MB-0045 Q.1 Discuss the objective of profit maximization vs wealth maximization .T h e f i n a n c i a l m a n a g e m e n t c o m e a l o n g w a y b y s h i f t i n g i t s f o c u s f r o m t r a d i t i o n a l approach to modernapproach.

The modern approach focuses on wealth maximization rather than profit maximization.Thisgives a longer term horizon for assessment, making way for sustainable performance by businesses.A myopic person or business is mostly concerned aboutshort term benefits. A short term horizon canfulfill objective of earning profit but may not helpin creating wealth. It is because wealth creation needsa longer term horizon Therefore, FinanceManagement or Financial Management emphasizes on wealthmaximization rather thanprofitmaximization.For a business, it is not necessary that profit should be the only objective; it mayconcentrate on various other aspects like increasing sales, capturing more marketshare etc, whichwill take care of profitability. So, we can say thatprofit maximizationis a subset of wealth and being a subset, it will facilitate wealth creationGiving priority to value creation, managers havenow shifted from traditional approach to modernapproach of financial management that focuseson wealth maximization. This leads to better and trueevaluation of business. For e.g., under wealth maximization, more importance is given to cash flowsrather than profitability. As it issaid that profit is a relative term, it can be a figure in some currency, itcan be in percentage etc.For e.g. a profit of say $10,000 cannot be judged as good or bad for a business,till it is comparedwith investment, sales etc. Similarly, duration of earning the profit is also importanti.e. whether it is earned in short term or long term.In wealth maximization, major emphasizes is on cashflows rather than profit. So, to evaluate variousalternatives for decision making, cash flows aretaken under consideration. For e.g. to measure theworthof a project, criteria like: present valueof its cash inflow present value of cash outflows (netpresent value) is taken. Thisapproach considers cash flows rather than profits into consideration andalso use discountingtechnique to find out worth of a project. Thus, maximization of wealth approachbelieves thatmoney has time value.An obvious question that arises now is that how can we measure wealth.Well, a basic principle is thatultimately wealth maximization should be discovered in increasednet worth or value of business. So, tomeasure the same, value of business is said to be a functionof two factors - earnings per share andcapitalization rate. And it can be measured by adoptingfollowing relation:Value of business = EPS / Capitalization rateAt times, wealth maximizationmay create conflict, known as agency problem. This describes conflictbetween the owners andmanagers of firm. As, managers are the agents

appointed by owners, a strategicinvestor or theowner of the firm would be majorly concerned about the longer term performance of thebusinessthat can lead to maximization of shareholders wealth. Whereas, a manager might focus ontakingsuch decisions that can bring quick result, so that he/she can get credit for good performance.However, in course of fulfilling the same, a manager might opt for risky decisions which can puton stake the owners objectives.Hence, a manager should align his/her objective to broadobjective of organization and achieve atradeoff between risk and return while making decision;keeping in mind the ultimate goal of financial management i.e. to maximize the wealth of itscurrent shareholdershe objections are:-(i) Profit cannot be ascertained well in advance to expressthe probability of return as future isuncertain. It is not at possible to maximize what cannot beknown.(ii) The executive or the decision maker may not have enough confidence in the estimatesof future returns so that he does not attempt future to maximize. It is argued that firm's goalcannotbe to maximize profits but to attain a certain level or rate of profit holding certain share of themarket or certain level of sales. Firms should try to 'satisfy' rather than to 'maximize'(iii There must be a balance between expected return and risk. The possibility of higher expectedyields are associated with greater risk to recognise such a balance and wealthMaximization isbrought in to the analysis. In such cases, higher capitalisation rate involves. Suchcombination of expected returns with risk variations and related capitalisation rate cannot beconsidered in theconcept of profit maximization.(iv) The goal of Maximization of profits isconsidered to be a narrow outlook. Evidentlywhen profit maximization becomes the basis of financial decisions of the concern, it ignoresthe interests of the community on the one hand andthat of the government, workers andother concerned persons in the enterprise on the other hand.Keeping the above objections in view, most of the thinkers on the subject have come totheconclusion that the aim of an enterprise should be wealth Maximization and not the profitMaximization. Prof. Soloman of Stanford University has handled the issued very logically.Heargues that it is useful to make a distinction between profit and 'profitability'. Maximizationof profits with a vie to maximising the wealth of shareholders is clearly an unreal motive. Ontheother hand, profitability Maximization with a view to using resources to yield economicvalueshigher than the joint values of inputs required is a useful goal. Thus the proper goal of financialmanagement is wealth maximization. Q2. Explain the Net operating approach to capital structure. Ans.

net operating income approach examines the effects of changes in capital structure in termsof net operating income. In the net income approach discussed above net income available toshareholders is obtained by deducting interest on debentures form net operating income. Thenoverall value of the firm is calculated through capitalization rate of equities obtained on the basisof net operating income, it is called net income approach. In the second approach, on the other hand overall value of the firm is assessed on the basis of net operating income not on the basis of net income. Hence this second approach is known as net operating income approach.The NOI approach implies that (i) whatever may be the change in capital structure the overallvalue of the firm is not affected. Thus the overall value of the firm is independent of the degreeof leverage in capital structure. (ii) Similarly the overall cost of capital is not affected by anychange in the degree of leverage in capital structure. The overall cost of capital is independent of leverage.If the cost of debt is less than that of equity capital the overall cost of capital must decrease withthe increase in debts whereas it is assumed under this method that overall cost of capital isunaffected and hence it remains constant irrespective of the change in the ratio of debts to equitycapital. How can this assumption be justified? The advocates of this method are of the opinionthat the degree of risk of business increases with the increase in the amount of debts.Consequently the rate of equity over investment in equity shares thus on the one hand cost of capital decreases with the increase in the volume of debts; on the other hand cost of equitycapital increases to the same extent. Hence the benefit of leverage is wiped out and overall costof capital remains at the same level as before. Let us illustrate this point. If follows that with the increase in debts rate of equity capitalization also increases andconsequently the overall cost of capital remains constant; it does not decline.To put the same in other words there are two parts of the cost of capital. One is the explicit costwhich is expressed in terms of interest charges on debentures. The other is implicit cost whichrefers to the increase in the rate of equity capitalization resulting from the increase in risk of business due to higher level of debts. Optimum capital structure This approach suggests that whatever may be the degree of leverage the market value of the firmremains constant. In spite of the change in the ratio of debts to equity the market value of itsequity shares remains constant. This means there does not exist a optimum capital structure.Every capital structure is optimum according to net operating income approach.

Q.3 What do you understand by operating cycle. Ans. An operating cycle is the length of time between the acquisition of inventoryand the saleof that inventory and subsequent generation of a profit. The shorter the operating cycle, the faster a business gets areturn on investment(ROI) for the inventory it stocks. As a general rule,companies want to keep their operating cycles short for a number of reasons, but in certainindustries, a long operating cycle is actually the norm. Operating cycles are not tied toaccounting periods, but are rather calculated in terms of how long goods sit in inventory beforesale.When a business buys inventory, it ties up money in the inventory until it can be sold. Thismoney may be borrowed or paid up front, but in either case, once the business has purchasedinventory, those funds are not available for other uses. The business views this as an acceptabletradeoff because the inventory is an investment that will hopefully generate returns, but keepingthe operating cycle short is still a goal for most businesses so they can keep their liquidity high.Keeping inventory during a long operating cycle does not just tie up funds. Inventory must bestored and this can become costly, especially with items that require special handling, such ashumiditycontrols or security. Furthermore, inventory can depreciate if it is kept in a store toolong. In the case of perishable goods, it can even be rendered unsalable. Inventory must also beinsured and managed by staff members who need to be paid, and this adds to overalloperatingexpenses.There are cases where a long operating cycle in unavoidable. Wineries and distilleries, for example, keep inventory on hand for years before it is sold, because of the nature of the business.In these industries, the return on investment happens in the long term, rather than the short term.Such companies are usually structured in a way that allows them to borrow against existinginventory or land if funds are needed tofinanceshort-term operations.Operating cycles can fluctuate. During periods of economic stagnation, inventory tends to sitaround longer, while periods of growth may be marked by more rapid turnover. Certain products can be consistent sellers that move in and out of inventory quickly. Others, like big ticket items,may be purchased less frequently. All of these issues must be accounted for when makingdecisions about ordering and pricing items for inventory. Q.4 What is the implication of operating leverage for a firm. Ans.Operating leverage:

Operating leverage is the extent to which a firm uses fixed costs in producing its goods or offering its services. Fixed costs includeadvertisingexpenses,administrative costs, equipment and technology, depreciation, and taxes, but not interest on debt,which is part of financial leverage. By using fixed production costs, a company can increase its profits. If a company has a large percentage of fixed costs, it has a high degree of operatingleverage. Automated and high-tech companies, utility companies, and airlines generally havehigh degrees of operating leverage.As an illustration of operating leverage, assume two firms, A and B, produce and sell widgets.Firm A uses a highly automated production process with robotic machines, whereas firm Bassembles the widgets using primarily semiskilled labor. Table 1 shows both firms operatingcost structures.Highly automated firm A has fixed costs of $35,000 per year and variable costs of only $1.00 per unit, whereas labor-intensive firm B has fixed costs of only $15,000 per year, but its variablecost per unit is much higher at $3.00 per unit. Both firms produce and sell 10,000 widgets per year at a price of $5.00 per widget.Firm A has a higher amount of operating leverage because of its higher fixed costs, but firm Aalso has a higher breakeven pointthe point at which total costs equal total sales. Nevertheless,a change of I percent in sales causes more than a I percent change in operating profits for firm A, but not for firm B. The degree of operating leverage measures this effect. The followingsimplified equation demonstrates the type of equation used to compute the degree of operatingleverage, although to calculate this figure the equation would require several additional factorssuch as the quantity produced, variable cost per unit, and the price per unit, which are used todetermine changes in profits and sales:Operating leverage is a double-edged sword, however. If firm As sales decrease by I percent, its profits will decrease by more than I percent, too. Hence, the degree of operating leverage showsthe responsiveness of profits to a given change in sales. Implications: Total risk can be divided into two parts: business risk and financial risk. Businessrisk refers to the stability of a companys assets if it uses no debt or preferred stock financing.Business risk stems from the unpredictable nature of doing business, i.e., the unpredictability of consumer demand for products and services. As a result, it also involves the uncertainty of long-term profitability. When a company uses debt or preferred stock financing, additional risk financial riskis placed on the companys common shareholders. They demand a higher expected return for assuming this additional risk, which in turn, raises a companys costs.Consequently, companies with high degrees of

business risk tend to be financed with relativelylow amounts of debt. The opposite also holds: companies with low amounts of business risk canafford to use more debt financing while keeping total risk at tolerable levels. Moreover, usingdebt as leverage is a successful tool during periods of inflation. Debt fails, however, to provideleverage during periods of deflation, such as the period during the late 1990s brought on by theAsian financial crisis.

MB-46

Q.1 What is product mix? What are the strategies involved in product mixand product line? (10 marks) Answer Product mixThe number of individual products produced or sold by an organization. Themix is defined by the industry and manufacturing environment, andmanagement strategies that position the company as a specialty, niche or broad- based supplier of goods and services. Instances where the product mix varieswidely from period to period often requires more investment in facilities andinventory, and may result in lower levels of customer service.It is extremely important for any organization to have a well-managed productmix. Most organizations break down managing the product mix, product line,and actual product into three different levels.Strategies involved in product mix and product lineProduct-mix decisions are concerned with the combination of product linesoffered by the company. Management of the companies' product mix is theresponsibility of top management.Some basic product-mix decisions include:1.reviewing the mix of existing product lines;2.adding new lines to and deleting existing lines from the product mix;3.determining the relative emphasis on new versus existing product lines in themix;4.determining the appropriate emphasis on internal development versus externalacquisition in the product mix;5.gauging the effects of adding or deleting a product line in relationship to other lines in the product mix; and6.forecasting the effects of future external change on the company's productmix.Product-line decisions are concerned with the combination of individual products offered within a given line. The productline manager supervisesseveral product managers who are responsible for individual products in theline. Decisions about a product line are usually incorporated into a marketing plan at the

divisional level. Such a plan specifies changes in the product linesand allocations to products in each line. Generally, product-line managers have the following responsibilities:1.considering expansion of a given product line;2.considering candidates for deletion from the product line;3.evaluating the effects of product additions and deletions on the profitability of other items in the line; and4.allocating resources to individual products in the line on the basis of marketing strategies recommended by product managers.Decisions at the first level of product management involve the marketing mixfor an individual brand/product. These decisions are the responsibility of a brand manager (sometimes called a product manager). Decisions regarding themarketing mix for a brand are represented in the product's marketing plan. The plan for a new brand would specify price level, advertising expenditures for thecoming year, coupons, trade discounts, distribution facilities, and a five-year statement of projected sales and earnings. The plan for an existing productwould focus on any changes in the marketing strategy. Some of these changesmight include the product's target market, advertising and promotionalexpenditures, product characteristics, price level, and recommended distributionstrategyManaging the product mix for a company is very demanding and requiresconstant attention. Top management must provide accurate and timely analysis(BCG) of their company's product mix so the appropriate adjustments can bemade to the product line and individual products. Q.2 What is a distribution channel? Explain the factors to be consideredwhile setting up a distribution channel. (10 marks) Answer Distribution channelA path through which goods and services flow in one direction (from vendor tothe consumer), and the payments generated by them that flow in the oppositedirection (from consumer to the vendor).A marketing channel can be as short as being direct from the vendor to theconsumer or may include several interconnected intermediaries such aswholesalers, distributors, agents, retailers. Each intermediary receives the itemat one pricing point and moves it to the next higher pricing point until it reachesthe final buyer. Also called channel of distribution or marketing channel. Distribution is also a very important component of Logistics & Supply chainmanagement. Distribution in supply chain management refers to the distributionof a good from one business to another. It can be factory to supplier, supplier toretailer, or retailer to end customer. It is defined as a chain of intermediaries,each passing the product down the chain to the next organization, before itfinally reaches the consumer or end-user. This process is known as the'distribution chain' or the 'channel.' Each of the elements in these chains willhave their own specific needs, which the producer must take into account, alongwith those of the all-important end-user.Factors to be considered for setting up Distribution channelThe selection of distribution is affected by many of factors, which playsignificant role while choosing the channel for distribution. It may include the buying pattern of consumer, type of the product is perishable, or auto mobile,weight and bulk and it also depends on the company's resources.The

main affecting factors are following..Organization objectives - If company objective is to have mass appeal and rapidmarket penetration.type of product - Perishable products should have a short distribution channel,FMCG goods should have a wide reaching, intensive distribution channel.nature and extent of market- Distribution to consumer market or industrialmarkets would be different channel structures.existing channel for comparable product- company may chose it's existingchannel of distribution for relative product. buying habit of customersUnderstanding consumer needs and criteria for buyingChannel Availability - Channels may not be availableand other factors likeCustomer CharacteristicsProduct AttributesType of OrganizationCompetitionMarketing Environmental Forces and Characteristics of IntermediariesChannelsA number of alternate 'channels' of distribution may be available: Distributor, who sells to retailers,Retailer (also called dealer or reseller), who sells to end customersAdvertisement typically used for consumption goodsDistribution channels may not be restricted to physical products alice from producer to consumer in certain sectors, since both direct and indirect channelsmay be used. Hotels, for example, may sell their services (typically rooms)directly or through travel agents, tour operators, airlines, tourist boards,centralized reservation systems, etc. process of transfer the products or servicesfrom Producer to Customer or end user.There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services - thelatter offering anything from televisions through tools. There has also beensome evidence of service integration, with services linking together, particularlyin the travel and tourism sectors. For example, links now exist between airlines,hotels and car rental services. In addition, there has been a significant increasein retail outlets for the service sector. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas.Channel decisionsChannel Sales is nothing but a chain for to market a product through differentsources.Channel strategyGravity & adventurePush and Pull strategyProduct (or service)CostConsumer locationManagerial concernsThe channel decision is very important. In theory at least, there is a form of trade-off: the cost of using intermediaries to achieve wider distribution issupposedly lower. Indeed, most consumer goods manufacturers could never justify the cost of selling direct to their consumers, except by mail order. Manysuppliers seem to assume that once their product has been sold into the channel,into the beginning of the distribution chain, their job is finished. Yet thatdistribution chain is merely assuming a part of the supplier's responsibility; and,if they have any aspirations to be market-oriented, their job should really be extended to managing all the processes involved in that chain, until the productor service arrives with the end-user. This may involve a number of decisions onthe part of the supplier:Channel membershipChannel motivationMonitoring and managing channels Q.3 Discuss the communication development process with examples. (10marks)

Answer In development communication, you see that there are twowords-development and communication.Communication is a message understood or sharing of experience. When werefer to communication, in the context of development, we refer to various typesof communication like interpersonal, group and mass communication.Development,It is not easy to define this as it depends on the context.Development is about change. It is about changing for the better.It could be about social or economic change for improvement or progress.When we refer to development communication, it is about such communicationthat can be used for development. It is about using communication to change or improve something. Here we use different types of messages to change thesocio-economic condition of people. These messages are designed to transformthe behaviour of people or for improving their quality of life. Therefore,development communication can be defined as the use of communication to promote development. Those who write or produce programmes on issuesrelated to development are called development communicators.Role of a development communicator The development communicator plays a very significant role in explaining thedevelopment process to the common people in such a way that it findsacceptance.In order to achieve this objective a development communicator:has to understand the process of development and communication;should possess knowledge in professional techniques and should know theaudience; prepare and distribute development messages to millions of people in such a way that they are received and understood, accepted and applied.If they accept this challenge they will be able to get the people to identifythemselves as part of a society and a nation. This identity will help in bringinghuman resources together for the total welfare of the individual and thecommunity at large.DEVELOPMENT COMMUNICATION USING VARIOUS MEDIAThe history of development communication in India can be traced to rural radio broadcasts in the 1940s in different languages. Have you ever heard a rural programme on radio? If you come from a rural area, you probably would haveheard. People who present these programmes speak in a language or dialect thatthe people in your area speak. The programmes may be about farming andrelated subjects. The programme may comprise of interviews with experts,officials and farmers, folk songs and information about weather, market rates,availability of improved seeds and implements. There would also be programmes on related fields. During the 1950s, the government started hugedevelopmental programmes throughout the country.In fact, when Doordarshanstarted on 15th September 1959, it was concentrating only on programmes onagriculture. Many of you might have seen the Krishi Darshan programme onDoordarshan. Later in 1975, when India used satellites for telecasting television programmes in what is known as SITE (Satellite Instructional TelevisionExperiment), the programmes on education and development were madeavailable to 2400 villages in the states of Andhra Pradesh, Bihar, Karnataka,Madhya Pradesh, Orissa and Rajasthan.As far as the print media is concerned, after Independence when the Five Year Plans were initiated by the government for planned development, it was thenewspapers which gave great importance to development themes. They wroteon various government development programmes and how the people couldmake use of them.If the print media have contributed to

development communication, theelectronic media radio and television especially All India Radio andDoordarshan have spread messages on development as the main part of their broadcasts. However, amongst all the media that are used for developmentcommunication, traditional media are the closest to people who need messagesof development like the farmers and workers. Such forms of media are participatory and effective.You may have seen construction workers cooking their meal of dal and riceover open fires in front of their tents set up temporarily on the roadside. Theyneed to be educated about the values of balanced nutrition, cleanliness, hygiene and water and sanitation.In various parts of India, groups of volunteers use street theatre as a medium for development communication. This is done through humorous skits and playsthrough which the importance of literacy, hygiene etc. are enacted. The contentfor the skits is drawn from the audiences life. For example, they are told aboutbalanced nutrition . This means supplementing their staple diet of dal and ricewith green leafy vegetables known to cure night blindness, an ailment commonamong construction workers. Similarly, female construction workers and their children are taught how to read and write.However, problems in communicating a message in an effective way has been amatter of concern to development workers.How can people be taught new skills at a low cost?What would be a good way to deal with sensitive topics such as health issues?How can complicated new research, like that in agriculture for example, besimplified so that ordinary people can benefit?One option has been the use of comics. But, in order to achieve the desiredresults, these comics should be created locally.But what are comics ? You must have all at some point of time read a comic.Comics involve story telling using visuals which must follow local ideas andculture in order to be understood correctly by people. The important thing aboutcomics is that they are made by people on their own issues in their ownlanguage. So, readers find them closer to their day-to-day lives.Programmes are organized in the remote areas of Jharkhand, Rajasthan,Tamilnadu, and the North East to provide training to rural communicators toenable them to use comics in development communication.Information on sensitive health issues such as HIV/AIDS has beencommunicated throught the medium of comics in several states. However, youmust understand that development communication using various media is possible only with the active involvement of the following:(i) Development agencies like departments of agriculture.(ii) Voluntary organizations(iii) Concerned citizens(iv) Non governmental organizations (NGOs)ExamplesOne of the first examples of development communication was Farm Radio Forums in Canada. From 1941 to 1965 farmers met in groups each week tolisten to special radio programs. There were also printed materials and preparedquestions to encourage group discussion. At first this was a response to theGreat Depression and the need for increased food production in World War II.But the Forums also dealt with social and economic issues. This model of adulteducation or distance education was later adopted in India and Ghana.In 1999 the U.S. Government and D.C. Comics planned to distribute 600,000comic books to children

affected by the Kosovo War. The comic books are inAlbanian and feature Superman and Wonder Woman. The aim is to teachchildren what to do when they find an unexploded land mine left over fromKosovo's civil war. The comic books instruct children not to touch the antipersonnel mines and not to move, but instead to call an adult for help. In spite of the 1997 Ottawa Treaty which attempts to ban land mines they continue to killor injure 20,000 civilians each year around the world.Since 2002, Journalists for Human Rights, a Canadian based NGO, has operatedlong term projects in Ghana, Sierra Leone, Liberia, and the DR Congo. jhr works directly with journalists, providing monthly workshops, student sessions,on the job training, and additional programs on a country by country basis. Q.4. Select any mobile handset and mobile company and then evaluate itspositioning strengths or weakness in terms of attributes, benefits, values,brand name and brand equity. (10 marks) Answer AbstractIn the late 1990s, Nokia overtook then leader Motorola to emerge as a behemothin the global mobile phone industry. Nokia's dominance continued into the firstfew years of the 2000s, but it suddenly came under threat in 2003-2004, whensmaller Asian vendors started making their presence felt with better products atlower prices. The company's problems also had internal causes and analysts said one of thereasons could be that it had become too complacent with its success and lost itsagility in reading and responding to market signals.This case study discusses the various problems Nokia faced in 20032004,including the company's tardiness in introducing the clamshell phones that had become very popular and its resistance to manufacturing operator specifichandsets. It also discusses the efforts Nokia made to recover its market once itrealized that its performance was slipping. The case concludes with an analysisof the challenges the company faced in the future and the various options aheadof it.Issues:To understand the difficulties faced by an erstwhile giant in the global mobile phone industry in 2003-2004.To appreciate the importance of innovation in a dynamic and volatile industry.To analyze the effect of changing market conditions on companies.To appreciate the importance of keeping abreast with changing marketconditions and adapting to them speedily.To examine future challenges that the company faced and the various optionsavailable to itWe want to be the company that brings this industry to the next phase. And if we have a little bit of a bump in the road in 2004, that's immaterial."- Jorma Ollila, CEO of Nokia, in mid 2004.1"Nokia didn't have the coolness factor. They didn't really do flip phones; theywere a little late with cameras, and they didn't push them. Coolness in theconsumer space is a big deal, and they were stodgy."Jack Gold, vice president of Meta Group, aConnecticut-based technology consulting firm, in 2005.2Positive SignsThe announcement of Nokia Corporation's (Nokia) quarterly results in April2005 was a much awaited event as far as the global mobile phone industry wasconcerned. The company, which had emerged as an industry leader in the late1990s, had run into rough weather in 2003-2004, with sales and earnings falling below expected levels. So much so that when the company announced poor

results in the first quarter of 2004, several analysts declared that it was the beginning of the end of Nokia's dominance in the industry.However, Nokia was not ready to throw in the towel quite so easily. Thecompany put up a tough fight over the second half of 2004 to recapture its lost position in the market.It introduced several new models, modified designs, and aggressively promoted products with a view to increasing its market share, which had fallen to a low of around 28 percent in early 2004 from an average of 35 percent over the previousthree years. Nokia's efforts started paying off by late 2004. The company announcedsatisfactory results for the fourth quarter of 2004 and market share for the year 2004 also stabilized at 32 percent by the end of the year. Jorma Ollila (Ollila), Nokia's CEO, while acknowledging that 2004 had been a challenging year,declared that the company was poised to recover in 2005. Ollila's predictioncame true when the company announced better than expected results for the firstquarter of 2005, ending March 31.In the first quarter of 2005, Nokia's sales increased 17 percent over thecorresponding quarter of the previous year to $9.65 billion. Net profit rose 18 percent to $1.1 billion. Global handset sales rose 11 percent, prompting Nokia to increase its estimate of the size of the global handset marketin 2005 by 100 million to 740 million.Commenting on Nokia's improved performance, Jussi Hyoty (Hyoty), an analyst at securities firm FIM Securities,said, "Nokia's result was definitely better than expected, and it shows that it's agrowth company again."3However, despite these positive signs, several analysts wondered whether Nokiawould ever be able to dominate the industry as it did in the late 1990s and thefirst two years of the new century, especially in light of the aggressivecompetition posed by several new Asian companies as well as more established players like Motorola and Sony Ericsson.BackgroundDespite the relatively recent emergence of the mobile phone industry globally, Nokia's company history goes back to the 1800s.The company was first set up on the banks of the river Nokia (after which it wasnamed) in southwestern Finland in 1865 by Fredrik Idestam, who was a mining engineer. The original Nokia was a forest industry enterprise that primarilymanufactured paper.In 1898, Carl Henrik Lampen, a shopkeeper, and J.E. Segerberg, an engineer,set up the Finnish Rubber Works Ltd. (FRW) to manufacture rubber andassociated chemicals. In 1912, Konstantin Wikstrom, an engineer, set up theFinnish Cable Works (FCW) to manufacture electrical cables for lighting purposes. These three companies had business dealings with each other throughthe early 1900s and eventually merged in 1967 to form the Nokia Corporation.The new company had four major businesses - forestry, rubber, cable andelectronics.By 1980, Nokia was a large business conglomerate with several

businessesranging from tires to televisions and computers to telecommunications.ExcerptsThe Rise to the Top Nokia drew on its experience of setting up Nordic cellular networks (whichwere more advanced than those used by Japan, the rest of Europe, and the US atthat time) to successfully adopt the GSM standard. The company was listed onthe New York Stock Exchange in 1994. Over the 1990s, Nokia became one of the most successful mobile phone manufacturers in the world and began to enter non-Scandinavian markets as well. Nokia was also one of the first mobile manufacturers to realize the importanceof the design element in mobile phones and its phones were more aestheticallydesigned than those of competitors. In 1998, Nokia overtook Motorola to become the largest mobile manufacturer in the world...Designed for Innovation Nokia was the first mobile phone manufacturer to realize in the late 1990s that phones no longer played only a functional role; they were also becomingfashion symbols.Until Nokia began emphasizing the design aspect, mobile phones were bulky, bricklike devices with an external antenna and a standard keypad.Manufacturers emphasized functionality over aesthetic appeal. Nokia broke new ground in 1999, when it launched its 8200 handset on thecatwalk at a Paris fashion week.. The Decline In mid-2004, The Economist wrote, "When a firm dominates its market,especially one that is driven by constant technological advances, it risks becoming so fixated with trying to ward off what it reckons to be its most powerful challenger that it leaves itself vulnerable to attack from other directions."Analysts said this statement accurately characterized what happenedwith Nokia.In the early 2000s, Microsoft Corp (Microsoft) announced its decision to enter the mobile phones market. The announcement set alarm bells ringing in Nokiaas Microsoft had the reputation of being an aggressive competitor...Efforts at RecoverySoon after announcing disappointing results in the first quarter of 2004, Nokiarealized that it was in trouble and began to take steps to correct matters. Thecompany not only cut prices on certain handsets to increase market share, butalso fine-tuned its portfolio to adjust products to meet market needs. It killedsome outmoded models and brought forward the launch of several others,including a number of clamshell phones.In June 2004, Nokia launched five new models of phones, out of which threewere clamshells. Nokia's new models were the 6260 model, a clamshell whosecover not only flipped open but also swiveled, the 6630, which Nokia claimedwas the world's smallest camera phone, designed for 3G networks, another clamshell, the 6170, and two low end models, the 2650 and 2600. Several other models were also marketed aggressively.For instance, the low end 1100 model for emerging markets and the 6230 midrange model became very popular in 2004. (The 6230 was so popular in somemarkets that at times, Nokia was not able to meet the demand)...A Challenging FutureDespite Nokia's laudable efforts in the direction of recapturing its lost market position, the opinions of analysts on its turnaroundwere mixed.While the company's detractors believed that Nokia had lost its competitiveadvantage in the mobile phone market, its supporters said the company'sinherent strengths and stable financial position would help it sail through thedifficulties it had faced in 2003-2004 to recover

in the future. However, most of them agreed that the mobile phone industry was undergoing a vast change.In the early 2000s, mobile phones were expected to perform a variety of functions in addition to looking stylish and being easy to operate. Nokia'scompetitors had understood this and were in the process of launching severalmodels that were style statements in themselves... ExhibitsExhibit I: The Phone Feature of N-Gage Q. 5 What is retailing? Explain the functions and different types of retailing with its key features. (10 marks) Answer RetailingRetail consists of the sale of goods or merchandise from a fixed location, suchas a department store, boutique or kiosk, or by mail, in small or individual lotsfor direct consumption by the purchaser.[1] Retailing may include subordinatedservices, such as delivery. Purchasers may be individuals or businesses. Incommerce, a "retailer" buys goods or products in large quantities frommanufacturers or importers, either directly or through a wholesaler, and thensells smaller quantities to the end-user. Retail establishments are often calledshops or stores. Retailers are at the end of the supply chain. Manufacturingmarketers see the process of retailing as a necessary part of their overalldistribution strategy. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as a public utility, likeelectric power.Types of retailers by marketing strategy:Department stores - very large stores offering a huge assortment of "soft" and"hard goods; often bear a resemblance to a collection of specialty stores. Aretailer of such store carries variety of categories and has broad assortment ataverage price. They offer considerable customer service.Discount stores - tend to offer a wide array of products and services, but theycompete mainly on price offers extensive assortment of merchandise ataffordable and cut-rate prices. Normally retailers sell less fashionoriented brands.Supermarkets - sell mostly food products;Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubs charge a membership fee;Variety stores or "dollar stores" - these offer extremely low-cost goods, withlimited selection;Demographic - retailers that aim at one particular segment (e.g., high-endretailers focusing on wealthy individuals).Mom-And-Pop (or Kirana Stores as they call them in India): is a retail outletthat is owned and operated by individuals. The range of products are veryselective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the storeholder.Specialty stores: A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store thatspecializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits aReebok or Gap store then they find just Reebok and Gap products in therespective stores.General store - a rural store that supplies the main needs for the localcommunity;Convenience stores: is essentially found in residential areas. They providelimited amount of merchandise at more than average prices with a speedycheckout. This store is ideal for emergency and immediate purchases.Hypermarkets: provides variety and

huge volumes of exclusive merchandise atlow margins. The operating cost is comparatively less than other retail formats.A classic example is the Metro in Bangalore.Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000-40,000 square feet.Example: SPAR supermarket.Malls: has a range of retail shops at a single outlet. They endow with products,food and entertainment under a roof. Example: Sigma mall and Garuda mall inBangalore, Express Avenue in Chennai.Category killers or Category Specialist: By supplying wide assortment in asingle category for lower prices a retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed atthe centre of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores areforced to reduce the prices if a category specialist retail store is present in thevicinity. For example: Pai Electronics store in Bangalore, Tata Croma.E-tailers: The customer can shop and order through internet and themerchandise are dropped at the customer's doorstep. Here the retailers use dropshipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This formatis ideal for customers who do not want to travel to retail stores and areinterested in home shopping. However it is important for the customer to bewary about defective products and non secure credit card transaction. Example:Amazon and Ebay.Vending Machines: This is an automated piece of equipment wherein customerscan drop in the money in machine and acquire the products. For example: Softdrinks vending at Bangalore Airport.Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what income level they target.Other types of retail store include:Automated Retail stores are self service, robotic kiosks located in airports, mallsand grocery stores. The stores accept credit cards and are usually open 24/7.Examples include ZoomShops and Redbox.Big-box stores encompass larger department, discount, general merchandise,and warehouse stores.Convenience store - a small store often with extended hours, stocking everydayor roadside items;General store - a store which sells most goods needed, typically in a rural area;Retailers can opt for a format as each provides different retail mix to itscustomers based on their customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to display products well and enticethe target customers to spawn sales.Functions of RetailingRetailers play a significant role as a conduit between manufacturers,wholesalers, suppliers and consumers. In this context, they perform variousfunctions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.SortingManufacturers usually make one or a variety of products and would like to selltheir entire inventory to a few buyers to redu7ce costs. Final consumers, incontrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of bothsides, by collection an assortment of goods from different sources, buying themin sufficiently large quantities and selling them to consumers in small units.The above process is referred to as the sorting process. Through this process,retailers undertake activities

and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, onand average, 15,000 different items from 500 companies. Customers are able tochoose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers wouldhave to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market towhich the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers Stop targetsthe elite urban class, while Pantaloons is targeted at the middle class.Breaking Bulk Breaking bulk is another function performed by retailing. The word retailing isderived from the French word retailer, meaning to cut a piece off. To reducetransportation costs, manufacturers and wholesalers typically ship large cartonsof the product, which are then tailored by the retailers into smaller quantities tomeet individual consumption needs.Holding Stock Retailers also offer the service of holding stock for the manufacturers. Retailersmaintain an inventory that allows for instant availability of the product to theconsumers. It helps to keep prices stable and enables the manufacturer toregulate production. Consumers can keep a small stock of products at home asthey know that this can be replenished by the retailer and can save on inventorycarrying costs.Additional ServicesRetailers ease the change in ownership of merchandise by providing servicesthat make it convenient to buy and use products. Providing product guarantees,after-sales service and dealing with consumer complaints are some of theservices that add value to the actual product at the retailers end. Retailers alsooffer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. Thedisplay itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.Channel of CommunicationRetailers also act as the channel of communication and information between thewholesalers or suppliers and the consumers. From advertisements, salespeopleand display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, deliverydelays, and customer complaints. The manufacturer can then modify defectiveor unsatisfactory merchandise and services. Transport and Advertising FunctionsSmall manufacturers can use retailers to provide assistance with transport,storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage andvolume of sales needed to cover both their costs and profits.

Q. 6 a. What is CRM? What are its objectives? (2 marks)b. Write a short note on Brand development. (8 marks)Answer CRM stands for Customer Relationship Management . It is a process or methodology used to learn more about customers needs and behaviors in order to developstronger relationships with them. There are many technological components to CRM, butthinking about CRM in primarily technological terms is a mistake. The more useful way tothink about CRM is as a process that will help bring together lots of pieces of informationabout customers, sales, marketing effectiveness, responsiveness and market trends. CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. Objectives of CRM CRM, the technology, along with human resources of the company, enables the company toanalyze the behavior of customers and their value. The main areas of focus are as the namesuggests: customer , relationship , and the management of relationship and the mainobjectives to implement CRM in the business strategy are: To simplify marketing and sales process To make call centers more efficient To provide better customer service To discover new customers and increase customer revenue To cross sell products more effectivelyThe CRM processes should fully support the basic steps of customer life cycle . The basicsteps are: Attracting present and new customers

Acquiring new customers Serving the customers Finally, retaining the customers Brand development A plan to improve the performance of a particular product or service. For example, as part of brand development a firm may initiate a new advertising campaign that includes freesamples.

MB-48

Q1. What are the essential characteristics of Operation Research? Mention differentphases in an Operation Research study. Point out some limitations of O.R? Ans. Characteristics of Operations Research Operations research, an interdisciplinary division of mathematics and science, uses statistics,algorithms and mathematical modeling techniques to solve complex problems for the best possible solutions. This science is basically concerned with optimizing maxima and minima of the objective functions involved. Examples of maxima could be profit, performance and yield.Minima could be loss and risk. The management of various companies has benefited immenselyfrom operations research.Operations research is also known as OR. It has basic characteristics such as systems orientation,using interdisciplinary groups, applying scientific methodology, providing quantitative answers,revelation of newer problems and the consideration of human factors in relation to the stateunder which research is being conducted. Systems Orientation o This approach recognizes the fact that the behavior of any part of the system has an effect onthe system as a whole. This stresses the idea that the interaction between parts of the system iswhat determines the functioning of the system. No single part of the system can have a bearingeffect on the whole. OR attempts

appraise the effect the changes of any single part would haveon the performance of the system as a whole. It then searches for the causes of the problem thathas arisen either in one part of the system or in the interrelation parts. Interdisciplinary groups o The team performing the operational research is drawn from different disciplines. Thedisciplines could include mathematics, psychology, statistics, physics, economics andengineering. The knowledge of all the people involved aids the research and preparation of thescientific model. Application of Scientific Methodology o OR extensively uses scientific means and methods to solve problems. Most OR studiescannot be conducted in laboratories, and the findings cannot be applied to natural environments.Therefore, scientific and mathematical models are used for studies. Simulation of these models iscarried out, and the findings are then studied with respect to the real environment. New Problems Revealed o Finding a solution to a problem in OR uncovers additional problems. To obtain maximum benefits from the study, ongoing and continuous research is necessary. New problems must be pursued immediately to be resolved. A company looking to reduce costs in manufacturing mightdiscover in the process that it needs to buy one more component to manufacture the end product.Such a scenario would result in unexpected costs and budget overruns. Ensuring flexibility for such contingencies is a key characteristic of OR. Provides Quantitative Answers o The solutions found by using operations research are always quantitative. OR considers twoor more options and emphasizes the best one. The company must decide which option is the bestalternative for it. Human Factors o In other forms of quantitative research, human factors are not considered, but in OR, humanfactors are a prime consideration. People involved in the process may become sick, which wouldaffect the companys output. PHASES OPERATIONS RESEARCH Formulate the problem: This is the most important process, it is generally lengthy and timeconsuming. The activities that constitute this step are visits, observations, research, etc. With thehelp of such activities, the O.R. scientist gets sufficient information and support to proceed and is better prepared to formulate the problem. This process starts with

understanding of theorganizational climate, its objectives and expectations. Further, the alternative courses of actionare discovered in this step. Develop a model: Once a problem is formulated, the next step is to express the probleminto a mathematical model that represents systems, processes or environment in the formof equations, relationships or formulas. We have to identify both the static and dynamicstructural elements, and device mathematical formulas to represent the interrelationshipsamong elements. The proposed model may be field tested and modified in order to work under stated environmental constraints. A model may also be modified if themanagement is not satisfied with the answer that it gives. Select appropriate data input: Garbage in and garbage out is a famous saying. Nomodel will work appropriately if data input is not appropriate. The purpose of this step isto have sufficient input to operate and test the model. Solution of the model: After selecting the appropriate data input, the next step is to finda solution. If the model is not behaving properly, then updating and modification isconsidered at this stage. Validation of the model: A model is said to be valid if it can provide a reliable prediction of the systems performance. A model must be applicable for a longer time and can be updated from time to time taking into consideration the past, present andfuture aspects of the problem. Implement the solution: The implementation of the solution involves so many behavioural issues and the implementing authority is responsible for resolving theseissues. The gap between one who provides a solution and one who wishes to use it should be eliminated. To achieve this, O.R. scientist as well as management should play a positive role. A properly implemented solution obtained through O.R. techniques resultsin improved working and wins the management support. Limitations Dependence on an Electronic Computer:

O.R. techniques try to find out an optimalsolution taking into account all the factors. In the modern society, these factors areenormous and expressing them in quantity and establishing relationships among theserequire voluminous calculations that can only be handled by computers. Non-Quantifiable Factors: O.R. techniques provide a solution only when all theelements related to a problem can be quantified. All relevant variables do not lendthemselves to quantification. Factors that cannot be quantified find no place in O.R.models. Distance between Manager and Operations Researcher: O.R. being specialists jobrequires a mathematician or a statistician, who might not be aware of the business problems. Similarly, a manager fails to understand the complex working of O.R. Thus,there is a gap between the two. Money and Time Costs: When the basic data are subjected to frequent changes,incorporating them into the O.R. models is a costly affair. Moreover, a fairly goodsolution at present may be more desirable than a perfect O.R. solution available after sometime. Implementation: Implementation of decisions is a delicate task. It must take intoaccount the complexities of human relations and behaviour. Q2. What are the common methods to obtain an initial basic feasible solution for atransportation problem whose cost and requirement table is given? Give a stepwiseprocedure for one of them? Ans. Transportation Problem & its basic assumption This model studies the minimization of the cost of transporting a commodity from a number of sources to several destinations. The supply at each source and the demand at eachdestination are known. The transportation problem involves m sources, each of which hasavailable.i (i = 1, 2, ..,m) units of homogeneous product andn destinations, each of which requires bj (j = 1, 2., n) units of products. Here a i and bj are positiveintegers. The cost cij of transporting one unit of the product from theith source to the jth destination is given for eachi and j. The objective is to develop an integral transportation schedule that meets all demandsfrom the inventory at a minimum total transportation cost.It is assumed that the total

supplyand the total demand are equal.i.e.Condition (1)The condition (1) is guaranteed by creating either a fictitious destination with ademand equal to the surplus if total demand is less than the total supply or a (dummy)source with a supply equal to the shortage if total demand exceeds total supply. The cost of transportation from the fictitious destination to all sources and from all destinations to thefictitious sources are assumed to be zero so that total cost of transportation will remain thesame. Formulation of Transportation Problem The standard mathematical model for the transportation problem is as follows. Let xij be number of units of the homogenous product to be transported from source i to thedestination j Then objective is toTheorem:A necessary and sufficient condition for the existence of a feasible solution to thetransportation problem (2) is that Q3. a. What are the properties of a game? Explain the best strategy on the basis of minmax criterion of optimality.b. State the assumptions underlying game theory. Discuss its importance to businessdecisions.Ans. a) Minimax (sometimes minmax ) is a decision rule used indecision theory,game theory, statistics and philosophyfor mini mizing the possible losswhile max imizing the potential gain.Alternatively, it can be thought of as maximizing the minimum gain ( maximin ). Originallyformulated for two-player zero-sum game theory, covering both the cases where players takealternate moves and those where they make simultaneous moves, it has also been extended tomore complex games and to general decision making in the presence of uncertainty. Game theory In the theory of simultaneous games,a minimax strategy is a mixed strategywhich is part of thesolution to a zero-sum game. In zero-sum games, the minimax solution is the same as the Nashequilibrium. Minimax theorem The minimax theorem states:For every two-person, zero-sum game with finitely many strategies, there exists a value V and amixed strategy for each player, such that (a) Given player 2s strategy, the best payoff possiblefor player 1 is V, and (b) Given player 1s strategy, the best payoff possible for player 2 is V.Equivalently,

Player 1s strategy guarantees him a payoff of V regardless of Player 2s strategy,and similarly Player 2 can guarantee himself a payoff of V. The name minimax arises becauseeach player minimizes the maximum payoff possible for the othersince the game is zero-sum,he also maximizes his own minimum payoff.This theorem was established by John von Neumann, [1] who is quoted as saying As far as I cansee, there could be no theory of games without that theorem I thought there was nothingworth publishing until the Minimax Theorem was proved. [2] See Sions minimax theoremand Parthasarathys theoremfor generalizations; see alsoexampleof a game without a value. Example The following example of a zero-sum game, where A and B make simultaneous moves,illustrates minimax solutions. Suppose each player has three choices and consider the payoff matrixfor A displayed at right.Assume the payoff matrix for B is thesame matrix with the signs reversed(i.e. if the choices are A1 and B1 then B pays 3 to A ). Then, the minimaxchoice for A is A2 since the worst possible result is then having to pay 1, while the simpleminimax choice for B is B2 since the worst possible result is then no payment. However, thissolution is not stable, since if B believes A will choose A2 then

B will choose B1 to gain 1; thenif A believes B will choose B1 then A will choose A1 to gain 3; and then B will choose B2; andeventually both players will realize the difficulty of making a choice. So a more stable strategy isneeded.Some choices are dominated by others and can be eliminated: A will not choose A3 since either A1 or A2 will produce a better result, no matter what B chooses; B will not choose B3 sincesome mixtures of B1 and B2 will produce a better result, no matter what A chooses. A can avoid having to make an expected payment of more than 1/3 by choosing A1 with probability 1/6 and A2 with probability 5/6, no matter what B chooses. B can ensure an expected B chooses B1B chooses B2B chooses B3A chooses A1 + 3 2 + 2 A chooses A2 1 0 + 4 A chooses A3 4 3 + 1

gain of at least 1/3 by using a randomized strategy of choosing B1 with probability 1/3 and B2with probability 2/3, no matter what A chooses. These mixedminimax strategies are now stableand cannot be improved. b) Brandenburger and Nalebuff discuss how game theory works and how companies can use the principles to make decisions. The authors state that managers can use

the principles to create newstrategies for competing where the chances for success are much higher than they would be if they continued to compete under the same rules. A classic example used in the article is the caseof General Motors. The automobile industry was facing many expenses due to the incentives thatwere being used at the retailers. General Motors responded by issuing a new credit card wherethe cardholders could apply a portion of their charges towards purchasing a GM car. GM evenwent so far as to allow cardholders to use a smaller portion of their charges towards purchasing aFord car, allowing both companies to be able to raise their prices and increase long term profits.This action by GM created a new system where both GM and Ford could be better off, unlike thetraditional competitive model where one company must profit at the expense of another.The authors state that while the traditional win-lose strategy may sometimes be appropriate, butthat the win-win system can be ideal in many circumstances. One advantage to win-winstrategies is that since they have not been used much, they can yield many previouslyunidentified opportunities. Another major advantage is that since other companies have theopportunity to come out ahead as well, they are less likely to show resistance. The last advantageis that when other companies imitate the move the initial company benefits as well, in contrast tothe initial company losing ground as they would in a win-lose situation.The authors also state that there are five elements to competition that can be changed to providea more optimal outcome. These elements are: the players (or companies competing), addedvalues brought by each competitor, the rules under which competition takes place, the tacticsused, and the scope or boundaries that are established. By understanding these factors,companies can apply different strategies to increase their own odds of success.The first way that companies can increase their chances of success involves changing who thecompanies are that are involved in the business. One way that companies can improve their oddsof success is by introducing new companies into the business. For example, both Coke and Pepsiwanted to get a contract to have Monsanto as a supplier. Since Monsanto had a monopoly at thetime, they encouraged Holland Sweetener Company to compete with Monsanto. Since it seemedMonsanto no longer had a monopoly on the market, they were able to get more favorablecontracts with Monsanto. Another way that companies can improve their chances is by helpingother companies introduce more or better complimentary products.Companies can also change the added values of themselves or their competitors. Obviously,companies can build a better brand or change their business practices so they operate moreefficiently. However, the authors discuss how they can also lower the value of reducing the valueof other companies as a viable strategy. Nintendo reduced the added value of retailers by notfilling all of their orders, thus leaving a shortage and reducing the bargaining power of the

stores buying its products. They also limited the number of licenses available to aspiring programmers,lowering their added value. They even lowered the value held by comic book characters whenthey developed characters of their own that became widely popular, presumably so that they wouldnt have to pay as much to license these characters.Changing the rules is another way in which companies can benefit. The authors introduce theidea of judo economics, where a large company may be willing to allow a smaller company tocapture a small market share rather than compete by lowering its prices. As long as it does not become too powerful or greedy, a small company can often participate in the same marketwithout having to compete with larger companies on unfavorable terms. Kiwi International Air Lines introduced services on its carriers that were of lower prices to get market share, but madesure that the competitors understood that they had no intention of capturing more than 10% of any market.Companies can also change perceptions to make themselves better off. This can be accomplishedeither by making things clearer or more uncertain. In 1994, the New York Post attempted tomake radical price changes in order to get the Daily News to raise its price to regain subscribers.However, the Daily News misunderstood and both newspapers were headed for a price war. The New York Post had to make its intentions clear, and both papers were able to raise their pricesand not lose revenue. The authors also show an example of how investment banks can maintainambiguity to benefit themselves. If the client is more optimistic than the investment bank, the bank can try to charge a higher commission as long as the client does not develop a morerealistic appraisal of the companys value.Finally, companies can change the boundaries within which they compete. For example, whenSega was unable to gain market share from Nintendos 8-bit systems, it changed the game byintroducing a new 16-bit system. It took Nintendo 2 years to respond with its own 16-bit system,which gave Sega the opportunity to capture market share and build a strong brand image. Thisexample shows how companies can think outside the box to change the way competition takes place in their industry.Brandenburger and Nalebuff have illustrated how companies that recognize they can change therules of competition can vastly improve their odds of success, and sometimes respond in a waythat benefits both themselves and the competition. If companies are able to develop a systemwhere they can make both themselves and their competitors better off, then they do not have toworry so much about their competitors trying to counter their moves. Also, because companiescan easily copy each others ideas, it is to a firms advantage if they can benefit when their competitors copy their idea, which is not usually possible under the traditional win-losestructure.This article has some parallels with the article Competing on Analytics by (). The biggestfactor that both of these

articles have in common is how crucial it is for managers to understandeverything they can about their business and the environment in which they work. InCompeting on Analytics, the authors say that it is important to be familiar with thisinformation so that managers can change the way they compete to improve their chances of success. At the end of The Right Game: Use Game Theory to Shape Strategy, the authorsdiscuss how in order for companies to be able to change the environment or rules under whichthey compete they need to understand everything they can about the constructs under which theyare competing. Whether a manager intends to use analytics or game theory to be successful, he or she must first have all available information and use that information to understand how to makethe company better off. However, the work shown in Competing on Analytics tends to placean emphasis almost exclusively on the use of quantitative data to improve efficiency or marketshare of the company. The Right Game, however focuses more on using information to find creative ways of changing the constructs or rules applied between companies, often yielding amuch broader impact. Q4. a. Compare CPM and PERT explaining similarities and mentioning where they mainlydiffer.Ans. The Major Differences and Similarities between CPM andPERT CPM (Critical Path Method) & PERT(Program Evaluation and Review Technique)1)PERT is a probabilistic tool used with three 1)CPM is a deterministic tool, with only singleEstimating the duration for completion of estimate of duration.2)This tool is basically a tool for planning 2)CPM also allows and explicit estimate of andcontrol of time. costs in addition to time, therefore CPM can control both time and cost.3)PERT is more suitable for R&D related 3)CPM is best suited for routine and those projectswhere the project is performed for projects where time and cost estimates can the first time andthe estimate of duration be accurately calculated are uncertain.4)The probability factor i major in PERT 4)The deterministic factor is more so values or sooutcomes may not be exact. outcomes are generally accurate and realistic.Extensions of both PERT and CPM allow the user to manage other resources in addition to timeand money, to trade off resources, to analyze different types of schedules, and to balance the useof resources. Tensions of both PERT and CPM allow the user to manage other resources inaddition to time and money, to trade off resources, to analyze different types of schedules, and to balance the use of resources. Graphs

_ In mathematics, networks are called graphs, the entities are nodes, and the links are edges _ Graph theory starts in the 18th century, with Leonhard Euler _ The problem of Knigsberg bridges _ Since then graphs have been studied extensively. Graph Theory _ Graph G=(V,E) _ V = set of vertices _ E = set of edges 2 _ An edge is defined by thetwo vertices which itconnects _ optionally: 1 3A direction and/or a weight _ Two vertices are adjacentif they are connected byan edge 4 5 _ A vertexs degree is thenumber of its edges Graph G=(V,E) 2V = set of verticesE = set of edgesEach edge is now an 1 3arrow, not just a line >directionThe indegree of a vertexis the number of 5incoming edges 4The outdegree of a verte

is the number of outgoingedges