Business Studies

Coordination is called all pervasive because it is needed in every department (production, sales, finance…) and at every level (top, middle, lower) since all of them are interdependent.
The statement speaks of integrating efforts 'of different departments and at different levels' – that is exactly the all-pervasive nature.
Do not confuse with 'unity of action' (which is about binding individual efforts towards a common purpose).

Legal environment = laws, government rules and court decisions that affect business.
(i) A legal ban on liquor advertisements – legal.
(ii) Interest-rate change – economic.
(iii) Demand for organic food – social (changing preferences).
(iv) Digilockers – technological.
(v) Supreme Court order – legal (judicial decision).
So (i) and (v).

Centralisation means decision-making authority is retained at the top levels of management.
Decentralisation is the opposite – systematic delegation of authority to all levels.
Departmentalisation is grouping of activities; span of control is the number of subordinates under one superior.

Controlling = setting standards (5,000 straws/day), measuring actual output, comparing, finding the cause of deviation (no training) and taking corrective action (special training).
Comparing actual output with the target is what told Umang he was short – this is controlling.

Statement I: management has three dimensions – management of work, of people and of operations – so it is multi-dimensional (true).
Statement II: this is the 'all pervasive' feature – management is needed in every type of organisation (true).

Steps of controlling: set standards → measure actual performance → compare with standards → analyse deviations → take corrective action.
Assigning duties is part of organising, not controlling.

Place (physical distribution) includes the channels of distribution and the physical movement of goods (order processing, transportation, warehousing, inventory control) so that the product reaches buyers at the right place and time.

Organising = identifying and dividing work, departmentalising (grouping) activities, assigning duties and establishing authority–responsibility relationships.

Fayol's principle of Order: 'a place for everything (and everyone) and everything (and everyone) in its place'.
It avoids hindrance and wastage of time, which is why the dentist worked at maximum efficiency.

Dynamic nature → keeps on changing (iii).
Complexity → many interacting forces; easy in parts, hard as a whole (i).
Relativity → depends on local conditions, so varies by country/region (ii).

A science has a systematised body of knowledge with its own terms and concepts. Management too has its own vocabulary (planning, span of control, delegation…) which managers share – this is the 'systematised body of knowledge' feature.
Personalised application is a feature of art, not science.

Organisational objectives: survival, profit and growth.
Survival and profit are already achieved (revenue covers costs and risks). Increase in sales, capital, employees and products are the indicators of growth.

Business cycle: in a boom, sales and production rise, so more working capital is needed; in a depression (slowdown), less is needed.
The change here is due to economy-wide slowdown and recovery, not to seasons – so business cycle.

Primary market (new issue market) is where a company sells new securities directly to investors to raise fresh capital.
The secondary market only trades already-issued securities between investors; the company gets no money there.

Basis 'Safety': money market is safer because of short duration and sound issuers; capital market instruments are riskier with respect to return and principal repayment.

Financial planning REDUCES waste, duplication of efforts and gaps in planning – so statement (a) is wrong and hence does not show its importance.
(b), (c), (d) are genuine points of importance.

Gathering and analysing market information means studying customer needs and the market (including SWOT analysis) so the firm can decide which opportunities it can best pursue.
Marketing planning comes after this – setting marketing objectives and action plans.

Brand name = the part of a brand that can be spoken.
Brand mark = the part that can be recognised but not uttered – a symbol, design or logo.
Trade mark = a brand or part of it given legal protection.

Order processing = handling customers' orders accurately and speedily. Delay or mistakes here cause late or wrong-quantity delivery and dissatisfied customers.

Public relations (PR) builds and protects the company's image/goodwill with the public through press relations, product publicity, corporate communication, lobbying and counselling.

Concept 1 – Effectiveness: doing the right task and completing it so the goal is achieved (here, supplying 10,000 garments within two days). It is about the end result.
Concept 2 – Efficiency: doing the task correctly at minimum cost, i.e. getting maximum output with minimum use of resources (cost–benefit). Because double shifts raised cost, Hitesh was effective but not efficient.
Marks: identification ½ + ½, meaning 1 + 1.

The process is Training. Benefits to the organisation (any three):
1. Systematic learning – better than trial and error, which wastes effort and money.
2. Higher productivity – better quality and quantity of output, so more profit.
3. Prepares future managers who can take over in an emergency.
4. Raises employee morale and reduces absenteeism and employee turnover.
5. Helps the organisation respond effectively to a fast-changing environment (technology, markets).

(i) Dematerialisation – converting physical certificates into electronic holdings in a demat account (1 mark).
(ii) Money-market participants (any two): RBI, commercial banks, non-banking finance companies, state governments, large corporate houses, mutual funds (½ + ½).
(iii) National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) (½ + ½).

Any three, each with a line of explanation:
1. Amount of earnings – dividend is paid out of current and past profits; more earnings → more dividend.
2. Stability of earnings – a firm with stable earnings can declare higher dividends.
3. Stability of dividends – firms try to keep dividend per share steady.
4. Growth opportunities – firms with good growth prospects retain more and pay less.
5. Cash flow position – dividend needs cash; a good cash position is required.
6. Shareholders' preference, 7. Taxation policy (higher tax on dividends → lower payout), 8. Stock market reaction, 9. Access to capital market, 10. Legal constraints (Companies Act), 11. Contractual constraints (lenders' conditions).

(i) Judging accuracy of standards: a good control system helps management verify whether the standards set are accurate and objective. By keeping a watch on changes inside the organisation and in the environment, it helps review and revise standards.
(ii) Making efficient use of resources: through control a manager reduces wastage and spoilage of resources, because each activity is carried out according to predetermined standards and norms.
(1½ marks each)

Any three points:
1. Controlling takes place on the basis of standards developed during planning – without planning there is nothing to control against.
2. Planning without controlling is meaningless – controlling ensures that events actually conform to plans.
3. Planning prescribes the course of action to reach objectives; controlling evaluates whether decisions have been turned into the desired action.
4. Both are forward-looking and backward-looking: planning looks ahead but is based on past experience; controlling looks back at performance but its corrective action improves future plans.

(a) Premature evaluation – judging the meaning of a message before the sender finishes, because of a preconceived notion. It is a psychological (emotional) barrier. (½ + ½)
(b) Other psychological barriers (any two):
1. Lack of attention – a pre-occupied mind of the receiver does not listen to the message.
2. Loss by transmission and poor retention – when a message passes through many levels, part of it is lost or distorted; people also cannot retain information for long.
3. Distrust – if sender and receiver do not trust each other, they cannot understand the message in its true sense.
(½ for heading + 1 for explanation, each)

Total investment = Debt ₹4,00,000 + Equity (10,000 × ₹60) ₹6,00,000 = ₹10,00,000.
\( \text{ROI} = \dfrac{\text{EBIT}}{\text{Total investment}} \times 100 = \dfrac{2{,}00{,}000}{10{,}00{,}000} \times 100 = 20\% \)
Interest = 14% of ₹4,00,000 = ₹56,000.
EBT = 2,00,000 − 56,000 = ₹1,44,000.
Tax @50% = ₹72,000, so EAT = ₹72,000.
\( \text{EPS} = \dfrac{72{,}000}{10{,}000} = ₹7.20 \)
(b) Favourable financial leverage (trading on equity), because the return on investment (20%) is higher than the cost of debt (14%), so using debt raises the earnings of equity shareholders.
Common mistake: taking only equity (₹6,00,000) as the investment for ROI.

(a) Co-partnership / stock option – shares offered to employees below market price give them a feeling of ownership. It is a financial incentive, i.e. one measurable in direct money terms, used to motivate better performance. (1 + 1)
(b) Other financial incentives (any two):
1. Pay and allowances – basic pay, dearness allowance, other allowances.
2. Productivity-linked wage incentives – wages linked to increase in productivity.
3. Bonus – paid over and above salary.
4. Profit sharing – a share in profits to improve performance.
5. Retirement benefits – provident fund, pension, gratuity.
6. Perquisites/fringe benefits – car, housing, medical aid, children's education.

(a) Recruitment – searching for prospective employees and stimulating them to apply for jobs in the organisation.
(b) Workload analysis – part of estimating manpower requirements; it assesses the number and types of human resources needed for performing jobs and achieving objectives.
(c) Orientation (induction) – introducing the new employee to superiors, subordinates and colleagues and familiarising him/her with the company's rules and policies.
(d) Selection – identifying and choosing the best person out of a number of prospective candidates.
(½ for identification + ½ for meaning, each)

Any two, with explanation:
1. Pricing of securities – prices are fixed by demand and supply, giving a continuous valuation of securities.
2. Safety of transactions – membership is regulated and dealings follow the rules of the exchange and SEBI, so transactions are safe.
3. Contributes to economic growth – through disinvestment and reinvestment, savings move to the most productive uses.
4. Spreading of equity cult – encourages wider share ownership by regulating new issues and better trading practices and educating the public.
5. Providing scope for (healthy) speculation within the law, which keeps the market liquid.
(½ heading + 1½ explanation each)

\[\begin{array}{|l|l|l|}\hline \text{Basis} & \text{Primary market} & \text{Secondary market}\\\hline \text{Securities} & \text{New securities issued} & \text{Existing securities traded}\\\hline \text{Financing} & \text{Company gets funds (direct capital formation)} & \text{No funds to company (indirect capital formation)}\\\hline \text{Parties} & \text{Company sells to investors} & \text{Investors trade among themselves}\\\hline \text{Buying/selling} & \text{Only buying by investors} & \text{Both buying and selling}\\\hline \text{Price} & \text{Fixed by company management} & \text{Set by demand and supply}\\\hline \text{Location} & \text{No fixed place} & \text{Specified places (stock exchanges)}\\\hline\end{array}\]
Any four bases, 1 mark each.

Any four:
1. Educating the public about consumer rights through training programmes, seminars and workshops.
2. Publishing periodicals about consumer problems, legal reporting and reliefs available.
3. Comparative testing of products in accredited laboratories and publishing the results.
4. Encouraging consumers to protest and act against unfair and exploitative trade practices.
5. Giving legal assistance and advice to consumers seeking remedies.
6. Filing complaints in consumer courts on behalf of consumers.
7. Filing cases in the interest of the general public (not of any one individual).

The court may direct the opposite party to (any four):
1. Remove the defect in goods or deficiency in service.
2. Replace the defective product with a defect-free one.
3. Refund the price or service charges paid.
4. Pay reasonable compensation for loss or injury due to negligence.
5. Pay punitive damages in suitable cases.
6. Discontinue the unfair/restrictive trade practice and not repeat it.
7. Not offer hazardous goods for sale / withdraw them / stop their manufacture.
8. Pay at least 5% of the value of defective goods/deficient services to the Consumer Welfare Fund.
9. Issue corrective advertisement to neutralise a misleading one.
10. Pay adequate costs to the party.

(i) Discipline: obedience to the organisation's rules and the employment agreement, needed for smooth working. It requires good superiors at all levels, clear and fair agreements and judicious application of penalties.
(ii) Unity of Command: each employee should receive orders from and be responsible to only one boss. Dual subordination is avoided, preventing confusion about tasks and undermining of authority.
(iii) Unity of Direction: every group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination.
(2 marks each)

(i) Fatigue study: determines the amount and frequency of rest intervals needed to complete a task. A worker gets physically and mentally tired without rest; proper rest helps regain stamina and work at the same capacity.
(ii) Motion study: study of movements such as lifting, putting objects, sitting, changing positions while doing a job. Unnecessary/unproductive motions are eliminated so the job takes less time and is done efficiently.
(iii) Time study: determines the standard time to perform a well-defined job using a stop watch over repeated observations. It helps decide the number of workers to employ, frame incentive schemes and determine labour costs.
(2 marks each)

(a) Planning. (1 mark)
(b) Next five steps (1 mark each):
1. Developing premises – making assumptions about the future (forecasts) on which plans are based.
2. Identifying alternative courses of action to achieve the objectives.
3. Evaluating alternative courses – weighing the positive and negative aspects of each in the light of the objectives.
4. Selecting an alternative – the real point of decision making; choose the best (or a combination).
5. Implementing the plan – putting it into action; other managerial functions come into play.
(The last step, follow-up action, is not asked.)

(a) Divisional structure – separate units (divisions) for each product category, each multi-functional. (1)
(b) Advantages not mentioned (1 each):
1. Product specialisation develops varied skills in the divisional head, preparing him for higher positions.
2. Promotes flexibility and initiative – each division is autonomous, so decisions are faster.
3. Facilitates expansion and growth – new divisions can be added without disturbing existing ones.
(Fixation of responsibility/performance measurement is already in the case, so do not write it.)
Disadvantages not mentioned (1 each):
1. Conflict among divisions over allocation of funds; a division may maximise its own profit at the cost of others.
2. Divisional managers gain power and may ignore overall organisational interests.
(Increased cost due to duplication is already in the case.)

(a) Societal marketing concept: the firm identifies needs of the target market and satisfies them effectively while also taking care of the long-term well-being of consumers and society (social, ethical, ecological aspects). (1 + 1)
(b) Public relations: programmes to promote or protect the company's image and its products in the eyes of the public – press coverage of the launch, generating positive publicity, monitoring public attitude. (1 + 1)
(c) Any two (1 each):
1. Advertising – paid, impersonal communication by an identified sponsor to promote goods, services or ideas.
2. Sales promotion – short-term incentives (discounts, exchange offers, free service) to encourage immediate purchase.
3. Personal selling – oral, face-to-face presentation to prospective customers to make sales.