(For private circulation only)

MBA 2012

M G UNIVERSITY SYLLABUS (2010-12) SEMESTER I

CLASS NOTES IN CAPSULES

Prepared by MACFAST MBA Semester 1 students

Copyright material

MACFAST, TIRUVALLA

February 2011

(No part of this manual shall be re-printed, copied or distributed by any one

without the explicit [written] permission from the MBA Department.

Fr. Dr. K. Cyriac, Director, MBA)

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TABLE OF CONTENTS

SUBJECT CODE

NAME

PAGE NO.S

CC 1

PRINCIPLES OF MANAGEMENT

3 - 28

CC 2

ENVIRONMENT MANAGEMENT

29 – 49

CC 3

ECONOMICS FOR MANAGERS

50 – 71

CC 4

EXECUTIVE COMMUNICATION

72 – 88

CC 5

FINANCIAL ACCOUNTING

89 – 123

CC 6

BUSINESS MATHEMATICS

124 – 149

CC 7

STATISTICS FOR MANAGERS

150 – 174

CC 8

DATA PROCESSING

175 – 204

CC 9

INDIAN ETHOS AND VALUES

205 – 244

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PRINCIPLES OF MANAGEMENT

MODULE 1 - MANAGEMENT

Management means utilizing available resources in the best possible manner and also for achieving well

defined objectives. The resources are: men, money, materials, machines, methods and markets. These are

the six basic inputs in management process (six M's of management) and the output is in the form of

achievement of objectives. It is the end result of inputs and is available through efficient management

process.

Definitions of Management

According to Henry Fayol, "To manage is to forecast and to plan, to organize, to command, to

coordinate and to control".

According to Peter Drucker, "Management is a multi-purpose organ that manages business and

manages managers and manages workers and work".

Characteristics of Management

1. Management is a managerial process: Management is a process and not merely a body of

individuals. Those who perform this process are called managers. The managers exercise

leadership by assuming authority and direct others to act within the organisation. Management

process involves all managerial functions.

2. Management is a social process- Management takes place through people. The importance of

human factor in management cannot be ignored. A manager's job is to get the things done with

the support and cooperation of subordinates

3. Management is action-based: Management is always for achieving certain objectives in terms of

sales, profit, etc. It is a result-oriented concept and not merely an abstract philosophy.

4. Management involves achieving results through the efforts of others: Management is the art of

getting the things done through others. Managers are expected to guide and motivate subordinates

and get the expected performance from them.

5. Management is a group activity: Management is not an isolated individual activity but it is a

collective activity or an activity of a group. It aims at using group efforts for achieving objectives.

6. Management is intangible: Management is not directly visible but its presence is noticed in the

form of concrete results.

7. Management is all pervasive: Management is comprehensive and covers all departments,

activities and employees. Managers operate at different levels but their functions are identical

8. Management is an art, science as well as a profession: Management is an art because certain

skills, essential for good management, are unique to individuals. Management is a science

because it has an organised body of knowledge. Management is also a profession because it is

based on advanced and cultivated knowledge.

9. Management aims at coordination of activities: Coordination is the essence of management.

10. Management is innovative: Management techniques are dynamic and innovative. They need to be

adjusted as per the requirements of the situations.

11. Management has vast scope: The scope of management is quite comprehensive. It covers all

aspects of business. The principles of management guide managers while managing various

business activities.

12. Management is dynamic: Business is influenced by changes in economic, social, political

technological and human resource. Management adjusts itself to the changing atmosphere making

suitable forecasts and changes in the policies.

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13. Management aims at achieving predetermined objectives: Management is a meaningful activity.

All organizations are essentially groups of individuals formed for achieving common objectives.

An Organization exists for the attainment of specific objectives.

Need of Management

Direction, coordination and control of group efforts: In business, many persons work together. They need

proper direction and guidance for raising their efficiency.

1. Orderly achievement of business objectives

2. Performance of basic managerial functions

3. Effective communication at all levels

4. Motivating Employees

MANAGEMENT THOUGHT

SCIENTIFIC MANAGEMENT THEORY

Frederick Winslow Taylor (1856-1915) is considered to be the father of scientific management. Taylor

was supported in his efforts by Henry Gantt, Frank and Lillian Gilberth and Harrington Emerson. Four

basic parts of a series of ideas developed by Taylor are as follows:

i) Each person's job should be broken down into elements and a scientific way to perform each element

should be determined

ii) Workers should be scientifically and trained to do the work in the designed and trained manner.

iii) There should be good cooperation between management and workers so that tasks are performed in

the designed manner

iv) There should be a division of labor between managers and workers. Managers should take over the

work of supervising and setting up instructions and designing the work and the workers should be free to

perform the work themselves.

ADMINISTRATIVE MANAGEMENT THEORY

CLASSICAL MANAGEMENT THEORY

(1880s-1920s)

Classical management theory consists of a group of similar ideas on the management of organizations that

evolved in the late 19thcentury and early 20 th century. This school, evolved as a result of the industrial

revolution, in response to the growth of large organizations and in contrast to the handicraft system that

existed till then

Classical theorists recognised human emotions but felt that human emotions could be controlled by a

logical and rational structuring of jobs and work (i) application of science to the practice of management

(ii) development of the basic management functions and (iii) articulation and application of specific

principles of management.

THE THEORY OF BUREAUCRACY

Max Weber (1864–1920) wrote at the turn of the twentieth century, when Germany was undergoing its

industrial revolution.22 To help Germany manage its growing industrial enterprises at a time when it was

striving to become a world power, Weber developed the principles of bureaucracy—a formal system of

organization and administration designed to ensure efficiency and effectiveness. A bureaucratic system of

administration is based on five principles

• Principle 1: In a bureaucracy, a manager’s formal authority derives from the position he

or she holds in the organization.

Authority is the power to hold people accountable for their actions and to make the right to direct and

control their subordinates‘ behaviour to achieve organizational goals

• Principle 2: In a bureaucracy, people should occupy positions because of their performance,

not because of their social standing or personal contacts.

• Principle 3: The extent of each position’s formal authority and task responsibilities, and

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• Principle 4: So that authority can be exercised effectively in an organization, positions should be

arranged hierarchically, so employees know whom to report to and who reports to them.

• Principle 5: Managers must create a well-defined system of rules, standard operating procedures, and

norms so that they can effectively control behaviour within an organization.

FAYOL‟S PRINCIPLES OF MANAGEMENT

Working at the same time as Weber but independently of him, Henri Fayol (1841–1925), the CEO of

Comambault Mining, identified 14 principles (summarized in Table 2.1) that he believed to be essential to

increasing the efficiency of the management process.26 Some of the principles

Fayol‟s 14 Principles of Management

Division of Labour Job specialization and the division of labour should increase efficiency, especially if

managers take steps to lessen workers‘ boredom.

Authority and Responsibility Managers have the right to give orders and the power to exhort

subordinates for obedience.

Unity of Command An employee should receive orders from only one superior.

Line of Authority The length of the chain of command that extends from the top to the bottom of an

organization should be limited.

Centralization Authority should not be concentrated at the top of the chain of command.

Unity of Direction The organization should have a single plan of action to guide managers and workers.

Equity All organizational members are entitled to be treated with justice and respect.

Order The arrangement of organizational positions should maximize organizational efficiency and

provide employees with satisfying career opportunities.

Initiative Managers should allow employees to be innovative and creative.

Discipline Managers need to create a workforce that strives to achieve organizational goals.

Remuneration of Personnel The system that managers use to reward employees should be equitable for

both employees and the organization.

Stability of Tenure of Personnel Long-term employees develop skills that can improve organizational

efficiency.

Subordination of Individual Interests to the Common Interest Employees should understand how

their performance affects the performance of the whole organization.

Esprit de Corps Managers should encourage the development of shared feelings of comradeship,

enthusiasm, or devotion to a common cause.

BEHAVIOURAL MANAGEMENT THEORY

Theory X and Theory Y: Several studies after the Second World War revealed how assumptions about

workers‘ attitudes and behaviour affect managers‘ behaviour. Perhaps the most influential approach was

developed by Douglas McGregor. He proposed that two different sets of assumptions about work

attitudes and behaviour dominate the way managers think and affect how they behave in organizations.

McGregor named these two contrasting sets of assumptions Theory X and Theory Y

THEORY X According to the assumptions of Theory X, the average worker is lazy, dislikes work, and

will try to do as little as possible. Moreover, workers have little ambition and wish to avoid responsibility.

Thus, the manager‘s task is to counteract workers‘ natural tendencies to avoid work. To keep workers‘

performance at a high level, the manager must supervise them closely and control their behaviour by

means of ―the carrot and stick‖—rewards and punishments.

THEORY Y In contrast, Theory Y assumes that workers are not inherently lazy, do not naturally dislike

work, and, if given the opportunity, will do what is good for the organization. According to Theory Y, the

characteristics of the work setting determine whether workers consider work to be a source of satisfaction

or punishment; and managers do not need to control workers‘ behaviour closely inorder to make them

perform at a high level, because workers will exercise self-control when they are committed to

organizational goals

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THE HAWTHORNE STUDIES AND HUMAN RELATIONS: This research, now known as the

Hawthorne studies, began as an attempt to investigate how characteristics of the work setting—

specifically the level of lighting or illumination—affect worker fatigue and performance. The researchers

conducted an experiment in which measured worker various levels of illumination.

The experiment produced some unexpected results. The researchers found of whether they raised or

lowered the level of illumination, productivity increased. In fact, productivity began to fall only when the

level of to the level of moonlight, a level at which presumably workers could no longer see well enough

to do their work efficiently.

Hawthorne effect—seemed to suggest that toward their managers affect the level of workers‘

performance. In particular, the significant finding was that a manager‘s behaviour or leadership approach

can affect performance. This finding led many researchers to turn their attention to managerial behaviour

and leadership. If supervisors could be trained to behave in ways that would elicit cooperative behaviour

from their subordinates, then productivity could be increased. From this view emerged the human

relations movement, which advocates that supervisors be trained to manage subordinates in ways that

elicit their cooperation and increase their productivity.

CONTINGENCY THEORY: Another milestone in management theory was the development of in the

1960s by Tom Burns and G.M. Stalker in the United Kingdom Lawrence and Jay Lorsch in the United

States.39 The crucial message of is that there is no one best way to organize: The organizational the

control systems that depend on—are —characteristics of the external environment in which the

organization operates. According to contingency theory, the characteristics of the environment affect

ability to obtain resources.

SCHOOLS OF MANAGEMENT

1) MANAGEMENT PROCESS SCHOOLS

This school considers management as a process of getting things done by people who operate in

the organization. Management can best be divided in five broad functions such as; planning, organizing,

staffing, directing and controlling.

Henry Fayol is the father of this school of thoughts. These principles are equally applicable to all types of

organizations; business, government or any other organization. In this school recognizes management as a

separate discipline. It integrates the knowledge of other disciplines to improve management. There is

room for innovation, research and development. This school is criticized on the ground that under

dynamic conditions it may not be worthwhile to find out principles of universal application. This school

has provided a conceptual frame work which can be used for further research and development of

management thought.

2) THE EMPIRICAL SCHOOL: The empirical or case approach analyses management by studying

experiences of people actually managing business. This thinking is based on the belief that the study of

actual situation, where success, will help the students and practitioners to know how to manage

effectively in similar situations. This knowledge will help the managers in taking decisions in different

situations.

The basic assumption of this thought is that the actual business situation contributes to the development

of managerial skills. By such observations managers develop problem solving abilities which are essential

for the successful practice of management in actual life.

3) THE HUMAN BEHAVIOUR SCHOOL: This approach is based on the idea that managing involves

getting things done through people so its study should concentrate on interpersonal relationship. This

school concentrates on the human aspect of management and the belief that when people work together to

accomplish common objectives people should understand people.

These studies highlighted the relationship between social factors and productivity. The thinkers of human

behavior approach are of the view that the effectiveness of any organization depends upon the quality of

relationships among the people working in the organization

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4) THE SOCIAL SCHOOL SYSTEM: In this approach an organization should be considered as a

social system consisting of various groups of people. It is primarily concerned with the behaviour of

people in groups. It thus tends to be based on sociology and social psychology rather than on individual

psychology.

5) THE DECISION THEORY SCHOOL: This school of thought is based on the belief that managers

make decisions, whatever managers do is the outcome of decisions made by them out of the alternatives

available to them. The decision should be taken at right time, should be related to the situation and

should be feasible in a given situation.

MANAGEMENT AS A PROCESS:-

Planning, organizing

Controlling

Processed

Staffing, directing

Meaning of Management Process

Management process is a continuous one and is run by the managers functioning at different levels.

Management is now recognised as a distinct process in which managers plan, organize, lead, motivate and

control human efforts in order to achieve well defined goals. In fact, process means a series of

activities/operations undertaken/conducted for achieving a specific objective. Process is a systematic way

of doing things.

Definition of Management Process

According to D. E. McFarland, "Management is the distinct process by which the managers create, direct,

maintain and operate purposive organization through systematic, co-coordinated and cooperative human

efforts‖

MANAGEMENT FUNCTION:-

Planning: - it is a process which begin with objectives define strategies, policies and detailed plan to

achieve them, which establishes on organization to implement decision and conclude a review of

performance and feedback

a) Organizing: - once the objectives, strategies necessary plans carry them out are formulated the

next phase in management process is that of organizing.

b) Staffing: - it involves the process of filling position in the organization structure. This is done by

identifying work forces requirement inventorying the people available and recruiting, selecting,

placing, promoting, appraising, planning the career of compensation and training or otherwise

developing both candidate and current job holders to accomplish their task effectively and

efficiently. Finding right man at right time or right job.

c) Directing: - directing is the managerial functions of guiding, supervision, motivating and leading

people towards the attaining of plan target of performances. Directing is a continuous function

and is performed at all level of management. The main activities involved in directing are

leadership, communication, motivation and supervision.

d) Controlling:- controlling can be defined as ― determining what is seeing accomplished evaluating

the performances and if necessary applying correction measures so that performance takes places

according to plans‖

Input

Man

Material

Machinery

Money

Output

Services

Profit

Productivity

Customer

Satisfaction

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MODULE 2 - GROUP BEHAVIOUR

Team effectiveness

Team:

A team is a small number of people with complementary skills who are committed to a common purpose,

common preference goals and an approach for which they hold themselves mutually accountable.

Team V/s groups:

Work group: A group that interacts primarily to share information and to make decisions to help each

other perform within his or her area of responsibility.

Work team: A group whose individual efforts result in a performance that is greater than the sum of those

individual inputs.

Distinct features of Team:

They are empowered to share various management and leadership functions.

They plan, control and improve their own work processes.

They set their own goals and inspect their own work.

They are frequently responsible for acquiring any new training they might need.

They usually order materials, keep inventories and deal with suppliers.

Types of Teams

Teams can be classified based on their objectives. The three common forms are problem-solving

teams; self-managed teams and cross functional teams.

Problem solving teams: Groups of 5 to 12 employees from the same department who meet for a few

hours each week to discuss ways of improving quality, efficiency and the work environment.

Self-managed work teams: Groups of 10 to 15 people who take on responsibilities of their former

supervisor. Self-managed teams use clear boundaries to create the freedom and responsibility to

accomplish tasks in an efficient manner. The main idea of the self-managed team is that the leader does

not operate with positional authority.

Cross –functional teams: Employees from about the same hierarchical level, but from different work

areas, who come together to accomplish a task. A cross-functional team is a group of people with

different functional expertise working toward a common goal. It may include people from finance,

marketing, operations, and human resources departments.

Benefits of teams

Enhanced performance can come on many forms including increased productivity, improved quality and

improved customer service.

Employee benefits from teams include better quality of work life and reduced stress.

Teams result in reduced scrap fewer errors, fewer remuneration claims and reduced turnover and

absenteeism.

Team benefits management through organizational enhancements.

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Stages of Team Development (TUCKMAN‘S MODEL)

Most groups followed a specific sequence in their evolution and we thought that we knew what that

sequence was. But we were wrong .Recent research indicates that there is no standardized pattern of

group development. Let us review this by the Five Stage Model.

It was believed that group‘s pass through a standard sequence of five stages. These five stages have been

labeled as forming, storming, norming, performing and adjoining.

Forming: The first stage in, group development characterized by much uncertainty. The individual's

behavior is driven by a desire to be accepted by the others, and avoid controversy or conflict. Serious

issues and feelings are avoided, and people focus on being busy with routines, such as team organization,

who does what, when to meet, etc

Storming: The stage in, group development characterized by intragroup conflict. The team addresses

issues such as what problems they are really supposed to solve, how they will function independently and

together and what leadership model they will accept. Team members open up to each other and confront

each other's ideas and perspectives

Norming: The third stage in, group development characterized by close relationships and cohesiveness.

The team manages to have one goal and come to a mutual plan for the team at this stage. Some may have

to give up their own ideas and agree with others in order to make the team function. In this stage, all team

members take the responsibility and have the ambition to work for the success of the team's goals.

Performing: The fourth stage in, group development when the group is fully functional. These high-

performing teams are able to function as a unit as they find ways to get the job done smoothly and

effectively without inappropriate conflict or the need for external supervision. Team members have

become interdependent. By this time, they are motivated and knowledgeable. The team members are now

competent, autonomous and able to handle the decision-making process without supervision.

Adjourning: The final stage in, group development by temporary groups, characterized by concern with

wrapping up activities rather than task performance.

TEAM DECISION MAKING Effective decision making is especially important on teams of knowledge workers considering That

decisions are often the product of these teams. Unfortunately, many problems can occur that reduce the

quality of decisions and/or increase decision-making time. The purpose of this paper is to review the

literature on team decision making and relate it to knowledge work. Subjects covered includes the

benefits of effective decision making, potential problems of team decision making, possible solutions to

those problems and implications for practitioners, and roles in team decision making.

Issues and Solutions in Team Decision Making

Conformity occurs when a team member fails to challenge a decision that he or she knows is incorrect.

Although strong norms and systematic decision making processes can help achieve Coordination, they

also tend to produce uniformity and conformity which leads to reduced creativity and decreased decision

quality

Conflict

Since dealing with differences is an important part of individuals working together, the topic of conflict in

teams is a huge area of research. In fact, many believe that conflict management is another major

contributing factor of team effectiveness. The entire subject of conflict will not be broached here; instead,

this section will address conflict as it relates to team decision making. The literature delineates two types

of conflict: cognitive and affective. Cognitive conflict occurs with differences in perspectives and

judgments, while affective conflict is emotional and personal. cognitive conflict was beneficial to team

decision quality while affective conflict was destructive. Affective conflict led to poor decisions and low

levels of decision cceptance.

Polarization in teams refers to the finding that groups tend to make more extreme decisions than do

individuals

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Self-limiting behavior is the tendency of individuals in groups to either withdraw or limit their

contributions to the group‘s decision-making

Groupthink

Groupthink is defined as ―a mode of thinking that people engage in when they are deeply involved in a

cohesive in-group...members‘ striving for unanimity override their motivation to

realistically appraise alternative courses of action...a deterioration of mental efficiency, reality

testing, and moral judgment that results from in-group pressures‖). Groupthink often occurs in cohesive

groups (such as teams) when internal pressures towards conformity interfere with constructive critical

analysis and ultimately leads to dysfunctional decisions.

MODULE 3 - LEADERSHIP

"Leadership is the ability of a superior to influence the behavior of a subordinate or group and persuade

them to follow a particular course of action." — Chester Bernard

Characteristics of Leadership

1. Authenticity "After years of studying leaders and their traits, I believe that leadership begins and ends

with authenticity

2. Desire to Serve Others "Authentic leaders genuinely desire to serve others through their leadership."

3. Empowering People "They are more interested in empowering the people they lead to make a

difference than they are in power, money, or prestige for themselves."

4. Guided by Heart, passion and compassion "They are as guided by qualities of the heart, by passion,

and compassion, as they are by qualities of the mind."

5. Recognize their shortcomings "Authentic leaders use their natural abilities, but they also recognize

their shortcomings and work hard to overcome them."

6. Lead with Purpose "They lead with purpose, meaning and values."

7. Build Enduring Relationships "They build enduring relationships with people."

8. Clear Where They Stand "Others follow them because they know where they stand."

9. Refuse to Compromise "When principles are tested, they refuse to compromise."

10. Develop Themselves "Authentic leaders are dedicated to developing themselves because they know

that becoming a leader takes a lifetime of personal growth."

Leadership Theories

1. Trait Theories:

Similar in some ways to "Great Man" theories, trait theories assume that people inherit certain qualities

and traits that make them better suited to leadership. Trait theories often identify particular personality or

behavioral characteristics shared by leaders. If particular traits are key features of leadership, then how do

we explain people who possess those qualities but are not leaders? This question is one of the difficulties

in using trait theories to explain leadership.

2. Contingency Theories:

Contingency theories of leadership focus on particular variables related to the environment that might

determine which particular style of leadership is best suited for the situation. According to this theory, no

leadership style is best in all situations. Success depends upon a number of variables, including the

leadership style, qualities of the followers and aspects of the situation.

3. Situational Theories:

Situational theories propose that leaders choose the best course of action based upon situational variables.

Different styles of leadership may be more appropriate for certain types of decision-making.

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4. Behavioral Theories:

Behavioral theories of leadership are based upon the belief that great leaders are made, not born. Rooted

in behaviorism, this leadership theory focuses on the actions of leaders not on mental qualities or internal

states. According to this theory, people can learn to become leaders through teaching and observation.

5. Participative Theories:

Participative leadership theories suggest that the ideal leadership style is one that takes the input of others

into account. These leaders encourage participation and contributions from group members and help

group members feel more relevant and committed to the decision-making process. In participative

theories, however, the leader retains the right to allow the input of others.

LEADERSHIP STYLES

Four of the most basic leadership styles are: --Autocratic,--Bureaucratic -Laissez-faire, Democratic

Autocratic Leadership Style This is often considered the classical approach. It is one in which the manager retains as much power and

decision-making authority as possible. The manager does not consult employees, no are they allowed to

give any input. Employees are expected to obey orders without receiving any explanations. The

motivation environment is produced by creating a structured set of rewards and punishments.

Yet, autocratic leadership is not all bad. Sometimes it is the most effective style to use. These situations

can include: -New, untrained employees who do not know which tasks to perform or which procedures to

follow

Bureaucratic Leadership Style Bureaucratic leadership is where the manager manages ―by the book¨ Everything must be done according

to procedure or policy. If it isn‘t covered by the book, the manager refers to the next level above him or

her. This manager is really more of a police officer than a leader. He or she enforces the rules.

Democratic Leadership Style The democratic leadership style is also called the participative style as it encourages employees to be a

part of the decision making. The democratic manager keeps his or her employeinformed about everything

that affects their work and shares decision making and problem solving responsibilities. This style

requires the leader to be a coach who has the final say, but gathers information from staff members before

making a decision.

Democratic leadership can produce high quality and high quantity work for long periods of time. Many

employees like the trust they receive and respond with cooperation, team spirit, and high morale

Laissez-Faire Leadership Style

The laissez-faire leadership style is also known as the ―hands-off¨ style. It is one in which the manager

provides little or no direction and gives employees as much freedom as possible. All authority or power is

given to the employees and they must determine goals, make decisions, and resolve problems on their

own.

Functions of leadership The five important functions of leadership are as follows:-

1) To develop team work

2) To act as a representative of the work-group

3) To act as a counsellor of the people at work

4) Time management

5) Proper use of power

Qualities of a Good Leader

1) A leader should be Commendable and Exemplary

2) Good leader is always enthusiastic about the cause of the people

3) A leader believes in discipline

4) A leader has excellent logical and analytical skills

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5) A leader should always focus towards his goals, what he/she has envisioned for and promised to his

people

6) A great leader is proactive and committed to excellence

7) A leader inspires his team to achieve target and lead them to success

8) A good leader is the one who can give people voice and direction.

9) A leader should be tolerant of uncertainty and should always remain tranquil, composed and persistent

to his/her goals.

Importance of Leadership

Leadership is an important function of management which helps to maximize efficiency and to achieve

organizational goals. The following points justify the importance of leadership in a concern.

1. Initiates action-Leader is a person who starts the work by communicating the policies and plans

to the subordinates the work actually starts.

2. Motivation- A leader proves to be playing an incentive role in the concern‘s working. He

motivates the employees with economic and non-economic rewards and thereby gets the work

from the subordinates.

3. Providing guidance- A leader has to not only supervise but also play a guiding role for the

subordinates. Guidance here means instructing the subordinates the way they have to perform

their work effectively and efficiently.

4. Creating confidence- Confidence is an important factor which can be achieved through

expressing the work efforts to the subordinates, explaining them clearly their role and giving

them guidelines to achieve the goals effectively. It is also important to hear the employees with

regards to their complaints and problems.

5. Building morale- Morale denotes willing co-operation of the employees towards their work and

getting them into confidence and winning their trust. A leader can be a morale booster by

achieving full co-operation so that they perform with best of their abilities as they work to

achieve goals.

6. Builds work environment- Management is getting things done from people. An efficient work

environment helps in sound and stable growth. Therefore, human relations should be kept into

mind by a leader. He should have personal contacts with employees and should listen to their

problems and solve them. He should treat employees on humanitarian terms.

7. Co-ordination- Co-ordination can be achieved through reconciling personal interests with

organizational goals. This synchronization can be achieved through proper and effective co-

ordination which should be primary motive of a leader.

MODULE 4 - MANAGEMENT FUNCTIONS

Planning: Planning is concerned with the future impact of today's decisions. It is the fundamental

function of management from which the other four stem. The need for planning isoften apparent after the

fact. However, planning is easy to postpone in the short-run. Postponement of planning especially plagues

labor oriented, hands on managers.

Planning is important at all levels of management. However, its characteristics vary by level of

management

Planning TerminologyThe key terms are defined as follows:

Mission An organization's reason for being. It is concerned with scope of the business and what

distinguishes this business from similar businesses. Mission reflects the culture and values of top

management.

Objectives Objectives refine the mission and address key issues within the organization such as market

standing, innovation, productivity, physical and financial resources, profitability, management and worker

performance and efficiency. They are expected to be general, observable, challenging, and untime

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Development of tactics is a fifth level of planning. Tactics, the most specific and narrow plans, describe

who, what, when, where and how activities will take place to accomplish a goal.

Strategic Planning Strategic planning is one specific type of planning. Strategies are the outcome of strategic planning.

Strategies are major plans that commit large amounts of the organization's resources to proposed actions,

designed to achieve its major objectives and goals. Strategic planning is the process by which the

organization's strategies are determined In the process, three basic questions are answered:

1. Where are we now? 2. Where do we want to be? 3. How do we get there?

The "where are we now?" question is answered through the first three steps of the strategy formulation

process: (1) perform internal and external environmental analyses, (2)review vision, mission and

objectives, and (3)determine SWOT: Strengths, Weaknesses, Opportunities and Threats. SWOT analysis

requires managers to be honest, self-disciplined and thorough. Going on to strategy choices without a

comprehensive SWOT analysis is risky.

Strengths and weaknesses come from the internal environment of the firm. Strengths can be exploited,

built upon and made key to accomplishment of mission and objectives. Strengths reflect past

accomplishments in production, financial, marketing and human resource management. Weaknesses are

internal characteristics that have the potential to limit accomplishment of mission and objectives

Opportunities and threats are uncontrollable by management because they are external to the firm.

Opportunities provide the firm the possibility of a major improvement. Threats may stand in the way of a

firm reaching its mission and objectives.

Organizing:Organizing is establishing the internal organizational structure of the business. The focus is

on division, coordination, and control of tasks and the flow of information within the organization.

Managers distribute responsibility and authority to job holders in this function of management.

Organizational StructureEach organization has an organizational structure. By action and/or inaction,

managers structure businesses. Specifically, they decide:

1. Division of labor 2. Delegation of authority 3. Departmentation 4.Span of control 5. Coordination

Division of Labor Division of labor is captured in an organization chart, a pictorial representation of an organization's

formal structure. An organization chart is concerned with relationships among tasks and the authority to

do the tasks. Eight kinds of relationships can be captured in an organization chart:

1. The division/specialization of labor 2. Relative authority 3. Departmentation4. Span of control 5. The

levels of management 6. Coordination centers 7. Formal communication channels8. Decision

responsibility

Organization charts have important weaknesses that should be of concern to managers developing and

using them:

1. They may imply a formality that doesn't exist.

2. They may be inconsistent with reality.

3. Their usual top down perspective often minimizes the role of customers, front-line managers and

employees without management responsibilities.

4. They fail to capture the informal structure and informal communication.

5. They often imply that a pyramidal structure is the best or only way to organize.

6. They fail to address the potential power and authority of staff positions compared with line positions.

Delegation of Authority Authority is legitimized power. Power is the ability to influence others. Delegation is distribution of

authority. Delegation frees the manager from the tyranny of urgency. Delegation frees the manager to use

his or her time on high priority activities. Note that delegation of authority does not free the manager from

accountability for the actions and decisions of subordinates.

Delegation of authority is guided by several key principles and concepts:

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Exception principle - Someone must be in charge. A person higher in the organization handles exceptions

to the usual. The most exceptional, rare, or unusual decisions end up at the top management level because

no one lower in the organization has the authority to handle them.

Scalar chain of command - The exception principle functions in concert with the concept of scalar chain

of command - formal distribution of organizational authority is in a hierarchial fashion. The higher one is

in an organization, the more authority one has.

Decentralization - Decisions are to be pushed down to the lowest feasible level in the organization. The

organizational structure goal is to have working managers rather than managed workers.

Parity principle - Delegated authority must equal responsibility. With responsibility for a job must go the

authority to accomplish the job.

Span of control - The span of control is the number of people a manager supervises. The organizational

structure decision to be made is the number of subordinates a manager can effectively lead. The typical

guideline is a span of control of no more than 5-6 people. However, a larger span of control is possible

depending on the complexity, variety and proximity of jobs.

Unity principle - Ideally, no one in an organization reports to more than one supervisor. Employees

should not have to decide which of their supervisors to make unhappy because of the impossibility of

following all the instructions given them.

Line and staff authority - Line authority is authority within an organization's or unit's chain of command.

Staff authority is advisory to line authority

Departmentation Departmentation is the grouping of jobs under the authority of a single manager, according to some

rational basis, for the purposes of planning, coordination and control. The number of departments in an

organization depends on the number of different jobs, i.e., the size and complexity of the business.

Informal Structure The formal structure in each organization that has been put in place by management has an accompanying

informal structure. Management does not and cannot control the informal structure.

The informal structure has no written rules, is fluid in form and scope, is not easy to identify, and has

vague or unknown membership guidelines.

Staffing Part I

MEANING The term staffing is concerned with the recruitment, selection, placement, training, growth

and development of all the members of the organization. It is defined as the process involved in

identifying, assessing, placing, evaluating and developing individuals at work.

In the words of Kontz and O‘Donnell staffing can be defined as ―filling positions in the

organizational structure through identifying work force requirements, inventorying the work force,

recruitment, section, placement, promotion, appraisal, compensation and training people‖.

Heavy Investment Procurement of human resources involve investment in terms of selection, training and

development costs. This investment has divers effects, varying with the quality of the persons, the

functions performed, and the level of the organization structure at which they work.

1. Inter-related effort

The usefulness of the person in an enterprise depends on the manager under whom they work and

the facilities made available as well as other person or persons who assist him. For example, Sri

Ramesh is a shop floor manager in a factory. His efficiency on work will depend on his own

competencies as well as that of people under whom he is working as well as his subordinates.

2. Human resources as assets

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The staffing function gains its importance when it is understood that people are the most valuable

assets and resources of the organization. Competent people are required to operate all other physical

assets which otherwise remain inactive.

3. Long term effect

The investment in human resources is of long term effect. The man power produced are to be

deployed continuously in the organization. As long as they continue to work, human force use

resources and engage in transformation of the organization.

4. Loss may surpass investments

While comparing material resources with human resources, a notable distinction is that costs of

material resources used cannot be negative. This means loss may be up to the cost of such raw

materials but this is not so in case of money invested in human resources.

1. Man Process Planning:

Man power planning is concerned with forecasting the future man power needs of the

organization for various categories of activities over a specified period. The process of manpower

planning can be divided into two parts. One is an analysis for determining the quantitative needs of the

organization and other is the qualitative analysis to determine what qualities and characteristics are

required for performing a job. The former is called the quantitative aspect of manpower planning in which

management tries to ensure a fair number of personnel in each department and at each level. The second

aspect is known as a qualitative aspect to manpower planning where in management tries to get a proper

fit between the job requirements and the requirements on the part of personnel in terms of qualification,

experience and personality orientation.

The qualitative aspects thus involves job analysis which has two outcomes (1) Job description and

(ii) Job specification. Job analysis is the study of job content to determine human requirements. An

organization had to undertake data entry operations as part of its documentation work. They require Data

Entry Operators with proficiency in computers and adequate typing skills. Here the job to be undertaken

was computerized data entry of letters, drafts and reports. The skills required would call for candidates

with diploma in computer applications and proficiency in typing and documentation.. In our example job

description statement would illustrate the computerized documentation work to be undertake its nature

and implications and job specification would state the minimum requirements to do the job ie; diploma in

computer applications, computerized data entry skills etc.

2. Recruitment

Recruitment is concerned with the identification of sources from where the personnel can be

employed and motivating men to offer themselves for employment. Recruitment is the process of

searching for prospective employees and stimulating them to apply for job‘s in the organization.

Recruitment of staff can be from within the organization as well as from outside. Recruitment process

involves five elements viz (1) a recruitment policy (2) a recruitment organization (3) a forecast of man

power requirements (4) the development of manpower resources and (5) different techniques for utilizing

these resources and a method for assessing the recruitment programme.

3. Selection

Selection is a deliberate effort of the organization to select a fixed number of personnel from a large

number of applicants . Recruitment forms base for selection. Selection is essentially a negative process as

it involves elimination from a lot in order to select the most suitable candidate.

4. Placement and Orientation

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Once the process of selection is over, the selected candidates are directed to occupy their position in

the organization. Placement refers to putting the right person on the right job. Orientation means

introducing every selected employees to his fellow employees.

RECRUITMENT

Recruitment is the process of attracting qualified personnel, matching them with specific and

suitable jobs, and assigning them to these jobs. Its aim is to develop and maintain adequate man power

resources upon which an organization can depend, when it needs additional employees. It is an activity of

getting interested applicants and providing a pool of prospective employees so that the management can

select the right person for the right job from this pool. The process of recruitment involves identifying the

sources from which recruits can be selected and encouraging them to apply for the job.

Definition

In the words of Edwin B Flippo ―recruitment is the process of searching for prospective

employees and stimulating them to apply for job in the organization‖.

Source of Recruitment

There are mainly two sources of Recruitment. They are :

i. Internal Sources

ii. External Sources

Different sources of resources is given in figure 6.1

Internal Sources of Recruitment

Transfer is concerned with the shifting an employee from one job to another having similar status and

responsibility

Promotion

When a position falls vacant, it is filled from among those who are working in the same line of

activity at the lower level.

Recalling the laid-off employees

Lay off refers to the state where employees are temporarily terminated from work for want of

inputs like raw material and power, shortage of such inputs forces the employers to stop work and

terminate employees under a general condition that they will be recalled when work re

External Sources of Recruitment

i. Advertisement

Advertisement is the most effective means to search potential employees from outside the

organization. Employment advertisement in journals newspapers, bulletins etc. is quite common in

our country. By means of advertisement contains brief statement of the nature of jobs, the types of

people required and procedure for applying for these jobs.

ii. Personnel consultants

Some specialized agencies in the form of personnel consultancy services have developed in

recent times. They undertake the work of recruiting personnel on behalf of the employers. The

consultants are very helpful in procuring top and middle level executives.

iii. Jobbers and Contractors

This method is very popular in our country for hiring skilled and semi-skilled workers. Many

industries in India secure their manpower requirements through jobbers and contractors. The jobbers

and contractors keep themselves in touch with a large number of workers and bring them at the

places where they are required.

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iv. Factory gate

The concept of gate hiring is to select people who approach on their own for employment in the

organization. This happens mostly in the case of unskilled and semi-skilled workers. Gate hiring is

quite useful and convenient method at the initial stage of the organization when large number of such

people may be required by the organization. A large number of job seekers assemble everyday at the

gate of the factory. Usually, the first line superiors or foreman is deputed to select suitable workers

out of them.

v. University or Colleges

Many organizations conduct preliminary search of prospective employees by conducting

interviews at the campus of various institutes, universities and colleges. This source is quite useful for

selecting people to managerial posts, trainees, technical supervisor, scientist, and technicians. The

organization hold preliminary interviews on the campus on predetermined date and candidates found

suitable are called for further interviews at specified places.

vi. Waiting list

Most employers maintain a data base with details of applications received from causal applicants

as well as applicants who were not considered earlier. Such applications may be treated as a source of

recruitment, when vacancies arise in the organization.

vii. Employment Exchanges

There is a network of employment exchanges in the country which is run by the Government. It is

an important source of recruitment of personnel. Job seekers get themselves registered with these

exchanges. The names of these persons will be supplied to business concerns on the basis of their

requisition.

viii. Recommendations of the present employees

Some employers treat the recommendations of their present employees as a useful source of

recruitment. The present employees who knows the organization an the job is required to recommend

a person closely known to him for consideration of appointment. This ensures reliability and

suitability for the post. At the same time it helps in booting the morale of the existing employees for

the faith reposed in them.

ix. Labour Unions

In many organizations, labour unions are used as source of manpower supply at the lower levels.

Labour unions are asked to make recommendations for employment of people as a matter of goodwill

and co-operation.

TRAINING AND DEVELOPMENT

Training

Training means to impart information and skills through instructions. It is the method of

increasing the knowledge , skills and aptitudes of an employee for performing a particular job. Its purpose

is to enable them to do their jobs better. Training makes newly appointed worker fully productive with

minimum time.

A capable and competent person cannot do the best on his job unless he is systematically trained.

Training is necessary for new as well as existing employees.

Development

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While training imparts specific skills to the trainee, development envisages the overall formation

of an individual. It is undertaken for the wholistic improvement of an individual, both as a member of the

organization and a responsible citizen of the society. The developmental initiates in an organization

include personality development, motivation for growth, career planning etc.

Need of Training

Training is beneficial not only to the employers but also to the employees. The success or failure

of an organization largely depends on the efficiency of the personnel in an organization. Training helps in

sharpening and enhancing employees‘ ‗skills, which make them more effective on their job. It reduces

wastages and thereby contributes ton profitability of the enterprise. The significance of training is

discussed under the following heads.

1. Quick learning

Training helps to reduce the learning time necessary to attain an acceptable level not learn by

observing others or through a trial and error method if formal training programmes exist in the

organization. The qualified instructions will help the new employees to acquire the skills and

knowledge to so a particular job within a short span of time.

2. Higher Productivity

Enhanced skills and competencies acquired through training usually helps in increasing both

quantity and quality of the output. Training is also of great help to the existing employees. It helps

them to increase their level of performance on their present job assignments.

3. Less Supervision

If the employees are given adequate training, the need for supervision is minimum. Training does

not eliminate the need for supervision, but it reduces the need for detailed and constant supervision. A

well-trained employee is self-reliant in his work because he knows what to do and how to do. With

reduced supervision, a manager can increase his span of management.

4. Higher Morale

The morale of employee increases when they are given proper training. Morale is a mental

condition of an individual or group, which determines their willingness to co-operate. A common

objective of any training programmes is to mould employees‘ attitudes to achieve support for

organizational activities and to obtain better co-operation and greater loyalty. With the help of

training, dissatisfactions, complaints, absenteeism and labour turnover can be reduced.

5. Better Management

A manager can make use of training to manage in a better way. Training the employees can assist

him in his managerial functions. For instance, maintaining higher standards of quality, building a

satisfactory organization structure, delegating authority and stimulating employees are all made

possible through an effective training plan.

6. Economical Operations

Trained personnel will be able to make better and economical use of materials and equipments

thereby reducing wastage. In addition, the rate of accidents and damage to machinery and equipment

will be minimum. These factors will minimize the cost of production.

7. Benefits to employees themselves

As employees acquire more knowledge and skills from training, this increases their market value

and earning power. By securing such skills, they enhance their value to the employer and at the same

time ensure job security for themselves. Training helps in securing promotion and career growth.

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Training Methods

Training methods are mainly classified into two viz.1. On the job training and 2.Off the job

training.

On the job training

On the job training methods focuses on learning while and individual is actually engaged in work.

Such training methods place the employees in actual work situations and give them hands on experience

on the job. Here the employees learn by doing. It includes job rotation, apprenticeship, coaching,

vestibule training, committee assignments etc.

Off the job training

In off the job training, a trainee has to leave his place of work and devote his entire time for

training purpose. During this period, the trainee does not contribute anything to the organization. These

methods can be followed wither in the organization itself or the trainee may be sent away for training

courses organized by specialized institutions. These methods include conferences, role-playing, special

courses, sensitivity training, internship etc.

Following are the main types of training, which are adopted by organizations.

1. Apprenticeship programmes

Apprenticeship training programmes are directed more towards education than merely on the

vocational training. Under this, both knowledge and skills in doing a job or services of related jobs

are imparted. Under apprenticeship training , a trainee is put under supervision of a person who may

be quite experienced in his field. Such training becomes necessary when people enter a job, which

involves skilled trades like electrical works, mining operations etc.

2. Vestibule training

In vestibule training, employees taken through a short course under working conditions more or

less same as that of actual shop floor, sales or office conditions. Under this method, people will

develop and learn skills while working in situations similar to what they will face after they are put on

actual jobs. Many organizations establish training centre to train people for skilled work particularly

in the production department. Vestibules are training schools where complex work situations are

created and trainees exposed to such conditions.

3. Job rotation

Job rotation, a person is given job in various sections or departments of the organization. The

major objective of job rotation training is to broaden the background of the trainee. He can learn the

working of various sections and departments of the originations, which helps in developing integrated

knowledge of the organizational functioning.

4. Internship training

Internship training programmes have become popular these days because of co-operation between

employers and vocational and professional institutes. Under this method, the vocational and

professional institutes enter into an agreement with business enterprise for providing practical

knowledge to its students. It is meant for such vocations where advanced theoretical knowledge is to

be backed by practical experience on the job.

COMPENSATION

The term compensation denotes what the employees receive in return for their efforts contributed

to the organization. Three types of rewards are offered to the employees for their services such as pay,

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benefits and incentives. Pay refers to the wages and salaries that the employees receive periodically.

Benefits are indirect type of rewards such as insurance, medical benefits, recreational facilities, etc.

Incentives

It is undoubtedly a fact that incentives are a motivating factor for employees to perform

efficiently and effectively. To motivate employees to be more productive, companies follow a number of

incentive plans. Incentives may be in the form of bonus of premium. Bonus means the extra payment to

workers for their good performance such as reduction in cost and time, improvement in quality etc.

Premium is the extra benefit to the workers or employees as a result of higher output and betterment in

the overall performance of the organization. Usually, Rate of bonus and premium is fixed on an agreed

basis between management and workers. Generally, there are two types of incentives such as monetary

incentives and non monetary incentives.

Monetary incentives

Monetary incentives involve payment in cash or in kind or in both. Following are the various

types of monetary incentives.

1. Profit sharing

Now a days profit sharing has become a controversial issue in wages and incentive administration.

Labour is the most import element among the factors of production. It is their skills, efforts, efficiency,

and loyalty that bring profits to the organisation. So they believe that they have right to get a share of

surplus profit. The sharing of surplus profit increases the efficiency and morale of the employees. Profit

sharing here, implies sharing the profits carned beyond a particular limit fixed.

2. Co-partnership

Co-partnership compensates employees in three distinct ways. They get their usual wages, a share in

the profits of the company and also a share in the management of the company. The bonus, to which

employees or workers are entitled, are given to them in the form of shares. Thus, in this system,

employees share the capital as well as profits. This system in an improvement over all other system of

wage payment because it offers both profit sharing and control sharing.

3. Bonus

It is a reward that is offered on a one-time basis for high performance. The rate of bonus is not fixed.

It varies from year to year depending on the performance level of employees, amount of profit earned etc.

Bonus may be in cash or in some other form.

4. Suggestion from employees

Employees are reward for their valuable suggestions, which relate to increase in profits or reduction

in cost. It helps in creating greater employee involvement and commitment towards work. The value of

the reward would depend on the monetary worth of the suggestion in terms of cost saved or profits

enhanced.

5. Commission s

Usually, sales people work under commission basis. They get incentive or reward according to the

size of sales volume. Some sales people work on a straight commission basis whereby their pay is entirely

determined by their sales volume.

Non-monetary incentives :Managers and executives give more importance to social and esteem needs

than to money. They value recognition, praise for good work and status more than monetary rewards.

Some of the non-monetary incentives are discussed here.

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1. Good relation with supervisors Cordial and friendly relationship with supervisors enhances

commitment to work. It acts as a source of motivation, inspires and stimulates employees to work

efficiently and effectively.

2. Making the job challenging Lack of jobs satisfaction may make the work unpleasant and results in

loss of interest in the job. Making the job more challenging activates creatively in an individual and

this is beneficial to him.

3. Recognition for good work Providing recognition for good work is an immediate reward that has a

great value. ―praise acts as a more powerful incentive than blame‖. When the employer/ manager

recognizes and praises the employees for their good performance, it acts as a strong non-monetary

incentive. This recognition helps in improving attitudes of employees and motivates them to perform

better.

4. Previous knowledge and experience Knowledge of prior work performance motivates the

individuals to produce more. This prior knowledge also facilitates and promotes working as a team by

effective communication and problem solving. Those individuals who have previous work

experience perform better than those without such experience, acts as a good non-monetary incentive.

5. Participation in management decisionProviding adequate avenues for employees to participate he

decision making process is a non-monetary reward to them. Employees‘ participation in management

enhances their willingness to work and thereby increases the overall efficiency of the organization. It

is necessary to integrate individual and organizational goals to attain the objectives successfully.

Directing : Directing is influencing people's behavior through motivation, communication, group

dynamics, leadership and discipline. The purpose of directing is to channel the behavior of all personnel

to accomplish the organization's mission and objectives while simultaneously helping them accomplish

their own career objectives.

Motivation, the inner force that directs employee behavior, also plays an important role. Highly motivated

people perform better than unmotivated people. Motivation covers up ability and skill deficiencies in

employees

Three ways of looking at motivation are: needs, rewards and effort. The most effective motivation for

employees comes from within each employee, i.e., self-motivation. Possible indicators of self-motivation

include: past accomplishments in school, sports, organizations and work; stated career goals and other

kinds of goals; expertise in one or more areas that shows evidence of craftsmanship, pride in knowledge

and abilities, and self-confidence; an evident desire to continue to learn; and a general enthusiasm for life.

More effective employer action responds to employee needs, making their work useful to satisfying their

needs, helping employees understand the relationship between their contribution to success of the farm

and rewards received, and creating an atmosphere of equity and fairness.

Performance AppraisaL:No employee escapes performance appraisal. As a minimum, each employee

receives informal messages from his or her supervisor and co-workers. The messages may be carefully

calculated or emotional outbursts, frequent or infrequent, helpful or hurtful, understood or misunderstood,

consistent or inconsistent, fair or unfair. They may improve performance or cause additional performance

problems. They may motivate an employee or leave the employee discouraged and disgruntled.

Turning performance appraisal into a positive force challenges even the best farm personnel manager.

Three steps are necessary:

1. Establish written standards for employee performance

2. Develop both supervisor and employee understanding of these standards

3. Regularly inform employees of how they are performing relative to the established standards

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Effective performance appraisal moves beyond informal communication but does not exclude it. Planned

and formal performance evaluation interviews complement spontaneous informal employer-employee

interaction about performance.

Performance evaluation is a complex activity. A formal performance evaluation system can be a realistic

long-term goal to work toward. In the short-run, farm employers can take helpful steps toward the long-

run ideal. In the short-run, the following statements and questions can guide performance evaluation,

counseling and planning discussions with each employee:

1. I see the following three things as your most important strengths.

2. I see the following two things for us to work on improving during the next six months.

3. What do you see as your most important strengths?

4. What would you like to learn or work on improving?

5. How should I work on improving?

Intermediate steps could include clear communication of expectations for employees, regular feedback to

employees about their performance, providing employees opportunity to respond to their supervisor's

comments and additional training for employees based on needs identified through performance appraisal.

The notion of catching people doing things right should be an important part of employee evaluation and

improving performance appraisal.

Discipline:High quality farm worker performance requires implementation of carefully made tactical

plans. Deviations from the plans by employees results in standards not being met and goals not being

accomplished. Managers must deal with employees' deviation from rules, procedures and expected

behaviors. Employees coming late to work, not following safety procedures when working alone, not

properly cleaning equipment in their rush to get home, and using wrong or wrong amounts of medication

are examples of unacceptable behavior that should be addressed rather than ignored. A cautionary note is

in order.. This discussion of discipline applies to those cases in which the employee can reasonably be

expected to perform or behave according to established standards, norms or rules, i.e., they have been

carefully selected, well trained and are regularly evaluated.

A disciplined person exhibits the self-control, dedication and orderly conduct consistent with successful

performance of job responsibilities. This discipline may come through self-discipline, co-workers or the

supervisor/employer. Self-discipline is best and most likely to come from well selected, trained, and

motivated people who regularly have feedback on their performance.

An employee not performing up to the agreed upon standards or not following the understood rules is

subject to punishment, i.e., disciplinary action. Punishing or disciplining employees falls among the least

pleasant activities in human resource management. In the short-run, doing nothing or ignoring errant

actions and behavior almost always comes easier than taking the needed action.

Controlling:Controlling is a four-step process of establishing performance standards based on the firm's

objectives, measuring and reporting actual performance, comparing the two, and taking corrective or

preventive action as necessary

Characteristics of process Budget is a plan expressed in monetary terms, prepared and approved prior to a defined period time. It is

a written statement containing strategies, polices and programmes to be followed in the future. Budgeting

is an integral part of management functions. It is the process of designing, implementing and operating

budgets. It also involves forecasting. It is done for the purpose of planning different phases of business

operations, co-ordinating activities of different departments and to have effective control over it. The

major purposes of budgeting are:

1. To express clearly the goals and expectations of the firm.

2. To communicate it to all concerned for the purpose of implementing it.

3. To provide a detailed plan of action for reducing uncertainty.

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4. To co-ordinate the activities and efforts.

5. To provide a means of measuring and controlling the performance on the basis of which corrective

action can be taken.

Budgeting procedure involves there phases such as 1. Pre-planning, 2. Budget preparation, and

3. Control of operations.

1. Pre-planning : Pre-planning is the initial work for providing a initial work for providing a frame work

for the preparation of budget. An analysis of the objectives and goals of the firm, previous experience

and the current business environment are done at this stage.

2. Budget preparation : Budget preparation is done in accordance with the programmes of different

departments meant for the accomplishment of the objectives and goals.

3. Control of operations : it involves the preparation of performance reports and the comparison of the

performance against the budgets showing separately the variances or departure of actual and budgets.

Meaning and importance of capital budgeting.

Capital budgeting is a managerial technique of planning capital expenditure in accordance with

the objectives of the firm. Capital budget involves large sum of funds and have long – term implications.

It estimates the expected cash flows spread over a long period which involve a great degree of

uncertainty.

Capital budgeting is probably the most important area of decision making for financial manager

because it is in respect of planning the fund requirements, allocating the funds and controlling its uses.

Special care should be made taken in making such decisions because of the following reasons:

1. Long term implications: Capital budgeting decisions have long –term implications. If affect the future profitability and growth

of the firm. A wrong decision may endanger the very survival of the firm. Both inadequate and

excessive investments in fixed assets may create problems in the form of heavy operating costs and

loss of market share.

2. Irreversible decisions:

Capital budgeting decisions involve heavy investment in fixed assets and care irreversible. Once

implemented, such decisions can be scrapped only at huge losses. It is very difficult to find market for

the second hand capital goods and their conversion into other projects may not be possible.

3. Affect future cost structure:

Through capital budgeting decisions a firm commits itself to a sizable amount of fixed costs in terms

of wages, salary, rent of building and so on. If such decisions become unsuccessful or fetch a lesser

profits, the form will have to bear the fixed costs.

4. Competitive position:

These decisions have a bearing on the competitive position of the firm. They enable the firm to create

value added products with lesser costs which lead to profit and ultimately with a competitive position in

the market.

MODULE 5 - ORGANIZATIONAL POLITICS

What is organizational culture? A single definition of organizational culture has proven to be very elusive. No one definition of

organizational culture has emerged in the literature. One of the issues involving culture is that it is defined

both in terms of its causes and effect. For example, these are the two ways in which cultures often

defined.

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1. Outcomes- Defining culture as a manifest pattern of behavior

2. Process- Defining culture as a set of mechanisms creating cross individual behavioral consistency

Functions of organizational culture 1. Behavioral control

2. Encourages stability

3. Provides source of identity

Draw backs of culture 1. Barrier to change and improvement

2. Barrier to diversity

3. Barrier to cross departmental and cross organizational cooperation

4. Barrier to mergers and acquisitions

There are four basic ways in which a culture, or more accurately members of a reference group

representing a culture, creates high levels of cross individual behavioral consistency. There are:

Social Norms:-Social norms are the most basic and most obvious of cultural control mechanisms. In its

basic form, a social norm is simply a behavioral expectation that people will act in a certain way in certain

situations. Norms (as opposed to rules) are enforced by other members of a reference group by the use of

social sanctions. Norms have been categorized by level.

A. Peripheral norms are general expectations that make interactions easier and more pleasant.

B. Relevant norms encompass behaviors that are important to group functioning. Violation of

these norms often results in non-inclusion in important group functions and activities

C. Pivotal norms represent behaviors that are essential to effective group functioning

What is a value? Any phenomenon that is some degree of worth to the members of giving groups: The

conception of the desirable that establishes a general direction of action rather than a specific objective.

1. Organisational culture is same as organisationalclimate :In management literature there is often

ambiguity about the two concepts – organisational culture and organisational climate. As explained

earlier, organisational culture is a macro phenomenon which refers to the patterns of beliefs,

assumptions, values, and behaviours reflecting commonality in people working together. However,

organisational climate is a micro phenomenon and reflects how employees in an organisation feel

about the characteristics and quality of culture like morale, goodwill, employee relations, job

satisfaction, commitmrnt at the organisational, department or unit level. It refers to the psychological

enviornment in which behaviour of organisational members occurs. It is a relatively persistent set of

perceptions held by organisational members about the organisational culture. Another viewpoint

about climate is that various variables get subsumed under the concept of climate, whereas has unique

indicators like symbols, rites, myths, and stories.

2. Culture is same as „groupthink‟ :Since culture refers to shared assumptions and beliefs, it is likely to

cause confusion. Groupthink refers to group members hiding any differences in how they feel and

think and behave in a certain way. The phenomenon of groupthink is mostly used in a face – to – face

situation when dealing with small groups. Culture, on the other hand, is a much larger phenomenon

characterised by historical myths, symbols, beliefs, and artifacts.

3. Culture is same as organisation :Culture is a result of sustained interaction among people in

organisations and exists commonly in thoughts, feelings, and behaviour of people. Organisations on

the other hand, consist of a set of expectations and a system of reward and punishment substained by

rules, regulations, and norms of behaviour.

4. Culture is a social structure :Social structures in various collectives exhibit tangible and specific

ways in which people relate to one another overtly. However, culture operates on a system of unseen,

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abstract, and emotionally loaded forms which guide organisational members to deal with their

physical and social needs.

NATURE OF ORGANISATIONAL CULTURE

The culture of an organisation may reflect in various forms adopted by the organisation. These could be :

The physical infrastructure

Routine behaviour, langauge, ceremonies

Gender equality, equity in payment

Dominant values such as quality, efficiency and so on

Philosophy that guides the organisation‘s policies towards it employees and customers like ‗customer

first‘ and ‗customer is king‘, and the manner in which employees deal with customers.

Individually none of these connote organisational culture, however, together, they reflect organisational

culture. Although organisational culture has common properties, it is found that large organisations have a

dominant culture and a number of sub – cultures. The core values shared by the majority of the

organisational members constitute the dominant culture. Therefore, whenever one refers to the culture of

an organisation one actually talks about the dominant culture of an organisation one actually talks about

the dominant culture. Subcultures within an organisation are a set of shared understandings among

members of one group/department/geographic operations. For example, the finance department of an

organisation may have a sub – culture which is unique to this department vis–a–vis other departments.

This means that this department will not only have the core values of the organisation‘s dominant culture

but also some unique values. If an organisation does not have a dominant culture and is comprised only of

various sub – cultures, its effectiveness would be difficult to judge and there will be no consistency of

behaviour among departments. Hence, the aspect of common or shared understanding is an essential

component of organisational culture. Also, organisational culture exists at various levels.

LEVELS OF ORGANISATIONAL CULTURE

1. At Level One the organisational culture can be observed in the form of physical objects, technology

and other visible forms of behaviour like ceremonies and rituals. Though the culture would be visible

in various forms, it would be only at the superficial level. For example, people may interact with one

another but what the underlying feelings are or whether there is understanding among them would

require probing.

2. At Level Two there is greater awareness and internalisation of cultural values. People in the

organisation try solutions of a problem in ways which have been tried and tested earlier. If the

group is successful there will be shared perception of that ‗success‘, leading to cognitive changes

turning perception into values and beliefs.

3. Level Threerepresents a process of conversion. When the group repeatedly observes that the method

that was tried earlier works most of the time, it becomes the ‗preferred solution‘ and gets

converted into underlying assumptions or dominant value orientation. The conversion process has

both advantages. The advantages are that the dominant value orientation guides behaviour,

however at the same time it may influence objective and rational thinking.

These three levels range on a scale of superficial to deeply embedded. As cultural symbols get converted

to shared assumptions, they move from a superficial level to a real internationalised level

PATTERNS OF ORGANISATIONAL CULTURE

Types of Organizational Culture

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Organisational culture can vary in a number of ways. It is these variances that differentiate one

organisation from the others. Some of the bases of the differentiation are presented below :

1. Strong vs weak culture :Organisational culture can be labelled as strong or weak based on sharedness

of the core values among organisational members and the degree of commitment the members have to

these core values. The higher the sharedness and commitment, the stronger the culture increases the

possibility of behaviour consistency amongst its members, while a weak culture opens avenues for

each one of the members showing concerns unique to themselves.

2. Soft vs hard culture :Soft work culture can emerge in an organisation where the organisation pursues

multiple and conflicting goals. In a soft culture the employees choose to pursue a few objectives

which serve personal or sectional interests. A typical example of soft culture can be found in a

number of public sector organisations in India where the management feels constrained to take action

against employees to maintain high productivity. The culture is welfare oriented; people are held

accountable for their mistakes but are not rewarded for good performance. Consequently, the

employees consider work to be less important than personal and social obligations. Sinha (1990) has

presented a case study of a public sector fertilizer company which was established in an industrially

backward rural area to promote employment generation and industrial activity. Under pressure from

local communities and the government, the company succumbed to overstaffing, converting

mechanised operations into manual operations, payment of overtime, and poor discipline. This

resulted in huge financial losses (up to 60 percent of the capital) to the company.

3. Formal vs informal culture :The work culture of an organisation, to a large extent, is influenced by

the formal components of organisational culture. Roles, responsibilities, accountability, rules and

regulations are components of formal culture. They set the expectations that the organisation has from

every member and indicates the consequences if these expectations are not fulfilled

CORPORATE CULTURE

DEFINITION: Corporate culture is the total sum of the values, customs, traditions, and meanings

that make a company unique. Corporate culture is often called "the character of an organization",

since it embodies the vision of the company‘s founders. The values of a corporate culture influence

the ethical standards within a corporation, as well as managerial behaviour.

Senior management may try to determine a corporate culture. They may wish to impose corporate

values and standards of behaviour that specifically reflect the objectives of the organization. In

addition, there will also be an internal culture within the workforce. Work-groups within the

organization have their own behavioural quirks and interactions which, to an extent, affect the whole

system.

Corporate culture is a term used to describe the collective beliefs, value systems, and processes that

provide a company with its own unique flavour and attitude. Businesses of all sizes possess some

type of corporate culture, in that every company has a set of values and goals that help to define what

the business is all about. Here are some examples of elements that go into creating and defining a

corporate culture.

According to Deal and Kennedy corporate culture is based on an interlocking of six elements: history,

values and beliefs, rituals and ceremonies, stories, heroic figures and the informal cultural network of

storytellers, gossipers, whisperers, spies and priests. Their Culture Types model distinguishes four

corporate culture types, based on two elements:

Feedback Speed: How quickly are feedback and rewards provided (through which the people are

told they are doing a good or a bad job)

Degree of Risk: The level of risk taking (degree of uncertainty).

The combination of these two elements results in four types of corporate cultures:

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Tough-Guy Macho Culture (Fast feedback and reward, high risk):

Stress results from the high risk and the high potential decrease or increase of the reward.

Focus on now, individualism prevails over teamwork.

Typical examples: advertising, brokerage, sports.

Work-Hard, Play-Hard Culture (Fast feedback and reward, low risk):

Stress results from quantity of work rather than uncertainty.

Focus on high-speed action, high levels of energy.

Typical examples: sales, restaurants, software companies.

Process Culture (Slow feedback and reward, low risk):

Stress is generally low, but may come from internal politics and stupidity of the system.

Focus on details and process excellence.

Typical examples: bureaucracies, banks, insurance companies, public services.

Bet-Your-Company Culture (Slow feedback and reward, high risk):

Stress results from high risk and delay before knowing if actions have paid off.

Focus on long-term, preparation and planning.

Typical examples: pharmaceutical companies, aircraft manufacturers, oil prospecting companies

Types of Corporate Culture: Any large organization that involves a large amount of people working at different tasks will develop

a certain culture. The most successful corporations thrive because they have created a culture ideally

suited to the tasks they perform. Not every culture would work in every industry. There are several

key types of corporate cultures.

Aggressive Culture

The play culture is most concerned with creativity and finding innovative ways to accomplish tasks.

The quickest way to advance within this type of organization is by displaying the most intelligence

and coming up with the most useful ideas. This sort of culture works best in fields such as design

where large rewards are to be had for the company with the newest approaches. This culture would

not work in a more aggressive field.

Process Culture The process culture is less concerned with results and more concerned with a regular routine. Rather

than feedback on accomplishments most managers will be concerned with the proper way of doing

tasks. The quickest way to advance in this culture is by being especially conscientious in following

protocol. This sort of culture works poorly in most fields but may be useful in very conservative

industries where consistency is most highly valued.

How to build corporate culture.

To build corporate culture you need a clear vision of how you want your clinic to look

and feel and what values you want reflected in your clinic.

This vision must be communicated to your team; your team members need to see the

connection between this vision and what they do.

I would even suggest that you formulate your business and practice vision jointly with your

team, so that the vision is a part of them and their daily practice.

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To build corporate culture you, as the practice owner, need to believe in and offer praise and

a positive attitude, at all the times.

When we praise someone, they want to repeat the experience.

When we fail to reinforce employees for doing the right things, they unconsciously say,

"There's no benefit to doing this, so why bother".

Human beings crave feedback and will avoid situations where they don't get it.

Building corporate culture means that you are transparent with information, you explain

things to your team, you seek input, and you build trust by doing what you say you are going

to do.

Consistent, frequent and meaningful communication is fundamental to building positive

corporate culture.

Recruit and select the right people who embrace the type of culture you are creating.

It is important to make this a part of your hiring process by asking questions related to

practice values, team values, and personal aspirations. Ask for examples or experiences the

person has had in these areas to demonstrate what she/he is saying or espousing.

Creating social traditions and bonding opportunities for your team also builds your corporate

culture. For example, holding annual staff recognition events.

How Important is Culture to a Company?

The culture of a company is the quintessential representation of it‘s style. An organization‘s body

and life blood is it‘s most important asset, it‘s people. Any group‘s culture can be characterized by a

selection of the following traits they share:

inherent rules of engagementaccepted priorities and methods of interacting both internally

and externally

founding and binding principles of the corporation

socially defined

language

dress and clothing style

Without a well developed corporate culture a business is little more than a managed group of

mercenaries. Without culture, a business is likely to blend into the background and fail to stand out to

potential customers, collaborative business partners, and to potential leaders/employees. It is clear

that having a legendary (or at least reputable) corporate culture is extremely beneficial to any

organization.

CONCLUSION

Many other issues of ethics and organizational communication not explicitly discussed her, illustrate the

fact that ethics are integrated into all aspects of organizational life. These include topics such as human

resources, whistle blowing, leadership, privacy, diversity, voice, persuasion and coercion, change, power,

outcomes, recruitment and socialization, management style, advertising. As noted in the NCA Credo,

―Questions of right and wrong occur whenever people communicate. This includes the rich

communicative context of organizational communication. These efforts to place ethics at the center of the

field recognize the link between communication and ethics and implicitly argue for a conceptualization of

organization that includes at its core value dimensions.

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ENVIRONMENT MANAGEMENT

MODULE 1 CONCEPT OF SUSTAINABLE GLOBAL DEVELOPMENT

Sustainable development is the development that needs of the present without jeopardizing

the needs of the future generations. In other words, every generations should leave air, water & soil

resources pure &unpolluted. Although it is a difficult propositions, it can be achieved through proper

environmental mgt. Sustainable development has three interdependent components, which are as follows:

i. Economic development: Utilization of natural resources for cultivation, industrialization,

creating job opportunities & raising quality of life.

ii. Social development: Providing basic needs like food, clothes, shelter, health, education etc.

iii. Environment protection: Providing clean water, air, soil, i.e, safe environment to the present as

well as the future generations.

To meet the basic requirements of ever increasing population, industrialization is a must,but it results in

pollution,environmental degradation &causes ecological imbalances.At the same time ,industrial

development cannot be sacrificed as it creates job opportunities,raises the standard of living &solves

unemployment problems.So,sustainable development is the only answer. Development can take place if

the following concepts are taken care of

Control of population growth

Reduction in excessive usage of resources &enhancing resource conservation,i.e,continuous use

of renewable resources &protection of non renewable resources from wasteage &rapid depletion

ECOLOGIAL EQUILIBRIUM

Ecology is a branch of science that deals with the interrelationship between biotic &abiotic

components of nature as well as with the relationship among the individuals,population & community of

the biotic components.The term ecology is derived from the greek words oikos(meaning

house)&logos(meaning study of)& is used to denote the relationship between the organisms &their

environment.

Ecological balance or stability ecosystem of the impiles a balance between the production and

consumption of each components of ecosystem.

Issues Affecting Ecological Equilibrium

Ecological factors

In an ecosystem,a living organism is influenced by a large number of environmental fac-

Tors are known as eco factors.The ecological factors can be classified into the following :

Climatic factors:light,temperature,nature,rainfall,wind,humidity,athmospheric gases,pH.

A variation in these factors affects the distribution & life styles of organisims.

Topographic factors:altitude,slope&direction of mountain chain &valleys.

Edaphic factors: structure,formation&characteristics of different types of soils.

Biotic factors: Biotic factors are derived from the interactions between different species of life.

The different species mentioned here are plants,micro organisms &animals.

Limiting factors:Denote the amount of substances that is either least abundant or over abundant

in relation to the need of the living organisms.

Population Growth

Population growth is the change in a population over time, and can be quantified as the change in the

number of individuals of any species in a population using "per unit time" for measurement. In biology,

the term population growth is likely to refer to any known organism, but this article deals mostly with the

application of the term to human populations in demography.

Population exceeding the carrying capacity of an area or environment is called overpopulation. It may be

caused by growth in population or by reduction in capacity. Spikes in human population can cause

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problems such as pollution and traffic congestion, these might be resolved or worsened by technological

and economic changes. Conversely, such areas may be considered "underpopulated" if the population is

not large enough to maintain an economic system. Between these two extremes sits the notion of the

optimum population.

Carrying Capacity The term "carrying capacity," long known to ecologists, It "refers to the limit to the number of humans

the earth can support in the long term without damage to the environment." ( Giampietro, et. al. 1992 )

Resource depletion is an economic term referring to the exhaustion of raw materials within a region.

Resources are commonly divided between renewable resources and non-renewable resources. (See also

Mineral resource classification.) Use of either of these forms of resources beyond their rate of

replacement is considered to be resource depletion.Resource depletion is most commonly used in

reference to the farming, fishing, mining, and fossil fuels.

Over-consumption/excessive or unnecessary use of resources

Non-equitable distribution of resources

Overpopulation

Slash and burn agricultural practices, currently occurring in many developing countries

Technological and industrial development

Erosion

Irrigation

Mining for oil and minerals

Aquifier depletion

Forestry

Pollution or contamination of resources

Global Warming

Global warming is the warming near the earth's surface that results when the earth's atmosphere traps the

sun's heat. The earth is getting warmer. The changes are small, so far, but they are expected to grow and

speed up. Within the next fifty to one hundred years, the earth may be hotter than it has been in the past

million years. As oceans warm and glaciers melt, land and cities along coasts may be flooded. Heat and

drought may cause forests to die and food crops to fail. Global warming will affect weather everywhere,

plants and animals everywhere, people everywhere; humans are warming the earth's atmosphere by

burning fuels, cutting down forest, and by taking part in other activities that release certain heat trapping

gases into the air.

One major cause of global warming is the use of fossil fuels. Fossil fuels like coal, oil, and natural gas

that were formed from the remains of plant material deposited during the earth's carboniferous period. We

have known for only a few thousand years that coal, oil, and natural gas can be burned to provide energy.

It was not until the mid-1800s, however, that we began to burn very large quantities of these fossil fuels.

The worldwide consumption of fossil fuel has increased dramatically. Unfortunately, burning fossil fuels

is not the only thing that we humans are doing to increase the amount of carbon dioxide in the

atmosphere. In many parts of the world today, forests are being destroyed at an alarming rate. Enormous

numbers of trees are being cut down, both to provide timber and to clear the land for farming or ranching.

This destructive process is called deforestation. In order to clear forests for agriculture, people cut down

and burn all the trees in area. When the flames die down, nothing is left but acres of blackened, lifeless

countryside. The fire destroys all the plants and kills or drives off the animals. Because there has been

little attempt to replant trees in deforested areas, the world's forests are disappearing very quickly.

Module 2 - What is the meaning of non renewable resources

Non-renewable resources are natural resources which cannot be produced, grown, generated, or

used on a scale which can sustain its consumption rate.

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These resources often exist in a fixed amount, or are consumed much faster than nature can create

them.

Fossil fuels (such as coal, petroleum and natural gas) and nuclear power (uranium) are examples.

Fossil fuels • Fossil fuels, as its name suggests, were formed from the organic remains of prehistoric plants and

animals.

• They are responsible for much of the world‘s electric power and total energy demands.

• These three were formed millions of years ago beneath the earth‘s surface from the decomposed

bodies of dead plants and animals.

Origin of fossil fuels

Fossil fuels are formed by the anaerobic decomposition of remains of organisms including

phytoplankton that settled to the sea (or lake) bottom in large quantities under the sea, millions of

years ago.

Advantages of fossil fuels

It has capacity to generate huge amounts of electricity.

Fossil fuels are very easy to find.

Fossil fuels is used in power plants as they are very cost effective and is also in abundant supply.

Power plants that utilize these fuel are very efficient.

Power stations that make use of fossil fuel can be constructed in almost any location as large

quantities of fuel can be easily brought to the power plants.

Disadvantages of fossil fuels

Pollution is a major disadvantage of fossil fuels because they give off carbon dioxide when

burned causing a greenhouse effect and is responsible for global warming.

Some components of fossil fuel produces carbon dioxide when burned compared to other

components and also it gives off sulphur dioxide that creates acid rain.

Environmentally, the mining of fossils results in the destruction of wide areas of land. Mining this

fossil fuel is also difficult and may endanger the lives of miners.

Use of these fossils can cause unpleasant odors and some problems especially with

transportation.

Use of crude oil causes pollution and poses environmental hazards such as oil spills when oil

tankers, for instance, experience leaks or drown deep under the sea. Crude oil contains toxic

chemicals which cause air pollutants when combusted.

Coal

Coal is a fossil fuel like oil and gas. These are all formed out of organic matter deposited,

decomposed and compressed, storing all the carbon involved under the earth's surface for millions of

years

Advantages of coal Easily combustible and combustion helping in locomotion and in the generation of electricity and

various other forms of energy;

Widely and easily distributed all over the world.

Good availability

Inexpensive

Very large amounts of electricity can be generated in one place using coal, fairly cheaply.

Disadvantages of coal

It is Nonrenewable and fast depleting;

high coal transportation costs, especially for countries with no coal resources .

It leaves behind harmful byproducts upon combustion, thereby causing a lot of pollution;

Mining of coal leads to irreversible damage to the adjoining environment;

Nuclear fuel Nuclear fuel is a material that can be consumed to derive nuclear energy. Nuclear fuels are the

most dense sources of energy available.

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Most nuclear fuels contain heavy fissile elements that can be made to undergo a nuclear fission

chain reaction in a nuclear reactor. The most common fissile nuclear fuels are 235

U and 239

Pu. The

actions of mining, refining, purifying, using, and ultimately disposing of these elements together

make up the nuclear fuel cycle.

Not all nuclear fuels are used in fission reactors. Plutonium-238 and some other elements are used

to produce small amounts of nuclear power by radioactive decay in radioisotope thermoelectric

generators.

Advantages of nuclear fuel

Almost 0 emission (doesn't emit green house gases). It produces electricity without pollution .

They can be sited almost anywhere unlike oil which is mostly imported.

Does not consume fossil fuels which are getting scarcer and more expensive.

A lot of energy from a single power plant can be produced.

Disadvantages of nuclear fuel The problem of how to store the dangerous radioactive waste safely.

The risks of a dangerous accident or terrorist attack at the nuclear power plant.

risks in mining and transporting the radioactive fuel.

the safety risks in transporting the radioactive waste

the risks of theft of material, possibly for a nuclear bomb.

.

Conservation of non renewable resources

Use less of them by developing renewable fuels like wind power, sunlight, hydrogen gas (fuel

cells), and ethanol.

By consumption of petrol or diesel can be minimised by using mass transport modes like buses ,

trains, bicycles etc..

Four wheelers can be shared with other car owners on a rotational basis.

Renewable energy

Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and

geothermal heat, which are renewable (naturally replenished). In 2008, about 19% of global final energy

consumption came from renewables, with 13% coming from traditional biomass, which is mainly used

for heating, and 3.2% from hydroelectricity. The share of renewables in electricity generation is around

18%, with 15% of global electricity coming from hydroelectricity and 3% from new renewables.

Mainstream forms of Renewable Energy

Hydro Power

Wind Power

Solar Power

Biomass

Biofuel

Geothermal Energy

Tidal Energy

Hydroelectricity

It is the term referring to electricity generated by hydropower; the production of electrical power

through the use of the gravitational force of falling or flowing water.

It is the most widely used form of renewable energy.

Once a hydroelectric complex is constructed, the project produces no direct waste, and has a

considerably lower output level of the greenhouse gas carbon dioxide (CO2) than fossil fuel

powered energy plants.

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Wind power

Airflows can be used to run wind turbines.

Modern wind turbines range from around 600 kW to 5 MW of rated power, although turbines

with rated output of 1.5–3 MW have become the most common for commercial use; the power

output of a turbine is a function of the cube of the wind speed, so as wind speed increases, power

output increases dramatically.

Areas where winds are stronger and more constant, such as offshore and high altitude sites, are

preferred locations for wind farms. Typical capacity factors are 20-40%, with values at the upper

end of the range in particularly favourable sites.

Wind power is renewable and produces no greenhouse gases during operation, such as carbon

dioxide and methane.

Solar energy

Solar energy is the energy derived from the sun through the form of solar radiation. Solar

powered electrical generation relies on photovoltaics and heat engines.

A partial list of other solar applications includes space heating and cooling through solar

architecture, daylighting, solar hot water, solar cooking, and high temperature process heat for

industrial purposes.

Solar technologies are broadly characterized as either passive solar or active solar depending on

the way they capture, convert and distribute solar energy.

Active solar techniques include the use of photovoltaic panels and solar thermal collectors to

harness the energy.

Passive solar techniques include orienting a building to the Sun, selecting materials with

favorable thermal mass or light dispersing properties, and designing spaces that naturally

circulate air.

Biomass

Biomass (plant material) is a renewable energy source because the energy it contains comes from

the sun. Through the process of photosynthesis, plants capture the sun's energy. When the plants

are burned, they release the sun's energy they contain. In this way, biomass functions as a sort of

natural battery for storing solar energy.

As long as biomass is produced sustainably, with only as much used as is grown, the battery will

last indefinitely.

Geothermal energy

Geothermal energy is energy obtained by tapping the heat of the earth itself, both from kilometers

deep into the Earth's crust in some places of the globe or from some meters in geothermal heat

pump in all the places of the planet .

It is expensive to build a power station but operating costs are low resulting in low energy costs

for suitable sites. Ultimately, this energy derives from heat in the Earth's core.

The geothermal energy from the core of the Earth is closer to the surface in some areas than in

others. Where hot underground steam or water can be tapped and brought to the surface it may be

used to generate electricity. Such geothermal power sources exist in certain geologically unstable

parts of the world such as Chile, Iceland, New Zealand, United States, the Philippines and Italy

Tidal power

Tidal power, also called tidal energy, is a form of hydropower that converts the energy of tides

into electricity or other useful forms of power. The first large-scale tidal power plant (the Rance

Tidal Power Station) started operation in 1966.

Module- 3 - Environmental Ethics

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Environmental ethics is a branch of environmental philosophy, that studies the ethical relationship

between human beings and the environment. Environmental ethics has given a new dimension to the

conservation of natural resources. Environmental ethics believes in the ethical relationship between

human beings and the natural environment. Human beings are a part of the society and so are the other

living beings. When we talk about the philosophical principle that guides our life, we often ignore the fact

that even plants and animals are a part of our lives. They are an integral part of the environment and

hence have a right to be considered a part of the human life. On these lines, it is clear that they should also

be associated with our guiding principles as well as our moral and ethical values.

Environmental ethics is the discipline in philosophy that studies the moral relationship of human beings

to, and also the value and moral status of, the environment and its nonhuman contents. This entry covers:

the challenge of environmental ethics to the anthropocentrism (i.e., human-centeredness) embedded in

traditional western ethical thinking

(2) the early development of the discipline in the 1960s and 1970s;

(3) the connection of deep ecology, feminist environmental ethics, and social ecology to politics;

(4) the attempt to apply traditional ethical theories, including consequentialism, deontology, and

virtue ethics, to support contemporary environmental concerns

(5) the focus of environmental literature on wilderness, and possible future developments of the

discipline

six theoretical approaches to environmental ethics: (1) Anthropocentrism ("nature for man"), (2) Animal

Liberation, (3) the attempt to base an environmental ethic on alleged "Rights of Nature", (4) Gaia-

Centrism which bases environmental values in life communities, and (5) "Biophilia" which attempts to

link responsibility to nature with natural-evolutionary facts of "human nature."

Anthropocentrism

The view that humanity's needs and interests are of supreme and exclusive value and importance in

nature, so dominates the thinking of most people in our culture that it is virtually pre-conscious -- an

unexamined presupposition of most popular reflections, feelings, and utilization policies regarding wild

nature. Anthropocentrism has both a religious and a secular foundation. The rationale and justification of

the secular approach to anthropocentrism are somewhat different, yet they lead to essentially the same

conclusion as the religious. By this account, life has recently evolved to include a self-conscious, rational,

deliberative, personal species -- homo sapiens. Some species have sentient lives; that is, they are capable

of feeling and, most significantly morally speaking, of feeling pain. Most species, however, are neither

sentient nor conscious. That it is alive or not "matters" not a bit, say, to an insect or to a tree, and perhaps

very little to a hummingbird. These species haven't the mental (which is to say the neural) capacity to

"care." Life matters most, if not exclusively, to the one species we know of that can contemplate the past,

present and future of its own life, and act rationally and deliberatively to affect the condition of that life

ANIMAL LIBERATION

"animal liberation" is an inappropriate approach to environmental ethics, since it disregards the holistic

and ecosystemic view of the natural environment, and of mankind's responsibility toward this

environment .

GAIA-CENTRISM -- THE LAND ETHIC

The word "Gaia," the ancient Greek name of the "Earth Goddess," has been adopted by the British

biologist, James Lovelock, to designate his hypothesis that the Earth itself -- its global ecosystem, along

with the physical-chemical mechanisms of soil, atmosphere and oceans -- is an integrated, self-regulating

system. Hence, "Gaia-Centrism" -- the view that the whole Earth itself, and not any of its component

organisms or species or regions in isolation, is the focus of fundamental ethical concern Conservation is

getting nowhere because it is incompatible with our Abrahamic concept of Land. We abuse land because

we regard it as a commodity belonging to us. When we see land as a community to which we belong, we

may begin to use it with love and respect. There is no other way for land to survive the impact of

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mechanized man, nor for us to reap from it the esthetic harvest it is capable, under science, of contributing

to culture...

HOLISM AND CONTEXTUALISM IN ETHICS

Among the essential messages that the biologist and the ecologist offer the moral philosopher is that man

evolved from, and remains a member of, the natural community. Man is a natural being and thus remains

subject to nature's laws. This is so whether or not we are aware of this dependence or desire it. We have

long believed that this was not so; that mankind was of a special and separate order from nature. Recently,

while we have acknowledged our natural origins, we have allowed ourselves to believe that with our

remarkable growth in scientific knowledge and technical power we could declare our independence from

the life community. The hard facts seem to indicate that we can not, and that we will continue to believe

otherwise at our great peril

MORAL PSYCHOLOGY AND THE ENVIRONMENT

After a remarkably extended period of neglect, moral philosophers are once again adopting a

psychological perspective and examining the perennial issues of good and bad, right and wrong,

obligations and rights, etc., in such psychological terms as needs, fulfillments, moral sentiments, motives,

habits, capacities to comprehend and obey moral maxims, problem-solving abilities, moral

educability, etc

Green Marketing(module-III)

Green marketing refers to the process of selling products and/or services based on their

environmental benefits. Such a product or service may be environmentally friendly in it or produced

and/or packaged in an environmentally friendly way. The obvious assumption of green marketing is that

potential consumers will view a product or service's "greenness" as a benefit and base their buying

decision accordingly. The not-so-obvious assumption of green marketing is that consumers will be

willing to pay more for green products than they would for a less-green comparable alternative product -

an assumption that, in my opinion, has not been proven conclusively. Green marketing involves

developing and promoting products and services that satisfy customers want and need for Quality,

Performance, Affordable Pricing and Convenience without having a detrimental input on the environment

Green marketing is a golden goose. As per Mr. J. Polonsky, green marketing can be defined as,

"All activities designed to generate and facilitate any exchange intended to satisfy human needs or wants

such that satisfying of these needs and wants occur with minimal detrimental input on the national

environment." Green marketing must satisfy two objectives: improved environmental qualityand

customer satisfaction. Misjudging either or overemphasizing the former at the expense of the latter can be

termed ―green marketing myopia.‖

According to the American Marketing Association, green marketing is the marketing of products

that are presumed to be environmentally safe. Thus green marketing incorporates a broad range of

activities, including product modification, changes to the production process, packaging changes, as well

as modifying advertising. Yet defining green marketing is not a simple task where several meanings

intersect and contradict each other; an example of this will be the existence of varying social,

environmental and retail definitions attached to this term. Other similar terms used are Environmental

Marketing and Ecological Marketing.

Three keys to successful green marketing

Green Marketing isn't just a catchphrase; it's a marketing strategy that can help you get more customers

and make more money. But only if you do it right .For green marketing to be effective, you have to do

three things; be genuine, educate your customers, and give them the opportunity to participate.

Benefits of Green Marketing

36

Companies that develop new and improved products and services with environment inputs in mind give

themselves access to new markets, increase their profit sustainability, and enjoy a competitive advantage

over the companies which are not concerned for the environment.

Adoption of Green Marketing

There are basically five reasons for which a marketer should go for the adoption of green marketing. They

are -

Opportunities or competitive advantage

Corporate social responsibilities (CSR)

Government pressure

Competitive pressure

Cost or profit issues

Green Marketing Mix

Conclusion

Green marketing should not neglect the economic aspect of marketing. Marketers need to

understand the implications of green marketing. If you think customers are not concerned about

environmental issues or will not pay a premium for products that are more eco-responsible, think again.

You must find an opportunity to enhance you product's performance and strengthen your customer's

loyalty and command a higher price. Green marketing is still in its infancy and a lot of research is to be

done on green marketing to fully explore its potential.

(Module; 3)Concerns for environment in; product development, production process.

The magnitude of problems has expanded considerably over the past several decades, from pollution and

solid waste issues to deforestat-ion, soil erosion and other forms of natural resource depletion and de-

gradation.it is important to understand this shift since not only government actions, but but also the

individual acts of several decision-makers in the industrial sector will, in large part,determine wheather or

not society is capable of taking effective actions in environmental matters.

Product development

Development of products in an environment-friendly way is a major concern of people these days, where

to get started is the most difficult steps in the initiation of green product development strategy. Several

alternatives are available to bring this knowledge into the company. Grooming the individuals within an

organization, hiring experienced green professionals, or engaging consulting services are some of the

alternatives that help in advancing the knowledge. each alternative has its own benefits and drawbacks.

Internal green competency development takes time and choice of the individual is very important.there

are two elements to the green competency.

(1)The knowledge of the regulation

(2)The knowledge of the process steps ,the chemistry and analysis tools required to evaluate the material

properties for hazardous material and their proposed green replacements.

Larger companies need individuals that would have two set of skills, knowledge about rules and

regulations and coordination with the appropriate agencies and material and chemical knowledge. any

individuals with these skills is required in an organization.

Cleaner production

Cleaner production is the continuous application of an integrated,preventive environmental strategy to

processes and products to reduce risks to humans and the environment.for the production processes

,cleaner production includes conserving raw material water and energy,eliminating toxic raw materials

and reducing the quatity and toxicity of all emissionsand wastes before they leave a process.for

product,from stratergy focuses on reducing impacts along the entire life cycle of the product.organisation

achieve cleaner production by applying know-how,improving technology and changing attitudes.

Strategies for ensuring environmental –friendly business operations

37

1. Keep the travel minimum

2. Use web based technology

3. Run a paper- less office

4. When printing is unavoidable ensure a printer is compatible with refillable ink cartridge and has a

duplex printing function.

5. Online marketing

6. Turn off equipments.

7. Energy saving light-bulbs.

Packaging is the science, art and technology of enclosing or protecting products for distribution, storage,

sale, and use. Packaging also refers to the process of design, evaluation, and production of packages.

Packaging can be described as a coordinated system of preparing goods for transport, warehousing,

logistics, sale, and end use. Packaging contains, protects, preserves, transports, informs, and sells. In

many countries it is fully integrated into government, business, institutional, industrial, and personal use.

Package labeling or labeling is any written, electronic, or graphic communications on the packaging or

on a separate but associated label.

The purposes of packaging and package labels,Symbols used on packages and labels,Shipping container

labelling, Package development considerations, Environmental considerations5 Packaging machines6

References.

The first packages used the natural materials available at the time: Baskets of reeds, wineskins (Bota

bags), wooden boxes, pottery vases, ceramic amphorae, wooden barrels, woven bags, etc. Processed

materials were used to form packages as they were developed: for example, early glass and bronze

vessels. The study of old packages is an important aspect of archaeology.

Iron and tin plated steel were used to make cans in the early 19th century. Paperboard cartons and

corrugated fiberboard boxes were first introduced in the late 19th century.

Packaging advancements in the early 20th century included Bakelite closures on bottles, transparent

cellophane overwraps and panels on cartons, increased processing efficiency and improved food safety.

As additional materials such as aluminum and several types of plastic were developed, they were

incorporated into packages to improve performance and functionality.

In-plant recycling has long been common for production of packaging materials. Post-consumer recycling

of aluminum and paper based products has been economical for many years: since the 1980s, post-

consumer recycling has increased due to curbside recycling, consumer awareness, and regulatory

pressure.

As of 2003, the packaging sector accounted for about two percent of the gross national product in

developed countries. About half of this market was related to food packaging.

The purposes of packaging and package labels Label indicates net weight, composition, preparation, etc. The Union Flag, British Farm Standard tractor

logo, and British Meat Quality Standard logo are also present

Packaging and package labeling have several objectives

Physical protection - The objects enclosed in the package may require protection from, among

other things, mechanical shock, vibration, electrostatic discharge, compression, temperature, etc.

Barrier protection - A barrier from oxygen, water vapor, dust, etc., is often required. Permeation

is a critical factor in design. Some packages contain desiccants or Oxygen absorbers to help extend shelf

life. Modified atmospheres or controlled atmospheres are also maintained in some food packages.

Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function.

Containment or agglomeration - Small objects are typically grouped together in one package

for reasons of efficiency. For example, a single box of 1000 pencils requires less physical handling than

1000 single pencils. Liquids, powders, and granular materials need containment.

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Information transmission - Packages and labels communicate how to use, transport, recycle, or

dispose of the package or product. With pharmaceuticals, food, medical, and chemical products, some

types of information are required by governments. Some packages and labels also are used for track and

trace purposes.

Marketing - The packaging and labels can be used by marketers to encourage potential buyers to

purchase the product. Package graphic design and physical design have been important and constantly

evolving phenomenon for several decades. Marketing communications and graphic design are applied to

the surface of the package and (in many cases) the point of sale display.

Security - Packaging can play an important role in reducing the security risks of shipment.

Packages can be made with improved tamper resistance to deter tampering and also can have tamper-

evident[8]

features to help indicate tampering. Packages can be engineered to help reduce the risks of

package pilferage: Some package constructions are more resistant to pilferage and some have pilfer

indicating seals. Packages may include authentication seals and use security printing to help indicate that

the package and contents are not counterfeit. Packages also can include anti-theft devices, such as dye-

packs, RFID tags, or electronic article surveillance[9]

tags that can be activated or detected by devices at

exit points and require specialized tools to deactivate. Using packaging in this way is a means of loss

prevention.

Convenience - Packages can have features that add convenience in distribution, handling,

stacking, display, sale, opening, reclosing, use, dispensing, and reuse.

Portion control - Single serving or single dosage packaging has a precise amount of contents to

control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size

for individual households. It is also aids the control of inventory: selling sealed one-liter-bottles of milk,

rather than having people bring their own bottles to fill themselves.

Symbols used on packages and labels Many types of symbols for package labeling are nationally and internationally standardized. For

consumer packaging, symbols exist for product certifications, trademarks, proof of purchase, etc. Some

requirements and symbols exist to communicate aspects of consumer use and safety. Examples of

environmental and recycling symbols include the recycling symbol, the resin identification code and the

"Green Dot".

Bar codes , Universal Product Codes, and RFID labels are common to allow automated information

management in logistics and retailing. Country of Origin Labeling is often use

Package development considerations

Package design and development are often thought of as an integral part of the new product development

process. Alternatively, development of a package (or component) can be a separate process, but must be

linked closely with the product to be packaged. Package design starts with the identification of all the

requirements: structural design, marketing, shelf life, quality assurance, logistics, legal, regulatory,

graphic design, end-use, environmental, etc. The design criteria, performance (specified by package

testing), completion time targets, resources, and cost constraints need to be established and agreed upon.

Transport packaging needs to be matched to its logistics system. Packages designed for controlled

shipments of uniform pallet loads may not be suited to mixed shipments with express carriers.

An example of how package design is affected by other factors is the relationship to logistics. When the

distribution system includes individual shipments by a small parcel carrier, the sortation, handling, and

mixed stacking make severe demands on the strength and protective ability of the transport package. If

the logistics system consists of uniform palletized unit loads, the structural design of the package can be

designed to those specific needs: vertical stacking, perhaps for a longer time frame. A package designed

for one mode of shipment may not be suited for another.

With some types of products, the design process involves detailed regulatory requirements for the

package. For example with packaging foods, any package components that may contact the food are food

contact materials.[11]

Toxicologists and food scientists need to verify that the packaging materials are

39

allowed by applicable regulations. Packaging engineers need to verify that the completed package will

keep the product safe for its intended shelf life with normal usage. Packaging processes, labeling,

distribution, and sale need to be validated to comply with regulations and have the well being of the

consumer in mind.

Sometimes the objectives of package development seem contradictory. For example, regulations for an

over-the-counter drug might require the package to be tamper-evident and child resistant[12]

: These

intentionally make the package difficult to open.[13]

The intended consumer, however, might be

handicapped or elderly and be unable to readily open the package. Meeting all goals is a challenge.

Package design may take place within a company or with various degrees of external packaging

engineering: independent contractors, consultants, vendor evaluations, independent laboratories, contract

packagers, total outsourcing, etc. Some sort of formal Project planning and Project management

methodology is required for all but the simplest package design and development programs. An effective

quality management system and Verification and Validation protocols are mandatory for some types of

packaging and recommended for all.

Environmental consideration

sustainable packaging

Package development involves considerations for sustainability, environmental responsibility, and

applicable environmental and recycling regulations. It may involve a life cycle assessment which

considers the material and energy inputs and outputs to the package, the packaged product (contents), the

packaging process, the logistics system waste management, etc. It is necessary to know the relevant

regulatory requirements for point of manufacture, sale, and use.

The traditional ―three R‘s‖ of reduce, reuse, and recycle are part of a waste hierarchy which may be

considered in product and package development.

The waste hierarchy

Prevention – Waste prevention is a primary goal. Packaging should be used only where needed.

Proper packaging can also help prevent waste. Packaging plays an important part in preventing loss or

damage to the packaged-product (contents). Usually, the energy content and material usage of the product

being packaged are much greater than that of the package. A vital function of the package is to protect the

product for its intended use: if the product is damaged or degraded, its entire energy and material content

may be lost. Minimization – (also "source reduction") The mass and volume of packaging (per unit of

contents) can be measured and used as one of the criteria to minimize during the package design process.

Usually ―reduced‖ packaging also helps minimize costs. Packaging engineers continue to work toward

reduced packaging.

Reuse – The reuse of a package or component for other purposes is encouraged. Returnable

packaging has long been useful (and economically viable) for closed loop logistics systems. Inspection,

cleaning, repair and recouperage are often needed. Some manufacturers re-use the packaging of the

incoming parts for a product, either as packaging for the outgoing product or as part of the product itself

Recycling – Recycling is the reprocessing of materials (pre- and post-consumer) into new

products. Emphasis is focused on recycling the largest primary components of a package: steel,

aluminum, papers, plastics, etc. Small components can be chosen which are not difficult to separate and

do not contaminate recycling operations.

Energy recovery – Waste-to-energy and Refuse-derived fuel in approved facilities are able to

make use of the heat available from the packaging components.

Disposal – Incineration, and placement in a sanitary landfill are needed for some materials.

Certain states within the US regulate packages for toxic contents, which have the potential to contaminate

emissions and ash from incineration and leachate from landfill.[22]

Packages should not be littered.

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MODULE 4

POLLUTION can be defined as ―any undesirable change,in the physical,chemical or biological

charactertistics of air,water and soil that may cause harmful effects,on various forms of life and property.‖

POLLUTANT:

When the substances which cause pollution in the atmosphere increases to undesirable proportion

they are called pollutants.The main classifications are:

NONDEGRADABLE POLLUTANTS:examples are DDT,aluminium,mercury salts etc

BIODEGRADABLE POLLUTANTS:examples are domestic sewage,cow dung etc

EFFECTS OF SOLID WASTE

Creation of unhygienic condition

Foul smell and breeds various types of insects

Changes in physiochemical & biological characteristics

Affects productivity of soil

Affects ground water

MANAGING INDUSTRIAL POLLUTION

INDUSTRIAL POLLUTION is pollution which can be directly linked with industry,in contrast to other

pollution sources.this form of pollution is one of the leading causes of pollution.

The following are some of techniques of managing industrial pollution

Vacuum filtration of the carbon slurry has resulted in almost complete recovery of carbon –

fertilizer unit.

The chalk obtained afterremoving impurities by proper treatment can be utilised in the initial

stages so that the large amounts of byproduct of ammonium sulphate can be fruitfully utilised.

The method of dehydrate –hemi-hydrate process makes it possible to get pure grades of gypsum

containing low quantities of gypsum containing low quantities of p-20 and fluorine from phosphate plant.

Physical,biological and chemical treatment of liquid waste before disposal will minimize the

pollution by petrochemical unit.

MANAGING INDUSTRIAL WASTE

INDUSTRIAL WASTE is a type of waste produced by industrial activity,such as that of factories,mills

and mines.

3 common type of industrial waste

Industrial waste that exhibits hazardous characteristics (ignitable, Corrosive, Reactive and toxic)

Clinical waste

Municipal waste

MAIN CLASSIFICATION INDUSTRIAL WASTE MAY BE AS FOLLOWS:

>LIQUID WASTE

>SOLID WASTE

>GASEOUS WASTE

MEASURES WHICH ARE TAKEN:

New laws have been brought into effect by many countries into place to heavily tax companies

that produce excess amounts of waste.

Many lacal govt provide counselling,consulting and recommendations to organizations

Disciplinary actions need to be taken against cos that do nottake waste management seriously.

Citizens need to support

Environmental protection acts encourage and rewards to companies will also help.

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EFFECTIVE WASTE MANAGANENT

DEVELOPING RECYCLING TECHNOLOGIES

RECYCLING involves processing used,unwanted materials into new products to prevent waste of

potentially useful materials,reduce the consumption of fresh raw materials,reduce energy usage,reduce air

pollution and water pollutionby reducing the need for conventional waste disposal,and lower green house

gas emissions as compared to virgin production.

GOVT MANDATED DEMAND

Four methods of legislation exists

Minimum recycled content mandates

Utilization rates

Procurement policies

Recycled product labelling

COMMON RECYCLABLES

Aggregates and concrete

Batteries

Biodegradable waste

Clothing

Electronics disassembly and reclamation

Ferrous metals

Non-ferrous metals

Glass

Paint

Paper

Plastic

Textiles

Timber

Other techniques

tire recycling etc

42

MAINTAINING BIODIVERSITY

Biodiversity refers to the variety and variability among living organisms and the ecosystem

complexes in which they occur.

It means the variety and variability of all organisms.

Biodiversity constitutes the biological wealth.

LEVELS OF BIODIVERSITY

GENETIC BIODIVERSITY

Genetic Biodiversity means the variation of genes within a species.

In a species, each variety has its own genes or genetic make-up.

For example, there are various races of human beings such as Mongoloid, Negrito and Nordic,

etc.

Diversity of genes within a species increases its ability to adapt to disease, pollution and other

changes in environment.

When a variety of a species is destroyed, genetic diversity gets diminished.

SPECIES BIODIVERSITY

Species Biodiversity means a variety of species within a region. Such diversity can be measured

on the basis of species of a region.

For example Panthera Leopersica (lion), Panthera Tigris (big cat), Panthera Uncial ((snow

leopard), all belong to the same genus (Panthera) but they all differ at the species level.

Till now, only about 1.5 million living and 300000 fossil species have been actually described

and given scientific names.

More the species biodiversity means more the biological wealth.

ECOSYSTEM BIODIVERSITY

Ecosystem Biodiversity refers to the variety of ecosystem in a particular region or zone, for

example, various ecosystems include forests, wetlands, arid zones and deserts.

E.g.:- terrestrial (forests, grassland, desert, etc) ecosystems and aquatic (fresh water and marine)

ecosystems.

All these have their own fauna and flora (biodiversity).

I. BIOGEOGRAPHICAL CLASSIFICATION OF INDIA

India has a rich heritage of biological diversity and occupies the tenth position among the plant

rich nations of the world.

There are ten different bio-geographic habitats in India. They are as follows:

1. Trans-Himalayan 2. Himalayan 3. Desert 4. Semi-Arid 5. Western Ghats 6. Deccan Peninsula 7.

Gangetic Plain 8. North-East India 9. Islands 10. Coasts

II. VALUE OF BIODIVERSITY

Biodiversity is the source of food, medicine, fibers, rubber and timber. Several micro organisms are used

in industries to obtain valuable products. Diversity of organisms provides many ecological services free

of cost. Its importance can be grouped into different categories:

A. Biodiversity as a resource

a. Food b. Pharmaceutical c. Fuel d. Products e. Unknown Benefits

B. Non- Resource Value of Biodiversity

a. Ethic Value b. Aesthetic Value c. Cultural Value d. Optional Value

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III. BIODIVERSITY AT DIFFERENT LEVELS

1. Biodiversity at Global Level

2. Biodiversity at National Level

3. Biodiversity at Local Level

IV. THREAT TO BIODIVERSITY

Extinction is the complete elimination of a wild species.

Extinction in biology refers to disappearance of a species from earth when its last member dies.

A number of species are under threat of extinction due to both natural and manmade factors.

Natural Factors- Natural Calamities, competition between species, biological imparity of a species, etc

Man Made Factors- Deforestation, mining, urbanization, industrialization, grazing, etc

The numbers of causes for extinction of biodiversity are as follows:

1. Over Hunting 2. Habitat Destruction 3. Invasion of Exotic Species 4. Climate Change 5. Natural

Catastrophe 6. Over Exploitation 7. Pollution.

V. CONSERVATION OF BIODIVERSITY

1. In-Situ Conservation

In-Situ Conservation deals with conservation of species in their natural habitat i.e. the place

where the species is actually found.

This approach includes the protection of ecosystem. E.g.:

a. National Parks b. Wild Life Sanctuary c. Biosphere Reserves.

At present in India, we have 80 National Parks, 14 Biosphere Reserves and 420 Wildlife

Sanctuaries.

India has an elaborate network of protected areas covering approximately 4.66% of its total

geographical area.

2. Ex-Situ Conservation

It refers to the conservation of species outside their natural habitat.

Here, individuals of species are maintained in artificial conditions under human supervision.

It involves cultivation of rare plants and rearing of threatened animal species in Botanical and

Zoological gardens.

The rare plants are preserved in the form of seeds in seed banks by means of tissue culture

techniques. E.g.:

a. Seed Banks b. Cryo Preservation c. Botanical Garden d. Gene Banks e. Aquaria f. Pollen Storage

g. Tissue Culture.

GOVERNMENTAL AND INSTITUTIONAL SUPPORT FOR ESTABLISHING AND

MAINTAINING ENVIRONMENT-FRIENDLY BUSINESS

I. THE ROLE OF NGO‘S IN BUSINESS ACTIVITIES

It has been seen that the services rendered by the environmental NGO‘s are commendable.

They exert all sorts of pressure on the National Government, the international agencies and the

business corporations for furthering the cause of environment related issues.

They become the mediators between the government and the citizens.

They work at the grassroots level as the also with the poor or socially disadvantaged people and

provide them the necessary support.

THE INDIAN SCENARIO

a. Safe and hygienic human waste disposal

b. Narmada Valley Project

ROLE OF GOVERNMENTAL SUPPORT

44

Environmental Policies

Environmental Policy Instruments

Voluntary measures such as bilateral agreements negotiated between the government and private

firms & greener public purchasing programs.

MODULE 5

EMS standards An environmental management standard or system attempts to reduce environmental impact as

measured by some objective criteria/14001 standard is the most widely used/ISO 14001:2004 and ISO

14004:2004 deal wih EMS/The other standards in the family address specific environmental aspects

including : labeling,performance evaluation,life cycle analysis etc.

ISO 14000

The ISO 14000 series of standards are the first international standards on EMS/The major objective

of the series is to promote more effective and efficient management in the organization and to provide

useful and usable tools which are effective ,system based and flexible/Various requirements under ISO

14000 includes environmental policy,planning,implementation and operation checking and corrective

measures,management review.

INTERNATIONAL INITIATIVES FOR ENVIRONMENT MANAGEMENT

International treaties on environment

ANTARTIC TREATY

It was signed in 1959-Different parts of Antartica were claimed by seven countries/The treaty came

into force in June 1961 granted that the continent would only be used for peaceful purposes/The later

treaties such as Madrid agreement in 1991 and the protocol on environment protection in 1998

strengthened the Antartic treaty and preserved it only for non military scientific research for all the

countries in the world and declared the continent as a natural reserve.

THE BASEL CONVENTION ON MINIMISING HAZARDOUS WASTES

Industrial production results in hundreds of wastes every year/ These wastes are shipped off illegally

to far away places/The cross border transportation of hazardous wastes caught the public attention in late

1980‘s-Recogonising the gravity of problem govts and forward looking companies started exploring

solution /By 1980‘s the international community launched treaty negotiations under the auspices of the

United Nations Environment Programme/In March 1989 they adopted Basel convention on the control of

transboundary movements of hazardous wastes and their disposal/The treaty entered into force in

1992/The 3 steps strategy of the convention are 1. Minimize the generation of wastes 2. Treat waste as

near as possible to where they are generated 3. Reduce international movements of hazardous wastes.

CONVENTION ON BIOLOGICAL DIVERSITY

CBD is an international treaty adopted in Rio de Janeiro Brazil in June 1992 by 154 countries/Its

objectives are 1. Conservation of biodiversity 2. Sustainable use of the components arising from it 3.

Sharing of benefits of genetic resources in a fair and equitable way/It entered into force on 29 December

1993.

THE CARTAGENA PROTOCOL

The cartagena protocol on biosafety was adopted in January 2000/It entered into force on 11 Sepember

2003/The main aim of the protocol was to protect biodiversity from potential risks posed by living

modified organisms which is the gift of modern biotechnology.

45

GLOBAL STRATEGY FOR PLANT CONSERVATION

It was adopted by United Nations Convention On Biological Diversity and a sixteen point plan with an

aim to slow down the rate of plant extinction by 2010 around the world was implemented /The main

organ of this international body are Secretariat and Subsidiary Body on Scientific Technical and

Technological Advice(SBSTTA).

CONVENTION ON FISHING AND CONSERVATION OF LIVING RESOURCES OF THE HIGH

SEAS

The convention on fishing and conservation of living resources of high seas is an agreement designed

to solve the problems involved in the conservation of living resources of high seas through international

cooperation/The agreement was signed on 29 April 1958 and came into force on 20 March 1966/There

are 38 countries that have signed agreement and ratified/The agreement that was signed is in the form of

Articles.

GREEN PEACE INTERNATIONAL

Green peace international originated from formation of the Don‘t make a wave committee by a group of

Canadian and American expatriate peace activists in Vancouver in 1971/The committee came together

with the objective of stopping a second underground nuclear bomb test code named Cannikin by the

United states military beneath the island of Amchitka in Alaska/The test could not be stopped but the

organization of committee laid the groundwork for green peace international international‘s later

activities/The mission of this independent global non governmental organization is to change attitudes

and behaviour to protect and conserve the environment and to promote peace.

WTO PROVISIONS

WTO provisions directly relevant to trade related environmental issues are 1. Agreement on trade in

services-It takes place between producer and consumer that are in legal terms/2. Agreement on technical

barriers to trade-It tries to ensure that regulations, standards, testing and certification procedures do not

create unnecessary obstacles/3. Agreement on agriculture-It has three concepts A). Domestic support-It

has three categories a)green box-fixed payments to producers for environmental programmes. b)amber

box-contains domestic subsidies that govt have to reduce.c) blue box-contains subsidies which can be

increased without limit,so long as payments are linked to production limiting programs.B) Market access-

refers to reduction tariff or non tariff barriers to trade by WTO member states.C)Export subsidies-The

1995 AOA required developed countries to reduce export subsidies atleast 35%(by value)or by atleast

21%(by volume) over the five years to 2000/4.Agreement On TRIPS(Trade Related Aspects of

Intellectual Property Righs)-Patent law protecting inventions and processes/5.Agreement on sanitary

measures-It concerns the application of food safety and animal and plant health regulations.

ISSUES AND CHALLENGES FOR ENVIRONMENT MANAGEMENT IN THE GLOBALISED

WORLD

GLOBALISATION

Globalisation is a set of economic process in which production, marketing and investment are integrated

across the borders of nations /Globalisation trends creates challenges on scale and scope and speed

unprecendented in world history.

Environmental challenges under globalization

Protect urban people against urban environmental hazards like global warming,ozone depletion etc/The

environmental services for urban people are to provide cleaner air,cleaner water and healthier

cities/Address the sources of environmental degradation .

46

Urban environmental issues

Localized Environmental health problems like inadequate portable water ,indoor air pollution etc/Extra

urban impacts of urban activities like ecological disruption and resource depletion and emission of green

house gases-Inadequate waste disposal management,pollution of water bodies and green house gases.

Urban environmental challenges

Providing basic environmental services in a way that most effectively protects health/Identification and

implementing integrated approaches to urban environment to prevent and abate the impacts of pollution

and degradation/Proper dealing with accidents and environmental disasters deriving from both natural and

man made efforts/Urban poverty/Urban environmental factors affecting human health/Influence of

urbanization on food system etc.

URBAN GOVERNANCE AND MANAGEMENT

Good urban governance and management is one of the main pillars of sustainable cities/Good

governance is primarly through community participation,private sector involvement and the actions of

NGO‘s/Good governance in the back drop of the effects of globalization on urban environment involves

1. Provision for basic environmental services like sanitation, solid waste collection and disposal

management 2. Provision for better environmental management like preventing ecosystem degradation,

ozone depletion. 3. Improving environmental quality by imposing emission charges on pollution 4.

Provision for environmental justice like clean water etc.

Environmental impact studies and assessment

An environmental impact assessment is an assessment of the possible impact ,positive or negative-that a

proposed project may have on the environment ,consisting of the natural ,social and economical aspects.

The impact of anthropogenic activities on the use of environmental resourses or the natural environment

is termed as environmental impact. The assessment or evaluation of this impact are collectively called

environmental impact assessment EIA.

The ultimate objective of eia is to provide information to the decision makers so that proper programs and

plans can be implemented.

The steps involved in EIA study are as follows;

Screening of the project

I. Impact identification of the project

II. Impact prediction

III. Impact evaluation

IV. Participation of stake holders

V. Specification of monitoring and auditing measures

VI. Documentation of EIA study

VII. Review of report

VIII. Decision making

Environmental accounting and auditing

Environmental accounting

Environmental accounting is an important tool for understanding the role played by the natural

environment in the economy. Environmental accounting provides data which highlight both contribution

of natural resources to economic well being and the cost imposed by pollution or resource degradation.

Environmental accounting is sometimes referred to as ‗green accounting‘ or ‗integrated economic and

environmental accounting‘ or ‗resources accounting‘

What is environmental accounting?

Environmental accounting is a set of aggregate national data linking the environment to the economy,

which will have a long run impact on economic and environmental policy making. It is not a valuation of

47

environmental goods or services , social cost benefit analysis of projects affecting the environment, or

disaggregated regional or local data about the environment. Environmental accounting includes:

Valuation of environmental assets, goods or services; valuation refers to the process of deriving a

monetary value for things which are not sold in a market.

Social cost benefit analysis: social cost-benefit analysis tallies up all of the cost and benefits of a

proposed project ,including its impacts on environmental quality or on the availability of environmental

goods and services.

Disaggregated regional or local data about the environment: it is sometimes linked to a

geographic information system. Question often arise about the scale of environmental data; do they

pertain to a village , a province ,a watershed, or the whole country? Because system of national accounts

is national, and most countries maintain their economic data at the national level, environmental

accounts are primarily national accounts.

Environmental audit

Environmental audit is a review of activities affecting the environment to determine the status of a

corporation‘s compliance with central, state and local environmental law and regulations. It also provides

the corporation with data and other information on which environmental decision and planning could be

based.

An environmental audit is a management tool for taking inventory of company‘s environmental asset and

liabilities. As such , the audit provides information on a company‘s compliance status at a given point in

time, analysis of the perceived implications of the information gathered and, if management so chooses ,

options that arises from this information and analysis. In short , an audit provides a snapshot of one

segment of management responsibility.

Reasons to undertake an environmental audit:

There could be a number of reasons for undertaking an audit and the benefit process are described below:

Determining compliance status:

A fundamental reason for undertaking an environmental audit is to determine the status of a company‘s

compliance with central , state , and local environmental laws and regulations. More than a decade of

major environmental legislation regulating air and water pollution, chemicals, hazardous substances and

waste disposal has imposed a complete scheme of obligations on business, industry and local bodies.

Environment compliance represents a significant aspect of doing business both, in terms of the effort and

cost, necessary to achieve, compliance and in terms of the fines, penalties and liabilities that may be

incurred as a result of noncompliance.

An environmental audit can also help in maintain corporations

Compliance status in an effective manner. Frequently, facilities can be control technologies including

equipment, and management practices may be available to control a particular waste or discharge. An

audit can also help management recognize if there is a need for change in operating of administrative

procedures to improve the company‘s system for compliance assurance and internal reporting.

Crisis management

Information obtained in an audit can be enormous value in crisis situations. Such information can help a

company respond quickly to a spill or other pollution incidents the impacts of which may have been

exaggerated by the press or others. Conversely , such information can help companies avoid making

claims or assertion that , upon further investigation , prove to be understatements by saying nothing,but

this course may subject it to significant negative publicity.

Planning and conducting the audit

The basic elements of a success full audit are the same. The element includes the following:

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Defining the purpose and scope of the audit,resolving policy issues and establishing priorities

Assigning department responsibility for the audit function and ensuring in-house cooperation.

Choosing the audit team

Reviewing central , state and local laws and regulations to identify regulatory programmes

applicable to company operations

Selecting elements of analysis on which to base data collection

Beginning the audit

Preparing compliance profiles

Conducting a site visit

Analyzing and presenting the results of the audit

Evaluating the audit

Conducting the audit

Once the regulatory programmes , potentially applicable to company operations , have been identified and

the elements on which to base data collection and analyais have been selected the auidit may be begin.

Collection of audit data should be organasied into two stages; preliminary data collection prior to the site

visit , and data collection at the site

Environment managing systems

Environmental impact is an important issue across the globe , with pressure to minimize that impact

coming from many sources, including governments, trade association , supply chains and financial

stakeholders. Environment management system (ems)provides with a frame work for managing

environmental responsibilities efficiently in a way that is intergrated into your overall operations.

An environmental management system is relevant to all organizations, from single site to large

multinational and from high risk companies to low risk services organization . managing environmental

impacts is relevant to manufacturing , process and service industries , including local and central

governments, equipment manufacturers and suppliers.

Environmental management system refers to the management of an organization‘s environmental

programs in a comprehensive, systematic, planned and documented manner.it include the organizational

structure,planning and resources for developing , implementing and maintaining policy for environmental

protection. The features of an enviornmental management system (ems) are as follows:

It serve as a tool to improve environmental performance

It provides a systematic way of managing an organization‘s environmental affairs.

It is the aspect of the organization‘s overall management structure that addresses

Immediate and long term impacts of its products,services and process on environment

It focus on continual improvement of the system.

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Ems model

This is a model that can be used by a wide range of organizations from manufacturing facilities to service

industries to government agencies . the key element of an ems are as follows:

Policy statement: a statement of the organization‘s commitment to the environment .

Identification of significant environmental impacts: environmental attributes of products,activities

and services and their effects on the environment.

Development of objective and targets : environmental goals for the organization

Implementation: plans to meet objective and targets

Training: instruction to ensure employees are aware and capable of fulfilling their environment

responsibility

Management review

Ems standards

As with all management fuctions ,effective management tool ,standars and systems are required . an

environmental management standards or system or protocol attempts to reduce environmental impact as

measured by some objective criteria.

ISO 14000

The ISO 14000 is a standard used by organizations for designing and implementing an effective

environmental management system.

Objective of ISO 14000

to promote more effective and efficient environmental management in organizations

to provide useful and usable tools which are cost effective, system-based, flexible

reflect the best organizations and the best organizational practices available for gathering,

interpreting and communicating environmentally relevant information

various iso numbers Iso number range Subject matter

Iso 14000- 14009

Environmental management

system

IsO 14010-14019 Environmental auditing

ISO 14020 - 14029 Environmental labeling

ISO 14030 - 14039 Environmental performance

evaluation

ISO 14040 - 14049 Life cycle assessment

ISO 14050 - 14059 Terms and definition

ISO 14060 Environmental aspects in

product standards

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ECONOMICS FOR BUSINESS

Module-1

Micro economics: The word micro means a millionth part. Microeconomics is the study of the small part

or component of the whole economy that we are analyzing. For example we may be studying an

individual firm or in any particular industry. In Microeconomics we study of the price of the particular

product or particular factor of the production

Microeconomics - The study of the decisions of people and businesses and the interaction of those

decisions in markets. The goal of microeconomics is to explain the prices and quantities of individual

goods and services-Because we can‘t have everything, we need to make trade-offs and microeconomics

helps us make those tradeoffs.-A society faces 3 key tradeoffs:-

1,Which goods and services to produce-

2 How to produce them- How much labor and inputs should a firm use to produce a car.

3Who gets the good and services (allocation)-Examples: Workers need to choose how to allocate their

time between labor and leisure.-Firms need to choose how to allocate their investment between human

capital and machines.-Households need to choose how to allocate their incomes between savings and

expenditure.

Micro economics-uses

1.Helpful in understanding the working of free market economy. The micro economics helps us to

understand the working of free market economy. It tells us as to how the prices of the products and the

factors of production are determined. It throws light as to how the goods and services produced are

distributed among the various people for consumption through market mechanism.

2. Helps in knowing the conditions of efficiency. Microeconomics helps in explaining the conditions of

efficiency in consumption, production and in distribution of the rewards of factors of production. It

highlights the factors which are responsible for the departure from achieving the optimum efficiency. It

suggests policies also which help in the promotion of economic efficiency of the people Working of the

economy without central control. The microeconomics reveals how a free enterprise economy functions

without any central control.

3. Study of welfare economy. Microeconomic involves the study of welfare economics

Limitations of Microeconomics

1) Assumption of full employment in the economy which is unrealistic –

(2) Assumption of lasses fair policy which is no longer in practice in any country of the world –

(3) It studies part of the economy and not the whole.

What is the difference between micro and macro economics?

Microeconomics :behavior of individual economic units like consumers, producers, landowners, families,

etc. How and why do they make the decisions they make?

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Macroeconomics: analyzes how the entire national economy performs. It analyzes unemployment,

inflation, price levels, interest rates (many things we take as given in microeconomics).

Macro economics is the study of behavior of the economy as a whole. It examines the overall level of

nations out put, employment, price and foreign trade.

Macroeconomics is concerned with aggregate and average of entire economy. e.g. In Macro economics

we study about forest not about tree

Macroeconomics – The study of the national economy and the global economy and the way that

economic aggregates grow and fluctuate. The goal of macroeconomics is to explain average prices and

the total employment, income, and production

While microeconomics stresses on the individual firms and consumer, macroeconomics deals with the

whole economy as a single unit.

the former takes into consideration the demand and supply of the individual goods and services, while

the later takes into consideration the aggregate of demand and supply of all goods and services

In microeconomics, the equilibrium occurs when the quantity demanded equals the quantity supplied .In

macroeconomics, on the other hand, equilibrium occurs when the aggregate demand equals aggregate

Business Environment – refers to the totality of all the relevant forces external, to and beyond the control

of ,an individual business enterprise and its management.

The ideological beliefs of the ruling class-Value systems of the society-Rules & regulations laid down by

the govt.-The monetary policies of the Central Bank

There is a direct relationship between successful management and the influence and impact of

environmental change

Change is a process of constant renewal and regeneration in every conceivable sphere of society

Business organisation as the central component of the business environment are naturally also subject to

change

The interaction between the environment and a business organisation is an ongoing process that results in

new problems and new opportunities

Technological innovation ,Globalisation ,Growth of poverty, Collapse of emerging markets ,Shift from

manufacturing jobs to service jobs, New ways of doing work

Business environment: major types

1 Micro – Environment, Mission and objectives of the organisation ,The organisation and its

management , e.g. marketing , financial and purchasing management, Resources – human resources ,

capital and know how

2 Market environment, Consumers – needs , purchasing power and behavior, Suppliers, Intermediaries

,Competitors ,Opportunities & threats

3 Macro – environment-Technological environment, Economic environment, Social environment ,

Physical environment, Institutional – political environment, International environment

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Business environment Advantage India:

we have a young population/task force well versed in English language and are also major

contributors to world economy,

India is expected to benefit further from the demographic dividend emanating from a

higher proportion of the young population.

the IT enabled services (ITES) have provided job opportunities and will continue to do so

,the services sector in the country has benefited from the availability of vast skilled labour at

competitive rates ,

growth has also been fueled by increased local demand, backed by rising urban and rural

incomes.

The top mobile operators continue to rope in millions of subscribers every month with

innovative approaches and offers,

The role of the private sector and foreign investment in the Indian economy is increasing.

The rupee is now convertible on the current account, and exchange rates are market-

determined.

There has been rapid progress in implementing government commitment to the

deregulation process.

Industrial policy emphasizes boosting economic growth through encouraging the

generation of income and wealth.

The vast and growing middle-class population provides a large domestic market. Skilled

manpower and professional managers are available at moderate cost.

Capital markets, the banking infrastructure and the financial services sector are well

developed

BUSINESS Ethics -The word ethics is derived from the Greek word ethos meaning character and Latin

word mores meaning customs-To better understand ethics let us understand and contrast the definition of

ethics and la-Law is a consistent set of universal rules that are widely published, generally accepted and

usually enforced. These rules describe the ways in which people are required to act in society. Ethics

defines what is good for the individual and for society and establishes the nature of duties that people owe

to oneself and others in society.

Ethics are the guiding principles. -Where the proposed business activity/ operation of the company

borders on the unknown, the company needs to apply the ethics principle to decide on the project.-Ethics

help make relationships mutually pleasant and productive- imbibes a sense of community among

members- a sense of belongingness to society.

MODULE-2

Theory of consumption -The demand for any good is the amount consumers want to buy and are able to

buy in a particular period of time. The branch of economics devoted to the study of consumer behavior,

especially as it applies to decisions related to purchasing goods and services through markets

Determinants of Demand- price, income, price of related goods, expectation taste, population, govt.

policies etc.

Demand is the quantity of good and services that customers are willing and able purchase during a

specified period under a given set of economic conditions. The period here could be an hour, a day, a

month, or a year.

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The conditions to be considered include the price of good, consumer‘s income, the price of the related

goods, consumer‘s preferences, advertising expenditures and so on.

The demand schedule is a table that shows the relationship between the price of the good and the quantity

demanded. The demand curve is a graph of the relationship between the price of a good and the quantity

demanded. Ceteris Paribus: ―Other thing being equal‖

Three reasons why demand is downward sloping,

a. The substitution effect,

b. The income effect ,

c. The law of diminishing marginal utility

1The substitution effect – a lower price of a good causes a person to buy more of that good instead of

alternative goods. If the price of Nike shoes increases, people will start to buy Adidas and Reebok .

2 The income effect The change in the quantity demanded caused by a price change’s effect on real

income which measure‘s a person‘s purchasing power. When the price of a good decreases, your real

income (purchasing power) increases, or You can now buy more of everything. Let‘s say you buy 25

gallons of gas a week, and the price of gas is $2 a gallon. You‘re spending $50 a week on gas .Now

the price of gas decreases to $1 a gallon. You can now buy 50 gallons of gas a week for the same

amount of money, or you can buy 25 gallons of gas and more of other goods.3The law of diminishing

marginal utility –

Utility measures the want-satisfying power of a good or service.

Marginal utility is the additional or incremental satisfaction (utility) a consumer receives from acquiring

one additional unit of a product.

Cardinal Utility Analysis- A basic formulation of consumer demand theory involves an analysis of the

total utility and marginal utility derived from the consumption of a good.

Go under water and hold your breath, keep holding it until you think you will pass out. Then come up out

of the water, that first breath is wonderful -- tremendous utility. That is utility - the meeting of a need or

being satisfied.

Marginal Utility is the change in utility from one more good or service being consumed. So the amount of

utility from the first cup of coffee or that first breath is huge.

Diminishing Marginal Utility is the fact that each addition good or service consumed creates a smaller

and smaller amount of additional utility. In the examples above, that second cup of coffee in the morning

or the second breath after the first will provide additional satisfaction or need meeting, but it will not

provide near as much satisfaction (utility) as the first one did. The third cup or third breath has even less

additional satisfaction or need meeting ability (utility) as the second and the first. The key principle of

consumer demand theory is the law of diminishing marginal utility, which offers an explanation for the

law of demand and the negative slope of the demand curve

The law of diminishing marginal utility states that, ―as a consumer consumes more and more units of a

specific commodity, the utility from the successive units goes on diminishing‖. Mr. H. Gossen, a German

economist, was the first to explain this Law in 1854.

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Alfred Marshall later on restated this Law in the following words: ―The additional benefit which a person

derives from an increase of his stock of a thing diminishes with every increase in the stock that he already

has‖.

Basis of the law of demand. As he buys more and more, the marginal utility of the successive units

begins to diminish. Then he pays less amount for the successive units .From this it is clear that if a person

wishes to increase the sale of a commodity, he must lower its price

The Law of Equi-Marginal Utility is an extension to the law of diminishing marginal utility

This law states that how a consumer allocates his money income between various goods so as to obtain

maximum satisfaction .Suppose there are two goods 'x' and 'y' on which the consumer has to spend his

given income. The consumer‘s behavior is based on two factors: (a) Marginal Utilities of goods 'x' and 'y

‗ (b) The prices of goods 'x' and 'y' .Making the marginal utility per dollar spent the same for all goods

gets the most out of a budget. shift money from the area in which it is giving a low return to the area in

which it has a high return, he will be better off. This is the basic idea of the equi-marginal principle.

Maximization occurs when the return on the last dollar spent is the same in all areas. In terms of a

formula, a person wants

(Marginal Benefit of A)/(Price of A) = (Marginal Benefit of B)/(Price of B)

Equimarginal utilities - If good A costs twice as much as good B, then buy good A only when its

margenial utility is at least twice as great as good B‘s marginal utility……

Equimarginal principle- a consumer having a fixed income and facing given market prices of goods will

achieve maximum satisfaction or utility when the MU of the last dollar spent on each good is exactly the

same as the marginal utility of the last dollar spent on any other good. Utility maximizing rule -The Law

of Equi-Marginal Utility states that the consumer will distribute his money income in such a way that the

utility derived from the last rupee spent on each good is equal . When spending a limited amount of

money, consumers try to equate the marginal utility per dollar for the items being purchased.

Consumer‘s Equilibrium- consumer will attain its equilibrium (maximum satisfaction) at the point ,

where marginal utility of a product divided by the marginal utility of a rupee or price of the product is

equal to the price.

MU of a product

Consumer‘s equilibrium= = MU of a rupee

(one commodity) price of the product

Mu good 1 Mu good 2 Mu good 3

More goods = =

=MU/$

P1 P2 P3

Consumers‟ equilibrium- by using indifference curves.-ordinal utility -The idea of utility as

measurable in a cardinal way was subject to much criticism, The idea of a utility measure as a rank

ordering replaced the idea of cardinal measurement -An ―ordinal‖ measure is a ranking only. No unit of

measurement-Higher numbers imply only more preferred. In the ordinal utility context maximizing utility

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means choosing that bundle of goods that is on the highest indifference curve achievable with given

income and prices

• The marginal rate of substitution is the rate at which a person will give up good y (the good

measured on the y-axis) to get more of good x (the good measured on the x-axis) and at the same

time remain on the same indifference curve.

• Diminishing marginal rate of substitution is the general tendency for the marginal rate of

substitution to decrease as the consumer moves down along the indifference curve, increasing

consumption of good x and decreasing consumption of good y.

Tools needed to determine how consumers should allocate their income between 2 goods –

1Indifference Curves

2. Budget Constraint

Consumer‘s strategy is to keep moving to higher and higher indifference curves until he reaches the

highest one that is still affordable.

The Budget Line- A budget line describes the limits to consumption choices and depends on a consumer‘s

budget and the prices of goods and services.

The goal of the consumer is to buy the affordable quantities of goods that make the consumer as well off

as possible. The consumer‘s preference map describe the way a consumer values different combinations

of goods. The consumer‘s budget and the prices of the goods limit the consumer‘s choices.

The substitution effect involves the substitution of good x1 for good x2 or vice-versa due to a change in

relative prices of the two goods.

The income effect results from an increase or decrease in the consumer‘s real income or purchasing

power as a result of the price change. The sum of these two effects is called the price effect.

Elasticity- is a general concept that can be used to quantify the response in one variable when another

variable changes- The responsiveness of one variable to changes in another-

When price rises, what happens to demand? Demand falls BUT! ……How much does demand fall?

If price rises by 10% - what happens to demand? We know demand will fall –

By more than 10%-

By less than 10%?-

By same 10%-

Elasticity measures the extent to which demand will change due to price change.

Types- Price elasticity of demand, Income elasticity of demand- Cross elasticity - Elasticity Of price

Expectations- Advertisement Elasticity - Price elasticity of supply.

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PRICE ELASTICITY OF DEMAND

Price elasticity of demand is the degree of responsiveness of the quantity demanded to change in the

price.

Types of price elasticity of demand-…

.Ed= 0 perfectly inelastic …../Ed< 1 - Inelastic or less than unit elastic-… / Ed = 1 Unit elastic…./

Ed >1 Elastic …. /Ed =∞ perfectly elastic

Factors affecting elasticity of demand—

1availability of substitutes – commodities having substitutes is very elastic.-

2postponement of consumption-commodities, whose consumption can be postponed for sometime is

elastic.-

3proportion of expenditure- where a significant part of income is spent-is very elastic –

4 nature of the commodity-necessities-inelastic-comforts& luxuries- elastic-different uses of the

commodity- which has several uses- elastic-

5.habits- habituated of some commodities- inelastic

Importance of price elasticity of demand-

1It helps the monopolist in maximizing his profit.

2 It helps the govt. at the time of budget preparation. Govt. can levy more tax on the commodity , whose

demand is inelastic.

3.terms & conditions of foreign trade are always in favour of those countries ,whose import demands

are elastic , and export demands are inelastic .

4.It is useful to deciding remuneration to factors of production. ….labour demand is inelastic…wages and

salaries will increase

Demand Forecasting: Forecasting simply attempts to predict the level of sales at some future date-

How many Japanese tourists will visit India in 2012?-How many delegates will attend conferences in

London in 2001Demand forecasting refers to the prediction or estimation of a future situation under

given constraints

Types of forecasting.

Short term- 1 year sales, purchase, pricing and financing.

price elasticity of demand % change in quantity demanded

change in price%

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Medium term----assess demand situation at trade cycle ,eg. Garment industry-

Long term ----more than one year---planning a new unit

Major uses-

1Helping for continuous production planning-to eliminate the gap between-Demand and supply.

2 Regular supply of commodities-to maintain sufficient inventory of products. - Formulation of price

policy-

3 no fluctuation over a period of time-

4.For better planning and allocation of national recourses-

5.To formulate effective sales performance sales targets & actions-

6.Arrangements of finance –

7.prepare the budget for institutional finance-

8.To determine the production capacity –plant size and production. Determine the use of the forecast.

Eight Steps in Forecasting –

1. Select the items to be forecast.

2. Determine the time horizon of the forecast.

3. Select the forecasting model(s).

4. Gather the data.

5. Make the forecast.

6 Validate and implement results.

7&8 Monitor forecasts and adjust when needed production capacity.

There are two approaches -

A. survey method-qualitative-To collect information regarding the intention of the consumers by

Market research, survey, & economic intelligence……. Short term .

1 Survey of buyer‘s intentions-Complete enumeration-Sample survey-End-use method

2.Opinion poll method-Jury of executive opinion-Sales force composite-Delphi method-Market studies

B.Statistical method-quantitative-To use past trends and taking them guide and by extrapolating past

trends to estimate future demand….. Long run --

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1.Time-series-Trend fitting-- least squire method-Moving average-Exponential smoothing-Adoptive

control-Box-Jenkins-

2.Causal-Regression-Econometrics-Leading indicators-Diffusion index-Input-Output analysis-Life-cycle

analysis

The production function. production function specifies the maximum output that can be produced with a

given quantity of in puts . It is the relation between physical in put and physical output.

Fixed factors…..factors not related to the level and volume of product…..Building

Variable factors…..factors which are directly related to the volume of output……labur, fuel…

Fixed cost- supplementary–overhead cost- Payment for fixed factors of production in the short run. Eg.

Rent of the factory---

variable cost- prime cost- payment to the variable factors of production eg. Cost of raw material-

Total cost -is the lowest total expense needed to produce each level of out put.Total cost = total fixed cost

+ total variable cost TC = TFC + TVC-

Marginal cost : Marginal cost denotes the extra or additional cost of producing 1 extra unit of out put.-

MC = TCn – TCn-1 .Average cost : Average cost is the total cost divided by the total out put. AC =

TC/Q

The Production Process---

The production process can be divided-into the long run and the short run-Short run….a period in which

firms can adjust production by changing variable factors-

Long run……a period in which firms can adjust production by changing all factors-The terms long run

and short run do not necessarily refer to specific periods of time. -They refer to the degree of flexibility

the firm has in changing the level of output.

Total product-It refers to the total volume of goods & service produced during a given period of time.

Average product Per unit production of the variable factor

Marginal product - The change in the total output due to the application of one more or one less unit of

variable factor.

1.Law of variable proportion/ diminishing return- (increasing only one factor) - The law stating that if one

factor of production is increased while the others remain constant, the overall returns will relatively

decrease after a certain point we will get less and less extra out put when we add additional doses of an

in put while holding other inputs fixe. This law is also called the flower pot law. If it did not hold true, the

world‘s entire food supply could be grown in a single flowerpot

Stage 1 TP,MP,AP will increase in this stage. Stage 2TP increases at a diminishing rate. MP decreases

and become 0 AP starts decreasing Stage 3 TP- start declining MP-become negative

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AP- start declining

Assumptions of the law

-technology is remain constant-

one factor only varying ,

others are remaining constant-Possibility to change factor proportion

2. Law of Returns to scale -increasing In case, all in puts are increased in the same proportion and the

scale of production is expanded in three forms-

Increasing….( Economies of scale)…. returns to scale-more than the rate of input increase

Constant&…….at the same rate of input increase returns to scale

Diminishing ……returns to scale …. Less than the rate of input increase

What Does Economies Of Scale Mean?

The increase in efficiency of production as the number of goods being produced increases. Typically, a

company that achieves economies of scale lowers the average cost per unit through increased production

since fixed costs are shared over an increased number of goods.

There are two types of economies of scale:-

External economies - the cost per unit depends on the size of the industry, not the firm.-

Internal economies - the cost per unit depends on size of the individual firm

External economies of scale – the advantages firms can gain as a result of the growth of the industry –

normally associated with a particular are Supply of skilled labour –Reputation-Local knowledge and

skills-Infrastructure-Training facilities

The long-run average cost curve –LRAC-shows the minimum average cost at each output level when

all inputs are variable, that is, when the firm can have any plant size it wants. There is a relationship

between the LRAC curve and the firm's set of short-run average cost curves. If each plant size is

associated with a different amount of fixed costs, then each plant size for a firm will give us a different set

of short-run cost curves. Choosing a different plant size (a For the U-shaped long-run average cost curve,

there are economies of scale over small outputs, and diseconomies of scale at larger outputs. Not all firms

necessarily suffer from diseconomies of scale at large outputs. When a firm has economies of scale over a

range of outputs big enough to supply the total market demand,that firm is called a natural monopoly.

long-run decision) then means moving from one short-run cost curve to another.

Market structure-Number of suppliers-Product‘s degree of uniformity-Do firms in the market supply

identical products or are there differences across firms?-Ease of entry into the market-Can new firms

enter easily or are they blocked by natural or artificial barriers?-Forms of competition among firms-Do

firms compete only through prices or are advertising and product differences common as well?

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1.Perfectly Competitive Market Structure- Many buyers and sellers-Each Firm is a price taker-Each

buys and sells only a tiny fraction of the total amount exchanged in the market-Standardized or

homogeneous product-Buyers and sellers are fully informed about the price and availability of all

resources and products-Firms and resources are freely mobile over time they can easily enter or leave

the industry.

Because the perfectly competitive firm can sell any quantity for the same price per unit, marginal revenue

is also average revenue -Average revenue, AR, equals total revenue divided by quantity AR = TR / q-

Regardless of the rate of output, the following equality holds along the firm‘s demand curve -Market

price = marginal revenue = average revenue-Firms have time to enter and exit and to adjust their scale of

their operations-Short-run economic profit will in the long run encourage new firms to enter the market

and may prompt existing firms to expand the scale of their operations: the industry supply curve shifts

rightward in the long run, driving down the price-New firms will continue to enter a profitable industry

and existing firms will continue to increase in size as long as economic profit is greater than zero

2.A monopoly is a single supplier/seller to a market.( and a large number of buyers) market situation

where there is only one provider of a product or service, in other words a firm that has no competitors in

its industry. Monopolies are characterized by a lack of economic competition for the good or service that

they provide and a lack of viable substitute goods

Barriers to entry are the source of all monopoly power-there are two general types of barriers to entry-

technical barriers-legal barriers( Licenses, patents) To maximize profits, a monopolist will choose to

produce that output level for which marginal revenue is equal to marginal cost. marginal revenue is less

than price .Since MR = MC at the profit-maximizing output and P > MR for a monopolist, the monopolist

will set a price greater than marginal cost.

Monopoly profits will be positive as long as P > AC. Monopoly profits can continue into the long run

because entry is not possible. some economists refer to the profits that a monopoly earns in the long run

as monopoly rents. The size of monopoly profits in the long run will depend on the relationship between

average costs and market demand for the product

Perfect competition exhibits allocative efficiency, price= MC. Under Monopoly, the price is greater than

MC. Without productive efficiencies by a monopoly, P monp is greater than Ppc and Q mon is less than

Qpc .Reduction in welfare under monopoly. Possible inefficiency in Monopoly

3.An oligopoly is a market form in which a market or industry is dominated by a small number of sellers

(oligopolists). The word is derived from the Greek for few sellers. Because there are few participants in

this type of market, each oligopolist is aware of the actions of the others. The decisions of one firm

influence, and are influenced by the decisions of other firms

Above the kink, demand is relatively elastic because all other firm‘s prices remain unchanged. Below the

kink, demand is relatively inelastic because all other firms will introduce a similar price cut, eventually

leading to a price war. So the best option for the oligopolist is to produce at point E which is the

equilibrium point and incidentally ―the kink point‖. In an oligopoly, firms operate under imperfect

competition and a kinked demand curve which reflects inelasticity below market price & elasticity above

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market price. Following from the fierce price competitiveness created by this sticky-upward demand

curve, firms utilize non-price competition in order to accrue greater revenue and market share.

4.Monopolistic competition-A market structure in which several or many sellers each produce similar,

but slightly differentiated products. Each producer can set its price and quantity without affecting the

market place as a whole.( For eg. Many FMCG products, especially weak brands-

A firm in monopolistic Competition making short run profits as AC is below the AR curve at the profit

maximizing Level of output. A firm in monopolistic .Competition in the long run make normal profits

only, as it has to lower price because of competition from other firms ; Thus AR curve at the profit

maximizing Level of output is just equal to LRAC curve

Circular Flow of Income: The cyclical operation of demand, output, income, and new demand.

Leakages: flows out of circular flow when resource income is received and not spend directly on

purchases from domestic firms-Injections: Added spending in circular flow that does not come out of

current resource income.

National income is the final outcome of all economic activities of a nation valued in terms of money. It is

the money value of all final goods and services produced in a country during a period of one year. It is the

money value of the end result of all economic activities of the nation. Conceptually, national income

refers to the money value of the entire volume of final goods and services resulting from all economic

activities of the country. National income is the most important macroeconomic variable and determinant

of the business level and economic status of a country.The level of national income determines the level

of aggregate demand for goods and services.

National income concepts

1.Gross National Product (GNP) 2. Gross Domestic Product (GDP) 3. Net National Product (NNP)

Gross National Product-GNP-GNP is the most important and widely used measure of national income.

It is the most comprehensive measure of the national productive activities in an open economy. It is the

value of all final goods and services produced during a specific period, usually one year, plus income

earned abroad by the nationals, minus incomes earned locally by the foreigner

Gross Domestic Product-GDP -GDP is defined as the market value of all final goods and services

produced in the domestic economy during a period of one year, plus income earned locally by foreigners,

minus income earned abroad by the nationals.The concept of GDP is similar to that of GNP with a

significant procedural difference

NNP is defined as GNP less depreciation.NNP = GNP – depreciation.NNP gives the measure of net

output available for consumption by the society (including consumers, producers, and the Govt.).NNP is

the real measure of national income.NNP = NNI (net national income). NNP is the same as national

income at factor cost. NNP is measured at market prices including direct taxes. Indirect taxes are not a

part of actual cost of production. Therefore, to obtain real national income, indirect taxes are deducted

from the NNP. National income is NNP less indirect taxes

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There are many concepts of national income which are used by different economists and all of which are

inter-related. For measuring national income, an economy is viewed from three different angles:

1. Net product method -the national economy is considered as an aggregate of productive units of

different sectors such as agriculture, mining, manufacturing, trade and commerce, services, etc.

The production method measures national income as the sum of net products produced by the production

units in the given period. Therefore, the production method involves the following steps: (i) Identifying

the production unit (ii) Estimating their net products (iii) Valuing the goods and services (iv) Estimation

of net income from abroad. 1. estimating the gross value of domestic output in the various branches of

production. 2. determining the cost of material and services used, and also the depreciation of physical

assets 3. deducting these costs and depreciation from gross value to obtain the net value of domestic

output.

2. The income method- the whole of national economy is viewed as a combination of individuals and

households owning different kinds of factors of production which they use themselves or sell factor-

services to make their livelihood. factor-income method -The income method measures national income

as the sum total of factor income shares accruing to the factor owners. Factors of Production: Land,

Labour, Capital and Organization. Factor Incomes: Rent, Wage, Interest and Profit. One can easily

aggregate all the factor incomes over a period of time and this aggregate figure is known as national

income at factor cost. There are major additions and deductions to the national income accounting.

Additions: Income from foreign sectors in the form of rent, profits etc. Deductions: Incomes from all

illegal activities: theft, rubbery, smuggling, child labor, prostitutions etc., Incomes to the foreign sector

acting in domestic sectors .The total factor-incomes are grouped under three categories: 1. Labour

incomes, 2.capital incomes and 3. mixed incomes

3. The expenditure method -The national economy may also be viewed as a collection of consuming,

saving and investing units (individuals, households, firms and governments- expenditure method ) The

expenditure method measures national income at the final expenditure stages. In estimating the total

national expenditure, anyone of the two following methods are used: All the money expenditures at

market price are computed and added up together. The value of all the products finally disposed off are

computed and added up

Factors affecting national income

1. Factors of Production Normally the more efficient and richer the resources, the higher the level of

national income or GNP will be.-a)Land-Resources like coal, iron & timber are essential for heavy

industries so that they must be available and accessible.- In other words, the geographical location of

these natural resources affect the level of GNP.

b)Capital-Capital is greatly determined by investment. Investment in turn depends on other factors

like profitability, political stability etc.

c) Labour & Entrepreneur The quality or productivity of human resources is more important than

quantity.-Manpower planning and education affect the productivity and production capacity of an

economy

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2. Technology -This factor is more important for nations with little natural resources. The development in

technology is affected by the level of invention and innovation on production.

3.Government -Government can help to provide a favourable business environment for investment. It

provides laws and order, regulations that affect exchanges.The government promotes free trade and

competition which encourage economic activities

4. Political Stability -A stable economic and political system helps the allocation of resources. Wars,

strikes and social unrests will discourage investment and business activities

Uses of National Income Statistics

Standard of Living The per capita GNP allows us to compare the standard of living of different nations.

In general, a nation has a higher standard of living if its per capita GNP is greater than that of another

nation.

Policy Formulation In the compilation of GNP statistics, the government had already gathered a lot of

information of the economy. The government can base on these figures to plan and decide its policies

International Comparison By converting the local GNP figures into a common unit ( usually in US$ ), we

can compare the standard of living of different nations. It helps to show the rate of growth or

development of different nations.

Business Decision -The GNP figures can show the level of development of different industries and

sectors of an economy. It helps the businessmen to plan for production

MODULE-3 The ISLM Model

IS curve is the relationship between equilibrium aggregate output and the interest rate-LM curve is the

combinations of interest rates and aggregate output for which MD

= MS

Equilibrium in the goods market implies that an increase in the interest rate leads to a decrease in output.

Equilibrium in financial markets implies that an increase in output leads to an increase in the interest rate.

When the IS curve intersects the LM curve, both goods and financial markets are in equilibrium.

IS and LM interactions

The IS curve captures the essential relationship between the- rate of interest and income in the markets for

goods and services- (the circular flow of income). The LM curve captures the essential relationship

between the rate of interest and income in the money market.

For the two markets to be consistent with each other - the same rate of interest ruling in both the goods

and services market and in the money market - there can only be one equilibrium level of national income

(Y*), shown by the intersection of the IS curve with the LM curve

Fiscal policy refers to the government‘s choices regarding the overall level of government purchases or

taxes. Fiscal policy influences saving, investment, and growth in the long run. In the short run, fiscal

policy primarily affects the aggregate demand. When policymakers change the money supply or taxes, the

effect on aggregate demand is indirect—through the spending decisions of firms or households .When the

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government alters its own purchases of goods or services, it shifts the aggregate-demand curve directly.

When the government alters spending or taxes, the resulting shift in aggregate demand can be larger or

smaller than the fiscal change. The multiplier effect tends to amplify the effects of fiscal policy on

aggregate demand. The crowding-out effect tends to dampen the effects of fiscal policy on aggregate

demand.

What is Monetary Policy? The term monetary policy refers to actions taken by central banks to affect

monetary magnitudes or other financial conditions. Monetary Policy operates on monetary magnitudes or

variables such as money supply, interest rates and availability of credit. Policy ultimately operates

through its influence on expenditure flows in the economy. In other words affects liquidity and by

affecting liquidity, and thus credit, it affects total demand in the economy

MP is a part of general economic policy of the govt.-Thus MP contributes to the achievement of the goals

of economic policy. Objective of MP may be: Full employment, Stable exchange rate, Healthy BoP ,

Economic growth, Reasonable Price Stability, Greater equality I distribution of income & wealth,

Financial stability ,Variations in Reserve Ratios

Instruments of Monetary Policy

1.Discount Rate (Bank Rate) (also called rediscount rate) 2.Open Market Operations (OMOs) 3.Other

Instruments

Policy in the IS-LM Model - Fiscal Policy-Expansionary fiscal policy shifts the IS curve to the right-

Contractionary fiscal policy shifts the IS curve to the left

Monetary Policy- Expansionary monetary policy shifts the LM curve to the right- Contractionary

monetary pol icy shifts the LM curve to the lef.

Problems Using IS-LM-

A. Interpretation Problems (what is happening?)-Problems in knowing how to interpret real-world events

within the IS-LM framework

B. Implementation Problems (how to deal with it?)

C. Problems encountered in undertaking policy

MODULE-4

1. Keynes theory- Keynes theory of income and employment is based on the concept of

aggregate demand and aggregate supply

aggregate demand- the value of total expenditures on all goods and services in the economy during a

specific period of time Components: a. house hold consumption demand b. Investment demand c. govt.

demand d. Net export demand. Y= C+ I+ G + NX

Aggregate supply: the quantity of goods and services produce by the entire economy - AS= C+S

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Classical concept. AS curve is perfectly inelastic with respect to prices. It is at full employment level of

out put.-Keynes model: AS is perfectly elastic with respect to prices until the full employment level of

out put .firms are willing to supply any amount of out put at the prevailing price level.

The Multiplier: The view that a change in autonomous expenditures (e.g. investment) leads to an even

larger change in aggregate income. An increase in spending by one party increases the income of others.

Thus, growth in spending can expand output by a multiple of the original increase. The multiplier is the

number by which the initial change in spending is multiplied to obtain the total amplified increase in

income. The size of the multiplier increases with the -marginal propensity to consume (MPC).

2.Classical theory -Refers to the theory first proposed by Adam Smith in ―An Inquiry into the Nature and

Causes of the Wealth of Nations.‖Classical theory was the predominant theory in industrialized nations

from the time of Adam Smith until the Great Depression. The ideal quantity of total output is the quantity

that will yield full employment of labor. The quantity of total output that results in full employment of

labor is called Natural Real GDP. According to classical theory, a market economy is s Classical theory

argues that inadequate demand cannot be a problem in a market economy due to Say‘s Law. Say‘s Law-

Supply creates its own demand. The act of production leads to equivalent income to resource owners

According to classical theory, flexible interest rates in the credit market cause any consumer savings to be

exactly offset by business investment. This assumes that the quantity of both savings and investment is

determined by the interest rate are self-regulating and will automatically adjust to Natural Real GDP.

According to classical theory, the economy is self-regulating and will automatically close a recessionary

gap. The surplus of labor will cause wage rates in the economy to fall. The decrease in wage rates will

shift the SRAS curve to the right, until Natural Real GDP is reached According to classical theory, the

economy is self-regulating and will automatically close an inflationary gap. The shortage of labor will

cause wage rates in the economy to rise. The increase in wage rates will shift the SRAS curve to the left,

until Natural Real GDP is reached. If the economy is self-regulating and automatically adjusts to Natural

Real GDP, the proper macroeconomic policy is laissez-faire

3 Rostow's Model-

Stage 1 Traditional Society-The economy is dominated by subsistence activity where output is consumed

by producers rather than traded. Any trade is carried out by barter where goods are exchanged directly for

other goods. Agriculture is the most important industry and production is labour intensive using only

limited quantities of capital. Resource allocation is determined very much by traditional methods of

production.

Stage 2 Transitional Stage (the preconditions for takeoff)-Increased specialisation generates surpluses for

trading. There is an emergence of a transport infrastructure to support trade. As incomes, savings and

investment grow entrepreneurs emerge. External trade also occurs concentrating on primary products

Stage 3 Take Off- Industrialisation increases, with workers switching from the agricultural sector to the

manufacturing sector. Growth is concentrated in a few regions of the country and in one or two

manufacturing industries. The level of investment reaches over 10% of GNP.The economic transitions are

accompanied by the evolution of new political and social institutions that support the industrialisation.

The growth is self-sustaining as investment leads to increasing incomes in turn generating more savings

to finance further investment.

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Stage 4 Drive to Maturity-The economy is diversifying into new areas. Technological innovation is

providing a diverse range of investment opportunities. The economy is producing a wide range of goods

and services and there is less reliance on imports.

Stage 5 High Mass Consumption-The economy is geared towards mass consumption. The consumer

durable industries flourish. The service sector becomes increasingly dominant.

4.Harrod-Domar Model- The model suggests that the economy's rate of growth depends on: the level of

saving, and the productivity of investment i.e. the capital output ratio. Warranted growth – the rate of

output growth at which firms believe they have the correct a mount of capital and therefore do not

increase or decrease investment, given expectations of future demand. Natural rate of growth – The rate at

which the labour force expands, a larger labour force generally means a larger aggregate output. Actual

growth – The actual aggregate output change. There is no guarantee that an economy will achieve

sufficient output growth to sustain full employment in a context of population growth. The problem

arises when actual growth either exceeds or fails to meet warranted growth expectations. A vicious cycle

can be created where the difference is exaggerated by attempts to meet the actual demand, causing

economic instability - Capital stock (K) ,Output (Y) – GDP, Capital-Output ratio (k): the dollar amount of

capital needed to produce a $1 stream of GDP. K/Y or ΔK/ΔY, Savings (S) and the savings ratio (s): the

fixed proportion of national output that is used for new investment So S = sY(1) Net investment is the

change in the capital stock I = ΔK (2) Remember that k = K/Y or ΔK/ΔY, so that ----ΔK = kΔY (3) Net

savings must equal to net investment so that S = I. Combining (1), (2) and (3): sY = kΔY -------

s/k = ΔY/Y ------ ΔY/Y is the growth rate of GDP .

5.Schumpeter model -Schumpeter, an entrepreneur is a person who is willing and able to convert a new

idea or invention into a successful innovation. Entrepreneurship employs what Schumpeter called "the

gale of creative destruction" to replace in whole or in part inferior innovations across markets and

industries, simultaneously creating new products including new business models. In this way, creative

destruction is largely responsible for the dynamism of industries and long- term economic growth.

Innovations in the information and communications technology (ICT) industry are glaring examples of

modern day constructive destruction

MODULE-5 - Exchange Rate-BOP

Exchange rates -The value of one currency relative to another currency as the number of units of one

currency required to purchase one unit of the other currency. Foreign Exchange Market The financial

market where exchange rates are determined -Transactions conducted in the foreign exchange market

determines the rates at which currencies are changed-

The price of one currency in terms of another is called exchange rate.

There are two kinds of exchange rate based on transactions that make up the foreign exchange market:-

Spot transactions involve the near-immediate exchange of bank deposits, completed at the spot rate.

-Forward transactions involve exchanges at some future date, completed at the forward rate. When a

currency increases (decreases) in value, it experiences appreciation (depreciation)----

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Flexible exchange rates are exchange rates, which fluctuate according to market forces. Advantages:

a.Allow countries to maintain independent economic policies. b. Permit a smooth adjustment to external

shocks. C Don't need to maintain large internationalreserves.3.Disadvantages: a. Flexible exchange rates

are highly unstable so that flows of foreign trade and investment may be discouraged. b.They are

inherently inflationary

Fixed exchange rates are exchange rates which do not fluctuate or which change within a predetermine

band.2Fixed exchange rates provide the stability of exchange rate, but their disadvantages include: a)Too

rigid to take care of major upheavals. B). Need large reserves to defend the fixed exchange rate. C). May

cause destabilizing speculations; most currency crises took place under a fixed exchange system.

Defining Balance of Payments (BOP):A measurement of all international economic and financial

transactions between the residents of a particular country and the rest of the world The Balance of

Payments of any country is divided into two major accounts: the Current Account and the

Capital/Financial Account.

Current Account tracks: Balance of Trade: (net) merchandise exports and imports. Services Balance:

(net) financial services and travel (other) services -Financial: Provided by banks to non-residents. Travel

/other: Provided by domestic entities to foreign country residents, such as meals, hotels, air travel, student

exchanges, construction. Income Balance: (net) investment income from abroad and to foreign entities

(arises from previous investments).Net Transfers: (net) private remittances to residents abroad

(money/gifts) or by governments (aid).

The Capital and Financial Accounts -capture cross border investments during a recorded period.

Capital Account: Purchases (or sales) of real estate.-Financial Account:(net) Foreign Direct investment

(FDI).FDI in the U.S. minus U.S. FDI abroad -(net) Portfolio investment-Non-controlling equity

investments, i.e., common stock (<10%)-Debt instrument investments (i.e., bonds).-Include both personal

and institutional (mutual funds)-(net) Other financial transactions-Bank loans.

A country‘s BOP can have a significant impact on the level of its exchange rate and vice versa depending

on that country‘s exchange rate regime-The effect of an imbalance in the BOP of a country works

somewhat differently depending on whether that country has fixed exchange rates, floating exchange

rates, or a managed exchange rate system-Under a fixed exchange rate system the government bears the

responsibility to assure a BOP near zero-Under a floating exchange rate system, the government of a

country has no responsibility to peg its foreign exchange rate

Direct Investment – in which the investor exerts some explicit degree of control over the assets-Portfolio

Investment – in which the investor has no control over the assets nor any participation in the

management-Other Investment – consists of various short-term and long-term trade credits, cross-border

loans, currency deposits, bank deposits and other capital flows related to cross-border trade

Advantages- Growth of capital stock-Incorporated technologies-Possibilities to gain managerial and

labor skills-Higher incomes and economic development. (Taxation for public sector)-Finance education-

Finance health-Finance infrastructure development, etc.

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Trade Restrictions: Arguments -National Defense. 2Sanctions to Punish Offending Nations 3.Protect

Infant (or Dying) Industry 4.Protect Domestic Jobs from Cheap Foreign Labor 5.Scientific Tariff or Fair

Competition-

Countries use protectionist measures to shield a country‘s markets from intrusion by foreign competition

and imports

Arguments for Protectionism include:1maintain employment and reduce unemployment.2increase of

business size, and 3retaliation and bargaining.4protection of the home market. 5need to keep money at

home.6encouragement of capital accumulation.7maintenance of the standard of living and real

wages.8conservation of natural resources.9protection of an infant industry 10industrialization of a low-

wage nation .11national defense

KINDS OF TRADE RESTRICTIONS

1Tariff barriers- (Qualitative barriers) a.Ad valorem duty, b.Specific duty -cCompound duty- dVariable

levy- Creates revenue for government

Benefits-Infant industry protection-Dumping – of foreign goods at low prices to kill off competition-

Cheap labour – protection from cheap foreign labour-Strategic trade policy – ↑ national welfare at the cost

of other nations-Externalities – protect industries from foreign competition in order for them to capture

benefits of R&D

2.Non-tariff barriers (Quantitative barriers) –a.Quotas b.Voluntary export restraints, c. Orderly marketing

arrangements

3.Non-quantitative, non-tariff barriers-a.Direct government participation in trade-b.Customs and other

administrative procedures-c.Standard.

Intellectual Property is a property that arises from the human intellect. It is a product of human creation.

Intellectual Property is the creation of the human intellectual process and is therefore the product of the

human intellect or mind. It is an intangible form of property. It is a personal property. It is a basic form of

property. It is based on information Economic liberalization is a process and a matter of degree

MEANING – Grant of exclusive rights for a certain period over intangible assets created through human

skill, intelligence, labour and effort

INTELLECTUAL PROPERTY RIGHTS IN INDIA –

CHIEF COMPONENTS –1Copyright 2.Trademark -3Patent 4.Industrial Designs-5Geographical

indications-6 Semi-conductors (Layout-Designs (Topographies) of Integrated Circuits) -7.Plant Variety &

Bio-Diversity

IPR PROTECTION MECHANISM IN INDIA- SALIENT FEATURES

In conformity with International standards and as amended from time to time, the Indian laws provide for

both civil and criminal liability; Protection available to both registered as well as unregistered IPRs

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through civil suits, temporary / permanent injunction, arrest, penalty, damages, compensation etc.;

Criminal remedy more effective than civil proceedings;

GOVERNING STATUTES & TERM OF PROTECTION –

Under Copyright Act, 1957 – Lifetime + 60 yrs., for Natural entity and 50 yrs. from publication for

Artificial Entity; Under Patents Act, 1970 – 20 year, renewable;

Under Trademarks Act, 1999 – 10 year, renewable;

Under Designs Act, 2000 - 10 year + 5 year extension;

Under Geographical Indications of Goods (Registration and Protection) Act,1999 – 10 Years;

Under Protection of Plant Variety & farmer‘s Right Act, 2000 – Maximum 18 years; Biological Diversity

Act, 2002;

Under Semiconductor Integrated Circuits Layout Design Act, 2000, 10 year. Act to be implemented

hence no protection as of date

ECONOMIC LIBERALIZATION- The level of liberalization of a country‘s economy cannot be

determined in absolute terms, and has to be assessed on a comparative basis-There may be various factors

which can help to characterize a particular economy as regulated or liberalized, such as

(1) level of private enterprise –

(2) macro economic policy –

(3)m icro economic policy

1) level of private enterprise –

1. What percentage of the GDP comes from private ownership? What percentage of the labor force is

employed in the private sector? How large is the informal sector of the economy?

2. What major privatization legislation has been passed? What were its substantive features?

3. What proportion of agriculture, housing and land, industry, and small business and services is in

private hands?

4. What has been the extent of insider (management, labor, and nomenklatura) participation in the

privatization process? What explicit and implicit preferences have been awarded to insiders?

5. How much public awareness of and support for privatization has there been? What is the nature of

support and opposition to privatization by major interest groups

2) Macro economic policy-

1. Has the taxation system been reformed? What areas have and have not been overhauled? To what

degree are taxpayers complying? Is tax compliance difficult to achieve? Has the level of revenues

increased? Is the revenue-collection body overburdened? What is the overall tax burden?

2. Does fiscal policy encourage private savings, investment, and earnings? Has there been any

reform/alteration of revenue and budget policies? How large are budget deficits and overall debt? Is the

financing of the social insurance/pension system sustainable? What proportion of the budget is taken up

by subsidies to firms and individuals?

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3. Has there been banking reform? Is the central bank independent? What are its responsibilities? Is it

effective in setting and/or implementing monetary policy? What is the actual state of the private banking

sector? Does it conform to international standards? Are depositors protected?

4. How sound is the national currency? Is the value of the currency fixed or does it float? How

convertible is the currency? How large are the hard currency reserves? Has exchange rate policy been

stable and predictable 5. Is there a functioning capital market infrastructure? Are there existing or planned

commodities, bond, and stock markets? What are the mechanisms for investment and lending? What

government bodies have authority to regulate capital markets? Does the regulatory system provide for

investor protection, transparency and corporate accountability.

3)micro economic policy-1.Are property rights guaranteed? Are there both formal and de facto

protections of private real estate and intellectual property? Is there a land registry with the authority and

capability to ensure accurate recording of who owns what? What are the procedures for expropriation,

including measures for compensation and challenge? Have any seizures taken place?

2. To what extent have prices been liberalized? What subsidies remain? 3 Is it possible to own and

operate a business? Has there been legislation regarding the formation, dissolution, and transfer of

businesses, and is the law respected? Do there exist overly cumbersome bureaucratic hurdles that

effectively hinder the ability to own and dispose of a business? Are citizens given access to information

on commercial law? Is the law applied fairly? Do regulation or licensing requirements impose significant

costs on business and consumers? Do they create significant barriers to entry and seriously hamper

competition?. 4Is business competition encouraged? Are monopolistic practices limited in law and in

practice? If so,how? To what degree is "insider" dealing a hindrance to open competition? Are

government procurement policies open and unbiased? 5. Are courts effective, transparent, efficient, and

quick in reaching decisions on property and contract disputes? What alternative mechanisms for

adjudicating disputes exist?6. Does corruption inhibit business? 7. To what extent has international trade

been liberalized? To what degree has there been simplification/overhaul of customs and tariff procedures,

and are these applied fairly? What informal trade barriers exist? 8. To what extent has foreign investment

and capital flow been encouraged or constrained 9. Has there been reform of the energy sector? To what

degree has the energy sector been restructured? Is the energy sector more varied, and is it open to private

competition? Is the country overly dependent on one or two other countries for energy, including whether

exported fuels must pass through one or more countries to reach markets? 10. How stringent are the

labour laws? How co-operative are the workforce and the trade unions? 11. How effective is the legal

framework for creditor rights? 12. How sensitive are the insolvency laws to creditor rights? Do the

insolvency laws provide for corporate recovery? How efficient is the system for rehabilitation of viable

business?

QUESTIONS

1. What are the major features of Micro and Macro Economics?

2. Define Micro and Macro Economics. How these two are helpful to managers?

3. Explain the major benefits of Micro and Macro Economics?

4. Distinguish between internal and external environment of business.

5. Explain the emerging business environment and business ethics in India.

6. .Explain the Law-of diminishing marginal utility theory with a suitable example.

7. Distinguish between cardinal & ordinal utility analysis.

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8. Define indifference curve. How it helps to explain low of demand?

9. How price effect can be divided in to income and substitution effect?

10. What is equi-marginal principle? How it explains consumer‘s equilibrium?

11. Define price elasticity of demand and explain its importance in management decisions.

12. Explain, with diagrams- the different degrees of price elasticity of demand.

13. Explain the concepts-income elasticity, cross- elasticity, advertisement elasticity, elasticity of

price expectation.

14. Define production function. Explain the law of variable proportion.

15. How long run average cost curve explain the law of return to scale. write a brief note on

economies of scale.

16. Explain the price and out put determination method of perfect competition.

17. What is monopoly? What are the major features? How price is determined in monopoly?

18. Explain the functioning of oligopoly market. Discuss the various oligopoly models.

19. What is full coast pricing? what is the relation between product life cycle and pricing?

20. Describe an economy in terms of circular flows of income and expenditure. What is meant by

withdrawals and injections?

21. Define national income, what is its importance? what are the important methods of national

income measurement

22. Explain the Keynesian theory of income and employment. How it differ from classical model?

23. Explain the concept of multiplier with a suitable example.

24. Explain the classical model of economic planning

25. How Keynesian model is differ from classical model?

26. Critically examine Rostow‖s model of economic planning

27. explain the role of savings in Harror- Domer Model of economic planning.

28. Competition through innovation is the driving force of economic development ―-explain

29. Explain the concept of ISLM. How these are deriving and reaching an equilibrium?

30. Explain the effect of monetary and fiscal policy with the help of ISLM model.

31. What are the Problems of Using IS-LM in the Real World?

32. .Briefly describe ,how BOPs are use full for exchange rate determination. How BOP differ from

BOT?

33. Explain the role of foreign private investment in correcting BOPs of LDCs, and critically

examine their debt management policies.

34. .How protectionism will help to correct BOP problems?

35. .Explain the major prospects of economic liberalization in LDCs - take India as an example

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EXECUTIVE COMMUNICATION

MODULE- 1

COMMUNICATION

It is derived from the Latin word ―communis‖ which means common. It is an important aspect of human

behavior and symbolizes human beings ability to convey opinions, feelings, information and ideas to

others through words, body language or signs.

Features of communications

It is the life blood of the business

It is a continuous process

It needs proper understanding

It involves interaction and transaction

Leads achievement of the organizational objective

Functions and importance of communication in business organization:

Communication is the life blood of organization

Maintain good employee-employer relationship

Avoids Organizational Conflict

Boost the Morale of Employees

Helps in effective Decision Making

Powerful Motivational Tool

Helps in Better Coordination and accomplishing Organizational Goals

Communication Models:

Linear Model

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Transaction Model

Principles of Business communication:

• Clarity

• Completeness

• Conciseness

• Consideration

• Courtesy

• Correctness

• Formal communication

It is a means of communication that is formally controlled by managers or people occupying positions in

an organization. Communication flows through formal channels.

Informal communication

Side by side with formal channels of communication there exists on a much larger scale, an informal

channel of communication or a secondary network of information. It is also known as grapevine

communication.

Internal Operational Communication

It consists of the structured communication within the organization‘s work goal.

External Operational Communication

It is that part of an organization‘s communication structure which is concerned with achieving the

organization‘s work goals

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• Downward Communication:

Communication that flows from upper to lower (such as manager to employer or superior to

subordinate). It conveys executive decisions and provides information that helps employees do their jobs.

Job instructions, job rationales, procedures and practices information, feedback, and indoctrination are

examples of downward communication.

• Upward Communication:

Transmission of messages from lower to higher levels of the organization (such as communication

initiated by subordinates with their superiors).

Performance on the job, job related problems, fellow employees and their problems, subordinates

perceptions of org policies and practices, tasks and procedures are some examples of upward

communication.

• Horizontal Communication:

Flow of messages across functional areas at a given level of an organization (this permits people at the

same level to communicate directly). It flows between different departments

Facilitates problem solving, info sharing across different work groups, task coordination between

departments and project teams are examples of horizontal communication.

Grapevine Communication:

It represents the unofficial channels of communication which are created and controlled by people

themselves rather than the management. It follows no set of lines or definite rules, but it spreads very fast

like the grapevine. Rumors being communicated in an organization are also a type of grapevine.

Information Overload:

It is a term popularized by Alvin Toffler that refers to the difficulty a person can have understanding an

issue and making decisions that can be caused by the presence of too much information. The term itself is

mentioned in a 1964 book by Bertram Gross, The Managing of Organizations

One-way communication

Communication in which information is always transferred in only one pre-assigned direction. It does not

include a return channel.

Two-way communication

Two-way communication - uses communication to negotiate with publics, resolve conflict, and promote

mutual understanding and respect between the organization and its public(s).

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MODULE 2

BODY LANGUAGE:

Branch that deals with the study of the way body communicates is called Kinesics. It stands for

the way the body communicates without words, and through the movement of its parts.

KINESICS

It is also called body language. Movements of the body, or some part of it, used to communicate an idea,

intention or feeling.

BARRIERS OF COMMUNICATION

1. Language and Semantic barriers

2. Organisational barriers

3. Physical barriers

1. Semantic barriers

i. Lack of common language

ii. Poor vocabulary

iii. Poor knowledge of grammar and punctuation

2. Organisational barriers

i. Line of hierarchy

ii. Strict rules and regulations

iii. Wrong medium of communication

iv. Overload of communication

3. Physical barriers

i. Noise

ii. Time

iii. Distance

iv. Gender barriers

Psychological barriers

1. Attitudinal barriers

Attitude of seniors

Attitude of juniors

2. Difference in perceptions

3. Abstraction

4. Stereotyping

5. Emotional barriers

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6. Cultural barriers

7. Poor listening skills

8. Lack of feedback

Proxemics:-

Study of how we use space around to communicate the message ie, proxemics is the personal

space language.

There are 4 types of informal spaces

(a)Intimate zone-physical contact to 18 inches

Here only family members, close friends or selected persons are allowed.

(b)Personal zone-18 inches to 4 feet

This is meant for conversations with peers, friends, colleagues etc.

(c)Social zone-4 feet to 12 feet

This is used for formal & official relationships.

(d)Public zone-12 feet to 30 feet

This is most suitable for public meetings.

Semiotics

It is the study of cultural sign processes (semiosis), analogy, metaphor, signification and

communication, signs & symbols.

It divided into three branches, which include:

Semantics : Relation between signs and the things to which they refer

Syntactics : Relations among signs in formal structures

Pragmatics : Relation between signs and the effects they have on the people who use them

Phonetics

It is the systematic study of the production, transmission & reception of speech sounds.

Study of sounds of human speech or pronunciation.

3 categories

Articulatory phonetics : according to production in the vocal organs

Acoustic phonetics : according to physical properties

Auditory phonetics : according to effect of sound on the ear

Graphics

Graphics are visuals that aim to inform, illustrate or entertain through print or audio visual

mediums of mass communication.

Graphic communication is the communication through graphics & graphical aids.

It encompasses all processes from the origination of the idea through reproduction, finishing &

distribution of 2 or 3- dimensional products or electronic transmissions.

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It involves using visual material such as drawings, photographs, slides, transparencies & sketches

to relate ideas.

Colour

Colour produces emotional response to people‘s mind. Different colours produce different

feelings.

Red - alertness, excitement, lively & aggressive

Orange – being happy, exotic, healthy & vibrant

Yellow – being communicative, friendly, imaginative & playful

Green – being clean, natural, adventurous & analytic

Blue – being faithful, lonely, quite & rational

Purple – being creative, magical, mystical, artistic & sophisticated

White – safety, purity, cleanliness, innocence, goodness, perfection

Black – power, death, elegance, formality, death, evil, mystery, fear, strength, authority, grief

Patterns of communication

They are methods of communication that are used frequently in specific circumstances or with

certain people.

It determines the way in which communication happens in an organisation.

Various patterns of communication are

Chain – members communicate with people next to them in sequence

Wheel – information flow to & from one single member

Circle – communicate with any 2 other members

All channel / Comcon – communicate with all the members in a group

Communication networks

A communication network represents a pattern of information flow among group members.

2 types – centralised network & decentralised network

Centralised network – one central person

- Unequal access of information

Types :-

Y network

Wheel network

Chain network

Decentralised network – No central person

-Information can flow freely

Types :-

Circle network

All channel network

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Feed forward and feedback:-

Feed forward

Giving someone else positive suggestions for the future rather than focussing on negatives of the

past.

It allows a leader to create an image of desired management behaviours in the future.

Feedback

It is the response of a receiver to sender‘s message.

It could be nonverbal smiles, signs, oral or written.

Feedback should be more affective if it is well-timed.

2 types – positive & negative.

Positive feedback – suitable acknowledgement of a task performed well

Negative feedback – opposite to the favourable expectations of the receiver

MODULE-3

Measures and Solutions for effective communication

1. Clear and expressive

2. Avoid jargons

3. Receiver should be involved

4. Noise should be avoided

5. Choose correct technique of communication

6. Effective organisational structure

7. Hierarchical problems

Communication in negotiation

An interactive communication process that may take place whenever we want something from someone

else or another person wants something from us.

Characteristics of negotiation

1. Minimum two parties

2. Pre-determined goals

3. Expectation of outcome

4. Outcome should be satisfactory

5. Willing to compromise

Approaches to negotiation

1. Win-lose

2. Lose-lose

3. compromise

4. Win-win

Negotiation process

1. Preparation

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2. Opening phase

3. Bargaining phase

4. Closure phase

Role of IT in effective communication

1. Increases productivity

2. Reduces stress

3. Better understanding

4. Better means of conveying message

5. Enhances relationship

6. Saves time and money

Transactional analysis

It is defined by Webster‘s New Dictionary as a form of popular psychotherapy conducted on the

premise that there are three states of the ego (parent, adult, and child) in each individual, which must be

brought into balance.

The parent ego state is authoritarian, the adult ego state is rational and child ego state is

impulsive.

It is a study of many types of transaction that take place between people, and offers a model of

personality and the dynamics of self and its relationship with others.

Ego state

Self awareness

Script analyses

Stroking

Game analyses

Ego states

1. Parent ego

2. Adult ego

3. Child ego

Self awareness

1. Open self

2. Blind self

3. Hidden self

4. Unknown self

Script analyses

1. I am ok, you are ok

2. I am ok, you are not ok

3. I am not ok, you are ok

4. I am not ok, you are not ok

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Stroking

Recognition of others, and strokes are the units of interpersonal recognition

Games analysis

In game playing, people assume 3 roles they are:

1. Persecutors

2. Victims

3. rescues

Benefits of transactional analysis

1. development of positive thinking

2. interpersonal effectiveness

3. motivation

4. self evaluation

5. improve communication skill

Speaking in business communication

Forms of speaking

Face-to-Face Communication

Mechanical Device

a) Speaking Tubes

b) Dictating Machines

Intercoms

Functions of speaking

1) To improve and enhance their academic performance.

2) To increase the options of employment.

3) To enhance their subsequent professional competence

4) To improve their personal effectiveness.

Types of speaking

Speaking with confidence

Informal conversation

Beauty pageants

Pantomime script

Teaching

Extemporaneous speaking

Listening

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Effective listening is the process of analysing sounds, organizing them into recognisable patterns,

interpreting the patterns and understanding the message by inferring the meaning.

Types and functions of listening

Objectives of listening

To learn

To increase ones understanding

To adverse counsel

To relieve ones boredom

Importance of listening

Communication is not complete without effective listening.

An alternative listener stimulates better speaking by speaker.

A good listener learns things more than others.

A good listener learns to detect prejudices, assumptions and attitudes.

Main process in listening

Hearing

Filtering

Comprehending

Remembering

Responding

Levels of listening

Non-listening

Passive listening

Active listening

Major types of listening

Discriminative listening

Comprehension listening

Evaluative listening

Attentive listening

Pretence listening

Selective listening

Intuitive listening

MODULE – IV

BUSINESS CORRESPONDENCE

Business correspondence or business letter is a written communication between two parties. BC

means through which views are expressed and ideas or information is communicated in writing in the

process of business activities.

Principles of letter writing

i. Correctness- a letter should provide accurate data without errors. Sentences should be free from

grammar mistakes. Words should be correctly chosen and proper spelt.

ii. Coherence- It implies use of proper words in proper place to make the meaning logically complete

and easily understandable to the reader.

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iii. Clearness – Use simple and right words. Avoid unnecessary words and jargons.

iv. Consistency-Use related ideas to make up theme. Avoid contradictory view points or terms and

conditions.

v. Courtesy - Be positive and optimistic. Try to avoid negative expressions.

vi. Completeness – Develop message in your mind before you write or dictate.

vii. Clarity- Message should be expressed in clear terms and should avoid ambiguity.

viii. Relevant information- Facts, figures and information must be accurate, reliable and should contain

relevant matters.

Styles:

Indented form

Full block form

Modified block form

Hanging indentation

Full block form

Planning of letter writing

Understand the context

Use words appropriate to the subject

Use short sentences and paragraphs

Use standard draft or format

Specialised writing

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Constant improvisation

Types of business letters

Complaint letters- are an effective way of expressing the customer‘s/consumer‘s dissatisfaction

with a product or service.

Adjustment letters- is a responsive letter to a complaint made by a customer in writing.

Collection letters- otherwise called recovery letters, which sometimes sends to customer to pay

money or to recovery some money.

Reminders- otherwise called follow up letters, which most often the reminder letter is used as a

reminder of the missed payment

Enquiry appeal- it is a letter made by prospective customers regarding availability of various

products, services and other related aspects.

Warning letters- it is used in companies to improve the performance of employees or for curbing

any kind of bad behaviour.

Sales letters- is a piece of direct mail which is designed to persuade the reader to purchase a

particular product or service in the absence of a salesman.

AIDA Strategy

In AIDA strategy marketers capture the attention of the potential customer, generate interest, desire and

specified action. The four letters in AIDA represents following words:

A – Attention

I- Interest

D- Desire

A-Action

Job employment letter

Application letters seeking jobs essentially of two types:

i. Suomoto

ii. In response

Resume writing Tips

Tip 1 - Use Titles or Headings That Match the Jobs You Want

Tip 2 - Use Design That Grabs Attention

Tip 3 - Create Content That Sells

Tip 4 - Quantify and Use Power Words

Tip 5 - Analyze Ads and Job Descriptions to Identify Key Words

Tip 6 - Identify and Solve Employer's Hidden Needs

Tip 7 - Sell the Benefits of Your Skills

Tip 8 - Create an Image That Matches the Salary You Want

Tip 9 - Prioritize the Content of Your Resume

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Tip 10 - Tweak and Target Your Resumes and Cover Letters

.Job Resume Format and Example

Gary Andrews

512 North St. Los Angeles,

California, USA

(012) 345-6789

garry.pants@aol.com

CAREER OBJECTIVE

Seeking a dynamic position in Web Developing in order to increase my knowledge and further develop

my skills in the field

CAREER PROFILE

Presently employed in one of the top web design company

Provides fresh designs and on demand applications for the site

Professional and work oriented

Handled high end web projects and maintenance

More than 5 Years of working experience in the field

WORK EXPERIENCE

Web Master 2008 – present

Patriots Studios, Los Angeles, California

Conducts regular maintenances on each website created by the company

Makes sure that the website is bullet proof and free from bugs and errors

Ensures that the website is accessible by the public and the employees all the time

Provides contact information for problems and inquiry encountered by users with the web site

Web Designer 2006 – 2008

Speed Limit Studios, Los Angeles, California, USA

Created eye catching and interactive web pages for clients

Enhanced and modified previously created web pages if more suitable designs and applications

become available

Communicated with the client for their own preferences on how their website‘s appearance and

functionalities

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Computer Analyst 2004 – 2006

Select Corporation, Los Angeles, California, USA

Determined the software and hardware needed by the company

Provided computer technology solutions that aid faster growth in the company

Presented solutions to problems regarding Information Technology in general

EDUCATIONAL BACKGROUND

Bachelors Degree in Computer Science 2000 – 2004

Los Angeles Technical University

California, USA

Major in Computer Programming

Minors in IT Management

Graduated with honours

Dean‘s Lister for 6 semesters

TECHNICAL EXPERTIES

Languages: HTML, XML, CSS, Java, C++

Software: Adobe Dream Weaver, Adobe Photo Shop, Macromedia

Flash, Visual Studio.Net, Visual Basic 6 and MS Office.

CHARACTER REFERENCES

Available upon request

MODULE-5

EMAIL-ELECTRONIC MAIL

Computer based messaging system that transports electronic messages from one computer to another

through a communication network.

ADVANTAGES OF USING E-MAIL

E-mail communication is swift, in fact instantaneous

E-mail communication is extremely economical

E-mail communication has a large global reach and access

The sender can send copies of the message to many others instantaneously

It can be stored and retrieved as and when required by both of the sender and the receiver

COMMUNICATION NETWORKING SYSTEM

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Word processor; these relate to software that facilitate better organized and appealing business

correspondence.

Teleconferencing; is a conference or discussion that takes place over the telephone.

Video conferencing; video conferencing goes on a step ahead of teleconferencing, whereby apart

from the audio messages, video messages are available.

Short messaging services; is yet another message transmission medium that has grown rapidly in

both developed and the developing countries.

CHARACTERISTCS OF BUSINESS REPORTS

Generally submitted to a higher authority

Communicates upwards in an organisation

Logically organised

Objective in tone

For a limited audience

Both short and long

IMPORTANCE OF BUSINESS REPORTS

Conveyor of information; report serve as conveyor of information.

Review and evaluate operations; reports help management to review and evaluate operations

continuously.

Decision making; a report aims at providing correct, objective and suitable information to persons

who require it so that correct decision can be taken at his end.

Better coordination; reports aim to provides common understanding of information between

different groups in the organization thus ensuring better coordination.

Tools for measuring performance; reports are useful tools for measuring departmental

performance.

Help in making desirable changes; reports help in making and implementing desirable changes to

business polices.

STRUCTURE OF REPORTS

Title page

Table of contents

Acknowledgements

Executive summary

Body of the report

TYPES OF BUSINESS REPORTS

Informational reports and analytical reports

Routine or periodic reports and special reports

Informal and formal reports

STEPS IN REPORT WRITING

Planning; it is the first step in the writing process. It involves, knowing the purpose of message,

knowing the audience, determining the contents of the message, gathering the collection information,

organization of the message.

Drafting; compose; the first version of the message.

Revising; once the draft is ready, revise the writing.

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Formatting; it gives a neat and visually appealing look to the document.

Proofreading; this is the last opportunity of the writer has to make any changes to the message

before it passes on to the reader.

WRITING STYLE OF REPORTS

Use of short simple words

Varied vocabulary

Crisp, concise and clear writing

Use of positive language

Logical flow of ideas in paragraphs

Use of variety of sentence type

Reflecting courtesy

BASIC PURPOSES OF AN ILLUSTRATION SHOULD BE KEPT IN MIND

To give a general impression

To show detailed information

To show the structure and working of a system

INTERVIEWING-THE IMPORTANT ASPECTS

To be well informed

Homework should be done

Understanding the roll

Easing the candidate

Testing knowledge

Supply of questions

Listening skills

Process of elimination

Performance rating matrix

Conduct with dignity

The ultimate test

ESSENTIALS OF PUBLIC SPEAKING

Speaker‘s personality and demeanour

Know your audience

Speech preparation

Art of speaking

Voice of modulation

Pauses and punches

Listen participation

Great delivery

Speaking without hurting

CHARACTERISTIC OF GROUP DISCUSSIONS

Interface; is the interaction among the various members of the group.

Leader and members; group discussion is effective only when there is a group of members and

leader.

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Participation; the effectiveness and efficiency of a group discussion depend to a large extent upon

the active participation of the members.

Inter personal attraction

Pressure to conform – in a group discussion, there is always an element of pressure to conform to

norms.

Conflict- disagreement among the members of group.

ADVANTAGES OF GROUP DISCUSSION

It provides a deeper understanding of the subject

It improves the ability to think critically

It enhance in confidence in speaking

It provides different approaches to solving a problem

It helps the group in taking a decision

IMPORTANT INGREDIENTS FOR SUCCESS IN GROUP DISCUSSION

Positive personality

Communication skill

Sound knowledge and awareness level

Ability to coordinate

VIDEO CONFERENCING- live exchange of information among people distanced from each

other but linked by a telecommunication system.

Plan well in advance for the conference

Prepare a detailed agenda like you would do for a meeting and follow it

Involve all participants equally during the meeting

Speak normally and clearly. don‘t shout

Address individuals by their names to assure their attention when speaking

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FINANCIAL ACCOUNTING

MODULE1: ACCOUNTING PRINCIPLES

Accounting Concepts

Accounting concept refers to the basic assumptions and rules and principles which work as the basis of

recording of business transactions and preparing accounts. The main objective is to maintain uniformity

and consistency in accounting records. These concepts constitute the very basis of accounting. All the

concepts have been developed over the years from experience and thus they are universally accepted

rules.

Following are the various accounting concepts that have been discussed in the following sections:

1. Business entity concept

2. Money measurement concept

3. Going concern concept

4. Accounting period concept

5. Accounting cost concept

6. Duality aspect concept

7. Realisation concept

8. Accrual concept

9. Matching concept

1.BUSINESS ENTITY CONCEPT

Significance of Business Entity Concept

The following points highlight the significance of business entity concept:

1 This concept helps in ascertaining the profit of the business as only the business

Expenses and revenues are recorded and all the private and personal expenses are

ignored.

2 This concept restraints accountants from recording of owner‘s private/personal

transactions.

3 It also facilitates the recording and reporting of business transactions from the business point of view.

4 It is the very basis of accounting concepts, conventions and principles.

2.MONEY MEASUREMENT CONCEPT

Significance of Money Measurement Concept

The following points highlight the significance of money measurement concept:

1 This concept guides accountants what to record and what not to record.

2 It helps in recording business transactions uniformly.

3 If all the business transactions are expressed in monetary terms, it will be easy to

Understand the accounts prepared by the business enterprise.

4 It facilitates comparison of business performance of two different periods of the same firm or of the

two different firms for the same period.

3 .GOING CONCERN CONCEPT

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Significance of Going Concern Concept

The following points highlight the significance of going concern concept;

1.This concept facilitates preparation of financial statements.

2.On the basis of this concept, depreciation is charged on the fixed asset.

3. It is of great help to the investors, because, it assures them that they

will continue to get income on their investments.

4. In the absence of this concept, the cost of a fixed asset will be treated

as an expense in the year of its purchase.

5 .A business is judged for its capacity to earn profits in future.

4 .ACCOUNTING PERIOD CONCEPT

Significance

1. It helps in predicting the future prospects of the business.

2. It helps in calculating tax on business income calculated for a particular

time period.

3.It also helps banks, financial institutions, creditors, etc to assess and

analyze the performance of business for a particular period.

4. It also helps the business firms to distribute their income at regular

intervals as dividends.

5.ACCOUNTING COST CONCEPT

Significance

1.This concept requires asset to be shown at the price it has been acquired,

which can be verified from the supporting documents.

2.It helps in calculating depreciation on fixed assets.

3. The effect of cost concept is that if the business entity does not pay

anything for an asset, this item will not be shown in the books of

accounts.

6. DUAL ASPECT CONCEPT

Dual aspect is the foundation or basic principle of accounting. It provides

the very basis of recording business transactions in the books of accounts.

This concept assumes that every transaction has a dual effect, i.e. it affects

two accounts in their respective opposite sides. Therefore, the transaction

should be recorded at two places. It means, both the aspects of the

transaction must be recorded in the books of accounts.

Thus, the duality concept is commonly expressed in terms of fundamental

accounting equation :

Assets = Liabilities + Capital

Significance

1.This concept helps accountant in detecting error.

2. It encourages the accountant to post each entry in opposite sides of two

affected accounts

7. REALISATION CONCEPT

Significance

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1.It helps in making the accounting information more objective.

2. It provides that the transactions should be recorded only when goods

are delivered to the buyer.

8. ACCRUAL CONCEPT

Significance

1. It helps in knowing actual expenses and actual income during a particular time period.

2.It helps in calculating the net profit of the business.

9. MATCHING CONCEPT

Significance

1.It guides how the expenses should be matched with revenue for

Determining exact profit or loss for a particular period.

2. It is very helpful for the investors/shareholders to know the exact

amount of profit or loss of the business.

Accounting Equation

The recording of business transaction in books of accounts is based on a fundamental equation called

Accounting Equation. Whatever business possesses in the form of assets is financed by proprietor or by

Outsiders. This equation expresses the equality of assets on one side and the claims of outsiders

(liabilities) and owners or proprietors on the other side In Mathematical form,

The accounting equation holds at all times over the life of the business. When a transaction occurs, the

total assets of the business may change, but the equation will remain in balance.

Rectification Of Accounting Errors

Every businessman is interested in finding out the true profit and correct financial position of his business

at the close of the trading period. The effort of the accountant is to prepare the final accounts in such a

fashion which exhibits true picture of the business. Accounts are considered to be authentic proof of true

financial position of a concern. But in spite of best efforts there are certain transactions which are omitted

to be recorded or entered wrongly in the books. Such errors affect the final accounts. An accountant

should, therefore, try to locate such errors and rectify them before the preparation of final accounts.

Accountants prepare trial balance to check the correctness of accounts. If total of debit balances does not

agree with the total of credit balances, it is a clear-cut indication that certain errors have been committed

while recording the transactions in the books of original entry or subsidiary books. It is our utmost duty to

locate these errors and rectify them, only then we should proceed for preparing final accounts.

All errors of accounting procedure can be classified as follows:

1. Errors of Principle

Assets = Liabilities + Capital (owners equity)

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When a transaction is recorded against the fundamental principles of accounting, it is an error of

principle. For example, if revenue expenditure is treated as capital expenditure or vice versa.

2. Clerical Errors

These errors can again be sub-divided as follows:

(i) Errors of omission

When a transaction is either wholly or partially not recorded in the books, it is an error of omission. It

may be with regard to omission to enter a transaction in the books of original entry or with regard to

omission to post a transaction from the books of original entry to the account concerned in the ledger.

(ii) Errors of commission

When an entry is incorrectly recorded either wholly or partially-incorrect posting, calculation, casting or

balancing. Some of the errors of commission effect the trial balance whereas others do not. Errors

effecting the trial balance can be revealed by preparing a trial balance.

(iii) Compensating errors

Sometimes an error is counter-balanced by another error in such a way that it is not disclosed by the trial

balance. Such errors are called compensating errors.

From the point of view of rectification of the errors, these can be divided into two groups :

(i) Errors affecting one account only, and

(ii) Errors affecting two or more accounts.

Errors affecting one account

Errors which affect can be :

(a) Casting errors;

(b) Error of posting;

(c) Carry forward;

(d) Balancing; and

(e) Omission from trial balance.

All types of errors in accounts can be rectified at two stages:

(i) Before the preparation of the final accounts; and

(ii) After the preparation of final accounts

Errors rectified within the accounting period

The proper method of correction of an error is to pass journal entry in such a way that it corrects the

mistake that has been committed and also gives effect to the entry that should have been passed. But

while errors are being rectified before the preparation of final accounts, in certain cases the correction

can't be done with the help of journal entry because the errors have been such. Normally, the procedure of

rectification, if being done, before the preparation of final accounts is as follows:

(a) Correction of errors affecting one side of one account Such errors do not let the trial balance agree as

they effect only one side of one account so these can't be corrected with the help of journal entry, if

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correction is required before the preparation of final accounts. So required amount is put on debit or credit

side of the concerned account, as the case maybe. For example:

(i) Sales book under cast by Rs. 500 in the month of January. The error is only in sales account, in order

to correct the sales account, we should record on the credit side of sales account 'By under casting of.

sales book for the month of January Rs. 500".I'Explanation:As sales book was under cast by Rs. 500, it

means all accounts other than sales account are correct, only credit balance of sales account is less by Rs.

500. So Rs. 500 have been credited in sales account.

(ii) Discount allowed to Marshall Rs. 50, not posted to discount account. It means that the amount of Rs.

50 which should have been debited in discount account has not been debited, so the debit side of discount

account has been reduced by the same amount. We should debit Rs. 50 in discount account now, which

was omitted previously and the discount account shall be corrected.

(ii) Goods sold to X wrongly debited in sales account.

This error is affecting only sales account as the amount which should have been posted on the credit side

has been wrongly placed on debit side of the same account.

For rectifying it, we should put double the amount of transaction on the credit side of sales account by

writing "By sales to X wrongly debited previously."

(iv) Amount of Rs. 500 paid to Y, not debited to his personal account. This error of affecting the personal

account of Y only and its debit side is less by Rs. 500 because of omission to post the amount paid. We

shall now write on its debit side. To cash (omitted to be posted) Rs. 500.

Difference in Trial balance

Trial balance is affected by only errors which are rectified with the help of the suspense account.

Therefore, in order to calculate the difference in suspense account a table will be prepared. If the suspense

account is debited in' the rectification entry the amount will be put on the debit side of the table. On the

other hand, if the suspense account is credited, the amount will be put on the credit side of the table. In the

end, the balance is calculated and is reversed in the suspense account. If the credit side exceeds, the

difference would be put on the debit side of the suspense account.

Effect of Errors of Final Accounts

1. Errors effecting profit and loss account

It is important to note the effect that an en-or shall have on net profit of the firm. One point to remember

here is that only those accounts which are transferred to trading and profit and loss account at the time of

preparation of final accounts effect the net profit. It means that only mistakes in nominal accounts and

goods account will effect the net profit. Error in the these accounts will either increase or decrease the net

profit.

How the errors or their rectification effect the profit-following rules are helpful in understanding it :

(I) If because of an error a nominal account has been given some debit the profit will decrease or losses

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will increase, and when it is rectified the profits will increase and the losses will decrease. For example,

machinery is overhauled for Rs. 10,000 but the amount debited to machinery repairs account -this error

will reduce the profit. In rectifying entry the amount shall be transferred to machinery account from

machinery repairs account, and it will increase the profits.

(il) If because of an error the amount is omitted from recording on the debit side of a nominal account-it

results in increase of profits or decrease in losses. The rectification of this error shall have reverse effect,

which means the profit will be reduced and losses will be increased. For example, rent paid to landlord

but the amount has been debited to personal account of landlord-it will increase the profit as the expense

on rent is reduced. When the error is rectified, we will post the necessary amount in rent account which

will increase the expenditure on rent and so profits will be reduced.

(iil) Profit will increase or losses will decrease if a nominal account is wrongly credited. With the

rectification of this error, the profits will decrease and losses will increase. For example, investments were

sold and the amount was credited to sales account. This error will increase profits (or reduce losses) when

the same error is rectified the amount shall be transferred from sales account to investments account due

to which sales will be reduced which will result in decrease in profits (or increase in losses).

(iv) Profit will decrease or losses will increase if an account is omitted from posting in the credit side of a

nominal or goods account. When the same will be rectified it will increase the profit or reduce the losses.

For example, commission received is omitted to be posted to the credit of commission account. This error

will decrease profits ( or increase losses) as an income is not credited to profit and loss account. When the

error will be rectified, it will have reverse effect on profit and loss as an additional income will be

credited to profit and loss account so the profit will increase ( or the losses will decrease).

2. Errors effecting balance sheet only

If an error is committed in a real or personal account, it will effect assets, liabilities, debtors or creditors

of the firm and as a result it will have its impact on balance sheet alone. because these items are shown in

balance sheet only and balance sheet is prepared after the profit and loss account has been prepared. So if

there is any error in cash account, bank account, asset or liability account it will effect only balance sheet.

BANK RECONCILIATION STATEMENT

A Bank Reconciliation Statement is a statement prepared by the customer of a bank showing the causes

of disagreement between the balances as per his cash book and pass book as on a particular date. It is

prepared to bring the cash book balance in agreement with the balance as per Pass book.

NEED AND IMPORTANCE :Preparation of bank reconciliation statement is of very great importance

to a trader. If the bank balance shown by the cash book does not agree with the balance as per pass book,

the trader has to identify the reasons of the difference. This is possible only by preparing a Bank

Reconciliation Statement. In the absence of a Bank Reconciliation Statement, the customer is not sure

of the correctness of the bank balance shown by the cash book. Hence, the preparation of bank

reconciliation statement is of very great importance to the customer.

CAUSES OF DIFFERENCE BETWEEN CASH BOOK AND PASS BOOK BALANCE

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1. Cheques issued but not presented for payment.

2. Cheque paid in for collection but not collected.

3. Direct payment by a customer to the bank.

4. Interest on deposit credited by the banker.

5. Interest, dividend, rent, etc. collected by bank.

6. Payment made on behalf of the customer.

7. Bank charges as per pass book.

8. Bills receivable discounted, but dishonoured.

9. Interest on overdraft debited in pass book.

10. Credit instruments credited by bank but not recorded in cash book.

PREPARATION OF THE BANK RECONCILIATION STATEMENT

After ascertaining the cause of disagreement between the balance as per cash book and pass book,

the trader prepares a reconciliation statement to establish the genuineness of the balances of the

two sets of books.

The Bank Reconciliation Statement is prepared in such a way that on adjusting the amount of

the items of difference in the balance of one set of books, the balance of the other set is arrive

at.Bank Reconciliation Statement may be divided into four cases, on the basis of the balance with

which it is started.

1. Starting with debit balance as per cash book.

2. Starting with debit balance as per pass book.

3. Starting with credit balance(overdraft) as per cash book.

4. Starting with credit balance (overdraft)as per pass book.

THE ITEMS USUALLY ADDED TO THE BALANCE AS PER CASH BOOK

1.Direct payment by a customer to bank.

2.Interest on deposit credited by the bank.

3.Cheques issued but not presented for payment.

4.Interest, dividend, rent, etc. collected by bank.

5.Bills, promissory notes etc. collected and credited in the pass book

6.Cheques deposited for collection but omitted to be recorded in the cash book.

THE ITEMS USUALLY DEDUCTED FROM THE CASH BOOK BALANCE

1.Cheques paid in for collection but not collected.

2.Payment made by bank as per standing instructions such as insurance premium, rent,

lighting, etc.

3.Bank charges as per pass book.

4.Bills discounted but dishonoured.

5Interest on overdraft debited in pass book etc.

OVERDRAFT: The amount drawn by the customer of a bank in excess of his deposit

balance is called overdraft. In case of overdraft, the bank column of the cash book will

have credit balance and the pass book will have debit balance. On preparing the

reconciliation statement starting with overdraft, the adjustments should be made in the

opposite direction of starting with the deposit balance. When the bank makes any

payment for the customer, the overdraft as per pass book increases.

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MODULE 2: FINAL ACCOUNTS

PREPARATION OF FINAL ACCOUNTS

Final accounts consists of trading a/c P&L a/c and balance sheet.Trial Balance consists of Net Balances of

all ledgers. If the Trial Balance is tallying we can assume the posting of entries are correct. P & L

includes Revenue & Expenses, post the same to P&L. Then either Net profit / Loss will arrive. Then

calculation of depreciation and taxes, the net balance will transfer to balance sheet. Balance sheet consists

of Source of Fund & Application of funds (Assets & Liabilities).

1. Trading account

A trading account is an account which contains, " in summarized form, all the transactions, occurring,

throughout the trading period, in commodities in which he deals" and which gives the gross trading result.

In short, trading account is the account which is prepared to determine the gross profit or the gross loss of

a trader.The aim of preparing trading account is to find out gross profit or gross loss while that of second

section is to find out net profit or net loss.

Preparation of Trading Account:Trading account is prepared mainly to know the profitability of the

goods bought (or manufactured) sold by the businessman. The difference between selling price and cost

of goods sold is the,5 earning of the businessman. Thus in order to calculate the gross earning, it is

necessary to know:

(a) Cost of goods sold.(b) sales.

(b) Total sales can be ascertained from the sales ledger. The cost of goods sold is, however,

calculated. n order to calculate the cost of sales it is necessary to know its meaning. The 'cost of

goods' includes the purchase price of the goods plus expenses relating to purchase of goods and

brining the goods to the place of business. In order to calculate the cost of goods " we should

deduct from the total cost of goods purchased the cost of goods in hand. We can study this

phenomenon with the help of following formula:

Opening stock + cost of purchases - closing stock = cost of sales

As already discussed that the purpose of preparing trading account is to calculate the gross profit of the

business. It can be described as excess of amount of 'Sales' over 'Cost of Sales'. This definition can be

explained in terms of following equation:Gross Profit = Sales-Cost of goods sold or (Sales + Closing

Stock) -(Stock in the beginning + Purchases + Direct Expenses)

Usual Items in a Trading Account:

A) Debit Side:

1. Opening Stock. It is the stock which remained unsold at the end of previous year. It must have been

brought into books with the help of opening entry; so it always appears inside the trial balance. Generally,

it is shown as first item at the debit side of trading account. Of course, in the first year of a business there

will be no opening stock.

2. Purchases. It is normally second item on the debit side of trading account. 'Purchases' mean total

purchases i.e. cash plus credit purchases. Any return outwards (purchases return) should be deducted out

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of purchases to find out the net purchases. Sometimes goods are received before the relevant invoice from

the supplier. In such a situation, on the date of preparing final accounts an entry should be passed to debit

the purchases account and to credit the suppliers' account with the cost of goods.

3. Buying Expenses. All expenses relating to purchase of goods are also debited in the trading account.

These include-wages, carriage inwards freight, duty, clearing charges, dock charges, excise duty, octroi

and import duty etc.

4. Manufacturing Expenses. Such expenses are incurred by businessmen to manufacture or to render the

goods in saleable condition viz., motive power, gas fuel, stores, royalties, factory expenses, foreman and

supervisor's salary etc.

(B) Credit Side:

1. Sales. Sales mean total sales i.e. cash plus credit sales. If there are any sales returns, these should be

deducted from sales. So net sales are credited to trading account. If an asset of the firm has been sold, it

should not be included in the sales.

2. Closing Stock. It is the value of stock lying unsold in the godown or shop on the last date of

accounting period. Normally closing stock is given outside the trial balance in that case it is shown on the

credit side of trading account. But if it is given inside the trial balance, it is not to be shown on the credit

side of trading account but appears only in the balance sheet as asset. Closing stock should be valued at

cost or market price whichever is less.

Valuation of Closing Stock

The ascertain the value of closing stock it is necessary to make a complete inventory or list of all the

items in the god own together with quantities. On the basis of physical observation the stock lists are

prepared and the value of total stock is calculated on the basis of unit value. Thus, it is clear that stock-

taking entails (i) inventorying, (ii) pricing. Each item is priced at cost, unless the market price is lower.

Pricing an inventory at cost is easy if cost remains fixed. But prices remain fluctuating; so the valuation of

stock is done on the basis of one of many valuation methods.

The preparation of trading account helps the trade to know the relationship between the costs be incurred

and the revenues earned and the level of efficiency with which operations have been conducted. The ratio

of gross profit to sales is very significant: it is arrived at :

Gross Profit X 100 / Sales

With the help of G.P. ratio he can ascertain as to how efficiently he is running the business higher the

ratio, better will be the efficiency.

Closing Entries pertaining to trading Account

For transferring various accounts relating to goods and buying expenses, following closing entries

recorded:

(i) For opening Stock: Debit trading account and credit stock account

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(ii) For purchases: Debit trading account and credit purchases account, the amount being the et amount

after deducting purchases returns.

(iii) For purchases returns: Debit purchases return account and credit purchases account.

(iv) For returns inwards: Debit sales account and credit sales return account

(v) For direct expenses: Debit trading account and credit direct expenses accounts individually.

(vi) For sales: Debit sales account and credit trading account. We will find that all the accounts as

mentioned above will be closed with the exception of trading account

(vii) For closing stock: Debit closing stock account and credit trading account After recording above

entries the trading account will be balanced and difference of two sides ascertained. If credit side is more

the result is gross profit for which following entry is recorded.

(viii) For gross profit: Debit trading account and credit profit and loss account If the result is gross loss

the above entry is reversed.

Format of Trading Account:

Trading Account

For the year ending .......20......

Dr. Cr.

To Opening stock

........

To purchases .........

Less Returns ......... ........

To Carriage inwards

.........

To Cartage

.........

To dock charges

.........

To Wages

.........

To Duty

.........

To Freight

.........

To Clearing charges

.........

To Etc. Etc.,

.........

To Gross profit (Transferred

to profit and loss account) .........

By Sales .........

Less returns ......... .........

By Closing stock

.........

By Gross loss transferred

to profit and loss account .........

Advantages of Trading Account:

The advantages of the trading account are as follows:

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1. A trader can find out the gross profit and thereby can ascertain the percentage of profit he has

earned on the cost of goods sold. This percentage of gross profit may serve as his ready guide for

the adjustment of future sale price.

2. A trading account help a trader to compare his stock at open with that at the close. He can further

find out whether the purchases he has made during the period of account have been judicious.

3. Once can compare the figure of sales with similar figure of the previous year and can find out

whether business is improving or declining.

4. If the gross profit disclosed by the trading account is less than expected, an enquiry can be made

into the cause responsible for the decline. And if the gross profit is more than was expected, steps

can be taken to maintain it.

2. Profit and Loss Account Profit and loss account is the account whereby a trader determines the net result of his business

transactions. It is the account which reveals the net profit (or net loss) of the trader.The profit and loss

account is opened by recording the gross profit (on credit side) or gross loss (debit side).The expenses

which are recorded in profit and loss account are ailed 'indirect expenses'

FORMAT OF PROFIT&LOSS ACCOUNT:

For the year ended…….

100

Particulars Rs Particulars Rs

To gross loss b/d

To selling& distribution

expense:

(bad debts, commission

paid, sales tax, freight,

advertising, packaging…)

To administrative expense:

(legal exp, trade exp, rent,

rates & taxes, insurance,

printing& stationery…)

To Depreciation

To provision for bad

debts..

To Net Profit transferred

to capital a/c

By gross profit b/d

By discount received

By rent ‗‘

By commission ‗‘

By interest ‗‘

By profit on sale of asset..

By Net Loss transferred to

capital a/c

Final Accounts in Relation to Capital and Revenue Items

A final account is a general term used in bookkeeping for the account where the profit or loss of the

business is determined at the end of the accounting period.

Examples of final accounts for the trader are his Trading Account and Profit and Loss Account; for the

manufacturer, they are his Manufacturing Account, Trading and Profit and Loss Account; and for a non-

profit making organization, it is its Income and Expenditure Account.

Note that the balance sheet is not an account. It is a statement.

It is important to distinguish between a revenue expenditure and a capital expenditure, and between a

revenue receipt and a capital receipt because only revenue items appear in the final accounts.

Revenue expenditure is considered as an expense and must be debited to the final account, whereas

revenue receipts are revenue of the business and must be credited; whereas revenue receipts are revenue

of the business and must be credited to the final account.

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On the other hand, capital expenditure or capital receipt is not brought to the final account.

Revenue Expenditure

Revenue expenditure are cost incurred for the day-to-day running expenses of the business. They

include the purchase of stock for resale, purchase of services such as employee's wages, electricity,

water, cost of carriage of goods, stationery, and depreciation on fixed assets.

These items of revenue expenditure can only be used once. Income is normally earned from this revenue

expenditure.

Capital Expenditure

Capital Expenditure are payments for the purchase of assets that can be used over and over again in the

business. Normally, such assets can last for more than one accounting period.

The capital expenditure also adds to the value of an existing fixed asset. The benefit of such expenditure

to be derived by the business are spread over a number of years according to the lifespan of the fixed

asset.

Revenue Receipts

Revenue receipts refer to receipts from the normal activities of the business. For example, revenue

receipts of a trading organization are receipts from sale of goods, discounts received, commission

received and interest on bank deposits.

All revenue receipts earned for a particular period, whether payments for them have actually been

received or not, have to be credited to the Trading and Profit and Loss Accounts. These will increase it

profits.

Capital receipts

Capital receipts refer to receipts that is derived from sources other than the normal trading activities of the

business. It may comprise capital paid by partners, or in the case of a limited company, sums received from its

shareholders or debenture holders, loans and proceeds from the sale of its assets.

Manufacturing accountIt is an account prepared by manufacturing concerns in order to find out the cost of goods

manufactured . opening stock of raw materials and work in progress , purchase of materials and all direct expenses

are debited in it and closing stock of rawmaterials and work in progress are credited in it . the difference in this

account forms the cost of goods manufactured which is transferred to trading a/c .

Eg:Prepare manufacturing,rading & P&L a/c for the year ended 31-march-2010 & the B/S as on that date.

Capital 25000 Purchases 30230

Drawings 7000 Debtors 11000

Creditors 8000 Wages 6000

Discount received 702 Manufacturing expense 5000

Bank O/D 4000 Carriage inwards 400

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Provision for bad & D/D 600 Carriage o/w 420

Purchase returns 530 Bad debts 150

Sales 67500 Salaries 2800

Sales return 86 Interest & bank charges(dr) 126

Opening stock 9000 Discount allowed 150

Plant & Machinery Insurance(dr) 300

(including p&m 5000 Cash at bank 140

purchased On 1-1-2010) 17000 Cash in hand 30

Furniture 1500 Closing stock 7550

Buildings 15000

ADJTS:

1.Interest on capital at 10% p.a.

2.Outstanding expenses:

salaries-100

Wages-50

Interest on bank loan-100

3.Depreciation on machinery & furniture at 10% p.a & building at 2.5% p.a.

4.Prepaid expense on insurance Rs.100 & the salary Rs.50.

5.Reserve for bad & D/D at 10% of debtors.

6.Furniture costing Rs.500 was sold for Rs.350 & this amount was later credited to furniture account.

Dr MANUFACTURING & TRADING P&L A/C FOR THE YEAR ENDED 31-3-10

Particulars Amount Particulars Amount

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To purchases less returns 29700 by cost of production(?) 42475

―Carriage in 400

―Wages 6050

―Manufacturing expense 5000

―Depreciation on machinery 1325

42475 42475

To opening stock 9000 by sales less returns 67414

Cost of production 42475 closing stock 7550

Gross profit c/d 23489

74964 74964

To salaries 2850 by grossprofit b/d 23489

Int & bank charges 226 discount 702

Discount 150

Insurance 200

Carriage out 420

Prov for D/D 650

Loss on sale of furniture 150

Depreciation:

Building 375

Furniture 135

Int: on capital 2500

Netprofit to capital a/c 16535

24191 24191

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BALANCE SHEET

In financial accounting, a balance sheet or statement of financial position is a summary of the financial

balances of , a business partnership or a company. Assets, liabilities and ownership equity are listed as of

a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a

company's financial condition".[1]

one of the four basic financial statements, the balance sheet is the only

statement which applies to a single point in time of a business' calendar year.A standard company balance

sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually

listed first and typically in order of liquidity. Assets are followed by the liabilities. The difference

between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the

company and according to the accounting equation, net worth must equal assets minus liabilities.

1. Businesses have assets and so they cannot, even if they want to, immediately turn these into cash

at the end of each period. Often, these businesses A business operating entirely in cash can

measure its profits by withdrawing the assets entire bank balance at the end of the period, plus

any cash in hand. However, many businesses are not paid immediately; they build up inventories

of goods and they acquire buildings and equipment.

Current assets

1. Cash and cash equivalents

2. Inventories

3. Accounts receivable

4. Prepaid expenses for future services that will be used within a year

Non-current assets (Fixed assets)

1. Property, plant and equipment

2. Investment property, such as real estate held for investment purposes

3. Intangible assets

4. Financial assets (excluding investments accounted for using the equity method, accounts

receivables, and cash and cash equivalents)

5. Investments accounted for using the equity method

6. Biological assets, which are living plants or animals. Bearer biological assets are plants or

animals which bear agricultural produce for harvest, such as apple trees grown to produce apples

and sheep raised to produce wool.[17]

Liabilities

2. Accounts payable

3. Provisions for warranties or court decisions

4. Financial liabilities (excluding provisions and accounts payable), such as promissory notes and

corporate bonds

5. Liabilities and assets for current tax

6. Deferred tax liabilities and deferred tax assets

7. Unearned revenue for services paid for by customers but not yet decided.

Adjusting entries & closing entries

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Adjusting entries are made at the end of the accounting period (but prior to preparing the financial

statements) in order for a company‘s accounting records and financial statements to be up-to-date on the

accrual basis of accounting. For example, each day the company incurs wages expense but the payroll

involving workers‘ wages for the last days of the month won‘t be entered in the accounting records until

after the accounting period ends. Similarly, the company uses electricity each day but receives only one

bill per month, perhaps on the 20th day of the month. Prepaid Insurance. During the accounting period

some of those premiums expired (were used up) and need to appear as expense in the current accounting

period and the asset balance reduced.

Closing entries are dated as of the last day of the accounting period, but they are entered into the

accounts after the financial statements are prepared. For the most part, closing entries involve the income

statement accounts. The closing entries set the balances of all of the revenue accounts and the expense

accounts to zero. This means that the revenue and expense accounts will start the new year with nothing

in the accounts–allowing the company to easily report the new year revenues and expenses. The net

amount of all of the balances from the revenue and expense accounts at the end of the year will end up in

retained earnings (for corporations) or owner‘s equity (for sole proprietorships). Thanks to accounting

software, the closing entries are quite effortless.

ADJUSTMENTS

1. Closing stock

When it is given in the trial balance:

Taken only in balance sheet in the asset side.

When it is given in adjustment:

Credit side of trading a/c & taken in the asset side of balance sheet.

2.Outstanding expense(Expense due but not paid):

When it is given in trail balance:

Only taken in the liability side of balance sheet.

When it is given in adjustment:

Add along with concerned expense in the P&L a/c & shown in the liability side of

balance sheet.

3.Pre-paid expense:

When it is given in trail balance:

Only taken in the asset side of balance sheet.

When it is given in adjustment:

Deduct from the concerned expense in the P & L a/c & shown in the asset side of balance

sheet.

4.Accrued income:

When it is given in trail balance:

Asset side of B/S.

When it is given in adjustment:

Add along with concerned income & shown on the asset side of B/S.

5.Income received in advance:

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T/B-Liability side of B/S.

Adjt-Deduct from the concerned income & shown in the liability side of B/S.

6.Interest on capital:

T/B-Taken only in P&L a/c as an expense.

Adjt-Shown in P&L a/c as an expense & add along with capital in the B/S.

7.Interest on drawings:

T/B-Taken only in P&L a/c as an income.

Adjt-Shown in P&L a/c as an income & deduct from capital.

8.Depreciation:

T/B-Taken only in P&L a/c as an expense.

Adjt-Shown in P&L a/c as an expense & deduct from the concerned asset in the

B/S.

9.Bad debt:

When it is in given in T/B:

It is shown on the debit side of P&L a/c.

When it is given in Adjt:

It is deducted from sundry debtors in the B/S & debited in P&L a/c.

10.Provision for bad debt or doubtful debts.

When it is given in T/B:

It is deducted from bad debt in P&L a/c or Credited in P&L a/c.

When it given in Adjt:

It is added along with bad debt in P&L a/c & deducted from sundry

debtors in B/S.

11.Managers commission.

Calculation of management commission:

(a)Before charging such commission

Profit before commission*rate of commission/100

(b)After charging such commission:

Profit * rate/(100+rate)

It is shown on the debit side of P&L a/c & on the liability side of B/S.

12.Provision for discount on debtors.

It is always given in adjt:

It is shown on the debit side of P&L a/c & is deducted from debtors after

deducting further bad debt & new provision on debtors .

107

13.Provision for discount on creditors.

Adjt:

It is credited in P&L a/c & deducted from creditors in B/S.

14.Loss of goods by fire.

It has 3 effects in final a/c.

If insurance claim is recieved;

It is credited to trading a/c(entire amt of loss)

It is debited in P&L a/c(correct loss)

Correct loss=entire loss-insurance claim

Amount received from insurance company is shown on the asset

side of B/S.

If insurance clain is not received;

Entire loss is credited to trading a/c & also debited in P&L a/c.

MODULE 3:

Depreciation:

ACCOUNTING FOR DEPRECIATION

Introduction

The concept of depreciation is closely linked to the concept of business income. In the revenue generating

process the use of long-term assets tends to consume their economical potential. The economical potential

so consumed represents the expired cost of these assets and must be recovered from the revenue of the

business in order to determine the income earned by the business. In short depreciation is the decrease or

depletion in the value of an asset due to wear and tear, lapse of time, obsolescence, exhaustion and

accidents.According to William Pickles, ‗Depreciation is the permanent and continuing diminution in the

quality, quantity or value of an asset‘.The Institute of Chartered Accountants of England and Wales

defines depreciation as ‗the part of the cost of a fixed asset to its owner which is not recoverable when the

asset is finally put out use by him. Provision against this loss of capital is an integral cost of conducting

the business during the effective commercial life of the asset and is not depend upon the amount of profit

earned.

Causes of depreciation

1. Wear and Tear: Assets get worn or torn out on account of constant use.

2. Exhaustion: An asset gets exhausted through working. This is the case with mineral mines, oil wells

etc.

3. Obsolescence: Some assets are discarded before they are worn out because of changed conditions.

4. Efflux of Time: Certain assets get decreased in their value with the passage of time.

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5. Accidents: An asset may meet with an accident and therefore, it may get depreciated in its value.

FEATURES OF DEPRECIATION

1. The term depreciation is used only in respect of fixed assets.

2. Depreciation is a charge against profit. This means that true profit of the business cannot be

ascertained without charging depreciation.

3. All fixed assets, with certain possible exceptions, e.g., land and antiques, etc., suffer

depreciation although the process may be invisible or gradual.

Objectives of Providing for Depreciation

1. Ascertainment of the actual true profit.

2. Presentation of true financial position.

3. Replacement of asset.

METHODS OF PROVIDING FOR DEPRECIATION

The following are the various methods of providing for depreciation:

1. Uniform charge method

a. Fixed instalment method

b.Depletion method

c.Machine hour rate method

2.Declining charge or accelerated depreciation method

a.Diminishing balance method

b.Sum of years digits method

c.Double decling method

3.Others

Group depreciation method

Inventory system of depreciation

Annuity method

Depreciation fund method

Insurance policy method

1.Uniform charge methods

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In case of these methods, depreciation is charged on a uniform basis year after year.Such methods are

considered appropriate only for such assets which are uniformly productive.

The following three methods fall in this category.

A. fixed instalment method: This is also termed as the straight line method according to this

method, depreciation is charged evenly every year through out the effective life of the

asset. The amount of depreciation is calculated as follows:

Depreciation=original cost of the asset-estimated scrap value/life of the asset in number of accounting

periods.

D=C-S/N

Merits: this method is simple to understand and easy to apply.

This method is very suitable particularly in case of those assets which get depreciated more on

account of the expiry of the period.e.g lease-hold properties, patents etc.

Demerits: this method does not take into account the effective utilisation of the assets.

The total charge for use of the asset goes on increasing from year though the asset might

have been used uniformly from year to year.

The method tends to report an increase rate of return on investment in the asset on

account of the fact that get balance of the assets account is taken.

B.Depletion method: This is also knownas the productive out put method.according to this method, the

charge for depreciation in respect of the use of an asset will be based on the following factors:

Totals amount paid

Total estimated quantities of the output available

The actual quantity taken out during the accounting year

C.Machine hour rate method:this is also known as the service hours methods. This method takes into

accounts the running time of the assets for the purpose of calculating depreciation.the methods is

particularly suitable for charging depreciation on plant and machinery,aircraft,etc.the amount of

depreciation on plant and machinery aircraft etc.the amount of depreciation is calculating as follows:

original cost of the assets-scrap value /life of the asset in hour.

2.Declining charge depreciation method

In case of these methods,the amount charged for depreciation declines over the assets expected

life.these methods are suitable in those cases where:the receipt are expected to decline as the asset gets

older and it is believed that the allocation of depreciation should be related to the asset‘s of pattern

expected receipt.

The following method fall in this category.

110

A.Diminishing balance method

According to this method depreciation is charged on the book value of the asset each year.thus

the amount goes on decreasing every year.

The formula for calculating the rate of depreciation

Depreciation rate =1-n √netresidual value/acquisitioncost.

Merits: this method is simple to understand and easy to follow.

Demerits: the value of the assets

cann

of the diminishing balance method.the amount

of depreciation to be charged to the profit and loss account under this method goes on decreasing

every year.

C. double declining balance method

This method is similar to reducing or declining balance method explained earlier except that the

rate of depreciation is charged at the rate which is twice the straight line rate.while computing this rate

two things have to be kept in mind.

INVENTORY VALUATION

An inventory valuation allows a company to provide a monetary value for items that make up their

inventory. Inventories are usually the largest current asset of a business, and proper measurement of them

is necessary to assure accurate financial statements. If inventory is not properly measured, expenses and

revenues cannot be properly matched and a company could make poor business decisions.

Inventory and financial statements

When ending inventory is incorrect, the following balances of the balance sheet will also be incorrect as a

result: merchandise inventory, total assets, and owner's equity.

When ending inventory is incorrect, the cost of merchandise sold and net income will also be incorrect on

the income statement.

The inventory accounting involves two major aspects:

The cost of the purchased or manufactured inventory has to be determined and

Such cost is retained in the inventory accounts of the company until the product is sold

The following methods are the most commonly used for inventory valuation by companies:

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First-in First-Out (FIFO): the first goods to be sold (cost of sales) are the first goods that were

purchased or consumed (cost of production). The ending inventory is formed by the last goods

that were purchased and came in at the end to the inventory.

Last-in First-out (LIFO): the first goods to be sold (cost of sales) are the last goods that were

purchased or consumed (cost of production). The ending inventory is formed by the first goods

that were purchased and came in at the beginning to the inventory.

Average Cost: this method requires calculating the average unit cost of the goods in the beginning

inventory plus the purchases made in the period. Based on this average unit cost the cost of sales

(production) and the ending inventory of the period are determined.

Specific Identification: each article sold and each unit that remains in the inventory are

individually identified.

Inventory accounting systems

The two most widely used inventory accounting systems are the periodic and the perpetual.

Perpetual: The perpetual inventory system requires accounting records to show the amount of

inventory on hand at all times. It maintains a separate account in the subsidiary ledger for each

good in stock, and the account is updated each time a quantity is added or taken out.

Periodic: In the periodic inventory system, sales are recorded as they occur but the inventory is

not updated. A physical inventory must be taken at the end of the year to determine the cost of

goods sold. Regardless of what inventory accounting system is used, it is good practice to

perform a physical inventory at least once a year.

Inventory costing methods - periodic

The periodic system records only revenue each time a sale is made. In order to determine the cost of

goods sold, a physical inventory must be taken. The most commonly used inventory costing methods

under a periodic system are:

1. first-in last-out (FILO),

2. last-in first-out (LIFO), and

3. Average cost or weighted average cost.

These methods produce different results because their flow of costs is based upon different assumptions.

The FIFO method bases its cost flow on the chronological order purchases are made, while the LIFO

method bases it cost flow in a reverse chronological order. The average cost method produces a cost flow

based on a weighted average of unit costs.

Inventory costing methods - perpetual

The perpetual inventory system requires that a separate inventory ledger be maintained for each good.

Inventory ledgers provide detailed information on purchases, cost of goods sold, and inventory on hand.

Each column gives information on quantity, unit cost, and total cost.

The most commonly used inventory costing methods under a perpetual system are

1. first-in first-out (FIFO),

2. last-in first-out (LIFO), and

3. Average cost or weighted average cost.

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In the FIFO and LIFO method, each purchase record is kept with its purchase prices. Every piece sold is

subtracted from each purchase record until no qty is left and the next purchase record is considered. When

the average cost method is used, an average unit cost of each good is calculated each time a purchase is

made.

The advantages of the perpetual inventory system are a high degree of control, it aids in the management

of proper inventory levels, and physical inventories can be easily compared.

Whenever a shortage (i.e. a missing or stolen good) is discovered, the Inventory Shortages account should

be debited.

Periodic versus perpetual systems

There are fundamental differences for accounting and reporting merchandise inventory transactions under

the periodic and perpetual inventory systems. To record purchases, the periodic system debits the

Purchases account while the perpetual system debits the Merchandise Inventory account. To record sales,

the perpetual system requires an extra entry to debit the Cost of goods sold and credit Merchandise

Inventory. By recording the cost of goods sold for each sale, the perpetual inventory system alleviated the

need for adjusting entries and calculation of the goods sold at the end of a financial period, both of which

the periodic inventory system requires.

Using non-cost methods to value inventory

Under certain circumstances, valuation of inventory based on cost is impractical. If the market price of a

good drops below the purchase price, the lower of cost or market method of valuation is recommended.

This method allows declines in inventory value to be offset against income of the period. When goods are

damaged or obsolete, and can only be sold for below purchase prices, they should be recorded at net

realizable value. The net realizable value is the estimated selling price less any expense incurred to

dispose of the good.

Methods used to estimate inventory cost

In certain business operations, taking a physical inventory is impossible or impractical. In such a

situation, it is necessary to estimate the inventory cost.

Two very popular methods are 1) - retail inventory method, and 2)- gross profit (or gross margin) method.

The retail inventory method uses a cost to retail price ratio. The physical inventory is valued at retail, and

it is multiplied by the cost ratio (or percentage) to determine the estimated cost of the ending inventory.

The gross profit method uses the previous year‘s average gross profit margin (i.e. sales minus cost of

goods sold divided by sales). Current year gross profit is estimated by multiplying current year sales by

that gross profit margin, the current year cost of goods sold is estimated by subtracting the gross profit

from sales, and the ending inventory is estimated by adding cost of goods sold to goods available for sale.

INFLATION ACCOUNTING

Inflation accounting

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Inflation generally refers to the increasing trend in general price levels. That means the purchasing power

of money goes down. The American Institute Of Certified Public Accountants defines the inflation

accounting as a system of accounting, which purports record as built in mechanism, all economic events

in the terms of current cost. It is a method designed to show the effect changing costs and prices on affairs

of a business unit during the course of relative accounting period.

METHODS OF ACCOUNTING FOR CHANGING PRICES

The generally accepted methods of accounting for price level changes are

1. Current Purchasing Power Method (CPP)

2. Current Cost Accounting Method (CCA)

3. Hybrid Method

1 Current Purchasing Power Method

The CPP method also termed as constant rupee method. This method attempts to restate all items in

financial statements in terms of units of equal purchasing power. The CPP method basically attempts to

remove the distortions in financial statement which arise due to changes in the value of rupee. For

converting historical rupees in to current purchasing power as at the date of balance sheet an index

number is required. This done through a conversion factor

Conversion factor =Price index at the date of conversion

Price at the date of transaction

There are two approaches to determine the profit under CPP method. They are net change method and

income method.

LIMITATIONS OF CPP METHOD

CPP method is based on indices. It would be very difficult to apply with individual firms.

It would be a very difficult task to select a price index because there are various price indexes.

This method deals with the changes in general price level and not with the changes in the price

level of individual firms.

2 Current Cost Accounting Method

The limitations of CPP method led to the origin of CCA method. In here money remains to be the

measurement. The items of financial statements are restated in terms of current value of that item and in

terms of general purchasing power of money. The profits are computed on the basis of current values of

items. This requires the following adjustments

Revaluation adjustment

Depreciation adjustment

Cost of sale adjustment

Monetary working capital adjustment

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Advantages of CCA method

1. Computation of depreciation based on the fixed assets current value provides a realistic measure

of the resources used in a period.

2. Assets are shown at their current values in the balance sheet

3. It clearly differentiates the gains from the operations from the gains from the holding asset

4. Computation of monetary gains and losses highlights the effects of holding monetary items.

5. Cost of sales adjustment enables the entity to maintain its value in real terms.

Disadvantages of CCA method

1. Treatment of backlog depreciation is not proper.

2. This method ignores the materiality factor.

3. This method ignores the purchasing power gains and losses on the monetary items of the

firm.

4. This method is based on uniform accounting practices which are not true in actual

practices.

3.HYBRID METHOD

It combines the features of both CCA and CPP method. It has the benefits and limitations of both

CCA and CPP method. It is still in the evolutionary stage and not suitable for practical

application.

MODULE 4:

ACCOUNTS FOR ENTITIES

Accounts of Non-Trading Organizations

Non-Trading Organizations

Unlike trading organizations, non-trading organizations such as clubs, societies, associations, are not

formed mainly to make profits. Rather, they exist to promote their members' cultural, social and

recreational interests.

The normal activities of such non-trading organizations are therefore different from that of a trading

organization as the activities of the former are not designed solely to obtain profit. However, some non-

trading organizations may run a bar or a restaurant on a permanent basis for profits.

Also, they may, at one time or another, organize fund-raising projects such as a fun-fair or a jumble sale.

Such projects are not permanent. They may be held to raise funds for a specified purpose such as to add

to a club's building fund, or merely to increase the club's finds.

Receipts of Non-Trading Organizations

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The main items of revenue receipts are subscription from members, and interest from investments or

Bank Accounts. Gross trading profits (total sales revenue less cost of goods sold) from permanently run

bars and restaurants is another source of revenue receipts for some none-trading organizations.

Donations, unless specifically stated to be set aside for a capital purpose, e.g. the club building fund, are

normally treated as revenue receipts.

Proceeds from fund-raising projects such as sale of refreshments and the like, are normally treated as

revenue receipts, unless it is specifically stated that the proceeds from a particular project are to be set

aside for a capital purpose such as building a swimming pool.

Other examples of revenue receipts are locker fees, charges to other clubs for the use of premises, sale of

golf clubs and tennis balls.

Clear examples of capital receipts are legacies, endowments and government grants. Legacies are sums

of money left to a club by someone in his will.

Expenditure of Non-Trading Organizations

Non-trading organizations have both revenue as well as capital expenditure.

The main revenue expenditure of non-trading organizations are rent of club premises; caretaker's and

staff wages; honorarium; other miscellaneous expenses like laundry, repairs and maintenance to club

equipment and premises, cost of shuttlecocks, tennis balls or printing paper and stationery.

If the club were to have fund-raising projects, another important revenue expenditure would be the cost of

such fund-raising projects. This must be set off against the proceeds obtained from the fund-raising

projects.

Examples of capital expenditure are payments for the purchase of fixed assets to be used in the club, such

as the purchase of table tennis nets, tables and furniture for use in the club house.

Receipts and Payments Account

The Receipts and Payments Account is the equivalent of the Cash or Bank Account of a trading

organization. It summarizes the main items of cash or cheque receipts and cash or cheque payments made

during the course of the financial period or year.

Income and Expenditure Account

The Income and Expenditure Account is the equivalent of the Profit and Loss Account of a trading

organization. All items of capital expenditure and capital receipts are excluded, e.g. the purchase of a

new table-tennis table or the the donation received for the construction of a tennis court cannot be

recorded here as capital expenditure and capital receipt.

Accumulated Fund Account

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Accumulated Fund Account is equivalent of the Capital Account for a trading organization. All

additions to the accumulated fund are credited to this account. Thus, large legacies and donations

towards specific capital project are credited here straightaway.

The balance on the accumulated fund for the beginning of a particular period is the difference between the

total value of its assets and its total liabilities at that date (that is, the beginning of the financial period). It

is very important to work out the figure for the accumulated find (at the beginning of a period) before

drawing up the Balance Sheet at the end of the period. The surplus from the Income and Expenditure

Account is added to this fund, while the deficit is deducted from it.

ACCOUNTS OF PROFESSIONALS

Professional peoples like doctors, solicitors, etc. usually keep cash book, stock register and receipts and

expenditure account for maintaining a record of their professional income and expenses. In this

connection, it should be noted that professional people prepare their accounts on cash basis. However,

they take into account outstanding expenses, but not outstanding income. This is because they do not file

suits for recovery of their dues. For this purpose, income and expenditure account is debited with the

outstanding income as reserve after adding it to the income really received. Thus, the debit nullifies the

addition. The account revealing profit or loss is known as receipts and expenditure accounts as the

payments would indicate actual cash disbursement only.

ACCOUNT OF DOCTORS :

Usually, a practicing doctor keeps a diary for recording all details about the patients including fees. He

groups income from the diary and records in daily cash book having columns for visits, prescriptions

made and consultation fees.

In case a number of specialists join and practice in partnership, an analytical cash book having

different columns for charges for various specialists may be kept. Hence, the total fees of various

specialists may be ascertained separately. Similarly, expenses in the cash book under various heads, such

as medical expenses, surgical expenses, cost of medicines and drugs, cost of bandaging materials, etc.

may be analysed.

ACCOUNTS OF SOLICITORS:

Solicitors serve as a link between a client and his advocate. They receive and pay on behalf of

themselves end clients, respectively. Hence, separate records of receipts and payments are maintained for

office and clients. For this purpose cash book kept by solicitors are provided with one extra column for

clients on both debit and credit sides. All receipts from clients are debited to cash book in the client‘s

column And credited to his/ her‘s personal account or deposits account. But in the case of payment on

the behalf of the client, client‘s personal account is debited and cash book is credited in the clients

column. Thus, the balance of the client‘s column maintained in the cash book must be equal to the

balance shown by the client‘s personal account. This balance is adjusted in the bills for services rendered

to the clients.

SINGLE ENTRY SYSTEM

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Single entry system of book keeping may be described as a loose and defective way of recording

transactions ,wherein some transactions are recorded in their two fold aspect, some are recorded in so far

as they effect one aspect only, and few other are completely omitted to be recorded.

This type of accounting system with additional information can typically be compiled into an income

statement and balance sheet by a professional accountant.

Advantages

Single-entry systems are used in the interest of simplicity. They are usually less expensive to maintain

than double-entry systems because they do not require the services of a trained person.

Disadvantages

1. Data may not be available to management for effectively planning and controlling the business.

2. Lack of systematic and precise bookkeeping may lead to inefficient administration and reduced

control over the affairs of the business.

3. Single-entry records do not provide a check against clerical error, as does a double-entry system.

This is one of the most serious defects of single-entry systems.

4. Single-entry records seldom make provision for recording all transactions. In addition, many

internal transactions, such as adjusting entries are often not recorded.

5. Because no accounts are provided for many of the items appearing in both the Income Statement

and Balance Sheet, omission of important data is possible.

6. In the absence of detailed records of all assets, lax administration of those assets may occur.

7. Theft and other losses are less likely to be detected.

Ascertaining profit under the single entry system

Under the single entry system of book-keeping, it is not possible to prepare a regular trading and profit &

loss account, because no record is kept of the nominal accounts, therefore, the exact profit or loss for a

particular period cannot be ascertained. The net profit for a particular period can be ascertained in a rough

manner by comparing the financial position of the business at the commencement of the period with the

financial position at the end of the period. This requires the preparation of two statements of affairs, one

in the beginning and the other at the end.

Opening and closing balances of capitals can be the ascertained by preparing statement of affairs, and

comparison of the capitals at the two dates will reveal either profit or loss.

Preparation of accounts from incomplete accounts Books of accounts which are not prepared

according to the double entry system are called incomplete records or accounts. The system of keeping

incomplete records is called single entry system. It is an incomplete, unscientific and unsystematic

method of keeping the books of accounts of a trader.

Reasons for incompleteness

1 Lack of knowledge of recording transactions under double entry system.

2 The system is economical as lesser number of books need be maintained.

3 This method is most suitable to small firms and those concerns which have

mainly cash transactions

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4 The system being incomplete, actual income can be concealed.

ASERTAINMENT OF PROFIT OR LOSS

Though the records are incomplete, the trader has to ascertain the profit or loss of his business and

position regarding asset and liabilities. The main methods of ascertaining profit or loss and financial

position are

1. Statement of affairs methods (Capital comparison method)

2. Final accounts method (Conversion method)

Statement of affairs method

Statement of affairs is the statement of assets and liabilities to ascertain the capital of a concern

which keeps books under incomplete system. It is prepared in the form of balance sheet. The purpose of

preparing is not to assess the financial position of the business but to find out the capital.

Capital = Asset – Liabilities

Steps to find out the profit / loss

i. Find out the opening capital by preparing opening statement of affairs and closing capital

by preparing closing statement of affairs.

ii. Add any amount of withdrawal from the business and less any amount of additional

capital brought in to the business

iii. Calculate the excess of the adjusted capital over the opening capital to get the gross

profit.

iv. From the gross profit, deduct depreciation, provisions, interest on capital etc. and add

interest on drawings, prepaid expenses etc..

Closing capital

ADD: Drawings for the period

LESS: Additions during the year

LESS: Opening capital

GROSS PROFIT

LESS: Adjustments:

Depreciation

Interest on capital

ADD: Interest on drawings

NET PROIT/ LOSS

,,,,,,,,,,,,,,

,,,,,,,,,,,,,,

,,,,,,,,,,,,,,

,,,,,,,,,,,,,,

,,,,,,,,,,,,,,,,,

,,,,,,,,,,,,,,,

After ascertaining profit/loss , the final statement of affairs is prepared.

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FINAL ACCOUNTS METHOD

In order to prepare final accounts from incomplete records, we have to find out the missing figures by

making further computations and adjustment to available information. The various steps to convert single

entry to double entry are

Preparation of statement of affairs

Preparation of cash books.

Ascertain credit purchase and sales.

Prepare bills receivable account

Prepare bills payable account.

Prepare stock account.

Prepare revenue income account.

MODULE 5:

Hire purchase – Definition

Hire purchase (HP) is an idiom and legal term for a form of purchase in which payment for goods is

made in installments over a period of time and in which title to the goods supplied - in other words,

ownership - does not pass to the purchaser until all such payments have been made. Retention of title to

goods differentiates HP from other common consumer credit systems. Thus hire-purchase means a

transaction where the goods are sold by vendor to the purchaser under the following conditions:

The goods will be delivered to the purchaser at the time of agreement.

The purchaser has a right to use the goods delivered.

The price of the goods will be paid in instalments.

Every instalment will be treated to be the hire charges of the goods which is being used by the

purchaser.

If all instalments are paid as per the terms of agreement , the title of the goods is transferred by

vendor to the purchaser.

If there is a default in the payment of any of the instalments, the vendor will take away the goods

from the possession of the purchaser without refunding him any amount received earlier in the

form of various instalments.

Characteristics of Hire-purchase system

Hire-purchase is a credit purchase.

The price under hire-purchase system is paid in instalments.

The goods are delivered in the possession of the purchaser at the time of commencement of the

agreement.

Hire vendor continues to be the owner of the goods till the payment of last instalment.

The hire-purchaser has a right to use the goods as a bailer.

The hire-purchaser has a right to terminate the agreement at any time in the capacity of a hirer.

The hire-purchaser becomes the owner of the goods after the payment of all instalments as per the

agreement.

If there is a default in the payment of any instalment, the hire vendor will take away the goods

from the possession of the purchaser without refunding him any amount

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Difference between Hire-purchase system and Instalment payment system

In Hire-purchase system, the transfer of ownership takes place after the payment of all

instalments while in case of Instalment payment system, the ownership is transferred immediately

at the time of agreement.

In Hire-purchase system, the hire-purchase agreement is like a contract of hire though later on it

may become a purchase after the payment of last instalment while in Instalment payment system,

the agreement is like a contract of credit purchase.

In case of default in payment , in Hire-purchase system the vendor has a right to back goods from

the possession of the hire-purchaser while in case of Instalment payment system, the vendor has

no right to take back the goods from the possession of the purchaser; he can simply sue for the

balance due.

In Hire-purchase system, if the purchaser sells the goods to a third party before the payment of

last instalment, the third party does not get a better title on the goods purchased. But in case of

Instalment payment system, the third party gets a better title on the goods purchased.

In Hire-purchase system the provisions of the Hire-purchase Act apply to the transaction while in

case of Instalment payment system, the provisions of Sale of Goods Act apply to the transaction.

Accounting In the books of Hire-purchaser

Under Total Assets Value Method: Under this method of accounting in the books of hire-purchaser, is done on the assumption that the

ownership of the asset is also transferred to the purchaser with the delivery of goods. The following

journal entries are recorded under this method.

(i)On taking the delivery of assets at the time of agreement:

Asset A/c Dr. (Cash price of Asset)

To Hire vendor A/c.

(ii)On making the down-payment (if any):

Hire-Vendor....... A/c. Dr. (Amount of down payment)

To Cash/Bank A/c

(iii)On becoming the instalment due:

Interest A/c. Dr. (Amount of interest)

To Hire-Vendor A/c

(iv)On payment of instalment:

Hire-Vendor a/c Dr. (Amount of instalment)

To Cash/Bank A/c

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(v)On charging the depreciations:

Depreciation A/c. Dr. (Amount of depreciation)

To Asset A/c.

(vi)On Transfer of interest and depreciation to P/L A/c:

P/L A/c. Dr. (Total)

To Interest A/c. (Bal. of Intt. A/c.)

To Depreciation A/c. (Bal. of Dep. A/c.)

1.7 Accounting in the books of Hire-vendor

(i)On delivery of goods to the hire-purchaser at the time of agreement:

Hire – purchaser A/c Dr. Cash Price

To Hire – Sales A/c.

(ii)On receipt of cash at the time of agreement (down payment), if any:

Cash/Bank A/c. Dr. (Amt. of down payment)

To Hire-Purchaser

(iii)On interest being due:

Hire – Purchaser A/c Dr. Amt. of Interest

To Interest A/c.

(iv)On receipt of instalment:

Cash/bank A/c. (Amt. of Instalment)

To Hire – Purchaser

(vi)On Transfer of amount of interest to P/L A/c:

Interest A/c. Dr. (Balance of Intt. A/c.)

To P/L A/c.

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Lease accounting: lease accounting is defined as the method of acquiring right to use an equipment or

asset for a consideration. It enables the entrepreneur to reduce his investment in the project by taking

plant or equipment on hire rather than owing it.A contract of lease is entered for this purpose.It may be

defined as a contract where by the owner of an asset grants another party the exclusive rights to use the

asset usually for an agreed period of time in return for the payment of rent.

The important steps involved in a leasing transaction can be summarized as follows:

1. Firstly the lessee has to take a decision about the asset required and determine the manufacturer or the

supplier.

2. The lessee then enters into a lease agreement with the lesser.

3. After the lease agreement is signed, the lesser contacts the manufacturer or supplier to supply the asset

to the lessee.

OBJECTIVE:

The objective of the standard is to prescribe, for lessees and lessors, the appropriate accounting policies

and disclosures in relation to finance leases and operating leases.

INSURANCE CLAIM

In the course of running a business, a businessman is exposed to a number of risks such as fire, burglary,

accident etc... Out of all the risks, the fire risk is the most dangerous. In the case it goes out of control, it

may involve loss both in terms of property as well as human life. As prudent business secures him against

such loss by taking a proper insurance policy. Such policy is usually taken for two types of losses

(1) Loss to the property such as stock, plant, building etc...

(2) Loss of profit on account of dislocation of business.

CLAIMS UNDER FIRE INSURANCE POLICIES;-LOSS OF STOCK

A fire insurance policy is usually for one year. The insurance company agrees to compensate the insured

for any loss that he may suffer on account of loss of stock, in consideration of a certain amount paid as

premium.

The value of stock loss on fire can be ascertained as;

Stock in the beginning of the accounting year …………….

Add: purchases till the date of fire .……………

Less: cost of goods sold …………….

Value of stock on the date of fire …………….

Less: stock of goods salvaged …………….

Value of stock lost on account of fire ……………...

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The amount of claim for loss of stock to be filed with the insurance company depends on two important

factors;

1)Rate of gross profit: for determination of the loss of stock, cost of sales is necessary. This can be

ascertained by deducting the amount of gross profit from the sales made by the business.

2)Average clause:Inorder to discourage under insurance, usually the ‗average clause‘ is inserted in all

contracts of fire insurance. The object of inserting such a clause is to limit the liability of the insurance

company to that proportion of the actual amount of loss which the insured amount bears to the actual

value of the property

CLAIMS FOR LOSS OF PROFIT

Fire results not only in loss of property but also of profits to the business on account of its dislocation.

Such a loss can be got covered by taking a loss of profit policy

The policy should be adequate to cover the likely amount of loss which the insured may suffer on account

of dislocation of the business. The policy specifies both the period and the amount it covers. While

determining the amount of policy the insured should take into account not only the amount of net profit

he earns but also the amount of standing or fixed charges which have been charged against the revenue

for determining the amount of net profit.

Loss of profit occurs because of loss of sales on account of dislocation of the business. Moreover, the

insured may have to incur certain additional expenses to mitigate the amount of loss. There may also be

certain savings in expenses of the business because of its being closed down for some period. While

calculating loss of profit, short sales, rate of gross profit, loss due to short sales, increased cost of

working, saving in expenses, average clause etc. should be considered.

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BUSINESS MATHEMATICS

MODULE 1

Functions or mapping

Mapping or function is a specified type of relation between two terms.

Ordered Pairs

A pair of 2 objects which occur in a particular order(in which the order of the object is important)

E.g. Natural numbers and their squares can be represented by ordered pairs as

(1,1),(2,4),(3,9)..........

Relation

A relation means an association of 2 objects based on some property possessed by them. ‘R‘ is usually

used for relation.

E.g. Let A= 1,3,4,7,9,10,11,16

B= 0,1,2,3,4,5

and the relation R is ‗square of‘ from A to B, then

R= (1,1)(4,2),(9,3),(16,4)

Functions

Let A and B be 2 sets such that

A= a1,a2,a3 and B= b1,b2,b3

If by some rule each element of A is associated with the unique element of B, say a1 with b1,a2 with b2

and a3 with b3,then the collection of each association is called a function from A to B and written as f:A

→B. Here b1 is the image of a1 and a1 is the pre image of b1.

The above example can be made more clear by way of an arrow

diagram

Hence y = f(x), y is called the image of x and x is called the pre-image of y.

NECESSARY CONDITIONS FOR MAPPING A FUNCTION

i. For a function f from set A to set B, every element of set A should be associated to a unique

element of set B.

ii. No element of A is associated with 2 or more elements of B.

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Domain and Range of a function

The set of all 1st elements of the ordered pairs in a function f:A → B is called domain of the function f.

The set of all 2nd

elements in a function f:A to B is called the range of the function f.

The whole set B is called the co-domain of function f.

E.g. Let A=1,2,3,4

B=1,4,9,16,25

And R=(x,y): x A, y B, x=√ y

Domain:1,2,3,4, Range:1,4,9,16, Co-domain:1,4,9,16,25

Types of function

a) One-one function or an injective mapping

A function f:A→ B is said to be a one-one function if no two different elements in A have the same

image in B. That is each element in B is the image of only 1 element in A.

Example:

b) Many-one function

A function f:A → B is said to be a many-one function if 2 or more elements in A have the same image

in B.

Example:

c) Onto function

A function f:A → B is said to be an onto function if each element of set B is the image of atleast one

element in set A.

Example:

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d) Into function

A function f:A → B is said to be an into function if there exists atleast 1 element in B which is not the

image of any element in set A.

Example:

Composition of a function(Product mapping)

Let f : A → B and g : B → C be two functions.

Let h: A → C be function such that h(x) = g(f(x))

There is a way to combine the above two functions to create a new function. It is called

composition of two functions. It is a process through which we will substitute an entire function

into another function.

Vectors

Vector quantities are those which have direction as well as magnitude and combined according to certain

laws of addition. Eg: Displacement, Force, Velocity etc.

Line segment : Part of a straight line having 2 end points.

Directed line segment : A line segment with an arrow head showing direction.

Equal vector : They have same magnitude and they point in same direction.

Negative vectors : They are vectors of equal magnitudes but point in opposite direction.

Position vectors : When a vector OP is used to represent position of a point P with respect to

point O as origin, vector OP is called position vector.

Like and unlike vectors : Vectors which have same direction are called like vectors and which

have opposite direction are called unlike vectors.

Angle between like vectors = 0°. Angle between unlike vectors = 180°.

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Null / Zero vector : If initial and final points of a vector coincides, then it is called a zero vector.

Its length is 0 & its direction is indeterminate. Thus vector AA, vector BB etc are 0 vectors.

Unit vector : Vector whose magnitude is unity (1) is called a unit vector in the direction of vector

a, we have to simply divide by its magnitude.

Caret a = vector a/|vector a|.

Caret i, caret j, caret k are unit vectors parallel to x, y and z axes respectively. Unit vectors in

different direction are not equal although their moduli are same. Ie, unity.

Free and localized vector : A vector is said to be free if its initial point can be shifted anywhere on

its line of support on a line parallel to its line of support. Thus it has no particular location in

space.

A vector is said to be localized if its initial point is fixed & cannot be transferred to anyother

point on its line of support or a line parallel to its line of support.

Co-initial vectors : Vectors having same initial point are called co-initial vectors.

Co-planar vectors : 3 or more vectors lying on same plane or are parallel to same plane are called

co-planar vectors.

Collinear vectors : 2 or more vectors are said to be collinear if their directions are parallel, same

or opposite irrespective of their magnitudes. Collinear vectors may not be along same line.

Addition & Subtraction of vectors :-

Triangle method / Triangle law : If 2 vectors can be represented in magnitude & direction

by 2 sides of a triangle in same order, then resultant is represented in direction &

magnitude by 3rd

side of triangle taken in opposite order.

Parallologram method / Parallelogram law : If 2 vectors acting simultaneously at a point

can be represented in direction & magnitude by 2 adjacent sides of a parallelogram, then

their resultant is given completely in direction & magnitude by diagonal of parallelogram

which passes through point of intersection.

Polygon law : It states that if a number of vectors represented in direction & magnitude

by sides of a polygon taken in order then resultant is given in magnitude & direction by

closing side of polygon in opposite order.

Properties of vector:-

Vector a + vector b = Vector b + vector a (commutative)

Vector a +(vector b+ vector c) = (vector a + vector b)+ vector c (associative)

m(vector a + vector b) = ma + mb (distributive)

Null vector is identity for addition of vectors.

Position vector : To every free vector there corresponds a vector of same magnitude & direction

whose starting point is origin & terminal point is P. Then vector OP is called position vector of P

relative to 0.

Vector PQ = Position vector of Q – Position vector of P

Scalar / Dot product :-

Let vector a & vector b be 2 vectors & θ be angle between them, then scalar or dot

product of 2 vectors a & b is

Vector a • vector b = |vector a||vector b|cos θ.

Properties:-

Vector a• vector b = vector b• vector a(commutative)

Vector a•(vector b ± vecto c) = vector a•vector b ± vector a•vector c(distributive)

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(m•a)b = m(a•b) = a•(mb)

If a•b = 0, either a = 0 or b = 0 or a perpendicular to b

a•a = a2cosθ = a

2

(a+b)2 = (a)

2 + (b)

2 + 2a•b

Orthogonal vector triad:-

i•i = j•j = k•k = 1

i•j = j•k = k•I = 0

Corallary

a = a1i + a2j +a3k

b = b1i + b2j + b3k

a•b = a1b1 + a2b2 + a3b3

|a| = sq root of(a12 + a2

2 +a3

2)

|a| = a1/b1 = a2/b2 = a3/b3

Vector / Cross product:-

Let vector a & vector b be 2 non zero, non parallel vectors & let θ be angle between

them, then

a x b = |a||b|sin θ caret n, where n is a unit vector perpendicular to both a & b, such that a,

b & caret n form a right handed system.

Notes

A & b are parallel or collinear, then θ = 0° or 180°, then a x b = vector 0.

a x b = 0, then either a = 0 or b = 0 or sinθ = 0.

a x a = vector 0

a x b ≠ b x a . But a x b = -(b x a)

a x(b + c) = (a xb) + (a x c)

2 non zero vectors are parallel or collinear if and only if a x b = vector 0.

Orthogonal triads:-

i x j = k = -j x i

j x k = i = - k x j

k x i = j = -I x k

j x j = k x k = i x I = 0

|a x b| = |a||b|sinθ

Sinθ = |a x b|/|a||b|

Sin2θ + cos

2θ = 1

MATRIX

A matrix is a rectangular arrangement of no: arranged in rows and columns.

Order of matrix = no: of row * no: of columns.

Types of matrix

Raw matrix:- [ 1, 2] ; [ 1, 4, 8].

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Column matrix :- 5

6

8

Square matrix:- 1 2 3 4 5

3 4 5 9 7

8 1 3

Zero matrix:- 0 0

0 0

Diagonal matrix:- 3 0 0

0 2 0

0 0 1

Unit or identity matrix:-

I = 1 0 0

0 1 0

0 0 1

Transpose of matrix:-

A= 2 3 1 At = 2 0

0 4 7 3 4

1 7

Equity of matrix

Conditions:- Both matrix must have same order, Corresponding element of both matrix are equal.

Addition and Subtraction

A = 5 4 B = 3 0

2 1 4 2

Ie 5+3 4+0 5-3 4-0

2+4 1+2 2-4 1-2

8 4 2 4

6 3 -2 -1

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Additive inverse

A+B = B+A = 0 then A is said to be the additive inverse of B, & B is said to the additive inverse of A.

Scalar multiplication

m. a b = ma mb ie 4 2 3 = 8 12

c d mc md 1 5 4 20

Multiplication of matrix

A m*n * B n*p

Then ‗n‘ of A must be equal to ‗n‘ of B, then the resultant matrix will be in the form ‗n*p‘.

Determinants

A determinant is simply a square array of numbers, arranged in rows and columns. Every determinant has

a unique numerical value.

a b

c d = ad - bc.

Minors & Co-factors.

The minor of an element is a determinant ie. Left after removing the row and column which intersect at

the element and is of order 1 less than that of the given determinant.

a1 b1 c1 minors of a1

a2 b2 c2 b2 c2

a3 b3 c3 b3 c3

Note : 1. Only square matrix have determinant. 2. The determinant of a square matrix can be expanded

along any row or column. 3. If a row or column of a determinant consist of all zero, then the value of the

determinant is all zero.

Inverse of a matrix.

We have seen that unit matrix I= 1 0 and zero matrix 0 0 of order 2, we have

0 1 0 0

a*1/a = 1 or a*a -1

= 1. This is called the multiplicative inverse of A.

For a inverse of matrix to exist the following are necessary.

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Conditions:- matrix must be square.

The equation AB = AB = I must be satisfied. If A = a b then the

c d

Inverse of the matrix A is denoted by A-1

exist, if and only if (ad - cb) ≠ 0.

A-1

= 1/(ad -bc) d -b

-c a

MODULE 2

DIFFERENTIATION

It is the branch of maths concerned with the study of change.

It comprises of two chief branches i.e., differential &integral calculus.

Differential calculus is a subfield of calculus concerned with the study of how functions change

when their inputs change.

Standard Results

Product rule

If y = uv. Then use the formula

dy/dx= u.(dv /dx) +v.(du/dx)

Quotient rule

If y= uv then dy/dx=[v.(du/dx)-u.(dv/dx)]/v2

Function of a function

If y is a function of u and u is a function of x then dy/dx=dy/du*du/dx

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Implicit functions

In functions like x2+4xy-y=2x, y is not expressed in terms of x. This is called an implicit function. In the

case of such functions differentiate term by term and obtain dy/dx.

Logarithmic Differentiation

This method is used when the function has an index which itself is a function.

For example, y=x2x

,y=(logx)x etc

Proceed by taking logarithm on both the sides.

Higher order derivatives

The first derivative of y=f(x) is denoted by dy/dx or y1.The second derivative is denoted

by d2y/dx

2 or y2. Similarly n

th derivative of y=f(x) is denoted by d

ny/dx

n or yn.

Applications of Differentiation in Business Mathematics

The process of differentiation has very useful applications in the field of business and economics:

1. Marginal Cost: MC=dC/dx, where C is cost and x is quantity of production.

2. Marginal Revenue: MR=dR/dx, where R is revenue & x is quantity of sales.

3. Marginal Productivity: MP=dP/dL,where P is the output & L is the input.

4. Marginal Utility: MU=dU/dx, where U is utility & x is quantity of commodity purchased.

5. Marginal rate of substitution.

MAXIMA & MINIMA

A

B

• At A, maximum occurs and dy/dx =0 & d2y/dx

2 < 0,

• At B, minimum occurs and dy/dx =0 & d2y/dx

2 >0 .

• ELASTICITY

• Price elasticity of demand,ed = -(p/q).(dq/dp)

• Price elasticity of supply, es(p/q).(dq/dp)

INTEGRATION

Can be considered as the inverse of differentiation.

Formulae for integration can be obtained from the formulae of differentiation.

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Formulae

sin(x) -cos(x)

cos(x) sin(x)

sec2(x) tan(x)

cosec2(x) -cot(x)

sec(x)tan(x) sec(x)

cosec(x)cot(x) - cosec(x)

Note: a constant of integration should be added

Integration by parts

Definite Integral

= Ø(b)-Ø(a), where Ø(x) is the integral of f(x).

Properties of Definite integral

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Theorem. If f (x) and g(x) are defined and continuous on [a, b], except maybe at a finite number of

points, then we have the following linearity principle for the integral:

(i)

f (x) + g(x) dx = f (x) dx + g(x) dx;

(ii)

f (x) dx = f (x) dx, for any arbitrary number .

The next results are very useful in many problems.

Theorem. If f (x) is defined and continuous on [a, b], except maybe at a finite number of points, then we

have

(i)

f (x) dx = 0;

(ii)

f (x) dx = f (x) dx + f (x) dx;

(iii)

f (x) dx = - f (x) dx;

Application of Integration to Business

The process of Integration has very useful applications in the following fields of Business and

Economics.

1) Total Cost=∫(Marginal Cost)

2) Total Revenue=∫(Marginal Revenue)

3) Consumer‘s surplus= ,

Where f(q)=demand function, P=equilibrium price, Q=equilibrium quantity

4) Producer‘s surplus=PQ- ,where f(q)=Surplus function, P=Equilibrium Price,

Q=Equilibrium quantity.

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MODULE 3

Classical Optimization Techniques

The classical methods of optimization are useful in finding the optimum solution of continuous and

differentiable functions. These methods are analytical and make use of the techniques of differential

calculus in locating the optimum points. Since some of the practical problems involve objective functions

that are not continuous and/or differentiable, the classical optimization techniques have limited scope in

practical applications. However, a study of the calculus methods of optimization forms a basis for

developing most of the numerical techniques of optimization presented in subsequent chapters. In this

chapter we present the necessary and sufficient conditions in locating the optimum solution of a single-

variable function, a multivariable function with no constraints, and a multivariable function with equality

and inequality constraints.

A function of one variable f (x) is said to have a relative or local minimum at x = x* if f (x*) ≤ f (x* + h)

for all sufficiently small positive and negative values of h. Similarly, a point x* is called a relative or

local maximum if f (x*) ≥ f (x* + h) for all values of h sufficiently close to zero. A function f (x) is said to

have a global or absolute minimum at x* if f (x*) ≤ f (x) for all x, and not just for all x close to x*, in the

domain over which f (x) is defined. Similarly, a point x* will be a global maximum of f (x) if f (x*) ≥ f (x)

for all x in the domain. The following figure shows the difference between the local and global optimum

points.

A single-variable optimization problem is one in which the value of x = x* is to be found in the interval

[a, b] such that x* minimizes f (x). The following two theorems provide the necessary and

sufficient conditions for the relative minimum of a function of a single variable.

Theorem 1: Necessary Condition If a function f (x) is defined in the interval a ≤x ≤ b and has

a relative minimum at x = x*, where a < x* < b, and if the derivative df (x)/dx = f 1(x) exists as a finite

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number at x = x*, then f1(x*) = 0.

Theorem 2: Sufficient Condition. Let f 1 (x*) = f

1 1 (x*) = … = f

(n-1) (x*) = 0, but f

(n) (x*) ≠ 0.

Then f (x*) is (i) a minimum value of f (x) if f (n)

(x*) > 0 and n is even; (ii) a maximum value of f (x)

if f(n)

(x*) < 0 and n is even; (iii) neither a maximum nor a minimum if n is odd.

MULTIVARIABLE OPTIMIZATION WITH NO CONSTRAINTS

Here, we consider the necessary and sufficient conditions for the minimum or maximum of an

unconstrained function of several variables.

Theorem 3: Necessary Condition. If f (X) has an extreme point (maximum or minimum) at X

= X* and if the first partial derivatives of f (X) exist at X*, then

Theorem 4: Sufficient Condition. A sufficient condition for a stationary point X* to be an

extreme point is that the matrix of second partial derivatives (Hessian matrix) of f (X) evaluated at X*

is (i) positive definite when X* is a relative minimum point, and (ii) negative definite when X* is a

relative maximum point.

MULTIVARIABLE OPTIMIZATION WITH EQUALITY CONSTRAINTS

In this section, we consider the optimization of continuous functions subjected to equality constraints:

There are several methods available for the solution of this problem like the methods of direct

substitution, constrained variation, and Lagrange multipliers.

Lagrange Multipliers and their Applications

Optimization problems, which seek to minimize or maximize a real function, play an important role in the

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real world. It can be classifed into unconstrained optimization problems and constrained optimization

problems. Many practical uses in science, engineering, economics, or even in our everyday life can be

formulated as constrained optimization problems, such as the minimization of the energy of a particle in

physics; how to maximize the profit of the investments in economics.

The constrained optimization problems can be formulated into the standard form as:

Where, G, H are function vectors. The variables are restricted to the feasible region, which refers to the

points satisfying the constraints.

The Lagrange multipliers method, named after Joseph Louis Lagrange, provide a method for the

constrained non- linear optimization problems. It can help deal with both equality and inequality

constraints.

Without the inequality constraints, the standard form of the nonlinear optimization problems can be

formulated as:

The Lagrange function F is constructed as

By partial differentiation, the Lagrange function can be found.

Linear Programming

Linear programming (LP) problems are optimization problems in which the objective function and the

constraints are all linear.

Integer Programming

Integer programming is a special class of Linear Programming problem.A linear programming problem in

which some or all the variables in the optimal solution are restricted to assume non negative integer value

is called Integer programming problem.

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There are two common approaches. Historically, the first method developed was based on cutting planes

(adding constraints to force integrality). Another technique has been based on dividing the problem into a

number of smaller problems in a method called branch and bound.

Applications and Importance

Many industrial applications of large scale programming models are oriented towards planning decisions.

In business and industry it becomes necessary in many situations to plan models involving integer valued

variables. For example: in allocation of goods of the type trucks, aircrafts etc, fractional value of variables

is meaningless. Transportation problems, Assignment problems and sequencing and routing problems are

integer programming problems as they require integer values for the decision variables.

Dynamic Programming

Dynamic programming is a technique of optimisation using multistage decision process,in which a

sequence of inter related decisions has to be made.This technique decomposes the original problem into a

number of sub problems (or stages) each in one variable.The solution is obtained in an orderly manner by

starting from one stage to the next and is completed after the final stage is reached.

Goal Programming

In linear programming ,there is only one objective(or goal) such as maximisation of profit(or output) or

minimisation of cost(or time).But there may be situations where there may be multiple objectives.Goal

programming is a technique which can be used for finding the optimum solutions to such situations.

Applications

1.It can be used to amnagerial decision making areas.

2.In marketing Goal programming is useful for media planning.

3.This technique can be employed for port folio selection,capital budgeting,financial planning and

scheduling in the field of finance management.

4.In the field of production,it can be employed to aggregate production planning and scheduling.

MODULE 4

Quantitative Techniques And Its Applications In Business

Quantity is something measurable with definiteness. It can be explained as the numerical expression of

information or fact against qualitative expression, which is a non-numerical statement of fact. Thus

quantitative techniques involve introduction of the element of quantities such as numbers, symbols and

other mathematical expressions.

Some Important techniques in Mathematics

Arithmetic:

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Indices, progressions, series, logarithms etc come under arithmetic logarithms and indices are used and

simplification of mathematical calculations. In a series if some of the values are given we can estimate or

expect the required values in the later point of the series. Using progressions we can find the sum, mean

and the required term in a given series.

Algebra:

Algebraic concepts in sets, relations, functions etc are abstract in nature. These are used to identify the

object and their characteristics. The relation between the objects and the scope or extend of relation with

reference to the context is useful in quantitative analysis of different problems.

Geometry:

We can find the areas or volumes of the regions analytical geometry. Using plane geometry we can

express regions in a pictorial manner.

Calculus:

Limits and Continuity, Differentiation, Integration, Differential Euations etc. are calculus concepts on the

given equations.

Matrices:

Matrices are used to solve systems of Linear Equations.

Application of quantitative techniques in Industry

Quantitative techniques is recently developed `modern science‘. It is

multi-disciplinary in nature with inbuilt tools for decision making. These specific features widened the

scope of application of the subject into every sector where the decision makers play a significant role. It

may be the apex administrative body, the government, the defense, the trade and industry, non trade

organizations, service sectors or any such key sectors. Its application is more prominent in trade and

industry which can be in the following way:

Production:

Production process converts the raw materials into useful finished products. Production unit lies between

two stores house- the raw materials and finished products. The efficiency and the productivity of

production department is determined by how best they can reduce wastage of idle materials, unnecessary

movements of machines and men and materials between machines. All these can be monitored through

different quantitative techniques.

Procurement:

Every business organization is required to purchase different inputs. The role of procurement department

is to determine the required quality, which should not be more or less than the prescribed standard and

how much to buy. The department should be able to balance between the time of order and the time of

receiving the order. There should not be idle inventory. All these activities are undertaken with the help of

quantitative techniques

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Marketing:

The success of any industry or trade is directly determined by its ability to market the products. The

marketing department for the expansion of market share extensively uses market research , sales

promotion techniques, consumer survey etc.

Human Resource Management:

An organization or an enterprise is an network of people selected and positioned in a post assigning

specific task to be undertaken by them. It includes recruitment, training, payment of salaries and creation

of healthy network of human power, which is the most important fuel to run an organization. At every

stage of HR development programmes, quantitative techniques are applied by the human resource

department.

Finance:

Obtaining timely and adequate finance is life to any organization. Quality of finance can be improved by

applying the quantitative techniques. All the major enterprises use the major enterprises use the

quantitative techniques to reduce wastage in utilizing capital. They reduce burdens of payments and

obtain finance from cheaper sources. Budgetary control, credit risk analysis, cash flows etc are important

techniques.

Research and Development:

Research and Development department became an essential part of every organization, including the

Government Departments. The department takes the responsibility of conducting continuous studies to

improve the work efficiency, market share and to build good public image. Research and development

department encourages innovative projects, inventions and discoveries. All these activities directly

depend on different quantitative techniques. It can be said that the maximum tools and models of

quantitative techniques are utilized in research and development department.

SET THEORY

Set is collection of well-defined objects.a,e,I,o,u these objects are called elements of a set . Set

represented by A.

A=a,e,I,o,u, B=1,2,3,4,5

The objects of the set will not be repeated.

Various methods of representing a set

1. Description method – a well-defined description about the set

Eg: N is a set of natural numbers.

2. Tabular OR roster method- elements of the set are written inside a pair of braces separated by commas.

Eg : 1,2,3,4,…….

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3. Set builder or rule method – actual elements are not written but a rule or statements or formula is

written in briefest possible way. Eg:x:x is a natural number

Types of set

1. EQUAL SETS

Two sets are said to be equal if the elements of both the sets are the same

A=x,y,z,B=y,x,z

2. EQUIVALENT SETS

Two sets are said to be equivalent if they have equal number of sets

A=3,6,9, B=a,b,c,n(A)=n(B)

The number of elements in set are called cardinal numbers

Eg: B=a,b,c,d,e

N(B)=5

3. Disjoint sets

If two sets have no elements in common such sets are called disjoint sets

P=2,4,8 Q=3,1,6

4. Finite set

A set is said to be finite sets if it has limited number of elements in it.

P=1,2,3……..20

5. INFINITE SET

Set of natural numbers whole numbers integers are infinite sets. Set have infinite number of elements

6. null set (empty set)

A set which has no elements in it is called empty sets or null set and is represented as the symbol or ф

7. Joint set or overlapping sets

If two sets have at least one elements in common they are said to joint or overlapping sets

A=1,2,3,4 B=3,6,8,9

8. Singleton or unit set

A set which has only one element in it is called unit set

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Eg:x:x is the president of India

a , 10

9. SUBSET

In two sets A and B if

All element of set A are also the elements of set B . Then set A is said to a subset of B, A С B

A=5,6,7,8, B=2,3,4,……15

1. Every set is a subset of itself, 2. Empty set is a subset of every set

3. If A is a subset of B (A С B) and (B С A) then A=B

A=a,b

Subset of A=,a,ba,b

4. If a set has n elements the number of its subset is 2n

Proper subset

The set A is said to be a proper subset of B if, all elements of A is contained in B and there exists at least

one elements in B which is not in A

Number of proper subset = 2n-1

UNIVERSAL SET

it is the set which containing all the sets under consideration as its subset . Universal set is denoted by U

A=5,6,7,8 B=1,3,5,7 C=4,6.8.10 U=1,2,3,4,5,6,7,8,9,10

COMPLEMENT OF SET

The compliment of a set is the set of all elements in the universal set which ar not in set A . It is denoted

by A‘ or Ac

Eg: if U=1,2,3,4,5,6

A=2,3,5, A‘=1,4,6

If S=x:xЄN, A=even natural numbers, then, A‘=odd natural numbers

SET OPERATIONS

UNION Union of set A&B is the set which consists of all the elements which belongs either to set A or

to set B or to both set and is denoted by ―AUB or AcupB‖

A=5,6,7,B=6,8, then, AUB=5,6,7,8

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1 union of two set is commutative

2 union of two set is associative

3 A is a subset of (AUB)

A С (AUB), B С (AUB)

INTERSECTION OF TWO SETS

Intersection of two set A and B is the set of elements which are common to both AandB

It is denoted by AΩB(A cap B)

A=1,2,3,4

B=3,4,5,6

AΩB=3,4

Intersection of two set is commutative, AΩB=BΩA

Intersection of two set is associative, AΩ (BΩC)=(AΩB) ΩC

DIFFERENCES OF TWO SETS

If A and B are two given sets ,then their differences A-B is the set of those elements which belongs to set

A but not to set B

For eg: if A=b,c,d,e and B=a,b,c

A-B=d,e, B-A=a

DISTRIBUTIVE LAWS

1 AU(BΩC)=(AUB)Ω(AUC)

The union is distributed over the intersection of two sets

Let A=2,5,8,11, B=2,4,6,8, C=5,6,7,8,

BΩC=6,8, AU(BΩC)=2,5,6,8,11

AUB=2,4,5,6,8,11, AUC=2,5,6,7,8,11

(AUB) Ω(AUC)=2,5,6,8,11

So , AU(BΩC)=(AUB)Ω(AUC) =2,5,6,8,11

DE-MORGAN‘S LAWS

The complement of two sets is equal to the intersection of their complements

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(AUB)'=A'ΩB'

(AUB)'=A'ΩB'

CARDINAL PROPERTIES OF SETS

1. n(AUB)=n(A)+n(B)-n(AΩB), n(AUB)=n(A)+n(B) – for disjoint set,

2. n(A-B)=n(A)-n(AΩB)=n(onlyA), 3. n(B-A)=n(B)-n(AΩB)=n(onlyB),

4 .n(A')=n(U)-n(A), 5 n(B')=n(U)-n(B) 6. n(AUB)'=n(U)-n(AUB)

VENN DIAGRAMS

Venn diagrams are most commonly used pictorial representation of set. The idea was developed by John

Venn , he is English mathematician . On this diagram, universal set is represented by rectangle and all

other set under consideration by circle or oval within the rectangle.

Permutations and Combinations

Permutations

A permutation is one of the different arrangements of a group of items where order matters.

Summary

If you want to arrange 3 people in groups of 3 at a time, there are 3! ways to accomplish this task.

If you want to arrange 4 people in groups of 4 at a time, there are 4! ways to accomplish this task.

If you want to arrange n objects in groups of n at a time, there are n! ways to accomplish this task.

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Permutation Formula

Combinations

Combination

A combination is one of the different arrangements of a group of items where order does not

matter.

Combination Formula

The number of combinations of a group of n objects taken r at a time is:

CIRCULAR PERMUTATION

The number of circular arrangements of ‗n‘ distinct items is:

(n-1)! If there is a difference between the clockwise and anticlockwise arrangements,and

(n-1)! /2 if there is no difference between the clockwise and anticlockwise.

MODULE 5

Arithmetic progression (AP)

An arithmetic progression (AP) or arithmetic sequence is a sequence of numbers such that the

difference of any two successive members of the sequence is a constant.

Each term differs from the previous one by a constant, called the common difference

The number of permutations of n objects taken r at a time is:

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The common difference can be either positive or negative

Useful in calculating simple interest, etc

An A.P. with first term a, common difference d, and n terms can be written as

a, a+d, a+2d … a+(n-1)d

Sum of an Arithmetic Progression

If a is the first term ,l is the last term, n is the number of terms & d is the cd

or

Geometric Progression

A sequence where each term is a constant multiple (common ratio) of the previous term

Useful in compound interest, time value of money, calculating depreciation etc.

A geometric progression with first term a, a common ratio r, and n terms can be written as

a, ar, ar2, ar

3, … ar

n-1

Sum of n terms of a GP

If a is the first term and r is the CR of a GP

Sum to n terms of the GP is

i) Sn = a( rn-1)/ (r-1), if r >1

ii) Sn = a( 1- rn ) / (1 – r ), if r < 1

Harmonic Progression

A sequence of numbers is said to form a harmonic progression if their reciprocals form an

arithmetic progression.

To find the nth term of an H.P

To find the nth term of an H.P, find the n

th term of the corresponding A.P. obtained by the

reciprocals of the terms of the given H.P. Now the reciprocal of the nth term of an A.P. will be the

nth term of the H.P.

Binomial theorem

The binomial theorem describes the algebraic expansion of powers of a binomial. According to

the theorem, it is possible to expand the power (x + y)n into a sum involving terms of the form

axby

c, where the exponents b and c are nonnegative integers with b + c = n, and the coefficient a

of each term is a specific positive integer depending on n and b. For example,

147

The coefficient a in the term of xby

c is known as the binomial coefficient ( nCb) or ( nCc)

(the two have the same value). These coefficients for varying n and b can be arranged to form

Pascal's triangle. These numbers also arise in combinatorics, where gives the number of

different combinations of b elements that can be chosen from an n-element set.

Pascal's triangle

Properties

The expansion is a series (an adding of terms).

The number of terms in each expansion is one more than n. (terms = n + 1)

The power of a starts with an and decreases by one in each successive term ending with a

0. The

power of b starts with b0 and increases by one in each successive term ending with b

n

The power of b is always one less than the "number" of the term. The power of a is always n

minus the power of b.

The sum of the exponents in each term adds up to n.

The coefficients of the first and last terms are each one.

The coefficients of the middle terms form an interesting (but perhaps not easily recognized)

pattern where each coefficient can be determined from the previous term. The coefficient is the

product of the previous term's coefficient and a's index, divided by the number of that previous

term.

Binomial Theorem

(or Binomial Expansion Theorem)

The r th

term of the expansion of is :

Mathematics of finance

Simple interest

148

If P=amount deposited initially( Principal), r=rate of interest, T=number of years for which P is

deposited, total interest receivable. I=P*r*T &

Amount receivable, A=P+I = P+(P*r*T) = P(1+rT)

Compound interest

Interest is added to the principal at the end of the compounding period. Compounding can be

yearly, or can be monthly, quarterly, half yearly etc. More frequent compounding means more

interest for you.

In yearly compounding, A=P(1+r) after 1year, P(1+r)2 after 2years,and so on. After ‗t‘ years,

A=P(1+r)t

If compounding is ‗k‘ times in a year, A=P(1+r/k)kt

Compounding Continuously

rtPetA )(

Annual Percentage Yield (APY)

The percentage that, compounded annually, would yield the same return as the given interest rate with the

given compounding period.

Discount factor

• At compound interest, P becomes P(1+r)T in T years. Therefore, if somebody promises to give Rs

P(1+r)T after T years, it is worth only Rs P today.

• Amount receivable in future is to be multiplied by a number(always less than one) to arrive at the

present worth of that amount.

• In above example, P(1+r)T is to be multiplied by 1/(1+r)

T to arrive at present worth P. So the

discount factor is 1/(1+r)T.

Present value of money

• PV= Future amount* Discount Factor(DF)

• DF = 1/(1+r)T

Future value of money

• A=P(1+r)T ,when the compounding is yearly.

• Therefore,FV=Present Amount*(1+r)T

. We call (1+r)T

compounding factor.

Annuities

• A series of fixed payments/receipts at a specified frequency, over a fixed period.

• 2 types of Annuities. Ordinary Annuity; payment is at the end of the period. Annuity Due;

payment is at the beginning of each period.

149

Present and Future value of Annuity

• For calculating PV of Annuity, PV of each payment is calculated and added.E.g. if Rs 100 is paid

at the end of each year for 10 years, we calculate PV of each of these 10 payments of Rs 100

separately and add these 10 values.

• Similarly, for calculating FV of Annuity, FV of each payment is calculated and added.E.g. if Rs

100 is paid at the end of each year for 10 years, we calculate FV of each of these 10 payments of

Rs 100 separately and add these 10 values.

k

r

k

r

RFV

kt

11

k

r

k

r

RPV

kt

11

150

STATISTICS FOR MANAGERS

MODULE 1

COLLECTION & CLASSIFICATION OF DATA

Collection of data is the process of enumeration together with the proper recording of results .The success

of an enquiry is based upon the proper collection of data . There are mainly 2 type of collection of data:

Primary data: These are collected for the first time and they are original in character. If an individual or

an office collects the data to study a particular problem, the data are the raw materials of the enquiry.

They are primary data collected by the investigator to study any particular problem.

For collection of primary data, the investigator may choose anyone of the following methods:

Direct personal observation

Indirect oral interview

Information through agencies

Mailed questionnaires

Schedules sent through enumerator

Secondary data: These are already collected by someone for some purpose and are available for the

present study. For instance, the data collected during census operations are primary data to the department

of census and the same data, if used by a research worker for some study, are secondary data.

Sources of secondary data : The various sources of secondary data can be divided into two broader

categories

Published sources: various governmental, international and local agencies publish statistical data and

chief among them are :

(a).international publications,(b).official publications of central and state govt.(c).semi-official

publications (d).publications of research institutions (f).reports of various committees and commissions

appointed by a govt. (g).journals and news papers.

Unpublished sources: there are various of un published data .They are records maintained by various

govt. and private agencies, the research carried out by individual research scholars in the universities or

research institutions.

Classification of data

Classification is the process of arranging the available facts into homogeneous groups or classes

according to resemblances and similarities. The following are the definitions : ―classification is the

process of arranging things in many groups or classes according to their resemblances and affinities and

give expressions to the unity of attributes that may subsist amongst adiversity of individuals ―

Characteristics of classification

All the facts are classified into homogeneous groups by the process of classification

The basis of classification is unity in diversity

Classification may be either real or imaginary

Classification may be according to either similarities or dissimilarities

It should be flexible to accommodate adjustments

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Objects of classification

To simplify the complexities of collected data

To bring out the points of similarities of various items

To facilitate comparison

To bring out the relationships

To prepare basis of tabulation

To facilitate the statistical treatment of data

To facilitate easy interpretation

To eliminate unnecessary details

Methods of classification

Classification is done on the basis of characteristics possessed by the items the characteristics can be of

two kinds measurable and non -measurable .height ,weight, production , are measurable while sex, marital

status, education etc are non-measurable . the methods mainly classified into 4 types

Classification according to attributes

Under this method the data are classified on the basis of quantitative characteristics known as attributes.

Attributes may be classified as simple or manifold

In simple classification the data are divided on the basis of only one attributes. In manifold classification

the data are divided on the basis of more than one attributes

Classification according to variables

Under this method data are classified on the basis of quantitative characteristics such as age , height ,

weight , etc. these characteristics capable of direct measurement

Geographical classification

When the data are classified according to geographical differences , we have geographical classification

.here information relating to different places are shown

Chronological classification

When data are collected for a number of periods and they are arranged,

chronologically we have chronological classification

Frequency distribution

A frequency distribution is an orderly arrangement of data classified. According to the magnitude of

observations .when the data are grouped in to classes of appropriate size indicating the number of

observations in each class .we get frequency distribution

Tabulation method

152

Tabulation method is the next step of classification .it is an orderly arrangement of data in rows and

columns . It is a systematic presentation of data . Tabulation is the final stage in collection and

compilation of data . It is the process between collection of data and its analysis .

Objectives of tabulation

To simplify complex data

To facilitate statistical analysis

To economise space

To facilitate comparison

To save time

To remember the data

Important functions of tabulation

Tabulated data is easily understood

Tables are intended to summarise the data

Tabulation facilitate comparison

Tabulation reveals the nature of relationship between the variables

Tabulation eliminates all unnecessary details , which are collected

It helps further analysis of the data

Statistical Series

A systematic arrangement of items into some logical order

Individual Series

Discrete Series

Continuous Series

Cumulative Series

Frequency Distribution

The frequency (f) of a particular observation is the number of times the observation occurs in the

data.

Arrangement of data into different classes to know the frequencies in each class.

A frequency distribution is a tabular form that organises data into classes

It is obtained by dividing the data into different classes and shows the number of observations in

each class

Frequency Distribution

The objective is to provide insights about the data that cannot be quickly obtained by looking

only at the original data.

Frequency distribution can be constructed with classes of qualitative or quantitative attributes

Discrete and Grouped Frequency distribution

Discrete Frequency Distribution

o The number of times each value of the variable occurs in the data.

Grouped Frequency Distribution

o After classifying the data, divide the data into different groups called classes/class

interval and record the number of observations in each group(classes).

Components of Grouped Frequency Distribution

o Classes/ class interval

o Class Frequency

o Class Limit

o Class Mark

o Magnitude of class interval

o Class Boundaries

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Class/ Class interval

The classes /class interval or categories refer to the groupings of the observations

according to their size.

Eg. if students having mark 20 -25 is in a group, then 20-25 is a class.

Types of Class Intervals

o Inclusive Type : Both upper limit and lower limit are included in the class. Here the classes will

be like 0 – 9, 10 – 19, 20 – 29 etc.

o Exclusive Type : Upper limits is excluded from the class.

Eg : 0 – 10, 10 – 20, 20 – 30 etc.

o Open ended and closed ended class limit

Frequency

The frequency for a particular category or class is the number of observations that fall into that class.

Class limits

The class limits are the smallest or the largest numbers in each classes.

In class 20-25, 20 is the lower limit and 25 is the upper limit

Lower class limits are the smallest numbers belong to the different classes.

Upper class limits are the largest numbers that belong to the different classes.

Class marks

Class marks are the midpoints of the classes

½ (lower Limit + Upper Limit)

Class Boundaries

In grouped frequency distribution if gap exist between upper limit of the class and lower limit of the

succeeding class, then it is difficult to identify the class of some of the observation eg.

It is obtained by adding ½ d to the lower limit and subtracting ½ d fro the upper limit, where d is the gap

between upper limit of any class and lower limit of the succeeding class.

Magnitude

Difference between upper and lower class boundaries.

Eg. class 20-30, magnitude is 30-20 = 10

Continuous Distribution

When the total number of items and their range is large, discrete series cannot help in analysis.

Eg. Discrete series of age , 1-3, 4-6 where age between 3 to 4 is not considered

Here the variable is continuous, which can take any numeric value

Eg: Weights of students in a class, Age of the students, Monthly savings of a family etc

Relative Frequency Distribution

The relative frequency of a class is the fraction or proportion of the total number of data items belonging

to the class

A relative frequency distribution is a tabular summary of a set of data showing the relative frequency for

each class

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Steps in constructing a frequency distribution or frequency table

o Find the range of values in the data

o Decide the number of classes

o Decide the size of the class/class width

o Identify the number of observations in each class by using tally marks.

Graphs and charts

A graph should:

be simple and not too cluttered,

show data without changing the data‘s message,

clearly show any trend or differences in the data, and be accurate in a visual sense (if one chart value

is 15 and another 30, then 30 should appear to be twice the size of 15).

Column chart: used when comparing data values is important, and there are five or

fewer categories. When there are more than five, a dot chart should be used. Column graphs

generally display data better than horizontal bar graphs, and are preferred where possible.

Horizontal bar chart: used when category names are too long to fit at the foot of a

column. As with the column chart, it is more suited to five or fewer categories. When there are

more than five categories, use a dot chart.

Dot chart: It is used when displaying a comparatively large number of categories and

category order is unimportant. It is best used when portraying category values in descending

order of size.

Age pyramid: It is used when representing population age structure.

Pictograph: only used by professional graphic artists, although simple pictorial

presentations can be done by students. Care should be taken that comparisons are accurately

depicted.

Pie chart: It is used for simple comparison of a small number of categories. Values

should be markedly different, or differences may not be easily seen. Labelling sectors with their

actual values overcomes this problem. In some cases, where data values are close to each other, a

pie chart‘s message may be easily misunderstood. A column or horizontal bar chart may be more

useful.

Line chart: It is used for depicting data over time.

Histogram: this should be used with the same advice for a column graph, when depicting

continuous variable data.

Frequency polygon: this should be used when depicting continuous variable data and

you want to smooth out abrupt changes that may appear in a histogram.

Cumulative frequency curves or Ogives

The curve obtained by plotting cumulative frequencies is called a Cumulative frequency

curves or Ogives

Less than method

More than method

Measures of Central Tendency

Central tendency is a typical or representative score

Mean

155

Median

Mode

Measures of Dispersion

Mean, median and mode give locations of a data set‘s centre, but a data description will be more

comprehensive if you also know the spread.

Range

Mean Deviation

Inter-quartile Range

Quartiles

Variance and Standard Deviation

MODULE 2

Introduction to Probability

A probability provides a quantitative description of the likely occurrence of a particular event. Probability

is conventionally expressed on a scale from 0 to 1; a rare event has a probability close to 0, a very

common event has a probability close to 1.

Methods of Assigning Probabilities

Classical Probability

Relative Frequency Approach

Subjective Probability

A subjective probability describes an individual's personal judgement about how likely a particular event

is to occur. It is not based on any precise computation but is often a reasonable assessment by a

knowledgeable person.

Independent Events

Two events are independent if the occurrence of one of the events gives us no information about whether

or not the other event will occur; that is, the events have no influence on each other.

Union and Intersection of Events

A Venn diagram is used to describe visually the relationship between the sample space and possible

events within it; a contingency table shows frequencies or relative frequencies for two or more variables

at the same time.

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Definitions:

Mutually exclusive events are events such that if one event occurs, the other cannot occur.

Exhaustive events are events that include all possible outcomes of an experiment.

Addition Rules for Probability

When events are mutually exclusive:

P(A or B) = P(A) + P(B)

When events are not mutually exclusive:

P(A or B) = P(A) + P(B) - P(A and B)

Complementary Rule

If A and A are complementary events then

P(A ) = 1 P(A)

Conditional Probability

Let A and B be two events. The conditional probability of event A, given event B, denoted by P(A|B) is

defined as

P A BP A B

P B( )

( )

( ) provided that P(B) > 0.

Similarly, the conditional probability of B given A is defined as

P B AP A B

P A( )

( )

( ) provided that P(A) > 0.

Statistically Independence

Two events are independent when the occurrence or non-occurrence of one event has no effect on the

probability of occurrence of the other event.

Definition : Two events A and B are independent if and only if

P(A B) = P(A)P(B)

Multiplication Rules for Probability

Terms:

The marginal probability is the probability that a given event will occur. No other events are taken into

consideration.

157

Joint probability is the probability that two or more events will all occur.

Conditional probability is the probability that an event will occur given that another event has occurred or

will occur.

Independent events occur when the occurrence of one event has no effect on the probability that another

will occur.

Dependent events occur when the occurrence of one event changes the probability that another will occur.

Multiplication Rule When Events are Independent

P(A and B) = P(A) x P(B)

Multiplication Rule When Events are Not Independent (Dependent)

P(A and B) = P(A) x P(A| B)

Bayes' theorem

In probability theory, Bayes' theorem, often called Bayes' law or Bayes' rule, and named after Rev.

Thomas Bayes, shows how one conditional probability (such as the probability of a hypothesis given

observed evidence) depends on its inverse (in this case, the probability of that evidence given the

hypothesis).

Bayes gave a special case involving continuous prior and posterior probability distributions and discrete

probability distributions of data, but in its simplest setting involving only discrete distributions, Bayes'

theorem relates the conditional and marginal probabilities of events A and B, where B has a non-

vanishing probability:

Where,

P(A) is the prior probability or marginal probability of A. It is "prior" in the sense that it does not take

into account any information about B.

P(A|B) is the conditional probability of A, given B. It is also called the posterior probability because it is

derived from or depends upon the specified value of B.

P(B|A) is the conditional probability of B given A.

P(B) is the prior or marginal probability of B, and acts as a normalizing constant.

158

Probability distributions

Introduction

All the probability distributions can mainly classify under two categories, which are discrete probability

distributions and continuous probability distributions.

Discrete Probability Distributions

Binomial Distribution

Poisson Distribution

Hypergeometric Distribution

Continuous Probability Distributions

Normal Distribution

Important concepts:

1. Random variable: A random variable is a variable whose value is determined by the outcome of a

random experiment. A random variable can be discrete or continuous.

2. Discrete random variable: A random variable that assumes countable values is called a discrete random

variable.

3 Continuous random variable: A random variable whose values are not countable is called a continuous

random variable. A random variable that can assume any value contained in one or more intervals is

called a continuous random variable.

Terminology:

A probability distribution is the relative frequency distribution that should theoretically occur for

observations from a given population.

A random variable is a variable that can take on different values according to the outcome of an

experiment.

A discrete random variable is a random variable that can only take on certain values (generally the

integers) along an interval.

A continuous random variable is a random variable that can take on any value along an interval.

Nature/Characteristics of a Discrete Probability Distribution

The probability of x is always greater than or equal to 0 and less than or equal to 1.

The probability distribution includes all possible values (eg exhaustive)

The values of x are mutually exclusive (only one value can occur in any one experiment.

The sum of the probabilities of each outcome of the experiment add to one.

The Binomial distribution

The binomial distribution deal with consecutive trials, each of which has two outcomes, described as

"success" and "failure" or sometimes as 0 or 1.

159

Characteristics of Binomial Distribution:

There are two or more consecutive trials.

In each trial there are just two possible outcomes, usually denoted as success or failure.

The trials are independent.

Probability of exactly x successes in n trials:

P(X)= probability of exactly x success in n trials

n = number of trials, x = the number of successes, p= the probability of success in a single trial

(1-p) = q= the probability of failure in a single trial where P(success)+P(failure)=1

Mean of Binomial distribution

Variance of Binomial distribution

Poisson distribution

Poisson distribution is a discrete distribution. Typically, a Poisson random variable is a count of the

number of events that occur in a certain time interval or spatial area. For example, the number of cars

passing a fixed point in a 5 minute interval, or the number of calls received by a switchboard during a

given period of time.

A discrete random variable X is said to follow a Poisson distribution with parameter m, written X ~

Po(m), if it has probability distribution

where

x = 0, 1, 2, ..., n

m > 0.

The following requirements must be met:

the length of the observation period is fixed in advance;

the events occur at a constant average rate;

the number of events occurring in disjoint intervals are statistically independent.

The Poisson distribution has expected value E(X) = m and variance V(X) = m; i.e. E(X) = V(X) = m.

Normal Distribution

Normal distribution is a continuous probability distribution. Strictly, a Normal random variable should be

capable of assuming any value on the real line, though this requirement is often waived in practice. For

example, height at a given age for a given gender in a given racial group is adequately described by a

Normal random variable even though heights must be positive.

160

A continuous random variable X, taking all real values in the range is said to follow a Normal

distribution with parameters µ and if it has probability density function

We write

This probability density function (p.d.f.) is a symmetrical, bell-shaped curve, centered at its expected

value µ. The variance is .

The standard normal distribution is one with a mean of 0 and a standard deviation of 1. Standard scores,

also called z-scores or standardized data, are scores which have had the mean subtracted and which have

been divided by the standard deviation to yield scores which have a mean of 0 and a standard deviation of

1

The Normal Curve

The normal curve is not a single curve, rather it is an infinite number of possible curves, all described by

the same algebraic expression:

Exponential distributions

Exponential distributions are a class of continuous probability distributions. They describe the times

between events in a Poisson process, i.e. a process in which events occur continuously and independently

at a constant average rate.

Def: A continuous random variable X is said to follow exponential distribution if its probability density

function is f(x) = memx

for x varying between 0 &

Mean of exponential distribution = 1/m

Variance of exponential distribution= 1/m2

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MODULE 3

CORRELATION

Correlation is a measure of the relation between two or more variables. The measurement scales used

should be at least interval scales, but other correlation coefficients are available to handle other types of

data. Correlation coefficients can range from -1.00 to +1.00. The value of -1.00 represents a perfect

negative correlation while a value of +1.00 represents a perfect positive correlation. A value of 0.00

represents a lack of correlation. Correlation is a statistical technique that can show whether and how

strongly pairs of variables are related.

The main result of a correlation is called the correlation coefficient (or "r"). It ranges from -1.0 to +1.0.

The closer r is to +1 or -1, the more closely the two variables are related. If r is close to 0, it means there

is no relationship between the variables. If r is positive, it means that as one variable gets larger the other

gets larger. If r is negative it means that as one gets larger, the other gets smaller (often called an

"inverse" correlation).

Types of Correlation

1. Positive & Negative

2. Simple & Multiple

3. Partial & Total

4. Linear & Non-linear

Methods of studying correlation

1. Scatter diagram

2. Karl Pearson‘s coefficient of correlation

3. Spearman‘s Rank correlation coefficient

4. Method of least squares.

Scatter diagram or dot-diagram is a graphic device for drawing certain conclusions about the

correlation between two variables.

The scatter of the points as also the direction of scatter diagram reveals the nature and degree of

correlation between two variables

Karl Pearson‘s coefficient of correlation (r) (Pearson product moment correlation coefficient)

The quantity r, called the linear correlation coefficient, measures the strength and the direction

of a linear relationship between two variables. The linear correlation coefficient is sometimes

referred to as the Pearson product moment correlation coefficient in honor of its developer

Karl Pearson.

The mathematical formula for computing r is:

where n is the number of pairs of data.

Coefficient of Determination, r 2 or R

2 :

162

The coefficient of determination, r 2, is useful because it gives the proportion of

the variance (fluctuation) of one variable that is predictable from the other variable.

It is a measure that allows us to determine how certain one can be in making

predictions from a certain model/graph.

The coefficient of determination is the ratio of the explained variation to the total

variation.

The coefficient of determination is such that 0 < r 2 < 1, and denotes the strength

of the linear association between x and y.

The coefficient of determination represents the percent of the data that is the closest

to the line of best fit.

The coefficient of determination is a measure of how well the regression line represents the data. If the

regression line passes exactly through every point on the scatter plot, it would be able to explain all of the

variation. The further the line is away from the points, the less it is able to explain.

Coefficient of Correlation- Method of Least Squares

It has been pointed out that Karl Pearson's Coefficient of Correlation is based on the assumption that there

is linear relationship between the variables under study. One of the ways of studying this linear

relationship between x and y is by finding out the linear values of y corresponding to values of x. This is

done by the method of least squares.

(i) The equation of a straight line is

Y = a + bX

(ii) To find the values of a and b two normal equations are used. They are

∑ (Y) = n(a) + b (∑X) …… (i)

Z(XY) = a ∑ (X) + b ∑ (x2) ….. (ii)

(iii) By putting the relevant values of X and Y in the above equations, we can get the values of the

equation Y = a+bX

(iv) With this equation we can find the linear values of Y for given values of X.

(v) The Coefficient of Correlation is found out by dividing the standard deviation of the linear values

of Y by the standard deviation of the original values of Y.

Or r = Sy/σy Where Sy is the S.D. of the computed (linear) values of Y and is the S.D. of the original

values of Y.

Spearman's Rank Correlation

Spearman's Rank Correlation is a technique used to test the direction and strength of the relationship

between two variables. In other words, its a device to show whether any one set of numbers has an effect

on another set of numbers.

163

It uses the statistic R which falls between -1 and +1.

Regression Analysis

In general sense,it means the estimation or the prediction of the unknown value of one variable from the

known value of the other variable. It is a statistical device used to study the relationship between two or

more variables that are related.

In the words of M.M.Blair ―Regression analysis is a mathematical measure of the average relationship

between two or more variables in terms of the original units of the data”

Simple and Multiple Regressions

On the basis of number of variables, regression can be classified into Simple and Multiple Regressions.

When there are only two variables the regression equation obtained is called simple regression.

In multiple regression analysis there are more than two variables and we try to find out the effectof two or

more independent variables on one dependent variable. Let X,Y and Z be three variabnes. Let X andY be

the independent variables and Z be dependent variable. Then we use multiple regression analysis to study

the relative movem nt of Z, for a unit movement in X and Y.

REGRESSION EQUATIONS

The two regression equations are formulated to represent the two regression lines , namely:

The regression line of X on Y,

The regression line of Y on X

Regression line X on Y

To estimate the value of X for a given value of Y, we use the regression equation of X on Y. The equation

of regression line of X on Y is:

X-X = bxy (Y –Y )

Where,

bxy=regression coefficient of X on Y

bxy =n∑xy-(∑x∑y) n∑y2-(∑y)

Regression line Y on X

To estimate the value of Y for a given value of X, we use the regression equation of Y on X. The

equation of regression line of X on Y is:

Y- Y = byx (X-X)

Where,

byx=regression coefficient of Y on X

164

byx=n∑xy-(∑x∑y) n∑x2-(∑x)

2

Relation between Regression Coefficient and correlation Coefficient

byx =r.∑y/∑x

bxy =r.∑x/∑y

Properties of Regression Coefficients

The sign of both regression coefficients will be the same. That is, both will be positive or both

will be negative.

Product of the regression coefficients is the square of correlation coefficient,ie, byx x bxy = r2

if byx and bxy will have the same sign as ‗r‘.

When there is perfect correlation byx and bxy are reciprocals of each other.

Both the regression coefficients will not be greater than 1.

How to identify the two regression equations?

By supposing one of the equations as the regression of y on x and the other as x on y,we can obtain byx

and bxy. If the product of these two is numerically not greater than 1 then our assumption is true.

However, if byx and bxy numerically is greater than 1, then our assumption is wrong. Then we shall

conclude in the other way.

Multiple Regression

Y=a+b 1x1+b2x2

X1y=ax1+b1x12+b2x1x2

X2y=ax2+b1x1x2+b2x22

Then,

∑Y=na+b1∑x1+b2∑x2

∑X1Y=a∑x1+b1∑x12+b2∑x1x2

∑X2Y=a∑x2+b1∑x1x2+b2∑x22

Solve and obtain the values of a, b1 & b2

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MODULE 4

Time series analysis

• Time series is a technique which can be applied for the study of any activity whose behavior is

determined by time factor and where chronological fluctuation of data have effect on decisions.

• Def: ( Morris Hamburg): A time series is a set of observations arranged in chronological order.

• Time series can be mathematically defined by the functional relationship between the phenomena

or variable under study at a point of time, ie, Y = f(t).

• By reviewing historical data over time, we can better understand the pattern of past behavior of a

variable and better predict the future behavior.

Examples of time series data

1. Profits earned by a company for each of the past five years.

2. Workers employed by a company for each of the past 15 years.

3. Number of students registered for the MBA programme of an institute for each of the past five

years.

4. The weekly wholesale price index for each of the past 30 weeks.

5. Number of fatal road accidents in Kerala for each day for the past two months.

Components of a Time Series

1. Secular trend

It represents a gradual shifting of a time series to relatively higher (upward) or lower

(downward) values over a long period of time.

Trend is usually the result of changes in the population, demographics, technology,

and/or consumer preferences.

Eg : Upward tendency : Population, production & sales of certain products, prices,

incomes etc

Eg: Downward tendency : Deaths due to epidemics, infant mortality etc.

Uses of Trend analysis

Helps to get a general idea about the pattern of behavior under consideration. This helps

in business forecasting and planning future operations.

By isolating trend values from the given time series, we can study the short term and

irregular movements.

It enables us to compare two or more time series over different periods of time and to

draw important conclusions about them.

2. Seasonal variation

It represents any periodic, repeating pattern, less than one year in duration, in the time

series.

The pattern duration can be as short as an hour, or even less.

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Eg: Production & sales of agriculture products, sales and profits of jewellery or textile

shop, Customer arrivals in a hotel during a day etc.

Seasonal variation have two main causes

i. Climate in its widest sense

ii. Customs ( festival season )

Uses

Helps in planning future operations and formulating policy decisions regarding purchase,

production, inventory control, personnel requirements, selling & advertisements etc.

during various seasons of the year.

3. Cyclical variation

The wavelike movements with a period of oscillation more than one year

It represents any recurring sequence of points above and below the trend line lasting more

than one year.

They exhibit semi regular periodicity.

We assume that this component represents multiyear cyclical movements in the economy.

Eg : Economic prosperity, depression etc.

• Uses

• A study of the cyclical component helps managers to formulate policies aimed at

stabilising the level of business activity depending on whether it is prosperity, recession

or stabilisation period.

• Helps government to take measures to prevent the deterioration of mild recession to deep

depression and the swings of prosperity within limits without developing into storming

speculations.

4. Irregular variation

Also called random or erratic fluctuations.

It is the ―catch-all‖ factor that accounts for the deviation of the actual time series value

from what we would expect based on the other components.

It is caused by the short-term, unanticipated, and nonrecurring factors that affect the time

series. One cannot attempt to predict its impact on the time series in advance.

Eg : Wars, earthquakes, tsunami, strikes, lock outs etc can cause erratic fluctuations.

Mathematical models

1. Additive model

2. Multiplicative model

As most of the economic and business phenomenons conform to multiplicative model, additive

model is used rarely.

Measurement of Trend

• By inspection or estimate

• Freehand Curve Method

• Selected Point Method

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• By computation

• Semi-average Method

• Moving Average Method

• Least Square Method

Seasonal Variations

Why is It Necessary to Measure Seasonal Variation?

1. To make purchases profitably, ie. To buy when price is low and hold it for subsequent use or sale

when the price is high.

2. To adjust the data statistically for such variation.

Measurement of Seasonal Variations

1. Method of Simple averages

2. Ratio to Moving average method

3. Ratio to trend method

Trend and Seasonal Components in Forecasting

• Multiplicative Model - Steps

1. Calculating the Seasonal Indices

2. Deseasonalizing the Time Series

3. Using the Deseasonalized Time Series to Identify Trend

4. Seasonal Adjustments

5. Cyclical Component adjustments

Multiplicative Model

• Using Tt , St , and It to identify the trend, seasonal, and irregular components at time t, we describe

the time series value Yt by the following multiplicative time series model:

Yt = Tt x St x It

• Tt is measured in units of the item being forecast.

• St and It are measured in relative terms, with values above 1.00 indicating effects above the trend

and values below 1.00 indicating effects below the trend.

Calculating the Seasonal Indexes

1. Compute a series of n -period centered moving averages, where n is the number of seasons in the

time series.

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2. If n is an even number, compute a series of 2-period centered moving averages.

3. Divide each time series observation by the corresponding centered moving average to identify the

seasonal-irregular effect in the time series.

4. For each of the n seasons, average all the computed seasonal-irregular values for that season to

eliminate the irregular influence and obtain an estimate of the seasonal influence, called the

seasonal index, for that season.

Deseasonalizing the Time Series

• The purpose of finding seasonal indexes is to remove the seasonal effects from the time series.

• This process is called deseasonalizing the time series.

• By dividing each time series observation by the corresponding seasonal index, the result is a

deseasonalized time series.

• With deseasonalized data, relevant comparisons can be made between observations in successive

periods.

Using the Deseasonalizing Time Series to Identify Trend

• To identify the linear trend, we use the linear regression procedure; in this case, the data are the

deseasonalized time series values.

• In other words, Yt now refers to the deseasonalized time series value at time t and not to the actual

value of the time series.

• The resulting line equation is used to make trend projections, as it was earlier

Seasonal Adjustments

• The final step in developing the forecast is to use the seasonal index to adjust the trend projection.

• The forecast for period t, season s, is obtained by multiplying the trend projection for period t by

the seasonal index for season s.

Yt,s = Is[b0 + b1(t )]

Linear programming

In mathematics, linear programming (LP) problems are optimization problems in which the objective

function and the constraints are all linear.

History

Linear programming was a mathematical model developed during the second world war to plan

expenditures and returns such that it reduces costs to the army and increases losses to the enemy. It was

kept secret until 1947. Postwar, many industries found its use in their daily planning.

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The founders of the subject are George B. Dantzig, who published the simplex method in 1947, John von

Neumann, who developed the theory of the duality in the same year, and Leonid Kantorovich, a Russian

mathematician who used similar techniques in economics before Dantzig and won the Nobel prize in

1975 in economics. A breakthrough came after 1947 when Fiacco and McCormick introduced the Interior

Point Method in 1984.

Dantzig's original example of finding the best assignment of 70 people to 70 jobs still explains its success.

The computing power required to scan all the permutations to select the best assignment is vast and

impossible. He observed that it takes only a moment to find the optimum solution using the simplex

method, which is effectively noticing that a solution exists in the corners of the polygon described by the

equations formed from the given constraints.

Uses

Linear programming is an important field of optimization for several reasons. Many practical problems in

operations research can be expressed as linear programming problems. Certain special cases of linear

programming, such as network flow problems and multicommodity flow problems are considered

important enough to have generated much research on specialized algorithms for their solution. A number

of algorithms for other types of optimization problems work by solving LP problems as sub-problems.

Historically, ideas from linear programming have inspired many of the central concepts of optimization

theory, such as duality, decomposition, and the importance of convexity and its generalizations. Likewise,

linear programming is heavily used in microeconomics and business management, either to maximize the

income or minimize the costs of a production scheme. Some examples are food blending, inventory

management, portfolio and finance management, resource allocation for human and machine resources,

planning advertisement campaign etc.

Standard form

Standard form is the usual and most intuitive form of describing a linear programming problem. It

consists of the following three parts:

A linear function to be maximized Problem

e.g. maximize

constraints of the following form

e.g.

Non-negative variables

e.g.

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The problem is usually expressed in matrix form, and then becomes:

maximize

subject to

FORMULATION OF LPP

1. To write down the decision variables of the problem.

2. To formulate the objective function to be optimized (Maximized or Minimized) as a linear

function of the decision variables.

3. To formulate the other conditions of the problem such as resource limitation, market constraints,

interrelations between variables etc. as linear inequalities or equations in terms of the decision

variables.

4. To add the non-negativity constraint from the considerations that negative values of the decision

variables do not have any valid physical interpretation.

The objective function, the set of constraint and the non-negative constraint together form an LPP.

GRAPHICAL METHOD OF SOLVING LPP

Graphical method can be applied if the number of decision variables is two.

1. Consider each inequality constraint as equation

2. Plot each equation on the graph, as each will geometrically represent a straight line.

3. Mark the region. If the inequality constraint corresponding to that line is then the region

below the line lying in the first quadrant is shaded. For the inequality constraint sign, the

region above the line in the first quadrant is shaded. The points lying in common region will

satisfy all the constraints simultaneously. The common region thus obtained is called the

feasible region.

4. Take all the corner points in the feasible region. Substitute each point in the objective

function. The point/points which will optimize the objective function ( ie. Maximum value in

case of maximization and minimum in case of minimization problems.) will be the solution

point.

MODULE 5

Statistics in business forecasting

Statistical forecasting concentrates on using the past to predict the future by identifying trends, patterns

and business drives within the data to develop a forecast. This forecast is referred to as a statistical

forecast because it uses mathematical formulas to identify the patterns and trends while testing the results

for mathematical reasonableness and confidence.

Studying a problem through the use of statistical data analysis usually involves four basic steps.

1. Defining the Problem

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An exact definition of the problem is imperative in order to obtain accurate data about it. It is extremely

difficult to gather data without a clear definition of the problem.

2. Collecting the Data

We live and work at a time when data collection and statistical computations have become easy almost to

the point of triviality. One must start with an emphasis on the importance of defining the population about

which we are seeking to make inferences, all the requirements of sampling and experimental design must

be met.

Designing ways to collect data is an important job in statistical data analysis. Two important aspects of a

statistical study are:

• Population - a set of all the elements of interest in a study

• Sample - a subset of the population

Statistical inference is refer to extending your knowledge obtain from a random sample from a population

to the whole population. This is known in mathematics as an Inductive Reasoning. That is, knowledge of

whole from a particular. Its main application is in hypotheses testing about a given population.

The purpose of statistical inference is to obtain information about a population form information

contained in a sample. It is just not feasible to test the entire population, so a sample is the only realistic

way to obtain data because of the time and cost constraints. Data can be either quantitative or qualitative.

Qualitative data are labels or names used to identify an attribute of each element. Quantitative data are

always numeric and indicate either how much or how many.

For the purpose of statistical data analysis, distinguishing between cross-sectional and time series data is

important. Cross-sectional data re data collected at the same or approximately the same point in time.

Time series data are data collected over several time periods.

Data can be collected from existing sources or obtained through observation and experimental studies

designed to obtain new data. In an experimental study, the variable of interest is identified. Then one or

more factors in the study are controlled so that data can be obtained about how the factors influence the

variables. In observational studies, no attempt is made to control or influence the variables of interest. A

survey is perhaps the most common type of observational study.

3. Analyzing the Data

Statistical data analysis divides the methods for analyzing data into two categories: exploratory methods

and confirmatory methods. Exploratory methods are used to discover what the data seems to be saying by

using simple arithmetic and easy-to-draw pictures to summarize data. Confirmatory methods use ideas

from probability theory in the attempt to answer specific questions. Probability is important in decision

making because it provides a mechanism for measuring, expressing, and analyzing the uncertainties

associated with future events. The majority of the topics addressed in this course fall under this heading.

4. Reporting the Results

Through inferences, an estimate or test claims about the characteristics of a population can be obtained

from a sample. The results may be reported in the form of a table, a graph or a set of percentages. Because

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only a small collection (sample) has been examined and not an entire population, the reported results must

reflect the uncertainty through the use of probability statements and intervals of values.

INDEX NUMBERS

In business, managers are often concerned with the way in which values change over time:

prices paid for raw materials;

numbers of employees and customers,

annual income and profits, etc.

Index numbers are used to describe such changes. They are often concerned with money or manpower.

It is necessary in business to be able to understand and manipulate the different published index series, and

to construct your own index series.

Index numbers measure the changing value of a variable over time in relation to its value at some fixed

point in time, the base period, when it is given the value of 100.

Indexes are often used to show overall changes in:

a market,

an industry

the economy.

Price indexes

The most commonly quoted index is the Retail Price Index, the RPI.

The Retail Price Index is a monthly index indicating the amount spent by a 'typical household'.

It gives an aggregate value based upon the price of a representative selection of many hundred products and

services with weightings produced by the 'Family expenditure survey' as a measure of their importance.

The RPI shows price changes clearly and is applied when considering inflation for:

wage bargaining,

index linked benefits,

insurance values, etc.

The RPI is used as a benchmark against which other indexes are compared to show how the price of a

product changes over time, due to:

changing costs of raw materials;

variable supply and demand;

general inflation; etc.

Other Indexes

We can measure the way any variable changes over time:

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unemployment figures;

car registrations;

gross national product; etc.

Indexes can be calculated with any convenient frequency: yearly, monthly, daily, etc.

Examples of each are:

Yearly G.N.P. Gross National Product

Monthly Unemployment figures

Daily Stock market prices, etc.

Index values are measured in percentage points since the base value is always 100.

Changes over time are measured as either a percentage point change by subtraction

or as a percentage change.

percentage change = change in index number

original index number100 .

Types of Index Numbers

• An index can be classified as a price index, a quantity index, a value index, or a special-purpose

index.

Price index

A price index measures the changes in prices from a selected base period to another period.

• EXAMPLE: Producer Price Index - measures the average change in prices received in

the primary markets by producers of commodities in all stages of processing (1982=100).

Quantity index

A quantity index measures the changes in quantity consumed from the base period to another

period.

• EXAMPLE: Federal Reserve Board indexes of quantity output.

Value index

A value index measures the change in the value of one or more items from the base period to

the given period. The values for the base period and the given periods are found by PxQ.

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• EXAMPLE: the index of department store sales

Special-purpose index

A special-purpose index combines and weights a heterogeneous group of series to arrive at an

overall index showing the change in business activity from the base period to the present.

• EXAMPLE: The federal government puts out an index of leading economic indicators.

Construction of Index Numbers

• Simple Price Index, P : Let p0 be the base period price, and pt be the price at the selected or

given period. Thus, the simple price index is given by: P= (pt/p0) (100)

• An aggregate price index is developed for the specific purpose of measuring the combined change

of a group of items.

• An unweighted aggregate price index in period t, denoted by It , is given by

• With a weighted aggregate index each item in the group is weighted according to its importance,

which typically is the quantity of usage.

• Letting Qi = quantity for item i, the weighted aggregate price index in period t is given

by

• When the fixed quantity weights are determined from the base-year usage, the index is called a

Laspeyres index.

• When the weights are based on current period usage, the index is a Paasche index.

• Other methods used to calculate the index are, Fisher‘s which is the geometric mean of Laspeyers

& Paasche, Marshell - Edgeworth, Dorbish & Bowley , Waalche‘s and Kelly‘s methods

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DATA PROCESSING

Module -1

COMPUTER

The word computer comes from the word ―compute‖ which means ―to calculate‖.

Computer is an electronic device that can perform arithmetic calculations at high speed

A computer is also called a data processor because it can store,process and retrieve whenever

desired

The activity of processing data using a computer is called data processing.Data is the raw material

used as input and information is the processed data obtained as output of data

CHARACTERISTICS OF COMPUTER

a) Automatic

b) Speed

c) Accuracy

d) Diligence

e) Versatility

f) Power of remembering

g) No I.Q.

h) No feelings

Charles babbage is considered to be the father of modern digital computer.

FIVE BASIC OPERATIONS OF ACOMPUTER SYSTEM

Inputting

Storing

Processing

Outputting

Controlling

INPUT UNIT

It accepts instructions and datas from the outside world

It converts these data and instruction in computer acceptable form

OUTPUT UNIT

It accepts the results produced by the computer ,which are in coded form

It converts the coded form into human acceptable form

It supplies the converted results to outside world

STORAGE UNIT

Two types-primary storage and secondary storage

data and instructions required for processing (received from input device)

intermediate results of processing

final results of processing,before they are released to an output device

ARITHMETIC LOGIC UNIT(ALU)

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ALU of a computer system is the place where the actual executions of instructions take place during

processing operations.

One of the basic components of c.p.u.

CONTROL UNIT (CU)

CU of a system manages and coordinates the operations of all other components of the computer

system.CU acts as the central nervous system of the computer.

PROCESSOR

CONTROL PROCESSING UNIT(C.P.U.)

The brain of the computer.

Performs all the calculations and comparisons.

Activates and controls the operations of other units of the computer.

Two basic components are

a) control unit

b) arithmetic logic unit

No other single component of the computer determines its overall performance as much as the c.p.u.

REGISTERS

Special memory units called registers,are used to hold information on a temporary basis as the

instructions are executed and interpreted by the c.p.u.

PRIMARY MEMORY

RANDOM ACCESS MEMORY(RAM)

Primary sorage of a computer

RAM chips are volatile memory

READ ONLY MEMORY(ROM)

Rom- a non volatile memory chip

Data stored in a ROM can be read and used-they cannot be changed

ROMs are mainly used to store programs and data

CACHE MEMORY

It is commonly used for minimizing the memory processor speed mismatch.It is an extremely fast,small

memory CPU and the main memory whose access time is closer to the processing speed of the cpu.It is

used to temporarily store very active data and instructions during processing.

LIMITATIONS OF PRIMARY STORAGE

Limited capacity because the cost per bit of storage is high

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Volatile data stored in it is lost when electric power is turned off or interrupted.

SECONDARY STORAGE

Used in a computer to overcome the limitations of primary storage,Used to store large volumes of data on

a permanent basis..Also known as auxiliary memory.

INPUT DEVICES

Provides the means of communication between a computer and the outer world.Input devices are used to

enter data from outside world into primary storage.Output device supply the result of processing from

primary storage to the users.

KEYBOARD DEVICES

Keyboard allow the data entry into the computer system by pressing a set of keys

POINT AND DRAW DEVICES

Used to rapidly point to and select a graphic icon or menu item from multiple options displayed on the

Graphical User interface of a screen

MOUSE

Commonly Used In Personal Computers Ans Workstations

ELECTRONIC PEN

Pen based point and draw device.used to directly point it on the screen to select menu items or icons or

directly draw graphics on the screen

IMAGE SCANNER

Input device that translate paper document into an electronic format for storage in a computer.Electronic

format of a scanned image is its bitmap representation.

OPTICAL CHARACTER RECOGNITION DEVICE (OCR)

Character recognition software that converts the bitmap image of the characters to the equivalent ASCII

codes.

OPTICAL MARK READER (OMR)

Scanner capable of recognizing a pre specified type of mark of a pen or pencil,Very useful for grading

tests with objective type of tests.

BAR CODE READER

Scanner used for reading bar-coded data. Scanner uses laser beam to stroke across the pattern of bar code

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Central Processing Unit (CPU)

• CPU is the brain of the computer

• It is the part that interprets and carries out instructions.

• It controls and co-ordinates the operations of all other devices

CPU had two basic parts,

1. Control Unit and

2. Arithmetic and Logic

All the resources are controlled from the control unit.

The Control Unit guides the interpretation, flow and manipulation of all data and information

Arithmetic and Logic Unit (ALU)

All the arithmetic and logical operations are performed by the ALU.

When the CU gets an instruction that involves A / L Operations , it passes to the ALU.

The ALU performs the operation and the results are kept in registers or memory locations.

The Control Unit

PRINTER

• Devices for outputing

• printer-most common

• Video terminal

• Computer output microfilm-expensive

• Printer and microfilming are hard copy devices as data written using these PRINTER devices can

be read by people

PRINTER

2 types

Line printers

Drum printer

Chain printer

Serial character printers-dot matrix printer

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Line printer

• Line printers print a complete line at a time

• Printing speed varies from 150 lines to 2500 lines per minute.

Drum printers

• It has a cylindrical drum

• Charecters to be printed are embossed on its surface

• One set of characters are embossed on each line

CHAIN PRINTER

• it has a steel band on which character sets are embossed

• For printing a line all chars in that line are send from comp mem to printer buffer

• Band rotates at high speed

• As the band rotates, hammer is activated when the desired char as specified in the buffer comes in

front of it.

• Hammer will strike the carbon ribbon which is placed bw the chain ,paper and hammer

SERIAL PRINTERS

• Print one character at a time

• Here the print head consist of array of pins.

• Similar to type writers

• Normally slow(30-300 chars per sec)

Eg : dot matrix printer

NON IMPACT PRINTERS

Does not have hammers but traces the characters to be printed using ink or graphite particles

-ink jet printers

-laser printer

INK JET PRINTERS

• For getting sharp print of characters we are using inkjet printers

• It consist of a print head which has a no of small holes

• Individual holes can be heated by an IC resistor

• When resistor heats the ink near it vaporizes and is ejected the holes and make a dot on the paper.

• Printer has enough memory to print a page

• Latest inkjet printers allow colour printing

• Printing speed-120 chars per sec

• Used to print figures besides printing text

• Most inexpensive printer for home use

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LASER PRINTER

• Limitation of line and serial printers are the use of a print head and its mechanical move is slow

• In laser printers electronically controlled laser beam traces out the desired character to be printed

on a photoconductive drum.

• Drum attracts an ink toner on exposed area

DISPLAY DEVICES

A display device is a device for visual or tactile presentation of images (including text) acquired, stored,

or transmitted in various forms. Ex : Computer monitor, TV screen. Also known as an information

display

MONITOR TECHNOLOGIES:

CATHODE RAY TUBE (CRT)

LIQUID CRYSTAL DISPLAY (LCD)

PLASMA DISPLAY PANEL (PDP)

ORGANIC LIGHT EMITTING DIODE (OLED)

CRT MONITOR cathode-ray tube:

CRT: PRINCIPLE CRT display works on : Electron emission Electrons are emitted from the Cathode

tube. Phosphorescence It is the emission of visible light, when electron beam strikes Phosphor material.

LCD: Liquid Crystal Display

A Liquid Crystal Display is a thin, flat display device made up of any number of pixels arrayed in front of

a light source or reflector. It uses very small amounts of electric power, and is suitable for use in battery-

powered electronic devices

PLASMA TECHNOLOGY :

A plasma display panel (PDP) is essentially a collection of very small fluorescent-type lamps, each a few

tenths of a millimeter in size. The plasma display itself is a simple device consisting of two parallel glass

plates separated by a precise spacing of some tenths of a millimeter and sealed around the edges.

ORGANIC LIGHT EMITTING DIODES (OLEDs)

OLEDs: PRINCIPLE OLEDs are special because they are made up of organic polymer molecules

(otherwise known as plastic) allowing light to emit when a voltage is applied.

Scanner

A scanner is a device that captures images from photographic prints, posters, magazine pages, and similar

sources for computer editing and display. Scanners come in hand-held, feed-in, and flatbed types and for

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scanning black-and-white only, or color. Very high resolution scanners are used for scanning for high-

resolution printing, but lower resolution scanners are adequate for capturing images for computer display.

What is computer memory?

Computer memory refers to devices that are used to store data or programs (sequences of instructions) on

a temporary or permanent basic for use in an electronic digital computer. Computers represent

information in binary code, written as sequences of 0s and 1s.

What is RAM?

Random Access Memory (RAM) is the main 'working' memory used by the computer. When the

Operating system loads from disk when you first switch on the computer, it is copied into RAM.

The original IBM PC could only use up to 640 KB of memory (just over half a megabyte),

Whereas a modern computer can effectively house as much RAM as you can afford to buy.

What is ROM?

Read Only Memory (ROM) as the name suggests is a special type of memory chip which holds

Software which can be read but not written to. A good example is the ROM-BIOS chip, which Contains

read-only software. Often network cards and video cards also contain ROM chips.

SECONDARY STORAGE

Used in a computer to overcome the limitation of Primary Storage.

It has virtually unlimited capacity because the cost per bit of storage is very low.

It has an operating speed far slower than that of the primary storage.

Used to store large volume of data on a permanent basis.

Also known as Auxiliary Memory

Module -2

OPERATING SYSTEM

Operating system comes in the category of system software.

Definition:

– An operating system is an integrated set of programs that are used to manage the various

resources and overall operations of a computer system.

– Its prime objective is to improve the performance and efficiency of a computer system,

and increase facility, the ease with which the system can be used.

Functions of OS

Processor management: assigning processors to different tasks.

Memory management: allocation of main memory and storage to the system programs ,user

programs ,data etc

Input/output management: ie, coordinating and assigning of different input output devices while

one or more programs are being executed.

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File management: storage of files on various storage devices and the transfer of these files from

one storage device to another.

It allows the files to be modified through text editors.

Establishment and enforcement of a job priority system: it determines the order in which jobs are

executed in the system.

Automatic transition from job to job as directed by special control statements

Interpretation of commands and instructions

Establishment of data security and integrity

Production of error messages and error detecting aids.

Maintenance of internal time clock and log of system usage for all users.

Facilitates easy communication between the computer system and user.

Different computer programs are there for the operating system.

Out of these one program resides in main memory –resident program

Other programs stored on disk are called the transient program

The OS isolates the hardware from the user.

The user communicates with the OS, supplies application programs and input data, and receives

output data.

All the tasks performed by the OS are performed automatically—the user need not concerned

with what the OS is doing or how it handles tasks.

Efficiency of OS

The efficiency and overall performance of an OS are evaluated by 2 factors:

– Throughput: It is the total volume of work performed by a system over a given period of

time.

– Turnaround time: also called response time. It is time interval between, the time the user

submits a job to the system for processing, and the time he receives results.

Types of operating system

Batch processing system

Multi programming system

Time sharing system

Real time system

1. Batch operating system

During batch processing environment it requires grouping of similar jobs which consist of programs,

data and system commands.

This batch process does not need user interaction.

Some examples of such programs include payroll, forecasting, and statistical analysis programs.

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Users are not required to wait while the job is being processed. They can submit their programs to

operators and return later to collect them.

Process scheduling, memory management, file management and 1/0 management in batch processing

are quite simple.

Jobs are typically processed in the order of submission, that is, in the first come, first served basis.

Example

Job is to produce a corporation‘s monthly invoices, and the OS may have to execute a suite of

programs to produce the invoice...

– One process to accumulate the sales in each divisions

– Another process to determine the invoice amount

– Third process to update the company‘s accounts payable information...

– These programs operate on information contained in files rather than information

supplied by the interactive user.

So there is no need for user interaction while the job is running

Each user prepares a job and the jobs are collected into a batch and submitted to the computer.

After the computer has finished executing the batch, it produces a batch of output listing.

The output listing is given to user to reflect the result of running their job.

But it has two major disadvantages:

o Non-interactive environment

o Off-line debugging

Non-interactive environment:

Batch operating systems allow little or no interaction between users and executing programs.

The turnaround time taken between job submission and job completion in batch operating system

is very high.

Users have no control over intermediate results of a program. This type, of arrangement does not

create flexibility in software development.

Off-line debugging:

The second disadvantage with this approach is that programs must be debugged which means a

programmer cannot correct bugs the moment it occurs.

2. MULTI PROGRAMMING SYSTEMS

In multiprogramming two or more users programs are placed in main memory and executes them

concurrently.

The CPU switches from one program to another almost instantaneously.

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Since the operating speed of CPU is much faster than input/output operations, CPU can allocate

time to several programs instead of remaining idle when one is busy with I/O operations.

Thus in multiprogramming a number of programs are stored in main memory, where the CPU

executes a portion of one then a segment of another and so on.

Requirements of multiprogramming system:

1. LARGE MAIN MEMORY:

1. Main memory should be large enough to accommodate a good number of user programs,

also requires fast secondary storage device and fast CPU.

2. Memory protection:

1. Used to prevent a program in one memory partition from changing information in another

memory partition.

i. Memory partition feature is a combination of hardware and software which

prevents one program from addressing beyond the limits of its allocated storage

area.

3. Program status preservation:

1. Multiprogramming requires stopping of a program execution and then restarting its

execution after some time.

2. Thus before a program is suspended and the control is passed to another program ,

the values of all CPU registers should be stored in the memory area of that program

and then restored when control is ultimately returned to first program. This is known

as program status preservation.

4. Proper job mix:

1. A proper mix of I/O bound and CPU bound jobs is required to effectively overlap the

operations of CPU and I/O devices.

2. If a program is waiting for I/O operation, another program must have enough

computation to keep CPU busy.

Advantages:

a) Increased throughput

b) By using idle time of CPU for running other programs that are already residing in the

main memory.

c) Lower response time.

3. MULTI- PROCESSING SYSTEM

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Applicable in systems with more than one CPU.

Multiprocessing is used to describe interconnected computer configurations or computers with two or

more independent CPUs that have the ability to simultaneously execute several programs.

In such a system, instructions from different and independent programs can be processed at the same

instant of time by different CPU or the CPUs may simultaneously execute different instructions from

the same program.

Advantages:

a. Improves the performance of computer system

b. Efficient utilization of devices

c. Provides built-in back up

i. Ie, if one of the CPU fails, the other automatically takes over the complete

workload until repairs are made.

ii. Thus a complete breakdown of such systems is very rare.

4. TIME SHARING SYSTEM

It is a form of multiprogrammed Operating system which operates in an interactive mode with a quick

response time.

The user types a request to the computer through a keyboard.

The computer processes it and a response (if any) is displayed on the user's terminal.

A time sharing system allows the many users to simultaneously share the computer resources.

Since each action or command in a time-shared system take a very small fraction of time, only a little

CPU time is needed for each user.

As the CPU switches rapidly from one user to another user, each user is given impression that he has his

own computer, while it is actually one computer shared among many users

Memory management in time sharing system Provides for the protection and separation of user

programs.

Input/output management feature of time-sharing system must be able to handle multiple users

(terminals)

The term multiprogramming refers to the situation in which a single CPU divides its time between more

than one jobs.

Time sharing is a special case of multiprogramming, where a single CPU serves a number of users at

interactive terminals.

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Time sharing refers to the allocation of computer resources in a time dependent fashion to several

programs simultaneously.

Principal notion of a time sharing system is to provide a large number of user‘s direct access to the

computer for problem solving.

This is accomplished by providing a separate terminal to each user.

These entire terminals are connected to the main computer system.

Advantages:

i. Reduces CPU idle time

ii. Offers computing facility to small users

iii. Providing advantages of quick response

iv. Reduces the output of paper

v. Avoids duplication of software

vi. Disadvantages:

vii. Question of security

viii. Problem of reliability

ix. Problem of data communication

5. REAL TIME PROCESSING

• There are processes that require immediate response from the system like

– Stock market , finding the current product inventory etc

• In such cases real time processing system is needed.

• Real time means-immediate response from the computer.

– A system in which transaction accesses and updates a file quickly enough to affect the

original decision making is called real time system.

• Essential feature:

– Input data must be processed quickly enough so that further action can be taken based on

the results.

• Other words real time system is an online processing system with severe time limitations.

• Real time processing requires immediate transaction of input from all input originating terminals.

• Many remote stations are tied directly by high speed communication equipment to one or more

CPUs.

• Examples for real time processing system are:

– Air traffic control system

– Reservation system

– Systems that provide immediate updating of customer accounts like ATM

– Process control systems in nuclear reactor plants.

• Real time system should be highly reliable Because minimal downtime may cause danger to

several lives and cause financial loss.

– In an air traffic control system , several radar and computers keep track of air traffic in

each region,They must operate constantly, with minimum maintenanceAn unscheduled

downtime in this real time system may cost the life of several human beings.

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• In order to achieve the desired reliability, real time systems are normally duplicated, so that in the

event of a break down, back up facilities are immediately available for continuous operation of the

system.

• This makes some systems very expensive.

WINDOWS

Microsoft Windows is a series of software operating systems and graphical user interfaces

produced by Microsoft.

Microsoft first introduced an operating environment named Windows on November 20, 1985 as

an add-on to MS-DOS in response to the growing interest in graphical user interfaces (GUIs).

Microsoft Windows came to dominate the world's personal computer market, overtaking Mac

OS, which had been introduced in 1984.

As of October 2009, Windows had approximately 91% of the market share of the client operating

systems for usage on the Internet.

The most recent client version of Windows is Windows 7; the most recent server version is

Windows Server 2008 R2; the most recent mobile OS version is Windows Phone 7.

Early versions

Windows 1.0, the first version, released in 1985

1. It was announced in November 1983 (after the Apple Lisa, but before the Macintosh) under the

name "Windows", but Windows 1.0 was not released until November 1987

2. The shell of Windows 1.0 was a program known as the MS-DOS Executive.

3. Other supplied programs were Calculator, Calendar, Cardfile, Clipboard viewer, Clock, Control

Panel, Notepad, Paint, Reverse, Terminal, and Write. Windows 1.0 did not allow overlapping

windows. Instead all windows were tiled. Only dialog boxes could appear over other windows.

Windows 2.0

1. Released in October 1987 and featured several improvements to the user interface and memory

management

2. Windows 2.0 allowed application windows to overlap each other and also introduced more

sophisticated keyboard-shortcuts. It could also make use of expanded memory.

Windows 2.1

1. Released in two different flavours: Windows/386 employed the 386 virtual 8086 mode to

multitask several DOS programs, and the paged memory model to emulate expanded memory

using available extended memory.

2. The early versions of Windows were often thought of as simply graphical user interfaces, mostly

because they ran on top of MS-DOS and used it for file system services. Windows allowed users

to execute multiple graphical applications at the same time, through cooperative multitasking.

3. Windows implemented an elaborate, segment-based, software virtual memory scheme, which

allowed it to run applications larger than available memory: code segments and resources were

swapped in and thrown away when memory became scarce, and data segments moved in memory

when a given application had relinquished processor control.

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Windows 3.0 and 3.1

1. Windows 3.0, released in 1990 2. Windows 3.0 (1990) and Windows 3.1 (1992) improved the design, mostly because of virtual

memory and loadable virtual device drivers (VxDs) which allowed them to share arbitrary

devices between multitasked DOS windows.

3. Also, Windows applications could now run in protected mode (when Windows was running in

Standard or 386 Enhanced Mode), which gave them access to several megabytes of memory and

removed the obligation to participate in the software virtual memory scheme.

4. They still ran inside the same address space, where the segmented memory provided a degree of

protection, and multi-tasked cooperatively. For Windows 3.0, Microsoft also rewrote critical

operations from C into assembly.

Windows 95, 98, and Me

1. Windows 95, released in 1995.Windows 95 was released in August 1995, featuring a new user

interface, support for long file names of up to 255 characters, and the ability to automatically

detect and configure installed hardware (plug and play).

2. It could natively run 32-bit applications, and featured several technological improvements that

increased its stability over Windows 3.1. There were several OEM Service Releases (OSR) of

Windows 95, each of which was roughly equivalent to a service pack.

3. Microsoft's next release was Windows 98 in June 1998. Microsoft released a second version of

Windows 98 in May 1999, named Windows 98 Second Edition (often shortened to Windows 98

SE).

4. In September 2000, Microsoft released Windows Me (Me standing for Millennium Edition),

which updated the core from Windows 98 but adopted some aspects of Windows 2000 and

removed the "boot in DOS mode" option. It also added a new feature called System Restore,

allowing the user to set the computer's settings back to an earlier date.

Windows NT family

The NT family of Windows systems was fashioned and marketed for higher reliability business use.

1. The first release was NT 3.1 (1993), numbered "3.1" to match the consumer Windows version,

which was followed by NT 3.5 (1994), NT 3.51 (1995), NT 4.0 (1996), and Windows 2000

(2000).

2. Microsoft then moved to combine their consumer and business operating systems with Windows

XP, coming in both home and professional versions (and later niche market versions for tablet

PCs and media centres);

3. They also diverged release schedules for server operating systems. Windows Server 2003,

released a year and a half after Windows XP, brought Windows Server up to date with MS

Windows XP.

4. After a lengthy development process, Windows Vista was released toward the end of 2006, and

its server counterpart, Windows Server 2008 was released in early 2008.

5. On July 22, 2009, Windows 7 and Windows Server 2008 R2 were released as RTM (release to

manufacturing). Windows 7 was released on October 22, 2009.

Spread Sheet

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A spreadsheet is a computer applications that simulates a paper, accounting worksheet. It displays

multiple cells that together make up a grid consisting of rows and columns each cell containing

alphanumeric text, numeric values or formulas. Spreadsheets are frequently used for financial information

because of their ability to re-calculate the entire sheet automatically after a change to a single cell is

made.

Range

A cell on the same sheet is usually addressed as :=A1

A cell on a different sheet of the same spreadsheet is usually addressed as :

=SHEET2!A1

Instead of using a named range of cells a range reference can be used. Reference to a range of cells is

typically of the form (A1:A6)

Which specifies all the cells in the range all through A6. A formula such as ―=Sum (A1 :A6)‖ would add

all the cells specified and put the result in the cell containing the formula itself.

Formulas

A formula defines how the content of that cell is to be calculated from the contents of any other cell, each

time any cell is updated.

A formula identifies the calculation needed to place the result in the cell it is contained within. A cell

containing a formula therefore has to display components the formula itself and the resulting value. The

formula is normally only shown when the cell is selected by clicking the mouse over a particular cell;

otherwise it contains the result of the calculation.

A formula assigns value to a cell or range of cells and typically has the format:

=expression

Where expression consists of :

Values, such as 2,9,14 or 6.67E-11;

References to other cells such as eg: A1 for a single cell or B1:B3 for a range.

Arithmetic operators, such as +,-,*,\ and others

Relational operators, such as >=, < and others ;

Functions, such as SUM(), TAN() and many others.

The available options for valid formulas depend on the particular spreadsheet implementation but in

general most arithmetic operations and quite complete nested conditional operations can be performed by

most of todays commercial spreadsheet.

A formula may contain a condition (or nested conditions) with or without an actual calculation – and is

sometimes used purely to identify and highlight errors. In the example below it is assumed that the sum of

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a column of percentages (All through A6) is tested for validity and an explicit message put into the

adjacent right- hand side cell = IF(SUM(A1:A6)>100,more than 100%,SUM (A1:A6))

FUNCTIONS

Spreadsheets usually contain a number of supplied functions, such as arithmetic operations trigonometric

functions, statistical functions and so on. In addition there is a provision for user defined functions. In

Microsoft excel these functions are defined using visual basic for applications in the supplied visual basic

editor.

EXCEL FUNCTIONS

Excel functions include

Database functions

Logical functions

Date functions

Text functions

Mathematical functions

LOGICAL FUNCTION

• IF(logical_test , value_if_true , [value_if_false])

• IFERROR(value,value_if_error)

• AND(logical1, [logical2], ...)

• OR(logical1,logical2,...)

ARITHMETIC FUNCTIONS

• EVEN(number)

• LOG(number,base)

• FACT(number)

• POWER(number,power)

TEXT FUNCTIONS

• BAHTTEXT(number)

• CHAR(number)

• CONCATENATE (text1,text2,...)

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• LEN returns the number of characters in a text string.

• TRIM(text)- Removes all spaces from text except for single spaces between words

Database function (database, field, criteria)

• Database is the range of cells that makes up the list or database. A database is a list of related

data in which rows of related information are records, and columns of data are fields. The first

row of the list contains labels for each column.

• Field indicates which column is used in the function. Enter the column label enclosed between

double quotation marks, such as "Age" or "Yield," or a number (without quotation marks) that

represents the position of the column within the list: 1 for the first column, 2 for the second

column, and so on.

• Criteria are the range of cells that contains the conditions you specify. You can use any range

for the criteria argument, as long as it includes at least one column label and at least one cell

below the column label in which you specify a condition for the column.

DAVERAGE Returns the average of selected database entries

DCOUNT Counts the cells that contain numbers in a database

DCOUNTA Counts nonblank cells in a database

DGET Extracts from a database a single record that matches the specified criteria

DMAX Returns the maximum value from selected database entries

DMIN Returns the minimum value from selected database entries

DPRODUCT

Multiplies the valuesin a particular field of records that match the criteria in a

database

DSTDEV Estimates the standard deviation based on a sample of selected database entries

DSTDEVP

Calculates the standard deviation based on the entire population of selected

database entries

DSUM

Adds the numbers in the field columonm records in the database that match the

criteria

DVAR Estimates variance based on a sample from selected database entries

DVARP Calculates variance based on the entire population of selected database entries.

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MACROS IN WORD

• A macro is a shortcut to a task you do repeatedly.

• Think about the Centre align operation. You first highlight the word you want centred, then click

the centre icon in the toolbar. This is a macro. It's the short way of performing the centre task.

• Another example: keyboard based macro-edit cut(ctrl+x)

STEPS IN MACRO

• Create a macro

• Record a macro

• Stop recording

• View a macro

MAIL MERGE

• Quite simply, it is a way of placing content from a spreadsheet, database, or table into a Microsoft

Word document

• Mail merge is ideal for creating personalized form letters or labels instead of editing the original

letter several times to input different personalized information.

• this can save a lot of time as well as worry about not changing all of the information for the new

recipient.

• In order to create a mail merge, two documents are needed: a Word document and a file with the

data or records.

• This file can take many forms, such as an Excel spreadsheet, a database, or even another Word

document that has a table in it.

STEPS IN MAIL MERGE:

Start mail merge

Select the recipients

Insert merge field

Preview

MODULE :3

SQL is a standard language for accessing and manipulating databases.

SQL stands for Structured Query Language

SQL lets you access and manipulate databases

SQL is an ANSI (American National Standards Institute) standard

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RDBMS stands for Relational Database Management System.

RDBMS is the basis for SQL, and for all modern database systems like MS SQL Server, IBM

DB2, Oracle, MySQL, and Microsoft Access.

The data in RDBMS is stored in database objects called tables.

A table is a collections of related data entries and it consists of columns and rows.

The PRIMARY KEY uniquely identifies each record in a database table.

Primary keys must contain unique values.

A primary key column cannot contain NULL values.

Each table should have a primary key, and each table can have only ONE primary key.

SQL FOREIGN KEY Constraint

A FOREIGN KEY in one table points to a PRIMARY KEY in another table.

SQL COMMANDS:

SQL can be divided into two parts:

The Data Manipulation Language (DML) and the

Data Definition Language (DDL).

DML COMMANDS:

• SELECT - extracts data from a database

UPDATE - updates data in a database

DELETE - deletes data from a database

INSERT INTO - inserts new data into a database

DDL COMMANDS:

The DDL part of SQL permits database tables to be created or deleted. It also define indexes

(keys), specify links between tables, and impose constraints between tables. The most important

DDL statements in SQL are:

CREATE DATABASE - creates a new database

ALTER DATABASE - modifies a database

CREATE TABLE - creates a new table

ALTER TABLE - modifies a table

DROP TABLE - deletes a table

CREATE INDEX - creates an index (search key)

DROP INDEX - deletes an index

SYNTAX:

SQL CREATE TABLE Syntax

CREATE TABLE table_name

(

column_name1 data_type,

column_name2 data_type,

column_name3 data_type,

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....

)

INSERT INTO table_name VALUES (value1, value2, value3,...)

SQL SELECT Syntax

SELECT column_name(s)FROM table_name

SELECT * FROM table_name

SQL ALTER TABLE Syntax

To add a column in a table, use the following syntax:

ALTER TABLE table_name ADD column_name datatype

To delete a column in a table, use the following syntax:

ALTER TABLE table_name DROP COLUMN column_name

To change the data type of a column in a table, use the following syntax:

ALTER TABLE table_name MODIFY COLUMN column_name datatype

The DELETE Statement

The DELETE statement is used to delete rows in a table.

DELETE FROM table_name WHERE some_column=some_value

The DROP TABLE Statement

The DROP TABLE statement is used to delete a table.

DROP TABLE table_name

SQL UPDATE Syntax

UPDATE table_name

SET column1=value, column2=value2,...

WHERE some_column=some_value

The GROUP BY Statement

The GROUP BY statement is used in conjunction with the aggregate functions to group the result-set by

one or more columns.

SQL GROUP BY Syntax

SELECT column_name, aggregate_function(column_name)

FROM table_name

WHERE column_name operator value

GROUP BY column_name

The ORDER BY Keyword

The ORDER BY keyword is used to sort the result-set by a specified column.

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The ORDER BY keyword sort the records in ascending order by default.

If you want to sort the records in a descending order, you can use the DESC keyword.

SQL ORDER BY Syntax

SELECT column_name(s)

FROM table_name

ORDER BY column_name(s) ASC|DESC

INDEXING:

• An index is a structure that provides faster access to the rows of a table based on the values of one

or more columns.

• The index stores data values and pointers to the rows where those data values occur.

• In the index the data values are sorted and stored in the ascending or descending order.

• So the RDBMS can quickly search the index to find a particular data value, and hence the row

associated with it.

• Indexes are created using the CREATE INDEX statement.

• Syntax is:

• Creates an index on a table. Duplicate values are allowed:

o CREATE INDEX index_name

ON table_name (column_name)

• 3 types of indexes are there:

o Composite index: indexes involving more than one column.

o Unique index : indexes that prevent duplication of data

o Clustered index: where indexes are sorted both logically and physically.

• An index is a logical reorganization of the data in a table.

• The record numbers do not change; the index just allows the table to be viewed in an order other

than record number order.

• A sort is a physical reorganization of the records in a table.

SQL FUNCTIONS

• SQL Scalar functions

• SQL scalar functions return a single value, based on the input value.

• Useful scalar functions:

• UCASE() - Converts a field to upper case

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• LCASE() - Converts a field to lower case

• MID() - Extract characters from a text field

• LEN() - Returns the length of a text field

• ROUND() - Rounds a numeric field to the number of decimals specified

• NOW() - Returns the current system date and time

• FORMAT() - Formats how a field is to be displayed

Module-4

Topology

The way devices on the network are physically connected is known as topology or The physical layout or

the way in which network connections are made is called a topology.

Types of Topology

Bus Topology

In bus topology, all computers or network nodes are connected to a common communication medium.

This medium is a central wire called a ―bus‖. In this data & address move from one end of the network to

the other. Bus topology uses coaxial cable as a medium.

Star Topology

In star topology all the cables run from the computers to a central location, where they all are connected

to a device called “HUB”. HUB provide a central connection point for all computers across a

network.

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Data Flow

Multiple computers can send and receive data at the same time.Each computer sends and receives data

using its own cable.

Ring Topology

Ring topology looks like the bus topology with connected ends. Each computer is connected to the next

computer in the form of ring. The message flow in one direction. It is also called endless topology.

Mesh Topology

A mesh network is a local area network (LAN) that employs one of two connection arrangements, full

mesh topology or partial mesh topology.In the full mesh topology, each node (workstation or other

device) is connected directly to each of the others.

Switching techniques

Circuit switching

It is the simplest method of data communication. Here a dedicated physical path is established between

the sender and receiver by means of the nodes.

Message switching

Message is a unit of information and can be of any length. In this method if a station wishes to send a

message to another station it appends the destination address to the message .Then it is transmitted from

source to destination by broadcasting or by store –and-forward method.

Packet switching

Works similar to message switching. Here routing is done on packet basis not on message basis. Message

is split into packets of a fixed size.

Each packet contains

• A part of message

• Destination and source address

• Control information

• Message number etc.

Local Area Network (LAN)

A local area network (LAN) is a computer network covering a small physical area, like a home, office,

or small groups of buildings, such as a school, or an airport. Twisted pair cabling, and Wi-Fi are the two

most common technologies currently in use. A local area network (LAN) is a group of computers and

associated devices that share a common communications line or wireless link.

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Wireless Area Network (WAN)

A WAN spans a large geographic area, such as a state, province or country. WANs often connect multiple

smaller networks, such as local area networks (LANs) or metro area networks (MANs). The world's most

popular WAN is the Internet. WANs generally utilize different and much more expensive networking

equipment than LANs.

TRANSMISSION MEDIA

Conducted or guided media

use a conductor such as a wire or a fiber optic cable to move the signal from sender to

receiver

twisted pair wires- Consists of two insulated copper wires arranged in a regular

spiral pattern to minimize the electromagnetic interference between adjacent

pairs

coaxial cables- Has an inner conductor surrounded by a braided mesh

Both conductors share a common center axial, hence the term ―co-axial‖

optical fiber- Relatively new transmission medium used by telephone companies

in place of long-distance trunk lines

Require a light source with injection laser diode (ILD) or light-emitting diodes

(LED)

Wireless or unguided media

use radio waves of different frequencies and do not need a wire or cable conductor to

transmit signals

microwave communication- At microwave frequencies the waves can‘t bend or pass

obstacles. So micro wave transmission is in line of sight.

satellite communication- Communication satellite is a microwave relay station in space..can

relay signals over long distances.

broadcast radio- radio is omnidirectional and microwave is directional

Radio is a general term often used to encompass frequencies in the range 3 kHz to 300 GHz.

Infrared- Uses transmitters/receivers (transceivers) that modulate noncoherent infrared light.

Transceivers must be within line of sight of each other (directly or via reflection ).

Infrared does not penetrate walls.

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COMMUNICATION PROTOCOL

In data communication , a protocol is a set of rules and procedures established to control transmission

between two points ,so that the receiver can properly interpret the bit stream transmitted by the sender.

• Functions of data transmission protocol:

– Data sequencing

– Data routing

– Flow control

– Error control

– Precedence and order of transmission

– Connection establishment

– Data security

– Log information

• The different layers in OSI Protocol

• Physical layer

• Data link layer

• Network layer

• Transport layer

• Session layer

• Presentation layer

• Application layer

MODULE 5

World Wide Web and Business Community

Internet

E-Mail with TCP/IP

World Wide Web and Business Community

www represents the networking of internetworking resources and collection of internet sites.The main

application areas where www is attracting businesses are as follows,

1.In the field of publicity,marketing and advertising.

2.In the field of online setting.

3.In the field of research and development.

4.In the field of communication.

5.In the field of business collaboration.

The purpose of websites

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The majority of the sample companies use their websites to publish information about their companies

and their Products or services without any price information.

Use of multimedia

The main attraction of www for the business community is to develop containing graphics and

audio/video clips to make it effective.42 percent of the sample companies use text, graphics and

photographs in their web pages and 27 percent use of sound or video in addition to text, graphics and

photographs.

E-Mail

E-Mail short for electronic mail enables you to send your correspondence instantaneously anywhere in

the world via the internet.

Use of E-Mail

1 .No e-mail address is advertised on the website

2. E-mail enquiries are encouraged only about the web pages themselves.

3. E-mail enquiries are encouraged in relation to information about the company or its products or

services.

4. Order for products or services are sent via e-mail.

5. Credit card information is sent over the internet via e-mail.

Internet

Features

1. World Wide Web

2. Direct communication

3. Round the clock availability

4. Central repository of data

5. Search engines

6. Advertisement

7. E-Commerce

8. Distance learning

9. BBS and new services

10. Wide area networks

11. Shareware

12. software

Key concepts

1. Direct communication

2. Online shopping

3. Distance education

4. Knowledge base

5. Banking

6. Travel

7. Bill payments

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Internet protocols

There are number of internet protocols used. The most commonly used protocols are:

1. Transmission control protocol/Internet protocol(TCP/IP)

2. Hyper Text Transfer Protocol(HTTP)

3. File Transfer Protocol(FTP)

4. Telnet

TCP/IP is the communication protocol used to connect hosts on the internet. It is a collection of

communication protocols, the main ones being TCP and IP.TCP protocol works in different layers. They

are,

1. Application layer

2. Transport layer

3. Internet layer

4. Network interface layer

Characteristics

1. TCP enables data flow for monitoring

2. It avoids network saturation

3. It makes data to contain variable length segment which returns to the IP protocol

4. It makes data multiplex where information coming from distinct sources can be

circulated.

5. It enables successful communication between the client and server.

TCP is layered over the following functionality:

1. Streams

2. Reliable delivery

3. Network adaptation

HTTP

HTTP is a protocol that transfers files using the internet. It runs on top TCP/IP that forms the foundation

protocol of the internet. It assists in defining how messages are transmitted and formatted, and specifies

the actions that web browsers and web servers must engage in while responding to the issued commands.

FTP

FTP is an application protocol that allows files to be exchanged between computers through the internet.

It is the simplest protocol for downloading/uploading a file from/to a server, and is therefore also the most

commonly used one.

Telnet

Telnet is a protocol that allows you to access a remote computer provided you havebeen given the

permission to do so. It is typically referred to as ‗remote login‘. Telnet is based on a different concept

from HTTP and FTP.HTTP and FTP enable requests for specific files to be made only from remote

computers;with tennet on the other hand ,you can log in as a regular user on a remote machine with the

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privilage that may have been granted to you on that computer with regard to accessing specific data and

applications.

IP Address structure

An internet protocol is a unique address,which provides a universal address across the network.The IP

address consists of four parts and each is separated by a dot.Format of IP address is as follows:

xxx.xxx.xxx.xxx

Each XXX is a number between 0 and 255 stored in 8 bits and can have 2* values.The entity contains

two components as network identifier and host identifier

E-MAIL with TCP/IP

When both sender and receiver are connected to the mail server via a LAN or a WAN, we need two UAs,

two pairs of MTAs (client and server), and a pair of MAAs (client and server). This is the most common

situation today.

The user agent (UA) provides service to the user to make the process of sending and receiving a message

easier.

There are 2 types of user agents :

Command driven and GUI based

The actual mail transfer requires message transfer agents (MTAs). The protocol that defines the MTA

client and server in the Internet is called Simple Mail Transfer Protocol (SMTP).

The actual mail transfer is done through message transfer agents(MTA).

To send a mail ,a system must have a client MTA

To receive a mail the system must have the server MTA

The formal protocol that defines the client and server MTA in the internet is called Simple Mail

Transfer Protocol.(SMTP)

SMTP is used in 2 times

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Between the sender and senders mail server

Between the two mail servers

SMTP simply defines how commands and responses must be send back and forth.

SMTP uses commands and responses to transfer messages between an MTA client and MTA

server.

Each command or reply is terminated by a two character(carriage return and line feed )end-of-line

token.

Commands are sent from the client to the server.

It consist of a keyword followed by zero and more arguments .

SMTP defines 14 commands.

First 5 are mandatory

The process of mail transfer occur in 3 phases:

Connection establishment

Mail transfer

Connection termination

The third stage of mail delivery uses a message access agent; the client must pull messages

from the server. Currently two message access protocols are available: Post Office Protocol,

version 3 (POP3) and Internet Mail Access Protocol, version 4.

Pop3 is simple and limited in functionality

Client pop3 software is installed on recipient computer

Server pop3 software is installed on mail server

Mail accesss starts with the client,

The client opens a connection to the server

It then sends its username and password to access the mailbox

User can then list and retrieve the mail messages ,one by one .

Imap4 is similar to POP3 ,but more powerful and complex

Features:

User can check the email header prior to downloading

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User can search the contents of the email for a specific string of characters prior to

downloading

User can partially download email.

Some websites such as Hotmail and Yahoo provide email service to anyone who accesses the site. Mail

transfer and retrieval requires the use of HTTP.

Here the transfer of mail from the sender to their mail server is through HTTP

Transfer between two mail server is through SMTP

Transfer of mail from the receiver‘s mail server to the receiver is through HTTP

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INDIAN ETHOS AND VALUES

Module One

Indian Ethos in Context

Introduction

Any serious review of management values in view of Indian ethos raises many intriguing challenges.

Perhaps the most profound among them is to clarify the notion and the characterizing features of Indian

ethos. As the opening chapter of this work, the following pages mean to accomplish this task. It is true

that many contemporary authors prefer to highlight and draw from Indian ethos in management studies.

The academic and professional value of this attempt can never be underestimated. However, seldom do

many authors bother to clarify the notion of Indian ethos; rather, they take it for granted. Instead of a

consistent analysis, often certain descriptions and sparse reference to ancient sources are given to

characterize Indian ethos. But this approach may not satisfy contemporary Indian minds who are trained

basically in and through discursive reasoning.

Lack of a strictly systematic treatment of Indian ethos could be partially due to the traditional Indian way

of reasoning. It seems that Indian psyche does not entertain the notion of the unity of time and place in an

Aristotelian or Western academic style. Notions of unity and concentration on one kind of action may

look foreign to our age old tradition. For example, in the great epic Mahabharata, every now and then

characters change, stories change, some rishiappears, sub-plots develop in a way disturbing the narrative

continuity of space and time.In the Ajanta paintings and similarly in the Jatakas,which form a part of

Buddhist canonical literature, also there is no unity in the canvas of time and place. Therefore, in our

contemporary context, in order to facilitate discussion on management values, we need to depend more on

a discursive and logical style, but fully subscribing to the wisdom and wit of Indian ethos.

The facet of Indian ethos portrayed in this chapter represents only one version of the same. Definitely,

there is scope for different accounts and analysis of Indian ethos. This possibility reveals the richness and

vastness of what we try to grasp in terms of Indian ethos. As it will be pointed out below, this situation is

perfectly in harmony with the nature of Indian culture and ethos which allowed respectable space for

heterogeneity of thinking, analysis, appreciation and belief systems.

I Indian Ethos

Indian ethos is a fluid concept. Ethos means the guiding beliefs, standards, values and ideals that

characterize a group, a nation, or an ideology. Ethos represents the distinguishing character,

sentiment, moral nature, or guiding beliefs of a person, group, or institution.It refers to the spirit

which motivates their ideas and customs. The ethos of a culture manifests itself through

theirpractices, customs and beliefs. It describes their fundamental character or spirit. For

instance, basically the ethos of the American people is that it is a free society. Ethos is not simply

the moral beliefs of persons or the cultural assumptions of a country. Rather, ethos exercises a binding

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force on individuals belonging to a particular socio-cultural context, directing their overall attitude and

worldview.

Ethics and ethos are not mutually alien themes. In fact, the word ―ethics‖ is derived from the Greek word

ethos, meaning ―customary‖ or ―conventional.‖ In the preliminary sense of ethos, to be ethical means to

conform yourself to what is typically done, to obey the conventions and rules of one‘s society and

religion. Ethos suggests what is actually valued in a culture; but ethics suggests what ought to be valued

often irrespective of cultural and national identity. It is the task of normative ethics to reflect on what

should be done, rather than what is typically done. It is true that what is morally done can also be part of

ethical discourse qualifying it be called descriptive ethics.

Complex Textures of Indian Ethos

Perceptions of culture, history, identity and ethos of any country are necessarily subjective and

selective. There is no absolutely detached account of events; hence, there is no ‗scientific‘ history as

such. Same is the case with regard to Indian history also. India is an immensely diverse country with

many distinct traits, vastly disparate convictions, widely divergent customs and pluriformsocio-religious

and political viewpoints. India has absorbed to its heart many strands of different cultures. In spite of

and behind these there divergent socio-cultural, religious and political pluriformity,there remains a

certain national/regionalconsciousness which seems to indicate the presence and force of its ethos.

Having said this, it seems necessary to refer to two common misperceptions of Indian ethos:first, Indian

ethos is essentially religious,and especially Hindu ethos;secondly, Indian ethos consists in its

contradistinction with the Western ethos.

Indian Ethos: Hindu Ethos?

Once Hindu meant all the people living on this side of the Sindhu/Indus river. The word Hindu is the

(mis)pronunciation of the Sanskrit word Sindu by the Persians, the historic local appellation for the

Indus River in the northwestern part of the Indian subcontinent.In the fourth century BCE, when the

Greeks conquered Persian empire, Hind became India. Originally, Hindu was a secular term which was

used to describe all inhabitants of the Indian subcontinent (or Hindustan) irrespective of their religious

affiliation. To identify Indian ethos as overwhelmingly religious ordeeply anti-scientific involves

significant oversimplification of India‘s past and present. But India has a long tradition of heterodoxy,

openness, and reasoned discourse. In its religious core, India has been inclusive, tolerant, and

multicultural. Not all the great figures who decided the destiny of India at crucial epochs of its long

history were Hindus following its Varna system. For example, Chandragupta Mauryawas not a Hindu.

He was from central India, from a tribe and he became the great Kshatriya.It shows that the Varna

system was also flexible. Even Shivaji was not a Kshatriya. He was from a lower caste but he became

king.

Indian identity and ethos could be traced back to a variety of undeniable sources such as the Vedas, the

Upanishads, the Buddhists and the Carvakas, the Ramayana and the Mahabharata, the intellectual

exchanges in the first millennium between India and China, the liberal regimes of Ashoka and Akbar,

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the egalitarianism of Hindu Bhakti and Muslim Sufism, and in contemporary times the genius of men

like Gandhi, Tagore and Aurobindo.

In the opinion of AmartyaSen, Indians of any religious faith and background should have solid reasons to

celebrate their historical and cultural association with for example Nagarjuna‘s penetrating philosophical

arguments, Harsa‘s philanthropic leadership, Maitreyi‘s or Gargi‘ssearching questions, Carvaka‘s

reasoned scepticism, Aryabhata‘s astronomical and mathematical departures, Kalidasa‘s dazzling poetry,

Sudraka‘s subversive drama, AbulFazl‘s astounding scholarship, Shah Jahan‘s aesthetic vision,

Ramanujan‘s mathematics, or Ravi Shankar‘s and Ali Akbar Khan‘s music, without first having to check

the religious background of each.iIf we restrict Indian ethos to Hindu ethos, we will be reading Indian

ethos only in terms of a predominant religious affiliation alone. But it is simply taken for granted that all

Indians, as any citizen of any country, have multiple affiliations.

From among modern examples, Gandhi actually refused to restrict Indian culture to Hindus. In his

discussions with the British in the independence struggle, he did not want to talk for the Hindus

particularly, which the British were ready to listen to. He wanted to talk for ―the dumb, toiling, semi-

starved millions.‖ He even added that he could even speak for ―the Princes, … the landed gentry, the

educated class.‖ii

Indian Ethos: A Western Picture?

The second misperception about Indian ethos is derived from a contrast with the western culture and

ethos. It is believed that, by making a contrast with the Western ethos, one may try to identify the core of

Indian ethos. Frequently the core is said to be its spiritual aptitudes. AmartyaSen contends that this

approach emphasizes ―the differences—real or imagined—between India and the West.‖The real issue is

that while focusing on India‘s spiritual heritage, its rational contributions are simply overlooked. This

kind of a portrayal is understandable, because the West was naturally drawn to what was unique in India.

But that unique element does not exhaust Indian ethos.

―[Such] slanted emphases has tended to undermine an adequately pluralist understanding of

Indian intellectual traditions. While India has ... a vast religious literature [with] grand

speculation on transcendental issues ... there is also a huge—and often pioneering—

literature, stretching over two and a half millennia, on mathematics, logic, epistemology,

astronomy, physiology, linguistics, phonetics, economics, political science and psychology,

among other subjects concerned with the here and now.‖iii

It is true that India has examples of different types of attempt at the solution to the religious problem.

But they coexist with deeply sceptical arguments, sometimes within the religious texts themselves.

Among Sen‘sexamples is the ‗song of creation‘ of the Rig Veda, and the radical doubts expressed

therein.

―Who really knows? Who will here proclaim it? Whence was it produced? Whence is this

creation? The gods came afterwards, with the creation of this universe. Who then knows

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whence it has arisen? Whence this creation has arisen—perhaps it has formed itself, or

perhaps it did not—the one who looks down on it, in the highest heaven, only he knows—or

perhaps he does not know.‖

It would be more prudent to describe Indian Ethos as ―national ethos.‖For, there has been a vibrant

tradition of the pursuit of ideas across the spiritual, practical and scientific domains, which often is

neglected by the western approach to Indian ethos.

… a serious neglect, particularly for a country in which some of the decisive steps in

algebra, geometry and astronomy were taken, where the decimal system emerged, where

classical philosophy dealt extensively with epistemology and logic along with secular ethics,

where people invented games like chess, pioneered sex education and initiated systematic

political economy and formal linguistics.iv

Our national ethos is constituted and enforced by contributions of otherelements such as class, race,

gender, profession, politics matter very much along with the ethos that we share.

II Sources and Expressions of Indian Ethos

S.K. Chakraborty argues that Indian ethos essentially at its best is Vedantic and in that respect, it is

different from Indian culture in general. He qualifies culture as the colorful outward superstructure, but

ethos forms the invisible foundation. All the ingredients of it have come from this geographical mass

called India.v He attributes the right to become the foundations of Indian ethos only to the Vedas,

Upanishads, the Smritis, the Puranas, etc. According to him, Rabindranath Tagore, Vivekananda,

Aurobindo, Gandhi, etc. have taken this position. However, the attempt to attribute Indian ethos only to

the Vedic line could be challenged on account of the arguments in favor of the history and culture of

India which surpass these valuable sources. These sources do form one layer of the foundations of

Indian ethos. But they do not exhaust the breadth and depth of Indian ethos.

The message of the Gita also could be taken as a specific foundation of Indian ethos. Apparently a

heterogeneous text, the Gita is a reconciliation of many facets and schools of Hindu philosophy of both

Brahmanical (i.e., orthodox, Vedic) origin and the parallel ascetic, yogic tradition. It comprises primarily

Vedic (as in the four Vedas, as opposed to the Upanishads/Vedanta), Upanishadic, Samkhya and Yoga

philosophy. The Bhagavad Gita, meaning ―song of the Lord‖, refers to itself as a ‗Yoga Upanishad‘ and is

sometimes called Gītopanişad. It is not clear when exactly the Bhagavad Gita was written. Astronomical

evidence cited in the Mahabharata itself put the date at 3137 BCE, ancient Indian historical texts

(Puranas) suggest a date of about 1924 BCE and modern scholars hold widely differing dates that occur

after 1000 BCE.

Gita portrays two view-points regarding a conflict situation. It is a dialog between the God Krishna and

the hero Arjuna, taking place in a timeless moment on the battlefield before the ultimate struggle between

good and evil. At Kurkshetrathe royal cousins, the Pandavs and the Kouravs, face each other for the

decisive battle to end their long-running feud. The Bhagvad-Gita debates the rights and wrongs of

conflict. Krishna advises Arjuna that he needs to concentrate only on his duty. In modern terms he opts

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for deontology. But Arjuna raised his suspicions on the basis of the consequences he foresaw. He was

more a consequentiliast in contemporary terms. But his doubt cannot be set aside, as the story of

Mahabharatha proves at the end, though Lord Krishna had his preference for duty-bound approach.It

speaks of the yoga of equanimity, a detached outlook. The term yoga covers a wide range of meanings,

but in the context of the Bhagavad Gita it describes a unified outlook, of action, knowledge, devotion, and

the ability to stay attuned to the glory of the Self (Atman), which is of the same essence as the basis of

being (Brahman). The Gita has been rightly used as forming a solid basis of Indian ethos.

There are many significant people who are said to represent Indian ethos in many ways. If you prefer

forward looking, reformist dimension of Indian ethos, you need to respect Vivekananda, Mahatma

Gandhi, etc. If you insist on the radical nature of Indian ethos, you may choose Sankara, Mira Bai or

Aurobindo.

Briefly, we may say that any text, person or mythic story that creatively influences Indian mind broadly

and over a long period of time in one way or other can form a solid source or even expression of Indian

ethos. In fact, extensive studies specifying the heterogeneous nature of Indian ethos are scarce. That is

why often we are bound to return in this regard to certain religious sources alone. While recognizing this

limitation, we may suggest some of the general features of Indian ethos.

Featuresof Indian Ethos

1. The ethos that has developed in India is context-sensitive and not context-free. Ancient stories get their

context with reference to the frame in which they have been placed. Indian texts are historically dateless,

but their contexts, uses and efficacies are explicit. Even in Ramayana and Mahabharata, there are several

episodes, each story encased in a meta-narrative. And within the text, one story is the context for another

within it.

2. Ethos is not a homogeneous entity. There can be different expressions and layers within the same ethos.

Heterogeneity of Indian ethos cannot be overlooked. Indian ethos houses not only Vedas and Upanishads;

there are also narratives of the Dalits, and stories the Buddhists and Christians. There have been

heterogeneous readings even of the epics from India.

3. Indian ethos is dynamic. Every country has its own culture and character based on the social, political

and economic environment in which it operates. From that culture springs forth the national ethos, which

prescribes a code of conduct for its citizens and creates the context for business ethics and values in that

society. Indian culture is open to changes and the process of integration. Sankara‘aAdvaitic philosophy

did it. Vivekananda broadened the concept of brother/sisterhood from its narrow sectarian outlook.

Premises of Indian Ethos

What are the constitutive premises of Indian ethos? They consist in certain profound convictions.

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1. Indian ethos insists on purification of mind (chittashuddhi) above all. It means one needs to purify

his/her emotions, impulses, heart, rather than developing and sharpening one‘s intellect and skills. The

presumption is that if one is not morally upright, his/her knowledge and skill would turn destructive and

unwholesome. Indian ethos looks less favorably on techniques and performance than on right intention

and genuine results.

2. Indian ethos, following Vedantic thought, holds that the subject is the cause and the object is the effect.

Good or bad the acts of a person springs from his/her inner self. One conclusion, for example, is that if

there are disorder and disturbance in a business firm, there will be people with internal troubles. So Indian

style of management would ask you first to focus on men and women rather than setting right materials,

machinery and money. For the health of business structures depends on the people who manage it.vi

3. Nishkama karma or detached work. It offers a psychological approach to work. Nishkam karma has

been variously explained as ‗duty for duty‘s sake‘ and as ‗detached involvement‘, which is neither

negative attitude or indifference.We shall further explore this notion later. While emphasizing ethical

business practices adhering to intrinsic human values and reducing stress at the workplace many people

now tend to make use of nishkama karma from Indian ethos.vii

4. Work is not understood as drudgery or labor in Indian ethos. Work is equal to sacrifice. Thus it

becomes pleasing to the Cosmic agents as sacrifice and worship. It presupposes a human-cosmos

symbiosis. Therefore, no human work is against nature or the fine balance of the cosmic order. If artha

and kama are pursued simply for their own sake, with egoistic self-interest, it culminates not in a sacrifice

but in exploitation. Upanishads III, 14 says, ‗From food creatures come into being; from rain is the birth

of food; from sacrifice rain comes into being, and sacrifice is born of work.‘This presupposes a noble and

profound cycle of interdependence which starts from work akin to sacrifice. If this rthm is broken

somewhere, it results in a serious cosmic setbacks. We can understand this explanatory scheme of things

in the Jewish-Christian injunction also, ‗do not covet another‘s property.‘ For, it amounts to pursuing

artha egoistically and it denigrates the element sacrifice in such greedy pursuits.

5. The foundational premise of Indian ethos is that a balance between four dharmas is possible. Dharma,

Artha, Kama and Moksha are the four dharmas. There is no incompatibility between this worldly,

material affairs and the other worldly life. Indian ethos did not have to strive hard to combine these two

areas. It implies that there must be a balance between spiritual values and secular values. One of the

implications is that doing business will not stand extraneous to one‘s life of dharmas.

III How can Indian ethos serve contemporary business?

India is widely recognized as one of the fast bourgeoning economic forces in the world. Hosts of business

schools are producing energetic brand of young managers. But how can Indian ethos serve them to

become better managers and help them deal with moral complexities of ordinary business life?

1. Indian ethos provides an ethical worldview to business people. Indian wisdom indicates that

productivity of human being is more important than the productive capacity of the external, material and

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organizational structures.Therefore, a business person‘s primary focus must be on management of the

personnel. In other words, it begins with self-management. Because, unless the manager is able to manage

him/herself, s/he cannot manage others. Western model of management, seldom does speak about self-

management. It is particular about managing others in the broad (men, women, materials, money and

machines). However, recently, there have been attempts in Western business education to draw from

spiritual resources also.

2. Indian ethos gives great emphasis on values and ethics. For, Indian ethos nurtures a world-view which

is value based. That India has not invaded another country in its multi-millennium long history indicates

that India does not believe in external prowess. Indian ethos has not considered knowledge as power.

Rather, character is the real power and wealth. Therefore, Indian ethos emphasizes much more the inner

resources of personsthan outer resources. That‘s why according to tradition Indian kings always revered

rishis in their rule. This basic ethical spirit of Indian ethos can inspire business persons and firms to

adhere to their traditional ethical orientation.

3. Indian ethos can help business persons determine their priorities. It has to take place on different levels.

For instance, at the level of objective of business, one has to set the priorities: economic gains, customer

satisfaction, employee-welfare, social responsibility, etc. All of them can go together. But at times,

prioritization of these objectives would become mandatory in conflict situations. One of the issues

subjected to corporate governance is executive remuneration. In recent times it has been charged in

different courtiers that senior executives are disproportionately paid. The issue at stake is the widening

inequalities between the employees and managers.viii

This issue can be addressed according to the priority

which a firm maintains in corporate governance. Indian ethos will not give a firm clear directive as to

what is to be done. But it will provide the ethical spirit with which such issues are to be addressed.

4. Prevalence of Indian ethos can improve work culture in organization. There are certain fundamental

assumptions regarding work in Indian ethos. For instance, strength and cooperation for excelling in work

comes from divine power. Therefore, all kinds of work are an opportunity for doing good to the world and

thereby ensuring our own material welfare and spiritual good. That means, according to Indian ethos,

there are certain strong drives active within Indian ethos for self-motivation and self-development which

will in turn ensure an excellent work culture. Whether such a work culture actually prevails now in India

in general is a different question.

5. Indian ethos would help us keep a fine balancing of different management values in the organization.

Competition, self-interest, relationships, stakeholder rights, advertisements, protection of nature,

philanthropic works, etc. all are valuesin management systems. But each of them can become a disvalue

unless carefully tempered by an integral value system. Indian ethos in business context shall offera check

and balance in protecting these values and business interests.

6. Enhancing owner value or in a much narrower sense making profits, is an obvious aim of doing

business. Indian ethos is not against making profit.But profit must be made in an ethical way. Rigvedahas

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a general principle which says: ‗Ritamshansanta, rijudee-dhyana.‘ It means, praising the Eternal Law and

thinking straight.‘ This general principle is applied to making money and thus Rigveda says:

‗Let a man think well on wealth, and strive to win it

by the path of Law and by worship

and let him take counsel with his own inner wisdom,

grasp with spirit till greater ability.‘

Therefore, it would be wrong to conclude that Indian ethos encourages only spiritual values and it looks

down upon monetary gains.

7. Indian ethos establishes certain values highly effective for business relationships in terms of

employees, employers, clients, shareholders, stakeholders, agents, etc. For instance, respect to people is a

profound value of Indian ethos. The basic reason is that people command respect by virtue of their shared

divinity. There is an ancient exhortation: ParasparDevoBhava: regard the other person as a divine being.

For, each of us shares in the same divine consciousness. What this principle can do is to establish a sort of

basic respect for the human person.

8. Indian ethos nurtures an overall spiritual outlook. This is found expressed in certain sayings as well as

in some practices. AtmanaVindyateViryam: strength and inspiration for excelling in work comes from the

Divine.Teshamsukhmtesham shanti shaswati: Infinite happiness and infinite peace come to them who see

the Divine in all beings.It is also good to remember that the integral model of man exalted in Indian

culture was that of rishi. Rishis were supposed to be eternal pilgrims, searching for higher knowledge

always; they enlightened others; they saw reality in its totality. It is in this context that even kings and

emperors were attributed the title rajarshis. This indicates that certain ideals of rishis are found expressed

in their royal office.ix

9. Indian ethos can offer creative and alternative metaphors for ethical business. For instance, there are

proposals that managers of firms will resemble rajarshi; they will combine kingly (leading) role with that

of rishi (ascetic). Chakraborty loves to speak about ‗business ashram‘ which according to him, can claim

credibility to Indian mind. The root meaning of ashram is a place to labor (shram) for the fulfillment of a

vow (vrata). The metaphor of business ashram implies many things as far as the orientation of business is

concerned. It would naturally emphasize products with longer life cycle, as against the use and throw

model. He argues that organizations should contract rather than expand endlessly. For more attention

would be on localized, decentralized economic activities and production. It will save a lot of time from

long distance, high speed travel. Relationships in organizations are bound to become more personal and

friendly and less aggressively competitive. It will create an atmosphere where local needs are met with

local resources. Decisions will be taken in view of their overall spiritual, ecological, material and psychic

impact on people. Sustainable life style will be promoted by business, by insisting on energy saving

schemes. Standard consumption will no longer be the standard of living. It will focus on the inner

freedom and quality of life. In the work place better appreciation will be made of highest ends of the

workers such as fulfilling psycho-spiritual needs, rather than highlighting material gains alone.x

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Limitations of Indian ethos in business

There are also a few limitations about which we must be aware while extolling Indian ethos as the

substratum of ethical business in India.

1. Perhaps, the foremost difficulty is that the foundational textual sources of Indian ethos do not come

purely from a business or economic context. Most of them speak about management of country (politics)

or management of the self. Taken from an extra-business context, such texts need careful interpretation

and consistent adaptation to the modern business world and its issues.

2.Contemporary business is condemned to confront moral dilemmas. Indian ethos may not help us resolve

moral dilemmas in business. Some of the issues which business face cannot be resolved easily. For, while

trying to save a value, one might be destroying another, perhaps, a more important value. For instance,

consider issues such as downsizing the staff, pollution control, disposal of toxic waste, depletion and

allocation of scarce resources, cost containment, changes in law and technology, employee rights,

discrimination against women and minorities, and product safety. When one tries to deal with one of these

effectively, simultaneously s/he will be aggravating or creating anew another problem. Issues such as the

above said are complex and addressing them would lead us often to ethical dilemmas that are difficult to

resolve. Because competing claims of equal force present themselves simultaneously.The resolution of an

ethical dilemma requires not only interpersonal and negotiation skills but clarity of vision about ethical

values. One must be able to prioritize among values as far as possible. S/he must visualize the good and

evil associated with each open options. General insights of Indian ethos may not be sufficient in many

such moral dilemmas.

3. There are moral issues in business which can be settled only in a technical sense. For example, take the

prospect of whistle blowing. Despite its apparent goods, whistleblowing begs ethical justifications.

Because the prospect of whistleblowing leaves a number of questions open: under what conditions is

whistleblowing the right thing to do? When is it in the public interest to do so? Should an employee not

be loyal to his/her firm? What should employees do when they confront conflicting loyalties among

personal, organizational, and societal values?xi One may not get criteria to evaluate the chance or act of

whistleblowing directly from Indian ethos.

4. Recourse to Indian ethos may look like simply religious and spiritual. Proposals of business ashrams

made by some authors may not look attractive in a global market of fierce competition. It may give an

overall sense of self-control, generosity, thrift etc. many of such values are apparently not conducive to

successful business.

5. The different business constituencies of a corporation include groups such as managers, employees,

suppliers, customers and naturally the investors. One of the inevitable consequences of the corporate

existence of any business concern is the possible conflict of interests of various stakeholder groups. In the

case of non-business, non-profitable corporations the scope for conflict of interests could less frequent

and less fierce. As far as the potential conflict of interests in business corporations is concerned, two

important questions usually surface: in whose ultimate interest the corporation would be run? Who will

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impartially safeguard the due interests of various groups? Answers to these questions concern the area of

corporate governance.

Add:

This gave birth to FIVE ‗Mahavakyas‘ (Great utterances) of Upanishads (Indian Scriptures) ~

1. AyamAtma Brahma - Individual soul is synonymous with the Universal Soul.

2. AhamBrahmasmi - I am Brahman.

3. SarvamKhaluIdam Brahma - All that exists are existing in Brahman.

4. Prajnanam Brahman - Brahman is the one all-pervading consciousness.

5. Tat TvamAsi - You are That.

The Rigveda, mistakenly regarded as of only antiquary value, has this sound mantra for value-laden

business that Chakraborty reminds us of:

Let a man think well on wealth and strive to win it

By the path of law and by worship.

And let him take counsel with his own inner wisdom,

Grasp with spirit still greater ability.

Hardly a world-denying philosophy! And the epic of epics has this exhortation by its creator, Vyasa that

those who would create wealth and their educators would do well to ponder on:

I lift up my hands and I shout:

From dharma flow wealth and pleasure;

Why is dharma not practised?

Review Questions

1. Give a brief account on Indian ethos.

2. What are the salient features of Indian ethos?

3. How do you distinguish between Indian culture and Indian ethos?

4. How can Indian ethos promote ethical business in India?

iAmartyaSen, Argumentative Indian ( ).

iiIndian Round Table Conference, Second Session, 7th September, 1931-1st December 1931: Proceedings (London: Her Majesty‘s Stationery

Office, 1932), as cited in AmartyaSen, Identity and Violence (London: Penguin, 2006) 166.

iiiAmartyaSen, Argumentative Indian ( ).

ivAmartyaSen, Argumentative Indian, 316.

v S.K., Ethics in Management (New Delhi: Oxford, 1995) 4.

vi S.K.Chakraborty, Ethics in Management, 8-9.

viiBrij Kumar, Brij Nino Kumar, Horst Steinmann, Ethics in International Management(New York: Walter de Gruyter, 1998).

viii For details see, Güler M. Darman, Corporate Governance Worldwide: A Guide to Best Practices for Managers(Paris: ICC Publishing, 2004).

ixS.K.Chakraborty, Values and Ethics for Organizations (New Delhi: Oxford Univ. Press, 1998) 52.

x S.K.Chakraborty, Ethics in Management, 27-29.

xi R. Duska, ―Whistleblowing and Employee Loyalty,‖ T. Beauchamp & N. Bowie, eds., Ethical Theory and Business (Upper Saddle River, NJ.: Prentice-Hall, 1997).

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Module Two

Indian Business Management

Business Management

Management in India is an amalgam of practices borrowed from the West-and more recently

from Japan-overlaid with age-old Indian values and norms that the still extant. With an in-depth

historical perspective and a thorough analysis of four types of Indian organizations-traditional

family-owned private sector; public sector, government departments and multinationals.

Scope for Indian Model of Business Management

Indian Management as a distinct field of study is still in its infancy. Just as Japanese

Management with its emphasis on total quality emerged, now Indian companies with their

proven competitiveness, have caused the emergence of Indian management. Now it has begun to

gain acceptance and currency. In the first phase of management, western concepts were

borrowed and adapted to the Indian situation. With the establishment of the IIMs such need was

felt. Case studies were developed from Indian context. For this end, tools and techniques from

Japan and the West were used heavily. In the second phase, contradictions in the first phase were

exposed. Management theories conducive to Indian psyche were sought. Scholars began to

explore ancient Indian literature; they studied stories of successful business in India. During this

phase stress was laid on exposing Indian ethos, Indian culture and Indian perspective of

management. In the third phase, it has moved a step further. Indian ethos is a knowledge seeking

ethos which is in fine tune with knowledge economy.xi

During this phase, a new blend of

Western and Indian notions has been introduced, taking into account the ground realities in the

field. This is expected to develop into a global standard in due time.xi

Why do we need our own Management Style?

1. Social Factors affecting Management System in India. Many of them are unique. Unseen

in other places. Management system has to respect these features in building indigenous

style.

Trends in employment, job scenario in India

Population growth

Trends observed in Indians settling abroad

Women‘s issues and issues focusing on women‘s rights

Shift towards knowledge economy.

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Influence of caste, religion and political affiliation in work place.

2. Social structure: As has already been stated, India is an enormously hierarchical society and

this, obviously, has an impact on management style. It is imperative that there is a boss and that

the manager acts like a boss. The position of manager demands a certain amount of role-playing

from the boss and a certain amount of deferential behaviour from his subordinates. The boss is

definitely not expected to perform any seemingly 'menial' tasks such as making coffee for

everybody or moving chairs in a meeting room! Anglo-Saxon concepts of egalitarianism where

the boss is the primus inter pares are virtually incomprehensible in a society still dominated by

the historical conventions of the caste system.

3.Dualism resulted from grafting

The management concept in the west developed as a result of evolutionary process, based on the

changing values systems of the people - the social, political, and economic environment as well

as educational and cultural milieu. However, in India, historically we never evolved our own

concepts, keeping the Indian scenario in view. We found it convenient to transfer management

technology, just as scientific technology. As a result of these grafting process of management,

we have created more confusion in management thinking.

Indian Model of Management

Indian model of management practically means a management approach based on Indian ethos.

It does not mean that it would be style of management denigrating all aspects of western

management.

Characterizing features of Indian model of management

1. Emphasis on human values. They include ethical, spiritual and religious values. They are

supposed to serve as a foundation for healthy business management. As we have already

indicated, this approach does not focus basically on any management techniques to produce the

desired results. Rather attention is paid to the person who works, manages, invests, plans,

organizes…The presumption is that such value-driven persons will naturally contribute to

business causes to the maximum.

2. Management based on holism. It is much wider than the systems approach much favorable to

the western model. Holistic approach indicating unity between the Divine (The Divine means

perfection in knowledge, wisdom and power), individual self and the universe.Holistic approach

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considers human being in his/her totality, as an integral being of body, soul and the intellect. It is

in this context of holistic approach that meditation is emphasized. The presumption is that work

and career must help the person for total human enrichment and quality of life. There must be

harmonious use of these in business contexts. It is because of this holistic approach that ethics

becomes unavoidable. For in order to make use of the human person in totality, we need not only

rationality but morality as well. If business concerns disregard holism, even affluence can create

problems. For example, young managers earning attractive sum of rupees would be ill-directed

in the use of their money. While addressing one problem, namely economic need, it would be

opening many other problems.

Holism also has to do with our essential unity with the society and nature. If business disregards

holistic approach, it will not find any justification or scope for social responsibility of business.

Devoid of holistic attitude, nature will simply remain as a resource to be used and exploited to

the bottom level.

3 IMM emphasizes the person. S/he is taken as resources with enormous potential, energy and

talents for perfection as human being. Not only objects, materials, machines, money but persons

are also equally important. Emphasis laid person helps management to tap the inner resources of

the person than outer resources (skills). Inner resources means the character and virtues of the

person.

Brain-stilling– For rational and enduring decisions, silent mind is a necessity. A

perfectMounum(calm mind enjoying tranquility) is necessary. Brain-stilling or meditative silence

isthe most reliable method to discover solutions to problems and difficulties which seem to

bedifficult to be tackled by reason and intellect because through this one can come intocontact

with the inner mind or higher consciousness called Chetana.

4. IMM nurtures a specific kind of work ethos. We shall talk more about work ethos later in this

chapter itself. The specificity of Indian work ethos is that it places work in a broader context of

spirituality and integrated life vision. In other words, work is not an isolated area of human life.

Therefore, Indian ethos asks certain fundamental questions and offers answers. For example,

why work?The answer: to purify the mind and the heart (Chittashuddhi) and to become wise.

What is work? It is nurturing each other. It is a form of Yajna or sacrifice. Work equals to the

worship of the Divine.How to work?With the spirit of renunciation, i.e., Tyagand to serve others

without self-interest. What must be the spirit of work?Excellence and perfection in work.The

ultimate paradigm for Indian work ethos is Karma Yoga (selfless work).It serves private benefit

in the form of self-purification and public benefit. YogahKarmasuKaushalam- Excellence at

work through self-motivation and self-development with devotion and without attachment. Co-

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operation is a powerful instrument for team work and success in any enterprise involving

collective work. Never decide anything, never speak a word, never throwyourself into action

without stepping-back. The stepping back from a situation for a whileenables one to control and

master a situation.

5. IMM pays attention to management with reference to interiority. Therefore, emphasis is laid

on integrated growth, harmony, happiness and health. In other words, it begins with the

management of the self, rather focusing on managing others. Other things such as, machines,

materials and methods are taken as conscious partners in this process. In decision making

process, intuition is given weight just as information. Intuition is the act of coming to direct

knowledge or certaintywithout reasoning or inferring. It is immediate cognition by the inner

mind and when fullydeveloped, is efficient and effective for taking prompt and sound decisions.

Intuition skillsenable one to cope with confidence the fluctuating environment and rapid

changes. Faith isa prerequisite to develop and realize the power of intuition.

Self management or management by consciousness. Whenthe soul manages the other four

members of the human being, namely, the body, mind,intellect and the heart, the conflict these

four have amongst themselves can be resolved.This is management by consciousness. The

objective of self management is to first knowand manage oneself and then manage others.

6. IMM respects ethics and values in all domains of management, especially in problem solving

and conflict management. The commonly adopted means for conflicts resolution is integration

and synthesis on stressing super ordinate common goals. Focus is to maintain harmony and

unity. At times, self introspection and stepping back would give hints for problem solving.

7. IMM fosters certain basic management concepts. They include the following: Other than

saying that management means getting things done, IMM holds that it meanshelping others to

produce extraordinary results. Productivity of the organization is people centred, rather than

output centric. Prime concern of the firm is to produce performers, not realize targets.It helps the

subordinates to develop leadership quality. High emphasis is placed on self-motivation;

subordinates encouraged to be creative and given due autonomy.

8. IMM encourages integral approach to management. That means, it respects realistically both

sides of the coin. For example, it pays equal importance to rights and duties. It places profit as

one of the chief aims of doing business; while it never compromises service to and satisfaction of

all stakeholders, employees, customers, shareholders and citizens. Coordinating private and

public benefit. Economic gains are attempted through cooperation by playing complementary

role, not by extraction and exploitation.With regard to social responsibility, some sort of

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preponderance is given on giving not on taking. Duties given great importance and rights assume

secondary value.Equal emphasis on both skills and values.The person behind the machine is

given due regard. Organization values not only certifications of product quality such as ISO,

TQM, QC but alsohuman quality, values, character, mind enrichment.

9. Human Resource Management of IMM is people specific. It does not offer an HRM

program applicable to all people.It respects the basic division of people made by ancient Indian

scriptures into three categories. They are Tamasik (people with shady character), Rajasik (the

ambitious) and Satwik (the virtuous). Dealing with these people requires different approaches.

Traditionally in managing others four different methods are used. But they are to be applied in

different ways to these three categories of people. It is as follows:

Method Tamasik Rajasik Satwik

Saam Guide Inform Consult

Daan Reward Empower Recognize

Bhed Criticize Challenge Silence

Dand Control Warn Monitor

10.IMM has a specific style of performance assessmentsof the firm and employee.There are

many parameters offered to measure performance of the employees, managers and the

organization as a whole. Common good is held in high esteem as part of common vision of

business. Solving issues at human resource level, rather than at material, structural and external

levels. Efficiency and profit might be sacrificed for moral uprightness. Competition with one‘s

own performance to reach excellence, other than competition with others. Instead of meeting

targets, people are inspired to perform better. Long term and sustainable approach to growth and

achievements. Excellence sought for mutual benefits and common good. Balance is struck

between business success and mental peace.xi

Health of the company is assessed in terms of

people oriented performance and respect towards environmental values. Social costs also would

be included in balance sheet. Social costs will be internalized. Trust of customers and society are

also points of assessment.

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Work Ethos

One of the prominent aspects of Indian management is the emphasis laid on a healthy work

ethos. At the core, it refers to certain behavioral norms of employees, managers and executives in

work situations. Work ethos indicates basically how the workers and the firm as a whole deal

with different kinds of work. Work ethos in general suggests the organizational culture that

prevails in a work context. It reveals how workers deal with the objectives of their work in a

given time and place. Given a good work ethos, any firm is surely to succeed in realizing its

business goals. Therefore, work ethos forms one of the important aspects of Indian ethos in

business management.

What Does Work Ethos mean?

Work ethos has got different expressions and demands at various levels.

1. At the level of employees

a) Discipline

b) Punctuality.

c) Behaving properly with superior, colleagues and subordinates.

e) Not wasting time during working hours.

f) Dignity in relating to peers, semorn and subordinates,

g) To do things those are morally good or right.

h) Doing one‘s duties with a kind of religious like fervor. One brings out his best in his work

place.

loyalty and sense of belonging, by his behaviour, to the organization. One should protect the

interest of the organization

2. At the level of management

a) Commitment and accountability The workers should take full responsibility for the task

assigned to them and furthest efforts to achieve what is expected from them.

b) Loyalty. Wok ethos regulates te relation with the firms. Under usual circumstances it calls for

loyalty to the firm from workers. But under extraordinary situations, loyalty to the firm could be

superseded by other values such as concern for common good. It is a context in which whistle

blowing by employees could be justified.

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d) Sense of Belongingness The worker should exhibit by his behaviour a sense of

belongingness to the organization. A feeling of respect should be there for the organization. One

should maintain good relationship with peers, sub ordinates and superiors and treat them well.

f) No adverse comment about the organization in public.

In work ethos, we are supposed to cut a harmonious balance among our commitment to work,

home, and society. That means, we need to be moderate in actions and spending our energy. ―He

who is regulated in his habits of eating, sleeping, recreation and work can mitigate all material

pains by practicing the yoga system.‖ (Gita 6.17).

Merits of Work ethos

Work ethos active in a context has much to do with the performance of workers, degree of

productivity, quality of products, rate waste production, and the career satisfaction of workers.

Attention to work ethos will also contribute to the total meaningfulness of worker‘s life. For, it

would create a sense of personal fulfillment and social good. In addition to these elements, work

ethos presupposes the quality of team work. A team with poor work ethos is likely to be a

professional tragedy. A team motivated by an excellent work ethos will generate innovative ideas

and solutions. high morale. If there is no healthy work culture, it is doomed to create wastage,

poor quality products, low rate of productivity, infamy to the firm and lesser competitiveness.xi

What the Firm has to do?

Lack of commitment, discipline, poor working conditions, recognition by management, moral

standards. So practically, it reveals that work ethos is not merely the contribution of the

employees; it has also to do with the contribution of the management.

Expressions of poor work ethos:

The following factors are responsible for poor work culture in a business organization:-

1. Lack of commitment Lack of commitment refers to the disinterest shown by worker to

the work This creates poor work culture in the organization and results in poor quality of

(product and lower productivity. Dedication towards work should be visible by his behaviour.

2. Lack of discipline Discipline includes regularity, punctuality such as to come in time to

work place, to complete the task in given time, to follow rules and regulations if any, do not

waste time during working hours etc. Hence, lack of discipline will create poor work culture

which may cause delay in operations.

3. Poor working condition Poor working conditions includes unhealthy working climate,

lack of pure drinking water, lack of ventilation, lack of canteen facilities, lack of safety devices

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and norms, industrial pollution etc. These are the constituents of poor working conditions in an

organization.

4. Political interfere nee Most of the unions in the companies are affiliated to some political

party. Political leaders, sometimes, destroy the peace and harmony in the organization for the

sake of power and ego only. This is one of reasons that causes industrial conflict

5. Decline in moral standard Moral standards provide tool for judging the moral value of a

decision. They provide the basis for deciding whether an act is right or wrang. I f there is decline

in the moral standards, the culture of the work in an organization becomes poorer.

How to improve work culture?

Following are the other dimensions of work ethics

1. Protecting the interest of the organization: interest of organization must be on the top

agenda of employees. Their activities must focus on the protection of interest of the organization.

Workers can protect the interest of their organization through higher productivity and quality of a

product. They should make then best efforts in this regard.

2. Work ethics through appropriate system Clear cut policies, rules and regulations, reward

system etc. are supportive in establishing work ethics. Clarity of these will make work-ethics

more purposeful.

3. Work ethics in terms of proper communication system

Communication system is said to be life line of an organization. Proper communication channel

will promote work ethics in the organization. Any misunderstanding, mistrust, suspicion etc. may

be eliminated through communication system.

The management has to ensure just wages as per the actual contribution of the worker. This in

turn necessitates proper job evaluation, periodic training. There shall not be any exploitation of

the workers in terms of payment and work hours. In addition to this, workers also deserve perks

and bonus and recognition, etc.

1. In order to improve work ethos, wages should be linked with productivity. "Higher wages for

higher productivity should be the policy of the organization.

2. In order to reduce absenteeism, attendance bonus should be introduced.

3. In order to increase efficiency of workers, they should be properly rewarded. In other words,

efficient workers should get incentives.

4. Workers should be given opportunity for participation in management decisions.

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5. There should not be political interference in the day today operation of the business.

Indian Heritage in production and Consumption

Salient features of Production & Consumption in Indian Heritage

1. From the point of view of economists, production from local resources for local needs is

the most rational way of economic life. In the beginning, humans have a tendency to

produce goods and products according to their basic requirements or we can say needs.

2. Use of Resources: - Indian Heritage advocates the prudent and economic use of resources

in the development of man but does not advocate the irresponsible and indiscriminate use

of resources. It prefers the optimum use of resources and conservation of natural

resources because they are available in limited quantity.Needs, wants and desires are the

part of one's life. And production is required for fulfilling these needs, wants and desires

of human beings. With the development of human beings ways of production have also

changed in the modern world. Now a days, many natural resources or non-renewable

resources are used in excess to produce goods and services. Productive resources should

be diverted to produce most essential goods. The resources used m the production of

alcohol, harmful chemicals and arms should be used for the production of food, clothing

and house building.

3. Impact of Spiritual Consideration In early times, those was a coordination between Artha

(money) and Karma (desire). During that time, wealth creation was important but was not

the focus, so the focus was on striking a proper balance between the amount of efforts

and the amount remuneration attached to it.

4. Role of great economists in term of their thought on production and consumption can not

be ignored. Great intellectual gurus like Mahabna Gandhi. Vivekananda and Buddha

believed in one principle of 'more of giving and less of grabbing'.

5. Increase in per Capita income. A performance of the plan is judged by the criteria of how

quickly a country is able to increase its per capita income. Indian Heritage System did not

pay much attention to increase in per capita income the prime focus was on spiritual

growth. But it needs to bed one.

Nishkama karma theory is found first in chapter II, verse 48 of the Gita.

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Module Three

Ethical Values in Management

Values& Ethical Values

Ethical values suggest that a given mode of conduct or end-state of existence is personally or

socially preferable to an opposite mode of conduct or end-state of existence. Ethical values

indicate the worth or merit of an action or a person by virtue of its moral rightness or wrongness.

Therefore, practically, as we have already indicated, for decision makers ethical values serve as

the point of preference. They enjoy a certain amount of prescriptive force. They ask you to do

something or make a choice in a particular way. It is true that humans can reject them. But values

will attract, force and even admonish people, once they have been rejected. Ethical values can

even cause a sort of moral indignation in a person against disvalues found around us.

Ethical values tend to promote and ensure human well-being. But it is promoted by ethical

values is not personal and selfish well-being.No one person‘s well-being is to be counted as more

worthy or valuable than any others.Ethical values promote human well-being in an impartial

way.

Long term effectiveness of business in every respect depends on moral values that business

upholds.

Values can affect our behavior, beliefs, personality.

Values indicate a judgmental element.

There are fixed, unchanging values; they are stable. Similarly there are also changing values.

There is a hierarchy of values. There can be value conflicts actual practice of values. Between

individual and organization and among individuals and within oneself. Values are important as

far as business is concerned. For, the managers‘ value system is to determine in many a context

decisions in a business context. Laws do not cover all aspects of business life. Value system

indicates a hierarchy based on ranking of an individual‘s values in terms of their intensity.

Terminal values are desirable end-states of existence; the goals that a person would like to

achieve during his/her life time. Instrumental values are preferable modes of behaviour or means

of achieving one‘s terminal values. Values are called gunas.

From values originate value statements are grounded in values and define how people want to

behave with each other in the organization.

Values v/s Skills

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We need to make distinctions between and skills.

1. To ‗become‘, we need values. To ‗do‘, we need skills.

2. ‗Becoming‘ (needing values) must precede ‗doing‘ (needing skills). Values should act

as the basis of the skills acquired.

3. Values are the means of perfection. Skills must have sound system of values as the

base. Otherwise, one can manipulate skills for ulterior motives.

4. Values are internal, dealing with internal development of a person, purifying mind and heart.

Skills on the other hand only make a person proficient. Values are themeans of perfection of

personality.

5. The field of values is governed by union, holism and relatedness.

6. Values bring about excellence and universal good. Skills see us through mechanics

of management.

7. Skills are not enduring, values are.

8. Skills change with passage of time. Policy is flexible, principles and values are not.

We have permanent fundamental values. ―Skills must pass through the corridors of values and

the corridors have to be kept not dark and untidy, but well lit and clean.‖

We should not get the impression that acquiring skills is insignificant, but onlyacquiring skills

without reference to values would be unhealthy and dangerous. Of course, values are more

important that skills. The strength of skills cannot replace the functions of values. For they refer

to the inner core of the persons and integrity of the firm. Economic values are actually means;

moral values are often ends in themselves.

What do Ethical Values Serve in general?

Ethical values help us preserve ourselves, society and nature in their integrity, leading to its

ultimate fulfillment. Disrespect to values means doing violence to others or denying their rights

to certain moral good. For example, when a person tells lies, s/he denies a truth to someone who

has a right to it. The quest for values is innate in humans. They need not be taught; but their

demands need to be taught. People know naturally that they are to respect to truth; but what

truthfulness means especially in a complex situation perhaps needs to be taught. There are many

such situations in business life.

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Economic values are instrumental in the sense they serve as means to realize certain goals. The

worth of economic values can be assessed and measured. But ethical values cannot in that way

be measured. They need to be given expression in the form of ideals, spiritual principles, beliefs,

etc. upon which we base our practical living.

Value communication takes place by education, parenting and formation at home, training

programs, mass media, cultural tools such as narratives, social mores, rules and regulations,

religious thinking, prevailing ethos of a nation, etc.

Examples of Values in Business

The following are examples of values:

Ambition, competency, individuality, equality, integrity, service, responsibility, accuracy,

respect, dedication, diversity, improvement, enjoyment/fun, loyalty, credibility, honesty,

innovativeness, teamwork, excellence, accountability, empowerment, quality, efficiency, dignity,

collaboration, stewardship, empathy, accomplishment, courage, wisdom, independence, security,

challenge, influence, learning, compassion, friendliness, discipline/order, generosity,

persistence, optimism, dependability, flexibility, etc.

Values for Managers

Integrity of character. It refers to uprightness, being undivided between one‘s convictions and

actions.

Impartiality. This is more an attitude than its outward expressions. It demands one to look at

thing with fairness and without prejudice or bias.

Social responsibility. According to some schools of thought (Milton Friedman for example),

business has no social responsibility except to make profit respecting the given rules. But there

are many reasons to hold that managers are to respect not only the interests of the stockholders

but the claims and interests of all stakeholders, including nature, in doing business.

Accountability. Managers are held accountable before a number of people such as stochkolders,

employees, customers, the government, etc.

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Transparency. Good business cannot but be transparent to the concerned parties. Business

organizations nowadays design ways and means by which business transactions are kept

transparent in the due forum.xi

There are many values rooted in Indian scriptures. They include respect for individual, work is

worship, ethical integrity, self-discipline, customer satisfaction, detachment, mutual cooperation,

etc.

Why to Identify and Establish Values?

Effective organizations identify and develop a clear, concise and shared meaning of

values/beliefs, priorities, and direction sothat everyone understands and can contribute. Once

defined,values impact every aspect of your organization. You must support and nurture this

impact or identifying values will have been a wasted exercise. People will feel fooled and

misled unlessthey see the impact of the exercise within your organization. Ifyou want the

values you identify to have an impact, the following must occur.

• People demonstrate and model their values in action in their personal work behaviors,

decision-making, contribution, and interpersonal interaction.

• Organizational values help each person establish priorities in their daily work life.

• Values guide every decision that is made once the organization has cooperatively created the

values and the value statements.

• Rewards and recognition within the organization are structured to recognize those people

whose work embodies the values the organization embraced.

• Organizational goals are grounded in the identified values.

Adoption of the values and the behaviors that result is recognized in regular performance

feedback.

• People hire and promote individuals whose outlook and actions are congruent with the

values.

• Only the active participation of all members of the organization will ensure a truly

organization-wide, value-based, shared culture.

Values are the embodiment of what an organization stands for, and should be the basis for the

behavior of its members. However, what if members of the organization do not share and have

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not internalized the organization's values? Obviously, disconnection between individual and

organizationalvalues will be dysfunctional.

Why should business be value-ridden?

To protect its own economic interests on a long term basis.

To gain public support and trust.

To meet stakeholder expectations.

To prevent harm to the public.

To command loyalty from its employees.

To protect itself from unethical employees.

To enhance reputation and public image.

To attract competent employees and stakeholders.

To generate strong team work within the organization.

To help improve society. It will bring in fairness and equal rights and respect for human

dignity; laws and regulations came to be institutionalized. That has contributed in a great

deal in the production of goods and provision of services.

Ethical Values – Indian Insights

A broad definition of values, derived from an insight into ancient India‘s psychophilosophical

wisdom literature is: ―Values are states of feelings/emotions that underpin the content of a

choice/decision and determine the manner of using the intellect/reason for justifying and

implementing that choice/decision.‖

There are a few characteristically Indian values useful for managers. It does not mean that these

values are absolutely foreign to others. It means only that these values are held in high esteem in

India.

1. Synthesis rather than analysis.

2. Emphasis on duties than on rights.

3. Self control rather than control from outside.

4. Focus on spiritual gains than on material rewards.

5. Flexibility of order.

6. Attention to team achievement not individual gains.

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7. Harmonious life with nature than dominating it.

8. Spirit of sacrifice, than fighting.xi

Values in the Context of Global Changes

In fact, the global identifying in value is not only a result of western infiltration, but a basic

demand of human globalization as well. The world today is no more a confined and isolated one

like a thousand years ago, but a world in which people relate to and influence each other. Actions

of any individual and any group, especially actions of a state, which is a special group, could

make active or passive effect on other individuals and groups. In this situation, if there is no

universally accepted and generally conducted rules, humans being may get into a widespread

warfare. Moreover, a conflict may take place between human and nature, and the nature may

become human graveyard instead of homeland. In order to live a better life, people all over the

world must abide by some universally accepted and generally conducted rules, otherwise human

being will be ruined in the struggle between each other and in the barbaric plundering from

nature. Therefore, human value identification is unavoidable for human development, and it

corresponds to the globalization or cosmopolitanism. To select what value as the base and

direction depends on human available choices. If western value is the most advanced value

system available, it is certainly selected by people all over the world.

First, economic laws can be misinterpreted and misused by man. Therefore, moral values and

moral behavior are essential for the functioning of the market. Adam Smith insisted on the role

of moral sentiments. The churches believe that they are one agent in the foundation and

communication of moral values.

There are many pressing contemporary issues which make the concerns of global ethics very

relevant. For example, female genital mutilation is widely condemned as a violation of

internationally protected human rights. However, it continues to be an integral part of many

African, Asian, and Middle Eastern cultures. More generally, equality for women is an

internationally proclaimed human right and is set forth in many treaties, including the

Convention to Eliminate Discrimination against Women, which prohibits distinctions made on

the basis of gender. However, many cultures continue to deny women equal rights. Women are

not even permitted to leave the house unless in the company of a male relative. There are

countries where female infanticide is practiced; in certain regions, unmarried women suspected

of bringing dishonor to their families by losing their virginity are put to death. In some countries,

all religious practices have been forbidden. Individuals can be punished simply for holding and

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manifesting their religious beliefs. In other countries there are state-mandated religions, and

persons who convert from the state religion to another faith are subject to punishment,

sometimes death. Some countries punish criminal offenders by stoning them to death, or

amputating their limbs. These practices are considered ethically quite legitimate in those places

on the basis of certain culturally specific ethical norms. For others, they seem gross violation of

core ethical values. (my own article)

Relevance of Values in Business Management

1. Ethical evaluation is part and parcel of everyday business activity or managerial choices. Most business

activities, choices, decisions and judgments cannot but be performed without ethical judgements: hiring

and firing employees; choosing suppliers, setting prices, establishing objectives, determining dividends,

setting schedules and establishing contracts, etc. are done within an ethical framework. In addition to

these, there will be occasional, spectacular events such as corruption or frauds whose morality is rather

obvious. One may also confront ethical dilemmas where it would not be easy to determine the best course

of action. In a dilemma, one may find him/herself caught between the horns of apparently two

incompatible objectives. For example, the demand to improve quality and lower the cost of production

simultaneously; concern for better productivity and simultaneous concern for personnel pose dilemmas.

Introduction of a new technology in a production unit naturally turns part of the existing staff superfluous.

How to deal with this situation satisfying the economic performance of the company but without

sacrificing the company‘s social responsibility to its staff?xi

2. Ethics is basically meant to protect the vulnerable. In business there are a number of vulnerable areas or

relations of power-imbalances. For example, the relation between the buyers and sellers, employers and

employees, business people and the community as a whole usually is not perfectly balanced. Business

organizations themselves confront vulnerable situation; for they cannot avoid dealing with power

structures. Often one of the parties would be vulnerable to exploitation or violation of rights. In business

people interact with one another not as family members, friends or neighbours, but as buyers and sellers,

employees and employers. This is a relationship modulated by formal terms which include bargaining,

persuasion, marketing tactics, competition, etc. Nothing personal plays its role usually. So special care is

due in business to protect the rights of all, especially the vulnerable parties. The rules that ought to govern

these kinds of economic relations are not just legal or political, but ethical also. Because with legal and

political rules alone one cannot ensure fine business relations. For some aspects of a business relation, for

example the relation between a manager and his/her secretary may not be subjected to legal restrictions.

3. Business is affected by extra-economic concerns also. It is not driven by economic motives alone, but

also by social, political, cultural, technological changes and the corresponding changes in the outlook of

business stakeholders. For business is only a subsystem within the larger social system. If business is

affected by extra-economic concerns, the relation between the economic goals of business and the social

performance of business could open many ethical questions. For trying to maximise economic gains may

conflict with the social performance of business. Business ethics makes helps one to make a trade-off

between these two goals.

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4. The claims of shareholders make ethics vital to business conduct. Shareholders mind also the ethics of

the companies that they own. They take their investment decisions considering the companies‘ ethical

stance to various issues, not merely their financial performance. For example, what is the nature of

relationship of a company to a particular group of stakeholders? What are the rights of the stakeholders?

How far is the company responsible to them? How far should the managers act for the interest of the

stakeholders and safeguard self-interests, their pay, packages and termination in merger or acquisition of

companies? What about the employees who lose their job due to the merger of companies? How far is a

firm responsible for job reassignment or retraining for alternative assignments?xi

5. A firm‘s relation to its employees opens a large vista for ethical reflections. One of the major issues

that employees face is discrimination based on sex, race, nationality, religion, age, etc., in hiring, pay,

promotion and termination. There can be reverse discrimination against majority groups or against groups

left unprotected by law. In certain situations sexual discrimination may assume the form of sexual

harassment which then becomes a graver issue.

Employees‘ right to privacy also poses many ethical problems.It is argued that thattesting for drug use

tends to violate employees' right to privacy. On the one hand, the employer has to ensure a drug-free

workplace, lest to sacrifice high quality products, among other reasons. On the other hand, drug testing

may appear to destroy an employee‘s right to privacy. Employees‘ political activities, life style, sexual

preferences, etc., may become areas where employees‘ privacy is challenged, especially if such things are

somehow related to one‘s job performance. One may ask further questions in this context such as, can the

employer regulate the hairstyle of the employee? How far can s/he control the dress codes of the

employees? Company laws and customs may help a manager to judge a situation like this. But the

justification for the regulations, which a company takes, could be debated.

6. The range of business ethics covers employer-employee relationship. Issues in this realm include

employer‘s relation to union organisations of the employees, whistle blowing, large-scale lay offs, and

plant-closing situations. It can be debated ethically whether the employees can have a say with the

management in decisions that affect their jobs.

7. Relationship of a company to its customers offers prospects for ethical discussions. Product liability is

one of the issues that surfaces in this realm. Product liability means a company‘s responsibility for any

harm caused by its product or services. It is true that there are laws to safeguard the interests of the

customers. But the laws need not help them in all situations. There is also an implicit understanding in

business transactions, usually expressed in the Latin adage: ―caveat emptor.‖ It means that ―let the buyer

beware.‖ The purchaser has to beware of the quality of the product unless they cover the producers‘

warranty or guarantee. However, it cannot function as the sole guiding principle in business transactions.

Hence, the relation of a firm to its customers is of paramount importance.

8. Business advertising and promotional tactics raise ethical concerns. Nobody can sensibly underplay the

role of advertisements for successful marketing. But the field of advertisements do witness unethical

practices such as fraudulent, dishonest, sexually explicit and racially offensive advertising.

Advertisements may target vulnerable people such as children who lack experience and maturity to

evaluate a product. Advertisements for items like cigarettes, alcoholic beverages and handguns, etc. raise

ethical concerns as to their propriety. The marketing tactics used by a firm also may come under fire:

Nestlé‘s infant formula was criticised and opposed in Africa for indiscriminate free sampling, dressing the

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sales force in nurses‘ uniform, etc. These were alleged as means to exploit vulnerable people. Subsequent

its products were rejected for eight years.xi

9. The relation between business and environmental destruction raises many ethical debates. It is widely

accepted that there is a strong nexus between business and environmental hazards. Obviously, the

production, transportation and use of items such as automobiles, nuclear energy, chemicals and electronic

gadgets, including computers lead to the pollution of air, water and the land. Ethical deliberations have to

inform companies about the responsibility that they must bear for the clean up of polluted water and

dump sites. Reviewing the existing scenario business ethics has to address question such as should a firm

redesign its products to convert them nature-friendly? What precautions should be taken when using non-

renewable energy sources? What about the responsibility of business community towards forestry,

mining, protection of endangered species, animal rights? Can they indiscriminately use laboratory animals

to test the safety of drugs and cosmetic products?xi

10. Business done in a globalised world cause ethical issues of transnational relevance. When

multinational companies engage in business, it may generate unique ethical issues. A firm will have to be

sensitive to the host country‘s existing customs, practices and values. At the same time, following the

practice of the host country might contradict the accepted ethical codes of that firm. For example, in some

countries, giving and taking bribes or commissions may be a normal part of the deal. But the same

practice may be blatantly unethical in their home country.xi Can a company remain blind to the human

rights violation that takes place in the host-country and take advantage of it? Child labour might be rather

normal in a host country. Should a company accept the same practice or avoid all child labourers from its

facilities? Avoiding child labour may amount to denying the only available source of income to some

poor families. Is a multinational company bound to contribute to the development of the poor host

country? What about the morality of the legal exportation of toxic chemicals and drugs banned in one‘s

home country to poor countries?

11. The increasing use of technology adds a relatively new area for ethical inquiry in business.

Information technology (hereafter abbreviated as IT) and genetically modified food deserve special

mention in this regard. IT is not a single technology; it is a combination of four technologies, namely,

tools to access information, telecommunication linkages (networks), information processing hardware and

software, and storage media.xi The use of IT unleashes questions of privacy and confidentiality in

business, among other issues. The business of genetically modified food opens many ethical questions

including whether a firm can introduce a ‗terminator seed‘ that would make crops sterile, forcing farmers

to buy fresh seed every year. It has to be discussed whether any business firm can patent genetically

modified plants, animals and bacteria. The business of genetic engineering involves a reduction of

biodiversity as well as abuse of international political power, often widening the gap between the

developed and developing countries.

Module 4

Total Quality Management

Total quality management (hereafter abbreviated as TQM) is an approach to the art of management that

originated in Japanese industry in the 1950‘s. It steadily gained popularity in the West since the early

1980‘s. At its core, Total Quality Management (TQM) is a management approach to long-term

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success through customer satisfaction. In a TQM effort, all members of an organization

participate in improving processes, products, services and the culture in which they work. The

methods for implementing this approach come from the teachings of such quality leaders as

Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa and Joseph M.

Juran. The term ―Total Quality Management‖ has lost favor in the United States in recent years:

―Quality management‖ is commonly substituted. ―Total Quality Management,‖ however, is still

used extensively in Europe.

TQM refers to a philosophy that makes quality the driving force behind all managerial endeavors

such as leadership, design, planning, and improvement initiatives. The expression ‗total quality‘

conveys the culture, attitude and organization of a company that strives to provide customers

with products and services that satisfy their needs. This organizational culture requires quality in

all aspects of the company‘s operations right from the first time operations. TQM could be

adapted to government and social service organizations also, beside business endeavours, if

sufficient modifications are made.xi

TQM is not merely a technique; rather it has become a

philosophy of excellence adopted by business firms. In that level, TQM becomes an ethical tool

which ensures organizational and corporate excellence.

Dr. W. Edwards Deming, American statistician, had guided the Japanese industry to recover

itself after World War II, using statistical methods to improve the quality of products. The

Japanese industry listened to Deming. But American industry followed the traditional

management methods which, however, were unchallenged so long as there was little

competition.

Deming urged industrial leaders in Japan to find out what their customers wanted. It must be

complemented by improving the design and production process until the quality of their product

becomes superb. He initiated a new style of management that shifted the focus from profits to

quality. According to him, employees could learn how to monitor, control and continually

improve their work processes and systems. It required the application of a scientific approach to

management. Deming reasoned that products and services were improved by improving the way

the work gets done (the methods) instead of concentrating on the net results (the products).xi

According to Deming, the traditional model of management is guided by objectives. Its

functional success is dependent on a series of commands which help to convert objectives into

work standards. In this method, the performance of employees is guided and evaluated in terms

of numerical goals. As a result, workers, managers and supervisors focus on protecting their job

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by fulfilling the assigned tasks. In other words, to look good they overlook the concern for

customers or the long-term success of the organization. Employees working madly to meet

quotas lose sight of the larger purpose of work. For instance, it may happen that the salesmen

promote business to such an extent that production cannot keep pace with it.

In TQM the roles of workers and managers have to be redefined. A manager‘s role is to enable

employees to do the best job possible by foreseeing and eliminating obstructive elements on the

way. Workers learn to apply the expertise they have gained working with processes and

customers on a daily basis. Making use of the wisdom of Deming the Japanese industry thrived

competitively within four years. And later the US industry also came to adopt and make use of

TQM extensively.

What is Distinctive about TQM?

1. TQM is primarily customer-oriented. It means that greater concentration is laid on customer

satisfaction with a focus on understanding customer‘s needs and expectations. To serve this end,

all members of a business organization strive hard systematically to improve the organization.

All employees offer continued cooperation in this attempt across functional and hierarchical

boundaries.

2. TQM practically means a drastic change in an organization‘s culture. It implies that TQM, in

order to be successful, demands changes in the norms, values, and belief systems of an

organization. It calls for transformation in the decision making processes and power bases.

Change in the technology of a firm will do no good, unless decision-making bodies choose to

undergo changes.xi

And the expected changes are large-scale, long term and integral. So the

results of TQM can be ensured only when radical changes take place in the whole culture,

including the way of doing work in an organization.xi

3. TQM demands a novel management style. TQM at first glance may appear as a change in an

organization‘s technology and its way of doing work. But it has much to do with the

management aspect of business. For instance, in the service sector, TQM affects the way clients

are processed, how the service delivery methods are applied to them and how ancillary

organizational processes such as paperwork, procurement processes, and other procedures are

managed.

A core concept in implementing TQM is Deming‘s 14 points, a set of management practices to

help companies increase their quality and productivity:

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1. Create constancy of purpose for improving products and services.

2. Adopt the new philosophy.

3. Cease dependence on inspection to achieve quality.

4. End the practice of awarding business on price alone; instead, minimize total cost by

working with a single supplier.

5. Improve constantly and forever every process for planning, production and service.

6. Institute training on the job.

7. Adopt and institute leadership.

8. Drive out fear.

9. Break down barriers between staff areas.

10. Eliminate slogans, exhortations and targets for the workforce.

11. Eliminate numerical quotas for the workforce and numerical goals for management.

12. Remove barriers that rob people of pride of workmanship, and eliminate the annual rating

or merit system.

13. Institute a vigorous program of education and self-improvement for everyone.

14. Put everybody in the company to work accomplishing the transformation.

Nine Wastes To Be Eliminated

1. Work-in-process. Stocking items not immediately needed

2. Quality. Producing defective products.

3. Facilities. Having idle machinery and breakdowns, taking too long for setup.

4. Expenses. Overinvesting for required output.

5. Indirect labor. Excess personnel due to bad indirect labor system.

6. Talent. Employing people for jobs that can be mechanized or assigned to less skilled

people.

7. Motion. Not working according to the best work standards.

8. Product Design. Producing products with more functions than necessary.

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9. New-product run-up. Making a slow start in stabilizing the production of a new

product.

TQM and the Ethics of Management

1. If properly understood and applied, TQM can serve as a useful framework to include ethical

values in decision making procedures of business corporations. It offers a way to improve the

performance in ethical matters and provides a criterion for evaluating the quality of the

organization in its strategies, policies and operations. Because as we said already, TQM

incorporates the concepts of product quality, process control, quality assurance and quality

improvement. Besides it takes into consideration the performance of the firm on the whole,

during the entire process and through the entire organization including also suppliers and

cooperators. Such compressive patterns of business operations will necessary include an ethical

framework. This claim will be substantiated subsequently.

2. TQM is built on the foundations of ethics, more precisely of integrity and trust. TQM fosters

openness, fairness and sincerity and allows involvement by everyone. These three elements are

interconnected, though each element offers something distinctive to the perfection of TQM.

Integrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity.

Customers expect and deserve to receive integrity in business dealings. TQM will fail if integrity

is lacking in business transactions.

Trust is closely associated with integrity. Devoid of trust in business activities, TQM will not

survive. Trust operates in a firm very constructively: it fosters full participation of all members;

it invites empowerment of the employees; it encourages commitment; it allows decision making

at appropriate levels in the organization; it fosters individual risk-taking for continuous

improvement and it helps employees to focus on improvement of process. In these ways, trust

builds the cooperative environment essential for TQM.xi

3. As noted already, the fundamental feature of TQM is that it leads a firm to excellence through

quality products, services and processes. Quality in TQM cannot be restricted to products and

services. What counts most important is the quality of utility or value for customers. It is

achieved through various ways such as intense human resource development, the use of Quality

Circles, etc.xi

In this sense, ensuring quality is the prime concern of all in a business firm.xi

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Given the top most value to entailing overall quality, TQM is necessarily bound up with ethical

practices in a firm. Because superior quality goods shall be the outcome of quality management,

workforce, organizational practice, etc. Without ensuring these in advance, one cannot expect to

have quality goods. Naturally, this requires teamwork and team spirit or a favorable

organizational environment. When any of these factors fail, it will affect the quality of the net

product and the firm in the long run. It is in this wide sense that quality management is qualified

as total.

High quality can never be ensured with a band of dissatisfied and disoriented employees. A firm

needs a total revamping of its workforce to the single aim. The whole firm will have to learn

about quality of life, how it can be entailed by job satisfaction. All these are closely related to

ethical practices.

4. We have already explained that TQM is customer-oriented in the sense that its ultimate goal is

to satisfy the customer. However, there is an inherent problem in this apparently clear goal. That

is, the expectations and needs of the customer may not always be clearly expressed or well

defined. It could be very difficult to measure customer expectations. They are very much

subjective. Japanese author YojiAkao addresses this issue by distinguishing two basic classes of

customer wants, as follows.

First, what customers say they want. What is most important is to explore the meaning of what

customers say with the regard to the intended use of the product or service. Neglecting to explore

how the customer intends to use the product or service can lead to poor designs or mistaken

decisions.

Secondly, pay attention to the customer‘s expected quality of goods. The greatest problem is that

customers do not always verbalize their expectations in the most important points, rather they

take them for granted. For example, the expectation that a product must be safe. Customers will

be thoroughly dissatisfied if the product or service does not meet these assumed expectations.

Once the expectations are built into the product customers will hardly notice it. These

expectations are so integral to the nature of the product that they take them for granted.

Customer satisfaction in the service sector is all the more complicated to measure. However, one

may suggest three criteria to measure them, as follows.

1. How a customer compares the expectations s/he had about the service before receiving it with

the actual experience s/he has after receiving the service.

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2. Evaluation of quality both of the service process and service result. For example, in the

restaurant business, the quality of the treatment of customers by waiters can diminish or enhance

the quality and presentation of the food.

3. The promptness and accessibility of regular service and the level at which problems are

handled. Obviously, neglecting the needs of the employees for respectful treatment, supplies, and

resources will reduce the quality of service.

Indian Insights to Total Quality Management

Indian perception of total quality management begins with a focus on mind.

Sashkin and Kiser have defined TQM as ―Creating an organizational culture committed tothe

continuous improvement of skills, teamwork, processes, product and service quality,and

customer satisfaction‖. TQM stresses three principles: customer satisfaction,

employeeinvolvement, and continuous improvements in quality, which some refer to as the

qualitytrilogy. TQM is also said to be based on four fundamental commitments:

1. Commitment to the customer‘s total satisfaction

2. Commitment to understanding and improving the organization‘s processes

3. Commitment to employee improvement

4. Commitment to data-based decision making

Shared vision and values provide the foundation for making these commitments. Becausethe four

commitments often require behaviour that is not customary to managers, in mostorganizations,

unusual steps must be taken to ensure that workers and customers do notperceive the

commitments as hollow promises.It is pertinent to note here that it is values and the value system

that gives real meaning toTQM efforts. It provides the substratum or a solid foundation for TQM

and elevating thecapacity of people and organizations to produce extraordinary results on the

basis ofavailable material resources. In many ways, it teaches a worker to control the temptation

ofjumping into ‗who is wrong?‘ rather than concentrate on ‗what is wrong?‘, which is a coreidea

of TQM.

Indian focus on total quality also mentions certain personal aspects of human resources. For

instance, they must focus on human happiness. Material progress alone should not be the goal of

doing business. Practically it implies that human beings cannot be managed merely as workers or

money makers or just as another of production factors.

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Make management a personal act, rather than an indirect technology driven activity. Humans

cannot be treated as mere means for material ends. It can cause heavy fragmentation not only in

the work field but also in personal life of the workers. Technology in its turn would remain anti-

human and anti-nature. Very often contemporary firms do not follow the impact of the

professional life on their personal life. Many are reported to suffer from psychic disorders and

personal disorientation.

Transcultural Values

Globalization: Globalization affects a manager‘s people skills in lot many ways. At the

managerial level you have to work with people who are born and raised in different cultures.

What is right according to you may be is wrong according to them. So managers have to become

capable of working with people from different Cultures and because values differ across cultures,

an understanding of these differencesshould be helpful in explaining and predicting behavior of

employees from different countries Trans-cultural values are those beliefs that people across

the world are associating themselves with. These beliefs have come in various people because

of social changes brought by globalization, increased mobility and ethnic intermingling. As

you work with people from multicultural backgrounds, you will find that these differences raise

barriers to trans-cultural communication.

Fear: Each person perceives the other person as different and, therefore, dangerous. Usually as

people become better acquainted with each other, the fear gradually dissipates, only to be

replaced by dislike.

Dislike: Group members have a tendency to dislike people who behave or

communicatedifferently from what is considered ―the norm‖ in that culture or group. For

example, aworking class black person might dislike a middleclass whiteperson because white

people tend to be less vocal and expressive than many black people, and thus appear insincere

and weak.

Distrust: People from different cultures are often suspicious of each other‘s actions and motives

because they lack information. Unfortunately, unless there is pressure to change their attitudes,

some people never do progress beyond fear, dislike, and distrust to the next stage of acceptance.

Acceptance: Usually if two people from different cultures share enough good experiences over

a period of time, they will begin to accept each other rather than resent each other.

Respect: If individuals from diverse cultures are open minded, they would allow themselves to

see and admire qualities in one another.

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Trust: Once people from diverse cultures have spent enough quality time together, they usually

are able to trust each other.

Like: For people to like each other, they must share many things in common. To reach this

final stage, individuals from diverse cultures must be able to concentrate on the human qualities

that bind people together, rather than the differences that pull people apart.

Racism

Individual racism: Individuals are discriminated against because of their visible biological

characteristics; for example, black skin or the epicanthic fold of the eyelid in Asians.

Cultural racism: An individual or institution claims that its cultural heritage is superior to that

of other individuals or institutions.

Institutional racism: Institutions (universities, businesses, hospitals) manipulate or tolerate

policies that unfairly restrict the opportunities of certain races, cultures, or groups.

One of the flaws in the profession is an unwillingness to recognize that racism is endemic. This

unwillingness results in a lack of discussion about racism and leads to responses thatexacerbate

the problem.

Bias and Ethnocentrism Whatever their cultural background, people have a tendency to be

biased toward their own cultural values, and to feel that their values are right and the values of

others are wrong or not as good. Many people are surprised to discover that the values and

actions people so admire in their own culture may look them upon with suspicion from other

cultures, which are equally biased.

The belief that one‘s own culture or traditions are better than those of other cultures is called

ethnocentrism. The person who is ethnocentric tends to antagonize and alienate people from

other cultures. Cultural biases can distort your perception of other people‘s values and behavior,

and thus damage your ability to communicate. To overcome your biases, you must first

acknowledge that they exist.

Stereotyping

A cultural stereotype is the unsubstantiated assumption that all people of a certain racial and

ethnic group are alike. For example: All sindhis are businessmen. A son of a doctor is a doctor.

Stereotyping is particularly destructive when negative traits or characteristics are imposed on

all members of a cultural group.

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Ritualistic Behavior

A ritual is a set procedure for performing a task. Every culture has its own ways to perform a

task. It might happen that different people may do same things differently. For example we

can see that management style of U.S.A differs from Indianmanagement style, this happens

just because of rituals taughtto Indians by their family members and the society.

Language Barriers

Language provides the tools (words) that allow people to express their thoughts and feelings.

Thus, language barriers present a grave threat to transcultural communication among

different individuals.

Conflicting Perceptions and Expectations

When people from different cultures try to communicate, their best efforts may be thwarted by

misunderstandings and even serious conflicts. Misunderstandings due to cultural

differencescommonly arise in situations involving food and drink.

To prevent conflicts and misunderstandings, make sure that the message you send is the same

message that the receiver receives. When there is a language barrier, you will need to work

closely with an interpreter.

Module 5

Unity In Diversity

"A man who believes in himself and not circumstances is the real winner”

- SWAMI VIVEKANANDA

Please go through below mentioned facts, which will make you proud to be

1. Who is theco-founder of Sun Microsystems?

Mr. Vinod Khosla

2. Who is thecreator of Pentium chip(90% of the today's computers run on it)?

Mr. Vinod Dham

3. Who is thethird richest man on the world?

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According to the latest report on Fortune Magazine, He is Premji who is the CEO of

Wipro Industries. The Sultan of Bruneiis at 6th position now.

4. Who is thefounder and creator of Hotmail(World's No. 1 web based E-Mail program)?

Mr. Sabeer Bhatia later on sold to Microsoft.

5. Who is the president of AT & T-Bell Labs (AT & T-Bell Labs is the creator of program

languages such as C, C++, UNIX to name a few)?

Mr. Arun Netravalli

6. Who is theGM of Hewlett Packard?

Mr. Rajiv Gupta

7. Who is the newMTD(Microsoft Testing Director) of Windows 2000,responsible

to iron out all initial problems?

Mr. Sanjay Tejwrika

8. Who are theChief Executives of Citibank, Mckensey & Standard Charted?

Mr. Victor Menezes, Mr. Rajat Gupta and Mr. Rana Talwar

We Indians are the wealthiest among all ethnic groups in America, even faring better than the

whites and the natives:

There are 3.22 Millionsof INDIANs in USA (1.5 % of population).

YET, 38% of doctors in USA are INDIANs.

12% scientists in USAare INDIANs.

36% ofNASAscientists are INDIANs.

34% of Microsoftemployees are INDIANs.

28% of IBMemployees are INDIANs.

17% of INTELscientists are INDIANs.

13% of XEROXemployees are INDIANs.

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Quotes about India:

"We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific

discovery could have been made"

- Albert Einstein.

"India is the cradle of the human race, the birthplace of human speech, the mother of history, the

grandmother of legend and the great grand mother of tradition"

- Mark Twain.

"If there is one place on the face of earth where all dreams of living men have found a home

from the very earliest days when man began the dream of existence, it is India"

- French scholar Romain Rolland

These facts were recently published in a German Magazine, which deals with WORLD

HISTORY FACTS ABOUT INDIA

India never invaded any country in her last 1000 years of history.

India invented the Number system. Aryabhatta invented zero.

The world's first university was established in Takshilain 700 BC.

More than 10500 students from all over the world studied more than 60 subjects.

TheUniversityof Nalanda built in the 4th century BC was one of the greatest

achievements of ancient India in the field of education.

According to the Forbes magazine, Sanskrit is the most suitable languagefor computer

software.

Ayurvedais the earliest school of medicine known to humans.

The art of navigationwas born in the river Sindh 5000 years ago. The very word

"Navigation"is derived from the Sanskrit word NAVGATIH.

Budhayana first calculated the value of pi,and he explained the concept of what is now

known as the Pythagorean Theorem. British scholars have last year (1999) officially

published that Budhayan's worksdates to the 6th Century, which is long before the

European mathematicians.

Algebra, Trigonometry and Calculus came from India. Quadratic Equations were by

Sridharacharya in the 11th Century.

The largest numbers the Greeks and the Romans used were 106 whereas Indians used

numbers as big as 1053.

According to the Gemological Institute of America, up until 1896, India was the only

source of diamonds to the world.

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USA based IEEE has proved what has been a century-old suspicion amongst academics

that the pioneer of wireless communication was Professor Jagdish Bose and not Marconi.

The earliest reservoir and dam for irrigation was built in Saurashtra.

Chess was invented in India.

Sushruta is the father of surgery. 2600 years ago he and health scientists of his time

conducted surgeries like cesareans, cataract, fractures and urinary stones.

Usage of anesthesiawas well known in ancient India.

When many cultures in the world were only nomadic forest dwellers over 5000 years

ago, Indians established Harappan culturein Sindhu Valley (Indus Valley Civilization).

The place value system, the decimal system was developed in India in 100 BC.

India conquered and dominated China culturally for 20 centuries without ever having to

send a single soldier across her border" Hu Shih(former Chinese Ambassador to USA) If

we don't see even a glimpse of that great India in the India that we see today, it clearly

means that we are not working up to our potential, and that if we do, we could once again

be an ever shining and inspiring country setting a bright path for rest of the world to

follow.

You may further refer the assignment book (the first two assignments on IEV) for probable

questions and answers from Module 5.