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Table of Contents Pages

Engineering Management ................................................................................................................3


Nature of Management Processes ....................................................................................................3
Objectives of Management ..............................................................................................................5
Functions of Management................................................................................................................6
Frederick Winslow Taylor………………………………………………………………………...7
Principles of Scientific Management by Taylor ..............................................................................7
Henri Fayol ......................................................................................................................................8
Functions of Management by Fayol………………………………………………………………9

Principles of Management by Fayol………………………………………………………………9

Management by Objectives (MBO)……………………………………………………………10

Management by Exception (MBE)………………………………………………………………12

Management Information Systems (MIS)…………………………………………………….....13

Motivation Theories……………………………………………………………………………14

Causes of Motivational Problems……………………………………………………………..16

Group Behaviour………………………………………………………………………………16

Executive Communication Processes……………………………………………………………18

Forms & Barriers to Executive Communication………………………………………………19

Need/Importance of Executive Communication………………………………………………21

Human Resource Management (HRM)………………………………………………………….22

Plant Location……………………………………………………………………………………23

Plant Layout……………………………………………………………………………………25

Criteria for good Layout………………………………………………………………………..25

Types of Layout………………………………………………………………………………….27

Plant Maintenance………………………………………………………………………………29

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Industrial Safety…………………………………………………………………………………30

Material Handling………………………………………………………………………………31

Productivity………………………………………………………………………………….....32

Marketing………………………………………………………………………………………35

Marketing Concepts……………………………………………………………………………35

Components of Marketing……………………………………………………………………36

Product Mix…………………………………………………………………………………38

Product-Mix Management………………………………………………………………………39

Product Life Cycle……………………………………………………………………………….40

Product Distribution Channel……………………………………………………………….......41

Organisation……………………………………………………………………………………42

Types of Organisation…………………………………………………………………………42

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ENGINEERING MANAGEMENT

Definition of Management:

It is very difficult to give a precise definition of the term „management‟. Different scholars from
different disciplines view and interpret management from their own angles. The economists
consider management as a resource like land, labour, capital and organisation. The bureaucrats
look upon it as a system of authority to achieve business goals. The sociologists consider
management as part of the class elite in the society.

Management is the art of knowing what you want to do and then seeing that it is done the best
and cheapest way. ( F.W.Taylor)

Henri Fayol defined management as to forecast, plan, organize, command, coordinate and
control.

Summarily, management can be defined as the process of reaching organizational goal by


working with and through people and other organizational resources.

Engineering management is the fusion of business with engineering principles.

NATURE OF MANAGEMENT PROCESS

To understand the basic nature of management, it must be analysed in terms of art & science, in
relation to administration, a profession, in terms of managerial skills and style of managers.

Nature of management can be described as follows:

(1). Continuous process: Management is never ending process. It will remain the part of
organisation till the organisation itself does not exist. Management is an unending process as past
decisions always carry their impact for the future course of action.

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(2). Universal in nature: Management is universal in nature.ie. it exists everywhere in universe
where there is a human activity. The basic principles of management can be applied anywhere
whether they are business or non-business organisation.

(3). Multidisciplinary: Management is basically multidisciplinary. Though management has


developed as a separate discipline it draws knowledge and concepts of various other streams like
sociology, psychology, economics, statistics, etc. Management links ideas and concepts of all
these disciplines and uses them for good-self of the organisation.

(4). Management is a group of activity: Management is a vital part of group activity. As no


individual can satisfy all his needs himself, he unites with his co-worker and work together as an
organised group to achieve what he cannot achieve individually.

(5). Management is goal oriented: Management is a goal oriented activity. It works to achieve
some pre-determined objectives or goals which may be economic or social.

(6). Dynamic: Management is dynamic in nature.ie. techniques to manage business changes itself
over a period of time.

(7). System of Authority: Authority is power to get the work done by others and compel them to
work systematically. Management cannot perform in absence of authority. Authority and
responsibility depends upon position of manager in organization.

(8). Management is an art: Management is considered as art as both requires skills, knowledge ,
experience and creativity for achievement of desired results.

(9). Management is science: Management is considered as science. Science tells about the causes
and effects of applications and is based on some specific principles and procedures. Management
also uses some principles and specific methods. These are forced by continuous observations.

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OBJECTIVES OF MANAGEMENT

The objectives of management are narrated as:

(1). Organisational Objectives: Management is expected to work for the achievement of the
objectives of the particular organisation in which it exists. Organisational objectives include:

a). Reasonable profits so as to give a fair return on the capital invested in business.

b). Survival and solvency of the business.ie.continuity

c). Growth and expansion of the enterprise

d). Improving the goodwill or reputation of the enterprise

(2). Personal Objectives: An organisation consists of several persons who have their own
objectives. These objectives are as follows:

a). Fair remuneration for work performed

b). Reasonable working conditions

c). Opportunities for training and developments

d). Reasonable security of service

(3). Social Objectives: Management is not only a representative of the owners and workers, but is
also responsible to the various groups outside the organisation. It is expected to fulfill the
objectives of the society which are given below:

a). Quality of goods and services at fair price to consumers.

b). Honest and prompt payment of taxes to the Government.

c). Conservation of environment and natural resources

d). Fair dealings with suppliers, dealers and competitors.

e). Preservation of ethical values of the society

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FUNCTIONS OF MANAGEMENT

The major functions that a manager completes can be categorised into four (4) different functions
known as planning, organising, leading and controlling.

(1). Planning

In this step, the manager creates a detailed action plan aimed at some organisational goal.

Example:

Melissa, a marketing manager, has a goal of increasing sales during the month of February.
Melissa needs to first spend time mapping out the necessary steps she and her team of sales
representatives must take so that they can increase sales numbers. These steps might include
things like increasing advertisements in a particular region, placing some items on sale,
increasing the amount of required customer to sales representatives‟ contact, or contacting prior
customers to see if they are interested in purchasing additional products. The steps are then
organised into a logical pattern so that Melissa and her team can follow them.

Planning is an ongoing step and and can be highly specialised based on organisational goals,
division goals, departmental goals and team goals. It is up to the manager to recognise which
goals need to be planned within his or her individual area.

(2). Organising

This step requires the manager to determine how he/she will distribute resources and organise
her employees according to the plan.

Example:

Melissa will need to identify different roles and ensure that she assigns the right amount of
employees to carry out her plan. She will also need to delegate authority, assign work and
provide direction so that her team of sales representatives can work towards higher sales
numbers without having barriers in their way.

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(3). Leading

The function of management is leading. In this step, the manager spends time connecting with
her employees on an interpersonal level. This goes beyond simply managing tasks; rather, it
involves communicating, motivating, inspiring and encouraging employees towards a higher
level of productivity. Not all managers are leaders.

Example:

An employee will follow the direction of a manager because they have to, but an employee will
voluntarily follow the direction of a leader because they believe in who he/she is as a person,
what he/she stands for and for the manner in which they are inspired by the leader.

(4). Controlling

Controlling is the final function of management. Once a plan has been carried out the manager
evaluates the results against the goals. If a goal is not being met, the manager must also take any
necessary corrective actions to continue to work towards that goal.

FREDERICK WINSLOW TAYLOR (1856- 1915)

Frederick Winslow Taylor was an American manufacturing manager, mechanical engineer and
then a management consultant in his later years. He is often called “The father of scientific
management”. His approach is often referred to as Taylor‟s principles/ Taylorism.

Taylor‟s seminal work – The Principles of Scientific Management was published in 1911. In it
he put forward his ideas of „Scientific Management‟, sometimes referred today as Taylorism
which deferred from traditional „Initiative and Incentive‟ methods of management.

Principles of Scientific Management by Taylor:

(1). Each part of an individual‟s work is analysed “scientifically” and the most efficient method
for undertaking the job is devised; the “the one best way” of working.

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This consists of examining the implements needed to carry out the work and measuring the
maximum out of a „first- class‟ worker could do in a day; workers are then expected to do this
much work every day.

(2).The most suitable person to undertake the job is chosen, again “scientifically”. The individual
is taught to do the job in the exact way devised.

Everyone, according to Taylor, had the ability to be “first-class” at some job. It was
management‟s role to find out which job suited each employee and train them until they were
first-class.

(3). Managers must co-operate with workers to ensure the job is done in the scientific way.

(4). There is a clear „division‟ of work and responsibility between management and workers.
Managers concern themselves with the planning and supervision of the work and workers carry it
out.

Taylor summed up the differences between his principles of management and the traditional
method thus: Under the management of “initiative and incentive” practically the whole problem
is up to the workman while under the scientific management, fully one-half of the problem is up
to the management.

HENRI FAYOL (1841-1925)

Henri Fayol was a French mining engineer and director of mines who developed a general theory
of business administration that is often called Fayolism. He and his colleagues developed this
theory independently of scientific management but roughly contemporaneously. Like his
contemporary, Frederick Winslow Taylor, he is widely acknowledged as a founder of modern
management method.

Fayol‟s work was one of the first comprehensive statements of a general theory of management.
He proposed that there were six (6) primary functions of management and fourteen (14)
principles of management.

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Functions of Management by Fayol

(1). To plan

(2). To organise

(3). To staff

(4). To command/direct

(5). To coordinate

(6). To control

The control function, from the French contrôler, is used in the sense that a manager must receive
feedback about a person in order to make necessary adjustments and must analyse the deviations.
Lately, scholars of management combined the commanding and coordinating function into one
leading function.

Principles of Management by Henri Fayol:

(1). Divison of labour- The divison of work is the course of tasks assigned to and completed by a
group of workers in order to increase efficiency. Division of work, which is also known division
of labour, is the breaking down of a job so as to have members perform different tasks that make
up the whole. This means that for every one job, there can be any number of processes that must
occur for the job to be complete.

(2). Authority- Managers must be able to give orders. Authority gives them this right. Note that
responsibility arises whenever authority is exercised.

(3). Discipline- Employees must obey and respect the rules that govern the organisation. Good
discipline is the result of effective leadership.

(4). Unity of Command- Every employee should receive orders from only one superior.

(5). Unity of direction- Each group of organisational activities that have the same objective
should be directed by one manager using one plan for achievement of one common goal.

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(6). Subordination- The interests of any one employee or group of employees should not take
precedence over the interests of the organisation as a whole.

(7). Remuneration- Workers must be paid a fair wage for their services.

(8). Centralisation- Centralisation refers to the degree to which subordinate are involved in
decision making.

(9). Scalar chain- The line of authority from top management to the lowest ranks represents the
scalar chain. Communications should follow this chain.

(10). Order- This principle is concerned with systematic arrangement of men, machine, material,
etc. there should be a specific place for every employee in an organisation.

(11). Equity- Managers should be kind and fair to their subordinates.

(12). Stability of tenure of personnel- High employee turnover is inefficient. Management should
provide orderly personnel planning and ensure that replacements are available to fill vacancies.

(13). Initiative- Employees who are allowed to originate and carry out plans will exert high
levels of effort.

(14). Esprit de corps- Promoting team spirit will build harmony and unity within the
organisation.

Fayol‟s work has stood the test of time and has been shown to be relevant and appropriate to
contemporary management.

MANAGEMENT BY OBJECTIVES (MBO)

Management by objectives (MBO) is a personnel management technique where managers and


employees work together to set, record and monitor goals for a specific period of time.
Organisation of goals and planning flow top-down through the organisation and are translated
into personnel goals for organizational member.

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Key Concepts

The core concept of MBO is planning, which means that an organisation and its members are not
merely reacting to events and problems but are instead being proactive. MBO requires that
employees set measurable personnel goals based upon organisational goals. For example, a goal
for a civil engineer may be to complete the infrastracture of a housing division within the next
twelve months. The personnel goal aligns with the organisational goal of completing the
subdivision. MBO is a supervised and managed activity so that all of the individual goals can be
co-ordinated to work towards the overall organisational goal. You can think of an individual
personal goal as one piece of a puzzle that must fit together with all of the other pieces to form
the complete puzzle: the organisational goal. Goals are set down in writing annually and
continually monitored by manager to check progress. Rewards are based upon goal achievement.

Advantages

(1). It provides a means to identify and plan for achievement of goals. If you don‟t know what
your goals are, you will not be able to achieve them.

(2). Planning permits proactive behavior and disciplined approach to goal achievement.

(3). It also allows you to prepare for contingencies and roadblocks that may hinder the plan.
Goals are measurable so that they can be assessed and adjusted easily.

(4). Organisations can also gain more efficiency, save resources and increase organisational
morale, if goals are properly set, managed and achieved.

Disadvantages

(1). Application of MBO takes concerted effort.

(2). There is often a focus on mere goal setting rather than developing a plan that can be
implemented.

(3).The organisation often fails to take into account environmental factors that hinder goal
achievement such as lack of resources or management support.

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(4). Organisations may also fail to monitor for changes, which may require modification of goals
or even make them irrelevant.

(5). There is the issue of plain human neglect and failing to follow through on the goals.

MANAGEMENT BY EXCEPTION (MBE)

Management by exception (MBE) is a practice where only significant deviations from a budget
or plan are brought to the attention of management. The idea behind it is that management‟s
attention will be focused only on those areas in need of action. When they are notified of
variance, manager can hone in on that specific issue and let staff handle everything else. If
nothing is brought up, then management can assume everything is going according to plan.

Example

MBE model is similar to the vital signs monitoring systems in hospital critical care units. When
one of the patients vital signs goes outside the range programmed into the machine, an alarm
sounds and staff runs to the rescue. If the machine is quiet, it‟s assumed that the patient is stable
and they will receive only regular staff attention

If a company is going to implement MBE, they need to first set up a basic framework that will
identify items that vary from plan to plan.

Advantages

(1). Problematic issues are identified rapidly and managers are able to use their time and energy
more wisely for important issues rather than for less important ones that could provoke delays in
their daily operations.

(2). Managers need to work less on stastitics and the frequency of making decisions become less
which saves time.

(3). A manager takes fewer decisions, employees have more responsibility which increases their
motivation

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Disadvantages

(1). Occurrences of mistakes in calculating budget results in large variance differences and
finding the errors can be time consuming.

(2). Financial analysts responsible for calculation variances are increasing overhead costs of a
company.

(3). If the finanacial analysts are not performing well, it will become a waste of time and money.

(4). Only managers have the power over really important decisions which can be demotivating
for employees at a lower level

(5). The time taken for passing the issues to manager can be time-consuming.

MANAGEMENT INFORMATION SYSTEMS (MIS)

A management information system (MIS) is a computerised database of financial information


organised and programmed in such a way that it produces regular reports on operations for every
level of management in a company. It is usually also possible to obtain special reports from the
system easily.

The main purpose of the MIS is to give managers feedback about their own performance; top
management can monitor the company as a whole. Information displayed by the MIS typically
shows “actual” data over against “planned” results and results from a year before; thus it
measures progress against goals. The MIS receives data from company units and functions.
Some of the data are collected automatically from computer – linked checkout counters; others
are keyed in at periodic intervals. Routine reports are preprogrammed and run at intervals or on
demand while others are obtained using built-in query languages; display functions built into the
system are used by managers to check on status at desk-side computers connected to the MIS by
networks. Many sophisticated systems also monitor and display the performance of the
company‟s stock.

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Advantages of MIS

The following are some of the benefits that can be attained using MIS:

(1). Companies are able to identify their strengths and weaknesses due to the presence of revenue
reports, employee‟s performance record, etc. Identifying these aspects can help a company
improve its business processes and operations.

(2). Gives an overall picture of the company.

(3). Acts as a communication and planning tool.

(4).The availability of customer data and feedback can help the company to align its business
processes according to the needs of its customers. The effective management of customer data
can help the company to perform direct marketing and promotions activities.

(5). MIS can help a company gain a competitive advantage. Competitive advantage is a firm‟s
ability to do something better, faster, cheaper or uniquely when compared with rival firms in the
market.

MOTIVATION THEORIES

Motivation is the process of arousing and sustaining goal-directed behaviour. There are three (3)
groups of motivational theories.

(1). Content/ Internal Theory:

This theory suggests that variables within the individual give rise to motivation and behaviour.
Example: Maslow‟s hierarchy of needs theory, Alderfer theory and McClelland theory.

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Maslow‟s hierarchy of needs theory

SA= Self- Actualisation.

(2). Process theory:

This theory emphasises the nature of the interaction between the individual and the environment.
Example: Expectancy theory :

Valence - value or importance placed on a particular reward

Expectancy- belief that effort leads to performance

Instrumentality – belief that performance is related to rewards

(3). Reinforcement/ External Theory:

The theory focuses on environmental elements to explain behaviour. Example: two- factor theory
such as Herzeberg‟s two- factor theory:

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Hygienic factor- work condition related to dissatisfaction caused by discomfort or pain:
maintenance factor, contribution to employee‟s feeling not dissatisfied, contribution to absence
of complaints

Motivation factor- work condition related to the satisfaction of the need for psychological
growth: job enrichment, leads to superior performance and effort.

Causes of Motivational Problems

(1). Belief that effort will not result in performance

(2). Belief that performance will not result in rewards

(3). The value a person places on or the preference a person has for certain rewards.

GROUP BEHAVIOUR

A group is two or more individuals, interacting and interdependent who have come together to
achieve particular objectives.

Group behaviour emanates from the causes that contribute to the group‟s effectiveness- the well-
structured, well defined role and status hierarchy, able leadership, well developed norms and
strong cohesiveness a group has, the greater is the groupthink.

Groupthink is defined as the determination of mental efficiency, reality testing and moral
judgement in the interest of group solidarity.

As groups function and interact with other groups, they develop their own unique set of
characteristics including structure, cohesiveness, roles, norms and processes. As a result, groups
may co-operate or compete with other groups and inter- group completion can lead to conflict.

Why do People work in groups

(1). Security- By joining a group, individuals can reduce the insecurity of “standing alone ”.
People feel stronger, have fewer self- doubts and are more resistant to threats when they are part
of a group.

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(2). Status- Inclusion in a group that is viewed as important by others provides recognition and
status from its members.

(3). Self- esteem- Groups can provide people with feelings of self- worth. That is, in addition to
conveying status to those outside the group, membership can also give increased feelings of
worth to the group members themselves.

(4). Power- What cannot be achieved individually often becomes possible through group action.
There is power in numbers.

(5). Goal achievement- There are times when it takes more than one person to accomplish a
particular task; there is need to pull talents, knowledge or power in order to complete a job.

Group
Group Behaviour Model
Group Task
Member

Resources

External Performance
Group
Conditions &
imposed on Process
the group Satisfaction

Group

Structure

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EXECUTIVE COMMUNICATION PROCESSES

Executive communication is important for the development of an organisation. It is something


which helps the managers to perform basic functions of management.ie. planning, organising,
leading and controlling. Communication skills whether written or oral form the basis of any
business activity.

Communication is the transfer of information from the sender to the receiver with the
information being understood by both the sender and the receiver. Communication originates as
mental images within a person who desires to convey those images to another. Mental images
can include ideas, thoughts, pictures and emotions. The person who wants to communicate is
called the sender. To transfer an image to another person, the sender first must transpose or
translate the images into symbols that receiver can understand.

Symbols often are words but can be pictures, sounds or sound information (eg. touch/smell).
Only through symbols can the mental images of a sender have meaning to others. The process of
translating images into symbols is called encoding.

The Communication Model

Sender Receiver
Encodes Message Decodes

Once a message has been encoded, the next level in the communication process is to transmit or
communicate the message to the receiver. This can be done in many ways: during face-to-face
verbal interaction, over the telephone, through printed materials (letters, newspapers, etc) or
through visual media ( television, photographs)

Verbal, written and visual media are three examples of possible communication channels used to
transmit messages between senders and receivers. When a message is received by another
person, a decoding process occurs. Just as a sender must encode messages in preparation for
transmission through communication channels, receiver must sense and interpret the symbols
and then decode the information back into images, emotions and thoughts that make sense to

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them. When messages are decoded exactly as the sender has intended, the images of the sender
in the images of the receiver match and effective communication occurs.

Forms and Barriers to Executive Communication

Most people would agree that communication between two individuals should be simple. It‟s
important to remember that there are differences between talking and communicating. When you
communicate, you are successful in getting your point across to the person you‟re talking to.
When we talk, we tend to erect barriers that hinder our ability to communicate. These barriers to
communication are specific items that can distort or prevent communication within an
organization.

There are seven of these types of barriers to effective communication, including:

(1). Physical barriers- Physical disabilities such as hearing problem or speech difficulties hinder
the communication process. Geographical distance could also be a problem to effective
communication. The shorter the distance, the easier the communication.

A Paint Your Face Cosmetics product development specialist in Europe came up with a new idea
that used yogurt as a key ingredient for hair colour products. The specialist spent time emailing
the marketing manager in the U.S. with the idea, recipe and product description. The marketing
manager had difficulty getting her answers to product questions back from the specialist in
Europe. There were numerous nonverbal cues that were missed due to the use of emails only.
The final email response was interpreted by the specialist as that the manager did not like the
product, when in fact, the manager did like the product but only had some concerns about price.
The product idea was in danger of being lost.

The CEO was able to intercede and suggested that the two employees establish a regular meeting
via a video conferencing system to iron out the details of the product creation. Once the two
employees were able to talk face to face, the product idea was able to move into final
development very quickly.

The main issue in this example was a communication issue due to a physical barrier. The two
employees had a physically separated work environment that led to difficulty in finishing the

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idea. Technology is usually key to solving this barrier. Emails, phone calls, video conferencing
and webcams can help eliminate the barrier and provide closer communication.

(2). Perceptual barriers- The unique way in which people respond or interpret an object can be
a problem to effective communication.

(3). Emotional barriers- The importance of communication depends on the mental condition of
both parties. A mentally disturbed party can be a hindrance to effective communication. For
instance fear of reprisal or attack, fear of criticism for knowing little can hinder effective
communication.

(4). Cultural barriers- This is generally about a class of people or events that is widely held by a
given culture. Culture can be a significant impact on communication. Some cultures are open and
supportive of input from employees and a two-way flow of communication. Other cultures are
more top-down; leaders convey messages but don‟t seek out input from staff. Culture can
represent a barrier to communication when it keeps communication from happening or when
employees communicate the information and input they feel they are expected to communicate
and not what they really believe.

(5). Language barriers- This arises when words and symbols have different meanings for
different people that tend to a misunderstanding

(6). Gender barriers- The differences in how males and females tend to communicate have been
studied through research. It has been found that males tend to converse sitting side by side, while
females enjoy a more face-to-face exchange. Males do not feel the need to be close or even want
to be close by someone when speaking, whereas females prefer a more personal, close setting for
communicating.

(7). Interpersonal/ Status barriers- Status differences have also caused barriers to
communication within organisation. This type of barrier exists due to differences in
organizational hierarchy where employees have difficulty communicating either up or down the
co-orporate ladder. This difficulty can be eliminated by managers who are excellent at relating
and understanding their employees.

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The vice president of finance, Adams, realised that his employees were hiding work problems
and trying to solve them by themselves. They were afraid to admit mistakes and bring issues to
his attention. Adams was able to intercede and communicate that his door was always open for
the discussion of issues. He also told the employees that they could use text and email to contact
him any time if they needed his attention.

NEED/ IMPORTANCE OF EXECUTIVE COMMUNICATION

Communication serves as the foundation of every facet of business. Thus, it can be said that
effective communication is the building block of an organisation. Some of the benefits of
effective communication skills are:

(1). Communication keeps the foundation of motivation. It helps the employer to know how a
job is being performed and to improve performance if it is not up to the mark.

(2). Communication acts as a source of information and helps in the decision making process and
helps in identifying the alternative course of action.

(3). Communication also helps in building people‟s attitude. A well informed person will always
have better attitude than a less informed person. Different forms of communication like
magazines, journals and meetings will help the employees to form different attitudes.

(4). In the current business scenario, no business can survive in isolation. Socialising is very
important and communication is the tool that helps in socialising.

(5). Apart from the other functions of management, it also helps in the controlling process of
management. It allows the managers to know about the grievances of the subordinates and helps
the subordinates to know about the policies of the organisation.

(6). Communication is one of the basic features of management. It is instrumental in raising the
morale of the employees. It is through communication, verbal or non-verbal that people submit
different feedback and requirements to management.

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HUMAN RESOURCE MANAGEMENT (HRM)

Human resource management is a process of bringing people and organisations together so that
the goals of each are met.

Scope of HRM

The scope of human resource management refers to all the activities that come under the banner
of Human Resource Management. These activities are as follows:

Human Resource Planning- This refers to a process by which the company identifies the number
of jobs vacant, whether the company has excess staff or shortage of staff and to deal with this
excess or shortage.

Job Analysis Design- Another important area of Human Resource Management is job analysis.
Job analysis gives a detailed explanation about each and every job in the company.

Recruitment & Selection- Based on information collected from job analysis, the company
prepares advertisements and publishes them in the newspaper. This is recruitment. A number of
applications are received after the advertisement is published, interviews are conducted and the
right employee is selected, thus recruitment and selection are yet another area of HRM.

Orientation & Induction- Once the employees have been selected an induction or orientation
program is conducted. This is another important area of Human Resource Management. The
employees are informed about the background of the company, explain about the organisational
culture and values, work ethics and introduce them to other employees.

Training & Development- Every employee goes under training program which helps him to put
up a better performance on the job. Training program is also conducted for existing staff that
have a lot of experience. This is called refresher training. Training and development is one area
where the company spends a huge amount.

Performance Appraisal: Once the employee has put in around one (1) year of service,
performance appraisal is conducted – that is the human resource department checks the
performance of the employee. Based on this appraisal, future promotions, incentives, increments
in salary are decided.

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Compensation planning & Remuneration: These are various rules regarding compensation and
other benefits. It is the job of the human resource department to look into remuneration and
compensation.

Motivation, Welfare, Health & Safety: Motivation becomes important to sustain the number of
employees in the company. It is the job of the human resource department to look into different
methods of motivation. Apart from this, certain health & safety regulations have to be followed
for the benefits of the employees. This is handled by the HRM department.

Industrial Relations: Another important area of human resource management is maintaining


cordial relationship with the other union members. This will help the organisation to prevent
strikes lockouts and ensure smooth working in the company.

PLANT LOCATION

Plant location refers to the establishment of an industry at a particular place. The selection of
appropriate location can be done in two steps:

(i). Evaluation of various geographic areas and the selection of an optimum area.

(ii).Within each area there is a choice of proper site which can be urban, sub-urban or rural.

The fundamental object of location analysis is to maximize the profits by minimizing the total
cost of production associated with the production process.

Total Costs = Fixed costs + Operational costs

Fixed costs include expenditure on land, building, machines and other equipment, etc.

Operational costs are the expenditure incurred on inputs, transformation process and the
distribution of output, etc. The contribution of various factors to the total cost will vary from
place to place. The location of the plant can have crucial effect on the profitability of a project
and the scope for future expansion. It is difficult to set down rules whereby the problem of
facilities location can be programmed but there are a number of factors which should be
considered when selecting a suitable site. The principal factors which influence the choice of
location are:

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(1). Proximity to market: Organisation may choose to locate facilities close to their market, not
merely to minimize transportation costs but to provide a better service.

(2). Integration with other parts of the organisation: If the new plant or facility is one of a
number owned or operated by a single organisation or group, it should be so situated that its
work can be integrated with that of the associated units.

(3). Availability of labour & Skills: Certain geographical areas have traditional skills but it is
very rare that a location can be found which has appropriately skilled and unskilled labour in the
desired properties or qualities.

(4). Availability of Amenities: A location which provides good external amenities is often more
attractive than one which is more remote.

(5). Availability of transport: It is important that good transport facilities are readily available.

(6). Availability of inputs: A location near main suppliers will help to reduce cost and permit
staff to meet suppliers easily to discuss quality, technical or delivery programs.

(7). Availability of services such as gas, electricity, water, drainage, disposal of waste,
communications.

(8). Suitability of land & climate: The geology of the area needs to be considered, together with
the climatic conditions.

(9). Regional regulations: It is important to check at an early stage that the proposed location
does not violate any local regulations.

(10). Room for expansion: The choice for the location of the plant must make room for
expansion in the near future.

(11). Safety requirements: Some production units may present or may be believed to present
potential dangers to the surrounding neighbourhood. Location of such plants in remote areas is
desirable.

(12). Site cost: As a first change, the site cost is important, although it is necessary to prevent
immediate benefit jeopardizing along term plans.

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(13). Special grants, regional taxes and import/export barriers: Certain government and local
authorities often offer special grants, low- interest loans, low rental or taxes and other
inducements in the hope of attracting certain industries to particular locations.

(14). Political, cultural & economics situation: In choosing a plant location, one must put into
consideration the political and economic stability of that society or nation and also the cultural
norms of the people of that community.

PLANT LAYOUT

Plant layout is the physical arrangement of equipment and facilities within a plant. Optimising
the layout of a plant can improve productivity, safety and quality of products. Unnecessary
efforts of materials handling can be avoided when the plant layout is optimised. Plant layout
techniques apply to the case where several physical means have to be located in a certain area
either industrial processes or services.

The basic objective is to ensure a smooth flow of work, material, people and information. There
are probably two levels at which layouts are required. In one, the various departments have to be
sited and in the other, the items of equipment within a department need to be located.

Criteria for a good layout

(1). Maximum flexibility: A good layout will be one which can be rapidly modified to meet
changing circumstances.

(2). Maximum co-ordination: Entry into and disposal from any department of functional area
should be in such a manner that it must be convenient to the issueing or receiving departments.
Layout requires to be considered as a whole and not partially.

(3). Maximum use of volume: Facilities should be considered as cubic devices and maximum use
made of the volume available. This principle is particularly useful in stores where goods are can
be stacked at considerable heights without inconvenience, especially if modern lifting devices
are used. In offices, racking can be installed to minimize use of floor space.

(4). Maximum visibility: All the people and materials should be readily observable at all the time;
there should be no “hidden places” into which goods or information can get mislaid.

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(5). Maximum accessibility: All servicing and maintenance points should be readily accessible.
For example, equipment should not be placed against a wall in such a manner that necessary
maintenance cannot be easily carried out.

(6). Minimum distance: All movements should be both necessary and direct. Handling work adds
to cost but does not increase value; consequently any unnecessary or indirect movements should
be avoided.

(7). Minimum Handling: The best handling of material and information is no handling, but where
it is unavoidable it should be reduced to a minimum by the use of whatever devices are most
appropriate.

(8). Minimum discomfort: Poor lighting, excessive sunlight, heat, noise, vibration and smells
should be minimized and if possible counteracted.

(9). Inherent safety

(10). Maximum security

(11). Efficient process flow

Advantages of a good layout

(i). The overall process time and cost will be minimized by reducing unnecessary handling and
movement.

(ii). Supervision and control will be simplified by the elimination of “hidden corners”.

(iii). Changes in the programs will be most readily accommodated.

(iv). Total output from a given facility will be as high as possible by making the maximum
effective use of available space and resources.

(v). A feeling of unity among employees will be encouraged by avoiding unnecessary


segregation

(vi). Quality of the products or service will be sustained by safer and more effective methods of
operation.

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Types of layout

(1). Process layout

(2). Product layout

(3). Cellular layout

(4). Fixed position

(5). Hybrid (Mixed)

Process Layout

 This is used when the operations system must handle a wide variety of products in
relatively small volumes.
 It is designed to facilitate processing items or providing services that present a variety of
processing requirements.
 The layouts include department or other functional groupings in which similar kinds of
activities are performed
 A manufacturing example of a process layout is the machine shop, which has separate
departments for milling, grinding, drilling and so on.

Product (Assemby Line) Layout

 Product layouts are used to achieve a smooth and rapid flow of large volumes of products
or customers through a system
 A job is divided into a series of standardised tasks, permitting specialization of both
labour and equipment.
 The large volumes handled by these systems usually make it economical to invest huge
amount of money in equipment and job design.
 Operations are arranged in the sequence required to make the product. For instance, if a
portion of a manufacturing operation required the sequence of cutting, polishing and
painting, the appropriate pieces of equipment would be arranged in that sequence.
 Product layouts achieve a high degree of labour and equipment utilization.

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Cellular Manufacturing (CM) Layout

 Cellular manufacturing is a type of layout in which machines are grouped into what is
referred to as a cell.
 Groupings are determined by the operations needed to perform work for a set of similar
items or part families that require similar processing
 Cellular layout provides faster processing time, less material handling, less work-in-
process inventory and reduced setup time.
 Used when the operations system must handle a moderate variety of products in moderate
volumes.

Fixed- Position Layouts

 In fixed- position layout, the materials or major components remain in a fixed position
and workers, materials and equipment are moved as needed.
 Fixed- position layout is used when product is very bulky, heavy or fragile.
 Fixed-position layouts are used in large construction projects. (buildings, power plants
and dams), ship building and production of large aircraft and space mission rockets.
 Fixed- position layouts are widely used for farming, fire-fighting, road building, home
building, remodeling and repair.

Hybrid (Mixed) Layouts

 Actually, most manufacturing facilities are a combination of layout types.


 An example of a hybrid layout is where departments are arranged according to the types
of processes but the products flow through on a product layout.
 For instance, supermarket layout are fundamentally of a process nature, however, we find
most use fixed-path-material handling devices such as roller-type conveyors both in the
stock room such as checkouts and belt type conveyors at the cash registers.
 Hospitals also use the basic process arrangement, although frequently patient care
involves more of a fixed-position approach, in which nurses, doctors, medicines and
special equipment are brought to the patient.

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PLANT MAINTENANCE

Plant maintenance is the strategies and practices used to keep an industrial factory running
efficiently. Maintenance on plant and equipment is carried out to prevent problems arising, to put
faults right and to ensure equipment is working efficiently. Maintenance may be part of a
planned program or may have to be carried out at short notice after a breakdown. It always
involves non-routine activities and can expose those involved (and others) to a range of risks.

Importance of Plant & Equipment Maintenance

(1). An effective maintenance program will make plant and equipment more reliable. Fewer
breakdowns will mean less dangerous contact with machinery is required as well as having the
cost benefits of better productivity and efficiency.

(2). Additional hazards can occur when machinery becomes unreliable and develops faults.
Maintenance allows these faults to be diagnosed early to manage any risks. However,
maintenance needs to be correctly planned and carried out. Unsafe maintenance has caused many
fatalities and serious injuries either during the maintenance or to those using the badly
maintained or wrongly maintained/repaired equipment.

Types of Maintenance Strategies

There are four (4) general types of maintenance strategies. They are:

(1). Corrective Maintenance:

Maintenance is carried out following detection of an anomaly and aimed at restoring normal
operating conditions. This approach is based on the firm belief that the costs sustained for
downtime and repair in case of fault are lower than the investment required for a maintenance
program. This strategy may be cost-effective until catastrophic faults occur.

(2). Preventive Maintenance:

Maintenance carried out at predetermined intervals or according to prescribed criteria, aimed at


reducing the failure risk or performance degradation of the equipment. The maintenance cycles

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are planned according to the need to take the device out of service. The incidence of operating
faults is reduced.

(3). Risk-based Maintenance:

Maintenance carried out by integrating analysis, measurement and periodic test activities to
standard preventive maintenance. The gathered information is viewed in the context of the
environmental, operation and process condition of the equipment in the system. The aim is to
perform the asset condition and risk assessment and define the appropriate maintenance program.

(4). Condition-based Maintenance:

Maintenance based on the equipment performance monitoring and the control of the corrective
actions taken is a result. The real actual equipment condition is continuously assessed by the
online-detection of significant working device parameters and their automatic comparison with
average values and performance. Maintenance is carried out when certain indicators give the
signaling that the equipment is deteriorating and the failure probability is increasing.

INDUSTRIAL SAFETY

Industrial safety in the context of occupational safety and health refers to the management of all
operations and events within an industry for protecting its employees and assets by minimizing
hazards, risks, accidents and near misses. The relevant laws, compliance and best practices in the
industry have most of the issues addressed for the best protection possible. Employees are to
make sure that these are strictly adhered to have maximum safety.

Industrial safety covers a number of issues and topics affecting safety of personnel and
equipment in a particular industry. The following topics are generally discussed:

General safety – This refers to general aspects of safety which are common to all.

Occupational safety- This is safety particularly associated with the occupation.

Process & Production safety- This is safety in the process and production, etc.

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Material safety- This refers to safety of the materials used in the production.

Workplace safety- This has to do with safety issues directly related to the workplace.

Fire safety- This refers to fire safety, in particular the risks associated to the industry.

Electrical safety- This is safety in general, particularly arising from the equipment used.

Building & Structural safety- This is safety in general including installations as per existing
building code.

Environmental safety- This has to do with issues of environmental safety (direct or indirect
impact of the industry)

Some Personal Protective Equipment (PPE‟s)

MATERIAL HANDLING

Material handling is the movement, protection, storage and control of materials and products
throughout manufacturing, ware housing, distribution, consumption and disposal. As a process,
material handling incorporates a wide range of manual, semi-automated and automated
equipment and systems that support logistics and make the supply chain work. Their application
helps with:

 Forecasting
 Resource allocation
 Production planning

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 Flow and process management
 Inventory management and control
 Customer delivery
 After-sales support and service

A company‟s material handling system and processes are put in place to improve customer
service, reduce inventory, shorten delivery time and lower overall handling costs in
manufacturing, distribution and transportation.

A company‟s material handling process

PRODUCTIVITY

Productivity is a measure of the efficiency of a person, machine, factory, system, etc. in


converting inputs into useful outputs.

Productivity is computed by dividing average output per period by the total costs incurred or
resources (capital, energy, material, personnel) consumed in that period. Productivity is a
critical determinant of cost efficiency.

Factors that Affect Productivity

The eight (8) main factors that affect productivity are:

(1). Technical factors

(2). Production factors

(3). Organisational factor

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(4). Personnel factor

(5). Finance factor

(6). Management factors

(7). Government factors

(8). Location factors

Technical factors- Productivity largely depends on technology. Technical factors are the
most important ones. These include proper location, layout and size of the plant and
machinery, correct design of machines and equipment, research and development,
automation and computerization, etc. If the organisation uses the latest technology, then its
productiveness will be high.

Production factors- Productivity is related to the production factors. The production of all
departments should be properly planned, co-ordinated and controlled. The right quality of
raw-materials should be used for production. The production process should be simplified
and standardized. If everything is well it will increase the productiveness.

Organisational factor- Productivity is directly proportional to the organisational factors. A


simple type of organisation should be used. Authority and responsibility of every individual
and department should be defined properly. The line and staff relationships should also be
clearly defined. So, conflicts between line and staff should be avoided. There should be a
division of labour and specialisation as far as possible. This will increase organisations‟s
productiveness.

Personnel factors- Productivity of organisations is directly related to personnel factors. The


right individual should be selected for suitable posts. After selection, they should be given
proper training and development. They should be given better working conditons and work
environment. They should be properly motivated; financially, non-financially and with
positive incentives. Incentive wage policies should be introduced. Job security should also be
given. Opinion or suggestions of workers should be given importance. There should be

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proper transfer, promotion and other personnel policies. All this will increase the
productiveness of the organization.

Finance factors- Productivity relies on the finance factors. Finance is the life- blood of
modern business. There should be a better control over both fixed capital and working
capital. There should be proper financial planning. Capital expenditure should be properly
controlled. Both over and under utilisation of capital should be avoided. The management
should see that they get proper returns on the capital which is invested in the business. If the
finance is managed properly, the productiveness of the organisation will increase.

Management factors- Productivity of organisation rests on the management factors. The


management of organisation should be scientific, professional, future - oriented, sincere and
competent. Managers should possess imagination, judgement skills and willingness to take
risks.

They should make optimum use of the available resources to get maximum output at the
lowest cost. They should use the recent techniques of production. They should develop better
relations with employees and trade unions. They should encourage the employees to give
suggestions. They should provide a good working environment and should motivate
employees to increase their output.

Efficient management is the most significant factor for increasing productiveness and
decreasing cost.

Government factors- Productivity depends on government factors. The management should


have a proper knowledge about the government rules and regulations. They should maintain
good relations with government.

Location factors- Productivity also depends on location factors such as law and order
situation, infrastructure facilities, nearness to market, nearness to source of raw materials,
skilled workforce, etc.

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MARKETING

Marketing is the management process through which goods and services move from one concept
to the customer. It includes the co-ordination of four (4) elements called the 4 P‟s of marketing:

(1). Identification, selection and development of a product.

(2). Determination of its price.

(3). Selection of a distribution channel to match the customer‟s place and

(4). Development and implementation of a promotional strategy.

MARKETING CONCEPTS

There are five (5) different concepts of marketing, each of which varies in the function that they
deal with. For example, production concept deals with production and selling concept deals with
selling. Each of the concepts was developed as per the need of the market. As the market
changed, so did the concepts of marketing. The concepts of marketing are:

(1). Production Concept- This is where consumers prefer products that are widely available and
inexpensive. The production concept is more operations oriented than any other concept.

(2). Product Concept- This is where consumers favour products that offer the most quality,
performance or innovative features. The product concept believes in the consumer and it says the
consumers are more likely to be loyal if they have more options of products or they get more
benefits from the product of the company.

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(3). Selling Concepts- Here, consumers will buy products only if the company aggressively
promotes or sells these products. Of course, in this era of marketing, we know that selling is not
the only tactic to sell your product. You have to focus on marketing as well .

(4). Marketing Concept- This focuses on needs/wants of target markets and delivering value
better than competitors. The marketing concept believes in the pull strategy and says that you
need to make your brand so strong that customers themselves prefer your brand over every other
competitor. This can be achieved through marketing.

(5). Societal Marketing Concept- This focuses on needs/wants of target markets and delivering
value better than competitors that preserves the consumer‟s and society‟s well-being.

COMPONENTS OF MARKETING

If one is thinking about developing a marketing program, one needs to begin with a marketing
plan. The simple plans, if researched and implemented effectively, have the greatest impact.
Regardless of the scope of your marketing plan, you must keep in mind that it is a fluid
document. Every business needs to begin with a well- structured plan that is based on thorough
research, competitive positioning and attainable outcomes.

There are ten (10) components of a good marketing plan:

(1). Market Research

This is where you collect, organize and write down data about the market that is currently buying
the product(s) or service(s) you will sell. Some areas to consider:

 Market dynamics, patterns including seasonality


 Customers: demographics, market segment, target markets, needs, buying decisions.
 Product: what‟s out there now, what‟s the competition offering
 Current sales in the industry
 Suppliers: vendors that you will need to rely on.

(2). Target Market

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Understand where your product/service fits in the market and describe who you want to reach,
why this is important and how you are going to do it. The best approach is to find a gap where
there is customer demand and where your competitors are not satisfying this demand as well as
you could do it.

(3). Product/Service

Describe your product. How does your product relate to the market? What does your market
need, what do they currently use, what do they need above and beyond current use? What added
value can you offer that can over meet customer expectations?

(4). Competition

Describe your competition. Develop your “unique” selling proposition, which should be
articulated as a “unique customer value”. What makes you stand apart from your competition?
What is your competition doing better, the same or worse than you and where is the gap?

(5). Mission Statement

Write a few sentences that state:

 Key market- who you are selling to


 Contribution- what you are selling
 Distinction- your unique selling proposition

(6). Market Strategies

Write down the marketing and promotion strategies that you want to use or at least consider
using. Strategies to consider include:

 Partnering and networking


 External communication: advertising, publicity, promotions, sales, collateral, online
media.
 Internal communication: staff and partners
 Training programs

(7). Pricing, Positioning & Branding

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From the information you have collected, establish strategies for determining the price of your
product, where your product will be positioned in the market and how you will achieve brand
awareness.

(8). Budget

Match strategies to budgets. What strategies can you afford? What can you do in-house, what do
you need to outsource?

(9). Marketing Goals

Establish quantifiable marketing goals. This means goals that you can turn into numbers. For
instance, your goals might be to gain at least 30 new clients or to sell 10 products per week or to
increase your income by 30% this year. Your goals should include sales, profits and customer
satisfaction criteria.

(10). Monitor Your Results

Test and analyse. Identify the strategies that are working through customer feedback. These
include:

 Surveys
 Online polls
 Blogs
 Database management tools

PRODUCT MIX

Product mix is the assortment of products that a company offers to a market or tis customers. For
example, a small company may sell multiple line of products. Sometimes, these product lines are
fairly similar, such as dish washing liquid and bar soap which are used for cleaning and use
similar technologies. Other times, the product lines are vastly different, such as diapers and
razors. The four (4) dimensions to a company‟s product-mix include:

Product Width- The width of a company‟s product mix pertains to the number of product lines
that a company sells. For example, if a company has two product lines, its product-mix width is

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two. Small and upstart businesses will usually not have a wide product-mix. It is more practical
to start with some basic products and build market share. Later on, a company‟s technology may
allow the company to diversify into other industries and build the width of the product-mix.

Product Length- Product-mix length pertains to the number of total products or items in a
company‟s product mix. For example, ABC company may have two product lines and five
brands within each product line. Thus ABC‟s product-mix length would be 10. Companies that
have multiple product lines will sometimes keep track of their average length per product line.

In the above case, the average length of an ABC company‟s product line is five.

Product Depth- Depth of a product- mix pertains to the total number of variations for each
product. Variations can include size, flavour and any other distinguishing characteristic. For
example, if a company sells three (3) sizes and two (2) flavours of toothpaste, that particular
brand of toothpaste has a depth of six. Just like length, companies sometimes report the average
depth of their product lines; or the depth of a specific product line.

Product Consistency- Product-mix consistency pertains to how closely related product lines are
to one another in terms of use, production and distribution. A company‟s product-mix may be
consistent in distribution but vastly different in use. For example, a small company may sell its
health bars and health magazines in retail stores. However, one product is edible and the other is
not. The production consistency of these products would vary as well.

PRODUCT-MIX MANAGEMENT

It is extremely important for any organisation to have a well-managed product-mix. Most


organisations break down managing the product-mix, product line and actual product into three
different levels.

Product-mix decisions are concerned with the combination of product lines offered by the
company. Management of the companies‟ product-mix is the responsibility of top management.
Some basic product-mix decisions include:

(1). Reviewing the mix of existing product lines.

(2). Adding new lines to and deleting existing lines from the product-mix

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(3). Determining the appropriate emphasis on new versus existing product lines in the mix.

(4). Determining the appropriate emphasis on internal development versus external acquisition in
the product-mix.

(5). Gauging the effects of adding or deleting a product line in relationship to other lines in the
product-mix.

(6). Forecasting the effects of future external change on the company‟s product-mix.

Product-line decisions are concerned with the combination of individual products offered within
a given line. The product-line manager supervises several product managers who are responsible
for individual products in the line. Decisions about a product line are usually incorporated into a
marketing plan at the divisional level. Such a plan specifies changes in the product lines and
allocations to products in each line.

PRODUCT LIFE CYCLE

A new product progresses through a sequence of stages from introduction to growth, maturity
and decline. This sequence is known as the product life cycle and is associated with changes in
the marketing situation, thus impacting the marketing strategy and the marketing mix.

Introduction Stage- In the introduction stage, the firm seeks to build product awareness and
develop a market for the product.

 Product branding and quality level is established and intellectual property protection such
as patents and trademarks are obtained.
 Pricing may be low penetration pricing to build market share rapidly or high skim pricing
to recover developments cost.
 Distribution is selective until consumers show acceptance of the product.
 Promotion is aimed at innovations and early adopters. Marketing communications seeks
to build product awareness and to educate potential consumers about the product.

Growth Stage - In the growth stage, the firm seeks to build brand preference and increase market
share.

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 Product quality is maintained and additional features and support services may be added.
 Pricing is maintained as the firm enjoys increasing demand with little competition.
 Distribution channels are added as demand increases and customers accept the product.
 Promotion is aimed at broader audience.

Maturity Stage – At maturity, the strong growth in sales diminishes. Competition may appear
with similar products. The primary objective at this point is to defend market share while
maximizing profit.

 Product features may be enhanced to differentiate the product from that of competitors.
 Pricing may be lower because of the new competition.
 Distribution becomes more intensive and incentives may be offered to encourage
preference over competing products.
 Promotion emphasises product differentiation.

Decline Stage- As sales decline, the firm has several options:

 Maintain the product, possibly rejuvenating it by adding new features and finding new
uses.
 Harvest the product: reduce costs and continue to offer it, possibly to a loyal niche
segment.
 Discontinue the product, liquidating remaining inventory or selling it to another firm that
is willing to continue the product.

PRODUCT DISTRIBUTION CHANNEL

A distribution channel is a chain of businesses through which a manufacturer sends his products
to get them to a final buyer. It may involve wholesalers, distributors, agents and retailers.
Companies often use multiple methods to get their goods to customers. They may have several
indirect channels and several direct channels of distribution.

Any distribution channel with one or more intermediaries between the manufacturer and the final
customer is an indirect distribution channel. Each intermediary adds value to the process by

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taking the product further to its destination but also charges for this service. Therefore, the price
to a customer increases for each intermediary in the channel.

A direct distribution channel is one where a customer buys directly from a manufacturer. This is
the shortest distribution. Because there are no intermediaries, this often results in the lowest price
to the consumer. Many companies also sell direct via the internet.

Distribution channel is generally used to refer to the downstream perspective, answering the
question, “How does our product get to customers?”

When reversed, this same chain of business is called the supply chain. Supply chain answers the
question,” who are the suppliers?”, when looking upstream from the retailer back to the
manufacturer.

ORGANISATION

An organisation is an entity comprising multiple people such as an institution or an association


that has a collective goal and is linked to an external environment.

Types of Organisation

The main types of business organisation are:

(1). Sole trader

(2). Partnership

(3). Company

a).Private Limited Company (“ltd” )

b).Public Limited Company (“plc”)

(4). Cooperatives

(5). Franchises

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(6). Public Sector

(1). Sole Trader:

A sole trader is a business that is owned by one person. It may have one or more employees.

Advantages

(i). Total control of business by owner

(ii). Cheap to start up

(iii). Keep all profit

(iv). Keep proper business accounts and records.

Disadvantages

(i). Unlimited liability

(ii). Difficult to raise funds.

(iii). May be difficult to specialise or enjoy economics of scale

(iv). Problem with continuity if sole trader retires/dies

(2). Partnership

This is a business/organisation where there are two or more owners of the enterprise. Most
partnerships have between two and twenty members though there are examples like the major
accountancy firms where there are hundreds of partners.

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A partner is normally set up using a Deed of Partnership ( this contains amount of capital each
partner should provide, how profits/losses should be divided, rules on how to take new
partners,etc)

Advantages

(i). Spreads the risk across more people, so if the business gets into difficulty then there are more
people to share the burden of debt.

(ii). Partner may bring money and resources to the business

(iii). Partner may bring other skills and ideas to the business, complementing the work already
done by the original partner.

(iv). Increased credibility with potential customers and suppliers who may see dealing with the
business as less risky than trading with just a sole trader.

Disadvantages

(i). Have to share profits

(ii). Less control of business for individual

(iii). Disputes over workload

(iv). Problems if parties disagree over direction of business

(3). Companies

A company is owned by shareholders who appoint directors to give direction to the business. The
chief executive is the senior official within the company with responsibility for making major
decisions. Specialist managers will be appointed to run the company on behalf of the board.

A company is a legal body in its own right with an existence that is separate in law from its
owners. The company will thus be sued and can sue in its own name. Shareholders put funds into
the company by buying shares.

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Limited Liability is a form of business protection for company shareholders and some limited
partners. For these individuals the maximum sum they can loose from a business venture which
they have contributed going bust is the sum of money that they have invested in the company-
this is the limit of their liability

Private Companies have ltd after their names. They are typically smaller than public companies
although some are large. Shares in a private company can only be bought and sold with
permission of the Board of Directors. Shareholders have limited liability.

A public company can sell shares to the public and to financial institutions and have their shares
traded on the stock Exchange. The main advantage is that large amounts of capital can be raised
very quickly. One disvadvantage is that control of business cam be lost by the original
shareholders if large quantities of shares are purchased as part of a takeover bid.

(4). Co-operatives

A co-operative is a legal entity owned and democratically controlled by its members. Members
often have a close association with the enterprise as producers or customers of its products or
services or as it employees.

There are three (3) main types of co-operative business/organisation.

(1). Retail co-operatives

(2). Marketing or trader co-operatives

(3). Workers co-operatives

Examples of co-operative organisations are co-operative retail society, farmers‟ co-operatives,


marketing and distributing food products, small business credit unions, etc.

(5). Franchise

Franchising is really the „hiring out‟ or licensing of the use of „good ideas‟ to other companies.
The firm selling the franchise is called the franchisor and a person paying for the franchise is
called the franchisee. Franchisor may run a number of their own businesses, but also may want to

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let others run the business in other parts of the country. Franchising is becoming popular around
the world.

Franchisee required to invest often around £10,000- £50,000 in acquiring the franchise licence
and setting up the business. Once they have purchased the franchise they have to pay a
proportion of their profits to the franchisor on a regular basis. Depending on the business
involved, the franchisor may provide training, management, expertise and national marketing
campaigns. It may also supply the raw materials and equipment.

Advantages of franchising

(i). Tried and tested market place, so should have a customer base.

(ii). Easier to raise money from bank to buy a franchise

(iii). Given right and appropriate equipment to do job well

(iv). Franchisee normally receives retraining

(v). National advertising paid for by franchisor

(vi). Tried and tested business model

Disadvantages

(i). Cost to buy franchise is high

(ii). Have to pay a percentage of your revenue to business you have bought franchise

(iii). Have to follow franchise model, so less flexible

(6). Public Sector Organisation

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A public sector organisation is an organisation that is owned and run by the state or government.
It is the part of the economy concerned with providing various government services. The
composition of the public sector varies by country, but in most countries the public sector
includes such services such as the military, police, public transit, care of public roads, public
education, along with health care and those working for the government itself such as elected
officials.

The public sector might provide services that a non-payer cannot be excluded from such as street
lighting, services which benefit all of society rather than just the individual who uses the service.

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