Macfast Note
Transcript of Macfast Note
(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
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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
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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
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 .
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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.
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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,
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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.
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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
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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 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.