Author: shivamlohiya

UNIT 11

MARKETING MANAGEMENT

Introduction :

Marketing management is an important functional area of business.

– It is the process of planning, organising, directing and controlling the activities related to marketing of goods and services to satisfy customers needs & achieve organisational goals.

Market :

In the traditional sense, the market means a place where buyers & sellers gather to enter into transaction involving the exchange of goods & services. But in modern sense, market refers to meeting of buyers and sellers at a place, by telephone or by internet etc.

Marketing :

Markerting is a social process whereby people exchange goods & services for money or for something of vaue to them. Any thing that is of value to the other can be marketed e.g.

1.	Physical Products	– T.V. Mobile phone etc.
2.	Services	– Insurance, education etc.
3.	Person	– Selection for different posts.
4.	Place	– Agra Taj Mahal , etc.

Importance features of Marketing :-

1. Need and want : Satisfaction of the needs and wants of individuals and organisations.
2. Creating a market offering : Complete offer for a product of service.
3. Customer value : greatest benefit or value for the money.
4. Exchange mechanism : Exchange of products / services for money / value.

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Functions of Marketing / Marketing activities

1. Marketing research : Gathering and analysing marketing information i.e. what the customers want to buy, when they are likely to buy in what quantitis do they buy, from where do they buy etc.
2. Marketing planning : Specific plan for increasing the level of production, promotion of the products etc and specify the action programmes to achieve these objectives.
3. Product designing and development ; Marketer must take decision like, what-product? Which model / size ? brand name? Packaged ? quality level? So that customer needs are satisfied.
4. Buying & assembling : e.g. car. Raw material like steel, tyres, batteries, seats, stearing wheels etc are bought & them assembled in the form of a complete product.
5. Packing / Labelling : designing the package & labelling.
6. Branding : Creating a distinct identity of the product from that of competitors e.g. Videocon washing machine.

Concepts & Philosophies of Marketing :-

1. Production concept : Profits could be maximised by producing products at a large scale, thereby reducing average cost of production.

Drawback : Customer donot always buy inexpensive products.

1. Product concept : Business goals lies in making high quality products as customer favour them.
2. Sales Concept : Firms must undertake aggresive selling & promotion efforts to make customers buy their products.

Marketing Management :

Marketing management means management of the marketing function which

are

1. Choosing a target market.
2. Creation of demand
3. Creating, developing & communicating superior value for the customers.
4. Market Shares.
5. Goodwill
6. Planning & controlling marketing activities.

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Marketing Mix :

Marketing mix refers to ingredients or the tools or the variables which the markets mixes in order to interact with a particular markets.

Elements / 4 Ps of Marketing mix

1. Product Mix : Product live e.g. Hindustan Lever Limited – Colgate, lifebouy etc.

Elements

Branding Packaging Labelling

2. Price Mix : Value (Money) in lieu of product / Service recieved by seller from a buyer.

3. Promotion mix : informing the customers about the products & pursuading them to buy the same.

4. Place Mix : Physical distribution : Various decision regarding distribution of products.

• Channels of distribution : Whether wholesalers, retailors to be used or not.
• Physical movement of the products from producer to consumers.
• Storage, transportation, managing inventory (stock) etc.

Products :

Product is anything that can be offered to a market to satify a want or need.

1. Consumer Product : Purchased by the ultimate consumers for personal needs.

e.g. Soap, toothpaste, textile etc.

1. Industrial Products : Used as inputs in producing other products eg. raw materials, toots etc.

Detailed Study of 4 P s (Elements) of Marketing Mix :

PRODUCT MIX Three components are

1. i) Branding – giving a name / a sign / a symbol etc to a product eg. :Pepsi –

Nike

Qualities of a good Brand Name :

1. Simple and short : A brand name should be simple and short as Tata, Bata.
2. Easily Pronunceable : A brand name should be easily pronunceable as Lux, Dalda.
3. Suggestive : Brand name should be self explanatory that suggesting the inherent quality of the product as Ujjala suggest more whiteness.
4. Distinctive : Brand name should be so distinctive that it highlights itself in the group of other brand name such as : Tide, Perk.

Advantages of Branding

1. Brand name helps in advertising in an easier way.
2. Brand name establishes permanent identity of the product.
3. Branded products can be easily identified by consumers.
4. Brand name promotes repurchasing.

2. ii) Packaging : Act of designing and producing the container or wrapper of a product.

– Good packaging often helps in selling the product so it is called a silent salesman.

Functions of Packaging

1. Product Identification : Packaging help in identification of the product.
2. Product Protection : The main function of the packing is to provide protection to the product from dirt, insect and breakage.
3. Convenience : It provides convenience in carriage, stocking and in consuming.

Product Promotion : Packaging simplifies the work of sales promotion.

Advantages of Packaging

1. Rising standards of Health and Sanitations : The people are becoming health conscious they like to buy packed goods. The reason is that the chances of adulteration in such goods are minimised.
2. Innovational Opportunity : With the increasing use of packaging more innovational opportunity becomes available in this area for the researchers.
3. Product Differentiation : Packing is helpful in creating product differentiation. The colour, material and size of the package makes differences in the quantity of the product.

3) Labelling – Description of the product, its contents, the manufacturers,

date & time of manufacturing

– Helps in promotion / grading / identifying the product.

Function of Labelling :

1. Describe the product and specify its contents.
2. Grading of Product
3. Identification of the Product or Brand.
4. Help in promotion of Product.
5. Providing information required by law.

PRICE MIX : –

Price, pricing strategies, Price determination.

Price – Amount of money paid by a buyer (or recieved by a seller) in

consideration of the purchase of product or a services.

Pricing Strategies Price skimming – higher prices at initial stages to recover fixed costs.

Penetration pricing – Lower initial price to capture a large market.

Price determination / Factors affecting Pricing decisions

1. Pricing objectives : affects price of product / service e.g. maximum profits in short term leads to high price.
2. Product cost : Sets lower limits of the price.
3. Extent of competition in the market : No competition means complete freedom in fixing its price.
4. Utility & demand : More demand – Move price. Sometimes Less price – more demand depends upon the utility of the product.

Place Mix/ Physical Distribution Mix :

Covers all the activities required to physically move goods from manufacturers to the customers. Important activities includes.

1. Order processing : Accurate & speedy order processing leads to profit & goodwill & vise versa.
2. Transportation : Add value of the goods by moving them to the place where they are required.
3. Inventory control : Additional demand can be met in less time, the need for inventory will also be low.
4. Ware-housing : Need arises to fill the gap between the time of product is produced & the time it is required for consumption.

Channels of Distribution :

Direct Chennal – Manufacturer – Customer Indirect Chennal – Manufacturer – Retailer – customer

Manufacturer – wholesaler – Retailer – customer Manufacturer – Agent – wholesaler – Retailer customer

Factors Determining Choice of Channels of Distribution :-

Choice of appropriate channel of distribution is a very important marketing decision, which affects the performance of an organisation. Whether organisation will adopt direct marketing channels or long channels involving no. of intermediaries is a strategic decision.

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Factors Determining Choice of Channels of Distribution

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Market related Factor

1. Size of the market – no of customers – more customers more intermediates
2. Geographical concentration – concentrated buyers – direct selling spread customers – more intermediates
3. Size or order – i.e. quantity purchase –

Less – more intermediates More – direct selling

Promotion Mix

It refers to combination of promotional tools used by an organisation to

achieve its communication objectives.

Tools

1. Advertising : Most commonly used tool of promotion. It is an impersonal

form of communication, which is paid by the marketers (sponsors) to

promote goods or services. Common mediums are newspaper ,

magazine , television & radio .

Role or Importance of Advertising :

1. Enhancing customer satisfaction and confidence.
2. Helpful in increasing the demand of existing product.
3. Helpful to increase the Market Area.
4. Helpful in generating more employment.
5. Helpful in the economic development of the country.
6. Knowledge of various product.
7. No fear of exploitation.

Product Related Factor

1. Nature of product – technical (made to order) – direct selling
2. Penshable (direct / short channels); Non perishable – Long Channels.
3. The unit value of the product – costly – direct selling,
4. Product Complexity – Complex products – direct selling

Company related factor

1. Financial strength of the company

• Strong – direct / own channel
• Weak – middleman required.

1. Degree of control – Greater control Short/ direct channel.
2. Management – Sufficient knowledge

• direct selling & Vice versa.

Objections to Advertising :

1. Add to Cost
2. Undermines social value.
3. Confuses the buyers
4. Encourages sale of inferior product.
5. Some advertisement are in bad taste.

2. Sales Promotion :-

Short term incentives designed to encourage the buyers to make immediate purchase of a product / service.

Techniques

1.	Rebate : Special price to clear off excess inventory.
2.	Discounts : Price reduced to induce buyers to buy	more.
3.	Sampling : Free sample of a product to customers to try product & learn about it.
4.	Lucky draw : Lucky draw coupon eg. purchase an win a car. etc.	easy product &
5.	Full Finance @ 0%
6.	Contests.

3. Personal Selling :

Personal selling consists of contacting prospective buyers of product personally.

Features of the Personal Selling :

1. Personal contact is established under personal selling.
2. Oral conversation.
3. Quick solution of queries.
4. Receipt of Additional Information.
5. Development of reletionship.

Qualities of a good Salesman :

1. Physical Qualities : Physical qualities include personality health, stamina and tolerance
2. Mental Qualities : These include mainly skill, mental alertness, imagination and self confidence.

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	3. Social Qualities : These include social-abilities tact, sound character, sweet nature.
	4. Vocational Qualities : It includes mainly knowledge of product, knowledge of competitive product, training and aptitude.
4.	Publicity : is a non-personal form of communication & against advertising it is a non-paid form of communication e.g. If a manufacturer develops a car engine runs on water instead of petrol & this news is covered by television/ radio/ newspaper, it would be termed as publicity as the manufacturer benefit from it without bearing any cost. Merit : Mass reach, more credibility Limitation : Not with in th control of firm.
Public Relations :
Public relations is the deliberate planned and sustained efforts to establish and maintain mutual under standing between an organisation and its public
Features of Public Relation :
1.	Securing cooperation of Public
2.	Satisfying different group.
3.	Engaging in dialogue
4.	It is ongoing activity.
5.	Succesful relation with public.
Role of Public Relation
1.	This is economical Medium
2.	Boosting sales
3.	Image Building
4.	Easy to attract the public
Tools to Establish Public Relations :
1.	Speech
2.	Printed Materials
3.	Public services Activities
4.	Events
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QUESTION : MARKETING MANAGEMENT

One Mark Question

1. Define marketing management in present context.
2. Outline one objective of marketing management.
3. What is marketing research?
4. What is meant by product Mix?
5. What is a trade mark?
6. Which marketing philosophy gives more importance to consumer welfare instead of consumer satisfaction.
7. State any one Pillar of marketing concept.
8. Name the channel where in goods are made directly available by the manufacturer to consumers without involving any intermediary.
9. A lunch box free with Kissan Sauce is an example of the techniques of sales promotion. Name the technique.
10. Write any two brand names available in the market.
11. State any one feature of convenience goods.
12. Toothpaste is packed in a tube is an example of which type of packing.
13. Which concept of Marketing suggests that the organisation should earn profit through volume of production.
14. Name any two products which are subject to process of grading.
15. Name the element of marketing mix which makes the product available to the target customers.

Three or Four mark Questions

1. Explain any three advantage of labelling to the customers.
2. Differentiate between marketing and selling on the basis of :

(i) Meaning (ii) Scope (iii) Objectives.

1. Write any four difference between advertising and personal selling.
2. State any three advantages of sales promotion.
3. Explain any four functions of packing.
4. Advertising confuses rather than helps Do you agree? Give reasons.

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Five or Six Marks Questions

1. Explain the various functions of marketing management.
2. Explain four important elements of marketing mix.
3. Explain any four factors on which the choice of channels of distribution depend.
4. Advertising encourges sale of inferior products Do you agree? Give reasons.
5. Why public relations are important for an organisation.
6. Explain four qualities of a good brand.
7. Explain three methods of sales promotion.

UNIT 10

FINANCIAL MARKETS

Introduction :

Financial Market is a market for creation and exchange of financial assets like share, bonds etc. It helps in mobilising savings and channelising them into the most productive uses. It helps to link the savers and the investors by mobilizing funds between them. The person / Institution by which allocation of funds is done is called financial intermediaries.

Functions of Financial Market.

1. Mobilisation of Savings and channeling them into the most productive

uses: Financial market facilitates the transfer of savings from savers to investors and thus helps to channelise surplus funds into the most productive use.

1. Help in Price Determination : Financial Market helps in interaction of savers and investors which in turn helps in the determination of prices of the financial assets such as shares, debentures etc.
2. Provide Liquidity to Financial Assets : Financial market ficilitate easy purchase and sale of financial assets. Thus, it provide liquidity to them so that they can be easily converted into cash whenever required.
3. Reduce cost of transactions : Financial market provide valuable information about securities which helps in saving time, efforts and money and thus it reduces cost of transactions.

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Money Market

It is a market for short term funds / securities whose period of maturity is upto one year. The major participants in the money market are RBI, Commercial Banks, Non-Banking Finance Companies, State Government, Large Corporate Houses and Mutual Funds. The main instruments of money market are as follows.

1. Treasury Bills : They are issued by the RBI on behalf of the Central Government to meet its short-term requirement of funds. They are issued at a price which is lower than their face value and repaid at par. They are available for a minimum amount of Rs. 25,000 and in multiples thereof. They are also known as Zero Coupon Bonds.
2. Commercial Paper : It is a short term unsecured promisory note issued by large and credit worthy companies to raise short term funds at lower rates of interest than market rates. They are negotiable instrument transferable by endorsement and delivery with a fixed maturity period of 15 days to one year.
3. Call Money : It is short term finance repayable on demand, with a maturity period of one day to 15 days, used for interbank trasactions. Call Money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio as per RBI. The interest rate paid on call money loans is known as the call rate.
4. Certificate of Deposit : It is an unsecured instrument issued in bearer form by Commercial Banks & Financial institutions. They can be issued to

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individuals, Corporations and companies for raising money for a short period ranging from 91 days to one year.

5. Commercial Bill : It is a bill of exchange used to finance the working capital requirements of business firms. A seller of the goods draws the bill on the buyer when goods are sold on credit. When the bill is accepted by the buyers it becomes a marketable instrument and is called a trade bill. These bills can be discounted with a bank if the seller needs funds before the bill maturity.

Capital Market :

It is a market for long term funds where debt and equity are traded. It consists of development banks, commercial banks and stock exchanges. The capital market can be divided into two part.

1. Primary Market.
2. Secondary Market

Primary Market :

It deals wth the new securities which are issued for the first time. It is also known as the new issues market. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals. It has no fixed geographical location and only buying of securities take place in the primary market.

Secondary Market :

It is also known as the stock market or stock exchange where purchase and sale of existing securities take place. They are located at specified places and both the buying as well as selling of securities take place.

Methods of flotation of New Issues in the Primary Market

1. Offer through Prospectus : It involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital through an advertisement in newspapers and magazines.
2. Offer for sale : Under this method securities are offered for sale through intermediaries like issuing houses or stock brokers. The company sells securities to intermediary / broker at an agreed price and the broker resell them to investors at a higher price.

3.	Private Placements : It refers to the process in which securities are allotted to institutional investor and some selected individuals.
4.	Rights Issue : It refers to the issue in which new shares are offered to the existing shareholders in proportion to the number of shares they already possess.
5.	e-IPOs :- It is a method of issuing securities through on-line system of stock exchange. A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an e-initial public offer. SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company.
Difference between Capital and Money Market.
	Basis	Capital Market	Money Market
1.	Participants	Financial Institutions, Banks Corporate Entities, foreign investors and individuals	RBI, Banks, Financial Institutions & finance companies
2.	Instruments Traded	Equity shares, bonds preference shares and debentures	Treasury Bills, trade bills, commercial paper, call money etc.
3.	Investment outlay	Does not necessarily require a huge financial outlay	Entail huge sums of money as the instruments are quite expensive.
4.	Duration	Deals in medium & long term securities having maturity period of over one year.	Deals in short term funds having maturity period upto one year.
5.	Liquidity	Securities are less liquid as compared to money market securities.	Money market instruments are highly liquid.
6.	Expected Return	High return	Low return
7.	Safety	Capital Market instruments are riskier both with respect to return and repayment.	Money market instrument are generally much safer with a minimum risk of default.
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Difference between Primary and Secondary Market

Basis

1. Securities
2. Price of Securities
3. Purchase & Sale.
4. Place of Market
5. Medium

Primary Market

Only new Securities are traded.

Prices of securities are determined by the management of the company.

Securities are sold to investors directly by the company or through intermediary.

There is no fixed geographical location

Only buying of securities takes place

Secondary Market

Existing securities are traded.

Price are determined by the forces of demand and supply of the securities.

Investors exchange ownership of securities.

Located at specified places.

Both buying & the selling of securities can take place.

Stock Exchange / Share Markets

A stock Exchange is an institution which provides a platform for buying and selling of existing securities. It facilitates the exchange of a security i.e. share, debenture etc. into money and vice versa. Following are some of the important functions of a stock Exchange.

1. Providing liquidity and Marketability to Existing Securities : Stock Exchange provide a ready and continuous market for the sale and purchase of securities.
2. Pricing of Securities : Stock Exchange helps in constant valuation of securities which provide instant information to both buyers and sellers and thus helps in pricing of securities which is based on the forces of demand & supply.
3. Safety of transaction : The members of a stock exchange are well regulated, who are required to work within the legal framework. This ensures safety of transactions.
4. Contributes to Economic Growth : Stock exchange provide a platform by which saving get channelised into the most productive investment proposals, which leads to capital formation & economic growth.
5. Spreading of Equity cult : Stock exchange helps in educating public about investments in securities which leads to spreading of Equity culture.

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6. Providing scope for speculation : Stock exchange provides scope within the provisions of law for speculation in a restricted and controlled manner.

Trading Procedure on a Stock Exchanges.

1. Selection of Broker : In order to trade on a stock Exchange first a broker is selected who should be a member of stock exchange as they can only trade on the stock exchange.
2. Placing the order : After selecting a broker, the investors specify the type and number of securities they want to buy or sell.
3. Executing the order : The broker will buy or sell the securities as per the instructions of the investor.
4. Settlement : Transactions on a stock exchange may be carried out on either cash basis or a carry over basis (i.e. badla). The time period for which the transactions are carried forward is referred to as accounts which vary from a fortnight to a month. All transactions made during one account are to be settled by payment for purchases and by delivery of share certificates, which is a proof of ownership of securities by an individual.

Earlier trading on a stock exchange took place through a public outcry or aution system which is non replaced by an online screen based electronic trading system. Moreover, to eliminate, the problems of theft, forgery, transfer delays etc an electronic book entry from a holding and transferring securities has been introduced, which is called process of dematerialisation of securities.

National Stock Exchange of India (NSE)

NSE was set up by leading financial institutions, banks, insurance companies and other financial intermediaries in 1992 and was recognised as a stock exchange in April 1993. It has provided a nation wide screen based automated trading system with a high degree of transparency and equal access to investors irrespective of geographical location. NSE was set up with the following objectives.

1. Establishing a nation-wide trading facility for all types of securities.
2. Ensuring equal access to investors all over the country through an appropriate communication network.
3. Enabling shorter settlement cycles and book entry settlements.
4. Providing a fair, efficient and transparent securities market using electronic trading system.
5. Meeting international bench marks & standards.

NSE provides trading in following two segments :

1. Whole sale Debt Market Segment which provide platform for a wide range of fixed income securities such as Government Securities, treasury bills, state development loans, PSU bonds etc.
2. Capital Market Segment which provide platform for equity shares, preference shares, debentures etc. as well as retail Govt. securities.

Over the Counter Exchange of India (OTCEI)

OTCEI was promoted by UTI, ICICI, IDBI, IFCI, LIC, GIC, SBI Capital Markets and can Bank Financial Services. It is a place where buyers seek sellers and vice-versa and then attempt to arrange terms and conditions for purchase / sale acceptable to both the parties. It is fully computerised, transparent, single window exchange which provide quicker liquidity to securities at a fixed and fair price, liquidity for less traded securities. Following are the advantages of OTC Market.

1. It provides a trading platform to smaller and less liquid companies.
2. It is a transparent system of trading with no problem of bad or short deliveries.
3. Family concerns & closely held companies can go public through OTC.
4. Dealer can operate both in new issues & secondary market at their options.
5. It is cost effective as there is a lower cost of new issues and lower expenses of servicing the investors.

Difference beteen NSEI and OTCEI

	Basis	NSEI
1.	Establishment	1992
2.	Settlement	within 15 days
3.	Security	In whole sale debt
	Traded	Market segment Treasury

OTCEI

1990

within 7 days Equity, debentures etc.

bill, PSU Bonds etc & In Capital Market segment equity shares, preference shares, debentures

4. Objectives To provide nation

wide, ringless transparent trading facility for all instruments.

To serve as an exchange for securities of small companies.

5. Size of the Paid up capital Paid up capital

company Rs. 3 Crore & above Rs. 30 Lakh & above.

Depository Services and D mat Accounts :

Keeping in the mind the difficulties to transfer of shares in physical form SEBI has developed a new system in which trading in shares is made compulsory in electronic form Depository services and D Mat Account are very basis of this system.

Depository Services :

Now a days on line paper-less trading in shares of the company is compulsory in India. Depository services is the name of that mechanism. In this system transfer of ownership in shares take place by means of book entry without the physical delivery of shares. When a investor wants to deal in shares of any company he has to open a D Mat account. There are four players who participate in this system.

1. The Depository : A depository is an institution which hold the shares of an investor in electronic form. There are two depository institution in India these are NSDL and CDSL.
2. The Depository Participant : He opens the Account of Investor and maintains securities records.
3. The Investor : He is a person who wants to deal in shares whose name in recorded.
4. The Issuing Company : That organisation which issue the securities. This issuing company send a list of the shareholders to the depositories.

D Mat Accounts :

In this process a shares certificates converted its physical form to electronic form and credited the same number of holding to D mat A/c.

Benefits of D Mat Account :

1. Reduces of paper work.
2. Elimination of problems on transfer of shares such as loss, theft and delay.
3. Exemption of stamp duty when transfer of shares.
4. The concept of odd lot stand abolished.
5. Increase liquidity through speedy settlement.
6. Attract foreign investors and promoting foreign investment

Depository System Parallel to Banking System

The depository system in parallel to the Banking System. A bank holds cash in account the depository hold shares in account. The transfer of cash and shares take place with-out the physical handling of cash or shares.

Securities and Exchange Board of India (SEBI)

SEBI was established by Government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of securities market and for investor protection. It was given a statutory status on 30 January 1992 through an ordinance, which was later replaced by an Act of Parliament known as the SEBI Act, 1992.

Objectives of SEBI

1. To regulate stock exchange and the securities market to promote their orderly functioning.
2. To protect the rights and interests of investors and to guide & educate them.
3. To prevent trade malpractices such as internal trading.
4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc.

Function of SEBI

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Regulatory Functions

1. Framing Rule & Regulations
2. Registrations of broker & sub-brokers
3. Registration of collective investment schemes & mutual funds.
4. Regulation of Stock Brokers, portfolio exchanges, underwriters & Merchant Bankers
5. Regulation of task over bids by companies.
6. Levying fee or other charges as per Act.

1.

2.

3.

4.

5.

Development Functions

Training of intermediaries Conducting Research & Publishing useful information.

Undertaking measures to develop capital market by adapting flexible approach. Educating Investors to broader their understanding Permitting internet trading through registered stock brokers

Protective Functions

1. Prohibiting of frandulent & unfair trade practices.
2. Check on insider trading.
3. Ensure investors protection.
4. Promote fair practice & code of conduct in securities market.
5. Check on price rigging.
6. Check on preferential allotment.

One Marks Questions :
1.	What is the maturity period of a commercial Paper?
2.	What is a Treasury Bill?
3.	AB Ltd. has sold 1 lakh equity shares of Rs. 10 each at Rs. 12 per	share
	to an investment banker, who offered them to the public at Rs. 20 Identify the method of flotation.	each.
4.	State any two instruments of Capital Market.
5.	Who act as the watchdog of Security Market in India?
6.	Who is the Borrowers of call money?
7.	What is the other name of Zero coupon Bodn?
8.	Who issues the treasury Bill?
9.	What is the other name of Primary Market?
10.	What is a Prospectus?
11.	What is Dematerialization?
12.	What is the minimum amount of Treasury Bill?
13.	What is D Mat A/c?
14.	Write one benefit of D Mat Account?
Three / Four Marks Questions
1.	State the various protective functions of SEBI.
2.	What is money market? Explain its three instruments.
3.	What is meant by commercial paper & certificate of Deposit?
4.	Distinguish between NSEI and OTCEI on following basis. Size of the company Securities traded. Settlement Objective.
5.	State any four regulatory functions of the SEBI.
6.	Make difference between Primary and Secodary Market.
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Five/ Size marks Questions.

1. Explain any five / six functions of stock exchange.
2. Why was SEBI set up? State its development functions.
3. Explain any five methods of floating new issues in the primary market.
4. Explain the trading procedure on a stock exchange.
5. Distinguish between capital market and money market on the following

basis.
a)	Participants
b)	Instruments Traded.
c)	Duration of Securities Traded.
d)	Expected Return
e)	Safety
f)	Liquidity.

1. Primary Market contribute to capital formation directly Secondary Market does so indirectly Explain.
2. You are finance expert. Your father feels that there is no difference between Primary Market and Secondary Market. Where do you differ with him. How would you convince him. Give reasons in support of your answer.
3. What are the benefits of depository services and D Mat Account.
4. Explain the constituents of depositry services.
5. Mohan wants to sell 50 shares of Tata Motor. Explain the trading procedure of shares.

 

UNIT 8

CONTROLLING

Meaning & Definition

Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisation s resources are being used effectively and efficiently for the achievement of predetermined goals.

It can be defined as comparison of actual performance with the planned performance

The controlling functions find out how far actual performance deviates from standards, analyses the causes of such deviations and attempts to take corrective actions based on the same.

Importance of Controlling :-

1. Controlling helps in achieving organisational goals :- The controlling function measures progress towards the organisational goals and brings to light/indicates corrective action.
2. Judging accuracy of standards : A good control system enables management to verify whether the standards set are accurate or not.
3. Making efficient use to resources – By the process of control, a manager seeks to reduce wastage of resources.
4. Improves employees motivations : A good control system ensures that employees know well in advance what they are expected to do & also the standard of performance. It thus motivates & help them to give better performance.
5. Facilitating Coordination in action : In controlling each department and employee is governed by predetermind standards which are well coordinated with one another.

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6.	Ensuring order and discipline :- Controlling creates an atmosphere of order and discipline in the organisation by keeping a close check on the activities of its employees.
Limitations of Controlling
1.	Little Control on external factors : Generally no exterprise can control external factors such as government policies, technological changes, competitions etc.
2.	Resistance from employee – Control is often resisted by employees. They see it as a restriction on their freedom.
3.	Costly affair : Control is a costly affair as it involves a lot of expenditure time and efforts.
4.	Difficulty in setting quantitative standards :- Control system loses some of its effectiveness, when standards cannot be defined in quantitative terms. In the absence of quantitative standards, comparison with standards becomes difficult.
Relationship between Planning and Controlling : Planning and controlling are interrelated and infact reinforce each other in the sense that
1.	Planning is pre-requisite for controlling. Plans provide the standard for controlling. Thus, with out planning, controlling is blind.
2.	Planning is meaningless without controlling. It is fruitful when control is exercised.
3.	Effectiveness of planning can be measured with the help of controlling.
4.	Planning is looking ahead & controlling is looking back.
	Thus planning & controlling cannot be separated. The two are supplementary functions which support each other for successful execution of both the functions.
	Planning makes controlling effective where as controlling improves future planning.
Controlling Process :
1.	Setting performance Standards :- Standards are the criteria against which actual performance would be measured. Thus standards serve as bencemarks.
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1. Measurement of Actual performance : Performance should be measured in an objective and reliable manner. Which include personal observation, sample checking.
2. Comparing Actual performance with standard : This steps involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired performance.
3. Analysing Deviations – The deviations from the standards are assessed and analysed to identify the causes of deviations.
4. Taking Corrective Action :- The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

Techniques of Managerial Control

Traditional Control Techniques Modern Control Techniques

Personal Observation Return On investment

Statistical Reports Break even analysis Budgetary Control

Ratio Analysis Responsibility Accounting Management Audit PERT and CPM

Management information

Traditional Techniques :-

Traditional techniques are those which have been used by the companies for a long time and are still being used.

Modern Techniques :-

Modern techniques of controlling are those which are of recent origin. These techniques provide refreshingly new thinking on the way in which various aspects of an organisation can be controlled.

Budgetary Control : It is a technique of management control in which all operation are planned in advance in the form of budget & actual result are compared with budgetary standard.

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Types of Budget (i) Sales Budget, Production Budget etc.

Budgetary Control :

A budget reflects the policy for the specified period. The most common types of budgets used by an organisation are sales budget, production budget, cash budget etc.

Budgetary control is a technique of managerial control in which all operation are planned in advance in the form of budgets and actual results are compared with budgetary standards. This comparison reveals the necessary action to be taken so that organisational objectivies are accomplished.

Modern Techniques of Managerial Control :

1. ROI Return an investment

Net Income _x Sales

Sale Total Investments

1. Ratio Analysis : Liquidity ratios; Solvency ratios;

Profitability ratios; Turnover ratios.

PERT : Programme evaluation & review techniques.

CPM : Critical path method

MIS : Management Information System

1. It is computer based information system that provides support & information for effective managerial decesion making.
2. It servis as an important control technique by providing data & information to the managers at the right time so that appropriate corrective action may be taken in case of deviation from standards.

One Mark Question :-

1. Explain the meaning of controlling.
2. Write the first step of controlling process.
3. Mention any one features of good controlling system.
4. What are the two types of deviations.
5. Which principle of management control is based on the belief that an attempt to control everything results in controlling nothing.

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3-4 Marks Questions

1. Planning is looking ahead and controlling is looking back. Explain.
2. Controlling function of management is a pervasive function . Explain.
3. What is meant by Budgetary control?
4. Corrective action is essence of control . Explain.

5-6 Mark Questions :

1. Explain the various steps involved in the process of control.
2. Explain the importance of controlling is an organisation.
3. What is break-even-analysis? How it is an effective technique of control.
4. Planning and controlling are mutually interrelated and inter-dependent activities. Explain.
5. What are the advantages of Budgetary Control?
6. Explain the limitations of controlling?
7. Explain any two Traditional techniques of controlling.
8. Explain any two Modern techniques of controlling.

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UNIT 7

DIRECTION

Meaning

Directing as a function of managment, refers to the process of instructing, guiding counselling, motivating and leading people in the organisation to achieve its objectives. It does not mean only instructions but also include supervising the employess when they are performing the job, motivating them to perform more efficiently and leading them towards the achievement of organisational goal.

Features :

1. Directing initiate action : The other functions of management prepare a setting for action, but directing initiates action in the organisation.
2. Directing takes place at every level of Management :- Every manager from top executive to supervisor performs the function of directing.
3. Directing is a continous process of supervision, communication, leadership and motivation, It takes place throughout the life of the organisation.
4. Directing flows from top to bottom :- It is first initiated at the top level and flows to the bottom through organisational hierarchy.

Importance :

1. Initiates Action : It helps to initiate action by people in the organisation towards attainment of desired objectives. The employees start working only when they get instructions and directions from their superiors. It is the directing function which starts actual work to convert plans into results.
2. Integrate Employee s Efforts :- All the activities of the oranisation are interrelated so it in necessary to coordinate all the activities. It integrates the activities of subordinates by supervision, guidance and counselling.

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3.	Means of motivation – It motivates the subordinates to work efficiently and to contribute their maximum efforts towards the achievement of organisational goals.
4.	Facilitates change :- Employees often resist changes due to fear of adverse effects on their employment and promotion. Directing facilitate adjustment in the organisation to cope with changes in the environment.
5.	Stability and Balance in the organisation :- It helps to achieve balance between individual interests of employees and organisational interests.
Principles of Directing
1.	Maximum Individual Contribution : – Directing techniques must help every individual in the organisation to contribute his maximum potential for achievement of organisational objectives.
2.	Harmony of objectives – The objectives of individual and organisation must be in harmony with each other. But good directing should provide harmony by convincing the employees that organisational objectives are in their own interest.
3.	Unity of Command :- An individual or subordinate in the organisation should receive instructions from one superior only otherwise it creates confusion conflict and disorder in the organisation.
4.	Appropriateness of Direction Technique : According to this principle the technique like motivation, supervision, communication and leadership should be appropriate – according to the attitude and need of the employees.
5.	Managerial Communication : The two way flow of information is the most effective means of securing cooperation of the subordinates because it provides them an opportunity to express their feelings.
6.	Use of Informal organisation :- An informal organisation exist within formal organisation structure. So managers must make use of informal structure also for getting correct and real feed back.
7.	Leadership – A manager by becoming a good leader can make direction effective with the trust and confidence of his subordinates.
8.	Follow through : Mere giving of an order is not sufficient managers should follow it up by reviewing continuously.
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Elements of Direction

1. Supervision – It means observing the subordinates at work to see that they are working in according with plans and to help them in solving their problems. The important thing in supervision is it involves face to face contact between superior and subordinates. Supervisor s position is immediately above the worker.

Importance of Supervision / Role of a Supervisor

1. Link between workers and management because the supervisor explains management policies to worker and brings workers problems to the notice of the management.
2. Ensures issuing Instructions : To make sure that the instructions are communicated to each and every employee.
3. Facilities Control : – Control means match between actual and planned output. It ensures checking on the methods in use and progress of work according to planned schedule.
4. Maintainence of Discipline : The strict supervision and guidance of supervisor encourages the employees and workers to be more disciplined in the activities.
5. Feedback – The supervisors are directly dealing with the subordinates, As a result feedback in the form of suggestions, grievances keeps coming to the management.
6. Improved Motivation – A supervisor with good leadership qualities can build up high morale among workers.
7. Optimum utilisation of resources All the activities are under the observation of supervisor so less wastages and optimum utilisation of resources is possible.

Motivations :-

Meaning :- It is the process of stimulating people to act to their best ability

to accomplish desired goals. It depends upon satisfying needs of people.

Features :

1. Psychological phonomenon – It is personal and internal feelings which arises from the needs and wants of a person.
2. Goal Directed Behaviour – It includes people to behave in such a manner so that they can achieve their goal.
3. Motivation can be either positive or Negative – Positive motivation means inspiring people to work better and appreciating a work that is well done. Negative motivation means forcing people to work by threatening or punishing them.
4. Complex Process :- It is a complex and difficult process. Individuals differ in their needs and wants and moreover human needs change from time to time.

Motivation Process –

It is based on human needs.

Unsatisfied Needs
Tension
Drives

Search Behaviour
Satisfied Need
Reduction of Tension

An Unsatisfied needs of an individual creates tension which stimulates his or her drives. These drives generate a search behaviour to satisfy such need. If such need is satisfied, the individual is relieved of tension.

Importance –

1. Achievement of Organisational Goal : Motivation puts human resources into action by satisfying their needs through appropriate rewards. Motivated employees cooperate and contribute their maximum efforts towards the organisational goals.
2. Higher Efficiency of Employees – Depends upon their abilities and willingness to work hard. It bridges the gap between the ability to work and willingness to work and willingness always improves efficiency.
3. Reduction in resistance to change It helps to overcome resistance to change.
4. Stability in workforce – It brings confidence in employees and also improve their loyality and commitment towards the organisation. As a result the rates of labour absenteeism and labour turnover reduce.
5. Optimum Utilisation of Resources – The motivated workers would handle machines and materials properly. This would ensure optimum utilisation of resources and reduction of wastage.

Financial and Non-Financial Incentives – Incentive means all measures which are used to motivate people to improve performance.

Profit sharing

Pay and Allowances

Bonus

Retirement Benefits Perquisites

Productivity linked wage in centuries

Co-partnership/stock option

Status

Career Advancement

Opportunity

Job enrichment

Employee Recognition programmer

Employees participation Job security

Employees empowerment

Maslow s Need Hierarchy Theory of Motivation :- Maslow s Theory focuses on the needs as the basis for motivation

Example from the point
view of Individual

Example from the point of view of organisation

Self fulfilments

Achievement of goals

Status

Jobtitle

Friendship

Cordial relation with collegues

Stability of Income

Pension Plan

Hunger

Basic Salary

f Self J
^rActualisatioi
Needs

Needs of the highest order

Generally found in persons

whose first four needs have

f Esteem or Status ‘
needs self confidence,
prestidge

already been fulfilled.

Social Needs – Sense of Belongingness, association friendship

/ Safety or Security Needs – Oldage, \ sickness, job security, stability of income’

Basic of physiclogical needs – Food, clothing
Shelter, air, water, other necessities of life.

Leadership –

Leadership is the activity of influencing people to strive willingly for mutual objectives. Managers at all levels are expected to the leaders of their subordinates.

Features :-

1. Influence behaviour : It indicates ability of an individual to influence others.
2. Interpersonal relations : It tries to bring change in the behaviour of others.

3.	Common goals : It is exercised to achieve common goals of the organisation.
4.	Contnuous process : It is a continous process.
5.	Situational : There a no particular style of leadership it is related to particular situation.
Importance :- 1. Help in guiding and inspiring employees.
2.	Creates confidence – by recognising the Quality and capabilities of individuals.
3.	Handles conflicts effectively and does not allow adverse effects resulting from the conflics.
4.	Provides Training to Subordinates .
5.	Secures cooperation of members of organisation
6.	Inspires productivity
7.	Improves job satisfaction
8.	Achievement of organisational goals
9.	Introducing required changes.
Qualities of a Good Leader
1.	Physical Features – Health and endurance help a leader to work hard which inspires others also to work with same spirit.
2.	Knowledge – A leader must be able to examine every problem in the right direction.
3.	Integrity – He should be a model to others regarding his ethics and values.
4.	Initiative – He should not wait for opportunities come to his way rather he should grab the opportunities.
5.	Motivation skills – To understand the needs of people and motivate them through satisfying their needs.
6.	Communication skills : A leader must be a good communicator.
Communication – It is transfer of information from the sender to the receiver with the information being understood by the receiver.
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Elements of Communication Process –
1.	Sender – Who conveys his thoughts or ideas
2.	Message – Ideas, feelings, suggestions, order etc.
3.	Encoding – Converting the message into communication symbols such as words / pictures etc.
4.	Media – Path/ Channel through which encoded message is transmitted to receiver e.g., face to face, phone call, internet etc.
5.	Decoding – Converting encoded symbols of the sender.
6.	Receiver – Who receives communication of the sender.
7.	Feed back – All those action of receiver indicating that he has received and understood message of sender.
8.	Noise – Some obstruction or hindrance to communication like poor telephone connection, inattentive receiver.
Importance of Communication 1. Facilitates Coordination – between interrelated departments and sections thus creating a unity of purpose and action.
2.	Provides data necessary for decision makings – When information is effectively and efficiently communicated to management.
3.	Increases Managerial Efficiency – By Conveying the goals, targets, instructions.
4.	Promotes cooperation and Industrial Peace – The two way communication promotes cooperation and mutual understanding between the management and workers.
5.	Establishes effective leadership – Effective communication helps to influence subordinates – while influencing leader should posses good communication skills.
Formal Communication – refer to official communication which takes place following the chain of command. Classification of formal communication –
1.	Vertical communication – Flows vertically i.e., upwards or downwards through formal channels
	i) Downward Communication – Higher to lower level like plans, policies, rules etc.
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ii) Upward Communication – Subordinate to superior like suggestions, grievances, reports etc.

2. Horizontal / lateral Communication – between persons holding positions at the same level of ther organisation e.g., production manager may contact marketing manager about product design, quality etc.

Communication Net works of a Formal Communication.

Single Chain

Free Flow

Informal Communication : Communication that takes place without following the formal lines of communication is said to be internal communication. There is no fixed direction or path for the flow of information.

Grapevine or Informal Communication Networks

1. Single Strand – Each person communicates with the other in sequence.
2. Gossip – Each person communicates with all on non-selective basis.
3. Probability – The individual communicates randomly with other individual.
4. Cluster – the individual communicates with only those people whom he trusts.

Difference between Formal & Informal Communication
	Basis Formal Communication	Internal Communication
1.	Meaning within the official chain of command	Between individuals and groups which are not officially recognised.
2.	Channel Through a definite path	No definite path
3.	Speed Slow – because all information has to pass through an established chain of command	Very fast – Cuts across all the official channels.
4.	Nature More rigid and cannot be modified	Flexible and varies from individual to individual.
5.	Expression It is mostly expressed in written form.	It mostly tends to be oral
Barriers to Effective Communication –
1.	Semantic Barriers – Concerned with problems and obstructions in the process of encoding or decoding of message into words or impressions Semantic barriers are as follows.
1.	Badly expressed message
2.	Symbols with different meanings.
3.	Faulty Translations.
4.	Unclarified assumptions – Subject to different interpretations.
5.	Technical Targon – Technical words may not be understood by the workers.
Psychological Barriers – The state of mind of both sender and receiver affect the process of communication. Psychological barriers are as follows.
1	Premature Evaluation – Judgement before listening.
2.	Lack of attension.
3.	Loss by transmission and Poor Retention – When oral communication passes through various levels – destroy the structure of the message.
4.	Distrust – If the parties do not believe each other.
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Organisational Barriers

Factor related to organisation structure.

1. Organisational Policy
2. Rules and regulations.
3. Status.
4. Complexity in organisation structure.

Personal Barriers – of superiors and subordinates

1. Fear of challenge to authority.
2. Lack of confidence of superior on his subordinates.
3. Unwillingness to communicate.
4. Lack of Proper incentives.

Improving Communication Effectiveness.

1. Clarify the ideas before communication.
2. Communicate according to the needs of receiver.
3. Consult others before communicating.
4. Be aware of language, tone and content of message.
5. Ensure proper feedback.
6. Follow up communication.
7. Be a good listner.

QUESTIONS

1 Mark

1. Which function of management is known as Management-in-action ?
2. How supervision is helpful in maintaining discipline?
3. What is Economic Safety?
4. What is meant by Job Enrichment as a type of non-monetary incentives?
5. What is meant by Leadership ?
6. What is meant by Integrity ?
7. A leader does not wait for opportunities but creates them . This statement is related to which quality of a good leader?
8. What is meant by NOISE in communication process?
9. What is meant by Feedback in communication process?
10. What is meant by Grapevine ?

3 Marks Questions

1. Direction is the least important function of management . Do you agree with this statement? Give any two reasons in support of your answer.
2. The post of supervisor should be abolished in the hierarchy of Managers . Do you agree? Give any three reasons in support of your answers.
3. Explain how supervision facilities control?
4. Motivation can be either positive or negative. How?
5. Motivation helps to reduce absentism in the organisation. Clarify.

4/5 Marks Questions

1. Explain any four principles of directing.
2. State any four characteristics of motivation.
3. Clarify Job Enrichment and Job Securing as non-financial Motivators.
4. Explain the importance of leadership as the directing functions of management.
5. Explain any four factors which are likely to disrupt effective communication.

6 Marks Questions

1. Supervision is an important element of directing function . Explain any four reasons in support of the above statement.
2. Explain different financial and non-financial incentives used to motivate employees of a company.
3. Effectiveness of Leadership depends on the qualities of the leader . Explain any four such qualities of a leader.
4. In an organization there are many leaders. But a good leader must be a distinguished one. Suggest any four qualities that a good leader must possess.
5. Explain the meaning and importance of communication process.

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UNIT 5

ORGANISING

Meaning of Organising

After laying down the plans and objectives the next function to be performed by the managers is organising. It determines what activities and resources are required and decides who will do a particular task, where it will be done and when it will be done.

* Thus organising means establishing relationship between various factors of production and it in concerned with establishing relationship amongst jobs, sections, department & position.

Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.

Step Involved in the Process of Organising :-

1. Identification and Division of Work :- It involves identification and dividing the total work to be done into specific activities (called jobs) in accordance with previously determined plans. By dividing the work the burden of work can be shared among the employees.

It facilitates specialisation of work & skills. Duplication of work can be avoided by dividing the work into manageable activities.

1. Departmentalisation :- The second step in organising is to combine or group similar or related jobs into larger units, called departments, divisions or sections. They can be grouped on the basis of functions which an organisation undertakes to achieve its objective. For example departments may be created for manufacturing, marketing, financing etc.

Departmentalisation is done to achieve coordination & to facilitate unity of efforts.

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1. Assignment of duties Once departments have been formed each of them is placed under the charge of an individual called departmental head (e.g., production manager, finance manager etc.) Jobs are then allocated to the members of each department according to their skills and qualifications.
2. Establishing Reporting Relationships :- Merely allocating work is not enough. Each individual should also know from whom he has to take orders and to whom he is accountable. It helps in coordination amongst various departments.

Importance of Organising :-

1. Benefits of specialisation : – In organising every individual is assigned a part of total work and not the whole task. Due to this division of work into smaller units and repetitive performance leads to specialisation. Thus organising promotes specialisation which in turn leads to efficient & speedy performance of tasks.
2. Clarity in working Relationship :- It helps in creating well defined jobs and also clarifying the limits of authority and responsibility of each job. The superior, subordinate relationship is clearly defined in organising.
3. Effective Administration : It provides a clear description of jobs and related duties which helps to avoid confusion and duplication. Clarity in working relationships enables proper execution of work which results in effective administration.
4. Optimum Utilisation of resources : The proper assignment of jobs avoids overlapping/duplication of work. This helps in preventing confusion and minimising the wastage of resources and efforts.
5. Adaptation of change :- It allows a business enterprise to adapt itself according to changes in the business environment. Organisational structures can be suitably modified according to changes.
6. Development of personnel : Sound organisation encourages initiative & creative thinging on part of employees.
7. Expansion and growth : It helps in growth & diversification of an enterprise by adding more job positions & department.

Meaning of Organisational Structure :-

It seeks to establish relations among all the persons working in the

organisation. Under the organisational structure various posts are created to

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perform different activities for the attainment of the objectives of the enterprise. Relations among persons working on different posts are determined. The structure provides a basis or framework for managers and other employees for performing their functions.

The organisation structure can be defined as the frame work within which managerial and operating tasks are performed.

Relation between Span of Management and Organisation structure

– Span of mangement refers to the number of subordinates that can be effectively managed by a superior. The Span of management to a large extent gives shape to the organisation structure. This determines the levels of management in the structure.

Types of Organisation Structures

Functional Structure

Divisional Structure

I. Functional Structure :- In functional structure activities are grouped and departments are created on the basis of specific functions to be performed. For example all the jobs related to production are grouped under production department – Sales to sales department etc.

Advantages :

1. Specialisation – Better division of labour takes place which results in specialisation of functions and its consequent benefits.
2. Coordination is established :- All the persons working within a department are specialist of their respective jobs. It makes the coordination easier at department level.
3. Helps in increasing managerial efficiency : Managers of one department are performing same type of function again and again which makes them specialised and improves their efficiency.
4. Minimises cost – It leads to minimum duplication of effort which results in economies of scale and thus lowers cost.

Disadvantages

1. Ignorance of organisational objectives – Each departmental head works according to his own wishes. They always give more weight to their departmental objectives. Hence overall organisation objectives suffer.
2. Difficulty in Inter-departmental Coordination – All departmental heads work as per their own wishes which results coordination within the department but it makes inter-departmental coordination difficult.
3. Hurdle in complete development – because each employee specialises only in a small part of the whole job.

Suitability :-

1. Where the size of business unit is large.
2. Where specialisation is required.
3. Where there is mainly only one product in sold.

II. DIVISIONAL ORGANISATION STRUCTURE :

Dividing the whole enterprise according to the major products to be

manufactured (like metal, plastic, cosmetics etc) in known as divisional

organisation structure.

Advantages :-

1. Quick decision making :- Divisional manager can take any decision regarding his division independently which makes decisions quick and effective.
2. Divisional results can be Assessed :- Divisional results (profit/loss) can be assessed easily. On this basis unprofitable division can be closed.
3. Growth and Expansion :- It facilitates growth and expansion as new divisions can be added without disturbing existing departments.

Disadvantages :-

1. Conflicts – among different divisions on allocation of resources
2. Duplicity of Functions : – Entire set of functions is required for all divisions. It gives rise to duplicity of efforts among divisions.
3. Selfish Attitude :- Every division tries to display better performance even sometimes at the cost of other divisions. This shows their selfish attitude.

Suitablity :-

1. Where the number of main products are more than one.
2. Where the size of the concern is large enough.

FORMAL ORGANISATION

This structure is designed by the management to achieve organisational goals in which the responsibilities, authority and mutual relationships among all the employees working in an enterprise are clearly defined. It can be functional or divisional.

Features :-

1. It in deliberately created by the top management.
2. It is based on rules and procedures. Which are in written form
3. It is impersonal – Does not take into consideration emotional aspect.
4. It clearly difines the authority and responsibility of every individual.
5. It is created to achieve organisational objectivies.

Advantages :-

1. Easier to fix responsibility since mutual relationships are clearly defined.
2. No overlapping of work – because things move according to a definite plan.
3. Unity of command through an established chain of commands.
4. Easy to achieve objectives – because of coordination and optimum use of human and material resources.
5. Stability in the organisation – because behaviour of employees can be fairly predicted since there are specific rules to guide them.

Disadvantages :

1. The work is based by rules which causes unnecessary delay.
2. Lack of initiatives – because the employees have to do what they are told to do and they have no opportunity of thinking.
3. Limited in scope – It is difficult to understand all human relationships in an enterprice as it places more emphasis on structure and work.

Informal Organisation :

An informal organisation is that organisation which is not established

deliberately but comes into existence because of common interests, tastes and

religious and communal relations.

Features :

1. It originates from within the formal organisation as a result of personal interaction among employees.
2. It has no written rules and procedures.
3. It does not have fixed lines of communication.
4. It is not deliberately created by the management.
5. It is personal – means the feelings of individuals are kept in mind.

Advantage

1. Speed : Prescribed lines of communication are not followed which leads to faster spread of information.
2. Fulfillment of social needs – enhances job satisfaction which gives them a sense of belongingness in the organisation.
3. Quick solution of the problems – because the subordinates can speak out their mind before the officers which helps the officers to understand the problems of their subordinates.

Disadvantages :-

1. It creates rumours :- All the persons in an informal organisation talk carelessly and sometimes a wrong thing in conveyed to the other person.
2. It resists change and lays stress on adopting the old techniques.
3. Priority to group Interests – Pressurises members to confirm to group expectations.

Difference between Formal & Informal organisation

	Basis	Formal organisation	Informal organisation
1.	Meaning	If refers to the structure of well defined authority and and responsibility.	It refers to the network of social relationships which develops automatically
2.	Nature	Rigid	Flexible
3.	Authority	Arises by virtue of positions in management	Arises out to personal qualities.
4.	Adherence to rules	Violation of rules may lead to penalties and punishments	No such punishments.
5.	Flow of	Takes place through the	Not through a planned
	communi cation	scalar chain	route It can take place in any direction.

Delegation of Authority

Meaning – It means the granting of authority to subordinates to operate within the prescribed limits. The manager who delegates authority holds his subordinates responsible for proper performance of the assigned tasks. To make sure that his subordinates perform all the work effectively and efficiently in expected manner the manager creates accountability.

Elements of Delegation :-

1. Authority – The power of taking decisions in order to guide the activities of others. Authority is that power which influences the conduct of others.
2. Responsibility : It is the obligation of a subordinate to properly perform the assigned duty. When a superior issues orders it becomes the responsibility of the subordinate to carry it out.
3. Accountability – When a superior assigns some work to a subordinate, he is answerable to his superior for its success or failure.

Principle of Absoluteness of Accountability – Authority can be delegated but responsibility / Accountability cannot be delegated by a manager. The authority granted to a subordinate can be taken back and re-delegated to another person. The manager cannot escape from the responsibility for any default or mistake on the part of his subordinates.

Importance of Delegation of Authority

1. Reduction of Executive work load – It reduces the work load of officers. They can thus utilise their time in more important and creative works instead of works of daily routine.
2. Employee development – Employees get more opportunities to utilise their talent which allows them to develop those skills which will enable them to perform complex tasks.
3. Quick and better decision are possible – The subordinate are granted sufficient authority so they need not to go to their superiors for taking decisions concerning the routine matters.
4. High Morale of subordinates – Because of delegation of authority to the subordinates they get an opportunity to display their efficiency and capacity.
5. Better coordination – The elements of delegation – authority, responsibility and accountability help to define the power, duties and answerability related to various job positions which results in developing and maintaining effective co-ordination.

Difference – Authority, Resposibility and Accountability

Basis	Authority	Responsibility	Accountability
1. Meaning	Right to command	Obligation to perform an assigned task	Answerability for out come of the assigned task.
2. Origin	Arises from formal position	Arises from delegated authority	Arises from responsibility.
3. Flow	Downward – from Superior to Subordinate	upward – from Subordinate to Superior	upward – from Subordinate to Superior
4. Withdrawl	Can be withdrawn anytime by giving notice	Cannot be withdrawn once created	Cannot be withdrawn once created

Decentralisation :-

Meaning – It means to delegate authority to all levels of management for taking decisions. Under decentralisation all the authority except the one which is absolutely necessary for the superiors to hold is given to the subordinates permanently. Under decentralisation the number of centres for taking decisions

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increases because the managers belonging to the middle and lower level have the authority to take important decisions.

Centralisation and Decentralisation – represents the pattern of authority among managers at different levels. Centralisation of authority means concentrations of power of decision making in a few hands. In such an organisation very little authority is delegated to managers at middle and lower levels. No organisation can be completely centralised or decentralised. They exist together and there in a need for a balance between the two. As the organisation grows in size there is tendency to move towards decentralisation. Thus every organisation characterised by both.

Importance of Decentralisation :-

1. Develops initiative amongst subordinates – It helps to promote confidence because the subordinates are given freedom to take their own decisions.
2. Quick and better decisions – The burden of managerial decisions does not lie on a few individuals but get divided among various persons which helps them to take better and quick decisions.
3. Relieves the top Executives from excess workload – The daily managerial works all assigned to the subordinates which leaves enough time with the superiors which they can utilise in developing new strategies.
4. Managerial Development – It means giving authority to the subordinates upto the lower level to take decisions regarding their work. In this way the opportunity to take decisions helps in the development of the organisation.
5. Better Control – It makes it possible to evaluate performance at each level which results in complete control over all the activities.

Difference between – Delegation & Decentralisation

	Basis	Delegation	Decentralisation
1.	Nature	It is a compulsory act	It is an optional policy
2.	Freedom	Less freedom to take	More freedom of action due
	of action	decisions due to more	to less control by the top
		control by the superiors	management.
3.	Status	It is a process of sharing	It is the result of policy
		tasks and authority	decisions taken by top
			management.

37 XII – Business Studies

4.	Scope	Narrow – as it is confined	Wide – It includes extensions
		to a superior and his	of delegation to the lowest
		immediate subordinate.	of management.
5.	Purpose	To reduce the burden of	To increase the role and
		the manager	autonomy of lower level
			management.

QUESTIONS

1 marks

1. How effective administration in possible through organising?
2. Name the function of management which coordinates the physical, financial and human resources and establishes productive relations among them for achievement of specific goals.
3. Name the organisation which is directed by group norms.
4. What is organisation chart?
5. What is meant by organisational structure?
6. Difficulty in inter-departmental coordination is one of the limitations of which organisation structure.
7. What is meant by Authority?
8. What is the basis of delegation of authority.
9. Why effective management is possible through delegation of authority.

3 marks

1. What is functional organisation structure? Write two advantages of this structure.
2. How accountability related to authority? Explain.
3. Why is it necessary to delegate authority? Give three reasons.
4. Write three characteristics of decentralisation.
5. State three steps in the process of organising.

4/5 marks

1. Explain briefly any four features of formal organisation.
2. The employees of Sachin Ltd. a software company, have formed a Dramatic group for their recreation, Name the type of organisation and state its three features.
3. Distinguish between Formal and Informal organisation (any four points)
4. A manager is of the view that he is not responsible for the quality of work that he has delegated to his subordinates . Do you agree?
5. Delegation of authority provides the means where by a manager multiples himself Commnet.

6 marks

1. Explain the importance of organising as a function of management.
2. Formal organisation is considered better than informal organisation . Do you agree with this statement? Give reasons.
3. What is meant by Divisional structure of an organisation? Explan any two advantages and two limitations of it.
4. Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
5. Explain the meaning and process of delegation of authority.