Master of Business Administration- MBA Semester 2

MB0044 Production and Operations Management - 4 Credits

(Book ID: B1133)

Assignment Set - 1 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Q1. Explain briefly the Computer Integrated Manufacturing. Answer: Computer Integrated Manufacturing Integration occurs when a broad range of manufacturing and supporting activities are linked. Activities include engineering design, production planning, shop control, order processing, material control, distribution etc. Information flow across all functions takes place with the help of computers. Transmission, processing, distribution and feed back happen almost in real time so that intended activities are conducted rapidly. This process helps in rapid production and also reduce indirect costs. As response times decrease, customer satisfaction increases resulting in better business. CIM helps in avoiding accumulation of materials resulting in better throughput and better utilization of space. Bar coded labels that accompany materials contain instructions for processing them which are read by sensing devices and display the status on monitors. This information is available to all concerned personnel responsible in planning, marketing etc. so that they will be aware of the status of any order and if expediting is needed to meet deadlines, they will be able to seek intervention. Identifying shortages, ensuring faster deliveries becomes easy with CIM. One of the keys to success in the manufacturing business is to lessen errors and to enhance productivity. The more one can produce with fewer flaws, the more one can make at the bottom line. Over a period of time factory owners have integrated computer systems in order to streamline the production process. CAD, or computer aided design, has been able to aid the operators in the formulation and blueprints of more sophisticated products and technology.

CAM, or computer aided manufacturing, has offered the means by which to produce the more sophisticated items. CAM also enhances the productivity of the factory's output. Together the CAD and CAM systems reduce cycle times, enhance productivity, and aid in the streamlining of the overall production process.

Since the 1980's CAD and CAM have worked together to move from the idea phase to the application phase. This process has not ceased because of the implication. The factory sector has slowly been phasing in computer integrated manufacturing, or CIM over the years. This integration will allow for the digital information and computer control of the production process to be intertwined throughout and within the factory. In the CIM system some processes will be different. Data entry will now be stored in hard drives. This will allow for the manipulation and the retrieval of the data with a simple keystroke. The means by which the processing of data into the production of products will also be streamlined within hardware and software. This will allow operators to alter and enhance programs in order to improve products. The CIM system will also provide the necessary algorithms to bring all the data together. The data will then be able to intermingle with the sensor and modification components of the system. While the CIM system is the optimal choice to aid in the manufacturing process, it does come with a unique set of challenges. The greatest challenge is to get all the different machines within the factory to work on the same system. In the typical factory, there are a variety of machines that perform different tasks, that are made by a variety of suppliers. The issue is to get every one of these machines to accept the programming, and tasks from one mainframe computer. The second challenge of the CIM system is encapsulated within the data itself. While many operators may be lost on the actual production floor, there will be a need for operators to maintain the integrity of the data that is transmitted to the machines. The challenge is in acquiring competent individuals who can assure that all the data within the system is at its optimum operating integrity. The third, and final challenge that has been encountered in the use of the CIM system is process control. This entails assuring that the whole process runs smoothly. This particular challenge ties the data entry people, the programmers, and the production operators together. The factory will need to assure that the individuals working with the system throughout the factory are competent and knowledgeable. These individuals will need to be well trained, and probably need to update their training periodically. The goal of the CIM system is to eliminate the waste within the manufacturing process. This is done by taking the design, analysis, planning, purchasing, cost accounting, inventory control and distribution departments and interlink them with the factory floor, material handling, and management departments. The CIM system will have an impact on every system within the factory. The CIM system, which is sometimes referred to as the integrated computer aided manufacturing system, operates on both hard and software. Simply put, the software is what runs the factory, or the

brains. The hardware is what makes the machines run, or the muscles. The CIM system runs on an efficient output process. This means that the whole factory works together, not as separate parts. As a unified unit, it operates for the peak benefit of the whole factory. Simply put, the CIM system does not backload or store up work. It does not warehouse products. The CIM system keeps work flowing through computer integration in order to keep all the parts of the system constantly functioning. It registers all the raw material received by the factory. It then walks the material through the factory and the production process. The CIM system fractions every individual "center" of the factory into work cells. As work cells, they are then divided into individual stations. The stations are then broke down to the individual processes, and the processes are what metamorphosizes the raw materials into actual products. This may seem complicated, but it streamlines the whole manufacturing process. With each division of the factory broken down in such a manner, it allows operators to make any necessary changes to the system without shutting down the whole system. Cim is a very interactive, hands on system. If it is applied correctly, it will enhance the productivity of the whole factory. It will link several departments and functions together. It is simple to install. It usually is installed through a LAN, or local area network, connection.

Q2. What is automation? What are the kinds of automation?

Answer: Automation is the use of scientific and technological principles in the manufacture of machines that take over work normally done by humans. Following figure shows a sample automation production process: For services, automation usually means increase in quality and productivity using labor saving devices. Automation is ideal when the service provided or the product manufactured is highly standardized. Some extent of automation can be design eleven with customization, that is, product or services meant to produce or deliver low volumes specific to a requirement.The cost per unit determines the extent of automation required. Automation systems cost huge sums of money and therefore, a deep analysis of the various factors has to be done. The advantage of automation is that it has low variability and will be more consistent on a repetitive basis. On the shop floor variability causes loss of quality. Where is automation used?

Automation in the banking sector has resulted in ATMs which save a huge amount of banks labor and it is found to

have given greater customer satisfaction.

In education, long distance learning technology helps in supplementing class room instruction. The facilitating goodsthat are used in this case are e-courses, web sites and videos.There are three kinds of automation: fixed, programmable, and flexible.

1.Fixed: By its very nature, fixed automation is rigid. They are designed for high volume production and their rigidity ensures less variability. They are not amenable to change in product or process. They need minimal human intervention. Examples: Oil refineries and chemical processing units.

2.Programmable: Programming devices enable machines to operate automatically. The machines have sensing and control devices that enable this. The simplest of them called machine attachments replace human effort. They guide ,locate, move, and achieve relative positions by means of cams, optical sensing, and load sensing mechanisms and activate the controls to remove human intervention. Numerically controlled machines read instructions and convert them to machine. Computers are used for controlling one machine or a number of them and they have programs written into them for operations. They are Computer Numerically Controlled or for short, CNC machines. 3. Flexible: Robots are higher in the order of automation as they perform a variety of tasks. They are designed to move materials by holding them in their arms and making precise movements according to programs written into the computers that reside in them. They simulate human actions. They can grip and hold tools with the help of sensors.These sensors are sensitive to touch and force to know that the material is to be held with the requisite pressure for

3the conduct of operations. Vision sensors are used for inspection, identification and guidance. They use optics based instruments to gather data and feed them to the computers for activating the other parts of the robot. With the help of automation, 100% inspection of components can be done which ensures highest quality. Identification and movement of materials are helped by bar codes which are read and fed into the system for monitoring quantity, location, and movement. They help the automated systems to sort information and provide information for effecting any changes necessary. To make effective use of automated machines, we need to have theMovement of materials from and to different stations as also stores, automated. Automated Storage andRetrieval Systems (ASRS), receive orders for materials from anywhere in the production area, collect materials anddeliver materials to the work stations.To make effective use of automated machines, we need to have the movement of materials from and to different stations as also stores, automated. Automated Storage and Retrieval Systems (ASRS), receive

orders for materials from any where in the production area, collect materials and deliver materials to the workstations. Computers and information systems are used for placing orders for materials, giving commands and adjusting inventory records which show the location and quantity of materials available/needed. Continuous updating gives aclear picture for all concerned to enable them initiate action to keep the throughput smooth. Automated Guided Vehicle Systems (AGVS) like pallet trucks and unit load carriers follow embedded guide wires or paint strips to reach destinations as programmed.

Q3. What are the factors that influence the plant location?

Answer: Factors influencing Plant Location can be broadly divided into two types namely: general factors and special factors (See Figure Factors influencing plant location). General factors The general factors that influence the plant location are listed below (See Figure 5.2 General factors influencing plantlocation).

1.Availability of land: Availability of land plays an important role in determining the plant location. Many-a-time,our plans, calculations and forecasts suggest a particular area as the best to start an organization. However,availability of land may be in question. In such cases, we will have to choose the second best location. 2.Availability of inputs: While choosing a plant location, it is very important for the organization to get the labor atthe right time and raw materials at good qualities. The plant should be located: Near to the raw material source when there is no loss of weight. At the market place when there is a loss of weight in the material. Close to the market when universally available, so as to minimize the transportation cost.

3. Closeness to market places: Organisations can choose to locate the plant near to the customers market or far from them, depending upon the product they produce. It is advisable to locate the plant near to the market place, when The projection life of the product is low

The transportation cost is high

The products are delicate and susceptible to spoilage

After sales services are promptly required very often

The advantages of locating the plant near to the market place are: (i) Consistent supply of goods to the customers (ii) Reduction of the cost of transportation

4.Communication facilities: Communication facility is also an important factor which influences the location of aplant. Regions with good communication facilities viz. Postal and Tele communication links should be givenpriority for the selection of sites. 5.Infrastructure: Infrastructure plays a prominent role in deciding the location. The basic infrastructure needed inany organization are:

Power : For example, industries which run day and night require continuous power supply. So they shouldbe located near to the power stations and should ensure continuous power supply throughout the year.

Water : For example, process industries such as, paper, chemical, and cement, requires continuous watersupply in large amount. So, such process industries need to be located near to the water.

Waste disposal : For example, for process industries such as, paper and sugarcane industries facility fordisposal of waste is the key factor. 6. Transport: Transport facility is a must for facility location and layout of location of the plant. Timely supply of rawmaterials to the company and supply of finished goods to the customers is an important factor. The basic modesof transportation are by Air, Road, Rail, Water, and Pipeline. The choice of location should be made depending onthese basic modes. Cost of transportation is also an important criterion for plant location. 7. Government support: The factors that demand additional attention for plant location are the policies of the stategovernments and local bodies concerning labor laws, building codes, and safety. 8. Housing and recreation: Housing and recreation factors also influence the plant location. Locating a plant with thefacilities of good schools, housing and recreation for employees will have a greater impact on the organization.These factor seems to be unimportant, but have a difference as they motivate the employees and hence thelocation decisions

Q4. Describe the seven basic quality control tools. Answer: Flow Chart, Check sheet, Histogram, Pareto Analysis, Scatter Diagram, Control Chart, and Cause and Effect Diagram are the basic seven control tools considered for achieving quality.

a) Flow Chart Flow chart is a visual representation of process showing the various steps. It helps in locating the points atwhich a problem exists or an improvement is possible. Detailed data can be collected, analyzed, and methods forcorrection can be developed using flow charts. The various steps include:

Listing out the various steps or activities in a particular job Classifying them as a procedure or a decision Each decision point generates alternatives. Criteria and consequences that go with decisions are amenable to evaluation for purposes of assessing quality. The flow chart helps in pin-pointing the exact points at which errors have crept in. (See Figure 6.3 for Sample flow chart) b) Check Sheet: Check sheets are used to record the number of defects, types of defects, locations at which they are occurring, times at which they are occurring, and workmen by whom they are occurring. The sheet keeps a record of the frequencies of occurrence with reference to possible defect causing parameters. It helps to implement a corrective procedure at the point where th frequencies are more. (See Table 61. for Sample check sheet) The table shows that the number of defects 1 and 5 are not many as compared to defect no 2 which increased overthe days and appears to be stabilizing at the higher side and therefore needs to be attended immediately. The columnwhich shows days can be changed to observed by the hour, if need be. c) Histogram Histograms are graphical representations of distribution of data (See Figure 6.4 for Sample histogram chart). They are generally used to record huge volumes of data about a process. They reveal whether the pattern of distribution has a single peak, or many peaks and also the extent of variation around the peak value. This helps in identifying whether the problem is serious. When used in conjunction with comparable parameters, the visual patterns help us to identify the problem which should be attended to. The values shown are the number of observations made regarding a parameter. Sometimes, the percentages are shown to demonstrate the relative contribution of each of the parameters. d) Pareto Analysis: Pareto analysis is a tool for classifying problem areas according to the degree of importance and attending to the most important. Pareto principle, also called 80-20 rule, states that 80 percent of the problems that we encounter arise out of 20 percent of items. If we find that, in a day, we have 184 assemblies having problems and there are 11 possible causes, it is observed that 80 percent of them, that is, 147 of them have been caused by just 2 or3 of them. It will be easy to focus on these 2 or 3 and reduce the number of defects to a great extent. When the cause of these defects has been attended, we will observe that some other defect becomes predominantly observed and if the process is continued, we are marching toward zero defects. e) Scatter Diagram:

Scatter diagram is used when we have two variables and want to know the degree of relationship between them (See Figure 6.5 for Sample scatter diagram). We can determine if there is cause and effect relationship between the variables and the degree of extent over a range of values of the variables. Sometimes, we can observe that there is no relationship, in which we can change one parameter being sure that it has no effect on the other parameter. We can see that the change in variable 2 does not have much effect on variable 1. The other interpretation can be that for a small change in variable 1, the effect on variable 2 is more. f) Control Charts : Control charts are used to verify whether a process is under control. Variables, when they remainwithin a range, will render the product and maintain the specifications. This is called the quality of conformance. Therange of permitted deviations is determined by design parameters. Samples are taken and the mean and range of thevariable of each sample (subgroup) is recorded. The mean of the means of the samples gives the control lines.Assuming normal distribution, we expect 99.97 percent of all values to lie within the Upper Control Limit (UCL) andLower Control Limit (LCL) corresponding to + 3 . The graphical representation of data helps in changing settings to bring back the process closer to the target. g) Cause and Effect Diagram: Cause and effect diagram represents all the possible causes which lead to a defect on quality characteristics. These are arranged in such a way that different branches representing causes connect the stemin the direction of the discovery of the problem (See Figure 6.6 for Sample cause and effect diagram) . When each of them is investigated thoroughly we will be able to pin-point some factors which cause the problem. We will also observe that a few of them can have cumulative effect or even a cascading effect.When we observe that we have excessive defects from a machine, we try to identify all possible sources of the causes of defects. We make a study of each of them and try to correct it.

Q5. Define project management. Describe the five dimensions of project management. Answer: Managing a project is the practice of controlling the use of resources, such as cost, time, manpower, hardware, and software involved in the project. It usually starts with a problem statement and ends with delivery of a complete product . Project management involves understanding the scope and various processes in a project cycle. Management is the technique of understanding the problems, needs, and controlling the use of resources such as cost, time ,manpower and materials a) Project cycle:

A project cycle consists of the various activities of operations, resources, and the limitations imposed onthem. b) Process: A process is part of the project which consists of simple and routine instructions to achieve a desired result of any activity of the project. A process is responsible for bringing about the changes in the inputs fed to the process and giving out the desired output. c) Resource: The resource of a project refers to manpower, machinery, money, and materials which are required in the project. d) Scope: Scope of the project refers to the various parameters that affect the project in its planning, formulation, and executions. e) Project cost: Project cost is the budgeted expenditure of the project.

Q6. What is meant by Supply Chain Management (SCM)? What are the objectives of SCM? Answer: Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."SCM is required by an enterprise as a tool to enhance management effectiveness with the following organizational objectives: Reduction of inventory Enhancement of participation level and empowerment level Increase in functional effectiveness of existing systems like Enterprise Resource Planning (ERP), Accounting Software, and Documentation such as Financial reports/ Statements/ISO 9000 Documents

Effective integration of multiple systems like ERP, communication systems, documentation system and security Design / Research & Development (R&D) systems Better utilization of resources like men, material, equipment, and money Optimization of money flow cycle within the organization as well as from external agencies Enhancement of value of products, operations, and services. These enhancements will consequently enhance theprofitability of organization Enhancement of satisfaction level of customers and clients, supporting institutions, statutory control agencies,suppliers and vendors, employees and executives Enhancement of flexibility in the organisation to help in easy implementation of schemes involving modernisation, expansion and diversification even divestments, mergers and acquisitions Enhancement of coverage and accuracy of management information systems

Master of Business Administration- MBA Semester 2

MB0044 Production and Operations Management - 4 Credits

(Book ID: B1133)

Assignment Set - 2 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions. Q1. What is productivity? Write a brief note on capital productivity. Answer: Productivity is a measure of the efficiency of production. Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of a total input. Capital deployed in plant, machinery, buildings and the distribution systems as well as working capital are the components of the cost of manufacturing. Demand fluctuations, uncertainties of production owing to breakdowns, and inventories being created drag the productivity down. Therefore, strategies are needed to maximize the utilization of the funds allotted towards capital. The strategies included are: Outsourcing strategies Methods improvement Balancing of workstations Quality circles Rationalization of packaging methods

Outsourcing strategies When capacity requirements are determined it is easy to figure out whether some goods or services can be outsourced. Outsourcing can reduce the capital and manpower requirements. Also the available capacities can be used to augment corecompetencies thus reducing the cost of the product or service to

the customer. However, lack of expertise, quality considerations, nature of demand and cost factors may restrict outsourcing.

Lack of Expertise: The outsourced firm may not have the requisite expertise to do the job required. Quality Considerations: Loss of control over operations may result in lower quality. Nature of Demand: When the load is uniform and steady, it may not be worthwhile to outsource. Absence of supervision and control may be a hindrance to meet any urgent requirements of the customer. This affects the business especially if no production facilities are built in the organisation. Cost: It may not be worthwhile when the fixed costs that go along with making the product does not get reduced considerably.

Methods improvement Methods Improvement starts with Methods Analysis. The focus of this process is to find out how a job is done andbreaking it down to elemental tasks so that they are amenable for analysis. This is done for both running jobs and new jobs. For a new job, the description becomes the input for analysis. For current jobs, the analyst depends on observations, records and suggestions of the persons involved in the job. When improved methods are suggested, they are implemented and records created for assessing the consequences of the methods improvement procedures .The analyst should involve all concerned persons in the process so that acceptance becomes possible and opportunities open up for further improvements. Moreover, the people actually involved would be interested in improving their productivity and will help the analyst in the process.

Balancing of workstations Assembly lines carry out operations in a sequence so that the product gets completed in stages. Since the workflow has tobe uniform and operations may require different periods for completion the necessity of Line Balancing is felt. Capacitiesat workstations are so adjusted that a product takes approximately the same amount of time during each stage in the process of assembly.

Quality circles Kaoru Ishikawa is generally considered to have promoted the concept of Quality Circles. It is well known that he is the originator of fishbone diagrams to identify the root cause of any problem (See Figure 1.5 Example of a fishbone diagram).The causes for the existence of a problem are classified as pertaining to the material, processes or method or any factor that goes into production. The matter is further investigated and pursued till the exact cause is determined. Quality Circles use these principles in solving problems. A Quality Circle is composed of a small group of employees who genuinely care about others, and who preferably does similar work, that is: Meeting voluntarily with a leader on a regular basis Identifying the problems Analyzing the causes Recommending their solutions to management Implementing solutions, wherever possibleThe teams select projects as per these problems and implement actions to achieve improvement in the processes with aview to improve quality. Since these activities are carried out without affecting the regular work and involve little involvement of the managers, team work gets reinforced and results in continuous improvement in methods and quality. The capital deployed is minimal, if at all, and therefore productivity is enhanced.

Rationalization of packaging methods With logistics becoming an important function of the supply chain and outsourcing becoming the norm, packaging has become an important aspect. Space is at a premium and therefore stacking and storing have to more scientific .Movements inside the premises from one location to another location are being done with automated systems. Also there is a need for the packaging systems to be designed for safe transit and continuous monitoring both for quantities and operations need to be there. In case of outsourced products the materials used and their design should facilitate reuse of the same, which brings about economy.

Q2. Describe briefly the automated flow lines.

Answer: 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, these mi-finished parts are moved to the next machine in the sequence determined by the process requirements and 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, and positioned 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.The main 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. 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 favoring 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. Provisions 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 and Cellular Manufacturing along with conventional Product and Process Layouts are still resorted to, as they allow flexibility for the production system. As the methodologies of JIT and Lean Manufacturing have become important and relevant in manufacturing, many companies have realized 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.

Q3. What is meant by Total Quality Management? Mention the 14 points of Demings approach to management.

Answer: TQM is viewed from many angles as a philosophy, as an approach and as a journey towards excellence. The main thrust is to achieve customer satisfaction by involving everybody in the organisation, across all functions with continuous improvement driving all activities. TQM systems are

designed to prevent poor quality from occurring Deming's TQM helps organizations to improve the quality of the products and services they offer. Demings approach is summarized in his 14 points.1. Constancy of purpose for continuous improvement2. Adopt the TQM philosophy for economic purposes3. Do not depend on inspection to deliver quality4. Do not award any business based on price alone5. Improve the system of production and service constantly6. Conduct meaningful training on the job7. Adopt modern methods of supervision and leadership8. Remove fear from the minds of everyone connected with the organisation9. Remove barriers between departments and people10. Do not exhort, repeat slogans, and put up posters11. Do not set-up numerical quotas and work standards12. Give pride of workmanship to the workmen13. Education and training to be given vigorously 14. State and exhibit top managements commitment for quality and productivity

Q4. Describe briefly the Project Monitoring and control. Answer: Any project aimed at delivering a product or a service has to go through phases in a planned manner, in order to meet the requirements. It is possible to work according to the project plan only by careful monitoring of the project progress. It requires establishing control factors to keep the project on the track of progress. The results of any stage in a project, depends on the inputs to that stage. It is therefore necessary to control all the inputs and the corresponding outputs from a stage. A project manager may use certain standard tools to keep the project on track. The project manager and the team members should be fully aware of the techniques and methods to rectify the factors influencing delay of the project and its product. To analyze the project, methodologies such as, PERT (Program Evaluation Review Technique) and CPM (Critical Path Method) may be used. In the PERT method, one can find out the variance and use the variance to analyze the various probabilistic estimates pertaining to the project. Using the CPM, one can estimate the start time and the finish time for every event of the project in its WBS (Work Breakdown Structure).The analysis charts can be used to monitor, control, track, and execute a project. The various steps involved in monitoring and controlling a project from start to end are listed below.

Preliminary work: The team members must understand the project plans, project stage schedule, progress controls, tracking schedules, summary of the stage cost and related worksheets. All the members have to understand the tolerances in any change and maintain a change control log. They must realize the need

and importance of quality for which they have to strictly follow a quality review schedule and frequently discuss the quality agendas. They mustunderst and the stage status reports, stage end reports, stage end approval reports. Project progress: The members must keep a track of the project progress and communicate the same to other related members of the project. They must monitor and control project progress, through the use of regular check points, quality charts, and statistical tables; control the quality factors which are likely to deviate from expected values as any deviation may result in changes to the stage schedule. The project manager ensures that these changes are mades moothly and organizes review meeting with the project management group. Thus all the members are aware aboutthe progress of the project at all times. This helps them to plan well in advance for any exigency arising due to deviation from planned schedule. Stage control: The project manager must establish a project check point cycle. For this, suitable stage version control procedures may be followed. The details are to be documented stage wise. Project files have to be frequently updated with suitable version control number and revision status should be maintained for each change. Team members are identified who will exercise controls at various points of the project. Resources: The project manager has to plan the resources required for various stages of the project. He has to brief both the project team and the key resources about the objectives of every stage, planned activities, products, organisation metrics, and the project controls. This increases the visibility into the project performance and hence aquality control can be achieved. Allocating a right resource at the right place and the right time will significantlyen hance the efficiency and effectiveness of the resource. Quality control: Quality control is very important in any project. Quality control is possible if the project members follow the quality charts and norms very strictly. The following lists the possible ways to control quality: (See Figure9.4 Phases of quality control)

Schedule quality review :Project members are recommended to schedule the quality review at the beginning and alsothe end of every stage. This helps the project manager and team members to plan well in advance for any unforeseendeviation. Agenda for quality review:

The project manager should create and distribute a quality review agenda specifying the objectives, products, logistics, roles, responsibilities, and time frames. This increases the effectiveness of the review and also reduces the time gap. Conduct quality review: The quality review is to be conducted in a structured and formal manner. Quality review should focus on product development and its quality factors. The project members should check whether the review meets the prescribed quality standards. Progress control: The progress control of a project can be achieved by considering the following: Monitor performance: The first step for any project control mechanism is to monitor the progress. There arenumerous ways to monitor and measure various project parameters. For example, the team members log indetails of actual start date, actual finish date, actual hours worked per task, estimated hours to complete the task,elapsed time in hours to complete the task, any miscellaneous costs incurred during a stage. These inputs becomethe base to monitor the performance of the project and its stages. Update schedule: Update the schedule for: Actual start date for tasks started Actual finish date for tasks finished Actual hours worked per task Latest estimated work in hours to complete the task

Update costs: Update the stage cost summary worksheet with actual costs incurred during the period and estimated remaining costs. Miscellaneous costs will be automatically updated from the scheduler, since they are calculated from actual work.

Re-plan stage schedule:

Review the tracking Gantt and Cost workbook and identify any deviation from the baseline. Analyse the cause of the deviation. Refer back to the project control factors to help determine the appropriate corrective action and adjust the schedule accordingly. Determine if the stage has exceeded the progress, cost and quality tolerance levels agreed with the project management team. Review status of open issues and determine any further action required on these issues. Review the status of any outstanding quality reviews. Review any new change requests.

Conduct team status review: Conduct a status meeting with the project team. This is important to bring every one on the same page of the project progress. Create status report: The status report provides a record of current achievement and immediate expectations of the project. The status has to be effectively communicated to all concerned parties. Create flash report: Summarize the accomplishments for the month, schedule status, upcoming tasks for the month and any major issues. Distribute the same to all project team members and stakeholders. Project status reports: As discussed earlier, the status report provides a record of current achievements and immediate expectations of the project. This is generated on a regular basis depending upon the type, requirements and phase of the project. Typically it is generated for a week. Approvals: In any project, it is important to have top management or project sponsors into confidence about all the aspects of the project. This project stage reviews the decisions taken and actions planned and get it approved by the top management. The goals of such review are to improve quality by finding defects and to improveproductivity by finding defects in a cost effective and timely manner. The group review process includes several stages like planning, preparation, overview of a group review meeting, rework recommendations and follow-up.

Q5. Write a brief note on Just-In-Time (JIT).

Answer Just-In-Time (JIT) manufacturing is a process by which companies don't keep lots of excess inventory; instead, they manufacture a product as an order comes in. It is a management philosophy of continuous and forced problem solving. The objective of JIT manufacturing system is to: Eliminate waste that is, minimise the amount of equipment, materials, parts, space, and workers time, which adds a great value to the product Increase productivity JIT means making what the market demands when it is in need. It is the most popular systems that incorporate the genericelements of lean systems. Lean production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement. Deploying JIT results in decrease of inventories and increases the overall efficiencies. Decreasing inventory allows reducing wastes which in turn results in saving lots of money. There are many advantages of JIT. JIT: Increases the work productivity Reduces operating costs Improves performance and throughput Improves quality Improves deliveries Increases flexibility and innovativeness For industrial organisations to remain competitive, cost efficiencies have become compulsory. JIT helps in this process. It isextended to the shop floor and also the inventory systems of the vendors. JIT has been extended to mean continuous improvement. These principles are being applied to the fields of Engineering, Purchasing, Accounting, and Data processing. However, for organizations to completely implement JIT manufacturing system, they need to have a proper commitment along with the following basic facilities - proper material, quality, equipment, and people involvement

Q6. What is value engineering? Explain its significance.

Answer: Value Engineering (VE) or Value Analysis is a methodology by which we try to find substitutes for a product or anoperation.The concept of value engineering originated during the Second World War. It was developed by the General ElectricCorporations (GEC). Value Engineering has gained popularity

due to its potential for gaining high Returns on Investment (ROI).This methodology is widely used in business re-engineering, government projects, automakers, transportation anddistribution, industrial equipment, construction, assembling and machining processes, health care and environmentalengineering, and many others. Value engineering process calls for a deep study of a product and the purpose for which it isused, such as, the raw materials used; the processes of transformation; the equipment needed, and many others. It alsoquestions whether what is being used is the most appropriate and economical. This applies to all aspects of the product. Value Engineering helps your organization in: Lowering O & M costs Improving quality management Improving resource efficiency Simplifying procedures Minimizing paperwork Lowering staff costs Increasing procedural efficiency Optimizing construction expenditures Developing value attitudes in staff Competing more successfully in marketplace Value Engineering helps you to learn how to: Improve your career skills Separate "Symptoms" from "problems" Solve "root cause" problems and capture opportunities Become more competitive by improving "benchmarking" process Take command of a powerful problem solving methodology to use in any situation

Master of Business Administration- MBA Semester 2

MB0045 Financial Management - 4 Credits

(Book ID: B1134)

Assignment Set- 1 (60 Marks)

Note: Each Question carries 10 marks. Answer all the questions.

Q1. Show the relationship between required rate of return and coupon rate on the value of a bond

A1. 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 bonds 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 bonds 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 bonds 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 aknown 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 bonds 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 occursone 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-ordinaryannuity 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 worthless 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 doesnt 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 alsoinclude the present value of the par value received at maturity, we arrive at the following formula: Lets 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 well 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 semiannual, divide the coupon rate in half. The coupon rate is the percentage off the bonds 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 else where 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. There fore, 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.

Q2. What do you understand by operating cycle? A2. 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 fastera business gets are turn 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 trade off 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 bestored 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 unsalable. 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 product scan 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.

Q3. What is the implication of operating leverage for a firm? A3. 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 labour. Table 1 shows both firms operating cost structures. Highly automated firm A has fixed costs of $35,000 per year and variable costs of only $1.00 perunit, whereas labour-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. Never the less,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 As 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 companys 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 companys common shareholders. They demand a higher expected return for assuming this additional risk, which in turn, raises a companys 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.

Q4. What are the factors that affect the financial plan of a company? A4. 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 companys 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. 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 toy our 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 side track 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 companys 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 .

Q5. An employee of a bank deposits Rs. 30000 into his PF A/c at the end of each year for 20 years. What is the amount he will accumulate in his PF at the end of 20 years, if the rate of interest given by PF authorities is 9%? Hint Amount= 1534800 A.5 30000*FVIFA (9%, 20Y) = 30000*51.160 = Rs. 1534800 Q6. Mr.Anant purchases a bond whose face value is Rs.1000, and which has a nominal interest rate of 8%. The maturity period is 5 years. The required rate of return is 10%. What is the price he should be willing to pay now to purchase the bond? Hint: 924.28 A.6 Interest payable=1000*8%=Rs. 80 Principal repayment is Rs. 1000 Required rate of return is 10% V0=I*PVIFA(kd, n) + F*PVIF(kd, n) Value of the bond=80*PVIFA(10%, 5y) + 1000*PVIF(10%, 5y) = 80*3.791 + 1000*0.621 = 303.28 + 621 =Rs. 924.28

This implies that the company is offering the bond at Rs. 1000 but is worth Rs. 924.28 at the required rate of return of 10%. The investor may not be willing to pay more than Rs. 924.28 for the bond today.

Master of Business Administration- MBA Semester 2

MB0045 Financial Management - 4 Credits

(Book ID: B1134)

Assignment Set- 1 (60 Marks)

Note: Each Question carries 10 marks. Answer all the questions.

Q1.Show the relationship between required rate of return and coupon rate on the value of a bond

Answer:- The relation between the required rate of interest (Kd) and coupon rate on the value of a bond are displayed below. When required rate of interest (Kd) is equal to the coupon rate, the intrinsic value of the bond is equal to its face value. When required rate of interest (Kd) is greater than the coupon rate, the intrinsic value of the bond is less than its face value. When required rate of interest (Kd) is lesser than the coupon rate, the intrinsic value of the bond is greater than its face value.

Number of years of maturity When required rate of interest (Kd) is greater than the coupon rate, the discount on the bond declines as maturity approaches.

 When required rate of interest (Kd) is less than the coupon rate, the premium on the bond declines as the maturity increases.

Example To show the effect of the above, consider a case of a bond whose face value is Rs. 100 with a coupon rate of 11% and a maturity of 7 years.

If Kd is 13%, then,

V0 = I*PVIFA (Kd, n) + F*PVIF (Kd, n) = 11*PVIFA (13%, 7) + 100*PVIF (13%, 7) = 11*4.423 + 100*0.425 = 48.65 + 42.50 = Rs.91.15

After 1 year, the maturity period is 6 years, the value of the bond is

V0 = I*PVIFA (Kd, n) + F*PVIF (Kd, n) = 11*PVIFA (13%, 6) + 100*PVIF (13%, 6) = 11* 3.998 + 100*0.480 = 43.98 + 48 = Rs. 91.98.

We see that the discount on the bond gradually decreases and value of the bond increases with the passage of time as required rate of interest (Kd) ishigher than the coupon rate.

Continuing with the same problem above, let us see the effect on the bond value if the required rate is 8%.

If Kd is 8%, V0 = I*PVIFA (Kd, n) + F*PVIF (Kd, n)

= 11*PVIFA (8%, 7) + 100*PVIF (8%, 7) = 11*5.206 + 100*0.583 = 57.27 + 58.3 = Rs. 115.57

One year later, with Kd at 8%,

V0

= I*PVIFA (Kd, n) + F*PVIF (Kd, n)

= 11*PVIFA (8%, 6) + 100*PVIF (8%, 6) = 11*4.623 + 100* 0.630 = 50.85 + 63 = Rs. 113.85

For a required rate of return of 8%, the bond value decreases with passage of time and premium on bond declines as maturity approaches Q2.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 unsalable. 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. Q3.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 firms 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 pointthe point at which total costs equal total sales. Nevertheless, a change of 1 percent in sales causes more than a 1 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 As sales decrease by 1 percent, its profits will decrease by more than 1 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 companys 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 riskfinancial riskis placed on the companys common shareholders. They demand a higher expected return for assuming this additional risk, which in turn, raises a companys 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. Q4.Explain the factors affecting Financial Plan. Answer: To help your organization succeed, you should develop a plan that needs to befollowed. This applies to starting the company, developing new product, creating a newdepartment or any undertaking that affects the companys future. There are several factors that affect planning in an organization. To create an efficient plan, you need to understand thefactors involved in the planning process. Organizational planning is affected by many factors: Priorities In most companies, the priority is generating revenue, and this priority cansometimes interfere with the planning process of any project. For example, if you are in theprocess of planning a large expansion project and your largest customer suddenlythreatens to take their business to your competitor, then you might have to shelve theexpansion planning until the customer issue is resolved. When you start the planningprocess for any project, you need to assign each of the issues facing the company apriority rating. That priority rating will determine what issues will sidetrack you from theplanning 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 canhelp your company to grow and succeed, but if the company does not have the resources tomake the plan come together, it can stall progress. One of the first steps to anyplanning process should be an evaluation of the resources necessary to complete theproject, compared to the resources the company has available. Some of the resources toconsider are finances, personnel, space requirements, access to materials and vendorrelationships.

Forecasting - A company constantly should be forecasting to help prepare for changes in themarketplace. Forecasting sales revenues, materials costs, personnel costs and overheadcosts can help a company plan for upcoming projects. Without accurate forecasting, it can bedifficult to tell if the plan has any chance of success, if the company has the capabilities to pulloff the plan and if the plan will help to strengthen the companys standing within theindustry. For example, if your forecasting for the cost of goods has changed due to asudden increase in material costs, then that can affect elements of your product rolloutplan, 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 conting encyplan in place. If the company has decided to pursue a new product line, there needs to be apart 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 relationsproblems that a failed product can cause all need to be part of the organizational planningprocess from the beginning.

Q5. An employee of a bank deposits Rs. 30000 into his PF A/c at the end of each yearfor 20 years. What is the amount he will accumulate in his PF at the end of 20 years,if the rate of interest given by PF authorities is 9%?

Solution:

Year 1 2 30000 30000

Amount 9% 9% 3 30000 9% 9% 9% 9% 9% 9 10 11 12 13 14 15 16

Interest 3000 3270 9% 3885 4234 4615 5031 5484 30000 30000 30000 30000 30000 30000 30000 30000 9% 9% 9% 9% 9% 9% 9% 9%

Total

3564

4 5 6 7 8

30000 30000 30000 30000 30000

5977 6515 7102 7741 8438 9197 1002 1092

17 18 19 20

30000 30000 30000 30000

9% 9% 9% 9%

1191 1298 1415 1542

Q6.Mr. Anant purchases a bond whose face value is Rs.1000, and which has a nominal interest rate of 8%. The maturity period is 5 years. The required rate of return is 10%. What is the price he should be willing to pay now to purchase the bond? Hint: 924.28

Solution: Interest payable=1000*8%=Rs. 80, Principal repayment is Rs. 1000Required rate of return is 10% V0=I*PVIFA(kd, n) + F*PVIF(kd, n) Value of the bond=80*PVIFA(10%, 5y) + 1000*PVIF(10%, 5y)= 80*3.791 + 1000*0.621 = 303.28 + 621 =Rs. 924.28 This implies that the company is offering the bond at Rs. 1000 but is worth Rs.924.28 at therequired rate of return of 10%. The investor may not be willing to pay more than Rs. 924.28 forthe bond today.

Master of Business Administration- MBA Semester 2

MB0045 Financial Management - 4 Credits

(Book ID:B1134)

Assignment Set- 2 (60 Marks) Note: Each Question carries 10 marks. Answer all the questions Q1.The following data is available in respect of a company : Equity Rs.10lakhs,cost of capital 18% Debt Rs.5lakhs,cost of debt 13%Calculate the weighted average cost of funds taking market values as weights assuming tax rateas 40% Hint: Use the equation WACC = We Ke + Wp Kp +Wr Kr + Wd Kd + Wt Kt

Solution: Step I is to determine the cost of each component .Ke = ( D1/P0) + g= (2/32) + 0.1 = 0.1625 or 16.25% Kp = [D + {(FP)/n}] / {F+P)/2} = [14 + (10584)/8] / (105+84)/2 =16.625/94.5 = 0.1759 or 17.59% Kr = Ke which is 16.25%Kd = [I(1T) + {(FP)/n}] / {F+P)/2} = [12(1 0.4) + (10590)/7] / (105+90)/2 = [7.2 + 2.14] / 97.5 = 0.096 or 9.6%

Kt = I(1T)= 0.11(10.4)= 0.066 or 6.6%

Step II is to calculate the weights of each source .We = 200/750 = 0.267 Wp = 100/750 = 0.133 Wr = 100/750 = 0.133 Wd = 300/750 = 0.4 Wt = 50/750 = 0.06

Step III Multiply the costs of various sources of finance with corresponding weights and WACC is calculated by adding all these components WACC = We Ke + Wp Kp +Wr Kr + Wd Kd + Wt Kt = (0.267*0.1625) + (0.133*0.1759) + (0.133*0.1625) + (0.4*0.092) + (0.06*0.066) = 0.043 + 0.023 + 0.022 + 0.0384 + 0.004 = 0.1457 or 14.57% The value of WACC is 14.57%

Q2. ABC Ltd. provides the information as shown in table 6.21 regarding the cost,sales, interests and selling prices. Calculate the DFL .Details of ABC Ltd.

Output

20000 units

Fixed costs Variable cost Interest on borrowed Selling price per unit

Rs 3500 Rs 0.05 per units nil 0.20

Solution: EBIT 200000 Less: interest on borrowed funds NIL EBT 150000 DFL= EBIT {EBITI{Dp/(1-T)}} = 200000/(20000050000{25000/(10.50)} DFL=2.0 The degree of financial leverage of ABC ltd is found to be 2.0

Q3. Two companies are identical in all respects except in the debt equity profile.Company X has 14% debentures worth Rs. 25,00,000 whereas company Y does nothave any debt. Both companies earn 20% before interest and taxes on their totalassets of Rs. 50,00,000. Assuming a tax rate of 40%, and cost of equity capital to be22%, find out the value of the companies X and Y using NOI approach?Hint: use the formula K0 = [B/(B+S)]Kd + [S/(B+S)]Ke

Solution: S = 1000,000/.22 = 4545454.5 B = 25,00,000 K0=[25,00,000/[2500000+4545454.5)].14+[4545454.5/2500000+4545454.5)].22 =0.0496+.142 =.1915 or 19.15% V = 5000000/0.1915 = 26,109,660.57

Q4. Examine the importance of capital budgeting. Answer: Capital budgeting decisions are the most important decisions in corporate financialmanagement. These decisions make or mar a business organisation. These decisions commit afirm to invest its current funds in the operating assets (i.e. long-term assets) with the hope of employing them most efficiently to generate a series of cash flows in future. These decisionscould be grouped into: Decision to replace the equipments for maintenance of current level of business or decisions aiming at cost reductions, known as replacement decisions Decisions on expenditure for increasing the present operating level or expansion throughimproved network of distribution Decisions for production of new goods or rendering of new services Decisions on penetrating into new geographical area Decisions to comply with the regulatory structure affecting the operations of thecompany, like investments in assets to comply with the conditions imposed byEnvironmental Protection Act Decisions on investment to build township for providing residential accommodation toemployees working in a manufacturing plant The reasons that make the capital budgetingdecisions most crucial for finance managers are: These decisions involve large outlay of funds in anticipation of cash flows in futureFor example, investment in plant and machinery. The economic life of such assetshas long periods. The projections of cash flows anticipated involve forecasts of many financial variables. The most crucial variable is the sales forecast. For example, Metal Box spent large sums of money on expansion of its productionfacilities based on its own sales forecast. During this period, huge investments in R& D in packaging industry brought about new packaging medium totally replacingmetal as an important component of packing boxes. At the end of the expansionMetal Box Ltd found itself that the market for its metal boxes has declineddrastically.The end result is that metal box became a sick company from the position itenjoyed earlier prior to the execution of expansion as a blue chip.Employees lost their jobs. It affected the standard of living and cash flowposition of its employees. This highlights the element of risk involved in these type of decisions.

Equally we have empirical evidence of companies which took decisions onexpansion through the addition of new products and adoption of the latesttechnology, creating wealth for share-holders. The best example is the Reliance Group. Any serious error in forecasting sales, the amount of capital expenditure cansignificantly affect the firm. An upward bias might lead to a situation of the firmcreating idle capacity, laying the path for the cancer of sickness. Any downward bias in forecasting might lead the firm to a situation of losing itsmarket to its competitors. Long time investments of the funds sometimes may change the risk profile of thefirm. Most of the capital budgeting decisions involve huge outlay. The funds requiredduring the phase of execution must be synchronised with the flow of funds. Failureto achieve the required coordination between the inflow and outflow may causetime over run and cost over-run. These two problems of time over run and cost overrun have to be prevented from occurring in the beginning of execution of the project.Quite a lot of empirical examples are there in public sector in India in support of this argument that cost overrun and time over run can make a companysoperation unproductive. Capital budgeting decisions involve assessment of market for companys productand services, deciding on the scale of operations, selection of relevant technologyand finally procurement of costly equipment.If a firm were to realise after committing itself to considerable sums of money in the process of implementing the capital budgeting decisions taken that the decision to diversify or expandwould become a wealth destroyer to the company, then the firm would have experienced asituation of inability to sell the equipments bought. Loss incurred by the firm on account of thiswould be heavy if the firm were to scrap the equipments bought specifically for implementingthe decision taken. Sometimes these equipments will be specialised costly equipments.Therefore, capital budgeting decisions are irreversible. All capital budgetingdecisions involves three elements. These three elements are: Cost Quality TimingDecisions must be taken at the right time which would enable the firm to procure the assets atthe least cost for producing products of required quality for the customer. Any lapse on the partof the firm in understanding the effect of these elements on implementation of capitalexpenditure decision taken, will strategically affect the firms profitability. Liberalisation and globalisation gave birth to economic institutions like world tradeorganisations. General Electrical can expand its market into India snatching theshare already enjoyed by firms like Bajaj

Electricals or Kirloskar Electric company.Ability of GE to sell its products in India at a rate less than the rate at which Indiancompanies sell cannot be ignored.Therefore, the growth and survival of any firm in todays business environmentdemands a firm to be pro-active. Pro-active firms cannot avoid the risk of taking challenging capital budgeting decisions for growth. The social, political, economic and technological forces generate high level of uncertainty in future cash flow streams associated with capital budgeting decisions. These factors make these decisions highly complex. Capital budgeting decisions are very expensive. To implement these decisions,firms will have to tap the capital market for funds. The composition of debt andequity must be optimal keeping in view the expectations of investors and risk profileof the selected project.Therefore capital budgeting decisions for growth have become an essentialcharacteristic of successful firms today.

Q5. Briefly explain the process of Capital Rationing . Answer: The following are the steps involved in capital rationing Ranking of different investment proposals Selection of the most profitable investment proposal Steps involved in capital rationing Ranking of different investment proposals means

the various investment proposals shouldbe ranked on the basis of their profitability. Ranking is done on the basis of NPV, Profitabilityindex or IRR in the descending order. Net present value method

recognises the time value of money. Net present value correctlyadmits that cash flows occurring at different time periods differ in value. Therefore, there is aneed to find out the present values of all the cash flows. NPV can be represented with thefollowing formula. Net Present Value = present value of cash inflows present valueof cash outflows

Profitability index is also known as benefit cash ratio. Profitability index is the ratio of thepresent value of cash inflows to initial cash outlay.

The discount factor based on the requiredrate of return is used to discount the cash inflows.

P1 = present value of cash inflows/initial cash outlay

Internal rate of return (IRR) is the rate (i.e. discount rate) which makes the net present value of any project equal to zero. Internal rate of return is the rate of interest which equates the present value (PV) of cash inflows with the present value of cash outflows.IRR is also called as yield on investment, managerial efficiency of capital, marginal productivity of capital, rate of return and time adjusted rate of return. IRR is the rate of return that a project tearns. IRR can be determined by solving the following equation for Selection of the most profitable investment proposal After ranking the different investment proposals based on their net present value, profitability index and the internal rate of return, the selection of the most profitable investment proposal is to be done. The selection is done mainly in a view to select the investment proposal which earnsmore profits than compared to the other proposals. The basic features to be taken under consideration during the selection of the most profitable investment proposal are: The proposal should have the potentiality of making large anticipated profits The proposal should involve high degree of risk

The proposal should involve a relatively long time-period between the initial outlay and the anticipated return Evaluation of the selection procedure PI rule of selecting projects under capital rationing may not yield satisfactory result because of project indivisibility. When projects

involving high investment is acceptedmany small projects will have to be excluded. But the sum of the NPVs of small projects tobe accepted may be higher than the NPV of a single large project Capital rationing also suffers from the multi-period capital constraints

Q6.Explain the concepts of working capita lAnswer: The four most important concepts of working capital are Grossworking capital, Net working capital, Temporary working capital and Permanent working capital. Concepts of working capital Gross working capital Gross Working Capital refers to the amounts invested in various components of current assets. This concept has the following practical relevance. Management of current assets is the crucial aspect of working capital management Gross working capital helps in the fixation of various areas of financial responsibility

Gross working capital is an important component of operating capital. Therefore, forimproving the profitability on its investment a finance manager of a company must givetop priority to efficient management of current assets The need to plan and monitor the utilisation of funds of a firm demands working capitalmanagement, as applied to current assets Net working capital Net working capital is the excess of current assets over current liabilities and provisions. Networking capital is positive when current assets exceed current liabilities and negative whencurrent liabilities exceed current assets. This concept has the following practical relevance. Net working capital indicates the ability of the firm to effectively use the spontaneousfinance in managing the firms working capital requirements A firms short term solvency is measured through the net working capital position itcommands Permanent Working Capital Permanent working capital is the minimum amount of investment required to be made incurrent assets at all times to carry on the day to day operation of firms business. This minimumlevel of current assets has been given the name of core current assets by the TandonCommittee.Permanent working capital is also known as fixed working capital. Temporary Working Capital Temporary working capital is also known as variable working capital or fluctuating workingcapital. The firms working capital requirements vary depending upon the seasonal and cyclicalchanges in demand for a firms products. The extra working capital required as per the changingproduction and sales levels of a firm is known as temporary working capital

Master of Business Administration - MBA Semester 2

MB0046 Marketing Management (4 credits)

(Book ID: B1135)

ASSIGNMENT- Set 1

Note: Each Question carries 10 marks. Answer all the questions.

Q.1 Explain the various stages involved in new product development New Product Development New products are essential for existing firms to keep the momentum and for new firms they provide the differentiation. New product doesnt mean that it is absolutely new to the world. It may be a modification, or offered in a new market, or differentiated from existing products. Therefore it is necessary to understand the concept of new products .Meaning of New Products :a. They are really innovative. For example, Googles Orkut, a networking site which revolutionized social networking. In this site people can meet like minded people; they can form their own groups, share photos, comments and many more .b. They are very different from the others: Haier launches path-breaking 4-Door Refrigerators first time in Indiac. They are imitative; these products are not new to the market but new to the company. For example, Cavin Kare launched Ruchi pickles. This product is new to Cavin Kare but not to the market.

New product development process :Stage 1 - Idea generation: New product idea can be generated either from the internal sources or external sources. The internal sources include employees of the organization and data collected from the market. The external source includes customers, competitors and supply chain members. For example, Ingersoll Rand welcomes new ideas from the General public.

Stage 2-Idea screening:

Organization may have various ideas but it should find out which of these idea scan be translated into concepts. In an interview to Times of India, Mr. Ratan Tata, chairman TATA group discussed how his idea saw many changes from the basic version. He told that he wanted to develop car with scooter engine, plastic doors etc But when he unveiled the car, there were many changes in the product. This shows that initial idea will be changed on the basis of market requirements.

Stage 3 - Concept development: the main feature or the specific desire that it caters to or the basic appeal of the product is created or designed in the concept development .Concepts used for Tata Nano car are Concept I: Low-end rural car, probably without doors or windows and with plastic curtains that rolled down, a four-wheel version of the auto-rickshaw Concept II: A car made by engineering plastics and new materials, and using new technology like aerospace adhesives instead of welding Concept III: Indigenous, in-house car which meets all the environment standards Stage 4 - Concept testing: At this stage concept is tested with the group of target customers. If any changes are required in the concept or the message it will be done during this stage. Also the effectiveness is tested on a minor scale. If the concept meets the specific requirements, then it will be accepted.

Stage 5 Marketing strategy development: The marketing strategy development involves three parts. The first part focuses on target market, sales, market share and profit goals. TATAs initial business planconsisted sales of 2 lakhs cars per annum. The second part involves product price, distribution and marketing budget strategies. TATAs fixed Rs 1 lakhs as the car price, and finding self employed personswho work like agent to distribute the cars. The final part contains marketing mix strategy and profit goals. Stage 6 - Business analysis: it is the analysis of sales, costs and profits estimated for a new product andto find out whether these align with the company mission and objectives

Stage 7 - Product development: during this stage, product is made to undergo further improvements, new features or improvised versions are added to the product. There is also scope for innovation and using the latest technology into the product.

TATA Nano car development (Source: business world nanolution) Tried to outsource the product from all over the world. Development of mule or prototype with 20bhp. Designing the small engine Thermodynamic simulations and final engine Development of MPFI with help of Bosch. Cost reduction and negotiating with vendors.is carried out to support it

Q.2 Discuss the importance of SWOT analysis to develop effective marketing mix. Ans. A tool used by organisations to help the firm establish its Strengths, Weaknesses, Opportunities and Threats (SWOT). A SWOT analysis is used as a framework to help the firm develop its overall corporate, marketing, or product strategies. Note: Strengths and Weaknesses are internal factors which are controllable by the organisation. Opportunities & threats are external factors which are uncontrollable by the organization .Strength examples could include: A strong brand name. Market share. Good reputation .Expertise and skill .Weaknesses could include :Low or no market share .No brand loyalty. Lack of experience .Opportunities could include :A growing market .Increased consumer spending. Selling internationally. Changes in society beneficial to your company. Threats could include :Competitors Government policy eg taxation, laws Changes in society not beneficial to your company.A SWOT analysis is an excellent tool to use if the organisation wants to take a stepback and assess the situation they are in. Issues raised from the analysis are then usedto assist the organisation in developing their marketing mix strategy. A SWOT analysis must form the part of any prudent marketing strategy. Analysis A marketing plan starts with an analysis of the company, customers, competitors, external partners and the overall economy. The company's strengths may include its financial position and cash balance, product quality and brand recognition. Its weaknesses may include an inability to attract qualified candidates due to tightness in the labor market. Its market opportunities may lie in foreign markets with emerging and growing middle classes. It may also find opportunities in local markets indirectly by taking advantage of financial difficulties faced by some of its smaller competitors. However, entry of new competitors and emerging new technological innovations may represent threats because they can alter customer buying habits. External partners, such as suppliers and regulatory agencies, and the overall economic environment must also be evaluated for potential threats and opportunities.

Segmentation The division of a market into groups based on demographic and other factors is known as market segmentation. This allows advertising messages to be targeted specifically to maximize the sales opportunities in each segment. Using the SWOT analysis results, a company will know where the best

opportunities are, including niche areas or specificdemographic groups that might be underserved by its competitors. Similarly, it also willk now potential weaknesses in its own product offerings that might be exploited by its competitors to gain market share and take steps to correct them.

Strategy The four "P's" of a marketing strategy are product, price, promotion and place(distribution channels). Once again, SWOT analysis forms the basis of strategic choices. For example, product decisions are based on the market opportunities, the company's own internal research and development and manufacturing strengths, the availability of adequate financial resources, and the brand recognition. Pricing considerations include sales volume sensitivity to price changes and the impact of discounts and flexible payment terms. The strengths and weaknesses of the distribution channel are important considerations; also important to the marketing plan are the type and mix of channels -- for example, retail or direct -- and the transportation and ware housing logistics. Promotion considerations include designing advertising campaigns based on a brand's strengths -- for example, value and quality -- and the timing of media buys

Q.3 Briefly explain the major external and uncontrollable factors that influence an organization decision making, performance and strategies

Ans. An organization's macro environment is defined as the major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. This means that the macro environment consists of factors that affect a company, but are outside of its control. This could be almost anything from the wider community, such as interest rates, cultural factors, competitors, technological advances, government policy and even disastrous weather situations, to name a few .In the business world, the four factors that any macro environmental effect could have on a business are known as PEST. PEST is an acronym for Political, Environmental, Social or Technological factors. These factors are umbrella terms for almost anything that could affect business from the outside world. McDonald's and the macro environment McDonald's provides us with a few good examples of macro environmental factors and also shows that even worldwide corporations have many factors that influence their functioning and decision making. Because McDonald's stores are located worldwide, they have had to adapt to each individual culture they have moved into. China Daily(2004) describe how well KFC and McDonald's did when they first broke into the Chinese market. However, after curiosity from the general public died down, they were not doing so well. The restaurants needed to adapt to their new market, so McDonald' sstarted incorporating things like vegetable and seafood soup and corn soup. The American dcor was also overhauled, with many restaurants around Beijing

having enovations to make them look like traditional Chinese architecture. Now, according the Wall Street Journal (2011), McDonald's is claiming that China will be its biggest global market in years ahead

Super Size Me: McDonald's reinvention Super Size Me was a documentary made by Morgan Spurlock, who ate nothing but McDonald's for 30 days. Toward the end, he had serious medical problems, much less energy and sex drive and had put on a lot of weight. While McDonald's itself would probably disagree with consuming that much of its food over a 30-day period, people worldwide were adopting a negative view of the chain. It had to reinvent itself. Six weeks after the release of the film, McDonald's in the U.S. removed its "super size" option. This was the first part of its new "Eat Smart, Be Active" campaign, which also introduced salads, fruits and yogurts to its menu. The new healthy options were received with great success by the general public, and McDonald's had redeemed itself, maintaining its positive reputation.

The global financial crisis The GFC hit businesses hard back in 2009, and most of the world is still recovering. This is probably the most obvious recent example of how the macro environment can affect business. It is generally considered that this was the biggest financial crisis the world has seen since the Great Depression. While most people recognize how much the GFC has affected the business world, many people wouldn't consider food chains like McDonald's. With the GFC, many people started trying to be a bit more careful with how they spent their cash. To combat this, in Australia, McDonald's released several "budget" meal sand snacks. They introduced the $2 range, which had a list of products that cost $2 or less. They also introduceed the family box with four meals inside for $19.95. This was obviously targeted at young families, who are amongst some of McDonald's largest demographic of consumers. Constantly adapting, changing and reacting to the macro environment is crucial, even for large worldwide corporations like McDonald's. Conclusion The macro environment consists of anything and everything from the world outside of a business, which could have an effect on it. Being aware of these factors and being ready to adapt and change with them is crucial for a business to stay relevant over aprolonged period of time. McDonald's provides us with some great examples of how businesses adapt and change, and it is one of the biggest worldwide corporations. If it has to keep changing and reinventing itself, then it shows businesses of any size really need to be aware of macro environmental factors.

Q.4 Discuss the potential benefits associated with MIS. Ans. According to Kenneth C. Laudon and Jane Price Laudon in their book Management Information Systems: A Contemporary Perspective, an information system is "a set of procedures that collects (or retrieves), processes, stores, and disseminates information to support decision making and control." In most cases, information systems are formal ,computer based systems that play an integral role in

organizations. Although information systems are computer based, it is important to note that any old computer or software program is not necessarily an information system. "Electronic computers and related software programs are the technical foundation, the tools and materials, of modern information systems, " Laudon and Laudon wrote. "Understanding information systems, however, requires one to understand the problems they are designed to solve, the architectural and design solutions, and the organizational processes that lead to the se solutions."Though it is sometimes applied to all types of information systems used in businesses, the term "management information systems, " or MIS, actually describes specific systems that "provide managers with reports and, in some cases, on-line access to the organization's current performance and historical records, " Laudon and Laudon noted."MIS primarily serve the functions of planning, controlling, and decision making at the management level." MIS are one of a number of different types of information systems that can serve the needs of different levels in an organization. For example, information systems might be developed to support upper management in planning the company 'sstrategic direction or to help manufacturing in controlling a plant's operations. Some ofthe other types of information systems include: transaction processing systems, which simply record the routine transactions needed to conduct business, like payroll, shipping, or sales orders; and office automation systems, which are intended to increase the productivity of office workers and include such systems as word processing, electronic mail, and digital filing. Ideally, the various types of information systems in an organization are interconnected to allow for information sharing. SYSTEMS DEVELOPMENT The development of effective information systems holds a number of challenges for small businesses. "Despite, or perhaps because of, the rapid development of computer technology, there is nothing easy or mechanical about building workable information systems, " Laudon and Laudon stated. "Building, operating, and maintaining information systems are challenging for a number of reasons." For example, some information cannot be captured and put into a system. Computers often cannot be programmed to take into account competitor responses to marketing tactics or changes in economic conditions, among other things. In addition, the value of information erodes over time, and rapid changes in technology can make systems become obsolete very quickly. Finally, many companies find systems development to be problematic because the services of skilled programmers are at a premium teams or functional units, it becomes more difficult to keep the lines of communication open and encourage the sharing of ideas .Knowledge management is a way of using technology to facilitate the process of collaboration across an organization. A small business might begin sharing information between groups of employees by creating a best-practices database or designing an electronic company directory indicating who holds what knowledge. Larger companies, as David Coleman wrote in Computer Reseller News, can implement KM systems through targeted pilot projects or through a broader strategy involving the firm' stechnical infrastructure. Many companies have installed intranets or enterprise-wide computer networks with databases all employees can access as a form of KM. Anumber of software programs exist to facilitate KM efforts. Some of the leaders in the field include Lotus Notes, Microsoft Exchange Server, and a variety of systems basedon XML.

Q5. Describe five interdependent levels of basic human needs (motivators) as propounded by Abraham Maslow

Ans .Psychologist Abraham Maslow first introduced his concept of a hierarchy of needs in his1943 paper "A Theory of Human Motivation"1 and his subsequent book Motivation andPersonality.2 This hierarchy suggests that people are motivated to fulfill basic needs before moving on to other, more advanced needs. This hierarcy is most often displayed as a pyramid. The lowest levels of the pyramid are made up of the most basic needs, while the more complex needs are located at the top of the pyramid. Needs at the bottom of the pyramid are basic physical requirements including the need for food, water, sleep, and warmth. Once these lower-level needs have been met, people can move on to the next level of needs, which are for safety and security.As people progress up the pyramid, needs become increasingly psychological and social. Soon, the need for love, friendship, and intimacy become important. Further up the pyramid, the need for personal esteem and feelings of accomplishment take priority. Like Carl Rogers, Maslow emphasized the importance of self-actualization, which is a process of growing and developing as a person in order to achieve individual potential. Types of Needs Maslow believed that these needs are similar to instincts and play a major role in motivating behavior. Physiological, security, social, and esteem needs are deficiency needs (also known as D-needs), meaning that these needs arise due to deprivation. Satisfying these lower-level needs is important in order to avoid unpleasant feelings or consequences.

Maslow termed the highest-level of the pyramid as growth needs (also known as being needs or Bneeds). Growth needs do not stem from a lack of something, but rather from a desire to grow as a person. Five Levels of the Hierarchy of Needs There are five different levels in Maslows hierarchy of needs: 1. Physiological Needs These include the most basic needs that are vital to survival, such as the need for water, air, food, and sleep. Maslow believed that these needs are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met.2. Security Needs These include needs for safety and security. Security needs are important for survival ,but they are not as demanding as the physiological needs. Examples of security needs include a desire for steady employment, health insurance, safe neighborhoods, and shelter from the environment.3. Social Needs These include needs for belonging, love, and affection. Maslow considered these needs to be less basic than physiological and security needs. Relationships such as friendships, romantic attachments, and families help fulfill this need for companionship and acceptance, as does involvement in social, community, or religious groups.4. Esteem Needs After the first three needs have been satisfied, esteem needs becomes increasingly important. These include the need for things that reflect on self-esteem, personal worth, social recognition, and accomplishment.5. Self-actualizing Needs This is the highest level

of Maslows hierarchy of needs. Self -actualizing people are self-aware, concerned with personal growth, less concerned with the opinions of others, and interested fulfilling their potential. Q.6 List the important differences between Consumer market and business markets Ans. The consumer market is all about selling products and getting the best revenue from that. So therefore, offers will be placed on products to make them more attractive for people to buy so that company gets the sales. The consumer market is also very competitive and this means that if you wish to be successful within it, you need to keep tabs on what the competition is doing and better them. The consumer market is all about making cheap produce and selling it on at a higher price to the general public to make a profit.

The business market, however, is more difficult to define. The differences between it and the consumer market are mainly that the business market is less directly competitive, but at the same time you need to make sure your product, or shares, are attractive to the buyer. So it is more about promoting what you have to make buyers aware of it and why it is so good. The factors that influence consumer buying behaviour will be things such as the price ofthe product, and whether it is actually worth the price that it is being marketed at, the place at which it is being sold, because consumers often have favourite stores, and will look for a reputable name to buy from, and necessity. If the product is something that is needed rather than a one off or a novelty then you are more likely to sell it. The factors that influence business buying are more about the professionalism of the companies selling and their potential to keep providing good share prices are key factors. In the business market it is all about getting your name seen as reputable and knowing what is good to invest in at the time. In business you are more likely to need to impress a company than in consumer buying because the only judge is the consumer themselves.

Master of Business Administration - MBA Semester 2

MB0046 Marketing Management (4 credits)

(Book ID: B1135)

ASSIGNMENT- Set 2 Note: Each Question carries 10 marks. Answer all the questions.

Q.1 what do you mean by marketing functions? Briefly explain the important marketing functions. Answer: Functions Of Marketing The delivery of goods and services from producers to their ultimate consumers or users includes many different activities. These different activities are known as marketing functions. Different thinkers have described these functions in different ways. Some of the most important functions of marketing are discussed below:

1. Marketing Research and Information Management Marketers need to take decisions scientifically. Marketing research function is concerned with gathering, analyzing and interpreting data in a systematic and scientific manner. The types of market information could be analysis of market size and characteristics, consumer tastes and preferences and changes in them from time to time, channels of distribution and communication and their effectiveness, economic, social, political and technological environment and changes therein. A company can procure such information from specialized market research agencies, government or can decide to collect themselves.

2. Advertising and Sales Promotion Advertising is a mass media tool used to inform, persuade or remind customers about products or services. It is an impersonal message targeted at a chosen group through paid space or time. 3. Sales Promotion is a short term incentive given to customers or intermediaries to promote sales.

It supplements advertising and personal selling and can be used at the time of launching a new product or even during its maturity period.

4. Product Planning and Management A Marketer should identify the needs and wants of consumers, develop suitable products / services and make them available. Marketer is also required to maintain the product and its variations in size, weight, package and price range according to the changing needs and requirements of his customers. Information available through Market Research helps product management in taking appropriate decisions while planning the marketing efforts.

5. Selling This function of marketing is concerned with transferring of products to the customer. An important part of this function is organizing sales force and managing their activities. Sales force management includes recruitment, training, supervision, compensation and evaluation of salesmen. They need to be assigned targets and territories where they can operate. The salesmen interact with prospective purchasers facetoface in order to sell the goods. The purchaser may be end customer or an intermediary, such as a retailer or a dealer.

6. Physical Distribution Moving and handling of products from factory to consumers come under this function. Order processing, inventory, management, warehousing and transportation are the key activities in the physical distribution system.

7. Pricing This is perhaps the most important decision taken by marketer, as it is the only revenue fetching function and success and failure of the product may depend upon this decision. Therefore, the decision regarding how much to charge should be taken such that the price is acceptable to the prospective buyers and at the same time fetches profits for the company. While deciding on the price, the factors to be considered are competition, competitive prices, companys marketing policy, government policy, and the buying capacity of target market etc.

Importance Of Marketing. Peter Drucker, the famous management thinker in one of his classic articles has said Marketing is everything. All other activities in the organization are support services to the marketing strategy that the company pursues. Marketing is important not only to the company but to the consumers and society and to the economy.

Consumer stands to benefit from marketing activities. He has more alternatives to choose from, improved and better quality products are available and he is able to buy goods at convenient locations. Thanks to much improved customer service, a consumer is able to complain and expects his complaint to be attended in reasonable time. He can now buy with credit or debit card or cash or on installments. For the society as a whole, marketing is important because it acts as a change agent making people use latest products and improves the standard of living of the people. As we know, the main objective of marketing is to produce products and services for the society as per their needs and tastes, and while doing so it creates demand for these goods and services, encourages them to use them, thus leading to higher demand and sales. This higher demand allows the company to achieve economies of scale in both production and distribution resulting in decrease in production and distribution costs which can be used to reduce prices to consumers. For a company in any business, marketing is considered to be the most important activity. It helps an organization to keep abreast of changes taking place in the market and consumer tastes and preferences through market research. Based on this reliable data, it responds to these changes by rectifying any drawbacks in its products or changing its competitive strategy. Thus the companys decision making and planning are not based on just hunches but on sound market information. The firm that follows such practices is sure to prosper under all conditions. Marketing provides an effective channel of communication to the company with its consumers by way of advertising and sales promotion. Marketing thus brings revenue and earns goodwill for the company. Successful operation of marketing activities creates, maintains and increases the demand for goods and services in the economy. It results inthe increased level of production. This, in turn, increases the national income, which is beneficial to the economy. Marketing operations require the services of intermediaries such as wholesalers, retailers, transporters, and service provides for storage, finance, insurance and advertising. These services provide employment in large numbers. Q.2 Define the term Brand Equity ? Discuss the components of Brand Equity.

A. 2 Brand equity is a phrase used in the marketing industry to try to describe the value of having a wellknown brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well known names. Another word for "brand equity" is "brand value". The components of Brand Equity are 1) Awareness, 2) Association,

3) Attitude, 4) Attachment and 5) Activity.

Q.3 Why are marketing channels indispensable? List the functions of marketing channels.

A.3 Channel management programs have grown to be an indispensable part of channel marketing nowadays. Channel managers look at these programs as a efficient choice for the management of channel marketing. Today, programs have grown so advanced these help save lot of time and as well as initiatives for the channel managers. You can even install automated channel partner marketing software which usually will get upgraded automatically as channel partners submit information. Automated software is of great advantage as it assists channel partners get more precise data every time they sign in to the portal.

Additionally, there are numerous channel management application that aim at facilitating better relationship with channel partner. All these help by building sales as well as technical readiness and also by offering prospects to channel partners to even more enhance sales. The important goal of channel marketing management is to give partners information as and when they require it.

Q.4.Explain the different methods which allows a media planner to decide budget allocation A.4 Media vehicle selection, number of insertions and message structure depend on the budget allotted for the communication program. A popular channel may charge more for advertisement but organization gets better viewership. A newspaper having high circulation charges premium for the advertisement but all the organization may not have enough budgets to support such campaign. Hence marketer would like to decide what is the budget for the communication program? And how shall it be allotted optimally? There are four different methods on which a media planner decides the allocation of advertisement budget.

1. Affordable method: The method is used by small companies who dont have enough communication budgets. In this method company allots the fixed amount for the communication program. The advantage of this method is company can have better control over the spending on the

communication. The disadvantage is if sales require higher communication effort, company is not in a position to allocate the budget.

2. Percentage of sales method. In this method company allots the budget on the basis of total sales forecasted. This is the simplest method. Marketer can have better control over the budget and also have flexibility to allocate the budget.

3. Competition method: The Company sets its promotion budget on the basis of competitors advertising effort. Here company closely monitors the developments of the competitors communication program and study the industry trends in communication budget prior to setting up communication budget.

4. Objective and task method: The procedure involved in estimating the advertisement budget by this method are First, Objectives are set for the communication programs. Second, identifying the task to be performed to achieve the objective and third, estimating the cost of achieving these objectives.

Q.5 Define the term direct marketing Explain the different methods adopted for direct marketing

A.5 Direct Marketing : Direct marketing is concerned with establishing an individual relationship between the business offering a product or service and the final customer. Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording, analysis and tracking of customer behaviour to develop relational marketing strategies. The process of direct marketing covers a wide range of promotional activities you may be familiar with. These include:

a) Direct-response adverts on television and radio b)Mail order catalogues c) E-commerce (you bought this marketing companion following tutor2us direct marketing campaign!) d)Magazine inserts e)Direct mail (sometimes also referred to as junk mail)

f) Telemarketing

Q.6 List the important differences between International marketing and Domestic marketing. A.6 Scope The scope of domestic marketing is limited and will eventually dry up. On the other end, international marketing has endless opportunities and scope.

Benefits As is obvious, the benefits in domestic marketing are less than in international marketing. Furthermore, there is an added incentive of foreign currency that is important from the point of view of the home country as well.

Sharing of technology Domestic marketing is limited in the use of technology whereas international marketing allows use and sharing of latest technologies. Political relations Domestic marketing has nothing to do with political relations whereas international marketing leads to improvement in political relations between countries and also increased level of cooperation as a result.

Barriers In domestic marketing there are no barriers but in international marketing there are many barriers such as cross cultural differences, language, currency, traditions and customs.

Master of Business Administration - MBA Semester II

MB0047 Management Information Systems - 4 Credits

(Book ID: B1136)

Assignment - Set- 1 (60 Marks)

Note: Each Question carries 10 marks. Answer all the questions.

1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some Disadvantage of MIS?

Answer:MIS systems are extensively used in generating statistical report of any organizationwhich can be used to study management by behavior. They set objectives to their employees using ratio analysis. Management also uses MIS for decision making from thelow level management to top level management. In order to perform task usingInformation systems use of technical support is required. So it is the combination of 3components i.e. organization, technology and management.

MIS characteristics It supports transaction handling and record keeping. It is also called as integrated database Management System which supports inmajor functional areas. It provides operational, tactical, and strategic level managers with east access totimely but, for the most, structured information. It supports decision making function which is a vital role of MIS. It is flexible which is needed to adapt to the changing needs of the organization. It promotes security system by providing only access to authorized users. MIS not only provides statistical and data analysis but also works on the basis onMBO (management by objectives). MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures. It helps to build relevant and measurable objectives, monitor results, and send alerts.

Basic Function of MIS The main functions of MIS are:

Data Processing: Gathering, storage, transmission, processing and getting output of the data. Making the data into information is a major task. Prediction: Prediction is based on the historical data by applying the prior knowledge methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on the application and with different departments. Planning: Planning reports are produced based on the enterprise restriction on the companies and helps in planning each functional department to work reasonably. Control: MIS helps in monitoring the operations and inspects the plans. It consists of differences between operation and plan with respect to data belonging to different functional department. It controls the timely action of the plans and analyzes the reasons for the differences between the operations and plan. Thereby helps managers to accomplish their decision making task successfully Assistance: It stores the related problems and frequently used information to apply them for relative economic benefits. Through this it can derive instant answers of the related problem.

Disadvantages of MIS The following are some of the disadvantages of MIS: MIS is highly sensitive: MIS is very helpful in maintaining logging information of an authorized user. This needs to monitor constantly. Quality of outputs is governed by quality of inputs. MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the actual cost needs to have an accrual system having true costs of outputs which is extremely difficult. It has been difficult to establish definite findings. MIS is not flexible to update itself for the changes. The changes in the decision of top level management decrease its effectiveness. Information accountability is based on the qualitative factors and the factors like morality, confidence or attitude will not have any base

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

Answer: Knowledge Based System (KBS)

KBS are the systems based on knowledge base. Knowledge base is the databasemaintained for knowledge management which provides the means of data collections,organization and retrieval of knowledge. The knowledge management manages thedomain where it creates and enables organization for adoption of insights andexperiences.There are two types of knowledge bases. a. Machine readable knowledge bases: The knowledge base helps the computer to process through. It makes the data in the computer readable code which makes the operator to perform easier. Such information s are used by semantic web. Semantic web isa web that will make a description of the system that a system can understand. b. Human readable knowledge bases: They are designed to help people to retrieve knowledge. The information need to be processed by the reader. The reader can access the information and synthesize their own.KBS refers to a system of data and information used for decision making. The system is automated to work on the knowledge based data and information required in a particular domain of management activity. The processing is done based on the past decisions taken under suitable conditions. Decision making is based on the fact that the condition is similar to the past situation hence the decision is also is similar .Examples of KBS are intelligent systems, robotics, neural networks etc.

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.

Model of OLAP 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 berequired 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 supportapplication: 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 canconsider decision support systems as the best when it includes high-level summaryreports 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 mathematicalcalculations 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

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: Value Chain Analysis: The activities performed by a particular enterprise can be analyzed into primaryactivities, which directly adds value to the enterprises factors of production, which are to ge the r referred to as the value chain, and supporting activities.

Figure: Product Differentiation and Value Chain representation Porters Enterprise Value-Chain Value-addition activities like production, marketing delivery, and servicing of the product. These activities are connected in a chain. Support activities include those providing purchased inputs, technology, human resources, or overall infrastructurefunctions to support the primary activities .It is possible to reduce the transaction cost by proper coordination of all the activities. It should be possible to gather better information for various controls and also replace the same by less costlier activities. It will also be possible to reduce the overall time required to complete an activity. Therefore coordination is very important to achieve competitive advantage. For this it is necessary to manage the value chain as a system rather than as separate parts. Anenterprises value chain for competing in a particular industry is embedded in a larger stream of activities. What Porter termed as value system, may be referred to as theindustry valuechain. This chain consists of mainly the suppliers and distributionchannels. Any activity of an organization is subjected to one or more of the following

New technologies Newer technologies changes the direction of the value chain.

Shifting buyer needs The buyers have been increasing their demands to satisfy their needs in the form convenience and better price and features. This demand influences a change in the related market segments;

Variation in industry segmentation The value system undergoes a change depending upon the existence of old and new systems and its components in the value chain. Organizations, which fail to adjust will have to close down their business.

Changes in the costs It is possible to gain competitive advantage by optimizing the activities based on present conditions. Enterprises which continue to work on the older approaches in outdated modes of operation suffer.

Changes in government regulations If there is a change in the standards of the product of the enterprise, with respect to the environmental controls, restrictions on entryto the market, and trade barriers then it affect the performance of the enterprise.

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 andaccordingly 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 andseparation 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 businessactivities. This becomes a convenient way to handle the information being generated byvarious processes. Data warehouse is an archive of information collected from widemultiple sources, stored under a unified scheme, at a single site. This data is stored for along 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, bycompanies with a strong consumer focus - retail, financial, communication, andmarketing 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 enablesthem to determine the impact on sales, customer satisfaction, and corporate profits.Finally, it enables them to "drill down" into summary information to view detailtransactional data. With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchasehistory. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments

4. Explain DFD & Data Dictionary? Explain in detail how the informationrequirement is determined for an organization? DFD

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 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.

Determining the Information Requirement The sole purpose of the MIS is to produce such information which will reduceuncertainty risk in a given situation The difficulty to determine a correct and complete set of information is on account of the factors given below:1. The capability constraint of the human being as an information processor, a problem solver and a decision-maker.2. The nature and the variety of information in precise terms.3. Reluctance of decision-makers to spell out the information for the political and the behavioural reasons.4. The ability of the decision-makers to specify the information.In spite of these difficulties, methods are evolved based on the uncertainty scale, startingfrom the low to the high level of uncertainty. If the uncertainty is low, seekinginformation requirement or needs is easy as against a very high level of uncertainty. There are four methods of determining the information requirements. They are:1. Asking or interviewing2.

Determining from the existing system3. Analysing the critical success factors4. Experimentation and modelling.

Asking or Interviewing In this method a designer of the MIS puts questions or converses with the user of theinformation and determines the information requirements. Putting the questions is an artand it should be used properly to seek information. When the user has to select one answer from a finite set of answers a closed question should be asked. For example, "Which are the raw materials used for making a product?"But an open question is put, when the user has no precise knowledge but has an ability to determine all answers to select one out of them? For example, "Which are the raw materials which can be used in a product?" In open questions, the answers may not be immediate but can be obtained by surveying the domain knowledge of the user .When multiple users or several decision-makers in similar functions or positions are involved, a brain storming session is performed to cover all possible answers to the questions. When several users are involved, group consensus can be sought to get the most feasible set of answers .The experts or experienced users are asked to give their best answersthis approach is called the Delphi method. In all these methods, the system designer has to test the validity of all the answers independently. An experienced designer is able to analyse critically the answers given to the questions and determine the correct information requirement.

Determining from the Existing System In a number of cases the existing system, which has been evolved after a number of years, and has been designed out of experience gives straightaway the requirement of information. In any situations, systems from other companies can give additional information requirements. The fund of knowledge is available from the textbooks, handbooks, research studies which can determine the information requirement. For example, systems such as theaccounts receivables, the accounts payables, the pay roll, the inventory control, thefinancial accounting, etc., have a well determined, information requirement. Irrespective of the type of organization and business, ninety per cent of the information requirement is common and the balance ten per cent may be typical to the organization or the business, which needs to be determined separately. The managers in the operations and the middle management use the existing systems as a reference for determining the information requirements .This method is adopted when the rules and decision methods are outside the purview of the decision-maker. They are determined or imposed by external sources such as the Government, the Authority, the principles, etc. For example, the information required to manage shares of the company are determined through the rules and regulations laid down by the Company Law Board. The manager of the shares department has very little additional information need.In all such functions, the manager determines the information needs and the designer of the MIS can always fall back on the prescribed law books, manuals, theory andtextbooks, hand books, etc to confirm the information needs.

Analyzing the Critical Success Factors Every business organization performs successfully on efficient management of certain critical success factors. Other factors are important and play a support role in thefunctioning of the organization. Many times a function is singularly critical to the successful functioning of a business organization .For example, in a high technology business, the management of the technology becomes the critical function. Or in a service organization, the management of service becomes acritical factor. In a consumer industry, marketing and service becomes the criticalfunction. The information requirements of such organization

largely relate to the secritical factors. The analysis of these functions or factors will determine the information requirements

Experimentation and Modelling When there is total uncertainty, the designer and the user of the information resort to this method for determining the information requirement. The experimentation would decide the methodology for handling the complex situation. If the method is finalised, theinformation needs are determined as they have been evolved through theexperimentation. Test marketing of a product is an approach of the experimentation to decide the correct marketing strategy .Sometimes models are used for deciding the initial information needs and they aremodified during the implementation stage. The information requirements determinedthrough such methods undergo a qualitative change as the users get the benefit of learning and experience and the needs may undergo a change or get replaced completely

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: ERP Manufacturing management systems have evolved in stages over the few decades from asimple means of calculating materials requirements to the automation of an entireenterprise. Around 1980, overfrequent changes in sales forecasts, entailing continualre adjustments 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)The initials ERP originated as an extension of MRP (material requirements planning the nmanufacturing resource planning). ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organizations business or charter. Non-manufacturing businesses, non-profit organizations and governments now all utilize ERP systems .To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package. However, the term is typically reserved for larger, more broadly based applications. Theintroduction of an ERP system to replace two or more independent applicationseliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance to easier and/or greater reporting capabilities.Examples of modules in an ERP which formerly would have been standaloneapplications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System.

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 financialdepartment) 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 benefitsto 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 systemsdisappears. It standardized and reduced the number of software specialties requiredwithin larger organizations.

Advantages and Disadvantages of ERP

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 serviceDisadvantages Many problems organizations have with ERP systems are due toinadequate investment in ongoing training for involved personnel, including thoseimplementing 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 implementingan 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 tomove in a new direction in the near future.

Artificial Intelligence Artificial Intelligence is the science and technology based on various functions to developa 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 knownas artificial intelligent systems and their intelligence is referred to as artificialintelligence. It was said that the computer dont 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 naturalinterfaces.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 asthey 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 brains mesh likenetwork 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

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:-Closed decision making system & Open decision making system The decision-making systems can be classified in a number of ways. There are two type sof systems based on the managers knowledge about the environment. If the manager operates in a known environment then it is a closed decision-making system. Theconditions of the closed decision-making system are :a) The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented. b) The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked for selection .c) The manager can choose one of them, based on some goal or objective criterion .Few examples are a product mix problem, an examination system to declare pass or fail ,or an acceptance of the fixed deposits .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 incontrast 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 out come 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 .d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision, where his aspirations or desires are met best .Deciding on the possible product diversification lines, the pricing of a new product, and the plant location, are some decision-making situations which fall in the category of the open decision-making systems. The MIS tries to convert every open system to a closed decision-making system by providing information support for the best decision. The MIS gives the informationsupport, whereby the manager knows more and more about environment and theoutcomes, he is able to generate the decision alternatives, test them and select one of them. A good MIS achieves this.

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. 'For example, in decision- making problem about determining inventory control parameters (EOQ, Safety Stock, Maximum Stock, Minimum Stock, Reorder level) lead time is assumed fairly constant and stable for a planning period. Based on this, the

inventory parameters are calculated. Inventory manager wants to know how the cost of holding inventory will be affected if lead time is reduced by one week or increased byone week. The model with changed lead time would compute the cost of holdinginventory under new conditions. Such type of analysis can be done for purchase price change, demand forecast variations and so on. Such analysis helps a manager to takemore learned decisions. What if analysis creates confidence in decision-making model by painting a picture of outcomes under different conditions? Why is more time spend in problem analysis & problem definition as compared to the time spends on decision analysis? The manager, being a human being, behaves in a peculiar way in a given situation. The response of one manager may not be the same as that of the two other managers, as theydiffer on the behavioural platform. Even though tools, methods and procedures are evolved, the decision is many a times influenced by personal factors such as behavior .The managers differ in their approach towards decisionmaking in the organization, and ,therefore, they can be classified into two categories, viz., the achievement-oriented, i.e. ,looking for excellence and the task-oriented, i.e., looking for the completion of the task somehow. The achievement-oriented manager will always opt for the best and, there fore,will be enterprising in every aspect of the decision-making. He will end eavour to develop all the possible alternatives. He would be scientific, and therefore, more rational. H ewould weigh all the pros and cons properly and then conclude. The managers personal values will definitely influence ultimately. Some of the managersshow a nature of risk avoidance. Their behaviour shows a distinct pattern indicating a conservative approach to decision-making a path of low risk or no risk. Further, eventhough decision-making tools are available, the choice of the tools may differ depending on the motives of the manager. The motives are not apparent, and hence, are difficult to understand. A rational decision in the normal course may turn out to be different on account of the motives of the manager.The behaviour of the manager is also influenced by the position he holds in theorganisation. The behaviour is influenced by a fear and an anxiety that the personal image may be tarnished and the career prospects in the organisation may be spoiled due to a defeat or a failure. The managerial behaviour, therefore, is a complex mix of the personal values, the atmosphere in the organisation, the motives and the motivation, andthe resistance to change. Such behaviour sometimes over rides normal decisions based on business and economic principles. The interplay of different decision-making of all the managers in the organisation shapes up the organisational decision-making. The rationale of the business decision will largelydepend upon the individuals, their positions in the organisation and their inter-relationship with other managers.If two managers are placed in two decision-making situations, and if their objectives are in conflict, the managers will arrive at a decision objectively, satisfying individual goals. Many a times, they may make a conscious decision, disregarding organisations objective to meet their personal goals and to satisfy their personal values. If the manager is enterprising, he will make objectively rational decisions. But if the manager is averse to taking risk, he will make a decision which will be subjectively rational as he would act with limited knowledge and also be influenced by the risk averseness. Thus, it is clear that if the attitudes and the motives are not consistent across the organisation, the decision-making process slows down in the organisation

Master of Business Administration - MBA Semester II

MB0047 Management Information Systems - 4 Credits

(Book ID: B1136)

Assignment - Set- 2 (60 Marks)

Attempt each question. Each question carries 10 marks: Q1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some Disadvantage of MIS?

Answer:MIS systems are extensively used in generating statistical report of any organization which can be used to study management by behavior. They set objectives to their employees using ratio analysis. Management also uses MIS for decision making from thelow level management to top level management. In order to perform task usingInformation systems use of technical support is required. So it is the combination of 3components i.e. organization, technology and management. MIS characteristics It supports transaction handling and record keeping. It is also called as integrated database Management System which supports inmajor functional areas. It provides operational, tactical, and strategic level managers with east access totimely but, for the most, structured information. It supports decision making function which is a vital role of MIS.

 It is flexible which is needed to adapt to the changing needs of the organization. It promotes security system by providing only access to authorized users. MIS not only provides statistical and data analysis but also works on the basis onMBO (management by objectives). MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures. It helps to build relevant and measurable objectives, monitor results, and send alerts. Basic Function of MIS The main functions of MIS are: Data Processing: Gathering, storage, transmission, processing and getting output of the data. Making the data into information is a major task. Prediction: Prediction is based on the historical data by applying the prior knowledge methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on the application and with different departments. Planning: Planning reports are produced based on the enterprise restriction on the companies and helps in planning each functional department to work reasonably. Control: MIS helps in monitoring the operations and inspects the plans. It consists of differences between operation and plan with respect to data belonging to different functional department. It controls the timely action of the plans and analyzes the reasons for the differences between the operations and plan. Thereby helps managers to accomplish their decision making task successfully. Assistance: It stores the related problems and frequently used information to apply them for relative economic benefits. Through this it can derive instant answers of the related problem.

Disadvantages of MIS The following are some of the disadvantages of MIS: MIS is highly sensitive: MIS is very helpful in maintaining logging information of an authorized user. This needs to monitor constantly. Quality of outputs is governed by quality of inputs. MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the actual cost needs to have an accrual system having true costs of outputs which is extremely difficult. It has been difficult to establish definite findings. MIS is not flexible to update itself for the changes. The changes in the decision of top level management decrease its effectiveness. Information accountability is based on the qualitative factors and the factors like morality, confidence or attitude will not have any base

Q2. Explain Knowledge based system? Explain DSS and OLAP with example? Answer: Knowledge Based System (KBS) KBS are the systems based on knowledge base. Knowledge base is the databasemaintained for knowledge management which provides the means of data collections,organization and retrieval of knowledge. The knowledge management manages thedomain where it creates and enables organization for adoption of insights andexperiences.There are two types of knowledge bases. a. Machine readable knowledge bases: The knowledge base helps the computer to process through. It makes the data in the computer readable code which makes the operator to perform easier. Such information s are used by

semantic web. Semantic web isa web that will make a description of the system that a system can understand. b. Human readable knowledge bases: They are designed to help people to retrieve knowledge. The information need to be processed by the reader. The reader can access the information and synthesize their own.KBS refers to a system of data and information used for decision making. The system is automated to work on the knowledge based data and information required in a particular domain of management activity. The processing is done based on the past decisions taken under suitable conditions. Decision making is based on the fact that the condition is similar to the past situation hence the decision is also is similar .Examples of KBS are intelligent systems, robotics, neural networks etc.

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.

Model of OLAP 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 berequired 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 supportapplication: 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 canconsider decision support systems as the best when it includes high-level summaryreports 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 mathematicalcalculations 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

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: Value Chain Analysis: The activities performed by a particular enterprise can be analyzed into primaryactivities, which directly adds value to the enterprises factors of production, which are together referred to as the value chain, and supporting activities.

Figure: Product Differentiation and Value Chain representation Porters Enterprise Value-Chain

Value-addition activities like production, marketing delivery, and servicing of the product. These activities are connected in a chain. Support activities include those providing purchased inputs, technology, human resources, or overall infrastructurefunctions to support the primary activities .It is possible to reduce the transaction cost by proper coordination of all the activities. It should be possible to gather better information for various controls and also replace the same by less costlier activities. It will also be possible to reduce the overall time required to complete an activity. Therefore coordination is very important to achieve competitive advantage. For this it is necessary to manage the value chain as a system rather than as separate parts. Anenterprises value chain for competing in a particular industry is embedded in a larger stream of activities. What Porter termed as value system, may be referred to as theindustry valuechain. This chain consists of mainly the suppliers and distributionchannels. Any activity of an organization is subjected to one or more of the following New technologies Newer technologies changes the direction of the value chain. Shifting buyer needs

The buyers have been increasing their demands to satisfy their needs in the form convenience and better price and features. This demand influences a change in the related market segments; Variation in industry segmentation The value system undergoes a change depending upon the existence of old and new systems and its components in the value chain. Organizations, which fail to adjust will have to close down their business. Changes in the costs It is possible to gain competitive advantage by optimizing the activities based on present conditions. Enterprises which continue to work on the older approaches in outdated modes of operation suffer. Changes in government regulations If there is a change in the standards of the product of the enterprise, with respect to the environmental controls, restrictions on entry to the market, and trade barriers then it affect the performance of the enterprise. 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 tomodernize and make the organizations efficient. BPR directly affects the performance. Itis 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 andaccordingly 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 isreferred as relational database for the purpose of querying and analysis rather than justtransaction processing. Data warehouse is usually maintained to store heuristic data for future use. Data warehousing is usually used to generate reports. Integration andseparation of data are the two basic features need to be kept in mind while creating a datawarehousing. The main output from data warehouse systems are; either tabular listings(queries) with minimal formatting or highly formatted "formal" reports on businessactivities. This becomes a convenient way to handle the information being generated byvarious processes. Data warehouse is an archive of information collected from widemultiple sources, stored under a unified scheme, at a single site. This data is stored for along time permitting the user an access to archived data for years. The data stored and thesubsequent 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 makersrequire access to information from all sources. Setting up queries on individual processesmay be tedious and inefficient. Data Mining Data mining is primarily used as a part of information system today, bycompanies with a strong consumer focus - retail, financial, communication, andmarketing organizations. It enables these companies to determine relationships among"internal" factors such as price, product positioning, or staff skills, and "external" factorssuch as economic indicators, competition, and customer demographics.

And, it enablesthem to determine the impact on sales, customer satisfaction, and corporate profits.Finally, it enables them to "drill down" into summary information to view detailtransactional data. With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchasehistory. 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 informationrequirement is determined for an organization? DFD

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 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.

Determining the Information Requirement The sole purpose of the MIS is to produce such information which will reduceuncertainty risk in a given situation The difficulty to determine a correct and complete set of information is on account of the factors given below:1. The capability constraint of the human being as an information processor, a problem solver and a decision-maker.2. The nature and the variety of information in precise terms.3. Reluctance of decision-makers to spell out the information for the political and the behavioural reasons.4. The ability of the decision-makers to specify the information .In spite of these difficulties, methods are evolved based on the uncertainty scale, startingfrom the low to the high level of uncertainty. If the uncertainty is low, seekinginformation requirement or needs is easy as against a very high level of uncertainty. There are four methods of determining the information requirements. They are:1. Asking or interviewing2. Determining from the existing system3. Analysing the critical success factors4. Experimentation and modelling.

Asking or Interviewing In this method a designer of the MIS puts questions or converses with the user of the information and determines the information requirements. Putting the questions is an art and it should be used properly to seek information .When the user has to select one answer from a finite set of answers a closed question should be asked. For example, "Which are the raw materials used for making a product?"But an open question is put, when the user has no precise knowledge but has an ability to determine all answers to select one out of them? For example, "Which are the raw materials which can be used in a product?" In open questions, the answers may not be immediate but can be obtained by surveying the domain knowledge of the user .When multiple users or several decision-makers in similar functions or positions are involved, a brain storming session is performed to cover all possible answers to the questions. When several users are involved, group consensus can be sought to get the most feasible set of answers .The experts or experienced users are asked to give their best answersthis approach is called the Delphi method. In all these methods, the system designer has to test the validity of all the answers independently. An experienced designer is able to analyse critically the answers given to the questions and determine the correct information requirement. Determining from the Existing System

In a number of cases the existing system, which has been evolved after a number of years, and has been designed out of experience gives straightaway the requirement of information. In any situations, systems from other companies can give additionalinformation requirements .The fund of knowledge is available from the textbooks, handbooks, research studies which can determine the information requirement. For example, systems such as theaccounts receivables, the accounts payables, the pay roll, the inventory control, thefinancial accounting, etc., have a well determined, information requirement .Irrespective of the type of organization and business, ninety per cent of the information requirement is common and the balance ten per cent may be typical to the organization or the business, which needs to be determined separately. The managers in the operations and the middle management use the existing systems as a reference for determining the information requirements .This method is adopted when the rules and decision methods are outside the purview of the decision-maker. They are determined or imposed by external sources such as the Government, the Authority, the principles, etc. For example, the information required to manage shares of the company are determined through the rules and regulations laid down by the Company Law Board. The manager of the shares department has very little additional information need .In all such functions, the manager determines the information needs and the designer of the MIS can always fall back on the prescribed law books, manuals, theory andtextbooks, hand books, etc to confirm the information needs.

Analyzing the Critical Success Factors Every business organization performs successfully on efficient management of certaincritical success factors. Other factors are important and play a support role in thefunctioning of the organization. Many times a function is singularly critical to the successful functioning of a business organization .For example, in a high technology business, the management of the technology becomes the critical function. Or in a service organization, the management of service becomes acritical factor. In a consumer industry, marketing and service becomes the criticalfunction. The information requirements of such organization largely relate to the secritical factors. The analysis of these functions or factors will determine the information requirements

Experimentation and Modelling When there is total uncertainty, the designer and the user of the information resort to this method for determining the information requirement. The experimentation would decide the methodology for handling the complex situation. If the method is finalised, theinformation needs are determined as they have been evolved through theexperimentation. Test marketing of a product is an approach of the experimentation to decide the correct marketing strategy .Sometimes models are used for deciding the initial information needs and they aremodified during the implementation stage. The information

requirements determinedthrough such methods undergo a qualitative change as the users get the benefit of learning and experience and the needs may undergo a change or get replaced completely

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: ERP Manufacturing management systems have evolved in stages over the few decades from asimple means of calculating materials requirements to the automation of an entireenterprise. Around 1980, overfrequent changes in sales forecasts, entailing continualre adjustments 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)The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning). ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organizations business or charter. Non-manufacturing businesses, non-profit organizations and governments now all utilize ERP systems. To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package .However, the term is typically reserved for larger, more broadly based applications. Theintroduction of an ERP system to replace two or more independent applicationseliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance to easier and/or greater reporting capabilities.Examples of modules in an ERP which formerly would have been standaloneapplications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System. 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 financialdepartment) 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 systemsdisappears. It standardized and reduced the number of software specialties requiredwithin larger organizations.

Advantages and Disadvantages of ERP 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 serviceDisadvantages Many problems organizations have with ERP systems are due toinadequate investment in ongoing training for involved personnel, including thoseimplementing 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 implementingan 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 work force 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 developa 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 knownas artificial intelligent systems and their intelligence is referred to as artificialintelligence. It was said that the computer dont 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

naturalinterfaces.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. Asneural 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 brains mesh likenetwork 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

Q6. 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:-Closed decision making system & Open decision making system The decision-making systems can be classified in a number of ways. There are two types of systems based on the managers knowledge about the environment. If the manager operates in a known environment then it is a closed decision-making system. Theconditions of the closed decision-making system are: a) The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented. b) The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked for selection. c) The manager can choose one of them, based on some goal or objective criterion .Few examples are a product mix problem, an examination system to declare pass or fail, or an acceptance of the fixed deposits .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 out come 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 .d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision, where his aspirations or desires are met best

.Deciding on the possible product diversification lines, the pricing of a new product, and the plant location, are some decision-making situations which fall in the category of the open decision-making systems. The MIS tries to convert every open system to a closed decision-making system by providing information support for the best decision. The MIS gives the informationsupport, whereby the manager knows more and more about environment and theoutcomes, he is able to generate the decision alternatives, test them and select one of them. A good MIS achieves this. 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.'For example, in decision-making problem about determining inventory control parameters (EOQ, Safety Stock, Maximum Stock, Minimum Stock, Reorder level) lead time is assumed fairly constant and stable for a planning period. Based on this, the inventory parameters are calculated. Inventory manager wants to know how the cost of holding inventory will be affected if lead time is reduced by one week or increased byone week. The model with changed lead time would compute the cost of holdinginventory under new conditions. Such type of analysis can be done for purchase price change, demand forecast variations and so on. Such analysis helps a manager to take more learned decisions. What if analysis creates confidence in decisionmaking model by painting a picture of outcomes under different conditions? Why is more time spend in problem analysis & problem definition as compared to the time spends on decision analysis? The manager, being a human being, behaves in a peculiar way in a given situation. The response of one manager may not be the same as that of the two other managers, as theydiffer on the behavioural platform. Even though tools, methods and procedures are evolved, the decision is many a times influenced by personal factors such as behavior .The managers differ in their approach towards decisionmaking in the organization, and, therefore, they can be classified into two categories, viz., the achievement-oriented, i.e. ,looking for excellence and the task-oriented, i.e., looking for the completion of the task somehow. The achievement-oriented manager will always opt for the best and, therefore ,will be enterprising in every aspect of the decision-making. He will endeav our to develop all the possible alternatives. He would be scientific, and therefore, more rational. He would weigh all the pros and cons properly and then conclude .The managers personal values will definitely influence ultimately. Some of the managers show a nature of risk avoidance. Their behaviour shows a distinct pattern indicating a conservative approach to decision-making a path of low risk or no risk. Further, eventhough decisionmaking tools are available, the choice of the tools may differ depending on the motives of the manager. The motives are not apparent, and hence, are difficult tounderstand. A rational decision in the normal

course may turn out to be different on account of the motives of the manager.The behaviour of the manager is also influenced by the position he holds in theorganisation. The behaviour is influenced by a fear and an anxiety that the personal image may be tarnished and the career prospects in the organisation may be spoiled due to a defeat or a failure. The managerial behaviour, therefore, is a complex mix of the personal values, the atmosphere in the organisation, the motives and the motivation, andthe resistance to change. Such behaviour sometimes overrides normal decisions based on business and economic principles .The interplay of different decision-making of all the managers in the organisation shapes up the organisational decision-making. The rationale of the business decision will largelydepend upon the individuals, their positions in the organisation and their inter-relationship with other managers .If two managers are placed in two decision-making situations, and if their objectives are in conflict, the managers will arrive at a decision objectively, satisfying individual goals .Many a times, they may make a conscious decision, disregarding organisations objective to meet their personal goals and to satisfy their personal values. If the manager is enterprising, he will make objectively rational decisions. But if the manager is averse to taking risk, he will make a decision which will be subjectively rational as he would act with limited knowledge and also be influenced by the risk averseness. Thus, it is clear that if the attitudes and the motives are not consistent across the organisation, the decision-making process slows down in the organisation

Master of Business Administration - MBA Semester II

MB0047 Management Information Systems - 4 Credits

(Book ID: B1136)

Assignment - Set- 2 (60 Marks)

Attempt each question. Each question carries 10 marks: Q1. How hardware & software support in various MIS activities of the organization? Explain the transaction stages from manual system to automated systems?

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.

Advantages of a PC : Advantages a personal computer offers are a) Speed A PC can process data at a very high speed. It can process millions of instructions within fraction of seconds. b) Storage A PC can store large quantity of data in a small space. It eliminates the needof storing the conventional office flat files and box files which requires lots of space. The storage system in a PC is such that the information can be transferred from place to another place in electronic form. c) Communication A PC on the network can offer great support as a communicator in communicating information in the forms of text and images. Today a PC with internet is used as a powerful tool of communication for every business activity.

d) 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. It is possible to obtain mathematical results correct up to a great degree of accuracy. e) Conferencing A PC with internet offers facility of video conferencing worldwide. Business people across the globe travel a lot to meet their business partner, colleagues,and customers etc to discuss about business activities. By video conferencinginconvenience of traveling can be avoided.

A block diagram of a computer may be represented as Input unit is used to give input to the processor. Examples of input unit Keyboard, scanner, mouse, bar code reader etc

A processor refers to unit which processes the input received the way it has been instructed. In a computer the processor is the CPU Central Processing Unit. It does all mathematical calculations, logical tasks, storing details in the memory etc. Output unit is used to give output s from the computer. Examples of output unit Monitor, printer, speakers etc.

Organization of Business in an E enterprise Software Applications in MIS Internet technology is creating a universal bench or platform for buying and selling of goods, commodities and services. Essentially Internet and networks enable integration of information, facilitate communication, and provide access to everybody from anywhere.And software solutions make them faster and self-reliant as they can analyze datainformation, interpret and use rules and guidelines for decision-making. These enabling capabilities of technology have given rise to four business models that together work in an E enterprise organization. They are: E business E communication

E commerce E collaboration These models work successfully because Internet technology provides the infrastructure for running the entire business process of any length. It also provides email and other communication capabilities to plan, track, monitor and control the business operations through the workers located anywhere. It is capable of linking to disparate systems such as logistics, data acquisition and radio frequency used systems and so on. Low cost connectivity physical, virtual and universal standards of Internet technology make it a driving force to change conventional business model to E business enterprise model. Internet has enabled organizations to change their business process and practices. It has dramatically reduced cost of data and information processing, its sending and storing Information and information products are available in electronic media, and is a residenton the network. Once everyone is connected electronically, information can flowseamlessly from any location to any other location. For example, product information is available on an organization website which also has a feature of order placement. Anorder placed is processed at the backend and status of acceptance, rejection iscommunicated instantaneously to the customer. Such order is then placed directly on the order board for scheduling and execution. These basic capabilities of Internet have given rise to number of business models. Some of them are given in Table

The Internet and networks provide platform and various capabilities wherebycommunication, collaboration, and conversion has become significantly faster,transparent and cheaper. These technologies help to save time, resource and enable faster decision making. The technology adds speed and intelligence in the business processimproving quality of service to the customer. The business process of serving thecustomer to offer goods, products or services is made up of the following components. Enquiry processing Order preparation Order placement Order confirmation Order planning Order scheduling Order manufacturing Order status monitoring Order dispatching Order billing Order receivable accounting Order payment processing The entire process in parts or full can be handled through these technologies and software solutions. It provides important strategic, competitive advantage. Further, the technology is flexible and capable of handling any business models such as: Retailing, Trading, Auctioning Manufacturing, Distribution & Selling Outsourcing, Subcontracting Servicing, Training, Learning, Consulting The resultant effect is the reduction in cost of business operations, improved customer loyalty and retention and better quality offer to the customer. Four major applications mentioned earlier make this achievement possible. We go into details of each one of them. Transformation stage manual systems to automated systems

The manual system which was prevalent in the organizations before industrial revolution as slowly transformed into digital form by means of computer and related electronic instruments. 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

Q2. Explain the various behavioral factors of management organization? As per Porter, how can performance of individual corporations be determined?

Ans: Management organizations: An organization is a structure that uses the resources from the environment likemanpower, raw materials, capital and returns the output like products and services to the environment. It constitutes the rules, policies, responsibilities and procedures that are adopted by the organization.

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 behavein accepting them. User resistance is a major behavioral factor associated with theadoption of new systems. The following are compiled by Jiang et al. (2000) Reasons that employees resist new systems:1. Change in job content2. Loss of status3. Change in interpersonal relationships4. Loss of power 5. Change in decision making approach6. Uncertainty or unfamiliarity or misinformation7. Job security The major behavioral factors area)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 other wait and lag behind in making changes d)Organizational expectations over expectation can result in disappointments andtermination of innovation. Over expectation was observed in most earlyintelligent systems e)Resistance to change can be strong in MSS because the impacts may be significant.

Performance of individual corporations:

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 withthe use of information technology to support or sharpen an enterprise's competitivestrategy. Competitive strategy is an enterprise's plan for achieving sustainablecompetitive 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. Porter's classic diagram representing these forces is indicated below

There are two basic factors which may be considered to be adopted by organization in their strategies: a) low cost b) Product differentiationEnterprise can succeed relative to their competitors if they possess sustainablecompetitive advantage in either of these two. Another important consideration in positioning is 'competitive scope', or the breadth of the enterprise's target markets withinits industry, i.e. the range of product varieties it offers, the distribution channels itemploys, the types of buyers it serves, the geographic areas in which it sells, and the array of related industries in which it competes. Under Porter's 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. Porter's representation of them is indicated below According to Porter, competitive advantage grows out of the way an enterprise organizes and performs discrete activities. The operations of any enterprise can be divided into aseries of activities such as salespeople making sales calls, service technicians performing repairs, scientists in the laboratory designing products or processes, and treasurers raisingcapital. By performing these activities, enterprises create value for their customers .The ultimate value an enterprise creates is measured by the amount customers are willingto pay for its product or services. A firm is profitable if this value exceeds the collectivecost of performing all of the required activities. To gain competitive advantage over itsrivals, a firm must either provide comparable value to the customer, but performactivities more efficiently than its competitors (lower cost), or perform activities in aunique way that creates greater buyer value and commands a premium price(differentiation). As per Borden 1964, quoted in Wiseman 1988many differentiation bases can be classified as 4 Ps as given below:1. Product (quality, features, options, style, brand name, packaging, sizes, services,warranties, returns) 2. Price (list, discounts, allowances, payment period, credit terms) 3. Place (channels, coverage, locations, inventory, transport) And4. Promotion (advertising, personal selling, sales promotion, publicity).The various attributes listed above can be sharpened the firms product by the support of as uitable information technology Q3. Compare various types of development aspect of Information System? Explain the various stages of SDLC? Development of Information System sa)Development and Implementation of the MIS

Once the plan of 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 subsystem depends on its position in the total MIS plan, the size of the system, the user's 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 formalization in the system and procedures which determine the timing and duration of development of the system. Higher the degree of structured ness and formalization, greater is the stabilization of therules, the procedures, decision making and the understanding of the overall business activity. Here, it is observed that the user's and the designer's 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 inthe prototype visa vis Fulfillment of the information needs. The designer then takes stepsto 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 designer's 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 fulfill the corporate information needs. When it comes to information the functional, the departmental, the personal boundaries do not exist. This calls 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 information, 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 thecorporate business, helps considerably, in overcoming the problem of changing theattitudes of the multiple users and the originators of the data.

c) Life Cycle Approach There are many systems or subsystems in the MIS which have a life cycle, that is, they have birth and death. Their emergence may be sudden or may be a part of the business need, and they are very much structured and rule based. They have 100% clarity of inputs and their sources, a definite set of outputs in terms of the contents and formats. These details more or less remain static from the day the system emerges and remains in that static mode for a long time. Minor modifications or changes do occur but they are not significant in terms of handling either by the designer or the user of the system. Such systems, therefore, have a life and they can be developed in a systematic manner, and can be reviewed after a year or two, for significant modification, if any

. Examples of such systems are pay roll, share accounting, basic financial accounting ,finished goods accounting and dispatching, order processing, and so on. These system shave a fairly long duration of survival and they contribute in a big way as sources of data to the Corporate MIS. Therefore, their role is important and needs to be designed from the view point as an interface to the Corporate MIS. Table below shows the difference between the two approaches helping the designer select an approach

d) Implementation of the Management Information System

The implementation of the system is a management process. It brings aboutorganizational change it affects people and changes their work style. The process evokesa behavior response which could be either favorable or unfavorable depending upon the strategy of system implementation. In the process of implementation, the system designer acts as a change agent or a catalyst. For a successful implementation he has to handle the human factors carefully. The user of the system has a certain fear complex when a certain cultural work change is occurring .The first and the foremost fear is about the security to the person if the changeover from the old to new is not a smooth one. Care has to be taken to assure the user that such fears are baseless and the responsibility, therefore, rests with the designer. The second fear is about the role played by the person in the organization and how the change affects him .On many occasions, the new role may reduce his importance in the organization, the work design may make the new job impersonal, and a fear complex may get reinforced that the career prospects may be affected. There are certain guidelines for the systems designer for successful implementation of the system. The system designer should notquestion beyond a limit the information need of the user.1. Not to forget that his role is to offer a service and not to demand terms.2. Remember that the system design is for the use of the user and it is not the designer's prerogative to dictate the design features. In short, the designer should respect thedemands of the user.3. Not to mix up technical needs with the information needs. He should try to develop suitable design with appropriate technology to meet the information needs. The designer should not recommend modifications of the needs, unless technically infeasible

4. Impress upon the user the global nature of the system design which is required to meet the current and prospective information need.5. Not to challenge the application of the information in decision making. It is the sole right of the user to use the information the way he thinks proper.6. Impress upon the user that the quality of information depends on the quality of input.7. Impress upon the user that you are one of the users in the organization and that the information is a corporate resource and he is expected to contribute to the development of the MIS.8. Ensure that the user makes commitment to all the requirements of the system designs pecifications. Ensure that he appreciates that his commitments contribute largely to the quality of the information and successful implementation of the system.9. Ensure that the overall system effort has the management's acceptance.10. Enlist the user's participation from time to time, so that he is emotionally involved inthe process of development.11. Realize that through serving the user, he is his best guide on the complex path of development.12. Not to expect perfect understanding and knowledge from the user as he may be the user of a Non computerized system. Hence, the designer should be prepared to change the system specifications or even the design during the course of development.13. Impress upon the user that the change, which is easily possible in manual system, isnot as easy in the computer system as it calls for changes in the programs at cost.14. Impress upon the user that perfect information is nonexistent His role therefore stillhas an importance in the organization.15. Ensure that the other organization problems are resolved first before the MIS is takenfor development. 16. Conduct periodical user meetings on systems where you get the opportunity to know the ongoing difficulties of the users.16. Train the user in computer appreciation and systems analysis as his perception of thecomputerized information system will fall short of the designer's expectation.Implementation of the MIS in an organization is a process where organizationaltransformation takes place. This change can occur in a number of ways. The Lewin's model suggests three steps in this process. The first step is unfreezing the organization to make the people more receptive and interested in the change. The second step is choosing a Course of action where the process begins and reaches the desired lof stability, and the third step is Refreezing, where the change is consolidated andequilibrium is reinforced. Many a times, This process is implemented through an external change agent, such as a consultant playing the role of a catalyst. The significant problem in this task is the resistance to change. The resistance can occur due to three reasons, viz., the factors internal to the users of information, the factors inherent in the design of the system and the factors a rising out of the interaction between the system and its users. The problem of resistancecan be handled through education, persuasion, and participation. This itself can beachieved by improving the human factors, and providing incentives to the users, and eliminating the organizational problems before implementing the system. SDLC System development cycle stages are sometimes known as system study. Systemconcepts 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 and planning major changes in the organization. The system analyst gives a system development project, meaning and direction. Thetypical 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: Evel 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 databasedesign is the design of the database design and the application design is the design of theapplication programs.

d)Prototyping A prototype is a simplified implementation that is produced in order toverify in practice that the previous phases of the design were well conducted.

e)Implementation It is concerned with the programming of the final operational versionof 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.

4. 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 organizationdefinition 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 organization 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 any where. 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 organization based on

'Command Control' principle is absent. It is replaced by people organization that is empowered byinformation 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 organization of people but E organization 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 alearning organization.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 mostof the business organizations are using Internet technology, network, and wirelesstechnology for improving the business performance measured in terms of cost, efficiency, competitiveness and profitability. They are using E business

Ecommerce Solutions to reach faraway locations to deliver product and services. The enterprisesolutions like ERP, SCM, and CRM run on Internet (Internet / Extranet) & Wide Area Network (WAN). The business processes across the organization and outside run on Etechnology 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, electronicallytransacted business process .These transformations have made conventional organization design obsolete. The basis of conventional organization design is command & control which is now collaborates &control. This Change has affected the organization structure, scope of operations,reporting mechanisms, work practices, workflows, and business processes at large. The comparison between conventional Organization design and E enterprise is summarized in Table Comparison between Conventional Design and E Organization 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 Ecommerce. 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, Emoney are the examples of the Ecommerce application. The digital firm, which uses Internet and web technology and uses E business And Ecommerce solutions, is a realityand is going to increase in number. MIS for E business is different compared toconventional MIS design of an organization. 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 organization, it is necessary to redesign the organization to realize the benefits of digital firm. The organization 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 reengineering 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, countryspecific accounting practices, and laws of security are to be adhered strictly. Internet andnetworking technology has thrown another challenge to enlarge the scope of Organization where customers and vendors become part of the organization. Thistechnology offers a solution to communicate, coordinate, 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 theconventional organization. It means changing the organization behavior to takecompetitive advantage of the E business

technology.The last but not the least important is the challenge to organize and implementinformation architecture and information technology platforms, considering multiplelocations and multiple information needs arising due to global operations of the businessinto 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 contract where 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 of MTTF, MTTR, 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 betweent he 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).The SLA records a common understanding about services, priorities, responsibilities ,guarantees, and warranties. Each area of service scope should have the "level of service "defined. The SLA may specify the levels of availability, serviceability, performance, operation, or other attributes of the service, such as billing. The "level of service" canalso be specified as "target" and "minimum," which allows customers to be informed what to expect (the minimum), whilst providing a measurable (average) target value that shows the level of organization performance. In some contracts, penalties may be agreed up on in the case of non-compliance of the SLA (but see "internal" customers below). It is important to note that the "agreement" relates to the services the customer receives, and not how the service provider delivers that service .SLAs have been used since late 1980s by fixed line telecom operators as part of their contracts with their corporate customers. This practice has spread such that now it is common for a customer to engage a service provider by including a servicelevelagreement in a wide range of service contracts in practically all industries and markets. Internal departments (such as IT, HR, and Real Estate) in larger organization have adopted the idea of using service-level agreements with their "internal" customers users in other departments within the same organization. One benefit of this can be to enable the quality of service to be benchmarked with that agreed to across multiple locations or between different business units. This internal benchmarking can also be used to market test and provide a value comparison between an in-house department and an external service provider Service-level agreements are, by their nature, "output" based the result of the service as received by the customer is the subject of the "agreement." The (expert) service provider can demonstrate their value by organizing themselves with ingenuity, capability,and knowledge to deliver the service required, perhaps in an innovative way.Organizations can also specify the way the

service is to be delivered, through aspecification (a service-level specification) and using subordinate "objectives" other thanthose related to the level of service. This type of agreement is known as an "input" SLA.This latter type of requirement is becoming obsolete as organizations become moredemanding and shift the delivery methodology risk on to the service provider. Role of CIO in drafting SLAS 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 havehad? Did he really have the capacity to handle 14 projects? A CIO should explore running their area more like a service operation rather than a cost center, and developmetrics that track the performance of the information systems staff, as well as the equipment comprising the applications, infrastructure, and networks under the CIO 'scontrol. The first step, they say, is to implement service level agreements (SLAs) with business units. It sets the expectation on the technical areas of the CIO's operations. At aminimum, 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 helpwith 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 canhelp them perform better, and familiarizing them with computers and informationsystems 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 areinvolved. People, software and hardware errors course the biggest problem. Moredangerous 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 frequenthazards than any other else because availability of both of them depends upon thelocation. Sometimes communication channel are busy or noisy. There are power cuts and sometimes high voltage serge destroys a sensitive component of the computer.

iv) Fire hazard: it can happen because of electrical short circuits, flammable liquids etc.

v) Sabotage and riots: sometimes the employees destroy the computer centre in case of strike, lockout or there may be chances of riots in the area.

vi) Natural Disasters : Natural disasters are not controllable. They are not frequenthazards but if they happen they destroy the things or ruin them. Examples are earthquake, floods, tornadoes and lightening. vii) General hazards: this category covers many more hazards which are not covered any where and difficult to define and come spontaneously

Q6.Case Study: Information system in a restaurant.

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) th eitems ordered and the respective prices are automatically generated. This ordering systeme liminates 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 outan 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 togive 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 eachitem 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.

Questions to be analysed: 1. In the light of the system, describe the decisions to be made in the area of strategic planning, managerial control and operational control? What information would yourequire to make such decisions?2. What would make the system a more complete MIS rather than just doing transaction processing?3. Explain the probable effects that making the system more formal would have on the customers and the management.

Solution: 1. A management information system (MIS) is an organized combination of people,hardware, communication networks and data sources that collects, transforms anddistributes information in an organization. An MIS helps decision making by providing timely, relevant and accurate information to managers. The physical components of an MIS include hardware, software, database, personnel and procedures.Management information is an important input for efficient performance of variousmanagerial functions at different organization levels. The information system facilitatesdecision making. Management functions include planning, controlling and decisionmaking. Decision making is the

core of management and aims at selecting the best alternative to achieve an objective. The decisions may be strategic, tactical or technical. Strategic decisions are characterized by uncertainty. They are future oriented and relate directly to planning activity. Tactical decisions cover both planning and controlling.Technical decisions pertain to implementation of specific tasks through appropriatetechnology. Sales region analysis, cost analysis, annual budgeting, and relocation analysis are examples of decision-support systems and management information systems. There are 3 areas in the organization. They are strategic, managerial and operational control. Strategic decisions are characterized by uncertainty. The decisions to be made in the areaof strategic planning are future oriented and relate directly to planning activity. Here basically planning for future that is budgets, target markets, policies, objectives etc. is done. This is basically a top level where up-to-the minute information on the food item sordered and breaks out percentages showing sales of each item versus total sales is provided. The top level where strategic planning is done compares the weekly sales totalsversus food costs, allowing planning for tighter cost controls. Executive support systems function at the strategic level, support unstructured decision making, and use advanced graphics and communications. Examples of executive support systems include sales trend forecasting, budget forecasting, operating plan development, budget forecasting, profit planning, and manpower planning .The decisions to be made in the area of managerial control are largely dependent upon the information available to the decision makers. It is basically a middle level where planning of menus is done and whenever an order is voided, the reasons for the void are keyed in which later helps in management decisions, especially if the voids are related tofood or service. The managerial control that is middle level also gets customer feedback and is responsible for customer satisfaction .The decisions to be made in the area of operational control pertain to implementation of specific tasks through appropriate technology. This is basically a lower level where thewaiter takes the order and enters it online via one of the six terminals located in the restaurant dining room and the order is routed to a printer in the appropriate preparation area. The items ordered list and the respective prices are automatically generated. The cooks send out of stock message when the kitchen runs out of a food item, which is basically displayed on the dining room terminals when waiter tries to order that item .This basically gives the waiters faster feedback, enabling them to give better service tothe customers. Transaction processing systems function at the operational level of the organization. Examples of transaction processing systems include order tracking, order processing, machine control, plant scheduling, compensation, and securities trading. The information required to make such decision must be such that it highlights the trouble spots and shows the interconnections with the other functions. It must summarizeall information relating to the span of control of the manager. The information required tomake these decisions can be strategic, tactical or operational information. Advantages of an online computer system: 1. Eliminates carbon copies2. Waiters handwriting issues3. Out-of-stock message4. Faster feedback helps waiters to service the customers Advantages to management: 1. Sales figures and percentages item-wise2. Helps in planning the menu3. Cost accounting details2. If the management provides sufficient incentive for efficiency and results to their customers, it would make the system a more complete MIS and so the MIS shouldsupport this culture by providing such

information which will aid the promotion of efficiency in the management services and operational system. It is also necessary tostudy the keys to successful Executive Information System (EIS) development andoperation. Decision support systems would also make the system a complete MIS as itconstitutes a class of computer-based information systems including knowledge-based systems that support decision-making activities. DSSs serve the management level of the organization and help to take decisions, which may be rapidly changing and not easily specified in advance. Improving personal efficiency, expediting problem solving (speed up the progress of problems solving in an organization), facilitating interpersonal communication, promoting learning and training, increasing organizational control, generating newevidence in support of a decision, creating a competitive advantage over competition, encouraging exploration and discovery on the part of the decision maker, revealing new approaches to thinking about the problem space and helping automate the managerial processes would make the system a complete MIS rather than just doing transaction processing.3. The management system should be an open system and MIS should be so designedthat it highlights the critical business, operational, technological and environmentalchanges to the concerned level in the management, so that the action can be taken tocorrect the situation. To make the system a success, knowledge will have to beformalized so that machines worldwide have a shared and common understanding of the information provided. The systems developed will have to be able to handle enormous amounts of information very fast.An organization operates in an ever-increasing competitive, global environment.Operating in a global environment requires an organization to focus on the efficientexecution of its processes, customer service, and speed to market. To accomplish these goals, the organization must exchange valuable information across different functions ,levels, and business units. By making the system more formal, the organization can more efficiently exchange information among its functional areas, business units, suppliers ,and customers .As the transactions are taking place every day, the system stores all the data which can be used later on when the hotel is in need of some financial help from financial institutes or banks. As the inventory is always entered into the system, any frauds can be easily taken care of and if anything goes missing then it can be detected through the system.

Master of Business Administration - Semester 2

MB 0048: Operations Research (4 credits)

(Book ID: B1301)

ASSIGNMENT- Set 1 Marks 60

Note: Each Question carries 10 marks. Answer all the questions.

Q1. A toy company manufactures two types of dolls, a basic version doll-A and a deluxe version doll-B. Each doll of type B takes twice as long to produce as one of type A, and the company would have time to make maximum of 1000 per day. The supply of plastic is sufficient to produce 1000 dolls per day(both A & B combined). The deluxe version requires a facny dress of ehich there are only 500 per day available. If the company makes a profit of Rs 3.00 and Rs 5.. per doll, respectively on doll A and B, then how many of each doll should be produced per day in order to maximise the total profit. Formulate this problem.

Formulation: Let X1and X2be the number of dolls produced per day of type A and B, respectively.

Let the A require t hrs

So that the doll B require 2t hrs.

So the total time to manufacture X1and X2dolls should not exceed 2000t hrs.

Therefore, tX1+ 2tX2 2000t

Other constraints are simple. Then the linear programming problem becomes:

Maximize p = 3X1+ 5 X2

Subject to restrictions, X

1+ 2X2 2000 (Time constraint)

X1+ X21500 (Plastic constraint)

X2600 (Dress constraint)

And non-negatively restrictions

X1,X2 0

Q2. What are the advantages of Linear programming techniques? 1. The linear programming technique helps to make the best possible use of available productive resources (such as time, labor, machines etc.)

2. It improves the quality of decisions. The individual who makes use of linear programming methods becomes more objective than subjective.3. It also helps in providing better tools for adjustment to meet changing conditions.4. In a production process, bottle necks may occur. For example, in a factory some machines may be in great demand while others may lie idle for some time. A significant advantage of linear programming is highlighting of such bottle necks.5. Most business problems involve constraints like raw materials availability, market demand etc. which must be taken into consideration. Just we can produce so many units of product does not mean that they can be sold. Linear programming can handle such situation also.

Q3. Solve the following Assignment Problem

Operations 01 02 03 10 9 15

M1 15 10 16

M2 12 9 16

M3 11 12 17

M4

Since the number of rows are less than number of columns, adding a dummy row and applyingHungarian method, Row reduction matrix Operations 01 02 03 04 10 9 15 0 M1 15 10 16 0 M2 12 9 16 0 M3 11 12 17 0 M4

Optimum assignment solution Operations 01 02 03 04 [0] X 1 X M1 5 1 [0] X M2 2 [0] X X M3 1 3 X [0] M4

Hungarian Method leads to multiple solutions. Selecting (03, M2) arbitrarily. O1 M1 O2 M3 O3 M2 O4M4 10 09 16 00

------------------------TOTAL 35

Therefore, the optimum assignment schedule is O1 M1, O2 M3, O3 M2 AND O4 M4.

Q4. What is integer programming? If the unknown variables are all required to be integers, then the problem is called an integer programming (IP) or integer linear programming (ILP) problem. In contrast to linear programming, which can be solved efficiently in the worst case, integer programming problems are in many practical situations (those with bounded variables)NP-hard(non-deterministic polynomial-time hard), in computational complexity theory ,is a class of problems that are, informally, "at least as hard as the hardest problems in NP"). 0-1 integer programming or binary integer programming (BIP) is the special case of integer programming where variables are required to be 0 or 1 (rather than arbitrary integers). This problem is also classified as NP-hard, and in fact the decision version was one of Karp's 21 NPcomplete problems. If only some of the unknown variables are required to be integers, then the problem is called a mixed integer programming (MIP) problem. These are generally also NP-hard There are however some important subclasses of IP and MIP problems that are efficiently solvable, most

notably problems where the constraint matrix is totally uni-modularand theright-hand sides of the constraints are integers. Advanced algorithms for solving integer linear programs include: cutting-plane method branch and bound branch and cut branch and price if the problem has some extra structure, it may be possible to apply delayed column generation. Such integer-programming algorithms are discussed by Pad berg and in Beasley.

Q5. Explain the different steps involved in simulation methodologies? The methodology developed for simulation process consists of the following seven steps: Step 1: Identify and clearly define the problem. Step 2: List the statement of objectives of the problem. Step 3 : Formulate the variables that influence the situation and an extract or probabilisticdescription of their possible values or states. Step 4 : Obtain a consistent set of values (or states) for the variables, i.e., a sample of probabilistic variables, random sampling technique maybe used. Step 5 : Use the sample obtained in step 2 to calculate the values of the decision criterion, byactually following the relationships among the variables for each of the alternative decisions. Step 6 : Repeat steps 2 and 3 until a sufficient number of samples are available. Step 7 : Tabulate the various values of the decision criterion and choose the best policy.

Q6. Write down the basic difference between PERT &CPM. Though there are no essential differences between PERT and CPM as both of them share incommon the determination of a critical path. Both are based on the network representation of activities and their scheduling that determines the most critical activities to be controlled so as to meet the completion date of the project. PERT Some key points about PERT are as follows: 1. PERT was developed in connection with an R&D work. Therefore, it had to cope with the uncertainties that are associated with R&D activities. In PERT, the total project duration is regarded as a random variable. Therefore, associated probabilities are calculated so as to characterize it. 2. It is an event-oriented network because in the analysis of a network, emphasis is given on the important stages of completion of a task rather than the activities required to be performed to reach a particular event or task. 3. PERT is normally used for projects involving activities of non-repetitive nature in which time estimates are uncertain. 4. It helps in pinpointing critical areas in a project so that necessary adjustment can be made to meet the scheduled completion date of the project.

CPM

1. CPM was developed in connection with a construction project, which consisted of routine tasks whose resource requirements and duration were known with certainty. Therefore, it is basically deterministic. 2. CPM is suitable for establishing a trade-off for optimum balancing between schedule time and cost of the project. 3. CPM is used for projects involving activities of repetitive nature

Master of Business Administration - Semester 2

MB 0048: Operations Research (4 credits)

(Book ID: B1301)

ASSIGNMENT- Set 2 Marks 60 Note: Each Question carries 10 marks 1. What is a model in OR?. Discuss different models available in OR. A model is an idealized representation or abstraction of a real-life system. The objective of a model is to identify significant factors that affect the real-life system and the irinter relationships. A model aids the decision-making process as it provides a simplified description of complexities and uncertainties of a problem in a logical structure. The most significant advantage of a model is that it does not interfere with the real-life system.

A broad classification of OR models You can broadly classify OR models into the following types.

a. Physical Models include all form of diagrams, graphs and charts. They are designed to tackle specific problems. They bring out significant factors and interrelationships in pictorial form to facilitate analysis. There are two types of physical models :a. Iconic models b. Analog model sIconic models are primarily images of objects or systems, represented on a smaller scale. These models can simulate the actual performance of a product. Analog models are small physical systems having characteristics similar to the objects they represent, such as toys.

b. Mathematical or Symbolic Models

employ a set of mathematical symbols to represent the decision variable of the system. The variables are related by mathematical systems. Some examples of mathematical models are allocation, sequencing, and replacement models.

c. By nature of Environment: Models can be further classified as follows: a. Deterministic model in which everything is defined and the results are certain, such as an EOQ model .b. Probabilistic Models in which the input and output variables follow a defined probability distribution, such as the Games Theory.

d. By the extent of Generality Models can be further classified as follows

a. General Models are the models which you can apply in general to any problem. For example: Linear programming.

b. Specific Models on the other hand are models that you can apply only under specific conditions. For example: You can use the sales response curve or equation as a function of only in the marketing function.

2. Write dual of Max Z = 4X1+ 5X2 Subject to :3X1+ X2 15 X1+ 2X2 10 5X1+ 2X2

 20 X1, X2 0

Soln: Min W = 15Y1+ 10Y2+ 20Y3 Subject to 3Y1+ Y2+ 5Y34 Y1+ 2Y2+ 2Y35 Y1, Y2, Y30

3. Write a note on Monte-Carlo simulation. The Monte-Carlo method is a simulation technique in which statistical distribution functions are created by using a series of random numbers. This approach has the ability to develop many months or years of data in a matter of few minutes on a digital computer. The method is generally used to solve the problems which cannot be adequately represented by mathematical models, or, where solution of the mode, is not possible by analytical method. The Monte-Carlo simulation procedure can be summarized in the following steps: Step 1: Define the problem: a)

Identify the objectives of the problem, andb)

Identify the main factors which have the greatest effects on the objectives of the problem Step 2: Construct an appropriate model: a)

Specify the variables and parameters of the model. b)

Formulate the appropriate decision rules, i.e., state the conditions under which the experiment is to be performed. c)

Identify the type of distribution that will be used Models use either theoretical distributions or empirical distributions to state the patterns the occurrence associated withthe variables .d)

Specify the manner in which time will change .e)

Define the relationship between the variables and parameters. Step 3: Prepare the model for experimentation: a)

Define the starting conditions for the simulation, and b)

Specify the number of runs of simulation to be made. Step 4: Using step 1 to 3, experiment with the model:a)

Define a coding system that will correlate the factors defined in step 1 with the random umbers to be generated for the simulation. b)

Select a random number generator and create the random numbers to be used in the simulation .c)

Associate the generated random numbers with the factors identified in step 1 and coded instep 4 (a).Step 5: Summarize and examine the results obtained in step 4.Step 6: Evaluate the results of the simulation. Step 7: Formulate proposals for advice to management on the course of action to be adoptednd modify the model, if necessary.

4. Explain PERT

Program (Project) Evaluation and Review Technique (PERT) is a project management tool usedto schedule, organize, and coordinate tasks within a project. It is basically a method to analyze the tasks involved in completing a given project, especially the time needed to complete each task, and to identify the minimum time needed to complete the total project ome key points about PERT are as follows:1. PERT was developed in connection with an R&D work. Therefore, it had to cope with the uncertainties that are associated with R&D activities. In PERT, the total project duration is regarded as a random variable. Therefore, associated probabilities are calculated so as tocharacterize it.2. It is an event-oriented network because in the analysis of a network, emphasis is given on theimportant stages of completion of a task rather than the activities required to be performed toreach a particular event or task.3. PERT is normally used for projects involving activities of non-repetitive nature in which timeestimates are uncertain.4. It helps in pinpointing critical areas in a project so that necessary adjustment can be made tomeet the scheduled completion date of the project.

PERT planning involves the following steps: Identify the specific activities and milestones. Determine the proper sequence of the activities. Construct a network diagram. Estimate the time required for each activity. Determine the critical path. Update the PERT chart as the project progresses.

5. Explain Maximini - minimax principle

Solving a two-person zero-sum game Player A and player B are to play a game without knowing the other players strategy. However ,player A would like to maximize his profit and player B would like to minimize his loss. Also eachplayer would expect his opponent to be calculative. Suppose player

A plays A1 .Then, his gain would be a11 , a12 , ... , a1n ,accordingly Bs choice would beB1 ,B2 ,, Bn. Let1=min { a1 ,a12 ,, a1n.

Then,1is the minimum gain of A when he plays A1(1is the minimum pay-off in the first row.)

Similarly, if A plays A2, then his minimum gain is2, the least pay-off in the second row. You will find corresponding to As playA1, A2 ,, Am, the minimum gains are the row minimums1 , 2,, m .Suppose A chooses the course of action where i s maximum. Then the maximum of the row minimum in the pay-off matrix is called maxim in. The maxim in is =maxI{min j(aij) }

Similarly, when B plays, he would minimise his maximum loss. The maximum loss to B is when B j is j =max i ( aij ).

This is the maximum pay-off in the j th column. The minimum of the column maximums in the pay-off matrix is called minimax. The minimax is =min j{ maxi ( aij ) } If == v (say), the maximin and the minimax are equal and the game is said to have saddle point. If < , then the game does not have a saddle point.

Saddle point In a two-person zero-sum game, if the maximin and the minimax are equal, the game hassaddle point.Saddle point is the position where the maximin (maximum of the row minimums) and minimax(minimum of the column maximums) coincide. If the maximin occurs in ther throw and if the minimax occurs in thesth column, the position (r,s) is the saddle point.Here, v=a rs

is the common value of the maximin and the minimax. It is called the value of the game.The value of a game is the expected gain of player A, when both the players adopt optimal strategy. Note: If a game has saddle point, (r, s), the players strategy is pure strategy.

Solution to a game with saddle point Consider a two-person zero-sum game with players A and B. Let A1 , A2 , ,Am be the courses of action for player A. Let B1 , B2 , ,Bn be the courses of action for player B.

The saddle point of the game is as follows: 1. The minimum pay-off in each row of the pay-off matrix is encircled. 2. The maximum pay-off in each column is written within a box. 3. If any pay-off is circled as well as boxed, that pay-off is the value of the game. The corresponding position is the saddle point. Let(r, s)be the saddle point. Then, the suggested pure strategy for player Ais Ar .The suggested pure strategy for player BisBs. The value of the game is ars.

Note:

However, if none of the pay-offs is circled or boxed, the game does not have a saddlepoint. Hence, the suggested solution for the players is mixed strategy.

6. Write short notes on the following: a. Linear Programming b. transportation

Linear Programming Linear programming focuses on obtaining the best possible output (or a set of outputs) from agiven set of limited resources. The LPP is a class of mathematical programming where the functions representing the objectives and the constraints are linear. Optimization refers to the maximization or minimization of the objective functions. You can define the general linear programming model as follows:

Maximize or Minimize : Z = c1X1+ c2X2+ --- +cnXn

Subject to the constraints ,a11X1+ a12X2+ --- + a1nXn~ b1 a21X1+ a22X2+ --- + a2nXn~ b2 am1X1+ am2xX2+ --- + amnXn~ bm and X1, X2, .., Xn 0

Where, c j, bi and aij (i = 1, 2, 3, .. m, j = 1, 2, 3 ------- n) are constants determined from the technology of the problem and X j(j = 1, 2, 3 ----n) are the decision variables. Here ~ is either (less than), (greater than) or = (equal). Note that, in terms of the above formulation the coefficients c j, biand aijare interpreted physically as follows. If biis the available amount of resources i, where aijis the amount of resource i that must be allocated to each unit of activity j, the worth per unit of activity is equal to c j . Transportation

Transportation model is an important class of linear programs. For a given supply at each source and a given demand at each destination, the model studies the minimization of the cost of transporting a commodity from a number of sources to several destinations. The transportation problem involves m sources, each of which has available ai(i = 1, 2 m)units of homogeneous product and n destinations, each of which requires b j(j =1,2., n) units of products. Here ai and bj are positive integers. The cost cijof transporting one unit of the product from the ith source to the jth destination is given for each i and j. The objective is todevelop an integral transportation schedule that meets all demands from the inventory at aminimum total transportation cost. It is assumed that the total supply and the total demand are equal. mi=1ai=n j=1b j

(1)The condition (1) is guaranteed by creating either a fictitious destination with a demand equalto 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 areassumed to be zero so that total cost of transportation will remain the same.

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 Minimize Z =mi=1n j=1CIJXij

Subject tomi=1ai,i = 1, 2, 3, -------------, m andn j=1b j, j = 1, 2, 3, -------------, n (2)

With all XIJ 0

A necessary and sufficient condition for the existence of a feasible solution to the transportation problem (2) is: mi=1ai=n j=1b j

Master of Business Administration - MBA Semester 2

MB0049 Project Management (4 credits)

(Book ID: B1138)

ASSIGNMENT- Set 1 Marks 60

Note: Each Question carries 10 marks. Answer all the questions. Q1. Define project management. Discuss the need for project management Project Management is all about a mindset. The major characteristics of project mindset.

Characteristics of project mindset

a)Time: It is an important parameter in framing the right mindset. It is possible to improve the pace of the project by reducing the time frame of the process. The mindset is normally to work outa comfort mode by stretching the time limits.

b)Responsiveness: It refers to quickness of response of an individual. The vibrancy and liveliness of an individual or an organisation are proportional to its capabilities to respond to evolving processes and structure

.c)Information Sharing:

Information is power. Information is the master key to todays business .Information sharing is an important characteristic of the project mindset today. A seamless flow of information is a key to build a healthy mindset among various stakeholders in a project.

d)Processes: Project mindset lays emphasis on flexible processes. The major difference in a process and a system is in its capabilities of providing flexibility to different situational encounters .Flexible processes possess greater capabilities of adaptability

e)Structured planning: Structured planning based on project management life cycle enables one to easily and conveniently work according to the plan. It also enables efficient use of project resources and prioritisation of the activities based on resource planning. Hence having a right mindset and flexible processes in place is very important for a sound project management. Now let us have an assessment exercise

Q2. What is meant by risk management? Explain the components of risk management Risk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative orqualitativevalue of risk related to a concrete situation and are cognized threat(also called hazard).Quantitative risk assessment requires calculations of two components of risk (R):, the magnitude of the potential loss (L), and the probability(p)that the loss will occur. In all types of engineering of complex systems sophisticated risk assessments are often made within Safety engineering and Reliability engineering when it concerns threats to life, environment or machine functioning. The nuclear, aerospace, oil, rail and military industrieshave a long history of dealing with risk assessment. Also, medical, hospital, and food industries control risks and perform risk assessments on a continual basis. Methods for assessment of risk may differ between industries and whether it pertains to general financial decisions or environmental, ecological, or public health risk assessment Components are: Risk assessment is the process of examining a project to identify areas of potential risk. Risk identification can be facilitated with the help of a checklist of common risk areas for software projects, such as the brief lists presented in this chapter. You might also study an organization-wide compilation

of previously identified risks and mitigation strategies, both successful andunsuccessful. Risk analysis examines how project outcomes might change as a result of theidentified risks. Risk avoidance is one way to deal with a risk: dont do the risky thing! You might avoid risks by not undertaking certain projects, or by relying on proven rather than cutting-edge technologieswhen possible. In certain situations you might be able to transfer a risk to some other party, suchas a subcontractor.

Risk control is the process of managing risks to achieve the desired outcomes. Risk management planning produces a plan for dealing with each significant risk, including mitigation approaches ,owners, and timelines. Risk resolution entails executing the plans for dealing with each risk .Finally, risk monitoring involves tracking your progress toward resolving each risk item.

Q3. Describe the various steps involved in monitoring and controlling aproject Ans:- Project Monitoring and Control: Any project aimed at delivering aproductor a service has to go through phases in a planned manner in order tomeet therequirements. It is possible to work according to the project plan only bycarefulmonitoring of the project progress. It requires establishing control factors to keeptheproject on the track of progress. The results of any stage in aproject,depends on the inputs to that stage. It is therefore necessary to controlall theinputs and the corresponding outputs from a stage. A project manager mayusecertain standard tools to keep the project on track. The project managerand theteam members should be fully aware of the techniques and methods torectifythe factors influencing delay of the project and its product. Thevarious stepsinvolved in monitoring and controlling a project from start to end are asfollows Preliminary work

the team members understand the project plans, projectstage schedule,progress controls, tracking schedules, summary of the stagecost and relatedworksheets. All the member has to understand the tolerances inany change and maintain achange control log. They must realize the need andimportance of quality forwhich they have to follow strictly a quality reviewschedule andfrequently discuss on the quality agendas. They must understandthe stage statusreports, stage end reports, stage end approval reports. Project Progress The membersmust keep a track of the project progress andcommunicate the same to otherrelated members of the project. They mustmonitor and control projectprogress, through the use of regular check points,quality charts, and statistical tables,control the quality factors which are likely todeviate from expected values as anydeviation may result in changes to thestage schedule. The projectmanager ensures that these changes are madesmoothly and organizes reviewmeeting with the project management group. Stage Control The manager must establish aproject check point cycle. For thissuitable stage version control procedures may be followed. Thedetails are to bedocumented stage wise. Project files have to be frequently updated withsuitableversion control number and revision status should be maintained for eachchange. Team members are identified who will exercise controls atvarious pointsof the project. Resources Plan the resources required for various stage of the project. Brief both the project team and the key resources about the objectives of every stage,planned activities, products, organization, metrics and project controlsQuality Control This is very important in any project. Quality control is possibleif the projectmembers follow the quality charts and norms very strictly.Schedule Quality Review It isrecommended that quality review be scheduledat the beginning of the stage and alsoending of every stage.Agenda for quality review create and distribute a quality review agendaspecifying the objective,products, logistics, roles, responsibilities and time frame.Conduct quality review

the qualityreview is to be conducted in a structured andformal manner. Quality review shouldfocus on product development and itsquality factors. Focus on whether it meets theprescribed quality standard.Follow up - QR complete product status revised from In progresses toQRComplete. Follow up the actions planned in strict mannerwhich ensuresconformity to the standards.Review quality control procedures verify that the quality objectives foreachproduct are appropriate and that all participants are satisfied bothwith theprocess and its outcome. The Control Of The Project Process And Project Progress Control a) Monitor Performance: The team members log in details of actual startdate,actual finish date, actual hours worked per task, estimated hours to completethetask, elapsed time in hours to compete the task, any miscellaneous costsincurred during a stage. These inputs become the base to monitor theperformance of the project and its stages.b) UpdateSchedule-Update the schedule for actual start date for tasksstarted,actual finish date for tasks finished, actual hours worked per task, latestestimated work in hours to complete the task. Update costs - Update the stage cost summary worksheet withactualcosts incurred this period, estimated remaining costs. Miscellaneous costswill beautomatically updated from the scheduler, since they are calculatedfrom actual work. Re-plan stage schedule-Review the tracking Gantt and Costworkbookand identify any deviation from the baseline. Establish why thedeviationhas occurred. Refer back to the project control factors to helpdeterminethe appropriate corrective action and adjust the scheduleaccordingly.Determine if the stage has exceeded the progress,cost and qualitytolerance levels agreed with the project management team. Reviewstatusof open issues and determine any further action required on these issues.Review thestatus of any outstanding quality reviews Review any newchange requests. Conduct team status review- Conduct a status meeting with the projectteam. Itemsfor discussion are achievements this period planned activitiesthat are incomplete oroverdue, activities for the next period, new issuesidentified this period issues closed this period, summary of resultsof quality reviews , summary of schedule and cost status, suggestedrevisions to the plan.

 Create status report The status report provides a record of currentachievement and immediateexpectations of the project. The status has tobe effectively communicated to all interested parties. Create Flash report -summarize the accomplishments for the month,schedule status,upcoming tasks for the month and any major issues.Distribute to the projectteam and project management team Project Status Reports - As discussed earlier, the status report provides arecord of currentachievements and immediate expectations of the project.-A weekly statusreport includes:-Accomplishments during the period-Items not completed during the period-Proposed activitiesfor the next period-Any predicted slippage to the stageschedule, along with cause andcorrective action.-Any predicted costoverrun along with cause and corrective action.Approvals Project stagereviews and the decisions taken and actions plannedneed to be approved by thetop management. The goals of such review are toimprove quality by findingdefects and to improve productivity by finding defectsin a cost effective manner. Thegroup review process includes several stageslikeplanning, preparation and overview a group review meeting and reworkrecommendations and follow-up. Change Control Controllingthe changes in the project is possible through a proper changemanagement process and using necessary tools for controlling the change.Change control is necessary to control the increase of work at various stagesof project and to manage effectively the disruptions in the stages, if any. Thesefactors may affect the progress of the project, resulting in deviationsfrom thestage schedules, project and stage cost and project scope.

Q4. What is Project Management Information System (PMIS)? What are the majoraspects of PMIS? A project management information system (PMIS) is a part of management information systems(MIS) and manages information of a project centric organization. These electronic systems "help [to] plan, execute, and close project management goals."[1] PMIS systems differ inscope, design and features depending upon an organisation's operational requirements .Riskassessmentis a step in arisk

management procedure. Risk assessment is the determination of quantitativeorqualitativevalue of risk related to a concrete situation and arecognized threat(also called hazard).Quantitative risk assessment requires calculations of twocomponents of risk (R):, the magnitude of the potential loss(L), and the probability(p)that theloss will occur. In all types of engineering of complex systems sophisticated risk assessments areoften made withinSafety engineeringandReliability engineeringwhen it concerns threats to life,environment or machine functioning. The nuclear, aerospace, oil, rail and military industrieshave a long history of dealing with risk assessment. Also, medical, hospital, and food industriescontrol risks and perform risk assessments on a continual basis. Methods for assessment of risk may differ between industries and whether it pertains to general financial decisions orenvironmental, ecological, or public health risk assessmentAinformation systems ismainly aimedat providing the management at different levels with information relatedto the system of theorganization. It helps in maintaining a discipline in the system.A system is prone to malfunctionsif not properly maintained. An information systemdealing with project management tasks is theproject management information system. It helpin decision making in arriving at optimumallocation of resources. The information systems is based on a database of the organization. Aproject management information systemalso holds schedule, scope changes,risk assessment and actual results. Usual informationsystems are not designed for projects. Normal information systems tell managers if they are working within the scope of the budget. The information is communicated tomanagers at different levels of the organization depending uponthe need. Upper managers need to know information on all projects regarding progress,problems, resource usage, costs and project goals. This information helps them takedecisions onthe project. They should review the projects at each milestone and arriveatappropriate decision. Project manager and department managers need to see each projectschedule priority and use of resources to determine the most efficient use acrosstheorganization. Project team members need to see schedule, takes lists andspecification sothey know what needs to be done next. The four major aspects of a PM:-(a)Provide information to the major stakeholders ie the rightinformation atthe right time.(b) Assist the team members, stakeholders, managers with necessaryinformation and summary of the information shared to the higher level managers.(c)Assists the managers in doing what if analyses aboutproject staffing, proposed staffing changes and total allocation of resources.(d) Help organizational learning by helping the members of the organization learnabout projectmanagement.A good PMIS is possible to be developed from the team members and notfromthe systems administrators of the company. Organizations tend to allocate suchresponsibility byrotation among members with a well designed and structured data entry andanalytical format Q5. What is PERT chart? What are the advantages of PERT chart? A PERT chart is a project management tool used to schedule, organize, and coordinate tasks within a project. PERT stands for Program Evaluation Review Technique, a methodology developed by the U.S. Navy in the 1950s to manage the Polaris submarine missile program. A similar methodology, the Critical Path Method (CPM) was developed for project management in the private sector at about the same time APERT chart presents a graphic illustration of a project as a network diagram consisting of numbered nodes(either

circles or rectangles) representing events, or milestones in the project linked by labelledvectors(directional lines) representingtasks in the project. The direction of the arrows on the lines indicates the sequence of tasks. Inthe diagram, for example, the tasks between nodes 1, 2, 4, 8, and 10 must be completed insequence. These are called dependent or serial tasks. The tasks between nodes 1 and 2, and nodes 1 and 3 are not dependent on the completion of one to start the other and can beunder taken simultaneously. These tasks are called parallel orconcurrent tasks. Tasks that mustbe completed in sequence but that don't require resources or completion time are considered to have event dependency. These are represented by dotted lines with arrows and are called dummy activities . For example, the dashed arrow linking nodes 6 and 9 indicates that the system files must be converted before the user test can take place, but that the resources and time required toprepare for the user test (writing the user manual and user training) are on another path. Numbers on the opposite sides of the vectors indicate the time allotted for the task.The PERT chart is sometimes preferred over the Gantt chart,another popular project management charting method, because it clearly illustrates task dependencies. On the other hand,the PERT chart can be much more difficult to interpret, especially on complex projects. Frequently, project managers use both techniques. Advantages:-some tasks can have some slack time without affecting the project completion time.they are used to determine and avoid surprises and minimize wastages.

Q6. Write brief notes on the following: (i) Re-engineering and (ii) Re-structuring Business process re-engineering is the analysis and design of workflows and processes withinan organization. According to Davenport (1990) a business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering is the basis for manyrecent developments in management. The cross-functional team, for example, has become popular because of the desire to re-engineer separate functional tasks into complete cross-functional processes.[citation needed ]Also, many recent management information systems developments aim to integrate a wide number of business functions .Enterprise resource planning ,supply chain management, knowledge management systems,group ware and collaborative systems ,Human Resource Management Systems and customer relationship management Systematicstarting over and reinventing the way a firm, or abusiness process,gets its work done. Defined by Michael Hammerand James Champy (in their 1993 book 'Reengineering The Corporation') as "Fundamental rethinking and radical redesign of business process to achieve dramatic improvementsin critica lmeasures of performan cesuch as cost, service,and speed." See alsoBusiness Process Reengineering. Restructuring refers to the phenomenon of Westernurban areasshifting fromamanufacturingto aservice sector economic base. This transformation has affected demographics includingin comedistribution, employment ,and social hierarchy ;institutional arrangements including the growth of the corporate complex, specialized producer services, capital mobility ,informal economy, nonstandard work, and public outlays; as well as geographicspacing including the rise of world cities,spatial mismatch,and metropolitan growth

differentials Bringing about a drastic or fundamenta linternal change that altersthe relationships between different components or elements of anorganization or system

Master of Business Administration - MBA Semester 2

MB0049 Project Management (4 credits)

(Book ID: B1138)

ASSIGNMENT- Set 2 Marks 60 Note: Each Question carries 10 marks. Answer all the questions Q1. What are the various phases of project management life cycle? Explain A:The various phases in project management life cycle are:

Analysis and Evaluation Phase: It starts with receiving a request to analyse the problem from the customer.The project manager conducts the analysis of the problem and submits a detailedreport to the top management. The report should consist of what the problem is,ways of solving the problem, the objectives to be achieved, and the success rate ofachieving the goal.

Marketing Phase: A project proposal is prepared by a group of people including the projectmanager. This proposal has to contain the strategies adopted to market the productto the customers.

Design Phase: Based on the inputs received in the form of project feasibility study,preliminary project evaluation, project proposal and customer interviews, followingoutputs are produced: System design specification Program functional specification

Program design specification Project plan

Inspecting, Testing and Delivery Phase: During this phase, the project team works under the guidance of the project manager. The project manager has to ensure that the team working under him implements the project designs accurately. The project has to be tracked or monitored through its cost, manpower and schedule. The tasks involved in these phases are: Managing the customer Marketing the future work Performing quality control work

Post Completion Analysis Phase: After delivery or completion of the project, the staff performance has to beevaluated. The tasks involved in this phase are: Documenting the lessons learnt from the project Analysing project feedback Preparing project execution report

Analysing the problems encountered during the project Q2. Write brief note on project planning and scoping. A: The purpose of project planning and scoping is to first identify the areas of theproject work and the forces affecting the project and then to define the boundaries ofthe project. In addition, the scoping has to be explicitly stated on the line of theproject objectives. It also has to implicitly provide directions to the project. Theplanning and scoping should be such that the project manager is able to assessevery stage of the project and also enabling the assessment of the quality of thedeliverable of the project at every stage.First, let us list the steps involved in project scoping. These steps include:

Identifying the various parametric forces relevant to the project and its stages

Enabling the team members to work on tools to keep track of the stages andthereby proceed in the planned manner

Avoiding areas of problems which may affect the progress of the project

Eliminating the factors responsible for inducing the problems

Analysing the financial implications and cost factor at various stages of theproject

Understanding and developing the various designs required at various stagesof the project

Identifying the key areas to be included in the scope through variousmeetings, discussion, and interviews with the clients

Providing a base and track to enable alignment of project with theorganisation and its business objectives

Finding out the dimensions applicable to the project and also the ones notapplicable to the project

Listing out all the limitations, boundary values and constraints in the project

Understanding the assumptions made in defining the scopeAfter completing the project scoping, you can start your project plan. Project planninginvolves three processes as shown as under:

The identification process: The main steps in the identification process of any project are:

Identifying initial requirements

Validating them against the project objective

Identifying the criteria such as quality objectives and quantitative requirementsfor assessing the success of both the final product and the process used tocreate it

Identifying the framework of the solution

Preparing a template of the frame work of solution to illustrate the projectfeasibility

Preparing relevant charts to demonstrate the techniques of executing theproject and its different stages

Preparing a proper project schema of achieving the defined businessrequirements for the project

Identifying training requirement

Making a list of the training program necessary for the personnel working onthe project

Identifying the training needs of the individuals working in various functionsresponsible in the project

Preparing a training plan and a training calendar

Assessing the capabilities and skills of all those identified as part of theproject organisation

The review Process: The main steps in the review process of any project are:

Establishing a training plan to acquaint the project team members with themethodologies, technologies and business areas under study

Updating the project schedule to accommodate scheduled training activities

Identifying the needs for review and reviewing the project scope

Reviewing a project with respect to its stages and progress by preparing aplan for the review, fixing an agenda to review the project progress andkeeping the reports ready for discussion about stage performance

Reviewing the project scope, the objective statement, the non conformances in the project stages and identifying the need to use the project plan

Preparing a proper project plan indicating all the requirements from start to finish of the project and also at every stage of the project

Preparing a checklist of items to be monitored and controlled during the course of execution of the project

The analysis process: The main steps in the analysis process of any project are

Comparing the actual details with that in the plan with reference to project stages.

Measuring various components of the project and its stages frequently to control the project from deviating and also monitor the performance.

Deciding how the task, the effort and the defects are to be tracked, what tools to be used, what reporting structure and frequency will be followed at various stages.

Identifying the preventive and corrective steps to be taken in case of anyvariance

Performing root cause analysis for all problems encountered.If all the above steps are performed, scoping and planning become effective and the ideal outcome are achieved.

Q3. What is Return on Investment (ROI)? Explain its importance

A: Return on Investment (ROI) is the calculated benefit that an organisation is projected to receive in return for investing money, time and resources in a project. Within the context of the review process, the investment would be in an information system development or enhancement project.ROI information is used to assess the status of the business viability of the

project at key checkpoints throughout the projects life -cycle. ROI may include thebenefits associated with improved mission performance, reduced cost, increased quality, speed, or flexibility, and increased customer and employee satisfaction. ROI should reflect such risk factors as the projects technical complexity, the agencys management capacity, the likelihood of cost overruns, and the consequences of under or non-performance. Where appropriate, ROI should reflectactual returns observed through pilot projects and prototypes.ROI should be quantified in terms of money and should include a calculation of the break-even point (BEP), which is the time (point in time) when the investment begins to generate a positive return. ROI should be re-calculated at every major check point of a project to see if the BEP is still on schedule, based on projects pending and accomplishments to date .If the project is behind schedule or over budget, the BEP may move out in time; if the project is ahead of schedule or under budget the BEP may occur earlier In either case, the information is important for decision-making based on the value of the investment throughout the project life-cycle .Any project that has developed a business case is expected to refresh the ROI at each key project decision point (that is, stage exit) or at least yearly.

Q4. Discuss the role of effective data management in the success of project management.

A: Data management consists of conducting activities which facilitate acquiring data, processing it and distributing it. Acquisition of data is the primary function.To be useful, data should have three important characteristics timeliness, sufficiency and relevancy (as shown in figure 9.3). Management of acquisition lies inensuring that these are satisfied before they are stored for processing and decisions taken on the analysis. There should be data about customers, suppliers, market conditions, new technology, opportunities, human resources, economic activities, government regulations, political upheavals, all of which affect the way you function. Most of the data go on changing because the aforesaid sources have uncertainty inherent inthem. So updating data is a very important aspect of their management. Storing what is relevant in a form that is available to concerned persons is also important. When aproject is underway dataflow from all members of the team will be flowing with the progress of activities. The data may be about some shortfalls for which the member is seeking instructions. A project manager will have to analyse them, discover further data from other sources and see how he can use them and take decisions. Many times he will have to inform and seek sanction from top management .The management will have to study the

impact on the overall organizational goals and strategies and convey their decisions to the manager for implementation. For example, Bill of Materials is a very important document in Project Management. It contains details about all materials that go into the project at various stages and has to be continuously updated as all members of the project depend upon it for providing materials for their apportioned areas of execution. Since information is shared by all members, there is an opportunity for utilising some of them whe nothers do not need them. To ascertain availability at some future point of time ,information about orders placed, backlogs, lead times are important for all the members. A proper MIS will take care of all these aspects. ERP packages too help inintegrating data from all sources and present them to individual members in the way6 they require. When all these are done efficiently the project will have no hold ups anassure success.

Q5. What is Project risk management? Explain its significance. A: Project Risk Management The principles of project risk management can be stated very simply. Any project organisationis subject to risks. One which finds itself in a state of perpetual crisis, is failing to manage risk sproperly. Failure to manage risks is characterised by inability to decide what to do, when to doit, and whether enough has been done. Risk Management is a facet of Quality, using basic techniques of analysis and measurement to ensure that risks are properly identified, classified, and managed .In order to manage risks we have to understand what a risk is. The official definition provided tome by Professor James Garven, University of Texas at Austin is from the American Risk and Insurance Association: Risk management is the systematic process of managing an organization's risk exposures toachieve its objectives in a manner consistent with public interest, human safety, environmental factors, and the law. It consists of the planning, organizing, leading, coordinating, and controlling activities undertaken with the intent of providing an efficient pre-loss plan that minimizes the adverse impact of risk on the organization's resources, earnings, and cash flows. In my view the most helpful definition is that given by Larry Krantz, Chief Executive of Euro Log Ltd here in the UK. Larry says that 'A risk is a combination of constraint and uncertainty'. We all face constraints in our projects, and also uncertainty. So we can minimise the risk in the project either by eliminating constraints (a nice conceit) or by finding and reducing uncertainty. There are two stages in the process of Project Risk Management, Risk Assessment and Risk Control. Risk Assessment can take place at any time during the project, though the sooner the better. However, Risk Control cannot be effective without a previous Risk Assessment.

Similarly ,most people tend to think that having performed a Risk Assessment, they have done all that is needed. Far too many projects spend a great deal of effort on Risk Assessment and then ignore Risk control completely .Risk Assessment has three elements: Identify Uncertainties Explore the entire project plans and look for areas of uncertainty. Analyse Risks Specify how those areas of uncertainty can impact the performance of the project, either in duration, cost or meeting the users' requirements. Prioritise Risks Establish which of those Risks should be eliminated completely, because of potential extreme impact, which should have regular management attention, and which are sufficiently minor to avoid detailed management attention. In the same way, Risk Control has three elements, as follows :Mitigate Risks.Take whatever actions are possible in advance to reduce the effect of Risk. It is better to spend money on mitigation than to include contingency in the plan. Plan for Emergencies. For all those Risks which are deemed to be significant, have an emergency plan in place before it happens .Measure and Control. Track the effects of the risks identified and manage them to a successful conclusion.

Q6. Write brief note on project management application software.

A: The Microsoft Project family of products offers tools to work on a project from management point of view. Microsoft Project is designed for people who manage projects independently and dont require the capability to manage resources from a central repository. Microsoft has a team project management solution that enables project managers and their teams to collaborate on projects .After creating a fairly complete final project plan it is a good idea to create abaseline version to compare the original project plan with actual events and achievements .The following is the typical process followed for project management through this software as shown as under:

Reviewing the Baseline:

The Baseline created can be used to compare the original project plan with actual events and achievements. This will display the days required for each taskand project phase. For actual operating instructions please refer the Microsoft Project User Handbook.

Tracking Progress: After creating a baseline, if the project has begun, it is necessary to enter actual dates for the tasks that are being completed and the resource utilisation used to complete them. Again review different views and the cost and summary tables before proceeding to the next section. Return to the Entry view of the Gantt chart before proceeding.

Balancing Workloads: At times people and equipment may be assigned more work than they can complete in normal working hours. This is called over allocation. Project can test for this condition and reschedule (or level) their workload to accommodate completing tasks during a normal day

Monitoring Variances: After a baseline has been established and the project has begun, it is desirable to determine if tasks are being accomplished on time and /or if cost overruns are occurring. We also need to keep monitoring the performance to detect early deviations.

Creating Reports: Project has many different built-in reports and has the capability building custom reports and exporting data to other MS Office applications for integration into other reporting venues. These are often intelligent reports.