INDUSTRIAL MANAGEMENT

Importance of Management:      

Accomplishment of Goals. Effective utilization of resources Sound organization Providing vision and foresight Harmony in work Help and motivates employees in achieving personal objectives. Development of society and nation.

MANAGEMENT AS SCIENCE OR ART



MANAGEMENT AS A SCIENCE:  

Science is a systematized body of knowledge pertaining to particular field of enquiry. Contains concepts, hypotheses, theories and principles to explain cause and effect relationship between 2 or more factors. To be organized as science, a discipline should have:    

Have a method of scientific enquiry Establish cause and effect relationship Principles should be verifiable Ensure predictable results Universal applications

Management is systematized body of knowledge and the researchers uses scientific techniques to collect and analyse data about human cause and effect relationship. Management is called as a science but its not a perfect science.

Reasons for inexactness of management as science:   

Many principles of mgmt. not supported by research. Difficult to establish cause and effect relationship Applications of principles depends upon situations and factors. Mgmt. deals with the people at work and it is very difficult to predict their behavior accurately.

MANAGEMENT AS AN ART:   

Art signifies the application of knowledge and personal skills to brings out desired result. Science is learnt, an art is practiced. Science is to seek knowledge and art is to apply knowledge. Features of ART:   

Denotes personal Skills Signifies practical knowledge Helps in achieving concrete results Creative in nature

Management as an art :    

Practice of management does involve the use of knowledge of management concepts, principles and techniques. Manager has to apply his personal skills to deal with various problems in org. Management is situational Art of management can be mastered through continuous practice. Management is creative.

MANAGEMENT AS BOTH SCIENCE AND ART:    

Its both science and art. Science as contains certain universal truth Art as managing requires application of certain skills which are personal possession of manager. Manager be a applied scientist, possess the specialised knowledge of mgmt. and skills to put this knowledge into practice. Its been remarked that management is the oldest of arts and the youngest of science.

MANAGEMENT AS A PROFESSION


Profession an occupation backed by specialised body of knowledge and training and to which entry is regulated by representative body. Requirement of Profession:a) b) c) d) e) f)

Specialised field of knowledge Restricted entry based on the knowledge and training Representative or professional association Ethical code of conduct for self regulation. Social recognition Professional fee.

Professional Criteria
Specialised body of knowledge

Management
It has a systematised body of knowledge and principles
and

Entry based training

on

education

Entry does not require any prescribed qualification and training No professional assc. Of which membership is essential. In India, AIMA but not essential to hold its membership to be a manager Managers are not bound by any common code of conduct. Service is not the only goal for management. Growing concern for social responsibility of mgmt.

Professional Association

Code of Ethics

Service responsibilities

Management can be considered a profession : 

  

Mgmt. is supported by well defined body of knowledge that can be taught and learnt. There is need for the formal education and training in management to acquire competency for application of management principles, techniques and skills. Certain associations of managers have been formed in different countries in the world. Several associations of Managers like AIMA have prescribed code of conduct for their members. Managers are aware about their social responsibilities thats how they are guided by service motive. Entry to management profession is not restricted. Need not to have a all India representative association. There are no ethical code of conduct for the managers.

Management cant be fully regarded as a profession:  

DEVELOPMENT OF I.M.


History can be traced to the industrial revolution in England and other European nations during 18th and 19th century. Development of different schools of mgmt. during industrial revolution, rise of factory system, growth of trade unionism, expansion of industrial trade, consumerism, etc. Harold Koontz Management theory Jungle due to divergent direction of management thoughts.

Industrial Revolution:   

Result of invention from 1760 to 1820. Need of inventions due to increased demand of products due to widening of markets. Beyond the capacity of the industry to meet increasing demand with labor intensive techniques. Some prominent inventions:

James Hargreaves spinning genny (1764), Richard Arkwright waterframe (1779), Crompton Mule spinner , Cartwright Powerloom, and invention of steam engines. Growth of engineering industries Rise of chemical industries Use of power driven machines. Revolution in iron making Advancement in coal mining. Development of means of transport.

Significant contributions of Industrial revolution were:i. ii. iii. iv. v. vi.

Impact of industrial Management:   

revolution

on

Industrial

Large scale production Change of form of ownership Factory system Specialisation

EMINENT CONTRIBUTORS


Robert Owen (1771-1858):     

Started factory at Manchester for manufacturing textile machinery. Became Managing director of Charlton Twist company. Began cooperative moment in 1828 in Rochdale, England. Referred as Father of Personnel Management. Worked for developing spirit of coop. between management and works. Practiced the idea that workers should be treated as human, made prov. like reduced working hours, housing facilities, education of workers and children, etc. He preached personnel mgmt. pays dividend to the employees and is an essential part of every managers job.

Charles Babbage (1792-1871):     

British mathematician at Cambridge University from 1828 to 1839. Invented mechanical calculator in 1832 and conceived analytical machine in 1833 later termed as computer. Known for the book On the Economy of Machinery and Manufacture (1832). Perceived that methods of science and mathematics could be applied to solve factory problems. He was an mathematical management scientist Especially interested in economics of division of labor and the development of scientific principles. Tried to find out solutions to managerial inefficiencies, plaguing rail roads at that time. Approach to run railroad was one of system, commonsense, reports and control. Initiated job descriptions, promotions on the basis of merits and made people responsible and accountable for their operations.

Daniel C. McCallum:  

APPROACHES TO MANAGEMENT
Scientific Management Approach Management Process Approach Human Relation Approach. Behavioral Science Approach Quantitative Approach Systems Approach Contingency Approach. Operational Approach Empirical Approach.

Scientific Management:     

Industrial Revolution in England necessitated the development of new management principles and practices. Need of bringing people together for the purpose of working together. Establishment of formal organizational structure, formal lines of authority, factory systems and procedures. Management movement known as Scientific Management Fredrick Winslow Taylor (1865-1915), emphasized the need the need for adopting scientific approach. Important aspects, standard time, standard output, standard cost, standardisation of production process, change in the attitude of management and workers. Supporters, Henry L. Gantt, Frank Gilberth, Lillian Gilberth, Harrington Emerson, etc.

Management Process Approach:    

Perceive management as a process consisting of planning, organising, commanding and controlling. Regards management as a universal process. The process school is also called as Traditional or Universalist school. Henry Fayol is regarded as the father of this school. Supporters, Oliver Sheldon, J.D. Mooney and Chester I. Bernard. Recognising the importance of human element in org. Elton Mayo, Hawthrone Experiment and investigated the myriad of informal relationships, social cliques, patterns of communication and informal leadership. Lead to trend known as Human relation movement

Human Relations Approach: 

Behavioral Science Approach:    

Utilises and uses the methods and techniques of social sciences such as psychology, sociology, social psychology and anthropology. Pioneer of this school, Gantt and Munsterberg. As per them, study of management must be centered around the people and their interpersonal relations. Concentrated on motivation, individual drives, group relations, leaderships, group dynamics and so forth. Contributors, Abraham Maslow, Fredrick Herzberg, Victor Vroom, Douglas McGregor. Using of scientific tools for providing scientific basis for managerial decisions. Management problems can be expressed in terms of mathematical symbols and relationships. Linear programming, CPM, PERT, Break even analysis, Game theory and queuing theory widely popular.

Quantitative Approach:  

Systems Approach:    

Composed of elements or subsystems that are related and dependent on each other. Based on generalization that an organisation is a system and its components are inter-related and independent. Basic feature, more importance given to the over- all effectiveness of the system rather then sub-system. Founder, Chester I. Bernard. Emphasises on the communication and decision process through out the organisation.

Contingency Approach: 

 

Also known as situational approach. Basis, internal functioning of organisation must be consistent with the demands of technology and external environment and needs of its members. Suggest, there is no one best way to handle any management problem. 3 major parts :- i) environment, ii) management concepts, principles and techniques , iii) contingent rship between the two.

Operational Approach: 

Advocated by Koontz and ODonnell. Recongnises there is a central core of knowledge about managing which exist in management such as line and staff, patterns of departmentation, span of management, managerial appraisal and various managerial control techniques. Regards management as universally applicable body of knowledge that can be brought to bear at all levels of managing and in all types of enterprises. Also recognises actual problem manager face and the envt. in which they operate may vary between enterprises and levels.

Emperical Approach: 

Management is the study of the experience of managers. Knowledge based on experience of successful managers can be applied by other managers in solving problems and in making decisions. Based on the analysis of the past experience and uses the case method of study and research.

APPLICATIONS OF INDUSTRIAL MANAGEMENT

elps in development of the org. for achievement of group goals. Helps in finding out efficient and economical work methods. Helps to find out the economic lot size work required during processing. Helps in schedule of work. Tries to find out standard performances. Maintains discipline though control over the employees. Keeps co-ordination among the staff at various levels. Proper distribution of work and machines among the workers to secure maximum output. It improves efficiencies. Suggest new ideas and improvements. Helps in cost control, rating and budgetary control. Makes arrangement for payment on scientific basis. Takes care of trade, finance, insurance, store and banking policies. Gives due importance to labor grievances and their psychology. Helps in improving the competitive position of the organisation.

SCOPE OF IM
Engineering Management

Improvement of work condition

Improvement in Managerial Decisions

Improvement in Workplace, method and procedures

Improvement in product and services

Internal

External

Organizational problems:Leadership, Motivation, Automation, Org. culture, etc.

Work study, system analysis, layout planning, planning, directing, control, scheduling, etc

TQM, Value engg., Business process re-engg., Benchmarking.

Vendor Development, Customer Need Analysis, etc.

Lighting, Noise andvibration, fatigue, ventilations, etc.

ACTIVITIES OF I.M.


Manufacturing Engineering:i. ii.

Equipment selection and specialization Design of tools, jigs and fixtures. Work Measurement Determination of allowances Computation of standard time Material Management ( Raw material, semi-finished , finished and components) Machines and manpower Routing Estimating Scheduling Dispatching Expediting evaluation

Methods of Engineering:i. ii. iii.

Production planning and control:i.

ii. iii. iv. v. vi. vii. viii.

    

Plant layout and material handing. Organization management Inspection and quality control Wages and incentives Budgetary control and cost control.

FUNCTIONS OF INDUSTRIAL ENGINEERING.

          

Organization and management methods. Plant location and plant layout Materials handling methods. Methods engineering. Time study Production, planning and control. Statistical quality control Cost control Job evaluation Wage incentives Operation research.

PRODUCTIVITY

DEFINITION
 

No single definition of productivity. European Productivity Council is an attitude of mind. It is a

mentality of progress , of the constant improvement of that which exist. It is the certainty of being able to do better today than yesterday, and continuously. It is the constant adaptation of economic and social life to changing conditions; it is the continual effort to apply new techniques and methods. Its the faith in human progress. Another definition widely acceptable and commonly used productivity as the ratio of output to input in a productive system. As per definition productivity can be improved by either: 

Producing more output with the same inputs, or Using lesser inputs to produce same output.

Different views on productivity from different perspectives:  

Economics:- effect of envt. and govt. regulation. Industrial engg.:- Stress on effects of methods and work flow on productivity. Psychologist and management:- job design or other human relation approach.

  

Complexity to define productivity, as it encompasses inputs, outputs ad the conversion process of techno-socialcommercial environment of production system. Difficult to measure when end product is multiple commodities, not homogeneous in nature and has a number of byproducts. Out is converted into standard hours i.e. time allowed for a product delivered to stores by an individual worker or a group of workers. Eg. Total time allowed to product 1 unit = 15 mins (.25 hrs.) Units to be produced: 1000 units Total time = .25 x 1000 = 250 hours. Standard time is calculated with consideration to ideal situation with respect to normal speed of a worker and his willingness to work.

Productivity = Labor utilisation X Labor efficiency = Standard hours X Available shift hours Available shift hrs. Actual hours worked = Standard hours/ Actual hours worked In capitalist industry labor productivity has little significance.

PRODUCTIVITY, EFFICIENCY AND EFFECTIVENESS



 

Efficiency:- It is the ratio of actual output attained to the standard expected output. Indicates how well the resources are utilised to accomplish the targets or results. Effectiveness:- Degree of accomplishing the objectives. Productivity:- The combined result or effect of efficiency and effectiveness. Productivity Index:- Performance achieved Input resources consumed = Effectiveness/Effeciency

Efficiency, Effectiveness and productivity of a production system

DIFFERENT APPROACHES


Partial Productivity:   

Defined on the basis of class of the input being considered. Eg. Increase in labor and its impact on the increased output is represented by productivity. Same for capital productivity, material productivity, etc. Advantages:     

Good diagnostic measure to identify areas where improvements may be done. Easy to calculate as independent of other inputs. Easy to understand. Easy pin-pointing the logic for improvement. Easy to benchmark (compare) with other industries. Data may be easily generate Misleading if used out-of-context. Doesn t contain overall effect of the system of performance. Focused areas of improvement are difficult to identify. It gives the myopic view of performance. Misses holistic approach.

Limitations:    

Productivity of Labor = Output Number of workers or No. of man hours Man Hrs = No. of workers employed x No. of hrs. worked. Output Total Capital Employed Productivity of Material = Output Material Productivity of machine = Output Machine Hrs. worked Productivity of Land = Output Area of Land used. Capital Productivity =

TOTAL FACTOR PRODUCTIVITY



Ratio of net input to the sum of labor and capital inputs.

Net output = Total output Intermediate goods or services Labor + capital inputs Labor + capital Input

Advantages: 

Relatively easy to compile data from company records Preferred as easy to compare in cross-industry context. Many important inputs like material , energy, etc., are ignored. Net-output does not reflect the efficiency of prod. System in a proper way.

Limitations: 

TOTAL PRODUCTIVITY
 

Its the ratio of total output to the sum of all input factors. Advantages:     

Considers all the outputs and inputs factors. More accurate representation of real economic performances. Easy for top management to understand the company performance. If used with the partial productivity, areas of improvement may be identified. Easy for cost accountants to compare. Easy to do sensitivity analysis. Difficult to generate company wise and sector wise data. Many indirect measures of input/output are ignored.

Limitations: 

TPI = Total production of goods and services Labor + Capital + Materials + Power

PRODUCTIVITY AND PROFITABILITY

 

   

Basic Productivity Ratio:- Prod. = Output/Input. Productivity may be measured in terms of physical units, monetary units, depending upon the availability of data and requirement of specific situations. Increase in the productivity occurs when the ratio of output to input rises from one period to the next. Profitability = (Revenue Cost)/ Investment Profitability can be increased by reducing costs and that would also increase the productivity. A decrease in the price of the product may lead to decrease profitability even though productivity my be rising or vis--vis.

IMPORTANCE OF PRODUCTIVITY

Increase in Productivity

Reduction in Cost

Increase in Profits

Competitive advantage

Better Quality of life

FACTORS AFFECTING PRODUCTIVITY

Internal Factors or controllable


Categories of factors
External Factors or uncontrollable

Internal factors:a)

Technological factor:

          

Size and capacity of plant Product design and standardisation Timely supply of material and fuel Rationalisation and automation measures Repairs and maintenance Production planning and control Plant layout and location Material handling system Inspection and quality control Machinery and equipment used Research and development Inventory control.

b). Human Factors:  i. ii.

Existence of adequate skilled personnel in the org. for increasing the productivity. Two forces which affect the productivity of human labor are:Ability to work Willingness to work.

c). Financial Factors:

Adequate amount of capital required for running the org.

d). Material and Energy:  i. ii. iii. iv. v.

Efforts to reduce consumption of energy and materials. Factors to be considered:Selection of quality material Control of wastage Effective stock control Development of sources of supply Optimum energy utilization and energy savings.

External Factors:   

Natural factors ( physical, geographical and climatic conditions) Sociological Factors ( social customs, traditions and social institutions) Government policy (industrial policies, licensing policies, taxation policy, etc. Managerial Talent ( Professional managers)

FACTORS FOR INCREASING INDUSTRIAL PRODUCTIVITY

Improved raw materials Better technology Scientific selection and training of workers Work study Research and development Good working conditions Provision for incentives Harmonious relationship Quality and cost consciousness Workers participation in management Quality Circles (small group of workers which

regularly meets to discuss problems, investigate causes, recommend solutions and authorised to take corrective actions)

PRODUCTION SYSTEMS
 

   

Process by which goods and services are created. Other words, conversion of raw materials into semifinished ad finished products with the help of certain production process. Aim of any prod. system is produce economically the goods and services required by the customers. Essential to plan, organize, direct and control. All these activities together known as production management. Performed by the production manager.

PRODUCTION MANAGEMENT


Concept of Production:  

Traditionally used with the reference to manufacturing activity resulting in output of goods. Scope have been widened as its also include the production of services, as banking, insurance, teaching, defense , etc. Production function of acquiring inputs ( materials, capital, manpower, etc.) and transforming them into goods and services desired by customers. Output it measured in terms of predetermined standards of quantity, quality and time schedules and provides feedback to input and transformation subsytems for corrective actions. Transformat -ion process
Outputs: goods and services

Inputs: humans, financial , physical, technological.

Input-output model

Control

Production Management:

As per Elwood S. Buffa, Prod. Mgmt. deals with decision making related to production process, so that resulting goods and services is produced according to the specifications, in the amounts and by schedule demanded and at minimum cost. In simple words, prod. Mgmt. deals with the managerial functions related to the design of the production system and operation and control of the production system i.e. production planning and control.

FUNCTION AND SCOPE OF PRODUCTION MANAGEMENT

Design of product

Design of production system

Production planning and control

Selection of location

Layout of plant

Selection of plant and equipment

Research and development

TYPES OF PRODUCTION SYSTEM

 

Prod. system a framework within which conversion of input into output occurs. Types of production system:A. Production or continuous manufacturing.
a) Line production or synthetical industries. b) Flow production or analytical industries

B. Job production C. Intermittent production

CONTINUOUS PRODUCTION
 

  

Where facilities are standardised as to routines and flow since inputs are standardised. Involves continuous production of goods in anticipation of customer demand rather then in response to customer demand. Eg. Petroleum, chemical, cement, steel and sugar industries. Classified: (i) Flow or analytical industries (ii) Line or synthetical industries. Flow or analytical industries:  

Breaks up the material into several parts along with the processor production. Arrangement is not flexible. Eg. Oil refinery.

Mass Production or synthetical industries:  

Involves mixing upto two or more materials to manufacture a product. Identical particles are produced in vary large quantities. Eg. Electrical appliances.

Continuous manufacturing process lends to standardization of prod. techniques and to mechanization, in order to keep labor cost comparatively lower. Main characteristics :  

   

Flow of material is continuous with little or no queuing at any stage of processing. Machines and plant layout ( Special purpose machines and plant and assembly stages are laid out on the basis of product layout). Material handling comparatively less, firstly materials move through short distance between stages and secondly material handling is mechanised by conveyors and transfer machines. Relatively low skilled labor is necessary. Manufacturing cycle time is very short. Supervision is relatively easier as only few instructions are required. Interruptions due to breakdowns and absenteeism seriously affect prod.

JOB ORDER PRODUCTION

  

Manufacture of products to meet specific customer requirements of special orders. Quantity is usually small. Mainly concerned with special projects, models, proto-types, special machinery or equipments to perform specialised and specific tasks, components or sub-assemblies to provide replacement or repairs. 3 types of on the basis of regularity of production:i. A small number of pieces produced only once. ii. A small number of pieces produced intermittently when the need arises. iii. A small number of pieces produced periodically at a known intervals of time.

  

Planning become complex as one order all together different from the other. Skilled labor is required to handle variety of jobs. Eg. Brick making, shoe industry, customized machine making.

  

Output is mainly governed by the plant capacity and immediate increase in plant capacity is impractical. Scheduling is dependent on the assessment of production times. Main Characteristics:  

   

Small production runs, single or product designed and manufacture strictly to customer specifications. Flow of materials and components between different stages, highly discontinuous due to imbalanced operation. Relatively longer manufacturing cycle time as relatively long delays occur due to lack of materials, imbalanced work flow, design changes , etc. Machines are arranged according to process layout as it differ from product to product. Highly skilled and versatile workers are necessary. Highly competent general engineers used for close supervision. Unit cost of production is high as cannot take advantage of large scale buying and automation.

BATCH PRODUCTION
 

Manufacture of number of similar articles, either to meet a specific order or to satisfy continuous demand. When the production of particular batch is completed, plant and equipment can be used for the production of similar or other products. 3 types under batch production:i. ii.

iii.

A batch produced only once. A batch produced repeatedly at irregular intervals when the need arises. A batch produced periodically at known intervals to satisfy continuous demand. Size of the batch ( number of components to be produced per lot) Scheduling of production.

2 principle problems: 

Solution depends on whether the production is governed by the external orders or whether the plant is producing for internal consumption.

Characteristics:       

Characterised by short production run and frequent changes in set ups. It needs high investment. Planning, routing and scheduling changes with fresh batch of orders. Skilled labor capable of handling variety of jobs is required. Supervisors need considerable knowledge of specific process. Plant and equipment are procured and arranged to obtain flexibility. Material handling is less as compared to job order production. Disruptions due to machine breakdown, absenteeism do not seriously affect production as another machinery can be used, another operator from another machine can be shifted.

Eg. Electronic goods, medicines, eatable products, etc.

Characteristics
Examples

CHARACTERISTICS OF PRODUCTION SYSTEMS

Job order type Batch Production Continuous production
Prototype models, machine tools, spcl. Projects, large turbo generators, ship building material, etc. Non-standard. Very small. The product design changes from one order to another Shoe-making, cloth manufacturing, casting process, chemical plants, etc. Standard (similar) wide range of products are manufactured in small quantities of lots. The product design changes from lot according to product specifications General Purpose Plant Process layout combination or Automobile industry, electrical appliances, household appliances, sugar mills, toy manf. Co., glass manf., etc. Standard (identical). Few standards products are manufactured in large quantities. The product design is to be done only once. Special purpose Product layout Semi-skilled or unskilled. Since manufacturing activities become routine function

End Product quality and product design

Equipment Used Type of plant layout Skill of Worker

General Purpose Process (functional)

Highly skilled to handle special jobs

Skilled since there is frequent changes in product design machine set up for each lot

Characteristics
Supervising difficulties Material handling equipment In Process inventories Unit Cost of item

Job order type

Much Mobile

Batch production
Less Less mobile, conveyors can also be used Relatively low Less

Continuous production
Quite less Built in type wide scope for mechanised material handling systems Low, since production is continuous Quite less

High High

Prior Planning

Complex

Easy

Very easy

Control Balance of load

Complex Easier and flexible

Easy Relatively difficult

Very easy Very difficult coz of perfect balancing of prod. Line Only at the out set of new job. Once instructions given becomes routine High investment in machine since there may be duplication of machine for each production line

Job instructions

Complex and in details as the job changes every time Few machines are required as arranged in process layout. Investment in machine is less

Few job instructions when the prod. of another lot begins. Investment in machines comparatively more

Investment in machine and equipment

ORGANIZATIONAL OWNERSHIP


Firm an ownership organization which combines factors of production in a plant for the purpose of producing goods or services and selling them at profit. Selection of type of ownership:    

Size and nature of business to be started Technical difficulties. Market competition and scope of the articles in the market. Capital required Limitations and restrictions put forth by the Govt. in connection with grant of loans , foreign exchange and other such things.

TYPES OF OWNERSHIP
Co-operative sector enterprise Joint Stock companies Producer coop. society

Private Enterprise

Public sector Enterprise

Individual ownership

Partnership

Govt. Deptt.

Private Ltd. co.

Consumer coop.

Govt. co.

Public Ltd. co.

Housing co-op society

Statutory corp.

Credit co-op society

Statutory Board.

INDIVIDUAL OWNERSHIP
        

Also known as single proprietorship or one man business Simplest and oldest form. Individual entrepreneur supplies the entire capital. Organises and manages and take entire risk. Have the entire authority and responsibility for decision making, policy making and working. Profits and losses are of his own. Can be started by anyone having initiative, tact, selling aptitude and little capital. Legal Liability:- covers all his possessions and creditor can collect his personal property. Applications:   

For small scale business requiring small capital which can be spared by one man. Eg. Agriculture, cottage industries, retail trade, etc. Where the risk cover is not to heavy. Where management by one person is possible. Where local market is available.

Advantages:         

Simple and easy Least legal formalities Quick decisions and prompt actions Quality production Better labor relationship Personal attention to customers Small capital Maintenance of secrecy Incentive Flexibility. Limited capital Unlimited liability Personal limitations Small income Cannot compete with a big business Short life ( if a owner dies business may collapse Division of labor is not possible (one man show) No economies of large scale.

Disadvantages:       

PARTNERSHIP ORGANIZATION
      

At one stage of development it becomes impossible for one man to control the business and to contribute the necessary capital. Enters into a partnership with other person who can provide the assistance as well as capital for business. Partnership may be formed to start a new business altogether. Formed usually to combine capital, labor and varied skills. Partnership is owned by 2 or more people (upto 20). Shares powers, responsibilities and profits according to agreement. As per Indian Partnership Act, 1932 The relation between two or more persons who have agreed to share profit of a business, carried on by all or any of them acting for all . Formation:    

Formed either verbally or written agreement (preferred). Written agreement is known as Partnership Deed . Contains terms and conditions relating to partnership and regulations governing internal management. Lay down rights and duties of partners. Have to be duly stamped and sealed and registered in Court of Law.

Enjoys legal status and serve as legal evidence. Name of the firm Nature of business Date of starting of business Duration of partnership Rate of interest in the capital invested. Money contributed by each partner. Allotment of managerial functions among partners. Share profit and loss and proportion. Salary if any allowed to managing partners. Basis of inclusion of new partners. Amount which can be withdrawn by each partner. Aim of partnership and manner of dissolution. Provision of arbitration for settling the disputs. Name of the firm. Place of business principal place and branches if any. Name and addresses of all partners Date of joining the firm in case of every partner. Duration if any.

Contains of Deed:            

Statement to be prepared by partners containing:    

TYPES OF PARTNERS
General Partner
Participate in the working Jointly responsible for liab., obligations and defects. Liability and debts limited to the extent of capital. Not entitled to interfere in the administation
Take active part in the formation and management of business and may also get salary in addition of profit.

Limited partner Active or Managing Partner Sleeping and silent partner Nominal Partner Minor Partner

Don t take active part in business. Contribute capital and get the part of profit.
Lend their reputed name for the company s reputation Don t invest money nor take part in the management. Below 18 yrs of age. Allowed with the consent of other partners. Liability limited to their investment.

Advantages:         

Easy formation More capital Diverse talent Less possibility of error of judgement Prompt decisions Large economies Personal factor ( personal relationship with employees and the customers) Division of labor Simple dissolution Cautious and sound approach.

Disadvantages:       

Unlimited liability Short life ( death or retirement of any partner, it can come to an end) Insufficient capital Disagreement Less secrecy Non-transfer of partnership No direct relation between efforts and rewards Lack of public confidence.

Parameter
Membership Formation Capital Registration Risk/Profit Management Secrecy Soundness of Decisions Suitability Division of labor

Individual ownership
Individual owner No agreement is required Limited capital Not required

Partnership
Minimum 2 and max. 50 Through Partnership Deed Comparatively larger capital Necessary under the Partnership Act, 1932

Individual owner bear entire risk and Risk spread among partners and enjoy entire profit profit is shared as per agreement Individual manages entire business Shared by the partners

Individual owner can easily maintain Can be leaked if partner leaves the the secrets business. Individual not be expert in all aspects Problem examined from more than of business one view point hence decisions are more sound For small scale business Not possible Small as well as medium scale business Partner s may divide among themselves. the work

JOINT-STOCK COMPANY
    

Formed and registered under Indian Companies Act, 1956. Capital is contributed by a large number of persons, in the form of shares of different values. The purchaser of shares are known as shareholders . Managing body i.e. Board of Directors , elected by shareholders. Definition of company an artificial person having an independent legal entity and a perpetual succession with distinctive name and a common seal having a common capital divided into shares of fixed value which are transferable and carry limited liability .

CHARACTERISTICS
           

Created by registering or incorporating an association of persons under the Company Act. Has a separate legal entity distinct of its members. Artificial person Perpetual life and a very stable existence. Have a common seal. Separation of ownership from management. Limited liability of shareholders. Lower tax liability. Easy transferability of shares Wide distribution of risk of loss. Large membership Statutory regulations provided under Indian Companys Act, 1932.

Definition of Joint-stock company legal business owned by the shareholders having limited liability and managed by an elected Board of directors . Formation:  

Promoter prepares a scheme of business. Secure the cooperation of 6 more persons ( min. 7 to form a co.). Promoters prepares the following documents:    

Memorandum of association Articles of association List of persons who have consented to be the Directors of the company along with the consent in writing of such persons. Declaration by an advocate confirming all the requirement of Act fulfilled. Name and addresses of promoters.

Memorandum of Association contains:     

Name of the company Its name and objectives Location of head office. Amount of share capital Kind and value of each share. Declaration of limited liability.

Sales deptt. Auditor Purchase deptt. Shareholders Board of Directors Executive committee General Manager Accounting Deptt. Bankers Production Deptt.

Organization structure of Joint-Stock company.

TYPES OF JOINT STOCK COMPANIES



2 types of joint stock companies: 

Private limited company Public limited company Capital collected from the private partners, some may be active while others being sleeping. Restricts the right to transfer shares and avoid public to take up shares Number of member between 2 to 50, excluding employee and exemployee shareholders. Need not to file documents like consent of directors, list of directors, etc. with the Registrar of Joint Stock Companies. Need not obtain certificate of commencement of business from the Registrar. Need not to circulate, the balance sheet, P/L account, etc. among its members, but need to hold its annual general meeting. Must get its account audited. Have to send a certificate along with the annual return to the Registrar stating does not have shareholders more than 50 excluding employee and exemployee shareholders.

Private Limited Company:       

Public Limited Company:  

         

Capital is collected from the company by the issue of shares. Number of shareholders should not be less than 7, no limit for the maximum number of shareholders. Have to file the documents like consent of Directors, list of directors, director s contract, etc., along with memorandum of association and articles of association. Have to issue prospectus to the public. Have to allot shares within 180 days from the date of prospectus. Can start business only after getting the certificate of commence business. Has to hold statutory meeting and to issue a statutory report to all members and also to Registrar of companies. Easy transferability of shares. Directors are subject to rotation Have to get the account audited every year by registered auditor. Send financial statement to all its members and to the registrar. Had to hold general meeting every year. Managing agents gets a fixed percentage of net profit every year.

Advantages:      

Large capital Limited liability of members Transferability of shares. Perpetual succession. Specialist services Risk is shared. Have stability, efficiency and flexibility of management. Too much legal formalities. Managed by big shareholders. Managed by the high paid official and objectives might contradict that with of owners. Commitment of frauds are possible. BOD s can use their position for personal profits ( sell or purchase of shares) Difficult to maintain secrecy. Team spirit lacks. Lack of accountability due to divided responsibility.

Disadvantages:       

S.No.
1.

Particulars
Membership

Pvt. Ltd.
Confined to the close friends and relatives, they contribute for capital and public can not be invited. Min. 2 and max. 50 No need of holding statutory meeting to elect directors Cannot be resold or transferred without the consent of the co. No legal provision of the audit of co. s account. Can be started with any amount without any legal binding Has to use words Pvt. Ltd. at the end of its name Min. 2 Less legal controls Less restrictions for Directors remuneration

Public Ltd.
Its open to the General public and any person can contribute and become shareholders. Min. 7 and no max. limit. Statutory meeting has to be held and the shareholders elect the directors. Shares can be easily resold and transfer without the co. consent. Accts. have to be audited and circulated among the members. Min. lay down capital is legally required before starting of a business. Has to use only the word Ltd. at the end of its name. Min.3 Regulations are more strict Remuneration of directors is restricted to 11% of net profit.

2. 3.

Limits to membership Election of directors Resale of shares

4.

5.

Audit of Accounts

6.

Min. capital

7.

Name

8. 9. 10.

No. of Directors Legal Control Remuneration of Directors

COOPERATIVE ORGANIZATIONS ( SOCIETIES)



  

Due to the hardships suffered by exploited class compelled it to unite for their economic uplift through self and mutual help. Lead to the evolution of cooperative movement. Industrial coop. and consumer coop. were developed in Germany. Definition of Coop. Organization:

it is a form of org., wherein persons, irrespective of caste, creed ad religion voluntarily associate together as human beings, on the basis of equality for the fulfillment of their common economic interest . As per ILO, A coop. org. is an association of persons, usually of limited means, who have voluntarily joined together to achieve a common economic even through the formation of a democratically controlled organization, making equitable contributions to the capital required and accepting a fair share of risks and benefits of the undertakings .

FEATURES
       

Voluntary organizations Open memberships Economic and democratic management Profit is not important Spirit of cooperation Unity Common interest Cooperative status

AIM AND OBJECTIVES OF INDUSTRIAL COOPERATIVES

@

@ @ @ @

To purchase and supply raw materials, tools and equipment to members. To secure contracts and execute them with the help of members. To market the finished goods of members. To purchase machinery for giving on hire to members. To borrow funds from members and non-members. To grant loans and advances to members on the security of raw-materials and finished goods belonging to them. To undertake all such activities as are conducive or incidental to the accomplishment of aforesaid objectives. To safeguard the interest of poorer sections of community.

FORMATION
 

 

Application to be submitted to the Registrar of Cooperative societies. Application provide all essential information like name and address of the society, its aims and objectives, particulars of share capital , etc. Application should be signed by atleast 10 members. Should be accompany duplicate copies of Bylaws i.e. rules and regulation governing internal organization and management of the society. Registrar after scrutiny of documents will issue a certificate of registration and the society will be formed.

Producers s Cooperative society

Consumers Cooperative Society

TYPES OF COOP. SOCITIES

Housing Cooperative Society

Credit Cooperative Society.