer:

1. Development of securities market
2. Protection of Interest of Investors.

Question 14.
Who is Bull speculator?
Answer:
Bulls are speculators on the stock exchange who always expect a rise in the prices of securities. Hence, they go on buying shares in the expectationof selling them at a higher price in future and making profit.

Question 15.
Who is a Bear speculator?
Answer:
Bears are Speculators on the stock exchange who always expect a fall in the prices of securities. Hence, they go on buying shares in the expectation of selling them at a higher price in future and making profit.

Question 16.
Give the meaning is Spot Delivery?
Answer:
It means securities are delivered to the purchaser immediately on the spot after the payment is made.

Question 17.
What do you mean by Forward Delivery?
Answer:
In this case securities are transferred to the purchaser and payment is received at a later date, generally the period of forward delivery is one month, or it may be more with mutual agreement.

Question 18.
What are Blue Chips?
Answer:
It represents shares with high market capitilisation and also major share included in the main index of stock exchange.

III. Five Marks Questions and Answers

Question 1.
Explain any five Money Market Instruments.
Answer:
(a) It is an instrument of short-term borrowing by the government of India maturing in less than one year, it varies from 14 days to 364 days and they are highly liquid in nature.
(b) It is a method by which banks faced with temporary shortage of cash borrow short term finance from other banks, maturity period varies from one to fifteen days.
(c) These are short-term unsecured negotiable instruments in bearer form issued by commercial banks. It bears a maturity date and fixed rate of interest.
(d) It is a short-term unsecured promissiory note, negotiable and transferable by endorsement and delivery with a fixed maturity period of fifteen days to one year.
(e) They are short-term negotiable and self liquidating money market instruments with low risk. It is a bill of exchange used to finance the working capital requirements ofbusiness organisations.

Question 2.
Distinguish between Money market and Capital Market Money Market
Answer:
(a) It is a short term market
(b) It involves instruments like Treasury bills, Call money, Commercial bills.
(c) Major players are RBI, Commerical Banks
(d) Instruments are highly liquid.
(e) Rate ofreturn is low
(f) Low risk market

Capital Market
(a) It is a long term market’
(b) It involves instruments like Shares, Bonds, Debentures.
(c) Major players are individual investors, foreign investors.
(d) Instruments are relatively less liquid.
(e) Rate of return is high
(f) High-risk market.

Question 3.
Explain the trading procedure on a Stock Exchange.
Answer:

• 1st Step: Selection of a broker who is registered under SEBI
• 2nd Step: Opening a Demat Account in any of the selected banks.
• 3rd Step: Placing an order with the help broker.
• 4th Step: Giving orders to broker to execute the order.
• 5th Step: Last step in trading is to select the mode of payment for settlement.

Question 4.
State any ten depository services offered by a Depository.
Answer:
Depository services
(a) A depository helps in converting physical holding of securities into electronic holding.
(b) It keeps custody of investors holdings.
(c) It eliminates the risks involved with the physical certificates such as theft, forgery, damage of certificates.
(d) It significantly reduces brokerage charges.
(e) It reduces time required to clear each transaction as there is no paper work involved.
(f) It helps the investor to apply for new issues, as at present public issues are taking place only at demat mode.
(g) All corporate benefits like right issue, bonus shares are paid directly into investors Demat Account.
(h) Company pays dividend to the investors into their bank account registered in the Demat Account.
(i) Stamp duty is not applicable for transfer of securities in demat mode.
(j) An investor can monitor his investment dealings easily in Demat mode as depositories send SMS regarding debits or credits in Demat Account.

IV. Ten Marks Questions and Answers

Question 1.
Explain the different functions of stock exchange.
Answer:
(a) It is a organised market for securities.
(b) It is a deal with second hand or existing securities.
(c) It is a specialised market for purchase and sale of industrial and financial securities.
(d) Only approval and recognised securities of public and government companies are allowed for dealing.
(e) It provides liquidity by bringing together . investors and businesses.
(f) It may be an association of persons or an incorporated company.
(g) It regulates the dealing in securities.
(h) It facilitates free and paid trade of securities.
(i) It allows dealings of only listed companies securities.
(j) All investors have to buy and sell securities through members’of stock exchanges.
(k) Stock exchanges are regulated by SEBI as per Securities Contracts (regulations) Act 1956.

Question 2.
State any ten functions of SEBI.
Answer:
The principal functions of SEBI are as follows:
(a) Regulating the business in stock exchanges and any other securities market.
(b) Registering and regulating the working of capital market intermediaries (brokers, merchant bankers and so on).
(c) Registering and regulating the working of mutual funds.
(d) Promoting and regulating self-regulatory organisations.
(e) Prohibiting fraudulent and unfair trade practices in securities market.
(f) Promoting investor’s education and training of intermediaries of securities market.
(g) Prohibiting insider trading in securities.
(h) Regulating substantial acquisition of shares and take – over of companies.
(i) Conducting enquiries and audits of stock exchanges.
(j) Levying fees and other charges for carrying out its functions.
(k) Conducting research for the above purposes.
(l) Performing such other functions as may be prescribed by the Act or by the Government.

Question 3.
Mention any 10 Stock Exchanges Operating in India.
Answer:
(a) Bangalore Stock Exchange (Karnataka)
(b) Bombay Stock Exchange (Maharastra)
(c) Madras Stock Exchange (Tamilnadu)
(d) Pune Stock Exchange (Maharastra)
(e) Cochin Stock Exchange (Kerala)
(f) Delhi Stock Exchange (Delhi)
(g) Calcutta Stock Exchange (West Bengal)
(h) Hyderabad Stock Exchange (Andhra Pradesh)
(i) National Stock Exchange (Maharastra)
(j) Canara Stock Exchange (Karnataka)
(k) Jaipur Stock Exchange (Rajasthan)
(l) Ludiana Stock Exfchange (Punjab)
(Hint to remember, relate with IPL Cricket teams)

Question 4.
Name the market where companies Issue new securities.
Answer:
Primary Market.

Question 5.
How many stock exchatiges are there in India?
Answer:
Three are 22 regional stock exchanges and 2 National level Stock Exchanges- NSEI and OTCE!.

Question 6.
Why secondary market Is considered as market for second hand securities?
Answer:
Because in this market existing and second hand securities are sold between investors.

Question 7.
Which money market security is also known as Zero Coupon Bond?
Answer:
‘Treasury Bill’ is also known as Zero Coupon Bond.

Question 8.
Explain the term: Price Rigging
Answer:
Price Rigging refers to manipulating the prices ofsecunties with the main objectives of inflating or depressing the market price of securities.

Question 9.
‘A’ wants to get his company listed in National Stock Exchange . His company’s paid up capital is Rs. 20,00,000. Can he get it listed? Kindly advise him.
Answer:
No, he cannot get it listed in NSE because to get listed in NSE minimum paid up capital required is Rs. 3 crore.

Question 10.
Distinguish between Capital market and Money Market on the basis of following
(i) Participants
(ii) Duration
(iii) Instruments
Answer:
(i) Participants: The participants in capital market are financial institutions, banks, public and private companies, foreign investors and ordinary retail investors from public whereas in money market, the participants are financial institutions, banks, public and private companies but foreign investors and ordinary retail investors do not participate.

(ii) Duration: The capital market deals in medium and long term securities. Whereas the money market deals with short term securities having maximum tenure of one year.

(iii) Instruments: T,he common instruments of capital market are Equity shares, Debebtures, Pref. Shares, Bonds whereas the common instrument of money market are Treasury Bills, Commercial bills, Certificate of Deposits, Commercial paper.

Question 11.
Nature of ‘Capital market” can be well explained with the help of its features. State any three such features of Capital Market.
Answer:

1. Link between saver and investment opportunities.
2. Deals in long term investment.
3. Utilises intermediaries.

Question 9.
Nature of money Market’can be well explained with the help of its features. State any three such features of money market.
Answer:

1. Market for short term funds,
2. Deals in monetary assets whose pes k-d of maturity is upto one year,
3. Market where low risk, unsecured and short term debt instruments are issued and actively traded everyday.

Question 10.
State any three objectives of NSE.
Answer:

1. Establishing a nationwide trading facility for all types of securities.
2. Ensuring equal access to investors all ovet the country through an appropriate communication network.
3. Providing a fair, efficient and transparent securities market using electronic trading system.

Question 11.
Explain any three functions of a Stock Exchange.
Answer:

1. A Stock Exchange is a reliable barometer to measure the economic condition of a country.’
2. It helps to value the securities on the basis of demand and supply factors.
3. It provides ready market for sale and purchase of securities.

Question 12.
‘SEBI is the watchdog of security market’. Comment.
Answer:
SEBI was setup in 1988 to regulate the functions ofthe securities market and to protect the interest of investors but SEBI was found ineffective in regulating the activities of stock market. It was able to observe and watch only but failed to take corrective measure that is why it is called as watchdog.

Question 13.
‘Stock market imparts liquidity to investment’. Comment.
Answer:
The Stock market is a place where securities of companies are bought and sold. Generally the securities are long term and get matured only after a long period oftime. These securities can be sold in stock market and can be easily converted into cash. The presence of market is an assurance to investors that their investment can be converted into cash as and when required by them.

Question 14.
State any two methods of issuing securites in Primary Market.
Answer:
The Primary market is also known as the new issues market. It deals with new securities being issued for the first time.

The securities may be issued in primary market by following two methods:

1. public issue through prospectus
2. Offer for sale.

Question 15.
Explain the terms:
(i) Bulls
(ii) Bears
(iii) Stag
Answer:
(i) Bulls: Abul is a speculator who expects rise in price. He buys securities with a view to sell them in future at a higher price and making profit out of it.

(ii) Bears: A bear is a speculate who expects fall in the price. He sells securities which he does not possess.

(iii) Stag: A stag is a speculator who applies for new securities in expectation that prices will rise by the time allotment and he can sell them at premium.

Question 16.
What function does financial market perform?
Answer:
The financial market performs the function ofbringing together the deficit units (Corporate Sector) and surplus units (investors). It is through financial market that the lender meet the borrowers.

Exercises

Short Answer Type Questions

Question 1.
What are the functions of a Financial Market?
Answer:
Financial market plays an important role in the allocation of scarce resources in an economy by performing the following four important functions
1. Mobilisation of Savings and channelizing them into the most productive uses. A financial market facilitates the transfer of savings from savers to investors. It gives choice to the saver of different investments and thus, it helps to channelize surplus funds into the most productive use.

2. Facilitate Price Discovery In a financialmarket. the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset which is being traded in that particular market.

3. Provide Liquidity to Financial Assets Financial markets facilitate easy purchase and sale of financial assets. Holders of assets can readily sell their financial assets through the mechanism of financial market.

4. Reduce the Cost of Transactions Financial markets provide valuable Information about securities being traded in the market. It helps to save time, effort and money that both buyers and sellers of a financial asset would have to spend to try or otherwise link each other

Question 2.
“Money Market is essentially a Market for short term funds:’ Discuss.
Answer:
The money market is a market for short term funds which deals in monetary assets whose period of maturity is up to one year these assets are close substitutes for money. It is a market where low risks, unsecured and short term debt instruments that are highly liquid are issued and actively traded every day. It enables the raising of short term hinds for earning returns. The major participants in the market are the Reserve Bank of India, Commercial Bank. Non-Banking Finance Companies, State Go vernments, Large Corporate Houses and Mutual Funds.

Question 3.
What is a Tteasury bill?
Answer:
A Treasuiy Bill is an instrument of short term borrowing by the Government oflndia Maturing in less than one year. They are also known as Zero Coupon Bonds issued by the RBI on behalf of the Central Government to meet its short term requirement of funds. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default. They are issued at a price which is lower than their face value and repaid at par treasury bills are available for a minimum amount of Rs. 25,000.

Question 4.
Distinguish between Capital Market and Money Market.
Answer:
Difference between Capital and Money Market

Question 5.
What are the functions of a Stock Exchange?
Answer:
The efficient functioning of a stock exchange creates a conducive climate for an active and growing primary market following are the important functions of a stock exchange
1. Providing Liquidity and Marketability to Existing Securities: The basic function of a stock exchange is the creation of a continuous market where securities are bought and sold. It gives investors the chance to disinvest and reinvest. Thus provides both liquidity and easy marketability to the existing securities in the market.

2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. Such a valuation provides important instant information to both buyers and sellers in the market.

3. Safety of Transactions : The membership of a stock exchange is well- regulated and its dealmgs are well defined according to the existing legal framework which ensures that the investing public gets a safe and fair deal on the market.

4. Contributes to Economic Growth : A ! stock exchange is a market in which existing securities are resold or traded. This process of disinvestment and reinvestment saving get channelized into productive investment avenues. This leads to capital formation and economic growth

5. Spreading of Equity Cult: The stock exchange plays vital role in ensuring wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

6. Providing Scope for Speculation: The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner.

Question 6.
What are the objectives of the SEBI?
Answer:
The overall objective of SESI is to protect the interest of investors, promote the development and regulate the securities in market.

This maybe elaborated as follows

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

Question 7.
State the objectives of the NSE.
Answer:
NSE was setup with the following objectives:

1. Establishing a nationwide trading facility for all types of securities.
2. Through an appropriate communication network, ensuring equal access to investors.
3. Through electronic trading system, provides a fair, efficient and transparent security market. .
4. It enables shorter settlement cycles and book entry settlements.
5. Meeting international benchmarks and standards.

Question 8.
What is the OTCEI?
Answer:
The OTCEI is a company incorporated under the Companies Act, 1956. It was set up to provide small and medium companies an access to the capital market for raising finance In a cost effective manner. It is folly computerised, transparent, single window exchange which commenced trading in 1992. This exchange is established on the lines of NASDAQ the OTC exchange in USA. It has been promoted by UTI, ICICI, 1DBI, IFCI, LIC, GIC, SBI, capital markets and can bank financial services. It is a negotiated market place that exists anywhere as opposed to the auction market place, represented by the activity on securities exchange. Thus, in the

OTC exchange, trading takes place when a buyer or seller walks up to an OTCEI counter, taps on the computer screen, finds quotes and effects a purchase or sale depending on whether the prices meet their target.

Long Answer Type Questions

Question 1.
Explain the various money Market Instruments.
Answer:
Money Market Instruments
1. Treasury Bill: A treasury bill is an instrument of short term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds issued by Reserve Bank of India on behalf of the Central Government to meet its short term requirements of funds. They are issued in the form of a promissory note. They are highly liquid and issued at a price which is lower than their face value and repaid at par. Treasury bills are available for a minimum amount of Rs.25,000.

2. Commercial Paper: Commercial paper is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short term funds at lower rates of interest than market rates. It usually has a maturity period of 15 days to one year. The issuance of commercial paper is an alternative to bank borrowing for
large companies that are generally considered to be finally strong. It is sold at discount and redeemed at par.

3. Call Money: Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. Commercial Banks have to maintain a minimum cash balance known as cash reserve ratio. Call money is a method by which banks borrow from each other.

4. Certificate of Deposit: Certificates of deposit are unsecured, negotiable, short term instruments in bearer form, issued by Commercial Banks and development financial institutions. They can be issued to individuals, corporations and companies during periods of tight liquidity when the deposit growth of banks is slow but the demand for credit is high. They help to mobilise a large amount of money for short periods.

5. A Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. It is a short term negotiable, self-liquidating instrument which is used to finance the credit sales of firms, when goods are sold on credit, the buyer becomes liable to make payment on a specific date in fiiture.

Question 2.
What are the methods of floatation in Primary Market?
Answer:
The primary market is also known as the new issues market. It deals with new securities being issued for the first time. There are various methods of floating new issues in the primary market
1. Offer Through Prospectus: This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. The issues may be under written and also required to be listed on at least one stock exchange. The contents at the prospectus have to be in accordance with the provisions of the Companies Act and SEBI disclosure and investor protection guidelines.

2. Offer for Sale: Under this method securities are not issued directly to the public but offered for sale through intermediaries like issuing houses or stock brokers. In this case, company sells securities unblock at an agreed price to brokers who, in turn, resell them to the investing public.

3. Private Placement: Private placement is the allotment of securities by a company to institutional investors
and some selected individuals. It helps to raise capital more quickly than a public issue. Access to the primary market can be expensive on account of various mandatory and non¬mandatory expenses.

4. Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholder are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.

5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company the issuer company should appoint a registrar to the issue having electronic connectivity with the exchange. The issuer company can apply for listing of its securities on any exchange other than the exchange through which it has offered its securities. The lead manager co-ordinates all the activities amongst intermediaries connected with the issue.

Question 3.
Explain the Capital Market reforms in India.
Answer:
The National Stock Exchange is the latest, most modem and technology driven exchange.

NSE has setup a nationwide fully automated screen based trading system.
The NSE was set up by leading financial institutions, banks, insurance companies and others financial intermediaries. It is managed by professionals, who do not directly or indirectly trade on the exchange. The trading rights are with the trading members who offer their services to the investors. The Board of NSE comprises senior executives from promoter institutions and eminent professionals, without having any representation from trading members.

Objectives of NSE

1. Establishing a nationwide trading facility for all types of securities.
2. Ensuring equal access to investors all over the country through an appropriate communication network.
3. Providing a fair, efficient and transparent securities market using electronic trading system.
4. Enabling shorter settlement cycles and book entry settlements.
5. Meeting international bench marks and standards.. Within a span of 10 year, NST was able to achieve its objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian capital market.

Question 4.
Explain the objectives and functions of SEBI.
Answer:
Objectives of SEBI:
The overall objective of SESI is to protect the interest of investors, promote the development and regulate the securities in market.

This may be elaborated as follows

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

Functions of SEBI:
Keeping in mind the emerging nature of the securities market in India, SEBI was entrusted with the twin task of both regulation and development of the securities market.

It has certain functions Regulatory Functions

1. Registration of brokers and sub-brokers and other players in the market.
2. Registration of collective investment schemes and mutual funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and any other securities market.
4. Regulation of taken over bids by companies.
5. Calling for information by undertaking inspection conducting enquiries and audits of stock exchanges and intermediaries.
6. Levying for or other charges for carrying out the purposes of the act.
7. Performing and exercising such power under Securities Contracts Act. 1956, as may be delegated by the Government of India.

Development Functions

• Training of intermediaries of the securities market.
• Conducting research and publishing information useful to all market segments.
• Undertaking measures to develop the capital markets by adopting a flexible approach.

Protective Functions

• Prohibition of fraudulent and unfair trade practice like making misleading statements, manipulations, price rigging etc.
• Controlling insider trading and imposing penalties for such practices.
• Undertaking steps for investor protectioa
• Promotion of fair practices and code of conduct in securities market.

Question 5.
Explain the various segments of NSE.
Answer:
NSE provides trading in the following two segments:
1. Whole Sale Debt Market Segment: This segment provides a trading platform for a wide range of fixed income securities that include central government securities, treasury bills, state development loans, bonds issued by public sector undertakings, floating rate bonds, zero coupon bonds, index bonds, commercial paper, certificate of deposit, corporate debentures and mutual funds.

2. Capital Market Segment: The capital market segment ofNSE provides efficient and transparent platform for trading in equity, preference, debentures, exchange traded funds as well as retail government securities.

Multiple Choice Questions

Question 1.
Primary and secondary markets
(a) compete with each other
(b) complement each other
(c) function independently
(d) control each other
Answer:
(b) Primary Market and Secondary Market complement each other as primary market deals with the issue of new securities and secondary market also helps the fresh Investor to enter in the market

Question 2.
The total number of Stock Exchanges in India are
(a) 20
(b) 21
(c) 22
(d)23
Answer:
(d) There are 23 stock exchanges In India list of stock exchanges in India are Bombay, National, Regional, Ahmedabad, Bengaluru, Bhubaneshwar, Calcutta, Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Jaipur, Ludhiana, Madhya Pradesh, Madras (Chennai), Magadh, Mangalore, Meerut, OTC Exchange of India, Pune, Saurashtra Kutch, Vadodara.

Question 3.
The settlement cycle in NSE is
(a) T + 5
(b )T + 3
(c) T + 2
(d) T + 1
Answer:
(c) The settlement cycle in NSE is T + 2.

Question 4.
The National Stock Exchange of India was recognised as stock exchange in the year
(a) 1992
(b) 1993
(c) 1994
(d) 1995
Answer:
(b) NSE was incorporated in 1992 and was recognised as a stock exchange in April 1993

Question 5.
NSE commenced fiitures trading in the year
(a) 1999
(b) 2000
(c) 2001
(d) 2002
Answer:
(b) In 2000. NSE commenced future tradings.

Question 6.
Clearing and settlement operations of NSE is carried out by
(a)NSDL
(b)NSCCL
(c) SBI
(d) CDSL
Answer:
(b) NSCCL carried out the clearing and settlement operations of NSE.

Question 7.
OTCI was started on the lines of
(a) NASDAQ
(b) NYSE
(c)NASAQ
(d) NSE
Answer:
(a) OTCEI (Over The Counter Exchange of India) established on the lines of NASDAQ (National Association of Securities Dealers Automated Quotations).

Question 8.
To be listed on NSE, the minimum capital requirement for a company,
(a) Rs. 5 crores
(b) Rs. 3 crores
(c) Rs.6 crores
(d) Rs. 1 crore
Answer:
(b) In order to have its securities listed the companies should have an minimum of Rs. 3 crores.

Question 9.
A Treasury Bill is basically
(a) an instrument to borrow short term funds
(b) an instrument to borrow long term funds
(c) an instrument of capital market
(d) None of the above
Answer:
(a) Treasury Bills are an instrument to borrow short term funds. These are issued by RBI on behalf of the Government of India.

Case Problems:

‘R’ Limited is a real estate company which was formed in 1950. In about 56 years of its existence the company has managed to carve out a niche for itself in this sector. Lately, this sector is witnessing a boom due to the fact, that the Indian economy is on the rise. The incomes of middle class are rising. More people can afford to buy homes for themselves due 10 easy availability of loans and accompanying tax concessions.

To expand its business in India and abroad the company is weighing various Options to raise money through equity offerings in India. Whether to tap equity or debt, market whether to raise money from domestic market or international market or combination of both? When their to raise the necessary finance from money market or capital market. It is also planning to list itself in New York Stock Exchange to raise money through ADR’s. To make its offerings attractive it is planning to offer host of financial plans products to its stakeholders and investors and also expand it’s listing at NSE after complying with the regulations of SEBI,

Question 1.
What benefits will the company derive from listing at NSE?
Answer:
Following are the benefits the company can derive from listing at NSE

1. NSE provides nationwide trading facility for all types of facilities.
2. The liquidity and best available prices for the securities are ensured by the processing speed ofthe exchange.
3. TheNSE network is used to disseminate information and company announcements across the country.
4. Enabling shorter settlement cycles and book entry settlement.

Question 2.
What are the regulations of SEBI that the company must comply with?
Answer:
Following are the regulations of the SEBI for new issue that the company must comply with

1. Prospectus has to be attached with every application.
2. Objective of the issue and cost ofproject should be mentioned in the prospectus.
3. Company’s management, past history and present business of the firm should be highlighted in the prospectus.
4. Subscription List for public issue should be kept open for a minimum of 3 days and maximum of 10 days.
5. Collections agents are not allowed to collect application money in cash.
6. Issue should make adequate disclosure regarding the terms and conditions of redemption security conversion and other relevant features ofthe new Instrument so that an investor can make reasonable determination of risks returns. Safety and liquidity of the instrument the disclose shall be vetted by SEBI in this regard

Question 3.
How does the SEBI exercise control over ‘R’ Limited in the interest of investors?
Answer:
SEBI will exercise control over ‘R’ limited by:
1. Prohibiting fraudulent and uniair trade practices in the securities market, unfair trade practices Include price rigging. Making misleading statements

2. Prohibiting insider trading Le., restricts the persons having access to price sensitive information about the company to take undue advantage of it.

3. Examining that adequate disclosure about the terms and conditions of redemption, security conversion and other relevant features ofthe new Instrument at the time of issue is made so that an investor can make reasonable determination of risks returns. Safety and liquidity of the instrument.


The above figures are taken from the website ofNational Stock Exchange of India. They illustrate the movement of NSE stock indices as well as world stock indices on the date indicated.

Questions 4.
What do you mean by a stock index? How is it calculated?
Answer:
Stock index refers to the index used to capture the movement of the stock market. It is a barometer which measures overall market trend through a set of stocks which are representatives of the market. An ideal index must represent changes in the prices of securities and also show the price movement of different classes of shares.

Most of the stock market uses the following 3 methods of calculating index:

1. Price Weighted Index: An index reflecting the sum of the prices of the sample share in a certain year/month/week/day with reference to abase year.
2. Equal Weighted Index: An index reflecting the simple arithmetic average of the price relatives of a sample of shares in a certain period with reference to base year.
3. Value Weighted Index: It is an index reflecting the aggregate market capitalisation of the sample shares in certain period in relation to base year.

Question 5.
What conclusions can you draw from the various movements of NSE stock indices?
Answer:
There is a downward swing in the stock market. While comparing the previous and current index of NSE we can say that there is a depression in the market as index is down for all the sectors.

Question 6.
What factors affect the movement of stock indices? Elaborate on the nature of these factors.
Answer:
The fell in the domestic market. As given in the above table, can significantly be attributed to the market sentiments of world market. We can see the world indices and NSE indices are moving in the same direction.

Question 4.
What relationship do you see between the movement of indices in world markets and NSE indices?
Answer:
There is direct relation between NSE indices and world market indices. As there is negative trend in world index, it brings negative trend in NSE index also.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 9 Financial Management

Question 1.
A company wants to establish a new unit in which a machinery worth Rs.10 lakhs is involved. Identify the type of decision involved in financial management.
Answer:
Investment decision

Question 2.
A decision is taken to raise money for long term capital needs of the business from certain sources. What is this decision called ?
Answer:
Financing decision

Question 3.
A decision is taken to distribute certain parts of the profit to shareholders after paying tax. What is this decision called?
Answer:
Dividend decision

Question 4.
Name the source of finance carrying two fixed obligations viz., interest and redemption.
Answer:
Debentures

Question 5.
In case of inflation, does an enterprise need more or less of the working capital?
Answer:
More working capital

Question 6.
Identify the decision taken in financial management which affects the liquidity as well as the profitability of business.
Answer:
Capital budgeting decision

Question 7.
State why the working capital needs for a service industry are different from that of a manufacturing industry.
Answer:
Nature ofbusiness determines the working capital needs. Service industries which usually do not have to maintain inventory require less working capital whereas manufacturing industries have to maintain inventory in the form of Raw materials to finished goods there require more working capital.

Question 8.
To avoid the problem of shortage and surplus of funds what is required in financial management? Name the concept and explain its any three points of importance.
Answer:
Financial Planning. Sound financial planning is essential for success of any business enterprise. It is important because

1. it facilitates collection ;of optimum funds.
2. It helps in fixing the most appropriate capital structure.
3. It helps in investing finance in right projects.

Question 9.
State the factors which affect the capital structure of a company.
Answer:

1. Cash flow ability
2. control
3. Floatation cost
4. Flexibility
5. Market condition

Question 10.
Why is Financial Planning done?
Answer:
It is done to achieve the following two objectives:

1. To ensure the availability of funds whenever these are required.
2. To see that firm does not raise resources unnecessarily.

Question 11.
The length of the Production cycle affects the working capital requirements of an organization. Explain how?
Answer:
The production cycle is the time span between the receipt of raw material and their conversion into finished goods. Duration and length of the production cycle affects the amount of fonds required of R/M and expenses. Consequently, the working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.

Question 12.
‘Primary objective of financial management is to maximize the wealth of shareholders’. Explain.
Answer:
Maximization of shareholders wealth depends upon the market price of shares. Market price of equity share increase if the benefits from a decision exceeds the cost involved.

Question 13.
The directors of a manufacturing company are thinking of issuing Rs. 20 lacs additional debentures for expansion of their production capacity. This will lead to an increase in debt- equity ratio from 2:1 to 3:1. What are the risks involved in it?
Answer:
The increase in debt-equity ratio from 2:1 to 3:1 is subject to following risks-
(a) Interest on debt has to be paid even when the company is not making sufficient profits.
(b) The debenture holders have charge over the assets of the company so there is threat of solvency.

Question 14.
A businessman, who wants to start a manufacturing concern, approaches you to suggest him whether the following manufacturing concern would require large or small working capital: (a) Bread, (b) Coolers, (c) motorCar.
Answer:
(a) Bread: Requirement of working capital will be less because it has quick cash turnover.
(b) Coolers: Require for working capital will be more because it is a seasonal product.
(c) Motor car: Working capital requirement will be more.

Question 15.
You are the finance manager of a newly established company. The directors of the company have asked you to plan the capital structure of the company. State any four factors that you would consider while planning the capital structure.
Answer:
Following factors would be considered for the purpose-

1. Cash Flow Position
2. Interest Coverage Ratio
3. Return on Investment
4. Cost of debt
5. Tax rate

Question 16.
How Stock market conditions affect the capital structure especially when company is planning to raise additional capital?
Answer:
There are two main conditions of stock market i.e., Boom condition and Recession condition

During recession market is slow and investors also hesitate to take risk so at this time it is advisable to issue borrowed funds as they are less risky and ensure fixed repayment and regular interest. But during boom period, business flourishes and investors also take risk and prefer to invest in equity shares to earn more in the form of dividend.

Question 17.
How is Interest Coverage Ratio computed? What does it indicate?
Answer:
Interest Coverage Ratio = Earnings before interest and tax/interest

Higher ICR means companies can have more of borrowed fund securities whereas lower ICR means less borrowed fund securities.

Question 18.
How is Return on Investment computed?
Answer:
Return on Investment = Earnings before Interest and tax/ Total investment

I. One Mark Questions and Answers

Question 1.
Name any one basic objectives of Financial Management?
Answer:
Profit Maximisation.

Question 2.
What do you mean by financial decision?
Answer:
Decision – making in three major issues relating to the financial operations of a business organisation is called financial decision.

Question 3.
Name any one type of capital requirement of an organisation?
Answer:
Fixed Capital.

Question 4.
What is fixed Capital?
Answer:
The amount invested in acquisition and development of fixed assets is known as fixed capital.

Question 5.
What is working capital?
Answer:
Working capital refers to the funds, which an organisation must possess to finance its day – to – day operations.

Question 6.
State any one factor affecting working capital requirement of a business concern.
Answer:
Nature of the business.

Question 7.
State one factor affecting fixed capital requirement of a business concern.
Answer:
Scale of operation.

II. Two Marks Question and Answers

Question 1.
What is Financial Management?
Answer:
It involves the application of general management principles to financial activities.

Question 2.
Give the meaning of Investment Decisions.
Answer:
The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long term investment decision or capital budgeting decisions or short – term investment decision or working capital decision.

Question 3.
Give the meaning of Dividend Decisions.
Answer:
Dividend decisions relate to the appropriation of profit. Dividend decisions relate to what part of profit should be retained in the organisation and what part of it should be declared and distributed to shareholders as dividend.

Question 4.
Give the meaning of Financing Decisions.
Answer:
Financing decisions are concered with the financing ofbusiness activities and the quantum of finance to be raised from various sources of finance. The main sources of funds for an organisation are shareholders funds (owners fund) and borrowed funds (debt fund).

Question 5.
State any two factors affecting working capital requirement of a business concern.
Answer:

1. Nature of the business
2. Business cycle.

Question 6.
State any two factors affecting fixed capital requirement of a business concern.
Answer:

1. Scale of operation
2. Growth and expansion prospects.

Question 7.
What is Financial planning?
Answer:
Financial planning is the process of determining the objectives, polices, procedures and programmes to deal with the financial activities of an organisation.

Question 8.
Write the difference betweeen working capital and fixed capital
Answer:
Working capital refers to the fends, which an organisation must possess to finance its day – to -day operations whereas the amount invested in acquisition and development of fixed assets is known as fixed capital.

III. Five Marks Questions and Answers

Question 1.
Describe the importance of Financial Management
Answer:
(a) Financial Management helps in estimating the capital requirements of an organisation.
(b) Financial Management is capital budgeting i.e, procurement ofan organisation.
(c) Financial Management also procures working capital, it is the excess of current assets over current liabilities.
(d) Financial Management helps in appraisal of financial performance and financial control
(e) Financial Management helps the organisations in making financial decisions.
(f) Financial Management helps the organisation for making dividend policy decisions.
(g) It provides solutions to financial problems.

Question 2.
What do you mean by a financial decision? Explain in brief the types of financial decisions?
Answer:
Decision-making in three major issues relating to the financial operations of a busines sorganisation is called financial decision.

The three major issues are as follows:
(a) Investment Decisions:
The investment decision relates to how the firm’s fends are invested in different assets. Investment decision can be long term investment decision or capital Budgeting decisions or short – term investment decision. Capital Budgeting decisions involve investment in fixed assets which has long – term implications. Working capital decisions involve investment in current assets and immediate return can be expected from such investment.

(b) Financial Decisions:
Financing decisions are concerned with the financing ofbusiness activities and the quantum of finance to be raised from various sources of finance. The main sources of fends for an organisation are shareholder’s funds (owners fund) and borrowed funds (debt fond). A firm has to decide the right proportion between these two important sources of finance, viz., owner’s fond and debt fend by evaluating different factors affecting financing decisions such as cost, risk, effect on management control state of capital market etc.

(c) Dividend Decisions: Dividend decisions relate to the appropriation of profit. Dividend decisions relate to what part of profit should be retained in the organisation and what part of it should be declared as dividedend. Retained earnings increase the fixture earning capacity of the organisations whereas, dividend results in maximising shareholder’s wealth. Hence the finance manager has to take balanced dividend decisions so that owners should get reasonable return on their investment and needs of the business should not suffer.

Question 3.
Explain briefly the importance of Financial Planning.
Answer:
(a) It is a tool that helps in facing any financial uncertainties.
(b) It ensures sufficient funds are available when there is a need.
(c) It ensures liquidity of funds throughout the year.
(d) Its policies would contribute to the elimination ofwastes.
(e) It helps in optimum capital structure at minimum cost.
(f) It helps in achieving better financial co-ordination by control measures.

Question 4.
Explain any five factors which may influence the amount of working capital requirements in a business.
Answer:
(a) The nature of the business and amount required for day to day running of the business determines the working capital requirements.
(b) The scale of operations (large or small) determines the working capital requirements.

(c) The plans for growth and expansion the production rate the sales targets determines the working capital requirements.

(d) Most of the business are subject to seasonal factors and this affects and determines the working capital requirements of a company.

(e) The credit policy of a company has a huge impact in determining the working capital requirements.

(f) The stage of business cycle, recession, depression, boom fluctuations in demand all these factors determine the working capital requirements.

(g) The changes in the price levels have a greater impact in determining the working capital requirements.

(h) The level of competition also determine the working capital requirements.

(i) The span of time of production cycle i.e., the time gap between conversion into finished goods determines the working capital requirements.

(j) Profit levels also affects working capital requirements of a company.

Question 5.
Explain any five factors which may influence the amount of fixed capital requirements in a business.
Answer:
(a) The nature of the business determines the amount of fixed capital requirement of a company to a great extent.
(b) The size of operation (large or small) determines the capital requirement.
(c) The plans for growth and expansions determines the capital requirements of a company.
(d) Choice of technique, technology and methods of productions to be used determines the capital requirements.
(e) The method which the company use to purchase determines the capital requirements.
(f) The diversification policies of a company determines the capital structure requirements.
(g) The amount which the company wishes to spend on promotion determines the capital structure.
(h) The level of collaboration with other business organisation also determines the capital requirements.
(i) The place of operations also determine the capital requirements.
(j) The nature of products of its marketing strategies also determines the capital requirements.

IV. Ten Marks Questions and Answers

Question 1.
Explain the objectives of Financial Management.
Answer:
1. Basic Objectives
(a) Profit Maximisation: It is one of the basic objectives of financial management. It means earning sufficient profit for meeting expenses.
(b) Wealth Maximisation: It is another basic objective of financial management. It means the maximisation of market share value of the shares.

2. Other Objectives
(a) One of main objectives of Financial Management is proper estimation of total financial requirements of an organisation.
(b) Obtaining fimds and mobilising it is another important objective.
(c) To ensure proper and optimum utilisation offinance.
(d) To maintain proper inflow and outflow of cash for day to day expenses of an organisation.
(e) Another major objective of Financial Management to create reserves and minimising risk
(f) In addition to raising fimds co-ordination is one of the major objectives of Financial . management.
(g) To avoid deviation in inflow and outflow of fundsby financial control.
(h) To create goodwill and to help long run survival of the organisation.

Question 2.
Explain the factors which may influence the amount of working capital requirements in a business.
Answer:
(a) The nature of the business and amount required for day to day running of the business determines the working capital requirements.
(b) The scale of operations (large or small) determines the working capital requirements.

(c) The plans for growth and expansion the production rate the sales targets determines the working capital requirements.

(d) Most of the business are subject to seasonal factors and this affects and determines the working capital requirements of a company.

(e) The credit policy of a company has a huge impact in determining the working capital requirements.

(f) The stage of business cycle, recession, depression, boom fluctuations in demand all these factors determine the working capital requirements.

(g) The changes in the price levels have a greater impact in determining the working capital requirements.

(h) The level of competition also determine the working capital requirements.

(i) The span of time of production cycle i.e., the time gap between conversion into finished goods determines the working capital requirements.

(j) Profit levels also affects working capital requirements of a company.

Question 3.
Explain the factors which may influence the amount of fixed captail requirements in a business.
Answer:
(a) The nature of the business determines the amount of fixed capital requirement of a company to a great extent.
(b) The size of operation (large or small) determines the capital requirement.
(c) The plans for growth and expansions determines the capital requirements of a company.
(d) Choice of technique, technology and methods of productions to be used determines the capital requirements.
(e) The method which the company use to purchase determines the capital requirements.
(f) The diversification policies of a company determines the capital structure requirements.
(g) The amount which the company wishes to spend on promotion determines the capital structure.
(h) The level of collaboration with other business organisation also determines the capital requirements.
(i) The place of operations also determine the capital requirements.
(j) The nature of products of its marketing strategies also determines the capital requirements.

Exercises

Short Answer Type Questions

Question 1.
What is meant by capital structure?
Answer:
Capital structure refers to the mix between owners and borrowed funds. It represents the proportion of equity and debt.
Capital Structure = (Debt/Equity)

Question 2.
Discuss the two objectives of Financial Planning.
Answer:
Financial Planning strives to achieve the following two objectives
1. To Ensure Availability of Funds whenever These are Required: This includes a proper estimation of the funds required for different purposes such as for the purchase of long term assets or to meet day-to-day expenses of business etc.

2. To See That the Firm Does Not Raise Resources Unnecessarily: Excess funding is almost as bad as Inadequate funding. Efficient financial planning ensures that funds are not raised unnecessarily in orderto avoid unnecessary addition of cost.

Question 3.
What is ‘ financial risk’? Why does it arise?
Answer:
It refers to the risk of company not being able to cover its fixed financial costs.
The higher level of risks are attached to higher degrees of financial leverage with the Increase in fixed financial costs, the company it’s also required to raise its operating profit (EBIT) to meet financial charges. If the company cannot cover these financial charges, it can be forced into liquidation.

Question 4.
Define a ‘current assets’ and give four examples.
Answer:
Current assets are those assets of the business which can be converted into cash within a period of one year. Cash in hand or at bank, bills receivables, debtors, finished goods inventory are some of the examples of current assets.

Question 5.
Financial management is based on three broad financial decisions. What are these?
Answer:
Financial management is concerned with the solution of three major issues relating to the financial operations of a firm corresponding to the three questions of Investment, financing and dividend decision. In a financial context, it means the selection ofbest financing alternative or best investment alternative.

The finance function therefore, is concerned with three broad decisions which are as follows

1. Decision: The investment decision relates to how the firm’s funds are invested in different assets.
2. Financing Decision: This decision is about the quantum of finance to be raised from various long term sources and short term sources. It Involves identification of various available sources of finance.
3. Dividend Decision: This decision relates to distribution of dividend. Dividend is that portion of profit which is distributed to shareholders the decision involved here is how much of the profit earned by company is to be distributed to the shareholders and how much of it should be retamed in the business for meeting investment requirements.

Question 6.
What is the main objective of financial management? Explain briefly.
Answer:
Primary aim of financial management is to maximise shareholder’s wealth, which is referred to as the wealth maximisation concept. The wealth of owners is reflected in the market value of shares, wealth maximisation means the maximisation of market price of shares. According to the wealth maximisation objective, financial management must select those decisions which result in value addition, that is to say the benefits from a decision exceed the cost involved. Such value addition increase the market value of the company’s share and hence result in maximisation of the shareholder’s wealth.

Question 7.
Discuss about working capital affecting both the liquidity as well as profitability of a business.
Answer:
The working capital should neither be more nor less than required. Both these situations are harmful. If the amount of working capital is more than required, it will no doubt increase liquidity but decrease profitability. For instance, if large amount of cash is kept as working capital, then this excessive cash will remain idle and cause the profitability to fall. On the contrary, if the amount ofcash and other current assets are very little, then lot of difficulties will have to be faced in meeting daily expenses and making payment to the creditors. Thus, optimum amount of both current assets and current liabilities should be determined so that profitability of the business remains intact and there is no fall in liquidity.

Long Answer Type Questions

Question 1.
What is meant by working capital? How is it calculated? Discuss five important determinants of working capital requirements.
Answer:
Working capital is that part of total capital which is required to meet day-to-day expenses, to buy raw materials, to pay wages and other expenses of routine nature in the production process or we can say it refers to excess of current assets over current liabilities.
Working Capital = Current Assets – Current Liabilities

Factors affecting working capital requirement are
1. Nature of Business: The basic nature of a business influences the amount of working capital required. A trading organisation usually needs a lower amount of working capital compared to a manufacturing organisation. This is because in trading.

There is no processing required. In a manufacturing business, however, raw materials need to be converted into finished goods, which increases the expenditure on raw material, labour and other expenses.

2. Scale of Operation: The firms which are operating on a higher scale of operations, the quantum of inventory, debtors required is generally high. Such organisations, therefore, require large amount of working capital as compared to the organisations which operate on a lower scale.

3. Production Cycle: Production cycle is the time span between the receipts of raw materials and their conversion into finished goods. Some businesses have a longer production cycle while some have a shorter one. Working capital requirement is higher in ferms with longer processing cycle and lower in firms with shorter processing cycle.

4. Credit Allowed: Different firms allow different credit terms to their customers. A liberal credit policy results in higher amount of debtors, increasing the requirements of working capital.

5. Credit Availed: Just as a firm allows credit to its customers it also may get credit from its suppliers. The more credit a firm avails on its purchases, the working capital requirement is reduced.

Question 2.
Capital structure decision is essentially optimisation of risk-return relationship. Comment.
Answer:
Capital structure refers to the mix between owners and borrowed Hinds. It can be calculated as(Debt/Equity).

Debt and equity differ significantly in their cost and riskiness for the firm. Cost of debt is lower than cost of equity for a firm because lender’s risk is lower than equity shareholder’s risk, since lenders earn on assured return and repayment of capital and therefore they should require a lower rate of return. Debt is cheaper but is more risky for a business because payment of interest and the return of principal is obligatory for the business. Any default in meeting these commitments may force the business to go into liquidation. There is no such compulsion in case of equity, which is therefore, considered riskless for the business. Higher use of debt increases the fixed financial charges of a business. As a result increased, use of debt increases the financial risk of a business.

Capital structure of a business thus, affects both the profitability and the financial risk. A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity share.

Question 3.
A capital budgeting decision is capable of changing the financial fortune of a business. Do you agree? Why or why not?
Answer:
Investment decision can be long term or short term. Along term Investment decision is also called a capital budgeting decision. It involves committing the finance on a long term basis, e.g., making investment inanew machine to replace an existing one or acquiring a new fixed assets or opening a new branch etc. These decisions are very crucial for any business. They affect its earning capacity over the long-run, assets of a firm, profitability and competitiveness, are all affected by the capital budgeting decisions. Moreover, these decisions normally involve huge amounts of investment and are irreversible except at a huge cost. Therefore, once made, it Is almost impossible for a business to wriggle out of such decisions. Therefore, they need to be taken with utmost care. These decisions must be taken by those who understand them comprehensively.

A bad capital budgeting decision normally has the capacity to severely damage the financial fortune of a business.

Question 4.
Explain factors affecting the dividend decision.
Answer:
Dividend decision relates to distribution of profit to the shareholders and its retention in the business for meeting the future investment requirements. How much of the profits earned by a company will be distributed as profit and how much will be retained in the business is affected by many factors.

Some of the important factors are discussed as follows
1. Earnings: Dividends are paid out of current and past year earnings. Therefore, earnings is a major determinant of the decision about dividend.

2. Stability of Earnings: Other things remaining the same, a company having stable earning is in a position to declare higher dividends As against this, a company having unstable earnings is likely to pay smaller dividend.

3. Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies, is therefore, smaller than that in non-growth companies.

4. Cash Flow Position: Dividends Involve an outflow of cash. A company may be profitable but short on cash. Availability of enough cash in the company is necessary for declaration of dividend by it.

5. Shareholder: Preference If the shareholder in general, desire that at least a certain amount should be paid as dividend, the companies are likely to declare the same.

6. Taxation Policy: If tax on dividend is higher It would be better to pay less by way of dividends. As compared to this, higher dividends maybe declared if tax rates are relatively lower.

7. Stock Market Reaction: For investors, an increase in dividend is a good news and stock prices react positively to It. Similarly a decrease in dividend may have a negative impact on the share prices in the stock market.

8. Access to Capital Market: Large and reputed companies generally have easy access to the capital market and therefore, depend less on retained earnings to finance their growth These companies tend to pay higher dividends than the smaller companies which have relatively low access to the market.

9. Legal constraints: Certain provisions of the Company’s Act place restriction on payouts as dividend. Such provisions have to be adhered, while declaring dividends.

10. Contractual Constraints: While granting loans to a company, sometimes the lender may impose certain restrictions on the payment of dividends in future The companies are required to ensure that the dividends does not violate the terms and conditions of the loan agreement in this regard

Multiple Choice Questions

Question 1.
The cheapest source of finance is
(a) debenture
(b) equity share capital
(c) preference share
(d) retained earnings
Answer:
(d) Retained earnings is the cheapest source of finance.

Question 2.
A decision to acquire a new and modem plant to upgrade an old one is a
(a) financing decision
(b) working capital decision
(c) investment decision
(d) dividend decision
Answer:
(c) Investment decision is related to careful selection of assets in which funds will be Invested by firms. Thus, the above case comes under the investment decision.

Question 3.
Other things remaining the same, an increase in the tax rate on corporate profits will
(a) make debt relatively cheaper
(b) make debt relatively less cheap home
(c) no impact on the cost of debt
(d) we can’t say
Answer:
(a) If the tax rate on corporate, profit will increase it makes debt relatively cheaper.

Question 4.
Companies with higher growth paternal are likely to
(a) pay lower dividends
(b) pay higher dividends
(c) dividends are not affected by growth considerations
(d) None of the above
Answer:
(a) Companies who are having a higher growth pattern are likely to pay lower dividends.

Question 5.
Financial leverage is called favourable if
(a) return on investment is lower than cost of debt
(b) return on investment is higher than cost of debt
(c) debt is nearly available
(d) if the degree of existing financial leverage is low
Answer:
(b) If ROI is higher than cost of debt financial leverage in this case called favourable.

Question 6.
Higher debt equity ratio (Debt/Equity) results in Equity
(a) lower financial risk
(b) higher degree of operating risk
(c) higher degree of financial risk
(d) higher EPS
Answer:
(c) Higher debt equity ratio results in higher degree of financial risk.

Question 7.
Higher working capital usually results in
(a) higher current ratio, higher risk and higher profits
(b) lower current ratio, higher risk and profits
(b) higher equitably, lower risk and lower profits
(d) lower equitably, lower risk and higher profits
Answer:
(a) If the working capital is higher it results in higher current ratio, higher risk and higher profits.

Question 8.
Current assets are those assets which get converted into cash
(a) within six month
(b) within one year
(c) between one and three year
(d) between three and five year
Answer:
(b) Current assets are those assets which are converted in cash in one year.

Question 9.
Financial planning arrives at
(a) minimising the external borrowing by resorting to equity issues
(b) entering that the firm always have significantly more fun than required so that there is no paucity of funds
(c) ensuring that the firm paces neither a shortage nor a glut of unusable funds
(d) doing only what is possible with the funds that the firm has at its disposal
Answer:
(c) Financial planning means deciding how much to spend and on what to spend it ensuring that the firm paces neither a shortage nor a glut of unusable funds.

Question 10.
Higher dividends per share is associated with
(a) high earnings, high cash flows, unusable earnings and higher growth opportunities
(b) high earnings, high cash flows, stable earnings and high growth opportunities
(c) high earnings, high cash flows, stable earnings and lower growth opportunities
(d) high earnings, low cash flows, stable earnings and lower growth opportunities
Answer:
(c) Higher dividend per share includes higher earnings, high cash flows, stable earning and lower growth opportunities.

Question 11.
A fixed asset should be financed through
(a) a long term liability
(b) a short term liability
(c) a mix of long and short term liabilities
(d) None of the above
Answer:
(a) Fixed assets financed through long term liability.

Question 12.
Current assets of a business firm should be financed through
(a) current liability only
(b) long term liability only
(c) partly from both types i.e., long and short term liabilities
(d) None of the above
Answer:
(c) Current assets are financed through long and short term liabilities.

Case Problem:

‘S’ Limited is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% – 8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand it is flic ing. It is estimated that it will require about Rs. 5,000 crores to set up and about Rs. 500 crores of working capital to start the new plant.

Question 1.
What is the role and objectives of financial management for this company?
Answer:
Role of Financial Management Financial management is concerned with the proper management of funds it involves:

1. Managerial decisions relating to procurement of long term and short term fend
2. Keeping the risk associated with respect to procured funds under control.
3. Utilisation offends in the most productive and effective manner
4. Fixed debt equity ration capital. Objective of Financial Management

The objective of financial management is the maximisation of shareholder’s wealth The investment decision, financial decision and dividend decision help an organisation to achieve this objective In the given situation S limited envisages growth prospects of steel

Industry due to the growing demand. To expand the production capacity, the company needs to invest However, investment decision will depend on the availability of funds, the financing decision and the dividend decision. However, the company win take those financial decisions which result In value addition I e the benefits are more than the cost This leads to an increase in the market value of the shares of the company.

Question 2.
Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.
Answer:
Importance of financial plan for the company

1. Financial Planning ensures provision of adequate funds to meet working capital requirements.
2. It brings about a balance between in flow and out flow of funds and ensures liquidity throughout the year.
3. It solves the problems of shortage and surplus of funds and ensures proper and optimum utilisation of available resources
4. It ensures increased profitability through cost-benefit analyses and by avoiding wasteful operations
5. It seeks to eliminate waste of funds and provides better financial control.
6. It seeks to avail of the benefits of trading on equity.

Financial Plan of S Ltd:
Total finance required; Fixed capital = Rs. 1,000 crores
Working capital = Rs. 100 crores
Source of finance: 2:1 Ratio i.e..
50% of finance collected by issue of shares and 50% by borrowed funds.

Question 3.
What are the factors which will affect the capital structure of this company?
Answer:
Capital structure refers to the proportion In which debt and equity funds are used for financing the operations of a business. A capital structure is said to be optimum when the proportion of debt and equity is such that it results in an increase in the value of shares.

The factors that will affect the capital structure of this company are
1. Equity Funds: The composition of equity funds in the capital structure will be governed by the following factors
(a) The requirement of funds of ’ S Limited is for long term. Hence, equity funds will be more appropriate
(b) There are no financial risks attached to this form of funding
(c) If the stock market is bullish, the company can easily raise funds through issue of equity shares.
(d) If the company already has raised . reasonable amount of debt funds, each
subsequent borrowing will come at a higher interest rate and will Increase the fixed charges.

2. Debt Funds: The usage and the ratio of debt funds in the capital structure will be governed by factors like
(a) The availability of cash flow with the company to meet its fixed financial charges. The purpose is to reduce the financial risk associated with such payments which can further be checked by using ‘debt’ service coverage ratio
(b) It will provide the benefit of trading on equity and hence will Increase the earning per share of equity shareholders However, the return on Investment’ ratio will be the guiding principle behind it. The company should opt for trading on equity only when the return on investment is more than the fixed charges.
(c) Interest on debt funds is a deductible expense and therefore, will reduce the tax liability
(d) It does not result in dilution of management control.

Question 4.
Keeping in mind that it is a highly capital intensive sector what factors will affect the fixed and working capital. Give reasons with regard to both in support of your answer.
Answer:
The working and fixed capital requirement of ‘S’ Limited Will be high due to the following reasons.

1. The business is capital intensive and the scale of operation is large.
2. Heavy Investments are required for building up the production base and for technological upgradation.
3. In case of steel industry. The major Input is iron are and coal. The ratio of cost of raw material to total cost is very high. Hence, higher will be the need for working capital
4. The longer the operating cycle, the larger is the amount of working capital required as the funds get locked up in the production process for a long period of lime
5. Terms of credit for buying and selling goods, discount allowed suppliers and to the customers also determines the quantum working capital.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 8 Controlling

Question 1.
Which function of management ensures that actual activities confirm to planed activities?
Or
Name the function which reviews the operations in a business unit.
Answer:
Controlling

Question 2.
There are two managers Prakash and Pankaj. Prakash is saying that ‘controlling is forward looking’ whereas according to Pankaj ‘controlling is looking back’. Who is correct? Explain why.
Answer:
Both managers Prakash and Pankaj are correct and explain controlling as forward looking and looking back

Question 3.
Employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised, which in turn help them to give better performance. Which importance of controlling is highlighted here?
Answer:
Improves employees motivation.

Question 4.
Which function of management ensures work accomplishment according to plan? Name and explain the importance of the fiinction.
Answer:
Controlling is the function of management which ensures work accomplishment according to plans? And explain the importance of the controlling.

Question 5.
Controlling provides direction to all activities and efforts for achieving organizational goals. Which importance of controlling is referred here? Also explain two more of its importance.
Answer:
Facilitating coordination in action. Explain two more importance of controlling.

Question 6.
“There is close and reciprocal relationship between planning and controlling”. Explain the statement through an example.
Answer:
Yes, “there is close and reciprocal relationship between planning and controlling”. Without planning, there is no basis for controlling activities and without controlling planned activities cannot be implemented properly and there cannot be improvement in future plans.

Question 7.
“Controlling is a systematic process involving a series of steps.
Answer:
“Explain the process/steps of controlling.

Question 8.
Name the concept which suggests that only significant deviations which go beyond the permissible limit should brought to the notice of management
Answer:
Management by exception.

Question 9.
Which technique of control is concerned with the contribution of actual and planed expenditure.
Answer:
Budgetary control

Question 10.
“In ideal control system is the one that checks every bit of performance”. Do you agree with this statement? Give reasons to support your answer.
Answer:
No, I do not agree with this statement. Because a manager should focus on key points only and should not waste his energy in checking every bit.

Question 11.
Abhyuday ltd. is manufacturing auto spare parts on large scale. The company policy is that 3 % of the daily production could be defective, answer last two months it is observed that about 1012% of production is defective. Which function of management is reinsured to correct the above case? State the procedure to be followed to correct the things.
Answer:
The management function reinsured to correct the above case is controlling. The procedure to be followed is:

1. Find out the causes of deviation of defective percentage from 3 to 12.
2. Take corrective measures to control things.

Question 12.
“Comparing the actual performance with the laid standards, finding out the deviations and taking corrective action is an important function of a function of management”. Name the function and explain the process.
Answer:
Name of the function is controlling and explain the process of controlling.

I. One Mark Questions and Answers

Question 1.
What do you mean Controlling?
Answer:
It means power to order or restrain.

Question 1.
What completes the whole sequence of management process?
Answer:
Controlling.

Question 2.
What is control?
Answer:
Control means the power or authority to direct, order or restrain.

Question 3.
What do you mean by standard in controlling?
Answer:
The standard is a yardstick consisting of a specific set of actions, relating to a particular job on which the actual results are to be evaluated.

Question 4.
Give the meaning of deviation in controlling?
Answer:
Deviation means variation from the standards set as per plan.

Question 5.
How the variation is ascertained in controlling?
Answer:
When standards are developed and actual performance is measured accurately, a comparison of the two will ascertain any variation

Question 6.
State any one importance of Controlling?
Answer:
It helps in measuring actual performance.

Question 7.
State any one process of Controlling?
Answer:
Setting performance standards.

Question 8.
What is the need for Controlling?
Answer:
To ensure proper and timely accomplishment of organisational objectives.

Question 9.
What is the basis for Controlling?
Answer:
Planning is the basis for Controlling.

Question 10.
Controlling is not possible in the absence of?
Answer:
Planning.

Question 11.
Why do organisations use Controlling?
Answer:
To measure the actual performance with standards.

Question 12.
In which level of organisation controlling is used?
Answer:
It is used in all levels of management of organisation

Question 13.
What is Deviation?
Answer:
It means variation from Standard.

Question 14.
What is Standard?
Answer:
A yardstick consisting of specific set of actions relating to a particular job.

II. Two Marks Question and Answers

Question 1.
Define Controlling?
Answer:
According to Koontz and O’Donnell ‘controlling is the measuring and correcting of activities of sub-ordinates to ensure that events conform to plan.

Question 2.
State any two importances of Controlling.
Answer:
(a) It helps in measuring the actual performance with standards.
(b) It helps in improving organisations efficiency.

Question 3.
State any two steps in controlling process.
Answer:
(a) Setting performance standards.
(b) Measurement of actual process.

Question 4.
State any two corrective actions when there is deviation.
Answer:
(a) Review and revision of goals and standards.
(b) Change in the assignment of tasks.

Question 5.
What is Controlling?
Answer:
Controlling is a process which analyses whether the actions are taken as planned are not. It evaluates the actions by comparing it with the standards.

Question 6.
Mention any fourareas of management where controlling is used.
Answer:
(a) Production
(b) Personnel
(c) Capital
(d) Expenditure

Question 7.
What is Deviation / Variation?
Answer:
Deviation means variation from the standard, it maybe negative, zero or positive.

Question 8.
How is the variation ascertained in Controlling.
(a) If the performance is less than standard it leads to negative variation.
(b) If the performance is equal to standard then there is a zero deviation.
(c) If the performance is more than standard it leads to positive variation.

III. Five Marks Questions and Answers

Question 1.
Explain the importance of Controlling.
Answer:
(a) Controlling helps for execution of plans: It is the only means to ensure that the plans are being properly implemented.
(b) It improves employee’s efficiency: A person is likely to put better efforts ifhe is aware that his performance will be evaluated
(c) It improves organisational efficiency Proper control and evaluation methods ensure organisational efficiency and effectiveness.
(d) It is a basis for future: Controlling provides feedback and reveals shortcoming in plans and helps in future decision making.
(e) It is a means of co-ordination: Controlling facilities co-ordination among all departments by giving unity of direction
(f) Delegation of authority: An effective system of control facilitates delegation of authority with the help of feedback.
(g) Control simplifies supervision: It helps in simplifying the task of supervision by pointing out significant deviation from standards.
(h) Management responsibility: This process starts at the top levels and goes to lower level, responsibility is created through assignments of activities. A person must exercise control over the performance of this subordinates.

Question 2.
What do you mean by standard in controlling? State the requirements of good standard.
Answer:
The standard is a yardstick consisting of a specific set of actions, relating to a particular job on which the actual results are to be evaluated.

The standards for control should satisfy the following requirements:
(a) Standards should be simple and easily understandable.
(b) Standards shuld be capable of achieving with reasonable effort and time.
(c) Standards should be flexibleand not rigid.
(d) It should be consistent with the overall objectives ofthe organisation.
(e) It should be set scientifically with the help of time and motion studies.
(f) It should be expressed in quantitative terms.
(g) If should be set in consultation with people who are responsible to achieve them.

Question 3.
Explain briefly the controlling process
Answer:
(a) Setting performance standards: Different types of standards are used for measuring the performance of individuals: control standards are derived directly from goals and objectives of the organisation.

Standards should satisfy the following requirements:

• Standards should be capable of achieving.
• It should be flexible not rigid.
• It should be expressed in quantitative terms.
• It should be set in consultation with people who are responsible to achieve them.

(b) Measurement of actual performance The next step is to measure the actual performance in terms of the same lines on which the standards are set.

(c) Comparing actual performance with standards
Control process is the comparison of actual performance with standards it involves.

• Finding out the extent of deviation.
• Identifying the causes of such deviations.

(d) Analysing deviations

• Deviation means variation from the standard. If the performance is less than standard it leads to negative variation.
• If the performance is equal to standard then there is a zero deviation.
• If the performance is more than standard it leads to positive variation.

(e) Taking Corrective Action Corrective action man involves:

• Review and revision of goals and standard.
• Change in assignment of tasks.
• Provision for additional resources or new facilities.
• Improvement in the selection of training of workers or reform in the techniques of direction.

IV. Ten Marks Questions and Answers

Question 1.
Define controlling. Explain the importance of controlling.
Answer:
According to Koontz and O’Donnell ‘controlling is the measuring and correcting of activities of sub-ordinates to ensure that events conform to plan.
(a) Controlling helps for execution of plans: It is the only means to ensure that the plans are being properly implemented.
(b) It improves employee’s efficiency: A person is likely to put better efforts ifhe is aware that his performance will be evaluated
(c) It improves organisational efficiency Proper control and evaluation methods ensure organisational efficiency and effectiveness.
(d) It is a basis for future: Controlling provides feedback and reveals shortcoming in plans and helps in future decision making.
(e) It is a means of co-ordination: Controlling facilities co-ordination among all departments by giving unity of direction
(f) Delegation of authority: An effective system of control facilitates delegation of authority with the help of feedback.
(g) Control simplifies supervision: It helps in simplifying the task of supervision by pointing out significant deviation from standards.
(h) Management responsibility: This process starts at the top levels and goes to lower level, responsibility is created through assignments of activities. A person must exercise control over the performance of this subordinates.

Question 2.
Explain the controlling process.
Answer:
(a) Setting performance standards: Different types of standards are used for measuring the performance of individuals: control standards are derived directly from goals and objectives of the organisation.

Standards should satisfy the following requirements:

• Standards should be capable of achieving.
• It should be flexible, not rigid.
• It should be expressed in quantitative terms.
• It should be set in consultation with people who are responsible to achieve them.

(b) Measurement of actual performance The next step is to measure the actual performance in terms of the same lines on which the standards are set.

(c) Comparing actual performance with standards
The control process is the comparison of actual performance with standards it involves.

• Finding out the extent of the deviation.
• Identifying the causes of such deviations.

(d) Analysing deviations

• Deviation means variation from the standard. If the performance is less than standard it leads to negative variation.
• If the performance is equal to standard then there is a zero deviation.
• If the performance is more than standard it leads to positive variation.

(e) Taking Corrective Action Corrective action man involves:

• Review and revision of goals and standards.
• Change in the assignment of tasks.
• Provision for additional resources or new facilities.
• Improvement in the selection of training of workers or reform in the techniques of direction.

Exercises

Short Answer Type Questions

Question 1.
Explain the meaning of controlling.
Answer:
Controlling means ensuring that activities In an organisation are performed as per the plans Controlling also ensures that an organisations resources are being used effectively and efficiently for the achievement of desired goals Controlling is, thus a goal oriented function. Controlling is a very important managerial function. Because of controlling manager is able to compare actual performance with the planned performance In order to control the activities at all levels manager needs to perform controlling function.

Question 2.
Planning is looking ahead and controlling is looking back comment.
Answer:
Planning and controlling are inseparable Planning is the primary function of every organisation it is the thinking process. Which means looking ahead or making plans that how desired goal is achieved in future thus it is called a formed looking function on the other hand controlling is a systematic function which measures the actual performance with the planned performance.

It compared and analysed the whole process of an organisation and take correcting actions. Thus, it is a backward looking function but the statement “Planning is looking ahead and controlling is looking back” is partially correct because it should be understood that planning is glided by past experiences and the corrective action initiated by control function which alms to Improve future performance Thus. Planning and controlling are both backward looking as well as a forward looking functions.

Question 3.
‘An effort to control everything may end up in controlling nothing’. Explain.
Answer:
It’s a well-known fact that “Jack of all master of none” when we start controlling everything It results In control of nothing because It is not possible at one time to control various activities as this process may neither be economical nor easy Control thus focus on KRAs (Key Result Areas). It means Instead of controlling all activities, control where the critical points goes wrong and by which organisation suffers Thus, KRAs are set as critical points and one should be aware that he has to control what.

Question 4.
Write a short note on budgetary control as a technique of managerial control.
Answer:
Budgetary control is a technique of managerial control In which all operations are planned and this will help us in knowing how much we have to spend in order to achieve the future result. It compared the actual result with budgetary standards. This comparison reveals the necessary actions to be taken so that the organisational objectives are accomplished.

Budgeting offers the following advantages

1. Budgeting focuses on specific and time bound targets.
2. Budgeting standards is a source of motivation to the employees they set the against which their performance will be appraised and thus, enables them to perform better
3. Budgeting helps in optimum utilisation of resources by allocating them according to the requirements of different departments.
4. It helps the management in setting standards.
5. Explain how management audit serves as an effective technique of controlling. Management audit is a technique which

Long Answer Type Questions

Question 1.
Explain the various steps involved in the process of control.
Answer:
Controlling is a systematic process involving following steps
1. Setting Performance Standards: The first step in the controlling process is setting up of performance standards. Standards are the criteria against which actual performance would be measured. Standards can be set In both quantitative as well as qualitative terms. Some of the qualitative standards are cost to be Incurred, product units to be produced, time to be spent in performing a task etc. Improving goodwill and motivation level of employees are examples of qualitative standards.

2. Measurement of Actual Performance: Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. Some of the techniques used for measuring the performance are personal observation. Sample checking performance reports etc.

3. Comparing Actual Performance with Standards: This step involves comparison of actual performance with the standards. Such comparison will reveal the deviation between actual and desired results. Comparison becomes easier when standards are set in quantitative terms. For instance, performance of a worker In terms of units produced in a week can be easily measured against the standard output for the week.

4. Analysing Deviations: Some deviations in performance can be expected in all activities. It is therefore, important to determine the acceptable range of deviations. Also, deviations in key areas of business need to be attended more urgently as compared to deviations in certain insignificant areas. Critical point control and management by exception should be used by a manager in this regard.

5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits. However, when the deviations go beyond the acceptable range, especially in the important areas. It demands immediate managerial attention so that deviations do not occur again and standards are accomplished. In case the deviations cannot be corrected through managerial action. The standards may have to be revised.

Question 2.
Explain the techniques of managerial control.
Answer:
The various techniques of managerial control may be classified into broad categories
1. Traditional Techniques: Those techniques which have been used by the companies for a long time now are traditional techniques. However. These have not become obsolete and are still being used by companies.
(a) Personal Observation:
Personal observation enables the manager to collect first-hand information. It also creates a psychological pressure on the employees to perform well as they are aware that they are being observed personally in their job.

(b) Statistical Reports:
Statistical analysis in the form of averages, percentages, ratios, correlation etc. Present useful information to the managers regarding performance of the organisation in various areas. Such information when presented in the form of charts. Graphs. Tables etc. enables the managers to read them more easily and allow a comparison to be made with performance in previous periods and also with the benchmarks.

(c) Break-even Analysis:
It is a technique used by managers to study the relationship between costs, volume and profits. It determines the probable profits and losses at different levels of activity. The sales volume at which there is no profit, no loss is known as break-even point. It is a useful technique for the managers as it helps in estimating profits at different levels of activities.

(d) Budgetary Control
It is a technique of managerial control in which all operations are planned in advance in the form of budgets and actual results are compared with budgetary standards. This comparison reveals the necessary actions to be taken so that organisational goals are accomplished. A budget is a quantitative statement for a definite future period of time for the purpose of obtaining a given objective. It is also a statement which reflects the policy of that particular period. It will contain figures of forecasts both in terms of time and quantities.

2. Modern Techniques: Modem techniques of controlling are those which are of recent origin and are comparatively new in management literature. They provide a new thinking on the ways In which various aspects of an organisation can be controlled
(a) Return on Investment:
Return on Investment (ROI) is a useful technique which provides the basic yardstick for measuring whether or not invested capital has been used effectively for generating reasonable amount of return. It can be calculated as under
Net income Sales
ROI = \(\frac{\text { Net income }}{\text { Sales }} \times \frac{\text { Sales }}{\text { Totalinvestment }}\)

ROI provides top management an effective means of control for measuring and comparing performance of different departments. It also permits departmental managers to find out the problem which affects ROI in an adverse manner.

(b) Ratio Analysis:
It refers to analysis of financial statements through computation of ratios. The most commonly used ratios are

• Ratios Liquidity ratios are calculated to determinedly short term solvency of business.
• Ratios which are calculated to determine the long term solvency of business are known as Solvency ratios.
• Ratios These ratios are calculated to analyse the profitability position of a business.
• Ratios they are calculated to determine the efficiency of operations based on effective utilisation of resources.

3. Responsibility Accounting
Responsibility’ accounting is a system of accounting in which different sections, divisions and departments of an organisation are set up as ‘responsibility centres’. The head of the centre is responsible for achieving the target set for his centre.

Responsibility centres may be of the following types
(a) Cost Centre: A cost or expense centre Is a segment of an organisation which managers are held responsible for the cost Incurred in the centre but not for the revenues e.g., production department
(b) Revenue Centre: A revenue centre is held responsible for generating revenue e.g. Marketing department.
(c) Profit Centre: A profit centre is responsible for both cost and revenue e.g., repair and maintenance department
(d) Investment Centre: An investment centre is responsible not only for profits but also for investments made in the centre in the form of assets.

4. Management Audit: Management audit refers to systematic appraisal of the overall performance of the management of an organisation. The purpose is to review the efficiency and effectiveness of management and to improve its performance in future periods. It is helpful in identifying the deficiencies in the performance of management functions

The main advantages are
(a) Helps to locate weaknesses.
(b) It helps to improve the control system.
(c) Ensures updating of existing managerial policies and strategies in the light of environmental changes.

5. PERT and CPM Programme evaluation and review technique and critical path method are important network techniques useful n planning and controlling

These techniques are especially useful in planning, scheduling and Implementing time bound projects Involving performance of a variety of complex, diverse and inter-related activities These techniques deal with time scheduling and resource allocation for these activities and aims at effective execution ofprojects within given lime schedule and structure of costs.

6. Management Information System MIS: It is a computer based Information system that provides information and support for effective managerial decision-making A decision maker requires up-to-date accurate and timely information. MIS provides the required information to the managers by systematically processing massive data generated in an organisation Thus, MIS IS an important communication tool for managers

Question 3.
Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?
Answer:
Control is an indispensable function of management without control the best of plans can go away. A good control system helps an organisation in the following way
1. Accomplishing Organisational Goals: The controlling function measures progress towards the organisational goals and brings to light the deviations If any and indicates corrective action. It thus. Guides the organisation and keeps it on the right track so that organisational goals might be achieved

2. Judging Accuracy of Standards a good control system enables management to verify whether the standards set are accurate and objective an efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.

3. Making Efficient Use of Resources by exercising control a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most efficient and effective manner.

4. Improving Employee Motivation A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It thus motivates them and helps them to give better performance

5. Ensuring Order and Discipline Controlling creates an atmosphere of order and discipline In the organisation It helps to minimise dishonest behaviour on the part of the employees by keeping a close check on their activities ‘

6. Facilitating Co-ordination in Action Controlling provides direction to all activities and efforts for achieving organisational goals each department implemented employee is governed by predetermined standards which are well coordination with one another this ensures that overall organisational objectives are accomplished. Although controlling is an important function of management.

It suffers from the following limitations also
1. Difficulty in Setting Quantitative Standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. This makes measurement of performance and their comparison with standards a difficult task. Employee morale, job satisfaction and human behaviour are such areas where this problem might arise.

2. Little Control on External Factors: Generally an enterprise cannot control external factors such as government policies, technological changes competition etc.

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

4. Costly Affair: Control is a costly affair as It Involves a lot of expenditure. Time and effort. A small enterprise cannot afford to install an expensive control system. It cannot justify the expenses involved. Managers must ensure that the costs of installing and operating a control system should not exceed the benefits derived from it.

Question 4.
Discuss the relationship between planning and controlling.
Answer:
Planning and controlling are inseparable, they are twins of management. A system of control pre-supposes the existence of certain standards. These standards of performance which serve as the basis of controlling are provided by planning. Once a plan becomes operational controlling is necessary to monitor the progress, measure it, discover deviations and initiate corrective measures to ensure that events conform to plans. Planning is clearly a prerequisite for controlling.

Controlling cannot be accomplished with planning. With planning there is no pre-determined understanding of the desired performance, planning seeks consistent, integrated and articulated programmes while controlling seeks to compel events to conform to plans.

Following are some behaviour that you and others might engage in on the job. For each item, choose the behaviour that management must keep a check to ensure an efficient control system.

Question 5.
Biased performance appraisals.
Answer:
To avoid biased appraisal, a performance appraisal should be taken by a committee of experts.

Question 6.
Using company’s supplies for personal use.
Answer:
The statement is not so expensive, so it can be ignored.

Question 7.
Asking a person to violate company’s rules.
Answer:
Strict and Immediate disciplinary action should be taken.

Question 8.
Calling the office to take a day off when one is sick.
Answer:
Mass bunking should not be allowed.

Question 9.
Overlooking boss’s error to prove loyalty.
Answer:
Secret suggestion box can be used to collect feedback about the boss for appraisal.

Question 10.
Claiming credit for someone else’s mom
Answer:
Performance records of employees to be maintained.

Question 11.
Reporting a violation on noticing it.
Answer:
If minor can be over looked

Question 12.
Falsifying quality reports.
Answer:
Strict quality control techniques should be used.

Question 13.
Takinglongerthannecessaiytodothejob.
Answer:
Time and motion study should be used to fix standard.

Question 14.
Setting standards in consultation with workers.
Answer:
The use of scientific techniques can help in fixing the most feasible and optimum standards.

Multiple Choice Questions

Question 1.
An efficient control system helps to
(a) accomplishes organisational objectives
(b) boosts employee morals
(c) judges accuracy of standards
(d) All of the above
Answer:
(d) Efficient control system helps to accomplish objectives. boosts employee morals, judges accuracy of standards, analyse deviations.

Question 2.
Controlling function of an organisation is
(a) forward looking
(b) back moral looking
(c) forward as well as backward looking
(d) None of the above
Answer:
(c) Controlling is forward looking because it does not end only by comparing past performance with standards. Controlling is backward looking because It postmortems all past activities to set future standards. Thus, controlling is both forward as well as backward looking.

Question 3.
Management audit is a technique to keep a check on the performance of
(a) company
(b) management of the company
(c) shareholders
(d) customers
Answer:
(b) The purpose of management audit is to review the efficiency and effectiveness of management of the company.

Question 4.
Budgetary control requires the preparation of
(a) training schedule
(b) budgets
(c) network diagram
(d) responsibility centres
Answer:
(b) Budgetary control is a technique in which all operations are planned in advance in the form of budgets.

Question 5.
Which of the following is not applicable to responsibility accounting?
(a) Investment centre
(b) Accounting centre
(c) Profit centre
(d) Cost centre.
Answer:
(b) Accounting centre is not applicable to responsibility accounting.

Case Problems:

A company M limited is manufacturing mobile phones both for domestic Indian market as well as for export. It had enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing.
Question 1.
Identify the benefits the company will define from a good control system.
Answer:
When company starts following a good control on operations, it leads to derive benefits which are

1. Helps in achieving desired goals.
2. Judging accuracy of operations.
3. Making efficient and effective use of resources.
4. Improving employee morale.
5. Ensuring proper flow of orders and the whole system is in discipline.
6. It facilitates the co-ordination and Improve the performance of every Individual.

Question 2.
How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained?
Answer:
Company relates Its planning with control in this line of business by implementing effective control system as this will help in two aspects planning makes controlling effective and efficient whereas controlling improves future planning because it is like a post-mortem of past activities to find out deviations from the standards and in order to ensure that its plans are actually implemented and targets are attained they will take the help from controlling process as it is a systematic process and it leads to following benefits
1. Setting Up of Standards: In this step. Company set some targets against which the actual performance is measured.

2. Measuring of Performance: In this step, company is able to measure the Performance and evaluating that what is actually done by the employees?

3. Compare Performance: After evaluating the actual result. Company compares the actual performance with the planned one this helps in knowing that the desired goal is achieved or not.

4. Analysing Deviations: this refers to the difference between actual and desired performance. It helps in knowing to the company that the deviation is positive or negative. It needs focus on which part rather than analysing whole.

5. Taking Corrective Measures Final step is to know the type of operation and trying to remove this deviation and in future it matches with the plans.

Question 3.
Give the steps in the control process that the company should follow to remove the problems it is facing.
Answer:
The Company should follow these steps in a systematic manner

1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective actions

Question 4.
What techniques of control can the company use?
Answer:
The Company should follow the modem techniques to control the system
1. ROI (Return on Investment) It is a useful technique for controlling the overall performance of a company. It indicates how resources are being used. Facilitates balanced use effectively of capital employed. Focuses on profits and relates them to capital Invested.

2. Responsibility Accounting under this technique, the organisation is divided into centres that are responsible for the overall growth of various departments.

Responsibility centres in the organisation are:
(a) Cost Centre Under this. One can check the production and operational cost.
(b) Revenue Centre Sales or marketing departments come under this; it is responsible for generating revenue.
(c) Profit Centre Profit = Revenue – Cost. It ensures the actual profit derived from the business.
(d) Investment Centre This centre ensures the optimum use of assets and it makes use of return on investment.

3. MIS (Management Information System): it is a control technique which provides information and support for effective managerial decision making. It provides accurate information to the managers, helps in planning, controlling, provides oost effective information and many more.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 7 Directing

Question 1.
It is a concerned with instructing, guiding, and inspiring people in the organization to achieve its objectives. Name it.
Answer:
Directing

Question 2.
Every manager from top executive to supervisor performs the functions of directing. Which characteristics of directing are referred here.
Answer:
Directing takes place at every level of management

Question 3.
It take place throughout the life of the organization irrespective of people occupying managerial positions.
Mention the characteristic of directing highlighted here and also explains two more characteristics.
Answer:
Directing is a continuous process

Question 4.
“Directing is the least important functions of management”. Do you agree with this statement? Give any two reasons in support of your Answer.
Or
“Directing is not at all reinsured in an organization” do you agree? Give any two reasons in support of your Answer.
Answer:
No, I do not agree with this statement and explain any two point of importance of directing.

Question 5.
“A supervisor is not at all reinsured in an organization” do you agree? Give any three reasons in support of your Answer.
Or
“The post of supervisor should be abolished in the hierarchy of managers”. Do you agree? Give any three reasons in support of your Answer.
Answer:
No, I do not agree because a supervisor performs number of important functions.

Question 6.
It means overseeing the subordinates at work. Which element of directing is referred to?
Answer:
Supervision

Question 7.
Supervisor acts as a link between workers and management. How?
Answer:
Supervisor conveys management ideas to the workers on hand and workers problems to the management on the other

Question 8.
Which element of directing helps in inspiring subordinates to give their best to the organization. Explain any three points of importance of this element.
Answer:
Explain importance of motivation

Question 9.
Under these incentives schemes employees are offered company shares at a set price which is lower than market. Which incentive scheme is mentioned here? Also explain three more financial incentives.
Answer:
Explain co-partnership/ stock option scheme.
Other financial incentives are:

1. profit sharing
2. bonus
3. commission etc.

Question 10.
To satisfy the social and psychological needs which type of incentives are needed? Explain four types of such incentives.
Answer:
Non-monitory incentives are needed to satisfy the social and psychological needs. Type of non-monitory incentives are:

1. status
2. career development opportunity
3. organizational climate
4. job security
5. assignment of challenging job etc.

Question 11.
It is defined as the process of influencing other people to work willingly for group objectives. Mention this element of directing.
Answer:
Leadership

Question 12.
Name the type of formal communication in which the persons of the departments one at a higher position other at lower, communication with each other. Also state the problem which may arise in this type of communications.
Answer:
This type of communication is diagonal communication and state it’s any two limitations

Question 13.
Name the type of written communicatIon ¡n which two departmental heads communicate with each other. Why is this type of communication reinsured?
Answer:
In horizontal communication two departmental needs communicate with each other. Such communication generally relates to the officially accepted and recognized activities of the organization

Question 14.
Ramesh and suresh are working in the same organization but in different departments. One day at lunch time suresh informed ramesh that due to computerization many people are going to be retrcnched soon from the
organization.name, which type of communication of this. State any two limitations of this type of communication.
Answer:
It is an example of informal communication and also explain any two limitations Of informal communication

Question 15.
There are some barriers in communications, which are concerned with encoding and decoding of message. State any three such barriers.
Answer:
It refers to semantic barriers to communication:-

1. Symbols with different meanings
2. Badly expressed message
3. Unclarified assumptions

Question 16.
There are some barriers to 4a communications which are c&iaces with organizational structure regulations. State any three barriers.
Answer:
Organizational barriers:

1. Organizational policy
2. Status
3. rules and regulations

Question 17.
There are some barriers in communication which are concerned with the state of mind of both the sender and the receiver. State any three such barriers.
Answer:
It refers to psychological barriers:

1. Premature evaluation
2. Loss by transmission and poor attention
3. Lake of attention

Question 18.
Name the process of exchanging ideas, facts and information?
Answer:
Communication.

Question 19.
Name the element of directing under which sub-ordinates share his views with his superior.
Answer:
Communication.

Question 20.
Which type of communication takes place between superior sub-ordinates in the office?
Answer:
Formal Communication.

Question 21.
Name and explain the last steps of communication process.
Answer:
Feedback ‘it is the response given to sender for the message sent.

Question 22.
Name the grapevine network in which an individual communicate with only those people whom he trusts?
Answer:
Cluster grapevine network.

Question 23.
The employees of Infosys Ltd. have formed a dramatic group for their recreation. Name the type of an organization. Explain any three limitations of it.
Answer:
Informal organizations and explain any three limitations.

I. One Mark Questions and Answers

Question 1.
What is Directing?
Answer:
It is concerned with managing members of an organisation.

Question 2.
Mention any one importance of Directing.
Answer:
It helps in better co-ordination.

Question 3.
Mention any one of the elements of Directing?
Answer:
Delegation of work.

Question 4.
What is Supervision?
Answer:
It is concerned with observing the work of sub-ordinates.

Question 5.
What is leadership?
Answer:
The process of influencing sub-ordinates to work and achieve organisation goals.

Question 6.
Mention any one of the importance of Supervision?
Answer:
It acts as a link between workers and management.

Question 7.
From which language the word motivation is derived from.
Answer:
It is derived from Latin word ‘movere’ which means to move.

Question 8.
Mention any one Maslow’s hierarchy of needs.
Answer:
Physiological needs.

Question 9.
What is communication?
Answer:
It is exchange of information by two or more persons.

Question 10.
Mention any one importance of Communication.
Answer:
It increases productivity.

Question 11.
Mention any one type of Communication.
Answer:
Formal Communication.

Question 12.
Mention any one of the barriers to effective communication.
Answer:
Physical barriers.

Question 13.
Mention any one of two solutions to overcome barriers of Communication.
Answer:
Communication should be done in a language understood by both sender and receiver.

Question 14.
Which type of communication is called Grapevine Communication.
Answer:
Informal Communication.

Question 15.
State any one element of direction.
Answer:
Delegation.

Question 16.
Name any one need of human beings as stated by Maslow.
Answer:
Physiological Needs.

Question 17.
State any one style of leadership.
Answer:
Autocratic leadership.

Question 18.
Write any one quality of a successful leader.
Answer:
Confidence.

Question 19.
Name any one barrier of communication.
Answer:
Physical Barriers like distance.

Question 20.
State any one way to overcome the barriers to effective communication.
Answer:
Clarity of ideas.

II. Two Marks Question and Answers

Question 1.
Define Direction.
Answer:
According to Koontz and O’Donnell ‘Direction is the interpersonal aspect of managing by which sub-ordinates are led to understand and contribute effectively and efficiently to the attainment of enterprise objectives’.

Question 2.
State any two elements of Direction.
Answer:
(a) Delegation – Which involves issuing direction to sub-ordinates.
(b) Supervision – It is concerned which observing the work of sub-ordinates.

Question 3.
What is Supervision?
Answer:
It is an act of overseeing, management by overseeing keeps an eye on sub-ordinates to make sure they are performing as required or not.

Question 4.
Define Motivation.
Answer:
According to Koontz and O’Donnell. ‘Motivation is a general term applying to entire class of drives, needs, wishes and similar forces’.

Question 5.
Name any two styles of Leadership.
Answer:
(a) Autocratic leadership
(b) Democratic leadership

Question 6.
Define Communication.
Answer:
According to George Terry, ‘Communication is a exchange of facts, ideas, opinions or emotions by two or more persons.

Question 7.
What is Formal Communication.
Answer:
A type of verbal presentation or document intended to share information using formal channels of the organisation.

Question 8.
What is grapevine communication?
Answer:
Informal communication or grapevine is an informal channel of business communication. It is called so, because it stretches throughout the organisation in all directions irrespective of authority levels.

Question 9.
Give the meaning of sematic barreirs of communication?
Answer:
Sematic barriers: The use of difficult and multiple uses of languages, words, figures, and symbols create sematic barriers.

Question 10.
What is Directing?
Answer:
It is one of the most important functions of management which is concerned with managing members of an organisation.

Question 11.
Mention any two importance of Directing.
Answer:
(a) It ensure efficient use of resources.
(b) It helps to maintain discipline in the organisation.

Question 12.
Mention any two importances of Supervision.
Answer:
(a) It helps in planning and organising work.
(b) It acts as a vital link between workers and management.

Question 13.
What is Motivation?
Answer:
It is that element of directing which helps in converting the ability to work in workers to willingness to work.

Question 14.
Mention any two stages of Maslow’s Hierarchy of needs.
Answer:
(a) Physiological needs
(b) Safety needs.

Question 15.
What is Leadership?
Answer:
It is a quality of a character and personality giving apersonthe ability to gain the confidence of others and lead them.

Question 16.
Define Leadership?
Answer:
According to Koontz and O’Donnell, ‘Leadership is the ability of a manager to induce sub-ordinates to work with confidence and goal.’

Question 17.
Mention any two qualities of a successful leader.
Answer:
(a) Positive attitude
(b) Emotional stability.

Question 18.
What is Communication?
Answer:
It is an act of conveying information, ideas, opinions from one person to another person.

Question 19.
Mention any two importance of Communication.
Answer:
(a) It ensures smooth and uninterrupted working of an organisation.
(b) It helps in effective decision making.

Question 20.
Mention any two types of Formal Communication.
Answer:
(a) Downward Communication.
(b) Upward Communication.

Question 21.
What is Informal Communication?
Answer:
A casual form of information sharing typically used in personal conversations with friends and family members.

Question 22.
Mention any two barriers of Effective Communication.
Answer:
(a) Physical Barriers.
(b) Organisational Barriers.

III. Five Marks Questions and Answers

Question 1.
Explain the importance of motivation.
Answer:
Importance of Motivation:
(a) Productive use of resources: Modem organisations work through physical, financial and human resources. The utilisation of these resources depends on the willingness of people to work. Motivation enables people to convert physical and financial resources into useful products. It helps management to get the best out of human and non – human resources.

(b) Increased efficiency and output: Motivation enables to people to work enthusiastically. Performance is the product of not only the ability to do a task but the willingness to do it with zeal and enthusiasm. Motivation bridges the gap between the overall efficiency and output and helps in reducing the cost of operation.

(c) Achievement of goals: Motivation causes goal directed behaviour. It helps people to move in a desired direction and earn rewards. If people are not properly motivated no useful purpose can be served by planning, organising and staffing functions.

(d) Stability in work force: Attractive motivational schemes satisfy the needs of employees. As a result their commitment to the organisational work increases. This helps to reduce employee turnover and absenteesim from work.

(e) Development of friendly relations: Motivating employees through attractive rewards, promotional opportunities etc. encourages then to consider the well being of the firm as their own. This helps in developing cordial relations between the management and workers.

Question 2.
Explain briefly the importance of Supervision.
Answer:
(a) A supervisor guides the workers in doing a job.
(b) He helps in planning and organising the work.
(c) He acts as a vital link between workers and management.
(d) He motivates workers and procures maximum efficiency from them.
(e) He compares the actual performance of workers with the standards and help them identify their weakness.
(f) It helps in identifying the capabilities of workers and assign work accordingly.

Question 3.
Explain the types of Leaderships.
Answer:
(a) Autocratic Style: This type of leadership includes a leader who decides policies for a group all by himself without consulting anybody.
(b) Democratic Style: It is exactly the opposite style of autocratic style, here a leader takes decision for a group after consulting all and selecting the best alternative available.
(c) Bureaucratic Style: Here the leader is not concerned with people but he is concerned with following the policies of the organisation before taking a decision.
(d) Free Run Style: Here the leader entrusts the decision making authority to his sub-ordinates, leader hardly makes any contribution in this style.
(e) Executive Style: Here the leader develops a strategy after concerning the situation and also people who are involved.

Question 4.
Write the meaning and importance of communication
Answer:
Communication is an act of conveying information, ideas, opinions from one person to another.

Importance of Communication:
(a) Co-ordination: It is important to achieve a common goal in a organisation and communication helps in achieving it.
(b) Smooth Working: It ensures smooth and uninterrupted working in an organisation.
(c) Effective Decision Making: It helps in making sound and effective decisionmaking.
(d) Managerial Efficiency: all the functions of management cannot be discharged properly without communication.
(e) Co-operation: among workers is possible only when there is a formal or informal communication between them.
(f) Effective Leadership: one who has mastered communication skill becomes a successful leader,
(g) Increases Productivity: A good system of communication helps in achieving maximum productivity.
(h) Morale Building: It builds the morale of workers and motivates better participation.

Question 5.
Explain the advantages of good communication.
Answer:
The advantages of good communication are:
(a) Co ordination: Communication helps in coordinating the activities of the employees of an organisation in achieving organisational objectives.

(b) Effective decision making: A good communication system enables correct and complete information to be passed on the the top management. This assists the management in their decision making process and ensures that the right decision taken.

(c) Managerial Efficiency: Management is able to carry out its functions of planning, organising, control, etc. only if the communication system is strong. So good communication is essential to increase mangement efficiency.

(d) Increases Productivity: A good system of communication helps the management to achieve maximum productivity with minimum cost, elimination of waste, reduction o f cost etc..

(e) Co operation: Co – operation among workers is possible only when there is an exchange of information between individuals and groups and between management and employees. This promotes industrial peace and maximises production.

(f) Moral Binding: An effective system of communication builds good moral and improves human
relations.

Question 6.
Explain the importances of Directing.
Answer:
(a) It involves delegation of work and assiging responsibilities.
(b) It ensures optimum utilization of resources.
(c) It is an essential element for effective supervision, motivation, leadership and communication.
(d) It provides clarity of work and ensures efficiency.
(e) It maintains discipline in organisation and ensures smooth functioning of work.

Question 7.
Mention the elements of Direction.
Answer:
(a) Delegation – means giving instructions to sub-ordinates.
(b) Supervision – It is concerned with observing the work of sub-ordinates.
(c) Leadership – It is concerned with influencing sub-ordinates to work and achieve organisational goals.
(d) Motivation – It helps in converting the ability to work of employees to willingness to work.
(e) Communication – It is a exchange of infoirnation by two or more persons.
(f) Co-ordination – It implies proper integration of activities of various organisations members.

IV. Ten Marks Questions and Answers

Question 1.
Explain the importance of direction as a function of management.
Answer:
Importance of Directing
(a) Action Oriented: Directing is action oriented. It involves delegation of authority and assigning of responsibilities.
(b) Integration of efforts: It integrates efforts of employees at various levels by proper delegation of authority and responsibility which in turn helps in achieving organisationsl objectives.
(c) Efficient use of resources: Directing involves the bringing in proper methods of doing work. It helps in the efficient use of resources of the organisation.
(d) Essential element: Directing is essential for effective supervision, motivation, leadership and communication
(e) Efficiency: Proper direction will help the employees to achieve their best as it provides clarity or work. It ensures efficiency.
(f) Flexibility: Directing helps to bring flexibility in the organisation. It convinces the subordinates to accept the changes which the management intends to bring in future.
(g) Clarity: Directing gives clarity in authority and responsibility, this helps to minimise the ambiguity in the work.
(h) Discipline: It helps to maintain the discipline in the organisation, which results in smooth functioning of the work.
(i) Co – ordination: It co ordinates different activities of the management.
(j) Creation of Leaders: Good direction create good leaders.

Question 2.
Explain how supervision plays an important role as an element of direction.
Answer:
Supervision is concerned with initiating actions, putting the plans and decisions by stimulation of the human resources of the enterprises. Thus, it is clear that supervision , consists of the process and technique involved in issuing instructions and conforming the operations are carried out as planned. Importance of Supervision

Importance of Supervision can be explained as below:
(a) Issue of orders and instructions: A supervisor guides the workers in doing a job and helps them in clearing their doubts.
(b) Planning and organising the work: Supervision helps in planning and organising the work. It guides the subordinates. It lays down production targets and determines the procedures for doing the work.
(c) Vital link between workers and management: Supervision represents both workers and the management. It acts as a link between them. It communicates the policies of the management to workers and also provides the feedback of the workers to the management.
(d) Motivating subordinates: It inspires teamwork and secures maximum co – operation from the workers.
(e) Feedback to workers: It compares the actual performance of the workers with the standards and helps in identifying the weaknesses of the workers. As a result workers can improve their performance in future.
(f) Proper assignment of work: Supervision helps to identify the capabilities of workers and assigns the work accordingly.
(g) Maintain discipline: Supervision is directly responsible for enforcing the rules and regulations of the organisation, which helps to maintain discipline.

Question 3.
Explain Maslow’s Hierarchy of needs.
Answer:
(a) Physiological needs: It includes basic needs such as food, shelter, clothing etc., which are the most powerful motivators.
(b) Safety needs: After satisfaction of physiological needs, needs like job security insurance etc to cover risks arises.
(c) Social needs: It includes belongingness, association, acceptance, friendship and love.
(d) Esteem needs: Self respect is a key to such need and respect comes from being a accepted, recognition within the group and community.
(e) Self actualization needs: It includes the need to realise one’s capabilities and potentials by achieving specific goals.

Question 4.
Explain the qualities of a successful Leader?
Answer:
(a) Honesty: A successful leader should be honest.
(b) Enthusiastic: Asuccessful leader should have enthusiasm to face challenges.
(c) Good Personality: A good leader should have tidy and good appearance.
(d) Ability of Delegation: The success of leadership depends on the ability of a leader to assign work to his sub-ordinates.
(e) Communication: He should be very good at communication to sub-ordinates.
(f) Confidence: A self confident person can only create confidence in sub-ordinates.
(g) Initiative: A quality of initiativeness describes the quality of willingness to take risks.
(h) Positive Attitude: A good leader should have a positive set of mind for achieving goals even in difficult situations.
(i) Passion: He should be passionate towards the work he does.
(j) Creativity: Good leader should search for different methods of doing work effectively in order to avoid foredom.
(k) Emotional Stability: He should have control over his emotions and sentiments.
(l) Generosity: He should be able to build a rappo with his sub-ordinates and should be generous enough to praise good work of sub-ordinates.

Question 5.
What are the barriers to Effective Communication? Explain.
Answer:
1. Physical Barriers: It includes barriers which is caused by materialistic things like machines, plant layout and equipments.
(a) Distance – Communication obstructed by long distance.
(b) Noise – Communication obstructed by noise of machineries.
(c) Physical Management: Communication obstructed by physical arrangement of sources like men, money, material and machine.

2. Semantic Barriers:
It includes barriers which are caused by inability to understand a language or signs,
(a) Language – one of the most important barriers found all over the world, there will be a problem in communication if the sendei and receiver donot understand same language.
(b) Jargons: People often find it difficult to understand technical and unfamiliar terms drawn from literature.

3. Organisational Barriers: There arises from the organisational goals, regulations, structure and culture.
(a) Poor Planning: It refers to inability to design a proper plan.
(b) Organisational Distance: Distance between sender and receiver. .
(c) Timing: often good communication can be obstructed if not done on time.

4. Psychological Barriers: These arises only due to lack of interest in people for whom communication is meant.
(a) Perception: It depends on how the receiver understands it.
(b) Filtering: In downward and upward movement of communication there is a possibility of information getting filtered.
(c) Emotions: It creates a major barrier to communication.
(d) Viewpoint: Where the information is not clearly understood the receiver interprets it the way he wants.

Question 6.
Explain the way of overcome the barriers of Communication?
Answer:
(a) The person sending the communication should be very clear in what he wants to say.
(b) There should be proper structure for sending communication.
(c) It should not be sent by keeping the ability of own to understand but also understand the ability of the receiver.
(d) Suggestions should be welcomed from all comers before preparing communication planning.
(e) Should be aware of language, tone and content of message before sending.
(f) The need and interest of receiver should be kept in mind and it should be effective.
(g) Proper feedback should be collected to understand whether the receiver has received the message properly or not.
(h) It should be in accordance with the objectives, policies and programmes of the organisation.
(i) A follow up communication should be established in order ensure that the communication has been established as desired.
(j) Basic essence of communication is that both sender and receiver should be good listeners.

Question 1.
Draw the chart of Maslow’s Theory of Hierarchy of Needs.
Answer:

Question 2.
State any 10 qualities of a Successful Leader.
Answer:
(a) Honesty
(b) Initiatives
(c) Enthusiastic
(d) Positive Attitude
(e) Good Personality
(f) Emotional Stability
(g) Good Communication
(h) Generosity
(i) Confidence
(j) Creativity

Exercises

Short Answer Type Questions

Question 1.
Distinguish between leaders and managers.
Answer:
Difference between Managers and Leaders

Question 2.
Define Motivation.
Answer:
Motivation is defined as inducing. inspiring and stimulating a person to perform with their best ability, to accomplish the goal. It depends upon satisfying the needs of people. In the words of Farland, “motivation is the way in which urges, desires, aspirations or needs, direct control and explain the behavior ofhuman beings”.

Question 3.
What is informal communication?
Answer:
The social interactions, gossips, friendly talks and non-official matters which are discussed among different members of organisation who are not officially recognised is known as informal communication or we can say the communication that takes place without following the formal guidelines of communication Is said to be informal communication. This type of communication establishes the personal relationship among employees. It is flexible, dynamic and no records of information communication are maintained under this Informal communication system is generally referred to as “Grapevine”.

Question 4.
What are semantic barriers of communication?
Answer:
While communicating a message, misrepresentation of communication causes misunderstanding on account of use of wrong words lack of vocabulary skills, faulty translations, different interpretations is known as semantic barriers. It is concerned with the problems which arises in the process of encoding and decoding of message into words or impressions.

Main causes of semantic barriers are listed below

• Badly expressed message
• Symbols with different meanings
• Faulty translations
• Unclarified assumptions
• Technical jargon
• Body language and gesture decoding

Question 5.
Who is a supervisor?
Answer:
Supervision means instructing, guiding, monitoring motivating and observing the activities of employees from over and above. The person who is performing the work of supervision is known as supervisor. Supervisor is the link between management and subordinates. He is the person who translates the policies and plan of management to the subordinates and revert back the complaint, suggestions and feedback of subordinates to management.

Question 6.
What are the elements of directing?
Answer:
Directing comprises of four elements

1. Supervision: It can be understood as the process of guiding and instructing the efforts of employees.
2. Motivation: The process of encouraging the employees in order to help them in achieving the desired goals is known as motivation
3. leadership: It is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals.
4. Communication: It is the process of exchange of ideas, Views, facts, feelings etc between or among people to create common understanding.

Question 7.
Explain the process of motivation.
Answer:
Motivation process is based on how unsatisfied human need gets satisfied and results in reduction of tension.
The steps of the motivation process are as follows

1. Unsatisfied Need: The need of an individual which is not satisfied.
2. Tension Unsatisfied: need creates tension
3. Drive: This tension creates drive and an Individual starts looking for alternatives to satisfy the need.
4. Search Behaviour: Then he starts behaving as per chosen option.
5. Satisfied Need: after opting the chosen behaviour his need got satisfied.
6. Reduction of Tension: The fulfilment of need results in relieving of tension.

Question 8.
Explain different networks of grapevine communications.
Answer:
Grapevine communications may follow different types of network they are
1. Single Strand Network Each person communicates to the other in sequence.

2. Gossip Network Each person communicates with all on non-selective basis.

3. Probability Network the Individual communicates randomly with other Individual

4. Cluster Network The individual communicates with only those people whom he trusts

Long Answer Type Questions

Question 1.
Explain the principles of Directing.
Answer:
Principles of Directing:
1. Maximum Individual Contribution: This principle emphasises that directing techniques must help every employee to contribute to his maximum potential in order to achieve the organisational goals. It should help In bringing out unused or dormant potential of an employee to improve the efficiency of the organisation, e.g., suitable and appropriate Incentives should be given to encourage employees to improve their performance.

2. Harmony of Objectives: Most of the lime It happens that the organisational objectives and Individual objectives move in opposite directions, The person In charge of a team of workers should guide and Instruct his team In such a manner that they realise the Importance Of both the objectives.

3. Unity of Command: This principle insists that a person in the organisation should receive Instructions from one superior only. If Instructions are received from more than one, it creates confusion, conflict and disorder In the organisation Adherence to this principle ensures effective direction.

4. Appropriateness of Direction Technique According to this principle: Appropriate motivational and leadership technique should be used while directing the people based on subordinate needs capabilities. Attitudes etc., e.g.. Combination ofboth monetary and non-monetary Incentives should be used to elicit the right response from the employees.

5. Managerial Communication: Directing should convey clear Instructions to create total understanding to subordinates through proper feedback the manager should ensure that subordinate understands his instructions clearly.

6. Use of Informal Organisation: Informal groups or organisations exist within every formal organisation and every manager should spot and make use of such organisations for effective directing

7. Leadership: While directing the subordinates managers should exercise good leadership as it can influence the subordinates positively without causing dissatisfaction among them

8. Follow Through: Mere giving of an order is not sufficient Managers should follow It up by reviewing continuously whether orders are being implemented accordingly or any problems are being faced by the subordinates.

Question 2.
Explain the qualities of a good leader. Do the qualities alone ensure leadership success?
Answer:
Some of the qualities required by all leaders are
1. Physical Features: It is believed that good physical features attract people. Height, weight, health, appearance determine the physical personality of an individual.

2. Knowledge: A good leader should have required knowledge and competence Only such person can Instruct subordinates correctly and Influence them

3. Integrity: He should be a role model to other regarding the ethics and values A leader should possess high level of integrity and honesty.

4. Initiative: A good leader never waits for opportunities to come to his way rather he grabs the opportunity and use it to the advantage of organisation.

5. Communication and Motivation Skills: A leader should be a good communicator. He should have the capacity to explain his Ideas and make the people to understand his Ideas. He should also understand the needs of people and motivate them through satisfying their needs.

6. Self Confidence: A high level of self-confidence is very important for any leader He should not lose his confidence even in most difficult times A person who is not himself confident will never be successful in providing confidence to his followers

7. Decisiveness Leader: Should be able to take decisions while managing the work. Once he is convinced about a fact, he should be firm and should not change opinions frequently.

8. Social Skills: A leader should be sociable and friendly with his colleagues and followers. He should understand people and maintain good human relations with them. Many times, the success of an organisation is attributed to the leader, but due credit is not given to the followers. Many followers related factors like their skills, knowledge, commitment, willingness to co-operate team spirit etc. make a person an effective leader It is said that followers make a person, a good leader by acceptance of leadership. Therefore both followers and leaders are playing an vital role in leadership process.

Question 3.
Discuss Maslow’s Need Hierarchy theory of motivation.
Answer:
Maslow’s need Hierarchy; Theory of Motivation is a psychological term and the needs of an employee plays an important role In motivation. In order to study motivation various researchers developed theories on them. Among them Abraham Maslow’s need Hierarchy theory is considered of worth.

As per him, there exists a Hierarchy of five needs these are
1. Basic Physiological Needs; These needs are most basic in the hierarchy and corresponds to primary needs. Food, clothing shelter are a few examples of this type of need Basic salary helps to fulfil these needs

2. Safety/Security Needs When the basic needs satisfied, people start thinking of future. These needs provide security and protection from

3. Affiliation/Belonging Need These needs refer to human feeling ofbelongingness. We all as human beings look forward to being accepted In the society e.g.. friendship.

4. Esteem Needs These include factors such as self-respect, autonomous status, attention An individual wants a respect and recognition from others in this need

5. Self-actualisation Needs It is the highest level of need in the hierarchy It refers to the drive to become what one is capable of becoming The needs include growth self-fulfilment and achievement of goals etc.

Question 4.
What are the common barriers to effective communication suggest measures to overcome them?
Answer:
Common Barriers to Effective Communication Managers in all organisations lace problems due to communication barriers these barriers may prevent a communication or filter part of it or carry Incorrect meaning due to which misunderstanding may be created. Therefore all managers should take some steps to overcome these barriers.

There are broadly four groups of barriers
1. Semantic Barriers Semantic barriers are concerned with problems and obstructions In the process of encoding and decoding of message into words or -expressions Normally such barriers result on account of use of wrong words, faulty translations, different interpretations etc.

These are discussed below
(a) Badly Expressed Message: Sometimes the message is not communicated correctly by the manager because of inadequate vocabulary, usage of wrong words. Omission of needed words etc.

(b) Symbols with Different Meaning: A word may have several meanings Receiver has to perceive one such meaning for the word used by communicator.

(c) Faulty Translations sometimes while translating If incorrect translation is done due to poor command over both the languages then meaning of the message changes This leads to cause different meanings to the communications.

(d) Unclarified Assumptions: Sometimes communication may have certain assumptions which are subject to different interpretations the one should always clear the meaning of what he is instructing the worker to do, so that the worker has no doubts in his mind.

(e) Technical Jargon: Sometimes specialists may use technical words in their communication by which the receiver IS not aware Therefore, they may not understand the complete conversation.

(f) Body Language and Gesture Decoding: The body movement and body gestures plays an important role in conveying the message. If there is no match between what is said and what is expressed In body movements, communications may be wrongly perceived.

2. Psychological Barriers: Emotional or psychological factors acts as barrier to communications e.g., a person who is warned cannot understand what is being told.

Some of the psychological barriers are
(a) Premature Evaluation: Sometimes people evaluate the meaning of message before the sender completes his message. Such premature evaluation may be due to preconceived notions.
(b) Lack of Attention If the mind is pre-occupied then the result is non-listening of message by receiver act as a major psychological barrier.
(c) Loss by Transmission and Poor (Retention): When message passes through various levels. Successive transmission of message results in loss of information. It happens mostly with oral communication. Also people cannot retain the information for a long time if they are inattentive or not interested.
(d) Distrust: If the communicator and communicate do not believe on each other. They cannot understand each other’s message in its original sense as they are not giving importance to the information exchanged.

3. Organisational Barriers: The factors related to organisation structure, authority relationships, rules and regulations may sometimes act as barriers to effective communication some of these barriers are
(a) Organisational Policy: If the organisational policy is not supportive to free flow of communication, it may hamper effectiveness of communications.
(b) Rules and Regulations: Rigid rules and cumbersome procedures maybe a hurdle to communication similarly, communi cation through prescribed channel may result in delays.
(c) Status: Status of superior may create psychological distance between him and his subordinates the people working at higher level may not allow his subordinates to express their feelings freely.
(d) Complex Organisational: Structure In an organisation where there are number of managerial levels, communications gets delayed and distorted as number of filtering points are more
(e) Organisational Facilities: For smooth clear and timely communication proper facilities are required like frequent meetings suggestion box. Internet connection, Intercom facility. Lack or ineffectiveness of these facilities may create communication problems

4. Personal Barriers: The personal factors of both sender and receiver may exert influence on effective communication.
Some of the personal barriers are
(a) Fear of Challenge to Authority: If a superior feels that a particular communication may affect his authority negatively then he/she may not speak it out clearly and openly.
(b) Lack of Confidence of Superior: on his Subordinate If superiors do not have confidence on their subordinates, they may not seek their advice or opinions.
(c) Unwillingness to Communicate: Sometime subordinate or may not be prepared to communicate with their superiors if they think that it may adversely affect their interests.

(d) Lack of Proper Incentives: If there is no reward for communication then employees may not be motivated to communication e.q., if there is no reward or appreciation for a good suggestion, the subordinate may not be willing to offer useful suggestions again Some measures which can be adopted by organisations to improve communications are

• Clarify the Ideas Before Communi cation: The entire message to be communicated should be studied in depth analysed and stated in such a manner that It is clearly conveyed to subordinates. The message should be encoded In simple language which is understandable.
• Communication According to the Needs of Receives: All managers should be aware of the understanding level

5. Co-Partnership/Stock Option: Under these Incentives schemes, employees are offered company shares at a set price which is lower than market price The allotment of shares creates a peeling of ownership to the employees and makes them to contribute more for the growth of the organisation.

6. Retirement Benefits: Several retirement benefits such as provident fund, pension and gratuity provide financial security to employees after their retirement. This act as an Incentive when they are In serves in the organisation.

7. Perquisites: In many companies’ perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education etc. over and above the salary.

These measures help to provide motivation to the employees/managers

Non-financial Incentives: Incentives that help in fulfilling our psychological emotional and social needs are known as non-financial incentives some of the non-financial Incentives are
1. Status: Status means ranking or high positions In the organisation. Whatever power position prestige an employee enjoys in the organisation are indicated by his status Psychological, social and esteem needs of an Individual are satisfied by status given to their job.

2. Organisational Climate: This indicates the characteristics which describe an organisation and distinguish one from the other. Individual autonomy, reward orientation, consideration to employees, etc. are some of the positive features of an organisation. If managers try and include more of these In an organisation helps to develop better organisational climate

3. Career Advancement Opportunity: Managers should provide opportunity to employees to improve their skills and be promoted to the higher level Jobs appropriate skill development programmes and sound promotion policy Will help employees 10 achieve promotions. Promotions have always worked as tonic and encourages employees to exhibit improved performance

4. Job Enrichment: Job enrichment is concerned with designing jobs that include greater variety of work contentment require higher ofknowledge and Skill, give workers more autonomy level and responsibility and provide opportunity for personal growth and a meaningful work experience

5. Employee Recognition Programmes: Recognition means acknowledgement With a show of appreciation. When such appreciation is given to the work performed by employees, they feel motivated to perform/work at higher level, eg-,
(a) Congratulate the employee
(b) Displaying names of star performers
(c) Installing awards
(d) Distributing mementos

6. Job Security: Employees want their job to be secure. They want certain stab lily about future income and work so that they ‘ do not feet warned on these aspects and work with greater zeal There is only one problem with this Incentive i.e., when people feel that they are not likely to lose their jobs. They may become relaxed.

7. Employee Participation: It means Involving employees In decision making of the Issues related to them. In many companies, these programmes are In practice In the form of joint management committees. Work committees canteen committees etc.

8. Employee Empowerment: Empowerment means giving more autonomy and powers to subordinates. Empowerment makes people feel that their Jobs are important. This feeling contributes positively to the use of skills and talents in the Job performance,

Question 5.
The workers always try7 to show their inability when any new7 work is given to them. They are always unwilling to take up any kind of work. Due to sudden rise in demand a firm wants to meet excess orders. The supervisor is finding it difficult to cope up with the situation. Suggest ways for the supervisor to handle the problem.
Answer:
The supervisor can take help of monetary incentives to motivate the workers Their wages can be linked to productivity they can earn more incentives besides wages by producing goods. Supervisor should also play the role of a good leader and encourage them to accept any kind of work as it would lead to Increase exposure to the industry and better job prospects.

Question 6.
Workers of a factory often come to the production manager with the grievances. .The production manager finds himself overburd ened w ith so many tasks advise a way to relieve the production managers.
Answer:
To overcome the problem the production manager should take the folio wing measures:

1. Arrange necessary training programmes
2. Prepare a work schedule
3. Recommend the cases of the workers for promotion, rewards. Transfer, punishmentetc.
4. Proper availability of materials. Machines and tools for the workers
5. Delegate sum of authorities.

Question 7.
In an organisation employees always . feel they are under stress. They take last initiative and fear to express their problems before the manager. What do you think is wrong with the manager?
Answer:
The manager should adopt more friendly approach towards the workers. The manager should encourage a system of two-way communication; provide an outlet to workers to share their feelings, suggestions and problems.

Question 8.
In an organisation all the employees take things easy and are free to approach anyone for minor queries and problems. This has resulted in everyone taking to each other and thus resulting in inefficiency in the office. It has also resulted in- loss of secrecy and confidential information being leaked out. What system do you think the manager should adopt to improve communication?
Answer:
Excess of everything is bad. More use of Informal communication is resulting in this problem. A proper chain of command should be established. Only the necessary information should be passed through chain of command the employees will not be allowed to communicate at all levels. This Will save time and more discipline.

Multiple Choice Questions

Question 1.
Which one of the following is not an element of direction?
(a) Motivation
(b) Communication
(c) Delegation
(d) Supervision
Answer:
(c) Delegation is not en element of direction.

Question 2.
The motivation theory which classifies needs in hierarchical order is
(a) Fred Luthans
(b) Scott
(c) Abraham Maslow
(d) Peter F Drucker
Answer:
(c) Abraham Maslow gave the hierarchy offive human needs.

Question 3.
Which of the following ¡Is a financial incentive?
(a) Promotion
(b) Stock incentive
(e) Job security
(d) Employee participation
Answer:
(b) Stock incentive is a financial incentive which is a employee stock option with a tax benefiL

Question 4.
Which of the following is not an element of communication process?
(a) Decoding
(b) Communication
(c) Channel
(d) Receiver
Answer:
(b) communication is not the element of communication process, it is understood as a process of exchange.

Question 5.
Grapevine is
(a) Formal communication
(b) Barrier to communication
(c) Lateral communication
(d) Informal communication
Answer:
(d) Informal system of communi cation is referred as “Grapevine ”.

Question 6.
Status comes under the following type of barriers .
(a) Semantic barrier
(b) Organisational barrier
(c) Non semantic barrier
(d) Psychological barrier
Answer:
(b) Status related to organisation, Thus, it is a organisational barrier.

Question 7.
The software company promoted by Narayan Murthy is
(a) Wipro
(b) Infosys
(c) Satyam
(d) HCL
Answer:
(b) Narayana Murthy promoted Infosys.

Question 8.
The highest level need in need Hierarchy of Abraham Maslow
(a) Safety need
(b) Belongingness need
(c) Self actualisation need
(d) Prestige need
Answer:
(c) Self actualisation need is the highest level of need as it refers to the drive to become what one is capable of becoming.

Question 9.
The process of converting the message into communication symbols is known as
(a) Media
(b) Encoding
(c) Feedback
(d) Decoding
Answer:
(b) The process of converting message into symbol is known as Encoding.

Question 10.
The communication network in which all subordinates under a supervisor communicate through supervisor only is
(a) single chain
(b) inverted
(c) wheel
(d) free flow
Answer:
(c) In the wheel network, the communication takes place in such a manner that subordinates under a supervisor communicate through supervisor only.

Case Problems:

Y limited is a bank functioning in India. It is planning to diversify into increase business. Lately, the Government of India has allowed the private sector to gain entry in the mcrease business. Previously, it was the prerogative of LIC and GIC to do insurance business. But now with liberalisation of the economy and to make the field competitive other companies have been given licenses to start insurance business under the regulation of Insurance Regulatory and Development Authority’. Y limited plans to recruit high quality employees and agents and exercise effective direction to capture a substantial part of life and non-life insurance business.

Question 1.
Identify how the company can supervise its employees and agents effectively. What benefits will the company derive from effective supervision?
Answer:
The company can supervise is employees and agents by taking the following steps:

1. Training programmes should be organised
2. Make them understand the various policies so that they can convince their clients.
3. Establishing targets for them and also monetary incentives.
4. Regularised system for submission of periodical reports of their performance.

The benefits of the above steps will be

• Trained personnel will give better performance. They can Improve upon their skills
• Knowledge of the products of the Insurance company will ensure better satisfaction for the clients.
• They will compete to give better performance and earn higher incentives.
• It will help in identifying the areas where workers and agents need specialised training programmes.

Question 2.
What financial and non-financial incentives can the company use for employees and agents separately to motivate them? What benefits company will get from them?
Answer:
Incentives for Employees
1. Financial
(a) Productivity linked wage incentive
(b) Bonus
(c) Co-partnership
(d) Employee stock option

2. Non-financial
(a) Job-security
(b) Status
(c) Employee empowerment
(d) Employee recognition program

Incentives for Agents
(i) Financial
(a) Commission
(b) Bonus like paid vacation

3. Non-financial Incentive
(a) Cordial relationship
(b) Career advancement opportunity
(c) Job enrichment
(d) Recognition programmes like certificate of merit etc.
(e) Company achieves the motivation among the employees and they will contribute more in achieving targets.

Question 3.
How can the company ensure that higher order needs i.e., the esteem and self-actualisation needs are met?
Answer:
The higher order needs can be satisfied through
(i) Career advancement opportunity
(ii) Assignment of challenging job
(iii) Perquisites
(iv) Participation in management decisions

Question 4.
Identify the qualities of leadership in this line of business that the company manager must possess to motivate employees and agents.
Answer:
The qualities ofleaders which the manager of the Insurance company must possess are

1. Intelligence
2. Good communication skills
3. Self-confidence, integrity and honesty
4. Good listener
5. Pleasing personality

Question 5.
Give a model of formal communication system that the company can follow.
Identify the barriers in this model, how can they be removed?
Answer:
The most suitable model for formal communication

Barriers to Effective Communication
1. Barriers Due to Organisational Structure: An organisational structure is complex with numerous levels in between which creates distance between the top management and the workers. With long lines of communication, there is possibility of message losing its significance.

2. Psychological Barriers: Everyone perceives information in the light of their own experiences, prejudices and thinking.

3. Inability to communicate: The lack of ability to communicate leads to misunderstanding and confusion. Different people have different meaning for same words.

4. Status and Position: Sometimes, effective flow of communication is hampered by status and position of the sender and receiver.

Measures to Overcome the Barriers

1. Clarity in the thoughts of the sender is must for effective communication.
2. The sender should try to make the message meaningful and understandable
3. Message should be precise and to the point.
4. The sender should always take the feedback from the receiver.

Question 6.
How can informal communication help to supplement the formal communication model given by you in answer to the question?
Answer:
Informal communication takes place outside the official channels of communication It fills the gaps that might exist in formal communication.

Merits of Informal communication are

1. It helps the members to discuss the matters which cannot be discussed at the official leveL
2. It is a way of knowing the reactions and opinions of the people about a change.
3. It helps in building team spirit,
4. The information flows at a faster

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 6 Staffing

Question 1.
Which function of management helps in obtaining the right people and putting them on the right jobs?
Answer:
Staffing.

Question 2.
It implies introducing the selected employees to other employees and familiarizing them with the rules and policies of the organization. Name it.
Answer:
Orientation.

Question 3.
“Internal sources of recruitment are better than external sources of recruitment”.
Do you agree with this statement? Give any two reasons in support of your answer.
Answer:
Yes, I agree with this statement and Explain any two advantages of internal sources of recruitment.

Question 4.
Ashwath is working as a supervisor in a company. Due to his hard work, he is promoted to the post of Production Manager. Now the post of the supervisor is vacant and no one can be transferred or promoted to this post. Name the source of recruitment the company will use to fill up this post. State any three advantages of using this source of recruitment.
Or
Which source of requirement is needed to bring new blood to the organization? Explain any three advantages of this source.
Answer:
The company will use external sources of recruitment. (And explain any three advantages of an external source of recruitment.)

Question 5.
It is the process of identifying and choosing the best person out of a number of prospective candidates for a job. Name it.
Answer:
Selection.

Question 6.
Which step in the process of selection helps the manager to eliminate unqualified or unfit job seekers based on the information supplied in the application forms.
Answer:
Preliminary screening.

Question 7.
It is the process of increasing the knowledge and skills of an employee for doing a particular job. Which process is referred to here?
Or
What helps the employees in improving their job knowledge and efficiency.
Answer:
Training.

Question 8.
Which type of training is a joint program of training in which educational institutions and business firms cooperate?
Answer:
Internship training.

Question 9.
The trainee is put under the guidance of a master worker to require a higher level of skill. For example to become a plumber, electrician, etc. Which method of training is referred to here.
Answer:
Apprenticeship program.

Question 10.
In which type of training, employees learn their jobs on the equipment they will be using, but the training is conducted away from the actual work floor. Explain two other methods relating to this.
Answer:
Vestibule training.

Question 11.
“There is no need for human resource planning as so many people are available in the market these days” do you agree with this statement? Give reasons.
Answer:
No, I do not agree with this statement. There is a great need for human resources planning. Also, explain the points of need in her human resource planning.

Question 12.
“A newly appointed personnel manager is of the view that there is no need for training the workers”. Do you agree with his views? Give reasons in support of your answer.
Answer:
No, I do not agree with the view of a personal manager. There is a great need for training. Also, explain the points of need for her training.

I. One Mark Questions and Answers

Question 1.
What is Staffing?
Answer:
It is a process of manning the Organisation.

Question 2.
What is Manpower Planning?
Answer:
It is an estimation of manpower required for the organization.

Question 3.
What do the meaning of Recruitment?
Answer:
It is a process of finding suitable applicants for employment.

Question 4.
What is Selection?
Answer:
It is the process of picking the best candidate from a large pool of applicants.

Question 5.
What do you mean by Placement?
Answer:
It is a process of assigning jobs to the selected candidates.

Question 6.
Give the meaning of Orientation?
Answer:
It is a process of introducing the new employee to the organization’s environment.

Question 7.
What is Training?
Answer:
It is a process of increasing the knowledge and skill of an employee.

Question 8.
Give the meaning of Development.
Answer:
The term development refers to the process of not only building up the skill and abilities for. specific purpose, but also the overall competence of managerial executives to undertake more difficult and challenging tasks.

Question 9.
Give the meaning of Performance Appraisal?
Answer:
It is a systematic evaluation of employee’s performance and potential for development.

Question 10.
What is Promotion?
Answer:
It is a process of movement of an employee to a higher position.

Question 11.
What is the purpose of Preliminary screening?
Answer:
Preliminary screening is done to ascertain whether the minimum eligibility condition is fulfilled by candidates who have applied for the job and to prepare a list of eligible candidates who are to be evaluated further.

Question 12.
Name the one type of Selection Test.
Answer:
Aptitude Tests.

Question 13.
What is the purpose of conducting a Stress interview?
Answer:
A stress interview is conducted to see the candidate’s reactions under pressure and to test his patience.

Question 14.
Give the meaning of On – Job Training?
Answer:
It is a method where workers learn by doing the work,

Question 15.
What is Off-the-Job Training?
Answer:
It is a method where workers are provided training away from the actual working condition.

Question 16.
State any one method of on – the job training.
Answer:
Apprenticeship Training.

Question 17.
State any one method of off – the job training.
Answer:
Classroom lecture.

Question 18.
Mention any one importance of Staffing.
Answer:
It helps the Organisation to get the right people for the right job.

Question 19.
State any two processes that HRM includes.
Answer:
(a) Staffing
(b) Training and development.

Question 20.
Mention any two steps in Staffing Process.
Answer:
(a) Manpower planning
(b) Recruitment

Question 21.
What is Compensation?
Answer:
Compensation is an additional wage or salary to the employee.

Question 22.
Mention any one source of Recruitment.
Answer:
External Source.

Question 23.
Mention any one of the Internal Sources of Recruitment.
Answer:
Promotion.

Question 24.
Mention any one of the External Sources of Recruitment.
Answer:
Campus Recruitment.

Question 25.
Mention any two steps in Selection Process.
Answer:
(a) Preliminary Screening
(b) Selection Tests.

Question 26.
Mention any one type of Interview.
Answer:
Direct Interview.

Question 27.
Mention any one type of On-Job Training.
Answer:
Internship Training.

Question 28.
Mention any one type of Off-Job Training.
Answer:
Vestibule Training.

Question 29.
Mention any one importance of Training.
Answer:
It improves employee’s performance.

Question 30.
What is Coaching?
Answer:
It is a method where a superior trains a new employee.

II. Two Marks Question and Answers

Question 1.
Define Staffing.
Answer:
According to Me Farland, ‘ Staffing is the function by which managers build an organization through the recruitment selection and development of individuals as capable employees. ’

Question 2.
State the two activities of staffing.
Answer:
Selection, development.

Question 3.
State any two steps in staffing.
Answer:

1. Man Power Planning
2. Recruitment.

Question 4.
What is Manpower Planning?
Answer:
Manpower Planning is an estimation of human resources required by an organization. Its main focus will be on getting the right number of qualified people at right time.

Question 5.
What do you mean by Recruitment?
Answer:
Recruitment is a process of searching the candidates for employment and motivating them to apply for the jobs in the organization.

Question 6.
Give the meaning of Selection?
Answer:
It is a process of picking the best candidate from the large pool of applicants. It aims at finding the right people for the right job.

Question 7.
What is Placement?
Answer:
It is a process of assigning jobs to the selected candidates; it also includes the assignment of a job to a new employee, transfer, promotion, and also demotion of an existing employee.

Question 8.
Give the meaning of Orientation?
Answer:
Orientation is a process for introducing the newly selected employees to other employees and also to the rules, policies of the organization. It will help the new employee to know their colleagues.

Question 10.
What is Training & Development?
Answer:
It is a process that is undertaken in every organization to increase the knowledge and skills of an employee to perform the job accurately.

The term development refers to the process of developing the skill and abilities of an employee through proper training.

Question 11.
What is Performance Appraisal?
Answer:
Performance Appraisal is a systematic evaluation of employees based on their performance. It is concerned with distinguishing the employees based on their performance.

Question 12.
What is Promotion?
Answer:
It is a term that is usually used for the upward movement of an employee to a higher position with greater responsibilities and higher pay.

Question 13.
Define Recruitment?
Answer:
According to Dale Yoder, “Recruitment is a process to discover the sources of manpower to meet the requirements of the staffing schedule and employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient workforce”.

Question 14.
State any two Internal Sources of Recruitment.
Answer:
(a) Promotion
(b) Transfer
(c) Demotion

Question 15.
What is Transfer?
Answer:
It is a term used for shifting a person from one position to another position, it changes the responsibility and salary of an employee.

Question 16.
State any two External Sources of Recruitment.
Answer:
(a) Campus Recruitment
(b) Advertisement

Question 17.
Give the meaning of Campus Interview.
Answer:
Universities, institutions, colleges invite companies to their Campus to recruit for jobs. The executives of these companies take interview interested candidates and select suitable candidates. This process is popularly called “Campus Interview’’.

Question 18.
Define Selection.
Answer:
According to Yoder ‘Selection is the process by which candidates for employment are divided into two classes – those who will be offered employment and more who will not. ’

Question 19.
What are Selection Tests?
Answer:
It is the next step in recruitment after screening the applications the candidates are made to appear for different types of tests and they will have to pass these tests in order to reach the next level of recruitment.

Question 20.
What is Patterned or Structural Interview?
Answer:
It is a method of the interview where a series of questions are asked one after the other in order to understand the applicant’s qualification, skill, experience, etc.,

Question 21.
Give the meaning of Board or Panel Interview?
Answer:
It is a method of the interview where more than one person will be asking questions to an applicant at the same time.

Question 22.
What is Group Interview?
Answer:
It is a method of the interview where a number of candidates applied for a position are interviewed simultaneously. It is even called a group discussion where candidates will be given a common topic for discussion.

Question 24.
What is Apprenticeship Training?
Answer:
It is a formalized method of training that includes classroom training as well as on-the-job work done under supervision.

Question 25.
What is Internship Training?
Answer:
It is a method of training that allows gauging their interest in their chosen professional area with the help of both practical exposures to the work environment as well as theoretical knowledge.

Question 26.
Give the meaning of Job Rotation?
Answer:
It is a method of training in which an employee’s development is done through diversified training on different departments by rotation process.

Question 27.
What is the Case study method of training?
Answer:
Case study:
A case study is a written description of an actual situation in the past in the same organization or somewhere else and trainees are supposed to analyze and give their conclusions. This is an excellent method to ensure full participation of employees and generates good interest among them. The case is later discussed by an instructor with all the pros and cons (merits and demerits) of each option.

Question 28.
What is Vestibule Training?
Answer:
It is a method that allows trainees to work in a real work atmosphere which is created for training purposes. It helps them to learn their jobs better.

Question 29.
Give the meaning of Staffing.
Answer:
It is a managerial function that is concerned with manning the organization through proper selection, appraisal, and development.

Question 30.
Write any two importances of Staffing.
Answer:
(a) Increase in productivity and profitability
(b) It helps the organization to get the right people for the right job.

Question 31.
What do you mean by Compensation?
Answer:
The term compensation includes cash payments which is an addition to wages, salaries and also includes bonuses, share in profit pension, etc.,

Question 32.
Name the sources of Recruitment.
Answer:
(a) Internal Sources
(b) External Sources

Question 33.
What do you mean by Internal Source of Recruitment?
Answer:
It is a process of considering existing employees for a higher level of jobs through promotions and transfers.

Question 34.
What do you mean by External Sources of Recruitment?
Answer:
It is a process of filling up vacant positions from an external source after considering the qualifications required for the job.

Question 35.
What is Direct Recruitment?
Answer:
It is one of the sources of external recruitment in which applications are invited after preliminary tests and interviews suitable candidates will be selected.

Question 36.
What are Casual Callers?
Answer:
Most of the qualified and profiling aspirants for a job send applications to reputed companies these are known as casual callers or unsolicited applications.

Question 37.
Mention the importance of advertisements in Recruitment.
Answer:
It is one of the most effective means to find out the potential employees outside the organization by using different media like newspapers, journals, etc.,

Question 38.
What is Employment Exchange?
Answer:
It is a body set up by the Government for bringing together job aspirants and whenever an employer announces vacancies those who have registered to get a chance to apply.

Question 39.
What are Placement Agencies?
Answer:
They are very much similar to employment exchange but it is a private body that helps a registered job aspirant to get a suitable job based on his qualification skills and experience.

Question 40.
What is Campus Recruitment?
Answer:
It is a program conducted within educational institutes or in a commonplace to provide jobs to students pursuing or in the stage of completing the program.

Question 41.
What are Labour Contracts?
Answer:
It is a contract with the help of which specialist people are recruited to an organization purely on a contract basis i.e, only for a particular period of time.

Question 42.
Telecasting. Explain its importance in Recruitment advertising.
Answer:
It is one of the most effective popular and widely used sources of recruitment. It is a practice of telecasting the details of vacant posts in an organization.

Question 43.
What is Web Publishing?
Answer:
It is a process of recruiting people by publishing information on recruitment on websites with the help of the internet.

Question 44.
What is Selection?
Answer:
It is a process of choosing an individual who can perform the job better than anybody from the pool of applications received.

Question 45.
Mention any two steps in Selection Process.
Answer:
(a) Selection Tests
(b) Interview.

Question 46.
What is Preliminary Screening?
Answer:
It is a process that is conducted after receiving applications, here the recruiters will check whether the applicants fulfill all the eligibility conditions are not and then select candidates for the next level of recruitment.

Question 47.
Mention any two types of Selection Tests.
Answer:
(a) Aptitude Test.
(b) Personality Test.

Question 48.
What is Intelligence Test?
Answer:
It is one of the tools of selection test used to judge the mental capacity and ability of an applicant to understand the given situation and make decisions.

Question 49.
What are Aptitude Tests?
Answer:
It is one of the tools of selection test used to know the potential which the individual has for learning new skills.

Question 50.
What are Proficiency Tests?
Answer:
These tests are very much essential to measure the skills which are already acquired, it is a test to know the knowledge of the applicant in a particular area of his interest.

Question 51.
What are Personality Tests?
Answer:
It is one of the most effective tools of selection tests where the overall qualities of a person will be tested for examples morals, emotions, and maturity levels.

Question 52.
What are Interest Tests?
Answer:
It is a test to find out the candidate’s likes and dislikes; it helps the recruits to understand whether the candidate will be suitable for the vacant position or not.

Question 53.
What is an Interview?
Answer:
The interview is a formal meeting in person, especially one which is arranged for the assessment of the qualification of an applicant.

Question 54.
Mention any two kinds of Interviews?
Answer:
(a) Stress Interview
(b) Group Interview

Question 55.
What is a Direct Interview?
Answer:
It is a method of the interview where questions are directly asked the applicant about his identity, skills, qualification, experience, etc.,

Question 56.
What is an Indirect Interview?
Answer:
It is a method of the interview where the applicant is allowed to express his view and the interviewer listens to him carefully without disturbing him or asking any questions.

Question 57.
What is a Stress Interview?
Answer:
It is a method of the interview where the interviewer deliberately creates a stressful situation by asking uncomfortable or irritating questions to see the applicant’s reactions under pressure.

Question 58.
What do you mean by reference and background check?
Answer:
It is a collection of information of the candidates who pass the selection tests; in these checks, the qualities like honesty, temperament, the loyalty of the candidates are verified with the educational institutions and references given by the candidate.

Question 59.
When is the selection decision taken?
Answer:
After the candidate clears all the tests in the selection procedure, after consulting the management the selection decision will be taken.

Question 60.
What is a Medical Examination?
Answer:
A medical examination is a test where the employers check with the doctors whether the candidate is physically and mentally fit for the job or not.

Question 61.
What is a Job Offer?
Answer:
After the completion of the procedures in selection if the employee is satisfied with the outcome of the selection test he will issue an appointment letter consisting of all the details of the job it is known as a job offer.

Question 62.
What is Contract of Employment?
Answer:
If the candidate accepts the job offer of the employees and decides to join the organization, as service register will be open with all the details of the employee known as the contract of employment.

Question 63.
What is Training?
Answer:
Training is the organized procedure in which people learn knowledge and skills for a definite purpose.

Question 64.
Write any two importances of Training.
Answer:
(a) It improves employee’s abilities and skills.
(b) It helps in building an efficient and cooperative workforce.

Question 65.
What is on-the-job training?
Answer:
It is a method of training where workers learn to do certain work by actually doing it.

Question 66.
Mention any two types of on-the-job- training.
Answer:
(a) Internship Training
(b) Job Rotation.

Question 67.
What is Coaching?
Answer:
In this method, a new joiner will be given the training to do a job that has been assigned to him.

Question 68.
What do you mean by the off-job training method?
Answer:
In most technical jobs where more experience is required before entering the actual work environment, this method is used.

Question 69.
What is a Class Room Lecture?
Answer:
It is one of the most commonly used methods in off-job training in this method trainees are given theoretical knowledge about their work.

Question 70.
What is Case Study?
Answer:
It is a method used to train the trainees by giving an actual situation in the past that has happened in the organization and the trainers have to analyze the case.

Question 71.
What is Computer Modeling?
Answer:
It is a technique where a real work environment is created through a computer program. It allows a trainee to learn how to work without causing any damages to the original machines and equipment.

III. Five Marks Questions and Answers

Question 1.
Explain the importance of Staffing.
Answer:
(a) It helps the organization by manning the right people for the right jobs.
(b) It ensures higher job satisfaction.
(c) It increases productivity and profitability.
(d) It helps in building a sound organization.
(e) It ensures effective use of resources.

Question 2.
“Staffing is a part of Human Resource Management” – Give reasons.
Answer:
The majority of modern authorities in management subjects advocate that staffing is a part of human resource management and give the following reasons in support of their viewpoint.
(a) Staffing is a function that brings together the human assets and physical assets of the organization.
(b) Staffing involves knowledge and approaches to the concept of hiring, retaining, and firing personnel in the organization.
(c) Staffing is continuous and found at every level of management viz., lower level, middle level, and higher level.
(d) Introduction of human resource accounting also justifies that staffing should be treated as a part of human resource management.
(e) Human relations approach recognizes the human factor as the most important instrument of success in an organization. Making staffing a part of human resource management gives more importance to the staffing concepts viz., selection, development, training orientation, etc.

Question 3.
Briefly explain the step in Staffing Process?
Answer:
Following are the steps involved in Staffing Process.
(a) Manpower Planning
(b) Selection
(c) Placement and Orientation
(d) Training and Development
(e) Performance Appraisal
(f) Promotion and career planning
(g) Compensation.

(a) Manpower Planning is an estimation of human resources required by an organization. Its main focus will be on getting a right number of qualified people at right time.

(b) Recruitment is a process of searching the candidates for employment and motivating them to apply for the jobs in the organization.

(c) Selection is a process of picking the best candidate’ from the large pool of applicants. It aims at finding the right people for the right job.

(d) Placement is a process of assigning jobs to the selected candidates; it also includes the assignment of a job to a new employee, transfer, promotion, and also demotion of an existing employee.

(e) Orientation is a process for introducing the newly selected employees to other employees and also to the rules, policies of the organization. It will help the new employee to know their colleagues.

(f) Training is a process which is undertaken in every organization to increase the knowledge and skills of an employee to perform the job accurately.

(g) Development refers to the process of developing the skill and abilities of an employee through proper training.

(h) Performance Appraisal is a systematic evaluation of employees based on their performance. It is concerned with distinguishing the employees based on their performance.

(i) Promotion it in term that are usually used for the upward movement of an employee to a higher position with greater responsibilities and higher pay.

(j) Compensation includes cash payments which is an addition to wages, salaries and also includes bonus, share in profit pension, etc.,

Question 4.
Briefly explain any five External Sources of Recruitment.
Answer:
(a) Direct Recruitment.
(b) Casual Callers
(c) Advertisement
(d) Employment Exchange
(e) Placement Agencies
(f) Campus Recruitment

(a) Direct Recruitment is one of the sources of external recruitment in which applications are invited after preliminary tests and interviews suitable candidates will be selected.

(b) Casual Callers -Most of the qualified and profiling aspirants for a job send applications to reputed companies these are known as casual callers or unsolicited applications.

(c) Advertisement is one of the most effective means to find out the potential employees outside the organization by using different media like newspapers, journals, etc.,

(d) Employment Exchange is a body set up by the Government for bringing together job aspirants and whenever an employer announces vacancies those who have registered to get a chance to apply.

(e) Placement Agencies -they are very much similar to employment exchange but it is a private body that helps a registered job aspirant to get a suitable job based on his qualification, skills, and experience.

(f) Campus Recruitment – is a program conducted within educational institutes or in a commonplace to provide jobs to students pursuing or in the stage of completing the program.

Question 5.
Explain different types of Selection Tests.
Answer:
(a) Intelligence Test
(b) Aptitude Test
(c) Trade and Proficiency Tests
(d) Personality Test
(e) Interest Tests

(a) Intelligence Test is one of the tools of selection test used to judge the mental capacity and ability of an applicant to understand the given situation and make decisions.

(b) Aptitude Test is one of the tools of selection test used to know the potential which the individual has for learning new skills.

(c) Proficiency Tests -these tests are very much essential to measure the skills which are already acquired, it is a test to know the knowledge of the applicant in a particular area of interest.

(d) Personality Test is one of the most effective tools of selection tests where the overall qualities of a person will be tested for examples morals, emotions, and maturity levels.

(e) Interest Test – is a test to find out the candidate’s likes and dislikes it helps the recruits to understand whether the candidate will be suitable for the vacant position or not.

Question 6.
Briefly explain any 5 types of Selection Interviews.
Answer:
(a) Direct Interview
(b) Indirect Interview
(c) Patterened or structural Interview
(d) Stress Interview
(e) Board or Panel Interview
(f) Group Interview

(a) Direct Interview is a method of the interview where questions is directly asked the applicant about his identity, skills, qualification, experience, etc.,

(b) Indirect Interview is a method of interview where the applicant is allowed to express his view and th ‘ interviewer listens to him carefully without disturbing him or asking any questions.

(c) Patterned or Structural Interview is a method of the interview where a series of questions are asked one after the other in order to understand the applicant’s qualification, skill, experience, etc.,

(d) Stress Interview is a method of interview where the interviewer deliberately creates a stress situation by asking uncomfortable or irritating questions to see the applicant’s reactions under pressure.

(e) Board or Panel Interview is a method of the interview where more than one person will be asking questions to an applicant at the same time.

(f) Group Interview is a method of the interview where a number of candidates applied for a position are interviewed simultaneously. It is even called a group discussion where candidates will be given a common topic for discussion.

Question 7.
Explain the benefits of Training?
Answer:
(a) It increases the efficiency of employees.
(b) It reduces the time and cost involved in learning the work.
(c) It leads to a high level of employee motivation.
(d) Employee work accuracy will be more and chances of work accidents will be less.
(e) An employee with more knowledge and skill becomes more eligible for promotion and training enables him.

Question 8.
Explain the different methods of On – Job Training.
Answer:
(a) On-the-job training: It is a method of training where workers learn to do certain work by actually doing it.
(b) Apprenticeship Training: It is a formalised method of training that includes classroom training as well as on the job work done under supervision.
(c) Job Rotation: It is a method of training in which an employee’s development is done through diversified training on a different department by rotation process.

Question 9.
Explain different methods of Off-the Job-Training.
Answer:
(a) Off-job training method: In most of the technical jobs where more experience is required before entering the actual work environment this method is used.

(b) Class Room Lecture: It is one of the most commonly used methods in off-job training in this method trainees are given theoretical knowledge about their work.

(c) Case Study: It is a method used to train the trainees by giving an actual situation in the post that has happened in the organization and the trainers have to analyze the case.

(d) Vestibule Training: It is a method that allows trainees to work in a real work atmosphere that is created for training purposes. It helps them to learn their jobs better.

(e) Computer Modeling: It is a technique where a real work environment is created through a computer program. It allows a trainee to learn how to work without causing any damages to the original machines and equipment.

IV. Ten Marks Questions and Answers

Question 1.
Explain various sources of Recruitments?
Answer:

Internal Source of Recruitment
It is a process of considering existing employees for a higher level of jobs through promotions and transfers.

Internal Sources of Recruitment are:
(a) Promotion
(b) Transfer
(c) Demotion

Transfer: It is a term used for shifting a person from one position to another position, it changes the responsibility and salary of an employee.

External Sources of Recruitment: It is a process of filling up vacant positions from an external source after considering the qualifications required for the job.

External Sources of Recruitment are:
(a) Campus Recruitment
(b) Advertisement

Direct Recruitment: It is one of the sources of external recruitment in which applications are invited after preliminary tests and interviews suitable candidates will be selected.

Casual Callers: Most of the qualified and profiling aspirants for a job send applications to reputed companies these are known as casual callers or unsolicited applications.

Advertisements in Recruitment: It is one of the most effective means to ‘find out the potential employers outside the organization by using different media like newspapers, journals, etc.,

Employment Exchange: It is a body set up by the Government for bringing together job aspirants and whenever an employee announces vacancies, those who have registered get a chance to apply.

Placement Agencies: They are very much similar to employment exchange but it is a private body that helps a registered job aspirant to get a suitable job based on his qualification, skills, and experience.

Campus Recruitment: It is a program conducted within educational institutes or in a commonplace to provide jobs to students pursuing or in the stage of completing the program.

Labour Contracts: It is a contract with the help of which specialist people are recruited to an organization purely on a contract basis i.e, only for a particular period of time.

Question 2.
Explain the various steps followed in staffing.
Answer:
The various steps in the staffing process are:
(a) Man Power Planning: Refers to the process of estimating the manpower requirement of an organization. While estimating the manpower requirement, the management generally keeps in mind, the available infrastructure including the technology, production schedule, market fluctuation, demand forecasts, etc.

(b) Recruitment: Recruitment is the process of finding and attracting suitable applicants for employment. It is a process of searching for and obtaining applicants for jobs, so that the right people in right number can be selected.

(c) Selection: Selection is the process of picking suitable candidates from the pool of job applicants to fill various jobs in the organization. It is the process by which candidates for employment are divided into two groups – those who will be offered employment and those who will not.

(d) Placement & Orientation: Placement means assigning jobs to the selected candidates. Assigning jobs to employees may involve a new job or a different job. Thus, placement may include initial assignment of a job to the new employee and on transfer, promotion, or demotion of the existing (present) employee.

Orientation means introducing the selected (new) employee to other employees and familiarising him with the rules and policies of the organization Orientation process will also help the new entrant to know about his superiors, subordinates, and colleagues.

(e) Training and Development: Training is the process which is undertaken to increase the knowledge and skills of an employee to perform the present job accurately.
The term development refers to the process of not only building up the skill and abilities for a specific purpose but also the overall competence of managerial executives to undertake more difficult and challenging tasks.

(f) Performance appraisal: Performance appraisal is the systematic evaluation of the individual with respect to his performance on the job and his potential for development. It determines an employee’s worth to the organization and is generally done by the individual’s immediate superior in the organization

(g) Promotion: Promotion is a vertical movement of an employee within the organisation. In other words, Promotion refers to the upward movement of an employee from one job to another higher one, with an increase in salary, status, and responsibilities.

(h) Compensation (wages & salary administration): Workers tender their services for wages or salary (also called compensation). The term compensation comprises cash payments which is in addition to wages and salary and include bonuses, share in the profit, pension, etc. A properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required caliber and qualification in his/her organisation.

Question 3.
“Selection is the process of elimination”. – Justify this statement by explaining different steps in the selection process.
Answer:
Selection is the process of selecting the best and eliminating the rest. Workers are essential, active, and sensitive factors of production. Utmost care should be taken in either selection. Where efficient workers are the permanent assets of the future, inefficient workers will prove to be liabilities. Therefore, while making selection, the following steps are generally followed by all business organisation.

(a) Preliminary Screening: After receiving the applications from the candidates through the recruitment process, the same must be examined to decide, which ones deserve to be considered and followed up. Screening exercise involves checking the contents of the applications, so as to ascertian whether or not the minimum eligibility conditions are fulfilled by the candidates who have applied for the job. The purpose of screening is to prepare a list of eligible candidates who are to be evaluated further.

(b) Selection Tests: After screening the applications, eligible candidates are asked to appear for selection tests. These tests are made to discover and measure, the skill and abilities of the candidates in terms of the requirements of the job. Eg: Direct interview and indirect interviews.

(c) Interview: Interview is considered as a method ofpersona! appraisal, through face-to-face conversation and observation. The interview helps the employer to evaluate the candidate regarding personality, smartness, intelligence, attitude, etc. There are different kinds of interviews conducted by the employers. Eg: Direct interview and indirect interviews.

(d) Reference and Background checks: In addition to the requisite educational qualifications, skill, and experience, the candidates must also possess other qualities like balanced temperament, honesty, loyalty, etc. These qualities cannot be judged on the basis of any test. Therefore, information is to be obtained and verified from the heads of educational institutions where the candidates have studied or from the persons whose names are given by the candidates as referees or from their previous employees.

(e) Selection Decision: After a candidate has cleared all the hurdles in the selection procedure the employer may take a decision of selection after consulting the concerned manager who is responsible for the performance of the new employee.

(f) Medical Examination: Candidates finally selected for the job are asked to undergo a medical examination to see whether they are physically fit for the job.

(g) Job Offer (issue of Appointment letter): Candidates finally selected are offered to join the organization, for which a formal appointment order is issued by the organization.

(h) Contract of Employment (Acceptance of job offer): If the selected candidate decides to join the organization, he has to report to the concerned authority and formally join the organization by giving his consent (acceptance) in writing.

Question 4.
Briefly explain the methods of Training?
Answer:

On-the-job training: It is a method of training where workers leam to do certain work by actually doing it.

Two types of on-the-job-training are:
(a) Internship Training
(b) Job Rotation.

Apprenticeship Training: It is a formalized method of training that includes classroom training as well as on-the-job work done under supervision.

Coaching: In this method, a new joiner will be given the training to do a job that has been assigned to him

Internship Training: It is a method of training that allows gauging their interest in their chosen professional area with the help of both practical exposure to the work environment as well as theoretical knowledge.

Job Rotation: It is a method of training in which an employee’s development is done through diversified training on different departments by rotation process.

Off-job training method: In most of the technical jobs where more experience is required before entering the actual work environment this method is used.

Class Room Lecture: It is one of the most commonly used methods in off job training in this method trainees are given theoretical knowledge about their work.

Case Study: It is a method used to train the trainees by giving an actual situation in the post that has happened in the organization and the trainers have to analyze the case.

Vestibule Training: It is a method that allows trainees to work in a real work atmosphere that is created for training purposes. It helps them to learn their jobs better.

Computer Modeling: It is a technique where a real work environment is created through a computer program. It allows a trainee to learn how to work without causing any damages to the original machines and equipment.

Question 1.
Assuming that you are the HR manager of an organization state any ten sources you would look into while recruiting employees.
Answer:

Exercises

Short Answer Type Questions

Question 1.
Briefly enumerate the important sources of recruitment.
Answer:
There are two important sources of recruitment

• Promotion
• Transfer

These are of two types
(a) Transfer: When we move an employee from one department to the other, from one branch to the other, from one division to another which leads to a change in his/her working environment it is known as a transfer There is hardly any change in his authority and responsibility

(b) Promotion: When we move an employee to a higher level In the same department, branch, division, or different department, branch, or division that increases his authority, responsibility, and status, It is known as a promotion.

When the firm makes arrangements for manpower from outside the organization from any of the above-given sources, it is known as external sources of recruitment

Question 2.
What is meant by recruitment? How is it different from the selection?
Answer:
Recruitment refers to the process of finding possible candidates for a Job. It can be defined as the process of motivating and encouraging people to come and apply for a job in an organization Selection is the process of identifying and choosing the best person out of a number 01 prospective candidates for a job. If recruitment is positive, the selection is negative Recruitment helps in creating a pool of prospective workforce whereas selection helps in finding the best out of them.

Question 3.
Define training. How is it different from education?
Answer:
Training is the systematic development of knowledge, skills, and attitudes required by an individual to perform adequately a given task or job.

Question 4.
Distinguish between training and development.
Answer:
Difference between training and development

Question 5.
Why are internal sources of recruitment considered to be more economical?
Answer:
Filling of jobs internally is cheaper as compared to getting candidates from external sources because only transfer or promotion has to be done. It does not involve the long process of staffing or selection It Increases the cost in the form of more time, money, and efforts in recruiting.

Question 6.
What is the importance of staffing function in today’s environment?
Answer:
Staffing is considered to be a key function because it deals With human resources, which is regarded as one of the most valuable resource of any organization Once an organization could place the right man at the right Job it is easy to plan, organize, coordinate, direct and control the human activities to get the desired results It helps in discovering and obtaining competent personnel, ensures the continuous survival and growth, helps to ensure optimum utilisation of resources and improves Job satisfaction as well.

Long Answer Type Questions

Question 1.
Define the staffing process and the various steps involved in it.
Answer:
The staffing process of the management is concerned with acquiring, developing, employing, remunerating, and retaining people of we can say it is the timely fulfillment of the manpower requirements within an organization.

The following steps are involved in staffing process
(i) Estimating the Manpower Requirements: The first step in the staffing process is determining the present manpower Inventory and assessing the present and future manpower requirements of the organisation keeping In mind the production schedule, demand, etc.

(ii) Recruitment: Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organization. For this various sources can be used like transfer promotion, advertising, job consultants, etc

(iii) Selection: Selection of the prospective is the process of choosing from among the Job pool candidates developed at the stage of recruitment It involves a host of tests and interviews

(iv) Placement and Orientation: Employee to other employees orientation is introducing the selected and familiarising him with the rules and policies of the organization. He is taken around the workplace and given charge of the job for which he has been selected. Placement refers to the employee occupying the position or post for which the person has been selected

(v) Training and Development: All organizations have either in-house training centers or have forged alliances with training and educational institutes to ensure continued learning of their subordinates by offering opportunities for career advancement to their members, organisations are not only able to attract but also retain its talented staff.

(vi) Performance Appraisal: After the employees have undergone a period of training and they have been on the job for some time, there is a need to evaluate their performance The employee is expected to know what the standards are and the superior is to provide the employee feedback on his/her performance. The performance appraisal process, therefore, will Include defining the lob. appraising performance and providing feedback

(vii) Promotion and Career: Planning is very important for all organizations to address career-related Issues and promotional avenues for their employees. They must provide opportunities to everyone to show their potential and in return, promotions can be provided.

(viii) Compensation: All organizations need to establish wage and salary plans for their employees. There are various ways to prepare different payment plans depending on the worth of the job. Compensation, therefore, refers to all forms of pay or rewards going to employees.

Question 2.
Explain the procedure for the selection of employees.
Answer:
The important steps in the process of selection are as follows:
1. Preliminary Screening: It helps the manager eliminate unqualified or unfit Job seekers based on the information supplied In the application forms.

2. Selection Tests: An employment test is a mechanism that attempts to measure certain characteristics of individuals These range from aptitudes, such as manual dexterity, to Intelligence to personality.

3. Employment Interview: An interview is a formal, in-depth conversation conducted to evaluate the applicant’s suitability for the job.

4. Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and gaining additional on an applicant.

5. Selection Decision: The final decision has to be made among the candidates who pass the tests. Interviews and reference checks

6. Medical Examination: Before the candidate is given a job offer he/she is required to go through a medical test.

7. Job Offer Job offer IS made through a letter of appointment/confirm his acceptance Such a letter generally contains a date by which the appointee must report on duty.

8. Contract of Employment: After the job offer has been made and the candidate accepts the offer, certain documents need to be executed by the employer and the candidate There is also a need for, preparing a contract of employment It Includes lob title, duties responsibilities, date when continuous employment starts etc.

Question 3.
What are the advantages of training to the individual and to the organisation?
Answer:
Training helps both the organisation and the individual
Benefits to the Organisation

1. Training is a systematic learning which reduces the wastage of efforts and money.
2. Enhances employee productivity
3. Training helps a manager to handle an emergency situation.
4. Training motivates workers and thus reduces absenteeism.
5. Helps in adjusting to the changing environment (technological).

Benefits to the Employee

1. Better career opportunities due to improved skills and knowledge.
2. Earnings can be increased due to improved performance.
3. Trained workers can handle machines more efficiently.
4. Employees always remain motivated and satisfied.

Question 4.
The staffing function is performed by every manager and not necessarily by a separate department. Explain.
Answer:
Staffing is a function which all managers need to perform. It is the responsibility of all managers to directly deal with and select people to work for the organization.

When the manager performs the staffing function his role is slightly limited. In small organizations, managers may perform all duties related to employees’ salaries, welfare, and working conditions but as the organization grows and the number of persons employed increases, a separate department called the human resource department is formed which has specialists in managing people.

Question 5.
The workers of a factory are unable to work on new machines and always demand the help of a supervisor. The supervisor is overburdened with their frequent calls. Suggest the remedy.
Answer:
Since the workers of a factory are unable to work on new machines. Training should be imparted in this case as it is the process of learning new skills and application of knowledge. Whenever the new machines are installed in business it is the duty of management to provide training in order to achieve the desired goal. As per the case, it is mentioned that supervisors are overburdened with their calls.

The supervisor had some other work also if he involves in imparting training then his work is suffered. Thus, the management should provide the apprenticeship training program under this trainee put under the guidance of a master worker. These are designed to acquire a higher level of skill. The master-worker performs the job and the trainee observes him performing. When the learner learns all the skills then slowly he starts taking up the job step by step and gets a full charge of the job after some time.

Question 6.
The workers of a factory remain idle because of a lack of knowledge of hi-tech machines. Frequent visit of an engineer is made which causes high overhead charges. How can this problem be removed?
Answer:
The workers of a factory are not performing because of a lack of knowledge of hi-tech machines. Technological change arises the little need for employees to upgrade or alter their skills. Thus, in this case, training should be provided by the engineer to one of their supervisors so that he will guide the other workers and be able to enhance their productivity.

Frequent visit of engineer results in high overhead charges When the training imparted to the supervisor then he equips and handles the situation In the absence of engineer or In case of emergency.

Question 7.
The quality of production is not as per standards. On investigation, it was observed that most of the workers were not fully aware of the proper operation of the machinery. What could be the way to improve the accuracy?
Workers should be provided off-the-job training methods where they can be taught how to maintain accuracy related to the proper operations of the machinery. Training makes the employee more efficient and results in high productivity.

Question 8.
An organization provides security services. It requires such candidates who are reliable and don’t leak out the secrets of their clients. What step should be incorporated in the selection process?
Answer:
‘Reference check’ – this step should be done very carefully. The previous employers can be contacted to check his moral behavior or conduct. Sincerity etc. The new candidates should be made to sign a contract of employment which clearly states that strict action will be taken If found guilty.

Question 5.
A company manufacturing paper plates and bowls. It produces 1,00,000 plates and bowls each day. Due to the local festival, it got an urgent order of extra 50,000 plates and bowls. Advise how the company will fulfill its order and which method of recruitment would you suggest?
Answer:
There are two sources; internal and external. If an internal source is used then the existing workforce can be asked to work overtime. If an external source is used then

1. Existing employees can be asked to recommend the names of their friends and relatives.
2. Recruitment through labor contractors can also be done.

Multiple Choice Questions

Question 1.
Citizens of country other than host country or home country are
(A) Host country nationals
(B) Expatriates
(C) Home country nationals
(D) Third country nationals
Answer:
(D) Third-country nationals

Question 2.
Corporation orientation in which managers of host country understand, behavior andvulture of host-country markets be best classified as
(A) ethnocentric
(B) polycentric
(C) geocentric
(D) expat-centric
Answer:
(B) polycentric

Question 3.
Non-citizen employees of a country in which they are working is classified as
(A) expatriates
(B) subordinates
(C) coordinates
(D) none of above
Answer:
(A) expatriates

Question 4.
Specific procedure according to which ‘employees of company has legal rights to take part in policy designing’ is classified as
(A) sub-determination
(B) sub-ordination
(C) co-ordination
(D) codetermination
Answer:
(D) codetermination

Question 5.
Corporation orientation, in which management style and evaluation criteria of home country is superior to anything that host country offers, is called
(A) polycentric
(B) geocentric
(C) ethnocentric
(D) expat-centric
Answer:
(C) ethnocentric

Case Problems:

Question 1.
A company X limited is setting up a new plant in India for manufacturing auto components. India is a highly competitive and cost-effective production base ¡n this Sector. Many reputed car manufiicturers source their auto components from here. X limited is planning to capture about 40% of the market share in India and also export to the tune of at least $ 5 million in about 2 years of its planned operations. Achieve these targets requires a highly trained and motivated workforce. You have been retained by the company to advise it in this matter. While giving an answer keep in mind the sector, the company is operating.
Questions
(i) Outline the process of staffing the company should follow.
Answer:
X Ltd is planning to set up a new plant in India for manufacturing auto components. The prime concern of the company is to hire manpower who are highly trained and motivated. In order to achieve the targets, the company should follow the staffing process in this manner.

(ii) Which sources of recruitment the company should rely upon? Give reasons for your recommendation.
Answer:
The company is establishing a new unit in India. Thus, they should rely on external sources of recruitment. They should adopt this source and through employment exchange, placement agencies, labor contractors they will able to get the good staff in company This recommendation is fruitful because, through these sources the company is having a wide choice of candidates, they can get the qualified personnel and brings new blood in the organisation who are highly competitive, will work harder to show better performance.

(iii) Outline the process of selecting the company should follow with reasons.
Answer:
Through the recruitment, process organization receives a large number of applications. In order to select the most suitable candidate to perform the job. Selection process is to be considered. Following steps are to be taken ‘

The company should follow these steps in series as the first step preliminary screening helps the manager to select among those candidates whose applications are selected

The second step is the selection test it is to be conducted to check the practical knowledge of the candidate.

The third step interview is to be taken of those candidates who qualify for the test. A panel of experts is called who is identifying the best among hundreds.

Fourth step is the selection decision. The candidates who pass the test, interview included In selection list and critically examined that they are best or not.

The fifth step is examining their medical fitness they are efficient or not.

The sixth step is to offer the job, providing them a letter of appointment in which terms and conditions are mentioned.

A final step is a contract of employment when a candidate accepts the job offer they signed the contract of employment, the employer and candidate exchange certain documents.

(iv) Which methods of training and development should be Company initiate? Explain giving reasons.
Answer:
The company can use ‘On the job’ and ‘Off the job training methods.

The merits or benefits of ‘On the job’ are

1. It is a practical method.
2. The trainee can contribute towards the real/actual work.
3. Separate arrangements need not be done.

If the ‘Off the job ’ methods are used then the benefits derived are

1. Vestibule training helps in avoiding modem and expensive equipment from being damaged.
2. The conference helps In to develop conceptual knowledge reduce, resistance to change, etc.

Question 2.
A major insurance company handled all recruiting screening and training processes for data entry/customer service representatives. Their competitor was attracting most of the qualified, potential employees in their market. Recruiting was made even more difficult by the strong economy and the ‘job seeker’s market: This resulted in the client having to choose from candidates who had the ‘soft skills needed for the job but lacked the proper ‘hard’ skills and training.
Questions
(i) As an HR manager what problems do you see in the company?
Answer:
The human resource manager may face the following problems

1. Lack of trained workforce
2. Lack of sufficient personnel to provide, customer services.
3. Inefficient maintenance of data.

(ii) How do you think it can be resolved? Following steps can be taken to resolve these problems
Answer:

1. Proper training of the personnel.
2. Provision of incentive-based schemes.
3. The proper database should be maintained by the company to provide efficient services, in order to

Question 3.
A public transport corporation has hired 1,000 buses for the different routes for the passengers of a metropolitan city. Most of the 3,000 crewmen (drivers, conduct, helpers, etc.) of these buses have been found to be wanting in satisfactorily dealing with public and daily commuters. They seem to be little interested in the job and the job seems to have lost all meaning to them.
Questions
(i) As manager of the public transport company what measures do you suggest to improve the working of a crewman in question?
Answer:
The following measures can be taken to improve the working of crewmen.

1. Along with wages/salary, various other facilities should be provided to them like education for their children, insurance, etc.
2. Working hours should be between 7 to 8 per day
3. Intervals should be provided.

(ii) Is it possible to modify their behavior by planning a suitable type of training? Suggest one.
Answer:
Yes, it is possible to modify their behavior by planning a ‘coaching’ training program as in this program superior guides and instructs the trainee as a coach. He suggests the changes required in the behavior and performance of the employee. Coach gives due Importance to the objective of individual and objectives of the organization. Thus, effective coaching motivates the employees to perform their best ability.

Question 4.
Ms Jayshree recently completed her post-graduate Diploma in human resource management. A few months from now a large steel manufacturing company appointed her as its human resource manager. As of now, the company employs 800 persons and has an expansion plan in hand which may require another 200 persons for various types of additional requirements. Ms Jayshree has been given complete charge of the company’s human resource department.
Questions
i() Point out what functions is she supposed to perform?
Ms. Jayshree as an HR manager is required to perform the following functions

• Recruitment
• Prepare job description
• Preparing compensation and incentive plans
• Arranging training programs
• Making welfare schemes for employees
• Handling grievances of employees
• Handling labor dispute

(ii) What problems do you foresee in her job?
Answer:
She may face the following problems

• Properly qualified candidates may not be available.
• Demand for wages may go higher.
• After providing training the workers may leave the organization.
• Trade unions may bring unreasonable demands.

(iii) What steps is she going to take to perform her job efficiently?
Answer:
Following steps can be taken by her to perform her job efficiently

• She should make use of all the possible sources of recruitment.
• She should frequently consult the experts and also observe the policies followed by competitors to recruit and retain the workforce.
• Maintaining cordial relationships With trade unions and encouraging them to act as one big family.

(iv) How significant is her role in the organization?
Answer:
Her role n very significant In the organization. She is a human resources manager and is concerned with timely procurement of competent manpower and ensuring its effective and efficient utilization so as to survive along with the three main objectives; organizational, individual, and societal.

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 5 Organising

Question 1.
Name the function of management which coordinates the Physical, Financial, and Human resources and establishes productive relations among them for the achievement of specific goals.
Answer:
Organizing

Question 2.
Name and explain the two steps in the process of organizing which come after identification and division of work and departmentation.
Answer:
Assignment of duties and establishing reporting relationships.

Question 3.
Axar Ltd. is manufacturing Toys and has Production Sales, Purchase and Finance Department, which type of organizational structure would you suggest to them? State any three advantages of this organizational structure.
Answer:
I would suggest a functional structure from Axar Ltd.

Question 4.
Kohli Ltd. is manufacturing computers, soaps, and textiles. Which type of organizational structure would suit the requirement of such an organization? State any three advantages of this organizational structure?
Answer:
Divisional Structure would suit the requirement of KohliLtd.

Question 5.
It is a system of consciously coordinated activities of two or more people towards common objectives. Mention this system of organization and explain its two features.
Answer:
Formal organization

Question 6.
It is a network of personal and social relations not established or required by the formal organization but arising spontaneously as people associate with one another. Name this organization and give its three advantages.
Answer:
Informal organization

Question 7.
The directors of Natesh Ltd. An organization manufacturing computers has asked its marketing manager to achieve a target rate of 100 computers per day. The marketing manager has delegated the task to his deputy sales manager working under him. The deputy sales managers could not achieve the target. Is the marketing manager responsible for the failure of his deputy sales manager? Explain in brief, the relevant principle in support of your answer.?
Answer:
Yes, the marketing manager is responsible for the non-achievement of the target sales.

Question 8.
The Director of Kumar Ltd, an organization manufacturing computer wants to double the sales and given this responsibility to their sales manager. The Sales Manager has no authority either to increase, sales expense or appoint a new salesman. Hence, he could not achieve this target. Is the sales manager responsible for not achieving the target? Explain in brief, the relevant principle in support of your answer.
Answer:
No, the sales manager is not responsible for not achieving the target. The principle involved is the purity of authority and responsibility.

Question 9.
It refers to the systematic delegation of authority from top management to the lower-level managers. Mention the name of it.
Answer:
Decentralization.

Question 10.
“If we delegate the authority, we multiply it by two if we decentralize it, we multiply it by many,“ How?
Answer:
The scope of delegation of authority is limited as it is confined to a manager and his immediate subordinate in the work unit. Scope of decentralization. It involves systematic delegation of authority at all levels and in all functions of the organization. It is an extension of delegation to the lowest levels in the organization

Question 11.
The employee of VIRAJ Ltd., take part in volleyball matches on Sunday. Name the types of organizations formed.
Answer:
Informal organization

Question 12.
“The first Step in the process of organizing is identification and division of work” Why is his work divided into manageable activities?
Answer:
The work is divided into manageable activities so that duplication of efforts and resources can be avoided and the burden of work can be shared among the employees.

Question 13.
While allocating work to various employees how the work must be assigned?
Answer:
The work must be assigned to those who are best fitted to perform it well.

Question 14.
Which Function of management is concerned with building a stable framework or structure of various parts of an enterprise?
Answer:
Organizing.

Question 15.
How can a department or division be created?
Answer:
It can be created on the basis of-
(a) territory and
(b) products

Question 16.
How does an informal organization emerge?
Answer:
Informal organization emerges from within the formal organization when people interact beyond their officially defined roles.

Question 17.
Name the organization which has the benefit of Easy to fix responsibility?
Answer:
Formal organization

Question 18.
Name the type of organization that does not have predetermined objectives?
Answer:
Informal organization.

Question 19.
A Fashion design house has the following main job: (1) Manufacturing (2) Finance (3)Marketing (4) Personal (5) Research and Development Which organizational structure will you prefer for this type of company and why?
Answer:
A functional organizational structure will be suitable.

Question 20.
VINEETHA runs a shoe manufacturing factory. She wants to expand her business. For expansion, she contemplated entering into the manufacturing of leather bags and western formal wear apart from the running business of shoes. By doing this her company will be able to provide many products to working women under one roof. Which organization structure will you suggest to her and why?
Answer:
In this situation, a Divisional Structure will be suitable as it provides equal importance to all products. Also, describe the advantages of divisional organization structure.

Question 21.
Name the activity which increases the importance of the role of subordinates?
Answer:
Decentralization.

I. One Mark Questions and Answers

Question 1.
Which is the 2nd function of Management?
Answer:
Organizing.

Question 2.
Name any one of the Resources.
Answer:
Money.

Question 3.
Name any one importance of Organising.
Answer:
Optimum utilization of resources.

Question 4.
For which kind of Organisations does the functional structure suit?
Answer:
Large Organisations.

Question 5.
An Organisation involved in the production of different lines of products should adopt which type of organization structure.
Answer:
Divisional Structure.

Question 6.
Write a feature of formal Organisation.
Answer:
It is created to achieve predetermined objectives.

Question 7.
Write a feature of informal Organisation.
Answer:
It is unplanned and has no predetermined objectives.

Question 8.
What is Delegation?
Answer:
It is a process of transferring authority from superiors to subordinates.

Question 9.
Write the meaning of Authority.
Answer:
It is the right to give orders.

Question 10.
Write the meaning of Responsibility.
Answer:
It is the duty to perform according to the given orders.

Question 11.
Write the meaning of Accountability.
Answer:
It is a state of being answerable to the job performed.

Question 12.
Write anyone importance of Delegation.
Answer:
Effective Management.

Question 13.
What is Centralisation?
Answer:
It means the decision-making power is in the hands of a single or few people.

Question 14.
What is Decentralisation?
Answer:
It means the decision-making power is in the hands of more persons.

Question 15.
State any one importance of Decentralisation.
Answer:
The democratic system of decision-making.

Question 16.
Give the meaning Organising?
Answer:
A function that brings together all the necessary resources.

Question 17.
Name anyone step involved in the Organising process.
Answer:
Departmentalisation.

Question 18.
Name a type of Organisation Structure.
Answer:
Functional Structure.

Question 19.
Give the meaning of formal Organisation?
Answer:
A formal organization is one that is governed by proper rules and regulations.

Question 20.
Give the meaning informal Organisation?
Answer:
It refers to an organization where the relationship between people working in the organization is not established by formal authority.

Question 21.
Write any one element of delegation.
Answer:
Authority.

Question 22.
Give the meaning of centralization.
Answer:
The concentration of authority at the top level for decision-making with one or few managers is known as the centralization of authority.

II. Two Marks Question and Answers

Question 1.
Define Organising.
Answer:
According to Henry Fayol ‘To organize a business is to provide it with everything useful to its functioning – raw materials, machine tools, capital, and personnel.

Question 2.
What is the organizing process?
Answer:
The organizing process refers to the identification and division of activities among all the employees. It specifies and divides the duties among departments and employees and lays down the scope of authority and responsibility of each job. It helps to maintain coordination between the activities of various individuals and departments.

Question 3.
What is the functional structure of an organization?
Answer:
Functional Structure:
Grouping jobs of similar nature and organizing these major functions as separate departments create a functional structure. All departments report to a coordination head.

Question 4.
What is the divisional structure of an organization?
Answer:
Grouping of activities on the basis of product is known as a divisional structure of the organization. Under this structure the top-level delegates extensive authority to the divisional heads.

Question 5.
What is Delegation?
Answer:
Delegation of authority merely means the granting of authority to subordinates to operate within prescribed limits.

Question 6.
What is Decentralisation?
Answer:
Decentralization means that the concentration of the decision-making power lies in the hands of more persons.

Question 7.
What is Organising?
Answer:
It is a process of identifying and grouping the work to be performed. It aims at bringing together all the necessary resources for the accomplishment of organizational goals.

Question 8.
Mention any two importances of Organising.
Answer:
(a) Optimum utilization of resources,
(b) Effective administration.

Question 9.
Mention any two steps involved in the Organising process.
Answer:
(a) Identification and division of work
(b) Departmentalisation.

Question 10.
Mention any two types of Organisational Structures.
Answer:
(a) FunctionalStructure.
(b) Divisional Structure.

Question 11.
What is Functional Structure?
Answer:
It is an organizational structure that groups together similar kinds of jobs by creating separate departments and all the departments will have a Co-ordinating Head.

Question 12.
Mention any two situations where the functional structure is suitable in Organisation.
Answer:
(a) When the size of the organization is large.
(b) When the authority is decentralized.

Question 13.
What is Divisional Structure?
Answer:
It is an organizational structure where a grouping of activities are done on the basis of product and the divisional head is responsible for the smooth functioning of the division.

Question 14.
Mention any two situations where the functional structure is suitable in an Organisation.
Answer:
(a) If an organization is involved in the production of different lines of products.
(b) If the organization needs product specialization.

Question 15.
What is a Formal Organisation?
Answer:
Formal Organisation refers to a structure of well-defined jobs each bearing a definite measure of authority, responsibility, and accountability.

Question 16.
What is an Informal Organisation?
Answer:
It refers to the relationship between the people in the organization based on the personal attitudes, prejudices, likes and dislikes, etc.,

Question 17.
Mention the elements of delegation.
Answer:
(a) Authority
(b) Responsibility
(c) Accountability

Question 18.
What is Authority?
Answer:
Authority is a rightful or legal power to command or to act, a power which gives the right to give orders to make decisions.

Question 19.
What is Responsibility?
Answer:
It is a state of being responsible or accountable or answerable as for a trust, obligation, or debt.

Question 20.
What is Accountability?
Answer:
It means being answerable, it is an obligation to carry out responsibility and give reports to superiors.

Question 21.
Mention any two importance of delegation.
Answer:
(a) Effective Management
(b) Employee Development.

Question 22.
What is Centralisation?
Answer:
Centralization means that the concentration of the decision-making power lies in the hands of one or few people.

Question 23.
Write any two importances of Decentralisation.
Answer:
(a) Democratic system of decision making.
(b) It facilitates growth.

III. Five Marks Questions and Answers

Question 1.
Explain the Organising process.
Answer:
(a) Identification of Work: The process of Organising starts with the identification of work.

(b) Division of Work: After the first step, the whole work has to be divided into manageable activities.

(c) Departmentalisation: It refers to a grouping of activities of similar nature.

• on the basis of function
• on the basis of the type of product manufactured.

(d) Assignment of Duties: In order to ensure effective performance it is necessary to assign the work to a different set of people who have the ability to do it.

(e) Establishment of reporting relationships: After allocation, it is very essential to establish such clear relationships.

Question 2.
Explain the elements of delegation.
Answer:
The elements of the delegation are as follows:
1. Authority: Authority is the power to command employees and instruct them to perform a job. Authority determines the superior-subordinate relationship. lt flows from top to bottom, i.e., the superior has authority over the subordinate, wherein the superior communicates his decision to the subordinate expecting to perform it. The subordinate executes the decision as per the guidelines of the superior.

2. Responsibility: Responsibility is the obligation of a subordinate to perform the assigned duty. It arises from a superior-subordinate relationship because the subordinate is bound to perform the duty assigned to him. Thus, responsibility flows upwards i.e., the subordinate is always responsible to his superior.

3. Accountability: Accountability means being answerable for the final results. It is an obligation to carry out responsibility and to give reports about one’s performance to the superior. Authority can be delegated by a superior to his subordinate but accountability can never be delegated.

Question 3.
Explain the importance of Delegation.
Answer:
(a) Delegation enables effective management and increases working capacity.
(b) It is very much necessary for the smooth functioning of a business.
(c) It gives more opportunities to utilize the talents of employees and motivate them to grow.
(d) It facilitates growth and expansion by providing properly trained and experienced personnel.
(e) It helps in better coordination among various departments and functions of management.
(f) It creates a chain for superiors and subordinates on the basis of the hierarchy of management.

Question 4.
Explain the importance of Decentralisation.
Answer:
(a) Quick decision-making: Managers are free to make their own decisions.
(b) Democratic system: It avoids centralization of power and promotes a democratic approach.
(c) Incentive to workers: It provides job satisfaction and boosts the morale of employees.
(d) Facilitates growth: It enables managers of the lower levels to perform well and promote a sense of competitiveness.
(e) Development of Executives: Even the sub-ordinates get a chance to take a decision and get a promotion.
(f) Reduces workload: Decentralisation distributes the work and reduces the burden.

IV. Ten Marks Questions and Answers

Question 1.
Define Organising and Explain the importance of Organising.
Answer:
According to Henry Fayol ‘To organize a business is to provide it with everything useful to its functioning – raw materials, machine tools, capital, and personnel.

Importance of Organising:
(a) Organising leads to optimum utilization of resources without any wastage.
(b) Organising helps the organization to flexible and adjust to any kind of changes in the environment.
(c) Organising provides a clear description of all the work that has to be done and it minimizes confusion and duplication.
(d) Organising helps in systematic allocation and avoids repetitions and increases efficiency.
(e) Organising helps in defining different work relationships and clearly defines the lines of communication.
(f) It helps the organization to take up new challenges and promote growth and diversification

Question 2.
Distinguish between formal and informal Organisation.
Answer:

1. Draw a Functional Chart of an Organisation.
Answer:

Exercises

Short Answer Type Questions

Question 1.
Define‘Organising’?
Answer:
Organizing is defined as a process that initiates the implementation of plans by clarifying jobs, working relationships and effectively deploying resources for the attainment of identified and desired results.

Question 2.
What are the steps in the process of organizing?
Answer:
Organizing involves the following steps that need to be taken in series:

1. Identification and Division of Work: The organizing process begins with identifying and division of total work into small units.
2. Departmentalization: After dividing the work, related and similar jobs are grouped together and put under one department.
3. Assignment of Duties: After departmentalization, the work is assigned according to the ability of individuals.
4. Establishing Reporting Relationship: Assigning duties is not enough. Each individual should also know, who he has to take orders and to whom he is accountable. Thus, reporting relationship helps in co-ordination among various departments.

Question 3.
Discuss the elements of delegation.
Answer:
The elements of the delegation are as follows:
1. Authority:
It refers to the right of an individual to command his subordinates and to take action within the scope of his position. The concept of authority arises from the established scalar chain, which links the various job positions and levels of an organization. It must be noted that authority is restricted by laws and the rules and regulations of the organizations. Authority flows downward.

2. Responsibility:
Responsibility is the obligation of a subordinate to properly perform the assigned duty. It arises from a superior-subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. Responsibility flows upward.

3. Accountability:
Accountability implies being answerable for the final outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability. It cannot be delegated and flows upwards i.e., a subordinate will be accountable to a superior for satisfactory performance of work.

Question 4.
What does the term ‘Span of management’ refer to?
Answer:
Is the number of subordinates under a superior or we can say, it means how many employees can be effectively managed by a superior. The span of management, to a large extent gives shape to the organizational structure, e.q., if the number of subordinates under a superior keeps increasing when we move downward then the shape of the organizational structure will be as follows.

Question 5.
Under what circumstances would functional structure prove to be an appropriate choice?
Answer:
The functional structure would prove to be most suitable when the size of the organization is large, has diversified activities, and operations require a high degree of specialization. It promotes control and coordination within a department, increased managerial and operational efficiency, results in increased profits.

Question 6.
Draw a diagram depicting a divisional structure.
Answer:
Diagram of Divisional Structure

Question 7.
Can a large-sized organization be totally centralized or decentralized? Give your opinion.
Answer:
No large organization cannot be totally centralized or decentralized. Complete centralization would imply conceptualization of all decision-making functions at the apex of the management hierarchy. Such a scenario would obviate the need for a management hierarchy. On the other hand, complete decentralization would imply the delegation of all decision-making functions to the lower level of the hierarchy and this would finish off the need for higher, managerial positions. Both the situations are unrealistic.

As an organization grows in size and complexity, there is a tendency to move towards decentralized decision-making. This is because, in large organizations those employees, who are directly and closely involved with certain operations tend to have more knowledge about them than the top management, which may only be indirectly associated with individual operations. Hence, there is a need for balance between these co-existing forces.

Question 8.
Decentralization is extending delegation to the lowest level. Comment.
Answer:
Decentralization is extending delegation to the lowest level: Decentralisation explains the manner in which decision-making responsibilities are divided among hierarchical levels. Decentralization refers to the delegation of authority throughout all the levels of the organization. Decision-making authority is shared with lower levels and is consequently placed nearest to the point of action. In other words, decision-making authority is pushed down the chain of command.

Delegation is the process and decentralization is the end result, e.g., If the director gives the responsibility to the production head to complete the target of20,000 units and authorize him to hire the workers, the production head further shares his responsibility with the manager to select the worker. The manager shares his responsibility with supervisors, who are dealing with workers, authorizes him to select workers. Here, the responsibility is distributed at every level. That’s why we say systematic delegation leads to decentralization.

Long Answer Type Questions

Question 1.
Why is delegation considered essential for effective organizing? Effective delegation leads to the following benefits
Answer:
1. Effective Management: By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters. This makes the working of all the levels effective and efficient.

2. Employee Development: As a result of delegation, employees get more opportunities to utilize their talent and this may give rise to talent abilities in them. It makes them better leaders and decision-makers. Delegation empowers the employees by providing them with the chance to use their skills, gain experience and develop themselves for higher positions.

3. Motivation of Employees: Delegation helps in developing the talents of the employees. It also has psychological benefits. Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improve his performance further.

4. Facilitation of Growth: Delegation helps in the expansion of an organization by providing a ready workforce to take up leading positions in new ventures. Trained and experienced employees are able to play significant roles in the launch of new projects.

5. Basis of Management Hierarchy Delegation of authority establishes superior-subordinate, which management. The extent of delegated is the basis of the hierarchy of authority also decides the power that each job position enjoys in the organization

6. Better Co-ordination: Due to delegation work, duties, power all becomes very clear. This helps to avoid overlapping duties and duplication of effort as it gives a clear picture of the work being done at various levels. Such clarity in reporting relationships helps in developing and maintaining effective coordination amongst the departments, levels, and functions of management.

Question 2.
What is a divisional structure? Discuss its advantages and limitations.
Answer:
A divisional structure comprises separate business units or divisions. Each unit has a divisional manager responsible for the performance and who has authority over the unit. Generally, manpower is grouped on the basis of different products manufactured.

Merits:
1. Skill Development: Product specialization helps in the development of varied skills in a divisional head and this prepares him for higher positions as he gains experience in all functions.

2. Accountability Divisional heads are accountable for profits, as revenues and costs are related to different departments. Can be easily identified and assigned to them. This provides a proper basis for performance measurement.

3. Quick Decision Making: It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making.

4. Facilitates Expansion: It facilitates growth as new divisions can be added without interrupting the existing operations, by merely adding another divisional head and staff for the new product line.

Demerits
The divisional structure has certain disadvantages

1. Conflicts: May arise among different divisions with reference to allocation of funds.
2. Higher: Cost providing each division with a separate set of similar functions increases expenditure.
3. Ignoring Organisational Goals: It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager may gain power and in a bid to assert his independence may Ignore organizational interests.

Question 3.
Decentralization is an optional policy. Explain why an organization would choose to be decentralized.
Answer:
Decentralization is much more than the mere transfer of authority to the lower levels of the management hierarchy.

Its importance can be understood from the following Points
1. Develops Initiative among Subordinates: When lower managerial levels are given the freedom to make their own decisions they learn to depend on their judgment. A decentralized policy helps to identify those executives, who have the necessary potential to become dynamic leaders.

2. Develops Managerial Talent for the Future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organization, but equally important is the experience gained by handling assignments independently. It gives them a chance to prove their abilities and creates a reservoir of qualified manpower.

3. Quick Decision Making: In a decentralized organization, however, since decisions are taken at levels, which are nearest to the points of action and there is no requirement for approval from many levels the process is much faster.

4. Relief to Top Management: Decentralisation leaves the top management with more time, which they can devote to important policy decisions rather than occupying their time with both policies as well as operational decisions.

5. Facilitates Growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and develops a sense of competition amongst the departments. Consequently, the productivity levels increase and the organization is able to generate more returns, which can be used for expansion purposes.

6. Better Control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results. The extent of achievement of organizational objectives as well as the contribution of each department in the meeting, the overall objectives can be ascertained.

Question 4.
How does the informal organization support the formal organization?
Answer:
The informal organization offers many benefits Important among them are given as follows
1. Quick Feedback: Prescribed lines of communication are not followed. Thus, the informal organization leads to faster spread of Information as well as quick feedback

2. Social Needs: It helps to fulfill the social needs of the members and allows them to find like-minded people. This enhances their job satisfaction since it gives them a sense of belongingness in the organization

3. Organisational Objectives: It contributes towards the fulfillment of organizational objectives by compensating for inadequacies in the formal organization e.g., feedbacks on new policies, etc can be tested through an Informal network.

Question 5.
Distinguish between centralization and decentralization.
Answer:
Difference between centralization and decentralization

Question 6.
How is a functional structure different from a divisional structure?
Answer:
Difference between functional and divisional structure

Question 7.
Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as Western formal wear, thereby making her company a complete provider of corporate me. This will enable her to market the business unit as the one-stop for working women. Which type of structure would you recommend for her expanded organization and why?
Answer:
Neha should decide on the divisional structure because:

1. She will diversify her unit now into varied product lines.
2. Such a structure would enable her to know the profit margins from each product line and accordingly, she can plan and select the specific product for future diversification.
3. It will facilitate further expansion without disturbing the existing units.

Question 8.
The production manager asked the foreman to achieve a target production of 200 units per day, but he doesn’t give him the authority to requisition tools and materials from, the store’s department. Can the production manager blame the foreman if he is not able to achieve the desired target? Give Reasons.
Answer:
No, the production manager cannot hold the foreman responsible for the incomplete work as the foreman was not given authority by the manager. The principle of authority responsibility says that there should be a balance between authority and responsibility. If the authority given is more, then it leads to misuse of authority and if responsibility is more, then the work will not be completed.

Question 9.
A manager enhances the production target from 500 units to 700 units per month, but the authority to draw raw material was not given by him. The production manager could not achieve the revised production target. Who is responsible and which principle was violated?
Answer:
The manager is responsible for work not being completed. The principle of authority responsibility is violated.

Question 10.
A company has its registered office in Delhi, manufacturing unit at Gurgaon, and marketing and sales department at Faridabad. The company manufactures consumer products. Which type of organizational structure should it adopt to achieve its target?
Answer:

1. As a company is performing separate functions in separate areas, then it should adopt a functional structure
2. The services of experts are common to all products. It will be economical as no duplication will take place.
3. The span of management can be increased as workers will be doing some type of work.

Multiple Choice Questions

Question 1.
Which of the following is not an element of delegation?
(a) Accountability
(b) Authority
(c) Responsibility
(d) Informal organisation
Answer:
(d) Informal organization is not an element of delegation.

Question 2.
A network of social relationships that arise spontaneously due to interaction at work is called
(a) formal organization
(b) informal organization
(c) decentralization
(d) delegation
Answer:
(b) Informal organization implies social interaction amongst people.

Question 3.
Which of the following does not follow the scalar chain?
(a) Functional structure
(b) Divisional structure
(c) Formal organisation
(d) Informal organisation
Answer:
(d) Informal organization does not follow the scalar chain.

Question 4.
A tall structure has a
(a) narrow span of management
(b) a wide span of management
(c) no span of management
(d) fewer levels of management
Answer:
(a) A tall structure has a narrow span of management.

Question 5.
Centralization refers to
(a) retention of decision-making authority
(b) dispersal of decision-making authority
(c) creating divisions as profit centers
(d) opening new centers or branches
Answer:
(a) Centralisation implies a concentration of all decision-making functions at the apex of the management.

Question 6.
For delegation to be effective, it is essential that responsibility be accompanied by necessary
(a) authority
(b) manpower
(c) incentives
(d) promotions
Answer:
(a) Authority refers to the right of an individual to command his subordinates Thus, It is essential that responsibility be accompanied by the necessary authority.

Question 7.
The span of management refers to
(a) number of managers
(b) length of term for which a manager is appointed
(c) number of subordinates under a superior
(d) number of members in top management
Answer:
(c) Span of management is the number of subordinates under a superior.

Question 8.
The form of organization known for giving rise to rumors is called
(a) centralised organization
(b) decentralised organization
(c) informal organization
(d) formal organization
Answer:
(c) As is informal organization excess of interactions among people giving rise to rumors.

Question 9.
Grouping of activities on the basis of product lines is a part of
(a) delegated organization
(b) divisional organization
(c) functional organization
(d) autonomous organization
Answer:
(b) Divisional organization implies grouping of activities on the basis of product lines.

Question 10.
Grouping of activities on the basis of functions is a part of
(a) decentralized organisation
(b) divisional organization
(c) functional organization
(d) centralised organization
Answer:
(c) Functional organization implies grouping of activities on the basis of functions

Case Problems:

Question 1.
A company, which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organizational structure with separate departments for production, marketing, finance, human resources, and research and development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into the manufacture of a new range of electronic toys for which a new market is emerging.
Question
Prepare a report regarding organization structure giving concrete reasons with regard to benefits the company will derive from the steps it should take.
Answer:
In the given situation, the organization should shift from functional structure to divisional structure as the company wants to diversity, by adding a new product line. The reasons and benefits are

1. The performance of each unit can be easily assessed,
2. New product lines can be easily added without disturbing the existing units.
3. Decision-making is faster.
4. The divisional structure maintains a short line of communication with customers and provides better services to them.

Question 2.
A company manufacturing sewing machines set up in 1945 by the British promoters follows formal organization culture in totality. It is facing a lot of problems in delays in decision making. As the result, it is not able to adapt to changing business environment. The workforce is also not motivated since they cannot vent their grievances except through formal channels, which involve red tape. Employee turnover is high. Its market share is also declining due to changed circumstances and the business environment.
Question
You are to advise the company with regard to change it should bring about its organizational structure to overcome the problems faced by it. Give reasons in terms of benefits it will derive from the changes suggested by you. In which sectors can the company diversify, keeping in mind the declining market for the product the company is manufacturing?
Answer:
The suggestions are

1. To overcome the limitations of formal organization, the management should encourage workers to interact and socialize with each other through get-together outings. In this way, everyone will interact and like-minded people will come closer. The net result will be a more satisfied workforce.
2. The management should try to decentralize the organizational structure.
3. The suggested area where the business can be diversified is textile machinery like embroidery units, sequencing units, buttoning units.

Question 3.
A company X limited manufacturing cosmetics, which has enjoyed a pre-eminent position in business, has grown in size. Its business was very good till 1991. But after that, a new liberalized environment has seen the entry of many MNC’s in the sector. As the result, the market share of X limited has declined. The company had followed a very centralized business model with directors and divisional heads making even minor decisions. Before 1991, this business model had served the company very well as consumers have no choice. But now the company is under pressure to reform.
Question
What organization structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm?
Keep in mind that the sector in which the company is FMCG.
Answer:
The company X Ltd is working in a centralized way, which is not giving enough time to the higher officials to think of better policies, strategies to handle the changes in the changing environment. The company should thus get decentralized so that the routine type of work, Involving minor decisions can be looked after by the lower levels.

This Will give/save more time for the directors and divisional heads to plan strategies to fight competition

2nd PUC Business Studies Important Questions

Karnataka 2nd PUC Business Studies Important Questions Chapter 4 Planning

Question 1.
How does planning provide direction?
(a) Planning is goal-oriented.
(b) Continuous process.
(c) Pervasive function.

Question 2.
The planning function of management is conducted at which level of management?
Answer:
At all Three Levels.

Question 3.
One of the functions of management is considered as a base for all other functions. Name that Function.
Answer:
Planning.

Question 4.
Planning strangulates the initiative of the employees and compels them to work in an inflexible manner” Discuss.
Answer:
Planning reduces creativity.

Question 5.
Which limitation of planning suggests that the employees stop thinking and become blind followers of the Plan?
Answer:
Planning reduces creativity.

Question 6.
A company needs a detailed plan for its new project- the construction of a shopping mall. What type of plan Is it?
Answer:
Program.

Question 7.
In which type of plan the sequence to perform a job is determined?
Answer:
Procedure.

Question 8.
Which plans suggest action and non-action of employees?
Answer:
Rules

Question 9.
“No Smoking: the statement is related to which type of plan?
Answer:
Rule.

Question 10.
Me Donald does not give its franchise to any other company which is running a food business. This is related to which type of plan/
Answer:
Policy.

Question 11.
Name the type of plan which serve as a guide for overall business planning and define the future state of affair which the organization strives to realize?
Answer:
Objectives.

Question 12.
In which step of the planning process do the planners make predictions and assumptions regarding the future?
Answer:
Setting up planning premises for all the alternatives.

Question 13.
How should a manager select the best possible course of action?
Answer:
The manager should apply permutation and combination.

Question 14.
Without one function of management, the controlling function is not possible. Name the concerned function.
Answer:
Planning.

Question 15.
Planning is an activity that enables a manager to look ahead and anticipate changes. Mention the Benefit of planning highlighted here.
Answer:
Planning reduces the risks of uncertainty.

Question 16.
Planning ensures clarity in thoughts and actions, works are carried on smoothly without interruptions. Which importance of planning is mentioned here?
Answer:
Planning reduces overlapping and wasteful activities.

Question 17.
It helps the manager to look into the future and make a choice amount various ” alternative courses of action Enumerate the importance of planning indicated here.
Answer:
Planning facilitates decision-making.

Question 18.
Planning lays down the base for other functions of management. Which feature of planning is highlighted here?
Answer:
Planning is a primary function of management.

Question 19.
A plan is framed it is implemented and is followed by another plan and so on. Mention the feature of Planning indicates here?
Answer:
Planning is a continuous process.

Question 20.
Which features of planning are stressed by saying that planning is an intellectual activity of thinking rather than doing?
Answer:
Planning is a mental exercise.

I. One Mark Questions and Answers

Question 1.
What is Planning?
Answer:
It is an intellectual process, which requires a manager to think before doing anything.

Question 2.
State a benefit of Planning.
Answer:
Planning provides direction.

Question 3.
State a limitation of planning.
Answer:
Planning leads to rigidity.

Question 4.
State the function of management which determines the objectives of an organization.
Answer:
Planning.

Question 5.
Mention the first step of the planning process.
Answer:
Setting objectives.

Question 6.
State a type of plan.
Answer:
Strategies.

Question 7.
Give an example of the rule.
Answer:
Wearing identity cards compulsorily at the workplace.

Question 8.
What are the methods under Planning?
Answer:
They are the ways of doing a planned task.

Question 9.
What are programs under planning?
Answer:
It is a plan which lays down operations to be carried out to complete a given task.

Question 10.
Give an example for the budget.
Answer:
Sales Budget, advertising budget, etc.

Question 11.
Which is the first function performed in the process of Management?
Answer:
Planning.

Question 12.
What does planning mainly concentrate on?
Answer:
It concentrates on setting up the objectives of an organization.

Question 13.
Mention any one importance of Planning?
Answer:
It provides direction for the achievement of objectives.

Question 14.
Mention any one objective of Planning?
Answer:
It ensures co-operation and coordination.

Question 15.
Mention any one limitation of Planning.
Answer:
Planning leads to rigidity.

Question 16.
Mention the first step in planning.
Answer:
Setting up objectives.

Question 17.
Give an example for Strategy.
Answer:
Divide and Rule.

Question 18.
Give an example for Policies.
Answer:
Pricing Policy.

Question 19.
Give an example for Procedure.
Answer:
Procedure for admission of a student.

Question 20.
What is the objective under Planning?
Answer:
They have desired goals that the management of an organization would like to reach.

Question 21.
What are strategies under Planning?
Answer:
They are specific programs for achieving objectives.

Question 22.
What are policies under Planning?
Answer:
They provide a framework for decision-making.

Question 23.
What are the procedures under Planning?
Answer:
They are plans prescribing the exact time and sequence of work to be done.

Question 24.
What are the rules under Planning?
Answer:
They have established principles for carrying out activities in an organization.

Question 25.
What is our Budget under Planning?
Answer:
It is a plan for future expenditure.

II. Two Marks Question and Answers

Question 1.
Define Planning.
Answer:
According to Louis Allen ‘Planning involves the development of forecasts objectives, policies, programs, procedures, schedules, and budgets.

Question 2.
State any two disadvantages of planning.
Answer:

1. Planning leads to rigidity
2. Planning may not work in a dynamic environment.

Question 3.
State the first two steps in the planning process.
Answer:

1. Setting objectives
2. Developing premises.

Question 4.
What are planning premises?
Answer:
Planning premises are the assumptions about the future conditions and events like trends in population, changes in the political and economic environment, variations in production cost and prices, government and legal regulations, etc. Plans should be formulated by the management within the framework of the planning premises.

Question 5.
What is decision-making in planning?
Answer:
Decision-making is a process of selecting the best course of action from various available alternatives after evaluating each one of them.

Question 6.
Mention any two types of plans.
Answer:
Budgets, policies.

Question 7.
What are the objectives?
Answer:
Objectives are guidelines laid down by the top management and it serves as a benchmark for measuring the performing of the organization.

Question 8.
Give the meaning of Strategies?
Answer:
It is an elaborate and systematic plan of action, a formal scheme of inducing employees to do a proposed work.

Question 9.
What are Policies?
Answer:
Policies are the method by which any organization is administered. They provide a framework for decision-making.

Question 10.
What are Procedures?
Answer:
Procedures are a particular course of action intended to achieve a specific pre-determined goal.

Question 11.
State the meaning of Budgets?
Answer:
A Budget is a sum of money allocated for a future expenditure. It is also considered a control device.

Question 12.
How rule is different from policy?
Answer:
Policies are general statements that serve as a guide to the decision-making in the organization whereas Rules are the established principles for carrying out the activities in a systematic manner. Policies are guidelines that help in decision making while rules are rigid and specific prescribing a code of behavior.

Question 13.
What do you mean by Planning?
Answer:
It is concerned with establishing specific goals and objectives to be achieved in future. It is also a process of choosing from alternatives.

Question 14.
Mention any two importances of Planning?
Answer:
(a) Planning helps in achieving co-ordination
(b) Planning leads to efficiency in operation.

Question 15.
Mention any two features of planning.
Answer:
(a) Planning is the primary function of management
(b) Planning is a goal-oriented process.

Question 16.
Mention any two limitations of Planning.
Answer:
(a) It is a time-consuming process.
(b) It is a costly process.

Question 17.
Mention any two steps involved in Planning.
Answer:
(a) Setting up of objectives.
(b) Selection of alternatives.

Question 18.
Mention any two types of Plans.
Answer:
(a) Programmes
(b) Budgets

Question 19.
Why Planning is it a costly affair?
Answer:
Collection and analysis of information incur huge expenses, hence planning is known as a costly affair.

Question 20.
What do you mean by follow-up action?
Answer:
It is the process of checking whether the plans are being implemented or not. It is an act of monitoring plans.

Question 20.
What are Methods?
Answer:
It is an orderly process, a regular manner of doing anything. It specifies how each step is to be performed.

Question 21.
What are Rules?
Answer:
Rules are established principles of carrying out planned activities in a systematic manner and their violation attracts disciplinary action.

Question 22.
What are programs?
Answer:
A Programme is a precise plan which lays down the operations to be carried out to complete a given task.

III. Five Marks Questions and Answers

Question 1.
Explain the Importance of Planning.
Answer:
(a) Planning provides guidelines for the decision-making process of managers.
(b) Planning helps the organization in coping up with the changing environment and feeding challenges.
(c) Planning helps organizations to predict and assess future uncertainties and act accordingly.
(d) Planning reduces uncertainty, risk, and confusion in an organization’s operations.
(e) Planning helps in achieving coordination and established standards for controlling.
(f) Planning encourages and promotes innovation and creativity.

Question 2.
Explain the limitations of Planning.
Answer:
The following are the limitations of Planning.
(a) Planning is a predetermined course of action; hence it is rigid in nature and restricts creativity and innovation.
(b) Planning is very expensive, a large pool of money has to be spent on the collection of information and then analyzing it.
(c) Planning predicts the future and if there is any unexpected change, the plans become useless.
(d) Planning is a time-consuming task; it involves a lot of procedures between the collection of information and analysis.
(e) Planning does not guarantee an enterprise’s success, it only provides a base for analysis for future course of action.

Question 3.
What is planning? Explain any two types of plan.
Answer:
It is an intellectual process, which requires a manager to think before doing anything.

Two types of plan.
(a) Objectives: Objectives are guidelines laid down by the top management and it serves as a benchmark for measuring the performing of the organization
(b) Strategies: It is an elaborate and systematic plan of action, a formal scheme of inducing employees to do a proposed work.

IV. Ten Marks Questions and Answers

Question 1.
Explain any five types of plans.
Answer:
The following are the types of plans.
(a) Objectives: Objectives are guidelines laid down by the top management and it serves as a benchmark for measuring the performing of the organization
(b) Strategies: It is an elaborate and systematic plan of action, a formal scheme of inducing employees to do a proposed work.
(c) Policies: Policies are the method by which any organization is administered. They provide a framework for decision-making.
(d) Procedures: Procedures are a particular course of actions intended to achieve a specific predetermined goal.
(e) Methods: It is an orderly process, a regular manner of doing anything. It specified how each step is to be performed.
(f) Rules: Rules are established principles of carrying out planned activities in a systematic manner and their violation attracts disciplinary action.
(g) Programmes: A Programme is a precise plan which lays down the operations to be carried out to complete a given task.
(h) Budgets: A Budget is a sum of money allocated for a future expenditure. It is also considered as a control device.

Question 1.
Bring out the steps involved in Planning while establishing a new business unit.
Answer:

Exercises

Short Answer Type Questions

Question 1.
What are the main points in the definition of planning?
Answer:
The main points in the definition of planning are as follows

1. Planning is deciding in advance what to do and how to do it.’
2. It is one of the basic managerial functions.
3. Planning involves setting objectives and developing an appropriate course of action to achieve these objectives.
4. It bridges the gap between where we are and where we want to reach.

Question 2.
How does planning provide direction?
Answer:
Planning provides direction for action by deciding in advance what has to be done, how to do when to do and who will do it. When we try to seek answers to the above questions, which are well planned then directions are automatically highlighted.

Question 3.
Do you think planning can work in a changing environment?
Answer:
Planning may not work in a changing environment. The environment consists of a number of dimensions, economic, political, social, legal, and technological dimensions. The organization has to constantly adapt itself to changes. It becomes difficult to accurately assess future trends in the environment. Planning cannot foresee everything and thus, there may be obstacles to effective planning.

Question 4.
If planning involves working out details for the future, why does it not ensure success?
Answer:
Planning does not guarantee success. The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or It becomes meaningless. Managers have a tendency to rely on previously tried and tested successful plans It is not always true that just because a plan has worked before It will work again. This kind of false sense of security may actually lead to failure instead of success

Question 5.
Why are rules considered to be plans?
Answer:
Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion. It reflects a managerial decision that a certain action must or must not be taken. They are usually the simplest type of plans because there IS no compromise or change unless a policy decision is taken.

Question 6.
What kind of strategic decisions are taken by business organizations?
Answer:
Major strategic decisions include whether the organization will continue to be in the same line of business or combine new lines of activity with the existing business or seek to acquire a dominant position In the same market.

Long Answer Type Questions

Question 1.
Why is it that organizations are not always able to accomplish all their objectives?
Answer:
Organizations are not always able to accomplish all their objectives due to the following reasons
1. Planning: Leads to Rigidity In an organization a when defined plan is drawn up with specific goals to be achieved, within a specific time frame. These plans then decide how the work will progress In the future and managers may not be in a position to change It. This creates a problem as flexibility is very important. Always adhering to the plan may not give us the desired results always

2. Planning May does not Work in a Dynamic Environment: The business environment is dynamic, nothing is constant. The business environment is a totality of external forces, where In some changes or the other keep on taking place Plans to decide in advance what has to be done in future Planning cannot foresee everything and thus there may be obstacles to effective planning.

3. Planning Reduces Creativity Planning is generally done by top: management. Usually, the rest of the members just implement these plans. As a consequence, middle management and other decisions makers are neither allowed to deviate from plans nor are permitted to act on their own, thus planning in a way reduces creativity since people tend to think along the same lines as others, there is nothing new or innovative.

4. Planning Involves Huge Cost: Planning involves huge costs in its formulation. These may be in terms of time and money. The Costs incurred sometimes may not justify the benefits derived from plans.

5. Planning is a Time-Consuming Process: Sometimes plans to draw take up so much time that there is not much time left for their implementation and the objectives to be achieved.

6. Planning does not Guarantee Success: Any plan needs to translate into action or it becomes meaningless. Managers have a tendency to rely on previously tried and tested successful plans. It is not always true just because a plan has worked before it will work again.

Question 2.
What are the main features to be considered by management while planning?
Answer:
The main features to be considered by the management while planning is:
1. It Focuses on Achieving Objectives Planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.

2. It is the Primary Function: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions.

3. Planning is Pervasive: Planning is required at all levels of management as well as in all departments of the organization. The top management undertakes planning for the organization as a whole. Middle management does the departmental planning. At the lowest level, day-to-day operational planning is done by supervisors.

4. Planning is Continuous: Plans are prepared for a specific period of time, maybe for a month, a quarter, or a year. At the end of that period, there is a need for a new plan to be drawn on the basis of new requirements and future conditions. Hence, planning is a continuous process.

5. Planning is Futuristic: The purpose of planning is to meet future events effectively to the best advantage of an organization. It implies peeping into the future, analyzing it, and predicting it.

6. Planning Involves Decision Making: Planning essentially involves a choice among various alternatives and activities. If there is only one possible goal then there is no need for planning. The need only arises when alternatives are available. Planning thus involves

7. Planning is a Mental Exercise: Planning is basically an intellectual activity of thinking rather than doing because planning determines the action to be taken. Planning requires logical and systematic thinking rather than guesswork or wishful thinking.

Question 3.
What are the steps taken by management in the planning process?
Answer:
The planning process involves the following steps:
1. Establishing Objectives: The first step in planning is to determine objectives that must be realistic, specific, and clear so as to specify what is to be accomplished by the network of policies, procedures, strategies, etc.

2. Developing Premises: They include assumptions or forecasts of the future and unknown conditions that will affect the operations of the plans. They provide an idea about the future which facilitates the work of planning.

3. Identifying the Alternative Courses of Action: The next step in planning is to identify the various alternatives available to achieve the objectives.

4. Evaluating Alternative Courses: The merits and demerits of different courses of action are evaluated in the light of objectives to be achieved and their feasibility is judged i.e., how far they will be successful in helping to achieve the objective.

5. Selecting an Alternative: The next step is to find out the most suitable course to be followed. The efforts are directed towards selecting that course. Which increases efficiency in the organization by maximizing output and profits at the minimum costs.

6. Implement the Plan: At this step, the best alternative chosen is put to use. ,

7. Follow Up: Only putting the best alternative to action is not enough. The future is uncertain and dynamic. Therefore, it becomes important to check back whether the plan is giving results or not.

Question 4.
Is planning actually worth the huge costs involved? Explain.
Answer:
Planning involves huge costs, when plans are drawn up huge costs are involved in their formulation. These are in terms of time, money, effort, etc. Detailed plans require scientific calculations to ascertain facts and figures. The costs incurred sometimes may not justify the benefits derived from the plans. There are a number of incidental costs as well (which are indirect) like expenditures on organizing a meeting, consultation fees given to professional experts, market surveys, etc. But despite the high cost, no firm can work without proper planning if used properly.

Multiple Choice Questions

Question 1.
The bottom line of any business plan is
(A) marketing plan
(B) financial plan
(C) personnel plan
(D) production plan
Answer:
(A) marketing plan

Question 2.
Top management works on
(A) strategic plan
(B) corporate plan
(C) budgeting
(D) both A & B
Answer:
(A) strategic plan

Question 3.
A ‘’Strategic plan’ is also called
(A) long term plan
(B) short term plan
(C) BothAandB
(D) none of above
Answer:
(A) long term plan

Question 4.
Plan which is firstly discussed in a business plan is mostly
(A) marketing plan
(B) financial plan
(C) personnel plan
(D) production plan
Answer:
(A) marketing plan

Case Problems:

An auto company C Ltd is facing a problem of declining market share due to increased competition from other new and existing players in the market. Its competitors are introducing lower-priced models for mass consumers who are price sensitive. Questions
Question 1.
Prepare a model business plan for C Ltd to meet the existing challenge. You need to be very specific about quantitative parameters. You may specify which type of plan you are preparing.
Answer:
In such a situation, formulating a strategy would be advisable. A strategy is a Single-use plan It is normally made to fight competition in the market.

The model business plan, i.e., the strategy will be:

1. It is objective and its purpose is that how much sales it wants to increase over a specified time.
2. The company should then list down its strengths and weakness. This brings to light what will be easy and what will be difficult.
3. Aggressive, advertising and sales promotion techniques to be adopted.

Question 2.
Identify the limitations of such plans.
Answer:
Limitations of the above strategy can be

1. Shortage of fluids.
2. Shortage of technical professionals.
3. The top-level may not be competent enough to develop a suitable strategy.
4. The company may not be successful in assessing the future plans of the competitors as compared to its own strategy.

Question 3.
How will you seek to remove these limitations?
Answer:
The above limitations can be overcome by

1. Arranging funds in advance.
2. Effective methods of recruitment should be adopted to ensure the availability of effective staff in all departments.
3. The middle level should be encouraged to propose plans in the form of suggestions. After considering all these, a strategy should be planned.
4. The company should be able to assess the moves of the competitors.

2nd PUC Business Studies Important Questions