IGNOU B.Com Solved Question Paper
Term-End
Examination (December, 2011)
ELECTIVE
COURSE: COMMERCE
ECO-3:
MANAGEMENT THEORY
Time:
2 hours (Maximum Marks: 50)
(Weightage:
70%)
Note:
Attempt both Section 'A' and Section 'B'.
SECTION - A
1. Explain clearly the meaning of the
term 'Management' and describe its main functions. 3+9
Ans: Management:
Management is the coordination of all
resources through the process of planning, organising, directing, staffing and
controlling in order to attain stated objectives effectively and
efficiently. Effectively means doing the
right task, completing activities and achieving goals and efficiently means to
attain objectives with least amount of resources at a minimum cost. This process starts at the top and
continues in more or less degree at every level of the organisation.
According to Harold Koontz, “Management is an
art of getting things done through others and with formally organised
groups."
According to F.W. Taylor, “Management is an
art of knowing what do you want to do and then seeing that is is done in the
best and cheapest way.”
According to Henry Fayol, “To manage is to forecast, to plan, to organize, to command to co-ordinate and control.
Functions/Elements
of Management
According to Henry Fayol, in every
organisation manager perform certain functions to achieve results. These
functions are broadly classified under five categories:-
1. Planning: Planning is a process of making
decision about future. It provides direction to enterprise activities. Its work
is to decide in advance what is to be done, when and where it is to be done,
how it is to be done and by whom. The main functions of planning are Set up
goals, Forecasting, Search for alternatives source of action and Budgeting.
2. Organising: It is concerned with the
arrangement of an organisation’s resources – people, material, technology and
finances in order to achieve enterprise objective. The main functions of
organising are Job design, Job specification and Authority and responsibility.
3. Staffing: Staffing is the function of
employing suitable personas for the enterprise. It may be defined as an
activity where people are recruited, selected, trained, developed, motivated
and compensated for manning various positions.
4. Directing: According to Dale, direction is
telling people what to do and seeing that they do it to the best of their
ability. Directing is a function of guiding and supervising the activities of
sub ordinates. The four main elements of directing are:
5. Leadership: It is a process of influencing the
action of a person or a group to attain desired objectives. The success of an
organisation depends upon the quality of leadership shown by its managers.
6. Motivation: It is the process of stimulating
people to take desired courses of action. It is to inspire, encourage and impel
people to take required action.
7. Communication: It is a way of reaching other
with ideas, facts, and thoughts. Effective communication is important in
organisation because managers Can achieve very little without it.
8. Controlling: It is the management function
concerned with monitoring employee’s activities, keeping the organisation on
track towards its goals, and making corrections as required. It include four
things:
9. setting standard of performance;
10. measuring actual performance;
11. comparing actual performance against the
standard ;
12. Taking corrective actions to ensure goal
accomplishment.
2. (a) Discuss the importance of
Planning in an Organisation. 6+6
Ans: Importance and Advantages of
Planning
Planning is of vital importance in the
managerial process. No enterprise can achieve its objectives without systematic
planning. “Planning is the heart of management” The following points highlight
the importance of planning function of management:
1. Planning
provides directions: By stating i n
advance how work is to be done, planning provide direction for action. If goals
are well defined, employees are aware of what the organisation has to do and
what they must do to achieve those goals. Departments and individuals in the
organisation are able to work in coordination. Planning keeps the organisation
on the right path. If there was no planning, employees would be working
in different directions and the organisation would not be able to achieve its
goals efficiently.
2. Planning
reduces the risks of uncertainty:
Business enterprises operate in an uncertain environment and face several types
of risks. Planning enables these enterprises to predict future events and
prepare to face the unexpected events. With the help of planning, managers can
identify potential dangers and take steps to overcome them. Thus, planning
helps risk and uncertainty.
3. Planning
facilitates decision-making:
Decision-making involves searching for various alternative courses of action,
evaluating them and selecting the best course of action. Under planning,
targets are laid down. With the help of these targets, managers can better
evaluate alternative courses of action and select the best alternative. Plans
lay down in advance what is to be done and how it is to be done.
Therefore, decisions can be taken with greater confidence.
4. Planning
reduces overlapping and wasteful activities:
Since planning ensures clarity in thought and action, work is carried on
smoothly without interruptions. There is no confusion and misunderstanding.
Useless and redundant activities are minimized or eliminated. It is easier to
detect inefficiencies and take corrective measures to deal with them.
5. Planning
promotes innovative ideas: Planning is
thinking in advance and, therefore, there is scope of finding better ideas and
better methods and procedures to reach the objectives/goals of the enterprise.
This forces managers to think differently about the future of the organisations
from the present. Thus, planning makes the managers innovative and creative.
6. Planning
establishes standards for controlling:
Planning provides the goals or standards against which the actual performance
can be measured and evaluated. A comparison of actual performance with the
standards helps to identify the deviations and to take corrective action.
Planning makes control meaningful and effective. ‘Control
is blind without planning.” Thus,
planning provides the basis of control.
(b) State the limitations of Planning.
Ans:
Limitations of Planning
Planning is essential for a business
organisation. It is difficult to manage operations without formal planning. It
is important for the organisation to move towards achieving goals. But often
things to not always go according to plan. Unforeseen events and changes, rise
in costs and prices, environmental changes, government interventions, legal
regulations, all affect our business plans. Plans then need to be modified. Therefore,
planning might fail due to the following limitations:
1. Planning
does not work in dynamic environment:
The business environment is dynamic, nothing is constant. The environment
consists of a number of dimensions— economic, political, technological, legal
and social dimensions. The organisation has to constantly adapt itself to the
changes in business environment. However, it is not always possible to
accurately assess future trends in the environment.
2. Planning is
a time consuming process: Planning is
a time consuming process. It requires collection of information, its analysis
and interpretation. These activities may take considerable time. Sometimes
plans to be drawn up take so much of time that there is not much time left for
implementation of plans.
3. Planning
involves huge costs: Planning is an
expensive process in terms of money. When plans are drawn up, huge costs are
involved in the formulation of plans. If the costs are not justified by the
benefits derived from the plan, it may have adverse effect on the enterprise.
There are a number of incidental costs as well, like expenses on Board’s
meetings, discussions with professional experts and preliminary investigations
to find out the Viability of the plan.
4. Planning
creates rigidity: Planning leads
to rigid mode of functioning for managers. This has adverse effect on the
initiative to be taken by them.
5. Planning
does not guarantee success: The success
of an enterprise is possible only when plans are properly drawn up implemental.
Managers have a tendency to rely on previously tried and tested successful
plans. But it is not always true that a plan which has worked before, will work
effectively again.
6. Planning
reduces creativity: Planning is an
activity which is done by top management. Usually the rest of the organisation just implements these plans. As
a consequence, middle management and other decision makers are neither allowed
to deviate from plans nor are they permitted to act on their own. They only
carry out orders.
3.
Distinguish between formal and informal Organisations. Explain the functions of
the informal organisation. 6 + 6
Ans: Difference between formal and
Informal organisation:
|
Basis |
FORMAL |
INFORMAL |
|
1.Structure |
It
is official, so it has prescribed structure of roles and relationships. It is planned and deliberately created by
management |
It
is in unofficial or natural having no specific structure. It arises spontaneously without official
sanction by management |
|
2.Base |
It
is based on delegation of authority & may grow to very big size. It is mechanistic and brings order in the
organisations. |
It
arises through social interactions between employees. It usually remains small is size. It is humanistic and gives satisfaction to
employees. |
|
3.Nature |
It
is deliberately created impersonal with emphasis on authority, functions,
status differentials and down ward communications |
It
is personal with emphasis on people and their intricate relationships,
informal rankings and multidimensional communications. |
|
4.Shape |
It
is hierarchical and pyramid shaped. |
It
has no definite shape, and no division of work. It is structural less and ill defined. It is psychosocial system. |
|
5.Orientation |
Its
tasks, goals and values are economic oriented towards efficiency,
productivity profitability and growth. |
Its
tasks, goals and values are socio- psychological centering on individual and
group satisfaction affiliation co-friendship esteem etc. |
|
6.
Charts and Manuals |
It
can be shown in the form of charts and manuals of the organisation. |
It
finds no place on organisation charts and manuals. |
Functions of Informal Organizations:
a) Informal group
gives social satisfaction to the employees.
b) It promotes sense
of belongingness.
c) It provides
safety valve for emotional problems of the employees
d) It provides
social control.
e) It helps
developing communication channels in the organization
f) It provides help
on the job to the employees during illness, accidents etc.
g) It serves as a
check on authority of a manager.
h) It provides fertile ground for future leaders
i)
it supports in achieving organizational goals
j)
It reduces supervision.
k) It may help
manager to overcome their natural limitations of ability.
4. What do you mean by motivation? Do
you feel that motivation helps in inspiring and encouraging employees to work
willingly? Give your arguments. 3+9
Ans: Motivation: The word motivation is
derived from ‘motive', which means an active form of a desire, craving or need
that must be satisfied. Motivation is the key to organizational effectiveness.
The manager in general has to get the work done through others. These 'others'
are human resources who need to be motivated to attain organizational
objectives.
According to George R. Terry, "Motivation
is the desire within an individual that stimulates him or her to action."
According to
Berelson and Steiner “A motive is an
inner state that energizes activates, or moves and directs or channels behavior
goals".
According to Lills "It is the stimulation of any emotion or
desire operating upon one's will and promoting or driving it to action".
According to Encyclopedia of Management "Motivation refers to the degree of
readiness of an organism to pursue some designated goals and implies the
determination of the nature and locus of force inducing a degree of
readiness."
Role
of Motivation in inspiring and encouraging people to work willingly
Motivation is a psychological phenomenon which
generates within an individual. A person feels the lack of certain needs, to
satisfy which he feels working more. The need satisfying ego motivates a person
to do better than he normally does. The motivation process is influenced by
personality traits, learning abilities, perception and competence of an
individual. A highly motivated employee
works more efficiently and his level of production tends to be higher than
others. It originates from the-needs and wants of an individual. It is a
tension of lacking something in his mind, which forces him to work more
efficiently. The motivation procedure contributes to and boosts up the morale
of the employees. A high degree of motivation may lead to high morale. Some of
the effect of motivation on employees are given below:
a) High Performance: Motivated employee’s writ put maximum efforts
for achieving organizational goals. The untapped reservoirs of physical and
mental abilities are taped to the maximum. Better performance will also result
in higher productivity. The cost of production can also be brought down if
productivity is raised.
b) Low employee
Turnover and Absenteeism: When the
employees are not satisfied with their job then they will leave it whenever
they get an alternative offer. The dissatisfaction among employees also
increases absenteeism. The employment training of new employees costs dearly to
the organization.
c) Better
Organizational Images: Those enterprises
which offer better monetary and non-monetary facilities to their employees have
a better image among them. Such concerns are successful in attracting better
qualified and experienced persons. Since there is a better man-power to
development programme, the employees will like to join such organizations. Motivational
efforts will simplify personnel functions also.
d) Better Industrial
Relations: A good motivational system will create
job satisfaction among employees. The employment will offer them better service
conditions and various other incentives. There will be an atmosphere of
confidence among employers and employees. There will be no reason for conflict
and cordial relations among both sides will create a healthy atmosphere. So
motivation among employees will lead to better industrial relations.
e) Acceptability to
Change: The changing social an industrial
situations will require changes and improvements in the working of enterprises.
There will be a need to introduce new and better methods of work from time to
time. Generally employees resist changes for fear of an adverse effect on their
employment.
5. Define communication. What are the
steps involved in the process of communication? Explain. 4+8
Ans: Communication: The term communication is derived from a Latin
word “communis‟ which means common. This means establishing a common ground.
Now whatever is common is shared by all. But what is that which is shared by
all in communication? It is fact, ideas, understanding, opinions, information
etc.
In the words of Newman, Summer & Warren, “communication is an exchange of facts,
ideas, and opinions by two or more persons.”
According to Keith Davis, “Communication is the process of passing information and understanding
from one person to another.”
Communication should not be interpreted as merely
sending or receiving messages. It involves a systematic and continuous process
of telling, listening and understanding. It is a two way process and is
complete only when there is some response from the receiver of information.
Steps in Process of Communication
The process of communication is the inter
relationship between several independent components. It consists of a chain of
related actions and reaction which together result in exchange of information.
In order to understand the process of communication, it is necessary to
describe each of these components. A model of communication process is as
follows:
1. Sender: The sender is the first component of the
process of c communication. The sender may be a speaker, a writer or any other
person. He is the one who has a message and wants it to share it for some
purpose.
2. Ideation: Ideation is the preliminary step in
communication where sender creates an idea to communicate. This idea is the
content and basis of the message to be communicated. Several ideas may generate
in the sender’s mind. The sender must identify, analyze and arrange the ideas
sequentially before transmitting them to the receiver.
3. Message: Message is the heart of communication. It is
what the sender wants to convey to the receiver. It may be verbal i.e. written
or spoken or non verbal i.e. body language, space language, etc.
4. Encoding: To encode is to put an idea into words. In
this step the communicator organizes his ideas into a series of symbols or
words which will be communicated to the intended receiver. Thus the ideas are
converted into words or symbols. The words and the symbols should be selected
carefully, it should be understandable and most of all it should be suitable
for transmission and reception.
5. Transmission: Next in the process of communication is
transmission of the message as encoded messages are transmitted through various
media and channels of communication connects the sender and the receiver. The
channel and media should be selected keeping in mind the requirement of the
receiver, the communication to be effective and efficient the channel should be
appropriate.
6. Receiver: Receiver is the person or group for whom the
message is meant. He may be a listener, a reader or a viewer. Any neglect on
the part of the receiver may make the communication ineffective. Receiver is
thus the ultimate destination of the message. It the message does not reach the
receiver the communication is said to be incomplete.
7. Decoding: Decoding means translation of symbols encoded
by the sender into ideas for understanding. Understanding the message by
receiver is the key to the decoding process. The message should be accurately
reproduced in the receiver’s mind. If the receiver is unable to understand the
message correctly the communication is ineffective.
8. Behaviour of the
receiver: It refers to the response by the
receiver of the communication received from the sender. He may like to ignore
the message or to store the information received or to perform the task
assigned by the sender. Thus communication is complete as soon as the receiver
responses.
9. Feedback: Feedback indicates the result of
communication. It is the key element in the communication and is the only way
of judging the effectiveness of communication. It enables the sender to know whether
his message has been properly interpreted or not. Systematic use of feedback
helps to improve future message. Feedback, like the message could be oral,
written or non verbal. It has to be collected from the receiver.
6. Discuss
the nature, benefits and limitations of Break-even Analysis as one of the
modern techniques of control. 3+4+5
Ans: Break
even analysis: The study of
cost-volume-profit analysis is often referred to as “Break even analysis “and
the two terms are used interchangeably by many. This is why break even analysis
is a known form of cost-volume-profit analysis. The term break even analysis is
used in two sense – narrow sense and broad sense. In its broad sense, break
even analysis refers to the study of relationship between cost, volume and
profit. In its narrow sense, it refers to a technique of determining that level
of operations where total revenue equal total expenses i.e., breakeven point.
The
main Features (Characteristics) of Break even analysis are as follows:
1. Cost Classification: This technique makes a
sharp distinction between variable costs and fixed costs. It is the variable
cost on the basis of which production and sales policies are designed by a
firm.
2. Managerial Decisions: It is a technique of
analysis and presentation of costs which help management in taking many
managerial decisions such as make or buy decision, selling price decisions etc.
3. Inventory Valuation: Under break even
analysis technique, inventory for profit measurement is valued at marginal cost
only.
4. Price Determination: Prices are determined
on the basis of marginal cost by adding contribution which is the excess of
selling price over variable costs of sales.
5. Contribution: Break even analysis makes use
of Contribution for taking various decisions. Contribution is the difference
between sales and marginal cost. It forms the basis for judging the
profitability of different products or departments.
Advantages
of Break even analysis
1.
Helpful in Cost
control: It divides total cost into fixed and variable cost. By concentrating
all efforts on the variable costs, total cost can be controlled.
2.
Profit Planning:
It helps in short-term profit planning by making a study of relationship
between cost, volume and Profits, both in terms of quantity and graphs.
3.
Evaluation of
Performance: The different products and divisions have different profit earning
potentialities. Break even analysis is very useful for evaluating the
performance of each sector.
4.
Helpful in Decision
Making: It is a technique of analysis and presentation of costs which help
management in taking many managerial decisions such as make or buy decision,
selling price decisions, Key or limiting factor, Selection of suitable Product
mix etc.
5.
Production
Planning: It helps the management in Production planning. The effect of
alternative production policy can be readily available and decision can be
taken that would yield the maximum return to Business.
Disadvantages of Break even analysis
1. It is based on an unrealistic assumption that
all costs can be segregated into fixed and variable costs. In the long term
sales price, fixed cost and variable cost per unit may vary.
2. All costs are not divisible into fixed and
variable. There are certain costs which are semi-variable in nature. The
separation of costs into fixed and variable is difficult and sometimes gives
misleading results.
3. Under break even analysis technique, stocks
and work in progress are understated. The exclusion of fixed costs from Stock
Valuation affects profit, and true and fair view of financial affairs of an
organization.
4.
Marginal cost data becomes unrealistic in case
of highly fluctuating levels of production, e.g., in case of seasonal factories.
5.
It can correctly
assess the profitability on a short-term basis only, but for long term it is
not effective.
SECTION-B
7. Write explanatory note on any two
of the following: 7+7
(a) Barriers to effective delegation
Ans:
Barriers in delegation of authority
1. Reluctance to delegate: In many cases managers
will not be interested to delegate to authority. They will not be willing to
give authority to subordinates. They will not make any plan to delegate
authority.
2. Fear of subordinates: Managers in many cases
fear from subordinates because they think that when there is delegated
authority their performance will be superior to the performance of manager and
subordinate may pose challenge to the manager.
3. Lack of trust: Managers may lack confident or
trust on subordinates. They do not think or believe that after delegating
authority, subordinates will do better or their performance will improve.
4. Incompetence of subordinates: Subordinates
must be competent enough for effective delegation of authority. Subordinate
must be willing and competent to accept delegated authority. In many
organizations due to the incompetency of subordinates delegation of authority
is affected.
5. Lack of control: When employees are delegated
authority, they will be free to work. They will work autonomously; managers
cannot exercise effective control over them. Delegation is affected.
(b) Behavioral theory of leadership
Ans: The Behavioural Theory: The short
comings of the trait theory led to a significant change in the emphasis of
leadership approach. This shift in emphasis began to focus an attention on the
actual behaviour and actions of leaders as against personal qualities or traits
of leaders. According to his approach, leadership involves an interpersonal
relationship between a leader and subordinates in which the behaviour of the
leader towards the subordinates constitutes the most critical element. The good
behaviour of the leader raises the morale, builds up confidence and spirit
among the team members and the lack of good behaviour will discard him as a
leader.
But the
behavioural theories also suffer from certain limitations, e.g., what
constitutes the most effective style of leadership behaviour? Moreover, a
particular behaviour or action of a leader may be effective at one point of
time while the same may be ineffective at some other point of time and in some
other circumstances.
(c) Budgetary control
Ans: Concept
of Budgetary Control: Budgetary
control is the process of determining various budgeted figures for the
enterprise for the future period and them comparing the budgeted figures with
the actual performance for calculating variances, if any.
According to Brown and Howard, “Budgetary
control is a system of controlling costs which includes the preparation of
budgets, coordinating the departments and establishing responsibilities,
comparing actual performance with the budgeted and acting upon results to
achieve maximum profitability.”
Objectives of Budgetary Control: The main objectives of
budgetary control are as follows:
a) To ensure planning for future by setting up
various budgets, the requirements and expected performance of the enterprise
are anticipated.
b) To co-ordinate the activities of different
departments.
c) To operate various cost centres and
departments with efficiency and economy.
d) Elimination of wastes and increase in
profitability.
e) To anticipate capital expenditure for future.
f) To centralize the control system.
g) Correction of deviations from the established
standards.
h) Fixation of responsibility of various
individuals in the organization.
(d) Importance of directing function
Ans: Importance of Directing
a) To Initiate Action: The employees in the
organisation start working only when they get instructions and directions from
their superiors. In the directing function the superiors direct the actions of
employees toward the predetermined goals of the organisation.
b) To Integrate Employees’ Efforts: In the
organisation numbers of employees are working at different levels and in
different job positions. The employees may differ in their levels of authority
and the type of job assigned.
c) Means of Motivation: Directing function does
not mean giving orders only but through directions and instructions the
superiors try to motivate the employees to perform to their best ability.
d) Balance in the Organisation: The directing
function tries to create balance in the organisation. Generally when the
employees are working at different levels they develop different attitudes and
the balance between their attitudes is made by directing function.
e) To Facilitate Change: Generally the employees
hesitate in accepting the changes but through directing function the changes
can be implemented more easily as while giving directing the superiors guide
the subordinates that the changes are better for them also.
***
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