26126 MBA modified

MBA Assignments

MBA/PGDBA Semester II

MB0044 – Production & Operations Management

Q1. Explain in brief the origins of Just In Time. Explain the different types of

wastes that can be eliminated using JIT

Ans. Just in Time (JIT) is a management philosophy aimed at eliminating waste and

continuously improving quality. Credit for developing JIT as a management strategy

goes to Toyota. Toyota JIT manufacturing started in the aftermath of World War II.

Although the history of JIT traces back to Henry Ford who applied Just in Time

principles to manage inventory in the Ford Automobile Company during the early part of

the 20th Century, the origins of the JIT as a management strategy traces to Taiichi Onho

of the Toyota Manufacturing Company. He developed Just in Time strategy as a means

of competitive advantage during the post World War II period in Japan.

The post-World War II Japanese automobile industry faced a crisis of existence, and

companies such as Toyota looked to benchmark their thriving American counterparts.

The productivity of an American car worker was nine times that of a Japanese car

worker at that time, and Taiichi Onho sought ways to reach such levels.

Two pressing challenges however prevented Toyota from adopting the American way:

1. American car manufacturers made ―lots‖ or a ―batch‖ of a model or a component

before switching over to a new model or component. This system was not suited

to the Japanese conditions where a small market required manufacturing in small

quantities.

2. The car pricing policy of US manufacturers was to charge a mark-up on the cost

price. The low demand in Japan led to price resistance. The need of the hour was

thus to reduce manufacturing costs to increase profits.

To overcome these two challenges, Taiichi Onho identified waste as the primary evil.

The categories of waste identified included

 overproduction

 inventory or waste associated with keeping dead stock

 time spent by workers waiting for materials to appear in the assembly line

 time spend on transportation or movement

 workers spending more time than necessary processing an item

 waste associated with defective items

Taiichi Onho then sought to eliminate waste through the just-in-time philosophy, where

items moved through the production system only as and when needed.



Q2. What is Value Engineering or Value Analysis? Elucidate five companies which

have incorporated VE with brief explanation.



Ans. Value Engineering (VE), also known as Value Analysis, is a systematic and

function-based approach to improving the value of products, projects, or processes.VE

involves a team of people following a structured process. The process helps team

members communicate across boundaries, understand different perspectives, innovate,

and analyze.When to use itUse Value Analysis to analyze and understand the detail of

specific situations.Use it to find a focus on key areas for innovation.Use it in reverse

(called Value Engineering) to identify specific solutions to detail problems.It is

particularly suited to physical and mechanical problems, but can also be used in other

areas.



Quick X Long



Logical X Psychological



Individual X Group



How it works

Value Analysis (and its design partner, Value Engineering) is used to increase the value

of products or services to all concerned by considering the function of individual items

and the benefit of this function and balancing this against the costs incurred in delivering

it. The task then becomes to increase the value or ecrease the cost.







Q3. Explain different types of Quantitative models.Differentiate between work

study and motion study

Ans. Quantitative models are needed for a variety of management tasks, including

(a) identi¯cation of critical variables to use for health monitoring,

(b) antici- pating service level violations by using predictive models, and

(c) on-going op- timization of con¯gurations.

Unfortunately, constructing quantitative models requires specialized skills that are in

short supply. Even worse, rapid changes in provider con¯gurations and the evolution of

business demands mean that quantitative models must be updated on an on-going basis.

This paper de-scribes an architecture and algorithms for on-line discovery of

quantitativemodels without prior knowledge of the managed elements. The architecture

makes use of an element schema that describes managed elements using the common

information model (CIM). Algorithms are presented for selecting a subset of the element

metrics to use as explanatory variables in a quantitative model and for constructing the

quantitative model itself. We further describe a prototype system based on this

architecture that incorporates these algo-rithms. We apply the prototype to on-line

estimation of response times for

DB2 Universal Database under a TPC-W workload. Of the approximately 500 metrics

available from the DB2 performance monitor, our system chooses 3 to construct a model

that explains 72% of the variability of response time.



In production and operations management, models refer to any simple representation of reality in

different forms such as mathematical equations, graphical representation, pictorial representation, and

physical models. Thus a model could be the well known economic order quantity (EOQ) formula, a

PERT network chart, a motion picture of an operation, or pieces of strings stretched on a drawing of a

plant layout to study the movement of material. The models help us to analyze and understand the reality.

These also help us to work determine optimal conditions to for decision making. For example, the EOQ

formula helps us to determine the optimum replenishment quantities that minimize the cost of storing plus

replenishing.The number of different models we use in production and operations management run into

hundreds, or even more than a thousand. These are really too many to enumerate in a place like these. I

am listing below a random list of broad categories of models used in production and operations

model.Operations research models. This is actually a very broad classification and covers many of the

other categories in the list given here.

 Inventory models

 Forecasting models

 Network models

 Linear programming models

 Queuing models

 Production planning and control models

 Engineering drawings

 Photographs and motion pictures used in time and motion studies.

 Material movement charts

 Process flow diagrams

 Systems charts

 Statistical process control charts.

 Variance analysis

 Regression analysis

 Organization chart

 Fishbone chart

Work study and motion study

Work study includes a wide field of measurement tools and techniques. Motion study or method study is

concerned with analyzing individual human motions (like get object, put object) with a view to improving

motion economy.

Q4. What is Rapid Prototyping? Explain the difference between Automated flow line and

Automated assembly line with examples.

Ans. Rapid prototyping is the automatic construction of physical objects using additive manufacturing

technology. The first techniques for rapid prototyping became available in the late 1980s and were used

to produce models and prototype parts. Today, they are used for a much wider range of applications and

are even used to manufacture production-quality parts in relatively small numbers. Some sculptors use the

technology to produce complex shapes for fine arts exhibitions.

Automated flow lines : When several automated machines are linked by a transfer system which moves

the parts by using handling machines which are also automated, we have an automated flow line. After

completing an operation on a machine, the semi finished parts are moved to the next machine in the

sequence determined by the process requirements a flow line is established. The parts at various stages

from raw material to ready for fitment or assembly are processed continuously to attain the required

shapes or acquire special properties to enable them to perform desired functions. The materials need to be

moved, held, rotated, lifted, positioned etc. for completing different operations.

Sometimes, a few of the operations can be done on a single machine with a number of attachments. They

are moved further to other machines for performing further operations. Human intervention may be

needed to verify that the operations are taking place according to standards. When these can be achieved

with the help of automation and the processes are conducted with self regulation, we will have automated

flow lines established. One important consideration is to balance times that different machines take to

complete the operations assigned to them. It is necessary to design the machines in such a way that the

operation times are the same throughout the sequence in the flow of the martial. In fixed automation or

hard automation, where one component is manufactured using several operations and machines it is

possible to achieve this condition – or very nearly. We assume that product life cycles are sufficiently

stable to invest heavily on the automated flow lines to achieve reduced cost per unit. The global trends are

favouring flexibility in the manufacturing systems. The costs involved in changing the set up of

automated flow lines are high. So, automated flow lines are considered only when the product is required

to be made in high volumes over a relatively long period. Designers now incorporate flexibility in the

machines which will take care of small changes in dimensions by making adjustments or minor changes

in the existing machine or layout. The change in movements needed can be achieved by programming the

machines. Provision for extra pallets or tool holders or conveyors are made in the original design to

accommodate anticipated changes. The logic to be followed is to find out whether the reduction in cost

per piece justifies the costs of designing, manufacturing and setting up automated flow lines. Group

Technology, Cellular Manufacturing along with conventional Product and Process Layouts are still

resorted to as they allow flexibility for the production system. With methodologies of JIT and Lean

Manufacturing finding importance and relevance in the competitive field of manufacturing, many

companies have found that well designed flow lines suit their purpose well. Flow lines compel engineers

to put in place equipments that balance their production rates. It is not possible to think of inventories

(Work

In Process) in a flow line. Bottlenecks cannot be permitted. By necessity, every bottleneck gets focused

upon and solutions found to ease them. Production managers see every bottleneck as an opportunity to

hasten the flow and reduce inventories. However, it is important to note that setting up automated flow

lines will not be suitable for many industries

Automated Assembly Lines : All equipments needed to make a finished product are laid out in such a

way as to follow the sequence in which the parts or subassemblies are put together and fitted. Usually, a

frame, body, base will be the starting point of an assembly. The frame itself consists of a construction

made up of several components and would have been ‗assembled‘ or ‗fabricated‘ in a separate bay or

plant and brought to the assembly line. All parts or subassemblies are fitted to enable the product to be in

readiness to perform the function it was designed to. This process is called assembly.

Methodologies of achieving the final result may vary, but the basic principle is to fit all parts together and

ensure linkages so that their functions are integrated and give out the desired output. Product Layouts are

designed so that the assembly tasks are performed in the sequence they are designed. You will note that

the same task gets repeated at each station continuously. The finished item comes out at the end of the

line

The material goes from station 1 to 5 sequentially. Operation 2 takes longer time, say twice as long. To

see that the flow is kept at the same pace we provide two locations 2a and 2b so that operations 3, 4 an 5

need not wait. At 5, we may provide more personnel to complete operations. The time taken at any of the

locations should be the same. Otherwise the flow is interrupted. In automated assembly lines the moving

pallets move the materials from station to station and moving arms pick up parts, place them at specified

places and fasten them by pressing, riveting, screwing or even welding. Sensors will keep track of these

activities and move the assemblies to the next stage. An operator will oversee that the assemblies are

happening and there are no stoppages. The main consideration for using automated assembly lines is that

the volumes justify the huge expenses involved in setting

Up the system.



Q5.Explain Break Even Analysis and Centre of Gravity methods. Explain Product layout and

process layout with examples.







Ans. Break Even Analysis refers to the calculation to determine how much product a company must sell

in order to break even on that product. It is an effective analysis to measure the impact of different

marketing decisions. It can focus on the product, or incremental changes to the product to determine the

potential outcomes of marketing tactics. The formula for a break even analysis is:

Break even point ($) = (Total Fixed Costs + Total Variable Costs).

Total Variable Costs = Variable cost per unit x units sold

Unit contribution (contribution margin) = Price per unit – Variable cost per unit.

When looking at making a change to the marketing program, one can calculate the incremental break

even volume, to determine the merits of the change. This determines the required volume needed such

that there is no effect to the company due to the change.

If making changes to fixed costs (changing advertising expenditure etc.):

Incremental break even volume = change in expenditure / unit contribution.

Thus if a company increased its advertising expenditure by $1 million, and its unit contribution for the

specific product is $20, then the company would need to sell an additional 50,000 units to break even on

the decision.

If making changes to the unit contribution (change in price, or variable costs):

Incremental break even volume = (Old Unit Volume x (Old Unit Contribution – New Unit Contribution))

/ New Unit Contribution

Thus if a company increased its price from $15 to $20, and had variable costs of $10, it is increasing its

unit contribution from $5 to $10, assume also an old unit volume of 1 million. It could therefore reduce

its volume by 500,000 to break even on the decision.

When making changes to a specific product, cannibalization of other products may occur. To calculate

the effect of cannibalization, the Break Even Cannibalization rate for a change in a product is:

New Product Unit Contribution / Old Product Unit Contribution.

New Product is the planned addition to a product line (or change to a product within a product line), Old

Product is the product that loses sales to the new product (or the product line that loses sales). The

cannibalization rate refers to the percentage of new product that would have gone to the old product, this

must be lower than the break even cannibalization rate in order for the change to be profitable.

In manufacturing, facility layout consists of configuring the plant site with lines, buildings, major

facilities, work areas, aisles, and other pertinent features such as department boundaries. While facility

layout for services may be similar to that for manufacturing, it also may be somewhat different—as is the

case with offices, retailers, and warehouses. Because of its relative permanence, facility layout probably

is one of the most crucial elements affecting efficiency. An efficient layout can reduce unnecessary

material handling, help to keep costs low, and maintain product flow through the facility.

Firms in the upper left-hand corner of the product-process matrix have a process structure known as a

jumbled flow or a disconnected or intermittent line flow. Upper-left firms generally have a process

layout. Firms in the lower right-hand corner of the product-process matrix can have a line or continuous

flow. Firms in the lower-right part of the matrix generally have a product layout. Other types of layouts

include fixed-position, combination, cellular, and certain types of service layouts.

PROCESS LAYOUT

Process layouts are found primarily in job shops, or firms that produce customized, low-volume products

that may require different processing requirements and sequences of operations. Process layouts are

facility configurations in which operations of a similar nature or function are grouped together. As such,

they occasionally are referred to as functional layouts. Their purpose is to process goods or provide

services that involve a variety of processing requirements. A manufacturing example would be a machine

shop. A machine shop generally has separate departments where general-purpose machines are grouped

together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore, facilities

that are configured according to individual functions or processes have a process layout. This type of

layout gives the firm the flexibility needed to handle a variety of routes and process requirements.

Services that utilize process layouts include hospitals, banks, auto repair, libraries, and universities.

Improving process layouts involves the minimization of transportation cost, distance, or time. To

accomplish this some firms use what is known as a Muther grid, where subjective information is

summarized on a grid displaying various combinations of department, work group, or machine pairs.

Each combination (pair), represented by an intersection on the grid, is assigned a letter indicating the

importance of the closeness of the two (A = absolutely necessary; E = very important; I = important; O =

ordinary importance; U = unimportant; X = undesirable). Importance generally is based on the shared use

of facilities, equipment, workers or records, work flow, communication requirements, or safety

requirements. The departments and other elements are then assigned to clusters in order of importance.

Advantages of process layouts include:

 Flexibility. The firm has the ability to handle a variety of processing requirements.

 Cost. Sometimes, the general-purpose equipment utilized may be less costly to purchase and less

costly and easier to maintain than specialized equipment.

 Motivation. Employees in this type of layout will probably be able to perform a variety of tasks on

multiple machines, as opposed to the boredom of performing a repetitive task on an assembly line.

A process layout also allows the employer to use some type of individual incentive system.

 System protection. Since there are multiple machines available, process layouts are not

particularly vulnerable to equipment failures.

Disadvantages of process layouts include:

 Utilization. Equipment utilization rates in process layout are frequently very low, because

machine usage is dependent upon a variety of output requirements.

 Cost. If batch processing is used, in-process inventory costs could be high. Lower volume means

higher per-unit costs. More specialized attention is necessary for both products and customers.

Setups are more frequent, hence higher setup costs. Material handling is slower and more

inefficient. The span of supervision is small due to job complexities (routing, setups, etc.), so

supervisory costs are higher. Additionally, in this type of layout accounting, inventory control,

and purchasing usually are highly involved.

 Confusion. Constantly changing schedules and routings make juggling process requirements more

difficult.

PRODUCT LAYOUT

Product layouts are found in flow shops (repetitive assembly and process or continuous flow industries).

Flow shops produce high-volume, highly standardized products that require highly standardized,

repetitive processes. In a product layout, resources are arranged sequentially, based on the routing of the

products. In theory, this sequential layout allows the entire process to be laid out in a straight line, which

at times may be totally dedicated to the production of only one product or product version. The flow of

the line can then be subdivided so that labor and equipment are utilized smoothly throughout the

operation.

Two types of lines are used in product layouts: paced and unpaced. Paced lines can use some sort of

conveyor that moves output along at a continuous rate so that workers can perform operations on the

product as it goes by. For longer operating times, the worker may have to walk alongside the work as it

moves until he or she is finished and can walk back to the workstation to begin working on another part

(this essentially is how automobile manufacturing works).

On an unpaced line, workers build up queues between workstations to allow a variable work pace.

However, this type of line does not work well with large, bulky products because too much storage space

may be required. Also, it is difficult to balance an extreme variety of output rates without significant idle

time. A technique known as assembly-line balancing can be used to group the individual tasks performed

into workstations so that there will be a reasonable balance of work among the workstations.

Product layout efficiency is often enhanced through the use of line balancing. Line balancing is the

assignment of tasks to workstations in such a way that workstations have approximately equal time

requirements. This minimizes the amount of time that some workstations are idle, due to waiting on parts

from an upstream process or to avoid building up an inventory queue in front of a downstream process.

Advantages of product layouts include:

 Output. Product layouts can generate a large volume of products in a short time.

 Cost. Unit cost is low as a result of the high volume. Labor specialization results in reduced

training time and cost. A wider span of supervision also reduces labor costs. Accounting,

purchasing, and inventory control are routine. Because routing is fixed, less attention is required.

 Utilization. There is a high degree of labor and equipment utilization.

Disadvantages of product layouts include:

 Motivation. The system‘s inherent division of labor can result in dull, repetitive jobs that can

prove to be quite stressful. Also, assembly-line layouts make it very hard to administer individual

incentive plans.

 Flexibility. Product layouts are inflexible and cannot easily respond to required system changes—

especially changes in product or process design.

 System protection. The system is at risk from equipment breakdown, absenteeism, and downtime

due to preventive maintenance.

_______________________________________________________

MB0045 – Financial Management

Q1. What are the 4 finance decisions taken by a finance manager.

Ans. A firm performs finance functions simultaneously and continuously in the normal

course of the business. They do not necessarily occur in a sequence. Finance

functions call for skilful planning, control and execution of a firm‘s activities.

Let us note at the outset hat shareholders are made better off by a financial

decision that increases the value of their shares, Thus while performing the

finance function, the financial manager should strive to maximize the market

value of shares. Whatever decision does a manger takes need to result in

wealth maximization of a shareholder.

Investment Decision

Investment decision or capital budgeting involves the decision of allocation of

capital or commitment of funds to long-term assets that would yield benefits in

the future. Two important aspects of the investment decision are:

(a) the evaluation of the prospective profitability of new investments, and

(b) the measurement of a cut-off rate against that the prospective return of new

investments could be compared. Future benefits of investments are difficult to

measure and cannot be predicted with certainty. Because of the uncertain future,

investment decisions involve risk. Investment proposals should, therefore, be

evaluated in terms of both expected return and risk. Besides the decision for

investment managers do see where to commit funds when an asset becomes less

productive or non-profitable.

There is a broad agreement that the correct cut-off rate is the required rate of

return or the opportunity cost of capital. However, there are problems in

computing the opportunity cost of capital in practice from the available data and

information. A decision maker should be aware of capital in practice from the

available data and information. A decision maker should be aware of these

problems.

Financing Decision

Financing decision is the second important function to be performed by the

financial manager. Broadly, her or she must decide when, where and how to

acquire funds to meet the firm‘s investment needs. The central issue before him

or her is to determine the proportion of equity and debt. The mix of debt and

equity is known as the firm‘s capital structure. The financial manager must strive

to obtain the best financing mix or the optimum capital structure for his or her

firm. The firm‘s capital structure is considered to be optimum when the market

value of shares is maximized. The use of debt affects the return and risk of

shareholders; it may increase the return on equity funds but it always increases

risk. A proper balance will have to be struck between return and risk. When the

shareholders‘ return is maximized with minimum risk, the market value per share

will be maximized and the firm‘s capital structure would be considered optimum.

Once the financial manager is able to determine the best combination of debt and

equity, he or she must raise the appropriate amount through the best available

sources. In practice, a firm considers many other factors such as control, flexibility

loan convenience, legal aspects etc. in deciding its capital structure.

Dividend Decision

Dividend decision is the third major financial decision. The financial manager must

decide whether the firm should distribute all profits, or retain them, or distribute

a portion and retain the balance. Like the debt policy, the dividend policy should

be determined in terms of its impact on the shareholders‘ value. The optimum

dividend policy is one that maximizes the market value of the firm‘s shares. Thus

if shareholders are not indifferent to the firm‘s dividend policy, the financial

manager must determine the optimum dividend – payout ratio. The payout ratio is

equal to the percentage of dividends to earnings available to shareholders. The

financial manager should also consider the questions of dividend stability, bonus

shares and cash dividends in practice. Most profitable companies pay cash

dividends regularly. Periodically, additional shares, called bonus share (or stock

dividend), are also issued to the existing shareholders in addition to the cash

dividend.

Liquidity Decision

Current assets management that affects a firm‘s liquidity is yet another important

finances function, in addition to the management of long-term assets. Current assets

should be managed efficiently for safeguarding the firm against the dangers of

illiquidity and insolvency. Investment in current assets affects the firm‘s profitability.

Liquidity and risk. A conflict exists between profitability and liquidity while managing

current assets. If the firm does not invest sufficient funds in current assets, it may

become illiquid. But it would lose profitability, as idle current assets would not earn

anything. Thus, a proper trade-off must be achieved between profitability and

liquidity. In order to ensure that neither insufficient nor unnecessary funds are

invested in current assets, the financial manager should develop sound techniques of

managing current assets. He or she should estimate firm‘s needs for current assets and

make sure that funds would be made available when needed.

It would thus be clear that financial decisions directly concern the firm‘s decision to

acquire or dispose off assets and require commitment or recommitment of funds on a

continuous basis. It is in this context that finance functions are said to influence

production, marketing and other functions of the firm. This, in consequence, finance

functions may affect the size, growth, profitability and risk of the firm, and

ultimately, the value of the firm. To quote Ezra Solomon

The function of financial management is to review and control decisions to commit or

recommit funds to new or ongoing uses. Thus, in addition to raising funds, financial

management is directly concerned with production, marketing and other functions,

within an enterprise whenever decisions are about the acquisition or distribution of

assets.

Various financial functions are intimately connected with each other. For instance,

decision pertaining to the proportion in which fixed assets and current assets are

mixed determines the risk complexion of the firm. Costs of various methods of

financing are affected by this risk. Likewise, dividend decisions influence financing

decisions and are themselves influenced by investment decisions.

In view of this, finance manager is expected to call upon the expertise of other

functional managers of the firm particularly in regard to investment of funds.

Decisions pertaining to kinds of fixed assets to be acquired for the firm, level of

inventories to be kept in hand, type of customers to be granted credit facilities,

terms of credit should be made after consulting production and marketing

executives.

However, in the management of income finance manager has to act on his own.

The determination of dividend policies is almost exclusively a finance function. A

finance manager has a final say in decisions on dividends than in asset

management decisions.

Financial management is looked on as cutting across functional even disciplinary

boundaries. It is in such an environment that finance manager works as a part of

total management. In principle, a finance manager is held responsible to handle all

such problem: that involve money matters. But in actual practice, as noted above,

he has to call on the expertise of those in other functional areas to discharge his

responsibilities effectively.

Q.2 What are the factors that affect the financial plan of a company?

Ans. To help your organization succeed, you should develop a plan that needs to be followed. This

applies to starting the company, developing new product, creating a new department or any undertaking

that affects the company‘s future. There are several factors that affect planning in an organization. To

create an efficient plan, you need to understand the factors involved in the planning process.

A businessman an businesswoman having a meeting image by sumos from Fotolia.com

A businessman an businesswoman having a meeting image by sumos from Fotolia.com

Organizational planning is affected by many factors.

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 Priorities

In most companies, the priority is generating revenue, and this priority can sometimes interfere with the

planning process of any project. For example, if you are in the process of planning a large expansion

project and your largest customer suddenly threatens to take their business to your competitor, then you

might have to shelve the expansion planning until the customer issue is resolved. When you start the

planning process for any project, you need to assign each of the issues facing the company a priority

rating. That priority rating will determine what issues will sidetrack you from the planning of your

project, and which issues can wait until the process is complete.

 Company Resources

Having an idea and developing a plan for your company can help your company to grow and succeed, but

if the company does not have the resources to make the plan come together, it can stall progress. One of

the first steps to any planning process should be an evaluation of the resources necessary to complete the

project, compared to the resources the company has available. Some of the resources to consider are

finances, personnel, space requirements, access to materials and vendor relationships.

 Forecasting

A company constantly should be forecasting to help prepare for changes in the marketplace. Forecasting

sales revenues, materials costs, personnel costs and overhead costs can help a company plan for

upcoming projects. Without accurate forecasting, it can be difficult to tell if the plan has any chance of

success, if the company has the capabilities to pull off the plan and if the plan will help to strengthen the

company‘s standing within the industry. For example, if your forecasting for the cost of goods has

changed due to a sudden increase in material costs, then that can affect elements of your product roll-out

plan, including projected profit and the long-term commitment you might need to make to a supplier to

try to get the lowest price possible.

 Contingency Planning

To successfully plan, an organization needs to have a contingency plan in place. If the company has

decided to pursue a new product line, there needs to be a part of the plan that addresses the possibility that

the product line will fail. The reallocation of company resources, the acceptable financial losses and the

potential public relations problems that a failed product can cause all need to be part of the organizational

planning process from the beginning

Q.3 Show the relationship between required rate of return and coupon rate on the value of a bond.

Ans. It is important for prospective bond buyers to know how to determine the price of a bond because it

will indicate the yield received should the bond be purchased. In this section, we will run through some

bond price calculations for various types of bond instruments.

Bonds can be priced at a premium, discount, or at par. If the bond‘s price is higher than its par value, it

will sell at a premium because its interest rate is higher than current prevailing rates. If the bond‘s price is

lower than its par value, the bond will sell at a discount because its interest rate is lower than current

prevailing interest rates. When you calculate the price of a bond, you are calculating the maximum price

you would want to pay for the bond, given the bond‘s coupon rate in comparison to the average rate most

investors are currently receiving in the bond market. Required yield or required rate of return is the

interest rate that a security needs to offer in order to encourage investors to purchase it. Usually the

required yield on a bond is equal to or greater than the current prevailing interest rates.

Fundamentally, however, the price of a bond is the sum of the present values of all expected coupon

payments plus the present value of the par value at maturity. Calculating bond price is simple: all we are

doing is discounting the known future cash flows. Remember that to calculate present value (PV) – which

is based on the assumption that each payment is re-invested at some interest rate once it is received–we

have to know the interest rate that would earn us a known future value. For bond pricing, this interest rate

is the required yield. (If the concepts of present and future value are new to you or you are unfamiliar

with the calculations, refer to Understanding the Time Value of Money.)

Here is the formula for calculating a bond‘s price, which uses the basic present value (PV) formula:









C = coupon payment

n = number of payments

i = interest rate, or required yield

M = value at maturity, or par value



The succession of coupon payments to be received in the future is referred to as an ordinary annuity,

which is a series of fixed payments at set intervals over a fixed period of time. (Coupons on a straight

bond are paid at ordinary annuity.) The first payment of an ordinary annuity occurs one interval from the

time at which the debt security is acquired. The calculation assumes this time is the present.

You may have guessed that the bond pricing formula shown above may be tedious to calculate, as it

requires adding the present value of each future coupon payment. Because these payments are paid at an

ordinary annuity, however, we can use the shorter PV-of-ordinary-annuity formula that is mathematically

equivalent to the summation of all the PVs of future cash flows. This PV-of-ordinary-annuity formula

replaces the need to add all the present values of the future coupon. The following diagram illustrates how

present value is calculated for an ordinary annuity:









Each full moneybag on the top right represents the fixed coupon payments (future value) received in

periods one, two and three. Notice how the present value decreases for those coupon payments that are

further into the future the present value of the second coupon payment is worth less than the first coupon

and the third coupon is worth the lowest amount today. The farther into the future a payment is to be

received, the less it is worth today – is the fundamental concept for which the PV-of-ordinary-annuity

formula accounts. It calculates the sum of the present values of all future cash flows, but unlike the bond-

pricing formula we saw earlier, it doesn‘t require that we add the value of each coupon payment. (For

more on calculating the time value of annuities, see Anything but Ordinary: Calculating the Present and

Future Value of Annuities and Understanding the Time Value of Money. )

By incorporating the annuity model into the bond pricing formula, which requires us to also include the

present value of the par value received at maturity, we arrive at the following formula:

Let‘s go through a basic example to find the price of a plain vanilla bond.

Example 1: Calculate the price of a bond with a par value of $1,000 to be paid in ten years, a coupon rate

of 10%, and a required yield of 12%. In our example we‘ll assume that coupon payments are made semi-

annually to bond holders and that the next coupon payment is expected in six months. Here are the steps

we have to take to calculate the price:

1. Determine the Number of Coupon Payments: Because two coupon payments will be made each year

for ten years, we will have a total of 20 coupon payments.

2. Determine the Value of Each Coupon Payment: Because the coupon payments are semi-annual,

divide the coupon rate in half. The coupon rate is the percentage off the bond‘s par value. As a result,

each semi-annual coupon payment will be $50 ($1,000 X 0.05).

3. Determine the Semi-Annual Yield: Like the coupon rate, the required yield of 12% must be divided

by two because the number of periods used in the calculation has doubled. If we left the required yield at

12%, our bond price would be very low and inaccurate. Therefore, the required semi-annual yield is 6%

(0.12/2).

4. Plug the Amounts Into the Formula:







From the above calculation, we have determined that the bond is selling at a discount; the bond price is

less than its par value because the required yield of the bond is greater than the coupon rate. The bond

must sell at a discount to attract investors, who could find higher interest elsewhere in the prevailing

rates. In other words, because investors can make a larger return in the market, they need an extra

incentive to invest in the bonds.

Accounting for Different Payment Frequencies

In the example above coupons were paid semi-annually, so we divided the interest rate and coupon

payments in half to represent the two payments per year. You may be now wondering whether there is a

formula that does not require steps two and three outlined above, which are required if the coupon

payments occur more than once a year. A simple modification of the above formula will allow you to

adjust interest rates and coupon payments to calculate a bond price for any payment frequency:







Notice that the only modification to the original formula is the addition of ―F‖, which represents the

frequency of coupon payments, or the number of times a year the coupon is paid. Therefore, for bonds

paying annual coupons, F would have a value of one. Should a bond pay quarterly payments, F would

equal four, and if the bond paid semi-annual coupons, F would be two.

_________________________________________________________

PGDBA -Semester 2

MB0046 – Marketing Management

Q.1 What is Marketing Information System? Explain its characteristics, benefits and information

types.

Ans. A Marketing Information System can be defined as ‗a system in which marketing information is

formally gathered, stored, analysed and distributed to managers in accord with their informational needs

on a regular basis‘.

Set of procedures and practices employed in analyzing and assessing marketing information, gathered

continuously from sources inside and outside of a firm. Timely marketing information provides basis for

decisions such as product development or improvement, pricing, packaging, distribution, media selection,

and promotion.

Characteristics of MIS

Philip Kotler defines MIS as ―a system that consists of people, equipment and procedures to gather,

sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision

makers.

Its characteristics are as follows:

1. It is a planned system developed to facilitate smooth and continuous flow of information.

2. It provides pertinent information, collected from sources both internal and external to the company, for

use as the basis of marketing decision making.

3. It provides right information at the right time to the right person.

A well designed MIS serves as a company‘s nerve centre, continuously monitoring the market

environment both inside and outside the organization. In the process, it collects lot of data and stores

in the form of a database which is maintained in an organized manner. Marketers classify and

analyze this data from the database as needed.

Benefits of MIS(Marketing Information System)

Various benefits of having a MIS and resultant flow of marketing information are given below:

1. It allows marketing managers to carry out their analysis, planning implementation and control

responsibilities more effectively.

2. It ensures effective tapping of marketing opportunities and enables the company to develop

effective safeguard against emerging marketing threats.

3. It provides marketing intelligence to the firm and helps in early spotting of changing trends.

4. It helps the firm adapt its products and services to the needs and tastes of the customers.

5. By providing quality marketing information to the decision maker, MIS helps in improving the

quality of decision making.

Types of Marketing Information

A Marketing Information System supplies three types of information.

1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly, quarterly,

or annual interval. This includes data such as sales, Market Share, sales call reports, inventory levels,

payables, and receivables etc. which are made available regularly. Information on customer awareness of

company‘s brands, advertising campaigns and similar data on close competitors can also be provided.

2. Monitoring Information is the data obtained from regular scanning of certain sources such as trade

journals and other publications. Here relevant data from external environment is captured to monitor

changes and trends related to marketing situation. Data about competitors can also be part of this

category. Some of these data can be purchased at a price from commercial sources such as Market

Research agencies or from Government sources.

3. Problem related or customized information is developed in response to some specific requirement

related to a marketing problem or any particular data requested by a manager. Primary Data or Secondary

Data (or both) are collected through survey Research in response to specific need. For example, if the

company has developed a new product, the marketing manager may want to find out the opinion of the

target customers before launching the product in the market. Such data is generated by conducting a

market research study with adequate sample size, and the findings obtained are used to help decide

whether the product is accepted and can be launched.

Q.2 a. Examine how a firm‟s macro environment operates.

b. Mention the key points in Psychoanalytic model of consumer behaviour.

Ans. The term micro-environment denotes those elements over which the marketing firm has control or

which it can use in order to gain information that will better help it in its marketing operations. In other

words, these are elements that can be manipulated, or used to glean information, in order to provide fuller

satisfaction to the company‘s customers. The objective of marketing philosophy is to make profits

through satisfying customers. This is accomplished through the manipulation of the variables over which

a company has control in such a way as to optimise this objective. The variables are what Neil Borden has

termed ‗the marketing mix‘ which is a combination of all the ‗ingredients‘ in a ‗recipe‘ that is designed to

prove most attractive to customers. In this case the ingredients are individual elements that marketing can

manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the

company can control in order to reach its target market the ‗four Ps‘. Each of these is discussed in detail

in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix

together with an explanation of how they fit into the overall notion of marketing.

A scan of the external macro-environment in which the firm operates can be expressed in terms of the

following factors:

 Political

 Economic

 Social

 Technological

The acronym PEST (or sometimes rearranged as ―STEP‖) is used to describe a framework for the

analysis of these macroenvironmental factors. A PEST analysis fits into an overall environmental scan as

shown in the following diagram:



Environmental Scan



/ \



External Analysis Internal Analysis



/\



Macroenvironment Microenvironment



|P.E.S.T.



Political Factors

Political factors include government regulations and legal issues and define both formal and informal

rules under which the firm must operate. Some examples include:

 tax policy

 employment laws

 environmental regulations

 trade restrictions and tariffs

 political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm‘s cost of capital. The

following are examples of factors in the macroeconomy:

 economic growth

 interest rates

 exchange rates

 inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macro environment. These

factors affect customer needs and the size of potential markets. Some social factors include:

 health consciousness

 population growth rate

 age distribution

 career attitudes

 emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and

influence outsourcing decisions. Some technological factors include:

 R&D activity

 automation

 technology incentives

 rate of technological change

External Opportunities and Threats

The PEST factors combined with external micro environmental factors can be classified as opportunities

and threats in a SWOT analysis.

The Psychoanalytical Model: The psychoanalytical model draws from Freudian Psychology.

According to this model, the individual consumer has a complex set of deep-seated motives which drive

him towards certain buying decisions. The buyer has a private world with all his hidden fears, suppressed

desires and totally subjective longings. His buying action can be influenced by appealing to these desires

and longings. The psychoanalytical theory is attributed to the work of eminent psychologist Sigmund

Freud. Freud introduced personality as a motivating force in human behavior.

According to this theory, the mental framework of a human being is composed of three elements, namely,

1. The id or the instinctive, pleasure seeking element. It is the reservoir of the instinctive impulses that a

man is born with and whose processes are entirely subconscious. It includes the aggressive, destructive

and sexual impulses of man.

2. The superego or the internal filter that presents to the individual the behavioral expectations of society.

It develops out of the id, dominates the ego and represents the inhibitions of instinct which is

characteristic of man. It represents the moral and ethical elements, the conscience.

3. The ego or the control device that maintains a balance between the id and the superego. It is the most

superficial portion of the id. It is modified by the influence of the outside world. Its processes are entirely

conscious because it is concerned with the perception of the outside world.

The basic theme of the theory is the belief that a person is unable to satisfy all his needs within the

bounds of society. Consequently, such unsatisfied needs create tension within an individual which have to

be repressed. Such repressed tension is always said to exist in the subconscious and continues to influence

consumer behavior.

4. The Sociological Model: According to the sociological model, the individual buyer is influenced by

society or intimate groups as well as social classes. His buying decisions are not totally governed by

utility; He has a desire to emulate, follow and fit in with his immediate environment.

5. The Nicosia Model: In recent years, some efforts have been made by marketing scholars to build

buyer behavior models totally from the marketing man‘s standpoint. The Nicosia model and the Howard

and Sheth model are two important models in this category. Both of them belong to the category called

the systems model, where the human being is analyzed as a system with stimuli as the input to the system

and behavior as the output of the system. Francesco Nicosia, an expert in consumer motivation and

behavior put forward his model of buyer behavior in 1966.

The model tries to establish the linkages between a firm and its consumer – how the activities of the firm

influence the consumer and result in his decision to buy. The messages from the firm first influence the

predisposition of the consumer towards the product. Depending on the situation, he develops a certain

attitude towards the product. It may lead to a search for the product or an evaluation of the product. If

these steps have a positive impact on him, it may result in a decision to buy. This is the sum and

substance of the ‗activity explanations‘ in the Nicosia Model. The

Nicosia Model groups these activities into four basic fields. Field one has two subfields the firm‘s

attributes and the consumer‘s attributes. An advertising message from the firm reaches the consumer‘s

attributes. Depending on the way the message is received by the consumer, a certain attribute may

develop, and this becomes the input for Field Two. Field Two is the area of search and evaluation of the

advertised product and other alternatives. If this process results in a motivation to buy, it becomes the

input for Field Three. Field Three consists of the act of purchase. And Field Four consists of the use of

the purchased item.

Q.3 Explain the key roles played and various steps involved in organizational buying.

Ans.

Point 1 – Introduction.

The need for an understanding of the organizational buying process has grown in recent years due to the

many competitive challenges presented in business-to-business markets. Since 1980 there have been a

number ofkey changes in this area, including the growth of outsourcing, the increasing power enjoyed by

purchasing departments and the importance given to developing partnerships with suppliers.

Point 2 – The organizational buying behaviour process.

The organizational buying behaviour process is well documented with many models depicting the various

phases, the members involved, and the decisions made in each phase. The basic five phase model can be

extended to eight; purchase initiation; evaluations criteria formation; information search; supplier

definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice implementation

(Matbuy, 1986).

Point 3 – The buying centre. The buying centre consists of those people in the organizational who are

involved directly or indirectly in the buying process, i.e. the user, buyer influencer, decider and

gatekeeper to who the role of ‗initiator‘ has also been added. The buyers in the process are subject to a

wide variety and complexity of buying motives and rules of selection. The Matbuy model encourages

marketers to focus their efforts on who is making what decisions based on which criteria.

Point 4 – Risk and uncertainty –

The driving forces of organizational buying behaviour. This is concerned with the role of risk or

uncertainty on buying behaviour. The level of risk depends upon the characteristics of the buying

situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and cause

certain desired behavioural reactions by the use of information and the implementation of certain

actions. The risks perceived by the customer can result from a combination of the characteristics of

various factors: the transaction involved, the relationship with the supplier, and his position vis-a-vis the

supply market.

Point 5 – Factors influencing organizational buying behaviour.

Three key factors are shown to influence organizational buying behaviour, these are, types of buying

situations and situational factors, geographical and cultural factors and time factors.

Point 6 – Purchasing Strategy.

The purchasing function is of great importance because its actions will impact directly on the

organization‘s profitability. Purchasing strategy aims to evaluate and classify the various items purchased

in order to be able to choose and manage suppliers accordingly. Classification is along two dimensions:

importance of items purchased and characteristics of the supply market. Actions can be taken to influence

the supply market. Based on the type of items purchased and on its position in the buying matrix, a

company will develop different relationships with suppliers depending upon the number of suppliers, the

supplier‘s share, characteristics of selected suppliers, and the nature of customer-supplier relationships.

The degree of centralization of buying activities and the missions and status of the buying function can

help support purchasing strategy. The company will adapt its procedures to the type of items purchased

which in turn will influence relationships with suppliers.

Point 7 – The future.

Two activities which will be crucial to the future development of organizational buying behaviour will be

information technology and production technologies.

Point 8 – Conclusion.

Organizational buying behaviour is a very complex area, however, an understanding of the key factors are

fundamental to marketing strategy and thus an organization‘s ability to compete effectively in the market

place.

Q.4 Explain the different marketing philosophies and its approach.

Ans. Marketing is a societal process by which individuals and groups obtain what they need and want

through creating, offering and freely exchanging products and services of value with others.

According to the American Marketing Association, ―Marketing is the process of planning and executing

the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that

satisfy individual and organizational goods‖

There are six competing philosophies under which organizations conduct marketing activities ―the

production concept, product concept, selling concept, marketing concept, customer concept; and societal

concept.

1) The Production Concept: The production concept is one of the oldest concepts in business. The

production concept holds that consumers will prefer products that are widely available and inexpensive.

Managers of production-oriented businesses concentrate on achieving high production efficiency, low

costs and mass distribution.

They assume that consumers are primarily interested in products availability and low prices. This

philosophy makes sense in developing countries, where consumers are more interested in obtaining the

product than its features. It is also used when a company wants to expand the market.

2. The product Concept – Product concept holds that consumer will favour these products that offer the

most quality, performance and innovative features. Managers in these organizations focus on making

superior products and improving them over time. They assume that buyers admire well-made products

and can evaluate quality and performance product oriented companies often trust that their engineers can

design exceptional products. They get little or no customer input, and very often they will not even

examine competitor‘s products.

3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone, will

ordinarily not buy enough of the organization‘s products. The organization most, therefore, undertakes an

aggressive selling and promotion effort. This concept assumes that consumers typically show buying

inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole

battery of effective selling and promotion tools to stimulate more buying. The selling concept is

epitomized by the thinking that ―The purpose of marketing is to sell more stuff to more people for more

money in order to make more profit

Most firms practice the selling concept when they have over capacity. Their aim is to sell what they make

rather then make what market wants.

4. The Marketing Concept: The marketing concepts hold that the key to achieving its organizational

goals consists of the company being more effective then competitors in creating, delivering and

communicating superior customer value to its chosen target markets.

The marketing concept rests on four pillars: target market, customer needs, integrated marketing and

profitability. There is a contrast between selling and marketing concepts:

―Selling focuses on the needs of the seller; marketing on the needs of the buyer‖.

Selling is preoccupied with the seller‘s need to convert his product into cash; marketing with the ideas of

satisfying the needs of the customers by means of the product and the whole cluster of things associated

with creating, delivering and finally consuming it.

5. The customer Concept: Under customer concept, companies shape separate offers, services and

messages to individual customers. These companies collect information on each customer‘s past

transactions, demographics, psychographics and media and distribution preferences. They hope to achieve

profitable growth through capturing a larger share of each customer‘s expenditures by building high

customer loyalty and focusing on customer lifetime value.

The ability of a company to deal with customers are at a time become practical as a result of advances in

factory customization, computers, the internet and database marketing software.

6. The Societal Marketing Concept: The societal marketing concept holds that the organization‘s goal is

to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more

effectively and efficiently than competitors in a way that preserves or enhances the consumer‘s and the

society‘s well being.

The societal marketing concept calls upon marketers to build social and ethical considerations into their

marketing practices. They must balance and juggle the often-conflicting criteria of company profits,

consumer want satisfaction and public interest.

Companies see cause-related marketing as an opportunity to enhance their corporate reputation, raise

brand awareness, increase customer loyalty, build sales and increase press coverage. They believe that

consumers will increasingly look for signs of good corporate citizenship that go beyond supplying

rational and emotional benefits.

Q. 5 What are the various stages involved in decision process when a consumer is buying new

product? Also, explain the adoption process.

Ans. Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only

one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not

always include all 6 stages, determined by the degree of complexity…discussed next.

The 6 stages are:

1. Problem Recognition(awareness of need)–difference between the desired state and the actual

condition. Deficit in assortment of products. Hunger–Food. Hunger stimulates your need to eat.

Can be stimulated by the marketer through product information–did not know you were deficient?

I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new

pair of shoes.

2. Information search–

 Internal search, memory.

 External search if you need more information. Friends and relatives (word of mouth).

Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set.

Hungry, want to go out and eat, evoked set is

1.

 chinese food

 indian food

 burger king

 klondike kates etc

2. Evaluation of Alternatives–need to establish criteria for evaluation, features the buyer wants or

does not want. Rank/weight alternatives or resume search. May decide that you want to eat

something spicy, indian gets highest rank etc.

If not satisfied with your choice then return to the search phase. Can you think of another restaurant?

Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try

to influence by ―framing‖ alternatives.

1. Purchase decision–Choose buying alternative, includes product, package, store, method of

purchase etc.

2. Purchase–May differ from decision, time lapse between 4 & 5, product availability.

3. Post-Purchase Evaluation–outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have

you made the right decision. This can be reduced by warranties, after sales communication etc.

After eating an indian meal, may think that really you wanted a chinese meal instead.

Adoption Process

Adoption is an individual’s decision to become a regular user of a product. How do potential

customers learn about new products, try them, and adopt or reject them? The consumer adoption process

is later followed by the consumer loyalty process, which is the concern of the established producer. Years

ago, new product marketers used a mass market approach to launch products. This approach had two

main drawbacks: It called for heavy marketing expenditures, and it involved many wasted exposures.

These drawbacks led to a second approach, heavy user target marketing. This approach makes sense,

provided that heavy users are identifiable and are early adopters. However, even within the heavy user

group, many heavy users are loyal to existing brands. New product marketers now aim at consumers who

are early adopters.

The theory of innovation diffusion and consumer adoption helps marketers identify early adopters.

An innovation is any good, service, or idea that is perceived by someone as new. The idea may have a

long History, but it is an innovation to the person who sees it as new. Innovations take time to spread

through the social system. The Innovation diffusion process is defined as “the spread of a new idea

from its source of invention or creation to its ultimate users or adopters. The consumer adoption process

is the mental process through which an individual passes from first hearing about an innovation to final

adoption.

Adopters of new products have been observed to move through five stages:

1. Awareness : The consumer becomes aware of the innovation but lacks information about it.

2. Interest : The consumer is stimulated to seek information about the innovation.

3. Evaluation: The consumer considers whether to try the innovation

4. Trial: The consumer tries the innovation to improve his or her estimate of its value.

5. Adoption : The consumer decides to make full and regular use of the innovation.

Q. 6 Explain briefly the marketing mix elements for an automobile company giving sufficient

examples.

Ans. Marketing mix is the combination of elements that you will use to market your product. There are

four elements: Product, Place, Price and Promotion. They are called the four Ps of the marketing mix.

The objectives of this lesson about marketing mix is to give you:

-The tools you need for establishing your detailed marketing plan and forecasting your sales.

1. Challenge 2. Product 3. Place 4. Price 5. Promotion 6. Sales strategy 7. Do it yourself 8. Coaching

1-CHALLENGE

You have gotten a rough idea about the market situation and the possible positioning of your

product. Of course, it‘s far to be sufficient. Now, you must write your detailed planning. It means that

brainstorming is ended and that you have to go to the specifics in examining and checking all the

hypothesis you had made in the preceding chapters. You will use the marketing mix.

Some people think that the four Ps are old fashionable and propose a new paradigm: The four Cs!

Product becomes customer needs; Place becomes convenience, price is replaced by cost to the user,

promotion becomes communication. It looks like a joke but the Cs is more customer-oriented.

2-PRODUCT

A good product makes its marketing by itself because it gives benefits to the customer. We can

expect that you have right now a clear idea about the benefits your product can offer.

Suppose now that the competitors products offer the same benefits, same quality, same price. You have

then to differentiate your product with design, features, packaging, services, warranties, return and so on.

In general, differentiation is mainly related to:

-The design: it can be a decisive advantage but it changes with fads. For example, a fun board must offer

a good and fashionable design adapted to young people.

-The packaging: It must provides a better appearance and a convenient use. In food business, products

often differ only by packaging.

-The safety: It does not concern fun board but it matters very much for products used by kids.

-The “green”: A friendly product to environment gets an advantage among some segments.

In business to business and for expensive items, the best mean of differentiation are warranties,

return policy, maintenance service, time payments and financial and insurance services linked to

the product

3-PLACE-DISTRIBUTION

A crucial decision in any marketing mix is to correctly identify the distribution channels. The question ”

how to reach the customer” must always be in your mind.

-Definition: The place is where you can expect to find your customer and consequently, where the

sale is realized. Knowing this place, you have to look for a distribution channel in order to reach

your customer.

In fact, instead of ―place‖ it would be better to use the word ―distribution‖ but the MBA lingo uses

―place‖ to memorize the 4 Ps of the marketing mix!

4-PRICE

Price means the pricing strategy you will use. You have already fixed, as an hypothesis a customer

price fitted to your customer profile but you will have now to bargain it with the wholesalers and retailers.

Do not be foolish: They know better the market than you and you have to listen their advices.

5-PROMOTION

Advertising, public relations and so on are included in promotion and consequently in the 4Ps.

Sometimes, packaging becomes a fifth P. As promotion is closely linked to the sales, I will mention here

the most common features about the sale strategy.

-Definition: The function of promotion is to affect the customer behavior in order to close a sale.

Of course, it must be consistent with the buying process described in the consumer analysis.

Promotion includes mainly three topics: advertisement, public relations, and sales promotions.

-Advertisement:

It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have to take notice

about three important notions:

Reach is the percentage of the target market which is affected by your advertisement. For example, if you

advertise on radio you must know how many people belonging to your segment can be affected.

Frequency is the number of time a person is exposed to your message. It is said that a person must be

exposed seven times to the message before to be aware of it. Reach*frequency gives the gross rating

point. You have to evaluate it before any advertisement campaign.

Message: Sometimes, it is called a creative. Anyway, the message must: get attraction, capture interest,

create desire and finally require action that is to say close the sale.

Down-earth-advice:

There are some magical words that you can use in any message:

-Your-You–I-Me-My–Now-Today

-Fast-Easy-Cool-New-Fun-Updated-Free-Exciting-Astonishing

-Success-Love-Money-Comfort-Protection-Freedom-Luck.

-Public relations:

Public relations are more subtle and rely mainly on your own personality. For example, you can deliver

public speeches on subjects such as economics, geo-economics, futurology to several organizations (civic

groups, political groups, fraternal organizations, professional associations)

6-SALES STRATEGY

Sales bring in the money. Salesmen are directly exposed to the pressure of finding prospects, making

deals, beating competition and bringing money.

PGDBA Semester II

MB0047 – Management Information Systems

Q1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give

some Disadvantage of MIS?

Ans. Definition :

Organized approach to the study of information needs of a management at every level in making

operational, tactical, and strategic decisions. Its objective is to design and implement man-machine

procedures, processes, and routines that provide suitably detailed reports in an accurate, consistent, and

timely manner. Modern, computerized systems continuously gather relevant data, both from inside and

outside the organization. This data is then processed, integrated, and stored in a centralized database (or

data warehouse) where it is constantly updated and made available to all who have the authority to access

it, in a form that suits their purpose.

Characteristics of MIS:

MIS is mainly designed to take care of the needs of the managers in the organization.

MIS aids in integrating the information generated by various departments of the organization.

MIS helps in identifying a proper mechanism of storage of data.

MIS also helps in establishing mechanism to eliminate redundancies in data.

MIS as a system can be broken down into sub systems.

The role and significance of MIS in business and its classification is explained. It is possible to

understand the various phases of development in MIS based on the type of system required in any

organization.

Functions of MIS

1. Data processing

It includes the collection, transmission, storage, processing and output of data. It simplifies the statistics

and reduces to the lowest cost by supplying an unified format.

2. Function of prediction

It predicts the future situation by applying modern mathematics, statistics or simulation.

3. Function of plan

It arranges reasonably the plans of each functional department in accordance with the restrictions afforded

by enterprises and provides the appropriate planning reports according to different management.

4. Function of control

It monitors and inspects the operation of plans and comprises with the differences between operation and

plan in accordance with the data afforded by every functional department, and be assistant to managers to

control timely each method by analyzing the reasons why the differences comes into being.

5. Function of assistance

It derives instantly the best answers of related problems by applying to various of mathematics‘ mode and

analyzing a plentiful data stored in computers in the hope of using rationally human resource, financial

resource, material resource and information resource for relative abundant economic benefits.

Disadvantages of MIS

1.highly senstive requires constant monitoring.

2.buddgeting of MIS extremely difficult.

3.Quality of outputs governed by quality of inputs.

4.lack of flexiblity to update itself.

5.effectiveness decreases due to frequent changes in top management

6.takes into account only qualitative factors and ignores non-qualitative factors like morale of worker,

attitude of worker etc..

Q2. Explain Knowledge based system? Explain DSS and OLAP with example?

Ans. Knowledge-based system focuses on systems that use knowledge-based techniques to support

human decision-making, learning and action it is a computer system that is programmed to imitate human

problem-solving by means of artificial intelligence and reference to a database of knowledge on a

particular subject. Also it based on the methods and techniques of artificial intelligence and their core

components are the knowledge base and the inference mechanisms.

Decision Support Systems (DSS)

DSS is an interactive computer based system designed to help the decision makers to use all l the

resources available and make use in the decision making. In management many a time problems arise out

of situations for which simple solution may not be possible. To solve such problems you may have to use

complex theories. The models that would be required to solve such problems may have to be identified.

DSS requires a lot of managerial abilities and managers judgment.

You may gather and present the following information by using decision support application:

• Accessing all of your current information assets, including legacy and relational data sources, cubes,

data warehouses, and data marts

• Comparative sales figures between one week and the next

• Projected revenue figures based on new product sales assumptions

• The consequences of different decision alternatives, given past experience in a context that is described.

Manager may sometimes find it difficult to solve such problems. E.g. – In a sales problem if there is

multiple decision variables modeled as a simple linear problem but having multiple optima, it becomes

difficult to take a decision. Since any of the multiple optima would give optimum results. But the strategy

to select the one most suitable under conditions prevailing in the market, requires skills beyond the

model.

It would take some trials to select a best strategy. Under such circumstances it would be easy to take

decision if a ready system of databases of various market conditions and corresponding appropriate

decision is available. A system which consists of database pertaining to decision making based on certain

rules is known as decision support system. It is a flexible system which can be customized to suit the

organization needs. It can work in the interactive mode in order to enable managers to take quick

decisions. You can consider decision support systems as the best when it includes high-level summary

reports or charts and allow the user to drill down for more detailed information.

A DSS has the capability to update its decision database. Whenever manager feels that a particular

decision is unique and not available in the system, the manager can chose to update the database with

such decisions. This will strengthen the DSS to take decisions in future..

There is no scope for errors in decision making when such systems are used as aid to decision making.

DSS is a consistent decision making system. It can be used to generate reports of various lever

management activities. It is capable of performing mathematical calculations and logical calculation

depending upon the model adopted to solve the problem. You can summarize the benefits of DSS into

following:

• Improves personal efficiency

• Expedites problem solving

• Facilitates interpersonal communication

• Promotes learning or training

• Increases organizational control

• Generates new evidence in support of a decision

• Creates a competitive advantage over competition

• Encourages exploration and discovery on the part of the decision maker

• Reveals new approaches to thinking about the problem space

Online Analytical Processing (OLAP)

OLAP refers to a system in which there are predefined multiple instances of various modules used in

business applications. Any input to such a system results in verification of the facts with respect to the

available instances.

A nearest match is found analytically and the results displayed form the database. The output is sent only

after thorough verification of the input facts fed to the system. The system goes through a series of

multiple checks of the various parameters used in business decision making. OLAP is also referred to as a

multi dimensional analytical model. Many big companies use OLAP to get good returns in business.

The querying process of the OLAP is very strong. It helps the management take decisions like which

month would be appropriate to launch a product in the market, what should be the production quantity to

maximize the returns, what should be the stocking policy in order to minimize the wastage etc.

A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box. Each

adjoining faces with common vertex may be considered to represent the various parameter of the business

situation under consideration. E.g.: Region, Sales & demand, Product etc.

Decision Support Systems (DSS)

DSS is an interactive computer based system designed to help the decision makers to use all l the

resources available and make use in the decision making. In management many a time problems arise out

of situations for which simple solution may not be possible. To solve such problems you may have to use

complex theories. The models that would be required to solve such problems may have to be identified.

DSS requires a lot of managerial abilities and managers judgment.

You may gather and present the following information by using decision support application:

Accessing all of your current information assets, including legacy and relational data sources, cubes,

data warehouses, and data marts

Comparative sales figures between one week and the next

Projected revenue figures based on new product sales assumptions

The consequences of different decision alternatives, given past experience in a context that is described.

Q3.What are Value Chain Analysis & describe its significance in MIS? Explain what is meant by

BPR? What is its significance? How Data warehousing & Data Mining is useful in terms of MIS?

Answer:-

BPR

The existing system in the organization is totally reexamined and radically modified for incorporating the

latest technology. This process of change for the betterment of the organization is called as Business

process re-engineering. This process is mainly used to modernize and make the organizations efficient.

BPR directly affects the performance. It is used to gain an understanding the process of business and to

understand the process to make it better and re-designing and thereby improving the system.

BPR is mainly used for change in the work process. Latest software is used and accordingly the business

procedures are modified, so that documents are worked upon more easily and efficiently. This is known

as workflow management.

Signification of BPR

Business process are a group of activities performed by various departments, various organizations or

between individuals that is mainly used for transactions in business. There may be people who do this

transaction or tools. We all do them at one point or another either as a supplier or customer. You will

really appreciate the need of process improvement or change in the organizations conduct with business if

you have ever waited in the queue for a longer time to purchase 1 kilo of rice from a Public Distribution

Shop (PDS-ration shop). The process is called the check-out process. It is called process because uniform

standard system has been maintained to undertake such a task. The system starts with forming a queue,

receiving the needed item form the shop, getting it billed, payment which involves billing, paying amount

and receiving the receipt of purchase and the process ends up with the exit from the store. It is the

transaction between customer and supplier.

Data Warehousing – Data Warehouse is defined as collection of database which is referred as relational

database for the purpose of querying and analysis rather than just transaction processing. Data warehouse

is usually maintained to store heuristic data for future use. Data warehousing is usually used to generate

reports. Integration and separation of data are the two basic features need to be kept in mind while

creating a data warehousing. The main output from data warehouse systems are; either tabular listings

(queries) with minimal formatting or highly formatted ―formal‖ reports on business activities. This

becomes a convenient way to handle the information being generated by various processes. Data

warehouse is an archive of information collected from wide multiple sources, stored under a unified

scheme, at a single site. This data is stored for a long time permitting the user an access to archived data

for years. The data stored and the subsequent report generated out of a querying process enables decision

making quickly. This concept is useful for big companies having plenty of data on their business

processes. Big companies have bigger problems and complex problems. Decision makers require access

to information from all sources. Setting up queries on individual processes may be tedious and inefficient.

Data Mining – Data mining is primarily used as a part of information system today, by companies with a

strong consumer focus – retail, financial, communication, and marketing organizations. It enables these

companies to determine relationships among ―internal‖ factors such as price, product positioning, or staff

skills, and ―external‖ factors such as economic indicators, competition, and customer demographics. And,

it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it

enables them to ―drill down‖ into summary information to view detail transactional data. With data

mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions

based on an individual‘s purchase history. By mining demographic data from comment or warranty cards,

the retailer could develop products and promotions to appeal to specific customer segments.

Q4. Explain DFD & Data Dictionary? Explain in detail how the information requirement is

determined for an organization?

Answer:-

Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the

processes convert the input data into output. They do not explain how the processing takes place.

DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD can

easily illustrate relationships among data, flows, external entities an stores. DFD can also be drawn in

increasing levels of detail, starting with a summary high level view and proceeding o more detailed lower

level views.

Rounded rectangles represent processes that transform flow of data or work to be done.

Rectangle represents external agents- the boundary of the system. It is source or destination of data.

The open-ended boxes represent data stores, sometimes called files or databases. These data stores

correspond to all instances of a single entity in a data model.

Arrow represents data flows, inputs and outputs to end from the processes.

A number of guideline should be used in DFD

Choose meaningful names for the symbols on the diagram.

Number the processes consistently. The numbers do not imply the sequence.

Avoid over complex DFD.

Make sure the diagrams are balanced

Data Dictionary

The data dictionary is used to create and store definitions of data, location, format for storage and other

characteristics. The data dictionary can be used to retrieve the definition of data that has already been

used in an application. The data dictionary also stores some of the description of data structures, such as

entities, attributes and relationships. It can also have software to update itself and to produce reports on its

contents and to answer some of the queries.

Q5. What is ERP? Explain its existence before and its future after? What are the advantages &

Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural Networks?

Answer:-

Manufacturing management systems have evolved in stages over the few decades from a simple means of

calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent

changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of

the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new

concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise

Resource Planning (ERP).

ERP Before and After

Before

Prior to the concept of ERP systems, departments within an organization (for example, the human

resources (HR)) department, the payroll department, and the financial department) would have their own

computer systems. The HR computer system (often called HRMS or HRIS) would typically contain

information on the department, reporting structure, and personal details of employees. The payroll

department would typically calculate and store paycheck information. The financial department would

typically store financial transactions for the organization. Each system would have to rely on a set of

common data to communicate with each other. For the HRIS to send salary information to the payroll

system, an employee number would need to be assigned and remain static between the two systems to

accurately identify an employee. The financial system was not interested in the employee-level data, but

only in the payouts made by the payroll systems, such as the tax payments to various authorities,

payments for employee benefits to providers, and so on. This provided complications. For instance, a

person could not be paid in the payroll system without an employee number.

After

ERP software, among other things, combined the data of formerly separate applications. This made the

worry of keeping numbers in synchronization across multiple systems disappears. It standardized and

reduced the number of software specialties required within larger organizations.

Advantages and Disadvantages

Advantages – In the absence of an ERP system, a large manufacturer may find itself with many software

applications that do not talk to each other and do not effectively interface. Tasks that need to interface

with one another may involve:

A totally integrated system

The ability to streamline different processes and workflows

The ability to easily share data across various departments in an organization

Improved efficiency and productivity levels

Better tracking and forecasting

Lower costs

Improved customer service

Disadvantages – Many problems organizations have with ERP systems are due to inadequate investment

in ongoing training for involved personnel, including those implementing and testing changes, as well as

a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.

While advantages usually outweigh disadvantages for most organizations implementing an ERP system,

here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is

involved, however, success does depend on skills and the experience of the workforce to quickly adapt to

the new system.

Customization in many situations is limited

The need to reengineer business processes

ERP systems can be cost prohibitive to install and run

Technical support can be shoddy

ERP‘s may be too rigid for specific organizations that are either new or want to move in a new direction

in the near future.

Artificial Intelligence

Artificial Intelligence is the science and technology based on various functions to develop a system that

can think and work like a human being. It can reason, analyze, learn, conclude and solve problems. The

systems which use this type of intelligence are known as artificial intelligent systems and their

intelligence is referred to as artificial intelligence. It was said that the computer don‘t have common

sense. Here in AI, the main idea is to make the computer think like human beings, so that it can be then

said that computers also have common sense. More precisely the aim is to obtain a knowledge based

computer system that will help managers to take quick decisions in business.

Artificial Intelligence and Neural Networks

Artificial intelligence is a field of science and technology based on disciplines such as computer science,

biology, psychology, linguistics, mathematics and engineering. The goal of AI is to develop computers

that can simulate the ability to think, see, hear, walk, talk and feel. In other words, simulation of computer

functions normally associated with human intelligence, such as reasoning, learning and problem solving.

AI can be grouped under three major areas: cognitive science, robotics and natural interfaces.

Cognitive science focuses on researching on how the human brain works and how humans think and

learn. Applications in the cognitive science area of AI include the development of expert systems and

other knowledge-based systems that add a knowledge base and some reasoning capability to information

systems. Also included are adaptive learning systems that can modify their behavior based on information

they acquire as they operate. Chess-playing systems are some examples of such systems.

Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve semi-

structured problems with incomplete knowledge by developing approximate inferences and answers, as

humans do.

Neural network software can learn by processing sample problems and their solutions. As neural nets start

to recognize patterns, they can begin to program themselves to solve such problems on their own.

Neural networks are computing systems modeled after the human brain‘s mesh like network of

interconnected processing elements, called neurons. The human brain is estimated to have over 100

billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the

interconnected processors in a neural network operate in parallel and interact dynamically with each

other.

This enables the network to operate and learn from the data it processes, similar to the human brain. That

is, it learns to recognize patterns and relationships in the data. The more data examples it receives as

input, the better it can learn to duplicate the results of the examples it processes. Thus, the neural

networks will change the strengths of the interconnections between the processing elements in response to

changing patterns in the data it receives and results that occur

Q 6. Distinguish between closed decision making system & open decision making system? What is

„what – if„analysis? Why is more time spend in problem analysis & problem definition as compared

to the time spends on decision analysis?

Answer:-

If the manager operates in an environment not known to him, then the decision-making system is termed

as an open decision-making system. The conditions of this system in contrast closed decision-making

system are:

a) The manager does not know all the decision alternatives.

b) The outcome of the decision is also not known fully. The knowledge of the outcome may be a

probabilistic one.

c) No method, rule or model is available to study and finalise one decision among the set of decision

alternatives.

What if analysis

Decisions are made using a model of the problem for developing various solution alternatives and testing

them for best choice. The model is built with some variables and relationship between variables

considered values of variables or relationship in the model may not hold good and therefore solution

needs to be tested for an outcome, if the considered values of variables or relationship change. This

method of analysis is called ‗what if analysis.‘

Decision Analysis by Analytical Modelling

Based on the methods discussed, a decision is made but such decision needs to be analysed for conditions

and assumptions considered in the decision model. The process is executed through analytical modelling

of problem and solution. The model is analysed in four ways.

What if analysis • Goal Seeking Analysis

Sensitivity analysis • Goal Achieving analysis

____________________________________________________________

PGDBA SEMESTER II

MB0048 –Operation Research

Q1. a. Explain how and why Operation Research methods have been valuable in aiding executive

decisions.

b. Discuss the usefulness of Operation Research in decision making process and the role of

computers in this field.

Ans.

Churchman, Aackoff and Aruoff defined Operations Research as: “the application of scientific methods,

techniques and tools to operation of a system with optimum solutions to the problems”, where ‘optimum’

refers to the best possible alternative.

The objective of Operations Research is to provide a scientific basis to the decision-makers for solving

problems involving interaction of various components of the organisation. You can achieve this by

employing a team of scientists from different disciplines, to work together for finding the best possible

solution in the interest of the organisation as a whole. The solution thus obtained is known as an optimal

decision.

You can also define Operations Research as “The use of scientific methods to provide criteria for

decisions regarding man, machine, and systems involving repetitive operations”.OR ―Operation

Techniques is a bunch of mathematical techniques.‖

b. “Operation Research is an aid for the executive in making his decisions based on scientific

methods analysis”. Discuss the above statement in brief.

Ans.

―Operation Research is an aid for the executive in making his decisions based on scientific methods

analysis‖.

Discussion:-

Any problem, simple or complicated, can use OR techniques to find the best possible solution. This

section will explain the scope of OR by seeing its application in various fields of everyday life.

i) In Defense Operations: In modern warfare, the defense operations are carried out by three major

independent components namely Air Force, Army and Navy. The activities in each of these components

can be further divided in four sub-components namely: administration, intelligence, operations and

training and supply. The applications of modern warfare techniques in each of the components of military

organisations require expertise knowledge in respective fields. Furthermore, each component works to

drive maximum gains from its operations and there is always a possibility that the strategy beneficial to

one component may be unfeasible for another component. Thus in

defense operations, there is a requirement to co-ordinate the activities of various components, which gives

maximum benefit to the organisation as a whole, having maximum use of the individual components. A

team of scientists from various disciplines come together to study the strategies of different components.

After appropriate analysis of the various courses of actions, the team selects the best course of action,

known as the ‗optimum strategy‘.

ii) In Industry: The system of modern industries is so complex that the optimum point of operation in its

various components cannot be intuitively judged by an individual. The business environment is always

changing and any decision useful at one time may not be so good some time later. There is always a need

to check the validity of decisions continuously against the situations. The industrial revolution with

increased division of labour and introduction of management responsibilities has made each component

an independent unit having their own goals. For example: production department minimises the cost of

production but maximise output. Marketing department maximises the output, but minimises cost of unit

sales. Finance department tries to optimise the capital investment and personnel department appoints

good people at minimum cost. Thus each department plans its own objectives and all these objectives of

various department or components come to conflict with one another and may not agree to the overall

objectives of the organisation. The application of OR techniques helps in overcoming this difficulty by

integrating the diversified activities of various components to serve the interest of the organisation as a

whole efficiently. OR methods in industry can be applied in the fields of production, inventory controls

and marketing, purchasing, transportation and competitive strategies.

iii) Planning: In modern times, it has become necessary for every government to have careful planning,

for economic development of the country. OR techniques can be fruitfully applied to maximise the per

capita income, with minimum sacrifice and time. A government can thus use OR for framing future

economic and social policies.

iv) Agriculture: With increase in population, there is a need to increase agriculture output. But this

cannot be done arbitrarily. There are several restrictions. Hence the need to determine a course of action

serving the best under the given restrictions. You can solve this problem by applying OR techniques.

v) In Hospitals: OR methods can solve waiting problems in out-patient department of big hospitals and

administrative problems of the hospital organisations.

vi) In Transport: You can apply different OR methods to regulate the arrival of trains and processing

times minimise the passengers waiting time and reduce congestion, formulate suitable transportation

policy, thereby reducing the costs and time of trans-shipment.

vii) Research and Development: You can apply OR methodologies in the field of R&D for several

purposes, such as to control and plan product introductions.

Q2. Explain how the linear programming technique can be helpful in decision-making in the areas

of Marketing and Finance.

Ans.

Linear programming problems are a special class of mathematical programming problems for which the

objective function and all constraints are linear. A classic example of the application of linear

programming is the maximization of profits given various production or cost constraints.

Linear programming can be applied to a variety of business problems, such as marketing mix

determination, financial decision making, production scheduling, workforce assignment, and resource

blending. Such problems are generally solved using the ―simplex method.‖

MEDIA SELECTION PROBLEM.

The local Chamber of Commerce periodically sponsors public service seminars and programs.

Promotional plans are under way for this year‘s program. Advertising alternatives include television,

radio, and newspaper. Audience estimates, costs, and maximum media usage limitations are shown in

Exhibit 1.

If the promotional budget is limited to $18,200, how many commercial messages should be run on each

medium to maximize total audience contact? Linear programming can find the answer.

Q3. a. How do you recognise optimality in the simplex method?

b. Write the role of pivot element in simplex table?

Ans. Simplex method is used for solving Linear programming problem especially when more than two

variables are involved

SIMPLEX METHOD

1. Set up the problem.

That is, write the objective function and the constraints.

2. Convert the inequalities into equations.

This is done by adding one slack variable for each inequality.

3. Construct the initial simplex tableau.

Write the objective function as the bottom row.

4. The most negative entry in the bottom row identifies a column.

5. Calculate the quotients. The smallest quotient identifies a row. The element in the intersection

of the column identified in step 4 and the row identified in this step is identified as the pivot

element.

The quotients are computed by dividing the far right column by the identified column in step 4. A

quotient that is a zero, or a negative number, or that has a zero in the denominator, is ignored.

6. Perform pivoting to make all other entries in this column zero.

This is done the same way as we did with the Gauss-Jordan method.

7. When there are no more negative entries in the bottom row, we are finished; otherwise, we start

again from step 4.

8. Read off your answers.

Get the variables using the columns with 1 and 0s. All other variables are zero. The maximum value you

are looking for appears in the bottom right hand corner.

Example

Niki holds two part-time jobs, Job I and Job II. She never wants to work more than a total of 12 hours a

week. She

has determined that for every hour she works at Job I, she needs 2 hours of preparation time, and for

every hour

she works at Job II, she needs one hour of preparation time, and she cannot spend more than 16 hours for

preparation. If she makes $40 an hour at Job I, and $30 an hour at Job II, how many hours should she

work per

week at each job to maximize her income?

Solution: In solving this problem, we will follow the algorithm listed above.

1.Set up the problem. That is, write the objective function and the constraints.

Since the simplex method is used for problems that consist of many variables, it is not practical to use the

variables x, y, z etc. We use the symbols x1, x2, x3, and so on.

Let x1 = The number of hours per week Niki will work at Job I.

and x2 = The number of hours per week Niki will work at Job II.

It is customary to choose the variable that is to be maximized as Z.

The problem is formulated the same way as we did in the last chapter.

Maximize Z = 40×1 + 30×2

Subject to: x1 + x2 ≤ 12

2×1 + x2 ≤ 16

x1 ≥ 0; x2 ≥ 0

2. Convert the inequalities into equations. This is done by adding one slack variable for each

inequality.

For example to convert the inequality x1 + x2 ≤ 12 into an equation, we add a non-negative variable

y1, and we get

x1 + x2 + y1 = 12

Here the variable y1 picks up the slack, and it represents the amount by which x1 + x2 falls short of 12.

In this problem, if Niki works fewer that 12 hours, say 10, then y1 is 2. Later when we read off the final

solution from the simplex table, the values of the slack variables will identify the unused amounts.

We can even rewrite the objective function Z = 40×1 + 30×2 as – 40×1 – 30×2 + Z = 0.

After adding the slack variables, our problem reads

Objective function: – 40×1 – 30×2 + Z = 0

Subject to constraints: x1 + x2 + y1 = 12

2×1 + x2 + y2 = 16

x1 ≥ 0; x2 ≥ 0

3. Construct the initial simplex tableau. Write the objective function as the bottom row.

Now that the inequalities are converted into equations, we can represent the problem into an augmented

matrix called the initial simplex tableau as follows.



x1 x2 y1 y2 Z C



1 1 1 0 0 12

2 1 0 1 0 16



– – 0 0 1 0

40 30



Here the vertical line separates the left hand side of the equations from the right side. The horizontal line

separates the constraints from the objective function. The right side of the equation is represented by the

column C.

The reader needs to observe that the last four columns of this matrix look like the final matrix for the

solution of a system of equations. If we arbitrarily choose x1 = 0 and x2 = 0, we get

Which reads

y1 = 12

y2 = 16

Z =0

The solution obtained by arbitrarily assigning values to some variables and then solving for the remaining

variables is called the basic solution associated with the tableau. So the above solution is the basic

solution associated with the initial simplex tableau. We can label the basic solution variable in the right

of the last column as shown in the table below.



x1 x2 y1 y2 Z



1 1 1 0 0 12 y1



2 1 0 1 0 16 y2



– – 0 0 1 0 Z

40 30



4. The most negative entry in the bottom row identifies a column.

The most negative entry in the bottom row is –40, therefore the column 1 is identified.



x1 x2 y1 y2 Z



1 1 1 0 0 12 y1



2 1 0 1 0 16 y2



– – 0 0 1 0 Z

40 30

Q4. What is the significance of duality theory of linear programming? Describe the general rules

for writing the dual of a linear programming problem.

Ans.

Linear programming (LP) is a mathematical method for determining a way to achieve the best outcome

(such as maximum profit or lowest cost) in a given mathematical model for some list of requirements

represented as linear relationships. Linear programming is a specific case of mathematical programming.

More formally, linear programming is a technique for the optimization of a linear objective function,

subject to linear equality and linear inequality constraints. Given a polytope and a real-valued affine

function defined on this polytope, a linear programming method will find a point on the polytope where

this function has the smallest (or largest) value if such point exists, by searching through the polytope

vertices.

Linear programs are problems that can be expressed in canonical form:

where x represents the vector of variables (to be determined), c and b are vectors of (known) coefficients

and A is a (known) matrix of coefficients. The expression to be maximized or minimized is called the

objective function (cTx in this case). The equations Ax ≤ b are the constraints which specify a convex

polytope over which the objective function is to be optimized. (In this context, two vectors are

comparable when every entry in one is less-than or equal-to the corresponding entry in the other.

Otherwise, they are incomparable.)

Linear programming can be applied to various fields of study. It is used most extensively in business and

economics, but can also be utilized for some engineering problems. Industries that use linear

programming models include transportation, energy, telecommunications, and manufacturing. It has

proved useful in modeling diverse types of problems in planning, routing, scheduling, assignment, and

design.

Duality: Every linear programming problem, referred to as a primal problem, can be converted into a

dual problem, which provides an upper bound to the optimal value of the primal problem. In matrix form,

we can express the primal problem as:

Maximize cTx subject to Ax ≤ b, x ≥ 0;

with the corresponding symmetric dual problem,

Minimize bTy subject to ATy ≥ c, y ≥ 0.

An alternative primal formulation is:

Maximize cTx subject to Ax ≤ b;

with the corresponding asymmetric dual problem,

Minimize bTy subject to ATy = c, y ≥ 0.

There are two ideas fundamental to duality theory. One is the fact that (for the symmetric dual) the dual

of a dual linear program is the original primal linear program. Additionally, every feasible solution for a

linear program gives a bound on the optimal value of the objective function of its dual. The weak duality

theorem states that the objective function value of the dual at any feasible solution is always greater than

or equal to the objective function value of the primal at any feasible solution. The strong duality theorem

states that if the primal has an optimal solution, x*, then the dual also has an optimal solution, y*, such

that cTx*=bTy*.

A linear program can also be unbounded or infeasible. Duality theory tells us that if the primal is

unbounded then the dual is infeasible by the weak duality theorem. Likewise, if the dual is unbounded,

then the primal must be infeasible. However, it is possible for both the dual and the primal to be

infeasible

___________________________________________________________

PGDBA Semester 2

MB0049- Project Management

Q.1 Describe in detail the various phases of Project management life cycle.

Ans. Projects too have to chore through their life-cycles adhering to a system. Every project irrespective

of its size, scope has to adapt a system. A system in the project management refers to the existence of

interrelationship of activities in a project. The absence of a system makes a project die.

No matter what project it is that you‘re preparing for, the project management life cycle can assist you in

narrowing your focus, keeping your objectives in order and finishing said project on time, on budget and

with a minimum of headaches. Every project management life cycle contains five steps: Initiation,

Planning, Execution, Monitoring/Control and Closure. No one step is more important than the other and

each step plays a crucial role in getting your project off the ground, through the race, down the stretch and

across the finish line.

Phases of Project management life cycle

1) Initiation

In this first step you provide an over-view of the project in addition to the strategy you plan on using in

order to achieve the desired results. During the Initiation phase you‘ll appoint a project manager who in

turn will — based on their experience and skills — select his team members. And lest you think you need

to be a Bill Gates or Donald Trump in order to see your project take on a life of it‘s own, fear not: there

are some great technological tools available to get you through the Initiation phase of the project

management life cycle.

2) Planning

The all-important second step of any successful project management life cycle is planning and should

include a detailed breakdown and assignment of each task of your project from beginning to end. The

Planning Phase will also include a risk assessment in addition to defining the criteria needed for the

successful completion of each task. In short, the working process is defined, stake holders are identified

and reporting frequency and channels explained.

3 & 4) Execution and Control

Steps Three and Four take you into deeper water. When it comes to the project management cycle,

execution and control just may be the most important of the five steps in that it ensures project activities

are properly executed and controlled. During the Execution and Control phases, the planned solution is

implemented to solve the problem specified in the project‘s requirements. In product and system

development, a design resulting in a specific set of product requirements is created. This convergence is

measured by prototypes, testing, and reviews. As the Execution and Control phases progress, groups

across the organization become more deeply involved in planning for the final testing, production, and

support.

5) Closure

By the time you reach Step Five — Closure — the project manager should be tweaking the little things to

ensure that the project is brought to its proper conclusion. The Closure phase is typically highlighted by a

written formal project review report which contains the following elements: a formal acceptance of the

final product (by the client), Weighted Critical Measurements (a match between the initial requirements

laid out by the client against the final delivered product), lessons learned, project resources, and a formal

project closure notification to higher management.

The Project Management Cycle saves time and keeps everyone on the team focused. Fortunately, modern

technology provides a variety of templates that will take you from A-to-Z (or in this case from Start-to-

Finish) making the Project Management Cycle user friendly no matter what your level of management

experience!

Q.2 List and explain the various aspects of programme management.

Ans.

Project Management

Project management is the planning, organizing, directing, and controlling of company resources.

It is clear from this definition that project management is concerned with the dynamic allocation,

utilization, and direction of resources (both human and technical), with time — in relation to both

individual efforts and product delivery schedule — and with costs, relating to both the acquisition and

consumption of funding. As a corollary, it is safe to say that without the direction project management

provides, work would have to proceed via a series of negotiations, and/or it would not align with the

goals, value proposition, or needs of the enterprise.

Within a program, these same responsibilities (i.e., allocation, utilization, and direction) are assigned to

people at three levels in the management hierarchy; the higher the level, the more general the

responsibilities. For example, at the bottom of the management hierarchy, project managers are assigned

to the various projects within the overall program. Each manager carries out the management

responsibilities we described above.

At the middle of the hierarchy is the program manager/director, whose major responsibility is to ensure

that the work effort achieves the outcome specified in the business and IT strategies. This involves setting

and reviewing objectives, coordinating activities across projects, and overseeing the integration and reuse

of interim work products and results. This person spends more time and effort on integration activities,

negotiating changes in plans, and communicating than on the other project management activities we

described (e.g., allocating resources, ensuring adherence to schedule, budget, etc.).

At the top of the program management hierarchy are the program sponsor(s) and the program steering

committee. Their major responsibility is to own and oversee the implementation of the program‘s

underlying business and IT strategies, and to define the program‘s connection to the enterprise‘s overall

business plan(s) and direction. Their management activities include providing and interpreting policy,

creating an environment that fosters sustainable momentum for the program (i.e., removing barriers both

inside and outside the enterprise), and periodically reviewing program progress and interim results to

ensure alignment with the overall strategic vision.

These individuals receive periodic summary reports and briefings on funding consumption, resources and

their utilization, and delivery of interim work products and results. Typically, they will focus on these

reports only if there is significant deviation from the plan.

So, let‘s return to the questions we posed at the start of this section: What is program management? Is it

really management at all?

If you think of management activities strictly as those we defined for project management, then the

answer to the second question is ―No,‖ or maybe ―Partly.‖ At the project level, managers do still perform

these activities, but the program manager/director addresses a different set of program goals or needs,

which requires a different ―bag of tricks‖ as well as a different view of what is happening and what needs

to get done. And at the top of the hierarchy, the executive leaders who set goals and oversee the program

certainly do not perform the same detailed activities as project managers

Q.3 Write a short note on the following:

a. Project progress control tools and mechanisms

b. Process in bringing about a change in project management.

Ans. Project progress control tools and mechanism

Project monitoring and control also provides information to support status reporting, progress

measurement, forecasting and updating current cost and schedule information. During this process, it is

also important to ensure that implementation of approved changes are monitored when and as they occur.

As for tools and techniques used in facilitating project monitoring and control, automated project

management information systems and Earned Value are among the most commonly used. Both are also

used to update information. Earned Value also provides a means for forecasting future performance based

upon past performance.

Status reports are used for communicating project progress and status. Variance Analysis reports are

typically used to identify variances and the information often used as a basis for determining corrective

actions.

The ideal suite of project management tools would provide fully integrated functionality such that:

 tools share the same communication medium to the team (eg Web, Intranet, Exchange server,

EMail, Client/Server)

 information can be automatically transferred to other tools, or, better still, be held only once (eg

team names, task lists, EMail addresses, distribution lists)

 efficiency and effectiveness is supported by automatic messaging and workflow control – the

applications will always prompt those responsible for action.

The tools that are used in project planning are

1. Project organization



Process Skills and activities



 Prepare an outline project justification, plan and project budget

Initiation  Selection and briefing of the project team, assigning roles and organization

 Feasibility study- risk and key success factors



 Project definition and project plan

Planning

 Communicate to the team



 Allocating and monitoring the work and cost

Execution  Ensuring work and team cohesion

 Reporting progress

 Monitoring progress and managing changes

Control

 Helping the team to solve project problems



 Satisfactory delivery

Close

 Compiling lessons from project experience



2. Project structure

Development plan, project tracking and oversight.

3. Project Key personnel – Identify those business areas that are within the scope or directly interface

with the scope boundary and list them in the ―Business area‖ column of the project assignment worksheet

Identify the key personnel for each area and list them in the ―Person‖ column of the project assignment

worksheet.

4. Project management team

It is a senior management team, which will be accountable for the project.

 Identify project sponsor, client representative and technical representative.

 Stage managers- who will plan and manage the project on a day-to-day basis for this stage

 Project coordinators- client coordinator and technical coordinator

 Clearly define these coordination, control activities and identify the brief suitable personnel to

carry them out

5. Key stakeholders

Identify management level personnel who are critical to the success of the project.

Document the responsibilities of stakeholders

6. Stage teams

Identify appropriate personnel required for the stage, define the team structure and appoint team leaders

Document the time commitment and responsibilities to be performed by the team members.

7. Key resources

Individuals assigned to a key resource role may work towards gathering ―Business key resources‖ and

―Technical key resources‖. They are project coordinators and team invitees.

8. Work Breakdown Structure (WBS)

The entire process of a project may be considered to be made up on number of sub process placed in

different stage called the Work Breakdown Structure (WBS).

A typical example of a work breakdown structure of a recruitment process is indicated below :

This is the technique to analyze the content of work and cost by breaking it down into its component

parts.

Project key stages form the highest level of the WBS, which is then used to show the details at the lower

levels of the project. Each key stage comprises many tasks identified at the start of planning and later this

list will have to be validated.

WBS is produced by Identifying the key elements, breaking each element down into component parts and

continuing to breakdown until manageable work packages have been identified. These can then be

allocated to the appropriate person.The WBS does not show dependencies other than a grouping under the

key stages. It is not time based- there is no timescale o the drawing.

9. Task duration

Identifying lead and lag times helps in working out task duration.

Lead time: An amount of time, which a successor task can overlap with its predecessor task, i.e. the time

before the completion of the predecessor at which the successor can start.

Lag time: An amount of time, between a predecessor and a successor task, i.e. the time after the

completion of the predecessor that the start of the successor is delayedQ.4 Describe in brief the various

phases of the quality control process.

Q.4 Describe in brief the various phases of the quality control process.

Ans.

The definition of the ISO 8204 for quality:

“Totality of characteristics of an entity that bears on its ability to satisfy stated and implied needs.”

This means that the Software product conforms to requirements defined.

Description of Phases:

Software Quality Management (SQM) describes the processes that ensure that the Software Project would

reach its goals i.e. meet the client‘s expectations.

Any phase of SDLC has its own independent stages of planning, execution, monitoring, control &

reporting. Likewise Software Quality Management has the following three categories or key phases:

1. Quality Planning

2. Quality Assurance

3. Quality Control

Quality Planning:

Quality Planning is one of the most important parts of Software Quality Management. It is the start

activity of SQM. Through proper planning we can ensure that the processes that make a product are

audited correctly to meet the overall project objective. The staring of Quality Planning process is

followed differently by different Organization. It has been described in different Quality Policy and

Documentation across various Organizations.

Other industry standards related to the Software Project can be referred to Planning phases when needed.

These act as Standard inputs for some specific projects. The Planning stage is having following inputs:-

1. Quality Policy of a Company

2. Organization Standards

3. Referencing Industry Standards

4. Regulatory compliances

5. Statement Of Work

6. Project specific Requirements

Quality planning process can ensure that standards are as per client‘s expectations. The outcomes of

Quality Planning process are as follows:-

1. Standards defined for the project

2. Quality Plan

Various tools and techniques are used to create the quality plan. Few of these tools and techniques are

briefly described in this article. Here are some over views:-

Benchmark: Deciding on the present product standards by comparing with the performances of similar

products which is already exist in the market.

Cost of Quality: The total cost of quality is a summation of prevention, appraisal and failure costs.

Design of Experiments: Statistical data can be used to determine the factors influencing the Quality of the

product.

Other tools: There are various tools used in the Planning process such as Cost Benefit Analysis, Cause

and Effect Diagrams, System Flow Charectistics.

All of the above key points aids in the formation of a Quality Management Plan for a particular project.

Quality Assurance:

Quality Plan which is created during planning is the input to Quality Assurance Process. The Assurance

stage is having the following inputs:

1. Quality Audits

2. Various Techniques used to evaluate performance of project

Quality Assurance Process helps us to ensure that the Project is following the Quality Management Plan.

The tools and techniques which are used in Planning Process such as System Flow Charectistics, Design

of Experiments, Cause and Effect Diagrams can be implemented here too, as per requirements.

Quality Control:

The next step to Quality Assurance Process is Quality Control. The Control stage is having following

inputs:

1. Quality Management Plan.

2. Quality Standards for the Project.

3. Actual Observations and Measurements of the work done or work in Progress.

The Quality Control Processes use various tools to Observe and Measure if the work done or not. If the

Work done and it is found that the deliverable is not satisfactory then it can be sent back to the

development team for fixes.

If the work done meets the requirements as defined then it is accepted and released to the clients.

Q.5 Write short note on the following Project Management tools:

a. Quality Certification

b. Strategic inflection point

c. Force field analysis

d. Information risk management

Ans.

Quality Certification

Quality certification has become extremely important in competitive markets and especially in gaining

foothold in exports. To avail the certification of ISO-9000, a unit has to undertake significant costs; the

small scale industries have been found wanting mainly on account of resource crunch to implement

quality systems to obtain this certification. However, as a paradigm shift, SSI must make ‗Quality‘ a way

of life.

It has been decided to push the quality upgradation programme in the SSI Sector in a big way.

A scheme has been launched to give financial incentive to those SSI units who acquire ISO-9000

certification, by reimbursing 75% of their costs of obtaining certification, subject to a maximum of Rs.

0.75 lacs per unit.

In order to promote modernisation and technology upgradation in SSI, the units are assisted in

improving the quality of their products.

A new scheme has been launched to assist SSI units in obtaining ISO-9000 or an equivalent international

quality standard. Subject to an upper ceiling of Rs. 075 lacs, each unit is given financial assistance equal

to 75% of the costs incurred in acquiring the quality standard.

The SSI units are also encouraged to participate in quality awareness and learning programmes organised

specially for their benefit.

Strategic inflection point

Point at which a corporation facing a new situation must alter the path it is on and adapt, or fall into

decline. The term was coined by Hungarian-born US computer entrepreneur Andy Grove, chairman of

microprocessor company Intel. Grove believes strategic inflection points occur when a company‘s

competitive position goes through a transition. The idea concerns how companies recognize and adapt to

paradigm changes. At a strategic inflection point the way a business operates, and the concept of it as a

business, undergoes a change.

Force field analysis

Force field analysis is an influential development in the field of social science. It provides a framework

for looking at the factors (forces) that influence a situation, originally social situations. It looks at forces

that are either driving movement toward a goal (helping forces) or blocking movement toward a goal

(hindering forces). The principle, developed by Kurt Lewin, is a significant contribution to the fields of

social science, psychology, social psychology, organizational development, process management, and

change management.

Lewin, a social psychologist, believed the ―field‖ to be a Gestalt psychological environment existing in an

individual‘s (or in the collective group) mind at a certain point in time that can be mathematically

described in a topological constellation of constructs. The ―field‖ is very dynamic, changing with time

and experience. When fully constructed, an individual‘s ―field‖ (Lewin used the term ―life space‖)

describes that person‘s motives, values, needs, moods, goals, anxieties, and ideals.

Lewin believed that changes of an individual‘s ―life space‖ depend upon that individual‘s internalization

of external stimuli (from the physical and social world) into the ―life space.‖ Although Lewin did not use

the word ―experiential,‖ (see experiential learning) he nonetheless believed that interaction (experience)

of the ―life space‖ with ―external stimuli‖ (at what he calls the ―boundary zone‖) were important for

development (or regression). For Lewin, development (or regression) of an individual occurs when their

―life space‖ has a ―boundary zone‖ experience with external stimuli. Note, it is not merely the experience

that causes change in the ―life space,‖ but the acceptance (internalization) of external stimuli.

Lewin took these same principles and applied them to the analysis of group conflict, learning,

adolescence, hatred, morale, German society, etc. This approach allowed him to break down common

misconceptions of these social phenomena, and to determine their basic elemental constructs. He used

theory, mathematics, and common sense to define a force field, and hence to determine the causes of

human and group behavior.

Information risk management

Information Risk Management follows information as it is created, distributed, stored, copied,

transformed and interacted with throughout its lifecycle.

Three Pillars to an Information Risk Strategy

1) Information-centric approach: Begin by understanding what information is critical to key business

initiatives, such as growth through acquisitions or expanding partnerships. Then diligently ‗follow the

data‘ to gain a more holistic view of all the places where it exists across the organization, where the

points of vulnerability are, and what events could put your business at risk.‖

2) Risk/Reward analysis: Security investments should be prioritized, based on the amount of risk a given

activity entails relative to the potential business reward, and in keeping with the organization‘s appetite

for risk.

3) Ensuring repeatability: Once enterprise information has been located and a risk assessment

performed, the next step is to implement controls — including policies, technologies, and tools — to

mitigate that risk. Here, organizations often turn to frameworks like ISO 27002 and the PCI Data Security

Standard.

Q.6 List and describe in brief the various types of review used for improving performance of a

project.

Ans. Performance Measurement

Most of us have heard some version of the standard performance measurement cliches: ―what gets

measured gets done,‖ ― if you don‘t measure results, you can‘t tell success from failure and thus you can‘t

claim or reward success or avoid unintentionally rewarding failure,‖ ― if you can‘t recognize success, you

can‘t learn from it; if you can‘t recognize failure, you can‘t correct it,‖ ―if you can‘t measure it, you can

neither manage it nor improve it,‖ but what eludes many of us is the easy path to identifying truly

strategic measurements without falling back on things that are easier to measure such as input, project or

operational process measurements.

Performance Measurement is addressed in detail in Step Five of the Nine Steps to Success®

methodology. In this step, Performance Measures are developed for each of the Strategic Objectives.

Leading and lagging measures are identified, expected targets and thresholds are established, and baseline

and benchmarking data is developed. The focus on Strategic Objectives, which should articulate exactly

what the organization is trying to accomplish, is the key to identifying truly strategic measurements.

Strategic performance measures monitor the implementation and effectiveness of an organization‘s

strategies, determine the gap between actual and targeted performance and determine organization

effectiveness and operational efficiency.

Good Performance Measurement

 Focus employees‘ attention on what matters most to success

 Allow measurement of accomplishments, not just of the work that is performed

 Provide a common language for communication

 Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality,

expected value(targets), and thresholds

 Are valid, to ensure measurement of the right things

 Are verifiable, to ensure data collection accuracy

Problems in Performance Appraisals:

 discourages teamwork

 evaluators are inconsistent or use different criteria and standards

 only valuable for very good or poor employees

 encourages employees to achieve short term goals

 managers has complete power over the employees

 too subjective

 produces emotional anguish

Solutions

 Make collaboration a criterion on which employees will be evaluated

 Provide training for managers; have the HR department look for patterns on appraisals that

suggest bias or over or under evaluation

 Rate selectively(introduce different or various criteria and disclose better performance and coach

for worst performer without disclosing the weakness of the candidate) or increase in frequency of

performance evaluation.

 Include long term and short term goals in appraisal process

 Introduce M.B.O.(Management By Objectives)

 Make criteria specific and test selectively{Evaluate specific behaviors or results}

 Focus on behaviors; do not criticize employees; conduct appraisal on time.

___________________________________________________________________

MBA/PGDBA Sem-II

Assignment Set-II

PGDBA- Semester II

MB0044 – Production & Operations Management

Q1. Explain Logical process and Physical process modeling. What are the ingredients of Business

Process?

Ans

Business Process Modeling

A process is a coordinated set of activities designed to produce a specific outcome. There are processes

for saving a file, constructing a building, and cooking a meal. In fact, there is a process for almost

everything we do. A business process is a type of process designed to achieve a particular business

objective.

Business processes consist of many components, including:

 The data needed to accomplish the desired business objective

 Individual work tasks that manipulate, review, or act upon the data in some way

 Decisions that affect the data in the process or the manner in which the process is conducted

 The movement of data between tasks in the process

 Individuals and groups which perform tasks

Processes can be manual or automated, fully documented or simply knowledge in the minds of one or

more people. They can be simple or complex. They can be formal, requiring exact adherence to all

details; or flexible, provided the desired outcome is achieved.

Logical Process Modeling

Logical Process Modeling is the representation of a business process, detailing all the activities in the

process from gathering the initial data to reaching the desired outcome. These are the kinds of activities

described in a logical process model:

 Gathering the data to be acted upon

 Controlling access to the data during the process execution

 Determining which work task in the process should be accomplished next

 Delivering the appropriate subset of the data to the corresponding work task

 Assuring that all necessary data exists and all required actions have been performed at each task

 Providing a mechanism to indicate acceptance of the results of the process, such as, electronic

―signatures‖

All business processes are made up of these actions. The most complex of processes can be broken down

into these concepts. The complexity comes in the manner in which the process activities are connected

together. Some activities may occur in sequential order, while some may be performed in parallel. There

may be circular paths in the process (a re-work loop, for example). It is likely there will be some

combination of these.

The movement of data and the decisions made determining the paths the data follow during the process

comprise the process model. The contains only business activities, uses business terminology (not

software acronyms, technical jargon, etc.…), completely describes the activities of the business area

being modeled, and is independent of any individual or position working in the organization. Like its

sibling, Logical Data Modeling, Logical Process Modeling does not include redundant activities,

technology dependent activities, physical limitations or requirements or current systems limitations or

requirements. The process model is a representation of the business view of the set of activities under

analysis.

Heretofore, many applications and systems were built without a logical process model or a rigorous

examination of the processes needed to accomplish the business goals. This resulted in applications that

did not meet the needs of the users and / or were difficult to maintain and enhance.

Problems with an unmodeled system include the following:

 Not knowing who is in possession of the data at any point in time

 Lack of control over access to the data at any point in the process

 Inability to determine quickly where in the process the data resides and how long it has been there

 Difficulties in making adjustments to a specific execution of a business process

 Inconsistent process execution

. Ingredients of Business Process

1) Time: You must understand that time is money. In business, our objective is to make money. Period.

But the question is how productively you convert your time into money. Are you making full use of your

time or you just let the time pass by you?

How much you make depends on how good you are at converting time to money. If you are already

productive, then you may want to ask what are the things you can do to

improve further the ratio of dollar/second? If you are making $0.01/second, what you can do to make it

$0.02/second? Or even more. Remember time is the most valuable asset and once it‘s gone, it‘s gone.

Also time is also the fairest distribution of resources every human being receives.

2) People: To be successful in business, you must have people connections. I mean the right people.

People consist of customers, suppliers, partners, staff, and associates.

One thing that you must not leave out is your mentor or coach. Having genuine mentors or coaches is

very important and it can make a very big difference in your business.

To make sure that you have more profits, you must serve people well. Organize your database of people

connections. By simply knowing who does what, who supplies what, who needs what, where to get what

make you miles ahead of other people. To organize your connections, you can either use a paper folder or

computer spreadsheet.

3) Knowledge and Skills: When I talk about knowledge and skills, I am not referring to academic

knowledge that you find in schools or colleges. What‘s more important to you

is knowledge and skills that can bring you results you want.

How many MBA holders that you know of have become business owners and have made tones of

money? That shows getting the right knowledge and skills is important. Don‘t blindly go after knowledge

that could drown you. Go for knowledge and skills that are universally tested and proven.

Examples of right knowledge and skills are where to get what from who, money making trends,

marketing strategies, art of dealing with people, negotiation skills, selling skills, skills of managing and

growing money, investment skills, universal laws of success, and more. Don‘t waste time on unnecessary

knowledge as I went through that before. There‘s only so much that you need to know and learn. Be sharp

and focus when you acquire knowledge and skills. Don‘t follow what normal people do.

4) Personal Health: In fact, this is the most important ingredient of all. How can you run a business

without a healthy body? In order to maintain an optimum health, you have to provide your body with

proper nutrients and sufficient exercise. And also don‘t forget about emotional well being. Don‘t let anger

and other negative emotions control you.

This is where positive and empowering attitudes come into play. Maintaining your body is just like

maintaining your car. If you send your car to workshop for regular service and pump petrol regularly,

why don‘t you do the same for your body? It‘s something for you to think about. Don‘t be stingy over

spending money for your own health because physical and mental health can cause you a lot of money in

the long run if your body is not taken care of properly.

5) Money: Let‘s face it. It does take money to make money even you need a little. But you might not need

a lot of money to start a business because there are many ways to

start one with low capital.

I meet a lot of people who want to be rich but are not willing to invest the money. You must invest in

something in order to for you to get something. The law of sowing and

reaping is at work. Don‘t expect something without investing anything. Money is one of the investments

you need to make.

Even though you don‘t need to have a capital for your business, but at least you must be able to cover

your expenses while building your business. You also need money to buy products to stock up and other

stuff. So, you must at least come up with whatever amount that you have to start a business.

These are the five basic ingredients of business success. Do your best to acquire or grow or invest in these

ingredients. But the good thing is you don‘t need to have a perfect combination of ingredients to get

started. You can still perfect the ingredients along the way. Somehow, get it started with what you‘ve got.

Article Source: http://EzineArticles.com/24925

Q2. Explain Project Management knowledge areas. With an example explain work Breakdown

Structure.

Ans.

The Project management knowledge areas are described in the following.

Project integration management describes the processes and activities needed to identify, define,

combine, unify and coordinate the various project management elements within the project management

process groups. The project management processes are develop project charter, develop preliminary

project scope statement, develop project management plan, direct and manage project execution, monitor

and control project work, integrated change control and close project.

Project scope management describes the processes needed to ensure that the project includes all the work

required – and only the work required – to complete the project successfully. The project management

processes are plan scope, define scope, create work breakdown structure, verify scope and control scope.

Project time management describes the processes required to ensure on-time project completion. The

project management processes are define project activities, sequence activities, estimate activity

resources, estimate activity duration and develop and control project schedule.

Project cost management describes the processes involved in planning, estimating, budgeting and

controlling costs to ensure that the project is completed within the approved budget. The project

management processes are cost estimating, cost budgeting and cost control.

Project quality management describes the processes involved in assuring that the project will satisfy the

objectives for which it was undertaken. The project management processes are quality planning, perform

quality assurance and perform quality control.

Project human resource management describes the processes that organise and manage the project team.

The project management processes are human resource planning, acquire project team, develop project

team and manage project team.

Project communications management describes the processes concerning the timely and appropriate

generation, collection, dissemination, storage and ultimate disposition of project information. The project

management processes are communications planning, information distribution, performance reporting

and manage stakeholders.

Project risk management describes the processes concerned with conducting risk management on a

project. The project management processes are risk management planning, risk identification, qualitative

risk analysis, quantitative risk analysis, risk response planning and risk monitoring and control.

Project procurement management describes the processes that purchase or acquire products, services or

results as well as contract management processes. The project management processes are plan purchases

and acquisitions, plan contracting, request seller responses, select sellers, contract administration and

contract closure.

Work Breakdown Structure

A work breakdown structure (WBS) in project management and systems engineering, is a tool used to

define and group a project‗s discrete work elements in a way that helps organize and define the total work

scope of the project.[1]

A work breakdown structure element may be a product, data, a service, or any combination. A WBS also

provides the necessary framework for detailed cost estimating and control along with providing guidance

for schedule development and control. Additionally the WBS is a dynamic tool and can be revised and

updated as needed by the project manager.

Example of a product oriented work breakdown structure of an aircraft system

Q3.Take an example of any product or project and explain Project Management Life Cycle.

In industry, product lifecycle management (PLM) is the process of managing the entire lifecycle of a

product from its conception, through design and manufacture, to service and disposal.[1] PLM integrates

people, data, processes and business systems and provides a product information backbone for companies

and their extended enterprise.[2]

‗Product lifecycle management‘ (PLM) should be distinguished from ‗Product life cycle management

(marketing)‗ (PLCM). PLM describes the engineering aspect of a product, from managing descriptions

and properties of a product through its development and useful life; whereas, PLCM refers to the

commercial management of life of a product in the business market with respect to costs and sales

measures.

Product lifecycle management is one of the four cornerstones of a corporation‘s information technology

structure.[3] All companies need to manage communications and information with their customers (CRM-

Customer Relationship Management), their suppliers (SCM-Supply Chain Management), their resources

within the enterprise (ERP-Enterprise Resource Planning) and their planning (SDLC-Systems

Development Life Cycle). In addition, manufacturing engineering companies must also develop, describe,

manage and communicate information about their products.

One form of PLM is called people-centric PLM. While traditional PLM tools have been deployed only on

release or during the release phase, people-centric PLM targets the design phase.

Example

Recent (as of 2009) ICT development (EU funded PROMISE project 2004-2008) has allowed PLM to

extend beyond traditional PLM and integrate sensor data and real time ‗lifecycle event data‘ into PLM, as

well as allowing this information to be made available to different players in the total lifecycle of an

individual product (closing the information loop). This has resulted in the extension of PLM into Closed

Loop Lifecycle Management

Benefits

Documented benefits of product lifecycle management include:[4][5]

 Reduced time to market

 Improved product quality

 Reduced prototyping costs

 More accurate and timely Request For Quote generation

 Ability to quickly identify potential sales opportunities and revenue contributions

 Savings through the re-use of original data

 A framework for product optimization

 Reduced waste

 Savings through the complete integration of engineering workflows

 Documentation that can assist in proving Compliance for RoHS or Title 21 CFR Part 11

 Ability to provide Contract Manufacturers with access to a centralized product record

Q4. Explain PIMS. What is the difference between key Success Factor (KSF) and Knowledge (K)

Factor? Explain with example.

Ans. Project Management Information System (PMIS) are system tools and techniques used in project

management to deliver information. Project managers use the techniques and tools to collect, combine

and distribute information through electronic and manual means. Project Management Information

System (PMIS) is used by upper and lower management to communicate with each other.

Project Management Information System (PMIS) help plan, execute and close project management goals.

During the planning process, project managers use PMIS for budget framework such as estimating costs.

The Project Management Information System is also used to create a specific schedule and define the

scope baseline. At the execution of the project management goals, the project management team collects

information into one database. The PMIS is used to compare the baseline with the actual accomplishment

of each activity, manage materials, collect financial data, and keep a record for reporting purposes.

During the close of the project, the Project Management Information System is used to review the goals

to check if the tasks were accomplished. Then, it is used to create a final report of the project close.

To conclude, the project management information system (PMIS) is used to plan schedules, budget and

execute work to be accomplished in project management

Key Success Factors

Definition: The factors that are a necessary condition for success in a given market.

 When writing a business plan, it‘s crucial to identify what will make your business a success.

Think of key success factors as the small towns you must pass through to reach your destination.

If you don‘t consult a map to found out where those towns are, you may miss a turnoff and your

destination. Key success factors, also known as critical success factors, keep you and your

employees on track to make your business a success.

 Increasing the sales of a product or service is a common key success factor, but it should be linked

to a measurable goal, such as ―sales of product X will increase by 30 percent in the fourth

quarter.‖ Measuring the outcome of the goals related to your key success factors is essential to

keeping your business on target.

 Almost all businesses can benefit from having the key success factor ―attract new customers.‖

Decide how many new customers your business needs to succeed, and set a related goal, such as

―increase walk-in traffic by 25 percent by offering samples at the door.‖ Other examples of

common key success factors are, ―retain quality employees,‖ ―increase profit margin‖ and

―increase customer satisfaction.‖

 Some businesses are subject to more regulation than others. Manufacturing facilities must comply

with OSHA regulations, and they may want to develop a key success factor that addresses the

company‘s compliance. For example, ―Provide all employees with hazardous material training.‖

 Key success factors should always be relevant to the business you are in. An example of an

industry specific key success factor is ―increase load factor relative to the industry average.‖ This

key success factor is specific to the airline industry, as referenced in ―Airline Industry Key

Success Factors‖ in the Graziadio Business Report. Fleet management is essential to airlines,

limousine companies and taxi services, but it‘s not relevant to the development of computer

games.

 The key success factor ―Build a manufacturing facility to produce 80 percent of inventory‖ is an

example of what RapidBi.com calls temporal factors. According to the web site, temporal factors

―relate to short-term situations, often crises. These CSF‘s may be important, but are usually short-

lived.‖ In this example, once the manufacturing facility is constructed and operational, the key

success factor is no longer needed and can be replaced by a currently relevant one.

Measurable Key Success Factors

General Key Success Factors

Regulatory Key Success Factors

Industry Specific Key Success Factors

Temporal Key Success Factors

Knowledge factor

India may be a brain bank to the world. but it doesn‘t help if other countries cash in on this more

frequently than india itself. The state of Indian higher education is the weak link in this chain it‘s the

reason why Indians spend $3 billion annually seeking education abroad.

Those who study abroad tend to stay on abroad, while according to a NASSCOM-Mckinsey estimate only

10-25 per cent of those earning a college degree in India are employable.

Now the National Knowledge Commission (NKC) has written to the prime minister stating that raising

the number of indian universities from 350 to 1,500 is critical if India‘s growth is to be sustained.

As NKC Chairman Sam Pitroda notes, only 7 per cent of India‘s population aged 18-24 enters higher

education, which is half the Asian average. China has created 1,250 new universities within just the last

three years.

India‘s percentage of youth enrolled in college has to be brought up to at least asian levels while at the

same time enhancing academic standards.

The only way such a sweeping revamp can be carried out is if today‘s centrally managed education

mono-polies are dismantled, and education is depoliticised and debureaucratised.

Q5. Explain the seven principles of supply chain management. Take an example of any product in

the market and explain the scenario of Bullwhip effect.

Ans. There is many steps which involved in SCM implementation are- Business Process, sales and

marketing. Logistics, costing, demand planning, trade- off analysis, environmental requirement, process

stability, integrated supply, supplier management, product design, suppiers, customers, material

specifications, etc.

Some important aspect of SCM-

The level of competition existing in the market and the impact of competitive forces on the product

development.

Designing and working on a strategic logic for better growth through value invention. Working out new

value curve in the product development along with necessary break point.

Using it to analyses markets and the economies in product design. Tine, customer, quality of product and

the concept of survival of fittest.

Steps of SCM principals:

Group customer by need: Effective SCM groups, customer by tietinct service meeds those particular

segment.

Customize the logistics networks: In designing their logistics network, companies need to focus on the

service requirement and profit potential of the customer segments identified.

Listen to signals of market demand and plan accordingly- sales and operations planners must monitor the

entire supply chain to detect early warning signals of changing customer demand and needs.

Differentiate the product closer to the customer-companies today no longer can afford to stock pile

inventory to compensate for possible forecasting errors, instead, they need to postpone product

differentiation in the manufacturing. Process closer to actual customer demand.

Strategically manage the source of supply-by working closely with their key suppliers to reduce the

overall casts of owning materials and services; SCM maximizes profit margins both for themselves, and

their supplies.

Develop a supply chain wide technology strategy- as one of the cornerstones of successful SCM

information technology must be able to support multiple levels of decision making.

Adopt channel spanning performance measures- Excellent supply performance measurement systems do

more than just monitor internal functions. They apply performance criteria that embrace bathe service and

financial metrics, including as such as each accounts true profitability.

PGDBA- Semester II

MB0045 – Financial Management

Q1. Discuss the objective of profit maximization vs wealth maximization

Ans. The financial management come a long way by shifting its focus from traditional approach to

modern approach. The modern approach focuses on wealth maximization rather than profit maximization.

This gives a longer term horizon for assessment, making way for sustainable performance by businesses.

A myopic person or business is mostly concerned about short term benefits. A short term horizon can

fulfill objective of earning profit but may not help in creating wealth. It is because wealth creation needs a

longer term horizon Therefore, Finance Management or Financial Management emphasizes on wealth

maximization rather than profit maximization. For a business, it is not necessary that profit should be the

only objective; it may concentrate on various other aspects like increasing sales, capturing more market

share etc, which will take care of profitability. So, we can say that profit maximization is a subset of

wealth and being a subset, it will facilitate wealth creation.

Giving priority to value creation, managers have now shifted from traditional approach to modern

approach of financial management that focuses on wealth maximization. This leads to better and true

evaluation of business. For e.g., under wealth maximization, more importance is given to cash flows

rather than profitability. As it is said that profit is a relative term, it can be a figure in some currency, it

can be in percentage etc. For e.g. a profit of say $10,000 cannot be judged as good or bad for a business,

till it is compared with investment, sales etc. Similarly, duration of earning the profit is also important i.e.

whether it is earned in short term or long term.

In wealth maximization, major emphasizes is on cash flows rather than profit. So, to evaluate various

alternatives for decision making, cash flows are taken under consideration. For e.g. to measure the worth

of a project, criteria like:

―present value of its cash inflow – present value of cash outflows‖ (net present value) is taken. This

approach considers cash flows rather than profits into consideration and also use discounting technique to

find out worth of a project. Thus, maximization of wealth approach believes that money has time value.

An obvious question that arises now is that how can we measure wealth. Well, a basic principle is that

ultimately wealth maximization should be discovered in increased net worth or value of business. So, to

measure the same, value of business is said to be a function of two factors – earnings per share and

capitalization rate. And it can be measured by adopting following relation:

Value of business = EPS / Capitalization rate

At times, wealth maximization may create conflict, known as agency problem. This describes conflict

between the owners and managers of firm. As, managers are the agents appointed by owners, a strategic

investor or the owner of the firm would be majorly concerned about the longer term performance of the

business that can lead to maximization of shareholder‘s wealth. Whereas, a manager might focus on

taking such decisions that can bring quick result, so that he/she can get credit for good performance.

However, in course of fulfilling the same, a manager might opt for risky decisions which can put on stake

the owner‘s objectives.

Hence, a manager should align his/her objective to broad objective of organization and achieve a tradeoff

between risk and return while making decision; keeping in mind the ultimate goal of financial

management i.e. to maximize the wealth of its current shareholders.

Q2. Explain the Net operating approach to capital structure.

Ans. net operating income approach examines the effects of changes in capital structure in terms of net

operating income. In the net income approach discussed above net income available to shareholders is

obtained by deducting interest on debentures form net operating income. Then overall value of the firm is

calculated through capitalization rate of equities obtained on the basis of net operating income, it is called

net income approach. In the second approach, on the other hand overall value of the firm is assessed on

the basis of net operating income not on the basis of net income. Hence this second approach is known as

net operating income approach.

The NOI approach implies that (i) whatever may be the change in capital structure the overall value of the

firm is not affected. Thus the overall value of the firm is independent of the degree of leverage in capital

structure. (ii) Similarly the overall cost of capital is not affected by any change in the degree of leverage

in capital structure. The overall cost of capital is independent of leverage.

If the cost of debt is less than that of equity capital the overall cost of capital must decrease with the

increase in debts whereas it is assumed under this method that overall cost of capital is unaffected and

hence it remains constant irrespective of the change in the ratio of debts to equity capital. How can this

assumption be justified? The advocates of this method are of the opinion that the degree of risk of

business increases with the increase in the amount of debts. Consequently the rate of equity over

investment in equity shares thus on the one hand cost of capital decreases with the increase in the volume

of debts; on the other hand cost of equity capital increases to the same extent. Hence the benefit of

leverage is wiped out and overall cost of capital remains at the same level as before. Let us illustrate this

point.

If follows that with the increase in debts rate of equity capitalization also increases and consequently the

overall cost of capital remains constant; it does not decline.

To put the same in other words there are two parts of the cost of capital. One is the explicit cost which is

expressed in terms of interest charges on debentures. The other is implicit cost which refers to the

increase in the rate of equity capitalization resulting from the increase in risk of business due to higher

level of debts.

Optimum capital structure

This approach suggests that whatever may be the degree of leverage the market value of the firm remains

constant. In spite of the change in the ratio of debts to equity the market value of its equity shares remains

constant. This means there does not exist a optimum capital structure. Every capital structure is optimum

according to net operating income approach.

Q.3 What do you understand by operating cycle.

Ans. An operating cycle is the length of time between the acquisition of inventory and the sale of that

inventory and subsequent generation of a profit. The shorter the operating cycle, the faster a business gets

a return on investment (ROI) for the inventory it stocks. As a general rule, companies want to keep their

operating cycles short for a number of reasons, but in certain industries, a long operating cycle is actually

the norm. Operating cycles are not tied to accounting periods, but are rather calculated in terms of how

long goods sit in inventory before sale.

When a business buys inventory, it ties up money in the inventory until it can be sold. This money may be

borrowed or paid up front, but in either case, once the business has purchased inventory, those funds are

not available for other uses. The business views this as an acceptable tradeoff because the inventory is an

investment that will hopefully generate returns, but keeping the operating cycle short is still a goal for

most businesses so they can keep their liquidity high.

Keeping inventory during a long operating cycle does not just tie up funds. Inventory must be stored and

this can become costly, especially with items that require special handling, such as humidity controls or

security. Furthermore, inventory can depreciate if it is kept in a store too long. In the case of perishable

goods, it can even be rendered unsaleable. Inventory must also be insured and managed by staff members

who need to be paid, and this adds to overall operating expenses.

There are cases where a long operating cycle in unavoidable. Wineries and distilleries, for example, keep

inventory on hand for years before it is sold, because of the nature of the business. In these industries, the

return on investment happens in the long term, rather than the short term. Such companies are usually

structured in a way that allows them to borrow against existing inventory or land if funds are needed to

finance short-term operations.

Operating cycles can fluctuate. During periods of economic stagnation, inventory tends to sit around

longer, while periods of growth may be marked by more rapid turnover. Certain products can be

consistent sellers that move in and out of inventory quickly. Others, like big ticket items, may be

purchased less frequently. All of these issues must be accounted for when making decisions about

ordering and pricing items for inventory.

Q.4 What is the implication of operating leverage for a firm.

Ans.

Operating leverage: Operating leverage is the extent to which a firm uses fixed costs in producing its

goods or offering its services. Fixed costs include advertising expenses, administrative costs, equipment

and technology, depreciation, and taxes, but not interest on debt, which is part of financial leverage. By

using fixed production costs, a company can increase its profits. If a company has a large percentage of

fixed costs, it has a high degree of operating leverage. Automated and high-tech companies, utility

companies, and airlines generally have high degrees of operating leverage.

As an illustration of operating leverage, assume two firms, A and B, produce and sell widgets. Firm A

uses a highly automated production process with robotic machines, whereas firm B assembles the widgets

using primarily semiskilled labor. Table 1 shows both firm‘s operating cost structures.

Highly automated firm A has fixed costs of $35,000 per year and variable costs of only $1.00 per unit,

whereas labor-intensive firm B has fixed costs of only $15,000 per year, but its variable cost per unit is

much higher at $3.00 per unit. Both firms produce and sell 10,000 widgets per year at a price of $5.00 per

widget.

Firm A has a higher amount of operating leverage because of its higher fixed costs, but firm A also has a

higher breakeven point—the point at which total costs equal total sales. Nevertheless, a change of I

percent in sales causes more than a I percent change in operating profits for firm A, but not for firm B.

The ―degree of operating leverage‖ measures this effect. The following simplified equation demonstrates

the type of equation used to compute the degree of operating leverage, although to calculate this figure

the equation would require several additional factors such as the quantity produced, variable cost per unit,

and the price per unit, which are used to determine changes in profits and sales:

Operating leverage is a double-edged sword, however. If firm A‘s sales decrease by I percent, its profits

will decrease by more than I percent, too. Hence, the degree of operating leverage shows the

responsiveness of profits to a given change in sales.

Implications: Total risk can be divided into two parts: business risk and financial risk. Business risk

refers to the stability of a company‘s assets if it uses no debt or preferred stock financing. Business risk

stems from the unpredictable nature of doing business, i.e., the unpredictability of consumer demand for

products and services. As a result, it also involves the uncertainty of long-term profitability. When a

company uses debt or preferred stock financing, additional risk—financial risk—is placed on the

company‘s common shareholders. They demand a higher expected return for assuming this additional

risk, which in turn, raises a company‘s costs. Consequently, companies with high degrees of business risk

tend to be financed with relatively low amounts of debt. The opposite also holds: companies with low

amounts of business risk can afford to use more debt financing while keeping total risk at tolerable levels.

Moreover, using debt as leverage is a successful tool during periods of inflation. Debt fails, however, to

provide leverage during periods of deflation, such as the period during the late 1990s brought on by the

Asian financial crisis.

____________________________________________________________________

PGDBA-Semester II

MB0046 – Marketing Management

Q.1 What is product mix? What are the strategies involved in product mix and product line?

Ans.

The product mix of a business includes product lines and individual products. A product line is a set of

products in the product mix that are closely interrelated either because they serve in a similar way, sold to

the similar client groups or have same price range. A product is a unique component in the product line

that is different in size, cost, look, or some other attribute. Product choices at these levels are normally of

2 sorts: Those that have variety and range of the product line and those that are modified in the product

mix occur over time.

Product Mix is the total number of product choices a company offers their customer. If you make

muffins, and you offer Blueberry and Cranberry, your product mix has 2 choices. The product mix grows

as the number of features on the product grows. A true evaluation of the mix can ONLY be done with a

feature/option level analysis. That is because customers buy features and options. The strength of the

mix is based on how well the feature choices are capturing sales and market demand.

Strategies involved in Product Mix and Product Line

When the product is a part of product-mix, there are five kinds of strategies involved:

I. Product Line Pricing In product line pricing, management must decide on the price steps to set between

various products in a line. This should take into account the differences in products features, customer

evaluations, competitor‘s prices etc.

II. Optional-Product Pricing The pricing of optional or accessory products along with the main product.

For example, a car buyer may choose to order a CD changer as an optional product.

III. Captive-Product Pricing Setting a price for products which must be used along with the main product.

For example, HP makes printers and cartridges. It makes very low margins on its printer (the main

product) but very high margins on cartridges .

IV. By-Product Pricing Setting a price for the by-products. Like in processing meats, petroleum products,

chemicals etc. Using by-product pricing, the manufacturer will find a market for the by-products and

should accept any price that covers more than the cost of storing and delivering them. For example, at

Alba, water is obtained as a by-product while manufacturing aluminum. This water can now be sold to

the market.

V. Product Bundle Pricing Combining several products and offering the bundle at a reduced price. For

example, fast food restaurants bundle a burger, French fires and soft drink at a combo price.

Q.2 What is a distribution channel? Explain the factors to be considered while setting up a

distribution channel

Ans. Distribution channel

Definition: Path or ‗pipeline‗ through which goods and services flow in one direction (from vendor to the

consumer), and the payments generated by them flow in the opposite direction (from consumer to the

vendor). A distribution channel can be as short as being direct from the vendor to the consumer or may

include several inter-connected (usually independent but mutually dependent) intermediaries such as

wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and

moves it to the next higher pricing point until it reaches the final buyer. Also called channel of

distribution or marketing channel.

Channel of Distributions

A channel of distribution or trade channel is defined as the path or route along which goods move from

producers or manufacturers to ultimate consumers or industrial users. In other words, it is a distribution

network through which producer puts his products in the market and passes it to the actual users. This

channel consists of :- producers, consumers or users and the various middlemen like wholesalers, selling

agents and retailers(dealers) who intervene between the producers and consumers. Therefore, the channel

serves to bridge the gap between the point of production and the point of consumption thereby creating

time, place and possession utilities.

A channel of distribution consists of three types of flows:-

 Downward flow of goods from producers to consumers

 Upward flow of cash payments for goods from consumers to producers

 Flow of marketing information in both downward and upward direction i.e. Flow of information

on new products, new uses of existing products,etc from producers to consumers. And flow of

information in the form of feedback on the wants,suggestions,complaints,etc from

consumers/users to producers.

An entrepreneur has a number of alternative channels available to him for distributing his products. These

channels vary in the number and types of middlemen involved. Some channels are short and directly link

producers with customers. Whereas other channels are long and indirectly link the two through one or

more middlemen.

These channels of distribution are broadly divided into four types:-

 Producer-Customer:- This is the simplest and shortest channel in which no middlemen is

involved and producers directly sell their products to the consumers. It is fast and economical

channel of distribution. Under it, the producer or entrepreneur performs all the marketing

activities himself and has full control over distribution. A producer may sell directly to consumers

through door-to-door salesmen, direct mail or through his own retail stores. Big firms adopt this

channel to cut distribution costs and to sell industrial products of high value. Small producers and

producers of perishable commodities also sell directly to local consumers.

 Producer-Retailer-Customer:- This channel of distribution involves only one middlemen called

‗retailer‘. Under it, the producer sells his product to big retailers (or retailers who buy goods in

large quantities) who in turn sell to the ultimate consumers.This channel relieves the manufacturer

from burden of selling the goods himself and at the same time gives him control over the process

of distribution. This is often suited for distribution of consumer durables and products of high

value.

 Producer-Wholesaler-Retailer-Customer:- This is the most common and traditional channel of

distribution. Under it, two middlemen i.e. wholesalers and retailers are involved. Here, the

producer sells his product to wholesalers, who in turn sell it to retailers. And retailers finally sell

the product to the ultimate consumers. This channel is suitable for the producers having limited

finance, narrow product line and who needed expert services and promotional support of

wholesalers. This is mostly used for the products with widely scattered market.

 Producer-Agent-Wholesaler-Retailer-Customer:- This is the longest channel of distribution in

which three middlemen are involved. This is used when the producer wants to be fully relieved of

the problem of distribution and thus hands over his entire output to the selling agents. The agents

distribute the product among a few wholesalers. Each wholesaler distribute the product among a

number of retailers who finally sell it to the ultimate consumers. This channel is suitable for wider

distribution of various industrial products.

An entrepreneur has to choose a suitable channel of distribution for his product such that the channel

chosen is flexible,effective and consistent with the declared marketing policies and programmes of the

firm. While selecting a distribution channel, the entrepreneur should compare the costs,sales volume and

profits expected from alternative channels of distribution and take into account the following factors:-

 Product Consideration:- The type and the nature of products manufactured is one of the

important elements in choosing the distribution channel. The major product related factors are:-

 Products of low unit value and of common use are generally sold through middlemen.

Whereas,expensive consumer goods and industrial products are sold directly by the

producer himself.

 Perishable products; products subjected to frequent changes in fashion or style as well as

heavy and bulky products follow relatively shorter routes and are generally distributed

directly to minimise costs.

 Industrial products requiring demonstration, installation and aftersale service are often sold

directly to the consumers. While the consumer products of technical nature are generally

sold through retailers.

 An entrepreneur producing a wide range of products may find it economical to set up his

own retail outlets and sell directly to the consumers. On the other hand, firms producing a

narrow range of products may their products distribute through wholesalers and retailers.

 A new product needs greater promotional efforts in the initial stages and hence few

middlemen may be required.

 Market Consideration:- Another important factor influencing the choice of distribution channel

is the nature of the target market. Some of the important features in this respect are:-

 If the market for the product is meant for industrial users, the channel of distribution will

not need any middlemen because they buy the product in large quantities. short one and

may as they buy in a large quantity. While in the case of the goods meant for domestic

consumers, middlemen may have to be involved.

 If the number of prospective customers is small or the market for the product is

geographically located in a limited area, direct selling is more suitable. While in case of a

large number of potential customers, use of middlemen becomes necessary.

 If the customers place order for the product in big lots, direct selling is preferred. But,if the

product is sold in small quantities, middlemen are used to distribute such products.

 Other Considerations:- There are several other factors that an entrepreneur must take into

account while choosing a distribution channel. Some of these are as follows:-

 A new business firm may need to involve one or more middlemen in order to promote its

product, while a well established firm with a good market standing may sell its product

directly to the consumers.

 A small firm which cannot invest in setting up its own distribution network has to depend

on middlemen for selling its product. On the other hand, a large firm can establish its own

retail outlets.

 The distribution costs of each channel is also an important factor because it affects the

price of the final product. Generally,a less expensive channel is preferred. But sometimes,

a channel which is more convenient to the customers is preferred even if it is more

expensive.

 If the demand for the product is high,more number of channels may be used to profitably

distribute the product to maximum number of customers. But, if the demand is low only a

few channels would be sufficient.

 The nature and the type of the middlemen required by the firm and its availability also

affects the choice of the distribution channel. A company prefers a middlemen who can

maximise the volume of sales of their product and also offers other services like storage,

promotion as well as aftersale services. When the desired type of middlemen are not

available, the manufacturer will have to establish his own distribution network.

All these factors or considerations affecting the choice of a distribution channel are inter-related and

interdependent. Hence, an entrepreneur must choose the most efficient and cost effective channel of

distribution by taking into account all these factors as a whole in the light of the prevailing economic

conditions. Such a decision is very important for a business to sustain long term profitability.

Q.3 Discuss the communication development process with examples.

Ans. Everyone communicates. Some better than others. Understanding the communication process can

help improve communication at home, at work and with friends.

Communication seems so natural and one generally assumes that there is no need of working on it. It is so

untrue. Most fights or arguments with spouses, children or friends are the result of bad communication.

How much of an argument is caused by ineffective communication? How much of what is said is taken in

the wrong context? How much of the meaning was changed or lost? How much was totally

misunderstood or came out wrong? All of those are examples of broken communication.

Development Communication designs communication strategies for development projects and reform

programs, economic and sector work, Country Assistance Strategies and Poverty Reduction Strategies.

Building on the communication audit, which provides an understanding of the social, cultural and

political nuances and assessment of local communication capacity, the Development Communication

division works with task teams and government counterparts to prepare communication strategies with

the objective of promoting constituencies for support and putting in place a transparent and inclusive

development process.

This involves:

 segmenting audiences based on their positions,

 framing the issues,

 preparing appropriate messages to mobilize support and address the right

concerns,

 finding the most effective mix of channels to reach audiences,

 creating communication capacity on the ground to implement the process,

 building consensus, and

 designing mechanisms for supervision and evaluation.

Development Communication is creating a repository of knowledge based on its own experience and

international best practices in development communications. This intellectual base of Development

Communication operational and capacity building work is continually updated and customized to meet

country-specific needs. The division also maintains a database of communication professionals around

the world and their market costs so their expertise can be harnessed when needed.

Q.4. Select any mobile handset and mobile company and then evaluate its positioning strengths or

weakness in terms of attributes, benefits, values, brand name and brand equity.

Ans. Strength or Weakness of HTC Mobile Handset

Introduction

HTC is one of the leading manufacturers of PDAs and smart phones around the world. It is one of the

fastest growing companies in the world and maximizing its market share rapidly.

SWOT Analysis

SWOT is the tool to see that where organization stands, which areas required improvement, which areas

required serious consideration, which would be the source of growth, which things need avoidance and so

on. The SWOT of HTC will help to understand the position of HTC in the market.

Strengths

It is the leading maker of PDAs smart phones in the world. It is establishing in the world rapidly and

attracting more and more customers from all around the world.

It has successfully recognized its brand name and has got the good image about the product quality. Its

products are considered as reliable products and its gaining more and more success rapidly.

The research and development in HTC has been given more importance as it is the way to know what

customers want.

There is the strong set up of research and development in HTC.

The portfolio of HTC is quite wide it has made 42 smart phones product up till now.

The customer base of HTC is also very wide as it caters the customer national and international both and

the no. of customers also increasing as the time passes.

Weaknesses

As its weakness, HTC is not a very much recognized brand in the market. Its competitors, which are

Nokia, Blackberry, Apple etc. are way much popular and have acquired a big share of market.

Another weakness is that, they got a very small range of cell phones models as compared to their

competitor, Nokia, which has got a huge variety of smart phones, from cheapest to most expensive one.

Opportunities

HTC is providing Touch Screen Cell Phones, which are very much in demand these days, most of the

people, who use expensive cell phones, goes for Touch Screen. On the other side, Since HTC

collaborated with Google and launched their cell phones with Google Android OS install in it, their

market also got increased. It is also said that, because of the name of Google, HTC got popularity. Google

popularity plays a huge role in the success of HTC.

3G technology has been launched all over the world, and is getting launched in other countries as well.

Since HTC cell phones have got 3G technology support, so it is an opportunity for HTC company that

where ever the 3G technology launches, HTC‘s cell phones demands would raise their.

Threats

The major threat to HTC, or any other Smartphone company, is a very much popular and highly in-

demand brand, Apple iPhone. It is a big hindrance in the demand of HTC cell phones.

Apart from that, the financial crunch could also be the threat for the company. That‘s because HTC smart

phones are expensive and are not affordable for many of the smart phones users. On the other side

Nokia‘s smart phones are way cheaper, and are providing the same characteristics, which a Smartphone

should have. So lot of people prefers Nokia on HTC.

Q. 5 What is retailing? Explain the functions and different types of retailing with its key features.

Ans.

Retailing involves selling products and services to consumers for their personal or family use.

Department stores, like Burdines and Macy‘s, discount stores like Wal-Mart and K-Mart, and specialty

stores like The Gap, Zales Jewelers and Toys ‗R‘ Us, are all examples of retail stores. Service providers,

like dentists, hotels and hair salons, and on-line stores, like Amazon.com, are also retailers.

Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and

consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a

channel of communication, storage, advertising and certain additional services.

Sorting

Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a

few buyers to redu7ce costs. Final consumers, in contrast, prefer a large variety of goods and services to

choose from and usually buy them in small quantities. Retailers are able to balance the demands of both

sides, by collection an assortment of goods from different sources, buying them in sufficiently large

quantities and selling them to consumers in small units.

The above process is referred to as the sorting process. Through this process, retailers undertake activities

and perform functions that add to the value of the products and services sold to the consumer.

Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are

able to choose from a wide range of designs, sizes and brands from just one location. If each

manufacturer had a separate store for its own products, customers would have to visit several stores to

complete their shopping. While all retailers offer an assortment, they specialize in types of assortment

offered and the market to which the offering is made. Westside provides clothing and accessories, while a

chain like Nilgiris specializes in food and bakery items. Shoppers‘ Stop targets the elite urban class, while

Pantaloons is targeted at the middle class.

Breaking Bulk

Breaking bulk is another function performed by retailing. The word retailing is derived from the French

word retailer, meaning ‗to cut a piece off‘. To reduce transportation costs, manufacturers and wholesalers

typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities

to meet individual consumption needs.

Holding Stock

Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory

that allows for instant availability of the product to the consumers. It helps to keep prices stable and

enables the manufacturer to regulate production. Consumers can keep a small stock of products at home

as they know that this can be replenished by the retailer and can save on inventory carrying costs.

Additional Services

Retailers ease the change in ownership of merchandise by providing services that make it convenient to

buy and use products. Providing product guarantees, after-sales service and dealing with consumer

complaints are some of the services that add value to the actual product at the retailers‘ end. Retailers also

offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for

it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed

by retailers to answer queries and provide additional information about the displayed products. The

display itself allows the consumer to see and test products before actual purchase. Retail essentially

completes transactions with customers.

Channel of Communication

Retailers also act as the channel of communication and information between the wholesalers or suppliers

and the consumers. From advertisements, salespeople and display, shoppers learn about the

characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales

forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or

unsatisfactory merchandise and services.

Transport and Advertising Functions

Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-

payment of merchandise. This also works the other way round in case the number of retailers is small.

The number of functions performed by a particular retailer has a direct relation to the percentage and

volume of sales needed to cover both their costs and profits.

Q. 6 a. What is CRM? What are its objectives? (2 marks)

b. Write a short note on Brand development. (8 marks)

Ans. CRM stands for Customer Relationship Management. It is a process or methodology used to

learn more about customers‘ needs and behaviors in order to develop stronger relationships with them.

There are many technological components to CRM, but thinking about CRM in primarily technological

terms is a mistake. The more useful way to think about CRM is as a process that will help bring together

lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market

trends.

CRM helps businesses use technology and human resources to gain insight into the behavior of

customers and the value of those customers.

Objectives of CRM

CRM, the technology, along with human resources of the company, enables the company to analyze the

behavior of customers and their value. The main areas of focus are as the name suggests: customer ,

relationship , and the management of relationship and the main objectives to implement CRM in the

business strategy are:

 To simplify marketing and sales process

 To make call centers more efficient

 To provide better customer service

 To discover new customers and increase customer revenue

 To cross sell products more effectively

The CRM processes should fully support the basic steps of customer life cycle . The basic steps are:

 Attracting present and new customers

 Acquiring new customers

 Serving the customers

 Finally, retaining the customers

Brand development

A plan to improve the performance of a particular product or service. For example, as part of brand

development a firm may initiate a new advertising campaign that includes free samples.

____________________________________________________________________

PGDBA Semester II

MB0047 – Management Information Systems

Q1. How hardware & software support in various MIS activities of the organization? Explain the

transaction stages from manual system to automated systems?

Ans. Generally hardware in the form of personal computers and peripherals like printers, fax, machines,

copier, scanners etc are used in organization to support various MIS activities of the organization.

Computers are widely used to support in MIS activities. Some of the types commonly used in business

are desktop computer, notebook computer, PDA etc.

Advantage of PC in Organization for MIS activities

Speed: A PC can process data at a very high speed. It can process millions of instructions within fractions

of seconds.

Storage: A PC can store large amount of data in a small space. Information can easily transform from

one place to another place.

Communication: PC with internet is used as a powerful tool of communication for every business

activity.

Accuracy: A PC is highly reliable in the sense that it could be used to perform calculations continuously

for hours with a great degree of accuracy.

Conferencing: A PC with internet offers facility of video conferencing worldwide. Business people

across the globe travel a lot to meet their business partner, colleague and customer etc to discuss about

business activities.

Software support in MIS activities

MS-Windows: Windows is an operating system. It supports various applications like MS-Office, Lotus

Smart Suite, Outlook etc.

MS-Excel: It is used to make charts, graphs, pivot tables and MIS reports etc.

MS-WORD: It is used for letter drafting.

MS-Power Point: Power point is used for presentation

Q2. Explain the various behavioral factors of management organization? As per Porter, how can

performance of individual corporations be determined?

Ans. The value of Information is not present day discovery. We have always observed that the

Information is the asset of any organization. The existence of information is since the Big bang happened

and then on it went on. But the value of information is being used only after the industrial revolution.

Before, it was only in the record which we are using now in an efficient way. The first information was

binary. Information is generated by interactions; information is

by interaction, as without comparison, without a context, without interaction, there is nothing.

Traditional information systems are said to contain data, which is then processed. The processed data is

called information. The processing of data takes place by selecting the required fact and organizing it in a

way to form meaningful information which is used for some organizational needs.

In Manual systems, a series of action takes which may be similar as well as different to

processing in traditional systems. For instance, in hospital information systems the patient details

can be viewed by the administrator as well as patient. But the views perceived by these are

different. One may view it as a record to take print and other may be the source of his ailment

description. What is common to the two systems is the idea of transformation. Transformation

occurs when systems participants are faced with cues from their environment, which may be data

or situations, and the participants then define and redefine what to do next, either processing data

or developing a situation, altering the system each time to transform it to a state closer to the

participants goal or objective. When a fact from either type of system is presented for

manipulation, a transformation can occur. Thus, transformation is common to both types of

systems.

A transformation had to necessarily go through the following stages ±

a) appraisal of the procedures b) types of documents c) storage systems d) formulations and coding e)

verification and validation f) review g) documentation

After the industrial revolution slowly manual systems were transformed into digital form by

means of computer and related instrument

Q2. Explain the various behavioral factors of management organization? As per Porter, how can

performance of individual corporations be determined?

Ans:

Behavioral factors

The implementation of computer based information systems in general and MSS in particular is affected

by the way people perceive these systems and by how they behave in accepting them. User resistance is a

major behavioral factor associated with the adoption of new systems. The following are compiled by

Jiang et al. (2000); reasons that employees resist new systems:

· Change in job content

· Loss of status

· Change in interpersonal relationships

· Loss of power, Change in decision making approach

· Uncertainty or unfamiliarity or misinformation

· Job security

The major behavioral factors are

a) Decision styles symbolic processing of AI is heuristic; DSS and ANN are analytic

b) Need for explanation ES provides explanation, ANN does not, DSS may provide partial explanation.

Explanation can reduce resistance to change

c) Organizational climate ± some organizations lead and support innovations and new

technologies whereas others wait and lag behind in making changes

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d) Organizational expectations ± over expectation can result in disappointments and termination

of innovation. Over expectation was observed in most early intelligent systems.

e) Resistance to change can be strong in MSS because the impacts may be significant.

Performance

Out of many possible interpretations of a strategy an organization adopts in business, it is found

that a majority is concerned with competition between corporations. Competition means

cultivating unique strengths and capabilities, and defending them against imitation by other

firms. Another alternative sees competition as a process linked to innovation in product, market,

or technology. Strategic information systems theory is concerned with the use of information

technology to support or sharpen an enterprises competitive strategy. Competitive strategy is an

enterprises plan for achieving sustainable competitive advantage over, or reducing the edge of,

its adversaries. The performance of individual corporations is determined by the extent to which

they manage the following (as given by Porter)

a) the bargaining power of suppliers;

b) the bargaining power of buyer;

c) the threat of new entrants;

d) the threat of substitute products; and

e) Rivalry among existing firms.

Porters classic diagram representing these forces is indicated below

Porters Forces Driving Industry Competition (Porter 1980)

There are two basic factors which may be considered to be adopted by organization in their

strategies:

a) low cost

b) product differentiation

Enterprise can succeed relative to their competitors if they possess sustainable competitive advantage in

either of these two. Another important consideration in positioning isµ competitive scope, or the breadth

of the enterprises target markets within its industry, i.e. the range of product varieties it offers, the

distribution channels it employs, the types of buyers it serves, the geographic areas in which it sells, and

the array of related industries in which it competes. Under Porters framework, enterprises have four

generic strategies available to them whereby

they can attain above-average performance.

They are:

a) cost leadership;

b) differentiation;

c) cost focus; and

d) focused differentiation.

Q 3. Compare various types of development aspect of Information System? Explain the various

stages of SDLC?

Ans:

Development of Information Systems

a) Development and Implementation of the MIS

Once the plan for MIS is made, the development of the MIS, calls for determining the strategy of

development. As discussed earlier, the plan consists of various systems and subsystems. The

development strategy determines where to begin and in what sequence the development can take

place with the sole objective of assuring the information support.

The choice of the system or the sub-system depends on its position in the total MIS plan, the size of the

system, the users understanding of the systems and the complexity and its interface with other systems.

The designer first develops systems independently and starts integrating them with other systems,

enlarging the system scope and meeting the varying information needs.

Determining the position of the system in the MIS is easy. The real problem is the degree of

structure, and formalisation in the system and procedures which determine the timing and

duration of development of the system. Higher the degree of structured-ness and formalisation,

greater is the stabilization of the rules, the procedures, decision-making and the understanding of

the overall business activity. Here, it is observed that the users and the designers interaction is

smooth, and their needs are clearly understood and respected mutually. The development

becomes a method of approach with certainty in input process and outputs.

b) Prototype Approach

When the system is complex, the development strategy is Prototyping of the System. Prototyping is a

process of progressively ascertaining the information needs, developing methodology, trying it out on a

smaller scale with respect to the data and the complexity, ensuring that it satisfies the needs of the users,

and assess the problems of development and implementation.

This process, therefore, identifies the problem areas, inadequacies in the prototype vis-à-vis

fulfillment of the information needs. The designer then takes steps to remove the inadequacies.

This may call upon changing the prototype of the system, questioning the information needs,

streamlining the operational systems and procedures and move user interaction.

In the prototyping approach, the designers task becomes difficult, when there are multiple users of the

same system and the inputs they use are used by some other users as well. For example, a lot of input data

comes from the purchase department, which is used in accounts and inventory management.

The attitudes of various users and their role as the originators of the data need to be developed

with a high degree of positivism. It requires, of all personnel, to appreciate that the information is

a corporate resource, and all have to contribute as per the designated role by the designer to fulfil

the corporate information needs. When it comes to information the functional, the departmental,

the personal boundaries do not exist. This call upon each individual to comply with the design

needs and provide without fail the necessary data inputs whenever required as per the

specification discussed and finalised by the designer.

Bringing the multiple users on the same platform and changing their attitudes toward informa-

tion, as a corporate resource, is the managerial task of the system designer. The qualification,

experience, knowledge, of the state of art, and an understanding of the corporate business, helps

considerably, in overcoming the problem of changing the attitudes of the multiple users and the

originators of the data.

Stages of SDLC

System development cycle stages are sometimes known as system study. System concepts which are

important in developing business information systems expedite problem solving and improve the quality

of decision-making. The system analyst has to do a lot in this connection. They are confronted with the

challenging task of creating new systems an planning major changes in the organization. The system

analyst gives a system development project, meaning and direction.

The typical breakdown of an information systems life cycle includes a feasibility study,

requirements, collection and analysis, design, prototyping, implementation, validation, testing

and operation. It may be represented in the form of a block diagram as shown below:









a)Feasibility study: It is concerned with determining the cost effectiveness of various alternatives in the

designs of the information system and the priorities among the various system components.

b) Requirements, collection and analysis: It is concerned with understanding the mission of the

information systems, that is, the application areas of the system within the enterprise and the problems

that the system should solve.

c) Design: It is concerned with the specification of the information systems structure. There are two types

of design: database design and application design. The database design is the design of the database

design and the application design is the design of the application programs.

d) Prototyping: A prototype is a simplified implementation that is produced in order to verify in practice

that the previous phases of the design were well conducted.

e) Implementation : It is concerned with the programming of the final operational version of the

information system. Implementation alternatives are carefully verifies and compared.

f) Validation and testing: It is the process of assuring that each phase of the development process is of

acceptable quality and is an accurate transformation from the previous phase.

Q4. Compare & Contrast E-enterprise business model with traditional business organization

model? Explain how in E-enterprise manager role & responsibilities are changed? Explain how

manager is a knowledge worker in E-enterprise?

Ans:

Managing the E-enterprise

Due to Internet capabilities and web technology, traditional business organisation definition has

undergone a change where scope of the enterprise now includes other company locations,

business partners, customers and vendors. It has no geographic boundaries as it can extend its

operations where Internet works. All this is possible due to Internet and web moving traditional

paper driven organisation to information driven Internet enabled E-business enterprise. E-

business enterprise is open twenty-four hours, and being independent, managers, vendors,

customers transact business anytime from anywhere.

Internet capabilities have given E-business enterprise a cutting edge capability advantage to

increase the business value. It has opened new channels of business as buying and selling can be

done on Internet. It enables to reach new markets across the world anywhere due to

communication capabilities. It has empowered customers and vendors / suppliers through

secured access to information to act, wherever necessary. The cost of business operations has

come down significantly due to the elimination of paper-driven processes, faster communication

and effective collaborative working. The effect of these radical changes is the reduction in

administrative and management overheads, reduction in inventory, faster delivery of goods and

services to the customers.

In E-business enterprise traditional people organisation based on µCommand Control¶ principle

is absent. It is replaced by people organisations that are empowered by information and

knowledge to perform their role. They are supported by information systems, application

packages, and decision-support systems. It is no longer functional, product, and project or matrix

organisation of people but E-organisation where people work in network environment as a team or work

group in virtual mode.

E-business enterprise is more process-driven, technology-enabled and uses its own information and

knowledge to perform. It is lean in number, flat in structure, broad in scope and a learning organisation.

In E-business enterprise, most of the things are electronic, use digital technologies and work on databases,

knowledge bases, directories and document repositories. The business processes are conducted through

enterprise software like ERP, SCM, and CRM supported by data warehouse, decision support, and

knowledge management systems.

Today most of the business organisations are using Internet technology, network, and wireless

technology for improving the business performance measured in terms of cost, efficiency,

competitiveness and profitability. They are using E-business, E-commerce solutions to reach

faraway locations to deliver product and services. The enterprise solutions like ERP, SCM, and

CRM run on Internet (Internet / Extranet) & Wide Area Network (WAN). The business

processes across the organisation and outside run on

E-technology platform using digital technology. Hence today¶s business firm is also called E-

enterprise or Digital firm.

The paradigm shift to E-enterprise has brought four transformations, namely:

· Domestic business to global business.

· Industrial manufacturing economy to knowledge-based service economy.

· Enterprise Resource Management to Enterprise Network Management.

· Manual document driven business process to paperless, automated, electronically transacted business

process.

These transformations have made conventional organisation design obsolete. The basis of

conventional organisation design is command & control which is nowcol l aborat es& cont rol .

This change has affected the organisation structure, scope of operations, reporting mechanisms,

work practices, workflows, and business processes at large.

In E-enterprise, business is conducted electronically. Buyers and sellers through Internet drive

the market and Internet-based web systems. Buying and selling is possible on Internet. Books,

CDs, computer, white goods and many such goods are bought and sold on Internet. The new

channel of business is well-known as E-commerce. On the same lines, banking, insurance,

healthcare are being managed through Internet E-banking,

E-billing, E-audit, & use of Credit cards, Smart card, ATM, E-money are the examples of the E-

commerce application.

The digital firm, which uses Internet and web technology and uses E-business and E-commerce solutions,

is a reality and is going to increase in number.

MIS for E-business is different compared to conventional MIS design of an organisation. The

role of MIS in E-business organization is to deal with changes in global market and enterprises.

MIS produces more knowledge-based products. Knowledge management system is formally

recognized as a part of MIS. It is effectively used for strategic planning for survival and growth,

increase in profit and productivity and so on.

To achieve the said benefits of E-business organisation, it is necessary to redesign the organisa- tion to

realize the benefits of digital firm. The organisation structure should be lean and flat. Get rid of rigid

established infrastructure such as branch office or zonal office. Allow people to work from anywhere.

Automate processes after re-engineering the process to cut down process cycle time. Make use of

groupware technology on Internet platform for faster response processing.

Another challenge is to convert domestic process design to work for international process, where

integration of multinational information systems using different communication standards,

country-specific accounting practices, and laws of security are to be adhered strictly.

Internet and networking technology has thrown another challenge to enlarge the scope of

organisation where customers and vendors become part of the organisation. This technology

offers a solution to communicate, co-ordinate, and collaborate with customers, vendors and

business partners. This is just not a technical change in business operations but a cultural change

in the mindset of managers and workers to look beyond the conventional organisation. It means

changing the organisation behaviour to take competitive advantage of the E-business technology.

The last but not the least important is the challenge to organise and implement information

architecture and information technology platforms, considering multiple locations and multiple

information needs arising due to global operations of the business into a comprehensive MIS.

Q5. What do you understand by service level Agreements (SLAs)? Why are they needed? What is

the role of CIO in drafting these? Explain the various security hazards faced by an IS?

Ans. A service level agreement (frequently abbreviated as SLA) is a part of a service contractw here the

level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted

delivery time (of the service) or performance. As an example, internet service providers will commonly

include service level agreements within the terms of their contracts with customers to define the level(s)

of service being sold in plain language terms (typically the (SLA) will in this case have a technical

definition in terms ofM TTF,M TT R, various data rates, etc.)

A service level agreement (SLA) is a negotiated agreement between two parties where one is the

customer and the other is the service provider. This can be a legally binding formal or informal ―contract‖

(see internal department relationships).Contracts between the service provider and other third parties are

often (incorrectly) called SLAs as the level of service has been set by the (principal) customer, there

can be no ―agreement‖ between third parties (these agreements are simply a ―contract‖). Operating

LevelAgreements or OLA(s), however, may be used by internal groups to support SLA(s).

Role of CIO in drafting SLA S

One of the major responsibilities of the CIO is to establish the credibility of the systems organization. The

systems department should not only focus on providing better service to the various lines of business but

also help businesses operate better. If the CIO wants to be taken seriously, he needs to do what other

executives do and have his own business metrics and performance measurements, so that he can

effectively measure his internal business

performance. Other business departments have them, but CIOs generally do not because IT has always

been viewed as a cost center. Measurements in IT tend to be vague and lacking in context. For example,

‗I had 14 projects last year, and I did them well.‘ But there is no real business measurement there. How

many projects should the manager have had? Did he really have the capacity to handle 14 projects? ACIO

should explore running their area more like a service operation rather than a cost center, and develop

metrics that track the performance of the information systems staff, as well as the equipment comprising

the applications, infrastructure, and networks under the CIO‘s control. The first step, they say, is to

implement service level agreements (SLAs) with business units. It sets the expectation on the technical

areas of theCIO‘s operations.At a minimum, they should set up what is expected and what levels of

service the equipment will provide. The underlying SLAs should be some sort of a chargeback system

with business units, particularly when it comes to apportioning staff time. If information systems are now

providing a service, the staff needs to understand where the service is being used to be properly

remunerated or to demonstrate where the value is. The second part of the IT operations equation is

computer equipment, and CIOs must have a firm

handle on how that equipment is being used. There are softwares to help with the people picture, and

there are other products that can monitor hardware performance, such as network and server uptime. One

of the major roles of the CIO is to make the organization information systems savvy and increase the

technological maturity of the information systems organization.A major part of the CIO‘s job is to make

the users aware of the opportunities arising as a result of technical innovations, how this can help them

perform better, and familiarizing them with computers and information systems applications. The

information systems management also has the job of helping the end users adapt to the changes caused by

information systems, and to encourage their use. Finally, CIOs need to institute life cycle management

with their applications and computer equipment. Most IT organizations do not have any idea of the life

cycle of an application how long they want it to last, and when it needs to be refurbished, replaced, or

disposed of. Lacking this knowledge, it is easy for applications to linger long after they should be gone,

and for companies to spend far too much money on maintaining ailing applications.

Security Hazards faced by an Information system:

Security of the information system can be broken because of the following reasons:

i)Malfunctions: In this type of security hazard, all the components of a system are involved. People,

software and hardware errors course the biggest problem. More dangerous are the problems which are

created by human beings due to the omission, neglect and incompetence.

ii) Fraud and unauthorized access: This hazard is due to dishonesty, cheating or deceit. This can be

done through

a) Infiltration and industrial espionage

b) Tapping data from communication lines

c) Unauthorized browsing through lines by online terminals, etc.

iii) Power and communication failure: In some locations they are the most frequent hazards than any

other else because availability of both of them depends upon the location. Sometimes communication

channel are busy or noisy. There are power cuts and sometimes high voltage serge destroys a sensitive

component of the computer.

Q6. Case Study: Information system in a restaurant.

Ans. CASE SUMMARY

A waiter takes an order at a table, and then enters it online via one of the six terminals located in the

restaurant dining room. The order is routed to a printer in the appropriate preparation area: the cold item

printer if it is a salad, the hot-item printer if it is a hot sandwich or the bar printer if it is a drink. A

customers meal check-listing (bill) the items ordered and the respective prices are automatically

generated. This ordering system eliminates the old three-carbon-copy guest check system as well as any

problems caused by a waiters handwriting. When the kitchen runs out of a food item, the cooks send out

an out of stock message, which will be displayed on the dining room terminals when waiters try to

order that item. This gives the waiters faster feedback, enabling them to give better service to the

customers. Other system features aid management in the planning and control of their restaurant business.

The system provides up-to-the-minute information on the food items ordered and breaks out percentages

showing sales of each item versus total sales. This helps management plan menus according to

customers tastes. The system also compares the weekly sales totals versus food costs, allowing planning

for tighter cost controls. In addition, whenever an order is voided, the reasons for the void are keyed in.

This may help later in management decisions, especially if the voids consistently related to food or

service. Acceptance of the system by the users is exceptionally high since the waiters and waitresses were

involved in the selection and design process. All potential users were asked to give their impressions and

ideas about the various systems available before one was chosen

_____________________________________________________________________

PGDBA- Semester II

MB0048 – Operation Research

Q1. What are the essential characteristics of Operation Research? Mention different phases in an

Operation Research study. Point out some limitations of O.R?

Ans. Characteristics of Operations Research

Operations research, an interdisciplinary division of mathematics and science, uses statistics, algorithms

and mathematical modeling techniques to solve complex problems for the best possible solutions. This

science is basically concerned with optimizing maxima and minima of the objective functions involved.

Examples of maxima could be profit, performance and yield. Minima could be loss and risk. The

management of various companies has benefited immensely from operations research.

Operations research is also known as OR. It has basic characteristics such as systems orientation, using

interdisciplinary groups, applying scientific methodology, providing quantitative answers, revelation of

newer problems and the consideration of human factors in relation to the state under which research is

being conducted.

Systems Orientation

o This approach recognizes the fact that the behavior of any part of the system has an effect on the

system as a whole. This stresses the idea that the interaction between parts of the system is what

determines the functioning of the system. No single part of the system can have a bearing effect on the

whole. OR attempts appraise the effect the changes of any single part would have on the performance of

the system as a whole. It then searches for the causes of the problem that has arisen either in one part of

the system or in the interrelation parts.

Interdisciplinary groups

o The team performing the operational research is drawn from different disciplines. The disciplines

could include mathematics, psychology, statistics, physics, economics and engineering. The knowledge of

all the people involved aids the research and preparation of the scientific model.

Application of Scientific Methodology

o OR extensively uses scientific means and methods to solve problems. Most OR studies cannot be

conducted in laboratories, and the findings cannot be applied to natural environments. Therefore,

scientific and mathematical models are used for studies. Simulation of these models is carried out, and the

findings are then studied with respect to the real environment.

New Problems Revealed

o Finding a solution to a problem in OR uncovers additional problems. To obtain maximum benefits

from the study, ongoing and continuous research is necessary. New problems must be pursued

immediately to be resolved. A company looking to reduce costs in manufacturing might discover in the

process that it needs to buy one more component to manufacture the end product. Such a scenario would

result in unexpected costs and budget overruns. Ensuring flexibility for such contingencies is a key

characteristic of OR.

Provides Quantitative Answers

o The solutions found by using operations research are always quantitative. OR considers two or more

options and emphasizes the best one. The company must decide which option is the best alternative for it.

Human Factors

o In other forms of quantitative research, human factors are not considered, but in OR, human factors

are a prime consideration. People involved in the process may become sick, which would affect the

company‘s output.

PHASES OPERATIONS RESEARCH

 Formulate the problem: This is the most important process, it is generally lengthy and time

consuming. The activities that constitute this step are visits, observations, research, etc. With the

help of such activities, the O.R. scientist gets sufficient information and support to proceed and is

better prepared to formulate the problem. This process starts with understanding of the

organizational climate, its objectives and expectations. Further, the alternative courses of action

are discovered in this step.

 Develop a model: Once a problem is formulated, the next step is to express the problem into a

mathematical model that represents systems, processes or environment in the form of equations,

relationships or formulas. We have to identify both the static and dynamic structural elements, and

device mathematical formulas to represent the interrelationships among elements. The proposed

model may be field tested and modified in order to work under stated environmental constraints.

A model may also be modified if the management is not satisfied with the answer that it gives.

 Select appropriate data input: Garbage in and garbage out is a famous saying. No model will

work appropriately if data input is not appropriate. The purpose of this step is to have sufficient

input to operate and test the model.

 Solution of the model: After selecting the appropriate data input, the next step is to find a

solution. If the model is not behaving properly, then updating and modification is considered at

this stage.

 Validation of the model: A model is said to be valid if it can provide a reliable prediction of the

system‘s performance. A model must be applicable for a longer time and can be updated from

time to time taking into consideration the past, present and future aspects of the problem.

 Implement the solution: The implementation of the solution involves so many behavioural issues

and the implementing authority is responsible for resolving these issues. The gap between one

who provides a solution and one who wishes to use it should be eliminated. To achieve this, O.R.

scientist as well as management should play a positive role. A properly implemented solution

obtained through O.R. techniques results in improved working and wins the management support.

Limitations

 Dependence on an Electronic Computer: O.R. techniques try to find out an optimal solution

taking into account all the factors. In the modern society, these factors are enormous and

expressing them in quantity and establishing relationships among these require voluminous

calculations that can only be handled by computers.

 Non-Quantifiable Factors: O.R. techniques provide a solution only when all the elements related

to a problem can be quantified. All relevant variables do not lend themselves to quantification.

Factors that cannot be quantified find no place in O.R. models.

 Distance between Manager and Operations Researcher: O.R. being specialist‘s job requires a

mathematician or a statistician, who might not be aware of the business problems. Similarly, a

manager fails to understand the complex working of O.R. Thus, there is a gap between the two.

 Money and Time Costs: When the basic data are subjected to frequent changes, incorporating

them into the O.R. models is a costly affair. Moreover, a fairly good solution at present may be

more desirable than a perfect O.R. solution available after sometime.

 Implementation: Implementation of decisions is a delicate task. It must take into account the

complexities of human relations and behaviour.

Q2. What are the common methods to obtain an initial basic feasible solution for a transportation

problem whose cost and requirement table is given? Give a stepwise procedure for one of them?

Ans.

Transportation Problem & its basic assumption

This model studies the minimization of the cost of transporting a commodity from a number

of sources to several destinations. The supply at each source and the demand at each

destination are known. The transportation problem involves m sources, each of which has

available.

i (i = 1, 2, …..,m) units of homogeneous product and

n destinations, each of which requires

bj (j = 1, 2…., n) units of products. Here a

i and bj are positive

integers. The cost cij of transporting one unit of the product from the

ith source to the

jth destination is given for each

i and j

. The objective is to develop an integral transportation schedule that meets all demands

from the inventory at a minimum total transportation cost.It is assumed that the total supply

and the total demand are equal.i.e.

Condition (1)The condition (1) is guaranteed by creating either a fictitious destination with a

demand equal to the surplus if total demand is less than the total supply or a (dummy)

source with a supply equal to the shortage if total demand exceeds total supply. The cost of

transportation from the fictitious destination to all sources and from all destinations to the

fictitious sources are assumed to be zero so that total cost of transportation will remain the

same.

Formulation of Transportation Problem

The standard mathematical model for the transportation problem is as follows. Let xij be number of units

of the homogenous product to be transported from source i to the

destination j Then objective is to

Theorem:

A necessary and sufficient condition for the existence of a feasible solution to the

transportation problem (2) is that

Q3. a. What are the properties of a game? Explain the “best strategy” on the basis of minmax

criterion of optimality.

b. State the assumptions underlying game theory. Discuss its importance to business decisions.

Ans. a)

Minimax (sometimes minmax) is a decision rule used in decision theory, game theory, statistics and

philosophy for minimizing the possible loss while maximizing the potential gain. Alternatively, it can be

thought of as maximizing the minimum gain (maximin). Originally formulated for two-player zero-sum

game theory, covering both the cases where players take alternate moves and those where they make

simultaneous moves, it has also been extended to more complex games and to general decision making in

the presence of uncertainty.

Game theory

In the theory of simultaneous games, a minimax strategy is a mixed strategy which is part of the solution

to a zero-sum game. In zero-sum games, the minimax solution is the same as the Nash equilibrium.

Minimax theorem

The minimax theorem states:

For every two-person, zero-sum game with finitely many strategies, there exists a value V and a mixed

strategy for each player, such that (a) Given player 2′s strategy, the best payoff possible for player 1 is V,

and (b) Given player 1′s strategy, the best payoff possible for player 2 is −V.

Equivalently, Player 1′s strategy guarantees him a payoff of V regardless of Player 2′s strategy, and

similarly Player 2 can guarantee himself a payoff of −V. The name minimax arises because each player

minimizes the maximum payoff possible for the other—since the game is zero-sum, he also maximizes

his own minimum payoff.

This theorem was established by John von Neumann,[1] who is quoted as saying ―As far as I can see, there

could be no theory of games … without that theorem … I thought there was nothing worth publishing

until the Minimax Theorem was proved‖.[2]

See Sion‘s minimax theorem and Parthasarathy‘s theorem for generalizations; see also example of a game

without a value.

Example

The following example of a

B chooses B1 B chooses B2 B chooses B3

zero-sum game, where A and B

make simultaneous moves, A chooses A1 +3 −2 +2

illustrates minimax solutions.

A chooses A2 −1 0 +4

Suppose each player has three

choices and consider the payoff A chooses A3 −4 −3 +1

matrix for A displayed at right.

Assume the payoff matrix for B

is the same matrix with the signs reversed (i.e. if the choices are A1 and B1 then B pays 3 to A). Then,

the minimax choice for A is A2 since the worst possible result is then having to pay 1, while the simple

minimax choice for B is B2 since the worst possible result is then no payment. However, this solution is

not stable, since if B believes A will choose A2 then B will choose B1 to gain 1; then if A believes B will

choose B1 then A will choose A1 to gain 3; and then B will choose B2; and eventually both players will

realize the difficulty of making a choice. So a more stable strategy is needed.

Some choices are dominated by others and can be eliminated: A will not choose A3 since either A1 or A2

will produce a better result, no matter what B chooses; B will not choose B3 since some mixtures of B1

and B2 will produce a better result, no matter what A chooses.

A can avoid having to make an expected payment of more than 1/3 by choosing A1 with probability 1/6

and A2 with probability 5/6, no matter what B chooses. B can ensure an expected gain of at least 1/3 by

using a randomized strategy of choosing B1 with probability 1/3 and B2 with probability 2/3, no matter

what A chooses. These mixed minimax strategies are now stable and cannot be improved.

b)

Brandenburger and Nalebuff discuss how game theory works and how companies can use the principles

to make decisions. The authors state that managers can use the principles to create new strategies for

competing where the chances for success are much higher than they would be if they continued to

compete under the same rules. A classic example used in the article is the case of General Motors. The

automobile industry was facing many expenses due to the incentives that were being used at the retailers.

General Motors responded by issuing a new credit card where the cardholders could apply a portion of

their charges towards purchasing a GM car. GM even went so far as to allow cardholders to use a smaller

portion of their charges towards purchasing a Ford car, allowing both companies to be able to raise their

prices and increase long term profits. This action by GM created a new system where both GM and Ford

could be better off, unlike the traditional competitive model where one company must profit at the

expense of another.

The authors state that while the traditional win-lose strategy may sometimes be appropriate, but that the

win-win system can be ideal in many circumstances. One advantage to win-win strategies is that since

they have not been used much, they can yield many previously unidentified opportunities. Another major

advantage is that since other companies have the opportunity to come out ahead as well, they are less

likely to show resistance. The last advantage is that when other companies imitate the move the initial

company benefits as well, in contrast to the initial company losing ground as they would in a win-lose

situation.

The authors also state that there are five elements to competition that can be changed to provide a more

optimal outcome. These elements are: the players (or companies competing), added values brought by

each competitor, the rules under which competition takes place, the tactics used, and the scope or

boundaries that are established. By understanding these factors, companies can apply different strategies

to increase their own odds of success.

The first way that companies can increase their chances of success involves changing who the companies

are that are involved in the business. One way that companies can improve their odds of success is by

introducing new companies into the business. For example, both Coke and Pepsi wanted to get a contract

to have Monsanto as a supplier. Since Monsanto had a monopoly at the time, they encouraged Holland

Sweetener Company to compete with Monsanto. Since it seemed Monsanto no longer had a monopoly on

the market, they were able to get more favorable contracts with Monsanto. Another way that companies

can improve their chances is by helping other companies introduce more or better complimentary

products.

Companies can also change the added values of themselves or their competitors. Obviously, companies

can build a better brand or change their business practices so they operate more efficiently. However, the

authors discuss how they can also lower the value of reducing the value of other companies as a viable

strategy. Nintendo reduced the added value of retailers by not filling all of their orders, thus leaving a

shortage and reducing the bargaining power of the stores buying its products. They also limited the

number of licenses available to aspiring programmers, lowering their added value. They even lowered the

value held by comic book characters when they developed characters of their own that became widely

popular, presumably so that they wouldn‘t have to pay as much to license these characters.

Changing the rules is another way in which companies can benefit. The authors introduce the idea of judo

economics, where a large company may be willing to allow a smaller company to capture a small market

share rather than compete by lowering its prices. As long as it does not become too powerful or greedy, a

small company can often participate in the same market without having to compete with larger companies

on unfavorable terms. Kiwi International Air Lines introduced services on its carriers that were of lower

prices to get market share, but made sure that the competitors understood that they had no intention of

capturing more than 10% of any market.

Companies can also change perceptions to make themselves better off. This can be accomplished either

by making things clearer or more uncertain. In 1994, the New York Post attempted to make radical price

changes in order to get the Daily News to raise its price to regain subscribers. However, the Daily News

misunderstood and both newspapers were headed for a price war. The New York Post had to make its

intentions clear, and both papers were able to raise their prices and not lose revenue. The authors also

show an example of how investment banks can maintain ambiguity to benefit themselves. If the client is

more optimistic than the investment bank, the bank can try to charge a higher commission as long as the

client does not develop a more realistic appraisal of the company‘s value.

Finally, companies can change the boundaries within which they compete. For example, when Sega was

unable to gain market share from Nintendo‘s 8-bit systems, it changed the game by introducing a new 16-

bit system. It took Nintendo 2 years to respond with its own 16-bit system, which gave Sega the

opportunity to capture market share and build a strong brand image. This example shows how companies

can think outside the box to change the way competition takes place in their industry.

Brandenburger and Nalebuff have illustrated how companies that recognize they can change the rules of

competition can vastly improve their odds of success, and sometimes respond in a way that benefits both

themselves and the competition. If companies are able to develop a system where they can make both

themselves and their competitors better off, then they do not have to worry so much about their

competitors trying to counter their moves. Also, because companies can easily copy each other‘s ideas, it

is to a firm‘s advantage if they can benefit when their competitors copy their idea, which is not usually

possible under the traditional win-lose structure.

This article has some parallels with the article ―Competing on Analytics‖ by (). The biggest factor that

both of these articles have in common is how crucial it is for managers to understand everything they can

about their business and the environment in which they work. In ―Competing on Analytics‖, the authors

say that it is important to be familiar with this information so that managers can change the way they

compete to improve their chances of success. At the end of ―The Right Game: Use Game Theory to

Shape Strategy‖, the authors discuss how in order for companies to be able to change the environment or

rules under which they compete they need to understand everything they can about the constructs under

which they are competing. Whether a manager intends to use analytics or game theory to be successful,

he or she must first have all available information and use that information to understand how to make the

company better off. However, the work shown in ―Competing on Analytics‖ tends to place an emphasis

almost exclusively on the use of quantitative data to improve efficiency or market share of the company.

―The Right Game‖, however focuses more on using information to find creative ways of changing the

constructs or rules applied between companies, often yielding a much broader impact.

Q4. a. Compare CPM and PERT explaining similarities and mentioning where they mainly differ.

Ans.

The Major Differences and Similarities between CPM and PERT

CPM (Critical Path Method) & PERT(Program Evaluation and Review Technique)

1)PERT is a probabilistic tool used with three 1)CPM is a deterministic tool, with only single

Estimating the duration for completion of estimate of duration.

2)This tool is basically a tool for planning 2)CPM also allows and explicit estimate of and control of time.

costs in addition to time, therefore CPM can control both time and cost.

3)PERT is more suitable for R&D related 3)CPM is best suited for routine and those projects where the

project is performed for projects where time and cost estimates can the first time and the estimate of

duration be accurately calculated are uncertain.

4)The probability factor i major in PERT 4)The deterministic factor is more so values or so outcomes

may not be exact. outcomes are generally accurate and realistic.

Extensions of both PERT and CPM allow the user to manage other resources in addition to time and

money, to trade off resources, to analyze different types of schedules, and to balance the use of resources.

Tensions of both PERT and CPM allow the user to manage other resources in addition to time and

money, to trade off resources, to analyze different types of schedules, and to balance the use of resources.

Graphs

_ In mathematics, networks are called graphs, the entities are nodes, and the links are edges

_ Graph theory starts in the 18th century, with Leonhard Euler

_ The problem of Königsberg bridges

_ Since then graphs have been studied extensively.

Graph Theory

_ Graph G=(V,E)

_ V = set of vertices

_ E = set of edges 2

_ An edge is defined by the

two vertices which it

connects

_ optionally: 1 3

A direction and/or a weight

_ Two vertices are adjacent

if they are connected by

an edge 4 5

_ A vertex‘s degree is the

number of its edges





Graph G=(V,E) 2

V = set of vertices

E = set of edges

Each edge is now an 1 3

arrow, not just a line ->

direction

The indegree of a vertex

is the number of 5

incoming edges 4

The outdegree of a vertex

is the number of outgoing

edges

____________________________________________________________________

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PGDBA- Semester II

MB0049 – Project Management

Q.1 Explain the nine steps which take project management to a New Horizon

Ans.

The following nine steps are suggestive measures to provide new dimensions to the management of

projects.

Step 1:

Believing in discontinuity and not continuity with incremental improvements

Continuity or the status quo is a function of quantum of changes. Incremental improvements are valid

only when the rate of change is not excessive. Both the continuity and incremental improvements are

linked with the rate of change and quantum. Beyond a threshold of rate of change, one cannot go with the

continuity and incremental improvements. The modern day Internet and technological based world has

witnessed the unprecedented rate of change and explosion in the quantum of changes. It is this process

which has resulted in making continuity theory as baseless. Continuity in principle is to preserve the past

where as discontinuity breaks the linkage with the past to the extent it can have fewer constraints to move

into the future. There is no choice except to believe in discontinuity as only then mind and body is

prepared to accept the unknowns and be ready to face it and control thereafter.

Step2:

Owning the problems and sharing the solutions

More one owns problem, more he becomes experienced. It is not the number of years of service one has

performed for a company but how much number of problems was faced and owned is now becoming the

benchmark to define an experienced person from inexperienced. The true spirit of entrepreneurial outlook

is to own the problems and solve the same and in this process make Money. The fixed mould mentality is

to empower the problems to be faced outside than oneself and get the credit for solutions.

Step 3:

Breaking the status quo mentality

No change means perpetuation of the Present into the Future. This is in contradiction to the nature as

Future is not the extension of Present. Breaking the status quo mentality implies in taming the future as it

is the future which becomes Present at some point of time. Focusing into Future and affecting the Present

is antiestablishment and require concerted efforts to move out from the comfortable zones. Project

managers can hardly afford to have status quo mentality as day in and day out they are involved in acting

in present to affect Future. At times, when we do not get away from the status quo mentality,

contradictions fall apart everywhere in the project between the two types of group- the champions of

future and those who believe in extending Present.

Step 4:

Stepping out of comfortable zone

As apart of the step 3 and in a way extension of it, the comfortable zone is to dear to break and cross. Fear

of uncertainties makes the comfortable zone more comfortable than if the fear did not exist. The project

managers of tomorrow are those who have so called comfortable zone carve out from that area which

conventionally is uncomfortable and that is the zone of uncertainties. If we seek comforts in conquering

the uncertainties with planning and indomitable spirit of winning, then we are able to provide project

leadership and inspire the team members to plunge into risk taking.

Step 5:

Human Capital by passing Financial Capital

While the agriculture society witnessed the Nature as the foremost, the 20th century saw the men-

machine interaction as the key factor for the capital formation. 21st century in this Internet age is

beginning to see the human capital surpassing the financial capital. Venture capitalists were all over the

place to fund any idea, which they thought would create a brave new world. Its consequent failure in the

last couple of years could not be attributed to the over faith in Human capital but absence of effective

filtering mechanism from good to bad idea. While Return On Investment (ROI) could be seen as financial

driven phenomena, Return On Time Invested (ROTI) is basically based human efforts and its

deployment. ROTI will be more meaningful to ROI in the context of new processes on their way to

unfold in the beginning of 21st century.

Step 6:

Transform work culture from 5 to 7 dimensions

Conventionally we all live in the conventional 5 dimensions of space i.e. X, Y and Z, Time and Mind. We

need to supplement on these 5 dimensions the additional 2 dimensions of Passion and Joy If we do what

we want do then the gap between Wish and Reality is so little that one is in position to provide its very

best. It is his/her added 2 dimensions, which make the total difference. The new miracles in project

management will take place when we bring the work of joy like in the art domain of music and paintings

in our project work.

Step 7:

Real number of encounters replacing number of years of experience

The experience profile should be redefined by the number of encounters and problems faced instead of

number of years. The wisdom evolved based on encounters is far richer than accumulated simply by

repeating the same encounters n number of times in one‘s employee ship. The secret is to increase the

encounters meaningful to ones own dream or passion profile.

Step 8:

Seeking meaning out of change

Change is first degree. It is a must. Change can be threat or an opportunity. It depends how one looks at

it. If change is resisted, it becomes all the more difficult to see the real outcome of the change as it is

partly distorted. Project implies change and that too a temporary one. It is essential to make people to

have a real communication about the change. One of the major strategies to bring about a change is to

communicate, communicate and communicate.

Step 9:

Detachment from the fruits of the results

To act is within one‘s control. To get the reward as a reaction to the action is not within one‘s purview.

Too much emphasis on that part, which is not within our control, is a wasteful exercise instead

concentrates on actions to the best of one‘s ability. The results so arrived at must be analyzed from the

cause and effect relationship and constant learning must be made out of all such actions or group of

actions. Attachment with the results of the actions often dilute one‘s own energy and may shift one‘s

focus from the main road to its detour. Detachment from the results does not imply one should not

demand or expect materialistic benefits, no, it only means that in case you do not get what you deserve,

leave it and move forward rather than brooding over that part which is not within one‘s control. The

journey comes to a standstill if we get attached to the surroundings and to the results of the present

beyond a small time frame. Project managers and team members are never stationary. They must move

on. In summary, the new discovery or dimensions in project management heavily depends on the human

factor of breaking ceilings, getting motivated all the time, working with passion, detachment with the

results rather than with the actions, human capital surpassing that of financial capital, breaking the status

quo mentality, owning the problems and solutions and creating discontinuity. The journey has just

begun and it must continue as in the human race, there is no finishing line.

Q.2 Discuss the traits of a successful project manager.

Ans. Ten Traits of a Successful Project Manager

This short article highlights some of the best traits of a successful project manager. He or she has many of

these abilities:

1. In Touch – Regularly checks the ―pulse‖ of the project. The balance is in checking often enough

for scope and length of the project, without over-checking.

2. Good Vibrations – Has inner and outer warmth. The manager understands people, and can use

humor as a relief.

3. Rock-solid – Has a solid character. Everyone respects and trusts the manager and his actions.

4. Does the Job – Has a preference for action – doesn‘t wait for issues to resolve themselves.

5. Good Reactions – Anticipates problems and plans as he can to handle or avoid them.

6. Not Scattered – Can handle mulitple tasks with proper focus. His management style is balanced

between multi-tasking and focusing on the important details and tasks. This trait is connected to

good time management.

7. Focused Picture – When buried in details, she can also look at the big picture, and understands

how the teams efforts are integrated in the whole of the project.

8. Quality Workmanship - Through leading by example, quality outcomes and products are

achieved.

9. Bends, but Unbreakable – Has flexibility, but can make firm decisions. It is a key trait to be able

to understand when decisions have to be made by the manager (as opposed to letting others

intercede or make decisions for the manager by default.)

10. Leverages Tools – Learns and uses tools to help manage projects. A good PM doesn‘t get buried

learning complex project management tools – especially if she does not yet know the theories or

uses behind techniques (such as earned-value management or PERT charts).

Q.3 Define the change management model.

Ans.

1) Change management is a systematic approach to dealing with change, both from the perspective of an

organization and on the individual level. A somewhat ambiguous term, change management has at least

three different aspects, including: adapting to change, controlling change, and effecting change. A

proactive approach to dealing with change is at the core of all three aspects. For an organization, change

management means defining and implementing procedures and/or technologies to deal with changes in

the business environment and to profit from changing opportunities

Successful adaptation to change is as crucial within an organization as it is in the natural world. Just like

plants and animals, organizations and the individuals in them inevitably encounter changing conditions

that they are powerless to control. The more effectively you deal with change, the more likely you are to

thrive. Adaptation might involve establishing a structured methodology for responding to changes in the

business environment (such as a fluctuation in the economy, or a threat from a competitor) or establishing

coping mechanisms for responding to changes in the workplace (such as new policies, or technologies).

Terry Paulson, the author of Paulson on Change, quotes an uncle‘s advice: ―It‘s easiest to ride a horse in

the direction it is going.‖ In other words, don‘t struggle against change; learn to use it to your advantage.

2) In a computer system environment, change management refers to a systematic approach to keeping

track of the details of the system (for example, what operating system release is running on each

computer and which fixes have been applied).

The Change Management Model

The model follows a 3-phase, 8-step process which is represented graphically below. Click on the

graphic below to view the phase and step descriptions.

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A change management model

Dealing With The Truths of Change

Leaders of change take note:

• Emotional reactions are at least as important as any other aspect of implementing change.

• The higher the involvement in change, the less negative the inevitable reactions.

• The intensity of emotional reaction is proportionate to the speed of change.

• The unresolved effects of change are cumulative.

• The longer a group / individual / situation has remained static, the greater the investment in the status

quo. Therefore, the greater the resistance and reaction.

• Rewards and incentives can cause people to change, but they will not neutralise their feelings of loss.

Dealing With Change Misconceptions

• Change happens quickly

• Survivors are glad they have a job

• Time takes care of everything

• Everyone who is not on board has something wrong with them

• The weak people are the ones who leave

• During change, those who appear OK really are

• People ―hear‖ what senior management communicates

• People take senior management communication at face value

• If the communication is done ―right‖ the first time, it is enough

• By changing the formal relationship, how we ―do business‖ will change

• The transition behaviour of the senior management is invisible to the rest of the organisation

• Pressures that caused the change will be seen in a rational manner

We suggest these misconceptions require a thoughful approach from those leading change.

What Happens when your Organisation Undergoes Change?

People frequently feel overwhelmed when there are major changes within their organisation. They are

often uncertain of their future, and the future of their colleagues in the organisation. Consequently the

following fear of change reactions may occur.

People generally feel smaller, ie.

Self-conscious - the only one feeling the effects

Missing - opportunities, job, status, security taken away

Alone - nobody understands, the unlucky one

Lethargic- commitment goes, energy levels drop

Limits - each person has limits to the amount of change they‘re comfortable with

Enough - when those limits are reached they cry enough and resist further change

Revert - people easily revert back to known behaviours

Because we are all individuals we react differently. Some of the common reactions to change result in the

following behaviours at work:

Drop in morale

Drop in work outputs and

Drop in productivity

Drop in Manager‘s credibility

Drop in Commitment to the organisation and work

Drop in levels of service

Staff resisting change or conflict and making life difficult. This especially happens when people have

been in the organisation for a long time.

Staff ―bad mouthing‖ the organisation/management or behaving in negative ways because they feel angry

and/or threatened and want to hit back at the organisation.

Effective leaders of change are aware of these not uncommon individual reactions to change. They plan

how to deal with change by acccepting that employee anticipation and fear of change is a significant

organisational risk unless people can be encouraged to learn and engage with the change and reflect upon

the choices and options available to them.

“The dogmas of the quiet past are inadequate to the stormy present.The occasion is piled high with

difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act

anew” Abraham Lincoln

Q.4 Describe the three major classification and categories of Risk management.

Ans.

Risk management is a structured approach to managing uncertainty related to a threat, a sequence of

human activities including: risk assessment, strategies development to manage it, and mitigation of risk

using managerial resources.

About Types of Risk Management

Commercial enterprises apply various forms of risk management procedures to handle different risks

because they face a variety of risks while carrying out their business operations. Effective handling of risk

ensures the successful growth of an organization.

Various types of risk management can be categorized into the following:

· Operational risk management:

Operational risk management deals with technical failures and human errors

· Financial risk management:

Financial risk management handles non-payment of clients and increased rate of interest

· Market risk management:

Deals with different types of market risk, such as interest rate risk, equity risk, commodity risk, and

currency risk

Types of Risk Management Techniques

Risk management is a business process in which a business analyzes risk in an effort to miminize the

effects of such risk. Organizations must identify risks and assess how dangerous each risk could be to the

organization. Taking steps to eliminate risks will reduce the possibility of a financial loss. Risk

management should be continuous and revisited at intervals the organization deems appropriate.

Identify Weaknesses: Risk analysis begins with identifying all potential weaknesses. Weaknesses are

internal. One example is a product or service that does not meet the needs of the customer. Other

examples include staffing shortages, unreliable employees and ineffective leadership. After an

organization examines these and other areas for potential weaknesses, it can examine more closely

different parts of the organization such as systems, finances, and human resources. Communication with

other people may also bring to light some potential weaknesses within the organization.

Identify Threats: Threats are external factors that can negatively affect an organization. Identify all

potential threats by looking into the parent company, the organization itself and the industry. Determine

how threatening each could be to the organization and how vulnerable the organization is to an attack

from competitors. Other examples of external threats include natural disasters, war, disclosure, hackers,

theft, errors in data entry and changes in the economy.

Estimate Risks: After each threat and weakness has been identified, the next step is to determine how

damaging they are or could be. These threats and weaknesses may or may not negatively impact the

organization. To calculate the value of one of these risks, take the probability of the threat taking place

and multiply it by the cost of fixing the damage caused by the threat.

Manage Risks: An organization must manage the risks once it knows the value of each risk. To be cost-

effective, spend less money eliminating a risk than the amount it would cost to resolve the aftermath if the

event occurs. If the event occurs, and it will not cost much to resolve, it may not even be worth the time

and money spent eliminating it. Managing risks can be done by using existing assets to improve methods,

transfer responsibilities or improve internal controls. In addition, a contingency plan can manage risks by

creating a plan that will reduce the effect of the risk, should it occur. Investing in new resources is another

way to manage risks.

Critical Path: The critical path refers to specific tasks in a project that are necessary for the successful

completion of the project. The tasks are displayed in flow chart or diagram along with the amount of time

it should take to complete each one. The tasks must be completed in the correct order; if one task does not

get complete, it could hold up the entire project and risk missing the completion date. Manage the risk by

ensuring the tasks get completed in order and on time, and prepare a contingency plan.





Q.5 List and explain the 10 rules which serve as the guidelines for development of high technology.

Ans.

Guidelines for development of high technology

Some guidelines in the form of rules which help organization to be strong in this area.

Rule1. Identify the critical technology and make a deliberate choice for indigenous development.

Rule2. Always aim one step higher in performance.

Rule3. Focus on multi use technologies.

Rule4. Spot the competency of divisions and empower them for technology development.

Rule5. Ensure redundancy for critical systems and technologies.

Rule6. Focus efforts through Programme/Projects/Mission oriented approach.

Rule7. Build concurrency into every activity.

Rule8. Build long term partnership with all the stake holders.

Rule9. Focus on Problem Forecasting and Prevention.

Rule10. Ensure continuous and integrated Performance Measurement.

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