Q.

1 Discuss the three broad areas of Financial Decision

Making

Ans:-Finance Decisions:

Finance decisions relate to the acquisition of funds at the least cost.

Here cost has two dimensions viz explicit cost and implicit cost. Explicit
cost refers to the cost in the form of coupon rate, cost of floating and
issuing the securities etc.

Implicit cost is not a visible cost but it may seriously affect the
company’s operations especially when it is exposed to business and
financial risk. For example, implicit cost is the failure of the
organization to pay to its lenders or debenture holders loan
installments on due date on account of fluctuations in cash flow
attributable to the firms business risk.

In India if the company is unable to pay its debts, creditors of the

company may use legal means to sue the company for winding up.
This risk is normally known as risk of insolvency. A company which
employs debt as a means of financing normally faces this risk
especially when its operations are exposed to high degree of business
risk.

In all financing decisions a firm has to determine the proportion of

equity and debt. The
composition of debt and equity is called the capital structure of the
firm. Debt is cheap because interest payable on loan is allowed as
deductions in computing taxable income on which the company is
liable to pay income tax to the Government of India.

An investor in company’s shares has two objectives for investing:

1. Income from Capital appreciation (i.e. Capital gains on sale of shares

at market price)
2. Income from dividends.

It is the ability of the company to give both these incomes to its

shareholders that determines the market price of the company’s
shares.

The most important goal of financial management is maximization of

net wealth of the shareholders. Therefore, management of every
company should strive hard to ensure that its shareholders enjoy both
dividend income and capital gains as per the expectation of the
market.

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But, dividend is declared out of the profit earned by the company after
paying income tax to the Govt of India.

Investment Decisions:

To survive and grow, all organizations must be innovative. Innovation

demands managerial proactive actions. Proactive organization’s
continuously search for innovative ways of performing the activities of
the organization. Innovation is wider in nature. It could be expansion
through entering into new markets, adding new products to its product
mix, performing value added activities to enhance the customer
satisfaction, or adopting new technology that would drastically reduce
the cost of production or rendering services or mass production at low
cost or restructuring the organization to improve productivity. All these
will change the profile of an organization. These decisions are strategic
because, they are risky but if executed successfully with a clear plan of
action, they generate super normal growth to the organization. If the
management errs in any phase of taking these decisions and executing
them, the firm may become bankrupt. Therefore, such decisions will
have to be taken after taking into account all facts affecting the
decisions and their execution.

Two critical issues to be considered in these decisions are:

1. Evaluation of expected profitability of the new investments.

2. Rate of return required on the project.

The rate of return required by investor is normally known by hurdle

rate or cutoff rate or opportunity cost of capital. After a firm takes a
decision to enter into any business or expand it’s existing business,
plans to invest in buildings, machineries etc. are conceived and
executed. The process involved is called Capital Budgeting. Capital
Budgeting decisions demand considerable time, attention and energy
of the management. They are strategic in nature as the success or
failure of an organization is directly attributable to the execution of
capital budgeting decisions taken. Investment decisions are also
known as Capital Budgeting Decisions. Capital Budgeting decisions
lead to investment in real assets Dividends are payouts to
shareholders. Dividends are paid to keep the shareholders happy.
Dividend policy formulation requires the decision of the management
as to how much of the profits earned will be paid as dividend. A
growing firm may retain a large portion of profits as retained earnings
to meet its needs of financing capital projects. Here, the finance
manager has to strike a balance between the expectation of
shareholders on dividend payment and the need to provide for funds
out of the profits to meet the organization’s growth.

-2-
Dividend Decisions

Dividend yield is an important determinant of an investor’s attitude

towards the security (stock) in his portfolio management decisions. But
dividend yield is the result of dividend decision. Dividend decision is a
major decision made by a finance manager. It is the decision on
formulation of dividend policy. Since the goal of financial management
is maximisation of wealth of shareholders, dividend policy formulation
demands the managerial attention on the impact of its policy on
dividend on the market value of the shares. Optimum dividend policy
requires decision on dividend payment rates so as to maximize the
market value of shares. The payout ratio means what portion of
earnings per share is given to the shareholders in the form of cash
dividend. In the formulation of dividend policy, management of a
company must consider the relevance of its policy on bonus shares.
Dividend policy influences the dividend yield on shares. Since
company’s ratings in the Capitalmarket have a major impact on its
ability to procure funds by issuing securities in the capital markets,
dividend policy, a determinant of dividend yield has to be formulated
having regard to all the crucial elements in building up the corporate
image. The following need adequate consideration in deciding on
dividend policy:

1. Preferences of share holders Do they want cash dividend or Capital

gains?
2. Current financial requirements of the company
3. Legal constraints on paying dividends.
4. Striking an optimum balance between desires of share holders and
the company’s funds requirements.

Liquidity Decision
Liquidity decisions are concerned with Working Capital Management. It
is concerned with the day to–day financial operations that involve
current assets and current liabilities.

The important element of liquidity decisions are:

1) Formulation of inventory policy

2) Policies on receivable management.
3) Formulation of cash management strategies
4) Policies on utilization of spontaneous finance effectively.

Q.2 What is the future value of an annuity and state the

formulae for future value of an annuity

-3-
Ans:The value of a group of payments at a specified date in the future.
These payments are known as an annuity, or set of cash flows. The
future value of an annuity measures how much you would have in the
future given a specified rate of return or discount rate. The future cash
flows of the annuity grow at the discount rate, and the higher the
discount rate, the higher the future value of the annuity.

This calculation is useful for determining the actual cost of an annuity

to the issuer:

C = Cash flow per period

i = Interest rate

n = Number of payments

This calculates the future value of an ordinary annuity. To calculate the

future value of an annuity due, multiply the result by (1+i). (Payments
start immediately instead of one period into the future.)

Example: What amount will accumulate if we deposit $5,000 at the

end of each year for the next 5 years? Assume an interest of 6%
compounded annually.

PV = 5,000
i = .06
n=5
FVoa = 5,000 [ (1.3382255776 - 1) /.06 ] = 5,000 (5.637092) =
28,185.46

Year 1 2 3 4 5

10,300.0 15,918.0
Begin 0 5,000.00 21,873.08
0 0

Intere
0 300.00 618.00 955.08 1,312.38
st

Depos 5,000.0
5,000.00 5,000.00 5,000.00 5,000.00
it 0

End 5,000.0 10,300.0 15,918.0 21,873.0 28,185.46

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 0 0 0 8

Q.3 The equity stock of ABC Ltd is currently selling for Rs 30

per share. The dividend expected next year is Rs 2.00. the
investors required rate of return on this stock is 15 per cent. If
the constant growth model applies to ABC Ltd, What is the
expected growth rate?

Ans:-

Formula to be used to resolve this problem

P0=D1/Ke-g

In this case,

P0 = Price of One share = Rs. 30

Ke=Required rate of return on the equity share = 15% = 0.15

D1=Expected dividend after one year = Rs. 2

g = growth rate = ?

Hence,

P0=D1/Ke-g

Ke-g = D1/P0

0.15-g = 2/30

0.15-g = 0.0666

g=0.15-0.0666

g = 0.0834

Hence Growth Rate of ABC Ltd = 8.34%

Q.4 State the assumptions underlying the CAPM model and MM

model

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Ans:-
Capital asset pricing model (CAPM) is used to determine a theoretically
appropriate required rate of return of an asset, if that asset is to be
added to an already well-diversified portfolio, given that asset's non-
diversifiable risk. The model takes into account the asset's sensitivity
to non-diversifiable risk (also known as systematic risk or market risk),
often represented by the quantity beta (ß) in the financial industry, as
well as the expected return of the market and the expected return of a
theoretical risk-free asset.

Assumptions made are as below -

1. Aim to maximize economic utilities.
2. Are rational and risk-averse.
3. Are broadly diversified across a range of investments.
4. Are price takers, i.e., they cannot influence prices.
5. Can lend and borrow unlimited amounts under the risk free rate
of interest.
6. Trade without transaction or taxation costs.
7. Deal with securities that are all highly divisible into small parcels.
8. Assume all information is available at the same time to all
investors.

The model assumes that either asset returns are (jointly) normally
distributed random variables or that investors employ a quadratic form
of utility. It is however frequently observed that returns in equity and
other markets are not normally distributed. As a result, large swings (3
to 6 standard deviations from the mean) occur in the market more
frequently than the normal distribution assumption would expect

The model assumes that the variance of returns is an adequate

measurement of risk. This might be justified under the assumption of
normally distributed returns, but for general return distributions other
risk measures (like coherent risk measures) will likely reflect the
investors' preferences more adequately. Indeed risk in financial
investments is not variance in itself, rather it is the probability of
losing: it is asymmetric in nature.

The model assumes that all investors have access to the same
information and agree about the risk and expected return of all assets
(homogeneous expectations assumption).[citation needed]

The model assumes that the probability beliefs of investors match the
true distribution of returns. A different possibility is that investors'
expectations are biased, causing market prices to be informationally
inefficient. This possibility is studied in the field of behavioral finance,
which uses psychological assumptions to provide alternatives to the

-6-
CAPM such as the overconfidence-based asset pricing model of Kent
Daniel, David Hirshleifer, and Avanidhar Subrahmanyam (2001)

The model does not appear to adequately explain the variation in stock
returns. Empirical studies show that low beta stocks may offer higher
returns than the model would predict. Some data to this effect was
presented as early as a 1969 conference in Buffalo, New York in a
paper by Fischer Black, Michael Jensen, and Myron Scholes. Either that
fact is itself rational (which saves the efficient-market hypothesis but
makes CAPM wrong), or it is irrational (which saves CAPM, but makes
the EMH wrong – indeed, this possibility makes volatility arbitrage a
strategy for reliably beating the market).[citation needed]
The model assumes that given a certain expected return investors will
prefer lower risk (lower variance) to higher risk and conversely given a
certain level of risk will prefer higher returns to lower ones. It does not
allow for investors who will accept lower returns for higher risk. Casino
gamblers clearly pay for risk, and it is possible that some stock traders
will pay for risk as well.[citation needed]

The model assumes that there are no taxes or transaction costs,

although this assumption may be relaxed with more complicated
versions of the model.[citation needed]
The market portfolio consists of all assets in all markets, where each
asset is weighted by its market capitalization. This assumes no
preference between markets and assets for individual investors, and
that investors choose assets solely as a function of their risk-return
profile. It also assumes that all assets are infinitely divisible as to the
amount which may be held or transacted.[citation needed]

The market portfolio should in theory include all types of assets that
are held by anyone as an investment (including works of art, real
estate, human capital...) In practice, such a market portfolio is
unobservable and people usually substitute a stock index as a proxy
for the true market portfolio. Unfortunately, it has been shown that this
substitution is not innocuous and can lead to false inferences as to the
validity of the CAPM, and it has been said that due to the
inobservability of the true market portfolio, the CAPM might not be
empirically testable. This was presented in greater depth in a paper by
Richard Roll in 1977, and is generally referred to as Roll's critique

The model assumes just two dates, so that there is no opportunity to

consume and rebalance portfolios repeatedly over time. The basic
insights of the model are extended and generalized in the
intertemporal CAPM (ICAPM) of Robert Merton, and the consumption
CAPM (CCAPM) of Douglas Breeden and Mark Rubinstein.[citation
needed]

-7-
CAPM assumes that all investors will consider all of their assets and
optimize one portfolio. This is in sharp contradiction with portfolios that
are held by individual investors: humans tend to have fragmented
portfolios or, rather, multiple portfolios: for each goal one portfolio —
see behavioral portfolio theory and Maslowian Portfolio Theory

MM's key assumptions and the role played by each are:

(1) Unlimited borrowing and lending is available to all market

participants at one rate of interest. Role: makes the cost of personal
and corporate borrowing and lending the same.
(2) Individual margin borrowing is secured by the shares purchased,
the borrower's liability is limited to the value of these shares, there are
no costs to bankruptcy. Role: makes the risk of personal and corporate
borrowing and lending the same.
(3) All companies can be grouped into equivalent risk classes. Role:
enables investors to identify companies with identical business risk.
(4) Capital markets are perfect. Role: permits investors to easily and
costlessly arbitrage between securities of companies which differ only
in their financing mix.
(5) There are no corporate income taxes. Role: prevents the tax code
from making debt financing more valuable by allowing interest and not
dividends as a tax deduction.
(6) Shareholders are indifferent to the form of their returns, all returns
are taxed at the same rate. Role: prevents investors from seeing any
difference in value between interest, dividends, and capital gains.

Q.5 Write the cash flow analysis?

Ans:-

(1) Estimate your annual gross income as the first step in preparing
a cash flow analysis. Allow for subtractions if your business is not
operating at full potential. For instance, if you own an apartment
complex, you add the amount of rent for each month, but subtract an

-8-
estimated amount for unforeseen vacancies. The longer you are in
business, the easier it will be to predict operating losses.

(2) Add any other income you receive and you will arrive at your
"effective gross income." This is a reliable business accounting figure
that represents your entire annual projected gross income. Write this
number down for future figuring.

(3) Compile a list of the expenses you incur in order to operate your
business. Separate this by category. Think about the purchases of big
equipment you make. If you have a painting business, you would write
down the expenses you pay annually for paint sprayers, rollers,
brushes and drop cloths.

(4) Write down all your office expenses, utility charges, advertising
expenses and other fees you pay for equipment repairs and
maintenance. Everything you need to purchase in the operation of your
business counts.

(5) Remember to include professional fees and taxes in your cash

flow analysis. If you have an accountant, his fee goes here--so does
insurance policy expense, worker's compensation payments,
unemployment insurance fees and taxes charged on your equipment
or building.

(6) Add your business accounting expense together and double

check your chart of accounts to make sure you got them all. This
number represents the total amount of expenses necessary to operate
your business. Write it down beneath the effective income figure.

(7) Figure out your debt service. Calculate the amount of payments
you will make to the bank for loans, mortgages or other financing. Add
these together and write the number down beneath the total expenses
figure.

(8) Subtract the total expenses and the total debt service figures
from the effective annual income number. This is your cash flow
analysis for the year.

Q.6 The following two projects A and B requires an investment

of Rs 2, 00,000 each. The income returns after tax for these
projects are as follows:
Year Project A Project B
1 Rs. 80,000 Rs. 20,000
2 Rs. 80,000 Rs. 40,000

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3 Rs. 40,000 Rs. 40,000
4 Rs. 20,000 Rs. 40,000
5 Rs. 60,000
6 Rs. 60,000

Ans: Using the following criteria determine which of the projects is

preferable.
Project
A

Incom PVIF@10
year e % PVCI
8000
1 0 0.909 72720
8000
2 0 0.826 66080
4000
3 0 0.751 30040
2000
4 0 0.683 13660
18250
PVCI 0
PVCI - NPV
18250 -
0 200000 = 17500
Project
B

Incom PVIF@10
year e % PVCI
2000
1 0 0.909 18180
4000
2 0 0.826 33040
4000
3 0 0.751 30040
4000
4 0 0.683 27320
6000
5 0 0.621 37260
6000
6 0 0.564 33840
17968
PVCI 0

- 10 -
PVCI - NPV
-
17968 2032
0 200000 = 0

As Project A is preferable option as it has minimal losses.

Q1. Highlight the importance of Distribution channel and

marketing intermediaries in carrying out the marketing
function.

Ans: The delivery of goods and services from producers to their

ultimate consumers or users includes many different activities. These
different activities are known as marketing functions. Different thinkers
have described these functions in different ways. Some of the most
important functions of marketing are briefly discussed below:

1. Marketing Research and Information Management

Marketers need to take decisions scientifically. Marketing research

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

2. Advertising and Sales Promotion – Advertising is a mass media

tool used to inform, persuade or remind customers about products or
services. It is an impersonal form of communication targeted at a
chosen group through paid space or time.
Sales Promotion is a short-term incentive given to customers or
intermediaries to promote sales. It supplements advertising and
personal selling and can be used at the time of launching a new
product or even during its maturity period.

3. Product Planning and Management – A Marketer should identify

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

- 11 -
4. Selling – This function of marketing is concerned with transferring
of products to the customer. An important part of this function is
organizing sales force and managing their activities. Sales force
management includes recruitment, training, supervision, compensation
and evaluation of salesmen. They need to be assigned targets and
territories where they can operate. The salesmen interact with
prospective purchasers face-to-face in order to sell the goods. The
purchaser may be end customer or an intermediary, such as a retailer
or a dealer.

5. Physical Distribution – Moving and handling of products from

factory to consumers come under this function. Order processing,
inventory, management, warehousing and transportation are the key
activities in the physical distribution system.

6. Pricing – This is perhaps the most important decision taken by

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

Importance of marketing intermediaries

These are firms which distribute and sell the goods of the company to
the consumer.

Marketing intermediaries play an important role in the distribution,

selling and promoting the goods and services. Stocking and delivering,
bulk breaking, and selling the goods and services to customer are
some of the major functions carried out by the middlemen. Retailers,
wholesalers, agents, brokers, jobbers and carry forward agents are few
of the intermediaries. Retailers are final link between the company and
the customers. Their role in the marketing of product is increasing
every day.

- 12 -
Q.2 a. Explain the different product mix pricing strategies

Product Mix Pricing Strategies

1. Product Line pricing: Strategy of setting the price for entire

product line. Marketer differentiates the price according to the range of
products, i.e. suppose the company is having three products in low,
middle and high end segment and prices the three products say at Rs
10 Rs 20 and Rs 30 respectively.

Figure 1

In the above example of Nokia mobile phones Nokia 1110 is priced @

Rs 1349, Nokia 7610 priced @ Rs 6249 and Nokia E90 priced @ Rs
34599. All the three products cater to the different segments – low,
middle and high income group respectively. The three levels of
differentiation create three price points in the mind of consumer. The
task of marketer is to establish the perceived quality among the three
segments. If the customers do not find much difference between the
three brands, he/she may opt for low end products.

2. Optional Product pricing: this strategy is used to set the price of

optional or accessory products along with a main product.

Body cover Slide MoldingRear Roof End

Rs 1521 underbody Rs 6396
Rs 1123

- 13 -
 Rs 8883

Figure 2

Maruti Suzuki will not add above accessories to its product Swift but all
these are optional. Customer has to pay different prices as mentioned
in the picture for different products. Organizations separate these
products from main product so that customer should not perceive
products are costly. Once the customer comes to the show room,
organization explains the advantages of buying these accessory
products.

3. Captive product pricing: Setting a price for a product that must

be used along with a main product. For example, Gillette sells low
priced razors but make money on the replacement cartridges.

4. By-product pricing: It is determining the price for by-products in

order to make the main product’s price more attractive. For example,
L.T. Overseas, manufacturers of Dawaat basmati rice, found that
processing of rice results in two by-products i.e. rice husk and rice
brain oil. If the company sells husk and brain oil to other consumers,
then company is adopting by-product pricing.

5. Product bundle pricing: It is offering companies several products

together as a bundle at the reduced price. This strategy helps
companies to generate more volume, get rid of the unused products
and attract the price conscious consumer. This also helps in locking the
customer from purchasing the competitors’ products. For example,
Anchor toothpaste and brush are offered together at lower prices.

Q2 b. Give a note on marketing concepts.

The Marketing Concept – The Marketing Concept proposes that a

company’s task is to create, communicate and deliver a better value
proposition through its marketing offer, in comparison to its
competitors; to its target segment and that this customer oriented
approach only can lead to success in the market place.
Today, marketing function is seen as one of the most important
functions in the organization. Many marketers put the customers at the
centre of the company and argue in favor of such a customer
orientation, where all functions work together to respond, serve and
satisfy the customer.
Many successful and well known multinational companies have
adopted marketing concept as their business and marketing

- 14 -
philosophies. Many Indian companies in the banking and other service
sectors follow customer orientation and service as their motto.
According to this concept, a company’s marketing effort must start
right from identifying, through Market Research, exact needs and
wants of the target market.

Q.3 a. What are the features of business markets?

Features or Characteristics of Business Markets

Following are some of the unique features of business markets where

large establishments purchase the required goods and services from
other businesses. Such B2B operations determine the organizations as
buyers and those organizations who supply the various requirements
will be the sellers or suppliers or service providers.

1. Few but bulk Buyers: The no. of buyers is few but they buy in
large quantity. For example, major airlines buy the necessary
equipments from the aircraft manufacturers

2. Geographical concentration of buyers: Buyers are

geographically concentrated. For example, shipping industries are
located on the east and west coasts of India than in any other places.

3. Variable demand: The nature of demand is fluctuating because

the demand is basically a derived one. Based on the requirements of
the consumer markets, organizations buy the goods and make the
finished goods available in the market for final consumption. Larger the
consumer demand, larger will be the organizational buying. For
example, mobiles are being used by a large population and so cellular
companies have to meet this rising demand.

4. Inelastic demand: The demand is also inelastic because

organizations cannot make rapid changes in the production structure
and so prices remain constant in the short-term. For example, Shoe
manufacturers will not buy much leather if the price of leather is less
neither will they buy less leather if the price increases.

5. Systematic purchasing: The purchasing activity is directly

between the buyer and supplier organization which means there are no
or very few middlemen involved. Purchasing activity is usually
undertaken by purchase departments based on a proper structure and
through various mechanisms like having purchase requisitions from
other sections, inviting tenders and sending invoices from the
suppliers, purchasing agreements or contracts with the key suppliers,

- 15 -
renewing agreements etc. For example, Reliance Fresh has regular
contracts with the agricultural producers for smooth supply of fresh
fruits and vegetables.

6. Multiple buying influences: there will be several parties involved

in deciding about the purchases because organizations will have
several departments and units functioning under it with different
requirements. So, unless they have the proper resources to work with
there will be problems in the departments. For example, purchase
department in a Hospital must be aware about the specific
requirements in the clinical wards, operation theaters, labs, etc.

7. Reciprocation: This means that when an organization buys goods

from another organization then the supplier organization also might
need certain other goods that are produced by the buyer organization.
For example, a stationery supplier will supply the necessary
stationeries to the paper manufacturer who in turn provides papers to
the supplier.

8. Lease agreements: Most organizations take on lease the

expensive equipments required by them rather than buy it. So, in this
way, they reduce cost, get better service and the lessor or one who
provides the equipments will also profit from the rent or lease charges.
For example, TATA provides the transport trucks to other organizations
on lease.

Q.3 b. Write a short note on product line and product mix.

Product line: The group of related products which uses same

marketing efforts to reach the consumer.

The product line identifies profitable and unprofitable products and

helps in allocation of resources according to that. The product line
understanding helps the marketer to take line extension, line pruning
and line filling strategies of the company.

Pidilite Industries, the adhesives and chemical company, have the

following group of related products (or product lines) in consumer and
business markets.

Consumer market.

1. Adhesives and sealants.

2. Art materials and stationeries.
3. Construction chemicals.
4. Automotive chemicals

- 16 -
5. Fabric care

Business market

1. Industrial adhesives.
2. Textile chemicals.
3. Organic pigment powders.
4. Industrial resins and
5. Leather chemicals.

Product Line Decisions:

The major product line decisions are

a. Product line length
b. Product line stretching
c. Product line filling
d. Product line pruning

a. Product line length: The number of items in the product line is

called the product line length. Company should decide whether it
requires longer chain or shorter length. The decision depends upon the
objective of the company, competitive environment and profitability. If
the chain is short company can add new products and if it is lengthy
company can reduce the number of products. For example, Pidilite’s
adhesives and sealants line has following 11 items in the product line.
Hence the length of product line is 11

1. White Glue 2. Paper Glue

3. Glue Stick 4. Instant Adhesive
5. Epoxy Putty 6. Epoxy Adhesive
7. PVC Insulation8. Silicone
Tape Sealants
9. Contact Glue 10. All Purpose
Glue
11. Maintenance
Spray

b. Product line stretching: Company lengthens its product line

either by stretching upwards or downwards or both ways. Line
stretching decision depends on three situations:-

i. Company which operates in high end market may come up with mid
class or low class targeted products.

- 17 -
ii. The company which operates in lower end of market may come up
with high end market products.

iii. If the company operates in mid segment and comes out with low
end product as well as high end product then it is stretching both
ways.

For example, Maruti Suzuki Limited launched its first product, Maruti
800 in the year 1983 and in the year 1985 it launched Maruti Gypsy.
Gypsy is costlier than Maruti 800 and targeted for higher segment. This
shows that the company extended its product line upwards or in short,
upward stretch.

Tata Motors launched their Rs 1 lakh car NANO in the year 2008. The
company which was targeting upper class and middle class with their
products SUMO and Indica respectively, has stretched downwards to
reach the lower level segment. This illustrates the downward stretch.
Toyota Kirloskar Limited which extended their line from Qualis and
Corolla to Innova and Camry is planning to come out with small car in
India. This clearly illustrates the two way stretch of the product line.

c. Product line filling: Adding more items in the present product line.
For example, in the year 2000 Maruti Suzuki launched Alto. This
product was between Maruti 800 and Maruti Zen. Here company was
trying to fill the gap existing in the segment by introducing ALTO, i.e.
line filling.

d. Product line pruning: Removing the unprofitable products form

the product line. Toyota Kirloskar phased out their well known brand
Qualis when they thought the brand was not adding value to the
product line.

Product Mix

Product mix: The number of product lines and items offered by

marketer to the consumers

A company’s product mix has four different dimensions. They are

product mix width, product mix length, product mix depth and product
mix consistency.

The following shows the product mix of Jyothy Laboratories:

Fabric care House holdUtensil Fragrance Personal Allied

insecticide cleaners s care business

- 18 -
Ujala Maxo Exo dishMaya Jeeva Continenta
supreme cyclothrin wash Natural l special
coil bar (8, 15, 20,
(9ml, 30ml, 40 and 100(Coconut
75ml, (8hr, 10hr,(100g, sticks.) Milk with
125ml,250ml 12hr) 200g Milk
) 380g) Protein,
Coconut
Milk with
Jasmine
and
Coconut
Milk with
Kasturi
Manjal,
and is
presented
in 75gm
packs. )
Ujala Max Exo dish Marketing
washing vaporizer wash of godrej
powder liquid Tea
(30ml, 45ml)
(25g, 500g, (500ml,
1Kg) 125ml)
Stiff & shine Max Marketing
aerosol of Ekta
(20gm dhoop
sachets, (150ml,300m
100ml andl)
200ml
bottles)

Product mix width: The total number of product lines that company
offers to the consumers.

For example, Jyothy Laboratories’ product mix has six lines. Hence the
width is 6

- 19 -
Product mix length: The total number of items that company carries
within its product line.
For example, Jyothy Laboratories fabric care division has three items

Product line depth: The number of versions offered of each product in

the line.

For example, Jyothy Laboratories’ Jeeva Natural is offered in three

versions i.e. Coconut Milk with Milk Protein, Coconut Milk with Jasmine
and Coconut Milk with Kasturi Manjal, and is presented in 75gm packs.

Product mix consistency: If company’s product lines usage, production

and marketing are related, then product mix is consistent, else it is
unrelated.

In the case of Jyothy Laboratories, all six product lines are FMCGs.
Hence it is having consistent product mix. But ITC Company’s cigarette
and cloth product lines are totally unrelated.

- 20 -
Q.4. a. Select any deodorant brand and evaluate its positioning
strengths or weakness in terms of attributes, benefits, values,
brand name and brand equity.

Brand Name

A name, term, design, symbol, or any other feature that identifies one
seller’s good or service as distinct from those of other sellers’.

The legal term for brand is trademark. A brand may identify one item,
a family of items, or all items of that seller. If used for the firm as a
whole, the preferred term is trade name

Brand name: Axe

Axe was launched in France in 1983 by Unilever. It was inspired by

another of Unilever's brands, Impulse.

Unilever were keen to capitalize on Axe's French success and the rest
of Europe from 1985 onwards, later introducing the other products in
the range. Unilever were unable to use the name Axe in the United
Kingdom and Ireland due to trademark problems so it was launched as
Lynx

Although Axe's lead product is the fragranced aerosol deodorant body

spray, other formats of the brand exist. Within underarm care the
following are available: deodorant aerosol body spray, deodorant stick,
deodorant roll-on, anti-perspirant aerosol spray (called Axe Dry), and
anti-perspirant stick (also called Axe Dry).

The attribute of the brand that customer associates with his/ her belief.
A person may associate the brand for power, strength or
protectiveness. For example, a customer may associate Axe brand not
just for perfumes but also any accessory associated with perfumes
such as Shampoos etc. So, for him, Axe represents perfume.

Brand Equity

Brand equity is set of assets linked to a brand‘s name and symbol that
adds value to the product or service and/or that firm’s customer.

Components of brand equity:

1. Brand loyalty: From its launch (Axe), the yearly fragrance variant
has played a key part in the success of the brand by offering
something new each year.

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2. Brand awareness: The type of fragrance (Axe) variants have
evolved over time. From 1983 until about 1989, the variant names
were descriptions of the fragrances and included Musk, Spice, Amber,
Marine, and Oriental.

3. Perceived quality
4. Brand associations: Axe also launches limited edition variants
from time to time that may be on sale for a few months or over a year

4.b. You are a research expert in the field of marketing

footwear products. What are the various research approaches
you would consider before making a consumer survey
regarding footwear?

Ans:-Below are the various research approaches that need to be

considered before making a consumer survey regarding footwear
products:

1) Observational Research – Fresh data can be collected by

observing the situation and the people in the situation.
2) Focus Group Research is a method of discussion in which a
team of eight to twelve persons invited for a group discussion in
presence of a skilled moderator to discuss a product, service, a firm
or any marketing related activity. The proceedings are observed
and recorded on videotape and subsequently analyzed to
understand consumer attitudes, beliefs and behavior.
3) Survey Research – This is the most common of the approaches
wherein surveys are undertaken with the help of a questionnaire to
learn about people’s knowledge, beliefs and preferences.
4) Behavioral Research – Customer’s actual behavior in terms of
actual purchases reflect their preferences and are more reliable
than responses provided in surveys which are memory based.
5) Experimental Research – The most scientific method of
research is experimental research which tries to capture cause and
affect relationships.

Q. 5 a. What advice would you give a company that has facing

bad publicity? What steps would you tell the company to
improve its reputation?

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Ans:-Publicity can be said as a simple act of making a suggestion to
the concerned parties – TV or radio channel, news reporter or
journalist, film makers, etc. that leads to the inclusion of a
company/products in an already existing story or a newly developed
one. Publicity may also include any such information that attracts
attention to a company, its products, its people or any event, usually
generated by a third party such as media. Publicity maybe a part of PR
or it may be independent of it in certain situations.

Publicity may have positive or negative impacts. For example, it

became a negative publicity for Coca-Cola when people in India,
started to throw or break the bottles on the roads because of the belief
that it contained pesticides or toxic substances. News channels
covered the same giving negative publicity to the company and the
products.

Ways in which organizations can use publicity as a communication tool

are as follows:

• Organizing events, contests, exhibitions, public displays, tours, etc.

• Sponsoring awards, scholarships or giving charity for any noble
cause.
• Issuing reports, conducting survey or polls, taking stand on any
debatable or environmental issues, etc.
• Any other way that is appropriate like for example displaying the
products in a movie and asking the lead actors to use the products in
that movie.
Ways in which organizations can avoid or minimize the effects of bad
publicity:
• Providing people with the accurate information and giving
clarifications if needed either through press release, media interviews,
websites, public messages, advertising etc.
• Company’s top management or spokesperson can give a public
statement or comment in the various media.
• Improvising Public Relations and designing good publicity message to
erase the effects of bad publicity.
• Continuing to provide quality products and services to the
consumers.
• Involving in community work or environmental protection campaigns
or any such activity for a good cause.

b. As a brand manager, what are the ways in which you will

select a brand name for your product- watches and how will
you position it in the market?

- 23 -
Ans:Brand provides the image to the product. Brand manager should
be careful in selecting a proper name for the brand for watches.

Brand Name: Titan

There are six suggestions from Philip Kotler to create a successful

brand name. They are

1. It should suggest something about the product benefits and

qualities; e.g. Titan
2. It should be easy to pronounce, recognize, and remember
3. The brand name should be distinctive
4. It should be extendable
5. The name should be easily translated into a foreign language
6. It should be capable of registration and legal protection e.g. Titan is
a registered brand and other brands cannot compete with it using any
similar sounding name.
Brand managers have four options of sponsoring the brand. They are
1. Manufacturer brand
2. Private brand
3. Licensing
4. Co- branding

Q. 6 a. What is MIS? What are its benefits?

MIS (Marketing Information System):

MIS is a set of procedures to collect, analyze and distribute accurate,

prompt and appropriate information to different levels of marketing
decision makers.

Benefits of MIS

- 24 -
Various benefits of having a MIS and resultant flow of marketing
information are given below:

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

implementation and control responsibilities more effectively.
2. It ensures effective tapping of marketing opportunities and enables
the company to develop effective safeguard against emerging
marketing threats.
3. It provides marketing intelligence to the firm and helps in early
spotting of changing trends.
4. It helps the firm adapt its products and services to the needs and
tastes of the customers.
5. By providing quality marketing information to the decision maker,
MIS helps in improving the quality of decision making.

6.b. How is rural marketing different from urban markets?

Rural Marketing

In a rapidly changing scenario, marketers have to continuously explore

new markets and ways of serving them. In India, enterprises are
discovering the potential of a huge rural population to drive business.
Prof C K Prahlad, had aptly summed up the potential as ‘fortune at the
bottom of the pyramid’ in a pathbraking book of the same name. Rural
marketing is not something akin to glocalisation. It is not the
modification of urban marketing strategies to suit the rural market. On
the other hand it is developing products to meet the needs of the rural
sector and reaching it across as per the specific characteristics of the
rural environment. In case of a detergent, it is producing one which will
suit the rural environment (considering that the dirt and grime is
different, clothing alternatives are different, availability of water and
number of times of washing is different and so on); packaging and
pricing which will be akin to their requirement and alternative ways for
which the detergent may be put to use. For example Hindustan Lever
found that its detergent was being used for washing the cattle.

Importance of Rural marketing: The following table will give you some
idea about the emergence of the rural market which marketers may
ignore at their own peril.

Rural Markets different from Urban Markets

- 25 -
This has to be understood in the light of the 4Ps or 7Ps of marketing.
Imagine that you are trying to establish a Coffee Café Day Outlet in a
remote village in Maharashtra. Will that be viable proposition? Yet
there may be consumers for coffee in the rural sector too. The offering
has to suit the sector. Similarly an ice cream parlor may not be a
workable idea in a village or a cluster of villages if there is no
electricity connection there. The ice cream cart vendor is a better idea.
Keeping these situations in perspective, one can draw some inferences
why rural marketing is different.

1. Accessibility and mobility: This applies both for the supplier and
the consumer. The movement of the people is restricted by the lack of
surface roads and the mode of transport. There are restrictions by way
of visibility during night.

2. Average income level of consumers: The average wage earners

are characterized by lower per capita income and disposable income in
comparison to the urban.

3. Geographical distances: The living quarters are separated more

than they are in the urban areas. The cluster of villages is also
segregated by distances.

4. Literacy level: On an average the literacy level in the rural sector

is lower in comparison to the urban sector.

There could be several other issues which are specific to the rural
sector. These may force marketers to take a different approach for the
entire marketing process or at least some of them as against the urban
sector.

1. How hardware & software support in various MIS activities

of the organization? Explain the transaction stages from
manual system to automated systems?

Hardware support for MIS

Generally hardware in the form of personal computers and peripherals

like printers, fax machines, copier, scanners etc are used in
organization to support various MIS activities of the organization.

Advantages of a PC : Advantages a personal computer offers are –

- 26 -
a) Speed – A PC can process data at a very high speed. It can process
millions of instructions within fraction of seconds.

b) Storage – A PC can store large quantity of data in a small space. It

eliminates the need of storing the conventional office flat files and box
files which requires lots of space. The storage system in a PC is such
that the information can be transferred from place to another place in
electronic form.

c) Communication – A PC on the network can offer great support as a

communicator in communicating information in the forms of text and
images. Today a PC with internet is used as a powerful tool of
communication for every business activity.

d) Accuracy – A PC is highly reliable in the sense that it could be used

to perform calculations continuously for hours with a great degree of
accuracy. It is possible to obtain mathematical results correct up to a
great degree of accuracy.

e) Conferencing – A PC with internet offers facility of video

conferencing worldwide. Business people across the globe travel a lot
to meet their business partner, colleagues, and customers etc to
discuss about business activities. By video conferencing inconvenience
of traveling can be avoided.

A block diagram of a computer may be represented as

Input unit is used to give input to the processor. Examples of input

unit –Keyboard, scanner, mouse, bar code reader etc.

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

- 27 -
Organization of Business in an E enterprise – Software
Applications in MIS

Internet technology is creating a universal bench or platform for buying

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

•E business
•E communication
•E commerce
•E collaboration

These models work successfully because Internet technology provides

the infrastructure for running the entire business process of any
length. It also provides email and other communication capabilities to
plan, track, monitor and control the business operations through the
workers located anywhere. It is capable of linking to disparate systems
such as logistics, data acquisition and radio frequency used systems
and so on. Low cost connectivity physical, virtual and universal
standards of Internet technology make it a driving force to change
conventional business model to E business enterprise model.

Internet has enabled organizations to change their business process

and practices. It has dramatically reduced cost of data and information
processing, its sending and storing. Information and information
products are available in electronic media, and is a resident on the
network. Once everyone is connected electronically, information can
flow seamlessly from any location to any other location. For example,
product information is available on an organization website which also
has a feature of order placement. An order placed is processed at the
backend and status of acceptance, rejection is communicated
instantaneously to the customer. Such order is then placed directly on
the order board for scheduling and execution. These basic capabilities
of Internet have given rise to number of business models. Some of
them are given in Table

- 28 -
The Internet and networks provide platform and various capabilities
whereby communication, collaboration, and conversion has become
significantly faster, transparent and cheaper. These technologies help
to save time, resource and enable faster decision making. The
technology adds speed and intelligence in the business process
improving quality of service to the customer. The business process of
serving the customer to offer goods, products or services is made up of
the following components.

• Enquiry processing
• Order preparation
• Order placement
• Order confirmation
• Order planning
• Order scheduling
• Order manufacturing
• Order status monitoring

- 29 -
• Order dispatching
• Order billing
• Order receivable accounting
• Order payment processing
The entire process in parts or full can be handled through these
technologies and software solutions. It provides important strategic,
competitive advantage. Further, the technology is flexible and capable
of handling any business models such as:

• Retailing, Trading, Auctioning

• Manufacturing, Distribution & Selling
• Outsourcing, Subcontracting
• Servicing, Training, Learning, Consulting

The resultant effect is the reduction in cost of business operations,

improved customer loyalty and retention and better quality offer to the
customer. Four major applications mentioned earlier make this
achievement possible. We go into details of each one of them.

Transformation stage manual systems to automated systems

The manual system which was prevalent in the organizations before

industrial revolution was slowly transformed into digital form by means
of computer and related electronic instruments. A transformation had
to necessarily go through the following stages

a) Appraisal of the procedures

b) Types of documents

c) Storage systems

d) Formulations and coding

e) Verification and validation

f) Review

g) Documentation

- 30 -
2. Explain the various behavioral factors of management
organization? As per Porter, how can performance of individual
corporations be determined?

Ans:

Management organizations:

An organization is a structure that uses the resources from the

environment like manpower, raw materials, capital and returns the
output like products and services to the environment. It constitutes the
rules, policies, responsibilities and procedures that are adopted by the
organization.

Behavioral factors

The implementation of computer based information systems in general

and MSS in particular is affected by the way people perceive these
systems and by how they behave in accepting them. User resistance is
a major behavioral factor associated with the adoption of new systems.
The following are compiled by Jiang et al. (2000) ; Reasons that
employees resist new systems:

1. Change in job content

2. Loss of status

- 31 -
3. Change in interpersonal relationships

4. Loss of power

5. Change in decision making approach

6. Uncertainty or unfamiliarity or misinformation

7. Job security

The major behavioral factors are

a) Decision styles symbolic processing of AI is heuristic; DSS and

ANN are analytic

b) Need for explanation – ES provides explanation, ANN does not,

DSS may provide partial explanation. Explanation can reduce
resistance to change

c) Organizational climate some organizations lead and support

innovations and new technologies whereas other wait and lag
behind in making changes

d) Organizational expectations – over expectation can result in

disappointments and termination of innovation. Over expectation
was observed in most early intelligent systems.

e) Resistance to change – can be strong in MSS because the

impacts may be significant.

Performance of individual corporations:

Out of many possible interpretations of a strategy an organization

adopts in business, it is found that a majority is concerned with
competition between corporations. Competition means cultivating
unique strengths and capabilities, and defending them against
imitation by other firms. Another alternative sees competition as a
process linked to innovation in product, market, or technology.
Strategic information systems theory is concerned with the use of
information technology to support or sharpen an enterprise's
competitive strategy. Competitive strategy is an enterprise's plan for
achieving sustainable competitive advantage over, or reducing the
edge of, its adversaries. The performance of individual corporations is
determined by the extent to which they manage the following (as
given by Porter) –

- 32 -
a) The bargaining power of suppliers;
b) The bargaining power of buyer;
c) The threat of new entrants;
d) The threat of substitute products; And
e) Rivalry among existing firms.

Porter's classic diagram representing these forces is indicated below.

There are two basic factors which may be considered to be adopted by

organization in their strategies:

a) low cost
b) Product differentiation

Enterprise can succeed relative to their competitors if they possess

sustainable competitive advantage in either of these two. Another

- 33 -
important consideration in positioning is 'competitive scope', or the
breadth of the enterprise's target markets within its industry, i.e. the
range of product varieties it offers, the distribution channels it
employs, the types of buyers it serves, the geographic areas in which it
sells, and the array of related industries in which it competes. Under
Porter's framework, enterprises have four generic strategies available
to them whereby they can attain above average performance.
They are:

a) Cost leadership;
b) Differentiation;
c) Cost focus; And
d) Focused differentiation.

Porter's representation of them is indicated below

According to Porter, competitive advantage grows out of the way an

enterprise organizes and performs discrete activities. The operations of
any enterprise can be divided into a series of activities such as
salespeople making sales calls, service technicians performing repairs,
scientists in the laboratory designing products or processes, and
treasurers raising capital. By performing these activities, enterprises
create value for their customers.

The ultimate value an enterprise creates is measured by the amount

customers are willing to pay for its product or services. A firm is
profitable if this value exceeds the collective cost of performing all of
the required activities. To gain competitive advantage over its rivals, a
firm must either provide comparable value to the customer, but
perform activities more efficiently than its competitors (lower cost), or

- 34 -
perform activities in a unique way that creates greater buyer value and
commands a premium price (differentiation). As per Borden 1964,
quoted in Wiseman 1988many differentiation bases can be classified
as 4 P’s as given below:

1. Product (quality, features, options, style, brand name, packaging,

sizes, services, warranties, returns) ;
2. Price (list, discounts, allowances, payment period, credit terms) ;
3. Place (channels, coverage, locations, inventory, transport) ; And
4. Promotion (advertising, personal selling, sales promotion, publicity).

The various attributes listed above can be sharpened the firms product
by the support of a suitable information technology.

- 35 -
3. Compare various types of development aspect of
Information System? Explain the various stages of SDLC?

Development of Information Systems

a) Development and Implementation of the MIS

Once the plan of MIS is made, the development of the MIS calls for
determining the strategy of development. As discussed earlier, the
plan consists of various systems and subsystems. The development
strategy determines where to begin and in what sequence the
development can take place with the sole objective of assuring the
information support. The choice of the system or the subsystem
depends on its position in the total MIS plan, the size of the system,
the user's understanding of the systems and the complexity and its
interface with other systems. The designer first develops systems
independently and starts integrating them with other systems,
enlarging the system scope and meeting the varying information
needs. Determining the position of the system in the MIS is easy. The
real problem is the degree of structure, and formalization in the
system and procedures which determine the timing and duration of
development of the system. Higher the degree of structuredness and
formalization, greater is the stabilization of the rules, the procedures,
decision making and the understanding of the overall business activity.
Here, it is observed that the user's and the designer's interaction is
smooth, and their needs are clearly understood and respected
mutually. The development becomes a method of approach with
certainty in input process and outputs.

b) Prototype Approach

When the system is complex, the development strategy is Prototyping

of the System. Prototyping is a process of progressively ascertaining
the information needs, developing methodology, trying it out on a
smaller scale with respect to the data and the complexity, ensuring
that it satisfies the needs of the users, and assess the problems of
development and implementation. This process, therefore, identifies
the problem areas, inadequacies in the prototype visàvis Fulfillment of
the information needs. The designer then takes steps to remove the
inadequacies. This may call upon changing the prototype of the
system, questioning the information needs, streamlining the
operational systems and procedures and move user interaction. In the
prototyping approach, the designer's task becomes difficult, when
there are multiple users of the same system and the inputs they use

- 36 -
are used by some other users as well. For example, a lot of input data
comes from the purchase department, which is used in accounts and
inventory management. The attitudes of various users and their role as
the originators of the data need to be developed with a high degree of
positivism. It requires, of all personnel, to appreciate that the
information is a corporate resource, and all have to contribute as per
the designated role by the designer to fulfill the corporate information
needs. When it comes to information the functional, the departmental,
the personal boundaries do not exist. This calls upon each individual to
comply with the design needs and provide without fail the necessary
data inputs whenever required as per the specification discussed and
finalised by the designer. Bringing the multiple users on the same
platform and changing their attitudes toward information, as a
corporate resource, is the managerial task of the system designer. The
qualification, experience, knowledge, of the state of art, and an
understanding of the corporate business, helps considerably, in
overcoming the problem of changing the attitudes of the multiple users
and the originators of the data.

c) Life Cycle Approach

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

- 37 -
Examples of such systems are pay roll, share accounting, basic
financial accounting, finished goods accounting and dispatching, order
processing, and so on. These systems have a fairly long duration of
survival and they contribute in a big way as sources of data to the
Corporate MIS. Therefore, their role is important and needs to be
designed from the view point as an interface to the Corporate MIS.

Table below shows the difference between the two approaches helping
the designer select an approach.

d) Implementation of the Management Information System

- 38 -
The implementation of the system is a management process. It brings
about organizational change; it affects people and changes their work
style. The process evokes a behavior response which could be either
favorable or unfavorable depending upon the strategy of system
implementation. In the process of implementation, the system
designer acts as a change agent or a catalyst.
For a successful implementation he has to handle the human factors
carefully. The user of the system has a certain fear complex when a
certain cultural work change is occurring. The first and the foremost
fear is about the security to the person if the changeover from the old
to new is not a smooth one. Care has to be taken to assure the user
that such fears are baseless and the responsibility, therefore, rests
with the designer. The second fear is about the role played by the
person in the organization and how the change affects him. On many
occasions, the new role may reduce his importance in the organization,
the work design may make the new job impersonal, and a fear
complex may get reinforced that the career prospects may be
affected. There are certain guidelines for the systems designer for
successful implementation of the system. The system designer should
not question beyond a limit the information need of the user.

1. Not to forget that his role is to offer a service and not to demand
terms.

2. Remember that the system design is for the use of the user and it is
not the designer's prerogative to dictate the design features. In short,
the designer should respect the demands of the user.

3. Not to mix up technical needs with the information needs. He should

try to develop suitable design with appropriate technology to meet the
information needs. The designer should not recommend modifications
of the needs, unless technically infeasible.
4. Impress upon the user the global nature of the system design which
is required to meet the current and prospective information need.

5. Not to challenge the application of the information in decision

making. It is the sole right of the user to use the information the way
he thinks proper.

6. Impress upon the user that the quality of information depends on

the quality of input.

7. Impress upon the user that you are one of the users in the
organization and that the information is a corporate resource and he is
expected to contribute to the development of the MIS.

- 39 -
8. Ensure that the user makes commitment to all the requirements of
the system design specifications. Ensure that he appreciates that his
commitments contribute largely to the quality of the information and
successful implementation of the system.

9. Ensure that the overall system effort has the management's

acceptance.
10. Enlist the user's participation from time to time, so that he is
emotionally involved in the process of development.

11. Realize that through serving the user, he is his best guide on the
complex path of development.

12. Not to expect perfect understanding and knowledge from the user
as he may be the user of a Non computerized system. Hence, the
designer should be prepared to change the system specifications or
even the design during the course of development.

13. Impress upon the user that the change, which is easily possible in
manual system, is not as easy in the computer system as it calls for
changes in the programs at cost.

14. Impress upon the user that perfect information is nonexistent; His
role therefore still has an importance in the organization.

15. Ensure that the other organization problems are resolved first
before the MIS is taken for development. 16. Conduct periodical user
meetings on systems where you get the opportunity to know the
ongoing difficulties of the users.

16. Train the user in computer appreciation and systems analysis as

his perception of the computerized information system will fall short of
the designer's expectation. Implementation of the MIS in an
organization is a process where organizational transformation takes
place. This change can occur in a number of ways.

The Lewin's model suggests three steps in this process. The first step
is unfreezing the organization to make the people more receptive and
interested in the change. The second step is choosing a Course of
action where the process begins and reaches the desired level of
stability, and the third step is Refreezing, where the change is
consolidated and equilibrium is reinforced. Many a times,

This process is implemented through an external change agent, such

as a consultant playing the role of a catalyst. The significant problem in
this task is the resistance to change. The resistance can occur due to

- 40 -
three reasons, viz., the factors internal to the users of information, the
factors inherent in the design of the system and the factors arising out
of the interaction between the system and its users. The problem of
resistance can be handled through education, persuasion, and
participation. This itself can be achieved by improving the human
factors, and providing incentives to the users, and eliminating the
organizational problems before implementing the system.

SDLC

System development cycle stages are sometimes known as system

study. System concepts which are important in developing business
information systems expedite problem solving and improve the quality
of decision making.

The system analyst has to do a lot in this connection. They are

confronted with the challenging task of creating new systems and
planning major changes in the organization. The system analyst gives
a system development project, meaning and direction. The typical
breakdown of an information systems life cycle includes a feasibility
study, requirements, collection and analysis, design, prototyping,
implementation, validation, testing and operation. It may be
represented in the form of a block diagram as shown below:

a) Feasibility study It is concerned with determining the cost

effectiveness of various alternatives in the designs of the information
system and the priorities among the various system components.

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b) Requirements, collection and analysis It is concerned with
understanding the mission of the information systems, that is, the
application areas of the system within the enterprise and the problems
that the system should solve.

c) Design It is concerned with the specification of the information

systems structure. There are two types of design: database design and
application design. The database design is the design of the database
design and the application design is the design of the application
programs.

d) Prototyping A prototype is a simplified implementation that is

produced in order to verify in practice that the previous phases of the
design were well conducted.

e) Implementation It is concerned with the programming of the final

operational version of the information system. Implementation
alternatives are carefully verifies and compared.

f) Validation and testing It is the process of assuring that each

phase of the development process is of acceptable quality and is an
accurate transformation from the previous phase.

4. Compare & Contrast E-enterprise business model with

traditional business organization model? Explain how in E-
enterprise manager role & responsibilities are changed?
Explain how manager is a knowledge worker in E-enterprise?

Ans:-

Managing the E enterprise

Due to Internet capabilities and web technology, traditional business

organization definition has undergone a change where scope of the
enterprise now includes other company locations, business partners,
customers and vendors. It has no geographic boundaries as it can
extend its operations where Internet works. All this is possible due to
Internet and web moving traditional paper driven organization to
information driven Internet enabled E business enterprise. E business
enterprise is open twenty four hours, and being independent,
managers, vendors; customers transact business anytime from
anywhere. Internet capabilities have given E business enterprise a
cutting edge capability advantage to increase the business value. It
has opened new channels of business as buying and selling can be
done on Internet. It enables to reach new markets across the world
anywhere due to communication capabilities. It has empowered

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customers and vendors / suppliers through secured access to
information to act, wherever necessary. The cost of business
operations has come down significantly due to the elimination of paper
driven processes, faster communication and effective collaborative
working. The effect of these radical changes is the reduction in
administrative and management overheads, reduction in inventory,
faster delivery of goods and services to the customers.

In E business enterprise traditional people organization based on

'Command Control' principle is absent. It is replaced by people
organization that is empowered by information and knowledge to
perform their role. They are supported by information systems,
application packages, and decision support systems. It is no longer
functional, product, and project or matrix organization of people but E
organization where people work in network environment as a team or
work group in virtual mode. E business enterprise is more process
driven; Technology enabled and uses its own information and
knowledge to perform. It is lean in number, flat in structure, broad in
scope and a learning organization.

In E business enterprise, most of the things are electronic, use digital

technologies and work on databases, knowledge bases, directories and
document repositories. The business processes are conducted through
enterprise software like ERP, SCM, and CRM supported by data
warehouse, decision support, and knowledge management systems.
Today most of the business organizations are using Internet
technology, network, and wireless technology for improving the
business performance measured in terms of cost, efficiency,
competitiveness and profitability. They are using E business,

Ecommerce

Solutions to reach faraway locations to deliver product and services.

The enterprise solutions like ERP, SCM, and CRM run on Internet
(Internet / Extranet) & Wide Area Network (WAN). The business
processes across the organization and outside run on E technology
platform using digital technology. Hence today's business firm is also
called E enterprise or Digital firm. The paradigm shift to E enterprise
Has brought four transformations, namely:

• Domestic business to global business.

• Industrial manufacturing economy to knowledge based service
economy.
• Enterprise Resource Management to Enterprise Network
Management.

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• Manual document driven business process to paperless, automated,
electronically transacted business process.

These transformations have made conventional organization design

obsolete. The basis of conventional organization design is command &
control which is now collaborates & control. This Change has affected
the organization structure, scope of operations, reporting mechanisms,
work practices, workflows, and business processes at large. The
comparison between conventional Organization design and E
enterprise is summarized in Table

Comparison between Conventional Design and E Organization

In E enterprise, business is conducted electronically. Buyers and sellers

through Internet drive the market and Internet based web systems.
Buying and selling is possible on Internet. Books, CDs, computer, white
goods and many such goods are bought and sold on Internet. The new
channel of business is well known
as Ecommerce. On the same lines, banking, insurance, healthcare are
being managed through Internet E banking, E billing, E audit, & use of
Credit cards, Smart card, ATM, E money are the examples of the
Ecommerce application. The digital firm, which uses Internet and web
technology and uses E business And Ecommerce solutions, is a reality
and is going to increase in number. MIS for E business is different
compared to conventional MIS design of an organization. The role of
MIS in E business organization is to deal with changes in global market
and enterprises. MIS produces more knowledge based products.

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Knowledge management system is formally recognized as a part of
MIS. It is effectively used for strategic planning for survival and growth,
increase in profit and productivity and so on. To achieve the said
benefits of E business organization, it is necessary to redesign the
organization to realize the benefits of digital firm. The organization
structure should be lean and flat. Get rid of rigid established
infrastructure such as branch office or zonal office. Allow people to
work from anywhere. Automate processes after reengineering the
process to cut down process cycle time. Make use of groupware
technology on Internet platform for faster response processing.
Another challenge is to convert domestic process design to work for
international process, where integration of multinational information
systems using different communication standards, country specific
accounting practices, and laws of security are to be adhered strictly.
Internet and networking technology has thrown another challenge to
enlarge the scope of Organization where customers and vendors
become part of the organization. This technology offers a solution to
communicate, coordinate, and collaborate with customers, vendors
and business partners. This is just not a technical change in business
operations but a cultural change in the mindset of managers and
workers to look beyond the conventional organization. It means
changing the organization behavior to take competitive advantage of
the E business technology.

The last but not the least important is the challenge to organize and
implement information architecture and information technology
platforms, considering multiple locations and multiple information
needs arising due to global operations of the business into a
comprehensive MIS.

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5. What do you understand by service level Agreements
(SLAs)? Why are they needed? What is the role of CIO in
drafting these? Explain the various security hazards faced by
an IS?

Ans:-

A service level agreement (frequently abbreviated as SLA) is a part

of a service contract where the level of service is formally defined. In
practice, the term SLA is sometimes used to refer to the contracted
delivery time (of the service) or performance. As an example, internet
service providers will commonly include service level agreements
within the terms of their contracts with customers to define the level(s)
of service being sold in plain language terms (typically the (SLA) will in
this case have a technical definition in terms of MTTF, MTTR, various
data rates, etc.)

A service level agreement (SLA) is a negotiated agreement between

two parties where one is the customer and the other is the service
provider. This can be a legally binding formal or informal "contract"
(see internal department relationships). Contracts between the service
provider and other third parties are often (incorrectly) called SLAs — as
the level of service has been set by the (principal) customer, there can
be no "agreement" between third parties (these agreements are
simply a "contract"). Operating Level Agreements or OLA(s), however,
may be used by internal groups to support SLA(s).

The SLA records a common understanding about services, priorities,

responsibilities, guarantees, and warranties. Each area of service
scope should have the "level of service" defined. The SLA may specify
the levels of availability, serviceability, performance, operation, or
other attributes of the service, such as billing. The "level of service"
can also be specified as "target" and "minimum," which allows
customers to be informed what to expect (the minimum), whilst
providing a measurable (average) target value that shows the level of
organization performance. In some contracts, penalties may be agreed
upon in the case of non-compliance of the SLA (but see "internal"

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customers below). It is important to note that the "agreement" relates
to the services the customer receives, and not how the service
provider delivers that service.

SLAs have been used since late 1980s by fixed line telecom operators
as part of their contracts with their corporate customers. This practice
has spread such that now it is common for a customer to engage a
service provider by including a service-level agreement in a wide range
of service contracts in practically all industries and markets. Internal
departments (such as IT, HR, and Real Estate) in larger organization
have adopted the idea of using service-level agreements with their
"internal" customers — users in other departments within the same
organization. One benefit of this can be to enable the quality of service
to be benchmarked with that agreed to across multiple locations or
between different business units. This internal benchmarking can also
be used to market test and provide a value comparison between an in-
house department and an external service provider.

Service-level agreements are, by their nature, "output" based — the

result of the service as received by the customer is the subject of the
"agreement." The (expert) service provider can demonstrate their
value by organizing themselves with ingenuity, capability, and
knowledge to deliver the service required, perhaps in an innovative
way. Organizations can also specify the way the service is to be
delivered, through a specification (a service-level specification) and
using subordinate "objectives" other than those related to the level of
service. This type of agreement is known as an "input" SLA. This latter
type of requirement is becoming obsolete as organizations become
more demanding and shift the delivery methodology risk on to the
service provider.

Role of CIO in drafting SLA’S

One of the major responsibilities of the CIO is to establish the

credibility of the systems organization. The systems department
should not only focus on providing better service to the various lines of
business but also help businesses operate better. If the CIO wants to
be taken seriously, he needs to do what other executives do and have
his own business metrics and performance measurements, so that he
can effectively measure his internal business performance. Other
business departments have them, but CIOs generally do not because IT
has always been viewed as a cost center. Measurements in IT tend to
be vague and lacking in context. For example, 'I had 14 projects last
year, and I did them well.' But there is no real business measurement
there. How many projects should the manager have had? Did he really
have the capacity to handle 14 projects? A CIO should explore running

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their area more like a service operation rather than a cost center, and
develop metrics that track the performance of the information systems
staff, as well as the equipment comprising the applications,
infrastructure, and networks under the CIO's control. The first step,
they say, is to implement service level agreements (SLAs) with
business units. It sets the expectation on the technical areas of the
CIO's operations. At a minimum, they should set up what is expected
and what levels of service the equipment will provide. The underlying
SLAs should be some sort of a chargeback system with business units,
particularly when it comes to apportioning staff time. If information
systems are now providing a service, the staff needs to understand
where the service is being used to be properly remunerated or to
demonstrate where the value is.

The second part of the IT operations equation is computer equipment,

and CIOs must have a firm handle on how that equipment is being
used. There are software’s to help with the people picture, and there
are other products that can monitor hardware performance, such as
network and server uptime. One of the major roles of the CIO is to
make the organization information systems savvy and increase the
technological maturity of the information systems organization. A
major part of the CIO's job is to make the users aware of the
opportunities arising as a result of technical innovations, how this can
help them perform better, and familiarizing them with computers and
information systems applications. The information systems
management also has the job of helping the end users adapt to the
changes caused by information systems, and to encourage their use.
Finally, CIOs need to institute life cycle management with their
applications and computer equipment. Most IT organizations do not
have any idea of the life cycle of an application – how long they want it
to last, and when it needs to be refurbished, replaced, or disposed of.
Lacking this knowledge, it is easy for applications to linger long after
they should be gone, and for companies to spend far too much money
on maintaining ailing applications.

Security Hazards faced by an Information system:

Security of the information system can be broken because of the

following reasons:

i) Malfunctions: In this type of security hazard, all the components of

a system are involved. People, software and hardware errors course
the biggest problem. More dangerous are the problems which are
created by human beings due to the omission, neglect and
incompetence.

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ii) Fraud and unauthorized access: This hazard is due to
dishonesty, cheating or deceit. This can be done through –

a) Infiltration and industrial espionage

b) Tapping data from communication lines
c) Unauthorized browsing through lines by online terminals, etc.

iii) Power and communication failure: In some locations they are

the most frequent hazards than any other else because availability of
both of them depends upon the location. Sometimes communication
channel are busy or noisy. There are power cuts and sometimes high
voltage serge destroys a sensitive component of the computer.

iv) Fire hazard: it can happen because of electrical short circuits,

flammable liquids etc.

v) Sabotage and riots: sometimes the employees destroy the

computer centre in case of strike, lockout or there may be chances of
riots in the area.

vi) Natural Disasters: Natural disasters are not controllable. They are
not frequent hazards but if they happen they destroy the things or ruin
them. Examples are earthquake, floods, tornadoes and lightening.

vii) General hazards: this category covers many more hazards which
are not covered anywhere and difficult to define and come
spontaneously.

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6. Case Study: Information system in a restaurant.

Case Summary:

A waiter takes an order at a table, and then enters it online via one of
the six terminals located in the restaurant dining room. The order is
routed to a printer in the appropriate preparation area: the cold item
printer if it is a salad, the hot-item printer if it is a hot sandwich or the
bar printer if it is a drink. A customer’s meal check-listing (bill) the
items ordered and the respective prices are automatically generated.
This ordering system eliminates the old three-carbon-copy guest check
system as well as any problems caused by a waiter’s handwriting.
When the kitchen runs out of a food item, the cooks send out an ‘out of
stock’ message, which will be displayed on the dining room terminals
when waiters try to order that item. This gives the waiters faster
feedback, enabling them to give better service to the customers. Other
system features aid management in the planning and control of their
restaurant business. The system provides up-to-the-minute information
on the food items ordered and breaks out percentages showing sales
of each item versus total sales. This helps management plan menus
according to customers’ tastes. The system also compares the weekly
sales totals versus food costs, allowing planning for tighter cost
controls. In addition, whenever an order is voided, the reasons for the
void are keyed in. This may help later in management decisions,
especially if the voids consistently related to food or service.
Acceptance of the system by the users is exceptionally high since the
waiters and waitresses were involved in the selection and design
process. All potential users were asked to give their impressions and
ideas about the various systems available before one was chosen.

Questions to be analysed:

1. In the light of the system, describe the decisions to be made in the

area of strategic planning, managerial control and operational control?
What information would you require to make such decisions?
2. What would make the system a more complete MIS rather than just
doing transaction processing?
3. Explain the probable effects that making the system more formal
would have on the customers and the management.

Solution:
1. A management information system (MIS) is an organized
combination of people, hardware, communication networks and data

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sources that collects, transforms and distributes information in an
organization. An MIS helps decision making by providing timely,
relevant and accurate information to managers. The physical
components of an MIS include hardware, software, database, personnel
and procedures.

Management information is an important input for efficient

performance of various managerial functions at different organization
levels. The information system facilitates decision making.
Management functions include planning, controlling and decision
making. Decision making is the core of management and aims at
selecting the best alternative to achieve an objective. The decisions
may be strategic, tactical or technical. Strategic decisions are
characterized by uncertainty. They are future oriented and relate
directly to planning activity. Tactical decisions cover both planning and
controlling. Technical decisions pertain to implementation of specific
tasks through appropriate technology. Sales region analysis, cost
analysis, annual budgeting, and relocation analysis are examples of
decision-support systems and management information systems.

There are 3 areas in the organization. They are strategic, managerial

and operational control.

Strategic decisions are characterized by uncertainty. The decisions to

be made in the area of strategic planning are future oriented and
relate directly to planning activity. Here basically planning for future
that is budgets, target markets, policies, objectives etc. is done. This is
basically a top level where up-to-the minute information on the food
items ordered and breaks out percentages showing sales of each item
versus total sales is provided. The top level where strategic planning is
done compares the weekly sales totals versus food costs, allowing
planning for tighter cost controls. Executive support systems function
at the strategic level, support unstructured decision making, and use
advanced graphics and communications. Examples of executive
support systems include sales trend forecasting, budget forecasting,
operating plan development, budget forecasting, profit planning, and
manpower planning.

The decisions to be made in the area of managerial control are largely

dependent upon the information available to the decision makers. It is
basically a middle level where planning of menus is done and
whenever an order is voided, the reasons for the void are keyed in
which later helps in management decisions, especially if the voids are
related to food or service. The managerial control that is middle level
also gets customer feedback and is responsible for customer
satisfaction.

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The decisions to be made in the area of operational control pertain to
implementation of specific tasks through appropriate technology. This
is basically a lower level where the waiter takes the order and enters it
online via one of the six terminals located in the restaurant dining
room and the order is routed to a printer in the appropriate preparation
area. The item’s ordered list and the respective prices are
automatically generated. The cooks send ‘out of stock’ message when
the kitchen runs out of a food item, which is basically displayed on the
dining room terminals when waiter tries to order that item. This
basically gives the waiters faster feedback, enabling them to give
better service to the customers. Transaction processing systems
function at the operational level of the organization. Examples of
transaction processing systems include order tracking, order
processing, machine control, plant scheduling, compensation, and
securities trading.

The information required to make such decision must be such that it

highlights the trouble spots and shows the interconnections with the
other functions. It must summarize all information relating to the span
of control of the manager. The information required to make these
decisions can be strategic, tactical or operational information.

Advantages of an online computer system:

1. Eliminates carbon copies
2. Waiters’ handwriting issues
3. Out-of-stock message
4. Faster feedback helps waiters to service the customers

Advantages to management:

1. Sales figures and percentages item-wise

2. Helps in planning the menu
3. Cost accounting details

2. If the management provides sufficient incentive for efficiency and

results to their customers, it would make the system a more complete
MIS and so the MIS should support this culture by providing such
information which will aid the promotion of efficiency in the
management services and operational system. It is also necessary to
study the keys to successful Executive Information System (EIS)
development and operation. Decision support systems would also
make the system a complete MIS as it constitutes a class of computer-
based information systems including knowledge-based systems that
support decision-making activities. DSSs serve the management level

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of the organization and help to take decisions, which may be rapidly
changing and not easily specified in advance.

Improving personal efficiency, expediting problem solving (speed up

the progress of problems solving in an organization), facilitating
interpersonal communication, promoting learning and training,
increasing organizational control, generating new evidence in support
of a decision, creating a competitive advantage over competition,
encouraging exploration and discovery on the part of the decision
maker, revealing new approaches to thinking about the problem space
and helping automate the managerial processes would make the
system a complete MIS rather than just doing transaction processing.

3. The management system should be an open system and MIS should

be so designed that it highlights the critical business, operational,
technological and environmental changes to the concerned level in the
management, so that the action can be taken to correct the situation.
To make the system a success, knowledge will have to be formalized
so that machines worldwide have a shared and common understanding
of the information provided. The systems developed will have to be
able to handle enormous amounts of information very fast.

An organization operates in an ever-increasing competitive, global

environment. Operating in a global environment requires an
organization to focus on the efficient execution of its processes,
customer service, and speed to market. To accomplish these goals, the
organization must exchange valuable information across different
functions, levels, and business units. By making the system more
formal, the organization can more efficiently exchange information
among its functional areas, business units, suppliers, and customers.

As the transactions are taking place every day, the system stores all
the data which can be used later on when the hotel is in need of some
financial help from financial institutes or banks. As the inventory is
always entered into the system, any frauds can be easily taken care of
and if anything goes missing then it can be detected through the
system.

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Q1.Providing adequate resources are key to productivity –
comment.

Ans1. Key elements of a Productivity Improvement Program:

1. Obtain Upper Management Support. Without top management

support, experience shows a PIP likely will fail. The Chief Executive
Officer should issue a clear, comprehensive policy statement. The
statement should be communicated to everyone in the company. Top
management also must be willing to allocate adequate resources to
permit success.

2. Create New Organizational Components. A Steering Committee

to oversee the PIP and Productivity Managers to implement it are
essential. The Committee should be staffed by top departmental
executives with the responsibilities of goal setting, guidance, advice,
and general control. The Productivity Managers are responsible for the
day-to-day activities of measurement and analysis. The responsibilities
of all organizational components must be clear and well established.

3. Plan Systematically. Success doesn't just happen. Goals and

objectives should be set, problems targeted and rank ordered,
reporting and monitoring requirements developed, and feedback
channels established.

4. Open Communications. Increasing productivity means changing

the way things are done. Desired changes must be communicated.
Communication should flow up and down the business organization.
Through publications, meetings, and films, employees must be told
what is going on and how they will benefit.

5. Involve Employees. This is a very broad element encompassing

the quality of work life, worker motivation, training, worker attitudes,
job enrichment, quality circles, incentive systems and much more.
Studies show a characteristic of successful, growing businesses is that
they develop a "corporate culture" where employees strongly identify
with and are an important part of company life. This sense of belonging
is not easy to engender. Through basic fairness, employee
involvement, and equitable incentives, the corporate culture and
productivity both can grow.

6. Measure and Analyze. This is the technical key to success for a PIP.
Productivity must be defined, formulas and worksheets developed,
sources of data identified, benchmark studies performed, and
personnel assigned. Measuring productivity can be a highly complex
task. The goal, however, is to keep it as simple as possible without

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distorting and depreciating the data. Measurement is so critical to
success, a more detailed analysis is helpful

Q.2 Compare the following:

a. Traditional Vs. Projectised Organization.

Ans:-

Traditional organisations

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 Projectised organizations
1 They have the formal organization They have teams comprising
structure, with departments, functions, members who are responsible for
sections having a hierarchy of completing one entire deliverable
managers and their assistants. product.

2 All of the managers function on a
continuous basis catering to a series of
requirements issued by the planning
department.
3 An assembly of various units of their
production forms a products and a
variety of such products make up the
business of the company.
4 No particular member or a department
or a team is responsible for the
completion of any particular product.
Their creativity and innovation is in
particular respect of their jobs.
5 Most of the members do not get
exposed to other areas of operations in
the organisation. They become
specialists and insular.
The teams will have all the
resources required to finish the
jobs.
They have a time schedule within
which all the elements of the
projects have to be completed.
There is greater accountability
among team members and
everyone is responsible for the
delivery.
It is found that a sense of
‘ownership’ of the project
motivates team members to be
creative, cooperative among them
to achieve high productivity.

Q3. List out the macro issues in project management and

explain each.

Ans3. The macro issues in project management:

a) Evolving key success factors (KSF) upfront: In order to

provide complete stability to fulfillment of goals, one need to
constantly evaluate from time to time, the consideration of what will
constitute the success of completing a project and assessing its

- 56 -
 success before completion. The KSF should be evolved based on a
basic consensus document (BCD). KSF will also provide an input to
effective exit strategy (EES). Exit here does not mean exit from the
project but from any of the drilled down elemental activities which may
prove to be hurdles rather than contributors.

b) Empowerment Title (ET): ET reflects the relative importance of

members of the organization at three levels.

i) Team members empowered to work within limits of their respective

allocated responsibilities the major change from bureaucratic systems
is an expectation from theses members to innovate and contribute to
tome and cost.

ii) Group leaders are empowered additionally to act independently

towards client expectation and are also vested with some limited
financial powers.

iii) Managers are empowered further to act independently but to

maintain a scientific balance among time, cost, expectation and
perception, apart from being a virtual advisor to the top management.

a)Partnering Decision making (PDM): PDM is a substitute to

monitoring and control a senior with better decision making process
with work closely with the project managers as well as members to
plan what based can be done to manage the future better from past
experience. The key here is the active participation of members in the
decision making process. The ownership is distributed among all
irrespective of levels the term equally should be avoided here since
ownership is not quantifiable. The right feeling of ownership is
important.
The PD process is made scientific through:

• Earned Value management system (EVMS)

• Budgeted Cost of work scheduled (BCWS)
• Budgeted cost of work performed (BCWP)
• Actual cost of work performed (ACWP)

a) Management by exception (MBE): “No news is good news”. If a

member wants help he or she located a source and proposed to the
manager only if such help is not accessible for free. Similarly a
member should believe that a team leaders silence is a sign of
approval should not provoke comments through excessive seeking of
opinions. In short leave people alone and let situation perform the

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demanding act. The bond limit of MBE can be evolved depending on
the sensitivity of the nature and size of the project.

Q.4 Describe the traits of a professional manager in details?

Ans4. Traits of a professional manager

The following list contains traits you should exemplify if you are a
leader. Reference this list as needed when fulfilling your leadership
responsibilities.

Motivating:

The inner drive that motivates followers to achieve goals is an

important aspect of leadership. You need to possess the ability to

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inspire followers and compel them to reach their goals. Unless you can
motivate them, any attempts to reach goals will fail.

Optimistic:

Demonstrating a good attitude goes a long way toward goal

achievement. If you adopt a positive attitude, you will become a source
of motivation and an asset to the entire team. An optimistic outlook is
contagious-if you are optimistic, your followers will tend to assume the
same attitude, which is beneficial for the group as they strive to reach
goals. Set a solid example for followers by always maintaining a
positive demeanor.

Supportive:

Expressing confidence in your followers' abilities is vital to successful

leadership. Followers will be more committed to accomplishing goals if
they know they have your full support. You should also be willing to
demonstrate support by making personal sacrifices for your followers'
well being. Your followers' needs should always be a top priority. When
you show that you support their needs, your followers will appreciate
your concern and respond with mutual support.

Knowledgeable:

Knowledge is crucial to successful leadership. You need to be

knowledgeable in order to recognize and understand all the
possibilities available in a situation and to make the best possible
decisions. You should also make an effort to continually learn new
information--the more knowledge you possess, the more capable you
will be to make sound decisions.

Flexible:

Being rigid and narrow-minded can be a leader's downfall. If you are

flexible and open to new ideas, followers will feel encouraged to
contribute their expertise. This communication will help you achieve
goals, since others may have suggestions that you had never
considered. Being flexible also requires you to change set courses of
action when needed. You must be able to make modifications to
decisions when necessary, and not merely stick to a set plan of action
for the sake of continuity.

Empowering:

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You must be willing to grant responsibilities to your followers. Followers
appreciate being trusted and will be more motivated to perform well
when given the opportunity to complete tasks on their own. To
successfully empower your followers, you need to accurately assess
their skills and personalities. By understanding the potential of your
followers, you will be able to allot each follower an appropriate amount
of responsibility. Otherwise, you risk assigning tasks that are either too
difficult or too simple for followers to complete.

Trustworthy:

As a leader, you must create a high level of mutual trust with your
followers. You build trust through your actions, by demonstrating
fairness, integrity, and dependability. Without the presence of trust, it
will be difficult to establish the positive leader-follower relationships
necessary for the achievement of goals.

Encourages growth:

A certain level of excellence needs to be established in order to

encourage your followers to improve their performance. Measure the
performance levels of your followers by setting standards that will
drive them to grow professionally.

Efficient:

Since you are responsible for coordinating the efforts of any number of
followers, it is essential that you utilize solid time management skills.
Organization is the key to successfully accomplishing goals in an
allotted amount of time. You will need to organize your own efforts, as
well as those of your followers, to ensure that all tasks are completed
by the set deadlines.
Communicates clearly:

In order to lead successfully, you must maintain an open channel of

communication with your followers. Open communication requires you
to clearly specify your thoughts and concerns, as well as encourage
and recognize feedback from followers. A relationship that fosters open
communication will be beneficial to both you and your followers.
Confusion regarding what is expected from one another will be
minimized, and conflicts will be easier to resolve when they arise.

Fosters relationships:

Being a good leader requires that you develop and utilize strong
interpersonal skills. Treat your followers with respect and courtesy to

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help promote positive interactions. Building a solid relationship with
followers will encourage them to become more comfortable working
with you. Maintaining the leader-follower relationship is critical, since
its status influences the achievement of goals.

Q.5 List the major participants of project review process. Also

highlight roles and responsibilities of each.

Ans5. This Project Review defines a process for conducting a cross-

functional, project-level review of a team's implementation of the
Software Development Life Cycle (SDLC). A Project Review Report
documents learning points for future development teams and SDLC
improvement.

The Software Development Life Cycle and the Project Review

information contained in this document apply to all cross-functional
product development projects.
It may apply to a single project of five to nine team members or a full
cross-functional product line involving 50 to 70 group members.

A commitment of one or two hours for each meeting is needed.

Meetings may be held separately or in parallel as part of a large group
workshop.

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This Project Review Process uses a three-stage model based on a
search for common ground and building a shared vision of the future.
The process stages are:

1) Examine the past to determine what went well and what

could have been better. Everyone votes on the three most
important items in each list.
2) Determine current positive and negative forces. Everyone
votes on top three.
3) Build a shared action plan for future improvements.
Everyone votes on the top three priorities.

The outcome expected of this process is a prioritized list of

improvement actions based on a common vision and a shared
commitment.

The process is designed to (stage one) let go of past difficulties and

build energy from past strengths while (stage two) seeking alignment
with current positive forces for success.

The visioning (stage three) explores new methods, work simplification,

and/or technology opportunities to improve project performance

Project Review
Project Review Meetings provide an opportunity to analyze and
document project successes and difficulties, thereby providing a better
foundation for future development teams. A final review of all
development phases must be completed prior to disbanding of the
team. Each functional unit prepares a summary of learning points
relevant to their functional area, and conducts one or more "public"
meetings to review findings and teach others.

Meeting minutes documenting discussion and summarize learning

points are published within one (1) week after each Project Review
Meeting. A final Project Review Report combines all review meeting
minutes and functional reports into a single document for review by
future teams. Software Development Life Cycle (SDLC) changes will be
submitted to the Process team to initiate changes to the SDLC.

• Scheduling: The Project Review Meeting is part of the lessons

learned and improvement recommendation activity. Despite being
a deliverable late in the product development process, the team is
encouraged to hold one or more Project Review Meetings during
earlier phases of development. The final Project Review Meeting
occurs after the system is operational.

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A meeting announcement memo for each Project Review Meeting will
be distributed to all potential attendees a minimum of two (2) weeks
prior to the meeting

• Responsibility: The responsible executive or designate (usually

the process team leader) will be responsible for scheduling,
moderating, note-taking, meeting minutes, summarizing learning
points, and preparing a final Project Review Report. Team members
and functional representatives may be called upon to lead portions
of the presentation/discussion and may be asked by the responsible
executive to assist in the preparation of meeting minutes or the
final Project Review Report.

Roles and responsibility of project review process

• Program Charter provides an overall vision of the program
goals and objectives to the team members;
• Work Plans lay down detailed schedules of activities,
milestones, and deliverables of the project team, and identifies the
resources available;
• Governance Plan identifies the roles and responsibilities of
each member of the project team;
• Work Breakdown Structure defines the specific deliverables
due from each team member, at each stage of the project;
• Communication Plan establishes the protocol, procedure, and
methods to communicate project information and issues among
members of the team;
• Forms and Templates simplify communication, record-keeping
and reporting;
• Risk Analysis lists out potential problems and chances of
deviance from the project methodology, the probability of such
occurrences, the possible impact, and possible solutions.

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Q.6 ABC organization has been in software business since last
20 years. The senior management feels that although they are
making profits, but the profit on an average is the same each
year. They decide that they would make some additions to the
business and decided to go ahead with development of some
high technology for better profits. Can you suggest some
guidelines, which the management should follow in this
venture?

Ans. Every business aims to commence its activities in the foreign

market. The foreign market provides with both opportunities and risks.
Therefore some prefer to enter in to strategic relationships and one
such is the Joint Ventures.

A Joint Venture is an entity formed between two or more parties to

undertake economic activity together. The JV parties agree to create,
for a finite time, a new entity and new assets by contributing equity.
They then share in the revenues, expenses, and assets and the control
of the enterprise. Therefore the basic characteristics of joint venture
can be summed up as:

1) Based on a Contractual Agreement.

2) Specific limited purpose and duration.
3) Joint Property Interest
4) Common Financial and Intangible goals and objectives.
5) Shared profits, losses, management and control.
Reasons for setting Joint Ventures abroad

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The reasons for setting up joint ventures can be contributed to three
main factors and they are:
1. Internal Reasons.
2. Competitive Goals.
3. Strategic Goals.

1. The Internal reasons are as follows:

• Building on company’s strength.
• Spreading on costs and risks.
• Improving access to financial resources.
• Economies of scale and advantages of size.
• Access to new technologies and customers.
• Access to innovative managerial practices.

2. The Competitive Goals are as follows:

• Influencing structural evolution of the industry.
• Defensive response to blurring industry boundaries.
• Creation of stronger competitive units.
• Speed to market.
• Improved Agility.

3. The Strategic Goals are as follows:

• Diversification
• Synergies.
• Transfer of technology/skill

Indian Joint Ventures Abroad

India started opening its economy a decade ago to integrate with

global economy. The business ventures abroad are not a new
phenomenon in the independent India. The initiatives were taken way
back in the 1960s with the first ventures of Birlas in Ethopia in the year
1964. However, it has assumed specific significance after the Indian
government started economic reforms in the year 1991, making
globalization of Indian business an integral part of economic reforms.

Significance of Indian Joint Ventures Abroad

International trade is considered to be imperative for economic

development. Economic borders of various countries have been
opened on this premise under the aegis of world trade organization. In
countries, whose economy has moved from the level of necessity to
comforts and luxuries levels, there are increasing pressures for newer,
better and superior products with consistent quality, high reliability

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and attractive finish etc. Further, with the labour becoming
increasingly costly, the firms have to go for development of capital
intensive technologies. The huge investments in new product and
technology development demands higher levels of production to
ensure operations of the firms above the breakeven point. The scale of
operations required over a period of time reaches a level that is well
above the entire domestic demand in most of the developed countries,
which generally have small population.

The firms thus face the problem of searching new markets and cheaper
sources of raw material, labour and other resources. Their growth and
development, thus, depends upon internationalization of the business.

Advantages and Disadvantages

A business while deciding upon whether to go for a joint venture
should make a thorough analysis on its business goals.

Advantages
• Financial resources can be shared.
• Allows for Investor diversification.
• Reduces local Friction.
• Reduce Fixed costs per product.
• Direct management of business activities.
• Competitive strengths of two parties can be combined.
• A local JV partner knows the market.
• Economic incentives add value to JVs.

Disadvantages
• JV profits are shared.
• Shared technologies can be used beyond JV.
• Local Management of a JV can be unknown

Broadly there are two schemes under which an Indian Party can set up
a JV abroad, namely the Automatic Route and the Normal
Route/Approval Route.

Automatic Route

Under the Automatic Route, an Indian Party does not require any prior
approval from the Reserve Bank for setting up a JV abroad (in case of
investment in the financial sector, however, prior approval is required
from the concerned regulatory authority both in India and abroad).

The criteria for direct investment under the Automatic Route

are as under:

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 • The total µfinancial commitment of the Indian Party in JVs in any
country other than Nepal, Bhutan and Pakistan is up to 100% of its
net worth and the investment is in a lawful activity permitted by the
host country
• The Indian Party is not on the Reserve Banks exporters caution
list / list of defaulters to the banking system published/ circulated by
the Credit Information Bureau of India Ltd. (CIBIL)/RBI or under
investigation by the Enforcement Directorate or any investigative
agency or regulatory authority;
• The Indian Party routes all the transactions relating to the
investment in a JV through only one branch of an authorized dealer
to be designated by it.

Normal Route

Proposals not covered by the conditions under the automatic route

require the prior clearance of the Reserve Bank for which a specific
application in form ODI with the documents prescribed therein is
required to be made to RBI.
Requests under the normal route are considered by taking into account
inter alias the prima facie viability of the proposal, business track
record of the promoters, experience and expertise of the promoters,
benefits to the country, etc

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