COMPENDIUM Department of Management Studies

2019 Indian Institute of Technology Delhi

(Institute of Eminence, Govt of India)
 Finance 03
17 Marketing
Contents
Operations 25
37 Strategy
HR 47
Interview
51 Questions
Finance
What is finance?
Finance is a field that is concerned with the allocation (investment) of assets and liabilities over space and
time, often under conditions of risk or uncertainty. Finance can also be defined as the art of money
management.

Banking
Since money and monetary benefits are being talked about in the world of Finance, the first and foremost area
that holds importance and affects our day-to-day lives is the Banking Sector. We interact and deal with bank in
some way or the other every now and then.

E.g. - You must have contacted (or about to contact) your bank to pay the first installment towards your IIT
Delhi fees by now.

Money can be seen as the blood, and Banks are the veins through which it flows in any economy, hence
ensuring the smooth functioning of it.

But, have you ever given a thought on how the Banks function? What are the key terms you must know in
Banking?

So, here are few of the Banking terms you should be aware of as an MBA student (which you already are):

Reserve Bank of India (RBI):

Reserve Bank of India is the central bank of India. RBI has the sole monetary policy authority with it. Only RBI
is authorized to plan, prepare and implement the monetary policy of India. It is called ‘the banker of the banks’
as it regulates all other banks and has superiority over them. The primary objective of RBI is maintaining price
stability while keeping in mind the objective of growth of the country. Maintaining price stability not only
ensures stable economy, but also maintains public confidence in the system, protect depositors' interest and
provide cost-effective banking services to the public. It also manages the Foreign Exchange Management Act,
1999 to facilitate external trade and payment and promote orderly development and maintenance of foreign
exchange market in India. Lastly, it also issues and exchanges or destroys currency and coins not fit for
circulation to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Monetary Policy
The RBI often gives out its Monetary policy wherein it manages the liquidity to create economic growth.
Liquidity means how much money is there in the supply to public at a given point of time. That
includes credit, cash, and money market mutual funds. The primary objective of central banks behind
monetary policy is to manage inflation. The second is to reduce unemployment, but only after they have
controlled inflation.

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CRR
Cash Reserve Ratio (CRR) is the share of the total deposits with the bank that is mandated by the Reserve Bank
of India (RBI) to be maintained with the latter in the form of liquid cash. It means the banks do not have access
to that much amount for any economic activity or commercial activity. Banks can’t lend the money to
corporates or individual borrowers, or neither for any investment purposes. So, that CRR remains in current
account with RBI and banks don’t earn anything on that.

SLR
SLR, statutory liquidity ratio is the amount of money (a percentage of the total bank deposits)that is invested
in certain specified securities predominantly central government and state government securities. Once again
this percentage is of the percentage of the total bank deposits available as far as the particular bank is
concerned. The SLR, the money goes into investment predominantly in the central government securities as I
mentioned earlier which means the banks earn some amount of interest on that investment as against CRR
where it earns zero.

Repo Rate
When the Banks run out of funds, they may approach the RBI for a loan to meet their obligations. Repo rate is
the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to
commercial banks in the event of such shortfall.

Reverse Repo Rate

Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India)
borrows money from commercial banks within the country. It is a monetary policy instrument which can be
used to control the money supply in the country.

Basel Norms
In today’s dynamic environment, even the banks are exposed to a variety of risks. Cases of big banks collapsing
due to their inability to sustain the risk exposures are readily available. In light of this, the Basel Committee on
Banking Supervision (BCBS) which is a part of Bureau of International Settlement (BIS) has given ‘Basel Norms
for Banking’ to tackle the risks involved.

Basel is a city in Switzerland and the headquarters of Bureau of International Settlement (BIS). BIS is an
international financial institution owned by central banks which fosters international monetary and financial
cooperation and serves as a “bank for central banks". The Reserve Bank of India is a part of sixty-member BIS
central banks team. Every two months BIS hosts a meeting of the governor and senior officials of central banks
of member countries to review the financial position on central banks of the world.

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Finance
Basel I:
In 1988, BCBS introduced capital measurement system called Basel capital accord, also called Basel 1. It
focused almost entirely on credit risk. It defined capital and structure of risk weights for banks. The minimum
capital requirement was fixed at 8% of risk-weighted assets (RWA). RWA means assets with different risk
profiles. For e.g.: An asset backed by collateral would carry lesser risks as compared to personal loans, which
have no collateral.
Assets of banks were classified and grouped into five categories according to credit risk, carrying risk weights
of:
0% (for example cash, home country debt like Treasuries),
20% (securitizations such as MBS rated AAA)
50%,
100% (for example, most corporate debt), and
Some assets are given no rating
India adopted Basel 1 guidelines in 1999.

Basel II:
In 2004, BCBS came up with Basel II norms which are an extension of Basel I. These norms incorporate credit
risk of assets held by financial institutions to determine regulatory capital ratios.
It is based on three main pillars:
1. Minimal Capital Requirements: banks to maintain 8% minimum capital ratios of regulatory capital over
risk-weighted assets
2. Regulatory Supervision: separating credit risks from operational risks and quantifying both
3. Market Discipline: Reducing the scope or possibility of regulatory arbitrage by attempting to align the
real or economic risk precisely with regulatory assessment

Basel III:
Basel III or Basel 3 released in December 2010 is the third in the series of Basel Accords. These guidelines were
introduced in response to the financial crisis of 2008. These accords deal with risk management aspects for the
banking sector. In a nutshell, we can say that Basel iii is the global regulatory standard (agreed upon by the
members of the Basel Committee on Banking Supervision) on bank capital adequacy, stress testing, and
market liquidity risk.
Objectives/aims of the Basel III:
1. Improve the banking sector’s ability to absorb shocks arising from financial and economic stress,
whatever the source
2. Improve risk management and governance
3. Strengthen banks’ transparency and disclosures

CIBIL Score
CIBIL Score is a three-digit numeric summary of the credit history of an individual issued by TransUnion CIBIL,
India’s leading credit information company which maintains one of the largest collections of consumer
information globally. The score is derived using the credit history found in the CIBIL Report (also known as CIR
i.e. Credit Information Report). A CIR is an individual’s credit payment history across loan types and credit
institutions over a period of time. A CIR does not contain details of the savings, investments or fixed deposits
held by an individual.

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Finance
The CIBIL score, calculated based on credit behavior as reflected in the ‘Accounts’ and ‘Enquiries’ section of
CIR, ranges between 300-900. A score above 700 is generally considered good. A Credit Score plays a critical
role in the loan and credit card approval process. This is the first screening criterion applied by banks and
financial institutions when reviewing your loan application.

NPA
A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment
of principal has remained ‘past due’ for a specified period of time. In simple terms, an asset is tagged as non-
performing when it ceases to generate income for the lender. Once the borrower has failed to make interest or
principal payments for 90 days the loan is considered to be a non-performing asset. Current NPA value stands
at Rs 10,35,528 crore, as on March 31, 2018 for Scheduled Commercial Banks (SCBs) of India as per India
Today.

Time Value of Money

The concept of Time Value of Money (TVM) holds extremely important relevance in taking any financing
decisions. According to this concept, the same value of money received at two different points of time is not
same. In other words, the value of same amount of money received today is higher than the value of same
amount of money received on a future date. This is explained by the element of interest involved between the
two points of time under consideration.

Discounting
Discounting is the process of determining the present value of a payment or a stream of payments that is to be
received in the future. Given the time value of money, a rupee is worth more today than it would be worth
tomorrow.
The value calculated at the start of the period, i.e., time=0 which is the time of doing the investment is called
Present Value for an investment.

Compounding
Compounding is the process in which an asset's earnings are reinvested to generate additional earnings over
time. There is an exponential growth because the investment will generate earnings from both its initial
principal and the accumulated earnings from preceding periods.
The value calculated at the end of the period, i.e., on maturity date is called Compounded Value for an
investment.

Net Present Value

Net Present Value (NPV) of a financial decision is the difference between the present value of all cash inflows
and the present value of cash outflows from a particular investment.
A positive net present value indicates that the projected earnings generated by a project or investment
exceeds the anticipated costs. It is assumed that an investment with a positive NPV will be profitable, and an
investment with a negative NPV will result in a net loss. This concept is the basis for the Net Present Value
Rule, which dictates that only investments with positive NPV values should be considered.

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IRR
The internal rate of return (IRR) is a measure of an investment’s own rate of return. The term internal refers to
the fact that the internal rate excludes external factors, such as inflation, the cost of capital, or various
financial risks. IRR only shows the rate a particular financial decision, if taken, is offering the investor after
discounting the time value of money effect.
However, the decision whether to invest or not depends on its comparison with Required Rate of Return
(RRR). RRR is the rate one expects from any investment, and it may wary from individual to individual based on
their preferences and risk taking ability.
If the IRR>RRR, then it is advised to invest as the actual return exceeds the expected return in this case. If the
IRR<RRR, then the investment does not meet the expectations of the individual and he/she should not invest
in the same.
If IRR=RRR, it is indifferent case.
Please note here that the same investment can be worth investing for someone, whereas it can be not worth
investing for another person based on the variance in required rate of return from individual to individual.
Rule of 72
The Rule of 72 is a great mental math shortcut to estimate the effect of any growth rate using compound
interest. Here’s the formula:
Years to double = 72 / Interest Rate
This formula is useful for financial estimates and understanding the nature of compound interest. Example:
At 6% interest, your money takes 72/6 or 12 years to double.

Stock Markets

A stock market, equity market or share market is the aggregation of buyers and sellers (a loose network of
economic transactions, not a physical facility or discrete entity) of stocks (also called shares), which represent
ownership claims on businesses; these may include securities listed on a public stock exchange, as well as
stock that is only traded privately.

Primary Market
The primary market is the part of the capital market where the newly issued securities are traded for the first
time. Here, the investor purchases the securities from the issuer directly. Primary markets create long term
instruments through which corporate entities raise funds from the capital market. It is also known as the New
Issue Market (NIM). Once the securities are sold in NIM, they move to secondary market, where it is
purchased by other prospective investors.

Secondary Market
The secondary market, also called the aftermarket and follow on public offering is the financial market in
which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.
The securities that are sold in primary market are next sold in secondary market itself. NSE and BSE are the
two Indian secondary markets having index as Nifty and Sensex respectively.

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Finance
SENSEX
The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply the SENSEX) is a
free-float market-weighted stock market index of 30 well-established and financially sound companies listed
on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively
traded stocks, are representative of various industrial sectors of the Indian economy. The 30 companies are
decided based on the market capitalization of the companies.

NIFTY
The NIFTY 50 index is National Stock Exchange of India's benchmark broad based stock market index for the
Indian equity market. Full form of NIFTY is National Stock Exchange Fifty. It represents the weighted average of
50 Indian company stocks in 12 sectors and is one of the two main stock indices used in India. Nifty is owned
and managed by India Index Services and Products (IISL), which is a wholly owned subsidiary of the NSE
Strategic Investment Corporation Limited.

SEBI
Securities and Exchange Board of India (SEBI) is the regulator and controller of capital markets of India. Capital
markets include Stock Markets, Bonds/Debentures Markets etc. The primary objective of SEBI is to protect the
investors’ rights and maintain their confidence in the market. To ensure this, SEBI keeps a lot of checks and
balances to keep things transparent and within acceptable ranges at all point of times. SEBI was established in
1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992.

Mutual Funds
A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for
managing the money. Mutual funds are an ideal investment vehicle for regular investors who do not know
much about investing, as it is managed by financial experts. Investors can choose a mutual fund scheme based
on their financial goal and start investing to achieve the goal.

Bull and Bear Market

Since the markets are driven by only two factors, namely, the performance of a particular stock (this includes
any externalities affecting its performance) and the sentiments of the buyers/sellers; the bull and bear form
represent the performance of the market as a whole. The terms "bull" and "bear" market is used to describe
whether the stocks are appreciating or depreciating in value. At the same time, because the market is
determined by investors' attitudes, these terms also denote how investors feel about the market and the
ensuing trends.
A bull market is a situation where the market that is on the rise. It is typified by a sustained increase in market
share prices. In such times, investors often have faith that the uptrend will continue over the long term.
Typically, in this scenario, the country's economy is strong and employment levels are high.
A bear market is one that is in decline. Share prices are continuously dropping, resulting in a downward trend
that investors believe will continue. During a bear market, the economy will typically slow down and
unemployment will rise as companies begin laying off workers.

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Fundamental Research
It is a technique to analyze the behavior of stock prices in the long run. The belief here is that one should buy a
good stock and leave it to increase in its value over years. The premise is that in the long run, the true or fair
value of an equity share is equal to its intrinsic value. The intrinsic value of a share is the present value of all
future expected cash inflows from the share. If the intrinsic value is greater than current price of the share, the
share is underpriced and hence a good buy. On the other hand, if the intrinsic value is less than current price
of the share, it is over-priced and hence a good sell. However, it all depends on the company’s performance
and future prospects. A fundamental researcher analyses the company and its future prospects to reach a
conclusion of investing decision.

Technical Research
Technical Analysis is based on the premise that ‘history repeats itself’. Hence future price movements can be
well predicted on the basis of past price and volume data. Technical analysts are therefore called ‘chartists’
because they study various charts and patterns to predict ‘What price should be’. Technical analysis is done on
the basis of trend analysis of past prices. Technical analysis is used primarily to time the market i.e., in
identifying the right time to buy or sell. It must be noted that technical analysis predicts future prices over a
short period of time and hence may not be useful for a long-term investor who just want to buy and hold the
securities.

Speculation
Speculation is investment in an asset that offers a potentially large return but is also very risky; a reasonable
probability that the investment will produce a loss. It can be defined as the assumption of considerable risk in
obtaining commensurate gain. Considerable risk means that the risk is sufficient to affect the decision.
Commensurate gain means a higher risk premium. Speculative assets are high risk-high return assets and
hence should be invested in with caution.

Financial Accounting

GAAP
GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and
standards for financial reporting. The acronym is pronounced "gap."
GAAP specifications include definitions of concepts and principles, as well as industry-specific rules. The
purpose of GAAP is to ensure that financial reporting is transparent and consistent from one organization to
another.
There is no universal GAAP standard and the specifics vary from one geographic location or industry to
another. In the United States, the Securities and Exchange Commission (SEC) mandates that financial reports
adhere to GAAP requirements. The Financial Accounting Standards Board (FASB) stipulates GAAP overall and
the Governmental Accounting Standards Board (GASB) stipulates GAAP for state and local government.
Publicly traded companies must comply with both SEC and GAAP requirements.

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Accounting Concepts

Full Disclosure Concept

For a business, the full disclosure principle requires a company to provide the necessary information so that
people who are accustomed to reading financial information can make informed decisions concerning the
company.
The required disclosures can be found in a number of places including the company's financial statements
including any supplementary schedules and notes (or footnotes).
The disclosures in the notes to the financial statements include the effects of foreign currencies, contingent
liabilities, leases, related-party transactions, stock options, and much more.

Accounting Period Concept

All the transactions are recorded in the books of accounts on the assumption that profits on these transactions
are to be ascertained for a specified period. This is known as accounting period concept. Thus, this concept
requires that a balance sheet and profit and loss account should be prepared at regular intervals. This is
necessary for different purposes like, calculation of profit, ascertaining financial position, tax computation etc.
Further, this concept assumes that, indefinite life of business is divided into parts. These parts are known as
Accounting Period. It may be of one year, six months, three months, one month, etc. But usually one year is
taken as one accounting period which may be a calendar year or a financial year.

Accrual Concept
The meaning of accrual is something that becomes due especially an amount of money that is yet to be paid or
received at the end of the accounting period. It means that revenues are recognized when they become
receivable. Though cash is received or not received, and the expenses are recognized when they become
payable though cash is paid or not paid. Both transactions will be recorded in the accounting period to which
they relate. Therefore, the accrual concept makes a distinction between the accrual receipt of cash and the
right to receive cash about revenue and actual payment of cash and obligation to pay cash as regards
expenses.

Conservatism Concept
The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible
when there is uncertainty about the outcome, but to only recognize revenues and assets when they are
assured of being received. Thus, when given a choice between several outcomes where the probabilities of
occurrence are equally likely, you should recognize that transaction resulting in the lower amount of profit, or
at least the deferral of a profit. Similarly, if a choice of outcomes with similar probabilities of occurrence will
impact the value of an asset, recognize the transaction resulting in a lower recorded asset valuation.
Under the conservatism principle, if there is uncertainty about incurring a loss, you should tend toward
recording the loss. Conversely, if there is uncertainty about recording a gain, you should not record the gain.

Matching Concept
The matching concept states that the revenue and the expenses incurred to earn the revenues must belong to
the same accounting period. So once the revenue is realized, the next step is to allocate it to the relevant
accounting period. This can be done with the help of accrual concept.

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Economic Entity Concept
This concept assumes that, for accounting purposes, the business enterprise and its owners are two separate
independent entities. Thus, the business and personal transactions of its owner are separate. For example,
when the owner invests money in the business, it is recorded as liability of the business to the owner. Similarly,
when the owner takes away from the business cash/goods for his/her personal use, it is not treated as
business expense. Thus, the accounting records are made in the books of accounts from the point of view of
the business unit and not the person owning the business. This concept is the very basis of accounting.

Going Concern Concept

This concept states that a business firm will continue to carry on its activities for an indefinite period of time.
Simply stated, it means that every business entity has continuity of life. Thus, it will not be dissolved in the
near future. This is an important assumption of accounting, as it provides a basis for showing the value of
assets in the balance sheet; For example, a company purchases a plant and machinery of Rs.100000 and its life
span is 10 years. According to this concept every year some amount will be shown as expenses and the
balance amount as an asset. Thus, if an amount is spent on an item which will be used in business for many
years, it will not be proper to charge the amount from the revenues of the year in which the item is acquired.
Only a part of the value is shown as expense in the year of purchase and the remaining balance is shown as an
asset.

Materiality Concept
The materiality concept is the principle in financial accounting and reporting that firms may disregard trivial
matters, but they must disclose everything that is important to the report audience. Items that are important
enough to matter are material items.

Money Measurement Concept

This concept assumes that all business transactions must be in terms of money that is in the currency of a
country. In our country such transactions are in terms of rupees. Thus, as per the money measurement
concept, transactions which can be expressed in terms of money are recorded in the books of accounts. For
example, sale of goods worth Rs.200000, purchase of raw materials Rs.100000, Rent Paid Rs.10000 etc. are
expressed in terms of money, and so they are recorded in the books of accounts. But the transactions which
cannot be expressed in monetary terms are not recorded in the books of accounts. For example, sincerity,
loyalty, honesty of employees are not recorded in books of accounts because these cannot be measured in
terms of money although they do affect the profits and losses of the business concern.

Financial Statements

Profit and Loss/Income Statement

The income statement is one of the major financial statements that is used to show the profitability of a
company during the time interval specified in its heading. The period of time that the statement covers is
chosen by the business and will vary.

It captures two aspects of a business–Revenue & Expenses over a given period (usually 1 year or 1 accounting
period) through both operating and non-operating activities.

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Operating activities: All the activities that contribute to generating revenue from the business’s core
operations (manufacturing, marketing and selling of goods) are clubbed under this head.
Non-operating activities: All activities that are not a part of the business’s core operations are called non-
operating activities. Items like interest income, dividend income, foreign exchange gains etc. are the business’s
non-operating activities.

Revenue: This is income generated by a company from its main business activities (sales of goods or services)
and is also called turnover or top line.
The Income statement has another head called ‘Other Revenue’. This is income generated from its non-
operating activities.

Cost of Goods Sold (COGS): All the expenses that lead to adding value to the raw material/semi-finished goods
before the finished product is kept away for storage or is sent out of the factory constitute a part of the head
‘Cost of Goods Sold. This also includes items like electricity cost at the factory, worker wages, carriage-in cost
of the raw material etc.
Gross Profit = Revenue- COGS

Selling General & Administrative Expenses(SG&A): This head constitutes all the operating expenses like
storage costs, selling expenses, employee’s salaries, marketing costs, R&D overheads etc. Selling costs include
direct selling expenses such as those that can be directly linked to the sale of a specific unit such as credit,
warranty and advertising expenses. SG&A expenses include salaries of non-sales personnel, rent, heat and
lights

EBITDA = Total Gross Profit–SG&A

Depreciation: It is used in accounting to try to match the expense of an asset to the income that the asset
helps the company earn.
For example, if a company buys a machinery for $1 million and expects it to have a useful life of 10 years, it will
be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-
line depreciation), which will be matched with the money that the equipment helps to make each year
Amortization: It is like depreciation as a concept except that it is applied only to intangible assets. For
example, suppose ABC Medical firm spent $30 million dollars on a piece of medical equipment and that the
patent on the equipment lasts 15 years, this would mean that $2 million would be recorded each year as an
amortization expense

EBIT (Operating Profit) = EBITDA – DA

Other Revenue: This includes interest income, dividend income, profit from sale of assets etc.

Other Expenses: This includes any non-operating expense or loss.

Tax Expenses: A tax expense is a liability owing to federal, state/provincial and municipal governments.
• Current Tax – tax expected to be paid on current years income
• Deferred Tax – net effect of recognizing deferred tax liability / assets
• Deferred Tax Assets – higher taxes paid in the current year will result in lower taxes in future years
• Deferred Tax Liabilities – tax saved in the current year will reverse and result in higher taxes in future

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Balance Sheet
A Balance Sheet is a financial statement that summarizes a company's assets, liabilities and shareholders'
equity at a specific point in time. The balance sheet gets its name from the fact that the two sides of the
equation below – assets on the one side and liabilities plus shareholders' equity on the other – must balance
out.
Assets = Liabilities + Shareholders' Equity

Assets
An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and
governments.
Assets can be broadly divided into 2 categories:
• Current Assets:
All assets that are reasonably expected to be converted into cash within one year in the normal course
of business
Current assets are important to businesses because they are the assets that are used to fund day-to-day
operations and pay ongoing expenses
Example: Cash, accounts receivable, inventory, prepaid expenses
• Non-Current Assets:
Assets that are expected to be converted into cash in a time frame greater than a year, anything that
isn’t a current asset
Example: Property, plant and equipment, Intellectual Property, Goodwill

Liabilities
Liabilities are a company's legal debts or obligations that arise during the course of business operations.
Liabilities are the money that a company owes to outside parties, from bills it has to pay to suppliers to
interest on bonds it has issued to creditors to rent, utilities and salaries.
Liabilities can be broadly divided into 2 categories:
• Current liabilities are debts payable within one year, ex Interest payable, rent, tax, utilities, wages payable,
customer prepayments while
• Long-term liabilities are debts payable over a longer period like long term debt and pension fund liability.

Owner’s Equity
It is the portion of the balance sheet that represents the capital received from investors in exchange for stock
(paid-in capital) and retained earnings. A stockholders' equity represents the equity stake currently held on
the books by a firm's equity investors
Owner’s Equity = Total Assets–Total Liabilities
Stockholders' equity is often referred to as the book value of the company, and it comes from two main
sources
• Original source is the money that was originally invested in the company, along with any additional
investments made thereafter

• The second comes from retained earnings that the company is able to accumulate over time through its
operation.

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Cash Flow Statement
The statement of cash flow reports the impact of a firm's operating, investing and financial activities on cash
flows over an accounting period. The cash flow statement is designed to convert the accrual basis of
accounting used in the income statement and balance sheet back to a cash basis.
The cash flow statement reveals the following information:
1. How the company obtains and spends cash
2. Why there may be differences between net income and cash flows
3. If the company generates enough cash from operation to sustain the business
4. If the company generates enough cash to pay off existing debts as they mature
5. If the company has enough cash to take advantage of new investment opportunities

The following terms are used in this Statement with the meanings specified:

• Cash comprises cash on hand and demand deposits with banks.

• Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts
of cash and which are subject to an insignificant risk of changes in value.
• Cash flows are inflows and outflows of cash and cash equivalents.
• Operating activities are the principal revenue-producing activities of the enterprise and other activities
that are not investing or financing activities.
• Investing activities are the acquisition and disposal of long-term assets and other investments not included
in cash equivalents.
• Financing activities are activities that result in changes in the size and composition of the owners’ capital
(including preference share capital in the case of a company) and borrowings of the enterprise.

Segregation of Cash Flows

The statement of cash flows is segregated into three sections:
1. Operating activities
2. Investing activities
3. Financing activities

Cash Flow from Operating Activities (CFO)

CFO is cash flow that arises from normal operations such as revenues and cash operating expenses net of
taxes.

This includes:
• Cash inflow (+)
1. Revenue from sale of goods and services
2. Interest (from debt instruments of other entities)
3. Dividends (from equities of other entities)
• Cash outflow (-)
1. Payments to suppliers
2. Payments to employees
3. Payments to government
4. Payments to lenders
5. Payments for other expenses

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Examples of cash flows from operating activities are:
(a) Cash receipts from the sale of goods and the rendering of services
(b) Cash receipts from royalties, fees, commissions and other revenue;
(c) Cash payments to suppliers for goods and services
(d) Cash payments to and on behalf of employees.
(e) Cash receipts and cash payments of an insurance enterprise for premiums and claims, annuities and
other policy benefits
(f) Cash payments or refunds of income taxes unless they can be specifically identified with financing and
investing activities
(g) Cash receipts and payments relating to futures contracts, forward contracts, option contracts and swap
contracts when the contracts are held for dealing or trading purposes.

Cash Flow from Investing Activities (CFI):

CFI is cash flow that arises from investment activities such as the acquisition or disposition of current and fixed
assets.

This includes:
• Cash inflow (+)
1. Sale of property, plant and equipment
2. Sale of debt or equity securities (other entities)
3. Collection of principal on loans to other entities
• Cash outflow (-)
1. Purchase of property, plant and equipment
2. Purchase of debt or equity securities (other entities)
3. Lending to other entities

Examples of cash flows arising from investing activities are:

(a) Cash payments to acquire fixed assets (including intangibles). These payments include those relating to
capitalized research and development costs and self-constructed fixed assets,
(b) Cash receipts from disposal of fixed assets (including intangibles)
(c) Cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than payments for those instruments considered to be cash equivalents and those
held for dealing or trading purposes)
(d) Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than receipts from those instruments considered to be cash equivalents and those
held for dealing or trading purposes)
(e) Cash advances and loans made to third parties (other than advances and loans made by a financial
enterprise)
(f) Cash receipts from the repayment of advances and loans made to third parties (other than advances
and loans of a financial enterprise)
(g) cash payments for futures contracts, forward contracts, option contracts and swap contracts except
when the contracts are held for dealing or trading purposes, or the payments are classified as financing
activities

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Finance
(h) cash receipts from futures contracts, forward contracts, option contracts and swap contracts except
when the contracts are held for dealing or trading purposes, or the receipts are classified as financing
activities

Cash flow from financing activities (CFF)

CFF is cash flow that arises from raising (or decreasing) cash through the issuance (or retraction) of additional
shares, short-term or long-term debt for the company's operations. This includes:
• Cash inflow (+)
1. Sale of equity securities
2. Issuance of debt securities
• Cash outflow (-)
1. Dividends to shareholders
2. Redemption of long-term debt
3. Redemption of capital stock

Examples of cash flows arising from financing activities are:

(a) Cash proceeds from issuing shares or other similar instruments
(b) Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-term borrowings
(c) Cash repayments of amounts borrowed

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 Marketing
Introduction
● Marketing is a societal process by which individuals and groups obtain what they need and want
through creating, offering and exchanging products of value with others
● Marketing focuses on the use of all the firm’s controllable influences to satisfy the customer
● Selling or advertising are merely a subset of marketing actions used to satisfy consumer needs

Marketing Objectives
1. Satisfy the needs of a group of customers better than the competition
2. To grow the business by adapting it to changes in the environment by -
• Monitoring changes in customer needs
• Monitoring changes in competition
• Monitoring changes in company’s resources and skills
• Looking for opportunities and threats that arise from these changes
• Taking relevant actions to cater to these opportunities and threats

o Needs - Basic human requirements. E.g. - Air , water, food

o Wants – Directed to specific objects that might satisfy the need. E.g. - Rice, cereal, tea
o Demands - Wants for specific products backed by an ability to pay. E.g. - Mercedes

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 Marketing
What is Marketed?
Goods, Services, Events, Experiences, Persons, Places, Properties, Organizations, Information and Ideas

Who Markets?
A marketer- It seeks response from another party, called the prospect.
There can be marketers on both sides of the party

What are the Key Markets?

a) Consumer Markets
b) Business Markets
c) Global Markets
d) Non Profit and Governmental Markets

Marketing Process
The below process shows how a firm needs to understand customer needs, and bring in suitable products
to cater to those needs-

Market Research

Segmenting, Targeting and Positioning

Product, Price, Place, Promotion

Implementation- Execution, Quality, Experience

Control- Monitor, Evaluate, Control

Market Research
Marketing research is the function that links the consumer, customer, and public to the marketer through
information— information used to identify and define marketing opportunities and problems; generate,
refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of
marketing as a process. Marketing research specifies the information required to address these issues,
designs the method for collecting information, manages and implements the data collection process,
analyzes the results, and communicates the findings and their implications.
Marketing research is all about generating insights. Marketing insights provide diagnostic information
about how and why we observe certain effects in the marketplace and what that means to marketers.

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 Marketing
Key Steps in Marketing Research:

• Define the Problem:

In this stage you need to identify the actual problems that are relating
to the apparent symptoms. What information is needed to solve the
problem? For example, poor sales within a business are not the
problem, they are the symptom of a larger issue such as a weak
marketing strategy.

• Develop the Research Plan:

In the second stage of marketing research we develop the most
efficient plan for gathering the needed information and discover what
that will cost.

• Collect Information:
There are two types of market research that can be performed:
Primary research - involves collecting information from sources
directly by conducting interviews and surveys, and by talking to
customers and established businesses.
Secondary research - involves collecting information from sources
where the primary research has already been conducted. Such
information includes industry statistics, market research reports, news
paper articles, etc.

• Analyze the Information:

You must attach meaning to the data you have collected during your
market research to make sense of it and to develop alternative
solutions that could potentially solve your business problem. You
should determine how the knowledge you have gained through
researching your market can be applied and used to develop effective
business strategies.

• Present the Findings:

Reach a conclusion. With the alternatives you have developed to solve
your problem in mind, perform a cost- benefit analysis of each
alternative keeping in mind the potentially limited resources available
to your business. You may also need to perform further investigation
into each alternative solution to arrive at the best decision for your
business in regards to meeting consumer demands.

• Make the Decision:

Implement your research. Put your final solution into practice.
Without completing this step your research could potentially have
been a waste of your time and resources.

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 Marketing
Segmentation
Dividing heterogenous groups into homogenous sub-groups. It involves:
• Marketing Research
• Key Buying Determinants
• Identifying Sub-Groups
• Niche Marketing
Ignoring segmentation may be dangerous

Targeting
Designing product mix according to Segmentation
Evaluation of Market Segments
Size and Growth
Attractiveness
Competition
Buyer Power
Supplier Power
Company Resources

Segmentation Techniques
Created by Law
Marketers
Demographic – Age/Gender/Income/Marital Status/Education
Geographic – Temperature/Development Levels
Behaviouristic – Occasions/Attitude/Loyalty/Readiness
Psychographic – Lifestyle/Personality
Usage Frequency

Targeting Strategies
• Mass Marketing –
Un-differentiated same Product Mix
Ex – Petrol, Soft Drinks
• Segmented Marketing
Different Mix for Different Segments
Ex – Nutritional Supplements, Cosmetics
• Niche Marketing
Un-serviced segments
Ex – Pet salons, Organic Food

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 Marketing
Positioning
Implanting a product image – at the top of the customer’s mind
Product Differentiation
USP
Superiority
Affordability
Value Propositions
More for More
Same for Less
Positioning Statements
Communicated through Promotion Mix

Marketing Mix
“Marketing Mix is the set of controllable variables that the firm can use to influence the buyer’s response”*
Jerome McCarthy’s 4P Classification – Product, Place, Price and Promotion.
This mix is assembled keeping in mind the needs of target customers and organization, depending upon its
available resources and marketing objectives

• Product
”Product is a set of tangible and intangible attributes including packaging, brand, prestige, services which
buyer may accept as offering satisfaction of wants and service”
Set of questions marketers must ask:
What does the client want from the service or product?
What features must the product have to meet the client’s needs?
How is the product different from that of the competitors?
What does the product look like?

• Price
Price regards the sale price of the product and reflects what consumers are willing to pay for it.
In simple terms, it is the exchange value of goods and services in terms of money.
Factors taken into account while determining the price of a product include
Cost of production: Adding a reasonable profit margin
Demand: Keeping in mind price elasticity, demand in the market, buyer’s capacity, willingness to pay
and preferences
Competition
Marketing Objectives: Profit or sales maximization, increasing market share, survival in the market?

Pricing Strategies
Cost-plus pricing—simply calculating your costs and adding a mark-up
Competitive pricing—setting a price based on what the competition charges
Value-based pricing—setting a price based on how much the customer believes what you’re selling is worth
Price skimming—setting a high price and lowering it as the market evolves
Penetration pricing—setting a low price to enter a competitive market and raising it later

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 Marketing
• Place
Place: Refers to providing access to the customer to the product in a sustainable and efficient manner.
It primarily is concerned with distribution and involves a lot of factors:
• Warehousing
• Transportation
• Inventory Management
• Determination of Channel
Since distribution exhibits direct connect to the customer, hence it is also responsible for training and
managing the intermediaries to sell the product on behalf of the organization.

• Promotion
Promotion of any Goods or services refers to the marketing communications for that particular entity to the
target or general audience.
The purpose of Promotion is broadly classified into three parts:
• To present information to the customer and others
• To increase the demand
• To differentiate the product
The factors concerned with Promotion are:-
• What needs to be communicated
• How to reach the target audience
• How often to communicate

The 7Ps model is a

marketing model that
modifies the 4Ps model.
The 7Ps is generally used
in the service industries.

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 Marketing
Digital Marketing
Digital marketing is defined by the use of numerous digital tactics and channels to connect with customers
where they spend much of their time: online. Allows marketers to see accurate results in real time. Few
techniques are:
Social Media Marketing - Promotes brand and content on social media channels to increase brand
awareness, drive traffic, and generate leads for your business.
Facebook, Instagram, Twitter.

Content Marketing
Creation and promotion of content assets for the purpose of generating brand awareness, traffic growth,
lead generation, and customers. The channels in content marketing strategy include:
Blog posts, online brochures and look books.
Pay-Per-Click
PPC is a method of driving traffic to website by paying a publisher every time an ad is clicked.
Search Engine Optimization (SEO)
Process of optimizing website to "rank" higher in search engine results pages, thereby increasing the
amount of organic (or free) traffic the website receives.

Evolution of Marketing Philosophies

• Consumers prefer widely available and inexpensive

product
The Production Concept
• High Production Efficiency, low costs and mass
distribution

• Offers best product quality, performance or innovative

The Product Concept features
• Product is not well priced, distributed or advertised

• Does not cater to customer requirements

The Selling Concept • Selling is the main motto. They try to sell what they
make instead of make what the market wants

• Customer centric
The Marketing Concept • Not to find right customers for the product, but right
product for the customers

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 Marketing
Product Life Cycle
The progression of a product through a distinct sequence of stages, each posing different challenges,
opportunities and problem is known as the product life cycle.
Sales

Product life cycle

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Operations
Operations Management
Operations Management is the art of managing the functioning of processes for the production of goods or
the delivery of services. Planning, designing, controlling and improving these processes is known as
Operations Management. It involves ensuring the efficiency and efficacy of the processes. As every
organization either produces goods or delivers services, Operations Management is an essential activity.
Some of the components of Operations Management are:

1. Production Systems: Dealing with the production of good, this involves managing plant, equipment,
labor, and the flow of information to convert input (usually raw material) to desirable output.
2. Performance Metrics: Effectiveness can be judged by the final product’s price, quality, lead time,
availability of stock and sustainability. Efficiency can be judged in terms of productivity – for
equipment, labor and inventory turnover.
3. Physical Configuration and Management: For efficient delivery of services, it is required to maintain a
smooth flow of good between the various processing stages in an organization. This is made possible
by ensuring the best possible arrangement of equipment and labor in the plant. Some of the aspects
involved are the capacities of the machinery, outsourcing, automation, team coordination and
information flow.
4. Service Operations: Organizations delivering services differ in many ways from manufacturing
organizations – in terms of a lack of physical inventory, tangibility of final output, constant owner
involvement, and more abstract quality metrics. However, they too are equally concerned with
meeting customer requirements, choosing the best layout, demand forecasting, etc.
5. Mathematical Modelling: Most of the Operation Management problem can be mathematically
modelled – transportation, assignment, queueing are just some of the problems which can be
mathematically modelled using linear algebra and multivariate calculus.
6. Safety and Maintenance: This involves improving the product dependability across its lifecycle,
employee safety from occupational hazards and integration with the supply chain.

Systems and Process Approach

Systems Approach - A system is a combination of various components that is designed to accomplish a

certain task. The components may not necessarily be physical – for example operating policies in a
manufacturing facility is a conceptual framework in an otherwise mostly physical system. The systems
approach towards Operations Management emphasizes that it is one function within a linear sequence of
processes and is thus ‘protected’ from the actions of the marketplace. Thus both physical stocks and
allocation of responsibility within functions outside of operations are used to protect the operations
system from the external environment. The idea behind this model is that the operations function can
concentrate solely on transforming inputs of raw materials into goods and services without the need to
consider the external environment outside of the organizational system.

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Operations
Process Approach - A process involves activities, or a series of activities that transform an inputs to
outputs. The process approach towards Operations Management emphasizes on horizontal management,
and greater coordination between cross-functional processes and tries to narrow the focus of these
processes towards the organization goals.

Differences between Manufacturing and Service Organization

Manufacturing Organization Service Organization

Tangible Product Intangible Product

Inventory/Stocks Maintained No Inventory/Stock

Low Involvement of Customer High Involvement of Customer

Longer Response Times Shorter Response Times

Large Facilities Small Facilities

Capital Intensive Labor Intensive

Quality is Objective Quality is Subjective

Similarities between Manufacturing and Service Organization

Both are concerned about quality, productivity & timely response to its customers

Must make choices about capacity, location, layout

Must plan its operations, schedules and resources

Balance capacity with demand by a careful choice of resources

Must make an estimate of demand

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Operations
Supply Chain
Supply Chain refers to the chain of activities involved in delivery of the products or services to the
customer. For example, the supply chain of a steel angle begins from the procurement of raw material from
the supplier to the final purchase by the customer. The supply chain for a firm in the service industry beings
from the acknowledgement of the customer requirement to final fulfillment of the service to the customer.

Supply chains involve the movement of

• Material
• Money
• Information

Supply Chain Management refers to coordinating these activities to ensure the smooth and uninterrupted
flow of product through the various stages of processing. For traditional products, an efficient Supply Chain
is preferred. However, for products where continuous innovation is required, the Supply Chain needs to be
responsive to cater to variations in product design.

The activities involved in the Supply Chain are:

• Inbound Logistics: The logistics associated with initial movement of the raw material to the
manufacturing unit and subsequent movement within the unit.
• Outbound Logistics: The logistics associated with movement of the finished goods from the end of the
manufacturing production line till the end user.
• Marketing and Sales: Involve gathering customer requirements and then fulfilling them through an
exchange process.
• Service: The activities associated with the delivery of the product eg. in-store staff and post-sales
service, fulfilling warranty, etc.
• Support Areas: Finance, Human Resource Management, Legal, Control, Quality departments which are
indirectly involved in the production of the product
• Procurement: Purchase of raw material or services which are transformed into or used to reach the
final product

Value Chain
The value chain is the chain of activities involved in the delivery of a product or service which add value
(mostly financial) to the final product. The Value Chain differs from the Supply Chain in that every step of
the supply chain may not be a part of the value chain. For example, consider two restaurants identical in all
respects except one offers self-service and one offers waited service. While the offerings are the same, the
value chain for the second restaurants can allow it to price its items at a higher price because of its value
chain that offers food to the customers at their tables.
Bullwhip Effect
This refers to the progressively larger changes required at each step of the supply chain due to the change
in consumer demands or requirements. The amount of such change increases as one goes from the
consumer end to manufacturing end. This is because of the safety stock kept at each level, which due to
the absence of trust in demand forecasting, keeps on compounding as we move up the supply chain.

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Operations
Logistics
Logistics is a portion of supply chain management involved with the physical movement of goods, usually
starting when the products is dispatched from the factory to the point where it is finally delivered to the
customer. When the flow of goods is from the customer back to the manufacturer, it is known as reverse
logistics, for example in cases of damaged goods or for product recycling.

• 2nd Party Logistics (2PL) – Is a logistics company that owns and operates its transportation fleet and
offers its transportation services to those who might want to avail it. E.g. Safe Express
• 3rd Party Logistics (3PL) – Is a logistics company that takes care of all the logistic services required by a
firm. It may also offer consultancy for improvements in supply chain. E.g. DHL
• 4th Party Logistics (3PL) – Is a logistics company that takes care of all the logistic services and sub-
contracts a portion of the operations to another logistic solutions provider. It plays more of a
consultant and solution provider role. E.g. DHL, FedEx

Reverse Logistics:
The process of planning, implementing, and controlling the efficient, cost-effective flow of product back
upstream for the purposes of source reduction/conservation, recycling, substitution, and disposal
Inventory
Inventory is the stock of products that a company holds for a variety of purposes. These products may be in
raw material form, a work-in-progress (WIP) or as finished goods. A company may wish to hold inventory
for the following reasons:
• When the next process has a slower input rate than the output rate of the process preceding it
• To meet variations in seasonal demand
• As “safety stock” for uncertain periods e.g. machine breakdown
• To achieve economies of scale by manufacturing in larger batch sizes
• To appreciate in value e.g. alcoholic products and rice

Inventories can be classified on the basis of their purpose of stocking as follows:

• Buffer/Safety Stock – An extra buffer kept to reduce possibility of running out of stock due to uncertain
circumstances.
• Cycle Stock – It is the inventory kept for further processing to be converted to raw material. The
replenishment of this is cyclic in nature, in accordance with the manufacturing schedule.
• De-Coupling Stock – This is the stock kept when the input rate of a process is greater than the output
rate of the process before it, which could create a de-coupling between them, if stock is not
maintained.
• Anticipation Stock – This is the stock kept in anticipation of peak in demands, due to uncertain
consumer requirements or seasonal variations, which are unpredictable.
• Pipeline Stock – These are the goods in between the finished production stage and finally reaching the
customer.
• Bill of Material (BOM): A listing of all the subassemblies, intermediates, parts, and raw materials that
go into a parent assembly showing the quantity of each required to make an assembly. It is used in
conjunction with the master production schedule to determine the items for which purchase
requisitions and production orders must be released.

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Operations
• Forecasting: The business function that attempts to predict sales and use of products, so they can be
purchased or manufactured in appropriate quantities in advance.

Inventory Control Techniques

Inventory control techniques are employed by the inventory control organization within the framework of
one of the basic inventory models, viz., fixed order quantity system or fixed order period system. Inventory
control techniques represent the operational aspect of inventory management and help realize the
objectives of inventory management and control. The most commonly employed technique is ABC analysis.
ABC Analysis: Also known as “Selective Inventory Control”, it segregates items on the basis of cost incurred
for keeping inventory and the number of items currently in stock.

• “A class" inventory will typically contain items that account for 80% of total value, or 20% of total items.
Require high control of inventory levels. Lead time would be tried to reduce so as to avoid keeping in
inventory.
• "B class" inventory will have around 15% of total value, or 30% of total items. Require medium control
of inventory levels.
• "C class" inventory will account for the remaining 5%, or 50% of total items. Require low control of
inventory levels.

On similar lines as the ABC analysis, inventories can also be controlled as:
• High Medium Low (HML) - On the basis of unit value rather than annual consumption;
• Vital Essential Desirable (VED) – On the basis of criticality of inventories
• Scarce Difficult Easy (SDE) – On the basis of availability of material
• Fast Slow Non-Moving (FSN) – On the basis of speed of movement

Economic Order Quantity

A company faces two types of costs when it decides to increase its inventory:
• Expenditure in terms of ordering costs, proportional to number of orders
• Expenditure in terms of inventory holding costs, proportional to number of units ordered

Since the total consumption is the same, these two costs are inversely proportional. Hence, the number of
units to be ordered in each order is known as Economic Order Quantity (EOQ).

EOQ=√((2*Annual Consumption*Cost per Order)/(Annual Carrying Cost per Unit))

Manufacturing Strategies
Manufacturing Strategies refer to the approach adopted while manufacturing the order with respect to the
customer demand. These depend on the volume of customer orders, level of customization in the product,
fluctuation in demand and the manufacturing speed, among other factors.

Make to Stock
This is a traditional approach adopted by industries where the demand can be predicted reliably. In such
cases, stocks are maintained to meet customer demand as well as stock for fluctuations in demand, which
aside from meeting those fluctuations, also helps in maintaining economies of scale. However, this can
prove inefficient in the case of inaccurate demands. E.g. In FMCG industries

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Operations
Assemble to Stock
This is an approach adopted for products where the products can be customized to a certain extent, but
also need to be delivered quickly. This approach involves manufacturing the components in stock and then
assembling them on receiving the customer order. This approach tries to have the best of both worlds – a
short lead time and level of customization. E.g. Dell, Subway Subs
Make to Order
This approach is taken for products that offer high levels of customization, but result in a higher lead time.
The product is manufactured only after receipt of the customer order. It is ideal for companies that offer
exclusive, higher priced offerings. E.g. Boeing, Luxury Cars

Engineer to Order
This approach is adopted for products that go through the complete process – from ideation to delivery as
per the customer specifications. This results in complete customizability, but results in the highest levels of
wait time as no standardized product design is available, which results in additional time required for
research and development. This approach is adopted in specialized heavy equipment and infrastructure
projects. e.g. Transformers, Substations, Dams

Layout Planning
Layout means how the transformed resources are positioned relative to each other and how the various
tasks are allocated to these transforming resources. Layout decisions include the best placement of
machines (in production plants), offices and desks (in office settings), or service centers (in service settings
like hospitals or supermarkets).

Types of Layout
1. Assembly Line Layout: Interchangeable or semi-finished parts move forward on a moving belt (called
Assembly Line) and parts are added in sequence at workstations until the final product is assembled. This
layout is most common in automobile manufacturing industry.
2. Fixed Layout: In a Fixed-position layout, the main body/project is fixed at one place whereas workers and
equipment come to that place and complete the product/project. This layout is common in industries
where the final product is very heavy and large and therefore difficult to move around. Example: Ship-
building plants, Aircraft assembly plants.
3. Hybrid Layout: Hybrid layout is a combination of Product-based, Process-based and Fixed position
layouts. This type of layout provides more flexibility depending on changing needs of different
manufacturing facilities.
4. Office Layout: In offices, the efficient layout is one where the workers, their equipment, and desks are
grouped and placed in such a way to ensure comfort, safety and effective movement of information.
5. Retail Layout: In Retail layout, the priority is to expose the customer to as many products as possible, as
sales and profitability vary directly with customer exposure to products. Various products in a store are
allocated space based on this principle.

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Operations
Product - Process Matrix
The product-process matrix is a model that is used to demonstrate the combination of a product's (or
product group's) volume and variety characteristics, and the nature of the processes that make it.

Process Examples

Project Process Restaurants, Hospitals, Construction of buildings

Bakery that bakes customized cakes, Programmer coding custom

Job Process
websites

Batch Process Bakery with different types of cakes

Line Process Assembly line of manufacturing plants

Continuous Process Chemical plants, refineries

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Operations
Manufacturing Frameworks
These frameworks are the philosophies adopted by manufacturers to optimize production, reduce wastage,
eliminate defects and improve productivity.

Toyota Production System

The Toyota Production System is a combination of manufacturing and managerial practices which was
developed by Toyota. This system introduced many of the manufacturing frameworks listed below. The
underlying principles involve:
Continuous Improvement
Respect for People
Long-Term Philosophies
Right Process to Produce Right Results
Value Addition to Organization by Developing People and Partners
Develop Learning by Continuously Solving Root Problems

Lean
The Lean Manufacturing approach involves elimination of wastage and involves producing “more” with the
resources, without affecting efficiency in the process. Waste may be due to overburdening of work load in
certain areas or the unevenness in the distribution of work. It breaks down systems and process by
categorizing them into value-addition activities and wasteful activities, and works towards eliminating the
non-wasteful processes. The type of wastes are classified as TIMWOODS

T – Transportation
I – Inventory
M – Material
W - Waiting
O – Over-processing
O – Over-productions
D – Defects
S – (Underutilization of) Skills

Kaizen
Kaizen is a Japanese word that means “improvement”. This is an approach that emphasis on continuous
improvement of all functions and involves all systems, processes and employees of the organization. This
approach has also been successfully implemented in various industries not involved in manufacturing –
healthcare, psychotherapy and banking. The cycle of Kaizen is defined as “Plan, Do, Check and Act”.

Jidoka
Jidoka means automation with a human touch or intelligent automation. This involves automation being
used more in supervisory mode rather than production mode. Thus, instead of handing everything over to a
machine, a human supervises the operation of a machine. In case of a failure, the human has the power to
immediately stop production. It involves the following principles:
Detect the Abnormality
Stop
Fix the Problem
Improvements to be Incorporated in Standard Operating Procedure

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Operations
Heijunka
Heijunka, or production leveling, aims to reduce wastage by ensuring uniformity in the work distribution
across various units, production lines or manufacturing units. This results in minimum inventories, capital
costs, manpower, and production lead time through the whole value stream. In case of constant demand,
production leveling is easy, but in case of variable demand, demand leveling is the preferred approach by
manufacturing a constant amount but stocking to meet consumer demand.

Poka-Yoke
Poka-Yoke means avoiding mistakes or prevention or errors. The framework is only applicable for errors that
might be unintentional. It involves use of “interlocks”, which involve additional steps to be performed in
order to finish a process, which ensure all actions performed are with intent and caution. An example is a
microwave that doesn’t start till the door is shut which avoid unintentionally switching it on with direct
exposure. This “idiot-proofs” the processes and reduces the time and money spent for training and quality
control exercises.

Just-In-Time Manufacturing
As the name suggests, this technique seeks to minimize the response time in the receipt of raw material
from suppliers and delivery of goods to customers. As this is a waste reduction technique, this is a subset of
lean manufacturing and the usage of this term is decreasing in contemporary times.

Kanban
Kanban is a manufacturing system that uses visual signals to increase operational efficiency and is a
complement to the lean manufacturing system. It strives to make manufacturing demand driven. “Kanban
Cards” are used to signal or stop production by the inventory manager. Manufacturing is stopped when
inventory becomes excess and is resumed when inventory is at sub-optimal levels. Visual aids may be
containers which are sent to the production line from the inventory that need to be filled, which give an idea
about the total production levels required.

3 ‘G’s of Kaizen
These are under the umbrella of Kaizen. As a whole, they encourage managers to take a more hand-on
approach and investigate the on-ground facts. This ensures they have the correct information for decision
making.
• Gemba: The Shop Floor. Encourages Managers to gather firsthand information by visiting the shop floor.
• Gembutsu: The Actual Product. Encourages Managers to observe the final product currently being
produced, which allows them to visualize the end goal.
• Genjistsu: The Actual Facts. Encourages Managers to find out the facts that about the problems in
manufacturing, such as output levels, defects, or wastage.

Quality Management
Quality can mean different things to different people. Some of the aspects of quality are:
Fitness of use
Conformance to Standards
Meeting Customer Specifications

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Operations
Quality for manufacturing firms can be measured both in quantitative and qualitative terms. Harvard
Business School defines the following 8 dimensions of quality:
• Performance
• Features
• Reliability
• Conformance
• Durability
• Serviceability
• Aesthetics
• Perceived Quality

Costs of Quality
These are the indirect costs involved in the production of products:

• Prevention Costs – Costs involved in ensuring quality control at manufacturing stage by employing
various manufacturing frameworks, maintenance, employee training, etc.
• Inspection Cost – Costs involved in quality inspection after production of product. Involves visual
inspection, routine testing, customer acceptance tests, etc.
• Internal Failure Costs – Costs involved in correction of defects due to products failures identified before
the product reaches the end consumer. Costs include repair, rework, disposal, re-manufacturing, etc.
• External Failure Costs – Costs involved in correction of defects due to products failures identified after
the product reaches the end consumer. Costs include honoring warranty costs, repair, complain systems,
etc.

Quality Control Tools

• For Data Collection – Check Sheets, Scatter Diagrams, Cause and Effect Diagram
• For Data Collation – Pareto Chart, Process Diagrams
• For Identifying Outliers – Histograms, Process Control Charts

5S Methodology
It is a workplace enhancement that emphasizes increase in productivity by organizing, maintaining and
sustaining the new order.
Sort – Sort through all items and remove unnecessary items.
Set in Order – Putting all items at the optimal location.
Shine – Maintaining and inspecting the workplace regularly.
Standardize – Standardize process to sort, set and shine.
Sustain – Sustain the above processes by self-discipline.

Six-Sigma
Six Sigma strategies seek to improve the quality of the output of a process by identifying and removing the
causes of defects and minimizing variability in manufacturing and business processes. Six-Sigma approach
requires a maximum of 3.4 defects per million opportunities (of making defects).

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Operations
For Manufacturing Organizations, Six-Sigma adopts the DMAIC approach:
• Define – Definition of the problem, goals and scope of improvement
• Measure – Collection of data by measurement of current output parameters
• Analyze – Analysis of the data to identify significant causes of variation
• Improve – Process improvement of the causes identified above
• Control – Analysis of the output to verify output matches customer specification

In Service Organizations, Six Sigma adopts the DMADV approach:

• Define – Definition of the problem, goals and scope of improvement
• Measure – Collection of data by measurement of current output parameters
• Analyze – Analysis of the data to identify significant causes of variation
• Design – The results of internal tests are compared with customer wants and needs. Any additional
adjustments needed are made.
• Verify – While the product or service is being released and customer reviews are coming in, the
processes may be adjusted.

Process Analysis Terminology

Order Qualifiers
These are the minimum requirements that should be present in the final product as per the customer
specifications. While presence of these requirements do not give any competitive edge to a firm, absence of
these requirements can lead to disqualification from the pool of options the customers is considering. Their
presence only leads to the firm being qualified for consideration, nothing more.

Order Winners
These are the features of the products that are up and above the basic customer requirements. These are
the factors that differentiate the product from the competitor’s offerings. After the order qualifiers bring all
products on the same level playing fields, these factors are the ones that help shape the customer’s attitudes
towards a particular product.
For example for choosing a cellphone, the absence of calling or text facility will lead to removal from
consideration but the presence of regular software updates or a better after-sales support may lead to a
model being viewed more favorably than others.

Process Capacity
This is the maximum output rate of a process.
In case a process involves a series of activities, the process capacity is the output rate of the slowest activity.
In case of parallel activities, the process capacity is the sum of the output rates of the capacities.

Capacity Utilization
It is the current output, expressed as a percentage of the process capacity.

Takt Time
It is defined as the time between the productions of two separate units when the production is synced to
customer demand rate.
𝑇𝑖𝑚𝑒 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛
𝑇𝑎𝑘𝑡 𝑇𝑖𝑚𝑒 =
𝑇𝑖𝑚𝑒 𝑆𝑝𝑒𝑐𝑖𝑓𝑖𝑒𝑑 𝑏𝑦 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟

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Operations
Cycle Time
Cycle time is the time taken to complete a particular process from start to finish.
Ideally, takt time should be equal to cycle time. In case cycle time is less than takt time, there are chances of
overproduction and overstaffing. In case cycle time is more than takt time, it means the firm is not able to
meet customer demand, leading to dissatisfaction.

Lead Time
Lead time is the time difference between the product order and the receipt of the product.

Throughput Time
Throughout time is the time taken for the product to pass through the manufacturing process.
1
𝑇ℎ𝑟𝑜𝑢𝑔ℎ𝑝𝑢𝑡 𝑇𝑖𝑚𝑒 =
𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒

Idle Time
This is the time in which no activity is being performed – either by labor or machine.

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 Strategy
Introduction
Consulting is a job of fixation and improvement of the client business problem. The Consultant is an expert
in the field of business and prepares some strategies to overcome the existing problems of the company
and to improve business.
Consultants are hired to serve some specific purpose, broadly,
1. Achieving organizational goals and purposes
2. Solving management and business problems
3. Identifying and seizing new opportunities
4. Enhancing learning
5. Implementing changes
Generally, consultants are two types,
a. Industry consultants
Having more than 10 years of experience in a given industry, they are helpful for companies to make
decisions based on their domain experience and knowledge of the industry they worked in past.
b. Career consultants
Consulting experts are having a set of skills in research, analytics, presentations, frameworks, etc. They
coach others to use this knowledge and expertise to solve the problems.
Strategy is the creation of unique and valuable position with a distinctive set of activities carried out by
the firm which can keep delivering the unique value.
Strategy requires creating a “fit” among many different company activities. Fit has to do with the ways the
company’s activities interact and reinforce one another. The activities of the company should not seem to
contradict with one another.
Consulting and Strategy is a standout amongst the various engaging career options a MBA graduate have.
It is extremely promising and rewarding provided you have that consulting acumen.

This document not just gives a prologue to the basic concepts but would likewise check you on some
fundamental aptitudes that are required to be an expert in field of consulting.
We at DMS, IIT Delhi strongly believe in innovativeness and uniqueness and these two parameters are
essential to be a decent strategist and consultant. So, we thought of a unique and imaginative quiz that
could enable you to evaluate your consulting abilities and in the meantime enable us to show a few ideas.

Entire quiz would be divided into three parts. Each of this part is designed in such a manner that you get
the crux of the fundamental that is being discussed in that part.

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 Strategy
Some guidelines for the quiz:
• Read the questions and instructions carefully.
• Try to sort out your thoughts and pen it down on a sheet of paper
• Now compare your answers with the solutions we propose
• Mark your answer on certain parameters that would be unique to each question. These parameters
would be mentioned under solution section.
• Add up the individual score and check whether you are the future strategist and consultant?

We hope that you have a great learning time with this quiz!!

Quiz

Part 1: Dealing with Uncertainties and Unknowns

Each and every consultant needs to be an expert in handling an issue to which there is definitely not a
correct answer or nobody has done previously. It requires careful guess and judgments to reach to the
right answer.

Question - How many bicycles are there in the IIT Delhi campus?

Part 2: Devising the Right Strategy

Devising a strategy is extremely crucial and consultants need to do it in a holistic approach keeping into
account various aspects from business stand point.

Problem Statement: Blotics is a startup in the area of Blockchain and Analytics begun by 3 young
technology enthusiasts with extraordinary enthusiasm for new advancements. The point of their startup is
to create solutions based upon Blockchain for different clients. However, they are clueless regarding the
methodology they ought to pursue to develop their business.

They are looking responses to following inquiries

• Which customers do they have to draw in with?
• How to win contracts from new clients?
• How to plan the group and what ought to be the proper size of the group in the first place?
• What business model should they follow?
Blotics hired you as their expert to enable them to develop their business and give answers for above
inquiries. Could you help Blotics to achieve this goal?

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 Strategy
Part 3: Building the Organizational Structures
As consultants, it is important to understand different organizational structures and how to use them in a
given scenario. An effective organizational structure is critical to serve customers in a better way. It is also
important in delivering services and administering tasks effectively.
Problem Statement: Following the consultant’s advice, Blotics expanded its business and hired 7 more
employees. Now they are facing challenges to manage roles and responsibilities. Till now, they have been
managing it in ad-hoc manner. Could you list out different departments/ positions for these 10 employees
keeping in mind that 3 out of these 10 are the founders of the organization and suggest a suitable
organizational structure for present scenario?

Solution
Part 1: Dealing with Uncertainties and Unknowns
Part1 dealt with questions where a logical guess needs to be made. Following is the framework one should
follow for answering these kinds of questions.
1. Start with a logical guess based upon which further calculations are carried out.
2. Drill down to as many clusters as possible
3. Do smart calculations and round off based upon a logical approach
4. Validate your guess using your experience and sense checks.
Following is the solution to estimating the number of bicycles in the campus based upon above approach.
There could be more clusters added but the below solution is just to provide you with an approach to
solve these questions
Assumptions & Calculations:
Total Number of Students: 8000
Total Number of Faculty Members: 400
Total Number of Non-teaching Staff: 1000
Percentage of Student as Hostlers: 80 (6400)
Percentage of Faculty Members as Residents: 60 (240)
Percentage of Staff as Residents: 65 (650)
Number of Go Green Centres: 10
Number of Cycles at each Centre: 25

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 Strategy
Total number of Go Green Cycles: 10*25 = 250----------------------------------------------------------------------- (1)
Percentage of Hostlers using bicycle: 40 (2560) ---------------------------------------------------------------------- (2)
Percentage of Non Hostlers using bicycle: 2 (32)---------------------------------------------------------------------- (3)
Percentage of Residential Faculty Members using Bicycle: 1 (2)-------------------------------------------------- (4)
Percentage of Married Residential Faculty Members: 80 (192)---------------------------------------------------- (5)
Percentage of Married Residential Faculty Members with children aged 5-10: 30 (58)--------------------- (6)

Percentage of Married Residential Faculty Members with children aged 5-10 using Bicycles: 80 (46) - (7)
Percentage of Residential staff using bicycle: 30 (195) ------------------------------------------------------------- (8)
Percentage of Non-Residential staff using bicycle: 20 (70) -------------------------------------------------------- (9)
Total number of bicycles in the campus would be= 2560 + 32 + 2 + 192 + 58 + 46 + 8 + 195 + 70 = 3163

If you have followed a similar approach with different clusters and roughly similar answer, it’s a great job
done!!
Few Other Similar Type Questions for practice: -
1. How many black cars are there in Jaipur?
2. What is the number of smartphones in Delhi?
3. How are many drinking water bottles (1 liter) sold in Mumbai per day?
4. What is the number of Two-wheelers in Panipat (Haryana)?
5. How many people of our country is wearing jeans at a particular day?
6. What is the number of ‘AXE Deo’ sold in a day in Chennai?
Part 2: Devising the Right Strategy

When we are devising a strategy we need to consider various parameters and come up with a strategy
which is well balanced. Every consultant uses some framework to help him/her devise the right strategy.
Before we look at this particular case, let us first learn few frameworks that are available.

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 Strategy
Boston Consulting Group (BCG) Matrix
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the
business brand portfolio and its potential. It classifies business portfolio into four categories based on
industry attractiveness (growth rate of that industry) and competitive position (relative market share).
There are four quadrants into which firms brands are classified:

Question marks are the brands that require Stars operate in high growth industries and
much closer consideration. They hold low maintain high market share. Stars are both
market share in fast growing markets cash generators and cash users.
consuming large amount of cash and incurring
losses. Strategic choices: Vertical integration,
horizontal integration, market penetration,
Strategic choices: Market penetration, market market development, product development
development, product development,
divestiture

Dogs hold low market share and Cash cows hold high market share but operate
operate in a slowly growing market. In in slowly growing market. They are most
general, they are not worth investing in profitable for the brand and generate high
because they generate low or negative volumes of cash.
cash returns
Strategic choices: Product development,
diversification, divestiture, retrenchment

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 Strategy
SWOT Analysis
• This is one of the most basic yet a powerful framework that could be used by a consultant to analyze
the Strengths, Weaknesses, Threats and Opportunities of the organization in a given scenario or
problem.
• It analyzes various internal and external factors that might have an impact on the viability of a project,
product, place or person.

Internal attributes and resources that Internal attributes and resources that
support a successful outcome work against a successful outcome.

External factors that the entity can External factors that could jeopardize
capitalize on or use to its advantage the entity's success.

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 Strategy
PESTEL Analysis
A PESTEL analysis is a framework or tool used by marketers to analyze and monitor the macro-
environmental (external marketing environment) factors that have an impact on an organization.

Political
Internal attributes and resources that
These factors determine
support a successful outcome
the extent to which a
government may
influence the economy
Environmental: or a certain industry
These factors
include all those Economic
that influence or Rise in the inflation rate
are determined by would cause companies
the surrounding to increase prices
environment

Social
Legal These factors scrutinize
There are certain the social environment
laws that affect the of the market, and
business gauge determinants like
environment in a cultural trends,
Technological demographics,
certain country
These factors pertain population analytics etc.
to innovations in
technology that may
affect the operations
External factors that the entity canindustryExternal
of the and the factors that could jeopardize
market favorably or the entity's success.
capitalize on or use to its advantage
unfavorably

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 Strategy
Porter’s Five Forces
• Competitors: In a competitive environment, firm’s decision is highly influenced by what the
competitors do

• Barriers to Entry: The threat of new entrants to the market determines the sustainability of market
share. It is evaluated in terms of market entry barriers which may be in the form of high fixed cost,
product differentiation etc.

• Substitutes: There is always a threat of substitute products replacing the existing product(s) of a firm

• Suppliers: A competitive market with limited suppliers brings with it high level of bargaining power of
suppliers

• Buyers: Multiple products of same category gives the buyers an advantage in bargaining, thus high
bargaining power of buyers exists in multi-brand products.

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 Strategy
Value Chain Analysis
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis
of the competitive strength of the business. The activities of a business could be grouped under two
headings:

Primary Activities ‐ activities that are directly concerned with creating and delivering a product or service
(e.g. component assembly). Primary activities are broken down further into inbound logistics, operations,
outbound logistics, marketing and sales, and after-sales service

Support Activities – These activities are not directly involved in production but may increase
effectiveness or efficiency. Support activities include procurement of inputs, development of technology
and human resources management, and general firm infrastructure.

External factors that could jeopardize

the entity's success.

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 Strategy
ANSOFF Matrix

The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior
managers, and marketers devise strategies for future growth. The matrix suggests that a business’
attempts to grow depend on whether it markets new or existing products in new or existing markets.

External factors that could jeopardize

the entity's success.

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 HR
The term ‘Human resources’ is used to describe both the people who work for a company or
organization and the department responsible for managing resources related to employees.

Human Resource Management (HRM)

Human resource management is a contemporary, umbrella term used to describe the management and
development of employees in an organization. Also called personnel or talent management, human
resource management involves overseeing all things related to managing an organization’s human
capital.

Key Functions of HRM

Recruitment, Selection & introduction: Recruitment is the process of attracting, screening, and
selecting potential and qualified candidates based on objective criteria for a particular job.

Personnel administration: This function involves recording, maintaining and retrieving employee related
information including employment history, work hours, earning history etc. This also includes keeping track of
health and safety levels of employees.

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 HR
Training & Development: HR is always responsible for providing required trainings to employees
timely to sharpen their interpersonal skills and lead to personality development.

Performance & reward management: Assessing performance of employees critically based on

alignment with standards of organization and providing rewards for performance. These rewards can be:
➢ Increment in salary
➢ Bonuses
➢ Certificates
➢ Company cars
➢ Pensions
➢ Life assurance
➢ Profit sharing
➢ Dental plans
➢ Medical insurance
➢ Vouchers
Rewards are the best way to retain and motivate employees so that they can work to their fullest
potential.

Talent Management: Talent management is an organization's ability to recruit, retain, and produce
the most talented employees available in the job market. It refers to the anticipation of required human
capital for an organization and the planning to meet those needs.

Succession & Career Planning: This is the process of identifying long-range needs and cultivating a
supply of internal talent to meet those future needs. It assists in finding, assessing and developing the
individuals necessary to the strategy of the organization.

Labor relations: Labor relation is regards to the workforce who work within a trade union. Employees in
such domain form a union/group to voice their decisions effectively to the higher management. It is also
responsibility of HR to maintain good relations with such unions.

HR Planning: Human resource planning should serve as a link between human resource management
and the overall strategic plan of an organization. Human resource planning includes creating an employer
brand, retention strategy, absence management strategy, flexibility strategy, (talent management)
strategy, (recruitment) and selection strategy.

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 HR
Future of HR Transformation
Merging of artificial intelligence (AI) into HR functions like onboarding and administration of benefits will
improve the overall employee experience.
• AI Recruiters: These are implemented to automate scheduling interviews, provide ongoing feedback
to candidates and answer their questions in real time
• Cognitive engines: Cognitive engines could help employees arrive at key day-to-day decisions in the
workplace including vacation requests, team training and hiring processes
• Personalized employee experiences: A system will be created that will answer a new employee's most
pressing or job critical questions to help get them up to speed fast. An AI, for example, could provide
training suggestions or provide the names, locations and contact info for people he/she should look to
connect with on his first day or so. That same employee could also be advised by AI engines that a
new hire webpage contains a lot of useful information

Terms of interest
1. Attrition
This term refers to the voluntary and involuntary terminations, deaths and employee retirements that
result in a reduction to the employer's physical workforce. If you work in a human resources department
at a large organization, keeping track of attrition trends can be a job in and of itself.
2. Behavioral competency
Behavioral competency is essentially an evaluation of the behavior qualities and character traits of an
employee. How these competencies are defined can vary by employer, but fundamentally they revolve
around people skills, managerial skills and achievement skills.
3. Benchmarking
Benchmarking is a process of measuring the performance of an organization or team through a variety of
metrics—for example, customer satisfaction rate, sales and retention—for future comparison.
Benchmarking can be used to compare internal performance and the external performance of
competitors to measure if improvement has occurred.
4. Change management
This is a considered approach for transitioning individuals or organizations from one state to another in
order to manage and monitor change. Companies can stay ahead of the game when they think ahead
about how they can manage the introduction, implementation and consequences of major organizational
changes.
5. Confidentiality agreement
This is an agreement between an employer and employee in which the employee may not disclose
branded, patented or confidential information. Many companies have protected information that, if
leaked, could be devastating for the brand or welfare of the organization—a confidentiality agreement
serves as legal protection from this.

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 HR
6. Due diligence
Generally speaking, due diligence refers to the steps taken to ensure compliance with laws and
regulations. In mergers and acquisitions, due diligence is the process of thoroughly examining the details
of an investment or purchase to ensure all paperwork and documentation is up to date and compliant.
7. Emotional intelligence
Emotional intelligence is the ability to recognize, assess and manage one’s own emotions, as well as
others’ emotions. High emotional intelligence is a must-have skill for those working in human resources.
8. Exit interview
An exit interview is the final meeting between management and an employee leaving the company.
Information is gathered to gain insight into work conditions and possible changes or solutions, and the
employee has a chance to explain why he or she is leaving.
9. Freedom of association
Freedom of association is a right for people to associate with (or leave) any group of their choosing. That
group also has the right to take collective action in pursuit of its members’ interests. In an HR context, this
generally refers to workers’ freedom to form labor unions.
10. Grievance
A grievance is a complaint brought forward by an employee about an alleged violation of law or
dissatisfaction with work conditions.
11. Gross misconduct
Gross misconduct is an action so serious that it calls for the immediate dismissal of an employee. Physical
violence and intoxication at work are two common examples of this.
12. Nepotism
Nepotism is preferential hiring of relatives and friends, even though others might be more qualified for
those positions. The favoritism is generally showed by individuals in a position of authority such as CEOs,
managers or supervisors.
13. Onboarding
Onboarding is the process of moving a new hire from applicant to employee status, ensuring that
paperwork is done, and orientation is completed.
14. Retention strategy
Retention strategy refers to the processes and policies used to ensure employees stay. In order to retain
employees and reduce turnover, managers must help employees meet their goals without losing sight of
the organization’s goals. This is always a balance that must be managed carefully.

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 Interview Questions
Tell us something about yourself, Or Introduce yourself.
This is the simplest question asked in an interview, but it is one of the most important question as well
because a short and crisp framing of it creates a good first impression. It also sets the tone for the rest of
the interview. The reason is the broadness of the question. The interviewer asks this question to test your
communication skills, body language and clarity of thoughts; this question is also asked to make you talk
about someone you are most aware of, i.e., yourself and therefore to make you comfortable for the rest of
the interview. Thus your introduction should be precise and not more than 1-1.5 minute long.
Take this question as an opportunity to showcase your best traits. This question gives you a chance to talk
about yourself. Hence, you can start with the general details like your name, qualification, extracurricular
activities, academic background and then continue with your biggest academic or extra-curricular
achievement (one or 2 max.), your interests and your long-term career vision. Such an explanation in
chronological order gives a systematic approach to the interview.
Emphasize on the points that you want the interviewer to ask subsequent questions on. This will make you
the driver of your interview. Amidst all this don’t make it long. Keep it short. Interview panel will pick
points on its own.

Strength and weakness questions, Or, What are your Strengths and Weaknesses?
This is a kind of trap question. Most candidates are not aware about their strengths and weaknesses.
Prepare this answer well. Do a SWOT analysis. Talk to close friends and especially parents. Take honest
opinions and frame your answers well. Most importantly be honest.
While answering about strengths, the prime focus should be on your traits that are required for a
professional career. And while answering questions about your weaknesses, avoid the areas that would
make your candidature doubtful or show your carelessness. But keep this in mind that all professionals
have weaknesses. Don't fake a weakness. Give a genuine response.
Candidates often take this question wrong and give a crafty answer. They must remember that interview
panel is not taking the interview for the 1st time. They can very easily make out if you are genuine or
faking. Be ready with examples to support your point.

What are your short-term and long-term objectives? Where do you see yourself 5
years or 15 years from now?
Don’t make general statements like “I want to be a Manager or General Manager or Vice President”. The
corporate hierarchy is known to the interviewer. These answers clearly show that you are not aware of
what you want in life.
Rather, if you have a work-ex, elaborate on how your work-ex has influenced you in a particular domain
and relate it with the kind of work you would want to pursue immediately after MBA. For freshers show a
learning attitude as it is beginning years of your career so you want to explore more in certain fields and
then subsequently build a career on that. Your short term will be your stepping stone for your long term.

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 Interview Questions
Try to build a story here. Connect your past with your present and use it to shape your coming years. Use
your past experiences such as internships, projects, competitions, events, etc. in schools, colleges and
previous company to express your interest in a particular domain of MBA. For more you can read some
GMAT essays as how people frame their stories.

What are your hobbies and interests?

Interviewers wish to understand whether you pursue an interest and if you do so, how deep is your
involvement. Hobby is any activity which we do in our spare time. Your hobby could be painting, traveling,
singing, dancing etc. But be cautious; your interest can't be shallow. When you talk about something
being your hobby/interest, make sure you are involved deeply or at least to the extent that put you above
the beginner level. You need to make very sure that you know everything about your hobby.
For instance, if your hobby is coin collection, you should know that the hobby of coin collection is known
as numismatics. If your hobby is listening to music, you need to be very precise, as to which kind of music
you listen to and the kind of genre you admire, as in, rock, jazz, classical, etc. There will be a lot of
questions on your hobbies (especially for freshers). Be cautious as someone from the panel might have
the same hobby. In addition to this, having an example or two at the back of your mind where you have
showcased your talent / hobby on stag can serve as your distinguishing factor from other candidates in
the panel’s mind.

Who inspires you or Who is your role model?

These questions are asked by interviewers to test your definition of success. Sometimes the aim is to
check your ethics and values. A role model is a person whom you admire for certain qualities. Role models
need not be celebrities. You could name someone you know closely. Your parents, relatives or friends can
be your role models; alternatively, your response could be any corporate tycoon. Provide an admirable
justification for your choice. If you have a role model, list all qualities that you admire in that person and
reasons why you admire them. You could also state facts as to why you look up to them; in the sense that
they inspire you.

How would you handle a situation or What is a solution you recommend to a

particular problem?
The Interviewer may ask real-life problems and ask you to suggest a solution. This could be usually
targeted to test/understand one of the following:
Try to give a rational reason for your recommendation and be honest. You may give examples or real-life
scenarios wherein you’ve implemented them and obtained results. Examples always leave a good
impression. Your domain knowledge, goal clarity, communication skills and general awareness, to
summarize, are being assessed. Stay calm, be confident, and respond honestly. Even if you could not
frame your answer spontaneously, just pick few bits from the situation and try to be rational and ethical.

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 Interview Questions
Panel just want to see your thought process. Sometimes in the flow of answering, candidates start
countering their own points. Don’t do that. Be calm and patient. Be thoughtful, after all it’s a thinking
question.

Questions about Work-ex:

It is a grave mistake to not brush up about your work-ex. Don’t give random answers as I do this or that.
Be specific as what is your role in the organization. Interview panel may ask about real life questions
related to your work, so be prepared. Read about the organization's facts from reliable sources like the
official website. A good knowledge about the company during the interview reflects your seriousness and
involvement.

Why do you want to pursue an MBA

This is probably the most important question of the interview as the panel wants to know whether you
are focused to pursue an MBA or not. For candidates with work-ex, you should show that you have
reached a certain position and how MBA will shape your career and increase your competitiveness. Avoid
vague or crafty answers. Try to inculcate points such as how working in corporate environment garnered
your attention to that specific domain, and how you felt that pursuing management would give a healthy
boost to your career. For freshers, try to relate all possible experiences in schools, colleges where you
have managed any event or exhibited any leadership skills which attracted you to pursue MBA degree in a
particular domain.
This question serves as a make or break question, where you need to market yourself as to why you are fit
for an MBA now.

Current affairs
Current affairs is important, especially for freshers, as the panel might ask your opinion about some of the
current happenings in the country. If you read a newspaper daily, then it is good but if you don’t you can
follow Study IQ videos from YouTube and just glance at few of the important once at 2x speed. That is
more than enough. You need to be honest with the panel regarding the topic you know or don’t know, it is
advisable to not do a guesswork as the panel will know in and out about the topic asked. Focus only on
reading national, international and economic sections in a newspaper.

Do you have any questions?

You can answer yes or no. Totally depends upon you. Take this as an opportunity if you have any doubts
regarding the college or any specific program it offers. It shows that you have done your homework well.
Show the panel that you’ve gone the extra mile and taken the time to find out that bit more about the
college. It will go in your favor. It’s normal to experience a feeling of dread when you think that you don’t
have any killer questions to ask at the end. Just remember to let the interview panel know that you are
keen to know about the college.

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 Interview Questions
Miscellaneous points

• Before your interview begins, try conversing with other candidates, which will not only help in
increasing your confidence, but may also help you in brushing up certain topics or questions which
can be asked in the interview

• For freshers, questions will be asked about your respective streams, prepare your favorite subject and
least favorite subject and common questions asked in an interview regarding those subjects

• Be ready to accept your mistake, if you have committed during your interview, panel always welcome
a learning attitude

• Your entire presence need to be cordial and formal, avoid being over-expressive with the panel

• Stress interviews are rare, but you will immediately realize if you are facing such kind of interview or
not, keep your calm, display confidence even if you’re nervous and keep your answers short and crisp
in order to cater to every question being fired at you

• For people with work-ex, you get brownie points for using relevant experience in the questions asked,
which not only shows your presence of mind, but also exhibits how your work-ex has shaped up your
personality

• At the end of the interview if you feel it didn’t go well, don’t lose heart as you never know what
quality you displayed caught the eye of the panel, which they felt is important for an MBA aspirant

Compendium || DMS IIT Delhi 54

Compendium || DMS IIT Delhi 55