Chapter 1-Nature and Significance of Management: Meaning

AVB ACADEMY
CHAPTER 1- NATURE AND SIGNIFICANCE OF MANAGEMENT
 MEANING: - Management is an art of getting things done through others in order

to achieve organisational goals effectively and efficiently.
Management is dependent on Efficiency and Effectiveness.
 EFFICIENCY: - It refers to completion of of work with minimum cost.
 EFFECTIVENESS:- It refers to completion of work on time.
 DIFFERENCE BETWEEN EFFICIENCY AND EFFECTIVENESS:-
BASIS OF
EFFECTIVENESS EFFICIENCY
DIFFERENCE
MAIN
Time Cost
CONSIDERATION
It refers to completion of It refers to completion of
MEANING
task on time task with minimum of cost
 FEATURES OF MANAGEMENT:-
a) Goal Oriented:- Management is required only when there is goal and manager on the
basis of his knowledge try to achieve these goals.
b) Management is Pervaisve:- Management is universal in nature. It is used in all types

of organizations whether economic, social or political irrespective of its size, nature
and location and at each and every levelbecause anything minus management is zero.
c) Management is Intangible:- Management is Intangible i.e. it cannot be seen or

touched only the presence of management can be felt and judged through the profits
of the organisation and employee satisfaction.
d) Management is a group activity:- It is a group activity since it involves managing

and coordinating activities of different people as a team to attain the desired
objectives of the organization
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e) Management is Continuous:- Management is a never ending process because plans
are always revised and made after achieving the objective.
f) Maanagement is Multidimensional:-
Management of work:- In this what is to be done is decided so that there is less
wastage of resources.
Management of People:- In this by whom it is to be done is decided inorder to
remove duplicacy of work.
Management of operations:- In this how it is to be done is decided so that task can be
accomplished efficiently.
g) Dynamic function : It is a dynamic function since it has to adapt according to need,
time and situation of the changing business environment. For example, McDonalds
made major changes in its ‘Menu’ to survive in the Indian market.
 OBJECTIVES OF MANAGEMENT:-
 ORGANIZATIONAL OBJECTIVES:
Organizational Objectives can be divided into Survival (Earning enough revenues to
cover cost); Profit (To cover cost and risk); and Growth (To improve its future
prospects).
a) Survival:- Management by taking positive decisions with regard to different

business activities ensures survival of business for long term.
b) Profit:- It plays an important role in facing business risks and successful running
of business activities.
c) Growth:-Management must ensure growth which can be measured by increase in

sales, number of employees, number of products, additional investment, etc.
 SOCIAL OBJECTIVES:
Social objectives is to provide some benefits to society like applying environmental

friendly practices in the production process and giving employment to disadvantaged
sections of society, etc. Example: TISCO, ITC, and Asian Paints.
 PERSONAL OBJECTIVES:
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Personal Objectives is to focus on diverse personal objectives of people working in

the organization which need to be reconciled with organizational objectives. like
good working conditions, financial security and peer recognition.
 LEVELS OF MANAGEMENT
 TOP LEVEL:-
 Consists of:-
Chairperson, Chief Executive Officer, Chief Operating Officer or equivalent and
their team. Managing director, general manager, BOD.
 Functions:-
a) Framing the objectives of the organisation.
b) Formulation of plan and policies for the organisation.
c) Allocation of resources among the other levels.
 MIDDLE LEVEL:-
 Consists of:-
Divisional or Departmental heads, Plant Superintendents and Operation Managers
etc.
 Functions:-
a) Planning – Day to day planning.
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b) Interpretation of policies made by the top level.
c) Establish coordination among various department.
d) Provide motivation to the employees.
 LOWER LEVEL:-
 Consists of:-
Foremen, supervisor and inspector etc.
 Functions:-
a) Day to day operational planning.
b) Providing suitable work environment to workers.
c) Ensuring the performance of workers according to standard.
d) Forwarding the suggestion / complaints to middle level management.
 IMPORTANCE OF MANAGEMENT:-
a) Helps in achieving the goals:- It is needless to say that management is a goal oriented
activity and to achieve the goals proper management and proper direction should be
given to the subordinates.
b) Increase efficiency:- Manager increase efficiency by utilising the resources such as

man, material and machineetc. in an optimum manner.
c) Creates a dynamic organisation :- Every organisation works in a dynamic

environment and to face that changes management is required
d) Helps in achieving personal objectives:- Management helps the individuals achieve

their personal goals while working towards organizational objectives.
e) Helps in development of society:- Management helps in the development of society

by producing good quality products, creating employment opportunities and
adopting new technologies.
 NATURE OF MANAGEMENT:-
 MANAGEMENT AS A SCIENCE:-

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 MEANING OF SCIENCE:- It refers to systematic body of knowledge based on
observation and experimentation and establishes cause and effect relation.It refers to
systematised body of knowledge that explains certain general truths.
 FEATURES OF SCIENCE:-
a) Systematic body of knowledge:- Science is a systematised body of knowledge

gathered after a lot of observation and experimentation.Management is also a
systematised body of knowledge as its principles and theory are developed by year of
research.
b) Based on experimentation:- The principle of science are based on experiemnatation

and observation management principles are also developed after collection of facts
analysis and experiements.
c) Universal Applicability:- The principle of science are rigid and have universal
applicability. The principle of management have universal applicability but its
principle are not rigid. The The management has to deal with human beings and
human beings behaviour is flexible due to which principle of management have to be
modified from person to person and according to situation.
 CONCLUSION:- So we can conclude that management is not a pure science or a

perfect science rather it is a social science it has to deal with human.
 MANAGEMENT IS AN ART:-
 MEANING OF ART:- It refers to practical application of the existing knowledge

skillfully.
 FEATURES OF ART:-
a) Existence of theoratical knowledge:- In every art there is systematic and organised

study material to acquire theoratical knowledge. In management also there is
existence of systematic lnowledge which help in managerial studies so this fetaure of
art is present in management also.
b) Personalised Application:- In art not only theoritical knowledge but its practical
application is also required and it depends on skill and ability of the person. In
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management all manager learn the principles but their efficiency depends on how
will they use that under different situation . So management also satisfies this feature
of art.
c) Based on Practice and Creativity:- The artist require regular practice of art to become
more fine and perfect without practice he looses his perfection. In management also
managers gains efficiency and creativity as they work under different situations. So
management satisifies this feature also.
 CONCLUSION:- On comparing the features of art with management we can

conclude that management is an art.
 MANAGEMENT AS A PROFESSION:-
 MEANING OF PROFESSION:- It is an occupation backed by specialised

knowledge, training, degree and have restricted entry.
 FEATURES OF PROFESSION:-
a) Well defined body of knowledge:- In every profession there is a well defined body of
knoweledge which helps the professional to gain specialisation. In management also
there are large number of books available on management studies which are analysed
by scholars to develop new principal and techniques. This feature is present in
management.
b) Restricted entry:- The entry to a prfession is restricted through an examination or

degree. In management there is no restriction on entry as any one can become a
manager irrespective of educational qualification. So presently this feature of
profession is not presented in management but very soon it will be available.
c) Existence of code of conduct:- In every profession there are code of conduct fixed by
professional organisation and are binding on all the profession.In management there
is growing emphasis on code of conduct of the managers AIMA ( All India
Management Association ) is trying to have code of conduct so at present this feature
of profession is not present in the management.
d) Presence of Professional Association:- For every profession there are professional

association and every professional has to get himself registered with his assoication

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before practising that profession. In case of Management there are various
association but it is not compuslory for a manager to get himself registered. So at
present this feature of profession is not present in management.
 CONCLUSION:- On comparing the features of profession with management we

can conclude that management is not a full – bodied profession but very soon it will
be a profession.
 COORDINATION:-
 MEANING:- Coordination means bringing together the activities and resources of

organisation and bringing harmony in them. Coordination is the force which
synchronizes all the functions of management and activities of different departments
 FEATURES OF COORDINATION:-
a) Integrate group efforts:- It integrates group efforts by giving a common focus to

group efforts to ensure the performance according to the plans.
b) Unity of action:- Coordination ensures that all department work together and create a
balance in all the department. It act as a binding force in all the department.
c) Continuous process:- Coordination is a never ending process. Manager works

continuously to achieve coordination because without coordination company cannot
function efficiently.
d) Pervaisve:- Coordination is a universal function it is required at all levels in all the

departments and perform all the function.
e) Deliberate function:- Every manager tries to coordinate activities of organisation to

avoid confusion and chaos.
f) Coordination is the responsibility of all managers:- It is equally important at all the
three-top, middle and lower levels of management. Thus it is the responsibility of all
managers that they make efforts to establish coordination.
 IMPORTANCE OF COORDINATION:-

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a) Size of the organisation:- The need of coordination increases with the increase in size
of the organisation because in large organisation a lot of people are working from
different background and have their own need and objective which needs to be
harmonised with the objective of organisation.
b) Functional Differentiation:- The function of organisation are divided into different

department and each department work for its own objective but the requirement is to
harmonise the activities of all the department to achieve the common goals.
c) Specialisation:- In today’s organisation there is a high degree of specialisation and

the specialist feel they are the only qualified person and all of them work seprarately.
Due to which it will lead to confusion. So there is a need to coordinate the activities
of all the specialist and achieve the common goal.
 COORDINATION IS THE ESSENCE OF MANAGEMENT:-
 Need to perform all the function of management:-
a) Planning:- In planning coordination is required between main plan and supportive

plan of different departments in order to achieve organisational objective.
b) Organising:- In organising coordination is required between resources and authority

and responsibility and accountability.
c) Staffing:- In staffing coordination is required between skill of person & job assigned
to him.
d) Directing:- In directing there must be coordination between superior and subordinate.
e) Controlling:- Coordination is required between standards and actual performance.
 At all levels:-
a) Top level:- To integrate all the activities of organisation towards common interest.
b) Middle level:- Between different departments so that they work as a part of one
organisation.
c) Lower level:- To integrate activities of workers to achieve organisational goals.

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 FUNCTIONS OF MANAGEMENT:-
a) Planning:- Thinking in advance what to do, when to do, and who is going to do it. It
bridges the gap between where we are and where we want to reach.
b) Organising:- organization means deciding the framework of working how many

units and sub-units are needed,how many posts are needed, how to distribute the
authority and responsibilities.
c) Staffing:- It refers to recruitment, selection, training, development and appointment

of the employees.
d) Directing:- It refers to guiding, instructing, inspiring and motivating the employees.
e) Controlling:- Controlling is monitoring the actual performance towards the

attainment of the organizational goals.

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CHAPTER 2 -PRINCIPLES OF MANAGEMENT
 MEANING: - These are broad and general guidelines for decision making and
behaviour of the managers.
 PRINCIPLE OF MANAGEMENT V/S PRINCIPLE OF PURE SCIENCE: -

Principle of mangement are Principle of science are rigid and
flexibleand cannot be tested in the can be tested.
laboratory.
 PRINCIPLE V/S VALUES: -
a) Values are something which are acceptable and desirable and are related with morals
where as principles are basic truth for behaviour.
b) Values are formed through common practice where as principle are formed after
research.
 FEATURES OF PRINCIPLE OF MANAGEMENT:-
a) General Guidelines: - The management principle are general guidelines to all

managerial problems this is because real business situation are dynamic.
b) Flexible: - Management principle are flexible as it can be modified according to

given situation.
c) contingent: - The application of the management principle is dependent on the

particular situation prevailing at a point of time.
d) Formed by Practice and experimentation: - Management principle are not developed

overnight rather they are formed after lot of practice, experimentation and
observation.
e) Pervasive or universal applicability: - It means that management principle are

applicable to all type of organisation and at all the level.
f) Mainly Behavioural:- Since the principles aim at influencing complex human

behaviour they are behavioural in nature.
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g) Cause and Effect relationship:- They intend to establish relationship between cause

& effect so that they can be used in similar situations.
 IMPORTANCE OF PRINCIPLE OF MANAGEMENT:-
a) Provide managers with useful insight into reality:- Management principles act as a
guidelines for manager and improves knowledge, ability and understanding of
managers under various situation and guide manager to take right decision at right
time.
b) Optimum utilisation of resources:- The management principles are based on planned

activities of man and material. Principle are designed to get maximum benefit from
efforts.
c) Meeting dynamic environment: - Every businessman has to make changes in the

organisation according to the environment and management principles help the
manager in implementing those changes effectively.
d) Scientific Decisions: - Managers have to take number of decisions every day for that
they need to access the available resources very carefully for taking appropriate
decision.
e) Management training, education and research:- Management principles are helpful in

identifying the areas in which existing and future managers should be trained. They
also provide the basis for future research.
f) Fulfilling social responsibility:- Principles of management not only help in achieving

organizational goals but also guide managers in performing social responsibilities.
Example : “Equity” and “Fair” remuneration.
 FAYOL PRINCIPLES OF MANAGEMENT (About Henry Fayol: Henry Fayol

(1841-1925) got degree in Mining Engineering and joined French Mining Company
in 1860 as an Engineer. He rose to the position of Managing Director in 1988. When
the company was on the verge of bankruptcy. He accepted the challenge and by
using rich and broad administrative experience, he turned the fortune of the
company. For his contributions, he is well known as the “Father of General
Management”. known as the father of management studies and thought). Fayol has
given 14 principles:-
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1. Divison Of Work: - According to this principle whole work is divided into smaller
task and each task is assigned to the workers according to their capability and
qualification. When one person will repeat the same task again and again he will gain
specialisation. For eg. in a furniture company the task of table can be divided like
wood cutting by one person, finishing by another person. It will help in achieving
specialisation .
 Positive effect:
Optimum utilisation of resources.
Benefits of specialisation.
No duplicacy of work.
 Violating effect:
Vice versa of positive effect.
2. Unity of command: - According to this principle a subordinbnate should receive

orders from his immediate boss. Because if he receives orders from more than one
boss he will get confused and will not be able to understand that whose order must
be executed first. For eg. An employee receives orders from production manager
regarding quality and at the same time from the sales manager regarding the task of
sales he will get confused and cannot perform his job efficiently.
No confusion i.e no chaos.
Effectiveness in the working.
No Ego clashes.
3. Unity Of Direction: - According to this principle the effort of all the members and
employees of organisation must be directed towards one direction i.e. common goal.
This principle help in coordination. For eg. If an organisation is providing different
lines of products like cosmetics, medicines etc. then each division must have its own
plan and employment of that division to achieve their own task.
Achievement of common goal of coordination
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4. Authority And Responsibility: - According to this principle there must be balance

between authority and responsibility. Authority means power to take decisions and
responsibility means obligation to complete the job on time. Excess authority may
lead to negative result and excess responsibility will not allow the worker to
complete his task. For Example – If a person is given responsibility to produce 100
units but has no authority to purchase the raw material he cannot perform his job.
No misuse of authority.
Help in meeting responsibility on time.
5. Disciplne: - Disciplne refer to general rule and regulation for systematic working. It
also means developing commitments in the employees towards organisation. Fayol
insisted that discipline is required at superior as well as subordinate level. For
Example – The employee must meet their commitments on time towards
organisation.
Systematic working in the organisation.
No confussion and disorders.
Improves efficiency.
6. Subordination Of Individual Interest To General Interest: - According to this

principle the general interest will prevail over the individual interest in case if the
individual objective are different from the group objective then manager will try to
reconcile their objectiove. For Example – If individual objective is to earn more
salary and organisation is going through financial crisis in this situation the
individual must sacrifice its interest towards organisation.

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Achievement of organisational goal.
Coordination between individual and group objective.
 Negative effect:
7. Remuneration Of Person: - According to this principle employees should be given

that much of remuneration so that they can fullfill their basic need because if the
employees are satisifed they will work more efficiently. The wage should be given
according to financial capacity of the company by keeping in mind the minimum
wage act of the government.
Motivation to employees.
Employees put more effort toward the work.
Increase in turnover of employees.
8. Centralisation And De - Centralisation: - Centralisation means the power in few

hands at the top level. Decentralisation means evenly distribution of power at every
level of management. According to Foyal there must be a balance between
centralisation and de – centralisation. For eq. The major decision, objective, paln
should be centralised where as routine work should be decentralised.
Fast decision at middle and lower level.
Strict control by the Top level.
 Negative (Violating) effect:

Complete decentralisation leads to misuse of authority. Complete centralisation leads
to delay in work.
9. Scalar Chain (Chain Of Aurthority): - It means line of authority or chain of superior

from highest to lowest rank. Fayol insist that this chain must be followed strictly and
if some important information has to be passed. Fayol, permitted a shortcut in the
chain known as Gang Plank.

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systematic flow of information.
No communication gap.
Easy to find responsibility.
10. Principle Of Order: - It refers orderly arrangement of men and material. Fayol,
insist there must be a fix place to keep every material and fixed place or seat should
be given to every employee so that no time and energy is wasted in search for them.
No wastage of time.
smooth and systematic working.
11. Stability Of Tennure Of Personnel: - According to this principle the management

must provide the feeling of job security among the employees because with the
feeling of insecurity for job they cannot contribute their maximum and this is not
also good for the organisation. According to Fayol employee should be master of all
things and not jack of all things. Frequent transfers may hit the productivity of the
workers.
Improves efficiency level of employees.
No wastage of time and resources.
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12. Principle Of Equity: - Equity refers to kind, fair and just treatment to employee.
Employees will put their best only when they are treated with kindness and justice. It
means application of rules irrespective of position and gender. There should not be
any discrimination on the basis of caste, colour, religion and gender.
Employees get satisfied.
Motivate the employees.
Healthy relation between superior and subordinate.
13. Initiative: - Foyal suggested that employee in the organisation must be given an
opportunity to take some initative in the making and execution of plan. Suggestion
from the employee should be welcome as it gives a lot of satisfaction to employee.
Motivation to employee.
Feeling of beloningness in the employees.
14. Espitirt De Corps: - It means unity is strength. Fayol insisted on the team work he
suggested that “ I” should be replaced with “WE”. Each and every employee in the
organisation must understand his part and contribute toward achivement of goals.
Develop team spirit.
Achivement of group goals.

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 PRINCIPLE OF FW TAYLOR:- (Fredrick Winslow Taylor (1856-1915) was a
person who within a very short duration (1878-1884) rose from ranks of an ordinary
apprentice to chief engineer in Midvale Steel Company, U.S.A. Taylor conducted a
number of experiments and came to conclusion that workers were producing much
less than the targeted standard task.)
1. Science, not rule of thumb:- According to this principle taylor insists that each job
performed in the organisation should be based on scientific inquiry and not on
intutions and hit and miss method. He says that there must be thinking before doing
which is not in the case of rule and thumb.
2. Harmony, Not Discord:- According to this principle those who work together in an
organisation must work in the harmony i.e with mutual understanding and give and
take. In this principle taylor insists that there is a need for both the groups
(management and workers) to change their attitude for each other and that is known
as Mental Revolution.
3. Cooperation, Not Individualism:- This principle is an extension of all the above

principle. According to this principle work must be carried on co-operation with each
other . To have the cooperation management should welcome good suggestion of
employee and they should be rewarded for suggestion.
4. Development of workers to their greatest efficiency and prosperity:- Taylor insisted

that due care should be taken while selecting the employees and after selecting they
must be given job according to their qualification. Employee must be sent for
training from time to time to update their knowledge. This will ensure greatest
efficiency and prosperity for both company and workers.
 TECHNIQUES OF FW TAYLOR:
1. Fatigue Study:- This technique is conducted to find out the frequency of rest interval
and duration of rest interval and number of rest interval. A person will get tired if he
will perform a job for a long period of time. Frequency and duration of the rest
interval is fixed by observing the workers.
2. Method Study:- It is conducted to find out the one best method of doing a particular
job in orders to keep the cost minimum and to make optimum utilisation of
resources.

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3. Time Study:- It is conducted to determine standard time for completing a job. Taylor
suggested that time required to perform job should decide scientifically. If a worker
complete the job before this time then he is efficient otherwise he is inefficient.
4. Motion Study:- The motion study is conducted to To determine the movement of the
worker when they are performing the job. For writing down wasteful motion to
minimise the unproductive movement of the worker.To conduct motion study Taylor
has suggested to observe the worker when he is performing the job and note down all
the movement he is doing and after that makes the strategy to cut down the
unproductive motion.
5. Differential Piece Wage System:- This technique emphasis on

Paying different rate of usage to efficient and inefficient workers.
Extra wages paid to efficient employees will motivate them and motivate inefficient
employees to become efficient employee.
when payment is given according to the number of the units produced production
will maximise.
For example: Standard task is 10 units. Rates are: Rs 50 per unit for producing 10
units or more and Rs 40 per unit for producing less than 10 units
Worker A produces 11 Units; he gets Rs 550 (11 units x 50 per unit)
Worker B produces 09 units; he gets Rs 360 (9 units x 40 per unit)
This difference of Rs 190 will motivate B to perform better.
6. Standardisation And Simplification Of Work:- standardisation does not only means

quality standard but it refers to setting up standard for men, machine, size, type and
weight etc. Simplification refers to eliminating superfluous varieties of product or
service. It results in savings of cost of labour, machines and tools. It leads to fuller
utilization of equipment and increase in turnover.
7. Functional Foremanship:- In this technique taylor suggested the division of factory in

two departments.

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Planning Production
Route clerk:- Determining the route Gang boss:- Arrange material, machine
through which the raw material will and tools for the job.
pass
Instruction card clerk:- Lays down the Speed boss:- maintain the speed of
instruction according to which workers production and remove unnecessary
perform their job. delays.
Time and cost clerk:-Set the time and Repair boss:- Keeps the machine in
cost for doing a particular job. running condition by greasing, oiling,
repairing etc.
Disciplinarian:- Maintain discipline Inspector:- Inspects whether the work is
done as per the standard of quality laid
down.
 FAYOL VS TAYLOR:-
Basis Fayol Taylor

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He developed the theory of
Nature of He developed the concept of
Functional management or
Research Scientific management.
Management process.
His principle and techniques are

His principles are concerned with
Concern concerned with workers
management efficiency.
efficiency.
He designed principles for top He designed principles for lower

Level
level of management. level of management.
Improving overall administration For him increasing productivity

Focus by observing certain principles through work simplification was
was his main focus. main focus.
He was rigid in his approach and

Rigidity and
His principles were flexible. he felt that there should be no
flexibility
deviation from fixed standards.
His principles are applicable to His principles are applicable to
business as well as non-business production and manufacturing
Applicability
organizations i.e. are applicable i.e. are applicable to specific
universally. situations.
He did not follow this principle
Unity of He strictly follow this principles
instead he insisted on minimum
command i.e. one boss for one employee.
eight bosses.

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CHAPTER 3 - BUSINESS ENVIORNMENT
 MEANING:- It refers all the forces which are external to a business beyond its
control and effect the working of business enterprise.
 FEATURES:-
a) External forces:- Business environment is a sum total of all forces external to

business firms.
b) Dynamic Nature:- It is dynamic as it keeps on changing in terms of technological

improvements, change in fashion etc.
c) Uncertain:- It is uncertain as it is very difficult to predict the future happenings

especially when environment changes too frequently.
d) Relatively Subjective:- It is a relative concept as it differs from country to country

and even region to region.
e) Interrelated:- Elements of business environment are closely interrelated. For eg.

People can purchase quality goods which will improve their quality of life (Social
environment) because their incomes are rising (economic environment).
f) Complexity:- Business environment is complex which is easy to understand in parts

separately but it is difficult to understand in totality.
g) Specific and general forces:- Business environment includes both specific and
general forces. Specific forces include investors, competitors, customers etc. who
influence business firm directly while general forces include social, political,
economic, legal and technological conditions which affect a business firm indirectly.
 IMPORTANCE OF BUSINESS ENVIRONMENT:-
a) Identify opportunities and first more advantage:- Opportunities refer to positive

changes that will help to improve the firms performance. Early identification of
opportunities help the firm to take the first mover advantage. For eg. Maruti udyog.

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b) Identify threats and early warning signals:- Threats refer to negative changes that
will effect the firms performance. Environmental awareness help the manager to
identify threats on time and take the corrective actions immediately.
c) Improves efficiency:- The firms which continuously monitor their environment and
develop suitable courses of action improve their present as well as future
performance.
d) Tapping / Gathering useful resources:- Firm assembles various resources called

inputs from its environment like raw material machine etc. and supplies its output
such as goods and services for the customer.
e) Helps in plannings and policy formulation:- since business environment provides the
firm opportunities and threats which can be the basis for planning and policy
formulation.
 DIMENSIONS / ELEMENTS / COMPONENTS OF BUSINESS

ENVIRONMENT:-
a) Economic environment:- It consist of inflation rate, interest rate, value of rupee,

stock market money change in disposable income of the people. Example:- Rise in
GDP leads to increase in disposable income of the people due to which demand
increases.
b) Social Environment:- It includes social trends values, life expactancy, customs and
tradition birth and death rates, consumption habits etc. Example:- (a) Social
environment present various threats and opportunitites like the health and fitness has
created opportunitites for product like diet soft drinks and at the same time created
threats for tobacco company.(b) Values refer to the concept that a society holds in
high esteem. For example:- Social justice, free dom etc.
c) Political Environment:- It include political condition like stability, peace, attitude of

elected government towards business, extent of government interferance. Example:-
Government provides subsidy in the production of cotton garments. It will have
positive impact on cotton textile business.
d) Legal Environment:- It includes legislation pass by the government. For eg.

Consumer Protection Act, Trademark Act etc. court judgements, adminstrative

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orders issued by government authoritites. Every enterprise has to obey these laws
otherwise they can face many legal problems.
e) Technologoical environment:- It refers to change taking place in the methods of

production. It includes scientific improvement and innovation. For eg. Carbon copies
replaced by xerox machines.
 IMPACT OF GOVERNMENT POLICY CHANGES ON BUSINESS

INDUSTRY:-
a) Increasing competition:- Due to abolition of licensing requirement and entry of

MNC's competition for firms has increased.
b) More demanding customers:- Customers have become more demanding as increased

competition in the market gives the wider choice in goods and services.
c) Market Orientation:- Earlier firms use to produce first and then go to the market for
sale later but now firms have to study the customer needs and wants and produce
goods accordingly.
d) Changes in technological environment:- Increased competition forces the business

firms to develop new techniques to survive and grow in the market.
e) Developing human resources:- The new market conditions require people with
higher competition and commitment.
 LPG :-
a) Internal environment:- It refers to all those factors which influence business and
present within the business itself and are under the control of business.
b) External environment:- It refers to those factors which influence business, exist

outside the business and business has no control over these factors.
c) Liberalisation:- It means removal of unncessary controls and restrictions on business.

It means end of quota raj.
d) Privatisation:- It means giving a greater role to private sector in national building

process and a reduced role to public sector.
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e) Globalisation:- It means integrating the economy with rest of the world for the
smooth flow of goods and services across the borders.
 WHAT IS DEMONETIZATION?
Demonetization is a process of stripping a currency unit of its status as a legal tender.

In simple words, when the Government demonetized the 500 and 1000 rupees notes,
they were no longer valid as legal currency. Usually, a new currency replaces the old
currency unit/s.
 POSSIBLE BENEFITS OF DEMONETIZATION:-
a) Increased Savings:- When currency is demonetized, people tend to deposit their cash
with a bank and store less physical currency at home. This helps them save more.
b) Lower lending rates:- With currency demonetization, money moves from people to
banks and financial institutions. Therefore, there is a better circulation of money.
Further, banks and financial institutions have a lower cost of funds which translates
into lower lending rates.
c) Better economy:- Since demonetization induces people to deposit their cash with the
banks, there is a higher circulation of money in the economy. The government
receives more taxes and can undertake more development projects. Eventually, this
leads to a better-performing economy.
d) Curbing anti-social activities:- Usually, anti-social elements like smugglers or

terrorists use cash as a mode of transaction. When the government decided to
demonetize 500 and 1000 rupees notes, they were the highest denomination notes in
circulation. By demonetizing them, the government forced these anti-social units to
find ways to get rid of the old notes. This allowed the government an opportunity to
get a better control over the unaccounted money in the economy and curb anti-social
activities.

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CHAPTER 4 -PLANNING
 MEANING:- It is deciding in advance what is to be done, when it is to be done, how
it is to be done and by whom it is to be done. It bridges the gap between where we
are and where we want to go.
 FEATURES OF PLANNING:-
a) Focus on achieving the objectives:- Planning starts with determination of objectives.

After setting the objective plans and procedure are developed to achieve those
objectives.
b) Primary function of Management:- Planning is performed by every manager at every

level. Every manager is required to plan before performing any other function.
c) Planning is Pervasive (Every where):- Planning is present and is required at every

level of management and in all the departments. The only difference is the nature and
extent of planning. For eg. top management plans about investment decision where
as middle management plans about working capital decision.
d) It is continuous:- It is a never ending process because planning is done for future and
future is uncertain therefore it needs to be updated all the time.
e) It is Futuristic:- Planning always looks ahead as it bridges the gap between where we
are and where we want to go. Planning is done on some prediction and assumption
which are made on the basis of past.
f) It is mental exercise:- It is a mental process which requires high thinking skills. In

planning forecasting is to be done on the basis of assumption which require high
mental exercise.
g) It involves decision making:- Decision making involves searching for various

alternatives, evaluating those alternatives and then selecting the best one therefore
planning involves decision making.
 IMPORTANCE OF PLANNING:-

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a) It provides direction:- As planning is concerned with future. It decides in advance
what is to be done, by whom it is to be done and who is to do it which makes the
path clean. Therefore planning provides direction.
b) Reduces the risk of uncertainities:- In today's time environment is changing very fast
due to which lot of uncertainities arises. Therefore planning is done to reduce the risk
of uncertainity.
c) Helps in optimum utilisation of resources:- Plans are made for every level of
management and awareness be coordination and awareness about the plan. If plans
are shown to everyone duplicacy of work is avoided and resources can be used
optimisely.
d) It promotes innovative ideas:- Planning requires high thinking and it is an intellectual

process. There are lot of ways for doing the same thing and manager has to decide
which way is better one. It promotes innovative ideas.
e) It helps in controlling:- In planning standards are set and in controlling actual

performances are measured against these standards therefore it is rightly said that
controlling is blind without Planning.
f) It involves decision making:- Decision making involves searching for various

alternatives evaluating those alternatives and then selecting the best one therefore
planning involves decision making.
 PROCESS OF PLANNING:-
There are seven steps in the process of planning.
a) Setting Objectives:- Objective are end points towards which the activities of an
organisation are directed. Therefore the first step in the planning process is to set the
objectives as the way to reach that point becomes clear. For eg. company sets an
objective of 100 crore profit.
b) Developing Premises:- As planning is done for future and future is uncertain

therefore certain assumption and prediction are drawn to forecast accurately.
c) Identifying alternative courses of action:- After setting the objective and developing
premises, the next step is to identify various courses of action. For eg. the objective
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of the company is profit maximisation. There are two ways of achieving this
objective: 1st sales maximisation. 2nd increase in prices.
d) Evaluating alternative courses:- After identifying various courses of action

evaluation is to be done of every course on the basis of its merits and demerits.
e) Selecting the best alternative:- After evaluating, the best plan is selected which is
dynamic and best suited for the organisation.
f) Implementation:- After selecting the plan, it needs to be implemented and everyone

must be aware about the plans.
g) Follow - up:- After implementing the plans. It must be checked whether everyone is
doing every thing according to the plans or not. It is done to find out deviations and
to correct them.
 TYPES OF PLAN:-
 STANDING PALNS:-
a) These are used again and again whenever a particular situation arises.
b) These plans are updated whenever requires.
c) Prepared by Top management.
d) Also known as multi used plans or repeated use plans.
 Types of Standing Plans:-
 Objectives:-
a) It refers to the end points towards which all business activities are directed.
b) Prepared by Top level management.
c) Objectives can be quantitative as well as qualitative.
 Strategy:-
a) It is a comprehensive plan to achieve objectives.
b) It includes adopting a particular course of action, allocation of resources etc.
c) Prepared by Top level management.
d) It is dynamic as it depends on ever changing business environment.
e) It provides guidelines for thinking and action.( broad contours)

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 Policies:-
a) It is general statement that channelizes energy towards a particular direction.
b) Policies are derived from objectives.
c) They are formulated by all the level of managers.
d) Policies do not have time dimension.
e) They are prepared to avoid confusions and provide a simplified frame work for
other plans.
f) Eg. A company policy is not to employee any person who is less than 18 years of
age.
 Procedure:-
a) It is chronological sequence of various steps to be taken in order to complete a
task in efficient manner.
b) It reduces wasteful motion and unnecessary steps.
c) These are rigid and cannot be changed.
d) There can be different procedures like Procdure for processing and order,
recruitment of employees etc.
 Methods:-
a) It can be defined as a systematic way of doing a routine jobs.
b) It should be clear and Precise ( to the point ).
c) For eg. There are different methods for valuing stock like FIFO (First In First
Out), LIFO (Last In First Out).
d) These are flexible statements.
 Rules:-
a) It specifies what is to be done, what not to be done.
b) Rules are rigid and the person who will break these rules will be penalised. For
eg. No smoking in the company.
 SINGLE USE PLANS:-

a) These are formulated to accomplish a specific objective.
b) These are prepared for handling non recurring situations.
c) They are prepared by middle management and lower level of amanagement.
d) These plans are also known as Specific Plans.
 Budget:-
a) It is a statement of expected results expressed in numerical terms.
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b) These act as standards for measuring actual performances.
c) Budget can be various types Cash Budget, Sales Budget etc.
d) It also act as controlling device.
 Programme:-
a) It is a combination of objectives, Policies, Procedures, Rules which are designed
to get a systematic working.
b) It provides a step by step approach to guide the action.
c) It can be of different types like training program, sale promotion program etc.
 LIMITATION OF PLANNING:-
a) Leads to Rigidity:- As planning decide in advance what is to be done, when it is to

be done and by whom it is to be done. It creates rigidity as this is very difficult to
change these plans.
b) May not work in Dynamic Environment:- Planning can be successful for internal
environment in organisation but real test of planning is when it has to cope with the
external environment which keeps on changing everytime.
c) It reduces creativity:- Planning involves determination of policies, procedure etc. in

advance which is to be strictly followed by employees whether these are wrong. It
reduces the creativity of employees.
d) It involves huge cost:- It is an expensive process as it involves a lot of expenditure

on gathering and analaysis of information and evaluation of various alternatives. Due
to this limitation, a firm with shortage of fund can’t frame plan.
e) Time Consuming:- As the planning process is very lengthy, starting with setting the
objectives followed by gathering and evaluation of alternatives and then following it
up. It becomes hectic and time consuming.
f) Planning doesn’t generate success:- Planning may create a flase sense of security in
the organisation. As future is uncertain and it can’t be predicted with 100%
guarantee. The past is the past and you cannot predict the future on the past therefore
planning doesn’t guarantee success.

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CHAPTER 5 - ORGANISING
 MEANING:- It refers to identifying and grouping different activities in the
organisation and bringing together human and non human resources to achieve
organisational goals.
 ORGANISING PROCESS:-
a) Identification and division of work:- The first step in the organising process is to
identify the work to be perofrmed and then dividing it in a systematic manner so that
every person get work and perform to the best of his ability. It helps is avoiding
duplicacy of work and promotes specialisation
b) Departmentalisation:- It refers to the process of grouping together the activities of

similar nature under one department. It can be done on the basis of function,
products, customers etc.
c) Assignment of duties:- After departmentalisation the next step is assigning of duties

to different employees. It should be done on the basis of knowledge, experience and
qulaification of the individual. For eg. Manager should be assigned duties relating to
purchase of raw material.
d) Establishing reporting relationship:- In this step the authority and resposnsibility

should be defined related to the job. There is a need to create superior subordinate
relationship as it helps in creating coordination among various departments.
 IMPORTANCE OF ORGANISING:-
a) Benefit ofSpecialisation:- It provides the benefit of specialisation as work is divided

into smaller task and each task is assigned to the worker according to their ability
which is performed by them again and again.
b) Clarity in working relationship:- In organising authority relationship are established

to create superior subordinate relationship. It is done to avoid conflicts and
confusion.

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c) Optimum utilisation of resources:- In organising duties are assigned on the basis of
knowledge, experience and qualification. It helps in avoiding duplicacy of work and
in the optimum utilisation of resources.
d) Development of Personnel:- Organising helps in developing the perosnnel according

to the best of their availability by delegation of authorities, responsibilities and
decentralisation of work. It promotes sense of responsibility among subordinates and
help in developing future managers.
e) Adaption to change:- An organisation is working in a dynamic environment which

creates opportunities and challenges for an organisation. Therefore organising helps
organisation to change itself according to environment in order to survive and grow.
f) Effective administration:- Organising leads to effective administration by providing a

clear description of jobs and related duties which helps to avoid confusions and
duplication.
 ORGANISATION STRUCTURE
 Meaning:- It is a network of job position authority and responsibility at different

levels. It is the framework within which mangers have to perform their tasks.
 Span of management/control:- It refers to the number of subordinates that can be

effectively managed by a superior.
 TYPES OF ORGANISATION STRUCTURE
 FUNCTIONAL STRUCTURE:- It refers to dividing the organisation on the basis

of the function performed by the departments. For eg. There are various departments
like purchase department, sales department, marketing department etc performing
their respective function.
 SUITABILITY:-
Single Product.
Large scale organisation.
High degree of specialisation is required.
 MERITS:-
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a) Specialisation:- When the job of similar nature regrouped into departments and each
department has to perform the work on regular basis then it promotes specialisation.
b) Easy supervision:- The supervisor can easily supervise and guide all the employees
who are performing the task because all the tasks are related to one function only.
c) Effective Training:- It makes the training of the employees more effective as they are
trained in the limited skills only.
d) Economical:- It leads to minimal duplication of efforts and leads to economies of

scale thereby reducing cost.
 DEMERITS:-
a) Ignores Organisational goal:- Every department in organisation want to achieve their

own target and forget the objective of the whole organisation.
b) Difficult to fix the accountability:- It is not easy to fix the accountability in

functional structure as each and every department blames the other for non
completion of task.
c) Inflexible:- As the employees get training in limited skills. They do not have the
knowledge about the other departments due to which rigidity arises.
d) Lack of coordination:- When the department becomes too large it is very difficult to
develop coordination and it leads to delay in decision.
 DIVISONAL STRUCTURE:- When the activity related to one product are grouped
under one department is called divisioanl organisation structure.
 SUITABILITY:-
More than one product.
Large scale.
Aim is to diversify.
 MERITS:-

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a) Product Specialisation:- All activities related to one product are grouped under one
department which brings integration, coordination and specialisation.
b) Fast decision making:- There is no dependence of one department on another for

decisions due to which decisions are taken quickly.
c) Accountability:- In this it is easy to fix accountability of one division as all the

decisions as independent for the non achievement of the objective.
d) Expansion and growth:- New divisions can be added without disturbing the existing
divisions.
 DEMERITS:-
a) Duplicacy of work:- As all the divisions performing the same work related to
purchase, sales, finance etc. which leads to duplicacy of the work.
b) Costly:- This type of structure is very costly because more employees need to be
hired and more operating cost need to be incurred.
c) Ignoring organisational goals:- Every department in organisation want to achieve

their own target and forget the objective of the whole organisation.
 TYPES OF ORGANISATIONS:-
 FORMAL ORGANISATION:- It refers to a structure of jobs and positions with

clearly defined authority responsibility and accountability.
 FEATURES :-
a) It is deliberately created by the Top management to achieve objectives.
b) It is stable due to its well defined structure.
c) It is created to facilitate smooth functioning of organisation.
d) In this ARA relationships are cleared.
 MERITS:-
a) Fixation of responsibility:- It is easy to fix responsibility as mutual relationships are

clearly defined.

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b) Unity of command:- There is unity of command as formal organisation make use of

official channels of communication.
c) Achieving objectives:- It is established to achieve organisational objectives in an

efficient manner.
d) Provides stability:- The well defined structure and policies and rules provides
stability to the organisation.
 INFORMAL ORGANISATION:- It is a network of perosnal and social

relationships not established by the management but arising spontaneously as people
associate with each other.
 FEATURES:-
a) It is not created deliberatley by the management.
b) It is formed by the employees as to get phycological satisfaction.
c) Does not follow fix bath of authority and communication.
 MERITS:-
a) Fast decision making:- As there is no prescibed channel of communication. Informal

organisation leads to fast spread of information and quick feedback.
b) Fullfill social needs of the employees:- It satisfied the social needs of memebers
which give them sense of belongingness and communication.
c) Correct feedback:- Through informal structure the mangement can know the real
feedback of the employees as employees do not hesitate in communication. Therfore
it complement the formal organisation.
d) More emphasis on individual interest:- Informal organisation gives more importance

gives more importance to individual needs and the organisational interest.
 DEMERITS:-
a) Spread rumours:- Informal organisation structure spread rumours which may mislead
the employees and work against the interest of the formal organisation.

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b) No systematic working:- As there is no prescribed channel and not having clear

reporting relationship due to which there is no system of working.
c) Not easy to fix the responsibility:- No fix path of authority and responsibility – No
unity of command.
 DIFFERENCE BETWEEN FORMAL AND INFORMAL ORGANISATION:-
BASIS OF FORMAL INFORMAL

DIFFERENCE ORGANISATION ORGANISATION
It occurs due to interaction
Deliberatley created by
MEANING of employees with each
Top level management.
other.
NATURE Rigid Flexible.
No fixed path of
FLOW OF Fixed route i.e Scalar
communication flow in any
COMMUNICATION chain
direction.
Arises by virtue of By virtue of personal
ORIGIN
position in management. qualities.
Created to serve Created by employees to

PURPOSE
organisational interest. fulfill their social needs.
LEADERSHIP Leader are managers. Leaders are choosen.
 DELEGATION OF AUTHORITY ( MULTIPLIED BY 2 ):-
 MEANING:- It refers to the process of sharing of responsibility between superior

and his subordinate.
 PRINCIPLES OF DELEGATION:-

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a) There must be a balance between authority and responsibility:- Authoity should be
granted according to responsibility. If authoity is more, person may misuse the
power and if responsibility is more it makes the person inefficient.
b) The authority granted to subordinate can be taken back and redeligated to another
person.
c) Delegation does not mean abdication:- The manager shall be accountable for the
performance of assigned task. He cannot escape from the responsibility for any
default on the part of his subordinate. This is known as principle of absoluteness of
authority.
 ELEMENTS OF DELEGATION:-
 Authority:-
a) It refers to the power granted to an individual to perform the assigned task.
b) It flows from top to bottom.
c) It arises from the Formal organisation i.e scalar chain.
d) It can be delegated.
 Responsibility:-
a) It refers to the obligation of a subordinate to perform the task properly.
b) It flows upwards.
c) It arises from superior subordinate relationship.
d) It cannot be entirely delegated.
 Accountability:-
a) It refers to the answerability for the final outcome of the assigned task.
b) It flows upward.
c) It arises from responsibility.
d) It cannot be delegated.
 IMPORTANCE OF DELEGATION:-
a) Effective Management:- In delegation process manager passes the routine work to

their subordinates and can concentrate upon their important matters. It leads to
effective management of task.

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b) Employee development:- As a result of delegation employees get more chance to use
their talent and develop skill to perform difficult task. It helps in the development of
employees as future manager.
c) Motivation of employees:- Where manager share his responsibility with its

subordinate. It motivates the employees to perform the best of their ability.
d) Better coordination:- Three elements of delegation i.e. ARA helps to define power,
duties and answerability related to various jobs. It avoids duplicacy of work and
promotes coordination.
e) Facilitate growth:- In the process of delegation manager passess responsibility and

authority keeping in mind the ability of subordinate. By doing this he get benefit of
specialisation and facilitates organisational growth.
f) Basis of management hirarchy:- Deligation establishes subordinate relationships

which become the basis for developing management hirarchy.
 DECENTRALISATION ( MULTIPLIED BY MANY ):-
 MEANING:- It is a process of increasing the importance of subordinate in an

organisation. It is a distribution of authorities by top management between middle
and lower level.
 IMPORTANCE OF DECENTRALISATION:-
a) Develop future talent.
b) Facilitate growth.
c) Relief to top management.
d) Motivate employees.
e) Quick decision making:- In decentralisation the routine jobs are transferred to

subordinates so that the functioning do not stop. The subordinates can take the
decision on their own and do not wait for top level management.

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f) Better Control:- Decentralisation makes it possible to exercise control by evaluating
the performance of each and every manager. Manager can be held accountable for
their results.
 DIFFERENCE BETWEEN DELIGATION AND DECENTRALISATION:-
BASIS DELIGATION DECENTRALISATION
MEANING Done Done
NATURE Necessary Optional

As a result of division of As a result of policy of
STATUS/ORIGIN
work. management.
To reduce the work of To enhance the capacity
PURPOSE/OBJECTIVE
superior of subordinate.
Authority, Responsibility
ELEMENTS No such elements
and Accountability

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CHAPTER 6 - STAFFING
 MEANING:- Putting right person on the right job i.e. it is a process of recruitment,
selection and development of human resources. It is concerned with obtaining
utilising and maintaining a satisfactory workforce.
 IMPORTANCE:-
a) Filling jobs with competent personnel:- As staffing involves putting the right person
on the right job through proper recruitment and selection process. It helps in
discovering competent personnel for various jobs.
b) Better performance:- Since performance of the organisation depends upon the quality
of persons employed. Staffing ensures high performance by putting right person on
the right job.
c) Survival and growth:- By appointing efficient staff. Staffing ensures continuous

survival growth of an organisation. As orgainsation grow with effort of its
employees.
d) Optimum utilisation of human resources:- Proper man power and planning

recruitment and selection enables an organisation to acquire competent personnel
which facilitates optimum use of human resources.
e) Key to other function:- No other function of management can be performed without

human beings and the problem of human being is solved by staffing.
 PROCESS OF STAFFING:-
1. Estimating the manpower requirement:- The first step of staffing process is to

estimate the future needs of man power. It aims to determine number and type of
employees required. It involves two kinds analysis.
Wrok load analysis:- Determine the number and type of employees required.
Work force analysis:- Number and type of employees available with the
organisation.

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2. Recruitment:- It refers to a process of searching for prospective employees and
encouraging them to apply for the job. It is a positive process. It can be done through
external and internal sources.
 SOURCES OF RECRUITMENT:-
 INTERNAL SOURCE:- It refer to making use of existing staff to fill the vacant
jobs. There are two internal sources:-
a) Promotion:- It refers to movement of employee from lower level to higher level

position carrying higher responsibilities and pays. It is vertical shifting of
employees. It helps to improve the motivation and satisfaction level of
employees.
b) Transfer:- It refers to shifting of an employee from one job to another, one

department to another department without any change in responsibilities and
status. It is horizontal movement of employees. It is done to train the employees
for different jobs
 MERITS OF INTERNAL SOURCES:-
a) Higher motivation level:- Promoted employees are motivated to improve their

performance. It also motivates other to improve their efficiency.
b) Economical:- The process is cheaper as the existing employees are offered the
job.
c) No over or under staffing:- Transfer helps to shift surplus work force to

departments with shortage of staff.
d) No orientation:- There is no need of orientation as all the employees are already

familiar with the staff.
 DEMERITS OF INTERNAL SOURCES:-
a) Not suitable for new organisation:- Internal sources are not suitable for new
enterprises.

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b) Limited choice:- The choice under this method is limited as choice is to be made
from the few candidated available within the organisation.
c) Lack of competition:- It reduces the spirit of competition among the employees as

there is no introduction of fresh talent.
d) Low productivity:- The overall productivity of the enterprises reduces due to

frequent tranfer.
 EXTERNAL SOURCES:- It refers to searching for employees from the sources

outside the organisation. There are various external sources:-
a) Placement agencies:- In this services of placement agencies are used for selecting
the best candidate. They provide a nation wide services in matching personnel
demand and supply. This method is used for filling the middle and higher level
positions.
b) Campus recruitment:- In this method organisation conducts interviews in

campuses of various institutes, universities and colleges to search for suitable
candidates. For eq. IIT, IIM.
c) Recommendation of employees:- In this existing employees are encouraged to

recommend suitable persons among their friends and relative for employment.
d) Labour contractor:- Under this method intermediaries known as agent or labour

contractor are used for hiring worker they get some fees from the organisation for
their services.
e) Web Publishing:- Internet is becoming the most common source for recruitment
these days certain websites are speciality designed to provide information about
the job seekers and the job openings. For eg naukri.com
f) Drect recruitment:- In this notice is placed on the notice board of the enterprise
specifying the details of jobs available. Under this job seeker assembles outside
the organisation on the specified date. Selection is done on the spot. It is suitable
for unskilled or semi skilled jobs. The workers under this method are casual
workers badali workers.

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g) Casual callers:- Company generally received application form job seeker at
various point of time. Companies keep database of such applicants because
whenever vacancy arises such applicants are called.
h) Advertisements:- In this method Ad is given in newspaper, trade journals and

magazines along with full discription of job and its requirement. This method
provide range of candidate for selection.
i) Employment Exchange:- In this employment exchange is run by government are

use for filling unskilled and semi skilled jobs. Unemployed persons get
themselves registered with thses exchanges. It serve as link between job seekers
and employees
 MERITS OF EXTERNAL SOURCES:-
a) Qualified Personnel:- By using external source of recruitment the management

can attract qualified and trained people to apply for the vacant jobs in the
organization.
b) Wider Choice:- The management has a wider choice in selecting the people for
employment.
c) Fresh Talent:- It provides wider choice and brings new blood in the organization.
d) Competitive Spirit:- If a company taps external sources, the staff will have to
compete with the outsiders.
 DEMERITS OF EXTERNAL SOURCES OF RECRUITMENT:-
a) Dissatisfaction among existing employees:- Recruitment from outside may cause

dissatisfaction among the employees. They may feel that their chances of
promotion are reduced.
b) Costly process:- A lot of money has to be spent on advertisement therefore this is

costly process.
c) Lengthy Process:- It takes more time than internal sources of recruitment.

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3. Selection:- It is the choosing the best person out of theperson who have applied for
the jobs. It is a negative process. Applicant who have cleared all the hurdles of
selection process are offered the job.
 SELECTION PROCESS
a) Preliminary screening or short listing:- This step is taken by a manager to

eliminate the most unqualified and unsuitable candidates on the basis of
information provided through application forms. It helps in eliminating those
candidates who do not possess the requisite qualifications, age and experience.
b) Selection tests:- Selection tests aim at measuring certain characteristics of

individuals. Important tests are:
i. Intelligence tests:- Intelligence test aims at measuring the intelligence of an

individual.
ii. Aptitude test:- It measures the ability and potential of an individual to learn
new skills.
iii. Personality tests:- Value and belief system of the employee is judged. These
tests are very important and are difficult to be designed. It judges the
emotions and reaction of the candidate.
iv. Trade test:- This test judges the professional competence and job-related
knowledge of the candidates. It measures the existing skills of the
candidate.
v. Interest Tests:- Interest tests help in ascertaining the pattern of interests or

involvements of an individual.
c) Employment interview:- Interview is conducted to have a detailed conversation

with the applicant for measuring his suitability for the job. It is conducted to
check the communicatiob skills and personality of the candidate.
d) Reference and background checks:-More information about the candidate is

gathered from indirect personal sources like previous employers, teachers,
university professors, etc. Often employers ask for references with names,
addresses and contact numbers of people to verify information provided by the
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applicant. References help the employer to acquire more information about the
candidate.
e) Selection decision:- The employer then chooses the best candidates out of those
who clear the tests, interviews and reference checks.
f) Medical examination:- After selection a candidate undergoes a medical fitness

test.
g) Job Offer:- Appointment letter is given to the candidate confirming him the place
and date of starting his job. The candidate is expected to report on the mentioned
date.
h) Employment Contract:- This includes the terms and conditions applicable to both
—the employer as well as the employee. The contract includes detailed
information about remuneration, duty hours, rules and regulations, allowances,
etc.
4. Placement and orientation:- Placement refers to assigning the job to the condidates
i.e. giving them appointment letter. Orientation refers to introducing the new
employees to the organisation.
5. Training and Development:- It involves improving the job knowledge and

competence of employees to help them to perform various jobs effeciently. It not
only improves their present but improve their carreer.
 METHODS OF TRAINING:-
 ON THE JOB METHOD:- In this method training is given at the work place at the
time of actual working. This method is known by the name learning by doing.
a) Induction Training ( orientation):- It refers to the process of introducing the new

employees to other employees and telling them about the rules and regulation of
the organisation. The duration of induction training may be few hours or few
days. Such training may be given through lectures, films, shows etc. It increases
the efficiency of new employees.
b) Job rotation:- It refers to shifting of employees from one job to another job or
from one position to another position. It increases the knowledge of the
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employees and his experience. The example of this method is transfer, promotion
etc.
c) Apprenticeship:- Under this method, apprenticeship trainee work under the direct
supervision of experts who guide and help him in learning a job in this there is
specific period of learning. The example is electrician and plumber.
d) Internship Training:- In this method professional institute enter into arrangement

with big enterprises wherein there students are sent for training. This method is
used for providing theoritical knowledge as well as practical knowledge.
 OFF THE JOB METHOD:- In this method training is provided to the employees
away from the job.
a) Vestibule Training:- In this method training is given in a classroom where actual

work environment is created. This method is useful where employees are required
to handle expensive equipment.
 DIFFERENCE BETWEEN ON THE JOB AND OFF THE JOB:-
BASIS ON THE JOB OFF THE JOB
MEANING Done Done
PRINCIPLEADOPTED Learning while doing. Learning before doing.

Away from the work
PLACE OF TRAINING Work place.
place.
Techincal jobs. Managerial jobs.( higher
SUITABILITY
( lower level) level
 DEVELOPMENT:-It refers to the overall growth of the employee.
 EDUCATION:-It is a process by which knowledge, training, understanding,

physical capability and mental outlook of the employees are improved to make them
dynamic.

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 DIFFERENCE BETWEEN TRAINING, DEVELOPMENT AND
EDUCATION:-
BASIS TRAINING DEVELOPMENT
MEANING Done Done
Enable the employee to do Overall growth of the

PURPOSE
the job better. mployees.
ORIENTATION Job oriented. Career oriented.
SCOPE Narrow. Broader.
 IMPORTANCE OF TRAINING AND DVELOPMENT:-
 TO THE ORGANISATION ( EMPLOYER):-
a) Reduces cost of production:- It teaches the worker to make most economical and
efficient use of resources which present the wastage of resources and reduces cost
of production.
b) Increase productivity:- Well trained employees gives better performances on the

job both in terms of quality and quantity.
c) Prepare future manager:- Training help the employees to take over challenging
job and prepare them to take position of future manager in the future.
d) Boast employees moral:- Training not only improve the performance of the
employee but also improves the overall attitude of the employees towards the job
and organisation.
 TO THE EMPLOYEES:-

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a) Career growth:- It helps employees to advance in their career by imparting new
improved knowledge and skills.
b) Increase earnings:- It helps the employees to perform the better due to which
worker can get higher wages and bonus.
c) Safety of employees:- The trained worker used the equipment and machines safe
due to which the chances of accident are very less.
d) High morale:- Training not only improve the performance of the employee but
also improves the overall attitude of the employees towards the job and
organisation.
6. Performance Appraisal:- It refers to the systematic evaluation of employees

performance against predetermined standards. It is done to make promotion and
transfers etc.
7. Compensation:- It refers to price of jobs. It includes salary, rewards and other

incentives given to employees. It includes direct as well as indirect payments. Direct
payments are of two types:-
Time Base:- Salary, wages paid on weekly and monthly basis.
Performance Based:- Payment on the basis of units produced.
 STAFFING AS A PART OF HRM:- HRM may be defined as the core of

borrowing, developing and maintaining competent work force to achieve organised
goals in an efficient manner.Staffing as a line as well as staff activity. Staffing as a
function of every manager.
Staffing is pervasive i.e. it is performed by all the manager at all the levels. However
the scope of staffing is different in small and large organisation.
 In small orgainsation:- Peroformed by all the manager
 In large orgainsation:- Peroformed by separate department i.e. HRD.
 EVALUATION OF HRM:-
a) Labour relation officer:- In todays time, there are trade unions and these union felt a
need of mediator between the worker and the owner. It gives birth to labour relation
officer.
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b) Personnel Manager:- With the introduction of factory more of employees are

employed under one roof due to which the need of manageris felt who can recruit
and select the employees and the manager is Personnel manager.
c) HRM:- Increase in the scope of work and fast changing environment leads to the
replacement of Personnel manager with HRM.

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CHAPTER 7- DIRECTING
 MEANING: Directing means giving instructions, guiding, counseling, motivating
and leading the staff in an organization in doing work to achieve Organizational
goals. Directing is a key managerial function to be performed by the manager along
with planning, organizing staffing and controlling.
 CHARACTERISTICS OF DIRECTING:-
a) Pervasive Function:- Directing is reguired at all levels of organization. Every

manager provides guidance and inspiration to his subordinates.
b) Continuous Activity:- Directing is a continuous activity as it continuous throughout

the life of organization.
c) Human Factor:- Directing function is related to subordinates and therefore it is

related to human factor. Since human factor is complex and behaviour is
unpredictable, direction function becomes important.
d) Creative Activity:- Directing function helps in converting plans into performance.

Without this function, people become inactive and physical resources are
meaningless.
e) Executive Function:- Directing function is carried out by all managers and

executives at all levels throughout the working of an enterprise, a subordinate
receives instructions from his superior only.
 IMPORTANCE OF DIRECTING:-
a) Initiates Action:- It helps to initiate action by the people in the organization towards
attainment of desired objectives. The employees start working only when they get
instructions and directions from their superiors. It is the directing function which
starts actual work to convert plans into results.
b) Integrates Employee’s Efforts:- All the activities of the organization are interrelated
so it is necessary to coordinate all the activities. It integrates the activities of
subordinates by supervision, guidance and counselling.

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c) Means of motivation:- It motivates the subordinates to work efficiently and to
contribute their maximum efforts towards the achievement of organizational goals.
d) Facilitates change:- Employees often resist changes due to fear of adverse effects on
their employment and promotion. Directing facilitates adjustment in the organization
to cope with changes in the environment.
e) Stability and balance in the organization:- Managers while performing directing

function instruct, guide, supervise and inspire their subordinates in a manner that
they are able to strike a balance between individual and organizational interests.
 LEADERSHIP: -
 MEANING:- It is a ability of the superior to induce subordinates to work with

confidence and zeal.
 LEADERSHIP STYLES: -
 AUTHORITATIVE OR AUTOCRATIC:- It is a leadership style which is boss –

oriented. The power are in one hands. The boss gives the order to be followed by
subordinates. He takes decision without consulting the group members. The flow of
communication is one way.
MERITS DEMERITS
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a) Guide decision making a) Creates frustration and low morale
among workers.
b) Increases productivity of b) Not allow subordinates to after
workers. suggestions.
c) In meeting targets on time. c) No utilisation of creativity of
employees.
d) Suitable for unskilled
employees at lower level.
 DEMOCRATIVE OR PARTICIPANTS: In this decisions are taken by consulting

the group members. There is a two way communication . He ask people to do things
after proper discussion of a plan. His decisions are not unilateral. It is also known as
subordinate centerd style.
MERITS DEMERITS
a) Active participation by a) Delay in decision as it involves
employees ensures better consultation with subordinates.
decision making.
b) Increases confidence and b) It may not yield positive results if
morale of employees. subordinates not willing to
communicate.
c) Absenteeism and labour
turnover decreases.
 LASSIEZ FAIRS OR FREE RAIN:- In this the leader depends largely on the
group to establish its own goals and work out its own problem. In this all employees
are expert in their own field. This type of leadership is present in research labs etc.

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MERITS DEMERITS
a) Environment of freedom at a) Ignores the contribution of leader in
workplace. goals achievement.
b) Maximum scope for b) Fails to give proper guidance and
development of subordinates support to subordinates, incase of
need.
c) It is suitable where people are
highly educated and motivated.
 MOTIVATION:-
 MEANING:- Motivation refers to the set of forces inspiring a person to work for
achievement of certain objectives.
 Motive:- It is inner state that activates and directs behaviour towards goal.
 Motivator:- It is a technique used to motivate people. It can be financial as well as

non-financial.
 FEATURES OF MOTIVATION:-
a) Internal feeling:- The needs, desires which influence the human behaviour internally.
It varies from individual to individual. Motivation is a psychological concept which
lies within a person.
b) Produces gola oriented behaviour:- Motivation induces people to behave in such a

manner, that they can achieve their goals.
c) complex process:- All individuals have different expectations. Motivation is a

complex process as it varies from person to person. Some people are motivated by
money while some through status.
d) Positive or negative:- Positive motivation provides rewards like increase in pay,

Promotion etc. Negative motivation uses negative means like warning letters,
punishments etc.
 IMPORTANCE OF MOTIVATION:-
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a) Better utilisation of resources:- Motivated workers handles the machines carefully

which ensure proper utilisation of resources.
b) Reduced absenteeism and turnover:- Motivated workers have less numbers of

grievances against management. They are loyal to the organisation as a result
absenteeism reduces.
c) Reduction in resistance to change:- Motivated people accepts the changes very easily
without any resistance because they know if changes are not implemented the
organisation will not grow and employees will not be able to fulfill their needs.
d) Better work environment:- Motivation leads to better work environment as the

employees level of satisfaction increases and chances of conflicts with their superior
reduces.
e) Contributes to organisational goals:- Motivated people do the best for acheiving the
organisational goals with the achievement of organisational goals, they can also
achieve their personal goals.
f) Increased Efficeincy:- Motivation creates willingness on part of employees to work

for higher efficiency. Motivation is goal directed.
 HIERARCHY OF NEEDS - ABRAHAM MASLOW:-
 Maslow's need Hierarchy theory:- It refers to that theory of motivation which is

based on a hierarchy of five human needs.
 Assumption by Maslow:-
a) Peoples behaviour is influenced by their needs.
b) Needs arise in hierarchical order.
c) A satisfied need can no longer motivate the people.
d) A person moves to the next level needs only when his lower level needs are
satisfied.
 Five needs identified by maslow:-
a) Physiological needs:- These needs are for survival and maintenance of human life.
It includes food, clothing, shelter etc.
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b) Security or safety needs:- Everybody wants job security and protection against
dangers.
c) Affiliation or Belongingness needs:- Man is a social being therefore he needs

someone with whom he can exchange his feelings.
d) Ego or Esteem needs:- It includes self confidence, achievement status and

success. These are concerned with prestige and respect of individuals.
e) Self actualisation needs:- These are the needs of highest order. These are
concerned with achieving what a person considers to be his mission in life.
 INCENTIVES:- It is something which stimulates a person towards goal.
FINANCIAL NON – FINANCIAL

(i) Play and allowances:- A very crucial
financial incentive forcing employee is (i) Status:- It means the position. Higher
basic salary and allowances like dearness status means higher authority,
allaowance, House rent allowance. responsibility, prestige etc. For eg.
Salary scale varies from organisation to company car, furnished house etc.
another.
(ii) Productivity linked wages
(ii) Organisational Climate:- It includes
incentives:- Some companies linked
open communication, mutual trust,
wages with production. Higher
cooperation etc. Positive approach
production means higher wages and vice
creates better organisational climate.
– versa.
(iii) Bonuses:- It is customary to
(iii) Job Security:- Employees prefer job
distribute bonuses to employees every
security over higher wages or salary job
year. It is an amount which employee
which do not carry security.
receives over salary.
(iv) Job Enrichment:- It means an
(iv) Profit sharing:- In this the
attempt to increase one’s authority,
employees get a share in profit if the
responsibility, scope etc. It suggest that
profit exceeds the level fixed by
jobs are redisgned so that employee
management and employees jointly.
satisfaction increases by doing a job.

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(v) Co – Partnership / Stock option:- In (v) Career advancement opportunity:- If
this the employee are given shares at a employees are provided with opportunity
price less than the market price as a for their advancement and growth, they
reward for their services. feel much satisfied.
(vi) Recognition:- Appreciation satisfies
(vi) Perquisites:- In many companies
one’s esteem needs. Occassionally a pat
fringe benefits such as car, housing,
on the back of an employee, may help in
medical allowance are given over and
improving his performance in a great
above their salaries.
way.
(vii) Retirement benefits:- (vii) Employee Participation:-
It includes pension, gratuity etc. It Employees are allowed to participate in
satisfy the security needs of the the decision making process. It increases
employee. the loyalty of workers.
(viii) Employees empowerment:-

It means granting authority and
responsibility to subordinates.
(i) These are paid in money. (i) It doesn’t involves any money.
(ii) Helps in satisfying lower level needs. (ii) Higher level needs.
(iii) Effective in case of workers. (iii) effective in case of managers.

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(iv) Visible and measurable as expressed (iv) Not visible and measurable as can’t
in money terms. be expressed in terms of money.
 COMMUNICATION:-
 MEANING: - It refers to the process of exchanging facts, ideas, feelings between

sender and services. Communication is important for the directing function because
all other elements of directing become possible only when there is adeguate
communication.
 COMMUNICATION PROCESS OR ELEMENTS:-
a) Sender:- The one who sends his idea to another person.
b) Message:- Subject matter of communication i.e. what sender intends to say.
c) Encoding:- Converting message into symbols. For eg. words, gestures etc.
d) Media:- Face to face, Internet, Telephone, emails etc.
e) Receiver:- Person for whom the message is sent.
f) Decoding:- Understanding the symbols, gestures connectivity is called decoding.
g) Feedback:- It is a signal whether receiver has received the message and understood
by him or not.
 TYPES OF COMMUNICATION:-
FORMAL INFORMAL

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a) It refers to the interchanging of a) Interchanging of the information
information formally informally
b) Written as well as oral b) Quick feedback is available.
c) Established formal relations i.e. of c) Formation of social relations with

superior and subordinates employees
d) There is a prescribed path i.e d) No prescribed path

information will pass through a
definite channel.
e) Deliberately created by Top level. e) Communication is fast and
effective.
f) Maintains the dignity of the f) It follows more on human needs

superiors as a formal channel has and social needs.
to be followed.
g) Information is available on time g) There is unsystematic
and clear information is available. communication.
It is clear and effective.
h) Easy to fix the source i.e from h) It leads to spreading of rumours in
where the information has come. the organisation.
i) The route of communication is so i) Not possible to locate the source

big that it will lead to distortion of of information as there is no
information in between. prescribed path.
 BARRIERS TO EFFECTIVE COMMUNICATION:-
 SEMANTIC / LANGUAGE / LINGUISTIC BARRIERS:- These business are

related with the language used by the sender and how the receiver interprets it.
a) Badly expressed message:- This barrier is created because of wrong choice of

words, freguent repetitions or omission of needed words.

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b) Words with different meaning:- A symbol or word may have different meaning, if
the receives misunderstands the message, the message becomes meanningless.
For eg. Tata Docomo ' more '.
c) Faulty Translation:- Information received by subordinates has to be moulded by

him according to his own understanding. Little carelessness will make the
information ineffective. For eg. Tobo bata has all the best results.
d) Unclassified assumptions:- Sometimes sender takes it for granted that receiver

knows the basic information. So its enough to tell him about Major subject matter.
For eg. Teacher and students.
e) Technical Jargon:- Sometimes the vocabulary (Jargon used by the sender) is so

technical that it wont be possible for everyone to understand its clarity. Therefore
simple vocabulary should be used. For eg. "CHAK DE INDIA".
 PSYCHOLOGICAL BARRIERS / EMOTIONAL BARRIERS:- These barriers

are related with the mental stage of the sender as well as receiver.
a) Premature evaluation:- Sometimes the receiver tries to understand the meaning

before listening it properly which creates confussion.
b) Lack of attention:- when the reciever's mind is pre - occupied with some work,
he / she can't listen the message attentively.
c) Distrust:- For successfull communication, sender and receiver must trust each
other. If there is a lack of trust between them, the process will not be complete.
 ORGANISATIONAL BARRIERS:- Theses barriers are related with the

organisation stability, rules and policies etc.
a) Organisational Policies:- Sometimes organisational policies may lead to delay in

communication. For eg. everything has to be conveyed in written form which
creates delay.
b) Rules and regulations:- Sometimes rules becomes barriers due to which sender is
not able to send some of the message.

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c) Complex structure:- More the number of hierrarchy or level, greater will be the
complexity. It leads to delay in communication and information gets deviated
before it reaches.
 PERSONAL BARRIERS:-
a) Fear of challenge of authority:- Sometimes superior do not communicate in order

to secure their position as if they communicate there weaknesses will come out
and their position is in danger. For eg. movie = Gabbar is back.
b) Lack of confidence in subordinates (distrust).
c) Unwillingness to communicate:- Sometimes subordinates do not want to

communicate because they think if they will communicate it will effect them
directly.
d) Lack of Proper Incentive:- If the subordinates gives the suggestion but they won't
receive the incentives for it, they feel discouraged and in future they won't
communicate.
 MEASURES TO OVERCOME BARRIERS:-
a) Communicate according to the needs of receiver:- The sender should prepare the
message not according to his own needs, he should keep in mind the needs of the
receiver.
b) Clarity of ideas before communication:- The sender before conveying should be very
clear in his mind about what he wants to convey.
c) Be a good listener:- It is an essence of communication, both the sender and receiver

should be good listeners. Both should listen to each others point of view closely and
attentively.
d) Feedback:- The purpose of feedback is to ensure whether the receiver has understood
the meaning of message clearly or not. Proper methods of feedback should be used to
ensure effective communication.

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e) Be aware of language, tone and content:- The sender should take care of the words
and language which he should use before sending the message. Sender should
communicate what receiver wants to listen.

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CHAPTER 8 - CONTROLLING
 MEANING:- It refers to the comparison of actual performance with the standards in
order to find out deviatio0n anf then correcting the deviations. It ensures that
activities in an organisation are performed as per plans.
 CONTROLLING PROCESS:-
a) Setting performance standards:- The first step of controlling process is to set

standard against which the actual performances are measured. Standards can be set in
both qualitative as well as quantitative terms.
b) In quantitative terms standards are expressed in terms of cost to be incurred, revenue
to be earned etc. In qualitative term increasing goodwill and motivation of
employees.
c) Measurement of actual performance:- Once the standard are set the next step is to
measure actual performances. Performances should be measured in an unbiased
manner. It can be done using various technique like personnel observation, sample
checking and perfromance report etc. While measuring performances both
qualitative and quantitative standards should considered.
d) Comparison of actual with standards performance:- In this step, actual performaces

are compared with standard to find out the deviations. It must be noted that if actual
performances are equal to standards the process of controlling ends.
e) Analysing deviations:- After finding the deviation the next step is to analyse these
deviations. There are two methods to analyse the deviation:-
I. CPC (Critical Point Control):- In this the focus is only on the KRA ( Key result
areas ) which are critical to averall performance of an organisation.
II. MBE (Management by exception):- In this manager should give attention only
to unacceptable deviations. According to MBE the minor deviations should be
given less attention. It would conserve time and efforts which could be utilised
on important matters.
f) Taking corrective actions:- The final step is to take corrective action i.e to remove
the deviation so that these deviation do not occur in future. It involves modification
of plans and standards.

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 IMPORTANCE:-
a) Achieving organisational goals:- It is a goal orinted process. It determine whether

plans are being observed and suitable progress is made towards the objectives.
Through this activity every attempt is made to keep the things on the right track.
b) Judging accuracy of standards:- It helps the organisation to verify whether the

standards are accurate and achievable. A good controlling system helps in revising
standards according to the changing environment.
c) Efficient use of resources:- It helps to reduce wastage and spoilage of resources. It

aims to ensure that each activity is performed is according to the set standards.
d) Improving employees motivation:- Controlling helps in motivating the employees as

employees knows in advance the standards against which performance should be
measured.
e) Ensuring order and discipline:- An efficient controlling system create the atmosphere
of order and discipline in organisation by keeping a continuous check on employees
regarding activities like theft, fraud etc.
f) Coordination in Action:- It facilitates coordination between department and division

by providing the unity of Direction. It integrate activity of different departments
towards common goal.
 RELATIONSHIP BETWEEN PLANNING AND CONTROLLING:-

They are two sides of a coin and can’t be separated from each other.
a) Planning and controlling are interrelated and interdependent:-

Controlling is blind without Planning:- Controlling is always done on the basis of
planning because in controlling actuals are measured with standards. So planning is
essential to perform controlling.
Planning without controlling is useless:- Controlling helps to check the accuracy of
the plans and revisions of the plans. Therefore controlling is essential to make plans.
b) Planning is Prescriptive and Controlling is evaluative:- Planning is the prescriptive

process as it prescribes the most appropriate cause of action to be followed whereas
controlling is evaluating process which checks the performance with the planned
perfromance.
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c) Both are forward as well as Backward looking:- Planning is forward looking as

defines in advance, what is to be done, How it is to be done and when it is to be done
and Planning is backward looking as it is guided by the past experiences. Controlling
is backward looking as it compares actual performance with the standards set in past
and it is forward looking as it helps in planning for future.

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CHAPTER 9 - FINANCIAL MANAGEMENT
 MEANING:- Finanical management is an activity of business which is concerned
with obtaining the funds and their effective utilisation.
 OBJECTIVE:- The main objective of Financial Management is the Wealth

maximisation. It mean increase in the values of the investment made by
stakeholders.
Wealth maximisation:- Number of shares x current market price.

For eg. :- X has 100 shares of ABC ltd. of 100 each. After sometime the value of
share increased to Rs. 120.
Wealth increased = 100 x 20 = Rs. 200
 FINANCIAL PLANNING:-
 MEANING:- It refers to the determination of firm's financial objectives, financial

policies and financial procedures. It refers to the blueprint of firms financial
requirements.
 OBJECTIVES:-
a) Timely availability of funds:- The first objective of finanical planning is to ensure

that funds should be available in time for long term and short term purpose.
b) Avoid overcapitalisation and undercapitalisation:- Financial planning ensures that

there should be no overcapitalisation and undercapitalistion i.e funds should be
available on time and no less or no more funds, just the reguired amount of funds.
 IMPORTANCE:-
a) Helps in avoiding business shocks and surprises:- By estimating the future receipts
and payments, financial planning helps in avoiding business shocks and surprises.
b) Helps in coordination:- Financial planning helps in coordinating activities of sales,

purchase, finance etc.

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c) Helps in avoiding wastage of income:- In the absence of Finanical planning,
financial reserves can be wasted. For eg. without financial planning there can be
overcapitalisation or undercapitalisation, but financial planning can help in
overcoming the problems.
d) Financial controlling:- Financial planning helps in controlling the financial activities.

In this actual performances are compared with the standards (Budget) to find out
deviation, so met standards can be re - revised.
 INVESTMENT DECISIONS:-
 MEANING:- It refers to decisions which are concerned with investment of firms

funds in different assets. Assets can be of two types.
(a) fixed assets
(b) current Assets
 TYPES:-
a) Long term investment decisions:- These decision are concerned with investment of
funds in fixed assets. These decisions are known as capital budgeting decisions.
b) Short term investment decisions:- These decisions are concerned with investment of
funds in working capital. For eg. cash, stock, debtors etc.
Net WC = CA - CL
Gross WC = CA
 FACTORS INFECTING INVESTMENT DECISIONS:-

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a) Cash flaws of the project:- The amount needed for investment is known as cash
outflow and returns from the same investment is known as cash inflows. Both of
these to be analysed before finalising the decision.
b) Rate of return:- Firm should compare rate of return expected from different projects.
The project with higher return should be selected.
c) Investment criterias:- There may be many criteria while investing is long term assets
like funds involve, rate of interest, cash flow etc. for the purpose capital budgeting
techniques and decisions are taken.
 IMPORTANCE OF CAPITAL BUDGETING:-
a) Long-Term Goals:- For the growth & prosperity of the business, long-term goals are
very important for any organization. A wrong decision can be disastrous for the
long-term survival of the firm. Capital budgeting has its effect in a long time span. It
also affects companies future cost & growth.
b) Involvement Of A Large Number Of Funds:- Capital Investment requires a large

number of funds. As the companies have limited resources, the company has to make
a wise & correct investment decision. The wrong decision would harm the
sustainability of the business. The large investment includes the purchase of an asset,
rebuilding or replacing existing equipment.
c) Irreversible Decision:- These decisions are generally irreversible as it requires large

amounts of funds. It is difficult to find the market for that asset. The only way
remains with the company is to scrap the asset & incur heavy losses.
 FINANCING DECISIONS:-
 MEANING:- It deals with determination of source of finance, amount of funds

reguired, amount raised from each source of finance and cost of each source of
finance.
 SOURCE OF FINANCE:-
Owner fund:- Eguity share capital, Preference share capital, retained earning.
Borrowed funds:- Debentures, Bonds, Loans etc.

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 FACTORS AFFECTING FINANCIAL DECISIONS:-
a) Cost:- Cost of raising funds from different sources is different. For eg. Rate of
interest on debts, dividends to be paid on preference share capital etc. are in the form
of costs. A prudent financial manager will prefer the cheaper source of finance i.e
debt.
b) Risk:- Risk associated with different source of finance is different. Therefore debt
should be avoided as it is the most risky source of finance.
c) Flotation cost:- It refers to the cost involved in Issue of securities. For eg.
underwriting commission, retained earnings should be used as it doesn't involve any
flotation cost.
d) cash flow position:- If cash position of company is good then debt capital should be
used because interest and repayment can be made easily, owners funds should not be
used.
e) Fixed operating cost:- If company is having high burdens of fixed operating cost like
salary, rent etc. then owners capital should be used, if the burden is low then debt
capital should be used.
f) Control consideration:- If eguity shareholders do not want to dilute the control then
they should use the borrowed fund i.e debt capital.
g) Interest converge ratio:- This ratio helps in determining the number of times profits
are covering the interest. Higher the ratio, better it is and company should use debt.
h) Debt Service coverage ratio:- It tells us about cash payment to be made and the
amount of cashavailable = PAT + Deposit + Interest + Non cash expenses.
i) State of Capital Markets:- During boom, finance can easily be raised by issuing
shares but during depression period, raising finance by means of debt is easy.
j) Period of Finance:- For permanent capital requirement, Equity shares must be issued
as they are not to be paid back and for long and medium term requirement,
preference shares or debentures can be issued.
 DIVIDEND DECISIONS:-
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 MEANING:- These decisions are concerned with how much profits are to be
distributed among share holders and how much profit is to be retained.
 FACTORS AFFECTING DIVIDEND DECISIONS:-
a) Earnings:- Dividend are paid out of current as well as past earnings. Therefore
greater earnings means more dividends.
b) Stability of earnings:- Companies having stable earnings give more dividends as

compared to companies with unstable earnings.
c) Growth opportunities:- If growth opportunities are available in the market, then less
dividends will be given, if opportunities are not there, dividends will be given.
d) Cash flow position:- If cash flow position is favourable, more dividends will be
given and vice - versa.
e) Taxation Policy:- Dividend is tax free in the hands of shareholders. Company has to
pay the taxes on dividends, if tax is more dividends will be low and vice versa.
f) Shareholder preferences:- If shareholders are retired and old aged, stable dividends
should be given as it is their source of income on the other hand young age and
working class prefer less dividends.
g) Stock market reaction:- Increased dividends draw positive reaction from the stock
market. However, if the dividends are lowered by a company it tends to have a bad
impact on the share prices as their demand goes down.
h) Access to Capital market:- Large credit-worthy companies have easy access to the

capital market in terms of raising funds. These companies can keep less retained
earnings and pay a higher dividend to strengthen the market price of their shares.
i) Legal constraints:- Since the payment of dividend is connected with a large number
of shareholders, it should be done within the legal framework and transparency.
j) Contractual constraints:- Generally loan providing bodies ensure through contractual

agreements that the borrowing company will be restricted in payment of dividends.

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This is done to provide financial protection to the lenders who may get in trouble in
situation of bankruptcy of the borrower.
 CAPITAL STRUCTURE:-
 MEANING;- It is the proportion of Debt and Equity in raising funds for doing
business. In other words, it is the mixture of Owners’ funds and Borrowed funds.
 FACTORS AFFECTING CAPITAL STRUCTURE:-
a) Debt service coverage ratio:- (DSCR)
DCSR =
DSCR indicates ability of a firm to service its Debt. It is a better indicator than ICR.
b) Interest coverage ratio (ICR):- It is the number of times Earning Before Interest and
Tax can cover the Interest on Debt taken by a firm.It indicates the firm’s ability to
serve the interest on Debt taken. ICR
=
c) Cash flow position:- Debt should be taken only if Cash flow position of a company is
good.
d) Cost of Debt:- Debt can be taken if it is available at a lower interest rate.
e) Cost of Equity:- Cost of Equity becomes high in case Debt is taken beyond a level.
This happens due to the increased burden of Debt on equity shareholders who expect
higher dividend.
f) Capital structure of other companies:- A business firm may observe the capital
structure (D/E ratio) of other companies in the same industry but should not blindly
follow them. Deciding the capital structure of a company should be based upon its
own strengths and weaknesses.
g) Return on Investment:- When the return on investment is greater than the rate of
interest, a company can increase its Debt to increase its earning per share (EPS).

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h) Tax rate:- With the increase in tax rate Debt becomes cheaper.
i) Stock market conditions:- When market is bullish Equity is preferable, but when
market is bearish Debt is a better choice.
j) Floatation costs:- The costs of raising Debt and Equity are different. The high
floatation costs of Equity in comparison to Debt make it a costlier source.
k) Control considerations:- Too much of issuing of Equity may result in loss of control
of management over the company.
l) Regulatory framework:- In order to raise funds, the company should stay within the
legal framework set by bodies like SEBI and RBI.
m)Flexibility:- A company has only limited sources form where it can obtain Debt. In
case it exhausts all the possible sources it will lose the flexibility to arrange further
Debt.
n) Risk consideration:- Debt is riskier though it is cheaper. A firm has to repay the
principal amount as well as regular interest on it. It is bound to do so.
 WHEN TO USE DEBT?
Debt should be used when RETURN ON INVESTMENT > COST OF DEBT.

This is known as favourable financial leverage. It will have a positive impact on the
EPS of equity share holders. This is known as TRADING ON EQUITY.
Let us take an example:-

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 FIXED CAPITAL:- It refers to the funds which are invested in fixed assets. These
are also known as Long term investment decisions.
 FACTORS AFFECTING THE REGUIREMENT OF FIXED CAPITAL:-
a) Nature of business:-Manufacturing requires more Fixed capital than trading business.
b) Scale of operations:-A firm involving large scale business requires more Fixed
capital.
c) Choice of Technique:- Capital intensive business requires more Fixed capital than a
labour intensive business.
d) Upgradation of technology:- Business requiring frequent upgradations of technology

requires more Fixed capital.
e) Growth prospects:- Companies having higher growth prospects require more

investment in Fixed capital.
f) Diversification:- When a firm diversifies into new areas, its requirement of Fixed
capital increases.
g) Financing alternatives:- When business firms have an alternative of taking fixed

assets on lease, they do not have to purchase fixed assets.
h) Level of collaboration:- Fixed capital requirement of a firm becomes less if it gets

into collaboration with another firm, as both the firms can share resources of each
other.
 WORKING CAPITAL:- The capital needed by a business firm to meet its day to
day operations is known as Working capital. Examples: Cash-in-hand, Raw
materials, Prepaid expenses, Work-in-progress, Bills receivable etc.
 FACTORS AFFECTING THE REGUIREMENT OF WORKING CAPITAL:-

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a) Nature of business:- Manufacturing firms have more Working capital requirements
than trading firms.
b) Scale of operations:- Higher the scale of operations, more is the Working capital
requirement.
c) Business cycle:- More during recovery and boom, less during recession and
depression.
d) Seasonal factors:- Businesses that are seasonal in nature need more amount of
working capital during the peak season.
e) Production cycle:- Products having longer production cycle need more Working
capital.
f) Credit allowed:- More Working capital is required when credit is allowed by the
business firm.
g) Credit availed:- If a firm is able to purchase raw materials on credit from its suppliers
than less working capital will be required.
h) Availability of raw material:- If raw material is easily available, requirement is less,

otherwise more.
i) Growth prospects:- Higher the chances of growth, more will be the requirement.
j) Level of competition:- Higher the level of competition among firms more will be
their Working capital requirements.
k) Inflation:- Working capital requirement is also determined by price level changes.
For example, during inflation prices of raw material, wages also rise resulting in
increase in working capital requirements.

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CHAPTER 10 – FINANCIAL MARKETS
 MEANING OF FINANCIAL MARKETS: - It refers to the place where buying
and selling of financial assets takes palce.
 FUNCTIONS OF FINANCIAL MARKETS: -
a) Mobilisation of savings to productive use:- Financial markets helps in the

mobiloisation of savings of the people to the more productive uses and fulfill the
need of the people where it is reguired. Financial markets combines the demand and
supply side of finance. This function is known as financial intermediation.
b) Price Discovery:- Financial markets discover the prices of financial assets with the
help of the market forces i.e. damand and supply . Best buyers price and best seller
price where meets is discovered price.
c) Provides liquidity to financial assets:- This is a readily available market where

buyers and sellers of all the securities are available at all the times. it means
whenever investors want cash, they can go to the market and sell their securities.
d) Reduced cost of transaction:- Financial markets provides information regarding

various type of services without spending any money. Therefore it reduces the cost
of transactions.
 TYPES OF FIANANCIAL MARKETS: -
BASIS OF
MONEY MARKET CAPITAL MARKET
DIFFERENCE
MEANING It is a market where It is a market where
transaction in short – term transaction in long – term
services are made. services are made.
PARTICIAPANTS RBI, Banks, Financial Banks, Financial
Institutions Institutions, Foreign banks,
Corporates.
DURATION 1 day to 1 year Morethan a year.

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INSTRUEMENTS T – Bills, Call money, Equity shares, Preference
Commercial Paper etc. shares.
LIQUIDITY More liquid as it is has a Less liquid.

ready market.
RISK Less risky High risk
RETURNS Less More
 MONEY MARKET INSTRUMENTS:-
 Treasury Bill:-
a) Short term unsecured instruments.
b) Issued by RBI on behalf of Central governmen
c) Maturity Period: - 14 days, 91 days, 112 days, 314 days.
d) These bills are known as Zero coupon bonds as no interest has to be paid on these
bills at a fixed rate.
e) Issued at less than face value and paid at face value (issued at discount and
redeemed at par)
f) Minimum amount:- 25000 and multiples of it.
g) Also known asDeep discount bonds or zeo coupon bonds.
 Commercial Paper:-
a) Unsecured Promissory notes.
b) Issued by well reputed and credit worthy company.
c) Maturity Period: - 15 days to 12 months / 1 year.
d) Bridge Financing:- It means using short term funds to meet the long term
reguirements of finances. For payment of floatation cost.
 Call money:-
a) Used by commercial banks to maintain CRR (Cash Reserve Ratio).
b) These are called Inter Bank Borrowings.
c) Matuurity Period: - 1 day to 15 days.
d) Interest rate used for call money is known as call rate which varies from day to
day.
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 Certificate of deposits:-
a) Issued by scheduled commercial banks and financial instutions like ICICI , IDBI
etc.
b) Minimum face value = 5 lakh / cod, minimum investment 25 lakhs.
c) It is a negotiable instruement.
 Commercial Bill:-
a) Negotiable instrument easily transferable.
b) Used for financing credit sales.
c) It is also known as BOE.
d) If the seller needs money, he can get the bill discounted from the bank.
 TYPES OF CAPITAL MARKET:-
BASIS OF
PRIMARY MARKET SECONDARY MARKET
DIFFERENCE
Securitites as offered for the
Existing securities are
ISSUE first time or offered by new
offered in this market.
companies.
BUYING AND
Only buying of securitites. Both buying and selling
SELLING
PHYSICAL Fixed place known as stock
No physical location
LOCATION exchange
PRICE By market forces of demand
By management
DETERMINATION and supply
CAPITAL
Direct formation of capital Indirect formation.
FORMATION
 METHODS OF FLOATATION OF CAPITAL IN PRIMARY MARKET: -
a) Public Issue / Initial Public Offer:- Under this method the company issue prospectus
and invites the General public to purchase securities.
b) Offer for sale:- In this method securities are first offered to the
intermediaries( Brokers) at fixed price and these are resold to General Public and
intermediaries get the commission.

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Sell resell
Companies Intermediaries General Public
Securities securities
c) Private Placement:- In this method company issue securities to financial istitutions,

brokers etc. instead of selling them to General Public. It is a cheaper method as
compared to Public issue.
d) Right issue:- When a existing companies issue new shares, these are first offered to
existing shareholders as they have the first right over the new issue.
e) E – IPO’s:- In this, companies issue securities to general public electronically i.e

with the help of internet. For this companies has to enter a contract with SEBI. The
companies issuing securities also appoints a registrar who looks after all the work.
 STOCK EXCHANGE (SECONDARY MARKET): -
 MEANING:- Stock exchange is a place where listed securities are bought and sold
for investment or speculation.
 FUNCTIONS OF STOCK EXCHANGE: -
a) Economic growth:- Financial markets helps in the mobiloisation of savings of the

people to the more productive uses and fulfill the need of the people where it is
reguired. Financial markets combines the demand and supply side of finance. This
function is known as financial intermediation.
b) Price Discovery:- Financial markets discover the prices of financial assets with the
help of the market forces i.e. damand and supply . Best buyers price and best seller
price where meets is discovered price.
c) Provides liquidity to financial assets:- This is a readily available market where

buyers and sellers of all the securities are available at all the times. it means
whenever investors want cash, they can go to the market and sell their securities.
d) Spreading equity cult:- Stock exchange collects information regarding various

securities and make it available to public free of cost in order to guide them and

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creates awareness amongst them, so that they come to the place and invest their ideal
savings for productive purpose.
e) Scope of speculation:- When securities are purchased with a motive of earning profit
by selling them at higher price is known as speculation. It is legal activity and
allowed by the court.
 Example of stock exchamge:-

Bombay stock exchange(BSE)
National Stock Exchnage (NSE)
Calcutta Stock Echange (CSE)
 TRADING PROCEDURE ON A STOCK EXCHANGE: -
a) Selection of a Broker:- Broker is an intermediary which help in buying and selling of

securities. The first step is to select a Broker registered with SEBI.
b) Opening DEMAT account:- It is an account in which securities are stored in

electronic form. It is opened with a depository. At present there are two Depositories
in India:-NSDL(National securities depository limited), CDSL (Central depository
service limited). For opening DEMAT account:- ID proof (PAN Card), Address
proof (Ration / Aadhar card) is reguired.
c) Palcing an order:- After opening a Demat account, the investor can buy securities
with the help of broker. The order may be given personally or telephonically or
through e-mail.
d) Executing the order:- As per the orders of investors the broker buys and sells the
securities. He issues contract note to the investor which contains name of securities
bought and sold, price, quantity etc. It is to be signed by the broker and it is to be
kept by investor as a proof of transaction.
e) Settlement:- It is a final stage of the procedure. It means securities are transferred

from the Demat account of seller to the Demat account of the buyer. Now a days ‘ T
+ 2 ‘ rolling statement is enforced. It implies if a transaction is done on Monday, it
will be settled on Wednesday.
f) Transaction Time:- 09:15 to 09:30 from Maonday to Friday.

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 SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA): -
SEBI was established by Government of India on 12 April 1988 as an interim

administrative body to promote orderly and healthy growth of securities market and
for investor protection. It was given a statutory status on 30 January1992 through an
ordinance which was later replaced by an Act of Parliament known as the SEBI Act,
1992. It seeks to protect the interest of investors in new and second hand securities.
 OBJECTIVES OF SEBI: -
a) Regulation of Stock Exchanges:- In order to provide efficient services to all the

participants.
b) Keep a check on Insider Training:- It means buying and selling of securities by those
personnel (Director, Promoters) who have secret information and they can benefit
them by using that information. SEBI has done a great job in controlling Insider
Trading.
c) Protection to Investors:- Protected by SEBI from unfair Trade Practices of the

Intermediaries or from the wrong information provided by the companies in their
prospectus. It was done because capital market is meaningless in the absence of
investors.
 FUNCTIONS OF SEBI: -
 Protective:-
a) To check unfair trade practices.
b) To check insider Trading.
c) To provide education to investors regarding securities.
d) To promote code of conduct relating to securities market.
 Regulatory:-
a) To regulate the business in share market.
b) To register broker, sub – brokers, underwriters etc.
c) To register and regulate credit rating agency.
d) To register and regulate venture capital fund.
e) To carry out audit of share markets.
 Development:-
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a) To provide training to intermediaries like Broker, Sub – Broker.
b) To develop capital markets by adopting flexible approach.
c) To do research work and publish information for all the parties in the capital
market.

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CHAPTER 11 - MARKETING MANAGEMENT
 MARKETING MANAGEMENT:- It is that business activity in which human
wants are satisfied by exchange of goods and services. The motive of marketing
management is to satisfy the consumer wants in a better way.
 MARKET:- It is a place where buyer meets seller for exchange of goods and
services.
 CONSUMER:- Consumer refers to people or organisation who demand goods and

services for satisfaction of their wants.
 MARKETER / SELLER:- He is a person or organisation who makes available

goods and services to satisfy the needs of the customer.
 MARKETING:- It is a process under which valuable goods and services are

created, offered and exchanged for some consideration.
 FEATURES OF MARKETING:-
a) Needs and wants:- All the activities in the market are carried out keeping in mind the
need and wants of consumers.
b) Creating a Market offering:- It refers to provide complete information about the

product and services. A good market offering is always prepared keeping in mind the
needs and priorities of customers.
c) Customer Value:- Customer value the products on the basis of its quality and he is
ready to pay more, if he will get good quality product.
d) Exchnage Mechanism:- It is a process which involves exchange of goods and

services for money or money’s worth i.e. for some consideration. Its main aim is to
reduce the distance between buyer and seller through intermediaries. Therefore it is
known as essence of marketing.
 OBJECTIVES OF MARKETING MANAGEMENT: -

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a) Creation of demand:- The first aim of marketing mangement is to create demand for
its product by studying and analysing the needs of customers.
b) Marketing Share:- Every business firm wants to capture a bigger share in the market
and it can do so by adopting various promotional techniques and by making extra
selling efforts.
c) Goodwill:- It is an asset of the business and it can be created only by selling quality
products at a reasonable price.
d) Customer Satisfaction:- The primary motive of any business is to earn profits and it
can do so only by satisfying the consumer wants by selling them quality products.
 FUNCTIONS OF MARKETING: -
a) Gathering and analysing market information (Market Survey):- The most important
function of marketing is to conduct market research i.e. study market conditions in
order to determine needs and preference of consumers.
b) Market Planning:- After conducting market survey, the next function is to make
plans for promotion, plans for increasing production, so that marketing objectives
can be achieved.
c) Product designing & development:- After Market Planning, the next step is to design
the product and develop the product. It involves decision regarding features,
appearance etc. to make it look attractive and saleable.
d) Standardisation and Grading:- Standardisation means miantaining quality standards

to achieve uniformity in the product. It provides assurance regarding quality of
product to consumer.
Grading means classifying the product on the basis of size, quality, shape etc. It is
done to differentiate the product.
e) Packaging and Labelling:-
f) Branding:-
g) Pricing:- covered in Marketing mix

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h) Promotion:-
i) Customer support services:-
 MARKETING MIX AND ITS ELEMENTS: -
It refers to set of tools that are being used to obtain its marketing objectives. It includes
four (P’s):-
Product mix
Price mix
Place mix
Promotion mix
 PRODUCT MIX: -
It refers to the combination of all decisions relating to product. It includes three things:-
Branding, Packaging and Labelling etc.
 BRANDING:-
a) Branding: - It refers to the process of creating a unique identity of a product.

b) Brand: - It refers to the special word or symbol or letter or mixture of all these.
c) Brand Name: - It is that part of Brand which can be spoken.
d) Brand Mark: - It refers to that part of Brand which can be recognized.
e) Trade Mark: - When a Brand is registered under the Trade Mark act it becomes a
Trade mark.
f) Generic name:- The name by which a product is normally called.
 QUALITIES OF GOOD BRAND NAME:-
a) Simpe and short:- Brand name should be simple and short. For eg. Lux.
b) Easy to pronounce:- A brand name should be easy to pronounce. For eg. Bata, Tata.
c) Suggestive:- Brand name should be self explanatory. For eg. Hajmola.
d) Distinctive:- Brand name should be different and highlighted among the other
brands. For eg. Set wet zatak.

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 ADVANTAGE OF BRANDING:-
TO PRODUCER TO CUSTOMER
Consumers can easily recognise the
Helps in advertising in easy way
product because of its barand.
Establishment of Permanent identity Consumer is assured about the quality
of product of the product due to its present name.
It promotes repurchases(brand loyalty).
Competition becomes easier with the
help of established brand name.
 PACKAGING: -
It refers to those activities which deals with the designing amd production of containers
in which products are packed.
 TYPES OF PACKAGING: -
a) Primary Packaging:- In which product is stored. For eq. Tube of Toothpaste.
b) Secnadary Packaging:- The packaging in which product is safeguard from the outer
surroundings.
c) Transportation Packaging:- It is done for the easy transportation of product from one
place to another.
 FUNCTIONS OF PACKAGING (IMPORTANCE): -
a) Product Differentiation:- Packaging helps in creating the Brand image of the product
by differentiating it from other products.
b) Product Protection:- Packaging protects the product from damage and spoilage
during trasnportation, storage and distribution. It saves the product from climate
effect.
c) Product Promotion:- Pakaging act as a silent salesman as it promotes the product and
increase it sales by making the packaging attractive.
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d) Product information:- A good packaging provides the information regarding the

product and its use.
e) Convenience (Transportation):- Packaging provides convenience in carrying the

product from one place to another and in storage also.
 LABELLING:-
It is a process of preparing label.
 FUNCTIONS OF LABELLING:-
a) Product Information:- Regarding its content and use. How to use and statutory
information.
b) Product differentiation (Identification):-
c) Product Promotion:-
d) Product Grading:- Labelling helps to grade the product into different categories
according to their features or qualities. For eg. Green Label, Red label, Yellow label.
 PRICE MIX:-
It refers to all those decisions which are concerned with the price fixation of any
product or service.
 FACTORS AFFECTING PRICE: -
a) Objective: - There may be various objectives of the firm such as getting rate of
return, capturing market share or maximisation of sales etc. Thus price should be
determined after considering all these things.
b) Cost of production:- Cost and price of the product are closely related. Price should be
fixed not below the cost. At least price should be able to recover the variable cost.
Costs sets the floor price – the minimum level / lower limit at which the product may
be sold. • Price should recover Total costs (Fixed costs/overheads + Variable costs+
Semi-variable costs) in the long run, but in certain circumstances(introduction of a

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new product/entry into a new market) product price may not cover all the costs for a
short while.
c) Demand for product:- Market survey has to be done before price fixation. If demand
is more than supply, higherprice can be fixed. Utility provided by the product and the
demand of a product set the upper limit of price that a buyer would be willing to pay
for a product. Buyers pay to the point where the utility of the demand is more than or
equal to the utility derived from it.
d) Price of competitive firm: - It is necessary to take into consideration price of the

products of competitive firms, prior to fixing the prices. In case of cut – throat
competition it is desirable to keep price low.
e) Government Policy:- Government regulations are also to be considered before fixing

the prices.
f) Distribution Channel Policy:- If the channel of distribution is lengthy keep the prices
low, but if the channel of ditribution is small, keep the prices high.
 PLACE MIX:-
It includes all those activities which are needed to make the product available to the
target customers.
 CHANNELS OF DISTRIBUTION:-
These are middleman who help in the flow of goods and services from producers to
consumers.
 TYPES OF CHANNEL OF DISTRIBUTION:-
a) Direct Channel :- Manufacturer-Customer. Eg. mail order, internet, door to door

selling.
b) Indirect Channel:-
One level:- Manufacturer-Retailer-Customer.

Two level:- Manufacture-wholesaler-Retailer-customer.
Three leve:- Manufacture -Agent -Wholesaler -Retailer -Customer

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 PHYSICAL DISTRIBUTION AND ITS COMPONENTS:-
It means movement of goods from place of production to place of consumption.
 COMPONENTS:-
a) Order Processing:- It refers to time and steps involved between receiving the order
from customers and delivery of goods. The order should be processed quickly and
accurately to increase customer satisfaction.
b) Transportation:- It implies movement of goods from one place to another with the
various modes of transportation. For eg. Roadways, Railways, waterways etc.
c) Warehousing (Storage):- It creates time utility as there is a gap between production

and consumption. It reserves the goods and supply it whenever demanded.
d) Inventory control:- It decides the level of inventory to be miantained with the

suppliers. Higher level of inventory ensures supply but block the working capital,
whereas low inventory leads to loss of customers.
 PROMOTION MIX:-
It refers to combination of promotional tools used by an organization to
communicate and persuade customers to buy its products.
 ADVERTISING:-
It is a paid form of promotion method involving an identified sponsor. It is
impersonal in nature.
 Role of Advertising:-
a) It is capable of mass reach. It can reach a large number of people.

b) Creates satisfaction among the customers.
c) It is an expressive medium of spreading the intended message.
d) Since a large number of people can be reached, the per unit cost of reaching
people is very less.
e) It informs the target audience about the product and makes their shopping easier
and effective.
 PERSONAL SELLING:-

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It is selling of a product by an individual to another individual or group of
individuals by establishment of an oral conversation
 Features of Personal Selling:-
a) It involves formation of personal relationship.

b) It involves direct feedback.
c) Minimum wastage of efforts takes place here.
d) It involves flexibility as the direct seller can alter the content of his conversation
in order to suit the requirements of his client.
 DIFFERENCE BETWEEN ADVERTISEMENT AND PERSONAL

SELLING:-
BASIS OF
ADVERTISING PERSONAL SELLING
DIFFERENCE
PERSONAL V/S It is an impersonal form of It is a personal form of

IMPERSONAL communication. communication.
Advertising has a broader

It has a narrower reach as
reach as the advertisement
REACH only a few people can be
reaches a large number
contacted directly.
people simultaneously.
It is inflexible as It is flexible as the seller can

advertisements are adjust the message as per the
FLEXIBILITY
standardised and cannot be requirements of different
adjusted. customers.
It is more suitable where It is more suitable when

TARGET GROUP marketing is to be done to marketing is to be done for a
large number of consumers. few selected consumers..

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As advertising reaches the

Personal selling is relatively
COST INVOLVED masses simultaneously, the
costly.
cost per person is low.
It takes a lot of time and

It can cover the entire market
TIME INVOLVED effort to cover the entire
in a short period of time.
market.
Through advertising,
As the seller directly contacts
CUSTOMER feedbacks and reactions of
the customers, he get
FEEDBACK the customers cannot be
feedback from the customers.
judged.
It involves communication
MEDIUM OF through mass media such as It personal communication
COMMUNICATION television, newspapers, radio, through sales persons.
etc.
The basic objective of The basic objective of

advertising is to create personal selling is to create
OBJECTIVE
interest of the customers awareness about the product
towards the product. and induce decision making.
 SALES PROMOTION:-
It refers to short term incentives/ other promotion activities that seek to stimulate
interest, trial or purchase.
 PUBLIC RELATIONS:-
All the different types of activities and programmes undertaken by a business firm to
create a good image in the eyes of various stakeholders is known as Public relations
exercise.
 Role of Public relations:-

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a) Press releases:- A good image creating information is passed on to the press (about
the products and the company) and all efforts are made to maintain good relations
with the Press.
b) Corporate communication:- Brochures, newsletters visuals, etc. are used during

participation in conferences and seminars. All these activities are done to enhance
the image of the company by getting in contact with the public and stakeholders of
the business.
c) Lobbying:- The company ensures that there should be a lobby of their supporters
among government officials and ministers. These relations help companies a lot in
gaining favourable support from the government.
d) Product publicity:- Various events are organised to create awareness about the
products.
e) Counselling:- People are made aware about various aspects of life in a selfless
manner by the company on various issues like Women empowerment,
Environmental concerns, Educational development among poor children, etc.
 Objectives of Public relations:-
a) Building awareness:- Through the use of various types of platforms, goodwill is

generated in the market and people are made aware about company’s products.
b) Building credibility:- Credibility is generated and increased among the public with
the help of media.
c) Reducing cost of promotion:- Public relation activities act as a good supplement to

other promotional activities.
d) Stimulating sales force:- It becomes easier for the sales force to promote goods
which are being appreciated even otherwise.
 MARKETING MANAGEMENT PHILOSOPHIES:-

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PRODUCTION PRODUCT SELLING MARKETING SOCIETAL

BASIS
CONCEPT CONCEPT CONCEPT CONCEPT CONCEPT
STARTING Market and

Factory Factory Factory Market
POINT Society
Customer
Quantity of Quality of Existing Customer needs &
FOCUS
product product product needs Society
welfare
Availability Improvement
and in the quality Promotion Integrated Integrated
MEANS
Affroadability of of the and Selling Marketing Marketing
the product product
Customer
satisfaction
Volume of Product Sales Customer
END and
production Quality volume satisfaction
Society’s
welfare

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CHAPTER 12 – CONSUMER PROTECTION
 MEANING: - A consumer is defined as any person who buys any product or hires
or avails of any service. Consumer Protection implies assurance against anti -
consumer trade practice by the producers and traders. Anti - consumer trade practices
include adulteration, sub - standard quality, fractional weights measure, over
charging, misleading claims in advertisements etc.
 IMPORTANCE OF CONSUMER PROTECTION:-
 FROM THE POINT OF VIEW OF CONSUMER'S:-
a) Consumer Ignorance:- The consumer are many a time not aware of the quality
standards and can't differentiate between pure and adulterated goods. This ignorance
may give opportunities to some suppliers to cheat the consumers by selling sub -
standards goods and charging higher prices.
b) Unorganised consumers:- We have a very few organisations of consumers. Beacuse

of lack of powerful consumer movement, the consumer feel the need of adequate
legal protection against the malpractice of producers and traders.
c) Widespread consumer expolitation:- The consumers are widely exploited by

dishonest producers and traders. For example:- They may sell sub - standards or
duplicate goods. Thus there is a strong case for the protection of consumers against
malpractices.
 FROM THE POINT OF VIEW OF BUSINESS:-
a) Long term interest:- Self interest of business requires satisfaction of consumers. If a

business fails to satisfy the consumers, they will shift over to the product of
competitors. Such a business will not exist in long - run.
b) Use of society's resources:- Business is a trustee of society's resources. Such

resources must be used for the benefit of the society and the consumers.
c) Social responsibility:- Business is run to achieve multiple objectives. It has both

economic and social objectives. The economic objectives related to earning of
sufficient profits before survival and growth of the business. The social objectives
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arise because of several stakeholders of business such as consumers, employees,
suppliers, society and the government.
d) Moral Justification:- Buiness is a part of society and so has moral obligation. It must
be guided by social ethics and norms. It is the moral responsibility of a business to
protect and advance the interests of consumer.
e) Government Interaction:- Government takes active interest in the protection of

consumer rights. Consumer protection act 1986 is a landmarrk legislation to
safeguard the interests of consumers against defective goods, unsatisfactory services,
unfair tarde practices.
 CONSUMER PROTECTION ACT, 1986:-
 Who is a consumer?
Any person who buys any goods for a consideration (i.e. price) whether paid or
promised or partly paid or partly promised in lumpsum or in installments. But it does
not include a person who obtain goods by re - sale or commercial purpose.
Any person who hires or avails of any service for a consideration (i.e. price) whether
paid or promised or partly paid or partly promised in lumpsum or in installments. But
it does not include a person who avails service for any commercial purpose.
 who are not considered as consumers?

a) The person who obtain goods for resale.
b) The person who uses the goods without the approval of the buyer.
c) The person who avails of the services without the approval of the buyer.
d) The person who obtains goods without any consideration.
e) The person who hires or avails of any services without consideration.
 Who can file a complaint?

a) Any customer.
b) Any registered consumer organisation.
c) Central or state government.
d) One or more consumer on behalf of numerous consumers.
e) A legal heir or representative of a deceased consumer.
 Within what period can complaint be filed:-

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The complaint must be filed within three months of purchase of goods and if some
testing of goods required then within five months.
 CONSUMER RIGHTS:-
a) Right to safety:- It is the consumer right to be protectred against goods and services
which are hazardeous to health or life. For this consumer has to look at safety
standards like hallmark for jewellery, ISI for electronics.
b) Right to be informed:- The consumer has the right to be informed about the quality,
quantity, purity standard price of goods which he intend to purchase. Therefore, the
manufacturers must mention complete information about the product on the label and
package of the product.
c) Right to choose:- The consumer should be assured of freedom to choose from a

variety of products at competitive prices. The seller should not use aggressive selling
techinque to sell the product to the consumer. This will violate his right to choose.
d) Right to representation(or to be heard):- The consumer has a right to register

dissatisfaction with any product and get his complaint heard. This right is of greater
importance than the first three rights. Therefore grievances and claims of consumers
must be heard and considered by the business firms.
e) Right to Redressal:- It is the right to seek redressal against defect in goods or any
unfair trade practice suffered by the consumer. If the quality and performance of a
product falls short of seller's claims, the consumer has a right to certain remedies.
f) Right to consumer education:- It means the right of acquiring knowledge and being a
well - informed consumer throughout his life. He should also be made aware of his
right and the remedies available through publicity in the mass media.
 CONSUMER RESPONSIBILITIES:-
a) To provide adequate information to the seller:- The consumer has the responsibility
to provide adequate information about his needs and expectations to the sellers.
b) To exercise caution in purchasing:- The consumer must try to get full information on
the quality design, utility, quantity price etc of the product.

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c) To insist on cash memo or receipt:- The consumer must get a cash memo or receipt
as a proof of purchase of goods from the seller. This would help him in making a
complaint to the seller in case of any defect in the goods.
d) To file complaint against genuine grievances:- The consumer must file a complaint
with the seller or manufafturer about any defect or short coming in the products and
services.
e) To be quality consious:- The consumer should never compromise on the quality of

goods.
f) To be cautious against false and misleading advertisements:- It is the responsibiltiy

of the consumer not to be carried away by such advertisements. If he finds
discrepancy he must bring it to the notice of the seller or advertiser.
g) To exercise his legal rights:- the consumer has the right to safety, right to be
informed, right to choose, right to representation, right to seek redressal and right to
seek information.
h) Assert yourself to ensure that you get a fair deal.
 REMEDIES AVAILABLE TO THE CONSUMER'S:-
a) Removal of defects in goods or services supplied by the seller.

b) Replacement of goods with new goods of similar description.
c) Refund of price by the seller or manufacturer to the complainant.
d) Payment of compensation if the consumer has suffered any loss or injury.
e) Discontinuance of the unfair/restrictive trade practices and not to repeat them.
f) Not to offer the hazardeous goods from being offered for sale.
g) Withdrawl of hazardeous goods from being offered for sale.
h) Provide for adequate costs to the complainant.
 REDRESSAL MACHINERY (Three tier mechanism):-
 District forum:
a) It is formed by state government.
b) It consist of a President and two members (atleast one woman).
c) President should be working or retired judge of district court.
d) Complaints can be filed upto the value of Rupees 20 lakh.
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e) Remedies available (Already discussed)
f) If any of the aprties not satisfied with the decission can appeal to state
commission within 30 days.
 State commission:-
a) It is formed by state governments.
b) It consist of President and two members (atleast one women).
c) President should be working or retired judge of high Court.
d) Complaint can be filed upto the value of one crore.
e) Remedies available (Already discussed).
f) If any of the parties not satisfied with the decision can appeal to National
Commission within 30 days.
 National Commission:-
a) It is formed by Central government.
b) It consist of President and four members(atleast one women).
c) President should be working or retired judge of Supreme Court.
d) Complaint can be filed more than the value of one crore.
e) Remedies available (Already discussed).
f) If any of the parties not satisfied with the decision can appeal to Supereme court.
 CONSUMER ORGANISATION'S AND NGO's:-
 MEANING:- Non-government organisation (NGO's) are those organisation which

aim at promoting the welfare of the people and are non - profit making. They are
voluntary bodies and are free from the interference of the government. For eq.
VOICE, New Delhi.
 ROLE OF CONSUMER ORGANISATIONS & NGO'S:-
They perform the following function and roles:-
a) They organise campaigns on various consumer issues to create social awareness.

b) They organise training programmes for the consumers and make them conscious
of their rights and modes of redressal of their grievances.
c) They bring out periodicals and other publications to enlighten the consumers
about various consumer related developments.

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d) They provide free legal advise to their memeber or matters of consumer interest
and help them to take up greivances.
e) They interact with businessman and members of commerce and industry for
ensuring a better deal for consumers.
f) Encouraging consumers to strongly protest wherever necessary.

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Chapter 1-Nature and Significance of Management: Meaning

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Chapter 1-Nature and Significance of Management: Meaning

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AVB ACADEMY

CHAPTER 1- NATURE AND SIGNIFICANCE OF MANAGEMENT

 MEANING: - Management is an art of getting things done through others in order

Management is dependent on Efficiency and Effectiveness.

 EFFICIENCY: - It refers to completion of of work with minimum cost.

 EFFECTIVENESS:- It refers to completion of work on time.

 DIFFERENCE BETWEEN EFFICIENCY AND EFFECTIVENESS:-

b) Management is Pervaisve:- Management is universal in nature. It is used in all types

c) Management is Intangible:- Management is Intangible i.e. it cannot be seen or

d) Management is a group activity:- It is a group activity since it involves managing

MANISH BHATIA Page 1 of 97

a) Survival:- Management by taking positive decisions with regard to different

c) Growth:-Management must ensure growth which can be measured by increase in

Social objectives is to provide some benefits to society like applying environmental

Personal Objectives is to focus on diverse personal objectives of people working in

b) Increase efficiency:- Manager increase efficiency by utilising the resources such as

c) Creates a dynamic organisation :- Every organisation works in a dynamic

d) Helps in achieving personal objectives:- Management helps the individuals achieve

e) Helps in development of society:- Management helps in the development of society

MANISH BHATIA Page 4 of 97

a) Systematic body of knowledge:- Science is a systematised body of knowledge

b) Based on experimentation:- The principle of science are based on experiemnatation

 CONCLUSION:- So we can conclude that management is not a pure science or a

 MEANING OF ART:- It refers to practical application of the existing knowledge

a) Existence of theoratical knowledge:- In every art there is systematic and organised

 CONCLUSION:- On comparing the features of art with management we can

 MEANING OF PROFESSION:- It is an occupation backed by specialised

b) Restricted entry:- The entry to a prfession is restricted through an examination or

d) Presence of Professional Association:- For every profession there are professional

MANISH BHATIA Page 6 of 97

 CONCLUSION:- On comparing the features of profession with management we

 MEANING:- Coordination means bringing together the activities and resources of

a) Integrate group efforts:- It integrates group efforts by giving a common focus to

c) Continuous process:- Coordination is a never ending process. Manager works

d) Pervaisve:- Coordination is a universal function it is required at all levels in all the

e) Deliberate function:- Every manager tries to coordinate activities of organisation to

MANISH BHATIA Page 7 of 97

b) Functional Differentiation:- The function of organisation are divided into different

c) Specialisation:- In today’s organisation there is a high degree of specialisation and

 COORDINATION IS THE ESSENCE OF MANAGEMENT:-

 Need to perform all the function of management:-

a) Planning:- In planning coordination is required between main plan and supportive

b) Organising:- In organising coordination is required between resources and authority

d) Directing:- In directing there must be coordination between superior and subordinate.

e) Controlling:- Coordination is required between standards and actual performance.

c) Lower level:- To integrate activities of workers to achieve organisational goals.

b) Organising:- organization means deciding the framework of working how many

c) Staffing:- It refers to recruitment, selection, training, development and appointment

d) Directing:- It refers to guiding, instructing, inspiring and motivating the employees.

e) Controlling:- Controlling is monitoring the actual performance towards the

MANISH BHATIA Page 9 of 97

 PRINCIPLE OF MANAGEMENT V/S PRINCIPLE OF PURE SCIENCE: -

 PRINCIPLE V/S VALUES: -

 FEATURES OF PRINCIPLE OF MANAGEMENT:-

a) General Guidelines: - The management principle are general guidelines to all

b) Flexible: - Management principle are flexible as it can be modified according to

c) contingent: - The application of the management principle is dependent on the

d) Formed by Practice and experimentation: - Management principle are not developed

e) Pervasive or universal applicability: - It means that management principle are

f) Mainly Behavioural:- Since the principles aim at influencing complex human

g) Cause and Effect relationship:- They intend to establish relationship between cause

 IMPORTANCE OF PRINCIPLE OF MANAGEMENT:-