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IGNOU Solved Question Papers: ECO - 03 (December' 2019) | IGNOU B.Com Solved Question Paper


IGNOU B.Com Solved Question Paper

Term-End Examination (December, 2019)



Time: 2 hours, Maximum Marks: 50

Weightage: 70%

Note: Attempt both the Section A and Section B.


Note: Attempt any three questions.

1. Discuss various managerial functions that are basic and common to all organisations. 12

Ans: 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:-

a)      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.

b)      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.

c)       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.

d)      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:-

1. 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.

2. 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.

3. 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.

4. Supervision: Supervision means instructing, guiding, monitoring and observing the employees while they are performing jobs in the organisation. The word supervision is the combination of two words i.e., super+vision where super means over and above and vision means seeing.

e)      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:

Ø  setting standard of performance;

Ø  measuring actual performance;

Ø  comparing actual performance against the standard ;

Ø  taking corrective actions to ensure goal accomplishment.


2. "Planning is a process consisting of certain steps or series of sequential activities." Comment upon the statement with relevant examples. 12

Ans: Planning Process: Planning process involves the setting up of business objectives and allocation of resources for achieving them. Planning determines the future course of action for utilizing various resources in a best possible way. It is a combination of information handling and decision making systems based on information inputs, outputs and a feedback loop.

Steps in the process of Planning:

a)      Setting organisational objectives: The first and foremost step in the planning process is setting organisational objectives or goals, which specify what the organisation wants to achieve. For example, an increase in sales by 20% could be the objective of the organisation. Objectives may also be set for each individual department. They give direction to all departments.

b)      Developing planning premises: Planning is concerned with the future, which is uncertain. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises. Assumptions are made in the form of forecasts about the demand for a particular product, government policy, interest rates, tax rates, etc. Therefore, accurate forecasts become essential for successful plans.

c)       Identifying alternative courses of action: Once objectives are set and assumptions are made, then the next step is to identify all possible alternative courses of action. For example, in order to achieve the organisational objectives of increasing profit, the alternatives may be

a.       increase the sales of an existing product, or        

b.      Produces and sells a completely new product.

d)      Evaluating alternative courses: The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved, its feasibility and consequences. For example, the risk-return trade-off is very common. The more risky the investment, the higher is the possibility of returns. To evaluate such proposals, detailed calculations of earnings, earnings per share, interest, taxes, dividends are made.

e)      Selecting the best possible alternative: This is the real point of decision making. The best/ideal plan has to be adopted, which must be the most feasible, profitable and with least negative consequences. The manager must apply permutations and combinations and select the best possible course of action. Sometimes, a combination of plans. may be selected instead of one best plan.

f)       Implementing the plan: Once the plans are developed, they are put into action. For this, the managers communicate the plans to all employees very clearly and allocate them resources (money, machinery, etc.

g)      Follow-up action: The managers monitor the plan carefully to ensure that the premises are holding true in the present condition or not. If not, adjustments are made in the plan.


3. (a) Describe the importance of staffing function in an organisation. 6

Ans: Need and Importance of Staffing:

1. Obtaining competent personnel: Proper staffing helps in discovering and obtaining competent personnel for various jobs.

2. Higher performance: Proper staffing ensures higher performance by putting right person on the right job.

3. Continuous survival and growth: Proper staffing ensures continuous survival and growth of the enterprise, research & development, innovation.

4. Optimum utilization of human resources: Proper staffing helps to ensure optimum utilization of human resources. It prevents underutilisation of personnel and high labour costs. At the same time, it avoids disruption of work.

5. Improve job satisfaction: Proper staffing improves job satisfaction and morale of employee through objective assessment and fair rewarding of their contribution.

(b) What do you mean by Management Development Programmes? Discuss few techniques of management development programmes. 6

Ans: All those persons who have authority over others and are responsible for their activities & for the operations of an enterprise are managers. Any activity designed to improve the performance of existing managers to provide for a planned growth of managers to meet future requirements is management development.

According to Flippo “executive development includes the process by which managers and executives acquire not only skills and competency in their present job but also capabilities for future managerial tasks of increasing difficulty and scope.” 

In simple words, Executive development or management development is a systematic process of learning and growth by which managerial personnel gain and apply knowledge, skills, attitudes and insights to manage the work in their organization effectively and efficiently.

Methods of training for managers/methods of managerial development/executive development:

A) On the job method: On the job method refers to training given to personnel inside the company. There are different methods of on the job training.

1. Job rotation: This method enables the company to train managerial personnel in departmental work. They are taught everything about the department. Starting from the lowest level job in the department to the highest level job. This helps when the person takes over as a manager and is required to check whether his juniors are doing the job properly or not. Every minute detail is studied.

2. Planned progression: In this method juniors are assigned a certain job of their senior in addition to their own job. The method allows the employee to slowly learn the job of his senior so that when he is promoted to his senior job it becomes very easy for him to adjust to the new situation. It also provides a chance to learn higher level jobs.

3. Coaching and counseling: Coaching refers to actually teaching a job to a junior. The senior person who is the coach actually teaches his junior regarding how the work must be handled and how decisions must be taken, the different techniques that can be used on the job, how to handle pressure. There is active participation from the senior.

Counseling refers to advising the junior employee as and when he faces problems. The counselor superior plays an advisory role and does not actively teach employees.

4. Under study: In this method of training a junior is deputed to work under a senior. He takes orders from the senior, observes the senior, attends meetings with him, learns about decision making and handling of day to day problems. The method is used when the senior is on the verge of retirement and the job will be taken over by the junior.

5. Junior board: In this method a group of junior level managers are identified and they work together in a group called junior board. They function just like the board of directors. They identify certain problem, they have to study the problem and provide suggestions. This method improves team work and decision making ability. It gives an idea about the intensity of problem faced by the company. Only promising and capable junior level managers are selected for this method.

B) Off the job training method: Off the job training refers to method of training given outside the company. The different methods adopted here are:

1. Classroom method: The classroom method is used when a group of managers have to be trained in theoretical aspects. The training involves using lectures, audio visuals, case study, role play method, group discussions etc. The method is interactive and provides very good results.

2. Simulation: Simulation involves creating atmosphere which is very similar to the original work environment. The method helps to train manager handling stress, taking immediate decisions, handling pressure on the jobs etc. An actual feel of the real job environment is given here.

3. Business games: This method involves providing a market situation to the trainee manager and asking him to provide solutions. If there are many people to be trained they can be divided into groups and each group becomes a separate team and play against each other.

4. Committee: A committee refers to a group of people who are officially appointed to look into a problem and provide solution. Trainee managers are put in the committee to identify how they study a problem and what they learn from it.

5. Conference: Conferences are conducted by various companies to have elaborate discussions on specific topics. The company which organizes the conference invites trainee manager and calls for experts in different fields to give presentation or lecture. The trainee manager can ask their doubts to these experts and understand how problems can be solved on the job.

6. Readings: This method involves encouraging the trainee manager to increase his reading related to his subject and then ask him to make a presentation on what he has learned. Information can be collected by trainee manager from books, magazines and internet etc.

7. In basket training: In this method the training is given to the manager to handle files coming in and to finish his work and take decisions within a specified time limit. The trainee manager is taught how to prioritize his work, the activities which are important for his job and how to take decisions within limited time limit.

4. Explain various techniques of co-ordination used by management in an organisation. 12

5. Explain different stages involved in the control process. Give suitable example to support your answer. 12

Ans: Steps in Controlling Process

In order to perform his control functions, a manager follows three basic steps. First of all, he establishes the standards of performance to ensure that performance is in accordance with me plan. After this, the manager will appraise the performance and compare it with predetermined standards. This step will lead the manager to know whether the performance has come up to the expected standard or if there is any deviation. If the standards are not being met, the manager will take corrective actions, which is the final step in controlling.

1)      Establishing standards: A standard acts as a reference line or basic of comparison of actual performance. Standards should be set precisely and preferably in quantitative terms. It should be noted that setting standards is also closely linked with and is an integral part of the planning process. Different standards of performance are set up for various operations at the planning stage, which serve as the basis of any control system. Establishment of standards in terms of quantity, quality or time is necessary for effective control. Standards should be accurate, precise, acceptable and workable. Standards should be flexible, i.e., capable of being changed when the circumstances require so.

2)      Measurement of performance: This step involves measuring of actual performance of various individuals, groups or units and then comparing it with the standards, which have already been set up at the planning stage. The quantitative measurement should be done in cases where standards have been set in quantitative terms. In other cases, performance should be measured in terms of quantitative factors as in case of performance of industrial relations manager. Comparison of performance with standards is comparatively easier when the standards are expressed in quantitative terms.

3)      Comparison: This is the core of the control process. This phase of control process involves checking to determine whether the actual performance meets the predetermined or planned performance. Manager must constantly seek to answer, “How well are we doing?” When a production supervisor checks the actual output or performance of his department with the production schedule, he is performing comparison aspect of control. When-an executive calculates the performance of his subordinates once in six months or   annuity, he is performing comparison aspect of control. Checking return on in investment is a comparison phase of control.

4)      Taking corrective action: The final step in the control process is taking corrective actions so that deviations may not occur again and the objectives of the organisation are achieved. This will involve taking certain decision by the management like re-planning or redrawing of goals or standards, assignment of clarification of duties. It may also necessitate reforming the process of selection and the training of workers. Thus, control function may require change in all other managerial functions. If the standards are found to be defective, they will be modified in the light of the observations.

6. Discuss briefly the three basic styles of leadership with suitable examples. 12

Ans: Leadership Styles or Types of Leaders

1.       Autocratic or Authoritarian Style leader: An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader. No suggestions or initiative from subordinates is entertained. The leader forces the subordinates to obey him without questioning. An autocratic leader is, in fact, no leader. He is merely the formal head of the organisation and is generally disliked by the subordinates who feel comfortable to depend completely on the leader.


a)      Reduced stress due to increased control

b)      A more productive group ‘while the leader is watching’

c)       Improved logistics of operations

d)      Faster decision making


a)      Short-termistic approach to management.

b)      Manager perceived as having poor leadership skills

c)       Increased workload for the manager

d)      People dislike being ordered around

e)      Teams become dependent upon their leader

2.       Laissez-faire or Free-rein Style Leader: Under this type of leadership, maximum freedom is allowed to subordinates. They are given free hand in deciding their own policies and methods and to make independent decisions. The leader provides help only when required by his subordinates otherwise he does not interfere in their work. The style of leadership creates self-confidence in the workers and provides them an opportunity to develop their talents. But it may not work under all situations with all the workers, may bring problems of indiscipline. Such leadership can be employed with success where workers are competent, sincere and self-disciplined.


a)      No work for the leader

b)      Frustration may force others into leadership roles

c)       Allows the visionary worker the opportunity to do what they want, free from interference

d)      Empowers the group


a)         It makes employees feel insecure at the unavailability of a manager.

b)         The manager cannot provide regular feedback to let employees know how well they are doing.

c)          Managers are unable to thank employees for their good work.

d)         The manager doesn’t understand his or her responsibilities and is hoping the employees can cover for him or her.

3.       Democratic or Participative Style leader: The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates. Subordinates are encouraged to make suggestions and take initiative. It provides necessary motivation to the workers by ensuring their participation and acceptance of work methods. Mutual trust and confidence is also created resulting in job satisfaction and improved morale of workers. It reduces the number of complaints, employee's grievances, industrial unrest and strikes. But this style of leadership may sometimes cause delay in decisions and lead to indiscipline in workers.


a)      Positive work environment

b)      Successful initiatives

c)       Creative thinking

d)      Reduction of friction and office politics

e)      Reduced employee turnover


a)      Takes long time to take decisions

b)      Danger of pseudo participation

c)       Like the other styles, the democratic style is not always appropriate. It is most successful

d)      when used with highly skilled or experienced employees or when implementing operational changes or resolving individual or group problems.


7. Write explanatory notes on any two of the following: 7+7

(a) McGregor's Participation theory

Ans: McGregor’s Theory X and Y

Doughlas McGregor introduced these two theories i.e., Theory X and Theory Y, based on two distinct views of human beings. He proposed, at opposite extremes, two pairs of assumptions about human beings which he thought were implied by the actions of the mangers. Theory X deals with one extreme, based on one set of assumptions and Theory y deals with another extreme based on another set of assumptions. These theories are not based on any research, but according to McGregor, these are intuitive deduction.

Theory X: -This theory is based on the traditional approach to human behavior. The assumptions generally, held by the managers in their theory are: -

a)      The average human beings inherently dislike work and will try to avoid it, whenever possible

b)      A the employee are lazy, they must be controlled, coerced, threatened with punishment to achieve goals, to which they are indifferent

c)       Average employee will try to avoid responsibility and seek formal directions whenever possible, because they have relatively little ambition.

Theory y: -This approach assumes that management by direction and control is questionable method for motivating such people whose physiological and social needs have been satisfied and whose social; esteem and self actualization needs are becoming more important. For such people, Theory Y seems to be applicable, which is the contrast of Theory X. This theory makes the following assumptions about people:

a)      The average human being does not inherently dislike work. He can view work as natural or enjoyable as rest or play

b)      Employees will exercise self direction and self control in the attainment of the objectives to which they are committed

c)       Given proper working conditions, average person can learn to accept and even to seek responsibility

d)      Commitment to objectives is a function of the rewards associated with their achievement

e)      All the people are capable of making innovative and creative decision and the decision making is not the sole province of the people in management position.

(b) Problems of informal organisation

Ans: Disadvantages of Informal Organisations:

1)      Informal groups generally resist change.

2)      Interest of formal and informal groups may clash with each other.

3)      As informal groups set their own norms about quote of work to be done hence productivity remain below optimum (maximum) level.

4)      Members of informal organisation may adopt group think philosophy by way of assuming that group decision is the only right decision.

5)      Informal group ends to promote rumors, grapevine which spreads at a much faster rate and hence harmful to the organisation.

6)      Mangers should not resist formation of in formal groups but try to convince it to contribute to organisational goals.


(c) Behavioural approach to management

(d) Limitations of management principles

Principles of Management are the statements of fundamental truth which provide guidelines which help management to take decisions and action. They are derived from observation and experimental studies. Some of the limitations of management principles are listed below:

a)      Universal Application is a myth: Though management principles are considered to be universally applicable, it is a well known fact that all the principles are not applicable in every situation. Universal applicability of management principles is a myth.

b)      Employees will suffer in long run: a Management principle promotes specialisation which can be a problem for employees in the long run because present business situation is diversified and expertise in various fields in now a must for every employee.

c)       Delay in decision making: Complete Centralisation of powers and decision making some times causes unnecessary delay in decision making.

d)      Misuse of authority: Complete decentralisation will result in misuse of authority.


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