MBA Semester 1.
NAME : Ravi k.
ROLL NO : 511127275
LEARNING CENTER : malleshwaram
COURSE : MBA
SEMESTER : FIRST SEMESTER
CENTER CODE :
DATE OF SUBMISSION : 02-06-2011
MARKS AWARDED :
SIGNATURE Of EVALUATOR :
SEAL OF CENTER :
Managerial Roles and Skills.
Q.1 Write a note on the managerial roles and skills.
The Mintzberg in 1973 categorized the managerial roles in three categories
• Informational roles
• Decisional roles
• Interpersonal roles
1. Informational roles
This involves the roles of incorporate and circulates information as and when required.
Following are the main sub-roles which manager often performs:
a) Monitor: collecting information from organizations, both from inside and outside of the
b) Disseminator: circulate or communicating information to organizational members.
c) Spokesperson: representing the organization to the outsiders.
2. Decisional roles
It involves decision making, again this role can be sub-divided in to the following
a. Entrepreneur: Initiating new ideas to improve organizational performance.
b. Disturbance handlers: taking corrective action to cope with adverse situation.
c. Resource allocators: Allocating human, physical and monetary resources.
d. Negotiator: negotiating with trade unions or any other stakeholders.
3. Interpersonal roles
This roles involves activities with people working in the organization. This is supportive role
for informational and decisional roles.
Interpersonal roles can be categorized under three sub sections:
o Figurehead: Ceremonial and symbolic role
o Leadership: leading organization in terms of recruiting, motivating etc.
o Liaison (relationships): making good relationship with external bodies and public relations
There are the management skills has been identified by Kartz in 1974
1. Technical Skills
2. Human Skills
3. Conceptual Skills
1. Technical Skills
The ability to apply the specialized knowledge or expertise. All jobs require some specialized
expertise and many people develop their technical skills on the Job.
Vocational and on – the – job training programs can be used to develop this type of skill.
2. Human Skills
This is the ability to work with, understand and motivate the other people both individually
and a group). This requires sensitivity towards other issues and concerns.
People who are proficient in technical issues, but not with interpersonal skills, may face
difficulty to manage their subordinates.
To acquire the human skill, it is pertinent to recognize the feelings and sentiments of others,
ability to motivate others even in adverse situation and communicate own feelings to others
in a positive and inspiring way.
3. Conceptual skill
This is an ability to critically analyze, diagnose a situation and forward a feasible solution. It
requires creative thinking, generating options and choosing the best available option.
Q.2 Explain the social learning theory in detail.
Social learning theory focuses on the learning that occurs within a social context. It considers
that people learn from one another, including such concepts as observational learning,
imitation, and modelling. Among others Albert Bandura is considered the leading proponent
of this theory.
General principles of social learning theory follow:
1. People can learn by observing the behavior is of others and the outcomes of those
2. Learning can occur without a change in behavior. Behaviorists say that learning has to be
represented by a permanent change in behavior, in contrast social learning theorists say that
because people can learn through observation alone, their learning may not necessarily be
shown in their performance. Learning may or may not result in a behavior change.
3. Cognition plays a role in learning. Over the last 30 years social learning theory has become
increasingly cognitive in its interpretation of human learning. Awareness and expectations of
future reinforcements or punishments can have a major effect on the behaviors that people
4. Social learning theory can be considered a bridge or a transition between behaviorist
learning theories and cognitive learning theories.
How the environment reinforces and punishes modeling:
People are often reinforced for modeling the behavior of others. Bandura suggested that the
environment also reinforces modeling. This is in several possible ways:
1.The observer is reinforced by the model. For example a student who changes dress to fit in
with a certain group of students has a strong likelihood of being accepted and thus reinforced
by that group.
2. The observer is reinforced by a third person. The observer might be modeling the actions
of someone else, for example, an outstanding class leader or student. The teacher notices this
and compliments and praises the observer for modeling such behavior thus reinforcing that
3. The imitated behavior itself leads to reinforcing consequences. Many behaviors that we
learn from others produce satisfying or reinforcing results. For example, a student in my
multimedia class could observe how the extra work a classmate does is fun. This student in
turn would do the same extra work and also receive enjoyment.
4. Consequences of the model‘s behavior affect the observers behavior vicariously. This is
known as vicarious reinforcement. This is where in the model is reinforced for a response and
then the observer shows an increase in that same response. Bandura illustrated this by having
students watch a film of a model hitting a inflated clown doll. One group of children saw the
model being praised for such action. Without being reinforced, the group of children began to
also hit the doll .
Contemporary social learning perspective of reinforcement and punishment:
1. Contemporary theory proposes that both reinforcement and punishment have indirect
effects on learning. They are not the sole or main cause.
2. Reinforcement and punishment influence the extent to which an individual exhibits a
behavior that has been learned.
3. The expectation of reinforcement influences cognitive processes that promote learning.
Therefore attention pays a critical role in learning. And attention is influenced by the
expectation of reinforcement. An example would be, where the teacher tells a group of
students that what they will study next is not on the test. Students will not pay attention,
because they do not expect to know the information for a test.
Cognitive factors in social learning:
Social learning theory has cognitive factors as well as behaviorist factors (actually operant
1. Learning without performance: Bandura makes a distinction between learning through
observation and the actual imitation of what has been learned.
2. Cognitive processing during learning: Social learning theorists contend that attention is a
critical factor in learning.
3. Expectations: As a result of being reinforced, people form expectations about the
consequences that future behaviors are likely to bring. They expect certain behaviors to bring
reinforcements and others to bring punishment. The learner needs to be aware however, of
the response reinforcements and response punishment. Reinforcement increases a response
only when the learner is aware of that connection.
4. Reciprocal causation: Bandura proposed that behavior can influence both the
environment and the person. In fact each of these three variables, the person, the behavior,
and the environment can have an influence on each other.
5. Modeling: There are different types of models. There is the live model, and actual person
demonstrating the behavior. There can also be a symbolic model, which can be a person or
action portrayed in some other medium, , such as television, videotape, computer programs.
Behaviors that can be learned through modeling:
Many behaviors can be learned, at least partly, through modeling. Examples that can be cited
are, students can watch parents read, students can watch the demonstrations of mathematics
problems, or seen someone acting bravely and a fearful situation. Aggression can be learned
through models. Much research indicate that children become more aggressive when they
observed aggressive or violent models. Moral thinking and moral behavior are influenced by
observation and modeling. This includes moral judgments regarding right and wrong which
can in part, develop through modeling.
Conditions necessary for effective modeling to occur:
Bandura mentions four conditions that are necessary before an individual can successfully
model the behavior of someone else:
1. Attention: the person must first pay attention to the model.
2. Retention: the observer must be able to remember the behavior that has been observed.
One way of increasing this is using the technique of rehearsal.
3. Motor reproduction: the third condition is the ability to replicate the behavior that the
model has just demonstrated. This means that the observer has to be able to replicate the
action, which could be a problem with a learner who is not ready developmentally to replicate
the action. For example, little children have difficulty doing complex physical motion.
4. Motivation: the final necessary ingredient for modeling to occur is motivation, learners
must want to demonstrate what they have learned. Remember that since these four conditions
vary among individuals, different people will reproduce the same behavior differently.
Effects of modeling on behavior:
1.Modeling teaches new behaviors.
2.Modeling influences the frequency of previously learned behaviors.
3.Modeling may encourage previously forbidden behaviors.
4.Modeling increases the frequency of similar behaviors. For example a student might see a
friend excel in basketball and he tries to excel in football because he is not tall enough for
People are more likely to engage in certain behaviors when they believe they are capable of
executing those behaviors successfully. This means that they will have high self-efficacy. In
layman's terms self-efficacy could be looked as self confidence towards learning.
How self-efficacy affects behavior:
Joy of activities: individuals typically choose activities they feel they will be successful in
Effort and persistence: individuals will tend to put more effort end activities and behaviors
they consider to be successful in achieving.
Learning and achievement: students with high self-efficacy tend to be better students and
Factors in the development of self efficacy:
In general students typically have a good sense of what they can and cannot do, therefore
they have fairly accurate opinions about their own self-efficacy. In my multimedia program,
the challenge is to increase student self-efficacy. There are many factors which affect self
efficacy. Some of these factors can be; previous successes and failures, messages received
from others, and successes and failures of others. Note example of ACS and Cliff & Vanessa.
Self-regulation has come to be more emphasized in social learning theory. Self-regulation is
when the individual has his own ideas about what is appropriate or inappropriate behavior
and chooses actions accordingly. There are several aspects of self regulation:
Setting standards and goals
Promoting self-regulation can be an important technique. This is usually done by teaching the
individual to reward himself after doing the needed behavior. For example, a graduate student
will tell himself to complete a certain chapter before taking a break and relaxing.
An effective strategy is to teach learners to give themselves instructions that guide their
behavior. There are five steps to achieve this goal:
a.Overt external guidance
b.Overt self guidance
c.Faded, overt self guidance
d.covert self instruction
Self monitoring and self reinforcement:
These are two ways that people can control their own behavior. First they monitor and
observe their own behavior, sometimes even scoring behavior. Secondly, people are also able
to change their behavior by reinforcing themselves, by giving are withholding reinforcement.
Educational implications of social learning theory:
Social learning theory has numerous implications for classroom use.
1. Students often learn a great deal simply by observing other people.
2. Describing the consequences of behavior is can effectively increase the appropriate
behaviors and decrease inappropriate ones. This can involve discussing with learners about
the rewards and consequences of various behaviors.
3. Modeling provides an alternative to shaping for teaching new behaviors. Instead of using
shaping, which is operant conditioning, modeling can provide a faster, more efficient means
for teaching new behavior. To promote effective modeling a teacher must make sure that the
four essential conditions exist; attention, retention , motor reproduction, and motivation.
4. Teachers and parents must model appropriate behaviors and take care that they do not
model inappropriate behaviors.
5. Teachers should expose students to a variety of other models. This technique is especially
important to break down traditional stereotypes.
6. Students must believe that they are capable of accomplishing school tasks. Thus it is very
important to develop a sense of self-efficacy for students. Teachers can promote such self-
efficacy by having students receive confidence-building messages, watch others be
successful, and experience success on their own.
7. Teachers should help students set realistic expectations for their academic
accomplishments. In general in my class that means making sure that expectations are not set
too low. I want to realistically challenge my students. However, sometimes the task is beyond
a student's ability, example would be the cancer group.
8. Self-regulation techniques provide an effective method for improving student behavior.
Q.3 Explain the Big 5 model of personality.
The five factor model of personality focuses upon those behaviors that you express while
dealing with people, changing circumstances and your environment. The two remaining
behavioral dimensions relate to work and depression situations. The five big personality tests
measure intensity of your behaviors in these five areas.
Descriptions of these factors shall help you to understand why different careers are related
with different degrees of your behaviors. Why selection of certain options in paper pencil test
can qualify you for certain jobs and disqualify for the others. This page shall also help you to
understand nexus between big five factors.
Factor 1: Agreeableness (A)
How do you react to others‘ opinions? When you agree to them easily, you are considered
agreeable. However, your strong reactions qualify you as challenger in the words of Howard
and Howard (2001). There are some other correlated traits for agreeableness.
A Higher Degree in „A‟
The five factor model of personality considers you as good natured, sympathetic and
forgiving. You are considered as tolerant, agreeable and courteous. You prove an excellent
team member. You strive to bring harmony amongst your mates. You are friendlier,
approachable and appeasing. You can ignore your own needs for others‘.
However, you are not a good leader. You prefer to work in background. You keep your
opinions to yourself to avoid conflict. You are easily influenced. But you are a born social
reformer. You can prove an excellent teacher. The psychology is one of the best fields for
A Lower Degree in „A‟
Five factor model of personality considers you as critical, analytical and tough. You are
expressive in your opinions. You don‘t hide your reactions. You want your efforts and
achievements to be acknowledged. You can challenge. You are a born leader.
However, you may not prove a good team leader. Extreme degrees qualify you as a rude,
callous and self-centered person. You are viewed as hostile. You are not considered
cooperative. Your love for power can lead you to be an autocrat.
You are considered suitable for those careers where you are given freedom to exercise your
will. Military leadership, public administration and management are the best career
dimensions for you.
Factor 2: Openness to Change (O)
Five factor model of personality considers you open for change when you accept new
thoughts, ideas and changes.
However, you are considered close to change when you avoid new experiments and follow
rules and regulations very strictly. The other correlated personality traits with different
degrees are mentioned below.
A Higher Degree in „O‟
You qualify to be counted as original, creative and curious. You believe that change is more
than essential for social evolution. You love revolutions. You enjoy complexities of things
and strive to find out their solutions. You can handle new systems, technologies and tools
with great ease. You always build a big picture but tend to ignore vital details.
You are considered suitable for the careers where a lot of creativity, novelty and originality is
A Lower Degree in „O‟
The five factor model of personality qualifies you as a resistant to change. You are
traditional. You love peaceful
environment, secure jobs and serene family life. You spend a lot of time on details. You can
execute plans very well.
However, you are not a good planner. Your focus on details may cause you to ignore big
picture. You accept change only when there is no way out. The careers where rules and
regulations are to be followed very strictly are considered suitable for you. You can prove a
good judge, accountant and auditor. No one can be better financial manager than you.
Factor 3: Extraversion (E)
Do you love gatherings?
Or you prefer solitude?
Five factor model of personality considers your preferred way to handle your environment
very important. Different criteria are adopted when you apply for a job of cricket
commentator and for a position of a script writer. You can identify what level of degree you
require to go for your dream job.
A Higher Degree in „E‟
The five factor model considers you social, friendlier and talkative. You are often assertive
and energetic. You can do many tasks successfully at a time. You prefer to lead others. You
are charismatic. However, you rely upon others without knowing them very well. You are
considered fit for politics, sales and public related careers.
A Lower Degree in „E‟
You are considered private, serious and skeptic. You don‘t rely on others easily. You keep
your secrets to your self. You are often quiet. You prefer environment where you can work
alone. Production management, natural sciences and art related careers are considered
suitable for you.
Factor 4: Conscientiousness (C )
How do you take your work?
A Higher Degree in „C‟
The five factor model of personality considers you an organized, focused and timely achiever
of your goals. You plan things and follow that route strictly. You are not easy to be
distracted. However, you tend to be workaholic. You are self-disciplined. You are considered
confident, dutiful and reliable. You often prove a strong executive in any organization.
A Lower Degree in „C‟
The five factor model of personality considers you careless, relaxed and unorganized. You
don‘t plan things and pursue your goals with a flexible approach. Some day you work a lot
and other day you go on vacations. You are spontaneous. However, you are not considered
good for projects where deadlines are to be followed.
Factor 5: Neuroticism (N)
How do you handle depression?
A Higher Degree in ‗N‘
The five factor model considers you nervous, unstable and vulnerable to negative
emotionality. You are never satisfied with your life. You are inflamed easily. You are
reactive and often fail to recover from depression shock easily. You always feel a need for
stability. In extreme cases, you may be advised clinical treatment. You have optimistic
approach to life.
A Lower Degree in „N‟
The five factor model of personality considers you emotionally stable, strong nerved and
composed person. You are often calm and optimist. You recover from depression periods
very easily. You can find out the best out of the worst. You love peace and security. You are
often satisfied with your life. You are a valuable candidate for careers in air traffic,
controllers and airline pilots, finance management and engineering.
Q.4 What are the different factors influencing perception?
What is Perception?
―A process by which individuals organize and interpret their sensory impressions in order to
give meaning to their environment‖
Why is it Important?
•Because people‘s behavior is based on their perception of what reality is, not on reality
•The world that is perceived is the world that is behaviorally important.
Factors Influencing Perception
When an individual looks at a target and attempts to interpret what he or she sees, that
interpretation is heavily influenced by personal characteristics of the individual perceiver.
The more relevant personal characteristics affecting perception of the perceiver are attitudes,
motives, interests, past experiences, and expectations.
Characteristics of the target can also affect what is being perceived. This would include
attractiveness, gregariousness, and our tendency to group similar things together. For
example, members of a group with clearly distinguishable features or color are often
perceived as alike in other, unrelated characteristics as well. The context in which we see
objects or events also influences our attention. This could include time, heat, light, or other
The Nature of Perception
Perception is the process by which individuals select, organize, and interpret the input from
their senses to give meaning and order to the world around them. The process of perception
involves the perceiver—the person making the interpretation, the target of perception—what
the perceiver interprets, and the situation in which perception takes place. The target can be
an event, a situation, an idea, a noise, a group of people, or another person. Person
perception, or the process of perceiving another person, plays a large role in organizational
Internal and External Attributions
Causal explanations for behaviors can be either internal attributions, behavior caused by
some characteristic of the target, or external attributions, behavior assigned to factors outside
the individual. Common internal attributions include ability, effort, and personality. Poor
performance may be attributed to lack of effort or ability, and poor relations with coworkers
may be attributed to personality. Common external attributions include luck, chance, and
easy tasks. A worker‘s accomplishment may be viewed as a stroke of luck. Whether
attributions are internal or external
determines how people respond to behavior. High performance, attributed to ability, results in
a promotion, but attributed to luck, results in no promotion. The attributions people make for
their own behavior influence subsequent actions. A successful worker who attributes an
outcome to luck remains unaffected, whereas attributing success to ability increases
The Link between Perception and Individual Decision Making
Individuals in organizations make decisions; they make choices from among two or more
•Top managers determine their organization‘s goals, what products or services to offer, how
best to finance operations, or where to locate a new manufacturing plant.
•Middle- and lower-level managers determine production schedules, select new employees,
and decide how pay raises are to be allocated.
•Non-managerial employees also make decisions including whether or not to come to work
on any given day, how much effort to put forward once at work, and whether or not to
comply with a request made by the boss.
•A number of organizations in recent years have been empowering their non-managerial
employees with job-related decision-making authority that historically was reserved for
•There is a discrepancy between some current state of affairs and some desired state,
requiring consideration of alternative courses of action.
•The awareness that a problem exists and that a decision needs to be made is a perceptual
•Every decision requires interpretation and evaluation of information. The perceptions of the
decision maker will address these two issues.
•Data are typically received from multiple sources.
•Which data are relevant to the decision and which are not?
•Alternatives will be developed, and the strengths and weaknesses of each will need to be
―The processes, through which individuals attempt to combine, integrate and interpret
information about others‖. Social status, a target‘s real or perceived position in society or an
organization, also affects perception. High-status targets are perceived as more credible,
knowledgeable, and responsible than low-status targets. Organizations use a high-status target
to make public announcements and presentations because the audience perceives that person
To ensure that women and minorities enjoy equal footing including social status, many
organizations have adopted affirmative action programs. Yet, these programs may perpetuate
the low status of women and minorities because others perceive and treat affirmative action
hires as second-class citizens. This can result in not fully utilizing these workers‘ capabilities.
After qualified employees left the company, Monsanto realized that affirmative action
initiatives must include training programs to manage diversity, eliminate bias, and avoid the
second-class citizen status that minorities inadvertently acquire.
Barriers to Social Perception
1. Selective Perception
•Any characteristic that makes a person, object, or event stand out will increase the
probability that it will be perceived.
•It is impossible for us to assimilate everything we see—only certain stimuli can be taken in.
2. Halo Effect
•The halo effect occurs when we draw a general impression on the basis of a single
•This phenomenon frequently occurs when students appraise their classroom instructor.
•Students may give prominence to a single trait such as enthusiasm and allow their entire
evaluation to be tainted by how they judge the instructor on that one trait.
•The reality of the halo effect was confirmed in a classic study.
•Subjects were given a list of traits such as intelligent, skillful, practical, industrious,
determined, and warm, and were asked to evaluate the person to whom those traits applied.
When the word ―warm‖ was substituted with ―cold‖ the subjects changed their evaluation of
◦The experiment showed that subjects were allowing a single trait to influence their overall
impression of the person being judged.
◦Research suggests that it is likely to be most extreme when the traits to be perceived are
ambiguous in behavioral terms, when the traits have moral overtones, and when the perceiver
is judging traits with which he or she has had limited experience.
•Stereotyping—judging someone on the basis of our perception of the group to which he or
•Generalization is not without advantages. It is a means of simplifying a complex world, and
it permits us to maintain consistency. The problem, of course, is when we inaccurately
•In organizations, we frequently hear comments that represent stereotypes based on gender,
age, race, ethnicity, and even weight.
•From a perceptual standpoint, if people expect to see these stereotypes, that is what they will
perceive, whether or not they are accurate.
Q.5 Write a note on contemporary work cohort.
Contemporary Work Cohort
Robbins (2003) has proposed Contemporary Work Cohort, in which the unique value of
different cohorts is that the U.S. workforce has been segmented by the era they enteredthe
which they grew up. The cohorts and the respective values have been listedbelow:
1.Veterans-Workers who entered the workforce from the early 1940s through theearly
1960s. They exhibited the following value orientations:
They were influenced by theGreat Depression and World War II
a.Believed in hard work
b.Tended to be loyal to their employer
c.Terminal values: Comfortable life and family security.
2.Boomers- Employees who entered the workforce during the 1960s through the mid-1980s
belonged to this category. Their value orientations were:
a.Influenced heavily by John F. Kennedy, the civil rights and feminist movements,the
Beatles, the Vietnam War, and baby-boom competition.
b.Distrusted authority, but gave a high emphasis on achievement and materialsuccess
c.Organizations who employed them were vehicles for their careers
d.Terminal values: sense of accomplishment and social recognition
3.Xers- began to enter the workforce from the mid-1980s.
They cherished the followingvalues:
a.Shaped by globalization, two-career parents, MTV, AIDS, and computers.
b. Value flexibility, life options, and achievement of job satisfaction.
c.Family and relationships were important and enjoyed team-oriented work.
d.Money was important, but would trade off for increased leisure time.
e.Less willing to make personal sacrifices for employers than previous generations.
F,Terminal values: true friendship, happiness, and pleasure.
4.Nexters-most recent entrants into the workforce.
a.Grew up in prosperous times, have high expectation, believe in themselves, and confident
in their ability to succeed.
b.Never-ending search for ideal job; see nothing wrong with job-hopping.
c.Seek financial success.
d.Enjoy team work, but are highly self-reliant.
e.Terminal values: freedom and comfortable life .
Q.6 Explain the characteristics of organization Development.
Organization Development (OD) is a planned approach to improve employee and
organizational effectiveness by conscious interventions in those processes and structures that
have an immediate bearing on the human aspect of the organization.
A normal OD process can be phased in following manner:
Problem identification: The first step in OD process involves understanding and
identification of the existing and potential problems in the organization. The awareness of the
problem includes knowledge of the possible organizational problems of growth, human
satisfaction, the usage of human resource and organizational effectiveness.
Data Collection: Having understood the exact problem in this phase, the relevant data is
collected through personal interviews, observations and questionnaires.
Diagnosis: OD efforts begin with diagnosis of the current situation. Usually, it is not limited
to a single problem. Rather a number of factors like attitudes, assumption, available resources
and management practice are taken into account in this phase. There are four steps in
•Structural analysis: Determines how the different parts of the organization are functioning
in terms of laid down goals.
•Process analysis: Process implies the manner in which events take place in a sequence. It
refers to pattern of decision making, communication, group dynamics and conflict
management patterns within organization to help in the process of attainment of
•Function analysis: This includes strategic variables, performance variables, results,
achievements and final outcomes.
•Domain analysis: Domain refers to the area of the organization for organizational
Planning and implementation: After diagnosing the problem, the next phase of OD, with
the OD interventions, involves the planning and implementation part of the change process.
Evaluation and feedback: Any OD activity is incomplete without proper feedback.
Feedback is a process of relaying evaluations to the client group by means of specific report
Q.1 Explain the different types of communication with relevant examples.
Types of Business Communication
There are two types of business communication in an organization:
Communication within an organization is called ―Internal Communication‖.
It includes all communication within an organization. It may be informal or a formal function
or department providing communication in various forms to employees.
Effective internal communication is a vital mean of addressing organizational concerns. Good
communication may help to increase job satisfaction, safety, productivity, and profits and
decrease grievances and turnover.
Under Internal Business Communication types there come;
a) Upward Communication
b) Downward Communication
c) Horizontal/Literal communication
a) Upward Communication
Upward communication is the flow of information from subordinates to superiors, or from
employees to management. Without upward communication, management works in a
vacuum, not knowing if messages have been received properly, or if other problems exist in
By definition, communication is a two-way affair. Yet for effective two-way organizational
communication to occur, it must begin from the bottom.
Upward Communication is a mean for staff to:
◦Achieve job satisfaction and ◦Provide feedback
b) Downward Communication
Information flowing from the top of the organizational management hierarchy and telling
people in the organization what is important (mission) and what is valued (policies).
Downward communication generally provides enabling information – which allows a
subordinate to do something.
e.g.: Instructions on how to do a task.
Downward communication comes after upward communications have been successfully
established. This type of communication is needed in an organization to:
◦Transmit vital information
◦Encourage 2-way discussion
Both Downward & Upward Communications are collectively called ―Vertical
c) Horizontal/Literal communication
Horizontal communication normally involves coordinating information, and allows people
with the same or similar rank in an organization to cooperate or collaborate. Communication
among employees at the same level is crucial for the accomplishment of work.Horizontal
Communication is essential for:
Communication with people outside the company is called ―external communication‖.
Supervisors communicate with sources outside the organization, such as vendors and
It leads to better;
It should improve
Ultimately, it helps to achieve
Q.2 What are the general principles of writing especially business writing?
After 40 years as a professor of English at Cambridge University, F.L. Lucas (1894-1967)
concluded that teaching people how to write well is impossible. "To write really well is a gift
inborn; those who have it teach themselves." Still, he said, "one can sometimes teach them to
write rather better."
In his book Style (Cassell, 1955), Lucas offered the following basic principles to "shorten
that painful process" of learning how to write better.
It is bad manners to waste [the reader's] time. Therefore brevity first, then, clarity.
It is bad manners to give [readers] needless trouble. Therefore clarity. . . . And how is clarity
to be achieved? Mainly by taking trouble and by writing to serve people rather than to
The social purpose of language is communication--to inform, misinform, or otherwise
influence our fellows. . . . Communication [is] more difficult than we may think. We are all
serving life sentences of solitary confinement within our bodies; like prisoners, we have, as it
were, to tap in awkward code to our fellow men in their neighboring cells. . . . In some
modern literature there has appeared a tendency to replace communication by a private
maundering to oneself which shall inspire one's audience to maunder privately to themselves-
-rather as if the author handed round a box of drugged cigarettes.
Just as the art of war largely consists of deploying the strongest forces at the most important
points, so the art of writing depends a good deal on putting the strongest words in the most
important places. . . . One of the most important things, to my mind, in English style is word-
order. For us, the most emphatic place in a clause or sentence is the end. This is the climax;
and, during the momentary pause that follows, that last word continues, as it were, to
reverberate in the reader‘s mind. It has, in fact, the last word.
As the police put it, anything you say may be used as evidence against you. If handwriting
reveals character, writing reveals it still more. You cannot fool all your judges all the time. . .
. Most style is not honest enough. Easy to say, but hard to practice. A writer may take to long
words, as young men to beards--to impress. But long words, like long beards, are often the
badge of charlatans. Or a writer may cultivate the obscure, to seem profound. But even
carefully muddied puddles are soon fathomed. Or he may cultivate eccentricity, to seem
original. But really original people do not have to think about being original--they can no
more help it than they can help breathing. They do not need to dye their hair green.
6.Passion and Control
This, indeed, is one of the eternal paradoxes of both life and literature--that without passion
little gets done; yet, without control of that passion, its effects are largely ill or null.
One learns to write by reading good books, as one learns to talk by hearing good talkers.
Every author's fairy godmother should provide him not only with a pen but also with a blue
9.Sophistication and Simplicity
My point is merely that the sophisticated (ready though they may be to suppose so) do not
necessarily express themselves better than the simple--in fact, may often have much to learn
10.Sound and Rhythm
Apart from a few simple principles, the sound and rhythm of English prose seem to me
matters where both writers and readers should trust not so much to rules as to their ears.
Lucas concluded his discussion of style by quoting the 18th-century Dutch writer Madame de
Charrière: "Have ideas that are clear, and expressions that are simple." Neglecting that bit of
advice, Lucas said, is responsible for "more than half the bad writing in the world."
Q.3 How would you prepare yourself for an oral business presentation?
Effective Oral Presentation Skills
There is a myth that great speakers are born, not made. This is based on the misconception
that somehow certain individuals have the innate ability to stand in front of an audience with
no anxiety and give a moving, dynamic speech. The truth is, however, that great speakers
generally spend years developing and practicing their art of communication. All great
speakers had to learn the basics of organization, preparation, delivery and dealing with
anxiety. In order to do anything well, it takes constant practice and a mastery of the basics.
Speaking is no different. One of the most important techniques you can apply to become a
more confident and effective speaker is to reduce anxiety. If implemented, the following tips
could help reduce your anxiety before your next presentation:
Ø Organize - Focus on your presentation.
Ø Visualize - Mentally rehearse a perfect presentation with questions and answers.
Ø Practice - Standing up, out loud, using visual aids. Obtain feedback from others.
Ø Breathe - Sit up or stand erect, not relaxed. Inhale deeply a number of times.
Ø Focus on Relaxing!
Ø Release Tension - Try isometric exercises. Tighten and release your muscles. Start with
toes and end with fists.
Ø Move - Flex your muscles - don't lock! Use a cordless microphone.
Ø Eye Contact with the Audience - Think one on one. Connect with the audience and make
yourself personable. Use the feedback and energy you receive from your audience.
Planning your presentation is another component to becoming an effective speaker and
presenter. There are essentially two steps that should be followed prior to delivering a
1) develop your objectives.
2) analyze your audience.
In preparation, one must identify the values, needs and constraints of the attendees and the
level of knowledge of the audience. For example, do not use slang, jargon, acronyms, or
technical terms without explanation. It should also be determined in advance "what will
work" and "what won't work". In other words, what will gain you the most favorable
reaction. In order to ascertain these items in advance, you should put yourself in the shoes of
the people who will be listening to your presentation. The next phase towards improving your
effective oral presentation skills is organizing your thoughts. There are a number of steps to
Step #1 Brainstorm main ideas. Use index cards or post it notes and only use one idea per
Step #2 State the sub points. Ideally there should be between 2-5 sub points in your
presentation. Be specific using explanations, data and evidence to back up your points.
Step #3 State the benefits. Specifically state the benefits before and at the end of the body of
Step #4 Develop handouts. Handouts should reinforce important points, summarize action
items and include supporting data.
Step #5 Develop visual aids (PowerPoint slides, charts and graphs). Visual aids should be
used to focus the attention of your audience, reinforce the verbal message and to stimulate
interest. Keep in mind that effective presentations are people-centered, not media-centered.
Too many presentations rely on the media to carry the message. While the media can
certainly help, it's your interaction and rapport with the audience that makes the difference
between an effective or ineffective presentation.
Step #6 Main idea preview/review sentence (i.e. Tell them what you're going to tell them, tell
them, then tell them what you told them).
Step #7 Develop the introduction. Get the audience to focus their attention on you, provide
background information and introduce yourself - who you are and why you're qualified.
Step #8 Develop the conclusion. Your conclusion should be persuasive like a "call to action".
Spell out what specifically they need to do, when and how.
The delivery of your presentation is another key to a successful presentation. An effective
presentation should be delivered in the following sequence:
• Preview Sentence
• Main Ideas and Sub Ideas
• Review Sentence
In order to come across to your audience as confident and persuasive, you should consider the
way you physically deliver your points to your audience. The following are some helpful tips
to help you achieve a level of confidence in delivering your presentation:
Ø Posture - Stand up straight, but avoid being stiff. Do not shift your weight from side to
Ø Movement - Keep yourself at least 4-8 feet from the front row - don't pace!
Ø Gestures - Your presentation should be a form of animated conversation. Avoid keeping
your hands in your pockets or on your hips, crossing your arms or wringing your hands.
Ø Eye Contact - Do not look at the back of the room or over their heads. Maintain good eye
contact to build rapport, trust and confidence.
Ø Using your Voice - Avoid being monotone which is generally caused by anxiety. Also
avoid talking too fast. When people are nervous, they sometimes trip on their words. Be
cognizant of your volume. Make sure that everyone can hear you.
At the conclusion of a presentation, there is generally a question and answer session that
should be prepared for in advance. To prepare for this last hurdle, you should anticipate the
questions that you could potentially be asked ahead of time. The key is to prepare for the
worst and rehearse your responses to such questions. The more you prepare your answers the
more well versed and confident you will be. One tip you might employ during the question
and answer session is to repeat the question being asked. This will give you some additional
time to prepare your response. In general, we think five times faster than we speak! Whatever
you do, it is important that you maintain your style. If you don't know the answer to the
question you are being asked, be honest and say that you don't know but that you will find
out. Remember to really listen to the questions, do not interrupt and make sure that you stay
focused on the individual asking the question. Finally, don't forget to thank your audience for
all of their excellent questions.
If you employ these techniques, you will be on your way to becoming a more effective
speaker and delivering successful presentations. For information on workshops on how you
or your team can deliver more effective presentations, please feel free to contact us.
Q.4 You are a team manager having 15 members in your team. Two of your key team
members are on 3-weeks leave. You have to call for a monthly team meeting within a week.
How effectively you would plan and carry out this meeting?
These are periodic meetings that are called to review the progress being made on a particular
For example,weekly meetings may be held to review sales progress.Or,if a new project has
been initiated,periodic messages may be held to review the progress of different stages of the
As our 2 of key team member on 3-week leave so we need to make keep a meeting with use
Two way,but not face-to-face channels communications.
With the advent of new technologies,communication can now be two way,without being face
to face.when distance makes such meetings impractical.
Teleconferencing,telephone and email communication are all examples of this type of
channel.In this case,the communication is purely oral,since non-verbal cues cannot be used to
enhance the communication,in the absence of the face-to-face contact.Immediate feedback is
however possible,as with the face-to-face channel,since thereciever can react immediately to
the sender‘s telephone or email message.This type of communication is of an impersonal
nature,due to lack of face-to-face contact.
Teleconferencing is almost as good as face-to-face communication,sice is enables two
parties is different locations to see(if there is videoconferencing facility)and speak to each
other.Today many large Indian organizations make use of this technology,while
teleconferencing has the advantage of saving time and costs involved in travel,if cannot
replace face-to-face meetings completely.Some types of interaction such as
brainstorming,negotiation,persuation and problem solving can be conducted better through
Telephone Communication has the advantage of being able to contact people who would be
impossible to reach in person.It is also relatively inexpensive,compared to face-to-face
communication.The disadvantage is that it is hard to hold the listener‘s attention for too long.
Email is another two –way,but not face-to-face channel that allows senders and recievers to
send and respond to one anothers messages almost instantaneously.Within an office,an email
is used as an alternatively to telephone communication and personal meetings and is called
the ―intranet‖.The email has the advantage of low cast speed and the ability to send messages
to several people any where in the world.The disadvantages are its impersonal nature and the
lack of confidentiality,since the messages can be stored or passed on to others.
As 2 member who are on leave,we should not take much time of him over telephone so we
need to think for following 2 aspects:
Managing Time – There is no prescribed length for meeting.The duration of meeting will
depend on the type and purpose of the meeting. Generally,problem-solving meetings will take
longer than other routine meetings.In any case,the chair person should set a time budget for
the meeting,depending on the agenda and ensure adherence to the time limit.
Keeping the meeting focused- Often,a lot of time is wasted during meetings by going of track
and by discussing the topics that are irrelevant.In such situation,it is the responsibity of the
chair person,or the person moderating the discussion to make sure that the discussion remains
focussed on the topics mentioned in the agenda.
Q. 5 Distinguish between circulars and notices along with formats.
Circulars and Notices
Like memos, circulars and notices are also written forms of communication within the
The difference between a circular and a notice is that circulars are announcements that are
distributed to small or selective groups of people within the organization, whereas notices are
meant for a larger group of people.
Example – If a manager wants to call a meeting of heads of departments, he will pass around
A circular only to the heads, requesting them to attend that meeting. On the other hand,
notices generally contain information or announcements that are meant for all the employees
of an organization.
Example – A list of declared holidays for a calendar year is a notice, since the information is
relevant to all employees.
A notice is therefore a legal document that has to be put up on an official notice or bulletin
Let us examine another example of a circular and a notice.
Imagine that you are the President of the Student Committee in a management college and
wish to hold a meeting to plan for the Annual Management Fest of the college. You will have
to send some information to those whom you want to involve in organizing the Fest. You
may not want all the students to be involved initially, since it may take a lot of time and there
may be too many suggestions. Instead, you may choose to invite only the committee
members to discuss details such as the date, venue, duration, how to get sponsors and so on.
For this purpose, you may send a circular only to the student committee members, requesting
them to attend the meeting.
During the meeting, the date and venue may be finalized and various smaller committees may
be formed, such as a reception committee, stage committee and so on. You may also decide
to get each student to contribute a nominal amount for the Fest. In order to announce these
details and to ask for student contributions, you may then put up a notice on the official
college notice board, which all students can see and respond to.
A sample circular and notice are given below –
TO : All Departmental Heads
Safety Aspects in Science Laboratories
The purpose of this circular is to emphasize the importance of safety in research
laboratories. All laboratory supervisors are responsible for the safety of research
scientists in their charge. It is their duty to draw their attention to any safety hazard
that pertains to a particular activity. In this context, supervisors should be familiar
with relevant guidelines on laboratory safety and they should be careful at all times
to observe standard safety procedures, when practical activities are being conducted
in the laboratory.
Please bring this circular to the notice of the supervisors concerned and to the
of the representatives as appropriate, for transmission to individual research less
General Manager – HR
March 11 th , 2008
Note that a circular, like a memo is brief and to the point. It has a caption that indicates the
message to be conveyed, Like a memo, there is no formal salutation or close.
MANIPAL UNIVERSAL LEARNING March 11 th , 2008
Manipal Towers, Bangalore REF: ADM/N/4499
Sub: Manipal Family Day Celebrations
This is to inform all employees of MUL that a Manipal Family Day celebration will be
held at Manipal County on Friday March 14 th , between 10 am and 7 pm. A pickup
and drop back facility is being organized for all employees and their family members.
In view of the celebrations, this will be a holiday. Instead, Saturday, March 15 th will be
a working day to compensate for this holiday. All are encouraged to attend and make
the event a success.
SENIOR MANAGER, HR
The above notice is meant for all employees of the organization. It has a reference number,
date and a subject, similar to a memo. The notice covers two different issues related to one
subject. Employees are first informed that a holiday has been declared to celebrate Manipal
Family Day. Then the same notice mentions a different working day to compensate for this
holiday. Sometimes, under special circumstances, notices may also be sent to individual
employees. An example of this type of notice is the ―Show Cause Notice‖, which is sent
when an employee is found to be guilty of major misconduct. The notice mentions the
allegations against the employee and asks for a written explanation within a specified time,
failing which the action that would be taken against him/her( e.g., being suspended from the
job)is stated. Notices are read by a large number of people and can also be used as evidence
in court cases. Therefore, care must be taken when writing them. They have to be worded
very precisely and clearly, to make sure that there is no ambiguity. They should also be brief
and to the point. The tone should be firm, but not offensive and arrogant. Depending on the
type of notice, the duration of display of a notice is specified under various legal provisions.
Q. 6 You are a sales manager for a particular brand of mixer and blender. Frame a sample
bad news letter telling a customer about that her claim for the product replacement is
rejected on the grounds that the product didn‟t have any defect during the sale.
3rd main,4th cross,
Jaynagar 4th block,
We give replacement warranty only for manufacture defect in out product like mixer and
blender .A review of the April 15th sales records of over show room shows that is was
checked and tested with the customer and found it was working fine.Customer were asked to
checked properly in out show room and take delivery only if he is satisfied.
Therefore,our customer care and service center agent was correct in refusing to give
replacement of mixer and blender for those products which was don‘t have defect at the time
You have mentioned in our claim letter that you are regular user of our products.Although we
cannot grant you a replacement or refund,I have asked our service engineer to repair the
faulty parts.A complimentary copy of our products and service booklet is also enclosed.you
will know exactly what the other producs you can use are in your day today life.
Service Representative,Kenstar Applinace
STATISTICS FOR MANAGEMENT
1. (a) What is the difference between a qualitative and quantitative variable?
Qualitative data is a categorical measurement expressed not in terms of numbers, but
rather by means of a natural language description. In statistics, it is often used
interchangeably with "categorical‖ data.
For example: favorite color = "blue"
height = "tall"
Although we may have categories, the categories may have a structure to them. When
there is not a natural ordering of the categories, we call these nominal categories.
Examples might be gender, race, religion, or sport.
When the categories may be ordered, these are called ordinal variables. Categorical
variables that judge size (small, medium, large, etc.) are ordinal variables. Attitudes
(strongly disagree, disagree, neutral, agree, strongly agree) are also ordinal variables,
however we may not know which value is the best or worst of these issues. Note that
the distance between these categories is not something we can measure.
Quantitative dataQuantitative data is a numerical measurement expressed not by
means of a natural language description, but rather in terms of numbers. However, not
all numbers are continuous and measurable. For example, the social security number
is a number, but not something that one can add or subtract.
For example: favorite color = "450 nm"
height = "1.8 m"
Quantitative data always are associated with a scale measure.
Probably the most common scale type is the ratio-scale. Observations of this type are
on a scale that has a meaningful zero value but also have an equidistant measure (i.e.,
the difference between 10 and 20 is the same as the difference between 100 and 110).
For example, a 10 year-old girl is twice as old as a 5 year-old girl. Since you can
measure zero years, time is a ratio-scale variable. Money is another common ratio-
scale quantitative measure. Observations that you count are usually ratio-scale (e.g.,
number of widgets).
A more general quantitative measure is the interval scale. Interval scales also have a
equidistant measure. However, the doubling principle breaks down in this scale. A
temperature of 50 degrees Celsius is not "half as hot" as a temperature of 100, but a
difference of 10 degrees indicates the same difference in temperature anywhere along
the scale. The Kelvin temperature scale, however, constitutes a ratio scale because on
the Kelvin scale zero indicates absolute zero in temperature, the complete absence of
heat. So one can say, for example, that 200 degrees Kelvin is twice as hot as 100
(b) A town has 15 neighbourhoods. If you interviewed everyone living in one
particular neighbourhood, would you be interviewing a population or a sample
from the town? Would this be a random sample? If you had a list of everyone living
in the town, called a frame, and you randomly selected 100 people from all
neighbourhoods, would this a random sample?
If want to do statistics in a particular area and interviewed everyone then it is called as
a population and if you doing statistics analysis for a town and interviewed only 15
neighbourhoods then it is called that interviewing a sample from town.It is also called
―chunk‖ which refers to the friction of the population being investigated which is
selected neither by probability nor by judgement.
Moreover,a list are frame work should be available for the selection of the sample.It is
used to make a pilot studies.However,there is a high chance of bias being introduced.
If you had a list of every one living in the town,called a frame and you randomly
selected 100 people from all neighbourhoods,then this called random sample.
2. a) Explain the steps involved in planning of a statistical survey?
Statistical survey is a method used to collect in a systematic way, information from a sample
of individuals. Although most people are familiar with public opinion surveys that are
reported in the press, most surveys are not public opinion polls (such as political polling), but
are used for scientific purposes. Surveys provide important information for all kinds of
research fields, e.g., marketing research, psychology, health professionals and sociology..
A survey may focus on different topics such as preferences (e.g., for a presidential candidate)
, behavior (smoking and drinking behavior), or factual information(e.g., income), depending
on its purpose. Since survey research is always based on a sample of the population, the
success of the research is dependent on the representativeness of the population of concern.
Modes of Data Collection
There are several ways of administering a survey. The choice between administration modes
is influenced by several factors, including
2) coverage of the target population.
3) flexibility of asking questions.
4) respondents willingness to participate.
5) response accuracy.
Different methods create mode effects that change how respondents answer. The most
common modes of administration are listed
a.use of interviewers encourages sample persons to respond, leading to higher response rates.
b.interviewers can increase comprehension of questions by answering respondents' questions.
c.fairly cost efficient, depending on local call charge structure
d.good for large national (or international) sampling frames
e.some potential for interviewer bias (e.g. some people may be more willing to discuss a
sensitive issue with a female interviewer than with a male one)
f.cannot be used for non-audio information (graphics, demonstrations, taste/smell samples)
g.unreliable for consumer surveys in rural areas where telephone density is low
traditional telephone interviews
computer assisted telephone dialing
computer assisted telephone interviewing (CATI)
a.the questionnaire may be handed to the respondents or mailed to them, but in all cases they
are returned to the researcher via mail.
b.An advantage is, is that cost is very low, since bulk postage is cheap in most countries
c.long time delays, often several months, before the surveys are returned and statistical
analysis can begin
d.not suitable for issues that may require clarification
e.respondents can answer at their own convenience (allowing them to break up long surveys;
also useful if they need to check records to answer a question)
f.no interviewer bias introduced
g.large amount of information can be obtained: some mail surveys are as long as 50 pages
h.response rates can be improved by using mail panels
i.members of the panel have agreed to participate
j.panels can be used in longitudinal designs where the same respondents are surveyed several
a.can use web or e-mail. Web is preferred over e-mail because interactive HTML forms can
b.often inexpensive to administer
c.very fast results
d.easy to modify
e.response rates can be improved by using Online panels - members of the panel have agreed
f.honesty of responses can be an issue
g.if not password-protected, easy to manipulate by completing multiple times to skew results
h.data creation, manipulation and reporting can be automated and/or easily exported into a
format that can be read by PSPP, DAP or other statistical analysis software
i.data sets created in real time
j.some are incentive based (such as Survey Vault or YouGov)
k.may skew sample towards a younger demographic compared with CATI
i.often difficult to determine/control selection probabilities, hindering quantitative analysis of
j.used in large scale industries.
Personal in-home survey
a.respondents are interviewed in person, in their homes (or at the front door)
b.very high cost
c.suitable when graphic representations, smells, or demonstrations are involved
d.often suitable for long surveys (but some respondents object to allowing strangers into their
home for extended periods)
e.suitable for locations where telephone or mail are not developed
f.skilled interviewers can persuade respondents to cooperate, improving response rates
g.potential for interviewer bias
Personal mall intercept survey
a.shoppers at malls are intercepted - they are either interviewed on the spot, taken to a room
and interviewed, or taken to a room and given a self-administered questionnaire .
b.socially acceptable - people feel that a mall is a more appropriate place to do research than
c.potential for interviewer bias
d.fast and e.easy to manipulate by completing multiple times to skew results.
b) What are the merits & Demerits of Direct personal observation and Indirect Oral
1. Merits of direct personal observation
• First hand knowledge of job requirements but other job analysis methods only allow the job
analyst to indirectly obtain this information.
• Works well with jobs that have a short work-cycle, manual and psychomotor tasks, physical
activities-assembly-line worker and accounting clerk are examples
• Supplements other data collection methods
• Simple to use.
• Verifies data from other sources.
2. Demerits of direct personal observation
• Does not provide complete information for more complex jobs.
• May interfere with job performance
• Validity & reliability may be problematic
• Not useful for jobs consisting of mostly mental tasks.
• Time consuming
• May bias worker performance.
• Small sample size.
• Requires skilled observer.
• First, they cannot capture the mental aspects of jobs, such as decision making or planning,
since mental processes are not observable.
• Second, observation methods can provide little information relating to personal
requirements for various jobs because this kind of information is also not readily observable.
• Direct observation methods provide little information on which to base job specifications.
Advantages of using an indirect oral Interview
• If the respondent lacks reading skills to answer a questionnaire.
• Are useful for untangling complex topics.
• The Interviewer can probe deeper into a response given by an interviewee.
• Interviews produce a higher response rate.
Disadvantages of using an indirect oral Interview
• The interviewer can affect the data if he/she is not consistent.
• It is very time consuming.
• It is not used for a large number of people.
•The Interviewer may be biased and ask closed questions.
3. a) Draw Ogives from the following data and measure the median value. Verify it by
Central 5 15 25 35 45
Frequenc 5 11 21 16 10
Central Limits Frequnecy Less than Greter than
5 0-10 5 10 5 0 63
15 10-20 11 20 16 10 58
25 20-30 21 30 37 20 47
35 30-40 16 40 53 30 26
45 40-50 10 50 63 40 10
Total 63 50 0
Median value by actual calculations:
Central Frequency Cumulative
5 5 5
15 11 16
25 21 37
35 16 53
45 10 63
Total - 63
Here n= 63,
M is the [(n+1)/2]th value
= 32nd Value.
So,it is M=25.
b) Complete the following distribution, if its Median is 2,600 and compute the value of
Size 1000- 1500- 2000- 2500- 3000- 4000- 5000- Total
1500 2000 2500 3000 4000 5000 6000
Frequ 120 ? 400 500 ? 50 20 1500
Size Mid (middle Frequency Cumulative
1000-1500 1250 120 120
1500-2000 1750 f 120+f
2000-2500 2250 400 520+f
2500-3000 1750 500 1020+f
3000-3500 3500 Fl 1020+f+fl
4000-5000 4500 50 1070+f+fl
5000-6000 5500 20 1090+f+fl
Total f= 1090+f+fl
Size Mid(Middle Frequency d=X- Fd
1000-1500 1250 120 -1 -120
1500-2000 1750 130 0 0
2000-2500 2250 400 1 400
2500-3000 1750A 500 0 0
3000-4000 3500 280 1.75 490
4000-5000 4500 50 2.75 287.5
5000-6000 5500 20 3.75 75
Total 1500 1132.5
Since median is 2600,it falls in the class interval 2500-3000,so mean is 1750.Them the
arithmetic mean is calculated as:
Ẍ = A-Σ fd’Σf × C.I
4. a) What is the main difference between correlation analysis and regression analysis?
Regression is a way of describing how one variable, the outcome, is numerically related to
predictor variables. The dependent variable is also referred to as Y, dependent or response
and is plotted on the vertical axis (ordinate) of a graph. The predictor variable(s) is(are)
also referred to as X, independent, prognostic or explanatory variables. The horizontal axis
(abscissa) of a graph is used for plotting X.
Looking at a plot of the data is an essential first step. The graph above suggests that lower
birth weight babies grow faster from 70 to 100 than higher birth weight babies. Linear
regression can be used to fit a straight line to these data:
Equation: Y = a + bx
b is the gradient, slope or regression coefficient
a is the intercept of the line at Y axis or regression constant
Y is a value for the outcome
x is a value for the predictor
The fitted equation describes the best linear relationship between the population values of
X and Y that can be found using this method.
The method used to fit the regression equation is called least squares. This minimises the
sum of the squares of the errors associated with each Y point by differentiation. This error
is the difference between the observed Y point and the Y point predicted by the regression
equation. In linear regression this error is also the error term of the Y distribution, the
The simple linear regression equation can be generalised to take account of k predictors:
Y = b0 + b1x1 + b2x2 +...+ bkxk
Assumptions of general linear regression:
Y is linearly related to all x or linear transformations of them
all error terms are independent
deviations from the regression line (residuals) follow a normal distribution
deviations from the regression line (residuals) have uniform variance
A residual for a Y point is the difference between the observed and fitted value for that
point, i.e. it is the distance of the point from the fitted regression line. If the pattern of
residuals changes along the regression line then consider using rank methods or linear
regression after an appropriate transformation of your data.
Correlation refers to the interdependence or co-relationship of variables.
In the context of regression examples, correlation reflects the closeness of the linear
relationship between x and Y. Pearson's product moment correlation coefficient rho is
a measure of this linear relationship. Rho is referred to as R when it is estimated from a
sample of data.
R lies between -1 and 1 with
R = 0 is no linear correlation
R = 1 is perfect positive (slope up from bottom left to top right) linear correlation
R = -1 is perfect negative (slope down from top left to bottom right) linear
Assumption of Pearson's correlation:
• at least one variable must follow a normal distribution
N.B. If R is close to ± 1 then this does NOT mean that there is a good causal relationship
between x and Y. It shows only that the sample data is close to a straight line. R is a much
r² is the proportion of the total variance (s²) of Y that can be explained by the linear
regression of Y on x. 1-r² is the proportion that is not explained by the regression. Thus 1-
r² = s²xY / s²Y.
b) In a multiple regression model with 12 independent variables, what are the degrees of
freedom for error? Explain?
Consider a random sample of n observations (xi1, xi2, . . . . , xip, yi), i = 1, 2, . . . , n.
The p + 1 random variables are assumed to satisfy the linear model
yi 0 1xi1 2xi2 pxip + ui i = 1, 2, . . . , n
where ui are values of an unobserved error term, u, and. the unknown parameters are
The error terms ui are mutually independent and identically distributed, with mean = 0
and constant variances
E [ui] = 0 V [ui] =
This is so, because the observations y1, y2, . . . ,yn are a random sample, they are
mutually independent and hence the error terms are also mutually independent
The distribution of the error term is independent of the joint distribution of x i, x 2, . . .
0 1 2 p are constants.
Equations relating the n observations can be written as:
0 1 p can be estimated using the least squares procedure, which
minimizes the sum of squares of errors.
can be computed:
The problem of multiple regression can be geometrically represented as follows. We can
visualize that n observations (xi1, xi2, …..xip, yi) i = 1, 2, ….n are represented as points in a
(p+1) - dimensional space. The regression problem is to determine the possible hyper-planes
in the p – dimensional space, which will be the best- fit. We use the least squares criterion
and locate the hyper-plane that minimizes the sum of squares of the errors, i.e., the distances
from the points around the plane (observations) and the point on the plane.
(i.e. the estimate ŷ).
ŷ = a+b1x1+b2x2+…+bpxp
Standard error of the estimate
where yi = the sample value of the dependent variable
ŷi = corresponding value estimated from the regression equation
n = number observations
p = number of predictors or independent variable
The denominator of the equation indicates that in multiple regression with p independent
variables, the standard error has n-p-1 degrees of freedom. This happens because the degrees
of freedom are reduced from n by p+1 numerical constants a, b1, b2, …..bp, that have been
estimated from the sample.
Fit of the regression model
The fit of the multiple regression model can be assessed by the Coefficient of Multiple
determination, which is a fraction that represents the proportion of total variation of y that is
explained by the regression plane.
Sum of squares due to error
Sum of squares due to regression
Total sum of squares
SST = SSR + SSE
The ratio SSR/SST represents the proportion of the total variation in y explained by the
regression model. This ratio, denoted by R2, is called the coefficient of multiple
determination. R2 is sensitive to the magnitudes of n and p in small samples. If p is large
relative to n, the model tends to fit the data very well. In the extreme case, if n = p+1, the
model would exactly fit the data.
A better goodness of fit measure is the adjusted R2, which is computed as follows:
Adjusted R2= 1 – ( ) (1-R2)
Statistical inferences for the model
The overall goodness of fit of the regression model (i.e. whether the regression model is at all
helpful in predicting the values of y can be evaluated, using an F-test in the format of analysis
Under the null hypothesis: Ho: β1 = β2 = ... = βp = 0, the statistic
has an F-distribution with p and n--1 degrees of freedom
ANOVA Table for Multiple Regression
Source of Sum of Degrees Mean F ratio
Variation Squares of Squares
Regression SSR p MSR MSR/MSE
Error SSE (n-p-1) MSE
Total SST (n-1)
Whether a particular variable contributes significantly to the regression equation can be tested
as follows: For any specific variable xi, we can test the null hypothesis Ho: βi = 0, by
computing the statistic
and performing a one or two tailed t-test with n-p-1 degrees of freedom.
Standardized regression coefficients
The magnitude of the regression coefficients depends upon the scales of measurement used
for the dependent variable y and the explanatory variables included in the regression
equation. Unstandardized regression coefficients cannot be compared directly because of
differing units of measurements and different variances of the x variables. It is therefore
necessary to standardize the variables for meaningful comparisons.
The estimated model
ŷi = bo+b1xi1+b2xi2+….bpxip
can be written as:
The expressions in the parentheses are standardized variables; b’s; are unstandardized
regression coefficients and s1, s2, …sp are the standard deviations of variables x1, x2, ….xp and
sx is the standard deviation of variable y. The coefficients (bisi)/sy, j=1,2,…,p are called
standardized regression coefficients. The standardized regression coefficient measures the
impact of a unit change in the standardized value of xi on the standardized value of y. The
larger the magnitude of standardized bi, the more xi contributes to the prediction of y.
However, the regression equation itself should be reported in terms of the unstandardized
regression coefficients so that prediction of y can be made directly from the x variables.
Multiple correlation coefficient, R, is a measure of the strength of the linear relationship
between y and the set of variables x1, x2, …xp. It is the highest possible simple correlation
between y and any linear combination of x1,x2,….,xp. This property explains that the
computed value of R is never negative. In this sense, the least squares regression plane
maximizes the correlation between the x variables and the dependent variable y. Hence, it
represents a measure of how well the regression equation fits the data. When the value of the
multiple correlation R is close to zero, the regression equation barely predicts y better than
sheer chance. A value of R close to 1 indicates a very good fit.
A useful approach to study the relationship between two variables x and y in the presence of a
third variable z is to determine the correlation between x and y after controlling the effect of z.
This correlation is called partial correlation. Partial correlation is the correlation of two
variables while controlling for a third or more other variables. For example r12.34 is the
correlation of variables 1 and 2, controlling for variables 3 and 4. If partial correlation r12.34 is
equal to uncontrolled correlation r12 , it implies that the control variables have no effect on
the relationship between variables 1 and 2.. If partial correlation is nearly equal to zero, it
implies that the correlation between original variable is spurious.
Partial correlation coefficient is a measure of the linear association between two variables
after adjusting for the linear effect of a group of other variables. If the number of other
variables is equal to 1, the partial correlation coefficient is called the first order coefficient. If
the number of other variables is equal to 2, the partial correlation coefficient is called the
second order coefficient, and so on.
First order Partial Correlation
The first order partial correlation between xi and xj holding constant xl is computed by the
where rij, ril and rjl are zero order (Pearson‘s r coefficient)
Second order Partial Correlation
Correlation between xi and xj holding constant xl and xm is computed by the following
where rij, rim.l, rjm.l are first order partial correlation coefficients.
Statistical significance of partial correlation coefficients can be tested by using a test statistic
similar to the one for simple correlation coefficient.
where q is the number of variables held constant. The value of t is compared with tabulated t
for n-q-2 degrees of freedom.
In practice, the problem of multicollinearity occurs when some of the x variables are highly
correlated. Multicollinearity can have significant impact on the quality and stability of the
fitted regression model. A common approach to multicollinearity problem is to omit
explanatory variables. For example if x1 and x2 are highly correlated (say correlation is
greater than 0.9), then the simplest approach would be to use only one of them, since one
variable conveys essentially all the information in the other variable.
The simplest method for detecting multicollinearity is the correlation matrix, which can be
used to detect if there are large correlations between pairs of explanatory variables.
When more subtle patterns of correlation coefficients exist, the determinant of the correlation
matrix computed by IDAMS can be used to detect multicollinearity. The determinant of the
correlation matrix represents as a single number the generalized variance in the set of
predictor variables, and varies from 0 to 1. The value of the determinant near zero indicates
that some or all explanatory variables are highly correlated. The value of the determinant
equal to zero indicates a singular matrix, which indicates that at least one of the predictors is
a linear function of one or more other predictors.
Another approach is to compute the ‗tolerance‘ associated with a predictor. The tolerance of
xi is defined as 1 minus the squared multiple correlation between that xi and the remaining x
variables. When tolerance is small, say less than 0.01, then it would be expedient to discard
the variable with the smallest tolerance. The inverse of the tolerance is called the variance
inflation factor (VIF).
Stepwise regression is a sequential process for fitting the least squares model, where at each
step a single explanatory variable is either added to or removed from the model in the next fit.
The most commonly used criterion for the addition or deletion of variables in stepwise
regression is based on partial F-statistic:
The suffix ‗Full‘ refers to the larger model with p explanatory variables, whereas the suffix
‗Reduced‘ refers to the reduced model with ( ) explanatory variables.
Forward selection procedure begins with no explanatory variable in the model and
sequentially adds a variable according to the criterion of partial F- statistic. At each step, a
variable is added, whose partial F- statistic yields the smallest p - value. Variables are entered
as long as the partial F-statistic p-value remains below a specific maximum value (PIN). The
procedure stops when the addition of any of the remaining variables yields a partial p-value >
PIN. This procedure has two limitations. Some of the variables never get into the model and
hence their importance is never determined. Another limitation is that a variable once
included in the model remains there throughout the process, even if it loses its stated
significance, after the inclusion of other variable(s).
The backward elimination procedure begins with all the variables in the model and proceeds
by eliminating the least useful variable at a time. A variable, whose partial F p-value is
greater than a prescribed value, POUT, is the least useful variable and is therefore removed
from the regression model. The process continues, until no variable can be removed
according to the elimination criterion.
The stepwise procedure is a modified forward selection method which later in the process
permits the elimination of variables that become statistically non- significant. At each step of
the process, the p-values are computed for all variables in the model. If the largest of these p-
values > POUT, then that variable is eliminated. After the included variables have been
examined for exclusion, the excluded variables are re-examined for inclusion. At each step of
the process, there can be at the most one exclusion, followed by one inclusion. It is necessary
that PIN POUT to avoid infinite cycling of the process.
Regression with Qualitative Explanatory Variables
Sometimes, explanatory variables for inclusion in a regression model are not interval scale;
they may be nominal or ordinal variables. Such variables can be used in the regression model
by creating ‗dummy‘ (or indicator) variables.
Dichotomous variables do not cause the regression variables to lose any of their properties.
Since they have two categories, they manage to ‗trick‘ least squares, while entering into the
regression equation as interval scale variables with just two categories.
Consider for example, the relationship between income and gender
y = a + bx
y = income of an individual, and
x = a dichotomous variable, coded as
0 if female
1 if otherwise
The estimated value of y is
ŷ =a if x = 0
ŷ=a+b if x = 1
Since our best estimate for a given sample is the sample mean, a is estimated as the average
income for females and a+b is estimated as average income for males. The regression
coefficient b is therefore
male – female
In effect, females are considered as the reference group and males‘ income is measured by
how much it differs from females‘ income.
Consider, for example, the relationship between the time spent by an academic scientist on
teaching and his rank.
y = a+bx
y is the percentage of work time spent on teaching
x is a polytomous variable ‗rank‘ with three modalities:
1 = Professor
2 = Reader
3 = Lecturer
We create two dummy variables:
X1 = 1 if rank = Professor
0 if otherwise
X2 = 1 if rank = Reader
0 if otherwise
Note that we have created two dummy variables to represent a trichotomous variable. If we
create a third dummy variable X3 (score 1; if rank = Lecturer, and 0 otherwise), the
parameters of the regression equation cannot be estimated uniquely. This is because if the
score of any respondent on X1 and X2 is known, it would always be possible to predict his
score on X3. For example if a respondent has score 0 on X1 (not Professor) and 0 on X2 (not
Reader), then the respondent is certainly a Lecturer (i.e., score 1 on X3). This represents a
situation of perfect multicollinearity. Hence the general rule for creating dummy variables is:
Number of dummy variables = Number of modalities minus 1.
Statistical significance of regression coefficients and Multiple R2 is determined in the same
way as for interval scale explanatory variables.
5. a) Discuss what is meant by Quality control and quality improvement.
Statistica1 quality control (SQC) is the term used to describe the set of statistical
tools used by quality professionals. Statistical quality control can be divided into three
1. Descriptive statistics are used to describe quality characteristics and relationships.
Included are statistics such as the mean, standard deviation, the range,
and a measure of the distribution of data.
WHAT IS STATISTICAL QUALITY CONTROL?
WHAT IS STATISTICAL QUALITY CONTROL?
2. Statistical process control (SPC) involves inspecting a random sample of the
output from a process and deciding whether the process is producing products
with characteristics that fall within a predetermined range. SPC answers the
question of whether the process is functioning properly or not.
3. Acceptance sampling is the process of randomly inspecting a sample of goods
and deciding whether to accept the entire lot based on the results. Acceptance
sampling determines whether a batch of goods should be accepted or rejected.
The tools in each of these categories provide different types of information for use in
analyzing quality. Descriptive statistics are used to describe certain quality characteristics,
such as the central tendency and variability of observed data. Although descriptions
of certain characteristics are helpful, they are not enough to help us evaluate whether
there is a problem with quality. Acceptance sampling can help us do this. Acceptance
sampling helps us decide whether desirable quality has been achieved for a batch of
products, and whether to accept or reject the items produced. Although this information
is helpful in making the quality acceptance decision after the product has been produced,
it does not help us identify and catch a quality problem during the production
process. For this we need tools in the statistical process control (SPC) category.
All three of these statistical quality control categories are helpful in measuring and
evaluating the quality of products or services. However, statistical process control
(SPC) tools are used most frequently because they identify quality problems during
the production process. For this reason, we will devote most of the chapter to this
category of tools. The quality control tools we will be learning about do not only
measure the value of a quality characteristic. They also help us identify a change or
variation in some quality characteristic of the product or process. We will first see
what types of variation we can observe when measuring quality. Then we will be able
to identify specific tools used for measuring this variation.
Variation in the production processleads to quality defects and lack of product consistency.
The Intel Corporation,the world‘s largest and most profitable manufacturer
ofmicroprocessors, understands this.Therefore, Intel has implemented a program it calls
―copy-exactly‖ at all its manufacturing facilities. The idea is that regardless of whether the
chips are made in Arizona, New Mexico, Ireland, or any of its other plants, they are made in
exactly the same way. This means using the same equipment, the same exact materials, and
workers performing the same tasks in the exact same order. The level of detail to which the
―copy-exactly‖ concept goes is meticulous. For example, when a chipmaking machine was
found to be a few feet longer at one facility than another, Intel made them match.When water
quality was found to be different at one facility, Intel instituted a purification system to
eliminate any differences. Even when a worker was found polishing equipment in one
direction, he was asked to do it in the approved circular pattern.Why such attention to
exactness of detail? The reason is to minimize all variation. Now let‘s look at the different
types of variation that exist.
Stastical quality improvement
•Statistical process control (SPC) is a management philosophy that relies on straightforward
statistical tools to identify and solve process problems.
•By systematically identifying potential problems in process control, managers can
proactively make corrections before quality outcomes suffer.
•SPC methods are useful in helping managers to measure whether their processes and
products conform to design specifications, and they also help organizations to improve
productivity and reduce waste.
•SPC methods are used extensively in manufacturing settings but are also relevant in the
Statistical process control (SPC) is an optimization philosophy centered on using a variety of
statistical tools to enable continuous process improvement. Closely linked to the total quality
management (TQM) philosophy, SPC helps firms to improve profitability by improving
process and product quality. Although initially used in manufacturing, SPC tools and
methods work equally well in a service environment.
SPC methods are used extensively by organizations to enable systematic learning. Using
methods developed in the 1920s by Walter Shewhart and subsequently enhanced by quality
consultants William Edwards Deming and Joseph Juran, organizations are able to use a set of
straightforward statistics to find out whether or not their processes conform to expectations.
Furthermore, the use of SPC methods can help to identify instances of process variation that
may signal a problem in the process. By identifying process variation and potential
nonconformance with design expectations early in the production or service environment,
managers can proactively make corrections before the process variation negatively impacts
quality and customer perceptions.
Although SPC is enabled with statistical analysis, the management philosophy that underlies
SPC is much broader than a set of statistics. To improve a process systematically, managers
must first identify key processes and key variables of interest. Every organization has
hundreds, if not thousands, of processes and variables that can affect product and service
outcomes, and one challenge is to focus on the processes and variables that are of key
concern. SPC tools can be useful in identifying areas that need attention, but managerial
insight is needed to use the SPC tools strategically.
Managers can directly influence organizational performance using SPC practices. Their
choice of key processes and performance variables creates a feed-forward signaling device to
the organization about key performance indicators. This causes attention to be paid to these
processes and variables. Feedback is then received through the SPC information, enabling
evaluation of the data and an opportunity for corrective actions to be taken. Thus, SPC is not
merely a set of statistical tools, but a management philosophy that helps organizations to
improve performance through feed-forward and feed-back loops.
b) What are the limitations of a quality control charts?
Statical Process Control (SPC) will only help address changes that drive a process "out of
control". An "in control" process is unrelated to whether or not the units it produces are
acceptable. This concept often leads to the misapplication of statistical process control. That
said, when properly understood and applied, SPC can be a power tool for addressing process
changes before they result in lost produce.
SPC is non-value added, it invested cost on man power is the biggest disadvantage. The
advantage is SPC can give you high confident level on the quality.
6. a) Suggest a more suitable average in each of the following cases:
(i) Average size of ready-made garments.
Airthmetic mean will be used because it is continuous and additive in nature.
(ii) Average marks of a student.
Airthmetic mean will be used because it is the data are in the interval and the distribution is
b) State the nature of symmetry in the following cases:
(i) When median is greater than mean.
The data are ―skewed to the left‖ with a long tail of scores pulling the mean down more than
Skewness is a measure of the asymmetry of the probability distribution of a real valued
random variable.Thw skewness value can be positive or negative,or even
undefined.Qualitatively,a negative skew indicates that the tail on the left side of the
probability density function is longer than the right side and the bulk of the values(including
the median)lie to the right of the mean.A positive skew indicates that the tail on the right side
is longer than the left side and the bulk of the values lie to the left of the mean.A zero value
indicates that the values are relatively evenly distributed on both sides of the mean,typically
but not necessarily implying a symmetric distribution.
(ii) When Mean is greater than median.
It is a skewed distribution positive skew os skewed to the right mean nothing but the average
of the total value which denoted as x.To find mean value of given is defined as the ratio of
the sum of given number divided by the total numbers.Median number of set of data value
after arranging the data as in ascending order.
Check the mean value is greater than median value of the following data.
Step 1 : Sum of the given set of data value is
Step 2 : Count the given set data
Here there are 6 data given.
Step 3 : Formula:sum of data/number of data in set
Step 4 : 246/6=41
Hence the mean value of the data is 41
Mean is 41.
To find the median value:
Step 1: Arrange the given set data in ascending order.
Step 2 : Check the total number of data is odd or even.Here the given data are in even
Step 3 : Find the middle number of given set of data.
Here 34 and 45 are the middle number.
Step.4 : Find the mean value of the two members.
That the median value of the given set of data is 36.5
Median is 39.5
Compare the mean and median value of the given set of data.
Mean:41 and median is 39.5.
41 > 39.5
Q.2a. List the accounting standards issued by ICAI.
Accounting Standards issued by the ICAI
• Withdrawal of the Announcement issued by the Council on ‗Treatment of exchange
differences under Accounting Standard (AS) 11 (revised 2003), The Effects of Changes in
Foreign Exchange Rates vis-à-vis Schedule VI to the Companies Act, 1956‘
Accounting Standards (ASs)
• AS 1 Disclosure of Accounting Policies
• AS 2 Valuation of Inventories
• AS 3 Cash Flow Statements
• AS 4 Contingencies and Events Occuring after the Balance Sheet Date
• AS 5 Net Profit or Loss for the period,Prior Period Items and Changes in Accounting
• AS 6 Depreciation Accounting
• AS 7 Construction Contracts (revised 2002)
•AS 8 Accounting for Research and Development
•AS 9 Revenue Recognition
• AS 10 Accounting for Fixed Assets
• AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003),
• AS 12 Accounting for Government Grants
• AS 13 Accounting for Investments
•AS 14 Accounting for Amalgamations
• AS 15 (revised 2005) Employee Benefits Limited Revision to Accounting Standard (AS)
15, Employee Benefits (revised 2005)
• AS 15 (issued 1995)Accounting for Retirement Benefits in the Financial Statement of
• AS 16 Borrowing Costs
• AS 17 Segment Reporting
• AS 18, Related Party Disclosures
•AS 19 Leases
•AS 20 Earnings Per Share
• AS 21 Consolidated Financial Statements
• AS 22 Accounting for Taxes on Income.
• AS 23 Accounting for Investments in Associates in Consolidated Financial Statements
•AS 24 Discontinuing Operations
•AS 25 Interim Financial Reporting
•AS 26 Intangible Assets
• AS 27 Financial Reporting of Interests in Joint Ventures
• AS 28 Impairment of Assets
•AS 29 Provisions,Contingent` Liabilities and Contingent Assets
•AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS
2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29
•AS 31, Financial Instruments: Presentation
•Accounting Standard (AS) 32, Financial Instruments: Disclosures, and limited revision to
Accounting Standard (AS) 19, Leases .
2b. Write short notes of IFRS.
IFRS (International Financial Reporting Standards)
The goal of IFRS is to provide a global framework for how public companies prepare and
disclose their financial statements. IFRS provides general guidance for the preparation of
financial statements, rather than setting rules for industry-specific reporting.
Having an international standard is especially important for large companies that have
subsidiaries in different countries. Adopting a single set of world-wide standards will
simplify accounting procedures by allowing a company to use one reporting language
throughout. A single standard will also provide investors and auditors with a cohesive view
Currently, over 100 countries permit or require IFRS for public companies, with more
countries expected to transition to IFRS by 2015. Proponents of IFRS as an international
standard maintain that the cost of implementing IFRS could be offset by the potential for
compliance to improve credit ratings.
IFRS is sometimes confused with IAS (International Accounting Standards), which are older
standards that IFRS has replaced.
Q.3 Prepare a Three-column Cash Book of M/s Thuglak & Co. from
The following particulars
1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000
2. Paid into bank Rs. 10,000
3. Bought goods from Hari for Rs, 200 for each
4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1%
5. Sold goods to Mohan for each Rs. 1.175
6. Received a cheque from Shyam to whom goods were sold for Rs.800.Discount
7. Shyam‘s cheque deposited into bank
8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repair
9. Bank notified that Shyam‘s cheque has been returned dishonored and debited
the account in respect of charges Rs. 10
10. Received a money order Rs. 25 from Hari
11. Shyam settled his account by means of a cheque for Rs. 820, Rs. 20 being for
12. Withdrew from the bank Rs. 10,000
18. Discounted a B/E for Rs. 1,000 at 1% through bank
20. Honored our own acceptance by cheque Rs. 5,000
22. Withdrew fir personal use Rs. 1,000
24. Paid tread expenses Rs. 2,000
25. Withdrew from bank for private expenses Rs. 1,500
26. draft purchased for Rs. 5,005Purchased machinery from Rajiv for 5,000 and
paid him by means of a bank
27. Issued cheque to Ram Saran for cash purchased of furniture Rs. 1,575
28. Received a cheque for commission Rs. 500 from R.& Co. and deposited into
29. Ramesh who owned us Rs. 500 became bankrupt and paid us 50 paise in the
30. Received payment of a loan of Rs. 5,000 and deposited Rs. 3,000 out of into
31. Paid rent to landlord ―Mohan‖ by cheque of Rs. 220
31. Interest allowed by bank Rs. 30
Receipts Discount Cash Bank Payment Discount Cash Bank
To 50000 By 200
To balance 20000 By 20 2000
To capital 10000 By 250
To sales 1175 By 100 810
To sales 100 By 10000
To M.O 25 By Disc 1000
To Shyam 820 By 1000
To 500 By Pvt 1500
To Ramesh 250 250 By 5005
To loan 2000 3000 By 1575
To interest 30 By rent 220
To 5000 By trend 2000
By Bank 50
By 48250 19740
Total 350 52275 41325 120 52275 41325
Q.1 Price elasticity of demand depends on various factors. Explain each factor with the
help of an example.
Responsiveness of the demand for a goods or service to the increase or decrease in its price.
Normally, sales increase with drop in prices and decrease with rise in prices. As a general
rule, appliances, cars, confectionary and other non-essentials show elasticity of demand
whereas most necessities (food, medicine, basic clothing) show inelasticity of demand (do not
sell significantly more or less with changes in price). Elasticity of demand appears in the
definitions of the following terms: market penetration pricing, price elasticity of demand,
elasticity of demand appears in these other terms: income elasticity of demand, own price
elasticity of demand.
Price elasticity of demand (PED) is defined as the measure of responsiveness in the quantity
demanded for a commodity as a result of change in price of the same commodity. It is a
measure of how consumers react to a change in price. In other words, it is percentage change
in quantity demanded as per the percentage change in price of the same commodity. In
economics and business studies, the price elasticity of demand is a measure of the
sensitivity of quantity demanded to changes in price. It is measured as elasticity, which is it
measures the relationship as the ratio of percentage changes between quantity demanded of a
good and changes in its price. In simpler words, demand for a product can be said to be very
inelastic if consumers will pay almost any price for the product, and very elastic if consumers
will only pay a certain price, or a narrow range of prices, for the product.
Calculating the Price Elasticity of Demand
You may be asked the question "Given the following data, calculate the price elasticity of
demand when the price changes from $9.00 to $10.00" Using the chart on the bottom of the
page, I'll walk you through answering this question. (Your course may use the more
complicated Arc Price Elasticity of Demand formula. If so you'll need to see the article on
First we'll need to find the data we need. We know that the original price is $9 and the new
price is $10, so we have Price(OLD)=$9 and Price(NEW)=$10. From the chart we see that
the quantity demanded when the price is $9 is 150 and when the price is $10 is 110. Since
we're going from $9 to $10, we have QDemand(OLD)=150 and QDemand(NEW)=110,
where "QDemand" is short for "Quantity Demanded". So we have:
To calculate the price elasticity, we need to know what the percentage change in quantity
demand is and what the percentage change in price is. It's best to calculate these one at a
Calculating the Percentage Change in Quantity Demanded
The formula used to calculate the percentage change in quantity demanded is:
[QDemand(NEW) - QDemand(OLD)] / QDemand(OLD)
By filling in the values we wrote down, we get:
[110 - 150] / 150 = (-40/150) = -0.2667
We note that % Change in Quantity Demanded = -0.2667 (We leave this in decimal terms.
In percentage terms this would be -26.67%). Now we need to calculate the percentage change
Calculating the Percentage Change in Price
Similar to before, the formula used to calculate the percentage change in price is:
[Price(NEW) - Price(OLD)] / Price(OLD)
By filling in the values we wrote down, we get:
[10 - 9] / 9 = (1/9) = 0.1111
We have both the percentage change in quantity demand and the percentage change in price,
so we can calculate the price elasticity of demand.
Final Step of Calculating the Price Elasticity of Demand
We go back to our formula of:
PEoD = (% Change in Quantity Demanded)/(% Change in Price)
We can now fill in the two percentages in this equation using the figures we calculated
PEoD = (-0.2667)/(0.1111) = -2.4005
When we analyze price elasticity we're concerned with their absolute value, so we ignore the
negative value. We conclude that the price elasticity of demand when the price increases
$9 to $10 is 2.4005.
Different degree of price elasticity:
Perfectly Elastic Demand:-
If demand is perfectly elastic, it means that at a certain price demand is infinite (A good with
a very high elasticity of demand). In other words if a firm increased price by 1%, it would see
all its demand evaporate.
In a perfectly competitive market it is assumed a firm would have a perfectly elastic demand.
This is because if they increased the price, the consumers with perfect information would
switch to other firms who offer the identical product.
A consumer will not purchase designer jeans if he or she is in financial dire straits or price
increases of those jeans.
But necessary goods like medicines, food items, petrol etc are the exceptions.
Perfectly Inelastic Demand:-
When a price change has no effect on the supply and demand of a good or service, it is
considered perfectly inelastic. An example of perfectly inelastic demand would be a life
saving drug that people will pay any price to obtain. Even if the price of the drug were to
increase dramatically, the quantity demanded would remain the same.
Q.2 A company is selling a particular brand of tea and wishes to introduce a new flavor.
How will the company forecast demand for it ?
Demand forecasting for new products is quite different from that for established
products.Here the firms will not have any past experience or past data for this purpose.An
intensive study of the economic and competitive characteristics of the product should be
made to make efficient forecasts.
Professor Joel Dean,however,has suggested a few guidelines to make forecasting of demand
for new prodocts.
The demand for the new product may be considered as an outgrowth of an existing product.
For e.g.. demand for new tata indica . which is modified version of Old indica can most
effectively be projected based on the sales of the old indica, the demand for new pulsar can
be forecasted based on the a sales of the old pulsor. Thus when a new product is evolved
from the old product. The demand conditions of the old product can be taken as a basis for
forecasting the demand for the new product.
b) Substitute approach
If the product developed serves as substitute for the existing product, the demand for the new
product may be worked out on the basis of a market share. The growths of demand for all the
products have to be worked out on the basis of intelligent forecasts for independent veriables
that influence the demand for the substitutes. After that, a portion of the market can be sliced
out for the new product.For e.g.. A moped as a substitute for a scooter ,a cell phone as a
substitute for a land line. In some cases price plays an important role in shaping future
demand for the product.
C) Opinion poll approach
Under this approach the potential buyers are directly contacted, or through the use of samples
of the new products and their responses are found out. These are finally blown up to forecast
the demand for the new product.
d) Sales experience approach
Offer the new product for in a sample market ; say supermarkets or big bazaars in big cities.
Which are also big marketing centers. The product may be offered for sale through one suoer
market and the estimate of sales obtained may be blown up to arrive at estimated demand for
e)Growth Curve approach
According to this,the rate of growth and the ultimate level of demand for the new product are
estimated on the basis of the pattern of growth of established products.For eg.An automobile
Co.,while introducing a new version of a car will study the level of demand for the existing
A firm will survey consumers reactions to e new product indirectly through getting in touch
with some specialized and informed dealers who have good knowledge about the
market,about the different varieties of the product already available in the market,the
consumers preferences etc.This helps in making a more efficient estimation of future demand.
These methods are not mutually exclusive.The management can use a combination of several
of them,supplement and cross check each other.
Q.3 The supply of a product depends on the price. What are the other factors that will
affect the supply of a product.
FACTORS THAT DETERMINE ELASTICITY OF SUPPLY The elasticity of supply
depends on the following factors the person that had crated this was sabeena spears hit me
up on facebook <3 thank you very much The value of price elasticity of supply is positive,
because an increase in price is likely to increase the quantity supplied to the market and vice
versa. The elasticity of supply depends on the following factors: SPARE CAPACITY
How much spare capacity a firm has - if there is plenty of spare capacity, the firm should be
able to increase output quite quickly without a rise in costs and therefore supply will be
The level of stocks or inventories - if stocks of raw materials, components and finished
products are high then the firm is able to respond to a change in demand quickly by supplying
these stocks onto the market - supply will be elastic EASE OF FACTOR SUBSTITUTION
Consider the sudden and dramatic increase in demand for petrol canisters during the recent
fuel shortage. Could manufacturers of cool-boxes or producers of other types of canister have
switched their production processes quickly and easily to meet the high demand for fuel
containers? If capital and labour resources are occupationally mobile then the elasticity of
supply for a product is likely to be higher than if capital equipment and labour cannot easily
be switched and the production process is fairly inflexible in response to changes in the
pattern of demand for goods and services. TIME PERIOD
Supply is likely to be more elastic, the longer the time period a firm has to adjust its
production. In the short run, the firm may not be able to change its factor inputs. In some
agricultural industries the supply is fixed and determined by planting decisions made months
before, and climatic conditions, which affect the production, yield. Economists sometimes
refer to the momentary time period - a time period that is short enough for supply to be fixed
i.e. supply cannot respond at all to a change in demand.
SABEENA SPEARS ROCKS THE WORLD ALL OVER THE INTERNATIONAL
Q.4 Show how producers equilibrium is achieved with isoquants and isocost curves.
Definition of Optimum Factor Combination:
In the long run, all factors of production can be varied. The profit maximization firm will
choose the least cost combination of factors to produce at any given level of output. The least
cost combination or the optimum factor combination refers to the combination of factors
with which a firm can produce a specific quantity of output at the lowest possible cost.
Explanation of Optimum Factor Combination:
There are two methods of explaining the optimum combination of factor:
(i) The marginal product approach.
(ii) The isoquant / isocost approach.
These two approaches are now explained in brief:
(i) The Marginal Product Approach:
In the long run, a firm can vary the amounts of factors which it uses for the production of
goods. It can choose what technique of production to use, what design of factory to build,
what type of machinery to buy. The profit maximization will obviously want to use that mix
of factors of combination which is least costly to it. In search of higher profits, a firm
substitutes the factor whose gain is higher than the other. When the last rupee spent on each
factor brings equal revenue, the profit of the firm is maximized. When a firm uses different
factors of production or least cost combination or the optimum combination of factors is
Mppa = Mppb = Mppc = Mppn
Pa Pb Pc Pn
In the above equation a, b, c, n are different factors of production. Mpp is the marginal
physical product. A firm compares the Mpp / P ratios with that of another. A firm will
reduce its cost by using more of those factors with a high Mpp / P ratios and less of those
with a low Mpp / P ratio until they all become equal.
(ii) The Isoquant / Isocost Approach:
The least cost combination of-factors or producer's equilibrium is now explained with the
help of iso product curves and iso costs. The optimum factors combination or the least cost
combination refers to the combination of factors with which a firm can produce a specific
quantity of output at the lowest possible cost. As we know, there are a number of
combinations of factors which can yield a given level of output. The producer has to choose,
one combination out of these which yields a given level of output with least possible outlay.
The least cost combination of factors for any level of output is that where the iso product
curve is tangent to an iso cost curve. The analysis of producers equilibrium is based on the
Assumptions of Optimum Factor Combination:
The main assumptions on which this analysis is based areas under:
(a) There are two factors X and Y in the combinations.
(b) All the units of factor X are homogeneous and so is the case with units of factor Y.
(c) The prices of factors X and Y are given and constants.
(d) The total money outlay is also given.
(e) In the factor market, it is the perfect completion which prevails. Under the conditions
assumed above, the producer is in equilibrium, when the following two conditions are
(1) The isoquant must be convert to the origin.
(2) The slope of the Isoquant must be equal to the slope of isocost line
The least cost combination of factors is now explained with the help of figure 12.9.
Here the iso cost line CD is tangent to the iso product curve 400 units at point Q. The firm
employs OC units of factor Y and OD units of factor X to produce 400 units of output. This is
the optimum output which the firm can get from the cost outlay of Q. In this figure any point
below Q on the price line AB is desirable as it shows lower cost, but it is not attainable for
producing 400 units of output. As regards points RS above Q on isocost lines GH, EF, they
show higher cost. These are beyond the reach of the producer with CD outlay. Hence point Q
is the least cost point. It is the point which is the least cost factor combination for producing
400 units of output with OC units of factor Y and OD units of factor X. Point Q is the
equilibrium of the producer.
At this point, the slope of the isoquants equal to the slope of the isocost line. The MRT of the
two inputs equals their price ratio.
Thus we find that at point Q, the two conditions of producer's, equilibrium in the choice of
factor combinations, are satisfied.
(1) The isoquant (IP) is convex the origin.
(2) At point Q, the slope of the isoquant ΔY / ΔX (MTYSxy) is equal to the slope of the
isocost in Px / Py. The producer gets the optimum output at least cost factor combination.
Q.5 Discuss the full cost pricing and marginal cost pricing method. Explain how the two
methods differ from each other.
Setting the price based upon prices of the similar competitor products.
Competitive pricing is based on three types of competitive product:
Products have lasting distinctiveness from competitor's product. Here we can assume
o The product has low price elasticity.
o The product has low cross elasticity.
o The demand of the product will rise.
Products have perishable distinctiveness from competitor's product, assuming the
product features are medium distinctiveness.
Products have little distinctiveness from competitor's product. assuming that:
o The product has high price elasticity.
o The product has some cross elasticity.
o No expectation that demand of the product will rise.
Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing
the product and adds on a percentage (profit) to that price to give the selling price. This
method although simple has two flaws; it takes no account of demand and there is no way of
determining if potential customers will purchase the product at the calculated price.
This appears in 2 forms, Full cost pricing which takes into consideration both variable and
fixed costs and adds a % markup. The other is Direct cost pricing which is variable costs plus
a % markup, the latter is only used in periods of high competition as this method usually
leads to a loss in the long run.
Creaming or skimming
Selling a product at a high price, sacrificing high sales to gain a high profit, therefore
‗skimming‘ the market. Usually employed to reimburse the cost of investment of the original
research into the product: commonly used in electronic markets when a new range, such as
DVD players, are firstly dispatched into the market at a high price. This strategy is often used
to target "early adopters" of a product or service. These early adopters are relatively less
price-sensitive because either their need for the product is more than others or they
understand the value of the product better than others. In market skimming goods are sold at
higher prices so that fewer sales are needed to break even.by Gaspard dento
This strategy is employed only for a limited duration to recover most of investment made to
build the product. To gain further market share, a seller must use other pricing tactics such as
economy or penetration. This method can come with some setbacks as it could leave the
product at a high price to competitors.
A limit price is the price set by a monopolist to discourage economic entry into a market, and
is illegal in many countries. The limit price is the price that the entrant would face upon
entering as long as the incumbent firm did not decrease output. The limit price is often lower
than the average cost of production or just low enough to make entering not profitable. The
quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than
would be optimal for a monopolist, but might still produce higher economic profits than
would be earned under perfect competition.
The problem with limit pricing as strategic behavior is that once the entrant has entered the
market, the quantity used as a threat to deter entry is no longer the incumbent firm's best
response. This means that for limit pricing to be an effective deterrent to entry, the threat
must in some way be made credible. A way to achieve this is for the incumbent firm to
constrain itself to produce a certain quantity whether entry occurs or not. An example of this
would be if the firm signed a union contract to employ a certain (high) level of labor for a
long period of time.
A loss leader or leader is a product sold at a low price (at cost or below cost) to stimulate
other profitable sales.
Setting a price based upon analysis and research compiled from the targeted market.
The price is deliberately set at low level to gain customer's interest and establishing a foot-
hold in the market.
Setting a different price for the same product in different segments to the market. For
example, this can be for different ages or for different opening times, such as cinema tickets.
Premium pricing is the practice of keeping the price of a product or service artificially high in
order to encourage favorable perceptions among buyers, based solely on the price. The
practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume
that expensive items enjoy an exceptional reputation or represent exceptional quality and
Aggressive pricing intended to drive out competitors from a market. It is illegal in some
Contribution margin-based pricing
Contribution margin-based pricing maximizes the profit derived from an individual product,
based on the difference between the product's price and variable costs (the product's
contribution margin per unit), and on one‘s assumptions regarding the relationship between
the product‘s price and the number of units that can be sold at that price. The product's
contribution to total firm profit (i.e., to operating income) is maximized when a price is
chosen that maximizes the following: (contribution margin per unit) X (number of units
Pricing designed to have a positive psychological impact. For example, selling a product at
$3.95 or $3.99, rather than $4.00.
A flexible pricing mechanism made possible by advances in information technology, and
employed mostly by Internet based companies. By responding to market fluctuations or large
amounts of data gathered from customers - ranging from where they live to what they buy to
how much they have spent on past purchases - dynamic pricing allows online companies to
adjust the prices of identical goods to correspond to a customer‘s willingness to pay. The
airline industry is often cited as a dynamic pricing success story. In fact, it employs the
technique so artfully that most of the passengers on any given airplane have paid different
ticket prices for the same flight.
An observation made of oligopic business behavior in which one company, usually the
dominant competitor among several, leads the way in determining prices, the others soon
Pricing method whereby the selling price of a product is calculated to produce a particular
rate of return on investment for a specific volume of production. The target pricing method is
used most often by public utilities, like electric and gas companies, and companies whose
capital investment is high, like automobile manufacturers.
Target pricing is not useful for companies whose capital investment is low because,
according to this formula, the selling price will be understated. Also the target pricing method
is not keyed to the demand for the product, and if the entire volume is not sold, a company
might sustain an overall budgetary loss on the product.
Method of pricing in which all costs are recovered. The price of the product includes the
variable cost of each item plus a proportionate amount of the fixed costs. A form of cost plus
Method of pricing for an organization where the goods or services offered by the organization
are regularly priced higher than competitors, but through promotions, advertisements, and or
coupons, lower prices are offered on key items. The lower promotional prices are targeted to
bring customers to the organization where the customer is offered the promotional product as
well as the regular higher priced product
Premium Decoy pricing
Method of pricing where an organisation artificially sets one product price high, in order to
boost sales of a lower priced product.
In business, the practice of setting the price of a product to equal the extra cost of producing
an extra unit of output. By this policy, a producer charges, for each product unit sold, only the
addition to total cost resulting from materials and direct labor. Businesses often set prices
close to marginal cost during periods of poor sales. If, for example, an item has a marginal
cost of $1.00 and a normal selling price is $2.00, the firm selling the item might wish to
lower the price to $1.10 if demand has waned. The business would choose this approach
because the incremental profit of 10 cents from the transaction is better than no sale at all.
Value Based pricing
Pricing a product based on the perceived value and not on any other factor. pricing based on
the demand for a specific product would have a likely change in the market place.
Nine Laws of Price Sensitivity & Consumer Psychology
In their book, The Strategy and Tactics of Pricing, Thomas Nagle and Reed Holden outline 9
laws or factors that influence how a consumer perceives a given price and how price-sensitive
s/he is likely to be with respect to different purchase decisions:
1. Reference Price Effect Buyer‘s price sensitivity for a given product increases the
higher the product‘s price relative to perceived alternatives. Perceived alternatives can
vary by buyer segment, by occasion, and other factors.
2. Difficult Comparison Effect Buyers are less sensitive to the price of a known / more
reputable product when they have difficulty comparing it to potential alternatives.
3. Switching Costs Effect The higher the product-specific investment a buyer must make
to switch suppliers, the less price sensitive that buyer is when choosing between
4. Price-Quality Effect Buyers are less sensitive to price the more that higher prices
signal higher quality. Products for which this effect is particularly relevant include:
image products, exclusive products, and products with minimal cues for quality.
5. Expenditure Effect Buyers are more price sensitive when the expense accounts for a
large percentage of buyers‘ available income or budget.
6. End-Benefit Effect The effect refers to the relationship a given purchase has to a
larger overall benefit, and is divided into two parts: Derived demand: The more
sensitive buyers are to the price of the end benefit, the more sensitive they will be to
the prices of those products that contribute to that benefit. Price proportion cost: The
price proportion cost refers to the percent of the total cost of the end benefit accounted
for by a given component that helps to produce the end benefit (e.g., think CPU and
PCs). The smaller the given components share of the total cost of the end benefit, the
less sensitive buyers will be to the component's price.
7. Shared-cost Effect The smaller the portion of the purchase price buyers must pay for
themselves, the less price sensitive they will be.
8. Fairness Effect Buyers are more sensitive to the price of a product when the price is
outside the range they perceive as ―fair‖ or ―reasonable‖ given the purchase context.
9. The Framing Effect Buyers are more price sensitive when they perceive the price as a
loss rather than a forgone gain, and they have greater price sensitivity when the price
is paid separately rather than as part of a bundle.
Human Resource Management
Q.1 Write down the difference between Personnel management and Human Resource
HRM vs Personnel management:
Some say that there are no basic differences between Human Resource Management and
Personnel management. These experts say that the two terms – HRM and Personnel
management – have no difference in their meaning, and can be used interchangeably. Well,
there are many experts who have come up with many differences between the two.
Personnel management is regarded to be more administrative in nature. Personnel
management basically deals with the employees, their payroll and employment laws. On the
other hand, Human Resources Management deals with the management of the work force,
and contributes to an organizationâ€™s success.
Human Resources Management is spoken about in a much broader sense than Personnel
Management. It has been said that HRM incorporates and develops personnel management
skills. It is Human Resources Management that develops a team of employees for an
Personnel management can be considered as reactive, in the sense that it provides concerns
and demands as they are presented. On the contrary, Human resources Management can be
stated to be proactive, as it pertains to the continuous development of policies and functions
for improving a companyâ€™s workforce.
Whereas personnel management is independent from an organization, the Human Resources
Management is an integral part of a company or an organization.
One can also come across differences in motivational aspects. While Personnel management
tends to motivate the employees with compensations, rewards and bonuses, Human
Resources Management tends to provide motivation through human resources, effective
strategies for facing challenges, work groups, and job creativity.
Personnel management focuses on administrating people. On the contrary, the prime focus of
Human Resources Development is to build a dynamic culture.
1. Personnel management deals with employees, their payroll and employment laws. On the
other hand, Human Resources Management deals with the management of the work force,
and contributes to an organizationâ€™s success.
2. HRM basically deals with developing personnel management skills. It is Human Resources
Management that develops a team of employees for an organization.
3. While Personnel management is considered to be reactive, Human Resources Management
is stated to be proactive.
4. Personnel management focuses on administrating people or employees. On the other hand,
the prime focus of Human Resources Development is to build a dynamic culture.
5. Personnel management is independent from an organization. On the contrary, Human
Resources Management forms an integral part of a company or an organization
Q.2 Write a note on scope of HR in India.
One very important trend in the recent times has been the growth of human resource
outsourcing. HR outsourcing is the outsourcing of peripheral but necessary administrative
tasks such as payroll, benefits, education/training, recruiting personnel, administration, to
realize economies of scale and achieve standardization of services.
Rapidly changing market dynamics and global competitive pressures have caused
organizations to spend more time focusing on their core business. Organizations are fast
realizing that they can't be all things to all people. So companies now, be it a software
company, a service provider or a manufacturing firm, decide what they are good at and
outsource everything else, i.e., focus on their core competency, and let someone else do the
rest in a more efficient and cost-effective manner.
As a result, human resources outsourcing is becoming increasingly prevalent. The number of
companies outsourcing HR activities continues to rise, and the scope of outsourced HR
activities continues to expand. HR outsourcing can happen in HR functions, like payroll
administration (producing checks, handling taxes, dealing with sick-time and vacations),
employee benefits (Health, Medical, Life insurance, Cafeteria, etc), human resource
management (hiring and firing, background interviews, exit interviews and wage reviews),
risk management, etc. Outsourcing has become a common response to manage people and
technology resources strategically, enhance services, and manage costs more effectively.
Outsourcing noncore activities allows HR professionals to move away from routine
administration to a more strategic role. The organization can focus on higher value-added
activities while the outsourcing provider takes care of the day-to-day administration. Critical
internal resources, such as technology and talent, can be devoted to company's core business.
Outsourcing reduces the need for large capital expenditures in noncore functions. Thus,
outsourcing becomes a strategy for reducing the capital intensity of the business. This
strategy has gained popularity as companies aim to become more nimble and gain the speed
and flexibility necessary to compete in today's business environment. A growing number of
executives understand the benefits it can bring in terms of not only cost savings, but also
heightened strategic focus. Many recognize outsourcing relationships as long-term
partnerships created to further the strategic goals of the organization.
The HR outsourcing business opportunity is large and India is likely to garner a larger and
larger piece of this pie in the future. India, with its intrinsic advantages such as low cost,
ready pool of English speaking manpower and geographic positioning, is emerging as a
viable destination for HR outsourcing companies to set up their businesses.
But still here people are not very clear about what exactly is manpower outsourcing all about,
and issues like quality and trust needs to be addressed properly. Experts say the basic reasons
hampering the growth of HR outsourcing in India are confidentiality and cost factors.
Moreover, the fear of losing jobs, losing control over confidential data, ethics and quality of
outsourcing vendors, security breaches and overall confidence in the vendors deters many
organizations. The biggest problem - and this is why the HR outsourcing industry in India is
on the back foot - is the government and the industry's failure to tackle issues like data
security and data privacy. This is where Indian HR outsourcing companies face a major
handicap. The Indian government is still grappling with drafting a data protection law
designed to quell growing privacy concerns from their offshore clients.
However, the future seems to be very promising. It's set to become a $ 51 billion market
worldwide in 2005, representing 39 per cent of the total business process outsourcing
revenue. Estimates show that the latent size of HR outsourcing in India is about $ 2 billion
with a current market of $ 27million and it is growing at an alarming rate of about 50 per
cent. India has immense potential as more than 80% of fortune 1,000 companies are
discussing HR outsourcing as a way to cut costs and increase productivity.
Right now, India is barely skimming the surface of the HR outsourcing market potential.
Indian life Hewitt (ILH), FIDELITY, EXULT and MAFOI are some of the prominent HR
outsourcing services providers in India and the clients include giants of manufacturing,
software and service industries like GE Capital, Ford Motors, Hyundai Motors, Satyam
Group, Infosys, Enron, Haldia Petrochemicals and HSBC, to name a few, but many more
needs to be added to that list.
HR outsourcing has a huge potential for employment also. Nasscom numbers are a million
software jobs by 2005; HRO would be about a 25 per cent of that. Experts believe that in
present times HR outsourcing is undergoing a transition phase, it would still be sometime
before we see increased levels of HR activities being outsourced to India as lack of domain
knowledge and quality are some of the critical issues.
Till that time, HR outsourcing in India remains to be a gold mine waiting to be unearthed...
Q.3 Explain the critical steps in Human Resource Planning system.
We will attempt to discuss in details the critical steps that are part of the above system.
A. Purpose of Human Resource Planning: Human Resource Planning fulfils individual as
well as organizational goals. What it essentially amounts to is ―striking a balance‖ between
the future human resources needs and the future enterprise needs. And this is done with the
clear objective of maximizing the future return on investment in human resources. And this
objective may be laid down for a short-term (i.e.for one year).
B. Estimating/Forecasting the future Manpower Requirements: the first step in the
process is to arrive at the desired organizational structure at a given point in time. Mapping
this structure with the existing structure helps in identifying the gap in resources requirement.
The number and type of employees needed have to be determined. In addition to the structure
there are a number of external factors that affect this determination. They include business
forecasts, competitor strategy, expansion plans, product/skills mix changes, profit/revenue
growth projections, in addition to management philosophy and government policies. This
step also includes an analysis of the external labour/talent environment, its demographics,
demand/supply of the required talent, and cost considerations.
C. Auditing Human Resources: Once the future human resource needs are estimated, the
next step is to determine the present supply of manpower resources. This is done through
what is called ―Skills Inventory‖. A skills inventory contains data about each employee‘s
skills, abilities, work preferences and other items of information which indicate his worth to
the company. Skills inventory are also referred to as competency dictionaries. This
information is usually retained as part of the performance management system with the HR
department. This step in the HRP system helps identify the existing profile of the manpower
and its efficiency. It helps highlight where the organization is vs. where it ought to be. The
step concludes with identifying clear gaps in the skills/ manpower mix required to meet the
upcoming business objectives.
D. Job Analysis: After having decided how many persons would be needed, it is necessary to
prepare a job analysis. The recorded details of training, skills, qualification, abilities,
experience and responsibilities, etc. as needed for a job are studied. Job analysis includes the
preparation of job descriptions and job specifications.
E. Developing a Human Resource Plan: This step refers t the development and
implementation of the human resource plan, which consists in finding out the sources of
labour supply with a view to making an effective use of these sources. Some important
considerations at this point are:
• Specific roles/disciplines being hired for, of them which roles are pivotal for the business
• Competencies and capabilities needed
• Manager vs. employee hiring
• Hire internally vs. External sourcing
• Planning for new skills through training existing staff vs. hiring new teams
• In case of surpluses, planning for redeployment/ reduction in workforce as required
• Succession planning for key positions in the company.
Q.4 With reference to the compensation and salary system what are the systems that are
helpful to raise the effectiveness of employees.
Compensation/ salary systems are designed to ensure that employees are rewarded
appropriately depending on what they do and the skills and knowledge (intellect)
required for doing a specific job. It must therefore provide for the following key factors
in order to be effective: The following factors may be helpful to raise the effectiveness
• Signal to the employee the major objectives of the organizations- therefore it must link to
the overall goals and objectives of the company. For example if doing a quality job is critical
for the company its compensation system has to ensure that this is adequately rewarded. On
the other hand if a company values productivity and units produces, the compensation system
would be designed such that productivity is rewarded.
• Attract and retain the talent an organization needs – the need to benchmark salaries to the
prevalent market standard for that job / skill so that the company is able to attract the right
talent. If a enterprises pays a salary lower that what the market does for that
job/responsibilities, the probability that suitable candidates would take the job offer and join
the company. Even if they do join subsequently when they find that the market pays more for
that job they would quickly find a more remunerative job and leave the company.
• Motivate employees to perform effectively – as discussed at the outset, money is a key
motivator and it often might be the only motivator for most employees, therefore ensuring
that compensation is appropriately disbursed need to be taken care of while designing the
compensation system. Jobs in the brick and motor, production setups would focus on higher
incentive policies that would motivate the employee to produce more while the base-salary
would be low.
• Create the type of culture the company seeks to engender – compensation systems play a
critical role as sponsors for the organizations culture. A performance driven culture would
build compensation policies that clearly and significantly reward performance. A company
that rewards loyalty would reward employees who stay longer in the company with
significantly better incentive programs.
Hence we see how compensation systems are reflective of the organizations over all
philosophy of what its goals and objectives are and how this can be linked to salary payout.
Q.5 What is competency? How it can be linked to the HR system?
Apart from the experiences of labour competencies applied to vocational training, there is
another possibility of application of this approach: human resources management.
Many enterprises in the United States, Europe and lately in Latin America, have incorporated
competency-based human resources management as a tool to improve productivity and to
foster a positive atmosphere in the relationships with their collaborators. These efforts are
justified by the attempts of the organisation to improve productivity and competitiveness
levels by means of knowledge and learning ability. Thus, it becomes evident that there is
tendency to revalue human contributions to organisational competitiveness.
This application of the competencies approach comprises the traditional areas of human talent
management at the
organisation: selection, remuneration, training, assessment and promotion. Several
experiences of applications of standardised competency systems have taken place in England,
Ireland,Scotland and cases,the main characteristic is their national projection and the
articulation of training institutions with the needs of enterprises through training based on
In addition, several enterprises motivated by the pressures of change and reorganisation of
work have set about imple-menting competency-based systems of human resources
management in order to maintain their competitiveness.
The implementation of these systems goes through the process of defining the key
competencies for the organisation. Then they are discussed with the participation of workers,
but not necessarily all of them, and then applied to selection, determination of training needs,
performance assessment and personnel remuneration and promotion.
The experiences that confirm this answer are based on applications of the behaviourist
approach on labour competency, according to which the competencies shown by the best
workers are determined and then taken as a reference of best performance.
Below there are some definitions of labour competency that are typically based on behaviour
and best performance:
• A competency is an ability that may be subject to measurement and that is necessary to do a
job efficiently, that is, to produce the results expected by the organisation. Competency
analysis has the aim of identifying the knowledge,skills, abilities and enabling behaviours
that employees are supposed to demonstrate for the organisation to fulfil its goals and
objectives. Tohave a competency, it may just be necessary one type of knowledge,
skill,ability or behaviour, or it may require a combination of all of them.
• An underlying characteristic of the individual, which is causally related to an effective or
high-level performance in a working situation and defined by a certain criterion.
• Groups of knowledge, abilities, aptitudes and behaviours that a person possesses and that
enable him to carry out an activity successfully.
• A skill or a personal attribute of an individual‘s conduct, which may be defined as a
characteristic of his behaviour, and, according to which the task-oriented behaviour may be
classified in a logical and reliable manner.
• Group of knowledge, abilities, skills and attitudes in terms of observable behaviour,
required to perform in the assigned roles in the processes of the organisation (Electricidad de
• Measurable and observable knowledge, abilities and skills, as well as characteristics
associated with an excellent performance at work and the achievement of results (Buck
• Group of knowledge, abilities, skills, attitudes and values whose application at work is
translated into a high-level performance, which contributes to the achievement of the key
objectives of the business (Petróleos deVenezuela).Competency-based human resources
management has the following characteristics:
Enterprise-focused: One of the main features of these experiences is not placing the emphasis
on the problem of training as a national problem; such experiences simply take place at an
enterprise level. The premise that facilitates this methodological attitude derives from
considering that the competencies of one occupation may be different in two different
organisations. The organisational philosophy, of manufacturing and customer service, varies
from enterprise to enterprise. In this case, each organisation needs to find its key
competencies so that its collaborators can achieve the expected results.
The best ones as reference: Behaviourist competency-based management models identify the
best workers, i.e. those who are obtaining the best results. From there the profile of
competencies is derived, based on the assumption that if the best performance becomes a
standard, then the whole organisation will improve its productivity.
Designed competencies, rather than consulted ones: Some of the competencies that are
required by the organisation cannot be obtained by consulting workers. This is not enough; it
is necessary that the management office defines the types of competencies expected from
their collaborators in order to achieve their goals and that those competencies are included
within the standards so as to facilitate knowledge and training. With this idea, workers are not
the only element to define competencies; it is necessary to consult them but that is not
Q.6 “Dynamic Learning” is an organization that wants to revise the HR policies. It has
conducted a survey and the results of survey indicated that r=there is employee unrest,
tardiness, absenteeism, more grievances. This all clearly indicates low morale. Suggest the
measures that can be taken to improve employee morale.
Employee Morale Boosters
Morale boosters can take the form of recognition,ecompensation,special perks or simply
terminating employees.Here are 11 low cost morale boosters:
Welcome ideas:Employee morale improves when staffs feel they are valued.Share and
implement their innovations and ideas.
Keep Score:Mount a large score board in the office to recognize top performers and to
motivate those on the bottom of the list.
Inspect:The old management adage,inspect what you expect is true.Companies with a lack of
focus can confuse staff and lead to less morale.
Thank you notes: Send a special thank you letter to you staff‘s family or spouse,praising their
good work and efforts.
Huddle:Have a daily morning huddle to highlights tasks for the day and to cheer yesterday‘s
Open Up: Provide an open forum or one-on-one time to allow employees to express their
concerns and feelings can be an easy means to boost morale.
Have Fun:Special events and outside work activities can take the pressure off the day-to-day
grind in the office.
Show Charity: Get your staff involved in a bigger cause to help them see there is more to life
Add Perks:Use low cost such as a Football table in the lunch room.
Fire Staff: Sometimes the root cause of employee morale can be a staff member whose
negativity brings down the group.Even a top performer can bring down staff behind your
Measure It:Keep tabs on the levels of morale in your business by regularly measuring
The backbone of business success resides in the productivity and output of your
employees.Those companies who remain vigilant to the signs of low morale and who focus
on improving morale can thwart off the impact of a low morale workplace.