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MEI Notes ATME, Mysore

The document outlines the objectives, vision, mission and programs of the Department of Computer Science and Engineering at ATME College of Engineering. The objectives are to provide quality education, promote research, develop academic and professional alliances, and cultivate community relationships. The vision is to develop globally competent human resources and the mission is to keep pace with advancements in knowledge and help students compete at a global level. The document also lists the topics to be covered for the subject Management Entrepreneurship for IT Industry including introduction to management, entrepreneurship, project preparation, ERP, micro and small enterprises, and institutional support.

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0% found this document useful (0 votes)
249 views110 pages

MEI Notes ATME, Mysore

The document outlines the objectives, vision, mission and programs of the Department of Computer Science and Engineering at ATME College of Engineering. The objectives are to provide quality education, promote research, develop academic and professional alliances, and cultivate community relationships. The vision is to develop globally competent human resources and the mission is to keep pace with advancements in knowledge and help students compete at a global level. The document also lists the topics to be covered for the subject Management Entrepreneurship for IT Industry including introduction to management, entrepreneurship, project preparation, ERP, micro and small enterprises, and institutional support.

Uploaded by

study material
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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17CS51

ATME COLLEGE OF ENGINEERING


13th KM Stone, Bannur Road, Mysuru - 560 028

DEPARTMENT OF COMPUTER SCIENCE AND


ENGINEERING

(ACADEMIC YEAR 2019-20)

Notes of Lesson

SUBJECT: Management Entrepreneurship


for it Industry

SUB CODE: 17CS51SEMESTER: V

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INSTITUTIONAL MISSION AND VISION

Objectives
 To provide quality education and groom top-notch professionals, entrepreneurs
and leaders for different fields of engineering, technology and management.
 To open a Training-R & D-Design-Consultancy cell in each department,
gradually introduce doctoral and postdoctoral programs, encourage basic &
applied research in areas of social relevance, and develop the institute as a
center of excellence.
 To develop academic, professional and financial alliances with the industry as
well as the academia at national and transnational levels.
 To develop academic, professional and financial alliances with the industry as
well as the academia at national and transnational levels.
 To cultivate strong community relationships and involve the students and the
staff in local community service.
 To constantly enhance the value of the educational inputs with the participation
of students, faculty, parents and industry.

Vision
 Development of academically excellent, culturally vibrant, socially responsible
and globally competent human resources.

Mission
 To keep pace with advancements in knowledge and make the students
competitive and capable at the global level.
 To create an environment for the students to acquire the right physical,
intellectual, emotional and moral foundations and shine as torch bearers of
tomorrow's society.
 To strive to attain ever-higher benchmarks of educational excellence.

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Department of Computer Science & Engineering


Vision of the Department
Nurture graduates in Computer Science and Engineering to face challenges in
industry, education and society at global level.
Promote research that responds swiftly to the needs of the 21st century and to build a
Center of Excellence.

Mission of the Department

 To inculcate professional behavior, strong ethical values, innovative research


capabilities and leadership abilities in the young minds & to provide a teaching
environment that emphasizes depth, originality and critical thinking.
 Motivate students to put their thoughts and ideas adoptable by industry or to
pursue higher studies leading to research.

Program Educational Objectives (PEO'S):

1. Empower students with a strong basis in the mathematical, scientific and


engineering fundamentals to solve computational problems and to prepare them
for employment, higher learning and R&D.
2. Gain technical knowledge, skills and awareness of current technologies of
computer science engineering and to develop an ability to design and provide
novel engineering solutions for software/hardware problems through
entrepreneurial skills.
3. Exposure to emerging technologies and work in teams on interdisciplinary
projects with effective communication skills and leadership qualities.
4. Ability to function ethically and responsibly in a rapidly changing environment
by applying innovative ideas in the latest technology, to become effective
professionals in Computer Science to bear a life-long career in related areas.

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Program Specific Outcomes (PSOs)

1. Demonstrate understanding of the principles and working of the hardware and


software aspects of Embedded Systems.

2. Use professional Engineering practices, strategies and tactics for the


development, implementation and maintenance of software.

3. Provide effective and efficient real time solutions using acquired knowledge in
various domains.

1. Explain the principles of management, organization and entrepreneur.


2. Discuss on planning, staffing, ERP and their importance
Objectives 3. Infer the importance of intellectual property rights and relate the
institutional support

Topics Covered as per Syllabus


Module -1: Introduction - Meaning, nature and characteristics of management, scope and
Functional areas of management, goals of management, levels of management, brief overview of
evolution of management theories,. Planning- Nature, importance, types of plans, steps in
planning, Organizing- nature and purpose, types of Organization, Staffing- meaning, process of
recruitment and selection

Module -2:
Directing and controlling- meaning and nature of directing, leadership styles, motivation
Theories, Communication- Meaning and importance, Coordinationmeaning and importance,
Controlling- meaning, steps in controlling, methods of establishing control.
Module – 3:`
Entrepreneur – meaning of entrepreneur, characteristics of entrepreneurs, classification and types
of entrepreneurs, various stages in entrepreneurial process, role of entrepreneurs in economic
development, entrepreneurship in India and barriers to entrepreneurship. Identification of
business opportunities, market feasibility study, technical feasibility study, financial feasibility
study and social feasibility study.

Module-4:
Preparation of project and ERP - meaning of project, project identification, project selection,
project report, need and significance of project report, contents, formulation, guidelines by

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planning commission for project report, Enterprise Resource Planning: Meaning and Importance-
ERP and Functional areas of Management – Marketing / Sales- Supply Chain Management –
Finance and Accounting – Human Resources – Types of reports and methods of report
generation

Module-5:
Micro and Small Enterprises: Definition of micro and small enterprises, characteristics and
advantages of micro and small enterprises, steps in establishing micro and small enterprises,
Government of India indusial policy 2007 on micro and small enterprises, case study
(Microsoft), Case study(Captain G R Gopinath),case study (N R Narayana Murthy & Infosys),
Institutional support: MSME-DI, NSIC, SIDBI, KIADB, KSSIDC, TECSOK, KSFC, DIC and
District level single window agency, Introduction to IPR.
List of Text Books
1. Principles of Management -P. C. Tripathi, P. N. Reddy; Tata McGraw Hill, 4th / 6th Edition,
2010.
2.Dynamics of Entrepreneurial Development & Management -Vasant Desai Himalaya
Publishing House.
3. Entrepreneurship Development -Small Business Enterprises -Poornima M Charantimath
Pearson
Education – 2006.
4. Management and Entrepreneurship - Kanishka Bedi- Oxford University Press-2017
List of Reference Books
1. Management Fundamentals -Concepts, Application, Skill Development Robert Lusier –
Thomson.
2. Entrepreneurship Development -S S Khanka -S Chand & Co.
3. Management -Stephen Robbins -Pearson Education /PHI -17th Edition, 2003
List of URLs, Text Books, Notes, Multimedia Content, etc
1. https://www.tutorialspoint.com
2. http://www.cse.iitm.ac.in/~vplab/courses/comp_org.html
1. Define management, organization, entrepreneur, planning, staffing,
Course ERP and outline their importance in entrepreneurship
Outcomes 2. Utilize the resources available effectively through ERP
3. Make use of IPRs and institutional support in entrepreneurship
Internal Assessment Marks: 20 (3 Session Tests are conducted during the semester and
marks allotted based on average of best performances).

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MODULE 1

INTRODUCTION
1.0 Meaning

1.1 Nature and Characteristics of management

1.2 Scope and functional areas of management

1.3 Goals of management.

1.4 Levels of management

1.5 Brief overview of evolution of management theories

1.6 Planning- Nature

1.7 Importance

1.8 Types of plans

1.9 Steps in planning

1.10 Organizing- nature and purpose

1.11 Types of Organization

1.12 Staffing- meaning

1.13 Process of recruitment and selection


1.0 Meaning
“Cannot be defined or understood let alone be practiced except in terms of
performance dimensions And of the demands of performance” on it as said by Drucker in
1973.The results of a manager’s action should be enjoyed by the customer or the client as
the ultimate beneficiary. The customers may be internal or external to the organization.

1.1 Nature and Characteristics of management


1)All the managers carry out the managerial functions of planning, organizing, staffing
leading and controlling 2)management applies to any kind of organization 3)applies to
managers at all organizational levels 4)the aim of the managers is same create the surplus
5)managing is concerned with productivity, which implies effectiveness and efficiency.

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 Characteristics of management

Intangible (not measurable and cannot be seen) but its presence can be felt by efforts in
the production sales and revenues.

2)universal and it is applicable to all sizes and forms of organizations

3) a group activity and it involves getting things done with and through others

4) Is goal oriented and all actions of management are directed at achieving specific goals.
5)is science as well art and emerging now as a profession

6)is multidisciplinary and it has contributions from psychology, sociology, anthropology

1.2 Scope and functional areas of management


The management is a must for every organization which encompasses for profit as
well as nonprofit organizations, government as well as non government organizations,
and service as well as manufacturing organizations. It is in fact difficult to find an area of
activity where management is not applicable. Management is not only limited to business
enterprises for profits but also to the for non-profit organizations like educational
institutions, health care organizations, financial organizations, stores management for
keeping their cost of the operation at the optimal levels Government organizations like
municipal corporations, water supply departments, electricity boards in providing best
possible services to the public Non-government agencies like environmental agencies
benefit from management in achieving their social objectives in cost effective manner
Manufacturing organizations extensively use management to increase production to
enhance the quality of the products manufactured and similarly Service organizations
benefit from management in providing an exemplary service experience to the customers

Functional areas of management are:

1.2.1 Planning :
Planning is the functions that determines in advance what should be done .It is looking
ahead and preparing for the future.It is a process of deciding the business objectives and
chanting out the methods of attaining those objectives. Planning is a function which is
performed by managers at all levels top middle and supervisory.
1.2.2 Organizing :
To Organize a business is to provide it with everything useful to its functioning
:Personnel,Raw materials ,tools,capital.All this may be divided into two main sections,the
human organization and material organization.Once the managers have established
objectives and developed plans to achieve them,they can design and develop human
organization that will be able to carry out those plans successfully. Staffing is an example
for human organization.

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1.2.3 Directing:
After the plans have been made and the organization has been established and staffed ,the
next step is to move towards its defined objectives.This function can be called by various
names “leading”, “Directing”, “Motivating”, “actuating”. But what ever the name used to
identify it ,in carrying out this function the manager explains to his people what they have
to do and helps them to do it to the best of their ability.
1.2.4 Controlling :
The manager ensures that performance occurs in conformity with the plan adapted ,the
instructions issued and the principles established.This is the controlling function of the
management,it involves three elements.
a)Establishing standards of performance
b)Measuring current performance and comparing it against the established standards
c)Taking actions to correct any performance that does not meet these standards.
1.2.5 Innovating :
It is necessary for an organization to grow bigger.But it is necessary that it constantly
grows better.This makes innovation an important function of a manager.Innovation means
creating new ideas which is to improve the product,process and practice.

1.3 Goals of management.

The management is a must for every organization which encompasses for profit as
well as nonprofit organizations, government as well as non government organizations,
and service as well as manufacturing organizations.

1.4 Levels of Management

In any organization, there are three levels of management the first-line, middle
and top level managers.

 First-line management: is made up of foreman and white collared supervisors.


 Middle management: consists of vast and diversified group consisting plant
managers, personnel managers and department heads.
 Top management: consists of board chairman, the company presidents, and the
executive vice presidents.

1.4.1 Roles of a manager:


Interpersonal roles:
(i)Figure head: performs duties of ceremonial nature such as greeting the touring
dignitaries, attending the wedding of an employee etc. (ii)Leader: every manager must
motivate and encourage their employees, try to reconcile their individual needs with the
goals of the organization. (iii)Liaison: in this role, every manager must develop contacts
outside the vertical chain of command to collect information useful for the organization.
Informational roles:
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Monitor: must perpetually scan his environment for information interrogate his liaison
nad subordinates to get any solicited information useful for the organization.
Disseminator: manager passes the privileged information directly to the subordinates who
otherwise would not have access to it. Spokesman: may require to spend a part of the
time in representing the organization before various outside groups having some stake in
the organization such as government officials, labour unions, financial institutions.
Decisional roles:
(i)Entrepreneur: in this role the manager proactively looks out for innovation to improve
the organization by means of means creating new ideas, development of new products or
services or finding new uses for the old ones. (ii)Disturbance handler: must act like a
firefighter to seek solutions to various unanticipated problems (iii)Resource allocator:
must divide work and delegate authority among his subordinates. (iv)Negotiator: must
spend considerable time in negotiations. Example: the foreman negotiating with the
workers for the grievance problems.
1.4.2 Managerial skills:
The manager is required to posses three major skills: Conceptual skill which deals with
ideas, human relations skill which deals with people and technical skill which deals with
things.
(i) Conceptual skill: deals with the ability of manager to take a broad and farsighted view
of organization and its future, ability to think in abstract ability to analyze the forces
working in a particular situation.
(ii) Technical skill: are managers understanding of the nature of the job that people under
him have to perform. Refers to the person’s knowledge and proficiency in any type of
process or technique.
(iii) Human relations skill: is the ability to interact effectively with people at all levels and
the manager sufficient ability to
 to recognize the feelings and sentiments of others.
 to judge the possible reactions to and the outcomes of various courses of action he
amy undertake
 to examine his own concepts and values which may enable to more useful
attitudes and about himself. Skill mix of a manager with the change in his level:
o Top level: technical skill becomes less important
o Middle management: human relations skill become more important.
o Supervisory skill: technical skill becomes more important.
1.4.3 Management and administration:
Management Administration
1) Management involves doing which 1)Administration involves thinking
is a lower level function concerned which is a top level function which
with the execution and direction of centers around the determination of
policies and operations. No two plans, policies and objectives of a
separate personnel are required. Each business enterprise.
manager performs both activities and 2) Administration is a term used in the
spends part of his time in administering governance of non-business institutions
and part of his time managing. 2) (such as government, army etc). In

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Management is a generic term which administration, on-business institutions


includes administration Manager is the economic consequences of decisions are
term used in the business enterprises. In secondary
management, economic performance
becomes the chief dimension of
management.

1.4.4 Management as a science or art or a profession


Management as a science:
A discipline is called science if
1)the methods of the inquiry are systematic and empirical
2)if the information can be ordered and analyzed and
3)results are cumulative and communicable

1)Systematic means orderly and unbiased attempt to gain knowledge must be with the
personal or other prejudgment Inquiry being empirical means that it is not an armchair
speculation or priory approach.
2)the scientific information so collected as raw data must be finally ordered and analyzed
with the statistical tools which makes the results
3) Communicable and intelligible which also permits repletion of the study and the
results in the sense that what is discovered is added to which has been found before which
helps us to learn from past mistakes and obtain guides for the future.
To analyze whether management is a science: Management is not like the exact or
natural science such as physics, chemistry etc which are called exact sciences which
makes it possible to study any one of many of the factors affecting a phenomenon
individually by making the other factors inoperative for that moment of time by
examining the effects of heat on the density of air by holding other factors constant in the
laboratory for example but where as in management it is not possible to study in
management as it involves the study of amn and multiplicity of factors affecting him in
which involves the study of monitory incentives on workers’ productivity . Which means
that findings are not accurate and dependable as those of physical sciences and therefore,
a management can be put in the category of a behavioral science. Management are not
culture bound because even though the different cultures may give rise to different
management practices, techoques or theory concepts and principles reamin the same
which laed to the conclusion that manafement did not differ from country to country
which is true even in the field of natural sciences.
Management as Art.

As the science considers the why phenomena management as an art is


concerned with the understanding how a particular task can be accomplished which
involves art of getting things done through others in a dynamic and non repetitive fashion
and has to constantly analyze the existing situation, determine the objectives, seek the
alternatives, implement, coordinate, control and evaluate information and make decisions.
As the knowledge of management theory and principles is a valuable kit of the manager

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but it cannot replace his managerial skills and qualities which has to be applied and
practiced which makes us to consider manager as an art. Like the art of a musician or the
art of a painter who uses his own skill and does not copy the skills of others Thus we may
conclude that management involves both the elements those of an art and those of science
where in certain aspects of management make it as a science, certain others which
involves the application of skill makes it an art.

Management is a profession:

Characteristics of a profession:
1)existence of organized and systematic knowledge 2) formalized methods of acquiring
training and experience. 3)existence of an association with the professionalization as a
goal 4)existence of an ethical code to regulate the behavior of the members of the
profession 5) Charging of fees based on service.
Management:
1)Does not have fixed norms of managerial behavior 2)no uniform of code of conduct or
licensing of managers 3)entry of managerial jobs are not restricted to to individuals with a
special academic degree only and hence management cannot be called a profession.

1.5 Brief overview of evolution of management theories

Development of management thought Evolution of the management can be studies as


1)Early classical approaches represented by
a)scientific management b)administrative management and c)bureaucracy
2)Neoclassical approaches represented by
a)human relations movement and behavioral approach
3)Modern approaches represented by
a)quantitative approach b)systems approach and c)contingency approach

Classical approach
1.5.1 Scientific management:
Fredric Winslow(1856-1915) is considered as the father of Scientific management
Exerted a great influence on the development of the management through his experiment
and writings. Conducted as a series of experiments in three companies Midvale steel,
Simonds Rolling machine and Bethlehem Steel while serving as a chief engineer of
Midvale steel company for a period of 26 years.

1.5.2 Taylors contributions under scientific management.


1) Time and motion study: started time and motion study under which each motion of job
was timed out with the help of stop watch of doing job was found and shorter and fewer
motions were developed and amongst these the best job was found which replaced the old
rule of thumb knowledge of the workman.

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2) Differential payment: new payment plan called the differential piece work was
introduced which was linked incentives with production. under this plan a worker
received low piece rate if he produced the standard number of pieces and high rate if he
surpassed the standard which would motivate the workers to increase production
3) Drastic reorganization and supervision: introduced two new concepts separation of
planning and doing and functional foremanship. Taylor suggested that the work should be
planned by the foreman and not by the worker and there should be as foreman as there are
special functions involved in doing a job and each of these foreman should give orders to
the worker on his specialty.
4) Scientific recruitment and training: Taylor emphasized the need for scientific selection
and development of the worker. He says that management should develop and train every
worker to bring out his best facilities and enable him to do a higher, more interesting and
more profitable class of work than he has done in past.
5) Intimate and friendly cooperation between the management and the workers: Taylor
argued that both the management and the workers both should try to increase production
rather than quarrel over profits which would increase the profits to such an extent that
labour and management would no longer have to compete for them and should sow
common interest in increasing productivity.

Contributions and limitations of scientific management:


Contributions:
1) Time and motion studies have made us aware that the tools and physical movements
involved in a task can be made more efficient and rationale.
(2) Scientific selection of workers has made us recognize that without ability and training
a person cannot be expected to do job properly.
(3) The scientific management have to work design encouraged the mangers to do one
best way of doing the job.

Limitations:
(1)Taylors belief that economic incentives are strong enough to motivate workers for
increased production proved wrong as there are other needs such as security, social needs,
or egoistic needs rather than financial needs
(2) Taylors time and motion study is not accepted as entirely scientific as there is no best
way of doing the same job by two individuals as they may not have same rhythm,
attention and learning speed
(3) Separation of planning and doing the greater specialization inherent in the system
tends to reduce the need for skill and greater monotony of work.
(4)Advances in methods and better tools and machines eliminated some workers who
found it difficult to get other jobs and caused resentment among them.

1.5.3 Fayol’s Administrative management:

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Henry Fayol is considered as the father of administrative management(1841-1925) Where


the focus is on development of broad administrative principles. Was a French mining
engineer turned a leading industrialist and a successful manager. Provided a broad
analytical framework of the process of administration.
Fayol’s 14 principles of management as general guides to the management process and
management practice.

1)Division of work: In the management process produces more and better work with the
same effort as the various functions of management like planning, organizing, directing
and controlling cannot be performed efficiently by a single proprietor or by a group of
directors which must be entrusted to specialists in related fields.

2) Authority and responsibility: Implies that the manager should have the right to give
orders and power to exact obedience and the manager also may exercise formal authority
and also personal power.

Formal authority is derived from the official position and personal power is the result of
Intelligence, experience, moral worth, ability to lead, past service etc. Responsibility is
closely related to authority and an individual who is willing to exercise authority must
also be prepared to bear responsibility to perforators etc. the work in the manner desired.

3) Discipline: Absolutely essential for smooth running of the business and discipline
means the obedience of authority, observance of rules of rules of service and norms of
performance, respect for agreements, sincere efforts of completing the given job, respect
for superiors. Best means of maintaining discipline are (a)good supervisors at levels
(b)clear and fair agreements between the employees and the Employer.

4) Unity of command: This principle requires that each employee should receive
instructions about a particular work from one superior only if reported to more than one
superior would result in confusion and conflict of instructions.

5) Unity of direction: Means that there should be complete identity between individual
and organizational goals on the one hand and between the departmental goals on the other
hand and both should not pull in different directions.

6) Subordination of individual interest to general interest: In a business concern, an


individual is always interested in maximizing his own satisfaction through more money,
recognition, status etc. which is against the general interest which lies in maximizing
production and hence there is a need to subordinate the individual interest to the general
interest.

7) Remuneration: Remuneration paid to the personnel of the firm should be fair and
should be based on general business conditions such as cost of living, productivity of the

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concerned employees and the capacity of the firm to pay and the fair remuneration
increases workers efficiency and morale and fosters good relations between them and
management.

8) Centralization: The degree of centralization or decentralization of authority must be


decided on the basis of nature of the circumstances, size of the undertaking, the type of
activities and the nature of organizational structure.
9) Scalar chain: Scalar chain means the hierarchy of authority from the highest executive
to the lowest ones for the purpose of communication and states superior-subordinate
relationship and the authority of superiors in relation to subordinates at various levels and
the orders or the communications should pass through the proper channels of authority
along the scalar chain.
10) Order: Putting things in order needs effort and the management should obtain
orderliness in work through suitable organization of men and materials and the principle
of right place for everything and for every man should be observed by the management
which requires the need for scientific selection of competent personnel, correct
assignment of duties to personnel and good organization.

11) Equity: Means equality of fair treatment which results from a combination of
kindness and justice and employees expect management to be equally just to everybody
which requires managers to be free from all prejudices, personal likes or dislikes.

12)stability of tenure of personnel: Is necessary to motivate workers to do more and better


work and they should be assured security of job by management which if not provided
they have fear of insecurity of job, their morale will be low and they cannot give more
and better work.

13) Initiative: Means freedom to think out and execute a plan which when provided to
the employees leads to innovation which is the landmark of technological progress.
Initiative is one of the keenest satisfactions for an intelligent man to experience and hence
mangers are required to give sufficient scope to show their initiative.

14) Esprit de corps: Means team spirit which should be created b y the management
among the employees and is possible only when all the employees pull together as a team
and there is scope for realizing the objectives of the concern and there should be harmony
and unity among the staff which is a great source of strength to the undertaking which
could be achieved through avoiding divide and rule motto and use of verbal
communication and written communication to remove misunderstandings.
Contributions and limitations of administrative management:
Contributions:
1) Fayols principles met with wide spread acceptance among writers on management and
among managers and managers themselves.

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2) Drawing inspiration from Fayol a new school of thought known as the Management
Process School came into existence.
Limitations:
1)Fayols principle of specialization lead to the following dysfunctional consequences:
(a) Leads to the formation of small work groups with norms and goals with each
individual carrying out his own assigned part without bothering about the overall purpose
of the organization as a whole.
(b) Results in the dissatisfaction amongst workers as it does not provide them the
opportunity to use all their abilities.
(c) Results in the dissatisfaction amongst workers as it does not provide them the
opportunity to use all their abilities.
2) one of the findings un Fayols principles is that there is nothing in Fayols writings to
indicate which is the proper one to apply like for example the principle of unity of
command and the principle of unity of specialization or division of labour cannot be
followed simultaneously. In this way many of these principles are full of contradictions
and dilemmas.
3) Fayols principles are based on a few case studies only and have not been tested
empirically and whenever tested have fallen like autumn leaves.
4) These principles are often stated as unconditional statements of what should be done in
all circumstances when what is needed are conditional principles of management.
5.the principles of Fayol such as the principles specialization, chain of command, unity
of direction and span of control result in the mechanistic organizational structures which
are insensitive to employees Social and psychological needs.
6.these principles are based on the assumption that the organization are closed systems
but in reality organizations are open systems and hence the rigid structures so created do
not work well under stable conditions.
1.5.4 Bureaucracy

German scientist Max Weber is considered to be the father of Bureaucracy. Made


a study on various business and government organizations and distinguished three types
of administration amongst them. Leader oriented tradition oriented and bureaucratic.

(i) Leader oriented: Administration is one in which there is no delegation of management


functions and all employees serve as loyal subjects of a leader.

(ii) Tradition oriented: all managerial positions are handed down from generation to
generation and who are you rather than what you can do becomes the primary function.

(iii) Bureaucratic oriented: is based on the persons demonstrated ability to hold the
position and no person can claim particular position either because of his loyalty to the
leader or because the position has been traditionally held by members of his family and
the people earn positions because they are presumed to be best capable of filling them.

Important features of Bureaucratic Administration:

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1)insistence on following standard rules: There should not governed by the personnel
preferences of the employer but it should be governed by the standard rules which
provides equality in the treatment of subordinates and continuity and predictability of
action.
2) Systematic division of work: increases production by improving efficiency and saving
time in changing over from one job to another.
3) Principle of hierarchy followed: each lower officer is under the control and supervision
of a higher one.
4) Not necessary for the individual to have knowledge of and training in the application
of rules: These form the basis on which legitimacy is granted to his authority.
5) Administrative acts, decisions and rules are recorded in writing: makes the
organization independent of people besides making peoples understanding more accurate.
6) There is rational personnel administration: people are selected on the basis of their
credentials and merit and are paid according to their option in their hierarchy, promotions
are made systematically and there is on winning peoples loyalty and commitment.

Contributions and limitations of bureaucracy:


Contributions
Bureaucracy can be viewed as the logical extension of management when it becomes
impossible for one person to fulfill all managerial functions which has enabled most
modern large scale organizations which require functionally specialized staff to train and
control the people with heterogeneous backgrounds and to delegate specific
responsibilities and functions to them.
Limitations:
Has lead to important dysfunctional consequences of bureaucracy as follows:
1) Over conformity of rules: Employees observe stick to rule policy because they follow
stick to the rule policy because they fear of being penalized of the violation of these rules
and therefore follow the letter of law without going into its spirit.

Example: a doctor in the emergency spends precious time in filling various forms before
helping the accident victim.
2)buck passing: In situations where there are no rules, employees are afraid of taking
decisions independently and may be punished for wrong decisions and therefore either
shift decisions to there or postpone them which results in the increase of office work and
leads to Parkinson’s disease.
3) Categorization of queries: Probable queries coming from outside are generally
classified in advance into a few broad categories and answer for each category are
prepared in advance. On receiving the query the employees job is to simply determine its
category and tick the reply applicable to that category
4) Displacement of goals: Very common phenomena in bureaucratic organization and
takes place when an organization substitutes for its legitimate goals some other goal
which it was not created ,for which resources were not allocated to it and which it is not
known to serve. Can occur in several ways:

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(a) occurs when the leaders try to devote to preserve the organization itself rather than its
intial purpose and when several interest groups try to use the organizational goals to serve
their own golas.
(b) occurs when the employees try to internalize the rules and the goals are totally
forgotten which is called professional automation. Example: praising the librarian for neat
and orderly look of the library and not for increase in the number of book borrowers.
Praising the factory worker for his regular attendance and not for the quality of his
performance.
(c) Secondary goals of an organization subordinating its primary goals so that latter are
not served effectively. Example: university initiating certain social or extra-curricular
activities to attract students to classes and universities consuming greater time and
resources in conducting the same rather than teaching a course.
(d)sectional interests developing among the heads of sub-units of the organization which
may lead to forget the organizational goals.
5)No right of appeal: The clients the bureaucratic organization feel dissatisfied because
they have no right of appeal
6) Neglect of informal groups: Forms informal groups which play an important role in the
organization which has lead to the development of group dynamics which are ignored by
the bureaucratic organization.
7)Rigid structure: precise description of roles and over conformity of rules make
bureaucratic structures rigid which work well in stable environments but do not work well
in today’s organizational flexible structures which require constant mentoring, collection
of information and changing of job descriptions and roles of the employees.
8) Inability to satisfy the needs of the mature individuals: A mature individual wants
independence, initiative, self-control, opportunity to use his all skills and information to
plan his future which is not provided as the hierarchy and control features work against
this organization.

Non Classical Approaches


Are called neoclassical because they do not reject the classical concepts but only try
to refine them.

1.5.5 The human relations movement:


Emerged to achieve complete production efficiency and workplace harmony Was
developed in helping managers to deal more effectively with the people side of the their
organizations. Came into existence due hawthorns experiments conducted by Elton Mayo
and his colleagues at the western electric company’s plant in Cicero, Illinois from 1927 to
1932 which employed 29,000 workers to manufacture telephone parts and equipment.
Elton Mayo’s experiments can be divided into following four parts:
1)Illumination experiments
2)relay assembly test room
3)interviewing program
4)bank wiring test room

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Illumination Experiments:
Was considered to be the first phase of study Productivity was correlated with
illumination, tested, experiments were done on a group of workers and the productivity
was measured at various levels of illumination for the first time and two groups were
formed and set up in different buildings for the second time this time one group called the
control group worked under the constant level of illumination and the other group called
the test group called worked changing levels of illumination. Results: When post-
productivity of two groups were compared, it was found that illumination affected
production only marginally.
Relay assembly test room:
Was considered to be the second phase of study In this phase, the object of study being
broadened, along with the impact of illumination on production, other factors such as the
length of the working day, frequency and duration of rest pauses and other physical
conditions were taken into consideration. A group of six women workers, who were
friendly with each other, were selected for the experiment, were told about the
experiment, were made to work in a informal atmosphere with the supervisor researcher
in a separate room who acted as a friend, philosopher and guide. Several variations were
made in the working conditions during the study, to find the most ideal combination for
production. Results: the researchers found that the production group had no realtion with
the working conditins which went on increasing and stabilized at a high level even when
all the improvements were taken away and the poor pre-test conditions were reintroduced
and something else was responsible for this. (a)feeling of importance among girls as
result of participation in the research and the attention they got (b)warm informality
,tension-free interpersonal and social relations amongst small groups and relative freedom
from strict supervision and rules lead to these results (c)high group cohesion among girls
3.
Interviewing programme
The knowledge about the informal group processes which were accidentally acquired in
the second phase made researchers design the third phase. They wanted to know about the
basic factors responsible for human behavior at work Method used to know the basic
factors: More than 20000 workers were interviewed. Questions were asked relating to the
type of supervision, working conditions, living conditions and so on.

Indirect questions were asked to the workers and the workers were free to talk about their
favorite topics related to their work environment. Results: the study revealed that the
workers social relations inside the organization had an unmistakable influence on their
attitudes and behavior and about the all-pervasive nature of informal groups on their
culture and the production norms which the members were forced to obey.
Bank wiring observation room: Can be considered as the fourth phases of
experimentation.
Involved in-depth observation of 14 men making terminal banks of telephone wiring
assemblies, to determine banks of telephone wiring assemblies, to determine the effect of
informal group norms and formal economic incentives on productivity.

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 Results
Study revealed that group evolved its own production norms for each individual worker
which were much lower than the those set by the management and the workers would
produce that much and no more thereby defeating the incentive system This artificial
restriction of production saved workers from a possible cut in their piece rates and
protected weaker and slower workers from being reprimanded or thrown out of jobs.
Class of workers-production rate Called foolish-was more than the group norm were
isolated, harasses or punished by the group in the several ways and were called rate
busters. Those who were too slow were nicknamed as chisellers. Those who complained
to the supervisor against their coworkers were called squealers.
 Conclusion
The experience of the Hawthorne experiments had a profound impact on the luminaries of
the human relations movement. Came to realize the important role played by informal
groups in the working of an organization.

1.5.6 Contributions and limitations of the human relations movement:


Contributions: The contributions can be summarized as follows:
1) a business organization is not merely a techno-economic system but is also a social
system and hence it is important to provide social satisfaction to the workers to produce
goods.
2) There is no correlation between improved working conditions and high production.
3) A workers production norm is set and enforced by his group and not by the time and
motion study done by the industrial engineer and those deviating from the group were
penalized by the coworkers.
4) Worker does not work for money only and also nonfinancial awards affect his
behavior and limit the economic incentive plan.
5) Employee centered, democratic and participative style of supervisory leadership is
more effective than task centered leadership.
6) The informal group and not the individual is the dominant unit of analysis in
organizations.

Limitations:
1) is swing in the opposite direction and is as much s incomplete as the scientific
management and administrative management. The human relations writers saw only the
human variable as critical factor

and ignored other variables.


2) The implicit belief that every organization can be turned down into one big happy
family which could satisfy everybody was not correct as every organization is made up of
a number of diverse social groups with incompatible values and interests.
3) This approach emphasizes the importance of symbolic rewards and underplays the role
of material rewards.

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4)Approach provides an unrealistic picture about informal groups by describing them as


major source of satisfaction for industrial workers and it is assumed that many workers do
not come to the factory to seek affiliation and affection.
5) Approach is in fact production oriented and not employee oriented as it claims to be.
Many of its techniques (running canteens, social groups) trick workers into false sense of
happiness.
6)the leisurely process of decision making of this approach cannot work during
emergency,
7) Makes un unrealistic demand on the superior and wants him to give up is desire.
8) Approach is based on wrong assumption that satisfied workers are more productive
workers because attempts to increase output by improving working conditions and the
human relations skills of a manager generally in the dramatic productivity increases that
are expected.
1.5.7 Behavioural approach:
This version is an improved and a more mature version of the human relation approach
management. Douglas McGregor, Abraham Maslow, Kurt Levin, Chester Bernard, Mary
Parker Follett, George Humans, Renis Likert, Chris Argyris, and warren Bennis are some
of the foremost behavioral scientists who made significant contributions to the
development of the behavioral approach to management. These scientists were rigorously
trained and used more sophisticated research methods. These people came to be regarded
as the behavioral scientists rather than the members of the human relations school. The
findings of these people have enormously helped in understanding the organizational
behavior. These do not believe in the highly classical organization structures which were
built around the traditional concepts of hierarchical authority, unity of command, line and
staff relationships and narrow spans of control. They believe that lot of domination takes
place by the managers which causes subordinates to become passive and dependent on
them. These scientists prefer more flexible organization structures and jobs built around
the capabilities and aptitudes of average employees. Recognizes the practical and
situational constraints on human rationality for making optimal decisions which in
practice is done in a suboptimal manner. Attach more weight age to participative and
group decision making as the business are so complex that it is not fair nor feasible to
make individuals responsible for solving them. Underline the desirability of humanizing
the administration of the control process and encouraging the process of self-direction and
control instead of imposed control. Also favor participation in the establishment,
measurement and evaluation of standards of performance, prpmt information feedback to
whose performance is off the mark and for positive and reformative measure instead of
punitive measures. Consider organizations as group of individuals with certain goals for
both big and small groups about the individuals forming groups, joining groups, group
size, structure and process and group cohesiveness. Have made extensive studies on
leadership which they believed democratic style desirable and the autocratic style
appropriate in some situations.

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Believed that the realistic model of human motivation as complex because people react
differently for the same situation or react the same way to different situations and no two
people are exactly alike.

Modern approaches(Three of them)


1) Quantitative
2) Systems approach
3) Contingency approach
1.5.8 Quantitative approach:
Called the management science approach
Gained momentum during the second world war when UK and USA were desperately
trying to seek the solutions to a number of few, complex problems in warfare.
Interdisciplinary group of scientists were engaged for this purpose were known as
operations research(OR) teams because their work consisted of analyzing operations and
carrying out applied scientific research which were the same which were used for solving
problems in the industry. solving problems in the industry using OR techniques
1) A mixed team of specialists from relevant disciplines is called to analyze he problem
and to propose a course of action to the management. 2) The team constructs the a
mathematical model t simulate the problem which in symbolic terms all relevant factors
that bear the problem, and the interrelationship amongst them
3) By the changing the values of the variables in the model generally with a computer and
they team can determine the effect of each change. Thus we can conclude that the focus is
on quantitative approach is based on decision making with quantitative tools and
techniques for making objectively rational decisions. 2) Approach facilitates disciplined
thinking, precision and perfection by expressing relationships in quantitative terms which
has been widely used in planning and control activities where problems can be precisely
indentified and defined in quantitative terms.

1.5.9 Systems approach


Provides integrated approach to management problems and the key concepts of systems
approach are
1)a system is a set of independent parts:
 Which together works as a single unit and performs some function. Similarly an
organization can also be considered to be composed of four independent parts namely
task, structure, people and technology.
 Structure subsystem: refers to the formal division of authority and responsibility,
communication channels and workflow.
 People subsystem: refers to the employees with their motives, attitudes and values
and the informal organization.
 Technology subsystem: refers to the tools and equipment as well as techniques which
are used by the organization to perform the task.
2)concept of considering the system as a whole: Means that no part of the system can
be analyzed and understood apart from the whole system and conversely, the whole

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system cannot be accurately perceived without understanding all its parts. Each part bears
a relation of interdependence to every other part which rather than dealing separately with
the various parts of the organization as a whole. The above concept facilitates more
effective diagnosis of complex situations and increases the likelihood of appropriate
managerial functions
3)a system can be either open or closed: Open system is one which interacts with its
environment and closed system is one which is independent of the environment. All
living systems are actually dependent on the external environment for information,
material and energy. They enter the system from the environment as inputs and leave the
system as outputs and therefore they are rightly conceived as open systems. Inputs of a
business organization: raw materials, power, finance, equipment, human effort,
technology, information about market, new products, government policies and the
changes these inputs into output of goods, services and satisfaction and the transformation
process is known as throughput. The transformation process can be categorized as
follows: Physical(as in manufacturing) Location(as in transportation Exchange(as in
retailing) Storage(as in warehousing) Physiological(as in telecommunications) The output
of a system is always more than the combined output of its parts which is called synergy.
Which in organizational terms means that as separate departments within organization
cooperate and interact they become more productive if they acted in isolation. One
important mechanism of a system which enables to exercise control over its operations
is feedback as shown in the figure.
4)Every system has a boundary: boundaries can be clearly observed and therefore more
precisely defined in the case of physical and bilological systems than in case of social
systems. For example: we can define the physical boundaries of the human body or a plot
of land very precisely but it is difficult to define the boundary of an orgainisation and
they do not have clearly observable boundaries.
Concept of a boundary:
1) Helps a system in determining whether it ends and the other system begins.
2) Divides those elements that are a part of a system from those that are a part of its
environment
3) Enables a system to protect its transformation process from the vagaries of its
environment. Contributions of systems approach: A problem here is studied both at the
level of the subsystem (micro level) and the total system (macro level). Application of
this approach results in the requirement that executives in addition to having the skills in
their own functional areas should have enough knowledge of other areas also who should
be generalists also. Contingency approach: Is the second approach which tries to
integrate the various schools of management thought. There is no best way of doing
things under all conditions Methods and techniques are highly effective in one situation
may not work in other situations and results differ because the situations differ.
The task of a manger is to try to identify which technique will in a particular best
contribute to the attainment of the management goals and managers have therefore to
select the situational sensitivity and practical selectivity. Contingency views are
applicable in designing organizational structure, in deciding the degree of

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decentralization,in planning information decision systems,in motivational and leadership


approaches in establishing communication nad control systems ,in re shoifsolving
conflicts and managing change ,in establishing and control systems and in several areas of
organization and management.

1.6 Planning Nature

 Planning :
Planning is the beginning of the process management
A manager must plan before he can possibly organize, staff, direct or control. Because
planning sets all other functions into action, it can be seen as the most basic function of
management. Without planning other functions become mere activity.

Planning is an intellectual process which requires manager to think before acting. It is


thinking in advance. it is planning that managers of organization decide what is to be
done, when it is to be done, how it is to be done, and how has to do it. Decision making
is an integral part of planning. It is the process of choosing among alternatives.
Obviously, decision making will occur at many points in the planning process. Planning
is a continuous process like a navigator constantly checks where his ship in going in the
vast ocean, a manger must constantly watch his plans must constantly monitor the
conditions, both within and outside the organization to determine if changes are required
in his plans.

 Corollary
A plan must be flexible. By flexibility of a plan is mean its ability to change direction to
adapt to changing situations without undue cost. It needs to possess a built in flexibility in
at least major areas technology, market, finance, personal and organization. Flexibility in
technology means the mechanical ability of a company to change and vary its product-
mix according to changing needs of its customers. Flexibility in market means the
company’s ability to obtain additional funds on favorable terms whenever there is need
for them. Flexibility in personnel means the company’s ability o shift individuals from
one job to another. Flexibility in organization means the company’s ability t shift
individuals from one job to another. Flexibility in organization means the company’s
ability to change the organization structure. Flexibility is possible only within the limits.
it is almost invariably true that it involves extra cost. Sometimes it may e so expensive
that it benefits may not be worth the cost. People may develop patterns of the thought that
are resistant to change. Sometimes people may develop patterns f thoughts that are
resistant to change. Sometimes already established and procedures may become so deeply
ingrained in the organization that changing them may become difficult. In most cases
irretrievable costs already incurred in fixed assets, training, advertising may block
flexibility. Planning is all pervasive function. In other words, planning is important to all
managers regardless of their level in the organization. There are however some
differences in involvement by managers at different levels. One major difference

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concerns the time period covered. Top level managers are generally months to five years
later, or even after that. Lower level managers are more concerned with planning
activities for the day, week or month .first line supervisors, for example plan the work
activities for their people for the day. They are not responsible for predicting sales levels
and ordering materials to produce Products six months in the future. A second major
difference concerns the time spent on planning. Top managers generally spend more time
on planning. They are concerned with establishing objectives And developing plans to
meet those o bjectives. Lower level managers are more involved in executing these plans.

1.7 Importance of planning

1.7.1 Minimizes risk and uncertainty


By providing a more rational, fact-based procedure for making decisions, planning allows
managers and organizations to minimize risk and uncertainty. Planning does not deal with
future decisions, but in futurity of present decisions.

If a manager does not make any provision for the replacement of plant and machinery, the
problems he will have to face after ten years can well be imagined. The manager has a
feeling of being in control if he has anticipated some of the possible consequences and
has planned for them. It is like going out with an umbrella in cloudy weather. It is
through planning that the manger relates the uncertainties and possibilities of tomorrow to
the facts of today and yesterday.

1.7.2 Leads to success:


Planning does not guarantee success but studies have shown that, often things being
equal, companies which plan not only outperform the non-planners but also their past
results. This may be because when a businessman’s actions are not random arising as
mere reaction to the market place Planning leads to success by doing beyond mere
adaption to market fluctuations. With the help of a sound plan, management can act
proactively and not simply react. It involves to attempt to shape the environment on the
belief that business is not just the creation of environment but its creator as well.

1.7.3 Focus attention on the organizations goals:


Planning helps the manger to focus attention on the organizations goals and activities.
This makes it easier to apply and coordinate the resources of the organization more
economically. The whole organization is forced to embrace identical goals and
collaborate in achieving them. It enables the manager to chalk out in advance an orderly
sequence of steps for the realization of organizations goals and to avoid needless
overlapping of activities.

1.7.4 Facilitates control: In planning, the manager sets goals and develops plans and to
accomplish these goals. These goals and plans then become standards against which

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performance can be measured. The function of control is to ensure that activities conform
to the plans. Thus control can be exercised only if there are plans.
1.7.5 Trains executives: Planning is also an excellent means for training executives.
They become involved in the activities of the organization and the plans arouse their
interest in the multifarious aspects of planning.

Forms of planning:

Planning can take many forms and styles in practice. Planning can be
comprehensive or limited in scope. There are organizations that plan to the last
detail. Others rest content, simply broad targets for the next financial period.
Planning may be done by an army of experts using sophisticated forecasting
techniques. Or it may be done in a seat of the pants manner, by a number of
executives, sharing their judgments over a cup of coffee. Planning may begin at
the top with top executives deciding on targets and passing them down for
implementation or it may begin at the bottom with the lowest sections formulating
their targets and sending them up for evaluation and coordination. Planning may
be done participitavely with many members of the organization chipping in with
their ideas and judgments or it may done in the elitist manner by a few executives
or technocrats.

Thus there are many forms and styles of planning, and planning practices are
likely to vary from organization to organization. One useful way of classifying
them is to distinguish between strategic planning and tactical planning.

About Strategic planning involves deciding what the major goals of the entire
organization will be and what policies will guide the organization in its pursuit of
these goals and depends on the data collecteif the d outside the organization such
as market analysis, estimates of costs, technological developments and so on and
if the data being mostly imprecise make strategic planning less certain.

About Tactical planning involves deciding specifically how the resources of the
organization will be used to help the organization achieve these strategic goals. for
example if the organization has prepared a ten-year strategic plan which envisages
a profit rate of 25% on capital employed in the tenth year, it also necessary to
prepare a more detailed tactical plan for the next year, with a specific target of
10% on the capital employed.

Distinction between strategic planning and tactical planning.


Strategic planning Tactical planning
1)decides the major goals and policies 1)decides the detail use of resources for
of allocation of resources to achieve achieving these goals
these goals 2)is done at lower levels of
2) Done at higher levels of management

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management. Middle managers 3)it is short term


sometimes not even aware that strategic 4)is generally based on the past
planning being considered. performance of the organization and is
3)it is long term less uncertainly
4) Is generally based on long term 5)is more detailed because it is
forecasts about technology, political involved with the day-to-day operations
environment and is more uncertain. of the organization
5)is less detailed because it is not
involved with the day to day operations
of the organization

1.8 Types of plans:

 Single use plans and standing plans.


Single use plans are developed to achieve a specific end and when the end is reached the
plan is dissolved. The two major types of plans are single use plans are programmers and
budgets.
Standing plans on the other hand are designed for situations that recur often to justify
the standardized approach. For example, it would be inefficient for a bnak to develop a
single use plan for processing a loan application for each new client. instead it uses one
standing plan that anticipates in advance whether to approve or turn down the request
based on the information furnished, credit rating, etc. the major types of plans are
policies, procedures methods and rules.

i)Objectives
ii)Strategies
1.8.1 Objectives:
Are the goals of the organization which the management wishes the organization to
achieve. These are the end points or pole-star towards which all business activities like
organizing, staffing, directing and controlling are directed. Only after having defined
these end points the can determine the kind of organization the kind of personnel and
their qualifications, the kind of motivation, supervision and direction and the control
techniques which he must employ to reach these points. Objectives are the specific targets
to be reached by an organization. They are the translation of the organization’s mission
into concrete terms against which the results can be measured. Example:1)university
decision to admit a certain number of students or the hospitals decision to admit a certain
number of indoor patients.
 Characteristics of the objectives
1)Objectives are multiple in number : Implies that every business enterprise has a
package of objectives set out in various key areas. There are eight key areas in which
objectives of performance and results are set which are (i)market standing (ii)innovation
(iii)productivity(iv)physical and financial resources(v)profitability (vi)Manager

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performance and development (vii)worker performance(viii)attitude and public


responsibility.
2)objectives are either tangible or intangible: for some objectives such as in the areas
of market standing, productivity, and physical and financial resources) there are
quantifiable values available. Other areas of objectives are not readily quantifiable and
are intangible, such as manager’s performance, workers morale, public responsibility etc.
3)objectives have priority: Implies that at one particular given point of time, the
accomplishment of one objective is relatively more important than others. Priority of
goals also says something about the relative importance of certain goals regardless of
time. For example, the survival of organization is necessary condition for the realization
of other goals.
4)objectives are generally arranged in a hierarchy: This means that we have corporate
objectives of the total enterprise at the top, followed by divisional or departmental
objectives, then each section and finally individual objectives. Objectives at all levels
serve as an end and as a means.
5)objectives sometimes clash with each other: The process of breaking down the
enterprise into units requires that objectives be assigned to each unit. Each unit is given
the responsibility of attaining an assigned objective. The process of allocating objectives
among various units creates the problem of potential goal conflict and sub optimization
on, where in achieving the goals of one unit may put in risk of achieving the goals of the
other.
Requirements of sound objectives:
(i)Objectives must be clear and acceptable: The objectives must be clear and
understandable amongst people which could be achieved by unambiguous
communication, should be compatible with their individual goals.
(ii)objectives must support one another: Objectives could interlock or interfere with
one another which require the need for coordination and balancing the activities of the
entire organization, otherwise its members may pursue different paths making it difficult
for the manager to achieve the company’s overall objectives.
(iii)objectives must be precise and measurable: An objective must be spelled out in
precise, measurable terms the reasons for which being (1) The more precise and
measurable the goal, the easier it is to decide the way of achieving it. (2) Precise and
measurable goals are better motivators of people than general goals. (3) Precise and
general goals make it easier for lower level managers to develop their own plans for
actually achieving these goals. (4) It is easier for managers to ascertain whether they are
succeeding or failing if their goals are precise and measurable.
(iv) objectives should always remain valid: Means that the manager should constantly
review, reassess and adjust them according to the changed conditions.

 Advantages of objectives: The following are the benefits of objectives


(i) They provide a basis for planning and for developing other type of palns such as
policies,budgets and procedures.

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(ii) They act as motivators for individuals and departments of an enterprise imbuing their
activities with a sense of purpose.ult in undesirable com

(iii) They eliminate haphazard action which may result in undesirable consequences.
(iv) Facilitate coordinated behavior of various groups which otherwise may pull in
different directions.
(v) Function as a basis for managerial control by serving as standards against which
actual performance can be measured.
(vi)They facilitate better management of the enterprise by providing a basis for leading,
guiding, directing and controlling the activities of people of various departments.
(vii)Lessen misunderstanding and other conflict and facilitate communication among
people by minimizing jurisdictional disputes.
(viii) Provide legitimacy to organizations activities.
1.8.2 Strategies
A corporate strategy is a plan which takes these factors into account and provides optimal
match between the firm and the environment. Two important activities are involved in
strategy formulation
(i)environmental appraisal (ii)corporate appraisal.
(i) environmental appraisal:
(1)Political and legal factors: An analysis of the relevant environment results in the
identification of threats and opportunities. Key environment factors which need to b e
studied are (a)stability of the government and its political philosophy. (b)taxation and
industrial licensing laws (c)monitory and fiscal policies (d) Restrictions on capital
movement, repatriation of capital, state trading etc.
(2)economic factors (a)level of economic development and distribution of income (b)
Trend in prices, exchange rates, balance of payments. (c) Supply of labour, raw, material,
capital etc.
(3)competitive factors: (a)identification of principle competitors (b)analysis of their
performance and programmers in major areas (c)antimonopoly laws and rules of
competition (d)protection of patents, trademarks, brand names and other industrial
property rights
(4)social and cultural factors: (a)literacy levels of population (b)religious and social
characteristics (c)extent and rate urbanization (d)rate of social change
(ii)Corporate appraisal: Involves the analysis of company’s strengths and weaknesses. A
company’s strength may lie in outstanding leadership, excellent product design, low-cost
manufacturing skill, efficient distribution, efficient customer service, personal
relationship with customers, efficient transportation and logistics, effective sales
promotion, high turnover of inventories and capital etc. The company must plan to exploit
these strengths to the maximum. Similarly it may suffer from a number of weaknesses.

Standing plans:

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1.8.3 Policies: A policy is a general guideline for decision making which sets up
boundaries around decisions including those that cannot be made and shutting out those
that cannot. A policy can be considered as a verbal, written or implied overall guide
setting up boundaries that supply the general limits and the direction in which ,managerial
action takes place Policies suggest how to do the work. They do not dictate terms to
subordinates and provide only a framework within which the decisions must be made by
the management in different spheres.
Example:
1)Recruitment policy of a company is to recruit meritorious people through the
employment exchange
2) Distribution policy of a fertilizer company is farmer oriented. Policies and objectives
guide thinking and action, but with a difference. Objectives are end points of planning
while policies channelize decisions to these ends.
Advantages of policies:
1) Policies ensure uniformity of action in respect of matters at various organizational
points which make actions more predictable.
2) Policies speed up decisions at lower levels because subordinates need not consult their
superiors frequently.
3)makes it easier for the superior to delegate more and more authority to the his
subordinates without being unduly concerned because he knows that whatever decision
the subordinates make will be within the boundaries of the policies.
4) Policies give a practical shape to the objectives by elaborating and directing the way in
which the predetermined objectives are to be attained.
1.8.4 Types of policies:
Can be classified on the basis of sources, functions or organizational levels
1)Classification on the basis of sources: three types originated, appealed, implied and
imposed policies
(a) Originated policies: Are usually established formally and deliberately by top managers
for the purpose of guiding of actions of their subordinates and also their own. These
policies are set out in print and embodied in manual.
(b) Appealed policies: Are those which arise from the appeal made by a subordinate to
his superior regarding the manner of handling a given situation and comes into existence
because of the appeal made by the subordinate to the supervisor.
(c) Implied policies: are also policies which are stated neither in writing nor verbally.
Such policies are called implied policies. Only by watching the actual behavior of the
various superiors in specific situations can the presence of implied policy is ascertained.
(d) Externally imposed policies: are the policies which are imposed on the business by
external agencies such as government trade associations, and trade unions. Example:
policy dictated by the government law.

2) Classification on the basis of functions: on the basis of business functions, policies


may be classified into production, sales, finance, and personnel policies. Every one of
these functions have number of policies.

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For example: Sales function may have policies relating to market. Production function:
may policies relating to the method of production, output, inventory, research. Finance
function: may have policies relating to capital structure, working capital, internal
financing etc. Personal function: may have policies relating to recruitment, training,
working activities, welfare activities etc. 3.classification on the basis of organizational
level: on this basis range from major company policies through major departmental
policies to minor or derivative polices applicable to the smallest element of organization.
Guidelines for effective policy making:
(1) as far as possible should be stated in writing and should be clearly understood by
those who are supposed to implement them.
(2) Should reflect the objectives of the organization, define appropriate methods and
action.
(3) The top managers and the subordinates should participate in the formulation of
policies for successful implementation of the policies.
(4) Should strike a reasonable balance between the stability and flexibility. Conditions
change and policies must change accordingly. The degree of stability should also prevail
to achieve the sense of direction
(5) Different policies should not pull in different directions and s one should support one
another and they must be internally consistent.
(6) Should not detrimental to the interest of the society and must confirm to the canons of
ethical behavior which prevail in society.
(7)must be comprehensive to cover as many contingencies as possible (8)Should be
periodically reviewed in order to see whether they are to be modified, changed or
completely abandoned and new ones put in their place.
1.8.5 Procedures
Policies are carried out by means of more detailed guidelines called procedures. A
procedure provides a detailed set of instructions for performing a sequence of actions
involved in doing a certain piece of work. The same steps are followed each time that
activity is performed.
For example: the procedure for purchasing raw material may be
(i)the requisition from the storekeeper to the purchasing department.
(ii) Calling tenders for purchase of materials.
(iii)placing orders with the suppliers who are selected
(iv)inspecting the materials purchased by the inspecting department and
(v) Making payment to the supplier of materials by the accounts department. Similarly,
the procedure for the recruitment of personnel may be
(i)inviting applications through advertisement (ii)screening the applications
(iii)conducting written test (iv)conducting interview for those who have passed the
written test and (v) Medical examination of those who are selected for the posts.
Procedures may also exist for conducting the meetings of directors and shareholders,
granting loans to employees, issuing raw materials from the stores department, granting
sick leaves to the employees, passing bills by the accounts department.

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Difference between the policy and the procedure.


Policies procedures
1. Are the general guidelines to both 1 .are the guidelines to action only
thinking and action of people at usually for the people at the lower
higher levels levels
2.help in fulfilling the objectives of 2.show us the way to implement
the enterprise policies
3.are generally broad and allow some 3. Are specific and do not show
latitude in decision making latitude.
4.are often established without any 4.are always established after
study or analysis thorough study and analysis of work

Advantages and limitations of procedures:


Advantages:
1) They indicate a standard way of performing a task which ensures a high level of
uniformity in performance in the enterprise.
2)they result in work simplification and elimination of unnecessary steps and overlapping
3)they facilitate the executive control over performance b y laying down the sequence and
timing of each task, executives dependence on the personal attributes of his subordinates
is reduced
4)they enable employees to improve their efficiency by providing them with knowledge
about their entire range of work
Limitations:
(1)By prescribing one standard way of performing a task, they limit the scope for
innovation or improvement of work performance.
(2)By cutting across department lines and extending into various other departments, they
sometimes result in duplication, overlapping and conflict. These limitations can be
overcome if the management reviews and appraises the procedures periodically with an
intention to improve them.
 Methods: A method is a prescribed way of in which one step of a procedure is
performed. For example the specified technique to be used in screening the
applications or conducting a written test is a method where as the sequence of steps
involved in the recruitment of personnel consists of a procedure. Methods help in
increasing the effectiveness and usefulness of the procedure. By improving the
methods reduced fatigue better productivity and lower costs can be achieved. Methods
can be improved in a number of ways. Manual methods of performing a task can be
replaced by the mechanical means, or theexisting mechanized process may be
improved and unproductive methods improved by conducting motion study.
 Rules: Are detailed and recorded instructions that a specific action must or must not
be performed a given situation. In sanctioning overtime to workmen, in regulating
travelling allowances, in sanctioning entertainment bills and in other similar matters a
uniform way of handling them or dealing with case has to be followed which are all
covered by the rules of the enterprise. They make sure that the job is done in the same
manner every time bringing uniformity in efforts and results.
 Single use plans:
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1.8.6 Programmes and budgets


Programmes
Programmes: Programmes are precise plans or definite steps in proper sequence which
need to be taken to discharge a given task. Programmes are drawn in conformity with the
objectives and are made up of policies, procedures, budgets etc. The essential ingredients
of every programme are time phasing and budgeting. This means that the specific dates
should be laid down for the completion of the each successive stage of a programme. A
provision should also be made in the budget for financing the programme. Often a single
step in a programme is set up as a project.
Budgets
A budget is a financial and/or quantitative statement prepared prior to a definite period of
time, of the policy perceived during that period, for the purpose of obtaining a given
objective. Budgets are plans for a future period of time containing the statements of the
expected results in numerical terms that is rupees, man hours Product units and so forth.
The important budgets are sales budget, revenue budgets, cash budget and expense
budget.
Advantages:
1) Budgets are useful for the enterprise and are expressed in numerical terms, facilitate
comparison of the actual results with the planned ones and thus serve as control device
for measuring performance.
2) They help in identifying and removing the dead heads of expenditure.

1.9 Steps in planning:

The various steps involved in planning are as follows:

1)Establishing verifiable goals or set of goals to be achieved: The first step in planning
is to determine the enterprise objectives which are often set up by the upper level or top
managers, usually after number of possible objectives have been carefully considered.
There are many types of objectives managers may select: desired sales volume or growth
rate, the development of a new product or service or even a more abstract goal such as
becoming more active in the community. The type of goal selected will depend on a
number of factors: the basic mission of the organization, the value its mangers hold and
the actual and the potential abilities of the organization.
2)Establishing planning premises: it is the second step in planning to establish planning
premises which is vital to the success of planning as they supply pertinent facts and
information relating to the future such as population trends, general economic conditions,
production costs and prices, probable competitive behavior, capital and material
availability and government control and so on.
Planning can be variously classified as under

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(a)internal and external premises


(b)tangible and intangible premises
(c)controllable and non controllable premises

(a)internal and external premises:


Internal premises include sales forecasts, policies and programmes of the organization,
capital investment in plant and equipment, competence of management, skill of labour,
etc.
External premises can be classified into three different groups Business environment,
factors which influence the demand for the product, and the factors which affect the
resources available to the enterprise.
(b)Tangible and non-tangible premises:
Tangible premises: those which can be quantitatively measured while Intangible
premises are those which being qualitative in character and cannot be measured.
Tangible examples: population growth, industry demand, capital and resources invested
in the organization are all tangible.
Intangible: political stability, sociological factors, business and economic environment
are all tangible.
(c)controllable and non controllable premises: Some of the planning premises are
controllable and some are non-controllable and because of the non controllable factors
there is need for the organization to revise the plans periodically in accordance with the
current development. Examples of uncontrollable factors: strikes, wars, natural
calamities, emergency, legislation etc. Examples of controllable factors: company’s
advertising agency, competence of management member’s skill of the labour force,
availability of resources in terms of capital and labour, attitude and behavior of the
owner’s of the organization.
3)deciding the planning period:
It is the next task once the upper level managers have selected the basic long term goals
and the planning premises. Business plans are made in some instances once for a year and
plans are made for decades based on some logic and future thinking. The factors which
affect the choice of period are:
(a) Lead time in development and commercialization of new product.
(b)The time required to recover capital investments or the pay-back period and (c) Length
of the commitments which are already made.

(a)lead time in development and commercialization of new product: Example: Heavy


engineering manufacturing company wanting to start a new project should have a
planning period of five years.
(b)time required to recover capital investments or the pay-back period: It is the
number of years over which the investment outlay will be recovered or paid back.
Example: machine investment Rs.10 lakhs cash inflow Rs.2 lakhs/year then the payback
period is 5 years

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(c)length of commitments already made: plan period should be as long as possible to


enable the fulfillment of commitments already made

4) Finding alternate courses of action: The fourth step of planning is to find the alternate
courses of action. Example: securing the technical knowhow by engaging a foreign
technician or by training staff abroad.
5)evaluating and selecting the alternate courses of action: After selecting the alternate
courses selection the best course or course of action with the help of quantitative
techniques and operations research.
6)developing the derivative plans: Once plan formulated, its broad goals must be
translated on day to day operations of organization Middle level managers must draw up
the appropriate plans, programmes and budgets for their sub-units which are described as
derivative plans.
7)measuring and controlling the process: Plan cannot be run without monitoring its
progress. The managers must check the progress of their plans.
Limitations of planning:
1) Planning is expensive and time consuming process. it involves significant amount
of money, energy and also risk without any assurance of the fulfillment of the
organizations objectives
2) Sometimes restricts the organization to the most rational and risk free
opportunities. Curbs the initiatives of the manager and forces him to operate within
the limits set by it and sometimes cause delay in decision making in case of
emergency.
3) Scope of planning is limited with rapidly changing situations.
4) Establishment of advance plans tends to make administration inflexible. Example:
business changes, change in government policy, may make the original plan lose its
value.
5) Another limiting factor in planning is the formulating of the accurate premises.
6) Planning may sometimes face peoples resistance to it.
Making plan effective: Guidelines for making the plan effective
1)Coordination: It is important that all plans fit together not only in terms of content
but also important plans fit together at proper time.
2) Communication: Every manager in the organization should have access to
complete information not only pertaining to his own area of planning but also others
area.
3) Participation: Participation of the subordinates with superiors is a key element in
making planning effective.
4) Proper climate: Top managers must establish proper climate for planning.

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1.10 Organization

Definition, Nature and purpose of organization

An organization can be defined as a social unit or human grouping deliberately structured


for the purpose of attaining specific goals. An organization can also be defined as the
process of identifying and grouping of the work to be performed, defining and delegating
responsibility and authority and establishing relationships for the purpose of enabling
people to work most effectively together in the accomplishment of their objectives.

1.10.1 Nature of organization:

1)An organization basically consists of group of people who form the dynamic human
element of the organization

2) Organization helps in identifying the various tasks to be performed which are assigned
to the individuals to perform to achieve the common objectives or common purpose of the
organization.

3) It ensures to achieve coordination amongst the people working in various departments


of the organization And ensures integrated efforts to achieve organizational objectives or
goals.

4) It delegates authority to the managers with commensurate responsibility and


accountability for the discharge of their duties and also amongst different hierarchical
levels in an organization.

5) It also aides in achieving financial, physical material and human resources. 6)


Organizations are part of the larger environment and hence they are influenced by the
external environment.

7) Organization helps in the realization of the plans made by the managers 8)It helps in
nurturing and growing special skills and talents by the virtue of division of labour 9)it
facilities seamless communication

1.10.2 Purpose of an organization:

The purpose of any organization is to achieve goals for which it is formed which aims at
achieving common objectives through its group member efforts. The organizations exist
for different purpose and the efforts for organizational members are directed for the
achievement of this purpose. For example: For business organization the purpose is to
develop people and their skills for contributing towards the growth of the enterprise
through profits For nonprofit organization the purpose the objective would be to serve
the members of the committee in a productive manner

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1.11 Types of Organization

a) Business organization: are those organizations which are formed with the purpose of
earning profits the sole purpose being to earn surplus in the form of profits without which
they cannot survive and grow Example: Firms engaged in manufacturing, trading,
services etc.

b)Non -profit service organizations: are those organizations who do not have the motive
of making.

profits but to serve the people of the a specific community or a segment of a society.
Example: Rotary club, Lions club, Orphanages, Charitable hospitals etc.

Formal organizations :are officially formed with definite structure which describes
authority and responsibility, relationship and behavior of organizational members

Informal organization: do not have any official recognition and they are formed due to the
social interaction needs of the people resulting in different types of social networks.
Found in all formal organizations where people come together and form social groups for
various reasons like common interests, friendship or affiliation, satisfaction of emotional
needs

Principles of organization: The principles of organization are as follows 1) Objectives:


The objectives of the enterprise influence the organization structure and hence the
objectives of the enterprise should first be clearly defined. Then every part of the
organization should be geared to the achievement of these objectives.

2) Specialization: Effective organization must promote specialization. The activities of


the enterprise should be divided according to functions and assigned to persons according
to their specialization.

3) Span of control: As there is a limit to the number of persons that can be supervised
effectively by one boss, the span of control should be as far as possible, the minimum.
That means, an executive should be asked to supervise a reasonable number of
subordinates only.

4)Exception :As the executives at the higher levels have limited time, only exceptionally
complex problems should be referred and routine matters should be dealt with by the
subordinates at lower levels. This will enable the executives at higher levels to devote
time to more important and crucial issues.

5) Scalar Principle: This Principle is sometimes known as the “chain of command”. The
line of authority from the chief executive at the top to the first-line supervisor at the
bottom must be clearly defined.

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6) Unity of command: Each subordinate should have only one superior whose command
he has to obey. Multiple-subordination must be avoided for it causes Uneasiness,
disorder, indiscipline and undermining of authority.

7) Delegation: Proper authority should be delegated at the lower levels oh manager of the
organization also. The authority delegated should be equal to responsibility

That is each manager should have enough authority to accomplish the task assigned to
him. Inadequate delegation often results into multiplication of staff and service activity..

8) Responsibility: The superior should be held responsible for the acts of his subordinates.
No superior should be allowed to avoid responsibility by delegating authority to his
subordinates

9) Authority: The authority is the tool by which a manager is able to accomplish the
desired objective. Hence, the authority of each manager must be clearly defined. Further,
the authority should be equal to responsibility.

10) Efficiency: The organization structure should enable the enterprise to function
efficiently and accomplish its objectives with the lowest possible cost.

11) Simplicity: The Organization structure should be as simple as possible and the
organization levels should as far as possible, be minimum. A large number of levels of
organization means difficulty of effective communication and coordination. Too many
committees and excessive procedures Also unduly complicate the structure.

12) Flexibility: The organization should be adaptable to changing circumstances and


permit correction of demonstrated deficiencies in the existing structure without
dislocation and disruption of the basic design.

13) Balance: There should be a reasonable balance in the size of various departments,
between centralization and decentralization, between the principle of span of control and
the short chain of command, and among all types of factors such as human, technical and
financial.

14) Unity of direction: There should be one objective and one plan for a group of
activities having the same objective. Unity of direction facilitates unification and
coordination of activities at various levels.

15) Personal Ability: As people constitute an organization, there is need for proper
selection, placement and training of staff. Further the organization structure must ensure
optimum use of human resources and encourage management development programmes.

16) Acceptability: The structure of the organization should be acceptable to the people
who constitute it.Two things generally happen if people oppose the structure: it is
modified gradually by the people, or it is used ineffectively.

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1.11.1 Departmentalization

Definition: The horizontal differentiation of tasks or activities into discrete


segments is called departmentalization. Departmentalization is one important step of
building an organization. There are several bases for departmentalization, each of which
is suitable for particular corporate sizes, strategies and purposes. Following is a brief
description of these bases. `

1) Functions: the most widely used base for departmentalization is function. Each major
function of the enterprise is grouped into a department. Example: finance and marketing
departments in a manufacturing company.

Advantages

1)It is a simple form of grouping activities for small organizations which manufacture
only a limited number of Products or render only a limited number of services.
Everybody in this form of organization understands and feels highly secure both in his
work and in relationships.

2) It promotes excellence is performance because of development of expertise in only a


narrow range of skills.

3) It leads to improved planning and control of the key functions.

4) It ensures economy, there is only one department related to one function for the entire
function.

5) Manpower and Other resources of the company are effectively utilized by time-
sharing then across products or projects.

Drawbacks

1) It fosters sub-goal loyalties. It is difficult for anyone to understand the task of the
whole and to relate his own work to it. Each manager thinks only in terms of his own
departmental goals and does not think in terms of the company as a whole. Example: the
manufacturing department may concentrate on meeting cost standards and delivery dates,
and neglect quality control Result: the sales or marketing department may be flooded with
complaints lead to inter-departmental conflicts and disagreements, feuds,
misunderstandings etc.

2)Does not offer a good training ground for the overall development of manager who
gains expertise in handling problems of his particular department only

3) Unsuitable for organizations which are large in size, complexity or innovative scope.
4) In this form the customer needs evoke conflicting interpretations from each department
head like the story of twelve blind people and an elephant.

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5)In this form the procedures are overly complicated, wasteful and time consuming
weakness called organizational arthritis develops where the structure is rigid and resists
adaptation.

6) It is difficult to judge whether the activities of a particular department are worth their
cost.

1.11.2 Products

Eminently suited for large organization manufacturing a variety of products. For each
major product a separate semi autonomous department is created and is put under the
charge of a manager who may also be responsible for producing profit of a given
magnitude. For each department, all the needed manufacturing, engineering, marketing,
manpower and other facilities are assembled. Product departmentalization is the logical
pattern to be followed when each product requires raw materials, manufacturing
technology and marketing methods that are markedly different from others from those
used by other products in the organization. Example: many companies like Hindustan
Lever, Richardson Hindustan and Johnson & Johnson have product based departments.

Advantages:

1) This form relieves top management from operating task responsibility and therefore
can concentrate on such centralized activities such as finance, R&D and control.

2) Enables top management to compare performances of different products and invest


more resources in profitable products and withdraw resources from unprofitable ones.

3) In this form as the responsibility is entrusted on a particular department head, he is


stimulated for improving his performance.

4) In this form natural team work develops as each worker sees that his contribution is
needed to make the whole product.

Drawbacks:

1) This form results in duplication of staff and facilities.

2) Extra expenditure is incurred in maintaining a sales force for each product line.

3) Employment of a large number of managerial power is required.

4) Equipment in each product may not be utilized fully.

1.11.3 Customers

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An enterprise may be divided into number of departments on the basis of the customers
that it services. Example: An electronics department may be divided into separate
departments for military, industrial and consumer customers.

Regions or territory

When production or marketing units of an organization are geographically dispersed in


various locations, it is logical to departmentalize those units on a geographical basis.
Example: The Indian railways are departmentalized on this basis like north, west, south,
eastern, central are departments in this sense.

Advantages:

1) Motivates each divisional head to show high performance.

2) Provides each regional head an opportunity to adapt to his local situation and customer
need with speed and accuracy.

3) Affords valuable top management training and experience to middle-level executives.


4) Enables the organization to take advantage of location factors, such as availability of
raw materials, labour, market etc.

5)enables the organization to compare regional performances and invest more resources
in profitable regions and withdraw resources from unprofitable ones

Drawbacks:

1) Gives rise to duplication of various activities and many of the routine and service
functions carried out by the regional offices can be carried out centrally by the head office
very economically.

2) Many regional units may forget the overall interest of the total organization

1.11.4 Major disadvantages of departmentalization

1) Accidental occurrences when carried out from one shift to another affect the product of
the other shift also.

2) Workers working in the shift may incomplete work to workers of the following shift.
3)Difficult for the manager to correctly measure the performance of certain department

1.11.5 Committees

A committee is a group of people who have been formally assigned some task or some
problem for their decision and implementation Classification of committees: be broadly
classified into advisory committees and executive committees.

Advisory committees:

1) committees are vested with staff authority


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2) Only have a recommendation role and cannot enforce implementation of their advice
or recommendation. Examples of advisory committees formed in business enterprises:
works committees, sales committees, finance committees etc.

Executive committees:

1)Nested with the line of authority

2) Not only take decisions but also enforce decisions and thus perform a double role of
taking a decision nad ordering its execution. Example: Board of directors is an example
of an executive committee. Are also classified as standing committees or ad-hoc task
forces.

(i)Standing committees: Are formed to deal with current organizational problem.


Example: finance committee in a company, loan approval committee in a bank etc.
Members of this committee are chosen because of their title or position, instead of
individual qualifications or skills.

(ii) Ad-hoc committees: Have a short duration, dissolved after the task is over, or the
problem is solved and their members are chosen for their skills and experience.

Advantages:

1) People get an opportunity to better understand each other’s problems and move
towards organizational goals.

2) Provide a forum for the pooling of knowledge and experience of many persons of
different skills, ages and backgrounds which helps in improving the quality of decisions.
3) Provide an opportunity to many persons to participate decision-making process.

4) Are excellent means of transmitting information and ideas, both upward and downward
5) Contribute indirectly to their training and viewpoints.

6) Are impersonal inaction and hence their decisions are generally unbiased and are based
on facts and there is no fear of single individual taking a decision.

Weaknesses

1) Committees keep up minutes and waste hours by setting up a committee which takes a
longer time to get action than from an individual manager.

2) If wrong decision taken, no member can be individually blamed which encourages


irresponsibility among members of the committee.

3) Can be expensive form of administration where huge amount is spent on convening


meetings and giving allowances to the members.

4) Members of the coordinating committees feel appointed to protect their interests of the
departments rather than finding appropriate solution to the problem.

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5) Have a tendency to perpetuate themselves and difficult to dissolve them.

6) Decisions are generally based on some compromise among ymembers which are not
best decisions which results in log rolling.

7) Consists of large number of persons, difficult to maintain secrecy.

8) Chairman often changes, influence accumulate in the hands of some other person
which may result in domination and may bring about resistance from others.

1.11.6 Authority and responsibility:

Authority Is the institutionalized right of a superior to command and compel his


subordinates to perform a certain act. Rests in the chair or position. If position changes
the authority of the individual also changes.

Use of Authority

1) It enforces the obedience to norms: The subordinate who accepts the authority of the
superior is motivated to an extent that by the fear of sanctions against him.

2)secures expertise in making the decisions: Helps to enable the enforcement and
execution of expert advice given by the specialists in the organization.

3)permits centralization of decision making and coordination of activity: It is possible to


centralize the function of decision making and force all the members to take mutually
consistent decision.

Responsibility

Responsibility is the obligation the subordinate to obey these commands. Whenever a


superior assigns a task to him, it is the responsibility of the subordinate to perform it.

Has two dimensions

1)first dimension is the responsibility for 2)responsibility to 1)Responsibility for: Is the


obligation of a person to perform certain duties in job description or accepted by him
2)Responsibility to: is his accountability to superiors and associated with check up,
supervision, control and punishment Responsibility cannot be delegated or transferred.
The superior can delegate to subordinate the authority to perform and accomplish a
specific job.

1.11.7 Decentralization of authority

The delegation if authority by an individual manager is closely related to and


organizations decentralization of authority. Management has to decide the amount of
decision-making authority should be centralized in the hands of the chief executive and
the amount to be distributed among them at lower levels .

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The greater the decentralization

1) The greater is the number of decisions made at the lower levels.

2) The greater are the important decisions made at the lower levels.

3)The greater is the number of decisions made at the lower levels

4) The fewer are the people to be consulted at the lower level and lesser is the checking
required on the decisions made at the lower levels. Centralization and decentralization are
not absolute but relative. Absolute centralization is not possible except in one man
enterprise. Decentralization characteristics all organizations and there cannot be absolute
decentralization of authority .

1.11.8 Distinction between delegation and decentralization

Delegation Decentralization
1)is a process, which refers to the granting 1) is the end result of delegation and
of authority and the creation of dispersal of authority
responsibility between one individual to 2)the superior is relieved from his
another responsibility for the work decentralized
2)superior continues to be responsible for and the subordinate becomes liable for that
the work delegate to his subordinates 3)is optional and may or may not be
3)is vital and essential to the management practiced as a systematic policy.
process and only through delegation
subordinates can be involved in the
organization and management can get
things done

Advantages of decentralization

1) Reduces the problem of communication and red tape: As organization grows bigger it
takes long time for top managers to make decisions. Decentralization unclogs the
communication process and improves efficiency.

2)Permits quicker and better decision making: The employees being close to the work,
knowledgeable often make better and swift decisions than their superiors who are not in
touch with the specifics of the situation

3)Recognizes and capitalizes on the importance of the human element: Gives more
power, prestige and status and feel more motivated and satisfied in their jobs

4)Leads to a competitive climate within the organization: Where each division is made
into a distinct profit centre, its head is encouraged to to exercise initiative and
ingenuineity.

5)Ensures the development of employees: Because the employees are to be excellently


trained for promotions into positions of greater authority nad responsibility.

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6) Facilitates diversification of products activities and markets: Was demonstrated by


Alfred D Chandler by his study on DuPont, General Motors and Standard Oil. Initially
these companies had a centralized organizational structure due to limited products but as
companies expanded these companies decentralized their operations to provide greater
independence and convenience.

Advantages of centralization:

1)Coordination of activities of subordinates are better achieved

2) No duplicate of efforts or resources.

3)Decisions taken account the interests of the employees of the entire orgainisation

4) Strong central leadership develops.

1.12 Staffing : Meaning

The process of recruiting, retaining, developing and nurturing the workforce is called
staffing Advantages of proper and efficient staffing.

1.12.1 Manpower Planning

1) It helps in discovering talented and competent workers and developing them to move
up the corporate ladder.

2) Ensures greater production by putting the right man in the right job.

3)it helps to avoid a sudden disruption of an enterprises production run by indicating


shortages of personal if any in advance.

4) Helps to prevent underutilization of personnel through over manning and the resultant
high labour cost and low profit margins.

5) Provides information to management for the internal succession of managerial


personnel in the event of unanticipated turnover.

1.12.2 Recruitment

It is defined as the process of identifying the sources for prospective candidates and to
stimulate them to apply for the jobs. Is also defined as the generating of the applications
or applicants for specific positions. Is defined as the process of attracting potential
employees to the company. The management should have a proper plan of recruitment
regarding the quantity and quality of personnel required and the time when it is needed.

Sources of requirement:

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Can be broadly classified into two categories: internal and external Internal sources refer
to the present working force of the company. vacancies other than the at the lowest level
may be filled by the existing employees of the company.

About more commonly used external sources of recruitment are:

1)Re-employing former employees: laid off employees or employees left due to personal
reasons may be reemployed who may require less training compared to the strangers of
the enterprise.

2) Friends and relatives of the present employees: personnel with a record of good
relationships may be encouraged to recommend their friends and relatives for
Appointment in the concern where they are employed.

3) Applicants at the gate: suitable unemployed employees who call at the gates of the
factories or companies are called are interviewed by the factory or company personnel
and those who are found suitable for the existing vacancies are selected.

4) College and technical institutes: many big companies remain in touch with the colleges
and technical institutions to recruit young and talented personnel.

5) Employment exchanges: employment exchange set up by the government for bringing


together those men who are in search of the employment and these who are in search of
employment and those who are looking for men. Employment exchanges are considered a
useful source for the recruitment of clerks, accountants, typists.

6) Advertising the vacancy: can be done by advertising the vacancy in leading news
papers which may be used when the company requires services of persons possessing
certain special skills or when there is acute shortage of labour force.

7) Labour unions: persons are sometimes recommended for appointment by their labour
unions.

1.12.2 Selection:

Steps in the selection procedure: There are three steps in the selection procedure namely
job analysis, job description and job specification.

1)Job analysis: Is the process by means of which a description is developed of the


present methods and procedures of doing a job, physical conditions in which the job is
done, relation of the job to other jobs and other conditions of employment

2)Job description: The results of the job analysis are set down in job descriptions for
production workers, clerical people and the first-line supervisors and managers also.

3)Job specification A job specification is a statement of the minimum acceptable human


qualities necessary to perform a job satisfactorily. Commonly used selection procedure
steps.

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1)Application bank: Filling the application blank by the candidate is the first step in
which the applicant gives relevant personal data such as qualification, experience, firms
in which he has worked.

2)Initial interview: Selected personnel based on the particulars furnished in the


application blank are called for the initial interview by the company Which is the most
important means of evaluating the poise or appearance of the candidate.

3) Employment tests: Are used for the further assessment of the candidate of his nature
and abilities certain tests are conducted by the company.

These are:

(i)Aptitude test: is used in finding out whether a candidate is suitable for clerical or a
mechanical job which helps in assessing before training as how well the candidate will
perform the job.

(ii)Interest test: is used to find out the type of work in which the candidate has an
interest.

(iii) Intelligent test: used to find out the candidates intelligence and candidates mental
alertness, reasoning ability, poor of understanding are judged.

(iv) Trade or performance achievement test: this test is used to measure the candidate’s
level of knowledge and skill in the particular trade or occupation in which all he will be
appointed, in case he is finally selected. in this test the candidate is asked to do a simple
operation of the proposed job. Example: A candidate for a driver may be asked to drive to
test his driving proficiency, a typist may be asked to type out some letters to find out his
speed and efficiency.

(v)Personality test: is used to measure those characteristics of a candidate which


constitute his personality. e.g
selfconfidence,temperant,initiative,judgement,dominance,integrity,originality.personlaity
tests are very important in the selection process.

4) Checking references: used to know about the important personal details about the
candidate, his character, past history his background verified from the people mentioned
in the application after selection and found satisfactory at the interview.

5) Physical or medical examination: is another step in selection procedure. The


objectives of this examination are

(i) to check the physical fitness of the applicant for the job applied for

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(ii)to protect the company against the unwarranted claims for compensation under certain
legislative enactments.

6) Final interview: This interview is conducted for those who are ultimately selected for
employment and the selected candidates are given an idea about their future projects
within the organization.

1.14 Assignment Questions

December 2010

1. Define management, Mention levels of management. Substantiate the statement that


management is both science and art.
2. Explain the contribution of F.W Taylor for scientific management process.
3. Describe the reasons which make planning process,an important activity in
management.
4. Explain the steps that are generally required in planning process.
5. Describe the departmentation based on functions with its merits and demerits.
6. Explain the advantages of delegating authority to others.
7. Describe the various steps followed in recruitment process.
December 2009
1. Define “Management” and bring out its nature and characteristics.
2. Briefly explain the functional areas of management.
3. List out the levels of management and also list the roles of management.
4. Define planning and discuss its importance.
5. Discuss the various steps in planning
6. Define an Organization and distinguish between formal and informal Organization.
7. Discuss any two types of Organization structures with a chart highlighting their merits
and demerits.
8. Distinguish between
1) Centralized and Decentralized
11) Selection and Recruitment.
June 2009
1. Define Management
2. With a neat Sketch .Explain the functions of management
3.Briefly explain the concept of modern management approches

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4.Give any four concrete reasons for the paramount importance of the planning function.
5.Briefly explain the steps involved in planning.
6.Briefly explain the principles of organization.
7.write any four advantages of proper and efficient staffing.
8. Write short notes on following i) MBO ii)MBE iii) Span of Control

June 2010
1. Define management .What are the nature and charecteristics of management ?Explain
its functions.
2. Is management a science ,art or profession?Explain
3.What are the modern management approaches?Explain briefly the contigency approach
of management.
4.Briefly explain the types of planning
5.Explain hierarchy of plans
6.What are the advantages and disadvantages of line and staff organization?
7.Explain the following i)Types of departmentation ii)Principles of committess
8.what are MBO and MBE ?Explain
9.What is recruitment ?Explain Various sources of Recruitment.
2013
1. What is management? Consider management as operational process,Explain its various
sub process.
2. Explain required change in skill -Mix of a manager,with respect to his level in an
organization.
3.what are the features of Bureucratic administration?
4.Define planning .Compare stategic planning with tactical planning.
5.Explain major principles to be followed to develop sound and efficient organizational
structure.
6.what is span if management/span of control?what is significance of number of relations
between manager and subordinates in span of control?
7.What are different advantages of decentralization.
JUNE 2012
1.What is management?Explain the various roles of management
2.Explain the nature and characteristics of management

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3.Mention the contribution and limitation of scientific mangagement


4.Bringout the nature and importance of planning.Explain the forms of planning
5.What is span of management?Explan the various factors that govern the span of
management
6.Distinguish between centralization and decentralization .Mention their advantages.
7.What are the importances of staffing?Give examples.

1.15 Outcome
 Define management,Organization,entrepreneur,planning,staffing,ERP, and outline
their importance in entrepreneurship.
 Utilize the Resources available effectively through ERP
 Make use of IRPS and institutional support in Entrepreneurship.

1.6 Further Reading


1. Principles of Management -P. C. Tripathi, P. N. Reddy; Tata McGraw Hill, 4th / 6th
Edition, 2010.
2.Dynamics of Entrepreneurial Development & Management -Vasant Desai Himalaya
Publishing House.
3. Entrepreneurship Development -Small Business Enterprises -Poornima M
Charantimath Pearson
Education – 2006.
4. Management and Entrepreneurship - Kanishka Bedi- Oxford University Press-2017

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MODULE 2

Directing and Controlling

2.1 Meaning and nature of directing

2.2 leadership styles

2.3 Motivation theories

2.4 Communication and -Meaning and importance

2.5 Co-ordination meaning and importance

2.6 Controlling -Meaning

2.7 Steps in Controlling

2.8 Methods in Establishing the control

2.9 Outcome

2.10 Further Reading

2.1 Meaning and nature of directing


Means issuance of orders and leading and motivating subordinates as they go about
executing orders Consists of the process and techniques utilized in issuing instructions
and making certain that operations are carried on as originally planned. Is a vital in
managerial function Is used to stimulate action by giving direction to his subordinates
through orders and also supervise their work to ensure that the plans and policies achieve
the desired actions and results. To conclude direction is the process of utilizing the
techniques in issuing instructions and making certain that operations are carried out on as
originally planned.

2.1.1 Objective:
4. Explain the principles of management, organization and entrepreneur.
5. Discuss on planning, staffing, ERP and their importance
3. Infer the importance of intellectual property rights and relate the institutional
support

2.1.2 Requirements or principles of effective direction:

1) Harmony of objectives: The goals of its members must be in complete harmony with
the goals of an organization The manager must direct the subordinates in such a way that
they that they perceive their goals to be in harmony with enterprise objectives. For

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Example the company’s profits may be associated with the employee’s gains by giving
additional bonus or promotion.

2) Unity of Command: The subordinates must receive orders and instructions from one
supervisor only the violation of which may lead to conflicting orders, divided loyalties
and decreased personal responsibility for results.

3) Direct supervision Every supervisor must Maintain face-to-face contact with his
subordinates which boosts the morale of the employees,increases their loyalty and
provides them with feedback on how well they are doing.

4) Efficient Communication: Communication is An instrument of direction through


which the supervisor gives orders,allocvates jobs.explains duties and ensures
performance. Is a two way process which enables the superior to know how his
subordinates feel about the company and how the company feels on a number of issues
concerning them. In communication comprehension is more important than the content.

5) Follow-through: Is an act of following through the whole performance of his


subordinates to keep check on their activities, help them in their cat and point out
deficiencies if any and revise their direction if required.

2.2 Leadership Styles

Three leadership styles widely used:

1) Traits approach

2) Behavioral approach

3) Contingency approach Traits approach:

2.2.1 Trait

It is basically a character and deals with personal abilities and assumed to be God’s gift
and abilities Are identified as mental and physical energy, emotional stability,
knowledge of human relations, empathy, objectivity, personal motivation, communication
skills, teaching ability, social skills, technical competence, friendliness and affection,
integrity and faith, intelligence etc. Traits approaches – Trait theories argue that leaders
share a number of common personality traits and characteristics, and that leadership
emerges from these traits. Early trait theories promoted the idea that leadership is an
innate, instinctive quality that you either have or don't have. Now we have moved on
from this approach, and we're learning more about what we can

do as individuals to develop leadership qualities within ourselves and others. traits are
external behaviors that emerge from things going on within the leader's mind – and it's
these internal beliefs and processes that are important for effective leadership.

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2.2.2 Behavioral approach – What does a good leader do?

Behavioral theories focus on how leaders behave. Do they dictate what needs to be done
and expect cooperation? Or do they involve the team in decisions to encourage
acceptance and support.

In the 1930s, Kurt Lewin developed a leadership framework based on a leader's decision-
making behavior. Lewin argued that there are three types of leaders:

a. Autocratic leaders make decisions without consulting their teams. This is considered
appropriate when decisions genuinely need to be taken quickly, when there's no need for
input, and when team agreement isn't necessary for a successful outcome.

b. Democratic leaders allow the team to provide input before making a decision, although
the degree of input can vary from leader to leader. This type of style is important when
team agreement matters, but it can be quite difficult to manage when there are lots of
different perspectives and ideas.

c. Laissez-faire leaders don't interfere; they allow people within the team to make many
of the decisions. This works well when the team is highly capable and motivated, and
when it doesn't need close monitoring or supervision. However, this style can arise
because the leader is lazy or distracted, and, here, this approach can fail.

2.2.3. Contingency approach– situation influencing good leadership

The realization that there isn't one correct type of leader led to theories that the best
leadership style is contingent on, or depends on, the situation. These theories try to
predict which leadership style is best in which circumstance.

When a decision is needed fast, which style is preferred? When the leader needs the full
support of the team, is there a better way to lead? Should a leader be more people oriented
or task oriented? These are all examples of questions that contingency leadership theories
try to address.

Fiedlers model

Hersey Blanchands model

Robert J House model.

2.3 Motivation Theories

1) Maslow’s need hierarchy theory

2) Herzberg’s two factor theory

3) McClelland’s achievement theory

4) Victor Vroom’s Expectancy theory

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5) Adams equity theory

6) Skinners behavior modification theory

2.3.1 Maslow’s need hierarchy theory

An unsatisfied need is the basis for the motivation process and the starting point and
begins the chain of events leading to behavior as shown in the figure below.

Order of priority of human needs

Begins with the person’s unsatisfied need at the lowest level-identification of the need
develops in the form of as goal which leads to the fulfillment of the need to achieve the
goal. These needs are arranged in the form of a ladder of five successive categories as
shown in the figure above.

(i)Physiological needs: Arise of the basic physiology of life like the need for food, water,
air, etc which must be at least satisfied partially for continued survival.

(ii)Security needs: Needs to feel free from economic threat and physical harm which
need protection from arbitrary lay-off and dismissal, disaster and avoidance of the
unexpected.

(iii)Egoistic needs: are the needs which relate to respect and prestige the need for
dominance for example. Can be classified as self-esteem and esteem from others. Self
esteem is the need for worthiness of oneself and the esteem is the necessity to think others
that he is worthy

(iv) Self-fulfillment needs: are the needs to realize ones potential that is realizing one’s
own capabilities to the fullest-for accomplishing what one is capable of to the fullest.

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example a musician must make music etc. According to Maslow, people attempt satisfy
their physical needs first. as long as the needs are unsatisfied they dominate and after they
become reasonably satisfied and progress to the next level and so on.

2.3.2 Herzberg’s Two-factor theory

Original study based on the research by Fredrick and Herzberg who interviewed 200
engineers and accountants and were asked about the good times and bad times they think
about their jobs. Out of these interviews two factors emerged called the

(I)maintenance factors and (II)motivators or satisfiers.

I Maintenance factors(Factor 1)

1) Fair company polices and administration

2) A supervisor who knows the work

3) A good relationship with ones supervisor.

4) A good relationship with ones peers.

5) A good relationship with ones subordinates.

6) A fair salary

7) Job security

8) Personal life

9) Good working conditions

10) Status

To build motivation different set of factors are necessary which are called motivators or
satisfiers.

II)Motivators or satisfiers(Factor 2)

1) Opportunity to accomplish something significant

2) Recognition for significant achievements

3) Chance for advancement

4) Opportunity to grow and develop on the job

5) Chance for increased responsibility

6) The job itself.

Some facts about the two factors:

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1) Motivators are job centered

2) Maintenance factors are related working conditions and environmental conditions.

3) These two group of factors are also known as intrinsic and extrinsic rewards.

4) These two sets of factors are unidirectional.

2.3.3 McClelland’s need for achievement theory:

According to McClelland there are three important needs

(i)The need for affiliation (n Aff)

(ii)the need for power(n Pow)

(iii)the need for achievement(nAch)

(i)Need for affiliation (n Aff): Reflects desire to interact socially with people
Concerned about the quality of an important personal relationship

(ii) The need for power (n Pow): Person having high need for power tries to exercise the
power and authority Concerned with influencing others and winning arguments

(iii) the need for achievement(n Ach): has three distinct characteristics

(a)preference in setting moderately difficult but potentially achievable goals

(b) doing most things himself rather than getting them done by others and willing to take
personal responsibility for his success or failure and does not want to hold responsible for
it.

(c) seeking situations where concrete feedback is possible.

2.3.4 Victor Vroom’s Expectancy theory:

Works under conditions of free choice where an individual is motivated towards activity
which he is most capable of rendering and which he believes has the highest probability
of leading to his most preferred goal. The basic concepts of this theory are

1) First and second level outcomes: Job related goals before an individual such as
promotion, increase in salary, recognition, praise and so on are called second level
outcomes. Each second level outcome can be associated with a value called valence for
each individual. The valence can be positive, negative or zero Valence positive:
individual wants to attain promotion Valence negative: does not want to attain promotion
Valence zero: outcome towards which he is indifferent Second level outcomes can be
achieved in different ways: (i)promotion by leaving the organization , by absenting
himself to show dissatisfaction, by joining a pressure group, by attending a training

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programme,or developing intimacy with the boss, by bribing somebody, by improving


performance or by bribing somebody and so on.

2) Instrumentality: All first level outcomes have equal probability of leading the
individual to the second level outcome The individual has subjective estimates of these
probabilities ranging from -1 to +1 which are called instrumentalities. -1 indicates a belief
that second level outcome is certain without the first level outcome 0 indicates a belief
that second level outcome is impossible without first level outcome 1 indicates a belief
that second level outcome is certain with first level outcome

These instrumentalities are helpful in determining the valence of each first-level


outcome The valence of each first-level outcome is the summation of all products arrived
by multiplying its instrumentalities with the related valences of the second level
outcomes.

3. Expectancy: is the probability estimate which joins the individual’s efforts to first
level outcome. Expectancy values are always positive ranging from 0 to 1.

4. Motivation: Motivation is the multiplicative function of the valence of each first-level


outcome (V1) And the believed expectancy (E) that given effort will be followed by a
particular first level outcome, That is M=f(V1*E)

2.3.5 Adams equity theory: In this theory,

Equity is defined as the ratio between The individual’s job inputs (such as effort, skill,
experience, education and seniority) to the The job rewards (such as pay or promotion) it
is believed that the individuals motivation, performance and satisfaction will depend on
his on his or her subjective evaluation of his or her effort/reward ratio and the
effort/reward ratio of others in similar situations

2.3.6 Skinners behavior modification theory:

The theory developed by researches done by B.F Skinner. The theory is believed and
based on the behavior of the past circumstances which they have learnt that the certain
behaviors associated with pleasant outcomes and certain other behaviors are associated
with unpleasant outcomes. Example: Obedience to authority leads to praise and
disobedience leads to punishment. The consequences that increase the frequency of a
behavior are positive reinforcement (praise or monitory rewards) or negative enforcement
(A manager requiring all subordinates to attend early morning meetings if the
performance falls below a certain desired level of the organization.

Negatives of the above theory proposed: Avoids concern for the inner motivation of
the individual. Skinners behavior modification theory is criticized for two reasons

(i) Overemphasis of extrinsic rewards ignores the fact that people are better motivated by
intrinsic rewards.

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(ii) The theory is unethical no manager has a right to manipulate and control his
employees behavior life.

2.4 Communication

Communication means Exchange of opinions, facts ideas or emotions by two or more


persons. The sum of all things what one does to create an understanding in the minds of
others. Is the process of passing information, correct understanding and with right
Interpretation from one person to another. Importance of communication:

The importance of communication raised from the fact that earlier business was
considered only a technical and formal structure. But by Hawthorne’s experiments it was
realized that every organization requires structure is a social system involving the
interactions of the people working at different levels and proper communication is
required to the goals of the organization, organizations existence from the birth to
continuing.

2.5 Co-ordination

Is the orderly synchronization or fitting together of the interdependent efforts of


individuals to attain a common goal For example in hospital the proper synchronization
of the activities of the nurses, doctors, ward attendants and lab technicians to give a good
care to the patient. Can be considered as an essential part of all managerial functions of
planning, organizing, directing and directing If the manger performs these functions
efficiently and expertly coordination is automatically generated and there remains no
need for special coordination.

2.5.1 Coordination is required at every level of all managerial functions

In planning: performs his function of planning by coordination of the interrelating the


plans of various departments

In organizing: coordination is required in grouping and various activities to subordinates


and in creating departments

In directing: coordination is required to take effect of his particular action will have on
other departments and executives

In controlling: coordination is required manger evaluates operations and checks whether


performance is in conformity with the desired results.

2.5.2 Techniques of coordination:

The following are the important techniques of coordination

1) Rules procedures and policies:

Helps in coordinating the subunits in the performance of their Repetitive activities.


Standard policies, procedures and policies are laid down to cover all possible situations If
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the breakdown of the above occurs more rules, regulations are required to be framed to
take care of the breakdown

2) Planning: Ensures coordinated effort and targets of each department dovetail with the
targets of all other departments. example fixing the targets of the10000 units of additional
production and consequently the sales requires the coordination of the two departments
respectively to meet the demands and achieve the target.

3) Hierarchy: Is the simplest device of achieving coordination by hierarchy or chain of


command By putting together independent units under one boss some coordination
among their activities is achieved. Sometimes defective because makes individuals
dependent upon, passive towards and subordinates to the leader.

4) Direct contact: used to solve the problems created at the lower levels which affects
the employees can be resolved by formal informal contacts to prevent overloading to top
executives.

5)Tas force: Temporary group made up of representatives from the same departments
facing problems and exists as long as the problems lasts and each participant returns to
normal tasks once the solution is reached

6)committess:arise due the fact when certain decisions consistently become


permanent.these groups are labeled committees. This device greatly eases the rigidity of
the hierarchical structure,promotes effective communication and understanding,of
ideas,encourages the acccepatnce of commitment to policies and makes implantation
more effective.

7) Induction: Of a new employee is a social setting of his work is also a coordinating


mechanism. The device familiarizes the new employee with organizations rules and
regulations dominant norms anf behavior, values and beliefs and integrates his personal
goals with organizational goals.

8) Indoctrination: Device commonly used in religious and military organizations is


another coordinating device which develops the desire to work together for a purpose.
The major task of a leader being to build an organization can be succeeded by the
indoctrination and other means by converting the neutral body into a committed body
9)Incentives: providing independent units with an incentive to collaborate such as profit
sharing plan is another mechanism.

10) Liasaon departments: evolved to handle transactions and typically occurs between
the sales and production departments.

11)Workflow: is the sequence of steps by which the organization acquires inputs and
transforms them into outputs and exports these to the environment which is largely
shaped by the technological, economic and social considerations and helps them in
coordination.

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2.6 Controlling and meaning

A control system is needed for four purposes

1. Measuring Progress

2.Uncovering deviations.

3.Indicating corrective action

4.Transmitting corrective action to the operation

2.6.1 Measuring progress

There is a close link between planning and controlling the organizations operations. The
control process continually measures progress towards goals.Control consists in verifying
weather everything occurs in conformity with the plan adapted,instruction issued and
principle applied.

2.6.2 Uncovering deviation

Change ,Change is an integral part of almost any organization’s enviornement.Markets


shifts ,new products emerge ,new meterial are discovered and new regulation are
passed.The control function enables managers to detect changes that are affecting their
organization products and services.

Complexity ,Todays vast and complex organizations ,with geographically seperated


plants and decentralized operations make control a necessary. Diversified product lines
need to be watched closely to ensure that quality and profitability are being maintained
;sales in different retail outlets needs to ne recorded accurately and analyzed.

Mistakes ,Managers and their subordinates very often commit mistakes.Example wrong
parts are ordered ,wrong pricing decisions are made, problems are diagnosed incorrectly
and so on.

Delegation, when managers delegate authority to subordinates, their responsibility to


their own superiors is not reduced. The only way managers can determine if their
subordinates are accomplishing the tasks that have been delegated to them is by
implementing a system of control.

2.6.3 Indicating corrective action

Controls are needed to indicate corrective actions.they may reveal for examples that plans
needed to be redrawn or goals need to be modified or there is need for reassisgnment or
classification of duties.

2.6.4 Transmitting corrective action to the operation

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Controls are needed to transmit corrective action to the operation while it is progressing
so that the transformation subsystem modifies its inputs or its production plan to reduce
any discrepancy or error and keeps the output “on course”.

2.7 Steps in control process

There are three basic steps in a control process:

1. Establishing standards.

2.Measuring and comparing actual results against standards

3.Taking Corrective actions,

2.7.1 Establishing standards

the first step in the control process is to establish the standard against which results can be
measured.Since the entire operation cannot be observed,each organization must develop
its own list of key result areas for which standard need to be established.

Guidelines for setting standards

1. They must be specifically determined in quantitative terms.

Standards expressed in general terms such as , “ costs should be reduced” or “orders


should be executed quickly” are not specific as “overheads must be reduced by 12
percent”.Even standards in areas such as public relations, while hard to express in
quantitative terms,can be defined more accurately by adding more specific details ,about
the number and type of customer complaints.

2. They should be accepted by the individuals involved. They must fit their expectations
and group habits.

3.They need to be flexible in order to adapt to changing conditions.

4. They should emphasize the achievement of results.

2.7.2 Measuring and comparing actual results against standards

The step in the control process is to measure the result and compare it with the
predetermined standards. One important point to be considered here is whether
measurement and comparison are to be done at various stages in the throughput process
or at the end.

2.7.3 Taking Corrective Action

After comparing the actual performance with prescribed standards and findings the
deviations, the next step that should be taken by the manager is to correct these
deviations. Corrective action should be taken without wasting time so that the normal
position can be restored.
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2.8 Methods in Establishing the Control

Control techniques are almost as diverse as the activities of business. The following are
three important ways in which they are classified:
(a) Past-oriented control techniques and future-oriented control techniques
(b) Market control techniques, bureaucratic control techniques and clan control
techniques
(c) Old control techniques and new control techniques

2.8.1 Past-oriented control techniques and future-oriented control techniques

Past-oriented control techniques are also known as post-action controls. They measure
results after the work is completed—it is post-mortem. Examples of such controls are
most accounting records, inspection of goods and services and school grade reports.
These controls can be used to plan future steps before repeating the same operation.
They can also be used as a basis for rewarding, disciplining, training or promoting
individuals.
Future-oriented control techniques are also known as steering controls or feed-
forward controls. They measure results before the work is completed. They serve as
warning-posts principally to direct attention rather than to evaluate. Examples of such
controls are cash flow and funds flow analysis, network planning, etc. which enable
managers to keep a watch on an operation while it is progressing and to see that they
will have problems in such areas as cash or on-time delivery unless they take prior
action. Mail order companies, to cite another example, have found that the weight of
incoming mail gives an early indication of the volume of business. With this warning
of ups and downs in the volume of work, they are able to adjust work assignments in
order to reduce expenses or to make prompt deliveries of unusually large volumes.
The two types of control we have discussed above are not alternatives to each other.
Most organi- sations use both these types. With a future-oriented control (which
enables corrections to be made before the system output is effected) a manager would
still want to measure the final system output since nothing can be expected to work
perfectly enough to give the confidence that the final output will always be exactly as
is desired.

2.8.2 Market control techniques, bureaucratic control techniques and clan control
techniques
Market control techniques establish control by drawing comparisons of prices and
profits of previous years, or of other organisations. The prices which organisations
assign to their products or services are considered as an accurate reflection of the
effectiveness of their internal control.
Bureaucratic control techniques (such as rules, policies, hierarchy of authority,
operating budgets and periodical statistical reports), establish control by requiring
employees to comply with them.
Clan control techniques establish control by generating trust, tradition, commitment
and shared belief.

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Although all three types may appear in an organisation yet each is best suited to a
particular type of organisation. Thus, market control techniques are best suited to
profit organisations operating in a competitive environment, bureaucratic control
techniques are best suited to non-profit organisations where prices and competitive
markets do not exist, and control techniques are best suited to matrix organisations and
small family-owned organisations, which should follow hundred per cent commit-
ment rule.

2.8.3 Old Control Techniques and New Control Techniques

Old control techniques are those techniques which have been long used by
managers. Most of these techniques are financial or accounting-based directed toward
the control of money. New control techniques provide the kind of information that are
not readily available with the old techniques. As engineers are far ahead of managers in
their ability to measure what is going on, these techniques act as better future-oriented
devices directed toward the control of time.We give below a brief description of some
techniques under each category.

Old Control Techniques


Budgeting A budget is a statement of anticipated results during a designated time
period expressed in financial and non-financial terms. As indicated in the preceding
section, three essential steps in the control process include establishing standards,
comparing results with standards, and taking corrective action. In terms of these steps,
the preparation of budgets is, in effect, the step of establishing clear and unambiguous
standards of performance mostly in monetary terms.
Budgets cover a designated time period—usually a year. At stated intervals during
that time period, actual performance is compared directly with the budget targets and
deviations are quickly detected and acted upon.
The budgeting process begins when top management sets the strategies and goals for
the organisation. Usually, lower level managers will then devise budgets for their sub-
units within these guidelines set by top management. The budgets will then be
reviewed by the superiors of these managers; the superiors will eventually integrate
lower level budgets into their own budget and send it up the chain of command for
review. This process continues until the organisation’s overall budget has been
approved by the board of directors. A budget department or budget committee may
assist line managers in budget preparation and review.
Communication of pfanning premises is essential if the subsidiary budgets at lower
levels are to be prepared consistently. The production manager, for instance, must
know what assumptions to make about wages, availability of raw materials, volume of
sales etc. Similarly, the sales manager must know about how soon and at what cost a
certain new product will be ready for the market. Therefore, someone must provide a
forecast or guess that can be used consistently in all the subsidiary budgets.
Types of budgets On the basis of the purpose for which budgets are prepared, they may
be classified as follows:

1. Personnel Budget It is a personnel programme expressed in monetary terms usually


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for one year. The personnel manager can compare his expenditures under various
heads with the budgeted provisions and with those of other companies. This enables
him to know whether he is spending high or low, whether he is getting his money’s
worth and whether he is in danger of losing his better men.
2. Sales budget It is a comprehensive sales programme and plan for developing sales.
It lays down the sales potential in terms of quantity, value, period, product, etc. Sales
forecasting is the basis for preparing this budget. A sales budget is prepared by the
sales manager with the assistance of salesmen and market research officers. The
factors to be considered for preparing sales budget are population trend, consumer’s
purchasing power, price trend of the product, nature of competition, past sales, extent
of advertising, etc.
3. Selling and distribution cost budget This budget lays down the cost of selling and
distribution of the product during the budget period. It includes advertising cost,
research and development cost, transport cost, etc. This budget is jointly prepared by
the sales manager, advertising manager and the distribution manager.
4. Production budget This budget is based on the sales budget. It lays down the
quantity of units to be produced during the budget period. The main purpose of this
budget is to maintain an optimum balance between sales, production and inventory
position of the firm. This budget is also known as the “output budget”.
5. Production cost budget This budget is based on the production budget. It lays down
the estimated cost of carrying out production plans.
Further, the production cost budget is subdivided into various sub-budgets like raw
materials budget, labour budget, production overhead budget, etc. The raw material
budget lays down the quantity of raw material required for production during the budget
period. This budget is prepared by the head of the manufacturing department. The
labour budget lays down the estimates of labour requirements neces- sary to carry out
estimated production during the budget period. It may include both direct and indirect
labour requirements. In some cases, indirect labour requirements may be shown in the
manufacturing expenses budget instead of in the labour budget. The production
overhead budget gives the estimates of all production overheads to be incurred during
the budget period. It breaks up the production overheads into three parts, viz., fixed,
variable, and semi-variable.
6. Capital expenditure budget This budget outlines specifically, capital expenditures
for plant, ma- chinery, equipment, inventories and other items. It also points out the
plans concerning investment, expansion, growth, improvements, replacements, etc.
7. Cash budget This budget gives the anticipated receipts and disbursements for the
budget period and shows the cash position arising from it. It indicates the requirement
of cash at various points of time and helps the management in planning and arranging
cash to meet the needs of the business concern. Thus, it ensures that the concern never
has any shortage of cash required. Cash budget helps the management in controlling
and coordinating the activities which involve receipt and payment of cash.
8. Master budget A master budget gives a summary of all the functional budgets and
shows how they affect the business as a whole. In other words, it is compiled from
various subsidiary or functional budgets. It provides detailed particulars regarding
production, sales, cash, fixed assets, etc. The need for a master budget containing a
summary of all the subsidiary budgets arises because business concerns are too large to
permit the detailed planning of all the aspects of the business in one budget.
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Advantages of budgetary control The following are some of the important advantages
of budgetary control:

1. The different functional budgets clearly indicate the limits for expenses and also the
results to be achieved in a given period. This helps the enterprise in having a
planned approach for its various activities. This also keeps everybody in the
enterprise alert and encourages the optimum use of its resources.
2. Budgets make it possible to coordinate the work of the entire organisation. In
devising budgets, managers take into account information provided by the sub-units
of their organisation. The interaction between managers and subordinates that takes
place during the budget development process helps define and integrate the
activities of all members in the organisation.

1. Since budgets are generally prepared with the consultation of managers at


different levels, they provide to the enterprise the fruit of combined wisdom Lower
level managers are motivated in accepting and meeting budgets that they have had
a hand in shaping.
2. The budgetary control brings together the activities of various departments in an
overall perspec- tive and this promotes cooperation and team spirit among the
employees.
3. Through budgetary control, the deviations from the predetermined subjective
standards are found out and the management is enabled to take suitable corrective
action immediately. This minimises wastage and losses.
4. The budget system helps people learn from past experience Once the budget
period is over, man- agers can analyse what occurred, isolate errors and their
causes, and take steps to avoid those errors in the next budget period.
5. Budgets improve communication A plan cannot be put into effect unless it is
communicated to those who must carry it out. In the process of developing the
budget with those responsible for its implementation, managers can communicate
their own objectives and plans most effectively.
Limitations of budgetary control Some of the limitations of budgetary control are as
under:

1. Budgets are mostly inflexible and rigid and do not respond to internal or external
environmental changes. In so far as they are in error, because of these
unmanageable changes, they lose their validity as a standard. A district sales
manager, for example, cannot be held accountable for a drop in sales if a truckers’
strike prevents delivery of merchandise to his customers.
2. Budgets are of little help in handling the here-and-now problems that supervisors
have. They are useful only in analysing the past and charting the future. They do
not “manage”, but merely serve as a tool to be used by management.
3. In a budgetary control programme people show anxiety to spend their current
budget to the hilt so that their budget for the next financial year is not reduced.
They show little concern to evaluate the result of their spending. In fact, all their
effort is directed at increasing the budget for the next year. ‘Performance’ in the
budget-based organisation means the ability to maintain or increase one’s budget.
4. A good manager is discouraged from taking initiative and undertaking activities
for which pro- vision has not been made in the budget, even though they are
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useful for the enterprise. On the other hand, a bad manager can hide his
inefficiency behind the budget which does not examine whether last year’s
expenditure was at all, necessary and whether there were more economical
alternatives to the expenditure that could yield the desired results.
Zero-base budgeting (ZBB) Under traditional budgeting, a manager starts with the
current level of operation as an established base instead of re-evaluating all
programmes. This type of budgeting, therefore, does not answer questions such as: Are
current programmes efficient and effective? What are the alternatives? Should current
programmes be eliminated or reduced in order to fund higher-priority new programmes
or to improve profits? This is not so under zero-base-budgeting which is done every
year from a scratch. A manager here, is required to evaluate each item’s worth to the
company, from the ground up, and justify every rupee spent in terms of current
corporate goals. It is, therefore, better to term it as “De nova budgeting” or budgeting
from the beginning.
Cost Accounting The cost of production determines the profit earned by an enterprise.
In view of this fact, modem management has given much importance to cost
accounting and cost control. Standard costing is one of the techniques of cost control
and it is being increasingly used by modem business.
concerns for the purpose of cost reduction and cost control. The objective of standard
costing is the same as that of budgetary control. The system involves a comparison of
the actuals with the standards and the discrepancy is called variance. The various
steps involved in standard costing are:

1. Setting of objective cost standards for various components of cost—such as raw


materials, labour and overheads. The standards fix the limits within which the
different types of expenses must be kept.
2. Measurement of actual performance.
3. Comparison of actual cost with the standard cost laid down.
4. Finding the variance of actual cost from the standard cost.
5. Finding the causes of variance.
6. Taking necessary action to prevent the occurrence of
variance in future. Standard costing differs from budgeting in a
number of ways:
1. Standards are set by some systematic technique and are more “objective” whereas
budgets are more “subjective”.
2. Standards refer to specific, detailed units of processes or products, whereas
budgets relate to departments and general grouping of units.
3. Standards are subject to revision less frequently than budgets.
Responsibility Accounting Responsibility accounting can be defined as a system of
accounting under which each departmental head is made responsible for the
performance of his department.
Under this system, each department is made a semi-autonomous profit centre, i.e., a
centre responsible for the generation of profit. A department generates profits by
“selling” its output either to an outside customer or to other departments or profit
centres in the same organisation. The prices at which one profit centre sells its output
or services to other profit centres are called transfer prices. The transfer prices for
“selling” the output of one department or profit centre to the other department or profit

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centre may be fixed in anyone of the following ways:


1. Markup on actual cost Many companies just add a margin of profit of say, 10 per
cent of the process cost as the transfer cost. For example, assume that a steel company
has a pig iron plant which supplies pig iron to the steel plant which in turn supplies
steel to the finishing plant. If all the three plants of the company are to be judged by the
profits they earn, the pig iron plant will supply iron to the steel plant at a price arrived
at by adding 10 per cent to its process cost. This will be the purchase cost of the steel
mill. Similarly, whatever the production cost of the steel plant, a 10 per cent mark up
would be allowed on that and that would become the purchase cost of the finishing
plant. Thus each centre will show separate profits.
Fixing transfer prices on the basis of a mark up on actual cost is not a good method.
This is because it passes on the inefficiency of one department to the other.
2. Markup on standard cost Under this method, the markup on standard cost is
allowed. Departments working at less than the standard efficiency would have a lower
profit since their costs would be higher than the standard costs. This method has the
advantage of brining out the efficiency of each department, However, one great
disadvantage of this method is that the ultimate sale price of the product becomes very
high since it includes the markups on standard costs for each department.
3. Market price Under this method, the transfer price is fixed at a price equivalent to
the one prevail- ing in the market at the time of transfer. The receiving department thus
pays to the selling department

the same price which it would have paid to an outsider seller. This is a good method
because under it the true profitability of a department as an independent unit is
revealed. The only limitation of this method is that very often market prices are not
available for the semi-finished output of one department which the receiving
department is using as an input.
4. Negotiated Prices In certain special circumstances, transfer prices may be fixed on
the basis of negotiations between departmental heads.
A profit centre resembles a business in miniature. Like a separate company, it has an
income statement that shows revenue, expense, and the difference between them, which
is profit. The income statement for a profit centre, therefore, is a basic management
control document which motivates the manager to reduce all controllable expenses in
order to increase the profit for his profit centre.
Financial Statements and Ratio Analysis The Trading Profit and Loss Account and the
Balance Sheet of a company are the usual financial statements which are prepared ex
post (in retrospect) to indicate what financial events occurred since the last statements.
Depending on the company, the period covered by a financial statement could be the
previous year, the previous quarter, or the previous month. The usefulness of these
statements for applying control measures is limited by the fact that they cover only past
events. However, they can provide managers with useful information about trends.
Managers can also use these statements to compare their organisations with other
organisations and can thus evaluate their own performance. In addition, they are used
by people outside the organisation to evaluate the organisation’s strengths, weaknesses
and potential.
Ratio analysis seeks to extract information from a financial statement in a way that

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will allow an organisation’s performance in different areas to be evaluated. It involves


selecting two significant figures from a financial statement and expressing their
relationship in terms of a percentage or ratio.
The ratios most commonly used by organisations are the following:
1. Liquidity ratios They measure the company’s ability to pay back short-term debts by
converting assets quickly into cash. In other words, they are a measure of a company’s
liquidity. One such ratio is the current ratio. It is expressed by the fraction: Current
assets Current liabilities.
2. Debt ratios While liquidity ratios are used to measure a company’s short-term
financial position, debt ratios are computed to assess its ability to meet long-term
commitments. The simplest debt ratio is total debt divided by total assets. This ratio
tells us what proportion of the company’s assets is owned by its creditors.
3. Profitabiliy ratios These ratios express profits as percentage of sales or of total assets
to depict the company’s efficiency of operation. A profit of Rs 4 lakh, for example, is
unimpressive if it is derived from a total sales of Rs 40 crore or a capital investment of
Rs 100 crore.
4. Operating ratios These ratio measure how efficiently the manufacturing and sales
are being carried out. Some of the more common operating ratios are the inventory
turnover ratio and the total assets turnover ratio. The inventory turnover ratio is defined
as sales — inventory. For example, if a company has sales of Rs 10 lakh and an average
daily inventory of Rs 2 lakh, it may be said to be turning over its inventory five times.
A high rate of inventory turnover is frequently a positive sign. It suggests that these
assets are being used efficiently by the firm.
The total assets turnover ratio is expressed as sales = total assets. This ratio gives an
indication of how effectively the firm’s assets are being used. Too low a ratio may
indicate the need for either an increased sales effort or possibly the liquidation of the
company’s less productive assets.

The training cost per employee or the average travelling expenditure per trip or the
number of personnel staff per 100 people in the total company population are examples
of ratios which throw light on the efficiency of personnel department.
The ratio analysis comparisons can be made in one of two ways: (a) comparisons
over a time period—the present ratio compared with the same organisation’s ratio in
the past; and (b) comparison with other similar organisations or with the industry as a
whole. The first type of comparison will indicate how the organisation’s performance
or condition has changed; the second type will suggest how well the organisation is
doing relative to its competitors.
Return on investment Also known as the Du Pont system of financial analysis this
ratio is expressed by the following formula:

This ratio is computed on the basis of capital turnover (sales + investment)


multiplied by earnings as a proportion of sales (profit sales). This calculation
recognises that one division, with a high capital turnover and a lower percentage of
earnings to sales, may be more profitable in terms of return on investment than another

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with a high percentage of profits to sales but with low capital turnover.
Break-even Analysis Break-even analysis is another control device used in business
firms. It involves the use of a chart to depict the overall volume of sales necessary to
cover costs. It is that point at which the cost and revenue of the enterprise are exactly
equal. In other words, it is that point where the enterprise neither earns a profit nor
incurs a loss.
Figure 18.2 depicts a simple break-even chart for a single product of a company. The
horizontal axis in this figure identifies units of sales. The vertical axis identifies both
costs and revenues. We can easily know from this figure that Rs 10,000 is the total
revenue and Rs 23.000 (approximately) are the

70 —

Rev
50
(thousands of rupees)
Revenues and costs

COS

30 Variable costs
Break-even point
(Loss)
20 ’

Fixed costs

total costs associated with a sales volume of 1,000 units. Threrefore, at a sales volume
of 1,000 units we should expect an overall loss of Rs 13,000. Similarly, at a sales
volume of 4,500 units we should expect an overall profit of Rs 10,000 (Rs 45,000 in
revenue minus Rs 35,000 in costs). Our break-even point lies at a sales volume of
3,000 units. At this point revenue exactly covers the cost.
Break-even analysis can be used both as an aid in decision-making and as a control
device. The specific areas where break-even analysis can help in decision-making
include
1. identifying the minimum sales volume necessary to prevent a loss;
2. identifying the minimum sales volume necessary to meet established profit
objectives;
3. providing information helpful in making decisions on the effect of raising or
lowering prices; and
4. providing data helpful in decisions to drop or add product lines.

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As an aid to control, break-even analysis provides one more yardstick by which to


evaluate company performance at the end of a sales period. One can compare the actual
profit of the past period with what it should have been according to the break-even
analysis.
The following are the two difficulties of drawing a break-even chart for a multi-
product firm:
(a) A break-even chart with the I-axis measuring “units sold” cannot be prepared,
since many unlike types of products are sold by the same firm.
(b) A break-even analysis becomes difficult also because the firm might be selling
many products with different profit margins.
However, a series of break-even charts can be made to show the results of sales of
different product mixes. Break-even charts of the sales of the individual products are
also useful.
Audit Audit is a very common control technique used in financial management.
Internal audit is con- ducted by an internal auditor who is an employee of the
organisation. He makes an independent appraisal of financial and other operations. In
addition, he appraises company’s policies, plans, and management performance. He
pinpoints defects in the policies or plans and gives suggestions for eliminating the
defects. As internal audit is conducted regularly, it keeps the employees always alert.
External audit is an independent appraisal of the organisation’s financial accounts
and statements. The purpose of external audit is to ensure that the interests of
shareholders and other outside parties connected with the company are safeguarded
against the malpractices of the management. The exter- nal auditor is a qualified person
and he has to certify the annual profit and loss account and balance sheet after careful
examination of the relevant books of accounts and documents. In case the external
auditor is negligent in performing his duties or becomes party to any fraud or error
committed by the management, he will be liable under both civil and criminal laws.
Marketing audit examines six major components of the company’s marketing
situation. These are: marketing environment, marketing organisation, marketing
strategy, marketing planning and control systems, marketing functions and marketing
productivity.
Personnel audit is a systematic and comprehensive analysis of all activities and the
result of a personnel programme. It ensures a complete review, at regular intervals of
the effectiveness and utility of the various personnel functions and activities, policies
and procedures.
Reports A major part of control consists of preparing reports to provide information to
the management for purposes of control and planning. The following are certain types
of reports which are prepared and submitted to the management regularly.
1. Top Management
(i) Profit and loss statement
(ii) Balance sheet
(iii) Position of stock
(iv) Cash-flow statement
(v) Position of working capital
(vi) Capital expenditure and forward commitments together with progress of
projects in hand
(vii) Sales, production and other appropriate statistics

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2. Sales Management
(i) Actual sales compared with budgeted sales to measure performance by
(a) products;
(b) territories;
(c) individual salesmen; and
(d) customer.
(ii) Standard profit and loss by products
(a) for fixing selling prices; and
(b) to concentrate sales on most profitable products.
(iii) Selling expenses in relation to budget and sales value, analysed by
(a) products;
(b) territories;
(c) individual salesmen; and
(d) customers.
(iv) Bad debts and accounts which are slow and difficult in collection.
(v) Status reports on new or doubtful customers.
3. Production Management
To buyer: Price variations on purchases analysed by commodities.
To Foreman

(a) Operational efficiency for individual operators, duly summarised as


department averages
(b) Labour utilisation report and causes of lost time and controllable time
(c) Indirect shop expenses against the standard allowed
(d) Scrap report.
To Works Manager

(a) Department operating statement


(b) General works operating statement (expenses relating to all works expenses
not directly allocable or controllable by departments)
(c) Plant utilisation report
(d) Department scrap report
(e) Material usage report.
4. Special Reports
These reports may be prepared at the request of the management accountant or the
manager. The necessity for them may arise on account of the need for a more
detailed information on matters of interest first revealed by the routine reports.
Some of the matters in respect of which such reports may be prepared are:
(a) Taxation, legislation and its effect on profits
(b) Estimate about the earning capacity of a new project
(c) Break-even analysis
(d) Replacement of capital equipment
(e) Special pricing analysis
(f) Make or buy decisions.
Some important considerations in drawing up these reports are as follows:
Information Quality The more accurate the information, the higher its quality and the
more securely managers can rely on it when deciding what action to take. However, the
cost of obtaining information increases as the quality of the information desired goes

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up. How accurate the information needs to be will vary with the situation. But, in
general, information of higher quality that does not add materially to a manager’s
decision-making capability is not worth the added cost.
Information Timeliness The information provided by a report must suggest action in
time for that ac- tion to be taken. Just when information is considered timely, however,
will depend on the situation. For example, reports destined for top-level managers to
monitor progress on long-range objectives may be considered timely if they arrive at
quarterly intervals. The cost of making them available weekly would not be justified,
since long-range plans are neither reviewed nor modified at such frequent intervals.
However, middle and lower level managers responsible for ongoing operations and
activities may need a weekly or even daily report on machine downtime if delays are to
be minimised. The quality control managers must get a daily or weekly report on all
customer rejections. On a monthly or quarterly basis, such information would merely
be ancient history and would be of no value to the manager.
Timeliness may also be determined by company policy or by events rather than by
the calendar. In- formation on inventory, for example, is provided to the manager
responsible for recording only when a previously established minimum level for the
inventory is being approached. Requiring inventory on a cal- endar basis—such as every
week—when inventory levels for most items are well above their record point would
usually not be worth the added cost, since action would not be implied by the
information.
Information Quantity and Relevance A report that provides too little information can
be ineffective, because it may lead managers to make wrong or late decisions that
worsen problems instead of solv- ing them. Conversely, a report that provides
managers too much information can also prove ineffec- tive because that may not
isolate what they need from a flood of irrelevant facts and figures. A good report
should fill or evaluate information so that only the most relevant information is
supplied to the appropriate manager. In addition, a good report should condense
information, so that what is relevant may be absorbed in a short period of time.
Gantt Chart Figure 18.3 is a sample Gantt chart, sometimes referred to as a bar chart,
employed to plan and track jobs on the shop floors. The chart is named after Henry C.
Gantt. The example indicates that job A is behind schedule, job B is ahead of schedule
and job C has been completed, after a delayed start for equipment maintenance. Note
that whether the job is ahead of schedule or behind schedule is based on where it stands
compared to where we are now. In Fig. 18.3 we are the end of Wednesday and job A
should have been completed. Job B has already had some of Thursday’s work
completed. This information can be used to schedule overtime and to shift workers
from one job to another.
Standing Orders, Rules, Limitations Standing orders, rules and limitations are also
control techniques used by the management. The manager who authorises his
subordinates to make certain decisions or delegates some of his powers, lays down the
limits for them. Limits may be decided on the basis of the nature of work and status of
the subordinate. Standing orders are issued by the management and they

Start of an activity
Job Monday Tuesday Wednesday Thursday Friday
End of an activity Activity time
Schedule allowed
Actual work progress
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Point in time where chart is
reviewed
X
Time set aside for non production
activities e.g.
17CS51

Gantt Chart

are to be observed by the subordinates. They may be concerned with the rules,
regulations, discipline, procedures, conditions, timings, etc.
Personal Observation A manager can also exercise fruitful control over his
subordinates by observing them while they are engaged in work. Personal observation
helps the manager not only in knowing the workers’ attitude towards work but also in
correcting their work and methods, if necessary. Moreover, when the worker knows
that he is being observed by his superior, he will be alert and will not waste his time.
But in some cases he may also resent being observed and may develop resistance. In
any case, this method is very costly and cannot work in large concerns.

New Control Techniques


These techniques which are of recent origin do not markedly overlap the traditional
control devices, but provide the kind of information not readily available with the
traditional methods. Therefore, when these control techniques are used, it is usually in
addition to the control devices described in the preceding section.
PERT and CPM The two major techniques under this heading are PERT (Programme
Evaluation and Review Technique) and CPM (Critical Path Method). Both techniques
were developed independently, although virtually at the same time, around 1957-58.
PERT was first developed for the US Navy in connection with the Polaris weapons
system and is credited with reducing the completion time of the programme by two
years. CPM was developed jointly by Du Pont and Remington Rand of USA in order to
facilitate the control of large, complex industrial projects.
Both PERT and CPM are primarily oriented towards achieving better managerial
control of time spent in completing a project. Under both the techniques, a project is
decomposed into activities and then all activities are integrated in a highly logical
sequence to find the shortest time required to complete the entire project. The main
difference between PERT and CPM lies in the treatment of time estimates. PERT was
created primarily to handle research and development projects in which time spans are
hard to estimate with any degree of accuracy. Consequently, PERT time spans are
based on probabilistic estimates. CPM, on the other hand, is usually concerned with
projects that the organisation has had some previous experience with. Time estimates,
therefore, can be made relatively accurately.
The use of both PERT and CPM has spread rapidly today in controlling time-critical
projects such as reinforcing a weak dam, constructing a building at an Olympic site or
completing contracts that include penalty payment clauses. Many companies, make use
of these techniques for working out the cost estimates of a project also.

Steps involved in developing the netrrork Both under PERT and CPM, the purpose is
to divide the project into a number of operations and then to draw a picture of the order
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in which and of the time when these operations should be started and completed. This
picture is known as the Project Graph or Arrow Diagram. The following steps are
involved in drawing this diagram:
1. The first step is to break down the whole project into a number of clearly
identifiable activities and events. An activity is the actual performance of a task.
Each activity requires some time and resources for its completion. The
commencement or completion of an activity is called an event. An event is that
particular instant of time at which some specific part of a plan has been achieved.
An event does not signify any expenditure of time or resources. Any two events
are always joined by some activity. The preceding event is called the “tail event”
and the following is called the “head event”.
2. Once the list of various activities is ready, we have to examine each activity in
relation to the other activity and ask ourselves the following questions:
(i) What other activity/activities must be completed before this activity can start
(prece- dence)?
(ii) What other activity/activities can be done while this activity is being done
(concurrence)?
(iii) What activity/activities cannot start until after this activity is done
(subsequence)?
3. The next step is to draw the diagram portraying the precedence, concurrence and
subsequence of all activities and events. On this diagram, all activities are shown
by arrows and all events are shown by circles. The diagram also tells us the time
required for the completion of each activity. In CPM diagrams, a single time
estimate is written against each activity. In PERT, however, each activity is
assigned three-time estimates (optimistic, most likely, and pessimistic), plus a
fourth which is based on the other three. The optimistic time is the shortest time
the activity should take if everything goes well and no mishaps occur. The
pessimistic time is the longest time the activity could conceivably take when
everything that could go normally wrong goes wrong, barring outright
catastrophe. Most likely time is the time the activity should take under normal
circumstances. Generally the three time estimates for each activity are combined
into a weighted average, called expected activity time. This is written below the
other three estimates.
4. Finally, the critical path is determined. The critical path is the longest path
through the network in terms of the amount of time the entire project will take. It
indicates a series of activities which must be done in sequence and which will take
longer than the other sequences of jobs that can go along simultaneously. It is
critical because the time spent on the activities that lie along this path must be
shortened if the total time of project is to be
shortend. For example, if in a project three
activities A, B and C are to be completed, of
which activities A and B (requiring six days
and three days, respectively) can
simultaneously be
carried out but activity C (requiring

two activities, then the critical path would be along the


activities A and C as shown in Fig. 18.4. Fig. 48.4 Critical path

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If A takes six days, and B three days, the shortest elapsed time to reach event l when
activity C can start would be six days. Thus there is no point in spending money to
expedite activity B but there may be a good reason for expediting A if the total time is
to be shortened.

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Module 3

3.1 Meaning of entrepreneur


3.2 Characteristics of entrepreneurs
3.3 Classification and types of entrepreneurs
3.4 Various stages in entrepreneurial process
3.5 Role of entrepreneurs in economic development
3.6 Entrepreneurship in India and barriers to entrepreneurship
3.7 Identification of business opportunities
3.8 Market feasibility study
3.9 Technical feasibility study
3.10 Financial feasibility study and social feasibility study.

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ENTERPRENEURSHIP

Fig :Model of Entrepreneurship

” An Entrepreneur is one who always searches for changes responds to it and exploits. It
is an opportunity”- Peter.

[ An ENTREPRENUER is one who owns his business]

An entrepreneur is an economic agent who plays a very important role in a country’s


economic development .entrepreneur passes required knowledge, skills, initiative drive
and spirit for innovation and aims to achieve goal.

Entrepreneur is a dynamic activity which helps to bring changes in process, innovation in


business and new ideas and usage of resources etc.,

Meaning and evolution of concepts:

Entrepreneur is developed from French word “entrepreneur”

According to joseph,

“An entrepreneur is an advanced economy where an individual introduces a method of


production in the branch of manufacture, A product at which consumers are not familiar
,new raw materials or new markets and the life”

According to him entrepreneurship are :


 Introduction of new product
 Introduction of new method of production.
 Development of new markets
 Making changes.
To summarize, an entrepreneur is the person who bears risks, unites various factors of
production ,to explore the opportunities in order to evoke demand well than employment.

3.2 Characteristics of Entrepreneur:

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1. Action oriented.
2. Determination and commitment
3. Creativeness
4. Accept responsibilities
5. Self confident
6. Bath thinker, planner, worker
7. Future vision, intelligent

Qualities of Entrepreneur :
1. Success and achievement
2. Risk bearer
3. Opportunity explorer
4. Planner
5. Stress takers
6. Facing uncertainties
7. Independent
8. Flexible
9. Self confident
10. Motivator

FUNCTIONS OF ENTREPRENUERSHIP
PRIMARY FUNCTION OTHER FUNCTIONS FUNCTION
IMPORTANT FOR
DEVELOPING
COUNTRIES
 Planning.  Diversion of  management of
 Organizing. productions. resources.
 Decision making  Expansion of the  Dealing with public.
 Management enterprise.  Engineering.
 Innovation  Maintaining  New product
 Risk bearing employer and development
 Leading employee  Parallel
 Controlling relationship. opportunities
 Solving labour  Marketing
problems.  Management
 Interaction with  Customer relation.
outside agensies

3.3 Types Of Entrepreneurs

the entrepreneur has been broadly classified according to business, professional skills,
motivation, growth and stages of development.

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a) According to type of business


1. Business entrepreneurs
2. Trading entrepreneurs
3. Industrial entrepreneurs
4. Co-operative entrepreneurs
5. Agriculture entrepreneurs
6. Retail entrepreneurs
7. Service entrepreneurs

b) According use of technologies


1. Technical or non technical entrepreneurs
2. Professional entrepreneurs
3. Low tech or high tech entrepreneurs

c) According to motivation
1. Pure entrepreneurs
2. Induced entrepreneurs
3. Motivated entrepreneurs
4. Spontaneous entrepreneurs

d) According to the growth


1. Growth entrepreneurs
2. Super growth entrepreneurs

e) According to stages of development


1. Fixed entrepreneurs
2. Modern entrepreneurs
3. Classical entrepreneurs

f) According to the area


1. Urban entrepreneurs
2. Rural entrepreneurs

g) According to age and gender


1. Young entrepreneurs
2. Old entrepreneurs
3. Male entrepreneurs
4. Female entrepreneurs

h) According to scale of operation


1. Small scale entrepreneurs
2. Medium scale entrepreneurs

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3. Large scale entrepreneurs

i) Other types
1. Professional and non professional entrepreneurs
2. Modern entrepreneurs
3. Traditional entrepreneurs
4. Skilled entrepreneurs
5. Unskilled entrepreneurs
6. Forced entrepreneurs
7. Inherited entrepreneurs
8. National and international entrepreneurs

According to types of business:

a) Business entrepreneur: they are individual who conceives for a new idea for a new
product or service lending to new business he deals with product development,
marketing, sales.
b) Trading entrepreneur: Trading entrepreneur is one who undertake trading
activities and not concerned with manufacturing work whose only aim is trading.
c) Industrial entrepreneur : Industrial entrepreneur is generally a manufacturer who
understands the potential needs of a customer and a product or service to meet
marketing needs.
d) Cooperate entrepreneurs :demonstrates his innovative skills in organizing and
managing cooperative undertakings.
e) Agricultural entrepreneurs: undertakes agricultural activities such as raising crops,
marketing the crops, fertilizing and other inputs of agriculture. The cover broad
spectrum of agriculture and its related ideas.

According to technology:

a) technical entrepreneur: called craftsman ,develops quality goods. his concentration


is oriented towards manufacturing ,marketing and selling .His main aim is to
develop quality goods with technical ideas.
b) Non technical entrepreneur: he is not concerned with technical aspects of the
product. their main concentration is to develop an alternative marketing and
distribution strategies to promote their business.
c) Professional entrepreneur: is a person whose interest is to establish a business but
does not deal with the management and organizing it. Generally speaking ,they
sell out an established business and starts an other venture.

According to Motivation

a) Pure entrepreneurs: is a person who gets motivated by psychological and not by


economic rewards. He works for his own satisfaction and for his own status.

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b) Induced entrepreneurs: is a person who is induced to take up a task. due to policy


measures that provide assistance, incentives etc., to start up the enterprise many
small scale industries are started by people because of government institutions are
giving support.
c) Motivated Entrepreneur : new entrepreneurs are motivated by desire of self
fulfillment they come in existence because of the possibilities of making and
marketing the new product.
d) Spontaneous entrepreneur :this type of entrepreneur start their business by natural
talents in them. they take their initiatives, boldness and self confidence motivate
them to be an entrepreneur.

According to growth

Growth of enterprise may be termed as low, medium, high and super growth. The
development of a new venture leads to a chance of growth. They are those who take
up industry with substantial growth prospects. On the other hand growth
entrepreneurs shows enormous performance in any venture they take up.

According to stages of development

a) First generation entrepreneur: first generation entrepreneur is one who starts


industrial units by his own innovative ideas and skills.
b) Modern entrepreneur: is one who undertakes those projects that are well needed
and suited for changing the demands.
c) Classical entrepreneur: is one who is concerned with the customer and marketing
needs by developing new ventures.

Others

a) innovative Entrepreneur: is one who sees opportunity for introducing a new


technique of production process or a new product or a new market or a new
service using his innovative ideas.
b) Initiative Entrepreneur: are revolutionary and take a lot of initiative in any work
,he can set in motion the chain reaction which leads to humilative progress. He is
more an organizer or factor of production than a creator.

3.4 Stages of entrepreneurial process :

1. Identification of an opportunity
2. Evaluation of the opportunity
3. Preparation of the business plan
4. Determination and organizing the resources
5. Management of enterprise

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1. Identification of an opportunity: the first step in entrepreneurial process is


identifying the opportunities. This may be from own idea or from external sources
like consumers, business associates, members of distribution, independent
technical organization, consultant etc., consumers are the best source of idea for a
new venture who tells a need of a product or service due to close contact with end
users, members of distribution system, one can identify new business
opportunities through a discussion with a retailer , wholesaler and a
representatives.
Some individuals are highly technical oriented who are not interested in any
entrepreneurship.

2. Evaluation of opportunities : the opportunities identified either by using the input


from customers, business associates, channel members, technical must be
carefully screened and evaluated.
This evaluation perhaps the most critical element of the entrepreneur process. the
evaluation process involves looking at the length of the opportunity, its real and
perceived value, its risk and returns .the length of the opportunity market size
decides risk and gains or profits. SWOT( strength, weakness, opportunities and
threats) is one of the useful analysis tools. Strength and weakness are internal
factors, opportunities and threats are external factors. The risk reflects markets,
competition, technology and capital involved .it is very important for an
Entrepreneur to put forward time and effort to succeed.
Usually planning involves
a) description about product
b) agreement of an opportunity
c) assessment of an Entrepreneur
d) resources needed
e) amount and source capital needs
f) rewards and profits expected
3. development of business plan
it includes the following:
a) title of the project, table of contents and summary
b) description of business and industry
c) technology plan
d) financial plan
e) organizational plan
f) production and operation plan
g) marketing and distribution plan
h) summary of the plan
4. determination and organizing the resources
the process begins with the assessment of present resources. enough care must be
taken not to underestimate the amount and nature of the resources required.

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The risk involved with insufficient or incorrect resources should be calculated.


Alternate source of supply ,process of manufacture are to be planned.
5. Management of enterprise
After the resources are acquired ,the entrepreneurs must use them to implement
business plan.

3.5 Role of entrepreneur in economic development

The role of entrepreneur in economic development involves just increasing the output of
the product and income of the product. It involves in initiating and change in the structure
of business and society. this change give way to growth and higher output that leads to
profit. Innovation plays important role in economic growth of both product and service.
The new capital created expands the capacity of growth and increases the output of man’s
side.
Entrepreneur bridges the gap between science and market. It brings new product and
services in the market. Entrepreneur plays a vital role in economic growth and creating
employment in people.

3.6 Barriers in Entrepreneurship

1. Lack of capital
2. Lack of technical knowledge
3. Economic business cycles
4. Non availability of raw materials and resources
5. Government resources
6. No idea about technology
7. Unstable and unpredictable material
8. Globalization and entry of foreign goods
9. Risks

3. 7 Entrepreneurship in India

The evolution of entrepreneurship in India is the effort of great people as well as


professionals . it started as a family business in 1850 as the cotton mill industry in
Bombay.

Past: in the past the business community was involved in trade and commerce. The
community was known as vaishyas or vanias.

The following points are not worthy with respect to entrepreneurship:

a) Manufacture supply product based on demands.


b) All the family members were involved in business.
c) The industrial activity was controlled by caste system.
d) Skills were inherited from ancestors.
e) Trade System were dependent on caste system.
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Present: there is tremendous growth of industry and services over last 60 years. some of
the not worthy highly talented entrepreneurs in India are Tata, Adithya Birla.

3.8 Identification of business

Business opportunities can be obtained from different sources. For this one has to
evaluate following areas and understand the gap between demand and supply

a) Study of government rules


b) Extensive and in depth study of opportunities
c) SWOT analysis
d) Market feasibility study
e) technical feasibility study
f) financial feasibility study
g) social feasibility study

Sources of business idea

a) Unfulfilled demands provided on to new product.


b) Our own creative idea
c) Social and economic trends
d) Magazine, journals, research etc.,
e) Emerging new technologies
f) Changes in customer needs
g) Trade, fares and exhibitions
h) Bank and government agencies

3.9 Market feasibility study

Includes the following

i. Nature of market: a perfect computation to be studied.


ii. Cost of productions : it is essential to study and control cost of
production to decide selling price
iii. Selling and price and profit : selling price plays a vital role in profit
iv. Demand: demand will decide the facility planning
v. Market share : estimated market share is to be made in order to compare
with other products.
vi. Target market : study is made with regard to target market.

3.10 Technical feasibility study

Includes the following

i. Location of the project : it is very important. It may be located in rural, urban or


semi urban areas.

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ii. Availibilty of raw materials : they are studied.


iii. Selection of machinery : it is required for productions
iv. Construction of factory, building and its size: construction details depends on size
are analyzed.
v. Utilities : the detailed availability of utilities like water, gas, electricity are
studied.
vi. Production capacity: establishment of Production capacity is analyzed.
vii. Staff requirement : study of Staff requirement is analyzed.
viii. Technical viability : Technical viability is studied

3.11 Financial feasibility study [write detailed explanation for sub headings]

Includes the following

i. Total capital cost of project


ii. Source of capital
iii. Subsidiary sources for additional finance
iv. Financing for future development of business
v. Break even analysis
vi. Estimation of cash and fund flow
vii. Return of investment
viii. Proposed balanced sheet
ix. Lost of labour and technology

Social feasibility study [write detailed explanation for each]

i. Location
ii. Social problem
iii. pollution
iv. other problem

Module 4
4.1 Preparation of the Project

4.1.1 Meaning of the project

4.1.2 Project Identification

4.1.3 Project selection

4.1.4 Project report

4.1.5 Need and significance of the project report

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4.1.6 Contents

4.1.7 Formulation

4.1.8 Guidelines by planning Commision for project report

4.2 Enterprise Resource planning

4.2.1 Meaning and Importance

4.3 Functional Areas of Management

4.3.1 Marketing

4.3.2 Sales

4.3.3 Supply Chain Management

4.3.4 Finance and Accounting

4.3.5 Human Resource

4.3.6 Types of Reports and Methods of Report Generation.

4.1.1 Meaning of the project


Project is scientifically evolved as workplan to achieve a specific objectives
within a period of time.

The dictionary meaning f project is scheme,design,proposal that is intended to be


achieved.Each project differs in size,nature,objectives,time and complexities.Project is
unique and not repetitive activities.

Definition

“Project is an approval for a capital investment to develop facilities to provide


goods and services”

-World Bank

“Project is an onb,non repetitive with discrete time,financial and technical


performance goals”

-Harrison

“Project is whole complex of activities involved in using resources to gain


benefits”

-Jillinger
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4.1.2 Project Identification


A project having good market is generally selected as a good project by an
entrepreneur. Identifying project is a crucial step in any business and plays a vital role.

Project identification is selection of data compiling and analyzing. Utilizing the existing
resources and facilities without any change in business is known as additive opportunity.

The opportunities involving new ideas that cause some change in the existing
structure are known as Complimentary opportunities.

Project identification involves the following ways:

1. Observation

It is very important source of project idea. It includes observation on product and service
with the available raw materials or skills to produce good products.

2. Trade and professional magazine

This keeps a person in touch with latest development and trends.

3. Bulletins of research institutions

Provide new ideas based on the findings which is published in bulletins.

4. Government sources

They also provide useful information that helps in identification of new project
ideas.

The project ideas can also be discovered from other sources

a. Customer needs
b. Emergency trends
c. Government policy
d. Ideas
e. Trade fairs
f. Observation of market
g. Competators products
h. Idea by friends and relatives

4.1.3 Project selection

It starts from where project identification ends. One of the well known tool SWOT is used
for analyzing.

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Project selection includes the following:

1. Technology

Is required to develop a project.

2. Equipment

The availability of equipment should be studied.

3. Investment size

Study of investment should be made rationally and accurately.

4. Location

Suitable location for project.

5. Marketing

The product should be marketable.

4.1.4 Project report

4.1.5 Project Need and significance of the project report


Project report is a written document which has a greater significance for the
entrepreneur.

The project report essential serves two functions:

1. A road map that shows direction to the goals.


2. How to achieve them.

4.1.6 Contents

Contents of project reports:

1. General information

The report should contain general information regarding the


company,profile,product details and specification.

2. Parameters

Details of parameters like name,education,qualification,work experience,etc are


provided.

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3. Location

Details like location of project like lease or own are to be indicated.

4. Land and building

Details of area of lands,type of construction,cost of construction,detailed plan are


incuded.

5. Plan and machinary

Detail of machinery like cost,supplier has to be included.

6. Capital requirement and growth

Information about all item of cost should be carefully collected.

7. Operational requirement and cost

Information like fuel,power,labour,utilities,maintenance ,etc are included.

8. Production process

Description like process chart,alternative technologies are provided.

9. Raw material

List of raw materials required,its quality and quantity,sources of supply.cost are


provided.

10. Man power

Details of man power required including skill,semi-skill,cost of man power,cost of


training are provided.

11. Products

Products produced and standards are to be mentioned.

12. Market

Target user,distribution channel,selling-price,estimation sales are included.

13. Economic analysis

Profits,return on investmants,break events,market share are included.

14. Working capital

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Requirement of working capital,source of working capital,nature are to be


provided.

15. Requirement of funds

Breakup of project costs in term of land,building,machinery are to be included.

4.1.7 Formulation
It involves step by step investigation and development of project.

A general set of information given in a project report is listed below:

1. General information

It includes the following:

a. Biodata of parameter

Name and address,qualification,experience are incuded

b. Industry profile

Analysis of industry to which project belongs are included

c. Constitution and Organization

Constitution and organization structure of enteprise are included

2. Project description

a. site

Location of enterprise owned or leased are included.

b. Physical infrastructure

Availability of infrastructure like raw materials and skilled labours are included.

c. Utilities

The details of utilities like power required and requirement of food,water


are clearly stated.

d. Pollution control

The points like nature,scope of dumps,sewage system are mention.

e. Communication system

Details of availability of communication facilities like telephone,fax are included


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f. Transport facilities

Requirement of transport and need of transport are included

g. Machinary and equipment

A complete list of machinery and equipments,source of supply,cost of


machinery are included.

h. Capacity of the plant

The installed and licensed capacity of the plant should be mentioned

 Technology selected and R&D activity


The technology selected,source of technology are to be included

3. Market potential

`Details like demand,supply situation,distribution channels are to be followed

4. Capital costs and source of finance

Detailed estimation of various capital,land,building,plant,machinery,cost of


installation are to be mentioned

5. Assesment of working capital requirement

The requirement of working capital with source of supply should be included

6. Other financial aspects

Like cost of production,projected profits,expected sales,revenues,loss are


included.

7. Economic and social variables

As a part of social responsibility any damage to the society and the cost to control
the damage like pollution control,etc are to be mentioned.

8. Project implementation

At the end,details of schedule of implementation of various task are to be


included.

4.1.8 Guidelines by planning Commision for project report


Planning commission of India issues some guidelines for preparing project reports.The
project formulation involves identification of investment by the enterprise and
administrative ministry of planning commission.

Summary of guidelines by planning commission are presented here:

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1. General information

Includes analysis of industry to which it belongs.The report describes the type of


industry,priority,past performance,role of public sector,funds and information about
enterprise.

2. Preliminary analysis of alternatives

Details like gap between the demand and supply,proposed products,availability of


capacity,list of all existing plans,list of proposed projects are to be presented

3. Project description

The feasibility report should provide description of the technology,process


selected for the projects,selection of locations,plans,population,water
land,environment,pollution are to be provided

4. Marketing plan

Details like marketing plan,demand,target price are to be presented

5. Capital requirement and cost

Information regarding the capital requirement and cost are to provided

6.Operational Analysis

Cost for commercial production are called operationalcost.Cost for raw materials
fuels,salary ets are to be included

7. Financial Analysis

It includes balance sheets,clearance foreign exchange,income tax,incentives etc.

8. Economic Analysis

Social profitability analysis is to be made like foreign trade,direct cost etc.

9. Miscallaneous Aspects

Depending upon the nature and size of operation of particular project and relevant
information may be included.

4.2 Enterprise Resource planning

Enterprise resource planning (ERP) is an enterprise backbone that integrate

1.Business operation and

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2. Information system

within the manufacturing , logistics , distribution , accounting , finance of human resource


of a company it organizes an integrate operation such that information flows to make
optimum use of resources such as men material, money and machine enterprise resource
ranning promises one database, one application and one user interface.

Fig 4.2
Enterprise resource planning As shown in Fig 4.2 gives a real time view for core
business process such as production , order processing and inventory management it
maintains common database management system

Enterprise resource planning tracks business resource such as raw material and
commitment made by business such as purchase orders, no matter which department
has entered the data into system

Enterprise resource planning provides integrated modules of

• Manufacturing

• Logistics

• Distribution

• Accounting

• Finance

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• Human resources

4.2.1 Meaning and Importance


• Reduce paper documents by easy entering and retriving information

• Improve cost control

• Fast response and follow up of customer

• More efficient cache collection

• Better monitoring of queries

• Quick response to change in business operation

• Helps to achieve competitive advantage in business process

• Improve supply-demand linkage with remote location and branches in different


countries

• Provide a unified customer database

• Improve international operations by supporting tax structure , multiple currencies


and language

4.3 Functional areas of Management


MARKETING:

Customer relationship

Interaction marketing and


Production and sales
operation
Human Resource
Manufacturing resource
Compensation analysis
planning Functional
Employee skill inventory
Manufacturing Business
execution systems Personal requirement
Systems forecasting
Process control

Accounting
Finance
Order processing
Cash Management
Inventory Control
Accounts receivable Investment management
payment and ledger
Capital and financial budgeting
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Fig 4.3 Functional areas of Management


• Marketing

As shown in the figure is concerned with planning promotion and sales also
development of new product

• Interactive marketing

Where customers become the partners in crediting, marketing , purchasing , improving


products and services

• Sales force automation

Use mobile computing and internet technologies for sales , support and management

• Other systems

Assist marketing manager in customer relationship management , product planning ,


rising , sales promotion forecasting etc

• Interactive marketing

Uses internet , intranet and extranet which establish 2 way transaction between
customer and business

• The goal is to use those networks and make customers as partner in business

Customers actively engage in all the process using technologies like chat, discussion
groups ,web forms , emails , instant messaging etc

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4.3.3 Supply Chain Management (SCM)

Commit Schedule Make Deliver


Supply chain

Life cycle

Strategic Forecast and demand planning


Supply chain Sourcing Customer order fulfillment
Management and
Procurement
Distributive network and warehouse operations
Production Transportation and shipment
logistics Management

Shared Market data Collaborative fulfillment

SCM solution Supplier Manufacturer Retailer Customer

Fig 4.3.3 SCM

Supply chain life cycle (supply chain management fig 4.3.3)

Supply chain management helps company get right product to right place at right
time.

The main goal of SCM is efficiently management demand , inventor , network of


business relationship customer , suppliers, distributors and others

Main goals of SCM is to create fast , efficient ,low cost network of business
relationship is also called supply chain which is also called value chain . The fig
above explain the business process of supply chain life cycle

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4.3.3 Human Resource

Human resources:

• Recruitment, selection

• Job placement

• Performance appraisals

• Employee benefits

• Training and development

• Health safety security

4.3.5 Accounting

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Human resource information system designed to support

1.Planning to meet the personal needs of business

2.Development of employee

3.Control of policies and programs

Most HR's supports recruitment ,selection, placement, beneficiary development , safety ,security
etc

4.3.5 Finance

Computer based financial management as shown in the figure supports business managers and
professionals, They support:

1. Financing of the business

2. The allocation and control of financial resources with a business

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3. Major financial management system (MFMS) categorize which include


cash,investment,capital,budgeting and financial planning marketing.

4.3.6 Reports
The research report has a very important role to play in the entire research process.it is a
concrete proof for the study that was undertaken.It is the one way communication by the
researcher to the reader.

The significant role the report can play is as follows

 The research report documents all the steps followed right from framing the
research question to the interpretation of the findings.
 Each step also includes details on how and why that step was conducted.The
justification for choosing one technique over the other.
 It also serves to authenticate the quality of the work carried out and establishes the
strength of the findings.
 The report gives a clear direction in terms of the implication of the results for the
decision maker.
There are two types of reports
Brief report
 Working papers or basic reports
they are written for recording the process carried out in terms of scope and
framework of the study, the methodology followed and the instrument designed,
The results and findings could also be recorded.
 Survey reports
It might or might not have an academic orientation. The focus here is to present
findings in easy to comprehend format that includes figures and tables.

Detailed reports

These are more formal and could be academic ,Technical or business report

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 Technical reports :These are major documents and would include all elements of
the basic reports ,as well as the interpretations and conclusions ,as related to the
obtained results.
 Business reports : These reports include conclusions as understood by the business
manager.

4.3.7 Steps Involved in report writing

Preliminary Section
Title Page
Letter of Authorization
Executive Summary
Acknowledgement
Table of Contents

Back Ground Section


Problem statement
Study Introduction and
Literature Survey
Scope and objectives of
the study
Review of Literature

Methodology Section
Research design
Sampling design
Data analysis

Finding section
Results
Interpretation of results

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Conclusion section
Conclusion and
recommendation

Appendices

Glossary of terms

Bibliography

Module 5
5.1 Micro and Small Enterprises:
5.2 Definition of micro and small enterprises.
5.3 characteristics and advantages of micro and small enterprises.
5.4 steps in establishing micro and small enterprises,
5.5 Government of India indusial policy 2007 on micro and small
enterprises, case study (Microsoft), Case study(Captain G R
Gopinath),case study (N R Narayana Murthy & Infosys),
Institutional support:
5.6 MSME-DI.
5.7 NSIC.
5.8 SIDBI
5.9 KIADB
5.10 KSSIDC
5.11 TECSOK
5.12 KSFC
5.13 DIC and District level single window agency

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5.14 Introduction to IPR.

Module 5
5.1 Micro and Small Enterprises:
5.2 Definition of micro and small enterprises.
5.3 characteristics and advantages of micro and small enterprises.
5.4 steps in establishing micro and small enterprises,

5.5 Case Study 1: AMAR GOPAL BOSE:


 Entrepreneur for Bose Corporation to 1964
 Most of equipment developed for Military purposes
 He is an Electrical and Sound Engineer
 He was one of the 271th richest man in the World
 His main product was speakers, car audios
 In 1968,he developed direct reflecting speakers
 In 1989,he was awarded with Excellence Teaching award in MIT.
 In 1995,he was received with Junior Bose Award.
 In 1980,he developed Electromagnetic replacement for automatic shock observers.
 He was specialist in developing small speakers.
 Specialized product in Bose Corporation.
1. Car Audio
2. Noise Cancelling Headphone
3. Smart phone Applications
4. Automatic suspension systems
5. Seat suspension for large vehicles.

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Case Study 2:MICROSOFT


 Bill Gates is the founder of Microsoft
 Co founder of Microsoft is paul Allen.
 Founded in April 4, 1975.
 Their first product was Basic Computer.
 Their main intension was to produce Personal Computer.
 In 1983,Paul Allen resigned,
 From 1983, Jon Shirley became the vice president and started developing Mouse
and DOS.
 In 1985,Bill Gates became top Billionaire (31 years).
 Bill Gates was an Investor, Writer, Philanthropist apart from being the founder of
Microsoft
 In 1986, SQL servers was introduced.
 In 1990, Jon Shirley retires and Michael became the Vice president.
 In 1992,Microsoft introduced windows 3.1
 In 1994,Microsoft released Windows NT
 In 1995,Microsoft launched Windows 95
 In 1997, anti-trust cases were filed against Microsoft.
 In 2001, developed Windows XP.

Case Study 3:Role Of Government In SSI


 SSI-Small Scale Industries.
 Also known as MSME (Micro small medium Enterprise).
 Developed in year 2006.
 Backbone of whole economy ,provides finance to people.
 Importance:
1. Partner in nation Building
2. Customerized Products
3. Employment to local people
4. Creation of job
5. Discipline into Industry.

 Advantages of SSI:
1. Privacy
2. Profits
3. Decision making
 Disadvantages :
1. Lack of Finance
2. Lack of Liability
3. Lack of Continuity
4. Limited scope of expansion

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 To support SSi, government has started this Organisation:


1. Government provides separate training sessions, raw materials, technical
teaching to SSI.
2. Presently focuses on Technical Teaching.
3. Marketing sessions also handled by government by providing exhibitions
in other states/ countries.
4. Only Nationalized banks give financial support .
5. Government of India has recently launched Ambitious Estate Industrial
Programme.
 Financial needs of SSI:
1. Equity or risk capital.
2. Investing our own money.

 Loan or borrowed capital


1.Further categorized to long capital and short capital

 Financial Structure should have


1.Low investment and high profit.
 Two types of SSI:
1. Traditional
2. Modern

Case Study 4:Capt.Gr Gopinath:


 Gorur Ramaswamy Iyenger Gopinath.
 Born on November 13,1951,Gorur,Hassan.
 NDA-National Defence Academy.
 1971,Bangladesh Liberation War
 1971,he took retirement
 In 1997,Deccan Aviation –cofounder
 In 2007,sold for King Fisher
 In 2003,he founded Air Deccan –a low cost airline
 In 2009,Deccan 360
 Awards:
1. 1996,Ralex Award
2. 2005,Rajyotsava Award
3. He wrote a book “simply fly” in 2010-Cellins business
 He was an author ,ex-politician apart from being an eneterpreneur.
 He was a Loksaba candidate from 2009 and 2014.

Case Study4:Shahnaaz Hussain:


 Successful woman Enterpreuner

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 Have a trademark name in her product ‘shahnaz’.


 1971-Investment of 35000
 2006-Padmashree Award
 Products were sold over 138 countries
 Most of her products representation was done in 1980 in London.
 She was the first pioneer in Vocational beauty of India
 35 years ago,she gave free training for physically challenged impaired people.
 She also wrote a book for a physically challenged impaired people
 Using Ayurveda as base stage, she developed 375 products
 Some of the product are Eyeliner, facewash , anti-wrinkle treatment
 Shanaaz has too franchize all over India
 She also has herbel business school
 Awards:
1. 1989-Bharat Nirman Award
2. 1995-Rajiv Gandhi Sambhavana for promoting Ayurveda
3. 1996-World’s greatest Enterpreunership Award
4. 2006-Padmashree Award from APJ Abdul Kalam
 Women of the year Udyog Award.
5. 2008-Leonard Vinel Award
6. 2011-Indian Achiever’s Award
 Asian’s leading women

7.2012-Outstanding Ayurvedic Innovation Award


8.2014-Golden peacock Enterpreunership Leadership Award

Case Study:6: DR DEVI PRASAD SHETTY:


1. He was born on 8th May1953,Mangalore
2. He wanted to become a heart surgeon when he was in 5th grade at school
3. He was a cardiac surgeon and was trained at Guy’s hospital in the United
Kingdom.
4. He was inspired b Mother Teresa
5. Narayana Hospital was founded by him
6. He also started Telemedicine and was expertized on all over the world.
7. He provide visa test for providing external treatment from other countries.
8. Awards he won:
 Padma Bhushan award for medicine in 2012
 Schwab found actions award in 2003
 Sir M Vishveshvaraya memorial award in 2003
 Ernst and young Enterpreuner of the year in2003
 Karnataka Ratna Award in 2001
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 Padmashree award in 2004


 Social Enterpreunership award from world economic forum in
2005
 Rajyotsava award in 2002

5.5 MSME-DI.
5.6 NSIC.
National Small Industries Corporation LTD this is one of the oldest
agencies set by the central government 1955.
Nature of support
Wide ranging industrial inputs.
Objectives
(i)To promote ,aid and foster the growth of SSI in the country with a focus
on commercial aspects.
(ii)To enable the small scale Industries to gain competitive advantage and
to contribute effectively to the development of the economy.
(iii)To evolve special schemes to meet the needs if handicapped,Scheduled
castes and Schedule tribes .
Functions

(i)To provide machinery on hire-purchase scheme to SSI

(ii)To procure government orders for small scale units.

(iii)To develop small scale units as ancillaries to large industries.

(iv)To import and distribute scarce and rare raw meterials among actual
users in the small scale sectors.

(v)To undertake the construction of industrial estates.

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(vi)To help exporting products of SSI

(vii)To develop prototype of machines and equipment and pass on the know
how to SSI.

(viii)To set up SSI in other developing countries.

5.7 SIDBI
Small Industries Development Bank of India ,It was established in 1990 under the act
of Indian Parliament as a principal financial Institution.
Nature of support
Financial services and other support services.
Objectives
(i) To promote ,finance and develop small scale sector in India.
(ii) To Coordinate the functions of other institutes engaged in similar activities.
(iii) To finance industrial infrastructure projects

Functions

(i)To provide finance assistance to

New projects

Expansion of projects

Modernization of projects

(ii)To initiate steps for technological up gradation and modernization of existing units.

(iii)To promote rural industrialization

(iv)To provide channels for marketing SSI products in India and Abroad.
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5.8 KSSIDC
Karnataka state small scale Industries Development Corporation
Nature of support
Infrastructure and industrial inputs.
Objectives
(i)To assist small scale industries in the procurement of raw meterials.
(ii)To take up any activity aimed at rapid development of small scale industry
Functions
(iv) To establish and manage industrial estates.
(v) To procure and distribute scarce and rare raw materials to various SSI
(vi) To provide assistance towads marketing of products from various SSIS
(vii) To Organize national level and international level exhibition and
facilitate exchange of information
(viii) To Supply machinery under hire purchase scheme
(ix) To provide guidance to SSI entrepreneurship
(x) To provide Technical library facility to help entrepreneurs in their work.
(xi) To provide Laboratory.

5.9 KIADB
Karnataka Industrial area development board.This is a statutory body established in
1966 by government of Karnataka.

Objectives

(i)To establish Industrial areas and promote rapid and orderly


establishment of industries in the state of Karnataka.
(ii)To provide infrastructural facilities and amenities to SSI
(iii)To assist in implementation of government policies.

Functions

(i)To acquire lands for industrial activity at identified and notified


Locations and form industrial area with all infrastructure facilities like
Road ,Electricity, water.
(iii)To acquire lands per single unit complexs for government

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organizations and facilitate government projects.


(iv)To provide all infrastructure facilities to such industrial areas.
(v)To maintain the infrastructural facilities during the contractual
period.

5.10 TECSOK
Technical Consultancy Services of Karnataka,It was established in 1976 by the
government of Karnataka.It is located in basava bhavan basaveshwara circle
,Bangalore.
Nature of support
Multi disciplinary technical ,industrial and management consultancy.
Objectives
(i) To provide reliable consultancy support for entrepreneurs to startup self
employment ventures in Karnataka.
(ii)To provide consultancy services to the various departments and agencies of state
and central governments.
Functions
(i)To identify investment opportunities which are location-specific.
(ii)To assist entrepreneurs in obtaining stationary and procedural clearances.
(iii)To carry out feasibility studies and environmental impact studies.
(iv)To assist preparation of detailed project reports as per investment norms and
financial norm.
(v)To carry out market survey and research specific to industry needs.
(vi)To assist in project implementation and extend turn key assistance.
(vii)To help in reorganization and restructuring of employees
(viii)To diagnose sick units and suggest rehabilitation measures.

5.11 KSFC

Karnataka state financial corporation established in 1951 through state financial


Corp-Act 1951
Objectives
(xii) To cater to financial requirements of small scale units.
(xiii) To extend medium and long term credits to units which fall outside the
purview of Industrial finance Corporation and Public sector Banks.

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Functions

(i)To provide long term finance to small and ,medium sized industrial units organized
on different ownership basis such as proprietorship,partnership,cooperative,public or
private.

(ii) To provide finance to service oriented enterprises such as travel agencies,car


rentals agencies ,hotels tourism related activities.

(iii)To take over Sick SSI Units and auction them to entrepreneurs willing to rebuild.

5.12 DIC and District level single window agency


Expanded as “District Industries Centre”. It was launched in 1978.
Nature of Support
Information and consultancy services ,Industrial Inputs.
Objectives
(i) To effectively promote cottage and small scale industries in rural areas and
small towns.

(ii) To act as Single window Agency to help entrepreneur with all the information
under one roof.
(iii) To serve as an integrated administrative framework at the distinct level for
industrial development.

Functions

(i) Surveys :To carry out surveys to assess the potential of a district with respect
toindustrial development taking into account availability of raw
material,manpower,infrastructure demand for a product .This survey provides
a basis for advising budding entrepreneurs.
(ii) Action plan: To prepare an action plan for industrial development of the
district
(iii) Appraisal : To appraise various investment proposals received from
entrepreneurs
(iv) Guidance:To guide entrepreneurs in selecting appropriate machinery and
equipment

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(v) Marketing:To assist entrepreneurs in marketing their products and assess the
possibility of export promotions
5.13 Introduction to IPR.
Intellectual property rights: Explain topics
(i) Patents
(ii) Trade secrets
(iii) Trade marks

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