Final

MB0028
PRODUCTION & OPERATIONS MANAGEMENT

Set 1
1. Explain the various automated system for transfer of materials in the production plant.
Illustrate by considering an example of automobile show?
Ans. The various automated system for transfer of material in the production plant are
Computer numerically controlled or, for short, CNC machines. Robots are higher in the order
of automation as they perform a variety of tasks. They are designed to move materials by
holding them in their arms and make precise movements according to programmers written into
the computers that reside in them. They simulate human action. They can grip and hold tools and
with the help of sensors which are sensitive to touch and force to ‘know’ that the material is to be
held with the requisite pressure for the conduct of operations. Vision sensors are used for
inspection, identification and guidance. They use optics based instruments to gather data and feed
them to the computers for activating other parts of the robot. With the help of automation,
inspection of components can be done 100% which ensures highest quality identification and
movements of materials are helped by bar codes which are read and fed into the system for
monitoring quantity, location, movement etc. They help the automated systems to sort
information for effecting any changes necessary. To make effective use of automated machines,
we need to have the movement of materials from and to different stations as also stores,
automated. Automated Storage and Retrieval Systems- ASRS – receive orders for materials
from anywhere in the production area, collect materials and deliver materials to the workstations.
Computers and information systems are used for placing order for materials give commands,
adjust inventory records which show the location and quantity of materials available/needed.
Continues updating gives a clear picture for all concerned to enable them initiate action to keep
the throughput smooth. Automated Guided Vehicle Systems-AGVS- are pallet trucks and unit
load carriers follow embedded guide wires or paint strips to reach destinations as programmed.
---------------------------------------------------------------------------------------------------------------------
2. State the important consideration for locating an automobile plant collect into an layout
planning of an automobile plant for various source?
Ans. Planning is perhaps the most important function of management. There two parts. The
first will be the location of the plant and the second manufacturing facility lay-outs and planning
for them.
a. Facility Location- the identification of the location of the facility includes the various factors
that effects the economics of competing locations and helps in choosing the most optimal.
Factors influencing an automobile Plant Location can be broadly divided into two types namely-
General Factors and Special Factors.
General Factors
1) Availability of land – Our plans, calculations and forecasts suggest a particular area as the
best, but availability of land may be in question. Many times we will have to choose the
second best location on this count.
SMU Page 1
2) Availability of inputs- labour, raw materials.
3) Closeness to market places
4) Communication facilities
5) Infrastructure- power, water
6) Transport
7) Government support- subsidies etc
8) Housing and recreation- educational facilities
Special Factors
1. Economic stability- outside investments
2. Cultural factors
3. Wages
4. Joint ventures- support of big time players.
These are the various considerations to be identified.

---------------------------------------------------------------------------------------------------------------------
3. Who are the players in project management? What are the various roles and
responsibilities of a player?
Ans. The players in project management are individual and organizations:
a) That are actively involved in the project.
b) Whose interests may be affected by the outcome of the project, positive or negative.
c) Exert influence over the project and its results.
d) Players are also called “stakeholders “of the project.
e) Project manager-the individual responsible for managing the project.
f) Customer-the individual or organization who will use the product-the end result of the
project.
g) Performing organization- the enterprise whose employees are most directly involved in
doing the work of the project.
h) Sponsor- the individual or group within or external to the performing organization that
funds the project.
Roles and responsibilities:
SMU Page 2
a) There is a team of managers who manage the projects.
b) There may be different teams working on different projects.
c) An experienced project team manger and his team may manage more than one project at a
time.
d) The project team is responsible for ensuring that the project upon completion shall deliver
the gain in the business for which it is intended for.
e) The project team has to properly coordinate with each other working on different aspects
of the project.
f) The team members are responsible for the completion of the project as per the plans of
the project.
The above are the roles and responsibilities of the players.

4. What are the various steps in project monitoring and controlling a project?
Ans. The various steps involved in monitoring and controlling a project from start to end are as
follows-
1) Preliminary work – The team members understand the project plans, project stage
schedule, progress controls, tracking schedules, summary of the stage cost and related
worksheets. All the members have to maintain a change control log to any changes realize
the importance of quality and follow strictly a quality review schedule and frequently
discuss on the quality agendas. They must understand the stage status reports, stage end
reports, stage end approval reports.
2) Project progress- the members must monitor and control project progress, through the
use of regular check points, quality chart, statistical tables, control the quality factors as
any deviation may result in changes to the stage schedule. The project manager ensures
that these changes are made smoothly and organizes review meeting with the project
management group.
3) Stage control- The manager must establish a project check point cycle. Project files have
to be frequently updated with suitable version control number and revision status be
maintained for each change. Team members are identified who will exercise controls at
various points of the project.
4) Resources- plan the resources required for various stage of the project. Brief both the
project team and the key resources about the objectives of every stage, planned act ivies,
products, organization, metrics and project controls.
5) Quality control-
SMU Page 3
a) Schedule quality review at the beginning of the stage and also ending of every
stage.
b) Create and distribute a quality review agenda specifying the objective, products,
logistics, roles, responsibilities and time frame.
c) Conduct quality review in a structured and formal manner focused on whether it

meets the prescribed quality standard.
d) Follow up the actions planned in strict manner which ensures conformity to the
standards.
e) Review quality control procedures and verify the quality objectives of each
product
6) Progress control
a) Monitor the performance of the team members.
b) Update the schedule for actual start and finish date for tasks and actual hours
worked per task.
c) Update the stage cost summary worksheet with actual costs incurred in this
period.
d) Review the undergone stages and identify any deviation from the baseline.
Determine the appropriate corrective action and adjust the schedule accordingly.
e) Conduct team status meeting and discuss about the achievements, incomplete
activities, activities for the next, new issues identified, issues closed in this period.
f) Create status report providing a record of current achievements and immediate

expectations of the project and communicate to all interested parties.
g) Create flash report for the month with major issues and distribute to the project
management team.
h) A weekly status report includes
− Accomplishment during this period.
− Items not completed during the period.
− Proposed activities for the next period.
− Any predicted slippage or cost to the stage schedule, along with cause and
corrective action.
SMU Page 4
7) Approvals
Project stage review and the decisions taken and actions planned need to be
approved by the top management. The goals of such review are to improve quality and
productivity by finding defects in a cost effective manner.
These are the various steps involved in monitoring and controlling the project.
---------------------------------------------------------------------------------------------------------------------
5. What are the steps involved in SCM implementation?

Ans. SCM implementation involves the following steps:
1. Study the strengths and weaknesses within the enterprise as well as of External
Agencies involved.
2. Understand the organizational objectives.
3. Study the existing systems and identify the gaps and propose solutions to plug the
loopholes
4. Evolve consensus and test fire individual solutions.
5. Integrate solutions which are adjudged successful into the mainstream.
6. Study overall impact after all proposals in a section are implemented review consensus.
7. Finalize SCM document, circulate and implement
These are the steps involved in SCM implementation.
---------------------------------------------------------------------------------------------------------------------
6. Explain the necessity and objectives of SCM?

Ans. SCM is required by an enterprise as a tool to enhance management effectiveness with the
following organizational objectives:
a) Reduction of inventory.
b) Enhancement of participation level and empowerment level.
c) Increase in functional effectiveness of existing systems like ERP, Accounting Software

and Documentation like Financial reports/Statements/ISO 9000 Documents etc.
d) Effective integration of multiple systems like EPR, communication systems,

documentation system and secure.
e) Design /R&D systems etc.
f) Better utilization of resources- men, material, equipment and money.
SMU Page 5
g) Optimization of money flow cycle within the organization as well as to and from external
agencies.
h) Enhancement of value of products, operations and services and consequently,

enhancement of profitability.
i) Enhancement of satisfaction level of customers and clients, supporting institutions,

statutory control agencies, suppliers and vendors, employees and executives.
j) Enhancement of flexibility in the organization to help in easy implementation of schemes

involving modernization, expansion and diversification- even divestments, mergers and
acquisitions,
k) Enhancement of coverage and accuracy of management information systems.
These are the needs and objectives of SCM.
SMU Page 6
MB0028
PRODUCTION & OPERATIONS MANAGEMENT
Set 2
1. Explain how material flow information helps in work centre decision. Consider example
of shopping center. Illustrate?
Ans. Inventory is necessary to avoid stock out situations which lead to machine downtime
which has serious consequences for productivity. Lead times between open time and finish time
and uncertainties of availabilities of materials make it mandatory to keep buffer stocks. The
Question is how much? Historic data and projections based on simulation or some other
techniques help in optimizing this aspect. The reason why companies still build up inventories is
for the reasons
1) Customer service- created inventory helps speed up delivery, thus meeting the need of the
customer. An old customer tends to stay with you if you are able to give immediate
delivery or he may be tempted to try a new supplier.
2) Ordering cost- Frequent reordering increases the cost of procurement. Higher quantities
may bring in entitlement for discounts. Further price increases will not affect us.
3) In the shop floor longer runs lead to higher productivity and minimize the set up costs.
4) Labor and equipment utilization will be high as quantities produced per set up are high.
5) Reduced transportation costs- both inbound and outbound.
All the above are some of the reasons why companies prefer to carry inventories. The only
way to utilize this resource is to optimize. Optimization is a process where the resultant effect
of all factors both cost increasing and decreasing elements in each of them is analyzed.
Decisions are taken with some risks. Repeated implementation and study brings in
organizational learning and improves the outcomes of subsequent decisions. Utilization of
resources adds to the profitability of the company. No manager can avoid risk taking, but
using scientific methodology reduces the ill effects.
---------------------------------------------------------------------------------------------------------------------
2. What are the reasons for failure of a project?

Ans. A project may fail because of one or more of the following reasons –
1) Incidence of project failure :
a) Project being initiated at random at all levels

b) Project objective not in line with business objective
c) Project management not observed
SMU Page 7
d) Project manager with no prior experience in the related project
e) Non – dedicated team
f) Lack of complete support from clients
2) Factor contributing to project success not emphasized :
a) Project objective in alignment with business objective

b) Working within the framework of project management methodology
c) Effective scoping, planning, estimation, execution, controls and reviews, closure
intertwined with quality
d) Proactive approach towards project bottlenecks
e) Communication and managing expectations effectively with clients, team
members and stake holders
f) Prior experience of PM in a similar project
3) Overview of information and Communication Technological (ICT) projects :
a) Involve information and communication technologies such as the World Wide

Web, e- mail, fiber – optics and satellites
b) Enable societies to produce, access, adapt and apply information in greater
amounts, more rapidly and at reduced costs
c) Offer enormous opportunities for enhancing business and economic viability
4) Common problem encountered during projects
a) No prioritization of project activity from an organizational position

b) One or more of the stages in the project mishandled
c) Less qualified / non – dedicated manpower
d) Absence of smooth flow of communication between the involved parties.
The above are the reasons for the failure of a project.
---------------------------------------------------------------------------------------------------------------------
3. Explain the various phases in project management life cycle?

Ans. The phases of project management life cycle are:
1) Analysis and Evaluation phase: this is the initial phase of any project. In this phase
information is collected from the customer and entire project has to be planned and it
should be done in a strategic manner. The project manager conducts the analysis of the
problem and submits a detailed report to the top management.The important tasks of this
phase are as follows:
SMU Page 8
a) Specification Requirement Analysis (SRA): It has to be conducted to determine
the essential requirements of a project in order to achieve the target.
b) Feasibility study: to analyze whether the project is technically economically and
practically feasible to be undertaken.
c) Trade–off analysis: to understand and examine the various alternatives which could
be considered.
d) Estimation: to estimate the project cost, effort required for the project and
functionality of various processes in the project.
e) System design: choose a general design that can fulfill the requirements.
f) Project evaluation: evaluate the project in terms of expected profit, cost and risk
involved.
2) Marketing phase: A project proposal is prepared by a group of people including the

project manager. This proposal has to contain the strategies adopted to market the product
to the customers.
3) Design phase: this phase involves the study of inputs and outputs of the various project
stages: input received, Consists of project feasibility study, preliminary project evaluation
details, project proposal and customer interviews;
Output produced, consists of system design specifications, functional specifications of

the project, design specifications of the project and project plan.
4) Execution phase: in this phase the project manager and the team members work on the
project objectives as per the plan. At every stage during the execution reports are prepared.
5) Control – Inspecting, Testing and Delivery phase: The project manager has to ensure
that the team working under him, implements the project designs accurately. The project
has to be tracked or monitored through its cost, manpower and schedule. The project
manager has to ensure ways of managing the customers, marketing the future work and
ways to perform quality control work.
6) Closure and Post completion Analysis phase: Upon satisfactory completion and delivery
of the intended product or service the staff performance has to be evaluated. prepare the
report ffedback analysis followed by the project execution report.
The above are the phases in the project management life cycle.
---------------------------------------------------------------------------------------------------------------------
4. What are the seven principles of SCM?
Ans. The seven principles of SCM are:
SMU Page 9
1) Group customer by needs- Effective SCM groups customer by distinct service needs,
regardless of industry and then tailors services to those particular segments
2) Customize the logistics network- In designing their logistics network, companies need to
focus on the service requirement and profit potential of the customer segments identified.
3) Listen to signals of market demand and plan accordingly- Sales and operations planners
must monitor the entire supply chain to detect early warning signals of changing customer
demand and needs. This demand driven approach leads to more consistent forecast and
optimal resource allocation.
4) Differentiate the product closer to the customer- Companies today no longer can afford to
stock pile inventory to compensate for possible forecasting errors. Instead, they need to
postpone differentiation in the manufacturing process closer to actual consumer demand.
The strategy allows the supply chain to respond quickly and cost effectively to changes in
customer needs.
5) Strategically manage the source of supply- by working closely with their key suppliers to
reduce the overall costs of owning materials and services, SCM maximizes profit margins
both themselves and their suppliers.
6) Develop a supply chain wide technology strategy – as one of the cornerstones of
successful SCM information technology must be able to support multiple levels of
decision making. It also should afford a clear view and ability to measure the flow of
products, services and information.
7) Adopt channel spanning performance measures – Excellent supply chain performance
measurement systems do more than just monitor internal functions. They apply
performance criteria that embrace both service and financial metrics, including as each
accounts true profitability.
These are the seven principles of SCM.
---------------------------------------------------------------------------------------------------------------------
5. Explain what is meant by bullwhip effect and how to prevent it?

Ans. The bullwhip effect is the uncertainty caused from distorted information flowing up and
down the supply chain. This has its effect on almost all the industries, poses a risk to firms that
experience large variations in demand, and also those firms which are dependent on suppliers,
distributors and retailers. A bullwhip effect may arise because of-
1) Increase in the lead time of the project due to increase in variability of demand.
2) Increase in the stocks to accommodate the increasing demand arising out of complicated
demand models and forecasting techniques.
3) Reduced services levels in the organization.
4) Inefficient allocation of resources
5) Increased transportation cost.
Bullwhip effect may be avoided by one or more of the following measures-
1) Avoid multiple demand forecasting.
SMU Page 10
2) Breaking the single orders into number of batches of orders.
3) Stabilize the prices, avoid the risk involved in overstocking by maintaining a proper stock
4) Reduce the variability and uncertainty in point of sale (POS) and sharing information.
5) Reduce the lead time in the stages of the project.
6) Always keep analyzing the past figures and track current and future levels of
requirements
7) Enhance the operational efficiency and outsourcing logistics to a capable and efficient
agency.
These are the measures to prevent Bullwhip effect.
---------------------------------------------------------------------------------------------------------------------
6. What do you understand by line balancing? What is the importance of order picking in
material handling?
Ans. The assembly lines are best suited for the study and analysis of the line Balancing
Problem, called Assembly line balancing (ALB). All ALB are categorized by GHOSH and
GAGNON as to falling into four categories as under:
SMD- single model determination: This model assumes that the one product that passes
through the dedicated line has all tasks times know. This model is useful when automatic
machines or where operations have their times predictable with certainty.
SMS- Single Model Stochastic : this is applicable when a single product goes through machines
where manual content is more and the operations do not have definite periods. Determining
locations and sizes of buffers require to keep the throughput is the purpose of this algorithm.
MMD-Multi/Mixed Model Deterministic: in this case task times are known, but we have many
products that go through the line. The products are assembled in batches.
MMS- Multi/mixed Model stochastic: The task times are variable and we have many products
that go through the production line. The problems of balancing such lines are more.
Decomposition of the assembly into sub-assemblies and having advanced handling equipment
may help to make inventories small and keeping the flow line smooth.
Order Picking is a process by which items or products for which supply is to be made
have to be retrieved from specific storage location. It is found to take 60% of labour activities in
the Warehouse. Since it is critical to the business to meet customer’s demand expeditiously and
accurately, lot of attention is being given to this aspect of operations. In the manufacturing arena,
we desire to move towards small lot sizes, point-of-use-delivery and cycle time reductions. These
are necessary to meet the targets of JIT, which have economic implications. Efficient order
picking is necessary for being competitive. In the supply chain, storage, retrieval and delivery do
not add value to the product, but are necessary.
These are the importance of order picking in material handling.
SMU Page 11
MB0029
FINANCIAL MANAGEMENT
Set 1
1. Explicit cost and implicit cost are the two dimensions of cost. What role does cost play in
financial decisions.
Ans. Financing decisions relate to the acquisition of funds at the least cost. Here cost has two
dimensions viz explicit cost and implicit cost.
Explicit cost refers to the cost in the form of coupon rate, cost of floating and issuing the
securities etc.
Implicit cost is not a visible cost but it may seriously affect the company’s operations
when it is exposed to business and financial risk.
In all financing decisions a firm has to determine the proportion of equity and debt. The
composition of debt and equity is called the capital structure of the firm. Another thing notable in
this connection is that the firm cannot avoid its obligation to pay interest and loan installments to
its lenders and debentures.
The most important goal of financial management is maximization of net wealth of the
share holders. Therefore, management of every company should strive hard to ensure that its
shareholders enjoy both dividend income and capital gains as per the expectation of the market.
This confirms the established theory that equity is costly and debt is cheap but risky source of
funds to the corporate.
SMU Page 12
The challenge before the finance manager is to arrive at a combination of debt and equity
for financing decisions which would attain an optimal structure of capital. An optimal structure is
one that arrives at the least cost structure, keeping in mind the financial risk involved and the
ability of the company to manage the financial risk. Besides, financing decisions involves the
consideration of managerial control, flexibility and legal aspects. As such it involves quite a lot
of regulatory and managerial elements in financing decisions.
---------------------------------------------------------------------------------------------------------------------
2. Assume you are newly appointed as Finance Executive in manufacturing firm. What
guidelines you need to follow in financial planning?
Ans. The guidelines to be followed for financial planning as a newly appointed executive is as
follows:-
1) Establish Corporate Objectives: Corporate objectives could be group into qualitative and
quantitative. For example, a company’s mission statement may specify “create economic
– value added”. But this qualitative statement has to be stated in quantitative terms such
as a 25% ROE or a 12% earnings growth rates. Since business enterprises operate in a
dynamic environment, there is a need to formulate both short run and long run objectives.
2) Next stage is formulation of strategies for attaining the objectives set. In this connection,
corporate develop operating plans. Operating plans are framed with a time zone. It could
be a five year plan or a ten year plan.
3) Once the plans are formulated, responsibility for achieving sales target, operating targets
cost management bench marks, profit targets etc is fixed on respective executives.
4) Forecast the various financial variables such as sales, assets required, flow of funds, cost
to be incurred and then translate the same into financial statements. Such forecasts help
the finance manager to monitor the deviations of actual from the forecasts and take
effective remedial measures to ensure that targets set are achieved without any time
overrun and cost overrun.
5) Develop a detailed plan for funds required for the plan period under various heads of
expenditure.
6) From the funds required plan, develop a forecast of funds that can be obtained from
internal as well as external sources during the time horizon for which plans are
developed. In this connection legal constrains in obtaining funds on the basis of
covenants of borrowings should be given due weightage. There is also a need to
collaborate the firm’s business risk with risk implications of a particular source of funds.
7) Develop a control mechanism for allocation of funds and their effective use.
SMU Page 13
8) At the time of formulating the plans certain assumptions need to be made about the
economic environment. But when plans are implemented economic environment may
change. To manage such situations, there is a need to incorporate an inbuilt mechanism
which would scale up or scale down the operations accordingly.
---------------------------------------------------------------------------------------------------------------------
3. Due to over capitalization the company may collapse which would certainly affect its
employees, society, consumers and its shareholders. What remedies you would suggest?
Give suitable example.
Ans. A company is said to be over capitalsed, when its total capital (both equity and debt)
exceeds the true value of its assets. It is wrong to identify overcapitalization with exceeds of
capital because most of the overcapitalized firms suffer from the problems of liquidity. The
correct indicator of overcapitalization is the earnings capacity of firms. It will not be in a position
to pay dividends to its shareholders as per their expectations. It is a sign of overcapitalization. It
is also possible that company has more funds than its requirements based on current operation
levels, and yet have low earnings.
Overcapitalization may be on account of any of the following:
1) Acquiring assets at inflated rates.
2) Acquiring unproductive assets.
3) High initial cost of establishing the firm.
4) Companies which establish their new business during boom condition are forced to pay
more for acquiring assets, causing a situation of overcapitalization once the boom
conditions subside.
5) Total funds requirement have been over estimated.
6) Unpredictable circumstances (like change in import – export policy, change in market

rates of interest, change in international economic and political environment) reduce
substantially the earnings capacity of the firm. For example, rupee appreciation against
U.S.dollar has affected earning capacity of firms engaged mainly in export business
because they invoice their sales in US dollar.
7) Inadequate provision for depreciation adversely affects the earnings capacity of a

company, leading to overcapitalization of the firm.
8) Existence of idle funds.
Effects of over capitalization:

1) Decline in the earnings of the company.
SMU Page 14
2) Fall in dividends rates.
3) Market value of company’s share falls, and company looses investor’s confidence.
4) Company may collapse at any time because of anemic financial conditions – it will affect
its employees, society, consumers and its shareholders. Employees will lose jobs. If the
company is engaged in the productive and marketing of certain essential goods and
services to the society, the collapse of the company will cause social damage.
Remedies for overcapitalization:
Restructuring the firm is to be executed to avoid the situation of company becoming sick.
It involves:
1) Reducing of debt burden.
2) Negotiation with term lending institutions for reduction in interest obligation.
3) Redemption of preference shares through a scheme of capital reduction.
4) Reducing the face value and paid up value of equity shares.
5) Initiating the mergers with well managed profit making companies interested in
taking over ailing company.
---------------------------------------------------------------------------------------------------------------------
4a. Mr. Avinash aged 40 years, needs 50000 after 5 years. If the interest rate is 10% how
much should he save now to get Rs.50000 at the end of 5 years?
Ans. F.V = P.V(1+r)n
50000 = P.V(1+0.1)5
50000 = 1.6105P.V.
P.V = 31046/-
4b. A Senior citizen intents to deposit Rs.1000 annually in ICICI bank for 3 years. The
prevailing interest rate is 10%. What is the maturity value of the deposit?
Ans FVA = A [ (1+r)n – 1] / r
FVA = 1000 [ (1+0.1)3 – 1] / 0.1
FVA = 1000 [ (1.331 – 1] / 0.1
FVA = 1000 [3.331]
FVA = 3310/-
5. Explain various types of bonds.
Ans. The Bonds are of three types:
SMU Page 15
1) Irredeemable Bonds (also called perpetual bonds)
2) Redeemable bonds (i.e., Bonds with finite maturity period) and
3) Zero coupon bonds
1) Irredeemable Bonds or Perpetual Bonds:

Bonds which will never mature are known as irredeemable or perpetual bonds. Indian
Companies Acts restricts the issue of such bonds and therefore these are very rarely issued by
corporate these days. In case of these bonds the terminal value or maturity value does not exist
because they are not redeemable. The face value is known; the interest received on such bonds is
constant and received at regular intervals and hence the interest receipts resemble perpetuality.
The present value (the intrinsic value) is calculated as:
Vo= I/id
If a company offers to pay Rs.70 as interest on a bond of Rs. 1000 par value, and the current
yield is 8%, the value of the bond is 70/0.08 which is equal to Rs. 8.75
2) Redeemable Bonds:
There are two types viz., bonds with annual interest payments and bonds with semi-
annual interest payments.
Bonds with annual interest payments;
Basic Bond Valuation Model:
The holder of a bond receives a fixed annual interest for a specified number of years and a fixed
principal repayment at the time of maturity. The intrinsic value or the present value of bond can
be expressed as:
Vo or Po=∑nt=1 I(I+Kd)n +F/(I+Kd)n
Which can also be stated as follows?
Vo = I*PVIFA (Kd, n) + F*PVIFA (Kd, n)
Where Vo = Intrinsic value of a bond
Po = Present value of the bond
I = Annual interest payable on the bond
F = Principal amount (par value) repayable at the maturity time
N = Maturity period of the bond
Kd= Required rate of return
Bonds with Semi-Annual Interest payment:

In reality, it is quite common to pay interest on bonds semi-annually, with the effect of
compounding, the value of bonds with semi-annual interest is much more than the ones with
annual interest payments. Hence, the bond valuation equation can be modified as:
Vo or Po=∑nt=1 I/2(I+id/2)n + F/(I+id/2)2n

Where Vo = Intrinsic value of a bond
Po = Present value of the bond
I/2 = Semi-annual interest payable on the bond
F = Principal amount (par value) repayable at the maturity time
2n = Maturity period of the bond expressed in half-yearly periods
Kd/2= Required rate of return semi-annually.
SMU Page 16
3) Valuation of Zero Coupon Bonds:
In India Zero coupon bonds are alternatively known as Deep Discount Bonds. For close
to a decade, these bonds became very popular in India because of issuance of such bonds at
regular intervals by IDBI and ICICI. Zero-coupon bonds have no coupon rate, i.e., there is no
interest to be paid out. Instead, these bonds are issued at a discount to their face value, and the
face value is the amount payable to the holder of the instrument on maturity. The difference
between the discounted issue price and face value is effective interest earned by the investor.
They are called deep discount bonds because these bonds are long term bonds whose maturity
some time extends up to 25 to 30 years.
---------------------------------------------------------------------------------------------------------------------
6. Sushma Industries wishes to issue bonds with Rs.100 as par value, 5 years to maturity,
coupon rate 11% and YTM of 11%.
a. What is the value of the bond?
Ans. YTM = 11%
Po = I [PVIFAr,n] + Bn [PVIFr,n]
Po = 11 [PVIFA r=11, n=5] + B [PVIF r=11, n=5]
Po = 11 [3.696] + 100 [0.593]
Po = 40.656 + 59.3
Po = 99.956/-
b. If the YTM is 10% what would be the value of the bond?

Ans. YTM = 10%
Po = 11 [3.791] + 100 [0.621]
Po = 41.701 + 62.1
Po = 103.801/-
c. If the YTM is 13% what is the value of the bond?

Ans. YTM = 13%
SMU Page 17
Po = 11 [3.517] + 100 [0.543]
Po = 38.687 + 54.3
Po = 92.987/-
SMU Page 18
MB0029
FINANCIAL MANAGEMENT
Set 2
1. Is equity capital free of cost? Substantiate your statement.
Ans. Some people are of the opinion that equity capital is free of cost for the reason that a
company is not legally bound to pay dividends and also the rate of equity dividend is not fixed
like preference dividends. This is not a correct view as equity shareholders buy shares with the
expectation of dividends and capital appreciation. Dividends enhance the market value of shares
and therefore equity capital is not free of cost.
Example:
Suraj metals are expected to declare a dividend of Rs.5 per share and the growth rate in dividend
is expected to grow @ 10% p.a. the price of one share is currently at Rs.110 in the market. What
is the cost of equity capital to the company?
Solution: Ke = (D1/Pe) + g
= (5/110) + 0.10
= 0.1454 or 14.54%
---------------------------------------------------------------------------------------------------------------------
2a. What is the rate of return for a company if the β is 1.25, risk free rate of return is 8%
and the market rate of return is 14%. Use CAPM model?
Ans. β = 1.25
Risk free rate of return (Rf) = 8%
Market return (Rm) = 14%
According to CAPM model:
Re = Rf + β (Rm – Rf)
= 0.08 + 1.25 (0.14 – 0.08)
= 0.08 + 1.25 (0.06)
= 0.08 + 0.075
SMU Page 19
= 0.155 or 15.5%
2b. Sundaram Transports has the following capital structure.
Equity capital Rs.10 par value 250 lakhs
12% preference share capital Rs.100 each 100 lakhs
Retained earnings 150 lakhs
12% Debentures (Rs.100 each) 350 lakhs
14% Term loan from SBI 150 lakhs
Total 1000 lakhs
The market price per equity is Rs 54. The company is expected to declare a dividend
per share of Rs.2 per share and there will be a growth of 10% in the dividends for the next
5 years. The preference shares are redeemable at a premium of Rs.5 per share after 8
years. The current market price of preference share is Rs.92. Debenture redemption will
take place after 7 years at a discount of 2% and the current market price is Rs.91 per
debenture. The corporate tax rate is 40%. Calculate WACC.
Ans. Ke = D / Price + g
Ke = 2/54 + 0.1
Ke = 0.137 or 13.70%
Kp = D + [ (MV – NP) / n ] / [ (MV + NP) / 2 ]
Kp = 12 + [ (105 – 92) / 8 ] / [ (105 + 92) / 2 ]
Kp = (12 + 1.625) / 98.5
SMU Page 20
Kp = 13.625 / 98.5
Kp = 13.83%
Kr = Ke
Kr = 13.70%
Kd = I (1-t) + [(MV – NP) / n] / [(MV + NP) / 2]
Kd = 12(1 – 0.4) + [(98 – 91) / 7] / [(98 + 91) / 2]
Kd = 7.2 + 1 /94.5
Kd = 8.67%
Kt = I (1 – t)
Kt = 14 (1 – 0.4)
Kt = 8.4%
---------------------------------------------------------------------------------------------------------------------
Particulars Amount Wi Ki WiKi
(lakhs)
Equity capital Rs.10 par value 250 0.25 13.70 3.425
12% preference share capital Rs.100 each 100 0.10 13.83 1.383
Retained earnings 150 0.15 13.70 2.055
12% Debentures (Rs.100 each) 350 0.35 8.67 3.034
14% Term loan from SBI 150 0.15 8.40 1.260
Total 1000 1.00 11.157

SMU Page 21
3. The effective cost of debt is less than the actual interest payment made by the firm. Do
you agree with this statement? If yes/no substantiate your views.
Ans. The effective cost of debt is less than the actual interest payment made by the firm. This
statement is very much true and this can be substantiated by analyzing the following example:
ABC ltd. wants to have an issue of non-convertible debentures for Rs. 10 Cr. Each
debenture is of par value of Rs. 100 having an interest rate of 15%. Interest is payable annually
and they are redeemable after 8 years at a premium of 5%. The company is planning to issue the
non-convertible debentures at a discount of 3% to help in quick subscription. If the corporate tax
is 50%. What is the cost of debenture to the company?
Solution:
Kd = I(1 – t) +{(MV – NP) / n}

{(MV + NP) / 2}
Kd = 15(1 – 0.5) +{(105 – 97) / 8}

{(105 + 97) / 2}
Kd = 7.5 +{1}
{101}
Kd = 8.5
101
Kd = 0.0841 or 8.41%
By analyzing the above example we can easily say that the cost of debt is
8.41% and the interest rate paid by the firm is 15% which is higher than the cost of
debt when compared in the above mentioned problem. Therefore the effective cost
of debt is less than the actual interest payment made by the firm.
---------------------------------------------------------------------------------------------------------------------
4. Why capital budgeting decision very crucial for finance managers?
Ans. There are many reasons that make the capital budgeting decisions the most crucial for
finance mangers, they are as follows:
1) These decisions involve large outlay of funds now in anticipation of cash flows in
future. For example, investment in plant and machinery. The economic life of such assets has
long periods. The projections of cash flows anticipated involve forecasts of many financial
variables. The most crucial variable is the sales forecasts.
SMU Page 22
For example, Metal Box spent large sums of money on expansion of its production
facilities based on its own sales forecast. During this period, huge investment in R&D in
packaging industry brought about new packaging medium totally replacing metal boxes as an
important component of packing boxes. At the end of the expansion Metal Box ltd found itself
that the market for its metal boxes had declined drastically. The end result is that metal box
became a sick company from, the position as a blue chip. Employees lost their jobs. It affected
the standard of living and cash flow position of its employees. This highlights the element of risk
involved in these types of decisions.
a.) Equally we have empirical evidence of companies which took decisions on expansion
through the addition of new products and adoption of the latest technology creating
wealth for shareholders. The best example is the Reliance group.
b.) Any serious error in forecasting sales and hence the amount of capital expenditure can
significantly affect the firm. An upward bias may lead to a situation of the firm
creating idle capacity, laying the path for the cancer of sickness.
c.) Any downward bias in forecasting may lead the firm to a situation of losing its market
to its competitor. Both are risky fraught with grave consequences.
2) A long term investment of funds some times may change the risk profile of the firm.
A FMCG company with its core competencies in the business decided to enter into a new
business of power generation. This decision will totally alter the risk profile of the business
of the company. Investor’s perception of risk of the new business to be taken up by the
company will change his required rate of return to invest in the company. In this connection it
is to be noted that the power pricing is a politically sensitive area affecting the profitability of
the organization. Therefore, Capital budgeting decisions change the risk dimensions of the
company and hence required rate of return that the investors want.
3) Most of the capital budgeting decisions involve huge outlay. The funds requirements
during the phase of execution must be synchronized with the flow of funds. Failure to
achieve the required coordination between the inflow & outflow may cause time over run and
cost over run. These two problems of time over run and cost over run have to be prevented
from occurring in the beginning of execution of the project. Quite a lot empirical examples
are there in public sector in India in support of this argument that cost over run and time over
run can make a company’s operations unproductive. But the major challenge that the
management of a firm faces in managing the uncertain future cash inflows and outflows
associated with the plan and execution of capital budgeting decisions.
4) Capital budgeting decisions involve assessment of market for company’s products and
services, deciding on the scale of operations, selection of relevant technology and finally
procurement of costly equipment. If a firm were to realize after committing itself
considerable sums of money in the process of implementing the capital budgeting decisions
taken that the decision to diversify or expand would become a wealth destroyer to the
company, then the firm would have experienced a situation of inability to sell the equipments
bought. Loss incurred by the firm on account of this would be heavy if the firm were to scrap
the equipment bought specifically for implementing the decision taken. Sometimes these
equipments will be specialized costly equipments. Therefore, capital budgeting decisions are
irreversible.
5) The most difficult aspect of capital budgeting decisions is the influence of time. A firm
incurs capital expenditure to build up capacity in anticipation of the expected boom in the
SMU Page 23
demand for its products. The timing of the capital expenditure decision must match with the
expected boom in demand for company’s products. If it plans in advance it may effectively
manage the timing and the quality of asset acquisition. But many firms suffer from its
inability to forecast the future operations and formulate strategic decision to acquire the
required assets in advance at the competitive rates.
6) All capital budgeting decisions have three strategic elements. These three elements are
cost, quality and timing. Decisions must be taken at the right time which would enable the
firm to procure the assets at the least cost for producing the products of required quality for
customer. Any lapse on the part of the firm in understanding the effect of these elements on
implementation of capital expenditure decision taken, will strategically affect the firm’s
profitability.
7) Liberation and globalization gave birth to economic institutions like world Trade
organization. General Electrical can expand its market into India snatching the share already
enjoyed by firms like Bajaj Electricals or Kirloskar Electric Company. Ability of GE to sell
its products in India at a rate less than the rate at which Indian companies sell cannot be
ignored. Therefore, the growth and survival of any firm in today’s business environment
demands a firm to be pro-active. Pro-active firms cannot avoid the risk of taking challenging
Capital budgeting decisions for growth. Therefore, capital budgeting decisions for growth
have become an essential characteristic of successful firms today.
---------------------------------------------------------------------------------------------------------------------
5. A road project require an initial investment of Rs.10,00,000. It is expected to generate the
following cash flow in the form of toll tax recovery.
Year Cash Inflows
1 4,50,000
2 4,25,000
3 3,00,000
4 3,50,000
What is the IRR of the project?
Ans. Average of cash inflows = 15,25,000 / 4

Average of cash inflows = 3,81,250 /-
Initial investment / Average of cash inflows

= 10,00,000 / 3,81,250
= 2.62
Factor 2.62 lies between 19% and 20%
PV @ 19%
SMU Page 24
Year Cash Inflows PV @ 19% PV of Cash
Inflows
1 4,50,000 0.840 3,78,000
2 4,25,000 0.706 3,00,050
3 3,00,000 0.593 1,77,900
4 3,50,000 0.499 1,74,650
NPV = Total of PV of Cash Inflows – Initial Investment

NPV = 10,30,600 – 10,00,000
NPV = 30,600 /-
PV @ 20%

Inflows
1 4,50,000 0.833 3,74,850
2 4,25,000 0.694 2,94,950
3 3,00,000 0.579 1,73,700
4 3,50,000 0.482 1,68,700

NPV = 10,12,200 – 10,00,000
NPV = 12,200 /-
PV @ 21%

Inflows
1 4,50,000 0.826 3,71,700
2 4,25,000 0.683 2,90,275
3 3,00,000 0.564 1,69,200
4 3,50,000 0.466 1,63,100
SMU Page 25
NPV = 9,94,275 – 10,00,000
NPV = (5,725)/-
IRR = A + [(C – O) / (C – D)] * (B – A)

IRR = 20 + [(10,12,200 – 10,00,000) / (10,12,200 – 9,94,275)] * (21 – 20)
IRR = 20 + 0.68
IRR = 20.68%
6. What is sensitivity analysis? Mention the steps involved in it.

Ans. There are many variables like sales, cost of sales, investments, tax rates etc which affect
the NPV and IRR of a project. Analysing the change in the project’s NPV or IRR on account of a
given change in one of the variables is called Sensitivity Analysis. It is a technique that shows
the change in NPV given a change in one of the variables that determines cash flows of a project.
It measures the sensitivity of NPV of a project in respect to a change in one of the input variables
of NPV.
The reliability of the NPV depends on the reliability of cash flows. Therefore if casts go wrong
on account of change in assumed economic environments, reliability of NPV & IRR is lost.
Therefore, forecasts are made under different economic conditions viz pessimistic, expected and
optimistic. NPV is arrived at for all the three assumptions,
Following steps are involved in sensitivity analysis:
1) Identification of variables that influence the NPV & IRR of the project.
2) Examining and defining the mathematical relationship between the variables.
3) Analysis of the effect of the change in each of the variables on the NPV of the project.
MB0030
MARKETING MANAGEMENT
Set 1
1. Explain BCG Matrix.

BCG (Boston Consultancy Group) This model is used to identify company’s SBU’s
(Strategic Business Unit) position in the market. This model identifies the SBU’s Strength,
Weaknesses, Opportunities and Threats (SWOT) on the basis of market growth rate and relative
market share. This model is also known as growth Share Matrix.
Star Question Mark High
SMU Page 26
Cow Dog
Market growth rate
Low
High Low
Axis Components:
1) Market growth rate: The rate at which market is growing.
2) Relative market share: Market share of the SBU divided by the market share of the
largest competitor.
Model Components:
1) Star: This category represents the high market share and high industry growth. SBU’s in this
category require large investment to defend their position. SBU will turn as cash cow after some
time.
2) Cash Cows: This category represents the low growth rate and high market share which is the
characteristic of SBU operating in mature industry. Here company needs less investment to hold
their position. Hence it generates more cash or in management terms we say cash cow can be milked.
3) Question Mark: This category represents high market growth and low market share.
SBU’s in this category has two options, either to invest heavily and bring them to star
position or divest / liquidate from that position.
4) Dogs: SBU’s in this category generates less cash for the company as it operates in
low growth and low market share. Usually companies will not invest in this category and try
to liquidate or divest.
2. Describe the Marketing mix for Pepsi.
Ans. Marketing Mix: The marketing mix is the blend of 4 P’s i.e., The Product, its price, promotion
and distribution blended together to get favourable response from the customer. It is the specific
collection of actions employed by an organization to stimulate acceptance of its ideas, products or
services. The basic functions included in the mix are product development, branding and packaging,
pricing, promotion, advertising, selection of channels of distribution, physical handling and personal
selling.
SMU Page 27
Product Price
• Variety • List price
• Discounts
• Quality • Allowances
• Credit period
• Features
• Credit terms
• Brand name
• Packaging
• Services
Customers and
Intended
Positioning
Place
Promotion Channels
Coverage
• Advertising
Assortments
• Sale promotion Locations
• Public relation Inventory
• Publicity Transportation
• Personal selling
1) Product: It is a good, service, idea, place or person that offered to customer to satisfy
his/her need. The attributes of product are variety, quality, warranty, design, packaging and
service
2) Price: Price is the valuation placed upon the product by the offer. It has to cover
pricing discounts, allowances and terms of credit. It deals with price competition.
SMU Page 28
3) Place: Distribution of goods from the factory to the target customer. It includes
distributors, stockiest and retailers. To illustrate, Zenith computers uses authorized distributor
to sell laptops and desktops to the target customers.
4) Promotion: Promotion is the Persuasive communication about the product by the
offer to the prospect. It covers advertising, personal selling, sales promotion, publicity
relations, exhibition and demonstration used in Promotion. Largely it deals with non-price
competition.
-------------------------------------------------------------------------------------------------------------------------
3. Choose any well-known company & study the micro environment and macro environment
for the same.
Ans. A marketing oriented company always keeps tab on its external environment carefully to
analyze oppurtunities and threats. This external environment influences company’s
strategies in two levels i.e. external macro environment and external micro environment.
These factors are uncontrollable by the organization. Even the best of the company faces
threat if one of the external environment is adverse to it. A moderate company will be
successful if the external environment favours it.
Further studying both the environments in detail:
1) Micro environment: The forces which are very close to the company and have impact
on value creation and customer service.
a) The company:
Integrating a strategic plan into a specific marketing plan requires a lot of co-ordination
of other functions like finance, human resource, production, research and development
and various other departments of the company. Thus the company’s marketing plan
should be supported by the other functional departmental activities also in order to have a
favorable position in the environment.
b) Intermediaries:
Marketing intermediaries plays an important role in the distribution, selling and
promoting the goods and services. Stocking and delivering, bulk breaking and selling the
goods to the customers are some of the major functions carried out by the middlemen.
Retailers, wholesalers, agents, brokers, jobbers, and carry and forward agents are few
intermediaries to name. Retailers are final link between company and customers. Their
role in the marketing of product is increasing everyday.
c) Public:
These are micro environmental groups, which helps company to generate the financial
resources, creating the image, examining the company’s policy and developing the
attitude towards the product. We can identify six types of public:
 Financial public
 Media public
 Regulation agencies
 Citizen action groups
 General public
 Internal public
SMU Page 29
d) Competitors:
A company should monitor its immediate competitor. The product should be positioned
differently and should be able to provide different services.
e) Suppliers:
They are the first link in the entire supply chain of the company. Hence any problems or
cost escalation in this stage will have direct effect on the company. Many companies
adopted supplier relation management system to manage them well.
f) Customers:
A company may sell its products directly or through marketing intermediaries to reach its
customers. Direct or indirect marketing depends on what markets companies serve.
Generally we can divide the market into five categories:
 Consumer market
 Business market
 Reseller market
 Government market
 International market
2) Macro environment:
a) Demographic environment:
It studies the population characteristics like size, density, location, gender composition,
age structure, occupation and religion.
Demography statistics helps companies to develop their products in better way.
These statistics are also used in developing proper supply chain, communicating product
information and changing the product attributes. This environment is analyzed on the
basis of the following factors:
 Age structure of the population
 Marital status of the population
 Geographic distribution of the population
 Education level
 Migration
 Occupation
b) Political and Legal environment:

Government policies, legislations, regulations and stability will directly affect the
business. Therefore it is inevitable for the firm to closely monitor this environment. The
political and legal forces are grouped into the following four categories:
 Monetary and fiscal policies
 Social legislations and regulations
 Government relationships with the industry
 Legislations related to marketing
c) Economic and Natural environment:
SMU Page 30
Economic environment refers to all the economic variables which affects the spending
and savings structure of the nation. It is further analyzed into the following four
categories:
 Consumer spending pattern
 Interest rates
 Inflation
 Changes in income
Natural environment: Environmental concerns are growing over the years. Governments
increased regulations to manage the natural resources. Marketers should be aware of such
trends in the natural environment. Some of the factors which organizations should keep a
vigil on are as follows:
 Inadequate raw materials
 Global warming and pollution levels
 Regulatory world
d) Social and Cultural environment:

Number of women who are working in India is increasing day by day. This segment is
looking towards products which help them in bringing better work life balance. Metro
sexuality is another new phenomenon, wherein a man also assumes the role of women
like purchasing household items and helping in kid’s education, etc.. it made marketer’s
task more difficult on positioning their products.
Time short people are a new segment which involves people who work for long hours and
have less personal time. These people are looking for products which satisfies them
quickly and conveniently.
e) Technology environment:
IT has revolutionized the lives of the people. It brought dramatic changes in the way
organizations operates. It helped in cost reduction, automation, better communication and
efficiency in the organization. The new NANO technology in waiting is expected to
reduce the cost and the size of the materials.
---------------------------------------------------------------------------------------------------------------------
4. Write a short note on Consumer buying behaviour.

Ans. A Consumer is one who is the ultimate user of product. A Consumer market is defined as all
the individuals and household who buy goods and services for personal consumption.
Since Consumer is one who will decide whether or not to buy a particular product, marketers
have to understand the role of consumers in the market and work out market programmers
accordingly. “All psychological, social and physical behavior of all potential consumers as they
become aware of evaluate purchase, consume and tell others about products and services.
To understand the Indian marketing and Consumer Behavior better, marketing firms have to look
at the characteristics features of the Indian consumers. The consumers vary in their consumption
pattern based on geographical location, density of population, urban-rural feature of the consumer,
age, literacy level, income level, linguistic diversity, religion and dress, food habits and festivals
celebrated.
SMU Page 31
Types of Buying Decision Behavior according to Henry Assael Model.
High Involvement Low Involvement

Significant difference between Complex buying behavior Variety seeking buying behavior
brands
Few differences between brands Dissonance reducing buying Habitual buying behavior.
behavior
Complex buying behavior: Customers who are representing this behavior are highly involved in
the purchase of the product or service. The process became complex as difference between
brands are very high. For example, customer who wants to purchase refrigerator would like to
know the meanings of defrosting, door lock, digital temperature control etc.
Dissonance reducing buying behavior: The behaviour exhibited by the customer when product
purchase requires high involvement but only few differences exist. For example, customers who
want to purchase CTV will not find many differences between the brands but the price of the
product and it’s technically makes customer to involve more. One of the major disadvantages of
this type of behaviour is customer will show post dissonance which is very difficult to control.
Variety – seeking buying behavior: When there are significant difference between the brands
existing but customer will not involve more while purchasing, marketer identify this behaviour as
variety seeking buying behaviour. Let us discuss the purchasing behaviour of customer for
biscuits. There are many varieties of biscuits available. One can purchase salt biscuits, cream
biscuits, Marie biscuits, and milk biscuits of Britannia, Parle, ITC sun feast and others. The
customer who purchased Britannia tiger earlier may purchase Sun feast cream biscuit next time.
This doesn’t mean that quality of Britannia tiger is inferior to other brands but customer would
like to try the varieties available in the market.
Habitual buying behavior: The low involvement between the brands and few differences
between the brands leads to the habitual buying behaviour. For example spice powder marketed
by MDH, Everest or MTR have very few differences between them and customers do not search
the information to purchase particular product. Marketers whose customer represents this
category should follow below listed strategies
1) Use price and sales promotions to stimulate product trial.
2) Use more visual aspects than the wordings in the advertisements
3) Television is the better media for this type of products.
4) Use classical conditioning theory to create advertisements.
-------------------------------------------------------------------------------------------------------------------------
5. Company A has homogeneous consumer preferences in the market, Company B sells
different variants of soaps, while Company C is a small firm, with constrained resources. What
do you think is the most suitable market coverage strategy for the all the three companies.
Ans. Here Company A is considered as Undifferentiated Market, Company B is considered as
Differentiated Market and Company C is considered as Concentrated Market.
SMU Page 32
1) Undifferentiated Marketing:
It is a market coverage strategy in which the company treats the target market as
one and does not consider that there are market segments that exhibit uncommon needs. The
company focuses on the centre of the target market to get maximum advantage. The feature
of ‘one product-all segments’ calls for presenting one marketing-mix for the target market.
For example, the Coca-Cola Company sells Coke, Limca, Thums-up etc., and does not
distinguish the target audience.
2) Differentiated Marketing:
It is a market coverage strategy in which the company goes for proper market
segmentation as depicted by its analysis of the total market. The company, therefore, goes for
several products of several segment approach which calls for preparing different marketing
mixes for each of the market segment. This strategy is followed by Hindustan Lever Limited
which sells different soaps (Life boy, Lux, Rexona, Liril, Pears etc.) and each of them has its
own market. Thus, the company creates segments in the soap market and not in toiletries
market (including soaps, detergents, toothpaste, etc.)
3) Concentrated Marketing:
It is a market coverage strategy in which company follows ‘one product-one segment’
principle. For example, Ashok Leyland produces large chassis of machine which can be used
for buses and trucks. The manufacturer gets maximum knowledge about the segment’s needs
and therefore acquires special reputation. This strategy can also help the small company to
stand against a large corporation because the small company can create niches in its one-
product one-segment approach by providing maximum varieties.
-------------------------------------------------------------------------------------------------------------------------
6. Describe various bases for positioning the product with example.

Ans. Bases for positioning the product
Overcoming the positioning difficulties enables the company to solve the marketing-
mix problem. Thus seizing the “high-quality position” requires the firm to produce high quality
products, charge a high price, distribute through high-class dealers and advertise in high-quality
media vehicles.
The bases for positioning strategies that are available are:
1) Attribute Positioning:
A company positions itself on an attribute such as size or number of years in existence. Sun
feast position its snacky brand as bigger lighter and crisper.
2) Benefit Positioning:
The product is positioned as the leader in a certain benefit.
Automotive: Hyundai Santro

SMU Page 33
Headline: India’s best-loved family car is now also India’s simplest car to drive.
Subhead: Hyundai introduces Santro Zip plus Automatic & Xing.
No shifting gears, no clutch, no problems.
Baseline: The simplest car to drive. (Positioning)
3) Use or Application Positioning:

Positioning the product as best for some use and application. For example, Kenstar
positioned its product as unexpectedly cold.
4) User Positioning:
Positioning the product as best for some user group. In this advertisement of Parle-G, the
boy was positioned as rock star. This advertisement basically targets the kids and boys.
5) Competitor Positioning:
The product claims to be better in some way than a named competitor. In this
advertisement Mathrubhumi base line says ‘In the wake of ABC results, Mathrubhumi
celebrates the addition of 33,960 copies while nearest competitor laments the loss of 7,258
copies. Planners, take note’. It is directly mentioning its and competitors sales of newspaper.
6) Product Category Positioning:

The product is positioned as the leader in a certain product category. Bajaj CT 100 was
positioned as leader in the entry segment bikes.
7) Quality or Price Positioning:

The product is positioned as offering the best value. The vegetable oil brand position it
self as ‘anokhi shuddata, anokha asar’. This means, company offers unique purity and unique
effect.
SMU Page 34
MB0030
MARKETING MANAGEMENT
Set 2
1. Write a short note on product life cycle.

Ans. The product which is introduced into the market will undergo some modifications over the
period. Its sales also fluctuate. Therefore marketer is interested in finding out how sales changes over a
period and what strategies are best suited at that point. A product category over time. Generally the
curve resembles a bell shaped curve.
Product life cycle (bell shaped curve)

According to this type of cycle a product passes through five stages:
1) Product development stage:

In this stage company identifies the viable idea and develops it. Sales in this stage are
zero but huge research and development budget is required. Therefore company incurs losses at
this stage.
.
2) Introduction stage:
Company introduces the product into the market. As the product is new to the market,
awareness is usually very low. Here company adopts heavy sales promotion and product
awareness programs. The cost of product is very high and sales are very low. At this juncture
the company charges high price to the customer.
3) Growth stage:
Company gets experience over the period and now thries to get the maximum market
share (takes first mover advantage). Sales will grow rapidly, resulting in lesser cost and better
profit. Company reduces the price of the product and offers varieties and values in it. It focuses
on building better distribution network and pushes the product through it. Therefore company
needs less sales promotion. Number of competitors will grow and it forces company to keep tab
on them.
4) Maturity stage:
a) Peak sales.
b) Low cost per customer.
c) High profits.
d) Competition based pricing.
e) Communicating the product differentiation to consumer.
f) Improving supply chain efficiency.
g) Defend the market share.
h) Industry experiences the consolidation.
SMU Page 35
5) Decline stage:
In this stage, product sales and profit decline. Company should phase out weak items
from their product mix. The advertisement budget of the company also comes down.
---------------------------------------------------------------------------------------------------------------------------
2. Explain various categories of brand sponsorship with example.
Ans. Brand sponsorship
Brand managers have four options of sponsoring the brand. They are
1) Manufacturer brand:
The brand owned by manufacturer and promoted either directly or indirectly. This type of
strategy has been followed for many years. Pillsbury atta is a manufacturer brand.
2) Private brand:
Private brands are also called store brands. These brands bear the store name or store selected
vendor name. Basic ingredients of private labels are
a) It must be a unit package: It is difficult to assign a Private Label character to say, rice
sold loose from a 100kg bag. Even though it may enhance consumer loyalty for whatever reason, it
does not qualify as a Private Label product.
b) Relabeling: The unit pack must bear only the brand name of the particular store or any
other party the store may choose for its Private Label programme.
Private labels will enhance the category profitability, increase the negotiation power of
the retailer and better value creates better consumer loyalty. All retailers cannot go for the
private labeling. Private labels can be introduced if and only if
a) The consumer is not getting a tangible value.
b) The retailer is not making enough returns from the sale of the branded goods.
3) Brand Licensing:
It is the legal authorization by the trade marked brand owner to allow another company
to use its brand for a fee. For example, Hugo Boss, Tommy Hilfiger, Lovable, Lacoste, and
Nike are some of the textile brands those licensed their brands in the Indian market. The major
benefits of brand licensing are low cost, free publicity and revenue from royalty fees. Brand
licensing also suffers from serious limitations like lack of manufacturing control, and failure of
licensing arrangements.
4) Co-Branding:
According to Kotler, co-branding is ‘the practice of using the established brand names
of two different companies on the same product. For example, ICICI and HPCL came together
to sell ICICI-HPCL petro cards to the customer. Here card is the co-branding between the two
companies. Co-branding helps ICICI to utilize their financial resources well. It adds another
banking facility to the bank while HPCL can lock the customer from buying the petroleum
products from competitors. HPCL also gets the benefit of financial power which it doesn’t
have. Both companies promote these products. Hence they can leverage brand image and can
reduce the cost. All companies will not get benefit from co-branding. Some times company
may lose the brand image if the product fails.
3) Explain the product mix pricing strategies with example.

SMU Page 36
Ans. Product mix:
The number of product lines and items offered by marketer to the consumer
A Company’s product Mix has four different dimensions. They are product mix width, product
mix length, product mix depth and product mix consistency.
Fabric care House hold

Utensil Fragrances Personal Allied
insecticide cleaners care business
UjalaSupreme Maxo Exodishwash Maya JeevaNatural Continental
(9ml,30ml,75ml,cyclthrin coil
bar(100g,200g, (8,15,20,40 (Coconut
& Milk
special
125ml,250ml) (8hr,10hr,12hr) 380g) 100 sticks.) with Milk
Protein,
Coconut Milk
withJasmine and
Coconut Milk
with
KasturiManjal,
and is
presented in
75gm packs.)
UjalaWashing MaxVaporizer Exodishwash Marketing of
powder(25g, (30ml, 45ml) liquid(500ml, godrej Tea
500g, 1 kg) 125ml)
Stiff&Shine Maxaerosol Marketing of
(20gmsachets, (150ml, 300ml) Ekta dhoop
100ml&200ml
bottles)
Product mix width: The total number of product lines that company offers to the consumers.
For example, Jyothy Laboratories’ product mix has six lines. Hence width is 6
Fabric care House hold

Utensil Fragrances Personal care Allied business
insecticide cleaners
For example, Jyothy Laboratories fabric care division has three items
Fabric Care
Ujala Supreme
UjalaWashing
Powder
Stiff & Shine
Product line depth: The number of versions offered of each product in the line.
SMU Page 37
For example, Jyothy Laboratories’ Jeeva Natural is offered in three versions i.e., Coconut milk
with Milk Protein, Coconut Milk with Jasmine and Coconut Milk with Kasturi Manjal, and is
presented in 75gm packs.
Product mix consistency: If company’s product lines usage, production and marketing are related,
then product mix is consistent, else it is unrelated.
In the case of Jyothy Laboratories, all six product lines are FMCGs. Hence it is having consistent
product mix. But ITC Company’s cigarette and cloth product lines are totally unrelated.
---------------------------------------------------------------------------------------------------------------------------
4. What are various logistics functions? Describe in brief.
Ans. Major logistics functions
1) Warehousing:
Goods produced at the factory may not be consumed simultaneously. Therefore
companies need to store the goods. Companies able to use proper warehousing facilities
enhanced their operation efficiency. Warehousing can also be used as hub where goods come
to the facility and cross docked. Nowadays many companies are assigning this work to
specialized players in ware housing. Hence warehousing itself grew like separate industry.
2) Inventory management:
Organizations need to store the goods required for day to day operation. They cannot
store high inventory as stock piles up and cost also increases. They are not sure of demand
fluctuation and its impact on the inventory, so they do not want take risk by carrying little
inventory. For example, Safe Express which provides inventory solution to Barista replenishes
the goods on daily basis so that Barista can maintain zero inventory space in their outlets.
3) Transportation:
The goods need to be carried from one place to another. Transporters ship the goods
from supplier location to factory and from factory till customer. They use different modes to
perform the function. The different modes are
a) Air transportation:
This mode of transportation is used to transport perishable goods. The dominant
characteristics of this mode are quick delivery, premium pricing and limited quantity
transportation.
b) Water transportation:
This is the slowest but most cost efficient mode of transportation. It can carry
wide varieties of goods but it can reach only limited places. This mode is usually suited
for bulky, low value non perishable goods.
c) Surface transportation:
This mode is again divided as highway transportation and rail transportation. It
can carry wide variety of assortments. In case of rail transportation it can carry bulky
products while in highway transportation it is of high value goods.
d) Pipelines:
This mode is excellent in meeting delivery schedules as it is having fewer
obstacles. The drawback of this type of transportation mode is, it carries very limited
variety of products and covers very limited geographic space. The cost of the
transportation is very low. The most suitable products for this mode are oil, natural gas
and slurried products.
SMU Page 38
e) Internet carriers:
This mode is used to carry digital products from producer to consumer via
satellite abled modem or telephone wires. Software companies, education institutions etc.
are very few to name, who are using this mode of transport.
---------------------------------------------------------------------------------------------------------------------------
5. What is IMC? Describe the communication development process in brief.
Ans. According to The American Marketing Association, IMC – Integrated Marketing
Communication is “a planning process designed to assure that all brand contacts received by
a customer or prospect for a product, service, or organization are relevant to that person and
consistent over time.”
Communication development process
Preparing target customer profile
Identifying promotion objectives
Designing a message
Selecting channels of communication
Selecting the message source
Target customer feedback
1) Preparing target customer profile: Effective marketing communication starts with

identifying the target customer to whom the communication is developed. In this stage
company prepares target customer profile.
2) Identifying promotion objectives: Target customer profile provides inputs about his/her
readiness to purchase the product. Customer may be in any of the six stages of hierarchy
of effects. The six stages are awareness, knowledge, liking, preference, conviction and
purchase. Every company likes to bring their customer to purchase stage from other five
stages. Therefore it create different promotion program at different stage. To make it
clearer, Company first creates awareness about the product, educate them about the
advantages, induce them to choose the brand, stimulates and monitor that customer
purchases the product.
a) Awareness: Marketer creates the new range of products. Awareness level for
these products is very low. Intention of the advertisement is to create awareness
about these new products. In the following example of Reebok play dry technology
garments, it focuses to create awareness among the target audience.
b) Knowledge: In this stage target audience don’t have complete knowledge of the
product. Marketer explains the product in detail and its advantages to the target
customers.
c) Liking: Promotion is used to convert knowledgeable audience into likeable
category. Marketer uses celebrities to create interest in the product.
SMU Page 39
d) Preference: Creating differentiation in the market place so that customer
identifies it over the rival brands. Big bazaar advertisement with tag line ‘is se sasta
aur achcha kahin nahi’ or nobody sells cheaper and better is alluring the customer
by telling them what differentiation they can bring.
e) Conviction: Customer may have preference over the product but he/she still not
able to decide. In this situation, marketer develops the messages in such a way that
it provides platform for him to decide.
f)Purchase: Sometimes customers are having strong desire to buy the product but
due to affordability or any other environmental character, they are not able to
purchase. In this situation, marketer uses promotional schemes particularly reduced
price schemes to attract the customer. Company also comes out with
communication programs for repeat purchasers and loyal customers.
3) Designing a message: After deciding the communication objectives, Marketer turns to
develop right message which should create attention, interest, desire or action (AIDA) by
the customer. Before deciding what should be their in this message, we will understand
AIDA model in detail.
AIDA model:
a) Attention: The marketing communication should generate attention
towards the product. In this stage customer is having the need; organization should
provide solution from their communication.
b) Interest: Once the customer provides enough attention towards the
communication, organization should stimulate it to create interest.
c) Desire: The interest created should be forced in the customer mind so that
he will develop desire towards the product.
d) Action: Strong desires should be forced in the customer mind so that he
will develop desire towards the product.
4) Selecting the channels of communications:
a) The communicator may use company sales people, reference groups, blogs, RSS,
webinar, online communities and social networking sites to promote their products.
These media are called as personal communication channels. The word of mouth
campaigns buzz marketing and viral marketing are some examples of personal
communication channels.
• Word of mouth communication: The personal communication between

customers and their reference groups about the product.
• Buzz marketing: The marketing technique in which organizations create

opinion leaders (people whose opinion are sought by others) and spread the
product information to others.
SMU Page 40
• Viral marketing: The marketing technique of using social networks on
the internet to create the brand image.
b) The communicators are using mass media like print (Newspaper, magazine,
journals) Broadcast (radio, television) Outdoor (hoardings, Bill board posters) and
online (e-mail, communities, groups, websites) to communicate their product
attributes.
5) Selecting the message source: Messages communicated by the celebrities and proper
sources have high credibility among the target consumers. Many companies use well
known actors and actresses, cricket players, and even cartoon characters to promote their
advertisements.
Companies should be very careful about the selection of the sources. If the
product character does not match with sources, then product will fail in the market.
6) Target Customer Feedback: The communicator collects the feedback on the promotion
campaign to assess how many of target customer able to see, hear or read the message.
This stage helps communicator to understand how many of target customers actually able
to recall the message? And among them how many of them really purchased it. Some
companies go further and ask the customer to provide suggestion to improve the
promotion campaign.
---------------------------------------------------------------------------------------------------------------------
6. What are alternative approaches to marketing while going international? Study Pepsi’s
international marketing strategy.
Ans. The orientation towards the market varies from company to company. Each one adopts
different approaches on the basis of their expertise or strength of the company. Some companies
adapt same product for all the markets while others differentiate for each country. In this context,
we would like to know what are the common approaches adopted by the company in international
marketing. The three common approaches used in the international market are:-
1) Domestic market extension approach.
2) Multi domestic market orientation.
3) Global market orientation.
1) Domestic market extension approach: Companies that adopt this strategy thinks
international markets are secondary to its domestic markets.
2) Multi domestic market orientation: In the international market each country has its
uniqueness. Their preference varies. The consumer profile is different from domestic operation.
Companies develop different market plans for such markets. For example, in France, men use more
cosmetics than men. A cosmetics company should change the product positioning differently.
3) Global market orientation: In this approach, company thinks that products’ needs
are universal in nature irrespective of country where they work. Here company tries to
standardize their products or services. For example, Sony Walkman is same across the
SMU Page 41
world. The product information brochure contains explanation in different languages
of different countries. The final product is same in all the countries.
MB0031
MANAGEMENT INFORMATION SYSTEMS
Set 1
SMU Page 42
1. Define MIS? What are the objectives and characteristics of MIS?
Ans. Organized approach to the study of information needs of a management at every level in
making operational, tactical, and strategic decisions. Its objective is to design and implement
man-machine procedures, processes, and routines that provide suitably detailed reports in an
accurate, consistent, and timely manner. Modern, computerized systems continuously gather
relevant data, both from inside and outside the organization. This data is then processed,
integrated, and stored in a centralized database (or data warehouse) where it is constantly updated
and made available to all who have the authority to access it, in a form that suits their purpose.
The Basic characteristics of an effective Management Information System are as follows:
1) Management-oriented: The basic objective of MIS is to provide information support to

the management in the organization for decision making. So an effective MIS should start
its journey from appraisal of management needs, mission and goal of the business
organization. It may be individual or collective goals of an organization. The MIS is such
that it serves all the levels of management in an organization i.e. top, middle and lower
level.
2) Management directed: When MIS is management-oriented, it should be directed by the
management because it is the management who tells their needs and requirements more
effectively than anybody else.
Manager should guide the MIS professionals not only at the stage of planning but also on
development, review and implementation stages so that effective system should be the
end product of the whole exercise in making an effective MIS.
3) Integrated: It means a comprehensive or complete view of all the sub systems in the
organization of a company. Development of information must be integrated so that all the
operational and functional information sub systems should be worked together as a single
entity. This integration is necessary because it leads to retrieval of more meaningful and
useful information.
4) Common data flows: The integration of different sub systems will lead to a common
data flow which will further help in avoiding duplicacy and redundancy in data
collection, storage and processing. For example, the customer orders are the basis for
many activities in an organization viz. billing, sales for cashing, etc. Data is collected by a
system analyst from its original source only one time. Then he utilizes the data with
minimum number of processing procedures and uses the information for production
output documents and reports in small numbers and eliminates the undesirable data. This
will lead to elimination of duplication that simplify the operations and produce an
efficient information system.
5) Heavy planning-element: The preparation of MIS is not a one or two day exercise. It
usually takes 3 to 5 years and sometimes a much longer period. So the system expert has
to keep 2 things in mind – one is that he has to keep future objectives as well as the firm’s
information well in advance and also he has to keep in mind that his MIS will not be
obsolete before it gets into action.
6) Sub System concept: When a problem is seen in 2 sub parts, then the better solution to
the problem is possible. Although MIS is viewed as a single entity but for its effective
SMU Page 43
use, it should be broken down in small parts or subsystems so that more attention and
insight is paid to each sub system. Priorities will be set and phase of implementation will
be made easy. While making or breaking down the whole MIS into subsystems, it should
be kept in mind that the subsystems should be easily manageable.
7) Common database: This is the basic feature of MIS to achieve the objective of using
MIS in business organizations. It avoids duplication of files and storage which leads to
reduction in costs. Common database means a “Super file or Master file” which
consolidates and integrates data records formerly stored in many separate data files. The
organization of the database allows it to be accessed by each subsystem and thus,
eliminates the necessity of duplication in data storage, updating, deletion and protection.
8) Computerized: MIS can be used without a computer. But the use of computers increases
the effectiveness and the efficiency of the system. The queries can be handled more
quickly and efficiently with the computerized MIS. The other benefits are accuracy,
storage capacity and timely information.
9) User friendly/Flexibility: An MIS should be flexible i.e. there should be room for further
modification because the MIS takes much time in preparation and our environment is
dynamic in nature.MIS should be such that it should be used independently by the end
user so that they do not depend on the experts.
10) Information as a resource: Information is the major ingredient of any MIS. So, an MIS
should be treated as a resource and managed properly
---------------------------------------------------------------------------------------------------------------------
2. Explain strategic MIS categories in detail. Give illustrations for each category.
Ans. Strategic Information System
A Strategic Information System (SIS) is a system to manage information and assist in

strategic decision making. A strategic information system has been defined as, "The information
system to support or change enterprise's strategy."
A SIS is a type of Information System that is aligned with business strategy and structure. The
alignment increases the capability to respond faster to environmental changes and thus creates a
competitive advantage. An early example was the favorable position afforded American and
United Airlines by their reservation systems, Sabre and Apollo. For many years these two
systems ensured that the two carriers' flights appeared on the first screens observed by travel
agents, thus increasing their bookings relative to competitors. A major source of controversy
surrounding SIS is their sustainability.
SISs are different from other comparable systems as:
1) They change the way the firm competes.

2) They have an external (outward looking) focus.
3) They are associated with higher project risk.
4) They are innovative (and not easily copied).
SMU Page 44
It is mainly concerned with providing and organization and its members an assistance to
perform the routine tasks efficiently and effectively. One of the major issue before any
organization is the challenge of meeting its goals and objectives. Strategic IS enable such
organization in realizing their goals. Strategic Information System (SIS) is a support to the
existing system and helps in achieving a competitive advantage over the organizations
competitors in terms of its objectives. This unit deals with the critical aspects of the strategic
information system. This unit indicates the theoretical concepts and the way in which the same
are realized in practice. The flow of the unit is in such a way that it starts with the development
of contemporary theory about strategic uses of corporations' internal information systems leading
to systems which transcend the boundaries of particular organizations. The process whereby
strategic information systems are created or identified is then examined. A number of
weaknesses in the existing body of theory are identified, and suggestions made as to directions in
which knowledge is or may be progressing. A strategic information system is concerned with
systems which contribute significantly to the achievement of an organization's overall objectives.
The body of knowledge is of recent origin and highly dynamic and the area has an aura of
excitement about it. The emergence of the key ideas, the process whereby strategic information
systems come into being is assessed, areas of weakness are identified, and directions of current
and future development suggested.
Information system is regarded as a tool to provide various services to different

management functions. The tools have been developing year by year and the application of the
tool has become more and more diverse. In management it is now a very power means to manage
and control various activities and decision making process. The original idea of automating
mechanical processes got quickly succeeded by the rationalization and integration of systems. In
both of these forms, IS was regarded primarily as an operational support tool, and secondarily as
a service to management. Subsequent to the development, it was during the last few years that an
additional potential was discovered. It was found that, in some cases, information technology
(IT) had been critical to the implementation of an organization's strategy. An organization’s
strategy supported by information system fulfilling its business objectives came to be known as
Strategic Information System. The strategic information system consists of functions that
involved gathering, maintenance and analysis of data concerning internal resources, and
intelligence about competitors, suppliers, customers, government and other relevant
organizations.
---------------------------------------------------------------------------------------------------------------------
3. Write a detailed note on the planning and development of Management Information

Systems.
Ans. Information is a corporate resource, as important as the capital, labor, know-how etc. and
is being used for decision-making. Its quality, therefore, is required to be very high. Low quality
information would adversely affect the organizational performance as it affects decision-making.
The quality of information is the result of the quality of the input data, processing design, system
design, system and procedures which generate such a data, and the management of the data
processing function. Quality, unlike any other product, is not an absolute concept. Its level is
SMU Page 45
determined with reference to the context and its use, and the user. Perfect quality just as perfect
information is non-achievable and has cost-benefit implications.
However, it is possible to measure the quality of information on certain parameters. All
these parameters need not have a very high value. Some parameters may have lesser importance
in the total value on account of their relevance in the information and its use.
The quality parameters which are generally considered are shown in the table
Individual Explanation Effect on Examples

differences information
processing
Locus of control The degree of More information The production
internal or perception Gathering and decisions, selection
external to the in assessing the control analysis, if internal. of tools and
situation. Which is internal to the materials etc.
organization or external
to the organization?
Personal The degree of faith in Low dogmatism, The pricing,

dogmatism. beliefs, opinions and then more advertising in a
past experience. information Competitive
collection and environment.
processing.
Risk propensity. The ability to take the Higher, then more The top
risk. Information management
gathering and decision-making in
analysis. a strategic planning.
Tolerance for Level of clarity Tight tolerance then Manager Constantly

ambiguity. required in More information asking for more
The information. The collection and information.
ability to read through analysis.
the information.
Manipulative The ability to High ability, then Experienced and

intelligence. manipulate less skillful
the data and Information and Managers rely on
information more self analysis. the manipulative
Vis-à-vis the stored intelligence.
information and
knowledge.
Experience in Extent of experience at High, then correct The managers with

decision-making. Particular level of filtering of data and a wide experience
decision making. appropriate choice in the different
SMU Page 46
of fields
Decision making- Of management call
process. for precise and less
but pertinent
information.
Knowledge of The extent of Higher, then less The Technocrat

the task, tools knowledge Information scientists and
and technology. In the application of the relevant to and managers of
tools and technology. tools correct technology have
analysis. definite
information.
The quality of these important parameters is ensured by conducting a proper systems

analysis, designing a suitable information system and ensuring its maintenance from time to time,
and also subjecting it to audit checks to ensure the system integrity.
The quality of the parameters is assured if the following steps are taken.
1) All the input is processed and controlled, as input and process design.
2) All updating and corrections are completed before the data processing begins.
3) Inputs (transactions, documents, fields and records) are subject to validity checks.
4) The access to the data files is protected and secured through an authorization scheme.
5) Intermediate processing checks are introduced to ensure that the complete data is
processed right through, i.e. run to run controls.
6) Due attention is given to the proper file selection in terms of data, periods and so on.
7) Backup of the data and files are taken to safeguard corruption or loss of data.
8) The system audit is conducted from time to time to ensure that the information system
specifications are not violated.
9) The system modifications are approved by following a set procedure which begins with
authorization of a change to its implementation followed by an audit.
10) Systems are developed with a standard specification of design and development.
11) Information system processing is controlled through programmed control, process control
and access control.
12) Ensure MIS model confirms consistency to business plan satisfying information needs to
achieve business goals.
The assurance of quality is a continuing function and needs to be evolved over a period and
requires to be monitored properly. It cannot be assessed in physical units of measure. The user of
the information is the best judge of the quality.
---------------------------------------------------------------------------------------------------------------------
4. Explain in detail the necessity and importance of Systems Design in MIS.
SMU Page 47
Ans. The systems design phase is generally broken into two sub phases, top-level design and
detailed design.
Top-level design consists of the identification of the major system components and their
functions. In order to specify the top-level design, a number of alternative system design
concepts are synthesized and evaluated in terms of a variety of selection criteria, which include
cost (implementation, operation and maintenance), performance, satisfaction of requirements,
development risk, flexibility for expansion/upgrading, and political acceptability. The important
aspect of top-level design is to present several feasible solutions to the system managers and
users, to describe their advantages and disadvantages, and to obtain a consensus on a preferred
design concept.
Detailed design consists of specifying all of the system components and functions in
detail. In the detailed design phase, decisions are made concerning what data elements are to be
collected, how they are to be coded, how frequently they are to be collected, and at what levels of
detail they are to be aggregated. The decision on the unit of analysis has a significant impact on
both the cost of the system operation (especially the data collection burden) and on the flexibility
of ad-hoc reporting. This design decision is particularly important. While it is an easy matter to
revise a data entry screen or report format, it is not possible to produce a desired report about a
particular type of unit if data on that unit are not included in the data base.
A major advantage of most management information systems, however, is that they
include the total population of interest, so that statistical analysis is not required to analyze the
data. For a software subsystem, the structured analysis / structured design approach involves the
use of techniques such as data flow diagrams, functional decompositions, and structure charts.
Since we recommend making heavy use of fourth-generation database management software, the
amount of detail depicted in the detailed software design is generally minimal.
The detailed design phase also identifies the initial reports to be produced by the system
(reporting levels, frequency, content, and format). With fourth-generation database software it is
an easy matter to change reports or develop new reports, so the specification of the output reports
is not critical (since it will almost surely change over time).
The amount of effort expended in detailed software design for management information
systems is often not very great, for two reasons. First, through the use of fourth-generation
software it is relatively easy to implement modifications of report content and format (as long as
the necessary data are available). Second, it is recommended to adopt a rapid-prototyping
approach to the software development. Fourth-generation languages are ideally suited to this
approach, which consists of developing an initial version of the software, testing it, modifying it,
and then producing a second, improved, version. This iterative process is repeated one or more
times until a desired version is obtained. With the rapid-prototyping approach, the "design" is
continually evolving, and a minimum amount of effort is expended in documenting each of the
prototypes. The system design phase specifies what computer equipment is to be used. Because
of the very high computing power (fast speed, large memory, long word-length) of current-day
microcomputers, the large capacity of hard drives, the tremendous variety and capabilities of
available application software, and the reasonable cost of hardware and software, current
microcomputer-based systems will be able to accomplish many of the desired system
requirements at acceptable cost and level of complexity. Because of the large diversity of choice,
however, and because the acquisition and training costs are not negligible, it is necessary to
carefully consider the alternatives and make a good selection.
Experience with a wide variety of software and hardware is a valuable asset in guiding
the hardware/software selection process. The significant processing capabilities of
SMU Page 48
microcomputers make them appropriate candidates for many practical MIS applications. Major
categories of software involved in a microcomputer-based MIS system are database software,
spreadsheet / presentation graphics, and statistical analysis packages. Depending on the system
size and number and location of users, networking may be a useful option.
---------------------------------------------------------------------------------------------------------------------
5. Explain in detail about e-business, e-commerce and e-collaboration. Give suitable

examples.
Ans. E-business
E-business is limited to executing core business process of organization. This process
would have external interface like suppliers, customers, contractors so on. The core business
processes of the organization are procurement, manufacturing, selling, distribution, delivery and
accounting. These core processes are best run by application packages like enterprise resource
planning(ERP).if enterprise definition is made wider including customer, suppliers and
distributors, application package like supply chain management(SCM) is best suited for planning
and execution of entire business process.
For example, when a supplier sends goods, it is received in the warehouse. This event is
processed E=way using E-business systems suite. The receipt, processing is done to confirm the
validity of dispatch by the supplier, confirmation of quality, acknowledging the receipt, updating
the purchase order, effecting material accounts and supplier accounts, creating a liability in
payables and posting it into cash flow projections. You will observe that receipt processing is
first done at locations like warehouse and procurement module of ERP takes over all updates and
changes.
E-business systems use internet/ intranet/ extranet capabilities to process an event in
manner covering all technical, commercial, business operations and interface with external
agencies-business enterprise traditional people organization based on 'Command Control'
principle is absent. It is replaced by people organization that is empowered by information and
knowledge to perform their role. They are supported by information systems, application
packages, and decision-support systems. It is no longer functional, product, and project or matrix
organization of people but E-organization where people work in network environment as a team
or work group in virtual mode. E-business enterprise is more process-driven, Technology-
enabled and uses its own information and knowledge to perform. It is lean in number, flat in
structure, broad in scope and a learning organization.
In E-business enterprise, most of the things are electronic, use digital technologies and
work on databases, knowledge bases, directories and document repositories. The business
processes are conducted through enterprise software like ERP, SCM, and CRM supported by
data warehouse, decision support, and knowledge management systems.
Today most of the business organizations are using Internet technology, network, and
wireless technology for improving the business performance measured in terms of cost,
efficiency, competitiveness and profitability. They are using E-business, Ecommerce solutions to
reach faraway locations to deliver product and services. The enterprise solutions like ERP, SCM,
and CRM run on Internet (Internet / Extranet) & Wide Area Network (WAN). The business
processes across the organization and outside run on E-technology platform using digital
technology. Hence today's business firm is also called E-enterprise or Digital firm.
The paradigm shift to E-enterprise has brought four transformations, namely:
a) Domestic business to global business.
SMU Page 49
b) Industrial manufacturing economy to knowledge-based service economy.
c) Enterprise Resource Management to Enterprise Network Management.
d) Manual document driven business process to paperless, automated, electronically
transacted business process.
These transformations have made conventional organization design obsolete. In E-
enterprise, business is conducted electronically. Buyers and sellers through Internet drive the
market and Internet-based web systems. Buying and selling is possible on Internet. Books, CDs,
computer, white goods and many such goods are bought and sold on Internet. The new channel
of business is well-known as Ecommerce. On the same lines, banking, insurance, healthcare are
being managed through Internet E-banking, E-billing, E-audit, & use of Credit cards, Smart card,
ATM, E-money are the examples of the Ecommerce application. The digital firm, which uses
Internet and web technology and uses E-business and Ecommerce solutions, is a reality and is
going to increase in number.
MIS for E-business is different compared to conventional MIS design of an organization.
The role of MIS in E-business organization is to deal with changes in global market and
enterprises. MIS produces more knowledge-based products. Knowledge management system is
formally recognized as a part of MIS. It is effectively used for strategic planning for survival and
growth, increase in profit and productivity and so on. To achieve the said benefits of E-business
organization, it is necessary to redesign the organization to realize the benefits of digital firm.
The organization structure should be lean and flat. Get rid of rigid established infrastructure such
as branch office or zonal office. Allow people to work from anywhere. Automate processes after
reengineering the process to cut down process cycle time. Make use of groupware technology on
Internet platform for faster response processing. Another challenge is to convert domestic
process design to work for international process, where integration of multinational information
systems using different communication standards, country-specific accounting practices, and
laws of security are to be adhered strictly.
Internet and networking technology has thrown another challenge to enlarge the scope of
organization where customers and vendors become part of the organization. This technology
offers a solution to communicate, coordinate, and collaborate with customers, vendors and
business partners. This is just not a technical change in business operations but a cultural change
in the mindset of managers and workers to look beyond the conventional organization. It means
changing the organization behavior to take competitive advantage of the E-business technology.
The last but not the least important is the challenge to organize and implement
information architecture and information technology platforms, considering multiple locations
and multiple information needs arising due to global operations of the business into a
comprehensive MIS.
E-Commerce
E-Commerce is a second big application next to ERP. It is essential deals with buying and
selling of goods. With the advent of intent and web technology, E-Commerce today covers an
entire commercial scope online including design and developing, marketing, selling, delivering,
servicing, and paying for goods. Some E-Commerce application adds order tracking as a feature
for customer to know the delivery status of the order.
The entire model successfully works on web platform and uses internet technology. E-
Commerce process has two participants, namely
Buyer and Seller like in traditional business model.
SMU Page 50
And unique and typical to E-commerce there is one more participant to seller by authorization
and authentication of commercial transaction.
E-Commerce process model can be viewed in four ways and categories:
a) B2C: Business Organization to Customer
b) B2B: Business Organization to Business
c) C2B: Customer to Business Organization
d) C2C: Customer to Customer
In B2C Model, business organization uses websites or portals to offer information about
product, through multimedia clippings, catalogues, product configuration guidelines, customer
histories and so on. A new customer interacts with the site and uses interactive order processing
system for order placements. On placements of order, secured payment systems comes into
operation to authorize and authenticate payment to seller. The delivery system then take over to
execute the delivery to customer.
In B2B Model, buyer and seller are business organizations. They exchange technical &
commercial through websites and portals. Then model works on similar line like B2C. More
advanced B2B model uses Extranet and Conducts business transaction based on the information
status displayed on the buyer’s application server.
In C2B Model, customer initiates actions after logging on to seller’s website or to server.
On the server of the selling organization, E-Commerce applications are present for the use of the
customer. The entire Internet banking process work on C2B model where account holders of the
bank transact a number of requirements such as seeking account balance, payment and so on.
In C2C model, Customer Participates in the process of selling and buying through the
auction website. In this model, website is used for personal advertising of products or services.
E-Newspaper website is an Example of advertising and selling of goods to customer.
In B2B Model, the participants in E-business are two organization with relations as
buyer=seller, distributor-dealer and so on.
E-Collaboration
E-Collaboration every business has a number of work scenarios where group of people
work together to complete the tasks and to achieve a common objective. The group could be
teams or virtual teams with different member strength. They come together to platform a task to
achieve some results. The process is called Collaboration. The Biggest Advantage of E-
Collaboration is that it taps the collective wisdom, knowledge and experience of the members.
The collaboration team or group could be within the organization and between the organizations
as well. Since, E-Collaboration works on an internet platform and uses web technology, work
group/team need not be at one physical location. E-collaboration uses E-Communication
capabilities to perform collaborative tasks or project assignment. Its effectiveness is increased by
software ‘GroupWare’ that enables the members of the group to share information, invoke an
application and work together to create documents and share them and so on.
E-Collaboration helps work effectively on applications like calendaring and scheduling
tasks, event, project management, workflow application, work group application. E-collaboration
system components are internet, Intranet, Extranet and LAN, WAN networks for communication
through GroupWare tools, browser.
Let us illustrate the model using an event in the business such as receipt of material for a
job to be processed on the shop floor. In this event there is a transaction receipt of material,
SMU Page 51
which needs to be processed, and then a workgroup will use this information of material receipt.
Each member of this workgroup has a different goal.
---------------------------------------------------------------------------------------------------------------------
6. What is an internet? Explain the differences between internet, intranet and extranet.
Ans. Internet
The Internet is a global system of interconnected computer networks that use the
standardized Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network
of networks that consists of millions of private and public, academic, business, and government
networks of local to global scope that are linked by copper wires, fiber-optic cables, wireless
connections, and other technologies. The Internet carries a vast array of information resources
and services, most notably the inter-linked hypertext documents of the World Wide Web
(WWW) and the infrastructure to support electronic mail. In addition it supports popular services
such as online chat, file transfer and file sharing, gaming, commerce, social networking,
publishing, video on demand, and teleconferencing and telecommunications. Voice over Internet
Protocol (VoIP) application allows person-to-person communication via voice and video.
Difference between internet, intranet and extranet.
Extranet
An extranet is a private network that uses the Internet protocols and the public
telecommunication system to securely share part of a business's information or operations with
suppliers, vendors, partners, customers, or other businesses. An extranet can be viewed as part of
a company's intranet that is extended to users outside the company. An extranet requires security
and privacy. A new buzzword that refers to an intranet that is partially accessible to authorized
outsiders. Whereas an intranet resides behind a firewall and is accessible only to people who are
members of the same company or organization, an extranet provides various levels of
accessibility to outsiders. You can access an extranet only if you have a valid username and
password, and your identity determines which parts of the extranet you can view.
Intranet
An internal use, private network inside an organization that uses the same kind of software
which would also be found on the Internet. Inter-connected network within one organization that
uses Web technologies for the sharing of information internally, not world wide. Such
information might include organization policies and procedures, announcements, or information
about new products. An intranet is a restricted-access network that works like the Web, but isn't
on it.
Usually owned and managed by a company, an intranet enables a company to share its
resources with its employees without confidential information being made available to everyone
with Internet access. A network based on TCP/IP protocols (an internet) belonging to an
organization, usually a corporation, accessible only by the organization's members, employees, or
others with authorization. An intranet's Web sites look and act just like any other Web sites, but
the firewall surrounding an intranet fends off unauthorized access. Like the Internet itself,
intranets are used to share information.
SMU Page 52
Internet
An electronic network of computers that includes nearly every university, government,
and research facility in the world. Also included are many commercial sites. It started with four
interconnected computers in 1969 and was known as Arpanet. A network of computer networks
which operates world-wide using a common set of communications protocols. The vast
collection of inter-connected networks across the world that all use the TCP/IP protocols. A
global network connecting millions of computers. A worldwide network of computer networks.
It is an interconnection of large and small networks around the globe. The Internet began in 1962
as a resilient computer network for the US military and over time has grown into a global
communication tool of more than 12,000 computer networks that share a common addressing
scheme.
MB0031
MANAGEMENT INFORMATION SYSTEMS
Set 2
1. What are limitations of MIS? What are the factors which lead to the success and failure
of MIS in an organization?
Ans. Limitations of MIS
SMU Page 53
MIS incorporates a wide variety of knowledge areas. Both technology and technology-
related products are evolving at an extremely fast and unpredictable pace, Many of the term used
in MIS environments ate imprecise and controversial, MIS problems often are not east to define
or structure, The body of knowledge in MIS is relatively recent and scarce A lack of rapport
often exists between MIS personnel and management and also between MIS personnel and users
A Management Information System (MIS) is a valuable tool company management uses to gauge
the effectiveness of their business operations. The MIS can provide detailed insight to certain
portions of a company and also assist management with making critical business decisions.
While the style and format of the MIS has changed over the years, its use in management
decisions has increased greatly.
Factors which lead to the success and failure of MIS in an organization
Factors Contributing to Success
If a MIS is to be success then it should have all the features listed as follows:
1) The MIS is integrated into the managerial functions. It sets clear objectives to ensure that the
MIS focuses on the major issues of the business.
2) An appropriate information processing technology required to meet the data processing and
analysis needs of the users of the MIS is selected.
3) The MIS is oriented, defined and designed in terms of the user’s requirements and its
operational viability is ensured.
4) The MIS is kept under continuous surveillance, so that its open system design is modified
according to the changing information needs.
5) MIS focuses on the results and goals, and highlights the factors and reasons for non
achievement.
6) MIS is not allowed to end up into an information generation mill avoiding the noise in the
information and the communication system.
7) The MIS recognizes that a manager is a human being and therefore, the systems must
consider all the human behavioral factors in the process of the management.
8) The MIS recognizes that the different information needs for different objectives must be met
with. The globalization of information in isolation from the different objectives leads to too
much information and information and its non-use.
9) The MIS is easy to operate and, therefore, the design of the MIS has such features which
make up a user-friendly design.
10) MIS recognizes that the information needs become obsolete and new needs emerge. The MIS
design, therefore, has a basic potential capability to quickly meet new needs of information.
SMU Page 54
11) The MIS concentrates on developing the information support to manager critical success
factors. It concentrates on the mission critical applications serving the needs of the top
management.
Factors Contributing to Failures
Many a times MIS is a failures. The common factors which are responsible for this are listed as
follows:
1) The MIS is conceived as a data processing and not as an information processing

system.
2) The MIS does not provide that information which is needed by the managers but it
tends to provide the information generally the function calls for. The MIS then becomes
an impersonal system.
3) Underestimating the complexity in the business systems and not recognizing it in

the MIS design leads to problems in the successful implementation.
4) Adequate attention is not given to the quality control aspects of the inputs, the
process and the outputs leading to insufficient checks and controls in the MIS.
5) The MIS is developed without streamlining the transaction processing systems in

the organization.
6) Lack of training and appreciation that the users of the information and the
generators of the data are different, and they have to play an important responsible role in
the MIS.
7) The MIS does not meet certain critical and key factors of its users such as a
response to the query on the database, an inability to get the processing done in a
particular manner, lack of user-friendly system and the dependence on the system
personnel.
8) A belief that the computerized MIS can solve all the management problems of
planning and control of the business.
9) Lack of administrative discipline in following the standardized systems and

procedures, wrong coding and deviating from the system specifications result in
incomplete and incorrect information.
10) The MIS does not give perfect information to all the users in the organization.
---------------------------------------------------------------------------------------------------------------------
2. What is Business Process Re-engineering? Explain in detail the focus of BPR on the
current issues in Business.
SMU Page 55
Ans. Business Process Re-engineering is a major innovation changing the way organization
conduct their business. Such changes are often necessary for profitability or even survival. BPR
is employed when major IT projects such as ERP are undertaken. Many concepts of BPR
changes organizational structure. The support system in any organization plays a important role
in BPR. It is difficult to carryout BPR calculations using ordinary programs like spreadsheets etc.
experts make use of applications with simulations tools for BPR. Reengineering is basically done
to achieve cost reduction, increase in quality, improvement in speed and service. BPR enable a
company to become more competitive in the market. Employees work in team comprising of
managers and engineers to develop a product. This leads to formulation of interdisciplinary terms
which can work better than mere functional terms. The entire business process developing a
product gets new dimension. This has lead to reengineering of much old functional process in
organizations.
Current issues in Business

Apart from the usual ways of managing a process in any business information system, it is
necessary to enhance the value of the process and also the methods used in improving the
process. Some of the concepts of information management for effective information systems are
the traditional concept of database, the emerging concepts of data mining and data warehousing.
1. Concept of database-database is a data structure used to store organized information. A

database is typically made up of many linked tables of rows and column. For example a
company might use a database to store information about their products, their employees,
and financial information. Databases are now also used in nearly all e-commerce sites to
store product inventory and customers information. Database software, such as Microsoft
access, FileMaker pro and MySQL is designed to help companies and individuals
organize large amounts of information in a way where the data can be easily searched,
sorted and updated.
2. Data mining-data mining is primarily used as a part of information system today, by

companies with a strong costumer focus – retail, financial, communication and marketing
organizations. It enables these companies to determine relationships among “internal”
factors such as price, product, positioning, or staff skills and “external” factors such as
economic indicators, compensation, and customer demographics. And, it enables them to
determine the impact on sales, customer satisfaction, and corporate profits. Finally, it
enables them to “drill down” into summary information to view detail transactional data.
With data mining, a retailer could use point on an individuals purchase to send targeted
promotions based on an individuals purchase history. By data mining demographic data
form comment or warranty cards, the retailer could develop products and promotions to
appeal to specific customer segments.
3. Data mining- a data warehouse is a copy of transaction data specifically structured for
querying and reporting. The main output from data warehouse systems are either tabular
listings with minimal formatting or highly formatted “formal” reports on business
activities. This becomes a convenient way to handle the information being generated by
various processes. Data warehouse is an archive of information collected from wide
multiple sources, stored under a unified scheme, at a single site. This data is stored for a
long time permitting the user an access to archived data for years. The data stored and the
SMU Page 56
subsequent report generated out of a querying process enables decision making quickly.
This concept is useful for big companies having plenty of data on their business
processes. Big companies have bigger problems and complex problems. Decision makers
require access to information from all sources. Setting up queries on individual processes
may be tedious and inefficient. Data warehouse may be considered under such situations.
---------------------------------------------------------------------------------------------------------------------
3. Explain the various role of a Systems Analyst. What is meant by Feasibility of systems?
What are the various types of Feasibility study?
Ans. Role of a Systems Analyst
The system analysts are the facilitators of the problem and needs of a business to determine
how the business systems and information technology can best solve problem and accomplish
improvements for the business.
The system analyst is responsible for examining the total flow of data throughout the
organization. Various aspects of an organization like personnel interactions and procedures for
handling problems of the computer are studied by him. The person involved in the system
development is known as systems analyst. His main role is as consultant supporting and
maintenance expert, he should work with cross section of people and should have the experience
of working with computers. He is a problem solver and takes problem as a challenge and enjoys
meeting challenges. He knows hoe to use the right tool, techniques and experience at the right
time.
Feasibility of systems
Feasibility is a measure of how beneficial the development of an information system
would be of an organization. Feasibility analysis is the activity by which the feasibility is
measured.
Feasibility study is a preliminary study which investigates the information needs of
prospective users and determines the resource requirements, costs, benefits and Feasibility of a
proposed project. The data is first collected for Feasibility study. Later on, the findings of the
study are formalized in a written report that includes preliminary specification and a development
plan for proposed system. If the management approves these recommendations of the report the
development process can continue.
Types of Feasibility study

The goal of feasibility study is to evaluate alternative systems and to propose the most
feasible and desirable system for development. The feasibility of a proposed system can be
evaluated in four major categories.
Technical feasibility: it is a measure of technology suitability to the application being designed

or the technology ability to work with other technology. It measures the practicality of a
specified technical solution.
Economic feasibility: it is the measure of the cost effectiveness of a project. It is also known as
cost benefit analysis.
SMU Page 57
Operational feasibility: it is a measure of how comfortable the management and users are with
the technology.
Schedule feasibility: it is a measure of how reasonable the project schedule is.

---------------------------------------------------------------------------------------------------------------------
4. Explain the significance of DSS. What are the components of DSS and explain DSS
model?
Ans. A Decision Support System (DSS) is a class of information systems (including but not
limited to computerized systems) that support business and organizational decision-making
activities. A properly designed DSS is an interactive software-based system intended to help
decision makers compile useful information from a combination of raw data, documents,
personal knowledge, or business models to identify and solve problems and make decisions.
Typical information that a decision support application might gather and present are:
1) an inventory of all of your current information assets (including legacy and relational data
sources, cubes, data warehouses, and data marts),
2) comparative sales figures between one week and the next,
3) Projected revenue figures based on new product sales assumptions.
DSS components
At the core of a DSS are a database and a model base. In addition, a typical DSS contains
a dialogue manager, which allows decision makers to easily access and manipulate the database
and use common business terms and phrases. A DSS also contains presentation tools. The system
is dependent on data which are required to be collected and processed for any decision making.
The availability of the data is usually not a problem but the quality is always a concern. The
quality concern is very important and the data must go through a validation process before it can
be used in the DSS.
The model base in a DSS gives decision makers access to a variety of models to assist
them in the decision making process. In supply chain DSS; the models are the mathematical
models of the various supply chain activities. These models mathematically represent the supply
chain activities and provide decision support based on built in analytical tools. The analytical
tools commonly used are heuristics, optimizing tools, simulation and AI (artificial intelligence).
See your text for more details. The model base may include model management software (MMS)
that coordinates the use of models in a DSS.
5. Read the following case and answer the question.
You have 10 messages on voice mail, six faxes in your in-basket, three people standing outside
of your office waiting either for you to get off of the phone or finish speaking with the guy sitting
in your office (whichever comes first). Your computer just beeped to inform you, again, that an
e-mail message has just been added to your stockpile of unread messages gathering electronic
dust. You make a mental note to change the notification sound to an evil laugh. Your reading pile
SMU Page 58
is teetering, threatening to put out of misery the plant you haven't watered in three weeks. You
wonder who the strange people are in the picture on your desk. ... Oh yeah, it's your spouse and
kids.
Your boss strides into your office, throws a letter under your nose, and says, "Read this. We just
got a project that requires us to `collaborate over the Internet'-whatever that means-and since
you're the computer guru around here, you have to get a handle on it and teach us all what to do
by next Thursday." As he leaves, you make a few e-comments about what he can e-do with his e-
letter. Welcome to e-hell. Most professionals know by now that eventually they will have to deal
with e-business. It's too early to tell if e-collaboration will resolve the communications overload
engineers are facing today or just clutter the available bandwidth even more. Look around you.
Did PCs lead to a paperless office? Waiting for the e-collaboration to stabilize or shake out,
however, might be counterproductive. You might find yourself in a situation like the one
described above where you'll have to "e-collaborate" in a pinch. If this happens, here are a few
survival tips: read about e-collaboration to get a general impression of what it is and how it
works and then visit some Websites where some of the more popular products exist and try them
out. Visit the HPAC Engineering Interactive Website at www.hpac.com and, under Heavy Duty
Content, choose the Information Technology (IT) Tips area. Read the columns on extranets that
were published by Dr. Joel Orr in April and May 2000 and the August column by Digital Media
Editor Lynne Brakeman on collaboration software exhibited during the A/E/C Systems show
earlier this year. These three columns introduce you to collaboration software and point you to
some products that are tailored to our industry.
I'd also recommend visiting Orr's Website (www.extranets.cc) for a comprehensive list of sites.
Some of these sites allow you to download "demo" versions. Trying out the software demo will
help you decide which method is right for you and possibly your whole company. Call some of
the vendors and ask if they provide training either online or at a nearby facility. Depending on
the stock market, some might be desperate enough to come to your office.
If your firm is being required to e-collaborate, as the story goes above, try and find the people
who are leading the e-collaboration effort and ask them what method they're using. If they have
not made a decision on which product to use, you may be able to sway them toward a decision
that benefits you and your company. If you need to teach others in your company how to use e-
collaboration tools or make a corporate-wide procurement/standardization decision, I recommend
that you do further research and get others in your company involved. To learn more about
introducing new information technologies gradually into a company, read the IT Tips column
"Strategic Planning for Information Technology" in the December 1996 issue. This e-business is
a tough nut to crack. It represents a pivotal time in our industry. The best way to deal with it is
proactively.
Question: Which particular concept of MIS is being dealt here in this particular case? List out all
the issues related to MIS mentioned in the above case. List out all the advantages and
disadvantages what you feel is appropriate in this case.
Ans. After studying the above case it can be interpreted that the concept dealt in this case is e-
collaboration. Firstly let us brief out what e-collaboration is.
Different group of people working together to accomplish a common objective is
collaboration. Today these groups are put onto a network with the help of e-technologies through
internet support for communication and helping out to have access to different databases and
SMU Page 59
servers. The biggest advantage of e-collaboration is that it taps the collective wisdom, knowledge
and experience of the members.
Since e-collaboration works on an internet platform and uses web technology, work
groups need not be at one physical location. The system components are internet, intranet,
extranet, LAN and WAN networks for communication through groupware tools or browsers.
The groupware tools today have become an integral part of the organization. Enterprise
Resource Planning(ERP), Customer Relation Management(CRM), Supply Chain
Management(SCM) are the three packaged software solutions which are integrated in one
customize suit known as Enterprise Application Integration(EAI). EAI supports e-organization
functioning through MIS.
MIS for E-business is different compared to conventional MIS design of an organisation.

The role of MIS in E-business organization is to deal with changes in global market and
enterprises. MIS produces more knowledge-based products. Knowledge management system is
formally recognized as a part of MIS. It is effectively used for strategic planning for survival and
growth, increase in profit and productivity and so on.
To achieve the said benefits of E-business organisation, it is necessary to redesign the
organisation to realize the benefits of digital firm.
The organisation structure should be lean and flat.
1) Get rid of rigid established infrastructure such as branch office or zonal office.
2) Allow people to work from anywhere.
3) Automate processes after reengineering the process to cut down process cycle
time.
4)Make use of groupware technology on Internet platform for faster response
processing.
Advantages:
Internet and networking technology has thrown challenge to enlarge the scope of
organisation where customers and vendors become part of the organisation. This technology
offers a solution to communicate, co ordinate and collaborate with customers, vendors and
business partners.
E-business enterprise is open twenty-four hours, and being independent, managers,
vendors; customers transact business any time from anywhere.
It has no geographic boundaries as it can extend its operations where Internet works. All this is
possible due to Internet and web moving traditional paper driven organisation to information
driven Internet enabled E-business enterprise.
MIS in E-organisation deviates from traditional report formats to automated intelligent
knowledge driven system. It enforces manager to act quickly to response displayed on the screen.
Most of the decisions of middle and operational management are delegated to IT-enabled
information and knowledge driven systems. They are supported by the rule-based transaction
processing system, decision support systems, expert systems, artificial intelligence (AI) systems,
and data warehouse and mining systems.
MIS in E-organisation deviates from the conventional model of 'Capture Compute
Process Analyse Report Think and Act' to 'Point Click Respond Act.
Disadvantages:
SMU Page 60
One challenge is to convert domestic process design to work for international process,
where integration of multinational information systems using different communication standards,
country specific accounting practices, and laws of security are to be adhered strictly.
This is just not a technical change in business operations but a cultural change in the
mindset of managers and workers to look beyond the conventional organisation. It means
changing the organization behaviour to take competitive advantage of the E-business technology.
The last but not the least important is the challenge to organise and implement information
architecture and information technology platforms, considering multiple locations and multiple
information needs arising due to global operations of the business into a comprehensive MIS.
MB0032
OPERATIONS RESEARCH
Set 1
1. Describe the broad classification of Operations Research models in detail. Name the
different steps needed in OR approach of problem solving?
SMU Page 61
Ans. A model is a representation of reality; it is an idealized representation or
abstraction of real life system. The objective of model is to identify significant factors and
their interrelationship. A model is helpful in decision making as it provides a simplified
description of complexities and uncertainties of a problem in logical structure. Major
advantage of models is it does not interfere with real system.
Broad Classification of OR models:

1) Physical Model: Includes all form of diagrams, graphs and charts. They are designed to
deal with specific problems. They bring out significant factors and interrelationship in
pictorial firm so as to facilitate analysis. There are two types-
i) Iconic Models.
ii) Analog Models.
Iconic models are an image of an object or system, represented on a small scale. These
models can simulate the actual performance of a product.
Analog moles are small physical systems that have similar characteristics and work like
an object it represents E.g. Toy.
2) Mathematical Model: or symbolic models employ set of mathematical symbols to
represent the decision variables of the system. The variables are related by mathematical
system. E.g. Allocation, sequencing, replacement models etc.
3) By Nature of Environment:
We have
i) Deterministic model in which everything is defined and the results are certain. E.g.
EOQ model.
ii) Probabilistic Models in which the input and output variables follow a probability
distribution. E.g. Games Theory.
4) By the Extent of generality: The two models belonging to this class are
i) General models can be applied in general and does not pertain to one problem only.
E.g. Linear programming.
ii) Specific model is applicable under specific condition only. E.g. Sales response curve
or equation as a function of advertising is applicable in marketing function alone.
The OR approach to problem solving consists of the following steps:

a) Definition of the problem.
SMU Page 62
b) Construction of the model.
c) Solution of the model.
d) Validation of the model.
e) Implementation of the final result.
---------------------------------------------------------------------------------------------------------------------
2. Describe the graphical method to solve the Linear Programming Problem. Use the
following example.
Maximize Z=30X1+40X2
Subject to constrains
1.5X1+1.9X2<600----------- (1)
0.3X1+0.2X2<100------------ (2)
0.0X1+0.2X2<30 and------------- (3)
X1>0, X2>0
Ans. A LPP with two decision variables x1 and x2 can be solved easily by graphical method.
We consider the x1 x2-plane where we plot the solution space, which is the space enclosed by the
constrains. Usually the solution space is a convex set which is bounded by a polygon, since a
linear function attains extreme (maximum or minimum) values only on boundary of the region, it
is sufficient to consider the vertices of the polygon and find the value of the objective function in
these vertices. By comparing the vertices of the objective function at these vertices, we obtain the
optimal solution of the problem.
The method of solving a LPP on the basis of above analysis is known as the graphical
method. The working rule for the method is as follows:
Step I: Write down the equations by replacing the inequality symbols by the equality symbol
in the give constraints.
Step II: Plot the straight lines represented by the equations obtained in step I.
SMU Page 63
Step III: Identify the convex polygon region relevant to the problem. We must decide on
which side of the line, the half-plane is located.
Step IV: Determine the vertices of the polygon and find the values of the given objective
function Z at each of these vertices. Identify the greatest and least values. These are
respectively the maximum and minimum value of Z.
Step V: Identify the values of (X1, X2) which correspond to the desired extreme value of Z.
this is an optimal solution of the problem.
Solution:
The above graph is got by finding out the values of X1 and X2 in each of the three equations.
Thus the three lines represent the three equations. Then OABCD is the feasibility region carried
out by the constrains operating on the objective function. The intersection points B and C can be
solved by using the linear equations of the respective points
i.e. For B, 0.2X2=30, therefore X2=150
Substitute X2 in Eqn. 1 we get X1=210
Therefore B (210,150)
Similarly for C, from Eqn. 1 & 2 find X1 and X2 we get

X2=111.11 and X1= 259.26
Therefore C (259.26, 111.11)
SMU Page 64
At point Feasible solution of the Corresponding revenue Total revenue
product-mix Z
X1 X2 From X1 From X2
O 0 0 0 0 0
A 0 150 0 6000 6000
B 210 150 6300 6000 12300
C 259.26 111.11 7777.8 4444.4 12222.2
D 333.33 0 9999.9 0 9999.9
From the above table we find that revenue is maximum at Rs.12,300 when 210 units of X1 and
150 units of X2 are produced.
3. Describe the Penalty Cost Method (Big M Method) for solving L.P.P.
Ans. Consider a L.P.P when atleast one of the constraints is of the type ≥ of =. While
considering in the standard form, add a negative variable to each of such constraints. These
variables are called artificial variables. Their addition causes violation of the corresponding
constraints, since they are added to only one side of an equation, the new system is equivalent to
the old system of constraints if and only if the artificial variables are zero. To guarantee such
assignments in optimal solution, artificial variables are incorporated into the objectives function
with large positive coefficients in a maximization program. These coefficients are denoted by
±M.
Whenever artificial variables are part of the initial solution X0, The last row of simplex
table will contain the penalty cost m. the following modifications are made in simplex method to
minimize the error of incorporating the penalty cost in the objective function. This method is
called Big M-method or Penalty cost method.
1) The last row of the simplex table is decomposed into two rows, the first of which
involves those terms not containing M, while the second involves those containing M.
2) The step 1 of the Simplex Method is applied to the last row created in the above
modification and followed by steps 2, 3 and 4 until this row contains no negative
elements. Then step 1 of Simplex algorithm is applied to those elements next to the last
that are positioned over zero in the last row.
3) Whenever an artificial variable ceases to be basic, it is removed from the first column of
the table as a result of step 4, it is also deleted from the top row of the table as is the
entire column under it.
4) The last row is removed from the table whenever it contains all zeroes.
SMU Page 65
5) If non zero artificial variables are present in the final basic set, then the program has no
solution. In contrast, zero valued artificial in the final solution may exist when one or
more of the original constraint equations are redundant.
---------------------------------------------------------------------------------------------------------------------
4. Why Duality concept is important in OR? Describe the economic importance of Duality
concept.
Ans. The importance of Duality concept is due to two main reasons
1) If the primal contains a large number of constraints and a smaller number of variables, the
labour of computation can be considerably reduced by converting it into the dual problem
and then solving it.
2) The interpretation of the dual variable from the loss or economic point of view proves
extremely useful in making future decisions in the activities being programmed.
Economic Interpretation of Duality:

The linear programming problem can be thought of as a resource allocation model in
which the objective is to maximize revenue or profit subject to limited resources. Looking at the
problem from this point of view, the association dual problem offers interesting economic
interpretations of the L.P resources allocation model.
We consider here a representation of the general primal and dual problems in which the
primal takes the role of a resource allocation model.
Primal: Dual:
Maximize Minimize
n n
Z= ∑ Cj. Xj Z= ∑ bi .yi
j=1 i=1
subject to subject to
n m
∑ aij. xj ≤ bi, i= 1, 2… m ∑ aij yi ≥ ci, j=1, 2… m
j=1 i=1
Xj≥0, j=1, 2… n Yj≥0, i=1, 2… m
From the above resources allocation model, the primal problem has n economic activities
and m resources. The coefficient Cj in the primal represents the profit per unit of activity j.
Resource i, whose maximum availability is Bi, is consumed at the rate Aij units per unit of
activity j.
Economic interpretation of Dual Variables:

For any pair of feasible primal and dual solutions,
(Objective value in the maximization problem) ≤ (objective value in the minimization problem)
At the optimum, the relationship holds as a strict equation.
Note: Here the sense of optimization is very important.
SMU Page 66
Hence clearly for any two primal and dual feasible solutions, the values of the objective
functions, when finite, must satisfy the following inequality.
n m
Z= ∑ Cj Xj ≤ ∑ bj yi =W
j =1 i =1
The strict equality, Z=w, holds when both the primal and dual solutions are optimal.
Consider the optimal conditions z=w first given that the primal problem represents a
resource allocation model, we think of z as representing profit in Rupees. Because bi represents
the number of units available of resources I, equations z= w can be expressed as profit (Rs.) =∑
(units of resources i) X (profit per unit of resource i).
This means that the dual variables yi, represent the worth per unit of resource i [variables
yi are also called as dual prices, shadow prices and simplex multipliers].
With the same logic, the inequality z < w associated with any two feasible primal and
dual solutions is interpreted as (profit) < (worth of resources)
This relationship implies that as long as the total return from all activities is less than the
worth of resources, the corresponding primal and dual solutions are not optimal. Optimality is
reached only when the resources have been exploited completely, which can happen only when
the input equals the output (profit).
Economically the system is said to remain unstable (non-optimal) when the input (worth of
the resources) exceeds the output (return). Stability occurs only when the two quatitites are equal.
---------------------------------------------------------------------------------------------------------------------
5. Describe the Matrix Minimum Method of finding the initial basic feasible solution in
transportation problem.
Ans. Step I: Determine the smallest cost in the cost matrix of the transportation table. Let it be
Cij. Allocate Xij = min (ai, bj) in the cell (i, j).
Step II: If Xij = ai cross off the ith row of the transportation table and decrease bj by ai to step
III.
If Xij = bj cross off the ith column of the transportation table and decrease ai by bj go to step
III.
If Xij = ai = bj cross off either the ith row or the ith column but not both.
Step III: Repeat steps I and II for the resulting reduced transportation table until all the rim
requirements are satisfied whenever the minimum cost is not unique make an arbitrary choice
among the minima.
---------------------------------------------------------------------------------------------------------------------
6. What do you understand by the Integer Programming Problem? Describe the Gomory’s
All-I.P.P method for solving the I.P.P problem.
Ans: The Integer Programming Problem IPP is a special case of LPP where all or some
variables are constrained to assume non-negative integer values. This type of problem has lot of
applications in business and industry where quite often discrete nature of the variables is
involved in many decision making situations.
E.g. In manufacturing the production is frequently scheduled in terms of batches, lots or runs;
In distribution, a shipment must involve a discrete number of trucks or aircrafts or freight cars.
GOMORY’S ALL – IPP METHOD
SMU Page 67
An optimum solution to an I.P.P is first obtained by using simplex method ignoring the
restriction of integral values. In the optimum solution if all the variables have integer values, the
current solution will be the desired optimum integer solution. Otherwise the given IPP is
modified by inserting a new constraint called Gomory’s or secondary constraint which represents
necessary condition for integrability and eliminates some non integer solution without losing any
integer solution. After adding the secondary constraint, the problem is then solved by dual
simplex method to get an optimum integer solution. If all the values of the variables in this
solution are integers, an optimum inter-solution is obtained, otherwise another new constrained is
added to the modified L P P and the procedure is repeated. An optimum integer solution will be
reached eventually after introducing enough new constrains to eliminate all the superior non
integer solutions. The construction of additional constraints, called secondary or Gomory’s
constraints is so very important that it needs special attention.
CONSTRUCTION OF GOMORY’S CONSTRAINTS

Consider a L P P for which an optimum non-integer basic feasible solution has been attained.
With usual notation, let this solution be displayed in the following simplex table.
yb xb y1 y2 y3 y4
y2 y10 y11 y12 y13 y14
y3 y20 y21 y22 y23 y24
y00 y01 y02 y03 y04
Clearly the optimum basic feasible solution is given by xb= [x2, x3] = [y10, y20]; max z= y00
Since xb is a non-integer solution. We assume that y10 is fractional.
The constraint equation is
y10 = y11x1+ y12x2+y13x3+y14x4 (x1 = x4 = 0)
reduces to
y10 = y11x1+x2+y14x4 (x1 = x4 = 0) ----------- (1)
because x2 and x3 are basic variables (which implies that y12 =1 and y13 = 0)
The above equation can be rewritten as
X2 = y10- y11x1 – y14x4
This is a linear combination of non-basic variables.
Now, since y10 ≥ 0 the fractional part of y10 must also be non negative. We split over each of y ij in
(1) into an integral part Iij, and a non negative fractional part, f1j for j = 0, 1, 2, 3, 4. After this
break up (1) may be written as
I10 + f10 = (I11 + f11) x2 + (I14 + f14)x4
Or
F10 – f11 x2 – f14 x4 = x2 + I11 x1 + I14 x4 – I10 ------------- (2)
Comparing (1) and (2) we come to know that if we add an additional constraint in such a way the
L.H.S of (2) is an integer, then we shall be forcing the non-integer y10 towards an integer. This is
what is needed.
The desired Gomory’s constraint is f10 – f11 x1 – f11 x4 ≤ 0.
SMU Page 68
Let it be possible to have f10 – f11 x1 – f11 x4 = h where h. 0 is an integer.
Then f10 = h + f11 x1 +f14 x4 is greater than one. This contradicts that 0 < fij < 1 for j = 0, 1, 2, 3, 4.
Thus Gomory’s constraint is
∑ fig xj ≥ f10 or -∑ fij.xj ≤ -f10
j= 1, 4 j= 1, 4
or -∑ fij.xj + Gsla (1) = -f10
j= 1, 4
when Gsla (1) is slack variable in the above first Gomory’s constraint.
This additional constraint is to be included in the given L.P.P in order to move further towards
obtaining an optimum all integer solution. After the addition of this constraint, the optimum
simplex table looks like as given below.
yb xb y1 y2 y3 y4 Gsla (1)
y1 y10 y11 y12 y13 y14 0
y2 y20 y21 y22 y23 y24 0
Gsla (1) -f10 -f11 0 0 -f14 0

y00 y01 y02 y03 y04 y05
Since – f10 is negative. The optimal solution is infeasible and thus the dual simplex method is to
be applied for obtaining an optimum feasible solution. After obtaining this solution, the above
referred procedure is applied for constructing second Gomory’s constraint. This process is to be
continued so long as an all-integer solution has not been obtained.
SMU Page 69
MB0032
OPERATIONS RESEARCH
Set 2
1. Describe in detail the OR approach of problem solving. What are the limitations of the
Operations Research?
Ans. The OR approach to problem solving consists of the following steps:
1) Definition of the problem:
The first and most important requirement is that the root problem should be identified and
understood. The problem should be identified properly, this indicates three major aspects: i) a
description of the goal or the objective of the study, ii) an identification of the decision
alternative to the system, and iii) a recognition of the limitations, restrictions and requirements of
the system.
2) Construction of the model:
Depending on the definition of the problem, the operations research team should decide on
the most suitable model for representing the system. Such a model should specify quantitative
expressions for the objective and the constraints of the problem in terms of its decision variables.
A model gives a perspective picture of the whole problem and helps tackling it in a well-
organized manner. If the resulting model fits into one of the common mathematical models, a
convenient solution may be obtained by using mathematical techniques. If the mathematical
relationships of the model are too complex to allow analytic solutions, a simulation model may
be more appropriate. There are various types of model which can be constructed under different
conditions.
3) Solution of the model:
Once an appropriate model has been formulated, the next stage in the analysis calls for its
solution and the interpretation of the solution in the context of the given problem. A solution to a
model implies determination of a specific set of decision variables that would yield an optimum
SMU Page 70
solution. An optimum solution is one which maximizes or minimize the performance of any
measure in a model subject to the conditions and constraints imposed on the model.
4) Validation the model:

A model is a good representative of a system, then the optimal solution must improve the
system’s performance. A common method for testing the validity of a model is to compare its
performance with some past data available for the actual system. The model will be valid if under
similar conditions of inputs, it can reproduce the past performance of the system. The problem
here is that there is no assurance that future performance will continue to duplicate past behavior.
Also, since the model is based on careful examination of past data, the comparison should always
reveal favorable results. In some instances this problem may be overcome by using data from
trial runs of the system. It must be noted that such a validation method is not appropriate for non-
existent systems, since data will not be available for comparison.
5) Implementation of the final result:

The optimal solution obtained from a model should be applied practice to improve the
performance of the system and the validity of the solution should be verified under changing
conditions. It involves the translation of these results into detailed operating instructions issued in
an understandable form to the individuals who will administer and operate the recommended
system. The interaction between the operations research team and the operating personnel will
reach its peak in this phase.
---------------------------------------------------------------------------------------------------------------------
2. What are the characteristics of the standard form of L.P.P? What is the standard form of
L.P.P? State the fundamental theorem of L.P.P.
Ans. The characteristics of the standard form are:
1) All constraints are equations except for the non-negativity condition which remain
inequality (≥, 0) only.
2) The right-hand side element of each constraint equation is non-negative.
3) All variables are non-negative.
4) The objective function is of the maximization or minimization type.
The inequality constraints can be changed to equations by adding or subtracting the left
hand side of each such constraint by a non-negative variable. The no-negative variable that has to
be added to a constraint inequality of the form ≤ to change it to an equation is called a Slack
variable. The non-negative variable that has to be subtracted from a constraint inequality of the
form ≥ to change it to an equation is called a Surplus Variable. The right-hand side of a
constraint equation can be made positive by multiplying both sides of the resulting equation by (-
1) wherever necessary. The remaining characteristics are achieved by using the elementary
transformations introduced with the canonical form.
The Standard Form of the LPP.

Any standard form of the L.P.P is given by
n
SMU Page 71
Maximize or minimize z = ∑ Ci.Xi
i=1
n
Subject to: ∑ aij xj +Si = bi (bi ≥ 0) i = 1, 2 ……m.
i=1
& xj ≥ 0, j = 1, 2 ….n.
Si ≥ 0, i = 1, 2 …….m.
Fundamental Theorem of L.P.P:

Given a set of m simultaneous linear equations in n unknowns/ variables, n ≥ m, AX = b,
with r (A) = m. If there is a feasible solution X ≥ 0, then there exists a basic feasible
solution.
3. Describe the Two-Phase method of solving a linear programming problem with an

example.
Ans The drawback of the penalty cost method is the possible computational error that could
result from assigning a very large value to the constant M. to overcome this difficulty, a new
method is considered, where the use of M is eliminated by solving the problem in two phases.
They are
Phase I: Formulate the new problem by eliminating the original objective function by the
sum of the artificial variables for a minimization problem and the negative of the sum of the
artificial variables for a maximization problem. The resulting objective function is optimized by
the simplex method with the constraints of the original problem. If the problem has a feasible
solution, the optimal value of the new objective function (which indicates that all artificial
variables are zero). Then we proceed to phase II. Otherwise, if the optimal value of the new
objective function is non zero, the problem has no solution and the method terminates.
Phase II: Use the optimal solution of the phase I as the starting solution of the original
problem. Then the objective function is taken without the artificial variables and is solved by
simplex method.
Example:
Use the two phase method to
Maximize z = 3x1 – x2
Subject to 2x1 + x2 ≥ 2
x1 + 3x2 ≤ 2
x2 ≤ 4,
x1, x2 ≥ 0
Soln: Rewriting in the standard form,

Maximize z = 3x1 – x2 + 0S1 – MA1 + 0.S2 + 0.S3
Subject to 2x1 + x2 – S1 + A1 = 2
x1 + 3x2 + S2 = 2
x2 + S3 = 4,
SMU Page 72
x1, x2, S1, S2, S3, A1 ≥ 0.
Phase I:
Consider the new objective,
Maximize Z* = - A1
Subject to 2x1 + x2 – S1 + A1 = 2
x1 + 3x2 +S2 = 2
x2 + S3 = 4
x1, x2, S1, S2, S3, A1 ≥ 0.
Solving by simplex method, the initial simplex table is given by
x1 x2 S1 A1 S2 S3
0 0 0 -1 0 0 Ratio
A1 – 1 2* 1 -1 1 0 0 2 2/2 = 1
S2 0 1 3 0 0 1 0 2 2/1 = 2
S3 0 0 1 0 0 0 1 4
-2 -1 1 0 0 0 -2
Work
 column* pivot element
x1 enters the basic set replacing A1.
The first iteration gives the following table:

x1 x2 x1 A1 S2 S3
0 0 0 -1 0 0
x1 0 1 1/2 -1/2 1/2 0 0 1
S2 0 0 5/2 1/2 -1/2 1 0 1
S3 0 0 1 0 0 0 1 4
0 0 0 1 0 0 0
Phase I is complete, since there are no negative elements in the last row. The optimal solution
of the new objective is Z* = 0.
Phase II:
Consider the original objective function,
Maximize z = 3x1 – x2 + 0S1 + 0S2 + 0S3
Subject to x1 + x2/2 – S1/2 = 1
5/2 x2 + S1/2 + S2 = 1
x2 + S3 = 4
x1, x2, S1, S2, S3 ≥ 0
with the initial solution x1 = 1, S2 = 1, S3 = 4, the corresponding simplex table is
x1 x2 S1 S2 S3
3 -1 0 0 0 RATIO
x1 3 1 1/2 -1/2 0 0 1
S2 0 0 5/2 1/2 * 1 0 1 1/(1/2) =2
S3 0 0 1 0 0 1 4
SMU Page 73
0 5/2 -3/2 0 0 3
Work
 column * Pivot element
Proceeding to the next iteration, we get the following table:
x1 x2 S1 S2 S3
3 -1 0 0 0
x1 3 1 3 0 1 0 2
S1 0 0 5 1 2 0 2
S3 0 0 1 0 0 1 4
0 10 0 3 0 6
Since all elements of the last row are non negative, the current solution is optimal.
The maximum value of the objective function Z = 6 which is attained for x1 =2, x2 = 0.
4. What do you understand by transportation problem? What is the basic assumption

behind the transportation problem? Describe the MODI method of solving transportation
problem.
Ans. Transportation model studies the minimization of the cost of transporting a commodity
from a number of sources to several destinations. The supply at each source and the demand at
each destination are known. The transportation problem involves m sources, each of which has
available ai (I = 1, 2, 3 ………, m) units of homogeneous product and n destinations each of
which requires bj (j = 1, 2, 3 …... n) units of products. Here ai and bj are positive integers. The
cost cij of transporting one unit of the product from the ith source to the jth destination is given for
each i and j. The objective is to develop an integral transportation schedule that meets all
demands from the inventory at a minimum total transportation cost.
It is assumed that the total supply and the total demand are equal.
m n
i.e. ∑ ai = ∑ bj (1)
i=1 j=1
The condition (1) is guaranteed by creating either a fictitious destination with a demand equal
to the surplus if total demand is less than the total supply or a (dummy) source with a supply
equal to the shortage if total demand exceeds total supply. The cost of transportation from the
fictitious destination to all sources and from all destinations to the fictitious sources are assumed
to be zero so that total cost of transportation will remain the same.
Formulation of Transportation Problem:

The standard mathematical model for the transportation problem is as follows
SMU Page 74
Let xij be number of units of the homogeneous product to be transported from source i to the
destination j
Then objective is to
m n
Minimize z = ∑ ∑ cij xij
i=1 j=1
subjected to
n
∑ xij = ai, i = 1, 2, …., m
j=1
m (2)
∑ xij = bj, ij = 1, 2, …., n
i=1
with all xij ≥ 0 and integrals
Theorem: A necessary and sufficient condition for the existence of a feasible solution to
the transportation problem (2) is that
m n
∑ ai = ∑ bj
i=1 j=1
The Transportation Algorithm (MODI Method):

The first approximation to (2) is always integral and therefore always a feasible solution.
Rather than determining a first approximation by a direct application of simplex method it is
more efficient to work with the table given below called the transportation table. The
transportation algorithm is the simplex method specialized to the format of table it involves:
a) Finding an integral basic feasible solution
b) Testing the solution for optimality
c) Improving the solution, when it is not optimal
d) Repeating the steps (ii) and (iii) until the optimal solution is obtained.
The solution to T.P is obtained in two stages. In first stage we find Basic feasible solution by
one of the following methods
a) North-west corner rale.
b) Matrix minima method or least cost method
c) Vogel’s approximation method.
In the second stage we test the B.F’s for its optimality either by MODI method or
by stepping stone method.
D1 D2 Dn Supply ui
S1 c11 c12 c1n a1 u1
x11 x12 x1n
S2 c21 c22 c2n a2 u2
x21 x22 x2n
SMU Page 75
S3 c31 c32 c3n a3 u3
x31 x32 x3n
Sm cm1 cm2 cmn am um

xm1 xm2 xmn
Demand b1 b2 bn ∑ai = ∑bi
Vj v1 v2 vm
---------------------------------------------------------------------------------------------------------------------
5. Describe the North-West corner rule for finding the initial basic feasible solution in the
transportation problem.
Ans. Step 1: The first assignment is made in the cell occupying the upper left hand (North
West) corner of the transportation table. The maximum feasible amount is allocated there, that is
x11 = min (a1, b1)
So that either the capacity of origin O1 is used up or the requirement at destination D1 is
satisfied or both. This value of x11 is entered in the upper left hand corner (Small Square) of
cell (1, 1) in the transportation table.
Step 2: If b1 > a1 the capacity of origin O, is exhausted but the requirement at destination D1
is still not satisfied, so that at least one more other variable in the first column will have to take
on a positive value. More down vertically to the second row and make the second allocation of
magnitude
X12 = min (a2, b1 – x21) in the cell (2, 1). This either exhausts the capacity of origin O2 or
satisfies the remaining demand at destination D1.
If a1 > b1 the requirement at destination D1 is satisfied but the capacity of origin O1 is not
completely exhausted. Move to the right horizontally to the second column and make the second
allocation of magnitude x12 = min (a1 –x11, b2) in the cell (1, 2). This either exhausts the
remaining capacity of origin O1 or satisfies the demand at destination D2.
If b1 = a1, the origin capacity of O1 is completely exhausted as well as the requirement at the
destination is completely satisfied. There is a tie for second allocation; an arbitrary tie breaking
choice is made. Make the second allocation of magnitude x12 = min (a1 –a1, b2) = 0 in the cell
(1, 2) or x21 = min (a2, b1 – b2) = 0 in the cell (2, 1).
Step 3: Start from the new north west corner of the transportation table satisfying destination
requirements and exhausting the origin capacities one at a time, move down towards the lower
right corner of the transportation table until all the rim requirements are satisfied.
---------------------------------------------------------------------------------------------------------------------
6. Describe the Branch and Bound Technique to solve an L.P.P problem.
Ans. Sometimes a few or all the variables of an IPP are constrained by their upper or lower
bounds or by both. The most general technique for the solution of such constrained optimization
problems is the branch and bound technique. The technique is applicable to both as well as mixed
I.P.P the technique for a maximization problem is discussed below:
Let the I.P.P be
n
Maximize Z = ∑ cj xj ………………………………… (1)
j=1
Subject to the constraints
SMU Page 76
n
∑ aij xj ≤ bi i = 1, 2, ……., m …………………..(2)
j=1
xj is integer valued, j = 1, 2, ……., r (≤ n)…………………….(3)

xj ≥ 0………………….. j = r+1… n ………………………… (4)
Further let us suppose that for each integer valued xj, we can assign lower and upper bounds
for the optimum values of the variables by
Lj ≤ xj ≤ Uj j = 1, 2… r ………………………… (5)
The following idea is behind “the branch and bound technique”
Consider any variable xj, and let I be some integer value satisfying Lj ≤ I ≤ Uj -1. Then clearly
an optimum solution to (1) through (5) shall also satisfy either the linear constraint.
xj ≥ I + 1…………………….(6)
Or the linear constraints xj ≤ I …………………… (7)
To explain how this partitioning helps, let us assume that there is no integer restriction (3),
and suppose that this then yields an optimal solution to L.P.P – (1), (2), (4) and (5).
Indicating xa = 1.66 (for example). Then we formulate and solve two L.P.P’s each containing
(1), (2) and (4). but (5) for j = 1 is modified to be 2 ≤ x1 ≤ U1 in one problem and L1 ≤ x1 ≤ 1
in the other. Further each of these problems process an optimal solution satisfying integer
constraints (3).
Then the solution having the larger value for z is clearly optimum for the given I.P.P
however, it happens that one (or both) of these problems has no optimal solution satisfying
(3), and thus some more computations are necessary. We now discuss step wise the algorithm
that specifies how to apply the partitioning (6) and (7) in a systematic manner to finally arrive
at an optimal solution.
We start with an initial lower bound for z, say z(0) at the first iteration which is less than or
equal to the optimal value z*, this lower bound may be taken as the starting Lj for some xj.
In addition to the lower bound z (0), we also have a list of L.P.P’s (to be called master list)
differing only in the bounds (5). To start with (the 0th iteration) the master list contains as
single L.P.P consisting a single (1), (2), (4) and (5). We now discuss below, the step by step
procedure that specifies (6) and (70 can be applied systematically to eventually get an
optimum integer – valued solution.
Branch and Bound Algorithm
At the tth iteration (t = 0, 1, 2 …)
Step 0: If the master list is not empty, choose an L.P.P out of it. Otherwise stop the process,
go to step 1.
Step 1: Obtain the optimum solution to the chosen problem. If either
i. It has no feasible solution or
ii. The resulting optimum value of the objective function z is less than or equal to z (t),
then let z(t+1) = z(t) and return to step 0 otherwise go to step 2.
Step 2: If the so obtained optimum solution satisfies the integer constraints (3) then record it.
Let z (t+1) be associated optimum value of z: return to step 0. Otherwise go to step 3.
Step 3: Select any variable xj, j = 1, 2…, p that does not have an integer value in the obtained
optimum solution to the L.P.P chosen in step 0. Let x j * denote this optimal value of xj. Add
SMU Page 77
two L.P.P’s to the master list: these L.P.P’s are identical with the L.P.P chosen in step 0,
except that in one, the lower bound on xj is replaced by [ xj*] + 1. Let z (t+1) = z (t); return step
0.
MB0032
PROJECT MANAGEMENT
Set 1
1. What are the various characteristics of a project? What is the importance of each
characteristic? Give examples
Ans. Project Life Cycle and Process Flows:

The life cycle means the important phases that are required by any project
from start to end of the project. Normally this process of project will go through the preparation
which constitutes formulation and modeling, planning, control, execution, monitoring, completion
and review.
Understanding the project life cycle- In the preparation stage, the project manager along
with the associates and team members draft the outline of the project. They identify the various
factors required to be taken care of in the project. They identify the various factors required to be
taken care of in the project. Based on their discussion they formulate the plans and model the
activities for execution. Budgets are prepared. Once the model is approved it is then recommended
for implementation.
1) During this stage roles and responsibilities of the various members involved in the
project are listed out. Also the team works on the feasibility report to assess the
project feasibility with respect to time, economics and technicalities. The factors
which are arrived at based on risk analysis and uncertainties are used to establish
the control factors to be exercised during the execution of the project. Various
monitoring tools are set to monitor the project progress.
The implementation stage involves the execution of the project as agreed, while carefully
monitoring progress and managing changes. The completion stage involves the satisfactory
SMU Page 78
delivery to the customer the products or services. This is followed by project review to look into
the various issues which affected the project during the course of its execution.
Any project is undertaken to deliver either a service or a product. Project deliverable
could be a set of outputs that are expected during various stages of the project. It could be as
simple as a new product or modification to an existing product.
A project plan is documented with the following key issues-
1) Key stages of the project
2) Project logic diagram
3) Key stages responsibility chart
4) Estimates for all key stages
5) Optimized project Gantt chart
6) Updated and reviewed project risk log
7) Risk management forms for new high risks
8) Project operating budget
Characteristics of a Project:
Any project may be considered to have the following characteristics:
1) Resource requirement:
During the course of executing the project, it is seen that the resource requirement
increases from start to an intermediate stage of the project. It further increases at rapid rate and
becomes constant while the project is during its 80 to 95% progress stage. Thereafter the
resources requirement decreases to zero i.e when the project comes to a finish.
2) Funds:
The requirement of funds for the completes execution for of the project also follows the
same trend as that of the resources. The 2 are more or less proportional.
3) Probability of completion:
The probability of completing the project can be estimated based upon the normal
distribution curve. In the initial stage of the project the probability of completing the project is
low though not zero. It gradually increases and as the project approaches finish the probability of
completing the project tends to become 100%.
4) Risk:
The risks involved in the project affecting its completion time is high at the initial stages
and low at the later stages of the project.
5) Design changes:
The project during the course of its progress may be subjected to changes because of
some external factors. The influence of such external factors on the project may result in changes
in the design of the project though not very often. It is observed that such changes if any are
normally high during the initial stages of the project and decreases as the project approaches
finish.
---------------------------------------------------------------------------------------------------------------------
SMU Page 79
2. State the principles of Deming’s Philosophy relevant to Project Management. Explain
how each one is applicable in management?
Ans. Principles of Deming’s Philosophy:
Just as higher manager teams act together and ask for what is best for the company,
Project Manager Teams are formed for the various project. They act as a group to ensure that all
projects are completed. In this way they will learn to use finite resources. It is better to make the
team responsible for the implementing strategy.
The qualities we should look for in a leader are:
1) Enthusiasm
Desire to do the job and willingness to put in that extra work
2) High tolerance for ambiguity

Under conditions of chaos and disparate team members, clear cut authority lines do not
exist in a project environment. Situations exist where doubts about correctness of decisions will
have to be faced. Leader should take decisions, with a little uncertainty- because others also may
not know. He will be taking a risk. But that is why leaders are there. Such timely qualities will
result in members accepting him as a member
3) High coalition and team building skills

This concerns both the external and internal team members. Customers, their
representatives, suppliers, inspectors etc. are from the outside who are interested in the progress
of the project. Building up relationships and balancing competing requirements is a necessary
characteristic of a project manager
4) Client customer orientation

Customer expectations and problems are continually changing and the better the project
manager understands the problems of the e customer, better he will be able to solve them. The
final measure of success of the project is satisfaction of the customer.
5) Business Orientation
The project manager should understand the business of the organization he works for. He
should know the way things are looked at by the top management and align his thoughts and
conduct, so as not to be in confusion or conflict with them. He should have his senses tuned to
grasp business opportunities that crop up during the implementation.
---------------------------------------------------------------------------------------------------------------------
3. Explain the concept of concurrency in High Technology Development.
Ans. Concurrency in High Technology Development:
The basic characteristics of a project is that it is set of non-repetitive activities which create a
unique product or service. The activities utilize a variety of resources. Systematic acquisition and
deployment in a relatively short span of time is the essential process of a project. Development of a
project starts with the acceptance of the proposal by the customer in all respects technical and
commercial. The marketing people would have taken concurrence of the details and the time
schedules for various stages from the project manager and given their commitment to the customer.
The following are the stages in the development process:
1) Obtaining the specifications

SMU Page 80
2) Creating a work breakdown structure
3) Preparing a comprehensive PERT chart
4) Forming groups and teams
5) Forming a core group consisting of members chosen from as many teams as possible.
6) Fixing the responsibility areas
7) Preparing budgets, supplier contracts
8) Setting up communication channels, feed back routes and monitoring mechanisms.
Many of the above activities can be performed concurrently and save a lot of time.
The above is generally common for most of the projects. In some cases many of the activities are
done by one or two persons. You will observe that information flow is of utmost importance. With
most communication becoming almost instant, it is only necessary to follow the protocol
established, to ensure that the decision making processes are not hindered. Having developed the
project as above, it is ready for implementation.
1) Obtaining the specifications:

This is the culmination of the efforts of the marketing department in securing the
contract. The needs and associated requirements are clearly written down, based on which the
proposal has been given. This is an important phase as the needs of the customers would be
converted to proposal which should meet his requirements. In most of the cases, a number of
changes would need to be made. Considerations of cost, possibility of a few changes to
accommodate the technical requirements or acquisition of new techonology to incorporate
improved performance characteristics will be considered.
Time required for the project may undergo a change. To reduce the cost, or improve upon
delivery or for better monitoring, the customer may offer the services of a few of his personnel,
equipments or even buy technology. When all these are agreed upon, a detailed document
covering all aspects would be ready. Based on the final document, the specifications of all
components of the project will be made. If a few have only broad descriptions of what is
intended, they are made note of and the person department which would finalize within a time
frame is worked out. When specifications are available, the project manager can proceed further.
2) Creating a work breakdown structure

Once the specifications are completely ready, the project manager has the responsibility
of showing the work elements in a structure which show the sequence in which they are to be
performed. Who will be responsible for different aspects of the project. Define the specific
activities that have to be performed. All of them have resources to perform their activities.
Different points of time they require those resources. To get procured proper arrangements to be
made. We should give concentration of reliability of vendors and back up for those vendors So
all the persons responsible activities will have been identified and the sequence of operations
settled
3) Preparing a comprehensive PERT chart

The basis for this chart is the critical path. A number of activities make a project. Because
of technological necessities some activities can be performed only after some others have been
completed. Some activities are independent of some other set of activities Different activities
require different duration for their completion. Some projects are big and a number of clearly
distinguishable stages, called milestones, are identified. Since some activities run concurrently,
SMU Page 81
there are possibilities that one set of activities end up early and have to wait for some other
activities to proceed further
This means that there are more paths from the beginning to end, and one of them takes
more time than the others. We call that critical path.. In PERT Programme Evaluation and
Review Technique we take into consideration the fact that the time allocated for all the activities
might not be determinable. So we give three time estimates – optimistic, most likely and
pessimistic. Giving weightage of four to the most likely period, we try to find the variance of the
project. As some activities get completed earlier, there are opportunities to utilize the resources
allocated to them for the critical activities to hasten the project. These are done on a continuous
basis as the project is under progress. Since actual times taken for the activities are changing
reviewing helps us to meet the deadline by resource smoothing. A chart is prepared and stubs of
different colours are used to indicate the progress of all activities, so that corrections can be
effected.
4) Forming groups and teams

The next stage in the development of the project, is to identify persons to undertake the
various tasks which include procurement of materials, maintaining equipments, stocking of
spares, etc. Some of them are to be shared between teams. However, most of the teams formed
are focused on the jobs assigned to them. Forming and developing teams which contribute their
best to the project, is a challenging task. He should ensure that the knowledge and skills of the
members of a team complement those of others. In projects where knowledge base is very high
like those in the IT, R &D, Innovations fields – to create an atmosphere of camaraderie and
mutual respect will go a long way in improving efficiency. Opportunities should be created for
them to spend time together outside working hours. If for some reason, any member does not
want to stay in a team, he or she should be accommodated at the earliest. A number of
professional consultants offer training programmes for the managers in this area. The latest
trends in HR are to find new ways to make employees feel comfortable and important so that
they stay and work better
5) Forming a core group consisting of members chosen from as many teams as possible
They will be generally senior members in their teams. They will be sharing information
about the progress and see what activities can be hastened or retarded, what facilities can be
loaned, which person from a team can help another team in solving a problem. Coordination and
cooperation result in solving problems sooner. The members of the core group will be
responsible to bring to the notice any changes they want in their teams. This group will facilitate
conflict resolution among the teams.
6) Fixing the responsibility areas

This is a crucial stage in the development of the project. Every person in the project team
members and the members of the core group will know what is expected of him. Each team will
know as to what they are expected to complete during what periods. The core member of this
team will be in communication with the other teams as well as the project manager regarding the
progress or any other additional resources the team would need to keep to the schedule
7) Preparing budgets, supplier contracts

SMU Page 82
At this stage the Project Manager knows what his teams can contribute to the project. He
will prepare the budget for what his firm is going to buy for being utilized by the various team
members for completing their jobs. However, a number of inputs may have to be procured and
the contracts with suppliers have to be given out depending on the competitive offers, quality and
delivery schedules required. Firm commitments from suppliers have to be obtained. Clauses
about inspection, transport, insurance and payment will have to be worked out in detail and
accepted. Project overruns are common and costly. Many good projects have floundered on this
account. Every care should be taken to ensure these are attended to at this stage. Many firms,
knowing that these are likely to happen, will add these costs to the project cost. But then, we
have competition to contend with
8) Setting up communication channels, feed back routes and monitoring mechanisms

The last step in the development process of a project is to establish a system of reporting
and initiation of action taken upon them. Monitoring and control become meaningful when
timely actions are taken. With the availability of intranet and internet, transfer of information has
become very easy and authentic. Internet chatting, video-conferencing avoids movements of
persons, saving on time and money. Nevertheless personal meetings will be useful to clarify a
number of matters, especially financial ones.
-----------------------------------------------------------------------------------------------------------------------
4. Explain in detail the project management review process. What are the various post review
activities?
Ans. Project management review process schedule and timeline
The Project Management Review Process includes the following steps:
1) Identification of projects that will participate in the Reviews

2) Development and adherence to a quarterly reporting schedule
3) Compilation of standard project management data into a presentation data
4) Collection of detailed project files that support the information reported during the project
Management Reviews and may be requested for inspection during a formal audit
5) Participation in the Review meetings with any required follow-up activities
Applicable Projects
Any corporate or major information system at any facility is a candidate for the
Project Management Review Process. A meeting will be scheduled to introduce and explain the
Project Management Review Process and reporting tools. As candidate projects are added to the
Review portfolio, they will be incorporated into the next review cycle schedule
The program and project managers of the information systems that are included in
the Review portfolio are expected to comply with the process described in this guide. The program
and project managers of information systems that are not being reviewed through the Project
Management Review Process should also consider using this guide as mandates, that all
information technology resources undergo a management, control, and review process.
Several of the current and future corporate and major information systems
initiatives have been identified in the Departmental Information Architecture Program guidance
SMU Page 83
series and in the Corporate Systems Information Architecture (CSIA) document. Infrastructure
projects may be considered candidates for the Review process. Modernization plans are also
sources for identifying corporate and major systems that should be included in the Review
portfolio or whose system owners should implement and follow this process.
Reporting schedule:
The Project Senior Management Reviews are scheduled every three months in
conjunction with the fiscal year. A table may be prepared to contain the columns- “As of Date”
column indicates the last day in which information should be included for each reporting period,
the “ Briefing Due Date” column provides the date that an electronic version of the briefing is due.
Project Management Data
Legislative and regulatory mandates ensure that technology initiatives are

implemented at acceptable costs within reasonable and expected time frames. The team ensures
that investments in information technology are fully justified and aligned with agency missions and
business needs. Agency CIOs have the responsibility to ensure co-ordination and tracking of
investments.
Throughout the project life-cycle it is important to apply standard project

management best practices, including tracking and reporting, to all projects, regardless of size. For
smaller projects, stages may be combined and deliverables reduced in scope as appropriate. For
larger or more complex projects, additions project planning, tracking, and reporting activity may be
appropriate.
For all projects identified to participate in project Management Reviews the

standard set of project management reporting requirements fits into the following 5 categories:
i) General Project Overview

ii) Project Status
iii) Product Status
iv) Issues and Risks
v) Project Unique Information
Project Files
A substantial amount of project management information that is useful throughout

the information system’s life-cycle should be gathered in a central project file maintained by the
project manager. All work products developed during the project life-cycle should be included in
the project file. The project manager should verify that all pertinent project information and
documentation are placed in the project file on a timely basis. In addition to being useful in
responding to routine and ad-hoc requests for information, a project file
Is instrumental in case of internal or external audits.
Information about projects in the review portfolio will be made available for
addition to a corporate and major information system repository. This repository serves as a
SMU Page 84
database or data warehouse for storing and accessing information. In addition to the Project
Management Review briefing slides, the repository is being used to store other information needed
for reporting. The following list includes some of the documents that should be provided for the
projects participating in the review process:
a) Set of review charts
b) Supporting documentation
c) Handouts
d) Project plan
e) Work breakdown structure
f) Review meeting notes
Access to the repository is restricted to members of the staff responsible for the
Reviews, responding to inquiries, and preparing federally mandated reports, and to the program
and project managers.
Review Briefings
There are 2 formats for the Review briefings: First time and ongoing. The first
time review is the initial briefing that occurs when a project is first added to the review portfolio.
All subsequent reviews use the ongoing review briefing format. The primary difference between
the 2 formats is the General Overview of the project that is presented during the First Time Review
(FTR). This information is omitted from the Ongoing Review briefings unless it has changes since
the previous review. It is expected that some of the charts in the First Time Review will need to be
included in the first Ongoing Review of the Fiscal year since annual objectives and funding may
change at the start of the fiscal year
The briefing content is designed to address all of the pertinent information about the project at a
level appropriate for management and senior management Ex: the CIO
Preparation and electronic submission of each briefing to the CIO is required on a quarterly basis.
A face to face briefing may not be required each quarter. The CIO will notify the system owner
program project manager to schedule the face-to-face briefings that are required for each reporting
period.
Following are some general guidelines for preparing the briefings:
The briefing can be given by the project manager. Other project stakeholders or
key personnel may be involved in the presentation. The briefings should focus on the current status
and issues associated with the project. Two hours are allocated for each briefing. Participants may
attend the meeting in person. Program and project managers are expected to bring their senior
management to the quarterly briefings. Senior contractor management attendance is considered to
be a good indicator of their interest in assuring their staffs are delivering good products. A detailed
WBS should be provided with the presentation charts.
Termination from the Review Process
SMU Page 85
By mutual agreement between the CIO and the Program Manager, once a project
has been implemented (the system is in operation), the project may discontinue the Review
briefings.
Post review activities:
Once the Project Management Review has been conducted, follow up with
program project managers on any issues or concerns requiring attention, the status of open items
from the review, and CIO reporting actions, e g : reports to the CIO council. The CIO may also
recommend quality assurance analysis be conducted.
Issues or concerns Requiring Attention
The project manager is responsible for raising issues or concerns that require
assistance or guidance to the attention of the CIO. These items should be communicated whenever
they become known, and not held to the next Project Management Review. The CIO will assign
appropriate OCIO staff available to help resolve open items. The program project manager should
communicate the status of these items in each quarterly reviews until the items are resolved closed.
Status of Open items from Review
The program project manager is responsible for tracking the open items from the
reviews and communicating the status in each quarterly review until the items are closed. The
supporting the scheduling of reviews will coordinate with the program project manager after the
quarterly reviews to help ensure that new items have been captured for tracking and action by the
program project manager.
CIO Reports
The staff supporting the CIO Quarterly Reviews will prepare a summary report
after each Project Management Review. The summary report will include the following
information:
a) Summary Status
b) Open issues items
c) Status Performance Objectives Measures
d) Status of Schedule cost
The summary report will be provided to the program project manager to gain
concurrence on the content. The summary report will be used by the CIO when reporting status to
the CIO Council.
-----------------------------------------------------------------------------------------------------------------------
5. Explain the structure of the documentation systems as required by supply chain
monitoring. What is the significance of documentation? How does it help a manager?
Ans. Odette Documentation System Specifications:
Introduction to (SCMo) Supply chain monitoring
SMU Page 86
The intent of this document is to define the structure of the Documentation system its
content, the method of content generation and to attain common documentation of all standard
process of Odette. The documentation is valid for the SCM – group of Odette. The
Documentation System is intranet based to provide immediate access to current, uptodate Process
documentation. The System allows users to navigate through graphical structures to relevant
documentation and processes which were created with the ARIS Toolset.
The process documentation system serves the following objectives:
1) Present standard processes to be adhered to across the industry, and in so doing secure their
correct application
2) Offer a central location of all process and system related information- form customizing
documentation to working guidelines
3) Allow flexible and quick adaptation in case of process changes or enhancement and provide the
updated information immediately
4) Present the standard processes in the intranet, where users can look up the current processes
whenever necessary
5) Availability at every working location
Defining the Process Documentation System
The content of the process Documentation System includes the area supply chain
management from the Odette Supply Chain Management Group. The system includes graphical
process documentation, in the form of process chains, as well as the entire range of documentation
related to the processes. Related information is attached to each documentation level, where it can
be in the form of a single document or a link to further documents or other process chains.
The process Documentation System gives, according to its objectives, an overview and a detailed
view of the relevant processes for SCMo. The processes give the information as to which activities
are done and by whom, when the activities are done and which systems and information support
those activities. Easy system operation is achieved though the use of top down navigation and the
availability of a search index.
Model, Object and Symbol Specifications
Models and Model Types being Used:
ARIS offers a wide variety of model types to enable modeling customized to

individual specifications. The models and model types used in the documentation system are listed
in the following table:
Mode identification Model type

Work Package Function Tree
Process Function Tree
Sub Process Process Chain (eEPc)
SMU Page 87
Description of Models and Objects
Function Tree
The entry level of the process documentation structure is the function tree that
shows the hierarchic structure of the process documentations. The function of the SCMo-
documentation contains three levels:
Level 0: Work Package
Level 0 shows the work packages, which represent the different part projects. At
present only the SCMo-processes are described in this documentation.
Level 1: Process
On Level 1, the processes that belong to the work package on Level 0 are listed
They are not yet the specific processes, but rather self-contained process blocks.
Level 2: Sub-Process
In level ,, the processes are graphically depicted in the form of process chains.
The process chain-model itself can be opened via the assignment The chart describes the objects
that are used in the function tree-model:
Object Definition Example
Function An object that represents a Operative Processes

work package, a process or Update SCM0
a sub process Inventory Information
Edge Illustrates logical Alert Workflow
succession by connecting
the individual elements
-----------------------------------------------------------------------------------------------------------------------
6. Write down a brief outline of any assumed project management plan
Ans. Project summary:
Project Overview-Consider a firm- XYZ as a Stock Broker/ Dealer firm. Any
support software will have applications supporting the following components:
1) First a Brokerage Account Opening application on XYZ’s Web site that will allow any
internet user to open a brokerage account with XYZ
2) Second an account opening and maintenance applications, which is primarily for XYZ’s
representatives to open accounts for the applications received in paper format
This is an intranet application. The application will provide features such as account
history viewing and account balance, status, and activity information. This will allow XYZ to
SMU Page 88
effectively evolve to a client account servicing application besides being an account-opening
engine. This is an enhancement of an existing application
Project Code Project Name Customer

Xxxxxx XYZ Project XYZ Corporation
Project Configuration Business Backup Backup
Leader (PL) Controller (CC) Manager (BM) PL CC
BB SB HR BJ HP
Project Type Platform Number of Phases
Maintenance Development Java, Oracle, Five
Window
Project Start Date Project End Date Total estimated

Revenue
Onshore Offshore
April5, 2001 May 20, 2001 Nov 3, 2001 US $ xxxx,xxx
Name and Phone Number Fax Number E-mail Id

Designation
Project Scope
1) To provide an effective, efficient means of amount maintenance activities

2) To allow representatives to provide information
3) To provide a complete picture to the client representatives for account status, valuation,
order status, and trade activity
4) To increase the intelligence of the update process
5) To provide an interface that can display required amount history
Value addition to the customer
1) This project will allow XYZ to effectively evolve a client account serviceing application
besides being an account giving engine
a) Objectives
Strengthen relationship with XYZ by delivered high quality software on time
Become preferred vendor by developing expensive on XYZ product and systems
b) Commitment made to the customer
c) Assumption:
Assumptions made while planning
SMU Page 89
2) Intelligent update to business partners will be incorporated in only the maintenance part
of the application and not in the Account opening engine
3) Qualified people will approve Rational Unified Process methodology for implementing
this project
4) Changes in functional and technical requirements during the life cycle of the project may
have an impact on the schedule. Any impact on cost or schedule due to these changes will be
intimated to XYZ
5) XYZ reviewers will take seven days to approve a milestone document If no comments are
received within this time period, it will be considered as approved
Project Planning
Project Process
The standard development process of XYZ will be followed
1) Tailoring Notes
Deviation from Standard Added/Modified/Deleted Reasons for Deviations

Process
Only those use cases that Modified Iteration based developemtn
are going to be taken up in a is being done
particular iteration will be
elaborated at that point of
time
Development of logical Modified Confirmation to RUP
object model will be done methodology
incrementally in the first
few iteration
Development of physical Modified Confirmation to RUP
object model will be done methodology
incrementally in the first
few iteration
Physical database design Modified Confirmation to RUP
may be refined I later methodology
iterations
Development of unit test Modified Confirmation to RUP
plan will be done in each methodology
iteration
Development of unit test Modified Iterative approach is being
plan will be done in each used
iteration
Logging of defects will be Modified Iterative approach is being
iteration wise used
SMU Page 90
Requirements trace ability Modified Confirmation to RUP
will be done through the methodology
requisite pro-tool
No vision document and Modified Deviation from RUP
business case as we started
with the scope document,
which serves the same
purpose
Requirements change management process
2) Change request tracking
a) Changes requested by customer will be logged in change request and analyzed for impact
on the project. A change request form will be submitted to customer for approval. Change
request that are approved will be attached to the project contract as agenda
b) Major change usually has an effort/delivery-on-time impact on the project. The customer
needs to formally approve these changes
c) Because this is a short duration project, if any one or a group of changes request takes more
than 2% of the total estimated effort for the project, re-estimation of the project schedule
and effort will be done
3) Requirement Traceability – Requisite tool will be used alongwith Estimated size and
Effort
Estimation Criteria
Program/Function (Use Case) Criteria

Simple use case 3 or fewer transaction
Medium use case 4 to 7 transactions
Compex use case ^ 7 transactions
a) Estimated build effort- Estimate the effort required in man days for each program or
function of the project. This will help in estimating the total build effort
b) Phase Wise effort estimation – Estimate the total effort wrt each activity and effort for
each phase of a project expressed as percentage of man days
c) Schedule – Prepare a list of items as deliverable to the customer and indicate the date of
completion or delivery of the item to the customer. This is specified in the form of a table
indicating various milestone of commitment to the customer
People:
Make a list of the people required for each role in the project along with number of
members required for each role The list should consist of skilled and unskilled people depending
SMU Page 91
upon the role and experience of the individual. Also prepare the requirement plan of people as to
when and how many of each type would be required on the project
Hardware, Software and Tools:

Indicate the hardware and software resources required in the project at every
stage. Plan for procurement of hardware and software depending upon the need at various stage of
the project Prepare a date wise plan of procurement Tool List has to be prepared phase wise and
activity wise. Specify the tools to be developed on the project along with the house tools to be
developed in project which can be in the form of a Weekly Activity Report
Training Plan
Technology Duration Waiver criteria

Javan Language 7 days If already trained
VisualAge for Java 3 days Exposed as part of initial
training
Java Applets 4 hrs If already trained
Java Swing 4 hrs If already trained
Persistence Builder 8 hrs Mandatory
OOAD 1 day If already trained
1) Business Domain
System 7 days If already trained

Appreciation
2) Process Related
Quality system 3 hrs If already trained

Configuration management 2hrs If already trained for CC.
For others, on the job
training
Group review 4 hrs If already trained
Defect prevention 4.5 hrs Mandatory
SPS tool 4.5 hrs If already trained
RUP methodology 2hrs Mandatory
Quality Plan – Quality Goals:
Project Quality Goals

Goals Value Basis for Setting Org-wide
Goals Norms
SMU Page 92
Total number of 145 0.033 defects/ Man- 0.052 defects/Man
defects injected hour. This is 10% Hour
better than Synergy,
which is 0.036
defects/Man-hour
Quality (acceptance 5 3 % or loss of total 6% of estimated
defect density estimated number of number of defects
defects
Goals Value Basic for Setting Org. Wide Norms

Goals
Productivity 57 3.4% productivity 50
improvement over
Schedule Delivery on Time 10%
1) Estimation of Defects to be defected
Review/Testing Estimated numbers % of defects to be Basis of Estimation

Stage of defects to be defected
detected
Requirements and 129 20% Referenced similar
design review project estimations
(synergy)
Code review 29 20% Referenced similar
project estimations
(synergy)
Unit testing 57 40% Referenced similar
project estimations
(synergy)
Integration And 25 17 % Referenced similar
Regression Testing project estimations
(synergy)
Acceptance testing 5 3% Referenced similar
project estimations
(synergy)
Total estimated 143 100%
number of defects to
be detected
2) Prepare a strategy for meeting quality goals indicating the expected benefits
SMU Page 93
Reviews
Prepare a table of important review points. The table should contain the review item and
the type of review required for each of the review item. Type of review could be one-person
review, group review etc
Risk Management Plan
Prepare a table of risk management plan to indicate the risk type, probability of each risk,
impact of the risk on the project, risk exposure and a risk mitigation plan for each risk
Project Tracking
Prepare a measurement plan for tracking the project. The plan must indicate the
appropriate metric to be used, the unit of measurement and the tool to be used. Also prepare the
procedure for task tracking. Similarly prepare a table for tracking various issues of the project like
logging details, review by, review time, floats etc. Obtain customer feedback on the various items
of the project. Determine the actions for each quality activity. Plan for a review by a senior
management and have a planned frequency of reviews. Verify the status report about each activity
of the project. Prepare a list of
tolerances for the defects observed in items and monitor such items
Prepare Reports to be given to the Customer which may indicate –

1) Milestones reports and weekly status reports
2) Issue requiring clarification
3) Escalation, if any
Prepare Report to be given to the Business Manager which should contain-

1) Customer feedback
2) Milestones and weekly status reports
3) Issues requiring clarification / attention
4) Escalation, if any
5) Number of requirement changes and estimated effort for them
6) Major changes in plan
Prepare the project organization chart as applicable to the project under consideration, include the
project team members list along with their responsibility, starting date and completion date of the
activity. A detailed table of roles and responsibilities for each may be prepared
Closure report
At the end prepare closure report table Indicate the necessary project phase/entity
along with project code and corresponding status
Summary
SMU Page 94
Prepare a summary of the various performance parameter used in the project with
respect to each of the actual, estimated and deviations in activity and also furnish the reasons for
deviations
Risk management
Prepare the table on risk management indicating the type of risk, actual elapsed
time, estimated time, percentage slippage and reasons for slippage.
Schedule
Prepare a table of effort distribution over life cycle stage of the project
Defects
A defect distribution table can be prepared as indicated below

Stage Actual % of total Estimated % of total % deviation
Defected number of defects number of estimated
defects Found defects defects
Reg. And 11 10 29 20 -62
design
review
Code review 58 50 29 20 100
Unit testing 15 13 57 40 -73
Integration 29 25 25 17 16
and system
testing
Acceptance 3 2 5 3 -40
testing
Total 116 100 145 100 -20
Casual Analysis and Lessons Learned

There were very few large deviations in the process performance; the actual
performance was close to what was expected. The reasons for the deviations where they are large
are given along with deviation. Some key lessons are:
1) Incremental or phased development is extremely helpful in achieving higher quality
and productivity because data from the first phase can be used to improve the
remaining phase through defect prevention
2) Defect prevention can be substantial in reducing the defect injection rate. In terms of
effort also, defect prevention pays off handsomely; by putting in a few hours of effort,
up to 5 to 10
3) If a change request has a major impact, discussion with the customer using a detailed
impact analysis can be very helpful in setting the right expectations and doing a
proper cost benefit analysis
SMU Page 95
4) The defects removal efficiencies code reviews and unit testing are very low. Processes
for both, and implementation of these processes, need to be reviewed to improve these
numbers. In this project system/ integration testing compensated for the poor
performance of reviews and unit testing. However, for larger projects, this may not be
possible and poor performance I reviews and unit testing can have adverse effects on
quality
MB0032
PROJECT MANAGEMENT
Set 2
1. How can risks be prioritized in a project management? Give any suitable example
Ans. Risk Management Process:
Determine scope of the risk session. Select the team and moderator. The moderator
explains the risk process to new team members. Identify risks (potential future problems)
Brainstorm areas of risk, E.g., Weak areas such as unknown technology. Things which are
critical are extremely important to the effort. Such as the timely delivery of a vendor’s database
software, creation of translators, or a user interface that meets the customers’ needs. Identify
things that have caused problems in the past, such as loss of key staff, missed deadlines, or error-
prone software. Remove invalid or irrelevant.
Current problems should be treated as problems, not risks. Minimize the risks.
Stakeholders may adopt various strategies to prevent the risk but risks are unavoidable. Risks
vary from one project to another project. A contingency plan has to be prepared to handle the
riks.
The main steps to handle risk are:
1) Identify risks:
For each risk item:
a) If team understand the risk item we have to split into separate risk. E.g., Disk may overload
under condition X. Disk may overload under condition Y. Discuss and determine its scope.
b) Consequences when the risk item happen
c) Determine the impact would be if the worst happened, using a scale of one to ten
d) Determine how risk item will occur, using a scale of one to ten
e) Determine the priority of the risk items and thus which to work on (impact*likelihood)
2) Analyze the risk:
SMU Page 96
Use any of the available methods to analyze the risk. Software may be used for the
purpose of analysis
3) Plan to mitigate risks:

Select the most important risk issues, such as the top 2 or 3, top 20%. Brainstorm on
actions that could be taken to reduce the likelihood of the risk item occurring. Brainstorm on
actions that could be taken to reduce the impact if the risk item does occur. Decide which actions
to pursue. Select a person to be responsible for each action chosen. Document the information in
the risk management plan
4) Review risks:
Establish how often risks should be reviewed (once a month is typical). Risk reviews can
be incorporated into existing project status and phase reviews. Update the list based on risk
review sessions
5) Control the risk:

It refers to controlling the deviations in a project which may be one of the reasons to
induce a risk element in the project. Controlling the risk ensures that the project is likely to be
completed as per the plans and heading towards the goals set for the project. It is preferable to
work in a structured mode to handle risks in a project.
---------------------------------------------------------------------------------------------------------------------
2. Mention any 6 characteristics of interpersonal behaviour. What are the types of reviews?
Ans. Interpersonal Behaviour:
In a team the maxim that all member swill do well to remember is “ Learn to appreciate
the problems of others, and some others would appreciate yours”. It is therefore important that in
a business environment, particularly in Project Management, efforts to evolve solutions jointly
has great benefits, both for the teams as well as the organization. The top management has the
responsibility of encouraging such a culture to develop team work to healthy inter-personal
behaviour.
Inter-personal behaviour calls for:
1) Projection of a pleasant, but firm personality

2) Clarity of expression and communication
3) Patience in listerning and reacting with empathy
4) Documentation and correct recording
5) Offer to help
6) Call for help whenever necessary
7) Seeking information before attempting decisions
8) Not waiting for things to go wrong
9) Motivation of others through efficiency and meticulousness, rather than urging and
exhibiting dependency
SMU Page 97
10) Putting team goals ahead of individual targets
The project manager should make it a habit of expressing appreciation openly for any good
work done. Cross Functional Teams have become a necessity and the synergy they generate would
be lost if inter-personal behaviour is not of high standard. As members are from different
functions, understanding the requirements or compulsions of others is difficult. This fact should be
impressed upon all the members and requesting them to cooperate is vital.
-----------------------------------------------------------------------------------------------------------------------
3. What are the main considerations in planning P2M? Give relevant examples.
Ans. Project and Programme Management-P2M
Some of the considerations for effective programme management are given below:
Focusing on the various strategic initiatives taken up for multiple projects and the issue
related to benefits and risks.
Bringing about the attention of management to a defined set of benefits, which are
understood immediately, which are managed throughout the implementation and at completion
Helping top management to set priorities, choosing options and allocate resources.
Setting up mechanisms to measure and ensure that the projects making contributions for realizing
expected business benefits
Leading the organizations on the path of ‘where it’ an ‘where it wants to be’
Ensuring that the effects of the programme driven changes are coordinated, the transitions are
successfully managed. The operations are effective and efficient
Process of P2M:
The objectives sought to be achieved and the methods which are adopted and the
activities that are going to be undertaken the process include the following steps:
Preparing and maintaining a set of activities and the workflow that is to be followed and
identifying business areas responsible for different stages in the above:
1) Making sure that the priorities that the above generate are relevant and the projects are run on
the basis of their impact on the business as a whole
2) Structuring the programme so that the responsibilities and roles at both programme and
project level are acceptable to both the top management and managers
3) Planning the various points of review between various phases of the projects
The process has to incorporate all the important aspects which are to be addressed during
implementation and management of the projects. It is important to identify all factors and
incorporate resources men, materials, technology and time, so that their provision can be planned
-----------------------------------------------------------------------------------------------------------------------
4. What is the significance of reviewing ROI? Explain in detail.
Ans. ROI:
Return on investment (ROI) is the calculated benefit that an organization is projected to
receive in return for investing money (resources) in a project.Within the context of the Review
Process, the investment would be in an information system development or enhancement project.
ROI information is used to assess the status of the business viability of the project at key
checkpoints throughout the project’s life-cycle
SMU Page 98
ROI may include the benefits associated with improved mission performance, reduced
cost, increased quality, speed or flexibility, and increased customer and employee satisfaction. ROI
should reflect such risk factors as the projects technical complexity, the agencys management
capacity, the likelihood of cost overruns, and the consequences of under or non performance.
Where appropriate, ROI should reflect actual returns observed through pilot projects and
prototypes
ROI should be quantified in terms of dollars and should include a calculation of the
break even point (BEP), which is the date when the investment begins to generate a positive return.
ROI should be recalculated at every major checkpoint of a project to see if the BEP is still on
schedule, based on project spending and accomplishments to date. If the project is behind schedule
or over budget, the BEP may move out in time; if the project is ahead of schedule or under budget
the BEP may occur earlier. In either case, the information is important for decision-making based
on the value of the investment throughout the project life cycle.
Any project that has developed a business case is expected to refresh the ROI at each key
project decision point or at least yearly.
-----------------------------------------------------------------------------------------------------------------------
5. What is meant by baseline? How is it reviewed?
Ans. Project Management using Software
The Microsoft Project family of products offers tools to work on a Project from
management point of view. Microsoft Project is designed for people who manage projects
independently and don’t require the capability to manage resources from a central repository.
Microsoft has a team project management solution that enables project managers and their teams to
collaborate on projects
After creating a fairly complete final project plan it is a good idea to create a baseline to
compare the original project plan with actual events and achievements.
Reviewing the Baseline

The Baseline created can be used to compare the original project plan with actual events
and achievements. This will display the days required for each task and project phase. For actual
operating instructions.
Tracking Progress
After creating a baseline, if the project has begun, it is necessary to enter actual dates that
tasks are being completed and the resource utilization used to complete them. Again review
different views and the cost and summary tables before proceeding to the next section. Return to
the Entry view of the Gantt chart before proceeding
Balancing workloads
At times people and equipment can become assigned more work than they can complete
in normal working hours. This is called over allocation. Project can test for this condition and
reschedule their workload to accommodate completing tasks during a normal day
Monitoring Variances
After a baseline has been established and the project has begun, it is desirable to
determine if tasks are being accomplished on time and or if cost over runs are occurring
Creating Reports
SMU Page 99
Project has many different built in reports and has the capability building custom reports
and exporting data to other MS Office applications for integration into other reporting venues
-----------------------------------------------------------------------------------------------------------------------
6. Explain in detail GDM and its key features.
Ans. Global Delivery Model
The latest Trend in Project Management The Global Delivery Model (GDM) is
adopted by an industry or Business such that it has a capability to plan design, deliver and serve to
any Customers or Clients Worldwide with Speed, Accuracy, Economy and Reliability
The key Features of GDM are:

1) Standardization
2) Modularization
3) Minimum Customization
4) Maximum Micro structure
Adoption of a combination of the Greatest Common Multiple and the Least Common Factor of
a Large Mass of Microbial Components:
1) Standardization- Ingenious Design and Development of Components and Features which are
like to be accepted by 90% of World-wide Customers. Global Standards of Design focusing
on highly standardized Methods and Processes of manufacture or Development. Adopt Plug-
and-socket Concepts with minimum adaptable joints or Connections
2) Modularization- Product or Solution split up into smallest possible individual identifiable
Entities, with limited individual Functioning Capability but powerful and robust in
Combination with other Modules
3) Minimum Customization Minimum Changes or Modifications to suit individual Customers

4) Maximum micro structuring- splitting of the Product Modules further into much smaller
entity identifiable more through characteristics rather than application Features. Approach
through Standardization of these Microbial Entities even across Multiple Modules.
Application of these Microbial Entities to rest within multiple Projects or Products or even as
add ons suit belated Customer Needs
Features of GDM:
1) Cuts across Geographical and Time Zone Barriers

2) Unimaginable Speeds of Response and Introduction
3) Common Pool of Microbial Components
4) Largely Independent of Skill Sets required at Delivery stages
5) Highly automated Processes
6) Quality Assurance as a Concurrent rather than a Control Process
7) Near-Shore Development, Manufacture and Delivery for better Logistics
8) Mapping of Economical Zones rather than Geographic Zones
9) Continuous Floating virtual inventory to save Time and Efforts
===================================================
SMU Page 100

Final

Загружено:

Сведения о документе

Исходное описание:

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Final

Загружено:

Авторское право:

Доступные форматы

MB0028

PRODUCTION & OPERATIONS MANAGEMENT

3) Closeness to market places

5) Infrastructure- power, water

7) Government support- subsidies etc

8) Housing and recreation- educational facilities

4. Joint ventures- support of big time players.

These are the various considerations to be identified.

c) Exert influence over the project and its results.

d) Players are also called “stakeholders “of the project.

e) Project manager-the individual responsible for managing the project.

Roles and responsibilities:

b) There may be different teams working on different projects.

The above are the roles and responsibilities of the players.

c) Conduct quality review in a structured and formal manner focused on whether it

a) Monitor the performance of the team members.

f) Create status report providing a record of current achievements and immediate

h) A weekly status report includes

− Accomplishment during this period.

− Items not completed during the period.

− Proposed activities for the next period.

5. What are the steps involved in SCM implementation?

2. Understand the organizational objectives.

4. Evolve consensus and test fire individual solutions.

5. Integrate solutions which are adjudged successful into the mainstream.

7. Finalize SCM document, circulate and implement

These are the steps involved in SCM implementation.

6. Explain the necessity and objectives of SCM?

b) Enhancement of participation level and empowerment level.

c) Increase in functional effectiveness of existing systems like ERP, Accounting Software

d) Effective integration of multiple systems like EPR, communication systems,

e) Design /R&D systems etc.

f) Better utilization of resources- men, material, equipment and money.

h) Enhancement of value of products, operations and services and consequently,

i) Enhancement of satisfaction level of customers and clients, supporting institutions,

j) Enhancement of flexibility in the organization to help in easy implementation of schemes

k) Enhancement of coverage and accuracy of management information systems.

These are the needs and objectives of SCM.

5) Reduced transportation costs- both inbound and outbound.

2. What are the reasons for failure of a project?

a) Project being initiated at random at all levels

2) Factor contributing to project success not emphasized :

a) Project objective in alignment with business objective

3) Overview of information and Communication Technological (ICT) projects :

a) Involve information and communication technologies such as the World Wide

4) Common problem encountered during projects

a) No prioritization of project activity from an organizational position

The above are the reasons for the failure of a project.

3. Explain the various phases in project management life cycle?

2) Marketing phase: A project proposal is prepared by a group of people including the

Output produced, consists of system design specifications, functional specifications of

4. What are the seven principles of SCM?

Ans. The seven principles of SCM are:

These are the seven principles of SCM.

5. Explain what is meant by bullwhip effect and how to prevent it?

Overcapitalization may be on account of any of the following:

1) Acquiring assets at inflated rates.

2) Acquiring unproductive assets.

3) High initial cost of establishing the firm.

5) Total funds requirement have been over estimated.

6) Unpredictable circumstances (like change in import – export policy, change in market

7) Inadequate provision for depreciation adversely affects the earnings capacity of a