Expected answer of business studies

Expected answer of business studies
March 2004 set-3
1) Differentiate between ‘marketing’ and ‘selling’ on the basis of (a) meaning and (b) emphasis.

Differences between marketing and selling
POINT OF DIFFERENCE MARKETING SELLING

1.MEANING Marketing mean all customers want satisfactory efforts concerning with planning pricing promoting product and selling. Selling is the transfer of the ownership and possession of the goods to the purchasers.

2.EMPHASIS
Marketing - Emphasis is on the satisfaction of customers wants effectively
Selling - Emphasis is on the product.

2) Explain in brief, the term ‘directing’ as a function of management.

Directing as a function of management is concerned with instructing, guiding, and inspiring people in the organisation to achieve its objectives
It involves overseeing people at work, making provision for necessary facilities and creating a work environment whereby employees may perform to the best of their abilities

3) What is meant by the product concept of ‘marketing’?

It is true that customers want to buy high quality product but only when they need them. This product concept says that goods produced by business unit shall have high quality and improve them overtime.

4) Explain, in brief, ‘management’ as an activity.

The word activity implies doing something like reading, writing, etc. While doing so the material resources and human efforts are integrated in such a way that there is minimum wastage of material time and energy.

5) Give two examples of the impact on business organizations of changes in social environment.

The following are two examples of the impact on business organizations of changes in social environment: -
(1) Some years ago the manufactures of vanaspati ghee used to import animal fat for manufacturing vanaspati ghee. On the basis of the strong public protests the government cancelled the import license of these manufactures.

(2) Raise in middle class influence the investing public in corporate sector and continuing demand potential for variety of consumer items.

6) Explain briefly any three important features of advertising.

a) Reach: - Advertising can reach a large market. One commercial aired through All India Radio or Doordarshan has a potential to reach a very large customer.
b) Choice: - Advertising can be possible through a wide variety of media like video, audio or audio-visual.
c) Legitimacy: - When the products or service are promoted through advertising, the message is presented publicly to the audience, it makes legitimacy in the eyes of the prospects.

7) Explain any three sales promotion activities commonly used by marketers.
Three sales promotion activities are: -
a) Rebates: - Some times, the product is made available at special prices less than original price for limited period of time by business unit.
b) Discount: - This is like price promotion, in which certain percentage of price reduced as discount from the list price .The purpose is to induce them to buy or buy more.
c) Refund: - In these days the sellers’ offers to refund a part of price paid by the customer on the production of some proof of purchase.

8) Explain any three reasons as to why proper understanding of management principles is necessary.
Understanding of management principles is necessary because: -
a) Achieve results economically: - Management principles help in setting realistic objectives for the business, therefore effort could be made to get result economically.
b) Optimum utilization of resources: - Managers are capable of making proper use of the available resources of the business. This is possible if activities are planned in advance and organized systematically.
c) Social responsibility: - Business has responsibility towards different interest groups (society, workers, customers, and insurance). The management principles fair to all suggest that organization must take care of the interest of all including social commitments.

9) “Leadership is required only for less efficient subordinates.” Do you agree? Give any three reasons in support of your answer.
No, I do not agree with this statement because: -
Leadership is must be ahead of the group if plans are to be performed well. There are reasons: -
a) Helps in guiding and inspiring employees: - A leader by exercising his leadership creates an urge in the employees for higher Performance and helps in the attainment of organizational goal.
b) Secures co-operation of members of organisation: - Managers are successful only when they secure willing corporation of their subordinates. As leader, managers persuade employees to work enthusiastically and with confidence.
c) Creates confidence: - sometimes individuals fail to recognize their qualities and capabilities. The leader creates confidence among them because of his insight, understanding and ability to handle situations.

10) Enumerate any three advantages and three disadvantages of “formal communication”.
Advantages of formal communication: -
a) Systematic: Formal communication is systematic and ensures orderly flow of information and ideas.
b) Authentic: The source of communication can be easily located.
c) Fixing of Responsibility: Responsibilities of action taken on the basis of any formal communication can be easily fixed.
Disadvantages: -
i) Slow moving process: Formal communication following the scalar chain of authority is slow moving process.
ii) Lack of Personal Touch: Personal warmth and touch is lacking in formal communication.
iii) Lack of Freedom: Free and frank opinion cannot be expressed just to avoid criticism and confrontation.

11) The directors of a newly established company having paid up equity share capital of Rs. 2.5 crores, desire to get its shares traded at an All India level stock exchange. As finance manager of the company, suggest the name of the stock exchange for the purpose. Give any three reasons in support of your answer.

As finance manager of the company having Rs. 2 crores paid up equity share capital, I suggest that NSEI (National Stock Exchange of India) is the best stock exchange where a company share can be traded, if the company already listed. Means the inclusion of securities permitted to be traded as per the official list of the stock exchange.

My suggestions are based on the following reasons: -
a) Nation-wide coverage: - The NSE has a nation-wide coverage. Prior to the setting of this, all stock exchanges in India were regional. They operated in a limited jurisdiction, situated in large cities. Investors could not avail the facilities easily. But with the NSEI we have to merely visit to only NSEI dealer.
b) Ring-less: - The NSEI is ring-less and there is no trading floor. Trading of securities is to be done through a network of computers of NSEI dealers, located in differential cities.
c) Transparency: - All transaction on NSEI are electronically conducted and fully computerized; since the NSEI is screened based Investors can check the exact price at which the transaction occurred.

12) Which method of wage payment – time -rate or piece -rate -would you adopt in each of the following situations? Give reasons in support of your answer.
a. Where rate of output is determined solely by machine and not by operation.
b. Where production process requires high degree of skill.
c. Where work flow is regular,
d. Where quantity of output is more important than its quality

a) Time rate system is more suitable because workers have no control over the rate of output.
b) Time - rate is more suitable as the job requires a high degree of skill. The worker would not be in a hurry to complete his job and would maintain the degree of skill and quality desired.
c) Piece - rate is suitable because any increase or decrease in the speed may upset the whole production process
d) Piece rate is suitable because, when quantity of output is more important than its quality.

13) State any two developmental functions and any two regulatory functions of the securities and Exchange Board of India (SEBI).

Developmental functions of SEBI: -

I. SEBI promotes training of intermediaries of the securities market.
II. SEBI permitted internal trading in a limited way through registered stockbrokers.


Regulatory functions of SEBI: -
I. SEBI registers and regulates the working of mutual funds etc.
II. SEBI regulates takeover of companies.

14) Which principles of management envisage that each group of activities having the same objectives must have one head and one plan? Explain the principles with a suitable example.

“Unity of direction” is the principle. According to Henri Fayol the efforts of all the members of the organization should be directed towards common goal. For example: - suppose an automobile company has three divisions: - cars, scooters, and three wheelers. Now, each division must have its own targets. Since, each product has its own market and problems. Each division must plan its targets as per its environmental conditions to achieve better results. Thus the principle of unity of directions emphasises the importance of common goal being persuade by all in a group activity under the direction of one head.

15) “Authority can be delegated but responsibilities cannot”. Explain this statement, in brief.
According to the principle of absolute responsibility, authority can be delegated but responsibility cannot be delegated by a manager. The managers remain responsible to his own superior for the tasks, which he may assign to his subordinate. In other words, the managers cannot escape from responsibility for any default on the part of his subordinates. The process of delegations does not relieve the managers of his own responsibility. Every superior is responsible for the act of his subordinates to whom he delegates authority for any work. For example: - If the foreman fails to get 200 units produced by the workers on any day, he is responsible to his superior He cannot escape by saying that the workers were at fault.

16) Explain, in brief, any five economic changes that have been initiated by the Government of India since 1991.
The Government of India has been going through a process of economic reform and liberalization from 1991.
The five economic changes are the following: -
1. New Industrial Policy: - A number of industries have been liberalized from the clutches of licensing and comfort. Substantive changes have been introduced in matters like foreign investment and technology import.
2. New Trade Policy: - The Govt. of India changes trade policy like –removal of Import Licensing, liberalization of all import except small non-permitted list of items, abolition of export duty; simplifying export procedures, introducing of partial convertibility of rupee.
3. Fiscal Reforms: - The fiscal reforms centered on reduction of fiscal deficits and reforms of the taxation system, corporate and personal. Income tax was scaled down, substantial reduction in the excise and import duty.
4. Monetary Reforms: - The Govt. carried out a phased reduction of structure liquidity ratio (SLR) and permitted degree flexibility to the bank in the matter of deposits interest rate equity was permitted. Allowed setting of new private sector bank.
5. Capital market reforms: - The Govt also carried out channel of reforms in respect of the capital market like; Removal of restriction on interest rate on debentures, public sector bonds, allowing free prices of shares, liberalization of bonus issue allowing private sector to set up mutual funds.

17) “Administration is a part of management”. Explain the view.
“Administration is a part of management”
According to this view, management means the entire planning, policy making and co-ordination of efforts, controlling the operation and maintaining the discipline for the efficient and smooth functioning of a business enterprise. It means management involves effective planning, policy making, fixations of targets and operational functions of providing men, money and material to carry out the policy and run the day-to-day activities of the enterprise smoothly and systematically for producing tangible result in the process of work. According to this opinion management involves: -
1. Responsibility for policy formation
2. Responsibility for planning organizing, directing and controlling
3. Responsibility for supervision.
So, finally we can say that an administration is more important in top level. As one moves down the layers of the organization Managerial functions become more and more important.

18) Explain, in brief, any five factors that should be taken into consideration while determining capital structure of business enterprises.
Factors determining capital structure: -
a) Financial Leverage: - The most important factor in deciding capital structure is the impact of financial leverage/ capital gearing on the owner of the company. This is possible only if the rate of interest on the debt is less than the rate on the investment.
b) Cash Flow Ability: - Capital structure also depends upon ability of the business to generate enough cash flow to meet its fixed commitments. The fixed charges are interest on debt, dividend on preference capital and principal amount of loan which have to be paid .So company must earn sufficient profit.
c) Comfort: - The equity shareholders have a say in the management of a company. Debenture holders, preference shareholders have no right, a limited right to interfere in business affairs. If the company thinks to change in managerial control better to raise fund through issue of debenture or loan from financial institution.
d) Flexibility: -A company should be able to adopt its capital structure to changing conditions, when required the capital structure should be flexible enough to raise additional fund without undue delay and cost. Additional fund may be raised in the form of debt or share capital.
e) Market condition: - The capital structure depends upon the condition in the capital market, the mood of the investors and the internal condition of the company. The company should decide on the alternative method of financing and choose an appropriate mix. Whenever the company requires additional fund.

19) Explain briefly the various steps involved the process of controlling.
The steps involved in the processes of control are: -
1. Establishing standards: - The first step in the control process is the setting of standards of performance; standards are the criteria for judging results. They are the yardsticks of performance and specify what should be accomplished.
2. Measuring Performance: -The second major step in the process is the measurement of performance. It means evaluation of the work actually done and result achieved. Measurement is most useful if actual performance is expressed in the same units as the planned targets or standards.
3. Compare Performance Against standards: - comparisons of actual performance with the planned targets or standards involve two steps.
(a) Finding the external of deviations.
(b) Identifying the causes of such deviations.
4. Taking corrective action: - The purpose of control is not only to defect errors and defects in the performance of work but also to adopt remedial measure. Corrective actions are, therefore initiated on the basis of factor causing deviations between standards and actual results.

20) Though one of the effect of under-capitalization is that the market value of shares goes up, yet under-capitalization is not considered good for the company.” Do you agree with the statement? Give reasons.

Yes, I agree with this statement because other effect of under –capitalization of a company are: -

1. Increase in number of competitors: - Rate of profit is high in an under-capitalized company. Impressed by it several new competitors enter the market. On account of increase in number of competitors, the profits of these companies are adversely affected.
2. More govt. interference: - the consumers treat large profits of undercapitalised companies as their exploitation. They feel that, high price are charged from them for the product of the company. They complain to the Govt. against this exploitation. Consequently, Govt. is compelled to interfere in the affairs of the company.
3. Payment of more taxes: - Since these companies earn high profits, they are made to pay large sums by way of co-operate tax.
4. Demand of more remuneration by the employees: - Because of high profits earned by these companies their workers and employees make demand for raise in wage and salary structure. If this demand is not met, they get disappointed and frustrated which affect their efficiency adversely.

21) Explain the following rights of consumers:
1. The right to safety
2. The right to consumer education, and
3. The right to be heard.

OR
Explain any four ways and means of consumer protection followed in India

1) The right to safety: - This is protection against risk to life or any danger of damage to life. Manufacturing defect etc. if any, detected by the consumer causing damage should be reimbursed. For example: - electrical goods, pressure cookers etc.
2) The right to consumer education: - Consumer education refers to educate the consumer constantly with regards to their right. In other words, consumers must be aware of the right they enjoy against the loss they suffer on account of goods and services purchased by them. Govt. has taken several measures to educate the consumers.
3) The right to be heard: - The consumers should be assured that complaints or grievances regarding a product or services would be considered. Newspapers, consumer associations encourage dissatisfied consumers to write about product. Thus, the right to be heard should be available to every consumer.

OR
Ways and means of consumer protection
1) Lok Adalats: - The concept of lok adalats, in India is catching up fast. Here, aggrieved parties can directly approach these adalats with their grievances. Issues are discussed on the spot and decisions are taken thereafter, DTC. Indian railway, D.D.A. hold lok adalats from time to time to sort out the problems faced by users.
2) Public Interest Litigation: - The concept of PIL is any person can move to the court in the interest of the weaker individual or a group who or which nay not be in a position to seek legal remedy on his / their own. So PIL provides legal representation to unrepresented groups and interests
3) Environmentally friendly product: - The ministry of environment and forests has introduced the “Eco –mark” scheme. The scheme authorizes Producers to use the eco –mark label with the symbol of an earthen pitcher if the products satisfy the condition laid down regarding the production processes and use of environmentally friendly material.
4) Redressal forums and consumer protection councils: - Under the consumer protection act, 1986, a judicial machinery has been set up to deal with consumer grievances and dispute. The district forums state commissions and national commission are constituted to provide for a simple, speedy and inexpensive redressal of consumers grievances.

22) Explain briefly any six points, which highlight the importance of planning.
OR

Explain in brief the meaning of policy and rule as types of plans and give any four point of distinction between them.

Importance of planning are: -
1. Offsetting uncertainty and change: - Planning is necessary because of future uncertainty and change. Manager must look ahead, anticipate change, consider the impact of change, and develop appropriate responses, Planning reduces uncertainty. It also clarifies the consequences of action, manager might take in response to change.
2. Focusing attention on objectives: - planning is directed towards the objectives of the business undertaking. Therefore, the attention of every manager is focused on these objectives in the very course of performing their respective planning functions.
3. Gaining Economical Operation: - Planning works for efficiency and economy in operation planning is concerned with the predetermined and well thought out course of action. Therefore it helps in avoiding chaos, confusion, and disorder and therefore waste of resource.
4. Established co-ordinated efforts: - Planning gives direction to manager and non-managers. When the employees know where the organization is going and what they must contribute to reach the objectives, they can co-ordinate their activities, co-operate with each other, and works in teams.
5. Encourages innovation and creativity: - Planning is thinking in advance and therefore, there is a scope of finding better and different method and procedures to achieve the desired objectives. This forces managers to think differently from the present.
6. Facilitating control: - Plans provide standards for controlling employees’ performance. Executives cannot have a check on the accomplishment of their subordinates without planned goals.
OR

Policy: - A policy specifies the organization’s general response to a designated problem or a situation. Example -- a school admission office might establish a policy that admission will be granted to those applicants who have a minimum score of 60% marks.

Rules: - Rules spell out specific required action or non-action allowing no discretion making. They do not allow any deviations. Example: - No smoking, No admission without permission etc.

Differences between policies and rules
S.No. POLICY RULES
1) Policies are a general statement. Rules are the most specific statements.
2) Policies guide to decision making Rules guide to behaviour
3) Lay down management attitude. Indicates what should or should not be done.
4) Flexible may have some exception. Rigid no exception or deviations

23) What is an Informal organization? Distinguish between formal organization and informal organization on the basis of;
a. purpose, b . Behaviour of members, c. adherence to rules, and d. stability
OR

Explain in brief any six points, which highlight the importance of decentralization in an organization.

Informal organization originates from within the formal organization to meet the cultural and social need of members of the operation when several organizations individually work together for achieving certain organizational good, they come to know each other’s cultural interest and needs. They associate informally to fulfil such interest to need. The network of those social groups based on friendship is called informal organization.

Differences between Formal and informal organisation
S.NO. BASIS FORMAL ORGANISATION INFORMAL ORGANISATION
1) Purpose To achieve planned organizational goals To satisfy social and cultural needs and fulfil common interest.
2) Behaviours of members Standards of behaviour and performance are prescribed and enforced by management.
Standards of behaviour and performance are evolved by mutual consent among members called groups-norms.
3) Adherence to rules Violation of rules may need to penalties. No such punishment at the violation of rules.
4) Stability It is stable and predictable Neither stable nor predictable

“ OR”

IMPORTANCE OF DECENTRALISATION

1. Reduction in workload of top executives: - In a decentralized organization top executives are not engaged in common, day- to-day problems. Therefore, they have enough time to plan ahead, develop new strategies and concentrate in co-ordination and control.
2. Improving motivation: - A decentralized organization improves motivation of employees because it encourages lower levels to take decisions without seeking approval from higher levels.
3. Improved teamwork: - In decentralized organizations managers at different levels are given autonomy. They make special effort to seek the participation of subordinates in decision making have constant, open communication and take personal interest in their welfare.
4. Executive development: - Lower-level managers learn the art of exercising decision-making authority; prepare them for promotion to higher levels. This leads to development of future executives.
5. Quick decision making: - Since decision making authority is entrusted nearest to the point of action quick decision making is facilitated; it provides competitive edge to the company
6. Promotes initiative and creativity: - Managers with greater degree of autonomy take initiative; develop better ingenious ways of doing the work; thereby creativity and experimentation are encouraged.

24) Explain in brief any six steps involved in the process of Selection of employees.
OR
Explain in brief any six external sources of recruitment of workers?

Selection process involves the following steps: -
1) Scrutiny of Application Received: - As per requirements received from various departments applications are invited and applications received are closely screened; those applicants who do not possess the requisite qualification are kept out of the list of candidates.
2) Preliminary interview: - After scrutiny of application personal department conduct first interview. This interviews questions cover points such as educational qualification, experience, age, place of residence, marital status (whether married or unmarried)
3) Specialised Application Form: - After clearing preliminary interview specialized application form are given to candidates. The form of application varies according to the requirement of the job. Specialized applications are –
a. They should be as brief as possible in keeping with the need of adequacy
b. They should cover only those point in definite forms
4) Testing: - There are different “tailor made tests”, i.e. standardized tests are available for this purpose. It helps in improving the accuracy and effectiveness of proper selection of such candidates. There are some important tests – (a) Trade test (b) performance test (c). Psychological test
5) Interview: - It is a selection tool of major importance for nearly all jobs. This is to use to select skilled and technical jobs, which is already mentioned in specialized application form.
6) Checking references: - Generally a reference is demanded by companies’ means. If a candidate has submitted a work experience certificate the company sends a person to enquire about his character and reputation. Company may use telephone, postal service or personal visit by a person.
7) Medical examination: - Almost in every organization it is the practice that to select a candidate, it is ensured that have he must be a clear physical fitness. Candidates are checked up by a medical officer examination. Final selection is then made.
“ OR”

External sources of recruitment of workers: -
1. Recommendation of the present employee: - Many firms encourage their employees to recommend the names of their relatives, friends and acquaintance for employment.
2. Factory gate: - sometimes, a large number of jobs seekers assemble every day at the gate of the factory. Those are the unskilled workers, selected on immediate requirement by foreman.
3. Jobbers and contractors: - Many industries in India secure their manpower requirement through jobbers and conductors. Jobbers are ready to supply required number of workers to the company on payment of commission.
4. Collages, universities, technological institution and school: - All these institutions are very useful source of employees for full range of jobs. They pick up young and talented persons. Mostly those institutions have their own employment and guidance bureau with the sole objective of providing employment to their students.

5. Employment exchange: - Public employment exchanges are an important source of recruitment from outside. Job seekers get their names registered in those exchanges. Employment exchanges keep in touch with the employers. On request of employer, Employment exchange sends the name of registered candidates, who are having the desired qualification and experience.
6. Media advertising: - Advertising is an extremely popular method of recruiting staff. The advertiser can choose the most appropriate newspaper or a journal for the post being advertised. For example: -If an accountant is needed, the post may be advertised in an accountancy journal, or employment news / ‘Rojgar Samachar’.

25) ”Advertising costs are passed on to the consumers in the form of high prices” and some “advertisements are in bad taste”. Do you agree? Give reason in support of your answer.
OR
Explain, in brief the factors that are taken into consideration while taking decision on pricing the product.

A. Advertising costs are passed on to the consumers in the form of high price”.
No, I don’t agree with this agreement. The most serious objection to advertising is that all these costs, production and marketing are summed up and covered in the selling price. This is true no manufacturer pays for the advertising costs out of his own pocket. On the other hand, advertising increases market efficiency by increasing demand. Since demand is increasing, sales go up and manufacturer can go in for large-scale production and thus, take advantages of economies of scale, economics of scale further lead to reduction of costs and therefore, lower prices. Ultimately consumers not pay from their pocket.
B. Some advertisement in bed taste”
Yes I agree with this statement, there are certainly some advertisement which are not prepared with care and concern for other people test sometimes the manner in which somebody is speaking in an advertisement may not appeal to everyone. Advertisement showing women dancing when not required or women running after a man because he is wearing a particular suiting or using a particular perfume are certainly not in good taste. But individual differ in their perception of good taste and bed taste.
OR


Determination of price of the product is a very important but difficult function of marketing manager.
Following factors are to be kept in mind while pricing the product: -
A. Cost: - Cost of production is the main component of price. No company can sell its product or services at less than the cost of production. There are two types of cost fixed and the variable cost. Fixed cost are rent of the premises, salaries of the permanent staff, variable cost vary with production like material cost, labour cost. Thus before price fixation, it is necessary to compile data relating to cost of production and keep that in mind.
B. Competition: - Competition is another important consideration while pricing. When a firm does not face any competition it can enjoy complete freedom in fixing its price. But when there are competitors selling the same or similar product, the pricing freedom of the firm is considerably reduced. Example: - Marutizen now faces a lot of competitors from brand like Santro and Indica. Therefore, its pricing cannot be approached in isolation without considering the prices of other products.
C. Customers’ demand: -Customer’s demand must be taken into consideration. Price elasticity in this regard is an important measure. When demand of the product is inelastic, the marketer can charge higher price without much loss of the market or demand. However, when the demand is elastic a slight change in price alters the demand by a big magnitude. Elasticity tends to be higher when there are substitute of the product. Buyers are sensitive to price and buyers are quick to change their buying habits.
D. Purchasing power of customers: - what is the purchasing power of the customer and at what price and how much they can purchase? It should also be taken into consideration.
E. Government regulation: - The price of the commodity and services is fixed as per the regulation of the government, it should also be borne in mind.