Solution

IMPORTANT QUESTION

Class 12 - Business Studies

1. Yes, the management of IBM. Tech Ltd. is fulfilling all the objectives-organisational objectives, social objectives and personal
objectives.
i. Organisational objectives are the economic objectives of a business. These are survival, profit and growth. The main objective
of every management is to fulfil the economic objectives of a business.
"Profits of IBM. Tech Ltd. are enough for the survival and growth."
ii. Social objectives involve creation of benefits or economic value for the society. Every organisation has a social obligation
towards society.
"IBM. Tech Ltd. has set up an engineering college in which one-third of the students are girls to whom the company gives
50% scholarship."
iii. Personal objectives are related to satisfying diverse needs of the employees such as financial needs, social needs and higher
level needs. In any given organisation, some people have personal needs that need to be fulfilled and managed.
“...it pays competitive salaries and perks to all its employees. All the employees are happy working in the organisation
because of personal growth and development.”
2. Management is regarded as an 'art' because like in any art, in management too, there is:
It presupposes the existence of theoretical knowledge on any given subject. This means that there is literature, theory and
principles developed over the years.
Personalised Application: This means that theoretical knowledge is used differently by each individual.
Practice and Creativity: The acquired theoretical knowledge is subject to individual creativity and potential.
Management is regarded as a 'science' because like science, management is a systematic body of knowledge with its own theories
and principles which are derived through observation and repeated experimentation. However, since management deals with
human beings and human behaviour, the outcomes of these experiments are not capable of being accurately predicted. Therefore,
management is called an 'inexact science'.
True nature of management
Management is both an art and a science. The practice of management is an art. However, managers can work better if their
practice is based on the principles of management. These principles constitute the science of management. Management as an art
and a science are therefore not mutually exclusive, but complementary to each other.
3. i. Rishitosh Mukherjee is working at the middle level of management.
ii. Three more functions required to be performed by Rishitosh Mukherjee at this level are
a. To interpret the policies framed by the top level of management to lower level management to work accordingly as they
work as link chain between the top and lower level.
b. To assign necessary duties and responsibilities to the employees of his department for the implementation of the plans and
then also seen them that they perform it in the best and cheapest way.
c. To motivate employees of his respective department to achieve the desired objectives by giving them incentive either
financial or non-financial.
4. Coordination in management refers to bringing together the activities and resources of organisation and bringing harmony in them
in order to achieve the organisation objectives. The nature of coordination are:
a. Coordination is a continuous function as it is never ending because manager works continuously to achieve coordination and
maintain coordination because without it the organisation cannot function efficiently. All managers perform a series of
functions in order to ensure the smooth functioning of an organisation.
b. Coordination is an all pervasive function Coordination is a universal function because it is required at all the levels of
management, in all the departments and to perform all functions due to interdependence of various activities on each other.
Managers exist in all enterprises and in all countries.
c. Coordination is a deliberate function as every manager tries to coordinate the activities of the organisation to avoid confusion
and chaos in the organisation.
5. Coordination as
i. A continuous process: To coordinate is to harmonize all the activities of an organization so as to facilitate its success. It is a
continuous process because the goals cannot be achieved without harmony and sustained efforts. It should start at the planning

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 stage and continue with the other functions of management. The continuity arises as a result of being the essence of
management, rather than being a separate function. As the management starts with planning and ending with controlling but it
never stops and it again has to start with a new goal for another project.
ii. An all-pervasive function: Coordination is required at all levels of management due to the interdependent nature of activities
of different departments either a manager is in the top level, middle level or lower level he has need of it always to complete
work. It integrates the efforts of different departments and different levels with each function.
iii. A deliberate function: A manager has to coordinate the efforts of different people in a conscious and deliberate manner. Even
where the members of a department willingly cooperate and work, coordination gives a direction to that willing spirit. It is the
duty of every manager to do this deliberately to accomplish the organizational goal effectively and efficiently.
6. a. Co-ordination
Co-ordination is the process by which a manager synchronises the activities of different departments towards the achievement
of a common goal.
b. Importance of Co-ordination:
i. Growth in size
ii. Functional Differentiation
iii. Specialisation
7. a. Meeting changing environment requirement: The Company used to have total control over its marketing department but
now in a revolutionary move it has outsourced many functions related to marketing.
b. Harmony, not discord: The workers decided to work extra in order to gain sympathy of the organisation. Soon the strike was
over and the management decided to admit to the demands of the workers as the management realised that it was not a strike
as the workers worked more.
c. Fatigue study: He observed after how many rest intervals the performance of the workers maximized.
8. The principle of management which is violated initially is Cooperation not Individualism as the suggestions were overlooked
and the strikes happened. All the suggestions made by the workers are not even attended which has resulted in many strikes
during last couple of months. here should be a comprehensive collaboration between the employees and the management rather
than individualism.
The principle of management which is followed later on is Development of Each and Every Person to His or Her Greatest
Efficiency and Prosperity. However recent reports from the organisation say that there is a training module going on for the
employees so that their individual development can take place to the maximum.
The concept of management which is discussed in the last part of the case is Standardisation. This training module which is now
to be followed at the main branch will be later given a uniform format and will be applied to all branches of the organisation.
Standardisation implies to the method of establishing standards for every industry activity; it can be standardisation of manner,
time, raw material, machinery, product, processes or operating situations.
9. i. He continuously motivates his Research and Development department that new and latest methods of doing work must be
explored. (Science, not Rule of Thumb)
ii. If this vehicle (organisation) is to be driven in the right way then both the wheels should be properly aligned. (Harmony, not
discord)
iii. Among his employees, he has instilled the feeling that no decision will be taken without consulting the subordinates.
(Cooperation and not Individualism)
iv. Paying attention to training is the secret of the company.
Development of each and every person to his/her greatest efficiency and prosperity.
10. a. Harmony Not Discord: The principle emphasises that there should be complete harmony between the management and the
workers. Management should share gains of the company with the workers and workers should work hard and be willing to
embrace change for the good of the company. This requires 'Mental revolution' on the part of both management and workers.
Both management and the workers should transform their thinking. Both should realise that they require one another. : Factory
system of manufacturing meant that managers worked as a connection between the owners and the employees.
b. To achieve this state, Taylor called for Mental Revolution.
11. i. Fatigue study
Fatigue Study determines the amount and frequency of rest intervals in completing task.
The rest intervals help the workers to regain stamina and work again with the same capacity resulting in increased
productivity.
Proper rest interval are required for effective working of the employees.

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 ii. Differential piece wage system
Differential Piece Wage System is a technique which differentiates between efficient and less efficient workers. It
rewards the efficient workers and motivates the less efficient ones to improve their efficiency.
In this plan, there are two piece rates – one for those workers who produce the standard output or more, and the other
for those who produce less than the standard output.
iii. Standardisation and simplification of work
Standardisation refers to the process of setting standards for every business activity which can be standardisation of
process, raw material, time, product, machinery, methods or working conditions.
Simplification aims at eliminating superfluous varieties, sizes and dimensions.
12. The technique of functional foremanship suggests that the entire mechanism of an organization should be bifurcated into planning
and production departments. The planning department should have the following supervisors:
i. Instruction Card Clerk
ii. Route Clerk
iii. Time and Cost Clerk
iv. Disciplinarian
The production department should have the following supervisors;
Gang Boss
Repair Boss
Speed Boss
Inspector
13. Standardisation is done for the following reasons:
i. To ensure that a given product range has fixed types, sizes, characteristics etc.
ii. To bring about interchangeability, for manufactured parts, output, developments etc. among various branches.
iii. To set uniform standards of performance for men, machines etc.
iv. To make the product more competitive in the market
v. To abide by the set norms and regulations laid down by the government
14. 'Unity of direction' and 'order' as principles of general management are discussed below
i. Unity of direction: 'One unit and one plan' for the group of activities having the same objective is the essence of this principle
It implies that all the departments of an organisation must strive for the achievement of a common goal. It means that the
efforts of the members of the organization should be directed towards the achievement of a common goal. It was forwarded by
Fayol.
ii. Order: According to Fayol. 'People and material must be in a suitable place at the appropriate time for maximum efficiency'.
This principle states that there should be a place for everything and everyone in an organisation and that thing or person
should be found at Its allotted place. This will lead to increased productivity and efficiency. Here the efficiency relates to the
time taken for the completion of a particular task. For instance, the raw material for the production of finished goods should be
made readily available so that the workers must not waste time in looking for it.
15. Following are the consequences or adverse effects of each of these principles:
a. Division of work: The violation of this principle leads to the dearth of specialization among the employees.
b. Unity of Command: The violation of this principle leads to confusion in the mind of the subordinate in following the orders.
c. Remuneration: The violation of this principle leads to a situation of unrest among the employees and makes them
demotivated.
d. Order: Improper placement of men and material may lead to wastage of resources.
e. Stability of tenure: Instability and insecurity among employees and they would tend to leave the organization.
16. a. Unity of Command
The principle of unity of command states that each employee in an organisation should receive orders from one
superior only and he should be responsible to only one superior.
It prevents confusion regarding tasks to be done.
b. Subordination of Individual Interest to General Interest
The principle of Subordination of Individual Interest to General Interest states that the interest of an organization
should take priority over the interests of any one individual employee.
Larger interests of the workers and stakeholders are more important than the interest of any one person.
c. Stability of Personnel

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 Employees, once selected, should be kept at their post for a minimum fixed tenure and be given reasonable time to
show results.
17. Business Environment: It means sum total of all individuals, institutions and other forces that are outside the control of business
enterprise but that may affect its performance.
The importance of the business environment is highlighted by the following facts:
i. First Mover Advantage: The business environment provides many opportunities for the firms to improve their performance.
The firms which are able to scan these opportunities at an early stage get maximum benefit and can leave their competitors
behind.
ii. Warning Signal: Environment understanding helps an enterprise to recognize qualitative information in advance, which can
be used to prepare it for facing likely challenges.
iii. Tapping Useful Resources: Business requires many resources like raw materials, tools, types of equipment, finance, labour
etc. for performing business activities. These resources are known as inputs. The business environment provides all these
inputs to the business firms for carrying out their activities and also expects something in return.
iv. Coping with Rapid Changes: The business environment is very dynamic. One can see changes like new technologies,
fragmented markets, more demanding customers, heavy global competition and so on. Thus, in order to efficiently cope with
these changes, managers must understand the environment and should adopt appropriate courses of action at the right time. It
helps management become more sensitive to the ever-changing needs of customers. As a result, they are able to respond to
such changes effectively.
18. i. Technological Environment: 'With rapid advancements in the field of replacing manual work with machines, a robot named
\Sujan has been invented and developed'. It consists of scientific improvements and innovations which provide new ways of
producing goods, rendering services, new methods and techniques to operate a business.
ii. Social Environment: ‘However, this issue has to be carefully looked into keeping in mind the consumer attitude towards
product innovations, problem of unemployment and its impact on the quality of life'. Social Environment consists of social
forces like traditions, values, social trends, level of education, the standard of living etc. All these forces have a vast impact on
business.
iii. Legal environment: ‘Through the orders and decisions of various commissions and agencies at Centre, State or local level
the Indian Government is playing a very significant role in balancing the use of human and machine power.' It includes
various laws passed by the government, administrative orders issued by government authorities, court judgments as well as
decisions rendered by the central, state or local governments.
19. i. Planning is deciding in advance what to do and how to do. Before doing something, the manager must formulate an idea of
how to work on a particular task. Thus, planning is closely connected with creativity and innovation. Changes and occurrences
cannot be avoided, but managers may anticipate them and adapt their strategies accordingly by deciding plans and courses of
action ahead of time.
ii. The plan that is developed has to have a given time frame but time is a limited resource. It needs to be utilised judiciously. If
time factor is not taken into consideration, conditions in the environment may change and all business plans may go waste.
Planning will be a futile exercise if it is not acted upon or implemented.
iii. Planning is the most challenging activity for the management as it guides all future actions leading to growth and prosperity of
the business. The goal of planning is to efficiently meet future occurrences to an organization's benefit. Planning entails
predicting future events and situations and making plans based on those predictions.
iv. Planning provides the goals or standards against which actual performance is measured. By comparing actual performance
with standards, if there is any deviation it can be corrected. Therefore, planning is a prerequisite for controlling. lanning
establishes the benchmarks against which actual performance is assessed.
v. Planning is purposeful as it focuses on achieving objectives. Specific goals are set out in the plans along with the activities to
be undertaken to achieve the goals.
vi. Planning is pervasive. It is required at all levels of management as well as in all departments of the organisation. Thus,
planning is not an exclusive function of top management.
20. While business planning is important and a requisite for every organization, it does have some limitations:
i. Rigidity: Once the planning function is complete and the action plan is set, then the manager tends to only follow the plan.
The manager may not be in a position to change the plan according to circumstances. Or the manager may be unwilling to
change the plan. This sort of rigidity is not ideal for an organization.
ii. Not ideal in Dynamic Conditions: In an economic environment rarely anything is stagnant or static. Economic, political,
environmental, legal conditions keep changing. In such a dynamic environment it becomes challenging to predict future
changes. And if a manager cannot forecast accurately, the plan may fail.

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 iii. Planning can also reduce creativity: While making a plan takes creativity after that managers blindly follow the plan. They
do not change the plan according to the dynamic nature of the business. Sometimes they do not even make the appropriate
suggestions to upper management. The work becomes routine.
21. Divisional structure; since the company manufactures many consumer products, it is a multi-product company. The company will
have separate business units or divisions for each product. Each unit will have a divisional manager responsible for performance
of his division.
(i) It helps the managers to develop varied skills related to a product and facilitates managerial development.
(ii) Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their
divisions.
(iii) With more initiative and flexibility, decisions are taken much faster in divisional structure.
(iv) It facilitates expansion and growth as new division can be added without interrupting the existing operations.
22. Functional structure is preferred for this type of company. Grouping of jobs of similar nature under functional and organising
these major functions as separate departments creates a functional structure. All departments report to a coordinating head. A
functional structure is an organisational design that groups similar or related jobs together.
23. Karan has adopted a decentralization policy as he believes in the capabilities of his subordinates. He follows the philosophy of
selective dispersal of authority throughout all the levels in his division.
Whereas Arjun follows a policy of centralization as he prefers to function through strict controls and retains all the decision-
making authority with himself.
24. The production manager cannot blame the foreman, if he is not able to achieve the desired target, as the authority delegated to a
subordinate should be equal to his responsibility. Authority and responsibility of a subordinate should go hand in hand. This
problem is based on two principles of management: ‘Delegation of Authority and Responsibility’ and ‘Parity of Authority and
Responsibility’.
According to first principle, authority can be delegated but responsibility can never be delegated. In this problem. Production
Manager delegated his responsibility. Therefore, only production manager shall remain responsible for non-achievement of target
and not the foreman.
According to second principle, there should be proper adjustment between authority and [Link], foreman cannot
be held responsible for not achieving the desired result. But, the directors can blame the production manager for not achieving the
target.
25. Delegation of authority. Delegation of authority simply refers to an act of entrusting the subordinates with the same powers that
are of the superior authority i.e. granting of authority by superior to subordinate. It is based on the elementary principle of division
of work by which a superior spread his area of managerial influence. In short, the delegation of authority means assigning work to
others and giving them authority to do. The division of work means dividing the total work to be done into specific activities. The
objective of the division of work is to put the right man on the right job. By delegation of authority, a superior assigns a particular
job to a subordinate and gives him authority to do.
26. Responsibility refers to the work assigned to a person, position or job. Responsibility defines the work or duties to be carried out
by a person. Authority means power or right to command. Authority is needed to perform a given responsibility. If a person is not
given authority, he will not be able to perform his duties. Both responsibility and authority should go hand-in-hand. Let us take an
example:
The directors of Vaani Ltd., an organisation manufacturing toys, have asked their production manager to achieve a target
production of 1,500 pieces per day. The production manager has asked his foreman to achieve this target but he did not give him
the authority for the requisition of tools and materials from the Stores Department. The foreman could not achieve the desired
target.
The production manager cannot blame the foreman because foreman was not given adequate authority to perform his task in a
proper manner.
27. Delegate authority due to the following reasons:
It reduces the workload of managers. By sharing some of his own work with the subordinates, the manager is able to
concentrate on more important jobs. This way he increases his own effectiveness and that of his subordinates. When
delegation of authority takes place at all levels of the organisation it leads to proper division of work and assignment to all
managers in a systematic manner.
It increases morale of the subordinates: Delegation helps the subordinate to develop their capabilities to handle new and
more challenging jobs. This gives him job satisfaction. it increases his morale, self confidence and efficiency to get
promotion.

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 It establishes a superior-subordinate relationship. The flow of authority from top to lower level of management is
directed and controlled by the process of delegation. This gives meaning and content to the flow of authority and to
managerial jobs.

28. Delegation of Authority Basis Decentralisation

Delegation of authority is a compulsory act. Nature Decentralisation is an optional policy decision.

The main purpose is to lessen the burden of The main purpose is to increase the role of the subordinates in
Purpose
the manager. the organisation by giving them more autonomy.

There are less freedom to take own decisions Freedom of There is greater freedom of action as there is less control over
as there is more control by superiors action/Control executives.

The maximum authority is retained at top Level of

Authority is systematically distributed at every level.
level. authority
29. a. Planning and Organising
b. i. The lines to be quoted for planning
‘'One of them said ..... was considered right’'.
ii. The lines to be quoted for organising
“Now he established ..... completed easily.”
c. Values:
i. Team spirit
ii. Concern for the environment
30. Staffing is the process of hiring eligible candidates in the organization or company for specific positions.
The three main aspects of staffing function are as follows:
i. Recruitment: The company should rely upon the external sources of recruitment as it is setting up a new plant. Methods of
external recruitment the company should adopt are advertisement, management consultants and placement agencies, campus
recruitment, etc. to recruit technical, professional and managerial personnel.
ii. Selection: Selection process of employees will include preliminary screening of application forms to eliminate unqualified
job-seekers; selection tests such as intelligence test, aptitude test, etc., employment interview to judge the candidates
suitability for the jobs, reference and background checks, selection decision, medical examination, job offer and contract of
employment.
iii. Training and development: The company should initiate various training programmes to increase the knowledge and skills
of the employees so that they may handle sophisticated/hi-tech machines and equipment, e.g. Apprenticeship training
Vestibule training, Internship, etc.
31. Advantages of internal sources of recruitment
i. Employees are motivated to improve their performance. A promotion at a higher level may lead to a chain of promotion at
lower levels in the organisation. This motivates the employees to improve their performance through learning and practice.
Employees work with commitment and loyalty and remain satisfied with their jobs. Also peace prevails in the enterprise
because of promotional avenues.
ii. Internal recruitment also simplifies the process of selection and placement. The candidates that are already working in the
enterprise can be evaluated more accurately and economically. This is a more reliable way of recruitment since the candidates
are already known to the organisation.
iii. Transfer is a tool of training the employees to prepare them for higher jobs. Also people recruited from within the organisation
do not need induction training.
32. Selection is the process of identifying and choosing the best person out of a number of prospective candidates for a job.
It is done in the third step, in which a prospective candidate is chosen from the pool of candidates It ensures that the organization
gets the best among the available and it also enhances the morale of the selected candidate. Thus, the action or fact of carefully
choosing someone or something as being the best or most suitable.
33. i. The supervisor may provide Vestibule training to the workers in order to enable them handle their work independently.
Vestibule Training is a term for near-the-job training, as it offers access to something new (learning). Vestibule training is a
popular method for providing off the job training during which the trainees learn their jobs on the equipment they will be
using at their actual workplace. This is usually done when employees are required to handle sophisticated machinery and
equipment. A vestibule is a large entrance or reception room or area.

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 ii. The benefits of imparting training to the employee are as follows:
a. The economy in Operations: Trained personnel will be able to make better and economical use of materials and type of
equipments. Wastage will be low. In addition, the rate of accidents and damage to machinery and equipment will be kept
to the minimum by the well- trained employees. These will lead to less cost of production per unit.
b. Greater Productivity: A well-trained employee usually shows greater productivity and higher quality of work-output than
an untrained employee. Training increases the skills of the employees in the performance of a particular job. An increase
in the skills usually helps to increase both the quantity and quality of output.
34. Training is the process by which the aptitudes, skills and abilities of the employees to perform specific jobs are improved.
i. Induction Training
It is a type of training given to help the new employee in settling down quickly into the job by becoming familiar with the
people, the surroundings, the job and the business.
ii. Vestibule Training
Vestibule Training is a method of training which is imparted with the help of equipment & machine identical to those
at the place of work.
The training is conducted away from actual work floor and is is generally used where the employees are required to
handle sophisticated machinery.
iii. Apprenticeship Training
Apprenticeship Training is a method of training in which the trainee is kept under guidance of a master worker for a
prescribed period of time.
It is designed to acquire a higher level of skill; so people who want to enter skilled trades e.g. plumbers & electricians
are often required to undergo such programme.
iv. Internship Training
Internship Training is a joint programme of training between educational institutions and business firms.
35. i. Motivation is an internal feeling: The urges or needs of human being which influence human behaviour are internal. it
depends on the human nature and their needs.
ii. Motivation produces goal directed behaviour: It helps to produce a behaviour in the employee to improve his performance.
goal is effectively acheived by making the environment around the worker by motivating them.
iii. Motivation can be either positive or negative: Positive motivation provides positive rewards like increase in pay, promotion,
recognition etc., Negative motivation uses negative means like punishment, stopping increments, threatening etc. which also
may induce a person to act in the desired way.
iv. Motivation is a complex process: Any type of motivation may not have uniform effect on all the members.
36. We do not agree with the statement that human beings can be motivated only through monetary or cash incentives. Human beings
can also be motivated by non-monetary incentives. Non-monetary incentives have a distinct and significant role in motivating
employees who are not satisfied with money alone. Non-monetary incentives include all social and psychological attractions by
which workers are encouraged to accomplish the best and work more. Such incentives include job security, recognition,
participation in management, pride in the job, promotion, labour welfare, social security measures.
Non-monetary incentives satisfy workers' social and psychological satisfaction. Workers are not always motivated by monetary
gains. Therefore, in any programme to increase production, management should offer monetary as well as non-monetary
incentives to the workers.
37. Maslow's hierarchy of needs is a motivational theory in psychology comprising a five-tier model of human needs, often depicted
as hierarchical levels within a pyramid proposed by Abraham Maslow in his 1943 paper "A Theory of Human Motivation". His
theory was based on human needs. He felt that within every human being, there exists a hierarchy of five needs.
i. Basic Physiological needs: Physiological needs are biological requirements for human survival, e.g. air, food, drink, shelter,
clothing, warmth, sex, sleep. If these needs are not satisfied the human body cannot function optimally. Maslow considered
physiological needs the most important as all the other needs become secondary until these needs are met.
ii. Safety/Security needs: These are the needs connected with the psychological fear of loss of job, property, natural calamities
or hazards, etc. An employee wants protection from such types of fear. He prefers adequate safety or security in this regard i.e.
protection from physical danger, security of job, pension for old age, insurance cover for life, etc. The safety needs come after
meeting the physiological needs.
iii. Affiliation/belonging needs: After physiological and safety needs are fulfilled, the third level of human needs is interpersonal
and involves feelings of belongingness. These needs are concerned with; Affection, Sense of belongingness, Acceptance, and
Friendship.

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 iv. Esteem needs: All humans have a need to feel respected; this includes the need to have self-esteem and self-respect. In social
needs, the need for belongingness and acceptance plays a dominant role in motivating human behavior. It includes; Self-
respect, Autonomy status, Recognition, and Attention.
v. Self Actualization needs: Maslow describes this level as the desire to accomplish everything that one can, to become the most
that one can be. It is the highest level of need in the hierarchy. It includes; Growth, Self-fulfilment, and achievement of goals.
Maslow’s theory is based on the following assumptions
i. Behaviour of people is based on their needs. Satisfaction of such needs influences their behaviour.
ii. People’s needs arise in hierarchal order, commencing from basic needs and ending at higher level needs.
iii. People can be motivated only by the unfulfilled needs and once a particular need is satisfied, it ceases to be a motivating
factor.
iv. After satisfying the lower level need people move towards the next hierarchal order.
38. a. The internal source of recruitment has been used by the export house to fill up the post of the supervisor through promotion.
The two advantages of using an internal source of recruitment are stated below:
i. Employees are motivated to improve their performance
ii. Internal recruitment simplifies the process of selection and placement:
b. The types of financial incentives offered to Neeraj are as follows:
i. Pay and allowances: This fact is evident by the following line: "his salary is increased accordingly."
ii. Perquisites: This fact is evident by the following line: "as per the policy of the export house, he is offered free medical aid
and education to his two children."
39. The supervisor is a link between management and the operative employees because a supervisor plays important role in conveying
the management ideas to the workers and problems of workers to the management.
40. Autocratic/Authoritarian leadership
Under this style, leader concentrates all authority in himself, instructs subordinates as to what to do, when to do it; how to do it,
etc. He also exercises close supervision and control over his subordinates. Subordinates are expected to do what they are told.
The autocratic leader accomplishes the results through the use of authority, fear of deprivation, punishment and such other
negative rewards. As it is negative in character, authoritarian approach will succeed only in the short run.

Advantages of Autocratic Leadership:

i. It provides for quick decision-making because here only one person i.e., the leader takes decisions.
ii. Mostly subordinates like to work under centralized authority and strict supervision.
iii. As there is no consultation with subordinates, confidential matters can be kept secretly.
iv. Leadership gives strong motivation and satisfaction to the leader who dictates terms.
v. At lower levels, only less competent subordinates are required.
vi. This style may yield positive outcome if great speed is needed.
41. a. Types of communication barriers discussed above are:
i. Organizational barrier
ii. Psychological barrier (give the meanings)
b. i. Organisational barriers:
Rigid Rules and regulations may delay communication.
‘Global India Ltd.' had rigid rules and would insist on communication through prescribed channels, which led to
delays'
Complexity in organization structure leads to delayed and distorted communication. ‘The company also had a
number of managerial levels causing further delay and distorted communication'
Sometimes the complexity of organisational structure and multiple managers make it difficult to convey
information properly, and the information gets distorted leading to miscommunication.
ii. Psychological barriers:

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 Loss by transmission and poor retention may act as a barrier to communication. ‘The company also had a number
of managerial levels causing farther delay and distorted communication.
Distrust between the sender and the receiver acts as a barrier.
‘Chintamani and the workers did not believe in each other and so could not understand each others messages in the
original sense'
Premature evaluation of information by the receiver even before it is transmitted can lead to barriers in
communication, as it will create premature conclusion to the message, which withholds the original message.
42. According to Philip Kotler, "Control is the process of taking steps to bring actual results and desired results closer together."
The relationship between planning and controlling functions of management is given below:
i. Planning is Meaningless without Controlling: It is true as the controlling ensures that everything is going on as laid down in
the plans.
ii. Controlling is Blind without Planning: It is true as controlling takes place on the basis of a standard developed by planning.
iii. Planning is Prescriptive whereas, Controlling is Evaluative: Planning Prescribes an appropriate course of action for
achieving objectives whereas controlling evaluates whether decisions have been translated into desired results.
iv. Planning and Controlling both are Forward-Looking: On the one hand, plans are always formulated for the future and on
the other hand, controlling also takes corrective action for the future.
v. Planning and Controlling both are Looking Back: On the one hand, planning is formulated on the basis of past experience
and on the other hand, controlling is like a postmortem of past activities.
43. Financing Decision is, concerned with the decisions about how much to be raised from which source. The main sources for funds
of a firm are shareholders funds (equity and retained earnings) and borrowed funds (debentures).
i. Cost: The cost of raising funds can be classified into two types:
a. Cost of debt: A firm’s ability to borrow at a lower rate increases its capacity to employ higher debt. Thus, more debt can
be used if the debt can be raised at a lower rate.
b. Cost of equity: Shareholders expect a rate of return from equity, which is affected by using more debt capital. When a
company increases debt, the financial risk faced by the equity holders increases. Consequently, their desired rate of return
may increase. It is for this reason that a company can not use debt beyond a point. If the debt is used beyond that point, the
cost of equity may go up sharply and share price may decrease in spite of increased EPS.
ii. Cash flow position of business:
a. Size of cash flows must be considered before issuing debt.
b. Company must ensure that sufficient cash flows are expected to cover fixed cash payment obligations (interest payment
and repayment of principal).
iii. Level of fixed operating cost:
a. If a business has a high level of fixed operating costs (e.g. building rent, Insurance premium, salaries, etc). It must opt for
lower fixed financing costs. Hence lower debt financing is better.
b. If fixed operating cost is less, more of debt financing may be preferred.
iv. Control Considerations:
a. Issues of more equity may lead to dilution of management’s control over the business. Debt financing has no such
implication.
b. Companies afraid of a takeover bid may consequently prefer debt to equity.
44. i. Investment decision: It relates to how the funds of a firm are to be invested into different assets so that the firm is able to earn
the highest possible return for the investors. Investment decision can be -long-term, also known as capital budgeting where the
funds are committed on a long-term basis. Long-term Investment decisions are concerned with the utilization of funds for the
purchase of fixed assets as required by the organization. Short-term investment decision also known as working capital
decision and it is concerned with the levels of cash, inventories, and debtors. They are related to the utilization of funds to
meet the day to day expenditure requirements.
ii. Dividend decision: It relates to the decision regarding the distribution of dividend. The decision taken is as to how much
dividend is to be retained in the business and how much should be distributed to shareholders, after taking into account
various factors affecting it. The Finance Manager has a mammoth task in hand related to the bifurcation of profits between the
distribution of dividend and retained earnings.
45. a. Fixed capital is a permanent investment made to meet the longer-term needs (requirements) of the business activities. Thus,
fixed capital has a permanent existence in the business. It is usually present in the form of fixed assets like land, building,
plant, machinery, etc. The decision to undertake computerisation of owned warehouses will increase the fixed capital

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 requirements of its business both in present and future as after some time, the technology being used will become obsolete and
need upgradation.
b. The company may use retained earnings and take loans from financial institutions to implement this plan.
46. i. Stability of earnings
Other things remaining the same, a company having stable earning is in a better position to declare higher dividends.
As against this, a company having unstable earnings is likely to pay smaller dividend.
earning stability enhances the financial position of the organisation that helps the organisation in the distribution of the
dividend.
ii. Taxation policy
If tax on dividend is higher, it is better to pay less by way of dividends.
As compared to this, higher dividends may be declared if tax rates are relatively lower.
47. Financial Planning. Importance of Financial Planning are:
(i) It tries to forecast what way may happen in the future under different business situations. In other words, it makes the firm
better prepared to face the future.
(ii) It helps in avoiding business shocks and surprise and helps the company in preparing for the future.
(iii) It helps in co-ordinating various business functions e.g., sales and production functions, by providing clear policies and
procedures.
(iv) Detailed plans of actions prepared under financial planning to reduce: waste, duplication of efforts and gaps in planning.
(v) It tries to link the present with the future.
48. Financial planning is the process in which a blue print of an organisation’s future preparations relating to finance. The two reasons
are:
i. It tries to forecast what may happen in the future under different business situations. In other words, it makes the firm better
prepared to face the future.
ii. It helps in avoiding business shocks and surprise and helps the company in preparing for the future.

49. Basis Capital Market Money Market

The capital market deals in medium and long-

Money market instruments have a maximum tenure of one year and
Duration term securities such as equity shares and
may even be issued for a single day.
debentures.

Capital market securities are considered liquid Money market instruments, on the other hand, enjoy a higher
investments because they are marketable on degree of liquidity as there is a formal arrangement for this. The
Liquidity the stock exchanges. However, a share may Discount Finance House of India (DFHI) has been established with
not be actively traded, i.e. it may not easily the specific objective of providing a ready market for money
find a buyer. market instruments.

Capital market instruments are riskier both

The money market is generally much safer, with a minimum risk of
with respect to returns and principal
default. This is due to the shorter duration of investing and also to
Safety repayment. Issuing companies may fail to
the financial soundness of the issuers, which primarily are the
perform as per projections, and promoters
government, banks, and highly rated companies.
may defraud investors.

Investment Does not demand a significant financial

Does demand a significant financial investment.
Outlay investment.

50. i. The company should buy Shares, debentures, bonds.

ii. The Capital market is expected to give a better return in a buoyant economy as
a. The securities are held for a longer duration
b. There is a scope of earning capital gains on shares.
iii. The securities are safe in this market as compared to the money market because:
a. Capital markets are well organized whereas money markets are not that organized
b. Liquidity is high in the money market whereas liquidity is comparatively low in capital markets.
c. Due to high liquidity and low duration of maturity in money markets, Instruments in money markets are a low risk
whereas capital markets are the comparatively high risk.

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51. Stock exchange is a marketplace where securities, commodities, derivatives and other financial instruments are traded. The core
function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities
trading on that exchange. Exchanges give companies, governments, and other groups a platform from which to sell securities to
the investing public.
Main functions of stock exchange are as follows
i. Pricing of securities: The stock market helps to value the securities on the basis of demand and supply factors. Higher the
demand for such securities, higher is their value. The valuation of securities is useful for investors, government and creditors.
ii. Contributes to economic growth: In stock exchange, securities of various companies are bought and sold. This process of
disinvestment and reinvestment helps to invest in most productive investment proposal and this leads to capital formation and
economic growth.
iii. Spreading of equity cult: Stock exchange encourages people to invest m ownership securities by regulating new issues,
better trading practices and by educating people about investment.
iv. Liquidity: The main function of stock market is to provide ready market for sale and purchase of securities which assures the
investors that their investment can be converted into cash whenever they want.
v. Safety of transaction: The stock exchange is well regulated and its dealings are well defined according to the existing legal
framework This ensures that the investing public gets a safe and fair deal m the market.
52. i. Depository is like a bank where investors can deposit or withdraw securities. It is necessary for every company to be
registered with depository if the company wants its securities to be transacted in the electronic form.
ii. An investor may hold its securities in physical form or Demat form. In case, he wishes to hold his securities in Demat form
(electronic form), he is required to open an account with DP. For this, he may choose any of the available DP's for e.g. ICICI,
Indiabulls securities, etc.
iii. On the purchase of shares through a trading account in the secondary market, the DP credits the beneficiary account (demat
account number of the investor) with the equivalent number of shares in the electronic form.
iv. The DP also provides the statement of beneficiary account at regular intervals to the investor. It also updates the statement
after any transaction (buying/selling of shares).
53. Dematerialisation of securities
Your investments in shares and debentures can be held in electronic or dematerialised form in a depository. Depository is an entity
which holds securities (shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at
the request of the investors.
Dematerialisation is comparable to keeping your money in a bank account. In demat form, your physical share certificates are
replaced by electronic book entries; purchase of shares are reflected as credits in your demat account and sales are reflected as
debits.
54. Yes, I agree as SEBI regulates and protects the interest of investors. SEBI was established in 1988 and given a statutory status in
1992, to protect the investors from the fraudulent malpractices, rampant in securities market before 1988. As a watch dog, it
regulates the market and protects the investors by keeping a check on various manipulative activities by performing the following
functions:
i. Regulates takeover bids by companies.
ii. Prohibits fraudulent and unfair trade practices.
iii. Undertakes several steps to protect the investors, for example calls for information by conducting inspections, enquiries and
audits of the companies.
55. The marketing concept of marketing management lays emphasis on customer satisfaction. It believes that customer satisfaction
plays a vital role in the success of any organization. In the long run, any organization can survive and maximize profits only if it
identifies customer needs and effectively works towards fulfilling them. This concept identifies the fact that people purchase a
product for satisfaction of a specific need (such as functional need, social need, psychological need, etc.). Any organization must
aim towards identifying such needs and satisfy them in an effective manner. In other words, all the decisions in the firm are taken
from the point of view of the customers. An organization works and sells not according to what it has, but according to what the
customer wants. The marketing concept is based on the following points.
i. i. The efforts of all marketing activities must be directed towards a particular segment of the market or group of customers.
ii. ii. The organizations must clearly identify the needs and requirements of the target customer.
iii. iii. It should develop such products and services that satisfy the needs of the customers.
iv. iv. It should not just independently work towards customer satisfaction, but should also aim at satisfying the customers better
than its competitors.
v. v. The crux of all efforts of marketing is profit.

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 The marketing concept helps in the effective marketing of goods and services. It helps in the identification of the market and
target customers. If all marketing activities are directed towards customer satisfaction, marketing of goods and services would
take place in an effective and smooth manner. It helps in satisfying the needs of the target market better than competitors by
keeping the profit margin as well. If decisions of production, pricing, designing, etc. are based on the needs of the customers,
selling would not be a problem. For example, if customers want dual sim mobile phones, high pixel camera, GPS, etc. the
company produces mobile phones with such features. Similarly, other decisions of the company such as pricing, branding, etc. are
also based on the requirements of the customers.
56. i. Marketing planning: Another important function of marketing is to develop appropriate marketing plans to achieve the
marketing objectives of the organisation.
ii. Product designing and development: Another important marketing activity relates to designing and developing the product
in such a way that it attracts the target customers.
iii. Pricing of products: Price of product refers to the amount of money customers have to pay to obtain a product. Price is an
important factor affecting the success or failure of a product in the market.
iv. Standardisation and grading: Standardisation refers to producing goods of pre-determined specifications, which helps in
achieving uniformity and consistency in the output.
Grading is the process of classification of products into different groups, on the basis of some of its important characteristics
such as quality, size, etc.
57. Product means goods or services or ‘anything of value’, which is offered to the market for sale. The concept of product relates to
not only the physical product such as Hindustan lever offers number of consumer products like toiletries (Close-Up toothpaste,
Lifebuoy soap, etc.), detergent powder (Surf, Wheel), food products (Refined Vegetable Oil); Tata offers Tata Steel, Trucks, Salt
and a large number of other products; LG Electronics offers televisions, refrigerators, colour monitors for computers, etc; Amul
offers a number of food products (Amul milk, ghee, butter, cheese, chocolates, etc.) but also the benefits offered by it from
customer’s view point (for example toothpaste is bought for whitening teeth, strengthening gums, etc.). The concept of product
also include the extended product or what is offered to the customers by way of after sales services, handling complaints,
availability of spare parts etc. These aspects are very important, particularly in the marketing of consumer durable products (like
Automobiles, Refrigerators, etc.).
The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.
Packaging: Packaging refers to designing and developing the package for the products.
Labelling: Labelling refers to designing and developing the label to be put on the package. The label may vary from a simple tag
to complex graphics.
Branding: A very important decision area for marketing of most consumer products is whether to sell the product in its generic
name (name of the category of the product, say Fan, Pen, etc.) or to sell them in a brand name (such as Pollar Fan or Rottomac
Pen). Brand name helps in creating product differentiation, i.e., providing basis for distinguishing the product of a firm with that
of the competitor, which in turn, helps in building customer’s loyality and in promoting its sale.
58. i. Physical distribution is the physical handling and movement of goods from the place of production to the place of distribution
is an important element of marketing mix.
ii. Main components of physical distribution are as follows:
a. Order Processing: In a typical buyer-seller relationship order placement is the first step. Products flow from
manufacturers to customers via channel members while orders flow in the reverse direction, from customers to the
manufacturers. A good physical distribution system should provide for an accurate and speedy processing of orders, in the
absence of which goods would reach the customers late or in wrong quantity or specifications. This would result in
customer dissatisfaction, with the danger of loss of business and goodwill.
b. Transportation: Transportation is the means of carrying goods and raw materials from the point of production to the point
of sale. It is one of the major elements in the physical distribution of goods. It is important because unless the goods are
physically made available, the sale cannot be completed.
c. Warehousing: Warehousing refers to the act of storing and assorting products in order to create time utility in them. The
basic purpose of warehousing activities is to arrange placement of goods and provide facilities to store them. The need for
warehousing arises because there may be difference between the time a product is produced and the time it is required for
consumption. Generally the efficiency of a firm in serving its customers will depend on where these warehouses are
located and where are these to be delivered.
59. a. The component of marketing mix being discussed in the above lines is place/physical distribution which is one of the four
elements of the marketing mix. It is the process of making a product or service available for the consumer or business user

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 who needs it. This can be done directly by the producer or service provider, or using indirect channels with distributors or
intermediaries.
b. The two main decisions involved in physical distribution are:
i. physical movement of goods from producers to consumers
ii. choice of channels of distribution
c. Indirect channel of distribution has been adopted by HUL. It is a two level channel i.e. (Manufacturer - wholesaler- retailer-
consumer)
60. Personal selling is the promotional tool of marketing mix which involves the oral presentation of the message with one or more
prospective customers for the purpose of making sales. three benefits of this tool are as follows:
i. It involves formation of personal relationship.
ii. It involves direct feedback.
iii. Minimum wastage of efforts takes place here.
61. The Consumer protection Act 2019 seeks to protect and promote the consumers’ interest through speedy and inexpensive
redressal of their grievances.
It extends to the whole of India. It is applicable to all types of businesses whether a manufacturer or a trader and whether
supplying goods or providing services including e-commerce firms. It applies to both offline and online transactions
through electronic means or by teleshopping or direct selling or multi-level marketing.
The Act confers six rights to consumers with a view to empowering them and to protect their interests. For the redressal of
consumer grievances, the Consumer Protection Act 2019 provides for setting up of a three-tier enforcement machinery at
the District, State, and the National levels, known as the ‘District Commission’, ‘State Commission’, and the ‘National
Commission’, respectively.
The Chapter V of the Consumer Protection Act of 2019 provides for a mediation process for settlement of disputes at three
levels - National, State and District with all three being attached to the respective commissions. It is a new provision in the
Act 2019 as an alternate mechanism to ensure faster aspeedydispute settlements by respective commissions.
Consumer Protection Act, 2019 is a law to protect the interests of the consumers. This Act provides safety to consumers
regarding defective products, dissatisfactory services, and unfair trade practices.
62. Under the Consumer Protection Act,1986 a consumer is defined as:
a. Buys any goods for a consideration which has been paid or promised or partly paid and partly promised,
b. Hires or avails of any services for consideration which has been paid or promised or partly paid and partly promised,
63. Some of the quality certification marks are:
i. FPO (Fruit Products Order 1955) - It contains specification and quality control requirements regarding the production and
marketing of processed fruits and vegetables, sweetened aerated water, vinegar and synthetic syrups.
ii. ISI- On consumer durable products. ISI mark is a certification mark for industrial products in India. It is the most popular and
recognised certification mark in the Indian subcontinent. This mark ensures that the product conforms to the Indian standards
mentioned by the Indian Standard Institute.
iii. Hallmark- BIS certification scheme for gold jewellery items.
iv. Earthen Pitcher- for Labelling Environment-friendly products.
v. AGMARK - It is a grade standard for agricultural commodities and like stock products.
vi. Wool mark- It signifies 100% pure wool.
64. The District Forum consists of a President and two other members, one of whom should be a woman. They all are appointed by
the State Government concerned. A complaint can be made to the appropriate District Forum when the value of the goods or
services in question, along with the compensation claimed, does not exceed ₹ 20 lakhs. On receiving the complaint, the District
Forum shall refer the complaint to the party against whom the complaint is filed. If required, the goods or a sample thereof, shall
be sent for testing in a laboratory. The District Forum shall pass an order after considering the test report from the laboratory and
hearing to the party against whom the complaint is filed. In case the aggrieved party is not satisfied with the order of the District
Forum, he can appeal before the State Commission within 30 days of the passing of the order. As the Forum receives the
complaint, it refers it to the concerned party against whom the compliant is registered. After considering the tests and reports and
on hearing both the concerned parties, the forum passes a judgement order.
65. If the Consumer Court is satisfied about the genuineness of the complaint, it can issue one or more of the following directions to
the opposite party.
(i) To remove the defect in goods or deficiency in service.
(ii) To replace the defective product with a new one, free from any defect.

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(iii) To refund the price paid for the product, or the charges paid for the service.
(iv) To pay a reasonable amount of compensation for any loss or injury suffered by the
consumer due to the negligence of the opposite party.
(v) To pay punitive damages in appropriate circumstances.

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