F1 paper

100 marks

76 Marks MCQ
2 Mark question * 30 = 60 Marks
More than 3 options will be available to mark (circle and Box options)
1 Mark question * 16 = 16 marks
Only 3 options are given in answer (only circle question, no box question)

For box more than one option is correct

For round only one option is correct

24 Marks MTQ
6 MTQ 4 marks each = 24 marks
Multiple Tasking questions
Little scenario will be given and questions pertaining to the scenarios will be given in different
formation (formation may be 1+1+1+1, 3+1, 2+2 any formation)
One scenario (true and false, choose the correct option, multiple options, fill in the blank)

Hotspot question – examiner may give any graph and ask to perform some kind activity )

BPP book
Kaplan and BPP kit

Organization
Buchanan and hyzenski
1. Social arrangement
2. Collective goals
a. Personal goal-salary, position
b. Organizational goal-revenue, production, marketing
3. Controlled performance
4. Physical boundary
Sole trader ship-one man no other employee- no organization
Sole proprietorship –other employees
Why org exists
a. To overcome individual limitation
b. Specialization
c. Pool of expertise –good quality DM
d. Synergy interaction or cooperation of two or more people to increase productivity (2+2=5).
e.
Difference between organizations
Purpose
Ownership
Funding
Accountability-answerability
Process
Employees
Communication
Systems
Legal status

Sector (profit making organization)

Manufacturing
Health
Pharma
Disposable
Machinery
Services
Banks
Cellphone
CA firm
Education
Law chambers
Consultants
Commerce
Trading – local
Import
Export
Retailer and wholesaler
Agriculture
Pesticides
Agri equipment
Research and development seeds productions
Power
Power generation
Oil and Gas
Extraction
Refinery
Distribution PSO Shell

Hierarchy – level of management

Same as floors in building
Function – department
Effective – Quality
Efficient – Time management
Economy – Cost
Resource – are 6M used to generate value for organization
Men
Money
Material
Machine
 Management – decision makers
Make ups – Patents or brands, copyrights, franchise, license
Entrepreneur- who take risk (business owner and business managers)
What is risk – variation in outcome (200 M)

Organization by Motive
Profit organization – profit maximization, wealth maximization of shareholders
Non-profit org- any purpose other than profit

Types of Profit making organization

Sole proprietorship
Single owner
Small and young organization
Control in one hand
Quick DM
No profit sharing
No loss sharing
One man decision
Quality of decision affected

Partnership
When two or more business combines their capital and skills to run the business and profit or loss
is shared in accordingly.
Profit and loss sharing
Better quality of DM
Slow DM
Risk of conflicts among partners

Limited company (co

Limited liability Company
Private limited company (LTD)
Public limited company (PLC)
Listed company- public limited company but shares can be traded on stock exchange
Unlisted company – public limited company (shares cannot be traded on stock
exchange)
Company limited by guarantee
Shareholders provide guarantee by personal assets.
Stock exchanges (limited by guarantee)
Limited liability Company
a. Separation of ownership and control
b. Divorce of ownership and control
c. Company has virtual body
d. Shareholders / investors/ owners are separate
e. Both shareholders and directors have limited rights
f. Shareholders can appoint auditor
g. Shareholder appoint board of director in AGM(annual general meeting)
h. Auditor work is to evaluate financial statement (whether financial statement is according to laws
rules and regulations and accounting and auditing standards)
i. Auditor once in year evaluate FS
j. Applicable UK- companies act 2005-06 (law to control the companies)
k. UK – company’s House
l. Companies Act 2017
m. SECP (securities and exchange commission of Pakistan)
n. Other Regulatory bodies regulation (SBP, central bank of UK)
o. Listing regulations (Karachi Stock exchange regulation, LSE regulations)
p. PEC, PMDC, PMDC,
q. ICAP, ACCA, ICAWE, CPA.
r. ICS, ICG.
Private limited company
a. Company which shares cannot be traded on stock exchange
b. Friends and family involved in this company
c. Maximum no of shareholders are 50
d. Privately sold shares
e. Information of this company is not available publically (FS is not available on website)
Public Limited company
a. Public Limited but unlisted
a. Shares cannot be traded on stock exchange
b. No limitation on numbers of shareholders
c. Not limited to friends and family
d. Information available publically (Financial statement available on website)
e. Privately sell shares
b. Public limited listed
a. Shares of this company can be traded on stock exchange
b. Stock exchange is market where shares are sell and purchase
c. No limitation on no of shareholders
d. Information publically available
e. Corporate governance (regulations)
c. BOD is divided in two parts (limitation is with only public limited listed company)
d. EDs and NEDS

EDs (executive directors) NEDs (non-executive directors)

Selected by shareholders Selected by shareholders
Employees Not employees of the company
Get monthly salaries They get lump sum payment (per hour)-
payment is called consultancy fee
Involve in day to day operations They cannot obtain after retirement
(relations with customers, suppliers, benefits not involved in day to day
daily productions, budgets etc) operations
Not independent Independent (no relation with the
company customers, no suppliers,
no employees, no cross directorship,
no family relations with directors,
shareholders)
 They are involved in monitoring the
company, directors.
They evaluate strategy for organization
Evaluate the performance of directors
Internal control system

Effectiveness ---------Quality
Efficiency---------------Time
Not for profit organization (any purpose other than profit maximization)
4 types
 Public sector organization
 NGO non-Government Organization
 Cooperative societies
 Mutual Association
1. Public Sector Organization
a. Which is owned and run by Govt.
b. Army
c. Police
d. Public universities
e. Publics school
f. BBC
g. Ministry
h. Regulatory body (company house)
Features of public sector org.
1. Accountability (answerability)
a. PSO are Accountable to parliament
b. Upper house –House of lords-senate
c. Lower House – Legislative assembly or house of common.- national assembly
d. Law which is made by parliament
e. Regulation is part of law but made by regulatory authority
f. Regulatory body – kind of organization in which parliament vest his power to some
limitation
g. All PSO are accountable to parliament
2. Funding
a. Tax
b. Subscriptions -once in life
c. Borrowing (public sector net cash requirement)PSNCR
i. Internal borrowing-
1. state bank (central bank of England)-
2. national saving
ii. External borrowing
1. IMF
2. World Bank
3. Asian development bank
3. Gap
Fill the gap left by private sector
4. Economies of scale
 a. Increase in quantity or production scale, reduces the cost.
b. Govt. buy centrally which reduces the cost.

NGO. Non Govt Org

Privately owned org work for social development and welfare
Not for profit org
Edhi
UNESCO
Save the children
Oxfam
Clubs
Funding
Donation – without specifying any purpose
Grant – for specific purpose- covenant – condition
Volunteer work- perform duty without any payment
Charity – collection of money after performing some activity

Co-operative society
Owned by its members
Work for benefits of members
Funded through member contributions
Democratically controlled (one member one vote)
Non-financial benefits in term services
Eg Islamabad bar association, chamber of commerce and industry, customer association

Mutual Association
Same as co-operative org
Provide financial benefits
Building societies, micro finance bank

Org structure

Org structure

Hierarchy – level of management – 6 levels

BOD
Senior Manager GM
Manager
Astt. Manager
Supervisor
Worker
Scalar chain – chain of command
Vertical
FLOW TOP TO BOTTOM gangs Plank
Gang’s plank- chain of command Manager Finance Manager Purchase
It flow horizontally
 Astt Astt Astt
Manage Manager Manager
r

Span of control
No of persons directly reporting
BOD (SOC 2) (promotion 1 SOC increase, change hierarchy)
1. SM (SOC 3-Wide) Senior manager (SOC 3)
a. Manager 1. Managers SOC3
Astt managers
Astt managers
Astt managers
b. Manager 2. Manager SOC Nil
c. Manager 3. Managers SOC Nil
2. SM (SOC 2- narrow)
a. M
b. M (soc 1-Narrow)
i. AM
a. Narrow SOC -2
b. Wide SOC- more than 2
Type of structure on basis on SOC.
Flat structure Tall structure
Wide SOC Narrow SOC
Loose control Control tight
Repetitive nature of work or easy work More sensitive nature of work or difficult
work
Less hierarchy More hierarchy

De-layering- removal of hierarchy from org structure which convert tall org into flat org.
Empowerment- addition of hierarchy in org structure which convert flat org into tall org
Downsizing- removal of employees from organization haphazardly .

Organizational structure by control

Centralization and decentralization
Centralization Decentralization
Control at one place Power or control is distributed
Decision making is better Quick decision making
Pool of expertise Better understanding of local environment
Easy to communicate decision Motivation for employees
Better resource allocation Closer to customer (customer oriented )
 Manipulation of 6M which generate value for organization
1. Men
2. Money
3. Machine
4. Material
5. Management
6. Make ups – patents and copyrights

Tangible intangible

Flexibility
Expansion or contraction of organization in term of size
Size mean numbers of employee
Numeric flexibility – change in numbers of employee in whole organization (employees are hired
on contract basis)
Functional (functional always means department) flexibility- departmental flexibility –
organization shift its employees between department or product
Temporal flexibility- seasonal flexibility –hire employees on seasonal basis
Handy shamrock organization
1. Professional core
 This is only permanent part of organization
 Consist of Directors and senior managers
 Pay salary to this part
 Rest of organization consist of contractual employees
 Purpose of professional core is to bring business for organization
2. Contractual fringes
 They are consultants
 Hired when business available for org
 They are paid consultancy fee

3. Contractual worker
 Worker who work physically
 Wages daily basis
 Project based hiring
4. Customers
 Virtual Patel
 They are not permanent part of organization
 Marketing , self service.

Formal and informal organization

Formal organization
 Defined roles and responsibilities duties
 Formal communication –email, mail, report , letters, office memos , notice
 Formal hierarchy
 Informal organization
 Organization based on friend and family
 No formal communication
 Mostly verbal communication or sms
 One formal organization have many informal organization
 Run side by side in formal organization
 Loosely structure
 Informal communication
o Grapevine
Adv of informal org Dis adv of informal org
speedy communication Very difficult to control
Responsiveness Rumors
Effective Incomplete information
May create misunderstanding

Outsourcing
1. Contracting out in house facility to third party on certain price
Off shoring
1. Type of outsourcing but out of country
Competency
1. How resources are being used
a. Core competency – best utilization of resources
i. Hard to imitate- to copy
ii. Valued by customer
iii. Competitive advantage
b. Non-core competency- where not using its resources in best possible way.
i. Minimum requirement to stay in market
Resources are 6M
Men
Money
Material
Management
Machine
Make ups- patents-tangible product and copyrights- intangible products (intellectual property)

Hollow organization structure

Branded organization
Perform core competency in house and outsource non-core competency.

Virtual organization
It is hub of network
Uses IT to create bridge between suppliers and customers
e.g – Amazon, Ali baba, Draz, virtual university

Modular organization
 Divide the organization process in components and decide on the basis of cost whether to
prepare it in house or outsource it
 Mostly unbranded org follow this process
 these organization do not rely on core or non-core competencies
 do not rely on quality of product
 average customer satisfaction

Shared service center

 some MNC centralize some of its department which provide services to entire organization no
matter what country is.
 E.g Telenor Pakistan has central finance department in Pakistan provide all financial services to
Telenor rest of world.

Boundary less organization

 Concept based upon IT
 No proper formal structure
 No boss no subordinates
 Equal designation
 Work is divided in parts and each part is outsourced to worker or employees
 Each employee is independent contractor
 Employees are Not bound to follow organizational policies
 Contractors are required to follow the timeline
 No salary but contract fee
 Division of organization on the basis of specialization

A. Production
B. Research and development
C. Purchases
D. Administration
E. Accounts and finance
F. Service department
G. Marketing department
H. HR department

1. Production
a. It converts raw material into finished goods
b. Select the area of factory
c. Select production process
d. No. of unit produced
e. Quality of product
f. Op. and closing stock of product
g. Control production cost
2. Research and development
a. Research
i. To work on new product or new process (manufacturing process)
1. Secondary research- further research or extend the primary research
2. Primary research- to find and research on the data collected and
compiled at first hand = FS is primary research
3. Field research-information or data collected in field
4. Desk research- Research within org premises
b. Development
i. To improve the existing product or existing manufacturing process
Which asset is created by R and D- patent (tangible), copyright (intangible) –
resources (make ups).
Purchase Dept.
a. Purchase of raw material
 b. Decide EOQ
c. Purchase price
d. Quality of raw material
e. Quantity
f. Select supplier
g.
h. Time of purchase
i. Build good relations with suppliers

Administration department

1. Involve all activities left by other departments

2. Maintain sanctity of organization (mahol)
3. Ensure dress code
4. Time in and time out of employees
5. Prepare policies and procedure
6. Small repair and maintenance
7. Cleanliness
8. Janitorial services
9. Small purchases (stationary items)
Accounts and finance department

1. Record transections
2. Bookkeeping
3. Prepare financial statement (how many parts of financial statement)
4. Payment and receipt
5. Finance –arrange finances for organization
a. Debt finance loan short term or long term
b. Equity finance –issue shares
6. Parts of financial statement
a. Statement of financial position
b. Statement of comprehensive income
c. Cash flow statement
d. Statement of changes in equity (Share capital, reserves, revaluation, retained earnings,
specific reserves)
e. Notes to the accounts- explanation of all 4 parts

Marketing department
Marketing is process which reduces the gap between customer and organization.
Orientation
Is the point of view which company takes to sell its product?
Marketing orientation
Address customer need price economy
 Target market
Where company sell its product
Product orientation
We are perfect we have made perfect product

Market mix
Ingredients of marketing
7ps used to reduce the Gap between customer and org.
Price
Place Manufacturing
Promotion
Product
Process
People Service Industry
Physical evidence

Also called market strategies Examiner

‘Price
1. Factors on price
a. 4Cs
i. Cost- price is more cost
ii. Customers- price should bring value for money to customer
1. VFM
a. 3Es
b. Effectiveness – Quality
c. Efficiency – Time
d. Economy – Less prices
iii. Competitors – Price
1. Should be set much more then competitor price
2. Neither set much less then competitor
iv. Corporate objectives – strategy or targets of the company
2. Pricing techniques
a. Cost plus technique
i. Monopoly Business
ii. Cost + Profit = price
b. Perceived quality pricing
i. Brands
ii. High price
iii. Price reflect brand value
 iv. No decrease
c. Price penetration
i. Low price
ii. Necessity goods
iii. Low profit margins
d. Price skimming
i. High price
ii. Technology goods
iii. Price gradually down
e. Price discrimination
i. Same goods and services but different prices are set
ii. Price depend upon situation, demand, season climate
f. Loss leader pricing
i. Super store follow this pricing techniques
ii. Some goods are sold at loss and this loss is covered from sale of other goods
g. Bundle or package pricing
i. Buy one get one free.

Product
a. Size
b. Weight
c. Quantity
d. Quality
e. Packing of product
f. Shape of packing
g. Stages of product
ii. Core product – Idea of product , intangible,
iii. Actual product – tangible product- basic need, flagship product
iv. Augmented product –enhanced product
1. Warrants- repairable
2. Guarantees – Exchange
3. Place
a. Where to sell the product
i. Outlet management –shop, showroom
ii. Warehouse management –
iii. Distribution channel
1. Sole distributor
2. Multi distributor
3. Agency
4. Franchising
 5. Branch network
6. Wholesale
iv. Distributor
1. Advance payment
2. No targets
V agency –
Target
Credit payment
Franchising
Capital cost by franchisee
Promotion
Advertisement
Promotion process
Awareness
Interest
Desire
Action

Type of advertisement
ATL
Above the line-headline
Billboards
Banners
Cinema
BTL
Below the line- headline
Leaflet , broachers, flayers, souvenirs, news papers
EM- electronic media
TV, radio, IT
Process
 It play major role in marketing of service industry
 Process means the steps involved to provide services to customers
 If process to provide services is complex it dissatisfy the customers
 Complexity of process is major factor to close the gap between customers and organization
People
 People mean persons who are performing the task of service, who are in direct contact with the
customers.
 Behavior of people matter in marketing of service industry
 Good behavior satisfies the customers and vice versa
 Good behavior brings effective marketing
Physical evidence
 No physical product in service industry
 Only physical evidence to consumer the services is receipt or slip given to consumer

Organization structure
a. Simple structure
b. Functional structure
c. Divisional /product/ brand structure
d. Geographic structure
e. Hybrid structure

Recruitment and selection

1. Recruitment
a. Roles
b. HR planning
2. Selection
a. Test
b. Interview
c. Group selection
d. References
Recruitment
 Roles
o Roles of HR department
 Decide the salary, job description, promotion, training and development
o Role of line manager
 Send job requisition to HR department
 Line manager is immediate boss who need assistant
 Send the objective of new employee
o Role of consultant
 When organization do not have sufficient resource to interview and hire the top
level post
 Organization uses the services of external consultant
 HR planning required for new post
o Job design / Job analysis
 Job Description
 Who will perform the job
 What to do
 How to do
 When to do
 Where to do
 Salary
 Organization factor – designation , reporting lines, accountability and
responsibility
 Development factor- Promotions, educations , training and
development
  Environmental factors – benefits, seating arrangement s, car, tools to
perform the job
 Person specification
 Qualification of person
 Experience
 Salary
 Qualities required to perform the job
o Intelligence
o Dressing
o Communication
o Relation building
o Behaviour
o Team working skills
o Advertisement
 Selection of media
 Print media
 IT
 News media
 News papers
 Digest
 Periodicals etc
 Qualitied of good job advertisement
 Precise description of organization
 No of post
 Designation required
 Salary
 Experience required
 Other qualities required
 Date to apply
 Address to apply
 Other information

Selection
Test
 Types of Test
o Proficiency test
 For professional qualification
 For accountant prepare income statement form the question
o Psychometric test
  To check the intelligence
 Decision making
 Behaviour
 Analytical skills
 Team work
Interview
 Types of interview
o One to one interview
 Only HR department takes interview
 Suitable for small post (supervisor or worker type post selection)
o Panel Interview
 HR manager and line manager both take interview
 Suitable for middle managers
o Group/Board Interview
 Whole BOD is present in interview
 Suitable for higher level posts eg GM, CEO, CFO, COO, CIA, Chief accountant
 Types of questions
o Open questions – question which require lot of details eg explain your self
o Close questions – which are answered in yes or no eg are you Muslim
o Probing questions –questions require more details and clarify your point of view
o Problem solving questions – situation is given ask to solve the problems
o Leading questions – which lead to certain behaviour either positive or negative specially
in army
 Reference
o When person is selected and ask to provide different references
o Professional reference (past working organization , written form, details about last
salary, professional behaviour and knowledge)
o Domestic references – (friends, family, neighbors etc. and enquire about character of
person)
 Group Selection
o Entire group of person is selected
o Eg army select the group, banks select the entire marketing team
o Focus is on group behaviours, coordination and cooperation
o For selection group task are assigned not individual task

Training and development

 Training
Is teaching a person new skill or behaviour
Types of training
On job training
 Training takes place at office premises
 Temporary promotion is on job training
 Senior employee gives training in office about new skills and behaviours
 Use of IT to learn new skill or behaviour in office through webinars, skype etc
 New task or new project is assigned
 Induction training – new employees are trained in office by senior about organization
policies and procedures and culture
Off job training
 Learning provided outside the office premises
 Some courses are offered
 Block learning – entire group of employees are send for training out side the premises
 Sandwich training – employees are send for new courses , they come back (after completing
half of course) and preform what they have learned again send to complete rest of course.
Development
Long term development of employee by offering series of training, education, teaching,
experiences etc
Generally for development some senior employee is engaged in development process
Development depends upon the potential of person.
Types of development
1. Mentoring
a. Mentoring is directive process in which a mentor is engaged with the employee and he
guide him in each and every part of life
b. In mentoring employee have no choice, he has to act as per mentor choice
2. Types of mentoring
1. Professional development – education to increase the professional competencies
2. Psychosocial development -help employees to understand the situation, quick decision
making , how to deal with people , increase the intelligence, behaviours

3. Counselling
a. Non directive process
b. Counsellor help other to help themselves
c. Counselor give choices to counselee about the ways to be selected

Learning
Acquisition of knowledge gained through study, experience, being taught is learning
Types of learning
1. Conditioning- learn from environment and society is conditioning - short term learning
2. Cognitive learning – learning through understanding the information by processing it in brain.
Long term learning
Theories of learning
1. Honey and Mumford Learning style theory
2. Kolb learning cycle theory

1. Honey and Mumford theory

a. There are four types of leaner or process of learning
b. Reflector-they learn through observation
i. Observing other people
ii. Watch and contemplate
iii. They try to copy the seniors
iv. They try perform steps in same way as their senior performed
v. Lower level employees
vi. They like discussion, fall in practical work with senior, want to be assistant
vii. Learn from feedback in context of organization
viii. Technician, mechanic, IT etc
c. Theorist
i. They learn from processing the information in brain
ii. Understand the science of work
iii. Build relation between different activities
iv. Create theory or hypothesis
v. Work on ideas
vi. More objectivity
vii. Result oriented
viii. They like stories, flow charts, videos
d. Pragmatist
i. They learn through performing
ii. They do not depend upon experience
iii. They take risk
iv. Do not believe in theories
v. Actors, society builders, businessman
vi. Perform experiments
e. Activist
i. They learn through challenge
ii. They perform and learn when they are challenged
iii. Brain storming puzzles competitions

Kolb learning cycle

According to KOLB a person learn from all steps told by honey and Mumford
1. Feel
a. Activist
b. Concrete experience
2. Observe
a. Reflector
b. Reflective observation
3. Think
a. Theorist
b. Abstract conceptualization
4. Perform/ do
a. Pragmatist
b. Active experimentation

Performance appraisal
 Performance management aims to get better results for the organisation via the measurement
and evaluation of individual performance
 Appraisal is part of the system of performance management, including goal setting,
performance monitoring, feedback and improvement planning.

Process of performance management

1. From the business plan
2. identify the requirements and competences
3. Draw up a performance agreement ( targets)
4. Draw up a performance and development plan with the individual (for weak areas)
5. Manage performance continually throughout the year, Managers can review actual
performance compare it standards set
6. Performance review

Main components of appraisal

 Reward review
 Performance review
 Potential review
Objectives of appraisal
 To measure and improve the performance of employees
 Increase their future potential
 To judge the gap between the actual and the desired performance.
 improving communication
 understanding training needs
  clarifying roles and responsibilities 
 Allocate rewards.
 Facilitating Promotion
 Motivating Superior Performance
 Setting and Measuring Goals
 Counseling Poor Performers
 Determining Compensation Changes
 Supporting Manpower Planning
Requirement of formal appraisal
1. defining what is to be appraised
2. recording assessments
3. getting the appraiser and appraisee together for feedback and planning.
 Appraisal techniques
1. Overall assessment
a. The manager writes in narrative form his judgements about the appraise.
2. Guided assessment
b. Assessors are required to comment on a number of specified characteristics and
performance elements, with guidelines as to how terms such as 'application',
3. Grading.
c. Grading adds a comparative frame of reference to the general guidelines, whereby
managers are asked to select one of a number of levels or degrees to which the
individual in question displays the given characteristic.
4. Behavioural incident methods
d. These concentrate on employee behaviour, which is measured against typical behaviour
in each job, as defined by common critical incidents of successful and unsuccessful job
behaviour
5. Results-orientated schemes.
e. These review performance against specific targets and standards of performance agreed
in advance by manager and subordinate together
 Appraisal interview
The appraisal interview is an important stage in the process, as it can be used to encourage
collaborative problem-solving and improvement planning
Tell and sell style
Managers are in complete control; they do most of the talking
Manager seeks
 to let the subordinates know how they are doing,
 to gain their acceptance of the evaluation
 to get them to follow the manager’s plan for improvement

Tell and listen style

 Evaluation to the subordinate and then let him or her respond to it.
 Manager describes the subordinate’s strengths and weaknesses during the first part of the
interview, postponing points of disagreement until later

Problem solving style

 Let’s solve the problem together

Barriers to effective appraisal

1. Faulty assumptions
2. Recency error
3. Psychological block
4. Criteria problems
5. Halo effect (false effect)
6. Too much focus on current event
7. Biased supervisor
8. The employee’s appearance
9. appraisal is seen as a one sided process – the manager is judge, jury and counsel for the
prosecution.
10. appraisal as bureaucracy

Direction of appraisal
a. Upward appraisal evaluates managers' performance based on input from their
subordinates ,
b. top-down evaluation format in which a manager is evaluated solely by their superior/
head
c. Horizontal Appraisal – same designation is evaluating the performance
d. 360 degree appraisal –Mix of different appraisal
i. Upward Appraisal
ii. Top down appraisal
iii. Horizontal Appraisal
iv. Customer appraisal
 Stakeholders
Definition
Stakeholders are the parties which influence the organization or can be influenced by the
organization
Types of stakeholders

Internal stakeholders – which exist within the organization includes employees, directors,
management, employee unions, culture etc.
Connected Stakeholders are the stakeholders which have contractual relationship with
organization includes shareholders, customers, suppliers, banks, trade Unions

External Stakeholders – Outside the organization, have no contractual relationships. It includes

Community, Govt., Pressure Groups, Tax authorities, Law enforcement agencies, international
stakeholders.
Stakeholder’s conflicts
Different stakeholders have different level of conflicts among them
Stakeholders Conflicts
Shareholders vs Directors Salary benefits and dividend
Customers vs directors Price and quality
Suppliers VS directors and shareholders Price of Raw material and payment terms
Govt Vs company Tax payments
Environmental agencies vs company Pollutions

How to manage the conflicts

There are two main reasons of conflicts
1. power – control over resources
2. interest – lack of opportunity increase the interest and vice versa (availability of opportunity
decrease the interest)

Mendelow Matrix provide us the best solution to resolve the conflicts

A
Minimal effort
Stakeholders with small power and interest
Minimum efforts to resolve the conflicts
Community and small customers falls in this category and small employees

B
Interest is high power is low
Middle level employees, small shareholders, average customers, average suppliers
In case of conflicts keep all stakeholder informed about company policies, products etc.

C
Interest low but power is high
Govt, institutional shareholders, trade unions, comparatively large customers and suppliers
Keep these stakeholders satisfied by accomplishing their needs

D
High interest high power
Key Players
Large shareholders, directors, banks employee unions
Involve them in policy making process
Involve them in decision making process.
 Organization structure
f. Simple structure
g. Functional structure
h. Divisional /product/ brand structure
i. Geographic structure
j. Hybrid structure

a. Simple structure
1. Sole proprietorship organization
2. Single owner
3. Control in one hand
4. No clear duties and responsibilities
5. Also called power structure as power is in one hand
6. Fast decision making
7. Low hierarchy
8. Tight control
9. Quality of decision may not be good

00000000
b. Functional structure
1. Also called departmental structure
2. Organization is divided in departments on the basis of specialization
3. This structure support the growth of organization
4. Each department take care of all products (no separate department for each product)
5. Suitable for few products (2-3) products
 Advantages Disadvantages
Specialization of skills Empire building
Standardization of process Conflicts among department
No duplication of work Lack of goal congruence

Divisional structure /product / brand structure

Organization is divided in division on the basis of nature of products
Strong middle line management
Each division is headed by divisional head
Divisional head in independent in making strategy
Each division is called SBU (strategic business unit)
Each division have separate department
Organization is divided in different division based on same nature of product and each product
have different department
In divisional structure some departments are centrally controlled under Head office (HR
department or R and D)
Divisional structure is decentralized structure.

Advantages Disadvantages
Growth Duplication of work
Motivation for employees due to Allocation of cost of centrally controlled
decentralized structure department (e.g BOD, CEO cost allocation is big
 problem)
Better Resource allocation Inter divisional conflicts increases
Competition among department increase
the performance and reduce the cost

Geographical structure
It is kind of divisional structure
Organization is spread in different geographical location
Each geo location is independent in strategy making
Head office exist to approve the strategy
Unilever (head office) UK
 Europe
 Asia
o Central Asia
o South Asia
 India
 Pakistan-Divisional Structure H/o- Division
 Bangla Dash D- Divisional structure
 Afghanistan
 Sri Lanka

o Middle East
 Saudia
 UAE
 Qatar
 Oman
 Bahrain
o Far east Asia
 Chian
 Japan
 Korea
o
 America
 Australia
 Africa

Same Advantages and disadvantages as of divisional structure

 Matrix structure
 also called hybrid structure
 it is combination of two structure functional and divisional structure
 it challenged the classical unity of command
 it uses duality of command
 a person is controlled by two managers simultaneously
 team based or project based structure

Advantages Disadvantages
Customer oriented Complex system
Motivation Costly
 Team work Difficult to control
Coordination

mintzberg theory building block model

mintzberg divide the organization structure into five parts
1. strategic apex
a. consist of BOD
b. give long term directions to organization
c. long term planning
d. time period may extend to 7+ years
e. long term targets
2. techno structure
a. involve in providing resources and consultancy to organization
b. help strategic apex to implement plan
c. also include consultant
d. IT, R and D, Quality control (QC), finance, HR marketing department
3. Middle line management
a. Create bridge between strategic apex and lower level staff also called operating core
b. Pass instruction from strategic apex to operating core
c. Physically improvise the plan
d. Purchasing and production department
e. Managers are part of middle line management
4. Support staff
a. Provide support to other departments
b. Repair and maintenance department
c. Law department
d. Admin department
e. Canteen department (to provide healthy food in order to keep employees healthy
through balanced diet)
5. Operating core
a. Working on production
b. Involve in day to day operation
c. Assistant managers and workers, supervisors, foreman
d. Daily production, daily sales, variances, transection recording etc.
 Environment
a. External environment
a. Dynamic
i. Quickly changing environment
ii. Responsive
iii. Eg IT environment
iv. Small and young entity, technology based organization
b. Static
i. Slowly changing environment
ii. Less responsive
iii. Large organization
iv. Work in basis necessity goods (nestle and unilever)
v. Govt Bureaucratic organization (ministry)
b. Internal environment
a. Simple
i. Clear duties and responsibilities
ii. No conflicts among employees
iii. Support and coordination for each other
iv. Clear objectives

b. Complex
i. Conflict among the employees
ii. Conflict may be professional nature
iii. Unclear duties and responsibilities

Mintzberg configuration based on 6 stereotypes of structure

 Type of organization Internal environment / Building block.
external
environment
Simple organization = Simple / dynamic Strategic Apex
sole proprietorship
Machine Bureaucracy – Simple / Static Techno structure
Govt Organization
Professional Complex / static Operating core
bureaucracy- CA
firms
Divisionalization - Simple / static Middle line management
Unilever
Adhoc - cracy (small IT Complex / dynamic Support staff and
firms) operating core
Missionary organization – Simple / static Ideology
religion organization

Robert Anthony theory

According to theory organization has three levels

1. Strategic level
a. Involve in long term planning
b. BOD (NED & ED)
c. Direction
d. 7 years or more
e. They perform 4 steps for strategic management process
i. Strategic analysis (environment analysis)
1. External environment
2. Internal environment
ii. Strategic options(growth options are generated)
iii. Strategic choice (chose best strategy)
iv. Implementation
2. Tactical level (senior managers and managers)
a. Middle management
b. HR strategy
c. Production strategy
d. Competitor strategy
e. Purchasing plan
f. Create bridge between strategic apex and operational core)
g. Break the time of strategic level in half (2-4 years )
3. Operational level (Assistant managers, supervisors, workers)
a. Involve in day to day activities
b. One year plan
c. Daily production
d. Variances analysis
 e. Daily sales and purchase
f. Store management
g. Daily orders

Strategic management process

1. Strategic analysis
2. Strategic options
3. Strategic choice
4. Implementation
What is strategy
a. Long term plan
b. Analyze the environment
c. Understand the competencies (strength and weakness)
d. Maximum resource utilization
e. Gain competitive advantage
f. Fulfill the needs of shareholders.
Why we need strategy
We need strategy to overcome strategic drift
Strategic drift the gap between direction of environment and direction of organization
1. Environment direction- steps taken by environment to reach a certain point.
2. Organization direction – steps taken by organization to obtain certain targets

environment direction

Strategic Drift

Organization direction
 Step No. 1: Strategic analysis
Also called environment analysis
1. External environment (opportunity and Threats)
a. PESTEL
i. P- Political
ii. E- Economics
iii. S- Social
iv. T- technological
v. E- Ecological
vi. L- Legal
b. Porter Five forces
2. Internal environment (strength and weakness)
a. Resources
b. Competencies

Political factors (O/T)

1. Political infrastructure (presidential system or parliamentary system)
2. Basic Govt. Priorities
a. Health
b. Education
c. Infrastructure
i. Skills of labor
ii. Dams
iii. Roads
iv. IT and communication
v. Utilities
vi. Subsidy
3. Relations with neighbor countries
4. Import Policy
5. Export Policy
6. War against terrorism
7. Corruption
8. Capacity building (complete production capacity in country)
9. Investment policy
10. Industrialization (tax free zone)
11. Agriculture policy
12. Nationalization and privatization
13. Lobbying
a. Process used by businessman to influence the Govt
b. For this purpose business engage lobbying firm which build relations with Govt. and
convince govt for certain business policies
14. Administration
15. Crimes
16. Trade Policies

Economic Factors
1. Micro Economic Policies
2. Macroeconomic Policies
3. Economics is study of allocation scarce resources (limited resources -6Ms)
i. Men
ii. Material
iii. Money
iv. Machine
v. Management
vi. Make ups- (good value, brand value, patent value)
4. Firm resources (resources- use of 6M at firm)-
a. Study of allocation of Micro resources at frim level is called Micro economic
b. Micro Resources –Micro Environment
5. National resources (country resources- Use of 6M at national or country level)-
a. Study of allocation of Macro resources is called Macro Economics
b. Macro Resources- Macro Environment
6. Factor of Production (FOP)
a. FOP factors which manipulation generate value for a firm or country
i. Land – Rent (Material, Machine)
ii. Labor- wages and salaries (Men)
iii. Capital - Interest (Money)
iv. Entrepreneur –Profit (Management, Make ups)
7. Micro Economics
a. Law of demand
b. Law of Supply
8. Macro Economics
a. Priorities of Macro economics
i. Economic Growth
1. Growth of country revenue (Sales)
2. Country Revenue is called GDP (Gross Domestic Product)
3. GDP – Gross Domestic product
ii. Inflation
1. Rise in prices
2. Too much money chasing too few goods
iii. Unemployment
1. Joblessness
iv. Balance of payment
1. Balance sheet of country
2. Country assets and country liabilities
3. Exports (receivable) are assets and Imports (payable) Liabilities
Social Factors
Opportunities and threats affecting the society
Society is collection of people living together in different community, cultures etc.
There are some segregations in society
We can divide the society in different parts on different basis.
 This division is called segmentation
Following are types of segmentations
a. Demographics
i. Divide the society on basis of age, gender, height, colour, diseases etc
b. Geographic Segmentation
i. Divide the population on the basis of geographic location
c. Psychographic Segmentation
i. Psychological preferences (choices, brand loyalties, designs, taste, fashion)
d. Behavioral segmentation
i. Purchasing behaviors, income etc.
Family structure (separate family system or joint family systems)
Marriages and divorce

Technological factors
Technology friendliness
Technological shift in industry (conversion of industry from old to new technology)
Skilled workers
Govt Policies to support new technologies (reduce the taxes on import of new machinery)
Impact of technology on organization
 Lower cost production
 Increase in efficiency and effectiveness
 Better resource utilization
 Technology has increased the unemployment in the country
 Technology has reduce the size of organization (organization are becoming more flatter)
 Better control.

Ecological Factor
 Environmental laws
 Role of environmental agencies
 People environment friendliness
 Pollution
 Forestry
 Ecosystem
 Contamination of underground water
 Solid waste management system
 Co2 emission
 Sustainability
o Balanced use of resources so that they can be preserved for our future generation
o Less pollution will preserve ozone layer
o Less wastage of material. Mineral will make all resources be available for them
o Corporate social responsibility

Legal Factors
 Contract law
 Employment law
 Data protection act
 Competition laws
 Sale of goods act

Contract Law
 Following 4 conditions are necessary for valid contract
 Agreement
o Offeror- the person who offer
o Offeree- The person who is being offered
o Acceptance- clear acceptance of offer
o Condition of acceptance
 Counter offer is not acceptance
 Invitation to treat is not offer (thing placed on shelfs are not offer, it will be
consider as invitation to treat.
 Offer cannot be made to world eg. advertisement of sale in newspaper is not
offer
 Consideration
o Consideration is exchange of goods, services and money.
o Consideration is for both offeror and offeree
o Consideration should be sufficient not adequate
 Legal binding
o Domestic contracts are not legally binding
o Domestic contract is the contract between happily living couple
o Commercial contracts are legally binding
 Capacity and Legality
o Capacity mean
o Ownership, capacity to enter in contract, skill etc
o A person entering in contract is in capacity to enter in contract.
o Legality
o Contract must be legal
o Minor person cannot enter in contract.
Employment Law
 Employment is contract between master and slave.
 Both have certain duties (employer the master, employee the slave)
 Duties of employer  Duties of employees
 Take care of health and safety of  Work with honesty and integrity
employee
 Provide necessary equipment to carry  Use of skills and experience
the job
 In case of piece work approach,  Obey the legal orders
employer should provide work to employee
 Give legal orders to employee 
 Reasonable salary 
 
  

 Resignation
o Employee leave the job himself
 Retirement
o Employee leaves the job after completion of age limit.
 Dismissal (employee is dismissed on wrong basis he is not bound)
o Unfair Dismissal
 If employer dismiss the employee on unfair basis.
 Employer has to pay penalty
o Wrongful dismissal
 If employer do not follow the right procedure to dismiss
 Employer should made the committee to enquiry
 Inform labor officer before dismissal
 Redundancy
o If employee get free from job due to completion of contact period or completion of
project, or completion of period is called redundancy.

Data Protection Act

 This act is applicable on safety of personal data
 Personal Data includes NIC Number (National Insurance Card number), spouse name, name of
children, personal details like salary, diseases, DOB, address, phone number etc.
 Data Subject: a person whose data is being kept.
 Clauses of Act
o Data should be secured
o Data cannot be dispersed without prior permission
o Data should be complete
o Data should be updated
o Data cannot be kept longer then required
o Data should not be corrupt (virus free data)
o Data should be disposed-off securely
o Data can be transferred to Law enforcement for legal purpose
o Data Should be used for legal purpose.
Competition Law
Govt implement competition laws in country to promote competition and stop development of
Monopoly in the country.
Monopoly mean when one company hold more than 90% of market resources
Competition is required to provide best quality goods and services at lowest possible price
Govt do not want to develop the cartel.

Sale of Goods Act.

Sale and purchase of goods comes under this heading
Seller or producer is required to print all the details and ingredient used in product on it wrapper.
Name of the company, factory address should be printed on it.
How to handle the product should be part of product packing
Manufacturing and expiry date should be written on it packing
IF product is made under license, it should also be written.
 MRP (minimum retail price) should be written on product

Porter 5 forces
This theory is used to understand the Industry of sector.
Through this theory we can understand the opportunities and threats in industry or sector
According to porter there are 5 forces controlling the industry or sector.
If any company is deciding to enter in new industry for growth purpose, it should understand the
intensity of these forces .
1. Entry barriers or threats to new entrant
2. Bargaining power of customer
3. Bargaining power of suppliers
4. Threats of substitute product
5. Intense rivalry

1. Entry barriers or threats to new entrants

a. Some forces to stop new company to enter in the industry.
b. High capital
c. Technology
d. High finance cost (bank change the interest rates industry to industry)
e. Skills
f. Embargos (administrative and technical difficulties imposed by Govt.
g. Quotas (Govt gives limit and business cannot cross their limits)
h. License
i. Cartels
j. Political interference
k. Laws and regulations
2. Bargaining power of customers (power to influence price and other policies)
a. No of customer (high number of customer low will be their bargaining power)
b. Consumer association (to protect the right of customer) and it increase the bargaining
power of consumer
c. Consumer protection laws increase their bargaining power.
d. Rationale of customers (knowledgeable customer) increase their bargaining power
e. Customer purchasing pattern
f. Switching cost (when customer switch to alternative product difference in the cost is
called switching cost). High switching cost decrease the bargaining power of customer
g.
3. Bargaining power of suppliers
a. No of suppliers – more number of suppliers low will be their bargaining power.
b. Supplier association – increase the bargaining power of suppliers
c. Supplier switching cost – high SC high will be BP
d. Scarcity of RM increases suppliers bargaining power
e. Demand of raw material high demand strong supplier
f. purchasing pattern of industry (discounts)
4. threats of substitute product
a. the product with different morphology (physical characteristics) serve same purpose.
b. E.g coke and sprite, juices and water
c. Number of substitute products
d. Switching cost among substitute product
 5. Intense rivalry
a. Number of competitors
b. Price war
c. Competition laws
d. Lobbying
Internal environment analysis
Capability of resources and competencies
Resources = 6Ms
Competencies = how we are using resources
Core competency
Non-core competency
Strength and weakness of organization
Ratio analysis

Strategic options (to identify growth options)

a. Cost side (control the cost)
a. Porter Value chain analysis
b. Porter 3 generic strategies
b. Revenue Side options (increase the revenue)
a. Strategic alliance
b. Acquisition and mergers
c. Organic growth
d. Joint venture
e. Franchising
Cost side option

a. Porter value chain analysis

 According to porter there are two activities taking place in organization
a. Primary activities
a. Are basic activates
b. Involve in each and every business performed in different forms
b. Support activities
a. Its support is required in primary activates to save the cost
b. Procurement – purchase of items required
i. It is different from purchase department as purchase department is only
purchase raw material however procurement department purchase each and
every item in organization
c. IT
i. It provide support in form of Information technology, software and hardware
d. HR
i. Hiring of competent staff, firing on incompetent staff, training and development
e. Infrastructure
i. Hierarchy, duties and responsibilities, company policy, growth, strategy, culture
How cost can be saved

a. Inbound logistics
a. It include all the process from giving orders, selecting suppliers, price negotiation,
carrying and holding of raw material.
b. Part of procurement
i. EOQ decide
ii. Price negotiate
iii. Relation with suppliers
 iv. Quality of raw material
c. HR department part
i. Select competent staff
ii. Ensure training and development
d. IT department role
i. Introduce JIT in inbound logistics
ii. JIT- just In time
iii. A computerized system used to save the holding cost
e. Infrastructure
i. Payment policy to supplier
ii. A good payment policy help to build good realtions with suppliers .
b. Operations
a. A process which converts raw material into finished goods
b. Part of procurement
i. Purchase spare part of production machinery
ii. Packing material of finished goods
c. HR
i. Same as above
d. IT department
i. Production process automates
ii. Auto CAD (automatic computer aided design)
e. Infrastructure
i. Production and quality policy
ii. Policy on product mix
iii. Op and cl stock policy
c. Outbound logistics
a. Whole process start from Finished goods to make it available for customers
b. Procurement
i. Purchase of delivery vans
ii. Decide the route of vans
c. HR
i. Same as above
d. IT department
i. Develop online ordering system
ii. Save ordering inward cost
e. Infrastructure
i. Decide distribution channel
ii. Sole distributor-works on advance, no sales targets are not allocated
iii. Agency manufacturer provide the goods on credit to the agency, sales targets
given
iv. Branch network- organization develop its own branch network, organization
distributes it self
v. Franchising- license to sale the product is awarded and organization uses license
to manufacture the product (foods, medicine etc)
vi. Wholesale- used by unbranded goods, cash purchase on bulk.
d. Marketing and sales
a. Procurement
i. Purchase of marketing material
 b. HR
i. Same as above
c. IT
i. Use of IT for marketing
ii. Website development
iii. Use of social media (FB, Twitter, youtube etc.)
d. Infrastructure
i. Marketing strategies
ii. Commission policy is decided
e. After sales service
a. Procurement
i. Purchase of quality repairing parts
b. HR
i. Same as above
c. IT
i. Online complaint system
ii. Feedback forms
iii. Reply to customer complaining
d. Infrastructure
i. Warranties- only parts replacement
ii. Guarantees- product replacement
 Porter 3 generic strategies
Cost side strategy
A company have three basic growth strategies
Cost leadership, Differentiation, Focus
Strategies

Cost Leadership Differentiation

Broad  Lowest cost in industry  Uniqueness in product
 PVCA  Increase R&D cost
Segment
 Economies of scales  More product development
Segmentation ation  Low price  Competitive advantage
High  Low quality  High price
populatio  High quality
n
Focus (on customers)

Narrow Differentiation
Cost
segmenta
Leaders
tion
hip
Low
populatio
n

Marketing approach
Direct marketing
Door to door or institutional marketing
Build direct relation with the customer due narrow segment
Low population easy to build relation with customer
Suitable for focus strategy
Leaflet, flyers, billboards, customer agents, emails, workshops
Indirect marketing
Mass marketing
TV, Radio IT
Broad segment

A company making cars

USA
Segmentation on basis of income
High income (model Y)-high production
a. 70% (broader segment)
b. Differentiation (broader and high income)
c. High price cars
Low income (model X of car)- Low production
a. 30% (narrow segment)
b. Focus but cost leadership (narrow segment and low income)
c. Low price cars
 Pakistan
High income (Model Y) - low production
a. 30% (narrow segment)
b. Focus but differentiation (narrow segment and high income)
c. High price cars
d. Use direct marketing
Low income (Model X)- high production
a. 70% (broader segment)
b. Cost leadership (broader segment but low income)
c. Low price cars
d. Indirect marketing approach

Revenue side options

1. Strategic Alliance
a. This is contract relationship between two or more companies. This contract is made to
overcome weaknesses.
b. For example Coke and Nestle
c. Nestle lack good distribution network and Coke was deprive of good quality water. They
entered in contract in which coke will give distribution network and nestle will give good
quality water to coke.
2. Acquisition and mergers
a. When one company acquire another company to grow
b. This acquisition may be competitor or may be in other area.
3. Organic growth
a. Uses internal reserves
b. Increase its own branch network gradually
4. Joint venture
a. When 2 or more companies joint their resources and competencies to from another
company.
b. E.g A and B pool their capital and Form Company C. This C is joint venture
c. Parent companies continue their original business.
5. Franchising
a. When one business obtain the license to manufacture or sale the product the product of
another company is called franchising
b. In franchising company pays royalty on manufacture or sale of product.
c. E.g. KFC, Pizza hut, dominos etc.

Strategic Choice
How to choose the best strategy
a. CBA model (cost benefit Analysis Model)
a. Cost
1. Tangible Cost
2. Intangible Cost
b. Benefits
i. Tangible Benefits
 ii. Intangible Benefits
b. SAF model (suitability, acceptability, Feasibility)
a. PESTEL wise suitable
b. Acceptable shareholders
c. Feasible –resources (6M)

Implementation
Structure
Culture
Motivation
Marketing
Leadership
Corporate governance
Ethics
Audit
Behaviors
 Economics
 What is economics
 Types of economics
 Factor of production
 Market
 Micro Economics
 Macro Economics

What is economics
Economics is study of allocation of scarce resources.
Scarce mean limited.
Wealth
Money allocation
Pricing
Customers and suppliers

Types of economics
There two types of resources
1. Resources directly affecting firm or organization. Study of allocation of these resources are
called micro economics
2. Resources which are affecting country. Study of allocation of resources affecting country is
called macroeconomics.

Factor of production
Are the factors which manipulation generates value for organization and country.

Land: Cost of land Rent. Material and Machine

Labor: Cost of labor is salary and wages- Men
Capital: cost of capital is Interest- Money
Entrepreneur: cost entrepreneur is Profit- Management, makeups

Markets
Market is place
a. Where potential buyer and seller meets
b. Exchange of goods and services takes place
c. In Arm Length transection
a. Arm length mean (fair market value)

Types of market
1. Perfect market
a. It is ideal market (do not exist is world)
b. Concept of perfect market is designed to test economic laws
c. Perfect competition
d. Large number of buyer and sellers
e. No single buyer or seller is in position to influence the market
f. No entry or exit barriers
g. Homogenous products
 h. Rationale customers
2. Monopoly
a. One supplier have more than 90% resource in industry
b. E.g Pakistan railway
c. WAPDA
d. Monopoly is not good for economic health
e. Govt. want to avoid the monopoly situation
3. Oligopoly
a. 2-3 major market players
b. Association of supplier or market player
c. They create kind of monopoly
4. Monopolistic competition
a. Real world competition
b. Different products
c. Customer is no rationale
d. Entry and exit barriers
Substitute Products
Product with different morphology serves same purpose
Complementary Goods
The goods which can be used in conjunction with each other
Petrol and vehicle
AC and electricity
Student and book, teacher, curiosity

Utility
It the satisfaction or pleasure derived from consuming the goods is utility.
Law of marginal utility
Satisfaction or utility decreased by consuming one extra unit.
In economics marginal means one extra
For example Marginal cost – cost of making one extra unit
Marginal price = price of one extra unit

Law of demand
Demand is inversely proportion to price
High price low demand and vice versa.

Price

Demand curve

Demand
Shift in demand curve
Shift takes place when price of product do not change but quantity demanded changed

Price

P1

Q1 Q2 Demand

Factor of shift
1. Change in price of complementary and substitute goods
2. Change in disposable income (income = Expense + savings) expense part of income is called
disposable income.
3. Change in fashion
4. Change in taste
5. Change in climate and location
6. Change in populations

Demand curve in real world

This curve is due to marginal utility

Price elasticity of demand (PED)
Change in price bring what change in quantity demanded
Eg if price change by 20% will demand change by same magnitude
There are three possibilities
a. Demand will also change by 20% = unit elasticity (ideal condition)
b. Demand will be change more than 20% (price elasticity or elastic goods )
c. Demand will be change less than 20% (price inelasticity or inelastic goods )
How to calculate price elasticity of demand
Graphical method
a. Also called Arc elasticity of demand
b. It graphical presentation of change in demand

Price

Quantity

Arithmetical method
Coefficient of price elasticity of demand=( ∆Q /Q 1) ⁄ ( ∆ P /P 1)
∆ P is P1 (old price)- P2 (new price)
∆ Q is Q1 old quantity – Q2 new quantity

Price of Product X is $13 and at this price quantity demanded is 423,000. Company decided to
change the price by 17% and at new price estimated quantity demanded will be 389,000.
Please find the PED?

∆ Q=¿ 423000-389000=34000

∆ P = 13*17% = 2.21
PI= 13
Q1 = 423000
(34,000/ 423,000) ⁄ (2.21/13)

= .0804
= .17
CPED= 0.473
If PED > 1= Goods are elastic goods = Luxury items (little increase in prices more decrease in
demand)
 PED < 1 = Goods are inelastic goods = Basic necessities (more increase in price little decrease in
demand)
PED = 1 =Unit elastic Ideal condition

Income elasticity of demand

Change in income brings what change in demand.
=( ∆Q /Q 1) ⁄ ¿)

Cross elasticity of demand

Change in price of substitute goods brings what change in quantity demanded
=( ∆Q /Q 1) ⁄ ¿
It is used to understand the shift in demand curve.

Law of supply
It is the relation between supply and price
Price is directly related to quantity supplied
High price high will be the quantity supplied
Take the supplier point of view
High price bring more profit to suppliers.

Shift in supply curve

Shift in supply curve take place when price do not change but quantity supplied increased.
This is due to change in cost of factor of production
If cost of factor of production decreases, profit margin increased and supplier ready to supply more
goods due to high profit margin.
Factors of shift
Change in price labour
Change in price of material
Change in price of overheads
Reduction in taxes
Reduction in Interest rates

What extent supplier seems ready to supply

Supplier seems ready to supply until and unless
MC=MR
Marginal cost = cost of making one extra unit
1200 units $22000 =22000/1200 =18.33
1250 units $23,500
50 units $1,500
Per unit cost 1500/50= 30
Marginal revenue is price of product
MC=MR
Price = cost
Macro economics
4 basic Govt. economic priorities
1. Economic growth
2. Inflation
3. Unemployment
4. Balance of payment

Economic Growth
EG is growth in GDP (Gross Domestic Product) and GNP of the country ‘
GDP is same as revenue of the country (sales in company)
It can be calculated as
1. Revenue method – to add up the all revenue earn by the companies and salaries earned by
individual
2. Production method- add the prices of goods manufactured in the country
3. Expenditure method
a. GDP= C+I+G+ (X-M)
b. C= consumer expenditure (serve as revenue for the companies )
c. I= investment (serve as revenue from which purchase are being made)
d. G= Government spending
i. Development spending (health, education, infrastructure)
ii. Non development spending (salaries and other expenses)
e. X= Export
f. M= Import
4. GNP= Gross National Product
5. GNP= GDP + remittances Inward – Remittances outward
6. GDP represent as comparative term in form of %
7. This %age compare the figure with previous years.
8. GDP have two parts
a. Real increase- when production increased
b. Monetary Increase - just prices increased no increase in production inflation
c. 1500 product @ RS10-15000
d. 1500 product @Rs 12-18000
9. Multiplier effect
a. It is also called Snow ball effect
b. It is the effect created by Govt. injection of money in economy through development
expenditure eg. Govt spend money on Health, education, dams, power, agriculture,
roads.
c. This effect magnify many times.
10. Trade cycle
1- Recession – high unemployment, low spending, high interest rate
2- Growth – unemployment become low , increasing consumer spending, increase in GDP
3- Economic Boom – Maximum employment, Maximum consumer spending, Maximum GDP
4- Downfall- Unemployment tends to increase, decreasing consumer spending decreasing GDP
According to economics this cycle repeat in 15-20 years.

How Government Increase the GDP of country:

1. Govt. increase the consumer spending

2. Government reduces the tax rate, low prices and low prices increase purchasing capacity of
the consumer.
3. High consumer spending high GDP
4. Govt. Increase the investment in the country
5. Introduce tax free zones
6. Low tax on import of machinery
7. Increase production capacity of country
8. Govt. increase local production
9. Govt. provide skilled labour
10. Promote education for skilled educated labour
11. Lower tax rate on new investors
12. Govt. increase its spending on development projects
13. This development projects create multiplier effects
14. Inject money in economy
15. Lower the interest rate , low cost of capital and production cost
16. Low production cost increase the profit margin , high profit margin induce the investor to
invest more money in production
17. Control inflation, low inflation high purchasing power, high purchasing
18. Govt. tends to increase export of the country
19. Give incentive to the exporter by lowering the tax rates on exporter
20. Give other incentive to export by rebates (reclaim of duty and taxes)
21. Govt. increase the exchange rates, high exchange more conversion of money generates more
profits
22. Eg 1$ = Rs. 100, Govt increased the exchange rate to Rs. 150. (Devaluation of local currency)
23. A person export $1000 @ 100 equal to 100,000 but after increase in exchange rate it has
become 150,000.
24. This devaluation of money has decreased the import.
25. Eg 1$ = Rs. 100, Govt increased the exchange rate to Rs. 150.
26. A person who was exporting $1000@100= 100,000 now cost of; import become 150,000.
27. Import became costly, low purchasing power of consumer. Slowly gradually import reduces
the import and this will boost the GDP as per formula.
28. Political stability

Inflation
1. Rise in prices
2. Too much money chasing too few goods
3. It takes place when money in circulation increases
4. Inflation is allocation of money on goods produced in the country or kind of ration between
goods and money in circulation
5. E.g in country total cash in circulation is 1,000 and 50 products are produced
6. Allocation became 1000/50 mean 20 rupees to purchase goods.
7. Suddenly Govt print more notes of 200 hundred now money became 1200
8. 1200/50 now money available became 24 to purchase the goods.
9. Types of inflation
a. Cost Push Inflation
i. This type of inflation takes place when cost of factor of production increases.
ii. There are many reasons of cost of factor of production to increase eg demand
and supply, change in interest rate, political stability and globalization
b. Demand pull inflation
i. This phenomenon took place in japan in early 80s.
ii. In japan production capacity reaches to maximum level around 95%
iii. But demand continue to rise
iv. At certain level production stops to increase.
v. Due to which rise in prices took place
c. Imported Inflation
i. When cost of imported item tend to increase
ii. Two main reason of imported inflation
1. Devaluation of money
a. Rate of 1 dollar is Rs100
b. If a person import $1000 it will cost 100,000
c. After devaluation of money 1$ = Rs 150
d. $1000 import equal to Rs 150,000
2. Exporter increase the price of items
d. Monetary Inflation
i. This inflation is major factor contribute towards inflation
 ii. When Govt. issue more currency bills (more currency notes are printed)
iii. Allocation of money towards goods is disturbed.
e. Price wage spiral
i. In case of anticipated inflation (not real inflation), employees demand to
increase their salaries. Now employer have two choices
1. Increase the salary and increase the price accordingly
2. Fire the employees from organization and distribute their salaries in
rest of employees but this will create the unemployment.
10. Unemployment
a. Types of unemployment
b. Cyclical unemployment
i. This unemployment takes place when trade cycle in economy shift from boom
to downfall.
ii. GDP decrease, consumption or spending decreases, demand decreases, also
production decreases causes unemployment to increase.
c. Frictional unemployment
i. Short term unemployment
ii. When employee leaves the job and look for another job for better salary and
growth. He remains unemployed for some time.
iii. That unemployment is called frictional unemployment
d. Technological or structural unemployment
i. When change in technology takes place, old technology worker get
unemployed.
e. Seasonal unemployment
i. Seasonal industry observe this unemployment
ii. Seasonal worker get unemployed in off season
iii. E.g. Textile or sugar industry
f. Real wage unemployment
i. In case of anticipated inflation (not real inflation), employees demand to
increase their salaries. Now employer have two choices
ii. Fire the employees from organization and distribute their salaries in rest of
employees but this will create the unemployment.
Balance of payment
BOP is same as balance sheet in organization
It is country balance sheet
Exports are receivable and considered as assets
Imports are payable and considered as liability
There are three types of accounts
Current account- import and export of revenue items constitute current account
Capital account- import and export of capital items (import and export of heavy machinery are
settled in capital account)
Finance account- it is settlement account
Entries for current account
For example export of garments
Current Account Dr
Garment (country name)Cr
When payment received
Finance Account Dr
Current Account Cr
Import entries
Import of petrol
Petrol Dr
Current Account (country name) Cr
In case of payment
Current Account (country name) Dr
Finance Account Cr
Same entries for capital account in case of import and export of capital item

Budgets
There are three types of budgets
1. Balanced budget – same level of income and expenditure for government
2. Deficit budgets – more Govt spending and less revenue through low tax rates.
a. Keynes was economist and supports this type of budgets in order to increase the
consumer spending and GDP growth.
3. Surplus Budgets- High taxes, more Govt. income and low Govt, spending on development.

Fiscal policy: Govt. control economy through taxes and this policy is called fiscal policy
Monetary policy: Govt Control economy through change in interest rates and devaluation of
money this policy is called monetary policy.

Stagflation
It is combination of inflation and stagnation.
Inflation mean increasing and stagnation mean stopped.
It is state of economy in which inflation takes place but economy is not growing.
Inflationary Gap
Difference between real value of goods and inflated value
Deflationary Gap
Current employment income and full employment income gap is deflationary gap.
ECONOMICS is ended
 Culture
a. Definition
b. Factors
c. Who create culture in organization
d. Cultural artifacts
e. Theories
a. Edgar Schine
b. Handy 4 cultural stereotypes
c. Hofstede theory
1. Definition
a. Shared values and beliefs called culture
2. Factors on organizational culture
a. Purpose
b. History
c. Size
d. Age
e. Technology
3. Cultural artifacts (objects created for subsequent use)
a. Rituals (customs)
b. Stories (success stories)
c. Language (specific words)
d. Material symbols (tangibles, like dress, houses)
4. Who create culture in organization
a. CEO of the company
b. BOD
c. Senior management
 d. Shareholders
e. Stories
f. Policies
5. Theories
a. Edgar Schein
b. According to him there are three levels of culture

1. Underlying assumption
a. Hidden values
b. Hidden reason
c. No one know the main reason of act
2. Espoused values
a. Pertain to non-living thing
b. Office space
c. Furniture
d. Name plate
e. Logo
f. Motto of the company
i. E.g. great people to fly with etc.
g. Color etc.
h. Light arrangements
i. Letter head
j. Crockery
3. Observable behavior
a. Pertain to living things
b. Dress code
c. Greeting styles
d. Rituals
e. Stories
f. language
Handy ’s 4 cultural stereo types.

Handy divide organization on the basis of culture and name it on Greek gods.
1. Zeus
a. Power culture
b. Also called web culture
c. Power in concentrated
d. Centralized DM
e. Small and young org
f. Sole proprietorship
g. Employees are controlled by owner
h. Less policies and procedure
i. Less formalization, less formal communication
j. Less duties and responsibilities
k. Low hierarchy
l. Flat org
m. Cost saving
2. Apollo
a. Bureaucratic culture
b. Role culture
c. Clear duties and responsibilities
d. Tall structure
e. More hierarchy
f. Less innovation
g. Slow responding
h. Value is of position
i. Strict rules and regulation
j. Go by the book
3. Athena
a. Task culture
b. Innovation
c. Flat organization
d. Professional organization
e. Creativity
f. Time based job
g. Value is of person or work
h. Hard work
i. Software house
 j. Tight schedule
4. Dionysus
a. Mix of all above culture
b. CA firms and Law chambers

Hofstede theory
Hofstede has divided national culture into 6 aspects
According to him if organization wants success, need to introduce the national
culture in organization.
1. Power distance Index (PDI)
2. Individualism vs collectivism
3. Uncertainty avoidance index
4. Masculinity vs Feminine
5. Shor termism Vs Confucius
6. Indulgence vs Restrained

1. Power Distance Index

2. Distance between people and Govt.
3. Govt can listen people voice easily
4.
High PDI (panama) Low PDI (Israel)
More hierarchy Less hierarchy
More control Less control
Narrow Span of control Wide span of control
Irresponsible behavior Responsible behavior
Inequality Equal behavior
Unequal distribution of wealth Better distribution of wealth

2. Individualism vs collectivism.
a. how personal goal are prioritize over collective family goal or social goals.
b. Social value prevailed or individual values are preferred
 Individualism Collectivism
Individual decision making Social DM
Organizational interest is protected Social Interest is protected
Lack of interaction More interaction with each other
Prefer work Prefer relation
Independence Dependence
Responsibility Dislike responsibility
Lose control Tight control

Uncertainty avoidance Index

Uncertainty is avoided by planning
High UAI USA Low UAI Pakistan
High planning Low planning
No tolerance High tolerance
Rigidity Flexibility
Low hierarchy High hierarchy

Masculinity vs Feminine

Males have decisive value

a. Muscularity b. Feminine
c. Decisive power d. Equal gender role
e. Independence f. Softness and tenderness
g. Materialism h. Low materialman
i. Less society j. More society
Ch Committee
1. Define
2. Difference between committee and team
3. Terminology
4. Need of committee
5. Types of committee
6. Role of chairman and secretary

Define committee
Committee is group of people to whom some work is committed.

Difference between team and committee

Both team and committee are made by some authority
But there is difference between team and committee
a. Committee have authority to improvise the decision
b. Committee have heavy rules and regulations
c. Committee have chairman and secretary
d. Accountability
a. Individual accountability in committee
b. Mutual accountability in team

Terminology
1. Convening the meeting
 a. Call the meeting on pre decided time and venue
b. Convening the meeting is responsibility of secretary of committee.
2. Article (temporary) and memorandum (permanent) of association
a. Rules and regulations of meeting use to run the meeting.
b. It is kind of constitution of committee
c. Code of conduct or code of business of meeting
3. Proposal or motion
a. Any suggestion moved in meeting is called motion
4. Proposer
a. Person who gives ides, suggestion at first hand
5. Seconder
a. Person who second the meeting
b. For successful motion minimum one seconder is required

6. Voting
a. Use of right is called vote
b. Voting is used to pass the motion
7. Quorum
a. Minimum person required to attend the meeting to continue it.
8. Proxy
a. If a person is not able to attend the meeting he can send appropriate
person to attend the meeting and mark attendance.
9. Ruling
a. Immediate decision on some issue and pass the order about this decision
is called ruling.
10. Point of order
a. Any matter which goes against the law or article and memorandum.

Types of committee

1. Executive committee
a. Purpose is to give direction, make strategies long term planning
b. Example is Board of directors
c.
2. Standing committee
a. Long term committee
 b. Implement decision
c. Take critical decision
d. Formed to deal with complex situations
e. Govt: Public accounts Committee , Pakistan economic affair committee
3. Ad hoc committee
a. Short term committee
b. Made for specific purpose
c. Purpose is resolved committee dissolved
d. Investigations (JIT)
4. Sub committee
a. Formed to help standing committee
b. It assist other committees
c. Share the burden of standing committee
d. Long term in nature
5. Joint committee
a. This committee coordinate the between different committees
b. It coordinate between standing and sub committee
6. Steering committee
a. Project based
b. Help to speed up the projects
c. Short term
d. Project based
e. Give direction to the projects
7. Management committee
a. Help management to run the company (next chapter)
b. Part of corporate governance
c. Types of management committee
i. Nomination committee
ii. Remuneration committee
iii. Audit committee
iv. Risk committee
8. Health and safety committee.
a. To take care of health of employees
b. Ensure safety of employees
c. Safety procedure
 d. Health insurance
Purpose of committee
1. Brainstorming
2. Generate ideas
3. Implementation the decision
4. Complex situation
5. Bullying tactics (negative aspect)
6. Training and development
7. Better Control

A council is a group of people who come together to consult, deliberate, or make decisions.

A committee might also be denoted as a council, though a committee is generally a

subordinate body composed of members of a larger body, while a council may not be.

Role of chairman
Maintain the sanctity of committee (ensure the rules and regulations)
Brief the agenda
Ruling
Leader (head of committee)
Approve the projects
Bring impartiality

ROLE of secretary
1. Before meeting
a. Convene the meeting
b. Decide and distribute the agenda of meeting
c. Co-ordinate
d. Decide the venue of meeting and ensure its availability
2. During meeting
a. Assist the chairman
b. Take notes of proceeding in committee (minutes of meeting)
c. Create opportunities to take part for members
d. Answerable to committee on different matters
3. After meeting
a. Distribute the minutes of meeting
b. Minutes of meeting are written proceedings of meeting
c. Obtain members agreement on minutes of meeting
d. Work on assignments imposed by committee.
 Ch. Corporate Governance
1. Definition
2. Explanation
3. Objective of CG
4. Importance of CG
5. Limitation of CG
6. Role of BOD
7. Role of chairman and CEO
8. Role of NED
9. Role of committees
a. Nomination committees
b. Remuneration committee
c. Audit committees
10. Corporate Governance theories

Definition
Corporate governance is set of law, rules, regulations and principles through which
a company is directed and controlled.
1. Controlled
a. Externally
b. Govt.
c. Laws rules and regulation
d. Accounting and auditing standards
2. Directed (principles)
a. Internally
b. Involvement of directors (Board)
c. Director should involve in Strategy process
d. Director should support Ethics
e. Corporate culture
f. Internal Control systems in organization
g. Honesty
h. Transparency
i. Split of role of chairman and CEO
j. No one have unfetter power to govern the company
3. Elements of corporate Governance (pillars of CG)
a. Scepticism – doubtfulness
 b. Professional Judgment use of knowledge and experience
c. Fairness- unbiased
d. Reputation- careful about organizational reputation in market
e. Transparency- openness (each and every condition is disclosed to
shareholders in annual report and AGM once in year)
f. Innovation –bring creativity and innovation
g. Accountability- sense of answerability to shareholders
h. Personnel- training and development
4. Code of Corporate Governance (these are principles issued by FRC Financial
reporting council UK)
a. Leadership (chairman and NED)
i. Involvement of BOD in strategy process
ii. Corporate culture
iii. Ethics
iv. No one have unfettered power
v. Split of role of CEO and Chairman
b. Effectiveness (nomination committee)
i. Skills of board of director
ii. Training and development
iii. Mix of ages
iv. Innovation (effectiveness and efficiency)
v. Succession planning (replacement of directors)
c. Accountability (Audit commoitee)
i. Transparency
ii. Report the fair performance of company
iii. Strong internal control
iv. Risk management
d. Remuneration ( Remuneration committee)
i. Fix the remuneration of ED
ii. Remuneration should base on their performance
iii. Less fixed and more performance base salary
e. Relation with shareholders (AGM- annual general meeting and EGM
extraordinary general meeting)
i. Equable treatment of shareholders
ii. Institutional investor involvement in strategy.
 Application of corporate governance
a. Rules based approach
a. Make corporate Governance part of law
b. On non-compliance impose penalties, jail, damages etc
b. Principle based approach
a. Make code of corporate governance part of principles
b. In that rule CG are either applied or explained
c. No penalties are imposed
d. It is left on shareholder what punishment they suggest
.
Importance of CG
Bring impartiality to operations
Reduced risk of fraud
More confidence of shareholders
Growth
Objectivity (fairness or unbiased management)
Better internal control
More credibility of financial information
Sense of accountability
Effectiveness and efficiency

Limitation of corporate governance

Dominance of one person
Inexperience NED
High cost
Collusion mil jana

Role of BOD (ED and NED)

Strategy
Ethical principles
Policies and procedures design and implement
Bring effectiveness in operations
Corporate culture
HR management
Training and development
Prepare financial statement and maintain books of accounts
(it is responsibility of BOD, if BOD failed to prepare and maintain books of accounts
it is crime and criminal activity, jail and penalties )
Assets utilization
 Growth

Role of NED
Strategy
Performance evaluation of ED
Risk management
Monitoring

Role of Chairman and CEO

Chairman is head BOD
Chairman is independent NED
Involve in direction of BOD
Agenda and meeting
Approvals of plans
Direct relation with shareholders
Not involved in operative activity
CEO ( part of ED)
Head of company
Involve in day to day operations
Implement the strategy
Design and implement internal control system
Part of BOD
Prepare and present plans CEO but approved by BOD and chairman
Answerable to BOD
It is part of corporate governance to split the role of chairman and CEO
Segregation of duties.

Role of committees
1. Nomination committee
a. Consist of NED
b. Nominate the director for further election
c. Nomination is done on the basis of past performance
d. Maintain balanced skill and experience
e. Diversity in BOD ( male and female directors)
f. Training and development of directors
2. Remuneration committee
a. Consist of ED and NED (weightage of NED)
b. Set remuneration of ED
 c. Remuneration should be based upon past performance
d. Less Fixed part of remuneration, more part will be based upon
performance like bonus and commission.
e. Remuneration should be market based enough to retain the director
3. Audit committee
a. It consist of minimum 3 NED
b. Only NED
c. One of NED should be current financial back ground. (ACCA, CA, ICMA etc.)
d. Review the integrity of financial statement
e. Review the internal control system
f. Monitor the function of internal audit
g. External auditor is selected by shareholders.
h. Audit committee nominate the external auditor
i. Ensure the independence of external auditor(No threats to external
auditor)
j. Review internal audit report
k. Report to the shareholder on function and work performed by audit
committee.
l. Details of members of audit committee
m. Communicate with external auditor
4. Theories
a. Stewardship theory
i. Directors are stewards of company assets.
ii. They are bound to safeguard the assets and take company
obligations.
iii. Their main part is to stop the misuse of assets ( to save assets from
theft, errors, fraud misstatements etc)
iv. Utilize the assets in direction set.
v. Liabilities are company obligations (it is directors responsibility to
take care of all company obligations)
b. Agency theory
i. Directors are agents
ii. Shareholders are principal
iii. Director act according to principals demand and wishes
iv. Principal pay cost to agent for business operations and growth
 v. This cost is called agency cost
vi. Agency cost includes
1. Director salaries
2. Directors benefits
3. Monitoring cost
a. Auditor cost
b. NED cost
c. Audit committee cost
c. Stakeholder theory
i. It is responsibility of director to take care of all stakeholders
5. CSR
a. Corporate social responsibility
b. To serve the society
c. Fill social need
d. Social need
i. Community development
ii. Benefits for employees
iii. Road
iv. Hospitals
v. Education
vi. Clean environment
vii. Parks
viii. Step to educate society
ix. Development of society
x. Reduce carbon footprints
xi. Environmental costing
xii. NGO
xiii. Every organization should understand the needs society and act in
betterment of society.
Strategies for CSR (Caroll)
ENGRO AO
1. Proactive Strategy
a. To take first step to spend on CSR
b. Beat the competitors
c. Fix it, Engro
2. Reactive strategy
a. Spend on CSR but in response to competitors or any change in law new
legislation
3. Defensive Strategy
a. Spend on CSR but minimum
4. Accommodating strategy.
a. Take care of all CSR issues in best possible way to help all stakeholders.

Ethics
Part 1
Define ethics
Ethical types
Ethical development
Ethical dilemma
Ethical application
Part 2
IFAC
ACCA code of ethics
Ethical threats
How to deal with ethical threats
Professional ethics of accountants

Define Ethics
Ethics is difference between right and wrong
What is right and what is wrong
Ethics is relative term
It is not absolute term
Ethics can be defined in relation with
 Society
 Culture
 Religion
 Law
Type or Stages of ethics
1. Meta ethics
a. To understand the ethical principles in society
 b. Embedded culture
2. Normative ethics
a. To understand collective behaviours of different society
b. To find the similarities in different societies, cultures
c. Legislation process based upon normative ethics
3. Applied ethics
a. How to apply the ethics
i. Compliance based approach
1. Rule based approach
2. Make ethics part of law
3. Apply ethics by force
ii. Principle base approach
1. Believe in training and development
2. To follow the spirit of law
3. Education
4. Spirit of ethics
4. Ethical development
a. How ethics developed in society
b. Consequences based approach
i. Ethics are developed for desired consequences (results)
c. Duty based approach
i. Ethics are considered as duty no matter what the consequences are

a. Consequences based approach

a. Egoism
i. Initial method of developing ethics
ii. Ethics are developed to satisfy the personal egos.
iii. Eg. Protocol of prime minister
b. Pluralism
i. These ethics are developed to benefit majority of population
ii. In Pluralism consensus need to be developed
iii. For ethical principles to benefit poor.
c. Utilitarianism
i. Provide utility to entire society (not only majority)
ii. E.g. right of education
b. Duty Based approach
a. SOME OF THE ETHICS are developed as part of duty rather consequences
Ethical relativism: Are those ethical principles which developed in relation
situation.
i. Ethical behaviours are shown in relation to the situation
ii. Eg. In case of sudden accident it ethical to help the victims
Absolutism: universal ethical principles which are same in each society.
iii. E.g to serve your parent, speak truth etc.
Virtues: small good deeds (naikian)
iv. Eg help to cross the road, to remove the obstacle from road,
Ethical dilemma
Situation where no ethical solution is apparently possible

Ethics and accountants

Ethics for accountants
Honesty
Courtesy
Integrity
Transparency
Public interest
Take care of stakeholders
Do not involve in bribery
Refuse extortion money (Bhatta)

Professional code of ethics

IFAC international Federation of Accountants and ACCA combined issued code of
ethics
1. Integrity
a. Honesty and straightforwardness
2. Objectivity
a. Fairness (free from management bias)
b. Stick to the objective of profession
c. True and fair view

3. Confidentiality
a. Keep the client business secret
 b. Do not disclose it until and unless it is
i. Permitted by client
ii. Required by law
iii. In the public interest
iv. Required by accounting standards
4. Professional competence and due care
a. A member of professional body must have skill and knowledge to apply
the accounting and auditing standards.
5. Professional behaviour
a. Assertive and professional behaviour (respectful behaviour, tone of sound
normal, one cannot violate the rights of other person)
b. Must have skill and knowledge of all applicable laws and regulations.

Ethical threats
There are 5 threats to professional code of ethics
1. Self-interest threats
2. Self-review threats
3. Advocacy threats
4. Familiarity threats
5. Intimidation threats

Self-interest threats
1. Personal interest may affect the code of ethics
2. Gifts and hospitality
3. Employment with client
4. Loan and guarantees
5. Financial interest (audit own shares in client, now in case to misstatement
auditor will not disclose it as auditor have financial interest in the company).
6. Family relation with BOD
7. Business relations with client
8. Fee dependency (audit firm earn 15% of its total income from single client.
According to code more then 15% dependency is not allowable)
9. Contingent fee (if client ask to save the tax or overlook the fraud, auditor will be
paid more audit fee)
10. Overdue fee (if client hold the auditor fee for many years and if auditor detect
the fraud, he is offered to overlook it for payment of rest of fee)

Self-review threat
This threat created in situation in which auditor has to review its own work.
Auditor is not allowed to provide non audit services to AUDIT CLIENT.
In such condition audit may have to review its own work and audit may not accept
or admit its mistakes
ACCA and IFAC has not allowed auditor to provide following services to audit
client.
1. Accounting and bookkeeping services
2. Internal audit services
3. Tax planning and calculations tax advice
4. Custodianship of client assets
5. Valuation services (revaluation of non-current assets)
6. Staff assignment
7. Corporate finance services (auditor cannot prepare projected cash flow or
projected budgets for audit client).
8. IT services – auditor cannot involve in software preparation of company.

Advocacy threats
Auditor cannot represent the audit client before any forum
Eg courts, marketing, IPO issue of shares, bank, or any public forum, cannot issue
shares of audit client, cannot negotiate with bank

Familiarity threats
This threat created by long association with the audit client
Eg friendship or family relations etc.
Auditor is not allowed to create long relations with client therefore FRC has
reduced the continuous audit services to client up to 7 years.
NED (audit committee) are required to ensure the independence of auditor
Ensure that auditor should not involve in any relation with the client.

Intimidation threat
Undue influence or pressurize the auditor by audit client is called intimidation
threat.
Threat of life
Threat to expel from audit
Job threat

How to avoid threats

Training and development
Strong internal controls
Involvement of top management
CPD (continual professional development)
Whistle blowing system -
 Audit and controls
A process in which auditor express his opinion
About health of financial statement
Whether this FS materially present true and fair view or not
True –
1. according to law rules regulations and standards
2. free from error fraud and misstatement
Fair
1. free from management bias (nothing in this FS is hidden)
2. objectively presented – transparency fair open
elements of assurance engagement
1. 3 party relationship (auditor, director, shareholders)
2. Subject matter –Financial statement
3. Criteria –law rules regulations and standards
4. Evidence
a. Sufficient
i. Quantitative evidence
b. Appropriate (reliable evidence)
i. Qualitative evidence
ii. Third party evidence – best quality evidence
iii. Auditor generated
iv. System generated evidence (software evidence)
v. Client self-generated-lowest quality evidence
c. How auditor collect evidence
i. Test of control (evidence about effectiveness of internal control system)
1. Test of control also called compliance test
2. TOC also called walk through test
ii. Test of details (evidence to ensure that no fraud error in financial statement)
1. Test of details also called substantive procedure
2. Analytical procedure (ratio analysis , industry trends )
5. Report
a. Auditor issue opinion in form of report about financial statement
i. Unqualified opinion-Good report
ii. Qualified opinion- bad report

Internal audit
System to ensure the effectiveness and efficiency of operations to endure organizational
objectives are being met.
 External audit Internal audit
Selected by SH (nominated by AC) Selected by management
Independent Employee of the company
Report to SH Report to AC (NED)
Scope is given by Law Scope is given by management
Standard format of report (ISA 700) There is no standard format
Report is available to public Not available for public only NED can access
this report

Types of Internal Audit

1. Financial audit –internal audit of financial statement.
2. Compliance audit- to ensure application of laws rules and regulations on organization.
3. IT audit –audit of software used in company effectiveness and efficiency and economy.
4. Transection audit –audit of transection which is out of due course of business.
5. Investigation – investigation of fraud
6. Performance audit – check the performance of management how much they are successful with
the targets
7. Operation audit –ensure the efficiency and effectiveness of operations
8. Social audit – impact of organization on society and vice versa
9. Environmental audit: pollution created by organization , impact on environment.

External auditor can rely on work of internal audit?

Conditions
1. Same scope as of external audit
2. Must be member of professional accounting body
3. Work of internal audit is documented and filed as external audit
4. Performed toc (test of control) and tod (test of details)
5. Status of internal auditor – as management rely on work of external audit and take actions
accordingly

Internal control systems

Definitions

A system which ensure that organizational objectives are met

Components of ICS

1. Control environment
a. Duties and responsibilities of BOD, senior management
b. Corporate culture
c. Ethical awareness
 d. Formal communication
e. Role of BOD in strategy and its implementation
f. No conflict
g. Objectivity is clear
2. Control activities (SPAMSOAP)
a. Segregation of duties
b. Physical control (lock and key)
c. Authorization of transections
d. Management control (admin)
e. Supervision
f. Organizational control (Hierarchy)
g. Arithmetic control (calculations)
h. Personnel control (HR)
3. Risk management
a. Risk management is performed by audit or risk committee
b. Identification of risk
c. Assessment of risk (how powerful the risk is)
d. Planning of risk (TARA) transfer, accept, reduce and avoid)
e. Control
4. Information and Communication
a. Application of financial reporting framework
b. Flow of information
c. Reporting standards
5. Monitoring
a. Monitoring the efficiency and effectiveness of operations
b. Role internal audit
c. Role of audit committee

Types of control
1. Preventive control- which stop the misstatement (segregation of duties )
2. Detective control- bank reconciliation statement, Internal audit , investigation, other
reconciliations
3. Corrective control- type of internal control which automatically correct the misstatement
arithmetic control, TB, control accounts

Internal checks
Is the step to automatically check the work of employees
Duties or work performed by staff members automatically being checked
 IT control
1. Physical access control (IT equipment related )
a. Lock and key
b. Stop unauthorized access
c. Fire alarm
d. Temperature control of server room
e. Fire safety

2. Logical access control (related to software)

a. General control
i. Before purchasing of software
ii. Software needs analysis
iii. Involve employees in purchase decision
iv. Off the shelf or bespoken software
b. Application control
i. Password
ii. Entry processing

c. Data protection
i. Firewall
ii. Anti-virus
iii. Complete and integrated data
iv. Free from corruption of data
 Ch. Fraud and its prevention
1. Define fraud
2. Types of fraud
3. Prerequisite for fraud
4. Assessing the risk of fraud
5. Implication of fraud
6. Money laundering

Definition of fraud
1. Deprivation (Mehroom ker dena) of assets by deceit or without consent (marzi)
2. False representation of fact knowingly that it is false (falsified misrepresentation)

Deprivation of assets in organization

1. Theft of assets, cash, inventory

2. Payroll fraud : introduce ghost employees
a. Employees are not part of organization but taking salary
b. Fraud in salary slip by alteration
3. Teeming and lading
a. Tamper the sales ledgers
b. Theft of cash or receipt
c. Setting the subsequent receipt against the outstanding debts which conceal.
4. Fictitious customer (fake customer)
a. Fake customer is supplied with goods on credit
5. Collusion with suppliers or customers
a. Employee may collude with supplier and customer
b. He may produce fake bills for suppliers or enter fake payment from customers.
6. Manipulation of bank reconciliation statement
7. Disposal of goods to employees at minimum value rather market value

Fraudulent reporting
False representation of fact knowingly that it is false in financial statement
1. Cooking of books
a. Error or omission in books of accounts
b. Over or under valuation of inventory
c. Miscounting
d. Overvaluation of assets
e. Under valuation of bad debts
f. Over valuation of receivable
 g. Change the ledgers
h. Omission of sales from records
i. Provision for obsolete items not recorded
j. Provision for slow moving item
k. Expense or cost is understated
2. Creative accounting
a. Window dressing
b. Off balance sheet finance
c. Delaying the expenses
d. Manipulate the revenue recognition
Equity was –Ve
Share capital 1000 1000
Premium 50 50
Retained Earning (1500) (1500)
Revaluation reserve 0 2500
Total equity -(450) 2050

Window dressing
Tamper the financial statement in such a way that it look better and strong
Enter fake transection at financial year end to increase the sales
Off- balance sheet finance
Exclude the assets and liabilities deliberately from financial statement .
Assets are sold but not showed in financial statement

Prerequisites for fraud

These are reason for fraud
Why fraud takes place
1. Dishonesty
2. Motivation for fraud
3. Opportunity for fraud (weak internal control systems)

Assessing the risk of fraud

Factors involved in assessing the risk
External factors
1. Change in market
2. Changes in industry
3. Fraud taking place in industry
4. Inherent risk or implied risk of fraud in industry – it depend upon the nature of industry

Internal factors
1. Business Risk
a. Sudden growth in company
b. Change in MIS (software)
c. Change in hierarchy, duties and responsibilities
d. Acquisition and mergers
 e. Window dressing of financial statement
f. Change in cost structure
g. Unjustified growth in profit
2. Market opinion
a. Industry or market or customer and supplier opinion about the company
3. Complex structure
a. Complex structure mean parent company acquire different subsidiary and each have
complex share ownership
4. Personnel risk
a. Secretive behaviour
b. Expensive life style
c. Lack of segregation of duties
d. Low staff morale

Implication of fraud
1. If results are overstated
a. Actual profit is Low but profit shown high and short fall in working capital
b. Incorrect decision
c. Supplier will extend the credit term and company have short of resources to pay it off
d. Lack of cash availability causing shortage of fund and financial fatigue

2. If results are understated

a. Returns on investment reduced
b. Dissatisfaction in shareholders
c. Access to sources of finance will be reduced
d. Bad reputation
e. Sometime legal problems may be faced
Prevention of fraud
1. Following the code of ethics
2. Strong internal control system
3. Training and development
4. Recruitment of competent employees
5. Segregation of duties
6. Appropriate documentation
7. Physical control
8. Ensure the pre numbering of document

Money laundering
1. What is laundering
a. Use of illegal (criminal) proceeds
b. Hide the source of finance
2. Failed to disclose the information regarding money laundering is crime
3. Tipping off: disclosing information to any person which may create hurdles in investigation of
drug trafficking , drug money laundering terrorist related activities.
4. Penalties
a. 14 years imprisonment for knowingly assisting the laundering
b. 5 years for failure to report
c. 2 years for tipping off.
5. Role of financial service authority (FSA) is to prevent and control money laundering
6. Assessment of money laundering risk
a. IDENTIFY THE MONEY laundering risk associated with the business
b. Conduct the detailed business analysis
c. Customer analysis, employee analysis, money inflow and out flow, foreign bank account
etc.
7. Process of money laundering
a. Placement : place illegal proceeds in legal business
b. Layering : transfer of money from place to place, business to business to hide the
source
c. Integration: A person uses it in gamble and receive the cheque for it
8. FATF (financial action task force )
a. Inter Governmental Body
b. To develop and promote anti money laundering policies
c. Approx. over 50 members
d.
 Ch. Leadership and Management
1. Management
a. Define
b. Management theories
i. Henry Fayol theory
ii. F W Taylor
iii. Elton Mayo
iv. Peter Drucker
v. Mintzberg managerial role
vi. Contingency theory
vii. Behaviorism
viii. System theory
2. leadership
a. define
b. theories
i. trait theories
ii. style theories
1. Ashridge theory
2. Blake and mouton theory
iii. contingency/ situational theories
1. John Adair Action centered theory
2. Fiedler theory
3. Bennis theory
4. Kotter theory
5. Heiftz theory
Leader
Is person who motivate others for certain objective
A person who influence others
Leader has certain qualities
1. Objectivity
2. Direction
3. Communication skills
4. Influential
5. Interpersonal skills

Manager
A person who don’t work but never let any work undone

Manager Leaders
Short term view Long terms view broad horizon
Use authority Use power
Bring hard changes Bring soft changes (behaviors, thoughts ,
coordination and cooperation culture)
 Maintain change Bring change
More involved in planning budgeting Creativity, innovation direction
Implement strategy create strategy

1. Henry Fayol management theory

According to him manager have following responsibilities

1. Planning
a. Set objective
b. Budgeting
c. Take decision
2. Organizing
a. Resource allocation
b. Time and work allocation
3. Commanding
a. Pass the orders
b. Scaler chain
c. Give direction
4. Coordinating
a. Coordination between the activities
b. Conflicts handling
c. Provide supports
5. Controlling
a. Control the activates of employees
b. Variance analysis
c. Internal control system
d. Internal audit
e. Price and quality control

FW Taylor School of scientific management.

a. Manager select the employee for the job
b. Selection should be done in scientific way (test and interview)
c. Employee should be selected on its natural aptitude (interest of employees)
d. Manager record the work done of employees
e. Manager set high targets (planning)
f. For high targets high rewards
g. Manager must know how to perform the job in best possible way
h. Set principles and policies and mold the employees to follow organizational policies
i. This theory Also called Taylorism

Elton Mayo Theory

 School of human relationship
  According to this theory a good manager tries to build relations among the employees
 Elton Mayo believe that relations are only thing that can be used to motivate employees
 Good relations help to generate better performance
 This all conclusion was due to the experiment performed in western electric

Peter Drucker

For good managers, they have to perform 5 task or role

a. set objective – planning, strategy direction
b. Organizing the work- work allocation
c. Motivation manager should know the art to motivate people.
d. Performance measurement – evaluate the performance of employee, rewards
e. People development – Training and development of employee

Mintzberg theory
According to mintzberg there are 3 basic managerial role a manager have to play
1. Interpersonal role
a. Figurehead- manager has to be representative and prominent person, in meetings,
seminars, etc
b. Liaison- (rabta) manager have to create relation with outer world.(build relation within
and out of organization)
c. Leader – hiring and firing of employees (department)
2. Informational
a. Monitor the information and communication
b. Spokesperson – speaks about organizational policies, strategy , represent in front of
media
c. Disseminator – hold information and release it slowly according to the need and
requirement.
3. Decisional
a. Planner / entrepreneur
i. Set objectives
ii. Planning
iii. Strategy
b. Resource allocator
i. Organizing the work
ii. Resource utilization
c. Disturbance handler
i. Conflicts handler
ii. Provide support and coordination for employees
d. Negotiator
i. Negotiate with suppliers and customers , employees
4. Contingency theory
a. According to these theories there is no best approach for managers
b. Manager changes is style according to the requirement and need of situation
c. Change in environment force managers to change its management style

5. Behaviorism theory
a. A good Manager always works on behaviors of employees. Try to change behavior
towards organization, goals, objectives, colleagues.
b. Create coordination and cooperation
6. System theory.
a. Organization is combination of open and close system.
b. It is called semi permeable system
c. Good manager allow good forces to enter in organization and stop bad forces to enter.
d. Good forces – skills, training, customers. Quality RM
e. Bad forces- terrorism, conflict, politics

Leadership theories
1. Trait theories
a. Leaders cannot be made
b. Leaders are by birth leaders
c. There are certain qualities of leaders
i. Communication
ii. Objectivity
iii. Convincing power
iv. Direction
v. Strategy
vi. Knowledge
vii. Experience
viii. Influence
ix. Speaking power

2. Style theories
a. Ashridge theory
b. Blake and mouton theory
c. According to the style theories style of leaders are permanent
d. style cannot be changed
e. There are 2 basic styles
i. Directive style – dictatorship
ii. Supportive style – democracy
iii. All style theories are mix of these two basic styles
a. Ashridge theory
a. Tell style
i. 100%-Dir
ii. Give order
iii. Maintain distance from follower
iv. Only performance oriented
v. One way communication with followers
vi. Tight control
vii. Quick decision making
viii. Followers cannot act in changed situation in absence of instruction or in
absence of leaders.
b. Sell style
i. 20%- Sup
ii. 80% dir
iii. Distance maintain with followers
iv. Better communication with followers as he tells the reason of decision why
he is taking this decision
v. Follower can act better in absence of leader as they know the reason
vi. Confidence to followers
c. Consult style
i. 60% dir
ii. 40% supportive
iii. This style consult with followers before taking decision
iv. Take their opinion
v. Two way communication
vi. One of the best leadership style according to ashridge
vii. Followers are involved in DM which give them more confidence
viii. Easier to communicate decision
d. Join style
i. 80% democratic
ii. 20 Directive
iii. Leader is recessive (hidden)
iv. Decision are taken by followers
v. Less involvement of leader in DM
vi. Leader exist to acknowledge the decision
 Blake and mouton

Concern for production is directive style

Tight control
Task oriented
No margin of error
Pass orders
Concern for people is supportive style
Build relations with employees
Loose control
Try to create good relation among the employees
Coordination and cooperation
After taking these two style Blake constructed 5 styles
 Improvished style (1,1)- manager which need improvement
 Country club (1,9)- leader is only concerned with people, least concerned with targets and
objective, strategy and direction
 Middle of the road (5,5) average managers, no maximum use of resources,
 Task Manager (9,1) only concerned with productivity no concerned with people, demotivation
for employees
 Leader (9,9)- maximum resource utilization maximum concern for task and production as well as
maximum concern for people
 3. Contingency theories/ situational theories

 According to these theories styles are not permanent

 A leader changes its style according to the situation
 A good leader exploit the situation in his best interest
 Following are the theories
o John Adair action centered theories
o Fiedler Theory
o Bennies theories
o Kotter theories
o Heifetz theory
John Adair action center theory
Leader has to face three different situations and fulfill three different needs
 Team needs
o Build good team
o Team skills
o Team motivation
o Training and development of team
o Conflict resolution among the team
o Coordination and cooperation
 Individual needs
o Individual motivation
o Rewards
o Training
o Learning
o Communication
o Ethics
 Task needs
o Set objectives
o Planning
o Performance

Fiedler theory
Two types of leadership styles

 PDM (psychologically distant managers)

o Build distance from followers
o Tight control
o Performance oriented
 o One side communication
o Lack of independence for followers
o Planning at high level
o Dictatorship

 PCM (psychologically close managers)

o Build relation
o Coordination and cooperation
o Democratic styles
o Motivation
o Problem solving etc.
 According to the Fiedler
o There are three types of situation
 Worst unfavorable situation- best leadership style is PDM
 Extreme favorable situations- Best leadership style is PDM
 Middle of these situations- best style is PCM


PDM

Leadership
style

PCM

Unfavourable situation favourable

situation
 Bennis theory
a. Transformational leader (supportive)
i. Which transform the situation
ii. Change
iii. Behaviors
iv. Thoughts
v. Communication
vi. Culture

b. Transactional leader (tell / directive style)

i. He is manager
ii. Use authority
iii. Maintain the change brought by leader
iv. Comparison, calculation, logic,
Kotter theory
a. How to manage the resistance during change
b. Communication
c. Education
d. Facilitation
e. Negotiation (bargain)
f. Coercion (punishment)

Heifetz theory
There are two types of change
a. Adaptive change (change in culture, behaviour, thoughts, )
a. Transformational leader
b. Soft change

b. Technical change- maintain the change, use of authority

a. Hard change
b. Transactional leader
 Motivation
a. Define motivation
b. Factors of success
c. Motivational theories
a. Content theory
i. Maslow hierarchy of needs
ii. Hertzberg Theory
iii. McGregor X – Y people theory
b. Process theory
i. Vroom theory

1. Define Motivation
a. Driving force which stimulate the individual to show certain behavior
b. It is required in organization as high driving force mean high motivation
c. High motivation mean high performance
d. High performance leads to growth for organization and personal growth
e. A manager try to keep its staff motivated

2. Factor of success
a. Hard work
b. innate ability
c. Motivation

3. Motivational Theories
 Content theories
 Process theories

a. Content theories
i. Content mean needs
ii. According to these theories a person is motivated through its need
iii. Until and unless one need is not fully satisfied as person cannot move to next
need
iv. Sometime if need is not fulfilled it may create dissatisfaction
v. Birth of satisfaction is death of motivation in existing need
vi. This theory is very costly process
vii. ]
 Maslow hierarchy of needs

In context of organization
Physiological need Salary and wages
Safety needs Job security
Love need Relation with colleagues
Esteem needs Designation , benefits, recognition of work, honor
Self-actualization Leadership role, complex task, full potential utilization
(khud agahi, creativity etc.
khudi, relation
with GOD)
 Herzberg two factor theory

Extrinsic rewards intrinsic rewards

Rewards
Extra benefits if target is achieved
a. Extrinsic rewards (Hygiene factors)
a. Physical benefits, tangible benefits
b. Salaries, bonus, increments, commission
b. Intrinsic rewards (motivator factors)
a. Job rotation (rotate employees in different departments to obtain the experiences)
b. Job enrichment (an employee trusted with more duties and responsibilities no change in
designation but span of control increased )
c. Job enlargement (change in employee designation, change in hierarchy)

McGregor X people and Y people theory

VROOM theory
Process theory (first achievement then rewards)
Motivation is continuous process
It is not need, which motivates the person it is culture which motivate the person.
Culture is continuous process
Cost effective theory of motivation
F=EXVXI
F = motivational force
E = Expectancy (if I work hard, I will get the reward)
Good manager increase the belief of people about rewards
V = Valance ( belief that I can do this, I have potential to do, create value for rewards)
I = Instrumentality (way to get there, way to get targets)
 Ch. Personal effectiveness and communication
Personal effectiveness
a. Time management
b. Training and development
Communication
a. Definition
b. Direction of communication
c. Pattern of communication
d. Radio signal model
e. Types of communication
f. Barriers to effective communication

Personal effectiveness
Time
a. Time is scarce resource
b. Time is 4th dimension
c. Time management is necessary to be effective and efficient
d. Time management is necessary to be targeted
e. Time is strategic need
Time management
a. Set objectives
a. Objective should be smart
b. S= specific
c. M= measureable
d. A= attainable
e. R= relevant
f. T= time bounded
b. Set priorities of objectives
c. Prepare Action plan

Time management at office (ABCD approach)

a. Action - start when work is allocated
b. Bin - all unnecessary activities
c. Create detailed plan how to perform the work
d. Delegate accordingly
Barriers to effective time management
a. Procrastination (aaj ka kam kal per chorna)
b. Undue meetings
c. Undue paperwork
d. Delegate ineffectively
e. Complexity of work without training

Conflict

Define conflict
Clash of opposing forces including personalities, interest etc. for benefit of individual or group

Factors of conflicts
1. Power need
2. Resources need
3. Difference in interest, objectives
4. Personal incompatibilities
How to deal with individual conflicts
1. Communication: create smooth and independent communication between conflicting persons
2. Negotiation: try to create bargaining position or negotiation between them
3. Separation: If intensity of conflict is not reducing then separate them. This last step might result
in loss of JOB
Conflict management among the team
1. Denial or withdrawal
a. Called sweeping under the carpet
b. Manager deny the conflicting teams or group
c. Conflict continues to rise causing bad effect in future.
2. Suppression
a. Use of authority to suppress the conflict
b. This is not long lasting solution for conflicts
c. As in future it erupt like volcano
3. Dominance
a. Use of social position in society
b. Influential behavior
c. Also not long lasting
4. Collaboration approach
a. Also called integration approach
b. Same project or work is shared between conflicting parties
c. Parties are forced to complete the project in collaboration otherwise no one will sustain.
d. Best approach towards conflict resolution
Win win approach
Win Win approach – both conflicting parties are in benefit
Win Lose approach – One party lose and other party win
Lose Lose Approach – Both conflicting parties loose
 Formal Grievances (narazgi)
 It takes place when a person thinks that he is being wrongly treated.
 One force is opposing the others
 It is not clash like conflicts

Procedure to solve the grievance

Step 1. It should be carefully explain to line manager
Step 2. It should be explained to higher management specially HR department
Step 3. Some harsh steps should be taken by higher management (change the department or fire)

Communication
1. Definition
2. Why communication is required
3. Forms of communication
4. Direction of communication
5. Pattern of communication
6. Radio Signal Model
7. Nonverbal communication
8. Barriers to effective communication

1. Definition of communication
a. It involve transmission , exchange of information and feed back
b. Without feedback communication is not considered completed
2. Why communication is required
a. Planning
b. Coordination
c. Control
d. Decision making
3. Form of communication
a. Instruction
b. Giving and receiving information
c. Exchange of ideas
d. Comparing results
e. Orders
f. reports
g. Letter, emails, etc
4. Direction of formal communication (in context of organization)
a. Vertical communication
i. Communication between higher and lower designation (boss and subordinates)
ii. Same department but changed designation
iii. Scaler chain
b. Horizontal communication
i. Flow of information between two same designation person
 ii. Same designation but changed department
c. Diagonal communication
i. Flow of information between different department and designation
ii. Cross communication
iii. Both changed department and designation
iv. E.g AM of IT department communicate with Manager of Accounts department.
5. Communication pattern

a. Chain Communication
i. A-B-C-D-E
ii. Govt org
iii. Speed Rank 4
iv. Job satisfaction Rank 2
v. Leader- C
b. Circle communication
i. Marketing organization
ii. Team work
iii. Sales team
iv. Speed Rank 3
v. Job satisfaction Rank 1
vi. Leader- No leader
c. Y communication
i. Educational institute
ii. A=principal
iii. B=teacher
iv. C= coordinator
 v. D= student
vi. E= parents
vii. Speed Rank 2
viii. Job satisfaction Rank 3
ix. Leader C
d. Wheel
i. IT/ software organization
ii. C= marketing manager (bring business)
iii. Project is delivered to software engineer
iv. Speed Rank 1
v. Job satisfaction Rank 4
vi. Leader C
Radio signal model of communication
Also formal communication massage

At the time of encoding distortion come in massage

At the time of decoding distortion come in massage

Encoding
It is code or language of massage
Encoding may be written or verbal
Distortion
The problem sender is facing to encode or decode
 Meaning of massage may be lost in encoding
Distortion may be due to language
Technical language, jargons etc.
Channel
Medium through which massage can be transmitted
Email, report, letter, press release
Decoding
To understand the massage
Noise
Noise in environment
Noise may cause distortion

Nonverbal communication
1. Listening
a. Prepared for listening
b. Be attentive
c. Open ear
d. Listening critically
e. Open minded
f. Be interested
2. Body language
a. Facial expression
b. Gestures
c. Proximity (closeness)
d. Eye contact
e. Silence and sound
f. Response
g. Appearance
h. Grooming
i. Movement and stillness
j. Posture
k. Orientation

Barriers to effective communication

1. Distortion
2. Omission of information
3. Language barriers
4. Culture barriers
5. Pitch
6. Status difference
 7. Social educational back ground
8. People only listen what they want to listen
9. Technicalities in communication
10. Zoom app
11. Liking and disliking
12. Mind set
13. Moods
Chapter END

Group and individual behavior and equal opportunity

1. Individual behavior
a. Personality
b. Perception
c. Attitude
d. Intelligence
e. Individual behavior
2. Group
a. Definition of group
b. Team
c. Types of team
d. Features of team
e. Theories of team
i. Tuckman theory
ii. Belbin Team role theory
3. Equal opportunity
a. Equal opportunity
b. Discrimination
c. Diversity

Individual
a. Personality
a. It is pattern of individual thought, feeling and behaviors knowledge
i. Trait
1. Permanent part of personality
2. Stable set of behavior
3. Can not be changed
4. Also called quantitative
 5. Sensitive nature, anger, honest , cleverness etc
ii. Type
1. Reflect psychological preferences
2. Conditional
3. Learn from environment
4. Qualitative
5. Coolness, happiness, activeness, openness
b. Perception
i. It is the process by which brain select the information and make sense pf it
ii. It is kind of image build in mind about event or person
iii. Process of perception or reasons
1. Context
a. Background of person , he see what he want to see
2. The nature of stimuli
a. Attention of person
b. How the person pay attention
c. Sound, colours, beauty, smell
3. Internal factor
a. We move towards the factors which match our personality

b. If a person hungry he moves towards coo king Aroma

c. Needs and expectation
4. Trauma and fear
a. People avoid the situation which they do not like
c. Attitude
i. Attitude is formed by experience, personality social influence and feelings
ii. Positive, negative and neutral attitude
iii. Components
1. Knowledge
2. Feeling
3. Volition (power to choose freely)
d. Intelligence
i. Analytical Intelligence analytical power, comparison ,logic create
ii. Spatial intelligence poet, actor, creativity, observation ,
iii. Practical Intelligence – required physical activity, practical work
iv. Inter personal intelligence – communication, convincing intelligence, leaders

Individual behavior in organization

1. Assertive behavior: true professional behavior, insisting on own right without violation other
rights
2. Aggressive Behavior: aggression, violating on other rights, cerate conflicts
3. Passive behavior: giving importance on other rights and violating own rights
 Groups
Definition of group
Collection of individuals we perceived them as part of group.
Connectivity among the people is necessary
Advantages of cohesive group (united)
Improved teamwork
Creativity
Support
Better communication
Less chance of conflicts
Problem solving
Effectiveness and efficiency

Factors of group
Leader of group
Skills of group
Commitment of group
Loyalty of group
Solidarity (yakjehati)

Difference between group and team

1. Formal group is team
2. Team is made by authority
3. Formal membership
4. Have rules and regulation
5. Formal objective
6. Formal leader made by authority
7. Project oriented
Types of team
1. Multi skilled team – team members have more than one skill- suitable for simple nature of
projects
2. Multi-disciplinary team – team is made from different department but member have specific
skill. Suitable for complex nature of projects
3. Virtual team -

Role of managers in building teams

1. Select the team
2. Skills of team members
3. Control the team
4. Bring appropriate experience
5. Ideas generations
6. Organizing the work

Tuckman theory of group formation

According to Tuckman team have 6 stages
1. Forming
a. Awareness
b. Introduction
c. Exchange of information
d. Unclear objective
2. Storming
a. conflict
b. Norms, attitude behavior are challenged and rejected
c. Each person fight for chosen role
d. More the time of this stage more will be strength of group
3. Norming
a. Dust is settled down
b. Cooperation
c. Enjoyment start
d. Group behavior is establish
e. Group laws and regulations
4. Performing
a. Now group start performing
b. Help
c. Support
d. Cooperation
5. Dorming
a. Adjustment
b. More inward looking
c. Self-oriented
d. Internal politics
6. Adjourning
a. Group disband
b. Disbursed

Belbin team role theory

According to Belbin there are 9 roles in a complete team
 One role may have more than one person

Diversity and equal opportunity

What is equal opportunity?
1. It refer to the equal access to benefits with equal treatment
2. Equal chance of jobs to all society without discrimination
Importance of EO
1. Ethical and moral values
2. Justice to society
3. Reduce the crime rate
4. Increase pool of expertise
5. Coordination and support
6. Strong culture
7. Ethics
Discrimination
1. It is to recognize the difference in society on the basis of race, color, culture, ethnicity, gender
religion, age, disability etc.
2. Types of discrimination in context of organization
a. Direct discrimination- direct unfair treatment without having any discrimination policy.
b. Indirect Discrimination- it takes place when organization have policy to no to
discriminate but still management is involved in discrimination.
i. Eg an organization advertise for translator but write in advertisement that only
white people can apply even though organization have detailed policy on it.
c. Victimization
i. To victimize the person like making fun of him on different basis like language,
culture, color etc.
3. Positive and negative discrimination
a. Positive discrimination
i. In law there are some areas in which discrimination is allowed. This is called
positive discrimination
ii. E.g. appointment of female gynecologist instead of male gynecologist
iii. Appointment of disable accountant instead of able accountant.
iv. Appointment of male electrician instead of female.
b. Negative discrimination
i. Discrimination which is not allowed by law is called negative discrimination.
4. How discrimination is avoided in context of organization
a. Support from upper management
b. A working committee should be established to avoid the discrimination
c. Policies and procedures are in place to avoid discrimination
d. Monitoring process
e. Internal control should be established to avoid the discrimination
f. Recruitment and selection should be fair
g. Training and development of fair basis.
5. Diversity
 a. People are not alike
b. They have differences
c. These differences should be valued
d. Managing diversity in organization
i. Bring policy on diversity
ii. Tolerate the differences
iii. Communication effectively
iv. Flexibility
v. Monitoring
vi. Involvement of higher management

Roles and responsibilities of HR department

1. Recruitment and selection
2. Training and development
3. Learning
4. Performance evaluation
Recruitment and selection
3. Recruitment
a. Roles
b. HR planning
4. Selection
a. Test
b. Interview
c. Group selection
d. References

Recruitment
 Roles
 o Roles of HR department
 Decide the salary, job description, promotion, training and development
o Role of line manager
 Send job requisition to HR department
 Line manager is immediate boss who need assistant
 Send the objective of new employee
o Role of consultant
 When organization do not have sufficient resource to interview and hire the top
level post
 Organization uses the services of external consultant
 HR planning required for new post
o Job design / Job analysis
 Job Description
 Who will perform the job
 What to do
 How to do
 When to do
 Where to do
 Salary
 Organization factor – designation , reporting lines, accountability and
responsibility
 Development factor- Promotions, educations , training and
development
 Environmental factors – benefits, seating arrangement s, car, tools to
perform the job
 Person specification
 Qualification of person
 Experience
 Salary
 Qualities required to perform the job
o Intelligence
o Dressing
o Communication
o Relation building
o Behaviour
o Team working skills
o Advertisement
 Selection of media
 Print media
 IT
 News media
  News papers
 Digest
 Periodicals etc
 Qualitied of good job advertisement
 Precise description of organization
 No of post
 Designation required
 Salary
 Experience required
 Other qualities required
 Date to apply
 Address to apply
 Other information

Selection
Test
 Types of Test
o Proficiency test
 For professional qualification
 For accountant prepare income statement form the question
o Psychometric test
 To check the intelligence
 Decision making
 Behaviour
 Analytical skills
 Team work
Interview
 Types of interview
o One to one interview
 Only HR department takes interview
 Suitable for small post (supervisor or worker type post selection)
o Panel Interview
 HR manager and line manager both take interview
 Suitable for middle managers
o Group/Board Interview
 Whole BOD is present in interview
 Suitable for higher level posts eg GM, CEO, CFO, COO, CIA, Chief accountant
 Types of questions
o Open questions – question which require lot of details eg explain your self
o Close questions – which are answered in yes or no eg are you Muslim
 o Probing questions –questions require more details and clarify your point of view
o Problem solving questions – situation is given ask to solve the problems
o Leading questions – which lead to certain behaviour either positive or negative specially
in army
 Reference
o When person is selected and ask to provide different references
o Professional reference (past working organization , written form, details about last
salary, professional behaviour and knowledge)
o Domestic references – (friends, family, neighbors etc. and enquire about character of
person)
 Group Selection
o Entire group of person is selected
o Eg army select the group, banks select the entire marketing team
o Focus is on group behaviours, coordination and cooperation
o For selection group task are assigned not individual task

Training and development

Training
Is teaching a person new skill or behaviour
Types of training
On job training
 Training takes place at office premises
 Temporary promotion is on job training
 Senior employee gives training in office about new skills and behaviours
 Use of IT to learn new skill or behaviour in office through webinars, skype etc
 New task or new project is assigned
 Induction training – new employees are trained in office by senior about organization
policies and procedures and culture
Off job training
  Learning provided outside the office premises
 Some courses are offered
 Block learning – entire group of employees are send for training out side the premises
 Sandwich training – employees are send for new courses , they come back (after completing
half of course) and preform what they have learned again send to complete rest of course.
Development
Long term development of employee by offering series of training, education, teaching,
experiences etc
Generally for development some senior employee is engaged in development process
Development depends upon the potential of person.
Types of development
4. Mentoring
a. Mentoring is directive process in which a mentor is engaged with the employee and he
guide him in each and every part of life
b. In mentoring employee have no choice, he has to act as per mentor choice
5. Types of mentoring
3. Professional development – education to increase the professional competencies
4. Psychosocial development -help employees to understand the situation, quick decision
making , how to deal with people , increase the intelligence, behaviours

6. Counselling
a. Non directive process
b. Counsellor help other to help themselves
c. Counselor give choices to counselee about the ways to be selected

Learning
Acquisition of knowledge gained through study, experience, being taught is learning
Types of learning
3. Conditioning- learn from environment and society is conditioning - short term learning
4. Cognitive learning – learning through understanding the information by processing it in brain.
Long term learning
Theories of learning
3. Honey and Mumford Learning style theory
4. Kolb learning cycle theory

2. Honey and Mumford theory

a. There are four types of leaner or process of learning
b. Reflector-they learn through observation
 i. Observing other people
ii. Watch and contemplate
iii. They try to copy the seniors
iv. They try perform steps in same way as their senior performed
v. Lower level employees
vi. They like discussion, fall in practical work with senior, want to be assistant
vii. Learn from feedback in context of organization
viii. Technician, mechanic, IT etc
c. Theorist
i. They learn from processing the information in brain
ii. Understand the science of work
iii. Build relation between different activities
iv. Create theory or hypothesis
v. Work on ideas
vi. More objectivity
vii. Result oriented
viii. They like stories, flow charts, videos
d. Pragmatist
i. They learn through performing
ii. They do not depend upon experience
iii. They take risk
iv. Do not believe in theories
v. Actors, society builders, businessman
vi. Perform experiments
e. Activist
i. They learn through challenge
ii. They perform and learn when they are challenged
iii. Brain storming puzzles competitions

Kolb learning cycle

According to KOLB a person learn from all steps told by honey and Mumford
5. Feel
a. Activist
b. Concrete experience
6. Observe
a. Reflector
b. Reflective observation
7. Think
a. Theorist
b. Abstract conceptualization
8. Perform/ do
a. Pragmatist
b. Active experimentation
 Performance evaluation

 Performance management aims to get better results for the organisation via the measurement
and evaluation of individual performance
 Appraisal is part of the system of performance management, including goal setting,
performance monitoring, feedback and improvement planning.

Process of performance management

7. From the business plan
8. identify the requirements and competences
9. Draw up a performance agreement ( targets)
10. Draw up a performance and development plan with the individual (for weak areas)
11. Manage performance continually throughout the year, Managers can review actual
performance compare it standards set
12. Performance review

Main components of appraisal

 Reward review
 Performance review
 Potential review
Objectives of appraisal
 To measure and improve the performance of employees
 Increase their future potential
 To judge the gap between the actual and the desired performance.
 improving communication
 understanding training needs
  clarifying roles and responsibilities 
 Allocate rewards.
 Facilitating Promotion
 Motivating Superior Performance
 Setting and Measuring Goals
 Counseling Poor Performers
 Determining Compensation Changes
 Supporting Manpower Planning
Requirement of formal appraisal
4. defining what is to be appraised
5. recording assessments (comparison of targets and actual performance )
6. getting the appraiser and appraise together for feedback and planning.
 Appraisal techniques
6. Overall assessment
f. The manager writes in narrative (paragraph) form his judgements about appraisee.
7. Guided assessment
g. Assessors are required to comment on a number of specified characteristics and
performance elements, with guidelines as to how terms such as 'application',
8. Grading.
h. Grading adds a comparative frame of reference to the general guidelines, whereby
managers are asked to select one of a number of levels or degrees to which the
individual in question displays the given characteristic.
9. Behavioural incident methods
i. These concentrate on employee behaviour, which is measured against typical behaviour
in each job, as defined by common critical incidents of successful and unsuccessful job
behaviour
10. Results-orientated schemes.
j. These review performance against specific targets and standards of performance agreed
in advance by manager and subordinate together
Appraisal interview

The appraisal interview is an important stage in the process, as it can be used to encourage
collaborative problem-solving and improvement planning
Tell and sell style
Managers are in complete control; they do most of the talking
Manager seeks
 to let the subordinates know how they are doing,
 to gain their acceptance of the evaluation
 to get them to follow the manager’s plan for improvement

Tell and listen style

 Evaluation to the subordinate and then let him or her respond to it.
 Manager describes the subordinate’s strengths and weaknesses during the first part of the
interview, postponing points of disagreement until later

Problem solving style

 Let’s solve the problem together

Barriers to effective appraisal

11. Faulty assumptions
12. Recency error (a person work hard for whole year but in last month he do mistakes)
13. Psychological block (likes and dislikes)
14. Criteria problems – bad criteria set for employees
15. Halo effect (false effect)
16. Too much focus on current event
17. Biased supervisor
18. The employee’s appearance
19. Appraisal is seen as a one sided process – the manager is judge, jury and counsel for the
prosecution.
20. appraisal as bureaucracy

Direction of appraisal
2. Upward Appraisal
a. Upward appraisal evaluates managers' performance based on input from their
subordinates ,

b. rather than the traditional top-down evaluation (downward appraisal) format in which
a manager is evaluated solely by their heads
3. Horizontal Appraisal (a manager is appraised by same designation or peer)
4. 360 degree appraisal (mix of all appraisal)