MPA - CORE - 7

MODULE 2 - REVISION NOTES

Dr. Pallabi Mund
Assistant Professor (Management)
D.A.V. School of Business Management, Bhubaneswar

SHORT QUESTIONS AND ANSWERS

1. STATE ANY TWO POINTS OF IMPORTANCE OF PLANNING.

Answer: a) Planning provides directions: Planning assures that the objectives are certainly
asserted so that they serve as a model for determining what action should be taken and in which
direction. If objects are well established, employees are informed of what the company has to
do and what they need do to accomplish those purposes.
b) Planning decreases overlapping and wasteful activities: Planning works as the foundation
of organising the activities and purposes of distinct branches, departments, and people. It assists
in avoiding chaos and confusion. Since planning guarantees precision in understanding and
action, work is conducted on easily without delays.

2. WHAT IS LINE ORGANIZATION?

Answer: Line organization is the simplest & oldest form of organization structure which
follows a direct vertical relationship through which authority flows known as chain of
command or scalar principle. Authority flows from top to bottom and responsibility flows from
bottom to top. Since authority & responsibility flow in an unbroken straight line, it is called line
organization.

3. WHAT IS CENTRALIZATION OF AUTHORITY

Answer: Centralized authority means that the retention of powers and control concerning
planning and decisions lies with the top management. All-important rights and might are in the
hands of the top-level executives.

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4. WHAT IS STRATEGIC PLANNING?
Answer: Strategic planning is the process of planning as to how to achieve organizational
objectives with the available resources and is undertaken by the central management of the
business. It is an exercise by the top management to fix the objectives of the organization and
then plan to achieve them. An assessment of available resources is made at the top and then
things are planned for a time period of up to 10 years. It basically deals with the total
assessment of the organization, strengths, capabilities and weaknesses and an objective
evaluation of environment is made for future pursuits.

5. DISTINGUISH BETWEEN FORMAL AND INFORMAL ORGANIZATION.

Answer: Formal organizations adhere to specific rules and regulations, while informal
organizations operate based on shared norms and mutual trust. The level of flexibility,
communication patterns, decision-making processes and accountability also vary significantly
between the two.

6. WHEN CAN YOU SAY THAT THE ORGANIZATION IS HIGHLY

DECENTRALIZED?
Answer: An organization is said to be highly decentralized when the type
of organizational structure in which daily operations and decision-making responsibilities are
delegated by top management to middle and lower-level managers. This frees up top
management to focus more on major decisions. An example of a decentralized organization is
OYO rooms or a fast-food franchise chain.

7. WHAT DO YOU UNDERSTAND BY SINGLE USE AND STANDING PLAN

Answer: Single-use plans are for a shorter period and are repeatedly worked out in case of
need. Standing Plans are formulated for a longer period. Single-use plans are based on the
standing plan of an organisation.

8. WHAT IS WIDE SPAN OF MANAGEMENT? Answer: Span of management is said to be

wide if, there are large number of subordinates reporting to a manager. Wide span of
management leads to flatter organisational structures with only a few levels of management.

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9. PLANNING IS ALL PERVASIVE
Answer: Planning is called a pervasive function of management because planning occurs in all
types of organizations whether it is profit-making, non-profit making, business or non-business,
at all levels of management in a business organisation directing all managers in different
business units to work towards achieving the business goals and objectives. For example, top
managers plan for the organisation as a whole, while middle level managers propose
departmental plans and lower-level manager formulate day-to-day operational plans.

10. LONG TERM AND SHORT-TERM PLANS : Short term plans are conducted for immediate
or short-term concern, and its outcome is expected in less than one year’s time. On the other
hand, long term plans drive the company in a strategic direction where the stability of the
company and long-term goals are evaluated in the projected future. Examples.

11. DIFFERENCE BETWEEN CENTRALIZATION AND DECENTRALIZATION

Answer: If the power to take decisions vests in one person at the top/top level
management it will be a case of centralization, on the other hand if decision making power
is dispersed among many persons in the middle and lower level management, it will be a
case of decentralization.

12. WHAT ARE THE THREE ASPECTS OF MIND INVOLVED IN DECISION MAKING?
Answer: There are mainly three aspects of mind - the conscious mind, the subconscious mind,
and the unconscious mind which are involved in decision making. The conscious mind is the
part we're aware of and think with, whereas the unconscious mind is the creator of dreams. The
subconscious mind is where mental programs are created and carried out.

13. GRAICUNA’S FORMULA ON SPAN OF MANAGEMENT.

Answer: Graicunas, introduced a theory on span of management which explains three kinds
of relationships that a superior can have with subordinates. He formulated a theory and
suggested the number of subordinates under one superior based on mathematical calculations.
This type of relationship arises between the superior and his group of subordinates in all
possible combinations. Example: A manager having three subordinates would have three direct

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 group relationships. Formula = n (2n-1 -1) where n represents the number of subordinates.
The maximum number of direct reports a manager should have is nine.

14. STRATEGY: A strategy is a comprehensive plan to achieve the organisational objectives.

Strategy defines the future decisions regarding the organisation’s direction and scope in the
long run. For example, Choice of advertising media, sales promotion techniques, channels of
distribution, etc.

15. STANDING PLAN: Plans can be broadly categorized into two types: Standing/ Multiuse
Plans and Single Use Plans. Standing/ Multiuse Plans are made to be used time and again.
These plans are formulated to guide managerial decisions and actions on problems which are
recurring in nature. Standing plans are also called 'repeated use' plans because these provide
guidelines for actions to be taken in future. For ex: Objectives, Strategies, Procedures, etc.

16. ORGANIZATION MANUAL: An organizational manual is a handbook which provides

additional details to the information supplied by organization chart. It provides information on
pertinent matters about each position. It also provides uniformity and consistency in the
policies, operations, rules & regulations, procedures and practices and departmental details. It is
a useful guide to all the organizational members as it gives details of the extent to which
authority is exercised by every manager and a detailed analysis of various jobs in terms of job
content and job responsibilities. Few examples are – Policy Manual, Departmental Manual,
Operations Manual, etc.

17. ACCOUNTABILITY: Is when an individual or department experiences consequences for

their performance or actions. Accountability is essential for an organization and for a society.
Without it, it is difficult to get people to assume ownership of their own actions because they
believe they will not face any consequences.

18. AUTHORITY AND RESPONSIBILITY: According to Henry Fayol, "Authority is the right
to give orders and the power to exact obedience." Authority is derived by virtue of the position
of an individual in the organisation, and the degree of authority is maximum at the top level and

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 decreases consequently as we go down the corporate hierarchy. Therefore, it flows from top to
bottom, giving authority to superior over the subordinate. Responsibility is the obligation of an
individual, whether a manager or any other employee of the organisation to carry out the task or
duty assigned to him by the senior. Theo Haimann defines: "Responsibility is the obligation of
a subordinate to perform the duty as required by his superior".

19. FORMAL ORGANIZATIONS: are those which are officially formed with definite structure,
which describes authority and responsibility relationship, and behaviours of organizational
members are governed by well laid down policies, rules and regulations.

20. FUNCTIONAL ORGANIZATION: F.W. Taylor, the father of scientific management

developed the concept of functional organization. Under this organizational structure, jobs
related to common function are grouped under one department. For example, all the jobs
related to production are grouped under production department; jobs related to sales are
grouped under sales department and so on.

21. DELEGATION OF AUTHORITY: is a process the manager uses in distributing work to the
subordinates. Due to physical and mental limitations, it is difficult for one person to perform
all activities with respect to all functional area, therefore it becomes necessary that he gives part
of his work load to subordinates along with commensurate authority to carry out the assigned
task.

22. WHAT IS STRATEGIC PLANNING?

Answer: Strategic planning is the process of planning as to how to achieve organizational
objectives with the available resources and is undertaken by the central management of the
business. It is an exercise by the top management to fix the objectives of the organization
and then plan to achieve them. An assessment of available resources is made at the top and
then things are planned for a time period of up to 10 years. It basically deals with the total
assessment of the organization, strengths, capabilities and weaknesses and an objective
evaluation of environment is made for future pursuits.

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23. DEFINE FORECASTING.
Answer: Forecasting is a systematic estimation of future events with the help of in-depth
analysis of past and present events. Forecasting provides a basis for planning. Forecasting
includes both assessing the future and making provision for it. As a result, planning cannot be
done without forecasting. Thus, forecasting is the projection of future events (or conditions) in
the environment in which plans operate.

24. WRITE A SHORT NOTE ON PLANNING PREMISES.

Answer: Planning is concerned with future, which is uncertain and every planner is using
conjecture about what might happen in future. Therefore, the manager is required to make
certain assumptions about future. These assumptions are known as premises. Premises are the
base, upon which plans are drawn.

25. MERITS OF LINE AND STAFF ORGANIZATION:

Answer: The following are the merits of line and staff organization:
• Simple and easy to operate & less expensive
• Quick decision making
• Strict discipline can be maintained

26. WHAT IS POLITICAL ENVIRONMENT?

Answer: Political environment comprises those elements that are related to government affairs
in the type of government in power. Examples of political factors associated with a country's
central government are the level of bureaucracy, corruption, and government stability

27. SELECTING THE BEST FROM ALTERNATIVES IS DECISION MAKING. JUSTIFY

Answer: Decision-making is a process of selecting the best among the different alternatives. It
is the act of making a choice. There are so many alternatives found in the organization and
departments. Decision-making is defined as the selection of choice of one best alternative. For
example, choosing the best alternative depends on: First, the alternative should match the
goals and objectives of the business. Second, the alternative should match the current
assessment of the strengths of the business. Third, market opportunities need to exist for the

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 products. Lastly, the product should be able to be made efficiently and effectively.

LONG QUESTIONS AND ANSWERS

1. WHAT IS DEPARTMENTATION? WHAT ARE THE DIFFERENT BASIS OF
DEPARTMENTATION?
Answer: Departmentation refers to the process of grouping related activities or functions into
specialized units or departments within an organization for gaining efficiency and coordination.
There are basically six different bases of departmentation in an organisation, they are as
follows:
(A) Departmentation by Function: Similar activities of a business are grouped into major
departments or divisions under an executive who reports to the chief executive. This
departmentation is most widely used basis for organising activities and is present in every
organisation at some level.
Merits of Departmentation by Function:
• It suits well the small enterprises for creating major departments.
• It promotes specialization.

Demerits of Departmentation by Function:

• It may lead to excessive centralization.
• Poor inter-departmental co-ordination.

(B) Departmentation by Product: In a multiproduct organisation the departmentation by

product mostly suits. Here the activities are grouped on the basis of produce or product lines.

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All the functions related to particular product are bought together under the umbrella of product
manager.
Merits of Departmentation by Product:
• Each product division can be taken as a viable profit centre for accountability purposes.
• Marketing strategy becomes more pragmatic.
• Attention is given to product lines, which is good for further diversification and expansion.
Demerits of Departmentation by Product:
• It increases management cost. Service functions are duplicated both at the top and at the
operating levels of management.
• High cost of operation prevents the small & medium sized concerns from adopting this basis
of classification, particularly for creating major units.

(C) Departmentation by Process: The production function may be further subdivided on the
basis of the process of production when the production process has distinct activity groups,
they are taken as the basis of departmentation. Process departmentation is suitable when the
machines or equipment’s used are costly and required special skill for operating. It is useful for
organisations which are engaged in the manufacture of products which involves several
processes.
Merits of Departmentation by Process:
• It provides economy of operation
• The benefits of specialization are available.
• It simplifies supervision and plant layout.
Demerits of Departmentation by Process:
• Extreme specialization may reduce flexibility of operations.

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 • This type of departmentation may not provide opportunity for the all-round development of
managerial talent.
• Conflicts may arise among managers of different processes, particularly when they loose
sight of the overall company goals.

(D) Departmentation by Territory: It is suitable for organisations having wide geographical

market such as pharmaceuticals, banking, consumer goods, insurance, railways etc. Here, the
market is broken up into sales territories and a responsible executive is put in charge of each
territory. The territory may be known as district, division or region.
Merits of Departmentation by Territory:
• It helps in achieving the benefits of local operations such as local supply of materials &
labour, local markets etc.
• Full attention can be paid to local customer groups.

Demerits of Departmentation by Territory:

• It creates the problem of communication and co-ordination between various regional offices.
• It may be uneconomical due to costly duplication of personnel & physical facilities.

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 (E) Departmentation by Customers: This type of classification is adopted by enterprises
offering specialized services. To give the attention to heterogeneous groups of buyers in the
market, marketing activities are often split into various several parts. Such groups are suitable to
organisations serving several segments like a pharmaceutical company supplying to institutional
buyers such as hospitals and government and non-institutional buyers as wholesalers and retail
chemists. Thus, customers’ departmentation is useful for those enterprises which have to cater to
the special and varied needs of different classes of customers.

Merits of Departmentation by Customers:

• The main advantage of following this type of departmentation is that particular needs of the
particular- customers can be solved.
• Benefits of specialization can be obtained.

Demerits of Departmentation by Customers:

• There may be duplication and underutilization of facilities and resources.

• It may be difficult to maintain co-ordination among the different customer departments.

(F) Departmentation-Combined Base:

Sometimes, several bases of departmentation may be used simultaneously. First the organisation
is divided on the basis of functions. The marketing department is further divided on the basis of
product lines i.e., refrigeration and chemical division. The refrigeration division is further

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 divided on the basis of territory and the territory is further divided on the basis of customers i.e.,
retail and wholesale.
Combined base departmentation is also called as composite departmentation or mixed
departmentation. This type of departmentation provide the benefits of both functional and
product structures. But the conflicts between different departments and division may increase. It
becomes necessary to differentiate clearly between the line authority and functional authority of
managers.

2. DISCUSS VARIOUS PRINCIPLES OF ORGANIZING.

The various principles of organizing are explained as below:

• Principle of unity of Objectives: In the absence of a common aim, various departments will set
up their own goals and there is a possibility of conflicting objectives for different departments
within an enterprise. So there must be unity in objectives of the organization. The enterprise
should set up certain aims for the achievement of which various departments should work. A
common goal so devised for the business as a whole and the organization is set up accordingly to
achieve that goal.
• Principle of division of work and Specialization: The organization should be set up in such a
way that every individual should be assigned a duty according to his skill and qualification. The
person should continue the same work so that he specialises in his work. This helps in increasing
production in the concern.
• Principle of Span of Coordination: The co-ordination of different activities is an important
principle of the organization. There should be some agency to co-ordinate the activities of

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 various departments. In the absence of co-ordination there is a possibility of setting up different
goals by different departments. The ultimate aim of the concern can be achieved only if proper
co-ordination is done for different activities.
• Principle of Scalar chain: This principle refers to the vertical placement of supervisors starting
from top and going to the lower level. The scalar chain is a pre-requisite for effective and
efficient organization.
• Principle of Span of Control: Span of control means how many subordinates can be supervised
by a supervisor. The number of subordinates should be such that the supervisor should be able to
control their work effectively. Moreover, the work to be supervised should be of the same nature.
If the span of control is disproportionate, it is bound to affect the efficiency of the workers
because of slow communication with the supervisors.
• Principle of Centralization and Decentralization: If the power to take decisions vests in one
person at the top it will be a case of centralization, on the other hand if decision making power is
dispersed among many persons it will be a case of decentralization.
• Principle of Unity of Command: There should be a unity of command in the organization. A
person should be answerable to one boss only. If a person is under the control of more than one
person then there is a likelihood of confusion and conflict. He gets contradictory orders from
different superiors. This principle creates a sense of responsibility to one person. The command
should be from top to bottom for making the organization sound and clear. It also leads to
consistency in directing, coordinating and controlling.
• Principle of Authority and Responsibility: The authority flows downward in the line. Every
individual is given authority to get the work done. Though authority can be delegated but
responsibility lies with the man who has been given the work. If a superior delegates his
authority to his subordinate, the superior is not absolved of his responsibility, though the
subordinate becomes liable to his superior. The responsibility cannot be delegated under any
circumstances.
• Principle of Flexibility: The organization should be amendable according to the changing
situations. Everyday there are changes in methods of production and marketing systems. The
organization should be dynamic and not static. There should always be a possibility of making
necessary adjustments.

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 • Principle of Balance: The principle means that assignment of work should be such that every
person should be given only that much work which he can perform well. Few employees should
not be over worked and the others under-worked, then the work will suffer in both the situations.
The work should be divided in such a way that everybody should be able to give his maximum
effort.
• Principle of Efficiency: The organization should be able to achieve enterprise objectives at a
minimum cost. The standards of costs and revenue are pre-determined and performance should
be according to these goals. The organization should also enable the attainment of job
satisfaction to various employees.

3. DISTINGUISH BETWEEN DECENTRALIZATION AND DELEGATION OF

AUTHORITY. (3 marks, 2021) WHAT ARE THE OBSTACLES TO DELGATION OF
AUTHORTY.
Answer: Delegation of authority means assigning work to subordinates and giving them authority
to do it. Decentralisation refers to a systematic effort to delegate to the lowest levels all authority
except which can be exercised at central points. As control is in the hands of superior, less
freedom is given to subordinates.

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Barriers/Obstacles to Delegation of Authority:

In spite of delegation as an important process of management, few managers do not believe in

delegation. It does not mean that they do not want to believe in delegation, but there are several
barriers to this process.

a. Lack of Confidence in Subordinates: Some managers are not willing to delegate because they
do not have confidence in their subordinates. They feel that it is better to do it them- self rather
than wasting energy in correcting the mistakes of subordinate.
b. Lack of Confidence in Self: The lack of confidence in self makes a manager not to disclose
the power to subordinates. They fear about the exposure in the department. These managers
include generally those who promote themselves the most talented ones but actually they are
inefficient. This becomes more serious for superior when they get more talented subordinates.
They fear that after being exposed, they may lose the position.
c. Lack of Confidence in System: There are so many managers who do not believe in the
system. They think if authority will be delegated to subordinates, then they will get back
support from the system, especially immediate superior. If something happens wrong, they fear
of responsibility fixing.

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d. Fear of Losing Control: Some managers are always having a concern of losing control over the
job. Hence, they do not want to delegate the authority. They keep authority with them and told
subordinate to follow them mechanically without intellectual input.
e. Lack of Coordination: Sometimes, the lack of coordination between subordinate and superior
also works a barrier of delegation. The subordinate needs a moral support and to develop
coordination between the superior and subordinate. In absence of coordination, the effective
delegation is not possible.
f. “I Can Do Better” Approach: Being confident is always a desirable characteristic in a manager,
but the overconfidence of being the best to deliver on job becomes dangerous sometime. This
creates hindrance in delegation. Few people do have this approach of thinking “I can do it
better”. The delegation gives an opportunity to learn to get things done through and with
people.
g. Responsibility vs Accountability: The delegation ensures the responsibility of subordinates. It
does not mean that if subordinate makes mistake in decision making, the superior will not be
held responsible. Subordinate may be accountable for the decision, but the ultimate
responsibility is of the superior.
h. Inability to Establish a Channel: In some cases, the manager fails in establishing proper channel
of delegation. It may be due to boss-subordinate relationship or uncertain system response. This
is also a barrier to effective delegation.

4. DEFINE PLANNING. DISCUSS THE BARRIERS TO EFFECTIVE PLANNING.

WHAT MEASURES DO YOU SUGGEST TO OVERCOME THESE BARRIERS?

Answer: Planning deals with chalking out a future course of action & deciding in advance.
According to KOONTZ, "Planning is deciding in advance - what to do & how to do. It
bridges the gap from where we are & where we want to be".

BARRIERS (OR LIMITATIONS) TO EFFECTIVE PLANNING:

[Link] of accuracy: Accuracy in planning is dependent on the facts and figures available to
the planners. If reliable information and dependable data are not available, then planning is sure to
lose much of its value. The future cannot be forecasted accurately if the available information is
not authentic.

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[Link] Consuming and expensive process: Planning is said to be a time- consuming and an
expensive process. Planning has its own cost in terms of money, time, effort, and other resources.
There is little guarantee of getting benefits from planning as the future is full of uncertainty.
[Link] in administration: Planning directs the management to work on a predetermined
course of action. This may lead to internal inflexibility and procedural rigidity. Planning restricts
employees’ freedom, initiative, and desire for creativity. Executives are to move along a set track
as they have no alternative.
[Link] barriers: Difficulty in communicating goals and plans can stall a planning
session. Whether communication barriers stem from language or cultural differences, or whether a
manager simply is an ineffective communicator, poor communication can make it hard to express
goals and organizational mission.
[Link] or Ineffective Leadership: Leaders who are insecure or fearful in their own position
within an organization are ineffective when it comes to planning. A leader must inspire those
around him to work to their full capability. A leader who cannot lead, or who is unapproachable,
cannot collect suggestions and ideas from employees that are essential to effective planning.
[Link] of change: The scope of planning is limited in the case of an organization with rapidly
changing situations. Planning under conditions of rapid changes in the external environment tends
to be a difficult task. Industry experiences rapid changes, and thus, there is need for dynamism on
the part of the manager with regard to formulation of plans
[Link] Constraints: External constraints set limits to planning, as management has very little
(or no control) at all on those variables. Government policies (regarding taxation, import, export,
etc.), technological changes, competition, etc. act as a hindrance in the planning process. As a
result, managers are not free to take decisions in these areas. The effectiveness of planning is
reduced due to the influence of external factors.
[Link] a new approach: Planning tends to impose internal inflexibility. Generally,
managers are accustomed to a particular philosophy (or approach) continued over a long period of
time. As a result, managers become hesitant to adopt a new approach. Moreover, the initiative of
managers to develop new approaches is discouraged due to the inflexibility in the organization.
[Link] of Creativity: An ability to think originally and grow in new directions are what often
keep a company alive and vibrant. While one business model may work for many years,
organizations have to think creatively and take chances by expanding and growing into new areas.

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A lack of creativity, tied with poor leadership, can cause employees to grow bored and
disheartened, and employees who feel like that can't do their best work.
[Link] planning: Planning may not serve any useful purpose when it is directed towards
fulfilling individual goals. Sometimes, the persons involved in the planning process fail to
formulate correct plans due to lack of clear objectives and policies. Planning may also be
misdirected due to the lack of support from the top management.

REMEDIAL MEASURES (OR STEPS) TO OVERCOME BARRIERS TO

PLANNING:

An effective plan must have the following characteristics:

• Clearly defined objectives: Plans should be based on clearly defined objectives. Plans are
made and implemented for achieving certain objectives. The objectives should be clear,
concise, precise, and accurate. A plan should be comprehensive for the satisfactory fulfilment
of these objectives.
• High degree of flexibility: A plan deals with the future which is uncertain. A flexible plan
can easily be adjusted with the changing situations without much delay. Plans should be
prepared with a high degree of flexibility to enable modifications and refinements in
accordance with the demands of the situation.
• Unity of operation: Only one plan should be put into operation at a time. Multiple plans
operating concurrently will mean confusion, disorder, and duality. The aim of any good plan
is to keep the planning activity as a continuous one. If there are different plans, they should be
inter-linked to make a single plan.
• Pragmatic A sound plan should be pragmatic. It should provide for a proper analysis and
classification of action. It should be rational, appropriate, and comprehensive.
• Simplicity A sound plan should be simple and balanced. It should be capable of being put to
easy implementation. Employees of the organization should have a clear vision of the plan
and its contents. It should have communication value.
• Balanced plan Balance is an important attribute of a good plan. A balanced plan has a proper
bearing in thinking and doing. Proper weightage should be given to various tasks through the
interaction of resources and action. There should be proper coordination between short-term

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 and long-term plans. Plans must be integrated in such a manner that the short-range plan may
contribute to long-run objectives.
• Planning premises: Every plan is based on assumptions, known as planning premises. These
assumptions relate to the anticipation of the future environment. Effective planning is largely
dependent upon the knowledge and choice of planning premises. The description and analysis
of planning premises is imperative for successful planning.
• Commitment of employees: A sound plan should attract wider participation of employees,
especially those involved in its implementation. It should be free from social and
psychological barriers for more involvement of the employees. Employees should be properly
motivated and their commitment should be sought for proper implementation of the plan.

4. DEFINE PLANNING. DISCUSS ITS CHARACTERISTICS

Answer: Planning deals with chalking out a future course of action & deciding in advance.
According to KOONTZ, "Planning is deciding in advance - what to do & how to do. It bridges
the gap from where we are & where we want to be". Planning as a process involves thinking
before doing.

NATURE/CHARACTERISTIC'S OF PLANNING
• Planning is Goal-Oriented: The main condition of planning is determination of objectives.
Once the objectives are set up, the next step is to determine the steps that are to be followed
to achieve these objectives.
• Primacy of Planning: Planning is the `first among equals of all the other management
functions, because it starts with objectives which are the basis of all the other functions. The
process of management starts with planning. It is followed by organizing, staffing, directing
& controlling.
• Forward Looking: Planning means looking ahead. Planning is never done for the past. It is
done for the future to achieve certain objectives.
• Pervasiveness: Planning is required at all levels within the organization. The pervasiveness
of planning is generally overlooked. It is felt that planning is done at top levels only. This
may be true to certain extent that people at the top level devote most of their time to

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 planning than the managers at middle and lower levels, but manager at every level has to
plan his activities.
• Continuous Process: Planning is never ending activity of a manager. Planning always
tentative and subject to revision and amendment as new facts become known.
• Intellectual Process: Planning is an outcome. of mental exercise involving imagination,
foresight & sound judgment. It is neither guess work nor wishful thinking.
• Elasticity: Planning should be adaptable to the changing business environment. If planning
is rigid, it will not be able to achieve, business goals. Planning is dynamic process and it
adjusts with the needs & requirements of the situations.

5. OUTLINE THE FACTORS WHICH HIGHLIGHT THE IMPORTANCE OF

DECISION MAKING.
Answer: One of the most important functions of a manager is to take decisions in the
organization. Success or failure of an organization mainly depends upon the quality of decision
that the managers take at all levels. Each managerial decision, whether it is concerned with
planning, organizing, staffing or directing is concerned with the process of decision-making.

The factors/reasons why decision-making in management is important are:

• Managers to set goals and figure out what actions are needed to meet those goals and
evaluate whether those actions are working as intended.
• Ensuring the company keeps growing: Managers might make critical decisions that
ensure your workplace continues growing, like making financial decisions.
• Choosing business partners: Management may decide on valuable business partners,
like suppliers or stakeholders, that your workplace may partner with to bring in a higher
amount of profit.
• Choosing effective operations and strategies: Managers can decide on effective
strategies and operations to optimize efficiency and reach workplace goals.

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6. SHORT NOTE ON PLANNING PREMISES
Answer: Every plan is based on assumptions, known as planning premises. These assumptions
relate to the anticipation of the future environment. Effective planning is largely dependent
upon the knowledge and choice of planning premises.

Planning premises may be classified as follows:

[Link] and external premises: Internal premises are the resources and abilities which
pertain to the firm's own climate. These include sales forecasts, capital investment in plant and
equipment, skill of labor force, competence of management policies and programmers of the
organization, values and beliefs of organization members, management philosophy, etc. Such
premises are amenable to management control. On the other hand, external premises are related
to the external environment of business. They consist of economic, technological, social and
political factors such as population trends, Government policies and regulations, employment
figures, national income, price levels, technological changes, sociological factors, etc. External
premises may be classified in three groups, namely general business environment, product
market and the factor market characteristics.

[Link], semi-controllable and uncontrollable premises: Controllable premises are

those factors over which management has full control. Plant location, expansion programme,
advertising policy, capital investment, etc are examples of controllable premises.
Uncontrollable or non-controllable premises refer to war, population trends, new inventions,
natural calamities, business cycles, government policy, legislation, etc which are beyond the
control of management. They upset the plans and require periodical revision of plan in
accordance with current developments. Semi-controllable premises are those over which
management has partial control. Union management relations, firm's share in the market, etc.
are examples of such premises.

[Link] and intangible premises: Tangible or quantitative premises are those which can be
expressed or measured in quantitative terms, e.g., labor hours, units of production, number of
machines, capital investment, industry demand, population growth, etc. On the other hand,
intangible premises are those which cannot be measured quantitatively, e.g., company

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 reputation, public relations, employee motivation and morale, attitudes and philosophy of the
owners, political stability, etc. In spite of their qualitative nature, intangible premises play an
important role in managerial planning.

[Link] and Variable Premises: Constant Premises do not change. They remain the same,
even if there is a change in the course of action. They include men, money and machines.
Variable Premises are subject to change. They change according to the course of action. They
include union-management relations.

[Link] and unforeseeable premises: Foreseeable premises tend to be definite and

well-known and they can be foreseen with certainty. Requirements for men, money and
machines are examples of foresee able premises. Unforeseeable premises "such as war, strike,
natural calamities are unpredictable.

7. DECISION MAKING IS AT THE CORE OF MANAGEMENT. EXPLAIN. HOW IT IS

DONE?
Answer: The word ‘decides’ means to come to a conclusion or resolution as to what one is
expected to do at some later time. Once, Peter Drucker in his book “Practice of
Management,” said “Whatever a manager does, he does through making decisions.” It is
true that the job of management involves the making of innumerable decisions at different
situations. That is why many persons think that management means decision-making and
therefore it is apt to say that it forms the core of management.

Decision making involves a step-by-step process of the following:

1. Define the problem: The first and the foremost step in the decision-making process are to
define the real problem. A problem can be explained as a question for and appropriate solution.
The manager should consider critical or strategic factors in defining the problem. These factors
are, in fact, obstacles in the way of finding proper solution. These are also known as limiting
factors. For example, if a machine stops working due to non-availability of screw, screw is the
limiting factor in this case. Similarly, fuse is a limiting or critical factor in house lighting.
While selecting alternative or probable solution to the problem, the more the decision-making

21
 takes into account those factors that are limiting or critical to the alternative solutions, the
easier it becomes to take the best decision. Other examples of critical or limiting factor may be
materials, money, managerial skill, technical know-how, employee morale and customer
demand, political situation and government regulations, etc.

2. Analysing the problem: After defining the problem, the next important step is a systematic
analysis of the available data. Sound decisions are based on proper collection, classification and
analysis of facts and figures. Majorly there things are kept in mind while analysing a situational
problem: a) The futurity of the decision (to what length of time, the decision will be applicable
to a course of action), b) The impact of decision on other functions and areas of the business
and (c) The qualitative considerations which come into the picture.
3. Developing alternative solutions: After defining and analysing the problem, the next step is to
develop alternative solutions. The main aim of developing alternative solutions is to have the
best possible decision out of the available alternative courses of action. In developing
alternative solutions, the manager comes across creative or original solutions to the problems.
In modern times, the techniques of operations research and computer applications are
immensely helpful in the development of alternative courses of action.

4. Selecting the best type of alternative: After developing various alternatives, the manager has
to select the best alternative. Various factors are taken into consideration while selecting the
best course of action. Factors like the risk element involved in each course of action, the
economy of effort involved in each alternative, the available/limited resources especially the
human resources and lastly the proper timing of the decision and action.

5. Implementation of the decision: This involves the following-

(a) Proper and effective communication of decisions to the subordinates. Decisions should be
communicated in clear, concise and understandable manner.
(b) Acceptance of decision by the subordinates is important. Group participation and
involvement of the employees will facilitate the smooth execution of decisions.

22
 (c) Correct timing in the execution of decision minimizes the resistance to change. Almost
every decision introduces a change and people are hesitant to accept a change. Implementation
of the decision at the proper time plays an important role in the execution of the decision.

6. Follow up: A follow up system ensures the achievement of the objectives. It is exercised
through control. Simply stated it is concerned with the process of checking the proper
implementation of decision. Follow up is indispensable so as to modify and improve upon the
decisions at the earliest opportunity.

7. Monitoring and feedback: Feedback provides the means of determining the effectiveness of
the implemented decision. If possible, a mechanism should be built which would give periodic
reports on the success of the implementation. In addition, the mechanisms should also serve as
an instrument of “preventive maintenance”, so that the problems can be prevented before they
occur. the monitoring system should be such that the manager can go and look for himself for
first-hand information which is always better than the written reports or other second-hand
sources. In many situations, however, computers are very successfully used in monitoring since
the information retrieval process is very quick and accurate and, in some instances, the self-
correcting is instantaneous.

8. DISCUSS THE PROCESS AND TECHNIQUES OF DECISION MAKING.

Answer: It is true that the job of management involves the making of innumerable decisions at
different situations. That is why many persons think that management means decision-making
and therefore it is apt to say that it forms the core of management.

Decision making involves a STEP-BY-STEP PROCESS of the following:

o Define the problem: The first and the foremost step in the decision-making process are to
define the real problem. A problem can be explained as a question for and appropriate solution.
The manager should consider critical or strategic factors in defining the problem. These factors
are, in fact, obstacles in the way of finding proper solution. These are also known as limiting
factors. For example, if a machine stops working due to non-availability of screw, screw is the
limiting factor in this case. Similarly, fuse is a limiting or critical factor in house lighting.

23
 While selecting alternative or probable solution to the problem, the more the decision-making
takes into account those factors that are limiting or critical to the alternative solutions, the
easier it becomes to take the best decision. Other examples of critical or limiting factor may be
materials, money, managerial skill, technical know-how, employee morale and customer
demand, political situation and government regulations, etc.

o Analysing the problem: After defining the problem, the next important step is a systematic
analysis of the available data. Sound decisions are based on proper collection, classification and
analysis of facts and figures. Majorly there things are kept in mind while analysing a situational
problem: a) The futurity of the decision (to what length of time, the decision will be applicable
to a course of action), b) The impact of decision on other functions and areas of the business
and (c) The qualitative considerations which come into the picture.

o Developing alternative solutions: After defining and analysing the problem, the next step is to
develop alternative solutions. The main aim of developing alternative solutions is to have the
best possible decision out of the available alternative courses of action. In developing
alternative solutions, the manager comes across creative or original solutions to the problems.
In modern times, the techniques of operations research and computer applications are
immensely helpful in the development of alternative courses of action.

o Selecting the best type of alternative: After developing various alternatives, the manager has
to select the best alternative. Various factors are taken into consideration while selecting the
best course of action. Factors like the risk element involved in each course of action, the
economy of effort involved in each alternative, the available/limited resources especially the
human resources and lastly the proper timing of the decision and action.

o Implementation of the decision: This involves the following-

▪ Proper and effective communication of decisions to the subordinates. Decisions should be
communicated in clear, concise and understandable manner.
▪ Acceptance of decision by the subordinates is important. Group participation and involvement
of the employees will facilitate the smooth execution of decisions.

24
▪ Correct timing in the execution of decision minimizes the resistance to change. Almost every
decision introduces a change and people are hesitant to accept a change. Implementation of the
decision at the proper time plays an important role in the execution of the decision.

o Follow up: A follow up system ensures the achievement of the objectives. It is exercised
through control. Simply stated it is concerned with the process of checking the proper
implementation of decision. Follow up is indispensable so as to modify and improve upon the
decisions at the earliest opportunity.

o Monitoring and feedback: Feedback provides the means of determining the effectiveness of
the implemented decision. If possible, a mechanism should be built which would give periodic
reports on the success of the implementation. In addition, the mechanisms should also serve as
an instrument of “preventive maintenance”, so that the problems can be prevented before they
occur. the monitoring system should be such that the manager can go and look for himself for
first-hand information which is always better than the written reports or other second-hand
sources. In many situations, however, computers are very successfully used in monitoring since
the information retrieval process is very quick and accurate and, in some instances, the self-
correcting is instantaneous.

TECHNIQUES OF DECISION MAKING:

1. Marginal Analysis: This technique is used in decision-making to figure out how much extra
output will result if one more variable (e.g. raw material, machine, and worker) is added. In his
book, ‘Economics’, Paul Samuelson defines marginal analysis as the extra output that will result
by adding one extra unit of any input variable, other factors being held constant. Marginal
analysis is particularly useful for evaluating alternatives in the decision-making process.

2. Financial Analysis: This decision-making tool is used to estimate the profitability of an

investment, to calculate the payback period (the period taken for the cash benefits to account for
the original cost of an investment), and to analyze cash inflows and cash outflows. Investment
alternatives can be evaluated by discounting the cash inflows and cash outflows (discounting is

25
the process of determining the present value of a future amount, assuming that the decision-
maker has an opportunity to earn a certain return on his money).

3. Break-Even Analysis: This tool enables a decision-maker to evaluate the available

alternatives based on price, fixed cost and variable cost per unit. Break-even analysis is a
measure by which the level of sales necessary to cover all fixed costs can be determined. Using
this technique, the decision-maker can determine the break-even point for the company as a
whole, or for any of its products. At the break-even point, total revenue equals total cost and the
profit is nil.

4. Ratio Analysis: It is an accounting tool for interpreting accounting information. Ratios define
the relationship between two variables. The basic financial ratios compare costs and revenue for
a particular period. The purpose of conducting a ratio analysis is to interpret financial statements
to determine the strengths and weaknesses of a firm, as well as its historical performance and
current financial condition.

5. Operations Research Techniques: One of the most significant sets of tools available for
decision-makers is operations research. An operation research (OR) involves the practical
application of quantitative methods in the process of decision-making. When using these
techniques, the decision-maker makes use of scientific, logical or mathematical means to achieve
realistic solutions to problems. Several OR techniques have been developed over the years.

6. Game Theory: This is a systematic and sophisticated technique that enables competitors to
select rational strategies for attainment of goals. Game theory provides many useful insights into
situations involving competition. This decision-making technique involves selecting the best
strategy, taking into consideration one’s own actions and those of one’s competitors. The
primary aim of game theory is to develop rational criteria for selecting a strategy. It is on the
assumption that every player (a competitor) in the game (decision situation) is perfectly rational
and seeks to win the game.

In other words, the theory assumes that the opponent will carefully consider what the decision-
maker may do before he selects his own strategy. Minimizing the maximum loss (minimax) and
maximizing the minimum gain (maximin) are the two concepts used in game theory.

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9. WHAT IS MEANT BY ANALYSIS OF ENVIRONMENT? BRIEFLY DISCUSS
VARIOUS TECHNIQUES USED FOR ANALYSIS OF ENVIRONMENT.

Answer: Environmental analysis is a strategic tool. It is a process to identify all the external and
internal elements, which can affect the organization’s performance. The analysis entails
assessing the level of threat or opportunity the factors might present. These evaluations are later
translated into the decision-making process. The analysis helps align strategies with the firm’s
environment.

Environmental analysis or scanning is necessary because there are rapid changes taking place
in the environment that has a great impact on the working of the business firm. The following
important techniques are generally pressed into service while carrying out environmental
scanning:

(a) PESTLE analysis: is the simple & the effective tool that is used in a situation analysis to
identify the key external (the macro environment level) forces that might affect the organization.
PESTEL model is PEST including legal, environmental, ethical & demographic forces.

P for Political factors: The political factors take the country’s current political situation. It also
reads the global political condition’s effect on the country and the business. For example - “What
kind of government leadership is impacting decisions of the firm?”. Some political factors that
you can study are: Government policies, Taxes laws and tariff, Stability of government and Entry
mode regulations.

E for Economic factors: Economic factors involve all the determinants of the economy and its
state. These are factors that can conclude the direction in which the economy might move. So,
businesses analyse this factor based on the environment. It helps to set up strategies in line with
changes. Some of the economic factors that are taken into consideration - the inflation rate, the
interest rate, disposable income of buyers, unemployment rates, the monetary or fiscal policies
and the foreign exchange rate.

S for Social factors: Every country has a distinctive culture and a mindset. These attitudes have
an impact on the businesses. The social factors might ultimately affect the sales of products and
services. The social factors taken into consideration are - me of the social factors you should

27
study are - the cultural implications, the demographic factors especially gender, the people’s
lifestyles, distribution of wealth, etc.

T for Technological factors: Since the last 3 decades, technology is advancing continuously
which is greatly influencing businesses. Performing environmental analysis on these factors will
help a business stay up to date with the changes. Technological factors will help know how the
consumers react to various trends. Firms can collect information related to new discoveries and
innovations, the rate of technological obsolescence, the rate of technological advances and
innovative technological platforms for their benefit.

L for Legal factors: Legislative changes take place from time to time. Many of these changes
affect the business environment. If a regulatory body sets up a regulation for industries, for
example, that law would impact industries and business in that economy. So, businesses should
also analyse the legal developments in respective environments such as product regulations,
employment regulations, patent infringements, health and safety regulations.

E for Environmental factors: Changes in climatic changes can affect the trade. The consumer
reactions to particular offering can also be an issue. This most often affects agri-businesses.
Some environmental that organizations/businesses should be concerned about are: geographical
location, the climate and weather, waste disposal laws, energy consumption regulation and the
like.

(b) SWOT Analysis: SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It
is a framework used to evaluate a company's competitive position and to develop strategic
planning. SWOT analysis assesses internal and external factors, as well as current and future
potential. For example: A start up would have the following SWOT analysis:

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