KVS

(RAIPUR REGION)
brings for its
students

STUDY MODULE
For
CLASS-XII – Business Studies (2015-16)
Under the leadership of
Ms.P.B.S.Usha
Deputy Commissioner
(Chief Patron)

Mr. Girish Chand

Principal, KV-Nabarangpur
(Patron)

Content Formation by:

Sh. G. Shrivastav, Sh. A. K. Maurya,
PGT-Commerce, KV-1, Raipur (IST shift) PGT- Commerce KV, NTPC Korba.
Sh .R.K. Thakur, . Sh. Bikash Anand
PGT- Commerce, KV-No.2, Raipur. PGT-Commerce, KV, Bhawanipatna
Sh. Rakesh Chawala, Ms. M.D.P. Mukherjee
PGT-Commerce, KV, Koraput PGT-Commerce KV, Bilaspur
Sh. V. Jaiswal,
PGT-Commerce,
KV, Durg.

1
 KVS RAIPUR REGION
STUDY MODULE

CLASS-XII – Business studies

Points deserve your attention while taking examination:-

*Put the question number clearly on the middle of the page and highlight it by
underlining.
*Utilize the early 15 minutes to read the question paper carefully. Plan and
organize your answers in mind. Also try to analyze and break a long question
in small parts for easy understanding. As internal choice is provided only
in questions carrying 6 marks, select the questions to be attempted.
* Write your answers in points as far as possible. Avoid writing in
paragraphs. If a question carries a long answer but has been
allotted comparatively less marks, focus on points and sub-points
*to make presentation effective; underline the headings/main points and
keywords.
* Don’t get confused with the question starting with words like ” list out ,
outline, state, enumerate, explain “. In such questions ,answer with
complete sentence should be given for each point. Question started with
the word like ” state” give brief description(one sentence each). However,
you may check the marks assigned to the question and accordingly write
your answer within the given word limit.
* You can make your answers more effective by supporting it with
illustrations, diagrams, views of management experts, latest
example or data, wherever necessary.
* Questions based on distinction must be answered in tabular form
with the basis of distinction clearly specified.
*Do not spend more than requisite time on a particular question.
*Use your watch to keep track of time so as to finish the paper well in time
and do a quick revision before the exam ends.
Points deserve your attention to learn Business Studies better:-
*Learn the correct meaning of the concept duly supported by the
steps of the process with diagram.
* Keep remember views of management experts and latest example
or data.
* Do good practice of case studies to learn the concepts effectively.
* Learn distinction between two related concepts on certain concrete
basis and show them in tabular form.
*Solve Latest CBSE sample papers available at CBSE’s website CBSE
question papers asked in 2014 & 2015. These papers must be done in
examination like conditions i.e. Within a time limit of three hours.
* Learn and solve this Study Module.

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 Division of Marks

Units marks
1 Nature and Significance of Management
2 Principles of Management 16
3 Business Environment

4 Planning
5 Organising 14

6 Staffing
7 Directing 20
8 Controlling

9 Financial Management
10 Financial Markets 15

11 Marketing Management
12 Consumer Protections 15

Project Work is of 20 marks

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 NATURE & SIGNIFICANCE OF MANAGEMENT

Content Mapping:-
Management-concept, objectives, and importance Concept includes
meaning and features, Management as Science, Art and Profession,
Levels of Management, Management functions-planning, organizing,
Staffing, directing and controlling, Coordination- concept and importance

(One mark question & its answer)

(01) Define management. (1 mark)

It is a process of getting things done with prime aim of accomplishing organizational
objectives effectively and efficiently.
(02) How management is a process? (1 mark)
Management is a process as it follows series of continuous inter-related functions like
planning, organizing, staffing, directing and controlling.
(03) ‘Management is a pervasive function.’ Explain.
Management is required in every type of organization whether government or non-
government organization, business or non-business organization as well as to abroad.
(04) What is ‘being effective’ means?
Being effective means completing assigned task on assigned time.
(05) Define efficiency.
Efficiency is the ability to complete assigned task on assigned cost or at the lesser cost.
(06) Management is intangible force. Explain.
Management could not be seen but it can be realized with achievement of goal or satisfied
work force from the working environment and organization etc.
(07) Management is multi-dimensional functions. How?
Management is multi-dimensional because: (a) it manage work (b) it manage people (c) it
manage business operations.
(08) Management constantly reviews its organizational goals to meet the changing needs of the
environment. Identify the characteristic of management.
Management is ‘dynamic’.
(09) Roopa Garments always reserve three positions in their office for physically challenged
individuals. State the business objective which is Roopa Garments going to achieve through
this.
Social objectives.
(10) State two examples of personal objectives of management.
(a) provide safe & comfortable working environment (b) competitive wages & salaries (c)
growth & development opportunities to the workforce.
(11) Why is it extremely important for management to achieve economic objectives?
Achievement of economic objectives helps business to achieve personal and social
objectives.
(12) State two features of art present in management.
(a) continuous practice and creativity (b) personal application
(13) State two features of science present in management.
(a) Theoretical knowledge (b) applications based on experimentation
(14) Who is responsible to establish organizational goals and set targets for all individuals and
groups working in the organization?
Top Level Management
(15) Which is the most important function performed by the top level of management?
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 Planning
(16) Which is the most important function performed by the middle level of management?
Organizing
(17) Name the function of management which involved in preparing organizational strategies.
Planning
(18) Which level of management is responsible for implementation of plans and policies?
Operative level of management
(19) Supervisor belong to which level of management?
Operative level of management
(20) Define coordination.
It is a process of unifying individual efforts among interdependent activities and departments
of an organization.
(21) Name the process which synchronizes the activities of different departments.
Coordination
(22) At which level of management are the managers responsible for maintaining the quality of
output and safety standards ?
Operative level of management.

(Three/four marks question and its suggestive answer)

(23) Hero Ltd. target is to produce 10,000 shirts per month at a cost of Rs. 150 per shirt. The
Production Manager could achieve this target at a cost of Rs.160 per shirt. Do you think the
Production Manager is ‘effective’? Give reason in support of your answer.
Yes, the production manage is effective because he has completed the work in given time.
(needs to state the meaning of effectiveness).
(24) Your grandfather has retired from an organization in which he is responsible for
implementing the plans developed by the top management. At which level of management
was he working? State one more function performed at this level.
He is working at middle level of management. He has to interpret the policy of top
management to lower level. He has to look after of his respective department. He has to
assign duties and responsibilities to his subordinates.
(25) Identify the levels of management performing following responsibilities:
(a) Representing problems of workers regarding safety issues.
(b) Entering into joint venture with foreign company.
(c) Devising new schemes to boost sales.
Ans. (a) Operative level (b) Top level (c) Middle level
(26) Management of Diamond Ltd fulfills all its objectives and the organization is able to work
effectively and efficiently. It is using friendly method of production and disposes off the
waste material by either recycling it or using the same for landfill in such a manner that the
aquatic life is not disturbed. It also provides employment opportunities to the disadvantaged
sections of the society.
(a) Identify the objective of management which Diamond Ltd wants to fulfill by doing the
above activities.
(b) State any two other objectives that the management of Diamond Ltd should fulfill.
(c) Identify any two values which management of Diamond Ltd can communicate through
fulfilling the objectives as stated in (b).
(d) Identify any two values which Diamond Ltd desires to emphasize through its above
stated activities.
Ans. (a) Social objective
(b) (i) Organizational objectives (ii) Personal Objectives
(c) (i) Opportunity for growth (ii) Job Satisfaction (c) Harmony among the employees of
the organization
(d) (i) Waste management: recycling of waste material or using to landfill. (ii) Providing
employment opportunities to disadvantage sections of society
(27) Do you think management has the characteristics of a full-fledged profession?
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 Any profession like Lawyers, Medicine (Doctor), Engineer, Chartered Accountant should
have the following characteristics.
(a) Well defined and organized body of knowledge which can be acquired through course of
study, training.
(b) Restricted entry i.e. only after passing concerned exam in the field.
(c) Regulating body or professional association to admit only qualified / trained people.
(d) Common code of conduct to its members.
(e) Serving clients - main motive.
Though management does not satisfy fully the norms/features of profession,
it partly has some of its features, as given below.

WHY IS MANAGEMENT NOT CONSIDERED AS PROFESSION?

1. Practically most of the managers are not properly qualified and formally trained for the
job. Even some of them are illiterate, but perform well.
2. The practice of hereditary managers is prevalent, sons, daughters, and nearest relatives
of business magnates are born managers. Management is thrust upon them.
3. Code of conduct, an important feature of profession is not strictly followed in the
management. Though All India management Association has made code of conduct but
most of the managers’ even members of this association are not follow the code of
conduct.
At present management cannot be regarded as a profession in all respects because it has
some of the features of profession but not all. Therefore management is not a full-fledged
profession but it is growing position to become a profession.
(28) Management is not true science like physics or chemistry. Comment.
Management as a science: The essential features of science are:
1. There is a systematic body of knowledge in the form of principles and practices.
2. The principles are developed through the scientific methods of observations and
experiments.
3. The principles establish cause and effect relationships between different phenomena.
4. The principles have universal validity or application.
Management fulfills most of these features. It has a systematic body of
knowledge in the form of principles and techniques. Management principles have been
developed through observation and experiments in different types of organizations. These
principles establish cause and effect relationships. For example, the principle of unity of
command suggests that if a person has more than one boss at same time, discipline and
loyalty are likely to get undermined. Principles of management are valid in most of
situations.
However, these are flexible and can be modified to suit a given situation.
This is because management is concerned with human beings whose behavior cannot be
predicted with absolute accuracy. That is way management is known as a social science or
soft science and not likes as physics or chemistry.

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 Unit -2 PRINCIPLES OF MANAGEMENT

Content mapping:-
Principles of Management- concept and significance, Fayol‟s principles of
management, Taylor’s Scientific management- principles and techniques

Concept: A managerial principle is a broad and general guideline for decision making and
behavior. Management principles are not as rigid as principles of pure science.
They deal with human behavior.

Nature of Principles of Management:

(a) General guidelines:
They are not readymade solutions to all managerial problems; rather they are general
guidelines to help the management.

(b) Formed by practice and experimentation:

They are not developed overnight. They are derived on the basis of observations and
analysis of events which managers face in actual practice. Secondly they are derived
after conducting experimental studies.

(c) Flexible: They can be modified by managers to meet the needs of the situations.

(d) Universal Applicability: They are applicable to all types of organizations and situations.

(e)Mainly behavioural: Management principles aim at influencing behaviour of human

beings.
(f)Cause and effect relationships:
This principle intended to establish relationship between cause and effect so that they
can be used in similar situations in a large number of cases.
(g) Contingent:
The application of principles of management is contingent or dependent upon the
prevailing situation at a particular point of time. The application of principles has to be
changed as per requirements.
Importance or Significance of Principles of Management:
1. Provide useful insights to manager : –
Principle of managers provides useful insights to managerial behaviour and influence
managerial practices. These principles will add to their knowledge ability and
understanding of managerial situations and circumstances.
2. Optimum Utilization of Resources :—
Management principles aim at optimum utilization of human and physical resources for
the attainment of organizational goals. Resources should be used in such a manner that
they should give maximum benefit with minimum cost.
3. Scientific Decisions:
Management principles enable the managers to solve the problems systematically &
scientifically in changing conditions.
4. Meeting changing environment requirements:
Principles are modified and as such help managers to meet changing requirements of the
environment.

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5. Fulfilling social responsibility:
Due to awareness of the public, companies have to fulfill their social responsibilities.
Management theory and management principles have also response to these demands.
6. Management training, education and research:
Principles of Management are at the core of management theory. As such these are used as a
basis for management training, education and research.

Taylor’s Scientific Management:

Meaning: Application of science for each and every element of management. Knowing exactly

what you want man to do and seeing they do it in the best and cheapest way.
Principle of scientific Management:
1. Science not rule of thumb-
There should be scientific study and analysis of each element of job rather than
adopting old rule of the thumb approach on a hit and miss method. Encourage
“thinking before doing”.
2. Harmony not discord-
There should be complete harmony and proper understanding between
management and workers in achieving the organization goals.
3. Cooperation not individualism-
Taylor emphasized on the importance of cooperative group effort between the
management and workers in achieving the organisation’s goals and not
individualism.
4. Development of workers to their greatest efficiency and prosperity:
The management should scientifically select the workers; assign job as per their
physical, mental and intellectual capability and potential; and train them as per the
job requirement.
Techniques of scientific management;
1 . FUNCTIONAL FOREMANSHIP;
Planning In charge : The main function of "planning incharge "is to plan all aspects of
a job to be performed. It consists off our positions:
(i)Route clerk: He determines the sequence to perform various mechanical and manual
operations.
(ii) Instruction card clerk: He issues instructions to the workers to be followed by them.
(iii)Time and cost clerk :He is concerned with the framing of time schedule on the
basis of determined route. Also, he keeps the record of the cost of operations.
(iv) Disciplinarian: He is concerned with the coordination in each job from planning to
successful execution. He enforces rules and regulations and maintains discipline.
Production Incharge :It consists of following four specialists who are concerned with
the execution of plans.
(i)Speed Boss :He checks whether work is progressing as per schedule. He ensures
timely and accurate completion of jobs.
(ii)Gang Boss :He arranges machines, materials, tools, and equipment’s properly so
that workers can proceed with their work.
(iii)Repair Boss : He ensures that all machines, tools, equipment’s are in perfect
working order.

8
 Inspector: He ensures that the work is done as per the standards of quality set by
planning department.
b) Standardization and simplification of work
(i) To reduce a given line or product to fixed types, sizes and characteristics.
(ii) To establish interchange ability of manufactured parts and products.
(iii) To establish standards of excellence and quality in materials.
(iv) To establish standards of performance of men and machines..
c) Methodstudy
(1) Finding one best way of doing a job.
(2) Critical analysis is made for plant layout, product design, material handling and work
processes using techniques like process charts, operations research etc.
d) Motion study
(1) Making a thorough analysis of various motions being performed by a worker while
doing a particular task.
(2) Identifying and determining the ideal productive movement.
(3) Eliminate the unproductive movements and equipment.
e)Time study
1. It is the technique used to determine the standard time taken by the workman with
reasonable skill and ability to perform a particular task.
2. Here the job is divided into series of elements and the time required to complete
each element idealistically is recorded using a stopwatch.
f) Fatigue Study
Determines the amount and frequency of rest intervals required in completing a task.
g) Differential Piece wage system
1. In this system the efficient and in efficient workers are paid at different rates, as
financial incentives act as motivators.
2. First a standard task is established with the help of time and motion study, then two
rates are established.
3. Higher when standard outputs is produced and lower when the standard is not
met.
h) Mental Revolution
1.It involves a change in the attitude of workers and management towards one another
from competition to cooperation. Both should realize that they require one another.
Henri Fayol’s ‘Father of General Management’
Fayol’s14 Principles of Management:
1. Division of labour -work should be divided into small specialised job and
performed by a trained specialist
2. Authority and responsibility-there must be a balance between authority (right to
give orders) and responsibility (obligation to perform the assigned task).
3. Discipline-obedience to organization rules and regulation.

9
 4. Unity of command-receive orders from one boss.
5. Unit of Direction-all the units of the organization should aim and move towards
achieving the organizational goal.
6. Subordination of individual interest to common interest-the organisation interest
to be prioritized over individual interest.
7. Remuneration-pay should be fair and satisfying to both employee and the
organization.
8. Centralization and decentralization- P roper balance between centralization and
decentralization.
9. Scalar chain-orders or communication should pass from top to bottom and follow
the official line of command.
10.Orders-A place for everything/everyone and everyone in its place.
11. Equality-kindness, empathy and justice in the behaviour of manager towards
workers.
12.Stability of Tenure –frequent displacement of employee from their position should
be avoided. They should be given sufficient time to show their results.
13. Initiative-Employees to be encouraged to develop and carry out their improvement
plans.
14.Espirit de corps-need for team work, spirit and harmony.
Comparisons of the contributions of HENRY FAYOL and F. W. TAYLOR

Basis Henry Fayol F.W. Taylor

1.Perspective Top level management Lower level-shop floor level

2.UnityofCommand orders should be received from Did not feel that it is important
one boss. as under functional foremanship
a worker received orders from
eight specialists.

3.Applicability Universally applicable Applicable only to specialized

situations

4.Focus Improvement in the overall Concentrates on improving the

administration productivity

5.Personality Scientist . Practitioner.

6.Humanelement More importance attached to

ge scientificmanagement More importance given to human
increasing the production than element; e.g. principle of equity,
to the human element stability of tenure

7.Emphasis Greater emphasis on tools Emphasis on principles and

and standardization of work theory of general
i.e. General Theory of administration i.e. Scientific
Administration Management

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 8.Basisofformation Personal Experience Observations and experimentation

VERY SHORTANSWERTYPEQUESTIONS (1MARK)

1. Prince the manager of a business undertaking is very lax with his fellow employees and
subordinates. He does not given them parameters or rules for reporting to work and
completion of assignments. Which principle of management is overlooked?

Ans. Principle of Authority and Responsibility.

2. “Workers should be encouraged to develop and carry out their plans for development”.
Identify the principle of management formulated by Fayol.
Ans. Principle of initiative
3. “A manager should replace ‘I’ with ‘we’ in all his conversation with worker to faster team
spirit. Identify the principle of management emphasised here.

Ans. Espirit-De-Corps.

4. Which principle of Taylor advocates scientific enquiry as opposed to hit and trail?

Ans. Science is not Rule of Thumb

5. How are management principles derived?

Ans. Management principles are derived through observation and analysis of events.
6. Give any one difference between Principle and Technique.
Ans. Principles are guidelines to take decision where as techniques are methods to take
action
7. Why is it said that management principles are universal?
Ans. This it means that they are applicable to all kinds of organizations.
8. The principles of management aren't rigid and can be modified when the situation
demands. Which nature of principles is being discussed here?
Ans. Flexibility.
9. Define scientific management.
Ans. Application of a scientific approach to managerial decision making.
10. Who gave the concept of scientific management? What was his profession?

Ans. F.W. Taylor gave the concept of scientific management and he was on American mechanical
engineer.
11. List any two principle of 'Scientific Management' formulated by Taylor for managing an organization
scientifically.
Ans. (i)Science, not Rule of Thumb.(ii)Harmony, not Discord.
their large share in their respective markets.

12. Name two companies which have successfully implemented standardization and
simplification of work.

Ans. Nokia, Toyota and Microsoft. This is evident from their large share in their respective markets.

13.Factory owners or managers relied on personal judgment in attending to the problems

they confronted in the course of managing their work. Which principle of Taylor is it
referring to?
Ans. 'Rule of thumb'
14. What do you mean by Mental Revolution?
Ans. Mental Revolution means revolutionary change in the attitude of both workers and

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 managers from competition to cooperation.
1 Mark Questions (test yourself)
1. What do you mean by managerial principles?

2. Give one difference between managerial principles and pure scientific principles.

3. What is the difference between Principles & Values?

4. How are the principles of management formed?

5. Why is it said that principles of management are universal?

6. How can you say that managerial principles are flexible?

7. If the company doesn’t provide the right place for physical and human resources, which
principle of management is violated?

8. Which device helps subordinates of the same level of different departments to communicate?
Directly in case of emergency?

9. Which principle promotes team spirit?

10. Who emphasized on administrative principles of management?

11. What is positive effect of principle of division of work ?

12. What is the negative effect of not following the principle of division of work ?

13. What is principle of initiative ?

14. What is the objective of principle of unity of direction ?

15. What is the negative effect if principle of order is violated ?

16. Which principle of management suggests that employees should be treated with justice and
kindness?

17. What is the purpose of gang plank?

18. What is the principle of unity of direction?

19. Which technique of scientific management give high compensation to better performer ?

20. Which technique of scientific management seeks to find out one best way of doing a job ?

21. What is the objective of scientific management?

22. Name the technique of scientific management which focuses on separation of planning and

Execution function.

23. Name the personnel who work under the production In charge?

24. What is the objective of method study?

25. What is the objective of ‘Time Study’?

Answers to 1 mark questions

1. Principles of management are statement of fundamental truth which provide guidelines for

management decision making and action.

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2. Management principles are not as rigid as principles of pure science. They deal with

human behaviour, which is never static. Hence, principles of management have to keep pace

with change.

3. Principles are basic truth or guidelines for behaviour while values have moral connotations,

i.e., something which are acceptable or desirable.

4. They are formed by practice and experimentation.

5. Because they can be applied to all types of organization-business as well as non-business,

small as well as large, public sector as well as private sector, manufacturing as well as service

sector.

6. Because these can be modified by the manager when the situation so demands.

7. Principle of ‘Order’.

8. Gang Plank.

9. Espirit De Corps.

10. Henry-Fayol. He was a French mining engineer.

11. There would be specialization and efficient utilization of Labour.

12. Performance of the workers will be poor due to absence of specialization.

13. According to the principle of initiative, workers should be encouraged to develop and carry out
their plans for improvements.

14. To ensure unity of action and co-ordination.

15. There will be chaos leading to loss of time and material.

16. Principle of equity.

17. To enable two employees at the same level to communicate directly with each other.

18. Unity of direction.

19. Differentiate Piece wage system.

20. Method study.

21. Finding ‘one best way’ to do a particular task.

22. Functions Foremanship.

23. Speed Boss, Gang Boss, Repair Boss, and Inspector.

24. To find out ‘one best way’ of doing job.

25. To determine the standard time required to perform a certain job so as to fix a fair day’s

work for the workman.

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 SHORTANSWERTYPEQUESTIONS (3MARKS)

1. How are management principles derived?

Or
"Derivation of management principles may be said to be a matter of
science."Explain.
Ans. Management principles are derived by observations and experimental studies.
(i)Observation method
Under this method, practical events are observed and analyzed by managerial
researchers to derive management principles.
(ii)Experimental method
Under this method, experiments are conducted so that management principles
can be derived and their validity can be tested
(iii) Repeated experiments:
After experiments are conducted management principles can be repeated and
tested.
2. Which principle of management envisages that each group of activities having the same

Objectives must have one head and one plan? Explain the principle with a suitable example.

Ans. Unity of Direction:

The principle implies that there should be “ONE HEAD AND ONE PLAN” for a group of activities
having the same objective. Example: If a company is manufacturing motor cycle as well as cars,
then it should have two separate divisions. Each division should have its own in charge, plans &
resources effects.

1. Ensures unity of action.

2. Facilitates coordination.

Adverse effects :

1. There will be unnecessary duplication of efforts & wastage of resources.

2. Efficiency of the organization will also be adversely affected because of lack of unity of action.

3. Name and explain the technique of Taylor which is the strongest motivation for a worker to
reach standard performance.

Ans. Differential piece way system. This is method of wage payment suggested by F.W. Taylor in

which efficient & inefficient workers are paid at different rates. He wanted to reword efficient
worker. The efficient workers are paid at higher rates than the inefficient ones. Workers are
paid on the basis of the number of units produced. If a worker produces more than standard
units, he is given a higher wage per unit. Due to different rates for different sets of workers, It is
known as differential wages system.

4. Explain the objectives of standardization.

Ans. Standardization is done for the following reasons:
(i) To reduce a given line or product to fixed types, sizes and characteristics.
(ii) To establish interchange ability of manufactured parts and products.
(iii) To establish standards of excellence and quality in materials.
(iv) To establish standards of performance of men and machines.
5. Hina and Harish are typists in a company having same educational qualifications. Hina is
getting Rs. 3000 per month and Harish Rs. 400 per month as salary for the same working

14
 hours. Which principle of management is violated in this case? Name and explain the
principle.

Ans. Principle of Equity :-

The principle of ‘Equity’ emphasizes kindliness and justice in the behaviour of managers towards
works. According to Fayol, employees can be made to put in their best only when they are given
kind, fair and just treatment.

6. Explain the principle of unity of direction.

Ans. This principle suggests that in an organization there should be one head and one plan
for a group of activities having the same objective. This helps in bringing unity of
action and coordination in an organization. If a company is manufacturing two
different products then it should have two separate divisions or departments for both
the products. Each division or department should have their separate in-charge, plans
and execution resources etc.
7. Explain how principles of management .
i) Help the managers in taking scientific decisions
ii) Provide the managers with useful insights into real world situations
Ans. Explanation of relevant sub-headings from significance of principles of manageme
8. The production manager of Bharat Ltd. Instructs a salesman to go slow in selling the product,
whereas the marketing manager is insisting on fast selling to achieve the target. Which
principle of management is being violated in this case? State the consequences of violation of
this principle.

Ans. Unity of Command :-

Consequences of Violation :- If an employee gets orders from two superiors at the same time
i.e., principle of unity of command is violated.

authority is undermined

discipline and order is disturbed

stability is threatened

conflict among superiors

loyalty of employee is divided

employees will remain in confusion regarding whose tasks to be done. He will have option for
excuses.

9. Explain briefly the technique of fatigue study?

Ans. Fatigue study determines the amount and frequency of rest intervals in
completing a task. Workers can not work at a stretch. After putting in work for a
certain periods of time, they feel tired which affects their performance. If they are
allowed rest intervals, they will re-gain their stamina and will resume their
work with greater efficiency.
LONGANSWERTYPEQUESTIONS (6MARKS)
1) Explain the importance of management principles.
Ans. The importance of management principles can be understood by considering the
following points:
(i)Provide useful in sight to manage: Principles of management help in increasing
managerial efficiency by adding to their knowledge and ability to understand the

15
 various situations more objectively.
(ii)Optimum Utilization of Resources and effective administration: Management
principles help in organizing various activities in such away that results in elimination
of unwanted activities and consequent wastage. Management principles help in
managing organizations effectively.
For example, Unity of Command helps to avoid confusion and conflicts Unity of
Direction ensures unity of actions to facilitate coordination
(iii)Scientific decisions: They help the mangers in taking the decisions based on the
objective assessment of a situation. Thus decisions taken are logical and free from any
bias and prejudice.
(iv)Meeting changing environment requirements: Though the principles are only
guidelines for action yet they can be modified according to the need of changing
situations. Thus principles of management help in meeting changing requirements of
the environment.
(v)Fulfilling social responsibilities: Principles of management have been devised in
such a way that they help in fulfilling social responsibilities.
(vi)Management training, education and research: Principles of management are the
fulcrum of management theory so that they are used as a basis for management
training, education and research.
2. Explain the 'Principle of Scalar Chain 'with an example.
Ans. In every organization, there are formal lines of authority, from highest level to lowest
level of all superiors and subordinates, are known as scalar chain. The principle of
scalar chain suggests that there should be a clear line of authority from top to
bottom, linking superiors and subordinates at all levels. The scalar chain serves as a
chain of command as well as communication.

A
B E
F
C
G
D
H

Scalar Chain and Gang Plank

Example: The above figure shows the scalar chain linking managers at lower levels
with the top management. If D has to communicate with G, The message should
ordinarily move up through C and B to A, and then down from A to E, F and G.
Above mentioned chain has following disadvantages:
(i) It causes delay in reaching communication to the required level.
(i) Creates the possibility of distortion of information flow as various levels are
involved.
To avoid delays and to remove hurdles in the exchange of information, concept
of Gang Plank has been suggested by Fayol, shown by the dotted line joining D
and G.
3. Explain 14 principle of management given by Fayol.
Ans. Refer (gist of the chapter)
16
4. Differentiate between Unity of Command and Unity of Direction.
Ans.
Sl.No. Unity of Command Unity of Direction.
1 One boss one subordinate One head one plan
2 To avoid confusion in employee To direct the efforts of employee
towards main objective
3 Improves efficiency of employee Co-ordination of activity

Practice below mentioned question from NCERT book:

(a) Multiple Choice Questions Q. No. 01-10. Page No. 67-68
(b) Short Answer Question No. 01 to 03 & 05. Page No. 68
(c) Long Answer Question No. 01 to 05 Page No. 68-69
Case problem is very important Page No. 69-71

17
 Business Environment
Content mapping:
Business Environment- concept and importance . Dimensions of
Business Environment - Economic, Social, Technological, Political
and Legal Environment.
Impact of Government policy changes on business with special reference
to liberalization, privatization and globalization in India.
CONCEPT: The totality of all individuals, institutions and other forces that are
outside a business enterprise but that may affect its functioning and
performance.
Features of Business Environment: The salient features of business environment
are:
1. Totality of External Forces: The business environment is the sum total of all
individuals, institutions and other forces that are outside the control of a business
enterprises.
2. Dynamic Nature: Business environment is dynamic in nature as it keeps on
changing.
3. Specific and General Forces: Business environment includes both specific (like
customers, investors, competitors etc) and general (such as legal, political,
economic etc.) forces.
4. Interrelatedness: Elements of business environment are closely interrelated.
5. Complexity: Business environment consists of a large number of factors. Hence,
complex in nature.
6. Relativity: Business environment is a relative concept as it differs from firm to
firm and from one region to the other.
7. Uncertainty: It is very difficult to predict future accurately, especially when the
environment a business firm faces, is changing at a very fast pace.
Importance of Business Environment:
i. Identify the opportunities and getting the first mover
advantage - by being aware of the changes in business
environment, enterprises can identify opportunity and
strategize ways to capitalize on them.
ii. Identify threats and early warning signals - environment
scanning helps in detecting possible threats in future.
iii. Basis for planning and policy for formulation -
identification of threats and opportunity serves as basis for
deciding the future course of action.
iv. T a p p i n g useful resources - the resources are required
to carry on a successful business enterprise. These have
to be procured from the business environment.
v. Helps in coping with rapid changes - turbulent markets, less
brand loyalty, divisions and sub-divisions (fragmentation) of
markets, more demanding customers, rapid changes in
technology and intense global competition combined with
complex business environment calls for a flexible planning to

18
 cope with the changes.
vi. Improvement in organization performance - continuous and
constant monitoring and adapting suitable business practices result in
improved business performance.
Dimensions (Elements) of business environment: Business environment consists of five
important dimensions including economic, social, technological, political and legal.

Economic environment includes such factors as interest rates, inflation rates,

changes in disposable income of people, stock market indexes and the value of
rupee.
Social environment includes social forces like traditions, values, social trends,
society’s expectations of business, and so on.
Technological environment includes forces relating to scientific improvements
and innovations which provide new ways of producing goods and services and
new methods and techniques of operating a business.
Political environment includes political conditions such as general stability and
peace in the country and specific attitudes that elected government representatives
hold toward business.
Legal environment includes various legislations passed by the government,
administrative orders issued by government authorities, court judgments as well as
decisions rendered by various commissions and agencies at every level of the
government—center, state or local.
Economic environment in India: The economic environment in India consists of
various macro-level factors related to the means of production and distribution of
wealth which have an impact on business and industry. The economic environment
of business in India has been steadily changing since Independence mainly due to
government policies. In order to solve economic problems of our country at the
19
time of Independence, the government took several steps including control by the
state of key industries, central planning and reduced importance of the private
sector. These steps delivered mixed results until 1991 when Indian economy
happened to face serious foreign exchange crisis, high government deficit and a
rising trend of prices despite bumper crops.
As a part of economic reforms the Government of India announced

new Industrial Policy in July 1991 which emphasized on three major

elements which were:

 Liberalization - from the clutches of licensing policy. Therefore, removal of

entry
and growth restrictions on the private sector enterprises.• 

 Globalization:- encouragement of foreign private participation in
industrial development. This step mainly intended at integrating the
national economy with the world economy through the removal of barriers
on international trade and capital movement.
• Privatization - drastic reduction in the role of public sector. Further it aimed
at transfer of ownership ,management and control of the public sector
enterprise to the private sector.
The new industrial policy aimed at creating a more competent environment in
the economy so as to strengthen the process of industrialization. Its features
are as follows
•De-licensing of all projects except six industries
• Decreased role of public sector to merely 4
industries
• Disinvestment: selling of a part or whole of the shares of the public
sector undertaking
• Liberalization of Foreign capital
• Setting up of Foreign Investment board
(FIPB)
• Liberal policy for technical collaborations
Impact of Government policy changes on business and industry: The
government policy of liberalization, privatization. And globalization has made a
definite impact on the working of enterprises in business and industry in terms of
(a) increasing competition
(b) more demanding customers
(c) rapidly changing technological environment
(d) necessity for change
(e) need for developing human resource
(f) market orientation
(g) loss of budgetary support to the public sector. In the new economic
environment, the Indian enterprises have developed various strategies to meet the
challenge of competition.

20



Previous Year Questions:
2010-Delhi-Set-1
1. Explain by giving any five reasons why understanding of business environment is
important for managers.
Suggested Answer:
Understanding of business environment is important for managers because:
1. It helps to identify opportunities and getting the first mover advantage.
2. It helps to identify threats and early warning signals.
3. It helps in tapping useful resources.
4. It helps in coping with rapid changes.
5. It helps in assisting in planning and policy formulations.
6. It helps in improving performance.
(If an examinee has not given the headings as above but has given the correct
explanation, full credit should be given)
2010-Out side Delhi-Set-2
2. Explain any five impacts of government policy changes on business and industry in India.
Suggested Answer: See the basic theory

2011-Delhi-Set-1
3. “The understanding of Business Environment enables the firm to identify opportunities.”
What is meant by ‘opportunities’ here.
1
Suggested Answer:
Opportunities refer to the positive external trends or changes that will help a firm to
improve its performance.
4. Business Environment includes both ‘specific and general forces’. List any four general
forces. 2
Suggested Answer:
General forces (any four): 1. Social 2. Political 3. Economic 4. legal 5. Technological.

Other Question:
1. Give the meaning of the term ‘Business Environment’. OR What is business
environment. 1
Suggested Answer: See the detail given above.
2. “Management of every enterprise can be benefited from being aware of different
dimensions of business environment.” Explain any four such dimensions.
4
Suggested Answer: Explain any four dimensions given above.
3. Give any two examples of gain and loss each of the impact on business organisations due
to changes in economic environment. 2
Ans: The examples of the impact on business organisation due to changes in economic
environment are:
Gain: Insurance sector has been opened for private investment. Earlier there were only
governmental agencies like LIC, New India Assurance, etc. Now with the policy change

21
 a number of private companies have entered the field like Max India Insurance, Royal
Sundaram, ICICI Prudential etc.
Loss: Gradual reduction in the subsidy on kerosene and Petroleum products has increased
the cost for the industries using it as inputs to production.
4. Which Indian Policy has opened the doors of Indian economy for MNCs? 1
Ans: Industrial Policy 1991.
5. Write two political factors influencing business environment. 1
Ans: 1. Political conditions such as general stability and peace in the country.
2. Specific attitudes of elected government.
6. Write two legal factors influencing business environment. 1
Ans: 1. Legislation passed by the government
2. Administrative orders issued by government authorities.
7. The Finance Minister reduces the repo rate to face the situation of recession. This is
related to which dimension of business environment? 1
Ans: Economic Environment.
8. Name the term/process which indicates the induction of private ownership in state owned
enterprises. 1
Ans: Privatization.
9. How can environmental awareness help a manager? 1
Ans: Environmental awareness can help managers to identify various threats on time and serve
as an early warning signals.
10. Do you think that business environment is a relative concept? 1
Ans: Yes, business environment is a relative concept since it differs from country to country
and even region to region.
11. Explain the role of political environment in shaping the business.?
Ans. Business functions within the framework of political environment. Generally,
government's policies change with the change of guard in power. Business is required
to understand and follow such changes and also respect the orders that judiciary gives
from time to time.
For example , after globalization , Government of India allowed man y
companies to enter the Indian market for giving boost to the different industries like
food processing industry etc. That paved the way for entry of multinationals in India on
a large scale.
12. Explain the concept of technological environment.
Ans. It includes new approaches, new procedures, and new equipments to transform
inputs into outputs. It facilitates an organization's efficiency and effectiveness so that it
can try to remain at par with the best in the world. Technological changes provide
opportunities for some enterprises and become threats for some others.
For example, digital watches killed the business prospects of traditional watches; TV
has adversely affected radio & cinema industry; mobile phones have taken over the
market from landline phones.
13. What do you understand by legal environment? Give two examples which
protect consumers' interests.
Ans. Definition as given above..
Two examples protecting consumers' interests:
(i) Advertisement of alcoholic beverages is prohibited.
(ii) Packets of cigarettes should mention the statutory warning 'Cigarette smoking
is Injurious to health

22
 14. List the various changes initiated by the Government of India since 1991.
Ans. Various changes initiated by the Government of India since 1991 are
as follows:
(i) New industrial policy
(ii) New trade policy
(iii) Fiscal reforms
(iv) Monetary policy
(v) Capital market reforms
(vi) Phasing out of Subsidies and Price controls
15.What do you understand by economic environment? List the main
aspects of economic environment.
Ans. Economic environment consists of factors likes inflation rates, interest rates,
consumer’s incomes, economic policies, market conditions etc. which affect the
performance of a business firm.
Following are the main aspects of economic environment:
(i) The role of public and private sector in the existing structure of the economy.
(ii) The rate of increase in GNP and per capita income both at current and
constant prices. (iii) Quantum of exports and imports of different products.
(iv) Increase in transportation and
communication facilities. (v) Trends in
agricultural and industrial productions.
(vi) Amount of savings and investments.

Value Based Questions:

1. Gamma is a chemical producing company. It has not set-up its waste disposal unit. All
the chemical waste is thrown in rive. What kind of organizational values are ignored
could fit affect the people living in that area.
Ans: The industrial is ignoring its social responsibility and the kinds of values ignored are:
1. Value for health and safety of the people.
2. Respect for the environment. The entire ecological system will collapse.
2. A manager of a firm always takes into account the business environment while
determining the plan for the business. What values are reflected in the manager’s
behaviour?
Ans: The values reflected in the manager’s behaviour are:
1. Awareness 2. Alertness
3. Adaptability 4. Ready to act in the interest of the society.
3. One of the micro-blogging website decided to remove pages containing inflammatory
content with false information on Assam violence. Name the values that are considered
by the company.
Ans: the values that are considered by the company are”

23
1. Unity and integrity of the country
2. Peace
3. Empathy.

24
 PLANNING
Content mapping:-
Concept, importance and limitation, Planning process, Single use and
standing plans. Objectives, Strategy, Policy, Procedure, method Rule,
budget and Programme.
Planning is deciding in advance what to do and how to do. It is one of the basic
managerial functions. Planning therefore involves setting objectives and
developing an appropriate course of action to achieve these objectives .
Features of Planning
Planning focuses on achieving objectives; It is a primary function of management; Planning is
pervasive, continuous, futuristic and involves decision making, it establishes standards for
controlling, it is a mental exercise.
Importance/benefits of Planning
Planning provides direction, reduces risks of uncertainty, reduces overlapping and wasteful
activities, promotes innovative ideas, facilitates decision making, establishes standards for
controlling.
Limitations of Planning
Planning leads to rigidity; reduces creativity; involves huge costs; It is a time consuming process;
Planning does not work in a dynamic environment; and does not guarantee success.
Planning Process
Setting objectives: Objectives may be set for the entire organisation and each department or unit
within the organization.
Developing premises: Planning is concerned with the future which is uncertain and every planner
is using conjecture about what might happen in future.
Identifying alternative courses of action: Once objectives are set, assumptions are made. Then
the next step would be to act upon them.
Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative.
Selecting an alternative: This is the real point of decision making. The best plan has to be
adopted and implemented.
Implement the plan: This is concerned with putting the plan into action.
Follow-up action: Monitoring the plans are equally important to ensure that objectives are
achieved.

25
Types of Plans

Standing Plan – Known As Repeat Use Plans

Standing plans are used over and over again because they focus on organizational situations that
occur repeatedly. They are usually made once and retain their value over a period of years while
undergoing revisions and updates. That is why they are also called repeated use plans. Eg.
Objective, Strategy, Policy, Procedure, Method, Rule
Objectives: Objectives therefore can be said to be the desired future position that the
management would like to reach.
Strategy: A strategy provides the broad contours of an organization’s business. It will also refer
to future decisions defining the organizations direction and scope in the long run.
Policy: Policies are general statements that guide thinking or channelize energies towards a
particular direction.
Procedure: Procedures are routine steps on how to carry out activities.
Rule: Rules are specific statements that tell what is to be done.
Programme: Programmes are detailed statements about a project which outlines the objectives,
policies, procedures, rules, tasks, human and physical resources required and the budget to
implement any course of action.
Budget: A budget is a statement of expected results expressed in numerical terms. It is a plan
which quantifies future facts and figures.

Single Use Plan

Single use plans apply to activities that do not recur or repeat. Single use plan is one time plan
specifically designed to achieve particular goal that, once achieved will not recur in the future.
Such Plan is developed to meet the needs of a unique situation. The length of a single use plan

26
differs greatly depending on the project in question, as a single event plan may only last one day
while a single project may last weeks or months. Eg. Programme , Budget.

Previous Year Questions:

2010-Delhi-Set-1
1. Define Planning. List any two limitations of Planning.
2
Suggested Answer:
Planning means setting objectives for a given time period, formulating various courses of
action to achieve them and then selecting the best possible alternative from among the
various courses of action available. OR
Planning is deciding in advance what to do, how to do when to do and by whom it is to
be done.
(or any other correct definition)
The limitations of Planning are (Any two):
1. Leads to rigidity 2. May not work in a dynamic environment
3. Reduces creativity 4. Involves huge costs
5. Time consuming process 6. Does not guarantee success.
2. Explain ‘Objective’ and ‘Strategy’ as types of plans.
4.
Suggested Answer:
Objective: An objective is the end which the management seeks to achieve. An objective
needs to be expressed in specific terms and is to be achieved within a given time period.
Strategy: A strategy is a comprehensive plan for accomplishing an organization’s
objectives. It is a term used in defence parlance which means to prepare plans
considering the plan of adversary. Whenever a strategy is formulated, the business
environment needs to be taken into consideration.

2011-Delhi-Set-1
3. Differentiate between ‘Objective’ and ‘Strategy’ as types of plans. 3
Suggested Answer:
Objective: An objective is the end towards which all activities of the organization are
directed. An objective needs to be expressed in measurable terms and is to be achieved
within a given time period.
Strategy: A strategy is a comprehensive plan for accomplishing an organization’s
objectives. Whenever a strategy is formulated, the business environment needs to be
taken into consideration.
(Due credit be given for differentiation in any form)
4. ‘Planning is important function of management’. State any four reason. 4
Suggested Answer:
Importance of planning (any four):
1. Planning provides direction by stating in advance how the work is to be done.
2. Planning reduces risk of uncertainty by looking ahead and anticipating changes.
3. Planning reduces overlapping and wasteful activities by co-ordinating the activities of
different divisions.

27
 4. Planning promotes innovative ideas requiring application of mind and foresight.
5. Planning facilitates decision making by making a choice from among the alternative
courses of action.
6. Planning establishes standards against which actual performance is measured.
(or any other correct statement of importance)

2011-Outside Delhi-Set-1
5. Differentiate between ‘Policy’ and ‘Rule’ as a types of Plans. 3
Suggested Answer:
Differentiation between Policy and Rule
Policy: Policy is a general guideline which brings uniformity in decision making for
achievement of predetermined objectives. A manager may use his discretion to interpret
and apply a policy within its framework.
Rule: A rule is a statement that specifies what is to be done or not to be done. It is a
guide to behaviour. A rule does not allow for any flexibility or discretion and prescribes
penalty for violation.
2012-Delhi-Set-1
6. Name the type of plan which provides the broad contours of an organization’s business.
1
Suggested Answer: Strategy
7. ‘Planning always leads to success.’ Do you agree? Give reason in support of your answer.
1
Suggested Answer: No, planning may not always lead to success because planning is based on
certain assumptions about the future. These assumptions may or may not be correct.
8. State any five limitations of ‘Planning’. 5
Suggested Answer: Explain any five limitations given above.
2012-Outside Delhi-Set-1
9. Name the type of plan which is time bound and linked with measurable outcome. 1
Suggested Answer: Objective
10. ‘Planning is done for achieving the organizational goals.’ Do you agree? Give one reason
in support of your answer. 1
Suggested Answer: Yes, because it ensures that goals are clearly defined so that they act as a
guide for what actions are to be taken and in which direction.
2012-Foreign-Set-1
10. Name the type of plan which provides the prescribed ways in which a task has to be
performed considering the objective. 1
Suggested Answer: Procedure
11. How is planning a pervasive function? State. 1
Suggested Answer: Planning is required at all levels of management as well as in all departments
of the organisation.
12. Explain any three advantages and two limitations of ‘Planning’. 5
Suggested Answer: Explain any three advantages and any two limitations given above.
2013- CBSE Comptt
13-Explain how : (a) Planning facilitates decision making and (b) Planning may not work in
dynamic environment. 4
Suggested Ans: (a) Importance of planning and (b) Limitation of Planning

28
2013- CBSE Delhi Comptt
14-Explain how : (a) Planning provides direction for action and (b) Planning leads to rigidity.
4
Suggested Ans: (a) Importance of planning and (b) Limitation of Planning

15-Explain how : (a) Planning reduces risk of uncertainty; and (b) Planning involves huge
costs. 4
Suggested Ans: (a) Importance of planning and (b) Limitation of Planning
16-Explain how : (a) Planning focuses on achieving objectives and (b) Planning does not
guarantee success. 4
Suggested Ans: (a) Importance of planning and (b) Limitation of Planning
17-Explain how : (a) Planning reduces overlapping and wasteful activities; and (b) Planning
reduces creativity. 4
Suggested Ans: (a) Importance of planning and (b) Limitation of Planning

2014- CBSE Delhi Comptt

18-‘Dreams can be turned into reality only when managers think in advance what to do and
how to do it’. Name the function of management indicated by the statement.
Ans: Planning
19-State the type of plan that does not allow any flexibility.
Ans: Rules
2014- CBSE Comptt
20-Name the type of plan which is in the form of general statements, that guides thinking
towards a particular direction and helps in solving routine problems. 1
Ans: Policy
21-‘Process of planning involves certain logical steps’. Explain the first four steps of this
process. 4
Suggested Ans: Steps in planning process.
Other Questions:
Q.22- What are the key elements in the concept of planning?
Ans: There are three key elements in the concept of planning. These are:
(a) Establishing clear, precise and realistic objectives for a given time period.
(b) Determining and evaluating the various available alternatives of doing the task.
(c) Selecting the most suitable alternative.
Q.23- “Failing to plan is planning to fail.” Give two reasons and explain with suitable example.
4
Suggested Ans: The given statement highlights the importance of planning. Explain any two
importance.
Q.24- Why is it said that planning is pre-requisite for controlling? 1
Suggested Ans: Planning is said to be pre-requisite for controlling because planning provides
performance standards for which control is exercised.
Q25- Explain how ‘Planning’ provides direction to action. 3
Ans: Planning provides direction to action by:

29
 (a) Stating in advance how work is to be done.
(b) Clearly defining goals and objectives so that actions can be taken accordingly.
(c) Determining the policies, programme , procedures and strategies which provides
guidelines to the employees to achieve these objectives.
Q.26- Explain how ‘Planning’ reduces risk of uncertainty. 3
Ans: Planning reduces risk of uncertainty by:
(a) Making use of effective forecasting techniques, it enables the managers to look ahead
and anticipate changes.
(b) It shows the ways to deal with changes and uncertain events
(c) It helps in developing managerial responses for the unforeseen and unanticipated
circumstances by stimulating ‘what if’ situations.
Q.27- “Planning facilitates decision making” and “establishes standards for controlling”
Explain how? 5
Suggested Ans: Explain the two statements in the light of features of planning.
Q.28- ‘Planning is necessary for the effective management”. Comment 5
Suggested Ans: Explain the importance / benefits of planning.
Q.29- Briefly explain how planning helps in co-ordination.
Ans: Planning is regarded as the parent exercise as at covers all other functions of
management. It involves deciding in advance: what to do- i.e. planning objectives, how to
do- i.e. planning the organization, when to do- i.e. planning the time schedule, who is to
do- i.e., planning the staffing and what ought to be done has been achieved- i.e. planning
the control system. Activities are planned in such a manner that there is complete
harmony. Planning is a step by step approach and through this systematic approach it
helps in co-ordination.
Q.30- “Planning restricts creativity”. Explain (OR) State how planning leads to rigidity. 3
Ans: Planning restricts creativity because:
1. Planning is usually done by the top level management and rest of the organization just
implements it.
2. All organizational activities are preconceived and predetermined at the stage of
planning itself.
3. There is no or very little scope for middle and lower levels to deviate from the plan.
Q.31 “Planning does not guarantee success”. Explain 3
Ans: Planning does not guarantee success because:
1. Future is full of uncertainty, hence accurate prediction about future is not always
possible.
2. Managers have a tendency to apply previously tried and tastes successful plans, which
may not hold valid or appropriate in current environment.
3. Even if plans are well laid down, the extent to which these plans can be transformed
into action determines the level of success.
Q.32- What are the standing plans and Single-use-plans? 1+1
Suggested Ans: Explain the terms as given above.
Q.12 Distinguish between the standing plans and Single-use-plans. 3

Ans:

30
 Sl. Basis Standing Plan Single Use Plan
No.
1 Meaning Standing plan is formulated to deal Single-use plan is formulated for
with recurring problems. a specific period or situation.
2 Repetition These are made to be used time and These can not be used again
again.
3 Examples It includes objectives, strategy, In includes programme and
policy, procedure, method and rule. budget.
.
Value based Question:
1. Name the values, which a business organization follows when it plans.
Ans: The values, which are observed by a business organization, are:
1. Minimizing wastage of resources
2. Saving time and energy
3. Ensuring survival of business.
2. An insurance company dealing with public has clearly specified and put signboards at all
the place in the organization indicating “No Smoking”. Despite that some of the workers
continued smoking in the office premises. Name any two values, which are ignored by
the workers.
Ans: Values ignored by the workers are:
1. Obedience for the organizational rule.
2. Self-discipline
3. Work culture
4. Concern for the health of other people
5. Ignoring the ban imposed by government for smoking at public place
3. Which important value is talked about when the staff is complying with the rules and
regulation/Code of Conduct?
Ans: Discipline.

31
 Unit 5: ORGANIZING
Content mapping
Concept and importance. Organizing Process. Structure of organizing- functional
and divisional- concept. Formal and informal organization concept.
Delegation: concept, elements and importance.
Decentralization: concept and importance.
Structure of organizing- functional and divisional- merits and limitations.
Formal and informal - merits and limitations.

“Organizing is the process of defining and grouping, activities and establishing

authority relationships among them.”
“Organizing is a process which coordinates human efforts, assembles resources
and unite both into a group to be utilized for achieving specified objectives.”
Process: the process of organizing consists of the following steps:
(a).Identification and division of work (b).Departmentalization (c).Assignment of
Duties (d).Establishing reporting relationships.
Importance: Organizing is considered important because it leads:
(a) to division of work, (b) clarity in reporting relationships (c) optimum
utilization of resources, (d) growth, (e) better administration and greater creativity.
Organizational structure is the framework within which managerial and
operating tasks are performed. It can be functional or divisional.
Span of management is the number of subordinates under a superior.

Functional structure: groups activities on the basis of functions.

A functional structure is an organizational design that groups similar or related
jobs together.
The advantages of such a structure are:
1. specialization, 2. better control, 3. managerial efficiency and 4. ease in training
employees.
The disadvantages are:
1. functional empires, 2. conflict of interest, 3. inflexibility and 4. restriction in
managerial development.
Divisional structure: groups activities on the basis of Product.
In a divisional structure, the organizing structure comprises of separate
business units or divisions. Each unit has a divisional manager responsible for
performance and who has authority over the unit.

The advantages are:

1. integration, 2. product specialization 3. greater accountability, 4. flexibility,

32
5. better coordination and 6. more initiative.
The disadvantages are:
1. departmental conflicts, 2. increase in requirements of general managers.
3. ignoring of organizational interests, and 4. costly process,
Delegation:
Delegation refers to the downward transfer of authority from a superior to a
subordinate.
It has three elements: Authority, Responsibility and Accountability. Importance of
delegation is that it helps in effective management, employee development,
motivation, growth and coordination.
Authority: Authority refers to the right of an individual to command his
subordinates and to take action within the scope of his position.
Responsibility: Responsibility is the obligation of a subordinate to properly
perform the assigned duty.
Accountability: Accountability implies being answerable for the final outcome.

Centralization and Decentralization:

An organizing is centralized when decision-making authority is retained by higher
management levels whereas it is decentralized when such authority is delegated.
Decentralization is delegation of authority throughout the organization.
Importance of decentralization is that it helps in development of
(a) managerial talent (b) quick decision making (c) reducing burden on top
management (d) development of initiative (e) growth and better control.

1. Name the organization which is deliberately created? 1M

Ans: Formal Organizing
2- Divisional structure is more suitable for the firms having several products
and each product has distinct features. Do you agree? 1M
Ans: Yes, I do agree
3- Distinguish between functional structure and divisional structure. 4M
Functional Structure Divisional Structure.
Ans: Basis
Formation It is based on functions It is based on product
lines
Specialization Functional Product Specialization
Specialization
Responsibility Difficult to fix on a Easy to fix responsibility
departments
Cost Economical Costly

33
Co ordination Difficult for multi Easy, because all
product company functions related to a
particular product are
integrated in one
department.
Managerial Difficult, as each Easier, autonomy as well
Development functional manager has as the chance to perform
to report to the top multiple functions helps
management in managerial
development.

4-Distinguish between formal and informal organizations

Basis formal organizations informal organizations

Formation Deliberately Planned Emerges Spontaneously
among people
Purpose To achieve To satisfy social and
organizational goals cultural needs
Structure Well defined structure Does not have a clear-
cut
Behavior of members Standards of behavior Mutual consent among
members
Stability It is stable Neither stable nor
predictable.
Adherence to rules Violation of rules may No such punishment
lead to penalties

5. Which term denotes “The number of subordinates that can be effectively

managed by a superior? 1M
Ans: Span of control.
6. What are the elements of delegation of authority? 1M
Ans: Responsibility, Authority, Accountability.
7. Distinguish between authority and responsibility on the basis of: 3M
a. Direction of flow b. Delegation c. Origin
Ans: Basis Authority Responsibility
Direction of flow Authority flows Responsibility flows
downwards upwards

34
Delegation Authority can be Responsibility is
delegated absolute and cannot be
delegated.
Origin Arises from law Arises from authority.

8. Distinguish between ‘delegation’ and ‘decentralization’ of authority on the

basis of
i) purpose ii) parties involved and iii) withdrawal of authority.
Ans: Basis Delegation Decentralization
Purpose It means getting things To prepare the
done through organization for
subordinates handling major
expansion of its
activities
Parties involved It is confined with It indicates relationship
manager and his between top
immediate subordinate management and
various other
departments
Withdrawal of authority The delegated authority Withdrawal of authority
can be withdrawn by the is difficult
delegator

Some more question:

1. Name of the function of management which co-ordinates the physical,

financial and human resources and establishes productive relations among
them for achievement of specific goals. 1M
Ans: Organizing

2. Name and explain the two steps in the process o organizing which come
after ‘Identification and division of work’ and ‘Departmentalization’. 3M
Ans: Identification and division of work: Dividing the total work into jobs is
necessary because the entire work cannot be done by individual
Departmentalization: In this step combine or group similar jobs into larger units
called departments.

3. Organizing leads to a systematic allocation of jobs amongst the workforce.

Which importance of organizing is stated here? 1M

35
Ans: Benefits of specialization.

4. Organizing clarifies lines of communication and specifies who is to report to

whom. Mention the importance of organizing indicated here. 1M
Ans: Clarity in working relationships.

5. Aman Ltd. is manufacturing toys and has production, sales, Purchase and
Finance Departments. Which type of organization structure would you
suggest to them? State any three advantages of this organization structure. 3M
Ans: I would suggest functional structure for Aman Limited. Advantages of this
structure:
i. Supervision is facilitated. ii. Coordination with in the department is easier.

6. Hindustan Ltd. , is manufacturing computers, soaps and textiles. Which

type of organizational structure would suit the requirements of such
organization? State any three advantages of this organization structure. 4M
Ans: Divisional structure would shoot the requirements of Hindustan limited.
Advantages:
i. All activates associated with one product can be easily integrated.
ii. Decision making is faster and effective.
iii. Performance of individual product can be easily assessed.

7. It is a network of personal and social relations not established or required

by the formal organization but arising spontaneously as people associate with
one another. Name this organization and give its three advantages.
4M
Ans: Informal organization:
Advantages:
1. It brings feeling of belongingness.
2. Informal organization satisfies social and cultural needs.
3. It provides useful channel of communication.

8. It merely means the granting of authority to subordinates to operate within

prescribe limits. Mention the concept referred here. 1M
Ans: Delegation of Authority

9. Delegation provides a ready workforce to take up leading positions in new

ventures. Which importance of delegation is stated here? 1M
Ans: Facilitation of growth

36
10. “Authority can be delegated but accountability cannot.” Explain the
statement. 3M
Ans: According to the principle of absolute responsibility, authority can be
delegated but responsibility cannot be delegated by a manager. The manager
remains responsible to his own superior for the task which he may assign to his
subordinates. Every superior is responsible for the acts of this subordinates to
whom he delegates authority for any work.

11. The Marketing Manager of an organization has been asked to achieve a

target sales of 100 generators per day. He delegates the task to 10 sales
managers working under him. Two of them could not achieve their respective
targets. Is the marking manager responsible? Briefly explain the relevant
principle in support of your answer. 4M
Ans: Yes, Marketing manager is responsible for the non-achievement of the target
sales to his superior.
The principle related to this statement is absolute responsibility. It states that
authority can be delegated but responsibility cannot be delegated by manager. The
manager remains responsible are accountable to this own superior for the task
which he may have assigned to his subordinate.

12. It refers to the systematic delegation of authority from top management to

the lower level managers. Mention it. 1M
Ans: Decentralization of authority.

13. If we delegate the authority we multiply it by two, If we decentralize it, we

multiply it by money. 3M
A: Scope of delegation of authority is limited. It is clear that if we delegate the
authority we multiply it by 2 that is delegator and his subordinate to whom
authority is delegated.
Scope of decentralization of authority is wider than delegation. It involves
many people from to level to bottom lower level of authority.

37
 STAFFING
Content mapping:
Concept and importance of staffing.
Staffing as a part of Human Resource Management- concept.
Staffing process Recruitment- sources Selection –process
Training and Development- Concept and importance. Methods of training- on the
job and off the job- Induction training, vestibule training, apprenticeship training
and internship training.
Recruitment Sources- Internal-promotion, transfer; External -Direct recruitment,
Casual callers, Advertisements- (newspapers, journals, television), Employment
Exchange, Placement Agencies and Management Consultants, Campus
Recruitment, Web Publishing, Labour Contractors, Recommendations of
employees .Methods of on-the-job training and off-the job training-meaning.

MEANING OF STAFFING:
Staffing is ‘putting right people to the right jobs at the right time’. It begins with
workforce planning and includes different other function like recruitment,
selection, training, development, promotion, compensation and performance
appraisal of work force.
NEED AND IMPORTANCE OF STAFFING:
In any organization, there is a need for people to perform work. The staffing
function of management fulfills this requirement and finds the right people for the
right job. The staffing function has assumed greater importance these days because
of rapid advancement of technology, increasing size of organization and
complicated behavior of human beings. The ability of an organization to achieve
its goals depends upon the quality of its human resources.
STAFFING AS A PART OF HUMAN RESOURCE MANAGEMENT:
Staffing is a function which all managers need to perform. It is a separate and
specialized function and there are many aspects of human relations to be
considered.
It is the responsibility of all managers to directly deal and select people to work for
the organization. When the manager performs the staffing function his role is
slightly limited. In small organizations managers may perform all duties related to
employees salaries, welfare and working conditions.
But as organizations grow and number of persons employed increases, a separate
department called the human resource department is formed which has specialists
in the field to manage people. Human resource management includes many
specialized activities and duties which the human resource personnel must
perform.

38
RECRUITMENT:
Recruitment refers to the process of finding possible candidates for a job or
function. It has been defined as ‘the process of searching for prospective
employees and stimulating them to apply for jobs in an organization.’
Process of Recruitment:
The various activities involved with the process of recruitment includes:
(a) identification of the different sources of labour supply
(b) assessment of their validity,
(c) choosing the most suitable source or sources, and
(d) inviting applications from the prospective candidates, for the vacancies
Sources of recruitment:
(A) Internal Sources (B) External Sources
(A) internal sources:
Transfers: It involves shifting of an employee from one job to another, one
department to another or from one shift to another, without a substantive change in
the responsibilities and status of the employee
Promotions: Promotion leads to shifting an employee to a higher position,
carrying higher responsibilities, facilities, status and pay. Promotion is a vertical
shifting of employees
Merits of internal sources:
(a) Employees are motivated to improve their performance
(b) Simplifies the process of selection and placement
(c) Transfer is a tool of training the employees to prepare them for higher jobs.
(d) Shifting workforce from the surplus departments to those where there is
shortage of staff
(e) Cheaper as compared to getting candidates from external sources.
Limitations of Internal Sources:
(a) When vacancies are filled through internal promotions, the scope for induction
of fresh talent is reduced.
(b) Employees may become lethargic if they are sure of time bound promotions
(c) Enterprise cannot use internal sources of recruitment.
(d) Spirit of competition among the employees may be hampered.
(f) Frequent transfers of employees may often reduce the productivity of the
organization
(B) External Sources:
Direct Recruitment: The direct recruitment, a notice is placed on the notice
board. of the enterprise specifying the details of the jobs available. Job seekers
assemble outside the premises of the organization on the specified date and
selection is done on the spot recruitment.

39
Casual Callers: Organizations keep a database of unsolicited applicants in their
offices. Such jobseekers can be a valuable source of manpower. A list of such
jobseekers can be prepared and can be screened to fill the vacancies as they arise.
Advertisement: The advantage of advertising vacancies is that more information
about the organization and job can be given in the advertisement. Advertisement
gives the management a wider range of candidates from which to choose.
disadvantage is that it may bring in a flood of response, and many times, from
quite unsuitable candidates.
Employment Exchange: Employment exchanges run by the Government are
regarded as a good source of recruitment for unskilled and skilled operative jobs.
Disadvantage of it is that is may be up-to-date and many of the candidates referred
by them may not be found suitable.
Placement Agencies and Management Consultants: These provide a nationwide
service. These agencies compile bio-data of a large number of candidates and
recommend suitable names to their clients. Such agencies charge fee for their
services and they are useful.
Campus Recruitment: Organizations maintain a close liaison with the
universities, vocational schools and management institutes to recruit qualified
personnel for various jobs.
Recommendations of Employees: Applicants introduced by present employees,
or their friends and relatives may prove to be a good source of recruitment. Such
applicants are likely to be good employees because their background is sufficiently
known.
Labour Contractors: Workers are recruited through labour contractors who are
themselves employees of the organization. The disadvantages of this system are
that if the contractor himself decides to leave the organization, all the workers
employed through him will follow suit.
Advertising on Television: generally advertised through television and newspaper
The detailed requirements of the job and the qualities required to do it are
published along with the profile of the organization where vacancy exists.
Web Publishing: There are certain websites specifically designed and dedicated
for the purpose of providing information about both job seekers and job opening.
Merits of External Source:
(a) Qualified Personnel (b) Wider Choice (c) Fresh Talent (d) Competitive Spirit
Limitations of External Sources:
(a) Dissatisfaction among existing staff
(b) Lengthy process
(c) Costly process
SELECTION:

40
Selection is the process of identifying and choosing the best person out of a
number of prospective candidates for a job. Towards this purpose, the candidates
are required to take a series of employment tests and interviews.
Process of Selection:
1. Preliminary Screening: Preliminary screening helps the manager eliminate
unqualified or unfit job seekers based on the information supplied in the
application forms.
2. Selection Tests: An employment test is a mechanism (either a paper and pencil
test or an exercise) that attempts to measure certain characteristics of individuals.
These characteristics range from aptitudes, such as manual dexterity, to
intelligence to personalities.
Important Tests Used for Selection of Employees:
a. Intelligence Tests b. Aptitude Test
c. Personality Tests d. Trade Test
e. Interest Test
3. Employment Interview: The role of the interviewer is to seek information and
that of the interviewee is to provide the same. Though, in present times, the
interviewee also seeks information from interviewer.
4. Reference and Background Checks: Many employers request names,
addresses, and telephone numbers of references for the purpose of verifying
information and, gaining additional information on an applicant.
5. Selection Decision: The final decision has to be made from among the
candidates who pass the tests, interviews and reference checks.
6. Medical Examination: After the selection decision and before the job offer is
made, the candidate is required to undergo a medical fitness test.fit candidates are
give the job.
7. Job Offer: job offer is made through a letter of appointment/confirm his
acceptance. Such a letter generally contains a date by which the appointee must
report on duty.
Basic information that should be included in a written contract of employment will
vary according to the level of the job, but the following checklists sets out the
typical headings: Job Title, Duties, Responsibilities, Date when continuous
employment starts and the basis for calculating service, rates of pay, allowances,
hours of work, leave rules, sickness, grievance procedure, disciplinary procedure,
work rules, termination of employment.

TRAINING AND DEVELOPMENT:

Training and Development is an attempt to improve the current or future employee
performance by increasing an employee’s ability to perform through learning,

41
usually by changing the employee’s attitude or increasing his or her skills and
knowledge.
Importance of Training and Development:
The rapid changes taking place during the last quarter century in our highly
sophisticated and complex society have created increased pressures for
organizations to readapt the products and services produced, the manner in which
products and services are produced and offered, the types of jobs required and the
types of skills necessary to complete these jobs.
Benefits to the organization:
a) wastage of efforts and money is minimized.
b) leading to higher profits.
c) increases employee morale and reduces absenteeism and employee turnover.
d) It helps in obtaining effective response to fast changing environment.
Benefits to the Employee:
a) Improved skills and knowledge
b) Increased performance and help in earning more money.
c) Training makes the employee more efficient.
d) Training increases the satisfaction and morale of employees.
TRAINING, DEVELOPMENT AND EDUCATION:
Training: is any process by which the aptitudes, skills and abilities of employees
to perform specific jobs are increased. It is a process of learning new skills and
application of knowledge. It attempts to improve their performance on the current
job or prepare them for any intended job.
Education: is the process of increasing the knowledge and understanding of
employees. It is the understanding and interpretation of knowledge. It does not
provide definite answers, but rather develops a logical and rational mind that can
determine relationships among pertinent variables and thereby understand a
phenomenon
Development: refers to the learning opportunities designed to help
employees grow. It covers not only those activities which improve job
performance but also those which bring about growth of the personality, help
individuals in the progress towards maturity and actualization of their
potential capacities so that they become not only good employees but better
men and women.
METHODS OF TRAINING:
On-the Job Training Methods
(i) Apprenticeship Programmes: Apprenticeship programmes put the trainee
under the guidance of a master worker. These are designed to acquire a higher
level of skill. People seeking to enter skilled jobs, to become, for example,

42
plumbers, electricians or iron-workers, are often required to undergo
apprenticeship training.
(ii) Internship Training: It is a joint programme of training in which educational
institutions and business firms cooperate. Selected candidates carry on regular
studies for the prescribed period. They also work in some factory or office to
acquire practical knowledge and skills.
(iii) Job Rotation: This kind of training involves shifting the trainee from one
department to another or from one job to another. This enables the trainee to gain a
broader understanding of all parts of the business and how the organization as a
whole functions. The trainee gets fully involved in the departments operations and
also gets a chance to test her own aptitude and ability. Job rotation allows trainees
to interact with other employees facilitating future cooperation among
departments. When employees are trained by this method, the organization finds it
easier at the time of promotions, replacements or transfers.
(iv) Induction Training: Induction training is a type of training given to help a
new employee in settling down quickly into the job by becoming familiar with the
people, the surroundings, the job and the business. The duration of such type of
training may be from a few hours to a few days.
Off-the Job Training Methods
(i) Class Room Lectures/Conferences: The lecture or conference approach is
well adapted to conveying specific information rules, procedures or methods.
(ii) Films: They can provide information and explicitly demonstrate skills that are
not easily represented by the other techniques.
(iii) Case Study: Taken from actual experiences of organizations, cases represent
attempts to describe, as accurately as possible real problems that managers have
faced.
(iv) Computer Modeling: It simulates the work environment by programming a
computer to imitate some of the realities of the job and allows learning to take
place without the risk or high costs that would be incurred if a mistake were made
in real life situation.
(v) Vestibule Training: Employees learn their jobs on the equipment they will be
using, but the training is conducted away from the actual work floor. Actual work
environments are created in a class room and employees use the same materials,
files and equipment. This is usually done when employees are required to handle
sophisticated machinery and equipment.
(vi) Programmed Instruction: This method incorporates a prearranged and
proposed acquisition of some specific skills or general knowledge. Information
is broken into meaningful units and these units are arranged in a proper way
to form a logical and sequential learning package i.e. from simple to complex.

43
 Some questions:
1-The present day human resource management is a broader concept.”
Explain. 4M
Ans: The present day human resource management includes the following
activities:
a. Helps the organization to achieve its goals
b. Employees the skills and knowledge of employees efficiently and effectively.
c. Enhance job satisfaction.
d. Maintain high morale and good human relations within the organization
2. Why is induction is not required in the internal source of recruitment. 1M
Ans: Because employees are already well familiar with the organization.
3. State the meaning of placement as a staffing function. 1M
Ans: Placement: Once the job offer has been accepted by the selected
candidate he placed on this new job. Proper placement of an employee
reduces absenteeism. Placement therefore refers to placing the right person
on the right job.
4-Name two websites which are commonly visited both by the prospective
employees and the organizations searching for suitable people. 1M
Ans: www.naukari.com ; www.jobstreet.com

5-Distinguish between training and development. 4M

Ans: Training Development
It is used to add skills abilities of Development involves improving
the workers the capacities and capability of the
managerial personnel.
The term training is generally It is associated with the over all
used to impart specific skills growth of the executives.
among operative workers
it is to enable the employee to do It is to enable the overall growth
the job better of the employee
It is a job oriented process It is a carrier oriented process.

HOTS
1. It is described as the managerial function of filling and keeping filled the
positions in the organization structure. Which function of management is
referred here? 1M

44
Ans: Staffing
2. It is recruitment, selection, development, utilization, compensation and
motivation of human resources of the organization. Give the name of the
concept mentioned here. 1M
Ans: Human Resource Management.
3. It implies introducing the selected employee to other employees and
familiarizing him with the rules and policies of the organization. Name it. 1M
Ans: Orientation.
4. What is the next step after selection? 1M
Ans: Placement and Orientation.
5. It seeks to attract suitable applicants to apply for available jobs. Give the
term. 1M
Ans: Recruitment.
6. These are run by the Government as a source of recruitment for unskilled
and skilled operative jobs. What is being referred here? 1M
Ans: Employment exchanges.
7. Which type of personnel is recruited by management consultancy firms? 1M
Ans: Management consultancy firms help the organization to recruit technical,
professional and managerial personnel.
8. Harish is working as a supervisor in a company. Due to his hard work he is
promoted to the post of Production Manager. Now the post of supervisor is
vacant and no one can be transferred or promoted to this post. Name the
source of recruitment the company will use to fill up this post. State any three
advantages of using this source of recruitment. 4M
Ans: The Company will use external source of recruitment.
Advantages (with explanation):
i. Fresh talent ii. Wider choice iii. Qualified personnel
9. It is the process of identifying and choosing the best person out of a number
of prospective candidates for a job. Name it. 1M
Ans: Selection.
10. Name the test which is used as a measure of individual’s potential for
learning new skills. 1M
Ans: Aptitude test.

Questions based on Values

1. While selecting employees, an organization is not giving any priority to disabled
candidates, weaker sections in the society and even women. Identify the values
missing in the company’s selection process and also suggest a remedy.
Ans. i. Social objectives are not followed.
ii. Gender biased.
45
iii. Inclusive employment policy is violated
iv. Company’s selection policy is not good.
v. Company should give equal opportunity to all the prospective candidates.
2. A personnel manager while selecting new employees appoints only those
persons who fulfills his personal requirement directly or indirectly. Which values
are violated here?
Ans: i) Promotion to nepotism.
ii) Instigation to corruption.
iii) Selection of inefficient employees.
iv) Dissatisfaction in efficient members.

3-A production manager pays less than the minimum wages and gets their
signatures on minimum wages. Which values are not being followed by him?
Ans: i) Disobeying the law by not giving minimum wages.
ii)To take signature on minimum wages is fraud. iii) Exploitation of workers

46
 DIRECTING
Content mapping:
Concept and importance
Elements of Directing
- Supervision- concept, functions of a supervisor.
- Motivation- concept, Maslow's hierarchy of needs, Financial and non-financial
incentives.
- Leadership- concept, styles- authoritative, democratic and laissez faire.
- Communication-concept, formal and informal communication; barriers to
effective
Communication, how to overcome the barriers.
Q.1 What is meant by Directing? Explain the importance of directing? 6M
Ans: Directing is telling people what to do and seeing that they do it to the best of
their ability. It includes making assignment, explaining procedures, seeing their
mistakes are corrected, providing on the job instructions and issuing orders.
Importance of Directing (with proper explanation):-
1. It initiates action
2. It integrates employees’ efforts
3. It is the means of motivation
4. It facilitates implementing changes.
5. It creates balance in the organization
Q.2 Mention the elements of directing? 1M
Ans: 1. Supervision; 2. Motivation; 3. Leadership; 4. Communication
Q.3 what is Motivation? Explain Maslow’s Hierarchy of Needs
Ans. Motivation is a process of stimulating people to accomplish desired goals. It
depends up on satisfying the needs of people.
Maslow’s Hierarchy of Needs: - According to Maslow, man does every work to
satisfy his need. A man has various needs and their order can be determined.
The needs of a human being serve as a motivation for him. On the basis of priority
human needs can be divided into five parts (i) Physiological needs, (ii) Safety
needs, (iii).Affiliation or social needs, (iv) Esteem needs and (v) Self-actualization
needs.
Q.4- What is meant by “Esteem needs” and “Self-actualization needs” in
relation to motivation of the employees? 4M
Ans: i. Esteem Needs: these needs are needs for self esteem and need for other
esteem. For Example: Self-respect, self-confidence etc.
ii. Self-actualization Needs: This is the needs to be what one is capable of
becoming and includes needs for optimal development.

47
Q.5- “It is through motivation that managers can inspire their subordinates to
give their best to the organization”. In the light of this statement, explain, in
brief, the importance of motivation. 5/6 M
Ans: Importance of motivation:
Motivation sets in motion the action of people: Motivation builds the will to work
among employees and puts them into action.
a) Motivation includes the efficiency of work performance: Performance of
employees dependence not only on individual abilities but also on his willingness.
b) Motivation ensures achievement of organizational goals: If employees are not
motivated, no purpose can be served by planning organizing and staffing.
c) Motivation creates friendly relationships: Motivation creates friendly and
supportive relationships between employer and employees.
d) Motivation leads to stability in the employees: Motivation helps in reducing
absenteeism and turnover.
e) Motivation helps to change negative / indifferent attitudes of an employee
Q.6-Explain the various leadership styles. 6M
Ans:
1-Autocratic leadership style: This style is also known as leader centered style.
The leader keeps all the authority and employees have to perform the work exactly
as per his order. He does not decentralizes his authority. The responsibility of the
success or the failure of the management remains with the manager.
2-Democratic leadership: This style is also known as group centered leadership
style. Managerial decisions are taken by the manager in consultation with
employees. This leadership style is based on decentralization. Managers respect
the suggestions made by his sub ordinates.
3-Laissez-faire leadership style: This style as leadership is also known as free brain
leadership or individual centered style. The manger takes little interest in
managerial functions and the sub ordinates are left on their own. Manager
explains over all objectives, help sub- ordinates in determining their own
objectives. They provide resources. They also advise the employees.

Q.7 “All managers are leaders, but all leaders are not managers.” Do you
agree with this statement? Give any three reasons in support of your answer.
3M
Ans: Yes, I agree with this statement. Difference between leadership and
management

SN Basis Leader Manager

48
1 Origin Leadership Management
originates out originates out
of individual of official
influence power and
rights.
2 Forma Rights A leader has no A manager has
formal rights certain formal Q.8
rights Mention
3 Follower and A leas has A manager has three
subordinates followers subordinates advanta
ges and three disadvantages of laissez faire. 6M
Ans: Advantages (with proper explanation):
1. Development of self confidence in sub ordinates
2. High level motivation
3. Help in development of extension and enterprise
Disadvantages (with proper explanation):
1. Difficulty in cooperation
2. Lack of importance of managerial post
3. Suitable only for highly educated employees
Q.9 “Managerial functions cannot be carried out without an efficient system
of communication.” Do you agree? Give any three reasons in support of your
answer. 4M
Ans: Yes, I agree with this statement. Communication is important because of the
following reasons.
i. Communication facilitates planning in a number of ways
ii. Communication helps management in arriving at vital decisions
iii. Communication is necessary in creating unity of action of action
Q.10 Mention one barrier to effective communication. 1M
Ans: Poor listening skills of people.
Q.11 Give any one measure to improve communication. 1M
Ans: Communication according to the needs of receiver.
Q.12- What do you mean by grapevine? Explain two types of grapevine along
with diagram
Ans: Grapevine: The network or pathway of informal communication is known as
grapevine communication. Two types of grapevine communication
(i) Gossip (ii) Single Strand
Q.13- Explain any three measures to overcome the barriers to improve
communications effectiveness. 3M
Ans: 1. Clarify the areas before communication: Before communicating to
employees a manager should make an analysis of the subject matter.
49
2. Consult others before communication: A manager should encourage
participation of subordinates which will ensure their support and cooperation.
3. Communicate according to the needs of receiver: The manager should make
adjustments according to the needs of the receiver.

Q14- What are the Barriers to Communication? Explain.

It is generally observed that managers face several problems due to communication
breakdowns or barriers. These barriers may prevent a communication or filter part
of it or carry incorrect meaning due to which misunderstandings may be created.
Therefore, it is important for a manager to identity such barriers and take measures
to overcome them.
Some of these barriers include-semantic barriers, organizational barriers,
psychological barriers and personal barriers.
Semantic Barriers: Semantics is the branch of linguistics dealing with the
meaning of words and sentences. Some examples of Semantic Barriers are given
below:
(i) Badly expressed message
(ii) Symbols with different meanings
(iii) Faulty translations
(iv) Unclarified assumptions
(v) Technical jargon
(vi) Body language and gesture Decoding
Psychological barriers: Emotional or psychological factors acts as barriers to
communicators. Some examples of Psychological Barriers are given below:
(i) Premature evaluation
(ii) Lack of attention
(iii) Loss by transmission and poor Retention
(iv) Distrust
Organizational barriers: The factors related to organization structure, authority
relationships, rules and regulations may, sometimes, act as barriers to effective
communication. Some of these barriers are:
(i) Organizational policy
(ii) Rules and regulations
(iii) Status
(iv) Complexity in organization structure
(v) Organizational facilities
Personal barriers: The personal factors of both sender and receiver may exert
influence on effective communication. Some of the personal barriers of superiors
and subordinates are mentioned below:
(i) Fear of challenge to authority

50
(ii) Lack of confidence of superior on his subordinates
(iii) Unwillingness to communicate
(iv) Lack of proper incentives
Improving Communication Effectiveness
Manager should take appropriate measures to overcome these barriers and
promote effective communication in the organization such as:
i) Clarify the ideas before communication
ii) Communicate according to the needs of receiver.
iii) Consult others before communicating
iv) Be aware of language
v) Convey things of help and value to listeners
vi) Ensure proper feedback
vii) Communicate for present as well as future
viii) Follow up communications and ix) Be a good listener.

51
 CONTROLLING
Content mapping
Concept and importance.
Relationship between planning and controlling
Steps in the process of control
MEANING OF CONTROLLING:
Comparing actual performance with standards and finding deviations if any and
taking corrective action.
Actual Performance = Standards = No deviation
FEATURES/NATURE OF CONTROLLING:
Controlling is pervasive Controlling is a primary function
Controlling is a continuous process Controlling is a goal oriented function.
Controlling is both a backward looking as well as forward looking function
PROCESS OF CONTROLLING:
1. Setting performance standards: Standards are the Criteria against which actual
performance would be measured. Standards serve as bench marks. They can be set
in both quantitative as well as qualitative.
2. Measurement of actual performance: Performance should be measured in an
objective and reliable manner.
3. Comparing actual performance with standards:
4. Analyzing deviations: Major deviation or minor deviation and analyzing the
causes of deviation
a) Critical point control: Focus only on Key Result Areas (KRAs).
b) Management by Exception: Concentrate only on major deviations only.
5. Taking corrective action: When deviations go beyond the acceptable range,
especially in the important areas, it demands immediate managerial attention so
that deviations do not occur again and standards are accomplished.
Conclusion: In case the deviation cannot be corrected through managerial action,
the standards may have to be revised
IMPORTANCE OF CONTROLLING
Controlling ensures order and discipline by fixing standards in advance which
leads to improved employee motivation, it also facilitates efficient use of
resources, judging the accuracy of standards, facilitates coordination in
action which will result into accomplishment of organizational goals.

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 RELATIONSHIP BETWEEN PLANNING AND CONTROLLING
Planning and controlling are inseparable twins of management. Planning initiates
the process of management and controlling completes the process. Plans are the
basis of control and without control the best laid plans may go astray.
Planning is clearly a prerequisite for controlling. It is utterly foolish to think that
controlling could be accomplished without planning. Planning is prescriptive and
controlling is evaluative It is often said that planning is looking ahead while
controlling is looking back. However, the statement is only partially correct. Plans
are prepared for future and involve looking ahead. On the contrary, controlling is
like a postmortem of past activities to find out deviations from the standards. In
that sense controlling is a backward looking function. However, it should be
understood that planning is guided by past experiences and the corrective action
initiated by control function.
LIMITATIONS OF CONTROLLING:
1. Difficulty in setting quantitative standards: It is difficult to set standards for
all types of activities this makes measurement of performance and their
comparison with standards a difficult task.
2. Little control on external factors: Business environment is ever changing. The
firm has no control on external factors such as government policies, technological
changes, competition etc.
3. Resistance from employees: Employees oppose controlling measures taken by
any organization.
4. Costly affair: It is a costly affair as it involves a lot of expenditure, time and
effort. Especially small organizations cannot afford.
Some questions:
Q.1- Why it is said that planning is meaningless without controlling? 1M
Ans. In the absence of controlling, actual performance will not be measured and
compared. So, how far plans are implemented cannot be known.
Q.2. Why it is said that controlling is blind without planning? 1M
Ans. Without laid standards actual performance cannot be compared.
Q.3 Explain the limitations of Controlling. 3M
Ans: Hint: Refer limitations of controlling.
Q.4 Planning is looking ahead whereas controlling is looking back. Discuss.
3M
Ans: Hint: Relation of planning and controlling.
Q.5 Explain how controlling helps in ‘achieving better co-ordination’ and
‘better planning’. 3M
Ans: Hint: Refer Importance of Controlling.
Q.6 Controlling is a pervasive function. Explain. 3M

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Ans: (Hint) It is a pervasive function, it is required at every level and in every type
of organization.
Q.7 Does controlling help in ‘judging the accuracy of standards’ and
‘improving motivation of the employees’? Explain. 3M
Ans: Hint: Refer importance of Controlling
Q.8 Explain the difference between Planning and Controlling. 3M
Ans: Hint: Refer Relationship between Planning and Controlling
Q.9 What is Critical Point Control? 3M
Ans: It is neither economical nor easy to keep a check on each and every activity in
an organization. Controlling should focus on key result areas (KRAs) only which
are critical to the success of the organization.
Q.10 Suggest the corrective actions to be taken for the following causes of
deviation. 5M
i) Defective material ii) Defective machinery iii) Obsolete machinery
iv) Defective Process v) Defective physical conditions of work
Ans: i) Change the quality specification for the material used.
ii) Repair the existing machine or replace the machine if it cannot be repaired.
iii) Undertake technological up gradation of machinery
iv) Modify the existing process
v) Improve the physical conditions of work
Value Based Question:
Q.1 In controlling process, standards were set according to the efficiency of the
average employee. Which value has been kept in mind while setting the standards?
Ans: i) Increase in the morale of the employees
ii) Improving the quality of production
Q.2 On coming to know the negative deviations, fines are imposed on error-seeing
employees. Which value is being violated her?
Ans: i) Fear and frustration/disappointment amongst employees.
ii) Increase in the employee/labour turnover rate
Q.3 In company employees achieved quantitative standard but could not attain
qualitative standards. Which values have been ignored here?
Ans: i) Production of inferior quality goods.
ii) Exploitation of consumers.
Q.4 A manager observes that an old employee is not doing the required work.
Manager scolds him rudely without asking him the reasons. In your view how the
manager would have behaved and which values he should have kept in his mind?
Ans: i) To show respect to elderly employees
ii) Should not use ugly language/bad words.
iii) Without enquiring, scolding is bad/not to be done.

54
Q.5 A supervisor observes that during working hours some employees were busy
in gossiping instead of working. In-spite of instructions they did not start working
.when the matter was brought to the notice of management the union threatened to
go on strike. In your view was the behavior of employee and the union was
justified? What value are affected?
Ans: i) behavior of employee and the union was not justified.
ii) wastage of time.
iii) Union not to make unnecessary pressure of officials
iv) Threatening to strike on small matters is unhealthy practice

55
 FINANCIAL MANAGEMENT
Content mapping:
Concept and objective of Financial Management, Financial decisions:
investment, financing and dividend- Meaning and factors affecting,
Financial Planning- concept and importance, Capital Structure- Concept,
Fixed and Working Capital- Concept and factors affecting their
requirements

Q.1 What is meant by ‘Financial Planning’? Give any two points of its importance. (3)
Ans: Financial planning is essentially preparation of a financial blueprint of an organization’s
future operations.
Importance: (i) Optimum utilization of funds
(ii) coordination among different functional areas
(iii) Reduces financial uncertainties
(iv) Base for financial control
Q.2 Investment decision can be long-term or short-term. Explain long-term investment decision
and state any two factors affecting this decision. (4)
Ans: It relates to how the firm’s funds are invested in different Long term (fixed) assets . A
long-term investment decision is also called a Capital Budgeting decision.
Factors affecting: (i) Cash flows of the project
(ii) Rate of return of the project
(iii) Investment criteria involved
Q.3 What is meant by ‘Capital Structure’ of a company? State any two factors which affect the
capital structure of a company. (3)
Ans: CAPITAL STRUCTURE: Capital structure refers to the mix between owners fund
(Equity) and borrowed funds(Debts).
FACTORS AFFECTING THE CHOICE OF CAPITAL STRUCTURE
1. Cash Flow Position: Size of projected cash flows must be considered before issuing debts.
2. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times
earnings before interest and taxes of a company covers the interest obligation.
3. Debt Service Coverage Ratio(DSCR): Debt Service Coverage Ratio takes care of the deficiencies
referred to in the Interest Coverage Ratio (ICR). ANY TWO
Q.4 Identify the financial decision which determines the amount of profit earned to be
distributed and to be retained in the business. Explain any four factors affecting this
decision. ( 5)
Ans: DIVIDEND DECISION:-The decision involved here is how much of the profit earned by
company (after paying tax) is to be distributed to the shareholders and how much of it should be
retained in the business for meeting the investment requirements. (1 MARKS)
FACTORS AFFECTING DIVIDEND DECISION:-
a) Earnings: Dividends are paid out of current and past earning. Therefore, earnings is a major
determinant of the decision about dividend.
(b) Stability of Earnings: Other things remaining the same, a company having stable earning is
in a position to declare higher dividends. As against this, a company having unstable earnings is
likely to pay smaller dividend.

56
c) Stability of Dividends: It has been found that the companies generally follow a policy of
stabilizing dividend per share.
(d) Growth Opportunities: Companies having good growth opportunities retain more money
out of their earnings so as to finance the required investment.
(e) Cash Flow Position: Dividends involve an outflow of cash. A company may be profitable
but short on cash. Availability of enough cash in the company is necessary for declaration of
dividend by it.
(f) Shareholder Preference: While declaring dividends, managements usually keep in mind the
preferences of the shareholders in this regard.
Q.5- What is meant by ‘Financial Management’? State the primary objective of ‘Financial
Management. (3)
Ans: Financial Management: It is concerned with optimal procurement of funds as well as
usage (investment) of funds in long term and short term assets of the firm.
Objectives of Financial Management: Maximization of owners’ wealth is sole objective of financial
management. It means maximization of the market value of equity shares. Market price of
equity share increases if the benefits from a decision exceed the cost involved
Q.6- State how ‘growth prospects’ affect the working capital requirement of a company. (1)
Ans: If the growth prospects of a company are higher , it will require large amount of capital to
meet higher production and sales targets.
Q.7- Explain any four factors which affects the Fixed Capital requirement . (4)
Ans: FACTORS AFFECTING FIXED CAPITAL REQUIREMENT
1. Nature of Business: The type of business has a bearing upon the fixed capital requirements.
For example, a trading concern needs lower investment in fixed assets compared with a
manufacturing organization.
2. Scale of Operations: A larger organization operating at a higher scale needs bigger plant,
more space etc. and therefore, requires higher investment in fixed assets when compared with the
small organisation.
3. Choice of Technique: Some organizations are capital intensive whereas others are labour
intensive. A capital-intensive organization requires higher investment in plant and machinery as
it relies less on manual labour.
4. Technology Up gradation: In certain industries, assets become obsolete sooner.
Consequently, their replacements become due faster. Higher investment in fixed assets may,
therefore, be required in such cases.
5. Growth Prospects: Higher growth of an organization generally requires higher investment in
fixed assets.
6 .Diversification: A firm may choose to diversify its operations for various reasons, With
diversification, fixed capital requirements increases.
7. Financing Alternatives: A developed financial market may provide leasing facilities as an
alternative to outright purchase. Availability of leasing facilities, thus, may reduce the funds
required to be invested in fixed assets, thereby reducing the fixed capital requirements. Such a
strategy is specially suitable in high risk lines of business.
8. Level of Collaboration: At times, certain business organizations share each other’s facilities.
For example, a bank may use another’s ATM or some of them may jointly establish a particular
facility. Such collaboration reduces the level of investment in fixed assets for each one of the
participating organization. (Any four)

57
Q.8- What is meant by ‘ investment decision’ ? state any three factors affecting Investment
decision. (4)
Ans: It relates to how the firm’s funds are invested in different Long term (fixed) assets . A
long-term investment decision is also called a Capital Budgeting decision.
Factors affecting: (i) Cash flows of the project
(ii) Rate of return of the project
(iii) Investment criteria involved
Q.9-. What do you mean by ‘ financial planning’? Explain any five points which highlight its
importance. (6)
Ans: FINANCIAL PLANNING: Financial Planning is essentially preparation of financial
blueprint of an organization’s future operations. The objective of financial planning is to ensure
that enough funds are available at right time. 2MARKS
IMPORTANCE OF FINANCIAL PLANNING
(i) Optimum utilization of funds: There is optimum utilization funds raised from different
sources through investing decision under financial planning.
(ii) avoiding business shocks and surprises: It helps in avoiding business shocks and surprises
and helps the company in preparing for the future.
(iii) coordination among different functional areas: It helps in co-ordinating various business
functions e.g., sales and production functions, by providing clear policies and procedures.
(iv) Avoids confusion and wastage: Detailed plans of action prepared under financial planning
reduce waste, duplication of efforts, and gaps in planning.
(v) Base for financial control: Financial planning provides a base to exercise control over uses of
the fund through financial budget. Which also controls other financial affairs of the enterprise.
Q 10- . What is meant by dividend decision ? Explain any four factors which affect the dividend
decision of a company. (6)
Ans: DIVIDEND DECISION:-The decision involved here is how much of the profit earned by
company (after paying tax) is to be distributed to the shareholders and how much of it should be
retained in the business for meeting the investment requirements. (1 MARKS)
FACTORS AFFECTING DIVIDEND DECISION:-
a) Earnings: Dividends are paid out of current and past earning. Therefore, earnings is a major
determinant of the decision about dividend.
(b) Stability of Earnings: Other things remaining the same, a company having stable earning is
in a position to declare higher dividends. As against this, a company having unstable earnings is
likely to pay smaller dividend.
c) Stability of Dividends: It has been found that the companies generally follow a policy of
stabilizing dividend per share.
(d) Growth Opportunities: Companies having good growth opportunities retain more money
out of their earnings so as to finance the required investment.
(e) Cash Flow Position: Dividends involve an outflow of cash. A company may be profitable
but short on cash. Availability of enough cash in the company is necessary for declaration of
dividend by it.
(f) Shareholder Preference: While declaring dividends, managements usually keep in mind the
preferences of the shareholders in this regard.
(g) Taxation Policy: The choice between payment of dividends and retaining the earnings is, to
some extent, affected by difference in the tax treatment of dividends and capital gains

58
Q.11 Define ‘ Capital Structure’. (1)
Ans: Capital Structure’ is the composition of Debts and Equity of the long term source of fund.

Q.12- How does inflation affect the working capital requirement of a company ? (1)
Ans: Working capital requirement is affected by price level changes.

Q13-. Give the meaning of ‘investment decisions’ and ‘financing’ decisions of financial
management. (4)
Ans: Investment decision: It refers to the selection of assets in which fund will be invested by
the business. It relates to how the firm’s funds are invested in different Long term (fixed) assets .
A long-term investment decision is also called a Capital Budgeting decision
Financing Decision: - It refers to the quantum of finance to be raised from various sources of
long-term of finance. It involves identification of various available sources. The main sources of
funds for a firm are shareholders funds and borrowed funds. Shareholders funds refer to equity
capital and retained earnings. Borrowed funds refer to finance raised as debentures or other
forms of debt.
Q14-: Explain any three factors affecting Capital structure.
ANS.FACTORS AFFECTING THE CHOICE OF CAPITAL STRUCTURE
1. Cash Flow Position: Size of projected cash flows must be considered before issuing debt.
2. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times
earnings before interest and taxes of a company covers the interest obligation.
3. Debt Service Coverage Ratio(DSCR): Debt Service Coverage Ratio takes care of the
deficiencies referred to in the Interest Coverage Ratio (ICR).
Q15: Explain the following as factors affecting requirement of working capital.
(i)Nature of business (ii) Scale of operation (iii) Seasonal factors (iv) Production cycle
Ans: FACTORS AFFECTING WORKING CAPITAL REQUIREMENTS
1. Nature of Business: Trading Organisations – Less working capital
Manufacturing Organizations – more working capital
2. Scale of Operations: Large scale organizations – more working capital
Small scale organizations – less working capital
3. Business Cycle: Boom period - more working capita
Depression period - less working capital
4. Seasonal factors: Peak season – more working capital
Lean season – less working capital
5. Production cycle: Longer production cycle – more working capital
Shorter production cycle – less working capital
6. Credit allowed: Conservative/strict credit policy – less working capital
Liberal credit policy – more working capital
7. Credit availed: If credit is available easily from suppliers - less working capital
If credit is not available easily from suppliers – more working capital
8. Operating efficiency: If current assets are managed efficiently – less working capital
If current assets are not managed efficiently – more working capital
9. Availability of Raw Material: Easy and timely availability of raw material – less working
capital .
Q16- Why finance is required in a business organization?
Ans: Any one out of the following:
59
 -To start a business -Modernization -Diversification -Acquisition of assets
Q17. Give any two objectives of financial management.
Ans: Any one out of the following:
-Wealth maximization -Profit maximization -Efficient use of resources
-Safety of resources
Q19- . What is financial Leverage?
Ans: Technique of using fixed charge securities to increase the earning of equity share holders.

60
 FINANCIAL MARKETS
Content mapping:
Financial Markets: Concept, Functions and types, Money market and its
instruments, Capital market and its types (primary and secondary),Stock
Exchange- Functions and trading procedure, Securities and Exchange
Board of India (SEBI) -objectives and functions
Q.1 State any one ‘Developmental function’ of SEBI. (1)
Ans: (i) SEBI promotes training of intermediaries of the securities market such as brokers, sub –
brokers etc.,
( ii) SEBI has permitted internet trading in a limited way through registered stock brokers.
(iii) In order to reduce the cost of issue, SEBI has made underwriting optional. (ANY ONE)
Q.2 Explain any four function of ‘Stock Exchange’.
OR
Explain any four methods of floatation of new issue in the ‘Primary Market’ (6)
Ans: Functions of stock exchange
1. Providing Liquidity and Marketability to Existing Securities: It gives investors the chance
to disinvest and re-invest. This provides both liquidity and easy marketability to already existing
securities in the market.
2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of
demand and supply. A stock exchange is a mechanism of constant valuation through which the
prices of securities are determined.
3. Safety of Transactions: The membership of a stock exchange is well regulated and its
dealings are well defined according to the existing legal frame work. This ensures that the
investing public gets a safe and fair deal on the market.
4. Contributes to Economic Growth: A stock exchange is a market in which existing securities
are re-sold or traded. Through this process of disinvestment and re-investment savings get
channelized into their most productive investment avenues. This leads to capital formation and
economic growth.
5. Spreading of Equity Cult: The exchange can play a vital role in ensuring wider share
ownership by regulating new issues, better trading practices and taking effective steps in
educating the public about investments.
6. Providing Scope for Speculation: The stock exchange provides sufficient scope within in the
provisions of law for speculative activity in a restricted and controlled manner
OR
Following are the methods of raising capital from the primary market :
• 1. Public issue through prospectus: under this method the company wanting to raise capital
issues a prospectus to inform and attract the investing public. It invites prospective investors to
apply for the securities.
• 2.Offer for sale: under this method the sale of securities takes place in two steps. In the first
step the company sells the entire lot of shares to the intermediary firms of stock brokers at an
agreed price .In the second step, the intermediary resells these shares to investors at a higher
price.
• 3. Private placement: In private placement the entire lot of new securities is purchased by an
intermediary at a fixed price and sold not to the public but to selected clients at a higher price.

61
• 4 .Rights issue (for existing companies: This is the offer of new shares (additional shares) by
an existing company to the existing shareholders. The shareholder may either accept the offer for
himself or assign to another. A rights issue to the existing shareholders is a mandatory
requirement.
• 5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the
stock exchange has to enter into an agreement with the stock exchange. This is called an Initial
Public Offer (IPO). The issuer company should also appoint a registrar to the issue having
electronic connectivity with the exchange
Q.3 State any one ‘Protective function’ of SEBI. (1)
Ans: SEBI prohibits fraudulent and unfair trade practices in the securities market
Q.4- Stage any one objective of setting up of SEBI. (1)
Ans: 1• To regulate stock exchanges and the securities industry to promote their orderly
functioning.
2• To protect the rights and interests of investors, particularly individual investors and to guide
and educate them. (ANY ONE)
Q.5- What is the duration of the instruments being traded in money market? (1 )
Ans: Up to 1 year or 365 days
Q.6- Differentiate between ‘Capital Market’ and ‘Money Market’ on any four bases. (6)
Ans: Difference between Capital market and Money Market
Basis Capital Market Money Market
Duration More than one year Upto 365days or 1 year
Instruments Share, Debenture, Bonds Commercial Bill, Commercial
paper, Treasury bill, Call
Money, Certificate of Deposit
Participants Financial Institutions, Bank, RBI, Financial Institutions,
Corporate bodies, Foreign Bank
investors, Individual investors,
etc
Safety More risk-Less safety Less risk More safety
Return Higher Lesser
Liquidity Lesser Higher

Q.7- State any one function of ‘Financial Market’. 1

Ans: 1.Mobilization of savings and channeling them into the most productive uses: A
financial market facilitates the transfer of savings from savers to investors (industries)
2.Facilitates price discovery: In the financial market, the households are suppliers of funds and
business firms represent the demand. The interaction between them helps to establish a price
for the financial asset which is being traded in that particular market. (ANY ONE)
Q.8-. Explain any three functions of financial market.
Ans: Functions of financial market
1. Mobilization of savings and channeling them into the most productive uses: A financial
market facilitates the transfer of savings from savers to investors (industries)

62
2.Facilitates price discovery: In the financial market, the households are suppliers of funds and
business firms represent the demand. The interaction between them helps to establish a price for
the financial asset which is being traded in that particular market.
3. Provide liquidity to financial assets: Financial markets facilitate easy purchase and sale of
financial assets. In doing so they provide liquidity to financial assets, so that they can be easily
converted into cash whenever required.
4. Reduce the cost of transactions: Financial markets provide valuable information about securities
being traded in the market. It helps to save time, effort and money
Q9-. Explain the following money market instruments: (a) Treasury bill (b) Commercial paper
(c)Call money. (6)
Ans:
a. Treasury Bill (T-bills): It is basically an instrument of short-term borrowing by the
Government of India maturing in less than one year. They are also known as Zero Coupon
Bonds.
b. Commercial Paper: It is a short-term unsecured promissory note, negotiable and
transferable by endorsement and delivery with a fixed maturity period. It is issued by large and
creditworthy companies to raise sort-term funds at lower rates of interest than market rates. It
usually has a maturity period of 15 days to one year.
c. Call Money: It is a short-term finance repayable on demand, with a maturity period of one day to
fifteen days, used for inter-bank transactions. It is a method by which banks borrow from each other to
be able to maintain the cash reserve ratio.
Q.10- What is meant by ‘financial risk’ ? (1)
Ans: The inability to pay the fixed financial costs(Borrowed fund) creates a risk which is called
financial risk.
Ans: Working capital requirement is affected by price level changes.
Q.11 ‘Stock exchange not only contributes to the economic growth but performs many other
functions’ Explain any three other functions of ‘Stock Exchange’. (3)
Ans: Functions of stock exchange
1. Providing Liquidity and Marketability to Existing Securities: It gives investors the chance
to disinvest and re-invest. This provides both liquidity and easy marketability to already existing
securities in the market.
2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of
demand and supply. A stock exchange is a mechanism of constant valuation through which the
prices of securities are determined.
3. Safety of Transactions: The membership of a stock exchange is well regulated and its dealings are
well defined according to the existing legal frame work. This ensures that the investing public gets a
safe and fair deal on the market
Q 12. “ Financial market plays an important role in the allocation of scarce resources in an econoy by
performing various functions” Explain any three functions of financial market. (3)
Ans: Fuctions of financial market
1. Mobilization of savings and channeling them into the most productive uses: A financial
market facilitates the transfer of savings from savers to investors (industries)
2.Facilitates price discovery: In the financial market, the households are suppliers of funds and
business firms represent the demand. The interaction between them helps to establish a price for
the financial asset which is being traded in that particular market.

63
3. Provide liquidity to financial assets: Financial markets facilitate easy purchase and sale of
financial assets. In doing so they provide liquidity to financial assets, so that they can be easily
converted into cash whenever required.
Q13. Which method of short term finance do the bank adopt to maintain their cash reserve
ratio(CRR)?
Ans: Call money
Q14. Explain the functions of SEBI (Securities and Exchange Board of India).
Ans: Regulatory Function-
-Registration of Intermediaries
-Notification about rules and regulations
-levying of fees
-Regulation of investment schemes
-Inspections and enquiries
Development functions-
-Training to intermediaries
-Promotion of fair trade
-Research
Protective functions-
-Prevents insider trading
-Prohibits unfair trade practices
-Promotes fair trade practices
-Educates investors
Q15. Discuss the TRADING PROCEDURE of stock exchange.
TRADING PROCEDURE:-
The procedure for purchase and sale of securities in a stock exchange involves the following
steps:
4. Selection of broker
The first step is to select a broker who will buy/sell securities on behalf of the investor. This is
necessary because trading of securities can only be done through SEBI registered brokers who
are the members of a stock exchange. Brokers may be individual, partnership firms or corporate
books. The broker charges brokerage / commission for his services.
5. Opening demat account
The next step is to open a demat account. Demat (Dematerialized) account refers to an account
which an Indian citizen must open with the depository participant (banks, stock, brokers) to trade
in listed securities in electronic form.
The securities are held in the electronic form by a depository. At present, there are two
depositories in India NSDL (National Securities Depository Ltd.) and CDSL (Central
Depository Services Ltd.)

64
Depository interacts with the investors through depository participants. Your Depository
Participant will maintain your securities account balances and intimate to you the status of your
holding from time to time.
6. Placing the order
The next step is to place the order with the broker. The order can be communicated to the broker
either personally or through telephone, cell phone, e-mail etc.
The instructions should specify the securities to be bought or sold and the price range within
which the order is to be executed. Only the securities of listed companies can be traded on the
stock exchange.
6. Executing the order
According to the instructions of the investor, the broker buys or sells securities.
The broker then issues a contract note. A copy of the contract note is sent to the client.
The contract note contains the name and the price of the securities, names of the parties,
brokerage charged. It is signed by the broker.
7. Settlement
This is the last stage in the trading of securities done by the brokers on behalf of their clients.
The mode of settlement depends upon the nature of the contract.
Equity spot market follows a T+2 rolling settlement. This means that any trade taking place on
Monday gets settled by Wednesday. All trading on stock exchanges takes place between 9:55 am
and 3:30 pm. Indian Standard Time, Monday to Friday. Delivery of shares must be made in
dematerialized form, and each exchange has its own clearing house, which assumes all
settlement risk.

65
 MARKETINGMANAGEMENT
Content mapping:
Selling and Marketing- Concept, Marketing Management- Concept, Marketing Functions,
Marketing management philosophies, Marketing Mix – Concept and elements, Product-
Concept, branding, labelling and
Packaging, Price- Concept, Factors determining price, Physical Distribution - concept and
components, channels of distribution: types, choice of channels. Promotion – Concept and
elements; advertising concept, role, objections against advertising, personal selling-
concept and qualities of a good salesman, sales promotion- concept and techniques, public
relations- concept and role.

(1) What is marketing?

Ans.: Marketing is concerned with those activities which start much before the production and will be
continued even after sale till the final satisfaction of customers.
(2) State the main objective of marketing.
Ans.: To earn profits while satisfying the needs and wants of consumers.
(3) What is market offering?
Ans.: Market offering the product which satisfies the needs and wants of the present & potential buyers.
(4) Give any two examples of ‘customer value’.
Ans.: Free replacement, Additional features, added quantity & discounted rate etc.
(5) What type of products can be marketed?
Ans.: A product which is a bundle of utilities or source of satisfaction and is able to satisfy human
needs & wants can be marketed.
(6) Who is a marketer?
Ans.: A marketer is a person or an organization who provides goods or services to customers with an
intention of satisfying their needs & wants.
(7) State any two pillars of ‘marketing concept’.
Ans.: (i) Identification of target market or target customers (ii) Understanding the needs & wants of
target customers.
(8) What is grading?
Ans.: Grading refers to classifying products into different groups on the basis of some of its important
characteristics like size, quantity etc.
(9) Define ‘Standardization’.
Ans.: Standardization is a process of producing goods of predetermined specifications to provide
uniformity and consistency to the output.
(10) What type of information does a label provide?
Ans.: Label provides information about the product like manufacturing date, expiry date, ingredients,
price, direction to use, manufacturer’s address etc.
(11) What is the role of a brand?
Ans.: Brand gives an identity to a product and distinguishes it from competitor’s products.
(12) How does branding benefit a business?
Ans.: Branding builds company’s image, customer’s loyalty and promotes sales in the long run.
(13) Customer support services are considered to be the key to marketing success of an organisation in
modern days. Explain how?
Ans.: Customer support services help business to maintain good relationship with its existing
customers, get repeat sales and develop brand loyalty for the product.
(14) Define marketing mix.
Ans.: Marketing mix is described as the set of marketing tools that a firm uses to pursue its marketing
objectives in a target market.
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(15) What is product mix?
Ans.: Product mix refers to all important decisions related to product such as quality of product,
packing, labeling and branding of the products etc.
(16) Why a product may require secondary packaging?
Ans.: A product may require secondary packaging (i) to ensure product safety (ii) to attract customers
(17) How does packaging promote health and sanitation?
Ans.: Packaging promotes the product from dirt and getting adulterated.
(18) State the factor which buyer considers while paying for a product.
Ans.: The utility of the product
(19) Define ‘Price Mix’.
Ans.: Price mix refers to important decisions related to price of a product such as factors affecting
price, discount to be offered and term of credit to be allowed to customers etc.
(20) What is ‘Place Mix’.
Ans.: Place mix refers to all decisions that are related to physical distribution of goods & services.
(21) Define ‘channels of distribution’.
Ans.: Channels of distribution are the intermediaries like agents, wholesalers or retailers who act as link
between manufacturers and consumers.
(22) What is a ‘promotion mix’?
Ans.: Promotion mix refers to various promotional tools or selling techniques used by a marketer to
communicate with target customers
(23) Name the promotional toll which is an impersonal form of communication.
Ans.: Advertising
(24) Opponents of advertising say that it is ‘social waste’. What is their argument for this?
Ans.: Opponents say that advertising is s social waste because they feel that it adds to cost, multiples
the needs of people and undermine social values.
(25) What is sales promotion?
Ans.: Sales promotion refers to short term incentives, which are offered to stimulate the customers to
make immediate purchase of a product or service.
(26) Define ‘personal selling’.
Ans.: Personal selling is a personal form of communication used to inform customers about the product
and persuade them to buy the product.
(27) Define ‘publicity’ a promotional tool.
Ans.: Publicity refers to spreading information about the products or services of a company by
unidentified sponsors which is usually ‘media’.
(28) What is the role of ‘Public Relation Department’ in an organization?
Ans.: It generates positive publicity and improves public image of the organization.
(29) What is meant by term ‘selling’?
Ans.: Selling is mere exchange of goods for money between sellers and buyers. It means finding the
customers and transferring the goods to them for value or money.
(Three / four / five and six marks question & its suggestive answer)
(30) Briefly explain any three objectives of marketing management.
Ans.: Following are the objectives of marketing management:
(a) Creation of demand: The producers first ascertain what the customers want and then produce goods
according to the needs of customers.
(b) Capturing market share: Various promotional methods and another activities enable a firm to
capture a reasonable share in the market.
(c) Creation of goodwill: Marketing basically aims at building the reputation of the firm through
various image-building activities.
(d) Profitable sales volume through customers’ satisfaction
(e) To survive in a competitive market
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(31) Explain any six functions of marketing.
Ans.:
1. Gathering and Analyzing Market Information: This is necessary to identify the needs of the
customers and to take various decisions for the successful marketing of the products and services.
This is important for making an analysis of the available opportunities and weaknesses of the
organization and help in deciding that what opportunities can best be pursued by it.
2. Marketing Planning: Business has to develop a complete marketing plan covering various
important aspects including the plan for increasing the level of production, promotion of the
products, etc. and specify the action programmes to achieve these objectives.
3. Product Designing and Development: The design of the product contributes to the target
customers and also gives a competitive advantage in the market. It requires decision regarding the
size, design, colour, weight, quality, and other features of product to meet the expectations of the
customers.
4. Standardization and Grading: Standardization refers to producing goods of predetermined
specifications so that buyers conform to the quality, price, and packaging and reduces the need for
inspection, testing and evaluation of the products. Grading is the process of classification of
products into different groups according to similar characteristics.
5. Packaging and Labeling: Packaging is the act of designing and producing the package for a
product. A package is a wrapper or container in which product is enclosed, encased or sealed.
Packaging reduces the risks of spoilage, breakage, leakage, etc. in the process of storage and
transportation of goods. Packaging is important not only for protection of the products but also
serves as a promotional tool.
Labeling refers to designing the label to be put on the package, which indicates ingredients
including name of product & manufacturer, quality, quantity, price, date of manufacturing &
expiry, process of use and precautions etc.
6. Branding: Branding means giving a specific name, symbol or design to a product by which it will
be known. By branding, a manufacturer distinguishes his product from the competitors’ product so
that consumers may identify it easily and become loyal to it.
7. Customer Support services: Customer support services such as after sale services, handling
customer complaints, procuring credit services, maintenance services, technical services and
consumer information are provides maximum satisfaction to the customers, which is the key to
marketing success in modern days.
8. Pricing of Product: Pricing means the process of fixing the price of a product or services. Pricing
is an important function because the prices of a firm’s products determine the volume of sales and
the amount of profit.
Promotion: Promotion is the process of informing customers about the availability and uses of
products and services and persuading them to buy. It includes all the activities such as advertising,
personal selling, sales promotion and publicity which are intended to influence buyer’s behaviour.
9. Physical Distribution: The two major decision areas under the managing physical distribution
include –
a) Decision regarding channels (intermediaries) of distribution
b) Physical movement of the product from where it is produced to a place where it is required.
10. Transportation: 11. Storage or Warehousing:
(32) “Advertising misleads customers and increases the cost of products.” Do you agree with this
statement? Give reasons in support of your answer.
Ans.: Advertising has been subjected to a lot of criticism and public disapproval. The critics of
advertising raise the following objections against advertising:
1. Burden on consumer or Adds to Cost:

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 The amount spent by advertiser on his product is passed on to the consumer in the form of higher
prices. The customers have to pay more the advertised product. No manufacture pays for the advertising
costs out of his own pocket.
 Advertising, however, increase demand and leads to large scale of production. Large scale of
production reduces costs and results in lower prices. Therefore, advertising does not put burden of
higher prices on consumers in the long run.
2. Encourages Sale of Inferior and dubious products:
Advertising persuades innocent people to buy inferior and undesirable products such as liquor,
cigarettes, etc. Manufactures and traders make false and exaggerated claims in their advertisements
about the utility of their products. Ignorant consumers are misled to buy dubious products.
 Some businessmen misuse advertising to sell duplicate and dubious products. But this is not a fault
of advertising. People and government can check misuse of advertising by keeping a watch on
advertisers.
3. Confuse the Buyers:
Public is exposed to so many advertisements in different media. For example, five advertisements on
TV may be for toothpaste or detergent. Each brand claims it is better than others. Consumers get
confused and find it difficult to make a choice.
 Intelligent consumers can however make judgment on the basis of reputation of the manufacturer,
price of the brand and their needs.
4. Multiplies the needs
Advertising multiplies the needs of people and encourages un-healthy consumption. It induces people
to buy even those things which are not necessary. This leads to waste of society’s resources.
Advertising distorts family budgets and encourages wasteful expenditure.
 Advertising no doubt multiplies the needs. But it also inspires to work hard and earn more to
satisfy the increased needs. Moreover, some products are innovative and more useful to people.
(33) Explain in brief any three functions of labeling.
Ans.: Labels perform the following functions: (any of three)
(a) Describe the product and specify its contents: The manufacturer cannot communicate to each and
every customer personally so if he wants to communicate and share some information about the
product with customer it is done through labels.
(b) Identify the product: The label helps the customers to identify the product from the various types
available for example; we can easily identify a Cadbury chocolate from other brand of chocolate
with the label of both products.
(c) Help in grading: Label helps to grade the product into different categories for example; Brook
Bond Tea – Red Label, Green Label etc.
(d) Promote sale: Attractive & colourful labels excite customer and induce him to buy the product.
Specially in customer goods attractive labels increase sales volume.
(e) Providing information required by Law/Legal point of view: The label is also used to fulfil the
legal requirement as it is legal compulsion to print Batch no., Contents, Maximum retail price,
Weight or Volume on all the products. On some products giving statutory warning is also legal
compulsion and these are also fulfilled through label.
(34) Explain in brief any three qualities of good brand name.
Ans.: Following are some of the considerations, which should be kept in mind while choosing a brand
name: (any of three)
(a) Brand should be short, easy to pronounce, spell, recognize and remember: For example – Lux,
Dettol, Surf, VIP, Vim, Ponds, Rin etc. As if brand name is difficult to pronounce than customer
will hesitate to demand for it and failed to remembered.

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 (b) Brand name should be suggestive: Brand name must be suggests the utility, benefits and quality of
the product. For example – Hajmola suggests digestive property, Ujjala suggests brightness, Hair &
Care suggests care of hairs, Fair & Lovely, Promise, Genteel, Boost etc.
(c) Brand name should be unique & distinctive: The brand name should be very different and should
not lose its identity for example; Airtel, Tide, Liril, Safari, Sprit etc.
(d) Brand name should be adaptable to packing or labeling requirements, to different advertising media
and to different languages.
(e) Brand should be sufficiently versatile to accommodate new products, which are added to the
product line for example; Maggie, Colgate etc.
(f) It should be capable of being registered and protected legally.
(g) Chosen name should have staying power i.e., it should not get out of date.
(35) What is meant by Channels of distribution? Explain the types of channels of distribution.
Ans.: Channels of Distribution are set of firms and individuals that take title, or assist in transferring
title, to particular goods or services as it moves from the producers to the consumers. In other words,
channel refers to a team of merchants, agents, and business institutions that combine physical
movement and title movement of products to reach specific destinations.
Types of Channel of Distribution
1. Direct Channel: Manufacture Customer (Zero Level)
2. Indirect Channel:
Manufacture Retailer Customer (One Level)
Manufacture Wholesaler Retailer Customer (Two Level)
Manufacture Agent Wholesaler Retailer Customer (Three Level)
(36) Distinguish between marketing & selling.
Basis of difference Marketing Selling
1. Focus It focuses on the need of the customer. It focuses on need of the sellers, i.e.
convert goods in to cash.
2. approach/means The marketers use integrated approach The seller uses fragmented approach
to identify & satisfy customers’ needs. for selling products.
3. objective/aim Its aims at profits through customers Its aims at profits through transfer of
Satisfaction. title (sales).
4. Scope Its wider in scope and includes various It’s narrower in scope, only exchanges
types of activities of goods & services for consideration.
5. importance/ Customer is treated as the king & is Selling gives priority and supreme
predominance given supreme importance importance to product.
6. starting and Its starts much before production with Its starts after production & ends with
ending point the customers’ needs & continues even the sale of product
after sale
7. Perspective It has a long term as it lays emphasis on It has a short term as it focuses on
growth & stability of business. profit maximization.
(37) Distinguish between Advertising and personal selling.
S.N. Advertising Personal Selling
01 Impersonal form of communication Personal form of communication
02 Less flexible as standardized messages are Flexible. Messages can be changed as the type of
used customers
03 Mass reaches Limited number of customers can be contacted
04 Cost per person is less Cost per person is high
05 Covers market in short time Takes long time to cover market
06 No direct feedback can be obtained Direct feedback can be collected
07 More useful for standardized and consumer More useful for industrial & customized products
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 products
(38) What is meant by Packaging? Give any five points explaining why packaging is important.
Ans.: Packaging refers to the act of designing and producing the package for a product. A package is a
wrapper or container in which product is enclosed, encased or sealed. Packaging reduces the risks of
spoilage, breakage, leakage, etc. in the process of storage and transportation of goods. Packaging is
important not only for protection of the products but also serves as a promotional tool.
(a) Rising Standards of Health and Sanitation: Because of the increasing standards of living in the
country, more and more people have started purchasing packed goods as the chances of
adulteration in such goods are minimized.
(b) Self Service Outlets: The self service retail outlets are becoming very popular, particularly in major
cities and towns. Because of this, some of the traditional role assigned to personal selling in respect
of promotion has gone to packaging.
(c) Innovational Opportunity: Some of the recent developments in the area of packaging have
completely changed the marketing scene in the country. For example, milk can now be stored for 4-
5 days without refrigeration in the recently developed packing materials. As a result, the scope for
the marketing of such products has increased.
(d) Product Differentiation: Packaging is one of the very important means of creating product
differentiation. The colour, size, material etc., of package makes real difference in the perception of
customers about the quality of the product. For example, by looking at the package of a product say
Paint or Hair Oil, one can make some guess about quality of the product contained in it.
(39) Explain the sales promotion activities:
Ans.: Commonly used Sales Promotion Activities
1. Rebate: Sometimes, on some special occasion, a manufacture offers its products at special prices
much below the listed price. This is known as rebate. For example – offering khadi products at the
time of Gandhi Jayanti on special prices.
2. Discounts: These are like price promotions in which certain percentage of the price is reduced as
discount from the listed price. For example – discounts up to 50% by Janata Shoes House.
3. Refunds: In this case, the seller offers to refund a part of the price paid by the customer on the
production of some proof of purchase. For example – refund of Rs. 5 on presentation of empty pack
of Maggie Noodles.
4. Product Combinations: The customer is given another product as free gift along with the purchase
of certain goods. For example – gift of Ink-jet Printer with the purchase of Compaq Desk-top
Computer.
5. Quantity Gifts: Sometimes seller devise special package, which gives extra quantity, of the product
to the buyer at less price or no price. For example – buy two soaps and get one free by LUX.
6. Instant Draws and Assigned Gifts: Under this scheme, some gifts are given on the basis of draws
or some events. For example – Jainsons Westend, Karol Bagh, Delhi organize some events instantly
and deliver some gifts on the spot.
7. Lucky Draw: Under this scheme, some coupons bearing distinct numbers are issued on the purchase
of some products. At the end of a day or week or month, draws are taken and the winner is awarded
some gifts. For example – gift of computer to the lucky winner declared on the basis of draw taken
out of the tickets of visitors to India International Trade Fair.
8. Contests: In this scheme, competitive events are organized by the companies for promoting their
products. For example – Bournvita Quiz Contest etc.
9. Usable Benefits: In this scheme, gifts are given to the users of products. For example – free
servicing of cars.
10. Finance Scheme: This scheme makes finance available for customers. Sometimes, in order to
capture the market, finance is provided to the customer by the marketer at 0% interest rate. This is
followed usually for very costly products like Premium Cars etc.
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 11. Sampling: Under this scheme, some free samples are distributed to develop a taste for the product.
For example – launching of new type of toothpaste.
(40) “An important task in the marketing of goods relates to designing the label as it provides useful and
detailed information about the product.” In the light of the above statement draw a label for a packet of
‘juice’ and highlight the important information to be provided on it.
Ans.:
Delhi-12 Ready to drink FPO
appy
FIZZa
Test Best When Chilled (sparking apple juice drink) batch no. 2439
Date of Mfg April 2012
300 ml (Best before 12 months)
Contents: Protein, Sugar, Energy, Potassium, Fat, Calcium. Max. Price 29/-
(41) Name the element of marketing mix which affects the revenue and profits of a firm. Explain any five
factors which help in determining this element.
Ans.: Price Mix affects the revenue and profits of a firm as an element of marketing mix. Price mix
refers to the decisions relating to the price to be charged for the product, services or idea. Price stands
for the exchange value of the product i.e. what the customer has to pay? It involves decisions regarding
targeted customers, cost, profit margin, competitive products, discount & allowance, terms of credit.
The following are the few factors which help in determining the price of a product/service/idea:
1. Product Cost: The product cost includes the cost of producing, distributing and selling the product.
If these cost is lesser than the price of product may fixed at lower rate and vise-versa.
2. The Utility and Demand: The buyer may be ready to pay up to the point where the utility from the
product is at least equal to the sacrifice made in terms of the price paid. On the other hand,
consumers made purchase according to the law of demand as more units at a low price than at a
high price. However, on inelastic demand, the firm in a position to fix at higher prices.
3. Extent of Competition in the Market: Competitors prices and their anticipated reactions must be
considered before fixing the price of a product. Not only the price but the quality and the features of
the competitive products must be examined carefully, before fixing the price.
4. Government and Legal Regulations: The products which are necessary to made available for all
the people, government can regulate the upper price limit for products by declaring as such products
are essential commodity.
5. Pricing Objectives: First of all the objectives of fixing the price of product should be kept in mind.
Introduction of a new product, maximization of sales, obtaining market share leadership,
maximization of profits, surviving in a competitive market, attaining product quality leadership are
the main objectives of setting the price of product. Whatsoever the objective, will affect the price of
product i.e. if firm decides to maximize profits in the short run, it would tend to charge maximum
price for its products but if it is to maximize its total profits in the long run, it would opt for a lower
per unit price so that it can capture larger share of the market and earn greater profits through
increased sales.
6. Marketing Methods Used: Marketing methods which have been used by marketer is also
important factor for pricing product i.e. distribution system, quality of salesmen employed, quality
& amount of advertising, sales promotion efforts, the type of packaging, product differentiation,
credit facility and customers services etc. For example, if a firm provides free home delivery, it has
some flexibility in fixing prices.
(42) “Generally consumers prefer to buy goods directly from the producers but it is not always possible.”
Give reasons why it is so, by explaining four different factors responsible for this.
Ans.:Generally consumers prefer to buy goods directly from the producers but it is not always possible.
The different reasons responsible for this are as follows:

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 Nature of buyers: If number of buyer is large then it is better to take the service of middlemen for the
distribution of goods and vice-versa.
Types of buyers: If more buyers of the product belong to general category then there can be more
middlemen and vice-versa.
Buying quantity: It is useful for the manufacturers to rely on the services of the middlemen if goods
are bought in small quantity and vice-versa.
Cost: A manufacturer would select such channel of distribution which has less cost and also useful
from other angles.
Size of market: If the market area of the firm is scattered fairly then producer must take the help of
middlemen.
(43) State any four functions of Packaging.
Ans.: Packaging is the act of designing and producing the package for a product. A package is a
wrapper or container in which product is enclosed, encased or sealed. Packaging reduces the risks of
spoilage, breakage, leakage, etc. in the process of storage and transportation of goods. Packaging is
important not only for protection of the products but also serves as a promotional tool.
Following are the important functions of packaging:
(a) Protection of goods: Packaging protects the goods from adverse weather, insects, breakage in
handling etc.
(b) Identification of goods: Packaging helps to identifying the product. For example – Sanchi milk can
be easily identified from other branded milk.
(c) Convenience in handling and storage: Products can be moved from one place to another with the
help of appropriate packaging even storing also become safe and convenient.
(d) Utility of packaging material: Sometimes even the packing itself become useful. For example –
plastic bottles of pepsi are used for storage of some other liquid items.
(e) Selling small quantity becomes easy: selling in rural India has become possible due to packaging
in small pouches. Now a day’s shampoo, toilet soap, tea and many other products are being sold in
small packaging.
(44) Identify and explain the promotional tool of marketing mix which plays a persuasive, service and
informative role and thereby links a business firm to its customers. Also explain by giving any four
reasons how this tool helps in increasing the sales of businessmen.
Ans.: Personal Selling plays a persuasive service and informative role and thereby link a business firm
to its customers. Personal selling helps in increasing the sales of businessmen as under:
(a) By highlighting the qualities of a product a salesmen persuade the customer to buy the product.
(b) Salesmanship consists of writing buyer’s confidence for the seller’s house and goods, thereby
wining a regular and permanent customer which ultimately leads to increased sales.
(c) Salesman works as ‘eyes’ and ‘ears’ of the manufacturer and help them in improving their product
or sales policies by bringing to their suggestions, impressions and complaints of the consumers.
(d) He enables the producer to adapt himself to the particular needs of consumer. He makes exchange
of consumer; he opens new market and overcome obstacles to trade.
(45) Mansi, a shoe manufacturing for school students, decided to maximize her profit by producing and
distributing at large scale and thereby reducing the average cost of production.
(i) Identify the marketing management philosophy adopted by Mansi.
(ii) Explain this philosophy on the basis of
(a) Main Focus
(b) Means and Ends
Ans.:(i) Production Concept. As per this concept the consumers favour those products which are
widely available at an affordable price. This availability and affordability of the product is considered
as key to success under the production concept. This belief profit can be maximized by reducing the
production cost.

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(ii) (a) Production concept suggest to give main focus on quantity of product. (b) It means Availability
and Affordability of product; and the cost ends with earning of profit through large volume of
production.

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 CONSUMER PROTECTION
Content mapping:-
Concept and importance of consumer protection.
Consumer protection Act 1986:
Meaning of consumer and consumer protection.
Rights and responsibilities of consumers
Who can file a complaint against whom?
Redressal machinery. Remedies available.
Consumer awareness- Role of consumer
organizations and Non-Governmental Organizations
(NGOs).
Q.1.Briefly explain any three rights of consumer available under the Consumer Protection Act 1986.
Ans.: The rights provided under Consumer Protection Act, 1986 for protection of consumers are as
follows:
1. Right to Safety:
This is the right to be protected against the marketing of goods which are hazardous to health or life.
Certain goods like electrical goods and pressure cookers can cause injury, if there is any manufacturing
defect. Consumers have the right to be protected against any such danger.
2. Right to be informed:
Consumers have right to be given the facts they need to make an informed choice. Therefore, the
manufacturer should give all information regarding the quality, price, date of manufacture, precaution for
use, etc. either on the package or separately on a piece of paper.
3. Right to choose:
This is the right to be assured, wherever possible, of access to a variety of products and services at
competitive prices. The manufacturers should give the consumer the chance to choose from alternative
products. A consumer should not be forced to buy a particular product.
4. Right to be heard:
In case a consumer has been exploited or has complaint against the product or service, he has the right to be
heard and assured that his / her interest would receive due consideration.
5. Right to seek redressal :
This is the right to get relief against unfair trade practices and exploitation. When consumers are cheated or
exploited they have a right to get their claims settled against the manufacturer. A number of consumer
courts and agencies have been setup specifically for this purpose.
6. Right to consumer education:
A consumer can protect himself against various malpractices when he knows his rights and remedies
available to him. Therefore, he has the right to be educated about the rights and remedies available to him.
Q2-Explain any three responsibilities of consumers to safeguard their interests.
Ans.:The consumers should keep a few things in mind while purchasing product or services or any things.
1. Do not buy in hurry: The consumers should make an estimate of the things they want to buy well in
time. They should think about the things they want to buy along with their quality required by them.
They also take in consideration the place from where to buy their things.
2. Do not buy blindly: The consumers should make full use of their reason while buying things. They
should not take the seller’s words as the final truth.
3. Beware of false advertisement: The seller’s inform the consumers about their things through the
medium of advertisement. The sellers exaggerate the qualities of their goods through advertisement.
Therefore it is the responsibilities of consumers to recognize the truth of the advertisement.

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4. Buy only ISI and Agmark goods: It is the responsibility of consumers only buys goods with the ISI or
Agmark printed on them. Both these symbols are indicative of the good quality of the goods.
5. Do not compromise on quality: Consumers should not buy inferior stuff out of greed for less prices.
6. Do not forget to get receipt & guarantee/warranty card: Consumers should always get a receipt or
bill for the things purchased. In case a guarantee/warrantee card is also offered by seller, it should also
be taken. These documents will be of great help in setting all kinds of disputes with the seller.
7. Approach immediately the officer concerned in case of complaint: It is the responsibility of the
consumers to approach the officer concerned in case there is some complaint about the goods
purchased. A late compliant may find that the period of guarantee/warrantee has lapsed.
Q3-Mohit filed a case against ‘Domestic Coolings Ltd.’ in the ‘District Forum’, but he was not satisfied
with the order of the District Forum. Where can he appeal further against the decisions of District Forum?
(01 mark Delhi)
Ans.: Mohit can appeal further to the State Commission against the decisions of District Forum.
Q4- Amrit field a case against ‘Volvo Ltd.’ in the State Commission. But he was not satisfied with the
order of the State Commission. Name the authority to which he can appeal against the decisions of State
Commission. (01 mark AI)
Ans.: Amrit can appeal further to the National Commission against the decisions of State Commission.
Q5-Why consumer protection is important for a businessman? Give any one reason. (01 mark)
Ans.: Consumer protection gives consumer satisfaction which in turn increases the reputation, sales &
profitability of the business.
Q6-Why should a consumer look for ISI mark on electrical goods? (01 mark)
Ans.: ISI mark on electrical goods assures the consumer about the good quality and safety standard of
the product.
Q7-Reena purchased one litre of pure Deshi Ghee from a shopkeeper. After using it she had a doubt that it
is adulterated. She sent it for a laboratory test which confirmed that the Ghee is adulterated. State any six
reliefs available to Reena, if her complaints and the consumer court are satisfied about the genuineness of
the complaint. (06 marks)
Ans.: Reliefs available to Reena, if she complaints and the consumer court is satisfied about the
genuineness of the complaint, consumer court can issue one or more of the following directions to the
opposite party to give relief to Reena:
(a) To remove the defect in the one litre of pure Deshi pure Ghee.
(b) To replace the defective one litre of pure Deshi pure Ghee with new one.
(c) To refund the price paid for one litre of Deshi pure Ghee.
(d) To pay a reasonable amount of compensation for any loss or injury suffered by the Reena.
(e) To withdraw the hazardous/unhealthy Deshi pure Ghee from sale.
(f) To cease manufacture of such unhealthy goods at the factory place.
Q8-Prakhar purchased an ISI mark electric iron form ‘Bharat Electricals’. While using he found that it
was not working properly. He approached the seller and complained for the same. The seller satisfies
Prakhar by saying that he will ask the manufacturer to replace this iron. The manufacturer refused to
replace and Bharat Electricals decided to file a complaint in the consumer court.
Can ‘Bharat Electricals’ do this? Why? Also explain ‘who is a consumer’ as per Consumer Protection
Act, 1986.
Ans.: No. Bharat Ltd cannot file a complaint in consumer court. Because, as per Consumer Protection
Act, 1986; Bharat Ltd is not a consumer.
Definition of Consumer: Under Consumer Protection Act, 1986 consumer means –
(a) One who buys goods or hires services for consideration
(b) Any user of such goods with the approval of the buyer and beneficiary of services which is availed
of with the approval of one who hires the services; and
(c) Anyone who uses goods bought or services hired exclusively for earning livelihood become self
employment.
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 Therefore, Prakhar has the right to set defective electric press repaired or he can return it and set his
money back. He can claim for damages as he has incurred some loss due the defective electric press.
Q9- Discuss Various remedies available to the consumers for redressing their grievances under the
consumer protection Act 1986.
Ans. (a) District forum: According to consumer protection Act state government can set up
one or more district forum in each district.
1) District forum hears disputes involving a sum up to Rs. 20 Lacs.
2) It can file appeal against it with the state commission within 30 days.
(b) State commission:
1) State commission redresses grievances involving a sum exceeds Rs. 20 lacs and up to Rs. 1
crore.
2)It can file an appeal before the national commission within 30 days.
(c) National commission :
1) It is appointed by the Central Government
2) It has the jurisdiction to hear complaints involving a sum exceeding Rs. 1 crore.
3) It can file an appeal with the Supreme Court within 30 days
Q10-Discuss the role of Consumer Organizations and Non-Government Organizations (NGO’s)
Ans.
1. Education Consumers
2. Collecting data on different products and Testing them
3. Filing suit on belief if consumers
4. Helping Educational institutions
5. Promoting network of consumer association.
6. Extending support to Government
NGOs : Non-Government Organizations are those organizations which aim at promoting the welfare
of the people with non-profit concept. They are taking up various aspects of consumer exploitation.
Q.11 Q.10 WHOM AGAINST A COMPLAINT CAN BE FILED?
Ans; 1. The seller, manufacturer or dealer of goods which are defective.
„Defect‟ means any fault, imperfection or shortcoming in the Quality, quantity or purity of goods.
2. The provider of services if they are deficient in any manner.
„Deficiency‟ means any imperfection, shortcoming or Inadequacy in the quality, nature and manner
of performance of Services.

VALUE BASED QUESTION

Q.1 Ananya is a pure vegetarian. She went to a snacks bar and asked for “Veg. French Fries”. Later
on, she found that it had some non-vegetarian content. Neither the advertisement, nor
packing of the product showed that it may have non-vegetarian content. Identify the values
missing here in this context.
Ans. The manufacturer is not honest. So the value missing here is “Honesty”.
The right to information is violated.

Q.2 A pharmaceutical company is marketing its medicines in India which were banned in some
other countries due to their side effects. The company did not mention this information
anywhere. Identify the values missing.
Ans. I) Right to information is violated
II) Consumer protection is ignored.
III) The company is not following uniform practices in all the countries.
IV) India should have stringent laws to punish such companies.

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Q.3 Mr. X is a sweet maker (Halwai), who collects milk from village to village and prepares sweet on
Deepawali, due to increased demands, he purchased khoya from other shopkeeper which was adult
rated, because it was not possible to meet the demand from collected milk. For meeting the demand
quickly he has not maintained cleanliness while preparation of sweets. He kept two children for
packing the sweet and one female at cash counter. Which social values he is affecting and how?
Ans: i) Use of adulterated khoya will spoil the health of consumer.
ii) Child labour is a crime.
iii) Spreading diseases due to non consideration of cleanliness
iv) By employing females equal opportunities to females
Q.4 A company engaged in selling spice, claims about purity in its advertisement but in laboratories
after examination, the spices were found adult rated. Which values are being violated here?
Ans: i) Harmful for health
ii) Adulteration is violation of law
iii) False information to consumers.
Q.5 A Pharmacy Co. doesn’t provide information for the expiry date on the packet of his drug. This
manufacture violates which value?
Ans: i) Endangering the lives
ii) Violation of law
iii) False information to consumers
Q.6 A manufacture of food products uses bad quality material for packing the product resulting in
spoiling goods the reaching the consumers. Which value is being ignored here?
Ans: i) Deterioration of quality of products.
ii) Reduction in quantity of the products
iii) Bad effects on health of consumers
Q.7 A toy manufacturing co. uses low quality plastics and harmful colors which affects the health the
children. Which value is being ignored here?
Ans: i) Bad effects on the health of children
ii) Polluting the environment
iii) Violation of rules/regulations
Q.8 Mohan purchased a press for Rs.1000/-. On using it he found it defective. The seller did not respond
to the complaint. In your view what should be done by seller as well as Mohan?
Ans: i) The sellers should get the iron of Mohan repaired.
ii) Rights of Mohan should not be violated
iii) Mohan should file complaint to the company against the seller.
iv) If not heard than Mohan should move to consumer court.
Q.9 A patient didn’t read carefully the instructions on the pack of the drug. On using it his health
deteriorated further instead of improvement. If you are in his place than what you would do?
Ans: i) To read the instructions and Information carefully.
ii) To consult the chemist / doctor.

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