Anda di halaman 1dari 42

Principles and Practices of Management

Principles and Practices Of


Page 1
Principles and Practices of Management


Q1. “Management is a combination of Arts, Science & Profession”

Explain fully.

Ans. Before writing a write up on “Management is a combination of Arts,

Science & Profession” I would like to write something about the management.

Management is to create a team which accomplishes pre-determined goals with
more efficiently in a prescribed time period as planned/decided.

Management actually is planning, organizing, directing, controlling & coordinating

supported by leadership, communication, motivation and morale.

Now I would like to start Management as Art and afterwards I will write about
management as science and profession in detail.

Management as an Art

1. It requires conceptual, technical, human relationship & decision-making skills.

a) Conceptual Skills: Ability to see the “big picture” to recognize

significant elements & to understand relationship among the elements.
b) Technical Skills: Is knowledge of & proficiency in activities involving
methods, procedures & pressures e.g., Mechanic works with tools &
Superior show knows how to use these tools to teach them.
c) Human Relations: is ability to work with people; it is a cooperative
effort; teamwork; create an environment where people feel secure &
free to express their opinions.
d) Decision: Ability to solve problems in ways that will benefit the

2. It requires knowledge: Learning & acquiring knowledge from various

subjects such as Marketing, Finance, Production, etc.

3. Art is creative: As a discipline in function of creativity. We notice this

creativity in facing challenges of competition. Introduction of new product,
advertising campaigns etc.

Page 2
Principles and Practices of Management

4. Art is Personalized: Every person has different ways & means of performing
Art. Similarly every individual has different type of management, we categorize
them as Democratic, Autocratic, Patternistic, Beaurocratic etc.

5. Art is Performance: Performance indicators such as profit, growth &

development, market share can only understood management as a concept.

“Managing as practice is an Art; the organized knowledge underlying the

practice may be referred to as Science”

Management as Science

1. Science is a body of organized knowledge.

2. Science is developed over a period of time.
3. Science establishes cause & effect relationship.
4. Science has predictive power.
5. Rules / Regulations in Science varied from time to time. Old rules are
challenged & new rules are established.
6. Science is of two types: perfect science like physics/chemistry/maths and
social science as management.

Above rules also apply to the management as social science which consists of
history of management thought. Management as a subject developed over a
period of time. Generalizations in management e.g. “if you spend more money
on advertisement sales may go up”. “If you keep employees happy there may
not be any labour strikes”.

This word may happen/may not happen make management social science.

Management as a Profession

Before discussing about management as a profession it is better to know about

what actually the profession means. Any discipline to be called as profession
must fulfill following conditions e.g. like medicine, law.

a) It requires definite period of learning.

b) It has centralized rule making authority.
c) It has enforceable code of conduct.
d) It needs certificate of practice.
e) Membership through acquired qualification approval.
f) Social commitment/obligation/accountability.

Page 3
Principles and Practices of Management

If we compare above features with that of management, we get confusing


1. Anybody can become a manager does not require any specific qualification or
definite period of learning.

2. It has no centralized rule making authority. There are number of parent

bodies in specialized functional areas.

3. These parent bodies can publish desirable code of conduct but that cannot be
enforced by law in management.

4. There are many business that are managed/controlled/owned by various

business families in India such as Tata’s, Ambani’s, Birla’s, individuals born in
business families get ownership right/management right mainly due to law of
inheritance. It is irrespective of qualification they hold.

5. Management as a discipline does not require any certificate of practice.

There is no legal definition of the term manager.

6. Managers do have social commitment/ obligation/accountability. This is the

part of social responsibilities of management. These responsibilities are
desirable & not enforceable under law.

Management as Profession

Management as a subject is a dynamic, so the term “Profession” or “Professional

Manager” has got different connotation. This approach is very close to practice
of management. This approach clarifies the role of professional manager as well
as who can be called as professional manager.

At the outset, it must be made clear that professional manager is a mindset that

1. Separation of ownership from management.

2. Knowledge based decision instead of intuition and individual based
decision making.
3. It based on the experience & expertise of past manager in the requisite
4. Professional manager are objective/focused/performance oriented.
5. They help organizations in chalking out corporate strategies.
6. They help in meeting competitive challenges of business.

Page 4
Principles and Practices of Management

7. Specialization in every field, technological advancement, globalization of

business results into appointment of qualified managers at every level.
They can be called as professional manager.
8. Professional managers are creative/dynamic.
9. They follow management based on worldwide experiences & information.
10.They apply theories of management to solve emerging organizational

From the above you will clearly notice that “management is a combination of Art,
Science and Profession”.

Page 5
Principles and Practices of Management

Q2. “Planning cannot eliminate risk, but minimize it”. Explain this
statement with reference to the limitations of planning. Also write a
note on the various strategies adopted by Indian companies to stay
ahead of competition.

Ans. Management functions begin with forecasting. It is the scientific process of

looking forward which is based on past performance, current analysis & future
trends. Planning is based on forecasting. Planning is defined as a long look
ahead, broad look around and a searching look within. Actually planning is
based on answering following questions.
a) What is to be done?
b) Why to do it?
c) How to do it?
d) Where to do it?
e) Who will do it?
f) When to do it?

Planning is an imperative in uncertain environment. It actually makes

company competitive, it helps the company to face future challenges, it gives
direction & helps in formulating specific strategies & due to these characters
it also anticipate risk factors & eliminates waste. It cannot fully eliminate
risk. But its risk can be minimized if the information is authentic and reliable
to that particular organization. Its risk also depends upon the internal &
external variable which are beyond the control of the planner.

Strategies can be called the “Action Component” of planning. It is a

competitive planning. Indian companies have adopted various strategies for
survival & facing the threats from competition & also to stay ahead of the

Following are the examples of recent corporate strategies:

1. Joint ventures, Alliances, Tie-ups.

2. Take-over, Acquisitions.
3. Reverse mergers, mergers & amalgamations.
4. Demerger.
5. Core competence.
6. Diversification.
7. Harvesting.
8. Disinvestments.
9. Brand-building etc.

Page 6
Principles and Practices of Management

The purpose of strategies then is to determine & communicate, through a

system of major objectives & policies, a picture of the kind of enterprise that
is envisioned.

Strategy introduces a word called vision which is essentially a dream with a

deadline. It is a look beyond the present to see what the future can be.
Vision statement should have the following components:
a) An ability to inspire people to work for the organization.

b) It should be precise & objective.

c) It should be worthiness, which creates a lasting impact.

d) It should be achievable & realizable.

e) It should be clear & understandable detail.

Indian corporates show the vibrate dreams of their leaders. The tractor of
Mahindra & Mahindra Company has declared the vision to be the world’s
biggest tractor manufacturers by 2003. Powerful visions if communicated
always produce powerful results. An organization without a vision is like a
ship without a rudder.

Mission: It is derived from the vision statements. It elicits an emotional,

motivational response. It is easily understood & can be transformed into
individual action. Has a major able, attainable goal. It is simple, honest &
frank & is fully believed.

Mission is an action-oriented & enduring expression of how a company wants

to accomplish visions.

A corporate example of a mission statement of PepsiCo’s is “PepsiCo’s mission

is to increase the value of our shareholders investment. We do this through
sales growth, cost controls & wise investment of resources”. Hence mission
statement ends up company at its final destination-success.

Statement of vision and mission are not just elements of future planning.
They also provide benchmarks for an historic view. Managers will find it
difficult to develop a future strategy for a business without correctly
articulating its vision and mission. Vision & mission must be combined with
corporate values so as to have the realization of the organizational goals.

Page 7
Principles and Practices of Management

Q4. Define delegation of authority. What are the problems in

delegation? Explain the principles of effective delegation.

Ans. To delegate is to give, offer, confer and allot a part of authority to

subordinate. Authority is right to act or decide. As simple as delegation of
authority appears to be, studies have shown that many managers fail because of
poor delegation. Delegation is necessary for an organization to exist. Just as no
one person in an enterprise can do all the tasks necessary for accomplishing a
group purpose, so is it impossible, as an enterprise grows, for one person to
exercise all the authority for making decisions. There is a limit to the number of
persons managers can effectively supervise & make decisions for. Once this limit
has been passed, authority must be delegated to subordinates, who will make
decisions within the area of their assigned duties.

Authority is delegated when a superior give a subordinate discretion to make

decisions. Delegation becomes must because –
a) Structure of authority/accountability exists.
b) Superiors need to concentrate on important and vital issues.

Degrees of Delegation

As mentioned delegation is a network of authority relationship established. This

delegation has basically five degrees – zero, low, moderate, high, and fifth

a) Low degree of Delegation: Low degree of delegation is that in which

superior states a particular task to his subordinate & tell him to investigate
on that task & report back.
b) Moderate degree of Delegation: Moderate degree of delegation is that in
which superior states a particular task to his subordinate & tell him to
investigate on that task & report back with an action plan.
c) High degree of Delegation: High degree of delegation is that in which
superior states a particular task to his subordinate & tell him to investigate
on that task, make an action plan, formulate the plan and then report
back with the results and reasons.

1. Clarifying the assignment

Clarifying the assignments is the initial steps for an effective delegation process.
There are two steps which clarifying the assignment has to follow.

a. What to be delegated: a superior should always be clear as to what is to

be delegated to the subordinate. He should see to it that the subordinate
has the perfect knowledge & skill to perform the delegation.

Page 8
Principles and Practices of Management

b. Whom to be delegated: This is the important point while considering the

clarifying the assignment. It should be seen the subordinate to whom the
authority is being delegated has a perfect motivation and zeal to do a
particular job. Until & unless a subordinate has these two qualities the
efficiency of the work is null.

2. Specify the subordinates range of discretion

It should be always clear for a subordinate as to the parameters he has to work

in the boundaries & the limitations for the delegation should be clear so that
subordinate knows where to work & how to perform there.

3. Allow the subordinate to participate

If the superior allows participating more, he will be much clear about the
knowledge & their skills that his subordinates excels in and it will be easier for
him to decide as to which part of authority should be delegated to him. On the
whole it will increase the employee motivation.

4. Inform others that a delegation has occurred

Different people have different personalities and as a result different approaches.

When a delegation occurs in an organization all those who are affected by the
delegation should always be informed so that they get to know that under whom
they have to perform the job and clearly see as to the way their superior wants a
particular job to be done so that they mould themselves in the same manner.

5. Establish feedback control

This is a most important factor. Superior should always establish feedback

control so that subordinates report back to them periodically, give them time to
report back, monitor their progress. In this manner superior can identify the
problems faced by his subordinates & look for the solutions.

Due to this delegation in the organization it reduces the work load of superiors
permitting them to concentrate on key areas. It also helps subordinate to grow
& develop. Due to this delegation it helps in exercising effective control over the
activities of subordinates & also provides satisfaction to subordinates in terms of
recognition and this also results in prompt decision-making.

Problems in Delegation

1. Some managers believe in fallacy i.e., if we want it done right, do it


Page 9
Principles and Practices of Management

2. Managers lacking required confidence & trust in subordinates might not be

interested in delegating the authority.
3. Low self-confidence & more over confidence amongst the managers may
create a bottleneck in a process of delegation.
4. Fear amongst managers that they will lose status & position.
5. Poor examples set by superiors who do not delegate may discourage the
managers to delegate further.

Principles of Effective Delegation

1. Explain the degree of delegation (as explained above).

2. Select appropriate subordinates to delegate the authority.
3. Keep line of communication open. There should be a free flow of
information between superior & subordinate so that subordinate can take
decisions & to interpret properly the authority delegated.
4. Superior should train the subordinate; motivate them to get the results
5. Managers should be ever watchful for means of rewarding both effective
delegation and effective assumption of authority – financial and non-
6. Delegation should be accompanied by techniques for ensuring that the
authority is properly used. But if controls are to enhance delegation, they
must be relatively broad and be designed to show deviations from plans,
rather than interfering with routine actions of subordinate.
7. Don’t delegate and disappear.
8. Don’t follow practices of “Delegation on Paper” that should be
implemented otherwise it is of no use rather it wastes energy and paper.
9. Believe in feedback, interaction & result orientation of delegation.
10.Last but not least follow “Principle of Exception”. Subordinate should
approach superior only in case of exceptional matter, urgent matter,
discretionary matter requiring your attention & authentication. For all
other routine matters subordinate should function independently.

Page 10
Principles and Practices of Management

Q6. Write Detailed notes on (A) Delegation of Authority. (B) Barriers

to Communication & Principles of effective communication.

(A)Delegation of Authority

To delegate is to give, offer, confer and allot a part of authority to subordinate.

Authority is right to act or decide. As simple as delegation of authority appears
to be, studies have shown that many managers fail because of poor delegation.
Delegation is necessary for an organization to exist. Just as no one person in an
enterprise can do all the tasks necessary for accomplishing a group purpose, so
is it impossible, as an enterprise grows, for one person to exercise all the
authority for making decisions. There is a limit to the number of persons
managers can effectively supervise & make decisions for. Once this limit has
been passed, authority must be delegated to subordinates, who will make
decisions within the area of their assigned duties.

Authority is delegated when a superior give a subordinate discretion to make

decisions. Delegation becomes must because –
a) Structure of authority/accountability exists.
b) Superiors need to concentrate on important and vital issues.

Degrees of Delegation

As mentioned delegation is a network of authority relationship established. This

delegation has basically five degrees – zero, low, moderate, high, and fifth

a) Low degree of Delegation: Low degree of delegation is that in which

superior states a particular task to his subordinate & tell him to investigate
on that task & report back.
b) Moderate degree of Delegation: Moderate degree of delegation is that in
which superior states a particular task to his subordinate & tell him to
investigate on that task & report back with an action plan.
c) High degree of Delegation: High degree of delegation is that in which
superior states a particular task to his subordinate & tell him to investigate
on that task, make an action plan, formulate the plan and then report
back with the results and reasons.

1. Clarifying the assignment

Clarifying the assignments is the initial steps for an effective delegation process.
There are two steps which clarifying the assignment has to follow.

Page 11
Principles and Practices of Management

a) What to be delegated: a superior should always be clear as to what is to

be delegated to the subordinate. He should see to it that the subordinate
has the perfect knowledge & skill to perform the delegation.
b) Whom to be delegated: This is the important point while considering the
clarifying the assignment. It should be seen the subordinate to whom the
authority is being delegated has a perfect motivation and zeal to do a
particular job. Until & unless a subordinate has these two qualities the
efficiency of the work is null.

2. Specify the subordinates range of discretion

It should be always clear for a subordinate as to the parameters he has to work

in the boundaries & the limitations for the delegation should be clear so that
subordinate knows where to work & how to perform there.

3. Allow the subordinate to participate

If the superior allows participating more, he will be much clear about the
knowledge & their skills that his subordinates excels in and it will be easier for
him to decide as to which part of authority should be delegated to him. On the
whole it will increase the employee motivation.

4. Inform others that a delegation has occurred

Different people have different personalities and as a result different approaches.

When a delegation occurs in an organization all those who are affected by the
delegation should always be informed so that they get to know that under whom
they have to perform the job and clearly see as to the way their superior wants a
particular job to be done so that they mould themselves in the same manner.

5. Establish feedback control

This is a most important factor. Superior should always establish feedback

control so that subordinates report back to them periodically, give them time to
report back, monitor their progress. In this manner superior can identify the
problems faced by his subordinates & look for the solutions.

Due to this delegation in the organization it reduces the work load of superiors
permitting them to concentrate on key areas. It also helps subordinate to grow
& develop. Due to this delegation it helps in exercising effective control over the
activities of subordinates & also provides satisfaction to subordinates in terms of
recognition and this also results in prompt decision-making.

Page 12
Principles and Practices of Management

(B) Barriers to communication & principles of effective communication

It is probably no surprise that managers frequently cite communication break-

downs as one of their most important problems. Barriers can exist in the sender,
in the transmission of the message, in the receiver, or in the feedback. Specific
communication barriers are mentioned below:
a) Lack of Planning: Good communication seldom happens by
chance. Too often people start talking and writing without first
thinking, planning and staffing the purpose of message. Yet giving
the reasons for a directive, selection the most appropriate channel
and choosing proper timing can greatly improve understanding and
reduce resistance to change.
b) Unclarified Assumptions: Often overlooked, yet very important,
are the uncommunicated assumptions that underlie messages. A
customer may send a note stating that she will visit a vendor’s
plant. Then she may assume that the vendor will meet her at the
airport, reserve a hotel room, arrange for transportation, and set
up a full scale review of the program at the plant. But the vendor
may assume that the customer is coming to town mainly to attend
a wedding and will make a routine call at the plant. These
unclarified assumptions will result in confusion and the loss of
c) Semantic Distortion: Another barrier to effective communication
is semantic distortion, which can be deliberate or accidental. An
advertisement states “we sell for less” is deliberately ambiguous; it
raises the question less than what? Words may evoke different
responses. To some people the word “government” may mean
interference or deficit spending; to others, the same word may
mean help, equalization and justice.
d) Poorly expressed messages: No matter how clear the idea in
the mind of the sender of communication, it may still be marked by
poorly chosen words, omissions, lack of coherence, poor
organization of ideas, etc. This lack of clarity and precision, which
can be costly, can be avoided through greater care in encoding the
e) Communication Barriers in the International Environment:
Communication in the international environment becomes even
more difficult because of different languages, cultures, and
etiquette. Translating slogans is very risky. To overcome
communication barriers in the international environment large
corporates have taken a variety of steps e.g. large staff of
translators, provides extensive language training etc.
f) Loss by Transmission and Poor Retention: In a series of
transmissions from one person to the next, the message becomes

Page 13
Principles and Practices of Management

less and less accurate. Poor retention of information is another

serious problem. Thus, necessity of repeating the message and
using several channels is rather obvious.
g) Poor Listening and Premature Evaluation: There are many
talkers but few listeners. Everyone probably has observed people
entering a discussion with comments that have no relation to the
topic. One reason may be that these persons are pondering their
own problems – such as preserving their own egos or making a
good impression on other group members – instead of listening to
the conversation.
h) Impersonal communication: As the events in the Perspective
indicate, real improvement of communication often requires not
expensive and sophisticated (and impersonal) communication
media but the willingness of superiors to engage in face-to-face
i) Distrust, Threat and Fear: Distrust, threat, and fear undermine
communication. In a climate containing these forces, any message
will be viewed with skepticism. Distrust can be the result of
inconsistent behavior by the superior, or it can be due to past
experiences in which the subordinate was punished for honestly
reporting unfavorable, but true, information to the boss.
j) Insufficient Period for Adjustment to Change: Changes affect
people in different ways, and it may take time to think through the
full meaning of a message. Consequently, for maximum efficiency,
it is important not to force change before people can adjust to its
k) Information Overload: One might think that more and
unrestricted information flow would help people overcome
communication problems. However, changes are that attention will
be given first to matters that are easy to handle, while more
difficult but perhaps critical messages are ignored. People respond
to information overload by simply escaping from the task of
l) Other Communication Barriers: Besides the mentioned barriers
to effective communication, there are many others. In selective
perception people tend to perceive what they expect to perceive.
In communication this means that they hear what they want to
hear and ignore other relevant information. Still other barriers to
communication are differences in status and power between the
sender and the receiver of communication. Barriers also resulting
from illiteracy, ignorance, superstition in a country like India.

Principles of Effective Communication

Page 14
Principles and Practices of Management

Effective communication is the responsibility of all persons in the organization,

managers as well as non-managers, who work toward a common aim. Whether
communication is effective can be evaluated by the intended results. The
following guidelines can help overcome the barriers to communication:

1. Senders of messages must clarify in their minds what they want to

communicate. This means that one of the first steps in communicating is
clarifying the purpose of message and making a plan to achieve the
intended end.
2. Effective communication requires that encoding and decoding be done
with symbols that are familiar to the sender and receiver of the message.
Thus the manager should avoid unnecessary technical jargon.
3. The planning of the communication should not be done in a vacuum.
Instead, other people should be consulted and encouraged to participate:
to collect the facts, analyze the message, and select the appropriate
4. It is important to consider the needs of the receivers of the information.
Whenever appropriate, one should communicate something that is of
value to them, in the short run as well as in the more distant future.
5. There is a saying that the tone makes the music. Similarly, in
communication the tone of voice, the choice of language, and the
congruency between what is said and how it is said influence the
reactions of the receiver of the message.
6. Too often information is transmitted without communicating, since
communication is complete only when the message is understood by the
receiver. And one never knows whether communication is understood
unless the sender gets feedback. This is accomplished by asking
questions, requesting a reply to a letter, and encouraging receivers to give
their reactions to the message.
7. The function of communication is more than transmitting information. It
also deals with emotions that are very important in interpersonal
relationships between superiors, subordinates, and colleagues in an
8. Effective communicating is the responsibility not only of the sender but
also of the receiver of the information. Thus, listening is an aspect that
needs additional comment.
9. Remember the various barriers to communication – avoid mental blocks,
closed mind, ego problems.
10.Speak to the point and avoid communication garbage.

Page 15
Principles and Practices of Management

Q7. Define Decision-making. Prepare list of factors that affect

decision-making process.

Ans. Decision-making is defined as selection of a course of action from

among alternatives; it is at the core of planning. A plan cannot be said to exist
unless a decision – a commitment of resources, direction or reputation – has
been made. Decision making as a process and function of management is very
vital as many critical aspects of management depend upon the right decision at
the right time. It is an intellectual process involving the following steps:

a) Identify the problem.

b) Collect information from all possible sources.
c) Develop alternatives.
d) Compare and evaluate these alternatives.
e) Decision making stage of making a choice among alternatives.
f) Implementation and communication of decisions.
g) Follow-up and review.

Factors Affecting the Decision Making Process

1. Information – It must be available, authentic, adequate, reliable

must be available at the right time. It must be analysed and
presented in the right manner.

2. Time Factor – Decision must be taken at the right time.

3. External Environmental Factors – As decision making is always

interactive with the environment, various environmental factors
influence decision making such as economic, political, social,
cultural, technical, ethical, legal, global factors.

4. Internal Factors – Rules, regulations, procedures within the

organization or administrative restrictions also affect decision

5. Personality of the Decision Maker or Subjectivity – The decision

making process has a lot to do with who is the decision maker, his
attitudes, perceptions, values, style of functioning, the nature of
personality and overall way of thinking.

6. Participation, Acceptance and Implementation – Elements of how

decisions are taken, how far they are accepted and how they are to
be implemented also contribute in the decision making process.

Page 16
Principles and Practices of Management

7. Precedent – In a bureaucratic set up this becomes a ruling factor

as questions like “Have we done this before?”, “Is there a
precedent of taking such decisions?” are often asked before taking

8. Experience of a Decision Maker – As it is said that experience is the

best teacher, maturity in business experience of a manager go a
long way in taking effective decisions.

9. Power to Decide – Many times, people know what is wrong in the

organization, but often they do not have the power to decide and
act. That is how the concept of empowerment is evolved which
talks about decision making to the lowest possible level.

10. Escalation of Commitment: After a decision has been taken, it is

often felt that the decision is going in a wrong way, but more than
half of the work is completed. Therefore, there comes a point of
no return and the decision has to be completed in spite of negative

11. Bounded Rationality – Constructing simplified models that extract

the essential features from the problems without capturing all their
complexities. The decision maker settles for the early solution that
is good enough. In Layman’s language, decision maker finds out
the earliest available alternatives, takes certain things for granted
and acts on it. The decision maker takes generalized judgmental
shortcuts which are also called heuristics. For e.g. if two students
from a particular management institute show exemplary
performance in the job, the judgmental shortcut is “every student
from this institute is good”, and vice-versa.

12. Problem Perception: Problems that are visible catch a decision

maker’s decision. These problems become the first to be acted
upon or a priority. For e.g., if at the time of the chief executive
officers (CEO) visit, workers start agitating, then this agitation
becomes the main problem for the CEO because it is visible for

Page 17
Principles and Practices of Management


Q8. “Services Sector is India’s new economy” critically comment.

What are the general management challenges in Service Sector?
(Support your answer with corporate examples).

Ans. Service is popularly defined as “The Art and Science of managing the
experiences and exceptions of others”. A service is intangible i.e., this is not a
physical transfer of goods, yet it provides satisfaction to the customer. Good
service makes the customer feel good. It is provided by people not by machines.
The key features of services are:

1. Intangibility: This is not a physical transfer of goods. For e.g., Hotels

offer ‘comfort’, airlines offer ‘travel’ etc.
2. Simultaneous production and consumption: The services are
created and delivered on the spot. For e.g. the consultancy services of a
3. Non-Inventorial: Services cannot be stalked as inventory and delivered
at a later stage. For e.g. a room in a hotel is vacant would mean loss of
revenue which cannot be made good later.
4. Low Entry Barriers: Services are a good opportunity for new
entrepreneurs as they require little investment and hence they also lead
to a high degree of competition as the entry barriers in the service sector
are low.
5. Environment Factors: The influence of the various environment factors
can be felt strongly in the service sector, just as in case of the
manufacturing sector.

Now a days Service sector is contributing more than the half of the national
income. But its contribution to the employment generation has been less than
proportionate. The share of service sector has grown considerably in Gross
Domestic Product from 35% to 47% (approximately). The total employment has
also gone up but not in the proportion of market share as per the 1999-2000 RBI

One out of two Indians earn his livelihood by providing services. This is because
services is the most diverse sector of the economy, consisting of neurosurgeons,
college professors and housemaids.

Though the services sector has expanded relentlessly in the past decade, three
related events of the 1990’s gave it a pre-eminence.

Page 18
Principles and Practices of Management

1. An explosion in information technology (IT).

2. A slower growth and painful restructuring of India’s manufacturing
industry and
3. A virtual stagnation in agriculture.

As a consequence, India seems to leap from agriculture to services, by passing

the industrial evolution, unlike most other economies.


“Service is India’s new economy”

The growth of services sector is good, but the failure of the industry to grow is
bad. The reasons for the stunted industrial growth, like restrictive licensing
system, a closed economy, anti-employment laws etc do not exists for services.
For most hi-tech service industries, the two ingredients of are:

a. Labour
b. Knowledge

Both labour and knowledge is abundant in India. But this sector cannot keep
growing by itself. Services need efficient telecom, transport, roads and power as
much as industry and agriculture. The country has to invest more and better in
human resources. India has under invested in education. The quality of human
capital varies from world class computer professionals to complete illiterate.
The government's projections of the growth of GDP in 2002-2003 are being
revised by various government departments. Within two months of the start of
the new fiscal year (which occurs in April), the then finance minister Yashwant
Sinha had announced that GDP was likely to grow by 6 to 6.5 per cent this year.
This figure was always highly suspect, for it required agriculture to grow by 4.5
per cent, industry to grow by 5.5 per cent and the services sector to grow by 6.5
to 7.5 per cent.

A more conservative and far more respected set of estimates were those of the
Centre for Monitoring the Indian Economy (CMIE), which projected 4.1 per cent -
2 per cent in agriculture, 4 per cent in industry and 6 per cent in services.
However, the 6 per cent estimate had been cooked up by the Reserve bank of
India, no less. So it became the government's new mantra. This figure was
trotted out confidently by the prime minister.

Reasons for the Service Sector grown?

Page 19
Principles and Practices of Management

 The failures of countries to preserve an advantage in manufacturing. This

is because technological development that increase manufacturing
productivity pass with increasing rapidity across national borders, hence it
becomes harder for any country to gain a competitive advantage just by
making things and this advantage will have to come from design,
marketing, branding and distribution.
 There has been a marked tendency to distribute specialized knowledge
and high technology-embedded capital for labour in goods producing
process. For e.g. only 5% of IBM’s employees are involved in physical
production and only 10% of the purchase price of the PC goes to actual
 Contracting out is another reason for expansion of services. Many firms,
which were traditionally performing services activities in-house now, find it
more efficient to hire these to service producing firms. Firms prefer to
buy-in particular skills that requires rather than expensive labour that is
not fully utilized.

 As income per capita rises, agriculture loses its primacy, giving way first to
a rise in the industrial sector, then to the rise in service sector.

The service sector produces “intangible” goods, some well known – government,
health, education and some quite new – modern communication, information &
business services tends to require relatively less natural capital and more human
capital than producing agricultural or industrial goods. As a result demand has
grown for more educated workers, prompting countries to invest more in
education – an overall benefit to their people. Another benefit of the growing
service sector is that by using fewer natural resources than agriculture or
industry, it puts less pressure on local, regional, and global environment.
Conserving natural capital & building up human capital may help global
development become more environmentally & social sustainable.

For example in the service sector, India's foreign equity caps are a
disincentive to foreign investment. Foreign insurance companies are eager to
enter India's virtually vacant market, but New Delhi requires them to form joint
ventures with local firms and limit their investment to 26 percent. Because of a
45-year government monopoly on insurance, only a few Indian firms are
experienced enough to enter a joint venture with an foreign insurance company.
Even fewer possess the financial wherewithal to provide the 74 percent
investment necessary to start a new business. If an agreement could be reached
to lift the foreign equity cap, more foreign investors would be able to enter the
market, providing better insurance coverage for Indians in the process.

Four A’s of Service Sector

Page 20
Principles and Practices of Management

1. Accountability: There are many services which have emerged recently,

but the big question is ‘Is the Indian society ready to accept such
services? For e.g. professionally managed old-age homes or day care
centers and even wedding management services. As our social and
cultural fabric is different, it may take some time to accept such services.
2. Awareness: As the services sector is new to our economy, many
individuals and sections in society are not aware of the number of services
being offered in their towns and cities, such as, maintenance of housing
societies, payment of all taxes and bills, or reestablishment service for an
executive who has been transferred from one city to another.
3. Affordability: Services as a concept being intangible and many times
taken for granted, people are not yet ready to pay a price for it. So any
services offered must be affordable.
4. Availability: Services have a wide spectrum of activities. For e.g. in
Delhi, some entrepreneurs started with mobile Maruti maintenance service
where the concept is that Maruti Van acts as mobile service station. But,
looking at the distances to be covered in Delhi and the traffic jams, reach
ability and availability of services is the big question. A simple example
would be children’s day care centers or crèches not just being acceptable
to people but also their availability closer to home.

Management Challenges in the Service Sector

a. General Management Challenges

1. Communicating the concept (How to put across the idea of a particular

service that is being offered).
2. Branding.
3. Packaging.
4. Differentiating Factors.
5. Revenue Model (How many will be generated? Do we have sustainable
income model? Who are our customers)
6. Product, Price, Place, Promotion.
7. Pace, People and their experiences (The speed at which services are to
be launched, adopting as per time, and managing the experiencing of

b. Functional Management Challenges

1. Human resources (How to advertise the service? How to retain them?

How to train and develop them?)
2. Marketing and advertising (How to advertise the service? How to do a
market research? How to work on customer’s feedback?)

Page 21
Principles and Practices of Management

3. Finance and taxation (How to raise the required capital? Time factor and
break-even point, Accounting challenges, Taxation implications in terms of
budgetary provisions).

Looking at the earlier information in this section, it can be said that services
sector is our new economy consisting of Information Communicating and
Entertainment Companies or Technology Media and Telecommunication

Though India has leapfrogged into services sector, its major contribution towards
our GDP suggests:

1. Services will provide jobs for tomorrow.

2. There will be unprecedented growth of a number of services.
3. It will require a new set of management practices to be successful.
4. There is a tremendous scope for creativity in this sector.
5. With a most talented manpower in India, this sector is the strength of our
economy to show the world that Indians have arrived on the global scene.

Page 22
Principles and Practices of Management

Q9. Write a detailed note no Retailing Sector in India – Growth

prospects & various challenges.

Ans. “Retailing consists of those business activities, which are involved, in the sale of goods or
services to consumers for their personal, family or household use.” It is the final stage in the
distribution process for goods and services from manufacturers to final consumers

Retailing involves
- Interpreting needs of the consumers
- Developing good assortments of merchandise
- Presenting them in an effective manner so that consumers find it easy and attractive to buy.

Retailing differs from marketing in the sense that it refers to only those activities, which are
related to marketing goods and/or services to final consumers for personal, family or household
use. Whereas marketing, according to American Marketing Association, refers to "the process of
planning and executing the conception, pricing, promotion and distribution of ideas, goods and
services to create exchanges that satisfy individual and organizational objectives."

Organizational buyers purchase in order to perform a task or sell a product effectively, efficiently
and at a profit. They could be industrial buyers or intermediary buyers. Industrial buyers are
those who purchase goods and services to be used in or to aid manufacturing process.
Intermediary buyers are those (i.e. wholesalers and retailers) who buy merchandise for resale.
Retailers include street vendors, local supermarkets, department stores, restaurants, hotels,
barbershops, airlines and even bike and car showrooms. Still retailing may or may not involve the
use of a physical location. Mail and telephone orders, direct selling to consumers in their homes
and offices and vending machines - all fall within the purview of retailing. In addition to it,
retailing may or may not involve a "retailer." Manufacturers, importers, non-profit firms and
wholesalers are acting as retailers when they sell goods and/or services to final consumers.

Whatever the form of retailing, a retail marketing strategy defines the execution of the marketing
process and facilitation of customer satisfaction. This retail marketing strategy involves selecting
a retail target market (i.e. the carefully/exactly identified group of final consumers that a retailer
seeks to satisfy) and then implementing the corresponding retail marketing mix (i.e. a
combination of product, price, promotion and distribution strategies that will satisfy the retail
target market). The elements of the marketing mix encompass the facets shown in the table
below. The table depicts consumer service as the crux of the whole activity.

Retailing Industry in India

 Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles), the country sorely lacks anything that can resemble
a retailing industry in the modern sense of the term. This presents
international retailing specialists with a great opportunity.
 It was only in the year 2000 that the global management consultancy AT
Kearney put a figure to it: Rs. 400,000 crore (1 crore = 10 million) which
will increase to Rs. 800,000 crore by the year 2005 – an annual increase
of 20 per cent.
 Retailing in India is thoroughly unorganized. There is no supply chain
management perspective. According to a survey b y AT Kearney, an
overwhelming proportion of the Rs. 400,000 crore retail market is

Page 23
Principles and Practices of Management

UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is

 As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area. This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States).
India's per capita retailing space is thus the lowest in the world (source:
KSA Technopak (I) Pvt Ltd, the India operation of the US-based Kurt
Salmon Associates).
 Just over 8 per cent of India's population is engaged in retailing
(compared to 20 per cent in the United States). There is no data on this
sector's contribution to the GDP.
 From a size of only Rs.20, 000 crore, the ORGANISED retail industry will
grow to Rs. 160,000 crore by 2005. The TOTAL retail market, however, as
indicated above will grow 20 per cent annually from Rs. 400,000 crore in
2000 to Rs. 800,000 crore by 2005 (source: survey by AT Kearney)
 Given the size, and the geographical, cultural and socio-economic diversity
of India, there is no role model for Indian suppliers and retailers to adapt
or expand in the Indian context.
 The first challenge facing the organized retail industry in India is:
competition from the unorganized sector. Traditional retailing has
established in India for some centuries. It is a low cost structure, mostly
owner-operated, has negligible real estate and labour costs and little or no
taxes to pay. Consumer familiarity that runs from generation to generation
is one big advantage for the traditional retailing sector.
 In contrast, players in the organized sector have big expenses to meet,
and yet have to keep prices low enough to be able to compete with the
traditional sector. High costs for the organized sector arises from: higher
labour costs, social security to employees, high quality real estate, much
bigger premises, comfort facilities such as air-conditioning, back-up power
supply, taxes etc. Organized retailing also has to cope with the middle
class psychology that the bigger and brighter a sales outlet is, the more
expensive it will be.
 The above should not be seen as a gloomy foreboding from global retail
operators. International retail majors such as Benetton, Dairy Farm and
Levis have already entered the market. Lifestyles in India are changing
and the concept of "value for money" is picking up.
 India's first true shopping mall – complete with food courts, recreation
facilities and large car parking space – was inaugurated as lately as in
1999 in Mumbai. (this mall is called "Crossroads").
 Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized India's retailing industry.

Page 24
Principles and Practices of Management

 These drawbacks present opportunity to international and/or

professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it.
 The prospects are very encouraging. The first steps towards sophisticated
retailing are being taken, and "Crossroads" is the best example of this
awakening. More such malls have been planned in the other big cities of
 An FDI Confidence Index survey done by AT Kearney, retail industry is
one of the most attractive sectors for FDI (foreign direct investment) in
India and foreign retail chains would make an impact circa 2003.

The customers of the 21st century would expect to pick his/her own products from an array of
choices rather than asking the local kirana wallas to deliver a list of monthly groceries. Thus the
way of distribution of products has gained importance in the past decade.

What is the reason that big groups like Tata’s, ITC, Piramal Enterprises and S.Kumars
are putting huge amounts of money into retailing? The answer is very simple. Now,
just a couple large organized retailers are in the market whose turnover crosses Rs.
100 crore. And in this sector anything above 25 crore counts you as a major player.

Shopper's Stop: Shopper's Stop launched its Mumbai branch in 1991 with their men's
line soon followed by women's and children clothes. The concentration was on "one
room, one ambience, and one experience" and its success resulted in opening new
branches in Bangalore and Hyderabad. Cashing on in the current consumerist trend,
the shop not only offers products but also offers an avenue to channelize operations.
For customers who cannot afford a John Miller or Wendell Rodericks original once a
year moderately priced truck show is held at Shopper's Stop.

Challenges Ahead For Retailing

Organized retailing is not a bed of roses for the big players also. In addition to the advent of
Internet, various issues glare at retailing. Some of them are

Human Resource:

Big retail shops do not confine their target segments for employees to undergraduates. Shoppers
Stop broke the myth of MBAs not wanting to go into the retailing career. Cross Roads and
Spencer also hire MBAs to manage their chains. However there still exists a gap between the
supply and demand of professionals. Mr. Goenka, chairman RPG Group, hopes that one of the
greatest challenges facing modern retailing in India is the availability of trained personnel. In
order to address the problem RPG Group has set up a national retail Institute in Chennai, which,
offers a variety of courses in retail management for frontline, supervisory and managerial post.

Retaining the human resources is also a major challenge for these big retailers. The bigwigs like
Crossroads offer high compensation and create a cohesive environment that makes an employee
proud to be a part of such big retail chains.

Space and Infrastructure:

Page 25
Principles and Practices of Management

To establish a retail shop/ Mall, the real estate and the infrastructure are very vital. The
expenditure and availability on both the accounts do hinder the growth of the retail chain. The
land ceiling restrictions and other state restrictions on land use have prevented the growth of
efficient retailing in the cities. An average investment of about Rs. 5 crore is required to establish
a mall and that explains the rush of big companies into this business. Small and individual
retailers find it difficult to pour in that much of investment. In addition to the initial investment,
to combat e-tailing, expenditure has to be incurred on technological side. This makes the retail
projects less attractive for the individual players.

Consumer Mindset Towards Discount Stores:

In India the concept of discount stores like Wall-Mart, at which genuine, defect free international
brands are available at 50% discount, is yet to catch on. Still, the major section of customers is
conservative and choosy and prefers to go to a known retail shop than opt for a discount store.
Very few discount stores like SM2, Mumbai are at present operational. Its reach is confined to
major cities. Breaking the conventional mindset of the Indian consumers that discount stores do
not sell inferior goods will take some time.

Rural Market- How To Penetrate?

Penetration into the rural market is what big retailers have to concentrate on for growth.
Attracting rural markets will be different from that of the urban market. For example detergent
cakes are preferred to powder and coconut oil in bottle to sachets in the rural areas. The rural
consumer are different from the urban consumers as they are more price sensitive and their
quantity of consumption would be less as their share of wallet for shopping along with
entertainment is delineated. Food and agricultural inputs dominate the rural consumers list and
whatever is left would be used to fulfill aspiration needs. Customers in the rural area are not
urbanites without money. He has a distinct identity and value system. One more challenge in the
rural market is that shopping habits vary according to seasons. During harvest time, the spending
of a rural consumer increases compares to other times. However, penetration of television,
increasing literacy levels, mobility between rural and urban areas and telecommunication (STD
Services) have increased their awareness towards branded products and entertainment.
Customized retail shops would be a big success in the rural areas too if the right strategies are


The retailing community has accepted and realized the fact that the consumers want to choose
between the variety of brand and value for money is their topmost priority. The big retailers have
to deliver a consistent branded experience. Crossroads in Mumbai is an endeavor to achieve the
same, though its target segments the upper and upper middle class. Technology has made a
difference in retailing also. E-tailing (through internet) is considered to be eroding the store
retailing slowly. Is it the real picture? With the concept of B2C (Business to Consumer
Transactions over internet) coming up at a fast pace, an intimate two-way access is emerging
between the retailer and the customers. Customized products are offered to the customers. For
instance while one buys a book through, a synopsis of the book, its reviews, its
prominent readers and other books of the same author are some of the information provided to
the customers. Within minutes of placing an order, one gets a confirmation thus saving time and
satisfying the customer. The penetration level of the internet is increasing at a pace that the
reach would be equivalent to what television took about 40 years and that cable about 15 years.

Page 26
Principles and Practices of Management

In online services and the web, the retailers seek out the customers unlike the traditional model
where the customer goes to the store and locates the product. The busy life-style of the
consumers in this hectic era, tilts the preference needle towards the online retail model.
However, B2C success depends on the behavioral and attitudinal changes in customers. First, the
customers have to be familiar with Internet and have to be informed about buying on the net.
Then, the customers have to build the mentality to trust the e-sellers and be convinced on the
products quality. The KSA customer 2000 study showed that only 1% have ever used net
shopping though 40% are aware of it. But 10% of the representatives do not trust the quality in
net shopping. This shows e-tailing (stand alone) has a long way to go in India.
The major advantage of the retailers in India is that, most of the products operate on the push
factor than pull factor. In order to popularize their products the manufacturers have to attract the
customers to feel the products, physical existence and this is enabled by the retailers.

Instead of viewing e-commerce as a threat for retailing the big retailers can embrace technology
and provide value added and personalized services to the customers. In the recent times,
companies like ARCHIES have used technology to their advertisement and increased their sales.
By promoting, Fathers day, mothers, sisters, friendship, valentines, and even egg and Love at
first sight days, Archies has been successful in pulling crowd in their galleries all over India.

The big retailers can learn the lesson from Archies. A recent KSA Technopark survey finding
showed that Apparels and Consumer durables occupy the top slot in priority for shopping in
India. Apparels and Consumer durables and for that matter even footwear are those products
which gives satisfaction when you feel it. How can the big retailers use technology in this?
Technology is so flexible that it can coexist with business anywhere. The big retailers have to
have their websites to combat the competition from e-tailing. For instance for clothing, the big
retailers can show the variety and design offered by them through the net. A virtual experience
can be provided and the customer can have n option whether to visit the shop or shop from
home. If the virtual round through the shop is irresistible, the customer will definitely come to the
shop for an experience at least. Thus, in this era of Information Technology store and retailers
have to become technology savvy to satisfy customer preferences. The consumer mercantile
activities grouped into three phases, pre-purchase preparation, purchase consummation and
post-purchase interaction have to be properly incorporated with technology. The model below
explains the activities in the three phases of mercantile procedures.

Product / Service search and

information gathering
Pre-Purchase Interaction

Comparison of shopping
and product selection

Placement of Order

Page 27
Principles and Practices of Management

Authorization of payment Purchase Consummation

Receipt of Product

Customer Service & Post Purchase Interaction


Fig: Consumer Mercantile Activities

In the product/ service search, the retailers can give search for basic products and the brands
available with the retailer, the price and discounts if any. In case of customer specific information
like size and colours, the available colours size and a preview of the same can be displayed to
attract the customers.

Comparison of the prices between the products and unique features and attributes can make the
customer more informed and aware. The mode of receipt of money and the two-way
communication i.e. between the customer and retailer will ensure better customer service. This
will also ensure that the big retailers will not loose their customers who cannot visit their store
but would prefer goods from that particular retailer.

In case of purchase consummation, placement of order would be ensured if the customer were
satisfied with the product range. An immediate confirmation for order placement would also give
a sense of satisfaction to the customer. Proper dispatch of the product and acknowledgement of
the receipt of payment would involve the customer in the process and provide him a sense of

The after sales service plays a vital role in customer satisfaction and loyalty. By providing the
details and clauses for return of products, if such a situation arises, and personalized greeting
cards to the customers would ensure a personal touch and would motivate the customers to refer
the store to his/ her friends to visit the shop.

Even though adopting e-tailing along with store retailing would involve larger investment and
expenditure, the big retailers have to do so in order to sustain the onslaught of technology. With
the customer, especially the upper class becoming more techno- savvy, the retailers need to
formulate such strategies to retain and expand its customer base.

Page 28
Principles and Practices of Management

Q.11 “Event Management is the biggest challenges for Professional

Manager” discuss fully.

Ans. Since ancient times human race has been engaged in mass activities the
cause of which varied, to encourage the feeling of brotherhood, for recreation or
just for beer and skittles. These activities include entertainment in sports. All
these activities enhanced the feeling of brotherhood and sense of belongingness
in the society. A new sector has emerged in modern times that have taken care
of all these emotions and that sector is know to be as Event Management. An
event management company works on an event from is very conceptualization
and works till the execution of the same. Any mass gathering under the sun can
be considered as an event be it a birthday party or republic day parade. To
make it memorable one has to work on the details. To take care of all these
things and to perform them professionally even management companies come in
the picture.

According to Kotler “Events are the occurrences designed for marketing interests,
it is among one of the third generation non personal marketing tools”. Event
management companies involve themselves in the planning, organizing, and
execution of an event, which could include a product or a brand launch, an
exhibition, a concert or even a conference. Events are basically an extended
form of advertising, allowing brands to associate directly with the consumer.
Event is a form of interactive advertising.

Event Management as an industry in India is nascent, and in an unstructured

form. Leading event management companies in India are Wizcraft, DNA
Networks, CineYug, Pinnacle, Midas events etc. These companies have their
specific areas of specializations like entertainment, sports events, celebrity
management, corporate management, corporate events etc. These companies
handle most of the big events like Filmfare awards, Femina Miss India Pageant,
Zee Cine Awards, Sansui handled by government authorities. The biggest
concourse under the sun Kumbhmela is again handled by Allahabad municipal

In India in every city one can easily find hundreds of event management
companies. For example in Pune there are 215 big and small event management
companies operating with different specializations.

Most of the leading ad agencies in India also have a separate event section that
ad events, Vin event, Thompson Contact are the event management arms of
Lintas Mumbai, Vigennet, Ogilvy and mathers and HTA respectively.

Page 29
Principles and Practices of Management

Even leading television channels have separate event sections that works for the
promotion for the programme aired by their network. For example ZEE
Television has ZEE events as a separate arm for its event programming.

Various areas of operations are:

1. Concerts.
2. Corporate events (Brand launch etc).
3. Celebrity management.
4. Television events (Awards nights like Filmfare, Channel[V] Music
Awards etc).
5. Exhibitions.
6. Sporting events.
7. Artist Management.
8. High profile weddings, Birthday parties.
9. Parties at Discos, Night Clubs.
10. Talent Bank.
11. Direct Sales promotions.

The various steps taken by an event management company during the events
are concept evaluation, concept building and to formulate the communication
strategy. For different events we need different professionals, talent bank,
technical back up and depending on the place one may require logistics and
liaisons with local companies also. For various sections handled by any event
management company skilled professionals are required. So this sector can
cater to a vast stratum of skilled professionals. Various departments of a
company are client servicing, creative, production, administration, logistics, and
talent bank. So people from different backgrounds can work in an event
management company, all they need to have is organizational skills i.e.,
intelligent creativity.

Event management is among one of the fastest growing third generation

marketing tools. It is practiced along with various other tools like public
relations. This sector is considered to be a one off industry in India. The true
potential of this sector is yet to be realized. New opportunities are coming up in
various other sectors like television broadcasting and production. They have
realized that events have become an important promotional tool in their
marketing kit. At such times it becomes increasingly important that the events
be professionally managed.

Page 30
Principles and Practices of Management

New opportunities that are coming up are offers like one made by ZEE Television
Networks for the entire leading event management companies of India to work
with its event section to promote the programme aired on the network.

Leading advertising agencies in India also have separate event handling sections
that along with other instruments provide very good mix for integrated

A very nascent segment of big ticket entertainment business, the live

entertainment and event management industry has the potential to gross more
than Rs. 3350 Crore in less than five years from now, says a report prepared by
the Federation of Indian Chamber of Commerce and Industry (FICCI). Almost a
decade ago the industry was estimated at only Rs. 20 Crore in size, but has
grown to become a Rs. 200 to Rs. 250 Crore industry today.

The live concert circuit is probably the fastest growing segment of the business.
As per the industry estimates, it has grown more than 200 % between 1995 and
1999. The last three years have witnessed a spate of International Artists
coming to India to perform in live events.

With Indian Films and film celebrities always being close to the heart of Indians,
wherever they may be located, there is a huge potential for the event
management industry to organize live shows abroad. The last few years have
seen a plethora of such shows in Countries like the US, UAE, UK and South
Africa, where there is a large non resident Indian presence.

These shows have evoked tremendous response not only from the Indians
settled there but also from Pakistanis, Sri-Lankan, and UAE residents. Shows
already organized in the US featuring leading film artists have been a complete
sell-out, with people craving for more. The UAE with a large concentration of
South Indian population has been a favourite stop over for South Indian Film
Artists who have always performed to a full house. Moreover, with the growing
expatriate population in countries like Australia, Canada and New Zealand, there
is a huge untapped potential for shows/events to be organized abroad with
Indian Cinema Actors.

Problems Faced

The industry is facing the following problems:

A. Entertainment tax rates, which forms a big chunk needs to be rationalized

across the country. Presently different states levy different tax rates, with
southern states levying lower taxes. Funds thus saved can be re-invested in
more “Events”, which will help generate more revenues for the Government.

Page 31
Principles and Practices of Management

B. Apart from the tax rates, the payment of entertainment tax also poses a
major problem to the organizers. Currently the tax has to be paid before the
tickets of the events are sold and the relevant department stamps the tickets for
the tax paid is lost, if the tickets remain unsold. The Government should only
levy tax on the exact number of tickets sold.

C. In addition to the entertainment tax, an event management company is also

required to pay service tax. A clear case of double taxation, the service tax
element should be withdrawn.

D. For holding such events a large number of permissions need to be sought.

These include permissions from the Police Departments (for use of loud
speakers, traffic etc), Customs (in the event of foreign artists being used) local
municipal corporation and Central Government among others. This imposes
unusual hardship on event management companies as well as the artists. The
industry feels that instead the Government should introduce the facility of single
window clearance, which will expedite and reduce the time taken for such
permissions from the current one month to a few days.

E. Professional charges by organizations like Indian Performers Right Society or

IRPS and Indian Music Industry or IMI are unjustified arbitrary, almost
amounting to dual form of taxation, allege industry sources.

Inclusion of Even Management in to the list of services to be taxed is really

discouraging. Let us hope that excellence Professionalism Prevails & that this
sector will show spring action to handle this below.

Page 32
Principles and Practices of Management

Q.13 What are the problems faced by Indian Business families after
1991? (Beginning of liberation in India)
What is their strategic response for the same?

Ans. After 1991 in this complex age of new liberalized economy, such business
families also face common problems like

a. Transnational attack.
b. Stiff Competition.
c. Low Profiles.
d. Fickle Consumers.
e. Unproductive Labor.
f. Falling Share Values etc.

In spite of these, everyone of them has expanded its range of business activities.
This is so because

12. These corporates have a sound a knowledge of the tastes of Indian

13. These corporates are much more practically savvy and they know
how to maintain political links.

However, these family owned business also face major fears:

1. Splits like a clash between father and son or other members of the family
leading to division of the company e.g. the Birla Groups division into many
companies after the death of Mr. G.D.Birla.

2. Successful planning to get the right person at the right place after the
business pioneer retires or expires. The rules have changed after liberalization
and the successor needs to have the right qualification or the corporate needs to
outsource a person from outside the company, thus restricting the family’s
control on the business.

3. Lack of focus where the companies need to focus more on their areas of core
competence and selling of non-revenue generating companies. For e.g. Tata
selling TOMCO to HLL.

4. Transnational Attack: Foreign companies are more focused, organized, able

to bear shots and they pose a threat because of their global threats of product
and service quality.

6. LPG (Liberalization, privatization and globalization): Today’s Entrepreneurs

are having such huge opportunities only because of multinationals but the timing

Page 33
Principles and Practices of Management

of globalisation can be debated on. According to Mr. Shashikant Ruia (CEO,

Essar Group) – “The way the country was opened upto foreign competition was
unfair, but it has to be faced upto by the family business with a new set of

7. Difficulties with restructuring: The changed circumstances required a great

amount of change, but for most of these business houses change was painful,
expensive and forced. Very few could change from within, due to lack of
initiative taking ability.

8. Take Overs: Since most of the Indian Companies are neither technically nor
financially sound, they are always under the threat of takeovers.

9. HR Issues: Retaining the Indian Brain is a major difficulty of Indian

Companies. They have to:

a. Tap the untapped human resources.

b. Give them industry standards pay packages and other remuneration.
c. Emphasis on overall personality development through training and
d. Offer them a proper career path.
e. Delegate authority to them.
f. Give them space to work.

10. Lack of professional management and clashes between professional CEO’s

and family members who control the business. Separation of ownership from
management is always a debatable issue in such companies, though the need for
appointing a professional manager is widely accepted, problems arise in terms of
clashes of styles and approaches towards running the company. Today however
these families have to change their approach in order to remove the redundancy
in the system and in view of the liberalization in market place, Indian business
houses have to undergo radical strategic operational and financial transformation
and most importantly, they must rewrite the role of the family. The families
have realized that the family and the business are essentially two separate
institutional systems with distinctive rules governing the respective behaviors
they have began to appreciate this distinction. They have also made certain vital
changes over their future role to make the family business survive.

Some of the major strategies adopted by the Business families:

1. Raising their capital state to a comfort zone so that the fears of take over
can be kept at bay: preliberalisation, many families were running the business
with a low capital state of 15 to 20% which made them vulnerable for takeovers,
post liberalization, families like Tatas, Ambanis, Singhanias have raised their

Page 34
Principles and Practices of Management

stake to 26% on above and in many cases as high as 45 to 50% to gain

complete control over the management of the company.

2. Consolidation of business by selling of non viable and non care business such
as Raymonds sold their steel division to Thyssen of Germany and cement division
to Lafarge of France. Even Tata Steel sold their cement division to Lafarge to
concentrate on Steel business.

3. Appointment of Professional Manager: Business families have realized that

business should run by experts and specialists and the concept capital stake and
managerial stake should be clearly defined. So many business houses are taking
back seats and professional managers are running the show.

4. Attention and Investment in research and development : So far R&D was

neglected by Indian Business Houses. But companies have realized that
creativity, innovation, new product launch, improvement in quality bringing down
costs are the survival strategies of tomorrow. So business families have started
spending more on R&D. For e.g. Ranbaxy Pharmaceuticals, Dr. Reddy’s Lab,
Mahindra and Mahindra.

5. Joint Ventures and Tie Ups: With globalization and government rules and
regulations, moving ahead requires strategies like joint ventures, For e.g. Hero
and Honda of Japan, Bajaj having technical collaboration with Kawasaki of Japan

6. Technology upgradation and managing the pace of change: Technology

today is moving at the speed of internet. Most of the companies have realized
that managing understanding and adapting to changes are the challenges they
have to face and business families are readying themselves for this.

7. Understanding the realities that economies are moving from sellers market to
buyers market. Business families earlier took customers for granted. Post
liberalization, the consumer has wider choice of products. Business families have
adapted themselves to the new realities, and new product launch, customer
relationship management, reliable after sales service have become the
benchmarks of the new strategies.

8. Profit will not come from cornering licenses or Beaurocratic favours but by
being competitive at the market place: This realization has resulted into giving
weightage to the performance of managers over loyalty of managers towards

9. Succession Planning: Professional management is an attitude and mindset.

Many business families scions are educated, are trained abroad and they return

Page 35
Principles and Practices of Management

to take over. They begin at the grass-root level to gain experience. A senior
family member and trust professional manager acts as mentor for them. As soon
as they are ready to take over, they enter the board room with confidence.

In this entire shake up, some business families are emerged victorious and
others have disintegrated or lost out.

To conclude, it can be said that family owned business houses is an integral part
of Indian Business Families. At every stage of liberalization, they face problems
and challenges, but they are here to stay.

Page 36
Principles and Practices of Management

Q14. Define Emotional Intelligence. Explain its importance for a


Ans. Definition of emotional intelligence (EI) is "the ability to process emotional

information, particularly as it involves the perception, assimilation,
understanding, and management of emotion."

The Four branches of EI:

1. Perception Appraisal and Expression of Emotion

 Ability to identify emotion in one's physical states, feelings, and thoughts.
 Ability to identify emotions in other people, designs, artwork, etc. through
language, sound, appearance, and behavior.
 Ability to express emotions accurately, and to express needs related to
those feelings.
 Ability to discriminate between accurate and inaccurate, or honest vs.
dishonest expressions of feeling.

2. Emotional Facilitation of Thinking

 Emotions prioritize thinking by directing attention to important
 Emotions are sufficiently vivid and available that they can be generated as
aids to judgment and memory concerning feelings.
 Emotional mood swings change the individual's perspective from
optimistic to pessimistic, encouraging consideration of multiple points of
 Emotional states differentially encourage specific problem-solving
approaches such as when happiness facilitates inductive reasoning and

3. Understanding and Analyzing Emotions; Employing Emotional

 Ability to label emotions and recognize relations among the words and the
emotions themselves, such as the relation between liking and loving.
 Ability to interpret the meanings that emotions convey regarding
relationships, such as that sadness often accompanies a loss.
 Ability to understand complex feelings: simultaneous feelings of love and
hate or blends such as awe as a combination of fear and surprise.
 Ability to recognize likely transitions among emotions, such as the
transition from anger to satisfaction or from anger to shame.

4. Reflective Regulation of Emotions to Promote Emotional and

Intellectual Growth

Page 37
Principles and Practices of Management

 Ability to stay open to feelings, both those that are pleasant and those
that are unpleasant.
 Ability to reflectively engage or detach from an emotion depending upon
its judged informativeness or utility.
 Ability to reflectively monitor emotions in relation to oneself and others,
such as recognizing how clear, typical, influential or reasonable they are.
 Ability to manage emotion in oneself and others by moderating negative
emotions and enhancing pleasant ones, without repressing or
exaggerating information they may convey.
Emotional intelligence is defined as a person’s self-awareness, self-confidence,
self-control, commitment and integrity, and a person’s ability to communicate,
influence, initiate change and accept change. Studies have shown that emotional
intelligence impacts a leader’s ability to be effective. Three of the most important
aspects of emotional intelligence for a leader’s ability to make effective decisions
are self-awareness, communication and influence, and commitment and
integrity. Managers who do not develop their emotional intelligence have
difficulty in building good relationships with peers, subordinates, superiors and

Definition and Motive

"When it comes to improving organizational effectiveness, management scholars
and practitioners are beginning to emphasize the importance of a manager’s
emotional intelligence". What influence does emotional intelligence have on the
effectiveness of decisions made by a modern organizational leader?

Emotional intelligence
Emotional intelligence is a combination of competencies. These skills contribute
to a person’s ability to manage and monitor his or her own emotions, to correctly
gauge the emotional state of others and to influence opinions. Goleman
describes a model of five dimensions. Each area has its own set of behavioral
attributes as follows.
2. Self-awareness is the ability to recognize a feeling as it happens, to
accurately perform self-assessments and have self-confidence. It is the
keystone of emotional intelligence (Goleman, 1995).
3. Self-management or self-regulation is the ability to keep disruptive
emotions and impulses in check (self-control), maintain standards of
honesty and integrity (trustworthiness), take responsibility for one’s
performance (conscientiousness), handle change (adaptability), and be
comfortable with novel ideas and approaches (innovation).
4. Motivation is the emotional tendency guiding or facilitating the attainment
of goals. It consists of achievement drive (meeting a standard of
excellence), commitment (alignment of goals with the group or
organization), initiative (acting on opportunities), and optimism
(persistence reaching goals despite set backs).

Page 38
Principles and Practices of Management

5. Empathy is the understanding of others by being aware of their needs,

perspectives, feelings, concerns, sensing the developmental needs of
6. Social skills are fundamental to emotional intelligence. They include the
ability to induce desirable responses in others by using effective diplomacy
to persuade (influence); listen openly and send convincing messages
(communicate); inspire and guide groups and individuals (leadership);
nurture instrumental relationships (building bonds); work with others
toward a shared goal (collaboration, cooperation); and create group
synergy in pursuing collective goals.

These five characteristics will be shown to apply to a leader’s ability to make

effective decisions.

Effective Leadership
The term effective in this essay can be defined as (1) "getting the job done
through high quantity and quality standards of performance, and (2) getting the
job done through people, requiring their satisfaction and commitment".

Major Findings

Leaders who underestimated their leadership were positively linked to social self-
confidence while leaders who overestimated their abilities were negatively
related to sensitivity. The results also suggested "self-awareness may provide
individuals with greater perceived control over interpersonal events and
consequences in their life…transformational leaders who are self-aware possess
high levels of self-confidence and self-efficacy and provide orientation for
followers". The authors suggest that self-awareness may enable leaders to
understand the emotional implications of their own feelings and thoughts.
Managers who maintain accurate self-awareness have more attributes of
emotional intelligence and appear to be more effective to their superiors and
subordinates. Interviews of three senior executives revealed that "managers
‘who played the game’ according to established norms were looked upon
favorably by superiors in performance evaluations and promotion considerations.
However, those interviews also revealed that ‘fast-track’ candidates and the
‘darlings’ of senior management are often seen as self-serving, duplicitous and
uncaring by their subordinates". The high public self-consciousness aspect of
emotional intelligence may be useful for managers who are interested in success
(to maximize performance appraisal ratings), but "this does not guarantee high
ratings of transformational leadership and effectiveness by one’s subordinates".

You can make a quick measure of your own Emotional Intelligence by

answering these questions:
(1) Are you aware of the subtleties of your own feelings?

Page 39
Principles and Practices of Management

(2) Do you usually know what other people are feeling, even if they do not
say so?

(3) Does your awareness of what others are going through give you feelings
of compassion for them?

(4) Can you carry on doing the things you want to do under distressing
circumstances, so they do not control your life?

(5) When you are angry, can you still make your needs known in a way that
resolves rather than exacerbates the situation?

(6) Can you hang on to long-term goals, and avoid being too impulsive?

(7) Do you keep trying to achieve what you want, even when it seems
impossible and it is tempting to give up?

(8) Can you use your feelings to help you to reach decisions in your life?

People with high Emotional Intelligence will answer yes to these questions.
However, self-assessment can only measure well for people who are self-aware.
Therefore, the above test is only a good measure for those with the important
Emotional Intelligence quality of self-awareness. There are objective
psychometric instruments, but they are still in the development stage.

Emotions at work
Low emotional intelligence brings a plethora of negative emotions, like fear,
anger and hostility. These use up a lot of energy, lower morale, absenteeism,
apathy, and are an effective block to collaborative effort.

Emotions give us great energy. Negative emotions create negative energy and
positive emotions create positive energy. We all know the tight knot in the
stomach that comes with anger and resentment, and the primitive urges it brings
to wreak revenge, or at least discomfort, to the one we see as opposing us. We
also know the excitement of being involved in developing some project, be it an
ambitious new product, or winning a football match. It is obvious in the extremes
that emotions have a huge effect. They also have a steady, day to day effect.

It is easy to recognise low emotional intelligence in others. We are all guilty of

sounding off about someone who gets our backs up, who bulldozes their way
through opposition, so that somehow, their decision stands. We are not so quick
to ponder on how we could exhibit high emotional intelligence.

There are insensitive managers who try to bulldoze their staff. They think that
steady criticism, backed by a loud voice and veiled threats of redundancy, will

Page 40
Principles and Practices of Management

spur staff on to greater efforts. This is certainly emotionally unintelligent. The

typical reaction is for people to start huffing and puffing in corners, and
occasionally have a showdown shouting match. This is also emotionally

The reasons for this behaviour stem from emotions. Being badly treated by the
manager rouses anger, antagonism, fear, desire to get your own back, and a
general feeling of ill will. The manager probably behaves like that because of
similar feelings, caused by past experiences or they are mimicking how their boss
behaves. The behaviour evokes bad reactions, which evoke bad behaviour. Once
emotionally unintelligent behaviour starts, it creates a downward spiral of low
morale, avoidance, and negative politics.

This situation is common, and the deleterious effects are obvious to anyone who
has been there. Good work is not compatible with knotted stomachs and anxious
looking over the shoulder. Yet managers are slow to realise the value of
emotional intelligence in the workplace.

Logic is given more value. It is generally believed that a logical flow of

information is the essential ingredient for new ideas. Emotions are supposed to
be stowed away until the work is done. Exceptions might be made for artists and
poets, as their creativity is considered emotional, but the "real work" comes from

This staid point of view does not seem valid when you see and feel inspiration. It
comes with a whoosh, seemingly from nowhere. Suddenly, one thought locks
into another, a new connection is made, and we feel what is pithily known as the
"Aha" experience. There is a rush of excitement as we see a dozen possibilities
all at once, and can not wait to try them out. We write feverishly in case we
forget, we rush into the next office to tell our colleagues. We phone up whoever
we think can help us expand the ideas. Nothing will stop us. That is when ideas
really develop. The careful step by step process gets ideas into action, but their
first development comes from that heady rush of adrenaline. The logic is there in
abundance, but it is fuelled by emotional fervour.

Emotions have a part to play. The emotionally intelligent are aware of this. They
are not constantly thinking about how they feel. They do not go to the extremes
of letting it all hang out, or hiding everything. They express what they feel when
appropriate, so that molehills do not grow into mountains. They listen and
empathize, but do not drown people with sympathy.

Sometimes there is a fine line between empathy and sympathy, between self-
awareness and self-obsession, between confronting uncomfortable differences
and nit picking. Part of emotional intelligence is making these judgments.

Page 41
Principles and Practices of Management

What do you need for excellence in the job?

There are a great many formal and informal ways of deciding Emotional
Intelligence requirements for a job, from detailed competency frameworks, to
simple observations. Emotional intelligence is rarely given the importance it
deserves. A workforce that deals with problems, setbacks and conflict in a
productive way will avoid delays, and prevent obstacles growing. It is an asset
with a strong commercial benefit. So, decide beforehand what Emotional
intelligence elements will make the difference in your place of work and focus on
them using real world examples where possible.
Continuous reinforcement
The importance of emotional intelligence should be emphasized, not just once,
but continuously. It is not a separate quality from such factors as energy,
willingness to work hard, expanding knowledge bases, and so on. Emotional
intelligence is embedded in all areas of life and work. Therefore the principles
should be reinforced, if only tacitly, in all development programme.

Initial training starts people on the road to greater emotional intelligence. This
can rapidly add to the value of the organization’s emotional capital. It can bring
change that is more profound if it becomes part of an ongoing cultural
transformation programme, backed up by coaching, on-the-job learning,
participative processes and reinforcing of strong people oriented values and

To sum up, emotional intelligence is being able to harness emotions
effectively, so that they play a role in business success. It is not
emotionally intelligent to allow the heart to rule the head. It is no
better to allow the head to rule the heart. The heart and the head must
each play an intelligent role so that business relationships and business
projects can both improve, side by side.

Page 42